THE HON’BLE SRI JUSTICE N.R.L.NAGESWARA RAO APPEAL SUIT Nos.243 of 1997 and 261 of 1998 COMMON JUDGMENT: Both the appeals arise out of the judgment and decree dated 11.11.1996 in O.S.No.98 of 1988 on the file of the Subordinate Judge, Gudivada. The suit was filed by the plaintiff for recovery of a sum of Rs.40,835/- being the balance of principal and interest due under a promissory note dated 01.03.1984 executed by the defendants 2 and 4 on behalf of the 1st defendant firm for a sum of Rs.30,000/- payable with interest at 18% per annum after deducting the part payment of Rs.10,000/- on 10.11.1986. The defendants did not make the payment and hence, the suit. The 2nd defendant filed written statement stating that originally an amount of Rs.25,000/- was borrowed in 1971 on behalf of the 1st defendant and the suit promissory note is renewed from time to time and, therefore, it is not fully supported by consideration. The money was borrowed for the benefit of the firm. The 3rd defendant filed written statement contending that he is not liable for the debt since it was not borrowed for the benefit of the firm and there was absolutely no need for borrowing the same. In order to cause financial loss to the 3rd defendant, the defendants 2 and 4 have created false and collusive documents and, therefore, the suit is liable to be dismissed. The 4th defendant filed written statement contending that the suit is not maintainable in law and the 2nd defendant was instructed to clear the loan from out of the amount realized by the theatre and the 2nd defendant instead of discharging the suit debt misappropriated the amount and failed to clear the suit debt. Therefore, this defendant is not liable to pay the amount and the defendant being an agriculturist, the debt and interest have to be scaled down. On the above pleadings, the following issues were framed for trial: 1. Whether the suit pronote is true, supported by consideration and binding on defendant No.3? 2. Whether the payment endorsement dated 10.10.1986 is true? 3. Whether the suit is bad for misjoinder of parties? 4. To what relief? On behalf of the plaintiff, P.Ws.1 to 3 were examined and marked Exs.A-1 to A-10 and on behalf of the defendants, D.Ws.1 and 2 were examined and no documents were marked. After considering the evidence on record, the lower Court has decreed the suit of the plaintiff for the suit amount with subsequent interest at 6% per annum from the date of suit till the date of realization. Aggrieved by the failure of the lower Court to grant the contractual rate of interest, the plaintiff has preferred the appeal in A.S.No.243 of 1997 and aggrieved by the said judgment and decree against the 3rd defendant, the 3rd defendant has preferred the appeal in A.S.No.261 of 1998. The points that arise for consideration are: 1. Whether the 3rd defendant is not liable to pay the suit amount? 2. Whether the plaintiff is entitled for the contractual rate of interest after the institution of the suit instead of 6% per annum granted by the lower Court? 3. Whether there are any grounds to interfere with the judgment and decree of the lower Court? POINTS 1 to 3: So far as the partnership of the 1st defendant with the defendants 2 to 4 is concerned, there is no dispute, though the 3rd defendant has raised a plea that he has given a notice for retirement from the partnership firm and also claims to have instituted earlier, no material is placed before the Court to show that the partnership firm was dissolved and the assets have been settled between the partners. Evidently, the defendant No.2 is the managing partner of the 1st defendant firm. The lower Court on appreciation of the evidence and the plea of the defendants 2 and 4, has come to the conclusion that the debt was borrowed for the purpose of the 1st defendant and the 2nd defendant being the managing partner is authorized to contract the debts and defendants 2 and 4 themselves executed the promissory note though a plea was taken that it was on earlier promissory note, no material was placed before the lower Court and, therefore, the lower Court was not inclined to accept the plea of the defendants. Therefore, the decree of the lower Court in accepting the promissory note and the liability of the 1st defendant and its partners is concerned, it does not call for any interference. If at all defendant No.3 is to dispute the liability, he can dispute the same at the time when the dissolution of the firm and steps have been initiated by him and at that stage the liability of the debt for the benefit of the firm can be considered and at this stage the material on record does not show that the suit debt was not contracted for the benefit of the 1st defendant firm. Therefore, the liability of the defendants 1 to 4 cannot be excluded and consequently the appeal by the 3rd defendant is concerned, it has to be dismissed. So far as the claim of the plaintiff for subsequent interest is concerned, according to the learned counsel for the plaintiff, as per the Proviso to Section 34 of the Civil Procedure Code, 1908, where the debt is for a commercial transaction, the rate of interest may exceed 6% but shall not exclude the contractual rate of interest. In this case, according to him, the money was borrowed for the purpose of the business of the firm, which is the cinema theatre-1st defendant firm and, therefore, it has got all the requirements of a commercial transaction. No doubt, a discretion is given to the Court to grant an interest more than 6% per annum and on the contractual rate on the suit but still it is a matter of discretion to be exercised by the Court. As can be seen from the material on record, the Court has granted interest at the contractual rate, which appears to be at 18% per annum as claimed by the plaintiff and, therefore, in the appeal, at this stage, there are no special reasons made out by the plaintiff to show that the failure of the discretion by the lower Court is not proper. Therefore, there are no merits in the appeal. Accordingly, both the appeals are dismissed. Each party to bear their own costs. ________________________ N.R.L.NAGESWARA RAO, J 11-10-2011 MR THE HON’BLE SRI JUSTICE N.R.L.NAGESWARA RAO APPEAL SUIT Nos.243 of 1997 and 261 of 1998 Date: 11-10-2011 MR