M/S. Allied Motors vs M/S. Sanderson Agencies
1991 Latest Caselaw 808 Del

ORDER

USHA MEHRA, J.

1. M/s. Allied Motors Private Limited, a company incorporated under the Companies Act, where holding distributorship right of the Burshane Gas known as "Bharat Gas". They under the distributorship were permitted to appoint sub dealers. Pursuant to the said authority, the plaintiff company appointed M/s. Sandersons Agencies, through its partners as their sub distributors/ agents with effect from 1st January, 196 1. This sub dealership agreement was renewed from time to time and lastly it was renewed on 1st January 1975. The purpose of creating and assigning rights of sub dealership was to handle on plaintiff's behalf fair and equitable distribution of gas to various customers. The defendants, according to the plaintiff, violated the terms of the agreement, accordingly the plaintiff company invoked Clause 32 of the Agreement dated 1st January 1975 and terminated the sub-dealership agreement of defendant No. 1. This according to the plaintiff was done after obtaining the approval from "Bharat Refineries Ltd." (Hereinafter called 'the principals'). The termination was communicated on 9th October 1976. After the termination of the agreement, the defendants were bound to return the cylinders as well as the domestic pressure regulators and other records of the consumers including publicity material of the plaintiff company. Since the defendant did not do so, therefore, they were reminded by letters and ultimately by legal notice. The price of one cylinder at the relevant time was Rs. 350/-. And that of domestic pressure regulator Rs. 25/-. After checking accounts, it was found that the defendant kept 342 cylinders and 9 domestic pressure regulators. The defendant was called upon to return the same but failed to do. Besides this, from the accounts submitted by the defendant, an amount of Rupees 3,302.56 P. was due after adjusting the amount of security lying with the plaintiff, which was to the tune of Rs. 4,000/-. Over and above that, the defendant has also failed to provide S.T. Form No. I for a total value of Rs. 8,366.67 P. The liability of sales tax at the rate of 7% was that of the defendant which comes to Rs. 585.67 P. Thus the total amount due from the defendant payable to the plaintiff comes to Rs. 1,23,813.23 P. This amount, the defendant inspite of reminder has not paid, therefore, the plaintiff is also entitled to interest and the costs.

2. Defendant No. 3 was served and he filed the written statement contesting the suit inter-alia on the grounds that the defendant committed no violation of any term of the Agreement. Therefore, the plaintiff had no right to invoke Clause 32 of the Agreement. The termination of the rights of sub-distributorship has also been challenged. Moreover, the principal has already offered distributorship to the defendants. Hence, the basis of action by the plaintiff against the defendants is violative of the principle of natural justice. Since the principals have accepted the defendant as distributor, the termination is illegal. Moreover, the plaintiff in collusion with M/s. Jawala Agencies and Bharat Petroleum has illegally removed the cylinders, which were lying in the godowns of the defendants. Therefore, the defendants are not liable to pay any amount.

3. During the pendency of the proceedings, it transpired that Shri S. S. Narula died on 24th September, 1980. He left behind the legal heirs, which were ordered to be brought on record. Out of the legal representatives brought on record, defendant No. 4(c) and (e) filed their written statements alleging that there was no cause of action surviving in favor of the plaintiff after the principal accepted the defendants to be the distributor. On behalf of defendant No. 4(a) it was pleaded that fraud is being played by the plaintiff in connivance with the defendants as those defendants in connivance with the plaintiff want to grab the entire property, of defendant No. 4.

4. Replication was filed controverting all the allegations in the written statement. On the pleadings of the parties, the following issues were framed:

"I. Whether the suit has been filed by a duly authorised person?

2. Whether defendants 2 & 3 and late Shri S. S. Narula who was originally defendant No. 4 in the plaint were appointed subagents/ sub-distributors of the plaintiff on the basis of terms and conditions of the agreement executed between the parties on 1st January, 1975 ? OPP.

3. Whether defendants violated Clause 14(a) of the said agreement dated 1st January 1975, and various other terms and conditions of the agreement? If so, to what effect?

4. If issue No. 2 is found in affirmative, then whether plaintiff company was not justified in invoking Clause 32 of the agreement? OPD

5. Whether the defendants failed to return 342 cylinders and 9 domestic pressure regulators and as such the plaintiffs are entitled to a sum of Rs. 1, 19,925/ - as its value? OPP.

6. Whether the plaintiff is also entitled to another sum of Rs. 3302,56 P. as per statement of account annexed 'A' in the plaint? OPP.

7. Whether defendants have failed to provide Sales Tax Form No. I for the total value of Rs. 8,366.67 P. in spite of notice and as such are the defendants liable to pay a sum of Rs. 585.67 P. on account of Sales Tax at the rate of 7%?

8. Whether the plaintiffs are entitled to interest? If so, at what rate and from which date 9

9. Whether the legal heirs of late S. S. Narula, who was defendant No.4 in the original plaint, are not liable to the claim of the plaintiff? O.P. Legal heirs.

10. Relief". (sic)

5. I have heard Mr. G. S. Sistani, counsel for the plaintiff and nemo for the defendants. I have also taken into consideration the oral and documentary evidence placed on record and my reasoning on every issue is as under:

Mr. P. N. Arora, appearing as P.W. I has proved on record the true copy of the extracts of the minute book as Ex. P.W. 1/ 1. The Board of Director authorised Mr. P. N. Arora to sign, verify and institute the suit. Pursuance to the authority conferred on him by the Board of Directors of the company, he has filed this suit. Ex. P.W. I / I clearly shows the authority conferred on Mr. P. N. Arora, for instituting the suit. This authority has not been assailed nor controverter. In view of the same, I hold that a competent person has properly instituted the suit. Issue is accordingly decided in favor of the plaintiff.

Mr. P. N. Arora, appearing as P.W. I have proved the sub dealership Agreement dated 1-1-1975 exhibited as P.W. 1/2. Its partners, Shri S. S. Anrula, executed this Agreement on behalf of Sundersons Agency defendant No. 4. The factum of the execution of the Agreement dated 1st January, 1975, between the parties has remained unrebutted on record. In cross-examination not even a suggestion was given that no such Agreement was executed between the parties. The suggestion that there was a tripartite agreement the Plaintiff Company, M/s. Jawala Agencies and defendant No. Mr. Arora refuted me. Parties were bound by the terms of this Agreement i.e. Ex. P.W. 1/2. Shri Surinder Singh, D.W. I partner of the defendant No. I admitted that they were appointed as subagents of the plaintiff. He also proved his Partnership Deed Ex. P.W. 1/6 in which Capt. S. S. Narula was one of the partners, who had signed Ex. P. W. 1/ 2, the sub-agency agreement with the plaintiff. Hence, this issue is decided in favor of the plaintiff.

ISSUE NO. 3.

It is the testimony of Shri P. N. Arora, P.W. I that the defendant committed violation of the various terms and conditions of Agreement, Ex. P.W. 1/2, and According-to Shri P. N. Arora, the sub-distributorship of defendant was terminated on account of complaints received from the customers. Those complaints were forwarded to the defendant for rectification. He further testifies that it was on account of the number of complaints and not one individual complaint on the basis of which the sub-dealership was terminated. The plaintiff had been receiving the complaints since the beginning of 1975. The defendant also admitted that he used to get the complaints from plaintiff but had been rectifying the same. Mr. Arora denied the suggestion that sub-dealership was terminated for any ulterior motive. He, however, testifies that before terminating the sub-dealership approval of Bharat Refineries Ltd. i.e. 'principal' was also obtained. The said approval given by the Principal i.e. Bharat Refineries Ltd. is Ex. P.W. 1/4, Vide Ex. P.W. 1/4, the Principal accepted the contention of the plaintiff and accorded the approval to terminate the sub-dealership of defendant No. 1. He denied that sub-dealership of only those persons were terminated who were not related to the Directors of the plaintiff company. He further denied the suggestion that the sub-dealership was terminated because the plaintiff company apprehended that sub-distributor might be made independent distributors. On this part of his testimony, the defendant has not been able to extract any contradiction nor has been able to prove by any cogent and reliable evidence that the termination of the sub-dealership was for any other reason except mentioned by the plaintiffs that is on account of violation of the term of the sub-dealership Agreement. The issue is accordingly decided in favor of the plaintiff.

ISSUE NO. 4.

Since I have already held that there was a violation of the term of the Agreement, Ex. P.W. 1/2 therefore, the plaintiff was justified in invoking the Clause 32 of the Agreement. Plaintiff has in fact invoked Clause 32 to terminate the Agreement of sub dealership. In this case, from the evidence placed on record, it is clear that there was breach on the part of the defendant No. 1, with regard to delivery of the gas to the customers in perfect condition as envisaged under Clauses 14(a) and (b), therefore, the plaintiff was justified in terminating the Agreement Ex. P.W. 1/ 2 dated 1st January, 1975. While invoking Clause 32 of the Agreement, the plaintiff also complied with the provision by taking prior approval of the Principal which is apparent from Ex. P.W. 1/4. The issue is accordingly decided against the defendant and in favor of the plaintiff.

From the uncontroverter and unrebutted testimony of Shri P. N. Arora, P.W. 1, it is clear that at the time of institution of the suit, 342 cylinders and 9 domestic pressure regulators were lift with the defendant No. 1. These were not returned. But during the course of the proceedings, Mr. P. N. Arora, made a statement in this Court on 22nd October 1991 stating therein that out of 342 cylinders now only 85 are left to be recovered from the defendants. The rest of the cylinders were taken possession of by Bharat Refineries Ltd. on 'superdari'. Hence the plaintiff restricted its case of the return of 85 cylinders and 9 domestic pressure regulators. Therefore, while dealing with this case, I am restricting the discussion of the return of the cylinders to 85 instead of 342. Mr. Arora proved on record the factum of non-return of the cylinders after the termination of the dealership on 9th October 1976 vide Ex. P.W. 1/3. The termination was also communicated to the defendant telegraphically copy of which has been proved on record as Ex. P.W. 1/5. It is the term of the Agreement, Ex. P.W. 1/2, that as and when the sub dealership is terminated, the sub dealer was duty bound to return the cylinders and the domestic pressure regulators. From the statement of account placed on record, which the defendant had been submitting monthly and which have been proved on record as Ex. P.W. 1/ 7 to Ex. P.W. 1/ 9, the defendants had retained 342 cylinders and 9 domestic pressure regulators, which they were to return after the termination of the Agreement. It is further proved that neither the cylinder nor the domestic pressure regulator was returned nor money paid. On the contrary, the defendants vide Ex. P.W. 1/8 admitted the non-return of cylinder and domestic pressure regulator. Defendant, however, took the plea that the amount of those cylinders and regulators will be settled after the receipt of letter from the principal to whom they had approached against the illegal cancellation of the Agreement. Hence, Ex. P.W. 1/8 is an admission of liability by the defendants. Mr. Arora has proved the price per cylinder to be Rs. 350/- and that of domestic pressure regulator Rs. 25/-.

According to him the defendant had been sending payment by means of cheques in respect of the gas and equipment supplied to them. Those cheques on presentation were dishonored by the (sic) has been proved on record as Ex. P.W. 1/66 and that of the dishonored cheques as Ex. P.W.1/10 to, Ex. P.W. 1/ 15.

The defense of the defendant that these cylinders and regulators had been taken over by M/s. Jawala Agencies or Bharat Refineries Ltd. in connivance with plaintiff has not been proved on record. Mr. P.N. Arora, P.W, has denied this fact. I -as well as by Shri Dharam Vir Kohli. Mr. Kohli appearing as P.W. 3 testified that he was a Field Officer of the plaintiff company and after the termination of the Agreement, he went to collect the cylinders and the domestic pressure regulators but the defendants did not return the same. Bharat Petroleum gave permission to the plaintiff to take legal action for recovery of these cylinders. He further testify that the godown of defendant No. I and that of Jawala Agencies was partitioned by a partition wall. The cylinder used to be delivered to the defendant at its shop premises. Not even a suggestion was put to this witness that no cylinders were lying with the defendants or that all cylinders have been returned. Mr. H.R. Dhingra of M/s. Jawala Agencies, appearing as D.W. I have categorically denied that any cylinder of the defendant was taken possession of by his agency. According to him, Bharat Petroleum took over the cylinder from the defendant, which were kept in the godowns of the defendants. He was not very sure whether the cylinders were removed from the godowns of the defendant by Burma Shell or by the police. But at the same time clarified that these cylinders were not taken by Jawala Agencies. Vide Ex. P.W. 20; dated 26th November 1976 the defendant No. 1 admitted non return of the cylinders. The fact that cylinders and regulators were not returned by the defendant after termination of the agreement gets fortified from the admission made by the defendant to the effect that they have made representation to the Bharat Refineries Ltd. in connection with the cancellation of their sub dealership, therefore, pending disposal of their representation, they requested the plaintiff not to collect the cylinders. This is an admission on the part of the defendant that the cylinders had not been returned to the plaintiffs.

From the evidence discussed above, it Is clear that as on the date of the filing of the suit, 340 cylinders and 9 domestic pressure regulators were in possession of the defendants. But during the pendency of the suit, the Burma Shell through the police took on 'superdari'297 cylinders. Hence, as on date 85 cylinders are still left with the along with 9 domestic pressure regulators

The issue is accordingly decided in favor of the plaintiff and against the defendant.

(sic) statement of account as Ex. P.W. 2/11. Perusal of Ex. P.W.2/1 shows that at the time of termination of the Agreement, the defendant owed a sum of Rs. 3,302.56 p. Defendants had issued four cheques, which have been proved on record as Ex. P. W. I / 10 to Ex.P.W. 1/ 15. These cheques when presented were dishonored with the endorsement "payment was stopped by defendant No. I". Therefore, taking into account the amount against these cheques as well as the amounts not paid by the defendants came to Rs. 10,786.34 p. After giving credit of the amounts paid by the defendants including the security deposit of Rs. 4,000/- i.e. Rupees 7,483.78 p., the net amount due and payable by the defendant comes to Rs. 3,302.56 p. This amount was demanded according to Mr. P.N. Arora, P.W. I from the defendant by registered letter as well as by ordinary post but the defendants failed to pay the same. The letters intimating the dishonoring of the cheques and making a demand of this amount have been proved on record as Ex. P.W. 1/ 17 and Ex.P.W. 1/ 19. From the perusal of the Ex. P.W. 2/ 1 i.e. the statement of account, it is fully established that the defendants as on the date of the filing of the suit owed a sum of Rs. 3302.56 p. This amount is due to the plaintiff against the defendant after the adjustment of the security amount of Rs. 4,000 / -

As far as this issue is concerned, it is an admitted case on record that the defendants had not supplied Sales Tax Form No. I to the plaintiff for the sale value of Rs. 8,366.67 p. There is a deem admission of this fact on the part of the defendants. Reference can be had to Para 16 of the plaint and in reply thereto in the written statement. There is a vague denial to the specific assertions made by the plaintiff that S.T. Form No. I was not supplied. The denial by defendants being vague is deemed to be an admission of these facts. Similarly, from the perusal of the written statement filed by defendant No. 4 'E'&'C', there is no denial in the eye of law with regard to the non supply of S.T Form No.1 this admission read wit the statement-of P.W. 1, Shri P.N. Arora, i is amply clear that the defendants had not furnished or supplied the S.T. form No. I for the sale value of Rs. 8,366.67 p. Now the question for consideration is whether plaintiff is entitled to recover Rs. 585.67 I.e. 7% of the total value? Admittedly, plaintiff has not paid this amount to the Sales Tax Department. Therefore, to my mind without first getting it adjudicated and paid, plaintiff is not entitled to recover the same. It is only when plaintiff pays this amount to Sales Tax Department it can recover the same from the defendant.

Plaintiff's case is two fold, either return the cylinders and regulators or refund its price. Admittedly, the defendants have not returned 85 cylinders and 9 domestic pressure regulators, the total amount of which comes to Rs. 29,975/ -. Since neither this amount has been paid nor the cylinders have been returned. The question for consideration is whether the plaintiff is entitled to interest? Has the plaintiff claimed interest on account of any contract or on account of any usage or custom? The burden was on the plaintiff to prove, but from the perusal of the oral and the documentary evidence placed on record plaintiff has not been able to prove that he was claiming interest on account of contract or usage. Not an iota of evidence has been led to prove that plaintiff is entitled to interest. Neither usage nor custom has been proved on the basis of which interest has been claimed nor any Agreement has been proved, by virtue of which the plaintiff could be entitled for interest. Therefore, in the absence of having proved the entitlement this issue is decided against the plaintiff.

ISSUE No, 9

The burden was on the legal heirs of the deceased defendant No. 4, Capt. S.S. Narula but they have miserably failed to discharge the burden of this issue. The issue is accordingly decided against them.

RELIEF

In view of my discussion above, I hold that the plaintiff is entitled to the return of 85 cylinders and 9 domestic pressure regulators failing which lie will-be entitled to recover from the defendants a sum of Rs. 29,975,/ with costs and special costs of Rs. 2,000/ - for counsel. Decree be prepared accordingly. If the cylinders and domestic pressure regulators are not returned or price thereof is not paid within one month then plaintiff shall be entitled to interest @ 12% per annum pendente lite till realisation.

6. Order accordingly.