Karnataka High Court
G Shyama Bhat S/O Ishwara Bhat vs Karnataka Vyavasaya Varthaka Sangha ... on 7 December, 2009
Bench: N.Kumar, C.R.Kumaraswamy
M1-
IN THE HIGH COURT OF KARNATAKA AT BANGALORE
IDATED THIS THE 7"" DAY OF IDECECMBFCR. 2009
PRESENT
THE I"iON'BLE3 MR.«-JUSTICE N.KUM.AR
AND
THE HONBLE2 MRJUSTICE C.ra.KuMARAS.--ii2\}'A;$/ififf'
REGULAR FIRST APPEAL Ns;3.1.ioif.éd4O'i'7; »'
BETVVEEN :
Sri. G Shyama Bhat.
S/0 Ishwara Bhai.
Major
Now residing at Man.r'ia..If1ga«iVa "
Panaje, Puituri * .' _ AA
D.K. district. Aiapeiiant.
(I-3y Sri. K M V
1 Karr1.é1i.rak.a V'.y2ir1Jé1s.;i'ya Va rizhaka
Sélllghéli L3é.d:."Arisa1'i Road
»~'Bi11i'de1'._ M'ziz'1_g_&1lv()1*c?-- 1.
' V.V"'.R€Ephi'€§€I1tCfd by its Manager
.SI'i,. 'B'«S ''I"3__an.sari
" S','_Q"=a\_/é: r1"k,a:.iran1ana Bhat
- '-ReSi'cl'i'ng[:=at Mangaiore
,._D.i{,.c.i'ifs'iri(:t..
Sri_. 3~I~{ Govinda Rao
AA ;,_S/0"' Ramappayya
Major
" Residing at Field Street
M&1IlgEiiO1'€*}. k//
3 Sri. P B Anduiitrh
S/0 Araby
Merehaiit. Major
Residing at KLikkuj::1dka
Sullia Taiuk. Kukktijadka
D.i{. disirict.. Respondents
(Sri. M.C. Ravi Kumari Advocate For Ravi and Ravi, Advocates for 1'esp0ndeh'i.»Nrj';._1.}.. isms RFA M;fHed under_scpuon"9s oi cps "
against the Judgment and Decree datieci-:'2.3.'1_.2001 passed in O.S.N0. 86/83 by the 13$"e.A;Vddii.ti'01'ialV' Judge, (Sr.Dn.] and CJM, Maiigaioife. dee_'ife'evir'1g'=.the V' suit [er recovery of money'._ This appeal coming 0nd»VV"!](:)1',_heai'indg' this day, N.Kumar J., d€1iV€I'€v(--3i.jVjh€'fb'ii'O.)}$'i}Tg.I* JIiDkLMEyNTjf, Th_1__s.... Ci':€*ii'eii"c!.ei'nt's""'a'i)pea1 against the judgmefzi and _de:,c'?r.e"e.._.tis£T,_the Trial Court which has decreed thegsuit'0_f"i:.he~...'}5iainiiii as prayed for. ' "«.F"0ii"~.ti'ie purficise 01' eoiiveiiieiice. the parties are_d_i'Veefe:i'»§e'd.\ aid. their ranks as referred to in the ongmaisgei 'V3. 'The,Vpiair1tiff is a joint stock Company :ie~I1e0i<p0i'Vat'ed under the Indian Companies Act. It X/d -3- is carrying on the business oi' Commission Agency in agricuitural produce such as arecanuts. coconuts. plaintins, banana. pepper. cardamom and forest produce.
The first defendant was Managing Director as per resoiutiori 15.09.19"75. He continued ivthxe Director unit} he resign»ed Generai Administration of in him. subject to.':t'h«_e theVV"BAo'ard of Directors in Rates and Regu1ations."i:_ie'-- had the grant loans upto Rt3A_1300/;i'fwithj"Qr""--u?ithout. security. Without the express'"peei9'ini's.s1"o«ri=of the Board of Directors. the had to powers to grant ioagas, _Vo.r--_t*o give credit for sums exceeding '~d.3'i*lx.e had no powers to mortgage or V.hypo'the--..catve'; the properties or assets of the .coAn1ipan'y. without express permission of the Board ite._of_VV"Di'rectot*s. The Board of Directors of the "p-iaintiff" usualiy meet oiice in a month. During \/ -4- such meetings at} decisions regarding granting of loans or advances or providing credit faciiities would be taken. The Managing Director was expected to placebefore the Board of Directorsaii the papers for their consideration. The B::)a'rfc_"ip:<.V:of' Directors with the advice and V' defendant. the Managing Dir.cc~:t»o'rp second defendant. who is would take decisions. V t V t M The second defendaI1t:o.i.s:.tvhe'-,Chiei"ficcpoitintant of the company. down in an order dated 1.8_;'O§'«L Directors. His duhvtpies and':':'..r4es,pVo.risibilities as per the said I'€SO1L1?LiO1'Vi".._"'()f ".B_.oard of Directors were. ..V.inte1ra31iat'.* to"':31ai1it,airi correct and up-to--date AXacc«oants;_*,p'i'.epare and submit, quarterly tria} b"a1a.n_ce"tog._th,e"V.Board. to prepare and submit fina} _ bata'.t1ce"---V:'G.h'e'ets to the Board, to watch the working the Depots. to submit, reports to the Manager _'=_ar1_d"'i:he President regarding any irregtiiarities. to "hcheck all the slips prepared for each payment of
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amounts after verifying the eorre(:i.ness and regularity of such proposed payments. to submit regular siaiuiory reiurne. to make payment of various taxes and fees etc. And he should sub..ini£ to the Board all the consignors debit. which are more than one year old M carry out all the resolutions voi""i;-he l3oav.rjd':'arid--f!.1e'-.& must report the action iaken s.ho.Tu}d'i distribute work among ih_e~.__s1ai"i" _ arid s}"i;1f)"eir\rise their Work. In short. his. :A'(:lv1,_1'Ii),{ waé; ~I,o Hgéee all firiancial transactioris~'jb.e'ir1§§V}carii.ed._ or: properly and in aCco1'da:2--ee wj'i'h'»--i.aw"ai1d 1".eso'.Eutions of the Board to report about any irregulaivtie--s or {he Board.
'l"he_ l3o.a1.'.vCi"o'i1' [5i1'ewc1,ors of the plaintiff during 1-l l}-1e 1982 were agrieuliurisis 2'::_.3éEod.iVng:'=i_An" Villjages. who had no knowledge about marketing_o.rAladminis1'.ration of the company. The ill.'-'«._'Vi7.i1'St d'eVi_fendant is a law graduate and holds a v.'C'_O'fI'lf'f1A'€1'C('3 Degree and is liaving expert. knowledge practical skill in marketing and -6- admiriist.rat'ior1 of the ('.OI}'1;)'c11'}_V. The Board of Directors had piaeed absolute faith and trust in him. The second defendant who has served in the Accounts Department for several years trusted officer of the plaintiff. Compariy. __'1"he-«tie-i:o'ire_4_'*_ the Board of Directors had no 1'easor.--.t:.ogsu:sp_eet'" ' the Conduct and activities of the 2: 0 fl
2. After the resigriatiori 03.03.1982 the Board or D'iv'r'e:.et.()_r-S alppraise themselves of the by closely examining of the company. f.:f§f1(3jJi{r10\Af several unsavozvtiirti :ovi'«VV.:'_'theihdadihiiiistration of the eompar1zyvVVat defendants 1 and 2 Co1luSI'Qn of the defendants. The aiid'"2";"Vthe Managing Director and the °~_':h'ie.i'¥.}3s;«<;eoi;.i1i'ai1t. respecftiveiy. had Conducted themse1v_es7L_iri such a manner that there was appare~~nti;_y no room for suspicion. and the Board _Di'i'=«eetors concerned themselves with the papers V___""pei;taining to the admiriistration placed before u",i.hem. The Board of Directors were therefore X I07 lend c7'r shocked to find defendariis l and 2. misusing the trust. and confidence reposed on them have had a deep laid plan for rnaking illegal gain against»-__t_he interest. of the plaint.il'f company. The 1 and 2 colluded together and acE'ed-:4':iilleg.é§'lEy1V_""e V' unlawfully and contrary to and the Memorandum and Ar1"iycle__s"'loI'l'As's;.ociav€;":'o_n~l_y of the Plaintiff Company. V» .
On 27.06. 1980 1'é'1%'§'t_f djefelndantHlpnrported to have advanced to the :_t.hlii'rd: a sum of Way Bill Rs.94»,600/~ o'_w51'~th;:_ §bérsi-s '' l\lo.78398 was purported to haye 21 Transport Agency M/S.S.A.S".,__alnVdVx:3_o4ns; yTS_.ull1a. On verification of all ___.1,he yreqleve1nt' registers it is found that as noted in the said way bill by the plainiiff company. ll. is l _qui'Le-- clveizilrvldillronl the records that the defendants 1, .an_.d u3"*'have colluded among ixhemselves and have _fl_b"r_o'ug'ht about among t.l1en1selves certain records colour of credibility to the said l/ /, _8- transaction. The first defendant appears to have taken a typed let.ter from the third defendant. wherein a request. was made for advance to him a sum 01' Rs.9-4._600/wagainst the security of-"ul_»OO bags of arecanuts alleged to have been by him as per the aforesaid Way from Kukkujadka. The first appears to have obtained;l':'.Va'n_l Promissory Note dated the third defendant and zone lVAb.ral'ti.in*i.._Ku.n'ch.iA, per the prevailing practice of such a huge loarreou-l'd'"n:oi hA.§t*'54"€ given by the first deg'hten'danf.i the sanction of the Board of Directors. amount could be disbursed 'tAh€V'Tl3OUnd€i1 duty of both t.he xi'd.ei'e"ttria:r1«ts'vi.A.1 to check up and satisfy the goods noted in the way bill hadylhheenyliteceived by the company. And it is the __4'u_.sual pra_ctic:e to note in the Debit Slip the actual oi' the goods standing to the credit of the 'V"=.___"".'pei:son who took the loan. The receipt of all the "consignments are always recorded in a specific E/M register. And there is a register kept at the godown of the Company known as Inward Weighmem Register. And in the office there is another inward Weighmenl. Register I'1"1E1i1'11,vEV).§',!I':.1r€,(.L1. in both the Inward Weighment receipt. of all consignments are particuiar consignment of IOQJ'"o1' on the security of which a».s.t1n1A:4o.fd:'Re.9éi.iV£3d'O,/L advanced was not written V. oi"
Rs.94,600/~ to the t.h"i~r_d edx/divdenjced by the Debit Slip No.2dVd'ett:eVd'i"' and the ledger entry _..o.i7.c:Vt'_'he " Pfijjart from the above fudrdther and subsequent advances defendant to the third defeiidaiit or; v_VE1':'Vi.f()Ll.E~'J: dtttes without the sanction of did"-the 1)1§?e'<:':'o'i~ and finally as on 31.07.1982 found due from the third deienddantddyrdyets Rs.1.23.225/~. The above said H,,__,4itrarlsactdions were kept out of the knowiedge of the "§o.ard=_.of Directors and indeed were never brought V"=._,.j""'toV'[;the notice of the Board of Directors in their 'Wmeeting. There was no occasion for the Board of \i/ the defendants 4 and 5 appear -10- Directors to know these transactions and the first defendant. under the rules Could not have sanctioned the above loans. The second defendant who is a responsible officer in the pIaiy'h----t;iff company ought to have brought this n1atte.r_ll*!.o'thle-«V notice of the Board of Directors of the'helloiripanlyiii He has kept quiet and he has""le'o<1.ltided« defendants 1 and 2 in their his own monetary lC)€I'1€§'i'{.,S.:"v.' Unvder._ "the-.yla'blove circumstances, the said afi'10'Vll'nVV{"._.iS liable7 to be recovered from the _ll;vll.2VLl'a11d 3. They are jointly an;i:l l'tCl.l'pay the said anioumjlll of inierest thereon at 20% froin* realisation. The defeI'l,4(M$.r1t.sll"3._:VEiiid "2 committed fraud and llllbreqiclh pf rt-r.List"ori""t.lhe plaintiff company and they 'are_.peirs"oanalllVyliiiable to pay the said amounts. As the amount: due on the above f"~.«.4_l'a,ccou1itis Rs. 1 ,41,708.75. if 'The defendants i and 2 acting in Collusion to have \\/ ./ wig"
nefarious dealings of the first defendant; Both the defendants 1 and 2 along with 4 and 5 are personally liable to nialie good this amount. As on 16.10.1992, the amounts found Clue l'rorV1V.1'f,:Mtf'li1.Ve defendants 4 and 5 was Rs.l9.353.50 thereon at. 20% pa. from that 31.03.1983 the amount due .3 Rs.2l,l27.25. 3 3 3 3 3 3 The defendants l andffiljfas Director and Chief ACcoL1nta'ni.__ gflziintillilffflCompany ought to have taken all- safeguard the inaferesZ1"s.l[_.. offQV1h'e'=._' company to realise ihe £:111}OLif}l'fS.'.t",flLlVt'.. ':.'o~.V"ii:fa'-,fi;_:>111 its Consignors or ouston_1ers."-. ffB,l.V1l~, Ad_ufe" to their negligence and V careleissness they have not taken necessary steps fo:Vr'eooE\}lerjz..,Qf anioiinis due to the plaintiff before 'ills f(:la'ini'l.,WaS'*-- barred by lirniiaiion. A sum of due from one B.lbrahim of Bapel
--VKu:1chi"§-T'&er{:1a1a Post. Kerala. The Claim against u'~--hfim_for"ihe said amount was barred by limitation l\/ V13"
on O9,01.t982. There was another sum of Rs.5.113.T/"5 due from one Kasturi Nayak. wife of Shantharama. Nayak of Nettanige Mudnur Village. Kavu Post. Puttur Taluk. The Claim amount. was barred by limitation on The defendants 1 and 2 otxghtado appropriate legal action againgst. SaatdV"pe'rVson:.:vaA before the claims were ttmte'«.barr--ed'.' Aft1ay'e_:n0Vt done so and the plaintiff ctonipany is.'§,~gt: to toss on account of their :'1.eg1ig_et1.j_ce.""»._'pa_:*1'hereI'ore, the defendants 1 and V1tai3_Ie..7_to"fpflay the said amount with, ozi _t.hjeV" at 20% per an11um:"--.t'r'orI1' due dates. But the plaintiff 'cornpany7._ota.i'I11s interest. on the said
--'v.p_amc}"Ufl!f1t.:__f'E'1'on1AAG~4;.r___.}__'1v.1982 the date of 1'egts1'e1*ed ."..A11e.t'i"r;:Vep.'v__ASj.o'1'1.._31.03.1983 the amount. due on the a13."o\?L5 is Rs.'7.256/~.
Tdhe; defendants 1 and 2 ought to have "'p.dc.b't.--at_Aned licence under the provisions of the .._K_arnataka Money Lenders Act. as the plaintiff ki/.
W14, company was advancing the loans to its Consignors. The above t.ransaet.ions amounted to the business of lending monev Though the Said Act had Come into force in 1976 the dei'endan"t--s 1 and 2 did not apply for and take the 3 licence under the provisions 01' the said did not possess money 1er1de1*s"Iioe'nc:e<. Tii.e"re_fodr"e' a7 suit in o.s. No.e54/1980 on 1.h'e.. file of LilfiefM'ufi:.gi'~if"*--.. Court, Mangalore again'si«1r't.one'._S'i=i..}Gu1vndVVappa Gowda was disniissedday The evlaim in the said suit was for Rs~,4.7'7»T3.5'3ViV.xtt1'thiinterest and court: c.o"s't:..._V'7':héj:::f:§"ot.a«E»'*1.oss""eaused to the Dlaintiff Conipany on 'a_ot:~:o:,initV'Vo._{"'t,_he dismissal of the said suit wasi"Rs;v5;2'5$3.%8..;': And this amount was "'~,fK§ee;fV'er?1.3,5l'?. fron'1~--....1..}1e defendants 1 and 2 with '=.inte"r'estv.._t'tt',hereon at 20% per annum from date of dismissal of the said suit.
on ~3d1';03.I983 the amount due on that account "is .R§';~«_s,3 12/--.
_1L_ The plaintiff eompany got issued a Iegai notice on 04.11.1982 to the defendants and also to one Sri.K.I'"I.Mohammed to whom aiso defendants 1 and 2 appear to have made of large sums of money in the san1.e;" V' without the sanction of the :.E3'c)a.rd The defendants 1 and 2 1.0 would appear to have a1rea_d'y_ insV'ti.iu'!.ed.: in o.s_ No.41/1981 on,---ihe ,Fi'ie"L_"oI"-»_ihe "cvmi Judge Court, Puiiur agaiI1St4'h#i.f'l'i.":_I3i§'f€i1'dElViiiS 1. 2. 4 and 5 have sent V firiiiioloieiidsivb'r'ep.ii"e:s,_ to 'ytvvhe registered notice s bu};/::fi.:1"h e'-- -- iI1'fi"{"'f--. ' The "e_oia1I1§ofn,h for the claims made against iliefidefelida--t1't's"Vl1ei'eir1 is fraud. breach of K'1sFUSv.t'.."':~(T.;O_11I.l._SiOI1'Hgi'~£EVVCf riegiigenee and carelessness duties oi' the C1€'.f'€31'}daI11,S 1 and 2 andVoihei*d.efendanis. AI} the above ti-arisaetions are closely knit. together and prearrangement and "£.i:eVrefore the cause of action is common. "=..__""Therei'ore. a common suit is fiied. Therefore. they kl/A. "r16"
sought for 21 decree for money in .21 sum of Rs.1T/6.504/--. Subsequently, plaint was amended and the claim was reduced to Rs.1.4l,7'08.75.
4. After service of summons. the entered appearance and filed a statement. contesting the admits that the he was the piainiiff company for 7 has worked and disChaf:g~e_d law.
provisions of the of Association }:3_l21§in:tlil"f.'if-lo'n.1Vp_s;i1y and to the sat,isfa?r;tioinllllofy of Directiors, honestly, c1i1igemi'y..._ "peas.¢ri;;:ni'y.._:':"aiid bonafide. keeping in View the belstAi1"1terestls of the Company. All his la'cit_s'i"\iize?i*e either Vsléihcrticwiied and/or ratified by the lflolarcli' Ihiring the said period, the com-pany Dhas shown great progress and "<«_!'LI1'1}1)I'O\.f.E':Hl'"AI;:I€1'1'L. as is known to and adiliitted by all "'CQ'n_ee::ned. The accounts were auclitecl and the 'lit--..flBa?1ance Sheet was prepared regularly and as per -17- law. and all mat.t.e1*s were approved and accepted by the General Body.
'The allegation in the plaint. that the Managing Director had the power of g1'a11ti11gvVl'o:a»1is only upto Rs. £.OOO/- and that without permission of the Board of Di1*ectors_..V__hle::. power to grant loans or to exceeding Rs. 1.000/~ was deiiieii. The appointment oi' Nlainahgiiig D}ii*ecto1* does not disclose Vt.'hfé"_s'aici_v.lre..s;'t.ir.'ietions. The defendant reco.1lects_...si_lI'a.t'._Al"oi"'ll"'so'iiie". years the authoiity Director for the sanct.ionuoi'--loans':_was~.__ti~»i1limited as per guidelines. At any_ Valvl_i.he. trllansacétions including loans place during the time the 'r:leifeTnd..ai1_tfi,"w_a"s functioning as the Managing Direyctor with the authority. sanction or "I'_'E1[ifiCK:"!l;lAf'_:_'1'l of the Board of Directors. The Board '~o"fVVD»irectors are not entitled to escape the ""'responsibilit'y for their actions and omissions. if uflany and are not entitled to point at others for the it i;gW the piaiiitiff is $E,i})pI'€SSiI'1g documents iake at the proper time. He suspects the genuineness of the documents shown to the defendant. as the promissory note executed by the 3"' C1(3f'(3I1(?1.':v'1V1".'.i:"">'.).I'i 27.6.1980. The suggestion in the was granted on 27.6.1980 to the without sanction of the correct. The defendant does granted any Cash loan 3"; a sum of Rs.94,60O/--y"~o_I1 i5i;i'rt'her the advances referred to inthe5p1_.ai'--n_'éV.v"said to have been made 3!}? C'3(f,rI3f311.{i"'c'1'i':i~~1j.uCfé"Va1'iOuS dates wiihouzi thee{svaheiiio_n'«..o'_of Board of Directors etc... is allegation that those U'aI1S;'--1C1;iOI1RS kepdfs away E':-oni the Board of V."DiI'e'.(',if0iI_"S "is fai's'"e"';"V The aliegaiions that a sum of due from the 3"' defendant is not eorreici._.".r'¥._EiiV'a1iy rate. the 1*' defendant is not 'V1_iab1e*~t.voA';.Lhe piairitiff any amount. due from the 3?"
for any of the reasons alleged in the "°p1Vaini.. 3"' defendant: P.B.Andunhi would transact Win other names also. This defendant reeoileets -20- that on 27.6.1980. the amounts were due to the plaintiff from the 3"-3 defendant taking into account. aiso the liability in respect Ol'O't1'l€i'I"lE1'__I'I'1€S transacted by them. adjustment entries on that date and documents are taken defendant. for the balance amo__u.nt__for"tlhef'_p.ti'r:p'oesecu of security and convenienceifléotfirecftJ\le~ry,':"a"ft'¢e";..:
receiving some Cash froné:_"i.,he Anduhni. This was done Sri Narasimha Sastry found it desirable in the. inteirest. Company. The .:li\{afi.lfVJ5iV"?il'n'ii"':breach of trust are are not furnished.
'I'h.erefodre._" do not amount to a proper This defendant is not able .._to r..e§coli~ect the' transactions with defendants 4 'a'f1dV.Vd"'5,EV"ihVVeA~.'nature of the transaction and the ~i1"ansactions. This defendant is not «t_i_i.e'a'rnot1nts due from defendants 3 and 4 to the p_lai.ntiff. The other t1'ansact.ions referred to ~w__V'are alsoéienied. At any rate. this defendant is not t.o pay the said amount. The defendant. is M ,2]-
not in a position to say whether the license under the Money Lenders Act was required or not. The plainiifl'--Cornpany had iawyers for giving the advices and if advice is not got on what dot?ti.nie:ni{_s have to be taken regarding the Money this defendant is not iiablem However. he reeollects the .l license were aiso being n'1a_de l"i*.o;ln1 time He do not recollect. urhalllvlvllhaiabened. tlielllsuit mentioned in Pai*ag!'a_'pyh lhe suit is dismissed on the resignation Qf4l.'lfie' dei'e':11d'aA.ni'.".'uflfhe suit eiaim is barredzvlby i'ir:ili_i.at:i.o11_.'lV.The eiaim is also barred by the principles' waiver. acquiescence. All theyEran'sac:t.io11s.that have taken place during «gs "" "i'Vlar1ag,.;ii'ig [Director has been l's_aVi;et'ia.o:r1ed-_l"appropriate and ratified and are done with lproperiailluthoriiy as required. "defendant. W Sri ii Govinda Rao also has l-_i'i"l_e'c.i~a separate siatemeiit. Some of the members it "o.f7ihe Board of Directors wanted to make wrongful lye Wggw gain of the funds of the Company which this defendant was opposing and so only to wreck Vengeance he was placed under suspension since 19.10.1982, an enquiry was ordered by i'ra.n'1--.ing charges and that made this defendanr from the post in which he was \x!o1'kingi_f€:
additionai harassment, the pr'e'seni:&_ fried and this defendant was This defendant joined the_VL4""p_1;--1i11.Viifi" 11 Vyavasaya Varihaka,'Sangiha..."L_Lifni.i,ed cierk in the year 1956. as Chief Accountant o_r1'1y which appoin;£meni.Av(was7';eoni'i.rmed in the next year. No specific7duties*werebg-iy'e.1J.='to him. He was also not served witxirydaoytr_eso'1u.._i'iion passed by the Board of"
_ Direcitovrs. Theyuappointment order only indicates he .ew.a"s--._V responsible For keeping i,ipwto~date a-Ceo-11ni.s"~._aiid._.i:o act per the direction of the Managinvg.ttijiirzector. Therefore. all aiiegations in fthe p1ai'"n.ci'. contrary to the said facts was denied. .i}..8.4[:1970. when his duties were Iaid down in 1' ''~7.1.I".1t3v._()1':'-'(l1(:,'I'._ he was not the ChiefA('couI11iant. The .5 W24."
docunients which the plaintiff is relying on in the plaint. He is not in a position to recognise as to which were the doetimenis referred to in the Dlaint. He denies the iosses to the tune"--.yof Rs.94.600/-- as set--out in the plaint. liable to pay the aforesaid aI}'iOL1I1lS.W been no fraud as alleged niu(:h trust. To the best of defendant. accounts were were drawn. advanoesx ha.}.»"e" or by ratification by the _.He has also denied the paiigavgraphs. It is not hisgdulvtly"t,5o, license tinder the Money Lendersl'Act. if.thVe_fbd--e:e'i«s~io11 has gone against the cornpany. it" is it'.o--i' 'i.he':Con'ipany to challenge the lV's.aid'-ijlucl---gnment. l'i'i"i'el defeiidant has not advanced 'a_n'y_"ino*ney"'..fio~" anybody rnuch less the person nalmeld in.lblai':;agra13h 7. The suit is bad for non- joinder and mis--joinder of Cause of action. The '~p'lailnt«ii'f's eiairn is barred by principles of estoppel ""an\;:l waiver. The suit is frivolous and therefore. he llfisotlght for dismissal of the suit.
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6. 3"" defendant' also has tiied a detailed written statement. He has categorically admitted that he has been dealing with the plaintiE"f/Conipany for many years past and has consigned &11'1'21C1{an~7t':t't'.7tO the plailqtiff on many occasions. It is on 27.6.1980 this defendant of Rs.9-4600/~ from the ptadi»itt'i'1'E7 waybtil 11078398. It is eottuded with of them. The avern'ie;31_s ma'deivi_:':t.ti'a_t. t.h«e'1*'e i"'\V2§\/as no consigning of areka defendant is not aware a:-:-_te»_ what' o,r"iS--..i10iIrecorded in the i'egiste,i" 0f'th;'e_V 1)1?air1.t'i'tf&t'. it not true that some more ad.va«neeisVi'ittcttie-~._tVtCvbt;'ained by the defendant S1,1bSeq_Vt1e1it"tyV.V' .ff;hiAs_ d"'efendant decided to go and d_'0.:\N}_1AiI1"B()"fiib€ly. Hence. on 5.7.1982. this '_dpeV1'*s0na11y went to the office of the platintiit a'n'jdf:paid the entire amount. amounting to ?igs.1_'2..3"';22'5.00 and the promote dated 27.6.1980 f§':1r1di"'QAther eonneeted,doeuinents were returned to 1*" defendant had by then left" the
7.:ntaiiitiff/eonipany. This defendant. paid the
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aforesaid amount. into the hands of A Gopalalwishna Bhat who was the manager incharge of the plaintiff. The said A Gopalakrishna Bhat also said that he \PVOL1l'Cl..VV't?3."('i'2>17\.V_Ci a receipt for the amount. paid in a On 9.7.1982, this defendant w-rote a_.le»t.,t':e~1"V"t..o «.t.l'1e'u 4 said Manager incharge requesting...l11rtt«._t":o_' receipt. by registered post; Thei:¢"was to that letter. He did not pttrsiie' the lrii-after since he was busy making pr'e__p"a1"at:iohs" t"o.go to Bombay. If the plaintiff has produ'Ced.'V_a{1y:'~p.i"o't1o.te to be the one execL1t.eci"'t}y.' tliiisidéféndefI11..s._V:'ll is a forged document."i"v{TVhe7t'sL1.<i't'«..."is for non-joihder of necessary pa1'tiVes.;"._
7. Defehclaivtts 5 also filed a detailed '*,_wI"itfter1:sLatem"e'n.t._,____.The SEi11(',l'.lOl1 of Rs.30.000/-- on V"._q,2/L12.1.98(3.._o'r___on the earlier dated 2.l2. 1980 in a as alleged in the plaiiit were 'Vdenierl."'.a All the borrowiiigs were made by these ifdefe-iidaVrit,s on executing necessary records. It is 'denied that'. these defendants :~;21"e liable to pay ll/i (6) _28_ the dei'enda1'1ts 4 and 5 the what amount?
Whether owed to plaintiffs any and Whethex" any or both defendants along with other defeI1dants._ ' tho'-,x"
make good the amounts 1'(s'u1'1"d*.ft»Ohh"
be due from the Ci,F51'6;fld§1h'1/5' and 5 and if so. what "a_ni--ounts?; ' ° Whether the SLiitHx"i_t">a;V niigs joinder 0f.ea.usesh' of sajetji'0.n'? Whether t.h_e ' fV1§~--. "b~i::;V::r7-ed by 11n1:.:t'91._ti:'on?I_ N h 'V V "the Claimed are principles st opp e i" agai'i.ye 1* 21 n d 21 C'. q U ie scene e'? Vvere negligent in pe1'i"01'manee of Whe't~he:' defendantis 1 and 2 duties in not applying for not obtaining license under 'fie money lender Act'?
Whether the defendants 1 and 2 are liable to pay to the the amount lost to it on accotlnt of the dismissal of the suit ()5 the 1 and 2 are of ;:)lamtiff
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N654/£980? And if so. what is the extent of their liability'?
(13) What relief'?
9. The claim against. defendants 4 and given up. To substantiate the claim of 1 to 3. plaintiff examined a_;»SS_B addition. they have produced are marked as Ex.P.1 defendants. no evidence wa_s..ad.d'u_ced.l
10. The trial 1-_alfj'p_re'c'ilalion of the aforesaiidl"o'rf.ali.anddoceu'-menla'*i'y evidence on record held the lp_lalinili~ff1's 'a_reA..»p_r:operly represented: The plaintiff esi.a_bAl'i_vsli.,e1d that the loan granted to defendallfitwas unauthorised: 3"' defendant lfowelili.io._l'L'h;e». jp1..ainiiff' in a sum of Rs.1.41.708.50/-- as .Cli'ain1etll'r:'j_iln'lhe plaini; The case of fraud. breach Cof falsificaiion of accounts alleged in the ..fpfa'il1'i.fL is not established. The claim against 'edlélfendants 4 and 5 was not pressed. Both l",VHdefe1ida11i.s l and 2 are liable along wiih other 'LL/,_
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an audit report. the findings recorded by the trial Court; is vitiated.
Thirdly, it was contended the Managing Director cannot be held personally liable ifflany one of the customer has not repaid V. amount. When once the plea of fraud islli:..egaié.iiled'.-..l when 8"? defendant -- the cnstorner'iszal;soV:"a_§a'r't:y"1 to the proceedings, it' is _operi?_to",_t.he recover from the 3rd de['e'11r.d'ant t.h«els.a_"1_;d '*=afin"oum and there was no ol£3~li.giit,iO"n 'oil til'? Darlt'*of"lthe ls' defendant. to Clear the said»Van1o_ni'nft....and therefore, he Cont,e1ided,«s:ee_11 the judgment and dectre-el requires to be set» aside. PlerullVcolntr'a."diiearned counsel for the 1*espo{nder1ts 'supported the impugned judgment ' lr1._t*l<1.e" of the facts and rival eoritentions, t.he'-.followihL.g points arise for Consideration in this -32- (1) Whether the 1*' and 2*" defendants are liable to pay the money due from the 3"-' defendant to the plaintiff as held by the trial Court?
{2} Whether the suit filed without report was maintainable'?
{3} When a case of fraud, trust is held t.o be is the 1~"*'- defendant liabletlo pa'3(it~he«. it suit claim? T A it l3. Po1'ntNo.1 The material re.eord' '«di.s'€»1Aoses H that the plaintiff is a V PriVa_te:' '(l3:._on=l1par1y. 1.9' defenda,nt.* was"apL§)oi'i'iit.e'das a l\/Ianaging Director of the saidltColi;1;5a.n'yA;} At. the relevant point of time;§<2""~ defendant was the aeeount,ant. of the said eolmpazjyit.--.u"'l'he Directors 01' the Company are ag.rie_ulVt'ur'ilst's.;'x 15' defendant is a Law graduate _ who."ha=d exspertise in marketing and management 44",a11Clt_'the'refore, he was appointed the Managing _=_Dir'eeto1*. The material on record discloses on ~2--7:.6.l980, the p1aiht.ii'fpa1id a sum oi" Rs.94.€>OO to ]L/..
"33- the 3}" defendant. -- a customer of t.he plaintiff on his supplying 100 C[i.iiI'lEalS of arraclsianut. The material on record discloses apart from ___the aforesaid transactions on severai OCCElSlOF}"S~.,i"'.3""'j defendant has been paid money by The specific case pleaded by _t_h,e__pla--in'tl'i'ill"_':is"=that.v' the manaéiing director was 7--_not"A.'éiiithOrise"d"*~..,4t'tc-.i_A advance any sum in exeess=.__of the prior approval oi' the Boa-1f:d-.yot' D'iitel_c'torVS. The present transaction '=,\i'as'._ 1:'_eve'*r_'<.brought to the notice of the Board asst-v,n'ec:e.sspa1?y'.enii':'ies were not made in the .()l'. a:'eeotin.ts' niaiiitained by the Company aindbihe"i_ei1pt'.i'ije eornflpany was managed by dei"enda"nts._ ll was never brought to the nVot'._'icr:: of Alilfi€Tj_."'b0E1I'Cl. On 3.3.1982. 1*"
defengjdant resigned." Subsequently, 2"" defendant a'lso" It is on their resignations. when 1a.ceo1li1.tTs.._pwere}. checked, then they found these comrnitted by defendants 1 and 2.
fptnimedyiaijeely. a legal notice was issued. The books fof' 'a~c;count.s maintained in the plaintiffwcompany .'j_.d"ob"i'1:ot disclose the receipt of 100 bags of _34w araekanut on the basis of which the amount was tent to the 3"-' defendant. The evidence on record discloses that. 15>' defendant was not authorised to make any payment without. securing prope1ft,yjrfo.r the due repayment. The procedure whenever a payment is made under on the backside of the debit1;.""t_j}_1e secured as a security_.Vi7,.."--.t"he ag_1iic'u°itti;r'avlV produces is clearly n1ent.io'ne'd. T'h._ereafte~r,"that. product is taken in.t"o~.,.aceotirit;i'i'on1 thv-e"c'ornpany by making appropriate e'nt:rie.s1"-find'*__the inward register and sable 1.0}? ajprodticts. after adjusttVnent',i'«ithe wasvdwrioriilaily discharged. As aforesaid. 'if"a*ny<.__Ir;»oney is tent in excess of Rs.10(_3O/.d'"E31'i'o.Fi-.Pe--1'bm~.i"ssion of the Board was a "'."mLES"E':«:. _in fac"t);«___1_,__h¢e documents produced in the c;:Aa'e.e"as':' pointed by the trial Judge. all the r'es'o'_iut.'i'o"1*:s.t"a'i'e in handwriting of the 15' defe-.nda.n~i._d'<j'..--Ai it does not disclose that this ".t'ra11sa~ct'i;.on was brought to the notice of the board any point' 01' time. in fact. in the written
--if.--st--at'eArI1ent'. the 1*" dC'f€Ild£-111E. pleads ignorance \\/.
-35, document produced and marked in the case showing that there was a debit note for 100 bags of arrackanut do not represent. a genuine transaction. It is in this background is to be appreciated. But. none of the V' have entered into the content by cross examining the Company. His "ho assistance in provin_sg.the but through him they documents maintained 'business by the piainiti'§:i",(__b'an'.i;Iilihtetdsttttdddtproduced the memor;an'dVnt1ntV5»v'_V 01' association. promissory note by the 3*" defendant at the tirne Rs.9-4,600/m. He has V."{)_I'OC'...1.i:'(?f;'CA1 L?aAbOL1i.'"2'G'vd£?biI notes showing that 3*"-
"'~ae';'e_n'dé.-mi.t;\:;1s-. a regular customer to whom the arrtohtintsytwicrle paid and in the back side of the "said debit notes, there is no ment.ion about any '=_secLi'rity having been taken from him. The account ibogoks produced in the case shows either on 27.6.1980 or on other dates. there is any entry in via l in I' t. ii. .
_38i has failed to perform his statutory obligations. It is not only one transaction. There are more than 20 transactions where money has been paid tov'--t_he 3"' defendant contrary to the proced.ure.7i"-Ttfhe-., accountant who was in employment it who has been given p1'on1otion:-'aihd.yatithve:Ai;ele:vva:ntx'v.. point oi' time who was the failed to bring it to the and directors about,these-----iljrregiilaritjievsy.He is also a party to this" In fact, the disciplinary pr'oce_edi:n"gVs'weVi*e._l:i.iiV.litli'.a.i:«e'»dllagainst him and therea "terI__*.'_ it __ was ilwithdrawn on his resignat.ionl'."'€5'VRig:htlyghe not challenged the said order." He.al:_ls.o"'d__ié:i.not step into the witness box to _subslta_i1tia'--i.e"pthlell defences which he has put Invv.:'t«Vhesje._}e.ircumstances. we are of the View _ that-..__thev~fivnsdlings recorded by the trial Court that .4"-__VVI"'iQ[r or1ly__l'the 3?" defendant is liable to pay the said 4"7"c?..__II'if.,)_L1l.f1'[, even defendants l and 2 because of _la__§)ses. latches. negligence in discharging their ¢39«~ dues in unauthorisedly tending money to the 3""
defendant. We do not any jtistificatioii to interfere with the well considered order passed by the triai Court holding that all of them are liable to pay the said amount.
14. Point No.2 It is a fact that audit report before the Court. The suit .d report. The suit is o"n_h"t.he showing the payment to Debit notes are "Hdisputed.
Promisisory i's"~._pr_o_dueed which is not disputed'.. TheVae--eo'u__n't'".books are produced to showjvtihpat araekanut for which this 'a'rno'uni.7*vtfas adtfaneed was never taken into plaintiff and above all the 3""
defe..ndan~tradlrnitted the transaction and he pleads x"i«___V'diseha'rVgAe and he has failed to establish the plea "o_iVd_is";eharge. Under these eiretiinstanees. the trial Cdurt was justified in ignoring the fact though no "audit: report was produced. as the ease was based \/
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to the Claim made by the plaintiff independent. of fraud and breach of trust. When the plaintiff has established his Claim. the trial Court. was jufis..tV_i'-{died in Coming to the said Conclusion. We dQ:__1;iOf :"~S_€'€__x'_ any merit in this appeal. Accsif»diz1g1},".""ti*{:e..Véigjp-eaiyé is dismissed. Parties to bear t1f1€i§,"'--Qtk\'Ii=,CO.SV'L'S_'~~U,,,,_ AH8 / bnj: