Delhi District Court
M/S Indian Zari Emporium Private ... vs M/S Foremost International Private ... on 14 November, 2019
IN THE COURT OF SH. LAXMI KANT GAUR, ADDITIONAL
DISTRICT JUDGE, CENTRAL, TIS HAZARI COURTS, DELHI
CS No. 1224 of 2017
M/s Indian Zari Emporium Private Limited
Having its Registered Office at
2901, Kinari Bazar, Chandni Chowk,
Delhi110006 .......PLAINTIFF
Versus
1.M/s Foremost International Private Limited A Company Incorporated under the Companies Act Registered Office at Plot No.57, Udyog Vihar, Phase1, Gurgaon122001, Haryana
2. Shri Varun Moudgil Director of M/s Foremost International Private Limited Registered Office at Plot No.57, Udyog Vihar, Phase1, Gurgaon122001, Haryana
3. Shri Atul Moudgil Director of M/s Foremost International Private Limited Registered Office at Plot No.57, Udyog Vihar, Phase1, Gurgaon122001, Haryana
4. Ms. Shailja Khanna Director of M/s Foremost International Private Limited Registered Office at Plot No.57, CS No.1224/17 Indian Zari vs. Foremost International page 1 of 21 Udyog Vihar, Phase1, Gurgaon122001, Haryana (Deleted vide order dated 15.07.2017) .....DEFENDANTS Date of filing of the suit : 25.03.2017 Date of reserving judgment : 02.09.2019 Date of judgment : 14.11.2019 Suit for recovery of money Judgment Preliminary
1. Plaintiff and Defendant No.1 are companies registered under the Companies Act. Defendants No. 2 to 4 are the directors of the Defendant No.1. Defendant No.1 is in the business of manufacturing and export of readymade garments. Plaintiff and the defendants were having business relations for long. Plaintiff had been supplying knitted fabrics, laces and stripes to the defendant company. According to the Plaintiff, there had been an outstanding balance of Rs.4,96,412/ against the defendants as on 23.03.2016. Defendant No.1 did not make the said payment in spite of notice being given dated 08/07/2016. The plaintiff has claimed the said amount with interest at the rate of 18% CS No.1224/17 Indian Zari vs. Foremost International page 2 of 21 p.a. amounting to Rs. 5,85,766/ on the date of the filing of the suit. Plaintiff has also prayed for pendente lite and future interest at the rate i.e. 18% per annum.
2. It may also noted that during the course of the trial by the order of the court dated 15.07.2017 defendant no.4 had been deleted from the array of the parties.
Case of the Plaintiff
3. According to the case of the Plaintiff defendant No.2, director of the Defendant No.1 had approached the Plaintiff company for the supply of goods. Thereafter, the plaintiff had started supplying the goods to the Defendant No.1 and continued to do so for quite some time. Plaintiff had opened a running account of the defendant company, wherein it was keeping of record of the value of goods supplied to the defendant company and also the payments received. It is stated that the defendant had made the last payment on 08/03/2016 of Rs.34,850/ through NEFT. Plaintiff has placed on record its Statement of Account and also copies of bills/invoices against which the supplies had been made and payments not received.
Case of the defendant CS No.1224/17 Indian Zari vs. Foremost International page 3 of 21
4. According to the defendant, it was plaintiff who had approached the defendant making an offer to make supplies. It is stated that the basic nature of the work of the defendant is that it would procure the orders from European buyers and thereafter manufacture garments and supply them. In the context of the present case it is stated that, at the request of the Plaintiff the defendant had placed orders on the plaintiff for supply of fabric i.e knitted fabrics, laces and stripes for manufacturing garments for its European clients. It was clearly informed that the plaintiff company would place the orders only if it is committed that the fabric would be supplied within the stipulated time i.e. 15 days of the orders placed. It was also so mentioned on the Purchase Orders placed. It is alleged that the price quoted in the bills were highly inflated. Goods supplied were not as per the specification. And the goods were also not supplied in time. The result was the defendant could not complete its orders in time and its European customers had issued debit notes to the defendant No.1 company resulting in the loss to the Defendant Company.
5. It is further alleged that the goods supplied by the Plaintiff had been lying with the defendant company as they were of no use to the CS No.1224/17 Indian Zari vs. Foremost International page 4 of 21 defendant company of having been supplied late. Defendant had sent messages to the plaintiff to take back the goods but it did not do so. There is nothing outstanding against the defendant. Defendant in full and final settlement had made payment of Rs.34,850/ to the plaintiff after checking the material received and payment made.
6. In the written statement liability of directors has been denied to make any payment to the plaintiff considering that they are the directors of the company and not personally liable to make the payment. ISSUES FRAMED
7. On the basis of the pleadings following issues were framed :
i). Whether time was the essence of the contract? OPD
ii). If so, whether the goods, as stated were delayed beyond the stipulated period of time? OPD
iii). If, the above two issues are answered in the affirmative, whether the defendant suffered monetary loss because of delay? OPD
iv). Whether the goods supplied were not as per the specification? OPD
v). Whether the invoices filed by the Plaintiff were CS No.1224/17 Indian Zari vs. Foremost International page 5 of 21 inflated? OPD
vi). Whether the Plaintiff is entitled to the price of goods in question, as claimed, if so to what extent?
vii). Whether the plaintiff is entitled to interest, if so, at what rate and at what amount?
viii). Relief?
Evidence Examination of witness of defence
8. It was the defendant who had been asked to lead evidence first. From its side, Sh. Varun Modgil one of the directors of the defendant company was examined as DW1, there are two affidavits on record filed by him in examination in chief. Affidavits have been drawn on the lines of the case of the Defendants. It may be added that, in paragraph no.4 of the first affidavit it is stated that for the Purchase Order No.4380 the plaintiff had failed to supply goods of the requisite quality. It is also stated that the plaintiff had raised certain Invoices for which no Purchase Order had been placed and also for several Purchase Orders raised plaintiff failed to supply material. It is alleged that the plaintiff has placed on record with ulterior motive Purchase Orders CS No.1224/17 Indian Zari vs. Foremost International page 6 of 21 which had been placed by M/s Foremost Apparels Pvt. Ltd which is a separate entity. This witness had also referred to emails exchanged between the defendant company and its foreign buyers whereby the order had been cancelled by its buyer because of delay in the supply of goods. The said emails were referred to as Ex.DW1/1. Examination of the witnesses of the Plaintiff
9. Sh. Naveen Gupta one of the directors of the Plaintiff Company had been examined as PW1. His affidavit is also drawn on the lines of the case of the Plaintiff. In the affidavit filed, there was reference made to certified copy of a resolution by which he and an Accountant of the Plaintiff had been authorized to sign, verify and institute the suit as Ex.PW1/1; computer printout of the statement of account Ex.PW1/2; certificate under section 65B of the Evidence Act Ex.PW1/3; Purchases Orders Ex.PW1/4 (colly.); invoices Ex.PW1/5 (colly.) and Legal Notice with postal receipts etc. Ex. PW1/6 (colly.). Hearing of submissions
10.I had heard the submissions made from the side of the Plaintiff. Since the leading counsel had not appeared from the side of the defendant, parties had been given opportunity to file the written submissions. CS No.1224/17 Indian Zari vs. Foremost International page 7 of 21 Written submissions had been filed on behalf of the defendant No.1 to
3.
11.I have gone through the record of the case and also the written submissions filed.
12. Discussion and findings Issues No. 1,2&3 Whether time was the essence of the contract? OPD If so, whether the goods, as stated were delayed beyond the stipulated period of time? OPD If, the above two issues are answered in the affirmative, whether the defendant suffered monetary loss because of delay? OPD All the above three issues are interconnected therefore I am proceeding to decide all the three issue together.
13.Both in the written statement filed and the two affidavits filed in examination in chief there is no reference to any particular Purchase Order against which Plaintiff has a complaint of having goods not being supplied in time. It is stated in paragraph 7 of the affidavit "It is pertinent to mention that the defendant No.1 Company had specifically CS No.1224/17 Indian Zari vs. Foremost International page 8 of 21 mentioned in its purchase order that the delivery of the material has to be made within 15 day."
14. When the portion of the affidavit where it was so written was brought to the notice of DW1, it was stated by him that, it was not so mentioned on each and every Purchase Order. He had stated "It is correct that in my affidavit in para 5 and 6, I have stated about the stipulation of time (now from point A to A in para 5 and B to B in para 6), we had stated about this period in the Purchase Order themselves. Time limit for supply was not mentioned on each and every Purchase Orders." Then at one stage of crossexamination clarification was given that onwhich of the Purchase Order time limit for the supply of goods was referred to. He had deposed "we had mentioned on the Purchase Order placed by us upon the plaintiff pertaining to the goods to be dispatched to our buyer Inditex and the said date is reflected thereon Purchase Order at page 42,43 and 44 and they are separately exhibited as Ex.DW1/P2, P3 and P4.
15.Though I could find in all five purchase order where there had been time of delivery mentioned but as it seems the focus of the Defendants is only at three Purchase Orders Ex DW1/P2, ExDW1/P3 and Ex CS No.1224/17 Indian Zari vs. Foremost International page 9 of 21 DW1/4. The details of the Purchase Orders including the date for the performance of the contract are as under:
TABLE A S. PO Item Q in Invoices Time Date of No. meters specified for delivery delivery 1 ACP/4703/FIP Fringesh 10800 1) 2015 15 working 1)22/02/16 04/02/2016 Lace 2016/6417 days Q.3000
2) 24/02/16
2) 2015 16/6476 24/02/16 Q.8000 2 ACP/4704/FIP POM 75600 1)2015 18 days 1)20/02/20 06/02/2016 POM 2016/6336 16 Lace 18/02/2016 Q.3890
2) 2015 2016/6369 20/02/2016 2) 20/02/16 Q17245
3) 2015 3) 24/02/16 2016/6472 24/02/2016 Q: 19365
4) 29/02/16
4) 2015 16/6619 29/02/16 Q.14,405
5) 08/03/16
5) 2015 16/6889 08/03/16 Q. 20730 3 ACP/4705/FIP Twisting 44550 1)2015 20 days 1)22/02/16 06/02/16 Lace 2016/6421 working 22/02/2016 Q :2500 2) 25/02/16
2) 2015 16/6507 25/02/16 3) 24/02/16 Q: 1950 CS No.1224/17 Indian Zari vs. Foremost International page 10 of 21
3) 2015 16/6475 24/02/2016 Q.1500
16.As far as the purchase order at serial no. 3 in the above table is concerned it can be said whatever supplies had been made they were in time. For the goods supplied as against the purchase order at serial No. 2, there had been just a marginal delay of one to three days. As against purchase order at serial no. 2, some goods had been supplied in time and for some there had been delay of 5 to 12 days. All those deliveries have been underlined above. One my say it is only to that extent there had been a delay in the supply of goods. Just to put to it in context there had nineteen purchase orders against which the supplies and made and it is only in respect these many one may say there had been delay in the supply of goods.
17. Section 55 of the Contract Act reads as under:
"55. Effect of failure to perform at fixed time, in contract in which time is essential.--When a party to a contract promises to do a certain thing at or before a specified time, or certain things at or before specified times, and fails to do any such thing at or before the specified time, the contract, or so much of it as has not been performed, becomes voidable at the option of the promisee, if the intention of the parties was that time should be of the essence of the contract.
CS No.1224/17 Indian Zari vs. Foremost International page 11 of 21 Effect of such failure when time is not essential.--If it was not the intention of the parties that time should be of the essence of the contract, the contract does not become voidable by the failure to do such thing at or before the specified time; but the promisee is entitled to compensation from the promisor for any loss occasioned to him by such failure. Effect of acceptance of performance at time other than that agreed upon.--If, in case of a contract voidable on account of the promisor's failure to perform his promise at the time agreed, the promisee accepts performance of such promise at any time other than that agreed, the promisee cannot claim compensation for any loss occasioned by the non performance of the promise at the time agreed, unless, at the time of such acceptance, he gives notice to the promisor of his intention to do so."
18.Unlike other contracts when it comes to mercantile contracts ordinarily time is considered to be the essence of the contract.(see Mahabir Prasad Rungta v. Durga Dutta AIR 1961 SC 990). Therefore even without reference to the fact that Defendant had contract with a foreign buyer and/or the export to the foreign buyer was dependent upon the deliveries to be made, one may assume that time was the essence of the contract in respect of the purchase orders referred above.
19.But there are questions which still need to be answered. First, whether the defendant by accepting those goods after the specified time had waived of the rights which may have accrued to them as a result of the CS No.1224/17 Indian Zari vs. Foremost International page 12 of 21 deliveries being made by the defendant after the time stipulated. And, second as to whether the defendant had communicated to the plaintiff as required under section 661 of the Contract Act that as far the goods which had been received late, contract stands terminated for section 55 of the Act only makes the contract voidable and not void. It may also be added that these two questions though look different but in fact are two faces of the same coin.
20. I have seen the invoices already referred to in the Table A. It is clear that the goods had been accepted on behalf of the defendant and there had been no questions raised at the time of the acceptance of the goods. There is no note of any kind one can find on these invoices raising any such objection. There is also no certainty if immediately after the goods had been delivered any objection had been raised from the side of the defendant. It was deposed by DW1 " It is correct that there is no written objection raised regarding delayed delivery on the bill Ex. DW1/P7. Vol. objection was conveyed telephonically by my manger Mr. Sachin Sharma. I do not remember whether he conveyed the 1 Section 66 Mode of communicating or revoking rescission of voidable contract.--The rescission of a voidable contract may be communicated or revoked in the same manner, and subject to the same rules, as apply to the communication or revocation of a proposal1.
CS No.1224/17 Indian Zari vs. Foremost International page 13 of 21 objection as on the date of delivery or later on. I do not remember whether Mr Sachin Sharma had made the telephone call in my presence or not. I also do not remember whether Mr. Sachin Sharma made the call either from landline or from mobile phone. I do not even remember if the call was made to any particular person from plaintiff company or whether it was received on the landline or mobile phone. It is correct that I had personally not called the plaintiff with regard to the delayed delivery of goods. Vol. after the call from my employee the director in the plaintiff company Sh. Naveen Gupta present in court (witness points out to the said director) had made a call to me and during which I had told him personally and expressed the grievance regarding he delayed delivery."
21. He had also deposed at one stage " we raised objection regarding the goods which were received by us beyond the stipulated period, though not in writing. It is wrong to suggest that we never raised any objection even telephonically. Upon delayed delivery by the plaintiff, we made efforts to convince our own customers to accept the goods but when our customers refused, we telephonically tried to convince the plaintiff to accept the returned goods. Thereafter there was no response from CS No.1224/17 Indian Zari vs. Foremost International page 14 of 21 the plaintiff and they avoided to have any interaction. We did not raise any debit note qua those goods at any point of time. Vol. however, we remove those bills from our computer system with the intention that till the time plaintiff did not contact us and solve the problem, we will not proceed with those goods. Apart from telephonically raising our objection, we did not make efforts to send back the delayed goods to the plaintiff. Vol. there is no such system."
22. It may be stated here that nothing which this witness has deposed is crossverifiable. According to him, it was Mr. Sachin Sharma who had communicated to the Plaintiff as to their objection of receiving the goods late. Mr. Sachin Sharma has not being examined in this case as a witness. According to him they tried their own customers to accept the goods but they refused and then tried to convince the plaintiff to accept the returned goods. On the face of it the statement is not believable. Defendant states in the written statement that it " is engaged in the business of manufacturing and export of readymade garments to its buyers." When the witness states that his buyers had refused to accept the goods it means that the goods had already made manufactured, which means the fabrication material like laces and all which had been CS No.1224/17 Indian Zari vs. Foremost International page 15 of 21 supplied by the Plaintiff had been consumed. If that was the case then what was that which they were trying to return.
23. Defendants in their written statement have stated " It is imperative to mention here that due to the late delivery of the fabrics by the Plaintiff the garments/orders were not completed within time, which resulted in issuance of debit notes by European customers to the defendant No.1 company which caused loss to the company." There is, however, no debit note placed on record. If the defendant had one, it should not have been a problem for the defendant to place on record. There is no reason given why did the defendant withheld the best evidence from the Court. At the same it may also be noted if for the contract cancelled their own buyer could issue a debit note what prevented the defendants from issuing one to the Plaintiff. It is a standard business practice to do so.
24.I am of the view that in the given circumstances without any evidence to corroborate what has been deposed by the witness DW1, his testimony is not good enough to establish that defendant no.1 had not accepted the goods delivered after the due date and also that it had terminated the contract as was required under section 66 of the Contract Act.
CS No.1224/17 Indian Zari vs. Foremost International page 16 of 21
25. There is no evidence led on behalf of the defendants that defendant No1 suffered any loss as result of the late delivery of goods by the Plaintiff.
26. In the light of above discussion all the issues are decided in favour the Plaintiff and against the defendants.
Issue No.4 & 5 Whether the goods supplied were not as per the specification? OPD Whether the invoices filed by the Plaintiff were inflated? OPD
27.These issue arise from the set of allegation made in paragraph 6 of preliminary objection in the written statement. Neither in the written statement nor in the affidavit filed in evidence by witness DW1 it has been stated as to in respect of which of the supplies deviation had been made and what was the agreed rate at which the material was to be supplied and at and what rate the same had been supplied. It is stated in para 6 of the preliminary objection of the written statement "The plaintiff raised invoices /bills after supplying the material and payments were made thereon after checking /verifying the invoice bills. It is also pertinent to state here that the invoices filed by the plaintiff are not the actual invoices since the invoices were first checked / CS No.1224/17 Indian Zari vs. Foremost International page 17 of 21 confirmed as per the specification of materials to be purchased. The invoices raised were highly inflated and material delivered was not as per the specification agreed upon between the parties." What has been stated in the affidavit filed in the examinationinchief is no different. If this was the case that every invoice was checked, verified and confirmed at the end of the defendant, then there was no difficult for the defendants to have pointed out those supplies which did not conform to the specification and invoices were rates quoted were inflated. There is no explanation as to why the same had not produced or at least details thereof had not been provided. I am the view it can be presumed under section 114 [illustration (g)2] of the Evidence Act, that if those documents had been produced the same would have been unfavorable to the Defendant.
28.I would therefore, conclude that the defendants have failed to prove that the goods supplied by the Plaintiff were not as per the specifications and also that the bills submitted were inflated. The issues are accordingly decided against the defendants in favour of the 2
114. Court may presume existence of certain facts. -- The Court may presume the existence of any fact which it thinks likely to have happened, regard being had to the common course of natural events, human conduct and public and private business, in their relation to the facts of the particular case Illustration (g) that evidence which could be and is not produced would, if produced, be unfavourable to the person who withholds it; CS No.1224/17 Indian Zari vs. Foremost International page 18 of 21 Plaintiff.
Issue No. 6 Whether the Plaintiff is entitled to the price of goods in question, as claimed, if so to what extent?
29.There is no dispute as to the supplies made in terms of invoices filed on record. The only defence has been that the goods had not been supplied according to specification, delivered late and bills were inflated. These issues have already been discussed above and decided in favour of the Plaintiff. I have seen the statement of account filed. That does not seem to of much assistance. It is apparent the suit has been filed only in respect of the invoices which have remained unpaid.
30.In the written statement filed defendants have stated "it is stated here that after adjusting the complete payment the defendant company had made a full and final payment of Rs.34,850/ to the plaintiff. It is important to mention here that even at the time of last payment the plaintiff had assured that the material supplied by the Plaintiff company after the due date (due to which the order of the defendant company was cancelled by its European buyers) would be taken back and invoices would be withdrawn by the plaintiff and defendant CS No.1224/17 Indian Zari vs. Foremost International page 19 of 21 company will not be charged for the same.". The payment which is stated to have been made by the defendants is only in respect of invoice about which there had been no dispute, including the last payment Rs.34,850/. Thus there is no dispute that these bills have remained unpaid.
31. The amount of these bills comes to Rs.4,96,412/. This is an amount which can be said to be recoverable by the Plaintiff. It may also be stated here the liability of making the payment would only be of Defendant No.1 Company and not its directors for its trite law that for the debts of the company directors cannot be held personally liable. (See - Tristar Consultants vs Vcustomer Services India Pvt AIR 2007 Delhi 157) ISSUE NO. 7 Whether the plaintiff is entitled to interest, if so, at what rate and at what amount?
32. It would be fair to say that if this court has come to conclusion that an amount of Rs.4,96,412/ is due to be paid to the plaintiff then plaintiff can also be said to be entitled to interest on the said amount. In the legal notice dated 08.07.2016 [Ex.PW1/6 (colly)] sent plaintiff has CS No.1224/17 Indian Zari vs. Foremost International page 20 of 21 demanded interest at the rate of 18% per annum from 22.03.2016 till the payment is made. Suit was filed on 25.03.2017. It has been valued at Rs.5,85,766/. Apparently this amount appears to include the interest as well on the said amount.
33. I am of the view that interest on the amount i.e. Rs.4,96,412/ @ 9% p.a. from the date of filing of suit till realisation would meet the ends of justice. (See - Geetu Lakhpat v. Jaipal 2011SCC Online Del 1706) Relief
34.In view of the above discussion and the facts and circumstances of the case, I am decreeing the suit in favour of the plaintiff and against the defendant no.1 only for recovering a sum of Rs.4,96,412/ with interest @ 9% p.a. from 22.03.2016 till realisation. The plaintiff shall also be entitled to costs.
35.Decree sheet be prepared accordingly.
36.File be consigned to record room.
Announced in the open court on 14th November,2019 (LAXMI KANT GAUR) Additional District Judge(05), Central District, Delhi.
CS No.1224/17 Indian Zari vs. Foremost International page 21 of 21