Holding

Amendments to a plaint must be contested by the opposite party, and for suits instituted before the 1976 amendment interest is limited to 6% per annum under the unamended Section 34, making the High Court's higher interest award a nullity; interest on mesne profits must be computed yearly at 6%.

Summary

The widow of Pravinlal Madhvani sued the Madhvani brothers for partition of a tea estate, accounts of a family partnership and mesne profits, seeking 6% interest. While the appeal of the preliminary decree was pending, the High Court allowed an amendment to raise the interest rate to 13% and awarded interest at prevailing bank rates, without giving the defendants a chance to contest the amendment. The Supreme Court held that such amendment violated Order VI Rule 17 and that, for suits instituted before the 1976 amendment, interest must be limited to 6% per annum under the unamended Section 34 of the CPC, as mandated by Section 97(2)(e). Consequently, the High Court's decree granting interest above 6% was declared a nullity, and interest on mesne profits must be calculated yearly at 6%. The Court affirmed the quantum of mesne profits and goodwill awarded, modified the interest rates, and dismissed the appeals where no error was found.

Issues considered

The validity of amending the plaint without affording the opposite party an opportunity to contest the amendment.
Whether Section 97(2)(e) of the CPC (Amendment) Act, 1976 requires interest to be awarded as per the pre‑amendment provision of Section 34 for suits instituted before the amendment.
Whether the High Court's award of interest at bank rates exceeding 6% per annum is legally permissible.
The effect of the dismissal of a Special Leave Petition on the enforceability of the High Court's decree (res judicata).
The proper method of calculating interest on mesne profits.

Legislation cited

Code of Civil Procedure, 1908s. 34, s. Order VI Rule 17
Code of Civil Procedure (Amendment) Act, 1976s. 13, s. 97(2)(e)
Constitution of Indias. 136

Subjects

interest rateamendment of plaintSection 34 CPCSection 97 CPCmesne profitsgoodwillres judicatanullitypartitionpartnership accounts

Judgment

A SRI RAMNIK VALLABHDAS MADHVAN! AND ORS.
v.
TARABEN PRAVINLAL MADHVANI

NOVEMBER 5, 2003

B [V.N. KHARE, CJ., S.B. SINHA AND ARUN KUMAR, JJ.]

Code ofCivil Procedure (Amendment) Act, 1976-Section 97-Interest-
Rate of-Suit instituted prior to Amendment Act of 1976-Amendment ofplaint
C sought for changing rate of interest to 13'Yo-Amendment allowed in 1985-
Court awarding 13% interest from date of decree till realization-Held,
unamended provision would apply in view of Sec. 97 (l)(e) of the Civil
Procedure Code (Amendment) Act, 1976-Unamended provision restricted
interest from date of decree to realization to 6'Yo-Held, 13% rate of interest
could not be allowed-Code of Civil Procedure, 1908-Section 34.
D
Code of Civil Procedure, 1908-0rder VI Rule 17-Amendment-
Procedure after allowing-Held, opposite party must be given a char:ce to
contest the amended plea-Amendment allowed by court and on the same day
decree was passed on basis of amended plea-Held: illegal.

E Constitution of India, 1950-Article 136-Special Leave Petition--
Dismissal of-Effect of-Held, cannot act as res-judicata-Court allowing
amendment in rate of interest sought for by the plaintijf-l>ecree awarded on
the amended rate of interest-Amended rate of interest against provision of
/aw-Held, decree is an nullity being without jurisdiction-There is no res
F judicata in cases of inherent lack of jurisdiction.

Words and Phrases-Goodwill-Meaning of

The respondent was the widow of the paternal uncle of the
appellants. The family owned a tea estate, which was being managed by
G family firm of which the husband of the respondent was a partner. The
firm was continuously in business since 1954. The husband of the
respondent died on 4.5.1969. The respondent thereafter filed a suit against
the appellants and their widowed mother praying for the following relief:

(a) decree of partition of the tea estate.
I-I 230
R.V. MADHVANI v. T.P. MADHVANI 231
(b) decree for accounts of the family firm including goodwill, stocks A
in trade, standing crops etc. of the firm along with interest at 6% per
annum from 4.5.1969.

(c) decree for accounts of mesne profit from 5.5.1969 with interest
at 6 % per annum from 5.5.1969.
B
The Trial Court, by a preliminary decree, granted prayer (b) along
with interest thereon at 6% per annum from 4.5.1969. The suit of the
respondent in respect of other prayers was dismissed.

The respondent appealed against the preliminary decree. While the
appeal was pending before the High Court, the respondent applied for C
amendment of the plaint filed by her and the High Court allowed the
amendment application on 16.12.1985 and rate of interest claimed in
prayer (c) was changed to 13% per annum from 6% per annum. No
chance was given to the appellants to file reply to the amended plaint and
by order dated 16.12.1985, the High Court also allowed the appeal of the D
respondent. All three prayers made by the respondent in the plaint were
decreed. The High Court, taking note of amendment in Section 34 of the
Code of Civil Procedure by Code of Civil Procedure (Amendment) Act,
1976, allowed interest at the rate of interest as charged by the nationalised
banks during the relevant period on commercial loan. The special leave
petition filed against the order allowing amendment and the preliminary E
decree passed by High Court was summarily dismissed.

The Trial Court, thereafter, passed final decree in accordance with
the order of ,the High Court. Insofar as mesne profits was concerned, the
Trial Court determined a sum of Rs. 26,330,16.30 as due by way of mesne
profit to the respondent and awarded simpte interest thereon at the rate F
of 13% per annum till realization.

The appellants and the respondent filed appeals against the final
decree. By consent of parties a Commission consisting of a retired High
Court Judge and two Chartered Accountants, one nominated by each G
party, was appointed for determining the amount of mesne profit. The
Commission determined the mesne profit at Rs. 33,32,847.83.

Ultimately, the High Court disposed of the appeals modifying the
decree of the Trial Court. The High Court determined the mease profits
payable to the respondents, including interest from 5.5.1969 to 5.8.1986, H
232 SUPREME COURT REPORTS (2003] SUPP. 5 S.C.R.

A at Rs. 78,33,560.
The High Court calculated the interest at varying rates of interest
(ranging between 10% to 19% per annum) on periodical basis based on
change in the bank rate of interest as decided by the High Court earlier
while deciding the appeal against the preliminary decree. Though the High
B Court did not approve grant of such rates of interest, it did not change it
in view of the fact that the special leave petition against the earlier order
of the High Court had been dismissed. The High Court further awarded
the respondent Rs. 39,41,920 as mesne profits from 6.8.1986 till realization
with simple interest at the rate of 13% per annum. The High Court also
C awarded Rs. 1,23,111.37 to the respondent on account of her share of
goodwill, standing crops etc. with simple interest at the rate of 13% per
annum.

The appellants filed appeal before the Court.

Allowing the appeal in part and modifying the rate of interest
D awarded, the Court

HELD : Quantum of mesne profits

Per Arun Kumar, J (for himself and C.J)

E 1.1. The High Court arrived at a finding regarding quantum of mesne
profits after looking into the accounts, the report of the Commission
appointed by it and other relevant facts and material. There is no reason
to differ with the view of the High Court on this aspect. The Court is not
required to re-appreciate the material. However, a mistake has been
committed by the High Court in calculation of interest on mesne profits.
F Interest has to be calculated on yearly basis because the amount of mesne
profits on which interest is to be awarded has to be arrived at on year to
year basis. Interest cannot be allowed oil the whole amount from the
beginning. Interest had to be worked out on amounts falling due towards
mesne profits on yearly basis i.e. on the amount of mesne profits which
G could be taken to be due to the respondent at the end of each successive
year. (240-A, B, F, G]

Per S.B. Sinha, J. (concurring)

1.2. Decree for mesne profit was granted in favour of the respondent
for wrongful use of the property. The quantum of mesne profits can be
H arrived at by the High Court keeping in view the well-known principles
R.V. MADHVANI v. T.P. MADHVANI 233
of valuation for determining the same. The court in not enjoined with any A
duty to accept the quantification determined only on the basis of books of
account maintained by the appellants, particularly when the same had not
been proved. The High. Court has rightly considered the matter from
different angles. Even if any of the methods adverted to the High Court
and referred to herein before is adopted, the respondent would have been B
entitled to much more amount than claimed by her. The findings of the
High Court being just and proper need not be interfered with. [255-F, G)

Legality of rate of interest awarded

Per Arun Kumar, J. (for himself and C.J.).
c
2.1. On an amendment being allowed, the opposite party has to be
given a chance to respond to the amended pleading and if the plea is
contested the Court has to give its decision thereon. Not affording an
opportunity to the contesting party to contest a plea, which has been
allowed to be amended, is negation of justice. A bare reading of Order D
VI Rule 17 of Code of Civil Procedure shows that amendment is of a plea
contained in the pleadings and the object of allowing amendment of
pleadings is to determine the real questions in controversy between the
parties. This means the parties have to be given a chance to contest the
questions of controversy and the Court has to give its decision ultimately
on such contested issues. (243-E, F; 240-A, BJ E
2.2. In the present case the amendment application of the resp .•ndent
was allowed vide order date 16th December 1985 when on the same date
the appeal against the preliminary decree was disposed of. No amended
pleadings were filed. No opportunity was given to the appellants to contest F
the plea. The procedure followed in the present case in wholly illegal.
(244-A)

J. Jermons v. Aliammal and Ors., (1999) 7 SCC 382, relied upon.

3. The rate of interest awarded went even beyond what was
permitted by view of amendment. The respondent had only sought leave G
to amend the rate of interest as originally pleaded as 6% per annum to
13% per annum. This amendment was allowed. But in the decree the Court
allowed interest to be charged at the prevailing bank rate of interest
charged by nationalised banks from time to time on commercial
transactions during the relevant period. Thus the High Court while H
234 SUPREME COURT REPORTS [2003] SUPP. 5 S.C.R.

A allowing the prayer for amendment simultaneously passed a decree not
only based on the amended plea, but far exceeding it. Thus the decision
of the High Court in allowing interest on mesne profits at rate of interest
charged by nationalised banks from time to time on commercial
transactions is wholly illegal and unsustainable. (243-F-H; 244-C-D)
B 4.1. An amendment of plaint relates back to the date of institution
of the suit. Section 97(2)(e) of the Civil Procedure Code (Amendment) Act,
1976 provides that in suits instituted before enforcement of the amended
provision, interest has to be awarded as per unamended Section 34 to the
Code of Civil Procedure. In the present suit which was instituted much
before amendment of Section 34 of the Code of Civil Procedure, therefore,
c interest had to be allowed as per the unamended Section 34 of the Code
of Civil Procedure. (244-G-H; 245-A)

4.2. Section 34 of the Code of Civil Procedure as it stood before
amendment by Code of Civil Procedure (Amendment) Act, 1976 deals with
the question of interest in three stages. About the interest prior to the date
D if institution of suit, Section 34 does not say anything. About the interest
from the date of the institution of suit till date of decree, it says that interest
to be awarded should be as considered reasonable by the Court. About
interest from the date of the decree till realisation of the decretal amount,
the power of the Court to award interest is cirumscribed, i.e. it cannot be
E more than 6% per annum. (244-F, G)

4.3. While considering a reasonable rate of interest to be awarded
for the pre-decree period under Section 34 of the Code of Civil Procedure
as it stood before amendment, it is to be noted that in the present case
mesne profits are being awarded on account of retention of Shares of a
F co-owner in a property by the other-co-owners. This cannot be said to be
a commercial transaction. Moreover respondent herself claimed interest
in the plaint originally instituted at the rate of 6% per annum. By way of
amendment of the plaint she wanted to take advantage of the amended
provisions in the Code of Civil Procedure so as to claim interest at the
higher rate which in law she was not entitled to. Therefore, award of
G interest at the rate of 6% per annum on the amount found due would be
fair and reasonable in the facts and circumstances of the case. (245-B-D)

Effect of dismissal of special leave petition
Per Arun Kumar, J. (for himself and C.J.)

H 5.1. The disposal of special leave petition against a judgment of the
R.V. MADHVANI v. T.P. MADHVANI 235
High Court does not mean that the said judgment is affirmed by such A
dismissal. The order on special leave petition is also never res judicata.
(246-C)

Kunhavammed and Ors. v. State of Kera/a and Anr., [200016 SCC 359,
relied on.
B
5.2. An illegal decree is a nullity and can be ignored. Clear illegality
has been committed by the High Court in awarding interest on the decree
for mesne profits at a rate much higher than what claimed or what is
admissible. Similar is the illegality regarding award of interest at the rate
of 13% per annum on decree for accounts as per prayer (b). The decree
to that extent is a nullity and cannot be allowed to be enforced. (246-E) C
Anil R. Deshumkh v. Onkar N. Wagh and Ors., (1999) 2 SCC 205; Smt.
Nai Bahu v. Lala Ramnaryan and Ors., (1978) l SCC 58 and Srimati
Kaushalya Devi and Ors. v. Shri K.L. Bansal, [1969) l SCC 59, referred to.

Per Sinha, J. (concurring) D
5.3. The principles of res judicata which according to the High Court
would operate in the case, is not applicable. Principles of res judicata is a
procedural provision. The same has no application where there is inherent
lack of jurisdiction, In the facts and circumstances of the present case,
the principles of res judicata was not applicable. [255-H; 256-A) E
ChiefJustice ofA.P. and Anr. v. L. V.A. Diskshitulu and Ors. etc., [1979)
2 SCC 34; Dwarka Prasad Agarwal (D) by LRs and Anr. v. B. D. Agarwal
Ors., (2003) 6 SCC 230 and Mis Shree Bharat Laxmi Wool Store, Panipat
and Ors. v. Punjab National Bank and Anr., (1992) l SCC 204, referred to.
F
Goodwill

Per Sinha, J.

6.1. The term goodwill signifies the value of the business in the hands
of a successor, so far as increased by the continuity of the undertaking G
being preserved in the shape of the right to use the old name and otherwise.
It is something more than a mere chance of probability of old customers
maintaining their connection, though this is a material part of the practical
fruits. 'Goodwill' may be the whole advantage belonging to the firm, its
reputation as also connection thereof. It, thus, means that every affirmative
advantage as contrasted with negative advantage that has been acquired H
236 SUPREME COURT REPORTS (2003) SUPP. 5 S.C.R.

A in carrying on the business whether connected with the premises of
business or its name or style everything connected wi(h or carrying the
benefit of the business. (260-F-H(

Inland Revenue Commissioner v. Muller & Co., (19011 AC 223,
Halsbury's Laws of England, 4 th Edn., referred to.
B
6.2. The goodwill has been claimed for the firm's continuous business
since 1954. The Court has proceeded to calculate the amount of goodwill
on the basis of the profits derived by the firm for the last five years on an
average. The District Judge as also the High Court has assigned sufficient
and cogent reasons for awarding a sum of Rs. 3,45,139.14 towards the
C plaintiffs' share in goodwill. There is no infirmity in the judgment of the
Court below in this regard. (263-B-DI

CIVIL APPELLATE JURISDICTION : Civil Appeal Nos. 6429-31 of
1995.
D From the Judgment and Order dated 23.9.93 of the Madras High Court
in A. Nos. 998, 350 and 1305 of 1988.

WITH

C.A. Nos. 6432-6434/95 and 6484-8486 of 1995.
E
Bhimrao Naik, K. Ramamoorthy, Vinod A. Bobde, V. Balachandran,
V. Ramasubramanian, Ms.V. Mohana, Senthil Jagadeesan, S.R. Setia, Bhargava
V. Desai and Sanjeev Kr. Singh for the appearing parties.

The Judgment of the Court was delivered by
F
ARUN KUMAR, J. C.A. Nos. 6429-31/1995:

These appeals arise from a suit filed by respondent in the court of
Subrodinate Judge at Ootacamund, State of Tamilnadu on 28th October,
1972. The parties to the suit are closely related. Respondent Taraben is the
G widow of Pravinilal Madhvani while Santokben, original defendant No. 1.,
was the widow of Vallabhdas Madhvani real brother of Pravinlal Madhani.
Santokben died during the pendency of the litigation. Her three sons who
were defendants No. 2 (Ramnik), No. 3 (Praful) and No. 4 (Rajnikant) in the
suit, were appellants in these appeals. Appellants Santokben and her son
H Praful died during pendency of the appeals. Necessary steps regarding
R.V. MADHVANI v. T.P. MADHVANI [ARUN KUMAR, J.] 237
substitution have been taken. Appellant No. 4 Mis. Bengorm Nilgiri Plantations A
Co.,, is a partnership firm.

The family owned a tea estate in the Neelgiris area. It was known as
Bengorm Tea Estate. It was a co-wonership property of the members of the
family. A partnership firm was constituted under the name and style of
Bengorm Tea Plantations to manage the tea estate. The partnership did not B
have any proprietary interest in the estate. The shares of the parties in the tea
estate as well as in the partnership firm are not in dispute. Pravinilal died on
4th May, 1969. He left behind a will. Taraben respondent No. I claiming to
be sole executor of the estate of her husband Pravinlal filed the present suit
claiming the following reliefs: C
"18{a) Decree for partitions by metes and bounds of the plaintiffs
33% share in Bengorm Estate mentioned in Schedule to the Plaint
and separate possession thereof against defendants I to 4 and/or 6 in
severally.

(b) A decree for accounts against the defendants for the 30% share D
of Pravinlal Vithaldas Madhvani deceased in the defendant No. 6 in
respect of profits and monies to his credits and in the assets of the
firm including stocks in trade, stores and spares, standing crops,
investments, provisions, reserves and goodwill as mentioned in
paragraph 12 of the plaint and decree for the amount found to be due E
to the plaintiff as ascertained in this suit on enquiry with interest at
6% per annum from 4th May, 1969.

(c) Decree for accounts for mesne profits and/or illegal gains from
5th May, 1969 till payment as mentioned in paragraph 13 the plaint
and decree for the amount found to be due to the plaintiff as ascertained F
in this suit on enquiry with interest at 6% per annum from the date
herein."

A preliminary decree was passed by the trial court on 13th April, 1978
J
granting a decree in favour of the plaintiff {respondent herein) for accounts
against defendants for the 30% share of Pravinlal in the partnership firm with G
interest thereon at the rate of 6% per annum from 4th May, 1969 till realisation.
The suit with respect to other reliefs was dismissed. The plaintiff appealed
against the said preliminary decree with regard to relief denied to her by the
trial court. During the pendency of the appeal before the High Court on 21st
November, 1980, the plaintiff {appellant before the High Court) applied for H
238 SUPREME COURT REPORTS [2003] SUPP. 5 S.C.R.

A amendment of the plaint. An amendment was sought with respect to the rate
of interest as mentioned in paragraphs l 8(b) and 18(c) of the plaint. The
plaintiff had originally claimed interest at the rate of 6% per annum in both
these paras of the plaint. By amendment the rate of interest was sought to be
revised from 6% per annum to 13% per annum. The High Court disposed of
B the amendment application simultaneously with the appeal against the
preliminary decree vide judgment and orders dated 16th December, 1985.
The only amendment allowed was with respect to rate of interest in para
18(c) of the plaint. The plaintiff was allowed to amend the said prayer so as
to raise the claim with respect to rate of interest from 6% per annum to 13%
per annum. Similar amendment sought in para l 8(b) of the plaint was
C specifically rejected. So far as appeal against preliminary decree passed by
the trial Court is concerned, the Division Bench of the Madras High Court
allowed the same, thereby the prayer of the plaintiff with respect to 33%
share in the Bengorm Tea Estate and mesne profits after the death of Pravinlal
Vithaldas Madhvani on 4th May, 1969 alongwith interest on the amount
found due by way of mesne profits was allowed. The preliminary decree
D passed by the trial Court on 13th April, 1978 with respect to prayer contained
in para l 8(b) of the plaint became final. On the question of interest with
respect to para 18(c) of the plaint even though the High Court had allowed
the amendment to enable the plaintiff to claim interest at the rate of 13% per
annum, the High Court took note of amendment of Section 34 C.P.C. in the
E meanwhile and treating the suit claim as a commercial transaction, allowed
interest at the rate of interest as charged by nationalised banks during the
relevant years from time to time on commercial loans. The trial court pa~sed
a final decree on 6th January, 1988 and determined a sum of Rs . 2633016.33
paise as due by way of mesne profits. It awarded simple interest thereon at
the rate of 13% per annum till realization. It also passed a d1:cree for Rs.
F 67, 11 I .3 7 paise in pursuance of prayer in para 18(b) of the plaint with simple
interest at the rate of 6% per annum w.e.f. 5th May, 1969 till realisation.

The appellants appealed against the said final decree before the Madras
High Court. During the pendency of the appeals, with the agreement of
G counsel for the parties, the High Court appointed a Commission to determine
the amount of mesne profits payable to the plaintiff in the suit. The Commission
filed its report on 2nd September, 1990 determining a sum of Rs. 33,32,847.83
in this behalf. Ultimately by its impugned judgment dated 23rd September,
1993, the High Court dismissed to the appeals filed by the present appellants
against the final decree of the trial court. It modified the decree of the trial
H court and passed a final decree in the following terms :
R.V. MADHVANlv. T.P. MADBVANI [ARUN KUMAR, J.] 239
"The respondents/defendants do pay the petitioner/plaintiff the sum A
of Rs. 78,33,560 by way of mesne profits and interest due for the
period from 5.5.1969 to 5.8.1986 with simple interest at the rate of
13 per cent per annum of Rs. 39,41,920 from 6.8.1986 till date of
realisation and defendants do also pay the plaintiff the sum of Rs.
1,23, 111.37 by way of her share of good-will, standing crops and B
missing items with simple interest at the same rate of 13 per cent per
annum on this sum from 5.5.1969 till date of realization and the
proportionate cost. The petitioner/plaintiff should pay the court fee at
the time of execution." •

On the question of interest, the High Court has in Para 42 of the C
impugned judgment noted that it was wrong on the part of the High Court
·while passing the preliminary decree vide judgment dated 16th December,
1985 to award interest as per the rate of interest charged by nationalised
banks on commercial transactions form time to time. It was also felt that the
High Court ought not to have proceeded on the basis of amended Section 34
of the Code of Civil Procedure .. Yet the High Court did not interfere with D
award of interest only for the reason that the Special Leave Petition against
the preliminary decree had been dismissed by this Court.

The appellants who were defendants in the suit have filed the present
appeals against the judgment dated 23rd September, 1993 of the High Court.
During the hearing the learned counsel for appellants raised three points for E
decision of this Court in these appeals.

(i) Determination of quantum of mesne profits payable to the
respondent-plaintiff by the appellants;
(ii) Rate of interest to be awarded on the decretal amount; F
(iii) Adjustment of admitted liability of Pravinlal towards the
partnership firm in the sum of Rs. 4, 13,364.24 paise.

Point No. I

So far as the question of determination of quantum of mesne profit is G
concerned the liability to pay is not being disputed. The only dispute is with
respect to the determination of amount payable by way of mesne profits. As
pointed out earlier the Division Bench of the High Court had appointed a
Commission headed by a retired judge of the Madras High Court and assisted
by two Chartered Accountants, one nominated by each party, to carry out the H
240 SUPREME COURT REPORTS (2003] SUPP. 5 S.C.R.

A exercise regarding determination of mesne profits. The Commission filed its
report in the High Court. The High Court arrived at a finding regarding
quantum of mesne profits after looking into the accounts, the report of
Commission and other relevant facts and material. We have no reason to
differ with the view of the High Court on this aspect. We are not required
to reappreciate the material. As a matter of fact during the course of hearing,
B counsel for the appellant indicated willingness to go by the Commissioner's
report in this behalf. Therefore, we accept the finding of the High Court on
this issue. Total amount by way of mesne profits as per the impugned judgment
of the High Court comes to Rs. 39,41,920. This figure does not include
interest.
c Interest is leviable on the amount of mesne profits. The High Court has
in its impugned judgment awarded interest w.e.f. 5th May, 1970 till 5th
August, 1986 on periodical basis at varying rate of interest. Periods have
been fixed based on change in bank rate of interest. The rate of interest varies
between I0% p.a. to 19% p.a.. The award of interest by the High Court is
D based on its earlier order dated 16th December, I985 regarding levy of interest
as per prevailing bank rate of interest on commercial transactions form time
to time. This part of the judgment of the High Court in our view is not
correct. The rate at which interest is to be awarded is being separately
considered under Point No. 2 That decision will govern the award of interest
E on mesne profits.
A mistake has been committed by the High Court in calculation of
interest on mesne profits. Interest has to be calculated on yearly basis because
the amount of mesne profits on which interest is to be awarded has to be
arrived at on year to year basis. Mesne profits for the first year would be
F from 5th May, 1969 to 4th May, 1970, for the second year it will be from
5th May, 1970 to 4th May, 197 I and so on. It keeps adding on from year to
year. The total amount of mesne profits fol!nd due by the High Court on the
basis of Commissioner's report comes to Rs 38,41,920. This amount is the
total of mesne profits calculated on yearly basis. Interest cannot be allowed
on the whole amount form the beginning. Interest had to be worked out on
G amounts falling due towards mesne profits on yearly basis i.e. on the amount
of mesne profits which could be taken to be due to the plaintiff at the end
of each successive year.

Point No. 2

H The question of rate of interest has been the subject matter of serious
R.V.MADHVAN!v. T.P .. MADHVANI [ARUNKUMAR,J.] 241

controversy between the parties. The learned counsel for the appellant A
submitted that in the plaint filed on 28th April, 1972 interest claimed in paras
18(b) and 18(c) was at the rate of 6% per annum. He has further drawn our
attention to Section 34 of the Code of Civil Procedure as it stood at the time
of institution of the suit. It permitted interest being awarded maximum at the
rate of 6% per annum from the date of decree till realisation of the decretal B
amount. The said section is reproduced below:

"34(1) Where and in so far as a decree is for the payment of money,
the Court may, in the decree, order interest at such rate as the Court
deems reasonable to be paid on the principal sum adjudged, from the
date of the suit to the date of the decree, in addition to any interest C
adjudged on such principal sum for any period prior to the institution
of the suit, with further interest at such rate not exceeding six per
cent, per annum as the Court deems reasonable on such principal
sum, from the date of the decree to the date of payment, or to such
earlier date as the Court thinks fit.
D
(2) Where such a decree is silent with respect to the payment of
further interest on such principal sum from the date of the decree to
the date of payment or other earlier date, the Court shall be deemed
to have refused such interest, and a separate suit therefore shall not
lie."
E
Our attention was invited to para l 8(b) of the plaint in which decree for
accounts of the partnership firm to the extent of 30% share of Pravinlal is
sought alongwith interest at the rate of 6% per annum from 5th May, 1969.
The trial Court passed a preliminary decree on 13th April, 1978 as per which
only para I 8(b) of the plaint was decreed i.e. 30% share of Pravinlal in the
partnership firm with interest at the rate of 6% per annum from 4th May, F
1969 till realisation. This part of the preliminary decree was never challenged
by any party. Rest of the prayers in the plaint were rejected in the preliminary
decree. The plaintiff appealed against the preliminary decree only to the
extent it rejected other prayers in the plaint. There was no challenge to the
award of interest at the rate of6% per annum as claimed in para 18(b) of the G
plaint. Thus according to the learned counsel this part of the preliminary
decree became final and so far as the decree for accounts is concerned, the
plaintiff is entitled to interest only at the rate of 6% per annum.

Paras 18(a) and 18(c) of the plaint relate to award of mesne profits and
·interest thereon on the share of Pravinlal as a co-owner in the Bengorm Tea H
242 SUPREME COURT REPORTS [2003) SUPP. 5 S.C.R.

A Estate. The High Court accepted the appeal filed by the plaintiff against the
preliminary decree. A decree for partition of the Bengorm Estate to the extent
of one-third share of the plaintiff and for mesne profits on that one-third
share after the death of Pravinlal till separation of the one-third share was
passed on 16th December, 1985. The High Court awarded interest on the
B amount of mesne profits as per rate of interest charged by the nationalised
banks during the relevant years from time to time on commercial loans in
view of amended Section 34 of the Code of Civil Procedure. The learned
counsel for the appellant challenged this part of the judgment of the High
Court on various grounds particularly:

(a) in the original plaint interest had been claimed only at the rate
c of 6% per annum;
(b) amendment of the plaint was applied for in 1980 and was allowed
on 16th December, 1985 which enabled the plaintiff to amend
para I 8(c) of the plaint to claim interest at the rate of 13% per
annum.instead of6% per annum as originally pleaded. This means
D that the question of interest being charged at the rates prevailing
with nationalised banks from time to time on commercial
transactions could never arise. The decree could not go beyond
prayer of the plaintiff;
(c) The share of the plaintiff in Bengrom Estate with respect to
E which mesne profits were awarded and on which interest was
being sought, could not be said to be a commercial transaction
so as to attract rate of interest charged by nationalised banks
from time to time on commercial transactions;
(d) In view of Sections 13 and 97 of the Code of Civil Procedure
F (Amendment) Act 1976, the present suit having been instituted
prior to amendment of the C.P.C., interest could be awarded as
per provisions of unamended Section 34 only. Unamended Section
34 permitted interest maximum at the rate of 6% per annum
from the date of decree till realisation. Clause (e) of sub-section
G (2) of Section 97 of the Amending Act of 1976 is reproduced as
under:
"(e) the provisions of Section 34 of the principal Act, as amended by
Section 13 of this Act, shall not affect the rate at which interest
may be allowed on a decree in any suit instituted before the
commencement of the said section 13 and interest on a decree
H
R.V.MADHVAN!v. T.P.MADHVANI [ARUNKUMAR,J.] 243
passed in such suit shall be ordered in accordance with the A
provisions of Section 34 as they stood before the commencement
of the said Section 13 as if the said section 13 had not come into
force;"

(e) Amendment of plaint once allowed relates back to the date of
original plaint. Therefore, in view of the specific bar contained B
in Section 97 referred to above, such an amendment was clearly
illegal;

(f) The Court had only permitted amendment of the plaint which
does not mean that the plea contained by way of amendment is
accepted by the Court. The defendants had to be given a chance C
to contest the plea without which the amended claim with respect
to rate of interest could not be enforced.

It may be noted at this stage that on applications moved by the plaintiff
in this behalf, one-third share of the plaintiff in the Estate known as Bengom
Tea Easte was delivered to the plaintiff by the defendants on 5th March, D
1988 and there is no dispute about this fact.

The grounds raised on behalf of appellants can now be conveniently
dealt with. First we deal with the question of amendment of para 18 (C) of
the plaint allowed by the High Court in an application moved for that purpose.
One is a procedural aspect while the oth~r is a legal aspect. Procedural aspect E
demands that on amendment of being allowed, the opposite party has to be
given a chance to respond to the amended pleading and if the plea is contested
the Court has to give its decision thereon. Not affording an opportunity to the
contesting party to contest a plea, which has been allowed to be amended, is
negation of justice. In the present case the fact remains that amendment F
application of the plaintiff was allowed vide order dated 16th· December,
1985 when on the same date the appeal against the preliminary decree was
disposed of and rate of interest going even beyond what was permitted by
way of amendment, was awarded. The decree which was passed was for
much more than the amendment allowed. The plaintiff had only sought leave
to amend the rate of interest as originally pleaded as 6% per annum to 13% G
per annum. This amendment was allowed. But in the decree the Court allowed
interest to be charged at the prevailing bank rate of interest charged by
nationalised banks from time to time on commercial transactions during the
relevant period. Thus the High Court while allowing the prayer for "amendment
simultaneously passed a decree not only based on the amended plea, but for H
244 SUPREME COURT REPORTS [2003] SUPP. 5 S.C.R.

A exceeding it. No amended pleadings were filed. No opportunity was given to
defendants to contest the plea. A bare reading or Order VI Rule 17 of Code
of Civil Procedure shows that amendment is of a plea contained in the
pleadings and the object of allowing amendment of pleadings is to determine
the real questions in controversy between the parties. This means the parties
have to be given a chance to contest the questions in controversy and the
B Court has to· give its decision ultimately on such contested issues. This
procedure was not followed in the present case. The procedure followed is
wholly illegal. This Court had occasion to pronounce on this issue in J.
Jermons v Aliammal and Ors., [1999] 7 SCC 382. It was held that a new plea
cannot be allowed to be raised without effecting amendment of pleadings,
C without giving reasonable opportunity to the opposite party to file further
pleadings.and adduce evidence. Thus the decision of the High Court in
allowing interest on mesne profits at rate of interest charged by nationalised
banks from time to time on commercial transactions is wholly illegal and
unsustainable. As noted earlier even the High Court while passing the final
decree felt that in its earlier order dated 16th December, 1985, it should not
D have proceeded on the basis of amended Section 34 of the Code of Civil
Procedure while awarding interest at the rate charged by nationalized bank
on commercial transactions from tim~ of time. The impugned award of interest
is thus wholly unwarranted and illegal and has to be set aside.

E Coming to the legal aspect of the amendment of plaint allowed in the
present case by the High Court, it is to be noted that Section 34 of the Code
of Civil Procedure deals with the question of award of interest. Section 34
C.P.C. as it stood before amendment in February 1977 deals with the question
of interest in three stages. First is, interest prior to the date of institution of
suit, second stage is interest from the date of institution of suit till date of
F decree and the third stage is from the date of decree till realisation of the
decretal amount. About the first stage, Section 34 does not say anything
while about the second stage it says that the interest to be awarded should be
as considered reasonable by the Court. About the third stage i.e. from the
date of decree till realisation, the power of the Court to award interest is
G circumscribed i.e. it cannot be more than 6% per annum.

An amendment of plaint relates back to the date of institution of the
suit, Section 97(2) (e) of the Civil Procedure Code (Amendment) Act, 1976
provides that in suits instituted before enforcement of the amended provision,
interest has to be awarded as per the unamended Section 34 C.P.C. In the
H present suit which was instituted much before amendment of Section 34 of
R.V. MADHVANI v. T.P. MADHVANI [ARUN KUMAR, J.] 245

the Civil Procedure Code, therefore, interest had to be allowed as per the A
unamended Section 34 C.P.C. which means that from the date of decree till
realisation interest could not be more awarded than 6% per annum.

For the period prior to passing of the decree it is left to the court to
consider what would be the reasonable rate of interest. While considering a
reasonable rate of interest to be awarded for the pre decree period we have B
to note that in the present case mesne profits are being awarded on account
of retention of share of a co-owner in a property by the other co-owners. This
cannot be said to be a commercial transaction. Moreover plaintiff herself
claimed interest in the plaint originally instituted at the rate of 6% per annum.
By way of amendment of the plaint she wanted to take advantage of the C
amended provisions in the Code of Civil Procedure so as to claim interest at
a higher rate which in law she was not entitled to. Therefore, we consider
award of interest at the rate of 6% per annum on the amount found due on
account of mesne profits to be calculated on any yearly basis as indicated
earlier would be fair and reasonable in the facts and circumstances of the
case. D
We may now note the submission on behalf of the respondent in reply
to the arguments of the appellants on the question of award of interest. The
learned counsel for respondent only banked upon the fact that a Special
Leave Petition against the preliminary decree dated I 6th December, 1985
had been dismissed by this Court on an earlier occasion and according to the E
learned counsel, the consequence of that dismissal would be that the decision
on the question of award of interest contained in the preliminary decree dated
16th December, 1985 had the seal of approval of this Court and therefore, it
need not be interfered with at this stage. The learned counsel further argued
that assuming that award of interest by the High Court as per the preliminary F
decree dated 16th December, 1985 was erroneous, it was not such an error
as may render the decree a nullity. According to him the court had earlier
declined to interfere with these findings therefore, at this stage, this Court
should not go into this.

The learned counsel for respondent tried to draw our attention to the G
limitations in exercise of jurisdiction by this Court under Article 136 of the
Constitution of India. In our view, the argument advanced by the learned
counsel for the respondent has no substance. The scope of powers of this
Court under Article 136 of the Constitution oflndia was elaborately considered
in a recent decision of this Court in Kunhayammed and Ors. v. State of H
246 SUPREME COURT REPORTS [2003) SUPP. 5 S.C.R.

A Kera/a and Anr., (2000] 6 sec 359. The following observation are worth
noting.

"The Supreme Court cannot and does not reverse or inodify the
decree or order appealed against while deciding the petition for special
leave to appeal. What is impugned before the Supreme Court can be
B reversed or modified only after granting leave to appeal and then
assuming appellate jurisdiction over it. If the order impugned before
the Supreme Court cannot be reversed or modified at the SLP stage
obviously that order cannot also be affirmed at the SLP stage.

It follows that disposal of SLP against a judgment of the High Court
C does not mean that the said judgment is affirmed by such dismissal. The
order on Special Leacial petition is also never res judicata. In the present
case we are at a stage where we are hearing appeals i.e. leave to appeal has
already been granted and these are full fledged appeals against the judgment
of the High Court before us. Therefore, we are entitled to go into the question
D of legality and correctness of the impugned judgment.

We have demonstrated the clear illegality committed by the High Court
in awarding interest on the decree for mesne profits at a rate much higher
than what was claimed or what is admissible in the present case. Similar is
the illegality regarding award of interest at the rate of 13% per annum on
E decree for accounts as per para 18(b) of the plaint. The decree to that extent
is a nullity and cannot be allowed to be enforced.

Our attention has been drawn to several judgments of this Court which
support the view that an illegal decree is a nullity and can be ignored. These
are Ani/ R. Deshmukh v Onkar N. Wagh and Ors., (1999] 2 SCC 205, Smt.
F Nai Bahu v. Lala Ramnarayan and Ors., (1978] 1 SCC 58 and Srimathi
Kaushalya Devi and Ors. v. Shri K.L. Bansal, [1969] lSCC 59.

The result is that the appellant succeeds on point No. 2 i.e. with regard
to award of interest on the decree passed by the Court with respect to prayers
G contained in para 18(b) and para 18(c) of the plaint. The appellant will be
liable to pay interest under both the heads at the rate of 6% per annum. In
the case of decree for mesne profits i.e. prayer as per para I 8(c) of the plaint,
the interest has to be calculated on yearly basis as indicated already at the
rate of 6% per annum and on the lump sum amount of Rs. 39,4 I ,920 at the
same rate from 6.8. I 986 till realisation. Similarly on the decree for accounts
H as per prayer contained in para I 8(b) of the plaint the respondent No. I will
R.V.MADHVANiv. T.P.MADHVANI [ARUNKUMAR.J.] 247
be entitled to interest at the rate of 6% per annum on the sum of Rs. 1,23, 111.3 7 A
from 5th May, 1969 till realisation.

Point No. 3.

The learned counsel for the appellant vehemently argued that the
admitted liability of Pravinlal towards the partnership in suit to the extent of B
Rs. 4, 13,364.24 paise has to be adjusted against his share of the amount
falling due to the plaintiff on accounts being taken. The High Court accepted
the finding of the trial court that this amount stood already adjusted. The
learned counsel for the appellant challenged this finding and tried to
demonstrate that the adjustment had not been made so far.
c
The learned counsel for appellant also argued that the respondent-plaintiff
was not entitled to any share in the goodwill of the partnership firm because
the firm had no goodwill. The firm was only managing the affairs of the tea
estate and the question of goodwill did not arise. The tea produced by the tea
estate does not have a name, or a brand name. It has no registered trade D
marks. The entire produce is auctioned as tea and not as any particular brand
or type of tea. Therefore, it could not be said that the firm had any goodwill
and the award of share of goodwill to the plaintiff was uncalled for.

In our view, these are matters of accounts which High Court has
examined. The High Court arrived at certain findings on the basis of record E
and after considering the report of the Commission appointed by it to go into
accounts. The Commission consisted of a retired High Court Judge and two
Chartered accountants one of each party. Therefore, we would not 1ike to
interfere with the findings arrived at by the High Court on these matters.

In the result the appeals are allowed to the extent indicated above. The F
decree for accounts passed by the High Court under para I 8 (b) of the plaint
will stand modified with respect to the rate of interest. The High Court has
awarded interest at the rate of 13% per annum on the decretal amount of Rs.
1,23,111.37 paise w.e.f. 5th May, 1969 till realisation. In view ofour decision
interest will be payable on the said decretal amount at the rate of 6% per G
annum instead of 13% per annum. The decree on account of mesne profit as
per para 18(c) of the plaint stands modified with respect to the rate of interest
and the method of calculation of interest. Interest is to be calculated on the
amount of mesne profits arrived at on yearly basis at the rate of 6% per
annum for the entire period. On the final figure Rs. 39,41,920 interest is
payable at the same rate i.e. 6% per annum from 6th August, 1986 till H
248 SUPREME COURT REPORTS (2003) SUPP. 5 S.C.R.

A realisation. The appeals are disposed of accordingly. There will be no order
as to costs.

The plaintiff will pay court fee on the decretal amount in accordance
with law.

B C.A. Nos. 6432-34/1995 :

These appeals stand disposed of in terms of the above judgment.

C.A. Nos. 6484-86/1995 :

C These are cross appeals filed by the plaintiff in the suit against the
judgment and decree dated 23rd September 1993 passed by the Madras High
Court. The respondents' appeals against the said judgment are Civil Appeals
No. 6429-31/1995. All the appeals including the present appeals were heard
together and are being disposed of in terms of the judgment in C.A.Nos.
6429-3111995. In Civil Appeals No.6484-86/1995, the appellant was plaintiff
D in the suit. Two question have been raised. One pertains to reimbursement
regarding payment of gratuity alleged to have been made by the plaintiff to
the workers who came to her share along with the I/3rd share in the Bengorm
Tea Estate which she received in terms of the decree passed by the appellant
is with respect to the award of interest under the decree in her favour by the
E courts below.

So far as the question of reimbursement of the appellant regarding
amount of gratuity paid by her to the workers who came to her share along
with I/3rd share in the Bengorm Tea Estate allotted to her in terms of the
decree, the claim is totally untenable in our view. The learned counsel for the
F defendants submitted that in fact the defendants never wanted to transfer any
of the workers to the plaintiff. It was at the insistence of the plaintiff that
some of the workers were transferred to her. The plaintiffs insistence was on
account of the fact that she wanted trained workers to continue the operations
in the portion of tea estate which fell to her share. It is submitted on behalf
of the defendants that when the plaintiff took over a certain number of workers,
G all the obligations qua them would be deemed to be taken over by her. In our
view this submission has substance. The plaintiff was fully conscious of her
obligations qua the workers when she took them. It is also on record that the
plaintiff sold the part of the tea estate which came to her share, soon after
getting its possession. Therefore, we are not inclined to entertain the claim
H regarding liability towards gratuity with respect to the workers allotted to the
R.V. MADHVANI v. T.P. MADHVANI [SINHA, J.] 249

plaintiff on partition of the tea estate. This issue cannot be allowed to be A
reopened at this stage.

The other question raised in these appeals is regarding award of interest.
The same stands concluded by our judgment in C.A. Nos. 6429-31/1995. For
reasons stated in the said judgment, this claim is hereby rejected.
B
The result is that these appeals fail and are hereby dismissed with no
order as to costs.

S.B. SINHA, J. The predecessors in the interest to the parties have
been carrying on business in plantation and sale of tea under the name and
style ofBengorm Niligiri Plantations Company since 1954. The said Pravinlal C
Vithaldas Madhvani, the husband of the plaintiff-respondent was a partner in
the said firm having 30% share therein. The firm was reconstituted from time
to time. The firm was reconstituted on 14.12.68 with effect from 1.7.68.
Pravinlal died on 4th May, 1969. On his death the remaining partners
reconstituted the firm ignoring the claim of the plaintiff. She was not paid D
any amount towards her share. The Bengorm Tea Estate comprised of 417
acres of lands wherein Pravinlal had 33% interest. The said estate was a joint
family property and not an assets of the partnership firm.

In the aforementioned situation, a suit came to the filed by the plaintiff
herein praying inter alia for the following reliefs : E
"(a) Decree for partitions by mates and bounds of the Plaintiffs 33%
share in Bengorm Estate mentioned in Schedule to the Plaint <ind
separate possession thereof against defendants I to 4 and/or 6 in
severally.
F
(b) A decree for accounts against the defendants for the 30% share
of Pravinlal vithaldas Madhvani deceased in the defendant No. 6 in
respect of profits and monies to his credits and in the assets of the
firm including stocks in trade, stores and spares, standing crops,
investments, provisions, reserves and goodwill as mentioned in
paragraph 12 of the plaint and decree for the amount found to be due G
to the plaintiff as ascertained i11 this suit on enquiry with interest at
6% per annum from 4th May, 1969.

(c) Decree for accounts for mesne profits a11d/or illegal gains from .
5th May, 1969 till payment as mentioned in paragraph 13 of the
plaint and .decree for the amount found to be due to the plaintiff as H
250 SUPREME COURT REPORTS (2003] SUPP. 5 S.C.R.

A ascertained in this suit on enquiry with interest at 6% per annum from
the date herein.

(d) for appointment of Receiver

(e) for the costs of the suit, and
B (t) for such other reliefs as to this Hon'ble Court may seem fit and
proper in the circumstances of the case."

The Trial Court in terms of its judgment and preliminary decree dated
13.4. 1978 did not grant any relief in 1espect of prayers (a) and (c) treating
C the business as one run by the partnership and granted relief in favour of the
plaintiff in relation to prayer (b) only with 6% interest thereon. The plaintiff
thereagainst filed an appeal before the High Court. The High Court while
allowing the said appeal also granted enhanced interest at the bank rate
varying between 10% and 19%, upon allowing an application for amendment
of plaint claiming interest at the rate of 13% p.a. Two Special Leave Petitions
D filed by the appellants herein-one against the impugned judgment and the
other against the order allowing amendment were summarily dismissed by
this Court.

A final decree proceeding was thereafter initiated which was numbered
as O.S. No. 3of1986. I.A. No. 3of1987 was filed by the Plaintiff purported
E to be under Order 26 Rule 13 and Order 20 Rule 10 of Code of Civil
Procedure for passing a final decree for partition and award of mesne profits
in terms of the preliminary decree. I.A. No. 5 of 1987 was filed by her under
Order 20 Rule 12 and Section 151 of Code of Civil Procedure for passing a
decree for mesne profits for the period 5.5.1969 till the date of delivery of
F possession.

By a common judgment dated 6.1.1988, the learned District Judge
disposed of the said applications in terms whereof the Commissioner was
directed to sell the two bungalows, the factory and ancillary buildings by
holding a private auction amongst the parties and deposit the sale proceeds
G in the court. In I.A. No. 5 of 1987 the Court directed the defendants to pay
unto the plaintiff a sum of Rs. 12,51,762.46 with simple interest at the rate
of 13% per annum on 11,84,651.09 and with simple interest at the rate of 6%
per annum on Rs. 67,111.37 from 5.5.1969 till date of realisation. The
defendants were further directed to bear the proportionate costs of the suit.

H Being aggrieved thereby and dissatisfied therewith the plaintiff preferred
R.V. MADHVANI v. T.P. MADHVANI [SINHA. J.) 251

an appeal there against which was marked as A.S. No. 1305 of 1988. The A
defendants 1 to 4 and 6 also preferred an appeal against the said judgment
which was marked as A.S. No. 998 of 1988. The plaintiff also filed I.A. No.
3 of 1987 praying therein that possession of the properties to the extent of
her share be delivered free form all encumbrances like gratuity liability etc.
On 16.3.1988 an order was passed holding the defendant Nos. I to 4 liable B
to pay gratuity to workers from 5.5.1969 to 6.8.1986. The said order came
to be challenged by the defendants by filing a C.R.P. being No. 337 of 1989.
Another Interlocutory Application marked as I.A. No. 211 of 1988 was filed
to incorporate the two items "missing articles" and "gratuity deposits" in the
final decree passed in O.S. No. I of 1987 which was allowed. There against
also the defendants preferred an appeal before the High Court which was C
marked as A.S. No. 350of1988. On 14.12.1990 an order was passed in I.A.
No. 211 of 1988 amending the operative portion of the final decree
whereagainst also the defendants preferred a civil Revision Application marked
as C.R.P. No. I 008 of 1991. The trial judge further made some correction in
the decree which again became a subject matter of Civil Revision Application
before the High Court. By reason of the impugned judgment the High Court D
disposed of all the matters. The parties herein have preferred three appeals
before this Court against the judgment of the High Court.

Various other interlocutory applications were also filed before the District
court. The orders passe thereon were subject matter of different Civil Revision E
Applications, details whereof are not required to be adverted to herein.

In the said proceedings, it is pertinent to note that Receiver and joint
Receiver had been appointed.

The High Court having regard to the nature of controversy and upon F
taking into consideration the fact the mesne profits were required to be
evaluated, at the suggestions of the parties, appointed a Commissioner.

The Commissioner, inter alia, upon examining the books of accounts
of the partnership firm submitted a report before the High Court. The plaintiff
filed objections thereagainst. It was directed that the report of the G
Commissioner shall be taken on file in A.S. no. 998 of 1998 and would be
considered at the time of the hearing of the first appeal. The High Court did
not accept the Commissioner's report on assigning sufficient and cogent reasons
therefor. In doing so, it inter alia took into consideration the observations
made by it on the earlier round of litigation namely A.S. No. I 037 of 1978
to the effect that the defendants had every reason to manipulate the accounts H
252 SUPREME COURT REPORTS [2003) SUPP. 5 S.C.R.

A because they intended to deprive the plaintiff of their due share. It also took
into consideration the fact that at the initial stage of the litigation the defendants
had made an offer of only Rs. I, 12,064.15 towards the interest of the plaintiff
in relation to the valuable assets belonging to her husband. It further opined
that the books of accounts whereupon the Commissioner had relied upon was
B .not proved by the )th defenda11t who, according to the second defendant,
knew thereabout entry by entry. Mr. Ramnik, the second defendant, who
examined himself as R.W.1. according to the High Court, did not know about
the entries in the books of accolfllt. The High Court was furthermore of the
opinion that the entries in the booK~ of account were required to be proved
by independent materials and they by themselves are not admissible as
C evidence. The High Court further pointed out that the defendants have
committed several irregularities in maintaining the books of account stating:

"All the family members of the defendants have been operating the
accounts. The personal expenses of the defendants and their family
members are debited to the account of the firm. It is even seen that
D several foreign trips undertaken by the second defendant and his wife
were made at the expenses of the firm. Even small items of expenditure
like personal gifts made to sisters, hotel expenses, club expenses and
the like find a place in the firm Accounts. Defendants cannot be
heard to say that club expenses and travel expenses were intended to
promote the business since during the life time of Pravinlal no such
E expenses were incurred by the Firm. Further we find from Ex. A-129
that there were over drawings made by the defendants even beyond
their capital contribution. And all the monies borrowed form Central
bank of India were diverted by the defendants to their own other
Companies like Kodanandu Estate, Koshipathi Estate and Powraj
F Chemical etc."

It also noticed the fact that the defendant had entered into transaction
with their sister concerns.

Before the High Court, it is relevant to notice that it was contended that
G the genuineness of the said books of account was not disputed. The books of
accounts, it was urged, also came to be accepted by the Income-Tax
Department.

The High Court, however, on analyzing the materials on record found
the said pleas to be unacceptable. By way of example, it noticed that while
H the price of green leaves per kilogram of tea was Rs. 1.25, such leaves were
R.V. MADHVANI v. T.P. MADHVANI [SINHA, J.) 253
purchased from kodanad Tea Estate, a sister concern of the defendants at the A
price of Rs. 2.75 per kilogram. It was also found that no such admission was
made on behalf of the plaintiffs. It was observed:

"Even assuming that there was such an admission by the counsel, it
would not certainly bind the plaintiff."
B
As regard quantification of the mesne profit, the High Court relied
upon various circumstances in support of its conclusions. It noticed that the
tea Estate was making profit since 1954. It was observed that even when the
area was gong through severe drought the tea Estate at the hands of joint
Receiver made a sizeable profit in 1986 and, thus, was capable of making a C
sizeable profit throughout. The High Court pointed out that the firm had been
earning profits from 1960 to 1968 o.f more than Rs. 3'h lakhs per annum
except in 1964 when the profit earned came down to Rs. 2,35,502.47 and as
such there was no reason as to why the profit should have come down after
1969. In the aforementioned situation the High Court calculated the quantum
of mesne profit on the basis of the profits earned by the joint Receiver from D
6.8.1986 onwards for a period of 21 months. The High Court further noticed
that the defendant has not exhibited any document to show the profits for the
period 1.7.1985 to 5.8.1986 and the Commissioner, thus, committed a manifest
error in failing to take note thereof. It was further pointed out that even
account of 1985-86 was not produced by the defendants. It found that the
Commissioner without any basis whatsoever arrived at certain figures for the E
subsequent period beginning from I. 7 .1985 holding:

"It is not known how the Commission got the figures for the subsequent
period from 1.7.1985. If the plaintiffs share in the profits for the
period 1-7-1985 to 6-8-1986 is to be calculated on the basis of the F
receivers accounts for the period 6-8-1986 to 4-5-1988, the amount
would come to Rs. 7,32,969.63. Even if the amount is calculated on
the basis of the profits for the year ending 30-6-1985, it will be more
than Rs. 7,00,000. Even as it is, the Commission has worked out the
share of the plaintiff at Rs. 33,32,847.63. If the share of the plaintiff
for the period 1.7.1985 to 5.8.1986 is calculated as above, the total G
will exceed Rs. 40,00,000 which will be more than the total amount
claimed by the plaintiff."

It was further noticed that in any event the plaintiff could not be made
liable for any part of the loss purported to have been suffered by the firm as
H
254 SUPREME COURT REPORTS [2003] SUPP. 5 S.C.R.

A it was for it to compensate the Plaintiff for the user of her share in the
immovable properties and the mense profit has to be worked out only after
payment of such compensation. It, thus, came to the conclusion that irrespective
of the fact as to whether the firm was earning any profit or not, the plaintiff
was entitled to be suitably compensated.

B The Court found that even if the Commissioner's report after making
necessary correction of the mistakes contained therein is accepted, the plaintiff
would be entitled to mesne profit amounting to a sum of Rs. 47,00,000 which
would exceed the amount claimed by her.

The Court noticed that the Auditor had filed a calculation memo
C wherefrom it would appear that the plaintiffs claim for her I/3rd share of
mesne profits crimes to Rs. 1,63,08,623. The said figure was arrived at on the
basis of the capital value of the entire tea Estate being Rs. 32,00,000 in 1969.
The High Court observed:

"P.W. 2 Guha the Auditor has filed a calculation memo regarding the
D
plaintiffs claim for her 113 share of mesne profits at Rs. 1,63,08,623.
He states in his evidence that his calculation is based on the capital
value of the entire Tea Estate. He has adopted the value of the entire
Estate Rs. 32,00,000 in 1969 and proceeded to estimate the reasonable
return at the rate of 10%,ofthe value. The value of the plaintiffs 33%
E share in the entire Estate in 1969 was Rs. I0,56,000. On the basis of
I0% of the value of plaintiffs 33% share he arrived at the figure Rs.
1,08,000. He has added interest to the return from the capital and
shown the amount due as Rs. 2,51, 748. He took into account the
increase in the value of the Estate during the five years and fixed the
annual return from the property in 1975 at Rs. 2,00,000. From 1975
F to 1979 he has estimated the return on this basis. For the next period
from 1980 he calculated the return at Rs. 3,00,000 per annum. From
1985 he has proceeded on the basis that the annual return at Rs.
4,00,000. He has calculated interest on the basis of bank lending rate.
On the basis of the above said mode of the calculation as on 4.5.1986
G according to him the value of the plaintiffs 1/3 share of mesne profits
was Rs. 1,63,08,623.

The High Court further considered the matter from another angle that
is to say as to what amount the 'Estate' could have earned had it been given
on rent and on the said basis it came to the conclusion that even 33% share
H belonging to Pravinlal would have fetched Rs. 1,56,9582.17. It further took
R.V. MADHVANI v. T.P. MADHVANI [SINHA, J.] 255
into consideration the profit which was being earned by the competing A
neighbouring tea estates. According to p.w 3 the plaintiff's share of mesne
profit for the relevant period would have been calculated at Rs. 1,68,99,813.
It was in the aforementioned premise the High Court held that the plaintiff
was at least entitled to the amount Rs. 39,41,000 as claimed by her. It further
opined that the reference to the Commissioner by the High Court was not in B
accordance with rules inasmuch as a Commissioner appointed in terms of the
provisions of the Code of Civil Procedure could not have been made a quasi
arbitrator although the law relating to arbitration was not to be made applicable.

The submission of Mr. Ramamoorty is that having regard to the fact
that the parties are co-owners, the question as regard quantification of mesne C
profit should have been considered strictly in terms of order 20 Rule 12 of
the code of Civil Procedure. The learned counsel would contend that having
regard to the fact that there has been no suppression as regard the quantum
of yield of tea from the tea estate and as no major irregularities have been
found in respect thereof, the Commissioner could not be held to have
committed a manifest error in relying on the books of account maintained by D
them. We do not agree.

Mesne profit has been defined in Section 2(12) of the Code of Civil
Procedure to mean as profits which the person in wrongful possession of
property actually received or might with ordinary diligence would have
received therefrom together with interest on such profits. E
A decree for mesne profit was granted in favour of the plaintiff
respondent for wrongful use of the property. The quantum of mesne profit
can be arrived at by the High Court keeping in view the well-known principles
of valuation for determining the same. The Court is not enjoined with any F
duty to accept the quantification determined only on the basis of books of
account maintained by the defendants, particularly when the same had not
been proved. The High Court in our opinion has rightly considered the matter
from different angles. Even if any of the methods adverted to the High Court
and referred to hereinbefore is adopted, the plaintiff would have been entitled
to much more amount than claimed by her. We are, therefore, of the opinion G
that the findings of the High Court being just and proper need not be interfered
with.

So far as the question of rate of interest is concerned, it may be noticed
that the High Court itself found that the rate of interest should have been
determined at 6%. The principles of res judicata which according to the High H
256 SUPREME COURT REPORTS [2003] SUPP. 5 S.C.R.

A Court would operate in the case, in our opinion, is not applicable. Principles
of res-judicata is a procedural provision. The same has no application where
there is inherent lack of jurisdiction.

In Chief Justice of A.P. and Anr. v. L. V.A. Diskhitulu and Ors. etc.,
AIR (1979) SC 193 : [I 979] 2 SCC 34, the law is stated in the following
B tenns:

"23. As against the above, Shri Vepa Sarathy appearing for the
respective first respondent in C.A. 2826 of 1977, and in C.A. 278 of
1978 submitted that when his client filed a writ petition (No. 58908
of 1976) under Article 226 of the Constitution in the High Court for
c impugning the order of his compulsory retirement passed by the Chief
Justice, he has served, in accordance with Rule 5 of the Andhra
Pradesh High Court (Original Side) Rule, notice on the Chief Justice
and the Government Pleader, and, in consequence, at the preliminary
hearing of the writ petition before the Division Bench, the Government.
D Pleader appeared on behalf of all the respondents including the Chief
Justice, and raised a preliminary objection that the writ petition was
not maintainable in view of Cl 6 of the Andhra Pradesh Administrative
Tribunal Order made by the President under Article 371-D which had
taken away that jurisdiction of the High Court and vested the same
in Administrative Tribunal. This objection was accepted by the High
E Court, and as a result, the writ petition was dismissed in limine. In
these circumstances-proceeds the argument-the appellant is now
precluded on principles of res judicata and estoppel from taking up
the position, that the Tribunal's order is without jurisdiction. But,
when Shri Sarathi's attention was invited to the fact that no notice
F was actually served on the Chief justice and that the Government
Pleader who had raised this objection has not been instructed by the
Chief Justice or the High Court to put in appearance on their behalf,
the counsel did not pursue this contention further. Moreover, this is
a pure question of law depending upon the interpretation of Article
371-D. If the argument holds good, it will make the decision of the
G Tribunal as having been given by an authority suffering from inherent
lack of jurisdiction. Such a decision cannot be sustained merely by
the doctrine of res judicata or estoppel as urged in the case."

In Dwarka Prasad Agarwal (D) by Lrs. and Anr. v. S.D. Agrawal and
Ors., [2003] 6 SCC 230, it is stated:
H
R.V. MADHVANI v. T.P. MADHVANI [SINHA, J.] 257

"It is now well-settled that an order passed by a court without A
jurisdiction is a mullity. Any order passed or action taken pursuanr
thereto or in furtherance thereof would also be nullities. In the instant
case as the High Court did not have any jurisdiction to record the
compromise for the reason stated hereinbefore and in particular as no
writ was required to be issued having regard to the fact that public B
law remedy could not have been resorted to the impugned orders
must be held to be illegal and without jurisdiction and are liable to
be set aside. All orders and actions taken pursuant to or in furtherance
thereof must also be declared wholly illegal and without jurisdiction
and consequently are liable to be set aside. They are declared as
such." c
In Mis Shree Bharat Laxmi Wool Store, Panipat and Ors. v. Punjab
National Bank and Anr., [1992] I SCC 204, this Court held:

"In the instant case the suit was filed on April 20, 1972. The
amendment of Section 34 referred to above, therefore, clearly is not D
applicable. The Court is required to allow proper rate of interest
under the unamended Section 34. As we have seen earlier Section 34
has two parts, first part covering the period from the date of suit till
the date of decree and second covering the period from the date of
decree till the date of payment. We are concerned only with the
second part. The trial court has awarded interest more than 6 per cent E
under the unamended provisions for the period from the date of decree
till payments. The High Court appears to have not noticed the non-
applicability of the amendment to suits filed prior to the amendment."

We, therefore, are of the opinion that in the facts and circumstances of
the present case, the principles of res judicata was not applicable. F
The only other question which survives for consideration is computation
of net amount payable in terms of the decree in relation to prayer (b) of the
suit as determined in the final decree dated 6.1.I 988. In the suit a decree in
respect of the following items was played for :
G
"(i) 30% share of profit and monies lying to the credit of Late Pravinlal
Madhani in the assets of partnership firm Mis Bengurm Tea Plantation
Company as on 4.5.1969 on account of dissolution of the said firm
upon death of Late Pravin Madhavani and 33% share in the capital
assets and goodwill of the said firm. H
258 SUPREME COURT REPORTS [2003] SUPP. 5 S.C.R.

A (ii) Stock in trade as on 4.5.1969 - 30% share
(iii) Stores and Spares as on 4.5.1969 - 30% share
(iv) Standing Crops as on 4.5.1969 - 30% share
(v) Investments as on 4.5.1969 - 30% share

B (vi) Provisions as on 4.5.1969 - 30% share
(vii) Reserves as on 4.5.1969 - 30% share
(viii) Goodwill as on 4.5.1969 - 33% share
(ix) Capital assets as on 4.5.1969 - 33% share

c Admittedly, no appeal was filed against the preliminary decree. Thus,
it attained finality. The Trial Court in its judgment found that a sum of Rs.
5,34,993.94 is due to the plaintiff; wherefor the loan taken by the husband
of the plaintiff as proprietor of Darjeeling Tea Plantation Company and
liabilities towards Income Tax adjusted had already been deducted, the details
D whereof are as under :
"Amount found payable Rs. 5,34,993.94
Less DTP Loan Rs. 4,13,364.24
Less towards Income tax Rs. 20,996.00
Less towards Firms' Tax Rs. 33,522.33
E (his share - 30% of Rs.
1,11,741.10)
Rs. 4,67,882.57 Rs. 4,67,882.57
Balance Rs. 67,111.37
F Missing Articles Rs. 56,000.00

Total Rs. 1,23,111.37

The amounts receivable by the plaintiff were as under:

G Share in the assets of the firm:
(I) 30% share of 4,17,687.31 being Rs. 1,25,306.34
difference of receivable over payable
as per Balance Sheet of 4.5.1969

H (2) 30% share of further claims on pro-rata Rs. 23, I 02.98
R.V. MADHVANI v. T.P. MADHVANI [SINHA, J.] 259
basis for 4.5.69 on the basis of balance sheet A
and profit & loss account as on 30.6.69

(3) 33 share in the Goodwill of the firm as Rs. 3,45,139.34
on 4.5.69 Rs. 4,93,548.64

Add: Balance in current Account or Rs. 3,870.00 B
4.5.69 before crediting profit for the period Rs. 4,97,418.64
4.5.69

Add: Profit actually credited in Balance
Sheet on 4.6.69 Rs. 3870 + 9480 • c
13359) as in Bengorm Niligiri Plantations Rs. 9,489.64
Co; Rs. 5,06,907.64

Less: Amount due by Darjeeling Plantations
Co. in the book of Bengorm Niligri Plantation Rs. 4, 13,364.24
Co. Rs. 93,543.40 D

II. OTHER ADJUSTMENTS:

Amounts due being refunds of IT and Agril
IT as per accounts Rs. 10,575 E
Amounts due by us for payments made by
Bengorm for IT and Agril Rs. 20,996
The following chart shows the accounts as prepared by the parties.
(As shown on next page). F
\.
N

Closing Stock
RECEIVABLE
Rs. 1,39,585.30
PAYABLE
Sundry Creditors Rs. 2,02,655.27
°'
0

(Stock in trade &
transit)
Development rebate Rs. 1,43,436.14 Loans & Overdrafts Rs. 13,66,332.13 Rs. 15,68,982.40
reserve
Iniral depreciation Rs. 31,986.26 Difference of Receivable Rs. 4,33,193.43
over payable carried
forward en
Provision for Gratuity Rs. 3107.37 c:::
Provisions for Taration
Stores·& Space
Rs. 1,27,246.74 ""'tT1
::0
Rs. 1,03,957.90
Investments Rs. 17,787.00 a::tT1
Deposits & Prepaid Rs. 21,428.91 n
Expenses 0
Loans and Advances Rs. 13,70,828.52 c:::
::0
....,
Sundry Debtors Rs. 36,612.27
Cash & Bank Balances Rs. 6.184.44 Rs. 20.02.180.85 Tax Payable Rs. 20,02,180.85 ::0
tT1

Difference brought Rs. 4,33,193.45 Total provision for Rs. 1,27,246.74 ""'
0
::0
....,
forward Taxation
en
Less: Total tax paid Rs. 1,11,741.10 Rs. 15,505.64
~
as per Loans & advances 0
Difference of Receivable ....
0

over payable carried en
toward Rs. 4,17,687.81 c:::
Rs. 4,33,193.45 Rs. 4,33,193.45
""''.""
..,.
Difference brought Rs. 4,17,687.81 en
forward
n
?
R.V. MADHVANI v. T.P. MADHVANI [SINHA, J.] 261

The amounts receivables, inter alia, are closing stock, stores and spares A
and loans and advances. So far as the closing stock is concerned, the plaintiff
stated that the defendants inclusion of Rs. 1,39,685.80 on 4.5.1969 is a
duplicate one as on the said date they had shown the profit and loss as
income as also on the assets side in the balance sheet of Bengorm Nilgiri
Plantations Co. On 30.6.1969 being the same financial year, they have also B
taken the same amount from the income and, thus making nil profit towards
that. It has, therefore, been contended that this amount is an asset and rightly
included as a receivable.

Pro-rata profit to the extent of Rs. 23, 102.96 has been claimed as the
defendants have shown a larger profit during the period 5.5.1969 to 30.6.1969 C
and less profit from 1.7.1968 to 4.5.1969. A higher profit has been shown for
a period of I month 27 days and less profit has been shown for 308 days.
The plaintiff claimed the entire amount having regard to the fact that the
profit of the whole year has been apportioned. We do not see any illegality
in the order of the High Court in this regard.
D
So far as the goodwill is concerned, the submission of Mr. Naik is that
the goodwill of the tea estate had been offered to the plaintiff but she declined
the same. Further contention of Mr. Naik is that as the plaintiff has sold her
share in the tea estate for a sum of Rs. 90 lakhs including goodwill of the
firm; she cannot claim the same. Further contention of Mr. Naik is that as the
tea is sold at auction house, it having no brand name did not have any E
goodwill.

"Goodwill'', as Lord Machaghten described a thing very easy to describe,
very difficult to define, in Inland Revenue Commissioner v. Muller & Co.,
[1991] AC 2231. p
The term 'goodwill' signifies the value of the business in the hands of
a successor, so far as increased by the continuity of the undertaking being
preserved in the shape of the right to use the old name and otherwise. It is
something more than a mere chance of probability of old customers
maintaining their connection, though this is a material part of the practical G
fruits. 'Goodwill' may be the whole advantage belonging to the firm, its
reputation as also connection thereof. It, thus, means that every affirmative
advantage as contrasted with negative advantage that has been acquired in
carrying on the business whether connected with the premises of business or
its name or style everything connected with or carrying the benefit of the
business. H
262 SUPREME COURT REPORTS [2003) SUPP. 5 S.C.R.

A In Halsbury's Laws of England (Fourth Edition) Volume 35 at page
114, the law is stated in the following tenns:

"20 I. Goodwill generally; right to use name; sale to a partner. The
goodwill of the business carried on by a partnership fonns part of the
assets to be realised on distribution. If the goodwill is not sold, each
B partner may use the name of the finn, if by doing so he does not hold
out the other partners as still being partners with him. If a partner
agrees to retire and his partners buy this share but do not take any
express assignment of the goodwill, they are not entitled to continue
the use of his name as part of the finn name, and where a business
is carried on under the name, solely or with any addition, of an
c outgoing partner who is still living and not bankrupt, a purchaser of
the business including the goodwill is not entitled to use the name of
the outgoing partner in such a way as to suggest that he is still
connected with the business, unless the right to use the finn name is
expressly assigned. On dissolution, a partner may advertise that he is
D no longer connected with a periodical that the firm publishes.

Where the goodwill becomes on dissolution the property of one
of the partners (either by purchase in the ordinary way or pursuant to
a provision in the articles), the outgoing partner or partners may not
carry on a similar business in the name of the old finn, and may not
E solicit only customers,"

The goodwill is generally considered to be an asset of the partnership.
In the aforementioned volume of Halsbury's Laws of England at page 116,
it is further stated :

F "204. When goodwill is to be treated as an asset. Althoµgh, generally,
the goodwill should be included where, under the partnership articles,
a general account and valuation is to be taken on the death of a
partner, the value of the goodwill should not, in the absence of contrary
agreement, be included in the firm's periodical balance sheets; and,
therefore, where the value of the shate of a deceased partner is, by
G agreement, governed by the balance sheet, his estate is not entitled to
treat the goodwill as an asset.

Where a surviving partner sells the partnership business, the estate
of his deceased partner is entitled to a share of the purchase money
representing, the value, if any, of the goodwill; but, having regard to
H
R.V. MADHVANI v. T.P. MADHVANI [SINHA, J.) 263
the rights of the surviving partners to carry on a similar business, this A
value may be infinitesimal.

It is unlawful for a medical practitioner whose name is entered on
any list or medical practitioners undertaking to provide general medical
services under the national health service to sell any part of the
goodwill of his medical practice." B
The goodwill has been claimed for the firm's continuous business since
I 954. The court has proceeded to calculate the amount of goodwill on the
basis of the profits derived by the firm for the last five years on an average.
It is not contended that such a method is unknown in commercial field.
Whenever a firm is dissolved the value of the goodwill has to be worked out C
and divided between the partners.

The district judge as also the High Court had assigned sufficient and
cogent reasons for awarding a sum of Rs. 3,45, 139.14 towards the plaintiffs
share in goodwill. The second defendant examining himself categorically D
stated that the firm is the only one which has been continuously doing business
since I 954. We do not, therefore, find any infirmity in the judgment of the
courts below in this regard.

So far as the loan amount to Rs. 4, 13,364.24 is concerned, it appears
that the same stood adjusted as far back as in the year 1972. E
·The learned District Judge in his judgment has recorded:

"The debt due from M/s. Darjeeling Tea Plantations Compan~ stands
adjusted by taking of accounts as per Ex. A24. The 6th respondent
obtained the Reserve Bank permission Ex. B666 and has adjusted the F
debt due from Darjeeling Tea Plantation Company to Bengorm firm
on 24.6.1972. In the Balance sheets subsequent to 1972, the Darjeeling
Tea Plantations Company is not shown as a debtor and demand of
payment was not made."

It was further observed: G
The debt due from the Darjeeling Tea Plantations Company to the
Bengorm firm has been adjusted in 1972 and the debt is no longer
subsisting and no amount is due from Darjeeling Tea Company to the
Bengorm firm is the admission of R.W. 3. The debt due from
Darjeeling Tea Plantations Company has been adjusted as on 4.5. I 969 H
264 SUPREME COURT REPORTS (20031 SUPP. 5 S.C.R.

A as per the admission of R.W.3. The debt due from Darjeeling Tea
Plantations Company to the Bengorm firm has to be adjusted as on
4.5. I969 is admitted by the respondents I to 6 in paragraph 29 of Ex.
AI09."

The claim of the appellant to the effect that the plaintifrs husband was
B liable to pay 13% interest to the defendants has been rejected by the High
Court inter alia on the ground that no such case had been made out in the
written statements. Even no counter claim therefor was filed.

We, therefore, accept the reasonings of the High Court recorded in
relation to the said items.

For the reasons aforementioned. I respectfully agree with the opinion
of Brother Arun Kumar. J.

B.K.M. Appeals dismissed