Delhi High Court
Smt. Alka Gupta vs Mr. Narender Kumar Gupta on 13 March, 2009
Author: Rajiv Sahai Endlaw
*IN THE HIGH COURT OF DELHI AT NEW DELHI
+ CS(OS) 302/2007
%13.03.2009 Date of decision: 13th March, 2009
SMT. ALKA GUPTA ....... Plaintiff
Through: Mr. Aman Lekhi, Sr. Advocate with Mr.
Jaspreet S. Rai, Mr. Rakesh Kumar &
Mr. Vaibhav Vats, Advocates for the
plaintiffs.
Versus
MR. NARENDER KUMAR GUPTA ....... Defendant
Through: Mr. Rajiv Awasthi, Advocate for the
defendant.
CORAM :-
HON'BLE MR. JUSTICE RAJIV SAHAI ENDLAW
1. Whether reporters of Local papers may
be allowed to see the judgment? Yes
2. To be referred to the reporter or not? Yes
3. Whether the judgment should be reported
in the Digest? Yes
RAJIV SAHAI ENDLAW, J.
1. Issue No. 1 as follows, framed on 17th January, 2008 and
ordered to be treated as a preliminary issue falls for consideration:-
"1. Whether the suit is barred by the principle of
res-judicata as issue raised in the suit has been
directly and substantially been adjudicated between
the plaintiff and the defendant in suit No.16/2006
titled as Alka Gupta Vs. Narender Kumar Gupta vide
an order dated 25th November, 2006 by a competent
court? OPD"
2. During the hearing on the aforesaid preliminary issue on 12th
January, 2009, after hearing the counsel for the defendant and the
senior counsel for the plaintiff in part it was clarified that arguments
were being heard not only on the preliminary issue aforesaid but also
on as to why independently of Section 11 and Order 2 rule 2 of CPC,
CS(OS) 302/2007 Page 1 of 28
the suit should not be dismissed summarily, also on the ground of
re-litigation and abuse of the process of court. Thereafter on 16th
January, 2009 the statement of the plaintiff was also recorded and
arguments on the preliminary issue and the aforesaid aspect were
heard on 16th January, 2009 and 21st January, 2009.
3. The facts are as under:-
A. The plaintiff instituted the present suit for rendition of
accounts and recovery of dues. It is the case in the plaint,
that the plaintiff vide deed dated 5th April, 2000 entered into a
partnership with the defendant for doing the business of
running an educational institute under the name and style of
„Takshila Institute‟ offering specialized coaching to candidates
preparing for entrance examinations for Medical and
Engineering Colleges; the plaintiff and the defendant were
equal partners and the business under the said deed
commenced w.e.f. 1st April, 2000; that though the business
was very successful but the defendant appropriated all
receipts thereof unto himself and instituted a suit
No.438/2004 of the court of Shri Devender Kumar Jangala,
Civil Judge, Delhi for permanent injunction against the
plaintiff; that upon institution of the said suit it was clear that
the defendant was not interested in continuing the said
partnership which by implication stood dissolved with effect
from the date of institution of that suit; that the said suit
instituted by the defendant was withdrawn by the defendant
vide his statement dated 16th October, 2004; that the
defendant had no right to use the name, style and goodwill
associated with Takshila Institute, however the defendant
surreptitiously and unlawfully got the name, style and logo of
CS(OS) 302/2007 Page 2 of 28
Takshila Institute registered as his exclusive trademark and/or
copyright; that the books of accounts of Takshila Institute
were being maintained by the defendant and were in his
custody; that after the transfer of the immovable property of
Takshila Institute at Plot No.8, Pocket C-9, Sector-8, Rohini,
Delhi - 110085 by the plaintiff in favour of the defendant on
13th August, 2004 pursuant to a Bayana Agreement dated 29th
June, 2004 between the parties, the plaintiff was not able to
enter the said premises and was thus constrained to institute
the present suit; that the defendant had refused to account for
the monies received from time to time and to pay to the
plaintiff her share in it; that the plaintiff had got issued a legal
notice dated 8th March, 2005 to the defendant inter-alia
calling upon the defendant to render accounts of the said firm
and to pay to the plaintiff her share of accrued profits and
assets; that the defendant neither replied to the said notice
nor rendered the accounts; that the plaintiff had instituted
another suit against the defendant being suit No.16/2006
decided on 25th November, 2006 by the court of Shri Paramjit
Singh, Additional District Judge, Delhi; the projected income
concealed by the defendant for the period of 21st October,
2000 to 31st July, 2004 was in the sum not less than Rs.40 lacs
which can be attributed to the goodwill earned by Takshila
Institute during the subsistence of partnership; that the
defendant was even now earning from the said goodwill. The
plaintiff thus sought a preliminary decree for accounts of the
partnership from the date of commencement of partnership
agreement till dissolution by necessary implication on 31st
July, 2004 and a final decree for recovery of amounts so found
due of the plaintiff‟s share of profits and a decree in the
CS(OS) 302/2007 Page 3 of 28
alternative for recovery of Rs.25.28 lacs as per particulars
given in Annexure „A‟ to the plaintiff.
B. The defendant filed a written statement admitting the
partnership with the plaintiff and inter-alia stated that during
the subsistence of the partnership the plaintiff and Smt.
Deepa Gupta wife of the defendant jointly acquired second
floor of Property No.8, Pocket C-9, Sector-8, Rohini, Delhi -
110085; that the plaintiff was a teacher in a government
school having no knowledge and expertise in the business and
remained sleeping partner confining her interest to the
benefits arising out of the said business; that the plaintiff had
not disclosed at the time of entering into the partnership that
she was a teacher in a government school and thus not
entitled to enter into partnership business without permission;
that the parties were closely related to each other; that upon
differences having arisen, with the help of family and friends
it was resolved that the total value of the partnership will be
made and the 50% share of the plaintiff will be calculated and
paid to the plaintiff and who will relinquish all her rights and
claims in the institute which will become absolute property of
the defendant ; that on 6th June, 2004 the total value was
assessed at Rs.46 lacs and it was decided that the plaintiff will
transfer all her claims in the partnership in favour of the
defendant and defendant will pay Rs.23 lacs in lieu thereof to
the plaintiff; that the defendant paid Rs.1,50,000/- to the
plaintiff as a token amount; that on 29th June, 2004 a Bayana
Agreement was entered upon in which terms were reduced
into writing including payment of the balance sum of Rs.21.50
lacs against 50% share of the plaintiff in Takshila Institute
CS(OS) 302/2007 Page 4 of 28
towards goodwill etc. and also transfer of undivided half share
in the property at Rohini aforesaid; that on the date of signing
of the said agreement the defendant paid Rs.7.5 lacs to the
plaintiff and the balance amount Rs.14 lacs was to be paid on
the date of the execution of the sale deed of the Rohini
property; however the plaintiff on 26th July, 2004 forcibly tried
to put her locks on the institute leading to the filing of suit
No.438/2004 aforesaid by the defendant; that in the aforesaid
suit on 12th August, 2004 the counsels for the parties made
statement that compromise talks were going on and on 13th
August, 2004 in view of the compromise the plaintiff executed
sale deed of the Rohini property in terms of the Bayana
Agreement aforesaid and received the entire balance
consideration of Rs.14 lacs i.e. Rs.2 lac by draft and Rs.12 lacs
in cash; however no receipt for cash payment of Rs.12 lac was
given owing to relationship and since all disputes had been
settled and also because the plaintiff as well as her husband
were government employees and had expressed difficulty in
explaining the said receipt; that the plaintiff on 13th August,
2004 also wrote to the bank that the joint current account be
closed and the parties also subsequently on 16th October, 2004
reported to the court where the suit for injunction instituted
by the defendant was pending that the matter had been
compromised and the suit was withdrawn; that the plaintiff
however on 17th January, 2006 filed suit No.16/2006 in the
court of the Additional District Judge, Delhi claiming that the
sum of Rs.12 lacs was still due and to be paid by the
defendant; that the plaintiff had instituted the suit as a
counter blast to the suit instituted by the defendant against
one Shri Suresh Kumar Gupta for infringement of the
CS(OS) 302/2007 Page 5 of 28
copyright Takshila by running an institute in the same name
and carrying on the same business; that the said Shri Suresh
Kumar Gupta had stated in the court that he was running the
institute in the same name on the asking of the husband of the
plaintiff and notices of contempt were issued to the husband
of the plaintiff; that total consideration of Rs.21.5 lacs
mentioned in the Bayana dated 29th June, 2004 included Rs.2
lac towards transfer of the Rohini property and the remaining
19.5 lac towards 50% claim in lieu of share in goodwill of
Takshila Institute as well as furniture, fittings, intellectual
properties etc.; that the suit filed by the plaintiff for recovery
of Rs.12 lacs against the defendant had been decreed against
the defendant; it was, therefore, contended that the present
suit was hit by the principle of res-judicata and was in abuse
of the process of the court and the plaintiff had not
approached the court with clean hands.
C. The plaintiff filed a replication to the aforesaid written
statement. It was averred that the suit No.16/2006 was for
recovery of money due in respect of immovable property
detailed therein and not for rendition of accounts of the
partnership and thus the present suit was not barred by res-
judicata; that while the plaintiff was a highly acclaimed
qualified teacher, the defendant was not even a qualified
teacher; that the defendant knew even prior to entering into
the partnership that the plaintiff was a government teacher; it
was denied that at any stage it was agreed that total value of
the partnership firm shall be made and 50% share of the
plaintiff would be given to her; it was denied that any valuation
of Rs.46 lacs had been made or that Rs.1.50 lac was paid by
CS(OS) 302/2007 Page 6 of 28
the defendant to the plaintiff on 6th June, 2004; that the Bayana
Agreement was a matter of record and its contents may be
perused - it was not purported to be a settlement of all issues
relating to the partnership between the parties and it was
confined to the sale of the property mentioned therein; at that
time Takshila Institute was functioning from two places i.e.
from the property aforesaid at Rohini as well as from Paschim
Vihar and had there been a settlement between the parties in
relation to whole of Takshila Institute there must have been
some provisions for disposal of the interest of the plaintiff in
the branch of the institute at Paschim Vihar also; that the
Bayana Agreement was not intended to go beyond the sale of
the immovable property at Rohini; it was denied that sum of
Rs.12 lacs was paid in cash and for recovery of which amount
the suit No.16/2006 had been instituted and which had been
decreed.
D. It was on the aforesaid pleadings that the preliminary issue
aforesaid was framed.
4. The counsel for the defendant, at the outset, drew attention to
the Bayana Agreement dated 29th June, 2004 aforesaid. It is
significant that though the plaintiff had along with a plaint filed a list
of documents with documents running into 410 pages but the said
Bayana Agreement dated 29th June, 2004 was not filed by the
plaintiff. A large number of other documents having bearing on the
present aspect were, though filed, clubbed under eight heads only in
the list of documents so as to virtually make it impossible for anyone
perusing the said list to decipher the particular/individual
documents.
CS(OS) 302/2007 Page 7 of 28
5. It was the defendant who along with his list of documents filed
the said Bayana Agreement dated 29th June, 2004 at pages 78 to 80.
Some of the relevant clauses of the said Bayana Agreement in which
the plaintiff has been described as a seller or the first party and the
defendant as the purchaser or the second party relevant for the
present purposes, are re-produced herein below:-
"Whereas the first party has represented to the second
party that he/she/they is/are the sole and absolute owner/s
of UNDIVIDED HALF SHARE IN SECOND FLOOR
(WITHOUT ROOF RIGHTS) OF BUILT UP PROPERTY
BEARING NO. 8, POCKET & BLOCK C-9, SECTOR-8,
ROHINI, DELHI- 110085, BUILT ON A PLOT OF LAND
AREA MEASURING 158.87 SQ. MTSR AND PARTNER
OF 50% IN M/S. Takshila Institute, established in the
above said property.
WHEREAS THE first party for her/his bonafide needs and
requirements, has agreed to sell the above said property
to the second party and the second party has agreed to
purchase the same for a total consideration of
Rs.21,50,000/- (Rupees Twenty One Lacs Fifty Thousand
Only)
AND WHEREAS THE PARTIES have decided to put in
writing their terms and conditions of AGREEMENT TO
SELL;
Now this Agreement to Sell witnesseth as under:-
1. That the Property/UNDIVIDED HALF SHARE
SECOND FLOOR (WITHOUT ROOF RIGHTS) OF BUILT
UP PROPERTY BEARING NO.8, POCKET & BLOCK C-9,
SECOTR-8, ROHINI, DELHI-110085, BUILT ON A PLOT
OF LAND AREA MEASURING 158.87 SQ. MTSR. AND
50% Share of M/s Takshila Institute, established in
the above said property which is hereby agreed to be
sold includes all rights, titles, interests, goodwill,
electricity equipment, furniture, fixtures including,
passages, easements, facilities, privileges etc. which are
attached thereto or connected therewith.
2. That total consideration towards the sale of above
said property has been settled at Rs.21,50,000/- (Rupees
Twenty One Lacs Fifty Thousand Only) out of which the
first party has received from the second party a sum of
Rs.7,50,000/- (Rupees Seven Lacs & Fifty Thousand only)
advance/bayana prior to signing of this Agreement, the
receipt of which is hereby confirmed and the balance
CS(OS) 302/2007 Page 8 of 28
payment of Rs.14,00,000/- (Rupees Fourteen Lacs only)
shall be paid by the second party to the first party on or
before 29/8/2004.
10. That all original papers concerning the ownership of
property shall be handed over by the first party to the
second party on or before 28.2.2004, the date of final
payment.
13. That the Property hereby sold includes the Goodwill
of the firm M/S. Takshila Institute, having its office at C-
9/8, Sector-8, Rohini,Delhi-85, in which the first party is
also the partner of 50%. Morever it is specifically agreed by
the first party that the property includes all rights interest,
claims, title, furniture, fitting and all furniture, fixture and all
equipment of M/S. Takshila Institute."
At the bottom of the aforesaid document it is written in hand as
under:-
"This deed is subject of settlement of Paschim Vihar (F-
19, Bhera Enclave) Takshila Institute for the
consideration of Rs.15,00,000/- (Rupees fifteen lacs
only) in the name of Alka Gupta".
6. With respect to the aforesaid hand written portion it may be
mentioned that the senior counsel for the plaintiff argued that the
aforesaid had been interpolated by the defendant in the photocopy
filed before this court and the same did not exist in the plaintiff‟s
copy of the said agreement which though not filed was purported to
be shown to the court. The counsel for the defendant argued that
the copy of the Bayana Agreement filed by the defendant before this
court was itself a copy of the same document filed by the plaintiff
herself in suit No.16/2006 and the argument of interpolation was
fallacious. It was also the contention of the counsel for the
defendant that in fact the said writing was of the husband of the
plaintiff. The husband of the plaintiff present in court had denied
the same. However, faced with the said position, it was admitted by
the husband of the plaintiff present in court on the subsequent date
that the copy of the Bayana Agreement filed by the defendant before
CS(OS) 302/2007 Page 9 of 28
this court was in fact copy of the same document filed by the
plaintiff herself and which included the aforesaid hand written
portion.
7. The counsel for the defendant next drew attention to a receipt
dated 29th June, 2004 also executed by the plaintiff and filed at page
81 of defendants‟ documents. The same is as under:
"RECEIPT
I/We, SMT. ALKA GUPTA W/O DR. NAVINDU GUPTA
R/O H.NO. 81, DEEPALI, PITAMPURA, DELHI; do hereby
acknowledge and confirm that I/We have received from
SH. NARENDER GUPTA S/O SH. S.P. GUPTA R/O E-20/63,
SECTOR-3, ROHINI, DELHI-110085, a sum of Rs.7,50,000/-
________________________________________________, being
advance/bayana towards the sale of UNDIVIDED HALF
SHARE SECOND FLOOR (WITHOUT ROOF RIGHTS) OF
BUILT UP PROPERTY BEARING NO. 8, POCKET & BLOCK
C-9, SECTOR-8, ROHINI, DELHI-110085, BUILT ON A
PLOT OF LAND AREA MEASURING 158.87 SQ. MTSR. and
50% Share of M/S Takshila Institute, established in the
above said property which is includes all rights, titles,
interests, goodwill, electricity equipment, furniture,
fixtures including, passages, easements, facilities,
privileges etc. which are attached thereto or connected
therewith in this premises.
The total deal has been settled for Rs. 21,50,000/- (Rupees
Twenty One Lacs Fifty Thousand Only) and I agree to sign
and execute all necessary documents in favour of the above
said purchaser or his/her nominee on or before 29.8.2004
at the time of receiving balance consideration of Rs.
14,00,000/-. I further undertake and agree that if the
purchaser fails to pay balance consideration on or before
due date, his earnest money of Rs 7,50,000/- shall be
forfeited by me or if I fail to execute all sale documents in
favour of the purchaser on or before due date, I shall be
liable to pay the double of earnest money/advance, and
alternatively the purchaser shall have the option to get the
documents executed in his/her or his/her nominee‟s favour
through court of law at my risk, cost and consequences.
Hence, I have executed this Receipt at Delhi on this 29 day
of June 2004 in the presence of following witnesses.
WITNESSES.
EXECUTANT.
CS(OS) 302/2007 Page 10 of 28
The aforesaid document also has handwriting as under:-
"All the previous deed executed stands cancelled.
The Paschim Vihar Instt. deed would be settled in
the name of Dr. Rashmi Gupta for for the
consideration of Rs.15,00,000/- (Fifteen Lacs Only)."
The handwriting on this document also was first called an
interpolation but subsequently the same admission as aforesaid with
respect to the Bayana Agreement was made with respect to the
aforesaid handwriting also.
8. It is interesting to note that the aforesaid receipt also contains
another writing as under:-
"Original Bayana Agreement of 29th June, 2004
handed over and the court case will be withdrawn.
Sd/-
13th August, 2004"
9. The counsel for the defendant next drew attention to the copy
of the plaint in suit No.16/2006 instituted by the plaintiff; and paras
4,5&6 whereof are as under:-
"4. That an Agreement to Sell dated 29.06.2004, called the
„Bayana Agreement‟ had taken place between the defendant
and the plaintiff at Delhi in respect of undivided half share of
the plaintiff in respect of the Second Floor of the built up
property, without roof rights, bearing no.8, Pocket & Block C-
9, Sector 8, Rohini, Delhi 110 085. The said agreement has
been annexed herewith this plaint.
5. That under the said Agreement, in consideration of the
sale of the half share of the plaintiff in the said property,
including the goodwill, rights, interest, claims, title,
furniture, fixtures, fittings and equipment of the
Partnership Firm doing business from the said address
under the name and style of M/s Takshila Institute, the
defendant had agreed to pay to the plaintiff a sum of
Rs.21.5 lacs. The defendant admitted this fact at para 10 of
the plaint dated 30.07.2004 of his suit no. 438/2004, which is
reproduced as follows:
10. That the defendant No.1 executed a BAYANA
Agreement dated 29.06.2004 for the sale of her
CS(OS) 302/2007 Page 11 of 28
rights, title and interest in the built up premises
in which the Takshila Institute is housed at
present, that is, 2nd floor of the property bearing
no.8, Pocket and Block C-9, Sector 8, Rohini, and
also the goodwill, title, interests in the Takshila
Institute, in favour of the plaintiff No.1, true copy
of the said Agreement is annexed hereto and
marked as Annexure XIV, and received Rs.7.5
lacs has advance money for which she executed a
proper receipt copy whereof is annexed hereto
and marked as Annexure XV. That under the
above said agreement the residue amount of
Rs.14 lacs is to be paid to the defendant no.1 on
or before 29.08.2004.
6. That the price of the share of the plaintiff in the above
Said immovable property had been agreed between them as
Rs.2,00,000/- (Rupees Two Lacs Only), and the balance
amount of Rs.19.5 lacs (Rupees Nineteen Lacs Fifty
Thousand only) had been agreed by the defendant to be
paid to her in lieu of her share of the goodwill of the
Takshila Institute, her share in the furniture, fittings,
intellectual property in the form of Course Materials
developed for the students and her future rights in the
Takshila Institute."
10. The counsel for the defendant also drew attention to a
clearance certificate dated 13th August, 2004 obtained by the
plaintiff from the defendant and copy of which had been filed by the
plaintiff herself in the bunch of documents filed by her along with the
plaint and which is as under:-
"I, Narender Kumar Gupta S/o Late S.P. Gupta R/o
E-20/63, Sector-3, Rohini, Delhi-110085 in the
capacity of Managing Director of Takshila Institutes
situated at 19, LSC, Bhera Enclave, Paschim Vihar,
New Delhi and Plot No.8, C-9, Sector-8, Rohini, New
Delhi do hereby state that Smt. Alka Gupta W/o Dr.
Navindu Gupta R/o 81, Deepali, Pitampura, Delhi-
110034 had never received any amount of
money in cash or cheque from the institutes.
I further confirm that she or her legal heirs had
never shared any profit or loss in finances of
the institutes, during the period November
1999 to July 2004. She had only academic
interest as a visitor in the welfare of the
students.
CS(OS) 302/2007 Page 12 of 28
I, Narender Kumar Gupta declares that I would be
solely liable for any legal liabilities that may arrive
concerning tax, finance, academics etc. against
these institutes.
Sd/-
13.08.2004."
The counsel for the defendant also drew attention to the
written statement filed by him in suit No.16/2006 and to the
judgment of the Additional District Judge therein.
11. The senior counsel for the plaintiff initially argued that the sum
of Rs.21.50 lacs out of which the plaintiff claimed to have received
Rs.9.5 lacs and had sued for recovery of balance of Rs.12 lacs was
only for sale of Rohini property. It may be mentioned that this is the
stand of the plaintiff in the replication also. However, on being
confronted as to how such argument could be raised in the face of
the sale deed of the Rohini property being for the sale consideration
of Rs.2 lac only, it was argued that a number of improvements had
been made by the plaintiff in the Rohini property and the sum, over
and above Rs.2 lac was meant for the said improvements. Upon
being further confronted that the improvements and constructions, if
any, made by the plaintiff in the Rohini property would be part and
parcel of the immovable property and the consideration thereof also
would form part of the sale consideration of the property and which
had not been shown in the sale deed, it was argued that the sum
over and above Rs.2 lac was meant for the fittings and fixtures in the
Rohini property. Upon being confronted with the clauses of the
Bayana Agreement aforesaid, it was argued by the senior counsel for
the plaintiff that there was no mention in the recitals of the said
Bayana Agreement of the same being with respect to the 50% share
in the goodwill and the same finds mention only in the operative
CS(OS) 302/2007 Page 13 of 28
portions. It was also sought to suggest that the pleadings of the
plaintiff in the earlier suit as set out above was a case of bad
drafting.
12. I find the aforesaid conduct of the plaintiff of taking, shifting
and opportunistic stand to be in abuse of the process of the court. In
my view, the absence of the recitals with respect to the consideration
mentioned being for 50% share in Takshila Institute also in the
operative portions of the said agreements would not justify an
inference that the said clauses in the operative portions of the
agreement were not intended to be given effect to. In fact the
recitals also mention of the plaintiff being partner of 50% share to
Takshila Institute. Upon this view being made known to the senior
counsel for the plaintiff in the course of hearing, it was argued that
the 50% share of the goodwill of the firm mentioned therein was with
respect to branch of the institute being run in the Rohini property
and not in the goodwill of the branch of the institute/firm being run
in the Paschim Vihar property.
13. I find the aforesaid stand also to be unbelievable. This suit was
instituted for the rendition of accounts of the firm and without
specifying that the accounts or goodwill of the branch of the firm at
Rohini had been settled and only the accounts and goodwill of the
Paschim Vihar branch were due.
14. The senior counsel for the plaintiff also argued that the
plaintiff had in the plaint in CS(OS) No.16/2006 merely repeated the
contents of the Bayana Agreement and not made any further
admissions. I disagree with the said submission also. It is
unequivocally mentioned in para 6 of the plaint reproduced
hereinabove that out of Rs.21.5 lacs the price of the share of the
CS(OS) 302/2007 Page 14 of 28
plaintiff in the immovable property had been agreed at Rs.2 lac and
the balance Rs.19.5 lacs had been agreed to be paid to the plaintiff
in lieu of her share in the goodwill of Takshila Institute and her share
in furniture, fittings, intellectual property in the form of course
material developed for students and her future rights in the Takshila
Institute. The reference in para 6 is not with respect to Takshila
Institute in Rohini property but to Takshila Institute generally.
15. During the course of hearing on 12th January, 2009 in view of
the aforesaid inconsistent stand being taken by the plaintiff, it was
deemed expedient to direct the personal presence of the plaintiff
before the court for recording of her statement if found necessary.
The plaintiff appeared in person on 16th January, 2009 and after
hearing some arguments of the senior counsel for the plaintiff it was
deemed expedient to record the statement of the plaintiff. The
plaintiff in her statement has stated that she is an Income Tax
assessee since 1994 and had been filing Income Tax returns since
then; that she had entered into a partnership with the defendant in
1999 and which partnership remained in existence till August, 2004;
she admitted execution of the Bayana Agreement dated 29th June,
2004; she claimed that under the Bayana Agreement she was to
receive a sum of Rs.21,50,000/- against the Rohini property and the
goods lying in Rohini property; upon the Bayana Agreement being
shown to her and upon being asked to point out as to where it was so
written in the Bayana Agreement, she stated that it was nowhere
written therein that the sum of Rs.21,50,000/- was also for goods
lying in the Rohini Property. The senior counsel for the plaintiff had
interrupted at that stage and drawn attention to Clause 13 of the
document. The plaintiff in her statement admitted that it was
written in the Bayana Agreement that the sum of Rs.21,50,000/- was
CS(OS) 302/2007 Page 15 of 28
the consideration for all her rights, title and goodwill in the
partnership with the defendant also; she volunteered that it was only
with respect to the branch of Takshila Institute being run in the
Rohini property and not with respect to the branch at Paschim Vihar;
she admitted that before filing the suit she had not stated anywhere
that the rights and goodwill of the partnership mentioned in the
Bayana Agreement receipt aforesaid was only with respect to the
Rohini branch and not with respect to the Paschim Vihar branch; she
stated that she had not shown the amount of Rs.9.5 lacs admittedly
received from the defendant in her Income Tax return till then and
claimed that it will be shown only after the full amount is received by
her; upon being shown the plaint in Suit No.16/2006 (Supra) she said
that she could not remember whether it was mentioned therein that
the accounts of Paschim Vihar institute have not been settled; she
admitted that there was only one partnership with respect to both
the institutes; she admitted that the bank account of the partnership
in which she was earlier a signatory was got closed by her after the
execution of the sale deed of the Rohini property; she admitted
having obtained the clearance certificate aforesaid from the
defendant but stated that the same was for the reason of having not
received any amount from the defendant; she further stated that she
was a teacher in a government school. Upon being asked whether
she was to receive profits under the partnership deed or not she
stated that she was told that she will be compensated. She stated
that besides academic interest she had profit interest also in the
partnership; she claimed to have taken the clearance certificate for
the reason of the accounts having not been settled; she admitted that
she had not disclosed to the government school where she was
employed as a teacher that she was in partnership with the
defendant; she further admitted that under the rules of her service
CS(OS) 302/2007 Page 16 of 28
she is entitled to only make academic contribution and was not
entitled to be in partnership with the defendant; she admitted that
she had made statement to the Service Tax authorities on 7th
February, 2005. The said documents were produced by the counsel
for the defendant during the recording of the statement of the
plaintiff and upon the plaintiff admitting the same were exhibited as
C-1, C-2 & C-3. The plaintiff in the said documents had represented
that she was in the partnership of M/s Takshila Institute acting on
behalf of her father-in-law as sleeping partner for all practical
purposes and had further stated that she had never been formally
associated with Takshila Institute in any activity, teaching or office
work. The plaintiff on a subsequent date clarified that it was she
who was a partner in Takshila Institute and not her father-in-law.
She further stated that she had no knowledge whatsoever of any of
the affairs of the said firm. In the said statement she further relied
upon the clearance certificate aforesaid obtained from the defendant
and reiterated that she had only academic interest as a visitor in the
welfare of the students.
16. What emerges from the aforesaid is that the plaintiff at the
time of inception of the partnership and till date is a government
teacher and under the terms of her employment was not entitled to
enter into the partnership and was not entitled to earn any profits
therefrom. Not only under the terms of her employment, the plaintiff
before the Service Tax Authorities also represented that she had only
academic interest. It can only mean that she had no profit interest in
the partnership. Though the plaintiff has denied that she has filed
the clearance certificate aforesaid with the government school in
which she is employed but the purport of plaintiff obtaining the said
clearance certificate from the defendant can only be to use the same
CS(OS) 302/2007 Page 17 of 28
in the event of any complaint of breach of terms of employment
being made against her. Since the plaintiff had obtained the said
certificate, it can safely be presumed that the language thereof is at
the instance of the plaintiff only. The language of the said certificate
does not suggest that the same was taken for the reason of the
accounts of the partnership remaining to be settled as deposed by
the plaintiff. If the intent of obtaining the certificate had been so,
nothing prevented the certificate from stating so; on the contrary the
certificate is a confirmation by the defendant of the plaintiff having
never shared any profits and of the plaintiff thus being not liable for
any liabilities of the firm. On the contrary, the case of the plaintiff
before this court is that she was entitled to a share in the profits of
the firm.
17. The question which arises for adjudication is whether a litigant
can be permitted to take a stand in the court, diametrically opposite
to the stand of that litigant elsewhere. Can there be different stands
before the government as employer and before the Taxation
Authorities and before the court. Should the courts permit such
stand to be taken in the course of judicial proceedings and should
the courts come to the rescue of such a litigant in recovering dues
which that litigant elsewhere has represented are not due to her.
18. The aforesaid circumstance leaves no manner of doubt that the
plaintiff in contravention of the terms of her employment was
carrying on business as a partner with the defendant. The question is
of enforcement of such a partnership and or the terms thereof by the
court.
CS(OS) 302/2007 Page 18 of 28
19. In Murli Prasad Vs. Parasnath Prasad AIR 1967 Patna 191
partnership agreement was found to be contrary to the provisions of
the Electricity Act; it was thus held to be forbidden by law and void
under Section 23 of the Contract Act. It was further held that the
partnership is illegal if its object is the attainment of which is
contrary to law and or if it is formed for a purpose forbidden by
statute although independently of the statute there would be no
illegality. It was further held that the most important of
consequences of illegality in contract of partnership is that the
members of the partnership have no remedy against each other for
contribution or apportionment in respect of partnership dealings and
transactions. Reliance was placed on Velu Padayachi v.
Sivasooriam, AIR 1950 Mad 444 (FB) where it was held that a
partnership entered into for the purpose of conducting a business in
arrack or toddy on a license granted or to be granted to only one of
them is void ab initio, for the reason that it involves a transfer of the
license, which is prohibited under Rule 27. Reliance was also placed
on Pollock's Principles of Contract inter-alia to the effect that
when conditions are prescribed by statute for the conduct of any
particular business or profession, and such conditions are not
observed, agreements made in the course of such business or
profession are void if it appears by the context that the object of the
legislature in imposing the condition was the maintenance of public
order or safety or the protection of the persons dealing with those on
whom the conditions are imposed. Pollock was also quoted to the
effect that if it is shown as a fact that there was from the first, a
secret agreement to carry on the business in an illegal manner, the
whole must be taken as one illegal transaction.
CS(OS) 302/2007 Page 19 of 28
20. Ram Sewak Vs. Ram Charan AIR 1982 Allahabad 177 was a
case of concealment of profits; in that case the parties had been
keeping double set of accounts for evading payment of Income Tax
and Sales Tax. The lower court reported the matter to the Taxation
Authorities. The High Court held that the court should have refused
to entertain the suit on the ground of public policy, as it involved
directing the recovery of an amount found to be due to either party
as a share of the profits which had been deliberately concealed by
the parties from the books of account in order to evade the payment
of taxes. It was held that no court can countenance a deliberate
evasion of tax laws of the country and to lend the aid of the court for
recovering an amount which had been deliberately kept concealed by
the parties in order to evade payment of taxes due thereon. It was
held that if the courts were to do so it would amount to aiding and
abetting evasion of the laws by the court itself. It was further held
that since the object of the parties was found to be that the profits
will be earned in such a way or retained in such a manner as to
evade the payment of taxes which was forbidden by law and which
defeats the provision of the tax laws, therefore the object of the
agreement was forbidden by law and is opposed to public policies.
The agreement between the parties to earn concealed profits being
void, it was held that the court could not enforce the agreement by
directing an inquiry into that amount or the destination of the
concealed profits in order to enforce the recovery of the share
therein of one party from another.
21. The Apex court in Nair Service Society Ltd. Vs. Rev. Father
K.C. Alexander AIR 1968 SC 1165 quoted Lord Mansfield, C.J. in
Holman v. Johnson, (1775) 1 Cowper 341:
CS(OS) 302/2007 Page 20 of 28
"The objection that a contract is immoral or illegal as
between plaintiff and defendant sounds at all times
very ill in the mouth of the defendant. It is not for his
sake, however, that the objection is ever allowed; but
it is founded in general principles of policy which the
defendant has the advantage of, contrary to the real
justice, as between him and the plaintiff, by accident,
if I may say so. The principle of public policy is this :
ex dolo malo non-oritur actio. No court will lend its
aid to a man who founds his cause of action upon an
immoral or an illegal act. If, from the plaintiff's own
stating or otherwise the cause of action appears to
arise ex turpicausa or the transgression of a positive
law of this country, there the court says he has no
right to be assisted. It is upon that ground the Court
goes; not for the sake of the defendant, but because
they will not lend their aid to such a plaintiff."
It was further held that in a case in which a plaintiff must rely upon
his own illegality, the court may refuse him assistance. The Apex
court in that case held that the plaintiff did not have to rely upon any
illegality and thus held the principle not applicable.
22. In Smt. Surasaibalini Debi Vs. Phanindra Mohan
Majumdar AIR 1965 SC 1364 also it was reiterated that if the
plaintiff seeks the assistance of the court to effectuate an illegal
transaction the court will refuse to assist him.
23. In Sita Ram Vs. Radhabai AIR 1968 SC 534 it was held that
The principle that the Courts will refuse to enforce an illegal
agreement at the instance of a person who is himself a party to an
illegality or fraud is expressed in the maxim in pari delicto potior est
conditio defendantis. In Kedar Nath Motani Vs. Prahlad Rai AIR
1960 SC 213 it was held that if the illegality is of so trivial or venial
character and it is deemed more opposed to public policy to allow
the defendant to violate his fiduciary relation with the plaintiff than
to allow the plaintiff to gain the benefit of an illegal transaction, the
plaintiff would be entitled to the assistance of the court. The test to
CS(OS) 302/2007 Page 21 of 28
be applied is whether the illegality goes so much to the root of the
matter that the plaintiff cannot bring his action without relying upon
the illegal transaction into which he had entered; If the illegality be
trivial or venial and the plaintiff is not required to rest his case upon
that illegality, then public policy demands that the defendant should
not be allowed to take advantage of the position. It was further held
that a strict view, of course, must be taken of the plaintiff's conduct,
and he should not be allowed to circumvent the illegality by
resorting to some subterfuge or by mis-stating the facts.
24. Reference may also be made to the Full Bench decision in
Ghulam Ahmed Vs. Mohd. Iqbal AIR 1970 Jammu & Kashmir 165
where a partnership which entailed transfer of truck and its route
permit to the partnership business, in contravention of the provisions
of the Motor Vehicle Act was held to be void in entirety.
25. Lastly, in the celebrated case of S.P. Chengalvaraya Naidu
Vs Jagannath AIR 1994 SC 853 it was held that the courts of law
are meant for imparting justice between the parties; one who comes
to the court, must come with clean hands; it can be said without
hesitation that a person whose case is based on falsehood has no
right to approach the court - He can be summarily thrown out at any
stage of litigation. The Apex Court also noted that the process of the
court is being abused - property grabbers, tax evaders, bank loan
dodgers and other unscrupulous persons from all walks of life find
the court process a convenient lever to retain the illegal gains
indefinitely.
CS(OS) 302/2007 Page 22 of 28
26. In the present case the condition in the term of the
employment of the plaintiff as a government teacher, admittedly
prohibit her from carrying on any business activity or other vocation
for profits. Such condition has been imposed to ensure that the
teachers of the government school devote their full energy and time
to developing the young minds, rather than treating the government
service as a mere source of income and utilizing their time and skill
in earning/making money elsewhere. The plaintiff by entering into
the agreement of partnership with the defendant had clearly violated
her terms of employment and this court cannot come to her
assistance to enable her to earn profits which she otherwise is not
entitled. The plaintiff has admitted to having not shown any profits
whatsoever in her Income Tax return. It is inconceivable that the
plaintiff who has claimed to be in partnership since the year 1999 or
2000 would not have earned any profits from the partnership and/or
if would not have earned would have sat quietly for four years. The
plaintiff cannot be permitted to take different stands before different
foras. The condition/term of employment prohibiting the plaintiff
from entering into partnership is found to be in public interest and
the action of the plaintiff of breaching/violating the same is found to
be immoral and opposed to public policy. The breach is not found to
be trivial or venial. Further, the conduct of the plaintiff thereafter
also, as noted above is found to be of subterfuge and plaintiff has
been found to be misstating facts. The plaintiff is found to be an
unscrupulous person and her case is found to be based on falsehood.
This court refuses to come to the aid of plaintiff and her case is liable
to be dismissed summarily.
27. That even on the facts of this case, I have no doubt that the
plaintiff has abused the process of the court. The plaintiff in the
CS(OS) 302/2007 Page 23 of 28
Bayana Agreement aforesaid had clearly agreed to the sum of
Rs.21.50 lacs towards her share in the partnership firm inclusive of
the value of the Rohini property where the partnership business was
being carried on. As far as the Paschim Vihar property is concerned,
the issue with respect whereto was raised, the same also finds
mention in the said Bayana Agreement and the receipt. The conduct
of the plaintiff also shows that all accounts had been settled and no
accounts remained to be taken and for which purpose the suit had
been filed. Had the accounts not been settled, the question of the
plaintiff instructing the bank to delete her name from the account in
the name of the firm and of receiving the original Bayana Agreement
and of obtaining the clearance certificate aforesaid would not have
arisen. The case set up by the plaintiff is contrary to all the admitted
documents.
28. The Apex court in T. Arivandandam
Vs. T.V. Satyapal AIR 1977 SC 2421 has held that if on a
meaningful - not formal - reading of the plaint it is manifestly
vexatious, and meritless, in the sense of not disclosing a clear right
to sue, the trial court should ensure that bogus litigation is shot
down at the earliest stage. Again in Liverpool and London S.P.
and I Asson. Ltd. Vs. M.V. Sea Success I 2004 9 SCC 512 it was
held that when no cause of action is disclosed, the courts will not
unnecessarily protract the hearing of the suit; the court should
interpret the provisions in such a manner so as to save expenses,
achieve expedition, avoid the court's resources being used up on
cases which will serve no useful purpose. It was further held that a
litigation which in the opinion of the court is doomed to fail should
not further be allowed to be used as a device to harass. The Apex
court yet again in Shipping Corporation of India Ltd. Vs.
CS(OS) 302/2007 Page 24 of 28
Machado Brothers AIR 2004 SC 2093 held that it is the duty of the
court to dispose of infructuous litigation.
29. The senior counsel for the plaintiff referred to Sopan
Sukhdeo Saible Vs Asst. Charity Commissioner (2004) 3 SCC
137, Mayor (H.K.) Ltd Vs Owners & Parties, Vessel M.V.
Fortune Express (2006) 3 SCC 100 and K.K. Modi Vs K.N. Modi
(1998) 3 SCC 573 and argued that various issues already framed on
17th January, 2008 required adjudication of questions of facts,
recording of evidence to determine the understanding of parties and
parties ought to be given an opportunity to give their explanation of
documents aforesaid. It was argued that thus this suit did not fall in
the category of bogus and irresponsible litigation which could be
thrown out at threshold. It was further urged that re-litigation was
an abuse of process of court only when matter had been heard and
finally decided - in the present case no court has gone into the
question of whether accounts have been settled between the parties
or not; the judgment in previous suit was only concerned with
whether payment in cash claimed by the defendant had been made
or not. It was further urged that non mentioning and non filing of
Bayana agreement and the clause therein of consideration
mentioned therein being also towards her 50% share in Takshila
Institute, was not in abuse of process of court, since the foundational
facts of two cases were different. It was further urged that the
power of restraining proceedings was to be exercised sparingly and
only in exceptional cases. It was submitted that the defendant also
had been taking inconsistent stand and the understanding of
defendant also was that inspite of clearance certificate, the plaintiff
was entitled to her share in profits; both were acting illegally and
thus defendant could not take the plea of plaint being in abuse of
CS(OS) 302/2007 Page 25 of 28
process of court. It was further argued that bogus and irresponsible
has to be on reading of plaint and not on the basis of defence.
30. The senior counsel for the plaintiff further argued that
dismissal of suit would hamper the right of the plaintiff to have her
claim adjudicated. Reliance was placed on Chapter VIII of 186 th to
195th Report of Law Commission of India on Prevention of Vexatious
Litigation - it has to be habitual and persistent. Sathi Vijay Kumar
Vs Total Singh (2006) 13 SCC 353 was referred to, to urge that
power to strike off pleadings should be exercised with
circumspection. Reference was also made to Attorney General of
the Duchy of Lancaster Vs London and North Western Railway
Co. (1892) 3 Ch 274 and M/s Crescent Petroleum Ltd Vs
Monchegorsk AIR 2000 Bom 161 in this regard. The senior
counsel for plaintiff also relied on All India Reporter Ltd Vs D.D.
Datar AIR 1951 Nagpur 412 and Anderson Kirkwood Vs Walter
Mitchell AIR 1925 Cal 860 to buttress that court should not as a
rule decide an important point at the stage of striking out pleadings,
unless it is clear beyond all reasonable doubt.
31. I find the present case to be clear beyond all reasonable
doubts. The Beyana Agreement and Receipt admittedly executed by
plaintiff and the averments of plaintiff in plaint in earlier suit
instituted by plaintiff, permit of no controversy. The consideration
mentioned therein was in settlement of all claims of plaintiff with
respect to her share in partnership. The contemporaneous conduct
of plaintiff, of statement on 13th August, 2004 in suit no. 438/2004
instituted by defendant; of taking clearance certificate dated 13th
August, 2004 from defendant, of having her name as signatory
deleted from the bank account of firm are also in consonance with
CS(OS) 302/2007 Page 26 of 28
said documents. The facts of this case do not require any
opportunity for leading evidence to be given to the plaintiff. This
court cannot put a case contrary to such documents and conduct to
be put to trial. The explanations now given during arguments do not
form the basis of suit and pleadings.
32. The next question is with respect to the preliminary issue
framed on 17th January, 2008. The plaintiff in the plaint in Suit
No.16/2006 on the basis whereof the said issue was framed stated
that she was reserving her right to institute separate proceedings for
accounts of the partnership. However, no leave under Order 2 Rule
2 of the CPC was taken. What has to be determined is whether the
cause of action for that suit and this suit is the same or not.
33. The cause of action for that suit was the Bayana Agreement
aforesaid. The plaintiff sued for recovery of balance amount due
under the said Bayana Agreement. However, the same Bayana
Agreement provided for the amount of Rs.19.5 lacs to be paid
towards the plaintiff‟s share in the partnership and of Rs.2,00,000/-
towards the plaintiff‟s share of the Rohini property. Thus the
payment of Rs.19.5 lacs the balance whereof was claimed was
towards the share in partnership and if it was the case of the plaintiff
that the plaintiff was also entitled to the further relief of accounts
also besides the said amount of Rs.19.5 lacs, the cause of action was
the same. It is only upon being confronted with contradictions, now
argued by the senior counsel for the plaintiff as well as stated by the
plaintiff in her statement that the accounts sought to be settled
therein were with respect to the Rohini branch only of Takshila
Institute and not the Paschim Vihar branch. The plaintiff did not
state so in the plaint in that suit or in the plaint in this suit. The said
CS(OS) 302/2007 Page 27 of 28
claim if any of the plaintiff was to be adjudicated in that suit only and
plaintiff having not claimed relief in that suit and having also not
sought the permission under Order 2 Rule 2 of the CPC in that suit is
now not entitled to maintain the present suit. The Division Bench of
this court in Kamal Kishore Sahu Vs Nawab Zada Humayu
Kamal Hasan Khan 90(2001) DLT 45 (DB) held a second suit for
specific performance on same averments as in previous suit for
permanent injunction to be barred by Order 2 Rule 2 CPC, when
cause of action for the relief of specific performance had accrued
prior to the institution of suit for permanent injunction. The
preliminary issue is also decided in favour of the defendant and
against the plaintiff. Of course, it cannot be said that the present
suit is barred by res-judicata in as much as the said claims were not
decided in that case; but the principles of constructive res judicata
are applicable.
34. The effect of the aforesaid findings is that the suit is dismissed
with costs. The plaintiff is also burdened with costs of Rs.50,000/-
payable to the defendant.
RAJIV SAHAI ENDLAW
March 13, 2009 (JUDGE)
PP
CS(OS) 302/2007 Page 28 of 28
