1970 (8) TMI 95 - HC - Indian Laws

Summary

Issues Involved:
1. Whether the mortgage bonds (Ex. A-1 and Ex. A-2) executed by the 1st defendant were valid and supported by consideration.
2. Whether the suit was barred by limitation.
3. Whether a partner can mortgage partnership property.
4. The nature of the interest transferred under the mortgage deeds.

Issue-wise Detailed Analysis:

1. Validity and Consideration of Mortgage Bonds:
The trial court held that the mortgage bonds in question were true and supported by consideration. The plaintiff claimed that the 1st defendant borrowed money for the partnership business and executed mortgage bonds hypothecating the properties. The court affirmed that the plaintiff was entitled to recover the amounts as per the decrees passed in both suits, indicating that the mortgages were indeed valid and supported by consideration.

2. Limitation:
The trial court ruled that the suit was not barred by limitation. However, upon appeal, it was argued that the action should have been brought within three years from the date of dissolution of the firm (31-8-1954). The appellate court concluded that the action was not brought within the prescribed period of six years, thus barring the plaintiff from recovering the amounts due under Exs. A-1 and A-2.

3. Mortgage of Partnership Property:
The defense argued that a mortgagee cannot claim any interest in the partnership properties in specie and follow the properties in the hands of an auction-purchaser. The court noted that under Section 15 of the Partnership Act, the property of the firm is held exclusively for the business's purpose. No partner can claim or treat any item of the property as their own while the partnership subsists. The appellate court emphasized that a partner cannot mortgage partnership property as it would not create any interest in the plaintiff to follow the properties of the partnership in the hands of a court auction purchaser.

4. Nature of Interest Transferred:
The appellate court scrutinized whether the mortgage deeds transferred an interest in the partnership business or specific items of the partnership property. The court concluded that the deeds (Exs. A-1 and A-2) transferred specific items of property owned by the partnership, not merely the interest or share of the mortgagors. This transfer was deemed impermissible under the Partnership Act, which only allows a partner to transfer their interest in the partnership business to the extent of their share (Section 29(1) of the Partnership Act). The court found that the recitals in the mortgage deeds indicated that the mortgagors transferred their rights and interest in certain items of property owned by the partnership as if they had exclusive ownership rights.

Conclusion:
The appellate court set aside the trial court's judgment and decrees, concluding that the plaintiff was not entitled to recover the amounts due under the mortgage deeds as the action was barred by limitation. The court also dismissed the plaintiff's application for amendment of the trial court's decree, allowing the appeals with costs.

Final Judgment:
The appeals were allowed, and the judgment and decrees under appeal were set aside. The court-fee payable on the memorandum of appeal in appeal No.381 of 1967 was to be paid by the 1st respondent. No orders were necessary for S.R. No.1448/67, and it was to be returned. The plaintiff's application for amendment of the decree of the trial court was dismissed.