IN THE HIGH COURT OF KERALA AT ERNAKULAM
AS No. 104 of 1994()
1. RAM BHAT
... Petitioner
Vs
1. M/S.LEELARAM SHEVARAM (INDIA)PVT.LTD.
... Respondent
For Petitioner :SRI A.RAMA PRABHU,R.LAKSHMI NARAYAN
For Respondent :SRI K.N.SIVASANKARAN,MAYANKUTTY MATHER,
The Hon'ble MR. Justice V.RAMKUMAR
Dated :19/09/2006
O R D E R
V. RAMKUMAR, J.
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A.S. NO. 104 OF 1994
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Dated: 19-09-2006
JUDGMENT
Defendants 3 and 4 in O.S. 97/91 on the file of the Principal Sub Court,
Kochi, are the appellants in this appeal. The said suit instituted by respondents 1
and 2 herein was for realisation of a sum of Rs. 41,113.75 together with interest at
the rate of 15% totaling altogether to Rs. 55,112.75.
THE PLAINT AVERMENTS IN BRIEF:
2. The case of the plaintiffs can be summarised as follows:-
The first plaintiff is a Company by name M/s. Leelaram Shevaram (India)
Pvt.Ltd. represented by its Manager, the 2nd plaintiff. The first defendant
represented by defendants 2 and 5, is a registered partnership firm by name Sri
Ram Traders of which defendants 2 to 5 are the partners. On 11-7-1988 the first
defendant firm purchased 145 bags of boiled rice at the rate of Rs. 440 quintal.
The total value of the goods so purchased was Rs. 48,113.75 After the purchase
of goods, the first defendant firm issued Ext.A3 cheque for the aforesaid amount.
When the cheque was presented for encashment before the drawee bank it was
dishonoured. Even though the defendants were prosecuted before the Criminal
Court it was not successful for the reason that the cheque issued was a post dated
cheque. The 2nd and 5th defendants had filed a suit before the Munsiff’s Court,
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Cochin as O.S. 782/1988 seeking a perpetual injunction restraining the plaintiff
herein from initiating any police action. While so, defendants 4 and 5 expressed a
desire to settle the matter and clear the liability. The defendants had been
requesting for time to discharge the debt. They had paid only a sum of Rs.
7,000/-. On 26-9-1988 defendants 4 and 5 executed Ext.A5 promissory note for Rs.
48,113/- to the 2nd plaintiff undertaking to pay the said amount. On that day a
scooter was entrusted to the 2nd plaintiff requesting her to sell the same and adjust
its value towards the outstanding liability. On 5-7-1989 a notice was sent by the
plaintiffs calling upon defendants 2 to 5 to pay the amounts due and discharge the
liability. On receipt of notice defendants 4 and 5 have caused a reply notice to be
sent denying their liability. The balance amount due is Rs. 41,113.75 which is
payable with 15% interest thereon. Hence the suit.
PLEADINGS IN DEFENCE
3. Defendants 1, 2 and 5 did not enter appearance and they were set ex
parte. The suit was resisted by defendants 3 and 4 who filed a joint written
statement contending inter alia as follows:-
These defendants are not partners of the first defendant firm. The alleged
purchase of rice is also denied. These defendants had no connection or business
dealings with the first plaintiff. After 9-9-1987 these defendants have no connection
or dealings with the first defendant firm. The complaint alleged by the plaintiff was
investigated by the Mattancherry police and tried by the J.F.C.M., Kochi which had
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acquitted these defendants after trial. These defendants had not met the plaintiff to
settle the matter. The execution of Ext.A5 promissory note on 26-9-1988 is denied.
The 2nd plaintiff had filed a criminal complaint before the Mattancherry police.
Pursuant to the illegal influence exerted by the 2nd plaintiff the 4th defendant was
taken to the police station by the Divisional /Circle Inspector of Police,
Mattancherry at 12 noon on 26-9-1988. He was detained in the police station till 7
‘0’ clock in the night. During the said detention the 5th defendant was also brought
into the police station. The signatures of defendants 4 and 5 were forcibly
obtained under threat, coercion, intimidation, criminal force and all sorts of unlawful
means by the Divisional Inspector who thus got Ext.A5 promissory note executed
under duress. A scooter belonging to a relative of the 4th defendant was also
forcibly taken and handed over to the 2nd plaintiff. On the next day itself these
defendants had issued a lawyer notice to the Divisional Inspector of Police and the
2nd plaintiff. To the lawyer notice issued by the plaintiff before the institution of the
suit these defendants had sent a proper reply. Defendants 2 and 5 who are the
partners of the first defendant firm had filed an insolvency petition before this court
and the plaintiff is aware of the said proceedings. It was suppressing its knowledge
about the insolvency proceedings that the plaintiff has instituted the present suit with
the only purpose of harassing these defendants. These defendants are
unnecessary parties to the suit which is not maintainable. The 2nd respondent
plaintiff is not competent to represent the first plaintiff company. The suit is liable
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to be dismissed with costs.
THE TRIAL
4. The court below framed seven issues for trial. On the side of the
plaintiffs the 2nd plaintiff was examined as P.W.1 and Exts. A1 to A6 were marked.
On the side of the defendants the 4th defendant was examined as D.W.1. An officer
of the Union Bank of Cochin and a peon employed in Naveen Agencies, Cochin,
were examined as DWs2 and 3 respectively to prove the forcible execution of the
Ext.A5 promissory note from the police station under duress. Exts. B1 to B17 were
also got marked.
5. The learned Subordinate Judge after trial, as per judgment and decree
dated 29-6-1993 decreed the suit as prayed for on the original cause of action
although she found that Ext.A5 promissory note was vitiated by coercion, undue
influence etc. It is the said decree which is assailed in this appeal by defendants 3
and 4.
6. I heard the respective counsel appearing on either side.
ARGUMENTS IN SUPPORT OF THE APPEAL
7. Assailing the decree passed by the court below Advocate Smt. Ranjini
made the following submissions before me:-
Ext.B10 is the partnership deed dated 9-9-1987 whereunder the first
defendant firm then consisting of four partners was re-constituted consequent on
defendants 3 and 4 retiring from the firm and defendants 2 and 5 continued as
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partners in the firm. Along with Ext.B10 there is also the certified copy of the
notice issued under Sec. 63 (1) of the Partnership Act, 1932 which indicates the
retirement of defendants 3 and 4 from the firm with effect from 9-9-1987. Even
according to the plaintiff, the transaction in question namely, the purchase of rice
took place of 11-7-1988 which is 10 months after the retirement of defendants 3
and 4. Ext.A3 cheque and Ext.A5 promissory note are all on dates still subsequent
to 11-7-1988. In para 8 of Ext.B1 counter affidavit filed by the 2nd plaintiff herein in
O.S.782/1988 instituted by defendants 2 and 5 herein before the Munsiff’s Court,
Kochi, she has admitted that she was aware of the retirement of the two partners
on 9-9-1987. In Ext.B14 interlocutory application in the above suit as well as in
Ext.B8 indigent petition defendants 2 and 5 have unequivocally asserted that from
9-9-1987 onwards they are the surviving partners of the firm. Similarly, in
paragraph 5 of Ext.B5 judgment in C.C. 70/89 on the file of JFCM-I, Cochin it is
mentioned that the present 4th defendant who was the 4th accused in the case had
stated that he and his father Ram Bhat are not partners in the firm since 9-9-1987.
The 2nd plaintiff was a party to all the above proceedings and was aware about the
above assertion made by defendants 2, 4 and 5. Ext.B7 is the deposition of the 2nd
plaintiff herein in C.C 70/1989 wherein a specific suggestion was put to her that
present defendants 3 and 4 who were accused Nos. 1 and 4 in that case were not
partners of the firm since 9-9-1987. Her answer to the said suggestion was that
she does not know about that. Even in the present plaint the specific averment in
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paragraph 2 is that the first defendant is a partnership firm represented by its
partners defendants 2 and 5. This means that defendants 3 and 4 are not partners
of the said firm. The 2nd plaintiff examined as DW1 in this case does not say that
defendants 3 and 4 are partners of the firm. In order to rope in defendants 3 and 4,
DW1 would have it that defendants 3 and 4 had called her over the phone
regarding the transaction in question. As against this the 4th defendant examined as
D.W.1 has categorically stated that defendants 3 and 4 retired from the firm on 9-9-
1987 on which day the firm was re-constituted. Ext.A5 promissory note was
executed by defendants 4 and 5 under duress from the police station and this case
of the defendants has been upheld by the court below. Hence the decree granted
on the basis of the original cause of action as against the appellants is clearly
unsustainable.
JUDICIAL EVALUATION
8. I am afraid that I cannot agree with the above submissions. Ext.B10
re-constituted partnership deed dated 9-9-1987 itself recites that the original
partnership deed with the four partners was registered with the Registrar of Firms in
the year 1985. The name of the firm is Sri. Ram Traders. The original partners
were Suresh Chandra Bhat (D2), Ram Bhat (D3), Naveen Chandra Bhat (D4) and
Dinesh Bhat (D5). The 3rd defendant Ram Bhat is admittedly the father of the
other defendants namely defendants 2, 4 and 5. Ext.B10 further recites that Ram
Bhat and Naveen Chandra Bhat (D3 and D4 respectively) expressed their
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willingness to retire from the firm with effect from 9-9-1987 and therefore the
remaining two partners have decided to continue the business as a going concern
under the same name and style. The certified copy of the acknowledgment issued
by the Registrar of Firms and appended to Ext. B10 shows that a notice under
Section 63 (1) of the Indian Partnership Act, 1932 (hereinafter referred to as the Act
for short)has been issued to the Registrar of firms. But then there is nothing to
indicate that the plaintiff was aware of the retirement of defendants 3 and 4 on 11-7-
1988 when the first defendant firm purchased 145 bags of rice from the plaintiff
company. In Ext.B1 counter-affidavit, there is no admission by the 2nd plaintiff that
she was aware of the retirement of defendants 3 and 4 from the firm on 9-9-1987.
On the contrary, in Ext.B1 counter affidavit sworn to by her on 9-9-1998 what she
has stated is that the Ist petitioner therein (D2 herein) by signing in the cheque on
11-7-1988 as a partner of the firm was being dishonest since he was thereafter
contending that he retired from the firm on 9-9-1987. Merely because in Exts. B8,
B11 and B14 which were long after the transaction in question, the defendants
asserted that defendants 3 and 4 had retired from the firm with effect from 9-9-87 it
does not mean that the plaintiffs was aware of such retirement on 11-7-1988 when
the transaction in question was entered into or any day prior to that. On their own
admission , defendants 3 and 4 were partners of the firm from 1985 till 9-9-1987.
There is absolutely no acceptable evidence adduced in the case to show that the
plaintiff was aware of the retirement of defendants 3 and 4 when the first defendant
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firm purchased 145 bags of rice from the plaintiff company on 11-7-1988. As
against defendants 1, 2 and 5 who remained ex parte there is already a decree.
The only question which survives for consideration is as to whether the decree
passed as against the appellants who are defendants 3 and 4 is unsustainable for
the reason that the transaction in question was entered into subsequent to their
retirement from the first defendant firm.
9. The mode of retirement and the consequences of retirement of a
partner are to be found in Sec. 32 of the Act which reads as follows:-
“Retirement of a partner:- (1) A partner may retire, –
a) with the consent of all the other partners,
b) in accordance with an express agreement by the partners,
or
c) where the partnership is at will, by giving notice in writing to
all the other partners of his intention to retire.
2) A retiring partner may be discharged from any liability to
any third party for acts of the firm done before his retirement by an
agreement made by him with such third party and the partners of
the reconstituted firm, and such agreement may be implied by a
course of dealing between such third party and the reconstituted
firm after he had knowledge of the retirement.
3) Notwithstanding the retirement of a partner from a firm,
he and the partners continue to be liable as partners to third parties
for any act done by any of them which would have been an act of
the firm if done before the retirement, until public notice is given of
the retirement.
Provided that a retired partner is not liable to any third party
who deals with the firm without knowing that he was a partner.
4) Notices under sub-section (3) may be given by the retired
partner or by any partner of the reconstituted firm”.
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10. Thus, even after retirement from the firm, the quondam partner will
continue to be liable to a third party by virtue of Sec. 32 (2) of the Act for any pre-
retirement transaction or liability unless he is discharged from such liability by an
agreement (either express or implied) made by him with such third party and the
surviving partners of the re-constituted firm. With regard to any post-retirement
transaction or liability also such quondam partner will continue to be liable until
public notice in the manner provided under Sec. 72 of the Act is given of his
retirement, in view of Sec. 32 (3) of the Act which is enacted on the well known
principle of holding out. A person who has held himself out as a partner will be
presumed to hold the said status until he informs all concerned that he has ceased
to be so. In the case of a registered firm (the first defendant in this case is a
registered firm) the mode of giving a public notice is laid down under Sec. 72 (a) of
the Act. As per the said provision there should be a notice of change given to the
Registrar of Firms under Sec. 63 (1) of the Act and a notice by publication in the
official Gazette and a notice in at least one vernacular newspaper having
circulation in the district where the firm has its place or principal place of business.
See also C. Assiamma v. State Bank of Mysore – AIR 1990 Kerala 157. But if
any third party has dealt with the firm without knowing that the retired partner was
a partner of the firm, then the retired partner would not be liable to such third party
and in such a case there is no need for a public notice so as to absolve the retired
partner from his liability qua such third party. The burden in such a case will be
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on the retired partner (who wants to avoid the liability) to show that such third had
dealt with the firm without knowing that such retired partner was a partner of the
firm.
11. Coming to the facts of this case, as indicated earlier the appellants or
any of the other defendants have not been able to show that on 11-7-1988 when
the plaintiff entered into the transaction in question the plaintiff was aware that
defendants 3 and 4 had retired from the firm on 9-9-1987. At page 6 of the
deposition of the 4th defendant examined as DW1 he has admitted that no notice
of retirement was given either in the Gazette or in the newspaper and that no
public notice was also given. If so, by virtue of Sec. 32(3) of the Act defendants 3
and 4 will continue to be liable for the transaction in question until public notice in
the manner provided under Sec. 72 (a) of the Act has been given notwithstanding
the fact that the transaction in question is a post- retirement transaction. Even
assuming that a notice of change under sec.63(1) of the Act has been given to the
Registrar of Firms, that by itself will not be sufficient public notice within the
meaning of sec.72(a) of the Act.
12. It is true that Ext.A5 promissory note has been found to be vitiated by
coercion, intimidation etc. since the same was found to have been executed from
the police station under duress and attracting the ratio decided in K.C. Thomas v.
Supt. of Police – 1980 KLT 151 and Mathew v. Kuruvila – 1983 KLT 104. But
then the suit is not based on Ext.A5 promissory note alone but based on the
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original cause of action as well. In paragraph 8 of the plaint it has been specifically
averred as follows:
“Cause of action in the suit arose on 11-7-1988 when
the goods were purchased and cheque was issued, on 26-9-
1988 when the demand promissory note was executed for the
balance amount due and thereafter in Mattancherry Village
within the jurisdiction of this Hon’ble Court”.
The suit was filed on 5-4-1991 which is well within three years of the transaction
in question. Hence the court below was perfectly justified in granting a decree
against all the defendants as prayed for.
13. Equally misconceived is the contention that the plaint shows
defendants 2 and 5 alone as the partners representing the firm. Defendants 3 and
4 are also described as partners of the Ist defendant firm. Even if the plaint filed on
5-4-1991 did not show defendants 3 and 4 as partners, that will not in any manner
affect their liability since despite their retirement with effect from 9-9-1987, they
continued to be liable for want of public notice of their retirement. By virtue of Sec.
25 of the Act, the liability of the partners is joint and several. Each partner is a
representative of the other partners and is an agent as well as principal. Every
partner is liable for “an act of the firm” which expression has been defined to mean
any act or omission by all or any of the partners or any agent of the firm which gives
rise to a right enforceable by or against the firm. (Vide Sham Sunder v. State of
Haryana – AIR 1989 SC 1982 Mymoonath Beevi v. State of Kerala – 2005 (4).
KLT 174). Here the purchase of rice was by the 2nd defendant on behalf of and in
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the name of the Ist defendant firm of which defendants 2 to 5 were partners from
1985 onwards and notwithstanding the retirement of defendants 3 and 4
therefrom with effect from 9-9-1987, they also continued to be liable since no public
notice was admittedly given. Under these circumstances, the conclusion reached
by the Court below cannot be faulted.
In the result, this appeal is dismissed confirming the judgment and decree
passed by the court below. However, in the circumstances in the case, parties
shall hear their respective costs in this appeal.
V. RAMKUMAR, JUDGE.
ani.
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V.RAMKUMAR, J.
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A.S. NO. 104 OF 1994
JUDGMENT
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DATED: 19-09-2006
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