LILADITYA DEB Vs. REGISTRAR OF FIRMS
LAWS(ORI)-2020-4-7
HIGH COURT OF ORISSA
Decided on April 29,2020

Liladitya Deb Appellant
VERSUS
REGISTRAR OF FIRMS Respondents

JUDGEMENT

K.R. Mohapatra, J. - (1.) This writ petition has been filed with the following prayers: "P R A Y E R In the circumstances, the petitioner prays that this Hon "?ble Court will graciously be pleased to issue (sic) rule Nisi calling upon the opp. Parties to show cause as to why the letter dated 2.3.2015 under Annexure-1, and Form- D dated 28.5.2011 and 9.8.2011 under Annexures-4 and 5 shall not be quashed, A N D Why induction of the Opp. Party No.2 as partner of the Firm, Gangeya Supply Agencies shall not be quashed, A N D If the Opp. Parties fail to show cause of or in-sufficiently show cause the said Rule may please be made absolute, A N D Issue any other writ(s)/ order(s)/ direction(s) as this Hon "?ble Court deems fit and proper,And for this act of kindness, the petitioner as in duty bound shall ever pray."
(2.) The case of the Petitioner is that he, namely, Sri Liladitya Deb, along with his siblings Siladitya Deb and Rob Ray Deb formed a partnership firm by executing Registered Partnership Deed No.6239 dated 19.12.1964 (Annexure-2). The partnership firm, namely, M/s. Gangeya Supply Agency (for short 'the Firm') was registered under the provisions of the Indian Partnership Act, 1932 (for short 'the Act') on 26.04.1979. On 02.08.1989, Siladitya Deb and Rob Ray Deb retired from the partnership. Consequently, the firm was only left with one partner, namely, the Petitioner and was reduced to a proprietorship firm. On the day Siliditya Deb and Rob Ray Deb retired from the partnership, i.e., with effect from 02.08.1989, the Petitioner also executed an agreement with M/s. Falcon Marine Exports Private Ltd. (for short 'the Company'). Subsequently, on 17.02.1993, a supplementary agreement for change in the original partnership deed was executed between the Company and the Petitioner. Both the agreements dated 02.08.1989 and 17.02.1993 between the Company and the petitioner were unregistered agreements. Mr, Mohanty learned Senior Counsel submitted that both the aforesaid agreements were outcome of fraud and misrepresentation. The Opposite Party No.2, taking undue advantage of the situation, after a lapse of more than 15 years, sought for induction of his name as a partner in the Firm on the basis of a deed named and styled as Partnership Deed (Reconstituted) executed on 01.04.1995 between the Petitioner and said Opposite Party No.2 in his individual capacity. It is his submission that due to alleged inaction of the authorities under the Act seeking for an amendment in the constitution of the Firm by inducting the opposite party No.2 as a partner in the Firm, W.P.(C) No.17542 of 2010 was filed by the Opp. Party No. 2 with a prayer to direct the opposite party No.3 therein to produce the entire records in respect of the Firm and to amend the entry relating to the Firm before the Registrar of Firms by incorporating his name in the said register in accordance with law. The said writ petition was disposed of on 09.11.2010 with the following order: "Heard learned counsel for the petitioner. The prayer of the petitioner is for issuance of a writ of mandamus to opposite party no.3 to produce the entire records in respect of M/s. Gangeya Supply Agency which has been entered in the Register of Firms and record an entry of the statement in the said register in accordance with Annexure-4 placing reliance on Annexure-1 series seeking information from the PIO-cum-Under Secretary to the Inspector General of Registration, Orissa. As could be seen from Annexure-2, the information sought for by the petitioner is not available. In this view of the matter, the petitioner is at liberty to file an application seeking for amendment to make the entry in the Register of Firms. If such application is filed by producing necessary material facts and documents, the same may be considered and disposed of in accordance with law. The liberty granted does not amount to expressing any opinion regarding the claim made by the petitioner in this case. With the aforesaid observation and direction, the writ petition is disposed of. Urgent certified copy may be granted on proper application."
(3.) It is the submission of Mr. Mohanty, learned Senior Counsel that pursuant to the aforesaid direction, the authority under the Act without following due procedure of law and without giving an opportunity of hearing to the Petitioner, directed to induct the Opposite Party No.2 as a new partner in the Firm and communicated same to the Petitioner vide letter dated 02.03.2005 (Annexure-1). 3.1 Mr. Mohanty learned Senior Counsel further submitted that the order under Annexure-1 has been obtained by practising fraud and suppressing material facts. On a bare perusal of the order dated 09.11.2010 (supra), it is crystal clear that no direction to induct the Opposite Party No.2 as a new partner in the Firm was issued by this Court. But the authority under the Act by misinterpreting and misreading the order dated 09.11.2010 passed in W.P.(C) No. 17542 of 2010 directed to induct the Opposite Party No.2 as a new partner in the Firm and communicated the same to the petitioner on 02.03.2015 (Annexure-1). 3.2 The authority, in order to patch up the lacuna in the order under Annexure-1 and by overreaching the interim order dated 19.03.2015 passed in Misc. Case No.4518 of 2015 in this writ petition, issued another letter dated 18.04.2015 (Annexure-13) to the Petitioner indicating that inadvertently in the order under Annexure1, it was mentioned that pursuant to the direction of this Court, the Opposite Party No.2 was inducted as a new partner. But, in fact, the representation of the Opposite Party No.2 was duly considered by the authority and following due procedure of law, the Opposite Party No.2 was inducted as a new partner. The induction of Opposite Party No.2 as a new partner was independent of the direction made by this Court in W.P.(C) No.17542 of 2010. Thus, both Annexures-1 and 13 are not sustainable in law. It is his submission that on the strength of Annexures-4 and 5 and some unregistered documents manufactured by Opp. Party No.2, he styling himself as the Managing Partner of the Firm tried to interfere with its management and operate a separate bank account with the banker of the Firm, namely, Canara Bank, Laxmi Sagar Branch, Bhubaneswar for which the Petitioner was constrained to request the Bank to freeze the original account of the Firm. Thereafter, the Opp. Party No.2 filed an application under Section 9 of the Arbitration and Conciliation Act, 1996 before learned District Judge, Khurda in Arb. Case No. 534 of 2014 to restrain the Petitioner from managing the affairs of the Firm and to operate the bank account, which is still pending. In view of the above, induction of the Opposite Party No.2 as a partner to the Firm and issuance of FormD under Annexures-4 and 5 acknowledging the retirement of the Company and incorporating the Opp. Party No.2 as a partner to the Firm are per se illegal and are liable to be quashed. In support of his case, he relied upon the following case laws: (i) State of Orissa v. Binapani Dei, 1967 AIR(SC) 1269, wherein Hon'ble Supreme Court has observed as under: "12. It is true that some preliminary enquiry was made by Dr. S, Mitra. But the report of that Enquiry Officer was never disclosed to the first respondent. 'Thereafter the first respondent was required to show cause why April 16, 1907, should not be accepted as the date of birth and without recording any evidence the order was passed. We think that such an enquiry and decision were contrary to the basic concept of justice and cannot have any value. It is true that the order is administrative in character, but even an administrative order which involves civil consequences as already stated must be made consistently with the rules of natural justice after informing the first respondent of the case of the State, the evidence in support thereof and after giving an opportunity to the first respondent of being heard and meeting or explaining the evidence. No such steps were admittedly taken; the High Court was, in our judgment, right in setting aside the order of the State." (emphasis supplied) (ii) D.F.O., South Kheri v. Ram Sanehi Singh, 1973 AIR(SC) 205, wherein Hon'ble Supreme Court observed as under: "5. It la unnecessary to consider whether the order of the Divisional Forest Officer is made on "irrelevant grounds" because it is clear that before passing the order the Divisional Forest Officer did not call for any explanation of the respondent, and gave him no hearing before passing the order. It is averred in Paragraph-22(i) of the petition that the "cancellation order is in violation of the principles of natural justice having been done at a very late stage without affording any opportunity to the petitioner (respondent) to say anything against the action cancelling his tallies". To that averment, no reply was made by the forest authorities against whom the petition was filed. Granting that the order was administrative and not quasi-judicial, the order had still to be made in a manner consonant with the rules of natural justice when it affected the respondent's rights to property. This Court in the case of State of Orissa v. Dr. (Miss) Binapani Dei held in dealing with an administrative order that "the rule that a party to whose prejudice the order is intended to be passed is entitled to a hearing applied alike to judicial tribunals and bodies of persons invested with authority to adjudicate upon matters involving civil consequences. It is one of the fundamental rules of our Constitutional set-up that every citizen is protected against exercise of arbitrary authority by the State or its officers". The Divisional Forest Officer in the present case set aside the proceeding of a subordinate authority and passed an order which involved the respondent in considerable loss. The order involved civil consequences. Without considering whether the order of the Divisional Forest Officer was vitiated because of irrelevant considerations, the order must be set aside on the simple ground that it was passed contrary to the basic rules of natural justice. 6. Counsel for the appellants contended that this objection was not raised before the High Court either in the Court of First Instance or before the Division Bench. But the objection was prominently mentioned in the petition and there is no reply to it. We are unable to hold that because the High Court has not considered the question, the respondent will not be allowed to rely upon this contention in support of the order. If the plea raised by the respondent in his petition is true, and we see no reason to hold that it is not, the order challenged by him is plainly illegal and is liable to be set aside." (iii) Mohinder Singh Gill & Anr. Vs. The Chief Election Commissioner, New Delhi & Ors., 1978 AIR(SC) 851, wherein Hon'ble Supreme Court observed as under: "8. The second equally relevant matter is that when a statutory functionary makes an order based on certain grounds, its validity must be judged by the reasons so mentioned and cannot be supplemented by fresh reasons in the shape of affidavit or otherwise. Otherwise, an order bad in the beginning may, by the time it comes to court on account of a challenge, get validated by additional grounds later brought out. We may here draw attention to the observations of Bose J. in Gordhandas Bhanji "Public orders, publicly made, in exercise of a statutory authority cannot be construed in the light of explanations subsequently given by the officer making the order of what he meant, or of what was in his mind, or what he intended to do. Public orders made by public authorities are meant to have public effect and are intended to effect the actings and conduct of those to whom they are addressed and must be construed objectively with reference to the language used in the order itself." Orders are not like old wine becoming better as they grow older." (iv) Km. Neelima Misra vs Dr. Harinder Kaur Paintal And Ors., 1990 AIR(SC) 1402, wherein Hon'ble Supreme Court observed as under: "22. An administrative order which involves civil consequences must be made consistently with the rule expressed in the Latin Maxim audi alteram partem. It means that the decision maker should afford to any party to a dispute an opportunity to present his case. A large number of authorities are on this point and we will not travel over the field of authorities. What is now not in dispute is that the person concerned must be informed of the case against him and the evidence support thereof and must be given a fair opportunity to meet the case before an adverse decision is taken. Ridge v. Baldwin, (supra) and State of Orissa v. Dr. Binapani Dei & Ors., 1967 2 SCR 625. 23. The shift now is to a broader notion of "fairness" or "fair procedure" in the administrative action. As far as the administrative officers are concerned, the duty is not so much to act judicially as to act fairly (See: Keshva Mills Co. Ltd. v: Union of India, 1973 3 SCR 22 at 30; Mohinder Singh Gill v. Chief Election Commissioner, 1978 1 SCC 405 at 434; Swadeshi Cotton Mills v. Union of India, 1981 1 SCC 664 and Management of M/s M.S. Nally Bharat Engineering Co. Ltd. v. The State of Bihar & Ors., Civil Appeal No. 1102 of 1990 decided on February 9, 1990. For this concept of fairness, adjudicative settings are not necessary, nor it is necessary to have lis inter partes. There need not be any struggle between two opposing parties giving rise to a 'lis'. There need not be resolution of lis inter partes. The duty to act judicially or to act fairly may arise in widely differing circumstances. It may arise expressly or impliedly depending upon the context and considerations. All these types of nonadjudicative administrative decision making are now covered under the general rubric of fairness in the administration. But then even such an administrative decision unless it affects one's personal rights or one's property rights, or the loss of or prejudicially affects something which would judicially be called at least a privilege does not involve the duty to act fairly consistently with the rules of natural justice. We cannot discover any principle contrary to this concept." (emphasis supplied) (v) S. N. Mukherjee vs Union of India, 1990 AIR(SC) 1984, wherein Hon'ble Supreme Court observed as under: "39. The object underlying the rules of natural justice "is to prevent miscarriage of justice" and secure "fairplay in action." As pointed out earlier the requirement about recording of reasons for its decision by an administrative authority exercising quasi-judicial functions achieves this object by excluding chances of arbitrariness and ensuring a degree of fairness in the process of decisionmaking. Keeping in view the expanding horizon of the principles of natural justice, we are of the opinion, that the requirement to record reason can be regarded as one of the principles of natural justice which govern exercise of power by administrative authorities. The rules of natural justice are not embodied rules. The extent of their application depends upon the particular statutory framework whereunder jurisdiction has been conferred on the administrative authority. With regard to the exercise of a particular power by an administrative authority including exercise of judicial or quasi- judicial functions the legislature, while conferring the said power, may feel that it would not be in the larger public interest that the reasons for the order passed by the administrative authority be recorded in the order and be communicated to the aggrieved party and it may dispense with such a requirement. It may do so by making an express provision to that affect as those contained in the Administrative Procedure Act, 1946 of U.S.A. and the Administrative Decisions (Judicial Review) Act, 1977 of Australia whereby the orders passed by certain specified authorities are excluded from the ambit of the enactment. Such an exclusion can also arise by necessary implication from the nature of the subject matter, the scheme and the provisions of the enactment. The public interest underlying such a provision would outweigh the salutary purpose served by the requirement to record the reasons. The said requirement cannot, therefore, be insisted upon in such a case." 3.3 He also relied upon the following decisions to buttress his argument. (i) This Court in the case of Swastik Agency and 2 ors. Vs. State Bank of India, Main Branch and 3 ors., 2009 2 OrissaLR 201, held as under: "38. When the statute provides for a particular procedure, the authority has to follow the same and cannot be permitted to act in contravention of the same. It has been hither to uncontroverted legal position that, where a statute requires to do a certain thing in a certain way, the thing must be done in that way or not at all. Other methods or mode of performance are impliedly and necessarily forbidden. The aforesaid settled legal proposition is based on a legal maxim 'Expressio unius est exclusio alterius', meaning thereby that if a statute provides for a thing to be done in a particular, then it has to be done in that manner and in no other manner and following other course is not permissible. (Vide Taylor v. Taylor,1876 1 ChD 426; Nazir Ahmed v. King Emperor; Deep Chand v. State of Rajasthan, 1962 1 SCR 662; Patna Improvement Trust v. Smt. Lakshmi Devi, 1963 AIR(SC) 1077; State of Uttar Pradesh v. Singhara Singh and Ors, 1964 4 SCR 485; Hukam Chand Shyam Lal v. Union of India and Ors, 1976 2 SCR 1060; Chettiam Veettil Ammad v. Taluk Land Board and Ors, 1979 3 SCR 839; State of Bihar v. J.A.C. Saldanna,1980 AIR(SC) 327; State of Mizoram v. Biakchhawna, 1995 1 SCC 156; J.N.Ganatra v. Morvi Municipality Morvi, 1996 AIR(SC) 2520; Haresh DayaramThakur v. State of Maharashtra and Ors, 2000 AIR(SC) 2281; Dhanajaya Reddy v. State of Karnataka etc. etc, 2001 4 SCC 9; Commissioner of Income Tax, Mumbai v. Anjum M.H. Ghaswala and Ors, 2001 252 ITR 1 (SC); Prabha Shankar Dubey v. State of Madhya Pradesh, 2004 AIR(SC) 486; Ram Phal Kundu v. Kamal Sharma, 2004 AIR(SC) 1657; Indian Banks Association v. Devkala Consultancy Service, 2004 AIR(SC) 2615; Parle Biscuits (P) Ltd. v. State of Bihar and Ors, 2005 192 ELT 23 (SC); Harinarayan G. Bajaj v. Rajesh Meghani and Anr, 2005 10 SCC; and Raja Ram Pal v. Hon ble Speaker, Lok Sabha and Ors, 2007 3 SCC 184." (ii) In the case of State of Orissa and others Vs. Harapriya Bisoi, 2009 12 SCC 378, Hon'ble Supreme Court held as under: "31. it is necessary to consider the effect of fraud. xxx xxx xxx xxx xxx xxx 32. "Fraud" and collusion vitiate even the most solemn proceedings in any civilized system of jurisprudence. It is a concept descriptive of human conduct. Michael Levi likens a fraudster to Milton's sorcerer, Comus, who exulted in his ability to, 'wing me into the easy hearted man and trap him into snares'. It has been defined as an act of trickery or deceit. In Webster's Third New International Dictionary "fraud" in equity has been defined as an act or omission to act or concealment by which one person obtains an advantage against conscience over another or which equity or public policy forbids as being prejudicial to another. In Black's Legal Dictionary, "fraud" is defined as an intentional perversion of truth for the purpose of inducing another in reliance upon it to part with some valuable thing belonging to him or surrender a legal right; a false representation of a matter of fact whether by words or by conduct, by false or misleading allegations, or by concealment of that which should have been disclosed, which deceives and is intended to deceive another so that he shall act upon it to his legal injury. In Concise Oxford Dictionary, it has been defined as criminal deception, use of false representation to gain unjust advantage; dishonest artifice or trick. According to Halsbury's Laws of England, a representation is deemed to have been false, and therefore a misrepresentation, if it was at the material date false in substance and in fact. Section 17 of the Indian Contract Act, 1872 defines "fraud" as act committed by a party to a contract with intent to deceive another. From dictionary meaning or even otherwise fraud arises out of deliberate active role of representator about a fact, which he knows to be untrue yet he succeeds in misleading the representee by making him believe it to be true. The representation to become fraudulent must be of fact with knowledge that it was false. In a leading English case i.e. Derry and Ors. v. Peek, 1886-90 AllER 1 what constitutes "fraud" was described thus: (All ER p. 22 B-C) "fraud" is proved when it is shown that a false representation has been made (i) knowingly, or (ii) without belief in its truth, or (iii) recklessly, careless whether it be true or false". But "fraud" in public law is not the same as "fraud" in private law. Nor can the ingredients, which establish "fraud" in commercial transaction, be of assistance in determining fraud in Administrative Law. It has been aptly observed by Lord Bridge in Khawaja v. Secretary of State for Home Deptt, 1983 1 AllER 765, that it is dangerous to introduce maxims of common law as to effect of fraud while determining fraud in relation of statutory law. "Fraud" in relation to statute must be a colourable transaction to evade the provisions of a statute. "If a statute has been passed for some one particular purpose, a court of law will not countenance any attempt which may be made to extend the operation of the Act to something else which is quite foreign to its object and beyond its scope. Present day concept of fraud on statute has veered round abuse of power or mala fide exercise of power. It may arise due to overstepping the limits of power or defeating the provision of statute by adopting subterfuge or the power may be exercised for extraneous or irrelevant considerations. The colour of fraud in public law or administration law, as it is developing, is assuming different shades. It arises from a deception committed by disclosure of incorrect facts knowingly and deliberately to invoke exercise of power and procure an order from an authority or tribunal. It must result in exercise of jurisdiction which otherwise would not have been exercised. The misrepresentation must be in relation to the conditions provided in a section on existence or non-existence of which the power can be exercised. But non-disclosure of a fact not required by a statute to be disclosed may not amount to fraud. Even in commercial transactions non-disclosure of every fact does not vitiate the agreement. "In a contract every person must look for himself and ensures that he acquires the information necessary to avoid bad bargain. In public law the duty is not to deceive. (See Shrisht Dhawan (Smt.) v. M/s. Shaw Brothers, 1992 1 SCC 534). 33. In that case it was observed as follows: "Fraud and collusion vitiate even the most solemn proceedings in any civilized system of jurisprudence. It is a concept descriptive of human conduct. Michael levi likens a fraudster to Milton's sorcerer, Comus, who exulted in his ability to, 'wing me into the easy-hearted man and trap him into snares'". It has been defined as an act of trickery or deceit. In Webster's Third New International Dictionary fraud in equity has been defined as an act or omission to act or concealment by which one person obtains an advantage against conscience over another or which equity or public policy forbids as being prejudicial to another. In Black's Legal Dictionary, fraud is defined as an intentional perversion of truth for the purpose of inducing another in reliance upon it to part with some valuable thing belonging to him or surrender a legal right; a false representation of a matter of fact whether by words or by conduct, by false or misleading allegations, or by concealment of that which should have been disclosed, which deceives and is intended to deceive another so that he shall act upon it to his legal injury. In Concise Oxford Dictionary, it has been defined as criminal deception, use of false representation to gain unjust advantage; dishonest artifice or trick. According to Halsbury's Laws of England, a representation is deemed to have been false, and therefore a misrepresentation, if it was at the material date false in substance and in fact. Section 17 of the Contract Act defines fraud as act committed by a party to a contract with intent to deceive another. From dictionary meaning or even otherwise fraud arises out of deliberate active role of representator about a fact which he knows to be untrue yet he succeeds in misleading the representee by making him believe it to be true. The representation to become fraudulent must be of the fact with knowledge that it was false. In a leading English case Derry v. Peek,1889 14 AC 337 : 1886-90 ALLER Rep 1 (HL)] what constitutes fraud was described thus : (All Er p. 22 B-C) 'Fraud is proved when it is shown that a false representation has been made (i) knowingly, or (ii) without belief in its truth, or (iii) recklessly, careless whether it be true or false'." (iii) In the case of Nakula Charan Gochhayat and others v- Secretary, Jagaysighpur Sub-divisional House Building Co-operative Society Ltd. and others, 2011 2 ILR(Cut) 767, this Court held as follows; "45. Law is well settled that when the statute provides for a particular procedure, the authority has to follow the same and is not permitted to act in contravention of the prescribed provisions. It has been hitherto uncontroverted legal position that where a statute requires to do a certain thing in a certain way, the thing must be done in that way or not at all. Other methods or mode of performance are impliedly and necessarily forbidden. The aforesaid settled legal proposition is based on a legal maxim "Expressio unius est exclusion alteris", meaning thereby that if a statute provides for a thing to be done in a particular manner, then it has to be done in that manner and in no other manner and following other course is not permissible. (See Taylor v. Taylor,1876 1 ChD 426; Nazir Ahmed v. King Emperor, 1936 AIR(PC) 253; Ram Phal Kundu v. Kamal Sharma; and Indian Banks Association v. Devkala Consultancy Service, 2004 AIR(SC) 2615. xxxx xxxx xxxx xxxx xxxx xxxx 52. Law is well settled that every action of the State and its instrumentality should be fair, legitimate and above board and without any affection or aversion. (See Haji T.M. Hassan Rawther Vs. Kerala Finance Corporation, 1988 AIR(SC) 157; E.P. Royappa Vs. State of Tamil Nadu, 1974 AIR(SC) 555 and State of Andhra Pradesh & Anr., Vs. Nalla Raja Reddy, 1967 AIR(SC) 1458 3.4 He therefore prayed for the aforesaid relief.;


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