Research › Search › Judgment

Kerala High Court · body

2006 DIGILAW 601 (KER)

Mr. Ram Bhat v. Leelaram Shevaram (India) Pvt. Ltd.

2006-09-19

V.RAMKUMAR

body2006
Judgment :- Defendants 3 and 4 in O.S.97/91 on the file of the Principal Sub Court, Kochi, are the appellants in this appeal. The said suit instituted by respondents 1 and 2 herein was for realization of a sum of Rs.41,113.75 together with interest at the rate of 15% totaling altogether to Rs.55,112.75. THE PLAINT AVERMENTS IN BRIEF: 2. The case of the plaintiffs can be summarized as follows:- The first plaintiff is a Company by name M/s. Leelaram Shevaram (India) Pvt. Ltd. represented by its Manager, the 2nd plaintiff. The first defendant represented by defendants 2 and 5, is a registered partnership firm by name Sri Ram Traders of which defendants 2 to 5 are the partners. On 11-7-1988 the first defendant firm purchased 145 bags of boiled rice at the rate of Rs.440 quintal. The total value of the goods so purchased was Rs.48,113.75 After the purchase of goods, the first defendant firm issued Ext.A3 cheque for the aforesaid amount. When the cheque was presented for encashment before the drawee bank it was dishonoured. Even though the defendants were prosecuted before the Criminal Court it was not successful for the reason that the cheque issued was a post dated cheque. The 2nd and 5th defendants had filed a suit before the Munsiff’s Court, Cochin as O.S. 782/1988 seeking a perpetual injunction restraining the plaintiff herein from initiating any police action. While so, defendants 4 and 5 expressed a desire to settle the matter and clear the liability. The defendants had been requesting for time to discharge the debt. They had paid only a sum of Rs.7,000/-. On 26-9-1988 defendants 4 and 5 executed Ext.A5 promissory note for Rs.48,113/- to the 2nd plaintiff undertaking to pay the said amount. On that day a scooter was entrusted to the 2nd plaintiff requesting her to sell the same and adjust its value towards the outstanding liability. On 5-7-1989 a notice was sent by the plaintiffs calling upon defendants 2 to 5 pay the amounts due and discharge the liability. On receipt of notice defendants 4 and 5 have caused a reply notice to be sent denying their liability. The balance amount due is Rs. 41,113.75 which is payable with 15% interest thereon. Hence the suit. PLEADING IN DEFENCE 3. Defendants 1, 2 and 5 did not enter appearance and they were set ex parte. On receipt of notice defendants 4 and 5 have caused a reply notice to be sent denying their liability. The balance amount due is Rs. 41,113.75 which is payable with 15% interest thereon. Hence the suit. PLEADING IN DEFENCE 3. Defendants 1, 2 and 5 did not enter appearance and they were set ex parte. The suit was resisted by defendants 3 and 4 who filed a joint written statement contending inter alia as follows- These defendants are not partners of the first defendant firm. The alleged purchase of rice is also denied. These defendants had no connection or business dealings with the first plaintiff. After 9-9-1987 these defendants have no connection or dealings with the first defendant firm. The complaint alleged by the plaintiff was investigated by the Mattancherry police and tried by the J.F.C.M., Kochi which had acquitted these defendants after trial. These defendants had not met the plaintiff to settle the matter. The execution of Ext.A5 promissory note on 26-9-1988 is denied. The 2nd plaintiff had filed a criminal complaint before the Mattancherry police. Pursuant to the illegal influence exerted by the 2nd plaintiff the 4th defendant was taken to the police station by the Divisional/Circle Inspector of Police, Mattancherry at 12 noon on 26-9-1988. He was detained in the police station till 7 ‘O’ clock in the night. During the said detention the 5th defendant was also brought into the police station. The signatures of defendants 4 and 5 were forcibly obtained under threat, coercion, intimidation, criminal force and all sorts of unlawful means by the Divisional Inspector who thus got Ext.A5 promissory note executed under duress. A scooter belonging to a relative of the 4th defendant was also forcibly taken and handed over to the 2nd plaintiff. On the next day itself these defendants had issued a lawyer notice to the Divisional Inspector of Police and the 2nd plaintiff. To the lawyer notice issued by the plaintiff before the institution of the suit these defendants had sent a proper reply. Defendants 2 and 5 who are the partners of the first defendant firm had filed an insolvency petition before this court and the plaintiff is aware of the said proceedings. It was suppressing its knowledge about the insolvency proceedings that the plaintiff has instituted the present suit with the only purpose of harassing these defendants. Defendants 2 and 5 who are the partners of the first defendant firm had filed an insolvency petition before this court and the plaintiff is aware of the said proceedings. It was suppressing its knowledge about the insolvency proceedings that the plaintiff has instituted the present suit with the only purpose of harassing these defendants. These defendants are unnecessary parties to the suit which is not maintainable. The 2nd respondent plaintiff is not competent to represent the first plaintiff company. The suit is liable to be dismissed with costs. THE TRIAL 4. The court below framed seven issues for trial. On the side of the plaintiffs the 2nd plaintiff was examined as P.W.1 and Exts.A1 to A6 were marked. On the side of the defendants the 4th defendant was examined as D.W.1. An officer of the Union Bank of Cochin and a peon employed in Naveen Agencies, Cochin, were examined as DWs2 and 3 respectively to prove the forcible execution of the Ext.A5 promissory note from the police station under duress. Exts.B1 to B17 were also got marked. 5. The leaned Subordinate Judge after trial, as per judgment and decree dated 29-6-1993 decreed the suit as prayed for on the original cause of action although she found that Ext.A5 promissory note was vitiated by coercion, undue influence etc. It is the said decree which is assailed in this appeal by defendants 3 and 4. 6. I heard the respective counsel appearing on either side. ARGUMENTS IN SUPPORT OF THE APPEAL 7. Assailing the decree passed by the court below Advocate Smt. Ranjini made the following submissions before me:- Ext.B10 is the partnership deed dated 9-9-1987 whereunder the first defendant firm then consisting of four partners was re-constituted consequent on defendants 3 and 4 retiring from the firm and defendants 2 and 5 continued as partners in the firm. Along with Ext.B10 there is also the certified copy of the notice issued under Sec.63 (1) of the Partnership Act, 1932 which indicates the retirement of defendants 3 and 4 from the firm with effect from 9-9-1987. Even according to the plaintiff, the transaction in question namely, the purchase of rice took plaice of 11-7-1988 which is 10 months after the retirement of defendants 3 and 4. Ext.A3 cheque and Ext.A5 promissory note are all on dates still subsequent to 11-7-1988. Even according to the plaintiff, the transaction in question namely, the purchase of rice took plaice of 11-7-1988 which is 10 months after the retirement of defendants 3 and 4. Ext.A3 cheque and Ext.A5 promissory note are all on dates still subsequent to 11-7-1988. In para 8 of Ext.B1 counter affidavit filed by the 2nd plaintiff herein in O.S.782/1988 instituted by defendants 2 and 5 herein before the Munsiff’s Court, Kochi, she has admitted that she was aware of the retirement of the two partners on 9-9-1987. In Ext.B14 interlocutory application in the above suit as well as in Ext.B8 indigent petition defendants 2 and 5 have unequivocally asserted that from 9-9-1987 onwards they are the surviving partners of the firm. Similarly, in paragraph 5 of Ext.B5 judgment in C.C.70/89 on the file of JFCM-I, Cochin it is mentioned that the present 4th defendant who was the 4th accused in the case had stated that he and his father Ram Bhat are not partners in the firm since 9-9-1987. The 2nd plaintiff was a party to all the above proceedings and was aware about the above assertion made by defendants 2, 4 and 5. Ext.B7 is the deposition of the 2nd plaintiff herein in C.C 70/1989 wherein a specific suggestion was put to her that present defendants 3 and 4 who were accused Nos.1 and 4 in that case were not partners of the firm since 9-9-1987. Her answer to the said suggestion was that she does not know about that. Even in the present plaint the specific averment in paragraph 2 is that the first defendant is a partnership firm represented by its partners defendants 2 and 5. This means that defendants 3 and 4 are not partners of the said firm. The 2nd plaintiff examined as DW1 in this case does not say that defendants 3 and 4 are partners of the firm. In order to rope in defendants 3 and 4, DW1 would have it that defendants 3 and 4 had called her over the phone regarding the transaction in question. As against this the 4th defendant examined as D.W.1 has categorically stated that defendants 3 and 4 retired from the firm on 9-9-1987 on which day the firm was re-constituted. In order to rope in defendants 3 and 4, DW1 would have it that defendants 3 and 4 had called her over the phone regarding the transaction in question. As against this the 4th defendant examined as D.W.1 has categorically stated that defendants 3 and 4 retired from the firm on 9-9-1987 on which day the firm was re-constituted. Ext.A5 promissory note was executed by defendants 4 and 5 under duress from the police station and this case of the defendants has been upheld by the court below. Hence the decree granted on the basis of the original cause of action as against the appellants is clearly unsustainable. JUDICIAL EVALUATION 8. I am afraid that I cannot agree with the above submissions. Ext.B10 re-constituted partnership deed dated 9-9-1987 itself recites that the original partnership deed with the four partners was registered with the Registrar of Firms in the year 1985. The name of the firm is Sri. Ram Traders. The original partners were Suresh Chandra Bhan (D2), Ram Bhat (D3), Naveen Chandra Bhat (D4) and Dinesh Bhat (D5). The 3rd defendants Ram Bhat is admittedly the father of the other defendants namely defendants 2, 4 and 5. Ext.B10 further recites that Ram Bhat and Naveen Chandra Bhat (D3 and D4 respectively) expressed their willingness to retire from the firm with effect from 9-9-1987 and therefore the remaining two partners have decided to continue the business as a going concern under the same and style. The certified copy of the acknowledgment issued by the Registrar of Firms and appended to Ext.B10 shows that a notice under Section 63 (1) of the Indian Partnership Act, 1932 (hereinafter referred to as the Act for short) has been issued to the Registrar of firms. But then there is nothing to indicate that the plaintiff was aware of the retirement of defendants 3 and 4 on 11-7-1988 when the first defendant firm purchased 145 bags of rice from the plaintiff company. In Ext.B1 counter-affidavit, there is no admission by the 2nd plaintiff that she was aware of the retirement of defendants 3 and 4 from the firm on 9-9-1987. In Ext.B1 counter-affidavit, there is no admission by the 2nd plaintiff that she was aware of the retirement of defendants 3 and 4 from the firm on 9-9-1987. On the contrary, in Ext.B1 counter affidavit sworn to by her on 9-9-1998 what she has stated is that the 1st petitioner therein (D2 herein) by signing in the cheque on 11-7-1988 as a partner of the firm was being dishonest since he was thereafter contending that he retired from the firm on 9-9-1987. Merely because in Exts. B8, B11 and B14 which were long after the transaction in question, the defendants asserted that defendants 3 and 4 had retired from the firm with effect from 9-9-87 it does not mean that the plaintiffs was aware of such retirement on 11-7-1988 when the transaction in question was entered into or any day prior to that. On their own admission, defendants 3 and 4 were partners of the firm from 1985 till 9-9-1987. There is absolutely no acceptable evidence adduced in the case to show that the plaintiff was aware of the retirement of defendants 3 and 4 when the first defendant firm purchased 145 bags of rice from the plaintiff company on 11-7-1988. As against defendants 1, 2 and 5 who remained ex parte there is already a decree. The only question which survives for consideration is as to whether the decree passed as against the appellants who are defendants 3 and 4 is unsustainable for the reason that the transaction in question was entered into subsequent to their retirement from the first defendant firm. 9. The mode of retirement and the consequences of retirement of a partner are to be found in Sec.32 of the Act which reads as follows:- “Retirement of a partner:- (1) A partner may retire, - a) with the consent of all the other partners, b) in accordance with an express agreement by the partners, or c) where the partnership is at will, by giving notice in writing to all the other partners of his intention to retire. 2) A retiring partner may be discharged from any liability to any third party for acts of the firm done before his retirement by an agreement made by him with such third party and the partners of the reconstituted firm, and such agreement may be implied by a course of dealing between such third party and the reconstituted firm after he had knowledge of the retirement. 3) Notwithstanding the retirement of a partner from a firm, he and the partners continue to be liable as partners to third parties for any act done by any of them which would have been an act of the firm if done before the retirement, until public notice is given of the retirement. Provided that a retired partner is not liable to any third party who deals with the firm without knowing that he was a partner. 4) Notices under sub-section (3) may be given by the retired partner or by any partner of the reconstituted firm. 10. Thus, even after retirement from the firm, the quondam partner will continue to be liable to a third party by virtue of Sec. 32 (2) of the Act for any pre-retirement transaction or liability unless he is discharged from such liability by an agreement (either express or implied) made by him with such third party and the surviving partners of the re-constituted firm. With regard to any post-retirement transaction or liability also such quondam partner will continue to be liable until public notice in the manner provided under Sec.72 of the Act is given of his retirement, in view of Sec. 32 (3) of the Act which is enacted on the well known principle of holding out. A person who has held himself out as a partner will be presumed to hold the said status until he informs all concerned that he has ceased to be so. In the case of a registered firm (the first defendant in this case is a registered firm) the mode of giving a public notice is laid down under Sec.72 (a) of the Act. In the case of a registered firm (the first defendant in this case is a registered firm) the mode of giving a public notice is laid down under Sec.72 (a) of the Act. As per the said provision there should be a notice of change given to the Registrar of Firms under Sec.63 (1) of the Act and notice by publication in the official Gazette and a notice in at least one vernacular newspaper having circulation in the district where the firm has its place or principal place of business. See also C. Assiamma v. State Bank of Mysore – AIR 1990 Kerala 157. But if any third party has dealt with the firm without knowing that the retired partner was a partner of the firm, then the retired partner would not be liable to such third party and in such a case there is no need for a public notice so as to absolve the retired partner from his liability qua such third party. The burden in such a case will be on the retired partner (who wants to avoid the liability) to show that such third had dealt with the firm without knowing that such retired partner was a partner of the firm. 11. Coming to the facts of this case, as indicated earlier the appellants or any of the other defendants have not been able to show that on 11-7-1988 when the plaintiff entered into the transaction in question the plaintiff was aware that defendants 3 and 4 had retired from the firm on 9-9-1987. At page 6 of the deposition of the 4th defendant examined as DW1 he has admitted that no notice of retirement was given either in Gazette or in the newspaper and that no public notice was also given. If so, by virtue of Sec.32(3) of the Act defendants 3 and 4 will continue to be liable for the transaction in question until public notice in the manner provided under Sec.72 (a) of the Act has been given notwithstanding the fact that the transaction in question is a post-retirement transaction. Even assuming that a notice of change under sec.63(1) of the Act has been given to the Registrar of Firms, that by itself will not be sufficient public notice within the meaning of sec.72(a) of the Act. 12. Even assuming that a notice of change under sec.63(1) of the Act has been given to the Registrar of Firms, that by itself will not be sufficient public notice within the meaning of sec.72(a) of the Act. 12. It is true that Ext.A5 promissory note has been found to be vitiated by coercion, intimidation etc. since the same was found to have been executed from the police station under duress and attracting the ratio decided in K.C. Thomas v. Supt. of Police – 1980 KLT 151 and Mathew v. Kuruvila – 1983 KLT 104. But then the suit is not based on Ext.A5 promissory note alone but based on the original cause of action as well. In paragraph 8 of the plaint it has been specifically averred as follows: “Cause of action in the suit arose on 11-7-1988 when the goods were purchased and cheque was issued, on 26-9-1988 when the demand promissory note was executed for the balance amount due and thereafter in Mattancherry Village within the jurisdiction of this Hon’ble Court”. The suit was filed on 5-4-1991 which is well within three years of the transaction in question. Hence the court below was perfectly justified in granting a decree against all the defendants as prayed for. 13. Equally misconceived is the contention that the plaint shows defendants 2 and 5 alone as the partners representing the firm. Defendants 3 and 4 are also described as partners of the 1st defendant firm. Even if the plaint filed on 5-4-1991 did not show defendants 3 and 4 as partners, that will not in any manner affect their liability since despite their retirement with effect from 9-9-1987, they continued to be liable for want of public notice of their retirement. By virtue of Sec. 25 of the Act, the liability of the partners is joint and several. Each partner is a representative of the other partners and is an agent as well as principal. Every partner is liable for “an act of the firm” which expression has been defined to mean any act or omission by all or any of the partners or any agent of the of firm which gives rise to a right enforceable by or against the firm. (Vide Sham Sunder v. State of Haryana – AIR 1989 SC 1982 Mymoonath Beevi v. State of Kerala – 2005 (4). KLT 174). (Vide Sham Sunder v. State of Haryana – AIR 1989 SC 1982 Mymoonath Beevi v. State of Kerala – 2005 (4). KLT 174). Here the purchase of rice was by the 2nd defendant on behalf of and in the name of the 1st defendant firm of which defendants 2 to 5 were partners from 1985 onwards and notwithstanding the retirement of defendants 3 and 4 therefrom with effect from 9-9-1987, they also continued to be liable since no public notice was admittedly given. Under these circumstances, the conclusion reached by the Court below cannot be faulted. In the result, this appeal is dismissed confirming the judgment and decree passed by the court below. However, in the circumstances in the case, parties shall hear their respective costs in this appeal.