Madras High Court
Vaiyapuri vs M. Sundaresan And 10 Others on 20 July, 2001
Equivalent citations: AIR2002MAD28, (2001)3MLJ219, AIR 2002 MADRAS 28, (2002) 1 CIVILCOURTC 587 (2001) 3 MAD LJ 219, (2001) 3 MAD LJ 219
ORDER
1. This appeal is preferred against the judgment and decree passed in O.S.No. 221 of 1979 by the subordinate Judge, Karur on 14.8.1984.
2. The sixth defendant is the appellant herein.
3. The plaint averments are summarised as follows: The plaintiff, third defendant and one R.S.Vasantha were the partners of the business run by M/s. MS SV Traders. The business is to purchase and sell cottons, cotton wastes and yarn. Subsequently, Vasantha retired on 7.7.1978 and the plaintiff and the third defendant continued the business under the same name and style in the same place with same assets and liabilities. Thereafter, the third defendant also retired from the partnership relinquishing the rights under the said partnership in favour of the plaintiff. The third defendant is impleaded as a party to avoid any technical difficulty and no relief is prayed for against him. The first defendant purchased goods from the plaintiff on credit basis from 26.7.1978 and he has made various payments. The details of purchases and payments made by the first defendant are set out in the schedule. For all the purchases made by the first defendant, bills have been issued. In some of the receipts issued to the first defendant and signed by him, the amounts due as on date had been struck and he has acknowledged and accepted the same. After giving credit to the amounts paid by the first defendant, still a sum of Rs. 65,680 is due from the first defendant. The second defendant stood surety and guarantor for the amounts due by the first defendant. The second defendant has executed a 'Surety Guarantor' letter on 21.8.1978 in which, the second defendant has specifically undertaken and given guarantee for the amounts due by the first defendant. Thus, the second defendant is Jointly and severally liable to pay the amounts due to the plaintiff as undertaken by him in the letter. When pressed for the amounts due by the first defendant on 27.9.1978, he had given six post-dated cheques drawn on Karur Vysya Bank in his favour by S.P.Srinivasan, Proprietor, S.P.Srinivasan Agency duly endorsed in favour of the plaintiff. But, before the plaintiff could present even the first cheque for payment, which is dated 5.10.1978, the first defendant informed the plaintiff not to present those cheques for "encashment as his customer has not arranged for funds. He undertook to pay the amounts due and subsequently he made payments, but has not made payments in full. The amounts covered by cheque runs to Rs. 80,000.
He made payments only to the tune of Rs. 30,080 and when the plaintiff insisted on payments and settlement of accounts, the first defendant informed him to present those cheques for payment. When the plaintiff presented the cheques for encashment, they have been dishonoured and returned with the endorsement "Please refer to drawer" on 5.3.1979. Though the said S.P.Srinivasan is also liable for the amounts covered by the cheques, as the plaintiff learns he is also not in sound position, the plaintiff is not impleading him as defendant for recovery of amounts. The first defendant, as a principal debtor and the second defendant, as guarantor are both jointly and severally liable to pay the suit claim. The plaintiff prays for a decree against defendants 1 and 2 for a sum of Rs. 71,780 with subsequent interest and costs. The second defendant died on 9.9.1979 leaving behind him the defendants 4 to 13 as his heirs and they are in possession and enjoyment of all the assets of the deceased second defendant.
4. The first defendant, in his written statement, has contended that he has filed an Insolvency Petition in I.P.No.16 of 1979 on the file of the same court against the plaintiff and others and he has also filed an interim protection petition in I.A.No.89 of 1979 and the suit amount is included in the insolvency petition and the remedy of the plaintiff is only before the Insolvency Court.
5. The seventh defendant has filed a separate written statement in which he has contended as follows: The father of the seventh defendant viz., the second defendant, is in no way connected with any of the transactions said to have taken place between the first defendant and the plaintiff and he has no interest in those transactions. The second defendant has never seen the plaintiff and he had no opportunity to execute any letter alleged in the plaint. The letter, which is relied on by the plaintiff in the plaint, must be a concocted and forged document. The transaction was done only by the first defendant and by one S.P.Srinivasan and the second defendant did not take any part in it. Neither the father of the seventh defendant viz., the second defendant, nor the defendants 5,6,9 and 10 are liable to pay any amount claimed in the plaint. The suit is bad for non-joinder and mis-joinder of parties.
6. The trial court framed five issues and on a consideration of the matter, came to the conclusion that the second defendant stood as guarantor for the liability of the first defendant and E.x.A-6 Guarantee Letter is true, valid and binding and the defendants 4 to 13 are also liable to pay the amount out of the estate of the deceased second defendant in their hands and the suit is not hit by Section 69 of the Partnership Act and decreed the suit as prayed for with costs. Aggrieved by that, the sixth defendant has preferred the present appeal. In this judgment, for the sake of convenience, the parties are described as arrayed in the suit.
7. The points for determination in this appeal are:
(1) Whether Ex.A-6 guarantee was executed by the second defendant.
(2) Whether Section 69 of the Indian Partnership Act bars the maintainability of the suit.
(3) Whether the plaintiff is entitled for the suit claim.
8. Point No.1 : Ex.A-1, dated 3.4.1978, is the unregistered partnership deed among three partners, viz., the plaintiff, third defendant and Vasantha. Ex.A-2 is the Release Deed executed by Vasantha and she retired from the partnership on 7.7.1978. According to the plaintiff, the third defendant also retired from the partnership relinquishing his rights in the partnership in favour of the plaintiff. According to the plaintiff, the first defendant purchased goods from the plaintiff on credit basis from 26.7.1978 and various payments were made by him and after giving credit to the amounts paid by the first defendant, still the suit amount viz., a sum of Rs. 71,780 is due from him and the second defendant stood as guarantor for the amounts due by the first defendant and the second defendant is jointly and severally liable for the suit claim. The first defendant has contended that he had already filed I.P.No.16 of 1979 on the file of the same court against the plaintiff and others and the suit amount has been included in his insolvency petition and according to him, the remedy of the plaintiff is only before the Insolvency Court.
9. The second defendant died during the pendency of the suit and defendants 4 to 13 were added as his legal representatives and the fourth defendant also died pending the suit.
10. The seventh defendant in his written statement has contended that his father viz., the second defendant was in no way connected with the transactions said to have taken place between the first defendant and the plaintiff and Ex.A-6 guarantee, alleged to have been executed by the second defendant, must be a concocted and forged document and they are not liable for the suit claim.
11. Exs.A-3, A-4 Bill Books and Ex.A-5 receipt book clearly establish that the first defendant had business transactions with the plaintiff. In fact, the first defendant did not dispute the suit claim and he has included the suit amount in his Insolvency Petition. P.W.1 is the plaintiff and he has stated that the second defendant went through Ex.A-6 guarantee letter and after satisfying himself only he put his signature in it on 21.8.1978 and he stood as guarantor for the amount payable by the first defendant. He has further stated that the first defendant had endorsed six cheques in his favour and they were not honoured. It is evident from Ex.A-7 letter of the bank, dated 5.3.1979. P.W.2, Mani, is employed as clerk under the plaintiff and he is the scribe as well as the attestor to Ex.A-6. He has stated that P.W.1 and himself went to the house of the second defendant and he wrote E.x.A-6 as per the direction of the second defendant and it was read over to him and only after that the second defendant signed in Ex.A-6. D.W.1 is the sixth defendant and he admitted that second and fourth defendants are his parents and defendants 5 and 7 to 10 are his brothers and defendants 11 to 13 are his sisters. According to him, his father never conducted any yarn business and only the eighth defendant has carried on the yarn business and there was a suit pending in O.S.No.442 of 1978 and the eighth defendant had filed an application to adjudge him as insolvent and the said petition was dismissed. Ex.B-2, dated 1.12.1983, is the certified copy of the decretal order in I.P.No. 10 of 1982 and Ex.B-3 is the certified copy of, the written statement filed by the second defendant in O.S. No.442 of 1978. Ex.B-4 is the certified copy of the judgment in O.S. No. 442 of 1978,
12. According to D.W.1, the guarantee letter in the present suit had been created by the plaintiff only to collect the amount payable by the eighth defendant. The subject matter in the present suit relates to the claim of the plaintiff against the first defendant and also against the second defendant as guarantor. Since the second defendant died pending the suit, his legal heirs were impleaded as defendants 4 to 13 in the suit. It is transpired from the evidence of the parties that the eighth defendant was selling yarn and he was indebted very much. His business transaction is not relevant in the present case.
13. P.Ws. 1 and 2 have clearly stated that they went to the house of the second defendant and Ex.A-6 guarantee was written on his direction and he signed it. D.W.1 in the cross-examination has admitted that P.Ws. 1 and 2 came to their house. There was no necessity for the plaintiff to create the guarantee letter falsely. A circumstance was relied on by the plaintiff to show the genuineness of Ex.A-6. At the time of institution of the suit, the second defendant was alive. The plaintiff filed the suit before the Vacation Court and along with it, he filed I.A.No.25 of 1979 for attachment of the properties of the second defendant and the second defendant filed counter in the petition. The plaintiff in his affidavit filed in the petition has stated that the second defendant had executed a letter of guarantee. The second defendant, who filed a counter in the petition, did not dispute the letter of guarantee. If the second defendant had not executed Ex.A-6 letter of guarantee, he would have come with a definite case disputing the genuineness of letter of guarantee in his counter. This amply shows that Ex.A-6 guarantee letter had been executed by the second defendant. The testimonies of P.W's. 1 and 2 are trustworthy and it can be concluded that Ex.A-6 guarantee letter is true and valid.
14. Point Nos. 2 and 3:- It is contended by the learned counsel appearing for the appellant/ sixth defendant that the suit is barred under Section 69 of the Indian Partnership Act in view of the fact that the firm of the plaintiff was not registered. It is true that the firm, consisting of the plaintiff, the third defendant and Vasantha, constituted under Ex.A-1, is an unregistered one. According to the plaintiff, Vasantha executed Ex.A-2 release deed and retired from the partnership on 7.7.1978 and the third defendant also retired from the partnership relinquishing all his rights in favour of the plaintiff. The third defendant was examined as P.W.3 and he has stated that he retired from the partnership with the plaintiff on 31.3.1979 and the plaintiff became the sole partner to realise the dues and he is entitled to the suit claim.
15. Section 69 of the Indian Partnership Act lays down the effect of non-registration of the firm on suits to enforce the right arising from a contract by or on behalf of a firm against any third party and provides that such a suit shall not be entertained unless the firm is registered and the person suing is or has been shown in the register of firms as a partner in the firm. Sub-section (2) of Section 69 bars the institution of the suit to enforce the right arising out of the contract by a firm or on behalf of a firm against any third party unless the firm is registered and the person suing is or has been shown in the register of firms as a partner of the firm, Sub-Section (3) to Section 69 provides exceptions. It provides that a partner can enforce any right to sue for realising the property of a dissolved firm. Property includes realisation of the debt due to the firm from the third party. The leading decision on this aspect is Shanmugha Mudaliar v. P.V.Rathina Mudaliar and another, A.I.R. 1948 Mad. 187. A Division Bench of this Court has held as follows:
"... it is not in dispute that there was some arrangement by which the plaintiff became entitled to the whole of the monies alleged to be recoverable from defendant 1. Hence the suit was brought, by the plaintiff alone but, since defendant 2's husband had died before the suit, defendant 2 was joined by way of abundant caution.
When a firm has been dissolved, thereafter it is impossible for registration ever to be effected. Consequently the disability of non-registration cannot be overcome, as it can be during the continuance of the partnership, when the partners can, at any time, register as required by the Act and any disability existing upto that time regarding enforcement by suit of contracts and debts due to the partnership can be removed.
The words in sub-s.(3) of S. 69 which I have quoted above are very wide. The sub-section enacts that the provisions of the two previous sub-sections shall not affect any right or power to realise the property of a dissolved firm. It is the right of all the partners, or by some arrangement as between themselves, one or more, to realise the property of their late partnership. In the course of the argument it has not been suggested that moneys due to the partnership from a third party in respect of dealings between him and the partnership do not form part of the partnership property. It seems to me that the intention of the Legislature was to inflict disability for non-registration only during the subsistence of the partnership and, in doing that, al the same time there is provision that the partnership can cause the disability to be removed by registration before action is brought, although there was disability, by reason of non-registration, existing at the time the contract was made or the debt incurred. When a partnership has been dissolved the disability cannot be removed."
The above decision was followed by the High Court of Andhra Pradesh in Sri Baba Commercial Syndicate and another v. Channamasetti dasu and another, .
A learned single Judge of that Court has held as follows:
"On the dissolution of the firm, therefore, the obligations of third parties to the firm may be enforced in the course of the winding up of the firm even though the firm was not a registered one. It can also be enforced if the firm is dissolved and by an arrangement the collection of the debts is entrusted to one of the partners or if one partner gives up his right as is the case here and the remaining sole partner is the only partner left. Sub-section (3) is attracted in all such cases and a suit can thus be instituted against a third party for the realisation of a debt.
The words "power to realise the property of a dissolved firm" are wide enough to enable such a suit being brought. I have already staled that the words "power to realise the property of a dissolved firm" have to be construed in the widest sense and they undoubtedly include a right to realise a debt due to the firm. I have, therefore, no manner of doubt that since the firm is dissolved and the second defendant has walked out of the partnership leaving the 2nd plaintiff alone as the sole surviving partner of the dissolved firm, the second plaintiff can institute a suit for realising the debts based on a contract due to the dissolved firm from the first defendant."
It is clear from the above decisions that in the case of a dissolved firm, the disability contemplated by the non-registration of the firm is not to apply. Law does not impose any disability on unregistered partnerships acquiring property or dealing with third parties. The only disability imposed is that no suit by an unregistered partnership is maintainable. It is evident that after the dissolution of a partnership it can no more be registered. It follows that if the partnership is dissolved, for bringing a suit to realise the property of such dissolved firm, non-registration of the firm will not be a bar.
16. Learned counsel for the appellant/ sixth defendant Mr.S. Parthasarathy contends that the plaintiff has filed the present suit in his individual capacity and not as a partner of the dissolved firm and he has not given the details as to how and when the other partner viz., the third defendant went out of the partnership and in such circumstances, the suit cannot be construed as one to realise the property of dissolved firm as contemplated under Section 69(3) of the Indian Partnership Act.
17. Per contra, learned Senior Counsel Mr.V.K.Muthusamy, appearing for the first respondent/ plaintiff contends that a conjoint reading of paragraph 4 of the plaint will suffice to show that the firm is already dissolved in law as well as in fact and the plaintiff became the sole partner, entitled to recover the amounts due to the firm. It is no doubt true that the specific word "dissolved firm" is absent in the plaint, but paragraph 4 in the plaint contains all the particulars to show the dissolution of the firm and for better understanding, paragraph 4 of the plaint is extracted:
"4. Subsequently the said Vasantha retired vide deed dated 7-7-78 from the partnership and the plaintiff and 3rd defendant continued the business under the same name and style of "MS SV TRADERS" at the same place with the same assets and liabilities. Thereafter the 3rd defendant also retired from the partnership relinquishing all the rights of him in the said partnership in favour of the plaintiff."
The plaintiff has clearly mentioned about the retirement of partner Vasantha on 7.7.1978 and the retirement of third defendant afterwards, The third defendant has also given positive evidence as P.W.3 as to how the plaintiff became the sole partner. It is also relevant to note that the second defendant, while he is alive, did not dispute about the dissolution of the firm in his counter in I.A.No.25 of 1979. Further, the seventh defendant also did not dispute the averment in paragraph 4 of the plaint in his written statement.
18. It is also relevant to note that in the above decisions it is held that on the dissolution of the unregistered firm, by an arrangement, the collection of debts may be entrusted to one of the partners or if one partner gives up his right, the remaining sole partner can maintain the suit. In the present case also, the third defendant has given up his right as partner and the remaining sole partner, viz., the plaintiff, has filed this suit to recover the property of the dissolved firm. Hence, the suit is maintainable and the plaintiff is entitled for the suit claim as rightly held by the trial court.
19. In the result, the appeal fails and it is dismissed. There shall be no order as to costs.