Every partner is liable, jointly and severally for all acts of the firm done while he is a partner

Cause Title : Aftab Currim vs Ibrahim Currim & Sons, Interim Application (L) No. 1897 Of 2022, Bombay High Court

Date of Judgment/Order : 8th April, 2022

Corum : N. J. Jamadar, J.

Citied: Jodh Singh Gujral vs. S. Kesar Singh, High Court of Jammu and Kashmir

Background

Defendant no.1 is a registered partnership firm and defendant nos. 2 to 4 are its partner and in-charge of day to day affairs of defendant no.1 – firm. It is the case of the plaintiffs that upon the representation of defendant nos. 2 to 4 that the plaintiffs would get handsome i.e. 24% return on the investment made with the defendants, the plaintiffs had invested a sum of Rs.1 Crore, over a period of time. The amount was to be repaid on demand along with interest. The defendants committed default in repayment. Hence, the suit.

Defendant no. 4 asserted that since, there are eight partners of defendant no. 1 – firm, it is necessary to implead the rest of the five partners as party defendants to this suit, as in the wake of the dissolution of the firm, the outcome of the suit would bind only the party defendants and thereby the applicant – defendant no. 4’s share of liability would increase to 1/3rd from 1/8th. The Defendant no. 4 pleaded the plaintiffs be directed to amend the plaint and implead the rest of the partners of defendant no.1 – firm as defendant nos.5 to 9.

Judgment

The Bombay High Court observed that the Division Bench of the High Court of Jammu and Kashmir in the case of Jodh Singh Gujral vs. S. Kesar Singh has said that Section 43 of the Contract Act, which provides that when two or more persons make joint promise, the promisee may, in the absence of express agreement to the contrary, compel any one or more of such joint promisors to perform the whole of the promise. the Division Bench held that, there was no reason why the principle contained in Section 43 shall not apply to the partners.

Section 25 of the Partnership Act, 1932, provides that 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. It is trite, a firm is not legal entity. A partnership firm is only a collective or compendious name for all the partners. To put it in other words, a partnership firm does not have any existence apart from its partners. Thus, a decree in favour of or against firm in the name of the firm has the same effect like a decree in favour of or against the partners. When the firm incurs a liability, it can be assumed that all the partners have incurred that liability and so the partners remain liable jointly and severally for all the acts of the firm.

If this nature of the liability of the partners of a firm is considered in juxtaposition with the provisions contained in Section 43 of the Contract Act, it becomes explicitly clear that the plaintiffs are not enjoined to implead all the partners of the firm.