Bangalore District Court
Nsoft (India) Services Pvt Ltd vs M/S Mahaveer Enterprises on 4 December, 2024
KABC170008172021
IN THE COURT OF LXXXV ADDL. CITY CIVIL & SESSIONS
JUDGE, AT BENGALURU (CCH-86) (Commercial Court)
THIS THE 4TH DAY OF DECEMBER 2024
PRESENT:
SRI.ARJUN. S. MALLUR. B.A.L.LL.B.,
LXXXV ADDL. CITY CIVIL & SESSIONS JUDGE,
BENGALURU.
Com.OS.No.298/2021 C/W O.S.No.17/2022
Com.OS.No.298/2021
BETWEEN:
M/S Mahaveer Enterprises
Office At TD Lane, Gowdanpet Cross,
Opp. Chowdeshwaramma Temple,
Cottonpet, Bengaluru - 560 053.
Rep By Its Proprietor.
Sri. Ratan Kumar K.R.
S/O Ramappa,
Aged About 30 Years.
: PLAINTIFF
(Represented by Sri. N Sharath, Advocate)
AND
Com.OS.No.17/2022 and Com.O.S.No.298/2021
Nsoft India Services Pvt Ltd,
No.580, 30th Main Road,
BSK 3rd Stage,
Bengaluru - 560 085.
Rep By Its Managing Director.
: DEFENDANT
(Represented by Sri. Pradnya Gadre. Advocate)
Date of Institution of the suit 17-04-2021
Nature of the suit (suit on
pronote, suit for declaration &
Possession, Suit for injunction Suit for recovery of money
etc.)
Date of commencement of 16-02-2022
recording of evidence
Date on which judgment was 04-12-2024
pronounced
Total Duration Year/s Month/s Day/s
03 07 17
(ARJUN. S. MALLUR)
LXXXV Addl.City Civil & Sessions Judge,
Bengaluru.
O.S.No.17/2022
BETWEEN:
Nsoft India Services Pvt Ltd,
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Com.OS.No.17/2022 and Com.O.S.No.298/2021
No.580, 30th Main Road,
BSK 3rd Stage,
Bengaluru - 560 085.
Rep By Its Managing Director.
Mrs. Mangala Naagaraj
: PLAINTIFF
(Represented by Sri. Ajay J Nandalike, Advocate)
AND
M/S Mahaveer Enterprises
Office At TD Lane, Gowdanpet Cross,
Opp. Chowdeshwaramma Temple,
Cottonpet, Bengaluru - 560 053.
Rep By Its Proprietor.
Sri. Ratan Kumar K.R.
S/O Ramappa,
Aged About 30 Years.
2:Lokesh Mallikarjun
S/o Mr. Mallikarjun,
Aged about 40 years
R/At No.15/2
1st Cross
Near Anna Kuteera Hotel
Katriguppe Banashankari 3rd Stage
Bangalore - 560085
3:Vishvin Technologies Pvt Ltd
Having Its Office At No.3359
2nd Floor, Hosakerehalli Cross Road
Above More Super Market
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Com.OS.No.17/2022 and Com.O.S.No.298/2021
4th Phase Girinagar
Bengaluru 560085
4:Rajata Enterprises
Having Its Office At No.1591
21st Main, 5th B Cross
BSK 1st Stage
2nd Bangalore - 560050
5:Mrs.Jyothi Lokesh
W/o Lokesh Mallikarjun,
Aged about 38 years,
R/At No.15/2
1st Cross, Near Anna Kuteera Hotel
Katriguppe Banashankari 3rd Stage
Bangalore - 560085
6: Mr. Tarun Hansraj
S/o Hansraj Roonwal,
Aged about 29 years,
R/At No.15/2
1st Cross
Near Anna Kuteera Hotel
Katriguppe Banashankari 3rd Stage
Bangalore - 560085
: DEFENDANT
(Represented by Sri. Pavamana Associates. Advocate)
Date of Institution of the suit 03-01-2022
Nature of the suit (suit on
pronote, suit for declaration &
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Com.OS.No.17/2022 and Com.O.S.No.298/2021
Possession, Suit for injunction Suit for recovery of money
etc.)
Date of commencement of 16-02-2022
recording of evidence
Date on which judgment was 04-12-2024
pronounced
Total Duration Year/s Month/s Day/s
03 07 17
(ARJUN. S. MALLUR)
LXXXV Addl.City Civil & Sessions Judge,
Bengaluru.
COMMON JUDGMENT
Subject matter of both the suit being one and same,
between the same parties and common evidence being
led by both the parties these two suits are clubbed
together and disposed off by this common judgment.
2. The case of the plaintiffs in brief is as under:-
O.S.No.298/2021
3. This is a suit for recovery of a sum of
Rs.2,30,16,971/-(Rupees Two crores Thirty Lakh Sixteen
5
Com.OS.No.17/2022 and Com.O.S.No.298/2021
Thousand Nine Hundred and Seventy One Only) with
interest at 24% p.a. from the date of suit till realization.
4. The defendant No.1 in O.S.No.17/2022 has filed this
suit contending that the defendant had placed purchase
orders for supply of stationery and the plaintiff would
delivery the goods as per the purchase order and the
defendant after checking the quantity and quality would
issue acknowledgment of receipt of goods and also make
full payments. It is submitted that from June 2019 and on
wards the defendant without assigning any reason
stopped releasing of payments and whenever the plaintiff
raised a request for payments the defendant would
respond stating that upon receiving the payments from
BESCOM, GESCOM, HESCOM UPPCL-PUVVNL and BWSSB
and other organizations the payments would be made but
the defendant has failed to make the payments. It is
submitted that the plaintiff has delivered goods worth
Rs.1,78,33,396/- from July 2019 to January 2020 which
has been detailed in a tabular column under para 6 of the
plaint. In spite of exchanging several mails by way of
reminders, phone calls and also by personal visits said
amount has not been cleared by the defendant. It is
submitted that on 14.03.2020 plaintiff issued a legal
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Com.OS.No.17/2022 and Com.O.S.No.298/2021
notice demanding payments of the outstanding amounts.
There was no response to the said notice which prompted
the plaintiff to issue second legal notice dated
30.07.2020. Even to the said notice no reply has been
initiated. The plaintiff filed pre institution mediation
proceedings in PIM No.343/2020. The defendant
participated in the mediation proceedings but failed to
arrive at a settlement and the mediation proceedings
came to be closed as a non-starter. It is submitted that
the defendant has needlessly withheld the payments to
the extent of Rs.2,30,16,971/- towards which interest is
liable to be paid at 24% p.a. and together with interest
the interest and miscellaneous charges the total amount
payable by the defendant would be Rs.2,30,16,971/-.
Hence the suit.
5. The plaintiff in O.S.No.17/2022 who is the defendant in
this case has filed a detailed written statement denying
the plaint averments in toto. The plaint averments in
O.S.No.17/2022 becomes finds place in the written
statement.
O.S.No.17/2022
Suit for recovery of a sum of Rs.3,76,39,503/-(Three
7
Com.OS.No.17/2022 and Com.O.S.No.298/2021
Crores Seventy Six Lakhs Thirty Nine Thousand Five
Hundred and Three Only) with interest at 18% p.a. from
the date of suit till realization.
6. The plaintiff is a private limited company indulged in
providing web based Total Revenue Management(TRM)
services which includes supplies of hardware, software,
manpower, stationeries and consumables to power and
water utilities in India. Defendant No.1 is a retailer
involved in business of computer paper stationery and
thermal bill rolls. Defendant No.2 is the formal employee
of the plaintiff who was working with plaintiff from
03.03.2006 to 30.11.2019. Defendant No.3 is a company
formed by the family members of defendant Nos.2 and 5.
Defendant No.4 is a proprietorship concern involved in the
business of computer paper stationery and thermal bill
rolls represented by its proprietor defendant No.5 who is
also the wife of defendant No.2. Defendant No.6 was the
person representing defendant No.4 and was supplying
paper and stationery to the plaintiff from June 2013 to
February 2017.
7. The plaintiff in the course of its business had
indulged in providing services to BESCOM, GESCOM,
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Com.OS.No.17/2022 and Com.O.S.No.298/2021
HESCOM UPPCL-PUVVNL and BWSSB and for the said
purpose the plaintiff required thermal rolls of 58 GSM
quality, cash receipt papers, MCC Cash receipts paper,
single and double sheets. For BESCOM, GESCOM AND
HESCOM projects the plaintiff required thermal rolls for
printing electricity bills and also cash receipts. For UPPCL
and PUVVNL projects the plaintiff was in need of thermal
rolls for printing electricity bills. It is submitted that the
defendant No.2 being the General Manages, responsible
for assessing the demand of stationery projects,
recommending the quantity to be purchased and ensuring
that the required stock was transported to the clients
used to verify the requirements and recommend the
quantity to be purchased and get the purchase order
signed by the Managing Director and issue it to its
suppliers. All the purchase orders came to be prepared by
defendant No.2. It is submitted that based on the
requirement of the plaintiff the purchase order were
placed with defendant No.1 and 4 every month for supply
of the required stationery assessed and recommended by
defendant No.2. The plaintiff approximately had
purchased Rs.10 crores worth of stationery over 33
months from April 2017 to December 2019. During the
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Com.OS.No.17/2022 and Com.O.S.No.298/2021
months of April-May 2019 the management of the plaintiff
noticed irregularities in the transactions entered in
defendant No.1. The plaintiff company after resignation of
defendant No.2 appointed new staff for the purpose of
stock management from July 2019. The defendant No.2
also was questioned regarding the discrepancies and
irregularities in supply of the stationery to which he did
not respond but he quit the services of the company from
30.11.2019. The plaintiff on making independent inquiries
from site officers found that a quantity less than the
invoiced quantity of material being supplied and as it was
not possible to remove stock from the premises without
security verification it was evident that defendant No.2
was concocting the figures to show that the invoiced
quantity of materials was being supplied at the delivery
centers while in actual the quantity received and delivered
was less than the invoiced quantity. The said fraud was
being committed by defendant No.2 in connivance and
active support of defendant No.1 making illegal profits at
the cost of the plaintiff. Thereafter, the plaintiff obtained
required documents from various electricity companies
which really established that the quantity consumed for
the purpose of these companies was much lesser than the
10
Com.OS.No.17/2022 and Com.O.S.No.298/2021
quantities that was invoiced. During the process of
internal audit in the plaintiff organization it revealed in the
month of April-May 2019 that the quantity of stationery
supplied by defendant No.1 did not match with the
invoices and the defendant No.1 was getting orders
substantially for more quantities than was was required.
8. During the process of internal audit the following
discrepancies came to be revealed.
a) That the invoices submitted by the Plaintiff were for the
ordered quantity as per the purchase order, while the
actual quantity of stationery supplied was substantially
less than the ordered quantity.
b) That the specification and quality requirement of
thermal bill rolls was 58 GSM. The Defendant noticed that
the Plaintiff had been supplying thermal bill rolls of 55
GSM, which was of much lesser quality than the ordered
specification, and that too, at substantially higher rates as
compared to the then prevailing market price for such
product.
c) That the Plaintiff in collusion with Mr. Lokesh was
resorting to unethical, unlawful and dubious ways to
mislead the Defendant and caused substantial loss to the
Defendant, by filling up shredded paper waste in several
11
Com.OS.No.17/2022 and Com.O.S.No.298/2021
bill roll boxes supplied to the Defendant, and that the
Plaintiff in the process made wrongful gains much to the
detriment of the Defendant.
d) That the Plaintiff was resorting to similar nefarious
methods of under supply of quantity and over pricing of
materials with respect to Single Sheets and Double
Sheets and other stationery items.
e) That the Plaintiff managed to procure orders for much
higher quantities than was required, by colluding with Mr.
Lokesh, as the quantity required to be ordered was
required to established based on the number of
consumers.
f) That such ordered quantity from the Plaintiff never
reached the field in full. The Plaintiff. through collusion
with Defendants associates, i.e. the persons who were
ordering the stationery, receiving the stationery and
dispatching the stationery, was under-supplying the
materials to the delivery centers of the Defendant. The
Dispatch documents were tampered with to manipulate
the quantity of supply.
g) That there were no surplus stocks at any of the
delivery centers of the Defendant, despite the fact that
the quantity ordered was much more than the quantity
12
Com.OS.No.17/2022 and Com.O.S.No.298/2021
utilized in the delivery centers based on the number of
installations.
h) The above irregularities came to light over a period of
6 to 7 months when the Defendant conducted an in-house
verification and inquiry of the quantity ordered, quantity
supplied, quantity utilized and quantity on hand across all
of its centers of operation which is exceeding 200 in
number.
9. It is further submitted that the plaintiff came to
observe that it was being overcharged for the stationery
supplied to it. The thermal rolls supplied was of even
inferior quality than the ordered specifications. As fraud
had been committed on the plaintiff the purchase orders
issued by the plaintiff company and the invoices raised by
defendant No.1 was not legal as they were vitiated by the
fraud. It is submitted that the defendants illegally and
unjustly enriched by themselves by claiming excess
amounts by committing breach of confidence and trust
reposed by the plaintiff. It is submitted that the delivery
challan issued by defendant No.2 on behalf of the plaintiff
clearly discloses that the quantity supplied was very much
reduced and the quantity for which invoices were being
13
Com.OS.No.17/2022 and Com.O.S.No.298/2021
raised. In this regard the plaintiff had several meetings
with the defendant No.1 and during one of the said
meeting the defendant No.6 admitted that he had
separate loan transactions with defendant No.2 and on
further inquiry he revealed that defendant No.1 owed
several amounts payable to defendant No.3 in which the
wife of defendant No.2 is a principal shareholder holding
65% of the share capital and also as a Director. It is
submitted that the defendant No.3 came to be
incorporated on 17.08.2017 a few months after plaintiff
started placing purchase orders with defendant No.1. it is
submitted that defendant Nos.2 and 3 being hand in glove
with the defendant No.1 had floated defendant No.3 as
the beneficiary for the kickbacks from defendant No.1. It
is submitted that defendant No.6 claiming to be the owner
of defendant No.1 was colluding with defendant No.2 in
raising invoices for higher quantities but supplying lesser
quantities to the electricity supply companies.
10. It is further submitted that the defendant No.1 had
initiated PIM process and during the course of said
mediation it revealed that defendant No.6 was also a
signatory to the invoices raised by defendant No.4 and it
also reveals that defendant No.4 does not belong to
14
Com.OS.No.17/2022 and Com.O.S.No.298/2021
defendant No.6 but it was the proprietorship concern of
defendant No.5. It is also submitted that the plaintiff was
being over charged for the stationery supplied to it and
the purchase orders at invoices raised by defendant No.1
are not legally valid and therefore it is not binding on the
plaintiff to pay any amount under those invoices. It is
further submitted that by these fraudulent acts the
defendant have caused loss to the plaintiff to the extent
of Rs.2,34,58,606/- on account of the fraud committed by
defendant No.1 and on account of the frauds committed
by defendant No.4 the plaintiff has suffered loss to the
extent of Rs.1,41,80,897/- which is the illegal profits
earned by defendant Nos.2, 4 and 5. It is submitted that
the defendant No.1 had issued a legal notice dated
16.03.2020 calling upon the plaintiff to make payment of
the outstanding dues to the extent of Rs.1,78,33,398/-.
To the said notice the plaintiff has issued a reply dated
13.04.2020 denying the claim made by the defendant
No.1. The defendant No.1 also has filed a suit in
O.S.No.298/2021 claiming the said amount from the
present plaintiff. It is submitted that total loss suffered by
the plaintiff on account of fraud and misrepresentation is
quantified at Rs.3,76,39,503/- which the defendants are
15
Com.OS.No.17/2022 and Com.O.S.No.298/2021
liable to pay jointly and severally with interest at 18%
p.a. from the date of suit till realization. It is submitted
that there is no valid contract between the parties and the
purchase orders and invoices which were entered into
with malafied and fraudulent intention on making
wrongful gains are not binding upon the plaintiffs. On
these grounds plaintiff has sought for payment of suit
claim as prayed.
11. Defendant No.1 filed written statement denying the
plaint averments contending that it has filed a suit in
commercial O.S.No.298/2021 for recovery of money with
respect to supply of the goods made to the plaintiff in
which the present plaintiff has admitted liability. It is
submitted that the defendant No.1 was involved in the
business of computer paper stationery and thermal bill
rolls and that the defendant being an independent retailer
has supplied the materials to the plaintiff as per the
purchase orders placed by the plaintiff but the plaintiff
has defaulted in making proper payments under the
invoices and has filed this false suit making baseless
allegations. The defendant No.1 denies any fraud as
alleged by the plaintiff.
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Com.OS.No.17/2022 and Com.O.S.No.298/2021
12. Defendant No.2 has filed written statement wherein
he has contended that the plaintiff was procuring thermal
bill rolls and computer stationaries from defendant No.1
and M/s Hitech Comprint Private Limited and that
colluding with said M/s Hitech Comprint Private Limited
the plaintiff has indulged in fraudulent activities. It is
submitted that the defendant No.2 resigned from the
services of the plaintiff on 30.11.2019 and he has been
relieved with appreciation letter. Thereafter, the
responsibilities were passed on to the daughter of the
Managing Director by name Mrs. Bhuvana Nagaraj who
was working as a manager for Quality and Strategy. The
defendant No.2 has submitted that as per the customer
requirement before release of purchase order office note
with regard to customer quantity requirement along with
the required material has to be prepared which needs to
be signed by three senior officers and approved by
Managing Director and thereafter the indent would be
raised in the software which has to be prepared by the
office assistant and to be recommend by the quality
manager, general manager and chief financial officer. The
defendant No.2 further submits that the quality manager
used to personally verify the quality and quantity of the
17
Com.OS.No.17/2022 and Com.O.S.No.298/2021
materials and the quality manager alone was responsible
for taking inward of the materials. It is submitted that
defendant No.2 was not at all involved in receipt of
materials and therefore no collusion as alleged with
defendant No.1 has taken place and also denied all other
averments seeking dismissal of the suit.
13. The defendant No.3 has filed written statement
denying the entire plaint averments.
14. The defendant Nos. 4 and 5 have filed written
statement stating that the business transaction with the
plaintiff has been discontinued from March 2017.
15. Defendant No.6 has filed written statement stating
that he is unnecessary party to the present suit as
defendant No.6 had left M/s Rajatha Enterprises in which
he was an ordinary employee and he is unnecessary party
to the suit and as against him the suit suffers from mis-
joinder of parties and has sought for dismissal of the suit
with cost.
16. On the basis of the above pleadings of both parties
in both the suits this Court has framed the following
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Com.OS.No.17/2022 and Com.O.S.No.298/2021
issues and additional issues:
ISSUES
1. Whether the plaintiff proves that
defendant failed to pay an
outstanding amount of
Rs.1,78,33,396/- inspite of receipt
of his demand notice dated
30.07.2020 and thereby defendant
is liable to pay the same along with
interest @ 24% p.a.?
2. Whether the defendant proves that
the purchase orders issued by the
defendant and the invoices raised on
it by the plaintiff are all fraudulent
documents, tampered and
manipulated by plaintiff in collusion
with his employee Mr.Lokesh and
thereby defendant is not liable to
pay the amount claimed by the
plaintiff?
3. What order or decree?
ADDITIONAL ISSUES
4. Whether plaintiff proves that 2nd
defendant by colluding with
defendants 1 and 4 raised purchase
orders for supplies higher than the
required quantities and supplied
inferior quality goods less than the
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Com.OS.No.17/2022 and Com.O.S.No.298/2021
goods mentioned in the purchase
order with misrepresentation by
colluding with defendant 5?
5. Whether plaintiff further proves that
defendants jointly and severally
liable to pay Rs.3,76,39,503/- to him
towards the variance of the quality of
thermal rolls / supply of stationery
and for receipt of excess payments
for short supply of goods by playing
fraud on plaintiff company?
17. Common evidence has been lead by both parties.
The plaintiff in O.S.No.298/2021/defendant No.1 in
O.S.No.17/2022 has examined himself as P.W.1.
Defendant No.2 in Com.O.S.No.17/2022 has been
examined as P.W.2. The plaintiffs have got marked
documents at Ex.P-1 to Ex.P-94.
18. The defendant in O.S.No.298/2021/plaintiff in
O.S.No.17/2022 has examined the chief manager for
quality and strategy Bhuvana Nagaraj as D.W.1 and has
examined the Managing Director as D.W.2 and has got
marked documents at Ex.D.1 to D.37.
19. Heard the Learned Counsel for the plaintiff in
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Com.OS.No.17/2022 and Com.O.S.No.298/2021
Com.O.S.No.298/2021 and the counsel appearing for all
defendants in Com.O.S.No.17/2022. The counsel for the
plaintiff in Com O.S No.17/2022 has filed written
arguments and additional written arguments along with
citations. Perused the entire material on record.
20. My answer to the above issues and additional issues
are as under:-
Issue No.1 : In the Negative
Issue No.2 : In the Negative
Issue No.3 : In the Negative
Issue No.4 : In the Negative
Issue No.5 : As per final order for the
following.
REASONS
21. ISSUE NO.2 & ADDITIONAL ISSUE NO.1:- To
avoid repetition of facts and evidence these two issues
being interlinked with each other are taken up together
for answering.
22. The defendant in O.S.No.298/2021 filed his written
statement on 06.09.2021. In the course of written
21
Com.OS.No.17/2022 and Com.O.S.No.298/2021
statement in O.S.No.298/2021 the defendant has not
raised any counter claim. After filing of the written
statement the defendant on 03.01.2022 has filed the suit
in O.S.No.17/2022. The facts alleged in the written
statement and in the plaint in O.S.No.17/2022 are much
similar to each other. Though elaborate pleadings have
been put forth to put it in a nutshell the contention of the
defendant is that the defendant No.2 in O.S.No.17/2022
while in the course of his employment with the plaintiff
had clandestinely colluded with defendant No.1 i.e.,
plaintiff in O.S.No.298/2021 and in active collusion with
the other defendants mainly defendant Nos.3 to 6 in
O.S.No.17/2022 had raised bulky purchase orders
inflating the claims. It is contended that the present
plaintiff in O.S.No.298/2021 in collusion with defendant
No.2 of O.S.No.17/2022 raised invoices for large number
of quantity of print rolls and thermal bill rolls to be
supplied to the plaintiff for onward supply to the clients of
the plaintiff and purchase orders were raised for
quantities more than the required quantities and after
obtaining the supply from defendant No.1 the actual
supply that was made to the clients of the plaintiff was
much lesser than the quantity invoiced but the plaintiff
22
Com.OS.No.17/2022 and Com.O.S.No.298/2021
has been charged for the entire quantity and thereby by
fraud and collusion they have caused wrongful cause to
the plaintiff in O.S.No.17/2022 and have unjustly enriched
themselves. It is the specific contention of the defendant
in O.S.No.298/2021 that as the bills were inflated and
invoices raised on through fraudulent means the amount
payable on those bills or invoices are not legal and
therefore no liability exists on part of the defendant in
O.S.No.298/2021 to pay the suit claim. On the other hand
on account of inflated invoices the defendant had to suffer
huge losses and as a result of the fraud committed by
defendant No.2 and defendant No.4 in O.S.No.17/2022
the plaintiff therein has suffered a total loss to the extent
of Rs.3,76,39,503/- between 2013 to 2017. Therefore the
defendant in O.S.No.298/2021 has sought for payment of
the said amount as unjust enrichment made by the
defendants for themselves at the cost of the plaintiff with
interest at 18% p.a. as claimed in the suit in
O.S.NO.17/2022. The entire allegation of the defendant
in O.S.No.298/2021 and plaintiff in O.S. No.17/2022 is
that all the purchase orders raised are on account of fraud
committed by defendant No.2 therein colluding with other
defendants and therefore no liability exist on part of the
23
Com.OS.No.17/2022 and Com.O.S.No.298/2021
defendant in O.S.No.298/2021 to make good the suit
claim.
23. Before considering whether fraud has been made out
and proved in accordance with law it would be just and
proper to refer to some of the decisions relied upon by
both the plaintiff in O.S.No.17/2022 as well as the plaintiff
in O.S.No.298/2021 in relation tot he allegations of fraud.
The plaintiff in O.S.No.17/2022 has relied upon the
following decisions.
1. (2021) 4 SCC 713, Avitel Post Studioz Limited
and others vs. HSBC Pi Holdings (Mauritius)
Limited, wherein at para No.46 of the judgment it has
been observed as under:
"that section 17 of the Contract Act only applies if
the contract itself is obtained by fraud or cheating.
However, a distinction is made between a contract
being obtained by fraud and performance of a
contract (which is perfectly valid) being vitiated by
fraud or cheating. The latter would fall outside
section 17 of the Contract Act, in which the
remedy for damages would be available, but not
the remedy for treating the contract itself as being
void (see pp. 311-312). This is for the reason that
the words "with intent to deceive another party
thereto or his agent" must be read with the words
"or to induce him to enter into the contract", both
sets of expressions speaking in relation to the
24
Com.OS.No.17/2022 and Com.O.S.No.298/2021
formation of the contract itself. This is further
made clear by sections 10, 14 and 19, which have
already been referred to hereinabove, all of which
deal with "fraud" at the stage of entering into the
contract. Even section 17(5) which speaks of "any
such act or omission as the law specially deals to
be fraudulent" must mean such act or omission
under such law at the stage of entering into the
contract. Thus, fraud that is practiced outside of
section 17 of the Contract Act, i.e., in the
performance of the contract, may be governed by
the tort of deceit, which would lead to damages,
but not rescission of the contract itself."
2. 2005 (6) SCC 149, State of A.P. and another vs. T.
Suryachandra Rao, where in with respect to ingredients
constituting fraud under Sec.17 of the Indian Contract Act
it has been observed as under:
"By "fraud" is meant an intention to deceive;
whether it is from any expectation of advantage to
the party himself or from the ill will towards the
other is immaterial. The expression "fraud"
involves two elements, deceit and injury to the
person deceived. Injury is something other than
economic loss, that is, deprivation of property,
whether movable or immovable or of money and it
will include and any harm whatever caused to any
person in body, mind, reputation or such others.
In short, it is a non-economic or non-pecuniary
loss. A benefit or advantage to the deceiver, will
almost always call loss or detriment to the
deceived. Even in those rare cases where there is
25
Com.OS.No.17/2022 and Com.O.S.No.298/2021
a benefit or advantage to the deceiver, but no
corresponding loss to the deceived, the second
condition is satisfied.
A "fraud" is an act of deliberate deception with the
design of securing something by taking unfair
advantage of another. It is a deception in order to
gain by another's loss. It is a cheating intended to
get an advantage.
"Fraud" as is well known vitiates every solemn act.
Fraud and justice never dwell together. Fraud is a
conduct either by letter or words, which includes
the other person or authority to take a definite
determinative stand as a response to the conduct
of the former either by words or letter. It is also
well settled that misrepresentation itself amounts
to fraud. Indeed, innocent misrepresentation may
also give reason to claim relief against fraud. A
fraudulent misrepresentation is called deceit and
consists in leading a man into damage by willfully
or recklessly causing him to believe and act on
falsehood. It is a fraud in law if a party makes
representations, which he knows to be false, and
injury enures therefrom although the motive from
which the representations proceeded may not
have been bad. An act of fraud on court is always
viewed seriously. A collusion or conspiracy with a
view to deprive the rights of the others in relation
to a property would render the transaction void ab
initio. Fraud and deception are synonymous.
Although in a given case a deception may not
amount to fraud, fraud is anathema to all
equitable principles and any affair tainted with
fraud cannot be perpetuated or saved by the
application of any equitable doctrine including res
judicata.
26
Com.OS.No.17/2022 and Com.O.S.No.298/2021
"Fraud" and collusion vitiate even the most
solemn proceedings in any civilized system of
jurisprudence. It is a concept descriptive of human
conduct.
A false representation of a matter of fact whether
by words or by conduct, by false or misleading
allegations, or by concealment of that which
should have been disclosed, which deceives and is
intended to deceive another so that he shall act
upon it to his legal injury.
Section 17 of the Indian Contract Act, 1872
defines "fraud" as act committed by a party to a
contract with intent to deceive another. From
dictionary meaning or even otherwise fraud arises
out of deliberate active role of representator about
a fact, which he knows to be untrue yet he
succeeds in misleading the representee by making
him believe it to be true. The representation to
become fraudulent must be of fact with knowledge
that it was false."
3.(2004) 9 SCC 468, Krishna Mohan Kul Alian Nani
Charan Kul and another vs. Pratima Maity and
others, wherein at para 12 it has been observed as
under:
"When fraud, mis-representation or undue
influence is alleged by a party in a suit, normally,
the burden is on him to prove such fraud, undue
influence or misrepresentation. But, when a
person is in a fiduciary relationship with another
and the latter is in a position of active confidence
the burden of proving the absence of fraud,
misrepresentation or undue influence is upon the
27
Com.OS.No.17/2022 and Com.O.S.No.298/2021
person in the dominating position, he has to prove
that there was fair play in the transaction and that
the apparent is the real, in other words, that the
transaction is genuine and bona fide. In such a
case the burden of proving the good faith of the
transaction is thrown upon the dominant party,
that is to say, the party who is in a position of
active confidence. A person standing in a fiduciary
relation to another has a duty to protect the
interest given to his care and the Court watches
with zealously all transactions between such
persons so that the protector may not use his
influence or the confidence to his advantage.
When the party complaining shows such relation,
the law presumes everything against the
transaction and the onus is cast upon the person
holding the position of confidence or trust to show
that the transaction is perfectly fair and
reasonable, that no advantage has been taken of
his position.
This principle is that he who bargains in a matter
of advantage with a person who places a
confidence in him is bound to show that a proper
and reasonable use has been made of that
confidence. The transaction is not necessarily void
ipso facto, nor is it necessary for those who
inpeach it to establish that there has been fraud or
imposition, but the burden of establishing its
perfect fairness, adequacy and equity is cast upon
the person in whom the confidence has been
reposed. The rule applies equally to all persons
standing in confidential relations with each other.
Agents, trustees, executors, administrators,
auctioneers, and others have been held to fall
within the rule. The Section requires that the party
28
Com.OS.No.17/2022 and Com.O.S.No.298/2021
on whom the burden of proof is laid should have
been in a position of active confidence.
Where an active, confidential, or fiduciary relation
exists between the parties, there the burden of
proof is on the donee or those claiming through
him. It has further been laid down that where a
person gains a great advantage over another by a
voluntary instrument, the burden of proof is
thrown upon the person receiving the benefit and
he is under the necessity of showing that the
transaction is fair and honest."
24. Per contra the plaintiff in O.S.No.298/2021/
defendant No.1 in O.S.No.17/2022 has relied upon the
following decisions:
1. (1976) 2 SCC 142, Afsar Sheikh and others vs.
Soleman Bibi and others, wherein at para 15 it has
been observed as under:
"While it is true that `undue influence', `fraud',
`misrepresentation' are cognate vices and may, in
part, overlap in some cases, they are in law
distinct categories, and are in view of Order 6,
Rule 4, read with Order 6, r.2, of the Code of Civil
Procedure, required to be separtely pleaded, with
specificity, particularity and precision. A general
allegation in the plaint, that the plaintiff was a
simple old man of ninety who had reposed great
confidence in the defendant, was much too
insufficient to amount to an averment of undue
influence of which the High Court could take
notice, particularly when no issue was claimed and
no contention was raised on that point at any
29
Com.OS.No.17/2022 and Com.O.S.No.298/2021
stage in the trial court, or, in the first round, even
before the first appellate court."
2. Judgment of the Hon'ble Bombay High Court in
Second Appeal No.370/2018 dated 30.07.2018,
Rajesh Premji Bhansari and others vs. Manisha
Mahesh Bhanushali, wherein it is observed as under:
"Fraud is to be pleaded and proved. To prove
fraud, it must be proved that representation made
was false to the knowledge of the party making
such representation or that the party could have n
o reasonable belief that it was true. The level of
proof required in such cases is extremely higher.
An ambiguous statement cannot per se make the
representor guilty of fraud"
3.(2006) 13 SCC 599, Reliance Salt Ltd. vs. Cosmos
Enterprises and others, where in at para 10 it has been
observed as under:
"A claim which is denied or disputed, in the event
of necessity for determination of the lis, may not
be found to be correct. If Appellant was to allege a
breach of contract in a properly framed suit,
Respondent No.1 could also allege the breach of
contract on the part of Appellant herein. Breach of
contract by reason of supply of inferior quality of
tea or salt or delay in supply or a short supply
may render a party responsible for damages for
commission of breach of contract, but, breach of
contract alone does not lead to the conclusion that
a fraud had been committed thereby. It is
30
Com.OS.No.17/2022 and Com.O.S.No.298/2021
contended that commission of fraud would include
any act to deceive but then such act must be
confined to acts committed by a party to a
contract with intention to deceive another party or
his agent or to induce him to enter into a contract.
Fraud, which vitiates the contract, must have a
nexus with the acts of the parties prior to entering
into the contract. Subsequent breach of contract
on the part of a party would not vitiate the
contract itself."
25. I have gone through the above cited decisions and
keeping in mind the observations made therein as to what
would constitute fraud which would vitiate the entire
transaction rendering the contract void ab-initio it is now
required to see whether the defendant/plaintiff in
O.S.No.17/2022 has been able to plead and prove fraud
that would absolve from its liability to pay the suit claim
as claimed under O.S.No.298/2021 and entitle it to
recover the losses as alleged from the defendants in
O.S.No.17/2022.
26. The plaintiff in O.S.No.17/2022 is the defendant in
O.S.No.298/2021 and has examined its chief manager
quality and strategy Bhuvana Nagaraj as D.W.1 who has
reiterated the averments made in the plaint in
O.S.No.17/2022. In support of the affidavit evidence she
31
Com.OS.No.17/2022 and Com.O.S.No.298/2021
has got marked documents Ex.D.13 to D.37. Ex.D.1 to
Ex.D.12 have been marked through the cross examination
of P.Ws.1 and 2. Ex.D.13 comprises of copies of the
purchase orders placed with defendant No.1 in O.S.
No.17/2022 and plaintiff in O.S.No.298/2021 from April
2017 to December 2019. In fact these purchase orders
comprising of Ex.D.13 are admitted by the plaintiff in
O.S.No.298/2021 in its statement of admissions and
denial of the documents. Ex.D.14 is the tax invoice date
02.12.2019. Ex.D.15 to D.23 are the purchase orders
dated 22.11.2019, 17.112.2019, 02.11.2019,
22.11.2019, 17.12.2019 which are also annexed with the
indent report and office notes issued by the plaintiff in
O.S.No.17/2022 and defendant in O.S.No.298/2021.
Ex.D24 and D.25 are the electronic documents issued by
the GST portal pertaining to Mahaveer Computer
Stationeries. Ex.D.26 is the email sent by one Girish of
Vinayaka Art Printers with attachment of three invoices.
Ex.D.27 is the delivery challan. Ex.D28 and D.29 are the
certificates under Sec.65B of the Indian Evidence Act with
respect to Ex.D.25 and D.26. Ex.D.30 comprises of the
original invoices from the year 2017 to 2019. Ex.D.31
comprises of purchase orders for the period July 2018 to
32
Com.OS.No.17/2022 and Com.O.S.No.298/2021
December 2019. Ex.D.32 is the work awarded by
GESCOM dated 12.12.2015. Ex.D.33 is the contract order
issued by BESCOM dated 26.04.2016. Ex.D.34 is the work
order issued by BWSSB dated 16.02.2019. Ex. D.35 are
11 invoices issued to Mahaveer Computer Stationeries.
Ex.D.36 is the work order issued by HESCOM dated
04.03.2014. Ex.D.37 is the office copy of the agreement
dated 21.07.2018.
27. The defendant in O.S.No.298/2021 and plaintiff in
O.S.No.17/2022 specifically allege that the defendant
NO.2 colluding with other defendants of O.S.No.17/2022
raised invoices for higher quantities than what was
actually required to be supplied to the end customers of
the plaintiff but supplied only a lesser quantity and
thereby have made good the balance quantity of supply
for their unjust enrichment. At the outset it is pertinent to
mention here that on a careful reading of the entire plaint
averments is O.S.No.17/2022 and also the written
statement filed in O.S.No.298/2021 one cannot come
across what is the exact nature of fraud allegedly
committed by the defendant No.1 so as to vitiate all the
purchase orders and entitle the plaintiff in
O.S.No.17/2022 to be made good for the losses suffered.
33
Com.OS.No.17/2022 and Com.O.S.No.298/2021
A specific allegation of fraud is made as against defendant
No.1 and defendant No.4 of O.S.No.17/2022. As observed
in the above cited decisions to constitute fraud or vitiate a
claim on a ground of fraudulent transaction it is necessary
that the fraud must be specifically pleaded and proved.
28. It is the specific contention that defendant No.2 who
was working with the plaintiff has been instrumental in
playing the fraud and colluding with the defendant i.e.,
plaintiff in O.S.No.298/2021 inflated invoices were raised
for huge quantities of thermal bill rolls without there being
actual requirement and there by the plaintiff has been
made to pay for the thermal bill rolls that was not actually
required. The entire allegation of fraud is squarely put on
the shoulders of defendant No.1 and 2 i.e. plaintiff in
O.S.No.298/2021 and defendant No.2 in O.S.No.17/2022.
As already mentioned above though elaborate pleadings
are put in O.S.No.17/2022 except stating repeatedly that
fraud was played on the plaintiff in O.S.No.17/2022, the
pleadings are totally silent when and in what manner
alleged fraud came to be played. Raising of the invoices
under the purchase orders by the plaintiff in
O.S.No.298/2021 is not in dispute. In fact under taking
payments under those invoices to some extent is also not
34
Com.OS.No.17/2022 and Com.O.S.No.298/2021
in dispute. What the plaintiff in O.S.No.17/2022 contends
is that he was driven to pay more amount by showing
inflated requirement under the invoices than what actually
supplied and there by he has been made to suffer fraud.
Fraud is alleged on both defendant No.1 and defendant
No.4. The defendant No.4 in O.S.No.17/2022 is a firm by
name M/s Rajatha Enterprises of which defendant No.6 is
shown as a proprietor. It is the allegation that to obtain
kickbacks and for unjust enrichment they all have come
together colluding with defendant No.2 who was then an
employee of Nsoft India Services Private Limited have
committed the acts of fraud.
28. To discharge the said burden P.W.1 and 2 have been
cross examined by the defendant/plaintiff in
O.S.No.17/2022. P.W.2 in the course of his evidence has
got marked documents at Ex.P.85 to P.94. P.W.2 who is
defendant No.2 in O.S.No.17/2022 has filed a detailed
written statement denying any fraud as alleged against
him and submit that he was in fact the best employee
with the plaintiff who had been appreciated for his work
and he has been promoted from the level of clerk to the
post of General Manager and there had been not even a
single complaint of alleged fraud against him. He has
35
Com.OS.No.17/2022 and Com.O.S.No.298/2021
produced the documents at Ex.P.85 to P.87 which are the
promotions handed over to him, letter of revision in salary
on account of promotion, certificates of participation
under Ex.P.89 and P.90 and the relieving letter dated
30.11.2019 and no objection letter issued by the plaintiff
and photographs taken at the time of his farewell from
the plaintiff. The plaintiff in O.S.No.17/2022 and
defendant in O.S.No.298/2021 has cross examined P.W.2
at length and in the entire cross examination nothing is
forthcoming to infer that he had indulged in fraudulent
acts resulting in loss to the plaintiff Nsoft India Services
Private Limited. Mere supply of paper rolls by M/s Rajatha
Enterprises defendant No.6 sighing the purchase orders
and the invoices on behalf of M/s Rajatha Enterprises,
existence of the signature of P.W.2 in the invoice raised in
favour of Mahaveer Enterprises, P.W.2 being one of the
director in defendant No.3 which is started by his younger
brother, his wife and the wife of P.W.2 and defendant No.3
having transactions with P.W.2 would not in any manner
amount to proof of fraud alleged committed on the
plaintiff. Admissions by P.W.2 that defendant No.5 is a
family friend of D.W.2 who is the Managing Director of
Nsoft India Private Limited cannot amount to inference
36
Com.OS.No.17/2022 and Com.O.S.No.298/2021
that fraud has been indulged and played upon the
plaintiff. P.W.2 in cross examination has admitted the
documents produced at Ex.D.4 to D.12 and admission of
those document does not amount to fraud being
committed by the defendant No.2 in O.S.No.17/2022.
Neither in the cross examination of P.W.1 nor in the cross
examination of P.W.2 any circumstances that has been
brought to lead to an inference that fraud is played upon
the plaintiffs by the defendants to unjustly enrich
themselves.
29. The Learned Counsel representing Nsoft India
Services Private Limited in the course of his argument has
highlighted regarding fraud allegedly played between
2013 to 2017, 2017 to 2017 and till 2020. It is brought
out in the evidence of D.W.1 Bhuvana Nagaraj that during
the internal inquiry fraud has come to light. There is no
pleadings as to when the internal inquiry came to be
conducted, who conducted it and what prompted and
internal inquiry to be conducted. The allegation of fraud is
circumscribed to placing inflated indents for thermal rolls
than what was actually required to be supplied to the end
customers. For the said purpose what is required is what
was the indent of the end customer of the plaintiff namely
37
Com.OS.No.17/2022 and Com.O.S.No.298/2021
the electric supply companies for a given period, what
was the purchase order placed for the required stationery
and what has been supplied. If there was actual fraud
committed that same could have been reflected by
producing documents to show that the indent was never
placed for supply of the material as invoiced by the
defendant with the plaintiff which would lead to an
inference that by misrepresentation and fraud plaintiff has
been made to shell out more money than what was
actually required to be paid. To substantiate this aspect
there is absolutely no iota of evidence before the Court.
The plaintiff in O.S.No.17/2022 alleges causing loss to the
extent of more that 3 crore. However to substantiate the
same no cogent and satisfactory evidence is before the
Court.
30. Learned Counsel appearing of Nsoft India Services
Private Limited in the course of argument contended that
where there are no pleadings no amounts of evidence can
be permitted. It is submitted that the defendant has not
categorically denied the allegations of fraud made in the
plaintiff and therefore in the absence of denials it has to
be taken as admitted. In support of his argument he has
relied upon a decision of Hon'ble Apext Court reported in
38
Com.OS.No.17/2022 and Com.O.S.No.298/2021
(2008) 17 SCC 491, Bachhaj Nahar, Nilima Mandal
and another, wherein it has been observed in para 17 of
the judgment as under:
"It is thus clear that a case not specifically pleaded
can be considered by the court only where the
pleadings in substance, though not in specific
terms, contains the necessary averments to make
out a particular case and the issues framed also
generally cover the question involved and the
parties proceed on the basis that such case was at
issue and had led evidence thereon. As the very
requirements indicate, this should be only in
exceptional cases where the court is fully satisfied
that the pleadings and issues generally cover the
case subsequently put forward and that the
parties being conscious of the issue, had led
evidence on such issue. But where the court is not
satisfied that such case was at issue, the question
of resorting to the exception to the general rule
does not arise. The principles laid down in
Bhagwati Prasad and Ram Sarup Gupta (supra)
referred to above and several other decisions of
this Court following the same cannot be construed
as diluting the well settled principle that without
pleadings and issues, evidence cannot be
considered to make out a new case which is not
pleaded. Another aspect to be noticed, is that the
court can consider such a case not specifically
pleaded, only when one of the parties raises the
same at the stage of arguments by contending
that the pleadings and issues are sufficient to
make out a particular case and that the parties
proceeded on that basis and had led evidence on
39
Com.OS.No.17/2022 and Com.O.S.No.298/2021
that case. Where neither party puts forth such a
contention, the court cannot obviously make out
such a case not pleaded, suo moto."
31. The observations made in this decision is applicable to
the facts and circumstances of the case in hand wherein
there are no specific, cogent and clear pleadings
regarding the allegations of fraud. It is further submitted
by the Learned Counsel representing Nsoft India Services
Private Limited that when there has been no dispute of
the facts which does not require any proof and that the
defendant has failed to call for the better particulars and
therefore the defendant cannot be allowed to approbate
and reprobate at the same time. In support of the said
contentions he has relied upon the following decisions:
1. (2017) 8 SCC 592, Jaspal Kaur Cheema and
another vs. Industrial Trade Links and others.
2. 1986 SCC Online Kar 11, A H Bhat vs. K.R. Picture
Combines.
3. 2016(12) SCC 288, Muddasani Venkata Narasaiah
(Dead) throgh Lr's vs. Muddasani Sarojana.
32. I have gone through the above cited decisions and
the principles laid there in are under a different set of
facts and circumstances from what that is existing in the
40
Com.OS.No.17/2022 and Com.O.S.No.298/2021
case on hand.
33. With respect to the said arguments the Learned
Counsel representing M/s. Mahaveer Enterprises would
submit that there is absolutely no pleadings and no proof
regarding the alleged fraudulent acts and in its absence
inference of fraud cannot be drawn. In support of his
argument he has relied upon judgment of our Hon'ble
High Court reported in 2006(3) KarLJ 177,
Ranganayakamma vs. K.S. Prakash, wherein it has
been observed as under:
"The plaint disclose that the allegations are
general in nature. Except for the use of words
"fraud" and "misrepresentation", the plaintiffs
have not pleaded as to each verbal
misrepresentation, or occasion thereto. Order 6,
Rule 4 of the Code of Civil Procedure was of a
distinct category in law, requiring pleading with
specificity, particularity and precision. The plaint
averments, in our opinion, do not set out with
reasonable precision, the particulars so as to
constitute allegations of fraud and
misrepresentation, by defendants 1 and 2."
34. Therefore on considering the above aspects there
being no cogent and clear pleadings regarding the
allegations of fraud and there being no evidence on record
it cannot be said that the plaintiff in
41
Com.OS.No.17/2022 and Com.O.S.No.298/2021
O.S.No.17/2022/defendant in O.S.No.298/2021 has been
able to substantively prove the allegations of fraud
resulting in wrongful loss to M/s Nsoft Services India
Private Limited. Hence I answer Issue No.2 and
additional Issued No.1 in the negative.
35. ADDITIONAL ISSUE NO.2:- As already mentioned
above the plaintiff in O.S.No.17/2022 has raised a claim
for payment of a sum of Rs.3,76,39,503/- being the loss
quantified on account of variance in the supplies of the
thermal rolls invoiced by the plaintiff in O.S.No.298/2021.
It is the contention that the said amount is loss which is
suffered on account of the fraudulent act of defendant
No.1 to 6 in O.S.No.17/2022. It has been answered under
Issue No.2 and additional issued No.1 that the plaintiff
has failed to prove the allegations of fraud as against
defendant Nos.1 to 6 in O.S.No.17/2022. Therefore under
such circumstances and in view of the finding arrived
under issue No.2 and additional issue No.1 the plaintiff in
O.S No.17/2022 will not be entitled for claim as prayed
and accordingly Additional Issue No.2 is answered in
the negative.
36. Issue No.1:- The plaintiff in Com. O.S.No.298/2021
42
Com.OS.No.17/2022 and Com.O.S.No.298/2021
is seeking recovery of a sum of Rs.1,78,33,396/- which is
unpaid under the purchase orders described at Sl.Nos.1 to
31 of para 6 of the plaint. For the said amount interest is
claimed at 24% p.a. from 01.01.2022 to 03.03.2021
totaling to amount of Rs.49,83,575/-. Together with legal
professional charges the plaintiff is making a total claim
for Rs.2,30,16,971/-.
In support of the said claim P.W.1 the proprietor of
M/s Mahaveer Enterprises has filed affidavit by way of
evidence reiterating the averments made in the plaint. He
has got marked documents at Ex.P.1 to P.85. Ex.P.1 to
P.41 are the purchase orders and tax invoices dated
27.07.2019, 03.08.2019, 08.08.2019, 13.08.2019,
15.09.2019, 23.08.2019, 25.08.2019,
29.09.2019,23.09.2019, 04.10.2019, 18.10.2019,
19.10.2019, 21.10.2019, 22.10.2019, 25.10.2019,
02.11.2019 and 07.11.2019. Ex.P.42 to P.67 are copies
various orders, delivery challans and tax invoices of
different dates. Ex.P.68 to P.71 are the emails addressed
to Nsoft Services calling upon them to clear the
outstanding dues. Ex.P.72 is the office copy of the legal
notice dated 14.03.2020 and P.73 is the second legal
notice dated 30.07.2020. Ex.P.74 is the postal track
43
Com.OS.No.17/2022 and Com.O.S.No.298/2021
consignment disclosing service of the notice on defendant
Nsoft Services. Ex.P.75 is the application filed for PIM
proceedings. Ex.P.76 is the certificate under then 65B of
Indian Evidence Act. Ex.P.77 to P.84 are copies of
purchase orders dated 22.11.2019 and 17.12.2019 which
are admitted documents by the defendant in its statement
of admissions and denials.
37. P.W.1 has been cross examined at length and in the
course of the entire cross examination nothing has been
brought out to infer that the amounts are not due under
the said purchase orders and invoices as prayed. Through
the cross examination of P.W.1 documents at Ex.D.1 to
D.4 have been marked and those documents does not in
any manner substantiate that plaintiff has indulged in
fraudulent activities to cause wrongful loss. As already
mentioned above the main contention of the defendant is
that liability will not arise as by playing fraud the
defendant has been made to shell out more money for the
invoices which has been excessively raised. The defendant
who is the plaintiff in the counter suit has not been able
to prove the said allegations. To the legal notice sent
there has been no reply by the defendant. Nothing had
prevented the defendant to cause a reply to the said
44
Com.OS.No.17/2022 and Com.O.S.No.298/2021
notice. As already mentioned above placing of the
purchase orders and raising of the invoices are not at all
disputed. As the defendant has failed to substantiate
fraud on part of the present plaintiff resulting in loss more
than what has been due to be payable to the plaintiff, the
defendant herein would be liable to pay the suit claim to
the plaintiff as prayed. In the entire cross examination of
P.W.1 except putting questions with regard to the alleged
fraud defendant has not bothered to cross examine
plaintiff with respect to dues payable by it. Therefore
considering these aspects I am of the considered opinion
that the plaintiff is entitled for the suit claim as prayed in
O.S.No.298/2021.
ON MAINTAINABILITY OF SUIT
38. Even though it is held that plaintiff in Com
OS.No.598/2021 has been able to prove the suit claim the
plaintiff would not be entitled for the same as the very
suit of the plaintiff suffers from legal disability. The suit
having been filed in the name of the proprietary concern
is not maintainable under Order XXX Rule 10 of CPC. The
plaintiff M/s Mahaveer Enterprises which is described as a
proprietary concern has no right to file the suit in the
name of the concern but it should have been filed in the
45
Com.OS.No.17/2022 and Com.O.S.No.298/2021
name of proprietor. Relying upon the provisions of Order
XXX Rule 10 as the suit is filed in the name of proprietary
concern it is not maintainable and therefore no relief can
be granted.
39. Order XXX Rule 10 of CPC provides for suit against
person carrying on business in name other than his own
name. It is provided that any person carrying on a
business in a name or style other than his own name can
be sued in such name or style as if it were a firm name.
The provision of Order XXX Rule 10 is amply clear that a
proprietary concern can be sued in its name represented
by the proprietor. On other other hand the proprietary
concern cannot sue in its own name represented by the
proprietor. In other words for the purpose of filing a suit
by a proprietary concern it should necessarily be in the
name of the proprietor and not the concern. It cannot be
other way round wherein the proprietary concern cannot
file a suit describing it to be represented by the proprietor.
40. In this regard reliance is placed upon the following
decisions.
1. 2004 SCC online Del 1047, Meeraj Marketing
Corporation vs. Vishaka Engineering and another,
where in it has been observed as under:
46
Com.OS.No.17/2022 and Com.O.S.No.298/2021
"It was submitted that the suit was instituted in
the name of the proprietorship firm and,
therefore, the said suit was not maintainable.
The learned trial court also upheld the said
contention and dismissed the suit on that score
also. Therefore, the aforesaid plea is very
relevant and calls for in depth consideration by
us. A proprietorship firm has no legal entity like
a registered firm. A suit cannot be instituted in
the name of an unregistered proprietorship firm
and the said suit is to be instituted in the name
of the proprietor. It is an admitted position in
the plaint that the plaintiff is a proprietorship
firm. There is, however, no statement made in
the plaint by the plaintiff as to who is the
proprietor of the firm."
2. 2005 SCC online Del 1392, Svapn Constructions
vs. IDPL Employees Cooperative Group, wherein it
has been observed as under:
"Perusal of the petition reveals that petition has
been filed in the name of sole proprietorship
firm which is not a legal entity through its sole
proprietor. A sole proprietorship firm is not a
legal entity which can sue in its own name
though any two persons claiming or being liable
as partners and carrying on business may sue or
be sued in the name of firm of which such
persons are partners at the time of accruing of
cause of action, however under Order XXX of
the Code of Civil Procedure and under any other
provision of code a person carrying on business
in a name other than his can sue in the name
47
Com.OS.No.17/2022 and Com.O.S.No.298/2021
other than his. In Miraj Marketing Corporation
(supra) relied on by the respondent, it was held
that a sole proprietorship firm which is not a
legal entity can not sue in its own name. In that
case, plaintiff was described to be a
proprietorship firm represented through a
person who had neither signed the plaint nor
had signed the power of attorney which was
filed in the case and no statement was made in
the plaint as to who was the proprietor of the
firm. In the case of P.C. Advertising (supra), it
was held that the suit filed in the name of
proprietorship firm which was neither a
registered company nor a joint family nor a
partnership firm, in the absence of any prayer to
seek amendment to allow the sole proprietor to
sue in his name was maintainable.
If the sole proprietorship firm is not a legal
entity, the petition should have been filed by the
sole proprietor in his name on behalf of his sole
proprietorship firm and not in the name of sole
proprietorship firm. Considering it from any
point, the inevitable inference is that a petition
in the name of a sole proprietorship firm's name
which is not a legal entity is not maintainable."
3. (2003) 6 SCC 423, Arm Group Enterprises Ltd vs.
Waldorf Restaurant and others, wherein it has
observed as under:
"We have also held that Waldorf Restaurant is
merely a trade name and is not a legal entity.
The legal entity or the legal persons are the
proprietor of the partnership firm. Mere
statement in the pleadings of the appellants in
48
Com.OS.No.17/2022 and Com.O.S.No.298/2021
the course of litigation that use of the leased
premises by Waldorf Restaurant was a wrongful
entry cannot be an admission of the fact that
the firm came into possession of the premises
prior to the surrender of the lease by the
tenant."
4. (2012) 2 SCC 196, Rasiklal Manickchand Dhariwal
v. M/s. M.S.S.Food Products, where in it has been
observed as under:
"Rule 10 of Order XXX of the Code reads as
follows: "10. Suit against person carrying on
business in name other than his own.--Any
person carrying on business in a name or style
other than his own name, or a Hindu undivided
family carrying on business under any name,
may be sued in such name or style as if it were
a firm name, and, in so far as the nature of such
case permits, all rules under this Order shall
apply accordingly."
The above provision is an enabling provision
which provides that a person carrying on
business in a name or style other than his own
name may be sued in such name or style as if it
were a firm name. As a necessary corollary, the
said provision does not enable a person carrying
on business in a name or style other than in his
own name to sue in such name or style."
5. AIR 2009 Supreme Court 422, M/s. Shankar
Finance and Investments vs. State of Andra Pradesh
and others, wherein at para 8 it has been observed as
49
Com.OS.No.17/2022 and Com.O.S.No.298/2021
under:
"As contrasted from a company incorporated
under the Companies Act, 1956 which is a legal
entity distinct from its shareholders, a
proprietary concern is not a legal entity distinct
from its proprietor. A proprietary concern is
nothing but an individual trading under a trade
name. In civil law where an individual carries on
business in a name or style other than his own
name, he cannot sue in the trading name but
must sue in his own name, though others can
sue him in the trading name."
41. On going through the above cited decisions it is
amply clear that in so for as a proprietary concern is
concerned the suit has to be filed necessarily in the name
of the proprietor representing the concern and not the
other way round. In the present case the plaint describes
the plaintiff as M/s Mahaveer Enterprises represented by
its proprietor Sri. Ratan Kumar K.R. Therefore it is clear
that the suit if filed in the name of proprietary concern
which as per the provision of order XXX Rule 10 and as
per the ratio laid down in the above cited decision is not
maintainable. The suit being filed in the name of
proprietary concern is not maintainable. Hence I answer
Issue No.1 in the Negative.
50
Com.OS.No.17/2022 and Com.O.S.No.298/2021
42. ISSUE NO.3:- For the aforesaid reasons, in view of
findings recorded on the above issues, I proceed to pass
the following.
ORDER
Suit of the plaintiff in O.S.No.298/2021 and O.S.No.17/2022 are dismissed with costs.
Original Judgment shall be kept in O.S.No.298/2021 and copy there off in O.S.No. 17/2022.
Draw decree accordingly.
[Dictated to the Stenographer Grade-III, transcribed by her, corrected and signed by me then pronounced in the Open Court, dated this the 4th day of December 2024] Digitally signed by ARJUN ARJUN SRINATH SRINATH MALLUR Date: 2024.12.04 MALLUR 18:04:47 +0530 (ARJUN. S. MALLUR) LXXXV Addl.City Civil & Sessions Judge, Bengaluru.
ANNEXURE LIST OF WITNESSES EXAMINED ON BEHALF OF PLAINTIFF:
51Com.OS.No.17/2022 and Com.O.S.No.298/2021 PW-1 Ratan Kumar PW-2 Mr. Lokesh Mallikarjunappa LIST OF DOCUMENTS EXHIBITED ON BEHALF OF THE PLAINTIFF Ex.P.1 Original Purchase order dated 27.07.2019. Ex.P.2 & 3 Computer generated Tax invoice dated 27.07.2019.
Ex.P.4 Original purchase order dated 27.07.2019. Ex.P.5 Computer generated Tax invoice dated 03.08.2019.
Ex.P.6 Original purchase order dated 27.07.2019. Ex.P.7 Computer generated Tax invoice dated 03.08.2019.
Ex.P.8 Original purchase order dated 27.07.2019. Ex.P.9 Computer generated Tax invoice dated 03.08.2019.
Ex.P.10 Original purchase order dated 08.08.2019 Ex.P.11 Computer generated Tax invoice dated 13.08.2019.
Ex.P.12 Computer generated Tax invoice dated 15.08.2019.
Ex.P.13 Original purchase order dated 23.08.2019. Ex,.P.14 Computer generated Tax invoice dated 25.08.2019.
Ex.P.15 Original purchase order dated 23.08.2019. Ex.P.16 Computer generated Tax invoice dated 09.09.2019.
Ex.P.17 Original purchase order dated 23.08.2019. Ex.P.18 Computer generated Tax invoice dated 09.09.2019.
Ex.P.19 Original purchase order dated 23.08.2019. Ex.P.20 Computer generated Tax invoice dated 09.09.2019.
52Com.OS.No.17/2022 and Com.O.S.No.298/2021 Ex.P.21 Original purchase order dated 23.08.2019. Ex.P.22 Computer generated Tax invoice dated 09.09.2019.
Ex.P.23 Original purchase order dated 23.09.2019. Ex.P.24 Computer generated Tax invoice dated 23.09.2019.
Ex.P.25 Original purchase order dated 23.09.2019. Ex.P.26 Computer generated Tax invoice dated 04.10.2019.
Ex.P.27 Original purchase order dated 23.09.2019. Ex.P.28 Computer generated Tax invoice dated 04.10.2019.
Ex.P.29 Original purchase order dated 23.09.2019. Ex.P.30 Computer generated Tax invoice dated 04.10.2019.
Ex.P.31 Original purchase order dated 18.10.2019. Ex.P.32 Carbon copy of Delivery Challen dated 19.10.2019 along with receiver's seal and signature.
Ex.P.33 Computer generated Tax invoice dated 21.10.2019.
Ex.P.34 Original purchase order dated 18.10.2019. Ex.P.35 & Carbon copy of Delivery Challen dated 36 22.10.2019 along with receiver's seal and signature .
Ex.P.37 Carbon copy of Delivery Challen dated 19.10.2019 along with receiver's seal and signature.
Ex.P.38 Computer generated Tax invoice dated 02.11.2019.
Ex.P.39 Original purchase order dated 18.10.2019. Ex.P.40 Computer generated Tax invoice dated 02.11.2019.
Ex.P.41 Original purchase order dated 22.10.2019. Ex.P.42 Carbon copy of Delivery Challen dated 53 Com.OS.No.17/2022 and Com.O.S.No.298/2021 25.10.2019 along with receiver's seal and signature.
Ex.P.43 Computer generated Tax invoice dated 02.11.2019.
Ex.P.44 Carbon copy of Delivery Challen dated 09.10.2019 along with receiver's seal and signature.
Ex.P.45 Computer generated Tax invoice dated 12.11.2019.
Ex.P.46 Original purchase order dated 07.112019. Ex.P.47 Carbon copy of Delivery Challen dated 12.11.2019 along with receiver's seal and signature.
Ex.P.48 Carbon copy of Delivery Challen dated 06.11.2019 along with receiver's seal and signature.
Ex.P.49 Computer generated Tax invoice dated 12.11.2019.
Ex.P.50 Copy of Delivery Challen dated 26.11.2019 along with receiver's seal and signature. Ex.P.51 Computer generated Tax invoice dated 25.11.2019.
Ex.P.52 Computer generated Tax invoice dated 25.11.2019.
Ex.P.53 Copy of Delivery Challen dated 30.11.2019 along with receiver's seal and signature. Ex.P.54 Computer generated Tax invoice dated 02.12.2019.
Ex.P.55 Copy of Delivery Challen dated 27.11.2019 along with receiver's seal and signature. Ex.P.56 Computer generated Tax invoice dated 22.11.2019.
Ex.P.57 Copy of Delivery Challen dated 24.12.2019 along with receiver's seal and signature. Ex.P.58 Computer generated Tax invoice dated 54 Com.OS.No.17/2022 and Com.O.S.No.298/2021 26.12.2019.
Ex.P.59 Copy of Delivery Challen dated 27.12.2019 along with receiver's seal and signature. Ex.P.60 Invoice dated 01.01.2020. Ex.P.61 Copy of Delivery Challen dated 27.12.2019 along with receiver's seal and signature. Ex.P.62 Computer generated Tax invoice dated 01.01.2020.
Ex.P.63 Copy of Delivery Challen dated 24.12.2019 along with receiver's seal and signature. Ex.P.64 & Invoice dated 01.01.2020. 65 Ex.P.66 Carbon copy of Delivery Challen dated 27.12.2019 along with receiver's seal and signature.
Ex.P.67 Carbon copy of Delivery Challen dated 21.12.2019 along with receiver's seal and signature.
Ex.P.68 E-mail dated 06.02.2020 (ink page 86 to
95).
Ex.P.69 E-mail dated 06.02.2020 (ink page 96 to
98).
Ex.P.70 E-mail dated 02.03.2020 (ink page 99) Ex.P.71 E-mail dated 11.06.2020 (ink page 100 to
102).
Ex.P.72 Office copy of legal notice dated 14.03.2020.
Ex.P.73 Office copy of another legal notice dated 30.07.2020.
Ex.P.74 Original track consignment.
Ex.P.75 Mediation report. Ex.P.76 Certificate u/S 65B of the Indian Evidence Act, 1872. Ex.P.77 Copy of Purchase order dated 22.11.2019 55
Com.OS.No.17/2022 and Com.O.S.No.298/2021 (marked in view of it is admitted document as per the defendant's Affidavit of admission and denial of documents filed) Ex.P.78 Copy of Purchase order dated 22.11.2019 (marked in view of it is admitted document as per the defendant's Affidavit of admission and denial of documents filed) Ex.P.79 Copy of Purchase order dated 22.11.2019 (marked in view of it is admitted document as per the defendant's Affidavit of admission and denial of documents filed) Ex.P.80 Copy of Purchase order dated 22.11.2019 (marked in view of it is admitted document as per the defendant's Affidavit of admission and denial of documents filed) Ex.P.81 Copy of Purchase order dated 17.12.2019 (marked in view of it is admitted document as per the defendant's Affidavit of admission and denial of documents filed) Ex.P.82 Copy of Purchase order dated 17.12.2019 (marked in view of it is admitted document as per the defendant's Affidavit of admission and denial of documents filed) Ex.P.83 Copy of Purchase order dated 17.12.2019 (marked in view of it is admitted document as per the defendant's Affidavit of admission and denial of documents filed) Ex.P.84 Copy of Purchase order dated 17.12.2019 (marked in view of it is admitted document 56 Com.OS.No.17/2022 and Com.O.S.No.298/2021 as per the defendant's Affidavit of admission and denial of documents filed) Ex.P.85 Promotion letter dated 11.11.2023 issued by 2nd defendant.
Ex.P.86 Promotion letter dated 04.01.2016 issued by 2nd defendant.
Ex.P.87 Promotion letter dated 01.07.2018 issued by 2nd defendant.
Ex.P.88 Letter of revision in salary of 2nd defendant dated 01.01.2018.
Ex.P.89 Certificate of participation by 2nd defendant as project manager for defendant Nsoft. Ex.P.90 Certificate of participation by 2nd defendant as sales and business development support.
Ex.P.91 Relieving letter dated 30.11.2019. Ex.P.92 No objection letter dated 29.11.2019. Ex.P.93 Details of KT transfer. Ex.P.94 2 photographs (admitted documents) LIST OF WITNESSES EXAMINED ON BEHALF OF THE DEFENDANT D.W.1 Mr. Bhuvana Nagaraj D.W.2 Nagaraj Subramanya LIST OF DOCUMENTS EXHIBITED ON BEHALF OF THE DEFENDANT Ex.D.1 Tax Invoice dated 03.04.2019 Ex.D.2 Balance Sheet Ex.D.3 Legal notice dated 16.03.2020 57 Com.OS.No.17/2022 and Com.O.S.No.298/2021 Ex.D.4 Copy of email on reply to legal notice dated 13.04.2020 Ex.D.5 Tax Invoice dated 10.06.2013 Ex.D.6 Tax Invoice dated 28.07.2018 Ex.D.7 Auditors Report Ex.D.8 Email copies Ex.D.9 Letter dated 31.05.2023 Ex.D.10 Email Copy Ex.D.11 Email Copy Ex.D.12 Quotation Ex.D.13 The copies of purchase orders placed on 1 st defendant / PW1 and tax invoices raised by 1st defendant / PW1 from April 2017 to December 2019 being admitted documents as per Affidavit of admission and denial of documents filed by plaintiff in Com.O.S.298/2021 and defendant in Com.O.S.17/2022. (ink page 165 to 663) Ex.D.14 Tax invoice dated 02.12.2019. Ex.D.15 Purchase order dated 22.11.2019 along with indent report and office note issued by Nsoft.
Ex.D.16 Purchase order dated 17.12.2019 along with indent report, approval details and office note dated 13.12.2019 issued by Nsoft.
Ex.D.17 Tax invoice dated 02.11.2019 with copy of purchase order, indent report and office note.
Ex.D.18 Purchase order dated 22.11.2019 along with indent report and office note issued by Nsoft.
Ex.D.19 Purchase order dated 22.11.2019 along with indent report and office note issued by Nsoft.
58Com.OS.No.17/2022 and Com.O.S.No.298/2021 Ex.D.20 Tax invoice dated 02.11.2019 with copy of purchase order, indent report and office note.
Ex.D.21 Tax invoice dated 02.11.2019 with copy of purchase order, indent report and office note.
Ex.D.22 Tax invoice dated 02.11.2019 with copy of purchase order, indent report and office note.
Ex.D.23 Purchase order dated 17.12.2019 along with indent report and office note issued by Nsoft.
Ex.D.24 E-document issued by Goods and service tax pertaining to Mahaveer Enterprises. Ex.D.25 E-document issued by Goods and service tax pertaining to Mahaveer Computer Stationeries.
Ex.D.26 E-mail issued by one Girish of Vinayaka Art Printers with attachments / copy of 3 invoices Ex.D.27 Delivery challan / gate pass with copy of one photograph. (subject to objection) Ex.D.28 & Certificate u/S 65B of Indian Evidence Act 29 in respect of Ex.D.26 & 27. Ex.D.30 Original invoices from the year 2017 to 2019.
Ex.D.31 Original purchase orders from July 2018 to December 2019.
Ex.D.32 Original work award issued by Gulbarga Electricity Supply Company Limited dated 12.12.2015.
Ex.D.33 Original contract order No.1/2016-17 issued by Bangalore Electricity supply company limited dated 26.04.2016. Ex.D.34 Original work order dated 16.02.2019 59 Com.OS.No.17/2022 and Com.O.S.No.298/2021 issued by BWSSB.
Ex.D.35 11 original invoices of King Print Systems issued to Mahaveer Computer Stationeries. Ex.D.36 Office copy of work order issued by Hubli Electricity Supply Company Limited Dated 04.03.2014.
Ex.D.37 Office copy of the agreement dated 21.07.2018.
(ARJUN. S. MALLUR) LXXXV Addl.City Civil & Sessions Judge, Bengaluru.
60