M/S Foot Style (A Partnership ... vs M/S Bata India Ltd.
2011 Latest Caselaw 1373 Del

*             IN THE HIGH COURT OF DELHI AT NEW DELHI

+                         RFA No.529/1999

%                                                      9th March, 2011

M/s Foot Style (A partnership firm)                        ...... Appellant
                              Through:          Mr. D.N.Rao, Adv.
                        VERSUS


M/s Bata India Ltd.                                       ...... Respondent
                                 Through:       Mr. Raman Kapur, Adv.


CORAM:
HON'BLE MR. JUSTICE VALMIKI J.MEHTA

    1.   Whether the Reporters of local papers may be
         allowed to see the judgment?

    2.   To be referred to the Reporter or not?        Yes

    3.   Whether the judgment should be reported in the Digest? Yes


VALMIKI J. MEHTA, J (ORAL)

1.       The challenge by means of this regular first appeal under Section 96 of

the Code of Civil Procedure, 1908, is to the impugned judgment and decree

dated 10.5.1999 whereby the suit of the appellant/plaintiff for recovery of

Rs.2,11,620/- on account of goods (being footwear) supplied to the

respondent/defendant was dismissed. The reason for dismissal of the suit

was that though it was not disputed by the respondent/defendant that goods

were received, however, what was contended by the respondent/defendant

and      accepted    by   the   trial   court    was    that   the   dues     of   the

respondent/defendant towards the appellant/plaintiff were to be adjusted


RFA No.529/1999                                                       Page 1 of 11
 against the dues which were payable to the respondent/defendant by a sister

concern of the appellant/plaintiff, M/s Ess Cee Footwear.         The partner

Ramesh Chopra of the plaintiff firm was also a partner of M/s. Ess Cee

Footwear in which the other partner was Swaran Chopra-brother of Ramesh

Chopra.


2.    The trial court has relied upon the letter Ex.D-1 dated 14.12.1989,

written by Ramesh Chopra, the partner of the appellant/plaintiff firm to the

respondent/defendant to accept the plea of adjustment.            The relevant

portion of this letter reads as under:-


              "We do agree that the Ess Cee Footwear Co., has to pay
          the claim which has been given by M/s Bata India Limited. At
          present we are running one firm i.e. M/s Foot Style. In this
          firm also supplies do not so high that the funds can be
          diverted from this firm to dead firm M/s Ess Cee Footwear Co.
          Even than we are ready to take the liability of the claims of
          M/s Ess Cee Footwear Co. which will be payable in easy
          monthly instalments.

              Still we shall again request your goodself to please look
          into the matter and allow our (Sick Unit) sister concern M/s
          Ess Cee Footwear Co., to start production and supply goods
          to M/s Bata India Ltd. so that it will be easy for M/s Ess Cee
          Footwear Co., to pay the claims in fast movement. It is our
          humble request once again for consideration."
3.    The trial court has also noted that this aspect of adjustment was also

mentioned in the letter Ex.PW1/5 dated 13.9.1991 sent by the respondent

/defendant to the plaintiff and which was not objected to by the

appellant/plaintiff.   The relevant portion of this letter Ex.PW1/5 reads as

under:-



RFA No.529/1999                                                  Page 2 of 11
                  "We find from the records that M/s Ess Cee footwear,
           Delhi has a debit balance of Rs.1,01,483.01 in their ledger
           with us. As per your letter of authority dated 14.12.89, the
           above mentioned debit of Rs.1,01,483.01 t be paid by M/s
           Foot Style, Delhi.
                 We find from our record that the following Hundies of
           M/s F.Style are lying with us.

           Hundi Date        Bill No.     Date        Amount
           No.
           37. 9.9.90        F S 31 32    22.6.90     27,991.20
           36. 8.9.90        F S 51       31.8.90     12,506.04
           37. 14.10.90      52 53        27.9.90     35,938.00
           38. 14.10.90      54           1.10.90      6,881.17
           39. 23.10.90      55           17.10.90    10,496.70
           39. 23.10.90      56           25.10.90     6,334.40__
                                          Total       1,00,237.51

                             Hence, the payment due for Hundis
                         of M/s Foot Style is just at par of the
                         debit of M/s Ess Cee Footwear to be
                         realized by us. Considered the above
                         four points we are not in a position to
                         release your Hundies."


4.   The trial court was, therefore, wholly justified in dismissing the suit by

holding that the respondent/defendant was entitled to adjustment of its dues

against the dues which were payable by M/s Ess Cee Footwear to the

respondent/defendant. The trial court has also arrived at a finding of fact

that Sh. Ramesh Kumar Chopra and his brother Sh. Swaran Kumar Chopra

were the partners of M/s Ess Cee Footwear Company.         The trial court has

noted that the suit on behalf of M/s Ess Cee Footwear Co. against the

respondent/defendant was filed through Mr. Ramesh Kumar Chopra, the

author of Ex.D-1. The trial court has noted the statement recorded of Mr.

Ramesh Kumar Chopra under Order 10 CPC where he clearly admitted that


RFA No.529/1999                                                 Page 3 of 11
 he had written the letter dated 14.12.1989 Ex.D-1. In this context, paras 12

to 14, and 17 of the impugned judgment are relevant and the same read as

under:-


             "12.      The record reveals that my Ld. predecessor had
             recorded the statement of Shri Ramesh Chopra u/O 10
             CPC. Shri Ramesh Chopra had clearly, specifically and
             unequivocally admitted having written letter dated
             14.12.1989. He stated that he as well as his brother
             Swaran Chopra, who was also present in the court on that
             day are the partners of M/s Ess Cee Footwear Co. He
             explained that, although, he had written a letter to the
             defendant that the letter dated 14.12.1989 written by
             him, on behalf of the plaintiff, b e not given effect to , yet
             he had not filed any such letter on the record. It is
             interesting to note that the above said letter mentioned
             by Shri Ramesh Chopra did not see the light of the day till
             the eleventh hour. In absence of this letter, the value of
             the case of the plaintiff enervates. It is also interesting to
             note that in his statement recorded as PW1, Sh. Ramesh
             Chopra admitted that he had made statement dated
             11.9.95, in the court, and his statement is correct. He
             also admitted that Shri Swaran Chopra was still present in
             the court on that day as well. Shri Ramesh Chopra also
             admitted that after Ex.PW-1/5, the defendant did not
             claim the amount which was recoverable from Ms. Ess Cee
             Footwear. He, however, explained that the question of
             demanding the amount of M/s. Ess Cee Footwear would
             not have arisen as they have filed a suit before the
             Hon'ble High Court for recovery of Rs.12,00,000/- against
             the defendant.

             13. On the other hand, Shri B.S.Dass, DW1, explained that
             they have not claimed the amount which was due from
             M/s ESs Cee Footwear Co. because of Ex.PW1/5. He
             further explained that the plaintiff did not raise any
             objection or protest against the letter Ex.PW1/5. There is
             no evidence, worth the name, which may go to show that
             there is any protest, word, or syllable that the plaintiff had
             objected to Ex.PW1/5. The statement made by Shri
             Ramesh Chopra on 11.9.95 that he had written a letter
             not to give effect to letter Ex.D-1, appears to have been
             made out of whole cloth and is not substantiated by


RFA No.529/1999                                                 Page 4 of 11
               cogent and convincing evidence. Consequently, this issue
              cannot be ducked in the way the plaintiff wants. This is
              well known axiom of law that men may tell lies but the
              documents cannot.

              14. In absence of any letter of protest the evidence
              produced by the defendant, particularly, in Ex.D-1 gets
              preponderance over the rest. It must be borne in mind
              that nobody has called into question the authority of Shri
              Ramesh Chopra, in writing letter Ex.D-1. There is no
              evidence which may go to show that it had been
              withdrawn   or   some     protest   had   been     raised.
              Consequently, Ex.D-1 puts the defendant's case in an
              impregnable position.    This documentary evidence of
              immense importance has substance and, it can do without
              frills.

              .........

17. Further-more, the more non-production of the account-books or account-books properly maintained, does not cut much ice, particularly, when Ex.D-1 and Ex.PW1/5 are available on the record. Therefore, there is hardly any necessity of the account-books. Admissions made by both the parties are available on the record, and, therefore, the production and non-production of the books of account has no relevance. It is, also interesting to note that the plaintiff, too, has not produced its own books of accounts. For all these reasons, I find that the story propounded by the plaintiff does not just stack up. His claim hardly squares up with the realities which have cropped up in the evidence. As a matter of fact, the plaintiff does not have a bone to pick with the defendant."

5. I agree with the aforesaid findings and conclusions of the trial court as

I do not find any illegality or perversity in the said findings. The counsel for

the appellant firstly contended that the respondent/defendant should not

have been held entitled to adjustment towards the amount due from M/s Ess

Cee Footwear. This contention is liable to be rejected in view of Ex.D1 which

specifically allowed the adjustment and Ex.PW1/5 to which there was no

objection although the factum of adjustment in terms of Ex.D1 was

mentioned in Ex.PW1/5. The next argument was that the

respondent/defendant was not entitled to adjustment because an adjustment

entry was not found in the books of account of M/s Ess Cee Footwear nor any

notice of adjustment was given. I do not find that there is any legal provision

which disentitles the respondent/defendant to an adjustment although there

is a document executed on behalf of the plaintiff entitling adjustment and

simply because the adjustment entry is not found in the statement of

account. Adjustment entries are only consequential entries and the rights

actually flow from the agreement which entitles the adjustment. In the

present case, Ex.D-1 gave the entitlement of adjustment to the

respondent/defendant, and therefore, the trial court was justified in giving

adjustment to the respondent/defendant for dues payable by it to the

appellant/plaintiff against the dues payable to the respondent/defendant by

M/s Ess Cee Footwear Co. The learned counsel for the appellant next

contended that since there was no reply given by the respondent/defendant

to the notice of demand given by the appellant/plaintiff hence no adjustment

can be made. The answer to this argument is that in a civil suit there are

always points and evidences for and against each party and ultimately, the

entire evidence in the case, both documentary and oral, has to be

considered so as to decide the case on a balance of probabilities. I do not

find that non-reply to a notice of demand/adjustment by the

respondent/defendant is such so as to disentitle the claim of adjustment in

the face of the documents Ex.PW1/5 and Ex.D1. The next argument raised by

the learned counsel for the appellant was that the respondent/defendant

ought to have filed a suit for recovery against M/s Ess Cee Footwear Co. I do

not think that this argument is correct because once the

respondent/defendant had a right to adjustment there was no need to file a

suit for recovery.

6. After the arguments were concluded and I started dictating the

judgment in Court, there were repeated interruptions by the counsel for the

appellant and therefore I decided to dictate the balance portion of the

judgment in the chamber. The counsels then left, but, later on the counsel

for the appellant appeared before this Court and sought liberty to place on

record judgments. This was allowed on the presumption that the judgments

would be with reference to the arguments raised. However a reference to

the judgments showed that the same pertained not to an argument which

was advanced but to a new argument of lack of authority in a partner to

compromise in terms of Section 19(2) of the Partnership Act, 1932. This

practice to quietly slip in judgments on new points is to be deprecated as the

opposite counsel does not get an opportunity to rebut the same. I am

however dealing with the new argument and the judgments relied upon by

the counsel for the appellant inasmuch as I find that there is mention of this

argument in the impugned judgment. The contention/argument on behalf of

the appellant seems to be that one of the partners of the appellant/plaintiff

firm Sh. Ramesh Chopra could not bind the firm through a compromise

inasmuch there was another partner Sh. Attar Chand Chopra in the

partnership firm. Reliance is placed upon, in this regard, on the judgments

reported as Raghavaveera Sons Vs. Padmavathi AIR 1978 Madras 81,

Chainraj Ramchand Vs. V.S. Narayanaswamy AIR 1982 Madras 326,

Dalichand Vs. Mathuradas AIR 1958 Bombay 428 and Rati Lal Vs.

Uttam Lal AIR 1935 Calcutta 275. Before I deal with the judgments, I

must mention that though the suit was filed through Sh. Attar Chopra, the

only evidence in the suit led on behalf of the appellant/plaintiff was of Sh.

Ramesh Chopra as PW-1. Also, Attar Chand Chopra is none else than the

father of Sh. Ramesh Chopra. Even the present appeal has been filed

through Ramesh Chopra and who has sworn the affidavit in support of the

appeal. In my opinion, the defence of Section 19(2) of the Partnership Act,

1932 would not be available to the appellant/plaintiff because the said

provision is meant to protect other partners of the partnership firm who

would not like their claims to be reduced on account of one of the partners

giving up or compromising the claim of the partnership firm. This principle

will not apply when this argument is used as the ruse to avoid a liability,

more so, when no other partner has ever objected to the compromise of the

dues of the appellant/plaintiff as against the dues of M/s. Ess Cee Footwear

company. I have already stated that the suit and the appeal have been

prosecuted by Sh. Ramesh Chopra and therefore it is Ramesh Chopra who is

trying to play fast and loose at the same time because on the one hand Mr.

Ramesh Chopra claims that he as one partner cannot compromise the claim

on behalf of the partnership firm/appellant/plaintiff and yet again the same

Ramesh Chopra cannot claim that the firm should be given the benefit of

Section 19(2) of the Partnership Act, 1932. The defence of Section 19(2), if at

all available, ought to have been on behalf of the other partner Attar Chopra

and who has not taken this defence. So far as Ramesh Chopra is concerned

he is stopped from taking this defence as he is the signatory to Ex.D-1 dated

14.12.1989. The principal underlining Section 19(2) cannot and ought not to

be applied to defraud the third person when raised by the partner who

himself has compromised. The beneficial principal of Section 19(2) of the

Partnership Act, 1932 is meant to protect the other genuine partners of the

partnership firm whose entitlement may be reduced by a reckless, fraudulent

or illegal act of a partner. However, that principal cannot be applied in the

facts of the present case where Ramesh Chopra is the be all and end all so

far as the partnership firm is concerned. Further the so called act of a

person in violation of Section 19(2) can always be either expressly or

impliedly, ratified by the firm. In my opinion there is quite clearly a

ratification by the firm of the action of Ramesh Chopra in executing Ex.D1

because no reply was sent to the letter Ex.PW1/5 of the

respondent/defendant. The decision in the case of Raghavaveera

Sons(supra) only lays down that partner of a non-trading firm cannot bind

other partners for a hundi drawn on account of trading transaction.

Importantly, however, the said decision lays down the principle that the

provision of Section 19(2) will not apply when the firm is otherwise doing

business and the act of a partner of the firm is part and parcel of his doing

the business as a partner of the firm. Thus, the principle of Section 19(2) of

the Partnership Act, 1932 is not applicable where the act of the partner is

done in usual course of business. In the facts of the present case, the letter

Ex.D1 dated 14.12.1989 is also in the ordinary course of business because

there was a near identity of both the appellant/plaintiff firm and M/s. Ess Cee

Footwear company as it was Ramesh Chopra who was dealing with the

respondent/defendant on behalf of both the firms and it was Ramesh Chopra

who was the only witness who appeared on behalf of the appellant/plaintiff

and also filed and prosecuted the present appeal. The decision in the case of

Raghavaveera Sons(supra), therefore, would not apply in the facts of the

present case, and in fact, the principal therein laid down by reference to

lindley on partnership will go against the appellant/plaintiff. The decision in

the case of Chainraj Ramchand(supra) also can be distinguished on the

basis of the same reasoning whereby the decision in the case of

Raghavaveera Sons(supra) has been distinguished. The decisions in the

case of Rati Lal (supra) has no application because all that is stated in the

said judgment is that representation by one partner will not bind the other

partner of the firm. However, as already stated above, in a business

partnership, the general rule is otherwise and representation by one partner

will also bind the other partner of the firm. In any case, the said judgment

has no application as the facts of the said case were totally different from

the facts of the present case. The decision in the case of Dalichand

(supra) would also not apply because it deals with the position where one

partner sought to set off his own separate debt against the debt due to the

firm.

In view of the above, the principle enshrined in Section 19(2) of

the Partnership Act, 1932 cannot come to the aid of the appellant/plaintiff

and which argument of the appellant/plaintiff is accordingly rejected.

7. In view of the above, I do not find any illegality or perversity in the

impugned judgment and decree which calls for interference by this court in

appeal. The appeal is, therefore, dismissed leaving the parties to bear their

own costs. Trial court record be sent back.

MARCH 09, 2011                                         VALMIKI J. MEHTA, J.
Ib/Ne