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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

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

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

Order on: 5th 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