R.S.A.No. 1995 of 2011 (O&M) -1- IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH. R.S.A.No. 1995 of 2011 (O&M) Date of Decision:October 19,2011 Dalip Singh .... Appellant Vs. Manohar Singh and others .... Respondents CORAM : Honble Mr.Justice Ram Chand Gupta Present : Mr. Jasbir Singh Dhaliwal, Advocate for the appellant. * * * Ram Chand Gupta, J. C. M. No. 5566-C of 2011 Application is allowed subject to all just exceptions. RSA No.1995 of 2011 Defendant no.3 Dalip Singh having failed in both the courts below has filed the instant second appeal. Respondent No.1-plaintiff Manohar Singh filed suit against M/s Om Parkash Dalip Singh – defendant no.1/respondent no.2 and its four partners Om Parkash – defendant no.2/respondent no.3, Dalip Singh – defendant no.3/appellant, Balwant Rai and Makhan Singh – defendants/respondents no.4 and 5, for recovery of `6,77,950/-, alleging that defendants no.2 to 5 are partners of defendant no.1 firm. On 02.11.2003, defendant no.1 through its partner defendant no.2 borrowed `2,00,000/- from the plaintiff and executed a writing/receipt for the same. Thereafter on 1.12.2003 he again borrowed `2,50,000/- from respondent no.1 and executed a writing/receipt on the same day. Lastly, again he borrowed `1,25,000/- on 18.12.2003 by executing a writing/receipt. The R.S.A.No. 1995 of 2011 (O&M) -2- loan amount was to be repaid with interest @ 1.75% per month within stipulated period of six months from each respective writing. However, defendants failed to repay the same accordingly. The plaintiff therefore filed suit for recovery of `6,77,950/- including interest at the aforesaid agreed rate till filing of the suit. Only defendant no.3 contested the suit, whereas remaining defendants were proceeded ex-parte. Defendant no.3 broadly denied the plaint averments. It was asserted that no person was authorized by partners of the firm to take loan on behalf of the firm from anybody. The alleged loan amount was never received by the firm nor the same was entered in the account books of the firm. Partners of the firm are not liable to pay any amount to the plaintiff. The amount, if any received by defendant no.2, might be in his personal capacity. Firm defendant no.1 never received any amount from the plaintiff. The alleged writing, if any, has no concern with defendant No.3 or with the firm. It might be personal transaction of defendant no.2. Learned Civil Judge (Junior Division), Jagraon, vide judgment and decree dated 28.1.2010, decreed the plaintiff's suit for recovery of `6,77,950/- along with interest @ 1.75% per month from the date of each writing till date of decree and future interest @ 6% per annum from the date of decree till its realization. First appeal preferred by defendant no.3 has been dismissed by learned Additional District Judge, Ludhiana, vide judgment and decree dated 18.01.2011. Feeling aggrieved, defendant no.3 has filed the instant second appeal. I have heard learned counsel for the appellant and perused the case file. R.S.A.No. 1995 of 2011 (O&M) -3- Plaintiff Manohar Singh himself stepped into the witness box as PW-2 and examined Jagdev Singh (PW-1). Both of them have broadly stated according to plaintiff's version. On the other hand, Dalip Singh (defendant no.3) himself stepped into the witness box as DW-1 and broadly stated according to his own version. It has come in evidence of the plaintiff that writings Ex.P-1 to Ex.P-3 regarding the loan in question was scribed by Accountant of defendant no.1 firm and it was signed by defendant no.2 as partner of the firm, for and on behalf of defendant no.1 firm. On the other hand, there is self-serving statement of defendant no.3, which is not sufficient to rebut the cogent evidence of the plaintiff. In the aforesaid context, it has to be noticed with significance that defendant no.3 specifically pleaded that loan amount was not received by the firm or entered in its account books. However, defendant no.3 failed to produce the account books of defendant no.1 firm, of which he is a partner, and therefore, strong adverse presumption arises against defendant no.3-appellant. In addition to the aforesaid, Om Parkash – defendant no.2 was the most material witness on behalf of defendant no.3-appellant, but has not been examined. For non-examination of defendant no.2 also, strong adverse inference has to be drawn against defendant no.3-appellant. There is no explanation whatsoever for non-examination of Om Parkash as witness and for non-production of account books of defendant no.1 firm. It is thus manifest that defendant no.3 appellant has intentionally withheld the available material oral as well as documentary evidence, and therefore, adverse inference has been rightly drawn against defendant no.3. R.S.A.No. 1995 of 2011 (O&M) -4- It is also significant to notice that defendant no.3 in the witness box admitted signatures of defendant no.2 on writings Ex.P-1 to Ex.P-3 regarding taking of loan by defendant no.1 from the plaintiff. It was also admitted by defendant no.3 that the said writings bear stamp of defendant no.1 firm. The said writings have been written on letter head of defendant no.1 firm. Defendant no.3 also admitted that the firm has not yet been dissolved and Om Parkash – defendant no.2 is still subsisting partner of the firm. Learned counsel for the appellant vehemently contended that the loan was not taken by the firm, but the contention cannot be accepted because account books of defendant no.1 firm had been withheld by the appellant. Learned counsel for the appellant vehemently contended that defendant no.2 had no authority to take loan on behalf of the firm nor the loan was taken on behalf of the firm. Reference was made to Sections 18 to 22 of the Indian Partnership Act, 1932 (in short – the Act), which are reproduced hereunder :- “18. Partner to be agent of the firm. - Subject to the provisions of this Act, a partner is the agent of the firm for the purpose of the business of the firm. 19. Implied authority of partner as agent of the firm. - (1) Subject to the provisions of Section 22, the act of a partner which is done to carry on, in the usual way, business of the kind carried on by the firm, binds the firm. The authority of a partner to bind the firm conferred by this section is called his “implied authority”. R.S.A.No. 1995 of 2011 (O&M) -5- (2) In the absence of any usage or custom of trade to the contrary, the implied authority of a partner does not empower him to - (a) submit a dispute relating to the business of the firm to arbitration, (b) open a banking account on behalf of the firm in his own name, (c) compromise or relinquish any claim or portion of a claim by the firm, (d) withdraw a suit or proceeding filed on behalf of the firm, (e) admit any liability in a suit or proceeding against the firm, (f) acquire immovable property on behalf of the firm (g) transfer immovable property belonging to the firm, or (h) enter into partnership on behalf of the firm. 20. Extension and restriction of partner's implied authority. - The partners in a firm may, by contract between the partners, extent or restrict the implied authority of any partner. Notwithstanding any such restriction, any act done by a partner on behalf of the firm which falls within his implied authority binds the firm, unless the person with whom he is dealing knows of the restriction or does not know or believe that partner to be a partner. 21. Partner's authority in an emergency. -A partner has R.S.A.No. 1995 of 2011 (O&M) -6- authority, in an emergency, to do all such acts for the purpose of protecting the firm from loss a would be done by a person of ordinary prudence, in his own case, acting under similar circumstances, and such acts bind the firm. 22. Mode of doing act to bind firm. - In order to bind a firm, an act or instrument done or executed by a partner or other person on behalf of the firm shall be done or executed in the firm name, or in any other manner expressing or implying an intention to bind the firm.” A perusal of writings Ex.P-1 to Ex.P-3 (photostat copies shown by the counsel for the appellant) reveals that the same have been executed by defendant no.2 as partner of defendant no.1 firm and it has been executed for and on behalf of defendant no.1 firm on the letter head of the firm. A bare perusal of the said writing leaves no room for doubt that defendant no.2 took loan from the plaintiff for and on behalf of defendant no.1 firm and not in his personal capacity as averred by defendant no.3. Defendant no.2 had implied authority to take the said loan for and on behalf of defendant no.1 firm in view of Section 19 (1) of the Act. Exclusory clauses of sub-section (2) of Section 19 of the Act do not exclude the authority of partner to take loan on behalf of the firm. On the contrary, under Section 18 of the Act also, a partner is agent of the firm for the purpose of business of the firm. It is also significant to notice that under Section 20 of the Act, partners in the firm may, by contract between the partners, extend or restrict the implied authority of any partner. However, in the instant case, even partnership deed of firm- defendant no.1 has been withheld by defendant no.3 appellant, which could also depict whether defendant no.2 had R.S.A.No. 1995 of 2011 (O&M) -7- authority to raise loan for and on behalf of defendant no.1 -firm or not. For withholding the said document also, adverse inference arises against the appellant. Reference to Section 22 of the Act by counsel for the appellant also does not help the appellant in any manner because writings Ex.P-1 to Ex.P-3 have been executed by defendant no.2 as partner of defendant no.1 firm and the said writings have been specifically executed in the name of the firm and the loan has also been raised in the name of the firm. Defendant no.2 affixed his signatures at two places as partner of the firm, for and on behalf of defendant no.1- firm and the writings are also on the letter head of the firm. It is thus crystal clear that defendant no.2, who is partner of defendant no.1- firm, raised the loan in question for and on behalf of defendant no.1- firm and also executed writing for and on behalf of defendant no.1- firm being partner thereof. Learned counsel for the appellant also referred to Sections 26 to 28 of the Negotiable Instruments Act, 1881. The same are also reproduced hereunder:- “26. Capacity to make, etc., promissory notes, etc. - Every person capable of contracting, according to the law to which he is subject, may bind himself and be bound by the making, drawing, acceptance, indorsement, delivery and negotiation of a promissory note, bill of exchange or cheque. Minor. - A minor may draw, indorse, deliver and negotiate such instruments so as to bind all parties except himself. Nothing herein contained shall be deemed to empower a corporation to make, indorse or accept such R.S.A.No. 1995 of 2011 (O&M) -8- instruments except in cases in which, under the law for the time being in force, they are so empowered. 27. Agency. - Every person capable of binding himself or of being bound, as mentioned in Section 26, may so bind himself or be bound by a duly authorized agent acting in his name. A general authority to transact business and to receive and discharge debts does not confer upon an agent the power of accepting or indorsing bills of exchange so as to bind his principal. An authority to draw bills of exchange does not of itself import an authority to indorse. 28. Liability of agent signing. - An agent who signs his name to a promissory note, bill of exchange or cheque without indicating thereon that he signs as agent, or that he does not intend thereby to incur personal responsibility, is liable personally on the instrument, except to those who induced him to sign upon the belief that the principal only would be held liable.” The aforesaid provisions do not help the appellant in any manner. The impugned writings Ex.P-1 to Ex.P-3 are not promissory notes or any other negotiable documents. Even otherwise, according to provisions of the Act observed herein before, defendant no.2 had authority to raise loan on behalf of defendant no.1-firm and he did so accordingly, and therefore, all the defendants are jointly and severally liable to repay the loan amount with interest. There is concurrent finding recorded by both the courts below R.S.A.No. 1995 of 2011 (O&M) -9- in favour of respondent no.1-plaintiff. The said finding is fully justified by the evidence on record. The said finding is not depicted to be perverse or illegal in any manner nor it is based on misreading or misappreciation of evidence. Consequently, the said finding does not call for interference in second appeal. This appeal does not raise any question of law, much less substantial question of law, for determination. The appeal is completely meritless and is accordingly dismissed in limine. October 19, 2011 ( Ram Chand Gupta ) meenu Judge