Andhra HC (Pre-Telangana)
Sri Rama Mahal, Srikalahasthi And Ors. vs R. Rajasekhar on 6 June, 2007
Equivalent citations: 2007(6)ALD267, AIR 2008 (NOC) 52 (A.P.), 2008 (1) AJHAR (NOC) 227 (A.P.) 2008 AIHC (NOC) 425 (A.P.), 2008 AIHC (NOC) 425 (A.P.), 2008 AIHC (NOC) 425 (A.P.) 2008 (1) AJHAR (NOC) 227 (A.P.), 2008 (1) AJHAR (NOC) 227 (A.P.)
JUDGMENT G.V. Seethapathy, J.
1. These two appeals are directed against the judgment and decree dated 5.3.1999 in OS No. 36 of 1997 on the file of the Senior Civil Judge, Srikalahasthi, wherein the suit filed by the respondent herein for recovery of Rs. 2,50,000 with interest at 24% per annum was decreed and the counter-claim made by the appellants herein to pass a decree in their favour for a sum of Rs. 1,05,526/- was dismissed.
As the two appeals arise out of the same judgment and decree and between the same parties, they are heard together and they are being disposed of this common judgment.
2. The respondent-plaintiff in both the appeals, filed suit OS No. 36 of 1997 with the following averments:
The plaintiff was carrying on business in exhibition of motion pictures. The first defendant is the partnership firm for which the 2nd defendant is the Managing Partner and defendants 3 to 5 are the partners. The 3rd defendant is the wife, defendants 4 and 5 are the sons of 2nd defendant and they constituted joint Hindu family. On 30.6.1994 the plaintiff entered into an agreement of lease with the defendants 2 to 5 representing the first defendant firm for the purpose of screening and exhibiting motion pictures in Sri Rama hall belonging to the first defendant, on share basis. As per the terms of the agreement, in consideration of the exhibitors allowing playing time, the plaintiff shall pay a sum of Rs. 2,000/- per day for four shows to the defendants from out of the daily box office collections. On the date of agreement, the plaintiff paid a sum of Rs. 2,50,000/- to the defendants as a deposit, which is refundable without interest at the time of termination of lease period. Initially the lease period was fixed at 11 months, which was renewable once in every 11 months or upto three years commencing from 30.6.1994. The plaintiff deposited the amount of Rs. 2,50,000/- by way of demand draft bearing No. 877888 dated 28.6.1994 for Rs. 1,50,000/- and another demand draft bearing No. 877906 dated 29.6.1994 for Rs. 1,00,000/- drawn on Andhra Bank in favour of first defendant firm. The 2nd defendant received the drafts as Managing Partner and passed a receipt. Due to personal inconvenience and on account of ill health, the plaintiff decided to discontinue the business of exhibiting the motion pictures from 1.6.1997. Accordingly he informed the defendants one month in advance and requested them to refund the deposit amount of Rs. 2,50,000/- on or before 1.6.1997. The plaintiff stopped exhibiting motion pictures from 1.6.1997 in the theatre of first defendant. As the amount was not refunded, he sent a legal notice on 4.6.1997 calling upon the defendants to return the deposit amount forthwith. The notice was got returned un-served with the postal endorsement that addressee was continuously absent for seven days, though the defendants were very much available at the address. As the limitation period was fast approaching, he issued another notice dated 27.6.1997 informing the defendants that he would be constrained to approach the Court for recovery of the amount, if they failed to return the amount. As the defendants wantonly evaded to refund the advance amount with a view to make wrongful gain for themselves and to cause loss to the plaintiff, the suit is filed for recovery of the said amount with interest at 24% per annum.
3. The first defendant filed written statement, which was adopted by the defendants 2 to 5 by filing a memo, contending in brief as follows:
One R. Krishnamurthy, brother of the plaintiff, being the assignee on behalf of the plaintiff was the Manager of Sri Rama Cinema Hall and was getting the film boxes for and on behalf of the plaintiff from Film Distributors at Tirupati by entering into agreement with them and also signing the confirmation slips as lessee and exhibiting the films in the theatre. As per the terms and conditions of the agreement of lease dated 30.6.1994, the defendants are the exhibitors (lessors) screening the motion pictures supplied through the distributors (lessees) during the period of lease. The said R. Krishnamurthy did not pay the dues to number of film distributors and they referred the matter to the Chittoor District Film Distributors Association. The said association gave a notice to Krishnamurthy on 10.6.1997 demanding payment of the amounts due to ten distributors, totaling a sum of Rs. 1,71,311/-. The plaintiff having knowledge of the amount due to the distributors instead of clearing the same got issued a legal notice dated 27.6.1997 terminating the lease period with effect from 30.6.1997 and stopped exhibiting the films from 1.7.1997. It is false that the plaintiff was not exhibiting the motion pictures in defendants' cinema hall from 1.6.1997. Even on 10.6.1997 the assignee of the plaintiff got confirmation slip from M/s Mahalakshmi Pictures for screening Telugu film. The plaintiff has not issued any statutory notice under Transfer of Property Act for termination of lease. Usually the distributors have to pay commission to the Chittoor District Film Distributors Association, but the plaintiff failed to pay the same. As the association gave a notice on 5.11.1997 demanding payment of commission of Rs. 7,000/-, first defendant paid the said amount on 12.11.1997. The total amount paid by the defendants to the film distributors and distributors association is Rs. 1,11,296/-. Further the plaintiff has not paid the rent to the defendants for a period of 91 days from 1.4.1997 to 30.6.1997 at the rate of Rs. 2,000/- per day which comes to Rs. 1,82,000/-. Further, R Krishnamurthy has taken a sum of Rs. 50,000/- from one Nagarajachetty of Srikalahasthi on a pronote dated 26.1.1997, keeping the 2nd defendant as a guarantor and the said debt in a sum of Rs. 62,230/- was discharged by the 2nd defendant. Thus the plaintiff and his assignee are due in a sum of Rs. 3,55,256/-(Rs. 1,82,000/- + Rs. 1,11,296/- + Rs. 62,230/-) to the defendants and without clearing the amounts due, the plaintiff and his assignee stopped screening of films from 30.6.1997 in violation of Clause (6) of the lease deed dated 30.6.1994. To the notice issued by the plaintiff on 27.6.1997, the defendants got issued a reply notice dated 7.7.1997 for which the plaintiff issued a rejoinder on 19.7.1997. The plaintiff is not entitled to recover the deposit amount of Rs. 2,50,000/-. On the other hand, the plaintiff himself is liable to pay the balance amount of Rs. 1,05,526/- (Rs. 3,55,526/- - Rs. 2,50,000/-) to the defendants and the defendants have made a counter-claim for the said amount by paying necessary Court fees.
4. On the strength of the pleadings, the trial Court framed the following:
1. Whether the defendants are entitled to the counter-claim of Rs. 1,05,526/-?
2. Whether the plaintiff is entitled for Rs. 2,50,000/- earnest money deposited with the defendants as prayed for?
3. To what relief?
5. PW.1 was examined and Exs.A.1 to A. 13 were marked on behalf of the plaintiff. DWs.1 to 4 were examined and Exs.B.1 to B.19 were marked on behalf of the defendants.
6. On a consideration of the evidence on record, the trial Court on issue Nos. 1 and 2 held that the plaintiff is entitled to recover the amount of Rs. 2,50,000/- with interest and that the defendants have not established the counter-claim against the plaintiff. Accordingly the suit was decreed for the amount of Rs. 2,50,000/- with subsequent interest at 24% per annum from 1.7.1997 till the date of decree and future interest at 6% per annum till the date of realisation.
7. Aggrieved by the said judgment and decree, the defendants preferred appeal i.e., AS No. 1097 of 1999. Aggrieved over the dismissal of the counter-claim, the defendants filed other appeal AS No. 1374 of 1999.
8. Arguments of the learned Counsel for the appellants and respondent in both the appeals are heard. Records are perused.
9. Learned Counsel for the appellants contended that R. Krishnamurthy is none other than the brother of the plaintiff and he acted as assignee and did business on behalf of the plaintiff and failed to pay the amount due to various distributors and the said amount as also commission due to the film distributors association was paid by the defendants in a sum of Rs. 1,11,296/- and together with the arrears of rent in a sum of Rs. 1,82,000/- for a period of 91 days at the rate of Rs. 2,000/- per day from 1.4.1997 to 30.6.1997 and another sum of Rs. 62,230/- paid by the defendants on behalf of Krishnamurthy to Nagarajachetty, the plaintiff himself was liable to pay total amount of Rs. 3,55,256/- and after adjustment of the advance amount of Rs. 2,50,000/-, the plaintiff was still due in a sum of Rs. 1,05,526/-, for which the defendants made counter-claim and the trial Court erred in holding that the plaintiff has nothing to do with the alleged amounts due by Krishnamurthy. Learned Counsel for the appellants further contended that the plaintiff has not filed any rejoinder opposing the counter-claim made by the defendants and therefore the counter-claim must be deemed to have been admitted by the plaintiff, but however, the trial Court erred in ignoring the same and decreeing the suit.
10. Learned Counsel for the respondent-plaintiff on the other hand contended that Krishnamurthy was neither an assignee nor authorized representative of the plaintiff and he was only an employee, looking after the business and there is absolutely no privity of contract between plaintiff and Krishnamurthy or between Krishnamurthy and the defendants or between the defendants and the distributors and the alleged liability towards distributors or arrears of rent or debt of Nagarajachetty are all neither true nor binding on the plaintiff. He would further contend that as per the terms of the agreement of lease Ex.A.12, the defendants were bound to refund the advance amount of Rs. 2,50,000/- to the plaintiff, as the plaintiff has stopped the business at the end of three years period with effect from 30.6.1997. He further contends that neither the defendants nor Krishnamurthy ever informed the plaintiff about the alleged amounts claimed by the defendants and there was absolutely no privity of contract between the plaintiff and the defendants in respect of any such amount and so, the trial Court has rightly rejected the counter-claim, as the plaintiff was no way concerned with the said liability and consequently decreed the suit. He would further contend that on the eve of filing the suit, the plaintiff got issued second notice Ex.A.7 on 20.6.1997 for which the defendants gave a reply on 7.7.1997 subsequent to filing of the suit, wherein the counter-claim was made and the plaintiff got issued a rejoinder Ex.A.10 on 19.7.1998 as counter-claim and non-filing of any rejoinder subsequent to filing of the written statement is immaterial, inasmuch as there was no privity of contract between the plaintiff and the defendants at all in respect of those amounts and the counterclaim made by the defendants does not arise out of the transaction between the plaintiff and defendants.
11. In view of the rival contentions of the parties, the questions, which arise for consideration, are whether there was any privity of contract between the plaintiff and the defendants in respect of the amounts claimed by the defendants in their written statement and whether the plaintiff is liable to discharge the same and whether the defendants are entitled to recover the amount of Rs. 1,05,526/- after adjusting the advance amount of Rs. 2,50,000/- against the total amount of Rs. 3,55,256/- alleged to be due to the defendants?
12. It is not disputed that the plaintiff is the distributor and the defendants are exhibitors and they entered into an agreement of lease Ex.A.12 dated 30.6.1994 for exhibition of motion pictures in Srirama Mahal, a theatre owned by first defendant firm of which the defendants 2 to 5 are partners. The execution of lease deed Ex.A.12 and the terms and conditions thereof are not disputed by either of the parties. As per the terms of Ex.A.12, the period of lease is 11 months commencing from 30.6.1994 and it is renewable every 11 months upto maximum period of three years. Ex.A.13 is the endorsement of extension of lease period from 20.5.1995 to 19.4.1996. It is also not disputed that as per the terms of the lease, the plaintiff paid a sum of Rs. 2,50,000/- towards deposit to the defendants, which was refundable, without any interest. Ex.A.1 is the receipt passed by the defendants for receiving the said amount of Rs. 2,50,000/- from the plaintiff by way of two demand drafts. The defendants do not dispute their liability to refund the said amount to the plaintiff. They however, claimed that the plaintiff himself was due to them in a sum of Rs. 3,55,526/- and after adjusting the advance of Rs. 2,50,000/-, the plaintiff himself was due a sum of Rs. 1,05,526/- to them. The defendants contend that a sum of Rs. 1,11,296/- which was due to various film distributors of Tirupati by Krishnamurthy, who was looking after the business on behalf of the plaintiff was in fact paid by them, when they received a notice from Chittoor District Film Distributors Association under Ex.B.1. The plaintiff disowns any liability for the said amount on the ground that Krishnamurthy was not his assignee or his authorized representative and there was no privity of contract between Krishnamurthy and the defendants or himself and Krishnamurthy. The first and foremost question, which arises for consideration, is whether Krishnamurthy was an assignee of the plaintiff and whether the plaintiff is bound by the acts of Krishnamurthy ?
13. A perusal of Ex.A. 12 agreement shows that it was entered into between the plaintiff and the defendants only. The defendants are described as exhibitors (lessors) and the plaintiff is shown as distributor (lessee). Ex.A.12 is therefore an agreement between the distributor of the films on one hand and the exhibitor on the other. The expressions 'exhibitor' and 'distributor' no doubt included among others 'assignees' as stated in Ex.A.12. There is, however, absolutely no iota of evidence on record to show that Krishnamurthy was the assignee of the plaintiff, who is a distributor as per Ex.A.12. May be Krishnamurthy was the brother of the plaintiff and he was looking after the business on behalf of the plaintiff. There is however, nothing to show that he was appointed as assignee or agent or representative of the plaintiff so as to bind the plaintiff with any liability arising out of the acts of omission and commission on the part of Krishnamurthy. Admittedly, the said Krishnamurthy is not a party to the transaction under Ex.A.12 and he has not signed the said document even as an attestor. DW.1 also admitted the same. In the cross-examination DW.1 stated that Krishnamurthy, brother of PW.1 has not signed as lessee or attestor of Ex.A.12. He further admitted that the plaintiff has not given any authorization letter stating that his brother would do the business and obtain loans and discharge the same. It is also in his evidence that prior to the plaintiff taking on lease, one Ramanujam of Madras, was the lessee of the cinema hall and at that time also, Krishnamurthy was looking after the business on behalf of Ramanujam for a period of three years. It is also in his evidence that they entered the lease agreement similar to Ex.A.12 with the same terms and conditions with Ramanujam also. It is also borne out by evidence that subsequently to the plaintiff stopped the business with effect from 30.6.1997 and the defendants were screening the films with the assistance of Krishnamurthy. From the evidence of DW.1 it is clear that Krishnamurthy used to look after the business at the field level on behalf of lessees by getting the films of motion pictures from the distributors of Tirupati. It does not however elevate him to the status of an assignee or agent or authorized representative so as to render his acts of omission and commission legally binding on the lessors. The fact that Krishnamurthy was the brother of PW.1 does not make any differences as he used to look after the business of the previous lessee Ramanujam as well. The privity of contract under Ex.A.12 is between the plaintiff-distributor and the defendants-exhibitors. The mutual rights and liabilities have to flow necessarily from out of the said contract Ex.A.12 and not from any external or extraneous source. Ex.A.12 does not contain any reference to Krishnamurthy or to any role having been assigned to him. As per the terms of Ex.A.12, the plaintiff himself is the distributor and what is leased out is the playing time for the purpose of exhibition of motion pictures. The consideration for the same is rent of Rs. 2,000/- per day for four shows payable by the plaintiff to the defendants from out of daily collections. It is the responsibility of the exhibitors-defendants to maintain the theatre at their cost, arrange for sale of tickets and handover the collections to distributor for every show and out of the said collection, the distributor-lessee shall pay rental plus entertainment tax and show tax to the exhibitors. The exhibitors-lessors shall exhibit the films supplied by the distributors-lessees. It is the look out of the distributors to fetch the films and the exhibitor has nothing to do with the same. The terms of Ex.A.12 do not cast any obligation on the defendants to fetch the films from the distributors or to pay the balance collection to the distributors. Under Ex.A.12, the defendants are entitled for payment of rental from its daily collection at the rate of Rs. 2,000/- per day and no duty is cast on them to pay the balance collection to the distributors of Tirupati. In fact, the plaintiff himself is the distributor in terms of Ex.A.12. If the plaintiff secures the films from any other distributor, the liability for payment of any amount to those distributors depends on the terms of the contract between the plaintiff and those other distributors with which the defendants have no concern. There was absolutely no reason as to why the defendants have to make any payments to the film distributors of Tirupati when no such obligation is cast on them under the terms of Ex.A.12. The plaintiff alleges that the payments said to have been made by the defendants to distributors of Tirupati are false and fabricated and they are not binding on him. PW. 1 deposed that the defendants never brought to his notice that his brother was indebted to the distributors or to defendants and he has not authorized his brother to raise loans for the purpose of running business. He also deposed that he has not received any notice from the film distributors claiming any amount. DW.1 admitted that neither himself nor the distributors of Tirupati gave any notice to the plaintiff demanding the amount nor the distributors filed any suit. He categorically admitted that it is not their responsibility to pay the amount to the distributors for films brought by exhibitor. He also admitted that no distributor has issued any notice to Krishnamurthy or filed any suit against him. DW.1 claims to have issued a notice to Krishnamurthy for the amount payable by him to the distributors and that Krishnamurthy refused to receive the same, but no document is filed by DW.1 in that regard. According to PW. 1 after he stopped the business on account of ill-health on expiry of the lease period, he terminated the services of his brother Krishnamurthy and the said Krishnamurthy being aggrieved over the same is not in good terms with PW.1. DW.1 also admitted that disputes arose between plaintiff and his brother with regard to termination of services of Krishnamurthy by PW.1. It is suggested to DW.1 in the cross-examination that the amounts claimed by way of counter-claim are fictitious and are not real and to evade refund of the deposit amount, a false claim is made. Though DW.1 denied the suggestion, the fact remains that no demand was ever made by either defendants or the distributors of Tirupati against PW.1 or any notice issued by them to PW.1 regarding the amounts alleged to be due to them. The defendants claimed to have paid Rs. l,11,296/- to the film distributors of Tirupati, because they issued a notice Ex.B.1 demanding payment. Ex.B.1 letter was addressed by Chittoor District Film Distributors Association to Krishnamurthy but not to the defendants. DW.1 claims to have given a reply Ex.B.2 stating that they have no concern with those dues mentioned in Ex.B. 1. In Ex.B.2 it is further stated that Krishnamurthy would approach the film distributors association and sort-out the issue. Ex.B.2 therefore shows that even DW.1 was aware that there was no obligation cast on the defendants to discharge the debts allegedly due by Krishnamurthy. The film distributors association has not addressed any letter to the plaintiff. Having disowned liability to pay the amounts mentioned in Ex.B.1 letter, DW.1 however, claims to have paid total sum of Rs. 1,11,296/- to various distributors without any authorization by the. plaintiff. Ex.B.4 to B.10 are said to be the receipts issued by some of the film distributors for receipt of the amounts due to them from first defendant. Though the payments are said to have been made by way of cheques, significantly they were all subsequent to filing of the suit. Ex.B. 11 is said to be the notice received by first defendant from the association demanding payment of balance amount due and it is also subsequent to filing of the suit. The alleged payment of Rs. 7,000/- by defendants to the distributors' association towards their commission under Ex.B.13 dated 12.11.1997, is also subsequent to the suit. The alleged payment of Rs. 6,000/- to the association under receipt Ex.B.6 is also subsequent to filing of the suit. The suit was filed on 28,6.1997. The alleged payments under Exs.B.4 to B.10 and B.13, which are said to have been made, are subsequent to filing of the suit. Even if they are true, they are not binding on the plaintiff, as there was neither authorization from the plaintiff to make the payments nor any obligation cast on the defendants to pay the same under the terms of Ex.A.12. When the defendants have admittedly no concern with the procurement of the films by the plaintiff-distributor from other source and when the terms of the agreement Ex.A.12 do not impose any duty or obligation on the defendants to make any payments to the distributors, the alleged payments even if true are not binding on the plaintiff, as the said payments are admittedly not in pursuance of or by virtue of the terms and conditions of Ex.A.12. The oral and documentary evidence adduced by the defendants in a bid to establish the truth of the alleged payments by them to the distributors is of no avail to them. As Krishnamurthy is not found to be having any legal status as assignee or authorized representative of the plaintiff and not having any sanction or authorization for various acts of omission and commission from the plaintiff and when the plaintiff was never informed of the alleged amounts due to the distributors, no liability can be fastened on the plaintiff in respect of unauthorized acts of commission and omission on the part of Krishnamurthy. The defendants cannot therefore seek to adjust the said amount of Rs. 1,11,296/- paid by them against the advance of Rs. 2,50,000/- which was admittedly due by them to the plaintiff.
14. According to the defendants, the plaintiff did not pay the rents for a period of 91 days at the rate of Rs. 2,000/- per day from 30.4.1997 to 30.7.1997. The case of the plaintiff is that on the expiry of the lease period of three years, he stopped the business with effect from 30.6.1997 and he personally intimated to DW.1 about his intention to stop the business. In May 1997 he personally met the defendants and informed that he was not continuing the business after expiry of the lease period because of his ill-health for which, defendants 2 to 5 accepted and sought some time for refund of Rs. 2,50,000/- and he did not accord for the same. Subsequently, he issued notice Ex.A.2 dated 4.6.1997 demanding the refund of the advance amount. Ex.A.2 notice was of course returned un-served with endorsement that the addresses were absent. It is not disputed that the defendants never issued any notice to the plaintiff demanding any arrears of rent. There is nothing on record to show that the plaintiff failed to pay the rents from 1.4.1997 as alleged by the defendants. In the absence of any such evidence, the claim made by the defendants towards alleged arrears of rent remains totally unsubstantiated and hence, the said amount of Rs. 1,82,000/- is not liable to be adjusted against the advance amount.
15. The other amount claimed by the defendants by way of counter-claim is that Rs. 62,230/- which according to them was paid to one Nagarajachetty by way of discharge of pronote debt due by Krishnamurthy in a sum of Rs. 50,000/-. According to the defendants, Krishnamurthy borrowed Rs. 50,000/- from one Nagarajachetty for the purpose of running business. There is absolutely nothing on record to show that the plaintiff ever authorized Krishnamurthy to incur any debts on his behalf for the purpose of business. Again there is nothing on record to show that any liability was cast on the defendants to discharge any such debts. PW.1 categorically denied the genuineness of the said debt. According to DW.1 Krishnamurthy executed a pronote in favour of Nagarajachetty for the amount borrowed from him and that DW.1 paid the said amount. Admittedly, the discharged pronote is not filed into Court. Krishnamurthy is also not examined. None connected with the execution of the promissory note due to Nagarajachetty is examined. The claim of the defendants that Krishnamurthy borrowed Rs. 50,000/- from Nagarajachetty for the purpose of business under a pronote and DW.1 discharged the same totally remains unsubstantiated. Even otherwise, it is not known how the said debt even if true, is binding on the plaintiff, when there is no sanction or authorization by the plaintiff to Krishnamurthy to incur debt or to the defendants to discharge the same on behalf of the plaintiff. Hence the question of adjusting the said amount against advance amount of Rs. 2,50,000/- also does not arise.
16. The defendants contend that by virtue of Clause 6 of agreement Ex.A.12 any debts and liabilities due by the distributor shall be settled before the closure of the lease period and they shall be adjusted against the deposit amount of Rs. 2,50,000/-. For the purpose of convenience Clause 6 is extracted hereunder:
Clause 6: The Distributor (Lessee) has agreed to pay a sum of Rs. 2,50,000/- (Rupees two lakhs and fifty thousand only) on 30.6.1994 as deposit, free of interest. The said deposit and any other advances received or personal loans to the partners or any one among the partners of the said theatre received subsequently from the distributor, they shall be settled before the end of the contract period of 11 months or such renewed periods upto three years as aforesaid and if they are not settled to continue to supply the picture to the exhibitors (Lessors) to be screed till all the dues or debts or loans stated above the discharged. Till then the exhibitors (Lessors) shall not refuse to receive the films from the distributor (Lessee) to be screened in the theatre or cause any sort of objection or obstruction for the same on any ground or in anyway interfere with the said rights of the Distributor till then. Further if the said deposit or advances or personal loans received by the exhibitors the distributor is at liberty to retain the daily rentals to be paid to the exhibitors (Lessors) and adjust the same against the said deposit of Rs. 2,50,000/- and any other loans and till then, the Distributor shall have the right to supply films to be screened by the exhibitors and the exhibitors shall conclusively receive the films from the distributors only and screen the same.
17. A careful reading of clause 6 of Ex.A.12 shows that the deposit amount of Rs. 2,50,000/- and any other advance received or personal loans to the partners or any one among the partners of the theatre received subsequently from the distributor shall be settled before the end of the contract period of 11 months or such renewed period upto three years. What is sought to be settled before the end of the contract period besides the deposit amount is any other advance received or personal loans to the partners of the theatre from the distributor. Under the terms of Ex.A.12 distributor is the plaintiff himself and not other distributors of Tirupati. The intendment of clause 6 of Ex.A.12 was that besides the advance of Rs. 2,50,000/-, if any further amount is advanced or any personal loan is provided by the plaintiff-distributor to the partners of first defendant-theatre, the same shall also be settled before the expiry of the contract period. Clause 6 further contemplates that if for any reason, they are not so settled, then the distributor i.e., plaintiff shall be entitled to continue to supply the motion pictures and the exhibitors-defendants are liable to screen the same till all the dues or debts or loans are discharged. Clause 6 further provides that if the deposit or advance or personal loans received by the exhibitors-defendants are not discharged, the distributor-plaintiff is at liberty to retain the daily rentals to be paid to the exhibitors-defendants and adjust the same against the deposit of Rs. 2,50,000/- and any other loans. Clause 6 of Ex.A.12 therefore provides a mechanism for recovery of other loans if any advanced by the plaintiff to the defendants by withholding payment of daily rentals. Clause 6 therefore contains an enabling term which exposed the plaintiff to recover the amount due from the defendants. The said clause does not in anyway authorize the defendants to adjust the amounts if any due by the plaintiff to them. In fact, a perusal of Ex.A.12 shows that there was no term or condition stipulated that would enable the defendants to recover any amount from the plaintiff. Understandably such a term was not incorporated for the simple reason that there was no obligation cast on the defendants to pay any amount or discharge any debt to any one on behalf of the plaintiff. The question of defendants discharging any debts of the plaintiff and seeking recovery of the same by way of adjustments from the advance amount of Rs. 2,50,000/- does not simply arise under the terms of Ex.A.12.
18. The claim of the defendants that the plaintiff was due to them in a sum of Rs. 3,55,526/- remains unsubstantiated and hence their plea to adjust the same against advance amount of Rs. 2,50,000/- and their further claim that the plaintiff himself was due in a sum of Rs. 1,05,526/- are unsustainable.
19. Learned Counsel for the appellants contended that though the defendants laid a counter-claim in their written statement in respect of the amount of Rs. 1,05,526/-, no rejoinder was filed by the plaintiff in answer to the counter-claim of the defendants, which amounts to admission on the part of the plaintiff and therefore, the trial Court erred in rejecting the counterclaim. Learned Counsel for the respondent on the other hand contended that the plaintiff never admitted the counter-claim of the defendant. To the reply notice Ex.A.9 issued by the defendants, the plaintiff issued a rejoinder Ex.A.10 denying his liability for the amounts claimed by the defendants as a counter-claim. Exs.A.9 and A. 10 were exchanged subsequent to filing of the suit and before written statement was filed. Though the plaintiff gave a rejoinder notice Ex.A.10 repudiating the claim made by the defendants in his reply Ex.A.9, the plaintiff did not however file any rejoinder to the written statement.
20. Order VIII Rule 6-A CPC states that the plaintiff shall be at liberty to file a written statement in answer to the counter-claim of the defendants within such period as may be fixed, by the Court. Sub-rule (2) of 6-A mandates that the counter-claim shall have the same effect as a cross-suit so as to enable the Court to pronounce a final judgment in the same suit, both on the original claim and on the counterclaim. Sub-rule 4 states that the counterclaim shall be treated as a plaint and governed by the rules applicable to the plaints. Thus a counter-claim for all the purposes, must be treated as an independent action and is to be treated as a plaint in a cross-suit and the plaintiff is given liberty to file written statement in answer thereto. Rule 6-E of Order VIII CPC lays down that if the plaintiff makes default in putting any reply to the counter-claim made by the defendants, the Court may pronounce judgment against the plaintiff in relation to counter-claim made against him, or make such order in relation to the counter-claim as it thinks fit. It is significant to note that the failure to file reply by the plaintiff to the counter-claim made by the defendants does not necessarily or automatically result in pronouncement of judgment in favour of the defendants so far as counter-claim is concerned. It is open for the Court to make such orders as it thinks fit. Even Order VIII Rule 5(2) lays down that where the defendant has not filed a pleading, it shall be lawful for the Court to pronounce judgment on the basis of the facts contained in the plaint, except as against a person under a disability, but the Court may, in its discretion, require any such fact to be proved. Mere non-filing of the written statement by the defendant does not ipso facto result in passing a decree against the defendant. Sub-rule 2 of Order VIII Rule 5 only enables the Court to pronounce judgment on the basis of the facts contained in the plaint, where the defendant has not filed pleading. Even then the Court can still require in its discretion that any such fact be proved before judgment can be pronounced in favour of the plaintiff. The Court can pass judgment in favour of the plaintiff only after consideration of the case of the plaintiff, which comprises appreciation of the pleadings and evidence. When the defendants filed written statement raising a counter-claim, which is to be treated as a plaint, the failure of the plaintiff to file rejoinder or written statement in respect of counter-claim, does not automatically lead to upholding the counter-claim, if the defendant does not satisfy the Court about the genuineness and validity of his claim. Inasmuch as under Order VIII Rule 6-E, the Court may pronounce the judgment against the plaintiff or make such order in relation to the counter-claim as it thinks fit. Thus in a given case where the Court finds that the counter-claim made by the defendants is not sustainable for any reason, it is open for the Court to reject the same notwithstanding the fact that the plaintiff has not filed a rejoinder. Order VIII Rule 10 CPC states that where any party from whom a written statement is required under Rule 1 or Rule 9 fails to present the same within the time permitted or fixed by the Court, as the case may be, the Court shall pronounce judgment against him, or make such order in relation to the suit as it thinks fit and on the pronouncement of such judgment a decree shall be drawn up. Thus under Rule 10 also there is no mandate that on the failure of the party to file written statement, the Court shall invariably pronounce the judgment in favour of the plaintiff. Rule 10 enables the Court to make such order in relation to the suit as it thinks fit.
21. In Modula India v. Kamakshya Singh Deo , the Supreme Court while dealing with the scope of Order VIII Rules 1, 5 and 10 of CPC, held as follows:
An objection to our above conclusion has been raised on the basis of the provisions of Order VIII of the Code of Civil Procedure, Rules 1, 5 and 10 of this Order have been recently amended by the Amendment Act of 1976. We find nothing in these rules, which will support the contention urged on behalf of the respondents. Rule 1 merely requires that the defendant should present a written statement of his defence within the time permitted by the Court. Under Rule 5(2), where the defendant has not filed a pleading it shall be lawful for the Court to pronounce judgment on the basis of the facts contained in the plaint except against a person under disability but the Court may in its discretion require any such fact to be proved. Again under Rule 10 when any party from whom a written statement is required fails to present the same within the time permitted or fixed by the Court, the Court 'shall pronounce judgment against him or make such order in relation to the suit as it thinks fit'. It will be seen that these rules are only permissive in nature. They enable the Court in an appropriate case to pronounce a decree straightway on the basis of the plaint and the averments contained therein. Though the present language of Rule 10 says that the Court 'shall' pronounce judgment against him, it is obvious from the language of the rule that there is still an option with the Court either to pronounce judgment on the basis of the plaint against the defendant or to make such other appropriate order as the Court may think fit. Therefore, there is nothing in these rules, which makes it mandatory for the Court to pass a decree in favour of the plaintiff straightway because a written statement has not been filed. Reference was made before us to Sub-rule (1) of Rule 5. This sub-rule, however, has application only in a case where a pleading is filed but does not contain a specific or implicit denial of the averments contained in the plaint or other document to which it is a reply. Rule 5(1) cannot be made use of to sustain the contention that where there is no written statement the Court is bound to accept the statements contained in the plaint and pass a decree straightway. These provisions of the Code of Civil Procedure, far from supporting the contentions of the plaintiff that a decree on the basis of the plaint should follow a failure to file the written statement, rather indicate a contrary position, namely, that even in such cases, it is a matter for the Court to exercise a discretion as to the manner in which the further proceedings should take place. We, therefore, do not think that the terms of Order VIII in any way conflict with the conclusion reached by us.
22. In view of the principles laid down in the above case, mere non-filing of the rejoinder by the plaintiff to the counterclaim raised by the defendant in his written statement does not automatically amount to any admission of the claim made by the defendants and does not necessarily result in upholding of the counter-claim by the Court.
23. On proper appreciation of the evidence on record, the trial Court held that the counter-claim made by the defendants has nothing to do with the plaintiffs suit and there was no privity of contract between the parties which requires the plaintiff to meet counter-claim and no liability can be fastened in respect of payment said to have been made by the defendants to third parties with which the plaintiff has no concern and the alleged payments are beyond and outside the ambit of the terms and conditions of the agreement Ex.A.12.
24. In the circumstances and for the reasons stated above, it is held that the judgment and decree passed by the trial Court in OS No. 36 of 1997 decreeing the suit and rejecting the counter-claim of the defendants are not liable to be interfered with.
25. In the result, both the appeals are dismissed with costs.