THE HON'BLE SRI JUSTICE A.GOPAL REDDY and THE HON'BLE MR JUSTICE B.CHANDRA KUMAR L.P.A.Nos.122, 129 and 174 of 2000 and Cross-Objections (SR) No.42746 of 2000 COMMON JUDGMENT (per the Hon’ble Sri Justice A.Gopal Reddy): All these intra-Court appeals and Cross Objections have been preferred under Clause 15 of the Letters Patent against the common judgment and decree, dated 13.12.1999, passed by the learned Single Judge of this Court in A.S.Nos.372 and 1250 of 1987 and Tr.A.S.No.1635 of 1988, whereby he allowed the appeals by decreeing O.S.No.68 of 1979 and dismissing O.S.Nos.75 and 74 of 1979. For the sake of convenience, the parties hereinafter will be referred to as arrayed in O.S.No.75 of 1978. The brief facts, which are necessary for the disposal of the present appeals, are as under: The plaintiff-firm, which is the appellant herein, filed O.S.No.75 of 1978 on the file of the Subordinate Judge, at Vizianagaram for recovery of a sum of Rs.1,42,735/- said to be the balance amount due from the defendants as per the statement of accounts filed along with the plaint, and also for the sale of 713 bags of Khandasari sugar for realization of the amount due to it. The first defendant is a firm and it is carrying on the manufacture of Khandasari Sugar in its factory at Garugubilli and defendants 2 to 6 are its partners, while defendants 3 to 5 are the sons, defendant No.6 is the daughter and defendant No.7 is the son-in-law of defendant No.2. According to the plaintiff, defendant Nos.2 and 7 approached it and requested to allow them to store Khandasari sugar bags in its godown situated at Parapathi Street, Vizianagaram, and they would pay godown charges @ Rs.0.12 ps per bag per month. They also requested the plaintiff to advance loans to them on security of the said Khandasari sugar bags being stored with it and for the loan amount, they would pay interest @3% per annum. It was agreed between the plaintiff and the defendants that if the security given by the defendants in the form of Khandasari sugar bags becomes insufficient for the amounts advanced and if they fail to make sufficient security for paying the difference amount, the plaintiff would be entitled to sell the Khandasari sugar bags and apply the sale proceeds towards the loan amount due to it. Both the parties agreed for the aforesaid terms and accordingly, entered into lease agreement on 07.02.1978 under Ex.B.1. On 27.02.1978, the defendants stored 240 bags of Khandasari sugar in the plaintiff’s godown and borrowed an amount of Rs.48,999/-; that on 06.03.1978, they stored 135 bags and borrowed Rs.27,000/-; that on 10.03.1978, they obtained a loan of Rs.27,000/- on the security of 135 bags and that on 16.03.1978 they obtained a loan of Rs.27,000/- on the security of 135 bags. It was the claim of the plaintiff that some of those amounts were borrowed by defendant No.7, son-in-law of defendant No.2, as an agent of the first defendant firm. The plaintiff gave a notice to the defendants on 28.10.1978 stating that the pledged Khandasari sugar bags would be sold on 05.11.1978 for realization of the amount advanced by them and for other dues. At that stage, defendants 1 to 3 filed O.S.No.144 of 1978 on the file of the Sub-Court, Parvathipuram, which was subsequently transferred to the Court of the Subordinate Judge, Vizianagaram and was renumbered as O.S.No.68 of 1979, in which they have obtained injunction order on 26.10.1978 against the plaintiff from selling the Khandasari sugar bags on 05.11.1978, which fact has not been disclosed by the plaintiff in the plaint filed by it. On the strength of the injunction orders granted in their favour in O.S.No.144/1978, the defendants have removed 713 bags of Khandasari sugar bags from the plaintiff’s godown and thereafter, removed another 150 bags. Hence, the plaintiff gave a report to the Inspector of Police, Vizianagaram, who in turn registered a case, recovered the Khandasari sugar bags from the possession of the defendants and produced the same before the Judicial Magistrate of First Class, Vizianagaram on 03.11.1978. The learned Magistrate directed the police to keep the said sugar bags in their custody. At that stage, the plaintiff filed O.S.No.75 of 1978 for recovery of Rs.1,42,735/- and obtained an order of interim injunction on 04.11.1978 in I.A.No.655 of 1978 attaching 778 bags of sugar. The plaintiff then moved this Court by filing Receive and Transmit Petition in C.M.P.No.58 of 1979, wherein this Court on 03.01.1979 directed the Circle Inspector of Police, Vizianagaram to release 713 bags of Khandasari sugar in favour of the plaintiff upon furnishing guarantee to an extent of Rs.75,000/-. Having obtained the said order, the plaintiff proceeded to sell the Khandasari sugar bags. On coming to know about the said orders, defendants 1 to 3 moved this Court in C.M.P.No.1035 of 1979 stating that they had obtained injunction order in O.S.No.144 of 1978 on the file of the Sub-Court, Parvathipuram against the plaintiff and that suppressing the same, the plaintiff obtained an order for release of sugar bags from this Court on 03.01.1979 and this Court set aside the order, dated 03.01.1979 and directed the plaintiff to deposit Rs.50,000/- within six weeks to the credit of I.A.No.655 of 1978 in O.S.No.75 of 1978 and further directed that the Bank Guarantee of Rs.90,000/-, which has already been given to the satisfaction of the Circle Inspector of Police, Vizianagaram, shall be transferred in the name of Sub-Judge, Vizianagaram. While the matter stood thus, the Proprietor of the plaintiff in his individual capacity filed O.S.No.74 of 1979 seeking recovery of the amounts on the same set of facts and almost on the same cause of action. In O.S.No.144 of 1978, which was filed by defendants 1 to 3 and was renumbered as O.S.No.68 of 1979, it was stated that the first defendant requested the plaintiff to advance Rs.48,000/- and also to give the godown on lease for storing Khandasari sugar bags. The Proprietor of the first defendant on behalf of himself and the firm agreed to do so on 17.02.1978 and a lease deed to that effect was executed under Ex.B.1. According to the agreement, the rent was fixed at Rs.0.12 ps per bag per month. In pursuance of the lease agreement, the defendants started sending Khandasari sugar bags from 18.02.1978 onwards to the plaintiff’s godown. The first defendant requested the plaintiff to pay the lorry charges to the drivers and deduct the said amount from the loan amount, which it promised to advance to them. Defendants 1 to 3 sent the cheques under Exs.A.42 to A.47 and they admitted about the receipt of certain amounts under Exs.A.46 and A.47. On 29.07.1978, defendants 1 to 3 sent a draft for Rs.45,000/- and also paid cash of Rs.17,000/- to the plaintiff. On 24.09.1978, defendants 1 to 3 again sent a draft for Rs.6,000/- and also cash of Rs.15,000/- to the plaintiff and thereby discharged the loan amount and they admitted that some amount is still due. While the matter stood thus, when defendants 1 to 3 wanted to remove the stock for sending the same to Jaipur for sale, the plaintiff prevented them from doing so alleging that they still owes certain amounts to it and unless that amounts were paid, it will not allow them from removing the stock from the godown. Therefore, defendants 1 to 3 filed the above suit and obtained an order of injunction. In view of the similarity of the parties and the questions involved, though the issues have been framed separately in all these three suits, they were clubbed and tried together by recording the evidence in O.S.No.75 of 1978. In O.S.No.75 of 1978, defendants 1 to 3 filed written statements reiterating the averments made by them in O.S.No.68 of 1978. According to the plaintiff, the defendants stored 1088 Khandasari Sugar bags in its godown and borrowed an amount of Rs.1,42,735/- in various sums at different points of time. The entire dispute is with regard to the amounts allegedly lent to the first defendant firm through cheques issued on 10.03.1978, 26.03.1978 and 09.04.1978, which were acknowledged by defendant No.7 on behalf of the first defendant firm. On behalf of the plaintiff, the Managing Partner of the plaintiff-firm viz., P.Appaiah examined himself as P.W.1 and also examined P.Ws.2 to 7 and got marked Exs.A.1 to A.48. On behalf of the defendants, the third defendant examined himself as D.W.1 and further examined D.Ws.2 to 4 and got marked Exs.B.1 to B.45 and Exs.X.1 to X.13. The learned Trial Judge, considering the entire evidence available on record, held that defendant No.7 acted as Manager of the first defendant firm; that he transacted with the plaintiff on behalf of defendants 1 to 6 and he never acted in his individual capacity while transacting business with the plaintiff; that the defendants borrowed money from the plaintiff from time to time on security of Khandasari sugar bags deposited by them with the plaintiff; that all the transactions alleged to have been taken place between the plaintiff and the defendants were true and that defendant No.7 did act as the agent of the first defendant firm and his acts do bind the first defendant, and therefore, whatever cash is borrowed by defendant No.7 was on behalf of the first defendant and the same is payable by the first defendant firm to the plaintiff, whether it is defendant No.2, defendant No.3 or any other partner or defendant No.7 as Manager of the firm transacted with the plaintiff and borrowed money having deposited sugar bags as security. The learned Trial Judge further held that when the security is insufficient, the plaintiff can as well dispose of the Khandasari sugar bags to make good the deficiency as per the terms and that since the acts of the agent binds the principal, defendant No.7 being the agent of the first defendant is liable to pay the amounts due to the plaintiff, and accordingly, decreed O.S.Nos.75 of 1978 and 74 of 1979 and dismissed O.S.No.68 of 1979 holding that the plaintiff is entitled to recover the suit amount from the defendants. Aggrieved by the same, defendants 1 to 6 filed A.S.No.372 of 1987 and Tr.A.S.No.1635 of 1988, and defendants 1 to 3 filed A.S.No.1250 of 1987. A learned Single Judge of this Court, by common order, dated 13.12.1999, held that it is the specific case of the plaintiff that defendant No.7, who is the Manager of the first defendant firm, acted on behalf of the firm, and accordingly amounts were paid on the security of the Khandasari sugar bags and there was acknowledgment by him; that no doubt, defendant No.6, who is a partner of defendant No.1-firm, is none other than the daughter of defendant No.2 and defendant No.7 is her husband; that the cheques issued in the name of defendant No.7 in respect of the amounts alleged to have been paid to the first defendant firm through defendant No.7 were acknowledged by defendant No.7 on the letter heads of the firm and the correspondence in this regard was also marked in Exs.A.3, 5, 9, 10, 14,19, 21 to 26; that no doubt the said letters were on the letter heads of the first defendant firm and defendant No.7 has signed on them describing himself as the Manager of the firm; that except the self serving letters signed by defendant No.7, there is no other material or evidence forthcoming from the plaintiff's side to show that defendant No.1 firm has at any time acknowledged defendant No.7 as its Manager; that merely because the letters are issued on the letter heads of the first defendant firm, it does not go to show that defendant No.7 is in any way connected with defendant No.1 firm, and therefore, the amounts paid on 10.03.1978, 22.03.1978, 26.03.1978 and 09.04.1978 were through cheques in the name of defendant No.7, who acknowledged the same; that there is no proper explanation for issuing the cheques in question directly in the name of defendant No.7; that when the earlier amounts were paid by the plaintiff to the first defendant firm by way of cheques and in the absence of any confirmation or acknowledgment later on by the first defendant firm, one cannot rule out the possible collusion between the plaintiff and defendant No.7; that curiously, no attempt was made to summon and examine defendant No.7, who remained ex parte and that in the absence of any authority or agency, the first defendant firm cannot be mulcted with liability for the action of defendant No.7 and it will not be answerable for any such amount and defendant No.7 having received the amount would prima facie be liable for the suit claim personally, and accordingly allowed the appeals. Questioning the same, the present L.P.As and Cross-Objections have been filed. Sri C.Subba Rao, learned counsel appearing for the appellant strenuously reiterated the very same arguments, which were not accepted by the learned Single Judge. He contended that defendant No.7 is none other than the son-in-law of defendant No.2 and husband of defendant No.6, who is also a partner of the first defendant firm, and in the absence of any enmity or misunderstandings between defendants 1 to 6 and defendant No.7, and since defendant No.7 was maintaining good relationship with the other defendants, the question of doubting his authority does not arise. He also contended that defendant Nos.2 and 7 obtained the godown of the plaintiff-firm on lease under the lease agreement dated 17.02.1978 to store Khandasari sugar bags in it. Thereafter, they borrowed money from the plaintiff on the security of sugar bags stored in its godown. It is implied that defendant No.7 acted as a Manager of the first defendant firm and used to execute the letters in favour of the plaintiff as Manager of the firm and took loans sometimes in the name of the first defendant and some times on his name, but acting on behalf of the first defendant. In view of the same, the lower Court after appreciating the entire evidence available on record rightly held that the transactions between the plaintiff firm and the defendants are true, and that defendant No.7 did act as the agent of the first defendant firm and his acts do bind the first defendant firm, whatever cash is borrowed by defendant No.7 on behalf of the first defendant is payable by the first defendant-firm to the plaintiff, but, the learned Single Judge of this Court reversed the said findings only on the ground that the plaintiff failed to show any authorization that defendant No.7 received the amounts on behalf of the first defendant firm. He further contended that even the plaintiff is not entitled to decree against defendants 1 to 3, it is entitled to decree against defendant No.7, but the learned Single Judge of this Court though held that defendant No.7 had received the amounts, he is not liable for the suit claim personally, and dismissed the suits filed by the plaintiff. He lastly contended that once the transaction is established, the plaintiff cannot be called upon to establish the agency. On the other hand, Sri K.Pratap Reddy, learned Senior Counsel appearing for the respondents/defendants 1 to 3 contended that the plaintiff highhandedly seized the Khandasari sugar bags, which were taken possession by defendants 1 to 3, pursuant to the orders passed by the Court below in O.S.No.68 of 1987 and the plaintiff failed to establish authorization of defendant No.7 to receive the loan amount on behalf of the first defendant firm. He also contended that the learned Single Judge also gave a finding that the possibility of collusion between the plaintiff and defendant No.7 cannot be ruled out, and once the amounts to which the suit claim pertains to were paid in the name of defendant No.7 and were acknowledged, it is for the plaintiff to establish that defendant No.7 was acting on behalf of the first defendant-firm. In the absence of any authority or agency, the first defendant firm cannot be mulcted with such liability for the action of defendant No.7 and it will not be answerable for any such amount. He further contended that defendants 1 to 3 have not disputed about the receipt of amounts and they mentioned the amounts and obtained an injunction order in O.S.No.68 of 1979, but the plaintiff filed O.S.No.75 of 1978 suppressing the said fact. In the absence of any foundation laid for establishing the agency whatsoever in favour of defendant No.7, it can be inferred that defendant No.7 apparently colluded with the plaintiff and assisted it in filing the counter suit against defendants 1 to 3 and remained ex parte therein. In view of the same, the judgment under appeals does not call for any interference. From the above rival submissions, it is for the plaintiff to establish that defendant No.7 was authorized on behalf of the first defendant firm for receiving the amounts on storing Khandasari sugar bags in its godown. It is not in dispute that the first defendant is a firm engaged in manufacturing of Khandasari sugar at Garugubilli and the plaintiff, which is also a firm, leased out its godown to the first defendant under Ex.B.1, dated 17.02.1978, for storing Khandasari sugar bags on payment of monthly rent @ Rs.0.12 ps per bag. It is also not in dispute that the plaintiff advanced certain amounts to the defendants on the security of sugar bags lying in its godown. However, the dispute is only with regard to the amounts, which were paid in the name of defendant No.7, who acknowledged the same. According to the plaintiff, defendant No.7 received the amounts as an agent of the first defendant firm. It is also pleaded that defendant No.7 is the Manager of the first defendant-firm and that it is defendants 2 and 7, who approached the plaintiff for the purpose of storing the Khandasari sugar bags and borrowed the amounts on security of the said sugar bags stored in its godown. It is the specific case of the plaintiff that defendant No.7 is the Manager of the first defendant firm and he was acting on behalf of the firm and accordingly amounts were paid on the security of the Khandasari sugar bags some times in the name of the first defendant-firm and some times in the name of defendant No.7. Admittedly, defendants 1 to 3 filed O.S.No.68 of 1979 admitting receipt of certain amounts and complaining wrongful withholding of Khandasari sugar bags by the plaintiff in its godown and sought for permanent injunction restraining the plaintiff from interfering with their right from removing 883 sugar bags, and pursuant to the injunction order, they removed 713 sugar bags and 150 bags subsequently from the godown, which were seized by the police on the basis of the complaint given by the plaintiff. Therefore, it is for the plaintiff to establish the so-called agency. But it is pleaded that defendant No.7 is the Manager of the first defendant-firm, but no evidence was let in by the plaintiff showing that defendant No.7 is an agent of the first defendant-firm. Unless the same is established, it cannot be said that the acts of defendant No.7 bind the first defendant firm. Ex.B.1 also does not reflect the transaction sought to be focused by the plaintiff in any manner that defendant No.7 is a party to the said lease agreement. The learned Single Judge of this Court, after thoroughly examining the entire evidence available on record, concluded that there is no material to show that the first defendant-firm was made aware as to the fact that defendant No.7 was canvassing as a Manager of the firm or there is evidence to show that the disputed cheques were deposited into the account of the firm. It cannot be ruled out that in view of the relationship between defendant No.7 and other defendants, defendant No.7 might have used the letter heads of the first defendant-firm. The heavy onus lies on the plaintiff to establish that defendant No.7 is having an agency, which could be a general or special, express or implied. Before fastening any such liability on the firm, the factum of agency must be proved. Admittedly, the cheques were issued directly in the name of defendant No.7, even though earlier amounts have been paid by the plaintiff to the first defendant firm in some form or other. In the absence of any proper explanation for issuance of cheques in question directly in the name of defendant No.7 especially in the absence of any authorization, the first defendant firm cannot be mulcted with any liability for the action of defendant No.7. In view of the above, we do not find any infirmity or perversity in coming to the above said conclusion by the learned Single Judge, on appreciation of the evidence adduced by the parties. Since the decree was jointly and severally passed against all the defendants in O.S.No.75 of 1978, and defendant No.7 has not filed any appeal against the said decree, the decree against him has to be maintained. The learned Single Judge while allowing A.S.No.372 of 1987 preferred against O.S.No.75 of 1978, A.S.No.1250 of 1987 preferred against O.S.No.68 of 1979 and Tr.A.S.No.1635 of 1988 preferred against O.S.No.74 of 1979 dismissed O.S.Nos.75 of 1978 and 74 of 1979 against defendants 1 to 6 alone, and decreed O.S.No.68 of 1979 holding that the plaintiffs are entitled to the claim. In view of the same, we confirm the impugned order in respect of dismissal of O.S.Nos.75 of 1978 and 74 of 1979 against defendants 1 to 6 alone. Since the judgment and decree dated 30.12.1986 passed by the Subordinate Judge, Vizianagaram, against defendant No.7 for recovery of Rs.1,42,735/- has become final, and as no appeal has been filed by him, the decree against him stands good, and it is open for the plaintiffs in O.S.Nos.75 of 1978 and 74 of 1979 to recover the said amount from him. It is needless to say that in view of the dismissal of the suits against defendants 1 to 6, they are entitled to restitution of the amounts deposited pursuant to the decree in O.S.Nos.75 of 1978 and 74 of 1979. Since the suit in O.S.No.68 of 1979 is filed only for injunction or in the alternative for recovery of a sum of Rs.1,76,600/- and once the suit against the plaintiffs, who are defendants 1 to 3 in O.S.No.75 of 1978, has been dismissed, they are entitled to the suit amount. Once we hold that they are entitled to restitution of the amounts, the appeal filed against the O.S.No.68 of 1979 stands dismissed. In the result, L.P.A.Nos.129 and 174 of 2000, preferred against Tr.A.S.Nos.1635 of 1988 and A.S.No.372 of 1987 are allowed maintaining the decree against defendant No.7. L.P.A.No.122 of 2000 stands dismissed and the cross objections preferred in the said L.P.A are allowed. The rest of the order of the learned Single Judge is confirmed. There shall be no order as to costs. A.GOPAL REDDY, J B.CHANDRA KUMAR, J Date: 31.07.2009 va