Rajasthan High Court - Jaipur
Ballabh Das vs Rajesh Chand Gupta And Ors. on 31 August, 1987
Equivalent citations: 1987(2)WLN778
JUDGMENT Mohini Kapoor, J.
1. This is a plaintiff's appeal against the judgment and decree dated 31st March, 1978, passed by the Additional District Judge No. 1, Jaipur City, dismissing the suit of the appellant for the recovery of Rs. 20,563/-.
2. The facts of the case lie in a very narrow compass. The plaintiff appellant advanced a sum of Rs. 18,000/- on 1-4-1968, for which a pronote and receipt was executed by respondent No. 1. This pronote describes the borrower as Rajesh Chand Gupta s/o Harish Chandra Gupta, c/o Delhi Sanitary Stores, Choura Rasta Jaipur. The pronote has been signed by Rajesh Chand Gupta without specifying as to the capacity in which he has put his signatures. On 8-6-1969, a sum of Rs. 5,000/- was paid towards the loan by Rajesh Chand Gupta and he made an endorsement to this effect on the reverse of the pronote. The allegation of the plaintiff appellant was that the money had been obtained by Rajesh Chand Gupta in his capacity as partner of M/s Delhi Sanitary Stores, and this firm as well as the other partner Shri S.C. Gupta were also liable for the amount which remained unpaid. The suit was instituted on 3-10 1974 and in order to bring the suit within limitation, extension was sought on basis of an endorsement about the payment of Rs. 500/- by Shri R.K. Gupta, Advocate, who is said to have paid this amount on behalf of the firm and therefore, amounted to an acknowledgement within the meaning of Section 19 of the Limitation Act.
3. The respondents filed separate written statements. Rajesh Chand admitted the execution of the pronote and taking of Rs. 18,000/- but he denied that Rs. 500/- were paid by Shri R.K. Gupta on his behalf on 8-6-1969 so as to say that this payment would extend the period of limitation against him. The other respondent viz. Sushil Chand and the firm denied having obtained any loan of Rs. 18,000/- from the appellant and also denied the fact that the pronote had been executed on behalf of the firm.
4. The learned lower Court framed the following issues.
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5. The learned Additional District Judge held that pronote and receipt were executed by the respondent No. 1 in his personal capacity and not in the capacity of a partner of the firm and that the respondent No. 1 alone was liable for the amount of pronote. The payment of Rs. 500/- by respondent No. 1 was accepted by this payment was not held to be on behalf of the partnership firm. Coming to the payment of Rs. 500/- made by Shri Ramkalyan Gupta on 6-4-1972, it was held that the payment of this amount was proved by the statement of PW 4 Ramkalyan Gupta. This sum of Rs. 500/- had been realized by Shri R.K. Gupta, in execution of a decree of the respondent firm one U.N. Sharma, so far there is no dispute. However, according to the plaintiff appellant, this amount was paid to him by Shri R.K. Gupta on behalf of the respondent firm but respondent No. 2 has claimed that Shri R.K. Gupta handed over R.s. 500/- to him. Considering the evidence in this respect, the learned lower court held that entries with regard to the payment of Rs. 500/-in the account books of the respondent did not appear to be correct and the payment to the appellant was proved by evidence. However, it was also held that this payment was made on behalf of respondent No. 2 Sushil Chand and not on behalf of Rajesh Chand, respondent No. 1, and when the payment was not on behalf of the person, who was liable under the pronote then the payment would not extend the period of limitation against him. In this situation, the suit was held to be barred by time against the respondent No. 1 and as such it was dismissed against all the respondents.
6. In this appeal the learned Counsel for the appellant has first of all tried to show that the pronote in this case was executed by respondent No. 1 on behalf of the firm M/s Delhi Sanitary Stores and as such the firm was liable for the amount due in the pronote. His second effort's to show that the sum of Rs. 500/- was deposited by Shri R.K. Gupta on behalf of the firm and as such the period of limitation stood extended and the suit was within time against the firm as well as the partners of the firm. A submission has been made that the respondent firm maintains regular account books but the same have not been produced and this calls for raising an adverse presumption against it. According to him the amount borrowed from the appellant has been entered in the account books of the firm which goes to show that it was actually the firm which had borrowed the money and was, therefore, liable for the payment of the same. In the alternative, it has been contended that atleast decree should be passed against respondent No. 1, as he has signed the pronote and subsequent payment has been made by Shri R.K. Gupta towards this loan, about which an endorsement has been made and instructions given by one of the partners can be said to amount instructions on behalf of another partner also. The learned Counsel for the appellant has contended that the particulars of the person, executing the pronote as entered in Ex. 2 are not for purpose of identification of the executant but they are for purpose of showing the capacity in which the pronote has been executed and thus according to him the pronote should be taken to have been executed by respondent No. 1 as partner of the firm.
7. Reliance has been placed on (Indur) Pattabhirami Reddy v. (Kamishetty) Balliah AIR 1928 Madras 1196 wherein it has been held that where some of the partners signed an agreement without any words following their signatures to show in what capacity they signed, but the instrument sufficiently disclosed that the agreement was made on behalf of the firm, then the other partners also were bound by the agreement.
8. In Atmaram Mohanlal and Sons v. Motandas Dev Dayal and ors. AIR 1930 Sindh A) it has been held that the words which may be construed as merely description or as showing the designation of the person signing the instrument will not be sufficient to make a firm liable. It is the intention from the instrument which is to be seen in order to see whether the firm is liable or not. In this case a hundi purported to coma from a firm; on the instrument were words purporting to show the drawer as the firm. Merely because the partner signing a hundi did not disclose that he was signing on behalf of the firm, it was held that the partner would not be made personally liable and it was the firm which was liable for the amount.
9. On the other hand the learned Counsel for the respondent Nos. 2 and 3 has contended that a pronote is a negotiable instrument and a person who signs his name to it without disclosing that he signs as an agent or that he does not intend thereby to incur personal responsibility, is liable personally on the instrument, except to those who induced him to sign upon the belief that the principal only would be held liable, under Section 28 of the Negotiable Instruments Act. According to him the document by itself has to be looked into in order to determine as to who is the person liable under it and no supplementary evidence can be looked into for determining this question. According to him if the document has been signed by a person in the individual capacity then he cannot escape personal liability merely because he is a partner in some firm. According to him in order to make the firm liable, it is necessary that the pronote should disclose the fact that the intention was to make the firm liable and not the individual signing. The decisions cited by him shall be looked into but his contentions are that the Negotiable Instruments Act prevails over the Indian Contract Act as well as the Indian Partnership Act and the liability will be that of the person signing the pronote even if the amount has been utilised by the firm. The contentions about the payment made by Shri R.K. Gupta shall be considered later on.
10. In Madangopal v. Narsingndas & Sons AIR 1951 Rajasthan 64 considering Section 28 of the Negotiable Instruments Act, it has been held that where a person after signing his name on a negotiable instrument adds Managing Director or Managing Agent, it is not sufficient to indicate that he is making the Company liable and thereby excluding his personal liability. It was held that he must clearly indicate the name of the principal on the instrument itself and state that he is doing it for or on behalf of such principal as agent and not in his personal capacity.
11. In Hiralal v. Ratanlal 1967 RLW 383 the suit was based for the recovery of money on a cheque executed by one of the partners of the firm. The Bank was directed to pay the amount out of the joint account of defendant Nos. 1 and 5. Considering the circumstances of the case as well as the law applicable, it was held that the partner was not liable for cheque, signed by another partner alone and not indicating on its face that it was drawn on behalf of firm. Merely because of the direction to the bank to pay from Firm account would not make it sufficient to bind the other partner. It was further held that where the suit was based on Negotiable Instrument then the terms of the Negotiable Instruments Act were to be looked into and the provisions of the Partnership Act or Contract Act would not be looked into for purposes of determining the liability.
12. In Ghisulal v. Hazi Mohammed 1980 RLW 134 one of the partners took a loan and executed a pronote, describing himself as "proprietor of firm." It was held that absence of any other evidence to show that the loan was taken for and on behalf of firm other partner were not liable. A mere description as proprietor of firm does not make the firm or its other partners liable.
13. In Kastoor Chand v. Shiv Shankar 1986 RLR 421 the defendant took a loan from the plaintiff. The defendant was a Manager of Co-op. Society but the loan taken was not on behalf of the Society but was for purchasing sugar for Society. Considering the terms of the document, which said that the money was advanced, to the Manager for purposes of purchase of sugar for Upbhokta and money to be paid by himself. It was held that there is no ambiguity and defendant is personally liable for such loan.
14. In M. Rajagopal and other v. K.M. Imam . One of the partners signed the pronote but he did not sign it on behalf of the firm, nor there was any other material to infer that the pronotes were executed for the firm. The other partners were not made liable and it was held that the provisions of the Negotiable Instruments Act would prevail over those of the Partnership Act and the Contract Act.
15. In Thummala Rama Rao and Ors. v. Chodage Venkateshwara Rao and Ors. , a promissory note was executed by a managing partner in his individual capacity, without giving out the intention to bind the firm. It was held that the Firm and Partners other than executant were not liable on basis of such a document. It was also observed that even if the amount borrowed had been utilised by the firm, it could not be made liable because the executant did not act in a manner expressing or implying an intention to bind the firm.
16. Section 22 of the Indian Partnership Act provides for the manner in which an act or instrument can bind a firm. It says that in order to bind a firm, an act or instrument done or executed by a partner or other person on behalf of the firm shall be done or executed in the firm name, or in any other manner expressing or implying an intention to bind the firm. In the present case the pronote may be looked into once again, in order to look into the description which has been given in it. It is Rajesh Chand Gupta, Delhi Sanitary Stores, Jaipur, who has executed the pronote. It is no where mentioned in this document that he is a partner of the firm and that the loan has been taken by him on behalf of the firm or that he has signed the promissory note in his capacity as a partner of the firm and on behalf of the firm. The signatures are plainly in his individual capacity. The name of the firm has been mentioned only at one place and this can be said to be at the most a description of the respondent Rajesh Chand. Merely because Rajesh Chand Gupta happens to be a partner of Delhi Sanitary Stores, it could not mean that all transactions done by him are on behalf of this partnership firm. He may be having some other business also in which he may be having other partners or he may be having his business in his individual capacity. Unless it is made clear in the document itself that he is making the transaction on behalf of the firm of which he is a partner, the liability of the firm cannot arise. In the present case the liability of the firm cannot spell out from any of the wordings used in the promissory note. It does not even say that Rajesh Chand Gupta is a partner of the firm Delhi Sanitary Stores, if the executant wanted that he should be personally liable on this document then he should have specifically mentioned the name of the principal on whose behalf he had executed the same. All the decisions which have been cited above helped me in arriving at this conclusion that when the executant is an individual then he alone is liable and not the firm of which he is a partner or the other partners of the firm.
17. The question whether the money taken on loan by respondent No. 1 was deposited in the firm and utilised by the firm or not would not go to decide the question of liability under the pronote. Rajesh Chand may have done anything with the money and even if it was utilised by the firm, the liability would remain that of Rajesh Chand and not that of the firm.
18. The question which now arises for consideration is whether the payment of Rs. 500/- by Shri R.K. Gupta, was made on behalf of Rajesh, Chand, respondent No. 1, so as to extend the period of limitation against him. The endorsement on the reverse of Ex. P. 2 pronote reads that a sum of Rs. 500/- was recovered in execution against Upendranath Sharma and the same has been deposited as directed by Sushil Chand. This is in the hand writing of Shri R.K. Gupta and signed by him on 6-4-1972. This entry, therefore, speaks that Sushil Chand is a person, who had given instructions to Shri R.K. Gupta for depositing the amount towards the pronote in favour of the appellant. Even in his statement Shri Ram Kalyan Gupta has stated that the the sum of Rs. 500/- was paid by him to the appellant as per the instructions of Sushil Chand. Sushil Chand's father had also given such instructions but Rajesh Chand was not there and no such instructions were given by him. The statement of Shri R.K. Gupta further is that the entry about the payment was not made at the time the money was paid but it was made lateron when the appellant brought the pronote for getting the endorsement about payment of Rs. 500/-. From the statement of Shri Gupta, it is apparent that Rajesh Chand never authorised him to pay Rs. 500/- to the appellant. So as far as Rajesh Chand is concerned Shri R.K. Gupta cannot be said to be a person authorised by him for purpose of making payment to the appellant.
19. In this connection, it may be noted that Shri R.K. Gupta is an Advocate and he understands the implication of making an endorsement about payment of money on a document that an endorsement would have the effect of commencing a fresh period of limitation from the time when the payment was made. Before making an endorsement it was not enough that Shri R.K. Gupta should have been authorised to pay some money to the appellant but at the same time it was necessary that he should have been given instructions to make an endorsement on the document which would have some legal implication. At one time Shri R.K. Gupta was Advocate for the respondent but gradually he started getting cases from the appellant also and in these circumstances it was very necessary that he should have refrained from doing any act which could cast any doubt on his professional ethics. Here he was trying to help one of the parties at the cost of the other and this cannot be said to be appropriate for a person in his situation. I would not like to comment further on this, because any payment made by Shri Gupta could not be said to be payment by a duly authorised person of respondent No. 1 so as give a fresh period of limitation from the time when the payment was made. The suit against Rajesh Chand Gupta is beyond limitation and the appellant cannot get any relief against him.
20. The learned Counsel for the appellant has contended that the appellant as well as the respondent were friends and they have cordial relations between them and in such a situation they trusted each other and there fore the respondent should not raise a plea about the claim being barred by time. However, when the parties have come to a Court of law, the matter has to be decided on basis of legal and technical pleas also in addition to the factual aspects of the case. If the parties feel that the relationship between them is not to be affected even on account of this litigation then it is open to them to settle their accounts and make payments of what ever amount is due. The Court in this connection cannot grant any relief when the same cannot be allowed as per the law.
21. No other point has been raised before me. The appeal fails and is dismissed with costs.