P L D 1967 Lahore 811 (PLP)

MUHAMMAD FAZLE GHANI, J.‑This Letters Patent Appeal has been filed against the order of a learned Single Judge dated the 22nd of July 1960 by which the objection petition of the appellant about the attachment of certain amounts in the hands of the railway on behalf of Messrs N. D. Radha Kishen & Sons of Rawalpindi was partially rejected. The brief facts giving rise to the present appeal are that firm Messrs N. D. Radha Kishan & Sons were carrying on the business as a contractor of out agency work for the North Western Railway, Rawalpindi. Under this contract the firm carried passengers and goods from Rawalpindi to Sirinagar and vice versa and they were paid by the appellant railway for this work from time to time. According to the entries maintained with the appellant railway in their various books of accounts the total amount which was recoverable by the firm from the railway upto the time of Independence comes to Rs. 86,850‑13‑

6. Against this amount the appellant railway has shown a sum of Rs. 1,41,300‑12‑0 against the name of the firm on account of certain debit entries which are available in the various registers maintained by the appellant railway. As a result of these gross entries made by the appellant a balance of Rs. 86,850‑13‑6 has been shown against the name of the firm as an outstanding amount payable to the appellant by the firm N. D. Radha Kishan & Sons of Rawalpindi. The learned Single Judge has given in detail the various entries of the debit balance which has been raised by the appellant railway against the firm in his order under appeal and these details need not be repeated in this judgment.

2. Messrs M. K. Sethi, D. S. Sethi and A. R. Sethi were the partners of the firm Messrs N. D. Radha Kishan & Sons of Rawalpindi. These three partners were also Ex‑Directors F of Messrs Pindi Kashmir Transport Company which is at present under liquidation. On the basis of the order of this Court under section 235 of the Companies Act execution proceedings were drawn against the above‑named Ex‑directors by the official Liquidator of this Court and by another order dated the 13th of July 1962, all the money due to the judgment‑debtors from the appellant railway was attached and directed to be remitted to this Court. Consequently the amount of Rs. 1,41,300‑12‑0 which was shown in the credit accounts of Messrs. N. D. Radha Kishan & Sons was attached in the hands of the appellant railway. This attachment furnished a ground to the appellant to file an objection petition which was partially rejected by the learned Single Judge by his order under appeal in respect of Rs. 34,000 and Rs. 58,879‑9‑0 only while the appellant's objec tion with reference to other items mentioned in the objection petition and as further delienated in the order under appeal were, however, allowed.

3. In this appeal the order of the learned Single Judge disallowing the sum of Rs. 34,000 and Rs. 58,879‑9‑0 was challenged. It was contended that the liability of Messrs N. D. Radha Kishan & Sons in respect of the above‑named two amounts towards the appellant railway was established and, therefore, the appellant was entitled to set off the amounts due to them against the credit entries of Messrs. N. D. Radha Kishan & Sons. It was further submitted that there was no order or decree passed against the firm N. D. Radha Kishan & Sons, therefore, the decree of the Court which was against the three directors of the firm could not be executed against the firm as there were no funds of the three ex‑directors of the company with North Western Railway, therefore, these amounts of the firm were not liable for attachment. Lastly, it was urged that even if there was any liability of Messrs. N. D. Radha Kishan it devolved upon the late Government of India and the amount in the hands of the appellant was not liable for the same. The process of attachment in these circumstances was challenged as unwarranted by law.

4. For proper appreciation of the various contentions raised on behalf of the appellant it will be useful to give the particulars of the two items which have been disallowed by the learned Single Judge by his order under appeal:‑ (1) Advance paid to Pindi Kashmir Transport Company on behalf of Messrs N. D. Radha Kishan which has been included by the official Liquidator as debt due against the Pindi Kashmir Transport Co., but in respect of which the creditor will be deemed to be Messrs N. D. Radha Kishan & Sons, as a result of set off claimed Rs. 34,000. (2) Income-tax payable by Messrs N. D. Radha Kishan & Sons and claimed from N. W. R. by the Income-tax Department Rs. 58,879‑9‑0.

5. We propose to deal with the second item of Rs. 58,879‑9‑0 in the first instance. The appellant railway has claimed credit for this amount and adjusted the same in the accounts of firm Messrs N. D. Radha Kishan & Sons as a debit for the reason that a notice of demand from the Income- tax Authorities had been received by them. But it is conceded that the notice of demand was subsequently withdrawn by the Income‑tax Authorities and no payment has been made by the railway to the Income‑tax officer for or on behalf of Messrs N. D. Radba Kishan & Sons. Besides this claim no other justification was shown as to how the railway is entitled to ask for the credit of this amount in their favour especially so when this amount had not been paid by them to the Income‑tax Authorities. The notice of demand has also been withdrawn by the Income‑tax Department and the Railway can have no right or title to keep this amount for themselves. No effort was made by the learned counsel for the appellant to show that in what circumstances the appellant railway was entitled to retain this amount and appropriate it for themselves. In these circumstances we do not find that the order of the learned Single Judge can be questioned in any respect so far as the attachment of the sum of Rs. 58,879‑9‑0, is concerned.

6. Coming next to the amount of Rs. 34,000 we find that the learned Single Judge disallowed this amount on the ground that the railway wanted to have a double advantage for this sum. No doubt the order of the learned Single Judge is not very clear but we were informed by the official Liquidator, that the appellant railway had filed a claim before the Liquidation Judge as creditor of Pindi‑Kashmir Transport Company for this amount of Rs. 34,000 and their claim as a creditor of the liquidating company has been accepted by the Liquidation Judge and that debt stands proved against the company. After having gone to the Liquidation Judge as a creditor of Pindi‑Kashmir Transport Company for this very amount the appellant railway are estopped from claiming this amount out of the credits of Messrs N. D. Radha Kishan and Sons which are lying at their disposal. This position of fact that the appellant railway has claimed their debt of Rs. 34,000 against Pindi Kashmir Transport Company has not been controverted by the learned counsel for the appellant and in these circumstances the learned Single Judge rightly held that the appellants cannot be allowed to have the double advantage for the same amount. As a creditor of the company the appellants are entitled to be paid rateably out of the assets of the liquidating company for their credit of Rs. 34,000 which has been accepted by company Judge and they cannot set off this amount once again against the firm.

7. Messrs N. D. Radha Kishan & Sons were a partner ship firm and Messrs M. K. Sethi, D. S. Sethi and A. R. Sethi were its partners. Learned counsel for the appellant was not able to show that there were any other partners of this firm except the above‑named three persons. In these circumstances the property of the firm was the property of the partners and they being the judgment debtors of the liquidating company, to the tune of Rs. 4,32,079‑6‑0 the assets of the partners have rightly been reached by the official Liquidator and have been correctly attached in the hands of the appellant.

8. It was objected on behalf of the appellant that there was no decree against the firm and the property of the firm in the hands of the appellant could not be attached in execution of a decree passed against the firm or against the partners in the firm. The burden of this objection was that as the order sought to be executed under section 235 of the Companies Act was passed against Messrs M. K. Sethi, D. S. Sethi and A. R. Sethi as judgment‑debtors of the company and not as partners of Messrs N. D. Radha Kishan & Sons the property of the firm was not liable to attachment. It will be useful at this stage to reproduce the relevant provisions of Order XXI, rule 49 for the proper appreciation of the objection of the learned counsel for the appellant. It reads as under:‑ "49. (1) Save as otherwise provided by this rule, property be longing to a partnership shall not be attached or sold in execu tion of a decree other than a decree passed against the firm or against the partners in the firm as such. (2) The Court may, on the application of the holder of a decree against a partner, make an order charging the interest of such partner in the partnership property and profits with payment of the amount due under the decree, and may, by the same or a subsequent order, appoint a receiver of the share of such partner in the profits (whether already declared or accruing) and of any other money which may be coming to him in respect of the partnership, and direct accounts and inquiries and make an order for the sale of such interest or other orders as might have been directed or made if a charge had been made in favour of the decree‑holder by such partner, or as the circumstances of the case may require. (3) The other partner or partners shall be at liberty at any time to redeem the interest charged or, in the case of a sale being directed, to purchase the same. (4) Every application for an order under sub‑rule (2) shall be served on the judgment‑debtor and on his partners or such of them as are within (Pakistan). (5) Every application made by any partner of the judgment debtor under sub‑rule (3) shall be served on the decree‑holder and on the judgment‑debtor, and on such of the other partners as do not join in the application and as are within (Pakistan). (6) Service under sub‑rule (4) or sub‑rule (5) shall be deemed to be service on all the partners, and all orders made on such applications shall be similarly served." From the scheme of the above rule it is clear that the under lying principle in this rule is to save the property of partnership from attachment so that a running business should not be broken up by a result of direct action on the part of the execution Court which may paralyse or hamper the activities of the firm by intercepting any part of its gross income. The object of the rule is the protection of commerce which is considered to be an important source of national wealth. But this rule does not apply in the case of a dissolved firm or a defunct partnership. The entire scheme of the rule is based on the principle that there is a running enterprise in existence as a partnership at the time when the process is taken out for execution against the partners of the firm as such. These provisions of the law are to prevent as far as possible the disturbance or dislocation of the working of a continuing partnership. This rule would itself cease to apply when the firm is no longer in existence. It is not the case of the appellant that Messrs N. D. Radha Kishan & Sons are still a running firm. The business which was done by the firm was to perform the work of outgoing agency for North Western Railway from Rawalpindi to Sirinagar and vice versa. This business came to an end at the time when Sirinagar was occupied by India and North Western Railway ceased to dispatch goods and passengers upto Sirinagar from Rawalpindi after 1947. There is nothing on the record to indicate that Messrs N. D. Radha Kishan & Sons had any other business except the out going agency contract or if there was any such business it is still being carried on by them in Pakistan. At any rate the appellants are strangers to the firm and the provisions of Order XXI, rule 49 are meant only for the benefit of the partners of a firm or the firm itself and as such they have no locus standi to raise any such objection. Their main intention is to illegally retain the assets of the firm which are lying in their hand and to which they have no right or title under the law. Since the firm has also become defunct and is no longer continuing its business the objection, therefore, merits no consideration and is totally misconceived.

9. A reference was also made by the appellant to the provisions of section 8 of Indian Independence (Rights, Property and Liabilities) Order, 1947 and it was argued that the contract was made with Messrs N. D. Radha Kishan & Sons on behalf of the Governor‑General‑in‑Council before the 14th of August 1947 and as such the rights and liabilities under the contract are to be borne by the Government of India. We have thoroughly examined the provisions of the above‑mentioned law but we do not find that this is a case in which the liability of the recovery of the money devolves upon the Government of India. Neither this is a case of contract which could be deemed to have been made on behalf of the Government of Pakistan instead of Governor‑General‑in‑Council. The money of the judgment debtor is lying at the disposal of North Western Railway and has been attached under the orders of the Company Judge therefore, no question of any contractual liability arises in this case and Indian Independence (Rights, Property and Liabilities) Order, 1947 does not apply at all.

10. Before parting with the case it will not be out of place to mention that a half‑hearted attempt was made on behalf of the appellant to show that Messrs N. D. Radha Kisban & Sons had become evacuees and the amount which was lying at their credit in the hands of the appellant railway was evacuee property but soon after this suggestion was made the learned counsel became conscious of the implication of his submission and he withdrew this objection and cited Abdul Khaliq Abdul Razzaq v. Kishanchand (P L D 1964 S C 74) to the effect that this property was not treated as an evacuee property by declaration of the custodian or by usur by the Rehabilitation Authorities Lahore the 1st of March 1957, and as such it should not be treated as an evacuee property now by virtue of section 3 of Administration of Evacuee Property Act of 1957. In view of this submission of the learned counsel for the appellant we do not consider that we should refer this case to the Custodian under section 41 of the Administration of Evacuee Property Act, 1957.

11. Since Messrs N. D. Radha Kishan & Sons are a defunct firm and Messrs M. K. Sethi, D. S. Sethi and A. R. Sethi the three ex‑directors of Pindi Kashmir Transport Company the judgment‑debtors in the case, Were its only partners. The assets of the partners have rightly been attached in the hands of appellant Railway by the order of the learned Liquidation Judge. We, therefore, see no merit in this appeal which is hereby dismissed with costs. K. M. A. Appeal dismissed.