H Sripad vs Karnataka State Co-Operative
2021 Latest Caselaw 1609 Kant

                            1




            IN THE HIGH COU RT OF KARNAT AKA
                    DHARWAD B ENCH


       DATED THIS THE 24 T H DAY OF FEB UARY, 2021


                        PRESENT


 THE HON'B LE MR. JU ST ICE SREENIV AS HARISH KUMAR

                          AND

          THE HON'B LE MR. JU ST ICE P.N.DESAI


         REGU LAR FIRST A PPEAL NO.100021/ 2014

B ETWEEN:

H. SRIPAD
AGE: 37 YEARS, OCC: PROPR IET OR,
SNEHA AGRO L IMIT ED, KU SHTAGI,
R/O. KU SHTAGI, TQ: KUSHTAGI
DIST : KOP PAL.

                                          ...APPELLANT .
(B Y SHRI SAB EEL AHMED, ADVOCATE, FOR
SHRI A S PATIL, ADVOCATE.)


AND:

KARNATAKA STATE CO-OPERAT IVE
MARKET ING FEDERATION LTD
B engaluru, B RANCH: GANGAVATHI
REP. B Y ITS MANAGER
SHRI K B ASAVRAJAPPA S/O. THIPPESWAMI
AGE: 62 YEARS, R/O. GANGAVATHI,
TQ: GANGAVATHI, DIST : KOPPA L.

                                           RESPONDENT
(B Y SHRI SU NIL S. DESAI, ADVOCATE.)
                                  2




     THIS REGU LAR F IRST A PP EAL IS FILED UNDER
SECTION 96 OF THE CODE OF CIV IL PROCEDU RE,
PRAYIN G TO SET ASIDE T HE IMPUGNED JU DGMENT AND
DECREE DATED 19. 7.2013, PASS ED BY THE SEN IOR
CIVIL JU DGE, GANGAVATHI, IN O.S.NO.41/ 2008, ETC.,.

     RESERVED FOR JU DGMENT ON                  : 16.1.2021.

     JU DGMENT PRONOU NCED ON                   : 24.2.2021.

     THIS A PPEAL HAV ING B EEN HEARD AND RESERVED
FOR JUDGMENT, COMING ON FOR PRON OU NCEMENT OF
JUDGMENT THIS DAY , SRI P.N.DESAI, J, DELIVERED T HE
FOLL OWING:

                            JUDGMENT

This appeal arises out of the judgment and

decree d ated 19.7.2013, p assed by the Senior Civil

Judge, Gang avathi, in O.S.No.41/2008, decreeing

the suit in p art.

2. The appellant was the defendant and

respondent was the plaintiff before the trial Court.

They will b e referred as p er their respective ranks

before the trial Court.

3. The averments of the plain, in b rief, are as

follows:

a) That the plaintiff is a Co-operative

Marketing Federation called Karnataka State

Co-operative Marketing Fed eration Limited. It has

branches throughout Karnataka. The plaintiff is one

of the branches situate at Gang avathi taluka. It is

further stated that the plaintiff carries on the

business of purchase and sale of ag ricultural

produce, farmers req uisites for the memb ers of the

Federation. The Federation also procures and

distrib utes farmers requirements such as chemical

fertilizers, seeds, pesticides, irrigation equipments,

green house, iron and steel extracts and all other

domestic requirements for the p urpose of sale to its

members.

b) It is the plea of the plaintiff that

defend ant is a p rop rietor trad ing concern dealing in

fertilizers and pesticid es at Kushtag i under the name

and style 'M/s.Sneha Ag ro Limited '. The d efendant is

not a member of plaintiff Federation. As p er the

circular issued by Head Office of the Fed eration, the

fertilizers and pesticid es can b e supplied to non

member trad ers ag ainst d emand drafts or cash or

ag ainst b ank guarantee. The d efendant along with

other 12 d ealers mad e cred it purchases from the

plaintiff Federation of Gang avathi branch in the year

2002 to 2004 by colluding with the then branch

manager M.G.Shrinivas, store keep er/godown

keep er, M/s.M.S.Honnad and D.Shamarao. They have

purchased fertilizers and pesticides. In this reg ard

they made p ayment occasionally. The p laintiff found

that its manag er, godown keep er and accountant

were involved in mismanagement and

misapp ropriation. The manag er was suspended and

the other two employees were dismissed. In this

reg ard plaintiff filed complaint ag ainst the said

officials before Gang avathi p olice, which was

registered in Crime No.109/2005. The plaintiff came

to know illeg al purchase of fertilizers in the month of

May 2006.

c) In this reg ard plaintiff Federation issued a

leg al notice on 11.8.2008 calling upon the d efendant

to pay the amount due. As the defend ant did not

respond or make any p ayment, this suit came to be

filed for recovery of Rs.25,68,183/- with interest at

the rate of 18% p.a.

4. The defence of the defend ant is one of

total denial of the plaint averments. The d efendant

has d enied purchase of any goods by the plaintiff or

signing any delivery challans. The defend ant

contend ed that suit is b arred by law of limitation. It

is further contended that the defend ant is in no way

concerned with misap propriation and

mismanag ement of the plaintiff Federation officials.

The plaintiff Fed eration has filed the suit to harass

the defendant.

5. The trial Court framed 7 issues. The

plaintiff got examined one of its managers by name

K.Basavarajapp a and examined two more witnesses

K.Manjunath and G.Shrinivas as PW.2 and PW.3. The

plaintiff got marked 32 documents as Exs.P.1 to

P.32. On behalf of the defendant, defend ant himself

got examined as DW.1. No documents were produced

from defend ant's side.

6. After hearing the arg uments, the learned

trial Judg e decreed the suit for the amount claimed,

but awarded future interest at the rate of 11% p.a.

Aggrieved by the same, this app eal is preferred .

7. We heard the arguments advanced by Shri

Sab eel Ahmed, learned counsel for the app ellant and

Shri Sunil Desai, learned counsel for the respond ent.

8. The learned counsel for the app ellant

arg ued that, as per the plaintiff Federation bye-laws

and circulars, there was no scop e for any transaction

or business with the p roprietary concern or with

individual trad ers who are not memb ers of the

Federation. The learned counsel further argued that

PW.3 Shrinivas, a susp end ed emp loyee of the

plaintiff on the alleg ation of misappropriation, is not

a trustworthy witness. The plaintiff cannot take

shelter under their emp loyee, ag ainst whom they

filed criminal cases, and who was suspend ed from

service. The delivery notes Exs.P.13 to P.26 do not

contain any d escrip tion of amount, bill number or

quantity said to have been supplied in favour of the

defend ant. The defendant has sp ecifically d enied the

signatures at Exs.P.13(a)(ii) to Ex.P.26(a)(ii) on

Exs.P.13 to P.26 as his signatures. No evidence is

led to show that they are the signatures of the

defend ant. The learned counsel further argued that

as per the plaintiff, the transaction is of the year

2002 to 2004. According to plaintiff, mismanag ement

and misapprop riation of officials came to notice in

the year 2004 itself and they suspended and

dismissed their employees in 2004 itself. But they

contend that the said transaction came to the notice

of the plaintiff from the audit report d ated

31.3.2005. The leg al notice was issued on

11.8.2008. Till then no claim was mad e. Therefore

the suit is b arred by limitation. The auditor was not

examined. The d river of the lorry who delivered the

goods was not examined. Therefore the learned

counsel submits that the trial Court without

app reciating the evid ence p roperly, even though

observed that signature of d efendant was different,

wrongly held that defend ant has signed the delivery

notes which is a p erverse finding. The account

extract is not p roved in accordance with law. No

fraud by defend ant is either plead ed nor p roved . The

finding of the trial Court on limitation is illeg al. With

these contentions, prayed to dismiss the app eal.

9. Ag ainst this, the learned counsel for the

respondent argued that the trial Court has framed

proper issues and has considered all evid ence and

has arrived at a p roper conclusion. The plaintiff

came to know abut the involvement of the defend ant

only in the year 2006 through audit report. Exs.P.13

to P.26 are the delivery notes and Exs.P.27 and P.28

are the acknowledgements. On the other hand, the

suit is filed within three years from the date of

knowledge of audit report. The trial Court has g iven

proper reasons for all the issues and rightly decreed

the suit.

10. From the above, the following points arise

for our consid eration.

              i)         Is the find ing of the trial Court
      that         the      d efendant          purchased           the

fertilizers and p esticid es by executing the delivery note correct?

ii) Has the trial Court erred in arriving at a find ing that the defend ant is due to pay a sum of Rs.25,68,183/- with interest?

iii) Is the trial Court justified in hold ing that the suit is within the period of limitation?

              iv)        Whether       the     findings       of    the
      trial    Court        on     issue       Nos.1    to    6     are

perverse and req uire interference by this Court?

11. The undisputed contentions are that, the

defend ant is not the member of the plaintiff

Federation. The defend ant is a prop rietor trading

concern d ealing with p esticides and fertilizers under

the name and style M/s.Sneha Ag ro Limited,

Kushtagi. PW.3-G.Shrinivas examined on behalf of

the plaintiff was the b ranch manager of plaintiff and

was sub seq uently susp ended and a criminal case was

filed ag ainst him and another for misapprop riation

and mismanag ement. The suit amount claimed by

the plaintiff is of the year 2002 to 2004. Legal notice

came to b e issued on 11.8.2008 and suit was filed

on 3.10.2008.

12. The learned trial Judge while answering

the issues held that on the b asis of the documentary

evid ence produced by plaintiff, the goods were

delivered to the defend ant and his sub ag ents as per

Exs.P.13 to P.26 delivery notes. They bear the

signature of the defendant for having received goods

mentioned therein. The trial Judge also held that the

evid ence of PW.3-G.Shrinivas, ag ainst whom

alleg ations are mad e by the plaintiff Fed eration,

supported the plaintiff's case. Believing his evid ence,

it is held that the signatures of defendant on

Exs.P.13 to P.26 and Exs.P.27 and P.28 are that of

defend ant d espite observing that signatures on

Exs.P.13 to P.26, and P.27 and P.28 are in different

languag e. This conclusion was d rawn after comparing

the ad mitted signatures of the defend ant. Further

the trial Court held that the defend ant, with a

fraudulent intention, started chang ing the

signatures, and held that defend ant is liable to pay

the suit amount.

13. Reg arding the issue of limitation, the trial

Judge held that the plaintiff Fed eration noticed the

shortag e of goods and funds only in May 2006. The

suit from the date of knowledge of detection of

misapp ropriation and shortag e of goods was within

the p eriod of limitation as per section 17 of the

Limitation Act and answered that issue in favour of

the plaintiff.

POINT No s.1 and 2:

14. The initial b urden to p rove that the

defend ant was in due a sum of Rs.14,27,836/- in

resp ect of purchase of fertilizers and pesticides from

the year 2002 to 2004 is on the plaintiff.

15. In ord er to p rove that defendant has

purchased fertilizers and p esticides on cred it b asis,

plaintiff got examined its b ranch manager as PW.1.

In this examination-in-chief he has reiterated the

plaint averments.

16. It is the case of the plaintiff that the

higher authorities smelt some mismanag ement and

came to know that G.Shrinivas was involved and he

was susp ended in the year 2004. Then in the further

enquiry they came to know that Sonnad , godown

keep er and accountant Shamarao also have their

hands in misapp rop riation and they were d ismissed

from service. For redressal of plaintiff's loss, a

criminal case was filed by the Fed eration before

Gangavathi police, which was registered in Crime

No.109/2005. It is their case that the defend ant and

other 10 persons have misled the Federation and

they were involved and had indulged in illegal

purchase of materials in collusion with its 3

employees. This was informed to them by the said

Shrinivas. This is the evid ence of plaintiff.

17. On bare read ing of the plaint averments

and the evid ence of PW.1, it is evid ent that the

employees of the said Federation caused loss to the

plaintiff. For red ressal of the loss, a criminal case

was also filed against the said employees. Simp ly

stating that this defend ant is also involved in illeg al

purchase of material in collusion with the employees,

without any material, will not help the plaintiff. What

is illeg al p urchase is not stated either in the plaint

or in the evidence b efore the Court. Either in the

plaint or in the written statement, there is no

plead ing reg ard ing particulars of fraud alleged to

have been p layed by the defendant. On the other

hand, it is clearly plead ed in p arag rap h No.4 of the

plaint that the defendant made a purchase of

fertilizers and pesticid es from the year 2002 to 2004

on credit b asis and defend ant made occasional

payment. However a sum of Rs.25,68,183/- is due to

the plaintiff Fed eration by the defendant. If that is

the case, then the plaintiff has to prod uce leg ally

ad missible documents to show before the Court,

when the d efendant purchased on credit b asis, how

and when the p ayment is mad e.

18. The p laintiff has produced 14 delivery

notes copies, which are marked as Exs.P.13 to P.26

and their copies are marked as Ex.P.13(a) to P26(a).

They are marked subject to objection by the

defend ant. In the cross-examination PW.1 has stated

that the defendant had earlier made purchase

transaction in cash. PW.1 has admitted that as p er

the plaintiff's record s, d efendant has not mad e any

cred it business with them. He has further stated that

there are no records or any ag reement or consent

letter by the d efend ant or permission from their

Head Office to store the materials in defend ant firm

from the year 2002 to 2004. He has also ad mitted

that he cannot say which type of stock and what

quantity of goods were stored in the d efend ant firm.

He has clearly ad mitted that they will not store their

materials with private merchants without the

permission. He has also ad mitted that there are no

godowns at Kushtag i b elonging to their Fed eration.

But there is a State Government warehouse at

Kushtagi. They also give preference to the State

Government or Central Government warehouses. He

has clearly stated that they have got a book wherein

entry is mad e reg arding storing the goods with

defend ant. But plaintiff has not produced that b ook

or register or any documents in this reg ard . PW.1

has stated that sometimes the defend ant himself

take the goods and sometimes plaintiff d eliver the

goods to the d efend ant. But whenever they deliver

goods, they take receipt for the same and make an

entry in this regard and take sig nature on delivery

note. PW.1 has clearly admitted that the goods

mentioned in Exs.P.14, 16, 19, 20, 24, 25 are

delivered from their warehouse. But no documents

were p roduced . PW.1 has ad mitted that in Exs.P.13

to P.26, the number of b ags, the pag e numb er of

warehouse stock reg ister, KST numb er, bill number,

date are not entered.

19. PW.1 has further stated that at the

instance of d efend ant the goods were supplied to

different firms. But PW.1 has also ad mitted that the

goods were not kep t with the defend ant. So, the

plaintiff now cannot chang e his version. It is

specifically d enied by the defend ant that the dealers

shown in d elivery notes are not at all his ag ents or

dealers or he has signed on any d elivery notes.

20. We have perused the copies of Ex.P.13 to

P.26. They are all d ated 30.1.2004. In the said

documents, bill numb er is not mentioned. The

column 'from which godown the material were

disp atched' is not forthcoming. The alleged signature

of defend ant is appearing in Eng lish lang uag e. None

of the dealers of different ag ro centers or fertilizer

shops whose names are mentioned, was neither

examined nor any documents were produced to show

whether any goods were delivered to them by the

plaintiff or by any manufacturer on behalf of the

plaintiff. The d elivery letters are all p ertaining to

Gangavathi b ranch. PW.1 does not know from which

godown these g oods were delivered. There is no

signature or date as to when goods mentioned in it

were received. There is no signature of d river of

goods vehicle or vehicle number on the said

documents thoug h there is a column in this reg ard.

Absolutely there is no evidence to show that

defend ant purchased fertilizers and pesticid es from

the plaintiff. Not a single document prior to 2004

was p roduced to show that defendant purchased any

fertilizers and p esticid es from the plaintiff either on

cred it b asis or by p aying cash during the p eriod

2002 to 2004.

21. It is pertinent to note that defendant has

denied his sig nature on postal acknowledgement,

and also on Exs.P.13 to P.28. PW.1 and PW.2 have

not seen the signature of defend ant as they were not

working during the disputed period. The d efend ant

objected to marking those documents. PW.1 also

ad mits that there is a difference in the signature on

Ex.P.10, the postal acknowledgement, Ex.P.11

signature is also different. The signatures on

Exs.P.27, P.28 and Exs.P.13 to P.26 are also totally

different. No explanation is g iven by PW.1 to PW.3

as to difference in the signatures.

22. The learned trial Judge in the judgment

observed that the signature on Ex.P.27 and P.28 and

P.13 to P.26 are when comp ared , there is a lot of

difference b etween them. But the trial Judge has

observed without there being any leg ally admissible

evid ence that the d efend ant with a fraudulent

intention started changing the signature. The trial

Judge has considered the arg ument of the plaintiff as

to why the plaintiff would file a suit ag ainst

defend ant where there is no enmity. Such a

presump tion has no leg al basis at all. There is not a

single document to show that defend ant used to sign

in English language. The signatures on the summons

issued by the trial Court, vakalat, written statement,

deposition, and all the documents filed before the

Court on b ehalf of the defend ant, are in Kannad a

languag e. Therefore, there is no basis for the

learned trial Jud ge to arrive at a finding that the

defend ant used to fraud ulently chang e his sig nature.

On the other hand, on comparing the admitted

signature of d efend ant with the disputed sig nature,

it is evid ent that they are in different languages,

they do not app ear to b e of the same person. The

plaintiff and his witnesses admit that the d efend ant

had earlier also mad e certain transaction with them.

Whether he had signed at any time in Kannada

languag e is not forthcoming. Their signature on

other documents except Ex.P.13 does not b ear any

date when the goods were received. On Ex.P.13, the

signature of the person who received goods bears

the d ate as 2.7.2004. PW.1 in cross-examination

ad mitted that he was dismissed from service by the

plaintiff and he worked with the plaintiff from August

2001 to 31.3.2004. Then how he could id entify the

signature on Ex.P.13 which is dated 2.7.2004.

23. It is settled principle of law that if any

document is alleged to be signed or written wholly or

in part by any person, the signature or the

handwriting so much of the document as is alleged

to b e in that p erson's handwriting must be p roved to

be in his handwriting as per section 67 of the Ind ian

Evidence Act. There are methods of proof of

signature and handwriting (1) by calling the person

who signed or wrote the document; (2) by calling

the person in whose presence the document was

signed and written; (3) by calling an expert; (4) by

calling the person who is acquainted with the

handwriting of the persons by whom the document

was purported to be signed or written; (5) by the

ad mission of the person who was alleg ed to have

signed or written; (6) by comp arison, of the

signature on the document with the admitted or

proved signature of the p erson who purported to

have sig ned or written the document; and (7) by

other circumstantial evid ence. In view of the above,

if the evid ence of plaintiff is considered , it is evid ent

that no exp ert evidence is adduced by the p laintiff to

prove the sig nature of the defend ant. No

circumstantial evid ence is placed before the Court.

Defend ant has not admitted his sig nature. On

comp arison of ad mitted with the disputed signature,

the trial Court came to a conclusion that they are

different. The only person the plaintiff relies is PW.3

who has identified the signatures on delivery notes

as that of defend ant. But as already stated, delivery

notes themselves are not proved and contents of

those documents are not p roved and when plaintiff

ad mittedly makes alleg ation of mismanag ement and

misapp ropriation by the PW.3 and dismissed him

from service, and filed a criminal case ag ainst him,

then under such circumstances it is not prud ent to

rely on tainted evid ence of PW.3 who himself was

guilty of misapp rop riation to p rove the defend ant's

signature. The possibility of plaintiff collud ing with

PW.3 to avoid civil and criminal liability, if any, on

PW.3 is now planted by the plaintiff to say before

the Court that the signatures appearing on Exs.P.13

to P.28 when they have iota of evid ence to p rove

their case.

24. It is contend ed by the plaintiff that on

more than one occasion the d efend ant has confirmed

the transaction with the p laintiff by issuing DDs,

cheques and p ayment by cash in favour of the

plaintiff. Defend ant has issued the confirmation

letter for having purchased the goods from plaintiff

and defend ant agreed to make payment of

outstanding dues towards the plaintiff. The plaintiff

mainly relies on Ex.P.7 statement showing details of

fertilizers and p esticid es supplied but not b illed as

on 31.7.2008. In column 'DD number', totally 15

different ag ro ag encies names are shown. It is

mentioned that under Sneha Agro Limited, stock

were supplied to these 15 ag encies, fertilizer shops

and ag ro centers. In column 'Date', 30.1.2004 is

shown ag ainst all the 15 names. The 'quantity',

'rate' and 'value' of the goods is mentioned . In 'less

cred it balance' column, certain amount is shown and

balance due is shown.

25. The said Ex.P.7 statement does not

disclose as to who p rep ared this statement, what is

the b asis for the said statement, what is the d ate of

statement, where is the original records or any

documents which could reflect from where these

fig ures are mentioned. Nobody has certified as to

authenticity or leg al admissibility of the contents

mentioned in Ex.P.7. There is some seal of b ranch

Manag er, KSCMF Ltd., Gangavathi and one

K.Ramaiah has signed it. He has not stated from

where that extract is taken. There is also no

certificate that they are authenticated information or

true statement of any reg isters, stock books, or any

documents maintained in an ordinary course of

business by the p laintiff or its head office. It

app ears, b ased on this Ex.P.7, the plaintiff has filed

the suit. But this document is not admitted by the

defend ant, on the other hand, he has totally denied

any transaction and stated that d efendant never

made any p ayment to the plaintiff. The plaintiff has

not examined the ag ro ag encies, ag ro centers or

fertilizer shops or trad ers, whose names are shown

in Ex.P.7, to show that they have received any such

fertilizers or pesticid es. If at all any p ayment is

made either throug h cheque, or DDs, those

documents could have been produced before the

Court in support of Ex.P.7. No records were produced

to prove the existence of such fertilizer shops or

ag ro centers. Entire statement discloses only one

date of transaction i.e., 30.1.2004. Ex.P.7 does not

bear any date on which it was p rep ared. It does not

bear a certificate required under law or it is

mentioned that it is a true copy or an extract of the

account maintained by the plaintiff in their regular

course of business record s or reg isters. In the

absence of any certification by the comp etent

authority or person, such d ocument has no

evid entiary value.

26. According to PW.1, this statement is in

resp ect of goods supplied and purchased during the

period 2002 to 2004. But in Ex.P.7 no transaction is

shown either of the year 2002 or 2003. All

transactions are shown on 30.1.2004 only. There is

also no evid ence on record to show that the dealers

shown in d elivery notes are either ag ents or dealers

of the defend ant. The defend ant denied Ex.P.7 and

stated that it is created for the purpose of this case.

27. Contrary to his evid ence, PW.3 who is

stated to be the earlier manager has stated that the

goods shown in Exs.P.13 to 26 were not supplied

through their warehouse, but they were supplied

directly from the manufacturer. But he cannot say

when they informed the manufacturers, on which

date they asked them to supply the goods. In this

reg ard PW.3 has stated that there were records in

the office, but they are not produced. Therefore,

absolutely there is no evid ence to show that the

goods were supp lied to the defendant or any dealers

through d efend ant. Therefore we hold that the

plaintiff has failed to prove that the defend ant is due

to pay the amount mentioned in the plaint.

POINT No.3:

28. According to p laintiff the cause of action

arose when they came to know about the

mismanag ement and misap propriation. PW.3

Shrinivas was suspended in the year 2004 only. They

also came to know that one Sonnad , godown keeper

and accountant Shamarao were also involved in

misapp ropriation and they were also dismissed in the

year 2004 itself. A criminal case was filed in the

year 2005 ag ainst all of them. But they have

contend ed that only through audit report they came

to know about the illeg al purchase of fertilizers and

pesticides in the month of May 2006 and as per

section 17 of the Limitation Act the suit is within the

period of limitation.

29. On perusing section 17 of the Limitation

Act, 1963, it is evid ent that, in the case of any suit

or app lication for which a period of limitation is

prescribed by this Act, the suit based upon fraud of

the d efend ant, then the p eriod of limitation shall not

begin to run until the plaintiff discovers the fraud or

could with reasonable d iligence have d iscovered it.

The burden is on the plaintiff to show that by means

of such fraud he was kept away from knowledg e of

his right to sue. The plaint must contain p leading

and there must be evid ence of p articulars of fraud.

The plaintiff must also p rove that defend ant had

knowledge of such fraud . But if there is no pleading

or evid ence to that effect, then the p laintiff cannot

take a shelter under section 17 of the Limitation Act.

30. On perusing the p laint averments,

accord ing to plaintiff, this suit is filed for recovery of

the amount in resp ect of goods delivered to the

defend ant or at the instance of defend ant from the

year 2002 to January 2004. Therefore this suit ought

to have b een filed within three years from the d ate

when the amount became due. Admitted ly this suit

was filed on 3.10.2008 i.e., more than three years

after the amount become due.

31. Therefore, it is evid ent that the plaintiff

had the knowled ge in the year 2004 itself that the

amount was due. On the other hand even they filed a

criminal case ag ainst their employees alleging

cheating and misapp ropriation of their amount

before the police on 15.9.2005 mentioning that they

came to know from the audit report from 1.4.2003 to

31.3.2004 about misapp ropriation by their staff.

PW.1 admitted in the cross-examination that every

year there would be audit. Accord ing to plaintiff, it is

PW.3 and other two officials who have

misapp ropriated the amount and used it for their

personal gain. Then what is the fraud committed by

this defend ant is not forthcoming. Even assuming for

a moment that the defend ant had purchased the

goods from plaintiff, during the years 2002 to 2004,

it is not the plead ing of the plaintiff that defendant

has not paid any amount. On the other hand , in the

cross-examination PW.1 states that from the year

2002 to 2004 defend ant p aid some amount through

demand draft and some through cash. If at all the

defend ant had p aid any such amount, the plaintiff

could have p roduced the documents in this reg ard.

32. On the other hand, according to plaintiff,

it is their officials who committed misapprop riation

and fraud on the plaintiff. Therefore, the plaintiff

cannot take plea of fraud or misapp ropriation by

their staff so as to claim benefit of section 17 of the

Limitation Act to file the suit against the defend ant

after the period prescribed for filing a suit for

recovery of money. Neither in the evid ence nor in

the plaint there is alleg ation that the defend ant has

committed fraud on the p laintiff. It appears that

what could be mad e out from the arguments and the

contention of the plaintiff is that the plaintiff has

made an effort to bring the suit within the p eriod of

limitation on the ground that the defend ant

purchased the goods from the plaintiff without being

a member of plaintiff Federation, ag ainst their

circulars and bye-laws. Those circulars were not at

all p roduced nor proved. On the other hand PW.1

ad mits that defend ant has earlier mad e transaction

with them in cash. If at all the officials of the

plaintiff had sold the goods to third person by

violating their circulars or any bye-laws, then that

will not amount to fraud by a third person. At the

most if it is proved, it is the fraud or

misapp ropriation by the plaintiff's officials, for which

they were alread y dismissed from service and

prosecuted. The plaintiff has to take steps ag ainst

those officials to recover the amount or loss, if any,

as per their audit report in accordance with law.

When the fraud by their officials came to their notice

in the year 2004 itself, they did not file any suit or

take any action to recover the amount. Hence the

suit is clearly time b arred .

POINT No.4:

33. As we have discussed above, the plaintiff

has miserab ly failed to p rove that defend ant or his

dealers, if any, had any transaction with the

plaintiff. Even if it is p roved, then also the suit is

time b arred. The reasoning given by the trial Jud ge

that the plaintiff came to know about the

misapp ropriation only in May 2006 has no b asis at

all. Though the learned trial Judge has ob served that

PW.1's evid ence discloses that they noticed

misapp ropriation in 2004 itself, but that is not

sufficient and it should b e d etected only through

audit report, which was affirmed only on 31.3.2005

is not a proper reasoning or leg al inference. Even if

that date of affirmation is taken into consideration,

then also the suit filed on 3.10.2008 becomes time

barred. The plaintiff has not brought to the notice of

this Court from Ex.P.32 audit report that there was

anything ab out any fraud by the d efend ant. If the

bills are not made by the plaintiff's officials within

the p eriod of limitation, the defendant cannot be

held liab le.

34. In our consid ered view, the trial Judge has

committed grave error in decreeing the suit. The

finding of the trial Judg e is based on presumptions

and assumptions and are without any legal b asis.

The finding of the learned trial Judge is p erverse.

Hence, the judg ment and d ecree needs to b e set

aside. Accordingly we pass the following:

ORDER

Appeal is allowed.

The judgment and decree d ated 19.7.2013,

passed by the Senior Civil Judge, Gang avathi, in

O.S.No.41/2008 is hereby set aside.

The suit of the plaintiff is hereby dismissed with

costs.

Sd/-

JUDGE

Sd/-

JUDGE M rk / -