P L D 1962 (W (PLP)

WAHIDUDDIN AHMED, J.‑This first appeal arises out of Civil Suit No. 3 of 1956 brought by the respondent firm for the recovery of Rs. 7,270 against Wazir Muhammad & Co., a partnership business of Hyderabad, and five other defendants alleged to be the partners of the said firm, Appellants Nos. 1 and 2 were defendants Nos. 2 and 3 in the above‑mentioned suit and were sued as partners of the said firm. Mr. Sadik Ali G. Khoja, Second Assistant Judge, Jacobabad, has decreed the suit by judgment dated the 19th of May 1959. Messrs Hafiz Pir Bux & Co., the respondents, and Messrs Wazir Muhammad & Co., a partnership firm of which appellants Nos. 1 and 2 are stated to be the partners, used to carry on business in Hyderabad. On the 21st of March 1955 Abdullah, appellant No. 2 and Wazir Muhammad, defendant No. 6 before the trial Court, acting on behalf of their firm and other partners, approached the respondent firm for a loan. The respondent firm, on this request, is alleged to have advanced a loan of Rs. 7,270 under a bearer cheque No. 7046 on the Oriental Co‑operative Bank, Hyderabad. It was alleged by the respondent firm that the aforesaid partners of the appellant firm had promised to pay back this amount on demand but they failed to do so. Accordingly on the 14th of January 1956 they brought the above mentioned suit for the recovery of the said amount both against the appellants and against their firm and other partners. The suit was resisted. Appellant Abdullah, who was defen dant No. 3 in the trial Court, filed a separate written statement. He pleaded 1n defence that he did not approach the respondent firm for the alleged loan and was not liable to pay the amount claimed as he had already retired within the knowledge of the respondent firm from the firm of Wazir Muhammad & Co. No written statement was filed on behalf of the firm of Wazir Muhammad & Co. Appellant No. 1, who was defendant No. 2 in the trial Court, filed a joint written statement with defendants Nos. 4, 5 and 6 in the Lower Court. In defence these defendants pleaded that the firm of Wazir Muhammad & Co. had since long ceased to exist even before the institution of the suit and before the alleged cause of action and date of loan within the knowledge of the respondent firm. They further denied the fact that defen dants Nos. 3 and 6 acting on behalf of the firm or otherwise jointly and individually approached the respondent firm for obtain ing the alleged loan. They pleaded that neither the defendants were in need of money nor they promised to return the sum as they did not borrow any amount on behalf of the firm or on their own behalf. They further pleaded that the respondent firm could not base its claim on cheque No. 7046 dated the 21st of March 1955 and account books at its sweet will in view of the fact that the respondent firm had alleged in the criminal case under section 420, P. P. C. against defendant No. 6 that he had executed a document in their favour and took the amount in dispute as amanat. In the alternative the contesting defendants pleaded that the suit was liable to be dismissed as the alleged transaction defeated the provisions of the law of liquidation and winding up of companies, in so far as it involved and implied injury to the property of other persons namely, creditors and customers of the Oriental Co‑operative Bank Ltd., and is opposed to public policy. In this connection they alleged that the Oriental Co‑operative Bank Ltd. had gone into liquidation and was not in a position to pay its creditors and customers. The respondent who had its account of Rs. 7,270 with the said Bank was also to get its due share with other creditors of the said bank according to the law of liquidation of companies but in order to prejudice the right of other creditors and to defeat the provisions of liquidation law, the Manager of the said Bank at Hyderabad colluded with the respondent and got the said cheque deposited towards the debt due to the bank against the defendant No. 6 so that the respondent may get his whole amount of Rs. 7,270 from the defendant No. 6 and may not be adversely affected by liquidation scheme and shall prejudiced the right of the other creditors of the bank who were entitled to proportionate and equal distribution of .the assets of the bank. On these pleadings the learned Subordinate Judge struck as many as six issues. The respondents in support of their case examined P. W. 1 Akhtar Raza, P. W. 2 Karam Illahi, Head Clerk, Registrar of Companies, Khairpur Division, and P. W. 3 Hafiz Pir Bux, a partner of their firm. Neither the appellants nor the other defendants led any evidence in support of their case. After considering the evidence of the parties, the learned Sub ordinate Judge came to the conclusion that the claim of the respondent firm was enforceable in law and decreed the suit against the appellants and the other defendants. This appeal is filed only on behalf of Abdus Salam, defendant No. 2, and Abdullah, defendant No.

3. The firm of Wazir Muhammad & Co. and defendants Nos. 4 to 6 have not challenged the decree of the Subordinate Court in this appeal or under any separate appeal. Mr. Munawar Abbas, the learned counsel for the appellants, has not challenged before us the finding of the learned Subordinate Judge that a cheque for Rs. 7,270 (Exh. 47) was issued by the respondent firm in favour of Wazir Muhammad & Co., which was presented by it through its partner Wazir Muhammad to the Oriental Co‑operative Bank, Limited, Hyderabad, for payment through deposit slip (Exh. 48) in the firm account and that it was adjusted by the bank concerned towards the arrears of Rs. 7,882/2/‑ outstanding against the defendant firm for the overdraft of Rs. 10,000 sanctioned in its favour on the 6th of August 1954. He has also not pressed before us the objection raised in the grounds of appeal that the judgment of the learned Subordinate Court had not been properly delivered as Mr. Sadikali G. Khoja, the Judge who wrote and signed the judgment had no territorial jurisdiction to decide the case and the judgment under appeal was without jurisdiction and hence a nullity. On the application of the appellant firm that the suit under appeal was not transferred to the file of the Subordinate Judge concerned on his transfer to Jacobabad, this objection was referred to the office to apprise us whether any order of the transfer of this case was passed by the High Court. The office, by a note dated the 16th of December 1961 has brought it to our notice that the Senior Judge vide his order dated 20th April 1959 transferred the suit in question to the Court of Mr. Sadikali G. Khoja for writing judgment and intimation to this effect was sent to the District and Sessions Judge, Hyderabad, by letter dated the 22nd of April 1959. In this appeal the appellants' counsel has attacked the judg ment of the learned Subordinate Court only on the following grounds: (1) That the transaction in question was void as it was fraudulent and against public policy; (2) the terms of the transaction in dispute having been reduced to writing it was not open to the respondent firm to prove its case by oral evidence under section 91 of the Evidence Act ; (3) that the suit was based on account books which should have been thrown out as it is proved beyond doubt that the account books were not maintained in the regular course of business; and (4) that two of the defen dants namely, the appellants has taken up the plea that they had retired from the partnership much before the loan transaction within the knowledge of the respondent firm and the decree of the Subordinate Court in so far as the appellants have been made liable for the claim in dispute is erroneous. We will first deal with objections 2 and

3. A perusal of the plaint will show that the respondent firm had based its claim on cheque No. 7046 dated the 21st of March 1955 drawn on the Oriental Co‑operative Bank, Limited, Hyderabad, and in support it has also relied on its account books which contained the entry that the amount of the said cheque was paid by the said bank in the account of the appellant firm. It was only during the course of the evidence led by the respondent firm that it was brought out that a criminal complaint was filed against Wazir Muhammad, defendant No. 6, in respect of the above‑mentioned amount. In the criminal complaint the respondent firm alleged that this amount was taken by the appellant firm through Wazir Muhammad as amanat on the terms that it would be returned to it on demand. It was also admitted by P. W. 3 Hafiz Pir Bux in evidence that Wazir Muhammad had executed an amanatnama in this connection in favour of the respondent firm. It is there fore quite clear that the amount in dispute was paid to the appellant firm through the aforesaid cheque and the account books and the amanatnama alleged to have been executed by Wazir Muhammad was only evidence of the fact that this amount had been paid to the defendant firm. It cannot, therefore, be said that the amanatnama could be the basis of the transaction in question and as it had been reduced to writing no oral evidence could be led under section 91 of the Evidence Act. In our opinion it was open to the respondent firm to prove that the amount in dispute was paid through the cheque referred to above and that the appellants and their firm were liable to pay the amount paid under the cheque as they had derived benefit and advantage of the said amount. The mere fact that an amanatnama had been executed by defendant No. 6 would not mean that the respondent firm was precluded in law to lead other evidence in proof of their case. It is quite true that the respondent firm had suppressed this fact in the allegation made in the plaint but if the appellants or their firm or the other defendants wanted to take advantage of this fact it was open to them to summon the amanatnama from the criminal Court and to place reliance on it. This course was not adopted by them for obvious reasons. Even if this document had been summoned and relied upon it would not have in the least advanced their case or resulted in throwing out the case of the respondent firm. There is ample authority for the proposition that oral proof of payment or any payment of money for which receipt has been taken is admissible in spite of the provisions of section 91 of the Evidence Act. In the present case, on the other hand, the respondent firm not only lead oral evidence in support of their claim but have also produced documentary evidence to substantiate their claim. The contention of the learned counsel for the appellants that the entry about the transaction in dispute was not effected on the 21st of March 1955 but was made as late as 7th April 1955 is quite correct. But this fact alone will not show that the account books maintained by the respondent firm were not maintained in the ordinary course of business. The explanation of P. W. 3 Hafiz Pir Bux in this respect is quite plausible, namely, that the entry was not made in the account books as he expected that the appellant firm and the other defendants would pay the amount within a short period, but when he found that they had not paid ‑this amount an entry for this transaction was entered in the account books on 7th April 1955. In our opinion, the facts proved on the record do not in the least lead to the conclusion that the account books maintained by the respondent firm are not genuine. In any case the transaction in dispute is evidenced by the cheque drawn in favour of the appellant firm and by other documentary evidence, which shows that the amount of the cheque was adjusted in the loan account of the appellant firm. In these circumstances these objections have no force and must fail. The next question for consideration is whether the transac tion in question is fraudulent and against public policy and therefore void as alleged by the appellants. The particulars of the alleged fraud are stated by the contesting respondents in paragraph 12 of their written statement. They alleged that the suit was liable to be dismissed as the transaction entered into between respondent company and defendant No. 6 defeated the provisions of the law of liquidation and winding up of the companies in so far as it involved an implied injury to the property of another person namely, creditors and customers of the Oriental Co‑operative Bank Limited. According to the allegations the Oriental Co‑operative Bank Limited had gone into liquidation and was not in a position to pay its creditors and customers. The defendant firm which had a sum of Rs. 7,270 with the said bank was also to get its due share with other creditors of the said bank, according to the law of liquidation of companies but in order to prejudice the right of other creditors and to defeat the provisions of liquidation law the Manager of the said bank at Hyderabad colluded with the respondent and got the said cheque of Rs. 7,270 deposited towards the debt due to the bank against the defendant No. 6 so that the defendant firm may get his whole amount of Rs. 7,270 from defendant No. 6 and may not be adversely affected by liquidation scheme and may prejudice the right of other creditors of the bank who are entitled to proportionate and equal distribution of the assets of the bank. The evidence produced on the record on the other hand proves that the Oriental Co‑operative Bank Limited had not gone in liquidation on the 21st of March 1955. P. W. 1 Akhtar Raza (Exh. 46) stated in cross‑examination that the Registrar, Co‑operative Societies of the Bank, ordered the com pulsory winding up of the bank and the Branch Managers were informed about the liquidation on the 23rd of March 1955. He further admitted in cross‑examination that there were many transactions on the 21st of March 1955 in the bank concerned in the current account. The current account ledger shows some withdrawal transactions and one deposit transaction on the above mentioned date. Thus it is quite clear that on the 21st of March 1955 the Oriental Co‑operative Bank was carrying on it busi ness and was not closed. There is, however, no doubt in our mind on the evidence of P. W. 3 Hafiz Pir Bux that the respondent firm before the 21st of March 1955 had come to know that the Oriental Co‑operative Bank was about to go into liquidation. It further appears from the evidence of this witness that they had very intimate connection with the appel lant firm and it was arranged between them that the amount due to the respondent firm in the Oriental Co‑operative Bank, Hyderabad, would be withdrawn in such a manner that it would be adjusted in the over‑draft loan account of the appellant firm. It was further arranged between the two firms that in case the amount due to the respondent firm is adjusted with the loan account of the appellant firm, they would pay it later on to the respondent firm. It was in these circumstances that the cheque in question was issued in the name of the appellant firm and was adjusted in their loan account in the Oriental Co‑operative Bank. The fact that the cheque in question was deposited under the signature of defendant No. 6 clearly shows that he was a party to this arrangement. Thus if any fraud was committed on the Oriental Co‑operative Bank or its creditors, the appellant firm and its partner defendant No. 6 were a party to it. It is well settled law that if any fraud had been per petrated, the party to the fraud after perpetration cannot take advantage of it and take the plea that the transaction entered into was fraudulent. The learned counsel for the appellants in support of his contention has relied on a decision of the Calcutta High Court in Jafer Meher Ali v. Budge‑Budge Jute Mills Co. (I LR 33 Ca1. 702), a Single Judge judgment. He has particularly relied on the following observations of Sale, J. in support of his contention :‑ "In my opinion the word `object' in section 23 of the Contract Act was not used in the same sense as `consideration', but was used as distinguished from consideration and means purpose or design. If then the purpose of the parties was to defeat the provisions of the Bankruptcy Law there can be no doubt, I think, that the assignment or transfer would be inoperative under the provisions of section 6 of the Transfer of Property Act. The assignment being inopera tive the result would be that the beneficial interest of the assignor in the contract in suit vested in the Official Assignee on the vesting order being made, and it was then open to the Official Assignee to have claimed the benefit of the acts of the plaintiff and to take such other steps as were necessary to entitle him to call upon the defendant Company to fulfil the contract and to deliver the goods or in lieu of delivery to have claimed damages, but no such step was taken nor was any claim to the benefit of the contract made by the Official Assignee. The reason why the Official Assig nee did not and has not moved in this matter to protect the interest of the creditors probably is that there are no assets in his hands to meet the necessary expenses." On the above observations the learned counsel for the appellants contended that as the object of the transaction in question was to defeat the creditors of the Oriental Co‑operative Bank, it was void under section 23 of the Contract Act. The case cited is distinguishable because in that case it was found that the circumstances in which the transaction was entered into strongly suggest a fraudulent design on the part of those concerned there with. It was further found that the transaction was hit by the provisions of section 6 (h) of the Transfer of Property Act, which says that it is of such a nature that if permitted it would defeat the provisions of the Insolvency Act. None of these ingredients is present in this case. There is nothing to suggest that the respondent firm colluded with Wazir Muhammad to defeat the provisions of any law. It is an ordinary case where the customers of a bank come to know about the shaky condition of the bank and try to safeguard their interest by withdrawing their deposits from the bank. In our opinion these protective steps cannot be considered of such a nature which can strongly suggested a fraudu lent design on their part. Apart from this, the learned counsel for the appellants has failed to show that there was anything in the transaction in question which defeated any provision of law. At first the learned counsel relied on the Pakistan Companies Act and contended that it defeated the provisions of the Companies Act, but later on he admitted that the case under considera tion Is not to be considered according to the provisions of the Company Law. The Oriental Co‑operative Bank was registered under the Bombay Co‑operative Societies Act. Under the provisions of this enactment 'a society is registered as a limited body. It further shows that under section 7 (2) a bank can also be registered as a co‑operative society and is entitled to use the word "limited" in describing itself. Section 68 of the Bombay Co‑operative Societies Act lays down in clear terms that the provisions of the Indian Companies Act of 1930 shall not apply to societies registered under it. In the Bombay Co‑operative Societies Act of 1925 its. If there is no such provisions as fraudulent prefer ence of creditors or otherwise. In these circumstances the contention of the appellant firm that the transaction in dispute was fraudulent or defeated the provisions of any law is not substanti ated and must be repelled. Towards the close of the arguments the appellants counsel urged that appellants 2 anti 3 at the time when the transaction in dispute was entered into were not the partners of Wazir Muhammad within the knowledge of the respondent firm and should not have been made liable to pay the claim in dispute. The appellants, however, led no evidence in support of their contention. Mr. Munawar Abbas contended that the appellants failed to do so because the trial Court wrongly closed their case. The record however shows that the respondent firm closed its case before the learned trial Judge on the 23rd January 1958 and the case was adjourned to the 25th of February 1958 for recording the evidence of the appellant firm and other defendants including the appellant. On the 5th of February 1958 the appellants applied for sum moning the evidence but their witness remained unserved. On the 24th of February 1958 on the appellants' application, the case was further adjourned to the 26th March 1958 but he did not pay any costs for summoning any witness and therefore the learned subordinate Judge closed their case and did not permit them to lead any evidence. In our opinion, in the circums tances of the present case the learned Subordinate Judge was perfectly justified in closing the appellants' case. He rightly refused to further adjourn the case although the respondent's counsel was prepared and had given his consent to it. In law, however, the liability of the partners of a firm can be determined both in the suit itself and in the execution pro ceedings. Under Order XXX, rule 8, C. P. C., the right of a partner to appear under protest and to deny that he is a partner is fully recognised. In such cases two courses are open to the e Court. It can determine his liability in the suit itself or leave the question to be tried and determined under Order XXI, rule 50, C. P. C., at the time of the execution of the decree against the firm. The closure of the appellants' evidence cannot be treated as failure to put appearance. But in our opinion this is a fit case in which the question of the liability of the appellants as partners of Wazir Muhammad & Co. should be left over for determination during the execution proceedings. Mr. Inayatali, the learned counsel for the respondents, has consented to this procedure. Accordingly the question whether appellants 1 and 2 are liable under the decree passed by the learned Subordinate Court as partners of Wazir Muhammad & Company is left open for determination in the execution proceedings. In the result, the appeal, subject to the above remarks, is dismissed with costs. K. M. A./A. H. Appeal dismissed.