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TMI Blog2021 (7) TMI 1392X X X X Extracts X X X X X X X X Extracts X X X X ..... of Ext.P6 agreement can be fastened on the petitioner. Whether the partnership assets can be made liable for a debt allegedly owed by a partner? - HELD THAT:- There can be no doubt that if a partner owes any money, the creditor will be entitled to proceed against the profits that may be earned by the debtor, in his capacity as a partner of a firm or against the debtors' interest in the partnership firm. In the case on hand, Smt. P. Syamala had retired from the partnership as can be seen from Ext.P4 deed dated 31.03.2013, whereby the partnership was reconstituted. There is nothing in the pleadings of the parties to show that the retiring partner had any rights subsisting in the partnership, on the date of issuance of Ext.P3 letter by the Assistant Executing Engineer, proposing to withhold the amounts due to the firm, towards the risk and cost liability of Smt. P. Syamala. Ext.P3 proceeds on the basis that Smt. P. Syamala is a partner of the firm, which does not appear to be correct on the basis of Ext.P4 deed - Since the question whether Smt. P. Syamala has any cost and risk liability to the respondents is admittedly pending consideration of the competent civil court, it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ated 13.4.2000. Soon after the execution of the agreement relating to the work, he died on 7.7.2001, leaving behind his wife and two sons. In the agreement executed, Sri Sathyapalan had named his wife Smt. P. Syamala as his nominee, and it can be seen Ext.P8, which contains the nomination, that the nomination is for the purpose of receiving all or any sums due to her husband, under the terms of the agreement dated 16.6.2000. After the death of Sri Sathyapalan, his legal heirs wrote Ext.R4(a) letter to the Superintending Engineer on 10.7.2001, stating that they are the only legal heirs and they are willing to continue the work through a partnership firm, that they acknowledge the nomination of Smt. P. Syamala and further requesting that the nominee may be permitted to complete the balance work. The respondents thereafter executed Exhibit P6 supplementary agreement with the nominee on 03.08.2001, whereby it was agreed that the nominee shall execute the work as per the original schedule of the work, at the rate specified in that schedule and that the nominee shall not claim any enhanced rate of compensation, whatsoever. It can be seen from Exhibit P6 that the respondents in their wisd ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r was still a partner of the firm. The petitioner has produced Exhibit P4 Deed of Reconstitution of the partnership firm after the retirement of his mother, which shows that no further amount is due to her from the partnership firm. It is the contention of the petitioner that the respondents can proceed against the firm only with respect to amounts that are owed by the firm to his mother. It is further submitted that even in cases where a partner of the firm is to be proceeded against for amounts due from him in his individual capacity, the firm in which he is a partner can be proceeded against only to the extent of his share in the profits or such amounts outstanding to him from the firm. The petitioner points out that he has availed a loan for the works undertaken, from the Federal Bank, Kottarakara and that the credits withheld by the respondents are actually amounts that have to be credited into the loan account. It is submitted that the bank has already initiated steps under the SARFAESI Act for realising the amounts due. The writ petition is hence filed, praying to quash Exhibit P3 and for a direction to the respondents to release the credit received in favour of the firm for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ich is done to carry on, in the usual way, business of the kind carried on by the firm, binds the firm. The authority of a partner to bind the firm conferred by this section is called his implied authority . (2) In the absence of any usage or custom of trade to the contrary, the implied authority of a partner does not empower him to-- (a) submit a dispute relating to the business of the firm to arbitration, (b) open a banking account on behalf of the firm in his own name, (c) compromise or relinquish any claim or portion of a claim by the firm, (d) withdraw a suit or proceeding filed on behalf of the firm, (e) admit any liability in a suit or proceeding against the firm, (f) acquire immovable property on behalf of the firm, (g) transfer immovable property belonging to the firm, or (h) enter into partnership on behalf of the firm. xxxxx xxxxx xxxxx 22. Mode of doing act to bind firm.--In order to bind a firm, an act or instrument done or executed by a partner or other person on behalf of the firm shall be done or executed in the firm name, or in any other manner expressi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to meet, and in our judgment, it would not be proper to permit the appellant to make out an entirely new case at this stage. Apart from that, Section 22 of the Indian Partnership Act, 1932, clearly provides that in order to bind a firm by an act or an instrument executed by a partner on behalf of the firm, the act should be done or the instrument should be executed in the name of the firm, or in any other manner expressing or implying an intention to bind the firm. The sub-lease was not executed in the name of the firm, and it has been found by the courts below that respondent 4 in obtaining the lease, did not act on behalf of the firm. This in substance means that in obtaining the sub-lease, the parties to it did not intend to bind the firm by that transaction. 11. The effect of Sections 19 and 22 of the Partnership Act has been considered by this Hon'ble Court in several cases, but mostly in relation to negotiable instruments executed by partners. In the decision in M. Rajagopal v. K.S. Imam Ali reported in AIR 1981 Ker 36], a Division Bench of this Court after referring to several earlier decisions, held in paragraph 15 as follows: 15. The consistent view taken i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ere is nothing in the pleadings of the parties to show that the retiring partner had any rights subsisting in the partnership, on the date of issuance of Ext.P3 letter by the Assistant Executing Engineer, proposing to withhold the amounts due to the firm, towards the risk and cost liability of Smt. P. Syamala. Ext.P3 proceeds on the basis that Smt. P. Syamala is a partner of the firm, which does not appear to be correct on the basis of Ext.P4 deed. Since the question whether Smt. P. Syamala has any cost and risk liability to the respondents is admittedly pending consideration of the competent civil court, it is not necessary in these proceedings to go into the question as to the modes of recovery that can be resorted to by the respondents, if they are able to succeed in the civil court. In the result, the writ petition is allowed. The decision contained in Ext.P3 to withhold the payment due to the petitioner's firm is set aside. There will be a direction to the respondents to release the credit received in favour of the petitioner's firm for payment of CC8 and final bill amounting to Rs. 30,01,268/- immediately, at any rate within a period of one month from the date of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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