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CASE NO.: Appeal (civil)  802 of 2008

PETITIONER: Rajendran and others

RESPONDENT: Shankar Sundaram and others

DATE OF JUDGMENT: 30/01/2008

BENCH: S.B. SINHA & HARJIT SINGH BEDI

JUDGMENT: JUDGMENT

(Arising out of SLP (C) No. 22880 of 2004)

S.B. SINHA, J.

1.      Leave granted.

2.      Appellants herein were defendant Nos. 4 to 7 in the suit.   Plaintiff-respondent No.1 filed the suit against them and four others.  They are admittedly partners of defendant No.1 firm, M/s. AR. AS &  P.V.PV , registered under the Partnership Act, 1932.  Defendant No.3  P. Shankar (Respondent No.4 herein) was also a partner in the said  firm.   3.      Allegedly, Defendant No.2, P.V. Purushothaman (Respondent  No.3 herein), who has been described as the Managing Partner of the  said firm, fraudulently obtained an advance from the plaintiff  wherefor a personal guarantee was furnished by the defendant No.2.   Indisputably a cheque for a sum of Rs. 50 lakhs was issued in the  name of the defendant No.1.   

4.      Plaintiff-Respondent filed the aforementioned suit for  realisation of a sum of Rs.70,30,000/- with interest @ 20% per annum  inter alia alleging that all the defendants were jointly and severally  liable therefor.  An application under Order XXXVIII Rule 5 of the  Code of Civil Procedure was filed by the plaintiff.   

5.      Appellants in their written statement inter alia raised a  contention that since the amount of Rs. 50 lakhs purported to have  been taken in advance by defendant No.2 in connivance with  defendant Nos. 3 & 8 had not been used for the benefit of the  partnership firm, no order of attachment could be issued as against the  appellants herein.  The said contention of the appellants was accepted  by a learned Single Judge of the High Court by his order dated 10th  December, 2002  opining :-

\023    The  copy  of  the  partnership  deed  date  01-4-1996 has been filed by the contesting  defendants in the typed set.  A perusal of the same  clearly disclosed that the 2nd Defendant was not a  partner in the 1st defendant firm.  Moreover, the  plaintiff had also not filed any record to show that  the 2nd defendant was already in a partner (sic) in  the 1st defendant firm and the borrowal was also

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made only for the firm.  Unless and until, it is  established by the plaintiff, I am of the view that  the plaintiff is not entitled to seek any interim  order calling upon the defendants to execute a  security.\024  

6.      An intra court appeal was preferred thereagainst wherein a  Division Bench of the High Court by reason of the impugned  judgment opined :-

\023The 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 partner to borrow monies  (sic) 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 Leaned 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 the money  by the Plaintiff in the firm is not in dispute and in  the absence of any specific allegation that the  amount was paid personally to the defendants, 2, 3  and 8, though the cheque was issued in the name  of the firma 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 the 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 that the partnership dated 1-4-1996, the  learned Judge is not correct in rejecting the  Application as if the plaintiff has 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.\024

             On the said findings the appeal preferred by the plaintiff- respondent was allowed.  Appellants are thus before us.

7.      Appellants are, thus, before us.

8.      Mr. Ramamurthy, learned senior counsel appearing on behalf of  the appellants, would take us through the plaint as well as the written  statement to contend that from a perusal thereof it would appear that  in obtaining the said purported loan from the plaintiff-respondent,  defendant Nos. 2, 3 & 8 played a prime role    As defendant No.2 was  stated to be the Managing Partner of the firm, which he was not, and  in fact only his son (defendant No.3) was a partner, the purported loan  was granted by the plaintiff without even caring to ascertain as to who  are the partners of the said firm.         9.      Our attention was furthermore drawn to various provisions of

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the Partnership Act and in particular, Section 2(a); Section 18; Section  19; Section 22 and Section 28 thereof for advancing the proposition  that the firm would be bound only when a transaction is entered into  by a partner of the firm and that too subject to the limitations  contained in the aforementioned provisions.         10.     Mr. Amit Sharma, learned counsel appearing on behalf of the  respondents, on the other hand supported the impugned judgment.        11.     Concededly, the amount of loan was advanced by a cheque.   The said cheque was drawn in the name of the partnership firm.   Concededly again, the appellants were the partners thereof at the  relevant time, although an endeavour was made before the learned  Single Judge to show that they ceased to be so.  Having regard to the  fact that they purported to have retired from the partnership firm in the  year 2001 and the transaction herein between the parties are of the  year 2000, prima facie the liability of the appellants could not have  been ignored.  12.     The application for attachment before judgment was filed by  the plaintiff so as to protect his interest in the event the suit is decreed.   The court exercises, in such a situation, jurisdiction under Order  XXXVIII Rule 5 of the Code of Civil Procedure.  The Division Bench  of the High Court merely directed the appellants herein to furnish  security within the time specified thereunder.  It was directed that only  on their failure to do so, an order of attachment of the 2nd item on the  schedule to the petition shall be issued.   

13.     Appellants, in our opinion, are not seriously prejudiced thereby.   The court while exercising its jurisdiction under Order XXXVIII Rule  5 of the Code of Civil Procedure is required to form a prima facie  opinion at that stage.  It need not go into the correctness or otherwise  of all the contentions raised by the parties.  A cheque had been issued  in the name of the firm.  The appellants are partners thereof.  A  pronote had been executed by a partner of the firm.  Thus even under  the Partnership Act prima facie the plaintiff could enforce his claim  not only as against the firm but also as against its partners.   14.     Sections 2(a) ;  18 ;  19 ; 22 and  28 to which our attention has  been drawn, instead of assisting the appellants, prima facie assist the  plaintiff-respondent.   Allegations against defendant Nos. 2, 3 and 8  are required to be gone into at the hearing of the suit.  The Court at  this stage is required only to form a prima facie opinion.  The plaintiff  is entitled to secure his interest keeping in view the amount involved  in the suit.  For the said purpose a detailed discussion in regard to the  question as to whether defendant No.2 was a partner or not is not of  much relevance.   

15.     In any view of the matter as the appellants are not seriously  prejudiced if they furnish the security, this, in our opinion, is not a fit  case where this Court should exercise its jurisdiction under Article  136 of the Constitution of India.         16.     For the reasons abovementioned this appeal fails and is  dismissed.  No order as to costs.