Syndicate Bank v. R.S.R. Engineering Works and Ors.

Syndicate Bank v. R.S.R. Engineering Works and Ors.

2003 (4) ALD 62 SC

[retiring partners, Section 32(2)]

Facts

Respondent  No. 1: Partnership firm engaged in engineering works, Respondent Nos. 2 to 4: its partners

The respondents took a loan from the bank. They defaulted. Respondent Nos. 2 and 3 contended that the first respondent firm was dissolved and the fourth respondent took over the entire liability and, therefore, they are not liable for the suit claim.

Judgement

Trial Court: favoured R2 & R3

Passed the decree only against Respondent-1 and Respondent-4 for the suit claim

High Court (Upheld Trial  Court)

• Pray: Decree shall be passed against all the respondents as all of them had joint and several liabilities.
• HC rejected this plea and affirmed the decree of the trail court.

Supreme Court

Contentions

Respondent

1. Notice of dissolution of the firm was given to the plaintiff, but the appellant bank did not raise any objection and, therefore, under Section 32(2), R2 & R3 are not liable for any payment under suit.

Appellant

1. All the respondents by jointly executing various documents related to the said loan had admitted its execution.
2. The dissolution of the partnership will not affect their liability to discharge the suit claim and inter se arrangement between the partners is not binding on the appellant bank.
3. As per Sub-section 3 of Section 32, the respondent Nos. 2 and 3 cannot escape the liability as regard the suit claims made by the appellant.

Held (K.G . BALAKRISHNA)

1. (upheld the 3^rd contention of the appellant) No public notice was given about the retirement of R2 and R3 from the firm as envisaged under Section 32(3). Even if there was a public notice, it may not alter the position as the alleged liabilities of respondent Nos. 2 and 3 were incurred by them prior to the so called dissolution of the firm.
2. (dismissed 2^nd contention of the respondents) The fact that the appellant was aware of the dissolution of the partnership by itself will not absolve the liability of the retiring partners. Under S.32 (2), the liability of the retiring partner as against third party would be discharged only if there is an agreement made by the retiring partner, with the third party(bank in this case), and the partners of the reconstituted firm. This was absent in the present case, expressly or impliedly.

• Plaintiff appellant had every right to proceed against all the defendants in the suit

Law Point

It is perhaps self evident that a creditor’s rights will not normally be prejudiced by an agreement transferring an accured liability from one partner to another unless the creditor is made a party to the agreement or assents to its operation. Otherwise the agreement will, as regards him, be strictly res inter alias acta.