2018 (10) TMI 1009 - HC - Indian Laws

Liability of a partner for acts of the firm - loan taken by partnership firm unpaid - recovery proceedings by bank - contention for the petitioner is that till date the entire repayment has been made by the petitioner only, the other partner and his legal heirs have not made any payment - partners jointly and severally liable for the acts of the firm - Held that - It has not been disputed that the loan was taken by the partnership firm. Petitioner and Jai Singh were partners. The liability of the partners is co-extensive. The repayment of loan to the respondent No.3-bank cannot be stalled on the ground that there is dispute between the partners and that one of the partner is not discharging his share of liability. It is between the partners to settle their dispute inter-se. In case of a partnership firm, it cannot be contended by one of the partner that his liability is restricted according to his share and he will not discharge rest of the liability. The argument raised is against the provisions of Section 25 of Indian Partnership Act, 1932. As per Section 25 of the Indian Partnership Act, 1932, every partner is jointly and severally liable for the acts of the firm. The petitioner is liable to clear the liability of the firm. The right of the bank while making recovery is not affected by the individual share percentage of each partner in the firm, it is something into the partners. Thus the contention of the petitioner that on discharge of half of the liability, his share of property may be released by the respondent No.3-bank, deserves rejection. The alleged dispute between the partners is being used as a tool to deprive the respondent No.3- bank from recovering the outstanding dues. The property mortgaged was in joint ownership yet the endeavour is to get partial mortgaged property released. Petition dismissed.

Summary

Issues:
Challenge to order under Section 14 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002.

Analysis:
The petitioner sought to quash an order passed under Section 14 of the Act. The petitioner, a partner in a dairy farming business, had availed credit facilities from a bank, mortgaging land as security. A dispute arose between partners leading to default in loan repayment, prompting the bank to issue a notice under Section 13(2) of the Act. Subsequently, the bank moved an application under Section 14, resulting in the challenged order. The petitioner contested the order, proposing to pay only his share of the loan amount, citing the deceased partner's non-contribution. However, the court held that partners in a firm are jointly and severally liable for firm debts under Section 25 of the Indian Partnership Act, rejecting the petitioner's argument.

The court emphasized that partners' liability is joint and several, allowing creditors to recover debts from any partner. Citing legal precedents, the court reiterated that partners' liability is not limited to individual shares in the firm. Despite the petitioner's attempts to pay only his share, the court held that the bank's right to recover is unaffected by partners' individual contributions. The petitioner's argument to release his share of the mortgaged property upon partial payment was dismissed, emphasizing the joint liability of partners for firm debts.

The court noted the petitioner's failure to fulfill payment undertakings, indicating lack of bona fide intentions. The alleged dispute between partners was deemed a tactic to hinder the bank's recovery efforts. The court found no grounds for interference under Article 226 of the Constitution of India, ultimately dismissing the writ petition. The judgment underscores the principle of joint and several liability of partners in a firm, emphasizing the creditor's right to recover debts from any partner, irrespective of individual contributions.