Jyoti Jain vs ABP Private Limited & Anr

This appeal is directed against a money decree passed by Justice Debangsu Basak on 3rd September, 2014. The plaintiff filed a suit for recovery of a sum of Rs.40,60,139/- towards outstanding advertising bills from the defendants jointly and severally. The plaintiff contends that the defendant no.1 is an advertising agency accredited with the Indian Newspaper Society (INS). The defendant no.1 carries on business under the name and style of M/s. Parichay Advertising as the sole proprietor thereof.

According to the plaintiff, the defendant no.1 placed bookings for advertisements between March, 2000 and March, 2001 in two newspapers owned by the plaintiff namely, The Telegraph and Ananda Bazar Patrika for release of advertisements relating to the defendant no.2. The defendant no.2 is a client of the defendant no.1 for whom the said advertisement was issued. Written instructions for release of such advertisements were issued by the defendant no.1. The release orders are from the period 14th December, 2000 to 13th March, 2001. In terms of such release orders, the plaintiff issued advertisements in its two newspapers. The rate of publication was agreed upon. Subsequent to the advertisements being published, the plaintiff raised invoices on and from 31st January, 2001 till 31st March, 2001 on the defendants. The value of such invoices aggregate to Rs.43,05,420/-.

In view of non-payment, the plaintiff made complaints to the Indian Newspaper Society. The defendant no.1 is a member of the said society. INS verified that there could be no dispute with regard to the invoices raised by the plaintiff. INS had a bank guarantee on account of defendant no.1. Admittedly, the bank guarantee was invoked and INS has released a sum of Rs. 4,25,214/-on account of the defendant no.1 and released the said payment in favour of the plaintiff. The plaintiff gave credit to the defendants for the said sum. In the suit, the plaintiff claimed the balance amount of the invoice together with interest thereof from the defendants.

The defendant no.1 has filed its written statement. In her written statement, the defendant no.1 claimed that she was carrying on business under the name and style of M/s. Parichay Advertising. It is alleged that she entered into a partnership with one Mr. Sanjay Bansal on 20th April, 2000 and thereby the proprietorship concern of the defendant no.1 was converted into a partnership firm of the defendant no.1 and Sanjay Bansal in equal share. The defendant no.1 alleged to have issued a notice dated 14th October, 2000 on Mr. Bansal expressing her intention to withdraw from the said partnership and not to continue the partnership business with effect from 1st November, 2000. It is alleged that Mr. Bansal by his letter dated 1st November, 2000 confirmed the dissolution of the partnership firm and continuing the said business, namely, M/s. Parichay Advertising as sole proprietor thereof with effect from 1st November, 2000. The defendant no.1 further alleged that the deed of dissolution of partnership was executed between her and Mr. Sanjay Bansal on 1st November, 2000 and consequently Mr. Sanjay Bansal became liable for all liabilities in respect of M/s. Parichay Advertising. The defendant no.1 claimed that Mr. Bansal had indicated the change of status of M/s. Parichay Advertising to INS by a letter dated 22nd June, 2001. In view of the dissolution of the partnership firm, the defendant no.1 claimed that she is not liable. The defendant no.2 did not enter appearance in the suit.

On the basis of the pleadings, the learned Single Judge framed five issues:-

Is the plaintiff entitled to a decree for a sum of Rs.43,60,139.67 against the defendant no.1 and/or the defendants jointly and severally?

Is the plaintiff entitled to interim interest and interest upon judgment?

Is there any privity of contract between the plaintiff and the defendant no.1?

Is the suit bad for non-joinder of necessary parties ?

To what other reliefs the plaintiff is entitled?

On the basis of the oral and documentary evidence, the learned Trial Judge returned the finding in favour of the plaintiff and the suit was decreed for a sum of Rs.38,80,206/-together with interest at the rate of 8% per annum on and from 1st June, 2001 till realisation. This decree is under challenge.

Mr. Swarnendu Ghosh, learned Counsel appearing on behalf of the appellant has argued that the learned Single Judge has failed to take into consideration that the invoices were not signed by the defendant no.1 nor issued by proprietorship firm. It is submitted that a discreet enquiry with INS would reveal that the composition of the said firm namely, Parichay Advertising has been changed and Sanjay Bansal had taken over the said partnership and continued to function as the sole proprietor. It is submitted that in two proceedings which had recently come to the knowledge of the appellant, it has been held that Sanjay Bansal is the sole proprietor of Parichay Advertising and defendant no.1 is in no way connected with the said proceeding. However, it is admitted that at the time of disposal of the suit, the said two orders namely, the order passed by the Income Tax Appellate Tribunal for the assessment year ended 2001-02 dated 26th March, 2012 and the order passed by the VII Senior Civil Judge, City Civil Court in a suit filed by AGA Publication Ltd. against Pariechay Advertising, New Delhi, Pariechay Advertising, Mumbai and Indian Newspaper Society, findings were not produced. It is argued that these orders would show that it is the liability of Parichay Advertising, Mumbai and not Parichay Advertising, New Delhi.

The appellant has failed to satisfy the requirement of Order 41 Rule 27 of the Code of Civil Procedure which requires the party seeking for production of additional evidence at the appellate stage to establish that notwithstanding the exercise of due diligence such evidence was not available within his/her knowledge or could not after the exercise of due diligence be produced by him/her at the time when the decree appealed against was passed.

It is inconceivable that a party who had in his favour a judgment passed in 2012 would not be in a position to produce the said order and/or judgment, if she had thought such order or judgment to be relevant, in September, 2014 when the suit was decreed. The defendant no.1 did not feel it necessary to rely on such documents although she had the opportunity to produce the said documents before the learned Single Judge. However, we have perused the said two orders and did not find such orders to be relevant to the issue.

There are certain facts which are more than what meets the eye.

Firstly, the partnership deed with Mr. Bansal was entered into since the defendant no.1 could not manage the various branches of the said partnership. It is evident from the recital of the partnership deed which reads - "Whereas due to expansion of the business Mrs. Jyoti Jain was finding it difficult in controlling the business. Whereas Sh. Sanjay Bansal (Party of the SECOND PART) have expressed his desire to become a Partner in the said business for which the party of first part has agreed for want of experience working hands for which the second party is fully competent." The partnership deed also further disclosed that the name of the partnership firm would be Parichay Advertising which was prior to the partnership deed was controlled and run by defendant no.1 as the sole proprietor thereof.

Secondly, the defendant no.1 appears to have requested Sanjay Bansal by a purported communication dated 14th October, 2000 to settle accounts and submit fresh guarantees to INS and Doordarshan so that the guarantee could be released. By the said communication, she evinced her intention to discontinue the partnership business with effect from 1st November, 2000. There was no evidence produced before the learned Single Judge to show that before filing of the suit any such communication was made to the plaintiff about the reconstitution of the partnership business. Over and above, the respondent No. 1 did not object to encashment of the bank guarantee and remittance of the proceeds thereof to the plaintiff for a sum of Rs. 4,25,214/-. It cannot be disputed that the defendant No. 1 was not aware of such enforcement of the bank guarantee and realisation of the said amount by INS from the bank guarantee furnished by the defendant No. 1. There is nothing on record to show that the defendant no.1 was not aware of it. Even on this date, the appellant has failed to demonstrate that the defendant no.1 had complained of such invocation and demanded restoration of the said amount. This conduct coupled with non-compliance of Sections 45 and 72 of the Indian Partnership Act, in our view, is sufficient to fasten liability upon the defendant no.1.

Thirdly, it is an admitted position that no notice under Section 45 read with Section 72 of the Indian Partnership Act has been issued. Section 45 casts an obligation upon the partners of the firm to issue public notice of the dissolution. The section is very clear as to the liability for the acts of the partner done after dissolution. Until the public notice is given of the dissolution, the partners continue to be liable as such to third parties for any act done by any of them which would have been an act of the firm if done before the dissolution. This fiction creates a liability of the defendant No. 1 for its failure to act in terms of Section 45 read with Section 72 of the Indian Partnership Act. The defendant no.1 has also failed to establish that the plaintiff has notice aliunde of dissolution. Where after dissolution of a partnership firm registered under the Partnership Act, one of the partners carried on business of the firm in the same firm name but no public notice of the dissolution of the firm was given as required by law and a third person deals with the firm without knowing who the partners of the firm were at the time of such transaction, the partners who retired from the partnership as a result of the dissolution would nevertheless be liable for the transaction by virtue of Section 45(1) proviso of the Partnership Act. Section 45 of the Partnership Act clearly says that a partnership continues as to third parties who deal with the members thereof as partners until public notice of dissolution is given, even though, as between the partner the firm has been dissolved prior to such notice. In other words, a partnership is presumed to continues as to third persons until public notice of dissolution has been given, unless the person dealing with the firm after its dissolution, had actual knowledge of such dissolution. Accordingly, each partner of a former firm is bound by, and continues liable for, the acts of any former partner, if they would have been acts of the firm if dissolution had not taken place. The dissolution of a firm completely breaks the partnership relation between its members and consequently the agency constituted by that relation in regard to dealings with third persons. Thereafter, a partner ceases to have any authority to bind his previous co-partners by any act. The words "any act done by any of them which would have been an act of the firm if done before dissolution" indicate that notwithstanding the dissolution of the 1st defendant firm, the old partners of the firm continue to be liable as partners although by virtue of the dissolution they have ceased to be partners and are no longer partners for any act done by any of the old partners, provided that fact is of a character that would have been an act of the firm.

Section 39 of the Partnership Act speaks of dissolution of a firm. A deed of dissolution should necessarily deal with the matter such as settlement of accounts, payment of amounts found due on such settlement, closing down or continuation of business collection of outstanding amount and payment of liabilities. A person dealing with the firm will not be affected by the dissolution of which the Public Notice has been given, unless they themselves had notice of such dissolution. However, Section 45

(1) of the Partnership Act has twin objects. It aims to protect third parties dealing with him who had No notice of its prior dissolution and it also seeks to protect the partners of a dissolved firm from liability to third parties for acts of other partners done subsequent to the dissolution. It is clear from Section 45 and Section 72 of the Partnership Act that individual dealings with the firm would not be affected by a dissolution of which no public notice was given unless they themselves had knowledge of such dissolution which however, is not the case here. [See Juggilal Kamlapat vs. Sew Chand Bagri & Others reported at AIR 1963 Cal 505, Lakshmi Vilas Bank Ltd. v. Sun Finance reported at (1995) 2 LW 574 (Mad) DB, C. Ponnusamy vs. Chinnamman Constructions reported at (2014) 3 MWN (Cri) DCC 84 and Mayo Pharmacy vs. Aboobacker Haji reported at Vol 74 Company Cases page 407.]

Fourthly, the defendant No. 1 did not feel it necessary to apply for addition of Parichay Advertising, Mumbai as the defendant No. 1 has alleged that it is a separate entity and the invoices were raised at the instance of Parichay Advertising, Mumbai and not Parichay Advertising, New Delhi. It would not have made much difference because of absence of public notice. This artificial separation is meaningless as regards a third party unless there is compliance of Section 45 of the Partnership Act. The Learned Single Judge has relied upon Section 45 of the Indian Partnership Act and has arrived at a finding that there is no evidence on record to show that a public notice contemplated under Sections 45 and 72 of the Indian Partnership Act, 1932 was issued by the defendant No. 1. In absence of any such public notice, the defendant No. 1 continues to remain liable as a partner of the dissolved firm.

The Learned Single Judge has also noticed that INS stated that Mr. Sanjay Bansal applied for conversion of Parichay Advertising from a sole proprietorship concern of defendant No. 1 to a partnership firm. However, such application was never processed. The letter dated 5th November 2001 does not show that such conversion in fact had taken place, which means that the fiction of Section 45 of Indian Partnership Act continues till a public notice is issued inasmuch as the deed of dissolution was never acted upon. It appears that the defendant No. 1 is trying to create an artificial division between herself and Sanjay in order to avoid her liability in this proceeding. It further appears that Sanjay Bansal is an extended arm of the defendant No. 1 and the defence of the defendant No. 1 that the defendant No. 1 has no nexus with the Mumbai branch of Parichay Advertising is a clear afterthought and has remained unsubstantiated. They are partners in crime. The judgment of the Income Tax Tribunal was in respect of a return filed by Sanjay Bansal as proprietor of M/s. Parichay Advertising, New Delhi. Interestingly, the defendant No. 1 is also having her place of business at New Delhi. She inducted Sanjay to manage other branches. The scope of enquiry in the said proceeding is entirely different from the scope of enquiry in the suit. The judgment of the VII Senior Civil Judge, City Civil Court is also of no relevance as it did not deal with the issues raised in the suit and decided against the defendant No. 1. The suit was decreed against Parichay Advertising, Mumbai, ex parte. The issues in the suit are not same or similar. The facts are different. The pleading of the suit are not produced.

On the basis of the oral and documentary evidence available on record, we do not find any reason to interfere with the decree passed by the Learned Single Judge.

APD No. 304 of 2015 and GA No. 268 of 2016 stand dismissed.

However, there shall be no order as to costs.