TRAS/290/2001 of M/s. Sridevi Modern Rice ,Oil AND Flour Mill, Vs M. Chenchayya on 27 December 2006

COMMON JUDGMENT:

All these appeals arise out of a common judgmentpassed by the Principal Subordinate Judge, Eluru, in O.S.No.191of 1987 was filed by the plaintiff against the first defendant andalso the other defendant Nos. 2 to 7 for rendition of accounts.

2. The parties are referred to as arrayed in O.S.No.191 of1987 for the purpose of convenience.

3. According to the case of the plaintiff, the plaintiff along withdefendant Nos.2 to 7 was doing the business in the name andstyle of the 1[st] defendant and the partnership agreement wasentered into and the lease of the rice mill was taken from16.03.1983 to 30.11.1985 on yearly rent of Rs.20,000/-. Theplaintiff was having a share of 0-25 ps., whereas defendant Nos.2to 7 were having share of 0-75 ps. each. Defendant Nos. 2 and 3are said to be the Managing Partners of the firm. The business ofthe firm has been stopped from 01.04.1985, and defendant Nos. 2to 7 did not render the accounts in spite of legal notice. Therefore,the suit was filed for rendition of the accounts.

4. Defendant Nos.2 to 7 have filed a written statementadmitting the partnership, but pleading that on 12.07.1985 at thehouse of one Subbaraju, there was meeting of all the partners andelders and one Ch. Rama Rao, the accountant, produced theaccounts and consequently a settlement was arrived at and theplaintiff was found due a sum of Rs.3,00,000/- to the remaining partners and as the plaintiff has expressed his inability to pay theamount, he has executed five promissory notes of Rs.25,000/-each and one promissory note for Rs.37,500/- in favour of theremaining partners separately as per the advice of the elders. Itwas also further alleged that the plaintiff has caused damages tothe account books, on 16.07.1985 by putting them to fire and apolice report was given and consequently on the settlement and inview of the fact that the plaintiff has executed six promissorynotes, the said complaint has been withdrawn.

5. Basing on the six promissory notes obtained by defendantNos.2 to 7, they have filed the other suits. The plaintiff inO.S.No.191 of 1987 contended that the remaining partners used toobtain his signatures on blank stamped papers during the courseof the partnership business stating that they were required forobtaining permits. Therefore, he did not execute the saidpromissory notes and they are not supported by consideration andtherefore he is not liable for payment of the claim.

6. All these suits were clubbed together and evidence wasdifferently recorded in all the suits. But, however, a commonjudgment was pronounced by the Court below. The suitO.S.No.191 of 1987 was decreed, whereas the other suits withregard to the promissory notes were dismissed. Aggrieved by thesaid judgment, the defendants in O.S.No.191 of 1987 and theplaintiffs in the other suits have preferred the respective appeals.

7. The points that arise for consideration are:1)Whether the settlement of the accountspleaded on 12.07.1985 by the defendants and theconsequential execution of the promissory notes on 31.07.1985 is true?

Whether the findings of the Court below inholding that the promissory notes are not proved isbased on proper appreciation of the evidence?

Whether the decree for rendition of theaccounts passed by the Court below is legal andsustainable?

8. There is no dispute about the fact that the plaintiff and thedefendant did business in rice mill and having started in the year,1983, and the business was stopped by 30.06.1985. The questionbefore the Court is whether there was a settlement of the accountsas contended by the defendants and as to whether at the time ofsettlement, the accounts were looked into and the plaintiff hasexecuted six promissory notes under which he has undertaken topay money to the defendants. So far as, the execution of thesepromissory notes is concerned, the learned Judge at the initialstage was inclined to accept the evidence of the personsassociated with the execution of the promissory notes and alsofound that the plaintiff is not so innocent to have contributed thesignatures to the promissory notes. But, however, the learnedJudge was not inclined to accept the contention of the defendantsabout the settlement of accounts on 12.07.1985 and alsoconsequential execution of the promissory notes on 31.07.1985,for the reason that Ex.A1-legal notice has been issued by theplaintiff on 22.12.1985 and reply was given under Ex.A2 dated30.12.1985, and in that the factum of the settlement and executionof the promissory notes were not pleaded.

9. In order to appreciate the above findings of the Court, it isuseful to extract Para Nos.2 and 3 of Ex.A.2.useful to extract Para Nos.2 and 3 of Ex.A.2.

“2. It is true that my clients and your client enteredinto a partnership and carried on business of rice millingoperations under the name and style of S.R.R. VeeraRamakrishnamraju as contractors of Sri Devi ModernRice, Oils and Flours Mills, Kamavarapukota as allegedbut it is not correct to say that the business was closedwithout the knowledge and consent of your client.

3. As the firm incurred a loss of nearly five lakhs ofrupees, the business was wound up on 30.06.1985pending dissolution of the partnership and settlement ofaccounts. The loss has been arrived at on 12.07.1985 atthe house of the father of our clients, Sri Subbaraju, atEluru in the presence of all the partners including yourclient. In addition to the loss, your client is indebted tothe firm to an extent of Rs.1,75,000/-. Consequent on thetentative arrangement reached between the partnersinter se including your client, your client expressed hiswillingness to make good the sum of Rs.3,00,000/- byproviding security of immovable property as he was notin a position to pay it in cash immediately”.

10. As can be seen from the legal notice, the fact that thebusiness was stopped on 30.06.1985 is not in dispute. The losswas said to have been arrived at 12.07.1985, tune of nearlyRs.5,00,000/-. It was only stated that the plaintiff has agreed tomake good a sum of Rs.3,00,000/- including the sum ofRs.1,75,000/- which he is due.

11. If really, there was a final settlement of the accounts andthe plaintiff was found due a sum of Rs.3,00,000/- and executedthe promissory notes on 31.07.1985, then, it is very important factwhich in normal course of events in a legal notice would not havebeen failed to be mentioned. On the contrary, in para 3 what wasstated was pending resolution of the partnership firm andsettlement of the accounts the business was stopped. Evidently,for the alleged settlement arrived at on 12.07.1985 or 31.07.1985,

when the promissory notes were said to have been executed, nodocument has been executed between all the partners about thenature of the settlement. The settlement is said to have beentaken place at the house of Subbaraju, who is the father of thedefendants and he was not examined in the lower Court to provethe above fact and as per the written statement, the accountant-Ch. Rama Rao has looked into the accounts and also he was notexamined before the Court below. These are the most importantwitnesses who would have thrown light about the nature of thetransaction that has taken place either on 12.07.1985 or31.07.1985. In the absence of their evidence and in the absence ofthe fact of the complete settlement of the accounts and executionof six promissory notes in Ex.A2, then naturally the presumptionwith regard to the promissory notes is rebutted by thecircumstances and it is difficult to believe that the promissorynotes have come into existence in the manner as pleaded by thedefendants. Therefore, even if the Court below has initiallyinclined to accept the execution of the promissory notes, but thematerial evidence on record clearly goes to show that theinclination could not have been there and even otherwise themanner in which the promissory notes were said to have beenexecuted is not probable from the circumstances. Therefore, I donot find any error in the appreciation of the evidence of the Courtbelow particularly keeping in view the Ex.A.2 which is materialdocument.

12. The learned counsel for the appellant strongly contendedthat Ex.A2 is not a pleading and the absence of the mentioning ofthe promissory notes is not vital. But the fact remains anessential fact as great bearing about the determination of the rights between the parties cannot be allowed to be missed in thereply notice and in fact the claim of the parties is dependent onthis particular fact. Therefore, the omission of such a fact in thereply notice can only lead to inference that the fact did not existwhen the reply was given. Therefore, in view of the abovecircumstances, the dismissal of the suits by the Court below sofar as the promissory notes is concerned cannot be found fault.

13. Even otherwise, the appellants will not be put to loss toestablish their claim since the decree for dissolution of thepartnership has been passed and in course of enquiry there isevery right and opportunity for them to adduce evidence about theindebtedness of the plaintiff to the partners of the firm and theCourt can look into the above aspects and determine the rights ofthe parties. If the account books are not available, it is for theCourt and the Commissioner appointed by the Court to look intothe other modes of determining the accounts between the partiesand in these appeals such an issue cannot be decided andtherefore, there are absolutely no merits in the appeals and all theappeals are liable to be dismissed.

14. Accordingly, all the appeals are dismissed. Each partyshall bear their own costs. Miscellaneous Petitions, if any,pending in these appeals shall stand closed.

Dated: 06.03.2013SKA/INL

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JUSTICE N.R.L. NAGESWARA RAO