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Or.22, rule 10 C.P.C- In a suit by partnership firm of two partners , when one partner dies pending suit, the suit can be continued by another partner M/s AVK Traders … Appellant Versus Kerala State Civil Supplies Corporation Limited … Respondent = Reported in http://judis.nic.in/supremecourt/filename=40915

Or.22, rule 10 – In a suit by partnership firm of two partners , when

 

English: The supreme court of india. Taken abo...

English: The supreme court of india. Taken about 170 m from the main building outside the perimeter wall (Photo credit: Wikipedia)

 

one partner dies pending suit, the suit can be continued by another partner despite of non-joining of uninterested legal heirs of deceased partner as the entire interest devolves on the surviving partner as per rule 10 of Or. 22 of C.P.C. =

 

 

 

Whether on  dissolution  of  the

 

partnership firm on the death of the partner, could the suit already  filed be proceeded with by the  remaining  so-called partner.   =

 

under the Partnership Deed dated 4.11.2002 contained the following clause :-

 

 

 

      “In the event of  retirement  of  partner  or  refusal  of  the  legal

 

      representative of the deceased partner to become the  partner  of  the

 

      partnership as on the expiry of the period given  to  them  to  become

 

      partners or on the expiry of  the  period  given  to  them  to  become

 

      partner, the other partner shall have the power to purchase his  share

 

      by giving notice to retired partner or the legal representative of the

 

      deceased partner in writing  to  that  effect  within  three  calendar

 

      months or receipt of the notice by the retained partner or  the  legal

 

      representative of the deceased partner.  If the surviving partner fail

 

      to purchase the share of the partnership or the  legal  representative

 

      fail to express their interest within the said period, the partnership

 

      shall dissolve as on the expiry of three months mentioned earlier……”

 

 

 

During the pendency of the suit on 2.2.2009, the father  of  the  Appellant,

 

who was a partner, expired.  The Appellant and  his  sister  were  the  only

 

legal representatives of the deceased father.  On the death of  the  father,

 

the partnership stood dissolved w.e.f. 24.5.2009 since the  sister  was  not

 

interested in becoming a partner of the firm.

 

 

 

3.     In  view  of  the  above-mentioned  clause,  though  the  firm  stood

 

dissolved on 24.5.2009,  the  sole  surviving  partner  could  continue  the

 

business of the firm  as  a  proprietary  concern.   Consequently,  all  the

 

interests of the firm stood devolved upon the Appellant and  he  filed  I.A.

 

No.817 of 2002 in O.S. No.39 of 2008 for leave to continue to prosecute  the

 

suit for and on behalf of M/s AVK Traders  as  a  proprietary  concern.  The

 

Appellant also preferred I.A. No.814 of 2012 seeking necessary amendment  of

 

the plaint.  Appellant also filed I.A. No.815  of  2012  under  Order  XXIII

 

Rule 17 read with Section 151 CPC praying for recalling and  examining  PW1.

 

The Subordinate Court by a common  order  dated  8.2.2012  allowed  all  the

 

aforementioned applications preferred by the Appellant.  

 

a  registered

 

partnership firm, consisting of only two partners, filing a suit when  both

 

the partners were alive and 

 

during the pendency of the  suit,  one  of  the partners died and 

 

legal heir of the  deceased  partner  did  not  show  any

 

interest either in the assets of the firm or in  the  liabilities  and  had

 

refused to join as a partner.  

 

The  question  is,  on  dissolution  of  the

 

partnership firm on the death of the partner, could the suit already  filed be proceeded with by the  remaining  so-called partner.   

 

We  notice,  the

 

Subordinate Court has allowed that prayer  possibly  bearing  in  mind  the

 

principle laid down in Order  XXII  Rule  10  CPC,  which  deals  with  the

 

procedure in case of assignment before the final order of the  suit.   

 

Rule

 

10 refers to “devolution of any interest” during the pendency of the  suit.

 

In such a case, the Court can grant leave to prosecute the suit against the

 

person to or upon whom such interest has been  devolved.   

 

Admittedly,  the

 

partner who died is none other than the father of  the  Appellant  and  the

 

other sole  surviving  heir  is  his  sister.   

 

Sister  is  admittedly  not

 

interested in joining the firm and, therefore, she is not taking  over  the

 

assets and liabilities of the firm.  

 

Therefore, there has been  a  complete

 

devolution  of  interest  in  favour   of   the   Appellant.    

 

Under   the

 

circumstances,  the  Subordinate  Court  had  allowed  the  amendment   and

 

permitted the Appellant  to  proceed  with  the  suit,  granting  necessary

 

amendment, which, according to the Subordinate Court, was necessary  for  a

 

proper and effective adjudication of real dispute between the parties.  

 

The

 

High Court, in our view, by taking a hypertechnical approach held  that  if

 

such a prayer is allowed, the same would alter the nature and character  of

 

the suit.  

 

In our view, such a stand cannot be countenanced considering the

 

peculiar facts and circumstances of the case.

 

 

 

10.   We are of the view that the legal consequences  pointed  out  by  the

 

High Court might apply in a case 

 

where one of the several partners dies  in

 

the suit instituted in the name of the partnership firm as compared to when

 

one of the two partners of the partnership dies.   

 

Further, the High  Court

 

failed to notice that if the partnership firm succeeds  in  the  suit,  the

 

decree so granted would not be executable, and hence a  nullity.  

 

 In  such

 

circumstances, we are inclined to allow this appeal and set aside the order

 

of the High Court interfering with  the  order  of  the  Subordinate  Court

 

allowing the application for amendment and permission to prosecute the suit

 

as prayed for.  Ordered accordingly.

 

 

 

REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
Civil Appeal No. 9697 of 2013
(Arising out of SLP (C) No.20563 of 2012)

 
M/s AVK Traders … Appellant

 

Versus

 

Kerala State Civil Supplies
Corporation Limited … Respondent

 
J U D G M E N T

 

K.S. Radhakrishnan, J.

 

1. Leave granted.

 

2. OS No.39 of 2008 was a suit preferred on 1.1.2008 by M/s AVK Traders,
a partnership firm, for realization of an amount of Rs.53,39,648/- against
the Respondent Corporation for claims with regard to various supplies made
to the Corporation during the year 2004-06. Respondent Corporation filed
its written statement on 26.5.2008 denying the claim. M/s AVK Traders was
a partnership firm with only two partners, the Appellant and his father.
The partnership was later re-constituted. The re-constituted partnership
under the Partnership Deed dated 4.11.2002 contained the following clause :-

 

“In the event of retirement of partner or refusal of the legal
representative of the deceased partner to become the partner of the
partnership as on the expiry of the period given to them to become
partners or on the expiry of the period given to them to become
partner, the other partner shall have the power to purchase his share
by giving notice to retired partner or the legal representative of the
deceased partner in writing to that effect within three calendar
months or receipt of the notice by the retained partner or the legal
representative of the deceased partner. If the surviving partner fail
to purchase the share of the partnership or the legal representative
fail to express their interest within the said period, the partnership
shall dissolve as on the expiry of three months mentioned earlier……”

 

During the pendency of the suit on 2.2.2009, the father of the Appellant,
who was a partner, expired. The Appellant and his sister were the only
legal representatives of the deceased father. On the death of the father,
the partnership stood dissolved w.e.f. 24.5.2009 since the sister was not
interested in becoming a partner of the firm.

 

3. In view of the above-mentioned clause, though the firm stood
dissolved on 24.5.2009, the sole surviving partner could continue the
business of the firm as a proprietary concern. Consequently, all the
interests of the firm stood devolved upon the Appellant and he filed I.A.
No.817 of 2002 in O.S. No.39 of 2008 for leave to continue to prosecute the
suit for and on behalf of M/s AVK Traders as a proprietary concern. The
Appellant also preferred I.A. No.814 of 2012 seeking necessary amendment of
the plaint. Appellant also filed I.A. No.815 of 2012 under Order XXIII
Rule 17 read with Section 151 CPC praying for recalling and examining PW1.
The Subordinate Court by a common order dated 8.2.2012 allowed all the
aforementioned applications preferred by the Appellant. With regard to the
prayer for continuing the suit, the Subordinate Court held as follows :-
“In the instant case, out of two partners in the plaintiff firm, one
partner died during the pendency of the suit and as such the
partnership got dissolved. Therefore, I hold that the other partner
viz. the 2nd petitioner is entitled to continue the suit. Hence,
necessary amendment is also required to the plaint. Therefore, for a
proper and effective adjudication of the real dispute between the
parties the proposed amendment is also liable to be allowed……”

 

4. The Respondent Corporation preferred I.A. No.809 of 2012 under Order
XIV Rule 5 CPC seeking framing of additional issues. The Subordinate Court
vide order dated 8.2.2012 dismissed I.A. No.809 of 2012 filed by the
Respondent Corporation.

 

5. Aggrieved by the above-mentioned orders, the Respondent Corporation
preferred Original Petition (Civil) No.631 of 2012 before the High Court of
Kerala seeking the following reliefs :-

 
“(a) To call for the records leading to Ext.P11, P11(a), P11(b) & P12
and set aside the same.
(b) To declare that the respondent/plaintiff is not entitled to
continue the suit as a Proprietary concern.
(c) To direct the Court below to frame additional issues as prayed
for in Ext.P-4.
(d) To issue any other appropriate order or direction as this
Hon’ble Court may deem fit and proper in the facts and
circumstances of the case.”

 

The High Court did not allow the prayer for amendment of the plaint moved
by the surviving partner and held as follows :-
“When the above be the settled position of law, the application for
amendment moved by the surviving partner to alter the cause title to
convert the suit as one by the proprietary concern with him as its
‘proprietor’, which was instituted in the name of a firm, for the
reason of the death of the Managing Partner and also non-
interestedness of the legal heirs of that partner to come on record,
has no basis or merit at all, as the death of the Managing Partner in
no way affects the continuance of the suit instituted in the ‘firm
name’, in view of the protection afforded under Order XXX Rule 4 of
the Code.”

 
6. The High Court also took the view that there is no question of
altering and amending the plaintiff firm as a proprietary concern as that
would alter the nature and character of the suit, which cannot be
permitted. Further, it was also held by the Court that no further dilation
over that aspect is called for in the case other than pointing out that the
indefeasible rights of the legal heirs of a deceased partner in a suit
filed by a firm are insulated under sub-rule (2) of Rule 4 of Order XXX of
the Code. The High Court, however, did not interfere with the order of
the Subordinate Court allowing the application for recalling PW1 for
further examination. With regard to the prayers of the Respondent
Corporation for raising additional issues, the High Court took the view
that the same should have been allowed. Consequently, the prayer made by
the Respondent Corporation for framing additional issues was allowed.
Aggrieved by the above-mentioned order, this appeal has been preferred by
the Appellant.

 

7. Learned counsel appearing for the Appellant submitted that on the
death of one of the partners of a partnership firm consisting of only two
partners, remaining partner has become the sole proprietor/owner with all
assets and liabilities and as such he can always proceed with the suit as
per the provisions contained under Order XXII Rule 10 CPC. Learned counsel
also submitted that the reasoning of the High Court, if at all apply, could
apply in a case where there are more than one partners after the death of a
partner, in the event of which the firm could continue with minimum of two
partners. In such a situation, learned counsel suggested that the
provision of sub-rule (2) of Rule 4 of Order XXX of the Code would apply.
Learned counsel placed reliance on the judgment of this Court in
Purushottam Umedbhai & Co. v. Manilal & Sons [AIR 1961 SC 325],
particularly para 9 of the said judgment in support of this contention.
Learned counsel also made reference to the judgment of this Court in CIT v.
Seth Govindram Sugar Mills [AIR 1966 SC 24].

 

8. Learned counsel appearing for the Respondent Corporation, on the
other hand, submitted that if the Appellant is allowed to continue the suit
in the name of the firm, all the defence set up by the defendant in the
written statement would be frustrated. Learned counsel also submitted
that if the amendment sought for is allowed, that will alter the very
nature and character of the suit and that the High Court has rightly
rejected that prayer which calls for no interference by this Court.

 

9. We are in this case faced with a situation of a registered
partnership firm, consisting of only two partners, filing a suit when both
the partners were alive and during the pendency of the suit, one of the
partners died and legal heir of the deceased partner did not show any
interest either in the assets of the firm or in the liabilities and had
refused to join as a partner. The question is, on dissolution of the
partnership firm on the death of the partner, could the suit already filed
be proceeded with by the remaining so-called partner. We notice, the
Subordinate Court has allowed that prayer possibly bearing in mind the
principle laid down in Order XXII Rule 10 CPC, which deals with the
procedure in case of assignment before the final order of the suit. Rule
10 refers to “devolution of any interest” during the pendency of the suit.
In such a case, the Court can grant leave to prosecute the suit against the
person to or upon whom such interest has been devolved. Admittedly, the
partner who died is none other than the father of the Appellant and the
other sole surviving heir is his sister. Sister is admittedly not
interested in joining the firm and, therefore, she is not taking over the
assets and liabilities of the firm. Therefore, there has been a complete
devolution of interest in favour of the Appellant. Under the
circumstances, the Subordinate Court had allowed the amendment and
permitted the Appellant to proceed with the suit, granting necessary
amendment, which, according to the Subordinate Court, was necessary for a
proper and effective adjudication of real dispute between the parties. The
High Court, in our view, by taking a hypertechnical approach held that if
such a prayer is allowed, the same would alter the nature and character of
the suit. In our view, such a stand cannot be countenanced considering the
peculiar facts and circumstances of the case.

 

10. We are of the view that the legal consequences pointed out by the
High Court might apply in a case where one of the several partners dies in
the suit instituted in the name of the partnership firm as compared to when
one of the two partners of the partnership dies. Further, the High Court
failed to notice that if the partnership firm succeeds in the suit, the
decree so granted would not be executable, and hence a nullity. In such
circumstances, we are inclined to allow this appeal and set aside the order
of the High Court interfering with the order of the Subordinate Court
allowing the application for amendment and permission to prosecute the suit
as prayed for. Ordered accordingly.

 

 

 

……..……………………..J.
(K.S. Radhakrishnan)

 

 

 

……………………………J.
(A.K. Sikri)
New Delhi,
October 29, 2013

 

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