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Pannaji Devichand v. Lakkaji Dolaji

Bombay High Court
Jul 24, 1942
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Judgment Summary — Divatia, J.

Factual and Procedural Background

This revisional application concerns a dispute between two rival decree-holders seeking rateable distribution of assets realised in execution.

The petitioners obtained a decree against the firm of Kapurji Magniram, impleaded by its proprietor and vahivatdar Sogaji Ammaji Marwadi, and filed Darkhast No. 23 of 1937 to execute that decree. The opponents later obtained a decree against Sogaji Marwadi and four other persons in their individual capacities and filed Darkhast No. 176 of 1939 to execute their decree. In the opponents' darkhast certain property belonging to Sogaji was sold and the sale-proceeds were deposited in Court.

The petitioners applied for rateable distribution of those sale-proceeds on the ground that Sogaji had been served and had appeared in his own name in the petitioners' suit; consequently, the petitioners contended the decree against the firm was also executable personally against Sogaji and that therefore the capacities of the judgment-debtor were the same in both decrees.

The trial Court rejected the petitioners' application, holding that s.73 would apply only if both decrees were against the same judgment-debtor and concluding that Sogaji occupied different capacities in the two decrees (as partner in one and as an individual in the other). The trial Court relied on previous decisions including Balmer Lawrie & Co. v. Jadunath Banerjee and Sadhu Ram v. Dhanpat Rai-Telu Ram, and followed a subsequent High Court decision, Jamiyatram Gaurishankar v. Umiyashankar Pranshankar. The petitioners challenged that conclusion by filing the present revisional application.

Legal Issues Presented

  1. Whether, for the purpose of rateable distribution under section 73, the judgment-debtor Sogaji fills the same personal character where (a) one decree was obtained against a firm (with Sogaji served and appearing individually under Order XXX, rule 6) and (b) another decree was obtained against Sogaji in his individual capacity.
  2. Whether provisions of the Partnership Act (specifically s.49) or analogous provisions (referenced s.262 of the Indian Contract Act) prevent personal execution against a partner's separate property or otherwise preclude rateable distribution in the circumstances of this case.

Arguments of the Parties

Petitioners' Arguments

  • The petitioners asserted that in their suit against the firm of Kapurji the summons was served on Sogaji and he appeared in his own name; therefore, the decree against the firm was executable personally against Sogaji by virtue of Order XXX, rule 6 read with Order XXI, rule 50.
  • Because the decree was executable against Sogaji personally, the petitioners argued that Sogaji occupied the same capacity in both decrees and they were entitled to rateable distribution of the sale-proceeds deposited in Court in the opponents' darkhast.
  • The petitioners relied on authorities including Radha Kanta v. Pulin Krishna and Administrator-General of Bombay v. Haji Sultanalli Sushtary & Co., which supported the proposition that where a partner is served and appears personally, execution against him personally can follow and the judgment-debtor is the same for purposes such as set-off or rateable distribution.

Respondents' / Trial Court's Position

  • The trial Court held that section 73 applies only where both decrees are against the same judgment-debtor; it concluded that although the name was the same, Sogaji occupied different capacities in the two decrees (as partner in the petitioners' decree and as an individual in the opponents' decree), so s.73 was inapplicable.
  • The trial Court relied principally on Balmer Lawrie & Co. v. Jadunath Banerjee and Sadhu Ram v. Dhanpat Rai-Telu Ram (and a later High Court decision, Jamiyatram v. Umiyashankar), which were taken to support the proposition that different capacities of the same-named person may mean different judgment-debtors for the purpose of distribution.
  • In Sadhu Ram the respondents relied on s.49 of the Indian Partnership Act (and a similarity was noted to s.262 of the Indian Contract Act) to argue that a partner's separate property could not be made a hotchpot for rateable distribution between firm debts and the partner's separate debts.

Table of Precedents Cited

Precedent Rule or Principle Cited For Application by the Court
Balmer Lawrie & Co. v. Jadunath Banerjee Authority for the proposition that a decree against a firm may not be executable against an individual partner who was not served individually and hence that the partner may not be the same judgment-debtor for rateable distribution. The Court distinguished this case on its facts: in Balmer Lawrie the partner had not been shown to be capable of personal execution (not served individually), whereas in the present case Sogaji was served and appeared personally, so Order XXI, r.50(1) permits execution against him personally.
Sadhu Ram v. Dhanpat Rai-Telu Ram Held that, in view of s.49 of the Indian Partnership Act, rateable distribution could not be allowed because a partner's separate property should not be made a hotchpot for firm debts and individual debts. The Court rejected the applicability of that decision here: it found s.49 inapplicable because it deals with dissolution and distribution of firm vs. separate debts, whereas the present case involved one single decree and a going concern; also Order XXI, r.50 permits personal execution against a partner who has appeared.
Jamiyatram Gaurishankar v. Umiyashankar Pranshankar Applied the general proposition that a person holding different legal capacities (e.g., individual and heir) may not be the same judgment-debtor for rateable distribution. The Court considered this case distinguishable: that decision involved different capacities (individual vs. heir), whereas here the partner's personal liability arises specifically under the procedural rules (O.XXX and O.XXI r.50), so the capacities are not analogous.
Administrator-General of Bombay v. Haji Sultanalli Sushtary & Co. Held that cross-decrees between the same parties could be set off under Order XXI, r.18 because the cross-decrees were between the same parties. The Court treated the ratio as analogous: the decision supports the proposition that the parties must fill the same character; the Court applied that ratio to conclude that where a partner appears personally under O.XXX r.6, he is the same judgment-debtor for purposes of s.73.
Radha Kanta v. Pulin Krishna Followed the Administrator-General decision and supported the view that a partner who is served and appears personally can be treated as a judgment-debtor personally for execution purposes. The Court relied on Radha Kanta as supporting authority for the proposition that the decree could be executed against a partner personally where he had appeared, and therefore he would be the same judgment-debtor in both decrees, entitling the petitioners to rateable distribution.

Court's Reasoning and Analysis

The Court's analysis proceeded from the relevant provisions of the Civil Procedure Code and from the factual finding that Sogaji was served and appeared in his own name in the petitioners' suit.

  1. Statutory framework applied: the Court cited Order XXX, rules 1, 3, 5, 6 and 7 (service and appearance where defendants are sued as partners) and Order XXI, rule 50 (execution where a decree has been passed against a firm). The Court explained that:
    • Under O.XXX r.3 a summons addressed to a firm may be served on one or more partners.
    • Under r.5 a person served must be informed whether served as partner or manager and, in default, is deemed served as a partner.
    • Under r.6 persons sued as partners shall appear individually in their own names, but subsequent proceedings remain in the firm's name.
    • Under O.XXI r.50 where a decree has been passed against a firm, execution may be granted against partnership property and against any person who has appeared in his own name under O.XXX r.6 or r.7 or who has admitted or been adjudged to be a partner.
  2. Application to facts: because Sogaji was served as a partner and appeared personally under O.XXX r.6, the decree against the firm was executable personally against him by virtue of O.XXI r.50. Therefore, the "capacity" in which Sogaji was a judgment-debtor in the petitioners' decree corresponded to his personal capacity in the opponents' decree.
  3. Distinguishing contrary authorities:
    • Balmer Lawrie was distinguished because, in that case, the partner had not been shown to be subject to personal execution (he had not been served individually), so the decree could not be executed against him personally unless leave under O.XXI r.50(2) was obtained; the present case did not have that disability because Sogaji had appeared personally.
    • Sadhu Ram was considered insufficiently applicable: the Court questioned the application of s.49 of the Indian Partnership Act in that context because s.49 (dealing with distribution of firm and separate debts) applies on dissolution and concerns two distinct debts (firm debt vs separate debt), whereas the present case involved a single debt created by a decree; nothing in O.XXI r.50 conditions personal execution on the exhaustion of partnership assets.
    • Jamiyatram was distinguished as involving different capacities (individual vs heir) which the Court found not analogous to a partner who is personally liable under the specific procedural provisions permitting personal execution.
  4. Reliance on supportive authority: the Court found that the reasoning in Administrator-General of Bombay v. Haji Sultanalli Sushtary & Co. (and its affirmation in Radha Kanta v. Pulin Krishna) supported the view that where a person fills the same personal character in two decrees, the judgment-debtor is the same for purposes such as set-off or, here, rateable distribution under s.73.
  5. Conclusion of analysis: because Sogaji appeared personally under O.XXX r.6 and the decree against the firm was therefore executable personally against him under O.XXI r.50, Sogaji filled the same personal character in both decrees. Consequently, the petitioners were entitled to rateable distribution of the sale-proceeds deposited in Court.

Holding and Implications

Holding: The Court set aside the order of the lower Court, made the rule absolute, awarded costs, and remitted the matter to the trial Court for disposal according to law.

Implications for the parties:

  • The petitioners are entitled to rateable distribution in the darkhast filed by the opponents because Sogaji is to be treated as the same judgment-debtor in both decrees (having been served and appearing personally in the petitioners' suit, making the decree against the firm executable against him personally under O.XXI r.50).
  • The trial Court's contrary conclusion—based on the proposition that the same-named person filled different capacities so as to preclude rateable distribution—was reversed on the statutory and authorities-based analysis set out above.

The opinion resolves the dispute between these parties by reference to statutory provisions and existing authorities; it does not purport to announce a novel general principle beyond the application of Order XXX and Order XXI provisions to the facts of this case.

Rule made absolute.
J.G.R
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Divatia, J.:—

This revisional application arises in a dispute between two rival decree-holders for rateable distribution of certain assets realised in execution. The petitioners obtained a decree against the firm of Kapurji Magniram by its proprietor and vahivatdar Sogaji Ammaji Marwadi, and they filed Darkhast No. 23 of 1937 to execute the decree. Thereafter the opponents obtained a decree against the said Sogaji Marwadi and four other persons in their individual capacities, and filed darkhast No. 176 of 1939 to execute their decree. In the opponent's darkhast certain property belonging to Sogaji was sold and the sale-proceeds thereof were deposited in Court. The petitioners applied for rateable distribution of the assets inasmuch as they had obtained a decree against Sogaji. Their case was that in their suit against the firm of Kapurji, Sogaji was served and had also appeared in his own name. The decree was, therefore, executable personally against Sogaji. That being so, the capacity of Sogaji in both decrees was the same and they were entitled to rateable distribution in the sale-proceeds of his property in the opponents' darkhast.

The trial Court rejected the application on the ground that the petitioners would be entitled to rateable distribution under s. 73 only if both the decrees were against the same judgment-debtor; that the petitioners' decree was against Sogaji in his capacity as a partner of the firm of Kapurji while the opponents' decree was against him in his individual capacity. Thus, although the name was the same, Sogaji occupied different capacities in both the decrees, and therefore s. 73 was inapplicable. In coming to that conclusion the learned Judge relied upon two decisions, one of the Calcutta High Court in Balmer Lawrie & Co. v. Jadunath Banerjee and the other of the Lahore High Court in Sadhu Ram v. Dhanpat Rai-Telu Ram, both of which were followed by our High Court in Jamiyatram Gaurishankar v. Umiyashankar Pranshankar. The petitioners had relied upon the decisions in Radha Kanta v. Pulin Krishna, which had followed the decision of our High Court in Administrator-General Of Bombay…Plaintiff; v. Haji Sultanalli Sushtary & Co.…Defendants.. In the opinion of the learned Judge below the case of Administrator-General Of Bombay…Plaintiff; v. Haji Sultanalli Sushtary & Co.…Defendants. was distinguishable from the present case, and the decision in Radha Kanta v. Pulin Krishna being opposed to that in Balmer Lawrie & Go. v. Jadunath Banerjee he preferred to follow the latter, especially as it had been followed in Jamiyatram v. Umiyashankar. In order to appreciate the grounds of these decisions, it is necessary to refer to the relevant provisions of the Civil Procedure Code on this point. Under O. XXX, r. 1, any two or more persons liable as partners may be sued in the name of the firm. Under r. 3, where persons are sued as partners in the name of their firm, the summons shall be served upon any one or more of the partners, and under r. 5, where a summons is issued to a firm and served in the manner provided by r. 3, every person upon whom it was served shall be informed by notice in writing given at the time of such service, whether he was served as a partner or as manager, or in both characters, and, in default of such notice, the person served shall be deemed to be served as a partner. Under r. 6, where persons are sued as partners in the name of their firm, they shall appear individually in their own names, but all subsequent proceedings shall continue in the name of the firm. Lastly, r. 7 provides that where a summons is served in the manner provided by r. 3 upon a person having the control or management of the partnership business, no appearance by him shall be necessary unless he is a partner of the firm sued.

Now, applying these provisions to the facts of the present case, the petitioners impleaded the firm of Kapurji by its proprietor and vahivatdar Sogaji and the summons was served on Sogaji as a partner. Sogaji appeared in the suit and defended it. Thereafter the decree was passed against the firm by its partner Sogaji. Now, O. XXI, r. 50, provides that where a decree has beer passed against a firm, execution may be granted against any property of the partnership, and against any person who has appeared in his own name under r. 6 or r. 7 of O. XXX or who has admitted on the pleadings that he is or who has been adjudged to be, a partner. In the present case Sogaji appeared in his own name under r. 6. The result, therefore, was that, under the combined operation of O. XXX, r. 6, O. XXI, r. 50, the decree was executable against the person of Sogaji. That being so, the capacity of Sogaji as a judgment-debtor in the petitioner's darkhast would be the same as that of Sogaji as a judgment-debtor in the opponents' darkhast, and the petitioners, therefore, would be entitled to rateable distribution. This result would follow from the relevant provisions of the Civil Procedure Code apart from authority.

The lower Court principally relied upon the decision in Balmer Lawrie & Co. v. Jadunath Banerjee. That case is, in my opinion, distinguishable from the present case because there the decree was obtained against the firm of which the judgment-debtor was a partner but was not shown to be capable of execution against him individually. In other words, as the partner was not served individually in the suit, the decree could not be executed against him personally unless leave was taken under O. XXI, r. 50, sub-r. (2). In the present case, however, Sogaji was not only served in the suit but he appeared as a partner and defended it and therefore, under sub-r. (1) of r. 50, execution can be granted against him personally. The next case relied upon by the lower Court in Sadhu Ram Dhanpat Rai-Telu Ram. The facts of that case are no doubt similar to those of the present case. It was contended there that the decree obtained against the firm could be executed against the particular partner who had appeared in his own name in the suit in which the decree was passed and had admitted that he was a partner. It was, however, held that rateable distribution could not be allowed in view of the provisions of s. 49 of the Indian Partnership Act, which are similar to those of s. 262 of the Indian Contract Act. The learned Judges there interpreted the provisions of that section as meaning that although a decree against a firm could be executed against a partner appearing in the suit, it could not be executed against his separate property until the debts of the firm had been paid, that the firm's property was not that particular partner's property, nor was the partner's property the firm's, and that the partner's property cannot be made a hotchpot out of which rateable distribution could be made to satisfy both the decrees. With great respect to the learned Judges, it is difficult to see how s. 49 of the Indian Partnership Act could apply to those facts. This section occurs in the chapter relating to the dissolution of a firm, and it says that where there are joint debts due from the firm, and also separate debts due from any partner, the property of the firm shall be applied in the first instance in payment of the debts of the firm, and, if there is any surplus, then the share of each partner shall be applied in payment of his separate debts or paid to him; and that the separate property of any partner shall be applied first in the payment of his separate debts, and the surplus (if any) in the payment of the debts of the firm. In the first place the section Would apply only after the dissolution of a firm and not while a decree is obtained against a going firm as in the present case. In the second place, it would apply to different debts—the debt of the firm and the separate debt of the partner. On the facts of the present case and in the Lahore case there were no two different debts, but only one debt created by the decree. There is no question, therefore, of executing the decree against the assets of the partnership before executing it against the separate property of the partner. On the other hand, by virtue of the provisions of O. XXI, r. 50, the decree could be executed personally against the partner who has appeared in the suit, and there is nothing in that rule to show that personal execution against the partner cannot be taken unless the property of the partnership was exhausted. The provisions of O. XXI, r. 50, do not seem to have been brought to the notice of the Court. I am unable, therefore, to follow that decision.

It is true that both the decisions in Balmer Lamrie & Co. v. Jadunath Banerjee and Sadhu Ram v. Dhanpat Rai-Telu Ram have been followed in the recent decision of our High Court in Jamiyatram Gaurishankar v. Umiyashankar Pranshankar. In that case, however, the question was not between a person in his capacity as a partner and his capacity as an individual. But the decree there was obtained against a person individually and another decree against that person as representative of a deceased person, and it was held that the two decrees were not decrees against the same judgment-debtor because he held two different capacities, as his individual capacity was not the same as his capacity as the heir of a deceased person. The decisions in Balmer Lawrie & Co. v. Jadunath Banerjee and Sadhu Ram v. Dhanpat Rai-Telu Ram seem to have been relied upon on behalf of the respondent, and they were cited with approval in support of the proposition that a decree against A in his personal capacity and another against him as heir of a deceased person were not against the same judgment-debtor. To my mind there is a clear distinction between a person in his capacity as the heir of another person and a person who is a member of a firm and who is personally liable by virtue of the specific provisions of O. XXI, r. 50. This point does not seem to have been brought to the notice of the Court, and the two judgments had been relied upon and cited with approval only for the general proposition that the judgment-debtor would not be the same where he filled two different capacities. I am unable, therefore, to see how the decision in Jamiyatram v. Umiyashankar applies to the facts of the present case. On the other hand, there is an earlier decision of our High Court in Administrator-General Of Bombay…Plaintiff; v. Haji Sultanalli Sushtary & Co.…Defendants., the principle of which would apply to our case. In that case certain partners obtained a money decree in their individual capacities against a person who had also obtained a money decree against the firm composed of those partners. The question was whether the two decrees could be set off against each other under O. XXI, r. 18, of the Civil Procedure Code, and it was held that they could be set off because the cross decrees were between the same parties. The ratio decidendi of this case applies to the present case, because while under O. XXI, r. 18, cross decrees must be between the same parties, under s. 73 the judgment-debtor must be the same. In other words, the parties should fill the same character. This decision has been followed very recently by the Calcutta High Court in Radha Kanta v. Pulin Krishna. The facts of that case are similar to those in the present case, and in my opinion the reasoning adopted in that decision clearly supports the proposition that where a partner is served and appears in a suit to defend it against the firm, the decree could be executed against him personally, and that therefore he would be the same judgment-debtor in that decree and also in another decree obtained against him personally. This decision is in accordance with the provisions of Os. XXI and XXX which I have cited above. As the judgment-debtor Sogaji fills the same personal character in both the decrees, the petitioners are entitled to rateable distribution in the darkhast filed by the opponents.

The order of the lower Court is set aside and the matter is sent back to the trial Court for disposal according to law. The rule is made absolute with costs.

Rule made absolute.
J.G.R