Dinesh Bhakta Shrestha vs Mmtc Ltd.
2009 Latest Caselaw 3112 Del

      IN THE HIGH COURT OF DELHI AT NEW DELHI

                      CS(OS) 1087 of 2004

                                       Reserved on : 4th August 2009
                                       Decision on : 11th August 2009

      DINESH BHAKTA SHRESTHA                    ..... Plaintiff
                   Through Dr. Amitabha Sen with
                   Mr. Lalit Kr. Singh and
                   Ms. Aditi Pandey, Advocates

                      versus

      MMTC LTD. & ANR.                           ..... Defendants
                   Through Mr. Sanat Kumar and
                   Mr. Sanjay Sharma, Advocates.

      CORAM:
      HON'BLE DR. JUSTICE S. MURALIDHAR

      1.     Whether Reporters of local papers may be
             allowed to see the judgment?                No

      2.     To be referred to the Reporter or not?      Yes

      3.     Whether the judgment should be reported     Yes
             in Digest?

                               JUDGMENT

11.08.2009

S. Muralidhar, J.

1. This is a suit for recovery of Rs.58,60,288/- together with past,

pendente lite, future interest at 18 % per annum, and damages and costs.

2. The plaintiff, a Nepali national, is the sole proprietor of Mini Mini

Enterprises (MME) a concern registered with the Department of

Commerce of the Government of Nepal and having a registered office in

Kathmandu in Nepal. MME claims to specialise in fertilizer trade and

related services.

3. In the year 1997, the Defendant No.1 MMTC, a Government of India

undertaking which deals in agriculture inputs including fertilizers, was

negotiating a contract to supply and deliver 20,000 MT of urea fertilizer

at US$ 247 per MT to Agriculture Inputs Corporation (AIC) an

undertaking of the Government of Nepal. It is stated that the

Government of Nepal was in urgent need of supply of urea at that point

in time.

4. Even prior to MMTC entering into an agreement with AIC, MME was

in contact with MMTC and was coordinating the visit by MMTC

officials to Kathmandu for concluding the contract with AIC. On 19 th

June 1997, the MMTC wrote to MME informing it that a two-member

MMTC delegation would be visiting Kathmandu between 25 th and 26th

1997 for the finalization of the contract.

5. On 27th June 1997 an agreement was entered into between AIC and

MMTC for supply of 20,000 MT of urea by MMTC. The consignment

was to be delivered into three lots of 4000 MT, 6000 MT and 10,000

MT respectively. The agreement named the four warehouses of the AIC

where the consignment was to be delivered. As regards the delivery

period, the first lot of 4000 MT was to be delivered within twenty days

from the date of the agreement, the second lot of 6000 MT within forty-

five days and the third lot of 10,000 MT within sixty days.

6. By a letter dated 14th July 1997 addressed to MME, the MMTC

informed it that "we are pleased to appoint you as our Agents for

facilitating MMTC‟s business with HMG Nepal. To start with, we are

appointing you as our Agent for handling business concluded with M/s

AIC, Nepal on 27/6/1997 for export of 20,000 MT of bagged Urea.

Kindly note that the agency commission payable shall be 4% of value of

business concluded with M/s AIC, Nepal. Detailed terms and conditions

shall be sent to you in due course."

7. By a letter dated 6th August 1997 MME informed the MMTC that

AIC had opened a letter of credit (LC) for the contract. On the next day

it informed MMTC that Nepal Bank Ltd., Kathmandu had transmitted

the LC to American Express, New Delhi. The delivery period was

rescheduled effective from the date of opening LC, i.e., 6th August 1997.

8. It transpired that up to 4th September 1997 MMTC was able to deliver

only 1400 MT out of 4000 MT of the first lot in the Nepalgunj and

Bhairahawa offices of the AIC in Nepal. According to the plaintiff time

being the essence of the contract it was incumbent on the MMTC to

have adhered to the delivery schedule set out in the agreement with AIC.

Ultimately of the 20,000 MT of urea agreed to be supplied to AIC,

MMTC supplied 14686.603 MT during 1997.

9. On 23rd December 1997 AIC made a provisional payment of US$

66,790 to MMTC. A meeting was held between MMTC and AIC at

Kathmandu on 30th January 1998. Inter alia AIC agreed to release US$

114,629.66 withheld by it on account of shortage of urea in earlier

contracts subject to the insurance company giving a letter specifying that

AIC‟s claims are under process and shall be settled within a particular

date and MMTC undertaking to pay the differential amount out of the

100% value of shortages in case the insurance company settled the claim

for a lesser value.

10. MME kept writing to MMTC regarding the payment of agency

commission. According to the plaintiff several letters and reminders

were sent between February 1998 and September 2000, requesting for

release of the balance payments due to MME. Reliance is placed upon a

letter dated 28th September 2000 sent by fax by MMTC to the plaintiff

where the MMTC acknowledged that it owed the plaintiff the balance of

the commission. The said letter sent by fax reads as under:

"To: Shri Sunil Shrestha From : Shrikant Pathrabe Designation: Designation : Dy. Manager Organisation: Mili Mili Enterprise Date : 28/9/2000 Fax No. : 009771-417446 Page No. : 1 of 1 Pages

If the transmission is not clear, please notify us immediately.

Sub: Regarding agency commission against AIC Nepal contract

With reference to your msgs and meetings on the above subject, the matter was examined and the competent authority felt that the agency commission to M/s Mili Mili cannot be released immediately till AIC, Nepal remits the amount of US$2,99,821.79 which it had recovered arbitrarily from MMTC‟s bills out of the export payment for supply of 14686.603 MT of urea during 1997. Till date we have received only an amount of US$34,614.72 from AIC, which was remitted after much pursuation (sic persuasion) by MMTC by MMTC. AIC has been holding this amount for more than six months after recovery from the insurance company.

Since protecting the business interests of MMTC is one of the conditions of the agreement with M/s. Mili Mili, it is felt that M/s. Mil Mili should take up suitably with AIC for remittance of the balance amount before we can consider the remittance of

balance agency commission to M/s Mili Mili.

Yours faithfully, (Shrikant Pathrabe)"

11. According to the plaintiff, MME wrote on 9th August 2001 to the

MMTC demanding the payment of balance commission. Thereafter

when MME was unsuccessful in getting MMTC to pay the balance

commission, the proprietor of MME visited MMTC‟s office on 9th

May 2002. Immediately thereafter on 10th May 2002 MME wrote a

letter to the MMTC referring to the meeting held on 9th May 2002 and

pointing out that "till date we have not received our balance

commission in an amount of U.S.$ 78,313.63 even though we were

assured at one time (vide MMTC‟s letter dt. 28/9/2000) to release our

balance amount after recovery of insurance claim amount from the

under writers." This was followed by a reminder dated 28th October

2003 which reiterated that MMTC owed it the balance agency

commission of U.S. $78313.63 "despite your verbal and written

assurance to remit the balance after recovery of Insurance Claim (See

MMTC‟s letter of 28th September 2000) which claim has been

settled for long nearly two years already." (emphasis supplied)

12. When no payment was forthcoming the present suit was filed on

3rd September 2004.

13. In the written statement filed by the MMTC, a preliminary

objection was taken as to the suit being barred by limitation. It was

pointed out that even if it was assumed that the MMTC‟s letter dated

28th September 2000 constituted an acknowledgment of debt, the suit

filed on 3rd September 2004 was beyond the limitation period of three

years. The other preliminary objection was that the suit was bad for

mis-joinder of parties since the defendant No.2 being the Managing

Director of the Defendant No.1 was not a necessary party. On merits,

it was contended that due to serious lapses on the part of the plaintiff

in not getting the LC period extended, MMTC suffered huge losses. It

was further alleged that due to the inaction of MME, the plaintiff also

failed to get the release of payments from the AIC. The stand was that

since the plaintiff had failed to perform his part of the contract, he

could not ask for any further commission.

14. On 5th September 2005, the following issues were framed:-

"1. Whether the defendants agreed to pay to the plaintiff 4% commission on the total value of 20,000 metric tonnes of urea? OPP

2. Whether the defendants failed to perform their part of the agreement, if so, to what effect? OPP

3. Whether the plaintiff is entitled to recover amounts from the defendants, if so, how much? OPP

4. Whether the plaintiff is entitled to interest, if so, on what amount, at what rate and for what period? OPP

5. Whether the suit of the plaintiff is barred by time? OPD

6. Whether the suit is bad for mis-joinder of parties? OPP

7. Whether the plaintiff has committed breaches of the agreement, if so, to what effect? OPD

8. Relief."

15. The submissions of Dr. Amitabha Sen, the learned counsel for the

plaintiff and Mr. Sanat Kumar, the learned counsel for the defendants

have been heard.

16. One of the preliminary objections concerned the question of the

limitation. Therefore, this Court heard arguments on it first. In any event

in terms of Order XIV Rule 2(2) CPC, it was thought appropriate to hear

submissions on the aspect of limitation as a preliminary issue.

17. Issue 5: Whether the suit is barred by time?

The submission on behalf of the plaintiff is two-fold. It is first submitted

that the limitation did not begin to run only with effect from 28th

September 2000 when the MMTC wrote to the plaintiff acknowledging

that it owed the plaintiff agency commission. It is contended that at the

meeting held on 9th May 2002, MMTC acknowledged that the money

was owing to the plaintiff. The contents of the said meeting were

„memorialized‟ in the letter dated 10th May 2002 written by MME to

MMTC. There was no reply to this letter denying that such a meeting

took place. Further, in the cross-examination of the witness for the

defendant, the fact of the aforementioned meeting having been held on

9th May 2002 and the letter dated 10th May 2002 having received by the

MMTC were not denied. Consequently it must be taken as if the MMTC

has accepted that at the meeting held on 9 th May 2002 it again

acknowledged that it owed the plaintiff money in the form of the balance

agency commission and therefore limitation would begin to run only

from that date.

18. Secondly it is contended that one of the points raised in the plaint is

that the defendant No.1 perpetrated a fraud on the plaintiff by concealing

from the plaintiff that it had already received the full payment owing to

it from the AIC. This was the reason given by the MMTC for denying

the agency commission to the plaintiff. According to the plaintiff this

fraud was discovered on 25th October 2003. The suit was filed within

one year of the discovery of the fraud and therefore was within time.

19. Counsel for the defendant on the other hand points out that after 28 th

September 2000, there is no letter written by the MMTC to the plaintiff

in regard to the agency commission. The letter dated 10th May 2002 does

not indicate that it at the meeting held on 9 th May 2002, there was any

acknowledgment by the MMTC that the balance agency commission

was owed to the plaintiff. Even in the subsequent lawyer‟s notice issued

by the plaintiff to the defendant on 28th October 2003, no reference is

made to any such acknowledgment by the MMTC of its dues at the

meeting held on 9th May 2002. More importantly, that letter also does

not mention the plaintiff having discovered any fraud as alleged in the

plaint on 25th October 2003. It is further pointed out that the actual date

of discovery of the fraud is mentioned only in para 35 of the plaint

which sets out the various dates on which cause of action of filing the

suit arose. It is submitted that although according to the plaintiff it

realized only on 25th October 2003 that the MMTC had already received

the balance payment from AIC, in the letter dated 9 th August 2001, the

plaintiff acknowledged that the MMTC had already received the amount

claimed of payment from the underwriters. Therefore, there was no

evidence to show that the fraud was discovered only on 25 th October

2003. It is accordingly submitted that the suit is barred by limitation

even on the second limb of argument.

20. The facts are really not in dispute. It is only the interpretation of the

various documents that appear to be disputed. For instance MMTC does

not dispute the letter dated 28th September 2000 which has been

extracted hereinbefore. It can be construed to be an acknowledgment by

the MMTC that it owes agency commission to the plaintiff. If the

limitation for the plaintiff to claim the amount of agency commission is

to run from that date, then clearly the suit is barred by limitation as it

was filed on 3rd September 2004 more than three years after the date of

that letter.

21. To overcome this difficulty, the plaintiff claims that at a meeting

held on 9th May 2002 with MMTC the fact that it owed the plaintiff the

balance agency commission was acknowledged by the MMTC and that

this was thereafter memorialized by MME in the letter dated 10th May

2002 addressed to MMTC neither of which has been denied by the

defendant of its witness.

22. A perusal of the letter dated 10th May 2002 shows that it refers to

the meeting on 9th May 2002 regarding the release of commission to

the plaintiff. However, a careful perusal of that letter shows that it

does not indicate that at the meeting held on 9th May 2002, the MMTC

in fact acknowledged that it owed any sum to the plaintiff. The

learned counsel for the plaintiff was unable to point to this Court any

sentence in the said letter which records that at the meeting held on 9th

May 2002 there was any such acknowledgment by the MMTC.

23. Mr. Ashwani Kumar Verma, the Senior Manager of the MMTC

was examined as DW1. He was not specifically asked any question by

the learned counsel for the plaintiff as regards the meeting held on 9th

May 2002. In his cross-examination on 14th December 2007, he was

asked about the letter dated 10th May 2002 (Ex.P-5) and he answered:

"I have not replied to the plaintiff in response to Ex.P-5 but as regards

the Ex.P-6 and P-21 I cannot say whether any replies to the same were

sent by the MMTC to the plaintiff". The learned counsel for the

plaintiff wants this Court to infer from the above reply that the

MMTC not only admitted the receipt of the letter dated 10 th May 2002

but also that the said letter correctly memorialized what transpired at

the meeting on 9th May 2002. According to him it should further be

taken to have been admitted by the MMTC that at the meeting on 9th

May 2002 MMTC acknowledged that it owed the plaintiff balance

agency commission. This Court is unable to draw any such inference.

At the highest, the above reply by the witness can only be understood

as acknowledging the receipt of the letter dated 10th May 2002 and

nothing more. In any event, the letter dated 10th May 2002 nowhere

states that at the meeting held on 9th May 2002 the MMTC

acknowledged that it owed balance agency commission to the

plaintiff. It is one thing to say that the plaintiff stated in the said letter

that some balance amount was owing to MME by MMTC. It is

another to say that the MMTC acknowledged that it owed such

amount to MME. There can be no such deemed acknowledgment in

the manner suggested by the learned counsel for the plaintiff only

because the MMTC did not reply to the letter dated 10 th May 2002. A

question could have easily been put to the witness as to what

transpired in the meeting on 9th May 2002. However, no such question

was asked.

24. A reference may be made to Section 18 of the Limitation Act in

order to appreciate what kind of an acknowledgment is required in

law for the purposes of determining when the limitation begins to run.

The acknowledgment envisaged in Section 18 has to be in writing

singed by the party against whom such right is claimed. Where the

writing is undated, oral evidence may be given of the time when it

was signed. The earliest acknowledgment, if any, by the MMTC in

terms of Section 18 is dated 28th September 2000. After that date there

is no acknowledgment in terms of Section 18 Limitation Act.

25. Therefore, this Court is therefore unable to accept the submission

of the learned counsel for the plaintiff that the limitation period of

three years should begin to run from 9th May 2002.

26. The second limb of submission as regards limitation is that the suit

is based on the discovery of the fraud by the MMTC and that this

fraud was discovered on 25th October 2003. The precise averment in

the plaint in this regard is contained in paras 24, 25, 26 and 35 which

read as under:

"24. The Plaintiff was growing more and more impatient and tried whatever means and resources were available with him to get the balance commission released to him. During this extremely tiring and arduous efforts to collect the remaining balance, the Plaintiff came to know that the Defendant Company had already received from AIC the total amount due to the Defendants.

25. Shocked at the fraud perpetrated on him by a Government of India undertaking, the Plaintiff was at a complete loss. He had no idea how to recover loss. He had no idea how to recover from the Government and where to go. The Plaintiff expected that the Defendant Company, being a Government of India undertaking, would act in good faith and not deprive one of its agents off his legitimately earned commission in a fraudulent manner.

26. Exasperated, the Plaintiff sent a legal notice to the Defendant Company on October 28, 2003. The Plaintiff, in its legal notice, once again, stated the balance owing to him and demanded payment in full forthwith. The Defendants chose to ignore that notice also and continued its silence.

35. The cause of action first arose on May 9, 2002 when the Plaintiff met the Defendants and memorialized the minutes of the meeting in his letter dated May 10, 2002. The Plaintiff stated the accounts in his letter to the Defendants regarding the balance commission. It again arose on October 25, 2003 when the plaintiff discovered, contrary to Defendants‟ assertions, that the Defendants had already received their balance in full from AIC. This

fact of payment in full by AIC was fraudulently concealed by the Defendants from the Plaintiff who now realized that the Defendants never had the intention to perform what they were promising to the Plaintiff repeatedly. The cause of action further arose on October 28, 2003 when the Plaintiff issued a legal notice to the Defendants and demanded payment of the balance commission. The cause of action still continues. Hence, the suit has been filed within the prescribed limitation period."

27. In addition to the above, after the arguments had concluded the

plaintiff filed a further application purporting to place on record a

two-page brief on this aspect. The two-page brief is a reiteration that

the fraud was discovered on 25th October 2003 and therefore in terms

of Section 17 of the Limitation Act, the period of limitation would

begin to run from that date. It is contended that since there is no

specific denial by the defendant of these averments it should be taken

to be admitted that a fraud was discovered on the aforementioned

date. Reliance is placed on the judgments of the Supreme Court in

Pallav Sheth v. Custodian & Others AIR 2001 SC 2763; Ramesh B.

Desai v. Bipin Vadilal Mehta AIR 2006 SC 3672; Popat and Kotecha

Property v. State Bank of India JT 2005 (12) SC 302; Steel

Authority of India Ltd. v. Rameshwar Dass 60 (1995) DLT 271 (DB)

and Anil Sudan v. Bimla (2008) 9 AD Delhi 424.

28. A perusal of the para 35 of the plaint, shows that it is the only place

where the plaintiff has stated that the alleged fraud was discovered on

25th October 2003.The discovery of the fraud purportedly was in the

following manner. It was "contrary to the Defendants' assertions, that

the Defendants had already received their balance in full from AIC. This

fact of payment in full by AIC was fraudulently concealed by the

Defendants.........". This sentence in the above paragraphs of the above

plaint are repeated.

29. In the evidence filed by way of examination-in-chief, the plaintiff

has reproduced paras 24, 25 and 35 of the plaint verbatim. In other

words, the evidence of the plaintiff does not give further particulars of

how and in what manner the plaintiff discovered on 25th October 2003

the alleged fraud committed by the MMTC.

30. However, what is significant is that in para 28 of the plaint it is

stated:

"28. More than five years have passed since the supply of fertilizer under the above said Agreement was initiated, completed and payment received therefrom by the Defendants. Yet, the payment of the Plaintiff's legitimate and rightfully earned commission is still pending."

31. It would appear from the above paragraph that according to the

plaintiff the payments were received by MMTC in 1999 itself. The

above paragraph for some reason is not found in the affidavit filed by

way of evidence by way of examination-in-chief of the plaintiff.

32. A question was asked of DW1 about the payments received by the

MMTC and the reply of the witness is as under:

"I am not aware of the MMTC having recovered the insurance amount from underwriter. It is correct that MMTC filed an insurance claim in respect to the shortage of the amount relating to the present contract. I do not know the details of this insurance claim as it was filed long back. I do not know whether I have filed any documentary proof to show my contention in para-11 of my affidavit that plaintiff has failed to perform its part of obligation. Volunteered, it is evident from the fact that the agreed amount was not supplied by the plaintiff and no further extension of time could be given to the plaintiff by the AIC.

Q: Was the insurance claim related to the cyclonic weather claimed by the defendant?

A: The details of insurance claim is not known to me."

33. There is merit in the contention of the learned counsel for the

defendant that the letter dated 9th August 2001 written by the plaintiff to

the MMTC in fact suggests that the plaintiff was already aware by that

date the MMTC had received full payment. The said letter reads as

under:

"9th August 2001 M/s MMTC Limited Core-1, "Scope Complex"

7 Institutional Area New Delhi-110 003 INDIA

Kind Attn: Mr. P. K. Maheshwary - C.G.M.

Subject : Release of Commission -

AIC/Nepal contract dated 27-06-1997

Dear Sir,

This has reference to our meeting of 8th August 2001 at your office regarding subject matter. As informed to you via our e-mail dated 29th June 2001, AIC had already forwarded all required original documents pertaining to insurance claim of Urea and since MMTC have already received agreed claim amount from the underwriters, we now request you to kindly release our balance commission of U.S.$ 78,313.63 of subject contract at the earliest enabling us to close our file.

Should you need any further clarifications in this regard, please do let us know.

Thanking you, Yours faithfully

For Mili Mili Enterprises (Sunil Shrestha)"

34. An attempt was made by the learned counsel for the plaintiff to

suggest that the above letter only acknowledges MMTC having received

the amount from the underwriters and not from AIC. This really does not

help the plaintiff. If in fact the plaintiff knew that MMTC had already

received the payments and therefore the balance agency commission was

due to the plaintiff, it cannot be said that the plaintiff was unaware of the

MMTC having received the payment for the consignment. The whole

case of the discovery of the fraud as set out in para 35 of the plaint is

about the concealment by the MMTC from the plaintiff that the payment

had been received by it in full. The case that this alleged fraud was

discovered only on 25th October 2003 is belied by the Plaintiff's letter

dated 9th August 2001 to the MMTC.

35. Further the notice dated 28th October 2003 (Ex. P-6) also

acknowledges that the insurance claim of the AIC "has been settled for

long nearly two years ago". This assertion by the plaintiff is consistent

with what it stated in its letter dated 9th August 2001. A conjoint reading

shows that some time in 2001 itself the plaintiff was aware of MMTC

having received the full payment. Clearly therefore the so called fraud

was discovered by the plaintiff, on his own showing, in 2001 itself.

Therefore, the resort to Section 17 of the Limitation Act by the plaintiff

to somehow extend the period of limitation to 25th October 2003 the

alleged date of the discovery of the fraud is misconceived. If the plaintiff

knew that the so called fraud occurred on 9th August 2001 itself (actually

a date prior thereto) then even on that basis the limitation began to run

from that date and the suit is, therefore, barred by time.

36. In view of the above factual position, the decisions cited by the

plaintiff are of no assistance to him. Those decisions no doubt set out the

settled position in law that the limitation would begin to run only from

the date of the discovery of a fraud in terms of Section 17 of the

Limitation Act. But on the facts of the instant case, the date of the

discovery of the fraud, even according to the plaintiff, was some time

prior to 9th August 2001.

37. Therefore on both counts, this Court finds that the suit is barred by

limitation.

38. In view of the above discussion, preliminary issue No.5 is decided in

the affirmative in favour of the defendant and against the plaintiff. It is

held that the suit is barred by time.

39. In view of the finding on issue No.5, this suit fails. Consequently, a

decision on the other issues is not called for. The suit is dismissed with

costs. The records be consigned.

S. MURALIDHAR, J.

AUGUST 11, 2009 ak