M/S. Texem Engineering vs M/S. Texcomash Exports
2009 Latest Caselaw 3154 Del

IN THE HIGH COURT OF DELHI AT NEW DELHI

                               CS(OS) 407/1997

       M/S. TEXEM ENGINEERING                 ..... Plaintiff
                Through Mr. D.S. Narula with Mr. A.S. Narula
                and Mr. Rajesh Kumar and Ms. Vandana M.
                Bebarta, Advocates

                      versus


       M/S. TEXCOMASH EXPORTS                   ..... Defendant
                Through Mr. C. Mukund with Mr. Ashok Jain,
                Mr. Pankaj Jain, Mr. Anil Kasera, Ms. Vandana
                and Mr. Shashank Sharma, Advocates

       CORAM:
       HON'BLE DR. JUSTICE S. MURALIDHAR

       1.Whether reporters of the local news papers
          be allowed to see the judgment?                          No
       2.To be referred to the Reporter or not ?                   Yes
       3. Whether the judgment should be reported in the Digest? Yes


                                 JUDGMENT

13.08.2009

IA No. 11940/2001

1. This is an application filed by the Defendant under Order VII Rule

11 of the Code of Civil Procedure 1908 („CPC‟) seeking rejection of

the plaint.

2. The suit is for recovery of sum of Rs.1,00,17,972/- together with

future interest at the rate of 25% per annum from the date of the

institution of the suit till realization.

3. According to the Plaintiff it is a proprietary concern through its sole

proprietor Mr. Gurbachan Singh Saluja („GS Saluja‟). The Defendant

is a proprietary concern and Mr. Narendra Kumar Rajgarhia is its sole

proprietor. The Plaintiff claims to have introduced the Defendant to

M/s. Peico Electronics and Electricals Limited („PEEL‟) and as a

result thereof the Defendant signed a Memorandum of Understanding

(„MOU‟) dated 2nd November 1992 and thereafter an agreement dated

17th November 1992 with PEEL for the purchase of tea for export to

Russia. According to the Plaintiff, the Defendant had in consideration

of the services rendered by the Plaintiff agreed to pay to the Plaintiff

commission at the rate of Rs.15/- per kg of tea purchased by the

Defendant from PEEL. The Plaintiff also claims to have arranged for

the purchase of tea by the Defendant directly from M/s. Mahavir

Plantations Cochin subject to payment by the Defendant commission

at the rate of Indian rupee equivalent of US Dollar 0.05 for each kg of

tea purchased by the Defendant from M/s. Mahavir Plantations. It is

stated that the Defendant purchased in all 11,75,100 kg of tea from

Mahavir Plantations directly and/or/through PEEL. Consequently the

Defendant became liable to pay to the Plaintiff commission in the sum

of Rs.1,76,26,500/- (calculated at the rate of Rs.15/- per kg for tea

purchased). It is stated that the Defendant had till the filing of the suit

paid a total sum of Rs.13 lakhs on various dates leaving a balance of

Rs.1,63,26,500/-.

4. The Plaintiff based its claim on two documents, the originals of

which have been placed in a sealed cover in these proceedings. The

first is an agreement dated 1st September 1995 whereby the Defendant

confirmed that it would pay commission at the aforementioned rate of

Rs.15/- per kg for the total quantity of tea purchased by defendant to

the Plaintiff. The second document is a purported settlement deed

dated 26th March 1996. The Plaintiff has in the plaint sought to

explain the circumstances under which the said two documents came

to be executed.

5. It is claimed by the Plaintiff that a post-dated cheque No. 536809

dated 6th March 1996 for a sum of Rs.1.15 crores was drawn by the

Defendant in its favour on UCO Bank towards the balance

commission and that the said cheque was handed over personally by

Mr. Narendra Kumar Rajgarhia to Mr. GS Saluja and that the said

payment was duly received by the Plaintiff. According to the Plaintiff

there were certain proceedings instituted against the Defendant by the

Department of Revenue Intelligence („DRI‟) under the Foreign

Exchange Regulation Act 1973 („FERA‟) in the month of December

1995. According to the Plaintiff in order to escape liability the

Defendant Mr. Narendra Kumar Rajgarhia tried to implicate Ms.

Puneet Saluja the sister of Mr. GS Saluja, who was working with

Mr.Rajgarhia. In the plaint it is stated that the Defendant lodged an

FIR with the police that the said sum of Rs.1,15,00,000/- had been

received by the Plaintiff fraudulently in conspiracy with Ms. Puneet

Saluja. Mr. GS Saluja was arrested and remained in custody for 22

days. During this period there were numerous meetings between Mr.

Santokh Singh Saluja, („SS Saluja) father of Mr. GS Saluja and Mr.

Narendra Kumar Rajgarhia. It is claimed that Mr. Narendra Kumar

Rajgarhia informed Mr. SS Saluja that he was willing to a settlement

if the sum of Rs.1.15 crores was immediately returned. Further it was

agreed that the commission would be reduced from Rs.15/- per kg to

Rs.9/- per kg. A settlement dated 26th March 1996 in the

aforementioned terms was signed by Mr. SS Saluja and Mr. Narendra

Kumar Rajgarhia. It may be mentioned here that while the signatures

of Mr.Rajgarhia in both documents, i.e the agreement dated 1st

September 1995 and the settlement dated 26 th March 1996 have been

denied their contents have been denied by the Defendant.

6. The case of the Defendant is that Ms. Puneet Saluja who was

working with Mr. Rajgarhia had in her possession several blank

papers as well as cheques signed by him. These were misused and this

led to the filing of the FIR. After setting out some of the terms of the

purported settlement, the plaint in para 10 states that the aforesaid

agreement "was reached under most stressful conditions inasmuch as

Shri Gurbachan Saluja had remained arrested for 22 days." It is stated

in para 11 that pursuant to the settlement, "the sum of

Rs.1,15,00,000.00 was returned by the Plaintiff to the defendant and

Shri Gurbachan Singh Saluja was released on bail and the sister of

Shri Gurbachan Singh Saluja was also admitted to anticipatory bail."

It is further stated that pursuant to the settlement, the Plaintiff also

started corresponding with M/s. Mahavir Plantations for release of the

excess amount, if any, paid by the Defendant. The Plaintiff also was

corresponding with the Defendant seeking payment of commission.

After failing to recover the amount claimed, the present suit was filed.

7. In the written statement, the Defendant raised a preliminary issue

that the suit was based on forged and fabricated documents. Inter alia

both the agreement dated 1st September 1995 and 26th March 1996

have been assailed by the Defendant as being forged and fabricated. It

is claimed that some of the blank stamp papers signed by the

Defendant and issued on 1st September 1995 were discovered from the

residence-cum-office of the Plaintiff during search and seizure by the

police at his residence on 12th March 1996. Importantly it is stated

that at no point of time during the pendency of the criminal

proceedings, particularly at the stage of grant of bail, either of these

documents surfaced. Bail was granted to Mr. GS Saluja on 2nd April

1996 and anticipatory bail granted to Ms. Puneet Saluja on 3rd April

1996. The terms on which bail granted have been recorded in the

respective orders by the Additional Sessions Judge (ASJ). Neither

order made any mention of either the agreement dated 1st September

1995 or the settlement dated 26th March 1996. A statement was made

to the police and an affidavit submitted to the court on the same terms

by Ms. Puneet Saluja stating that she was not having any blank signed

papers/documents/cheques in her possession which Mr. N.R.

Rajgarhia might have given to him and that she had also given no

objection if the sum of Rs.16 lakhs as reverted back in the account of

M/s. Texcomash Exports directly or through the account of M/s.

Texim Engineering as she had no claim to either of these firms on the

above amount. She had also given such instructions to the Bank. In

para no. 8 of the written statement the complete details of the criminal

cases against Mr. GS Saluja and Ms. Puneet Saluja have been set out.

It is stated that while Mr. GS Saluja was arrested, Ms. Puneet Saluja

had absconded. Mr. GS Saluja twice applied for grant of bail but those

applications were rejected. The anticipatory bail of Ms. Puneet Saluja

was also initially rejected. Ultimately on 2nd April 1996 Mr. GS Saluja

was granted bail. The learned Additional Sessions Judge („ASJ‟) who

granted the bail noted that sum of Rs.1.15 crores was transferred to

the account of Ms. Puneet Saluja and from there a sum of Rs.60 lakhs

was transferred in the account of Mr. GS Saluja. Learned counsel for

the Plaintiff informed the learned ASJ that "settlement has since been

arrived between the parties and money has been paid back in terms of

the settlement." In those circumstances Mr. GS Saluja was admitted

to bail. The conditions on which Ms. Puneet Saluja was also granted

bail have been set out in para 8 of the written statement. It is

submitted that the fact that neither of these orders mention either an

agreement dated 1st September 1995 or settlement dated 26th March

1996. It appears that these documents have been created thereafter and

forged and fabricated only to enable the Plaintiff to make a false claim

by way of a suit.

8. In the reply filed to the written statement, the Plaintiff denied the

contents of para 8 thereof. It was denied that the Plaintiff had

committed any offence. It was submitted that father of Mr. GS Saluja

had agreed to the refund of Rs.1.15 crores and that there was no

question of the Defendant having any claim of the said amount. It is

stated that the Defendant "was able to motivate the Police to give

colour of an offence to a "No dispute" or at best "Civil dispute".

9. In the present application (IA No. 11940 of 2001) under Order VII

Rule 11 CPC the Defendant seeks rejection of the plaint essentially on

the ground that there is no cause of action for filing of the civil suit.

In the criminal proceedings the Plaintiff had agreed to refund the sum

of Rs.1.15 crores after admitting that it had been wrongly

misappropriated to the account of Ms. Puneet Saluja and thereafter a

sum of Rs.60 lakhs to the account of the Plaintiff Mr. GS Saluja. By

giving up all the claims arising out of those transactions a settlement

was reported to the criminal court. Further, on affidavit it was stated

that there were no signed papers of the Defendant left with Ms.Saluja.

On that basis bail was granted to the Plaintiff and anticipatory bail to

Ms. Puneet Saluja. Consequently, there was no claim outstanding as

far as the Plaintiff was concerned. Rejection of the plaint is sought on

the basis of the provisions of Order VII Rule 11 (d) inasmuch as the

Plaintiff was estopped in the above circumstances from making any

claim against the Defendant for payment of commission. On behalf of

the Defendant it is contended by Mr.C.Mukund, learned Advocate,

that having made statement before the criminal court giving up claims

against the Defendant, it is not open to the Plaintiff in terms of Section

115 of the Evidence Act to file the present suit against the Defendant

for the recovery of any sum. Reliance is placed upon the judgment of

the Supreme Court in B.L. Sreedhar v. K.M. Munireddy (Dead)

(2003) 2 SCC 355. In addition learned counsel for the Defendant has

placed reliance upon the judgment of the Supreme Court in T.

Arivandandam v. T.V. Satyapal (1977) 4 SCC 467 to contend that the

suit itself was vexatious and it is in abuse process of law inasmuch as

it is based on forged and fabricated documents.

10. Mr. D.S. Narula, learned counsel for the Plaintiff first submits that

another suit CS (OS) No. 2826 of 1996 titled M/s. Sunny

International v. M/s. Texcomash Export was filed against the present

Defendant for payment of agency commission in relation to certain

purchase of textile for exports. In the said suit IA No. 4870 of 1997

was filed by the present Defendant under Order VII Rule 11 CPC

seeking rejection of the plaint inter alia on the ground that the agency

agreement dated 9th April 1993 on the basis of which the claim for

commission was made by the Plaintiff there was a forged document.

The said application was rejected by the learned Single Judge on 19th

September 2002. It is accordingly submitted that the present

application should also be rejected since in any event the question

whether the two documents on the basis of which the claim has been

made by the Plaintiff is forged can be determined only at the trial.

Likewise a reference is made to the decision in Sarabjit Singh Anand

v. Manjit Singh Anand 2008 IV AD (Del) 89 to contend that the issue

raised in the present application cannot be decided without the matter

going to the trial. It is submitted that since the suit is already pending

since 1997 no purpose would be served in entertaining the application

under Order VII Rule 11 CPC at this stage.

11. It is then submitted by Mr. Narula, learned counsel for the

Plaintiff that for the purpose of deciding the application under Order

VII Rule 11 CPC the Court should examine only the plaint and the

documents filed along with it. The court is not expected to examine

the written statement and documents filed with it. It is submitted that

when the plaint read as it whole it discloses a cause of action and as

long as it does do that, it cannot be rejected. He refers to the decisions

of this Court in Inspiration Clothes & U v. Colby International

Limited 88 (2000) DLT 769 (DB) and Uday Kaushish v. Sanjay

Kaushish 77 (1999) DLT 509. Referring to the judgment in Poonam

Gupta v. Anita V. Kumar 2008 II AD (Delhi) 81 it is submitted that

even if the documents on the basis of which the claim is made

opposed to public policy and therefore hit by Section 23 of the

Contract Act 1872 such question cannot be decided at the stage of an

application under Order VII Rule 11 CPC. The suit will in any event

have to go to trial.

12. Having considered the submissions of learned counsel for the

parties it appears to this Court that the Defendant should succeed in

this application under Order VII Rule 11 CPC. The Court has opened

the sealed cover containing the aforementioned two documents and

certain other letters in original. The Agreement dated 1st September

1995 and settlement dated 26th March 1996 have been examined. The

purported settlement dated 26th March 1996 forms the basis of the

claim of the Plaintiff in the present suit. Therefore even on the basis

of the plaint and documents filed along with it, if this Court finds that

the claim would be barred by law in terms of Order VII Rule 11 (d)

CPC then this application ought to be allowed.

13. It may be recalled that according to the Plaintiff an FIR had been

lodged against the Plaintiff by the Defendant stating that the Plaintiff

had fraudulently and in conspiracy with Ms. Puneet Saluja taken away

a sum of Rs.1.15 crores. The Plaintiff has also stated that a sum of

Rs.1.15 crores was repaid to Mr. Rajgarhia pursuant to the settlement

between the parties. It was also stated that bail was granted to the

Plaintiff Mr. GS Saluja and anticipatory bail to Ms. Puneet Saluja on

the basis of such settlement. According to the Plaintiff this settlement

was signed on 26th March 1996. The said document requires to be

reproduced as under:

"Settlement Settlement between Narendra Kumar Rajgarhia r/o D- 52, Defence Colony, New Delhi - 110 024 and Santokh Singh Saluja r/o 123-124, Satya Niketan, New Delhi - 110 021 father of Gurbachan Singh Saluja and Puneet Saluja.

1. Sh. Santokh Singh Saluja will make his son and daughter issue cheque for Rs.1.15 crores in favour of Texcomash Export and if need be take the requisite cheque books to court for the said purpose and ensure statements in the court for release of money to Narendra Kumar Rajgarhia at the earliest.

2. Narendra Kumar Rajgarhia shall be liable to pay commission to Gurbachan Singh Saluja at the rate Rs.9.00 per kg instead of Rs.15.00 per kg on tea purchases involving Mahavir Plantations and Philips India and all amounts already paid by cheque in the name of Texem Engineering shall be deducted. Narendra Kumar Rajgarhia will within six months draw complete amounts of the said purchases and calculate amount payable to Texem Engineering at the rate of Rs.9.00 per kg.

3. Gurbachan Singh Saluja will in the meantime try and endeavour for refund of Rs.40 lakhs which according to Narendra Kumar Rajgarhia has been paid in excess as advance to Mahavir Plantation by Texcomash Export.

4. Narendra Kumar Rajgarhia will make all possible statements in the court to ensure Bail to both son and daughter of Santokh Singh Saluja and also ultimately take steps for finishing the case against them.

5. Santokh Singh Saluja will ensure favourable evidence by his son and daughter in case against Narendra Kumar Rajgarhia.

6. All future misunderstandings, if any, will be resolved by the parties in consultation with each other and if need be through the good offices of Mr. Pramod Khaitan." (emphasis supplied)

14. It is seen from the above settlement that in para 4 it has been

recorded that Narendra Kumar Rajgarhia "will make all possible

statements in the Court to ensure bail to both son and daughter of

Santokh Singh Saluja and also ultimately take steps for finishing the

case against them." The case referred to the criminal case against Mr.

GS Saluja and Ms. Puneet Saluja. The complainant in the case is Mr.

Narendra Kumar Rajgarhia. The FIR is for the offence including those

cheating under Section 420 IPC for forging and fabricating documents

under Sections 468/471 IPC. Clause 5 of the settlement states that

Santokh Singh Saluja "will ensure favourable evidence by his son and

daughter in case against Narendra Kumar Rajgarhia." Mr. Narula

clarifies such clause and has been referred to in which the case has

been instituted by the DRI for violation of FERA and Customs Act by

Mr. Narendra Kumar Rajgarhia.

15. Without examining whether the settlement is forged as alleged by

the Defendant, and assuming that it is not as contended by the

Plaintiff, the position that emerges is this. Both parties were facing

criminal proceedings. The Plaintiff under the IPC and the Defendant

under FERA. Both agreed to help each other to get out of their

respective cases. Such an agreement between the complainant and the

accused that the complainant "will make all possible statements in the

Court to ensure bail" and will "also ultimately take steps for finishing

the case against them" is opposed to public policy. Further, the

undertaking by S.S.Saluja that he "will ensure favourable evidence by

his son and daughter" against the Defendant is an agreement to stifle a

legitimate prosecution of the Defendant by the DRI. Both clauses

constitute interference with the course of criminal justice. The

contract containing these clauses is void in terms of Section 23 and

Section 28 of the Indian Contract Act 1872. Such a contract cannot

form the basis of a legitimate claim by the Plaintiff against the

Defendant. In Sudhindra Kumar Ray Chaudhuri v. Ganesh Chandra

Ganguli AIR 1938 Cal 840, the Calcutta High Court explained that

"no court of law can countenance or give effect to an agreement

which attempts to take the administration of law out of the hands of

the judges and put it in the hands of private individuals." It was

explained in Sita Ram v.Radha Bai AIR 1968 SC 534 that the courts

will refuse to enforce an illegal agreement at the instance of a person,

who is himself a party to the agreement or fraud. Entertaining the

claim of the Plaintiff in this suit would tantamount to stifling the

separate prosecutions of both the Plaintiff as well as the Defendant.

16. Mr. Narula tried to get out of the difficult situation by to

contending that this Court should only look to Clause 2 of the

settlement and ignore the other clauses. According to him the claim in

the suit is based only on Clause 2 in terms of which the Plaintiff was

entitled to receive commission at the rate of Rs.9/- per kg instead of

Rs.15/- per kg for tea purchased by Defendant from PEEL and M/s.

Mahavir Plantation. This Court is unable to accept the submission of

Mr. Narula. Section 24 of the Contract Act specifies when and in what

circumstances a contract can be held to be divisible. Here the part of

the consideration for the so-called settlement is clearly illegal. Clause

2 of the settlement cannot be severed; the entire agreement will have

to be read as a whole. The composite terms of the settlement have to

be understood for ascertaining the intention of the parties. Thus the

unlawful part cannot be severed from the „legal‟ part of the

agreement.

17. What also is unexplained is that the plaint does not set out fully

the background and the circumstances under which the

aforementioned documents emerged. The complete details of the

criminal proceedings in which bail was obtained by the Plaintiff and

anticipatory bail by his sister have not been set out. These were

material facts having a bearing on the claim made in the suit.

Nevertheless, the essential ground on which the plaint invites rejection

is that the claim is based on a contract which is on the face of it void.

18. In the circumstances, this Court is left in no doubt that when the

plaint and the documents filed along with it are read as a whole it is

apparent that the suit is barred by law.

19. In view of the above conclusion this Court is not called upon to

deal with the contentions of learned counsel for the Defendant that in

view of the statement made by the Plaintiff before the criminal court

on the basis of which the bail was granted, and which statements are

contrary to what is stated in the settlement dated 26th March 1996, the

rule of estoppel would apply to preclude the Plaintiff from making a

claim for money against the Defendant. The contention that the two

documents on which the claim is based are fabricated is also not being

examined. The decision of the learned Single Judge of this Court

rejecting the Order VII Rule 11 application in CS (OS) 2826 of 1996

(M/s. Sunny International v. M/s. Texcomash Export) has been

perused by this Court. That case did not involve the settlement deed

dated 26th March 1996 on the basis of which the present suit has been

filed. In the considered view of this Court the said order does not

preclude this Court from considering the present application on its

own merits.

20. For the aforementioned reasons, this application is allowed. The

plaint is rejected.

IA No. 3018/2001 (u/S 340 CrPC)

21. Learned counsel for the applicant/Defendant states that in view of

order passed in the application under Order VII Rule 11 CPC, he is

not pressing this application. It is disposed of as such.

CS (OS) 407/1997

22. In view of the order passed in I.A. No. 11940 of 2001, this suit

does not survive.

S. MURALIDHAR, J.

AUGUST 13, 2009 rk