Delhi High Court
M/S. Nirmal Lotteries vs Dda & Another on 24 August, 2009
Author: Reva Khetrapal
REPORTED
* IN THE HIGH COURT OF DELHI AT NEW DELHI
% DATE OF RESERVE: July 14, 2009
DATE OF DECISION: August 24, 2009
+ CS(OS) 1760/1992
M/S. NIRMAL LOTTERIES ..... Plaintiff
Through: Mr. Amit P. Deshpande, Advocate.
versus
D.D.A AND ANR. ..... Defendants
Through: Mr. Amiet Andlay and Mr. Arun K.
Sharma, Advocates.
CORAM:
HON'BLE MS. JUSTICE REVA KHETRAPAL
1. Whether reporters of local papers may be allowed
to see the judgment?
2. To be referred to the Reporter or not?
3. Whether judgment should be reported in Digest?
: REVA KHETRAPAL, J.
1. This is a suit for recovery of Rs.21,41,145/- (Rupees Twenty One Lakh
Forty One Thousand One Hundred and Forty Five only) from the defendant
with pendente lite and future interest at 24% per annum from the date of the
institution of the suit till the date of realisation.
2. The facts as set out in the plaint are that the plaintiff is a partnership
firm duly registered under the Indian Partnership Act, 1932. The defendant
No.1 is the Delhi Development Authority through the Director, State Lotteries.
The defendant No.2 is the Delhi Administration through its Finance Secretary.
At the time of the institution of the suit, the defendant No.1 was engaged in the
business and trade of running lotteries and had invited tenders for the
appointment of main stockist for running various State lotteries run by the
defendant No.1 on the terms and conditions set out in the invitation to tender.
The plaintiff submitted a tender dated 19.12.1990 for running a lottery in the
name of "Bhagyanidhi Weekly Lottery", of which the draw was to be
conducted every Wednesday. As per Clause 3 of the terms and conditions of
tender, 52 weekly draws and 2 bumper draws in a year were to be held with the
time gap between the two draws to be not less than seven days for weekly
draws and three months for bumper draws respectively. As per Clause 9 of the
tender, the plaintiff was required to furnish to the defendant a bank guarantee
in the sum of Rs.50,00,000/- (Rupees Fifty Lakh only) for the due performance
of all its obligations. Clause 14 related to the pricing of the tickets while
Clause 16 contained the terms and conditions, the fulfillment of which was to
be made on acceptance of the tender.
3. The defendant accepted the tender of the plaintiff vide its letter
No.D.Lott./Main Stockist/Sunday-Wednesday Lottery/90-91/2524 dated 26th
December, 1990. In terms of the acceptance letter, the defendant called upon
the plaintiff to deposit with the defendant the following amounts:
a) Amount of First Prize - Rs.3,00,000/-
b) Royalty - Rs.3,87,900/-
c) Printing charges - Rs.1,53,000/-
d) Publicity - Rs.90,000/-
e) Administration & Misc. charges - Rs.18,900/-
Total Rs.9,48,900/-
4. The plaintiff deposited the said amount with the defendant and thus
started functioning as the main stockist of the defendant.
5. As per Clause 9 of the tender, the plaintiff was required to furnish to the
defendant a bank guarantee in the sum of Rs.50,00,000/- (Rupees Fifty Lakh
only), which bank guarantee was obtained by the plaintiff from the Canara
Bank, Vithalvadi Branch, Bombay and submitted to the defendant.
6. The plaintiff's case is that as per Clause 16(vii) of the tender, an option
was given to the parties to terminate the contract by giving four months notice
of termination and the plaintiff by letter dated 17th May, 1991 gave to the
defendant four months notice of termination of the contract . The plaintiff's
further case is that the said notice was accepted by the defendant-DDA vide its
letter No.D.Lott/Misc.MS/Royalty/91/8115 dated 10th September, 1991
(Exhibit PW1/D-2). By the said letter, the defendant informed the plaintiff that
the defendant would issue a separate demand letter in due course in respect of
the amount which was payable by the plaintiff under the terms and conditions
of the contract and also intimated the plaintiff that it had been decided to run
the lottery in question departmentally from the 35th draw falling on 18.09.1991.
In response to the letter dated 10th September, 1991, the plaintiff sent a reply
dated 16.09.1991 stating therein that the defendant should inform the amount
due to the plaintiff and that the plaintiff would pay the amount within 48 hours.
7. The plaintiff alleges that the defendant dishonestly instead of making
any demand on the plaintiff invoked the bank guarantee for the amount of
Rs.53,74,667/- (Rupees Fifty Three Lakh Seventy Four Thousand Six Hundred
and Sixty Seven only) and after invoking the same, the defendant sent a letter
dated 20th September, 1991 to the plaintiff raising a demand of Rs.53,74,667/-
(Rupees Fifty Three Lakh Seventy Four Thousand Six Hundred and Sixty
Seven only) [Exhibit PW1/D-3]. The demand as contained in the said letter
consisted of six items as enumerated hereunder:
i) Difference on royalty upto 34th Draw - Rs.16,62,668/-
ii) Interest on difference of royalty - Rs.1,06,183/-
iii) Amount of dishonoured cheques - Rs.29,75,900/-
iv) Interest on amount of dishonoured
cheques - Rs.95,852/-
v) 10% penalty on royalty of Rs.1,78,202/-
from 35th to 52nd draw - Rs.3,20,764/-
vi) Cost of 54,000/- tickets of Baishakhi
Bumper - Rs.2,13,300/-
Total Rs.53,74,667/-
8. It is further the case of the plaintiff that as regards item (i), there was no
question of any difference in royalty upto the 34th draw, inasmuch as royalty
was fixed at Rs.1,29,300/- (Rupees One Lakh Twenty Nine Thousand and
Three Hundred only) per week as was made clear by the defendant's letter of
acceptance of the tender dated 26th December, 1990 (Exhibit DW2/D-12) and
the said royalty was paid and in any event, this amount was included in the
dishonoured cheques of Rs.29,75,900/- (Rupees Twenty Nine Lakh Seventy
Five Thousand and Nine Hundred only) referred to in item No.(iii) reproduced
hereinabove. According to the plaintiff, since no difference of royalty was
payable upto the 34th draw, there was no question of making any payment of
interest in respect of item No.(i) as claimed in item No.(ii) above. As regards
the amount claimed in item No.(iii) above, i.e., the amount of dishonoured
cheques, the plaintiff admits that this amount is payable by the plaintiff (para
20 of the plaint). As regards interest on the amount of the dishonoured
cheques as claimed in item No.(iv) above, the plaintiff asserts that there was no
agreement for payment of any interest and further the defendant has not
charged any interest from other stockists in respect of dishonoured cheques.
As regards item No.(v), it is stated that the total penalty amount payable is
Rs.4,87,030/- (Rupees Four Lakh Eighty Seven Thousand and Thirty only) [as
against Rs.3,20,764/- (Rupees Three Lakh Twenty Thousand Seven Hundred
and Sixty Four only) claimed by the defendants] and the said amount is
admitted as payable by the plaintiff. As regards item No.(vi), it is stated that
the plaintiff never conducted Baishakhi bumper, which was conducted by
another stockist and not by the plaintiff. Therefore, no amount of
Rs.2,13,300/- (Rupees Two Lakh Thirteen Thousand and Three Hundred only)
is payable by the plaintiff on this account. Thus, the total amount payable by
the plaintiff was Rs.34,62,930/- (i.e. Rs.29,75,900/- plus Rs.4,87,030/-) and the
defendant having already encashed the bank guarantee and received a payment
of Rs.53,74,667/- (Rupees Fifty Three Lakh Seventy Four Thousand Six
Hundred and Sixty Seven only) against the said amount, had illegally enriched
itself to the tune of Rs.19,11,737/- (Rupees Nineteen Lakh Eleven Thousand
Seven Hundred and Thirty Seven only) and this amount the defendant is liable
to pay to the plaintiff with interest for illegal detention of money at the rate of
24% per annum. The plaintiff served a legal notice dated 14.01.1992 on the
defendant, which was duly served, for payment of the said amount, but the
defendant has failed to pay the amount,which is now claimed in the suit with
pendente lite and future interest at 24% per annum.
9. It may be mentioned at this juncture that the suit though was originally
filed against the Delhi Development Authority, on the plaintiff's subsequently
moving an application under Order I Rule 10 CPC, the Delhi Administration
was impleaded as defendant No.2 by order of this Court dated 31st July, 2006.
10. Written statement was filed by the defendant No.2, wherein, at the
outset, it was submitted that the plaint was liable to be rejected as the plaintiff
had intentionally and deliberately concealed the facts with regard to his offer
dated 21st December, 1990, whereby the plaintiff had itself offered the
minimum annual turnover of Rs.21.50 crores (Rupees Twenty One Crore Fifty
Lakh only). The tender of the plaintiff was accepted by the Delhi Lotteries
vide letter dated 26.12.1990, only on the basis of the said minimum annual
turnover offered by the plaintiff. Thus, in case the amount due from the
plaintiff to the defendant No.2 is calculated on the basis of the annual turnover
of Rs.21.50 crores (Rupees Twenty One Crore Fifty Lakh only), no amount
would be found due to the plaintiff against the defendant No.2. The suit filed
by the plaintiff, in the circumstances, was misconceived.
11. Next, it was submitted by the defendant No.2 - Delhi Administration
that the plaintiff had earlier filed a suit, being Suit No.2858/1991 (Exhibit
DW2/D8) against the Delhi Development Authority seeking an injunction
restraining the DDA (the defendant No.1) from encashing the bank guarantee.
The said suit was contested by the DDA, which filed a detailed written
statement (Exhibit DW2/D-9) whereby the plaintiff was apprised of the
amount of Rs.53,74,667/- (Rupees Fifty Three Lakh Seventy Four Thousand
Six Hundred and Sixty Seven only) standing due against the plaintiff. The
details of this amount of Rs.53,74,667/- (Rupees Fifty Three Lakh Seventy
Four Thousand Six Hundred and Sixty Seven only) were also mentioned in the
defence. However, as no injunction was granted by this Court, the bank
guarantee was encashed and on encashment thereof, the suit was withdrawn by
the plaintiff. The present suit, according to the defendant, is an abuse of the
process of the Court.
12. On merits, the defendants' case is that the Delhi Lotteries had floated a
scheme for the sale of tickets under the name of "Bhagyanidhi Weekly
Lottery" to be conducted every Wednesday. This scheme was initially for the
sale of a minimum of 15 lakh tickets of Rs.2/- each per week for one year of 52
weekly draws. In case the weekly sale of tickets fell short of the target of 15
lakh tickets, then the facility of two bumper draws so as to make up the
deficiency in the sale of 15 lakh tickets per week was also provided under this
scheme. The scheme sponsored by the defendant was, in any case, for 52
weekly draws only. This scheme was subject to the various terms and
conditions as contained in the document Exhibit PW1/D-1. The sale of 15 lakh
tickets per week was the minimum, but as per Clause 9 thereof, it was open to
the main stockist to get the number of tickets increased at any time during the
year. The plaintiff had submitted an incomplete tender dated 19.12.1990
(Exhibit D-1) for running the aforesaid "Bhagyanidhi Weekly Lottery" as the
plaintiff had not filled up Column Nos.10 and 12 of the form, which related to
the "Minimum Annual Turnover Offered" and the "Minimum Assured Profit
on Turnover". In the circumstances, the plaintiff was required to offer the
minimum annual turnover and also the minimum assured profit on such
turnover, whereupon, the plaintiff vide his letter dated 21.12.1990 (Exhibit D-
2) addressed to the defendant offered the same. The said letter, being apposite,
is reproduced hereunder:
"Sub: Tenders for Wednesday Lottery.
Sir,
With reference to the negotiations conducted with the
members of the Committee on 21.12.90 at 2.00 p.m. in the
chamber of Director (Lott.) I offer the minimum annual
turn over of Rs. 21.5 crore @ 4.31% with guaranteed
profit of Rs.9266500/- per annum.
This offer is final."
13. The above offer submitted by the plaintiff, being the highest among the
tenderors, was accepted by the defendant vide their letter of acceptance dated
26.12.1990, Exhibit DW2/D-12. In the said acceptance letter, it was
categorically stated that the Director, Delhi Lotteries had been pleased to
accept the tender dated 19.12.1990 on the following terms and conditions:
"1) Minimum annual turnover : 21.5 crores
2) Rate of profit offered : 4.31%
3) Assured profit on turnover : Rs.92,66,500/-
per annum"
In the penultimate paragraph of the aforesaid letter, it was further stated
as follows:
"Your letter dated 21.12.90 will form the part of the
agreement."
14. In the above circumstances, the defendant claims that the plaintiff was
obliged to pay a sum of Rs.1,78,202/- (Rupees One Lakh Seventy Eight
Thousand Two Hundred and Two only) per week by way of royalty amount on
the minimum annual turnover of Rs.21.50 crores (Rupees Twenty One Crore
Fifty Lakh only), calculated at the rate of 4.31%, and that accordingly the
amount of Rs.9,48,900/- (Rupees Nine Lakh Forty Eight Thousand and Nine
Hundred only) was demanded by the defendant in its letter dated 26.12.1990
(which was only provisional), stating that in case the plaintiff could not
increase the sale of tickets per week proportionately so as to make up the
proposed annual turnover of Rs.21.50 crores (Rupees Twenty One Crore Fifty
Lakh only), the defendant would be left with no option, but to raise a demand
on the difference of royalty amount worked out on the basis of minimum
annual turnover of Rs.21.50 crores (Rupees Twenty One Crore Fifty Lakh
only) at the rate of 4.31% assured by the plaintiff vide their letter dated
21.12.1990. The defendant submits that the plaintiff therefore sent a notice
dated 17th May, 1991 to the defendant, whereby the plaintiff requested the
defendant to reduce the minimum annual turnover of Rs.21.50 crores (Rupees
Twenty One Crore Fifty Lakh only), as offered by the plaintiff firm vide letter
dated 21.12.1990, to Rs.15.60 crores (Rupees Fifteen Crore Sixty Lakh only).
It was further informed by the plaintiff firm vide letter dated 17.05.1991
(Exhibit D-3) that in case the defendant is unable to reduce the annual turnover
as required from Rs.21.50 crores (Rupees Twenty One Crore Fifty Lakh only)
to Rs.15.60 crores (Rupees Fifteen Crore Sixty Lakh only), then the letter
dated 17th May, 1991 may be treated as four months notice to discontinue with
the running of the said weekly lottery. The aforesaid request of the plaintiff
was considered by the defendant and was found not acceptable by the
defendant. By their letter dated 27th May, 1991 (Exhibit DW2/D-4), after
referring to the plaintiff's letter dated 21st December, 1990 under which the
tender dated 19.12.1990 for appointment of the plaintiff as the main stockist
was accepted, the defendant No.1 called upon the plaintiff to deposit the
amount of proportionate royalty of Rs.1,78,202/- (Rupees One Lakh Seventy
Eight Thousand Two Hundred and Two only) per weekly draw in future and to
clear the difference amount of Rs.9,78,040/- (Rupees Nine Lakh Seventy Eight
Thousand and Forty only) as worked out on the said basis for the last 20 draws.
The plaintiff by its letter dated 22nd August, 1991 (Exhibit D-5) proposed to
bring out one bumper draw each on the occasion of "Diwali" and "New Year
Day". The defendant No.1, on receipt of the aforesaid letter dated 22nd August,
1991 from the plaintiff, informed the plaintiff vide their letter dated 29th
August, 1991 (Exhibit DW2/D-6) that the plaintiff's proposal for bumper draw
could only be considered on the following conditions:
(i) Prompt remittance/payment of Rs.47,40,900/- (21 cheques) by the
plaintiff to the defendant towards the dishonoured cheques;
(ii) Withdrawal of the notice of termination by the plaintiff; and
(iii) An undertaking by the plaintiff that they would be depositing future
payment of dues of Delhi Lotteries through Bank Drafts/Pay Orders.
It was further made clear in the letter dated 29th August, 1991 that a
reply to the said letter be given before 30th September, 1991, failing which
action as per terms and conditions of the tender would be initiated. The
plaintiff firm by letter dated 30th August, 1991 (Exhibit PW1/DA) stated that
they were not in a position to make prompt payment in view of the adverse
market conditions, etc. and, thus, failed to accept the conditions as contained in
the letter dated 29th August, 1991 from the defendant No.1 to the plaintiff. In
the circumstances, the Delhi Lotteries issued letter dated 10th September, 1991
(Exhibit PW1/D-2) to the plaintiff conveying their acceptance to the notice of
termination sent by the plaintiff on 17.05.1991 and, thus, the contract of
running the lottery stood terminated with effect from the date on which the 35th
draw fell due, which was admittedly conducted by the defendant No.1
departmentally. As per the defendant No.1, therefore, the value of the tickets
in respect of the remaining 18 weekly draws worked out to Rs.11.30 crores
(i.e. Rs.21.50 crores minus Rs.10.20 crores). This, in a nutshell, is the defence
raised in the written statement.
15. Replication to the written statement was filed by the plaintiff, reiterating
the contents of the plaint and denying the averments made in the written
statement.
16. With the consent of the parties, the following issues were framed for
consideration on 17th April, 1998:
"1. Whether the plaintiff firm is a registered partnership
firm and the plaint has been signed and verified by
one of the registered partners thereof?
2. Whether the plaintiff committed breach of the
agreement to give minimum turnover of Rs.21.50
Crores @ 4.31% with guaranteed profit of
Rs.92,66,500/- per annum in terms of Ex.D-2? If so,
to what effect? OPD
3. Whether the plaintiff is entitled to claim any
damages for invoking bank guarantee and for
withholding the amount as alleged in paragraph 22
of the plaint? If so, its amount? Interest on the said
amount?
4. Relief? Costs?"
17. It may be mentioned at this juncture that initially, before the
impleadment of the defendant No.2, the defendant No.1 DDA had adduced the
evidence of DW1 Mr. R.D. Sharma, Deputy Chief Accounts Officer on the
aforesaid issues, but since he stated that in the absence of the records, which
had been transferred to the NCT of Delhi, he was not aware of the particulars
of the case, the plaintiff sought impleadment of the defendant No.2 - Delhi
Administration, to whom the Department of Lotteries had been transferred vide
Notification dated 31.03.1992 with effect from 01.04.1992.
18. After the impleadment of the Delhi Administration as defendant No.2
on the application of the plaintiff, an additional issue was framed by this Court
on 24.09.2007, which is as under:
"3A. Which of the defendants, if any, is liable to the
plaintiff? OPP"
19. In the course of trial, the plaintiff tendered in evidence the affidavit by
way of evidence of PW1 Shri Bakul U. Shah, while the defendant tendered in
evidence the affidavit of Shri Ajay Garg, Joint Director, Small Savings &
Lotteries, Government of NCT of Delhi. Both the aforesaid witnesses were
subjected to extensive cross-examination. No other evidence was led by the
parties on the issues reproduced hereinabove.
20. After hearing Mr. Amit P. Deshpande, the learned counsel for the
plaintiff and Mr. Amiet Andlay, the learned counsel for the defendant No.2 -
Delhi Administration, my findings on the issues are as recorded below.
Issue No.1:
21. With regard to the registration of the plaintiff firm, PW1 Mr. Bakul U.
Shah in his affidavit by way of evidence asserted that the firm was a registered
firm and that "Form A" issued by the Registrar of Firms evidencing
registration of the plaintiff firm w.e.f. 28th February, 1989 vide No.BA-22096
was Exhibit PW1/1. His name was shown at serial No.3 in the list of partners
in Exhibit PW1/1. The plaint had been signed and verified by him and the
vakalatnama was also signed by him on behalf of the plaintiff firm.
22. Mr. Amiet Andlay, the learned counsel for the defendant - Delhi
Administration contended that the instant suit was filed on 02.04.1992 and at
the time of the filing of the suit, the firm had seven partners as admitted by
PW1 Mr. Bakul U. Shah in his cross-examination and admittedly the
registration certificate of the firm, being of seven partners, was not on record
though the registration certificate of the firm, being of four partners, was on the
record (Exhibit PW1/1). Mr. Andlay also pointed out that there was on record
the copy of an application filed with the Registrar of Firms for carrying out the
changes with regard to the reconstitution of the firm and this was sufficient to
show that the firm had been reconstituted.
23. Reliance was placed by Mr. Andley on the judgments rendered by the
Hon'ble Supreme Court in Purushottam & Anr. vs. Shivraj Fine Art Litho
Works & Ors. 2006 (12) SCALE 232 and U.P. State Sugar Corpn. Ltd. vs.
Jain Construction Co. & Anr. JT 2004 (7) SC 61 to contend that the bar of
Section 69(2) of the Act was applicable to the instant case and that subsequent
registration of the firm, even assuming it to be registered on a subsequent date,
could not cure the initial defect in the filing of the suit.
24. It is trite that the question of registration of a partnership firm is
essentially a question of fact. It is also indisputable that if the Court finds that
the plaintiff firm is not a registered one, the suit would not be maintainable at
the instance of an unregistered firm, having regard to the mandatory provisions
of Section 69 of the Indian Partnership Act, 1932. There also cannot be any
doubt that the firm must be registered at the time of the institution of the suit
and not later [D.D.A. vs. Kochhar Construction Work and Anr. (1998) 8 SCC
559; U.P. State Sugar Corpn. Ltd. vs. Jain Construction Co. & Anr. JT
2004 (7) SC 61 and Purushottam & Anr. vs. Shivraj Fine Art Litho Works &
Ors. 2006 (12) SCALE 232]. Further, as held by the Hon'ble Supreme Court
in M/s. Shreeram Finance Corporation vs. Yasin Khan and Ors. (1989) 3
SCC 476, a suit filed by the existing partners of the firm after reconstitution is
also not maintainable if the newly added partners are not shown as partners in
the Register of Firms under the Act. In the said case, the suit was filed in the
name of the current partners as on the date of the institution of the suit, whose
names were not shown as partners in the Register of Firms maintained under
the Act. The Court held that the bar of Section 69 was attracted not on account
of non-registration of the partnership firm, but on account of the fact that the
persons suing had not been shown in the Register of Firms as partners of the
firm.
25. In the instant case, however, the position is exactly the reverse, and
I am, therefore, unable to agree with the contention of Mr. Andlay. It is not in
dispute that the plaintiff firm was registered with the Registrar of Firms
originally on 28th February, 1989. The suit was filed by the firm on 02.04.1992
and the partner who filed the plaint, namely, Bakul U. Shah (PW1) was
admittedly a partner of the firm at the time of the filing of the suit. Thus, it
cannot be said that as on the date of the filing of the suit, i.e., on 02.04.1992,
the registered firm was not in existence. It is on record that the firm was
reconstituted by inducting three more partners and notice thereof was given to
the Registrar, specifying the date from which the change had occurred, i.e., 20th
February, 1991. It is the Registrar who is authorized to carry out the formal act
of recording the change in the constitution of the firm. The application for the
aforesaid purpose was filed on 20th February, 1991 and as stated by PW1
(Bakul U. Shah), the firm was subsequently registered with seven partners.
Such change was effected by the Registrar with effect from the date of the
application, i.e., 20th February, 1991, prior to the date of filing of the suit.
26. I am buttressed in coming to the aforesaid conclusion from a judgment
of the Hon'ble Supreme Court in the case of Gwalior Oil Mills vs. Supreme
Industries reported in (1999) 9 SCC 113. In the said case, the firm was
originally registered with the Registrar of Firms on 29.07.1953. A suit was
filed by the firm for breach of contract on 26.05.1977. An application for
reconstitution of the firm was filed on 23.08.1976 and the changes were made
by the Registrar only on 28.02.1978. It was contended by the respondent that
the suit was liable to be dismissed in view of the provisions of Section 69 of
the Indian Partnership Act, as on the day when the suit was filed, the firm as
reconstituted was not duly registered with the reconstituted partners of the
firm. The High Court dismissed the suit. In appeal, the Hon'ble Supreme court
held that :-
"9. The implication of the registration so granted clearly was
that the reconstituted partnership firm came into existence
w.e.f. 1-1-1976. In any case, the firm of M/S Gwalior Oil Mills
never ceased to be a registered partnership firm. The suit was
filed by the firm in 1977 and the partner who filed the plaint,
namely, Arvind Naranji Patel was admittedly a partner in the
firm in his individual capacity and then as a Karta of his
Hindu undivided family. Even if the reconstitution of the firm is
ignored, it cannot be said that on 26-5-1977, the registered
firm was not in existence."
27. In such circumstances, in my view, keeping in mind the fact that the
suit has been filed by a duly registered firm, the bar of Section 69 of the
Partnership Act will not apply.
28. It is apposite that in M/s. Haldiram Bhujiawala & Anr. vs. M/s. Anand
Kumar Deepak Kumar &Anr. (2000) 3 SCC 250, the Hon'ble Supreme Court
noticed the recommendations made by the Special Committee in its report,
which were considered by the legislature while enacting the Partnership Act,
1932. Paragraphs 18 and 19 of the Report are particularly pertinent and are
reproduced hereunder:
"18. Once registration has been effected the statement
recorded in the register regarding the constitution of the
firm will be conclusive proof of the facts therein contained
against the partners making them and no partner whose
name is on the register will be permitted to deny that he is a
partner - with certain natural and proper exceptions which
will be indicated later. This should afford a strong
protection to persons dealing with firms against false
denials of partnership and the evasion of liability by the
substantial members of a firm.
19. ...On the other hand, a third party who deals with a
firm and knows that a new partner has been introduced can
either make registration of the new partner a condition for
further dealings, or content himself with the certain security
of the other partners and the chance of proving by other
evidence, the partnership of the new but unregistered
partner. A third party who deals with a firm without
knowing of the addition of a new partner counts on the
credit of the old partners only and will not be prejudiced
by the failure of the new partner to register."
29. Thus viewed, the bar of Section 69(2) clearly is not applicable to the
instant case. A third party who deals with a firm without knowing the addition
of new partners cannot possibly be prejudiced by the failure of the new
partner/s to register. If the third party knows that a new partner has been
introduced, it can make registration of the new partner a condition for further
dealings or content itself with the security offered by the other partners.
30. In view of the aforesaid, Issue No.1, in my opinion, must be decided in
favour of the plaintiff and against the defendants.
Issue No.2:
31. As regards this issue, a bare glance at document Exhibit D-1, which is
the tender dated 19.12.1990 submitted by the plaintiff with the defendant for
running the "Bhagyanidhi Weekly Lottery" and is an admitted document,
shows that Column No.10 captioned "Minimum Annual Turnover Offered"
and Column No.12 captioned "Absolute Assured Profit on Turnover" were
left blank by the plaintiff. The version of the defendant that in the
circumstances, the plaintiff was required to spell out the "Minimum Annual
Turnover" and also the "Minimum Assured Profit" on such turnover, therefore,
appears to be perfectly plausible. This also stands corroborated by the fact that
the plaintiff firm vide its letter dated 21st December, 1990 (Exhibit D-2),
offered the minimum annual turnover of Rs.21.50 crores at 4.31% with
guaranteed profit of Rs.92,66,500/- (Rupees Ninety Two Lakh Sixty Six
Thousand and Five Hundred only) per annum, stating: "This offer is final".
Yet again, letter dated 26th December, 1990, which is the letter of acceptance
of the tender of the plaintiff firm and is also an admitted document, specifically
corroborates the version of the defendants, in that, the said letter unequivocally
states that the acceptance of the tender is on the following terms and
conditions:
"1) Minimum annual turnover : 21.5 crores
2) Rate of profit offered : 4.31%
3) Assured profit on turnover : Rs.92,66,500/-
per annum"
In the penultimate paragraph, it is further stated:
"Your letter dated 21.12.90 will form the part of the
agreement."
32. In view of the aforesaid, in my opinion, it does not lie in the mouth of
the plaintiff to now contend that the letter dated 21.12.1990 (the contents of
which have nowhere been disputed by the defendants) was not part of the
agreement between the parties. More so, as the plaintiff by its own letter dated
17th May, 1991 (Exhibit D-3) categorically admitted that it had given the
highest offer of a minimum turnover of Rs.21.50 crores (Rupees Twenty One
Crore Fifty Lakh only) presuming that the market trend would remain healthy,
and requested the defendant to reduce the minimum turnover from Rs.21.50
crores (Rupees Twenty One Crore Fifty Lakh only) to Rs.15.60 crores (Rupees
Fifteen Crore Sixty Lakh only). The plaintiff, in my view, having failed to
give the minimum turnover assured by it must be held guilty of breach of the
said agreement in terms of Exhibit D-2. This being so, the plaintiff must be
held liable in terms of the said agreement to pay the difference of royalty paid
provisionally and the royalty assured upto the 34th draw, i.e., Rs.1,78,202/-
minus Rs.1,29,300/- = Rs.48,902/- x 34, totalling Rs.16,62,668/-.
33. As regards the interest, Clause 17 of the agreement provides for 18%
interest per annum on the amount found due from the main stockist in the
event of breach of any of the terms and conditions of the agreement by the
main stockist. Thus calculated, the interest on the difference of royalty works
out to Rs.1,06,183/- (Rupees One Lakh Six Thousand One Hundred and Eighty
Three only), which the plaintiff is liable to pay.
34. What now remains to be examined is the plaintiff's contention that this
amount of Rs.16,62,668/- (Rupees Sixteen Lakh Sixty Two Thousand Six
Hundred and Sixty Eight only) is included in the amount of the dishonoured
cheques of Rs.29,75,900/- (Rupees Twenty Nine Lakh Seventy Five Thousand
and Nine Hundred only).
35. A look at the evidence adduced by the defendant shows that DW-2, Shri
Ajay Kumar Garg, in the course of his cross-examination, was unable to deny
that the amount of Rs.16,62,668/- (Rupees Sixteen Lakh Sixty Two Thousand
Six Hundred and Sixty Eight only) was included in the amount of the
dishonoured cheques. The relevant part of the said evidence is being
reproduced hereunder:
"Q. Is it correct to say that your claim for difference in
royalty was included in the amounts of the dishonoured
cheques as referred in EX.DW2/D-6?
A. As far as I remember, it was not.
Q. Is your reply to the above question reflected in any
of the documents on the record of this case specially
EXDW2/D-6?
A. It is on record but I have to check it out.
Further cross-examination is deferred.
xxxx By Sh. Amit P. Deshpandey, Counsel for Plaintiff
I have not checked out whether the amount on account of
difference in royalty is included in the amount of the
dishonoured cheques as mentioned in Ex.DW-2/2/D6. I
do not remember if Ex.PW-1/D3 is the last communication
with the plaintiff on my part. It is wrong to suggest that
plaintiff had made the payment of Rs.17,70,000/- to the
DDA during 29/08/1991 to 20/09/1991........"
36. In the light of the above cross-examination of DW-2, in my view, the
plaintiff's contention that the amount of the dishonoured cheques included the
difference in the royalty amount to the extent of Rs.16,62,668/- (Rupees
Sixteen Lakh Sixty Two Thousand Six Hundred and Sixty Eight only), being
claimed by the defendant, must be upheld. The plaintiff, not having disputed
that the amount of Rs.29,75,900/- (Rupees Twenty Nine Lakh Seventy Five
Thousand and Nine Hundred only) was the amount payable by it on account of
dishonoured cheques (inclusive of the sum of Rs.16,62,668/-), the defendant
must be held entitled to receive the said amount. The amount of other
dishonoured cheques excluding the dishonoured cheques of Rs.16,62,668/-,
thus, works out to Rs.13,13,232/- (Rupees Thirteen Lakh Thirteen Thousand
Two Hundred and Thirty Two only), i.e. (Rs,29,75,900 minus Rs.16,62,668).
37. As regards interest thereon, the plaintiff contends that the defendant has
not charged any interest from other stockists in respect of dishonoured
cheques. There is, however, no evidence on record to substantiate the
aforesaid contention of the plaintiff and even otherwise there appears to be no
reason why the plaintiff should not be called upon to pay interest on the
dishonoured cheques. The plaintiff must accordingly be held liable to pay
interest at the contractual rate of 18% on the dishonoured cheques of
Rs.29,75,900/-, in accordance with Clause 17 of the agreement between the
parties.
38. Adverting next to the claim of the defendant for payment of 10%
penalty on the royalty amount of Rs.1,78,202/- (Rupees One Lakh Seventy
Eight Thousand Two Hundred and Two only) per week in respect of the
remaining 18 weekly draws, the first part of Clause 16(vii) is apposite, which
provides as under:
"If the Main stockists wants to terminate this agreement
before the stipulated terms, he shall have to give prior
notice of 4 months in writing or pay the royalty amount and
all the expenses for 4 months. In either case, he shall also
have to pay additionally, a penalty of 10% of the total profit
amount relating to unexpired term of the contract. If the
main stockists withdraw from the contract without first
giving requisite notice or paying amount of royalty
expenses and requisite penalty as specified above that shall
be recovered out of the bank guarantee and other
dues/deposits, if any payable to him."
39. In terms of the above clause, the defendant must be held entitled to
receive from the plaintiff the penalty amount of 10% of the total profit amount
relating to the unexpired term of the contract. Thus calculated, the same works
out to Rs.1,78,202/- per week x 18 weekly draws x 10% penalty=
Rs.3,20,764/- (Rupees Three Lakh Twenty Thousand Seven Hundred and
Sixty Four only).
40. As regards item No.(vi), i.e., the costs of 54,000 tickets of the Baishakhi
bumper draw amounting to Rs.2,13,300/- (Rupees Two Lakh Thirteen
Thousand Three Hundred only), the second part of Clause 16(vii) is relevant,
which is as under:
"In the event of any act of omission and/or commission on
the part of the main stockist after the announcement but
before the completion of any draw, resulting in any loss to
Delhi Lotteries, the main stockist shall make good the loss
caused to Delhi Lotteries. The loss shall be calculated on
the assumption that having once announced the
draw/draws, Delhi Lotteries shall have to complete the
draw/draws and incur necessary expenditure in connection
therewith. The decision of Director (Lott.) in this regard
shall be final & binding and shall not be called into
question in any proceedings whatsoever.
In the event of the main stockist, committing breach of any
of the terms & conditions of the agreement or failing to
fulfil all his commitment and obligations, the contract shall
stand determined and without any notice, without prejudice
to its rights under the terms/conditions of the agreement,
Delhi Lotteries shall be at liberty to continue the Lotteries
of its own utilising the tickets printed on behalf of the main
stockist and without payment of any compensation to them
and hold the draw(s) on the stipulated date or to float new
Lotteries or proceed in any other manner deemed
appropriate by it."
41. In view of the above, clearly the defendant must be held liable to
recover the amount of Rs.2,13,300/- (Rupees Two Lakh Thirteen Thousand
Three Hundred only) from the plaintiff and the decision of the Director of
Lotteries in this regard cannot be interfered with by this Court.
42. Adverting next to the question as to whether the plaintiff is entitled to
claim any damages for the invocation of the bank guarantee from the
defendants. According to the plaintiff, the defendant had wrongly and illegally
invoked the bank guarantee for the amount of Rs.53,74,667/- (Rupees Fifty
Three Lakh Seventy Four Thousand Six Hundred and Sixty Seven only), and,
in any case the defendant had illegally enriched itself to the tune of
Rs.19,11,737/- (Rupees Nineteen Lakh Eleven Thousand Seven Hundred and
Thirty Seven only) and is thus liable to pay to the plaintiff damages for the
illegal retention of the said sum at the rate of 2% per month for the excess
amount, as the nationalized banks were charging interest @ 24.75% per annum
on overdrafts and even otherwise, the market lending rate at the relevant time
was over 2% per month. Thus, calculated, the plaintiff claims to be entitled to
the interest of Rs.2,29,408/-, and the total amount due from the defendant to
the plaintiff works out to Rs.19,11,737/- plus Rs.2,29,408/- i.e. Rs.21,41,145/-
(Rupees Twenty One Lakh Forty One Thousand One Hundred and Forty Five
only).
43. As already discussed hereinabove, the plaintiff in the instant case was
guilty of breaching the terms of the agreement and even the cheques tendered
by the plaintiff to the defendants had been dishonoured from time to time. The
defendants, therefore, had every right to resort to encashment of the bank
guarantee furnished by the plaintiff in terms of the agreement and cannot be
faulted for the same. There is, however, no denying the fact that the
defendants had recovered an excess amount of Rs.16,62,668/- (Rupees Sixteen
Lakh Sixty Two Thousand Six Hundred and Sixty Eight only) from the
plaintiff, the said amount having already been included in the amount of the
dishonoured cheques. Thus, the defendants must be held liable to reimburse to
the plaintiff the said amount with interest thereon. Since the agreement
provided for 18% interest (Clause 17 of the agreement), interest at the rate of
18% must be taken to be the contractual rate of interest. The plaintiff is
accordingly held entitled to recover from the defendant No.2 a sum of
Rs.16,62,668/- (Rupees Sixteen Lakh Sixty Two Thousand Six Hundred and
Sixty Eight only) plus interest @ 18% thereon from the date of the encashment
of the bank guarantee till the date of realisation. The plaintiff shall also be
entitled to costs of the suit.
CS(OS) 1760/1992 stands disposed of accordingly.
REVA KHETRAPAL, J.
AUGUST 24, 2009
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