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Case title: Annapurna B. Uppin & Ors. V. Malsiddappa & Anr.

Case no.: Arising Out Of SLP (C.) No.11757 Of 2022

Order on: 5^th April 2024

Quorum: Justice Vikram Nath and Justice Satish Chandra Sharma

FACTS OF THE CASE

The case concerns the retrieval of an investment made by the complainant in a partnership firm from the legal heirs of the deceased partner, pursuant to the Consumer Protection Act of 1986. The complainant aimed to recover the investment from the appellants, who were the legal heirs of the deceased partner, arguing that they had inherited the estate of the deceased partner and therefore could not evade responsibility for fulfilling the payment owed to the complainant, who was respondent no.1.

The respondent, Malsiddappa, filed a complaint alleging that he had invested Rs. 5 Lakhs in the partnership firm M/s Annapurneshwari Cotton Co. on May 21, 2002, with a promised repayment after 120 months with interest at 18% per annum. Despite multiple requests for premature payment, the payment was denied. The complaint was filed before the District Consumer Disputes Redressal Forum (DCDRF) alleging deficiency in service.

CONTENTIONS OF THE APPELLANT

The appellants, legal heirs of the deceased managing partner of the firm, argued that they were never part of the partnership and that the complaint was not maintainable under the Consumer Protection Act, 1986.

The present appeal is not maintainable in view of the recent judgment of this Court in the case of Universal Sompo General Insurance Company Ltd. vs. Suresh Chand Jain and Another[1]:

wherein this Court has held that the remedy of Article 226 of the Constitution before the High Court would be available to an aggrieved party where the NCDRC[2] has decided an appeal or a revision but no such remedy would be available where it was an original complaint before the NCDRC. The present petition should be dismissed on the ground of alternative remedy.

CONTENTIONS OF THE RESPONDENTS

Respondent contended that the appellants, as legal heirs of the deceased partner, were liable for the payment, and the complaint was maintainable under the 1986 Act.

ISSUE –

Whether the complaint filed under the Consumer Protection Act, 1986, is maintainable.
Whether the appellants were liable for the investment returns as legal heirs of the deceased partner.
And Availability of alternative legal remedies.

COURT’S ANALYSIS AND JUDGEMENT

The Supreme Court observed that the respondent was deemed a partner of the firm as per the registered partnership deed. The investment being commercial in nature fell outside the purview of the Consumer Protection Act.

It was held that legal heirs do not automatically become liable for the firm’s debts upon the death of a partner unless explicitly stated and dismissed the complaint.

It advised the complainant to seek redressal in a civil court. The Supreme Court’s decision set aside the orders of lower consumer forums and provided guidance on resolving partnership investment disputes.

This judgment underscores the importance of understanding the legal framework governing partnership firms and consumer protection laws. It clarifies the scope of the Consumer Protection Act and the liability of legal heirs in partnership matters.

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Judgement Reviewed by – Chiraag K A

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[1] (2023) SCC Online SC 877

[2] National Consumer Disputes Redressal Commission

The case of Shakti Yezdani vs Jayanand Jayant Salgaonkar (Civil Appeal No. 7107 of 2017) is that the appellants in this case, who are the legitimate heirs of Jayant Shivram Salgaonkar, contested a lawsuit that respondent no. 1 had filed to administer the deceased’s assets, which included investments in mutual funds and fixed deposits (FDs). The deceased had nominated people for his Fixed Deposits and Mutual Funds.

A legal heir filed a suit in the Hon’ble Bombay High Court, requesting a declaration allowing the testator’s properties to be managed under court supervision. The nominees responded by claiming that they were automatically entitled to the Securities by virtue of their nomination. The arguments put forth by the nominees were rejected by a single judge of the High Court. The judge pointed out that neither the Companies Act nor the Depositories Act create a third mode of succession, meaning that a nominee is not entitled to the Securities to the exclusion of the legal heirs. In the appeal process, the Single Judge’s ruling was upheld by a Division Bench of the High Court. Aggrieved by this they preferred appeal in the supreme court.

The court held that the vesting of securities in favor of the nominee stipulated by the Companies Act and Depositories Act serves a limited purpose, namely, to ensure that there is no confusion regarding the legal formalities that must be completed upon the death of the holder, and, by extension, to protect the subject matter of nomination from any protracted litigation until the deceased holder’s legal representatives are able to take appropriate steps. The introduction of the nomination facility under the Companies (Amendment) Act, 1999 was solely to boost the investment climate and simplify the time-consuming process of obtaining various letters of succession from various authorities following the death of a shareholder.

It stated that there is a complex layer of commercial considerations that must be considered when dealing with company nomination issues or until legal heirs can sufficiently establish their right of succession to the company. As a result, providing a discharge to the entity once the nominee is involved differs significantly from granting nominees ownership of securities rather than legal heirs. The nomination process thus does not supersede the succession laws. Simply put, the Companies Act of 1956 and the Depositories Act of 1996 do not aim or intend to provide a third mode of succession. And it is clear that the Companies Act isn’t dealing with the law of succession.

Written by – Surya Venkata Sujith

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The Legal Heirs of A Deceased Partner are not held Liable for the Liability of Partnership Firm upon the Partner’s Demise : The Supreme Court

Nomination does not imply the absolute rights over the deceased persons property: Supreme Court