Ram Swarup Maru v. State Of Bihar And Another

Untwalia, J.:— This appeal by defendant No. 2 is from the judgment and decree of the 2nd Additional subordinate Judge at Purnea passed in Money Suit No. 148/2 of 1956/1963 by which the suit of the plaintiff-respondent No. 1 has been decreed in part. The State of Bihar (Respondent No. 1) filed the suit against the firm Messrs Ganesh Rice Mill said to be also known as firm Jalalgarh Rice Mill of Jalalgarh in the district of Purnea and Ram Swarup Maru (defendant No. 2) said to be the proprietor of the firm, defendant No. 1. The suit was for realisation of Rs. 29,492/10/3 pies. The plaintiff's case is that the defendants worked as purchasing and milling agent of the plaintiff during the years 1946–1947, 1947–1948 & 1948–1949 under the grain supply scheme sponsored by the plaintiff. They had to supply rice extracted from paddy supplied to them on plaintiff's account at such scale, rate and quality as may be fixed by the prescribed authority on behalf of the plaintiff. The defendants executed an agreement dated 30-3-1948 to this effect.

2. The plaintiffs case further is that the defendants received in all 22,748 maunds 2 seers of paddy from the plaintiff during the periods aforesaid including 16 maunds of paddy which was the balance due of the year 1946–1947. The defendants were liable to supply 14,201 maunds 27 seers and 6 chhataks of rice to the plaintiff in lieu of the paddy received but they supplied only 13,620 maunds of rice on plaintiff's account between March, 1948 to March, 1950. They did not supply the balance of 581 maunds 27 seers 6 Chhataks of rice and retained the same with mala fide intention for wrongful gain and as such they are liable to pay the equivalent price of rice not supplied by way of damages to the plaintiff. The plaintiff has claimed a sum of Rs. 9,307/- on account of the price of rice at Rs. 16/- per maund and has adjusted a sum of Rs. 7,127/8/- that was payable to the defendants by the plaintiff against the account in question on account of their milling charge etc. due from the Government. The balance claimed is Rs. 2,179/8/-. The next item of claim was a small sum of Rs. 80/8/- on account of excess payment for cartage allowance on certain quantity of rice despatched. The plaintiff's case further is that the defendants were supplied 58,000 new gunny bags and 38,092 once used gunny bags (which herein after will be referred to as the old bags) during the period between September, 1946 and March, 1948 while they were working as milling and purchasing agents. On accounting made by the plaintiff it was found that 24,514 new gunny bags and 3,074 old bags and 10.136 rotten bags remained with the defendants the value of which with sales tax came to Rs. 26,259/6/-. Adding to the various sums interest as per account given in schedule A appended to the plaint, the total claim in the suit as stated above, was to the tune of Rs. 29,492/10/3 pies.

3. Two written statements were filed by the appellant, one on 7-3-1963 and the other about a month later on 18-4-1963. The pleas taken by the appellant in the two written statements which are necessary to be stated are these. The suit as framed is not maintainable. The designation and description of defendant No. 1 indicating that Ganesh Rice Mill was also known as Jalalgarh Rice Mill is wrong and false. Defendant No. 2 was never the proprietor of the firm defendant No. 1. He was one of its partners along with seven others. The partnership firm Messrs Ganesh Rice Mill or Ganesh Rice Mill Company (whatever the name may be) was dissolved in or about the year 1951 and the firm was not in existence on the date of the suit which was not maintainable until and unless all the partners were impleaded as defendants in the suit. Ganesh Rice Mill worked as purchasing and milling agent of the plaintiff during the years 1946–1947 to 1948–1949 and supplied rice extracted from paddy supplied to the said mill. It was, however, not correct to say that the supply of rice was to be at such scale, rate and quality as prescribed by the prescribed authority on behalf of the plaintiff. The supply was according to the atcual recovery.

4. Defendant No. 2 only had executed an agreement on 30-3-1948 but the said agreement was not in accordance with law and it was not binding on the partnership firm. The figures given by the plaintiff in regard to the quantity of paddy or rice or its amount of claim on that basis were denied in the written statement. The rate of rice to be Rs. 16/- per maund was also not admitted. Excess payment of cartage was also denied. In regard to the figure of bags it was asserted even in the first written statement that only 54,000 new gunny bags and 37,400 old gunny bags had been supplied to the defendants from the various persons on account of the plaintiff. As against the figure of receipt of bass, the mill's statement showed that 50,564 new bags and 14000 old bags were supplied back to the plaintiff during the relevant period. Besides that 19,790 bags got rotten when the defendants were handling paddy and rice on account of the plaintiff. Thus a balance of 10,046 bags only remained with the mill on 21-5-1950. The said statement of account was accepted by the District Supply Officer, Purnea. Even after 21-5-1950 the mill supplied rice to various individuals at the mill gate against permits issued by the District Supply Officer. Pumea and 480 new bags were utilised and supplied on the Government account for the purpose leaving a balance of 9,566 old and rotten bags only remaining with the defendant mill. In spite of several requests made, the plaintiff did not care to remove those bags from the mill premises.

5. The further case in the written statement is that while acting as purchasing agent Ganesh Rice Mill purchased paddy on Government account to the extent of 80,000 maunds and a large number of bags which were used in those transactions became torn and unfit for use on account of movement-storage of paddy in those bags. In the additional written statement some figures relating to the supply of paddy and rice were given. It was said that only 22,729 maunds of paddy were received on Government account obviously for husking and not 22.748 maunds as is the case of the plaintiff 50 maunds of paddy and 40 maunds of rice were lost by cyclone and rain in the year 1948 for which report was submitted to the District Supply Officer. Pumea and was verified by the Marketing Inspector of the plaintiff and it was found to be correct 60 maunds of rice were supplied to the District Magistrate in the month of December, 1950. It was also claimed that there was shortage, shrinkage, and wastage of rice and paddy and even permissible percentage under the Government circulars has not been allowed.

6. The learned Additional Subordinate Judge has held the suit to be maintainable finding that the firm defendant No. 1 is not a partnership firm but it was a firm of which defendant No. 2 was the proprietor. It has further found that defendant No. 2 had executed an agreement for working as purchasing and milling agent of the plaintiff on behalf of his firm Ganesh Rice Mill and the mill premises and other properties sold by the so-called partners of Ganesh Rice Mill to a concern purporting to be a limited company in the name of Jalalgarh Rice and Oil Mill Limited was a sham and fictitious transaction and the name Jalalgarh Rice and Oil Mill Limited was merely a change in the constitution of the firm Ganesh Rice Mill.

7. The findings on the merits of the case are that 22,729 maunds of paddy had been supplied to the defendants as is their case from which they had to surely 14,229 maunds of rice. They supplied as is their case, only 13,690 maunds of rice and hence they are liable to pay the price of 539 maunds of rice at the rate of Rs. 16/- per maund. The total price of rice thus came to Rs. 8,624/-. Deducting a sum of Rs. 7,127/8/-, the claim on this account decreed by the Court below is Rs. 1,496/8/-. In regard to the bags account the finding recorded by the Court below is that 54,000 new gunny bags and 37,400 old gunny bags were supplied to the defendants out of which they have not accounted for 16,956 new gunny bags and 9568 old gunny bags. Calculating the price of new gunny bags at Rs. 100/- per hundred and at Rs. 3/- per hundred for the old gunny bags, the decree on account of the bags is to the tune of Rs. 17,237/-. The Court below has not passed any decree for realisation of Rs. 80/8/- or any sum on account of interest claimed up to the date of the suit. Thus, it has passed a decree for Rs. 18,733/8/- with interest pendente lite and future at the rate of 6 per cent per annum with proportionate costs. Defendant No. 2 has come up in appeal.

8. The points urged on behalf of the appellant in this appeal are:

(i) That the finding of the Court below with reference to the transaction with Jalalgarh Rice and Oil Mill Limited and any observation in regard to the transaction entered on 9-10-1952 with the said limited company is ultra vires and beyond the scope of the present suit and no finding could be recorded against the company in its absence.

(ii) That it ought to have been held that the firm defendant No. 1 was a partnership firm and not a proprietary firm of defendant No. 2; he was one of the partners besides seven others and it ought to have been further held that the partnership firm stood dissolved long before the institution of the suit.

(iii) That the suit filed against a dissolved firm and one of the partners of the firm was not maintainable.

(iv) That no decree could be passed because the contract said to have been entered into between the parties was void for violation of Section 175(3) of the Government of India Act, 1935.

(v) That the Court below has committed several errors in the matter of accounting of paddy, rice and bags as also in arriving at several findings of fact in regard to them and has thereby committed an error in decreeing the plaintiffs suit to the extent it has been decreed.

9. In my opinion, the first grievance made on behalf of the appellant is justified. Within the scope based upon the pleadings of this suit the only question was as to whether the firm Ganesh Rice Mill was also known as firm Jalalgarh Rice Mill. The Court below has not recorded any finding in this regard nor possibly a finding in favour of the plaintiff could be recorded as there was no evidence to this effect. From the evidence of D.W 3 Nakul Das, the Manager of Ganesh Rice Mill who subsequently was the manager of Ganesh Rice and Oil Mill Limited, a transferee of the mill premises on transfer by partners of Ganesh Rice Mill, it is clear that Ganesh Rice Mill was a partnership firm. The premises and properties of the mill were transferred by the sale deed (exhibit E) executed on 9-10-1952 by the partners of Ganesh Rice Mill in favour of Jalalgarh Rice and Oil Mill Limited, a company incorporated under the Indian Companies Act, 1913 and having its registered office at 178, Harrison Road, Calcutta. By two petitions filed in this Court, one on 29-8-1968 and the other on 4-11-1968, certain documents were tendered to be taken by way or additional evidence under Order 41 Rule 27 of the CPC. The documents tendered are the assessment orders of the Income Tax Officers showing that Ganesh Rice Mill was a partnership firm and a certificate for commencement of business granted by the Registrar of Joint Stock Companies, West Bengal, Under Section 103(2) of the Indian Companies Act, 1913, showing that Jalalgarh Rice Oil Mill Limited was incorporated under the said Act. Endeavour was made to persuade us to admit these documents either under Clause (b) or Clause (c) of Order 41 Rule 27 of the CPC as it stands under the Patna amendment.

10. We did not think it necessary to do so. Even without the aid of those documents there is no difficulty in holding on the ex parte evidence as it is, that Ganesh Rice Mill was a partnership firm. Its properties were sold under exhibit E, the sale deed, executed in the year 1952 by the partners of the firm after its dissolution to a limited company. It was not correct to say that the other name of the firm Ganesh Rice Mill was Jalalgarh Rice Mill. The question whether Jalalgarh Rice and Oil Mill Limited was in reality not a limited company, rather it was a firm belonging to defendant No. 2 or that the transaction in its favour entered into in the year 1952 was sham and a paper transaction could not be gone into in this suit. There were no such allegations in the plaint nor could they be made in a suit which was filed for realisation of the money said to be due when defendant No. 2 was working on behalf of the firm Ganesh Rice Mill. The findings recorded beyond the scope of the suit as also in absence of the limited company are all wrong and beyond the jurisdiction of this suit and cannot be allowed to stand.

11. I, however, accept the contention put forward on behalf of the appellant that Ganesh Rice Mill was a partnership firm in which defendant No. 2 was a partner along with others. He was not the proprietor of that firm. The evidence already adduced by the defendants is clear on this point. Learned Government Pleader No. 1 did not contest this point urged on behalf of the appellant. I, accordingly, hold that the decree passed by the Court below as it will stand after modification by this Court will be deemed to be a decree against defendant No. 1, the partnership firm and defendant No. 2, being one of partners. I also accept the contention put forward on behalf of the appellant that the firm stood dissolved in or about the year 1951.

12. Nonetheless, the argument put forward in the Court below as also here that no decree could be passed against a dissolved firm or against one of the partners of the firm must be rejected. It is well settled that a suit can be filed against a firm even after its dissolution in the name of the firm, vide Thomas Bear & Sons Ltd. v. Rulia Ram, AIR 1934 Lah 625, Pulin Bihari Roy v. Mahendra Chandra Ghosal, AIR 1921 Cal 722, Harjibandas Gordhandas v. Bhagwandas Pursram, AIR 1922 Cal 390, Maurice Mayahas v. W. Morley, AIR 1925 Cal 937, Agarwal Jorawarmal v. Kasam, AIR 1937 Nag 314 and Firm Gopal Company Ltd. v. Firm Hazarilal Co., AIR 1963 Madh Pra 37. No decision of any High Court taking a contrary view was cited before us on behalf of the appellant.

13. Section 25 of the Indian Partnership Act provides:

“Every partner is liable, jointly with all the other partners and also severally, for all acts of the firm done while he is a partner.”

14. Undoubtedly the suit relates for realisation of the plaintiff's claims in respect of all acts of the partnership firm done while defendant No. 2 was a partner of that firm. He was, therefore, liable jointly with all other partners and also severally for the satisfaction of the claims, if any. That being so, I do not find any defect in the frame of the suit when it has been filed against the firm as also against defendant No. 2 even though he was one of the partners and the firm stood dissolved on the date of the institution of the suit.

15. Admittedly there is no other written agreement on the basis of which transactions started between the parties in the relevant year. The only document relied upon on behalf of the plaintiff by was of an agreement is exhibit 1. It is dated 30-3-1948. It was executed only by Ram Swarup Maru, defendant No. 2. The agreement purported to be between him and the District Magistrate of Purnea. It was far from fulfilling any requirement of Section 175(3) of the Government of India Act, 1935. In the whole of the agreement the name of the firm Ganesh Rice Mill is not to be found and peculiarly enough, the agreement was executed by Ram Swarup Maru as the proprietor of “B. Ram Sarup Maru”. It had, therefore, to be conceded by learned Government Pleader that exhibit 1 is not the contract which can be said to be a lawful and legal contract binding on the parties. The contract of agency, therefore, pleaded by the plaintiff must fail on account of its voidness. Not even an implied contract can be spelt out from the transactions between the parties as it is not permissible to do so in face of the express language of Section 175(3) of the Government of India Act, 1935, or Article 299 of the Constitution: vide K.P Chowdhry v. State of Madhya Pradesh, AIR 1967 SC 203.

16. That being so, recourse was taken on behalf of the plaintiff-respondent to Section 70 of the Indian Contract Act in order to find out as to whether the decree of the Court below could be sustained on application of the law engrafted in that section. In the first instance, principles of law enunciated by the Supreme Court in State of West Bengal v. B.K Mondal and Sons, AIR 1962 SC 779 and Mulamchand v. State of Madhya Pradesh, 1968 BLJR 774 : (AIR 1968 SC 1218) have got to be appreciated, Gajendragadkar, J. (as he then was) pointed out in the case of State of West Bengal, AIR 1962 SC 779 that three conditions must be satisfied before the section aforesaid could be invoked. The conditions are:

“The first condition is that a person should lawfully do something for another person or deliver something to him. The second condition is that in doing the said thing or delivering the said thing he must not intend to act gratuitously, and the third is that the other person for whom something is done or to whom something is delivered must enjoy the benefit thereof.”

17. As pointed out in that case as also by Ramaswami, J. in Mulamchand's case, 1968 BLJR 774 : (AIR 1968 SC 1218) “the juristic basis of the obligation in such a case is not founded upon any contract or tort but upon a third category of law, namely, quasi-contract or restitution”. What Section 70 prevents is “unjust enrichment”, says Gajendragadkar, J. in the former case, “and it applies as much to individuals as to corporations and Government. But in all such cases not only the two conditions but also the third condition must be fulfilled that the other party has accepted the thing delivered and has enjoyed the benefit thereof”.

18. Ramaswami, J. says in Mulamchand's case, 1968 BLJR 774 : (AIR 1968 SC 1218)

“It is well established that a person who seeks restitution has a duty to account to the defendant what he has received in the transaction from which his right to restitution arises. In other words, an accounting by the plaintiff is a condition of restitution from the defendant.”

19. The principles of law as well enunciated, if I may say so with respect, by the Supreme Court are applicable to citizens as well as to corporations or Government. If the contract is void, it is void for both. Neither party can claim a specific performance of it or damages for breach of it or its enforcement in any other manner. Any party, however, by satisfying the requirements of Section 70 of the Indian Contract Act can base its claim on that footing. In that case also the principles enunciated by the Supreme Court will be applicable equally to the citizens, corporation and the Government. It matters little who is the plaintiff.

20. If a very technical and strict view was to be taken of the plaint, one could say that there is no basis of facts alleged in it to found a claim under Section 70 of the Indian Contract Act. But in my opinion, for the application of the principles of Section 70 of the Indian Contract Act such a strict and technical view of the pleading should not be taken. Moreover, in the plaint in question in the fourth paragraph it is to be found that the defendants did not supply the balance of the rice with mala fide intention and for wrongful gain.

21. In regard to bags, however, although the statement is not upto the mark in the seventh paragraph of the plaint, it indicates that according to the case of the plaintiff, the defendants after accepting the delivery of the bags retained a large balance of them and did not pay the price in spite of repeated demands suggesting thereby that they enriched themselves by enjoying the benefit of the thing delivered by the plaintiff.

22. (In paragraphs 12 to 18 the judgment analyses the evidence in the light of the principles of law enunciated under Section 7 of the Contract Act to find as to how far the plaintiff had succeeded in establishing its claim against the defendants on the rice account and/or the bags account. The trial Courts judgment and decree was accordingly modified.)

23. S. Wasiuddin, J.:— I agree.

TVN/D.V.C

24. Appeal partly allowed.