Baldev Singh vs Central Bank Of India

Ranjit Singh, J

Mr. Jeet Singh and Mr. Bahadur Singh, partners of firm M/s. Rupal Industries had approached Central Bank for grant of credit facilities of Rs. 3 lacs. To secure the repayment of this loan, they mortgaged Plot bearing No. 728, Industrial Area B, Ludhiana by depositing its title deed. It is seen that subsequently with some new partners two firms, namely M/s. Rupal Engineering and M/s. Rupal Enterprises were constituted and availed certain OD facility from Central Bank against collateral security of FDRs. When these loan accounts turned to be bad, Central Bank filed suits for recovery of the loan amounts against the said firms and their partners. The suits filed against M/s. Rupal Engineering and M/s. Rupal Enterprises were decreed ex parte. The third suit was also allowed. Recovery Certificates accordingly were drawn and issued by the DRT. When the recovery proceedings were in progress before the Recovery Officer, the appellant appeared and filed objection, contending that he was neither a judgment-debtor nor guarantor of M/s. Rupal Engineering and M/s. Rupal Enterprises. As per the appellant, he was a partner in M/s. Rupal Industries as per the partnership deed dated 31.1.1985. The appellant/objector claimed to be having 30% share in the property. It was stated that the partnership firm was the owner of the entire land and building on Plot No. 728, Industrial Area 'B' Ludhiana, having an area of 2462 sq. yds. As per the appellant, this property was mortgaged on 25.6.1990 by the other four partners in the account of M/s. Rupal Industries without the consent of the appellant. As per the appellant, oral partition had taken place in the partnership deed dated 31.1.1985 and a portion of the property fell in the share of the appellant/objector who was running his business under the name and style of M/s. Rupal Products. As per the appellant, two other partners, namely, Mr. Jeet Singh and Mr. Bahadur Singh continued to run the business of M/s. Rupal Industries in the remaining 70% of the property, but the entire property was put to sale by auction on 17.12.2002 to recover the dues of M/s. Rupal Engineering and M/s. Rupal Enterprises. According to the appellant, he being the owner of the property to the extent of 30% share, of which he was in possession, he had filed a civil suit for declaration that he was exclusive owner and in possession of that part of the property. The Civil Judge was pleased to stay the dispossession/restrain the respondent from interfering the possession of the property. As per the appellant/objector, he came to know about the sale of his portion of property only when the auction purchaser came to take its possession.

The objection filed by the appellant/objector before the Recovery Officer was accepted holding that his share of 30% in the property as mentioned in the partnership deed dated 31.1.1985 could not be sold or the possession thereof handed over to the auction purchaser. The auction of the property so held on 17.12.2002, which was confirmed in favour of the auction purchaser was cancelled and the certificate of sale issued was withdrawn. Aggrieved against this order, the auction purchaser filed an appeal before the Tribunal below which, vide its order dated 13.7.2009, has set aside the order passed by the Recovery Officer and has held the sale in favour of the auction purchaser is valid The present appeal is directed against that order passed by the Tribunal below.

The Counsel for the appellant by referring to the details as noted above commenced his arguments by stating that he had moved an application for placing on record certain documents like retirement-cum-reconstitution deed and the sale deed date 6.4.1988. As per the Counsel for the appellant, these documents, which have come to his possession subsequently, could not be produced before the Tribunal below. The Counsel for the respondent has intervened to state that the said prayer made by the appellant has already been rejected by this Tribunal vide its order dated 18.2.2013. Once the prayer made in the application for taking these documents on record has been rejected, the same plea cannot be re-heard reconsidered. The contention of the Counsel for the appellant is that the observation by this Tribunal that unless the averments of the appeal are suitably amended, the documents cannot be taken on record, cannot be construed as rejection of his prayer to take these documents on record. He, however, concedes that till date no action has been taken to amend the appeal as such. This order was passed on 18.2.2013 and thereafter the case has come up for hearing on a number of occasions. Even after lapse of over a-year-and-a-half, the appellant has not made any move to amend the appeal. Rather, the Counsel for the respondent would point out that, this case was argued at length and thereafter an application was moved for placing these documents on record. According to him, arguments on that application continued for a considerable period of time and ultimately the order dated 18.2.2013 came to be passed. Counsel points out that thereafter a number of opportunities were afforded to the parties to address their arguments in the appeal. After hearing the arguments in the appeal order was also reserved on 1.10.2013, but the case was released and was listed for final re-hearing on 30.5.2014 on which date, the case was adjourned for today, when, again, the Counsel for the appellant has reverted back to make submission on his prayer for taking these additional documents on record.

I find no justification in the prayer made by the Counsel for the appellant. I would also not find any justification in the prayer made by the Counsel for the appellant to allow him to file application for amending his appeal. After passing of an order on 18.2.2013 rejecting his prayer, the final arguments in this case were also heard and orders were reserved. No action, however, was taken by the appellant in any manner. Merely because the case was released and has been put up for rehearing would not entitle the appellant to renew or revive his request for placing the documents on record or amending the appeal. Counsel was accordingly asked to make submission on merit.

Counsel for the appellant has made a detailed reference to the order passed by the Recovery Officer. He would submit that the appellant was not a partner when the loan in question was taken and the appellant had no concern with it. He would accordingly plead that there was no justification for selling his 30% share in the property, especially so, when he has withdrawn from the partnership concern.

On the other hand, Counsel for the respondent would find fault with the order passed by the Recovery Officer. As per the Counsel, the appellant may have retired from the firm as partner, but the loan in question was advanced to the firm on the basis of a partnership deed dated 1.4.1988. The partnership in which the appellant was a partner was dissolved on 31.3.1988 and a fresh partnership deed dated 1.4.1988 was entered into and this deed would clarify the entire position. The copies of the partnership deed have been filed with the reply. A perusal of the partnership deed dated 1.4.1988 would show that the appellant had retired from the firm on 31.3.1988. Counsel would make a pointed reference to this partnership deed where it has been recorded that the new partnership has taken over the assets and liabilities of the old firm. On this basis, the Counsel would contend that the entire assets and liabilities had been taken over by the new partnership firm on 1.4.1988 on appellant's having retired from the earlier partnership on 31.3.1988.

As per the Counsel, Section 32 of the Partnership Act is very clear and regulates the legal position in regard to the retirement of a partner. This section provides that a partner may retire with the consent of all the other partners, or in accordance with an express agreement by the partners, or where the partnership is at will, by giving notice in writing to all the other partners of his intention to retire. The Counsel submits that there is no need to make any dissolution deed which view his erroneously been formed by the Recovery Officer and has rightly been set aside by the Tribunal below. As per the Counsel, the finding returned by the Recovery Officer, thus, cannot be sustained and was rightly set aside by the Tribunal below. By referring to Para 10 of the order passed by the Recovery Officer, the Counsel would submit that what weighed with the Recovery Officer is that no dissolution deed of partnership dated 31.1.1985 was submitted. He would also refer to that part of the order where the Recovery Officer had observed that as per the Partnership Act, a dissolution deed for retiring the partner is must. The Counsel would contest this observation which has primarily weighted with the Recovery Officer to pass the order which, as per Counsel, is per se illegal. The Tribunal below has considered this aspect and has observed that the Recovery Officer has ventured to set at naught the finding of the Civil Court by choosing to interfere with the Recovery Certificate issued by the DRT, Jaipur. The Tribunal has also observed that the Recovery Officer had brushed aside and set aside the judgment and decree of a Civil Court of competent jurisdiction. The Tribunal has therefore held that the Recovery Officer has misapplied Rule 45 of the Income Tax (Certificate Proceedings) Rules and has not made any finding on the application filed before him under Rule 11 of the Second Schedule to the Income Tax Act. As per the Tribunal, the Recovery Officer has also misconstrued the provisions of the Indian Partnership Act. Tribunal has observed that the Recovery Officer has erroneously held that the partnership stood dissolved on the retirement of this appellant and on such dissolution, the appellant was entitled to get 30% share in the immovable property, Obviously, such finding by the Recovery Officer was rightly interfered with by the Tribunal below.

It was a case of retirement of the appellant from the partnership firm and would not lead to dissolution of the partnership firm as such. On retirement of the appellant, the assets and liabilities were taken over by the partnership firm by adding new partners. Under such circumstances, the question of preparing any dissolution deed would not arise. The view formed by the Recovery Officer thus was rightly interfered with by the Tribunal below.

Finding himself in difficulty to raise a valid challenge to the view formed by the Tribunal below, the Counsel for the appellant has only been pressing for taking on record the additional documents. Today, he has also pressed before me his prayer for summoning the record of Sub-Registrar, Ludhiana to know the facts for proper adjudication. This prayer has been made in the rejoinder filed by the appellant to the reply filed to the application which he has filed for placing on record as additional evidence. The case being set up by the appellant would new be totally contrary to what was pleaded before me. Before the Recovery Officer, the only prayer made was that there was an oral partition which had taken place on 31.1.1985 and as per the said deed the portion of the property in which the appellant was running his business has come to his share. Now, he is trying to set up entirely a different case by pleading some sale deed in his favour. His submission that he had come to now about the sale deed much after, cannot be accepted. At this stage, I am not inclined to grant this prayer as made by the appellant. Otherwise I do not find any substance in the appeal. The order passed by the Tribunal below is fully justified and, therefore, calls for no interference. The appeal lacks in merit and, therefore, is dismissed.