Firm : Personal liability and liability of partnership firm to repay debts : SARFAESI Act. S. 35.

The appellants and the respondents were partners in
partnership business. The respondents allegedly took a loan from a bank by
forging documents. Thereafter, the bank initiated recovery proceedings against
partnership assets. Meanwhile, the appellants and the respondents became parties
to arbitration proceedings as per partnership clause and the appellants opposed
proceedings by the bank. However, the Trial Court rejected the appellants’
application and allowed the bank to continue with recovery proceedings.

The bank had instituted proceedings under the SARFAESI Act.
There is a specific provision in S. 35 of the said Act, which lays down that the
provisions of the Act would have overriding effect over other laws.

It is open for the appellants to oppose the application and
proceedings which are initiated by the bank under the SARFAESI Act and seek
discharge of their personal liability, as also the liability of the firm to
repay the said bank loan. The subject matter of the arbitration proceedings,
essentially, is the statement of accounts between the partners, whereas the
subject matter of the proceedings which are initiated by the bank are in respect
of recovery of loan which was taken by the partnership firm from the bank. These
proceedings being distinct and separate, the subject matter of both these
proceedings, therefore, is different and, therefore, is was justified in
rejecting the application filed by the appellants for impleading the bank as
party.