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Her Highness Maharani Mandalsa Kumari Devi v. Ramnarain Private Ltd.
Case Summary — S.T. Desai, J.
Factual and Procedural Background
This appeal arises from an order of Mr. Justice Shelat on a chamber summons under Order XXI, rule 50(2), which granted leave to the decree-holder to proceed in execution against certain persons alleged to be partners in the firm Messrs. Jagatsons International Corporation. The firm included several partners, one of whom was the Maharaja of Sirmoor, a Ruler recognised by the Government of India as within the scope of section 86 of the Code of Civil Procedure.
The plaintiffs (respondents before the court) filed a summary suit against the firm to recover Rs. 1,96,831.58 nP and took out a summons for judgment. Service of the summons was effected on the firm's manager and on one partner, Shib Chunder Kumar. At the hearing of the summons, the firm, through attorneys and counsel, submitted to a decree as prayed and was permitted to pay by instalments. The firm defaulted on payment. The plaintiffs applied by chamber summons for leave to execute the decree against seven individual partners (excluding the Maharaja of Sirmoor). Those seven persons were admitted to have been partners at all material times.
The learned Judge (Shelat, J.) made the chamber summons absolute, and four of the partners appealed to this Court. The appellants contended, principally through Mr. Singh, that the consent required by section 86 (read with section 87B) of the Code of Civil Procedure had not been given and that therefore the decree was a nullity and execution could not be permitted against the partners.
Legal Issues Presented
- Whether a decree passed against a firm is a nullity if one of the partners is a Ruler of a former Indian State and the requisite prior written consent of the Central Government under section 86 (read with section 87B) to sue that Ruler was not obtained.
- Whether a suit filed in the name of a firm (under Order XXX, r. 1) operates as a suit against every individual partner for all purposes, and if so, whether the immunity of a Ruler partner extends to the other partners or renders the decree void as to them.
- Whether the executing court could refuse execution against individual partners on the ground that the underlying consent to sue a Ruler-partner was absent and thus the decree was void.
Arguments of the Parties
Appellants' Arguments
- One of the partners in the defendant firm was the Maharaja of Sirmoor, a Ruler recognised under section 86 of the Code of Civil Procedure; therefore, a suit against the firm in which he was a partner could not validly be instituted without prior written consent of the Central Government as required by section 86 (read with section 87B).
- If the requisite consent was not obtained, any decree passed in such a suit would be a nullity. The appellants argued that this nullity could be relied upon by the executing court to decline execution against the partners.
- Relying on a decision of Chagla C.J. (Duleria & Co. v. Pokerdas Meghraj), the appellants contended that a suit against a firm containing a Ruler-partner could not in any circumstances be maintained or that the decree would be void if the prior consent had not been obtained.
- A related contention was formulated as a syllogism: the decree was against the firm (not individual partners), the decree is indivisible, therefore the decree was a nullity as to all partners if it could not validly be made against the Ruler-partner.
Table of Precedents Cited
| Precedent | Rule or Principle Cited For | Application by the Court |
|---|---|---|
| Duleria & Co. v. Pokerdas Meghraj, [1953] Bom. 237 | Consideration of whether a suit filed in the firm name was affected by the presence of a Ruler-partner who lacked Central Government consent; the case addressed whether an appearance under protest should remain and whether the Maharaja was a partner. | The court treated this decision as context-specific and refused to adopt a broad reading urged by the appellants. The judgment was read as directing that, where the question of a Ruler being a partner arises, that issue must be tried; it was not authority for the proposition that a suit can never be filed against a firm containing a Ruler-partner. |
| Western National Bank of City of New York v. Perez Triana & Co., [1891] 1 Q.B. 304 | Authority for the principle that suing in the firm's name is in truth suing the individual partners; the firm-name is a convenient label denoting the persons who compose the firm. | The court relied on this principle to hold that a decree passed against a firm operates as a decree against each individual partner; consequently, a decree against Jagatsons International Corporation was a decree against every partner, including the Maharaja of Sirmoor. |
Court's Reasoning and Analysis
The Court began by acknowledging the legal effect of sections 86 and 87B of the Code of Civil Procedure: a decree against a Ruler of a former Indian State without the requisite prior written consent of the Central Government would indeed be a nullity because the provisions are imperative and a court lacking that certificate would be without jurisdiction to entertain the suit against such a person.
However, the Court distinguished two related but distinct questions: (a) whether a decree passed against a firm in which one partner is a Ruler is necessarily a nullity as to all the partners because consent was not obtained, and (b) whether suing in the firm-name is, for all purposes, equivalent to suing the individual partners. The Court accepted that a suit in the firm-name operates as a suit against the individual partners (relying on Western National Bank), but rejected the proposition that the absence of consent in respect of a Ruler-partner renders the entire decree void as to other partners.
The judgment examined the Duleria decision and emphasised its factual and procedural context: in Duleria the City Civil Court's order was set aside so that the question whether the Maharaja was a partner could be tried; the observations in that case were not to be read as laying down a sweeping rule that suits could never be filed against a firm containing a Ruler-partner. The Court therefore limited the scope of Duleria to its true ratio.
The Court explained that a firm is not a separate juristic person; the firm-name is a label referring to the persons constituting it. Accordingly, a decree in the firm's name is, in substance, a decree against the individual partners, who are jointly and severally liable to the judgment-creditor. If one partner (the Ruler) could properly claim immunity for himself because of lack of prior consent, that immunity could be availed of only by that partner and could not be extended to or asserted on behalf of the other partners.
The Court also addressed the syllogistic argument that because the decree was against the firm and indivisible it must be null; it found the premises false. In the context of established law, a decree against a firm is a decree against its partners; therefore the decree could not be treated as a nullity against the other partners. The Court noted that there are exceptions and safeguards in execution law (Order XXI, rule 50), but those exceptions did not alter the present conclusion and were not material to the point decided.
In short, the Court accepted (i) that a decree against a Ruler without the Central Government's prior written consent is a nullity as to that Ruler; but (ii) rejected the contention that absence of consent in relation to the Ruler-partner automatically voids the decree as to other partners or prevents execution against them.
Holding and Implications
APPEAL DISMISSED
Holding (core ruling): The Court held that the decree passed on the summary summons in the name of Messrs. Jagatsons International Corporation operated as a decree against each individual partner, including the Maharaja of Sirmoor, and that the decree could not be treated as a nullity as to the other partners simply because the requisite prior written consent in respect of the Ruler-partner had not been obtained. Consequently, the executing court's order granting leave to proceed in execution against the partners was correct and the appeal was dismissed.
Implications: The direct effect on the parties is that execution may proceed against the individual partners (the appellants' contention that the decree was a nullity as to them was negatived). The Court limited the Duleria decision to its context and reaffirmed the established principle that suing in a firm's name sues the individual partners. The opinion does not announce any novel or sweeping new precedent beyond these applications of settled principles; it confines itself to the present facts and the correct interpretation of the cited authorities and statutory provisions.
Solicitors for respondent (as recorded in the opinion): Crawford Bayley & Co.
S.T Desai, J.:— This is an appeal from a judgment of Mr. Justice Shelat on a chamber summons under O. XXI, r. 50(2) and the order appealed against is one granting leave to the decree-holder to proceed in execution against certain persons as partners in the firm of Messrs. Jagatsons International Corporation. In that firm there were several partners including the Maharaja of Sirmoor, a principality in Himachal Pradesh. There is no dispute that the Government of India had recognised the Maharaja of Sirmoor as a Ruler entitled to the privileges under s. 86 of the Civil Procedure Code. The plaintiffs, who are respondent No. 1 before us, filed a suit against that firm to recover a sum of Rs. 1,96,831.58 nP. The suit was filed as a summary suit and the plaintiffs took out a summons for judgment. The writ of the summons was served only upon the manager of the firm and upon one of the partners, Shib Chunder Kumar, who is respondent No. 5 to the appeal. At the hearing of the summons for judgment, the firm was represented by attorneys and counsel and submitted to a decree as prayed and applied for liberty to pay the decretal amount in certain instalments, which application was granted. The firm failed to pay the instalments and the plaintiffs took out a chamber summons, out of which arises this appeal, for liberty to execute the decree against the seven individual partners (other than the Maharaja of Sirmoor) mentioned in the summons. Those seven persons were admittedly partners in the defendant firm at all material times. Various contentions were raised before Mr. Justice Shelat, who negatived them. We shall only examine those contentions which are pressed before us by Mr. Singh, learned counsel for the appellants. The learned Judge, as we have already mentioned, made the summons absolute and four of the partners have now come to this Court in appeal.
2. It has been argued firstly that the decree passed on the summons for judgment and which was a consent decree was a nullity, and if it was a nullity, it was competent to the executing Court to go into that contention and decline to grant any execution against the partners against whom execution of the decree was sought to be enforced by the chamber summons. The argument is that one of the partners in the firm of the judgment-debtors being a Ruling Prince, no valid decree could be passed against the firm of which he was a partner without the consent of the Central Government certified in writing as required by s. 86 of the Civil Procedure Code. Section 86 of the Civil Procedure Code has to be read with s. 87B which applies the principle of immunity to foreign Rulers to the Rulers of former Indian States. Now, the argument here is that no suit can be filed against a firm if one of the partners in that firm is a Ruler of a former Indian State, and if a suit is filed against a firm in which one of the partners is a Ruler of a former Indian State, the suit is not maintainable, and if a decree were to be passed in that suit, that decree would be a nullity. Another step of the argument is that a decree, against a Ruler of a former Indian State without the requisite consent of the Central Government before the institution of the suit is a nullity. We agree with Mr. Singh when he says that a decree passed against a Ruler of a former Indian State without the requisite consent of the Central Government would be a nullity. Sections 9 and 86 of the Civil Procedure Code have, in this contest, to be read together, and by doing so it must follow that a Court has no inherent jurisdiction to entertain a suit against a person to whom s. 86 applies. It can only do so if the requisite consent of the Central Government is obtained before, the institution of the suit. The provisions contained in s. 86, it is well established, are imperative, and a decree passed by a Court without the requisite certificate would be by a Court which has no jurisdiction at all to entertain the suit. It would be a case of the total absence of competence and the decree would be a nullity. But that is not the real difficulty of Mr. Singh in this ease. The real difficulty of Mr. Singh is when he asks us to accept the proposition that a decree passed against a firm in which one of the partners is a Ruler of a former Indian State would be a nullity if the consent of the Central Government was not obtained to the filing of the suit against him. The suggestion is that a suit against a firm in the name of the firm is as much a suit against every partner of the firm, including the partner who is a Ruler of a former Indian State. So far, we are in agreement with Mr. Singh. A suit against a firm is a suit against all the partners of the firm, and a fortiori it is a suit against one of those partners who is a Ruler of a former Indian State. But it is not possible for us to accede to the argument that a decree against a firm in which one of the partners happens to be a Ruler of a former Indian State is a nullity if the suit was filed without the requisite certificate.
3. Greatest reliance has been placed by Mr. Singh on a decision of Chagla, C.J in Civil Revision Application decided by his Lordship sitting alone reported in Duleria & Co. v. Pokerdas Meghraj . [1953] Bom. 237. We would like to preface our observations on that case by drawing attention to the very peculiar nature of the application which the learned Chief Justice had to consider. In the firm of Dulerai & Co. there were four partners, one of whom was the Maharaja of Orchha, a Ruler of the former Indian State of Orchha. The respondents to the Revision Application were Messrs. Pokerdas Meghraj and they filed a suit in the City Civil Court, Bombay, against the firm of Dulerai & Co. in the name of that firm to recover a sum of Rs. 5,000. The defendants filed their appearance under protest and informed the plaintiffs that as the Maharaja of Orchha was one of the partners and as the requisite consent of the Central Government under s. 87B read with s. 86 to file the suit against the Maharaja had not been obtained, the suit was not maintainable. The plaintiffs thereupon took out a chamber summons asking that the appearance under protest be removed. The chamber summons was heard by the Principal Judge of the City Civil Court, who held that as the suit was filed against the firm in the firm name and not against the partners in their individual names, ss. 86 and 87B had no application. He made the summons absolute and the Civil Revision Application was against that order. What the learned Chief Justice had to decide, and in fact decided, was that the learned Principal Judge of the City Civil Court was in error in passing that order. The effect of the judgment was that the appearance under protest was to remain on the record of the suit and the City Civil Court was directed to try the issue as to whether the Maharaja of Orchha was a partner in the defendant firm. It is in that context that certain observations seem to have been made in the judgement in that case. Read out of context, those observations may lend support to the argument pressed before us by Mr. Singh. But we are not prepared to read those observations as laying down the proposition which Mr. Singh has contended for before us. But as we have already observed, those observations are to be read in their proper contest bearing in mind the real point which had to be decided and what we are concerned with is the ratio of that decision. We do not think that the correct ratio of that decision is that a suit can in no circumstances be filed against a firm in which a Ruler of a former Indian State is a partner. Of course, if the question arises as to whether a Ruler of a former Indian State is a partner in a firm, then it would be necessary for the Court to determine that point and that is what seems to us to have been decided in that case. But we do not think we should read that decision as laying down the wide general proposition pressed for our acceptance by Mr. Singh.
4. A suit can be filed against a firm under O. XXX, r. 1, of the Civil Procedure Code if the requirements of that rule are satisfied. When a suit is filed against a firm under O. XXX, r. 1, the effect of that is, as was pointed out by Lindley L.J in the oft-quoted passage in the decision in Western National Bank of City of New York v. Perez Triana & Co. . [1891] 1 Q.B 304. (p. 314):
“It is only a convenient method for denoting those persons who compose the firm at the time when that name is used and a plaintiff who sues partners in the name of their firm in truth sues them individually, just as much as if he had set out all their names.”
5. Therefore, when a suit is filed in the name of a firm, the true position is that for all purposes, barring certain exceptions which are in the present context not material, the suit must be treated as operating as a suit and effective as a suit filed against all the partners in their individual names. A firm is not a legal entity or a person. A firm name is merely a label given for convenience to describe and refer to persons who have agreed to carry on business in partnership. Although in mercantile usage a firm is deemed to be clothed with sufficient personality, in the eye of law a firm has no legal existence as such. It is not a juristic person, and when reference is made to a firm, it is really to the individual partners who constitute that firm. This principle is so firmly established that its application permits of no doubt or debate. Therefore, in the present case when the summary suit was filed against the firm of Jagatsons International Corporation, it was for all relevant purposes a suit against all the partners in that firm and when a decree was passed in that suit on the summons for judgment, it was for all relevant purposes a decree against all the partners in that firm. If one of the partners was a person against whom a decree could not have, been passed because the requisite consent of the Central Government to the filing of the suit against him had not been obtained, that want of consent can be availed of only by that person and not by the other partners in the firm. The other partners could not possibly claim any immunity under s. 86 or s. 87B of the Code of Civil Procedure. In substance and in effect, the argument of learned counsel for the appellants asks us to extend that immunity to those other partners of the firm.
6. The same argument has been presented by Mr. Singh in a slightly different form.
7. It is stated that the decree passed by the Court was against Messrs Jagatsons International Corporation and not against the individual partners. Says Mr. Singh, the decree could have been passed against the individual partners other than the Maharaja of Sirmoor. The next premise is that the decree is not divisible and on these premises it is urged that the conclusion must of necessity be that the decree against the firm was a nullity. The premises of this syllogism are open to serious doubt. To say that the decree against Messrs. Jagatsons International Corporation was not a decree against the individual partners is in the present contest a fallacy. We have already referred to the legal position on the subject, and we may say it once again that a decree passed against a firm is a decree against the individual partners. There are certain exceptions to this proposition, but they do not in any manner disturb the correctness of this proposition. Those exceptions refer to certain safeguards in the matter of execution and those safeguards are to be found in O. XXI, r. 50, of the Civil Procedure Code. But in dealing with the present point we are not concerned with them. The argument is stressed in the form of a question. How can a decree passed against a firm in which one partner is a Ruler of a former Indian State be said to be a decree not against him? We do not suggest that the decree was not against the Maharaja of Sirmoor. The view we take is that it was a decree not only against the Maharaja of Sirmoor, but a decree against him as also every individual partner in the firm. The partners in the firm being jointly and severally liable to the judgment-creditor, the decree cannot be said to be a nullity against any of the appellants before us. For all these reasons, the present contention of the appellants must be negatived.
8. [The rest of the judgment is not material to this report.]
Solicitors for the respondent: Crawford Bayley & Co.
9. Appeal dismissed.
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