M.B. MOHAMMED ALI AND OTHERS v. BAIJU MOHAMMED AND OTHERS

# **IN THE HIGH COURT OF KERALA AT ERNAKULAM** # **PRESENT** # **THE HONOURABLE MR. JUSTICE P.B.SURESH KUMAR** **&** **THE HONOURABLE MRS. JUSTICE C.S. SUDHA** **THURSDAY, THE 3[RD] DAY OF FEBRUARY 2022 / 14TH MAGHA, 1943** **RFA NO. 525 OF 2007** **AGAINST THE JUDGMENT DATED 31.1.2007 IN O.S.NO.441/2002** **OF THE ADDITIONAL SUB COURT, NORTH PARAVUR** ## **NAME AND ADDRESS OF THE APPELLANTS/PLAINTIFFS:** - **1 M.B.MOHAMMED ALI, S/O.LATE M.K.BEERAN, AGED 55 YEARS, MEZHUKKATTIL HOUSE, NORTH EDATHALA P.O., ALWAYE.** - **2 M.B.MOIDEENKUNJU, S/O.LATE M.K.BEERAN, AGED 48 YEARS, MEZHUKKATTIL HOUSE, NORTH EDATHALA P.O., ALWAYE.** - **3 M.B.KOYAKUTTY, S/O.LATE M.K.BEERAN, AGED 46 YEARS, MEZHUKKATTIL HOUSE, NORTH EDATHALA P.O., ALWAYE.** - **BY ADVS. SRI.M.A.ABDUL HAKHIM SRI.JYOTHISH.J.KALLINGAL** ## **NAME AND ADDRESS OF THE RESPONDENTS/DEFENDANTS:** - **1 BAIJU MOHAMMED, (DIED)(ADDL R6 TO R9 IMPLEADED) S/O.P.S.ISMAIL, AGED ABOUT 42 YEARS, PALAKKAL HOUSE, KANJIRAPPILLY TALUK, KANJIRAPPILLY.** - **2 V.P.ASLAM S/O.V.K.PAREED, AGED ABOUT 52 YEARS, VELAPPILLY HOUSE, ERATTUPETTA.** - **3 M.D.JAFFER, S/O.M.P.MUHAMMED, AGED ABOUT 50 YEARS, PARUSSALAM, ERATTUPETTA.** - **4 P.M.ISMAIL, S/O.MUHAMMED KUNJU RAWTHER, AGED ABOUT 50 YEARS, VADAKKEPARAMBIL, MUNDATHANAM P.O., KANGASHA, KOTTAYAM.** R.F.A.No.525 of 2007 ..2.. - **5 M/S.CRESCENT CRUMBS PRIVATE LTD., PENGATTUSSERY, EDATHALA P.O., ALUVA, REP. BY ITS MANAGING DIRECTOR, 1ST DEFENDANT, BAIJU MOHAMMED, (NOW REPRESENTED BY ITS PRESENT MANAGING DIRECTOR V.B.NOORSALAM).** ***6 ADDITIONAL 6TH RESPONDENT NIMMY, W/O.LATE MR.BAIJU MUHAMMED, 1E, FIRST FLOOR, BD WEST WIND, LISSIE HOSPITAL LANE, COCHIN - 682018.** - ***7 ADDITIONAL 7TH RESPONDENT ALEEM MUHAMMED, S/O.LATE MR.BAIJU MUHAMMED , 1E, FIRST FLOOR, BD WEST WIND, LISSIE HOSPITAL LANE,COCHIN - 682018.** - ***8 ADDITIONAL 8TH RESPONDENT SUHARA (MINOR), D/O.LATE MR.BAIJU MUHAMMED, 1E, FIRST FLOOR, BD WEST WIND, LISSIE HOSPITAL LANE, COCHIN - 682018. REPRESENTED BY HER MOTHER AND NATURAL GUARDIAN NIMMY.** - ***9 ADDITIONAL 9TH RESPONDENT AFRA(MINOR), D/O.LATE MR.BAIJU MUHAMMED, 1E, FIRST FLOOR, BD WEST WIND, LISSIE HOSPITAL LANE, COCHIN - 682018. REPRESENTED BY HER MOTHER AND NATURAL GUARDIAN NIMMY.** ***(THE LEGAL REPRESENTATIVES OF DECEASED FIRST RESPONDENT ARE IMPLEADED AS ADDITIONAL RESPONDENTS 6 TO 9 VIDE ORDER DATED 7.6.2016 IN IA NO.1379 OF 2012.) BY ADVS. SRI.P.B.KRISHNAN SRI.P.M.NEELAKANDAN SRI.T.M.ABDUL LATHEEF R1 AND R5 SRI.P.B.SUBRAMANYAN SRI.T.I.ABDUL SALAM SRI.HARISH R. MENON R3 SRI.SABU GEORGE SRI.MANU VYASAN PETER SRI.PMM.NAJEEB KHAN R2 AND R4 SRI.PHILIP T.VARGHESE SRI.K.T.SHYAMKUMAR R3 SR.ADV. S.V.BALAKRISHNA IYER, R6 TO R9** **THIS REGULAR FIRST APPEAL HAVING COME UP FOR ADMISSION ON 03.02.2022, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:** R.F.A.No.525 of 2007 ..3.. **P.B.SURESH KUMAR & C.S.SUDHA, JJ. -----------------------------------------------** **R.F.A. No.525 of 2007 ----------------------------------------------Dated this the 3[rd] day of February, 2022** ## **JUDGMENT** ## **P.B.Suresh Kumar, J.** The defeated plaintiffs in a suit for realisation of money are the appellants. 2. Defendants 1 to 4 were holding the share capital of the fifth defendant, a private limited company (the Company). Among them, defendants 1 and 3 were holding 16305 shares each and defendants 2 and 4 were holding 17600 and 1740 shares respectively. During December, 1997, the net worth of the Company was Rs.205 lakhs and it had liabilities to the tune of Rs.193.08 lakhs. The case of the plaintiffs is that on 30.12.1997, the plaintiffs agreed to purchase the shares and take over the assets and liabilities of the Company held by defendants 1 to 4 in terms of four different agreements executed with defendants 1 to 4. It is also the case of the plaintiffs that pursuant to the arrangement evidenced by the R.F.A.No.525 of 2007 ..4.. said agreements, the plaintiffs have paid a sum of Rs.42,20,000/- to the defendants towards the value of their shares and towards liquidation of the liabilities of the Company. It is the further case of the plaintiffs that the arrangement aforesaid did not fructify and consequently the defendants agreed to return the amount received from the plaintiffs and rescind the earlier agreements in terms of another agreement dated 14.12.1999. The suit was instituted for realisation of the amount covered by the agreement dated 14.12.1999 from the defendants. It is alleged in the plaint that the defendants have not returned the amount as agreed in the agreement dated 14.12.1999. 3. The first defendant has filed a written statement on his behalf and on behalf of the Company. In the written statement, the first defendant has admitted the execution of the agreement dated 30.12.1997 and receipt of advance sale consideration. It was, however, contended by the first defendant in the written statement that the agreement dated 14.12.1999 was not conclusive and hence not enforceable. The first defendant has also contended in the written statement that the defendants have not received the amount stated to have been paid by the plaintiffs as mentioned R.F.A.No.525 of 2007 ..5.. in the agreement. 4. The third defendant remained _ex parte_ . Defendants 2 and 4 filed a separate written statement raising contentions identical to the contentions taken by the first defendant and the Company. 5. The second plaintiff gave evidence on behalf of the plaintiffs as PW1 and proved Exts.A1 to A8 documents. The first defendant gave evidence as DW1. Three blank cheques of the Company allegedly handed over by the defendants to the plaintiffs at the time of execution of the agreement dated 14.12.1999 as produced by the plaintiffs are taken on record as Exts.B1 to B3. 6. Among the documents proved on the side of the plaintiffs, Exts.A1 to A4 are the agreements dated 30.12.1997 and Ext.A5 is the agreement dated 14.12.1999. Ext.A6 is the lawyer's notice sent by the plaintiffs to the defendants. Ext.A7 is the returned postal article of Ext.A6 notice addressed to the first defendant and Ext.A8 is the postal acknowledgement card evidencing receipt of Ext.A6 notice by the fourth defendant. 7. The issues framed for trial were (1) whether Ext.A5 agreement relied on in the plaint is binding on the R.F.A.No.525 of 2007 ..6.. defendants and (2) whether the plaintiffs are entitled to realise the suit amount from the defendants. 8. Although Exts.A1 to A3 contain the signatures of defendants 1 to 3 respectively and the plaintiffs, Ext.A4 does not contain the signature of the fourth defendant. Similarly, although Ext.A5 is styled as one executed by defendants 1 to 3 as first party, it does not contain the signature of the second defendant. Likewise, although Ext.A5 is styled as one executed by the plaintiffs as the second party, it does not contain the signatures of the plaintiffs as well. 9. The court below took the view that the plaintiffs have not proved that they have paid to the defendants or expended for the Company Rs.42,20,000/- as stated in Ext.A5 and that since Ext.A5 does not contain the signatures of defendants 2 and 4 and the plaintiffs, it cannot be considered as a concluded contract. Consequently, the suit was dismissed. Aggrieved by the decision of the court below, the plaintiffs have come up in this appeal. 10. Pending appeal, the first defendant died and his legal representatives have come on record. 11. Heard the learned counsel for the appellants/plaintiffs, the learned Senior Counsel for the first R.F.A.No.525 of 2007 ..7.. respondent/first defendant as also the learned counsel for the third respondent/third defendant. 12. The learned counsel for the plaintiffs assailed the impugned judgment pointing out that the receipt of Rs.42,20,000/- by the defendants from the plaintiffs is a fact that is admitted by defendants 1 and 3 in Ext.A5 agreement itself and in the absence of any challenge to Ext.A5 agreement, it was unnecessary for the plaintiffs to prove the said payment. The learned counsel has brought to our notice the admission made by the first defendant as DW1 that he has agreed to return the said amount of Rs.42,20,000/- in instalments to the plaintiffs, and contended that in the light of the said admission, the court below was not justified at all in holding that the plaintiffs have not proved the payment of Rs.42,20,000/-. The learned counsel did not dispute the fact that even though Ext.A4 is styled as a document executed by the fourth defendant, it does not contain the signature of the fourth defendant. Similarly, the learned counsel did not dispute the fact that Ext.A5 is not signed by defendants 2 and 4 as also the plaintiffs. According to the learned counsel, insofar as there is no dispute to the fact that the Company was taken over by the plaintiffs pursuant to Exts.A1 to A4 agreements, the fourth R.F.A.No.525 of 2007 ..8.. defendant who has not objected to the running of the Company by the plaintiffs for about two years, cannot be heard to contend that the arrangement evidenced by Exts.A1 to A4 has been entered into without his consent. Similarly, it was also argued by the learned counsel that defendants 2 and 4 who were benefitted by the payments given by the plaintiffs and who were able to sell their shares in the Company later for a far higher amount cannot be heard to contend that they are not liable to pay to the plaintiffs the amount paid by the plaintiffs to the defendants and expended by them for the Company. Placing reliance on Section 43 of the Indian Contract Act, 1872, the learned counsel has also argued that insofar as the promise in Ext.A5 agreement being a joint promise, the same is enforcible against all the defendants jointly and severally. 13. The learned Senior Counsel for the first defendant did not dispute the execution of Exts.A1 to A5 agreements. On the other hand, placing reliance on the recitals in Exts.A1 to A4 that the Company has paid off its debts to the tune of Rs.18,50,000/- making use of the amounts brought in by the plaintiffs, the learned counsel submitted that Rs.42,20,000/- referred to in Ext.A5 is inclusive of the said amount paid by the plaintiffs to the Company and the first R.F.A.No.525 of 2007 ..9.. defendant has no obligation personally to return the said amount to the plaintiffs. It was also argued by the learned counsel that the suit being one instituted based on Ext.A5 agreement, insofar as Ext.A5 does not contain the signatures of the plaintiffs and in the absence of any evidence to show that the promise made by defendants 1 and 3 therein has been accepted by the plaintiffs, it cannot be contended that Ext.A5 is a concluded contract enforcible by law. Placing reliance on Section 7 of the Indian Contract Act, the learned counsel submitted that in order to convert a proposal into a promise, the acceptance must be absolute and unqualified. The learned counsel has also relied on the decision of the Apex Court in Civil Appeal No.7469 of 2008 to reinforce his submission that the acceptance of a proposal must be absolute and unqualified. It was also argued by the learned counsel that even if it is admitted that the plaintiffs have expended Rs.42,20,000/- for the Company, insofar as the first defendant held at the relevant time only 16305 shares out of 51950 shares of the Company, he is not liable personally for the entire amount claimed in the suit and if at all he is liable, his liability can only be in proportion to the shares held by him. It was also argued by the learned counsel that insofar as the first defendant was holding R.F.A.No.525 of 2007 ..10.. only a portion of the shares of the Company, the promise in Ext.A5, even if it is enforcible, cannot be construed as a joint promise for the plaintiffs to invoke Section 43 of the Indian Contract Act. The learned counsel has relied on the decision of the Apex Court in **Narayani v. Pathumma** , 1991 (1) KLT 108(SC), in support of the said contention. 14. The learned counsel for the third defendant endorsed the arguments advanced by the the learned Senior Counsel for the first defendant. 15. The points arise for determination, in the light of the submissions made by the learned counsel for the parties on either side are, (1) whether it is necessary for the plaintiffs in the facts and circumstances of the case to prove the payment of the amount mentioned in Ext.A5 for the purpose of enforcing the terms of the said document and (2) whether Ext.A5 is a conclusive agreement enforceable by law against all the defendants and if so, whether the plaintiffs are entitled to the decree sought for in the suit. 16. Point (1): As noted, the suit is for realisation of the amount covered by Ext.A5 agreement. The case of the plaintiffs in short is that in terms of Ext.A5 agreement, the parties therein have rescinded the earlier agreements executed R.F.A.No.525 of 2007 ..11.. between them for transferring the assets and liabilities of the Company namely, Exts.A1 to A4, on the promise made by the defendants that they would pay to the plaintiffs a sum of Rs.42,20,000/- in monthly instalments of Rs.75,000/- and that the defendants have not paid the said amount as agreed. The execution of Exts.A1 to A5 agreements is not is dispute. The defendants have also no case that Exts.A1 to A5 agreements are vitiated in any manner. The relevant clauses of Ext.A5 agreement read thus: Whereas both the parties are now reluctant to proceed with the agreement dated 30.12.1997 between them and the first party is not desirous of selling their interest in the company to the Second party and the second party is not desirous of purchasing them and taking over the liabilities of the company any more. Now it is hereby agreed as follows: 1. That the aforesaid agreement made on the 30[th] day of December, 1997 be and is hereby rescinded. 2. That both the parties have agreed that the second party is entitled to realise the amount expended by them in pursuant to the aforesaid agreement made on 30.12.1997 from the 1[st] party and the amount is fixed at Rs.42,20,000/- (forty two lakh twenty thousand only) which is inclusive of the amount paid directly to the 1[st] party and the money expended for the company. 3. That it is agreed that the 1[st] party shall pay to the second party the sum of Rs.42,20,000/- (rupees forty two lakh twenty thousand only) in equal monthly instalments of Rs.75,000/- (rupees seventy five R.F.A.No.525 of 2007 ..12.. thousand only). 4. That the 1[st] party shall pay the entire amount in instalments starting from the 1[st] day of January, two thousand without any default and they along with their assets are held personally liable for the entire amount. 5. Each party releases the other from other obligations arising out of performance or non performance of the contract under the aforesaid agreement made on 30.01.1997. The extracted clauses would show beyond doubt that the defendants have admitted in terms of Ext.A5 agreement that the plaintiffs have expended a sum of Rs.42,20,000/- pursuant to Exts.A1 to A4 agreements and have agreed to return the same to the plaintiffs in monthly instalments of Rs.75,000/-. In the absence of any challenge against execution of Exts.A1 to A5 agreements, according to us, it is unnecessary for the plaintiffs to prove the payment of the amount mentioned in Ext.A5. It is all the more so since the receipt of the said amount has been admitted by the first defendant in his evidence as DW1, stating that the said amount of Rs.42,20,000/- is one which he has agreed to return to the plaintiffs in instalments. The point is answered in favour of the appellants. 17. Point (2): It is seen that the court below took R.F.A.No.525 of 2007 ..13.. the view that Ext.A5 is not a conclusive agreement since it does not contain the signatures of defendants 2 and 4 and the plaintiffs. The very same stand was reiterated by the learned Senior Counsel for the first defendant also. The fact that Ext.A5 contains the signatures of defendants 1 and 3 is not in dispute. Let us first consider the question as to whether Ext.A5 would be regarded as a conclusive agreement atleast between defendants 1 and 3 on one side and the plaintiffs on the other side. There cannot be any doubt that a proposal when accepted becomes a promise and every promise forming the consideration for each other is an agreement. A written document signed by parties is not necessary for an agreement to be a concluded one. The contention of defendants 1 and 3 is that there is nothing on record to indicate that there was absolute and unqualified acceptance of the proposal by the plaintiffs in Ext.A5 agreement to return the amount expended pursuant to the Exts.A1 to A4 agreements in consideration of the plaintiffs rescinding those agreements. There cannot be any doubt that in order to convert a proposal into a promise, the acceptance must be absolute and unqualified. The question whether there is absolute and unqualified acceptance of a proposal in a given case is a pure question of fact to be inferred R.F.A.No.525 of 2007 ..14.. from the facts and circumstances of the case. True, Ext.A5 does not contain the signatures of the plaintiffs. But that by itself is not sufficient to infer that the proposal made in Ext.A5 has not been accepted by the plaintiffs. The materials on record indicate that acting upon Ext.A5 agreement, the plaintiffs have called upon the defendants to pay the amounts covered by the same. Ext.A6 is the notice issued in this regard on behalf of the plaintiffs. Likewise, the materials on record indicate that acting upon Ext.A5 agreement, the defendants have sold the assets and liabilities of the Company to a third party, which they could not have done otherwise in the light of Exts.A1 to A4 agreements. In other words, since it is established that the parties to Ext.A5 agreement have acted upon the same, it cannot be contended that Ext.A5 is not a concluded agreement [See **Dresser Rand S.A. v. Bindal Agro Chem Ltd.** , (2006) 1 SCC 751 and **Wipro Ltd. v. Beckman Coulter International S.A.** , 2006 SCC OnLine Del 743]. The finding to the contrary rendered by the court below is therefore, illegal. 18. As noted, the fourth defendant has not signed Ext.A4 agreement. It is that arrangement that was rescinded by some of the parties to Exts.A1 to A4 in terms of Ext.A5 R.F.A.No.525 of 2007 ..15.. agreement. The fourth defendant was not a party to Ext.A5 agreement as well. In other words, even if it is taken that the fourth defendant has also consented to transfer his shares in the Company to the plaintiffs, there is nothing on record to indicate that the fourth defendant is a party to the proposal to rescind Exts.A1 to A4 agreements on the terms and conditions stipulated in Ext.A5. In other words, according to us, the plaintiffs are not entitled to enforce Ext.A5 agreement against the fourth defendant. As noted, the argument advanced by the learned counsel for the plaintiffs in this regard is that the fourth defendant has not objected to the arrangement entered into between the plaintiffs and other defendants in terms of which the management of the Company was handed over to the plaintiffs. We do not find any merit in this contention, for the fourth defendant being only a shareholder, the inaction, if any, on his part to object to the arrangement made by the remaining shareholders of the Company would not confer a corresponding right on the plaintiffs to enforce an agreement in the nature of Ext.A5 against him, especially when the plaintiffs have no such case in the plaint, and when the suit is framed as if the fourth defendant is a party to both Exts.A4 and A5. As far as the second defendant is concerned, he is of course a party R.F.A.No.525 of 2007 ..16.. to Ext.A2 agreement like defendants 1 and 3, but has not put his signature in Ext.A5 agreement. As such, for the very same reasons, we are of the view that Ext.A5 agreement is not enforceable against the second defendant as well. 19. As noted, the plaintiffs seek a decree for realisation of Rs.42,20,000/- jointly and severally from the defendants. In the light of the finding that Ext.A5 agreement is enforceable against defendants 1 and 3, the question remaining to be considered is whether the plaintiffs are entitled to a decree against defendants 1 and 3 as prayed for. It is in this context, the learned Senior Counsel for the first defendant contended that the first defendant had only a limited interest in the Company and therefore, at any rate, the plaintiffs are entitled to get a decree against him only in proportion to the number of shares held by him in the Company. We do not find any merit in this contention also, for the recitals in Ext.A5 agreement do not indicate that the promise made by the first defendant as stated therein is in his capacity as a shareholder of the Company, holding 16305 shares. On the other hand, the recitals would show that the promise made by defendants 1 and 3 in Ext.A5 is a promise made by them in their individual capacity. According to the plaintiffs, the promise made by R.F.A.No.525 of 2007 ..17.. defendants 1 and 3 in Ext.A5 is a joint promise and therefore, in terms of Section 43 of the Indian Contract Act, in the absence of any express agreement to the contrary, defendants 1 and 3 are jointly and severally liable to perform the promise. A perusal of the recitals in Ext.A5 agreement as extracted in paragraph 16 above would indicate beyond doubt that the promise made therein by the signatories to the document is a joint promise and the defendants have not established any express agreement precluding the plaintiffs from compelling its performance against any one of them. In other words, the plaintiffs are entitled to a decree for realisation of the amount claimed by them jointly and severally from defendants 1 and 3. The judgment in **Narayani** relied on by the learned Senior Counsel for the first defendant to contend that the liabilities of the defendants are not joint cannot have any application to the facts of this case, for the issue considered in the said case was as to whether an acknowledgement of debt executed by one among the several heirs of a Muslim died intestate would bind the remaining heirs of the deceased. 20. The plaintiffs are claiming interest for the amount covered by Ext.A5 agreement at the rate of 18% per annum from the date of the agreement. True, the transaction is R.F.A.No.525 of 2007 ..18.. a commercial transaction, but having regard to the totality of the facts and circumstances of the case, we are of the view that interest at the rate of 9% per annum for the amounts due to them from the date of Ext.A5 agreement would be the appropriate interest to be granted to the plaintiffs. The point is answered accordingly. In the result, the appeal is allowed, the impugned judgment is set aside and the plaintiffs are granted a decree allowing them to realise a sum of Rs.42,20,000/- with interest at the rate of 9% per annum from 14.12.1999 till the date of payment with proportionate costs jointly and severally from defendants 1 and 3 charged on their properties. **Sd/-** ## **P.B.SURESH KUMAR, JUDGE.** **Sd/-** **C.S.SUDHA, JUDGE.** ds 26.01.2022