' This suit under the Banking Companies (Recovery of Loans) Ordinance, 1979 has been filed for recovery of Rs,10,13,374.00 by M/s. United Bank Limited, Lahore, the plaintiff, against M/s. Iftikhar and Company Civil Engineers and Contractors, Lahore and six others, the defendants.
2. According to the plaint defendant No,1, a partnership firm, opened a partnership account with the plaintiff on 4th of January, 1968. The said account was maintained under No,2822. The account opening form, original whereof has been placed on record, shows defendants Nos.2, 3, 4 and 5 as partners of defendant No,1-firm. The partnership letter addressed to the Bank dated 4-1-1968 has also been filed by the plaintiff wherein it is stated that defendants Nos.2 to 5 are the partners of the firm and shall be jointly and severally responsible to the Bank for the liabilities of the firm towards the plaintiff. It was also undertaken through the said letter that any change will be notified in writing and till then the responsibility of the partners individually shall remain intact. The defendant-firm was later converted into a private limited company w.e.f, 1st January, 1986 per intimation communicated to the plaintiff by the defendants vide their letter dated 12th of February, 1986, original whereof has also been placed on record.
3. On the request of defendant No,1 through defendants Nos.2 to 5 cash credit facility was allowed firstly in 1972 which was enhanced in 1973 to Rs,3,00,000.00 and to secure repayment thereof an equitable mortgage of property detailed in para 6 of the plaint was created by defendant No,7.
Again when the limit was increased to Rs,5,00,000.00 in 1974, defendant No,7 reiterated the mortgage through a registered mortgage deed dated 28th of March, 1975, which was finally registered on 12th of July, 1975 though it was presented for registration before the Local Commissioner on 15th of May, 1975 and the Local Commissioner made his endorsement of presentment and execution of the document also on 15th of May, 1975. The overdraft/cash credit facility availed of by the defendants in the sum of Rs,5,00,000.00 was acknowledged and undertaken to be repaid by defendants Nos.2, 3 and 4 through a promissory note executed by them on 3rd of July, 1975. The said facility was further enhanced to Rs,8,00,000.00 and the aforementioned defendants Nos.2, 3 and 4 executed yet another promissory note dated 27th November, 1976 in the sum of Rs,8,00,000 undertaking to pay the said amount alongwith interest at the rate of 4% above the published State Bank of Pakistan rate with a minimum of 14% per annum with quarterly rests. The defendants did not clear their liability which by passage of time accummulated to Rs,10,13,374 as on 9th May, 1987. The defendants having not cleared their liability the plaintiff has been obliged to file the present suit for recovery of aforementioned sum of Rs,10,13,374 together with interest at the rate of 14% per annum with quarterly rests from the date of institution of the suit till recovery through sale of the mortgaged property and in case the sale proceeds are not sufficient to satisfy the plaintiff's claim then through a decree against the defendants personally.
4. Summonses were issued to the defendants in Form 4 of Appendix B of the Code of Civil Procedure. Defendants Nos.1, 2, 3, 6 and 7 filed a joint petition for leave to appear and defend the suit (PLA No,53-B of 1987). In the said petition it was inter alia averred that defendant No,5 had died.
Consequent upon this disclosure the plaintiff made an application (C.M. No,12-B of 1988) praying that it having now transpired that defendant No,5, Muhammad Shafi, had died his name may be struck off from the list of defendants as otherwise also he is represented through defendants Nos.2 to 4 and 7. The presence of the legal heirs of deceased defendant No,5 being already on record was considered to be irrelevant as the said defendant had died before the institution of the suit.
However, by order dated 29th June,1988 the said defendant was struck off from the array of defendants on the own request of the plaintiff. Defendant No,4 though served neither appeared nor made an application for leave to appear and defend the suit. He was proceeded against ex parte vide order dated 25th November, 1987.
5. The learned counsel for the applicants-defendants made the following submissions in support of the petition for leave to appear and defend the suit:--
(1) That the suit is time barred;
(2) That one of the partners having died in 1971 defendant No,1-firm stood dissolved by virtue of Section 42 of the Partnership Act and, therefore, no liability of the said partnership firm can be enforced against the defendants; and
(3) That the private limited company, defendant No,6, did not take over liabilities of the partnership.
6. On the other hand, the learned counsel for the plaintiff submitted: ' First, that the suit having been filed on 12th of May, 1987 is not at all time barred there being continuous acknowledgements by the defendants about their liabilities, the last of such acknowledgement being dated 13th of November, 1986 through letter addressed to the plaintiff under signatures of defendant No,2. The learned counsel in this context also submitted that otherwise also the mortgage having been created through the registered deed on 12th July, 1975, the suit is well within 12 years which is the prescribed period of limitation for suits based on mortgages; ' Secondly, that the partnership did not stand dissolved as asserted by the defendants and for all intents and purposes it had been continuing on the own giving out of the defendants--through various letters, originals whereof have been placed on record; and ' Lastly, that the change of the firm to private limited company w.e.f, 1st January, 1986 had been duly notified by the company-defendant No,6 itself through letter dated 12th of February, 1986, the original of which letter has also been placed on record.
7. Having given consideration to the controversy involved, I am of the view that the contentions raised on behalf of the defendants have no force. The first contention as to the suit being barred by lime is on the face of it not tenable. It has been correctly pointed out by the learned counsel for the plaintiff that there had been continuous acknowledgements of debt by the defendants, some of which have been placed on record in original and the last is dated 13th of November, A 1986 wherein it was categorically undertaken that the accounts will be settled latest by 30th of June, 1987 and repayment will commence w.e.f, March, 1987. Apart altogether from the above position the suit being based on mortgage of immovable property will be governed by Article 132 of the Schedule to the Limitation Act which prescribes a period of 12 years for the institution of the suit to be computed from the date when the money sued for becomes due, which period has not as yet run out.
8. Taking up the second contention, I suffice by observing that the death of one of the partners of a firm does not as a rule dissolve the partnership. Section 42 of the Partnership Act, 1932 which governs the subject is reproduced hereunder for facility of reference :-- "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."
' A bare perusal of the above section would show that the dissolution of partnership on account of death of a partner has been subjected to a contract between the partners and is not a mandatory provision to take effect in all eventualities and without exception. It is by now well settled and, therefore, need not detain me for long that the dissolution of a firm on the death of one of the partners is subject to contract between the parties and the intention to continue the business in partnership by the surviving partners alongwith the legal representatives of the deceased partner can also be gathered from the conduct of the partners.
9. Applying the above principle to the case in hand, it would be seen that the intention of the surviving partners who happened to be the legal representatives of the deceased partners as well to continue the business of partnership not withstanding the death of the said partner was absolutely clear and unambiguous. The above view finds support from some of the attendant circumstances which inter alia are :--
(1) That no intimation was ever given to the plaintiff or for that matter to the general public about the death of the deceased partner or of the dissolution of the firm;
(2) That the partnership business was continued as such by the surviving partners who also are the legal representatives of the deceased partner; and
(3) That the bank account was continued to be operated in the same manner as was done during the life of the deceased partner.
' The second contention of the learned counsel for the defendants also, therefore, fails.
10. Adverting now to the only other contention left to be dealt with, it may be observed that the taking over of liabilities of defendant No,1 by defendant No,6 in the absence of any proof to the contrary having been placed on record stands established by virtue of the letter of defendant No,6 itself which has already been referred to above. Mere verbal denial by the defendants at this stage when they themselves had given out that defendant No,1 has been converted to defendant No,6 will not absolve defendant No,6 of its liability which admittedly is a private limited company and, therefore, for the purpose of liabilities of defendant No,1 and its partners would not enjoy any different status especially when the Managing Director of the said company is admittedly defendant No,2 himself and the other defendants have also not been denied to be the shareholders/Directors of the company. The last contention raised on behalf of the defendants also does not have any merit and is, therefore, repelled.
11. In view of the foregoing discussion, the petition for leave to appear and to defend the suit (PLA No,53-B of 1987) filed on behalf of the contesting defendants does not have any merit and is accordingly dismissed.
12. The petition for leave to appear and defend the suit filed by the contesting defendants having been dismissed, the contents of the plaint shall be deemed to be correct and admitted.
13. Resultantly, a preliminary decree with costs for recovery of Rs,10,13,374 is hereby passed in favour of the plaintiff and against defendants Nos.1 to 4 and 6 to 7 with their joint and several liability. The plaintiff shall also be entitled to interest at the rate of 14% per annum from the date of institution of the suit till realization of the total decretal amount.
14. The defendants are given five months time to make payment of the decretal amount, failing which the plaintiff may apply for passing of the final decree.