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Kanhailal Vs. Kantilal and ors. - Court Judgment

LegalCrystal Citation
SubjectProperty
CourtRajasthan High Court
Decided On
Case NumberCivil Second Appeal No. 89 of 1962
Judge
Reported inAIR1968Raj278
ActsContract Act, 1872 - Sections 10 and 27; Evidence Act, 1872 - Sections 101 to 104 and 114
AppellantKanhailal
RespondentKantilal and ors.
Appellant Advocate D.P. Gupta, Adv.
Respondent Advocate N.M. Kashliwal, Adv.
DispositionAppeal accepted
Cases ReferredIn Cruttwell v. Lye
Excerpt:
.....that the defendants had entered a contract to pay rs. 700/- per year by way of good-will, and that gulabchand was a tenant of the premises in question and was doing jewellery business in the premises sublet to the defendants. 700/- per year were settled in lieu of good-will; 700/- on account of good-will had been arrived at between the parties. 1872. 7. the crucial point that is to be determined in this case is whether or not the parties entered into a contract for payment of good-will money to the plaintiff. 700/- as his premises were good for the business. all the articles including the safe, takiya',gaddi',and al-mirah were transferred to the defendants after having obtained a list thereof. a practice has grown up in indian procedure of those in possession of important documents or..........hence this appeal. 5. it mav be stated here inter alia that in the course of trial, plaintiff gulabchand expired and his grandson kanhailal was brought on record as his legal representative. 6. the main contention of learned counsel for the appellant is that the lower court was wrong in not decreeing the plaintiff's suit for good-will amount to the tune of rs 2100/- his argument is that it has been amply proved that the defendants had entered a contract to pay rs. 700/- per year by way of good-will, and that gulabchand was a tenant of the premises in question and was doing jewellery business in the premises sublet to the defendants. he has also argued that the tower court grossly erred in defeating the plaintiff's claim merely because the witness described the amount in question as.....
Judgment:

L.S. Mehta, J.

1. This appeal is taken by the plaintiff Kanhailal against the judgment of learned District Judge, Jaipur District, dated August 19, 1961, dismissing the plaintiff's suit for a sum of Rs. 2644/12/6 (including Rs. 2100/- on account of good-will for 3 years at the rate of Rs. 700 per year, arrears Of rent and municipal charges amounting to Rs. 543/15/- from 1-1-51 to 1-10-32 and Re. 0-13-6 towards notice charges).

2. Plaintiff Gulab Chand, it appears, brought an action in the court of learned District Judge, Jaipur City, on May 28, 1953, against Kantilal and Kusumchand proprietors of the firm Kantilal Chaganlal, with the allegation that he had obtained rooms Nos. 26 and 28 in the second storey, building No. 18-20-26 from Amba Laxmi Narain Gundeli, on a monthly rental of Rs. 35/-, besides payment of municipal tax amounting to Rs. 6/57-per half year. These rooms were situate in a commercial locality. In Smt. year 2001. these rooms were sublet to the defendants firm on the condition that, besides municipal tax and the rent payable to the landlord, the defendants would pay Rs. 700/- per year to the plaintiff on account of good-will. Up-to Smt. year 2004 and for a part of Smt. year 2005, the good-will money had been paid by the defendants to the plaintiff. Thereafter the defendants ceased to make payment of the contractual amount including the rent and the municipal tax from 1-7-51 to 1-10-52. Thus, the defendants were liable to pay Rs. 2100/- on account of good-will and Rs. 543/15/- by way of rent and municipal tax, besides Re. 0.13.6 as notice expenses. The plaintiff, in the end, prayed that a decree for Rs. 2644/12/6 be passed in his favour against the defendants.

3. In the written statement the defendants admitted that they had obtained from the plaintiff two rooms on a monthly rental of Rs. 35/- in Smt. year 2000. No agreement had been arrived at between the parties about the payment of any good-will money. The landlord stopped charging the rent from July, 1951. A suit for ejectment was filed against the defendants in Bombay and that the suit was not maintainable in the Rajas-than courts.

4. The trial court framed 9 issues. The plaintiff examined 9 witnesses. In his defence the defendant Kantilal produced himself into the witness box and closed the evidence. The trial court decreed the plaintiff's suit on May 23, 1956. An appeal was filed in the Court of District Judge, Jaipur District. Mr. C. Jacob, the then District Judge, Jaipur District, held that the Civil Judge, at Jaipur had no jurisdiction to try the case by virtue of Section 28, Bombay Rent Control Act, 1947, and, therefore, the plaint should be returned to the plaintiff for presentation to the proper court. The matter then came up before this court. It was, then, held that the provisions of the Bombay Rent Control Act, 1947, had a limited applicability and could not be invoked to oust the jurisdiction of the Rajasthan Court, derived under Section 20, Civil Procedure Code. Consequently, the order of the District Judge. Jaipur District, was set aside and the case was remitted to the court of District Judge. Jaipur District, with the direction that the appeal should be heard and disposed of on merits. In pursuance of the above order, the District Judge, Jaipur District, heard the parties and dismissed the plaintiff's suit on August 29, 1961, for payment of Rs. 2100/- on account of good-will and passed a decree for Rs. 544-12-6, with proportionate costs throughout, on account of rent, municipal charges and notice expenses. Hence this appeal.

5. It mav be stated here inter alia that in the course of trial, plaintiff Gulabchand expired and his grandson Kanhailal was brought on record as his legal representative.

6. The main contention of learned counsel for the appellant is that the lower court was wrong in not decreeing the plaintiff's suit for good-will amount to the tune of Rs 2100/- His argument is that it has been amply proved that the defendants had entered a contract to pay Rs. 700/- per year by way of good-will, and that Gulabchand was a tenant of the premises in question and was doing jewellery business in the premises sublet to the defendants. He has also argued that the tower court grossly erred in defeating the plaintiff's claim merely because the witness described the amount in question as 'Aadat'. It has also been argued that the first appellate court erred in placing no reliance on the plaintiff's account books and in holding that the account books produced by the plaintiff, containing the entries relating to the payment of the amount in dispute for a certain period were not maintained in the ordinary course of business. According to learned counsel there is no variance between the pleading and the proof. As against this, learned counsel for the side opposite has contended that there is a marked variance between the pleadings and the proof. In the plaint it is given that Rs. 700/- per year were settled in lieu of good-will; whereas in the statements of plaintiff's witnesses, it is mentioned that Rs. 700/- per year were settled as 'Aadat' amount.

Learned counsel for the defendants further urged that there is no evidence on the record to prove that a contract, relating to Rs. 700/- on account of good-will had been arrived at between the parties. The business conducted by the defendants was run not in the plaintiff's name, but in the name of Kantilal Chaganlal. It has also been argued that the plaintiff has not produced any evidence to show that the business run by the defendants was identical in nature with that of the plaintiff and that after the subletting of the shops the plaintiff did not run any jewellery business in any other part of Bombay. No restraint in trade was put on the business of Gulabchand by the defendants, which is permissible by virtue of Section 27 of the Indian Contract Act. 1872.

7. The crucial point that is to be determined in this case is whether or not the parties entered into a contract for payment of good-will money to the plaintiff. The trial court decided this point in affirmative. The first appellate court answered this aspect of the matter in negative. There is no written contract on the point in issue. The most important oral evidence in the ca.se is that of Gulabchand. P. W. 5. He has stated on oath that the defendants promised to pay him Rs. 700/- as his premises were good for the business. The witness has further saidthat he used to carry on business in the name of Gulabchand Malpani. which had a goodwill. Other persons also took advantage of the location of his premises and paid him2% on account of 'Aadat'. The witness used to carry on jewellery business in the premises in question. All the articles including the safe, 'Takiya', 'Gaddi', and Al-mirah were transferred to the defendants after having obtained a list thereof. The statement of Gulabchand is supported by P. W. 2 Premchand, who has said that Chaganlal had told him that the premises had been taken over by him, Premchand has further pointed out that the locality, wherein these premises are situate, is famous for the business of jewellery.

Anandilal, P. W. 6, lends support to the deposition of Gulab Chand, P. W. 5. He has deposed that he conducted business in the premises in question at Bombay and sold goods in the 'Aadat' of Gulab Chand in Smt. year 1980-1990. He wanted to take these premises from Gulab Chand in Smt. year 2001 for a sum of Rs. 500/- per year, excluding rent, but Gulab Chand refused to sublet them to him, as he had already allotted them to Chagan Bhai for Rs. 700/- per year. Bal Kishan P. W. 8, son-in-law of Gulab Chand, states on oath that the premises had been sublet by Gulab Chand to the defendants in his presence for Rs. 700/- as 'Aadat'. He wanted to occupy these premises for Rs. 2000/- to Rs. 3000/- on account of 'pagari; but Gulab Chand refused to allot the same to him. P. W. 9 Ram Sahai's testimony is very material in this case. He was once plaintiff's Munim. He deposes that the plaintiff's Khatas, pertaining to Smt. Year 2001 to 2004, are in his handwriting. They are marked Exs. 1 to 4. In the Khata Ex. 5 of Smt. year 2007, there is an entry of Rs. 1880/13/- which is in his handwriting. Similarly, entries in the Kacchi Rokars Exs. 20, 19 and 23 are in his handwriting. Likewise, in the Nakal Bahi Ex. 6 there is an entry of Rs 880/-, in Ex. 7 there is an entry of Rs. 700/-, and in Ex, 11 there is an entry of Rs. 1400/-, in his handwriting. The witness has verified that in Ex. 9 there is in his handwriting an entry of Rs. 700/-. The witness has also verified certain entries made by plaintiff's Munim Bal Mukand, and Munim Gyarsilal, who are dead. The trial court has relied upon the testimony of this witness. There is no reason why that discretion should be interfered with by the appellate court. The defendant Kantilal has admitted in his statement that he carried on jewellery business. He further admits that he maintains regular accounts. He also states that his business is run in the name of Kusumchand Chaganlal.

8. A contract of this type need not always be express, but there may be an oral contract or a contract may be implied by law which may be inferred from the acceptance of payment and other circumstances; vide Ram Kumar Das v. Jagdish Chander, AIR 1952 SC 23. It may be pointed out thatthe defendants admittedly possess 'Bahis'. To refute the plea taken by the plaintiff, the respondents could have produced them. The defendants cannot be heard to say, relying on the abstract doctrine of onus of proof, that it was no part of their dutv to produce them, unless they were called upon to do so. In this connection a reference is made to Murugesam Pillai v. Gnana Sambandha Pandara Sannadhi, AIR 1917 PC 6, wherein, their Lordships of the Privy Council observed:

'A practice has grown up in Indian procedure of those in possession of important documents or information lying by, trusting to the abstract doctrine of the onus of proof, and failing, accordingly, to furnish to the Courts the best material for its decision. With regard to third parties this may be right enough -- they have no responsibility for the conduct of the suit; but with regard to the parties to the suit it is in their Lordships' opinion an inversion of sound practice for those desiring to rely upon a certain state of facts to withhold from the court the written evidence in their possession which would throw light upon the propo-sition.'

The above authority was reiterated in Rameshwar Singh v. Bajitlal Pathak, AIR 1929 PC 95. The aforesaid two Privy Council authorities were approved by their Lordships of the Supreme Court in Hiralal v. Badkulal, AIR 1953 SC 225, and it was held that the defendant denying the correctness of the amount found due could have produced his own account books before the court. In the present case, however, the defendants failed to produce their account books, although they are admittedly in possession of them.

9. From the evidence discussed above, it is clear that the defendants agreed to pay Rs. 700/- to the plaintiff and this amount was nothing else than the good-will of the business. As Gulab Chand's eyesight had become weak, he stopped doing the business. The argument that Gulab Chand might have started identical business. in some other locality of Bombay is thus negatived. Apart from the furniture etc., Gulab Chand, it appears, transferred the good-will of his premises to the defendant. Mr. Kashliwal, for the respondents, has urged that no good-will was assigned by the plaintiff and that the plaintiff transferred only the tenancy and not the good-will. I am unable to accept this argument on the facts and law in the present case. The relevant facts on the point are:

1. that the plaintiff's right to occupy the premises is based at least on a monthly tenancy;

2. that the business run by both the parties was the business of jewellery;

3. that the premises are situate in the well-known and famous business locality called Mumba Devi Road.

10. In this context, I am of opinion that good-will in this case must have necessarily passed to the defendants.

11. The first appellate court has confused itself by saying that there is a variance between the pleadings and the proof, In the pleadings the word 'good-will' has been specifically used. In the proof the word 'Aadat' has been used. The plaintiff's witnesses have explained that the plaintiff used to carry on business of 'Aadat' in jewellery and when those premises, where that business used to run, had been sub-let to the defendants, the defendants promised to pay to the plaintiff good-will amount on account of 'Aadat'. It is in this context that the statements of the plaintiff's witnesses have to be interpreted. This aspect of the matter has been fully explained by Gulab Chand by saying that the defendants promised to pay the money to him as his premises were situated in a good locality and that he had a good-will therein. It is also in the evidence, it may be reiterated, that the plaintiff transferred the entire lot of furniture etc., to the defendants. Thus, I am satisfied that the good-will of the business of the plaintiff was transferred and that the transfer of the good-will included the monthly tenancy right or whatsoever right of occupation which the plaintiff had had in the said premises.

To transfer ordinary dealer's business as a going concern and then to say that it does not include the very basic right to occupy the premises from where the business is carried on will be to dislocate and destroy the business and not to sell it as a going concern. In the present case the business cannot go on except from the premises in question and it is a business where the locality is an unavoidable part of the goodwill transferred. I am further fortified in my opinion that the transfer of good-will included in this case the tenancy right by reason of the fact that the good-will and the rent amount had actually been paid by the defendants for a certain period.

12. I now deal with the legal aspect of the matter. The first appellate court hai held that good-will is a commercial term signifying the value of the business having been increased or preserved in the shape in the continuity of undertaking of right to use the old name. It has further held that it has not been shown that the defendants ever conducted the business of Gulab Chand Malpani, in which name the plaintiff carried on his own business. This finding is obviously erroneous. Good-will of a business depends upon a variety of circumstances or a combination of them. The location, service, the standing of business, the honesty of those who run it, and the lack of competition and many other factors go individually or together to make up the good-will. It) has been observed by their Lordships of the Supreme Court in S. C. Cambatta & Co. v. Commissioner of Excess Profits Tax, Bombay, AIR 1961 SC 1010 that locality always plays an important part.

In Dulaldas Mullick v. Ganesh Das Damani, AIR 1957 Cal 280, Hon'ble Mr. Jus-tice P. B. Mukharji has pointed out that to sell the ordinary dealer's business as a going concern and then to say that it did not include the very basic right to occupy the shop room from where the business was carried on would amount to dislocating or destroying the business. It has further been laid down that a locality plays a significant part in determining good-will in an Australian case reported in Daniell v. Federal Commissioner of Taxation, (1928) 42 CLR 296, it is given at pages 302 and 303 thatgood-will is not separable from the premises which the business is carried on and that prima facie it should be treated as attached to the premises. In A. Trego v. G. S. Hunt, 1896 AC 7 their Lordships of the Privy Council quoted with approval at page 17 the remarks made by Wood G. C. in Churton v. Douglas, (1859-28 LJ Ch. 841) and held that good-will must mean every advantage, every positive advantage, as contrasted with the negative advantage of the late partner not carrying on the business himself, that has been acquired by the old firm in carrying on its business whether connected with the premises in which the business was previously carried on, or with the name of the late firm or with any other matter carrying with it the benefit of the business.

In another Privy Council case reported in the Commissioners of Inland Revenue v. Muller & Co'.s Margarine, Ltd., 1901 AC 217, it was observed that if there is one attribute common to all cases of good-will, it is the attribute of locality, for good-will has no independent existence. There is another important case on the point, reported in Federal Commissioner of Taxation and Wil-liamson, (1943) 67 CLR 561. In that case it has been emphasised that a particular good-will may be local or personal or partly one and partly the other. It is local to the extent to which the trade connection depends on the place in which the business is carried on. It is personal to the extent to which it is the personality, ability and good reputation of the trader that attract the trade and not the place where it is carried on. In Cruttwell v. Lye, (1810) 34 ER 129 House of Lords have categorically pointed out that good-will is nothing more than the probability that the old customers will resort to the old place. Lindley on the law of partnership XIIth Edn., has offered his comment on goodwill at page 467 and has said that good-will may have no value except in connection with a particular house and may be so inseparably connected with it as to pass with it under e will or deed without being specially mentioned. In Halsbury's Laws of England, 3rd Edn., Vol. XXXIII page 319 it is given that a good-will attached to the premises passed with them unless expressly excluded.

13. In the face of the above authorities, learned counsel for the side opposite took a wholly untenable attitude and there is no substance whatsoever in his arguments. Keeping in view the facts and the circumstances of this case, I am of the opinion that the good-will of the business of GulabchandMalpani on the Mamba Devi Road, as a going concern, including the monthly tenancy rights of the premises, was in fact transferred to the defendants in this particular case. The type of business and the type of customers which such a business is inherently likely to attract as well as the surrounding circumstances of the present case determine the nature of good-will transferred in favour of the defendants. In other words, the business of jewellery was being carried on by the plaintiff for a considerable period in the particular house in the past and that advantage accrued to the defendants together with the transfer of the premises. From the above, it is manifest that the first appellate court did not consider the matter of goodwill in a broader way.

14. In the result, I accept this appeal with costs throughout, set aside the judgment of the first appellate court and restore that of the trial court.


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