ORDER
A.B. Palkar, J.
1. This is a suit for recovery of money by plaintiff Bank.
2. Defendant No. 1 is a partnership firm carrying on business of manufacturing brushes. Defendant Nos. 2 to 5 are partners of the firm and defendant No. 6 is the guarantor.
3. Defendant No. 1 applied for grant of credit facilities and was given cash credit facility against hypothecation to the extent of Rs. 75,000/- and cash
credit against book debts to the tune of Rs. 50,000/- on execution of necessary document. Defendants No. 2 to 5 as partners of defendant No. 1 executed documents like demand promissory note, hypothecation deed, letter of continuing security in respect of both the facilities; whereas defendant No. 6 executed guarantee deed for the aforesaid facilities granted to the defendant Nos. 1 to 5. On execution of all the necessary documents, defendants opened a current account. Defendants converted their account to cash credit. The facility was thereafter enjoyed by the defendants and from time to time amounts were withdrawn. Plaintiff bank maintained the account of the defendants. The amounts were withdrawn by cheques issued under the signatures of two partners as required by the bank. The defendants agreed to pay interest at 4 1/2% over bank rate subject to minimum of 13 1/2% calculated on daily balance with quarterly rests. When the defendants were found irregular in making repayment and huge amount was due from them, the plaintiffs called upon the defendants to clear the dues by letter dated 27-10-1979. Defendant No. 3 by letter dated 2-11-1979 denied to have availed of or enjoyed any facility or even have opened an account with the bank. Similar was reply of defendant No. 4. However, there was no reply from defendant No. 2. Defendant No. 6 was also called upon to make payment by letter of 27-10-1979. Defendant No. 6 also did not bother to make any payment and therefore advocate’s notice was issued to all the defendants calling upon them to pay sum of Rs. 98,313.83 against cash credit hypothecation and against cash credit (book debts) amount of Rs. 57,573.15 along with interest as per the agreement. Defendant No. 3, 4 and 5 replied through their advocate denied to have obtained any credit facility and defendant No. 6 also denied having given security for loan advanced to defendant Nos. 1 to 5 and therefore plaintiffs had no alternative, than to approach this Court.
4. Defendant Nos. 1, 3 and 5 filed written statement and denied to have availed of any facility and contended that defendant No. 2 who was in charge of the entire business of the partnership firm joined hands with Branch Manager of plaintiff bank and played fraud on the other defendants. The defendant No. 2 is reported missing. He is not tracable. Defendant Nos. 1, 3 and 5 are not liable to make any payment to the plaintiff bank.
5. After the defendant No. 2 was found missing, it was revealed by the tax consultants of the defendants that some of the copies of the documents were lying with him. Defendant (No. 1) firm was registered with defendant Nos. 2 to 5 as partners. It was partnership at will. Clause 7 of the partnership deed requires that the bank account to be operated under signature of any two partners. In view of this defendant No. 2 could not have opened an account and could not have operated the same under his own signature. The other partners were unhappy with defendant No. 2 and therefore called upon him to dissolve the firm and defendant No. 2 agreed by letter dated 21-6-1977 that he would pay Rs. 71,194/- to each of three partners and take over entire liability of the firm.
6. Acting on this letter, defendant No. 2 got the sales tax certificate changed accordingly. He also obtained a new registration certificate under the Shops and Establishment Act from Municipal Corporation. It is clear from the correspondence that even though defendant No. 2 was not complying with the requirements of plaintiff bank, the limit of facility was enhanced and thus the defendant No. 2, bank officers were hand in glove in cheating the other defendants. Defendant No. 2 is missing from 21-4-1979. He had informed the plaintiff bank that the firm was dissolved on 1-1-1978. Defendants came to know about the fact that the defendant No. 2 was missing when the workmen of the factory informed them and thereafter a news item was published in the newspaper with photographs showing him as a missing person. The defendants have not signed any documents in favour of plaintiff bank and as such the suit is liable to be dismissed. Liability, if any is of defendant No. 1. Defendant No. 4 has not filed written statement.
7. Although defendant No. 6 has filed a separate written statement, his defence is also similar. He denied to have executed any document of guarantee in favour of the plaintiff or to have given security relating to loan advance to defendant Nos. 1 to 5. He has however stated in the written statement that he was asked by defendant No. 2 to accompany him to the office of the Bank of Baroda, Bhandup branch in August 1978 by giving him to understand that he-defendant No. 2 wanted defendant No. 6 to sign as a witness to the signatures of defendant No. 2 on some papers for opening an account with the Bank. On visiting the bank, some conversation took place between the defendant No. 2 and the Bank Manager and as defendant No. 6 did not know English, he did not understand what it was and what was its purpose. Thereupon, the Bank Manager produced certain papers and called upon the defendant No. 6 to sign informing him that the papers related to the bank account opened by defendant No. 2. Relying on this representation, defendant No. 6 signed the papers. Thus, defendant No. 2 and the Bank Manager have defrauded defendant No. 6. Defendant No. 6 signed blank printed forms on which nothing was written at the time of obtaining his signature and as such he is not liable to pay any sum due from defendant Nos. 1 to 5.
8. Defendant No. 4 was reported to have died on 13-12-1996. Justice Vaidyanathan passed an order on 13-12-1996 exempting the plaintiff from bringing heirs of defendant No. 4 on record under Order 22, Rule 4(5) of the Code of Civil Procedure and as such name of defendant No. 4 still appears on record, although he is no more.
9. On the pleadings indicated above, issues were framed by Justice Lodha on 1-7-1999, which are reproduced below with my findings thereon recorded against each of them and the reasons for the same are stated in the paragraphs that follows :
ISSUES
FINDING
1)
Whether the plaintiffs prove that the plaintiffs had advanced moneys to the extent of Rs. 75,000/- under cash credit (hypothecation facility) to the defendants ?
Yes.
2)
Whether the plaintiffs prove that the defendants had executed security documents copies whereof are annexed as Exhibits ‘A’ to ‘D’ to the plaint ?
Yes.
3)
Whether the plaintiffs prove that the plaintiffs had advanced loan to the defendants under cash credit (hypothecation of book debts) facility, to the extent of Rs. 50.000/- ?
Yes.
4)
Whether the plaintiffs prove that the defendants had executed the security documents copies whereof are annexed and marked Exhibit ‘E’ to ‘H’ to the plaint ?
Yes.
5)
Whether the plaintiffs prove -that the defendant No. 6 has executed two separate letters of guarantee both dated 26th September, 1997 Exhibits ‘I’ and ‘J’ to the plaint ?
Yes.
6)
Whether the plaintiffs prove that the defendants are jointly and severally bound and liable to pay to the plaintiffs the sum of Rs. 1,01,750.73 with interest on a sum of Rs. 98,509.08 at the rate of 4.50% over the Reserve Bank of India rate with the minimum 13% per annum with quarterly rests from the date of suit till payment and/or realisation as per particulars of claim Exhibit ‘U’ to the plaint ?
Yes.
7)
Whether the plaintiffs prove that there is due and payable by the defendants jointly and severally a sum of Rs. 59,585,865 as per particulars of claim Exhibit ‘V to the plaint with further interest on a sum of Rs. 57,687.50 at the rate of 4.50% over the Reserve Bank of India rate with a minimum 13% per annum with quarterly rests from the date of the suit till payment and/ or realisation ?
Yes.
8)
Whether the defendants prove that the defendant No. 2 had forged the signatures of defendant Nos. 1, 3 and 5 ?
No.
9)
Whether the defendants prove that defendant No, 2 had forged the signatures of defendant Nos. 1, 3 and 5 ?
No.
10)
Whether the defendant Nos. 1, 3 and 5 prove that they are not liable to pay any amount to the plaintiffs under cash credit (hypothecation of goods) and cash credit (hypothecation of book debts) facility account ?
No.
11)
Whether the defendants prove that the plaintiffs Branch Manager and the second defendant colluded to defraud the other defendants ?
No.
12)
What reliefs & orders?
As per the final order.
REASONS
10. ISSUE NOS. 1 TO 12 :
From the aforesaid issues, it is clear that all the issues are interconnected. The plaintiffs’ case that the defendant Nos. 1 to 5 applied for loan, executed documents and availed of the loan facility as extended by the bank is denied by the defendants with a further assertion that they have not signed any documents for availing the aforesaid facility and it was defendant No. 2 one of the partners of the firm who was acting for and on behalf of the firm throughout and who joined hands with the then Branch Manager of the bank and practised fraud and even went to the extent of forging signatures of defendant Nos. 1 to 5. The only distinction in the defence of these defendants and defendant No. 6 is that defendant No. 6 admitted to have signed documents when he was under an impression that he is only a witness to the signature of defendant No. 2 for opening account. Defendant No. 6 did not contest the suit even after filing contatious written statement. However, the suit was hotly contested by defendant Nos. 1, 3 and 5.
11. Plaintiff bank examined Manager of Bhandup Branch who was admittedly not the Manager at the time of execution of the documents and advance of loan to the defendants. He has however stated the facts from record. The then Manager of the Bank Mr. Deshpande has expired. All the documents are proved by the plaintiffs bank through the evidence of the present Manager. Defendant 1 to 3 led evidence of one Fakruddin Abdiali Anajwala their sales tax consultant and also examined defendant No. 3 and 5.
12. It is not in dispute that defendant No. 1 was a registered partnership firm of which defendant No. 1 to 4 were at all material times the partners. The partnership has not been dissolved till this date although at one time the partners had agreed to dissolve the partnership firm on certain sum of money being paid by defendant No. 2 to the other partners. It is also an admitted position that defendant No. 2 who was looking after the business of the firm used to look into the accounts and transactions with the bank. The other defendants were not taking active part either in business or in any other transaction of the firm. It is in this background that we have to consider the evidence on record. Plaintiff bank has not produced the entire statement of account and has relied only on the last portion of the accounts maintained
by the bank. Even after giving time to produce the account, the plaintiffs bank did not produce the entire extracts. The extract produced is from 1979 onwards and it was admitted by P. W. 1 the present Manager Mangesh Balaram Badle that the account books and record is not tracable. Therefore, the original account opening form as given in 1974 is not available. When suit is filed the bank is required to preserve the concerned account books and the entire record pertaining to the transaction, the witness did not dispute this fact and stated that the documents are not tracable and as such we have to decide on the basis of the available documents and the evidence adduced. Taking into consideration the nature of the defence, it is clear that it is for the defendants to prove firstly that fraud was practised by defendant No. 2 and Branch Manager and by joining hands and that the signatures of the defendants on various documents are forged. In any case, it is for the defendants to establish that number of documents produced in Court do not bear their signatures. If the defendants fail to prove this, then the onus which shifts on them on the basis of the plaintiffs evidence and the documents cannot be said to have been discharged by the defendants and the plaintiffs would be entitled to a decree. It is true that the original application for credit facility is not signed by all the defendants. It is signed only by defendant No. 2. This application is at Exhibit ‘C’. Letters for request for facility is also not signed by other defendants. It is signed by defendant No. 2. (Exhibits D-l and D-2). However, the material document namely the documents of promissory note, letter of continuing security, letter of partnership, letter of hypothecation have been signed by all the partners in respect of two distinct facilities availed by the defendants. These documents are Exhibits E-1 to E-4 and F-1 to F-5. They have also signed power of attorney Exhibit ‘G’, which is countersigned by Special Executive Magistrate. The defendants for the first time came up with the story of denying signatures on various documents when they received demand letter from the plaintiffs bank. Letter dated 23-10-1979 was addressed to the defendants (Exhibit N-1 and N-2) and even after the suit notice, similar reply was sent by the defendants. It is also not in dispute at this stage that defendant No. 2 is reported missing since before the filing of the suit and according to the defendants sometime from the year 1977. If there was some substance in the contentions of the defendants that the documents produced in Court do not bear their signatures then the defence could have been favourably considered. However, on scrutiny of the evidence, it becomes abundantly clear that the defendants have come up with false defence only in order to deny their liability and with that intention the two defendants who have entered the witness box have gone to the extent of denying their signatures. Even without verifying the documents i.e. to say even without taking inspection of the documents and finding out whether the signatures are their signatures. Defendant No. 6 does not dispute the fact of having visited the office of Bhandup Branch and having signed the documents and claims to have signed the same on being told by defendant No. 2 and the Manager that it was for the purpose of opening account of defendant No. 2 with the bank. Defendant Nos. 1, 3 and 5 have however asserted not to have visited the bank at any time and not to have signed any documents and as such claim the documents to be forged by defendant No. 2 in collusion with the then Branch Manager.
13. Reference to the evidence of two defendants who have entered the witness box would be sufficient to show how their evidence is totally unreliable. Defendant No. 5 Radhaben Ganatra, who is a house wife aged about 70 years entered the witness box (D. W. 2). Her statement that she is not personally aware of the transaction can be accepted without any hitch because being house wife she is may not be personally conversant with the facts. When she received bank’s notice, she handed it over to her brother in law. She merely stated that she has not signed any documents pertaining to the transaction and in cross-examination when she was confronted with the written statement, she even denied to have signed the written statement. She was told that it is her written statement filed in Court, even thereafter she maintained that she has not signed on it. It is obvious that having decided to deny the signatures on all the papers shown to her, she went to the extent of saying that even the written statement is not signed by her. She has signed in English and on the documents referred to earlier even her name is written in the same hand as her signature. She however stated in cross examination that she cannot read and write English but whatever documents of the firm were brought by her brother in law, she used to sign them. She admitted to have visited Union Bank once where the firm had its account earlier and even admitted that on instructions from her brother in law she used to sign cheques. Defendant No. 3 Mansukhlal Ganatra (D.W. 3) who is a businessman and is expected to be aware of the business transactions and dealings has stated that the business of his firm was being looked after by defendant No. 2 and since he was not giving proper accounts, other partners told him that they do not want to continue the business whereupon defendant No. 2 agreed to take over the business with all the liability. Therefore, on 21-6-1977 Mansukhlal (Witness), Varma and Mr. Dholkawala went to the office of the tax consultant (D.W. 1) and there it was agreed that Verma will pay Rs. 71,195 to each of them and will take over the business. It is the case of the defendants that this amount was never paid to them even after demand. However, the defendants have produced carbon copy of the letter written by Mr. Verma wherein he agreed to make them the payment of the aforesaid amount, which shows that after payment, the partnership was to be dissolved. Therefore, even till this date the partnership is not dissolved. Even otherwise the loan was taken when the firm was actually carrying on business and if the act of any of the partners can be said to be an act of the firm then it is binding on the firm and all partners. D.W. 2 stated that after he received message that defendant No. 2 has not attended the factory for 3-4 days, he visited the factory and found it closed. He, however wants us to believe that thereafter neither he nor any of the partners took any steps even to search the office and factory premises to find out the papers and account books or to take charge of the property of the firm including that of the premises and they were satisfied merely by giving a notice for publication that Mr. Verma is missing and by lodging police complaint. Lodging of police complaint is also doubtful because the copy produced in the Court does not bear any endorsement of any Police Officer and in fact it is admitted by this witness that the date on the copy is in the handwriting of the witness. Even if it is accepted that such a complaint was given it has no effect whatsoever so far as the claim in the suit is concerned. In cross examination he stated that he does not know even the
number of workers who used to work in the factory; when he visited the factory once, he found 7-8 persons working. He has not read any correspondence of the firm. The factory premises were taken on lease but he does not know the name of the landlord and although he claims that he had contributed to the business of the firm he has not stated what was the contribution of each of the partner but admitted that turnover was about Rs. 2 lakhs per year. He stated that they have not taken any profit but thereafter admitted that the profit used to be reinvested in the same business. It is clear from this that they were taking profits although not in cash. He admitted that he used to show profit and loss account in his income tax returns regarding this business and also used to see the balance sheet of the firm of which he used to get copy every year. He however could not produce any document and stated that all documents have been destroyed by white ants. He further admitted that while making averment in the written statement that Verma had forged signatures of other partners on different documents, he had not seen the original documents containing the signatures and he has not seen them till the date of giving evidence. Thus he has not at all seen the documents of which he claim that the signature of himself and other partners are forged. It is pertinent to point out that inspection of documents was taken by the defendants and he is aware that his advocate had asked for zerox copies of the original documents. He has also seen the zerox copies of the original documents. If at all on the documents or even the zerox copies forged signatures were noticed, he would have taken trouble to see the original documents. It is obvious that even without looking to the documents, he has audacity to say that the signature is forged or is not his signature at all. When he was shown the statement certified by Chartered Accountant of the firm he went to the extent of saying that he does not know the Chartered Account and did not make any enquiry with him and even after seeing the statement certified by the Chartered Accountant, he did not feel it necessary to contact the Chartered Accountant. When he was shown balance sheet as on 31-12-1975, he stated that the figures in that balance sheet regarding liabilities of the firm towards the partner under the head “Capital Account are correct”. At the same time when he was asked about the figure of Rs. 40,000/- in the said balance sheet which is liability towards the Union Bank of India, he went to the extent of saying that he is not aware. He is not aware even today whether the factory is still working. He is not even aware whether the firm was indebted to several creditors but admitted that two of the creditors had telephoned him. It is his assertion that he did not make any attempt to take possession of the property of the firm. He even claimed that he does not know the guarantor defendant No. 6. He admitted that he signed the written statement on behalf of himself and the firm and he also signed the vakalatnama on behalf of himself and the firm. He signed by presuming that his liability existed even for the firm. The witness has sworn affidavit of documents and stated that while swearing the affidavit that he had given all documents to his advocate. The witness who is looking after the litigation has sworn the affidavit of documents, who has signed the vakalatnama and written statement for himself and for the firm wants us to believe that he never saw the original documents till the date of entering witness box. It is obvious that having decided to deny the signature, the witness is going to any extent
and therefore his evidence is totally unreliable.
14. This witness has also admitted that after receipt of notice or letter of the bank there was discussion as to what reply is to be given and after deciding what reply is to be given to the plaintiff bank, the reply was sent. This shows that alter receipt of the notice there was deliberation between the defendants and they decided to take the defence of denying their signatures and claiming that they are forged and that also without caring to go to the bank to verify as to whether the signatures are their signatures. There is therefore absolutely no substance in the defence of the defendants that the signatures are not their signatures. Even otherwise a look at the signatures on the vakalatnama, signatures on the written statement makes it clear that the signatures are exactly similar to the signatures on the disputed documents. It is therefore clear that since Mr. Verma is absconding the defendants have now taken up the defence that the documents do not bear their signature and that also after consultation with each other and after having decided to deny the signatures even without verifying the original documents from the record of the bank.
15. In addition, to these documents there is a power of attorney on which they have signed in the presence of the Magistrate. It was contended on behalf of the defendants that the Magistrate has not properly stated as to who identified the witness in his presence or that he was personally knowing the deponents and therefore that document is not duly proved. The document not being referred for the contents thereof. What is material is that the signatures on that documents are also exactly similar. The above evidence has been referred to in extenso only to show how the entire defence of the defendants is untenable and can be stated to be false and raised only with a view to deny the liability.
16. Even assuming for the sake of arguments that defendant No. 2 has cheated these defendants to some extent, their liability as partners does not cease. Learned Counsel for the defendants did not dispute the proposition that the partnership is not dissolved in accordance with the law and therefore the fact that Mr. Verma agreed to pay some amount to all the partners is not significant. According to section 18 of the Indian Partnership Act, a partner is agent of the firm for the purpose of business of the firm and according to section 19 he has implied authority to do certain acts. Sub-section (2) of section 19 is to the effect that in the absence of any usage or custom of trade to the contrary, the implied authority of a partner does not empower him to (b) open a banking account on behalf of the firm in his own name. The restriction is to open a banking account in the name of the said partner. Therefore even if it is assumed that defendant No. 2 did not tell the other partners that he is opening the account, the account is opened in the name of the firm and not in the name of the defendant No. 2. Having found that the documents contain signature of the defendants, I am of the view that the account was opened in the name of the firm by all the partners and they had knowledge of the account opened. They had knowledge of the loan. Defendant No. 3 even admitted that defendant No. 2 used to take his signatures on cheques.
As per the evidence of the plaintiffs Manager the cheques were required to be signed by two partners. It is admissions of the defendant No. 3 that he used to sign cheques. Even defendant No. 5 stated that she used to sign cheques brought by defendant No. 3. All this clearly shows that when ever amount was to be withdrawn from the bank defendant No. 2 was approaching defendant No. 3 for signing the cheques. According to section 20 of the Indian Partnership Act, the implied authority of partner can be extended or restricted by contract between partners notwithstanding such restriction any act done by a partner on behalf of firm which falls within his implied authority binds the firm and according to section 20 implied authority of a partner can be restricted by contract to the contrary. However, notwithstanding such restriction an act which falls within the implied authority binds the firm unless the person dealing knows of such restriction. The argument of the learned Counsel therefore that on the original application, the defendant No. 2 alone has signed is of no avail to the defendants. Section 25 further makes clear that every partner is liable jointly with all other partners and also severally for all acts of the firm done while he was a partner. In this case even if it is found that there is some substance in the defence of the defendants that it was Verma who was looking after the business and he secured the loan, the liability of the defendants does not cease and they are jointly and severally liable to the bank. In fact the liability of the partners continues after dissolution of the partnership as per section 45 if the act of the partner can be said as one which would have been an act of the firm if done before dissolution until a public notice of dissolution is given. In this case however there is no dissolution of the firm even as on today and therefore the defendants are liable and as earlier found the defendants have even signed the necessary documents for taking loan. It cannot be accepted without any evidence that the Manager of the bank would go to the extent of allowing Mr. Verma to forge the signatures of his partners in his presence. The defendants have miserably failed to show that the signatures on the documents are not their signatures. The similarity on the signature on the admitted documents which are part of the record i.e. written statement and the vakalatnama are sufficient to indicate that the defendants having signed the documents have decided jointly to deny the signatures and they thereafter replied the notice and have taken up this defence obviously because no other defence was available to them. I am therefore convinced that there is no reason to disbelieve the evidence of the plaintiff supported by the documents and the part extract of account which is produced. I am therefore inclined to answer the issues accordingly and hold that the plaintiffs has proved the entire claim against all the defendants and the suit will have to be decreed. Issues 1 to 12 are answered accordingly.
17. In the result suit is decreed in terms of prayer Clauses (a), (b), (c), (g), (h), (i), (j), (k), (q) and (r). Prayer Clause (q) being the claim included in prayers (a) and (g) the same is excluded while passing the decree.
18. Order accordingly.