P.C. Mallick, J.
1. This notice has been taken out by the plaintiff for an order that the time to make an application to set aside or vary the report be extended and then to set aside or vary the said report. There is a further prayer that the decree passed on June 15, 1956 be recalled and the suit a proceeded with.
2. This suit was instituted by the plaintiff for dissolution of partnership.
3. On June 15, 1956 a decree was passed by consent whereby Mr. H.M. Majumdar was appointed valuer to assess the value of the plaintiff's share in the partnership and on the receipt of the share so assessed the plaintiff was to retire from the partnership. Pursuant to the said decree and order Mr. Majumdar filed his report on November 17. 1958.. The present application is directed against the said report.
4. Normally in order to discharge or vary a report beyond time the applicant is required to make two applications (1) for extension of time and (2) for varying or discharging the report. In the instant case these two have been combined in a single application. The petition is admittedly out of time. The reasons for not coming to Court within time are set out in paragraph 16 of the petition. The grounds on which the report is sought to he varied are set out in paragraph 13 of the petition. The petitioner has further prayed that the decree passed on June 15, 1956 be recalled. The ground in support of this prayer is that the petitioner consented to the decree on the representation made by the defendants that the genuine hooks of account would be tendered or produced before the valuer and this representation has proved to be false. The application is being contested by the defendants.
5. The first ground taken is that the Court has no power to extend the time once the time set out in Ch. 26 Rule 89 has expired. The report of Mr. Majumdar as stated before, was filed on November 17, 1958 and the present notice was taken out on July 29, 1959, that is long after 14 days had elapsed after the filing of the report. Mr. Mukherji the learned counsel appearing in support of the application, however, submitted that the Court has power to extend the time in exercise of the general power given to it by Rule 46 Ch. 38 of the Rules of this Court. On this point there is a decision of MeNair J-, in the case of Ranendra Nath v. Manicklal reported in : AIR1941Cal118 . In a considered judgment after reviewing the authorities the learned Judge recorded his considered opinion that the Court has power under Ch. 38 Rule 46 of this Court to extend time. Mr. S.B. Sinha (as he then was) as counsel appearing to oppose the application contended that the Court had no power to grant time after the expiry of 14 days when the report is confirmed by efflux ion of time. The contrary view has been expressed by Sarkar J., in his judgment dated March 1, 1957 in the unreported case of Mrs. Minal Bala Bonnerjee v. Keki Manekji Majoo. The decision of MeNair J., was cited and considered by Sarkar J., and His Lordship expressed his inability to accept the decision of MeNair J., as correct. In the opinion of Sarkar T., once the report has become final and binding by efflux ion of time under Ch. 26 Rule 89 the Court is powerless to extend the time and the general power given to the Court of extending time under Ch. 38 Rule 46 has no application once the report is confirmed. There is, therefore, a direct conflict of judicial opinion on this point --both of them of equal persuasive authority and none of them being a compelling decision on me.
6. The point involves consideration of Rules 89, 90, 91 and 92 of Chapter 26 of the Rules of this Court. The rules are hereunder set out:--
Rule 89. An application to discharge or vary a certificate or report shall be made by motion, upon notice to be given within fourteen days from the date of the filing thereof, or within such further time as may be obtained for that purpose but in that case the notice shall mention that it has been given with the leave of the Court. An application for further time may be made by petition in Chambers without notice.
Rule 90. A certificate or report of an officer, unless discharged or varied, will be taken as conclusive evidence of the facts found therein.
Rule 91. Where the facts are correctly stated in a certificate or report, questions of law may be raised at the hearing of the suit on further consideration. An application to discharge or vary a certificate or report as to such question need not be made,
Rule 92. A certificate or report after it has become binding will not be re-opened, except on the ground of fraud, surprise or mistake, or such , other special ground as may be allowed by the Court, on an application to the Court, by motion, which may be granted on such terms and conditions as to costs and otherwise as to the Court shall seem fit.
7. By Ch. 38 Rule 46 the Court is empowered to enlarge or abridge the time appointed by these Rules as the justice of the case may require and the application for such extension may be made even after the time has expired. This rule expressly enables a party to make an application for extension of time even after time has expired. Mr. Subimal Roy contended that Rule 92 of Chapter 26 expressly prohibits the report from being re-opened after it has become binding, that is, after 14 days, when the report is confirmed by efflux ion of time. In Mr. Roy's submission, this Rule prevents the application of the general power of the Court to extend time under Ch. 38 Rule 46. Here is a special provision in respect to report or certificate dealt with in Ch. 26 of the Rules and the provision of Ch. 38 Rule 46, which is general in character and which gives power to the Court to extend time is not applicable, so as to override the special provision of Chapter 26 Rule 92. Mr. Roy contends , that this was the point taken by Mr. S.B. Sinha as he then was, before MeNair, J., in the case reported above and remains unanswered in the judgment and that is the argument implicit in the decision of Sarkar, J., in the unreported decision noted above. When once the report has 'become binding', it 'cannot be reopened', except on grounds stated in Rule 92.
8. The fallacy of this argument is that it assumes that Rules 89 and 90 on the one hand and Rule 92 on the other deal with the same subject matter. In my judgment they deal with entirely different subject matters. The first' two Rules 89 and 90 deal with the question as to when the report will become binding while Rule 92 deals with the question as to when the report can be reopened after the report has become binding. The application to discharge or vary a report is to prevent a report from becoming binding, and not till the report becomes binding does Rule 92 of Ch. 26 come into play. In my judgment, after an application to discharge or vary a report has been dismissed, a further application to reopen a report lies on the ground of fraud, surprise or mistake. The report becomes binding either by effluxion of time or when an application to discharge or vary the report is dismissed. It is only when the report has become binding either by effluxion of time or after the dismissal of an application under Rule 89 that the question of reopening a report under Rule 92 arises. Rule 92, therefore, cannot be construed to be an express prohibition to make an application to extend time to discharge or vary a report under Ch. 28 Rule 89. Rule 92 deals with an entirely different matter, namely to reopen a report when it has become binding. It has nothing to do with an application wherein the only question is whether the report should be binding or not. In my judgment Ch. 26 Rule 92 is no impediment to the exercise of the general power of the Court to extend time under Ch. 38 Rule 46 to make an application to discharge or vary a report under Ch. 26 rule 89.
9. Another small point taken by Mr. Roy is that an application to extend time must be made separately before the Notice of Motion is taken out and the order granting leave must be expressly stated in the notice itself. That indeed is the procedure laid down by Sale, J., in the case of Lachmi-narain v. Baijnath, reported in ILR 24 Cal 437. In the instant case, this has not been done and both the prayers, namely, that time to make the application be extended and that the report be varied or discharged, are embodied in a single application. This is, however, a mere irregularity in procedure, not affecting the merits of the case and, in my judgment, the application is not liable to be dismissed on that 'ground. No argument was addressed on the point that the grounds alleged for extension of time are not sufficient.
10. The application, therefore, has got to be considered on merits.
11. Mr. Mazumdar has made his valuation on the basis of the books of account placed before him and other relevant papers. He also heard the parties. Further, he himself effected a valuation of the entire stock and did not accept the book value of the stock. In his report he found fault with the accounts and noted certain irregularities. Certain entries in the accounts have been noted to be arithmetically incorrect. There were other irregularities in the accounting. In particular, he noted that certain entries in the books showing that certain loans were contracted and subsequently repaid were not supported by documentary evidence and they may well represent clever manipulation of the accounts to show less profit. As I stated before, the valuer did not accept the book value of the stock but effected his own valuation of the stock existing at that date as appearing in the stock book. The entire stock was divided into three categories: (1) slocks that were marketable, (2) stocks damaged and broken and (3) stocks that were out of date. The value of the broken stock he has taken to be nothing. The valuation of the out-of-date stock has been taken to be a little more than what was alleged by the defendants. The defendants alleged it to be Rs. 3,000/, whereas the valuer has taken it to be Rs. 5.000/. It is to be noted that the defendants offered to make over to the plaintiff one-fourth, i.e. a little more than his due share of this portion of the stock, which, however, the plaintiff did not accept. So far as the remaining stock, that is, good marketable stock, is concerned' either the market value or the cost whichever is less, has been taken. In that way, he effected a valuation of the total stock. The goodwill is valued at one year's purchase of the average profits of the past three completed years immediately preceding the year 1362, B.S. The profit of the year has been taken to be not the profit shown in the books but the profit determined by the income-tax authorities and on the basis of which the income-tax was levied. The valuer by that method assessed the total value of the business, one-fifth of which he determined to be the value of the plaintiff's share. The value determined by the valuer is Rs. 38,395/1/7. Then the valuer records:
'This amount of Rs. 38,395/1/7 may be affected if
(1) unexplained loans of Rs. 37,000/- stated hereinbefore he treated as undisclosed income of business and in case share of which had not been paid to Sarat Babu even when such recorded payments were made;
(2) good-will value of Rs. 32, 755/- be increased or decreased on any other basis or consideration.'
12. Mr. Mukharji while challenging this report, very fairly conceded that this is the report of a very honest valuer. He recorded all the facts and even though some of the conclusions of the valuer are liable to be challenged as being contradicted by his own previous finding, nevertheless, it must be admitted that the report is of an honest and conscientious valuer. Mr. Mukharji commented that the valuer has himself recorded in his report that the books produced before him were full of defects and irregularities but at the same time he effected his valuation on the basis of the selfsame books. It is to be noted, however, that the valuer did not consider these books to be faked books, but that the books were not correct in certain respects. He himself attempted to correct the irregularities and mistakes and after making the said corrections he had effected a valuation on the basis of those hooks. It cannot, therefore, be said that the books of account placed before the valuer were not the genuine books of account of the business. A distinction should always be made between, faked books and books with irregularities and mistakes. A genuine book may be improperly or irregularly kept, but nevertheless it is genuine. Alter effecting the necessary corrections, it is possible to effect a valuation of a business of the books as corrected. In the instant case, that is what the valuer has done, In my judgment that is the correct thing to do. The books might have been defective but these books alone contained the materials on the basis of which valuation of the business could be made. I, therefore, do not agree with Mr. Mukharji that because the valuer has recorded that the books-contained certain irregularities and certain mistakes, therefore, the valuation effected on the basis of the same books is bound to be wrong.
13. A more substantial criticism of Mr. Mukherji is that the valuer has noted that loans to the extent of Rs. 37,000/- have not been supported by any document whatsoever. The valuer himself has-noted in his report that these entries unsupported by any document cannot be accepted as representing real transaction. If so they were made to disclose less profit than the partnership actually made during year. Even after recording this finding, the valuer effected the valuation on. the basis that they are good entrias. It is, however, to be noted that the valuer has expressly stated in his report that the valuation would have to be altered if these entries showing all told a loan of Rs. 37.000/- taken by the partnership to be not real loan. It will affect the valuation in two ways: (1) it will increase the value of plaintiffs share by one-fifth as his share of the accrued profit, (2) it will also have its effect on the 'goodwill' because 'goodwill' has been taken to be a year's purchase. Apparently, the learned valuer was apt to think that it was not within his province to determine whether loans were genuine loans. It is for the Court now to decide whether this loan of Rs. 37.000/- has been genuinely contracted by the partnership. I accept the contention of Mr. Mukharji that in the absence of any corroborative document, it must be held that the entries in the book showing loans of Rs. 3.000/-, Rs. 9,0007- and Rs. 25.000/-taken and repaid by the partnership are unreal en-tries. It was contended by the defendants that the Bank books will show that these sums were deposited with the bank. The bank books were, however, withheld by the defendants. Hut the fact that moneys were deposited in the bank does not prove that the money has been borrowed. In order to prove that a particular amount received by the partnership is a loan, there must be evidence to indicate; that the loan has been taken from a specified person and there must be a document evidencing the loan. There is no such evidence in this case. It has been argued by Mr. Roy that the burden of proof is on the plaintiff that the entries in the book are wrong. I do not think that the plaintiff is required to prove the negative. When the entries are challenged the defendants who were in management, are required to prove the correctness thereof by tendering the evidence in support of the entries. In any event when once evidence is led by the parties the burden of proof loses its importance. In the instant case no evidence has been tendered either before the valuer or before me in support of the entries which are nothing more, than corroborative evidence. The alleged loan of Rs. 25,000/- from one Biswanath Paul is not only made without any document in support of it, but the plaintiff in his affidavit has stated that the man answering the description in the entries has denied that he gave any loan to the partnership or that the same was repaid. This allegation has not been satisfactorily answered in the affidavit-in-reply. The answer is evasive and wholly unacceptable. I hold in favour of Mr. Mukharji that these three sums totalling Rs. 37,000/-should not be treated as loans but must be treated as profit. Tin's will affect the value of the partnership and the plaintiffs share in the partnership.
14. The valuer has stated that of the various methods of arriving at a valuation of the goodwill, the method adopted by him in this case is to take the average gross profit of a particular year to be the value of goodwill. On that basis, he has valued the goodwill at Rs. 32,420/- and each partner's share at Rs. 6,484/-. The valuer has noted that the value of the goodwill will be affected, if the profit is more than what is determined by him. As a result, therefore, of my finding that the sum of Rs. 37,000/- has not been borrowed by the partnership but really constituted profit, there, will be increase in the value of the business in two ways:
(1) The plaintiff will be entitled to one-fifth of this sum of Rs. 37,000/- being profit equally divisible amongst the five partners and
(2) by reason of the enhancement of the total profit, there will be an increase in the value of the goodwill as well.
15. Mr. Roy has submitted that the valuer has not taken the profit as ascertained from the book as the standard for valuation of the goodwill. He has taken the income as ascertained by Income-tax department as the basis. But even then had the valuer taken this Rs. 37,000/- as secret profit, his valuation would have been otherwise. In my judgment the value of the goodwill will have to be increased in Justice to the plaintiff. It has not been argued before me by Mr. Mukharji that some other principle should have been adopted by the valuer in determining the goodwill of the business. I cannot, therefore, say that the principle on which the valuation of the goodwill has been effected is not a proper principle.
16. Mr. Mukharji next contended that there was another account of the partnership with the Bengal Central Bank and though the account stood in the name of Sudhir it really belonged to the partnership. In support or this contention, he placed before the valuer a chit of paper which reads as follows :
'A/cSarat Paul -- Bengal A/c
Balance Brought forward from 1357B. S. due to
Paul & Bros
Gokul Chan-dra Paul
According to Mr. Mukharji's client, this is the account of the period and the writing has been made by Sudhir himself. The paper, however, has not been signed by any of the parties. The defendants contended that it is nothing more than a sketch paper and according to the defendants, this was totally irrelevant for the purpose of the valuation. It was urged on behalf or the plaintiff that this is a bit of evidence to show that the account is not the personal account of Sudhir but partnership account in which all the parties were equally interested and that is why so far as this account is concerned, known as the Bengal Account, the amounts to the credit of the different parties have been set out in the sheet. The valuer was apt to think that this is not sufficient evidence to establish that it was a partnership account. Before me, apart from this evidence and the affidavit of the parties, I have nothing to go upon. It is a case of oath against oath. On the evidence before me it is impossible to record a finding that the account in the name of Sudhir Kumar with the Bengal Central Bank is the partnership account, though a suspicion is roused because of the existence of the chit above referred to. Again, the plaintiff failed to give evidence of the amount lying in the bank at me relevant date on which he claimed a share. He could have obtained certified copy of the account and tendered the same as evidence either before the valuer or before me. It is, therefore, impossible to determine what would be the amount payable to the plaintiff on this score. I do not agree with Mr. Mukharji that the valuation should be modified on the footing that the account of Sudhir with the Bengal Central Bank was a partnership account.
17. The question now for me to decide is whether I should refer the matter back for a fresh valuation or effect the valuation myself on the materials before me. I do not see any useful purpose in directing a fresh valuation. As I stated bicorn, I do not agree with Mr. Mukharji that the books of account that were placed before the valuer to determine the value of the partnership are faked books or that apart from the defects noted by the valuer there are other defects in the books which ought to have been taken into account. That being so, it is useless to refer the matter once again to a valuer, which will involve further costs with no advantage to any of the parties including the plaintiff. I am, therefore, inclined to effect a valuation myself, on the basis of the materials that are available before me. The plaintiff, in any event, would be entitled to one-fifth of Rs. 37,000/-. Further, as I stated before, the value of the goodwill will he affected because of this fact. Taking everything into consideration, I think the interests of justice will be met if I raise the value of the plaintiff's share of the partnership business from Rs. 38,395/1/7 to Rs. 50.000/- and I make an order accordingly. The report of the valuer as varied is, therefore, confirmed.
18. The matter has now come up before me for further direction on report. I direct that on payment of the said sum of Rs. 50,000/- to the plaintiff, the plaintiff's interest in the business will cease. Costs of all the parties including the costs of this application will be paid out of the partnership. In making payment, if any amount has already been paid to the parties, that has not to be taken into account. This disposes of the present notice and the further direction on report.