Delhi District Court
J. P. Pathak vs M/S Pratibha Industries Ltd on 23 September, 2013
IN THE COURT OF SH. M.P. SINGH: ACJ/CCJ/ARC(SE), SAKET COURT, NEW
DELHI
Civil Suit No. 136/13
Unique case ID No. 02406C0450562010
J. P. Pathak
S/o R. N. Pathak,
Proprietor, Apex Security and Allied Services (Regd.)
B344, New Ashok Nagar, Delhi96 ........... Plaintiff
Vs.
M/s Pratibha Industries Ltd.
B85, Bhisma Pitamah Marg
Defence Colony, Delhi - 24 ......... Defendant
SUIT FOR RECOVERY OF Rs. 1,12,000/
Suit instituted on : 09.12.2009
Arguments heard on : 09.09.2013
Judgment pronounced on : 23.09.2013
JUDGMENT
1. Decision of the instant case hinges on the English Common Law principle of 'privity of contract' which was extended to India by the Privy Council in Jamna Das vs. Ram Autar (1911) 30 IA 7, and later on approved by the Apex Court in M. C. Chako vs. State Bank of Travancore AIR 1970 SC 504. The legal question in the instant case is, whether, where A and B enter into a contract inter se whereby A agrees to make payment to B's creditor, a creditor of B can sue A on the contract between A and B.
2. Brief facts, as set out in the plaint, may be taken note of: Plaintiff is the CS 136/13 J. P. Pathak vs. Pratibha Industries Ltd. Page 1/14 proprietor of Apex Security and Allied Services (Regd.). He is is engaged in the business of providing security guards. He was approached by the defendant company in December, 2008 with a request to provide security guards at latter's work site at Nizamuddin Bridge (Delhi Jal Board site), Delhi. On defendant's request, plaintiff provided security guards at the aforesaid work site from January 2009 till May 2009 @ Rs. 7,000/ per guard / per month for 12 hours daily. For having availed services of security guards at the aforesaid work site, defendant paid the bills raised by the plaintiff for the months of January, February and March 2009 through cheques bearing no. 203603, 204072 and 404296 dt. 27.02.2009, 09.04.2009 and 29.04.2009 amounting Rs. 11,433/, Rs. 45,500/ and Rs. 53,300/ respectively. (The second cheque (Ex. P4) was for Rs. 45,500/, but in the plaint it is incorrectly stated to be for Rs. 45,000/ only). For the months of April and May, 2009 plaintiff raised bills dt. 30.04.2009 and 31.05.2009 respectively amounting Rs. 56,000/ each during which period eight security guards were posted at defendant's disposal. Defendant, however, allegedly did not make any payment in respect of these two bills. Plaintiff thus accuses the defendant of having withheld payment amounting Rs. 1,12,000/. Plaintiff sent a legal notice dt. 06.07.2009 to the defendant to which the latter replied by refuting its liability. On these averments the present suit was instituted seeking recovery of Rs. 1,12,000/ along with pendente lite and future interest @ 18% per annum as well as cost of the suit.
3. Defendant company entered the contest by filing its written statement. The main plank of its defence is that there was no privity of contract between it and the plaintiff as it never entered into any agreement or contract with the latter for engaging his services for deployment of security guards at the work site. As per the CS 136/13 J. P. Pathak vs. Pratibha Industries Ltd. Page 2/14 defendant's stand, Steelcon Engineering Company, Laxmi Nagar, Delhi (hereinafter referred to as "Steelcon") used to work for it (defendant), and it was Steelcon who had provided the security guards to it. With respect to payments made by it through aforesaid three cheques to the plaintiff, it is stated that the same was done at the instance of Steelcon, and the payments so made were then debited from Steelcon's account. Bills raised by the plaintiff in defendant's name are alleged to be forged and fabricated. Defendant goes on to deny that it ever made payments in respect of bills raised by the plaintiff for the months of January, February and March 2009. Defendant reiterates that it never availed any services of the plaintiff and vehemently refutes plaintiff's contentions regarding posting of eight security guards at the work site. Insofar as its reply to plaintiff's legal notice is concerned, defendant does not dispute it. Denying rest of the averments, defendant seeks dismissal of the suit.
4. On the basis of pleadings and documents of the parties, the following issues were framed on 25.08.2011. The issues are as follows:
Issue no. 1 Whether there is privity of contract between the plaintiff and the defendant? (OPD) Issue no. 2 Whether the plaintiff is entitled to a decree for recovery of money as prayed for in clause (a) of the prayer in the plaint? (OPP) Issue no. 3 Whether the plaintiff is entitled to interest as prayed for? If so, on what amount, at what rate and for which period?
(OPP) Issue no. 4 Relief
5. In plaintiff's evidence, plaintiff examined himself as PW1. One CS 136/13 J. P. Pathak vs. Pratibha Industries Ltd. Page 3/14 Ravinder Singh was examined as PW2. PW3 was one Mr. Vijay Kumar Pathak. In defendant's evidence only one witness, namely, Ram Balak Sahu (DW1) stepped into the witness box.
6. I have heard the arguments at bar and perused the record of this case.
7. My issue wise findings on the aforesaid issues are as follows:
8. Issue No. 1 - Onus to prove this issue to the effect whether there is privity of contract between the parties was placed upon the defendant. It appears that there is a typographical error in this issue. This is for the reason that it was the defendant's stand that there was no privity of contract between the parties. Therefore, the defendant cannot possibly be asked to prove something which is entirely opposite to its own stand. It could be asked to prove only what it sought to establish by raising the plea that there was no privity of contract. This issue should instead have read as follows: Whether there is no privity of contract between the plaintiff and the defendant? (OPD). Or, in the alternative: Whether there is privity of contract between the plaintiff and the defendant? (OPP). I accordingly proceed ahead to give my finding on this issue on the basis that onus is on the defendant to prove that there is no privity of contract between the parties.
9. The real question in controversy is with whom did the plaintiff contract to provide security guards at the work site. Did he contract with the defendant or the Steelcon? Had there been a contract in writing in this regard, the answer could have been a fairly straight one. However, the problem is that no formal contract in writing was drawn up when the plaintiff agreed to depute his security guards at the work site. This has been fairly admitted by him in his cross examination. Relevant extracts out of his crossexamination conducted on 09.12.2011 CS 136/13 J. P. Pathak vs. Pratibha Industries Ltd. Page 4/14 are as follows:
"There was no contract in writing with the defendant company......... No letter of intent, letter of appointment, etc. was given by the defendant company in my favour."
10. Therefore, in the absence of an express written contract in this regard, we have to turn our attention to the oral deposition of the witnesses and the various documents led into evidence by the parties to determine whether the plaintiff had really contracted with the defendant as asserted by him. It is important to mention here that the testimonies of PW2 and PW3 are not too germane for determination of this issue. This is for the reason that these two witnesses stepped into the witness box to give evidence primarily to the effect that the plaintiff had posted them at the work site. This issue would turn on chiefly on the testimonies of plaintiff (PW1) himself and DW1 Ram Balak Sahu and the documents exhibited and proved on record.
11. Plaintiff in his examination in chief and for a better part of his cross examination took the position that he had contracted with the defendant Pratibha Industries Ltd. for deployment of security guards at the work site. Towards the end of his crossexamination, to a question whether he knew Steelcon, he stated that he neither knew it nor did he recognise it. However, what followed thereafter in his crossexamination is of very crucial importance, which is as follows:
I do not know Steelcon Engineering Consultants and I do not recognize the said company. I know Mr. Sameer Sayyad as (sic) whose site I used to work and provide security guards. There was no contract between me and Steelcon Engineering Consultants at any point of time. It is correct that I have prepared the bill dated 31.01.2009 (Ex. PW1/D2) in the name of Steelcon Engineering Company CS 136/13 J. P. Pathak vs. Pratibha Industries Ltd. Page 5/14 which has been filed along with the list of documents dated 14.05.2010 by the defendant. It is correct that I have prepared the bill dated 30.04.2009 (Ex. PW1/D3) in the name of Steelcon Engineering Company which has been filed along with the list of documents dated 14.05.2010 by the defendant. I had handed over the bills dated 31.01.2009 and 30.04.2009 to the defendant company. It is correct that I have prepared the bill dated 28.02.2009 (Ex. PW1/D4) and the attendance sheet for the period February, 2009 (Ex. PW1/D5) in the name of Steelcon Engineering Company which have been shown to me today. It is correct that I have prepared the bill dated 31.03.2009 (Ex.
PW1/D6) and the attendance sheet for the period March, 2009 (Ex. PW1/D7) in the name of Steelcon Engineering Company which have been shown to me today.
12. Now, when the plaintiff did not know or recognise Steelcon, how is it that he had prepared the attendance sheets of the security guards posted at the work site for the months of February and March, 2009 (Ex. PW1/5 and Ex. PW1/7 respectively) in the name of Steelcon? To take an analogy, a person rendering services of security guards to firm A, would prepare his attendance sheets and other documents only in the name of firm A and not in the name of some other firm, whom he does not even know, recognise or have knowledge about. To put it simply, in commercial transactions, a person would not prepare documents in the name of a firm, which is not known to him.
13. Furthermore, plaintiff, as per his own admission, had generated bills dt. 31.01.2009, 28.02.2009, 31.03.2009 and 30.04.2009 (Ex. PW1/D2, Ex. PW1/D4, Ex. PW1/D6 & Ex.PW1/D3 respectively) in the name of Steelcon and not in the CS 136/13 J. P. Pathak vs. Pratibha Industries Ltd. Page 6/14 name of defendant company. How is that the plaintiff had raised the bills in the name of Steelcon, when he did not even know and recognise it? These documents do suggest that Steelcon was somewhere in the loop in this entire transaction of availing of security guards at the work site. These documents completely discount plaintiff's oral evidence to the effect that he did not know Steelcon. On consideration of the evidence on record, I am not at all inclined to accept that the plaintiff did not know Steelcon. Now, a closer look at the bills for the months of January, February and March, 2009 and the payments made in respect thereof:
•Bill dt. 31.01.2009 for Rs. 11,433/ in the name of Steelcon (Ex. PW1/D2) - This bill was paid by the defendant to the plaintiff by way of cheque (Ex. P3) bearing no. 203603 for Rs. 11,433/ dt. 27.02.2009.
•Bill dt. 28.02.2009 for Rs. 45,500/ in the name of Steelcon (Ex. PW1/D4) - This bill was paid by the defendant to the plaintiff by way of cheque (Ex. P4) bearing no. 204072 for Rs. 45,500/ dt. 09.04.2009.
•Bill dt. 31.03.2009 for Rs. 53,300/ in the name of Steelcon (Ex. PW1/D6) - This bill was paid by the defendant to the plaintiff by way of cheque (Ex. P5) bearing no. 404296 for Rs. 53,300/ dt. 29.04.2009.
14. Now, I shall come to the bill for the month of April, 2009. As per the plaintiff's averments he has not been paid for services rendered for the month of April, 2009 together with that of May, 2009. Plaintiff's contention is that for the month of April, 2009 defendant did not make payment of the bill Ex. PW1/1. Now, I find from the record that the plaintiff has raised two different bills (Ex. PW1/D3 & Ex. PW1/1) for the month of April, 2009. Both the bills are for Rs. 56,000/ and dated 30.04.2009. However, there is a crucial difference between the two bills. The bill Ex. PW1/1, which has been led into evidence by the plaintiff, is in the name of 'Pratibha Industries Ltd.'. But the bill Ex. PW1/D3 (admitted by plaintiff in his CS 136/13 J. P. Pathak vs. Pratibha Industries Ltd. Page 7/14 crossexamination) stands in the name of 'STEELCON Engenring Comp'. This contradiction has not been explained by the plaintiff. How is it that for the month of April, 2009 he raised two bills in name of different persons? To me it appears that bill Ex. PW1/D3, in the name of 'STEELCON Engenring Comp', was raised earlier and when payment did not come, the plaintiff raised another bill Ex. PW1/1 in the name of 'Pratibha Industries Ltd.' so as to buttress his stand that it was Pratibha Industries Ltd. which was really liable to make the payment for the reason that the payments in the past were being made by Pratibha Industries Ltd. and not by Steelcon. This is a probable view which can be taken under the given circumstances.
15. It is, therefore, clear from the aforesaid that the practice that was followed was that the plaintiff would raise bills in the name of Steelcon and the defendant company would make payments of the bills on behalf of Steelcon. This discussion also makes it clear that the plaintiff did know Steelcon. What is also clear is that Steelcon was also involved in this entire transaction of deployment of security guards and it was also somewhere in the loop in this entire arrangement. To what extent was Steelcon involved in this transaction, would become clear as we proceed to the evidence of DW1 Ram Balak Sahu.
16. DW1 in his evidence by way of affidavit deposed that Delhi Jal Board had awarded the contract of designing and building unified MS clear water transmission main between Laxmi Nagar and Rajiv Gandhi Van Smriti vide letter no.
F7(54)EE(Proj.)WVII/2008/865 dt. 25.08.2008, which is Ex. DW1/1. He further testified that defendant thereafter engaged the services of Steelcon for executing certain works pertaining to dismantling and laying of pipes at Nizamuddin Bridge (the work site) and other related / ancillary works vide letter no. CS 136/13 J. P. Pathak vs. Pratibha Industries Ltd. Page 8/14 PIL/DJB/0809/RO/347 dt. 09.01.2009. This letter is Ex. DW1/2, addressed to Steelcon by Sh. V. M. Katyal, General Manager, Pratibha Industries Ltd. Clause 6 of this agreement, which is relevant for the present purpose, provided as follows:
"Provision of minimum 6 Nos. Guards and one number Gun Man for the Security of all goods, materials, machinery & equipments etc. is in your (Steelcon) scope of work order at your (Steelcon) cost."
17. In terms of clause 6 of the aforesaid document, it was for Steelcon to make arrangements for security guards. DW1 further testified that defendant at no point of time entered into any contract with plaintiff. He admits payment of aforesaid three cheques for the months of January, February and March, 2009 to the plaintiff. He, however, states that the aforesaid three cheques were issued to the plaintiff on the instructions of Steelcon. He also testified that the Steelcon wrote letter dt. 17.02.2009 (Ex. DW1/3) under the signature of its representative Mr. Samir Sayyed thereby requesting the defendant to release payments in favour of several security agencies employed by it, including the plaintiff. It has also come in his deposition that after release of payments of various amounts to various agencies, as per instructions of Steelcon, it made debit entries in latter's accounts (account statement Ex. DW1/4). He also testified that the copy of bills dt. 31.01.2009, 28.02.2009. 31.03.2009 and 30.04.2009 along with the attendance sheets for the months of February, March and April, 2009 (all these bills and attendance sheets raised in the name of Steelcon) were supplied to it by Steelcon. This witness was crossexamined by the plaintiff. But nothing emerged in his crossexamination which could be said to be favouring the plaintiff's stand that he had really contracted with the defendant and not with Steelcon for deployment of security guards. Except for suggestions, which were CS 136/13 J. P. Pathak vs. Pratibha Industries Ltd. Page 9/14 denied by the witness, nothing worthwhile was elicited in his crossexamination.
18. Therefore, what emerges from the evidence, both oral and documentary, is that the plaintiff had really contracted with Steelcon for deployment of security guards and not with the defendant. On conspectus of entire evidence on record, I find that the arrangement was like this : Defendant subcontracted its work to Steelcon. Steelcon engaged services of the plaintiff for deployment of security guards. Plaintiff would raise bills in the name of Steelcon and then send it to the latter for payment. Steelcon would then send the bills to defendant for release of payment to plaintiff. And the defendant would then make debit entries in the accounts of Steelcon maintained by it.
19. There is one more aspect. PW1 has, inter alia, deposed, "I know Mr. Sameer Sayyad as (sic.) whose site I used to work and provide security guards." As per PW1 (plaintiff) the work site was that of Mr. Sameer Sayyad and he had provided security guards at his work site. Who was this person by the name of Mr. Sameer Sayyad became clear only in defendant's evidence. DW1 in his evidence clearly stated that Mr. Sameer Sayyad was a representative of Steelcon and it he was who was looking after the affairs at the work site. This piece of evidence is a crucial one and clearly reveals that the plaintiff had really contacted with Steelcon and not with the defendant.
20. On a conspectus of the entire evidence on record I hold that there was no privity of contract between the plaintiff and the defendant.
21. However, the answer to this issue would be incomplete without examining whether plaintiff's case is covered within exceptions to the rule of privity of contract. If the plaintiff's case is found to be covered within exceptions to this rule, CS 136/13 J. P. Pathak vs. Pratibha Industries Ltd. Page 10/14 then he can maintain the instant action even though there was no privity of contract with the defendant. To the rule of privity of contract, courts have introduced a few exceptions. And one such exception is where by the terms of a contract a party is required to make payment to a third person and he acknowledges it to that person, a binding obligation is thereby created. A good illustration on this exception is the case of Devaraja Urs vs. Ram Krishnaiah AIR 1952 Mys. 109. The facts were - A sold his house to B under a registered sale deed and left a part of the sale price in his hands desiring him to pay this amount to C, his creditor. Subsequently B made part payments to C informing him that they were out of the sale price left with him and that the balance amount would be remitted immediately. B, however, failed to remit the balance and C sued him for the same. The suit was held to be maintainable. It was held that though originally there was no privity of contract between B and C, B having subsequently acknowledged his liability, C was entitled to sue him for recovery of the amount.
22. In the instant case, there is no evidence whatsoever to the effect that the defendant had acknowledged in writing or orally directly to the plaintiff to make the payments for the months of April and May. The plaintiff has led no evidence to the effect that the defendant had acknowledged to make the payment to it either orally or in writing. On this aspect, his examinationinchief is absolutely silent. Nothing emerged in his crossexamination which could suggest that defendant had made an acknowledgment to him for the payments that were due. In short, there is nothing on record to even remotely suggest that the defendant had made any such acknowledgment to the plaintiff.
23. However, there are one or two old decisions where courts have CS 136/13 J. P. Pathak vs. Pratibha Industries Ltd. Page 11/14 imposed, in such like cases, liability without there being any acknowledgment by the third party to the contract. Decisions of Calcutta High Court in Dwarka Nath Ash vs. Priyanath Malki (1916) 22 CWN 279 and Kshiodebehari Datta vs. Mangobinda Panda AIR 1934 Cal 682 can be referred for this. However, the ratio of these two decisions has not been consistently followed in India. Division Bench of Bombay High Court in National Petroleum Co. Ltd. vs. Popat Mulji AIR 1936 Bom 344 did not follow the ratio of Dwarka Nath (supra) and doubt correctness of the proposition stated therein. It was observed therein :
Later cases in the Calcutta High Court have applied the principle underlying that case to cases where the facts were quite different. In Dwarika Nath Ash v. Priyanath Malki (1916) 22 C. W. N. 279 the principle of the case of Debnarayan Dutt v. Chunilal Ghose was applied, although the contract on which the plaintiff sued had not been communicated to him, and he had not acted upon it. In the latest case in Calcutta, Kshirodebihari Datta V. Mangobinda Panda (1934) I.L.R. 61 Cal. 841, the Court, after reviewing all the authorities, English and Indian, came to the conclusion that ander Indian law any person who took a benefit under a contract to which he was not a party could sue directly upon that contract, and that it was not necessary to invoke the doctrine of trust or agency. With all respect to the learned Judges who decided that case, I am not prepared to adopt that view. The decision seems to me to be opposed to established principle and authority, and if the rule is to be introduced into this country that any person may sue upon a contract if he takes a benefit under it, although a stranger to such contract, I think that such rule must be introduced by the legislature, and not of the Courts.
From the point of view of practical convenience there seems to me to be quite as much to be said against the introduction CS 136/13 J. P. Pathak vs. Pratibha Industries Ltd. Page 12/14 of such a rule, as in favour of it. The reasoning in the Calcutta case is in conflict with a decision of the full bench of the Madras High Court in Subbu Chetti V. Arunachalam Chettiar (1929) I.L.R. 53 Mad. 270, where it was held that a person not a party to a contract could not sue upon the contract except in the special cases there enunciated. I prefer the Madras decision to the reasoning in Kshirodebihari Datta's case.
24. Not only this, in few other cases {Krishna Lal vs. Pramila AIR 1928 Cal 518 and Jagdamba Debya vs. Bibhuti Bhushan AIR 1933 Cal 407} Calcutta High Court itself did not follow the ratio of Dwarka Nath (supra). Madras High Court in the matter of Subbu Chetti vs. Arunachalam AIR 1930 Mad 382 also did not follow this ratio. Therefore, what emerges is that the settled position under the law is under the terms of a contract where a party is required to make payment to a third person, he can be sued by that third person only if and if he makes an acknowledgment of liability to that third person. It is only then that a binding obligations would be created. In the absence of any such acknowledgment he is under no obligation to that third person. The view expressed in Dwarka Nath (supra) does not lay down the settled position of law as it has not been followed in many cases by the High Courts in India, some of which have been cited hereinabove. Therefore, I have no doubt in mind that the case of the plaintiff does not fall within this exception to the rule of privity of contract.
25. There is yet another exception to the rule of privity of contract under which beneficiaries under a trust may sue and enforce the benefits in his favour though he is not a party to the contract. This exception also would not suffice to rescue the plaintiff inasmuch as the defendant was never holding any money in trust CS 136/13 J. P. Pathak vs. Pratibha Industries Ltd. Page 13/14 for the plaintiff. As found hereinabove, it was only releasing payments as instructed by Steelcon to various agencies, including the plaintiff, from time to time. It was as if the defendant was acting as a banker for Steelcon. It was not holding any money in trust for plaintiff. The evidence does not even remotely suggest that a trust was created in favour of the plaintiff visavis the defendant for the money to be paid. Neither has the plaintiff led any evidence along this line. His examination in chief is silent on this aspect. There are few other exceptions to the rule of privity of contract. However, the same are not being discussed here for the reason that they are not even remotely connected with the facts of the instant case.
26. I answer this issue by holding that there was no privity of contract between the plaintiff and the defendant. Unfortunately, for the plaintiff his case is not found to be covered within any of the exceptions to the rule of privity of contract.
27. Issue No. 2 & 3 - Onus to prove this issue was placed upon the plaintiff. The previous issue has been answered by holding that there was no privity of contract between the plaintiff and the defendant and that the instant case is not saved by the exceptions to this rule. In view thereof, it must be held that the plaintiff is not entitled to lay claim to its dues, or any interest thereon, against the defendant. This issue is answered against the plaintiff and in favour of the defendant.
28. Relief In view of the finding on the aforesaid issues, this suit of the plaintiff is liable to be dismissed. It is ordered accordingly. Parties are left to bear their own costs. Decree sheet be prepared. File be consigned to record room.
Announced in the open court on 23.09.2013 (M. P. Singh)
ACJ/CCJ/ARC(SE)
Saket Court, New Delhi
CS 136/13 J. P. Pathak vs. Pratibha Industries Ltd. Page 14/14