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Set-off and partnership (Corporate Law)

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This query is : Resolved

Author : Anonymous

Posted On 27 September 2011 at 00:26

Can a bank succeed to defend a lawsuit if A and B enter into a joint venture (partnership), open accounts together at a certain bank where unknown to B, A had secured a loan which he has since defaulted. The bank has debited the venture account to the full value of the loan. in the name of the firm A and B take sue the bank or the amount of the debit.


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Expert : R.Ramachandran

Posted On 27 September 2011 at 07:48

It will all depend upon the documents, facts and circumstances, the contents of the plaint, whether the partnership was a registered partnership or not, etc. The information provided by you is too sketchy and one cannot even hazard a guess about the possible outcome of the case.

Expert : raj kumar makkad

Posted On 27 September 2011 at 08:14

The partners are jointly and individually liable for any debt of any person/creditor viz. bank in the present matter. In the given case though A has not informed B before taking loan from bank and his account became NPA but bank has full authority to recover it through another account of A (though in the name of firm wherein B is also a partner) so there seem no illegality in the action of bank.

Expert : Shailesh Kr. Shah

Posted On 27 September 2011 at 08:44

I have similar opinion as advised by makkad sir.

Expert : Shailesh Kr. Shah

Posted On 27 September 2011 at 09:37

Section 22 of the indian partnership act clearly says In order to bind a firm, an act or instrument done or executed by a partner or other person on behalf of the firm shall be done or executed in the firm-name, or in any other manner expressing or implying an intention to bind the firm.

Expert : prabhakar singh

Posted On 27 September 2011 at 10:10

Any one of us can hardly deny that act of one partner binds all partners individually as well as collectively because of existence of partnership firm.

Then if the loan created by B with out knowledge of A was in name of the firm,the liability of partners being JOINT as well as SEVERAL,each of A and B are liable to Bank jointly as partners of firm and severally due to unlimited nature of liability the BANK or any third person can proceed against both or any of them for a partnership firm loan.

The Registration or non registration of partnership firm can not come in to way of third parties suing the partnership firm or it one or all partners,because non registration disables the firm itself from suing others and not that others become unable to enforce their right if partnership firm is an unregistered firm.

However A has right to sue B for losses caused to firm or HIM due to any negligence ,fraud,or misrepresentation played by B.

Expert : Chanchal Nag Chowdhury

Posted On 27 September 2011 at 12:48

Banks usually put in a clause that they are entitled to recover their money from any other a/c. of a person. The bank has only exercised the option. Your remedy lies against your partner.

Author : Anonymous

Posted On 27 September 2011 at 14:13

Thank you for timely responses, however please allow me to slightly add meat to the facts. thank you in anticipation.

BK Investments and Alphabet Construction enter into a joint venture partnership to construct a dam. The joint venture opened 3 accounts at XYZ Bank. BK Investments had previous (before the partnership) facilities with XYZ Bank and had since defaulted in loan repayment.The Bank has now debited one of the joint venture accounts recover the amount owed by BK Investments.

1.Can BK Investments in its own name sue the Bank for reversal of the transaction?

2. If it can,can the bank successfully defend its action to set off?



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