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Basudeo Lal Modi and ors. Vs. Madanlal Chhapolia and ors. - Court Judgment

LegalCrystal Citation
SubjectCompany
CourtOrissa High Court
Decided On
Case NumberFirst Appeal Nos. 12 and 16 of 1963
Judge
Reported inAIR1967Ori107
ActsCompanies Act, 1956 - Sections 147; Negotiable Instruments Act, 1881 - Sections 79; Code of Civil Procedure (CPC) , 1908 - Sections 34
AppellantBasudeo Lal Modi and ors.
RespondentMadanlal Chhapolia and ors.
Appellant AdvocateM.N. Das and ;K.C. Nanda, Advs. in F.A. No. 12/63 and ;N. Mukherjee and ;A.C. Mitra, Advs. in F.A. No. 16/63
Respondent AdvocateN. Mukherji, ;S.K. Dutta, ;S.P. Mohapatra, ;R.N. Sinha and ;H.C. Roy, Advs. in F.A. No. 12/63 and ;M.N. Das, ;K.C. Nanda, ;S.B. Nanda, ;H.C. Roy and ;H.C. Mukherjee, Advs. in F.A. No. 16/63
Cases ReferredAtkins and Co. v. Wardle
Excerpt:
.....defendant ramkumar. he appears to have overlooked the implications of the strong documentary evidence supported by oral evidence, all as discussed above, clearly establish the position that tbe joint family business noperam ramgopal ceased to exist by the time the suit hanonote ext......no. 2 ramkumar modi was decreed on contest as against defendant no. 1 noperam ramgopal, a hindu joint family firm and defendants 2, 3, 7 and 8 and against defendants 4 to 6 and 9 to 12--all members of the said joint family--to the extent of their interest in the joint family property with costs and dismissed ex parte without costs against the rest of the defendants as no relief was claimed against them. in f. a. no. 16 of 1963 the plaintiffs are the appellants from the decision of the trial court so as not granting pendente lite interest and proper pleader's fee on the grounds taken in the said appeal.2. the plaintiffs claim is based on a hand-note ext. 1 dated october 10, 1949 executed by defendant no. 2 ramkurnar modi. the handnote is quoted as follows:'sree ramjee ext. no. 1 :.....
Judgment:

Barman, Actg. C.J.

1. In F. A. No. 12 of1963 defendants 7 to 12 are the appellants from the judgment of the trial court by which the plaintiffs' suit on a handnote executed by defendant No. 2 Ramkumar Modi was decreed on contest as against defendant No. 1 Noperam Ramgopal, a Hindu joint family firm and defendants 2, 3, 7 and 8 and against defendants 4 to 6 and 9 to 12--all members of the said joint family--to the extent of their interest in the joint family property with costs and dismissed ex parte without costs against the rest of the defendants as no relief was claimed against them. In F. A. No. 16 of 1963 the plaintiffs are the appellants from the decision of the trial court so as not granting pendente lite interest and proper pleader's fee on the grounds taken in the said appeal.

2. The plaintiffs claim is based on a hand-note Ext. 1 dated October 10, 1949 executed by defendant No. 2 Ramkurnar Modi. The handnote is quoted as follows:

'Sree Ramjee

Ext. No. 1 :

Noperam Ramgopal greets Bajranglal Chhapolia and further borrowed from him Rs. 5,000(in words five thousand) rupees from you. I shall pay interest at the rate of Rs. 1-1-0 (one rupee one anna) per cent per month. I shall pay up the debt amount when you demand. Miti-Kartik, Badi-3, Sal 2006, date 10-10-49.

(Signed in four one anna Revenue stamps)

Noperam Ramgopal Sdt. Ramkumar (in Marwari

script)

M. S. 43/58

Ext. 1

Sd. L. N. Samanta

1st. A. S. J.

6-8-62.'

3. The plaintiffs' case is that defendant No. 2 Ramkumar Modi executed the suit hand-note on behalf of defendant No. 1 Noperam Ramgopal a Hindu Joint family firm carrying on business at Nayasarak, Cuttack, in favour of Plaintiff Bajranglal Chhapolia representing the joint family consisting of the plaintiffs for a sum of Rs. 5,000 with interest; the defendant joint family consisted of two principal branches, namely, Jagannath's branch represented by defendants 7 to 12 and Ramkumar's (defendant No. 2) branch consisting of defendant No. 2 Ramkumar, his son defendant No. 3 Gourisankar. Defendants 13 to 16 were made parties as trustees appointed by the members of the defendant joint family for payment of the debts of the joint family. After giving credit for the several part-payments of the dues on the hand-note as hereinafter mentioned the plaintiffs filed the suit against the defendants on March 1, 1958 for a sum of Rs. 6,873-13/- including interest as per particulars stated in the plaint.

4. The trustee defendants 13 to 16 did not appear and were set ex parte. Defendant No. 2 Ramkumar Modi and his son defendant No. 3 Gourisankar Modi and defendant No. 7 Basudeb Modi filed a joint written statement. Their defence in substance was that since 1944 the business was converted into a limited company as Noperam Ramgopal Limited as per certificate of incorporation Ext. B; the suit loan due under the handnote Ext. 1 dated October 10, 1949 was incurred by defendant No. 2 Ramkumar Modi for and on behalf of the said limited company who, according to them, was alone liable to pay the debt and that the said defendants 2, 5 and defendant No. 7 Basudeb Modi (one of the appellants herein) are not personally liable for the loan due to the plaintiffs.

5. The appellant defendants 8 to 12 (sons of appellant defendant No. 7) filed a joint written statement in which their defence in substance was this: The business on behalf of which defendant No. 2 Ramkumar Modi had executed the handnote was converted into a limited company in 1944 long before the hand-note was executed in 1949; so the appellant--defendants 7 to 12 are not liable. Alternatively they also pleaded that as there was partition of joint family in 1944 there was no joint family firm in existence on the date the suit handnote was executed in 1949, therefore the executant of the handnote defendant No. 2 Ramknmar Modi alone is liable.

6. In defence a point also arose that the plaintiffs' suit barred by limitation in thatthe part-payments made on the handnote did not, according to the defendants, save limitation. The part-payments made on the handnote were these:

Rs. 2,000/- paid by the trustees on May 15, 1951; Rs. 100/- said to have been paid by defendant No. 2 Ramkumar Modi alone on August 10, 1952; Rs. 200/- paid by defendant No. 2 Ramkumar alone on March 4, 1955 The suit was filed on March 1, 1958.

7. At the trial several issues were raised including issues 4 to 10 which are these:

4. Is the suit barred by limitation?

5. Is the rate of interest claimed high and excessive?

6. Is the defendant No. 1 a joint Hindu family as alleged by plaintiffs?

7. Are the defendants 2 to 12 living separate as alleged by these defendants?

8. Is the defendant No. 1 a limited company?

9. Was the loan incurred by the Limited Company Noperam Ramgopal Ltd. or by the Hindu Joint family firm?

10. Are the defendants 2 to 12 personally liable?

8. The trial court decided the issues in favour of the plaintiffs and accordingly decreed the suit as against defendants 1 to 12 aforesaid. Hence the appeal by the appellant-defendants 7 to 12 being F. A. 12 of 1963 and also the appeal by the plaintiffs being F. A. 16 of 1963.

Re: F; A. 12 of 1963.

9. The only point urged on behalf of the appellant-defendants 7 to 12 representing Jagannath's branch of the family was that defendant No. 2 Ramkumar alone was liable for the suit loan borrowed by him on the handnote Ex. 1 and that the appellant-defendants 7 to 12 are not liable for the same. In support of their case they relied on both documentary and oral evidence as discussed hereunder.

10. On March 27, 1944 there was a partition of two surviving branches of the family, namely Jagannath's branch fit Ramkumar's branch as per a registered deed Ext. A. Under the saia partition deed the joint family business of Noperam Ramgopal was continued as a joint family business; it was agreed that if in future there was necessity for partitioning the said business, they would be able to partition the same.

11. Subsequently in August 1944 the said business was converted into a limited company, namely Noperam Ramgopal Limited as appears from the certificate of incorporation dated 8-8-1944 by which the Assistant Registrar of Joint Stock Companies, Bengal certified it was a limited company incorporated under the Indian Companies Act of 1913. The appellant-defendants also relied on the Articles and Memorandum of Association of Noperam Ramgopal Limited Ext. E. They also relied on the assessment order of the Income-tax Officer in respect of Noperam Ramgopal Limited dated December 28, 1950 Ext. G-3 purporting to show that the business was assessed as a limited company, Noperam Ramgopal Limited. Their point is that since its incorporation on August 8, 1944 the joint family business of Noperam Ramgopalceased to exist and it became a limited company.

12. In further support of the appellant-defendants' contention, they relied on a judgment in Money Suit No. 359 of 1955 on the file of the Munsif, 2nd Court dated May 8, 1950 Ext. N purporting to show that defendant No. 2 Ramkumar borrowed the money (subject matter of the said money suit) on behalf and on account of the limited company Nope-ram Ramgopal Limited. In the said money suit the court found that the Hindu Joint family firm Noperam Ramgopal was neither in existence nor was there a joint Hindu family firm on the date of the loan in the said money suit (that is to say, September 23, 1949); that it was a company registered and incorporated under the Indian Companies Act; & further that the members of the said two branches of the family did not constitute a joint Hindu family on September 23, 1949 and that it severed in 1943.

The findings of the learned trial court in the said Money Suit No. 359 of 1955 were confirmed in appeal by the learned Additional Subordinate Judge, Cuttack, by judgment in Money Appeal No. 51/1955 dated October 31, 1957 Ext. 3(a). There was also a second appeal from the said decision being Second Appeal No. 13 of 1958 in which this court by judgment therein dated March 24, 1960 Ext. 3 upheld the decision of the said learned Additional Subordinate Judge. It was held by the High Court that the learned lower appellate court was perfectly justified in allowing a personal decree against defendant Ramkumar Modi which accordingly was confirmed by the High Court.

13. Apart from documentary evidence defendant No. 2 Ramkumar Modi as D. W. 1 stated to the effect that the brothers were divided by metes and bounds but the business remained Joint and it was carried on under the name and style of Noperam Ramgopal; that the business continued for six months and then the business became a limited company as Noperam Ramgopal Limited in 1944 with its Head Office in Calcutta; the company had four directors Jagannath, Basudeb, Gourisankar and himself (Ramkumar) as managing director. Apart from the evidence of defendant Ramkumar Modi there was also the evidence of an independent witness D. W. 3 Shiba Prasad Modi who said that before partition the business was running in the name of Noperam Ramgopal and that after partition the business was converted into a limited company.

14. It is thus clear from evidence that in 1944 the business changed its legal entity in that it was converted from its status as a joint family firm to a limited company Noperam Ramgopal Limited incorporated under the Indian Companies Act.

15. In the ultimate analysis of the evidence therefore the position appears to be this: After partition in 1944 the business continued to remain a joint family firm for six months; thereafter the joint family business ceased to exist. This is concluded by the judgment of the High Court in Second Appeal No. 13 of 1958Ext. 3 discussed above. Although the onus was on the plaintiffs to prove that Noperam Ramgopal was in existence on the date of handnota there is no evidence from the side of the plaintiffs that the said joint family business Noperam Ramgopal was in existence on the date of the handnote. The evidence of plaintiff No. 2 as P. W. 1 shows that he had no knowledge that the members of the defendant joint family belong to two different branches.

Similarly the evidence of P. W. 2 a neighbouring shopkeeper is also not helpful; he is a debtor to the plaintiffs; his knowledge is based on a certain handnote in his favour; he admitted that he did not know the household affairs of the defendants; he could not say if the business was limited company; he has not seen any paper relating to the defendants' said business. Thus P. W. 2 was not competent. Then P. W. 3 another neighbour said that he never heard of any business under the name of Noperam Ramgopal; there was never any such business under such name; there was no signboard on the shop as Noperam Ramgopal Limited. He is also an interested witness in that he is said to have lent Rs. 5,000 to Noperam Ramgopal on a Purja executed in favour of his wife and that the money was still due. The testimony of P. W. 4 a pleader's clerk has also no evidentiary value in that he had no personal transactions with the defendants' business.

16. The stand taken on behalf of respondent defendant No. 2 Ramkumar Modi and respondent defendant No. 3 Gourisankar Modi as stated in para. 16 of their Joint written statement, in substance was mat as result of the partition in 1944 the Joint family trade Noperam Ramgopal ceased to function and each branch carried on its separate business and sometime thereafter the two branches carried on business in partnership; their point is that the suit loan taken by defendant No. 2 Ramkumar was so taken on behalf of Joint family including himself, and accordingly all the defendants are liable for the suit loan under the handnote Ext. 1.

17. In view of the clear finding based on evidence discussed above that since as early as five years before the date of the handnote the Joint family business of Noperam Ramgopal ceased to exist and was converted into a limited company Noperam Ramgopal Limited, there is no force in the contention that all the defendants 1 to 12 are liable for the suit loan due on the handnote. The fact is that defendant Ramkumar signed the handnote purporting to be on behalf of Noperam Ramgopal on October 10, 1949 by when the joint family business was no longer in existence and in fact it was by then converted into a limited company.

18. Then the question is: Did the defendant Ramkumar sign the handnote on behalf of the limited company Noperam Ramgopal Limited? The answer is: No. The significant feature is that the executant defendant Ramkumar signed on behalf of Noperam Ramgopal. There is no mention of limited company in the handnote. Under Section 147 of the Companies Act 1956. corresponding to Sections 73 and 74 of the Act of 1918, the settled position in law ifthat if a limited company makes a contract without using the word limited' the directors who make the contract on behalf of the company are personally liable Atkins and Co. v. Wardle, (1889) 58 LJQB 377. In the present case, the defendant Bamkumar having signed the Hand-note without using the word 'limited' after 'Noperam Ramgopal', the defendant Ramkumar is personally liable.

19. On limitation, the plaintiffs' claim as against defendant No. 2 Ramkumar is saved by the two payments made and endorsed by the defendant Ramkumar. The loan was advanced on October 10, 1949. Defendant No. 2 Ramkumar having made payment on August 10, 1952 within three years from the date of the loan, and then the second payment having been made also by defendant No. 2 Ramkumar on March 4, 1955, the suit as filed on March 1, 1958 was filed within time. Accordingly the plaintiffs' suit as against defendant Ramkumar is not barred by limitation.

20. In this view of the entire position on the facts and circumstances of the case based on evidence as discussed above the decision of the learned trial court cannot be sustained. He appears to have overlooked the implications of the strong documentary evidence supported by oral evidence, all as discussed above, clearly establish the position that tbe joint family business Noperam Ramgopal ceased to exist by the time the suit hanonote Ext. J dated October 10, 1949 was executed by defendant No. 2 Ramkumar Modi, and that the said business was long before that time in 1944 converted into a limited company Noperam Ramgopal Limited.

21. In the result therefore, the appellant-defendants' appeal F. A. No. 12 of 1963 is allowed and the decision of the trial court is set aside. The plaintiff's claim against defendants 1, 3 to 16 is dismissed. The plaintiffs' suit for the dues claimed by them in the suit is decreed in their favour as against defendant No. 2 Ramkumar Modi alone who is found liable for the dues under the suit handnote Ext. 1 as aforesaid; each party to bear own costs. Re: F. A. No. 16 of 1963

22. The plaintiffs did not press their appeal for proper pleader's fee. As regards the plaintiffs' appeal against the judgment of the trial court so far as not granting their claim for interest pendente lite, the plaintiffs relied on Section 79 of the Negotiable Instruments Act, 1881, which provides that when interest at a specified rate is expressly made payable on a promissory note or bill of exchange, interest shall be calculated at the rate specified, on the amount of the principal money due thereon, from the date of the instrument, until tender or realisation of such amount or until such date after the institution of a suit to recover such amount as the court directs. In the present case though the contractual rate was one rupee, one anna per cent per mensem, and the plaintiffs have claimed only one rupee per cent per mensem, that is to say, 12 per cent per annum, we are of the opinion that the pendente lite interest at 6 per cent shall also be allowed against d-2.

23. The plaintiffs' appeal for pendente lite interest is thus allowed. The learned trial court was not justified in not granting pendente lite interest. The plaintiffs are allowed interest at the rate of 6 per cent per annum from the date of institution of the suit upto the date of decree and thereafter also at the rate of 6 per cent per annum until realisation of the amount as already given by the trial court.

The appeal is allowed as indicated above. There would be no order as to cost in this Court.

Das, J.

24. I agree.


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