M/s. P.P.M. Sankanalinga Nadar Sons vs Dr. D. Rajkumar

A.C. Arumugaperuamal Adityan, J.—This appeal has been directed against the decree and judgment in O.S. No. 185 of 1983 on the file of

the Court of Subordinate Judge, Tuticorin. The unsuccessful plaintiff, who has lost his case against the only contesting D7, is the appellant herein.

The short facts of the plaint sans irrelevant particulars are as follows:-

The first defendant is the Firm doing business at Tuticorin and the defendants are its partners. For the purpose of the first defendant''s Firm on

05.01.1981 the defendants through the partner second defendant borrowed a sum of Rs. 30,000/- from the plaintiff executing three Hundies for

Rs. 10,000/- each undertaking to re-pay the amount within 90 days from the date of Hundies i.e., on 04.04.1981. The defendants have also

agreed to pay interest at the rate of 24% per annum in case of default of the payment of the Hundies amount on due date. The defendants have

failed to make any payment on the due date except a sum of Rs. 1845/- on 06.04.1981 through draft. The plaintiff issued suit notice to the first

respondent on 28.03.1983 which was returned with an endorsement that ''the shop is closed''. The defendants are not entitled to the benefits of

Debt Relief Act. On the date of filing of the suit a sum of Rs. 42,058.13 was due. For realisation of the said amount of Rs. 42,058.13 with future

interest at the rate of 24% per annum, the plaintiff has come forward with this suit.

D1 to D6 remain exparte. The 7th defendant in his written statement would contend that the 7th defendant''s father Dr.S.V.K.S.Thangarajan

was only partner of the first defendant''s Firm. He was the head of D-7''s family. After his death, the 7th defendant became one of the partners of

D-1''s Firm. But he was only a nominal partner. The 7th defendant is not aware of the transactions referred to in the plaint. The 7th defendant

retired from the partnership on 07.02.1981. Accounts were taken and a deed of retirement were also drawn, whereunder the other partners

promised to pay the 7th defendant a large sum as an amount due to him. The suit claim is payable by other defendants, who were incharge of the

business and were taken the loan. Only a portion of a claim arises when D7 was the partner of the said Firm. Remaining portion had arisen after he

retired from the partnership and he is no way responsible for the same and the suit is liable to be dismissed.

3.The 7th defendant in his additional written statement would contend that he retired from the partnership Firm on 07.02.1981 and the balance

sheet was struck down upto 07.02.1981 and as per the statement of accounts, the said defendants have to pay Rs. 10689.26 to D7. The

defendants 1 to 5 are liable to pay the said sum of Rs. 10689.26 to the 7th defendant as per the release deed executed by all the partners of D-1''

s Firm. Due to animosity, some of the defendants have joined hand with the plaintiff in filing the suit. This defendant is not at all a partner and is not

liable to pay the debt of the Dl''s Firm. In the other suit filed by the plaintiff, this defendant has been exhonerated in one of the suits viz., O.S. No.

216 of 1983 and the trial Court has exonerated the 7th defendant on 02.11.1988. This defendant has filed I.P. No. 2/89 before the trial Court

against the defendants 1 to 5 to declare them as insolvent. The 7th defendant is an unnecessary party to the suit and he is not liable to pay the suit

debt after 07.02.1981.

4.On the above pleadings, the learned trial Judge has framed three issues for trial. The power agent of the plaintiff was examined as P.W. 1 and

Exs.A1 to A9 were marked on the side of the plaintiff. The 7th defendant has examined himself as D.W.1 besides examining 3rd defendant as

DW2. Exs.B1 to B12 were marked on the side of the defendants.

5.The learned trial Judge, after giving due consideration to the submissions made by the learned counsel on both sides, had decreed the suit as

against Dl to D6, but dismissed the suit as against D-7, which necessitated the plaintiff to approach this Court by way of this appeal.

The points for consideration in the appeal are as follows:-

(1) whether D-7/the respondent is liable to the plaintiff for the loan borrowed by Dl''s Firm under Exs.A1 to A3 after his retirement from D-1''s

Firm?

(2) Whether the decree and judgment of the learned trial Judge in O.S. No. 185 of 1983 is liable to be set aside for the reasons stated in the

memorandum of appeal?

Point No. 1:- Admittedly, the first defendant''s Firm had borrowed a sum of Rs. 30,000/- under Exs.A1 to A3, Hundies, dated 05.01.1981

from the plaintiff. Under Ex.A4, the plaintiff has demanded repayment of the loan borrowed by the defendant with 24% interest per annum. Under

Ex.A6, the defendants have agreed to pay 24% interest for the loan borrowed by them under Ex.A1 to A3. The defence taken by the only

contesting defendant i.e., D-7 is that his father was a partner of Firm and after his death D7 became a partner in the place of his father in the Dl''s

firm but, he would claim that he was only a nominal partner and was not aware of the transactions mentioned under the plaint.

7(a)The next limb of the defence put forth by the 7th defendant was that he had retired from partnership on 07.02.1981 itself and hence, he is not

liable for the suit claim. The learned counsel appearing for the appellant mainly focused his argument on Section 18, 25 and 32 of the Indian

Partnership Act, 1932 (hereinafter referred to as ""the Act"") and contented that borrowing of Rs. 30,000/- under Exs.A1 to A3 by Dl''s Firm, in

which admittedly D7 also a partner at the time of borrowing and u/s 25 of the Act, D7 is also jointly liable with other partners of Dl''s Firm to the

suit debt. Section 25 of the Act reads as follows:-

Every partner is liable, jointly with all the other partners and also severally, for all acts of the firm done while he is a partner

As per Section 18 of the Act, a partner of a Firm is considered to be the agent of the firm for the purpose of business of the firm. The learned

counsel appearing for the respondent would contend that as per Section 32(3) of the Act, the 7th defendant/the respondent has retired from the

partnership as early as on 07.02.1981 itself and that the partners have settled their account under Ex.B2 and defendants 1 to 5 are liable to pay

Rs. 10.687.26 to the 7th defendant as per Ex.B2, Balance Sheet and that as per proviso to Section 32(3) of the Act, the 7th defendant, who is a

retired partner, is not liable to the suit claim by the plaintiff, since DW1 himself has admitted in his evidence that he is not aware whether D7 is a

partner in Dl''s Firm. This contention of the learned counsel appearing for the respondent is not sustainable because u/s 32 (2) of the Act, a retired

partner can be discharged from his liability only by way of an agreement entered into between him and the other partners along with third parties so

as to discharge him from all the liabilities to the Firm. Section 32(2) reads as follows:-

A retiring partner may be discharged from any liability to any third party for acts of the firm done before his retirement by an agreement made by

him with such third party and the partners of the reconstituted firm, and such agreement may be implied by a course of dealing between such third

party and the reconstituted firm after he had knowledge of the retirement"".

Absolutely, there is no material placed before the trial Court to show that there was an agreement entered into between the partners of

reconstituted Firm on one side that the plaintiff on other side in order to discharge the 7th defendant from the liability of Dl''s Firm to the plaintiff.

Section 32(3) of the Act reads as follows;-

Notwithstanding retirement of a partner from a firm, he and the partners continue to be liable as partners to third parties for any act done by any

of them which would have been an act of the firm if done before the retirement, until public notice is given of the retirement

Admittedly, there is no public notice issued till date by D7 regarding his retirement as per Section 32(3) of the Act. The proviso to Section 32(3)

reads as follows:-

Provided that a retired partner is not liable to any third party who deals with the firm without knowing that he was a partner.

Taking shelter under the said proviso, the learned counsel appearing for the respondent would contend that P.W. 1 in his cross- examination has

deposed as to the effect that he has not seen the deed of partnership relating to Dl''s Firm and has filed the suit only after hearing from others that

D2 to D7 are the partners of Dl''s firm. The learned counsel would contend that as per proviso to Section 32(3) of the Act, since DW1 himself has

no knowledge whether D7 is a partner or not, he is not entitled to get a decree against D7. To answer this point, the learned counsel appearing for

the appellant, drawing the attention of this Court to Section 32 of the Act, would contend that a partner of a firm can be considered as a retired

partner only if he produces some material to show that with consent of all the other partners of the partnership Firm or with an express agreement

of other partners to show that D7 has retired from the partnership or by giving notice to all other partners in writing his expression to retire from the

partnership. But, absolutely, there is no material placed before the trial Court to show that the above three factors contemplated u/s 32(1) of the

Act have been complied with by D7 to treat D7 as a retired partner from Dl''s Firm. Further, as contemplated u/s 32(3) of the Act no public notice

was issued by D-7 regarding his retirement from Dl''s Firm. On the other hand, the evidence of D7 as DW1 is also worth mentioning at this

juncture. In the chief- examination itself D-7 as DW1 would admit that his father had expired in the year 1978 itself and there after he became one

of the partner of Dl''s Firm and that he retired from the partnership only on 07.02.198.1. So admittedly, on the date of borrowal of Rs. 30,000/-

under Exs.A1 to A3 on 05.01.1981 D7 was the parter of D1''s firm. So as per Section 25 of the Act, D7 is also jointly and severally liable for the

suit debts along with other partners.

7(b)The learned trial judge only on the basis of Ex.B2, Balance Sheet, has come to an erroneous conclusion that beings retired partner, D7 is not

liable for the debt incurred by Dl''s Firm, forgetting for a moment, the suit debt was borrowed on 05.01.1981 when admittedly D7 was a partner

of Dl''s Firm. The fact that D7 was exonerated inspect of other loan in another suit, has no barring to the present facts of the case. As per Section

25 of the Act, the 7th defendant is also liable to the suit debt. The only point worth consideration in the suit is whether the 7th defendant is liable to

pay 24% interest for the suit amount. Even though, the plaintiff would contend that the suit debt was borrowed for commercial transactions, it was

not specifically mentioned either under Exs.A1 to A3 or under Ex.A6 agreement for interest that the suit debt was borrowed for commercial

transactions. Under such circumstances, the plaintiff cannot claim 24% interest under Ex.A6 by taking shelter u/s 34 of CPC. Hence, I am of the

view that 12% interest for the loan amount will be reasonable and it will meet the ends of justice. Point No. 1 is answered accordingly.

Point No. 2:- In view of my finding and discussion in the earlier paragraphs, I hold on Point No. 2 that the judgment in O.S. No. 185 of 1983 is

liable to be set aside and the suit is liable to be decreed against all the defendants including D7. Point No. 2 is answered accordingly. In fine, the

appeal is allowed. The decree and judgment in O.S. No. 185 of 1983 on the file of Sub-Ordinate Judge, Tuticorin is set aside and the suit in O.S.

No. 185 of 1983 on the file of the Sub Court, Tuticorin is decreed for a sum of Rs. 28,155/- with 12% interest per annum from 05.04.1981 till the

date of decree and 9% interest per annum from the date of decree till the date of realisation with proportionate costs. Time for payment four

months from today. No costs.