Allowed

Ashok Kumar Agrwal, v. Smt. K.Vijaya

Telangana HC11 Dec 2013TRCCCA/6/2008

Case brief

AI extract

What is this about?

Review petitions were allowed to correct the error regarding the registration status of 'United Builders' firm. The firm was formally dissolved. Sale of firm property and related mortgage were declared illegal, though bank recovery rights against individuals were preserved. Shares to be determined based on asset values.

What did the court decide?

The partnership firm stands dissolved. The sale deed and subsequent mortgage are declared illegal. Preliminary decree passed for assessment of shares and distribution of assets.

Ashok Kumar Agrwal, Vs Smt. K.Vijaya — Contract and Commercial Disputes | Telangana HC (2013)

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THE HON’BLE SRI JUSTICE B. CHANDRA KUMAR

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Review CCCAMP No.96 of 2012 in CCCA No.276 of 2003, Review CCCAMP No.766 of 2011 in CCCA No.323 of 2003, and Review CCCAMP No.296 of 2012 in Tr. CCCA No.6 of 2008

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Common Order:

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These review petitions have been filed to review the common judgment dated 27.09.2011 passed in CCCA Nos. 276 of 2003, 323 of 2003 and Tr. CCCA No.6 of 2008.

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The main contention of Sri J. Prabhakar, learned counsel for the review petitioner, is that the firm which is under dispute is the registered firm, but this court under the premise that the firm is not a registered one, refused to grant certain reliefs as prayed for by the review petitioner and therefore there is an error apparent on the face of the record and therefore the review petitions have to be allowed.

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CCCAMP No.99 of 2011 in Rev.CCCAMP No.776 of 2010 in CCCA No.323 of 2003 has been filed to issue proclamation and bailable warrant of arrest of the Chief General Manager, Syndicate Bank, Basheerbagh, Hyderabad, for having failed to comply with the orders of this Court in Rev.CCCAMP No.776 of 2010 in CCCA No.323 of 2003, dated 07.02.2011. Since the appeal is allowed in part and further proceedings have to be continued by the trial Court to determine the shares of partners in the assets of the firm this petition stands remanded to the trial Court for passing appropriate orders after issuing fresh notices to the above Chief General Manager, Syndicate Bank, Basheerbagh, Hyderabad.

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CCCAMP No.765 of 2011 in Rev. CCCAMP No.766 of 2011 in CCCA No.323 of 2003 has been filed to receive certified copy of registration of the firm. In the circumstances stated in the affidavit filed in support of the petition, the CCCAMP No.765 of 2011 is ordered and the document is marked as Ex.B148.

¶8

CCCAMP No.542 of 2012 in Rev.CCCAMP No.766 of 2011 in CCCA No.323 of 2003 has been filed to receive certified copy of the FIR dated 06.01.2012, as additional evidence. In the circumstances stated in the affidavit filed in support of the petition, this CCCAMP is ordered and the document is marked as Ex.B149.

¶9

CCCAMP No.572 of 2012 in Rev.CCCAMP No.766 of 2011 in CCCA No.323 of 2003 has been filed to receive certified copy of FIR No.2/RCO-CR2/12, dated 25.01.2012 along with remand case diary as additional evidence. In the circumstances stated in the affidavit filed in support of the petition, the CCCAMP No.572 of 2012 is ordered and the documents are marked as Exs.B150.

¶10

CCCAMP No. 6 of 2013 in Rev.CCCAMP No.766 of 2011 in CCCA No.323 of 2003 has been filed to receive additional grounds. In the circumstances stated in the affidavit filed in support of the petition, the CCCAMP No.6 of 2013 is ordered.

¶11

CCCAMP No.6 of 2013 in Rev.CCCAMP No.766 of 2011 in CCCA No.323 of 2003 has been filed to stay the operation of the judgment and decree dated 27.09.2011 passed in CCCA No.323 of 2003 pending disposal of Rev.CCCAMP No.766 of 2011. Since the main review petition itself is being disposed of this petition stands closed.

¶12

CCCAMP No.14 of 2013 in Rev. CCCAMP No.96 of 2012 in CCCA No.276 of 2003 has been filed to stay the operation of the judgment and decree dated 27.09.2011 passed in CCCA No.276 of 2003 pending disposal of the review CCCAMP No. 96 of 2012. Since the main review petition itself is being disposed of this petition stands closed.

¶13

CCCAMP No.15 of 2013 in Rev. CCCAMP No.96 of 2012 in CCCA No.276 of 2003 has been filed to receive additional grounds in Review CCCAMP No.96 of 2012. In the circumstances stated in the affidavit filed in support of the petition, the CCCAMP No.15 of 2013 is ordered.

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CCCAMP No.163 of 2013 in Rev. CCCAMP No.296 of 2012 in Tr.CCCA No.6 of 2008 has been filed to stay the operation of the judgment and decree dated 27.09.2011 passed in Tr.CCCA No.6 of 2008 pending disposal of the review CCCAMP No. 296 of 2012. Since the main review petition itself is being disposed of this petition stands closed.

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CCCAMP No.164 of 2013 in Rev. CCCAMP No.296 of 2012 in Tr.CCCA No.6 of 2008 has been filed to receive additional grounds in Review CCCAMP No.296 of 2012. In the circumstances stated in the affidavit filed in support of the petition, the CCCAMP No.164 of 2013 is ordered.

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Heard both the parties. I have gone through the entire record. The review petitioner has filed certified copy of Form-C issued by the Registrar of Firms, Hyderabad, showing that the firm ‘United Builders’ has been registered on 20.06.1981. It is a fact that this Court under the

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premise that the partnership firm was not registered made certain observations and dismissed CCCAMP No.241 of 2005 and certain other miscellaneous applications. Since it is clear that there is an error apparent on the face of the record the Review CCCAMP No.766 of 2011 in CCCA No.323 of 2003, Rev. CCCAMP No.96 of 2012 in CCCA No.276 of 2003, and Rev.CCCAMP No.296 of 2012 in Tr.CCCA No.6 of 2008 are allowed. However, in view of the limited scope under Order 40 Rule 7 CPC this Court cannot review the entire judgment but has to review only that portion of the judgment which requires review.

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In view of the orders passed in Review CCCAMP Nos.766 of 2011, Review CCCA No.96 of 2012 and Rev.CCCAMP No.296 of 2012, the appeals are at once reheard and the following order is being made under Rule 8 of Order 43 CPC.

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The points that arise for consideration are;

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(1) Whether the partnership has to be dissolved, if so from which date the dissolution would come into force and what are the shares to which the partners would be entitled to on dissolution of the firm out of the firm properties?

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(2) Whether the accounts have already been settled?

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(3) Whether the plaintiffs are guilty of alienating the property during the pendency of the appeal?

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(4) Whether the plaintiffs are guilty of mortgaging the property with Syndicate Bank and obtaining loan and whether they are alone responsible to discharge the loans obtained from Syndicate Bank?

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Sri MAK Mukheed, learned counsel for the respondents/plaintiffs submitted that the scope of the review is limited

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and the findings based on proper appreciation of evidence cannot be disturbed. However, he could not dispute the contention of Sri J. Prabhakar, learned counsel for the petitioner, that the firm is a registered one. Sri MAK Mukheed further submits that there is no need to review the earlier judgment.

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Though several grounds have been raised in the review petitions and argued by Sri J. Prabhakar, learned counsel for the review petitioner/ defendant, such as findings of this Court with reference to electricity connection in paragraph 25 of the judgment is erroneous and that the electricity connection in an apartment would be given only after completion of civil construction and not before the completion of the civil works and that the findings of this Court that opening of doors and sajjas spoiling the over all getup and atmosphere or with regard to opening of drainage etc., are not based on proper appreciation of evidence, but all those points have been discussed in the judgment basing on the evidence on record. By stretch of no imagination it can be said that the same may amount to some mistake apparent on the face of the record or that those points could not be argued by the counsel for petitioner while arguing the appeal or that the petitioner has discovered a new and important matter or evidence which after exercise of due diligence was not within his knowledge. Therefore, there is no need to reconsider those aspects. Similarly, the submission of Sri J. Prabhakar that it is the plaintiffs who created specific hindrances preventing the defendant from making the construction or the observations with regard to bore well etc., need not be reconsidered. Though it is also argued that the plaintiffs failed to get the renewed permission from the Municipal Corporation of Hyderabad or keep the permit alive during the period of

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construction, these aspects also do not come within the purview of review, therefore, I am not inclined to touch those points. Therefore, there is no need to disturb the findings on point No.2 of the earlier judgment.

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Since the partnership firm is admittedly a registered firm the findings on point No.1 of the earlier judgment stands set aside. Consequently certain findings on point No.3 of the earlier judgment have to be modified.

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Point No.2: The main submission of Sri J. Prabhakar is that in view of the recitals of partnership deed dated 14.11.1981 the plaintiffs would get two frame structured flats in the ground floor towards their share of investment and one flat on the northern corner in the first floor towards their share of profit in the venture and that the defendant is entitled to sell all other flats in whatever manner he deems fit and that he is alone authorized to sell the flats on completion of construction. It is also his submission that the parties have already settled the accounts and the expenditure is recorded in the partnership deeds. It is also his submission that the plaintiffs have received more than their investment and that they are guilty of laches and lapses. It is also his submission that the total extent of land is 808 sq. yards and the value of the land as per the sale deed is Rs.40/- per sq. yard, as per the valuation report given by the Sub-Registrar is Rs.60/- per sq. yard and as per the valuation of the plaintiffs in the plaint is Rs.100/- per sq.yard and therefore the total value of the share of the plaintiffs comes to Rs.80,800/- and that the plaintiffs were already handed over ground floor frame structure admeasuring 2118 sq.ft. and its value comes to Rs.84,720/- and that they have already received the value of their share in the partnership firm and that the defendant had already

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invested Rs.3,75,000/- as on the date of registration of the firm and therefore the plaintiffs are not entitled to any other share. He has relied on the judgment reported in Bajranglal Maniram Singhvi Agarwal v. Anandilal Ramchandra Potda r^[1] , support of his contention that when the parties settled the accounts the presumption is that they settled the accounts with their eyes open and that they knew what the accounts contained and then decided what the settlement ought to be. I have gone through the facts of that case. In that case on dissolution of the firm there was a settlement of accounts between the parties. In this case there was no dissolution of firm and therefore the question of settlement of accounts on dissolution does not arise and therefore the above referred decision is not applicable to the facts of the case on hand. Sri J. Prabhakar further argued that this Court cannot rewrite the contract and the shares have to be decided as per the terms of the partnership deed. Reliance is placed on the judgment of the Apex Court in Orissa State Financial Corporation v. Narsingh Ch. Nayak^[2] . I have gone through the judgment of the said case. The facts of that case are entirely different. In that case a writ petition was filed assailing the notice issued under Section 30 of the State Financial Corporations Act, 1951 and the High Court passed orders drawing up a fresh contract between the parties and issued certain further directions in the matter. Thus, it is clear that the facts of the said case are entirely different and do not apply to the facts of the case on hand.

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The judgment reported in Gannamani Anasuya v. Parvatini Amarendra Chowdary^[3] , reveals that a right of a partner during the subsistence of the partnership firm is to get his share of profits from

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time to time as may be agreed upon among the partners and after the dissolution of the partnership or with his retirement from partnership of the value of his share in the net partnership assets as on the date of dissolution or retirement after a deduction of liabilities and prior charges. Thus, a partner would get the value of share in the net partnership assets as on the date of dissolution. Therefore, the plaintiffs and defendant would get the value of their share in the net partnership assets as on the date of dissolution. It is also settled law that the dissolution would come into effect from the date of judgment. Accordingly, if the partnership firm is dissolved the total value of the property of the partnership firm i.e., the value of the land and value of the constructed building have to be separately assessed. The plaintiffs would get their share according to the value of the land assessed as on the date of dissolution of the partnership firm. Similarly, the defendant would get his share basing upon the value of the constructed building constructed by him as on the date of dissolution. Additions or alterations if any made by the plaintiffs have to be deducted from the value of the constructed building.

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Point Nos.3 and 4:

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The further case of the review petitioner is that the respondent No.4 namely B. Balraj Goud availed certain loan facilities for about Rs.1.00 Crore from Syndicate Bank, Basheerbagh, Hyderabad, by mortgaging the suit schedule property. It is also the case of the defendant that the

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4^th respondent executed a registered memo of deposit of title deeds on 18.07.2008, vide document No.2435 of 2008 and registered in the office of Sub-Registrar, Chikkadpalli, Hyderabad. It is also the case of the defendant that this is nothing but a fraud played on the Court and

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also against him. The main submission of Sri J. Prabhakar is that the plaintiffs 1 to 3 have no right to sell any portion of the property which became the property of the firm. His main submission is that a partner during the subsistence of partnership firm cannot alienate the property of the firm.

¶37

In CCCAMP No.776 of 2010 the defendant sought a direction to the Chief Manager, Syndicate Bank, Basheerbagh, Hyderabad, to produce certain documents such as loan application executed by B. Balraj Goud (respondent No.4), original sale deed dated 23.06.2004, original release deed dated 23.06.2008, link documents, GPA etc. CCCAMP No.167 of 2010 is filed seeking to direct the respondents 4 and 5 to produce the registered sale deed dated 23.06.2004 and original title deeds referred in clause 7 of the said sale deed. CCCAMP No.572 of 2012 is filed to receive copy of FIR dated 25.01.2012 along with remand case diary. It appears that CBI registered cases against respondent No.4 and officials of the Syndicate Bank for playing fraud and issued FIR Nos.1 of 2012 and 2 of 2012 and the same were registered as Cr.Nos.RE1/CBI/BSFC/Bangalore and 2/RCO-CR-2/12. CCCAMP No.542 of 2012 is filed to receive copy of FIR dated 06.01.2012. Thus, the main allegation of the defendant is that the suit schedule property was not only alienated in favour of the respondents 4 and 5, but respondent No.4 has consequently mortgaged the same to Syndicate Bank and obtained huge loan and, thus, played fraud.

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One of the submissions of Sri J. Prabhakar is that the assets brought into the firm by any partner need not be registered. He relies on the decisions reported in Firm Ram Sahay Mall Rameshwar Dayal v. Bishwanath Prasad^[4] , Chief Controlling Revenue

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Authority v. Chidambaram, Partner, Thachanallur Sugar Mills and Distilleries^[5] , Commissioner of Income-Tax, Madras v. Janab N. Hyath Batcha Sahib^[6] , and Commissioner of Income-Tax, West Bengal v. Hind Construction Limited^[7] . There is no dispute with regard to principles of law settled in the above decisions. In support of his contention that no partner can claim exclusive right over any property and he cannot exercise right over the extent of his share in the business of the partnership firm reliance is placed on the decisions reported in Bina Murlidhar Hemdev v. Kanhaiyalal Lokram Hemdev^[8] , Addanki Narayanappa v. Bhaskara Krishnappa (dead) and thereafter his heirs^[9] , Champaran Cane Concern (dissolved) v. State of Biha r^[10] and Purushottam v. Shivraj Fine Arts Litho Works^[11] . There is no dispute with regard to legal principles laid down in the above decisions.

¶40

In Addanki Narayanappa’s case (9 supra) it was observed as follows.

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“The provisions of Sections 14, 15, 29, 32, 37, 38 and 48 make it clear that whatever may be the character of the property which is brought in by the partners when the partnership is formed or which may be acquired in the course of the business of the partnership it becomes the property o the firm and what a partner is entitled to is his share of profits, if any, accruing to the partnership from the realization of this property, and upon dissolution of the partnership to a share in the money representing the value of the property. No doubt, since a firm has no legal existence, the partnership property will vest in all the partners and in that sense every partner has an interest in the property of the partnership. During the subsistence of the partnership, however, no partner can deal with any

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portion of the property as his own. No can he assign his interest in a specify item of the partnership property to anyone.”

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In fact, in my earlier order dated 27.09.2011, I had categorically held that a partner cannot alienate the property during the subsistence of the partnership firm and sale by a partner is illegal. Admittedly, the registered sale deed dated 23.06.2004 has been executed by some of the partners and all the partners are not parties to the said document, that too during the pendency of the appeal proceedings. In view of the settled legal position, CCCAMP No.241 of 2005 is allowed declaring the registered sale deed dated 23.06.2004 bearing document No.1760 of 2004 executed by the first respondent on behalf of respondents 2 and 3 in favour of respondents 4 and 5 as illegal and the same stands cancelled. Accordingly, the action of the fourth respondent in depositing the title deeds in Syndicate Bank is declared as illegal. In the above circumstances, CCCAMP No.167 of 2010 is ordered directing the respondents 4 and 5 to produce the registered sale deed dated 23.06.2004, vide document No.1760 of 2004, original title deeds referred in clause 7 of the said sale deed. Thus, it is made clear that the action of the first respondent in executing the registered sale deed on behalf of respondents 2 and 3 in favour of respondents 4 and 5 and the action of respondent No.4 in obtaining the loan by mortgaging the suit schedule property is declared as illegal. However, this order does not prevent the Bank from proceeding against the persons individually who obtained loan by mortgaging the suit schedule property or against the share that may be allotted to them after dissolution of the partnership firm.

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It is also settled law that the subsequent events can be taken into consideration. Sri J. Prabhakar has relied on the judgment

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reported in Om Prakash Gupta v. Ranbir B. Goya l^[12] , in support of his contention that subsequent events can be taken into consideration. Though it appears that the plaintiffs are also guilty in alienating the property in favour of respondents 4 and 5 and the respondent No.4 also guilty in mortgaging the property with the Syndicate Bank, but however it appears that there are mistakes and faults on the part of both the parties. It is not in dispute that during the pendency of the suit the parties filed a joint memo and thereby the defendant was permitted to proceed with the construction. However, it is also not in dispute that the defendant has constructed three flats but did not construct one flat in the first floor towards northern side which he agreed to handover to the plaintiffs in lieu of their profits in the business. There is no need to discuss all the points that were discussed on point No.2 in the earlier order, but suffice to say that both the parties are guilty and that the defendant has not proceeded with the construction as per the joint memo filed before the Court below and lost the opportunity to proceed with the construction. It is submitted that the plaintiffs have taken return of Ex.A29 - sanction plan, Exs.A76 to 78 - sale deeds and Exs.A79 to 81 GPAs and alienated the property and in spite of issuing notice they have not produced those documents. CCCAMP No.167 of 2010 is filed directing them to produce the original sale deed dated 23.06.2004 and the other original title deeds. The copy of notice is filed along with CCCAMP No.167 of 2010. The main submission of Sri J. Prabhakar is that a party cannot take advantage of a fraud. There cannot be any doubt to say that unless a party gives an undertaking to produce the original as and when required by the Court, the original document cannot be returned to a party during the pendency of the proceedings of the suit or in an appeal. There cannot be any doubt to say that the plaintiffs are guilty

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of alienating the property during the pendency of the suit proceedings, but no useful purpose will be served by continuing the partnership firm. As per the contents of Exs.B33, B40, B23, B24 it is clear that the plaintiffs claimed that they are absolute owners of the property and it is clear that their stand is contrary to law.

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It is also submitted that for alienating the property during the pendency of the appeal contempt proceedings should be initiated. The defendant may file necessary applications for initiating any contempt proceedings, if so advised before the trial Court.

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Point No.1:

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It is settled law that where the conduct of a partner towards his co- partners results in willful persistent breaches the same would be just and reasonable ground to dissolve the firm. The conduct of the defendant in not completing the one flat towards the northern side in the first floor but constructing other flats and occupying them reveals that he conducted himself in such a manner relating to the business that it is not practicable to the other partners to carry on the business with him in the partnership. Since the defendant who failed to make construction even after filing a joint memo before the Court appears to be guilty of gross misconduct towards his partners and except dissolution of partnership firm there is no other way. Sri J. Prabhakar submits that though it is an admitted fact that a memo was filed in Ex.A30, dated 09.03.1989 before the lower Court, but the same is filed without prejudice to the contentions of the parties and that it was only a step to made up a compromise and therefore no evidentiary value can be attached to the same and it is inadmissible in evidence by virtue of Section 23 of the Evidence Act. It appears that for the first time the present argument is put forth by Sri J. Prabhakar. Admittedly, Ex.A30

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is a joint memo filed by both the parties and it became a part of Court record. Of course the same is filed without prejudice to the contentions of both the parties, but the same can be looked into in the interest of justice and for just conclusion of the case.

¶51

It has to be seen that the partnership firm came into existence and subsequently it was registered on 20.06.1981. Disputes arose between the parties resulting in filing of suits in 1984. Thus, the litigation has been pending for about 30 years. Therefore, I do not see any reason to continue the partnership firm. Accordingly, the firm has to be dissolved though both the parties are guilty of laches and mistakes.

¶52

Though it is contended by Sri J. Prabhakar that the plaintiffs are entitled to two floors in the ground floor and one floor on the northern side of the first floor admeasuring 1040 sq. yards and this is only share required to be given to the plaintiffs in the event of order of dissolution of the firm or otherwise and dissolution of the firm will not alter the share of the plaintiff as fixed in the partnership deed Ex.B17. I do not see any force in the contention of Sri J. Prabhakar. Had the partnership continued the parties would have been entitled to the shares as per the original partnership deed dated 25.10.1981. Since the firm could not carry out the business as per the terms and conditions of the said partnership deed, no party can insist to divide the shares basing on the original partnership deed.

¶53

In view of the laches on the part of the defendants and in not proceeding with the construction of the northern side flat in the first floor to be allotted to the plaintiffs, it is clear that the defendant is not entitled for the damages as claimed in his counter claim.

¶54

Sri J. Prabhakar argued that the suit is not maintainable since the plaint is not signed by the plaintiffs and that the original GPA is not

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filed. It appears that this ground was not taken by the defendant in his written statement or in the grounds of appeal and was not argued earlier. Therefore, I am not inclined to accept the contention of Sri J. Prabhakar.

¶56

In the circumstances, Review CCCAMP No.766 of 2011 in CCCA No.323 of 2003, Rev. CCCAMP No.96 of 2012 in CCCA No.276 of 2003, and Rev.CCCAMP No.296 of 2012 in Tr.CCCA No.6 of 2008 are allowed. Consequently, the common judgment dated 27.09.2011 passed in CCCA Nos.276 and 323 of 2003 and Tr.CCCA No.6 of 2008 stands confirmed as far as Point No.2 of the said judgment but stands modified to the extent expressly indicated in this order on other points and a preliminary decree is passed as follows. However, the above referred common judgment should be made as a part of this judgment and stands modified to the extent indicated in this order.

¶57

The partnership firm stands dissolved under Section 44 of the Partnership Act from the date of pronouncement of this order and the total value of the property of the partnership firm i.e., the value of the land and value of the constructed building have to be separately assessed. The plaintiffs shall be entitled to the share in proportion to the value of the land and the defendant shall be entitled to in proportion to the value of the building constructed by him as on the date of dissolution of the firm. The value of additions and alterations if any made by the plaintiffs exclusively have to be deducted from the total value of the constructed building. The lower Court is directed to follow the procedure prescribed under Section 48 of the Partnership Act in settling the accounts of the firm. It is left open to the lower Court to take appropriate steps to determine the value of the land and value of the constructed building as on the date of dissolution of the

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partnership firm and decide the shares of the plaintiffs and defendant and distribute the same to the parties in accordance with law.

¶59

The sale deed dated 23.06.2004 executed by the first respondent on behalf of respondents 2 and 3 in favour of respondents 4 and 5 stands declared as illegal. The action of the respondent No.4 in mortgaging the property to the Syndicate Bank is also declared as illegal. However, it is left open to the Bank to proceed against the persons who obtained loan by mortgaging the suit schedule property against them in person or to the extent of share of the property or value of the property which comes to their share on dissolution of the partnership firm.

¶60

CCCAMP No.99 of 2011 in Rev.CCCAMP No.776 of 2010 in CCCA No.323 of 2003 stands remanded to the lower Court for proceeding in accordance with law. Similarly all other miscellaneous applications which are not ordered stands remanded to the lower Court for proceeding in accordance with law. The Registry to prepare preliminary decree in accordance with the judgment dated 27.09.2011 passed in CCCA Nos.276 of 2013, 323 of 2003 and Tr.CCCA No.6 of 2008 as stands modified by this order. However, in the circumstances, no costs.

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___________________ B. CHANDRA KUMAR, J.

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Date: 11^th December 2013 Nsr

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