M/S. Balaji Cotton Ginning ... vs M/S. Sri Rajeswari Cotton ...
2023 Latest Caselaw 4231 AP

         THE HON'BLE SRI JUSTICE T.MALLIKARJUNA RAO

                      APPEAL SUIT NO.131 OF 2010

JUDGMENT:

1. The Appeal, under Section 96 of the Code of the Civil Procedure, is

filed by the appellants/defendants challenging the decree and Judgment

dated 31.12.2009 in O.S.No.771 of 2008 passed by the learned III

Additional Senior Civil Judge (Fast Track Court), Guntur (for short, 'trial

court'). Respondent is the plaintiff in the suit, who filed the suit in

O.S.No.771 of 2008 seeking recovery of Rs.9,51,242/- with interest and

costs from the defendants towards Khata dealings between them.

2. The parties will hereinafter be referred to as arrayed before the trial

Court.

3. The facts leading to the present Appeal, in a nutshell, are as under:

(a) The plaintiff firm has been involved in the cotton trade,

regularly supplying cotton to the 1st defendant's firm on a

credit basis. The 1st defendant firm engages in substantial

business activities with significant turnovers. All the

partners in both firms actively participate in the business

transactions. The 1st defendant firm opened a Khata with the

plaintiff firm, they purchased cotton on credit basis, with two

separate bills: Bill No.7, dt.08.12.2006 amounting to

Rs.5,93,433/- and bill No.8, dt.13.02.2007 amounting to

Rs.5,36,628/-. Both parties agreed that these amounts

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would carry the interest rate @ 24% per annum accruing the

bills date until the date of payment. The Khata of the 1st

defendant firm was entered in the plaintiff firm's account

books, which are maintained in the regular course of their

business. After opening the Khata of 1st defendant firm, it

made two payments, one of Rs.3,00,000/- on 18.01.2007

and another of Rs.2,00,000/- on 10.05.2007 through cheque

payment.

(b) In 2007, one of the partners in the 1st defendant firm,

Chittiprolu Suryanarayana, died intestate in 2007, leaving

behind his wife Nagabhayamma and his sons Jagan Mohan

Rao and Srinivasa Rao, as his legal heirs. After his death, the

1st defendant firm continued to operate with the remaining

partners, specifically defendants 3 to 7, and they were

responsible for the 1st defendant's firm's debt. The plaintiff

made repeated attempts to collect the outstanding debt from

the defendants, but the defendants postponed on one pretext

or another. Additionally, the 1st defendant borrowed

Rs.3,75,000/- from the plaintiff on 19th August, 2006 by way

of hand loan, agreeing to repay the same with interest @ 18%

p.a., and to that effect a receipt dt.19.08.2006 was issued by

one of the partners of the 1st defendant's firm, Jagan Mohan

Rao to confirm the loan amount. Despite this, the defendants

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only made a part payment of Rs.1,00,000/- on 23.01.2007

towards settling the personal loan debt.

4. Defendants 3 to 7 have adopted the 2nd defendant's written

statement, in which, they asserted that 1st defendant is a registered firm.

Initially, the firm was formed by partners, Late Chittiprolu Suryanarayana

and his sons Late Jagan Mohan Rao and Srinivasa Rao along with the 2nd

defendant for the benefit of their joint family. After the demise of

Chittiprolu Suryanarayana, the responsibility for all business and

financial transactions fell on his elder son, C.Jagan Mohan Rao.

Subsequently, he died. During their lifetimes, the entire amount owed as

per the Khata agreement was paid by them to the plaintiff, albeit at a

higher interest rate. Upon Jagan Mohan Rao's passing, the plaintiff visited

the defendants' residence and acknowledged the receipt of the outstanding

amount. At that time, there was an understanding that the matter had

been settled through negotiations between the elders. The plaintiff then

collected substantial sums from the 2nd defendant, indicating that he

would close the Khata and provide a receipt for a full and final settlement.

However, the plaintiff failed to issue the promised receipt and continued to

postpone doing so. The defendants argue that the interest claimed by the

plaintiff is exorbitant and unfair.

5. Based on the above pleadings, the trial Court framed the following

issues:

(1) Whether discharge pleaded by the defendant is true?

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(2) Whether the interest claimed by the plaintiff is excessive? (3) Whether the plaintiff is entitled to recover the suit claimed as prayed for?

(4) To what relief?

6. During the trial, on behalf of the plaintiff, P.W.1 was examined, and

Exs.A.1 to A.10 were marked. On behalf of the defendants, D.W.1 was

examined, and no documents were marked.

7. After completion of the trial and hearing the arguments of both

sides, the trial Court decreed the suit with costs against defendants 1 and

2 and against the estate of Jagan Mohan Rao of 1st defendant firm, which

is in the hands of defendants 3 to 7 for Rs.9,51,242/- with interest @ 6%

on the principal amount of Rs.6,30,055/- from the date of suit till the date

of realization.

8. Sri Md. Saleem learned counsel representing the appellants/

defendants put forth an argument that the trial Court accepted the

documents, i.e., Exs.A.1 to A.10 relied upon by the plaintiff firm, even

though none of the partners of the 1st defendant firm had signed these

documents regarding Khata transaction; the trial Court Judgment based

solely on the ground that the 1st defendant did not dispute the part

payment made by way of cheque either in the written statement or in the

evidence; the trial Court erred in decreeing the suit @ 24% p.a., from the

date of bill along with subsequent interest @ 6% p.a., on the principal

amount from the date of suit till the date of realization.

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9. Per contra, Sri Venkateswarlu Sanisetty learned counsel

representing the respondent/plaintiff, contends that the trial Court

correctly appreciated the case facts and came to a correct conclusion. The

reasons given by the trial Court do not want any modification.

10. Concerning the pleadings in the suit and the findings recorded by

the Trial Court, the following points would arise for determination:

1) Is the Trial Court justified in holding that the plaintiff is entitled to the suit amount as prayed for?

2) Is the pre-lite interest awarded by the trial Court @ 24% per annum yearly rests just and reasonable?

3) Is the Judgment passed by the trial Court needs any interference?

POINT NOs.1 to 3:

11. According to the 2nd defendant's written statement, there is no

outstanding debt between the plaintiff firm and the defendants; they

contended that the claim was settled during the lifetime of one of the

partners and Managing Partner of the 1st defendant firm. It is important to

note that the 1st defendant's firm consists of active partners, who are all

members of the same family. The 2nd defendant, who was examined as

DW.1, asserts that he is a sleeping partner of the 1st defendant firm,

which his father and brothers were actively involved in the firm's

operation; during their lifetime, they conducted transactions with the

plaintiff firm and fully discharged the debt. On the other hand, the

proprietor of the plaintiff firm, K.Sreenivasa Rao, who testified as PW.1

TMR, J A.S.No.131 of 2010

that the 1st defendant firm and its partners had established a running

Khata with the plaintiff. They had purchased cotton on credit under a bill

dated December 8, 2006, for a total of Rs.5,93,433/-, and under another

bill dated February 13, 2007, for Rs.5,36,628/-. The agreement included a

provision for repaying the amount with interest at a rate of 24% per

annum, calculated from the date of the bill until the date of full payment.

To substantiate their case, the plaintiff relied on Ex.A.3.

12. It is elicited in PW.1's cross-examination that the bills relating to

Ex.A.3 were held during the lifetime of Satyanarayana and Jagan Mohan

Rao. It is suggested to PW.1 in the cross-examination that such

transactions were held by defendants 1 and 2, but according to them,

defendants 3 to 7 were not liable to pay the debts.

13. The plaintiff contends that the data of 1st defendant firm, entered in

the plaintiff's firm account book, is being maintained in the regular course

of the business. To establish the said fact, the plaintiff's firm relied on

Ex.A.4 (state of account of 1st defendant's firm maintained in the

accounts book of plaintiff firm, dt.12.10.2008), Ex.A.5 (ledger book for the

year 2006-07 at page No.31), Ex.A.6 (ledger book for the year 2007-08

relating to page No.37), Ex.A.7 (Day book for the year 2007-08 relating to

page No.4), Ex.A.8 (ledger book for the year 2008-09 relating to page

No.37), Ex.A.9 (day book for the year 2006-07 relating to page No.42) and

Ex.A.10 (sales register for the year 2006-07 relating to page No.15). The

defendants did not dispute case of the plaintiff. It is also the plaintiff's

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case that after opening the khata of 1st defendant firm, it made two

payments, i.e., Rs.3,00,000/- on 18.01.2007 and Rs.2,00,000/- on

10.05.2007 by way of cheque towards part payments. The material placed

by the plaintiff clearly shows that the said payments were deducted.

14. It is not the defendants' case that the said payments were not

deducted from the outstanding amount. The plaintiff's case that one of the

partners, namely Chittiprolu Suryanarayana, died as intestate in the year

2007, leaving behind his wife, Nagabhayamma and his sons, Jagan

Mohan Rao and Suryanarayana, as his legal heirs, upon whom, the estate

was devolved, is not disputed.

15. It is the DW.1's version that the firm continued with the remaining

partners, i.e., defendants 3 to 7, who are the legal heirs of late

Suryanarayana. It is also the plaintiff's specific case that the 1st defendant

borrowed an amount of Rs.3,75,000/- from the plaintiff by way of a hand

loan, agreeing to repay the same with interest and to that effect, a receipt

was issued by one of the sleeping deceased partner namely Jagan Mohan

Rao of 1st defendant firm, is not disputed.

16. As seen from the defendants' contest, they are not disputing the

plaintiff's case regarding purchasing the cotton on a credit basis and

taking a hand loan. Once the defendants have not disputed the said

plaintiff's case and they have pleaded that the said debts were discharged,

they must establish the plea of discharge.

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17. Though the plaintiff has taken a plea regarding the hand loan

transaction with the defendants, no claim is made in the suit about the

same and the plaintiff stated that it would file a separate suit against the

defendants. The evidence adduced regarding the hand loan transaction

need not be considered.

18. The trial Court observed that the part payments made by the 1st

defendant firm under two cheques for Rs.5,00,000/- were not denied by

the defendants either in the written statement or in the DW.1's evidence.

The defendants have also not disputed the plaintiff's case that the ledger

books and invoices from the relevant pages covered under Exs.A.3 to A.9

show that 1st defendant firm opened khata with the plaintiff firm and

purchased the cotton and made part payment of Rs.5,00,000/-. On the

other hand, the defendants contend that though they do not know the

payments made by 1st defendant under two cheques in favour of the

plaintiff, he sold the property, which was attached by the plaintiff in the

suit and executed a registered sale deed by all the defendants. The trial

Court observed that the sale deed does not contain a recital that the 2nd

defendant is only a sleeping partner. Except for the self-serving testimony

of DW.1 (C.Srinivasa Rao, 2nd defendant), there is no corroborative

evidence on behalf of the defendants to prove their contention of

discharge. The defendants have not explained the mode of payments

towards that debt. Had the defendants discharged the debt, at least they

would be able to furnish the payment details. Without giving those details,

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accepting the defendants' contention about the plea of discharge is

difficult.

19. It is settled law that the best evidence in the case is the admission

of the opposite party. Admissions are valuable evidence because when a

party himself admits to being true, it may be reasonably presumed to be

so until the presumption is rebutted. The fact admitted must be taken to

be established. The effect of admission is merely to shift the onus of

disproving on the party, making them unless a plea of estoppels can be

successfully invoked. It is well settled that admission is the best evidence

that an opposing party can rely upon, though not conclusive, is a decisive

matter unless successfully withdrawn or proved erroneous. There cannot

be better evidence than one's admission.

20. Based on the DW.1's testimony, it is evident that after the passing

of his father and brother, he continued to engage in business activities

with other family members. The evidence presented during the legal

proceedings suggests that both the Managing Partner and one of the

partners of the 1st defendant firm had conducted business transactions

and procured cotton from the plaintiff during their lifetimes. As a result of

this evidence, the trial Court arrived at the conclusion that the individuals

acting on behalf of the family and in their personal capacities, including

both the partners and the firm itself, are collectively responsible for

settling the outstanding debt. In essence, the trial Court held that both

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the family members involved in the business and the business entity itself

are liable to repay the debt owed.

21. It is not the case of defendants 3 to 7 that after the death of the

Managing partner and one of the partners, they made payments. They

have taken a specific plea in the written statement that Khata debt was

paid by defendants 1 and 2 during their lifetime. Except taking bare pleas

that the defendants 1 and 2 have discharged the debt payable to the

plaintiff, no evidence is placed to substantiate the contention. Once the

defendants have not disputed the credit transactions as pleaded by the

plaintiff firm, they must establish the plea of discharge. The trial Court

has rightly placed the burden upon the defendants to establish the plea of

discharge. The defendants have failed to establish the plea of discharge.

The burden of proving discharge heavily rests upon them and in their

attempts, they have singularly failed. As both parties have let in evidence

and as plaintiff's evidence is more worthy of belief and the trial Court

rightly didn't accept the defendants' plea of discharge.

22. The defendants have taken a specific plea in the written statement

that the interest payable to the plaintiff is usurious. The plaintiff has not

placed any evidence justifying claiming interest @ 24% per annum. The

trial Court has not given any specific finding about the interest

entitlement @ 24% per annum.

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23. In a decision reported in M. Rajeswar Rao & Others V. Chitluri

Satyam (died) & others1 and another decision reported in Ms Surisetty

Nookaratnam V. Saragadam Gowri Ramalakshmi and another 2, the

composite High Court of Andhra Pradesh has reduced the pre-lite interest

from 24% to 12% per annum and from 18% to 12% per annum,

respectively, by relying on the judgments of Hon'ble apex Court in Mahesh

Chandra Bansal V. Krishna Swaroop 3 and in DDA V. Joginer

S.Monga4. In ascertaining the interest rate, the Courts of Law can take

judicial notice of inflation and the fall in bank lending rate of interest. A

reading of the precedents suggests that the steep fall in the Bank Lending

interest rate is the main reason for reducing the pre-lite interest from

24%. This Court views that if the interest rate is unconscionable and

usurious, the Court has the power to interfere. By following the case law

referred, this Court is inclined to reduce the interest rate from 24% to 18%

per annum from the date of the suit transaction till the date of filing of the

suit.

24. Given the above facts and circumstances, this Court views that the

plaintiff is not entitled to a rate of interest at 24% per annum. However, he

is entitled to a simple rate of interest at 18% per annum from the date of

the suit transaction till the date of filing of the suit. The findings arrived at

by the trial Court on the appreciation of evidence in this case, is therefore,

1 2013 SCC OnLine AP 809 2 2013 SCC OnLine AP 369 3 (1997) 10 SCC 681 4 (2004) 2 SCC 297

TMR, J A.S.No.131 of 2010

correct and does not call for interference, except the rate of interest as

indicated above. Accordingly, the points are answered.

25. For the reasons stated above, the Appeal is allowed in part by

modifying the interest from 24% to a simple rate of interest at 18% per

annum on the principal amount from the date of the suit transaction till

the date of filing of the suit. Out of the decree amount awarded, the

payment of Rs.3,00,000/- made on 18.01.2007 and Rs.2,00,000/- made

on 10.05.2007 shall be deducted. The rest of the Judgment holds good.

Both parties shall bear their costs.

26. Miscellaneous petitions pending, if any, in this Appeal shall stand

closed.

_________________________________ JUSTICE T. MALLIKARJUNA RAO

Date: 13.09.2023 SAK

TMR, J A.S.No.131 of 2010

THE HON'BLE SRI JUSTICE T.MALLIKARJUNA RAO

APPEAL SUIT NO.131 OF 2010

Date: 13.09.2023

SAK