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Kaka Ram Sohanlal and ors. Vs. Firm Thakar Das Mathra Das and ors. - Court Judgment

LegalCrystal Citation
SubjectCommercial
CourtPunjab and Haryana High Court
Decided On
Case NumberFirst Appeal No. 10 of 1955
Judge
Reported inAIR1962P& H27
ActsEvidence Act, 1872 - Sections 34, 74 and 76; Indian Income-tax Act, 1922 - Sections 54
AppellantKaka Ram Sohanlal and ors.
RespondentFirm Thakar Das Mathra Das and ors.
Cases ReferredChothu Bhagat Sewa Ram v. Balkishan Das Mohan Lal
Excerpt:
.....complain for the first time of the mode of proof. as already mentioned above, the persons whom he produced were disbelieved by the trial court for very good reasons. indeed, the income-tax manual clearly lays down that a copy of the assessment order will be supplied free of cost to the assessee, and that subsequent copies may be supplied on payment of charges. section 34 indian evidence act merely makes relevant the entries in books of account regularly kept in the course of business, and it further clearly lays down in the negative that such entries shall not alone be sufficient evidence to charge any person with liability. (25) i also entertain some doubt about the straight-forwardness of balbir singh and khazanchi lal vis-a-vis their dealings with kaka ram, bus as it was for the..........amount of capital as debt from the plaintiff-firm and spent the same in its business, that the account books of the defendant-firm for the years 1951-52 and 1952-53 were in possession of defendant no. 3 who during the illness of defendant no. 2 had carried them to his house, and that during the illness of defendant no. 2, defendant no. 3 produced the books of the firm in the income-tax and sales tax departments and also filed statements therefrom through the counsel of the defendant-firm.(3) the suit was resisted by defendant no. 3 who pleaded that neither he nor the defendant-firm either borrowed any amount from the plaintiff-firm or struck the alleged balances or any amount was due from him or the defendant-firm. he further pleaded that he had no knowledge if balbir singh defendant.....
Judgment:

P.C. Pandit, J.

(1) Firm Thakar Das Mathra Das of Ludhiana, through its proprietor Khazanchi Lal, brought a suit for the recovery of Rs. 17,371/14/3 against firm Raj Foundry and Iron Works, Ludhiana defendant No. 1, and its partners, Balbir Singh defendant No. 2 and Kaka Ram defendant No. 3, on the allegations that the defendant-firm started money dealings with the plaintiff-firm on the 3rd April, 1949, and these dealings continued up to the 6th November, 1953, that during this period the parties, after mutually understanding the accounts, had been entering the balance in their respective Bahis on the 31st of March of each year, that Rs. 16,319-15-3 was the balance due from the defendants on the 31st March, 1954, that every year defendant No. 2 on behalf of the defendant-firm used to admit the accounts to be correct and acknowledge the debt due to the plaintiff-firm, and that a sum of Rs. 1,051-15-0 as interest at the rate of-/8/- per cent per menses from the 1st April, 1953, up to the date of the suit, according to the agreement, custom and law, was also due from the defendant, firm. The plaintiff-firm field transliterations from its books of account along with the plaint in support of its claim.

(2) Defendant No. 1 namely, the firm, and defendant No. 2 Balbir Singh, who is son of Khazanchi Lal proprietor of the plaintiff-firm, supported the plaintiff's claim and submitted that the defendant-firm had been taking loans from the plaintiff-firm during the course of their money dealing from the 3rd April, 1949, up to November, 1953, that the defendant-firm had been borrowing the various amounts from the plaintiff-firm by means of letters and ruqqas, that on the 31st of March of each year both the firms had been, after comparing the entries appearing in their respective Bahis, admitting the accounts to be correct, that the account of the plaintiff-firm was correct, that the defendant-firm did not spend any amount from its pocket at the time of starting the business, and its entire business continued to be carried on with the money borrowed from the plaintiff-firm, that the entire machinery, building and lathes etc, were purchased with the money borrowed from the plaintiff-firm, that according to the agreement between defendant No. 2 and defendant No. 3 the entire capital was to be invested by defendant No. 2, that defendant No. 1 borrowed through defendant No. 2 the entire amount of capital as debt from the plaintiff-firm and spent the same in its business, that the account books of the defendant-firm for the years 1951-52 and 1952-53 were in possession of defendant No. 3 who during the illness of defendant No. 2 had carried them to his house, and that during the illness of defendant No. 2, defendant No. 3 produced the books of the firm in the Income-tax and Sales Tax Departments and also filed statements therefrom through the counsel of the defendant-firm.

(3) The suit was resisted by defendant No. 3 who pleaded that neither he nor the defendant-firm either borrowed any amount from the plaintiff-firm or struck the alleged balances or any amount was due from him or the defendant-firm. He further pleaded that he had no knowledge if Balbir Singh defendant No. 2 having colluded with his father Khazanchi Lal, proprietor of the plaintiff-firm, had got fictitious entries made. It was also contended that Balbir Singh had no authority at all to take loans on behalf of the defendant-firm, and that defendant No. 2 had filed a suit for dissolution of partnership and rendition of accounts against him, any defendant No. 2 had got the present suit filed by his father to put pressure on him.

(4) In the replication the plaintiff-firm controverted the allegations made by defendant No. 3 and submitted that the entries regarding the debt due to the plaintiff-firm were forthcoming in the Bahis of the defendant-firm, that the defendant-firm had no capital and it started its business by taking loans from the plaintiff-firm and thereafter the defendant-firm continued to take loans from the plaintiff-firm according to its needs, that defendant No. 2 carried on the work of money dealings on behalf of the plaintiff-firm and he had been taking loans and acknowledging debts, that no fictitious entries had been made, and that the plaintiff-firm had already produced in Court the receipts regarding the payments made by the plaintiff-firm on behalf of the defendant-firm.

(5) Defendant No. 3 in his statement before issues deposed that regular books of accounts were being maintained for the partnership business by defendant No. 2, that all those books were in the custody of defendant No. 2 and he did not know their present whereabouts, and that he was illiterate and he never produced those books in the Sales Tax Department.

(6) On the pleadings of the parties, the following issues were settled:

1. Whether the plaintiff advanced any loan to the firm defendant No. 1 and how much?

2. Whether defendant No. 2 signed fictitious entries and collusively acknowledged the debts and what is the effect?

3. Whether defendant No. 2 had no implied authority to incur the loan for the firm and what is the effect?

4. Whether the suit is within time?

5. Relief.

(7) After deciding all the issues in favour of the plaintiff the trial Judge decreed the suit for Rs. 17,371-14-3 and also awarded future interest at the rate of Rs. 6 per cent, per annum on the decretal amount from the date of the suit to the date of realisation. Against this decree, Kaka Ram, defendant No. 3, and the defendant-firm have filed the present appeal.

(8) The main contentions of the learned counsel for the appellants were that:

(1) neither Kaka Ram nor the defendant-firm had borrowed any amount from the plaintiff-firm and nothing was due to the plaintiff-firm;

(2) Balbir Singh, defendant No. 2, in collusion with his father, Khazanchi Lal, proprietor of the plaintiff-firm, had signed fictitious entries and had collusively acknowledged the debts of the plaintiff-firm;

(3) Balbir Singh had no authority to incur loans on behalf of the defendant-firm; and

(4) the trial court could not award future interest in the present case.

(9) With regard to the first contention, while deciding issue No. 1 in favour of the plaintiff, the trial Court had mainly relied on the following--

(I) transliterations from the plaintiff's account books, Exhibit P. 55 to P. 63, which were audited by the Sales-Tax and Income-Tax Departments;

(ii) various receipts and vouchers, Exhibits P. 36 to P. 44 and P. 64 to P. 100, issued by different individuals and firms, who received the amount from the plaintiff-firm, who had made the payments on behalf of the defendant-firm;

(iii) instructions (ruqqas), Exhibits P. 2 to P. 31, issued by Balbir Singh, defendant No. 2, to the plaintiff-firm asking it to make payments to various persons on behalf of the defendant-firm;

(iv) Defendant's account books up to 31-3-1950;

(v) withholding of the defendants' account books for the years 1951-52 and 1952-53 by Kaka Ram, appellant;

(vi) income-tax assessment for the year 1952-53. Exhibit P. 52, which shows that a sum of Rs. 500 by way of interest for a debt due to the plaintiff-firm was paid by the defendant-firm;

(vii) plaintiff's own statement in support of his claim; and

(viii) complete denial by Kaka Ram, appellant, of the incurring of any loan from the plaintiff-firm and no explanation given by the appellant as to the source of investments amounting to Rs. 20,000/- made in their business when it was expanded in the year 1950.

(10) As regards point N0, (I), the transliterations from the plaintiff's account books show a debt of Rs. 16,319/15/3 on 31-3-1954 due from the defendant-firm to the plaintiff-firm. Learned counsel for the appellants submitted that these account books had not been proved in accordance with law. According to him, the scribe of the different entries in the account books should have been produced and the statement of the plaintiff could not legally prove these account books because he was not an author of these entries and he had not stated that these account books were prepared by him munims under his supervision. In this connection, he relied on a number of authorities inter alia Gajendra Shah v. Shankar Bux Singh, AIR 1935 Oudh 16, and Lachmi Narain v. Musaddi Lal, AIR 1942 Oudh 155, which lay down that where the writer of the account books in alive but has not been examined, the account books are not said to be duly proved and are, therefore, inadmissible in evidence.

After hearing the counsel for the parties, I am of the view that there is no merit in this submission. It is beyond dispute that the objection with regard to the mode of proof of a document should be taken in the trial Court at the time when the document is produced before it and before the same is exhibited. This objection, if not taken at that stage, cannot be allowed to be raised later on at the appellate stage. While dealing with this matter, their Lordships of the Privy Council in Gopal Das v. Sri Thakurji, AIR 1943 PC 83, observed as under--

'Where the objection to be taken is not that the document is in itself inadmissible but that the mode of proof put forward is irregular or insufficient, it is essential that the objection should be taken at the trial before the document is marked as an exhibit and admitted to the record. A party cannot lie by until the case comes before a Court of appeal and then complain for the first time of the mode of proof.'

In my opinion, therefore, this objection cannot be allowed to be raised at this stage. Moreover, it is also significant to mention that this point was not raised even at the time of arguments before the trial Court since the same does not find mention in its judgment. Besides, in the present case, the plaintiff has produced his original books of account in Court and later on the transliterations of the relevant entries, Exhibits P. 55 to P. 63, were placed on the record. In the witness-box, as P.W. 6, he stated thus--

'Balbir, defendant No. 2, is my son and has had technical training in Machinery in the Government Technical Institute at Ludhiana. The defendants had no money to finance their partnership business and kept borrowing from me. They expanded the business in 1950-51 and incurred loans from me for purchase of machinery and erection of factory building. I have brought the books of account. The accounts are regular. P. 55 to P. 63 are correct transliterations from my books which are regularly kept. These books are audited by Sales-Tax and Income-tax Department. I made a number of payments to several persons on defendant's behalf and on their instructions. The receipts are P. 36 to P. 44 and P. 64 to P. 100. The instructions to make these payments are P. 2 to P. 31. Some of the payments were made by cheque. The defendants invested all the money in the partnership business.

Cross-examination. The receipts P. 36 to P. 44 and P. 63 to P. 100 were obtained by defendant No. 2. He used to make the payments. I do not remember what amounts were paid to Prithvi Raj, defendants' employee. Banta Singh is the real brother of defendant No. 3. Chanan Singh was some third party. The defendants started borrowing from me in 1944 though I do not remember the date or the amount. There was no writing.' (It may be mentioned that there are certain omissions and mistakes in the transliterations of the plaintiff's statement as printed on page 13 of the paper book and for this purpose his original statement should be seen).

In this connection, it is noteworthy that the defendant neither raised an objection with regard to the mode of proof of these documents nor did he cross-examine the witness with regard to the genuineness of the documents. Consequently, the statement of the plaintiff remained unchallenged and in the circumstances of this case I am of the view that the account books relied upon by the plaintiff had been duly proved.

(11) Learned counsel for the appellant then contended that even if the plaintiff's books of account had been duly proved, these alone were not sufficient to charge the appellant with liability and that each entry in the account books should have been proved. In this connection, he referred to the provisions of section 34 of the Indian Evidence Act 1872, and a number of authorities inter alia Banwari Lal v. Mt. Hussaini, AIR 1939 Lah 455, Ganeshi Lal v. Firm Mangat Ram Atma Ram, AIR 1924 Lah 540, and Abdul Haq v. Firm Shivji Ram Khem Chand, AIR 1922 Lah 338. It is true that account books alone are not sufficient to charge a person with liability but in the present case there is sufficient corroborative evidence in support of the account books. This corroborative evidence is found in the plaintiff's own statement as P.W. 6, the various receipts and vouchers, Exhibits P. 36 to P. 44 and P. 64 to P. 100, instructions (ruqqas) Exhibits P. 2 to P. 31, and the defendants' own account books so far as they are available. It was laid down in Kallu Mal Dhakkan Lal v. Bhawani Das Rekhab Das, AIR 1925 All 742, as under--

'Section 34 does not limit in any way at all the nature of the material upon which a Court may rely to support the statements in a book of account. Such material may take the shape of contemporary vouchers, receipts or other documentary evidence on of sworn oral testimony.'

It was also held in Firm Jodha Mal Budhu Mal v. Ditta, Air 1925 Lah 242(1), that the plaintiff's own statement on oath in support of entries could be support the entries in plaintiff's account books to fix the defendant with liability. It was again held in Suraj Prasad v. Mt. Makhna Devi, AIR 1946 All 127,--

'No doubt entries in the account books maintained by a creditor are not by themselves evidence to attach a liability to the debtor but they can be used to corroborate the evidence given by the creditor that the payments had been made and a decree can be passed on the basis of such corroborated evidence.'

In my opinion, where the transactions in dispute are numerous and extend over a large number of years, it is not necessary to prove each and every item in the account books but only the specific disputed entries are required to be proved. In such a case, the question to be determined is whether the account books are regularly kept and are genuine. In the present case, the plaintiff has made a definite statement that the

account books are regular and he was not cross-examined with regard to the genuineness of these account books, are already mentioned above. I would, therefore, hold that the plaintiffs' own statement on oath in support of the entries was sufficient to fix the appellants with liability.

(12) The learned counsel then referred to certain minor discrepancies in the plaintiff's account books. Learned counsel for the respondents explained those discrepancies. Moreover I find that these discrepancies very trivial and do not affect the genuineness of the account books.

(13) As regards point No. (ii), learned counsel for the appellants submitted that all the persons, who had received the money on the basis of these receipts and vouchers, had not been produced by the plaintiff. This objection was not raised before the trial Court. Moreover the trial Judge has believed these receipts and vouchers. After hearing the counsel for the parties. I find that there is no merit in this objection. If the appellant doubted the genuineness of any receipts or voucher, it was his duty to bring the person concerned to prove that the payment had not actually been made to him. It may be mentioned that the appellant produced D.W. 4, Devi Dyal, D.W. 6, Banta Singh, and D.W. 7, Ronaq Singh, but they had been disbelieved by the trial Court on the ground that two out of them, namely, D.W. 6 and D.W. 7 were not independent witnesses, as they were real brothers of Kaka Ram, appellant, and D.W. 4 had admitted having borrowed, a sum of Rs. 200/. Moreover, the trial Court has found that the payments of the bigger amounts to Tata Company at Calcutta for supply of pig iron, Karam Chand Thapar and Brothers for the supply of coal and Alfa Engineering Works for purchase of a lathe had been proved by Kaka Ram's own statement in the witness-box. This objection, therefore, fails.

(14) As regards point (iii), learned counsel for the appellants contended that the instructions (ruqqas) were signed only by Balbir Singh and not by Kaka Ram, appellant, and the persons who had received the money from the plaintiff-firm on the basis of these instructions had not been produced by the plaintiff. It is proved on the record that Balbir Singh, defendant No. 2, was literate and used to manage the affairs and maintain accounts of the partnership. Moreover, it was provided in the partnership-deed that defendant No. 2 was to keep accounts and look after the business. Therefore, in the ordinary course of things, the instructions had to be signed by him alone. As regards the other objection, the appellants should have produced the persons to show that they had no received the payments on the basis of these instructions. As already mentioned above, the persons whom he produced were disbelieved by the trial Court for very good reasons. There is, therefore, no force in these objections.

(15) As regards point (iv), the defendant's account books up to 31-3-1951 corroborate the plaintiff's account books. It has been found by the trial Court that the ledger account of the plaintiff-firm. Exhibit P. 102, and Exhibit P. 63, balance-sheet of the defendant-firm for the year 1950-51, tally with the amounts as given in the plaint as due from the defendant-firm at the end of March, 1951. It is significant to mention that the balance-sheet had been signed by Kaka Ram, appellant, also.

(16) As regards point (v), the trial Court, after going through the relevant evidence, came to the conclusion that the account books of the defendant-firm for the years 1951-52 and 1952-53 had been withheld by the appellant Kaka Ram which he had taken away during the illness of Balbir Singh, defendant No. 2, in November 1953. I have also gone through the evidence once again and find no reason to disagree with the finding of the trial Court on this point, Moreover, if these account books were with defendant No. 2, there was no reason for him to withhold them.

(17) As regards point (vi), learned counsel for the appellants contended that the certified copy of the income-tax return filed by the defendant-firm, Exhibit P. 52, which Rs. 500/- were stated to have been paid as interest to the plaintiff-firm, was inadmissible in evidence under section 54 of the Indian Income-tax Act, 1922, and relied on Anwar Ali v. Tafozal Ahmed, AIR 1925 Rang 84, and Devi datt Ramniranjandas v. Shriram Narayandas, AIR 1932 Bom, 291. In the first place, this objection was not taken before the trial Court and, secondly, there is no merit in this objection. The two authorities relied upon by the learned counsel for the appellants were considered and not followed in Venkataramana v. Varahalu, AIR 1940 Mad 308 wherein it was held as under:

'A Court is not precluded by section 54 from admitting in evidence a certified copy of an order of assessment which has been given to one of the partners by the income-tax authorities and which contains certain statements by other partners when those statements are otherwise relevant under the provisions of the Evidence Act. The provisions of section 26A indicate that it was not the policy of the Legislature to preclude from the cognizance of the Court an information regarding the aforesaid statements contained in the order of assessment.' Moreover, it was also held in Naim Singh v. Tikam Singh, (S) AIR 1955 All 388,

'Section 54, Income-tax Act, does not prohibit the assessee or assessees themselves to require the Income-tax Officer to furnish certified copies of the assessment order, or of any statement made therein in the proceedings held before him. Indeed, the Income-tax Manual clearly lays down that a copy of the assessment order will be supplied free of cost to the assessee, and that subsequent copies may be supplied on payment of charges. The returns are public documents within the meaning of S. 74, Evidence Act, and hence the certified copies of the income-tax return are admissible in evidence under section 76, Evidence Act.'

This contention of the learned counsel for the appellants is without any force.

(18) As regards point (vii), the trial Court believed the sworn testimony of the plaintiff in support of his claim. It is beyond dispute that the suit could be legally decreed on the basis of the plaintiff's account books corroborated as they were by the plaintiff's sworn testimony.

(19) As regards point (vii), it is proved on the record that Kaka Ram, appellant, had completely denied that the defendant-firm had ever borrowed any loan from the plaintiff-firm. The trial Court has found that the business of the defendant-firm expanded in the year 1950-51 and a sum of Rs. 20,000/- had been invested in it and it had gone unexplained wherefrom all this capital was forthcoming. Believing the statements of the plaintiff and defendant No. 2 as to the source of money necessary for the expansion of the business, it held that the appellant was a liar and decreed the plaintiff's suit. I find no reason to disagree with this finding of the trial Court. It is not possible for me to believe that the plaintiff had fabricated such a large number of documents beginning from the year 1949 only for the purpose of this case. Admittedly, the partners of the defendant firm had no funds of their own. There is no manner of doubt that a large sum of money was spent in expanding their business. The appellants have not given any explanation as to wherefrom this money was forthcoming. On the other hand, defendant No. 2 has stated on solemn affirmation that this money was borrowed from the plaintiff-firm. Under these circumstances, the trial Court was right in believing the plaintiff's version in this respect.

(20) As regards the second contention of the learned counsel for the appellants, it is true that defendant No. 2 was the son of Khazanchi Lal, one of the partners of the plaintiff-firm. It is, therefore, for this reason that one had to go through the entire evidence carefully with this background in mind. But there is nothing on the record to prove that defendant No. 2 has signed fictitious entries and acknowledged the debts of the plaintiff-firm in collusion with his father, Khazanchi Lal. In confirm the finding of the trial Court on this point.

(21) As regards contention No. 3, in the partnership-deed, Exhibit P. 1, it is proved that loans could be taken for the business of the defendant-firm. The account books of the defendant-firm up for the year 1950-51 showed that the defendant-firm had been taking loans from the plaintiff-firm. The instruction (ruqqas), referred to above, show that it was Balbir Singh who used to take the loans on behalf of the defendant-firm. Kaka Ram never objected to his taking these loans. It follows therefrom that Balbir Singh who was also managing the affairs of the partnership firm and maintaining its accounts, had the implied authority to borrow found that Balbir Singh was the managing partner of the defendant-firm and had the implied authority to incur loans for the business of the firm.

It is beyond dispute that a managing partner of a firm can borrow money for the purposes of the business of the firm and the other partners are bound by his acts and are responsible for the debts contracted by him (vide Gordhandas Chhotalal v. Raghuvirdasji, AIR 1932 Bom 539, Hari Shankar Misra v. Firm Bansilal Abirchand, Air 1946 Nag 266, and Maung Pe Thaung v. Toungoo Timber Co., AIR 1932 Rang 118. It was held in Chothu Bhagat Sewa Ram v. Balkishan Das Mohan Lal, 1932-33 Pun LR 411 that where a loan is contracted by a partner in the scope of the partnership business, the other partners are liable for it along with the contracting partners. Agreeing with the finding of the trial Court. I hold that Balbir Singh had the implied authority to incur for the defendant-firm.

(22) As regards the fourth contention of the learned counsel for the appellant, after hearing the learned counsel for the parties, I am of the view that this is not a case in which future interest from the date of the decree till the date of realisation should be awarded to the plaintiff, especially when a period of more than 6 years has elapsed since the passing of the decree. Moreover, the principal sum adjudged by the trial Court also includes an amount of Rs. 1,051/15/- as interest. In the circumstances of this case, it would be fair if the plaintiff is awarded interest at the rate of 6 per cent per annum on the principal sum adjudged by the trial Court namely, Rs. 17371/14/3 from the date of the suit till the date of the decree passed by the trial Court viz., 2-12-1954. The future interest from the date of the decree of the trial Court till the date of realisation should not be allowed.

(23) In view of what I have said above, I would partly accept this appeal and modify the decree passed by the trial Court to this extent that the plaintiff is granted a decree for the recovery of Rs. 17,371/14/3 with interest at the rate of 6 per cent per annum on this amount from the date of the suit till the date of the decree passed by the trial Court viz., 2-12-1954. In the circumstances of this case, however, I will have the parties to bear their own costs throughout.

Dua, J.

(24) I agree though, not without considerable hesitation. Section 34 Indian Evidence Act merely makes relevant the entries in books of account regularly kept in the course of business, and it further clearly lays down in the negative that such entries shall not alone be sufficient evidence to charge any person with liability. The regularity in the keeping of the account books makes the entries relevant which would otherwise be wholly irrelevant. But as my learned brother has based himself for his finding on the plaintiff's statement. I would agree that on the existing record the plaintiff has made out a case against the defendant.

(25) I also entertain some doubt about the straight-forwardness of Balbir Singh and Khazanchi Lal vis-a-vis their dealings with Kaka Ram, bus as it was for the appellant to show the conclusions of the Court below to be clearly erroneous and as he does not seem to have succeeded in the attempt, the conclusion of the Court below may not be liable to be reversed. In the result, I concur with my learned brother that this appeal fails and is dismissed as proposed by him.

(26) Order accordingly.


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