JASWANT SINGH, J. - (1.) THESE two appeals by certificates granted under Article 133 of the Constitution which are directed against the common judgment and decree dated 22/12/1972 of the High Court at Allahabad in two connected Civil First Appeals Nos. 465 of 1954 and 65 of 1955 preferred against the judgment and preliminary decree of the Second Additional Civil and Sessions Judge, Agra, dated 5/04/1954, in suit No. 76 of 1949 shall be disposed of by this judgment.
(2.) THE facts material for the purpose of these appeals are : THE appellant in Appeal No. 416 of 1973 and respondent No. 1 in Appeal No. 572 of 1974, Seth Loonkaran Sethiya, (hereinafter referred to for convenience as 'the plaintiff') is a financier living and carrying on business in Agra, respondents Nos. 1 to 3 in the first appeal and appellants Nos. 1 to 3 in the second appeal viz. Ivan E. John, Maurice L. John and Doris Marzano, grandsons and grand-daughter of one A. John, are partners of the registered firm called 'John & Co'., THEre are three spinning mills and one flour mill at Jeoni Mandi, Agra, which are compendiously described as 'John Mills'. Originally, the members of the John family were the exclusive owners of all these mills which have been in existence since the beginning of the current century. In course of time, some strangers acquired interest therein and by the time the present lis commenced, the following became the joint owners thereof to the extent noted against their names :- JUDGEMENT_379_1_1977Html1.htm Having run into financial difficulties, M/s. John & Co. were driven to tap various sources for raising loans for their business and other requirements. By virtue of the dead of agreement (Exh. 1321) dated 14/06/1947, they entered into a financial agreement with Sethiya & Co., a partnership firm of the plaintiff and Seth Suganchand. Under this agreement which was originally meant to last for five months but which was allowed to remain in force even after the expiry of that period. Sethiya & Co. undertook to advance to M/s. John & Co. funds to the extent of Rs. 8,00,000.00 on the security of yarn and to act as sole selling agents of the latter. On 29/01/1948, the Collector, Agra, attached moveable and immoveable properties of the mills pursuant to a certificate issued for relization of income tax dues for the years 1943 to 1945 outstanding against M/s. John & Co. which exceeded Rs. 20 lakhs. On 5/02/1948, the Collector, Agra, appointed Ivan E. John, Maurice L. John and Doris Marzano as custodians for running the mills. On 9/02/1948, the aforesaid agreement (Exh. 1321) dated 14/06/1947, with Sethiya & Co. which continued to remain in operation beyond its original term was renewed upto the end of April, 1948, by agreement (Exh. 1320). This agreement gave an option to the partners of Sethiya & Co. to allow it to continue in force until their dues were paid in full by M/s. John & Co. These financial agreements with Sethiya & Co. did not prove adequate to meet the monetary requirements of M/s. John & Co. Accordingly on the same day i. e. on 9/02/1948, they entered into another agreement (Exh. 1319) with the proprietary concern of the plaintiff carrying on business under the name and style of 'M/s. Tejkaran Sidkaran' whereby the latter agreed to advance certain amounts to them against 'mortgage' of cotton, its products and by-products which might be in their stock from time to time during the continuance of the agreement. By this agreement, M/s. John & Co. also undertook to pay to M/s. Tejkaran Sidkaran a sum of Rupees 2, 09,245-9-10 which on going into the accounts, was found to be due to the latter in respect of the supply of cotton. Nearly five months thereafter i. e. on 6/07/1948, the aforesaid partners of M/s. John & Co. succeeded in obtaining another financial accommodation from Sethiya & Co. (vide agreement Exhibit 168 : Exhibit A-1). By this deed, the financiers agreed, for the efficient working of the mills, to advance loan, as and when required, upto the limit of Rs. 25 1/2 lakhs to the partners of M/s. John & Co. on condition that they i. e. the financiers would have a floating and prior charge for all monies due to them for the time being including the amount due to them on the date of the agreement and all monies which they might choose to advance under the agreement, on all business assets including stores, coal, oil process etc. of the aforesaid three spinning mills. Describing himself as the sole proprietor of the firm 'Sethiya & Co.' and 'M/s. Tejkaran Sidkaran', Seth Loonkaran Sethiya filed in the court of the Civil Judge, Agra on 18/04/1949 an original suit, being suit No. 76 of 1949 against M/s. John. & Co. and its aforesaid partners (hereinafter referred to as 'the defendants first set') as also against Munnilal Mehra, Hiralal Patni and Gambhirmal Pandya and M/s. John. Jain Mehra & Co. (hereinafter referred to as 'the defendants second set') for recovery of Rs. 21,11,500.00 with costs and pendente lite and future interest by sale of the assets of M/s. John & Co. and for permanent injunction restraining the defendants first set from committing any breach of the aforesaid agreement dated 6/07/1948 as also for declaration that he had a prior and floating charge on all the business assets of M/s. John. & Co. The suit was later on amended by the plaintiff with the permission of the trial Court. By his amended petition of plaint, the plaintiff sought a decree against the defendants first set as also against the defendants second set.
(3.) THE case of the plaintiff was that Ivan E. John, Maurice L. John and Doris Marzano who were part owners of the aforesaid three spinning mills and a flour mill as also certain other properties and had been carrying on their business and running the mills under the name and style of John & Co. being heavily indebted and in urgent need of money to pay arrears of income tax as well as other dues and to carry on day to day business of the mills approached him time and again for finances, loans etc. for the aforesaid purposes, that he lent considerable sums of money under various agreements executed by the defendants first set in his favour and in favour of the firm 'M/s. Tejkaran Sidkaran' of which he was the sole owner and in that of Sethiya & Co.; that on or about 6-7-1948 all accounts between his firm 'Sethiya & Co.' and defendants first set were gone into after a full scrutiny thereof, a settled amount of Rs. 12,72,000.00 was found to be due to Sethiya & Co. from the defendants first set upto 30-6-1948; that this amount was admitted and accepted by the defendants first set and was as such debited to their account and was also acknowledged by them in the subsequent agreement entered into by them with him; that after the aforesaid settlement, the defendants first set solicited further financial help from him to run the mills and to meet their pressing liabilities which was acceded to by him on the terms and conditions set out in the agreement dated 6/07/1948 (Exh. 168); that by this agreement, he agreed inter alia to advance requisite funds to the defendants first set for carrying on the business of the mills and payment of the claims of Raja Ram Shawani Das and to meet other liabilities) up to the limit of Rs. 20 lakhs inclusive of the aforesaid amount admittedly found due to him from the defendants first set on the date of the agreement and to make a further advance of a sum of Rupees 5,50,000/- on the security of business assets and stocks other than bales of yarn and cotton; that it was also stipulated that he would have a floating and prior charge for the entire amount due to him on the date of the agreement on all the business assets including stores, coal, oil process etc. of all the three spinning mills of the defendants first set and that he would be paid interest at the rate 6 per cent per annum from the date of incurring liability in respect of each individual item besides commission at the rate of 1 per cent on all sales of products of the three spinning mills whether sold directly of otherwise during the currency of the agreement and a further commission at the rate of 12 per cent. on value of all the purchases of cotton required for consumption of the three spinning mills and godown rent as might be agreed. THE plaintiff further averred that it was specifically agreed between him and the defendants first set that the agreement would be in operation for the minimum period of one year and would also continue to be in force thereafter until the entire amount due to him from the defendants first set was fully paid up. THE plaintiff further averred that the accounts of business done by him under the name of M/s. Tejkaran Sidkaran with the defendants first set were gone into and finally the defendants first set admitted that a sum of Rs. 17,79,100.00 was due from them to his firm 'M/s. Tejkaran Sidkaran' and that under their written authority, he transferred the above liability to his firm 'Sethiya & Co.' and thus all accounts of the defendants first set with him were amalgamated in one account i. e. of Sethiya & Co. and the account of his firm 'M/s. Tejkaran Sidkaran' with the defendants first set was squared up and closed. THE plaintiff further averred that the defendants second set including Hiralal Patni, the ex-financier of the John Mills who had not despite best efforts succeeded in securing possession of the mills as co-proprietor thereof entered into partnership with the defendants first set under the name and style of M/s. John Jain Mehra & Co. and maliciously induced them to commit breaches of the agreement dated 6/07/1948 by forcibly turning out his representatives who used to remain incharge of the stocks, stores, coal, waste etc. of the mills and making them enter into a finance agreement contrary to the terms of the agreement with his firm. THE plaintiff also alleged that the defendants first set had at the instigation of the defendants second set unjustifiably closed the business of John & Co. and were colluding with the latter who were guilty of misappropriation and conversion of the goods over which he had a prior and floating charge. THE plaintiff also averred that on 4/04/1949, accounts were again gone into between him and the defendants first set and a sum of Rs. 47,23,738/4/9 were found due to him from them; that agreement dated 6/07/1948 between him and the defendants first set still subsisted and would continue to subsisted till 6/07/1949 and thereafter at his option till all his dues were paid up; and that a sum of Rupees 21,11,500/- was due to him from the defendants first set as per Sch. A of the plaint which both sets of the defendants were liable to pay. The statement of account as contained in Schedule A annexed to the plaint was as follows; Rs.a.p. "1.Settled balance on 4/04/1949 according to accounts books of the defendants. (The accounts upto 4/04/1949 were fully gone through and settled by both the parties and confirmed by the defendants by making necessary entries in their books...45,74,980101 2.Plaintiff's charges of commission, interest, godown, rent etc., according to the terms of the agreement and duly checked by the defendant's accountant and chief Account Officer as detailed below :- From 13th October to 31st October, 1948... 14,516136 From 1st November to 12/12/1948... 33,783 43 From 13th December to 12/01/1949... 34,100 33 From 13th January to 12/02/1949... 38,716123 From 13th February to 12/03/1949.... 27,832 92 Total... 1,48,749108 9/04/1949 paid to Mahalaxmi Oil Mills through Kirpa Narayan, Advocate and others... 8,708 50 10/04/1949 paid to Bishambar Nath & Co. (for Cotton supplied to John & Co.)... 1,57,005 30 Charges from 13th March to 12/04/1949... 62,804123 Total...49,52,248 90 9/04/1949 : Proceeds by sale of 5731 bales of yarn sold by defendants as per their authorities...28,40,748 90 Balance...21,11,500 00 Twenty one lacs, eleven thousand five hundred only. ;