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IN THE HIGH COURT OF KARNATAKA

DHARWAD BENCH

Dated this the 10th day of February 2014

Present

THE HON’BLE MR.JUSTICE N.KUMAR

and

THE HON’BLE MR.JUSTICE C.R.KUMARASWAMY

Regular First Appeal No.3064/2011

Between:

Sha Pukhraj Prakashkumar,New Cotton Market, Hubli,By its Partner, Ramesh,

S/o Bhawarlalji Ostwal,Age: 44 years, Occ: Business,R/o: New Cotton Market,Hubli-580023, Dist: Dharwad. …Appellant

(By Sri. Ravi S.Balikai & S.C.Jainar, Advocates)

A n d :

1. Chemo Bilogical, Manufacturers of Tablets, Capsules, And Dry Syrup, No.A-50,

G.T.Karnal Road, Industrial Area, New Delhi-110033, By its Proprietor, Babulal Lalchandji Ostwal, Age: 64 years, Occ: Business, R/o. No.A-50, Age: 64 years,

R/o – do –

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2. Lalchand Hansaji Ostwal,Age: 78 years, Occ: Business,R/o. No.A-50, G.T.Karnal Road,

Industrial Area,New Delhi-110033. …Respondents

(By Sri. Anand R.Kolli, Advocate for R1)

(notice to R2 is dispensed)

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This appeal is filed under Section 96 of CPC,1908, against the judgment and decree dated07.02.2011 passed in O.S.No.49/2008 on the file of the

Principal Senior Civil Judge, Hubli, dismissing the suitfiled for recovery of money.

This appeal coming on for Final Hearing this day,N.Kumar, J, delivered the following:

JUDGMENT

This is a plaintiff’s appeal against the judgment

and decree of the Trial Court which has dismissed the

suit of the plaintiff for recovery of money.

2. For the purpose of convenience, the parties are

referred to as they are referred to in the original suit.

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3. The plaintiff is a registered partnership firm.

One Babulal Lalchandji Ostwal, is the proprietor of

“Chemo Biological”-defendant No.1, which is carrying on

the business of manufacture of tablets, capsules and

dry syrup. Defendant No.2 is the father of Babulal

Lalchandji Ostwal. Both father and son are carrying on

the business. They are members of the joint hindu

family as well. The partners of the plaintiff and the

defendants are close relatives. When the defendants

were under financial difficulties, from time to time, the

defendants have borrowed money from the plaintiff. The

plaintiff was paid part of the principal amount and

interest. The plaintiff has maintained accounts in the

day-to-day ordinary course of business. The balance is

struck daily on the foot of accounts, the defendants are

liable to pay Rs.23,76,950/- to the plaintiff. Annexure-A

is extract of statement of accounts.

H.K.Veerabhadrappa and Co., Chartered Accountant of

the plaintiff, wrote a letter to defendant No.1 to confirm

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the balance as on 31.03.2006. Defendant No.1 sent a

reply dated 14.08.2006 to H.K.Veerabhadrappa and Co.,

stating that the statement of accounts sent by the

Chartered Accountant is incorrect. However, the

defendant confirmed the balance as on 12.08.2004. The

said Chartered Accountant of the plaintiff sent e-mail on

22.08.2006 to the following effect:

“However please note that we have not sent

any statement of account as made out by

your letter. Further your comments that the

statement of accounts is erroneous and

incorrect is not acceptable in the absence of

any details. Please sent us a copy of the

Statement of account of M/s. Sha Pukhraj

Prakashkumar, Hubli, to enable us to

reconcile the figures”

To this e-mail the defendant No.1 did not send any

reply. The defendant No.1 confirmed the balance by his

letters dated 31.03.1992, 31.03.1996, 31.03.1997,

16.05.2000, 26.04.2001 and 12.08.2004.

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4. The 1st defendant sent a letter dated 24.03.2005

wherein it is stated that the Income Tax Officer has

disallowed the interest and defendant No.1 has

requested the plaintiff to credit sum of Rs.14,79,216/-.

The plaintiff sent a proper reply through “registered post

acknowledgment due” dated 16.04.2005. In the said

letter, the plaintiff stated that the disallowance of the

Income Tax Department does not, in any way, take

away the right of receiving the interest. Hence the

question of reversal of interest of disallowance by the

Income-Tax Department does not arise in the books of

accounts. Defendant No.1 disputed regarding the

account maintained by the plaintiff by his letter dated

14.08.2006. The plaintiff filed O.S. No.352/2007 on the

file of the II Additional Civil Judge (Jr. Dn.), Hubli, for

settlement of accounts. Defendant No.1 herein had

taken up a defence that the suit was not maintainable,

hence the plaintiff had to withdraw the suit with liberty

to file a fresh suit on the same cause of action.

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Defendant No.1 has demonstrated his intention not to

pay the money to the plaintiff. Plaintiff issued a legal

notice through his advocate on 07.10.2006 &

28.12.2006. No reply is sent from defendant no.1. The

cause of action for the present suit arose when the

plaintiff had paid the loan from time to time and

defendant No.1 has repaid the loan amount partly from

time to time and also on 12.08.2004 when the

defendant No.1 has acknowledged the liability coupled

with promise to pay on 24.03.2005, later when he

disputed by his letter dated 14.08.2006 and also by

letter dated 25.04.2005 the defendant No.2 had

promised to repay the balance. Therefore, the suit was

filed for recovery of sum of Rs.23,76,950/- with interest

at 18% from the date of suit till realisation.

5. After service of summons, defendants entered

appearance. Defendant No.1 filed its written statement.

The 1st defendant contended that the plaintiff-

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partnership firm is not registered and therefore, the suit

is not maintainable. He contended that defendant No.2

has nothing to do with the transaction between the

plaintiff and defendant No.1. Defendant No.2 is neither

a partner nor a proprietor. In the earlier suit i.e.,

O.S.No.352/2007 the 2nd defendant was not impleaded

as a party. Because there is no cordial relationship

between father and son, the suit is filed impleading the

2nd defendant with a joint conspiracy and, therefore, it

was contended that the suit is liable to be dismissed for

mis-joinder of unnecessary parties. However, the

relationship between the parties set out in the plaint

was admitted. The defendant No.1 denied the allegation

that under financial crisis, the defendants borrowed

money from the plaintiff on many occasions. The

documents relied on by the plaintiff are all fabricated.

The defendants are not liable to pay Rs.23,76,950/-

claimed in the plaint. Writing of any letter by the said

chartered accountant to defendant No.1 was not denied.

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Defendant No.1 had not sent any statement of accounts

as alleged in the plaint. In fact, the plaintiff was called

upon to produce documents to establish that the

proprietor of the 1st defendant Babulal Ostwal has

confirmed the statement of accounts dated 12.08.2004

as alleged, but the said letter dated 12.08.2004 is not

signed by the 1st defendant. The suit filed on the basis

of the said letter is barred by law of limitation, as it is

filed beyond three years from that date. Original Suit

No.352/2007 was filed for settlement, whereas the

present suit is filed for recovery of the amount. the

nature of the earlier suit and the present suit are not

one and the same. the earlier suit was filed on the file of

II Additional Civil Judge (Jr. Dn.), Hubli, while the

present suit is filed before the Court of Principal Senior

Civil Judge, Hubli and, therefore, the permission

granted would not enable him to file a suit in another

court and save limitation. Therefore, the defendant

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totally denied the liability and sought for dismissal of

the suit.

6. On the aforesaid pleadings, the Trial Court has

framed the following issues:

“1. Whether the plaintiff proves that the

defendants have borrowed the money

from him from time to time and have

paid part of principal amount and

interest and now the defendants are due

in a sum of Rs.23,76,950/- as per the

accounts maintained by him in day

today ordinary course of business as per

Annexure-A submitted along with the

plaint?

2. Whether the plaintiff proves that the

defendant had confirmed the balance on

12.08.2004 as stated by him in para 3 of

the plaint?

3. Whether the first defendant proves that

the present plaintiff has no locus-standi

to file the suit in view of previous suit

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O.S.No.352/2007 was withdrawn by the

Power of Attorney with a permission to

file a fresh suit?

4. Whether the defendant proves that the

suit is bad for mis-joinder of second

defendant and who is unnecessary party

in this case?

5. Is the suit barred by law of limitation as

contended by the first defendant in his

written statement?

6. Whether the plaintiff proves that the

defendants are due in a sum of

Rs.23,76,950/- on the date of instituting

the suit?

7. What reliefs the parties are entitled to?”

The plaintiff, in order to substantiate his claim,

examined one Ramesh, a partner of the plaintiff-

partnership firm, as P.W.1 and the son of the Chartered

Accountant by name Aravind as P.W.2. The plaintiff

produced, in all, 46 documents which were marked as

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Ex.P.1 to P.46. On behalf of the defendants, the 1st

defendant was examined as D.W.1 and 5 documents

were produced and marked as Exs.D.1 to D.5.

7. The Trial Court, on appreciation of the aforesaid

oral and documentary evidence on record, held the

plaintiff has failed to prove the borrowing of money from

time to time and that the defendants are due in a sum

of Rs.23,76,950/-, as per the accounts maintained by

him. The plaintiff has failed to prove that the defendant

has confirmed the balance on 12.08.2004. The 1st

defendant has proved that the plaintiff has no locus

standi to file the suit in view of the previous suit i.e.,

O.S.No.352/2007 having been withdrawn by the power

of attorney with a permission to file a fresh suit. The

defendant had proved that the suit is bad for

mis-joinder of 2nd defendant who is an unnecessary

party. The suit is barred by law of limitation. The

plaintiff is not entitled to the suit claim. Aggrieved by

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the said judgment and decree of the Trial Court, the

plaintiff has preferred this appeal.

8. Learned counsel appearing for the appellant

assailing the impugned judgment and decree contended

that the correspondence between the parties, which is

not in dispute, clearly established the loan transaction

between the parties, the payment of money by the

plaintiff to the defendant, repayment of money by the

defendant to the plaintiff and also the balance amount.

The Trial Court has not properly appreciated the said

documentary evidence on record. Further, he contended

in Ex.P.21, there is a categorical admission of the

liability, the balance amount due and though the said

letter was written by the 1st defendant – the son of

defendant NO.2, the Trial Court committed a serious

error in not acting upon the said document. The

defendant in his evidence has admitted the transaction,

the letters confirming the debt and the suit filed is well

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within the period of limitation especially when the Court

granted time to file a fresh suit on the same cause of

action and, therefore, he submits that the judgment and

decree of the Trial Court requires to be interfered with

and the suit of the plaintiff is to be decreed.

9. Per contra, learned counsel for the defendant

No.1 supported the impugned judgment and decree.

10. In the light of the aforesaid facts and rival

contentions, the points that arise for our consideration

in this appeal are as under:

“ i) Whether the plaintiff has established the

loan transaction and whether the suit

claim was due as on the date of the suit

from the defendant?

ii) Whether the suit of the plaintiff is in

time?”

11. From the averments in the plaint, it is clear

that the plaintiff, though is claiming the amounts on the

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basis of a loan transaction, nowhere he has mentioned

the amount of loan advanced to the defendants and the

day on which the said amount is advanced. However,

the documents produced in the case discloses such loan

transaction. Ex.P.1 is the letter addressed by the 1st

defendant to the plaintiff on the letter-head; it is the

Accounts Statement for the year 1991-92 which shows

that a sum of Rs.2,00,000/- is paid by way of draft and

a sum of Rs.4,611.50 ps. is due towards interest

calculated at the rate of 18%. Thus, in all, a sum of

Rs.2,04,611-50 ps. was due as on 31.03.1992. Ex.P.2 is

another Accounts Statement for the year 1995-96 dated

31.03.1996 written by the 1st defendant on the letter

head which shows the payment of Rs.3,00,000/- by

draft and another amount of Rs.2,00,000/- by draft and

the total amount due as on 31.03.1996 is

Rs.17,98,168/-. Similarly, as per Ex.P.3, the

subsequent interest having been added, as on

31.03.1997, the total amount due from the 1st

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defendant to the plaintiff is shown at Rs.21,81,028/-.

Ex.P.4 is another letter dated 26.04.2001 addressed by

the 1st defendant to the plaintiff enclosing a duly

confirmed accounts statement for the year 2001-02.

Then, we have Ex.P.5, the bill prepared by the plaintiff,

which shows that as on 31.03.2002 a sum of

Rs.50,41,494/- being the amount due to the plaintiff

from the defendants. Then, we have Ex.P.6 a letter

addressed by the 1st defendant to the plaintiff enclosing

a demand draft for Rs.10,00,000/- as on 05.05.2003.

Ex.P.7 is another letter addressed by 1st defendant to

the plaintiff informing that they have debited the

plaintiff account with Rs.1,34,908/- being the difference

in interest. The said letter is written by the authorised

signatory and not by the 1st defendant. Along with that

letter they have sent a statement of accounts for the

period from 1991-92 to 2002-03 which clearly gives a

description of the amount, calculation of interest,

amount received, amount deducted towards TDS and

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the balance amount. The other letters produced show

the dispute regarding calculation of interest on

day-to-day basis and not on monthly or yearly basis.

Then we have the letter at Ex.P.11, wherein the 1st

defendant demonstrated that a sum of Rs.14,79,216/-

being the amount of interest disallowed by the income

tax Department should be credited to the account of the

1st defendant. A reply was sent as per Ex.P.13 by the

plaintiff bringing to the notice of the 1st defendant that

merely because the income-tax department did not

allow the interest that would not enure to the benefit of

the 1st defendant and it cannot avoid the liability to pay

the agreed rate of interest. Then, we have the letter-

Ex.P.15, wherein a sum of Rs.19,76,850/-, as on

22.03.2006 is shown as due to the plaintiff by the

defendant. Ex.P.18 is dated 01.04.2007 which happens

to be the basis on which the suit is filed. Much reliance

is placed on Ex.P.21, a letter said to have been

addressed by the 1st defendant to the plaintiff on

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12.08.2004 which shows that the opening balance at

Rs.22,17,407.00 ps. and after giving reduction of

Rs.1,34,908/- Rs.20,82,499/- became the amount due.

A sum of Rs.10,00,000/- was paid by way of demand

draft is adjusted and then a sum of Rs.10,82,499/- is

held to be due as on 12.08.2004. Then, we have the

letter addressed by the Auditor of the plaintiff to the

defendant claiming a sum of Rs.20,14,364/- as

receivable from the 1st defendant as on 31.03.2006. A

reply was sent by 1st defendant pointing out that no

statement of accounts is furnished. Similarly, further

correspondence is also produced. The statement of

accounts produced along with Ex.P.7 gives a glimpse of

nature of transaction between the parties. A careful

reading of the said statement of accounts discloses the

transaction between the parties started on 17.02.2002

with a sum of Rs.2,00,000/- being paid by the plaintiff.

The interest agreed upon was 18%. Again, for the

accounting year 1992-93, a sum of Rs.2,00,000/- was

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paid as on 30.06.1992 and yet another amount of

Rs.2,00,000/- was paid on 01.12.1992 by way of

demand drafts, but this time, the rate of interest agreed

was 21%. As no payments were made, interest was

calculated and added to the principal amount and then

the amounts were brought forward from year to year.

Again for the year 1995-96, yet another sum of

Rs.3,00,000 was paid on 21.09.2005 by way of demand

draft. Further a sum of Rs.2,00,000/- was paid on

25.09.1995. Thus, in all, a sum of Rs.11,00,000/- was

paid by way of demand drafts by the plaintiff. Then, we

have the accounts for the year 2000-2001 which shows

that the 1st defendant paid a sum of Rs.1,09,800/-,

then Rs.5,41,494/- on 11.06.2002, Rs.3,00,000/- as on

02.07.2002, Rs.10,00,000/- as on 25.07.2002,

Rs.5,00,000/- as on 18.09.2002, Rs.10,00,000/- as on

26.12.2002. In addition, the 1st defendant has also paid

a sum of Rs.10,00,000/- as on 5th May 2003. In all,

roughly about Rs.46,00,000/- is paid. As against the

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payment of Rs.11,00,000/-, a sum of Rs.46,00,000/- is

repaid by way of demand drafts. Except these

correspondences, nothing else is produced to show the

nature of business transactions. The interest is claimed

at 18% and 21%. The aforesaid statements make it clear

that the interest is calculated on daily basis and the

interest so calculated is added to the principal amount.

That is the reason why even after repaying a sum of

Rs.46,00,000/-, as against the borrowing of

Rs.11,00,000/-, still plaintiff is claiming a sum of

Rs.23,76,950/-. In the first place, there is no agreement

between the parties inter se. It is not the loan

transaction by a money lender to his customer. The

plaintiff is carrying on the business and, in the ordinary

course of business, he has lent some money to the

defendant. That is the reason why no documents are

executed, probably, because of the close relationship

between the parties. All payments by the plaintiff to the

defendants were made by way of demand drafts. All the

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repayments by the defendants to the plaintiff were made

by way of demand drafts. That is the reason why, in the

plaint, the plaintiff was unable to say what exactly is

the loan amount, what exactly is the rate of interest,

how exactly the repayments are appropriated towards

interest and principal amount.

12. It is in this background, we have to see the

conduct of the parties also. After payment of

Rs.10,00,000/- by way of demand drafts, the defendant

has denied the liability to pay any amount. Thereafter,

there is no acknowledgment of debt. The letter relied on

by the plaintiff is a letter written by his son. The

evidence on record shows that the 2nd defendant is the

father of the proprietor of the 1st defendant and they are

not in good terms with each other. There is difference of

opinion between father and the son i.e., the 1st

defendant and the person who has acknowledged the

letter. The evidence on record shows that they are all

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relatives. As long as their relationship was good,

payments were received and there was no problem. It is

only after their relationship was constrained, the suit is

filed. It is not in dispute that earlier suit was filed for

settlement of accounts to which the 2nd defendant

herein was not a party. The plaintiff withdrew the suit

with permission to file fresh suit on the same cause of

action. The earlier suit was filed on the file of II

Additional Civil Judge (Jr. Dn.), whereas the present

suit is filed in the Court of Principal Senior Civil Judge,

Hubli. When he had earlier filed a suit for settlement of

accounts, which was withdrawn because of formal

defect in the suit and later he filed the present suit for

recovery of money, it was incumbent on the part of the

plaintiff to state the basis for claim, he ought to have

mentioned what is the principal amount, what is the

interest payable thereon, what is the amount sofar

received by the defendant, how the repayments made

are appropriated towards principal and interest and

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what is the balance amount due to him. All these

particulars are conspicuously missing in the plaint. In

the evidence the plaintiff is unable to state these

particulars. Except stating that the defendants have

admitted the liability and relying on several letters

referred to above, nothing concrete is produced before

the Court to show what is the basis for the suit claim. It

is in this context, if the last payment of Rs.10,00,000/-

is taken into consideration, and the suit filed earlier was

withdrawn, it is to save the limitation reliance is placed

on Ex.P.21, which is not in the handwriting of

defendant No.1. It is in this context, the Trial Court on

proper appreciation of the evidence on record, has

rightly held that the plaintiff has failed to prove the suit

claim, the suit is barred by law of limitation.

13. As the Trial Court has taken the trouble of

looking into the entire evidence on record, the

documentary evidence, keeping in view the law

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governing the issues involved in this case, has recorded

a finding that the plaintiff has failed to establish his

claim for recovery of money and the claim is barred by

limitation, we do not see any good ground to interfere

with the well considered order passed by the Trial

Court. Therefore, there is no merit in the appeal. Hence,

it is dismissed.

Parties to bear their own costs.

SD/-

JUDGE

SD/-

JUDGEKms