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Varadachary and Company, Hyderabad Vs. Superiniteding Engineer (Operations) A.P.S.E.B, Mahabubnagar and Another - Court Judgment

LegalCrystal Citation
SubjectContract
CourtAndhra Pradesh High Court
Decided On
Case NumberWP No. 16184 of 1998
Judge
Reported in1999(3)ALD599; 1999(3)ALT431
ActsConstitution of India - Article 226; Chartered Accounts Act, 1949 - Sections 21 and 22; Indian Partnership Act, 1932 - Sections 43
AppellantVaradachary and Company, Hyderabad
RespondentSuperiniteding Engineer (Operations) A.P.S.E.B, Mahabubnagar and Another
Appellant Advocate Mr. G. Vidya Sagar, Adv.
Respondent Advocate Mr. K.N. Jwala, (SC for A.P.S.E.B)
Excerpt:
.....accounts act, 1949 and section 43 of indian partnership act - in 1987 chartered accountancy firm entered into agreement with respondent-board for work of maintenance of accounts - such firm dissolved in 1996 - in such agreement no period decided for termination of contract - agreement can be cancelled by any of parties to agreement - assets of dissolved not transferred to petitioner-firm and agreement entered in 1987 did not mention devolution of it upon succeeding partnership firm - respondent decided to terminate agreement entered in 1987 - petitioner claimed notice of termination is illegal and arbitrary - writ petition filed - respondent found continuing agreement with petitioner-firm not in interest of it - power vested in respondent to terminate agreement according to..........board strenuously contended that the firm now in existence is not the same firm with which the board entered into the agreement in the year 1987. the firm which existed in the year 1987 has already been dissolved and the assets and liabilities of the firm which existed in 1987 are not assigned to the new partnership that were constituted from time to time. if the partnership which entered into agreement with the a.p.s.e. board has been dissolved, the agreement ceased to exist. since the partnership firm is a legal entity and if there is a change in the legal entity, the respondent-board would be entitled to terminate such contract. at any rate, he further submitted that according to a letter issued by the petitioner on 13-8-1996, the petitioner requested the entrustment of the work.....
Judgment:
ORDER

1. Heard.

2. This writ petitioner is filed for a writ of mandamus declaring the notice of termination issued to the petitioner vide proceedings No.SE/OP/MBNR/PO(R)/CRS/CS/NO/308/ 98, dated 21-3- 1998 as illegal and arbitrary and consequently to set aside the same. A further direction is sought to continue the entrustment of the work of billing in pursuance of the agreement dated 30-12- 1988.

3. In the affidavit filed in support of the writ petition, it is stated that the petitionerCompany is a Chartered Accountant firm known as Varadachari and Company. It entered into an agreement with the Superintending Engineer/Operation, Rural Circle of the A.P.S.E.B., Hyderabad, for maintenance of accounts of the Sub-ERO/ Gadwal in the year 1988 vide letter dated 30-12-1988 and since then the petitioner Company has been maintaining the accounts in respect of the slab card service of the specified areas in the areas of Alampur, Manopad, Itekyal, Wadepally, leez, Maldakal, Gatto, Gadwal and Dharoor-Mandal of Mahabubnagar District. As the things stood thus, the petitioner Company had addressed a letter dated 13-5-1996 stating that the maintenance of the consumer account is being executed by Priyadarshini Computers Private Limited in which the deponent is a shareholder and Director and therefore requested the A.P.S.E. Board to include the name of Priyadarshini Computers also in the agreement for the purpose of executing the work. But, there was no response from the A.P.S.E. Board. Meanwhile, some of the partners of the firm have disassociated with the firm and therefore the firm was reconstituted on 5-7-1996 in which the deponent continued as the Managing Partner of the firm and the firm continued to be in the name known as M/s. Varadachari and Company. It is further stated that the petitioner filed Writ Petitioner No. 14508 of 1996 in this Court against the Institute of Chartered Accountants for not taking action against the four erstwhile Partners under Sections 21 and 22 of the Chartered Accounts Act, 1949. But the said writ petition was dismissed giving liberty to the petitioner to approach the Institute of Chartered Accountants for the alleged professional misconduct committed by some partners. Being not satisfied with the said writ petition, the petitioner filed WA No.943 of 1996 which was also disopsed of by order dated 3-9-1996 directing the Instituite of Chartered Accountants to dispose of the complaint within a period of two months. However,the said complaint before the Chartered Accountants of India is still pending. It is further stated that the petitioner firm vide letter dated 14-11-1997 intimated the change of partners and also requested to treat the earlier letter dated 13-5-1996 as withdrawn and also requested for payment of pending bills. But the Superintending Engineer/ Operation, Mahabubnagar vide his letters dated 14-11-1997 and 13-3-1998 stated that they are not taking any cognizance of the same. While so the Superintending Engineer/ Operation/Mahabubnagar vide letter dated 21-3-1998 issued a notice of termination of agreement by invoking the provisions of Clause (xiv) of the Agreement, and the petitioners are challenging the said termination notice in this writ petition as being illegal and arbitrary. The learned Counsel appearing for the petitioner contended that the impugned termination notice is illegal and without jurisdiction, since the partnership that entered into agreement with the Board with effect from 1-7-1987 is continuing, and the present partnership firm is a successor-in-interest of M/s. Varadachari and Company, which entered into an agreement with the A.P.S.E. Board, and the said agreement could not have been terminated on the grounds mentioned in the impugned notice dated 21-3-1998 vide proceedings No.SE/OP.MBNR/PO(R)/CRS/ CS/NO/308/98. He further submitted that no doubt earlier letter dated 13-8-1996, the firm requested the A.P.S.E. Board to note in the agreement that the work shall be entrusted to M/s. Priyadarshini Computers Private Limited by changing their name in the A.P.S.E. Board records. But the same was withdrawn later. The pendency of some dispute between some of the partners and filinga writ petition in WPNo.14508 of 1996, have nothing to do with the execution of the work by the firm in favour of the A.P.S.E. Board. He further submitted that pendency of the complaint before the Chartered Accountants of India could not have any consequence, as long as the petitioner-firm is ready to execute the work, in terms of thecontract of the year 1987 and the said partnership is not dissolved and it is still continuing by reconstitution from time to time. He further urged that at any rate the said contract could not have been put to an end by the petitioner in terms of the agreement entered into between the petitioner firm and the A.P.S.E. Board in the year 1987. Hence the impugned notice is liable to be set aside.

4. On the other hand, the learned Counsel appearing for the respondent-A.P.S.E. Board strenuously contended that the firm now in existence is not the same firm with which the Board entered into the agreement in the year 1987. The firm which existed in the year 1987 has already been dissolved and the assets and liabilities of the firm which existed in 1987 are not assigned to the new partnership that were constituted from time to time. If the partnership which entered into agreement with the A.P.S.E. Board has been dissolved, the agreement ceased to exist. Since the partnership firm is a legal entity and if there is a change in the legal entity, the respondent-Board would be entitled to terminate such contract. At any rate, he further submitted that according to a letter issued by the petitioner on 13-8-1996, the petitioner requested the entrustment of the work of M/s. Priyadarshini Computers Private Limited by changing their name in the A.P.S.E. Board record. That itself indicates that the petitioner firm is not in a position to execute the work efficiently. The contract was entered into in the year 1987 and in terms of the contract, particularly under Clauses (xiv) and (xv), the A.P.S.E. Board has the power to terminate the contract. Accordingly, by exercising such power, the A.P.S.E. Board has terminated the contract. Such an action of the A.P.S.E. Board cannot either said to be arbitrary or without jurisdiction. He also relied upon the judgments of the Supreme Court in M/s. Shri Sitaram Sugar Company Limited and another v. Union of India and others, : [1990]1SCR909 , and Gupta Sugar Works v. State of Uttar Pradesh, : [1988]1SCR577 , contending that this is not a matter for interference of this Court under Article 226 of the Constitution of India. This matter being governed by contract, this Court would not exercise its judicial power. Therefore, the writ petition is liable to be dismissed.

5. Both from the pleadings and also the arguments addressed on both sides, I find that there are few facts which are clearly admitted in this case. That the agreement was entered into between the firm by name M/s. Varadachari and Company, with the respondent-A.P.S.E. Board in the year 1987 Regarding the maintenance of accounts in respect of slab card services of the specified areas, as per the Annexures to the agreement, relating to the maintenance of records and accounts, relating to the electricity consumer. The contract is with effect from 1-7-1987. Clause (xiv) of the agreement says that the said agreement shall be valid until further orders. From this agreement it follows that when the contract is to be terminated, has not been mentioned. However, under Clause (xv), it is further stated that in the unhappy event of Accounting Agency not willing to continue the work or the Board deciding the matter the other way, the agreement can be put to an end. It is also not in dispute that the petitioner firm addressed a letter dated 13-8-1996 requesting the Board that the work shall be entrusted to M/s. Priyadarshini Computers Private Limited by changing the name in the A.P.S.E. Board records. It is also not in dispute that there are some litigations against the members of the petitioner's firm and writ petition No.14508 of 1996 was filed and there was also separate civil suit in OS No. 1011 of 1996 on the file of VII Additional Judge, City Civil Court, Hyderabad. But according to the contention of the petitioner, the partnership that entered into agreement with the Board is continuing. But, according to the contention of the respondent, the said partnership hasbeen dissolved and there is not privity of contracts between the reconstituted partnerships and the Board. The learned Counsel for the petitioner has brought to my notice the copies of the earlier partnership deeds. One such partnership is dated 29-9-1990. Under the clause (v) of the said partnership, it is stated that the partnership shall be at Will. The learned Counsel for the respondent submitted that the said partnership being a partnership at Will under Section 43 of the Indian Partnership Act, the same may be dissolved by any partner by giving notice in writing to all the partners of his intention to dissolve the firm. The respondent Counsel has brought to my notice, a notice issued by one of the partners dated 5-7-1996 intimating the Board that the partnership stand dissolved. He also brought to my notice copy of the notice issued by the Advocate on behalf of Mr. A.K.S. Srikrishna, one of the partners, dated 1-7-1996 addressed to all the partners informing that he is dissolving the firm by that notice w.e.f. 5-7-1996.

6. Having regard to these circumstances, the legal position would be that the partnership that entered into agreement stood dissolved with effect from 5-7-1996. As I have already noted above, a separate suit is also filed by the concerned person for rendition of the accounts. In these circumstances, it cannot be said that the partnership that entered into an agreement with the Board still existed as on today.

7. Now the other short point for my consideration would be, whether the present partnership can be considered to be a successor in interest of the partnership firm that entered into agreement in the year 1987.

8. The learned Counsel for the petitioner has brought to my notice in all four partnership deeds dated 29-9-1990, 1-9-1992, 1-4-1993 and 5-9-1996, one after the other.

But, in none of the partnership deed, I find the assignment of assets and liabilities to these partnership firms. It is nowhere stated that the contractual relationship between the firm that was in existence in the year J987 with the A.P.S.E. Board was assigned or devolved upon the succeeding partnership firms. Hence, it cannot be said that the present partnership firm is successor-in-intcrest of the partnership firm that existed in 1987 and which was dissolved in the year 1996, by one of the partners by name N.V.S. Srikrishna. Having known these aspects of the case, if the Board finds that it would not be in the interest of the A.P.S.E. Board to continue the agreement with the petitioner firm, the action of the A.P.S.E. Board cannot be found fault with. At any rate under clauses (xiv) and (xv) of the agreement, the A.P.S.E. Board has power to decide not to continue the work with the petitioner firm. For immediate appreciation, lam extracting both these clauses as under:

'(xiv) This agreement shall be valid until further orders and comes into force with effect from 1st day of July, 1987.

(xv) In the unhappy event of the accounting agency not willing to continue the work or the Board deciding the matter the other way or the cessation of the agreement, the ledgers, registers etc., maintained shall be handed over by the accounting agency to the authorised officer of the Board together with the balance of stock of stationary supplied by the Board and remaining unused, duly rendering proper accounting.'

9. From the above clause (xv), it is clear that the agreement was entered into with effect from 1-7-1987. But, it was until further orders, and in this clause, the A.P.S.E. Board reserved its power to put an end to the agreement by passing further orders, since the date is fixed. Under clause (xv) it is further provided that in the unhappy event ofthe accounting agency not willing to continue the work, or the A.P.S.E. Board deciding the matter the otherway, the A.P.S.E. Board could put to an end to the agreement and in the event of cessation of such agreement, all the ledgers, registers etc., maintained by the petitioner should be handed over to the A.P.S.E. Board. Keeping in view all the totality of circumstances, if the A.P.S.E. Board decides to terminate the agreement, the said action of the A.P.S.E. Board cannot be found fault with. At any rate, it cannot be said that the A.P.S.E. Board has no such power to terminate the agreement. The said agreement has been entered into with effect from 1-7-1987. Already 11 years have passed and the things have changed and so many efficient computer agencies have come into existence and the field has become highly competitive as on today, and it is still possible for the A.P.S.E. Board now to get the said work done on comparatively a lesser rate. In these circumstances, if the A.P.S.E. Board decides to cancel the agreement and allot the work to some other agency, the said action of the A.P.S.E. Board cannot be found fault with since the largess of the State stand protected.

10. For the above reasons, I do not find any merits in the writ petition and accordingly 1 pass the Order as under:

11. The writ petition is dismissed but without costs.


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