Gajendra Narain Singh vs Johri Mal Prahlad Rai

Rewritten Version Notice: This is a rewritten version of the original judgment.

Court: Supreme Court of India

Case Number: Civil Appeal No. 268 of 1960

Decision Date: 13 November 1962

Coram: J.C. Shah, P.B. Gajendragadkar, K.N. Wanchoo, K.C. Das Gupta

In the matter titled Gajendra Narain Singh versus Johri Mal Prahlad Rai, the judgment was rendered on 13 November 1962 by the Supreme Court of India. The opinion was authored by Justice J. C. Shah, and the bench comprised Justices J. C. Shah, P. B. Gajendragadkar, K. N. Wanchoo and K. C. Das Gupta.

The petitioner in the case was Gajendra Narain Singh and the respondent was Johri Mal Prahlad Rai. The date of the judgment is recorded as 13 November 1962, and the bench that pronounced the judgment included Justice J. C. Shah together with Justices Gajendragadkar, Wanchoo, Gupta and Das Gupta. The decision is reported in the citations 1964 AIR 581 and 1963 SCR Supl. (2) 303.

The statutory framework involved the execution of a decree against a partnership firm and the question of whether a summons served on an individual partner was maintainable. The provisions of the Code of Civil Procedure, 1908 (Act V of 1908) that were examined included Order 30, Rules 6 and 7, and Order 21, Rule 50.

The headnote of the decision explained that the respondent‑plaintiff instituted a suit in the Bombay City Civil Court against the firm M/s Tirhut Umbrella Works, seeking a decree for the sum of Rs 20,320. The summons in that suit was served on the appellant, Gajendra Narain Singh, in his capacity as a partner of the defendant firm. The appellant appeared before the Civil Court through counsel without raising any objection and obtained an adjournment to file a written statement. Subsequently, the counsel for the appellant applied to withdraw the appearance on the ground that the appellant was not actually a partner of the firm; the court rejected that application and proceeded to try the suit ex‑parte, ultimately granting the decree as prayed for. The decree was later transferred for execution to the District Court at Patna, where the respondent initially sought leave to execute the decree against the appellant but later wished to proceed with execution without obtaining such leave. The District Court held that the appellant was not a partner and, since the City Civil Court had not finally decided that question, the executing court was free to determine the issue. On appeal, the Patna High Court reversed the District Court’s order and directed that execution be carried out against the appellant. The Supreme Court held that, based on the evidence and the appellant’s failure to produce the original summons, it must be concluded that the appellant had indeed been served as a partner and had appeared in accordance with Rules 6 and 7 of Order 30 of the Code of Civil Procedure. By refusing leave to withdraw on the ground that the appellant was not a partner, the City Civil Court had implicitly decided that the appellant was a partner; because no appeal was filed against that implication, the decision was final, and the decree could be executed against the appellant under Order 21, Rule 50 of the Code of Civil Procedure.

The judgment was issued under the civil appellate jurisdiction in Civil Appeal No. 268 of 1960, which was an appeal from the judgment and order dated 5 September 1958 of the Patna High Court in Miscellaneous Appeal No. 252/55. Counsel for the appellant consisted of A. V. Viswanatha Sastri, Yogeshwar Prasad and U. P. Singh, while counsel for the respondents comprised G. S. Pathak, Rameshwar Nath and S. N. Andley. The judgment was delivered on 13 November 1962 by Justice Shah. In the factual backdrop, the plaintiffs, identified as M/s Johri Mal Prahlad Rai, commenced proceedings against M/s Tirhut Umbrella Works, a partnership firm carrying on business at Laheriasarai in the State of Bihar, before the City Civil Court in Bombay, seeking a decree for the amount of Rs 20,320 together with costs and interest.

In this case the plaintiffs, identified as M/s. Johri Mal Prahald Rai, instituted proceedings in the City Civil Court at Bombay against the firm M/s. Tirhut Umbrella Works, which carried on business at Laheriasarai in the State of Bihar, seeking a decree for the sum of Rs 20,320 together with costs and interest. The summons for the suit was served upon one Gajendra Narain Singh, hereinafter referred to as ‘Singh’, at the address Road 8, R Block, Patna, Bihar, on the basis that he was a partner of the defendant firm. Singh engaged counsel, who on 22 April 1953 filed in the Court a Vakalatnama signed by Singh authorising the counsel to act, appear and plead on his behalf in the suit. Subsequently a chamber summons directing the trial of the suit as a commercial cause was served on Singh. On 9 September 1953 Singh’s counsel addressed a letter to the attorneys of the plaintiffs requesting their consent to an “adjournment of the x x x suit” so that Singh could file his written statement. By agreement of the respective counsels the chamber summons for directions was adjourned by order of the Court for a fortnight. When the chamber summons for directions was taken up for hearing on 24 September 1953 the counsel informed the Court that Singh asserted he was not a partner of the defendant firm and prayed orally for an order permitting withdrawal of the appearance filed in Court. The Court declined to grant the oral request but directed that Singh could, if advised, pursue the appropriate proceedings for withdrawal of his appearance. The Court also ordered that the suit be transferred to the list of commercial causes and gave further directions for its conduct. At the hearing before the City Civil Court on 27 November 1953 the counsel again appeared, reiterated that his client, on whom the summons had been served, was not a partner of the defendant firm, and prayed that he be allowed to withdraw the appearance which had been filed without protest. The Court rejected the application for leave to withdraw the appearance and also denied the counsel’s request for an adjournment of the suit. Subsequently the counsel withdrew from the suit with the permission of the Court, and the matter proceeded ex parte. The Court recorded the evidence of a witness for the plaintiffs, admitted certain correspondence tendered by the plaintiffs, and decreed the suit in the manner prayed for. The decree was forwarded by the Registrar of the City Civil Court, Bombay, to the Court of the District Judge, Patna, together with a certificate of non‑satisfaction. The plaintiffs then applied for leave to execute the decree against Singh under Order 21, Rule 50(2) of the Code of Civil Procedure. Singh contended that he was not a partner of the defendant firm and therefore not liable to satisfy the firm’s debts; he further argued that he had not been served with summons in the suit, that his appearance in the suit which led to the decree was made in his individual capacity and not as a partner, and that he had informed the Court of his non‑partner status.

Singh informed the Court that he was not a partner of the defendant firm. After this declaration the plaintiffs applied for execution of the decree, asserting that no separate order granting leave to execute the decree was required. The District Judge of Patna, by an order dated 12 May 1955, held that execution could not be directed against Singh. The judge relied on sub‑clauses (b) and (c) of rule 50 of Order 21, observing that the question of whether Singh was a partner of the defendant firm had been left undecided by the City Civil Court. On the basis of the evidence before him the learned District Judge further concluded that Singh was not a partner of the defendant firm. The plaintiffs appealed the district judge’s order. The High Court at Patna, on appeal, examined the facts and held that the plaintiffs were entitled as a matter of right to execute the decree against Singh under rule 50(1)(b) of Order 21. Consequently the High Court reversed the district judge’s order and directed that execution proceed against Singh. Singh obtained a certificate under article 133(1)(a) from the High Court and preferred the present appeal.

Order 30 of the Code of Civil Procedure governs the manner in which suits may be instituted by or against firms. The provision states that two or more persons carrying on business in India may be sued in the name of the firm of which they were partners at the time the cause of action accrued. When a suit is filed against a firm, summons may be served in the manner prescribed by rule 3 of the same order. Rule 3, as relevant here, provides: “Where persons are sued as partners in the name of their firm, the summons shall be served either (a) upon any one or more of the partners, or (b) at the principal place at which the partnership business is carried on within India, upon any person having, at the time of service, the control or management of the partnership business there, as the Court may direct; and such service shall be deemed good service upon the firm so sued, whether all or any of the partners are within or without India…” The plaintiffs had sued the partners of M/s Tirbut Umbrella Works in the name of the firm, and the summons was served on Singh at Road 8, R Block, Patna. Ordinarily the original summons would have been in Singh’s possession, but he did not produce it before the District Judge of Patna. Upon reviewing the circumstances, the High Court concluded that Singh had been served with the summons of the suit as a partner of the defendant firm. That conclusion was strongly supported by the evidence and by the presumption arising under rule 5 of Order 30, which provides: “Where a summons is issued to a firm and is served in the manner provided by rule 3, every person upon whom it is served shall be informed by‑”

The Court explained that Order 5 of Order 30 requires a written notice to be given at the time a summons is served, regardless of whether the individual is served in the capacity of a partner, as a person who controls or manages the partnership business, or in both capacities, and that if such notice is not provided, the person served is to be deemed to have been served as a partner. The Court observed that it could not be ascertained from the record whether the summons in the present proceedings had been accompanied by the notice contemplated by that rule; however, the explicit language of the rule makes clear that, in the absence of the required notice, the person served is automatically considered to have been served as a partner. The Court noted that Singh had sworn an affidavit in the suit and, during the hearing of the execution proceeding, had testified that he had indeed been served with a summons in the suit. Moreover, Singh’s counsel had not contested the finding that Singh must be treated as having been served as a partner of the defendant firm. Consequently, the Court held that Singh was deemed to have been served as a partner. The Court then turned to Order 8 of Order 30, which provides that any person who is served with a summons as a partner may appear under protest, denying that he is a partner, but such a protest does not prevent the plaintiff from serving a fresh summons on the firm and obtaining a decree against the firm in default of appearance where no partner has appeared. The rule therefore allows the person served as a partner to deny his partnership status while still permitting the plaintiff to proceed with service on another alleged partner or on the person who controls the partnership business, and to seek a decree against the firm. A decree obtained in this manner may, with leave under Order 21 Rule 50(2), be executed against the firm and also against the individual who was initially served as a partner, even if that individual had appeared under protest. The Court clarified that the plaintiff is not obliged to obtain a fresh summons; he may instead move the Court to decide the plea of denial raised by the person who appeared under protest. The Court will then examine the evidence to determine whether the person served was a partner at the material time. If the evidence shows that the person was not a partner, the suit cannot continue unless a fresh summons is served under Rule 3. If the Court finds that the person was a partner, the service on him is treated as valid service on the firm and the suit proceeds against the firm. In the present case, Singh did not make an appearance under protest. Instead, he filed an appearance in his own name and obtained an adjournment to enable him to file his written statement. The Court held that such an appearance must be considered as an appearance on behalf of the firm.

The Court observed that Singh had filed his written statement after submitting an appearance in his individual capacity. That appearance was to be treated as an appearance on behalf of the defendant firm. At the hearing on the summons for directions, Singh asserted that he was not a partner of the defendant firm and consequently applied for permission to withdraw the appearance he had filed without protest. The Court noted that, unless it granted Singh leave to withdraw the initially filed appearance, the appearance would continue to be deemed an appearance under rule 6 of Order XXX on behalf of the firm. The Court further stated that it was not required to determine in the present proceedings whether Singh’s application for leave to withdraw his appearance had been properly rejected. It explained that such a question could be raised only by Singh in the appropriate forum for challenging the decision of the civil court, and that the issue was not relevant to the execution of the decree.

Order 21, rule 5 of the Code of Civil Procedure, which governs the execution of decrees against firms, was then examined. Clause (1) of the rule provides that when a decree is passed against a firm, execution may be directed against (a) any property of the partnership; (b) any person who has appeared in his own name under rule 6 or rule 7 of Order XXX, or who has admitted on the pleadings that he is, or who has been adjudged to be, a partner; or (c) any person who has been individually served with a summons as a partner and who has failed to appear, subject to the proviso contained in the provision. Clause (2) states that where the decree‑holder wishes to execute the decree against a person who does not fall within sub‑rule (1) clauses (b) and (c) as a partner in the firm, the decree‑holder may apply to the court that passed the decree for leave. If the liability of such person is not disputed, the court may grant leave; if the liability is disputed, the court may order that the liability be tried and determined in the same manner as any issue in a suit. Clause (3) provides that any order made after the liability of a person has been tried and determined under sub‑rule (2) shall have the same force and be subject to the same conditions as an appeal against a decree, as if it were a decree itself. Relying on sub‑clauses (b) and (c) of sub‑rule (1), the Court explained that a plaintiff who obtains a decree against a firm may execute that decree against any person who was individually served with a summons as a partner and failed to appear, as well as against any person who appeared in his own name under rule 6 or rule 7 of Order XXX. Since Singh, after being served as a partner, had appeared under rule 6, the decree of the City Civil Court, Bombay, was deemed executable against him. The plaintiffs had, in fact, made an application for leave to execute the decree against Singh on the ground that he was a person …

In the Court’s view the earlier proceeding had been based on an erroneous understanding of the law because it dealt with a person who was not covered by clauses (b) and (c) of sub‑rule (1) of rule 50 of Order 21. The Court therefore held that this mistake did not extinguish the person’s right under Order 21 rule 50(1)(b). Consequently, the plaintiffs were allowed to withdraw their application for leave that had been filed under sub‑rule (2) and to proceed with execution of the decree under sub‑rule (1). The record of the City Civil Court, Bombay, which had been placed before the District Judge, made it clear that Singh had been served as a partner of the defendant firm and had subsequently filed an appearance under rule 6 of Order 30 of the Code of Civil Procedure. After filing that appearance, Singh’s request to withdraw it was rejected, and the suit was finally decreed against the firm. Because the decree against the firm fell within sub‑rule (1) clause (b) of rule 50 of Order 21, it was legally enforceable against Singh as well. The Court therefore concluded that the High Court was correct in ordering that the decree of the City Civil Court, Bombay, be executed against Singh. As a result, the appeal was dismissed, and the parties were ordered to bear costs, with the appeal being formally closed.