Jammu & Kashmir High Court
J And K Bank Limited vs Abdul Samad Chaloo on 6 December, 2006
Equivalent citations: AIR2008J&K1, 2007(2)CTLJ459(J&K), 2007(1)JKJ354, AIR 2008 JAMMU AND KASHMIR 1, 2008 (2) ABR (NOC) 204 (J. & K.) = AIR 2008 JAMMU AND KASHMIR 1, 2008 AIHC (NOC) 49 (J. & K.) = AIR 2008 JAMMU AND KASHMIR 1
Author: Mansoor Ahmad Mir
Bench: Mansoor Ahmad Mir
JUDGMENT Mansoor Ahmad Mir, J.
1. This Civil First Appeal is directed against the judgment and decree dated 30.04.1997 passed by District Judge (Bank Cases), Srinagar, in the suit titled as Abdul Samad Chaloo v. J&K Bank Limited, whereby and where-under suit of the plaintiff came to be allowed, which shall be hereinafter referred to as impugned judgment.
2. It is necessary to notice the facts of the case herein.
Plaintiff-respondent had opened a bank account with appellant-defendant Bank at its Amira Kadal Branch and was being operated by him. Plaintiff was a partner of a firm which consisted of six partners and it was conducting business of Construction of Roads and Buildings and had its business at Anantnag with Union of India through Jammu & Kashmir Bank, Branch Office Anantnag. Jammu & Kashmir Bank through its Branch Manager, Anantnag Branch filed a suit for recovery against it. Appellant-defendant Bank created a lien against the individual account of the plaintiff-respondent which constrained the plaintiff to file a suit for recovery of Rs. 19,451-86p along with interest and costs.
3. Appellant-defendant Bank appeared and filed written statement and contested the suit on the grounds that plaintiff had an individual account at Amirakadal Branch and it adjusted balance amount of the plaintiff against the amount which was due from the firm at Anantnag Branch. Further pleaded that they could create lien against the individual account of the plaintiff. The trial court framed following issues on 16th March, 1988:
1. Whether the defendant Bank has a right of (sic) and set off against plaintiffs account No. 4045 and is entitled to adjust the among lying therein against the outstanding in plaintiffs account (as partner in some firm) with JK Bank Anantnag? OPD.
2. In case of issue No. 1 is replied in affirmative whether the defendant bank has exercised its. (sic) of lien and set off in accordance with law?
3. Whether the defendants prayer for freezing the suit account was refused by Distt. Judge, Ang. If so what is its effect on suit? OPP
4. Whether the plaintiff has no cause of action to maintain the suit? OPD.
5. Whether proper court fee has not been paid by the plaintiff? OPD.
6. Relief?
4. Trial court decided issues 1, 2 and 4 in favour of plaintiff-respondent against appellant-defendant bank and held that bank had no authority and power to create a lien against the individual account of the plaintiff and adjust against the outstanding balance of the firm of which plaintiff was one of the partner and decreed the suit. Issue No. 3 came to be decided in favour of defendant-appellant against the plaintiff-respondent. Issue No. 5 preliminary issue also came to be decided in favour of the plaintiff-respondent against defendant-appellant.
5. Appellant-defendant examined Kanya Lal Bhan, Krishan Lal, Manager, J&K Bank, Gh. Mohammad Reshi, Manager J&K Bank, Anantnag. Plaintiff-respondent examined Mohammad Maqbool. The trial court after considering of the matter decreed the suit. However, directed plaintiff-respondent to furnish security to the satisfaction of defendant-appellant.
6. Heard. Perused. Considered.
The crucial question involved in this lis is whether defendant-appellant Bank could create a lien and adjust the amount of the plaintiff-respondent towards the outstanding amount against a firm of which plaintiff-respondent was a partner? This question will decide the entire fate of the case.
7. The following are the admitted facts:
Plaintiff was operating account NO.4045 at Jammu & Kashmir Bank Branch Amirakadal. Plaintiff was one of the partner of the firm which was conducting business of Construction of Roads and Buildings at Anantnag with Union of India through Jammu & Kashmir Bank Branch Anantnag. The firm was defaulter and suit for recovery was instituted against the firm in the Court of District Judge, Anantnag. Defendant-appellant exercised his powers and created a lien against the individual account of the plaintiff-respondent and also credited the amount against the outstanding loan amount against the firm.
8. It is necessary to notice the relevant provisions of Indian Partnership Act, 1932, for short Act and it is profitable to reproduce Section 25 and 13(b) of the Act, herein which read as under:
25. Liability of a partner for acts of the firm. Every partner is liable, jointly with all the other partners and also severally, for all acts of the firm done while he is a partner.
13(b) the partners are entitled to share equally in the profits earned, and shall contribute equally to the losses sustained by the firm.
9. Both these provisions of law mandate that partner is always liable for partnership debt unless there is an implied or express restriction to the contrary. It is not the case of the plaintiff-respondent that there was such a contract.
10. Madhya Pradesh High Court in case titled AS. Karmachari Grih Nirman Sanstha, Gwalior v. Subhash Yadav has observed as under:
8. The general principle of partnership firm is that a partner is always liable for partnership debt unless there is implied or express restriction to the contrary.
9. All the partners are jointly and severally liable for the acts of one of the partners of the firm. In this regard reference be made to the decision reported as Gurram Subbaraavudu (died) Gurram Subr bamma v. Moto Pothula Narasimham (died) Garre Venkaiah . A promissory Note was executed by the Managing Partner of the firm. It was found by the Court that the debt was incurred for an on behalf of the firm and, therefore, all the partners are liable. It was pointed out that in view of the provisions contained in Sections 5, 18, 19 and 25 of the Act, all the partners are liable for the acts of other partners of the firm. In the present case, it is clear that the liability was created against the firm while it was carrying on business as firm. All partners including petitioner would thus be liable to discharge this liability.
11. Section 171 of the Contract Act provides for a general bankers lien. The banker can look to his general lien as a protection against loss on loan. The deposits and securities are held to be species of goods over which lien may be exercised.
12. Apex Court in a case titled Syndicate Bank v. Vijay Kumar and Ors. reported in All India Banking Law Judgments 1992 (1) Vol. 17 SC 01 also reported as (1992)2 SCC 330 has held as under:
7. Applying these principles to the case before us we are of the view that undoubtedly the appellant Bank had a lien over the two FDRs. In any event the two letters executed by the Judgment-debtor on 17.9.80 created a general lien infavour of the appellant Bank over the two FDRs. Even otherwise having regard to the mercantile custom as judicially recognized the Banker has such a general lien over all forms of deposits or securities made by or on behalf of the customer in the ordinary course of banking business. The recital in the two letter clearly creates a general lien without giving any room whatsoever for any controversy.
13. Keeping in view the ratio laid down in the aforesaid judgments, banker has a lien on all securities which would come into his hands unless there is an express contract or circumstances to the contrary. It is not the case of the plaintiff-respondent that in terms of any express contract the bank could not have created lien.
14. Keeping in view the provisions of Partnership Act particularly Section 25 and 13(b), referred hereinabove, read with ratio laid down by the Madhya Pradesh High Court, I am of the considered view that all partners are jointly and severally bound to discharge the liability of a firm and bank could recover the outstanding amount against the firm from any partner and it could not lie in the mouth of a partner that he is not liable to discharge liabilities of the firm but is liable only to the extent of his share and lien could not be created against his securities.
15. In view of the above discussion, the finding returned by the court below is not legally correct. Accordingly, finding returned by the trial court viz-a-viz issues 1, 2 and 4 are set-aside.
Registry is directed to prepare a decree sheet and send copy of this judgment and decree sheet to the trial court.