Delhi High Court
Mrs. Usha vs Punjab & Sind Bank & Anr. on 13 December, 2010
Author: V. K. Jain
THE HIGH COURT OF DELHI AT NEW DELHI
% Judgment Reserved on: 30.11.2010
Judgment Pronounced on: 13.12.2010
+ CS(OS) No. 2714/1998
MRS. USHA .....Plaintiff
- versus -
PUNJAB & SIND BANK & ANR. .....Defendant
Advocates who appeared in this case:
For the Plaintiff: Mr Vinay Kr. Garg and Ms.
Namrata Singh, Advs.
For the Defendant: Mr Sudhir Nandrajog, Sr. Adv.
with Ms. Prerna Mehta, Adv.
CORAM:-
HON'BLE MR JUSTICE V.K. JAIN
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 YES
in Digest?
V.K. JAIN, J
1. This is a suit for recovery of Rs 65,84,252/-. The
plaintiff, who is carrying business in the name and style of
M/s Universal Exports claims to be a commission agent who
used to introduce exporters/sellers to the buyers/importers
and receives commission from the seller. In the suit filed
through her attorney Shri Gulshan Gandhi, the plaintiff has
alleged that defendant No.2, which is a manufacturer of
cotton yarn through the plaintiff as a commission agent
agreed to supply yarn to M/s Exports India vide Revolving
L.C. No. 44/95 for Rs 2 crores revolving three times. The
plaintiff who had introduced defendant No.2 to the buyer
was to receive commission at the rate of 5% FOB value of
the L.C. The finalization of the deal is alleged to have been
preceded by an agreement/Memorandum of Understanding
(MoU) dated 22nd July, 1995 between the plaintiff and
defendant No.2 for payment of commission to the plaintiff at
the rate of 5% of the FOB value, after realization of export
sale proceeds. The plaintiff also claims that defendant No.2
had also agreed not to entertain a buyer directly or
indirectly. In terms of the MoU dated 22nd July, 1995,
defendant No.1 being the banker of defendant No.2
furnished Bank Guarantee No. 31/90736/95 dated 21st
September, 1995 for Rs 30 lacs, thereby standing guarantor
for payment of commission amount under the L.C. merely
on demand from the plaintiff and on failure of the seller to
pay the amount of commission.
2. It has also been alleged that despite contractual
obligation in this regard, defendant No.2 failed to supply
copies of all the invoices to the plaintiff. Later, the plaintiff
came to know about certain invoices, whereby goods were
shifted by defendant No.2 to Exports India. It is also alleged
that despite demand raised by the plaintiff for payment of
commission, the defendants connived with each other and
instead of paying the amount of Rs 27,31,494/- which was
due to the plaintiff, only a sum of Rs 13,65,747/- was paid
to her. The case of the plaintiff is that defendant No.2 had
sold goods worth more than Rs 9.5 crores and she was
entitled to commission at the rate of 5% of that amount, but
was paid commission only at the rate of 2.5% on the
transactions amounting to Rs 5,46,29,903/-. The plaintiff
has, therefore, claimed a sum of Rs 34,34,252 as principal
sum towards commission payable to her alongwith interest
thereon at the rate of 18% from 1st January, 1996 to 30th
November, 1998, amounting to Rs17,51,468/-. She has
also claimed a sum of Rs 13,50,000/- towards damages for
mental agony, tension and loss of health and Rs 48,532/-
towards documentation and miscellaneous expenses.
3. The suit has been contested by both the
defendants. Defendant No.1 has taken preliminary
objections that the suit is barred by limitation and is also
barred for the reason that a complaint made by her to the
Banking Ombudsman on the same facts has been
dismissed. Admitting issuance of Bank Guarantee No.
31/90736/95 dated 21st September, 2005 for Rs 30 lacs,
defendant No.1 has pointed out that the bank guarantee
stipulated payment of 50% of the commission on realization
of the L.C. amount from Canara Bank and the remaining
50% of the commission amount was to be payable on
completion of order and submission of proof thereto
alongwith acknowledgement from defendant No.2. It is also
claimed that since the bank guarantee was to remain in
force only till 30th November, 1995, defendant No.1 stood
discharged of all its obligations under the bank guarantee
unless the demand was made on or before that date. It is
also stated that in the written statement of defendant No.1
that though the bank guarantee was invoked by the plaintiff
on 28th November, 1995, the documents submitted by her
entitled her to payment of only 50% of the commission and
payment of Rs 1365748 was accordingly released to her
being 2.5% of the total FOB value. It is also alleged that
FOB value of the contract executed till that date being Rs
5,46,29,903, 2.5% of that value stood duly paid to the
plaintiff on payment of Rs 13,65,748/-. It is also alleged
that defendant No.2 had informed defendant No.1 that the
plaintiff had completed and performed only part of the
contract and was entitled to commission at the rate of 2.5%
of the FOB value.
4. In its written statement, defendant No.2 has
denied the alleged agreement/MoU and has claimed the
same to be a false and fabricated document. Defendant No.2
has also taken a preliminary objection that the suit is time-
barred. On merits, it is alleged that the order was not
completed to the extent of Rs 6 crores before 30 th November,
1995 and therefore, the offer to pay 5% commission of FOB
value under the Bank Guarantee became null and void. It is
alleged that as on 30th November, 1995, the order executed
a FOB value realized against six invoices amounted to Rs
5,46,29,903/- and since the conditions precedent to
balance 2.5% commission was not fulfilled, the plaintiff was
not entitled to get the balance commission. It is further
alleged that the terms and conditions of the contract
between the plaintiff and defendant No.2 embodied in the
Bank Guarantee dated 21st September, 1995 which was
valid up to 31st November, 1995 and the L.C. was to revolve
three times for the total amount of Rs 6 crores. It is further
alleged that as on 30th November, 1995, the contract
completed with the buyer amounted only to Rs
5,46,29,903/- The case of defendant No.2 is that invoice
Nos. 131 to 136 and 144 to 148 were not covered in the
transactions between the parties and it is only invoices Nos.
104 to 106, 108 to 111, 112 to 115, 117 to 122, 123 to 126,
128, 129, 137 to 141, 143, 145, 149, 151, 152, 154, 155
and 158 for a total amount of Rs 5,46,29,903/- which was
covered under the contract between the parties. According
to defendant No.2, it was realization of LC amount from
Canara Bank, completion of order and submission of Bank
Realization Certificate and not the shipment of goods which
was the criteria for payment of commission to the plaintiff.
5. The following issues were framed from the
pleadings of the parties:-
(i) Whether this Court has territorial jurisdiction to
entertain and try the present suit? OPP
(ii) Whether the suit is barred by limitation? OPD
(iii) Whether the suit is not maintainable in view of the
order dated 21.8.1997 passed by the Banking
Ombudsman (Maharashtra & Goa)? OPD
(iv) Whether the plaintiff in guilty of suppression of
facts/documents? OPD
(v) Whether the document filed by the plaintiff
alongwith the plaint at page 22 alleged as the
agreement/MoU is a false and fabricated document?
OPD
(vi) Whether the terms and conditions governing the
payment of commission to the plaintiff were not
contained only in the Bank Guarantee dated
21.09.1995? If so to what effect? OPP
(vii) Whether the plaintiff failed and neglected to fully
perform its part of the agreement under the Bank
Guarantee dated 21.09.1995 thereby disentitling the
plaintiff to the balance 2.5% commission under the
Bank Guarantee dated 21.09.1995? OPD
(viii) Relief.
Admittedly, Letter of Credit in favour of defendant No.2
M/s Hanil Era Textiles Limited was opened by Canara
Bank, Nehru Place, New Delhi. It is not in dispute that the
sale price of the goods sold by defendant No.2 to Exportos
India was realized through the Letter of Credit opened by
Canara Bank, Nehru Place, New Delhi in favour of
defendant No.2. Since price of the goods sold by defendant
No.2 to Exportos India was payable and also paid at New
Delhi, it is difficult to dispute that part of the cause of
action arose in Delhi. As per the terms and conditions of the
Bank Guarantee dated 21st September, 1995, realization of
LC amount from Canara Bank, New Delhi was a condition
precedent for payment of 50% of the total commission of the
plaintiff. Therefore, payment by Canara Bank, New Delhi to
defendant No.2 through the Letter of Credit opened by it,
constituted part of the cause of action for filing this suit.
Section 20(c) of the Code of Civil Procedure, to the extent it
is relevant, provides that the suit can be instituted in a
Court within the local limits of whose jurisdiction the cause
of action wholly or in part arises. Hence, Delhi Court has
jurisdiction to try the present suit. The issue is decided
against the defendants and in favour of the plaintiff.
7. Issue No.3
This issue was not pressed during arguments. The
defendants have not been able to show how the orders
passed by the Banking Ombudsman on 21st August 1997
renders the suit non-maintainable. The issue is decided
against the defendant and in favour of the plaintiff.
8. Issue Nos. 4,5 &6
The case of the plaintiff, as set up in the plaint, is that
an agreement/MoU dated 22nd July 1995, was executed
between her and defendant No.2. No such document has,
however, been proved by the plaintiff. Even the alleged
agreement/MoU has not been produced in original. As far
as PW-1 Mr. C.L. Babbar, Attorney of the plaintiff, is
concerned, he has admitted in his cross-examination that
he got associated with this case only after 06th March 2003,
when the General Power of Attorney was executed in his
favour. He has also admitted that he was neither a partner
nor an employee of M/s. Universal Exports. He is an
independent agent who can work for anyone. He has
expressly admitted that he did not attend the matter when
the Terms of Settlement of Bank Guarantee were negotiated.
9. In Janki Vashdeo Bhojwani and Anr. Vs.
Indusind Bank Ltd. and Ors. (2005) 2 SCC 217, the
husband of appellant No.2 Ms.Mohini Laxmikant Bhojwani,
was allowed to appear in the witness box on behalf of the
appellants. Taking into consideration the provisions
contained in Order 3 Rules 1&2 of the Code of Civil
Procedure, Supreme Court observed that these provisions
empower the holder of Power of Attorney to "act" on behalf
of principal and the term "acts" would not include deposing
in place and instead of the principal. It was held that if the
attorney has rendered some "acts" in pursuance to Power of
Attorney, he may depose for the principal in respect of such
acts, but he cannot depose for the principal for the acts
done by the principal and not by him. It was further held
that the attorney cannot depose for the principal in respect
of the matters of which only the principal can have a
personal acknowledge and in respect of which the principal
is entitled to be cross-examined. Supreme Court approved
the view taken by Rajasthan high Court in Ram Prasad v.
Hari Narain and Ors, AIR 1988, Rajasthan 185, wherein it
was held that the word "acts" used in Rule 2 or Order 3 of
CPC does not include the act of Power of Attorney holder to
appear as a witness on behalf of a party. It was further held
that the Power of Attorney holder can appear only as a
witness in its personal capacity and whatever knowledge he
has about the case he can state on oath, but, he cannot
appear as a witness on behalf of the party in the capacity of
that party.
Since Mr C.L. Babbar was nowhere in the picture
when plaintiff and defendant No.2 entered into an
agreement for payment of commission to the plaintiff on the
sales made by defendant No.2 to Exportos India and he had
no personal knowledge of the terms and conditions settled
between the plaintiff and defendant No.2, his testimony
cannot and does not prove the terms of the agreement
between the plaintiff and defendant No.2 in this regard.
Thus, the plaintiff has miserably failed to prove the alleged
agreement/MoU dated 22nd July 1995.
10. The plaintiff has not come in the witness box to
prove any oral agreement between her and defendant No.2.
No witness has been examined by the plaintiff to prove the
terms of the agreement between her and defendant No.2.
The plaintiff has examined only the bank officials, in
addition to her attorney Mr. C.L. Babbar. The bank
officials, obviously, cannot have any knowledge of the terms
and conditions agreed between the plaintiff and defendant
No.2. The plaintiff, therefore, has miserably failed to prove
that she was entitled to commission on all the sales which
were made by defendant No.2 to Exportos India. She has
also failed to prove any agreement between her and
defendant No.2 for payment of commission to her on the
transactions effected through 4th, 5th or 6th time revolving of
the L.C. No. 44/95. Consequently, it is only the Bank
Guarantee dated 21st September 1995 which can be looked
into to ascertain the terms and conditions agreed between
the plaintiff and defendant No. 2 with respect to payment of
commission to the plaintiff. The issues are, therefore,
decided against the plaintiff and in favour of the defendants.
The Bank Guarantee dated 21st September 1995, to
the extent it is relevant, reads as under:
In consideration of M/s Hanil Era Textiles
Limited Bombay (hereinafter called the
Seller) agreed to supply Yarns to M/s
Exportos India, New Delhi (hereinafter
called „the Buyers‟) vide revolving ILC No.
44/95 dated 31.0.1995 for Rs 2,00,000/-
(Rupees Two Crores only) from Canara
Bank, Nehru Place, New Delhi, through
M/s Universal Exports, B-3/81, Paschim
Vihar, New Delhi (hereinafter called „the
Commission Agent‟)
Under the terms of contract, the
commission is payable to Commission
Agent @ 5% on FOB value of the L/C
amount realization by Canara Bank, New
Delhi. And the amount of commission is
payable by the seller to the Commission
Agent as under:
(a) 50% of the total commission is
payable to Commission Agent after
realization of L/C amount from Canara
Bank, New Delhi.
(b) Balance 50% of commission
amount is payable to after completing the
order and submitting the proof of
following document (Xerox copy) and
acknowledgement issued by M/s Hanil
Era Textiles Limited.
(1) Bank Realization Certificate issued
by Canara Bnk, New Delhi....
(3) ......Unless a demand or claim
under this guarantee is made on us in
writing on or before the 30th November,
1995, we shall be discharged from all
liability under this guarantee
thereafter.....
12. There is also a stamp affixed on the Bank
Guarantee which expressly stipulated that unless a claim to
enforce the Bank Guarantee was received by the bank on or
before 30th November 1995, the bank shall be released and
discharged from all liabilities thereunder.
13. Though the Bank Guarantee envisaged revolving of
ILC No. 44/95 dated 31st July 1995 for Rs 2 crores only
three times, for a total sum of Rs 6 crores, the evidence on
record shows that it was later amended and it revolved six
times. This fact has been admitted by DW-2 Mr. Rajender
Kumar Aggarwal, Chairman of M/s Hanil Era Textiles
Limited. The case of the plaintiff is that she was entitled to
commission on all the sales made by defendant No.2
Exportos India under ILC No.44/1995 dated 31st July 1995.
As noted earlier, the plaintiff has miserably failed to prove
the agreement/MoU set up in the plaint and no oral
evidence has been led by her to prove the terms and
conditions agreed between her and defendant No.2. Hence,
the Court can give effect only to such terms and conditions
as were contained in the Bank Guarantee dated 21 st
September 1995. The Bank Guarantee specifically refers to
ILC No. 44/1995 revolving three times for a total sum of Rs
6 crores. Therefore, when the Letter of Credit was later
amended and it revolved 4th, 5th & 6th time, resulting in the
total sale by the defendant No.2 to Exportos India exceeding
Rs 6 crores, the plaintiff did not become entitled to any
commission on the transactional value exceeding Rs 6
crores. The commission payable to her under the Bank
Guarantee dated 21st September 1995 was restricted to the
transactional amount of Rs 6 crores and unless the plaintiff
is able to prove, by producing evidence other than the Bank
Guarantee dated 21st September 1995 that she was entitled
to commission on all the sales made by defendant No.2 to
the plaintiff and not only to the sales up to the value of Rs 6
crores, her claim for payment of commission or any amount
exceeding Rs 6 crores cannot be sustained.
14. Another important aspect in this regard is that the
amount of the Bank Guarantee was Rs 30 lacs. The
amount of commission on Rs 6 crores at the rate of 5% of
the FOB value also comes to Rs 30 lacs. This is a strong
indicator that the agreement between the plaintiff and
defendant No.2 was confined to payment of commission on
an amount not exceeding 6 crores, irrespective of the value
of the goods actually sold by defendant No.2 to Exportos
India.
15. Though the documents produced by the Canara
Bank show that the total sale made by defendant No.2 to
Exporter India against LC No. 44/95 far exceeded Rs 6
crores, there is no evidence to prove that it was the plaintiff
who had procured all the orders which Exportos India had
placed on defendant No.2. As noted earlier, the plaintiff has
not come in the witness box. As far as PW-1 is concerned,
he had no personal knowledge of the transactions since he
came to be associated with this case only after the Power of
Attorney was executed in his favour during pendency of this
suit. DW-2 Mr R.K. Aggarwal, Chairman of M/s Hanil Era
Textiles Limited has specifically stated in his cross-
examination that when the L.C. was amended as a new L.C.
for a new contract, it had nothing to do with the earlier L.C.
or the Bank Guarantee issued by the bank. When
questioned about further amendment and revolving of the
LC for the 5th time, he stated that this payment mode was
against a new contract for new quality of goods to be
supplied and had nothing to do with the contract of the
plaintiff or the previous Bank Guarantee and LC. He also
stated that as far as the plaintiff was concerned, the
transaction was limited to Rs 6 cores, as stated in the Bank
Guarantee and that they had dealings with Exportos India
in past as well as later with which the plaintiff had nothing
to do and it had not facilitated any of those transactions.
Similar answers were given by him when questioned about
revolving of the LC for the 06th time. Thus, there is no
evidence to prove that the plaintiff was instrumental behind
orders for purchases beyond Rs 6 crores.
16. However, assuming that all the orders for
defendant No.2 were procured by the plaintiff and she had a
role to play in all the purchases made by Exportos India,
she would, in the absence of any agreement for payment of
commission to her, on all the sales made by defendant No.2
to Exportos India, still not be entitled to any commission on
the transactions beyond Rs 6 crores. This is not the case of
the plaintiff that at the time the Bank Guarantee was
issued, there was an agreement, to her knowledge, between
defendant No.2 and Exportos India for supply of goods
worth Rs 9.5 crores. Had that been the position, the Bank
Guarantee would not have been restricted to transactions
up to Rs 6 crores. In any case, nothing prevented the
parties from agreeing that irrespective of the value of the
goods to be sold by the defendant No.2 to Exportos India,
the commission of the plaintiff would be restricted to 5% of
the FOB value not exceeding Rs 6 crores. The truth of the
matter appears to be that at the time the Bank Guarantee
was furnished, the plaintiff and defendant No.2 estimated
that the total value of the goods to be sold by defendant
No.2 to Exportos India would be about Rs 6 crores and
accordingly, it was decided to give commission to the
plaintiff at 5% of the FOB value up to Rs 6 crores. Since the
agreement between the parties expressly stipulated payment
of commission only on FOB value of Rs 6 crores, the
plaintiff, in the absence of an agreement to the contract, is
not entitled to any commission on the supplies beyond the
selling of Rs 6 crores stipulated in the Bank Guarantee.
17. It is not in dispute that the plaintiff has been paid
only Rs 13,65,747/- though the commission on
transactional value of Rs 6 crores would come to Rs 30 lacs.
Hence, the next question which comes up for consideration
is as to whether the plaintiff is entitled to the balance
amount of Rs 16,34,253/- and if so from whom.
18. As noted earlier under the terms and conditions
contained in the Bank Guarantee, defendant No.1 was to
stand discharged of all its obligations and liabilities under
the Bank Guarantee unless a demand was made on it in
writing on or before 30th November, 1995. Under the Bank
Guarantee, 50% of the commission was payable to the
plaintiff after realization of LC amount from Canara Bank,
New Delhi and the balance 50% of the commission amount
was payable after completion of order and submitting of
Bank Realization Certificates, issued by Canara Bank, New
Delhi and acknowledgement issued by M/s Hanil Era
Textiles Limited. Vide its letter dated 28th November, 1995,
which is Ex.P-13, the plaintiff submitted certain Bank
Realization Certificates to defendant No.1and requested it to
send to it commission calculated at 5% of the FOB value on
actual realization amount from Canara Bank, Nehru Place,
New Delhi. No particular amount was demanded in this
letter nor did the plaintiff seek commission on a particular
amount. It is not in dispute that the Bank Realization
Certificates sent to defendant No.1 amounted to Rs
5,46,29,903/-. This is noted in the letter of defendant No.1
dated December 8, 1995 which is Ex.P-2 and is an admitted
document. This has also been conceded in the notice Ex.P-
4 sent by the plaintiff to defendant No.2 through its
Advocate Mr Mahavir Parsad, wherein it is stated that the
plaintiff had submitted to the branch documents/Bank
Realization Certificates for Rs 5.45 crores on 28 th November,
1995. Admittedly, 2.5% of the aforesaid amount was paid
by defendant No.1, to the plaintiff, as commission vide its
letter dated 06th December, 1995. Since the plaintiff had
furnished Bank Realization Certificates only to the extent of
Rs 5.6 crores and not to the extent of Rs 6 crores, she was
entitled to an amount of Rs 13,65,748/- and not to Rs 15
lacs towards the commission payable on realization of the
LC amount.
With respect to the payment of balance 50% of the
commission amount, it was expressly stipulated in the Bank
Guarantee that it would be paid only after completion of
order and submitting of not only the Bank Realization
Certificates, but also the acknowledgment issued by M/s
Hanil Era Textiles Limited. Admittedly, the plaintiff did not
furnish acknowledgement issued by M/s Hanil Era Textiles
Limited to defendant No.1, while invoking the Bank
Guarantee on 28th November, 1995 or even thereafter.
Hence, the Bank was not obliged to pay and in fact could
not have paid the balance 50% of the commission amount
to her on receipt of the letter dated 28th November, 1995. In
fact, there is no evidence even of the order up to Rs 6 crores
having been completed by 28th November, 1995. But,
assuming that orders up to Rs 6 crores had been completed,
the plaintiff was still not entitled to balance of 50% of the
commission amount till the time acknowledgement issued
by M/s Hanil Era Textiles Limited was furnished by it to
defendant No.1. Demand of balance 50% of the commission
amount, without requisite document furnishing of which to
the bank was a mandatory requirement and a condition
precedent for payment by the bank, would not constitute a
valid demand and a valid invocation of Bank Guarantee,
with respect to the balance 5% of the commission amount.
Had defendant No.1 paid the balance 50% of commission
amount to the plaintiff, without obtaining acknowledgement
issued by M/s Hanil Era Textiles Limited, it might not have
been able to recover that amount from defendant No.2
which could have taken the stand in the absence of
acknowledgement from it, the bank was not expected to pay
balance 50 of the commission amount to the plaintiff.
19. There is yet another reason, why defendant No.1 is
not liable to make any payment to the plaintiff. There is no
evidence of the orders having been completed by 30th
November, 1995. Assuming that the orders were completed
after 30th November, 1995, the bank was not obliged to
make any payment towards balance 50% of commission
amount to the plaintiff for the simple reason that it stood
discharged of all its obligations and liabilities on 30th
November, 1995. The bank could not have paid the balance
50% of the commission amount pursuant to the invocation
dated 28th November, 1995 since acknowledgement from
M/s Hanil Era Textiles Limited was not provided to the bank
at that time. Any demand made after 30th November, 1995
was not binding on the bank and did not oblige it to pay the
balance 50% of the commission amount to the plaintiff even
if the orders had been completed and acknowledgement
from M/s Hanil Era Textiles Limited were to be furnished at
that time. I, therefore, hold that plaintiff is not entitled to
any amount from defendant No.1.
20. Vide letter dated 05th December, 1995, which is
Ex.P-3, written to defendant No.1, the plaintiff claimed
commission with respect to the goods sold by defendant
No.2 vide invoices No. 160-170 dated 27th November, 1995
the documents for which were negotiated on 04 th December,
1995. Since the bank stood discharged of all its liabilities
and obligations under the Bank Guarantee on 30th
November, 1995, it was not required to pay any commission
to the plaintiff on the transactions effected after 30th
November, 1995 and, therefore, could not have paid
commission on the sale of the goods documents for which
were negotiated on 04th December, 1995.
21. Coming to the liability of defendant No.2, it is not
in dispute that it was required to pay 5% of the
transactional value up to Rs 6 croes to the plaintiff as
commission. It is also an admitted case that defendant No.2
has sold goods worth more than Rs 6 crores to Exportos
India. This is also not the case of defendant No.2 that
supplies up to Rs 6 crores have not been completed.
Therefore, defendant No.2 cannot escape from its liability to
pay commission at the rate of 5%, on Rs 6 crores, to the
plaintiff, which comes to Rs 30 lacs. Since defendant No.1
has already paid a sum of Rs 13,65,747/- to the plaintiff,
defendant No.2 is liable to pay the balance amount of Rs
16,34,253/- to the plaintiff. This, of course, is subject to the
claim having not become barred by limitation.
22. The liability of defendant No.2 to pay the aforesaid
amount to the plaintiff accrued as soon as supplies to the
tune of Rs 6 crores to Exportos India were completed. The
plaintiff has claimed interest at the rate of 18% per annum
from 1st January, 1996 to 30th November, 1998. Admittedly
there was no agreement between the plaintiff and defendant
No.2 for payment of interest. This is not a suit for price of
goods sold and delivered. Hence, interest cannot be awarded
to the plaintiff under Sale of Goods Act. This is not a suit
based on negotiable instrument. Hence, interest cannot be
awarded to the plaintiff under Section 80 of Negotiable
Instruments Act.
23. Section 3 of Interest Act, to the extent it is
relevant, provides that in any proceedings for the recovery of
any debt or damages or in any proceedings in which a claim
for interest in respect of' any debt or damages already paid
is made, the court may, if it thinks fit, allow interest to the
person entitled to the debt or damages or to the person
making such claim, as the case may be, at a rate not
exceeding the current rate of interest, if the proceedings
relate to a debt payable by virtue of written instrument at a
certain time, then, from the date when the debt is payable,
to the date of institution of the proceedings. It further
provides that if the proceedings do not relate to any such
debt then interest can be awarded from the date mentioned
in this regard in a written notice given by the person
entitled or the person making the claim to the person liable
that interest will be claimed, to the date of institution of the
proceedings.
Ex.P-20 is the notice sent by the plaintiff to
defendant No.2, demanding the suit amount which includes
interest at the rate of 18% per annum w.e.f. 1st December,
1995. Hence, the plaintiff is entitled to interest from
defendant No.2 on the amount of Rs 16,34,253/- from the
date contacts to the extent of Rs 6 crores were completed,
till the date of filing of the suit. The rate of interest,
considering the nature of the transaction between the
parties, in my view, should be 12% per annum.
24. Though the plaintiff has claimed an amount of Rs
13,50,000/- towards damages for mental agony, tension
and loss of health, she has not proved any mental agony,
tension and loss of health to her on account of non-payment
of the balance amount of commission to her by defendant
No.2. The transaction between the plaintiff and defendant
No.2 being a commercial transaction, it is difficult to accept
that non-payment of the balance amount of commission
resulted in mental agony or tension to the plaintiff or loss of
health to her. In any case, the plaintiff has not come in the
witness box to prove the damages claimed by her. I,
therefore, hold that she is not entitled to any amount
towards damages. The plaintiff has also claimed for Rs
48,532/- towards documentation and miscellaneous
expenses. No evidence has, however, been led by her to
prove these expenses. Moreover, there is no agreement
between the plaintiff and defendant No.2 for payment of
such charges to her by defendant No.2. I, therefore, held
that the plaintiff is not entitled to any amount towards
documentation and miscellaneous expenses. The issues are
decided accordingly.
25. Issue No.2
The plaintiff invoked the Bank Guarantee on 28th
November, 1995, vide letter dated Ex.P-30. The plaintiff
wrote to defendant No.1 that she had written to M/s Hanil
Era Textiles Limited for her omission, but had not received
any response from it. She further wrote that under the
terms of Bank Guarantee, the bank was liable to pay
commission without any delay. Defendant No.1 was asked
to send commission against the Bank Guarantee dated 21 st
September, 1995 in the account of the plaintiff with
Allahabad Bank. Thus, while invoking the Bank Guarantee
dated 28th November, 1995, the plaintiff did not grant any
time to defendant No.1 to make payment of commission to
her, meaning thereby that the notice required the bank to
make immediate payment of amount of commission. Article
55 of Limitation Act, to the extent it is relevant, provides
that limitation in a suit for compensation for breach of any
contract is three years from the date when the contract is
broken. Article 113 of Limitation Act which is the residuary
Article prescribes a limitation of 3 years from the date when
the right to sue accrues and this Article applies to any suit
for which no period of limitation is provides elsewhere in the
Schedule of Limitation Act, 1963.
26. Supreme Court in Syndicate Bank Vs.
Channaveerappa Beleri and Ors. 2006 (11) SCC 506, held
that the liability under the guarantee would arise on the
guarantors only when a demand is made. It was noted that
Article 55 of Limitation act provides that the time will begin
to run only a demand is made. It was further noted that
even if Article 113 is to be applied, the time begins to run
only when the right to sue accrues and that such a right
accrues only when a demand for payment is made by the
Bank and is refused by the guarantors. It was further held
that when a demand is made requiring payment within a
stipulated period, say 15 days, the breach occurs or right to
sue accrues, if payment is not made or is refused within 15
days. It was further held that if while making the demand
for payment, no period is stipulated within which the
payment should be made, the breach occurs or right to sue
accrues, when the demand is served on the guarantor. The
Court was also of the view that a condition precedent for the
liability of the guarantor is that the demand should be for
payment of a sum which is legally due and recoverable from
the principal debtor and if the debt had already become
time-barred against the principal debtor, the question of
creditor demanding payment thereafter, for the first time,
against the guarantor would not arise.
Since no period for payment was stipulated by the
plaintiff when the Bank Guarantee was invoked, the right to
sue defendant No.1 accrued as soon as the letter dated 28th
November, 1995 invoking the Bank Guarantee was served
on defendant No.1. The endorsement made on the letter
Ex.P-13 dated 28th November, 1995 shows that it was
served on Punjab and Sind Bank on 29th November, 1995.
Computed from that date, the prescribed period of limitation
for filing the suit against defendant No.1 expired on 29th
November, 1998. A perusal of the plaint would show that
though the plaint purports to have been typed on 30 th
November, 1998, stamp papers on which the plaint has
been typed were purchased on 07th December, 1998. As per
the record of the registry, the plaint was registered on 09 th
December, 1998. Assuming the suit to have been filed on
07th December, 1998, it is still bared by limitation, since the
prescribed period for this purpose expired on 29th
November, 1998. Though it appears from the objection
sheet available in the file that some filing defects were found
by the Registry on 01st December, 1998 and those
objections were removed by 08th December, 1998, neither
there is any order of the Court nor an application by the
plaintiff for condonation of delay in re-filing. Even the
Vakalatnama in favour of he learned counsel for the plaintiff
has been executed on 05th December, 1998. Since the
Court Fee was purchased only on 07th December, 1998, it
could not have been filed before that date. No application
for extension of time for payment of the Court Fee was filed
by the plaintiff. In the absence of payment of requisite
Court Fee and an order of the Court condoning the delay in
re-filing, the period of limitation did not get extended. I,
therefore, hold that the suit was filed on 08th December,
1998.
27. Coming to the claim against defendant No.2, a
perusal of the Bank Guarantee would show that the bank
was required to pay the commission to the plaintiff only in
the event of failure of defendant No.2 to pay the same to the
plaintiff. The relevant clause of the Bank Guarantee reads
as under:-
"We, Punjab and Sind Bank, (hereinafter
referred to as the „Bank‟) at the request of
M/s Hanil Era Textiles Ltd. (Seller) do
hereby undertake to pay the Commission
Agent an amount not exceeding @ 5% on
FOB actual realization value against L/C
No.44/95 against any loss caused to or
suffered by the Commission Agent by
reason of non-payment by the said
seller."
Therefore, the Bank Guarantee could have been
invoked only on failure of defendant No.2 to pay the amount
of commission to the plaintiff. A perusal of the letter dated
28th November, 1995 would show that the plaintiff had
written to defendant No.2 for commission, but had not
received any response from it. This statement in the letter
clearly shows that defendant No.2 had committed breach of
its agreement with the plaintiff for payment of commission,
on or before 28th November, 1995, when the Bank
Guarantee was invoked. Computed from 28th November,
1998, the suit filed on 08th December, 1998 is clearly barred
by limitation even against defendant No.2. This is not the
case of the plaintiff that contracts up to Rs 6 crores were
completed on or after 08th December, 1995. Had the
contracts been completed on or after 08th December, 1995,
the plaintiff would have been entitled to recover Rs
16,34,253/- from defendant No.2. But, since that is not her
case, the claim against defendant No.2 is patently time-
barred.
The plaintiff also wrote a letter dated 05th
December, 1995 to defendant No.1, again asking it to pay
the balance 50% of the commission to her. It was in this
letter that the plaintiff referred to the shipment made by
defendant No.2 vide invoices No. 160-170, negotiated on
04th December, 1995. Even if computed from the date of
this letter, the suit filed on 08th December, 1998 is barred
by limitation against both the defendants.
28. The learned counsel for the plaintiff has referred to
the decision of Supreme Court in Mst. Rukhmabai Vs. Lala
Laxminarayan and Ors. AIR 1960 SC 335, where the Court,
while dealing with Article 120 of Limitation Act, 1908 was of
the view that there can be no right to sue until there is an
accrual of the right asserted in the suit and its infringement
or at least a clear and unequivocal threat to infringe that
right by the defendant against whom the suit is instituted.
This judgment, however, is of no help to the
plaintiff since the right to file suit accrued to the plaintiff on
or before 28th November, 1995 when the Bank Guarantee
was invoked. Even with respect to the shipment made by
invoice No. 160-170 dated 28th November, 1995 alleged to
have been negotiated on 04th December, 1995, the right to
sue had accrued to the plaintiff by 05th December, 1995
when she wrote to the bank demanding commission also on
the goods sold vide those invoices.
The learned counsel for the plaintiff has referred
the decision of Privy Council, AIR 1940 Privy Council, 63,
where the Court considering the provisions of Section 20 of
Limitation Act, 1908 which is equivalent to Section 19 of
Limitation Act, 1963, inter alia, observed as under:
"In the Limitation Act, Section 19, which
deals with acknowledgments, is not to be
read as based upon the theory of implied
promise: and it is difficult to see why
Section 20, which deals with payments,
should be regarded as based upon a
theory of acknowledgment. The Indian
Legislature may well have thought that a
payment if made on account of the debt
and evidenced by writing gave the
creditor some excuse for further delay in
suing, or was sufficient new proof of the
original debt to make it safe to entertain
an action upon it at a later date than
would otherwise have been desirable. The
words in Section 20 by which the matter
must be judged are "where part of the
principal of a debt is paid". As it is not
prescribed by the Section that the
payment should be intended by the
debtor to go towards the principal debt at
all, the words 'as such' having no place in
this part of the Section, it is not in their
Lordships' view correct to require that the
payment should have been made of part
as part."
This judgment, however, does not help the plaintiff
qua defendant No.2 since no part payment is alleged to have
been made by it to the plaintiff. It also does not help the
plaintiff against defendant No.1 for the simple reason that
even if a fresh period of limitation is computed from the date
of payment of Rs 13,65,747/-was made by defendant No.1
to her the suit, having been filed on 08th December, 1998
would still be barred by limitation. The issue is, therefore,
decided against the plaintiff and in favour of the defendant.
Order
In view of my findings on the issues, the suit is
hereby dismissed without any order as to costs. Decree
Sheet be prepared accordingly.
(V.K. JAIN)
JUDGE
DECEMBER 13, 2010
bg
