Shri Dileep Maheshwari vs M/S Cemindia Company Ltd. & Ors
2011 Latest Caselaw 3446 Del

*              IN THE HIGH COURT OF DELHI AT NEW DELHI

+                         RFA 43/2002

%                                                        July 20, 2011

SHRI DILEEP MAHESHWARI                                   ...... Appellant


                          Through:    Mr. D.K.Rustogi and Mr. B.S.Bagga,
                                      Advocates.

                          VERSUS

M/S CEMINDIA COMPANY LTD. & ORS                 .....Respondents

                   Through:    Mr. Manish Kohli and Mr. Manjit Pathak,
                              Adv. for R-3.

CORAM:
HON'BLE MR. JUSTICE VALMIKI J.MEHTA

    1.   Whether the Reporters of local papers may be
         allowed to see the judgment?

    2.   To be referred to the Reporter or not?

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

VALMIKI J. MEHTA, J (ORAL)

1. The challenge by means of this regular first appeal under Section 96 of

the Code of Civil Procedure, 1908 (CPC), is to the impugned judgment and

decree dated 30.8.2001 which dismissed the suit of the appellant/plaintiff for

recovery of money claimed on account of bad delivery of shares from the

defendant no.3/respondent no.3 to the plaintiff. The shares in questions

were 200 shares of the defendant no.1 M/s Cemindia Company Ltd.

2. The facts of the case are that the defendant no.3 admittedly sold 200

shares of M/s Cemindia Company Ltd. to the appellant/plaintiff on 29.4.1993.

The appellant paid to the respondent no.3 a sum of Rs.28,093.00 for the

purchase of such shares. The extant period of the transaction was during

the years when the shares were transacted not in D-mat form but they were

sold/purchased in the form of share scripts. In the share scripts, there is a

column with respect to transfers which are made inasmuch as it is not as if

each transfer had to be registered with the company whose shares were sold

and transferred inasmuch as before the cutoff date which is mentioned in a

share ownership form, there could take place many transfers and deliveries

inter se various buyers and sellers without the actual owner being reflected

in the share ownership register of the company whose shares were sold and

transferred. I may only state that this position resulted in a nominal owner

of shares, who existed in the shareholders register of a company and actual

owner of the shares who was different. The actual holder of the shares

scripts was the actual owner of the share scripts and the normal owner in the

shareholder's register of the company used to be a trustee for the actual

owner. This aspect is deliberated upon by the Supreme Court in its

celebrated judgment in the case of LIC vs. Escorts Ltd. & Ors. AIR 1986

SC 1370.

3. The appellant/plaintiff laid out a case in the plaint that the subject

shares were transferred firstly to Sh. Shashikant M. Damani and thereafter

through various transfers ultimately the same were lodged for transfer with

the respondent no.1 company by one M/s Phool Holdings Ltd. On lodging the

shares for transfer, it transpired that the original owner of shares as per the

shareholders register of the company had got duplicate shares issued on the

ground that the said shares had been lost. The net effect of the above was

that the subject shares which were sold by the respondent no.3 to the

appellant were "bad delivery". As normally happens, each purchaser takes a

refund of the amount from the person from whom he purchases the shares

which were bad deliveries. The names of all the different purchasers from

the appellant right to M/s Phool Holdings Ltd. are mentioned in the different

endorsements found in the relevant share transfer forms. The first person of

this chain M/s Secured Investment and Finance Company Ltd. demanded

payment from the appellant for bad delivery and the appellant pleaded a

case that he had to pay a sum of Rs.3,60,960/- to M/s Secured Investment

and Finance Company Ltd. On the demand being made to the respondent

no.3 in around October, 1994, the respondent no.3 refused to make payment

to the appellant resulting in filing of the suit.

4. After pleadings were completed, issues were framed on 10.1.2000 and

the main issue argued was issue no.5 as to whether the appellant is entitled

to recover any amount from the respondent no.3/defendant no.3 and if so,

how much? It is this issue which has been argued before me by the counsel

for both the parties.

5. First let us come to certain admitted facts. That the respondent no.3

sold 200 shares of M/s Cemindia Company Ltd. to the appellant /plaintiff is

not disputed. That the owner of such shares in the company M/s Cemindia

Company Ltd. reported loss of the shares and got duplicate share scripts

issued is also not disputed. What is really disputed is the price at which the

shares were transferred by appellant and which ultimately were bought by

M/s Phool Holdings Ltd. and whether the appellant was forced to pay the

amount of Rs.3,60,960/- to M/s Secured Investment and Finance Company

Ltd., who is the first endorsee on the share transfer forms as a buyer of the

subject share scripts.

6. The trial court has basically dismissed the suit on two main counts.

Firstly, the trial court relied upon the inconsistencies of the appellant/plaintiff

in the plaint and the evidence inasmuch as in the plaint, the stand which was

taken up was that the share scripts were sold by the appellant to Mr.

Shashikant M. Damani whereas in the evidence, the plaintiff proved the case

that the shares were in fact sold to M/s Secured Investment and Finance

Company Ltd. The second aspect was that it was not held to be proved that

the appellant/plaintiff had in fact parted with the sum of Rs.3,60,960/- to M/s

Secured Investment and Finance Company to whom the shares were alleged

to be sold.

7. Whereas the learned counsel for the appellant argued to explain away

Inconsistencies between the plaint and the evidence by referring to the

aspect that the share transfer forms itself showed transfer to M/s Secured

Investment and Finance Company Ltd. and not Mr. Shashikant M. Damani, it

was also further argued that the respondent no.3 could not take any

advantage of any mistake committed in para 9 of the written statement

because the respondent no.3 itself stated in the written statement that as

per its knowledge, the subject shares were sold to M/s Secured Investment

and Finance Company. It was further argued that when in the plaint, it was

stated that the shares were sold to Mr. Shashikant M. Damani, really what

the plaintiff meant was M/s Secured Investment and Finance Co. Ltd.,

inasmuch as this company was in fact owned by Mr. Shashikant M. Damani.

On the aspect of the finding of the trial court that the appellant failed to

prove the payment of Rs.3,60,960/- to M/s Secured Investment and Finance

Co. Ltd., learned counsel for the appellant drew the attention of the court to

the statement of account Ex.PW1/D3, and which is a statement of account of

M/s Secured Investment and Finance Co. Ltd. in the books of the

appellant/plaintiff, where there exists a necessary entry of bad delivery of

the subject shares and payment of Rs.3,60,960/- to the said M/s Secured

Investment and Finance Co. Ltd. It was also argued that in fact this

statement of account got produced during the cross examination of the

plaintiff himself by the respondent no.3 and there is no cross examination as

to the fact that the statement of account does not reflect the correct position

of the facts. Reliance is also sought to be placed upon a letter Ex.PW1/5

written by Mr. Shashikant M. Damani to Ms. Secured Investment and Finance

Co. Ltd. for payment of the amount of Rs.3,60,960/-

In response, the learned counsel for the respondent no.3 again

laid great emphasis on the fact that no person can be allowed to lead

evidence beyond what is pleaded in the plaint and since it was pleaded in

the plaint that the buyer was Mr. Shashikant. M. Damani, no evidence could

be led to show that shares were in fact sold to M/s Secured Investment and

Finance Co. Ltd. Learned counsel for the respondent also sought to lay

stress on the fact that the letter Ex.PW1/5 is not a letter from M/s Secured

Investment and Finance Company but this letter is in fact issued by Mr.

Shashikant M. Damani. It is also sought to be argued that in the cross-

examination, the plaintiff admitted that M/s N.K.Maheshwari & Co., Kanpur is

a different firm then the plaintiff and that in the same portion of the cross

examination, the plaintiff admitted that it had sold the shares to M/s

N.K.Maheshwari Co., Kanpur, further showing the inconsistencies that the

shares were not even sold to M/s Secured Investment and Finance Co.Ltd.

8. In my opinion, the appeal has considerable merits and is entitled to

succeed. The fact that the subject shares were sold by the respondent no.3

to the plaintiff is not disputed. It is also not disputed that these shares

resulted in bad delivery. It is an established practice under the normal

course of such contracts and also in the normal rules and regulations of the

stock exchange transactions, although the present is proved to be off stock

exchange transaction, that whenever there are various transfers before the

final transferee lodges the shares of the company for transfer and which

transfer is not recorded because of bad delivery, each buyer only claims his

monies from the immediately preceding seller and not earlier sellers or the

first seller. Once it is established on record that there was in fact a bad

delivery of shares, and which cannot be doubted in the present case, the

conclusion would have to be that the appellant/plaintiff has paid monies to

the respondent no.3 for shares/goods which it never received. Not only

therefore, the appellant is entitled to refund of the price paid to the

respondent no.3, further, the appellant is entitled to receive the losses which

it suffered on account of further transfer of shares, and to which, the

respondent no.3 had no title to sell.

9. In my opinion, normally, the argument that no evidence can be led

beyond the pleadings would be of considerable weight however, where the

parties go to trial with knowledge of their respective cases, then there is no

surprise caused to either of the parties and therefore the doctrine of

variance between pleadings and proof cannot come in. This doctrine cannot

come into application in the facts and circumstances of the case because the

respondent no.3 in its written statement admitted that it was to the

knowledge of respondent no.3 that the subject shares were sold by the

appellant to M/s Secured Investment and Finance Co.Ltd. I, therefore, reject

the argument urged on behalf of the respondent no.3 that there is a variance

between the pleadings and the evidence which is led in the case. In fact,

variance if any between the pleadings and the proof has been explained by

the plaintiff in his evidence to a question in the cross-examination and which

shows that in fact Mr. Shashikant M. Damani was the owner of the concern

M/s Secured Investment and Finance Co. and the same is the sister concern.

In common man's language, when reference is made to a person , it actually

means reference to the company represented by the individual. I may note

that there is no further evidence led on behalf of the respondent no.3 that

M/s Secured Investment and Finance Co. Ltd. is not a sister concern of M/s

Shashikant M. Damani.

10. So far as the argument that there is inconsistency that whether the

sale of the shares was made to M/s Secured Investment and Finance Co. or

to M/s N.K.Maheshwari Co., Kanpur, this aspect has also been sufficiently

explained in the evidence because the defendant in his cross-examination

admitted that M/s N.K.Maheshwari & Co. was the sole proprietorship of the

plaintiff Mr. Dileep Maheshwari. Mileage therefore cannot be derived by the

respondent no.3 from the alleged inconsistencies because really both the

firms M/s N.K.Maheshwari & Co., whether at Delhi or at Kanpur, are really

sole proprietorship concerns of the plaintiff, and, the statement that the

shares were sold to M/s N.K.Maheshwari Kanpur is made in the context

ultimately, that the shares were sold at Kanpur. It cannot therefore be said

that there is such contradiction so as to defeat the case of the

appellant/plaintiff for recovery of money. The contradiction in my mind has

been sufficiently explained and is not unnatural because businessmen tend

to refer their firms at different places sometimes as different concerns

because many a times separate books of account are maintained for the

separate concerns at different cities.

11. So far as the fact as to whether the appellant has failed to prove the

payment of Rs.3,60,960/- to the purchasers of shares from the appellant, in

my opinion, the very fact that the statement of account Ex.PW1/D3 was

produced during the cross-examination of the appellant, and that too,

subject to cost which the appellant paid, accordingly, the said statement of

account can be looked into. There cannot be any doubt about the contents of

the same because there is no question in the cross examination as to lack of

authenticity of the statement of account Ex.PW1/D3. In fact, I have gone

through the entire examination-in-chief of the respondent no.3 and find that

there is not a single affirmative statement that this payment of Rs.3,60,960/-

has not been made by the appellant to M/s Secured Investment and Finance

Co. Ltd. or M/s Shashikant M. Damani.

12. A civil case is decided on balance of probabilities and the balance of

probabilities including the affirmative evidence led by the appellant/plaintiff,

the statement of account Ex. PW1/D3 and the fact that the authenticity of

Ex.PW1/D3 has never been challenged even by making a token affirmative

statement whether in the examination in chief by the respondent no.3 or in

cross-examination to the appellant by the respondent no.3, makes me come

to the conclusion that the appellant has successfully proved payment of

Rs.3,60,960/- to M/s Secured Investment and Finance Co. Ltd.

13. In view of the above, the appeal is accepted, the suit of the plaintiff for

recovery of Rs.3,60,960/- is decreed against the defendant no.3/respondent

no.3 along with the interest from 1.5.1993 at 10% per annum simple till the

date of filing of the suit and 7 ½ % per annum simple pendente lite and

future till payment. Decree sheet be prepared. Trial court record be sent

back.

JULY 20, 2011                                      VALMIKI J. MEHTA, J.
ib