Raja Theatre vs Selvam Financiers and Another

Somasundaram, J.—The second respondent-garnishee in I.A. No. 1167 of 1980 in O.S. No. 1453 of 1980 on the file of the Sub-Court,

Coimbatore, is the appellant in this civil miscellaneous appeal. The petitioner in the said I.A. No. 1167 of 1980 is the first respondent in this civil

miscellaneous appeal. The first respondent in the said application is the second respondent in this civil miscellaneous appeal. For the sake of

convenience, the parties are referred to in this judgment as per their array in the Interlocutory Application.

The petitioner filed the application I.A. No. 1167 of 1980 in O.S. No. 1453 of 1980 on the file of the Sub-Court, Coimbatore under Order 38,

Rules 5 and 11(a) read with Order 21, Rule 49 and Order 40, Rule 1 and Section 151, C.P.C., to call upon the first respondent to furnish

sufficient security failing which to order of attachment before judgment of the share, interest, profit, credit and deposits due to him in the partnership

firm M/s. Raja Theatre at Coimbatore. The case of the petitioner in I.A. No. 1167 of 1980 is as follows. O.S. No. 1453 of 1980 has been filed

by the petitioner-firm against the defendants for the recovery of a sum of Rs. 1,31,600 together with interest at 18% per annum. The first

respondent in I.A. No. 1167 of 1980 and his wife are the defendants in the said suit. The defendants are heavily involved in debts having

borrowed moneys from various financiers throughout Tamilnadu. The defendants have disposed of the negatives and exhibition rights of the various

films and secreted all the sale proceeds. The defendants have disposed of their valuable immovable properties. The immovable property viz., the

house bearing door No. 83/110, Barathi Park Road, Coimbatore, standing in the name of the second defendant in the suit has been mortgaged

and the equity of redemption is practically worth nothing. The first respondent owned 30% share in the partnership firm M/s. Raja Theatres. The

other partners of the said firm are one Baskaran, the elder brother of the first respondent Viswanatha Chettiar and his sons Ravindranath and

Sekar. The first respondent has been making attempts to dispose of his interest in the said partnership firm. Unless the first respondent''s interest as

partner in the properties and profits of the firm M/s. Raja Theatres are attached, the first respondent is likely to enter into some arrangement with

the other partners of the said firm for transferring the same to them or to some third parties. On 31.10.1980 the lower Court passed an interim

order in I.A. No. 1167 of 1980 directing interim attachment of the interest and share of the first respondent in the partnership firm M/s. Raja

Theatres and the attachment was effected by pro-order on 15.11.1980. The first respondent remained ex parte in I.A. No. 1167 of 1980.

The second respondent filed a counter contending as follows: The first respondent had no interest in the partnership firm, M/s. Raja Theatres.

Even long prior to the filing of the suit the first respondent ceased to have any interest in the partnership firm. Even otherwise the application for

attachment is not maintainable in view of the fact that the partners of the firm have not been made parties in the garnishee proceedings. As per the

agreement dated 1.3.1979 among Viswanatha Chettiar and his two sons on the one hand and the first respondent on the other the assets and

liabilities of the first respondent in the partnership firm are to be taken over by Viswanatha Chettiar and his two sons in lieu of their discharging the

debts due by the first respondent as a partner of the firm. The petitioner is not entitled to the relief in the application, because, the first respondent

has no interest whatsoever in the firm M/s. Raja Theatres on the date of the filing of the application as well as on the date of the order of

attachment.

The lower Court, on a consideration of the entire evidence on record, held that the first respondent did not retire from the firm M/s. Raja

Theatres as per the agreement dated 1.3.1979 marked as Ex. B-1 in this case as alleged by the second respondent, and therefore the first

respondent continues to have right, title and interest in the said partnership firm to an extent of 30% on the date of the filing of the application I.A.

No. 1167 of 1980 and such right, title and interest of the first respondent in the partnership firm is liable to be attached, and consequently allowed

the application and directed the attachment effected by pro-order on 15.11.1980 to be made absolute. As against the order of the lower court in

I.A. No. 1167 of 1980 the second respondent-garnishee has filed this present civil miscellaneous appeal.

The two points which arise for consideration in this civil miscellaneous appeal are:

(1) Whether the first respondent had any right, title and interest in the firm M/s. Raja Theatres as on the date of attachment in Application I.A. No.

1167 of 1980 i.e., on 15.11.1980.

(2) Whether such right, title and interest of the first respondent in the firm M/s. Raja Theatres is liable for attachment before judgment in the suit

under Order 38, Rule 5, C.P.C.

Point No. 1: The interim attachment was ordered in I.A. No. 1167 of 1980 on 31.10.1980 and the attachment was effected by pro-order on

15.11.1980. Mr. M.R. Narayanaswami, learned Counsel for the second respondent would submit that on both the dates referred to above the

first respondent had no right, title and interest in the firm M/s. Raja Theatre as he retired from the said firm as early as on 31.12.1978. The

agreement marked as Ex. B-1, the ledger entry marked as Ex. B-5 and the certified copy of Form ''A'' maintained by the Registrar of Firms u/s 59

of the Indian Partnership Act marked as Ex. B-8 in this case will go to show that the first respondent was not having any interest in the partnership

firm on the date of attachment and, therefore, the. order of the lower Court directing attachment of the right, title and interest of the first respondent

in the firm Raja Theatres is illegal. Now, let us examine how far the documents Exs. B-1, B-5 and B-8 relied on by the learned Counsel for the

second respondent go to prove the case of the second respondent that the first respondent had no manner of right, title or interest in the

partnership firm Raja Theatres after 31.12.1978. Ex. B-1 is an unregistered agreement entered into between Viswanatha Chettiar, the brother of

the first respondent and his two sons Ravindranath and Sekar on the one hand and the first respondent on the other. A perusal of Ex.B-1 shows

that it is not a deed of dissolution of partnership firm M/s. Raja Theatres nor is it a deed by which the first respondent has actually transferred all his

right, title and interest in the firm in favour of the other parties to the agreement, Ex.B-1. Ex.B-1 also does not show that the first respondent retired

from the firm with effect from 31.12.1978. The recitals in Ex. B-1 with regard to the another firms Raju Chettiar and Brother clearly show that

some of the partners of the firm Raju Chettiar and Brother viz., Ravindranath and Sekar and their mother Indrani Viswanathan actually retired from

the said firm with effect from 31.12.1978 and the assets of the firm Raju Chettiar and Brother have become the, absolute properties of the first

respondent. On the other hand, the recitals in Ex. B-1 with regard to the partnership firm Raja Theatres go to show that the other three partners

Viswanathan and his two sons only agreed to take over the 30% share of the first respondent and the liabilities of the first respondent in the firm

and for that purpose they have agreed to take a proper document from the first respondent on a later date. Such a subsequent transferring his 30%

share in the partnership firm in favour of the other partners was not at all executed by the 1st respondent at a later date. Further, there is no recital

in Ex.B-1 to the effect that the first respondent retired from the partnership firm M/s. Raja Theatres with effect from 31.12.1978. A perusal of Ex.

B-1 shows that it is only an agreement to perform some acts in future in respect of the transfer of the rights and liabilities of the first respondent in

the partnership firm Raja Theatres. By any stretch of imagination Ex. B-1 cannot be construed as a document under which the first respondent

actually transferred all his right, title and interest in the partnership firm in favour of the other partners. As rightly held by the lower court the

agreement Ex. B-1 is only executory in nature and it cannot transfer the right, title and interest of the first respondent in the firm M/s. Raja Theatres

to Viswanatha Chettiar and his two sons. In these circumstances it has to be held that Ex. B-1 does not support the case of the second respondent

that the first respondent retired from the firm M/s. Raja Theatres with effect from 31.12.1978 and that by executing Ex. B-1 the first respondent

has actually transferred all his right, title and interest in the firm in favour of the other partners with effect from 31.12.1978 as contended by learned

Counsel for the second respondent.

The learned Counsel for the second respondent then placed reliance on Ex. B-5 in support of his contention that the first respondent ceased to

have any right, title and interest in the firm M/s. Raja Theatres and he retired from the said firm as early as 31.12.1978. Ex. B-5 is the ledger entry

dated 31.12.1978 at page 392 of the ledger book of Raja Theatres. Ex. B-5 shows that in the account of the first respondent a balance was

struck as on 31.12.1978 and the amount available to his credit was distributed in favour of Viswanatha Chettiar and his two sons. No reliance can

be placed on Ex. B-5 because it is a self-serving document and none of the partners viz., Viswanatha Chettiar, his two sons and the first

respondent have signed the ledger entry at page 392 of the ledger book of Raja Theatres. Further, the ledger entry dated 31.12.1978 at page 392,

Ex. B-5 is not supported by any receipt obtained from any one of the partners.

The third document relied on by the learned Counsel for the second respondent in support of his contention is Ex. B-8. Ex. B-8 is the certified

copy of Form A maintained by the Registrar of Firms u/s 59 of the Indian Partnership Act relating to the firm Raja Theatres. Ex. X-1 is the original

of Ex. B-8. Ex. X-2 is an application dated 1.3.1979 presented by one Kumar to the Registrar of Firms and signed by the outgoing partner the

first respondent. The endorsement made by the Registrar of Firms in Ex. X-2 shows that it was received by him only on 4.12.1981 though Ex. X-

2 was stated to have been prepared and signed by the first respondent on 1.3.1979. There was no explanation on the side of the second

respondent as to why the form marked as Ex. X-2 alleged to have been executed by the first respondent on 1.3.1979 should be filed before the

Registrar of Firms only on 4.12.1981. The recitals in Exs. B-1 and X-2 are contradictory to each other with regard to the actual date on which the

first respondent retired from the firm M/s. Raja Theatres. In Ex. B-1 it is stated that the first respondent would be retiring from the firm by

executing a proper document within thirty days from 1.3.1979 i.e., on 1.4.1979. On the other hand, Ex. X-2 says that the first respondent ceased

to be a partner from 31.12.1978. In view of the contradictory versions in Exs. B-1 and X-2 with regard to the date on which the first respondent

retired from the firm and in view of the fact that there is no explanation for presenting Ex. X-2 stated to have been signed by the first respondent on

1.3.1979 before the Registrar of Firms only on 4.12.1981 no reliance can be placed on Ex. B-8 in support of the case of the first respondent.

There is yet another circumstance which goes to show that the first respondent had not retired from the firm M/s. Raja Theatres. Ex. X-1 shows

that the partnership M/s. Raja Theatres is a partnership at will. In the case of a partnership at will, a partner can retire from the partnership by

giving notice in writing to the other partners as contemplated in Section 32(1)(c) of the Partnership Act. Section 32(1) of the Partnership Act

provides that a partner may retire with the consent of all other partners and in accordance with the express agreement between the partners or

where the partnership is at will by giving notice in writing to the other partners of his intention to retire. In the present case there was no express

agreement by the partners with regard to the retirement of the first respondent and there was no consent of all other partners for his retirement. As

a result a notice in writing expressing his intention to the Partnership Act. Admittedly such a notice as contemplated in Section 32(1)(c) of the

Partnership Act was not given by the first respondent to the other partners of the firm. In such circumstances, the case of the second respondent

that the first respondent had retired from the firm M/s. Raja Theatres with effect from 31.12.1978 cannot be true and valid in law. In those

circumstances the lower court rightly came to the conclusion that the first respondent did not retire from the firm M/s. Raja Theatres as per the

agreement Ex. B-1 dated 1.3.1979 with effect from 31.12.1978 and that the first respondent is having his right, title and interest in the said

partnership firm to an extent of 30%.

Point No. 2: Mr. M.R. Narayanaswami, learned Counsel for the second respondent would contend, that the petitioner has filed the suit O.S.

No. 1453 of 1980 against the first respondent and his wife for recovery of money on the basis of a promissory note in their individual capacity; the

suit was filed neither against the partnership firm nor against the first respondent in his capacity as a partner of the firm. In such a suit the right, title

and interest of the first respondent in the firm M/s. Raja Theatres is not liable for attachment under Order 38, Rule 5, C.P.C. The learned Counsel

for the second respondent further contended that in any event the attachment made in this case is invalid, because, the procedure laid down in

Order 38, Rule 5, C.P.C., was not followed by the lower Court before ordering attachment. We are unable to accept the above contention of the

learned Counsel for the second respondent. The right, title and interest of a partner in a partnership firm is a saleable property and such right, title

and interest of a partner in the partnership firm can be attached and sold. In Dharmaraju v. Motilal 57 M.L.J. 264.A.I.R. 1929 Mad. 641 : 116

I.C. 343 : ILR 52 Mad. 563 , a Full Bench of this Court, while dealing with the question whether a partner''s interest in a partnership firm can be

attached and sold, answered the question in the affirmative and held as follows:

It cannot be and is not disputed that a partner''s interest in a partnership is saleable property, within the meaning of Section 60, Civil P.C., and may

be attached and sold in execution of a decree obtained against the partner by his creditor: see Parvatheesan v. Bapamma ILR (1890) 13 Mad.

447 and Jagat Chunder Roy v. Iswar Chundar Roy ILR (1893) Cal 693. In both these cases reliance is placed upon the following observations of

their Lordships of the Privy Council in Deendayal v. Jugdeep ILR (1877) 3 Cal. 193, in which the question arose as to the rights of an execution

creditors and of a purchaser at an execution sale, in regard to the interests of an undivided coparcener in the Hindu family. Their Lordships, in

holding that such interest was liable to be attached and sold, observed as follows:

It is sufficient to instance the seizure and sale of a share in a trading partnership, at the suit of a separate creditor of one of the partners. The partner

could not have himself sold his share so as to introduce a stranger into the firm without the consent of his copartners; but the purchaser at the

execution sale acquires the interest sold with the right to have partnership accounts taken, in order to ascertain and realise its value.

When it is said that the right, title and interest of a partner in a partnership firm can be attached and sold, it can be done so only by proceeding

against the firm i.e., only by proceeding against the right, title and interest of such partners in the partnership firm. In view of the decision referred

above it has to be held that the right, title and interest of the first respondent in the partnership firm is liable to be purchased against by the

petitioner, who is the creditor of the first respondent.

It is a settled position of law that the interest of a partner in the partnership property is movable property. In Addanki Narayanappa and

Another Vs. Bhaskara Krishtappa and Others, , the Supreme Court has held as follows:

The interest of the partners of a family in the partnership assets was movable property, and the document evidencing the relinquishment of that

interest was not compulsorily registrable u/s l7(1) Registration Act.

Once when it is held that the interest of a partner in a partnership firm is movable property then, Order 21, Rule 46(1), C.P.C. is attracted. Order

21, Rule 46(1), C.P.C., prescribes the mode of attachment of debt, share and other property not in possession of judgment-debtor and the

relevant portion of the Rule provides that in the case of the other movable property not in the possession of a judgment-debtor, the attachment

shall be made by a written order prohibiting the person in possession of the same from giving it over to the judgment-debtor. Order 21, Rule 46(2)

further provides that a copy of such order shall be affixed on some conspicuous part of the Court-house and another copy shall be sent in the case

of the debt to the debtor, in the case of the share, to the proper officer of the corporation, and in the case of the other movable property (except as

aforesaid) to the person in possession of the same. Order 38, Rule 11-A(1) provides that the provisions of C.P.C. applicable to an attachment

made in execution of a decree shall apply to an attachment before judgment which continues after the judgment by virtue of provisions of Rule 11.

In view of Order 38, Rule 11-A(1), the Court, While ordering attachment of movables before judgment under Order 38, Rule 5, C.P.C, has to

follow the procedure prescribed in Order 21, Rule 46(1) and (2), C.P.C. In view of the above position of law it has to be held that the right, title

and interest of the first respondent in the partnership firm M/s. Raja Theatres is liable for attachment before judgment under Order 38, Rule 5,

C.P.C. In the affidavit filed in support of the petition I.A. No. 1167 of 1980 the petitioner has made out a case for attachment of the share in the

property and credit and deposits due to the first respondent in the partnership firm M/s. Raja Theatres and in the application for attachment the

petitioner requested the lower court to call upon the first respondent to furnish sufficient and sound security failing which to order attachment before

judgment. The lower court by the order dated 31.10.1980 ordered interim attachment only, of the interest and share of the first respondent in the

partnership firm and the lower court was right in doing so in view of the provision contained in Order 38, Rule 5(3), C.P.C. The first respondent

remained ex parte and the order of attachment was effected by pro-order over the said rights of the first respondent in the partnership firm on

15.11.1980. In these circumstances, there is no merit in the contention of the learned Counsel for the second respondent that the procedure

prescribed in Order 38, Rule 5, C.P.C., was not followed by the lower court before ordering attachment before judgment.

In these circumstances, the lower court rightly held that the first respondent did not retire from the firm M/s. Raja Theatres with effect from

31.12.1978; that the first respondent has right, title and interest in the partnership firm M/s. Raja Theatres to the extent of 30% and such right, title

and interest of the first respondent in the firm is liable to be attached and consequently made the order of interim attachment absolute. Hence the

order of the lower court is not liable to be interfered with in this appeal. There are no merits in the civil miscellaneous appeal and the same is liable

to be dismissed. Accordingly the civil miscellaneous appeal is dismissed. No costs.