K.K. Sreedharan v. K.S. Raveendran and P.A. Gopi

## **IN THE HIGH COURT OF KERALA AT ERNAKULAM** ## **PRESENT:** ## **THE HONOURABLE MR.JUSTICE THOMAS P.JOSEPH** **TUESDAY, THE 11TH DAY OF SEPTEMBER 2012/20TH BHADRA 1934** ## **SA.NO. 467 OF 2000 (E)** **-----------------------------------AS.284/1996 OF DISTRICT COURT, THRISSUR OS.371/1991 OF FIRST ADDITIONAL SUB COURT, THRISSUR** ## **APPELLANT/RESPONDENT NO.2/DEFENDANT NO.2:** **---------------------------------------------------------------------------** **K.K. SREEDHARAN, S/O.KARAPPAN, RESIDING AT KOLAT HOUSE, MANGATTUKARA DESOM, PADIYAM VILLAGE, THRISSUR DISTRICT.** **BY SENIOR ADVOCATE SHRI S.V.BALAKRISHNA IYER SRI.P.B.KRISHNAN** ## **RESPONDENTS/RESPONDENT/PLAINTIFF/DEFENDANT NO.1:** **---------------------------------------------------------------------------------------** **1. K.S. RAVEENDRAN, S/O. SANKARAN, RESIDING AT KOLAT HOUSE, MANGATTUKARA DESOM, PADIYAM, PADIYAM VILLAGE, THRISSUR DISTRICT.** **2. P.A. GOPI, S/O.PALLIYIL ACHUTHAN, RESIDING AT PALLIYIL HOUSE P.O., ANTHIKKAD, THRISSUR.** **BY ADV. SRI.TOM JOSE BY ADV. SRI.K.M.THOMAS RAJ** **THIS SECOND APPEAL HAVING BEEN FINALLY HEARD ON 11-09-2012, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:** ## **THOMAS P.JOSEPH, J.** **==================================== S.A. No.467 of 2000 ==================================== Dated this the 11[th] day of September, 2012 J U D G M E N T** The 2[nd] defendant in O.S. No.371 of 1991 of the Additional Sub Court, Thrissur is aggrieved by the preliminary decree for accounting passed by the District Court, Thrissur in A.S. No.284 of 1996. 2. The following substantial questions of law are framed for a decision: (i) Has not the lower appellate court acted illegally and without jurisdiction in passing a preliminary decree for accounting, finding also finally various amounts as being due and debarring the appellant in proving proper expenditure on the account of the plaintiff? (ii) Is not the present suit for accounting and other reliefs barred by limitation? (iii) Should not the lower appellate court entertain a plea of limitation even at the appellate **S.A. No.467 of 2000** -: 2 :- stage and has it not acted illegally in dismissing I.A. No.3794 of 1999? (iv) In the nature of the terms contained in Ext.B2, can the plaintiff make any claim for accounting? (v) Has not the appellant proved the proper utilization of the sale proceeds in terms of Ext.B2 and are the conclusions made by the lower appellate court sustainable? (vi) In any event should not the lower appellate court leave open all questions including the proper utilization of sale proceeds to the final decree stage? 3. Appellant is the step brother of the 1[st] respondent. The 1[st] respondent was doing business in electrical items in the name and style, 'M/s.Sona Vision Agencies'. According to the 1[st] respondent, at a time when he wanted to take up employment abroad in the year 1978, he had to leave the place and at that time he authorized the appellant to carry on the business on executing a Power of Attorney (the registration copy of which is ## **S.A. No.467 of 2000** ## -: 3 :- Ext.A1). After the 1[st] respondent returned from abroad, he demanded the appellant to render accounts but the later refused. In the meantime, the 1[st] respondent was accommodated in the individual business of the appellant. To restrain the 1[st] respondent from entering that shop room, appellant filed O.S. No.1132 of 1990. Thereon the 1[st] respondent filed the present suit to direct the appellant render accounts, for a mandatory injunction to direct the appellant and the 2[nd] respondent vacate the shop room and for compensation. 4. Appellant contended that there was a transfer of business to him as per Ext.B2 and that he was conducting the business on his own. He denied that he was appointed as agent of the 1[st] respondent to carry on the business. He also denied that the original of Ext.A1 was given to him. 5. The trial court found that it is not shown that the original of Ext.A1 was given to the appellant. The trial court refused to accept the case of the 1[st] respondent that the appellant was acting as his agent from the year, 1978 onwards. The trial court also found that based on Ext.B2, the appellant has acquired right over the business and hence he was not liable to account to the 1[st] respondent. It took the view that ## **S.A. No.467 of 2000** -: 4 :- in view of Exts.B23 and B23(a), the 1[st] respondent cannot make any claim over the shop room. Consequence was a dismissal of the suit. 6. The 1[st] respondent challenged that judgment and decree in the District Court, Thrissur in A.S. No.284 of 1996. Before the learned District Judge, the prayer for mandatory injunction and compensation was not seriously pursued. The learned District Judge, based on Exts.B23 and B23(a) held that the 1[st] respondent cannot justifiably claim a decree for mandatory injunction and compensation. However, the learned District Judge found that Ext.B2 was duly executed by the 1[st] respondent and delivered to the appellant and that Ext.A1 is binding on the appellant. The learned District Judge was of the view that even if Ext.A1 is not there, position of the appellant visa-vis the 1[st] respondent and concerning the business is only as an agent in view of Ext.B2. The appellant is liable to render account to the 1[st] respondent for the period from the date of Ext.B2 to the date on which the business was transferred to the partnership of which the appellant was also a partner. A further finding is that the sum of Rs.1,60,000/- obtained by the appellant by transfer of business to the firm is liable to be accounted and ## **S.A. No.467 of 2000** ## -: 5 :- that the plea that the appellant utilized the sum of Rs.1,60,000/for discharge of liability of the 1[st] respondent to D.W.7 and others cannot be accepted. The plea that the suit is barred by limitation was found against. A preliminary decree was passed directing the trial court to pass a final decree after taking the account. That preliminary decree is under challenge on the substantial questions of law framed above. 7. Exhibit A1 is the copy of Power of Attorney the 1[st] respondent executed in favour of the appellant. The first appellate court found that in all probability, the original of Ext.A1 was given to the appellant. To hold so, the first appellate court referred to the evidence of the appellant that he was operating the accounts of M/s.Sona Vision Agencies (for which, power was conferred as per Ext.A1) and that indicated that the original of Ext.A1 had reached the hands of the appellant. It is also found that Ext.B2 created agent-principal relationship between the appellant and the 1[st] respondent. 8. It is argued by the learned Senior Advocate that the suit is barred by limitation. It is pointed out that though not specifically pleaded in the written statement, question of limitation was raised before the learned District Judge by filing ## **S.A. No.467 of 2000** ## -: 6 :- I.A. No.3794 of 1999. Under Section 3 of the Limitation Act, 1963 (for short, “the Act”) period of limitation for accounting is three years when the account, during the continuance of the agency is demanded and refused or where no such demand is made, when the agency terminated. Learned Senior Advocate has placed reliance on the decision in **Craft Centre & others v. Koncherry Coir Factory** (1990 [2] KLT 837) and in particular, the observations in paragraph 4. It is argued that notwithstanding that the appellant has not specifically pleaded bar of limitation, it was well within the power of the courts below to consider that question under Sec.3 of the Act. The 1[st] respondent when examined as P.W.1 has admitted that there was a demand and refusal to account in the year, 1984 and hence the suit filed in the year 1990 is time barred. 9. It is further argued by the learned Senior Advocate that finding of the first appellate court that Ext.B2 created relationship of agent and principal between the appellant and the 1[st] respondent is not correct. At any rate, the first appellate court was not correct in rejecting the plea of appellant that of the sum of Rs.1,60,000/- he received by transfer of business to the rest of the partners of the firm, Rs.1,10,000/- was used to ## **S.A. No.467 of 2000** -: 7 :- discharge of the liability of the 1[st] respondent to D.W.7 and that the balance sum of Rs.50,000/- was used to discharge other liabilities. 10. At any rate, the question whether the said amount was used to discharge the liabilities of the 1[st] respondent should have been relegated for decision in the final decree proceedings since the first appellate court has passed only a preliminary decree. 11. The learned counsel for the 1[st] respondent argued that a plea of bar of limitation was raised only at the fag end of the proceeding in the first appellate court without any foundation in the pleadings. According to the learned counsel, there was no refusal to account in the year, 1984 and what happened in the year 1984 when the 1[st] respondent demanded accounts is only a postponement of rendering the accounts but not a refusal. Hence the suit is not barred by limitation. 12. It is further argued that there is no reliable evidence to show that the sum of Rs.1,60,000/- was utilized to discharge liability of the 1[st] respondent and hence there is no reason to interfere with the finding to that effect rendered by the first appellate court. 13. So far as the plea of limitation is concerned, there ## **S.A. No.467 of 2000** ## -: 8 :- could be no doubt that the court is empowered to consider it even in the absence of a specific plea by the opposite party in view of Sec.3 of the Act. 14. The 1[st] respondent when examined as P.W1 stated that he went abroad in the year, 1978 entrusting the shop room and the business to the appellant, under Ext.A1, Power of Attorney. In cross-examination he stated that he used to come to his native place, every 1½ to 2 years and in the year, 1984 when he was at his native place he had once demanded the appellant to render accounts. At that time, the appellant told him that there is no time and the account was not rendered. In the year, 1987 he had been to the shop the 2[nd] respondent was running. He was under the impression that the 2[nd] respondent (said to be another partner of the firm) was doing business in the shop room as Manager (of the appellant). In the year, 1987 he had asked the appellant to return the shop to him but it was not done. He stated that sometime in the year 1990 he returned to his native place and the appellant accommodated him in the business individually run by the appellant. While so, he received summons/notice from the court in the suit to prohibit him from entering that shop room. Thereafter he filed the present suit. ## **S.A. No.467 of 2000** -: 9 :- 15. What transpired in the year, 1984, I am unable to understand from the evidence of P.W.1 as a refusal by the appellant to render accounts. Instead, as rightly held by the first appellate court it was only a postponement of rendering the account which does not amount to a refusal. 16. It has come in evidence that it was sometime in October, 1988 that the appellant retired as a partner of the firm (to which he transferred the business). If that be so, the cause of action for the 1[st] respondent seeking rendition of accounts and other reliefs arose in October, 1988. The suit was filed on 22.03.1991 which is within three years from the date cause of action has arisen. Thus viewed, I am unable to accept the contention of the appellant that the suit is barred by limitation. 17. Then the question is whether the appellant is liable to account to the 1[st] respondent? Much reliance is placed on Exts.B23 and B23(a) and Ext.A5. Exhibit A5 is a letter dated 20.10.1980 issued by the appellant to the father of the 1[st] respondent. There is no evidence to show that any such information was given to the 1[st] respondent during that time. Therefore Ext.A5 is not sufficient to show that the appellant is not liable to render accounts to the 1[st] respondent. ## **S.A. No.467 of 2000** ## -: 10 :- 18. By Ext.B23(a), letter dated 31.08.1980 addressed by the 1[st] respondent to the then Manager of the landlord of the building, he stated that the business is wound up and the shop room is being returned. It is in the light of Ext.B23(a), that the first appellate court found that the 1[st] respondent is not entitled to the decree for mandatory injunction and compensation. 19. So far as Ext.B2 is concerned, that agreement is executed by the 1[st] respondent in favour of the appellant on 07.12.1978. A reading of Ext.B2 shows that the appellant was authorized to perform acts referred to therein on behalf of the 1[st] respondent. Exhibit B2 created only an agent-principal relationship between the appellant and the 1[st] respondent. Therefore by virtue of Ext.B2 the appellant cannot justifiably contend that he became the absolute owner of the business or the stock in trade. Hence the appellant is liable to account to the 1[st] respondent. 20. Then the question is whether the appellant is liable to account the sum of Rs.1,60,000/- received from the other partners of the firm when he retired from the partnership in October, 1988? According to the appellant, M/s.Sona Vision Agencies was indebted to several persons when the 1[st] respondent ## **S.A. No.467 of 2000** ## -: 11 :- was running the shop. It is the further case of the appellant that the 1[st] respondent had availed a loan of Rs.40,000/- from D.W.7 through one Narayanan Nair. Later, D.W.7 filed a suit against the said Narayanan Nair and obtained a decree for recovery of Rs.40,000/- with interest. To discharge that liability, the appellant had to pay Rs.1,10,000/-. The remaining Rs.50,000/was utilized for defending the suit filed against Narayanan Nair and for the discharge of other debts. To substantiate the above plea, appellate has given evidence as D.W.3. 21. D.W4 stated that Narayanan Nair, her father-in-law borrowed Rs.40,000/- from D.W.7 on behalf the 1[st] respondent and in his presence. She claimed that the said liability of D.W7 was discharged by the appellant. D.W.5 who claims to be a witness stated that he had introduced the 1[st] respondent to Narayanan Nair who availed loan from D.W.7 on the security of his property. D.Ws4 and 5 admitted that they are not witnesses to the agreement Narayanan Nair had executed in favour of D.W7. D.W7 stated that Narayanan Nair had availed loan on behalf the the 1[st] respondent and that the said liability was discharged by the appellant by paying Rs.1,10,000/-. 22. The first appellate court found that the mere fact that ## **S.A. No.467 of 2000** ## -: 12 :- D.Ws.3 to 5 and 7 have given evidence as above will not bind the 1[st] respondent. It was held that the said sum of Rs.160,000/- is also to be accounted to the 1[st] respondent. 23. The learned Senior Advocate has pointed out that in so far as the first appellate court has directed that accounts be taken and a final decree be passed, it should not have pronounced verdict on the plea of the appellant that Rs.1,10,000/- was utilized to discharge liability of the 1[st] respondent. According to the learned Senior Advocate, the said question also could have been relegated for decision in the final decree proceeding. 24. It is seen from the decree of the first appellate court that while holding that the appellant is liable to account to the 1[st] respondent from the date of Ext.B2 to the date on which business was transferred to the partnership of which the 1[st] appellant was also a partner, the first appellant court has also held that the contention that he has utilized Rs.1,60,000/- for discharge of the liability of the 1[st] respondent cannot be accepted. It also held that the 1[st] respondent is entitled to get interest on the said amount (also) at the said rate of 12% annum. 25. Since the first appellate court has only passed a preliminary decree and directed that accounts are to be settled ## **S.A. No.467 of 2000** ## -: 13 :- in the final decree proceeding, I am inclined to think that the question whether the sum of Rs.1,60,000/- or any portion of it was utilized by the appellant to discharge liability (if any) of the 1[st] respondent could also have been relegated to the final decree proceeding for a decision. For, I must notice that while passing a preliminary decree, the court is required only to decide the right of the parties. The question, what are the liabilities if any of the 1[st] respondent, the income derived by the appellant on behalf of the 1[st] respondent, whether liability if any of the 1[st] respondent was discharged by the appellant are matters to be decided by the court in the final decree proceeding. In that view of the matter, I am inclined to accept the contention of the learned Senior Advocate that the question whether the whole or any portion of Rs.1,60,000/- was utilized by the appellant for discharge of liability (if any) of the 1[st] respondent ought to have been relegated for decision in the final decree proceeding. In other respects, I do not find reason to interfere with the judgment and decree of the first appellate court. 26. The substantial questions of law framed are answered as above. In the result, the Second Appeal is allowed in part and the ## **S.A. No.467 of 2000** ## -: 14 :- judgment and decree of the first appellate court are modified as under: (i) The finding that the sum of Rs.1,60,000/was not utilized to discharge liability of the 1[st] respondent and that the said amount is to be accounted by the appellant is set aside. (ii) Consequently, the direction of the first appellate court that the 1[st] respondent is entitled to get interest on the sum of Rs.1,60,000/- at the rate of 12% per annum is also set aside. (iii) It is directed that the question whether the whole or any portion of Rs.1,60,000/- was utilized by the appellant to discharge liability (if any) of the 1[st] respondent be decided in the final decree proceeding, untrammelled by the observations or finding made by the first appellate court or in this judgment. (iv) It is open to the trial court while dealing with the final decree application to decide whether, apart from Rs.1,60,000/- obtained by way of transfer of business to the Partnership Firm, the appellant has ## **S.A. No.467 of 2000** ## -: 15 :- received further income from the business during the time directed by the first appellate court. (v) It is made clear that on the question whether the sum of Rs.1,60,000/- or portion of it was utilized by the appellant to discharge the liability (if any) of the 1[st] respondent, is open to the parties to adduce further evidence if any. (vi) In all other respects the judgment and decree of the first appellate court are confirmed. (vii) Parties shall bear their respective costs in this appeal. All pending Interlocutory Applications will stand dismissed. ## **THOMAS P. JOSEPH, JUDGE.** vsv