LOON KARAN SETHIA ETC. versus IVAN E. JOHN & ORS. ETC.

Citation: [1977] 1 S.C.R. 853 · Decided: 20-10-1976 · Supreme Court of India · Bench: A.N. RAY · Disposal: Disposed off

Cited by 3 judgment(s) · see the full citation network in Lexace

Judgment (excerpt)

853 
LOON KARAN SETHIA ETC. 
v. 
IV AN E. JOHN & ORS. ETC. 
October 20. 1976 
[A. N. RAY, C.J., M. H. BEG AND JASWANT SINGH, JJ.] 
Indian Partnership Act 1932-Sec. 69-Whetlzer mandatory--Whether s11it 
.can be filed by unregistered firm-Dissolution of firm-Suit by a partner of erst_ 
while unref?istered firm-If other partners of erstwhile firm necessary parties-
Material alterations inf a document-Effect of-Suit for specific and ascertained 
amo11nt-Whether court can make out new case and grant partial relief on an-
.other basis, 
Messl!S, John & Co. were in financial difficulties and, therefore, entered into a 
financial agreement with Sethia & Co. a partnership firm of the plaintiff and Seth 
Sugan Chand. On 6th July, 1948 Messrs. John & Co. obtained another financial 
accommodition from Sethia & Co. 
Messrs. Tejkaran Sidhkaran had also given 
some advances to Messrs, John & Co. The liability to the firm of Messrs. Tej-
.karan Sidhkaran was transferred to Sethia & Co. 
Seth Loonkaran Sethia filed a suit against John & Co. and his partners (de-
fendants first set) as well as Messrs. John, Jain, Mehra & Co. and its partners 
(Clefendants second set) for recovery of Rs. 21,11,500/- with costs and future in-
·terest and for a declaration that the plaintiff had a prior and floating charge on 
all the business assets of Messrs. 
John & Co. It was alleged by the plaintiff 
that the defendants (second set) entered into partnership with the defendants (first 
set) under the nameJ and style of Messrs. John Jain, Mehra & Co and maliciously 
induced them to commit breach of the agreement dated 6-7-1948 by forcibly 
turning out his representatives whd used to remain in charge of the stocks, stores. 
coal, waste, etc., of the mills and making them enter into a financial agreement 
contrary to the terms of the agreement with his firm. 
The plaintiff also alleged 
that accounts were again settled on 4-4-1949 and a sum of Rs. 47,23,738/- was 
found due to him from the defendants. 
The defendants 
(first set) contended that there was no 
settlement of ac-
counts; that the accounts were tainted with fraud and obvious mistakes and that 
on a true and correct accounting a large sum of money would be found due to 
them; that the plaintiff and said Sugan: Chand obtained various documents, agree-
ments, vouchers, receipts etc., and that the same were of no legal value as they 
were secured by the former by practising undue influence, fraud, coercion and 
misrepresentation; that the plaintiff had illegally and contrary to the agreement 
dated 6-7-1948 debited them with huge amounts which were not really due to 
them; that the cotton supplied by the plaintiff was of inferior aualitv and that the 
·rates charged were exorbitant. It was also denied that the plaintiff had floating 
or prior charge on any of their stocks, stores, etc; that the suit was barred by the 
provisions of sectio~ 69 of the Partnership Act and that the agreement dated 6-7-
1948 which was insufficiently stamped could not form the basis of the suit. The 
defendants (second set) also denied the claim of the plaintiff. 
The Trial Court held that the suit was maintainable; that the firm of Messrs. 
'Sethia & Co. was dissolved before the institution of the suit; that the suit bcinl( 
one for the recovery of the assets due to a dissolved partnership firm from a third 
party, was not barred 'wy section 69 of the Partnershi~ Act: that Seth Sugan Chand 
was not a necessary party to the suit; that the agreement dated 6-7-1948 was duly 
stamped and that no undue influence etc., was exercised bv the plaintiff on the 
defendants; that there was no accounting on 4-4-1949 as alleged bv the plaintiff 
and that both the plaintiff and the defendants (first set) committed a breach of 
the agreement dated 6-7-1948. 
The Trial Court also held that a charge was 
created in favour of the plaintiff in respect of the entire business assets and that 
·the defendants (second set) wer() liable to satisfy the plaintiff's claim. The Tri~! 
Court decreed the plaintiff's suit to the extent of Rs. 18.00, 152 but re.1ected his 
claim for specific performance .and injunction. The Trial c;our~ accordingly nasse? 
·a preliminary decree against both the sets of defendants directmg them to deposit 
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854 
SUPREME COURT REPORTS 
( 1977] 1 S.C. R. 
the said amount in the court within the prescrib d f 
d · 
plaintiff a right to apply for a final decree for thee sX~eol~n

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