- 1 - NC: 2025:KHC-D:430 RFA No. 100026 of 2020 IN THE HIGH COURT OF KARNATAKA, DHARWAD BENCH DATED THIS THE 10TH DAY OF JANUARY, 2025 BEFORE THE HON'BLE MR. JUSTICE HANCHATE SANJEEVKUMAR REGULAR FIRST APPEAL NO.100026 OF 2020 (MON) BETWEEN: SRI C. SATTI BABU S/O. BULLI VENKANNA, AGE: 42 YEARS, OCC: AGRICULTURE AND BUSINESS, R/O: H.NO. 479, MIG-I, WARD NO.30, 3RD CROSS, KUMAR HOTEL UPSTAIR, KUVEMPU NAGAR, CANTONMENT, BALLARI-583 101. TQ. AND DIST. BALLARI. …APPELLANT (BY SRI H.R. DESHPANDE, ADVOCATE) AND: SRI C. SRINIVAS S/O. VEERAGHAVALU, AGE: 45 YEARS, OCC: BUSINESS, R/O: D.NO.145B, 2ND CROSS, 5TH LINK, WARD NO.30, KUVEMPU NAGAR, CANTONMENT, BALLARI-583 101. TQ. AND DIST: BALLARI. …RESPONDENT (BY SRI SHIVARAJ P.MUDHOL, ADVOCATE) THIS REGULAR FIRST APPEAL IS FILED UNDER SECTION 96 OF CPC., AGAINST THE JUDGMENT AND DECREE DATED 15.10.2019 PASSED BY THE I ADDITIONAL SENIOR CIVIL JUDGE, BALLARI IN O.S.NO.193/2017, IN SO FAR THE FINDINGS ON ISSUE NO’S 2 TO 5 AND ETC., THIS REGULAR FIRST APPEAL, COMING ON FOR FINAL HEARING, THIS DAY, THE COURT DELIVERED THE FOLLOWING: Digitally signed by MALLIKARJUN RUDRAYYA KALMATH Location: HIGH COURT OF KARNATAKA - 2 - NC: 2025:KHC-D:430 RFA No. 100026 of 2020 ORALJUDGMENT (PER: THE HON'BLE MR. JUSTICE HANCHATE SANJEEVKUMAR) This Regular First Appeal is filed by the plaintiff challenging the judgment and decree dated 15.10.2019 passed in O.S.No.193/2017 on the file of I Additional Senior Civil Judge, Ballari, thereby, the suit filed by the plaintiff for recovery of money is dismissed. 2. For the sake of convenience and easy reference, the parties are referred to as per their rankings before the Trial Court. 3. It is the case of the plaintiff that, as per the plaint averments, the plaintiff and defendant are friends and residing at Kuvempu Nagar, Contonment, Bellari. The defendant has requested the plaintiff to become a partner of the firm during the year 2013, and the plaintiff agreed and invested a sum of Rs.15 lakhs as his share and sum of Rs.35 lakhs as the share of defendant. Thus, the plaintiff made a capital investment of Rs.15 lakhs as his share on 25.08.2015 to the defendant by way of cash. - 3 - NC: 2025:KHC-D:430 RFA No. 100026 of 2020 4. Further, it is pleaded that from the date of payment of the said sum of Rs.15 lakhs, the plaintiff was insisting that the defendant to register the partnership firm in the office of the Sub Registrar of Firms, Bellari, but the defendant has not got registered the firm. Thereafter, the plaintiff was not willing to continue as a partner with the defendant in the unregistered partnership firm and being unsatisfied with the manner in which the firm’s business was conducted therefore, the plaintiff requested the defendant to return the amount of Rs.15 lakhs. In turn, the defendant has paid a sum of Rs.13 lakhs by way of cheque on 10.03.2017 out of Rs.15 lakhs drawn on Axis Bank, Bellari. 5. It is pleaded that the plaintiff has presented the said cheque before the IDBI Bank, Ballari and it was returned with an endorsement stating that “signature of the drawer differs” and thus, the cheque was dishonoured. The plaintiff issued a legal notice to the defendant on 08.08.2007, calling upon the defendant to pay sum of Rs.13 lakhs, to which the defendant has issued vague reply notice denying the - 4 - NC: 2025:KHC-D:430 RFA No. 100026 of 2020 averments in the notice. Therefore, the plaintiff was constrained to file the suit for recovery of money. 6. The defendant has appeared through his counsel and filed written statement denying all the plaint averments. The defendant denied that the plaintiff is a partner of the firm and that the plaintiff has invested a sum of Rs.15 lakhs in the firm by giving said amount to the defendant. Furthermore, the defendant denied that he has issued cheque to the plaintiff; thus, totally the defendant denied all the plaint averments. 7. The defendant besides denying the plaint averments has pleaded some of the facts in the written statement. It is stated that the plaintiff, defendant and one Smt. K. Varalakshmi entered into a partnership deed on 08.04.2014. The plaintiff approached the defendant and requested to do business and accordingly, the defendant accepted the proposal of the plaintiff. Both of them started business in the name and style of S.V.S. Enterprises and opened a bank account in the Axis Bank, Ballari which also had cheque facilities. After some time, the said Smt. K. - 5 - NC: 2025:KHC-D:430 RFA No. 100026 of 2020 Varalakshmi retired from the firm on 25.08.2015. It is pleaded that the plaintiff has not paid the amount, and the defendant has alone invested the amount. 8. It is stated that the said firm was in loss since the beginning of the year 2017 and therefore, no work was undertaken by both the plaintiff and defendant from that year as their relationship had become strained. Further it is pleaded that the plaintiff was looking after the office work and the cheque books were under custody of the plaintiff in this way, the same is misused behind back of the defendant without knowledge of the defendant, the plaintiff has taken away five cheque leaves and letter pads with a malafide intention to harass the defendant, causing him mental and physical pressure. 9. It is further pleaded that after receiving message from the bank authorities, the defendant lodged complaint before the Police against the plaintiff, claiming that the plaintiff had stolen the cheque leaves. Therefore, pleaded that the defendant has not issued cheque to the plaintiff and prays to dismiss the suit. - 6 - NC: 2025:KHC-D:430 RFA No. 100026 of 2020 10. Based on the pleadings of the parties, the Trial Court has framed the following issues: 1. Whether the plaintiff proves that he became a partner of the firm in the year 2013 and invested a sum of Rs.15 lakhs of his share on 25.08.2015? 2. Whether the plaintiff proves that defendant has issued cheque of Rs.13 lakhs out of Rs.15 lakhs on 10.03.2017? 3. Whether the plaintiff proves that cheque issued by the defendant is dishonor? 4. Whether the plaintiff is entitle Rs.14,50,734/- with interest at the rate of 24% p.a.? 5. What order or decree? 11. In order to prove the case, the plaintiff has examined himself as PW-1 and got marked documentary evidence as Ex.P-1 to Ex.P-5 and the defendant has examined as DW-1 and got marked documentary evidence as Ex.D-1 to Ex.D-10. - 7 - NC: 2025:KHC-D:430 RFA No. 100026 of 2020 12. That the Trial Court upon appreciating the evidence on record, has dismissed the suit on the reason that when it is the case of the plaintiff that he has contributed Rs.15 lakhs, then why he has received only Rs.13 lakhs is not explained either in pleading nor in the evidence. Therefore, question of issuance of cheque as a part of payment does not arise. Hence, the plaintiff has failed to prove that the defendant has issued cheque for part payment and it was dishonoured. On this reason, the Trial Court has dismissed the suit. 13. Upon considering Issue No.1, the Trial Court held that the plaintiff proved that he became partner of the firm in the year 2013 and invested a sum of Rs.15 lakhs as his share on 25.08.2015 and held Issue No.1 in the ‘affirmative’. The Trial Court has answered Issue Nos.2 to 4 in the ‘negative’ holding that the plaintiff has failed to prove that the defendant has issued Axis Bank cheque of Rs.13 lakhs out of Rs.15 lakhs on 10.03.2013 and the said cheque was dishonoured on 13.03.2017. Hence, the Trial Court has - 8 - NC: 2025:KHC-D:430 RFA No. 100026 of 2020 dismissed the suit as the plaintiff is not entitled to the amount as claimed. 14. The plaintiff has preferred the appeal on raising various grounds that the Trial Court has answered Issue No.1 in the ‘affirmative’ holding that the plaintiff has proved that he has invested a sum of Rs.15 lakhs with the defendant for registration of partnership firm and doing business. But the defendant has not got registered their firm and business went under loss. Hence, the plaintiff has requested the defendant for refund of amount of Rs.15 lakhs paid by him to the defendant, for which, the defendant has issued a cheque for a sum of Rs.13 lakhs out of Rs.15 lakhs and it was dishonoured on the ground that “signature of the drawer differs”. The findings on Issue No.1 and Issue Nos.2 to 4 are contrary to each other. When Issue No.1 is answered in favour of the plaintiff, then the Issue Nos.2 to 4 also ought to have been answered in the affirmative in favour of the plaintiff. Therefore, the judgment and decree passed by the Trial Court is perverse and contrary to the evidence on - 9 - NC: 2025:KHC-D:430 RFA No. 100026 of 2020 record. Hence, prays this Court to allow the appeal and decree the suit as prayed for. 15. Learned counsel for the appellant submitted that the defendant has agreed for opening of firm by name and style of ‘S.V.S Enterprises’ initially with three partners i.e., the plaintiff, defendant and one Smt.K.Varalakshmi. Later on, the said Smt.K.Varalakshmi retired from the firm and therefore, the plaintiff and defendant have continued in the said partnership firm. When this being the admitted fact that as per clauses in the Partnership Deed-Ex.D1, the share of defendant is 70% and the share of plaintiff is 30% and also the defendant in his reply to the legal notice has admitted that the plaintiff has invested a sum of Rs.15 lakhs. If it is the case of defendant that the plaintiff has not invested amount, then there could not have been creating partnership firm by the ratio of profit and loss at 70%:30% between the defendant and plaintiff respectively. 16. Further, learned counsel for the appellant submitted that when the Trial Court has answered Issue No.1 in the ‘affirmative’ holding that the plaintiff has proved - 10 - NC: 2025:KHC-D:430 RFA No. 100026 of 2020 that he is the partner of firm and invested a sum of Rs.15 lakhs as his share, but the findings given in Issue Nos.2 to 4 are contrary to the findings of Issue No.1. Furthermore, the Trial Court assigned the same reasons that why the plaintiff has accepted Rs.13 lakhs instead of Rs.15 lakhs, is nothing but perverse approach of the Trial Court. Therefore, prays this Court to allow the appeal and decree the suit as prayed for. 17. On other hand, learned counsel for respondent/defendant submitted that the defendant has not issued cheque in favour of the plaintiff and has denied all averments of the plaintiff. Further, in reply to the legal notice got issued by the plaintiff, the defendant has denied issuance of cheque to the plaintiff. Further submitted that the plaintiff has stolen cheques and one of the cheque was misused by wrongly overwritten on it and submitted to the Court, thereby got dishonoured, just to harass the defendant. In this regard, the defendant has made complaint before the Superintendent of Police and Station House officer Cowl Bazaar Police Station. Therefore, it is the defence of - 11 - NC: 2025:KHC-D:430 RFA No. 100026 of 2020 defendant that the defendant has never issued cheque in favour of the plaintiff. Hence, the Trial Court has rightly considered the case on merits and dismissed the suit, which is not required to be interfered with by this Court. Hence, prays this Court to dismiss the appeal. 18. Upon hearing arguments on both sides and perused materials available on record, the points that would arise for consideration of the present appeal are as under: i) “Whether, under the facts and circumstances involved in the case, the plaintiff proves that a firm by name ‘S.V.S Enterprises’ was established in the year 2013 and invested a sum of Rs.15 lakhs of his share as 30% towards the business? ii) Whether, under the facts and circumstances of the case, the plaintiff proved that the defendant has issued a cheque of Rs.13 lakhs to the plaintiff and said issued cheque was dishonoured, thus the plaintiff entitled to amount as prayed in the plaint? iii)Whether the judgment and decree passed by the Trial Court requires interference with by this Court?” - 12 - NC: 2025:KHC-D:430 RFA No. 100026 of 2020 19. Upon considering pleadings and evidence of both parties, the admitted facts revealed that the plaintiff, defendant and Smt.K.Varalakshmi have opened the partnership firm by name and style of ‘S.V.S Enterprises’ by executing a partnership firm. Further, admitted that the said Smt.K.Varalakshmi has retired from the said partnership firm and the plaintiff and defendant have continued the said partnership firm. Ex.D1 is the Partnership Deed, which is unregistered partnership deed. The defendant has admitted in the evidence that his share in the partnership firm is 70% and the plaintiff share is 30% both are towards profit and loss of the partnership firm. 20. The defendant in his written statement has admitted that he has opened bank accounts in Axis Bank, Ballari in respect of the partnership firm under the name and style of ‘S.V.S Enterprises’ and also the firm is having cheque facilities. It is the case of the defendant that the said firm is under loss from the year 2017 and therefore both the plaintiff and defendant have not undertaken any work from January-2017 through the said firm. Therefore, from the - 13 - NC: 2025:KHC-D:430 RFA No. 100026 of 2020 above said pleadings, it is proved that both the plaintiff and defendant have established the partnership firm as per Ex.D1. But, it is the case of the plaintiff that the defendant has not got registered the said partnership firm in respect of repeated request made by the plaintiff. Thus, the plaintiff has intended to retire from the partnership firm and accordingly has requested the defendant to refund of his investment amount of Rs.15 lakhs. 21. The defendant in the cross examination has admitted that both the plaintiff and defendant have started partnership firm and opened a bank account in Axis Bank, Ballari. Ex.D1 is the Partnership Deed, which is not a registered one. Though the defendant has given reply regarding registration of the partnership firm, but Ex.D1 proved the fact that the said partnership firm is not registered. Therefore from pleadings and evidence on record, it is proved that initially the share of profit and loss of the firm and partners are; 40% to the defendant, 30% to Smt.K.Varalakshmi and 30% to the plaintiff. After retirement of Smt.K.Varalakshmi from the partnership firm, the - 14 - NC: 2025:KHC-D:430 RFA No. 100026 of 2020 defendant has taken share of Smt.K.Varalakshmi. Thus, the apportionment of profit and loss of the firm, defendant and plaintiff shares are 70%:30% respectively as it is stated in the written statement. 22. If it is the case of the defendant that the plaintiff has not invested the amount of Rs.15 lakhs, then there could not have been occasion for establishing of partnership firm by mentioning ratios of profit and loss in the Partnership Deed. The Partnership Deed is produced by the defendant himself in the suit. As per Ex.D1-Partnership Deed, the contribution of the plaintiff is 30%. It is the case of the plaintiff that since the defendant has not got registered partnership firm, therefore the plaintiff has intended to retire from the partnership firm and requested the defendant to refund of his investment amount of Rs.15 lakhs. 23. It is the case of the plaintiff that he has requested the defendant to return the amount of Rs.15 lakhs, for which the defendant has given a cheque of Rs.13 lakhs as per Ex.P1 to the plaintiff. The said cheque was dishonoured and returned with an endorsement stating that “signature of the - 15 - NC: 2025:KHC-D:430 RFA No. 100026 of 2020 drawer differs”. Ex.P2 is the legal notice issued to the defendant and defendant has received the said notice and replied to the notice as per Ex.P5. In Ex.P5 the defendant has stated that the plaintiff and defendant have agreed to become partners in the partnership firm and the plaintiff has invested a sum of Rs.15 lakhs as his share and the defendant has invested Rs.35 lakhs as his share. It is worthwhile to extract the said contention made by the defendant in the reply notice is as follows: “……….In this connection to your client as agreed to become a partner and further my client and your client have invested sum of rupees 15 lakhs as the share of your client and sum of rupees 35 lakhs as my client share towards opening of partnership firm.” 24. Therefore, as per the above reply given by the defendant to the notice issued by the plaintiff, the defendant has admitted that the plaintiff has invested a sum of Rs.15 lakhs and the defendant has invested a sum of Rs.35 lakhs in the partnership firm. As above discussed, the defendant has admitted that both the plaintiff and defendant have established firm under the name and style of ‘S.V.S - 16 - NC: 2025:KHC-D:430 RFA No. 100026 of 2020 Enterprises’ and also execution of Partnership Deed which shall prove the fact that the plaintiff has made an investment of Rs.15 lakhs in the partnership firm. 25. In the said reply of Ex.P5, the defendant has admitted regarding establishment of partnership firm between the plaintiff, defendant and one Smt.K.Varalaxmi and started business under the name and style of ‘S.V.S Enterprises’ and opened a bank account at Axis Bank, Ballari. If it is the defence of defendant that the plaintiff has not invested amount, then there could not be an occasion of admitting contends as discussed above in the reply. Therefore, the defence of the defendant is proved to be false one. Admittedly, the partnership firm is not a registered one and therefore the plaintiff has requested for refund of the amount of Rs.15 lakhs. But the defendant has issued a cheque-Ex.P1 of Rs.13 lakhs. The said cheque is dishonoured and returned with an endorsement stating that “signature of the drawer differs”. 26. The Trial Court has committed an error in assigning reason that if the plaintiff has contributed Rs.15 - 17 - NC: 2025:KHC-D:430 RFA No. 100026 of 2020 lakhs to the partnership firm, then why he has received only Rs.13 lakhs is not explained either in pleading nor in the evidence. This is not the correct approach of the Trial Court. The plaintiff might have satisfied with reimbursement of Rs.13 lakhs from the defendant and it is at discretion of the plaintiff. But on this reason, the Trial Court has stated that it cannot be said as the defendant has not issued a cheque to the plaintiff. Though the defendant has given complaint before the Superintendent of Police i.e., after dishonor of cheque and legal notice sent by the plaintiff to the defendant, the defendant has admitted that after 15 days of receipt of legal notice from the plaintiff, the defendant has lodged complaint before the Superintendent of Police that cheque was stolen. Lodging of complaint before the Police is nothing but an attempt of taking artificial defence to be taken in future anticipation that the plaintiff would file a case of cheque bounce against the defendant. Therefore, upon considering all evidence on record and of its preponderance of probabilities, it is proved that both the plaintiff and defendant were partners in the partnership firm and share of - 18 - NC: 2025:KHC-D:430 RFA No. 100026 of 2020 the plaintiff is 30% and share of the defendant is 70% and accordingly, the plaintiff has invested the amount of Rs.15 lakhs and defendant has invested the amount of Rs.35 lakhs and also it is proved that the partnership firm has not got registered as per law. When this being the fact that the plaintiff has invested the amount of Rs.15 lakhs, then towards re-imbursement of share amount the defendant has issued a cheque-Ex.P1 which was dishonoured. In this regard, the defendant has failed to prove that he has not issued cheque. 27. Though, the Trial Court has answered Issue No.1 in the affirmative, but the findings on Issue Nos.2 to 4 are completely perverse and contrary to Issue No.1. There is no reason by the Trial Court that why the plaintiff is not entitled to recovery of money from the defendant. Therefore, the Trial Court has committed an error in dismissing the suit. 28. Accordingly, the appeal is liable to be allowed in part. Consequently, the suit filed by the plaintiff is liable to be decreed in part. Therefore, the judgment and decree passed by the Trial Court is to be set aside. - 19 - NC: 2025:KHC-D:430 RFA No. 100026 of 2020 29. Hence, I proceed to pass the following: ORDER a) The RFA No.100026/2020 is allowed in part. b) The judgment and decree passed in O.S No.193/2017 dated 15.10.2019 by the Court of 1st Additional Senior Civil Judge, Ballari is hereby set aside. c) The suit of the plaintiff is decreed in part. d) The plaintiff is entitled for recovery of money from the defendant for a sum Rs.13 lakhs along with interest at the rate of 9% per annum from the date of issuance of cheque till the date of realization. The defendant shall pay the said amount to plaintiff within three months from today. e) Draw decree accordingly. f) No costs. Sd/- (HANCHATE SANJEEVKUMAR) JUDGE SRA-para 1 to 11 PMP-para 12 to end List No.: 1 Sl No.: 33