JETHALAL CHHOTALAL SHAH Vs. LALLUBHAI MULCHAND MEHTA

JUDGEMENT

(1.) This appeal turns on the construction of Section 61 (4) of the Provincial Insolvency Act (V of 1920).

(2.) The firm of Lallubhai Hirachand consisted of two partners, Chunilal Hirachand and Vrijlal Lallubhai. On November 14,1926, the firm borrowed Rs. 2,00O from the appellants Jethalal and Hiralal Chhotalal, the promissory note being signed by Chunilal one of the partners, for the firm, and again by Chunilal, for himself. The appellants sued both the firm as well as Chunilal on the promissory note, and obtained a decree against the firm and against Chunilal. The firm and the partners became insolvent. The appellants desired to obtain their amount from the separate property of Chunilal, The recovers were doubtful if they could proceed against this property and applied to the Court for directions as to the schedule in which the decree in favour of the appellants should figure. The trial Court decided that the decree- holders were entitled to be paid from Chunilal's separate property. In appeal by the receivers the learned District Judge was of a contrary opinion. The decree-holders appeal.

(3.) Section 61, Clause (4), of the Provincial Insolvency Act runs as follows:- In case of partners, the partnership property shall be applicable in the first instance in payment of the partnership debts, and the separate property of each partner shall be applicable in the first instance in payment of his separate debts. Where there is a surplus of the separate property of the partners, it shall be dealt with as part of the partnership property ; and where there is a surplus of the partnership property, it shall be dealt with as part of the respective separate property in proportion to the rights and interests of each partner in the partnership property.