V. ANANTHA RAJU & ANR versus T.M. NARASIMHAN & ORS.
[2021] 11 S.C.R. 860, Supreme Court of India, 2021
Outcome: Case Partly allowed (Granted)
Segment: Ratio
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[2021] 11 S.C.R. 860
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V. ANANTHA RAJU & ANR
v.
T.M. NARASIMHAN & ORS.
(Civil Appeal No. 6469 of 2021)
OCTOBER 26, 2021
[L. NAGESWARA RAO, SANJIV KHANNA AND
B. R. GAVAI, JJ.]
Partnership – Share in the profit and loss – A partnership
firm was constituted in the year 1986 – In 1992 the partnership
firm was re- constituted and the plaintiff no.1/appellant No.1 was
inducted as a partner with 50% share in profit and loss, along with
original partners, i.e., defendant Nos. 1 to 5 – It was however
provided in the 1992 Deed, that if plaintiff no.1 fails to bring in an
amount of Rs.50,00,000/- as his capital contribution on or before
31.3.1993, his share in the firm would be only to the extent of 10%
– The firm was again reconstituted in 1995, whereby the plaintiff
no.2, son of the plaintiff no.1 was inducted as partner – As per
1995 Deed, the share of the plaintiff Nos. 1 and 2 was to be 25%
each – Differences arose between the parties in 2004 and a
resolution was passed for expulsion of the plaintiffs from the firm –
A suit was filed by the plaintiffs for rendition of accounts and for
releasing their 50% share in the profits of the firm – Trial Court
held that the plaintiffs together are entitled to 10% share in the
profits and losses of the partnership firm till their expulsion –
Aggrieved, plaintiffs filed an appeal before the High Court, which
was dismissed – Before the Supreme Court, the plaintiffs/appellants
contended that the trial Court and the High Court erred in holding
that they will have only 10% share in the profits and losses of the
partnership firm – Whereas, the respondents/defendants contended
that 1995 Deed inadvertently mentioned that the plaintiffs will have
25% share each – Held: Once the plaintiffs had specifically
contended that the terms of the Deed were amended by the 1995
Deed, and the defendants admitted about the execution of the said
document, then the burden to prove mistake in the deed shifted upon
the defendants – In 1992 Deed, the share of plaintiff no.1 was
specified as 50%, however, it was specifically mentioned that if he
fails to bring in an amount of Rs. 50,00,000/- as his capital
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contribution to the firm on or before 31.3.1993, his share would be
10% – In the 1995 Deed, there was no mention regarding such
contingency – In view of Section 91 of the Evidence Act, the
evidentiary value of the 1995 Deed would stand on a much higher
pedestal, as against the oral testimony of the parties – This court is
unable to accept the contention of the defendants that the share in
the profits and losses of the partnership firm as mentioned in the
1995 deed is inadvertent or a mistake in fact – If it was a mistake or
inadvertence, nothing precluded the respondents/defendants from
rectifying the same between 1995 and 2004 – The trial court as
well as the High Court have erred in holding that the plaintiffs
together were entitled to only 10% share – Insofar as the expulsion
of the plaintiffs is concerned, the trial court has given sound reasons
for upholding the expulsion – No reason to interfere with the same.
Evidence Act, 1872 – ss. 91 and 92 – Discussed and explained.
Partly allowing the appeal, the Court
HELD: 1. This Court has held in Roop Kumar v. Mohan
Thedani that the integration of the act consists in embodying it in
a single utterance or memorial — commonly, a written one. This
process of integration may be required by law, or it may be
adopted voluntarily by the actor or actors and in the latter case,
either wholly or partially. It has been held that the question that
is required to be considered is whether the particular document
was
intended by the parties to cover certain subjects of transaction
between them to deprive of legal effect of all other utterances. It
has been further held that the practical consequence of integration
is that its scattered parts, in their former and inchoate shape,
have no longer any jural effect and they are replaced by a single
embodiment of the act. It has been held that when a jural act is
embodied in a single memorial, all other utterances of the parties
on the topic are legally immaterial for the purpose of determining
what are the terms of their act. It has been held that when persons
express their agreements in writing, it is for the express purpose
of getting rid of any indefiniteness and to put their ideas in such
shape that there can be no misunderstanding, which so often
occurs when reliance is placed upon oral statements. It has been
observed that the written contracts presume deliberation on the
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part of the contracting parties and it is natural that they should
be treated with careful consideration by the courts and with a
disinclination to disturb the conditions of matters as embodied in
them by the act of the parties. It has been held that the written
instruments are entitled to a much higher degree of credit than
parol evidence. [Para 22][882-D-H]
2. This Court has further held that Sections 91 and 92 of
the Evidence Act would apply only when the document on the
face of it contains or appears to contain all the terms of the
contract. It has been held that after the document has been
produced to prove its terms under Section 91, the provisions of
Section 92 come into operation for the purpose of excluding
evidence of any oral agreement or statement for the purpose of
contradicting, varying, adding or subtracting from its terms. It
has been held that it would be inconvenient that matters in writing
made by advice and on consideration, and which finally import
the certain truth of the agreement of parties should be controlled
by averment of the parties to be proved by the uncertain
testimony of slippery memory. It has been held that when parties
deliberately put their agreement into writing, it is conclusively
presumed, between themselves and their privies, that they
intended the writing to form a full and final statement of
their intentions, and one which should be placed beyond the reach
of future
controversy, bad faith and treacherous memory.
[Para 23][883-A-D]
3. It could thus be seen that once the plaintiffs/appellants
had specifically contended that the terms of the 1992 Deed were
amended/modified by the 1995 Deed, and the defendants/
respondents admitted about the execution of the said document,
i.e., the 1995 Deed, if it was the case of the defendants that the
terms mentioned in the 1995 Deed were inadvertent or a mistake
in fact, then the burden to prove the same shifted upon the
defendants. In view of Section 92 of the Evidence Act, any
evidence with regard to oral agreement for the purpose of
contradicting, varying, adding to, or subtracting from the terms
of the written contract, would be excluded unless the case falls
within any of the provisos provided in Section 92. The defendants
have attempted to bring their case within the first proviso to
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Section 92 of the Evidence Act, by contending that mentioning of
25% share to each of the plaintiffs in the profits and losses of the
partnership firm was a mistake in fact. [Para 25][883-F-G;
884-A]
4. Comparison of these two clauses 13 and 22 would reveal
that in the 1992 Deed, though the share of the defendant Nos. 1
to 5 in the profits and losses of the partnership firm was specified
as 10%, the share of plaintiff No.1 was specified as 50%.
However, it is specifically mentioned in the 1992 Deed, that in
the event, the plaintiff No.1 fails to bring in an amount of
Rs.50,00,000/- (Rupees Fifty lakh) as his capital contribution to
the partnership firm on or before 31.3.1993, the share in the profits
and losses of the partnership firm of defendant Nos. 1 to 4 would
be 20% each and that of the plaintiff No.1 and the defendant No.5
would be 10% each. [Para 35][888-A-C]
5. In the amended deed, i.e., the 1995 Deed, there is no
mention regarding such contingency upon the plaintiff No.1
depositing or not depositing an amount of Rs.50,00,000/- (Rupees
Fifty lakh). [Para 36][888-C]
6. What has happened between 1992 and 1995 is
exclusively within the knowledge of the parties. Though the
plaintiffs have averred that an amount of Rs.50,00,000/ (Rupees
Fifty lakh) was invested by the plaintiff No.1 in the intervening
period, the same is denied by the defendants. However, in view
of Section 91 of the Evidence Act, the evidentiary value of the
1995 Deed would stand on
a much higher pedestal, as against
the oral testimony of the parties. The 1995 Deed clearly shows
that it is executed after due deliberations, negotiations and mutual
consensus on the terms and conditions to be incorporated therein.
By the 1995 Deed, 6 new partners have been admitted to the
partnership firm, whereas 5 minors have been admitted to the
benefit of the partnership firm. The contention of the defendants,
that the share of the plaintiff Nos. 1 and 2 in the profits and losses
of the partnership firm, mentioned as 25% each, is by mistake
and, in fact, is only 5% each, does not sound logical and reasoned.
If it was by mistake or inadvertence, nothing precluded the
defendants from rectifying the same between 1995 and 2004.
[Para 37][888-D-F]
V. ANANTHA RAJU & ANR v. T.M. NARASIMHAN & ORS.
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7. In this factual background, this Court of the considered
view that the trial court as well as the High Court have erred in
holding that the plaintiffs together were entitled to only 10% share
in the profits and losses of the partnership firm till 18.6.2004.
The judgment and decree passed by the trial court, as affirmed
by the High Court, holding that the plaintiffs together have 10%
share in the profits and losses of the partnership firm is modified.
It is declared and decreed that the plaintiffs together are entitled
to 50% share in the profits and losses of the partnership firm till
18.6.2004. [Paras 39 and 43][889-E-F; 890-B-C]
Roop Kumar v. Mohan Thedani (2003) 6 SCC 595 :
[2003] 3 SCR 292 – relied on.
Gangabai w/o Rambilas Gilda (Smt.) v. Chhabubai w/o
Pukharajji Gandhi (Smt.) (1982) 1 SCC 4 : [1982] 1
SCR 1176; Ishwar Dass Jain (Dead) Through Lrs. v.
Sohan Lal (Dead) by Lrs. (2000) 1 SCC 434 : [1999] 5
Suppl. SCR 24 – referred to.
Case Law Referecne
[2003] 3 SCR 292
relied on
Para 21
[1982] 1 SCR 1176
referred to
Para 24
[1999] 5 Suppl. SCR 24
referred to
Para 24
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 6469
of 2021.
From the Judgment and Order dated 27.02.2015 of the High Court
of Karnataka at Bengaluru in R.F.A. No.1111 of 2008.
R. Basant, Sr. Adv., Jay Kishor Singh, Manu Krishnan G., Mohit
Raj, Advs. for the Appellants.
Balaji Srinivasan, Adv. for the Respondents.
The Judgment of the Court was
delivered by
B. R. GAVAI, J.
1. Leave granted.
2. The present appeal challenges the judgment and order passed
by the Division Bench of the High Court of Karnataka at Bengaluru
dated 27.2.2015, thereby, dismissing the first appeal being R.F.A. No.1111
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of 2008, filed by the appellants and confirming the judgment and decree
passed by the XXXIII Additional City Civil & Sessions Judge, Bangalore
city dated 18.8.2008, vide which the suit being O.S. No.5622 of 2004
(hereinafter referred to as “the said suit”) filed by the appellants/plaintiffs
came to be partly decreed.
3. The facts, in brief, giving rise to the present appeal are as
under.
The parties hereinafter will be referred to as per their status in
the said suit.
A partnership firm, namely, M/s Selwel Combines (hereinafter
referred to as “the partnership firm”) came to be constituted in the year
1986. Vide Partnership Deed dated 30.10.1992 (hereinafter referred to
as “the 1992 Deed”), the partnership firm was re-constituted and the
plaintiff No.1 (Appellant No.1 herein) was inducted as a partner along
with original partners, i.e., defendant Nos. 1 to 5. As per the 1992 Deed,
the plaintiff No.1 was to have 50% share in the profits and losses of the
partnership firm. It was however provided in the 1992 Deed, that if the
plaintiff No.1 fails to bring in an amount of Rs.50,00,000/- (Rupees Fifty
lakh) as his capital contribution to the partnership firm on or before
31.3.1993, his share in the profits and losses of the partnership firm
would be only to the extent of 10%.
On 2.11.1992, the partnership firm obtained a property on lease
for 99 years and constructed a commercial building thereon. The building
was leased out, which fetched a monthly rent of
Rs.22,05,532/-
approximately.
Vide the Deed of Amendment of Partnership dated 18.8.1995
(hereinafter referred to as “the 1995 Deed”), the partnership firm was
again reconstituted, whereby the plaintiff No.2, son of the plaintiff No.1,
and defendant Nos. 6 to 11 were inducted as partners and defendant
Nos. 12 to 16 were admitted to the benefit of the partnership firm. As
per the 1995 Deed, the share of the plaintiff Nos. 1 and 2 in the profits
and losses of the partnership firm was to be 25% each.
It is the contention of the plaintiffs that vide another Deed of
Amendment of Partnership dated 22.05.1996, the partnership firm was
reconstituted, whereby the defendant No.12 was inducted as a partner
and the defendant Nos. 13 to 16 were continued to be entitled for the
benefits of the partnership firm. However, this fact is disputed by the
contesting respondents.
V. ANANTHA RAJU & ANR v. T.M. NARASIMHAN & ORS.
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It appears that in the year 2004, differences arose between the
plaintiffs and the defendants with regard to the affairs of the partnership
firm. On 8.5.2004, the plaintiffs issued a legal notice to the defendants/
partners, demanding accounts right from the inception of the partnership
firm and their share of profits.
Defendant No.1 replied to the plaintiffs’ notice dated 8.5.2004 by
communication dated 12.5.2004. It was stated in the said reply that the
plaintiffs together were entitled only to 10% share in the profits and
losses of the partnership firm and that mentioning of 25% share each in
the 1995 Deed was only a mistake of record.
In turn, a show cause notice was issued by the defendants/partners
to the plaintiffs on 8.6.2004 with regard to the acts and omissions on the
part of the plaintiffs being contrary to the interests of the partnership
firm and other partners.
Thereafter, again, there was exchange of communication between
the plaintiffs and the defendants. According to the plaintiffs, in the meeting
of the partners, held on 18.6.2004, it was resolved to expel the defendant
No.1 from the partnership firm. However, as per the defendants, a
resolution was passed on the same day, i.e., 18.6.2004, resolving expulsion
of the plaintiffs from the partnership firm.
In this background, the said suit came to be filed by the plaintiffs
for rendition of accounts with effect from 30.10.1992 and for releasing
a sum
of Rs.5,48,06,729/- being their 50% share in the profits of the
partnership firm. The claim of the plaintiffs was resisted by the defendant
No.1 by filing a written statement dated 9.9.2005; defendant Nos. 2, 3, 7
to 12 by filing their joint written statement dated 21.10.2005; and
defendant No. 5 by filing written statement dated 29.10.2007.
The XXXIII Additional City Civil & Sessions Judge, Bangalore,
framed the following issues and answered them as such.
“17. On the above pleadings of the parties, the following issues
have been framed for consideration:
1.
Whether the suit of plaintiffs is bad for non-joinder of
necessary party that is M/s Selwel Combines?
2.
Whether the suit of plaintiffs is bad for mis-joinder namely
defendant No. 17 to 19?
3.
Whether the suit of plaintiffs is barred by limitation?
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4.
Whether the plaintiffs prove that they have got 25% share
each in the M/s Selwel Combines?
5.
Whether the plaintiffs are entitled to the relief of
Rs.5,48,06,729/-?
6.
Whether the defendant No. 1, 2 and 5 proves that the
expelled plaintiffs have no locus-standi to seek accounts of
the said firm?
7.
What order or decree?
19. My findings on the above issues are as under:
Issue No.1:
In the negative.
Issue No.2:
In the negative,
Issue No.3:
In the negative
Issue No.4:
In the negative, the plaintiffs have got 10%
share together in M/s Selwel Combines.
Issue No.5:
See order below
Issue No.6:
Plaintiff No. 1 and 2 were expelled from the
date 18/6/2004 and can seek for accounts.
Issue No.7
As per final order.”
While partly decreeing the suit, holding that the plaintiffs together
are entitled to 10% share in the profits and losses of the partnership firm
till 18.6.2004, and that from 18.6.2004, they were expelled partners of
the partnership firm, the trial court vide the judgment and order dated
18.8.2008 directed that the partnership firm had to be made as party in
the final decree proceedings. The other defendants-partners were also
granted liberty to apply to the Court during final decree proceedings for
their declaration of profit and loss share by paying necessary court fee.
The trial court further directed the partnership firm and the defendant
No.1 to produce all the accounts, balance sheets, returns filed before
Income Tax authorities and the bank
documents and such other
documents for the period from 30.10.1992 till 18.6.2004, before an
independent and impartial auditor for drawing the final decree.
Being aggrieved thereby, the plaintiffs preferred an appeal being
R.F.A. No.1111 of 2008 before the High Court of Karnataka at
Bengaluru. The Division Bench of the Karnataka High Court, by the
V. ANANTHA RAJU & ANR v. T.M. NARASIMHAN & ORS.
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impugned judgment and order dated 27.2.2015, dismissed the said appeal.
Being aggrieved thereby, the plaintiffs have approached this Court by
way of present appeal by special leave.
4. We have heard Shri R. Basant, learned Senior Counsel
appearing on behalf of the plaintiffs/appellants and Shri Balaji Srinivasan,
learned counsel appearing on behalf of the defendants/respondent Nos.
1 and 2. Though service of notice is complete on the other respondents,
no one has entered appearance on their behalf.
5. Shri R. Basant, learned Senior Counsel, appearing on behalf of
the appellants, submitted that both the trial court and the High Court
have grossly erred in holding that the plaintiffs will have only 10% share
in the profits and losses of the partnership firm. He submitted that the
finding, that since the plaintiffs failed to prove that they have invested an
amount of Rs.50,00,000/- (Rupees Fifty lakh) and as such, they are not
entitled to 50% share but only 10% share in the profits and losses of the
partnership firm, is totally erroneous. Learned Senior Counsel submits
that the 1992 Deed was drastically amended vide the 1995 Deed. He
submits that, though the 1992 Deed had provided that the share of the
plaintiff No.1 in the profits and losses of the partnership firm was 50%
and it will be reduced to 10% in the event the plaintiff No.1 does not
contribute an amount of Rs.50,00,000/- (Rupees Fifty lakh) towards capital
of
the partnership firm, there was no such stipulation in the 1995 Deed.
The learned Senior Counsel submits that, as a matter of fact, the plaintiffs
had invested the said amount of Rs.50,00,000/- (Rupees Fifty lakh). He
submits that, in any case, the 1995 Deed clearly provides that the plaintiff
No.1 and the plaintiff No.2, who was inducted into the partnership firm
by the 1995 Deed, would be entitled to 25% share each in the profits and
losses of the partnership firm. He submits that the same cannot be a
mistake or error. He submits that if the share of all the partners as
specified in the 1995 Deed is calculated, it would clearly reveal that it
provided for 25% share for each of the plaintiffs. The learned Senior
Counsel, therefore, submits that both the trial court and the High Court
have grossly erred in totally ignoring the specific provision contained in
the 1995 Deed.
6. Shri Balaji Srinivasan, learned counsel, appearing on behalf of
the respondent Nos. 1 and 2, submitted that the finding of fact, on the
basis of the appreciation of evidence, by the trial court as well as the
High Court warrants no interference. He submits that the perusal of the
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1992 Deed as well as the 1995 Deed would clearly show that the plaintiff
No.1 could not have 50% share in the profits and losses of the partnership
firm unless he invested an amount of Rs.50,00,000/- (Rupees Fifty lakh).
He submits that the evidence of plaintiff No.2 as PW-1 would itself
show that he has admitted that he had no material to establish that an
amount of Rs.50,00,000/- (Rupees Fifty lakh) was invested by the plaintiff
No.1 in the partnership firm. Learned counsel further submits that the
plaintiff No.1 has failed to step into the witness box and as such, an
adverse inference has to be drawn against him. Learned counsel further
submits that as per the 1992 Deed, the plaintiff No.1 was entitled only to
10% share in the profits and losses of the partnership firm since he
failed to invest an amount of Rs.50,00,000/- (Rupees Fifty lakh). By the
1995 Deed, the plaintiff No.2, who is son of the plaintiff No.1, came to
be inducted and the 10% share of the plaintiff No.1 was to be divided
amongst them. However, inadvertently, it came to be mentioned in the
1995 Deed that the plaintiffs will have 25% share each. Learned counsel,
therefore, submits that no interference is warranted and the appeal
deserves to be dismissed.
7. In the present case, most of the facts are undisputed. It is not in
dispute that vide the 1992 Deed (Exhibit D-3), the partnership firm was
reconstituted and the plaintiff No.1 was inducted as a partner along with
the original
partners, i.e., the defendant Nos. 1 to 5. As per clause 4 of
the 1992 Deed, the plaintiff No.1, i.e., the incoming partner, was to
contribute an amount of Rs.50,00,000/- (Rupees Fifty lakh) towards
capital, on or before 31.3.1993. As per clause 22 of the 1992 Deed, the
share of the plaintiff No.1 in the profits and losses of the partnership
firm was to be 50% if he contributed an amount of Rs.50,00,000/- (Rupees
Fifty lakh) on or before 31.3.1993. Failing which, the same was to be
only 10%.
8. It is also not in dispute that on 2.11.1992, the partnership firm
obtained a property on lease for a period of 99 years and constructed a
commercial building, which was leased out, and the monthly rent of which
was Rs.22,05,532/- approximately.
9. It will be relevant to refer to paragraphs 2 and 4 of the plaint in
the said suit, filed by the plaintiffs, in the City Civil Court at Bangalore:
“2. A firm by name M/s Selwel Combines was constituted in the
year 1986 and the same was registered in 1990. By means of
Reconstitution/Partnership Amendment Deed dated 30th of
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October 1992, the partnership firm was reconstituted consisting
of the first plaintiff and defendant 1 to 5 as the partners of the
firm. The capital as invested under the partnership Deed was to
an extent of Rs. 25,000/- each by each one of the defendants 1 to
5 and a sum of Rs. 50,00,000/- (Rupees Fifty Lakh only) was
invested by the first plaintiff alone. For the purposes of operation
of the Bank Accounts, the first defendant was constituted as the
Managing Partner who was entrusted with the duty to operate
the bank Accounts. The first plaintiff was entitled to a profit share
of 50% and each one defendants 1 to 5 were entitled to 10%
each. A copy of the Partnership Deed dated 30.10.1992 is
produced herewith and marked as DOCUMENT NO. 1.
4. The Partnership was again reconstituted by the Partnership
Amendment Deed dated 18.8.1995 by virtue of which the second
plaintiff and defendants 6 to 11 were to 16 who were them minors
were also admitted to the benefit of the partnership firm. The
firm was constituted to carry out the activities of building and
development. As per the Reconstitution Deed, the capital of the
firm was the contribution which were already made by the existing
partners and each one of the incoming partners had to contribute
a sum of Rs. 10,000/-. To reconstitute it further it is provided that
the first plaintiff was entitled to 25% of the profit share and the
second plaintiff who is none other than
the some of the first plaintiff
was also entitled to 25% of the profit share. The other partners
were entitled to various extent of shares as contained in the
Reconstitution Deed dated 18.08.1995. For the purposes of
operation of the Bank Accounts, the first defendant was constituted
as a Managing Partner who was entrusted with the duties of
operation of the Bank Accounts. The construction activities had
to be looked after by the first plaintiff. The Partnership Deed
further provided that the partners could withdraw the amounts
only if agreed mutually between the partners from time to time.
Clause 10 of the agreement provided that any of the partner as
per the Reconstitution Deed were entitled to appear in person or
could authorize any person to appear on behalf of the firm before
any judicial or quasi-judicial authority. Therefore as per the terms
of the Reconstitution Deed, the plaintiffs together are entitled to a
profit share up to 50%. Copy of the Reconstitution Deed dated
18.08.1995 is produced and marked as DOCUMENT NO. 2.”
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10. Perusal of the aforesaid paragraphs would reveal that the
plaintiffs have specifically stated that, in pursuance of the 1992 Deed, a
sum of Rs.50,00,000/- (Rupees Fifty lakh) was invested by the plaintiff
No.1 alone. It has been further averred that the plaintiff No.1 was entitled
to a share of 50% and each one of the defendant Nos. 1 to 5 were
entitled to share of 10% each in the profits and losses of the partnership
firm. The plaintiffs have further averred that the partnership firm was
again reconstituted on 18.8.1995 by the 1995 Deed, by virtue of which,
the plaintiff No.2 as well as defendant Nos. 6 to 11 were inducted as
partners in the partnership firm. Vide the 1995 Deed, the defendant
Nos. 12 to 16, who were then minors, were also admitted to the benefit
of the partnership firm. It has been averred that after the reconstitution
of the partnership firm as per the 1995 Deed, it was provided that the
plaintiff No.1 was entitled to 25% share in the profits and losses of the
partnership firm, so also, the plaintiff No.2, who is the son of the plaintiff
No.1, was entitled to 25% share in the profits and losses of the partnership
firm. It has further been averred that the share of the rest of the partners,
i.e., the defendant Nos. 1 to 11, in the profits and losses of the partnership
firm is as mentioned in clause 13 of the 1995 Deed, whereas the defendant
Nos. 12 to 16 were entitled to 2% share in the profits of the partnership
firm.
11. It is the
specific case of the plaintiffs in the plaint that the
partnership firm on 2.11.1992 had obtained a property bearing No.30,
situated at Cunningham Road, Bangalore-560 052, admeasuring an extent
of about 2972 sq. mtrs. on lease, for a period of 99 years. It is further
averred in the plaint that subsequent to the acquisition of the leasehold
rights, the partnership firm undertook the construction activities with the
investments, which were made according to the terms of the partnership
deed. It is the case of the plaintiffs that after the construction of the
building was complete, the entire building was leased out in favour of the
defendant No.17. It is averred that the defendant Nos. 18 and 19 were
made parties to the said suit since the current account of the partnership
firm was with the respondent No.18 - Bank, of which, the respondent
No.19 was the Manager. It is further averred by the plaintiffs in the
plaint that in the returns filed before the Income Tax Authorities, the
share of the plaintiffs in the profits and losses of the partnership firm
was shown as 25% each.
12. It will further be relevant to reproduce paragraph 9 of the
written statement, filed on behalf of the defendant No.1, in the said suit:
V. ANANTHA RAJU & ANR v. T.M. NARASIMHAN & ORS.
[B. R. GAVAI, J.]
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“9. It is true that the firm was reconstituted in the year 1995 and
the Defendants No. 6 to 11 are admitted as partners and further
Defendants No. 12 to 16 are admitted for the benefit of the firm.
They number of partners of the firm, nature of activities of the
firm and other details pertaining to the partnership deed is duly
recorded in the partnership deed and subsequent reconstitution
deeds. In the light of the facts stated supra, the 1st plaintiff was
not entitled to 25% share in the profits. Accordingly, at the time of
induction of 2nd plaintiff as a partner to the firm, it was agreed
between the partners that the 1st plaintiff would be entitled to
pass on 50% of his right to the 2nd plaintiff. Accordingly, the
plaintiffs No.1 and 2 are only entitled to 10% share. The condition
incorporated in the partnership deed dated 30-10-1992 had not
been rectified or varied in any manner. The reference to the share
of the party has come into documentation of the subsequent deeds
based on the preceding document, but without specific noting of
the noncompliance of the condition precedent to be performed by
the 1st plaintiff. However, due to proximate relationship between
the partners, the same was agreed to be understood between the
parties as per the original terms.”
13. It will also be relevant to refer to paragraph 4 of the written
statement, filed on behalf of the defendant No.2, in the said suit:
“4. The facts
regarding the constitution and re-constitution of the
firm M/s. Selwel Combines is a matter of record similarly, the
accounts of the firm is also a matter of record. In this context, it is
relevant to mention that the Plaintiff No.1 was inducted into the
firm as a partner and he had assured to invest Rs. 50,00,000/- on
or before 31.03.1993. Under that circumstance, he was entitled
to 50% of the share in firm. If he failed to comply with the same,
he is only entitled to 10% share. Subsequently his; half share has
been transferred to the Plaintiff No.2. By inadvertence by share
ratio of the Plaintiffs has been reflected as 50% in some
documents and the same is subject to rectification. The same
was not immediately rectified or altered due to the cordial
relationship between the parties and since there was no actual
distribution of funds in that ratio. Any statement made contrary to
the same is hereby denied. In fact, the Plaintiffs in the presence
of the other partners have accepted and admitted this fact. They
are estopped from pleading anything to the contrary.”
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14. The stand taken by the rest of the defendants in their written
statements is on the same lines as taken by the defendant Nos. 1 and 2.
15. It could thus be seen that the defendants have not disputed
the fact with regard to the reconstitution of the partnership firm in the
year 1995 vide the 1995 Deed. They have also not disputed the fact that
the defendant Nos. 6 to 11 were inducted as partners in the partnership
firm and that the defendant Nos. 12 to 16 were admitted to the share in
the profits of the partnership firm vide the 1995 Deed. It is however,
their case that the plaintiff No.1 was entitled to 50% share in the profits
and losses of the partnership firm, only if he invested an amount of
Rs.50,00,000/- (Rupees Fifty lakh) on or before 31.3.1993. It is their
case that, if the same was not complied with, he was entitled to only
10% share in the profits and losses of the partnership firm. It is their
stand that, by inadvertence, the profit and loss share ratio of the plaintiffs
had been reflected as 50% in some documents and the same was subject
to rectification. It is their further case that the same was not immediately
rectified or altered due to the cordial relationship between the parties.
16. It could thus be seen that the defendants have not disputed
about the reconstitution of the partnership firm by the 1995 Deed. They
have also not disputed that in the 1995 Deed, the share of plaintiff Nos.
1 and 2 in the profits and losses of the
partnership firm is mentioned as
25% each. However, it is their case that, since in pursuance of the 1992
Deed, the plaintiff No.1 had not invested an amount of Rs.50,00,000/-
(Rupees Fifty lakh), his share remained to be only 10%, half of which
was given to his son, i.e., the plaintiff No.2, vide the 1995 Deed. It is
their case that the plaintiffs’ share of 25% each, as mentioned in the
1995 Deed, is by inadvertence or a mistake in fact, and the same was
subject to rectification.
17. It will be apposite to refer to relevant part of the affidavit,
filed by the defendant No.1 under Order XVIII Rule 4 of the Code of
Civil Procedure, 1908, in the court of the City Civil Judge at Bangalore,
in the said suit:
“5. …In this context, it is pertinent to mention that on 18.8.1995, a
deed for reconstitution of partnership was entered into thereby
admitting the plaintiff No.2 as an additional partner. At the time of
induction of plaintiff No.2, the plaintiff No.1 had proposed
admission of plaintiff No.2 with an intention to bifurcate his share
in the firm by transferring half of his share to his son who is
V. ANANTHA RAJU & ANR v. T.M. NARASIMHAN & ORS.
[B. R. GAVAI, J.]
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[2021] 11 S.C.R.
plaintiff No.2. The plaintiff No.1 in terms of the agreement failed
to pay towards capital of the firm the sum of Rs.50 lakhs within
31.3.1993 and also until this day. Under such circumstances, in
reality, the plaintiff No.1 was holding only 10% share in the firm
and consequently by virtue of transfer of his half share the 5%
was transferred in favour of plaintiff No.2.
6. I state that on account of failure of plaintiff No.1 to contribute
Rs.50 lakhs before 31.3.1993 having not been noted, an error had
crept in the account of the firm initially reflecting the share of
plaintiff No. 1 as 50% and thereafter reflecting the share of
plaintiffs @ 25% each subsequent to induction of plaintiff No.2.”
18. It could thus be seen that even in his affidavit in lieu of
examination-in-chief, the defendant No.1 admits about the execution of
the 1995 Deed.
19. At this stage, it will be relevant to refer to Sections 17, 91 and
92 of the Indian Evidence Act, 1872 (hereinafter referred to as ‘the
Evidence Act’):
“17. Admission defined.—An admission is a statement, oral or
documentary or contained in electronic form, which suggests any
inference as to any fact in issue or relevant fact, and which is
made by any of the persons, and under the circumstances,
hereinafter mentioned.
91. Evidence of terms of contracts, grants and other
dispositions of property reduced to form of document.—
When the terms of a contract, or of a grant, or of
any other
disposition of property, have been reduced to the form of a
document, and in all cases in which any matter is required by law
to be reduced to the form of a document, no evidence shall be
given in proof of the terms of such contract, grant or other
disposition of property, or of such matter, except the document
itself, or secondary evidence of its contents in cases in which
secondary evidence is admissible under the provisions hereinbefore
contained.
Exception 1.—When a public officer is required by law to
be appointed in writing, and when it is shown that any particular
person has acted as such officer, the writing by which he is
appointed need not be proved.
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Exception 2.—Wills admitted to probate in India may be
proved by the probate.
Explanation 1.—This section applies equally to cases in
which the contracts, grants or dispositions of property referred to
are contained in one document, and to cases in which they are
contained in more documents than one.
Explanation 2.—Where there are more originals than one,
one original only need be proved.
Explanation 3.—The statement, in any document
whatever, of a fact other than the facts referred to in this section,
shall not preclude the admission of oral evidence as to the same
fact.
Illustrations
(a) If a contract be contained in several letters, all the letters
in which it is contained must be proved.
(b) If a contract is contained in a bill of exchange, the bill of
exchange must be proved.
(c) If a bill of exchange is drawn in a set of three, one only
need be proved.
(d) A contracts, in writing, with B, for the delivery of indigo
upon certain terms. The contract mentions the fact that B had
paid A the price of other indigo contracted for verbally on another
occasion.
Oral evidence is offered that no payment was made for the
other indigo. The evidence is admissible.
(e) A gives B a receipt for money paid by B.
Oral evidence is offered of the payment. The evidence is
admissible.
92. Exclusion of evidence of oral agreement.—When the
terms of any such contract, grant or other disposition of property,
or any matter required by law to be reduced to the form of a
document, have been proved according to the last section, no
evidence of any oral agreement or statement shall be admitted, as
between the parties to any such instrument or their representatives
in interest, for the purpose of contradicting, varying, adding to, or
subtracting from, its terms:
V. ANANTHA RAJU & ANR v. T.M. NARASIMHAN & ORS.
[B. R. GAVAI, J.]
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[2021] 11 S.C.R.
Proviso (1).—Any fact may be proved which would
invalidate any document, or which would entitle any person to
any decree or order relating thereto; such as fraud, intimidation,
illegality, want of due execution, want of capacity in any contracting
party, want or failure of consideration, or mistake in fact or law.
Proviso (2).—The existence of any separate oral agreement
as to any matter on which a document is silent, and which is not
inconsistent with its terms, may be proved. In considering whether
or not this proviso applies, the Court shall have regard to the degree
of formality of the document.
Proviso (3).—The existence of any separate oral
agreement, constituting a condition precedent to the attaching of
any obligation under any such contract, grant or disposition of
property, may be proved.
Proviso (4).—The existence of any distinct subsequent oral
agreement to rescind or modify any such contract, grant or
disposition of property, may be proved, except in cases in which
such contract, grant or disposition of property is by law required
to be in writing, or has been registered according to the law in
force for the time being as to the registration of documents.
Proviso (5).—Any usage or custom by which incidents not
expressly mentioned in any contract are usually annexed to
contracts of that description, may be proved:
Provided that the annexing of such incident would not be
repugnant to, or inconsistent with,
the express terms of the contract.
Proviso (6).—Any fact may be proved which shows in
what manner the language of a document is related to existing
facts.
Illustrations
(a) A policy of insurance is effected on goods “in ships
from Calcutta to London”. The goods are shipped in a particular
ship which is lost. The fact that that particular ship was orally
excepted from the policy, cannot be proved.
(b) A agrees absolutely in writing to pay B Rs 1000 on the
1st March, 1873. The fact that, at the same time, an oral agreement
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was made that the money should not be paid till the thirty-first
March, cannot be proved.
(c) An estate called “the Rampur tea estate” is sold by a
deed which contains a map of the property sold. The fact that
land not included in the map had always been regarded as part of
the estate and was meant to pass by the deed, cannot be proved.
(d) A enters into a written contract with B to work certain
mines, the property of B, upon certain terms. A was induced to
do so by a misrepresentation of B’s as to their value. This fact
may be proved.
(e) A institutes a suit against B for the specific performance
of a contract, and also prays that the contract may be reformed
as to one of its provisions, as that provision was inserted in it by
mistake. A may prove that such a mistake was made as would by
law entitle him to have the contract reformed.
(f) A orders goods of B by a letter in which nothing is said
as to the time of payment, and accepts the goods on
delivery. B sues A for the price. A may show that the goods were
supplied on credit for a term still unexpired.
(g) A sells B a horse and verbally warrants him
sound. A gives B a paper in these words “Bought of A a horse
for Rs 500”. B may prove the verbal warranty.
(h) A hires lodgings of B, and gives B a card on which is
written—”Rooms, Rs 200 a month”. A may prove a verbal
agreement that these terms were to include partial board.
A hires lodgings of B for a year, and a regularly stamped
agreement, drawn up by
an attorney, is made between them. It is
silent on the subject of board. A may not prove that board was
included in the terms verbally.
(i) A applies to B for a debt due to A by sending a receipt
for the money. B keeps the receipt and does not send the money.
In a suit for the amount, A may prove this.
(j) A and B make a contract in writing to take effect upon
the happening of a certain contingency. The writing is left with B,
who sues A upon it. A may show the circumstances under which
it was delivered.”
V. ANANTHA RAJU & ANR v. T.M. NARASIMHAN & ORS.
[B. R. GAVAI, J.]
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20. It could thus be seen that the admission given by the defendant
No.1 in his written statement as well as in his affidavit in lieu of
examination-in-chief, that the partners have executed the 1995 Deed, is
unambiguous and clear. In the light of this admission by the defendant
Nos. 1, 5, and 2, 3, 7 to 12, it will be relevant to consider the effect of
Sections 91 and 92 of the Evidence Act in the present case.
21. This Court in the case of Roop Kumar v. Mohan Thedani1
has elaborately considered the earlier judgments of this Court on the
issue in hand and has held as under:
“12. Before we deal with the factual aspects, it would be proper
to deal with the plea relating to scope and ambit of Sections 91
and 92 of the Evidence Act.
13. Section 91 relates to evidence of terms of contract, grants
and other disposition of properties reduced to form of document.
This section merely forbids proving the contents of a writing
otherwise than by writing itself; it is covered by the ordinary rule
of law of evidence, applicable not merely to solemn writings of
the sort named but to others known sometimes as the “best-
evidence rule”. It is in reality declaring a doctrine of the substantive
law, namely, in the case of a written contract, that all proceedings
and contemporaneous oral expressions of the thing are merged in
the writing or displaced by it. (See Thayer’s Preliminary Law
on Evidence, p. 397 and p. 398; Phipson’s
Evidence, 7th Edn.,
p. 546; Wigmore’s Evidence, p. 2406.) It has been best described
by Wigmore stating that the rule is in no sense a rule of evidence
but a rule of substantive law. It does not exclude certain data
because they are for one or another reason untrustworthy or
undesirable means of evidencing some fact to be proved. It does
not concern a probative mental process — the process of believing
one fact on the faith of another. What the rule does is to declare
that certain kinds of facts are legally ineffective in the substantive
law; and this of course (like any other ruling of substantive law)
results in forbidding the fact to be proved at all. But this prohibition
of proving it is merely that dramatic aspect of the process of
applying the rule of substantive law. When a thing is not to be
proved at all the rule of prohibition does not become a rule of
1 (2003) 6 SCC 595
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evidence merely because it comes into play when the counsel
offers to “prove” it or “give evidence” of it; otherwise, any rule of
law whatever might be reduced to a rule of evidence. It would
become the legitimate progeny of the law of evidence. For the
purpose of specific varieties of jural effects — sale, contract etc.
there are specific requirements varying according to the subject.
On the contrary there are also certain fundamental elements
common to all and capable of being generalised. Every jural act
may have the following four elements:
(a)
the enaction or creation of the act;
(b)
its integration or embodiment in a single memorial when
desired;
(c)
its solemnization or fulfilment of the prescribed forms, if
any; and
(d)
the interpretation or application of the act to the external
objects affected by it.
14. The first and fourth are necessarily involved in every jural
act, and second and third may or may not become practically
important, but are always possible elements.
15. The enaction or creation of an act is concerned with the
question whether any jural act of the alleged tenor has been
consummated; or, if consummated, whether the circumstances
attending its creation authorise its avoidance or annulment. The
integration of the act consists in embodying it in a single utterance
or memorial — commonly, of course, a written one. This process
of integration may be required by law, or it may be adopted
voluntarily by the actor or actors and in the
latter case, either
wholly or partially. Thus, the question in its usual form is whether
the particular document was intended by the parties to cover certain
subjects of transaction between them and, therefore, to deprive
of legal effect all other utterances.
16. The practical consequence of integration is that its scattered
parts, in their former and inchoate shape, have no longer any jural
effect; they are replaced by a single embodiment of the act. In
other words, when a jural act is embodied in a single memorial all
other utterances of the parties on the topic are legally immaterial
V. ANANTHA RAJU & ANR v. T.M. NARASIMHAN & ORS.
[B. R. GAVAI, J.]
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for the purpose of determining what are the terms of their act.
This rule is based upon an assumed intention on the part of the
contracting parties, evidenced by the existence of the written
contract, to place themselves above the uncertainties of oral
evidence and on a disinclination of the courts to defeat this object.
When persons express their agreements in writing, it is for the
express purpose of getting rid of any indefiniteness and to put
their ideas in such shape that there can be no misunderstanding,
which so often occurs when reliance is placed upon oral statements.
Written contracts presume deliberation on the part of the
contracting parties and it is natural they should be treated with
careful consideration by the courts and with a disinclination to
disturb the conditions of matters as embodied in them by the act
of the parties. (See McKelvey’s Evidence, p. 294.) As observed
in Greenlear’s Evidence, p. 563, one of the most common and
important of the concrete rules presumed under the general notion
that the best evidence must be produced and that one with which
the phrase “best evidence” is now exclusively associated is the
rule that when the contents of a writing are to be proved, the
writing itself must be produced before the court or its absence
accounted for before testimony to its contents is admitted.
17. It is likewise a general and most inflexible rule that wherever
written instruments are
appointed, either by the requirement of
law, or by the contract of the parties, to be the repositories and
memorials of truth, any other evidence is excluded from being
used either as a substitute for such instruments, or to contradict
or alter them. This is a matter both of principle and policy. It is of
principle because such instruments are in their own nature and
origin, entitled to a much higher degree of credit than parol
evidence. It is of policy because it would be attended with great
mischief if those instruments, upon which men’s rights depended,
were liable to be impeached by loose collateral evidence.
(See Starkie on Evidence, p. 648.)
18. In Section 92 the legislature has prevented oral evidence being
adduced for the purpose of varying the contract as between the
parties to the contract; but, no such limitations are imposed under
Section 91. Having regard to the jural position of Sections 91 and
92 and the deliberate omission from Section 91 of such words of
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limitation, it must be taken note of that even a third party if he
wants to establish a particular contract between certain others,
either when such contract has been reduced to in a document or
where under the law such contract has to be in writing, can only
prove such contract by the production of such writing.
19. Sections 91 and 92 apply only when the document on the
face of it contains or appears to contain all the terms of the
contract. Section 91 is concerned solely with the mode of proof
of a document with limitation imposed by Section 92 relates only
to the parties to the document. If after the document has been
produced to prove its terms under Section 91, provisions of Section
92 come into operation for the purpose of excluding evidence of
any oral agreement or statement for the purpose of contradicting,
varying, adding or subtracting from its terms. Sections 91 and 92
in effect supplement each other. Section 91 would be inoperative
without the aid of Section 92, and similarly Section 92 would be
inoperative without the aid of Section 91.
20. The two sections, however, differ in some material particulars.
Section 91 applies to all documents, whether they purport to dispose
of rights or not, whereas Section 92 applies to documents which
can be described as dispositive. Section 91 applies to documents
which are both bilateral and unilateral, unlike Section 92 the
application of which is confined to only bilateral documents.
(See: Bai Hira Devi v.
Official Assignee of Bombay [AIR 1958
SC 448] .) Both these provisions are based on “best-evidence
rule”. In Bacon’s Maxim Regulation 23, Lord Bacon said “The
law will not couple and mingle matters of specialty, which is of
the higher account, with matter of averment which is of inferior
account in law.” It would be inconvenient that matters in writing
made by advice and on consideration, and which finally import
the certain truth of the agreement of parties should be controlled
by averment of the parties to be proved by the uncertain testimony
of slippery memory.
21. The grounds of exclusion of extrinsic evidence are: (i) to admit
inferior evidence when law requires superior would amount to
nullifying the law, and (ii) when parties have deliberately put their
agreement into writing, it is conclusively presumed, between
themselves and their privies, that they intended the writing to form
V. ANANTHA RAJU & ANR v. T.M. NARASIMHAN & ORS.
[B. R. GAVAI, J.]
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a full and final statement of their intentions, and one which should
be placed beyond the reach of future controversy, bad faith and
treacherous memory.
22. This Court in Gangabai v. Chhabubai [(1982) 1 SCC 4:
AIR 1982 SC 20] and Ishwar Dass Jain v. Sohan Lal [(2000) 1
SCC 434: AIR 2000 SC 426] with reference to Section 92(1) held
that it is permissible to a party to a deed to contend that the deed
was not intended to be acted upon, but was only a sham document.
The bar arises only when the document is relied upon and its
terms are sought to be varied and contradicted. Oral evidence is
admissible to show that document executed was never intended
to operate as an agreement but that some other agreement
altogether, not recorded in the document, was entered into between
the parties.”
22. It could thus be seen that this Court has held that the integration
of the act consists in embodying it in a single utterance or memorial —
commonly, a written one. This process of integration may be required by
law, or it may be adopted voluntarily by the actor or actors and in the
latter case, either wholly or partially. It has been held that the question
that is required to be considered is whether the particular document was
intended by the parties to cover certain subjects of transaction between
them to deprive of legal effect of all other utterances. It has been further
held that the practical consequence of integration is that
its scattered
parts, in their former and inchoate shape, have no longer any jural effect
and they are replaced by a single embodiment of the act. It has been
held that when a jural act is embodied in a single memorial, all other
utterances of the parties on the topic are legally immaterial for the purpose
of determining what are the terms of their act. It has been held that
when persons express their agreements in writing, it is for the express
purpose of getting rid of any indefiniteness and to put their ideas in such
shape that there can be no misunderstanding, which so often occurs
when reliance is placed upon oral statements. It has been observed that
the written contracts presume deliberation on the part of the contracting
parties and it is natural that they should be treated with careful
consideration by the courts and with a disinclination to disturb the
conditions of matters as embodied in them by the act of the parties. It
has been held that the written instruments are entitled to a much higher
degree of credit than parol evidence.
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23. This Court has further held that Sections 91 and 92 of the
Evidence Act would apply only when the document on the face of it
contains or appears to contain all the terms of the contract. It has been
held that after the document has been produced to prove its terms under
Section 91, the provisions of Section 92 come into operation for the
purpose of excluding evidence of any oral agreement or statement for
the purpose of contradicting, varying, adding or subtracting from its terms.
It has been held that it would be inconvenient that matters in writing
made by advice and on consideration, and which finally import the certain
truth of the agreement of parties should be controlled by averment of
the parties to be proved by the uncertain testimony of slippery memory.
It has been held that when parties deliberately put their agreement into
writing, it is conclusively presumed, between themselves and their privies,
that they intended the writing to form a full and final statement of their
intentions, and one which should be placed beyond the reach of future
controversy, bad faith and treacherous memory.
24. Though referring to Gangabai w/o Rambilas Gilda (Smt.)v.
Chhabubai w/o Pukharajji Gandhi (Smt.)2 and Ishwar Dass Jain
(Dead) Through Lrs. v. Sohan Lal (Dead) by Lrs.3, it has been held
that it is permissible for a party to a deed to contend that the deed was
not intended to be acted upon, but was only a sham document, it would
be necessary to lead oral
evidence to show that the document executed
was never intended to operate as an agreement but that some other
agreement altogether, not recorded in the document, was entered into
between the parties.
25. It could thus be seen that once the plaintiffs had specifically
contended that the terms of the 1992 Deed were amended/modified by
the 1995 Deed, and the defendants admitted about the execution of the
said document, i.e., the 1995 Deed, if it was the case of the defendants
that the terms mentioned in the 1995 Deed were inadvertent or a mistake
in fact, then the burden to prove the same shifted upon the defendants.
In view of Section 92 of the Evidence Act, any evidence with regard to
oral agreement for the purpose of contradicting, varying, adding to, or
subtracting from the terms of the written contract, would be excluded
unless the case falls within any of the provisos provided in Section 92.The
2 (1982) 1 SCC 4
3 (2000) 1 SCC 434
V. ANANTHA RAJU & ANR v. T.M. NARASIMHAN & ORS.
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defendants have attempted to bring their case within the first proviso to
Section 92 of the Evidence Act, by contending that mentioning of 25%
share to each of the plaintiffs in the profits and losses of the partnership
firm was a mistake in fact.
26. It will also be relevant to examine the contention of the
defendants, as to whether the share of the plaintiffs in the profits and
losses of the partnership firm, mentioned in the 1995 Deed, was due to
inadvertence or was a mistake in fact.
27. It will be relevant to refer to the preamble of the 1995 Deed:
“Whereas the Parties 1 to 6, hereto in pursuance of Deed
of Partnership among themselves dated 30th October, 1992, have
been carrying on business at 31/1.1 Cunningham Road Bangalore
- 360052 as Builders and Developers under the name and style of
“SELWEL COMBINES”.
AND the Parties of Seventh, Eight, Ninth, Tenth, Eleventh,
Twelfth, Thirteenth parties have after negotiation agreed to join
the partnership firm M/s Selwel Combines as Partners with effect
from 18th August, 1995 and are referred tb as the Incoming
Partners.
And the Parties hereto have decided to admitted V.
Vijaylakshmi Kumari R. Poornima, Master R. Manjunath Master
S. Ragavendra, Master S. Badrinath to the benefit of this
partnership
AND whereas the parties of the First, Second, Third, Fourth,
Fifth and Sixth parts have decided to continue· the business of the
Firm “SELWEL COMBINES” after admitting parts
of the
Seventh, Eight, Ninth, Tenth, Eleventh, Twelth, Thirteenth parts
as Partners and are referred to as continuing partners.
And whereas the Parties hereto after negotiations amount
themselves have decided to amend the terms of partnership of
the Firm M/s “SELWEL COMBINES” with effect from
18.08.1995.
And whereas the parties hereto have decided to admit the
following minors to the benefit of Partnership as:
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And whereas parties hereto are desirous of reducing the
terms and conditions of the Agreement of Amendment of
Partnership into writing.”
28. It could thus clearly be seen that the 1995 Deed specifically
refers to the 1992 Deed between the party Nos. 1 to 6, i.e., plaintiff
No.1 and the defendant Nos. 1 to 5. It further states that the party Nos.
7 to 13, i.e., the defendant Nos. 6 to 11 and the plaintiff No.2, have, after
negotiation, agreed to join the partnership firm with effect from 18.8.1995.
It further states that it has been agreed between the parties that the
defendant Nos. 12 to 16 have been admitted to the benefit of the
partnership firm. The preamble specifically states that after negotiation
amongst themselves, the parties have decided to amend the terms of the
partnership firm with effect from 18.8.1995 and thereafter have reduced
the terms and conditions of the agreement of amendment of partnership
into writing.
29. It will be apposite to refer to clause 4 of the 1995 Deed, which
reads thus:
“4. Capital of the Firm
The capital of the firm shall consist of Capital already
contributed by parties of First, Second, Third, Fourth, Fifth and
Sixth parts and capital contributed by incoming partners of Rs.
10,000/- each.”
30. It could thus clearly be seen that clause 4 of the 1995 Deed
specifically provides that the capital of the partnership firm shall be the
capital already contributed by parties of First, Second, Third, Fourth,
Fifth and Sixth
parts, and the capital contributed by the incoming partners
of Rs.10,000/- each.
31. In contrast, it will be relevant to refer to clause 4 of the 1992
Deed, which reads thus:
V. ANANTHA RAJU & ANR v. T.M. NARASIMHAN & ORS.
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“4. Capital of the firm: Capital of the firm shall consist of capitals
already contributed by partners of First, Second, Third, Fourth &
Fifth as below:
First Partner
25,000
Second Partner
25,000
Third Partner
25,000
Fourth Partner
25,000
Fifth Partner
25,000
Sixth Partner is all of that contribute Rs. 50,00,000 (Fifty
Lakhs) as his contribution the capital of the firm and he shall
contribute his capital of Rs. 50,00,000 on or before 31st December
1993.”
32. It could thus be seen that clause 4 of the 1992 Deed, provides
that though the capital of the partnership firm was capital already
contributed by the defendants Nos. 1 to 5, i.e., Rs.25,000/- each, the
plaintiff No.1 was to contribute an amount of Rs.50,00,000/- (Rupees
Fifty lakh) to the capital of the firm.
33. It will also be relevant to refer to clause 13 of the 1995 Deed,
which deals with ‘sharing of profits or losses’ of the partnership firm:
“13. Sharing of Profits or Losses:
The book profits or losses shall be arrived at after providing
for interest paid or payable of this firm to any of the partners; out
of the balance, salary payable to any of them shall be allocated.
After this, balance of Profits or Losses shall be shared as below:
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The following persons are admitted to the benefits of
Partnership only:
34. In contrast, it will be relevant to refer to clause 22 of the 1992
Deed, which reads thus:
“22. Sharing of Profit & Losses: Book profits of the firm shall be
arrived at after providing for interest paid/payable to partner on
their capital account balances as in para 22. Out of book profits
first salary allowable to any of the partners will be allocated.
Balance profits or losses shall be shared as below:
Sri T. M. Narashimhan
10%
Sri. V. Srinivas
10%
Sri. V. Uma Shankar
10%
Sri. E. Ravi Kumar
10%
Sri. H. Shamanna
10%
Sri. V. Anantha Raju
50%
If Sri V. Anantha Raju fails to bring in Rs. 50,00,000 as his
capital contribution to the firm on or before 31st March 1993 he
shall be entitled to only 10% of the profits of the firm and liable to
share losses also at 10% of total losses. On that event, profits and
losses shall be shared or borne an the case may be as follows:
Sri T. M. Narashimhan
20%
Sri. V. Srinivas
20%
Sri. V. Uma Shankar
20%
Sri. E. Ravi Kumar
20%
Sri. H. Shamanna
10%
Sri. V. Anantha Raju
10%”
V. ANANTHA RAJU & ANR v. T.M. NARASIMHAN & ORS.
[B. R. GAVAI, J.]
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35. Comparison of these two clauses would reveal that in the
1992 Deed, though the share of the defendant Nos. 1 to 5 in the profits
and losses of the partnership firm was specified as 10%, the share of
plaintiff No.1 was specified as 50%. However, it is specifically mentioned
in the 1992 Deed, that in the event, the plaintiff No.1 fails to bring in an
amount of Rs.50,00,000/- (Rupees Fifty lakh) as his capital contribution
to the partnership firm on or before 31.3.1993, the share in the profits
and losses of the partnership firm of defendant Nos. 1 to 4 would be
20% each and that of the plaintiff No.1 and the defendant No.5 would
be 10% each.
36. In the amended deed, i.e., the 1995 Deed, there is no mention
regarding such contingency upon the plaintiff No.1 depositing or not
depositing an amount of Rs.50,00,000/- (Rupees Fifty lakh).
37. What has happened between 1992 and 1995 is exclusively
within the knowledge of the parties. Though the plaintiffs have averred
that an amount of Rs.50,00,000/- (Rupees Fifty lakh) was invested by
the plaintiff No.1 in the intervening period, the same is denied by the
defendants. However, in view of Section 91 of the Evidence Act, the
evidentiary value of the 1995 Deed would stand on a much higher pedestal,
as against the oral testimony of the parties. The 1995 Deed clearly shows
that it is executed after due deliberations, negotiations and mutual
consensus on the terms and
conditions to be incorporated therein. By
the 1995 Deed, 6 new partners have been admitted to the partnership
firm, whereas 5 minors have been admitted to the benefit of the
partnership firm. The contention of the defendants, that the share of the
plaintiff Nos. 1 and 2 in the profits and losses of the partnership firm,
mentioned as 25% each, is by mistake and, in fact, is only 5% each, does
not sound logical and reasoned. If it was by mistake or inadvertence,
nothing precluded the defendants from rectifying the same between 1995
and 2004. The arithmetical calculations would also show that the share
in the profits and losses of the partnership firm has been mentioned in
the 1995 Deed after due deliberations and negotiations. It could be seen
that, though the share of the defendant No.1, as per the agreement, i.e.,
the 1995 Deed, in the losses of the partnership firm is 28%, his share in
the profits is only 18%. The 10% difference of share in the profits and
losses of the defendant No.1 has been adjusted towards the 2% share in
the profits given to the defendant Nos. 12 to 16 each. As such, we are
unable to accept the contention of the defendants that the share in the
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profits and losses of the partnership firm as mentioned in the 1995 Deed
is inadvertent or a mistake in fact. In any case, if that was so, the burden
was on the defendants to establish that the 1995 Deed did not reflect the
mutual intention of the parties and the terms and conditions agreed
between the parties were different than those reduced in writing by the
1995 Deed.
38. We find that the following observations by the trial court in its
judgment and order dated 18.8.2008 are not sustainable in law, in the
light of the provisions as contained in Section 91 of the Evidence Act.
“…Therefore if we read the plaint and evidence of plaintiff No.2,
the plaintiffs have not produced any scrap of paper that plaintiff
No.1 had given or deposited Rs.50,00,000/- towards his share to
claim 50% of profit share. It is only mere assertions the plaintiffs
are asking before the court that “we are entitled for 50% share”
they are not saying before the court why and for what reasons
that they are entitled to 50% share - and other partners are entitled
to a lesser share. Merely because share of the plaintiffs have
been shown as 25% each either in the partnership deed dated 18/
8/1995 or subsequent returns filed before the income tax authorities
is of no avail because those documents have not been acted upon
to distribute the profits between the partners to show that plaintiff
Nos. I and 2 were given profit share at any time.”
39. In this factual background, we are of the
considered view that
the trial court as well as the High Court have erred in holding that the
plaintiffs together were entitled to only 10% share in the profits and
losses of the partnership firm till 18.6.2004.
40. Insofar as the challenge of the appellants to their expulsion
from the partnership firm is concerned, we do not find any merit in the
contention of the appellants. It will be relevant to refer to clause 17 of
the 1992 Deed:
“17. The Partners have right to expel an erring partner/partners
or a partner who prevents the other partner from carrying on
business effectively and profitable or the partner/partners who
causes damage to the interest of the firm of his/their acts, after
him/them reasonable opportunity of being hard.”
41. Perusal of clause 17 of the 1992 deed would reveal that the
partners have right to expel an erring partner/partners on the grounds
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specified therein. The 1995 Deed does not have any conflicting provision.
The clauses in the 1992 Deed, which are not superseded by the 1995
Deed, would still continue to operate. The trial court has given sound
reasons, while upholding the expulsion of the plaintiffs. We see no reason
to interfere with the same.
42. In the result, the appeal is partly allowed.
43. The judgment and decree passed by the trial court, as affirmed
by the High Court, holding that the plaintiffs together have 10% share in
the profits and losses of the partnership firm is modified. It is declared
and decreed that the plaintiffs together are entitled to 50% share in the
profits and losses of the partnership firm till 18.6.2004.
44. The judgment and decree passed by the trial court, as affirmed
by the High Court, to the effect that the plaintiffs are expelled from the
partnership firm with effect from 18.6.2004 is maintained. Rest of the
directions of the trial court in paragraphs 2 to 6 of the operative part in
its judgment are also maintained.
45. The appeal is disposed of in the above terms. There shall be
no order as to costs. Pending applications, if any, shall stand disposed of.
Ankiit Gyan
Appeal partly allowed.