Shankar Sundaram vs AR.AS. and P.V.P.V. and Others

K. Govindarajan,J.

The plaintiff having failed in his attempt to get an order directing the respondents to furnish security to the extent of the suit claim of Rs.

70,30,000/-, failing which to pass an order of attachment before judgment of the immovable properties mentioned in the schedule to the Judge''s

summons, has filed the above Appeal.

The plaintiff filed a suit in C.S.No. 477/2002 seeking a decree against the defendants on the basis of three promissory notes executed by the

3rd defendant/Shankar as a partner of the 1st defendant-firm. The 2nd defendant also executed guarantee letter for each promissory notes. As

stated in the plaint, a cheque was issued in the name of the partnership firm by the plaintiff. Since the amount was not paid, the plaintiff filed the said

suit. Pending suit, the plaintiff filed Application No. 2736/ 2002, seeking the relief as stated supra. In the Judge''s summons, two properties were

mentioned for the purpose of attachment. In the counter filed by the 4th respondent, it is stated that the 2nd item of the properties cannot be

attached as it exclusively belongs to the partnership unconnected with that of the 1st, 2nd, 3rd and 8th defendants. With respect to the 1st item of

the property,it is stated that the same does not belong to them. The learned Judge, appreciating the partnership deed dated 1.4.1996 found that the

2nd defendant was not a partner in the 1st defendant-firm and he is not authorised to borrow the amount on behalf of the firm. It is also found that

if any document was executed in the capacity of the partner of the 1st defendant-firm, then only the liability can be fastened on all the partners on

the presumption that the debt was borrowed for the firm. On that basis, the learned Judge rejected the application. Hence the above Appeal.

Learned counsel for the appellant produced the copy of the partnership deed dated 1.4.1996 in support of his submission that the 3rd defendant

who executed the promissory notes is the partner and the learned Judge is not correct in proceeding with the issue as if the 2nd defendant executed

the promissory notes. He also submitted that the cheque was issued only in the name of the firm and the 2nd respondent/2nd defendant has

executed the personal guarantee. 4. On the other hand, learned counsel for the respondents/defendants 4 to 7 submitted that the amount was not

bought by the appellant/plaintiff for the benefit of the firm and the 2nd respondent/2nd defendant is not the managing partner of the firm and so the

said borrowal does not bind on the said defendants. On that basis, learned counsel also submitted that the learned Judge is correct in rejecting the

Application and it does not warrant any interference. He also submitted that appeal is not maintainable against the order of the learned Judge.

The point for consideration in this Appeal is:-

Whether the learned Judge is correct in rejecting the Application filed by the appellant/plaintiff seeking an order for furnishing security by the

defendants

Learned counsel for the appellant submitted that he is not pressing this Application insofar as item No.1 of the property is concerned. It is also

admitted in the counter that item No.2 of the properties belongs to the partnership firm. But according to the defendants 4 to 7 in the said firm,

defendants 2, 3 and 8 are not partners. It is not at all disputed that the amount is paid to the partnership firm. Learned Judge proceeded with in the

order that the 2nd defendant had executed the promissory notes and borrowed the money. The learned Judge has not appreciated that the 3rd

defendant who is the partner of the firm as per the partnership deed dated 1.4.1996 executed the promissory notes and clause 10 of the

partnership firm gives power to a partners to borrow monies from the 3rd parties for the purpose of business. The 2nd defendant gave a letter

which is only for personal guarantee. So the reasonings given by the learned Judge that since the 2nd defendant is not a partner, the borrowal of

money is not for the benefit of the partnership cannot be countenanced. When the cheque was given in the name of the firm by the plaintiff, prima

facie, it has to be taken that it is borrowed on behalf of the partnership firm. When the payment of money by the plaintiff to the firm is not in dispute

and in the absence of any specific allegation that the amount was paid personally to defendants 2, 3 and 8, though the cheque was issued in the

name of the firm and the plaintiff also colluded with them, the argument of the learned counsel regarding the alleged collusion cannot be accepted.

Whether the amount is used for the firm or personally by defendants 2, 3 and 8 can be gone into only after adducing evidence. Prima facie, we find

that since the amount was paid in the name of the firm and promissory notes were executed by the partners of the firm and no other partnership

deed is produced before the Court, other than the partnership dated 1.4.1996, the learned Judge is not correct in rejecting the Application as if

that the plaintiff had no prima facie case. The learned Judge has not given any other finding as to the necessity for attachment, but rejected the

application only on the ground that the 2nd defendant is not the partner of the firm. Learned counsel for respondents 1,2, and 8, though, had given

undertaking to deposit the amount, no such amount was deposited though sufficient time was given.

Learned counsel appearing for respondents 4 to 7 raised an objection regarding the maintainability of the above Appeal. According to him, the

order passed by the learned Judge rejecting the Application filed to furnish security, cannot be construed as a ""judgment"" and so the above Appeal

preferred under Clause 15 of the Letters Patent is not maintainable. Referring to Order 43, Rule 1(q) of the Code of Civil Procedure, learned

counsel also submitted that even under the said provision, no Appeal is provided against the dismissal of the Application filed under Rule 2, Rule 3

or Rule 6 of Order 38 of the Code. The above said submission of the learned counsel cannot be sustained in view of the settled principles of law in

various decisions.

It is relevant to reproduce Clause 15 of the Letters Patent (Madras)1862, which is pressed into service by the learned counsel for respondents

4 to 7, and it reads as follows:-

Appeal from Courts of original jurisdiction to the High Courts in its appellate jurisdiction:- And we do further ordain that an appeal shall lie to the

said High Court of Judicature at Madras from the Judgment (not being a judgment passed in the exercise of appellate jurisdiction in respect of a

decree or order made in the exercise of appellate jurisdiction by a Court subject to the superintendence of the said High Court, and not being an

order made in the exercise of revisional jurisdiction, and not being a sentence or order passed or made in the exercise of the power of

superintendence under the provisions of Section 107 of Government of India Act, or in the exercise of criminal jurisdiction) of one Judge of the

said High Court or one Judge of any Division Court, pursuant to S. 108 of Government of India Act, and that notwithstanding anything

hereinbefore provided an appeal shall lie to the said High Court from a judgment of one Judge of the said High Court one Judge of any Division

Court, pursuant to Section 108 of the Government of India Act, made (on or after the 1st day of February, 1929) in the exercise of appellate

jurisdiction in respect of a decree or order made in the exercise of appellate jurisdiction by a Court subject to the superintendence of the said High

Court, where the Judge who passed the judgment declares that the case is a fit one for appeal; but that the right of appeal from other judgments of

Judges of the said High Court or of such Division Court shall be to us, Our heirs or Successors in Our or Their Privy Council, as hereinafter

provided.

In view of the above said provision in Clause 15 of the Letters Patent against a ""judgment"" passed by a learned single Judge of the High Court in

the Original Jurisdiction or first appellate jurisdiction, a Letters Patent Appeal lies to the Division Bench. Similarly, against the order made in the

revisional jurisdiction of the High Court, Clause 15 of the Letters Patent cannot be attracted. From the above, it is clear that if the order appealed

against is not a ""judgment"" , the appellate jurisdiction of the High Court under Clause 15 of the Letters Patent is not attracted and available.

The Apex Court in the decision in Shah Babulal Khimji Vs. Jayaben D. Kania and Another, , dealt with the maintainability of the appeal before

the Division Bench against the order dismissing the injunction application. The learned single Judge dismissed the injunction application. The

Division Bench of the Bombay High court dismissed the appeal on the ground that the order of the learned single Judge was not a ""judgment"" as

contemplated under Clause 15 of the Letters Patent of the High Court. The Apex Court dealt with the scope of the provisions of Sec. 104 read

with Order 43, Rule 1 of the Code and Clause 15 of the Letters Patent. The Apex Court held as follows:-

There is yet another aspect of the matter which shows that S. 104 merely provides an additional or supplement remedy by way of appeal and,

therefore, widens rather than limits the original jurisdiction of the High Court. For instance, in this very case with which this Court was dealing, an

order passed under S. 202 of the Companies Act was appealable to a larger Bench and yet it was argued that the order being of an interlocutory

nature would not be a judgment and therefore no appeal would lie to the division Bench. This contention was negatived by the Supreme Court and

it was held that against the order passed by a Trial Judge under the Companies Act, an appeal would lie to the Division Bench. On a parity of

reasoning, therefore, Section 104 read with Order 43, Rule expressly authorises and creates a forum for appeal against orders falling under various

clauses of Order 43, Rule 1 to a larger Bench of the High Court without at all disturbing, interfering with or overriding the Letters Patent

Jurisdiction.

Ultimately, the Apex Court in the said decision further held:

That there is no inconsistency between S. 104 read with Order 43, Rule 1 and the appeals under the Letters Patent and there is nothing to

show that the Letters Patent in any way excludes or overrides the application of S. 104 read with Order 43, Rule 1 or to show that these

provisions would not apply to internal appeals within the Court.

That even if it be assumed that Order 43, Rule 1 does not apply to Letters Patent appeals, the principles governing these provisions would apply

by process of analogy.

That having regard to the nature of the orders contemplated in the various clauses of Order 43, Rule 1, there can be no doubt that these orders

purport to decided valuable rights of the parties in ancillary proceedings even though the suit is kept alive and that these orders do possess the

attributes or character of finality so as to be judgments within the meaning of Clause 15 of the Letters Patent and hence, appealable to a Larger

Bench.

4.The concept of the Letters Patent governing only the internal appeals in the High Courts and the CPC having no application to such appeals is

based on a serious misconception of the legal position.

From the above said decisions, it is clear that the argument advanced by the learned counsel appearing for respondents 4 to 7 on the basis of

Order 43, Rule 1 of the code, cannot be countenanced.

Even in the decision in Employer in Relation to Managment of Central Mine Planning and Design Institute Ltd. Vs. Union of India and Another,

, following the decision in Shah Babulal Khimji Vs. Jayaben D. Kania and Another, , the Apex Court held as follows:-

In the instant case, we are concerned with the last mentioned category. From the above discussion, it follows that to determine the question

whether an interlocutory order passed by one Judge of a High court falls within the meaning of ''judgment'' for purposes of Letters Patent the test is

: whether the order is a final determination affecting vital and valuable rights and obligations of the parties concerned. This has to be ascertained on

the facts of each case.

So, it is clear that in order to keep an order as ''judgment'' within the meaning of Letters patent, the controversy must have been decided

affecting the valuable rights of the parties and it must contains traits and trappings of finality. An order which is available under the Code or under

any other statute confers a right on the applicant to prefer an appeal against the said order. But such an order may or may not be appealable if it is

not ''judgment'' under Clause 15 of Letters Patent. If it is a ''judgment'' which satisfies the requirements of the meaning of Clause 15 of the Letters

patent, then it becomes appealable under the said clause as it confers a right on the litigant to prefer appeal against such ''judgment''. There is no

definition under Clause 15 of the Letters Patent defining ''judgment''. From the above said decision of the Apex Court in Employer in Relation to

Managment of Central Mine Planning and Design Institute Ltd. Vs. Union of India and Another, , it is clear that an order will constitute ''judgment''

depending upon the facts and circumstances of each case and the nature and character of the order passed. The order would be ''judgment'' which

decides the matter of movement affecting the valuable rights of the parties and which works serious injustice to the parties concerned.

In this case, the appellant/plaintiff has come forward with the suit to recover money paid to the firm. To secure his claim, the appellant has

come forward with the Application under Order 38,Rule 5 of the Code. The learned Judge has not rejected the Application as there is no reason

for ordering the said Application but on wrong appreciation of facts, rejected the Application holding that the 2nd respondent/2nd defendant

borrowed money from the appellant/plaintiff and as he is not a partner, the plaintiff cannot sustain his claim against the partnership firm. The said

finding cannot be sustained as it is against the admitted facts. It is the specific case of the appellant that if security is not given, his rights will be

affected in the event of decreeing the suit against the defendants. Hence the order passed by the leaned Judge has to be construed as ''judgment''

within the meaning of Clause 15 of the Letters Patent and so the above Appeal is maintainable.

For all the reasons stated above, the order dated 10.12.2002 passed by the learned Judge is set aside and the respondents/defendants are

directed to furnish security to the extent of the suit claim of Rs. 70,30,000/-within four weeks from today, failing which there will be an order of

attachment of 2nd item of the schedule to the petition. This Appeal is allowed accordingly. No costs. C.M.P. Nos. 3905 and 18026 of 2003 are

closed.