JACOB KALLUMMOODAN v. M/S INTEGRATED RUBIAN EXPORTS LTD.

## **IN THE HIGH COURT OF KERALA AT ERNAKULAM** **PRESENT :** **THE HONOURABLE MR. JUSTICE P.BHAVADASAN** **MONDAY, THE 1ST APRIL 2011 / 11TH CHAITHRA 1933** **WP(C).No. 13324 of 2007(J)** **---------------------------------------** **( IA .NO. 1001 2005 IN OS.NO. 433/2005 of PRINCIPAL SUB COURT,KOLLAM)** **....................** **PETITIONER(S):** **-----------------------** **JACOB KALLUMMOODAN, S/O.JOSEPH KALLUMMOODAN, RESIDING AT JOY VILLA, SAKTHIKULANGARA, KOLLAM.** **BY ADV. SRI.K.JAYAKUMAR SRI.P.B.KRISHNAN** **RESPONDENT(S):** **---------------------------** **1. M/S.INTEGRATED RUBIAN EXPORTS LTD., AROOR, CHERTHALA TALUK-688 534, REPRESENTED BY THE MANAGING DIRECTOR.** **2. C.H.ABDUL RAHIM, MANAGING DIRECTOR, M/S.INTEGRATED RUBIAN EXPORTS LTD., AROOR, CHERTHALA TALUK-688 534.** **3. T.A.MOHAMMEDKUTTY, DIRECTOR, M/S.INTEGRATED RUBIAN EXPORTS LTD., AROOR, CHERTHALA TALUK-688 534, RESIDING AT THELAPPALLIL HOUSE, CHANDIROOR, CHERTHALA685 547.** **R1 TO R3 BY ADV. SRI.ALIAS M.CHERIAN** **THIS WRIT PETITION (CIVIL) HAVING BEEN FINALLY HEARD ON 21/03/2011, THE COURT ON 01/04/2011 DELIVERED THE FOLLOWING:** **sts** ## **WP(C)NO.13324/2007** ## **APPENDIX** ## **PETITIONER'S EXHIBITS:** - **P1 COPY OF THE DATED 17/10/2005, THE PLAINT IN O.S.NO.433/2005 SUB COURT KOLLAM.** - **P2 COPY OF THE DATED 14/3/2007, THE APPLICATION I.A.NO.1001/2007 IN O.S.NO.433/2005 SUB COURT, KOLLAM.** - **P3 COPY OF THE DATED 20/3/2007, THE COUNTER AFFIDAVIT IN I.A.NO.1001 OF 2007 IN O.S.NO.433/2005.** - **P4 COPY OF THE DATED 27/3/2007, THE ORDER IN I.A.NO.1001/2007 IN O.S.NO.433/2005,SUB COURT KOLLAM.** ## **RESPONDENT'S EXHIBITS: NIL** ## **/TRUE COPY/** ## **P.A.TO.JUDGE** **sts** ## **P. BHAVADASAN, J.** - - - - - - - - - - - - - - - - - - - - - - - - - - - W.P.(C). No. 13324 of 2007 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - Dated this the 1[st] April day of April, 2011. ## **JUDGMENT** The petitioner advanced amounts to the first respondent Company on various occasions. An amount of Rs.9,16,600/- was due. Since the amount was not paid, the suit was laid. Along with the suit, the petitioner moved I.A. 2400 of 2005 for attachment of the property belonging to the Company. The respondents entered appearance and undertook not to assign the property. That undertaking was recorded and the I.A. was closed. 2. According to the petitioner, he came to know that the property that was sought to be attached was highly encumbered and if the petitioner is able to get a decree in his favour, he may not be successful in recovering it by proceeding against the said property, which was sought to be attached and in respect of which the undertaking was given by the second and third WPC. 13324/2007. 2 respondent. Therefore the petitioner filed I.A. 1001 of 2007 seeking to attach another property in which it was claimed that the third defendant had a share which was valued at Rs.8,00,000/-. 3. That I.A. was opposed by the respondents. They pointed out that the property that was now sought to be attached by the petitioner belongs to a partnership firm and it is not liable to be attached and it does not exclusively belong to the third defendant. It is also pointed out that unless the partnership firm, which owned the property and the other partners were made parties to the proceedings, attachment cannot be issued against the property. 4. The lower court after considering the rival contentions held in favour of the respondents and dismissed the petition. That order is challenged in this writ petition. 5. Learned counsel appearing for the petitioner pointed out that the court below was not justified in dismissing the petition. It was pointed out that the court below failed to advert to Order 21 Rule 49 and Order 38 WPC. 13324/2007. 3 Rule 11A of the Code of Civil Procedure, which would show that the property is attachable. At any rate, according to learned counsel, the share of profits due to the third defendant from the partnership firm, of which he was a partner, is liable to to be subjected to a charge. In support of his contention, learned counsel relied on the decision reported in **K. Sobhana v. Catholic Syrian Bank** (1989 (1) K.L.J 19). Reliance was also placed on the decision reported in **Narayanapa v. Bhaskars Krishnappa (** A.I.R.1966 SC 1300). It was therefore contended that even assuming that the property as such was not liable for attachment, the court below ought to have issued an order creating a charge over the share of profits that is available to the third defendant from the partnership. 6. Per contra, learned counsel appearing for the respondents pointed out that what is sought for is an attachment before judgment of the property of the firm, which is not permissible under law. Learned counsel pointed out that Order 21 Rule 49 has application only when a WPC. 13324/2007. 4 decree is passed against the partnership and the property belonging to a partnership shall not be attached or sold in execution of a decree other than a decree passed against the firm or against the partners in the firm as such. That provision cannot be imported by virtue of Order 38 Rule 11A CPC. It is well settled, according to learned counsel, that a person cannot proceed against the properties of the partnership firm for a debt due from one of the partners. Accordingly, it is contended that the court below was perfectly justified in dismissing the application. 7. In order to understand the controversy between the parties, it is necessary to identify the issue involved. Going by the petition filed by the petitioner before the court below what is sought for is the attachment of the immovable property in which the third respondent is said to have a share valued at Rs.8 Lakhs. The property admittedly belonged to the partnership, of which, it is stated, the third respondent is a partner. The claim of the petitioner has to fail on two counts. WPC. 13324/2007. 5 8. The first count is that it is by now well settled that the properties of a partnership firm can be proceeded against only if there is a decree against the firm. The provisions relied on by the learned counsel for the petitioner read as follows: _“Order XXI Rule_ _**49. Attachment of partnership property** .-(1) Save as otherwise provided by this rule, property belonging to a partnership shall not be attached or sold in execution of a decree other than a decree passed against the firm or against the partners in the firm as such._ _(2) The Court may, on the application of the holder of a decree against a partner, make an order charging the interest of such partner in the partnership property and profits with payment of the amount due under the decree, and may, by the same or a subsequent order, appoint a receiver of the share of such partner in the profits (whether already declared or accruing) and of any other money which may be coming to him in respect of the partnership, and direct accounts and inquiries and make an order for the sale of_ WPC. 13324/2007. 6 _such interest or other orders as might have been directed or made if a charge had been made in favour of the decree-holder by such partner, or as the circumstances of the case may require._ _(3) The other partner or partners shall be at liberty at any time to redeem the interest charged or, in the case of a sale being directed, to purchase the same._ _(4) Every application for an order under sub-rule (2) shall be served on the judgment-debtor and on his partners or such of them as are within India._ _(5) Every application made by any partner of the judgment-debtor under sub-rule (3) shall be served on the decree-holder and on the judgment-debtor, and on such of the other partners as do not join in the application and as are within India._ _(6) Service under sub-rule (4) or sub-rule (5) shall be deemed to be service on all the partners, and all orders made on such application shall be similarly served.”_ _“Order XXXVIII Rule_ _**11A. Provisions applicable to attachment.** - (1) The provisions of this Code_ 7 WPC. 13324/2007. _applicable to an attachment made in execution of a decree shall, so far as may be, apply to an attachment made before judgment which continues after the judgment by virtue of the provisions of rule 11._ _(2) An attachment made before judgment in a suit which is dismissed for default shall not become revived merely by reason of the fact that the order for the dismissal of the suit for default has been set aside and the suit has been restored.”_ 9. A reading of Order 21 Rule 49 leaves one in no doubt that the property of the partnership cannot be attached or sold in execution of a decree other than a decree passed against the firm or partners of the firm as such. Then an exception is carved out that the court may, on an application by the holder of a decree, though there is no decree against the firm, create a charge on the interest of such partner in the partnership property and profits he is entitled to receive from the firm. Obviously this provision WPC. 13324/2007. 8 has application only if a decree is passed. Even though Order 38 Rule 11A says that the provisions of the Code applicable to an attachment made in execution of a decree shall apply as far as may be to an attachment before judgment, also does not mean that there can be attachment of the property of the firm or the so-called share of the partner in the partnership property. It must be remembered that in the case on hand what is sought for is an attachment of the share of the third respondent in the property of the firm. 10. In the decision relied on by the learned counsel for the petitioners, i.e., **K. Sobhana's case** (supra) it was held as follows: _“The question as to whether the decree_ _holder can attach the partnership property in execution of a decree obtained against a partner of a firm in his personal capacity requires to be considered in the light of the law stated above. A reference in this context to Order 21 Rule 49is also necessary. Clause (1) of Rule 49 provides that the property belonging to a partnership shall_ WPC. 13324/2007. 9 _not be attached or sold in execution of a decree other than a decree passed against the firm or against all the partners thereof as such. a decree holder however, can proceed against the interest of the partner in the partnership property in the manner laid down in clause (2) of Rule 49. This clause says that an order creating a charge on the interest of the judgment debtor in the partnership however, could be passed. The court can by the same or a subsequent order also appoint a receiver of the share of such partner in the profits and of any other money which may be coming to him in respect of the partnership and direct accounts and enquiries. Not only that the court can make an order for the sale of such interest. this clause also empowers the court to issue such other orders as might have been directed or made if a charge had been made in favour of the decree holder by such partner or as the circumstances of the case may require. On any such order being passed, the other partner or the partners shall be at liberty at any time to redeem the interest charged or in the case of a sale being directed, to purchase the said right. (clause 3) Every application for an order under sub-rule 2 shall be_ WPC. 13324/2007. 10 _served on the judgment debtor and on his partners or such of them as are within India. Similarly every application made by any partner of the judgment debtor under sub-rule 3 shall be served on the decree holder and on the judgment debtor and on such of the other partners as do not join in the application and as are within India. It is further provided by clause 6 that service under sub-rule 4 or sub-rule 5 shall be deemed to be service on all partners, and all orders made on such application shall be similarly served. This in short is the scheme of Rule 49.”_ ## 11. In the decision reported in **Narayanapa's case** (supra) it was held as follows: _“The provisions of Ss.14, 15, 29, 32, 37, 38 and 48 make it clear that whatever may be the character of the property which is brought in by the partners when the partnership is formed or which may be acquired in the course of the business of the partnership it becomes the property of the firm and what a partner is entitled to is his share of profits, if any, accruing to the partnership from the realisation of his property and upon dissolution of the partnership to a share_ WPC. 13324/2007. 11 _in the money representing the value of the property. No doubt, since a firm has no legal existence, the partnership property will vest in all the partners and in that sense every partners has an interest in the property of the partnership. During the subsistence of the partnership, however, no partner can deal with any portion of the property as his own. Nor can he assign his interest in a specific item of the partnership property to anyone. His right is to obtain such profits, if any, as fall to his share from time to time and upon the dissolution of the first to a share in the assets of the firm which remain after satisfying the liabilities set out in Cl.(a) and sub-cls.(i), (ii) and (iii) of Cl.(b) of S.48. The whole concept of partnership is to embark upon a joint venture and for that purpose to bring in as capital money or even property including immovable property, once that is done whatever is brought in would cease to be the exclusive property of the person who brought it in. It would be the trading asset of the partnership in which all the partners would have interest in proportion to their share in the joint venture of the business of partnership. The person who brought it in would, therefore, not_ WPC. 13324/2007. 12 _be able to claim or exercise an exclusive right over any property which he has brought in, much less over other partnership property. he would not be able to exercise his right even to the extent of his share in the business of the partnership. It is true that even during the subsistence of the partnership a partner may assign his share to another. In that case what the assignee would get would be only that which is permitted by S.29(1), that is to say, the right to receive the share of profits of the assignor and accept the account of profits agreed to by the partners._ “ 12. One fails to see how the principle laid down in the above decisions can be of any help to the petitioner. Neither of the decisions support the plea of the petitioner that he can proceed against the property of the firm stating that he seeks to have the share of the third respondent in the properties of the firm attached. 13. It is true that a partner can assign his interest in the partnership. But the assignee has only a limited right. WPC. 13324/2007. 13 He is only entitled to get the share of profits that is due to the assignor. In fact in the decision reported in **K.A.Ramachar v. I.T.Commissioner** (AIR 1961 SC 1059), it was held as follows: _“Under the law of Partnership, it is the partner and the partner alone who is entitled to the profits. A stranger, even if he were an assignee, has and can have no direct claim to the profits.”_ 14. In fact it will be profitable at this juncture to extract a passage by Lindley on Partnership, Fifteenth Edn. at page 533: _“Before the Partnership Act 1890 came into operation, a separate judgment creditor of a partner was entitled to levy execution not only against his debtor's separate property, but also against the property of any firm in which the debtor was a partner. The difficulties and inconvenience which arose from this mode of making a partner's share liable for his separate debts were pointed out in earlier editions of this work, and to these the reader is referred for the_ WPC. 13324/2007. 14 _law relating to this subject. This procedure was abolished by the Partnership Act 1890 and a new procedure following that available in the case of public companies was introduced. This alteration in the law was effected by section 23 of the Act, which is as follows:_ “23.-(1) After the commencement a writ of execution shall not issue against any partnership property except on a judgment against the firm. (2) The High Court, or a judge thereof, or a county court, may, on the application by summons of any judgment creditor of a partner, make an order charging that partner's interest in the partnership property and profits with payment of the amount of the judgment debt and interest thereon, and may by the same or a subsequent order appoint a receiver of that partner's share of profits (whether already declared or accruing), and of any other money which may be coming to him in respect of the partnership, and direct all accounts and inquiries, and give all other orders and directions which might have been directed or given if the charge had been made in favour of the judgment creditor by the partner, or which the circumstances of the case may require. WPC. 13324/2007. 15 (3) The other partner or partners shall be at liberty at any time to redeem the interest charged, or in case of a sale being directed, to purchase the same. (4) This section shall apply in the case of a cost-book company as if the company were a partnership within the meaning of this Act. (5) This section shall not apply to Scotland.” 15. It is well settled that a partner cannot deal with any portion of the partnership property as his own without the consent of other partners and he is not in the position of a co-owner. Until the firm is dissolved, the rights of the partner is also limited and that of his assignee is even more restricted. In this context, one may refer to the decision reported in **M.V. Karunakaran v. Krishan** (AIR 2007 SC 1501), wherein it was held as follows: “In Addanki Narayanappa and Another v. Bhaskara Krishnappa (dead) and thereafter his heirs and others (AIR 1966 SC 1300), this court opined: “........... _The whole concept of partnership is to embark upon a joint venture and_ WPC. 13324/2007. 16 _for that purpose to bring in as capital money or even property including immovable property, once that is done whatever is brought in would cease to be the exclusive property of the person who brought it in. It would be the trading asset of the partnership in which all the partners would have interest in proportion to their share in the joint venture of the business of partnership. The person who brought it in would, therefore, not be able to claim or exercise an exclusive right over any property which he has brought in, much less over other partnership property. he would not be able to exercise his right even to the extent of his share in the business of the partnership. As already stated his right during the subsistence of the partnership is to get his share of profits from time to time as may be agreed upon among the partners and after the dissolution of the partnership or with his retirement from partnership of the value of his share in the net partnership assets as on the date of dissolution or retirement after a deduction of liabilities and prior charges..............”_ _Herein we have to consider the case from altogether a different angle. It is not a case_ WPC. 13324/2007. 17 _where the partners of the firm were not the owners of the property. It is also not a case where the property was owned by the partnership firm. The partners as pre-existing co-owners had a definite share of the property. They merely applied their own property for running a business in partnership. On dissolution of the partnership, their right in the property revived. Using of a premises for business purpose would not automatically lead to the conclusion that the premises belonged to the partnership firm.”_ 16. It is thus very clear that unless a decree is obtained against the partnership, the assets of the partnership firm cannot be made liable for the debt of a partner. The only way to proceed against the debt incurred by a partner is under Order 21 Rule 49. That, as already stated, cannot be imported into by virtue of Order 38 Rule 11A. One cannot omit to note the opening words of Order 21 Rule 49, namely, ' _Save as otherwise provided by this rule..._ ', that clearly shows that the provisions contained in WPC. 13324/2007. 18 that rule are only for the purpose of that provision alone and does not extend to any other provision. Then again, what is intended by the said provision is only creation of a charge over the interest of the partner and the profits due to him from the firm. It does not contemplate attachment of the property of the partnership on the allegation that the partner has got a share in the property. That is something not known to law. In the case on hand, apart from the fact that there is no decree against the partnership inorder to enable the petitioner to proceed against him under Order 21 Rule 49, what is sought for is attachment of the property of the firm, which is not permissible under law. 17. Apart from the above fact, there is yet another glaring aspect. The third respondent herein, who is the third defendant in the suit is arrayed in the party array as the Director of the first respondent Company. It is an admitted fact that the first respondent company had incurred a debt and money was due from the company. It is significant to notice that there is no personal decree sought 19 WPC. 13324/2007. against the third defendant for the simple reason that the debt is alleged to have been incurred by the Company, which is a distinct and separate entity. Obviously no personal decree could have been passed against the third defendant. If that be so, the question of attachment of his share of profits and interest in the firm or creation of a charge does not arise at all. On this ground also the petition has to fail. Therefore, the lower appellate court was perfectly justified in dismissing the petition filed by the petitioner. No grounds are made out to interfere with the order impugned. This writ petition is without merits and accordingly it is dismissed. **P. BHAVADASAN, JUDGE** sb.