Supreme Court clarifies execution of decree against legal heirs in partnership dissolution: S.P. Misra vs. Mohd. Laiquddin Khan (2019)

Introduction

Date of the Judgment: October 18, 2019

Citation: 2019 INSC 1127

Judges: Indu Malhotra, J., R. Subhash Reddy, J.

Can a decree against a partner be enforced against their legal heirs after the partnership dissolves due to the partner’s death? The Supreme Court of India addressed this critical question in a recent case involving a dispute over a partnership agreement. The core issue revolved around whether the legal heirs of a deceased partner are bound by a decree obtained against the deceased partner during their lifetime, especially when the partnership itself is dissolved due to the death of one of the partners. The judgment was delivered by a two-judge bench comprising Justice Indu Malhotra and Justice R. Subhash Reddy, with the majority opinion authored by Justice R. Subhash Reddy.

Case Background

The case involves a partnership formed on April 14, 1982, between late Sri Jai Narayan Misra and late Smt. Hashmatunnisa Begum. Smt. Begum owned land in Paigah Compound, Hyderabad. The partners aimed to develop this land for real estate purposes. A dispute arose over a 3381 square meter portion of the land. Sri Jai Narayan Misra filed a suit (O.S No. 580 of 1988) seeking a permanent injunction against Smt. Hashmatunnisa Begum, restraining her from interfering with the development of the land and a mandatory injunction directing her to sign the layout plans. Smt. Hashmatunnisa Begum passed away on May 17, 1996, and Sri Jai Narayan Misra died on January 4, 2001. The suit was decreed in favor of Sri Misra on July 14, 1993. After the death of both original partners, the legal heirs of Sri Misra filed an execution petition seeking enforcement of the decree. The legal heirs of Smt. Begum filed an application under Section 47 of the Code of Civil Procedure, 1908 (CPC), contending that the decree was not executable against them.

Timeline:

Course of Proceedings

The Trial Court decreed the suit in favor of the original plaintiff, Sri Jai Narayan Misra, granting a permanent injunction against Smt. Hashmatunnisa Begum, restraining her from developing the property and directing her to sign the layout plan. After the death of both original partners, the legal heirs of Sri Misra filed an execution petition seeking enforcement of the decree. The legal heirs of Smt. Begum filed an application under Section 47 of the Code of Civil Procedure, 1908 (CPC), contending that the decree was not executable against them. The II Senior Civil Judge, City Civil Court, Hyderabad, allowed the application, holding that the decree was not executable against the legal representatives. The High Court of Judicature, Andhra Pradesh at Hyderabad, confirmed the order of the Trial Court.

Legal Framework

The case primarily revolves around the interpretation of Section 42(c) of the Indian Partnership Act, 1932, which states that a firm is dissolved by the death of a partner, subject to a contract between the partners. The court also considered Section 47 and Section 50 of the Code of Civil Procedure, 1908 (CPC). Section 47 of the CPC deals with questions to be determined by the court executing the decree, and Section 50 of the CPC deals with the execution of a decree against the legal representatives of a deceased judgment-debtor. The court also considered Order 21 Rule 32 of the CPC, which deals with the execution of a decree for specific performance.

Section 42 of the Indian Partnership Act, 1932 states:

“42. Dissolution on the happening of certain contingencies.—Subject to contract between the partners a firm is dissolved— (a) if constituted for a fixed term, by the expiry of that term; (b) if constituted to carry out one or more adventures or undertakings, by the completion thereof; (c) by the death of a partner; and (d) by the adjudication of a partner as an insolvent.”

Arguments

Appellants’ Arguments:

• The appellants argued that the partnership deed contained a clause stating that upon the death of either partner, their legal representatives would automatically become partners and continue the firm until the venture was completed.
• They contended that the legal representatives of the deceased partner, Smt. Hashmatunnisa Begum, were bound by the decree obtained against her, as they had stepped into her shoes as partners.
• The appellants relied on the judgment in Prabhakara Adiga v. Gowri and Others [(2017) 4 SCC 97], arguing that a decree can be executed against the legal representatives of a deceased judgment-debtor.

Respondents’ Arguments:

• The respondents argued that the partnership was dissolved upon the death of Smt. Hashmatunnisa Begum, as per Section 42(c) of the Indian Partnership Act, 1932, since there were only two partners.
• They contended that they were not partners in the original partnership and were not bound by the decree obtained against their predecessor.
• The respondents argued that any clause in the partnership deed contrary to the statutory provisions of the Partnership Act is void and against public policy.
• They argued that the decree obtained against Smt. Hashmatunnisa Begum was personal to her and could not be enforced against her legal heirs.

Issues Framed by the Supreme Court

The Supreme Court considered the following issue:

✓ Whether the decree obtained by the predecessor of the appellants can be executed against the respondents, who are the legal representatives of the original partner, considering the dissolution of the partnership due to the death of one of the partners.

Treatment of the Issue by the Court

The following table demonstrates as to how the Court decided the issues

Authorities

The Supreme Court considered the following authorities:

Cases:

• Prabhakara Adiga v. Gowri and Others [(2017) 4 SCC 97] – Supreme Court of India: The Court analyzed this case, which dealt with the execution of a decree for permanent injunction against the legal representatives of a deceased judgment-debtor. However, the court distinguished this case based on the facts of the present case.
• Girijanandini Devi v. Bijendra Narain Choudhary [AIR 1967 SC 1124] – Supreme Court of India: This case was referred to in the context of the maxim “actio personalis moritur cum persona” (a personal action dies with the person) and its limitations.

Legal Provisions:

• Section 42(c) of the Indian Partnership Act, 1932: The court referred to this provision to emphasize that a partnership is dissolved by the death of a partner.
• Section 47 of the Code of Civil Procedure, 1908 (CPC): This provision was considered in the context of the executing court’s powers.
• Section 50 of the Code of Civil Procedure, 1908 (CPC): This provision was considered in the context of execution of a decree against the legal representatives of a deceased judgment-debtor.
• Order 21 Rule 32 of the Code of Civil Procedure, 1908 (CPC): This provision was considered in the context of the execution of a decree for specific performance.

Judgment

The Supreme Court held that the decree obtained by the predecessor of the appellants was not executable against the respondents, who are the legal heirs of the deceased partner. The Court reasoned that the partnership was dissolved upon the death of Smt. Hashmatunnisa Begum, as per Section 42(c) of the Indian Partnership Act, 1932. The legal heirs were not parties to the original partnership agreement and were not bound by the decree.

What weighed in the mind of the Court?

The Court’s reasoning was primarily influenced by the statutory provision of Section 42(c) of the Indian Partnership Act, 1932, which stipulates that a partnership is dissolved upon the death of a partner. The Court emphasized that the legal heirs of the deceased partner were not parties to the original partnership agreement and thus could not be bound by the decree obtained against the deceased partner. The Court also highlighted the principle of “privity of contract,” stating that a contract cannot confer rights or impose obligations on third parties who are not party to it.

Logical Reasoning:

The Court considered the argument that the partnership deed stipulated that legal heirs would automatically become partners. However, it rejected this argument, stating that such a clause could not override the statutory provision of Section 42(c) of the Indian Partnership Act, 1932. The Court also considered the principle of “privity of contract,” stating that a contract cannot confer rights or impose obligations on third parties who are not party to it.

The Court concluded that the decree obtained against the deceased partner was personal to her and could not be enforced against her legal heirs. The Court emphasized that the legal heirs were not parties to the original partnership and had not derived any assets or liabilities from the partnership firm.

The Supreme Court quoted the following from the judgment:

“The legal representatives of late Smt. Hashmatunnisa Begum are not the partners of the original partnership deed dated 14.04.1982.”

“When such legal representative are not parties to the contract, such contract cannot confer rights or impose obligations arising under it on any third party, except parties to it.”

“When the partnership stands dissolved by operation of law under Section 42(c) of the Indian Partnership Act, 1932, the question of execution in pursuance of the decree does not arise.”

Key Takeaways

✓ A partnership is dissolved upon the death of a partner, as per Section 42(c) of the Indian Partnership Act, 1932, unless there is a specific contract to the contrary that is in consonance with the provisions of the Indian Partnership Act, 1932.

✓ Legal heirs of a deceased partner are not automatically bound by decrees obtained against the deceased partner, especially if the partnership has been dissolved.

✓ Clauses in partnership deeds that are contrary to the provisions of the Indian Partnership Act, 1932 are void and unenforceable.

✓ The principle of “privity of contract” applies, meaning that a contract cannot impose obligations on third parties who are not party to it.

Directions

The Supreme Court did not give any specific directions in this case, other than dismissing the appeal.

Specific Amendments Analysis

There was no discussion on specific amendments in the judgment.

Development of Law

The ratio decidendi of this case is that a decree obtained against a partner during their lifetime cannot be executed against their legal heirs after the dissolution of the partnership due to the partner’s death, especially when the legal heirs were not parties to the original partnership agreement. This judgment reinforces the statutory provision of Section 42(c) of the Indian Partnership Act, 1932, and clarifies the limitations on the enforceability of decrees against legal representatives in the context of partnership dissolution. This judgment also clarifies that any clause in the partnership deed that is contrary to the statutory provisions of the Indian Partnership Act, 1932, is void and unenforceable.

Conclusion

The Supreme Court dismissed the appeal, holding that the decree obtained against the deceased partner was not executable against her legal heirs. The Court emphasized the dissolution of the partnership upon the death of one partner and the fact that the legal heirs were not parties to the original partnership agreement. This judgment clarifies the position of law regarding the execution of decrees against legal representatives in the context of partnership dissolution.