The judgment establishes the importance of evidence and normal human behavior in determining the nature of financial transactions and the use of compensatory interest to prevent misuse of litigation.

Rajiv Sahai Endlaw, J.

1. The appeal impugns the judgment and decree (dated 30th November, 2004 of the Court of the Additional District Judge (ADJ), Delhi in Suit No.194/2003 filed by the deceased respondent/plaintiff) for recovery of Rs.8,40,000/-jointly and severally from the three appellants/defendants together with costs and interest pendente lite and future @ 10% per annum.

2. Notice of the appeal was issued and subject to the appellants/defendants depositing the entire decretal amount in this Court, execution was stayed. In compliance therewith, a sum of Rs.8,40,000/- only was deposited and no amount of interest pendente lite and till the date of deposit, also decreed was deposited by the appellants/defendants. However, no objection in this regard was taken by the deceased respondent. The amount deposited was ordered to be kept in a Fixed Deposit Receipt (FDR). The appeal was on 2nd March, 2006 admitted for hearing and the earlier interim order made absolute.

3. The counsels for the parties have been heard.

4. The counsel for the appellants/defendants has contended that out of the decretal amount of Rs.8,40,000/-, Rs.5,25,000/-was the principal amount and the balance was the interest @ 24% per annum till the date of institution of the suit. He further contended that the principal amount of Rs.5,25,000/-also comprises of two components i.e. Rs.4,40,000/-, the decree for recovery of which is challenged and the sum of Rs.85,000/-, the decree for recovery of which part is now not challenged by the appellants/defendants. He further contended that the appellants/defendants however challenge the grant of pre-institution interest @ 24% per annum on the said sum of Rs.85,000/- as well.

5. The counsel for the appellants/defendants has further contended,

(i) that the deceased respondent was a partner in the appellant/defendant No.1 along with the appellants/defendants No.2 & 3 for nearly 31 years;

(ii) that the said partnership firm was dissolved with effect from 31st March, 1991, with the deceased respondent / plaintiff opting to retire therefrom and the appellants/defendants No.2 & 3 namely Mr. Hans Raj Kapur and Mr. Rakesh Kapur opting to continue the partnership business;

(iii) that two documents i.e. Dissolution Deed and an Agreement, both dated 31st March, 1991 were executed by the parties in this regard and whereunder the appellants/defendants agreed to pay and the deceased respondent/plaintiff agreed to receive a total sum of Rs.5,00,000/- out of which Rs.1,15,000/-was paid and receipt thereof acknowledged in the documents itself and the balance Rs.3,85,000/- was agreed to be paid vide post dated cheques dated 28th April, 1991, 28th May, 1991, 28th July, 1991, 28th August, 1991 all for Rs.75,000/- and cheque dated 28th September, 1991 for Rs.85,000/-;

(iv) that the deceased respondent / plaintiff however filed the suit for recovery of Rs.4,40,000/- aforesaid on the basis of yet another cheque dated 10th April, 1991 of the appellant/defendant No.1 firm in favour of the deceased respondent, claiming that the said amount of Rs.4,40,000/- had also been agreed to be paid by the appellants/defendants to him in settlement of the accounts of the erstwhile partnership but had been returned dishonoured;

(v) that the appellants/defendants contested the suit, by not disputing the issuance of the said cheque of Rs.4,40,000/- but pleading the same to have been issued towards a friendly loan agreed to be advanced by the appellants/defendants to the deceased respondent / plaintiff with whom they had a 31 years relationship and that though the appellants/defendants subsequently on account of their financial hardship had asked the deceased respondent / plaintiff not to present the said cheque but the deceased respondent / plaintiff presented the cheque and upon dishonour thereof, filed the suit for recovery of the amount thereof;

(vi) that there could be no payment of Rs.4,40,000/- due to the deceased respondent / plaintiff t