Dismissed

Smt. Parvatibai Shivajirao Shendge v. the Sangli Sahakari Bank Ltd. and 4 Ors.

Bombay HC5 Nov 2009WP/1902/2009

Case brief

AI extract

What is this about?

The court dismissed a writ petition contesting the attachment of a deceased partner's residential flat. Holding that the deceased partner's estate was substantially represented, the court ruled the recovery certificate could be executed against that property.

What did the court decide?

The petition was dismissed, holding the attachment of the deceased partner's flat was valid as his estate was represented.

Smt. Parvatibai Shivajirao Shendge Vs the Sangli… — Cooperative Societies | Bombay HC (2009)

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IN THE HIGH COURT OF JUDICATURE AT BOMBAY

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ORDINARY ORIGINAL CIVIL JURISDICTION

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WRIT PETITION NO.1902 OF 2009

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Smt. Parvatibai Shivajrao Shendge ) widow, senior citizen, aged about 70 years ) residing at Flat No.101, First floor, Sukhada ) Co-operative Housing Society Limited, ) Sir Pockakhanwala Road, Worli Mumbai-18 )..Petitioner

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Vs.

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1.The Sangali Sahakari Bank Ltd. ) a Co-operative Bank registered under the ) the Maharashtra Co-operative Societies Act, ) 1960 having office at 151, Sangli Sahakar ) Bhavan, S.K.Bole Marg, Dadar, Mumbai-28 ) 2. M.B.Shinde, Special Recovery Officer and ) Sales Officer, Sangali Sahakari Bank Ltd., ) having office at 151, Sangli Sahakar ) Bhavan, S.K.Bole Marg, Dadar, Mumbai-28 ) 3. The Divisional Joint Registrar, Co-operative ) Societies, Mumbai Divisiion, Mumbai ) 4. Messrs Vilas Transport, a firm having ) address at 309, Navratan Building, 69, ) P’Dmello Road, Carnac Bunder, Mumbai-09 ) 5. The State of Maharashtra through ) Government Pleader, High Court, Bombay )..Respondents

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Mr. V. R. Dhond with Mr. T. N. Tripathi and Ms. Sapana Rachure i/b T. N. Tripathi & Co. for the Petitioner

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Mr. V. A.Thorat, Sr. Advocate with Mr. Harinder Toor i/b Mr. Subhash Bane for Respondents No.1 & 2

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Ms. Imam Calcuttawala, AGP

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CORAM: DR. D.Y. CHANDRACHUD, J.

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DATE: 5th November , 2009

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ORAL JUDGMENT :

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Shivajirao Krishnaji Shendge was a partner of a firm by the name of Vilas Transport Company which was constituted on 16^th September 1992, under a Deed of Partnership. One of the partners was his son, Prakash Shivajirao Shendge and two others were Vilas Shendge and Jaysingrao Shendge. The partnership firm submitted an application on 23^rd March 1998 to the First Respondent for the grant of a loan in the amount of Rs.1.30 crores. The application was signed by all the partners including Shivajirao. The loan

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was sanctioned by the Chairman of the Bank on 30^th March 1998, who incidentally also happened to be one of the partners of the firm. The bank had also extended an over draft facility in the amount of Rs.30 lacs to the

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partnership firm. All the four partners confirmed an outstanding of Rs.

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212.26 lacs as on 31^st March 2001 and furnished undertakings that the

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account would be regularised before 30^th June 2001. Shivajirao Shendge died on 23^rd December 2001. Upon his death a letter was addressed by one of his sons, Prakash Shendge, who also happened to be a member of the Legislative Assembly in the State of Maharashtra, on 27^th July 2005 to the Chairman of the Bank recording that he had been unable to fulfill the understanding that had been arrived at between the parties for the repayment of the amount of Rs.5 crores, due to his pre-occupation as a member of the Legislative Assembly. By a letter, an assurance was held out to the bank that an amount of Rs.5 crores would be paid within a period of 15 days. That assurance was not complied with. The Bank, it may be noted is a co-operative Bank registered under the Maharashtra Co-operative Societies Act, 1960.

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The Bank instituted two applications for the recovery of its dues under section 101 of the Maharashtra Co-operative Societies Act, 1960. On 13^th September 2002, the Assistant Registrar of Co-operative Societies allowed both the applications by decreeing the claim of the bank. In one recovery certificate the total amount decreed was Rs.2.68 crores approximately, while in the second, the amount was Rs.2.25 crores. The claim for interest

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was allowed. Both the recovery certificates attained finality, since no Revision Application was filed under section 154 of the Maharashtra Cooperative Societies Act, 1960. Execution proceedings were initiated by the Bank. An attachment has been levied by the bank on a residential flat, being flat 101, situated at Sukhada Co-operative Housing Society Ltd. at Worli. The attachment was questioned by taking out an Application under Rule 107(19) of the Maharashtra Co-operative Societies Rules, 1961. The application was rejected by the Special Recovery and Sales Officer by an order dated 29^th April 2009. The order rejecting the applications was questioned in Revision before the Divisional Joint Registrar under section 154. By an order dated 3^rd August 2009, the Divisional Joint Registrar, dismissed the Revision Application. Proceedings have been instituted before this Court under Article 226 of the Constitution by the widow of Shivajirao Shendge.

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On behalf of the Petitioner, it has been submitted that in the recovery proceedings that were instituted in 2002, the husband of the Petitioner was not impleaded as a party. The Petitioner was not a party as an heir of her deceased husband who had died on 23^rd December 2001. The flat in

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question, which has been attached was not offered as security to the Bank and the share certificate, at present stands in the name of the Petitioner. The bank has attached the flat on the ground that the husband was a partner of the firm. It is urged that, the assets of the Petitioner’s deceased spouse can be proceeded against only to the extent to which they were assets to the partnership. The residential flat was not an asset of the partnership and could not have been attached, in execution of the recovery certificate. Reliance was placed on a Judgment of a Division Bench of this

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Court in Mathuradas Canji Matani Vs. Ebrahim Fazalbhoy¹ and on a Judgment of the Supreme Court in Her Highness Maharani Mandalsa Devi Vs. M. Ramnarain Private Ltd.,² in support of the proposition that, if the Plaintiff takes the risk of not joining the legal representatives of a partner of a partnership firm who is dead on the date of the institution of the proceedings, the right of recourse is restricted only as against the assets of the partnership and not the personal assets of the deceased partner. In the present case, it was urged that, on the date on which the recovery proceedings were instituted under section 101 the spouse of the Petitioner had died. His heirs were not brought on the record and as a

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1 AIR 1927 BOM 581

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2 AIR 1965 SC 1718

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consequence the recovery certificate can be executed only against the assets of the partnership and against the separate properties of the partners who were impleaded as parties to the proceedings. The recovery certificate, it was urged, cannot be executed as against the personal assets of the deceased partner.

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On behalf of the Bank, it was urged that in the present case, the loan was granted and the over draft facility was sanctioned on the application of all the partners during the life time of Shivajirao Shendge. The loan application came to be sanctioned by the Chairman of the Bank, who also happened to be one of the partners of the partnership firm. During his life time, Shivajirao Shendge subscribed an undertaking together with all the partners agreeing to regularise the account. Even after the death of Shivajirao, one of the partners, who happened to be the son of the deceased partner and a member of the Legislative Assembly, had assured that the account would be regularised within a period of 15 days. Counsel submitted that the recovery certificates attained finality. The Petitioner has not challenged the recovery certificates. The Petitioner moved the State Government in a second Revision Application and at the same time

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instituted Writ proceedings before this Court. Moreover, it was urged that the recovery certificates would establish that the estate of the deceased partner was substantially represented by the presence of his son Prakash Shendge, who was already on the record of the recovery proceedings initiated under section 101 and by the three other sons of the deceased. Counsel stated that on 27^th April 2002, the Bank had during the pendency of the proceedings before the Assistant Registrar, drawn the attention of the authority to the circumstance that Shivajirao had died and placed on record the names of the legal representatives. The Bank requested that his legal representatives should be brought on record and both the recovery certificates dated 13^th September 2002 record the names of his heirs

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namely, Ramesh, Suresh and Sandip, as being on record.

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In considering the merits of the rival contentions, it would be appropriate

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to refer to the relevant statutory provisions on the subject. Rule 1 of the order 30 of the Civil Procedure Code, 1908, provides that any two or more persons claiming or being liable as partners and carrying on business in India may sue or be sued in the name of the firm, if any, of which, such persons are partners at the time of the accrual of the cause of action. Rule

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4 provides that notwithstanding anything contained in section 45 of the

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Indian Contract Act, where two or more persons may sue or be sued in the name of a firm and any of such persons dies, whether before the institution

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or during the pendency of any suit, it shall not be necessary to join the legal representatives of the deceased as a party to the suit. Rules 49 and 50 of Order 21 respectively deal with attachment of partnership property and the execution of a decree against a firm. Rule 50 stipulates that, where a decree has been passed against a firm, execution may be granted i)against any property of the partnership; ii) against any person who has appeared in his own name or who has admitted on the pleadings that he is, or has been adjudged to be, a partner; iii) against any person who has been individually served as a partner with a summons and has failed to appear. Under sub rule (2) of Rule 50, where a decree holder seeks to execute a decree against any person other than one specified in (ii) and (iii) above, he may apply to the Court which passes a decree for leave to do so.

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A Division Bench of this Court held in Mathuradas Canji Matani Vs. Ebrahim Fazalbhoy ,³ that where a partner was dead on the date of the institution of the suit and a liability is sought to be fixed on the private

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estate of a deceased partner apart from his interest in the partnership

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3 AIR 1927 BOM 581

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assets then, the legal representatives must be added. The Division Bench took note of the fact that there was substantial similarity in the language used in Order 30 and Order 21 Rules 49 and 50 with the corresponding rules of practice in England, The Division Bench cited the dictum of Romer L.J. In Ellis Vs. Wadeson to the effect that, if the legal representatives of a deceased partner are not added expressly as Defendants and the action is brought against the firm in the name of the firm, then judgment can only be obtained as against the surviving partners and be enforced against them and against the assets of the partnership. The issue was considered by the Supreme Court in Her Highness Mandalsa Devi (Supra). The Supreme Court held that in a normal case where all the partners of a firm are capable of being sued a suit may be filed and a decree obtained against the firm under Order 30 and such decree may be executed against the property of the partnership and all the partners by following the procedure of Order 21 Rule 50 of the Code of Civil Procedure. However, the Court noted that, there may be certain cases where it is found that one of the partners cannot be sued or cannot be adjudged a Judgment Debtor. Dealing with the case of a partner who has died, the Supreme Court observed as follows:

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“Again take a case where the creditor of a firm institutes a suit

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against a firm and one of its partners at the time of the accrual of

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the cause of action is dead at the time of the institution of the suit. The suit against the firm is really a suit against all the partners who were its partners at the time of the accrual of the cause of action, including the dead partner. Order 30 Rule 4 of the Code of Civil Procedure enables the creditor to institute the suit against the firm in the firm name without joining the legal representative of the deceased partner. The suit is, therefore, competent, but no suit can be instituted nor can a decree be obtained against a dead person. The decree passed in such a suit will, therefore, bind the partnership and all the surviving partners, but will not affect the separate property of the deceased partner”

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The Judgment of the Supreme Court enunciates the proposition that, Order 30 Rule 4 enables the creditor of a partnership firm to institute a suit in the name of the firm without joining the legal representatives of a deceased partner and such suit would be competent. The decree that is passed in such suit would bind the partnership and the surviving partners. However, the decree would not affect the separate property of the deceased partner.

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The Supreme Court, it may be noted, cited with approval the dictum of Romer L.J. in Ellis Vs. Wadeson , which had been relied upon in the judgment of the Division Bench of this Court in Mathuradas’s case .

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In the present case, the crux of the issue is as to whether, as a matter of fact, the estate of the deceased partner was validly represented in the proceedings which led up to the issuance of a recovery certificate.

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In companion Writ Petition No.2020 of 2009, which has been filed by the

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Bank in order to impugned the correctness of the order passed by the Minister, Co-operation, granting stay of the recovery proceedings on 7^th August 2009, the bank has specifically averred in paragraph 9(v) of the Petition that, on 27^th April 2002, it had addressed a letter to the Assistant Registrar of Co-operative Societies informing him that Shivajirao Shendge who was a partner of the firm had died on 23^rd December 2001 and mentioned there the names of his legal representatives. A copy of the letter addressed by the Bank to the Assistant Registrar, which bears an endorsement of the Registrar dated 29^th April 2002 has been placed on record. The Recovery certificates which were issued on 13^th September

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2002 clearly show the presence of i) Ramesh Shendge; ii) Suresh Shendge; iii)Sandipan Shendge, in their capacity of heirs. Obviously these persons could have been present only as heirs of the deceased partner Shivajirao Shendge. Apart from his three sons as aforesaid, the fourth son, Prakash Shendge, who was a partner of the partnership firm was already on record. In these circumstances, the material before the Court is sufficient to establish that the estate of the deceased partner was substantially represented in the proceedings before the Assistant Registrar of Cooperative Societies.

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Indeed, the loan in the present case was taken by the partnership firm during the life time of the deceased partner. The loan application, as already noted, was signed by all the partners including the partner who

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died, subsequently. The loan was sanctioned by the Chairman of the Bank who also happened to be a partner of the firm. All the partners had furnished an undertaking to regularise the account. Even after the death of his father, one of the partners who was a member of the Legislative Assembly had by his letter dated 27^th July 2005, assured the Bank that he would pay an amount of Rs.5 crores within a period of 15 days. That

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assurance has not been fulfilled. Section 25 of the Indian Partnership Act

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1932, provides that 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. In Dena Bank Vs. Bhikhabhai Prabhudas Parekh & Co. (2000) 5 SCC 694 and in Ashutosh Vs. State of Rajasthan & ors. (2005) 7 SCC 308, the Supreme Court observed that a partnership firm is only a compendious name for all the partners . It does not have any existence apart from its partners. A decree in favour of or against the firm in the name of the firm has the same effect as a decree in favour of or against the partners. While the firm is incurring a liability it can be assumed that all partners were incurring that liability and so the partners remain liable jointly and severally for all the acts of the firm.

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10.In the present case the concurrent finding of both the adjudicating authorities below is that, the residential flat in question was the property of the deceased partner. It is an admitted fact that the residential flat was originally allotted by HUDCO to the deceased partner in his life time.

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11.In these circumstances, the plea for the raising of attachment was

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misconceived and the Application was correctly rejected by the Competent

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Authority. The order of the Divisional Joint Registrar, dismissing the Revision does not called for interference.

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12.The Petition shall accordingly stand dismissed.

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(Dr. D.Y.Chandrachud, J)