1 SJ nos.295 and 296 of 2008 in suit nos.1391 and 1419 of 2008 IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION SUMMONS FOR JUDGMENT NO.295 OF 2008 IN SUMMARY SUIT NO.1391 OF 2008 Romi K. Sidhwani ...Plaintiff vs. M/s.Pankaj Investments & Ors. ...Defendants AND SUMMONS FOR JUDGMENT NO.296 OF 2008 IN SUMMARY SUIT NO.1419 OF 2008 Bindya R.Sidhwani ...Plaintiff vs. M/s.Pankaj Investments & Ors. ...Defendants Dr. Birendra Saraf i/by Ranjit & Co for Plaintiff in both the suits. Mr. Nitin Gangal i/by Ms N.V. Masurkar for the Defendant No.2. Mr. Merchant i/by K.V. Aiyar and Associates for Defendant No.4. Ms Daksha Shah for the Defendant Nos.3, 5 and 6. CORAM: A.S.OKA, J. DATE ON WHICH SUBMISSIONS ARE HEARD : 4 th February, 2011. DATE ON WHICH JUDGMENT IS PRONOUNCED : 1st March, 2011. JUDGMENT: 2 SJ nos.295 and 296 of 2008 in suit nos.1391 and 1419 of 2008 1 By a common judgment, these two summonses for judgment can be conveniently disposed of as the facts leading to the filing of both the suits are more or less identical. For the sake of convenience, a reference is made to the facts of Summary Suit No. 1391 of 2008. 2 According to the case of the Plaintiff, the first Defendant partnership firm is carrying on business of manufacturing aluminium. It is alleged that 2nd to 6th Defendants were and/or continue to be the partners of the first Defendant firm. It is alleged that, at the request of the first Defendant and its partners, the Plaintiff had lent and advanced to the first Defendant firm a sum of Rs.35, 50,000/– by cheques from time to time commencing from April 1998. It is the case of the Plaintiff that the first Defendant and its partners agreed to pay interest thereon at the rate of 10% per annum. It is alleged that the first Defendant and its partners repaid to the Plaintiff a sum of Rs.5, 53,906/– by a Cheque dated 22 nd May 1998. It is alleged by the Plaintiff that out of the said amount, a sum of Rs.5, 50,000/- represents the principal amount and the remaining amount of Rs.3, 906/- 3 SJ nos.295 and 296 of 2008 in suit nos.1391 and 1419 of 2008 is towards interest on the principal amount. It is alleged that by a cheque dated 9 th July 1999, the first Defendant paid a sum of Rs. 15,00,000/- to the Plaintiff, leaving a balance of a sum of Rs.15 Lacs. 3 It is the case of the Plaintiff that the Defendants failed to pay interest to the Plaintiff for the period from 1 st April 2006. The Plaintiff is relying upon ledger statements signed by the first Defendant from time to time till 31st March 2006 by which the first Defendants acknowledged and confirmed the liability of the Defendants to pay a sum of Rs.15,00,000/- and interest payable thereon. The Plaintiff by a letter dated 5 th December 2006 called upon the first Defendant to repay the said amount together with interest accrued thereon. However, the Defendants failed and neglected to make payment of any amount. The Plaintiff by his Advocates’ letter dated 6 th August 2007 called upon the first to fourth Defendants to pay to the Plaintiff the said amount of Rs.15, 00,000/- together with interest accrued thereon at the rate of 10% per annum from 1 st April 2006 till payment within a period of 48 hours from the receipt of the said letter. It is contended that the letter addressed to the first 4 SJ nos.295 and 296 of 2008 in suit nos.1391 and 1419 of 2008 Defendant was returned to the Plaintiff with postal remark is "not known". It is alleged that the 2nd to 4th Defendants received the said letter. The 4th Defendant by his letter dated 8 th August 2007 contended that there was a family separation and settlement and that the liability of the first Defendant was taken over by the 2nd Defendant. The 4th Defendant contended that he was not liable. Thereafter there was a further correspondence between the Plaintiff and the 4 th Defendants. By a separate letter dated 18 th September 2007, the advocate for the Plaintiff called upon 5th and 6th Defendants to comply with the requisitions contained in the aforesaid letter dated 6 th August 2007. A copy of letter dated 6 th August 2007 was forwarded to the said to Defendants. As the amount was not paid, the present suit is filed by the Plaintiff for a recovery of sum of Rs.17, 98,356/– with interest on the principal amount of Rs.15, 00,000/- at the rate of 10% per annum from the date of the suit till realization. 4 Summary Suit no. 1419 of 2008 has been filed against the same Defendants. In this case, the Plaintiff claims that a sum of Rs.15, 00,000/- 5 SJ nos.295 and 296 of 2008 in suit nos.1391 and 1419 of 2008 was advanced by the Plaintiff therein to the first Defendant. It is contended that the first Defendant along with its partners had agreed to repay the said amount together with interest thereon at the rate of 10% per annum. In this case also the Plaintiff is relying upon ledger statements signed by the first Defendant from time to time till 31 st March 2006 which according to the Plaintiff contain the acknowledgment of the liability of the Defendants. Reliance is placed on correspondence made between the parties and similar stand taken by the 4th Defendant. In the said suit decree is sought in the sum of Rs.17, 90,356 together with interest on the amount of his 15, 00,000/- at the rate of 10% per annum from the date of filing of the suit till realization. 5 The 4th Defendant filed a reply to the summons for judgment in both the suits. It was contended that the balance confirmation letter relied upon by the Plaintiff was a got up document. It is pointed out that the 2nd 5th and 6th Defendants are not the partners of the first Defendant firm. It is pointed out that the persons who are partners of the first Defendant have not been impleaded as parties to the suit. He pointed out that the 6 SJ nos.295 and 296 of 2008 in suit nos.1391 and 1419 of 2008 Defendant no.2, 5 and 6 were never the partners of the first Defendant firm. The fourth Defendant pointed out that the first Defendant firm was a part of erstwhile Pankaj group of companies. It was contended that the said group of companies was managed by the 2nd Defendant and his brothers. There was a family settlement for division and distribution of the assets and liabilities of the said group of companies. For implementation of the family settlement, the matter was referred to arbitration. An award dated 2nd July 2005 was made by the Arbitrators. As certain issues were raised thereafter, the matter was again referred for the clarification by the Arbitral Tribunal. Accordingly, on 25 th January 2008, a clarification was issued by the Arbitrators which provided that the first Defendant firm was taken over by the 2nd Defendant with effect from 1 st April 2003 and the liabilities of the first Defendant firm were taken over by the 2nd Defendant from the said date. In short the contention of the 4th Defendant is that by virtue of award of the Arbitrators, though he was a Partner, he ceased to be liable from 1 st April 2003 from which date the entire liability of the first Defendant was taken over by the 2nd Defendant. Various documents including the Family Settlement, Award of the Arbitrators and the 7 SJ nos.295 and 296 of 2008 in suit nos.1391 and 1419 of 2008 clarification issued by the Arbitrators has been relied upon in the reply. A rejoinder was filed by the Plaintiff. In the rejoinder it was contended that one Deepali Patel, the Accountant and authorized signatory of the first Defendant firm has signed the acknowledgments on behalf of the first Defendant and that the authority of the said person was never disputed by the partners of the first Defendant for last several years. Reliance was placed on a letter signed by the said person addressed to the plaintiff. Reliance was placed on TDS certificates issued by the first Defendant firm as regards deduction of income tax from the interest payable on the loan amount. 6 The second Defendant filed a reply to the summons for judgment. He contended that he was never a Partner of the first Defendant at any point of time. Photo copies of the partnership deed and supplementary partnership deed have been annexed to the said affidavit. 7. The learned counsel appearing for the Plaintiff pointed out that there is no reply filed on behalf of the first Defendant, third Defendant and 8 SJ nos.295 and 296 of 2008 in suit nos.1391 and 1419 of 2008 fifth and sixth Defendants. Therefore, the said Defendants are not entitled to defend the suit. He submitted that even the 2nd and 4th Defendants in their reply have not denied the liability of the first Defendant. He submitted that fourth Defendant is admittedly a Partner and therefore, is jointly and severally liable along with the first Defendant firm for repayment of the debts of the first Defendant firm. He submitted that as per the case made out by the 4th Defendant in his reply, the 2nd Defendant has taken over the entire liability of the first Defendant firm with effect from first April 2003. He submitted that the 2nd and 4th Defendants have no defence and therefore, they are not entitled to leave to defend the suit. The learned counsel appearing for the 2nd Defendant pointed out that admittedly the 2nd Defendant has never been a Partner of the first Defendant. He submitted that the case made out by the 4th Defendant that the 2nd Defendant is liable by virtue of Award of the Arbitral Tribunal has not been established. The learned counsel appearing for the 4th Defendant submitted that the award of the learned Arbitrators and the clarification Issued by the Learned Arbitrators clearly shows that with effect from first April 2003, the 4th Defendant is no longer 9 SJ nos.295 and 296 of 2008 in suit nos.1391 and 1419 of 2008 liable but only the 2nd Defendant is liable. He urged that summary suit is not maintainable on the basis of the alleged acknowledgments as the same are not signed by any authorized person. The learned counsel for the Plaintiff submitted that the 4th Defendant cannot avoid liability as admittedly he is a Partner of the first Defendant. 8 I have given careful consideration to the submissions. The suits have been filed for recovery of the loan advanced by the Plaintiff in both the suits to the first Defendant firm. Photo copies of the partnership deed dated 1 st April 1992 and supplementary deed of partnership dated 22 nd April 2002 have been annexed to the reply filed by the 2nd Defendant. The said documents show that except for the Defendant nos.3 and 4, none of the Defendant nos. 2 to 6 has been partners of the first Defendant firm. It is, therefore, obvious that the Plaintiff has no case against 5th and 6th Defendants. Even the 2nd Defendant has never been a Partner of the first Defendant firm. Except 2nd and 4th Defendants, no other Defendant has applied for leave to defend by filing a reply. 10 SJ nos.295 and 296 of 2008 in suit nos.1391 and 1419 of 2008 9 The 4th Defendant in his reply has contended that the first Defendant firm was a part of Pankaj group of companies. He stated that the said group of companies was managed by the 2nd Defendant and his brothers. He relied upon a family settlement between the brothers. He pointed out that the matter of implementation of the family settlement was referred to the Arbitrators. He has relied upon the clarification issued by the Arbitral Tribunal. He contended that as per the said clarification, the liability of the first Defendant has been taken over by the 2nd Defendant. The perusal of the said clarification issued by the arbitral tribunal shows that the first Defendant firm was to be managed and possessed by the group companies of the 2nd Defendant with effect from 1 st April 2003. There is no specific reference therein which provides that the 2nd Defendant has personally taken over the liability of the first Defendant firm. The defence of the 2nd Defendant is that as he was never a Partner of the first Defendant, he is not liable. The said defence cannot be said to be a moonshine or frivolous defence. Hence, the 2nd Defendant is entitled to unconditional leave to defend. 11 SJ nos.295 and 296 of 2008 in suit nos.1391 and 1419 of 2008 10 The suits have been filed in March 2008. Reliance has been placed on Ledger statements of the first Defendant duly signed by the accountant of the first Defendant from time to time till 31 March 2006. The execution of said alleged acknowledgments has been denied by the 4th Defendant by contending that none of the partners had authorized any other person to admit or acknowledge the liability on behalf of the first Defendant firm. In the rejoinder, the Plaintiff has disclosed that the alleged acknowledgments have been signed by one Deepali Patel, who is alleged to be the accountant and the authorized signatory of the first Defendant. There is nothing on record to show that the said person is the authorized signatory of the first Defendant who was duly authorized to sign the acknowledgment. The summary suits are based only on the Ledger statements of the first Defendant containing the acknowledgment. On the basis of honoured cheque, a summary suit may not lie. A triable issue arises whether the person who has purportedly signed the alleged acknowledgments had an authority to do so on behalf of the first Defendant firm. Therefore, even the 4th Defendant will be entitled to unconditional leave. It will be open for the plaintiff to apply for decree 12 SJ nos.295 and 296 of 2008 in suit nos.1391 and 1419 of 2008 against the first and third defendant. 11 Hence I pass following order:- (i) The Defendant nos. 2 and 4 are granted unconditional leave to defend. The written statement shall be filed within a period of 12 weeks from today. The suit shall be transferred to the list of commercial causes as against the said to Defendants. (ii) It will be open for the Plaintiff to apply for decree as against the Defendant nos. 1 and 3. (iii) The Summons for Judgment nos.295 and 296 of 2008 are accordingly disposed of. [ A.S.OKA, J ]