PETITIONER:
LOON KARAN SETHIA ETC.
Vs.
RESPONDENT:
IVAN E. JOHN & ORS. ETC.
DATE OF JUDGMENT20/10/1976
BENCH:
SINGH, JASWANT
RAY, A.N. (CJ)
BEG, M. HAMEEDULLAH
CITATION:
1977 AIR 336 1977 SCR (1) 853
1977 SCC (1) 379
ACT
Indian Partnership Act 1932--Sec. 69--Whether
mandatory---Whether suit can be filed by unregistered
firm--Dissolution of firm--Suit by a partner of erstwhile
unregistered firm--If other partners of erstwhile firm
necessary parties-Material alterations in a
documents--Effect of--Suit for specific and ascertained
amount--Whether court can make out new case and grant par-
tial relief on another basis.
HEADNOTE
Messrs.John & Co. were in financial difficulties and,
therefore, entered into a financial agreement with Sethia &
Co. a partnership firm of the plaintiff and Seth Sugan
Chand. On 6th July, 1948 Messrs. John & Co. obtained anoth-
er financial accommodation from Sethia & Co. Messrs. Tejka-
ran Sidhkaran had also given some advances to Messrs. John &
Co. The liability to the firm of Messrs. Tejkaran Sidhkaran
was transferred to Sethia & Co.
Seth Loonkaran Serbia filed a suit against John & Co.
and his partners (defendants first set) as well as Messrs.
John, Jain, Mehra & Co. and its partners. (defendants second
set) for recovery of Rs. 21,11,500/- with costs and future
interest and for a declaration that the plaintiff had a
prior and floating charge on all the business assets of
Messrs. John & Co. It was alleged by the plaintiff that
the defendants (second set) entered into partnership with
the defendants (first set ) under the name and style of
Messrs. John Jain, Mehra & Co and maliciously induced them
to commit breach of the agreement dated 6-7-1948 by forcibly
turning out his representatives who used to remain in charge
of the stocks, stores. coal, waste, etc., of the mills and
making them enter into a financial agreement contrary to the
terms of the agreement with his firm. The plaintiff also
alleged that accounts were again settled on 4-4-1949 and a
sum of Rs. 47,23,738/- was found due to him from the defend-
ants.
The defendants (first set) contended that there was no
settlement of accounts; that the accounts were tainted with
fraud and obvious mistakes and that on a true and correct
accounting a large sum of money would be found due to them;
that the plaintiff and said Sugan Chand obtained various
documents, agreements, vouchers, receipts etc., and that the
same were of no legal value as they were secured by the
former by practising undue influence, fraud, coercion and
misrepresentation; that the plaintiff had illegally and
contrary to the agreement dated 6-7-1948 debited them with
huge amounts which were not really due to them; that the
cotton supplied by the plaintiff was of inferior quality and
that the rates charged were exorbitant. It was also denied
that the plaintiff had floating or prior charge on any of
their stocks, stores, etc; that the suit was barred by the
provisions Of section 69 of the Partnership Act and that the
agreement dated 6-71948 which was insufficiently stamped
could not form the basis of the suit. The defendants.
(second set) also denied the claim of the plaintiff.
The Trial Court held that the suit was maintainable;
that the firm of Messrs. Sethia & Co. was dissolved before
the institution of the suit; that the suit being one for the
recovery of the assets due to a. dissolved partnership firm
from a third party, was not barred by section 69 of the
Partnership Act: that Seth Sugan Chand was not a necessary
party to the suit; that the agreement dated 6-7-1948 was
duly stamped and that no undue influence etc., was exercised
by the plaintiff on the defendants; that there was no ac-
counting on 4-4-1949 as alleged by the plaintiff and that
both the plaintiff and the defendants (first set) committed
a breach of the agreement dated 6-7-1948. The Trial Court
also held that a charge was created in favour of the plain-
tiff in respect of the entire business assets and that the
defendants (second set) were liable to satisfy the plain-
tiff’s claim. The Trial Court decreed the plaintiff’s suit
to the extent of Rs. 18,00,152 but rejected his claim for
specific performance and injunction. The Trial Court accord-
ingly passed a preliminary decree against both the sets of
defendants directing them to deposit
854
the said amount in the court within the prescribed time and
in default gave the plaintiff a right to apply for a final
decree for the sale of all the business assets, goods,
stocks, stores, etc. The decree also gave a right to the
plaintiff to apply for a personal decree against the defend-
ants for the balance of his claim in case the net sale
proceeds of the property of the firm were found insufficient
to discharge his claim.
The plaintiff filed an appeal in the High Court of
Allahabad and the defendants also filed an appeal against
the judgment of the Trial Court. The High Court allowed
both the appeals partially holding that no fraud, undue
influence, coercion or misrepresentation was practised by
the plaintiff; that the agreement dated 6-7-1948 was neither
insufficiently stamped nor did it require registration; that
the deed of dissolution dated 22-7-1948 was prepared for the
purpose of the case but there was sufficient evidence on the
record to indicate that said Sugan Chand had withdrawn from
the partnership carried on in the name of Serbia & Co. with
effect from 30-6-1948; that Seth Sugan Chand was not a
necessary party to the suit; that the suit was not barred.
by section 69 of the Partnership Act; that the alterations
in the deed dated 6-7-1948 were not material alterations and
did not render the agreement void; that the plaintiff had a
floating charge over the business assets of John & Co.; that
it was defendants (first set) and not the plaintiff who
committed breach of the’ agreement. The High Court, there-
fore, passed a preliminary decree for Rs. 11,33,668/- in
favour of the plaintiff and against the defendants (first
set) but dismissed the suit with costs as against the de-
fendants (second set). The High Court granted certificate
under Article 133 in both the appeals.
Dismissing the plaintiff’s appeal and allowing the
appeal of the defendants (first set) held:
(1) Section 69 of the Partnership Act is mandatory in
character and its effect is to render a suit by a plaintiff
in respect of a right vested in him or acquired by him
under a contract which he entered into as a partner of an
unregistered firm, whether existing or dissolved, void. [869
A]
(2) A partner of an erstwhile unregistered partnership
firm cannot bring a suit to enforce a right arising out of a
contract failing within the ambit of section 69 of the
Partnership Act. The suit out of which the appeals arise
was for enforcement of the agreement entered into by the
plaintiff as partner of Serbia & Co. It was never pleaded
by the plaintiff not even in his replication that he was
suing to recover the outstanding of a dissolved firm. Thus
the suit was clearly hit by section 69’ and was not main-
tainable. [869 B-C]
(3) A close scrutiny of the document and other evidence
clearly negatives the plaintiff’s claim that the firm was
dissolved with effect from 30th June 1948.
[865 C]
(a) The agreement dated 6th July 1948 itself is signed
by the plaintiff as a partner and the, expression partner
also appears in the body of the agreement.
[865 D]
(b) The alleged deed of dissolution dated 22nd July 1948
between the plaintiff and Seth Sugan Chand was prepared on a
stamp paper printed in the Government Press in November,
1948. The said Dissolution Deed was, therefore, clearly
fabricated by the plaintiff. The plaintiff signed various
cheques in July, 1948 as the partner of Sethia & Co. [865
F-H; 866 A-C; 867 F]
(c) No service by post or advertisement in the newspaper
about the dissolution was given either by the plaintiff or
by Seth Sugan Chand. [867 F]
(4) Seth Sugan Chand was a necessary party to the suit
and in spite of the objections raised on behalf of the
defendants the plaintiff did not care to implead’ Seth Sugan
Chand. The suit was bound to fail on that ground also. [869
D-E]
(5) A material alteration in a document without the
consent of a party to, it has the effect of cancelling the
deed. [870 A]
Volume 12 of Halsburys Laws of England (Fourth Edition)
referred to.
855
Nathu Lal & Ors. v. Musammat Gomti & Ors. (A.I.R. 1940
P.C. 160) relied on.
In the present case there were many material alterations
of the document. The material alterations, therefore have
the effect of cancelling the deed in question. [870 B-D]
(6) The plaintiff’s suit was for a specific and ascer-
tained sum of money on the basis of settled account. The
Courts below found concurrently that there was no settlement
of account as alleged by the plaintiff on 4th April 1949.
After that it was not open to the courts below to make out a
new case for the plaintiff which he never pleaded. The
courts be.low could have either dismissed the suit or passed
a preliminary decree for accounts directing that the books
of account be examined item by item and an opportunity
allowed to defendants to impeach and falsify the accounts.
[871 A-C]
JUDGMENT
CIVIL APPELLATE JURISDICTION: Civil Appeal Nos. 416 of
1973 and 572 of 1974.
(From the Judgment and Decree dated 22-12-1972 of the
Allahabad High Court in F.A. No. 465/54 connected with F.A.
65/55).
A. K. Kirty, Yogeshwar Prasad, S.K. Bagga, Mrs. S.
Bagga Miss Rani Arora for the Appellant (in CA. No. 416/73
and Respondent No. 1 in CA. No. 572/_74).
G.B. Pal, R.K. Mehta, Pramod Swarup and Miss Uma Mehta
for the Appellants (in CA 572/74 and Respondents 1-3 in CA.
No. 415/73).
B. Sen, S.M. Jain, Indra Makwana and Sushil Kumar Jain
for Respondents 5/2, 5/3 and 6 (in CA. No. 416/73).
S.T. Desai, Rajinder Singh and S.K. Dhingra for Respond-
ents 7 & 8 (in CA. No. 416/73).
The Judgment of the Court was delivered by
JASWANT SINGH, J. These two appeals by certificates
granted under Article 133 of the Constitution which are
directed against the common judgment and decree dated Decem-
ber 22, 1972 of the High Court at Allahabad in two connected
Civil First Appeals Nos. 465 of 1954 and 65 of 1955 pre-
ferred against the judgment and preliminary decree of the
Second Additional Civil & Sessions Judge, Agra, dated April
5, 1954, in suit No. 76 of 1949 shah be disposed of by this
judgment.
The facts material for the purpose of these appeals
are: The appellant in Appeal No. 416 of 1973 and respondent
No. 1 in appeal No. 572 of 1974, Seth Loonkaran Sethiya,
(hereinafter referred to for convenience as ’the plain-
tiff’) is a financier living and carrying on business in
Agra. Respondents Nos. 1 to 3 in the first appeal and
appellants Nos. 1 to 3 in the second appeal viz. Ivan E.
John, Maurice L. John and Doris Marzano, grandsons and
grand-daughter of one A John, are partners of the regis-
tered, firm called ’John & Co.’. There
856
are three spinning mills and one flour mill at Jeoni Mandi,
Agra, which are compendiously described as ’John Mills’.
Originally, the members of the John family were the exclu-
sive owners of all these mills which have been in existence
since the beginning of the current century. In course of
time, some strangers acquired interest therein and by the
time the present lis commenced, the following became the
joint owners thereof to the extent noted against their names
:-
1. Ivan E. John, Maurice L. John and Doris
Marzano, appellants Nos. 1 to 3 in Appeal
No. 572 of 1974 and respondents Nos. 1 to 3
in .Appeal No. 416 of 1973--Partners of the
firm ’John & Co.’, appellant No. 4 in
Appeal No.572 of 1974 and respondent No. 4 in
Appeal No. 416 of 1973:11/40th share
2. Seth .Munilal Mehrs (respondent. No. 6 in
appeal No. 416 of 1973 and respondent No. 9
in Appeal No, 572 of 1974).and Hiralal Patni
(respondent No..5 in Appeal No. 416 of
197.3, ’deceased’and now represented by
respondents Nos, 5/1 to 5/7 i3 the ’said
appeal and represented by respondents Nos..
2 to 8 in Appeal No. 572 of 1974):19/40th
share
3.Gambhirmal Pandya (P) Ltd.--part-ner in
M/s. John Jain Mehra & Co,: 8/40th share
4. Ivan E. John: 2/40th share
Having run into financial difficulties, M/s John & Co.
were driven to tap various sources for raising loans for
their business and other requirements. By virtue of the
deed of agreement (Exn.. 1321 ) dated June 14, 1947, they
entered into a financial agreement with Sethira & Co., a
partnership firm of the plaintiff and Seth Suganchand.
Under this agreement which was originally meant to last for
five months but which was allowed to remain in force even
after ’the expiry of that period Sethiya & Co. undertook to
advance to M/s John & Co. funds to the extent of Rs.
8,00,000/- on the security of yarn and to act as sole
selling agents of the latter. On January 29, 1948, the
Collector, Agra, attached moveable and immoveable properties
of the mills pursuant to a certificate issued for reali-
zation of income tax dues for the years 1943 to 1945 out-
standing against M/s John &Co. which exceeded Rs. 20
lakhs. On February 5, 1948, the Collector, Agra, appoint-
ed Ivan E. John, Maurice L. John and Doris Marzano as custo-
dians for running the mills. On February 9, 1948, the
aforesaid agreement (Exh. 1321) dated June 14, 1947, with
Sethiya & Co. which continued to remain in operation beyond
its original term was renewed upto the end of April, 1948,
by agreement (Exh. 1320). This agreement gave an option to
the partners of Sethiya & Co. to allow it to continue in
force until their dues were
857
paid in full by M/s John & Co. These financial agreements
with Sethiya & Co. did not prove adequate to meet the mone-
tary requirements of M/s John & Co. Accordingly on the same
day i.e. on February 9, 1948, they entered into another
agreement (Exh. 1319) with the proprietory concern of the
plaintiff carrying on business under the name and style of
’M/s. Tejkaran Sidkaran’ whereby the latter agreed to
advance certain amounts to them against mortgage of cotton,
its products and bye-products which might be in their stock
from time to time during the continuance of the agreement.
By this agreement, M/s John & Co. also undertook to. pay to
M/s Tejkaran Sidkaran a sum of Rs. 2,09,245-9-10 which, on
going into the accounts, was found to be due to the latter
in respect of the supply of cotton. Nearly five months
thereafter i.e. on July 6, 1948 the aforesaid partners of
M/S. John & Co. succeeded in obtaining another financial
accommodation from Sethiya & Co. vide agreement Exhibit 168:
Exhibit A-1. By this deed, the financiers agreed, for the
efficient working of the mills, to advance loan, as and when
required, upto the limit of Rs. 25 1/2 lakhs to the partners
of M/s John & Co. on condition that they i.e. the financiers
would have a floating and prior charge for all monies due to
them for the time being including the amount due to .them on
the date of the agreement and all monies which -they might
choose to. advance under the agreement, on all business
assets including stores, coal, oil process etc. of the
aforesaid three spinning mills.
Describing himself as the sole proprietor of the firm
’Sethiya & Co.; and ’M/s. Tejkaran Sidkaran’. Seth Loonkaran
Sethiya flied in the Court of the Civil Judge, Agra on April
18, 1949 an original suit, being suit No. 76 of 1949 against
M/s. John & Co.’ and its aforesaid partners (hereinafter
referred to as ’the defendants first set’) as also against
Munnilal Mehra, Hiralal Patm and Gambhirmal Pandya and M/s
John. Jain Mehra & Co., (hereinafter referred to as ’the
defendants second set’) for recovery of Rs. 21,11,500/- with
costs and pendente lite and future interest by sale o.f .the
assets of M/s John & Co. and for permanent injunction re-
straining the defendants first set from committing any
branch of the aforesaid agreement dated July 6, 1948 as also
for declaration that he had a prior and floating charge on
all the business assets of M/s John. & Co. The suit was
later on amended by the plaintiff with the permission of the
trial Court. By his amended petition of plaint, the plain-
tiff sought a decree against the defendants first set as
also against the defendants second set.
The case of the plaintiff was that Mr. Ivan E. John, Mr.
Maurice L. John and Doris Marzano who were part owners of
the aforesaid three spinning mills and a flour mill as also
certain other properties and had been carrying on their
business and running the mills under the name and style of
John & Co. being heavily indebted and in urgent need of
money to pay arrears of income tax as well as other dues and
to carry on day to day business of the milks approached him
time and again for finances, loans etc. for the aforesaid
purposes, that he ’lent considerable sums of money under
various agreements executed by the defendants first set in
his favour and in favour of the firm ’M/s Tejkaran Sidkaran
of which he was the sole owner and in that of Sethiya &
Co.; that on or about July 6, 1948 all accounts between his
858
firm ’Sethiya & Co.’ and defendants first set were gone into
and after a full scrutiny thereof, a settled amount of Rs.
12,72,000/- was found to be due to Sethla & Co. from the
defendants first set upto June 30, 1948; that this amount as
admitted and accepted by the defendants first set and was as
such debited in their account books and was also acknowl-
edged by them in the subsequent agreement entered into by
them with him; that the aforesaid settlement, the de-
fendants first set solicited further financial help from him
to run the mills and to meet their pressing liabilities
which was acceded to by him on the terms and conditions set
out in the agreement dated July 6, 1948 (Exh. 168); that by
this agreement, he agreed inter alia to advance requisite
funds to the defendants first set (for carrying on the
business of the mills ’and payment of the claims of Raja Ram
Bhawani Das and to meet other liabilities) up to the limit
of Rs. 20 lakhs inclusive of the aforesaid amount admittedly
found due to him from the defendants first set on the date
of the agreement and to make a further advance of a sum of
Rs. 5,50,000/- on the security of business assets and stocks
other than bales of yarn and cotton; that it was also stipu-
lated that he would have a floating and prior charge for the
entire amount due to him on the date of the agreement on all
the business assets including stores, coal, oil process etc.
of all the three spinning mills of the defendants first set
and that he would be paid interest at the rate 6 per cent
per annum from date of including liability in respect of
each individual item besides commission at the raw of 1 per
cent on all sales of products of the three spinning mills
whether sold directly or otherwise during the currency of
the agreement and a luther commission at the rate of 12
per cent on value of all the purchases of cotton required
for consumption of the three spinning mills and godown rent
as might be agreed. The plaintiff further averred that it
was specifically agreed between him and the defendants first
set that the agreement would be in operation for the minimum
period of one year and would also continue to be in force
thereafter until the entire amount due to him from the
defendants first set was fully paid up. The plaintiff
further averred that the accounts of business done by him
under the name of M/s Tejkaran Sidkaran with the defendants
first set were gone into and finally the defendants first
set admitted that a sum of Rs. 17,79,100/- was due from them
to his firm ’M/s Tejkaran Sidkaran’ and that under their
written authority, he transferred the above liability to his
firm ’Sethiya & Co.’ and thus all accounts of the defendants
first set with him were amalgamated in one account i.e. of
Sethiya & Co. and the account of his firm ’M/s Tejkaran
Sidkaran’ with the defendants first set was squared up and
closed. The plaintiff further averred that the defendants
second set including Hiralal Patni, the ex-financier of the
John Mills who had not despite best efforts succeeded in
securing possession of the mills as co-proprietor thereof
entered into partnership with the defendants first set under
the name and style of M/s John Jain Mehra & Co. and mali-
ciously induced them to commit breaches of the agreement
dated July 6, 1948 by forcibly turning out his representa-
tives who used to remain incharge of the stocks, stores,
coal, waste etc. of the mills and making them enter into a
finance agreement contrary to the terms of the agreement
with his firm. The plaintiff also alleged that the defend-
ants first set had at the instigation of the defendants
second set unjustifiably closed the business of John & Co.
859
and were colluding with the latter who were guilty of misap-
propriation and conversion of the goods over which he had a
prior and floating charge. -The plaintiff also averred that
on April 4, 1949, accounts were again gone. into between him
and the defendants first set and a sum of Rs. 47,23,738/4/9
were found due to him from them; that agreement dated July
6, 1948 between him and the defendants first set still
subsisted and would continue to subsist till July 6, 1949
and thereafter at his option till all his dues were paid up;
and that a sum of Rs. 21,11,500/- was due to him from the
defendants first set as per Schedule A of the plaint which
both sets of the defendants were liable to pay.
The statement of account as contained in Schedule A
annexed to the plaint was as follows:
-----------------------------------------------------------
Rs. a. p.
"1. Settled balance on 4th April, 1949
according to accounts books of the def-
endants. (The accounts upto 4th April,
1949 were fully gone through and se
ttled by both the parties and confirmed
by the defendants by making nec
essary entries in their books 45,74,980 10 1
2. Plaintiff’s charges of commission,
interest, godown rent etc., according
to the terms of the agreement and
duly checked by the defendant’s accountant
and chief Account officer as detailed below:--
From 13th October to 31st October, 1948 14,516 13 6
From 1st November to 12th December 33,783 4 3
From 13th December to 12th January 1949 34,100 3 3
From 13th January to 12th February, 1949 38,716 12 3
From 13th February to 12th March, 1949 27,632 9 2
Total 1,48,749 10 8
9th April, 1949 paid to Mahalaxmi
Oil Mills through Kirpa
Narayan advocate and others . 8,708 5 0
10th April 1949 paid to Bishambar
Nath & Co. (for Cotton supplied
to John & Co.) 1,57,005 3 0
Charges from 13th March to
12th April, 1949 62,804 12 3
Total 49,52,2489 0
9th April, 1949:
Proceeds by sale of 5731 bales
of yarn sold by defendants
as per their authorities 28,40,748 9 0
Balance 21,11,500 0 0
Twenty one lacs, eleven thousand
five hundred only.
5 --/338SCI/76
860
The suit was contested by both sets of defendants on
various grounds. Defendants first set inter alia pleaded
that there was no ’settlement of accounts between them and
the plaintiff as alleged by the latter; that ’the accounts
were liable to be reopened as they were tainted with fraud,
obvious mistakes etc., and that on a true and correct ac-
counting a large sum of money would be found due to them;
that though the plaintiff and Seth Sugan Chand (who owned
Indra Spinning and Weaving Mills and had a covetous eye on
John Mills) had obtained various documents, agreements,
vouchers, receipts etc. at various times from them, the same
were of no legal value as they were secured by the former by
practising undue influence, fraud, coercion and misrepresen-
tation. It was further pleaded by the defendants that :the
plaintiff had illegally and contrary to the agreement
dated July 6, 1948 debited them with huge amounts which were
not really due to them. It was further pleaded by the said
defendants that the cotton supplied to them by the aforesaid
financiers was of inferior quality and the amounts charged
by them in respect thereof were exorbitant and far in excess
of the prevailing market rates. The said defendants further
pleaded that though under the terms of the agreement dated
February 9, 1948 no commission on sales and purchases had
been agreed to be paid by them to the financiers still
they had been debited with huge amounts on that account and
likewise though simple interest had been stipulated in the
said agreement compound interest with monthly rests had been
debited to their account which was not at all justified.
The said defendants also disputed their liability to pay
certain items of expenditure like demurrage, wharfage etc.
which had been debited to their account. It was also pleaded
by the said defendants that the plaintiff had no floating
or prior charge on any of their stocks, stores etc. nor
could any such charge be claimed by him in law; that the
suit was barred by the provisions of Section 69 of the Part-
nershlp Act and that the agreement dated July 6, 1948 which
was insufficiently stamped could not form the basis of the
suit.
In the written statement filed by them the defendants
second set denied the allegations and insinuations made
against them by the plaintiff and raised a number of techni-
cal and other pleas. They also pleaded that the plaintiff
alone .was not entitled to file the suit concerning the firm
M/s. Sethiya as it did not belong to his joint Hindu family
but was a partnership firm.
The trial court framed as many as 21 issues and on a
consideration of the evidence adduced by the parties it held
inter alia that the suit as brought-by the plaintiff was
maintainable; that though the plaintiff had failed to prove
that the dissolution of the partnership between him and Seth
Sugan Chand took place on June 30, 1948, and no alternate
date of dissolution subsequent to June, 30, 1948, had been
set up by him, it was evident from the record that the
dissolution took place some time after July 30, 1948, and
before the institution of the suit; that the suit being one
for recovery of the assets due to a dissolved partnership
firm from a third party was not barred by Section 69 of the
Partnership Act; that Seth Sugan Chand was not a necessary
party to the suit; that agreement dated July 6, 1948, was
duly stamped and that no undue influence etc. was exercised
by the
861
plaintiff on the defendants first set in relation to the
execution of the agreements between Sethiya & Company and
the defendants first set. The ,trial court also held that
there was no accounting on April 4, 1949, as alleged by the
plaintiff and that both the plaintiff and the defendants
first set committed a breach .of agreement dated July 6,
1948. The breach committed by the defendants first set
according to the trial court lay in their unjustifiably
handing over possession to M/s. John Jain Mehra & Co. of the
goods on which the plaintiff held a charge thereby furnish-
ing him with a cause of action against both sets of defend-
ants. The trial court also held that under clause 13 of
the agreement dated July 6, 1948, a charge in favour of
the plaintiff was created in respect of the entire business
assets including stock-in-trade, stores, coal, oil etc.
lying inside the three spinning mills which were being run
by John & Company; that defendants first set utilised con-
sumed and otherwise dealt with the goods which were burdened
with the floating charge from July 6, 1948, to April 13,
1949, when John & Co. ceased to be a going concern and there
was a final rupture between the plaintiff and the defendants
I st set and the plaintiff’s floating charge got fixed or
crystalised. It also found that defendants second set were
not entitled to prior charge on the properties of John & Co.
existing on April 13, 1948, and were liable to satisfy the
plaintiff’s claim as despite notice of his floating charge
they consumed, converted and misappropriated stocks and
stores and other business assets of the defendants first
set. Finally, the trial court held the plaintiff to be
entitled to a decree for Rs. 18,00,152/- against both sets
of defendants but rejected his claim for specific perform-
ance and injunction. It accordingly passed a preliminary
decree against both the sets of defendants on April 5, 1954
directing them to deposit the said amount in Court within
the prescribed time and in default, gave the plaintiff a
right to apply for a final decree for the sale of all the
business assets, goods, stocks, stores etc. of the three
spinning mills as mentioned in the operative portion of its
judgment. The decree also gave a right to the plaintiff to
apply for a personal decree against the defendants first set
and the defendants second set for the balance of his claim
in case the net sale proceeds of the said property were
found insufficient to discharge his claim. Aggrieved by
the said judgment and decree of the trial court, the plain-
tiff preferred an appeal, ’being first appeal No. 465 of
1954, before the High Court at Allahabad claiming the fol-
lowing reliefs :-
"(a) A decree for a further sum of Rs.
64,082/3/5 by which amount his claim was
reduced by the trial
(b) Such rate of interest as he might be
entitled to on the aforesaid sum of Rs.
64,082/3/5 under the agreement dated July 6,
1948;
(c) Interest on the sum already decreed at
the rate agreed to under the agreement dated
July 6, 1948;
(d) Injunction in terms of para 47(b) of
the plaint and specific performance of the
agreement dated July 6, 1948;
862
(e) Costs of the appeal and costs which
the lower court wrongly disallowed or deducted
and also interest on the costs already award-
ed;
(f) A decree for sale of the shares
of the defendants in the machinery over which
he had a charge."
M/s John Jain Mehra & Co., of which the defendants
first set too were partners, also preferred an appeal
against the aforesaid judgment and decree of the trial
court, being first appeal No. 65 of1955, praying that the
decree passed by the trial court in favour of the plaintiff
be set aside and the suit dismissed with costs throughout.
The High Court allowed both the appeals No. 465 of 1954
and No. 65 of 1955 partially by its aforesaid judgment
dated December 22,1972, holding inter alia that no fraud,
undue influence, coercion or misrepresentation was prac-
tised by the plaintiff on the defendants first set in con-
nection with the execution of agreement dated February
9,1948, or agreement dated July 6,1948 (which is the basis
of the suit); that the agreement dated July 6,1948, was
neither insufficiently stamped nor did it require registra-
tion; that though it appeared that the deed of dissolution
dated July 22, 1948, was prepared for the purpose of the
case, there was sufficient evidence on the record to indi-
cate that Seth Suganchand had withdrawn from the partnership
carried on under the name of Sethiya & Co. with effect from
June 30, 1948, and had nothing to do with the transaction
evidenced by the agreement dated July 6,1948, which was
entered into by the plaintiff as the sole proprietor of
Sethiya & Co., that the entire rights and liabilities
flowing from the agreement dated July 6, 1948 having become
the rights and liabilities of the plaintiff alone and the
suit not being one for recovery of dues of a dissolved
partnership firm arising out of a cause of action which
accrued before the dissolution of the firm, neither Seth
Suganchand was a necessary party to the suit, nor was the
suit barred under section 69 of the Partnership Act; that
the alterations in the deed of agreement dated July 6, 1948
pointed out by the defendants were not material alterations
and did not render the agreement void; that the plaintiff
had a floating charge over the business assets of John &
Co., that it was the defendants first .set and not the
plaintiff who committed breach of the agreement by wrongful-
ly delivering possession of the charged goods on or after
April 13, 1949 i.e. after ceasing to be a going concern to
M/s. John Jain Mehra & Co.--a partnership firm of which the
defendants first set became a constituent part by virtue of
agreement dated April 11, 1949--that despite the knowledge
of the aforesaid prior charge, M/s John Jain Mehra & Co.
illegally intermeddled with the charge goods and used them
for their own business; that the plaintiff’s floating charge
on the assets of the defendants first set valuing Rs.
13,25,000/- became crystallised on April 13,1949 when on
default of the defendants first set, he intervened by bring-
ing the suit to recover all his out standings by sale of the
charged properties; that the charge of the plaintiff having
become crystallised, as indicated above, the defendants
first and second set held the properties as trustees and
were liable to make them
863
available to the plaintiff for recovery of his dues; that
keeping in view the legal position as well as the nature of
the transactions involved, the practice of courts and the
fact that the litigation between the parties had been suffi-
ciently protracted, it would be reasonable to award pendente
lite as well as future simple interest from the date of the
decree to the date of actual payment or realization at the
rate of 4 per cent per annum on the principal sum adjudged;
that though keeping in view the facts that no balance was
struck on April 4, 1949 in the Rokar (Exh. 179) of Sethiya
& Co. and the auditor’s report which showed that no specific
figure was mutually agreed upon on accounting on that date,
it could not be said that accounts were finally settled
between the parties on April 4, 1949, the defendants first
set had failed to point out which entry in the charts (Exh.
6103 to 6112) produced by the plaintiff was wrong; that Rs.
49,35,925/5/7 were advanced by Sethiya & Co. to the defend-
ants first set under the agreement dated July 6, 1948, from
the date of its execution to the date of the suit; that a
sum of Rs. 11,17,000/- was due to old Sethiya & Co. from the
defendants first set upto June 30, 1948 under the agreements
dated June 14, 1947 and February 9, 1948; that Rs.
1,55,000/were advanced by Sethiya & Co. on July 3, 1948 to
the defendants first set for purchase of the share of Beni
Madho; that in accordance with the obligation undertaken by
it under para 1 (8) of the agreement dated July 6, 1948,
Sethiya & Co. paid, on the basis of transfer voucher (Exh.
3039) dated February 28, 1949, drawn by the defendants first
set, a sum of Rs. 17,79,100/- to Tejkaran Sidkaran in full
satisfaction of the amount due to the latter under the
agreement dated February 9, 1948; that whereas the aggregate
of the debit items came to Rs. 82,47,380/15/4, the aggre-
gate of the credit-items came to Rs. 71,13, 712/6/6 leaving
a balance of Rs. 11,33,668 and paise 55 which the defend-
ants first set were liable to pay to the plaintiff; that
since the receivers appointed by the court at the instance
of the plaintiff after the institution of the suit were
able to secure possession of the charged properties that
existed prior to April .11, 1949 and it had not been estab-
lished that there was a removal from the mills’ premises of
the said properties or dissipation thereof because of the
aforesaid conversion and detention, the plaintiff was not
entitled to the decree for money against the defendants
second set; that the plaintiff could, no doubt, proceed
against the charged goods which were in the custody of the
receivers for recovery of his dues but as no. property on
which he held a charge or on which his floating charge
crystallised had remained in the custody of the defendants
second set after the appointment of the receivers, no li-
ability for his dues could be fastened on them nor could he
obtain a decree for specific performance against them. In
the result, in modification of the decree passed by the
trial Court, the High Court passed a preliminary decree for
Rs. 11,33,668.55 with proportionate costs and pendente
lite and future interest from the date. of the decree to
the date of the actual payment or realisation at the rate of
4 per cent per annum on the principal sum of Rs.
10,87,674.05 in favour Of the plaintiff and against the
defendants first set but dismissed the suit with costs as
against the defendants second set. The High Court made
it obligatory for the defendants
864
first set to pay or deposit in Court the aforesaid sum of
Rs. 11,33,668.55 together with interest within six mouths of
the passing of the decree failing which it held the
plaintiff entitled to apply for a final decree for sale of
all the business assets, goods, movables, stocks, stores
etc. mentioned in the inventory of Shri P.N. Raina,
Commissioner, and the receivers’ inventories. The High
Court further directed that if the net sale proceeds of the
said property were found insufficient to satisfy the
plaintiff’s aforesaid amount, he would get a personal
decree against defendants 1 to 3 for the balance of his
claim remaining due after scale. The High Court also
directed that a sum of Rs. 28, 662/9/ .... the sale
proceeds of cotton waste over which the plaintiff had charge
and which was in deposit with the Bank in the Court’s ac-
count -- would also be utilised towards the satisfaction of
the aforesaid amount decreed in the plaintiff’s favour. It
is against this judgment and preliminary decree that the
present appeals are directed.
We have heard counsel for the parties at length and gone
through the entire record relevant for the purpose of the
appeals before us. As per contentions of the counsel, the
following main questions arise for our determination :--
(1) Whether the first ’sethiya & Co.’ (of
which the plaintiff and Seth Suganchand were
partners) was dissolved with effect from June
30, 1948, as claimed by the plaintiff ?
(2) Whether the agreement dated July 6,
1948, was entered into by the plaintiff with
the defendants first set as a sole proprietor
of Sethiya & Co. or was it entered into by his
as a partner of Sethiya & Co. ’?
(3) Whether the suit is barred by section 69
of the Partnership Act ?
(4) Whether Seth Suganehand was a necessary
party to the suit ?
(5) Whether any material alterations were
made in the aforesaid agreement dated July 6,
1948, which rendered it void ?
(6) Whether the suit which was based upon
accounts stated or settled could be dealt with
in the manner in which it has been done ?
(7) Whether in addition to the imposition
of burden on the charged business assets etc.
of John & Co. for satisfaction of the decretal
amount, the defendants second set could be
saddled with any liability in that behalf ?
We shall take up these question seriatim. Questions
Nos. 1 & 2.: As these two questions are inextricably linked
up, they have to be dealt with together.
865
According to the plaintiff, the firm Sethiya & CO.,
which was formed by him in partnership with Seth Sugan-
chand for the specific purpose of providing money against
pledge of goods to the defendants first set and to act as
their sole selling agents and which consequently entered
into financial agreements with the said defendants vide
exhibits 1321 and 1320 on June 14, 1947, and February 9,
1948, respectively was dissolved with effect from June 30,
1948, and there-. after he alone carried on dealings with
the said defendants in the name: of Sethiya & Co. and M/s
Tejkaran Sidkaran as their sole proprietor and as such, the
agreement (Exh. 168) dated July 6, 1948, was entered into
by him with the said defendants as the sole proprietor of
Sathiya & Co. On the contrary, the defendants assert that
the firm ’Sethiya & Co.’ was in existence on July 6, 1948,
and thereafter as well. Let us examine the material on
the record and see which of these contentions is correct.
While the plaintiff relied in support of his contention upon
the deed of agreement (Exh. 168) dated July 6, 1948 and
the deed of dissolution dated July 22, 1948 produced by him,
the defendants strongly relied upon Exhibit A-1 and cer-
tain other documents. A close scrutiny of these documents
and other evidence adduced in the case clearly negatives
the contention of the plaintiff and goes a long way to
support the assertion of the defendants. It would be noted
that in the preamble of Exh. A-1 which is admittedly a
counter part of Exh. 168, the word ’partner’ occurs after
the word ’Sethiya’ and before the word ’of’ and in conso-
nance with its preamble, Exh. A-1 has been signed by the
plaintiff, Seth Loonkaran Sethiya, as a partner of M/s
Sethiya & Co. Now though the word ’partner’ occurring in
the preamble of Exh. 168 has been scored out, it has not
been initialled either by the plaintiff or by any one of the
partners of John & Co. It is also significant that while
affixing his signatures on Exh. 168 and its counterpart Exh.
A-1 the plaintiff described himself as a partner of M/s
Sethiya & Co, The contention of the plaintiff that his
partnership with Seth Suganchand came to an end with
effect from June 30, 1948, and the agreement dated July 6,
1948 was entered into by him with the defendants first set
as the sole proprietor of Sethiya & Co. is further falsified
by the dissolution deed dated July 22, 1948, itself produced
by him before the trial Court on December 13, 1949 which
would have passed muster if the defendants had not been
vigilant. It seems that on seeing this deed written partly
on an impressed stamp paper of Rs. 10/- which was not in use
in July, 1948, the suspicion of the defendants about the
spurious character of the deed was aroused and they hastened
to make an application requesting the trial court that in
view of the fact that the deed appeared to have been ’anti-
dated and manufactured for the purpose of the case’, the
stamp papers on which it was written be sent to the
officer-in-charge, India Security Press, Nasik, for examina-
tion and report as to when the said stamp papers were issued
for sale from the press. The reaction of the plaintiff to
this application and his subsequent conduct in relation to
the investigation sought to be made to get at the truth
regarding the date of issue of the aforesaid impressed stamp
Paper and consequently regarding the alleged dissolution of
the firm ’Sethiya & Co.’ is revealing. It is amazing that
the
866
simple request made by the defendants which should have been
readily agreed to by the plaintiff if he had been innocent
was stoutly opposed by him. The circumstances. in which
the so called deed of dissolution of partnership dated July
22, 1948, and the report dated February 27, 1950, of the
Assistant Master, India Security Press, Nasik disclosing
that ’the first high value (Rs. 10/-) impressed stamp in the
type of water marked paper as used in the document dated
July 22, 1948,was printed in his Press on November 23, 1948,
and as such couldnot have been, existence on July 22,
1948--the alleged date of execution of the document--disap-
peared is very intriguing It is also remarkable that when
during the cross-examination of the plaintiff on March 29,
1950, in connection with the issue relating to the bar of
section 69 of the Partnership Act the defendants wanted to
make use of the aforesaid report from the India Security
Press, Nasik, and it came to light that the report and the
original deed of dissolution set up by the plaintiff were
missing, the plaintiff came forward with an amusing applica-
tion stating therein that "in the interest of the early
disposal of the case, he undertakes not to rely on that
document in the suit and to argue the case without that."
The manner in which the plaintiff behaved when the defend-
ants attempted to have the duplicate copy of the aforesaid
report of the Assistant Master. India Security Press ob-
tained by the Court proved is no less interesting. A
reference to the minutes of proceedings of the trial Court
shows that after the Court had, at the request of the de-
fendants and with the consent of the plaintiff’s counsel,
passed the order on May 21, 1950, for issuing a commission
to Nasik for examination of the said officer of the Press in
respect of the aforesaid report about the impressed stamp
paper, the plaintiff made an application for stay of that
order and on Jully 4, 1950, his counsel, Shri Walter Dutt,
made the following statement :--
,lm15
"The court may for the purpose of deciding the issue
under section 69, Partnership Act take into consideration
the fact that the "document purporting to be a dissolution
deed executed between the partners of Sethiya & Co. is not
genuine although this fact is not admitted by the plaintiff
and the court may therefore, discard such portions of the
oral evidence of both plaintiff and Seth Suganchand as it
considers would be rendered unreliable if the view be taken
that the document in question was a fabricated one and the
court may presume that the document was not executed on the
date on which it purports to be executed."
On a consideration therefore of the totality of the
tell-tale facts and circumstances especially the aforesaid
description of the plaintiff as partner of Sethiya & Co. in
the preamble and at the food of Exh. A-1 and Exh. 168, the
clumsy attempt made to obliterate the aforesaid description
in the preamble of Exh. 168. the execution of a part of
the so called deed of dissolution of partnership dated July
22, 1948 on the aforesaid non-judicial impressed stamp Paper
of the denomination of Rs. 10/- which was not in existence
on July 22, 1948, the
867
resistence offered by the plaintiff to the defendants’
application requesting the Court to call for a report from
the India Security Press, Nasik, about the data of issue of
the said stamp Paper, the aforesaid report No. 780/26
dated February 27, 1950 of the India Security Press,
Nasik, that Rs. 10/- non-judicial impressed stamp paper
which had been used for part execution of the aforesaid deed
of dissolution had not been printed before November 23,
1948, the disappearance of the said deed of dissolution of
partnership of Sethiya & Co. set up by the plaintiff and
the report of the Assistant Master of the India Security
Press, Nasik, the defendants’ endeavour to’ have the dupli-
cate copy of the aforesaid report of the India Security
Press, Nasik about the impressed stamp paper of the denomi-
nation of Rs. 10/obtained by the Court proved and the plain-
tiff’s frentic efforts to thwart the attempt firstly by
making an application stating therein that he would not rely
on the aforesaid deed of dissolution dated July 22, 1948,
secondly, by making an application for stay of the order
passed by the trial Court regarding issue of a commission to
Nasik for formally proving the report of the India Security
Press and thirdly, by asking his counsel, Shri Waiter Dutt
to make the above quoted statement strongly incline us to
think in agreement with the subdued findings of the trial
Court that the aforesaid deed of dissolution was fabricated
by the plaintiff with the dishonest intention of playing a
fraud on the Court and gaining an undue advantage over the
defendants.
In addition to the facts and circumstances set out
above, the debit of items of Rs. 1,55,000/- and Rs. 1, 68,
552/12/6 to the account of the partnership firm ’Sethiya &
Co.’ on July 3, 1948, and July 10, 1949, respectively and
issue by the plaintiff of cheques No. BL 003628 dated July
16, 1948 (Exh. B-11)for Rs. 1,55,000/-, No. BL 003634 dated
July 16, 1948 (Exh. B-12) for Rs. 25,000/, No. BL 004636
dated July 20, 1948 (Exh. B-13) for Rs. 73,000/, No. BL
003630 dated July 9, 1948 (Exh. B-14) for Rs. 10,000/-, No.
BL 003635 dated July 17, 1948 (Exh. B-15) for Rs. 16,500/-,
No. ’BL 003632 dated July 10, 1948 (Exh. B-16) for Rs.
1,30,000/-, and No. BL 003633 dated July 10, 1948 (Exh. B-
17) for Rs. 1,68,552. 14/6 as partner of Sethiya & Co. also
go to demolish the theory of dissolution of the firm’ ’S-
ethiya & Co.’ on June 30, 1948 which the plaintiff sought to
build up on sandy foundations and furnish as eloquent proof
of the fact that the firm was very much in existence when
the agreement (Exh. 168) dated July 6, 1948, came into
being. It has also to be borne in mind that service by post
or advertisement in some paper of notice about the retire-
ment of a partner from a partnership firm on persons who are
in know of the existence of the firm and have been carrying
on dealings with it is of utmost importance to prevent them
from assuming that the partnership continues. In the in-
stant case, it is manifest from the evidence educed by the
plaintiff himself that neither he nor Seth Suganchand gave
notice in writing to the defendants first set that the
latter had retired from Sethiya & Co. with effect from June
30, 1948. The evidence also makes it clear that the con-
cerned persons and the general public were
868
not informed about the retirement of seth Suganchand from
the partnership firm ’Sethiya & Co.’ by publication of a
notice in some paper. The absence of these notices further
belie the plea of the plaintiff regarding dissolution of the
partnership firm ’Sethiya & Co.’ on June 30, 1948. That
the plaintiff’s story regarding dissolution of the firm
’Sethiya & Co.’ is a complete myth also receives strong
support from the fact that although approximately Rs.1,1
0,000/- are admitted by Seth Suganchand to be due to him
from the partnership not a farthing appears to have been
paid to him nor any document acknowledging the liability
appears to have been passed on to him.
The letter (Exh. 21) addressed to the Manger, Bank of
Bikaner Ltd., Agra, intimating to him that Seth Suganchand
had withdrawn from the partnership of Sethiya & Co. on which
strong reliance is placed on behalf of the plaintiff is not
helpful to him as it was not sent to the Bank before July
20, 1948.
The alleged dissolution of the partnership between Seth
Suganchand and the plaintiff not having been established, it
can be safely presumed in view of the above circumstances
that the partnership between them continued to subsist at
least upto July 20, 1948. We are accordingly of the opin-
ion that the firm ’Sethiya & Co.’ was not dissolved with
effect from June 30, 1948, as claimed by the plaintiff, and
that the agreement dated July 6, 1948, was entered into by
the plaintiff with the defendants first set not as the sole
surviving proprietor of Sethiya & Co. but as a partner of
the firm ’Sethiya & Co.’
Question No. 3: --For a proper determination of this
question, it is necessary to refer to section 69 of the
Partnership Act, 1932, the relevant portion whereof is
reproduced below for ready reference :--
"69."(1) No suit to enforce a right
arising from a contract or conferred by this
Act shall be instituted in any Court by or on
behalf of any person suing as a partner in a
firm against the firm or any person alleged to
be or to have been a partner in the firm
unless the firm is registered and the person
suing is or has been shown in the Register of
Firms as a partner in the firm.
(2) No suit to enforce a right arising
from a contract shall be instituted in any
Court by or on behalf of a firm against any
third party unless the firm is registered and
the persons suing are or have been shown in
the Register of of Firms as partners in the
firm.
(3) The provisions of sub-sectiOns (1)
and (2) shall apply also to a claim of set-off
or other proceeding to enforce a right arising
from a contract, but shall not effect--
(a) the enforcement of any fight to sue
for dissolution of a firm or for accounts of a
dissolved firm, or any right or power to
realise the property of a dissolved firm,
or .... "
869
A bare glance at the section is enough to show that it
mandatory in character and its effect is to render a suit by
a plaintiff in respect of a right vested in him or acquired
by him under a contract which he entered into as a partner
of an unregistered firm whether existing or dissolved, void.
In other words, a partner of a erstwhile unregistered part-
nership firm cannot bring a suit to enforce a right arising
out of a contract falling within the ambit of section 69 of
the Partnership Act. In the instant case, Seth Suganchand
had to admit in unmistakable terms that the firm ’Sethiya &
Co.’ was not registered under the Indian Partnership Act.
It cannot also be denied that the suit out of which the
appeals have arisen was for enforcement of the agreement
entered into by the plaintiff as partner of Sethiya & Co.
which was an unregistered firm. That being so, the suit is
undoubtedly a suit for the benefit and interest of the firm
and consequently a suit on behalf of the firm. It is also
to be borne in mind that it was never pleaded by the plain-
tiff, not even-in the replication, that he was suing to
recover the outstandings of a dissolved firm. Thus the suit
was clearly hit by section 69 of the Partnership Act and was
not maintainable.
Question No. 4: It would be noticed that the present
suit has been brought by the plaintiff alone and in spite of
the objection raised on behalf of the defendants, he did not
care to implead Seth Suganchand who was a necessary party to
the suit. Assuming without holding therefore, that section
69 of the Partnership Act did not apply to the present case,
the plaintiff could not in any event maintain the suit for
recovery of the aforesaid amount (which was made up of
items, some of which were admittedly due to the old Sethiya
& Co.) without impleading Seth Suganchand.
Question No. 5 :--Before proceeding to determine this
question it would be well to advert to the legal position
bearing on the matter As aptly stated in paragraph 1378 of
Volume 12 of Halsbury’s Law: of England (Fourth’ Edition)
"if an alteration (by erasure, interli-neation, or other-
wise) is made in a material part of a deed, after it execu-
tion, by or with the consent of any party to or person
entitle, under it, but without the consent of the party or
parties liable under it, but without the consent of the
party or parties liable under it, the deed is rendered void
from the time of the alteration so as to prefer the person
who’ has made or authorised the alteration, and those claim
ing under him, from putting the deed in suit to enforce
against an party bound by it, who did not consent to the
alteration, any obligation, covenant, or promise thereby
undertaken or made.
A material alteration, according to this authoritative
work, is on which varies the rights, liabilities, or legal
position of the parties a ascertained by the deed in its
original state, or otherwise varies the legal effect of the
instrument as originally expressed, or reduces to certainty
some provision which was originally unascertained and a such
void, or which may otherwise prejudice the party bound by
the deed as originally executed.
870
The effect of making such an alteration without the
consent of the party bound is exactly the same as that of
cancelling the deed."
To the same effect are the observations made by the Privy
Council on Nahtu Lal & Ors. v. Musarnat Gomti and Ors.(1).
Now a comparison of Exh. A-I (produced by the defendants
first et) with Exh. 168 (produced by the plaintiff)would
show that besides the obliteration of the word ’partner’
from the preamble as stated above, the plaintiff made two
other alterations in Exh. 168. Originally, the second
proviso to sub-clause (8) of clause 1 of the agreement stood
as given in Exh. A-1 ran thus:-
"The payment for purchase of cotton will be made on the
first (underlining is ours) day of its receipt in the mills
of the partners."
In Exh 168, however, the word ’first’ has been changed
into ’tenth’ thus making it read as "the payment for pur-
chase of cotton will be made on the tenth (underlining is
ours) day of its receipt in the mills of the partners."
The third alteration is no less important. As would be
evident from Exh. A-1, sub-clause (3) of clause 12 of the
agreement as actually drawn up between the parties read as
follows :--
"A commission of Rupee one percent on value of
all sales of products of the above three
spinning mills, viz. yarn, and newar, whether
sold directly by the partners or otherwise but
delivered and produced during the currency of
this agreement."
After the alteration, the clause has been made
to read as follows on Exh. 168 :--
"A commission of Rupee one percent on value of
all sales of products of the above three
spinning mills, viz. yarn, and newar, whether
sold directly by the partners or otherwise but
delivered or produced during the currency of
this agreement."
As a result of the last change, the word
’and’ has been substituted by the word ’or’.
As the above mentioned alterations sub-
stantially vary the rights and liabilities as
also the legal position of the parties, they
cannot be held to be anything but material
alterations and since they have been made
without the consent of the defendants first
set, they have the effect of cancelling the
deed. Question No. 5 is, therefore, answered
in the affirmative.
(1) A.I.R. 1940 P.C. 160.
871
Question No. 6--The plaintiff’s suit, as already indi-
cated, was for a specific and ascertained sum of money on
the basis of settled account. The courts below have con-
currently found that there was no settlement of account on
April 4, 1949, as alleged by the plaintiff. After this
finding, it was not open to them to make out a new case for
the plaintiff which he never pleaded and go into the ac-
counts and pass a decree for the amount which they consid-
ered was due from the defendants first set to the plaintiff.
They should have, in the: circumstances, either dismissed
the suit or passed a preliminary decree fox accounts di-
recting that the books of account be examined item by item
and an opportunity allowed to. the defendants first set to
impeach and falsify either wholly or in part the accounts on
the ground of fraud; mistakes, inaccuracies or omissions for
it is well settled that in case of fraud or mistake, the
whole account is affected and in surcharging and satisfying
the accounts, errors of law as well as errors of fact can be
set right. By adopting the latter course indicated by us,
the defendants first set would have got a fair and adequate
opportunity of scrutinizing the accounts and showing whether
they were tained with fraud, mistake, inaccuracy or omission
or of showing that any item claimed by the plaintiff was in
fact not due to him.
Question No. 7 :--The High Court has for cogent reasons
held that the goods on which the burden of charge lay being
available for the satisfaction of the liabilities, if any,
under the agreement dated July 6, 1948, the defendants
second set could not be held personally liable for payment
of the decretal amount. The opinion expressed by the High
Court is correct and we see no warrant or justification to
interfere with the same.
In view of the foregoing, we have no hesitation in
holding that as material alterations have been made by the
plaintiff in the agreement dated July 6, 1948 (which is the
basis of the suit) rendering it void and as the bar of
section 69 of the Partnership Act clearly applies to the
case, the suit is clearly untenable and has to be dismissed.
the result, Appeal No. 572 of 1974 is allowed and the
suit out of which it arose is dismissed. Consequently,
Appeal No. 416 of 1973 fails and is dismissed. In the
circumstances of the case, parties are left to Pay and bear
their own costs of these appeals.
C.A. 572/74 allowed.
P.H.P. C.A. 416/73 dismissed.
872