Research › Search › Judgment

Andhra High Court · body

2002 DIGILAW 733 (AP)

Vattumalli Narayana Rao v. Medrarapu Krishna Rao

2002-06-18

P.S.NARAYANA

body2002
P. S. NARAYANA, J. ( 1 ) THE 3rd defendant in O. S. No. 78/82 on the file of Subordinate Judge, Bhimavaram is he appellant. The 1st respondent in the Appeal is the plaintiff. Defendants 2, 4 and 5 were impleaded as respondents 2 to 5 in the present Appeal and the Appeal was dismissed for default as against those respondents/defendants. ( 2 ) THE 1st respondent/plaintiff filed the above suit for recovery of Rs. 20,584/- with costs and subsequent interest as against the 1st defendant firm and also the partners on the strength of a promissory note dated 21-9-1979 executed by the 1st defendant firm, represented by its Managing Partner, shown as 2nd defendant in the suit. ( 3 ) FOR the purpose of convenience, the parties are referred to as arrayed in the original suit. ( 4 ) THE 1st respondent/plaintiff had pleaded as follows : the 1st defendant is the firm while defendants 2 to 5 are its partners, doing rice and flour mill contract business under the name and style of the 1st defendant. The 2nd defendant is acting as the managing partner. The 2nd defendant for the purpose of the 1st defendant firm business, borrowed a sum of Rs. 15,000/- from the plaintiff on 21-9-1979 promising to re-pay the same together with interest at 1. 50 ps. per hundred per month and executed the suit promissory note on the even date, in his own handwriting. As the 2nd defendant borrowed the debt for the purpose of the 1st defendant business, all the defendants are liable to pay the suit debt. The defendants have failed to re-pay the debt in spite of demands. On 16-7-1981 a registered notice was also sent to the defendants demanding for payment of the debt. Defendants 1 to 4 received the said notice. 5th defendant returned the said notice. Defendants 1and 2 have not sent any reply. But defendants 3 to 5 have sent a reply through their advocate with false allegations on 27-7-1981. As the defendants have failed to re-pay the debt in spite of demands, the plaintiff was constrained to file this suit. Hence, the suit. 5th defendant returned the said notice. Defendants 1and 2 have not sent any reply. But defendants 3 to 5 have sent a reply through their advocate with false allegations on 27-7-1981. As the defendants have failed to re-pay the debt in spite of demands, the plaintiff was constrained to file this suit. Hence, the suit. ( 5 ) DEFENDANTS 1 and 2 remained ex parte and a written statement was filed on behalf of defendants 3 and 4 with the following allegations : ( 6 ) THE material allegations in the plaint are neither true nor the suit is maintainable under the law. The defendants 2 to 5 constituted partnership firm and contracted Sri Venkateswara Rice and Flour Mill and carried on business. But it is not true that the 2nd defendant acted as managing partner of the firm. It is equally not true that the 2nd defendant borrowed Rs. 15,000/- from the plaintiff on 21-9-1979 and executed the suit promissory note at Akividu. The defendants categorically denied the execution of the promissory note by the 2nd defendant, for the necessity of the firm. They also denied the passing of the consideration. There is no necessity for the defendants to contract a loan for the purpose of the firm. Therefore, the defendants and other partners are not liable to pay the suit debt. The 2nd defendant in fact was not given any exclusive right to incur liability on behalf of the firm individually. The borrowing if any should be jointly made by the defendants 2, 3 and 4. Therefore, the defendants 3 and 4 contend that the liability cannot be fastened to the 1st defendant firm. The other partners being non-executants are also not liable. The executant in his personal capacity alone is liable. The plaintiff never demanded for the payment of the said loan at any time, except sending a registered notice dated 16-7-1981. But a suitable reply on 27-7-1981 was sent. The 1st defendant firm is located at Pamarru. Consequently the suit has got to be filed in Sub-Court. Gudivada. Therefore, this Court has no jurisdiction to entertain the suit. Notwithstanding the clear denial of the execution of the promissory note by the 2nd defendant and also for want of binding nature of the suit liability on these defendants, the alleged instrument cannot be said to have been executed on behalf of the 1st defendant. Gudivada. Therefore, this Court has no jurisdiction to entertain the suit. Notwithstanding the clear denial of the execution of the promissory note by the 2nd defendant and also for want of binding nature of the suit liability on these defendants, the alleged instrument cannot be said to have been executed on behalf of the 1st defendant. The 2nd defendant is liable under this promissory note in his individual capacity but not on behalf of the firm. It is apparent from the preamble portion of the suit promissory note. Apart from that the 1st defendant firm is not functioning by 29-9-1979. Therefore, the firm which was not doing business from 21-9-1979 cannot be made liable. Consequently the question of the necessity for the firm or the execution of such promissory note does not arise. The defendants have reason to believe that the 2nd defendant might be responsible to certain extent for the present suit having made these defendants victims, for his foul play. These defendants have come to know that the plaintiff and the 2nd defendant are closely associated. Therefore, the defendants 3 and 4 sought for the dismissal of the suit with costs. ( 7 ) THE 5th defendant had not chosen to file any written statement. ( 8 ) ON the respective pleadings of the parties, the following Issues were settled :1. Whether the suit promissory note is true? 2. Whether defendants 3 to 5 are not liable to discharge the suit pro-note debt? 3. Whether this Court has no territorial jurisdiction to try this suit? 4. To what relief?in the trial Court, PW-1 to PW-3 were examined and Exs. A-1 to A-6 were marked and DW-1 was examined and Exs. B-1 to B-5 were marked. On appreciation of the oral and documentary evidence, the suit was decreed with costs and interest at 6% per annum from the date of suit till the date of realisation and aggrieved by the same, the 3rd defendant in the suit alone had preferred the Appeal. ( 9 ) SRI Vinay Kumar, the learned Counsel representing the appellant had taken me through the evidence of DW-1 i. e. , the 3rd defendant in the suit and also the findings recorded by the trial Court at paragraphs 19, 20 and 21 of the judgment. The learned Counsel further commenting on Ex. ( 9 ) SRI Vinay Kumar, the learned Counsel representing the appellant had taken me through the evidence of DW-1 i. e. , the 3rd defendant in the suit and also the findings recorded by the trial Court at paragraphs 19, 20 and 21 of the judgment. The learned Counsel further commenting on Ex. A-1 the promissory note dated 21-9-1979, had contended that the mere description or designation of a person signing the instrument will not be sufficient to make the firm liable and the instrument as such itself should show that the instrument was executed on behalf of the firm and if any of the recitals in Ex. A-1 are taken into consideration it cannot be said that the 2nd defendant executed Ex. A-1 on behalf of the 1st defendant firm and hence in this view of the matter, the other parties who are not parties to the said instrument cannot be made liable. The learned counsel also had pointed out that though several decisions had been cited, the trial Court had not properly appreciated the evidence available on record and had decreed the suit as against the other parties also, including the appellant/3rd defendant. ( 10 ) SRI A. Rama Krishna, the learned Counsel representing the 1st respondent/plaintiff on the contrary had taken me through the evidence of PW-1, PW-2 and PW-3 and had contended that the trial Court had recorded proper findings on appreciation of both oral and documentary evidence. The learned Counsel also had taken me through the recitals in Ex. A-1 and had pointed out that specifically it was recited in Ex. A-1 that the consideration was being received for the sake of the firm and for the sake of the business of the firm and the learned Counsel also had drawn my attention to the seal of the firm affixed in the midst of the promissory note and also on the stamps on which the managing partner of the firm, the 2nd defendant, had signed. ( 11 ) HEARD both the counsel. ( 12 ) THE following points arise for consideration in this Appeal : (A) Whether the suit promissory note is true, valid and binding? (b) Whether the appellant and the other defendants i. e. , defendants 3 to 5 are also liable to discharge the suit promissory note debt as partners of the 2nd defendant - 1st defendant firm? ( 12 ) THE following points arise for consideration in this Appeal : (A) Whether the suit promissory note is true, valid and binding? (b) Whether the appellant and the other defendants i. e. , defendants 3 to 5 are also liable to discharge the suit promissory note debt as partners of the 2nd defendant - 1st defendant firm? (c) To what relief? ( 13 ) FOR the purpose of convenience. Points (a) and (b) can be discussed and decided together. ( 14 ) THE 1st respondent/plaintiff filed the suit on the strength of a promissory note stated to have been executed by the 2nd defendant in the suit acting as the managing partner of the 1st defendant firm. Having borrowed a sum of Rs. 15,000/- for the business of the 1st defendant firm on 21-9-1979 and executed a promissory note of even date, promising to re-pay the same together with interest at 18% per annum. The contesting defendants were only defendants 3 and 4 who had resisted the suit on the ground that there was no necessity for the firm to borrow the suit amount and hence, they denied the very execution of the promissory note. They had also raised a plea that they are not liable to discharge the said debt, being non-executants of the said promissory note as the debt was not incurred by the 1st defendant firm for the purpose of business. No doubt, incidentally, the question of territorial jurisdiction to entertain the suit also was raised. But however, the said ground was not seriously canvassed by the learned Counsel representing the appellant in the Appeal. ( 15 ) PW-1 had deposed that the 1st defendant firm, consisting of defendants 2 to 5 as partners carried on business in paddy and rice and the 2nd defendant as the managing partner of the firm borrowed a sum of Rs. 15,000/- from him on 21-9-1979 representing the firm and executed Ex. A-1 pro-note in his favour in his own handwriting in the presence of one Padda Satyanarayana and Katreddi Kusumeswararao who had attested the said pro-note and he also further deposed that the 2nd defendant specifically told him that he was borrowing the said amount for the purpose of the 1st defendant firm and no doubt PW-1 had deposed certain other further details also. Satyanarayana - one of the attestors of Ex. Satyanarayana - one of the attestors of Ex. A-1, was examined as PW-3 and he had supported the evidence of PW-1 in all material particulars. The other attestor also was examined as PW-2 and the evidence of PW-1, PW-2 and PW-3 had been discussed in detail and ultimately the trial Court came to the conclusion that the execution of the promissory note is proved. It is pertinent to note that the managing partner, the 2nd defendant, who had executed the pro-note was set ex parte and he had not contested the matter at all. As can be seen from the body of Ex. A-1 it is clear that the 2nd defendant representing the 1st defendant firm executed Ex. A-1 for the purpose of the business of the firm and though in the beginning of the document i. e. Ex. A-1 the name of the 2nd defendant was referred to, the seal of the firm also was affixed. It was also recited that for the sake of the firm and the business of the firm the consideration was being received and even on the stamps also the signature of the 2nd defendant, and apart from it, the stamp of the firm can be seen. Taking all these aspects into consideration, the trial Court came to the conclusion that the 2nd defendant as the managing partner had executed Ex. A-1 and hence the other partners of the firm also are liable. Section 22 of the Indian Partnership Act, deals with Mode of doing act to bind firm, and Section 28 of the said Act deals with Holding out. Section 22 of the said Act reads as follows :"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". In Thirumala Rama Rao v. Chodagam Venkateswara Rao, AIR 1963 Andh Pra 154, where pro note was executed by managing partner in the individual capacity and there was no intention to bind the firm and the liability of the firm was not indicated, it was held that the firm and the other partners other than the executant were not liable. ( 16 ) HERE is a case where as already discussed by me, the very recitals in Ex. ( 16 ) HERE is a case where as already discussed by me, the very recitals in Ex. A-1 promissory note clearly go to show that the 2nd defendant as the Managing Partner with an intention and with a view to bind the firm and for the sake of firm only executed Ex. A-1. Apart from this aspect of the matter, the 3rd defendant is the appellant and the 1st defendant is the firm who is shown as 2nd respondent in the Appeal and as already referred to supra, the Appeal was dismissed for default as against the 2nd respondent and also respondents 3 to 5, the other partners and even in this view of the matter, the appellant cannot succeed in the Appeal. Point (c) :- Thus, viewed from any angle, the Appeal is devoid of merits and accordingly the same is dismissed. In the peculiar facts and circumstances of the case, no order as to costs. Appeal dismissed.