Bombay High Court
Skf India Limited vs Banarasi Lal Madan on 2 January, 2024
Author: N.J.Jamadar
Bench: N.J.Jamadar
2024:BHC-OS:42
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IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION
IN ITS COMMERCIAL DIVISION
SUMMARY SUIT NO.5 OF 2003
SKF India Ltd.
A company formed and incorporated
under the Companies Act, 1956 and
having its registered office at Mahatma
Gandhi Memorial Building, Netaji
Subhash Road, Mumbai - 400 002. ... Plaintiff
versus
Banarasi Lal Madan, an Indian
Inhabitant of Mumbai carrying on
business in the name and style of
National Machinery Stores having
his office at 77, 83, Nagdevi Street,
J.K.Chambers, Mumbai - 400 003 ... Defendant
Mr. Prashant Chavan with Mr. Sachin Kudalkar, Mr. Murari Madekar i/by M/s.
Madekar and Co., for Plaintiff.
Mr. Ankit Rajput i/by Mr. Manoj Bhatt, for Defendant.
CORAM : N.J.JAMADAR, J.
RESERVED ON : 27 JUNE 2023
PRONOUNCED ON : 2 JANUARY 2024
JUDGMENT :
1. This commercial division Summary Suit is instituted for recovery of a
sum of Rs.128,80,060.87 along with interest @ 18% p.a. from the date of institution of
the suit till payment and/or realisation.
2. The material averments in the plaint can be stated in brief as under :
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2.1 The Plaintiff is engaged in the business, inter alia, of manufacture and
sale of ball and roll bearings. The Plaintiff sells the goods to its various stockists on
principal to principal basis. The Defendant, who is the proprietor of National
Machinery Stores, also deals in the business as authorized stockist for the Plaintiff of
the goods manufactured by the Plaintiff.
2.2 Over the years, there have been transactions between the Plaintiff and
Defendant in the said jural relationship. During the period commencing from
September 1999 to November 2000, the Defendant had placed orders for sale and
delivery of ball and roll bearings. Pursuant to the said orders, the Plaintiff had sold
and delivered goods to the Defendant by raising diverse invoices, aggregating to
Rs.1,42,40,710.59. The Defendant had accepted the delivery of the goods without any
dispute or demur.
2.3 The Defendant, however, committed default in payment of the price of
the aforesaid goods. The Plaintiff repeatedly pursued the matter of unpaid price.
Vide letter dated 19 August 2000, the Plaintiff had called upon the Defendant to pay
the outstanding amount. In response thereto, vide letter dated 5 September 2000, the
Defendant, the Plaintiff claims, admitted its liability to pay the unpaid price and
undertook to pay the outstanding amount in the schedule incorporated therein.
2.4 The Plaintiff avers, the Defendant had also drawn three cheques bearing
Nos.152751, 152758 and 119848 aggregating to Rs.13,60,649.72 towards partial
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discharge of the liability. Two more cheques bearing Nos.119847 and 120009 for
Rs.23,64,388.04 and Rs.25,08,682.51, respectively, were also drawn. The first three
cheques drawn for Rs.13,60,649.72 were encashed on presentment. The Defendant,
however, requested the Plaintiff not to deposit rest two cheques by giving an assurance
that the outstanding amount would be paid by 10 January 2001. As the Defendant did
not honour the commitment, two cheques drawn for Rs.23,64,388.04 and
Rs.25,08,682.51 were presented for encashment. However, those cheques were
dishonoured on 20th and 25th January 2001, respectively.
2.5 The Plaintiff asserts, upon dishonour of the cheques, vide letter dated 29
January 2001, the Defendant malafide raised a contention that the cheques were not to
be presented for encashment. Thereupon, the Plaintiff addressed a demand notice on
9 February 2001. Instead of complying with the demand in the said notice, the
Defendant, vide Reply dated 5 March 2001, raised false and frivolous contention that
the Defendant was not liable to pay the price of the goods sold and delivered under the
invoices. Further correspondence was exchanged.
2.6 As the Defendant failed to pay the outstanding amount, the Plaintiff was
constrained to lodge a complaint under Section 138 of the Negotiable Instruments
Act, 1881 and institute this suit on the basis of the invoices raised by the Plaintiff,
admission of liability in writing by the Defendant vide communication dated 5
September 2000 and the two dishonoured cheques and, thus, the Summary Suit. In
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view of the admission of liability vide letter dated 5 September 2000, the suit was
stated to be not barred by law of limitation.
3. In the Summons for Judgment taken out by the Plaintiff, leave to defend
the suit was granted on the condition of making deposit. By complying with the said
condition, the Defendant has filed written statement and resisted the suit. The
substance of the resistance put-forth by the Defendant can be summerised as under :
3.1 That the suit has not been properly instituted. Plaint has not been
presented by a person properly authorized by the Plaintiff, which is a corporate entity.
Neither the plaint has been signed by any director of the company, nor Ramesh C.
Pandya who has signed the plaint, has been authorized to sign and verify the plaint.
Thus the suit having been instituted without any authority, is not maintainable and,
therefore, deserves to be dismissed on the said count.
3.2 The tenability of the suit was also questioned on the ground that the
Plaintiff has not produced the documents on which the suit is based, in conformity
with the provisions of Order 7 Rule 14 of the Code of Civil procedure, 1908.
3.3 The suit was stated to be barred by law of limitation as well. Out of 97
invoices, as particularized in the particulars of claim (Exhibit 1), 69 invoices were
stated to have been raised more than three years prior to the institution of the suit and,
therefore, the suit based on those invoices was ex-facie barred by the law of limitation.
3.4 The tenability of the suit was also assailed on the ground that it does not
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fall within the province of Order 37 of the Code. It was contended that the suit was
not based on the invoices as alleged. Secondly, the alleged acknowledgment of the
liability vide letter dated 5 September 2000 was of no avail as the letter dated 5
September 2000 was neither signed by the Defendant, the sole proprietor of M/s.
National Machinery Stores, nor anybody authorized by or on behalf of the Defendant.
The said acknowledgment dated 5 September 2000, was alleged to be false and
fabricated. In any event, even if Harish Madan was assumed to have signed the said
letter dated 5 September 2000, it did not constitute an acknowledgment of liability as
it has neither been executed by or on behalf of the Defendant, nor does it contain
promise or agreement to pay the amount to the Plaintiff. It was further contended that
the Summary Suit on the basis of dishonoured cheques was also legally unsustainable.
At any rate, since the aggregate amount of dishonoured cheques does not exceed Rs.49
Lakhs, the said claim of Rs. 128,80,060.87 was wholly misconceived.
3.5 The Defendant contended that the suit was essentially one for accounts
and for an amount alleged to be at the foot of account and not a suit which would fall
within the ambit of Order 37 of the Code.
3.6 On merits, the Defendant contended that the Plaintiff had suppressed
the real nature of the transaction between the parties and the understanding, subject
to which the post dated cheques were delivered by the Defendant to the Plaintiff. The
Plaintiff and Defendant have had regular transactions since the year 1985-86. The
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Defendant was made to submit annual indent of bearings required by the Defendant.
Along with the indent, the Defendant was made to deliver post dated accommodation
cheques. The Plaintiff was to encash those cheques only upon delivery of the goods
for the amount covered by those cheques.
3.7 The Defendant contends, the Plaintiff did not supply the goods in
accordance with the indent. Supplies were irregular and the Plaintiff, abusing its
monopolistic position in the industry, dumped slow moving bearings with the
Defendant and other stockists and withheld the supply of fast moving stock.
Resultantly, the Defendant suffered heavy losses as large quantities of slow moving
bearings pilled up as dead stock.
3.8 Adverting to the alleged monopolistic and abusive practices resorted to
by the Plaintiff, the Defendant contends, despite not supplying the goods as per
indents, the Plaintiff continued to collect post dated accommodation cheques from the
Defendant, before making supplies. To mitigate the losses, the Plaintiff eventually
devised a scheme of providing pecuniary benefits as "adjustment customers". The
Plaintiff, however, did not provide benefit despite sharing incomplete and truncated
statement of accounts. If the Defendant is given benefit of "adjustment customer"
Scheme, in fact, the Defendant would be entitled to recover money from the Plaintiff.
3.9 With regard to the transaction in question, the Defendant categorically
denied that any purchase orders were placed for the supply of the goods. The Plaintiff
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has misused the custody of the post dated cheques delivered as advance payment
against the future sale and delivery of the goods. It was denied that the Plaintiff had
sold and delivered the goods under the suit invoices for an aggregate value of
Rs.1,42,40,710.59.
3.10 According to the Defendant, the goods were always sold and delivered
against an advance payment and only on receipt of the price the goods were supplied.
Three cheques which were encashed by the Plaintiff were not to be presented for
encashment. Those three cheques were out of numerous cheques delivered by the
Defendant to the Plaintiff along with annual indents. The Plaintiff, however,
dishonestly abused the custody of those cheques and surreptitiously presented those
cheques for encashment. On the contrary, if credit is given to the Defendant under
the "Adjustment Customer" Scheme, the Plaintiff would owe substantial amount to
the Defendant. On these counts, amongst others, the Defendant prayed for dismissal
of the suit with costs.
4. In view of the aforesaid pleadings, issues were settled on 11 June 2015. I
have reproduced those issues with my findings against each of them for the reasons to
follow :
ISSUES FINDINGS
(1) Whether the suit is filed within Limitation ? Qua Invoices Nos.1 to 69
in the negative and qua
rest of the invoices in
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the affirmative.
(2) Whether the defendants prove that the
cheques that were given by the defendants
to the plaintiff were only accommodation
cheques and these cheques were not to be
encashed unless instructed by the defendants ? In the negative
(3) In the alternative, whether the defendants
prove that as per the contract, these cheques
were only used as advance on the understanding
that the plaintiff will supply the materials
within the agreed period in accordance with the
indent placed by the defendant on the plaintiff ? In the negative
(4) Whether the plaintiffs prove that the defendants
have issued the letter dated 5.9.2000 and the same
amounts to acknowledgment of liability ? In the negative
(5) Whether the plaintiffs prove that they are
entitled to a decree in the sum of
Rs.1,28,80,060.87 together with interest @ 18% p.a. Partly in the
from the date of the suit until payment affirmative.
/ realization ?
(6) What decree ? What Order ? As per final order.
REASONS
5. In order to substantiate the averments in the plaint, Mr. Mangesh
Ramani, (PW1), Manager (Finance) of the Plaintiff was examined. The Plaintiff has
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tendered a number of documents in support of the claim. Mr. Haresh Madan, (DW1)
the son and constituted attorney of the Defendant, has adduced evidence in the
rebuttal. The Defendant has also placed on record a number of documents to bolster
up the defence. At the conclusion of the trial, I have heard Mr. Chavan, learned
Counsel for the Plaintiff, and Mr. Rajput, learned Counsel for the Defendant, at
length. Learned Counsel took the court through the pleadings, evidence adduced by
the parties and the documents tendered for the perusal of the Court.
6. To start with uncontroverted facts. Firstly, it is incontestable that the
Plaintiff is a well known and reputed manufacturer of ball and roll bearings. Secondly,
the jural relationship between the plaintiff and defendant is not in contest.
Incontrovertibly, the defendant was one of the authorized stockists and distributors of
the ball and roll bearings manufactured by the Plaintiff. Thirdly, it is not in dispute
that there have been transactions between the plaintiff and defendant since long and
the Plaintiff had sold and delivered goods to the Defendant, in the past. Fourthly,
though the factum of delivery of the goods in question is put in contest, yet the fact
that three of the cheques drawn by the defendant in favour of the Plaintiff aggregating
to Rs.13,60,649.72 were honoured on presentment, and the two cheques drawn for Rs.
Rs.23,64,388.04 and Rs.25,08,682.51 were dishonoured, are not much in contest.
Fifthly, the delivery of the cheques by the defendant to the plaintiff is not in dispute,
though the time of delivery and the purpose thereof, have been put in contest.
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7. In the backdrop of these facts, apart from the questions of bar of
limitation and institution of the suit in conformity with law, the core controversy
revolves around the question as to whether the Plaintiff had sold and delivered goods,
as alleged, or the subject cheques were delivered by the Defendant to the Plaintiff long
back and the Plaintiff misused the custody of those cheques to, firstly, encash the first
three cheques and, later on, present two cheques for encashment, while it was the
understanding between the parties that those cheques were not to be encashed till the
delivery of the goods, warrants adjudication.
8. To begin with, the question as to whether the suit was lawfully instituted
by Mr. Ramesh C. Pandya, who has signed the plaint. Mr. Rajput, learned Counsel for
the Defendant forcefully canvassed a submission that the suit has been instituted sans
lawful authority, and, therefore, on this ground alone, the suit deserves to be
dismissed. It was urged that the Plaintiff being a Public Limited Company, the suit
ought to have been instituted only on the basis of a resolution passed by the board of
directors of the Company. The Plaintiff has not relied upon any board resolution nor
there is averment in the plaint that the board of directors of the Plaintiff had resolved
to institute the suit.
9. Mr. Rajput would further urge that the plaint has not been signed by any
director of the Plaintiff. Nor Ramesh C. Pandya, who signed the plaint had been
authorized to sign and verify the plaint. The endeavour on the part of the Plaintiff to
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show that there are documents which indicate that Ramesh Pandya was so authorized,
is belied by those documents (Exhibits P-2, P-3 and P-4) and the manner in which
Mangesh Ramani (P.W.1) fared in the cross-examination, submitted Mr. Rajput.
10. Mr. Rajput submitted that the legal position is absolutely clear that the
suit instituted sans lawful authority deserves to be dismissed. A strong reliance was
placed on the judgment of the Supreme Court in the case of State Bank of
Travancore V/s. M/s. Kingston Computers (I) P. Ltd. 1, a judgment of the Delhi
High Court in the case of M/s. Nibro Limited V/s. National Insurance Co. Ltd. 2, a
judgment of the learned Single Judge of this Court in the case of M/s. New Shelter
Enterprises V/s. Smt. Meenakshi w/o Sudhir Gupta3 and an order dated 19 March
2009 in M/s. Hari Shree Enterprises V/s. M/s. Vikas Housing Ltd. and Ors.4.
11. Mr. Chavan, learned Counsel for the Plaintiff, countered the
submissions on behalf of the Defendant with equal tenacity. Mr. Chavan would urge
that the plaint has been signed and verified by Ramesh Pandya, who was then working
as a Company Secretary of the Plaintiff. Thus, the provisions contained in Order
XXIX Rule 1 of the Code of Civil Procedure, 1908, constitute a complete answer to the
objection raised on behalf of the Defendant as it provides that, in suits by or against a
corporation, any pleading may be signed and verified on behalf of the corporation by
1 (2011) 11 SCC 524
2 AIR 1991 Delhi 25
3 Civil Revision Application No.62 of 2017
4 Chamber Summons No.1705 of 2008 in Suit No.3382 of 2007
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the secretary or by any director or other principal officer of the corporation who is able
to depose to the facts of the case. Since there is scrupulous compliance with the said
requirement as the plaint has been signed and verified by the Company Secretary, the
objection does not merit countenance, urged Mr. Chavan.
12. Mr. Chavan further submitted that, even otherwise the Plaintiff cannot
be non-suited on such technical ground. It was submitted that even in the absence of
such initial authority, there is no prohibition in law for ratification of action of
institution of the suit by the corporation, expressly or by implication. In the case at
hand, according to Mr. Chavan, there is evidence to indicate that the Managing
Director of the Plaintiff had given authority to Mangesh Ramani, Manager (Finance) -
P.W.1 to attend and appear in court on behalf of the company. Moreover, Power of
Attorney in favour of the Managing Director of the Company by the board of directors
has also been placed on record. Thus, there is implied ratification by the company,
even if it is assumed that there is no express authorization.
13. Mr. Chavan placed reliance on the decision of the Supreme Court in the
case United Bank of India V/s. Naresh Kumar and Ors. 5 and the Division Bench
judgment of this Court in the case of New India Assurance Co. Ltd. V/s. Sesa Goa
Ltd.6 wherein the decision in United Bank of India (supra) was followed.
14. Evidently, Ramesh C. Pandya has signed and verified the plaint in the
5 (1996) 6 SCC 660
6 2020(5) Mh.L.J.66
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capacity of the Company Secretary of the Plaintiff. In the year 2005, the plaint was re-
verified by Ramesh C. Pandya. However, the Plaintiff has not placed on record any
resolution passed by the board of directors authorizing the institution of the suit or
conferring authority on Ramesh C. Pandya to sign and verify the plaint.
15. Order VI Rule 14 of the Code prescribes that every pleading shall be
signed by the party and his pleader, if any. The proviso thereto addresses the
contingency of the inability of a party to sign the pleading and provides that, in such a
situation, the pleading may be signed by any person duly authorized by the party to
sign the same or to sue or defend on his behalf. As noted above, Rule 1 of Order XXIX
prescribes that in a suit by or against the corporation, any pleading may be signed and
verified on behalf of the corporation by the secretary or by any director or Principal
Officer of the Corporation who is able to depose to the facts of the case.
16. The import of these provisions fell for consideration before the Supreme
Court in the case of United Bank of India (supra), where the appellant bank had
instituted a suit for recovery of the money advanced to the Defendant - borrower.
The authority of the person who had signed and verified the plaint on behalf of the
appellant bank was challenged. In that context, the Supreme Court enunciated the law
as under :
"9. In cases like the present where suits are instituted or defended on
behalf of a public corporation, public interest should not be permitted to be
defeated on a mere technicality. Procedural defects which do not go to the
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root of the matter should not be permitted to defeat a just cause. There is
sufficient power in the Courts, under the Code of Civil Procedure, to ensure
that injustice is not done to any party who has a just case. As far as possible a
substantive right should not be allowed to be defeated on account of a
procedural irregularity which is curable.
10. It cannot be disputed that a company like the appellant can sue
and be sued in its own name. Under Order 6 Rule 14 of the Code of Civil
Procedure a pleading is required to be signed by the party and its pleader, if
any. As a company is a juristic entity it is obvious that some person has to
sign the pleadings on behalf of the company. Order 29 Rule 1 of the Code of
Civil Procedure, therefore, provides that in a suit by against a corporation the
Secretary or any Director or other Principal officer of the corporation who is
able to depose to the facts of the case might sign and verify on behalf of the
company. Reading Order 6 Rule 14 together with Order 29 Rule 1 of the
Code of Civil Procedure it would appear that even in the absence of any
formal letter of authority or power of attorney having been executed a person
referred to in Rule 1 of Order 29 can, by virtue of the office which he holds,
sign and verify the pleadings on behalf of the corporation. In addition thereto
and de hors Order 29 Rule 1 of the Code of Civil Procedure, as a company is a
juristic entity, it can duly authorise any person to sign the plaint or the
written statement on its behalf and this would be regarded as sufficient
compliance with the provisions of Order 6 Rule 14 of the Code of Civil
Procedure. A person may be expressly authorised to sign the pleadings on
behalf of the company, for example by the Board of Directors passing a
resolution to that effect or by a power of attorney being executed in favour of
any individual. In absence thereof and in cases where pleadings have been
signed by one of it's officers a Corporation can ratify the said action of it's
officer in signing the pleadings. Such ratification can be express or implied.
The Court can, on the basis of the evidence on record, and after taking all
the circumstances of the case, specially with regard to the conduct of the
trial, come to the conclusion that the corporation had ratified the act of
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signing of the pleading by it's officer." (emphasis supplied)
17. The Supreme Court has, thus, enunciated in clear and explicit terms that
a conjoint reading of Order 6 Rule 14 and Order 29 Rule 1 of the Code would indicate
that even in the absence of any formal authority or power of attorney having been
executed, a person referred to in Rule 1 of Order 29 can by virtue of the office which
he holds sign and verify the pleading on behalf of the corporation. The Supreme
Court went on to further exposit the law that a person may be expressly authorized to
sign the pleading on behalf of the company by a resolution of the board of directors or
by the power of attorney and, even in the absence thereof, and in cases where
pleadings have been signed by one of its officers, the corporation can ratify the said
action of its officer in signing the pleading. Such ratification can be express or implied.
18. Mr. Rajput, learned Counsel for the Defendant, made an earnest
endeavour to distinguish the aforesaid judgment on the premise that it was rendered in
the context of the suit instituted or defended on behalf of the public corporation and,
thus, taking a contrary view would have defeated the public interest.
19. It is true, in the opening sentence of paragraph 9, extracted above, the
Supreme Court had referred to a suit at the instance of public corporation. However,
in my view, the ratio of the decision in the case of United Bank of India (supra),
cannot be diluted by confining its applicability to a suit instituted by a public
corporation. The Supreme Court has after adverting to the provisions contained in
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the Code, enunciated the law in clear and explicit terms which governs even a private
limited company. In fact, the Supreme Court has enunciated the law on the premise
that procedural objections and technicalities be not given a march over substantive
justice. Such technical defects, the Supreme Court held, should not be permitted to
defeat a just cause.
20. In the case of State Bank of Travancore (supra), the Supreme Court
found that the Plaintiff therein had not produced any evidence to prove that concerned
person was appointed as director of the company and the resolution was passed by the
board of directors of the company to file a suit against the appellant-defendant and
authorized the said person to do so. The letter of authority issued by the Chief
Executive Officer of the company was nothing but a scrap of paper because no
resolution was passed by the board of directors delegating its power to the Chief
Executive Officer to authorize another person to file a suit on behalf of the company.
In the said case, the Supreme Court referred to the judgment of the Delhi High Court
in the case of M/s. Nibro Limited (supra), on which reliance was placed by Mr.
Rajput.
21. The judgment in the case of State Bank of Travancore (supra), turned
on its peculiar facts. The judgment of the Supreme Court in the case of United Bank
of India (supra), was not referred to in the said matter. It was not a case where the
plaint was signed and verified by the Company Secretary, or by a person who claimed
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to be the Company Secretary. Nor the aspects of ratification of the action of the
institution of the suit and the signing and verification of the plaint were canvassed in
the said case.
22. In M/s. Nibro Limited (supra), the learned Single Judge of the Delhi
High Court, after adverting to the provisions of the Companies Act, 1956 postulated
that the question of authority to institute a suit on behalf of the company is not a
technical matter as it has far reaching effect. Thus, unless the power to institute the
suit has been specifically conferred on a particular director, he has no authority to
institute a suit on behalf of the company and such power can be conferred by the board
of directors only by passing a resolution in that regard.
23. In M/s. New Shelter Enterprises (supra) also necessity of a resolution
by the board of directors to institute a suit was emphasised.
24. In M/s.Hari Shree Enterprises (supra), this Court did not approve the
submission that the powers conferred on the Managing Director of the company to
manage the affairs of the company include the power to sue on behalf of the company.
It was held that the power to sue must be separately given by the company and such
power can be given only under the Articles of Association of the Company.
25. The Division Bench of this Court New India Assurance Co. Ltd. V/s.
Sesa Goa Ltd. (supra), referred to judgments of the Supreme Court in the cases of
United Bank of India (supra), and State Bank of Travancore (supra), and Delhi
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High in the case of M/s. Nibro Limited (supra). In the said case as well, the person
who signed, verified and instituted the suit on behalf of the Respondent therein, was
its Company Secretary and General Manager (Corporate Affairs). The Division
Bench, thus, held the decision of the Supreme Court in the case of United Bank of
India (supra), affords a complete answer to the objection raised by the appellant
therein.
26. In the instant case, Ramesh C. Pandya has signed and verified the plaint
in the capacity of the Company Secretary. The primary requirement envisaged by
Order XXIX Rule 1 of the Code stands satisfied. Mangesh Ramani (P.W.1) has put
oath behind the assertion that Ramesh Pandya was the Company Secretary and legal
head and was given power of attorney by Rakesh Makhija. The distinction sought to be
made on behalf of the Defendant that the signing and verification of the plaint is a
procedural requirement and does not constitute authorization, does not merit
acceptance.
27. As noted above, the act of institution of the suit itself can be ratified by
the corporate entity, expressly or by implication. The Plaintiff has prosecuted the suit
by authorizing its officer to pursue the proceedings before the Court. In the face of
the position which Ramesh Pandya held and the subsequent conduct of the suit, it
would be rather difficult to accede to the technical objection on behalf of the
Defendant that there was no authorization to institute the suit. In any event, the
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pursuit and conduct of the suit by the corporate entity by authorizing its officers to
appear and take part in the proceedings in the suit, constitutes adequate ratification. I
am, therefore, not inclined to accede to the challenge to the tenability of the suit on
the ground that there was no lawful authorization.
Issue Nos.(1) and (4) :
28. Whether the suit was instituted within the period of limitation, in the
facts of the case, turns upon the nature of the transactions between the parties,
especially the character of the sale and delivery of the goods under the invoices. The
Plaintiff claimed that the Plaintiff had supplied the goods under the diverse invoices
and the outstanding amount of Rs.1,28,80,060.87 constituted the unpaid price of the
goods sold and delivered. Evidently, the invoices which are enumerated in the
particulars of claim (Exhibit I) appear to have been raised during the period 6
December 1999 to 22 July 2000. Since the suit was instituted on 1 July 2003, the
Defendant contends, the claim based on invoices at Sr. Nos.1 to 69, which were raised
upto 30 June 2000, is clearly barred by limitation.
29. In contrast, the Plaintiff asserts, the suit is within the limitation as the
provisions of Section 18 and 19 of the Limitation Act, 1963 are attracted. Firstly, the
payment of a sum of Rs.13,60,649.72 vide cheque Nos. 152751, 152758 and 119848
towards partial discharge of the liability, according to the Plaintiff, amounts to the
payment on account of debt under Section 19 of the Limitation Act, and, thus, a fresh
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period of limitation commenced from the date of the said part payment.
30. Secondly, the Plaintiff seeks to rely upon the provisions contained in
Section 18 of the Limitation Act, on the premise that the Defendant has acknowledged
the liability in writing. According to the Plaintiff, there was acknowledgment of the
liability in two ways. One, the Defendant had drawn two cheques bearing Nos.119847
and 120009 for Rs.23,64,388.04 and Rs.25,08,682.51 and they were dishonoured on
presentment on 28th and 30th January 2001, respectively. These dishonoured cheques
constitute acknowledgment of liability under Section 18 of the Limitation Act. Two,
the Defendant had in response to the demand to pay outstanding amount had
acknowledged the liability to pay the unpaid price and undertook to pay the
outstanding amount in writing vide letter dated 5 September 2000 (Exhibit - 24. This
letter dated 5 September 2000 brings the claim within the limitation, even if it is
assumed that each invoice gives rise to a distinct cause of action.
31. Per contra, the Defendant contends, the suit is not based on a running
account. The goods were to be delivered upon upfront payment under each of the
invoices. The goods were never sold on credit. The Defendant thus contends, the
suit would be governed by Article 14 of the Limitation Act, as there was no fixed
period of credit, agreed upon. The period of limitation, thus, began to run from the
date of delivery of the goods under each of the invoices. Therefore, the claim qua
invoices 1 to 69 is hopelessly barred by limitation.
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32. In view of the aforesaid nature of the controversy, it is necessary to first
determine the nature of the transaction between the parties. Recourse to invoices
raised by the Plaintiff would become necessary. The invoices (Exhibit P-6 Colly), inter
alia, record the payment term being "100% against the documents". Mangesh
Ramani, (PW1) conceded in the cross-examination that the payment term was "100%
against the documents" and the said term of payment was incorporated in all the
invoices.
33. The aforesaid term of payment i.e. "100% against documents" brings to
the fore the question as to whether each of the invoices constituted a distinct and
standalone transaction, or parties had maintained a running account. It would be
contextually relevant to note that to a pointed question as to whether the invoices and
lorry receipts are annexed to the plaint, Mangesh Ramani, (PW1) replied that the
Plaintiff has annexed details of unpaid invoices and the corresponding amounts under
which the Plaintiff supplied the goods to the Defendant. Upon being confronted as to
whether running account statement is annexed to the plaint, Mangesh Ramani, (PW1)
replied that the Plaintiff has given the statement of unpaid invoices of the Defendant
amounting to Rs.1,28,80,060.87.
34. In the absence of a stipulation of sale and delivery of the goods on credit
for a particular period, the payment becomes due the moment the goods are delivered.
Such transaction would then be covered by Article 14 of the Limitation Act, unless it
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could be shown that the suit is instituted for the balance due on a mutual, open and
current account to fall within the ambit of Article 1 of the Limitation Act.
35. Though an endeavour was made on behalf of the Plaintiff to show that
the Defendant used to pay the amount in part discharge of the liability, yet there is no
material to show that the Plaintiff had maintained a running account. In reply to the
question in the context of the letter dated 5 September 2000 (Exhibit P-24), allegedly
acknowledging the liability to pay the amount which was then not due, Mr. Mangesh
Ramani (P.W.1) asserted that due to running account, balance kept on changing
(Q.Nos.87 & 88).
36. What constitutes running account ? In P. Ramanatha Aiyar's Law
Lexicon, running account is defined as under :
"An account with a bank for money loaned, checks paid, etc, which during
the time makes monthly statements, striking the balance due each month,
which is carried forwarded and charged, constitutes a 'running account' and
is in effect but one transaction.
Current account; i.e. an account between two parties having a series of
transactions not covered by evidence of indebtedness (as notes or
certificates) and usually subject to settlement at stated intervals (as monthly
or quarterly)."
37. As noted above, the Plaintiff specifically avers that it had sold and
delivered goods under diverse invoices and the term of payment was "100% against
documents". Evidently, there was no stipulation of credit. When confronted Mr.
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Mangesh Ramani (P.W.1) attempted to wriggle out of the situation by asserting that
the statement of unpaid invoices aggregating to Rs.128,80,060.87 constitutes, in his
estimation, a running account.
38. In the face of the aforesaid evidence, I find substance in the submission
of Mr. Rajput, learned Counsel for the Defendant that each of the invoices evidenced
an independent transaction of sale and delivery of the goods. Merely because the
Defendant was in default in payment of price of the goods sold and delivered under
diverse yet independent invoices, the jural relationship cannot be said to be governed
by the provisions which apply to a running account.
39. In this context, Mr. Rajput placed reliance on a decision of the Delhi
High Court in the case of S.P.P. Food Products Pvt. Ltd. V/s. Hannu Marketing7.
In the said case, the Plaintiff had pleaded that there was business relationship between
the parties, under which the Plaintiff had sold to the Defendant woven fabric for
packing material and had relied upon the invoices. In that context, the Delhi High
Court held that the suit was liable to be dismissed on the ground of limitation as it
cannot be said to be based on an open, mutual and current account as envisaged under
Article 1 of the Limitation Act, 1963. In law, shifting balances are a sine qua non once
there is relationship between the parties of a seller and buyer and since there was no
shifting balances, the claim of the Plaintiff could be only be with respect to the two
7 2018(6) ADR 275
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invoices, and since the suit was filed three years after the supply of goods in terms of
those invoices, the suit was barred by limitation.
40. Reliance was also placed on a judgment of this Court in the case of
Vijaykumar Satishchandra and Co. V/s. Rajgopal Badrinarayan Malpani8 wherein
the facts were that the Defendants' firm had kept a Khata with the Plaintiff's firm for
purchasing cloths on credit. The Plaintiff claimed, the Defendant was in arrears of the
price of the cloths sold, supplied and delivered. On the question of limitation, after
adverting to the decision in the case of Atmaram Vinayak Kirtikar V/s. Lalji
Lakhamsi9 this Court held that the suit claim was governed by Article 14 of the
Limitation Act.
41. In Atmaram V/s. Lalji (supra), it was, inter alia, observed that where a
suit was based for recovery of goods sold and delivered without any stipulation as to
credit, the case would fall within Article 52 of the Limitation Act, 1908, which
provided that for the price of goods sold and delivered where no fixed period of credit
was agreed upon, the period of limitation was three years from the date of delivery of
the goods.
42. In the case at hand, as noted above, there is evidence to show that, on
the one hand, there was no stipulation as to credit, and, on the other hand, the term of
payment was 100% against document. This would imply that the claim would be
8 1996(3) Bom. C.R. 176
9 AIR 1940 Bom. 158
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governed by Article 14 and not by Article 15 of the Limitation Act, 1963. Secondly,
each of the invoices evidencing the sale and delivery of goods constituted a different
transaction. There is no evidence to indicate that there was a running account. In the
circumstance, the suit would not fall within the ambit of Article 1 of the Limitation
Act, which governs the suit for the balance due on a mutual, open and current account
where there have been reciprocal demands between the parties. Nor there is material
to show that there were independent obligations on both sides so as to fall within the
scope of Article 1.
43. A useful reference in this context can be made to the decision of the
Supreme Court in the case of The Hindustan Forest Company V/s. Lalchand and
Ors.10 wherein the concept of mutual account, to fall under Article 1, was expounded
as under :
"7. The question what is a mutual account, has been considered by
the courts frequently and the test to determine it is well settled. The case of
the Tea Financing Syndicate Ltd. v. Chandrakamal Bezbaruah 11 may be
referred to. There a company had been advancing monies by way of loans to
the proprietor of a tea estate and the proprietor had been sending tea to the
company for sale and realisation of the price. In a suit brought by the
company against the proprietor of the tea estate for recovery of the balance
of the advances made after giving credit for the price realised from the sale
of tea, the question arose as to whether the case was one of reciprocal
demands resulting in the account between the parties being mutual so as to
be governed by Article 85 of the Indian Limitation Act. Rankin, C.J., laid
10 AIR 1959 1349
11 (1930) I.L.R. 58 Cal 649
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down at p. 668 the test ,to be applied for deciding the question in these
words:
"There can, I think, be no doubt that the requirement of reciprocal
demands involves, as all the Indian cases have decided following Halloway,
A.C.J., transactions on each side creating independent obligations on the other
and not merely transactions which create obligations on one side, those on the other
being merely complete or partial discharges of such obligations. It is further clear
that goods as well as money may be sent by way of payment. We have therefore to
see whether under the deed the tea, sent by the defendant to the plaintiff for sale,
was sent merely by way of discharge of the defendant's debt or whether it was sent
in the course of dealings designed to create a credit to the defendant as the owner of
the tea sold, which credit when brought into the account would operate by way of
set-off to reduce the defendant's liability."
8. The observation of Rankin, C.J., has never been dissented from
in our courts and we think it lays down the law correctly.........."
(emphasis supplied)
44. For the foregoing reasons, I am persuaded to hold that the suit claim
would be governed by Article 14 of the Limitation Act, and the period of three years
would begin to run from the date of delivery of the goods under each of the invoices.
Evidently, the invoices 1 to 69 in the particulars of claim (Exh. I) were raised prior to
three years of the institution of the suit.
45. This leads me to the question as to whether there is an acknowledgment
of liability within the meaning of Section 18 of the Limitation Act. First, the
acknowledgment of liability in the form of the letter dated 5 September 2000 (Exhibit
P-24, page 385. As the existence and authenticity of the letter dated 5 September
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2000 (Exhibit P-24) were put in contest, including the aspect of the proof of the said
document in evidence as and by way of secondary evidence, it may be expedient to
extract the relevant part of the said letter. It reads as under :
"Dear Mr. Vishwanathan,
Reg. Outstanding Payments.
We refer the personal discussion had with your goodself regarding payments
wherein we have humbly explained regarding the delay and we give below the
anticipated payment schedule
Payment of Rs.30 Lacs September
Rs.30 Lacs October
Rs.30 Lacs November
Rs.35 lacs December
Rs.45 Lacs December
We regret the inconvenience caused and once again look forward to your
continuous support.
Thanking you,
Sincerely,
for National Machinery Stores,
sd/-
Harish Madan
46. Slew of exceptions were taken to the existence and authenticity of the
aforesaid letter. First and foremost, it is a false and fabricated document. Intrinsic
evidence of the form and print was sought to be pressed into service. Secondly, the
Plaintiff has not proved the aforesaid document in evidence, in as much as no
foundation was laid to receive secondary evidence thereof. Thirdly, the purported
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signatory to the said letter namely, Harish Madan was not authorized to sign the said
letter and acknowledge the said liability on behalf of the Defendant. Fourthly, the
aforesaid letter does not contain either an acknowledgment of liability or a promise to
pay the allegedly due amount. Thus, there is no acknowledgment of the subsisting
liability. Lastly, the letter does not deserve to be construed as an acknowledgment of
liability as on own showing of the Plaintiff as of 5 September 2000, the Defendant did
not owe an amount of Rs.170 Lakhs., referred to in the said letter. It is the stated case
of the Plaintiff that as of September 2000, the outstanding amount was
Rs.1,42,40,710.59. That bears out the falsity of the Plaintiff's claim.
47. The text of Section 18 of the Limitation Act, 1963 makes it abundantly
clear that the statement on which the plea of acknowledgment is founded, must relate
to a subsisting liability arising out of the jural relationship and it must be made before
the expiry of the period of limitation stipulated under the Act, 1963.
48. In the case of Shapoor Fredoom Mazda V/s. Durga Prosad Chamaria
and Ors.12 on which reliance was placed by Mr. Chavan, the nature of the statement to
qualify as an acknowledgment, the necessity of an unequivocal acknowledgment of
liability and the approach to be adopted by the Courts in construing the statement
were indicated in the following words :
"5. Section 19(1) says, inter alia, that where before the expiration of
the period prescribed for a suit in respect of any right, an acknowledgment of
12 AIR 1961 SC 1236
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liability in respect of such right has been made in writing signed by the party
against whom such right is claimed, a fresh period of limitation shall be
computed from the time when the acknowledgment was so signed. It would
be noticed that some of the relevant essential requirements of a valid
acknowledgment are that it must be made before the relevant-period of
limitation has expired, it must be in regard to the liability in respect of the
right in question and it must be made in writing and must be signed by the
party against whom such right is claimed. Section 19(2) provides that where
the writing containing the acknowledgment is undated oral evidence may be
given about the time when it was signed but it prescribes that subject to the
provisions of the Indian Evidence Act, 1872, oral evidence of its contents
shall not be received; in other words, though oral evidence may be given
about the date oral evidence about the contents of the document is excluded.
Explanation 1 is also relevant. It provides, inter alia, that for the purpose of S.
19 an acknowledgment may be sufficient though it omits to specify the exact
nature of the right or avers that the time for payment has not yet come, or is
accompanied by a refusal to pay, or is coupled with &.,claim to a set off, or is
addressed to a person other than the person entitled to the right.
6. It is thus clear that acknowledgment as prescribed by Section 19
merely renews debt; it does not create a new right of action. It is a mere
acknowledgment of the liability in respect of the right in question; it need not
be accompanied by a promise to pay either expressly or even by implication.
The statement on which a plea of acknowledgment is based must relate to a
present subsisting liability though the exact nature or the specific character
of the said liability may not be indicated in words. Words used in the
acknowledge judgment must, however, indicate the existence of jural
relationship between the parties such as that of debtor and creditor, and it
must appear that the statement is made with the intention to admit such jural
relationship. Such intention can be inferred by implication from the nature of
the admission, and need not be expressed in words. If the statement is fairly
clear then the intention to admit jural relationship may be implied from it.
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The admission in question need not be express but must be made in
circumstances and in words from which the court can reasonably infer that
the person making the admission intended to refer to a subsisting liability as
at the date of the statement. In construing words used in the statements
made in writing on which a plea of acknowledgment rests oral evidence has
been expressly s. excluded but surrounding circumstances can always be
considered. Stated generally courts lean in favour of a liberal construction of
such statements though it does not mean that where no admission is made
one should be inferred, or where a statement was made clearly without
intending to admit the existence of jural relationship such intention could' be
fastened on the maker of the statement by an involved or far-fetched process
of reasoning. Broadly stated that is the effect of the relevant provisions
contained in S.19, and there is really no substantial difference between the
parties as to the true legal position in this matter."
(emphasis supplied)
49. The aforesaid enunciation of law indicates that the statement to qualify
as an acknowledgment need not be accompanied by a promise to pay, express or
implied. The submission on behalf of the Defendant that the aforesaid letter dated 5
September 2000 does not contain an express acknowledgment of liability as there is no
promise to pay the amount, therefore, does not merit acceptance. In any event, the
letter dated 5 September 2000 contains a schedule of payment, which implies that the
Defendant acknowledged the existence of a jural relationship and professed to
discharge the subsisting liability.
50. The thrust of the submission on behalf of the Defendant that Mr. Harish
Madan was not authorized to make the acknowledgment is required to be appreciated
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in the backdrop of the evidence on record to show that Mr. Harish Madan had issued
the cheques which are subject matter of the suit, albeit in the capacity of the
authorized signatory, and had also addressed communications on behalf of the
Defendant, a proprietary concern of which the father of Mr. Harish Madan was the
proprietor. Yet, a definitive finding on the authority of Mr. Harish Madan in the light
of the view which this Court is persuaded to take may not be warranted.
51. On the aspect of the proof of the letter dated 5 September 2000 (Exhibit
P-24), Mr. Chavan would urge that the said document has been duly admitted in
evidence. At this stage, the objection to the admissibility of the document on the
count that no foundation was laid to adduce secondary evidence cannot be
countenanced.
52. Mr. Rajput joined the issue by canvassing a submission that there is a
distinction between the admissibility and proof of a document. In the instant case,
adverting to the manner in which Mr. Ramani (PW-1) fared in the cross-examination
on the aspect of making a copy of the original letter dated 5 September 2000, which
was allegedly misplaced while shifting the office of the Plaintiff's company, Mr. Rajput
would urge that the evidence plainly does not inspire confidence, and, thus, disproves
the very existence of the letter dated 5 September 2000, of which Exhibit P-24 is
claimed to be a copy.
53. Though I am not inclined to give much weight to the admissions in the
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cross-examination of Mr. Ramani (PW-1) as regards the process of taking photostat
copy of the original letter dated 5 September 2000, banked upon by Mr. Rajput, to
draw home the point that Mr. Ramani (PW-1) had not himself taken copies of the
original letter dated 5 September 2000, and, therefore, had no opportunity to see the
original, yet one factor which impairs the veracity of the Plaintiff's claim is apparent
inconsistency in the evidence before the Court and the stand of the Plaintiff in the
affidavit in Rejoinder in Summons for Judgment No.382 of 2004. In the said affidavit
in Rejoinder, it was categorically asserted on behalf of the Plaintiff that the aforesaid
letter dated 5 September 2000was addressed by the Defendant to the Plaintiff by fax,
and, thus, was binding on the Defendant. If the letter dated 5 September 2000 was
received by fax, then there was no question of there being the original of the letter
dated 5 September 2000, misplacing the same and, thus, secondary evidence thereof.
54. It is pertinent to note that in further affidavit in lieu of examination in
chief, Mr. Mangesh Ramani (P.W.1) affirmed that the letter dated 5 September 2000
was addressed by the Defendant to the Plaintiff in the ordinary course of business. A
photocopy of the said letter was taken by him from the original letter dated 5
September 2000 and had since been retained by him in the office file of the Plaintiff
prior to transfer of record from Bombay Distribution Center. It is not a case of the
Plaintiff that the original print out of the fax message was misplaced and Mr. Ramani
(PW-1) had prepared a copy thereof.
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55. To add to this, there is another crucial factor which throws a cloud of
doubt over the existence of letter dated 5 September 2000. The notice dated 9
February 2001 (Exhibit P-9) purportedly addressed on behalf of the Plaintiff recording
the amount due and payable by the Defendant to the Plaintiff upon the dishonour of
the subject cheques, is conspicuously silent about the said acknowledgment of the
liability vide letter dated 5 September 2000. The said notice adverts to non-payment
of the amount covered by various invoices aggregating to Rs.1,42,40,710.59, the
meeting which the parties had on 21 December 2000 and the presentment and
encashment of the three cheques pursuant to the understanding allegedly arrived at in
the said meeting, resulting in reducing the liability to Rs.1,28,80,060.87, as of 31
December 2000, and the further meeting dated 5 January 2001 and the dishonour of
the subject cheques. As the acknowledgment of the liability vide letter dated 5
September 2000 was a significant development in the pursuit of the recovery of the
outstanding amount, omission to refer to the said letter dated 5 September 2000 in the
notice dated 9 February 2001 cannot be said to be inconsequential or immaterial. Had
the said letter dated 5 September 2000 been in existence on 9 February 2001, the
Plaintiff would not have missed to refer to the same when the Plaintiff had referred to
two purported meetings between the parties subsequent thereto.
56. If the aforesaid omission is considered in juxtaposition with an apparent
inconsistency as regards the mode of receipt of the said letter dated 5 September
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2000, the existence of the said letter appears to be in the corridor of uncertainty. I am,
therefore, not inclined to place implicit reliance on the said letter dated 5 September
2000 as an acknowledgment of liability within the meaning of Section 18 of the
Limitation Act, 1963.
57. This leads me to the second limb of acknowledgment allegedly formed
by the two dishonoured cheques bearing Nos.119847 drawn for Rs.23,64,388.04 and
120009 for Rs.25,08,682.51 which were dishonoured on presentment on 28th and 30th
January 2001, respectively.
58. To bolster up this submission, Mr. Chavan placed reliance on the
decision of the Supreme Court in the case of Jiwanlal Achariya V/s. Rameshwarlal
Agarwalla13; a decision of the Delhi High Court in the case of Hotel Diplomat V/s.
Folio Holdings (India) Pvt. Ltd. and Anr. 14; Bela Goyal, Proprietor of Ispat
Sangrah V/s. Viipl - MIPL JV and Ors.15 and a Division Bench judgment of this
Court in the case of Dinesh B. Chokshi V/s. Rahul Vasudeo Bhatt and Anr.16
59. In the case of Jiwanlal Achariya (supra), the Supreme Court
considered the question in the context of Section 20 of the Limitation Act, 1908, a
precursor of Section 19 of the Limitation Act, 1963. The Supreme Court held that the
cheque itself is an acknowledgment of the payment in the handwriting of the person
13 AIR 1967 SC 1118
14 2012 SC Online Del 4436
15 2022 SC Obnline Del. 38
16 2013(2) Mh.L.J. 130
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giving the cheque, and, thus, the proviso to Section 20 was complied with and
therefore, a fresh period of limitation began on February 25, 1954, the date of the post
dated cheque which was eventually honoured.
60. In the case of Hotel Diplomat (supra), a learned Single Judge of the
Delhi High Court held that the dishonoured cheque would amount to
acknowledgment under Section 18 of the Limitation Act, 1963. It was, inter alia,
observed as under :
"15. Section 18(1) of Limitation Act, 1963 to the extent it is relevant
for our purpose, provides that where, before the expiration of the prescribed
period for a suit or application in respect of any property or right, an
acknowledgment of liability in respect of such property or right has been
made in writing signed by the party against whom such property or right is
claimed, or by any person through whom he derives his title or liability, a
fresh period of limitation shall be computed from the time when the
acknowledgment was so signed.
16. It is by now settled proposition of law that a dishonoured cheque
constitutes acknowledgment within the meaning of Section 18 of Limitation
Act. Reference in this regard can be made to the decision of this Court in
Rajesh Kumar V/s. Prem Chand Jain17 where it was held that a cheque
constitutes acknowledgment and whether it was dishonoured or encashed
would be immaterial. It was further held by this Court that where a cheque
was dishonoured a fresh period of limitation would start from the date of the
cheque. Similar view was also taken in S.C.Gupta V/s. Allied Beverages
Co. Pvt. Ltd.18 and also by Full Bench of High Court of Gujarat in
Hindustan Apparel Industries V/s. Fair Deal Corporation19"
17 AIR 1980 Del 80
18 163 (2009) DLT 495
19 AIR 2000 Gujarat 261
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61. The aforesaid pronouncement was followed by the Delhi High Court in
the case of Bela Goyal (supra).
62. In the case of Dinesh B. Chokshi (supra), a Division Bench of this Court
considered the question as to whether issuance of a cheque in repayment of a time
barred debt amounts to a written promise to pay the said debt within the meaning of
Section 25(3) of the Indian Contract Act, 1872. The said question was answered in
the affirmative, as under :
"15. On plain reading of Section 13 of the said Act of 1881, a
negotiable instrument does contain a promise to pay the amount mentioned
therein. The promise is given by the drawer. Under Section 6 of the said Act
of 1881, a cheque is a bill of exchange drawn on a specified banker. The
drawer of a cheque promises to the person in whose name the cheque is
drawn or to whom the cheque is endorsed, that the cheque on its
presentation, would yield the amount specified therein. Hence, it will have
to be held that a cheque is a promise within the meaning of Sub-section (3)
of Section 25 of the Contract Act. What follows is that when a cheque is
drawn to pay wholly or in part, a debt which is not enforceable only by
reason of bar of limitation, the cheque amounts to a promise governed by
the Sub-section (3) of Section 25 of the Contract Act. Such promise which is
an agreement becomes exception to the general rule that an agreement
without consideration is void. Though on the date of making such promise
by issuing a cheque, the debt which is promised to be paid may be already
time barred, in view of Sub-section(3) of Section 25 of the Contract Act, the
promise/agreement is valid and, therefore, the same is enforceable. The
promise to pay time barred debt becomes a valid contract as held by the
Apex Court in the case of A.V.Moorthy (supra). Therefore, the first question
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will have to be answered in the affirmative."
(emphasis supplied)
63. There can be no dispute about the proposition that the payment by
cheque before the expiry of the period of limitation would constitute an
acknowledgment of payment within the meaning of the proviso to Section 19 of the
Limitation Act, 1963 and, resultantly, a fresh period of limitation begins from the time
the said payment was made. Nor the proposition that a dishonoured cheque
constitutes an acknowledgment of liability in terms of Section 18 of the Limitation
Act, 1963 as the dishonoured cheque also satisfies the requirement of acknowledgment
of the liability under Section 18 of the Act, 1963, can be put in contest.
64. The crucial question is whether the provisions contained in Sections 18
and 19 of the Limitation Act, 1963 would be attracted in the facts of the case at hand ?
It is imperative to note that the applicability of Sections 18 and 19 would turn on the
nature of the transaction between the parties and the period of limitation prescribed
for institution of the suit to recover the unpaid price. We have noted that the material
on record leads to an inference that each invoices constituted a distinct transaction and
there was no running account. In that view of the matter, the claim of the Plaintiff that
part payment under Section 19 or the acknowledgment of the liability in the form of
the dishonoured cheques under Section 18 was in respect of the entire outstanding
amount deserves appraisal. If it is held that each of the invoices constituted a distinct
transaction, the limitation began to run from the date of the delivery of the goods
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under each of the invoices distinctly. Therefore, the acknowledgment under Section
18 or part payment under Section 19 ought to have been before the expiry of the period
of limitation qua a particular invoice.
65. It is pertinent to note that in the letter dated 19 August 2000 (Exhibit P-
7) calling upon the Defendant to pay the outstanding amount, the demand was qua the
amount covered by the invoices which were pending for over a particular period of
time, say six months, two months etc. and the Defendant was called upon to clear the
invoices which were pending for more than two months. It was not the case of the
Plaintiff that there was a running account and the particular amount was due at the
foot of the account. In contrast, the Defendant was called upon to clear the amount
covered by invoices which were due for over two months at the first instance. This
also indicates that each of the invoices constituted a distinct transaction.
66. The case of the Plaintiff that there was an acknowledgment of the entire
outstanding amount and the part payment was also in respect of the outstanding debt,
therefore, cannot be readily acceded to. In the circumstances, the aforesaid
pronouncements, in my considered view, do not advance the cause of the Plaintiff. I
am, therefore, inclined to hold that the suit qua Invoice Nos.1 to 69 raised on or before
30 June 2000 is not within the statutory period of limitation. Issue No.1 is, therefore,
required to be answered in the negative qua Invoices Nos.1 to 69 and in the affirmative
qua rest of the invoices. Issue No.4 is answered in the negative.
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Issue Nos.2 and 3 :
67. The edifice of the defence that the subject cheques were given by the
Defendant only by way of accommodation and they were not to be encashed, or in the
alternative, those cheques were issued by way of advance with an understanding that
the Plaintiff would supply the material in accordance with the indent placed by the
Defendant, was sought to be built around the purported purchase orders dated 15
October 2000, 18 October 2000 and 30 November 2000 (Exhibits D-1/14, D-1/15 and
D-1/16), respectively. Mr. Harish Madan (D.W.1) has put oath behind the statement
that cheque no.119847 drawn for Rs.23,64,388.04 payable on 15 October 2000 was to
cover purchase orders dated 15 October 2000 (Exhibit D-1/14 - page 973) and 18
October 2000 (Exhibit D-1/15 - page 974) and cheque No.120009 drawn for
Rs.25,08,862.51 payable on 30 November 2000 was to cover purchase order dated 30
November 2000 (Exhibit D-1/16 - page 975).
68. An endeavour was made to draw home the point that the practice followed
by the parties was such that the Defendant would place purchase orders with the
Plaintiff and the value of the purchase orders was calculated by the Defendant as per
the standard price list and an accommodation cheque was issued to cover the said
amount. To this end, attention of the Court was invited to the averments in the plaint
that the Defendant during the period commencing from September 1999 to November
2000 placed orders on the Plaintiff and the assertion of Mangesh Ramani (P.W.1) in
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the affidavit in lieu of examination in chief to the same effect. It was elicited in the
cross-examination of Mangesh Ramani (P.W.1) that there was a procedure of getting
confirmed orders from the stockists. It was, thus, submitted that the accommodation
cheques (Exhibit P-8) were delivered by the Defendant to the Plaintiff towards
confirmation of the purchase orders at Exhibits D-1/14, D-1/15 and D-1/16. Neither
the Plaintiff raised invoices against the aforesaid purchase orders, nor delivered the
goods to the Defendant. The purchase orders dated 15 October 2000 (Exhibit D-
1/14), 18 October 2000 (Exhibit D-1/15) and 30 November 2000 (Exhibit D-1/16
contain respective accommodation cheques as enclosures.
69. Mr. Rajput, learned Counsel for the Defendant placed heavy reliance
on the aforesaid purchase orders to buttress the submission that the subject cheques
were issued by way of accommodation cheques. Emphasis was laid on the fact that
two subject cheques, issued for the precise amount in rupees and paise, co-relate to
the value of the purchase order and not of any round figure amount so as to even
qualify as on account payment. The Plaintiff, according to Mr. Rajput, has made an ill-
attempt to show that the subject cheques were as and by way of on account payment.
Mr. Rajput also laid stress on the fact that the subject cheques were not deposited
along with three other cheques drawn for Rs.13,60,649.72, which were encashed, and
presented for encashment belatedly at Bangalore.
70. In opposition to this, Mr. Chavan, learned Counsel for the Plaintiff would
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urge that there is no proof of delivery of the purchase orders as alleged in the month of
October and November 2000. Secondly, on the own showing of the Defendant, it had
stopped accepting the delivery of the goods in the month of August 2000, and, thus,
there was no question of placing purchase orders in the month of October and
November 2000. Thirdly, in the purported legal notice which was issued on 5 March
2001, there is no reference to the theory of accommodation cheques having been
issued along with the purchase orders.
71. Mr. Chavan submitted that the said legal notice dated 5 March 2001 (Exhibit
P-10) was addressed after the Defendant as well as Harish Madan (D.W.1) were served
with the notice dated 9 February 2001, post dishonour of the subject cheques.
Omission to state that the subject cheques were delivered along with the purchase
orders, thus, erodes the credibility of the version of the Defendant.
72. To appreciate the controversy in a correct perspective, it is necessary to note
the correspondence that preceded the institution of the suit. Vide communication
dated 19 August 2000 (Exhibit P-7), the Plaintiff conveyed the outstanding position as
of 31 July 2000 and indicated that the price covered by 186 invoices was outstanding.
The Defendant was called upon, as a first step, to clear all invoices outstanding for
more than two months on or before 31 August 2000. It is the claim of the Plaintiff that
in response thereto the Defendant had issued a letter dated 5 September 2000 (Exhibit
P-24), which has already been dealt with while considering Issue No.1 and 4. The
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Plaintiff claims that the Defendant had issued three cheques aggregating to
Rs.13,60,649.72 which were honoured on presentment on 27 December 2000. In
addition, the Defendant had also issued two subject cheques. On 5 January 2001, the
Defendant requested the Plaintiff not to deposit the cheques as substantial payment
would be made by 10 January 2001. However, there was default on the part of the
Defendant. Hence, the cheques were presented for encashment and dishonoured on
28 and 30 January 2001.
73. The response of the Defendant at that stage is of critical salience. Vide
letter dated 29 January 2001 (Exhibit- E to the Plaint) after adverting to the meetings
dated 21 December 2000 and 27 December 2000, and the acknowledgment of the
cheques drawn for Rs. 13,60,649.72, the Defendant remonstrated that the Plaintiff's
Account Department had deposited the cheque drawn for Rs.23,64,388.04 on 15
October 2000, which was not in line with the commitment made on 21 December
2000.
74. It is imperative to note that in the letter dated 29 January 2001 (Exhibit- E),
no grievance was made that the subject cheques were issued by way of
accommodation cheques along with the purchase orders. Nor any dispute was raised
about the non-supply of the goods. Instead, the letter dated 29 January 2001 (Exhibit-
E) adverts to the commitment which the parties had made in the meeting dated 21
December 2000. Evidently, the Defendant had an opportunity on 29 January 2001,
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itself, after one of the subject cheques was presented for encashment, to raise the
grievance that those cheques were merely issued by way of accommodation cheques
and the Plaintiff had not supplied goods in accordance with the purchase orders, to
which those cheques were allegedly enclosed.
75. What follows is also of significance. The Plaintiff issued legal notice on 9
February 2001 (Exhibit P-9) by RPAD. The Plaintiff adverted to the transactions
between the parties, outstanding amount, presentment and dishonour of the subject
cheques and its intent to initiate legal proceedings, including a complaint under
Section 138 of the Negotiable Instruments Act, 1888. In that context, Mr. Harish
Madan (D.W.1), when confronted during the course of cross-examination (Que. 100)
as to whether the Defendant raised any dispute as regards the subject cheques (Exhibit
P-8) before receipt of the notice dated 9 February 2001 (Exh. P-9), replied that he was
not aware of the said notice dated 9 February 2001. Mr. Harish Madan (D.W.1)
conceded that the postal acknowledgment (Exhibit P-9 - page 394) evidences the
service of the said article and bears the signature of one Asha and that Asha was his
mother. To a pointed question as to whether he personally did respond to the notice
dated 9 February 2001 disputing supply of goods and raising of invoices, Mr. Madan
(D.W.1) reiterated that he was not aware of the said letter. Though Mr. Madan
(D.W.1) did not cave in to the suggestion that the Defendant in response to the notice
dated 9 February 2001, did not dispute having received supply of the goods under the
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invoices, yet it is imperative to note that the legal notice dated 5 March 2001 (Exhibit-
P-10) addressed on behalf of defendant is conspicuously silent about the subject
cheques having been delivered as the accommodation cheques along with the purchase
orders (Exhibits D-1/14, D-1/15 and D-1/16).
76. The Defendant cannot simply wriggle out of the situation by affirming that
he was unaware of the legal notice dated 9 February 2001 (Exhibit- P-9). It could not
be disputed that the said notice was sent at the address of the Defendant by RPAD.
The postal acknowledgment (Exh. P-9 - page 394) evidenced the service of the notice.
The legal notice dated 5 March 2001 (Exhibit P-10) undoubtedly does not refer to the
said notice dated 9 February 2001 (Exh P-9). However, the context and sequence of
events cannot be lost sight of. The Defendant had referred to the history of
transactions including the alleged monopolistic and manipulative acts of the Plaintiff
right from 1996-97. It defies comprehension that had the subject cheques been
delivered as and by way of accommodation cheques, along with the purchase orders,
the Defendant would have missed to state the same in the legal notice dated 5 March
2001 (Exhibit- P-10).
77. The claim that the Defendant was unaware of the notice dated 9 February
2001 does not advance the cause of the defence for the reason that the Defendant
became aware in the month of January 2001 itself that one of the subject cheques was
presented for encashment and dishonoured, as is evident from the letter dated 29
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January 2001 (Exhibit- E). Yet in the legal notice dated 5 March 2001 (Exhibit (Exh.
P-10), the Defendant refrained from spelling out the fact that those two cheques were
drawn by way of accommodation cheques.
78. The absence of proof of delivery of the purchase orders (Exhibits D-1/14,
D-1/15 and D-1/16) along with which the subject cheques were allegedly enclosed,
further erodes the claim of the Defendant. When called upon to point out from the
record any acknowledgment from the Plaintiff as regards the service of letters at
Exhibits D-1/14, D-1/15 and D-1/16, Mr. Harish Madan (D.W.1) replied that such
practice of placing orders was prevalent for over 15-16 years. To put it in other words,
proof of service or delivery of the purchase orders (Exhibits D-1/14, D-1/15 and D-
1/16) is not forthcoming. What accentuates the situation is the fact that the Defendant
claimed that the Plaintiff did not supply the goods in accordance with those purchase
orders. This would imply that there can be no corresponding documents in the form
of invoices, lorry receipts or delivery challans, which would lend credence to the
Defendant's version. Absence of contemporaneous contention on the part of the
Defendant to the effect that the subject cheques were delivered along with the
purchase orders and against which delivery of the goods was not made by the Plaintiff,
despite two communications dated 29 January 2001 (Exhibit- E) and 5 March 2001
(Exhibit- P-10) having been addressed on behalf of the Defendant, thus, militates
against the Defendant's version.
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79. It would be contextually relevant to note that in the legal notice dated 5
March 2001 (Exhibit P-10) the Defendant categorically asserted that on account of
indifferent marketing practices and not adhering to "adjustment customer and credit
notes" commitment, the Defendant stopped accepting delivery from the Plaintiff
since August 2000. Pertinently exchange of correspondence over the alleged
outstanding amount commenced in the month of August 2000. In the light of this
stand, the submission on behalf of the Plaintiff that there was no occasion for the
Defendant to place purchase orders and delivery of the subject cheques as and by way
of accommodation in the month of October and November 2000, appears to carry
conviction.
80. Moreover, there is no specific contention in the written statement that the
subject cheques were delivered along with the purchase orders (Exhibits D-1/14 and
D-1/16). Instead it was contended that those subject cheques were out of numerous
cheques given to the Plaintiff along with annual indents.
81. In the totality of circumstances, the purchase orders (Exhibits D-1/14, D-
1/15 and D-1/16) appear to be unilateral documents and do not command implicit
reliance. Resultantly, the edifice of defence falls through. I am, thus, impelled to
answer Issue Nos.2 and 3 in the negative.
Issue No.5 :
82. At the heart of the matter is the controversy as to the sale and delivery of the
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goods by the Plaintiff to the Defendant under the invoices (Exhibits P-6 and P-23
colly). Since the suit is essentially for the unpaid price of the goods allegedly sold and
delivered by the Plaintiff to the Defendant, the aspect of sale and delivery of the goods
assumes significance. To prove the sale and delivery of the goods over a period of time
under diverse invoices, the Plaintiff banks upon the invoices at Exhibit P-6 and P-23
colly., raised on various dates. To the invoices at Exh. P-6 colly., the copies of the
lorry receipts are annexed. Whereas, to the invoices at Exh. P-23 colly., lorry receipts
are not annexed.
83. The Defendant has assailed the proof of sale and delivery of the goods under
the aforesaid invoices, asserting that those invoices are shallow and the goods were
never delivered thereunder. The Defendant contends, the invoices are not backed by
purchase orders. Neither there is any evidence to show that the invoices and lorry
receipts were collected by the Defendant from the transporter nor the alleged invoices
and lorry receipts contain acknowledgment of the Defendant. Thus, the sale and
delivery of the goods, as claimed by the Plaintiff, has not at all been proved.
84. To bolster up the aforesaid defence, the Defendant had referred to and relied
upon the documents which evidenced the transactions between the parties in the past
and, thus, represented the course of the transactions between the parties. Reliance
was placed on the letter dated 2 January 1998 (Exh. D-1/3 - page 866) seeking annual
indent from the Defendant and the response thereto (Exh. D-1/4 - pages 867 - 871),
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which according to the Defendant, represented sample annual indent placed by the
authorized stockists.
85. Mr. Rajput, learned Counsel for the Defendant urged with a degree of
vehemence that the Plaintiff never delivered the goods without receipt of payment.
The invoices contained a clear stipulation that the term of payment was "100% against
documents". The invoices sought to be relied upon by the Plaintiff (Exh. P-6 and 23
colly) are paper invoices as they are not supported by any contemporaneous
documents evidencing the sale and delivery of the goods. Inviting attention of the
Court to the documents, which according to Mr. Rajput evidenced the genuine
transaction of sale and delivery, it was submitted that no reliance can be placed on the
invoices (Exh. P-6 and 23 colly). Emphasis was laid on the documents evidencing
payment of freight, octroi and demurrage and other charges (Exh.D-1/6, D-1/9) and
transporter's copy of invoices (Exh. D-1/7 dated 18 July 1997 and D-1/12 dated 25 July
1997) and receipts evidencing payment of octroi to the Municipal Corporation
(Exh.D-1/8 and D-1/10). None of the documents which usually accompany the
invoices evidencing sale and delivery of the goods, are to be found in the instant case,
urged Mr. Rajput.
86. Mr. Chavan, learned counsel for the Plaintiff joined the issue by canvassing a
submission that the invoices at Exh. P-6 colly., are duly supported by
lorry/transporters receipt annexed thereto. Those invoices were issued in conformity
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with the provisions contained in Central Excise Rules, 1944, especially Rules 52A and
173C. The invoices contain necessary particulars which in themselves ensure the sale
and delivery like the time of the removal of the goods, vehicle number etc. Mr.
Chavan would urge that it was nowhere the case of the Defendant that the goods were
not delivered. Evidence, according to Mr. Chavan, is required to be appreciated in the
light of the longstanding business relationship between the parties. There were
numerous transactions between the Plaintiff and Defendant, and till March 2001, or
for that matter till the written statement was filed, the Defendant had not disputed the
delivery of the goods. Laying emphasis on the correspondence between the parties
before the institution of the suit, Mr. Chavan would urge that the defence of non-
delivery of the goods is a creature of after thought.
87. It may be necessary to note the stand of the Defendant in the written
statement as to the sale and delivery of the goods. The Defendant claimed, it had
regular dealings with the Plaintiff since 1985-86. The Plaintiff instead of supplying the
fast moving bearings as per the Defendant's indent, supplied large quantity of slow
moving bearings at its whims and fancies. That resulted in piling with the Defendant
large quantities of bearings as dead stocks.
88. In the legal notice dated 5 March 2001 (Exh.P-10), the Defendant had
contended, inter alia, that the Plaintiff ignored to adhere to the specifications and
quantities as per the indents and supplied invariably bulk quantities of slow moving
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bearings. It was contended that due to indifferent marketing policy, the Defendant
stopped accepting delivery since August 2000. It would be contextually relevant to
note that in the letter dated 29 January 2001 (Exh. E) also the Defendant had not
raised the issue of non-delivery of the goods as per the invoices raised by the Plaintiff.
89. Mr. Rajput, learned Counsel for the Defendant attempted to wriggle out of
the situation by submitting that the aforesaid stand of the Defendant does not imply
the admission of the receipt of the goods under the invoices in question. The
contention in the written statement, according to Mr. Rajput, referred to the historical
context of the transactions between the parties. It was submitted that the contention
of the Defendant that he had stopped accepting the delivery since August 2000, can
by no stretch of imagination be construed as an admission that deliveries were
accepted prior thereto, much less prove the sale and delivery of the goods.
90. The aforesaid pleadings and the stand of the parties in the correspondence
which preceded the suit indicate that till March 2001, the principal grievance of the
Defendant was that the Plaintiff did not supply the goods as per the indent. Instead
the Plaintiff dumped the slow moving bearings with the Defendant. It is true, the
Plaintiff has to establish the sale and delivery of the goods, as claimed. However, the
fact that the parties were almost ad-idem on the cessation of the delivery of the goods
since the month of August 2000, and, before March 2001, no grievance of non-
delivery of the goods was made, cannot be lost sight of. If the supplies were not as per
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the specifications, as the buyer the Defendant had an option to reject the goods.
Under Section 37 of the Sale of Goods Act, 1930, where the seller delivers to the buyer
wrong quantity, subject to any usage of trade, special agreement or course of dealing
between the parties, the buyer may reject the goods. Where the seller delivers to the
buyer the goods he contracted to sell mixed with goods of a different description not
included in the contract, the buyer may accept the goods which are in accordance with
the contract and reject the rest, or may reject the whole.
91. There is not a shred of evidence to indicate that before the legal notice dated
5 March 2001, the Defendant had raised dispute about the supply of the goods which
were not in accordance with the specifications. However, as noted above, since each
of the invoices constituted a distinct transaction, it is incumbent upon the Plaintiff to
establish the delivery of the goods under the particular invoice, the amount of which
according to the Plaintiff, remained outstanding.
92. The manner in which Mangesh Ramani (P.W.1) fared in the cross-
examination on the aspect of sale and delivery of the goods is of importance. With
regard to the invoices (Exh.P-6), Mr. Mangesh Ramani (P.W.1) did not cave in to the
suggestion that consignee copy as well as the invoice used to first come to plaintiff's
office and only against 100% payment, the documents were handed over to the
consignee. Mr. Ramani (P.W.1) further went on to admit that at the time of delivery of
the material, the transporter would take the endorsement on the consignee copy that
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the material is delivered. He added that all the transporters did not take endorsement
on the invoice and some of them took it on the lorry receipt. Mr. Ramani (P.W.1) went
on to concede that the invoices P-6 were the consignor's copy and the stamp of receipt
of material was not seen on any of the documents at Exh.P-6 colly. Mr. Ramani (P.W.1)
further conceded that in respect of invoices P-23 colly., lorry receipts are not produced
in Court. Nor there is an acknowledgment of receipt of goods by the Defendant on
those invoices (P-23 colly). Mr. Ramani (P.W.1) went on to admit that lorry receipts
are not filed in respect of 19 invoices (Q.No.140). An endeavour was, however, made
to assert that the Defendant has already accepted and admitted the delivery of goods
in paragraphs 10(c) and 10(e) of the Written Statement (Q.No.141).
93. Another factor which could establish the sale and delivery inexorably was
issue of "C" Forms under the Central Sales Tax Act. Mr. Rajput, the learned Counsel
for the Defendant, strenuously submitted that issue of Form-C was a statutory
requirement under the Central Sales Tax Act as there were interstate sales evidenced
by few of the invoices. Attention of the Court was invited to the replies given by Mr.
Mangesh Ramani (PW-1), when he was confronted with the aspect of Form-C.
Ramani (PW-1) conceded in the cross-examination (Question No.160) that in respect
of 16 invoices referred therein the supplies were from Bangalore Factory and it was
mandatory to issue "C" Forms if the material was purchased interstate. Ramani (PW-
1) went on to add that collection of the "C" Forms was the responsibility of the
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Plaintiff's Taxation Department. To a pointed question, as to whether the Plaintiff
had demanded Form-C in respect of those 16 invoices, Ramani (PW-1) asserted that
Form-C must have been collected against the said invoices. However, in reply to
Question Nos.163 and 164 Ramani (PW-1) asserted that since the transactions were of
the year 1999-2000 it would be highly impossible to produce "C" Forms as such
documents were not required to be preserved for more than three years after the
assessments got over.
94. The situation which thus obtains is that in respect of 16 invoices which
represent the interstate sale, the sale and delivery could have been established by
producing Form-C. However, the Plaintiff claimed it was not in possession of Form-C.
This is not to suggest that Form-C itself could have established the sale and delivery
of the goods but to emphasise that the Plaintiff could have established the factum of
sale and delivery by banking upon Form-C. It is imperative to note that all these 16
invoices representing inter-state sale form part of Invoices of Exh.P-23 colly, which are
not supported by lorry / transporters receipts.
95. In the case of In Re: Reunion Electrical Manufactures vs. Unknown, 20 a
learned Single Judge of this Court inter alia observed that a Form-C, no doubt, is
evidence of a contract of sale having been entered into. The Form-C may, in
conjunction with other facts and circumstances, evidence that the goods were, in fact,
20 2006 SCC OnLine Bom 235.
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sold and delivered by the seller to the purchaser and the price at which the goods were
sold and delivered. In substance, therefore, the Form-C would evidence the
fact/existence of an agreement to sell as well as the price at which the goods were
agreed to be sold. It was further held that though Form-C certainly indicates the
existence of a jural relationship at some point of time, of seller and purchaser, it does
not acknowledge the existence, in praesenti, of a debtor-creditor relationship or the
existence of a liability on the date of the making/execution of the Form-C.
96. Mr. Rajput, the learned Counsel for the Defendant, submitted that in the face
of the aforesaid evidence, the Plaintiff cannot be said to have succeeded in establishing
the sale and delivery of the goods by merely placing the invoices (Exhibits-P6 and
P23), without anything more. Mr. Rajput Banked upon the pronouncement of the
Supreme Court in the case of M/s. Kumar Exports vs. M/s. Sharma Carpets21,
wherein in the context of a prosecution under Section 138 of the Negotiable
Instruments Act, 1881 ("N.I. Act"), where evidence was led by the drawer of the
cheque to the effect that the complainant - payee had stated before the Sale Tax
Department that sale of woolen carpets had not taken place, it was held that the onus
of proof would shift on the complainant - payee. As the complainant did not produce
any books of account or stock register maintained by him in the course of his regular
business or any acknowledgment for delivery of goods, to establish that as a matter of
21 (2009) 2 Supreme Court Cases 513.
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fact woollen carpets were sold and delivered, the complainant payee failed to establish
his case under Section 138 of the N.I. Act.
97. The aforesaid judgment was followed by a learned Single Judge of
Punjab and Haryana High Court in the case of Kulwinder Singh vs. Ajay Kamboj in
CRA-AS-132-2022, decided on 12th July, 2022 to hold that where the entire case of
the complainant was based on the accrual of the liability towards supply of the eggs,
the relevant evidence which was required to be produced ought to have substantiated
and established that the eggs had been actually supplied. Another learned Single
Judge of the Kerala High Court in the case of K.K.R. Products and Marketing (P) Ltd
vs. Mr. Y. Pradip and ors. in Crl.L.P. 1006/2011, dated 10.11.2011, held that the
invoices which do not contain acknowledgment of the respondents were not sufficient
to prove sale and delivery of the goods to the respondents.
98. Reverting to the facts of the case, the position which thus emerges is that
the invoices at Exhibit-P6 are supported by the lorry/transporters' receipts and
invoices of P-23 are not. Evidently, none of the invoices contain acknowledgment of
the consignee.
99. In the circumstances, even if the case of the Plaintiff is construed rather
generously having regard to the longstanding jural relationship between the Plaintiff
and Defendant, it would be rather difficult to believe the Plaintiff's version of the
actual sale and delivery of the goods under the invoices at Exhibit-P23 collectively.
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As noted above, the course of the transaction between the parties indicates that each
of the invoices represented a distinct transaction and the Plaintiff had also demanded
payment of the amount due qua each of the invoices by referring them, in the
communication dated 19th August, 2000, by the duration for which the amounts
remained unpaid. Thus, it was incumbent upon the Plaintiff to adduce evidence of the
delivery of the goods under invoices. The failure on the part of the Plaintiff to place
on record at least the lorry/transporters receipts' in respect of the invoices at Exhibit-
P23 is to the peril of the Plaintiff. It would be hazardous to presume the delivery of
the goods upon mere production of the copies of the invoices at Exhbit-P23. The fact
that 16 invoices out of the Invoices at P-23 represent inter-state sale and the Plaintiff
failed to produce form 'C' further dents the Plaintiff's claim.
100. As regards the invoices at Exhibit-P-6, the Court has the assurance in the
form of the lorry/transporters receipts which correspond with the respective invoices.
The lorry/transporters receipts contain the invoice number, consignors particulars,
the name of the consignee, the gross weight of the goods and the number of cases.
Those particulars tally with the particulars in the invoices. The absence of the further
documents, in the circumstances of the case, especially having regard to the
longstanding jural relations between the parties and the correspondence which took
place in the wake of the dispute over the payment of the price of the goods, does not
detract materially from the proof of sale and delivery under the invoices at Exhibit-P6.
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I am, therefore, impelled to hold that the Plaintiff has proved the sale and delivery of
the goods under the invoices at Exhibit-P6.
101. In view of the finding on issue Nos.1 and 4 on the aspect of limitation,
the claim for the price of the goods under the invoices, which were issued prior to
three years of the institution of the suit must be held to be barred by limitation. The
Plaintiff would thus be entitled to recover the amount covered by the invoices, which
were raised on or after 4th July, 2000. Those invoices are at Serial Nos.86, 88, 89, 92
to 107 and 109 to 112 (23 Invoices).
102. Conversely, the Defendant has not succeeded in establishing that the
cheques were delivered either by way of advance payment or they were
accommodation cheques only. Nor the Defendant could adduce evidence to establish
that it had made payment qua each of the aforesaid 23 invoices raised in between 4 th
July, 2000 to 21st July, 2000 and the goods were delivered only upon upfront payment.
Instead an endeavour was made to demonstrate that the goods under none of the
invoices were sold and delivered, which did not appear to be preponderately probable.
The Plaintiff is, therefore, entitled to recover the amount covered by the aforesaid 23
invoices aggregating to Rs.39,44,371.
103. In addition, two aspects deserve consideration. One, the payment of a
sum of Rs.13,60,649.72 allegedly towards partial discharge of the liability. Whether
this amount is required to be adjusted against the amount covered by the aforesaid 23
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invoices. Two, the liability of the Defendant in respect of two dishonoured cheques
drawn for Rs.23,64,388.04 and Rs.25,08,682.51. On the aspect of the payment of
Rs.13,60,649.72 there does not seem much controversy as even in the letter dated 29 th
January, 2001, the Defendant conceded that the Defendant had given consent for
presentment of those cheques. In the legal notice dated 5 th March, 2001, the
Defendant, however, contended that the Plaintiff mislead him to agree to allow
encashment of postdated cheques drawn for Rs.13,60,649.72. What is of relevance is
the fact that the Defendant did not claim that the said payment was towards discharge
of a particular debt.
104. As noted above, the Plaintiff's claim in respect of the invoices raised
before 30th June, 2000 is barred by limitation. The amount covered by the invoices
raised before 30th June, 2000 forming part of Exhibit-P6 is over Rs.63 Lakhs. In that
context, the submission of Mr. Chavan, the learned Counsel for the Plaintiff, that since
Defendant had not made any appropriation, the Plaintiff was entitled to appropriate
the same even in respect of a time barred debt appears to carry substance. Under
Section 60 of the Indian Contract Act, 1976 ("the Contract Act") where the debtor
omits to intimate, and there are no other circumstances indicating to which debt the
payment is to be applied, the creditor may apply at his discretion to any lawful debt
actually due and payable to him from the debtor, whether its recovery is or is not
barred by the law in force for the time being as to the limitations of suits. Under
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Section 61 of the Contract Act where neither party makes any appropriation, the
payment shall be applied in discharge of the debts in order of time, whether they are or
are not barred by the law in force for the time being as to the limitation of the suits. In
view of the aforesaid provisions, the payment of the sum of Rs.13,60,649.72 could be
lawfully appropriated towards the price of the goods covered by the invoices raised
before 30th June, 2000.
105. On the second aspect of the liability, on account of the dishonour of the
subject cheques again foundational facts are incontrovertible, namely, the cheques
were drawn, they were presented for encashment and dishonoured, and issue of notice
dated 9th February, 2001 has also been adequately proved. The Defendant failed to
establish that those cheques were accommodation cheques.
106. In my considered view, the amount covered by the said dishonoured
cheques is also not required to be appropriated towards the amount covered by the
aforesaid 23 invoices, for the reason that the issue of those dishonoured cheques
constitutes a contract to pay a time barred debt under Section 25(3) of the Contract
Act as held in the case of Dinesh Chokshi (supra).
107. The conspectus of the aforesaid consideration is that the Plaintiff would
be entitled to a decree for the amount covered by the dishonoured cheques i.e.
Rs.48,73,070.55, and the amount covered by 23 invoices, i.e. Rs.39,44,371/- which are
within statutory period of limitation.
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108. On the aspect of interest since the defendant had deposited the sum of
Rs.48,73,070.55 covered by the two dishonoured cheques and the plaintiff has been
permitted to withdraw the said amount alongwith interest accrued thereon, pursuant
to order dated 9th April, 2012 and the said payment under the dishonoured cheques is
construed as and by way of an agreement to pay a time barred debt, the plaintiff shall
not be entitled to claim any further interest on the said amount. So far as the amount
of Rs.39,44,371/- i.e. the amount covered by 23 invoices the claim in respect of which
is found within the period of limitation, since the dispute arose out of a purely
commercial transaction between the manufacturer / supplier and stockist, it may be
expedient to award interest at the rate of 10% p.a. from the date of the institution of the
suit till payment and/or realization.
109. I am, therefore, inclined to answer Issue No.5 in the affirmative to the
aforesaid extent.
110. For the foregoing reasons and findings on Issue Nos.1 to 5, the suit
deserves to be partly decreed. Hence, the following order:
:ORDER:
(i) The suit stands partly decreed.
(ii) There shall be a decree in favour of the Plaintiff and against the Defendant in
the sums of Rs.48,73,070.55 covered by the dishonoured cheques and
Rs.39,44,371/- covered by the 23 invoices at Exhibit-P6 (Sr.Nos.86, 88, 89, 92
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to 107 and 109 to 112) alongwith interest at the rate of 10% p.a. on the said
amount of Rs.39,44,371/- from the date of the suit till payment and/or
realization.
(iii) The plaintiff is entitled to retain the amount of Rs.48,73,070.55 alongwith
interest accrued thereon, which the plaintiff had withdrawn pursuant to the
order in Appeal (L) No.227 of 2012 dated 9th April, 2012.
(iv) The Defendant do pay the costs to the Plaintiff and bear his own.
(v) Decree be drawn accordingly.
( N.J.JAMADAR, J. )
Signed by: S.S.Phadke
Designation: PS To Honourable Judge
Date: 02/01/2024 20:35:25
