Madras High Court
Mr.Rajkumar vs Raj Yamaha on 30 November, 2023
Author: N.Sathish Kumar
Bench: N.Sathish Kumar
1
IN THE HIGH COURT OF JUDICATURE AT MADRAS
Judgement Reserved on : 31..10..2023
Judgement Pronounced on : 30..11..2023
CORAM
THE HON'BLE MR.JUSTICE N.SATHISH KUMAR
Civil Suit No.491 of 2019
Mr.Rajkumar,
S/o Mr.Harichand,
Proprietor,
Raj Yamaha,
No.6, T.Villa, M.G.R.Salai,
Palavakkam, Chennai 600 041.
..... Plaintiff
-Versus-
Raj Yamaha,
a Registered Partnership
Rep. By its Partners
[1] Mr.A.Jagadish
S/o Mr.Arunachalam
[2] Mrs.J.Loga,
W/o Mr.A.Jagadish,
Having one of the Office at
S-4, Besant Avenue,
Adayar, Chennai 600 020.
..... Defendant
Suit filed under Order VII, Rule 1 of the Madras High Court Original
Side Rules r/w Order XXXVII, Rule 1 of CPC and Order IV of the Madras
High Court Original Side Rules praying for a decree and judgment against the
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2
defendant for recovery of a sum of Rs.4,59,50,225/- [Rupees Four Crore Fifty
Nine Lakh Fifty Thousand Two Hundred and Twenty Five only] together with
interest at 24% per annum on the principal sum of Rs.4,18,00,000/- [Rupees
Four Crore and Eighteen Lakh only] from the date of plaint to till date of
realization and for the cost of the suits.
For Plaintiff : Mr.K.V.Babu
For Defendant : K.Bijai Sundar for
Mr.A.Balasingh Ramanujam
JUDGEMENT
Suit is filed for recovery of a sum of Rs.4,59,50,225/- [Rupees Four Crore
Fifty Nine Lakh Fifty Thousand Two Hundred and Twenty Five only] from the
defendant partnership firm together with interest at 24% per annum on the
principal sum of Rs.4,18,00,000/- [Rupees Four Crore and Eighteen Lakh
only] from the date of plaint till date of realization and for costs of the suit.
2. The suit is based on dishonored cheques.
3. The case of the plaintiff in brief is as follows:- The plaintiff was
originally the Proprietor of Raj Yamaha which was carrying on the business of
dealing in Two-Wheelers viz., Yamaha model motorcycles and was an
authorized dealer for sales and services of Yamaha Model motorcycles. The
plaintiff was running his business at Adayar, Thoraipakkam, Palavakkam,
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Velachery and Navalur in the City of Chennai. The plaintiff desired to retire
from the business activities as his son has been settled in United States of
America (USA). The partners of the defendant firm one A.Jagadish and
Mrs.J.Loga approached the plaintiff with an intent to take over the entire
business activities and for the purpose of convenient documentation, discussed
and decided to enter into a Deed of Partnership whereby A.Jagadish and
Mrs.Loga along with the plaintiff would constitute a partnership firm, so that
the business activity shall be carried on further without any issue with the
manufacturing company. Accordingly, a partnership deed was entered into on
17.07.2018 between the plaintiff-H.Rajkumar, and A.Jagadish & Mrs.J.Loga.
Though the document styled as deed of partnership, the intent between the
parties was that plaintiff shall handover the entire business activities to the
defendant on certain consideration and upon receipt of the entire
consideration, the plaintiff shall get relinquished from all the business activities
besides other liabilities.
4. It is the further case of the plaintiff that for the purpose of settlement
of amounts for selling away the entire business activities at 5 different
showrooms as already mentioned, the plaintiff and the partners of the
defendant firm have entered into an agreement of sale on 17.08.2018 whereby
it was agreed that the plaintiff shall be settled a sum of Rs.4.25 crore by the
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partners of the defendant firm as the purchase value. A sum of Rs.1.40 crore
was paid as advance by way of RTGS transfer on 24.05.2018, 08.06.2018 and
15.06.2018 from Axis Bank to the plaintiff's Account. Further, another sum of
Rs.1.25 crore was paid by way of bank transfer on 17.07.2018 and for the
balance of Rs.1.60 cores, the partners of the defendant firm have issued 4
different cheques as under:-
(1) Cheque bearing No.672392 for a sum of
Rs.50,00,000/- drawn on Vijaya Bank;
(ii) Cheque bearing No.000020 for a sum of
Rs.50,00,000/- drawn on HDFC Bank;
(iii) Cheque bearing No.672393 for a sum of
Rs.15,00,000/- drawn on Vijaya Bank; and
(iv) Cheque bearing No.000021 for a sum of
Rs.45,00,000/- drawn on HDFC Bank.
It was also agreed between the parties that upon realization of the said amount
of Rs.1.60 crore, the defendant shall become the absolute owner of the
company by name Raj Yamaha, which includes the showrooms and service
stations in all 5 locations referred to above along with the entire staff including
the different models of two wheelers and its spares and accessories.
5. It is the further case of the plaintiff that during the relevant point of
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time, the partners of the defendant firm approached the plaintiff for financial
assistance for a sum of Rs.1.20 crore to meet out their urgent business needs.
As the relationship was cordial between the plaintiff and the partners of the
defendant firm during the relevant point in time and also believing the
representation of the defendant in good faith, the plaintiff transferred a sum of
Rs.1.20 crore by way of RTGS transfer to the defendant. Thereafter despite
repeated requests for return of amount, besides requesting them to inform as to
when the cheques for the value of Rs.1.60 crore could be presented in the
plaintiff's account, the defendant was not forthcoming to honour their
commitments and after several rounds of meetings and discussions, the
amounts payable by the defendant to the plaintiff was reworked and the
defendant finally agreed to settle the entire claim of the plaintiff at Rs.4.18
crore and have accordingly issued the following 8 cheques in favour of “Raj
Yamaha”, Proprietary concern of the plaintiff.
(i) Cheque bearing No.000017 dated
10.10.2018 for a sum of Rs.75,00,000/- drawn on
City Union Bank, Chennai.
(ii) Cheque bearing No.000018 dated
15.10.2018 for a sum of Rs.50,00,000/- drawn on
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City Union Bank, Chennai.
(iii) Cheque bearing No.000025 dated
27.10.2018 for a sum of Rs.50,00,000/- drawn on
City Union Bank, Chennai.
(iv) Cheque bearing No.000026 dated
27.10.2018 for a sum of Rs.50,00,000/- drawn on
City Union Bank, Chennai.
(v) Cheque bearing No.000027 dated
27.10.2018 for a sum of Rs.50,00,000/- drawn on
City Union Bank, Chennai.
(vi) Cheque bearing No.000028 dated
27.10.2018 for a sum of Rs.50,00,000/- drawn on
City Union Bank, Chennai.
(vii) Cheque bearing No.000029 dated
27.10.2018 for a sum of Rs.50,00,000/- drawn on
City Union Bank, Chennai.
(viii) Cheque bearing No.000030 dated
27.10.2018 for a sum of Rs.43,00,000/- drawn on
City Union Bank, Chennai.
After having issued the cheques, the partners of the defendant firm requested
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the plaintiff not to present the cheques for collection until they inform the
plaintiff and believing the words of the partners of the defendant firm in good
faith, the plaintiff waited patiently. Since the cheques were getting lapsed, the
plaintiff had no other option except to present the cheques for collection. On
presentation, the cheques were returned by the defendant's banker for the
reason “funds insufficient” on 14.01.2019. The plaintiff issued a legal notice
dated 13.02.2019 calling upon them to settle the entire liability of Rs.4.18
crore. As the legal notice was returned, the plaintiff issued another legal notice
on 18.03.2019. That notice was served on the defendants. However, the
defendants had not come forward to settle their liability of Rs.4.18 crore.
Hence, the suit.
6. On the other hand, the defence of the defendant in brief is as follows:-
The defendant vehemently opposed the suit. Though the
agreement of sale has been admitted, the defendant inter alia contended that
they paid a sum of Rs.1.40 crore by way of RTGS transfer on 24.05.2018,
08.06.2018 and on 15.06.2018 through Axis Bank to the plaintiff. Further, on
17.08.2018, they paid further sum of Rs.1.25 crore by way of RTGS transfer
to the plaintiff's bank account and on the very same day an unregistered
partnership deed was signed by the plaintiff and the partners of the defendant
firm in which as per the recital, the plaintiff was having 51% profit and loss
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and the other partners were having profit and loss of 35% and 14%
respectively. The plaintiff contributed a sum of Rs.15.00 lakh towards capital
and the other partners contributed Rs.25.00 lakh and Rs.10.00 lakh
respectively towards their capital on the partnership firm and an unregistered
partnership deed was also entered with the plaintiff and the other partners of
the defendants on the very same day i.e., on 17.08.2018. As per clause 10 of
the sale agreement, the plaintiff took full responsibility of informing India
Yamaha Motors Private Limited and transferred all necessary documents
including the dealership transfer in the name of Jagadish and Mrs.J.Loga. As
per clause 7 of the sale agreement, partners Jagadish and Mrs.J.Loga have to
take stock audit of all the vehicles and spares stocks and pay for them within a
month time to the plaintiff separately apart from the mentioned amount.
7. It is the further contention of the defendant that though 4 cheques
bearing Cheque No.672392 for Rs.50,00,000/-, Cheque No.672393 for
Rs.15,00,0000/-, Cheque No.000020 for Rs.50,00,000/- and Cheque
No.000021 for Rs.45,00,000/- were issued for the remaining sale
consideration of Rs.1.60 crore, subsequently, the plaintiff collected cash for the
cheque amount and returned all the original cheques to the defendants at the
time of registration of partnership firm on 10.9.2018 and hence, sale price as
agreed by the defendant was paid to the plaintiff. The plaintiff never allowed
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the other partners to run the business and the plaintiff only continued to run
the business as a proprietorship concern till the end of financial year citing the
income tax problem. The other partners never objected the same and the
plaintiff after receiving the entire money run the business in the name of the
proprietorship concern only.
8. It is the further contention of the defendant that the plaintiff at the
time of entering the sale agreement totally suppressed the fact in respect of the
loan of Rs.13.25 crore which he had availed from Federal Bank as well as
Deutsche Bank and he never mentioned anything in the sale agreement as well
thereby the plaintiff played fraud upon the defendant by not disclosing the
material fact.
9. It is the further contention of the defendant that the plaintiff after
receiving the entire sale consideration of Rs.4.25 crore as per the sale
agreement from the defendant, the plaintiff simply informed that Yamaha
company is not allowing to sell the business and hence the plaintiff wanted to
be a partner of the firm Raj Yamaha and accordingly partnership firm was
registered on 19.09.2018 having principal place of business at No.4/74, OMR,
Navalur, Chennai. On knowing that the defendant lodged a complaint against
the plaintiff, the plaintiff finally came forward to settle the amount to the
defendants by way of cheque drawn on HDFC Bank, Perungudi Branch vide
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cheque No.000026 dated 26.01.2019 for Rs.4,32,00,000/- and assured that
the cheque would be honoured on its presentation whereas on presentation for
collection it was returned dishonored for want of funds. In this regard the
defendant already filed a complaint against the plaintiff under Section 138 of
the Negotiable Instruments Act which was taken cognizance in C.C.No.1030
of 2019 by the learned Judicial Magistrate at Tambaram and the same is
pending. To counter blast the same, the plaintiff filed the present suit. The
plaintiff who is also a partner of Raj Yamaha misused the signed blank
cheques in the name of drawee as Raj Yamaha and instituted the present suit
based on such dishonored cheques. The suit is not maintainable either in law
or on facts and the same is liable to be dismissed with costs.
10. On the basis of the above pleadings, the following issues were
framed for trial:-
(1) Whether the plaintiff is entitled for the
relief of recovery of a sum of Rs.4,59,50,225/-
together with interest at 24% per annum on the
principal sum of Rs.4,18,00,000/- from the date of
plaintiff till the date of realization;
(2) Whether the suit cheques issued by the
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defendants firm in favour of Raj Yamaha can be used
by the plaintiffs being one among the partner of the
firm as against the partnership firm for enforceability
of any debt or liability?
11. During trial, on the side of the plaintiff, who was said to be
Proprietor of Raj Yamaha, the then proprietary concern, examined himself as
P.W.1 and marked Ex.P.1 to Ex.P.17. On the other side, the defendant firm
examined one of its partner viz., A.Jagadish as D.W.1 and marked Ex.D.1 to
D.15.
12. This court has heard the arguments of the learned counsel on either
side.
13. Though the partnership firm by name Raj Yamaha is the defendant,
for the sake of convenience, A.Jagadish and Mrs.J.Loga who represented the
firm will hereinafter be referred to as the defendants 1 and 2 respectively and
the defendant partnership will be referred to as “the defendant firm”.
14. The learned counsel appearing for the plaintiff would vehemently
submit that execution of agreement for the sale of the entire proprietorship
business run by the plaintiff in the name and style of Raj Yamaha to the
defendants viz., A. Jagadish and Mrs.J.Loga is not in dispute. Having agreed
to purchase the business for Rs.4.25 crore, the defendants paid part of sale
consideration of Rs.2.65 crore in two installments by way of cheques, except
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Rs.1.60 crore towards the sale consideration, which was said to be paid in
cash, is also not in dispute. However, the said amount has not been paid.
Besides for total settlement including stocks and shares, the defendants 1 and
2 have agreed to pay a sum of Rs.4.18 crore. That apart, the defendants have
also received Rs.1.20 crore from the plaintiff for the purpose of their business
which is evident from Ex.P.6. Hence, it is his contention that only towards
payment of the said amount of Rs.4.18 core suit cheques were issued by the
defendant. Issuance of the cheques were also not in dispute. Therefore,
according to the learned counsel for the plaintiff, the contention of the
defendants that the defendants were never involved in the affairs of the
partnership firm cannot be countenanced. The documents filed on the side of
the plaintiff and the admissions made by D.W.1 in his cross examination
would vouchsafe the fact that after entering Ex.P.1-Deed of Partnership and
Ex.P.2 Agreement of Sale it was the defendants who were running the
dealership business. Ex.P.1 Partnership Deed was entered only for the name
sake so as to enable the licensor to issue dealership business to the partnership
firm which has also been clearly admitted by the defendants. Therefore,
according to the learned counsel for the plaintiff, the contention of the
defendants that they have repaid Rs.1.60 crore in cash to the plaintiff is
nothing but an afterthought and it has not been substantiated by any evidence.
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Therefore, once the issuance of cheque has been admitted and the sale of the
business has also been established by the plaintiff, it is for the defendants to
establish that consideration as agreed had been passed on. The defendants
merely denied plea of the plaintiff in this regard and they have not established
the payment of the said amount. Whereas the plaintiff has clearly brought in
evidence the circumstances under which the entire transaction had taken
place. Hence, the learned counsel for the plaintiff submitted that the plaintiff
is entitled for a decree for recovery of money based on dishonored cheque with
interest as prayed for in the suit.
15. The learned counsel for the defendants on the other hand
vehemently contended that though Ex.P.1 Deed of Partnership and Ex.P.2
Agreement of Sale were executed on the same day, the plaintiff has continued
as partner of the dealership business and was running the business. In other
words, it is the contention of learned counsel for the defendants that the entire
business was all along in the control of the plaintiff and for that purpose only,
the plaintiff had issued cheques for Rs.4.32 crore in favour of the defendants
which was dishonored.
16. The learned counsel for the defendants further contended that legal
notice issued by the plaintiff would itself describe the plaintiff as partner. The
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plaintiff has not explained in his legal notice why he had issued notice in the
capacity of one of the Partners of the firm despite having been claimed to have
sold the dealership business in favour of the defendants. The suit cheques
were issued by the partnership firm in the name of the plaintiff Raj Yamaha.
Hence, it is the contention of the learned counsel that when the plaintiff being
a partner cannot sue against the other partners of the firm. It is his further
contention that the documents produced by the plaintiff would clearly indicate
that invoices were raised by India Yamaha Motors Private Limited, even after
the partnership, the plaintiff continued the business. The payments for notices
have gone from the firm’s account. Hence, it is the contention of the learned
counsel that the suit cheques were not supported by any consideration. In the
mail sent by the plaintiff to the defendants, he had made a claim only to
Rs.2.50 crore and whereas the present suit has been laid for recovery of more
than Rs.4.00 cores which has not been explained. Further, according to the
learned counsel for the defendants, no Income Tax Returns have been filed by
the plaintiff to show that the defendants owe a sum of Rs.4.18 crore and there
is absolutely no evidence on record to show that how the suit claim of
Rs.4.18 crore has been arrived at by the plaintiff. Hence, according to the
learned counsel for the defendants, the defendants have brought out various
circumstances which would make the plaintiff’s case improbable and
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therefore, presumption available under Section 118 of the Negotiable
Instruments Act, 1881 will not apply to the facts of the case. In support of his
contention, the learned counsel relied upon few judgments of the Supreme
Court as well as this court.
Issue Nos.1 and 2:
17. Indisputably the plaintiff was carrying on proprietary business
dealing in Yamaha Model Two-Wheelers sales and service and was running
show-rooms at five different locations in the City of Chennai viz., at Adayar,
Thoraipakkam, Palavakkam, Velachery and Navalur. This fact has not been
disputed by the defendants in their entire written statement.
18. It is the specific case of the plaintiff that he and his wife had decided
to settle with his son in United State of America and therefore, they had
decided to wind up the proprietary business which was run by the plaintiff
and made an advertisement for the sale of the entire proprietorship business.
On such advertisement, the defendants 1 & 2, who are at present the partners
of Raj Yamaha, a Partnership Firm viz., viz., A. Jagadish and Mrs.J.Loga, had
approached him for outright purchase of the entire business for a total sale
consideration of Rs.4.25 crore. In this regard, an agreement was reduced into
writing between the plaintiff and the defendants. The agreement of sale is
Ex.P.2. This fact is also not in dispute.
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19. It is the admitted case of the defendants that a sum of Rs.1.40 crore
was paid by them on 24.05.2018, 08.06.2018 and 15.06.2018 through RTGS
transfer from Axis Bank to the plaintiff’s account towards part of sale
consideration under Ex.P.2 Agreement of Sale. Subsequently, another sum of
Rs.1.25 crore was paid by way of RTGS transfer on 17.08.2018. This fact is
also not in dispute before this court. Thus, admittedly, for the balance sale
consideration of Rs.1.60 crore, the defendants had issued the following four
cheques (i) cheque bearing No.67 2392 for Rs.50.00 lakh drawn on Vijaya
Bank; (ii) cheque bearing No.672393 for Rs.15.00 lakh drawn on Vijaya
Bank; (iii) cheque bearing No.000020 for Rs.50.00 lakh drawn on HDFC
Bank; and(iv) cheque bearing No.000021 for Rs.45.00 lakh drawn on HDFC
Bank.
20. The aforementioned four cheques, which had been issued towards
the remaining sale consideration of Rs.1.60 crore, were not admittedly
encashed and it is the specific case of the defendants that Rs.1.60 crore
payable towards balance sale consideration was paid to the plaintiff in cash
and they got back the original cheques from the plaintiff.
21. It is relevant to note here that no plausible documentary evidence
has been let in by the defendants to substantiate their stand that they had paid
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such a huge sum of Rs.1.60 crore by way of cash to the plaintiff. All the
transactions even prior to and after entering into agreement of sale were made
only through bank. Such being the position, it is highly improbable for the
defendants to contend that Rs.1.60 crore was paid in cash to the plaintiff.
Therefore, the contention of the defendants that they had paid the balance sale
consideration of Rs.1.60 crore to the plaintiff by way of cash cannot be
countenanced in the absence of any material whatsoever to substantiate such
contention.
22. On the other hand, a careful examination of Ex.P.1-Deed of
Partnership and Ex.P.2-Agreement of Sale, which were admitted on either side
makes it clear that though stamp papers were purchased on the same day and
both the deeds were entered into between the parties on the same day, Ex.P.1
Deed of Partnership came into existence between the plaintiff and the
defendants only for the purpose of continuing the business by the defendants
with India Yamaha Motors Private Limited. The very recitals in Ex.P.1-Deed
of Partnership that a separate bank account would be opened in the name of
the firm and such account would be operated on behalf of the firm by the
defendants 1 & 2 who are the partners of the firm would make the intent of
the parties very clear that the plaintiff had no access with the partnership
business taken over by the defendants 1 and 2. Though it has been stated in
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the contract that the plaintiff -Raj Kumar was having 51% of profit and loss in
the business, the intent of the parties could be gathered considering not only
the agreement of sale, but also from the other activities about which reference
would be made at the appropriate place in the latter part of this judgement.
23. If really the plaintiff had retained 51% of shares as indicated under
Ex.P.1-Deed of Partnership, there was no necessity for the plaintiff to hand
over the entire financial transaction to the partners of the firm, viz., the
defendants 1 and 2 herein. Further, the admission of the 1 st defendant (D.W.1)
during cross-examination to a suggestion made under Question No.251 that
the very purpose of execution of Ex.P.1-Deed of Partnership was to transfer
the entire business as a going concern to the defendants’ partnership firm
would make it clear that the business was not continued to be carried on by
the plaintiff.
24. A careful perusal of Ex.P.2-Agreement of Sale coupled with the
admission made by D.W.1, the 1st defendant regarding execution of Ex.P.2-
Deed of Partnership would clearly indicate that on the same day, the parties
viz., the plaintiff on one part and the defendants on the other part have entered
a contract for the sale of entire proprietorship business of the plaintiff for a
total sale consideration of Rs.4.25 crore. As already discussed, the fact that a
sum of Rs.1.25 crore and another sum of Rs.1.40 crore were paid through
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bank on three different dates towards part sale consideration are not in
dispute. Similarly, the fact that for the remaining sale consideration of Rs.1.60
crore, the defendants had issued four cheques, which are now subject matter
in the suit, is also not in dispute.
25. As per Clause 7 of the agreement, the defendants 1 and 2 had to
take stock audit of all the vehicles and spares stocks and pay for them within a
month’s time to the plaintiff separately apart from the mentioned amount. The
above said clause thus makes it categorically clear that apart from sale
consideration, the plaintiff and the defendants had also agreed between
themselves to arrive at an amount for the entire stock and spares, etc.
26. It is the specific contention of the plaintiff that after receipt of part of
sale consideration, since there was a cordial relationship existed between
himself and the defendants 1 and 2, when the defendants 1 and 2 made a
request to him for financial assistance to the tune of Rs.1.20 crore for the
further development of their business, he had advanced the said sum as loan.
In order to establish that he had paid Rs.1.20 crore to the defendants for the
development of their business, and the firm was only under the control of the
defendants 1 & 2, and supplies were made to the defendants’ partnership firm
by India Yamaha Motors Private Limited, the plaintiff has let in cogent
evidence and produced Ex.P.6-Original Bank Statement maintained by him
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with HDFC bank for the period from 01.01.2018 to 31.12.2018. On a careful
perusal of Ex.P.6 it could be seen that an amount to the tune of Rs.1.20 crore
was transferred to India Yamaha Motors Private Limited towards supplies
made on various occasions from the account maintained by the partnership
firm besides transfer of monies to one Dhanam Foundations Private Limited.
The evidence of D.W.1 would indicate the 1st defendant (D.W.1) is also one of
the Directors of Dhanam Foundation Private Limited. Various money
transactions found under Ex.P.6 were not disputed by the defendants.
27. The defence set up by the defendants is that despite Ex.P.2-
Agreement of Sale that the plaintiff was continuing the business as a partner
of the firm and the partnership business was in existence all along. In this
regard it is relevant to note that if the defendants were not really having any
control over the firm and it was only the plaintiff who had been continuing the
business, as a partner of the partnership firm, there was no need for the
defendants to obtain a separate dealer code and GST registration. The specific
admission made by D.W.1, the 1st defendant during cross examination makes
it clear that 1st defendant was dealing with India Yamaha Motors Private
Limited and that all the transactions in respect of transfer of amounts to India
Yamaha Motors Private Limited were made only through bank transactions.
D.W.1, the 1st defendant has also admitted that India Yamaha Motors Private
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Limited is that of their manufacturer. When a specific question was put to
D.W.1 about certain entries found in Ex.P.6 which has been filed on behalf of
the plaintiff to prove the retransfer of amount to the tune of Rs.1.20 crore to
the defendants, that payment of Rs.1.20 crore was made to India Yamaha
Motors Private Limited only at their instance, the 1 st defendant (D.W.1) has
not denied the suggestion but had conveniently chosen to give an evasive
answer that he did not know about those transactions. He, however, admitted
that he had obtained a separate dealer code and GST registration for the
purpose of operation of their partnership business. Ex.P.16 has been
specifically admitted by D.W.1. D.W.1 admitted during cross examination
that until new GST registration and dealer code are obtained separately in the
name of partnership firm, old dealer code in the name of the plaintiff Raj
Kumar was used for certain period. When a specific question was put to
D.W.1, the 1st defendant with regard to payment of Rs.1.20 crore paid back to
them by the plaintiff as loan for the development of their business, D.W.1, the
1st defendant had stated that he did not know about those transactions. The
verbatim of Question Nos.38 & 39 and the answers given to them by D.W.1
are reproduced hereunder:
“Question No.38: Witness is shown Ex.P.6
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bank statement – Out of the said sum of Rs.2.65
crore paid by you as advance, a sum of Rs.1.20 crore
was transferred back by the plaintiff at your instance
as per Ex.P.6 bank statement?
A: I do not know about these transactions.
Question No.39: What was the total amount
that was agreed to be paid by you to the plaintiff for
the sale of the business?
A: Rs.4.25 crore.”
Earlier when it was suggested to D.W.1, the 1 st defendant under Question
No.37 that, was the plaintiff right in saying that a sum of Rs.2.65 crore was
paid by you originally when you wanted to take over the entire business, he
replied in affirmative in sense that he paid the said amount from his personal
account to take over the entire business. Though he claimed to have paid
Rs.4.25 crore, except for payment of Rs.2.65 crore which has been admittedly
paid under the agreement of sale, admittedly, no material evidence what
soever has been produced by the defendants to substantiate their contention
that they had paid the balance sale consideration of Rs.1.60 crore in cash to
the plaintiff.
28. On the other hand, Ex.P.6 which is not in dispute would clearly go
to show that out of total sale consideration received from the defendants, a
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sum of more than Rs.1.20 crore has been retransferred for the business
purposes of the defendants viz., India Yamaha Motors Private Limited and
Dhanam Foundation Private Limited in which the 1st defendant (DW1) was
admittedly one of the Directors. D.W.1 has admitted that he has not adduced
any evidence to show the cash payment of Rs.1.60 crore to the plaintiff. When
a question was put to him under Question No.112 that what was the name
under which the new partnership business with Yamaha India Motors Private
Limited) was being carried on by him, he replied that the new business was
being carried on by him in the name and style “Sky Motors”. The very
question to the effect that, after signing of Ex.P.1 Deed of Partnership and
Ex.P.2 Agreement of Sale, until the new dealer code was alloted, earlier dealer
code in the name of the proprietary concern was used by him for the business,
the 1st defendant (D.W.1) had answered that he never involved in Yamaha
business during that period. Interestingly when it was suggested to him under
Question No.105 that though he claimed to have paid Rs.4.25 crore under the
sale agreement it was not substantiated by him in evidence through
documentary evidence before the court, he had stated that, except for payment
of Rs.1.60 crore, he produced evidence for the remaining amount. Thus, this
piece of evidence would only go to show that there was no evidence adduced
on his side for payment of Rs.1.60 crore.
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29. When it was suggested to D.W.1 under Question No.65 that he had
obtained a separate GST Registration for partnership firm, he admitted that a
separate GST Registration and PAN were obtained for the partnership firm.
Certificate in Form-C has been filed under Ex.D.5. He has further admitted
that principal place of business address was found to have mentioned in the
GST Registration Certificate. He has also admitted that under Ex.P.6, a sum of
Rs.15.00 lakh was transferred to Dhanam Foundations Private Limited
wherein he was one of the Directors.
30. When it was suggested to D.W.1, the 1st defendant under Question
No.79 that he was dealing with Yamaha India Motors Private Limited, he
(D.W.1) admitted the suggestion. Similarly, he has also not denied that
current business account in the name of India Yamaha Motors. He has also
admitted that India Yamaha Motors Private Limited is the manufacturer of the
defendant firm. When a specific suggestion was put to him regarding payment
made under Ex.P.6 to India Yamaha Motors by the plaintiff was only at their
instance, the 1st defendant (D.W.1) did not deny the suggestion, but, he has
simply stated that he did not know about those transactions. To the very
suggestion made to D.W.1 that after the execution of Ex.P.1 and Ex.P.2 since
new dealer code was awaited, the earlier code in the name of the proprietary
concern was used by the defendants for their business was not specifically
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denied by D.W.1. He has also admitted to a suggestion made under Question
No.131 that payments were made from his personal account to India Yamaha
Motors Private Limited. However, when it was further put to D.W.1 that for
what purpose these payments were given to India Yamaha Motors Private
Limited from his personal account, he has stated that since he was good at
handling of cash, his partner-Raj Kumar delivered cash to him and he made
payments to India Yamaha Motors Private Limited on his behalf. Ex.D.13,
original invoices would make it clear that they were raised for the sale of
Yamaha model motor cycles by India Yamaha Motors Private Limited on
14.09.2018 and 28.10.2018 on M/s.Raj Yamaha (12930). Those original
invoices (buyer copies) were produced by the defendants. If the defendants
were not really involved in the business, how originals of supply invoices
could have come into their hands. D.W.1 did not even deny the fact that
though the invoices were raised in the old dealer code, the amounts had been
paid from his personal account maintained with Axis Bank.
31. When a question was put to D.W.1 under Question No.277 that
what was the nature of business that was being carried on by the partnership
firm, he has stated that the firm was dealing in sales and service of multi
brand two wheeler and second hand two-wheeler sales. He has also admitted
Ex.D.11, a statement of account of his personal bank account which would
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reflect various payments made in the name of India Yamaha Motors Private
Limited during September 2018 to December, 2019. He, however, gave an
explanation that he made all those transfers only on behalf of the plaintiff.
32. Considering the cumulative fact of admission by D.W.1, the 1st
defendant, the nature of money transactions from the personal account of
D.W.1, the payment of substantial consideration made by the defendants at
the time of Ex.P.2 Agreement of Sale and only a sum of Rs.1.60 crore was
originally due to be paid towards balance sale consideration, this court finds it
hard to accept contention of the defendants that they never took control of the
business. In fact, various transactions from his own account and the invoices
raised by the manufacturer of two-wheelers on Raj Yamaha, Partnership firm,
money transactions through bank and the evasive reply of D.W.1 during his
cross examination that he did not know about those transactions would only
probabilise the plaintiff’s case that the defendants having agreed to purchase
the entire proprietorship business including the show-rooms located at five
different locations, agreed to pay a sum of Rs.4.18 crore and out of which a
sum of Rs.2.65 crore was already paid under the agreement itself and a sum
of Rs.1.60 crore alone was remaining to be paid.
33. Ex.P.3 (series) is the suit cheques ( 8 Nos.). The signatures on the
cheques are also not disputed by D.W.1. It is a partnership firm. The cheques
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had been issued in the name of Raj Yamaha which is admittedly a proprietary
concern. The proprietary concern is like that of an individual. The evidence as
discussed above would clearly indicate that after having obtained GST
Registration and PAN from the respective departments, the firm has started
carrying on its business with its separate code. Prior to obtaining such
separate dealer code / GST Registration and PAN, the business was continued
in the old GST which was standing in the name of the proprietary concern.
The signatures on the suit cheques were not disputed. Ex.P.2 would itself
indicate that all accounts shall be operated only by D.W.1 and the other
partner, who is none other than his wife. When it was specifically suggested to
D.W.1, the 1st defendant, during his cross examination under Question
No.251, that Ex.P.1 was executed only for the namesake for the purpose of
continuing the business with the manufacturer, he admitted the suggestion.
Similarly, Ex.D.15 E-mail communication from the plaintiff would also clearly
go to show that the value of the vehicle stocks and spares. This was not even
denied by D.W.1 in cross examination under Question No.327. The signatures
in the cheques were not disputed and the only contention of the defendants is
that the cheques were misused by the plaintiff. Another contention of the
defendants is after the defendants lodged police complaint against plaintiff,
after several round of litigation, the plaintiff had arrived at a settlement with
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the defendants and had issued a cheque for Rs.4.32 crore towards repayment
of amount assuring that he would ensure that the cheque would be honoured
on its presentation for collection. However, on presentation of the cheque, it
was dishonoured. In this regard, the evidence of the plaintiff would clearly
explain the circumstances under which that cheque came into possession of
the defendants and how it was misused. In this regard he had also lodged a
complaint. Though it is the contention of the defendants that the plaintiff had
issued a cheque dated 26.01.2019, the evidence of the plaintiff and the
documentary evidence adduced before the court would clearly go to show that
the plaintiff had, in fact, sent that cheque in a consignment and the
consignment was delivered only on 11.03.2019. Ex.P.9 is the consignment slip
with delivery note. Therefore, it is highly improbable to contend that the
plaintiff had issued the cheque dated 26.01.2019. The very writing in the said
cheque was also made by the defendant which was not disputed by D.W.1 in
his cross examination.
34. Further if any such cheque was really issued by the plaintiff and on
presentation of the same for collection, when the cheque was returned as
unpaid / dishonored, the defendants are still entitled to such amount. It would
be the normal conduct of a prudent man either to file a private complaint
against the person who issued such a cheque or to make a claim in the suit as
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counter claim. Admittedly no such counter claim was made by the defendant
in the instant case. Further to show that the defendants had paid cash of
Rs.1.60 core, absolutely, there is no material except the oral evidence of
D.W.1 that he had paid such amount in cash. It is relevant to note that all the
transactions of the defendants were made only by way of bank transfer.
Therefore, it is hard to believe that cash payment of Rs.1.60 crore was made
by the defendants to the plaintiff.
35. Considering all the above evidence, this court is of the view that the
defence set up by the defendants that after Ex.P.2 Agreement of Sale came
into existence, defendants never took possession of the show-rooms of the
plaintiff is highly improbable and this court is unable to accept the contention
of the defendants in this regard particularly, in the light of D.W.1's own
admission and the demeanour of D.W.1 feigning ignorance to certain
transactions made under Ex.P.6 and Ex.D.11. Ex.D.13 Email communication
was also not replied by the defendants wherein the plaintiff had quantified the
liability. It is the contention of the plaintiff that after reworking the defendants
had agreed to pay a sum of Rs.4.18 crore which included the amount received
by the defendants 1 and 2 and the unpaid amount of Rs.1.60 crore and also
vehicle stocks and spares. According to the plaintiff, Rs.4.18 crore was
arrived at as final settlement between himself and the defendants and in this
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regard, cheques were issued by the defendants.
36. The only contention of the defendants that signed blank cheque
leaves kept in the office had been misused by the plaintiff. Except making
such claim, no other material was placed on the side of the defendants.
Signing of the cheques by D.W.1 as a partner was also not disputed and the
fact that figures in the disputed cheques written in the handwriting of the
defendants were also not disputed. Such being the scenario, it is highly
improbable on the part of the defendants to say that cheques had been
misused by the plaintiff. Even in the written statement and in the evidence,
there is no circumstance pleaded and proved under what circumstances eight
signed cheques were left in the partnership firm. No person with ordinary
prudence would do so. It is, therefore, highly improbable to contend that the
1st defendant had kept eight signed blank cheques in his business place and
they were misused by the plaintiff. Thus, this court is of the view that after
having made part payment and issued the suit cheques towards the balance of
sale consideration, the defendants had taken over the control of the entire
business. Thereafter, several money transactions were taken place during
such partnership business from the personal account of the 1 st defendant and
he had also received a sum of Rs.1.20 crore from the plaintiff for the purchase
of motor cycles for his dealership business and also for the other company,
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All these proved facts would only probaiblize that after the payment of part
sale consideration of Rs.2.65 crore, a sum of Rs.1.20 crore was taken back by
the defendants as loan and the remaining sale consideration of Rs.1.60 crore
was also not paid. Under clause 7 of Ex.P.2 Agreement of Sale it was
specifically agreed between the parties to arrive at the value for stock of
vehicles and spares also.
37. Considering all the above, when the eight cheques were issued to the
plaintiff and the same were dishonoured, this court is of the view that the
plaintiff has established his claim. The statutory presumption available under
Section 118 of the Negotiable Instruments Act, 1881, will apply to the suit
cheques. Though the defendants contended that there is no liability due under
the cheque and that the plaintiff had misused the cheques, a perusal of the
entire evidence and the documents adduced before the court, this court is of
the firm view that no circumstances were brought on record to dislodge the
legal presumption available to the negotiable instruments. The only
contention of the defendants that legal notice was sent as a partner by the
plaintiff and therefore, the plaintiff continued to be a partner. In this regard,
this court has carefully perused Ex.P.4 legal notice issued on behalf of the
plaintiff. A mere reference made under Ex.P.4 legal notice describing the
plaintiff as a partner by itself shall not be a decisive factor. It is a mere
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inadvertence in drafting by the counsel who had issued the legal notice and
that will not wipe out the fact pleaded and established before this court.
38. Considering the above, this court is of the view that the plaintiff is
certainly entitled to recover the suit amount due under the dishonoured
cheques. The plaintiff has also established the fact that the plaintiff was a
proprietary concern and the defendants are the partners of Raj Yamaha, a
partnership firm and both are different entities and no connection with each
other except for selling the property by the proprietary concern to the
partnership firm.
39. Though the learned counsel for the defendants in support of his
contention placed much reliance on the judgement in the cases of Managing
Director, Chennai Metropolitan Water Supply and Sewearage Board v.
M.Umar FArooq Hussain [2006 (4) CTC 828] ; Thirumalai Iyengar v.
Subba Raja [AIR 1962 Mad 219] ; and B.Mahadevan v. K.Velmurugan
[2022 SCC OnLine Mad 3931], upon going through the same, this court
with great respect is of the view that the facts in those judgements cannot be
made applicable to the facts of the present case.
40. From the facts narrated and discussed above and from the records,
both oral and documentary, this court is of the view that the defence set up by
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the defendants is nothing but a falsehood and taking advantage of Ex.P.1-
Deed of Partnership which was executed for the name sake in order to
continue the business with the manufacturer, the defendants had taken such a
plea that the plaintiff has not handed over the business to them and continued
to be one of the partners of the firm.
41. Accordingly, both the issues are answered in favour of the plaintiff
and the plaintiff is entitled to a decree as prayed for with interest @ 12% p.a.
and further interest @ 9% p.a. from the date of decree till date of realization in
full and costs of the suit.
In the result, suit is decreed as prayed for with costs. The plaintiff is
entitled to recover a sum of Rs.4,59,50,225/- (Rupees Four Crore Fifty Nine
Lakh Fifty Thousand Two Hundred and Twenty-Five only) together with
interest @ 12% p.a. on the principal sum of Rs.4,18,00,000/- (Rupees Four
Crore and Eighteen Lakh only) from the date of plaint till date of decree and
thereafter with interest @ 9% p.a. from the date of decree till date of
realization in full.
Index : yes / no 30..11..2023
Neutral Citation : yes / no
kmk
https://www.mhc.tn.gov.in/judis
List of witnesses examined on the side of the plaintiff:
P.W.1 - H.Rajkumar (Plaintiff)
List of Witnesses examined on the side of the defendants:
D.W.1 – A.Jagadish (One of the partner of Raj Yamaha)
List of documents marked on the side of the plaintiff:
Ex.P.1 17.07.2018 Photocopy of Unregistered Deed of Partnership
entered into among the plaintiff and the defendants
Ex.P.2 17.08.2018 Photocopy of the Sale Agreement entered into
between the plaintiff and the defendants
Ex.P.3 (series - 8 Dishonored cheques dated 10.10.2018, 15.10.2018
Nos.) and 27.10.2018
Ex.P.4 13.02.2019 Office copy of the Legal Notice issued by the
plaintiff through his Advocate to the defendants
Ex.P.5 18.03.2019 Office copy of the letter
Ex.P.6 - Original Bank Statement with HDFC bank for the
period from 01.01.2018 to 31.12.2018
Ex.P.7 19.11.2018 Photocopy of the Letter of Intent from Yamaha
Motors
Ex.P.8 20.11.2018 Photocopy of the letter from Yamaha Motors
Ex.P.9 06.03.2019 Printout of FedEx shipping consignment along with
delivery note
Ex.P.10 14.03.2019 Printout of Online Complaint registered by the
plaintiff along with status of the complaint issued by
the Tamil Nadu Police Department
Ex.P.11 - Printout of E-mail correspondences between plaintiff
and HDFC Bank regarding stop payment along with
Certificate under Section 65B of Indian Evidence Act
Ex.P.12 18.03.2019 Photocopy of the letter of authorization issued in
favour of Shakti Deeban to file police complaint on
behalf of plaintiff against Jagadish
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Ex.P.13 04.04.2019 Original CSR NO.235/2019 registered against
Jagadish, one of the Partners of the defendant firm
Ex.P.14 04.04.2019 Photocopy of the proceedings under CSR
Ex.P.15 - Printout of Status details in respect of CSR
No.235/2019 issued by Tamil Nadu Police
Department through e-services portal
Ex.P.16 13.12.2018 Photocopy of the letter from D.W.1-A.Jagadish,
Partner, Raj Yamaha to the Branch Manager City
Union Bank, West Tambaram in reply to query
raised by the bank in respect of business transaction
and liability of the plaintiff with the Federal Bank
Ex.P.17 12.04.2023 Notice sent by the counsel for the plaintiff to the
counsel for the defendant calling upon to produce the
statement relating to the Current Account maintained
by the defendants with City Union Bank at
Tambaram West vide A/c No.510909010101189
List of documents marked on the side of the Defendant(s):
Ex.D1 16.03.2022 Notice to produce the documents
Ex.D2 13.04.2022 Notice to produce the documents
Ex.D3 20.08.2018 Minutes of the Meeting of Yamaha Motors
Ex.D4 19.09.2018 Partnership Registration Certificate
Ex.D5 19.10.2018 Form-C Certificate in the name of Raj Yamaha
Ex.D6 - Invoice raise in the name of Raj Yamaha
Ex.D7 21.12.2018 Letter given by the plaintiff to Federal Bank
Ex.D8 - Printout of Statement of Bank Account
Ex.D9 14.03.2019 Photocopy of the cheque return memo
Ex.D10 26.01.2019 Photocopy of the Cheque drawn in the name of
A.Jagadish
Ex.D11 - Attested copy of the bank statement from Axis Bank,
https://www.mhc.tn.gov.in/judis Tambaram Branch for the period from 01.09.2018 to
31.03.2019
Ex.D12 - Attested copy of the bank statement in respect of
Account maintained in the name of Raj Yamaha with
City Union Bank for the period from 11.09.2018 to
31.12.2018
Ex.D13 - Original Tax Invoices and Dispatch Advice issued in
the name of Raj Yamaha for the period from
September, 2018 and October, 2018
Ex.D14 21.11.2018 Original Letter issued by Yamaha Company in
favour of Raj Yamaha
Ex.D15 21.02.2018 Computer generated mail communication between
the plaintiff and the defendant along with Certificate
issued under Section 65B of the Indian Evidence Act
30..11..2023
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N.SATHISH KUMAR.J.,
kmk
Pre Delivery Judgement
in
30..11..2023
https://www.mhc.tn.gov.in/judis
