SHANTA AGARWAL Vs. BALDOTA BROS

JUDGEMENT

(1.) THIS is a suit filed by the plaintiffs to recover from the defendants a sum of Rs. 11 lakhs together with interest thereon at the rate of 1 per cent, per mensem from the dates of the respective advances made to the defendants.

(2.) THE plaintiffs' case is that, in January 1964, an agreement was arrived at between the plaintiffs and the defendants under which the plaintiffs agreed to advance to the defendants in cash large amounts of moneys which were undisclosed to the income -tax authorities, with interest at 1 per cent, per mensem, in respect of which the defendants agreed to execute promissory notes in the names of the plaintiffs or in other names benami for the plaintiffs, and were also, to renew the said loans from time to time on condition of issuing fresh promissory notes in the same names or in the names of different benamidars for the plaintiffs, as may be required by plaintiff No. 1 on behalf of the plaintiffs. In paras. 4 to 8 of the plaint the plaintiffs have set out the various advances that, were made pursuant to the said general agreement which has been pleaded in para. 3 of the plaint. In para. 8 of the plaint, the promissory notes as they finally stood renewed at the date of the filing of the present suit have been listed, and in para. 9 it has been stated that from about December 1965 the defendants were in great financial difficulties and the plaintiffs had, therefore, in January 1966 demanded the return of their loans amounting at the time to Rs. 11 lakhs, and interest thereon, from the defendants. In para, 11 of the plaint it has been averred that, some time in June 1966, there was a raid on the office and residence of the defendants by the Income -tax Department, and certain documents belonging to the defendants, including a diary maintained by them, were seized by the officers of the Income -tax Department. It is further stated in the said paragraph that defendants Nos. 2 and 3 who were then called upon to explain the contents of that diary made statements before the Income -tax Officers; concerned that the amounts mentioned in the diary had been received by them from the plaintiffs. It is further stated in the said para that thereafter several meetings took place with the Income -tax Officers concerned and, ultimately, a settlement was arrived at between the plaintiffs and the Income -tax Department as a result of which the plaintiffs disclosed the full amount of Rs. 11 lakhs and interest thereon to the said Department and filed the necessary income -tax and wealth -tax returns showing the same. In para. 15 of the plaint it is alleged that the amount of Rs. 15,37,166 was due and payable by the defendants to the plaintiffs at the date of the filing of this suit, and the plaintiffs prayed for a decree being passed in favour of all or one or more of them.

(3.) AFTER issues were framed by me, Mr. Parpia on behalf of the defendants applied that issues Nos. 1 to 5 be tried as preliminary issues in the case. That application was opposed by Mr. Laud. Before giving my ruling, however, I seriously cautioned Mr. Parpia on the inadvisability of the issue of illegality being tried as a preliminary issue, and made it quite clear to him that, if he persisted in his application in that behalf, he would be at the disadvantage of being confined to the averments contained in the plaint. Mr. Parpia, however, pressed his application for the trial of those preliminary issues, and after hearing both the counsel, 1 gave a ruling that issues Nos. 1, 2 and 3 were to be tried as preliminary issues as, according to Mr. Parpia, they were pure issues of law, but I declined to try issues Nos. 4 and 5 as preliminary issues as, in my opinion, they involved questions of fact, particularly in regard to the alleged acknowledgment of liability as saving the bar of limitation. The preliminary issues were then argued before me at considerable length and a large number of authorities were cited on both sides in the course of that argument.