Voltas Ltd. vs The Federal Bank Ltd. & Ors.
2009 Latest Caselaw 4838 Del

*            IN THE HIGH COURT OF DELHI AT NEW DELHI

                         + RFA No. 47/1997

                                           Reserved on      : 04.11.2009
                                           Date of decision : 26.11.2009


IN THE MATTER OF :

VOLTAS LTD.                                         ..... Appellant
                         Through: Mr. D.S.Chauhan, Ms.Ruchi Singh and
                         Ms. Beena Pandey, Advocates


                   versus


THE FEDERAL BANK LTD. & ORS.                     ..... Respondents
                    Through: Mr. V.P.Dewan, Advocate for R-1
                    None for respondents No. 2 to 6.

CORAM

* HON'BLE MS.JUSTICE HIMA KOHLI

     1. Whether Reporters of Local papers may
        be allowed to see the Judgment? Yes.

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

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


HIMA KOHLI, J.

1. The present appeal is filed by the appellant(defendant No.6 in

the court below) against a judgment and decree dated 16.11.1996 passed in

a suit for recovery of a sum of Rs.41,219.75 paise filed by the respondent

No.1/Bank (plaintiff in the court below), against the appellant and the

respondents No.2 to 6 (defendants No.1 to 6 in the court below).

2. Before proceeding to deal with the respective submissions of the

parties, it is necessary to advert to the brief facts of the case. Respondent

No. 1/Bank, plaintiff in the suit proceedings, claimed that on 06.07.1981, it

had engaged the services of the respondent No.2 firm as its sub-contractor

for completing certain jobs in connection with a contract awarded to it by the

West Bengal Electricity Board for erection, testing and commissioning of six

numbers of Electrostatic Precipitators for their Kolhaghat Thermal Power

Station. As per the averments in the plaint, respondent No.3, the sole

proprietor of respondent No.2 firm had an account with the respondent No.

1/Bank, who on his request, granted overdraft limit of Rs.20,000/- on

20.1.1981 to respondent No.2 and a promissory note dated 20.01.1981 was

executed by respondent No. 3 in favour of respondent No. 1/Bank. The

amount was subsequently increased to Rs.50,000/- and again on 16.9.1981,

the respondent No.3 executed a demand promissory note and other related

security documents as proprietor of respondent No.2 firm and the

respondents No.4 to 6 as co-obligants signed the documents jointly with

respondent No.3.

3. The respondent No.1/Bank further stated that the respondents

No.2 & 3 had executed a special power of attorney dated 14.8.1981 in its

favour, authorizing it to receive payments of their bills from the appellant,

raised in connection with execution of the contract, appropriate the same

and give due discharge in respect thereof and vide letter dated 28.08.1981,

the appellant had accepted the special power of attorney dated 14.8.1981. It

was averred that despite the assignment of debt and the obligation cast on

the appellant to make payments of the amounts payable to the respondents

No.2 & 3 directly, to the respondent No.1/Bank, the appellant released

payments to the tune of Rs.2,50,000/- in favour of the respondents No.2 &

3. On 12.03.1982, a sum of Rs.23,941/- was recovered by respondent No.

1/Bank from respondents No. 2 & 3 and after adjusting the said amount,

respondent No. 1 claimed that as on 12.3.1982, a balance sum of

Rs.32,090.85 paise remained outstanding and payable by the respondents.

Legal notices of demand were duly served by the respondent No. 1/Bank

upon the respondents, but they did not care to pay the same, thus

compelling the respondent No.1/Bank to file the summary suit in March

1983, praying for a decree of Rs.41,219.75 paise against the appellant and

respondents No. 2 to 6 jointly and severally, along with costs and future

interest @ 19.5%p.a. The respondent No.1/Bank impleaded the appellant

as defendant No. 6 in the aforesaid suit.

4. Appearance was entered in the suit proceedings by the

respondents No.2 to 6 (defendants No. 1 to 5) and the appellant (defendant

No. 6), who contested the suit. The appellant/defendant No. 6 raised a

preliminary objection in its written statement that the suit was liable to be

dismissed against it, on account of lack of privity of contract between the

parties. It was denied that the respondent No.1 was entitled to receive any

payment from the appellant/defendant No. 6 as per the special power of

attorney or that it was liable to pay any amount of bills of the respondents

No.2 & 3, directly to the respondent No. 1. The appellant asserted that it

did not owe any money to the respondents No.2 & 3 and as such, there was

no question of passing any decree against it.

5. After the pleadings in the suit were completed, the following

issues were framed:

"1.Whether the plaint has been signed and verified and the suit has been filed by a duly authorized person? OPP

2. Whether the signatures of defendants No. 3 to 5 were obtained on blank forms as alleged in para 3 of the written statement? If so, its effect?

3. Whether any liability can be fixed on defendant No.6 on the basis of power of attorney executed by defendant No.2 on behalf of defendant No.1 in favour of defendant No.6?

4. Whether there is any cause of action against defendant No.6?

5. To what amount and rate of interest the plaintiff is entitled, from each of the defendants?"

6. Vide order dated 10.5.1991, the defence of the respondents No.

2 to 5 was struck off. Though the appellant was proceeded against ex-parte

vide order dated 14.11.1994, the said order was later on set aside. In

support of its case, the respondent No.1/Bank examined Sh. A.R. Mathur,

Manager of the Bank, as PW-1 and Sh.T.C. Garg, Manager of the Bank as

PW-2. The appellant did not lead any evidence. After hearing the parties

and considering the pleadings and the evidence on the record, the trial court

passed a decree in favour of the respondent No.1/Bank and against the

appellant and respondents No.2 to 5 jointly and collectively, for a sum of

Rs.41,219.75 paise, along with costs and interest @ 19.5% p.a., from the

date of institution of the suit till realization of the decretal amount.

Aggrieved by the impugned judgment, the appellant/defendant No.6 has

filed the present appeal.

7. The main plank of the argument of the counsel for the

appellant/defendant No.6 was that on the strength of the special power of

attorney dated 14.8.1981 (Ex.PW-1/8) and in terms of the letter dated

28.8.1981 (Ex.PW-1/9) issued by the appellant to the respondent No.1, at

best the respondent No.1/Bank could have claimed from the appellant, the

amount that was found to be due and payable by it to the respondents No.2

& 3, but the trial court ought not to have directed recovery of the balance

amount of loans that the respondent No.1/Bank had advanced to the

respondents No.2 & 3 from the appellant on the ground that the same could

have been treated as due from the appellant to the respondents No.2 & 3.

He urged that the learned ADJ failed to appreciate the fact that liability to

pay the said amount could not have been fastened on the appellant as the

respondent No.1/Bank had failed to produce any material evidence to prove

that any amount was due and payable by the appellant to the respondents

No.2 & 3. The respondent No. 1/Bank having failed to discharge the said

onus, the trial court ought not to have decreed the suit against the appellant

on the basis of bald and vague allegations levelled against the appellant that

a sum of Rs.2.50 lacs was due and that in spite of the special power of

attorney executed by the respondents No.2 & 3 in favour of the respondent

No.1/Bank, the appellant had made direct payments of the said amount to

the respondents No.2 & 3. Counsel for the appellant also relied on a

judgment dated 15.12.1996 passed in a suit registered as Suit

No.1206/1982 entitled "The Federal Bank Ltd. vs. M/s Ganga Engineering

Works & Ors." wherein the appellant was impleaded as defendant No. 4. He

submits that the said suit which was instituted by respondent No. 1/Bank

was dismissed against the appellant in identical facts and circumstances as

exist in the present case in hand.

8. On the other hand, counsel for the respondent No.1/Bank

disputed the aforesaid submissions made on behalf of the appellant and

supported the impugned judgment by submitting that the appellant having

failed to categorically deny payment of Rs.2.50 lacs directly to the

respondents No.2 & 3, an adverse inference had been rightly drawn against

it to the effect that the said amount had been paid by it to respondents No.

2 & 3. In this regard, counsel for the respondent No.1/Bank referred to para

15 of the plaint and the reply given by the appellant in the corresponding

para of its written statement. In para 15 of the plaint, the respondent

No.1/Bank made an averment that as per the terms of the special power of

attorney dated 14.8.1981, executed by the respondents No.2 & 3 in favour

of the respondent No.1/Bank, the appellant/defendant No.6 was liable to pay

any amount of bills of the respondents No.2 & 3 directly to the respondent

No.1. It was further submitted that the appellant had violated the terms of

the special power of attorney and had made payments directly to the

respondents No.2 & 3 to the tune of Rs.2.50 lacs for which they were held

responsible as they were supposed to make payment of all the bills of the

respondents No.2 & 3 to the respondent No.1/Bank, which was duly

accepted by them. In the corresponding para of the written statement, the

appellant denied the aforesaid contention and its liability to pay any amount

of the bills of the respondents No.2 & 3 directly to the respondent

No.1/Bank. It was also denied that the appellant had violated the terms of

the special power of attorney. Additionally, it was submitted that as the

appellant did not owe any money to the respondents No.2 & 3, hence there

was no question of passing any decree against it.

9. I have heard the counsels for the parties and perused the trial

court record. I have also summoned the record of Suit No.1206/1982 and

perused the judgment dated 15.12.1996 passed by a learned Single Judge of

this Court.

10. Before proceeding to deal with the respective submissions of the

counsels for the parties, it is pertinent to note that prior to the contract in

question being awarded by the appellant in favour of the respondents No.2 &

3, the same was awarded to a sub-contractor by the name of M/s Ganga

Engineering Works (hereinafter referred to as „the firm‟), who also had an

account with respondent No.1/Bank, in which certain credit facilities were

availed of by them. To secure its advances, the respondent No.1/Bank

called upon the aforesaid firm to execute a demand promissory note and

other related security documents in its favour. Apart from the aforesaid

documents, a power of attorney dated 1.12.1980 was executed by the firm

in favour of the respondent No.1/Bank entitling it to receive from

the appellant, payments of the bills raised by the firm, for execution of the

job and give due discharge in respect thereof.

11. As per the appellant, M/s Ganga Engineering Works committed

breaches/defaults in execution of the contract. It therefore invoked the

bank guarantee for a sum of Rs.1,20,900/- issued by the respondent

No.1/Bank, at the instance of the firm in favour of the appellant. On

8.6.1981, the respondent No.1/Bank paid the full amount of the bank

guarantee to the appellant. The appellant cancelled the contract awarded to

the firm and thereafter, engaged the services of the respondent No.2 as a

sub-contractor for executing the same job. Thereafter, on 02.09.1982, the

respondent No.1/Bank filed a suit in this Court, for recovery of a sum of

Rs.1,97,599.01 paise against M/s Ganga Engineering Works and others,

including the appellant herein, registered as Suit No.1206/82. Pertinently,

the appellant herein, who was impleaded as defendant No.4 in the said suit

proceedings, contested the same on identical grounds as taken by it in the

present suit, which culminated in the impugned judgment, subject matter of

the present appeal. The said suit was eventually dismissed against the

appellant with costs, vide judgment dated 15.12.1996, whereunder it was

held that though there was a privity of contract between the respondent

no.1/Bank and the appellant, the onus was on the former as the plaintiff, to

prove that some amount was due from the appellant to M/s Ganga

Engineering Works (defendant No. 1 therein) and that since the respondent

No.1/Bank (plaintiff therein) had failed to prove the same, it could not claim

any recoveries from the appellant (defendant No. 4 therein). It was also

observed that it was not for the appellant (defendant No.4 therein) to prove

in the negative that no amount was due from it to M/s Ganga Engineering

Works.

12. In the present case, the trial court returned collective findings in

respect of issues No.3 & 4, in favour of the respondent no.1/Bank (plaintiff

therein) by holding that liability could be fixed upon the appellant (defendant

No. 6 in the court below) on the basis of the special power of attorney

executed by the respondent No. 3 on behalf of the respondent No.2, in

favour of the respondent No.1/Bank and that the latter had a cause of action

against the appellant. The learned ADJ decreed the suit collectively against

the appellant as well as the respondents No. 2 to 6 by taking notice of the

fact that the special power of attorney (Ex.PW-1/9) was duly accepted and

admitted by the appellant and that the allegation of the respondent

No.1/Bank in the plaint that the appellant had violated the terms of the

special power of attorney and made direct payments to the respondents

No.2 & 3 to the tune of Rs.2.50 lacs, was neither specifically disputed by the

appellant, nor did it lead any evidence in defence or in support of the said

issues. The trial court was of the opinion that the onus of proving issues

No.3 & 4 was on the appellant. While rejecting the argument of the

appellant that no amount was due and payable by it to the respondents No.2

& 3, it was held that the respondent No.1/Bank was entitled to recover the

suit amount from the appellant.

13. This Court is unable to persuade itself to agree with the trial

court that the onus of proving issues No.3 & 4 lay with the

appellant/defendant No.6. Since it was the respondent No.1/Bank who had

based its claim in the suit instituted by it against the appellant and

respondents No. 2 to 6, on a special power of attorney executed by the

respondents No.2 & 3 in its favour, the burden of proving issue No.3 lay at

the door of the respondent No.1/Bank. In view of the fact that the appellant

had admitted having received the aforesaid power of attorney (Ex.PW1/8) by

its letter dated 28.8.1981 (Ex.PW1/9), the onus in respect of issue

respondent No.3 was duly discharged by the respondent No.1/bank. Liability

could be fixed on the appellant on the basis of power of attorney executed

by respondents No. 2 & 3 and in favour of respondent No.1/Bank and

conveyed to the appellant. Issue No.4, i.e., „whether there was a cause of

action against the appellant/defendant No.6‟, was also framed in the

affirmative and was required to be proved by the respondent No.1/Bank as

the plaintiff. Counsel for the appellant is justified in submitting that it was

not for his client to prove in the negative that no amount was due and

payable by the appellant to the respondents No.2 & 3 and that it was for the

respondent no.1/Bank as the plaintiff to prove that some amount was

actually due from the appellant to the respondents No.2 & 3, which the

former was liable to pay to the respondent No.1/Bank, in view of the special

power of attorney executed by respondents No.2 & 3 in its favour and the

letter dated 28.8.1981 issued by the appellant to the respondent No.1.

14. A mere bald averment made by the respondent No.1/Bank in the

plaint that a sum of Rs.2.50 lacs was paid by the appellant directly to the

respondents No.2 & 3, without proving the same by way of placing on record

or summoning relevant material documents or adducing evidence, cannot be

held to be sufficient to conclude that the respondent No.1/Bank had

established that it was entitled to recover the suit amount from the appellant

as well. Hence, even if issues No.3 & 4 were decided in favour of the

respondent No.1/Bank and against the appellant, the trial court could still

not have arrived at the conclusion that on the strength of the special power

of attorney executed by the respondents No.2 & 3 in favour of the

respondent No.1/Bank, the latter could have claimed any amounts directly

from the appellant, without the same being proved in the first place, as due

and payable by it to the respondents No.2 & 3. Undoubtedly, there was a

privity of contract between the respondent No.1/Bank and the appellant as

the respondent No.1/Bank was entitled to receive the amounts payable to

respondents No.2 & 3 from the appellant in view of the special power of

attorney executed by the respondents No.2 & 3 in favour of the respondent

No.1/Bank. But the conclusion arrived at by the trial court that the

respondent No.1/Bank was entitled to recover the suit amount from the

respondents No.2 to 6 and the appellant jointly and collectively, is not

tenable. The onus still lay with the respondent No.1/Bank as the plaintiff in

the suit to prove as to what was the specific amount that was due and

payable by the appellant to the respondents No.2 & 3, liability in respect of

which could be fastened on the appellant on the strength of the special

power of attorney. The said onus was not discharged by the respondent

No.1/Bank.

15. The plea of the counsel for the respondent No.1/Bank that as the

appellant was ambiguous in response to para 15 of the plaint, the averments

contained in para 15 were rightly deemed to be admitted, is untenable.

Mere reliance on the averments made in para 15 of the plaint without

proving the same, was not enough to decree the suit against the appellant.

The respondent No.1/Bank ought to have stood on its own legs to prove its

case. This required summoning of relevant records, accounts, etc.,

maintained by the appellant in respect of its transactions with the

respondents No.2 & 3, pertaining to the contract, subject matter of the

special power of attorney, executed in favour of respondent No.1/Bank.

Further, a perusal of the corresponding para in the written statement filed by

the appellant shows that it had nowhere admitted owing any monies to the

respondents No.2 & 3 and had gone on to deny the contents of para 15 of

the plaint. Simply because a specific denial in respect of the figure of

Rs.2.50 lacs was not made by the appellant cannot be taken as an admission

on its part or considered sufficient to draw an adverse inference against it

and conclude that the respondent No. 1/Bank had discharged the onus

placed on it. It was not for the appellant to prove in the negative that no

amount was due and payable by it to the respondents No.2 & 3. Rather, it

was for the respondent No.1/Bank to prove in the positive that the appellant

had directly released specific and quantified amounts in favour of the

respondents No.2 & 3, contrary to the terms and conditions of the special

power of attorney (Ex.PW1/8).

16. In view of the aforesaid facts and circumstances, the findings

returned by the trial court under issue No.5, require to be modified. It is

held that the respondent No.1/Bank is entitled to recover a sum of

Rs.41,219.75 paise, along with interest @ 19.5% p.a. from the date of

institution of the suit till realization of the decretal amount, jointly and

collectively from the respondents No.2 to 5 alone and that no amount is due

and payable by the appellant/defendant No.6 to the respondent No.1/Bank.

As a result, the suit against the appellant/defendant No.6 fails and is

dismissed. A modified decree be prepared. Appeal is allowed with costs.

The trial court record be released forthwith.

                                                            (HIMA KOHLI)
NOVEMBER 26 , 2009                                            JUDGE
mk