IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE K.M.JOSEPH & THE HONOURABLE MR. JUSTICE M.L.JOSEPH FRANCIS MONDAY, THE 17TH MAY 2010 / 27TH VAISAKHA 1932 AS.No. 780 of 1997(C) --------------------- OS.675/1989 of ADDL.SUB COURT,KOTTAYAM .................... APPELLANT(S): DEFENDANTS: -------------------------------------------- 1. M/s. KALARICKAL TIMBER DEPOT,\ KOCHUPARAMBIL ROAD, PALLURUTHY, KOCHI-5. 2. K.K.DANIEL, KALARICKAL HOUSE, PARTNER OF DO. DO. (DIED) 3. K.D.JOHN OF DO. DO. 4. K.D.KITHO OF DO. DO. 5. K.D.LIBA OF DO. DO. 6. K.D.XAVIER OF DO. DO. 7. K.D.STANLEY OF DO. DO. 8. K.D.KOCHUTHRESSIA OF DO. DO. 9. K.D.KUNJAPPY OF DO. DO. 10. K.D.ANNIE OF DO. DO. 11. K.D.SEBASTIAN OF DO. DO. BY ADV. SRI.JOHN JOSEPH(ROY) RESPONDENT(S): PLAINTIFF: ----------------------------------------- M/s. JARIA TIMBERS, KUMMANAM P.O., KOTTAYAM-35 REPRESENTED BY THE MANAGING PARTNER V.M.SHAMSUDIN. ADV. SRI.T.R.RAMACHANDRAN NAIR SRI.V.G.ARUN SRI.T.R.HARIKUMAR THIS APPEAL SUIT HAVING BEEN FINALLY HEARD ON 08/12/2009 THE COURT ON 17/05/2010 DELIVERED THE FOLLOWING: K. M. JOSEPH & M. L. JOSEPH FRANCIS, JJ. -------------------------------------------------- A.S.NO.780 of 1997 E --------------------------------------------------- Dated this the 17th May, 2010 JUDGMENT K.M. Joseph, J. Appellants are the defendants. The respondent laid the Suit for realisation of money. The Suit is decreed for a sum of Rs.74,615/= with interest at 12 per cent per annum on the principal amount of Rs.55,207.31 from the date of Suit till realisation together with costs from the appellants and their assets. The counter claim filed by the appellants was disallowed. The appellants challenge the decision including the rejection of the counter claim. 2. According to the respondent/plaintiff, both the plaintiff Firm and the first appellant are carrying on business in timber. Appellants 2 to 11 are partners of the first defendant. The first defendant Firm purchased certain items of timber from the plaintiff Firm as per credit bills, Exts.A1, A2 and A3 and after adjusting an amount of Rs.1,147.43 due to the first appellant Firm, an amount of Rs.1,10,858.74 was due A.S.No.780/1997 -2- to the respondent/plaintiff Firm as per the Bills and Accounts maintained by it. The first appellant/first defendant paid a sum of Rs.55,651.13 in instalments by cash and cheques, and a balance amount of Rs.55,207.31 is due to the respondent Firm on 27.1.1987 as per the ledger, is the case of the respondent/firm. It is accordingly that the Suit was laid. 3. The case of the appellants, essentially was as follows: As on 1.4.1986, a sum of Rs.5,852.46 is due to the plaintiff. Further, as per Exts.A1, A2 and A3 credit bills, a further sum of Rs.1,10,858.74 is due. Accordingly, a total sum of Rs.1,16,711.20 was due to the plaintiff. But, it is pointed out that the appellants have effected the following payments: “ Details of Accounts: Amounts paid by defendants: Date 29.9.86 By cash Rs. 1,500.00 “ 4.10.86 By cash Rs. 10,000.00 “ 9.10.86 By cash Rs. 5,000.00 “ 18.10.86 By cash Rs. 5,000.00 “ 3.11.86 By cheque Rs. 10,000.00 “ 1.12.86 By cash Rs. 1,000.00 “ 1.12.86 By cheque Rs. 2,003.59 “ 2.12.86 Cheque (Teak advance) Rs. 15,000.00 “ 3.12.86 Cheque Rs. 12,500.00 A.S.No.780/1997 -3- “ 17.12.86 By cash Rs. 4,000.00 “ 13.1.87 Cheque Rs. 2,000.00 “ 13.1.87 By cash Rs. 3,000.00 “ 19.1.87 Cheque Rs. 5,000.00 “ 20.1.87 Cheque Rs. 5,000.00 Amount to be paid by plaintiff under Teak Wood agreement Rs. 35.000.00 Interest at 12% p.a. for Rs.35,000/- from, 11.6.89 Rs. 8,925.00 ------------------- Total Rs. 1,24,928.69 =========== Amount due to the plaintiff as on 1.4.86 Rs. 5,852.46 29.9.86 bill No.560 Rs. 24,503.59 31.12.86 bill No.576 Rs. 42,496.35 31.12.86 bill No. 577 Rs. 43,858.80 -------------------- Rs. 1,16,711.20 ============ Balance due to the defendants Rs.8,217.39/-” It is further contended that there was an agreement between the appellants and the plaintiff/firm to the effect that there will be an adjustment tender by the plaintiff and when the work is awarded to the plaintiff/firm, the plaintiff will supply a certain quantity at a certain rate to the appellants. It is pointed out that a cheque for Rs.15,000/= was issued by the first appellant under this transaction. It is further contended that later on, the plaintiff stated that it will A.S.No.780/1997 -4- pay Rs.50/= per Cubic Feet for 700 Cubic Feet as compensation (700 x 50 = Rs.35,000/= was due as compensation from the plaintiff to the appellants). On the said amount of Rs.35,000/=, the appellants further calculated interest at 12 per cent. Accordingly, the appellants contended that a sum of Rs.1,24,000/= and odd is due. Thus, after deducting the amounts payable to the plaintiff, the appellants raised a counter claim for Rs.8000/= and odd. 4. The plaintiff examined Pws.1 and 2 and produced Exts.A1 to A12. The defendants examined Dws.1 to 6 and produced Exts.B1 to B22. The trial court, taking note of the dismissal of OS No.667/86 filed before the Munsiff Court, Kozhikode for injunction to restrain the plaintiff from removing the timber, found that it is prima facie evidence there is no contract on the basis of the adjustment tender as contended by the appellants. It is found that the Judgment in the case will operate as res judicata and there is no question of awarding compensation. Further, the trial court found that the case that certain payments were made by the appellants to the plaintiff, cannot be accepted. Accordingly, the Suit was A.S.No.780/1997 -5- decreed as stated aforesaid. 5. We heard Shri John Joseph (Roy), learned counsel for the appellants and also Shri T. R. Harikumar, learned counsel appearing for the respondent. 6. Learned counsel for the appellants would contend that the Suit is laid claiming that after adjusting a sum of Rs.1,147.43, a sum of Rs.1,10,858.74 was due to the plaintiff. He would point out that the sum shown as due is palpably erroneous. It is further contended that payments were made to one Kochumarakkar, who was a Partner of the plaintiff/firm and they are not accounted. It is contended that the case of the plaintiff was that Kochumarakkar had retired from the Firm in 1986. He would contend that Ext.A12 dated 31.7.1995 issued from the Register of Firms, Thiruvananthapuram would show that Kochumarakkar though is stated to have retired in the year 1986, notice of retirement was given only in the year 1995. He would take us through Sections 32 and 72 of the Indian Partnership Act and contend that unless a notice is given of the retirement as is contemplated in the said provisions, it is not open to the A.S.No.780/1997 -6- plaintiff to contend that the payments made to Kochumarakkar need not be accounted by the plaintiff. He would further refer to Ext.B14 which is a payment slip dated 3.12.1986 to point out that Kochumarakkar has admitted that the amount due under Ext.A1 credit bill has been discharged. He would further refer us to Ext.B20 letter dated 2.12.1986 issued by the plaintiff and Ext.B22 letter dated 11.12.1986 issued by the plaintiff to contend that the claim for Rs.35,000/= as compensation was fully justified and there was no merit in the plea of res judicata. He also took us through the deposition of the witnesses Pws.1 and 2 and Dws.1, 5 and 6. DW5 is the son of Kochumarakkar. Certain documents are referred to prove that certain payments were made by the defendants. 7. Per contra, Shri T. R. Harikumar, learned counsel for the respondent would point out that it was admitted by defendant that as on 27.1.1987, a sum of Rs.50,711/- was due to the plaintiff. He would further point out that DW1 has admitted that no further amounts were paid after the said date. He would further contend that there is no A.S.No.780/1997 -7- merit in the counter claim wherein the claim for compensation is raised. He would submit that the claim for compensation is not tenable and it is barred. 8. The appellants admit Exts.A1 to A3 credit bills. According to them, however, the entire amounts due thereunder have been paid by the appellants and what is more, if credit is given for the amount of Rs.35,000/= allegedly due from the plaintiff on account of compensation payable for breach of the contract contained in Ext.B22 and interest thereon apart from, of course, crediting the amount of Rs.15,000/= paid towards the contract to supply under Ext.B20, a sum of Rs.8,217.39 is due. According to the appellants, Kochumarakkar was a partner of the plaintiff Firm and he continued to be a partner even at the time of Exts.A1 to A3 and he has received amounts and the case of the plaintiff that he had retired during that period, cannot be accepted. He also referred to the payment covered by Ext.B12 and submit that Rs.2500/- out of the same is not credited. 9. First we would like to consider the case of the A.S.No.780/1997 -8- appellants based on the claim for compensation. According to the appellants, the plaintiff and the appellants agreed that there would be an adjustment tender and further that the plaintiff agreed to supply 700 Cubic Feet of teak wood logs by Ext.B20 letter dated 2.12.1986 at Rs.210/= per Cubic Feet. It is accordingly that the cheque for Rs.15,000/= was paid to the plaintiff. But, it is the further case of the appellants that the plaintiff changed its attitude and offered Rs.50/= per Cubic Feet as the profit to the defendants, if the defendants will withdraw from the transaction, since the plaintiff has arranged for sale of the logs directly from the estate to third parties. This was informed to the appellants by Ext.B22 letter dated 11.12.1986. This was not agreeable to the appellants, it is contended and it is accordingly that they filed OS No.667/86 seeking a permanent injunction before the Munsiff Court, Kozhikode. According to the appellants, the said Suit was dismissed for want of jurisdiction. In the meantime, the timber logs were removed from the Nilambur rubber estate. Thus, the appellants are entitled to compensation of Rs.35,000/= which is based on Ext.B22 letter as per which, A.S.No.780/1997 -9- for 700 Cubic Feet of timber logs, Rs.50/= per Cubic Feet was offered as compensation. It is the further case of the appellants that the appellants made several demands to the plaintiff, but it did not settle the same and the present Suit was filed by the plaintiff. There is also reference to various other litigation, in view of the intervention of the police allegedly at the hands of the partners of the plaintiff Firm. 10. The trial court has essentially found that there was no contract as contended by the appellants and the judgment in OS No.667/86 will operate as res judicata. It is stated that since the court has found that there is no contract so as to restrain the plaintiff by injunction there is no question of awarding compensation. It is further found that the evidence adduced by the witnesses of defendants have nothing to do with the transaction and their case is barred by res judicata. 11. The first question to be considered is whether there is any merit in the appellants' case based on the claim for compensation. The case of the appellants is that there was an agreement between the parties that there would be A.S.No.780/1997 -10- an adjustment tender and that the plaintiff agreed to supply 700 cubic feet of teak wood logs at the rate of Rs.210/- per cubic feet. (See Ext.B20). It is stated that accordingly Rs.15,000/- was paid by the defendants. A change in attitude by the plaintiff is further pointed out and Ext.B22 letter dated 11.12.1986 is relied on this regard. As per the said letter it is pointed out that if the defendants withdraw from the transaction covered by Ext.B20 the plaintiff would pay at the rate of Rs.50/- per cubic feet as profit to the defendants. The court below, has, of course found that the matter is barred by res judicata by virtue of judgment in O.S.667/1986. It is also stated that dismissal of O.S.667/1986 is a prima facie evidence to show that there is no such contract between the parties as alleged. It is also found that the evidence adduced by the defendant's witnesses have nothing to do with this transaction. It is found that defendants are not entitled to adjust the amount of Rs.35,000/- claimed as compensation from the amount due from the defendants. 12. We are not impressed by the finding that the claim for compensation is barred by res judicata by virtue of A.S.No.780/1997 -11- the judgment in O.S.667/1986. That suit was filed for injunction against the plaintiff to restrain removal of timber logs. The said suit is dismissed finding that there was no jurisdiction. The judgment of the said suit is also not produced before the Court. We fail to see in such circumstances how the claim of the defendants for compensation could be said to be barred by res judicata. 13. However, we do not see any merit in the said claim of the defendants on merits. The claim of compensation is based on Ext.B22. It would appear that there was an agreement between the plaintiff and defendants and on the basis of the same that an adjustment tender came to be submitted by the plaintiff which was accepted. It would also appear that the defendants gave Rs.15,000/- as advance which is on the understanding apparently that out of the logs awarded to the plaintiff the plaintiff would supply 700 cubic feet of teak wood at the rate of Rs.210/- per cubic feet to the defendants. It may also be true that the plaintiff addressed Ext.B22 letter offering compensation at the rate of Rs.50/- per cubic feet if the defendants withdrew from the transaction A.S.No.780/1997 -12- covered by Ext.B20. There is no case established that a contract emerged even from Ext.B22. Ext.B22 reads as follows. “To Mr.K.D.John, Kalarikal Timber Depot, Palluruthy, Cochin-5. Dear Mr.K.D.John, In continuation of my agreement dated 2- 12-1986 for the sale of timber teak wood logs from Nilambur Rubber Company Ltd., I request you if you could cancel the above agreement for which I shall agree to reimburse you Rs.50/- per cft. as profit gain. If you are agreeable please let me have your comments in the matter. I regret to put forward this proposal as I am expecting more profit if logs are sold to other parties. There are parties to purchase whole lot for which amount promised will be paid to you for the whole lot as per my agreement. Thanking you, Yours sincerely, for JARIA TIMBERS, SHAMSUDHIN.V.M.” A.S.No.780/1997 -13- 14. Ext.B22 is dated 11.12.1986. The claim of the appellants is based on Ext.B22. But what is stated in Ext.B22 is that if the defendants are agreeable to relieve the plaintiff from the obligations under Ext.B20, compensation will be paid. We do not think it is established that the defendants have agreed to receive compensation in place of performance of obligations under Ext.B20. It cannot be said that the defendants have established that the plaintiff is liable to pay compensation in terms of Ext.B22. It is the case of the defendants themselves that they were not agreeable to the proposals contained in Ext.B22. In such circumstances there is no merit in the claim for compensation. If that is so the very basis of the amount shown in the accounts contained in the written statement cannot hold good. In fact, we also notice that the appellants have themselves admitted that they are liable to pay Rs.50,711/- as on 27.1.1987 and then no further amounts were paid after the said date. There is no merit in the contention of the appellants that Rs.15,000/- which is paid as advance pursuant to Ext.B20 has not been adjusted. Learned counsel for the plaintiff points out that A.S.No.780/1997 -14- actually it has been adjusted and there does not appear to be serious dispute that the amount of Rs.15,000/- paid by the defendants as advance towards Ext.B20 has been taken into consideration in arriving at the amount payable to the plaintiff. 15. Appellants have a case that certain amounts which have been paid by them has not been taken into consideration by the plaintiff. Particularly it is pointed out that the appellants have paid Rs.12,500/- on 3rd December, 1986. The court below took notice that a cheque for Rs.12,500/- has been received by Kochu Makkar and he was not a partner of the plaintiff firm during the relevant period. The court below found that, therefore, the payment of Rs.12,500/- by the defendants to Kochu Makkar cannot be considered as payment of the amount to the plaintiff. The court further found that as the defendant has failed to adduce any evidence to show that the amount has been paid by it it can only to conclude that the entries shown in Ext.B7 are not correct and even if any amount has been paid by the defendant it was not to the plaintiff firm and the partners of the plaintiff firm during the period have not received the A.S.No.780/1997 -15- same. 16. Learned counsel for the appellants in this regard would point out that Kochu Makkar was a partner of the plaintiff firm. The case of the plaintiff was that Kochu Makkar retired in 1986. According to the plaintiff, Kochu Makkar has joined as partner on 2.4.1982 and retired on 1.4.1986. The court found that from Ext.A12 showing the names of the partners Kochu Makkar and V.M.Shamsudeen the persons who executed Exts.B2, B3, B7, B8 and B9 are not partners during the relevant period. Learned counsel for the appellants would point out that under Sec.32 (3) of the Indian Partnership Act, 1932 and that if a person is a partner, the payments made to him would be binding on the firm and other partners even if he has retired unless he gives public notice as provided under Section 72 of the Act. In this regard he relied on Ext.A12 dated 31.7.1995 issued by the Registrar of Firms, Thiruvananthapuram. He would point out that it would show that though Kochu Makkar is said to have retired in 1986 actually notice of retirement was given only in the year 1995. Ext.A12 would show that Kochu Makkar retired A.S.No.780/1997 -16- on 1.4.1986. But, notice of retirement is given only in June, 1995. If a 3rd party deals with an allegedly retired partner and if he makes payments to him treating him as a partner it will not be legally permissible for the firm to disown the act of the partner without there being public notice as provided in the Indian Partnership Act. In such circumstances, we are of the view that the appellants are correct in contending that the payment of Rs.12,500/- should be taken into account by the plaintiff in its transaction with the defendants. According to the plaintiff, Kochu Makkar was having his own business. As far as payment of Rs.12,500/- is concerned it is by way of cheque. In Ext.B14 it is stated that the entire amount due as per Bill No.560 has been received by partner Jaria Timbers. Bill No.560 is Ext.A1, one of the bills on which the plaintiff has based his claim. Even according to the appellants as on 27.1.1987 a sum of Rs.50,711/- was due to the plaintiff. The court has found that one Shihabudeen has signed Ext.B12. But going by Ext.B12 he has joined as a partner only on 1.4.1992. As far as the question of Rs.12,500/- is concerned it is covered by a cheque though received by Kochu A.S.No.780/1997 -17- Makkar. 17. In view of the above discussion we feel that the said payment has to be necessarily reckoned by the plaintiff. Accordingly, we partly allow the appeal and modify the decree and pass a decree for Rs.57,728.31 with interest at the rate of 12% per annum on the principal amount of Rs.42,707.31 from the date of the suit till realisation together with costs as ordered by court below from the defendants and their assets. The parties are to suffer their respective costs in this appeal. (K.M.JOSEPH) JUDGE. (M.L.JOSEPH FRANCIS) JUDGE. kbk/MS