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2011 DIGILAW 447 (KAR)

Vishal Associates v. K. L. F. Oil Industries

2011-04-18

H.N.NAGAMOHAN DAS, K.L.MANJUNATH

body2011
Judgment 1. The appellants were defendants in O.S. No.389/2005 on the file of the Civil Judge (Sr. Dn), Belgaum. They are challenging the judgment and decree passed by the said court in a suit filed by the respondent/plaintiff for recovery of Rs.41,94,083/- with interest at 10% per annum against the defendants 1 to 3 and against the decree passed against the 4th defendant for a sum of Rs.1,83,087/- with interest at 10% per annum. 2. We have heard the learned counsel for the parties. 3. The facts leading to this case are as hereunder:- The plaintiff M /s KLF Oil Industries is a registered partnership firm engaged in manufacturing of coconut oil and other edible oils under different trade names. 1st defendant is a registered partnership firm. Defendant Nos.2 and 3 are its partners. 4th defendant is the father of 2nd defendant and husband of 3rd defendant. It is the case of the plaintiff that the 1st defendant firm was appointed as a selling agent of its products in Belgaum District and from time to time, it was supplying edible oil and so also the coconut oil and the 1st defendant was also maintaining accounts in its usual and regular course of its business and the amounts paid by the 1st defendant has been taken into account by the plaintiff and on due calculation, it was found that 1st defendant was due in a sum of Rs.41,94,083/- as on 07.04.2004. Similarly, 4th defendant as a proprietary concern of Mr. K. Venkatesh Damodar Kamath was also purchasing the oil products of the plaintiff and as on the same day, it was found that he was due in a sum of Rs.1,83,087/- and on the request of the plaintiff to pay the balance and acknowledge the same, the defendants have acknowledged their liability and therefore, the suit is filed for recovery on Rs.61,59,664/-with interest at 16% per annum out of which, the defendants 1 to 3 are required to pay a sum of Rs.59,32,636/-and the 4th defendant has to pay a sum of Rs.2,27,028/-with interest and it is also the case of the plaintiff that the 4th defendant has also created an equitable mortgage to discharge the amount payable to the plaintiff in respect of the residential houses in Belgaum. On the ground that the amounts are not paid as agreed upon the suit was filed. 4. The defendants contested the suit. On the ground that the amounts are not paid as agreed upon the suit was filed. 4. The defendants contested the suit. According to them, the suit filed by the plaintiff was not maintainable and the same was barred by principles of Order II Rules 2 CPC. It is contended by the defendants that the transactions between the plaintiff and defendants 1 to 3 are different from the transactions between plaintiff and the 4th defendant and the plaintiff cannot maintain a single suit by clubbing the cause of action of a commercial transaction pertaining to the dealings of a partnership firm and also that of a proprietorship concern namely 4th defendant who is in no way concerned with defendants 1 to 3. It was also contended that they are not liable to pay the amount as demanded by the plaintiff. It is also contended that there is no privity of contract to pay the interest either at the rate of 16% per annum or at any rate. In the circumstances, they requested the trial court to dismiss the suit. 5. Similarly, the 4th defendant raised similar contentions that the suit is not maintainable as the claim of the plaintiff and the cause of action of the plaintiff against defendants 1 to 3 Defendant No.4 are entirely different. In the circumstances, the 4th defendant requested the Court to dismiss the suit. 6. Based on the above pleadings, the following issues were framed by the Court below:- (i) Whether plaintiff proves that it is a registered partnership firm? (ii) Whether the plaintiff proves that during course of business, defendants 1 to 3 have fallen due a sum of Rs.41,94,083/- to it as on 07.04.2004? (iii) Whether plaintiff proves that defendant No.1 after good through contents of accounts had acknowledged its liability by way of balance confirmation letter dated 04.05.2003? (iv) Whether plaintiff proves that defendant No.4 during course of business with plaintiff had fallen due Rs.1,83,087/-? (v) Whether plaintiff proves that defendant No.4 had acknowledged liability to pay said sum? (vi) Whether plaintiff proves that defendant No.4 had mortgaged house for himself and on behalf of defendants 1 to 3 as a security to amount fallen due? (vii) Whether plaintiff proves that defendant 1 to 3 are liable to pay Rs.41,93,083/-and defendant No.4 is liable to pay Rs.1,83,087/-? (vi) Whether plaintiff proves that defendant No.4 had mortgaged house for himself and on behalf of defendants 1 to 3 as a security to amount fallen due? (vii) Whether plaintiff proves that defendant 1 to 3 are liable to pay Rs.41,93,083/-and defendant No.4 is liable to pay Rs.1,83,087/-? (viii) Whether plaintiff is entitled to interest at 16% per annum on the amount fallen due? (ix) Whether the defendants 1 to 3 prove that they used to make payments by cash also and since payments are not taken into consideration and the payments through cheques and also taken into consideration and thus the statement of accounts is false? (x) Whether defendants 1 to 3 are entitled for installments? If so, to what extent? (xi) Whether claim of plaintiff is barred by time? (xii) Whether defendant No.4 proves that plaintiff had agreed to pay the interest at rate of 18% per annum on the deposit amount of Rs.1/- lakh? (xiii) Whether defendant No.4 proves that the deposit amounts are lying with plaintiff? (xiv) Whether plaintiff proves that the deposit amount has been adjusted to the due of defendant No.4 during the year 2003-2004? (xv) Whether defendant No.4 proves that he has made excess payments of Rs.39,769/-as on 2002-2003? (xvi) Whether defendant No.4 proves that plaintiff is due Rs.2,35,269/- to him? (xvii) Whether defendant is entitled for decree for Rs.2,35,269/- or Rs.52,182/- as pleaded? (xviii) To what reliefs parties are entitled to? Addl. ISSUES (i) Whether plaintiff proves that suit in the present form is maintainable? (ii) Whether plaintiff is entitled for reliefs as prayed under Order II Rule 2 of CPC? (iii) Whether mortgage agreement alleged to be executed is valid and effective? 7. In order to prove the respective contentions, one of the partners of the plaintiff -firm was examined as PW-1 and the Marketing Manager as PW-2 and relied upon Ex.P-1 to Ex.P-106. On behalf of defendants, 2nd defendant has been examined as DW-1 and relied upon Ex.D-1 to Ex.D-63. 8. The trial court after considering the entire evidence held issue Nos.1 t 6, 14 and Addl. On behalf of defendants, 2nd defendant has been examined as DW-1 and relied upon Ex.D-1 to Ex.D-63. 8. The trial court after considering the entire evidence held issue Nos.1 t 6, 14 and Addl. Issue Nos.1 to 3 in the affirmative; Issue Nos.7 & 8 partly in the affirmative; Issue Nos.9 to 13 & 15 to 17 in the negative and ultimately, the plaintiff’s suit came to be decreed holding that Defendants 1 to 3 are liable to pay a sum of Rs.59,32,636/- with future interest at the rate of 10% per annum and similarly 4th defendant was directed to pay a sum of Rs.2,27,028/- with future interest at the rate of 10% per annum. The counter claim made by the 4th defendant has been rejected, since the 4th defendant had contended that the 4th defendant is entitled to receive money from the plaintiff. Against the said judgment to receive money from the plaintiff. Against the said judgment and decree, the present appeal is filed by the defendants 1 to 4. Though, several grounds are urged in the appeal memo, during the course of arguments, the following points are canvassed by the learned counsel for the appellants: 9. According to them, the trial court has committed an error in decreeing the suit holding that the suit is not barred by principles of Order II Rue 2 of CPC. It is contended that the interest awarded is bad in law. It is also contended that the defendants are not liable to pay the amount as claimed in the plaint, since, the plaintiff has failed to prove cash and every entry as the suit is based on the accounts. In the circumstances, he requests the Court to dismiss the suit by allowing the appeal. 10. Per contra, the learned counsel for the respondent submits that since the 4th defendant as a father of 2nd defendant and as a proprietor of a proprietary concern, who was also dealing with the plaintiff has executed an equitable mortgage, the suit filed by the plaintiff is maintainable and the suit cannot be dismissed on the ground of principles of Order II Rule 2. He alternatively contends that in such circumstances, if two claims are made, the plaintiff is entitled to elect one of the claims. He alternatively contends that in such circumstances, if two claims are made, the plaintiff is entitled to elect one of the claims. He further contends that in the event of this Court comes to the conclusion that the suit filed by the plaintiff is barred by principles of Order II Rule 2 CPC, in such circumstances, the plaintiff requests the Court to reject the claim against 4th defendant. He further contends that the transaction is a commercial one. In a commercial transaction, if the trial court has ordered to pay the interest at the rate of 10% per annum, the same cannot be lightly interfered by this Court as the plaintiff is entitled to claim interest as per the trade usage and customs. He further contends that when the 4th defendant has admitted the confirmation of the balance as per the acknowledgement, Ex.P-77, it is not open for the defendants to contend that the plaintiff has not proved its case. In the circumstances, he requests the court to dismiss the appeal. 11. Having heard the learned counsel for the parties, we have to consider the following points:- (i) Whether the suit filed by the plaintiff is barred by the principles of Order II Rule 2 of CPC? (ii) If the Court holds Point No.1 in the affirmative, whether the respondent/plaintiff has to be given an option to elect the suit claim against the defendants 1 to 3 or against the 4th defendant? (iii) Whether the findings of the trial court that the defendants are liable to pay the suit claim is to be reversed? (iv) What order? 12. The defendants are not disputing that they were appointed as selling agents of the products of the plaintiff. Therefore, the privity of contract between the plaintiff and Defendants 1 to 3 is not in dispute. Similarly, the 4th defendant who is claiming to be a proprietor of a proprietary concern is also not disputing the transaction between the plaintiff and him. The only dispute is whether the suit filed by the plaintiff is maintainable clubbing cause of action against the partnership firm, namely Defendants 1 to 3 and the cause of action against the 4th defendant, an individual and the other dispute is whether the defendants are liable to pay the suit claim and they are also liable to pay the interest. 13. 13. So far as the first point is concerned, it is not in dispute that the 1st defendant is a partnership concern. Defendants 2 and 3 are its partners. The 4th defendant is in no way concerned with the 1st defendant. It is not in dispute that he is the husband of 3rd defendant and the father of 2nd defendant. Merely because he happens to be the husband and father of defendants 2 & 3, he cannot be made as a party in a suit filed by the plaintiff against the 1st defendant. But, he could be made as a party along with defendants 1 to 3 when he has created an equitable mortgage to clear the amount payable by the defendants 1 to 3, since, he has executed an equitable mortgage in favour of the plaintiff. The execution of the equitable mortgage is not in dispute. The 4th defendant is made as a party, in view of he executing a document creating equitable mortgage, the suit filed by the plaintiff against the defendants 1 to 4 is maintainable. But the problem is, the plaintiff herein has clubbed the claim of amount payable by the defendants 1 to 3 cannot be clubbed with the cause of action against the 4th defendant as they are different entities and the cause the 4th defendant those persons cannot be clubbed together. In that view of the matter, we are of the opinion that the suit filed by the plaintiff is barred by principles of Order II Rule 2 of CPC. 14. Be that as it may. Even if we hold that the suit is barred by principles of Order II Rule 2 CPC, the Court has to give an option to the plaintiff to elect one of the cause of action. As stated earlier, the learned counsel for the respondent/plaintiff has categorically stated that in the event this Court holds that the suit is barred by principles of Order II Rule 2 CPC. Then the plaintiff may be permitted to pursue the suit against Defendants 1 to 3. As stated earlier, the learned counsel for the respondent/plaintiff has categorically stated that in the event this Court holds that the suit is barred by principles of Order II Rule 2 CPC. Then the plaintiff may be permitted to pursue the suit against Defendants 1 to 3. In view of this submission, we are of the opinion that the suit filed by the plaintiff as against the 4th defendant claiming the amount payable by the 4th defendant in his individual capacity has to be rejected as barred by principles of Order II Rue 2 CPC and the suit filed by the plaintiff against Defendants 1 to 3 is maintainable and the 4th defendants 1 to 3 since he has created an equitable mortgage to clear the loan of Defendants 1 to 3. 15. It is not in dispute that both the plaintiff as well as defendants 1 to 3 are maintaining the accounts. The plaintiff during its transactions has addressed several letters and has also requested the defendants to acknowledge the liability. The same has not been disputed by the defendants. Though, the defendants contend that the plaintiff has not produced the documents, the defendants have also not produced the documents. As a matter of fact, the defendants 1 to 3 are not disputing the transactions. On the contrary, they have admitted the transactions. It is also their case that they have paid the amount. When the defendants are not disputing the transactions and the payments made by them, when the 1st defendant is also a registered partnership firm which is maintaining the books of accounts, they could have produced the books of accounts to show the discrepancy, if any, in the books of accounts or in the suit claim of the plaintiff. Such an attempt has also not made by the defendants. The plaintiff in order to prove its transactions, has relied upon the evidence of its partners as well as the Marketing Manager. Their evidence is not challenged seriously. Therefore, we are of the opinion that the decree passed against defendants 1 to 3 cannot be found fault with by this Court. 16. So far as the rate of interest is concerned, even though there is no privity of contract, as the transaction is a commercial transaction, if the interest is awarded at 10% per annum, this Court cannot find fault with the order of the trial court. 16. So far as the rate of interest is concerned, even though there is no privity of contract, as the transaction is a commercial transaction, if the interest is awarded at 10% per annum, this Court cannot find fault with the order of the trial court. Accordingly we answer all the points under consideration. 17. In the result, the appeal filed by the appellants is allowed in part holding that the suit filed by the plaintiff against the 4th defendant claiming a sum of Rs.2,27,028/-with interest has to be set aside. Accordingly, the second portion of the order directing the 4th defendant to pay the amount of Rs.2,27,028/-with future interest at the rate of 10% p.a. is hereby set aside. Remaining portion of the decree is undisturbed. 18. It is made clear that in regard to the principal amount is concerned, the principle amount is exclusive of interest at 16% per annum and the interest payable at 10% shall be calculated on the actual balance excluding the interest portion calculated by the plaintiff. In view of the appeal being disposed of, Misc.Cv.107790/2010 for stay is hereby rejected.