RAMAKRISHNA REDDI Vs. SYNDICATE BANK

JUDGEMENT

(1.) The second respondent in LA. 703/79 is the petitioner. He is one of the partners of the first respondent-firm. The firm obtained loan from the Syndicate Bank, a nationalised bank, of its Cuddapah Branch. They hypothecated certain properties of the firm as security for the debt. When they failed to redeem the debt, the bank filed the suit for recovery of the amount lent on hypothecation. A preliminary decree was passed followed by a final decree on December 10, 1976. In execution thereof, E.P. 23/77 was filed for sale of the hypotheca. But the hypothecated property was found not available for sale ; as a result the Bank filed I.A. 203/79 to pass a personal decree against the partners of the firm. Therein, the petitioner who is respondent No. 3 and 7th respondent contested. A decree was accordingly passed. Challenging that decree, the present CRP is filed.

(2.) It is the case of the petitioner that there was a compromise decree in O.S. 1083/73 on the file of the Court of the District Munsif at Cuddapah inter se between the partners whereunder the second respondent agreed to take over the management and discharge the liabilities and take the Surplus assets. The petitioner and other partners also agreed to contribute their respective shares. Accordingly they paid the amount to the second respondent but he did not discharge the debt. It is also contended that a remedy under Order 38 Rule 1 of the Code of Civil Procedure to attach before judgment of the hypothecated property was available but was not taken aid of, as a result the assets were made to be depleted for execution. On account of these laches on the part of the bank, the bank cannot saek personal decree against the partners. It is also further contended that the loan was taken in the year 1971 on repayment in yearly instalments, but was not repaid. The application for personal decree was filed in the year 1979 beyond three years. Therefore the application for personal decree is barred by limitation. All these contentions have been negatived by the lower Court and the same has been pressed before me for consideration. With regard to the first point, viz., the laches on the part of the bank, I am unable to agree with the learned counsel for the petitioner. No doubt, a right is provided under Order 38, Rule 1 CPC to attach the assets in the hands of the firm before judgment, but that remedy need not be made avail of for the reason that the assets which were sought to be proceeded with are the subject of hypothecation. Therefore even without an attachment they are bound to be proceeded with and the partnership firm or its partners are under an obligation to make avail of those assets for realisation. Therefore the failure to take steps under Order 38, Rule I CPC is not an impediment for the bank to obtain personal decree against the partners. It is an admitted fact that they are partners of the firm and they are jointly and severally liable for the debts incurred by the firm. No doubt, personal decree against the individual partners is a last resort. Ordinarily, the mortgagee is to proceed in the first instance against the property hypothecated and in case the property is brought to sale and the sale-proceeds are found to be insufficient to discharge the decree debt then for the recovery of the remainder debt the personal decree is to be made. In this case when E.P. 23/77 was filed to bring the property to sale, it was found to be not available for sale. There fore it is not a ease that the hypothecated assests are still available for sale and not being proceeded within the first instance and yet personal decree is sought for. Under those circumstances, I hold that the failure on the part of the bank to take steps under Order 38, Rule 1 CPC does not disentitle it to proceed under Order 34, Rule 6 CPC seeking personal decree against the partners.

(3.) With regard to the second point, it is the contention of the petitioner that the limitation begins to run from the date when the default was committed for payment of the yearly instalment and they should have made avail of the steps available under Or. 38, Rule 1 to secure attachment before judgment of the hypothecated properties or other assets of the partnership firm and the failure thereof will furnish cause of action to seek a personal decree against the partners. Therefore limitation begins to run when the default in payment of the yearly instalment was committed and the application for personal decree was made in the year 1979 and that therefore it is barred by limitation. I am unable to agree with this contention of the learned counsel. Order 34, Rule 6 CPC postulates thus: