IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE K.SURENDRA MOHAN WEDNESDAY, THE 4TH NOVEMBER 2009 / 13TH KARTHIKA 1931 AS.No. 170 of 1996() ------------------------------- OS.144/1969 of I ADDL.SUB COURT,ERNAKULAM .................... APPELLANT(S): PLAINTIFF --------------------------- KARUNAKARAN, S/O. MUTTU VELU, 61 YEARS, MULLUR HOUSE, THRIKKANARAVATTOM DESOM, ERNAKULAM VILLAGE. BY ADVS.MR.M.P.RAMNATH MR.ELDHO PAUL, MOHAN I.ABRAHAM RESPONDENT(S): DEFENDANTS 2 AND 4 TO 7 ------------------------ 1. BAHULEYAN, S/O. MULLUR VELU, AGED 79 YEARS, RESIDING AT MULLOOR HOUSE, E.S.I. ROAD, COCHIN 18. *2. JANAKI, W/O. LATE MULLOOR MADHAVAN, RESIDING AT ILLATH PARAMBU, S.R.M.ROAD, COCHIN 18. (DIED) *IT IS RECORDED THAT R2 IS DEAD AND R3 TO R5 ARE HER LEGAL HEIRS VIDE ORDER DTD. 7.3.07 ON MEMO DTD. 1.3.07 CG. 1052/07. 3. MALLIKA, D/O. JANAKI AND LATE MULLOOR MADHAVAN, ILLATH PARAMBU, S.R.M. ROAD, COCHIN 18. 4. M.M.AMBIKA, W./O. A.K.MANI, NOW RESIDING AT ''MADHU MANDIRAM'', NEAR NEDUMBASSERY SCHOOL, NEAR TOSHIBA ANAND JUNCTION P.O. 5. SOMALATHA, S/O. LATE MULLOOR MADHAVAN, AND W/O.VIJAYAN, NAMBIARIPARAMBIL HOUSE, THAIKKATTUKARA, AMBATTUKAVU, ALWAYE. R1 BY ADV. MR.T.V.ANANTH R2 & R3 BY ADV. MR.T.K.KURIKESU THIS APPEAL SUITS HAVING BEEN FINALLY HEARD ON 23/05/2009, THE COURT ON 04/11/2009 DELIVERED THE FOLLOWING: tss K.SURENDRA MOHAN, J. ------------------------------------------- A.S.No.170 of 1996 ------------------------------------------- Dated this the 4th day of November, 2009 JUDGMENT The plaintiff in O.S.No.144 of 1969 is the appellant. He challenges the judgment and decree of the Ist Additional Sub Court, Ernakulam dated 29.4.1995 passed in the said suit dismissing the same. 2. The suit was filed for the specific performance of an agreement dated 24.11.1960 executed by the second defendant in favour of the plaintiff and his mother who is the third defendant agreeing to sell three items of properties to them. The plaintiff and the second defendant are brothers. The third defendant is their mother. They had another brother Madhavan, who died on 26.10.1960. The fourth defendant is the wife of deceased Madhavan and defendants 5 to 7 are his children. A.S.No.170 of 1996 2 3. Madhavan and the second defendant were conducting a partnership business by name 'Trustful Banking Company'. The firm was started in Midhunam, 1122 M.E. It flourished for some time with branches at various places. Subsequently the firm ran into financial difficulties. On 26.10.1960, Madhavan died. Thereupon, the firm got dissolved. After the death of Madhavan, the second defendant was managing the affairs of the firm and discharging its liabilities. 4. In the above circumstances, on 24.11.1960, the third defendant - mother executed a sale deed in respect of her self acquired property and sold the same for a consideration of Rs.17,700/-. The amount so received was entrusted to the second defendant for discharging the liabilities of the dissolved partnership firm. On the very same day, an agreement was executed by the second defendant A.S.No.170 of 1996 3 in favour of the third defendant and the plaintiff agreeing to sell three items of properties belonging to the partnership firm to the plaintiff. The consideration for each item of property was also specified. It is the contention of the plaintiff that he had agreed to the execution of the sale deed by the mother and utilization of the sale consideration for discharge of the debts of the partnership firm because the second defendant had executed an agreement for sale of three items of property that belonged to the partnership firm in their favour. According to him, the prior title deeds of the properties were also entrusted to him. But, the execution of the sale deed has not taken place. In the meanwhile an extent of 10 cents of property covered by the agreement was assigned to a stranger for a consideration of Rs.1,000/- on 20.11.1963. The second defendant extended the A.S.No.170 of 1996 4 term of the agreement for one year and there is also an endorsement to the said effect on the agreement. He also agreed to pay to the plaintiff the amount of Rs.1,000/- received by him as consideration for the sale of the extent of 10 cents sold by him to a stranger during the currency of the agreement. However, the sale deed was not executed even during the extended period of time and therefore, the term of the agreement was extended again for a further period of two years and an endorsement to the said effect was also made by the second defendant on the agreement on 18.11.1964. Though several demands were made by the plaintiff for execution of the agreement, the second defendant did not execute the sale deed. 5. In the above circumstances, the wife and children of deceased Madhavan instituted a suit, O.S.No.97 of 1963 before the Sub Court, Ernakulam, A.S.No.170 of 1996 5 claiming half share in the assets of the partnership firm. The first defendant was appointed as a Receiver for the properties in the said suit. Therefore, the first defendant was bound to execute the sale deed in terms of the agreement, it was contended. A petition was filed in O.S.No.97 of 1963 seeking a direction from the court to the Receiver to execute the sale deed. But, the court directed the plaintiff to seek reliefs in a separate suit. Sanction was also accorded to implead the Receiver in the said suit. Therefore, the plaintiff filed the present suit for specific performance of the agreement dated 24.11.1960. An alternative prayer for recovery of an amount of Rs.17,700/- with interest thereon at the rate of 6% per annum from the date of the agreement till the date of realization also was prayed for. A.S.No.170 of 1996 6 6. Defendants 2 and 3 have filed separate written statements admitting the plaint claim. The second defendant has further averred that the plaintiff had issued a registered notice to him on 7.10.1963 calling upon him to execute the sale deed in terms of the agreement dated 24.11.1960. However, he was not able to discharge the encumbrances on the property or to evict the tenants who were occupying the same. Later, the term of the agreement for sale was extended. 7. The suit was contested by defendants 4 and 5 who contended that the suit was filed with ulterior motive, to snatch their share in the properties of the partnership firm, to which they were legitimately entitled to succeed in their capacity as the legal heirs of deceased Madhavan. The suit, according to them was filed by the two brothers and the mother of deceased Madhavan in collusion with each other for A.S.No.170 of 1996 7 the purpose of depriving the wife and children of Madhavan of their property. According to them, late Madhavan and the second defendant had started business in the name and style “Trustful Daily Banking Company”. They were conducting kuris, loan advances, security etc. with their Head Office at Ernakulam. The business was running in profit and the firm had a number of branches spread over the erstwhile Travancore and the Malabar areas. Even during the life time of Madhavan, the second defendant was managing the affairs of the firm on the strength of a power of attorney. After the demise of Madhavan, the only object of the second defendant was to make personal gains. The widow and children of Madhavan were not capable of running the business. They also did not have the support or assistance of any of the relatives. The parents and the other brothers of Madhavan were all A.S.No.170 of 1996 8 supporting the second defendant since they were all his dependents. Madhavan died before settling the partnership accounts of the second defendant. It is alleged that the second defendant had committed fraud by not accounting for the collections received from the bank, by not discharging the debts due to creditors and by acquiring properties at auctions through bids in the names of near relatives. After the death of Madhavan, the fourth defendant demanded her share in the business. However, the second defendant was not willing to give her share and therefore an advocate's notice was issued. This annoyed the second defendant and instead of settling the matter, he intensified his fraudulent activities. 8. In the above circumstances, defendants 4 to 7 filed O.S.No.97 of 1963 before the Sub Court, Ernakulam on 18.9.1963 for settlement of accounts. This further annoyed the second defendant and he A.S.No.170 of 1996 9 started obtaining decrees against the partnership firm in benami names. The agreement referred to in the plaint is one of the fraudulent attempts made by the defendant in collusion with the plaintiff and the third defendant to deprive the legal heirs of deceased Madhavan of their legitimate rights. In O.S.No.97 of 1963, the court appointed the first defendant as Receiver on 22.2.1966 for managing the properties of the partnership firm. The Receiver was allowed to dispose of the plaint schedule item No.2 property situate in Amballur as per order dated 2.8.1967. 9. In the meanwhile, the plaintiff filed a petition in that suit as I.A.No.368 of 1967 alleging that the second defendant had agreed to sell the property to him. The petition was dismissed by the court. The Advocate Commissioner in O.S.No.97 of 1963 made an honest effort to dispose of the properties in order to clear the liabilities of the firm. He also published a A.S.No.170 of 1996 10 notice in the Mathrubhumi daily dated 9.1.1970. The plaintiff immediately filed the present suit and obtained an order of injunction against such sale. They denied the averment that the second defendant as the surviving partner of the partnership firm had made efforts for clearing the liabilities of the firm. His intention was only to take away the properties of the firm in order to make unlawful gain. They denied that the amount of Rs.17,700/- was received from the third defendant for clearing the debts of the partnership firm. The plaintiff was only a stooge in the hands of the second defendant. The plaintiff who is the younger brother of the second defendant and the third defendant who is his mother are depending on him for their maintenance. The reason stated in the agreement for the renewal thereof is not true. After the dissolution of the partnership firm following the death of Madhavan, the second defendant had no A.S.No.170 of 1996 11 independent right to enter into such an agreement. Therefore, they prayed for the dismissal of the suit. The first defendant, Advocate Receiver filed a written statement contending that the suit was instituted in collusion with the second and third defendants in order to defeat the interests of defendants 4 to 7. 10. Initially, the suit was decreed ex-parte, but the said decree was later set aside as per order in CMP No.2 of 1983 and an opportunity was given to defendants 4 to 7 to contest the suit. After filing of the written statement by defendants 4 to 7, an additional issue was raised. Thereafter, the suit was decreed by judgment dated 11.10.1988. A.S.No.141 of 1990 filed before this Court against the said judgment was allowed and the judgment and decree of the court below were set aside. Thereafter, the case was remanded for fresh disposal in accordance with law, untrammelled by the observations in the A.S.No.170 of 1996 12 appellate judgment. There was also a direction to dispose of the matter expeditiously. Both sides adduced evidence after the remand. 11. The court below had initially framed four issues. Subsequently an additional issue had also been raised. Since the issues were already raised, the court below did not raise any further issues after the remand. Therefore, after the additional evidence was over, the matter was heard. The evidence in the case consists of the documentary evidence Exts.A1 to A13 and Exts.B1 to B9 besides, the oral evidence of the plaintiff as PW1 and those of DWs.1 to 5. 12. On a careful consideration of the evidence on record and the pleadings of the parties, the court below came to the conclusion that the agreement Ext.A2 was not executed in connection with the winding up of the firm and that the same was not A.S.No.170 of 1996 13 capable of being specifically enforced. Therefore, the suit was dismissed with costs. This appeal is filed against the said judgment and decree. 13. According to the counsel for the appellant, the court below has seriously erred in dismissing the suit. According to him, there is nothing on record to show that Ext.A2 was a collusive agreement. The counsel points out that Exts.A1 and A2 are documents executed as part of the efforts of the mother and brother of deceased Madhavan to clear off the liabilities of the partnership firm, somehow or the other, after the untimely death of Madhavan. Since an item of property that belonged exclusively to the third defendant was sold as per Ext.A1 sale deed and the sale proceeds thereof were utilized for liquidating the liabilities of the partnership firm, the third defendant had to be suitably compensated for the loss of her property. Therefore, there is nothing A.S.No.170 of 1996 14 wrong in an agreement like Ext.A2, being executed in favour of the plaintiff who is the younger son of the third defendant, it is contended. It is further pointed out that the consideration received as per Ext.A1 was brought into the funds of the firm, as evidenced by the cash book Ext.A6, day book Ext.A7 and ledger Ext.A8. Since there is evidence to show that the sale consideration obtained as per Ext.A1 sale deed had been used for the benefit of the partnership firm, Ext.A1 agreement was perfectly valid and enforceable. However, before the second defendant could execute the sale deed in accordance with the terms of Ext.A2 agreement, defendants 4 to 7 filed O.S.No.97 of 1963 and the first defendant was put in possession of the properties involved. It can be seen from prayer A in the said suit, which has been marked as Ext.B4 that, the prayer was for obtaining half share in the assets of the firm remaining after A.S.No.170 of 1996 15 paying off all the debts. Therefore, defendants 4 to 7 are entitled to claim a share only in the amounts remaining after clearing all liabilities including the liability under Ext.A2 agreement. Reliance is placed on Section 47 of the Partnership Act, 1932 to contend for the proposition that the surviving partner or partners had the authority to clear off all the debts of the firm and to complete the process of winding up. It is alleged that defendants 4 to 7 have not taken any steps for the passing of the final decree in O.S.No.97 of 1963. Though a preliminary decree has been passed on 30.7.1966 as evidenced by Exts.B7 and B8, it is also submitted that as per Ext.A13 defendants 4 to 7 have already sold their undivided rights in favour of one Krishnan. Therefore, the appellant is in a situation where he would not be able to get any relief even if he succeeds in the appeal. The contentions of the A.S.No.170 of 1996 16 appellants are refuted by the counsel for the respondents. It is pointed out that the second defendant had no authority whatsoever to deal with the properties of the partnership firm after the death of Madhavan without the concurrence of his legal heirs. Therefore, they pray for dismissal of the appeal. 15. I have heard the counsel for the contesting parties. I have also gone through the records of the case. 16. The question that arises for consideration in the above appeal is “Whether Ext.A2 agreement is capable of being specifically enforced?” 17. It is an admitted fact that late Madhavan and the second defendant were partners conducting a business under the name and style, “Trustful Daily Banking Company”. It is also admitted that though the firm flourished for sometime, it fell into bad days A.S.No.170 of 1996 17 and had incurred liabilities. It is also an admitted fact that Madhavan had died on 26.10.1960. On the death of Madhavan, the partnership got dissolved leaving the second defendant as the sole surviving partner. 18. Ext.A1 sale deed executed by the third defendant-mother in favour of one Dr.Krishnakumar is dated 24.11.1960. However, the said document refers to an agreement for sale dated 21.10.1960 that preceded the sale deed. At the time of execution of the said agreement for sale, it is pointed out that Madhavan was alive and that he died five days thereafter. The case is that the property had been agreed to be sold on the specific agreement that the properties of the firm would be conveyed to the plaintiff. However, it is to be noted that on the above aspect, there is no independent evidence on record. Ext.A1 sale deed does not contain any recital A.S.No.170 of 1996 18 to the effect that the said sale was for the benefit of the partnership firm. Though Exts.A6 to A8 are pressed into service to contend that the amount representing the sale consideration in Ext.A1 sale deed had been brought into the books of accounts of the partnership firm, much reliance cannot be placed on the said documents for the reason that they are documents maintained by the second defendant himself. Even if it is presumed that the amount received as sale consideration in Ext.A1 was given to the second defendant by his mother, it cannot be presumed that the said amount was given on the specific understanding that the properties of the firm would be transferred to the plaintiff and the third defendant later. 19. Ext.A2 agreement for sale is executed on the same day as Ext.A1. As per Ext.A2, the second defendant is seen to have agreed to transfer three A.S.No.170 of 1996 19 items of properties belonging to the partnership firm to the plaintiff and the third defendant who are his mother and younger brother. It is worth noticing that the persons who stand to lose in the above arrangement are defendants 4 to 7, the wife and children of deceased Madhavan. The contention of defendants 4 to 7 that Ext.A2 agreement was only a subsequent creation to defeat their rights in the property assumes importance in the above context. An examination of Ext.A2 agreement shows that it is executed on plain sheets of paper and not on stamp paper. Therefore the possibility that it could have been created at any time by the parties thereto who are all close relatives, cannot be ruled out. As rightly noticed by the court below, defendants 4 to 7, who are the legal representatives of deceased Madhavan, had not joined Ext.A2 as parties. As already noted above, there is no evidence on record to show that A.S.No.170 of 1996 20 Madhavan had agreed to the above arrangement, before his death. 20. The contention of the plaintiff that he had consented to the execution of Ext.A1 sale deed only on the understanding that the properties of the partnership firm would be transferred to him is without substance and has been rightly held to be so by the court below. Since the third defendant- mother who was the absolute owner of the property covered by Ext.A1, did not require the consent of the plaintiff to sell her property to anyone, even if it is assumed that the sale consideration of Ext.A1 was utilized for discharging the debts of the firm, there is nothing to show that the said utilization was intended to confer any benefit on the plaintiff. 21. Though the agreement Ext.A2 is dated 24.11.1960, it is an admitted fact that a sale deed pursuant to the agreement was not executed by the A.S.No.170 of 1996 21 second defendant at any time. The reason given by him for not executing the sale deed is that, he was not able to discharge the liabilities on the property or to evict the tenants occupying the same. The reason is not at all convincing. First of all, there is no evidence to show that there was any encumbrance over the property covered by Ext.A2. Secondly, as rightly noticed by the court below, the second defendant has sold an extent of 10 cents out of the properties covered by Ext.A2 to a stranger for a consideration of Rs.1,000/-. Further, the term of Ext.A2 agreement has been extended twice by the second defendant, as per the endorsements contained therein. The first extension is dated 20.11.1963, which is after the sale of an extent of 10 cents out of the properties to a stranger. If the property could be sold to a stranger even before the agreement was extended, one fails to understand A.S.No.170 of 1996 22 why the sale deed in favour of the plaintiff could not have been executed. The conduct of the parties therefore clearly show that there was absolutely no impediment in executing a sale deed as stipulated in Ext.A2 agreement. It is further worth noticing that no particular time-limit is stipulated in Ext.A2. Therefore, there was no reason for making the endorsements in Ext.A1 extending the term of the agreement. Obviously, such endorsements have been made to lend credibility to the document. Though it is averred that several demands were made to the second defendant to execute the sale deed to which he had not responded, there is no convincing explanation for the conduct of the second defendant in not executing the sale deed. 22. It is interesting to note that O.S.No.97 of 1963 was filed by defendants 4 to 7 on 18.9.1963. The date of the first extension is 20.11.1963 after A.S.No.170 of 1996 23 the date of the said suit. In the suit, the first defendant was appointed as the Advocate Receiver and therefore the plaintiff is alleged to have filed a petition, I.A.No.368 of 1967 stating that the second defendant had agreed to sell the property to him. However, the said petition was dismissed and later on he filed the present suit. Though the Receiver had initiated action for selling the properties, he could not do so because of an order of injunction obtained by the plaintiff in the above suit. The conduct of the plaintiff is also wanting on many counts. Though Ext.A2 agreement is seen to have been executed on 24.11.1960, there is no evidence or material to show that he did anything to enforce the agreement. It is true that he had filed I.A.No.368 of 1967, as stated above. Meanwhile, the term of the agreement had been extended twice, the last extension being on 18.11.1964 for a period of two A.S.No.170 of 1996 24 years. The said two year period also expired on 18.11.1966. I.A.No.368 of 1967 is filed long after even the expiry of the extended term. No explanation is available as to why he waited for such a long time. In the context of the conduct of the parties, the allegation of defendants 4 to 7 assumes prominence. According to them, Ext.A2 was created only much later, after they filed O.S.No.97 of 1963, with the object of somehow defeating their claim. The plaintiff has no explanation as to why he had waited for such a long period of time. He has also no convincing explanation for the extension of the agreement on two occasions. Though it was not called for as per the terms of the agreement, he has no explanation why 10 cents out of an item of the property covered by the agreement was sold and he has also no explanation why he waited for filing I.A.No.368 of 1967 till 1967. At any rate, the A.S.No.170 of 1996 25 conduct of the plaintiff certainly disentitles him from seeking specific performance of Ext.A2 agreement. 23. It is contended by the counsel for the appellant that the second defendant had been acting in exercise of his rights under Section 47 of the Partnership Act for the purpose of winding up the affairs of the firm. The above discussion clearly shows that Ext.A2 was not executed in exercise of his right to initiate steps for winding up the affairs of the firm. As found above, Ext.A2 has been executed with the object of depriving the