M/S Sridevi Enterprises vs The State Of Andhra Pradesh
2021 Latest Caselaw 2933 AP

       THE HON'BLE SRI JUSTICE U.DURGA PRASAD RAO

                         Writ Petition No.4135/2021

ORDER:

The petitioners pray for Writ of Mandamus declaring the action of the

2nd respondent in not receiving and registering the Right Relinquishment

Deed of Partnership in respect of land admeasuring Ac.0.98 cents in Survey

No.661/1-3C1 and Survey No.661/1-3B in Nellore Municipal limits as

illegal, arbitrary and unconstitutional and for consequential direction to the

2nd respondent to receive and register the Right Relinquishment Deed of

Partnership.

2. The petitioners' case succinctly is thus:

The petitioner No.3 is the Managing Partner of the 1st Petitioner-Firm.

The petitioners are aggrieved by the action of the 2nd respondent in not

receiving and registering the Right Relinquishment Deed of Partnership

executed by the petitioners 4 to 7 in favour of the petitioners 2 and 3.

Initially, the 1st petitioner-Partnership Firm was formed with the

petitioner No.4 and Mr. Mallineni Venkateswara Rao under a Partnership

deed dated 20.10.2008 to carry on business in manufacturing and sale of

rice, broken rice, bran and trading in paddy. In due course of time, the 1st

petitioner-Firm acquired an extent of Ac.0.98 cents in Survey No.661/1-3C1

and Survey No.661/1-3B in Nellore Municipal limits and constructed rice

Mill thereon. During the crop year 2014-2015, the 1st petitioner-Firm

undertook custom milling of rice (CMR) to an extent of 1042.040 MTs

(Metric Tons) from A.P.State Civil Supplies Corporation Limited, Nellore 2 UDPR,J W.P.No.4135 of 2021

and delivered 480.744 MTs. For the balance of the CMR payable by the 1st

petitioner, its erstwhile Managing Partner Mr. Mallineni Venkateswara Rao

made a representation to permit payment of CMR dues without penal

charges and the said request was forwarded by the Joint Collector, Nellore to

the Managing Director, A.P.State Civil Supplies Corporation Limited,

Vijayawada vide proceedings dated 27.10.2018 and suggested to consider

the request made by petitioner No.1.

While so, at that juncture, the erstwhile partners of the 1st petitioner-

Firm i.e. the 4th petitioner herein and Mr. M.Venkateswara Rao approached

the petitioners 2 and 3 and requested to join as Partners in the 1st petitioner-

Firm to mobilize capital and necessary infrastructure and accordingly, a

partnership deed dated 01.07.2018 was executed and the same was

registered as Document No.397/2018 before the Sub Registrar, Nellore.

While the matter stood thus, Mr. M.Venkateswara Rao died on

18.11.2019 and therefore, his legal heirs i.e. the petitioners 5 to 7 were

admitted to the partnership vide an agreement dated 11.03.2020 and changes

in the Constitution were registered under section 63(1) of the Indian

Partnership Act, 1932, with the Registrar of Firms, Nellore.

Thereafter, petitioners 4 to 7 intended to retire from the 1st petitioner-

Firm with the consent of other partners i.e. petitioners 2 and 3 and

accordingly, they executed a Right Relinquishment Deed of Partnership on

22.10.2020 and presented the same before the 2nd respondent for registration

on the same day. However, the 2nd respondent, who is the Sub Registrar,

Nellore, refused to receive and register the same on the ground that the

immoveable property of the 1st petitioner-Firm, which is shown as schedule 3 UDPR,J W.P.No.4135 of 2021

property in the Right Relinquishment Deed of Partnership was included in

the prohibitory list under Section 22-A of the Registration Act, 1908.

However, when the petitioners verified the prohibitory list, the

schedule property under the Right Relinquishment Deed of Partnership was

not, in fact, included in the prohibitory list. The petitioners reliably came to

know that the 3rd respondent has given instructions to the 2nd respondent to

include the properties of the 1st petitioner in the prohibitory list in view of

the CMR dues payable by the 1st petitioner to the Civil Supplies authorities.

The action of the 2nd respondent in refusing to receive and register the deed

is wholly arbitrary. It is submitted that the 2nd respondent ought to have seen

that the relinquishment deed sought to be presented for registration

envisages transfer of rights and liabilities of the petitioners 4 to 7 in favour

of the 1st petitioner-firm, but not in favour of the petitioners 2 and 3 in their

personal capacity and therefore, the 1st petitioner-firm alone continues to

hold rights over the properties and also can be subjected to recovery

proceedings.

It is further submitted that the petitioners tried to convince the 2nd

respondent and they are ready and willing to clear off CMR dues of the 1st

petitioner and proposal made by them on behalf of the 1st petitioner to pay

actual dues without penal charges is pending consideration before

authorities. However the 2nd respondent failed to consider the issue in

proper perspective and refused to receive and register the Right

Relinquishment Deed of Partnership.

Hence, the Writ Petition.

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                                                             W.P.No.4135 of 2021

3. Respondents 4 and 5 filed Counter and opposed the writ petition

contending thus. It is true that the 1st petitioner is the partnership firm and

Mallineni Venkateswara Rao is one of the partners and the respondents are

not aware of partnership of Mallineni Venkateswara Rao with the 4th

petitioner.

It may be true that the 1st petitioner-Firm owns land admeasuring

Ac.0.98 cents in S.No.661/1-3C1 and Survey No.661/1-3B within the limits

of Nellore Municipal Corporation. The respondent No.5 supplied 1042.040

MTs paddy for custom milling during 2014-2015 and the 1st petitioner was

bound to return a quantity of 698.167 MTs of custom milling rice, but the 1st

petitioner had returned only 480.744 MTs of CMR leaving balance of

217.528 MTs. Thus the 1st petitioner violated the agreement entered with

the 5th respondent-Corporation and therefore, the Officials of the 5th

respondent visited the rice mill number of times, persuaded the 1st petitioner

to deliver the custom milling rice (CMR) at the earliest. The 1st petitioner

evaded the delivery of CMR despite efforts made by the Officers of the 5th

respondent and the petitioner-miller has filed an affidavit on 05.02.2016

agreeing to supply CMR by 28.02.2016. However, the said promise was not

kept up and not delivered CMR even by 31.03.2016. So, finally, on

14.03.2016, the District Collector, SPS Nellore District served notices to the

petitioner with a direction to furnish bank guarantee for the undelivered

CMR value and to deliver the CMR by 20.03.2016, else civil and criminal

cases would be initiated against the 1st petitioner-Miller for such default. On

that the 1st petitioner did not respond to the notices. So, the Tahsildar,

Nellore was directed on 30.04.2016 to take action against the 1st petitioner-

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                                                           W.P.No.4135 of 2021

Miller for recovery of dues for undelivered quantity of 217.448 MTs under

the A.P.Revenue Recovery Act. Again on 05.08.2016, the Joint Collector

has directed the Tahsildar, Nellore to take action under the A.P.Revenue

Recovery Act and to file criminal case against the 1st petitioner-Miller for

cheating and misappropriation of paddy and therefore the Tahsildar, Nellore

lodged report before the Nellore Rural Police Station and thereby a case in

Cr.No.335/2016 was registered on 10.08.2016 and at that stage, the

Managing Partner of the 1st petitioner had made request before the Joint

Collector on 10.08.2016 seeking time for two months for delivery of CMR

and the Joint Collector, Nellore rejected the said request and directed for

delivery of CMR immediately and when there was no response from the 1st

petitioner-Miller, the District Collector has authorized the Tahsildar on

23.06.2017 to initiate proceedings under the A.P.Revenue Recovery Act for

recovery of Rs.2,15,27,142/- and also informed to the 3rd respondent-District

Registrar not to carry/record any sale transaction of the properties held by

the petitioner-miller in the wake of dues of CMR to the respondent-

Corporation and also proposed to auction the properties of the petitioner. At

that stage, M.Venkateswara Rao, owner of the 1st petitioner, submitted a

representation seeking waiver of penal charges over the CMR dues so as to

enable him to clear off dues of CMR undelivered by him during KMS 2014-

2015. The Joint Collector and EO, ED, A.P.S.C.S.C.L, Nellore has

forwarded the representation of M.Venkateswara Rao to the Office of the 5th

respondent-Corporation for consideration and valuation of dues at the cost of

CMR, which was worked out to Rs.55,21,361/- on the quantity of CMR at

single rate.

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                                                               W.P.No.4135 of 2021

It is further submitted, the approach of the petitioners 2 and 3

requesting the 1st petitioner to join them to mobilize necessary infrastructure

and execution of the partnership deed dated 27.03.2019 and its registration

under the document No.398/2018 before the Registration Offices are not

within the knowledge of this respondent and they are the internal

arrangements and nothing to do with the 5th respondent-Corporation and

admission of the petitioners 5 to 7 into the partnership and intention of

retirement of petitioners 4 to 7 from the 1st petitioner-partnership firm,

execution of Right Relinquishment Deed of Partnership on 22.10.2020 and

presentation of the same before the 2nd Respondent and refusal of the same

are not within the knowledge of the 5th respondent-Corporation. However,

these arrangements were said to have been made by the petitioners in order

to avoid liability created by the 1st petitioner and in view of the criminal

prosecution initiated against the petitioner-miller.

It is further submitted that the 1st petitioner is a defaulter of CMR dues

and in view of the proceedings under the A.P.Revenue Recovery Act, to

protect the interest of the 5th Respondent-Corporation, the Officials have

included the properties of the 1st petitioner in the prohibitory list and refusal

to receive and register the alleged relinquishment deed is not arbitrary

because the petitioners want to evade both civil and criminal liability created

by the 1st petitioner-miller and in order to protect the interest of the 5th

respondent-Corporation, the 2nd respondent upon the instructions of the 3rd

respondent refused to register the said document and therefore there is no

arbitrariness on the part of the respondents.

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                                                             W.P.No.4135 of 2021

As per the agreement entered into with the 5th respondent-Corporation

by the 1st petitioner, in case of non-delivery of customized rice to the

Corporation, the Managing Partner of the 1st petitioner-Firm has agreed to

pay penal charges on the CMR dues and when there is an contractual

obligation on the part of 1st petitioner to obey terms and conditions of the

agreement. Mere submission of representation by the petitioners 2 and 3

would not absolve liability of the 1st petitioner-Miller and that too, the said

representation without intending to pay penal charges was made when the

Revenue Recovery Act proceedings were under active consideration for

auction of the properties and the present deed of relinquishment was moved

with a view to cause hurdle to the revenue recovery proceedings and that as

per the G.O.Ms.No.23, Consumer Affairs, Food and Civil Supplies (CS-I)

Department, dated 25.11.2014, when there is short delivery of rice, the rice

miller, who failed to deliver the custom milled rice as per agreement, within

15 days from the date of receipt of paddy, the respondent-Corporation shall

collect the cost of paddy supplied to the miller at 1½ times of the economic

cost along with interest till date of recovery/payment including the

expenditure incurred under the provisions of the A.P.Revenue Recovery Act.

Besides that, the Corporation has to initiate criminal action against the

violator/miller and so the 5th respondent acted following the clauses 15 and

16 of the G.O.Ms.No.23, dated 25.11.2014, which in vogue as on the date of

agreement and also that agreement is also incorporated with the said

conditions, and in view of the same, the petitioners cannot take shelter under

the judgment in W.P.15465/2020. The writ petition is not maintainable and

hence may be dismissed.

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                                                             W.P.No.4135 of 2021

4. Heard the learned Counsel for the petitioner Sri P.Badrinath, and the

learned Government Pleader for Stamps and Registration representing the

respondents 1 to 3, and Sri P.Hemachandra, Standing Counsel for the

respondents 4 & 5.

5. The main plank of the argument of the learned Counsel for the

petitioners is that the 1st petitioner-Firm undertook custom milling rsice

(CMR) to an extent of 1042.040 MTs from the 5th Respondent-Corporation

and delivered 480.744 MTs and the balance of 217.528 MTs is due. The

Managing Partner of the 1st Petitioner viz. Mallineni Venkateswara Rao

made a representation seeking permission to pay balance CMR due amount

without penal charges and the said representation was forwarded by the Joint

Collector, Nellore to the 5th Respondent for consideration. The learned

Counsel further argued that while the matter stood thus, some changes

occurred in the partnership-Firm. To mobilize the capital to discharge dues

under CMR and others, the 4th petitioner and the said Mallineni

Venkateswara Rao approached the petitioners 2 and 3 and requested them to

join as partners in the 1st petitioner-Firm and accordingly a partnership deed

dated 01.07.2018 was executed and registered. The learned Counsel further

submitted that in the meanwhile Mallineni Venkateswara Rao died and

therefore, his legal heirs were brought on record as petitioners 5 to 7 vide an

agreement dated 11.03.2020. Thereafter, the petitioners 4 to 7 intended to

retire from the 1st petitioner-Firm with the consent of other partners i.e.

petitioners 2 and 3 and accordingly, they executed Right Relinquishment

Deed of partnership on 22.10.2020 and presented the same before the 2nd

Respondent for registration. However, the 2nd Respondent obviously due to 9 UDPR,J W.P.No.4135 of 2021

instructions of the 3rd Respondent i.e. the District Registrar, Nellore refused

to receive and register the same on the ground that the immoveable

properties of the 1st petitioner-Firm, which is shown as schedule property in

the Right Relinquishment Deed of Partnership was included in the

prohibitory list under Section 22-A of Registration Act.

6. While vehemently fulminating the said action of the 2nd Respondent,

the learned Counsel for the petitioners argued that merely because the 1st

petitioner-Firm is liable to pay CMR dues, the respondents' authorities are

not legally justified to place the mill properties in the prohibitory list. The

learned Counsel further argued that even if the relinquishment deed

proposed to be executed by the petitioners 4 to 7 is registered, the right of

the respondents' authorities over the immoveable properties of the 1st

petitioner-firm will continue to vest and thereby the right of the Government

to realize the CMR dues from the 1st petitioner will not be affected in any

manner. Therefore, the action of the respondents, particularly the 2nd

respondent, in refusing to register the Right Relinquishment Deed of

partnership is arbitrary and illegal.

7. Per contra, while justifying the action of the respondents, the learned

Standing Counsel for the respondents 4 & 5 and learned Government

Pleader for Stamps and Registration would argue that the 1st petitioner-Firm

owes huge amount towards CMR charges and penalty to the 5th respondent

and therefore, the properties of the 1st petitioner are kept in the prohibitory

list. Without clearing dues of the 5th respondent, the petitioners cannot

proceed with the execution of the Right Relinquishment Deed of partnership.

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                                                             W.P.No.4135 of 2021

8. The point for consideration is whether there are merits in the writ

petition to allow?

9. Point: I gave my anxious consideration to the above respective

arguments. The sum and substance of the argument of the petitioners is that

the 1st petitioner-Firm was originally formed with the petitioner No.4 and

one Mallineni Venkateswara Rao under partnership deed dated 20.10.2008

to carry on business in procuring and sale of broken rice, bran and trading in

paddy. Later, the 1st petitioner-Firm acquired Ac.0.98 cents in S.No.661/1-

3C1 and Survey No.661/1-3B in Nellore Municipal limits and constructed a

rice mill and later the said Firm during the crop year 2014-2015, undertook

to custom milling of rice (CMR) to an extent of 1042.040 MTs from

A.P.Civil Supplies Corporation and they could deliver 480.744 MTs of

CMR and still there is balance of 217.528 MTs of CMR. The 1st Petitioner

has to deliver either the said rice or its equivalent value of money. While so,

to secure capital, the 4th petitioner and M.Venkateswara Rao got admitted

the petitioners 2 and 3 as partners by virtue of partnership deed dated

01.07.2018. Later, Mallineni Venkateswara Rao died and his legal

representatives i.e. petitioners 5 to 7 were brought on record as partners.

After some time, the petitioners 4 to 7 intended to retire from the

partnership-Firm and in that context, they proposed to execute Right

Relinquishment Deed of partnership dated 22.10.2020 and they have

presented the said document for registration, which was refused by the 2nd

Respondent on the ground that property was placed in prohibitory list. The

learned Counsel for the petitioners would argue that mere execution of

relinquishment deed in favour of the 1st petitioner will not absolve the 11 UDPR,J W.P.No.4135 of 2021

liability of the 1st petitioner-Firm to the respondents 4 and 5 towards custom

milling rice and CMR dues. Hence, placing the properties of the mill in the

prohibitory list is illegal.

10. Per contra, the case of the respondents is that huge amounts and

penalty are due from the 1st petitioner-Firm and if the Right Relinquishment

Deed of Partnership is executed, that would affect the interest of the 5th

Respondent and on that plea, they prayed to dismiss the petition.

11. On a close scrutiny of the facts and respective pleadings, I find the

contention of the respondents untenable. Admittedly, the 1st petitioner-Firm

is due of 217.528 MTs or equivalent money with penalty towards CMR to

the 4th and the 5th respondents. It appears already the proceedings under the

A.P.Revenue Recovery Act are commenced against the 1st petitioner-Firm.

Now, by virtue of execution of Right Relinquishment Deed of partnership,

what is sought to be done is, petitioners 4 to 7 propose to relinquish their

respective shares in the 1st petitioner-Firm in favour of the 1st petitioner-Firm

and its continuing partners i.e. petitioners 2 and 3. I have gone through the

copy of the proposed Right Relinquishment Deed of partnership dated

22.10.2020. This deed is said to be executed by four outgoing partners i.e.

petitioners 4 to 7 in favour of the petitioner-Firm i.e. M/s.Sridevi Enterprises

and its existing partners i.e. petitioners 2 and 3. It should be noted that the

share of the outgoing partners i.e. petitioners 4 to 7 is 4% which is valued at

Rs.26,00,000/-. On receiving their respective amounts, they propose to

relinquish their respective shares in the Firm assets mentioned in the

Annexure I-A in favour of the exiting Firm. Therefore, the Firm's assets

will be intact and continue in the hands of the petitioners 2 and 3. As rightly 12 UDPR,J W.P.No.4135 of 2021

submitted by the learned Counsel for the petitioners, mere execution of the

relinquishment deed will not affect the right, if any, of the 4th and 5th

respondents to realize CMR dues. The CMR dues are concerned, respondent

Authorities can have a lien over the assets and books of accounts of the 1st

petitioner-Firm and against the continuing partners i.e. petitioners 2 and 3 till

realization of all its dues. Therefore, I agree with the contention of the

petitioners that despite entering into relinquishment deed, rights of

respondents 4 and 5 will not be affected adversely. In that view, keeping the

properties of the rice mill, if any, in the prohibitory list is against Law.

12. Accordingly, this Writ Petition is allowed, directing the petitioners to

present the Right Relinquishment Deed of partnership dated 22.10.2020 by

incorporating a clear term therein to the effect that the said Right

Relinquishment Deed of Partnership will not, in any manner, affect the

rights of the respondents 4 and 5 from realizing CMR dues from the 1st

petitioner-Firm, in which case, the 2nd Respondent shall receive, process and

register the Right Relinquishment Deed of partnership. No costs.

As a sequel, interlocutory applications, if any pending, shall stand

closed.

_________________________ U. DURGA PRASAD RAO, J 09.08.2021 MVA