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Rattan Lal Ahluwalia Vs. Jai Janinder Parshad - Court Judgment

LegalCrystal Citation
SubjectCommercial
CourtPunjab and Haryana High Court
Decided On
Case NumberFirst Appeal No. 399 of 1963
Judge
Reported inAIR1976P& H200
ActsPartnership Act, 1932 - Sections 48, 50 and 52; Code of Civil Procedure (CPC) , 1908 - Order 20, Rule 5; Contract Act, 1872 - Sections 17 and 18
AppellantRattan Lal Ahluwalia
RespondentJai Janinder Parshad
Appellant Advocate M.S. Liberhan, Adv.
Respondent Advocate G.C. Garg, Adv.
DispositionAppeal dismissed
Cases ReferredThawardas Pherumal v. Union of India
Excerpt:
.....business was used to be signed by both the parties, viz,,the appellant and the respondent, and the books of account as well as the stock register had been kept in the premises of the partnership business and the same were accessible and open for inspection to the appellant, and the respondent had been visiting the office which was located in the premises of the partnership business. his failure to be vigilant in issuing cheques and signing ledger books etc. 5. it seems to me a well-settled proposition that the parties having accounts between them, who include partners in a business, may settle those accounts in two ways; jwaladutt pilani, air 1947 bom 135. in clause (b) of the dissolution deed exhibit p-l it is clearly stated that the valuation and estimates of all the properties, assets..........was used to be signed by both the parties, viz,, the appellant and the respondent, and the books of account as well as the stock register had been kept in the premises of the partnership business and the same were accessible and open for inspection to the appellant, and the respondent had been visiting the office which was located in the premises of the partnership business. the aforesaid evidence which had been led by the appellant himself, points out unmistakably that he was operating the bank account, issuing cheques and signing drafts and ledger books, and the books relating to the partnership business were lying in the premises of the partnership business, and were open to his inspection. all these matters go a long way to show that he was taking part in running the.....
Judgment:

Muni Lal Verma, J.

1. This appeal is by the defendant (hereinafter called the appellant) and arose out of the suit instituted by Jai Janinder Parshad (hereinafter called the respondent) for recovery of Rs. 5,376/- (Rs. 4,200/- as balance of the principal amount and Rs. 1,176/- as interest).

2. His (the respondent's) case was that he and the appellant had entered into oral agreement to run business of the manufacture and supply of Scientific Apparatus, Chemicals, Charts and Maps etc. under the name and style of Messrs. The Standard Scientific Apparatus and Chemical Suppliers (hereinafter referred to as the partnership business) with effect from February 1, 1946, their shares in the profits and losses in the said business being equal, i.e., one-half each and they ran the said business in Ahluwalia Buildings, Ambala Cant', since then. On August 18, 1948, the said agreement was reduced to writing and they executed deed (hereinafter called the partnership deed). About ten years thereafter, i.e., on September 30, 1958, they dissolved the said partnership by means of a writing (hereinafter called the dissolution deed) and by mutual agreement it was settled that the appellant would take all the capital, stocks, effects and good will including copyright and one-half of the office furniture, and would be the sole proprietor of the said business. In consideration thereof, he promised to pay Rs. 5,000/- to the respondent on or before April 30, 1959 and he (the respondent) had also taken one-half of theoffice furniture and retired from the partnership business. The appellant paid Rs. 500/- by means of a cheque (most probably dated April 19, 1959) and Rs. 300/-in cash (most probably on March 14, 1959) i.e., Rs. 800/- in all to the respondent. When he failed to pay the balance of Rs. 4,200/- despite the respondent's giving a registered notice to him, he (the respondent) sued him for recovery of Rs. 4,200/-being balance of the principal amount and Rs. 1,176/- as interest thereon.

3. The broad facts alleged by the respondent were admitted by the appellant. He, however, contested the suit on the pleas that he was a sleeping partner and had simply financed the partnership business while the respondent was a working partner, that the dissolution deed was vitiated by fraud and misrepresentation, and the respondent had defrauded him by misrepresenting state of things which was not real through rnisstatement and falsification of accounts and suppression of facts, as a consequence of which he had agreed to pay Rs. 5,000/- to him that Rs. 475/- had been paid to the respondent over and above the amount of Rs. 800/- admitted to have been received by him; and that he (the respondent) had by means of information collected from the partnership business published a directory known as Ashoka Guide (hereinafter referred to as such) in the name of his wife and had thereby benefited and caused loss to the partnership business. So, he claimed share in the said benefits to the extent of one-half and pleaded that the respondent was not entitled to claim any amount from him. He also claimed costs. The respondent while filing replication too claimed special costs. So the suit was tried on the following issues:

(1) Whether the agreement dated 30th of September, 1958, is vitiated by fraud and misrepresentation as alleged ?

(2) Whether the defendant is entitled to deduct any, if so what amount from the suit claim as alleged ?

(3) Whether the defendant has paid Rs. 475/- over and above the admitted payments ?

(4) Whether the plaintiff is entitled to interest, if so at what rate ?

(5) Whether any of the parties is entitled to special costs ?(6) Relief.

Issue No. 5 was not pressed at the time of arguments and, as such, no special costs were awarded to either party. The trial court answered issue No. 3 in the affirma-tive and held under issue No. 4 that the respondent was entitled to claim interest at the rate of Rs. 6/- per cent, per annum with effect from the date of notice given by him to the appellant. Finding issues Nos. 1 and 2 in the negative, it granted a decree for Rs. 3,725/- with interest at the rate of Rs. 6/- per cent per annum from the date of the said notice till realisation, with proportionate costs to the respondent against the appellant. Aggrieved by the said decree, Rattan Lal (now the appellant) came to this Court in appeal.

4. Mr. M. S. Liberhan, the learned counsel for the appellant, assailed the findings recorded by the trial Court on issues Nos. 1 and 2, and contended that the appellant was a sleeping partner and he had been defrauded by the wrong balance-sheet prepared and shown by the respondent, in executing the dissolution deed, and the respondent had published Ashoka Guide in the name of his wife by using information and knowledge derived from the partnership business, and had thereby earned a lot of money out of which one-half payable to him (the appellant) was not less than Rs. 15,000/-. I have not been able to agree with him. Partnership deed Exhibit D. W. 8/1 discloses that the appellant had financed the partnership business but it does not indicate that he (the appellant) was a sleeping partner. On the other hand, it reads to the contrary. In its Clause (1) it is stated that the appellant as well as the respondent being partners had been carrying on the business in partnership since February 1, 1946 i. e . about two and a half years prior to execution of the partnership deed. Its Clause (9) provided that neither the appellant nor the respondent could borrow individually any money for the partnership business. So, the said clause denied authority to the respondent to borrow money individually for the partnership business. In view of the said restriction, it would not be justified to say that the respondent was the sole working partner, or that the appellant had no hand whatsoever in the working of partnership business. Clause (12) of the partnership deed is to the effect that the accounts of the partnership business would continue to be operated upon by the appellant. There is nothing in the partnership deed to show that the respondent could operate upon the accounts of the partnership business. Therefore, all the aforesaid clauses in the partnership deed; Exhibit D. W. 8/1, in my opinion, read inconsistent with the contention of the learnedcounsel for the appellant that the appellant was a sleeping partner. Simply because it is provided in Clause (4) of the partnership deed that the respondent would be in charge of the actual working of the partnership does not necessarily, especially in view of the other clauses referred to above, make the appellant a sleeping parlner. It is pertinent to note that, the appellant appearing as D. W. 8 admitted, and similar is the statement of Sadhu Ram D. W. 7 who had been employed as Accountant in the partnership business and had been in the employment of the appellant as such after its dissolution that he (the appellant) had been operating the Bank account and used to sign cheques as well as drafts; and had also boon signing the balance-sheets yearly. In cross-examination the appellant further admitted that sometimes he might have been signing the correspondence whenever, the respondent happened to he absent. It is also in evidence from Sadhu Ram that the ledger of the partnership business was used to be signed by both the parties, viz,, the appellant and the respondent, and the books of account as well as the stock register had been kept in the premises of the partnership business and the same were accessible and open for inspection to the appellant, and the respondent had been visiting the office which was located in the premises of the partnership business. The aforesaid evidence which had been led by the appellant himself, points out unmistakably that he was operating the Bank account, issuing cheques and signing drafts and ledger books, and the books relating to the partnership business were lying in the premises of the partnership business, and were open to his inspection. All these matters go a long way to show that he was taking part in running the partnership business, though the part mainly assigned to him related to financing the partnership business and to operate the accounts of the same. In presence of the said evidence, it seems difficult to maintain that he was a sleeping partner. His failure to be vigilant in issuing cheques and signing ledger books etc., or to inspect the book of account does not, in my opinion, entitle him to claim the status of a sleeping partner.

5. It seems to me a well-settled proposition that the parties having accounts between them, who include partners in a business, may settle those accounts in two ways; firstly, they may meet and ascertain the exact balance and work out their respective liabilities andrights on the basis of information collected from the books of account and accept the same, that would be called an account stated and settled. In such a case, if it afterwards turns out that the agreement so arrived at by them was based upon error or the accounts had been tainted by fraud or misrepresentation, the accounts between them can be reopened. Secondly, the said persons may agree not to ascertain the exact balance from the books of account but agree to a gross sum as the balance and also the sum which one Is willing to pay and the other is content to accept; that may be called a settlement by compromise. A mere error in the accounts, if found afterwards, may not be a sufficient ground for reopening the accounts so settled by compromise. However, if it is shown that a settlement by compromise was the result of fraud committed or misrepresentation made by one party to the other, the accounts between the parties may be reopened if it is further shown that injustice had been done to the other side. I am supported in this view by judgments reported in Vatakkam Chirayil Parkum Kurundaliammal v. T. P. E. N. Kunhi Kannan, AIR 1930 Mad 141 and in Maneklal Mansukhbai v. Jwaladutt Pilani, AIR 1947 Bom 135. In Clause (b) of the dissolution deed Exhibit P-l it is clearly stated that the valuation and estimates of all the properties, assets and effects and good will etc., of the partnership business had been made by mutual satisfaction of the parties. A bare reading of the said dissolution deed reveals that it was more or less by compromise that the settlement was arrived at between the parties whereby the appellant accepted the liability to pay Rupees 5,000/- to the respondent on for before April 30, 1959, on account of the value of his (the respondent's) share in the stock, effects, good will etc., of the partnership business, and also in the copyright of all the charts and maps etc., manufactured by the said partnership; In addition to one-half of the office furniture which he had already taken.

In cases of fraud and misrepresentation there is misstatement or false state-merit, of fact(s) which misleads the party on whom the same is perpetrated. The principal difference between fraud and misrepresentation is that in the case of fraud the person making the suggestion, does not believe it to be true, while in the case of misrepresentation he believes to be true. It was argued by the learned coun-sel for the appellant that he had been misled by the balance sheet Exhibit D. W. 7/1 (its copy is Exhibit D. W. 7/lA) which indicated liabilities and assets of the partnership and included the statement of account relating to the year commencing from April 1, 1957 and ending on March 31, 1958, and he believed correctness of the same on the assurance given by the respondent; and could not verify the accuracy of the said balance sheet since he was a sleeping partner. So, according to him. the appellant was defrauded or at least he was misled to believe that (i) Adhe Press was debtor to the extent of Rs. 426.75 paise vide Balance Sheet 'A' prepared for the period from 1-4-1958 to 30-9-1958 and to the extent of Rs. 684/-vide Exhibit D. W. 7/lA to the partnership business, but the said press claimed to be creditor to the extent of Rs. 996.37 paise of the partnership business (ii) that the price of the reference books purchased, was shown to be Rs. 3,208/- and it was found subsequently that the said books were of the value of Rs. 2.832.62 paise. and even some of the reference books were found missing, and (iii) that the accounts of Sarvshri V. K. Bapna and T. V. Rawan who were commission agents of the partnership business, had been shown as squared but subsequently Shri V K. Bapna claimed Rs. 5,241/- and Shri T. V. Rawan claimed Rs. 4,505.35 paise. Balance sheet Exhibit 'A' prepared for the period from April 1. 1958 to September 30. 1958, was not signed by the respondent, and the evidence present on record is not sufficient to warrant a finding that it was prepared by him or within his knowledge. Therefore, he is not bound by it. Further it is in evidence from Sadhu Ram D. W. 7 that at the instance of the appellant he had checked the aforesaid statement of account and had compared it with the books of the partnership; and had found the same to be correct; and it was then signed by the appellant and was forwarded to the Income-tax Authorities. Sadhu Ram also maintained that he had prepared the balance sheet (Exhibit D. W. 7/lA) from the books of account and the same had been signed by both the parties. So, when according to Sadhu Ram both the aforesaid statements of account were found to be correct according to the books of the partnership, it cannot be said that the same contained any misstatement or false statement of fact. Since the appellant had signed the balance sheet (Exhibit D. W- 7/lA), he is bound by it and cannot question its correctness. He madea futile attempt to explain his signature on it by saying that he had been signing the balance sheets without checking the correctness of the same. That, in my opinion, may amount to negligence or carelessness on his part but cannot earn riddance to him of his signature on the said statement of account. If he failed to check the correctness of the same while signing the aforesaid balance sheet (Exhibit D. W. 7/lA), the fault lay with him and he should take the consequences. The record does not bear any evidence, much less reliable, to show that the respondent had made any misstatement or false statement of fact which could have induced the appellant to believe something which was not true. On the said state of evidence, it cannot be maintained, much less justly, that the respondent played any fraud or made any misrepresentation to the appellant whereby the latter could have been misled to accept the liability to pay Rs. 5,000/- to the former besides giving one-half of the office furniture to him. While dissolving the partnership, the appellant had taken good will and copyright of the articles besides the capital, stocks, effects of the partnership business. So the settlement arrived at by the parties by compromise as recorded in dissolution deed is not. in my opinion, tainted by fraud or misrepresentation. Sadhu Ram admitted during cross-examination that he had checked the books of account about three and a half months after dissolution of the partnership business and had appraised the appellant of all the matters. That means that if there was any error in the accounts, the same had come to the knowledge of the appellant in or about the middle of January, 1959. The appellant did not issue any notice to the responded complaining about any misstatement of fact made by him or fraud committed by him. or about any error found in the books of account. On the other hand, ha had paid Rs. 300/ in cash to the respondent on March 14, 1959. If it were a fact that the appellant had been defrauded by the respondent in arriving at the settlement recorded in the dissolution deed and the said matter had been brought to his notice by Sadhu Ram in the month of January, 1959. he could not. and was not expected to pay Rs. 300/- to the respondent on March 14, 1959. Therefore. the conduct of the appellant in not issuing any notice, to the effect referred to above, in paying the aforesaid amount of Rupees 300/- to the respondent after coming to know about the fraud alleged to havebeen committed on him, reads consistent with the conclusion arrived at that the dissolution deed was not tainted by fraud or misrepresentation.

6. The partnership business had running account with the Abhe Press. Therefore, the possibility that in the said account, Rs. 426.75 paise were found due from the said Press on September 30, 1958 when balance sheet 'A' was prepared, and Rs. 684/- stood due from it to the partnership business on March 31, 1958, when balance sheet Exhibit D. W. 7/1A was prepared, but on a later date the amount was found due to the Press from the partnership business, cannot be excluded. Admittedly, the appellant and the respondent were liable to pay the debts incurred by the partnership business from third persons during the currency of the said business. The dissolution of the partnership business determined their liabilities inter se, but their liability to pay the debts incurred by the partnership business from third persons prior to September 30, 1958 when the partnership business was dissolved, remained unaltered. So, if Abhe Press, or Sarvashri V. K. Bapna and T. V. Rawan had any genuine claim against the partnership business prior to September 30, 1958, they or anyone of them could proceed in that respect against both the parties. None of them gave any notice to the respondent for claiming any amount. Despite the notices alleged to have been received by the appellant from Abhe Press and from Sarv-shri V. K. Bapna and T. V. Rawan he (the appellant) did not write to the respondent calling upon him to explain the claims made by the said Press and Sarvshri V. K. Bapna and T. V. Rawan. Neither the said Press or Shri V. K, Bapna nor Shri T. V. Rawan had instituted any suit for recovery of the amounts alleged to have been claimed by them against the appellant, or against both the parties. On the said state of affairs, it is difficult to believe that any amount had, in fact, been due to the aforesaid Press, Shri V. K. Bapna or Shri T. V. Rawan on the date when dissolution deed was executed, much less that the respondent had suppressed the same at the time of settlement arrived at by the parties.

7. There is no evidence, much less convincing, to show that price of the reference books recorded in the stock register was higher than the one for which tbe same had been purchased, at the instance of the appellant, a local commissioner hadbeen appointed to make search in the house and other premises occupied by the respondent. The said local commissioner raided the house and other premises of the respondent, but on search no reference book belonging to the partnership business was found therein. The evidence present on record does not show that the respondent had taken away any reference book belonging to the partnership business, or that he had overhauled the same while recording its price in the stock register, or any other book of account of the partnership business. It, thus, follows that the contention raised on behalf of the appellant, that he had been misled to believe at the time of dissolution of partnership business, that Abhe Press was a debtor although it was a creditor, and some amounts were due to Shri V. K. Bapna and Shri T. V. Rawan from the partnership business, and the price of the reference books shown in the record and in the books of account was more than for which the same bad been purchased, or some of the reference books were found missing, is not borne out by the record, and the same is overruled.

8. It is not disputed that Ashoka Guide had been published by Shrimati Sushila Goyal, who is wife of the respondent. She is under-Matric, and admitted that she had never studied science in any school. Therefore, the learned counsel for the appellant appears to be right in contending that having regard to her academic qualifications, she could not possibly herself edit or prepare the Ashoka Guide. She explained that she had secured help in editing and publishing the Ashoka Guide from Shri B. D. Kapur, who had been employed by her. She, however, admitted that she used to consult her husband (the respondent) whenever she could not understand any word. Therefore, relying on Section 16(a) of the Indian Partnership Act (hereinafter called the Act), and tbe judgment reported in Abdul Razaak v. Mashiruddin Ahmad, AIR 1959 Gal 660, the learned counsel for the appellant urged that the income derived by Shrimati Sushila Goyal through the sale of Ashoka Guide should be reckoned as that of her husband (the respondent), and he should render account for the same to him (the appellant). I am unable to agree with him. The facts of Abdul Razaak's case (supra) were different. It appears that in that case Abdul Razaak had used the kiln and the apparatus and machinery belonging to the ad-mitted partnership between him and Mashiruddin Ahmad, for manufacturing the bricks which he had himself supplied to the Government and the price of which had been obtained by him. It was, therefore, observed that provisions of Section 16(a) of the Act applied to the facts of the said case and Abdul Razaak was hold liable to account for the price which he had obtained from the Government for the said bricks on the ground that he had derived profits himself by using the property of the partnership. In the instant case, there is nothing to show that the respondent had derived any profits for himself from any transaction of the partnership business, or from the use of any property, or business of the partnership or its name. Knowledge and information derived by the respondent from the partnership business cannot, in my opinion, be termed as the property of the said partnership. So, the mere fact that some knowledge or information might have been given by the respondent to his wife Shrimati Sushila Goyal, or to her employee -- Shri B. D. Kapur, cannot attract the provisions of Section 16(a) of the Act. Further, the respondent stated in the middle of para. 2 of the replication that the Ashoka Guide had been published by his wife eleven months after dissolution of the partnership business. Shrimati Sushila Goyal affirmed categorically in her statement that the Ashoka Guide had been published about a year after dissolution of the partnership business. The appellant did not refute the said statement and professed want of knowledge by representing that he did not know when it was published. Therefore, the statement of Shrimati Sushila Goyal being unrebutted prevails, and it has to be said that the Ashoka Guide had been published about a year after dissolution of the partnership business. In that view of the matter, I do not think that the appellant is entitled to share the benefits, or the income derived by Shrimati Sushila Goyal from the publication or sale of Ashoka Guide. It is also noteworthy that there is no evidence from which it can be concluded safely as to what amount she had, in fact, derived as benefit or income from the publication or sale of the Ashoka Guide.

9. At one stage of the arguments, the learned counsel for the appellant urged that the trial Court was not justified in awarding interest to the respondent. The respondent gave notice to the appellant for making payment of the amount stating therein clearly that if he failed topay the amount, interest at the rate of Rs. 12/- per cent, per annum would be charged from him. Therefore, in view of the authority reported in Thawardas Pherumal v. Union of India, AIR 1955 SC 468, the respondent was entitled to claim interest on the amount at the rate of Rs. 6/- per cent, per annum, from the date of the said notice, i.e., April 17, 1961. The trial Court had allowed interest at the said rate, and from the said date to the respondent. Hence, I see no ground to agree with the learned counsel for the appellant that the interest at the said rate could not be allowed to the respondent.

10, Therefore, I conclude that all the contentions raised by the learned counsel for the appellant are meritless, and the findings recorded by the trial Court on issues Nos. 1, 2 and 4 are impeccable; and there is no substance in this appeal.

Consequently, I, maintaining the judgment and decree of the trial Court, dismiss this appeal with costs


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