IN THE COURT OF THE PRINCIPAL SENIOR CIVIL JUDGE, ONGOLE
Present: Smt. Y.Hemalatha,
Principal Senior Civil Judge, Ongole
Friday, this the 19th day of August, 2016
ORIGINAL SUIT NO. 217 of 2008
Between:
1. Maruthiram Associates, rep. by its partner, Thatikonda Yogeswara Rao, Office situated at Bhagyanagar, Ongole, Prakasam District.
2. Thatikonda Hymavathi, Wife of Yogaiah, Aged about 48 years, Hindu, employee, Resident of Bhagyanagar, Ongole.
3. Thatikonda Yogeswararao, Son of Thirumalaiah, Aged about 45 years, Hindu, Tailor, Chimakurthy
4. Kotu Koti Reddy, Son of Yoganada Reddy, Hindu, aged about 42 years, Flat No.206, Maruthiram Apartments, Dharavari Gardens, Ongole.
5. Sudi Prabhavathi Wife of Ramesh Babu, Hindu, aged about 46 years, Flat No.G-2, Maruthiram Apartments, Dharavari Gardens, Ongole.
6. Nalamolu Radha Krishna Murthy, Son of Venkata Swamy, Hindu, aged about 46 years, Flat No. G-3, Maruthiram Apartments, Dharavari Gardens, Ongole.
7. Kavarthapu Rama Devi, W/o. Srinivasa Rao, Hindu, Housewife, Flat No. G-5, Maruthiram Apartments, Dharavari Gardens, Ongole.
8. Nannapuneni Amarnadh, Son of Subba Rao, Hindu, aged about 60 years, Flat No. 103, Maruthiram Apartments, Dharavari Gardens, Ongole.
9. Naladala Nageswara Rao, Son of China Jalaiah, Hindu, aged about 60 years, Flat No. 103, Maruthiram Apartments, Dharavari Gardens, Ongole.
10.Naladala Venkata Narasaiah, Son of China Jalaiah, Hindu, aged about 68 years, Flat No. 102, Maruthiram Apartments, Dharavari Gardens, Ongole.
2 11.Dintakurthy Badari Lakshmi, Wife of Venkata Subba Rao, Hindu, Flat No. 104, Maruthiram Apartments, Dharavari Gardens, Ongole.
12.Karavadi Anjaneyulu, Son of Chalamaiah, Hindu, aged about 55 years, Flat No. 105, Maruthiram Apartments, Dharavari Gardens, Ongole.
13.Uputuri Vara Prasad, Son of Ramanaiah, Hindu, aged about 55 years, Flat Nos. 106 and 107, Maruthiram Apartments, Dharavari Gardens, Ongole.
14.T.V.N.Siva Prasad, son of Venkata Subbaiah, Hindu, aged about 55 years, Flat No. G-1, Maruthiram Apartments, Dharavari Gardens, Ongole.
15.Vema Venkata Satyanarayana, son of Mallikarjuna Rao, Hindu, Flat No. 205, Maruthiram Apartments, Dharavari Gardens,Ongole.
16.Thumati Ramanamma, Wife of late Koteswara rao, Hindu, Housewife, Flat No. 301, Maruthiram Apartments, Dharavari Gardens, Ongole.
17.Panguluri Malakondaiah, Son of Punnaiah, Hindu, Flat No. 305, Maruthiram Apartments, Dharavari Gardens, Ongole.
18.Gurram Lavanya, Wife of Rama Mohan Rao, Hindu, Housewife, Flat No. 306, Maruthiram Apartments, Dharavari Gardens, Ongole.
19.Veeravalli Usha Rani, Wife of Veera Sekhara Rao, Hindu, aged about 48 years, Flat No. 302, Maruthiram Apartments, Dharavari Gardens, Ongole.
20. Thulluri Ramanaiah, son of Venkateswarlu, Hindu, aged about 48 years, Flat No. 106, Maruthiram Apartments, Dharavari Gardens, Ongole.
21.Narne Mohana Rao, son of Venkateswarlu, Hindu, aged about 52 years, Flat No. 201, Maruthiram Apartments, Dharavari Gardens, Ongole.
22. Akkineni Sailaja, Wife of Subba Rao, Hindu, aged about 50 years, Flat No. 208, Maruthiram Apartments, Dharavari Gardens, Ongole.
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23. Palaka Padmaja Kumari, W/o. Srinivas, Hindu, aged about 45 years, Flat No. 203, Maruthiram Apartments, Dharavari Gardens, Ongole.
(plaintiffs 4 to 23 were added as per orders passed in I.A.No.359/2011 dated 05.03.2012) …. PLAINTIFFS
AND
1. A. Pundarikakshayya, Son of Kotaiah, Aged about 60 years, Hindu, business, R/o. Ongole.
2. Thatikonda Parama Yogi, Son of Thirumalaiah, Aged about 42 years, Hindu, business, R/o. Ongole.
3. The Official Receiver, Ongole …. DEFENDANTS
This suit coming on 12.08.2016 for final hearing before me in the presence of Sri G. Balaji Rao, Advocate for the plaintiffs 1 to 3 and of Sri M.Ajoy Babu, Advocate for the plaintiffs 4 to 23 and of Sri M. V.Krupa Sagar, Advocate for the first defendant, Sri A.V.Radhakrishna Murthy, advocate for the second defendant and the third defendant having remained ex parte, upon hearing the advocates on record and upon perusing the oral and documentary evidence available on record and having stood over till this day for consideration, this court delivered the following:-
J U D G M E N T
This is a suit filed originally by the plaintiffs 1 to 3 to set aside the orders dated 01.10.2001 passed in I.P.No.4/1998 by the Additional Senior Civil Judge, Ongole, for costs and other reliefs. Subsequently, plaintiffs 4 to 23 were added as per orders passed in
I.A.No.359/2011 dated 05.03.2012.
2. The averments of the plaint filed by the plaintiffs, in brief, are as follows:-
The plaintiffs submitted that the first plaintiff is doing business in Real Estate and construction of apartments etc., under the name and style of Maruthiram Associates of which the plaintiffs 2 and 3 are partners and the second defendant was Managing
Partner. The first plaintiff firm purchased site in the year 1995 for construction of apartments and started construction of apartment consisting eight flats in each floor consisting ground +four floors and completed construction of ground floor and four flats in second floor before 15.7.1997. Thereafter, the first plaintiff firm did not construct the flats in the remaining floors, though it has to construct four flats in second floor, eight 4 flats in third floor and eight flats in fourth floor. Thus there is no necessity for any cement subsequent to 15.7.1997.
The plaintiffs further submit that the second defendant with a view to defraud the firm and to cheat the co-partners, had issued three hand letters on the letter pad of
Maruthiram Associates on 15.7.1997, 16.7.1997 and 13.8.1997 respectively without mentioning as to where he had purchased the cement and to whom he had issued those hand letters. The said hand letters are collusive and fraudulent and they do not indicate the existence of any debt, but for delivery of cement. No credit bills are there to prove the debt. The second defendant had created those hand letters by misusing his powers, acting detrimental to the interest of the firm and thus those documents do not bind the plaintiffs.
The plaintiffs further submit that the first defendant, in collusion with the second defendant, filed I.P.No.4 of 1998 on the file of Additional Senior Civil Judge, Ongole to declare the second defendant as insolvent in his individual capacity without arraying him as Managing Partner of the first plaintiff firm, but had shown the property of the first plaintiff firm. The second defendant remained ex parte in I.P. proceedings and the learned
Additional Senior Civil Judge, Ongole allowed the petition adjudging the second
defendant as insolvent granting one year time for discharge. The orders passed in the said
I.P. are outcome of collusion between the defendants 1 and 2 and thus the order is non-est in the eye of law. The plaintiffs are not aware of the proceedings till recently. The first defendant tried to throw the individual liability of the second defendant on the firm to make the firm property liable. The orders in the I.P were obtained in the individual capacity of the second defendant on his name but not as Managing Partner of the firm, but the property of the firm was shown as if it is the individual property of the second defendant. The second defendant, though having knowledge of the I.P., wantonly and deliberately and intentionally colluded with the first defendant and remained ex parte defeating the rights of the plaintiffs 1 to 3 in the suit property as joint partners. Hence, the defendants 1 and 2 are guilty of fraud and they played fraud on the plaintiffs to cause wrongful loss to them.
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The plaintiffs further submit that the second defendant, as contractor, individually, under took the constructed weavers colony at Vetapalem in the year 1997 and thus any suits are cases filed against the second defendant are in his individual capacity and they are no way concerned with the partners of the firm or to the firm. Since the second defendant was adjudicated as insolvent, he ceases to be the partner of
Maruthiram Associates and the personal acts of the second defendant do not bind the firm. The orders passed in I.P. do not disclose as to what act of insolvency was committed by the second defendant. The reason stated in the order has no legal basis. The first defendant has no grounds to file the I.P. and he had not stated any specific act of insolvency and the second defendant had not given any notice to any of the creditors that he is about to suspend payment the debt as required under section 6(1)(g) of Provincial
Insolvency Act. Further, the first defendant did not even mention in the I.P. that the second defendant is indebted to several others and the I.P.schedule property is the only property of the second defendant. The fraud played by the defendants in the I.P.
proceedings is manifest even from the documents filed by the first defendant in the I.P.
i.e. the hand letters are dated 13.8.1997, 15.7.1997 and 16.7.1997, whereas the cheques on which the cause of action to file the I.P. had arisen are dated 20.8.1996, 5.9.1996 and 4.7.1997.
Later, the plaintiffs 4 to 23, who are purchasers of flats in the apartment were added and the plaint was amended describing the sales made by them either from
Maruthiram Associates or from the purchasers of flats and that they have been in possession and enjoyment of their respective flats since the date of their purchase. Hence, the plaintiffs prayed to set aside the orders dated 1.10.2001 passed in I.P.No.4/1998 by the Additional Senior Civil Judge, Ongole.
3. The averments of the written statement filed by the first defendant, in brief, are as follows:-
The first defendant denied the averments of the plaint and contended that the second defendant on behalf of Maruthiram Associates had taken cement and later issued cheques drawn on Vijaya Bank, Ongole and those were bounced and this defendant filed 6
C.C.No.98/1997 under section 138 of Negotiable Instruments Act and later the second defendant entered into compromise and agreed to pay the amount of the cheques and since the second defendant entered into transactions on behalf of the firm, the plaintiffs, being partners, are also liable. The judgment in I.P.proceedings is a judgment in rem and moreover the plaintiffs have also enjoyed the goods received from the defendant. It is not at all the case of the plaintiffs that they had purchased cement elsewhere. Any act done by the partner of Managing Partner for the benefit of the Association is binding on all the partners. The correspondence was in the name of Maruthiram Associates, represented by its Managing Partner i.e. 2nd defendant. The plaintiffs are aware of execution of documents by the second defendant in favour of the plaintiff. As the second defendant did not pay the amount and committed the acts of insolvency, the defendant is constrained to file I.P. and the same was allowed. The order passed in I.P. is binding on the plaintiffs. The suit questioning the I.P. proceedings is not maintainable and the remedy left open to the plaintiffs is to get the orders annulled before Insolvency Court.
The suit claimed is barred by time. There is no cause of action for the plaintiffs to file the suit. Hence, prayed to dismiss the suit with costs.
4. The averments of the written statement filed by the second defendant, in brief, are as follows:-
The second defendant contended that he purchased cement from the first defendant and that there was no collusion between him and the first defendant and they never created false documents and that the cause of action for filing the insolvency was an off shoot of the inability of the defendant as managing partner to pay the debt due to the first defendant from the first plaintiff firm. The borrowings are true and valid and it is binding upon the first plaintiff and also its partners. The plaintiffs 2 and 3 are fully aware of the filing of the insolvency petition by the defendant and they are also aware of the factum of the defendant remaining ex parte in the said I.P. proceedings and also aware of the order dated 1.10.2001 passed in the said I.P. declaring the second defendant as insolvent. The plaintiffs 2 and 3 are though aware, they are feigning innocence and it is with the tacit and clear understanding of the plaintiffs 2 and 3, the defendant remained 7 ex parte in I.P.No.4/1998 and in fact the first defendant filed I.P. to save embarrassment to the second defendant. The suit is barred by law of limitation. The schedule property is not correct. The northern and southern boundaries are not correctly described and that too the extent of the property is 898 Sq.yards . Hence, prayed to dismiss the suit with costs.
5. On the above pleadings, the following issues have been settled for trial:- 1 Whether the plaintiff is entitled to set aside the orders passed in I.P.No.4/1998 dated 1.102001 by the Honourable Additional Senior Civil
Judge, Ongole?
2. Whether the plaintiffs 2 and 3 are aware of filing of insolvency petition by the 2nd defendant?
3. Whether plaintiff can question the I.P. proceedings in the civil Court?
4. Whether there is any fraud or collusion as claimed by the plaintiff?
5. Whether the schedule is correct?
6. To what relief?
6. After the plaintiffs 4 to 23 came on record, as per orders dated 28.8.2014 passed in I.A.No.95 of 2014, the 1st defendant filed additional written statement and the contents of the same are as follows:-
The plaintiffs 4 to 23 were added only to sail with the second defendant and plaintiffs 1 to 3 and they have no manner of right to question the insolvency proceedings in I.P.No.4/1998 on the file of Additional Senior Civil Judge’s Court, Ongole. There are no valid grounds for the plaintiffs to file the above suit and the present suit is filed only to set aside the order passed in I.P.No.4/1998 against the mandatory provisions of the insolvency Act. Hence, prayed to dismiss the suit with costs.
7. On the above additional pleadigns, my learned predecessor recast the issues as follows:
1 Whether the plaintiffs are entitled to set aside the orders passed in I.P.No.4/1998 dated 1.102001 by the Honourable Additional Senior Civil
Judge, Ongole?
2. Whether the plaintiffs are aware of filing of insolvency petition by the 2nd defendant?
3. Whether plaintiffs can question the I.P. proceedings in the civil Court?
4. Whether there is any fraud or collusion as claimed by the plaintiffs?
5. Whether the schedule is correct?
6. To what relief?
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8. During enquiry, the second plaintiff was examined as P.W.1, the fourth plaintiff was examined as P.W.2, the 12th plaintiff was examined as P.W.3, the 9th plaintiff was examined as P.W.4, husband of 11th plaintiff was examined as P.W.5 and 10th plaintiff was examined as P.W.6 and got marked Exs.A1 to A12. On behalf of the defendants, the first defendant is examined as D.W.1 and the third defendant/Official receiver was examined as C.W.1, but, no document was marked on behalf of the defendants.
9. Heard both sides.
10. Issue No.3:-
(a) Since the negative finding on this issue ousts the jurisdiction of this court to try the suit, this issue has been taken first before dealing with other issues.
(b) The learned counsel for the plaintiffs by relying on the decision in Hamza Haji vs. State of Kerala & another reported in 2006 SAR (Civil) 663 contended that it is always competent to any court to vacate any judgment or order, if it be proved that such judgment or order was obtained by manifest fraud. Whereas the learned counsel for the first defendant has contended that civil Court has no jurisdiction to set aside the order passed by the Insolvency Court and the remedy left open to the plaintiffs is to get the order nullified by an Insolvency Court.
(c) The plaintiffs filed this suit claiming that I.P. proceedings were stage-managed by the defendants 1 and 2 in collusion and that the second defendant remained ex parte and facilitated the first defendant to obtain an order adjudging the second defendant as insolvent and thus the proceedings in I.P. and so also the order passed therein are tainted with fraud and collusion.
(d) Their Lordships of the Apex Court in the decision in S.P.Chengalvaraya Naidu (died) by L.Rs. vs. Jagannath (Dead) by L.Rs. & Others reported in (1993) 3 SCR 422 categorically held that it is the settled proposition of law that a judgment or decree obtained by playing fraud on the court is a nullity and non-est in the eyes of law. Such a judgment/decree by the first court or by the highest court has to be treated as a nullity by every court, whether superior or inferior. It can be challenged in any court even in collateral proceedings.
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(e) Further, Section 44 of the Evidence Act enables a party otherwise bound by a previous adjudication to show that it was not final or binding because it is vitiated by fraud. The provision therefore gives jurisdiction and authority to a court to consider and decide the question whether a prior adjudication is vitiated by fraud
(f) In the case on hand, it is the contention of the plaintiffs that the order in I.P. is vitiated by fraud and the same is outcome of collusion between the defendants 1 and 2 and thus sought to set aside the order passed in the I.P. They did not approach this court to set aside the order on any ground other than fraud and thus this court has got jurisdiction to entertain the suit. Accordingly, issue No.3 is answered in favour of the plaintiffs.
11. Issue No. 2:-
(a) The plaintiffs claimed that that the plaintiffs 2 and 3 came to know of the orders passed in the I.P. recently. Whereas the second defendant contended that the plaintiffs 2 and 3 are aware of I.P.proceedings and with the tacit and clear understanding of the plaintiffs 2 and 3, the defendant remained ex parte in I.P.No.4/1998. Both the parties did not file any documentary evidence in support of their respective contentions. As could be seen from the cross-examination of P.W.1 by the first defendant, it is not even suggested to him that they knew the proceedings of the I.P. since its inception and so also its result.
Thus, there is no force in the contention raised by the defendants 1 and 2 that the plaintiffs have knowledge of the proceedings and result of the I.P. and the contention of the plaintiffs, that just prior to the filing of the suit they came to know the proceedings in
I.P. and hence they are constrained to file the suit, can be accepted. Thus, it can be safely held that the suit had been filed well within the period of limitation. Accordingly, issue
No.2 is answered in favour of the plaintiffs.
12. Issue No.4:-
(a) The learned counsel for the plaintiffs has contended that by 15.7.1997 the construction of flats in ground floor, first floor and four flats in second floor was completed and though the firm has to construct four other flats in second floor and eight flats each in third and fourth floor, it could not proceed with the further construction and 10 thus there was no need for the second defendant to purchase any cement from the first defendant and thus the hand letters were fabricated in active connivance and collusion of the defendants 1 and 2 only to suit their claim in I.P.
(b) The learned counsel for the plaintiffs further contended that a perusal of the hand letters marked as Exs.A4 to A6 clearly go to show that they do not reveal any liability of the second defendant to pay any amount to the first defendant and they only show that some cement bags were received and Exs.A4 and A5 do not even show to whom they were issued and that the signature of the second defendant found on Ex.A5 is not with any seal of the firm and thus Exs.A4 to A6 do not create any liability on the second defendant as managing partner to pay any amount to the first defendant.
(c) Per contra, the learned counsel for the first defendant has contended that since the second defendant had purchased cement from him on behalf of Maruthiram Associates, all the partners of the said association are liable to discharge the debt due and since the cheques issued by the second defendant were dishonoured, he filed C.C.No.98/1997 under section 138 of Negotiable Instruments Act and as the second defendant was purposefully secluding himself, he filed I.P.No.4 of 1998 on the file of Additional Senior
Civil Judge’s Court, Ongole and since the second defendant did not contest, the same was
allowed adjudging the second defendant as insolvent and thus the alleged fraud and collusion as pleaded by the plaintiff is not true and correct.
(d) The learned counsel for the first defendant further contended that since plaintiffs attacked the genuineness of the orders passed in I.P.No.4/1998 tainting them with fraud, the plaintiffs must furnish the details of fraud and other similar factors so as to enable the defendants to know as to how and on what basis the plaintiffs arrived at such conclusion and since the plaintiffs failed to plead any such details in their pleadings, the suit must fail. For the above proposition, he relied on the decision in (1) Dr Narender Bahadur v.
Birender Bahadur and others reported in 2013(6) ALD 628 (DB), (2) Pachi Pala Dora
Swamy v G. Maharshi reported in 2015 (4) ALD 402 and (3) Guduru Srinivas v.
Amradi Prabhakar and another.
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(e) The learned counsel for the first defendant further contended that the commissions and omissions of a co-partner on behalf of the firm binds the other partners of the firm and since the second defendant purchased cement bags as Managing Partner of the firm, the first defendant is entitled to recover the debt against one or more partners of the firm and thus the firm property is liable to discharge the debts due by the second defendant. For this proposition, he relied on the decision in State bank of Hyderabad,
I.D.P.L.Colony Branch v. Star Electrical Industries, Hyderabad and others reported in 2014(1) ALD 529.
(e) The learned counsel for the second defendant contended that the second defendant purchased cement from the first defendant and as he could not discharge the debt due, the first defendant filed I.P. and the second defendant remained ex parte in the I.P. with clear understanding with the plaintiffs 2 and 3 and that the plaintiffs 2 and 3 are aware of the
I.P. proceedings and its result.
(f) From the above rival contentions, now coming to the facts of the case on hand, it is the clear and categorical contention of the plaintiffs that the construction of flats in the apartment was stopped by 15.7.1997 itself and the firm could not proceed with the further construction thereafter, hence, there is no need for the second defendant to purchase cement from the first defendant alleged to have been made under Exs.A4 to A6. They further contended that the I.P. proceedings are tainted with fraud and though the second defendant was arrayed as respondent therein in his individual capacity, the property belongs to the firm was shown as if it was the individual property of the second defendant. Thus, the plaintiffs could plead the details of fraud in their pleadings to enable the first defendant to know as to how and on what grounds the plaintiffs came to the said conclusion that the proceedings in I.P.are tainted with fraud as envisaged in the decisions relied on by the learned counsel for the plaintiffs. Thus, there is no force in the contentions raised by the first defendant that the suit is not maintainable for want of details regarding fraud said to have been committed by the defendants 1 and 2.
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(g) Since the plaintiffs termed the I.P. proceedings as outcome of fraud and collusion, I shall now peruse the contents of the petition in I.P. and other documents available on record.
(h) A perusal of Ex.A3- copy of the petition in I.P.No.4/1998 on the file of the
Additional Senior Civil Judge’s Court, Ongole shows that it was filed by the first
defendant against the second defendant under sections 6(1) & 9 of Provincial Insolvency
Act with a prayer to declare the respondent as insolvent and appoint the official receiver to take charge of the petition schedule property and to distribute the proceeds among the genuine creditor (petitioner). He had shown the under construction building that was being made by Maruthiram Associates in an extent of 100 gadies as petition schedule and the same was valued at Rs.3,00,000/-.
(i) A perusal of Ex.A1-certified copy of the order dated 1.10.2001 passed in
I.P.No.4/1998 shows that though the respondent was represented by his counsel
Smt. P. Lakshmi Kumari, he did not contest the proceedings and hence he was set ex parte and after hearing the petitioner’s counsel, the court passed the orders as follows:- “Petitioner ready. No representation for respondent even at 4.50 p.m. Respondent called absent set ex parte. P.W.1 is examined. Exs.A1 to A3 are marked. Heard
Sri MVKS, the respondent said to be constructed flats and selling away. Hence, act of insolvency is proved. Petition is allowed declaring and adjudicating the respondent as insolvent. His properties will vest with O.R. For discharge one year.
Communicate the order to Official Receiver, Ongole.”
(j) Thus, a perusal of Ex.A1 certified copy of the orders passed in I.P.No.4/1998 clearly shows that the petition was allowed ex parte. Merely because a party did not choose to contest the proceedings, it cannot be said that the result of the proceedings was outcome of fraud and collusion. If a third party sought to assail those proceedings terming them as outcome of fraud and collusion, the evidence and the surrounding circumstances and documents have to be carefully scrutinized before arriving at a conclusion.
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(k) A perusal of the contents of the petition in I.P. shows that the petitioner / first defendant herein was a dealer in cement and the respondent/ second defendant started constructions under the name and style “Maruthiram Associates, Ongole” and for the purpose of construction, the respondent opened an account with the petitioner for supply of cement and in that process the second defendant indebted to the first defendant to the tune of Rs.2,70,000/- towards cement, transport charges and other incidental charges and towards part payment of the debt due, the respondent had given two cheques dated 20.8.1996 and 5.9.96 for Rs.1 lakh and Rs.2 lakh respectively but the said cheques were dishonoured and hence the first defendant filed C.C.No.98/1997 on the file of II
Additional Munsif Magistrate court, Ongole under sections 138 and 142 of Negotiable
Instruments Act. Later, both the defendants entered into compromise, as per the terms of which the second defendant agreed to pay the amount on or before 30.10.1997 and later the second defendant requested the first defendant to supply cement and in good faith the first defendant supplied the first consignment , for which the second defendant issued a cheque through a member of apartment and subsequently also the first defendant supplied cement and for this the second defendant issued cheque for Rs.81,600/- and the cheque was dishonoured. Subsequently, as the second defendant was hiding himself and was not available either in his dwelling house or at business place and not paying the amounts due, the first defendant filed the Insolvency Petition to declare the second defendant as insolvent.
(l) Though as many as 11 documents were referred to in the list of documents enclosed to the petition, Exs.A4 to A6 marked in this suit were only marked in the I.P.
proceedings as Exs.A1 to A3. A perusal of Exs.A4 to A6 (marked as Exs.A1 to A3 in
I.P.No.4/1998) shows that they simply states that some cement bags were received by
Maruthiram Associates. Exs. A4 and A6 contain the signature of the second defendant as
Managing Partner of Maruthiram Associates. Ex.A5 contains the signature of the second defendant without mentioning in what capacity he had signed it. Exs.A5 and A6 are found written on the letter pad of Maruthiram Associates, whereas Ex.A4 was written on a white paper. Exs.A4 and A5 do not contain the details as to whom they were issued, 14 whereas Ex.A6 shows that it was issued in the name of the first defendant. In Exs.A5 and
A6 the name of the Managing director was mentioned as ‘T.Vijayakanth’, but while issuing those hand letters, the name of the said ‘T.Vijayakanth’ found printed was put in brackets and the name of T.Paramayogi was written in handwriting.
(m) In his cross-examination, D.W.1 deposed that he had not filed any documentary proof in the I.P. to show that he sold cement to the second defendant on credit basis.
However, D.W.1 deposed that he cannot say as to whether Exs.A1 to A3 are showing that cement was sold on credit basis. A perusal of the contents of Exs.A4 to A6 show that they do not contain that either the second defendant or Maruthiram Associates has to pay the amount of the cement found received under those hand letters. As already stated supra, they simply state that cement was unloaded at the apartments.
(n) As already mentioned supra the value of the schedule property was mentioned as
Rs.3,00,000/-. Admittedly, there are twenty flats constructed in the apartments. Hence, on an average, each flat was valued at Rs.15,000/-. But, a perusal of Ex.A10- sale deed-cum- agreement regarding construction dated 30.5.1996 shows that the total value of the site including construction was valued at Rs.1,89,700/-, whereas Ex.A11-sale deed shows that the property there under was valued at Rs.2,50,000/-. Thus, it is clear that even in the year 1996 value of a flat was Rs.1,89,700/- and thus the worth of the schedule property would at least be more than Rs.25,00,000/-.
(o) Further, the insolvency petition filed by the first defendant does not even show that the second defendant has no other properties except the schedule property. The first defendant simply stated that the second defendant was secluding himself either at his dwelling house or at business place, thus he committed an act of insolvency and prayed to declare him as insolvent.
(p) A perusal of the insolvency petition shows that the second defendant herein was shown as respondent therein in his individual capacity. Except a sentence that the second defendant was making construction under the name Maruthiram Associates, nowhere in the petition it was mentioned that the said Maruthiram Associates is a partnership firm and the second defendant herein as Managing Partner of the said firm had sought for 15 supply of cement and in that process he fell in dues. Thus, the tenor of the petition clearly shows that the second defendant was shown as respondent in the I.P. in his individual capacity only but not as Managing Partner of Maruthiram Associates.
(q) In his cross-examination, D.W.1 denied the suggestion that he had not filed the complainant under 138 of N.I.Act against the firm, but against the second defendant only and that since the cheques were issued in the personal name of the second defendant, he did not exhibit them. Even as per the contents of the I.P. it shows that he filed complaint under Section 138 of Negotiable Instruments Act against the second defendant in his individual capacity, but not as Managing Partner of Maruthiram Associates.
(r) Admittedly the first defendant did not issue any notice either in the name of the firm or in the name of other partners of the firm apprising them of their liability. It is no doubt true that Section 25 of Partnership Act, 1932 envisages that a creditor of firm may, therefore, recover debt of firm from any one or more of the partners. In the case on hand, though the second defendant was shown as an accused in the complaint filed under section 138 of Negotiable Instruments Act and also as respondent in Insolvency Petition in his individual capacity, the first defendant wants to contend that since the second defendant became liable to pay the amount in pursuit of the business of the firm, the other partners as well as the firm are liable to discharge the debt and hence he had shown the property of the firm as petition schedule in the I.P.
(s) As already stated supra, since the first defendant nowhere termed the second defendant as Managing partner of the first plaintiff firm, he is not entitled to claim recovery of the amount from out of the properties of the firm, but, mischievously, he had shown the property belonging to the firm as petition schedule in the I.P.
(t) Further, though Exs.A4 to A6 letters do not show any liability on the part of the second defendant to pay any amount and though the value of the schedule property was undervalued, the second defendant, having sold away the flats constructed in the apartment, simply remained ex parte and facilitated the first defendant to obtain orders from a Court of law adjudging him as insolvent.
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(u) The evidence of P.Ws.2 to 6 are only regarding their purchase of flats in the apartment either from the second defendant or from the purchasers of the second defendant, they are not much relevant to decide the controversy involved in this suit.
Hence, it is needless to consider their evidence.
(v) C.W.1 is the Official Receiver and his evidence is only to the effect that despite the orders passed in I.P., the second defendant did not hand over the property and he could not proceed further in the matter, since possession of the property was not handed over for administration.
(w) The above discussion and findings goes to show that the Insolvency proceedings initiated by the first defendant against the second defendant is the outcome of collusion.
Further, though Ex.A4 to A6 (Exs.A1 to A3 marked in I.P.) do not show any liability on the second defendant to be discharged to the first defendant and though the property of the firm was included and the same was undervalued, the second defendant, having sold the flats in the said apartment, simply remained ex parte and facilitated the first defendant to obtain an order. Thus, the defendants 1 and 2 played fraud on the court behind the back of other partners. Accordingly, issue No.4 is answered in favour of the plaintiffs.
13. Issue No.5:-
In view of the findings given by the court while dealing with issue No.4, it is needless to dwell on this issue to ascertain as to whether the suit schedule was correctly mentioned or not and hence this issue has been left out unanswered.
14. Issue No.1:-
(a) In the decision relied on by the learned counsel for the plaintiffs 1 to 3 in
S.P.Chengalvaraya Naidu (died) by L.Rs. vs. Jagannath (Dead) by L.Rs. & Others
reported in (1993) 3 SCR 422, it was categorically held that it is the settled proposition of law that a judgment or decree obtained by playing fraud on the court is a nullity and non-est in the eye of law. Such a judgment/decree has to be treated as a nullity by every court, whether superior or inferior having jurisdiction.
17
(b) While dealing with issue No.4, this court came to the conclusion that the proceedings in I.P.No.4/1998 are the outcome of fraud and collusion between the defendants 1 and 2 and thus the order dated 1.10.2001 passed therein by the learned
Additional Senior Civil Judge, Ongole is a nullity and non-est in the eye of law and hence
the plaintiffs are entitled to set aside the same. Accordingly, Issue No.1 is answered in favour of the plaintiffs.
15. Issue No.6:-
In view of the findings and answers given on issues 1 to 4, the suit has to be decreed.
In the result, the suit is decreed setting aside the orders dated 1.10.2001 passed in
I.P.No.4/1998 on the file of Additional Senior Civil Judge, Ongole. The parties are directed to bear their own costs.
Dictated to the Stenographer, transcribed by him, corrected and pronounced by
me in open court, this the 19 th day of August, 2016.
Sd/- Y. Hemalatha
PRINCIPAL SENIOR CIVIL JUDGE,
ONGOLE
APPENDIX OF EVIDENCE
WITNESSES EXAMINED
For plaintiffs for defendants
P.W.1: Tatikonda Hymavathi D.W.1:Atmakuri Pundarikakshaiah P.W.2: Kotu Koireddy P.W.3: Karavadi Anjaneyulu P.W.4: Naladala Nageswara Rao P.W.5: Dintakurthy Venkata Subba Rao P.W.6: Naladala Venkata Narasaiah
Court witness:
C.W.1:Sri K. Raghava Rao, Official Receiver
DOCUMENTS MARKED
For plaintiffs:
Ex.A1/01.10.2001: Certified copy of the order in I.P.No.4/1998 on the file of
Additional Senior Civil Judge, Ongole filed by the first defendant
against the second defendant
Ex.A2/ : Certified copy of the petition filed in I.P.No.4/1998 before the Official Receiver Ongole filed by the first defendant to auction the I.P.schedule property 18
Ex.A3/ : Certified copy of the petition in I.P.No.4/1998 on the file of
Additional Senior Civil Judge, Ongole filed by the first defendant
against the second defendant
Ex.A4/13.08.1997: Certified copy of the acknowledgment of receipt of cement issued by the Managing Partner for Maruthiram Associates
Ex.A5/15.07.1997: Certified copy of the acknowledgment of receipt of cement issued the second defendant on the letter head of Maruthiram Associates
Ex.A6/06.07.1997: Certified copy of the acknowledgment of receipt of cement issued by the Managing Partner for Maruthiram Associates on the letter head of Maruthiram Associates
Ex.A7/23.02.1996: Sale deed-cum-agreement for construction executed by the second defendant as Managing Partner of Maruthiram Associates in favour of P.W.3/Karavadi Anjaneyulu.
Ex.A8/30.09.2012: Electricity charges payment receipt issued in the name of P.W.3/Karavadi Anjaneyulu
Ex.A9/17.02.1999: Sale deed executed by Swarna Venkarteswara Rao in favour of P.W.4/Naladala Nageswararao and his wife Venkata Subbamma
Ex.A10/30.05.1996: Sale deed-cum-agreement for construction executed by the second defendant as Managing Partner of Maruthiram Associates in favour of P.W.5/Dintakurthy Venkata Subba Rao
Ex.A11/28.04.1999: copy of the sale deed obtained from e-seva executed by Gorantla Srinivasa Rao in favour of P.W.6/Naladala Venkata Narasaiah
Ex.A12/30.09.2015: Two house tax receipts standing in the name of P.W.6/Naladala Venkata Narasaiah
For defendants:
Nil
Sd/- Y.Hemalatha
PRL.SR.CIVIL JUDGE,
ONGOLE