Southern Sales And Services vs Sauermilch Design And Handels ...
2021 Latest Caselaw 5285 Kant

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 IN THE HIGH COURT OF KARNATAKA AT BENGALURU

   DATED THIS THE 2nd DAY OF DECEMBER, 2021

                    PRESENT

     THE HON'BLE MR. JUSTICE ALOK ARADHE

                      AND

THE HON'BLE MR. JUSTICE ANANT RAMANATH HEGDE

                COMAP. No.19/2019

BETWEEN:

1. SOUTHERN SALES & SERVICES
A PARTNERSHIP FIRM AT NO.7/1,
1ST FLOOR, K H ROAD,
BENGALURU - 43.

2. SRI SHYAM GOENKA
PARTNER, SOUTHERN SALES &
SERVICES, AT NO.7/1,
1ST FLOOR, K H ROAD,
BENGALURU - 43.

3. SRI C S KEDIA
PARTNER, SOUTHERN SALES &
SERVICES, AT nO.7/1,
1ST FLOOR, K H ROAD,
BENGALURU - 43.                     .. APPELLANTS


(BY SRI.PRAMOD N KATHAVI, ADV.)
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AND:

SAUERMILCH DESIGN & HANDELS GMBH
A COMPANY INCORPORATED AND
FUNCTIONING UNDER THE LAWS OF
GERMANY HAVING ITS OFFICE AT
KREUZGRUNDWEG 1
36100 PETERSBURG, GERMANY.   ... RESPONDENT

(BY SRI.TEJAS, ADV. FOR M/S DUA ASSOCIATES, ADV. )


   THIS APPEAL IS FILED UNDER SECTION 13(1-A) OF
THE COMMERCIAL COURTS ACT, 2015 PRAYING TO
SET ASIDE THE JUDGMENT AND DECREE DATED
07.08.2019 PASSED BY THE LXXXII ADDL. CITY CIVIL
AND SESSIONS JUDGE, BENGALURU (CCH 83) IN
COMMERCIAL O.S. No.6700/2003 TO THE EXTENT OF
THE      DECREE       IN     FAVOUR   OF     THE
PLAINTIFF/RESPONDENT ENTITLING THE RESPONDENT
TO RECOVER A SUM OF DM 414,432.80 (EURO
211,896.13) (Rs.1,08,06,702.63) TOWARDS FREIGHT
COST OF RE-EXPORT OF GOODS AND SUM OF DM
213,325.1 (EURO 109,071.38) (RS. 55,62,640.03)
TOWARDS BALANCE CLAIM AMOUNT OF ADMITTED
SUM OF DM 680,000.00 WITH FUTURE INTEREST AT
8.5% P.A. FROM THE DATE OF SUIT TILL REALISATION
OF AMOUNT FROM THE APPELLANTS HEREIN AND ETC.

    THIS APPEAL BEING HEARD AND RESERVED ON
29TH NOVEMBER, 2021 AND COMING ON FOR
PRONOUNCEMENT OF JUDGMENT THIS DAY, ANANT
RAMANATH HEGDE J., DELIVERED THE FOLLOWING:
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                      JUDGMENT

In this appeal the challenge by the defendants is to

the part of the judgment and decree dated 07.08.2019

passed in Comm.O.S.No.6700/2003 on the file of the

LXXXII Addl. City Civil & Sessions Judge, Bengaluru

holding the defendants jointly and severally liable to pay

a sum DM 414,432.80 (EURO 211,896.13)

(Rs.1,08,06,702.63) along with interest @8.5% p.a.

2. The parties to this proceeding are referred to as

per their ranking in the original suit.

3. Facts in brief:

Plaintiff is a Company incorporated in Germany.

The 1st defendant is a partnership firm registered in India

and the 2nd and 3rd defendants are its partners. The

quality and colour of some consignment of home

furnishing products supplied to the plaintiff by the

defendants, did not conform to the specifications of the

plaintiff. This led to the dispute. After many discussions a

settlement was arrived at wherein the defendants agreed

to offer discount of DM 6,80,000.00 to the plaintiff to

compensate for the defective materials supplied. The

defendants were required to pay the said sum in 5

monthly equal installments commencing from March

2001. In addition to this, the plaintiff further made a claim

that it has supplied some raw materials to the defendants,

to expedite the delivery of products to the plaintiff and

claimed that defendants have not the paid price of said

raw materials. It is the further case of the plaintiff that

defective goods supplied by the defendants were re-

exported to the defendants in September 2001 and the

freight charges are to be borne by the defendants and

defendants failed to repay the said charges.

4. The demand notice sent by the plaintiff was not

answered by the defendants. The plaintiff sued the

defendants for recovery of Rs.3,86,52,156.42 (Euro

757,885.42) (DM 184,265,169). The suit was registered as

O.S. No.6700/2003 and on establishment of Commercial

Court, same was renumbered as Com.O.S. No.6700/2013.

5. The claim of the plaintiff can be classified under

three different heads:

(a) Towards the cost of re-export of defective goods to the

defendants amounting to Rs.1,08,06,702.63;

(b) Towards balance due in respect of discount agreed to

be paid by the defendants on defective materials supplied,

amounting to Rs.55,62,640.03;

(c) Towards cost of curtain rings, curtain tapes and

sticker amounting to Rs.1,45,16,648.67.

6. The claims (a) and (b) referred above are granted

by the Commercial Court. The claim (c) referred above is

rejected. The said rejection is not called in question by

the plaintiff. To the said extent, judgment and decree of

the Commercial Court has attained finality.

7. The defendants have questioned the judgment

and decree in respect of claims (a) and (b) referred

above.

8. It is also relevant to state that the suit was filed

invoking Order XXXVII of Code of Civil Procedure. In the

said suit, the defendants applied for a leave to contest the

matter. Unconditional leave was granted to defend the

suit. The plaintiff questioned this order granting

unconditional leave to contest the matter. The said

petition viz. CRP No.460/2005 was allowed by this court

and the defendants were put to terms and were directed

to deposit 55% of the admitted liability. The challenge to

the order in CRP No.460/2005, was made in Civil Appeal

No. 6046/2008 before the Supreme Court and same was

dismissed by Judgment dated 03.10.2008. The defendants

have deposited Rs.90,03,200 on 16.01.2009 before the

Commercial Court in terms of order passed in CRP

No.460/2005. The claim of the plaintiff which is in

dispute in this appeal is based on Ex.P.4, P16, Ex.P.6 and

Ex.P.7. Exhibit P4 and Ex.P16 are undisputed documents.

9. The defendants contested the suit and disowned

the liability under Ex.P.6 and Ex.P.7. The defendants

would also contend that liability under Ex.P.4 and Ex.P.16

cannot be enforced as the said liability is admitted by the

defendants subject to the condition that the plaintiff

would continue business relationship with the defendants.

Though the defendants admitted to offer DM 6,80,000.00

as discount for defective goods supplied by them and

though they paid DM 4,66,674.19 towards partial

discharge of liability admitted by them, the balance

amount of DM 2,13,325.10 was not paid by them on the

ground that the plaintiff did not continue the business

relationship with the defendants. Thus, the defendants

have disowned the liability of DM 6,80,000.00 admitted

under Ex.P.4 and Ex.P.16.

10. The defendants also contended that Ex.P.6

under which the plaintiff is seeking a decree to recover

cost of re-export of defective goods is not executed by the

defendants. Even execution of Ex. P.7 which reiterates the

liability under Ex.P.4 is also denied. The defendants

would further urge that Ex.P.6 and Ex.P.7 are concocted.

As an alternative plea, the defendants further contended

that even if Ex.P.6 and Ex.P.7 are held to be the

documents executed by the defendants, then also the

liability cannot exceed beyond DM 6,80,000.00 i.e. what is

contained in Ex.P.4 and Ex.P.16. According to the

defendants, the liability mentioned in Ex.P.6 and Ex.P.7 is

already captured under Ex.P.4 and Ex.P.16.

11. In this appeal the defendants have also

questioned the interest and the cost awarded by the

Commercial Court.

12. The Commercial Court framed the following

issues:

(1) Whether the defendants prove that they had agreed to pay DM 6,80,000.00 only on the assurance of the plaintiff to continue to place future orders for home furnishing products?

(2) Whether defendants further prove that as a good gesture and with assurance of the plaintiff to comply such commitments made payments in sum of DM 466,674.90 by October 2001?

(3) Whether the defendants further prove that as the very plaintiff committed breach of commitment, they are justified in not paying the balance?

(4) What decree or order?

13. We have heard the learned counsel appearing for

the parties and in terms of the contentions raised at the

bar, following points arise for consideration:

(i) Whether the defendants/appellants are able to

establish that Ex.P.6 and Ex.P.7 are forged and

concocted and no liability flows from the said

documents?

(ii) Whether the defendants/appellants are able to

establish that claim made under Ex.P.6 is

covered in terms of settlement under Ex.P.4?

(iii) Whether the plaintiff is entitled to reimbursement

of freight charges incurred towards re-export of

defective goods?

(iv) Whether the admission of liability by the

defendants in terms of Ex.P.4 is subject to rider

that the plaintiff should continue business

relationship with the defendants?

(v) Whether the interest @ 8.5% p.a. awarded by the

Commercial Court is excessive?

Discussion on Point No.(i)

14. To substantiate the claim that the documents

at Ex.P.6 and Ex.P.7 are concocted, at the instance of

defendants, expert's opinion was sought before the

Commercial Court. Handwriting expert gave her report

expressing inability to give her opinion on the disputed

signatures marked at Ex.P.6a and Ex.P.7a. The

defendants who were required to establish the plea of

forgery, did not take any further steps to secure a definite

opinion of the handwriting expert on the disputed

signatures. The witness-DW1 examined on behalf of

defendants, has admitted that Ex.P.6 and Ex.P.7 is also

written on the letter head of the 1st defendant. There is no

explanation as to how the letter head of the 1st defendant

reached the plaintiff providing an occasion to the plaintiff

to create the documents at Ex.P.6 and Ex.P.7. Thus, the

Commercial Court has come to the conclusion that the

documents are not forged. The authenticity of seal of

defendant no.1, appearing on Ex.P.6 and Ex.P.7 is not

disputed. In the absence of any other materials to hold

that the documents at Ex.P6 and P7 are concocted, we are

not persuaded to take a different view on the basis of

materials available on record on the plea of forgery raised

by the defendants. Thus, point No.(i) is answered in the

Negative.

DISCUSSION ON POINTS (ii) & (iii)

15. Plaintiff's claim to recover cost of re export of

defective goods is based on Ex.P.6 dated 20.11.2001. This

document is in the letter head of defendant No.1-firm.

This document is the letter addressed by the defendants

agreeing to pay DM 414,432.80 along with interest till

December 2002. The learned counsel for the defendants

has invited the attention of the Court to the statements

made in the cross examination of PW1 at paragraphs 32 to

38. Based on the said oral evidence, learned counsel for

the defendants would contend that Ex.P6 contains the

claim made under Ex.P4. On careful analysis of the

statement found in Ex.P.4, which is explicit as to the

nature and scope of settlement, it can be held that the

statements found in paragraphs 32 to 38 are not

conclusive to disbelieve the contents of Ex.P6 which bears

the seal and signature of the authorised signatory of the

1st defendant that too on the letter head of the 1st

defendant.

16. Claim based on Ex.P6 dated 20-11-2001 is

relating to freight charges of re-export of defective

materials. The defendants have raised the defence that all

claims are agreed to be settled in terms of Ex.P4 dated 29-

10-2001 and P16 dated 22-02-2001. Ex.P.4 in explicit

terms says that the liability of DM 6,80,000.00 is towards

the supply of defective goods. In fact, it is relating to

discount offered by the defendants, to compensate for the

loss on account of supply of defective products. In Ex.P4,

on the top of the tabular column, the nature of settlement

is explained. This explanation on the top of the tabular

column refers to 'discount' offered by the defendants. The

seal found in Ex.P.4 put by the plaintiff reads as under:

"Accepted for full and final settlement of above claim".

(Emphasis supplied)

In the document at Ex.P16, dated 20.02.2001, the

defendants have been asked by the plaintiff to pay

DM.6,80,000.00 in five monthly installments starting from

March 2001. This letter was sent from Germany and

signature of authorised signatory of defendant no.1 is put

on Ex.P16 along with the seal of defendant no.1. This

document also makes it abundantly clear that the plaintiff

would retain the defective goods. From Ex.P.4 and P16,

both being undisputed documents, one can safely

conclude that the settlement arrived at by the parties is

relating to discount payable to the plaintiff on the

defective goods supplied by the defendants. It also

emerges from reading of Ex.P16 that the parties agreed

that plaintiff would retain the defective goods. However the

suit filed by the plaintiff also includes a claim relating to

cost of re export of the defective materials which is said to

have been returned to the defendants in September 2001.

17. This being the claim, the question that needs to

be answered is, whether the plaintiff agreed to return the

defective goods at its own cost to the defendants?

18. It is seen from the records that the defendants

in the written statement have taken a stand that the

defective goods are not sent back to the defendants.

However in the cross examination, the DW1 has admitted

that defective goods are returned to the defendants by the

plaintiff and are sold by the defendants. This leads to

the inevitable inference that the original settlement in

terms of Ex.P16 dated 22-02-2001, which allowed the

plaintiff to retain the defective goods is modified in part

and later the parties agreed on return of goods to the

defendants. However, there is no written contract in this

regard. This settlement relating to return of the defective

goods has to be inferred from the attendant circumstances

and from Ex.P.6. This being the position, the next

question that needs to be answered is, who has to bear

the cost of re-export. The defective goods are returned

because they were defective and not as per the

specifications of the plaintiff. Since the goods supplied by

the defendants were defective, the cost of re-export has to

be borne by the defendants. The defendants have received

the defective goods and sold it. In the circumstance of the

case, asking the plaintiff to bear the cost of re export of

defective goods sounds highly illogical. It is like rewarding

the defendants for their the own fault. Having supplied

the defective goods, the defendants cannot shirk the

liability to bear the cost of re-export. If there were to be

an express contract, fastening the liability of re-export on

the plaintiff, then the plaintiff had to bear the cost of re-

export. The defendants have not raised plea of any such

contract. There is no stand in the written statement

explaining as to how, under what circumstances and on

what terms defendants agreed to receive the defective

goods which was once agreed to be retained by the

plaintiffs. The act of plaintiff returning defective goods to

the defendants cannot be termed as a gratuitous act on

the part of the plaintiff in the absence such plea by the

defendants. Instead of offering an acceptable explanation

as to why and on what terms the defendants have received

defective goods from the plaintiff, DW2-the partner of

defendant No.1 has not offered any explanation and has

tried to give an impression that he is unaware of goods

being returned. This stand of DW2 who is the partner of

defendant No.1 does not come to the rescue of the

defendants. DW1 on the other hand has admitted that

they have received the defective goods and same is sold by

them. Under the circumstances, there is no difficulty in

holding that the cost of re-export has to be borne by the

defendants. Thus, Point No.(ii) is answered in the negative

and Point No.(iii) is answered in the affirmative.

DISCUSSION ON POINT NO.(iv)

19. Coming to point No.(iv), referred above it is to

be noticed that the defendants though have taken a

contention that Ex.P.4 is executed subject to a rider that

the plaintiff would continue the business relationship with

the defendants, no such clause is found in any of the

documents placed before the Court. No admission to this

effect is elicited in cross examination of witness examined

on behalf of the plaintiff. There is no other circumstance

forthcoming from the evidence on record to support this

contention of the defendants. Under the circumstances,

point No.(iv) referred above is also answered against the

defendants and in favour of the plaintiff.

DISCUSSION ON POINT No.(v):

20. The learned counsel for the defendants would

urge that suit which is instituted in the year 2003 has

been dragged on for many years on account of non-co-

operation by the plaintiff and as such, would contend that

the plaintiff is not entitled to interest. He would also urge

that there is no clause in the agreement for payment of

interest. Alternatively, he would contend that interest @

8.5% p.a. is on higher side.

21. Section 3 of the Interest Act, 1978 and Section

34 of the Code of Civil Procedure would confer the powers

on the Court to award appropriate interest depending

upon the facts and circumstances of the case. The suit

was filed in the year 2003 when the interest regime was

much higher than 8.5% p.a. awarded by the Commercial

Court. No doubt in recent years the interest rates have

come down below 8.5% p.a. Considering the fact that the

transaction is a commercial transaction and considering

the fact that the dispute arose on account of defective

supply of goods, we deem that interest awarded by the

Commercial Court is appropriate in the facts and

circumstances of the case and does not call for

interference in exercise of powers under the appellate

jurisdiction. This view is also supported in terms of the

ratio laid down by the Hon'ble Supreme Court, in the

matter of ADITYA MASS COMMUNICATIONS PVT. LTD.

Vs APSRTC (AIR 2003 SC 3411). Hence, Point (v) is

answered in the negative.

OTHER CONTENTIONS RAISED BY THE DEFENDANTS:

22. The learned counsel appearing for the

defendants would further urge that the Commercial Court

erred in relying on the observations made in proceeding in

CRP No.460/2005 which is confirmed by the Supreme

Court in Civil Appeal No.6046/2008 to fasten the liability

on the defendants. This contention of the learned counsel

for the defendants has to be accepted. The Commercial

court could not have held that the plaintiff's case is

established in view of the observations made in above

referred CRP. It is to be noted that the CRP No.460/2005

was filed questioning the interlocutory order passed in the

suit on an application under Order XXXVII of Code of Civil

Procedure. It is settled position of law that any

observations made in the proceeding on an interlocutory

applications do not bind the Court while deciding the case

on merits. However, it is to be noted that the said reason

assigned by the Commercial Court referring to

observations made in CRP No.460/2005 is not the only

reason for the Commercial Court to uphold the claim of

the plaintiff. Though, we disagree with the said reasoning

of the Commercial Court, there is no scope to interfere

with the final outcome of the suit, as judgment and decree

under appeal is sustainable on four other reasons

assigned by the Commercial Court.

23. Learned counsel for the defendants also invited

our attention to the notice at Ex.P.8 which is not a

complete notice inasmuch as one page comprising

paragraphs 9 to 13 is missing. He would further point out

that reference to Ex.P.6 and Ex.P.7 in Ex.P.8 - notice is

not found and Commercial Court has wrongly observed

that there is a reference to Ex.P.6 and Ex.P.7 in the notice.

The Commercial Court further proceeds on the premise

that the reply is not issued to the said notice and as such

adverse inference has to be drawn against the defendants

to the effect that defendants have admitted the claim of

the plaintiff. Though, this Court is not in agreement with

the aforesaid observation, no interference with the

impugned judgment is warranted on this ground as the

Commercial Court has accepted the claim of the plaintiff

on the basis of other valid reasons discussed in the

impugned judgment.

24. The learned counsel for the plaintiff would also

contend that the Commercial Court though took note of

the fact that no specific issue relating to freight charges of

defective goods was framed, the Commercial Court has

proceeded to give a finding against the appellants without

affording opportunity to lead evidence on the said issue.

25. We have gone through the judgment of the

Commercial Court. The Commercial Court has given

detailed reasons while answering Issue No.4 as to why

there is no need to frame a specific issue, with regard to

the payment of freight charges in respect of the defective

goods. It is apparent from the records that the parties

went to the trial with clear understanding of what the

dispute is all about and have led evidence on the disputed

points. Thus, no prejudice is caused to the appellants in

not framing a specific issue and not allowing further

evidence on the said issue. There is no scope for

interference in the appeal

26. Accordingly, the following:

ORDER

(i) The impugned Judgment and Decree dated

07.08.2019 passed by the LXXXII Additional City

Civil & Sessions Judge, Bengaluru City (CCH.83)

in Com.O.S.No.6700/2003 is confirmed for the

reasons assigned above and consequently, the

appeal is dismissed.

(ii) The amount in deposit along with accrued

interest, pursuant to the interim order dated

24.10.2019, passed in this appeal shall be

released in favour of plaintiff-respondent after

due verification.

(iii) The amount of Rs.90,03,200/- deposited in the

original proceeding in terms of order passed in

CRP No.460/2005 along with interest shall be

released in favour of plaintiff-respondent after

due verification.

(iv) The appellants shall pay the balance decreetal

amount in terms of the decree of this Court

within a period of two months from the date of

this judgment.

(v) The cost of this appeal payable to the plaintiff-

respondent is on defendants-appellants.

Sd/-

JUDGE

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JUDGE

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