Bombay High Court
Stephen Bernard Construction Co., vs Jolly Constructions on 30 July, 2025
2025:BHC-AS:32483
FA-979-2017 J-C1.doc
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
CIVIL APPELLATE JURISDICTION
Digitally signed
by
HUSENBASHA
HUSENBASHA RAHAMAN
RAHAMAN
FIRST APPEAL NO. 979 OF 2017
NADAF
NADAF
Date:
2025.07.31
WITH
20:33:27 +0530
INTERIM APPLICATION NO. 15728 OF 2024
WITH
CIVIL APPLICATION NO. 2158 OF 2017
IN
FIRST APPEAL NO. 979 OF 2017
Stephen Bernard Construction Co.
A Proprietary Firm of Mr.Stephen Bernard,
Kandivali (W), Mumbai ...Appellant/Applicant
Versus
Jolly Constructions
A Registered Partnership Firm, Kalina, Mumbai ...Respondent
WITH
CIVIL APPLICATION NO. 3835 OF 2017
IN
FIRST APPEAL NO. 979 OF 2017
Jolly Constructions
A Registered Partnership Firm, Kalina, Mumbai ...Applicant
IN THE MATTER BETWEEN:
Stephen Bernard Construction Co.
A Proprietary Firm of Mr.Stephen Bernard,
Kandivali (W), Mumbai ...Appellant
Versus
Jolly Constructions
A Registered Partnership Firm, Kalina, Mumbai ...Respondent
***
Ms. G. Geetha a/w. Ms. Monika Gupta, Advocates for Appellant.
Mr. Pradip R. Kadam a/w. Mr. Hemant Hasnale Advocate for
Respondent.
***
CORAM : M.M. SATHAYE, J.
DATE : 30th JULY, 2025
JUDGMENT :
1. This appeal is filed challenging the Judgment and Decree dated
FA-979-2017 J-C1.doc
04.07.2017 passed by learned Judge of the City Civil Court, Mumbai
in Summary Suit No.6109 of 2006 (earlier H.C. Summary Suit
No.865 of 2006). The appeal is filed by Original Defendant. Present
Respondent is Original Plaintiff. By the said impugned Judgment and
Decree, the Appellant is directed to pay to the Respondent an amount
of Rs.24,65,114/- with interest @ 18% per annum on the principal
amount of Rs.22,51,670/- from the date of filing of the suit till full
realization. Parties are hereinafter referred to in their original
capacity.
2. Few facts necessary for disposal of the Appeal, are as under.
Summary suit was filed in this Court for recovery of amount under
the provisions of Order 37 of Civil Procedure Code, 1908 ('CPC' for
short). Even after grant of unconditional leave to defend the suit, the
suit proceeded without written statement and claim was allowed
under order dated 01.02.2013. A motion was filed for setting aside
ex-parte decree, however, there was delay in fling the motion. The
delay was not condoned and the motion was dismissed. Writ Petition
was filed challenging the said order. The Writ Petition was disposed
of under Consent Terms submitted by the parties and the execution
proceedings were stayed on deposit of certain amount. The order of
suit to proceed without written statement was set aside. The ex-parte
decree was set aside and suit was directed to be reconsidered on
merits.
3. The case of the Respondent/Plaintiff is as under. The Plaintiff is
a registered Partnership Firm and Defendant is a Proprietary Firm
working in construction business. The Defendant got the work of
FA-979-2017 J-C1.doc
construction project at Goregaon (East), Mumbai from M/s. National
Building Construction Corporation Limited ("NBCC', for short). The
construction work was allotted to it by Defendant under
letter/agreement dated 09.04.2004 (Exh.15) and construction work
was carried out while its running account was maintained by the
Defendant. The Plaintiff used to pay the bill of construction work by
issuing cheques. After completion of the construction work the
account was settled on 17.02.2005 for Rs.61,52,756/- with payment
of TDS worth Rs.93,125/-. When the accounts were settled, the
liability of the Defendant was calculated/fixed at Rs.22,51,670/-.
That for payment of said amount, the Defendant issued two cheques,
one Ex. 17 dated 05.04.2005, bearing number 005432 of
Rs.20,51,670/- drawn on State Bank of Travancore, Kandivali (W)
Branch and seocnd Ex. 18 dated 04.04.2005, bearing number 032166
of Rs.2,00,000/- drawn on same bank. These cheques were deposited
by the Plaintiff in the Bank, however, they got dishonoured for
insufficient funds. The Plaintiff sent a legal notice calling upon the
Defendant to pay the amount. The notice returned with endorsement
intimated-unclaimed. Plaintiff's construction material and instrument
worth Rs.6,53,900/- were lying at the site. But the Defendant did not
issue gate pass. That is how the suit came to be filed.
4. The Appellant/Defendant filed written statement contending
inter alia that suit is based on false, fabricated and forged documents
and by misusing stolen cheques. It is contended that letter/agreement
dated 09.04.2004, alleged to be the agreement between the parties,
is fabricated document. The joint statement dated 17.02.2005 is also
FA-979-2017 J-C1.doc
denied being a fabricated document with forged signature of the
Defendant. It is contended that the 2 cheques which are used as basis
for the suit, were stolen either by the Plaintiff, its partners or agents
from the office of the Defendant. That the Defendant was a sub-
contractor of NBCC which is a Government of India undertaking and
during the course of construction work, the Plaintiff used to supply
labourers and the said work was purely on casual and day to day
basis and charges were paid substantially by cash and by issuing
bearer cheques on daily basis. That payments were never made by
cross cheques. That Partners of the Plaintiff used to show muscle
power regularly and by resorting abusive language for extortion of
excessive amount. That it used to keep bearer cheques up to
Rs.2,00,000/- singed by him in the office to enable his superior staff
to clear the payment of the Plaintiff every day. That on 17.02.2005,
partners of the Plaintiff signed statement of account showing that
Rs.22,51,670/- are received in cash as full and final settlement. It is
contended that acknowledgment ('Received') duly signed by
Plaintiff's partner as well as rubber stamp of the Plaintiff is made.
That original of this document is in possession of the Defendant. That
the document of letter/agreement dated 09.04.2004 cannot be
considered because Mr. Anil Khanna was not authorized to sign that
document on behalf of Defendant. The fact of settlement of accounts
on 17.02.2005 is admitted. It is contended that the Defendant has
not issued the said 2 cheques because accounts are already settled by
full payment in cash. That on or about 18.05.2005, the
Appellant/Defendant received a phone call from the Manager of the
Bank who informed that cheques of large amount are received for
FA-979-2017 J-C1.doc
clearance. It is submitted that the complaint was lodged with local
police station regarding loss of hand bag containing important
documents including the said cheques.
5. Issues were framed. Plaintiff filed affidavit of evidence of its
partner - Mr. K. P. Francis as PW-1 and relied upon documentary
evidence. The sole Proprietor of Defendant - Mr. Stephen Bernard
filed affidavit of evidence as DW-1 and also examined his employee
Mr. Ravindrakumar Pandey as DW-2. The Trial Court has thereafter
decreed the suit as indicated above. In such circumstances, present
Appeal is filed.
SUBMISSIONS
6. Learned counsel for the Appellant/Defendant submitted that
the said two cheques are not issued by the Defendant as it does not
stand to reason that if the accounts were settled and amount was
arrived at, why two cheques will be issued and ordinarily one cheque
would have been issued. She submitted that the Plaintiff was mere
labour supplier and as such, there is no agreement with him and
labour used to be supplied on daily basis and daily payments used to
be cleared. She submitted that the entire account was settled and
under document Exh.25A, the settlement was full and final. That the
document at Exh.25A clearly indicates that the Plaintiff
acknowledged that it has received entire amount in cash. That said
document Exh.25A is not properly appreciated by the Trial Court.
That the PW-1 in examination-in-chief came with a case that two
cheques were issued in discharge of the liability after few days of
FA-979-2017 J-C1.doc
settlement of the accounts, however, in cross-examination he has
stated that on the day of settlement itself the cheque was received.
She submitted that the suit is based on two cheques. However, in
cross-examination only one cheque is referred. That the
contradictions clearly indicate that false case is filed. That the Trial
court has not properly considered the partnership deed which
indicates that the Plaintiff was carrying out the business of labour
contractor for construction work. That the Defendant is Proprietary
Firm and currently, the Proprietor is about 80 years old man against
whom execution is filed for recovery of money. That the evidence of
DW2 Mr. Pandey about the incidence during which the document
Exh25A was signed, has not been properly appreciated.
7. On the other hand, Mr. Kadam, learned counsel for the
Respondent/Plaintiff submitted that the Trial Court has properly
considered the evidence. He submitted that the Defendant has not
denied the signature and contents appearing on the cheques and
there is presumption under the Negotiable Instruments Act, 1881 that
the cheques were issued for legally enforceable debt. The suit notice
was issued on the address of the Defendant shown in the cause title
of the plaint. The notice was duly served, however, it was not
accepted. He submitted that the Defendant has changed its version
from time to time. He submitted that document Exh.25A is a disputed
document. He further submitted that the case of payment of
Rs.4,00,000/- on the date of account settlement has not been
clarified/established in as much as the document Exh.25A purports to
mean that the entire outstanding was paid in cash. He submitted that
FA-979-2017 J-C1.doc
the alleged endorsement about full and final settlement is inserted by
the Defendant or somebody from his office and the same is
unbelievable. He submitted that case of payment of Rs.4,00,000/- as
full and final settlement is contrary to the theory of full payment
under Exh.25A. He submitted that burden of proving the case about
issuance of cheque is on the Defendant which is not discharged.
8. No other arguments are advanced. No case-law is relied upon.
9. Following points arise for my consideration :
(1) Whether the Plaintiff has proved that it is entitled to
recovery of amount from the Defendant under settlement of
accounts dated 17.02.2005 ? YES
(2) Whether the said 2 cheques were issued towards
payment of amount under settlement dated 17.02.2005 ? NO
(3) How much amount and interest is payable by the
Defendant to Plaintiff ? As per final order.
REASONS
About point no. 1 & 2
10. The suit is based on 2 cheques Exh.17 and 18 and and the
settlement of accounts dated 17.02.2005 Exh.16. It is asserted that
settlement of account took place between the parties fixing the
payable amount to the Plaintiff as Rs.22,51,670/-. The presumption
under Negotiable Instruments Act, 1881 is rebuttable even for the
FA-979-2017 J-C1.doc
purpose of criminal proceedings. The present proceedings are not
criminal proceedings and it is a civil suit for recovery of money. The
question whether liability exists is a matter of evidence and
preponderence of probability. For rebutting the presumption the
Defendant has set up a defence that after the account was settled, the
entire amount settled between the parties was paid in cash for which
the endorsement was made on accounts statement which is duly
signed on behalf of the Plaintiff. The endorsement is produced in
original as Exh.25A. The whole dispute is revolving around these two
documents as Exh.16 and Exh. 25A.
11. This is a case where both parties have not come before the
Court absolutely clean. Neither the Plaintiff nor the Defendant has
disclosed in pleadings about existence of 2 original statement of
accounts. Plaintiff has produced Ex. 16 which bears original
signatures / seals of the parties. So also, Ex.25A is produced by
Defendant which also bears original signatures / seals of the parties.
12. The Plaintiff has to stand or fall on his own feet and therefore,
it is necessary to scan the oral evidence of Plaintiff's sole witness Mr.
K.P. Francis who is the partner of Plaintiff. It is seen that PW-1 has
stated in his examination-in-chief that after few days of settlement of
account (settlement stated to have taken place on 17.02.2005), the
defendant issued 2 cheques in discharge of the liability arrived at
under the settlement. When this witness was put to cross-
examination, while answering the question about the settlement that
took place on 17.02.2005, he has admitted that he received the
cheque on the day of settlement and 2 copies of settlement
FA-979-2017 J-C1.doc
documents were prepared and his partner Mr. Anthony had signed on
one of the copies (parallel document Ex. 25A) after writing the word
"Received". It is material to note that Mr. Anthony, who had signed on
Ex. 25A has not entered into witness box and offered himself for
cross-examination. So also the Plaintiff, though admitted that there
were 2 copies prepared of settlement of account, has chosen not to
disclose it when the suit is filed. They filed the suit on the basis of
document Exh.16 (one of the two copies) and 2 cheques received for
payment of settled amount. In the plaint, the Plaintiff have not
disclosed the existence of other copy of the settlement, of which
existence is admitted only in cross-examination.
13. The very fact that the second copy was admittedly signed by
Mr. K.K. Anthony after writing 'received' itself indicates that under
the second copy Exh.25A something was received by the Plaintiff for
which the second signature of Mr. Anthony was placed. Bare look at
Exh. 25A indicates that Mr. Anthony has signed twice on the said
document. The question is for receipt of what the said signature was
put ?
14. The case of the Defendant is that under the endorsement
("Received") the entire amount of Rs.22,51,670/- was paid in cash
and therefore, a signature was affixed stating received. However, it is
hard to believe that on the date of settlement, When the partner of
the Plaintiff came for settlement of accounts and prepared it sitting in
the office of the Defendant, the Defendant was already having so
much cash ready so as to settle the entire claim.
FA-979-2017 J-C1.doc
15. Interestingly DW-1 Mr. Stephen has stated in his examination
in chief that on the day of settlement, Rs.4,00,000/- was paid in cash
as full and final settlement, even if it was not due and Plaintiff
accepted the same, gave endorsement of "Received" and went away.
16. This aspect is supported by the evidence of D.W.-2 Mr.
Ravindra Kumar Pandey who has stated that - when it was about 9.30
p.m. or so, we all got fedup and lost our patience as we were not able
to go home and at that time Mr. Stephen suggested that to leave all
the documents/reecord and they should give in writing about their
claim being settled. He has further stated that since it was too late,
no formal document could be prepared and Mr. Francis and Mr.
Anthony agreed to receive Rs.4,00,000/- from Mr. Stephen and to
give acknowledgment. This witness has stated that Mr. Stephen
handed over 2 bundles of Rs.1000/- notes and 4 bundles of Rs.500/-
notes, totally amounting to Rs.4,00,000/- which was counted by Mr.
Anthony and given to Mr. Francis and thereafter signature was
affixed on document Exh. 25A. This part of the evidence of D.W.-2
Mr. Pandey has not been shaken in the cross-examination.
17. PW-1 Mr. Francis has admitted in the cross-examination that on
the day of settlement (17.02.2005) he had visited the office of the
Defendant at around 3.30 p.m. and was there till 9.30 p.m. and they
sat for taking accounts at around 6.30 p.m. and it was over in about
2½ hours and he received the cheque on the same day and therefore,
left the documents there itself. He has further admitted that he has
not asked the Defendant to give post dated cheques on day of the
settlement.
FA-979-2017 J-C1.doc
18. The aforesaid admissions of the Plaintiff's witness are sufficient
in my opinion to conclude that the Plaintiff's partners received
something on 17.02.2005 because they left and as per cross
examination they received a cheque therefore they left. This does not
add up to their story of 2 cheques of April 2005 being issued to them
for payment of amount settled on 17.02.2005. There is serious
contradiction in the evidence of Defendant's witness about when and
how many cheques were received towards payment of the said
settlement because in the examination-in-chief he has stated that he
received the cheques after a few days of settlement but in cross-
examination he has said that he received the cheque on the date of
settlement. The Plaintiff has surely not come before the Court with
clean hands.
19. Both the documents of settlement of accounts Ex. 16 and 25A
bears the signature of Defendant with seal. No police complaint is
filed by the Plaintiff about Ex.16 or Ex. 25A (settlement of accounts)
being executed forcibly or under threat of muscle power. Therefore
there is enough material to conclude that under signatures of all
parties concerned, the accounts were settled and figure of Rs.
22,51,670/- was arrived at.
20. PW-1 Mr. Francies has admitted in his cross-examination that
the Plaintiff-firm has no licence under the concerned Shops &
Establishment Act, that Plaintiff has no particular office, that Plaintiff
does not pay sales tax. He has admitted that the cheque Exhibit
No.17 of Rs.20,51,670/- was handed over to the Plaintiff by one lady
FA-979-2017 J-C1.doc
in the office of the defendant. He has stated that he does not know
about who wrote the contents of the said cheques. He has further
admitted that he does not have documents such as voucher, bills and
account books with him. From the copy of Plaintiff's partnership
deed, it is seen that Plaintiff was engaged in the business of labour
contractor for construction works at various sites. It is specific case of
the DW-1 Mr. Stephen that he used to clear the payment to the
Plaintiff every day as the Plaintiff was required to pay labourer on
daily basis and the Plaintiff always insisted on payment in cash and
rarely accepted payment by crossed cheque and always insisted for
either cash or bearer cheque. This portion of the Defendant's
evidence is not substantially challenged or shaken in the cross-
examination. Therefore, from the aforesaid admissions, it can be
safely concluded that for the construction purpose, Plaintiff was
supplying labour who used to be paid either in cash or by issuing
bearer cheques. Therefore in preponderance of probabilities, it is
improbable that only for the purpose of paying final payment under
settlement, Defendant will issue 2 crossed cheques as claimed by the
Plaintiff.
21. Now, turning to 2 cheques in question which are at Exhs.17
and 18. If the case of Plaintiff is to be accepted that after taking the
accounts finally an amount is arrived at which is due and payable,
there was no reason for Defendant to issue two cheques from
completely different series of cheques and having two amounts of
Rs.2 lakhs and Rs.20,51,670/-. Cheque Exh. 18 indicates that it was
taken from an old cheque book series with printed year as "19____"
FA-979-2017 J-C1.doc
clearly indicating that when that series of cheque book was issued, it
was meant for an year starting with figures 19 making it very old
cheque for settlement arrived at in February 2005. The action of the
Defendant seems to be in sync with his case about the cheques being
stolen and misused. The Defendant - Mr. Stephen has stated that he
was in Kerala (his native place) on 18.05.2005, where he received a
phone call from Bank Manager about cheque/s of large sum
deposited for clearance. He has stated that he immediately returned
to Mumbai and gave letter dated 19.05.2005 informing that he has
not issued those cheques and demanding their xerox copies from
bank. He has then on the same night (after midnight) filed police
complaint about his handbag with signed cheques being lost. The
Defendant has produced letter to police station and Certificate of
concerned police station dated 20.05.2005 at 00.15 giving details of
complaint with list of lost articles. It indicates loss of 4 signed
cheques on 13.05.2005 reported.
22. Considering the aforesaid evidence, I find it difficult to believe
that said two cheques were actually issued by the Defendant for
settling the singular figure arrived at under the settlement dated
17.02.2005. Hence Point Nos. 1 & 2 are answered accordingly.
23. Now turning to the aspect of amount and interest payable
under the settlement. The Defendant has come before the Court with
different versions. One version is of payment of Rs.4,00,000/- in
cash, duly supported by the oral evidence of DW-2 Mr. Pandey. Other
FA-979-2017 J-C1.doc
version is that Plaintiff received entire outstanding amount of Rs.
22,51,670/- in cash and for that purpose it was written "Received"
and signed. No doubt, Mr. Anthony of the Plaintiff's firm has signed
twice on Exhibit 25A (another copy of settlement). Plaintiff certainly
received something for which second signature with seal of the
Plaintiff company was placed on Exh. 25A after writing "Received".
However it is difficult to believe that on receiving only Rs. 4 Lakh,
any prudent man will sign on endorsement of full amount of Rs.
22,51,670/-. Therefore it is not possible to arrive at any concrete
conclusion about any payment being made on the day of settlement.
24. It is now necessary to consider whether there was any
contractual interest agreed between the parties. It is the case of the
Plaintiff that the business relations between the parties is governed
by a letter/agreement dated 09.04.2004 Exh.15. At the outset, it has
to be noted that this document is not signed by the proprietor of
Defendant but it is signed by one Mr. Anil Khanna. PW-1 Francis has
admitted that that Stephen Barnard is the only owner/sole proprietor
of the Defendant and that letter dated 09.04.2004 does not bear
signature of Stephen Barnard. Plaintiff's witness has clearly admitted
that he does not have any document to show that there was offer
inviting the Plaintiff for construction of project. He has also admitted
that Mr. Stephen is the only owner/proprietor of the Defendant
concerned. The authority letter in favour of Mr. Anil Khanna is
admittedly not produced in original on record. The alleged authority
letter of Mr. Khanna (xerox-Exh.24) shows authority in respect of
contract awarded to Defendant (not Plaintiff) and for correspondence
FA-979-2017 J-C1.doc
with NBCC, to raise invoices and collect payment on behalf of
Defendant. It does not give any authority to sign any agreement
awarding work or contract on behalf of Stephen Bernard in favour of
third party. Even otherwise, the letter/agreement dated 09.04.2004
does not contain any clause about payment of interest on arrears. It is
already held by me that the cheques in question were not issued for
payment of amount under settlement. It must be noted here that the
Plaintiff has chosen not to file proceedings u/s. 138 of the Negotiable
Instruments Act, 1881. The whole basis of the suit is the 'settlement
of accounts document' Ex. 16 which is duly signed by all parties. But
it is not a negotiable instrument. It is certainly not a cheque. It is
neither an unconditional undertaking nor an unconditional order to
pay. Therefore its neither a promissory note nor a bill of exchange. In
these circumstances, there is no basis for awarding interest @18% as
awarded by the Trial Court. For this reason the judgment of M/s.
Wolstenholme International Ltd. Vs. Twin Starts Industrial
Corporation & Ors - [AIR 2001 Bom 409] (replied upon by the Trial
Court) will not apply.
25. The Trial Court has also relied upon the Judgment of Amit H.
Jhaveri and Anr. v/s Bank of Baroda and Ors. [AIR 2011 Bom 11].
The said judgment is regarding a bank transaction of loan/finance-
facility. Contracts for bank loans always have interest clauses. The
said case law could not have been applied to the facts of this case.
The present case is based on a settlement of account document, that
too for amounts to be paid to labour, which was a day-to-day affair.
The settlement of accounts and final amount thereunder is also
FA-979-2017 J-C1.doc
disputed. Such a document as a basis for money recovery cannot be
equated with finance/bank loan documents having clear contractual
obligations of payment of interest permissible under RBI guidelines.
Therefore, interest awarded by the Trial Court is without any basis. It
is excessive and requires interference. In the overall facts and
circumstances, simple interest @8% appears to be just and proper.
26. Accordingly the liability of the Appellant / Defendant is
modified by passing following order.
(A) The Appeal is partly allowed.
(B) The impugned Judgment and Decree is quashed and set
aside. The suit is decreed partially.
(C) The Appellant/Defendant is held liable to pay to the
Respondent/Plaintiff an amount of Rs.22,51,670/- with
simple interest @ 8% per annum from date of settlement
(17.02.2005) till actual realization.
(D) Decree be drawn up accordingly.
(E) In view of disposal of the main appeal, all pending
interim/civil applications filed for various interim reliefs
are also disposed of in above terms.
(F) No order as to costs.
(M.M. SATHAYE, J.)
