The Allahabad High Court allowed a petition challenging the seizure order dated 21 December 2012, through an amendment application, and the order dated 31 October 2011, directing the second petitioner to be jointly and severally liable to make good the loss caused to the bank.

A division bench of this Court comprising of Hon’ble Justice Suneet Kumar and Hon’ble Justice Rajendra Kumar observed that it is not the case of the bank that the then officers (on date of dissolution of the firm) had no knowledge, and/or, were not aware of the dissolution of the firm and reconstitution of the proprietorship firm by the same name.

Brief Facts:

The first petitioner i.e., M/s Shiva Enterprises, is a proprietorship firm, and the second petitioner is the proprietor of the firm. The firm is engaged in the business of construction. Initially, the petitioner firm was a partnership firm which was subsequently dissolved in 2008, and thereafter, became a sole proprietorship firm.

On 9 July 2009, a partnership firm in the name M/s Maa Gayatri Construction was constituted, wherein, one Ranveer Singh and the second petitioner were partners. On 11 July 2011, Ranveer Singh informed the Bank that the firm (M/s Maa Gayatri Construction) has been reconstituted as a proprietorship firm of the same name and Ranveer Singh is the sole proprietor.

On 21 July 2011, Ranveer Singh, sole proprietor of the reconstituted firm, i.e., M/s Maa Gayatri Construction placed a cheque, dated 20 July 2011, for an amount at Rs.55,11,000/- in the account of the dissolved firm. However, the cheque deposited by Ranveer Singh in the account of his firm (M/s Maa Gayatri Construction) was a forged and manufactured document. Criminal Cases came to be filed against the persons involved and they were convicted.

The second petitioner was neither named in the FIR, nor, was he charge-sheeted. In the intervening period, the fourth respondent seized the bank account of M/s Shiva Enterprises of the second petitioner to satisfy the loss caused to the Bank by the sole proprietor of M/s Maa Gayatri Construction. Hence, the present petition.

The question that arises for determination is whether the respondent bank was justified in seizing the bank account and F.D.Rs. of the petitioner firm (M/s Shiva Enterprises) to satisfy the loss caused to the bank by a third firm (M/s Maa Gayatri Construction) after the petitioner ceased to be a partner.

Observations of the Court

The Court noted that the respondent-Bank in para 25 and 26 of the counter affidavit, has categorically pleaded that dissolution of the partnership firm M/s Maa Gayatri Constructions was neither served upon the respondent bank nor, the same is on the bank’s record. It has been denied that the alleged communication dated 11 July 2011 and 12 July 2011, written by Ranveer Singh, and the second petitioner respectively was received by the bank.

However, the petitioner has taken a categorical stand that the bank was informed of the dissolution of the partnership firm and the reconstitution of a proprietorship firm with the same name and title. The Court remarked that it is not the case of the bank that after the dissolution of the firm, the second petitioner continued to act or present himself as a partner of the dissolved firm.

The Court considered the stand of the bank to be feeble, observing that the stand of the bank cannot be taken at face value for the reason that fraud was committed immediately after the dissolution of the firm. It is not the case of the bank that the then officers (on date of dissolution of the firm) had no knowledge, and/or, were not aware of the dissolution of the firm and reconstitution of the proprietorship firm by the same name.

On the issue of notice, the Court observed that Public notice as contemplated under Section 63 and Section 72 is intended only to serve a purpose to bring home to the persons concerned the fact of retirement. That purpose will undoubtedly be served in a better way by personal or actual notice.

Further, the Court observed that though the communications by the petitioner and Ranveer Singh is not available in the record of the bank, that would certainly not mean or imply that the then officers had no information/knowledge of the dissolution of the firm.

The decision of the Court:

The Allahabad High Court, allowing the petition, held that the scale of justice considerably tilts in favor of the petitioners.

Case Title: M/S Shiva Enterprises And Anr. vs Union Of India Thru Secy. And Ors.

Coram: Hon’ble Justice Suneet Kumar and Hon’ble Justice Rajendra Kumar

Case no.: WRIT PETITION NO. 25126 OF 2012

Advocate for the Petitioner: Mr. R.D. Tiwari

Advocate for the Respondent: A.S.G.I., S.C., Ms. Sudha Pandey

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Deepak