Bhupinder Sharma vs M/S.National Panasonic India ...
2011 Latest Caselaw 6118 Del

*      IN THE HIGH COURT OF DELHI AT NEW DELHI

%                           Date of Decision: December 14, 2011

+                        RFA(OS) 76-77/2011

       BHUPENDER SHARMA                  ..... Appellant
           Through: Mr.Y.R.Sharma, Advocate and
                    Mr.A.P.Aggarwal, Advocate.

                              versus

       M/S.NATIONAL PANASONIC INDIA PVT. LTD.
                                                    ....Respondent
              Through:   Mr.Anil K.Kher, Senior Advocate with
                         Mr.D.R.Bhatia, Advocate and
                         Mr.Siddharth Jain, Advocate.

       CORAM:
       HON'BLE MR. JUSTICE PRADEEP NANDRAJOG
       HON'BLE MR. JUSTICE S.P. GARG

PRADEEP NANDRAJOG, J. (Oral)

1. The decree passed against the appellant and in favour of the respondent concludes as under:-

"22. In view of the aforesaid findings, the suit is decreed with costs against the defendant for a sum of `98,18,303.32 with interest @9% per annum, with effect from 10th July, 2001 till realization. However, it would be open for the defendant to proceed against M/s.Shreeyak through its proprietor by invoking Section 223 of the Indian Contract Act in respect of the decreed amount. Decree sheet be drawn accordingly."

2. Section 223 of the Indian Contract Act 1872 reads as under:-

"Where one person employs another to do an act, and the agent does the act in good faith, the employer is liable to indemnify the agent against the consequences of that act, though it may cause an injury to the rights of third persons."

3. It is apparent that the reasoning of the learned Single Judge terminates by holding that the appellant was the agent of M/s.Shreeyak.

4. We have proceeded unconventionally for the reason we find inchoate findings and observations in the impugned judgment and decree dated 13th May 2011 which contradict the claim made in the plaint.

5. The case pleaded in the plaint by the respondent is that the appellant was the sole proprietor of M/s.Shreeyak and at his request he was appointed by the respondent as a distributor on mutually agreed terms which were recorded in the stockist agreement. Pleading that the defendant i.e. appellant purchased various goods in respect whereof bills and invoices were raised, the plaint states that when accounts were reconciled `1.02 crores were payable by the defendant and in respect thereof minutes were drawn on 24 th August, 2000. Alleging that on 7th May 2001 the defendant proposed to make monthly payments in sum of `1 lakh, and pursuant thereto few cheques were issued and when presented for encashment, were dishonoured, the plaint terminates by praying that the defendant is liable to pay `98,18,303.32 as the principal sum due and `39,76,412/- as the pre-suit interest.

6. In the written statement filed the appellant stated that he was not the proprietor of M/s.Shreeyak and that it was the sole proprietary firm of one Sh.Surendra Sharma. Denying receiving any goods from the plaintiff it was pleaded that he never issued any cheques to the plaintiff.

7. Needless to state, the core issue to be decided was whether the appellant was the sole proprietor of M/s.Shreeyak.

8. As noted herein above, in the plaint, a reference was made to a stockist agreement alleging that the appellant

had executed the same, but the plaintiff i.e. the respondent did not file the stockist agreement. But, during cross- examination on 30.10.2006 its witness Rupesh Kumar Sharma PW-1 admitted that Ex.PW-1/D-1 was the stockist agreement entered into between the parties; and relevant would it be to highlight that when admission/denial of the documents filed by the parties was effected on 15.09.2005, the document was denied by the plaintiff/respondent.

9. The agreement has a preamble which reads as under:-

"STOCKIST AGREEMENT Distributor‟s Name : M/s.Shreeyak Address : Opp. Naveen Market, Phool Chowk, Raipur (MP) Telephone No. : 535396 Owner‟s Name : Mr.Surendra Sharma"

10. The agreement has been executed by Mr.Surendra Sharma by affixing a stamp of „Shreeyak‟; clearly recording that he was signing as the proprietor of the firm.

11. It is thus clear that the plaintiff knew from the very beginning that Mr.Surendra Sharma was the sole proprietor of M/s.Shreeyak and not the appellant. The plaintiff acted dishonest when during admission/denial it denied on 15.09.2005 that Ex.PW-1/D-1 was executed between the plaintiff and Mr.Surendra Sharma.

12. It be highlighted by us that it is not the case pleaded in the plaint that the plaintiff executed the stockist agreement with M/s.Shreeyak which was then the sole proprietary firm of Sh.Surendra Sharma and later on the assets and liabilities of the firm were taken over by Sh.Bhupender Sharma i.e. the appellant. In para 4 and para 5 of the plaint it is pleaded as under:-

"4. That the defendant is running a proprietary concern, in the name and style of Shreeyak, which is dealing in the business of sale of electronic products to retailers in Raipur, Chattisgarh.

5. That at the request of the defendant, he was appointed by the plaintiff as one of its stockists/distributors for the areas Durg, Bilaspur, Jagdalpur, Raigarh, Ambikapur, Rajnandgaon, Sarguja and Raipur, on the terms and conditions mutually agreed upon between then and recorded vide Stockist Agreement signed between them."

13. Various documents have been proved at the trial, some of which have been signed by Surendra Sharma as the sole proprietor of M/s.Shreeyak and some have been signed by Bhupender Sharma, but not as the proprietor of M/s.Shreeyak, evidenced by the writing: "For" i.e. on behalf of M/s.Shreeyak.

14. The impugned judgment has referred to documents exhibited as Ex.PW-1/4, Ex.PW-1/5, Ex.PW-1/7, Ex.PW-1/9, Ex.PW-1/11, Ex.PW-1/D-1, Ex.DW-1/5A, Ex.DW-1/5B, Ex.DW- 1/5C and Ex.DW-1/P-2 (collectively). We straightaway note the same for the effect thereof on the issue: Whether they reveal that Bhupender Sharma was the proprietor of M/s.Shreeyak.

15. Ex.DW-1/P-1 is a letter dated 9th September 2000 written on the letterhead of M/s.Shreeyak and is signed by Bhupender Sharma as under:-

"Yours faithfully Sd/- Bhupender Sharma For SHREEYAK"

16. It is apparent that Bhupender Sharma has signed on behalf of M/s.Shreeyak and not as the proprietor of M/s.Shreeyak.

17. Ex.PW-1/4 is a letter dated 25th July 1999 on the letterhead of M/s.Shreeyak and is signed by Bhupender Sharma as under:-

"Yours faithfully Sd/- Bhupender Sharma For SHREEYAK"

18. It is apparent that Bhupender Sharma has signed on behalf of M/s.Shreeyak and not as the proprietor of M/s.Shreeyak.

19. Ex.PW-1/5 is a letter dated 9th October 1999 on the letterhead of M/s.Shreeyak and is signed by Bhupender Sharma as under:-

"Yours faithfully Sd/- Bhupender Sharma For SHREEYAK"

20. It is apparent that Bhupender Sharma has signed on behalf of M/s.Shreeyak and not as the proprietor of M/s.Shreeyak.

21. Ex.PW-1/7 is a Minutes of the meeting dated 24 th August 2000, to which, as noted herein above, reference has been made in the plaint. The Minutes have been drawn on the letterhead of M/s.Shreeyak and have been signed by Bhupender Sharma: "For Shreeyak". However, we find that while drawing up the Minutes it is written that Mr.Bhupender Sharma, proprietor, visiting NPI Noida to discuss the settlement.

22. From the fact that in the Minutes reference has been made to Mr.Bhupender Sharma as the proprietor would not make Bhupender Sharma a proprietor of M/s.Shreeyak nor can the said obvious typographic error be treated as an admission that Bhupender Sharma admits to be the proprietor of M/s.Shreeyak.

23. Ex.PW-1/9 is a Minutes of a meeting dated 07.05.2001 which has been signed by Mr.Bhupender Sharma and Mr.S.M.Moses from the side of the distributor and thus the document is irrelevant for any discussion by us for the reason Mr.Bhupender Sharma has not signed the same as the proprietor of M/s.Shreeyak.

24. Ex.PW-1/11 is on the letterhead of M/s.Shreeyak and has been signed by Bhupender Sharma as under:-

"Yours faithfully Sd/- Bhupender Sharma For SHREEYAK"

25. Ex.DW-1/5A, Ex.DW-1/5B and Ex.DW-1/5C are three cheques issued by Bhupender Sharma and suffice would it be to state that these cheques have not been issued by him from the account of the sole proprietary firm and in respect thereof he has explained during cross-examination that he issued the cheques at the asking of Surendra Sharma by way of security and were returned to him when Surendra Sharma made payment by a demand draft. Thus, issuance of said three cheques which were not even presented for encashment is neither here nor there as regards the respondent but carry a meaning for the appellant, for the reason, the cheques not being presented for encashment would be proof that they were given as security. Otherwise, the normal conduct would be for the holder of the cheques to present the same for encashment.

26. We have repeatedly asked learned counsel for the respondent as to what does he has to say with reference to the undisputed fact that the parties i.e. the respondent and M/s.Shreeyak had executed a stockist agreement, Ex.PW-1/D- 1, which initially though denied by the respondent, was finally admitted by the respondent. We have asked this question in

the context of the pleadings made in para 4 and 5 of the plaint which we have reproduced herein above, to the effect that the respondent itself pleaded in the plaint that a stockist agreement was signed between the parties and that the respondent had not filed any stockist agreement to make good the plea that Bhupender Sharma had represented of being the proprietor of M/s.Shreeyak and having signed the stockist agreement.

27. Learned senior counsel concedes that in view of Ex.PW-1/D-1 there is no escape from the fact that it was Surendra Sharma and not Bhupender Sharma who had represented of being the sole proprietor of M/s.Shreeyak and it was said person who had entered into the stockist agreement with the company.

28. Admitting as aforesaid, learned senior counsel seeks to urge that law does not prohibit a person from taking over the assets and liabilities of a sole proprietary firm and thus urges that since Bhupender Sharma had been signing various letters on behalf of the firm, it has to be treated that he took over the assets and liabilities of the firm.

29. The argument is a desperate attempt to clutch on to straws. It cannot be accepted inasmuch as there are no pleadings to said effect in the plaint and law prohibits variance between pleadings and proof. Secondly, if this was the case of the plaintiff it should have led evidence to so establish.

30. Learned senior counsel now refers to the fact that Bhupender Sharma had issued a cheque from the account of M/s.Shreeyak and from this it has to be inferred that he was the sole proprietor of the firm. The cheque in question bearing No.313834 drawn on Oriental Bank of Commerce, Branch: Raipur has not been exhibited as a specific document but is a

part of a bunch of documents exhibited as Ex.DW-1/P-2 (collectively).

31. A word needs to be spoken on Ex.DW-1/P-2. The same is a certified copy of a complaint filed by the respondent under Section 138 of the Negotiable Instruments Act and court proceedings pursuant thereto. The cheque in question is the basis of the complaint and we highlight that the cheque has not been signed by Bhupender Sharma. It has been signed by Surendra Sharma as the proprietor of M/s.Shreeyak.

32. The respondent has wrongly alleged in the complaint that the cheque was issued by Bhupender Sharma.

33. Proceedings would show that the matter was compromised and vide order dated 10.03.2004 the complaint was compounded.

34. From the fact that Bhupender Sharma compounded the offence, it is sought to be urged by learned senior counsel for the plaintiff/respondent that the same is an admission by Bhupender Sharma that he was the proprietor of M/s.Shreeyak.

35. A party may compound an offence for various reasons and the same cannot be treated as an admission of any fact by a party. Bhupender Sharma resides in Raipur and for him to come to Delhi again and again to defend himself in a criminal proceedings was obviously a tedious task. Notwithstanding he not being the signatory to the cheque, to get rid of the harassment of repeatedly coming to Delhi, his compounding the offence could be motivated to save him from the harassment of repeatedly coming to Delhi, and thus cannot be treated as an admission of his being the sole proprietor of M/s.Shreeyak. We note that when cross- examined, Bhupender Sharma has stated that when the offence was compounded Mr.Surender Sharma had tendered

the agreed sum by way of a bank draft which statement was never challenged.

36. We note that there are various documents exhibited at the trial but before the learned Single Judge the only documents which were relied upon were Ex.PW-1/4, Ex.PW-1/5, Ex.PW-1/7, Ex.PW-1/9, Ex.PW-1/11, Ex.PW-1/5A, Ex.PW-1/5B, Ex.PW-1/5C, Ex.DW-1/P-1 and Ex.DW-1/P-2 (collectively). Same have been referred to before us.

37. The position therefore would be that the best evidence in favour of the respondent is communications signed by Bhupender Sharma on behalf of M/s.Shreeyak, but not as the sole proprietor of the firm; and as against that, the evidence in favour of the appellant would be Ex.PW-1/D-1. The said document is the origin of the jural relationship between the respondent and M/s.Shreeyak. It is the stockist agreement which is the foundation of the plaint. The respondent having admitted that Ex.PW-1/D-1 was the document under which M/s.Shreeyak was appointed as the stockist, cannot ignore that it was Mr.Surendra Sharma who signed the same clearly informing the respondent that Mr.Surendra Sharma was the proprietor of M/s.Shreeyak.

38. We have asked learned senior counsel for the respondent whether the respondent is willing to file an application before us under Order 1 Rule 10 read with Order 6 Rule 17 CPC to correct the error in the plaint and after deleting Bhupender Sharma as the defendant, is prepared to implead Surendra Sharma as a defendant and for which we have even guided learned senior counsel that the respondent may plead in the said application that it was bona-fide misled in believing that Bhupender Sharma was the sole proprietor of the firm and for which benefit of Section 21 of the Limitation Act could be

made available to the respondent, but learned senior counsel on instructions from the briefing counsel and after speaking to the representative of the respondent insists that it is Bhupender Sharma who is the sole proprietor of the firm.

39. At a civil trial, it is the preponderance of probabilities which decide an issue which is settled. The rule of best evidence is also applicable. In the teeth of Ex.PW-1/D- 1, we hold that so strong is the quality of the evidence in favour of the appellant and against the respondent that all other evidence fails in significance.

40. Now, a comment upon the impugned decision.

41. With reference to Section 186, Section 188, Section 197 and Section 233 of the Indian Contract Act 1872, the learned Single Judge has held there was an implied authority from the proprietor of M/s.Shreeyak in favour of Bhupender Sharma to act on behalf of the firm. It has been so held in paragraph 11. In the next paragraph i.e. paragraph 12 of the impugned decision the learned Single Judge has held that the proprietorship of a firm rests where its mind and will rests. Thereafter, with reference to Section 186 and Section 233 of the Contract Act, the learned Single Judge has held that the various letters would show that the defendant was all throughout acting on behalf of the firm. The decision concludes in paragraph 22 which we have noted herein above.

42. Section 186 of the Contract Act says that the authority of the agent may be express or implied and Section 188 deals with the extent of the authority of the agent. Now, an agent is not liable for the acts of his principal and to third parties would be liable only in a situation contemplated by Section 231 of the Indian Contract Act. Section 233 of the Indian Contract Act makes an agent personally liable if he

deals with the person not as an agent but as a principal and only in such circumstance the person concerned may either sue the agent or the principal or both.

43. In the instant case this is not so in view of Ex.PW- 1/D-1.

44. We conclude by highlighting that the impugned judgment does not hold that Bhupender Sharma is the proprietor of M/s.Shreeyak. It holds him liable by applying Section 233 of the Indian Contract Act, a provision which is not attracted in the instant case.

45. The appeal is accordingly allowed. Impugned judgment and decree dated May 13, 2011 is set aside. The suit filed by the respondent against the appellant is dismissed with costs throughout.

(PRADEEP NANDRAJOG) JUDGE

(S.P.GARG) JUDGE DECEMBER 14, 2011 dk