Delhi District Court
M/S A.S Shoe Accessories Pvt. Ltd. ... vs M/S Ess Aar Universal Pvt. Ltd on 23 February, 2024
IN THE COURT OF VIKAS GARG, ADJ-05 (EAST),
KARKARDOOMA COURTS, DELHI.
Suit No. 367/2020 (2529/16)
M/s A.S. Shoe Accessories Pvt. Ltd.
(A Company duly registered and incorporated
under the provisions of Indian Companies Act, 1956).
15, Sayed Nangloi, Gurudawara Wali Gali,
New Delhi-110087 ...........Plaintiff
Versus
M/s Ess Aar Universal Pvt. Ltd.
Regd Office-G-90, Basement,
Preet Vihar, Delhi-110092
Also at:
D-7/8, Shubham Apartment,
Dilshad Colony, Delhi-110095.
Also at:
J-56, Sector-63, Noida, U.P.
Also at:
A-40/1. Site-IV, Sahibabad Industrial Area,
Ghaziabad, U.P.
Also at:
G-16/B, Nathupur, Sonepat, Haryana ......Defendant
SUIT FOR RECOVERY OF RS. 35,40,341/- (Rs. THIRTY FIVE
LACS FORTY THOUSAND THREE HUNDRED FORTY ONE
ONLY) ALONGWITH PENDENTLITE AND FUTURE
INTEREST @ 18 % PER ANNUM.
CS No. 367/20 M/s A.S. Shoe Accessories Pvt Ltd through AR Vs. M/s Ess Aar Universal
Pvt Ltd Digitally
signed by
Page no. 1/42 VIKAS
VIKAS GARG
GARG Date:
2024.02.23
16:06:32
+0530
Date of Institution : 04.04.2016
Date of Final Arguments : 08.02.2024
Date of Decision : 23.02.2024
Final Decision : Decreed
JUDGMENT
1. By this judgment, I shall dispose of the present suit for recovery of Rs.35,40,341/- (Rs. Thirty five lakhs forty thousand three hundred forty one only) alongwith pendente lite and future interest @ 18 % per annum.
2. Originally, the plaintiff filed the suit against two defendants, but subsequently chose to exclude the second defendant from the proceedings.
CASE OF THE PLAINTIFF AS PER PLAINT Briefly, the essential facts required for a fair adjudication of the present suit, as presented in the plaint, are as follows:
3. Briefly stated, case of the plaintiff is that plaintiff is a company duly incorporated under the provisions of Indian Companies Act, 1956, and engaged in the business of manufacturing and trading of Pigments, Lacquers, Release Agents for Polyurethane, Shoe Sole finishing chemicals and chemicals for footwear industries etc and runs its business from the above said address and has earned a good name, fame and reputation in the said field of its business and having lots of customers all over India. It is CS No. 367/20 M/s A.S. Shoe Accessories Pvt Ltd through AR Vs. M/s Ess Aar Universal Pvt Ltd Digitally Page no. 2/42 signed by VIKAS VIKAS GARG Date:
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further stated by the plaintiff that defendant no. 1 is a company duly incorporated and registered under the provisions of Indian Companies Act, 1956, engaged in the business of PU/TR / other Shoe Material, Rubber Shoe Soles industry and running its business from the above given address. It is further averred that defendant no. 2 is managing director of the defendant no. 1 and the person in- charge of the day to day affairs of the defendant no. 1. It is further stated by the plaintiff that defendant no. 2 himself and also through his employees, approached the plaintiff in its office from time to time and expressed his desire to purchase various products manufactured and sold by the plaintiff. It is also averred that as per the requirements and orders placed by the defendants, the plaintiff supplied various products i.e. PU, Lacquers, dosing, other footwear material, chemicals and many more products to the defendants vide various invoices / challans, for which bills were duly raised by plaintiff and accepted by the defendants. It is also averred that the correctness and veracity of the said bills were also verified by the defendants at the time of accepting the delivery of the said materials and the challans / invoices and bills as aforesaid may kindly be read as part and parcel of this para for the purpose of description of goods / its price and dates of delivery / its respective weight and destination etc. It is further averred that it was agreed between the plaintiff and defendants that initially plaintiff would provide the goods on credit basis and raise the bills accordingly and the defendant would clear the bills as soon as possible. It is further averred that the plaintiff submitted the bills to the defendants well in CS No. 367/20 M/s A.S. Shoe Accessories Pvt Ltd through AR Vs. M/s Ess Aar Universal Pvt Ltd Page no. 3/42 Digitally signed VIKAS byDate:VIKAS GARG GARG 2024.02.23 16:07:45 +0530 time. However, despite the materials supplied by the plaintiff to the entire satisfaction of the defendants, the defendants have failed in making full payment of the said goods to the plaintiff, notwithstanding the reminders and personal visits of plaintiff for liquidating the outstanding amount due from and payable by defendants. It is further averred that as per the practice of business a ledger / running account was being maintained by the plaintiff in which all the entries have been duly entered and now as per the accounts, till 03.02.2014 there was an amount of Rs.25,47,008/- (Rs. Twenty Five Lakhs Forty Seven Thousand and eight only) pending on the part of defendants. It is further averred that defendants are deliberately and intentionally avoiding the payment of the above said outstanding amount and have been procrastinating the matter without any rhyme and reason. It is further averred that defendants had undertaken that they will make the payments on time and despite the fact that they were in receipt of the bills and statement of accounts to their entire satisfaction, still they have failed in making the payment Rs.25,47,008/- (Rs. Twenty Five Lakhs forty Seven Thousand and Eight only) till 03.02.2014 which after adding the simple interest @ 18 % per annum have now become Rs.35,40,341/- (Rs. Thirty five lakhs forty thousand three hundred forty one only) till the date of filing the instant suit i.e. 03.04.2016. It is further averred that the plaintiff has sent many mails to the defendants and also contacted and requested them personally and also requested over telephone to clear the outstanding amount but they kept the plaintiff assuring that very soon they would clear the outstanding CS No. 367/20 M/s A.S. Shoe Accessories Pvt Ltd through AR Vs. M/s Ess Aar Universal Pvt Ltd Digitally Page no. 4/42 signed by VIKAS VIKAS GARG Date:
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amount but never kept their promises. It is further averred that irresponsible behaviour of the defendants has caused a great harassment, inconvenience and financial losses to the plaintiff for which the defendants are liable to pay compensation to the plaintiff. It is further averred that when the requests, phone calls and personal visits of plaintiff did not yield any result the plaintiff sent a legal notice dated 25.01.2016 through his advocate to the defendants and demanded to pay the aforesaid amount of Rs.25,47,008/- (Rs. Twenty Five Lacs forty seven thousand and eight only) alongwith interest @ 18 % per annum from the date when it accrued up till the date of actual payment within 15 days from the date of receipt of the said legal notice. It is also averred that the defendant was also advised by way of the said notice that in case of failure in compliance, the plaintiff would proceed against the defendants before appropriate court of law at the cost, risk and consequences of the defendants. It is further averred that legal notice was duly served upon the defendants but the defendants neither made any payment to the plaintiff nor replied to the said legal notice and the above said amount is still payable and due on the part of the defendants. The plaintiff also stated that the initial cause of action in favor of the plaintiff arose on the 3rd of February 2014, with an outstanding amount of Rs. 25,47,008/- owed by the defendants. Furthermore, it is averred that subsequent instances of cause of action occurred each time the plaintiff contacted the defendants via meetings, calls, and emails, requesting payment, which the defendants failed to fulfill. The plaintiff further averred that further cause of action arose on the CS No. 367/20 M/s A.S. Shoe Accessories Pvt Ltd through AR Vs. M/s Ess Aar Universal Pvt Ltd Digitally Page no. 5/42 signed by VIKAS VIKAS GARG Date:
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25th of January 2016, when the plaintiff's legal representative sent a formal notice demanding payment, which was not met by the defendants. It is further claimed that the cause of action persists as the outstanding amount remains unpaid by the defendants. It is further averred that the orders for the supply of the above said goods were placed in Delhi at the office of the plaintiff and the registered office of the defendant no. 1 and the residence of the defendant no. 2 fall within the territorial jurisdiction of this court. It is also averred that legal notice was sent by the advocate of the plaintiff from his chamber situated in Dwarka Courts, Delhi. It is further averred that all the cause of actions arose in Delhi and within the jurisdiction of this court, therefore, this Court has jurisdiction to try and entertain the present suit. It is also averred that the value of the present suit for the purpose of court fee and jurisdiction has been valued for Rs.35,40,341/- (Rs. Thirty Five Lakhs Forty Thousand Three Hundred Forty One only) and the requisite court fee of Rs. 36950/- (Rs. Thirty Six Thousand Nine Hundred Fifty only) has been affixed.
It is prayed in the plaint by the plaintiff in the following words:
1. Pass a money decree for a sum of Rs. 35,40,341/- (Rs. Thirty Five Lakhs Forty Thousand Three Hundred Forty One only) alongwith pendente lite and future interest @ 18 % per annum from the date of filing of the present suit till the date of actual realization in favour of the plaintiff and against the defendant company.
2. Award cost of the suit in favour of the plaintiff and against CS No. 367/20 M/s A.S. Shoe Accessories Pvt Ltd through AR Vs. M/s Ess Aar Universal Pvt Ltd Digitally Page no. 6/42 signed by VIKAS VIKAS GARG Date:
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the defendant company.
3. Grant any other relief (s) which Hon'ble Court deems fit and proper under the facts and circumstances of the present case, in favour of the plaintiff and against the defendant company;
in the interest of justice and equity.
4. Upon receiving the summons, the defendants appeared and filed the written statement.
CASE OF THE DEFENDANTS AS PER WRITTEN STATEMENT:-
Briefly, the essential facts required for a fair adjudication of the present suit, as presented in the Written Statement, are as follows:
5. Defendant through Sudhir Rustogi (originally defendant no. 2 also), Director and Authorized representative filed a written statement submitting that present suit is not maintainable as same has neither been properly instituted nor the pleading therein have been properly verified by any authorized person of the plaintiff company. It is further stated that Sh. Anup Kumar has no power to institute any suit or to verify the pleadings in any suit against the defendant before any court of law vide Board resolution dated 15.03.2016 purportedly passed by the plaintiff company and as such filed by the plaintiff company against the defendant is liable to be rejected outrightly. It is further stated that plaintiff has not approached this court with clean hands and had concealed the material facts from the court regarding the supply of defective CS No. 367/20 M/s A.S. Shoe Accessories Pvt Ltd through AR Vs. M/s Ess Aar Universal Pvt Ltd Digitally Page no. 7/42 signed by VIKAS VIKAS GARG Date:
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chemical / material by the plaintiff to the defendant as a result of which, defendant has suffered losses not only in terms of money but also in term of reputation of defendant in the market as the defendant had to suffer sales return of huge quantity of soles from the renowned ladies footwear brand Catwalk and also had to visit Catwalk Mumbai, Catwalk Dehradun, Woodland stockyard at Delhi & Agra, Kamps Agra, Feet Care in Agra, Perfect footwear in Agra, Sai Overseas in Delhi, Park Export in Delhi, Metro & Metro in Agra and various other customers. It is further stated that plaintiff has also concealed from the court the fact that due to poor performance on the part of plaintiff, the defendant had to get the soles refinished at Dubai also as the shoes by its customers had already been dispatched there. It is also averred that the plaintiff had also concealed that the plaintiff was asked to lift his defective goods but the plaintiff did not prefer to do so despite causing loss of more than Rs. 40 lacs to the defendant. It is further averred that the plaintiff has filed the present case on the basis of false and concocted story as such the suit filed by the plaintiff is liable to be dismissed. It is further averred that no cause of action has arisen in favour of plaintiff and against the defendant to file the present suit as the goods supplied by the plaintiff was of inferior quality and was not upto the standards provided by the defendant. It is further averred that plaintiff neither supplied the desired goods to the defendant nor made any effort to minimize the loss being suffered by the defendant in refinishing of the goods and transit expenses and he had also not lifted the defective goods despite request and as the CS No. 367/20 M/s A.S. Shoe Accessories Pvt Ltd through AR Vs. M/s Ess Aar Universal Pvt Ltd Digitally Page no. 8/42 signed by VIKAS VIKAS GARG Date:
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defendant suffered a loss of more than Rs.40 lacs by the acts and misdeeds of the plaintiff, the defendant was constrained to debit a sum of Rs.20 lacs towards the plaintiff as per the terms settled with the plaintiff which was also acknowledged by the plaintiff and the plaintiff was asked to reconcile the accounts but the plaintiff did not prefer to do so. He further averred that there exists no entitlement of the plaintiff to recover any amount from the defendant and as such in the absence of any cause of action, the plaintiff is liable to be rejected as per the provisions of Order 7 Rule 11 CPC. It is averred that it is also relevant to mention that the plaintiff has also concealed from the Court that the defect in goods supplied by the plaintiff to the defendant could not have been found on immediate basis and the same could be revealed only at a later stage. It is further averred that a sole is molded and supplied by using: 1. Raw Material of Polyol and Isocyanate. 2. Dosing pigments. 3. Finish using pigments and dyes. It is further averred that in the complete process of manufacturing of PU Soles, the trust is very important between the parties as the business is done on credit basis and the quality of the goods supplied could be ascertained only after passing of some months and only after usage of material and as such in case of any issue with regard to defect in quality of goods, the claim is lodged by the customer and the same could be settled later on. It is averred that further, the dosing pigment plays a very important role in the process as the same can cause migration to the surface of the sole and can detach the finish from the surface of the sole. It is further averred that the plaintiff and the defendant are known to each other CS No. 367/20 M/s A.S. Shoe Accessories Pvt Ltd through AR Vs. M/s Ess Aar Universal Pvt Ltd Digitally Page no. 9/42 signed by VIKAS VIKAS GARG GARG Date:
2024.02.23 16:08:37 +0530 for quite a long time and earlier the plaintiff was the sole sales agent PAN India for the defendant and later on the plaintiff continued to supply the dosing pigments and finishes and lacquers to the defendant. It is further averred that the plaintiff used to supply the material from their Principal Sivam but gradually the plaintiff moved to manufacturing the pigments by themselves and changed the basic ingredients to save the cost. It is further averred that in the meantime, the requirements of the European Union changed and they banned the use of certain ingredients in the pigments and as such the plaintiff was requested by the defendant to supply the material in accordance with the European Reach Guidelines but in order to supply the material as per Reach Guidelines, the plaintiff supplied the pigments by changing the ingredients which were not compatible to raw material and as a result of which, the soles started showing defects after supplying the same to the customers. It is further averred that customers of the defendant complained about the stickiness of surface and detachment of the finish like layers of paint from the soles and also that the same was not bonding well i.e. adhesion of the lacquer was not proper. It is further averred that defendant complained about the same to the plaintiff as the problems kept on increasing since the complaints started coming from various customers and the defendant was constrained to lift many shipments from customers and also send his team to repair the soles at customer's end and also settle the claims with many customers. It is further averred that it is well within the knowledge of the partner of the plaintiff Mr. C. Bose that the defendant was not CS No. 367/20 M/s A.S. Shoe Accessories Pvt Ltd through AR Vs. M/s Ess Aar Universal Pvt Ltd Digitally Page no. 10/42 signed by VIKAS VIKAS GARG GARG Date:
2024.02.23 16:08:47 +0530 briefed about testing the product but even then the plaintiff has preferred to file the present suit which is devoid of merits and is liable to be dismissed. It is further averred that the present plaint submitted by the plaintiff is not in accordance with the provision under CPC and as such the same is liable to be rejected. It is further averred that no cause of action has arisen in favour of the plaintiff to file the present suit and the present suit filed by the plaintiff is totally misconceived and untenable in the eyes of law and has been filed in the order to harass the defendant by way of dragging the defendant in an unnecessary litigation and as such the suit is liable to be dismissed. It is further averred that the present court has no jurisdiction to try and adjudicate the present suit as neither the defendant's place of business is within the territorial limits of the present court nor any cause of action has arisen within territorial jurisdiction of this court. It is further averred that defendant has every time placed orders upon the plaintiff or its agents at the factory of the plaintiff at MIE, Bahadurgarh, Haryana, C forms were issued by the defendant from Noida, the material was also supplied by the plaintiff from Barhi or Bahadurgarh and the same was received at Noida by the defendant. It is also submitted that as per the provisions of Section 20 CPC, it is not open to any party to confer jurisdiction on a court which has got one in law and as such the plaint is liable to be rejected. It is further averred that it is reiterated that no event took place within the territorial limits of the Court and as such the Court has no jurisdiction to try and adjudicate the present case and the same is liable to be rejected for want of CS No. 367/20 M/s A.S. Shoe Accessories Pvt Ltd through AR Vs. M/s Ess Aar Universal Pvt Ltd Digitally Page no. 11/42 signed by VIKAS VIKAS GARG Date:
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jurisdiction. Rest of the case of the plaintiff has been denied by the defendants being wrong and incorrect.
Replication:
6. Replication has been filed to the written statement of the defendant, wherein the plaintiff has reaffirmed and reiterated the contents of the plaint and have denied the contents of the written statement of the defendants. The plaintiff's replication to the defendant's written statement asserts that the defendant has not approached the court with clean hands, alleging concealment of material facts. It is stated that despite numerous letters and mails requesting payment for goods sold, the defendant remained unresponsive. Additionally, it is claimed that the defendant failed to acknowledge receipt of a legal notice served by the plaintiff's advocate. The plaintiff stated that the defendant's defense of inferior quality materials and resulting business losses is false and an afterthought, lacking substantiation. Furthermore, the plaintiff denies the defendant's allegations regarding the poor quality of supplied materials, highlighting the defendant's procurement of materials from multiple sources and the complex nature of sole production. Despite any potential quality issues in the defendant's products, the plaintiff maintains that the responsibility cannot solely be attributed to their materials, as other suppliers also contributed to the manufacturing process. The plaintiff asserts that the materials provided were of the highest quality and challenges the absence of expert evidence supporting the defendant's claims. It is also stated CS No. 367/20 M/s A.S. Shoe Accessories Pvt Ltd through AR Vs. M/s Ess Aar Universal Pvt Ltd Digitally Page no. 12/42 signed by VIKAS VIKAS GARG Date:
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that the defendant's written statement lacks proper signature, verification, and filing by a competent individual. Overall, the plaintiff refutes the defendant's contentions, labeling them as false and unsubstantiated, and emphasizes that non-response should not be construed as admission.
7. On the basis of pleadings of the parties, following issues have been framed on 14.12.2016 for trial :-
1. Whether the plaintiff is entitled to the suit amount alongwith interest as prayed? OPP.
2. Whether this court has no territorial jurisdiction to adjudicate the present suit? OPD.
3. Whether the suit as framed is not maintainable? OPD.
4. Relief.
8. In order to prove his case, the plaintiff examined Sh. Anup Kumar Das, (Manager / Authorized representative of the plaintiff company) as PW1 and Sh. Anup Kumar Das tendered his affidavit Ex. PW-1/1 in his examination in chief, wherein averments made in the plaint have been reiterated. The plaintiff relied on the following documents:-
(1) Extract of minutes of meeting as Ex.PW1/A (2) Original challans/sales invoices alongwith details in tabular form as Ex.PW1/B (colly) (3) Computerized copy of ledger account as Ex.PW1/C CS No. 367/20 M/s A.S. Shoe Accessories Pvt Ltd through AR Vs. M/s Ess Aar Universal Pvt Ltd Digitally Page no. 13/42 signed by VIKAS VIKAS GARG Date:
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(Colly, 4 sheets) (Objected to by counsel for the defendant with regard to mode of proof).
(4) Various admitted C-form and communications as Ex. P1 to P9.
(5) Various office copies of demand letters along with postal receipts and e-mails as Ex.PW1/D. (colly, 3 sheets). (Objected to by counsel for defendant with regard to mode of proof) (6) Office copy of legal notice dated 25.01.2016 as Ex. PW1/E. (7) Postal receipts of the said legal notice as Ex. PW1/F (colly).
9. PW1 has been cross examined at length by the Ld counsel for the defendant. In the cross-examination of PW-1 Mr. Anup Kumar Dass, he stated that he had brought the original minutes book containing the resolution Ex. PW1/A. He acknowledged that no document demonstrating the constitution of the plaintiff as a Private Limited Company had been filed on record, nor had any document been filed to establish Mr. Rakesh Kumar Rastogi, Mr. Chinmoy Bose and Mr. Ashish Rastogi as the directors of the plaintiff. However, he denied the suggestion that the said three persons are neither the Directors of the plaintiff nor they are authorized to execute and issue Ex. PW-1/A on behalf of the plaintiff. PW-1 admitted that in Ex. PW-1/A or in the original Minutes Book containing Ex. PW-1/A, the power of authorization to issue a true copy of the extract of minutes of a meeting allegedly held on CS No. 367/20 M/s A.S. Shoe Accessories Pvt Ltd through AR Vs. M/s Ess Aar Universal Pvt Ltd Digitally Page no. 14/42 signed by VIKAS VIKAS GARG Date:
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15.03.2016 has not been given to any person. PW-1 denied the suggestion that Ex. PW-1/A has been fabricated by the plaintiff and the same has not been issued as per the relevant provision of law. PW-1 admitted that vide Ex. PW-1/A or any other document, he is not authorized to institute the present suit or to verify the pleadings. PW-1 stated that he has been working with the plaintiff since 2003. Initially he was appointed as Production Manager, however, in the year 2009, he was given the responsibility of looking after the complete managerial work of the plaintiff. PW-1 admitted that no document has been filed showing Rs.35,40,341/- as the recoverable amount of the plaintiff from the defendant and PW-1 further admitted that in Ex. PW-1/C no entry has been made after 02.04.2014 while the same is shown as the ledger account for the period from 01.04.2013 to 14.03.2016. He voluntarily stated that on 02.04.2014, the closing balance is shown as Rs. 25,47,008/-. PW-1 denied the suggestion that the plaintiff is not entitled to recover any amount from the defendant. He further replied that he cannot confirm whether the entries in Ex. PW-1/C are made by him. The computerized printout Ex. PW-1/C has been taken out from him from the computer present in the Accounts Department of the plaintiff, however, he cannot confirm from which computer the printouts were taken. PW-1 admitted that neither in the documents filed on record nor in Ex. PW-1/1, it is mentioned that computerized printout of Ex. PW-1/C and other computerized printouts were taken out by him. He further stated that the plaintiff has no production unit at Delhi. He also stated that the production unit of the plaintiff is CS No. 367/20 M/s A.S. Shoe Accessories Pvt Ltd through AR Vs. M/s Ess Aar Universal Pvt Ltd Digitally Page no. 15/42 signed by VIKAS VIKAS GARG Date:
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situated at Barhi, Sonipat. He also stated that the plaintiff used to dispatch the goods from Sonipat and from their trading unit, situated at Bahardurgarh. He also stated that the plaintiff had not dispatched any goods to the defendant from Delhi. He admitted that whatever goods were supplied to the defendant by the plaintiff, the same were sent from Sonipat and Bahadurgarh to the unit of the defendant situated at Noida only. He further stated that the address G-90, Basement, Preet Vihar, Delhi is only the registered office of the defendant and the same has no connection with the dispatch or receipt of goods. He denied the suggestion that the Delhi address of the defendant has no connection with the transaction between the plaintiff and the defendant. He further stated that the plaintiff was never informed by the defendant regarding the defect in the material before filing of the written statement by the defendant in the present case. He further stated that the e-mail ID. [email protected] is the e-mail I.D. of the managing director of the plaintiff. He also admitted that mail dated 22/02/2014 and 17/05/2014 was sent by the MD of the plaintiff to the defendant. He also admitted that the issue regarding the dosing quantity or plasticisers migration problem was reported to him in June, 2013. He does not remember when he took the steps to reduce the dosing quantity. He further stated that he does not remember as to in whose material (plaintiff or defendant) the dosing quantity was reduced.
The witness further stated that the plasticisers migration problem was reported verbally to them by the defendant, but he couldn't CS No. 367/20 M/s A.S. Shoe Accessories Pvt Ltd through AR Vs. M/s Ess Aar Universal Pvt Ltd Digitally Page no. 16/42 signed by VIKAS VIKAS GARG Date:
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recall their suggested course of action in response. Additionally, he claimed ignorance regarding specific emails sent by the plaintiff's MD to the defendant on certain dates, and he denied any knowledge of a debit note issued by the defendant to the plaintiff. The witness asserted that he was not informed about any debit through email, and he denied being responsible for matters related to accounts. Furthermore, he denied the suggestion that a significant amount was debited from the plaintiff's account on a particular date and that the plaintiff was asked to accept a balance sum. Finally, he refuted the allegations of a plasticisers migration problem or an oily feeling/stickiness problem when the plaintiff's material was used by the defendant, asserting that no such issues occurred at any time. He further stated that the loss suffered by the defendant was reported to the plaintiff through email and he does not remember whether the plaintiff was asked to lift the defective goods from the defendant. He denied that the plaintiff had supplied defective chemicals/material to the defendant. He does not know the process of manufacturing PU soles. He further stated that he cannot admit or deny whether the defect in the material could be ascertained only after usage. He further denied that the plaintiff used to supply goods to the defendant from its principal supplier M/s Sivam only and then the plaintiff itself started manufacturing the goods. He voluntarily stated that they have been manufacturing goods since the beginning. He denied the suggestion that the plaintiff was earlier the sole sales agent of the defendant. He admitted that the defendant used to purchase dosing pigments and lacquers from the plaintiff. He further CS No. 367/20 M/s A.S. Shoe Accessories Pvt Ltd through AR Vs. M/s Ess Aar Universal Pvt Ltd Digitally Page no. 17/42 signed by VIKAS VIKAS GARG Date:
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admitted that the plaintiff used to supply imported material to the defendant from M/s Sivam. He denied the suggestion that the plaintiff in their own manufacturing changed the basic ingredients due to which the problem occurred. He denied that the basic ingredients were changed to save the cost. He further denied that the plaintiff supplied defective material to the defendant as a result of which the defendant had suffered losses. He also denied that the defendant had not withheld any legitimate payment of the plaintiff. He denied that the defendant is not liable to pay the suit amount or interest to the plaintiff. He further denied that the notice dated 25/01/2016 was also incorrect. He also denied that the plaintiff was asked to minimize the loss of the defendant in re-finishing of the goods but the plaintiff did not help. He admitted that the plaintiff did not reconcile the accounts with the defendant in or after May 2014. He also admitted that the defendant used to issue C-Forms against every supply made by the plaintiff to the defendant. He also admitted that all the C-Forms were issued from Noida. He denied that the plaintiff has filed a false suit against the defendant.
10. Then the plaintiff closed his evidence and the defendant has been given the opportunity to lead the evidence.
11. In order to prove his case, the defendant examined Sh. Sudhir Rustagi (Authorized Representative of defendant) as DW-1 and Sh. Sudhir Rustogi tendered his affidavit Ex. PW-1/A in his examination in chief, wherein averments made in the written statement have been CS No. 367/20 M/s A.S. Shoe Accessories Pvt Ltd through AR Vs. M/s Ess Aar Universal Pvt Ltd Digitally Page no. 18/42 signed by VIKAS VIKAS GARG Date:
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reiterated. The Defendant relied on the following documents:-
(1) Copy of Resolution passed in meeting dt. 05.02.2010 as Ex. DW1/1.
(2) Copy of letter dt. 09.06.2016 issued by Footwear Design & Development Institute as Ex. DW1/2 (OSR) (3) Copy of e-mails dt. 22 & 23.06.2016 regarding defect in the material received as Ex.DW1/3 (OSR). (4) Computer generated claim amount working related to plaintiff as on 25.12.2014 as Ex.DW1/4. (5) Balance confirmation dt. 30.04.2014 issued by the defendant's company to the plaintiff as Ex. DW1/5 (OSR). (6) E-mail dt. 17.05.2014 sent by the plaintiff to the defendant as Ex.DW1/6 (Colly four sheets) (OSR). (7) Computer generated e-mail dt. 19.04.2014 sent by the defendant's company to the plaintiff as Ex. DW1/7 (OSR). (8) Computer generated e-mail dt. 22.02.2014 sent by the plaintiff to the defendant as Ex. DW1/8 (OSR). (9) Computer generated correspondence dt. 24.12.2013 and 25.12.2013 between the defendant and M/s Catwalk regarding issuance of debit notes as Ex. DW1/9 (OSR).
(10) Computer generated debit note issued to the defendant by M/s Park Exports as Ex. DW1/10.
(11) Computer generated e-mail communication between defendant and its customer as Ex. DW1/11.
(12) Computer generate statement of freight (inward and outward) and traveling expenses incurred for the goods CS No. 367/20 M/s A.S. Shoe Accessories Pvt Ltd through AR Vs. M/s Ess Aar Universal Pvt Ltd Digitally Page no. 19/42 signed by VIKAS VIKAS GARG Date:
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supplied to M/s Catwalk as Ex.DW1/12 (Colly 25 pages). (13) Certificate under section 65 B of Indian Evidence Act as Ex.DW1/13.
The defendant also relied upon documents already exhibited as Ex. D1 to D10 at the time of admission/denial of documents on 14.12.2016.
12. DW1 has been cross examined at length by Ld counsel for the Plaintiff. During cross-examination of DW1, it is deposed that the registered address of the defendant's company is Basement, G-90, Preet Vihar, Delhi-92. He further deposed that the defendant company is engaged in the business of manufacturing of footwear components. He also deposed that the defendant purchases raw materials from various suppliers and manufactures footwear components from them and sells the same to different buyers. He further deposed that there are two Directors in the defendant company. He admitted that the document Ex. DWI/1 i.e. authority letter issued in his favour does not bear the signature of another Director. He also admitted that there is no mention of the instant case in the said authority letter. He denied that he is not properly authorized to defend this suit or to depose in the court on that day. He also denied that he is not a competent witness. He voluntarily stated that there is no such requirement under Companies Act to pass for each matter a separate Resolution and this Board Resolution has not been superseded. He admitted that it is true that the plaintiff CS No. 367/20 M/s A.S. Shoe Accessories Pvt Ltd through AR Vs. M/s Ess Aar Universal Pvt Ltd Digitally Page no. 20/42 signed by VIKAS VIKAS GARG Date:
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might be supplying materials to other companies also as they used to supply the defendant company. He further stated that he has heard that the plaintiff had supplied defective materials to other companies however, he cannot quote the same. He further denied that he is deposing falsely that the plaintiff had supplied defective materials to other companies. He further denied that the material supplied by the plaintiff company to the defendant company was of good quality. He further deposed that he has already filed document Ex. DWI/2 which is the letter issued by the Technical Director of Footwear Design and Development Institute under the Ministry of Commerce. He stated that he has filed documents Ex.DW1/3 which are E-mails dated. 22.06.2016 and 23.06.2016. He further stated that all these documents clearly established that the ingredients, interalia, used by the plaintiff can create the problem of migration on the surface of soles. He also admitted that the above mentioned documents i.e. Ex DW1/2 and Ex,DW1/3(Colly) obtained after receiving the legal notice from the plaintiff and after filing of the instant suit. He further denied that these documents are procured and manipulated documents and an afterthought of the defendant. He admitted that he put a specific question to Footwear Design and Development Institute and in reply to my question, they wrote/issued this letter dated 09.06.2016 Ex.DW1/2 to him. He denied that the Ex. DW1/2 and Ex.DW1/3 (colly) are just a general opinion or that the same does not reflect that materials supplied by the plaintiff were of poor quality. He further denied that e-mails Ex.DW1/3 (colly) were sent by the customers on his asking only. Mr. Sudhir acknowledged that CS No. 367/20 M/s A.S. Shoe Accessories Pvt Ltd through AR Vs. M/s Ess Aar Universal Pvt Ltd Digitally Page no. 21/42 signed by VIKAS VIKAS GARG Date:
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Ex.DW1/3 (colly) did not indicate that the materials supplied by the plaintiff were of poor quality. When asked if any evidence had been filed wherein an expert had examined the material supplied by the plaintiff and opined that it was of defective or poor quality, Mr. Sudhir responded that the performance of the material is typically assessed after usage, sometimes even after supplying the product to the end user. He mentioned that Mr. C. Boss had been called to the factory multiple times, and despite efforts made, the problem couldn't be resolved. Mr. Sudhir referred to correspondence (Ex. DW1/6) where Mr. C. Boss himself admitted that the ingredients used could cause the issue of migration on the surface. Mr. Sudhir denied calling Mr. C. Boss and requesting him to visit their factory to resolve the issue. He also denied the assertion that Ex. DWI/6 is a fabricated and manipulated document. However, he admitted that he is not the author of the documents exhibited as Ex. DW-1/2 and the first page of DW-1/3. Mr. Sudhir stated that he had filed several transporter receipts and correspondence from customers regarding the return and repair of goods due to substandard quality claims. He referred to these documents as Ex. DW-1/7 to DW-1/12 (colly). He admitted that Ex. DW-1/7 is an email sent by him and not by a customer. He also admitted that the first two pages of DW-1/8 are not sent by any of his customers. He denied that the third page of DW-1/8 is a piece of paper prepared by him which does not contain any date, signature, stamp and proof of dispatch or receiving. He voluntarily stated that this is part of an email dated 05.12.2013 sent by him to Sh. Rakesh Rastogi and Mr. C. Bose, Directors of the CS No. 367/20 M/s A.S. Shoe Accessories Pvt Ltd through AR Vs. M/s Ess Aar Universal Pvt Ltd Digitally Page no. 22/42 signed by VIKAS VIKAS GARG Date:
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plaintiff company. He admitted that first page of Ex. DW-1/9 is an email sent by him. He also admitted that second page of Ex. DW-1/9 does not bear the name of plaintiff. He also admitted that it is nowhere written on the second page of Ex. DW-1/9 that the goods returned by the customer were prepared by the raw material supplied by the plaintiff. He voluntarily stated that It is mentioned in another email Ex. DW-1/6. It is correct that the Ex. DW-1/10 does not bear the signature and seal of the customer. He further admitted that no envelope or email has been filed to prove that he has received it from the customer. He further denied that Ex. DW- 1/10 is a fabricated and manipulated document. He admitted that the Ex. DW-1/4 and Ex. DW-1/5 are a worksheet and a confirmation note prepared by him. He denied that he prepared those documents just to strengthen his case. He deposed that he has filed a document Ex. DW-1/11 to prove that the soles were refinished in Dubai. He denied that it is nowhere mentioned that the soles were refinished in Dubai in the Ex. DW-1/11.
Mr. Sudhir clarified that he did not specifically mention the loss of Rs. 40 lakhs in his Income Tax Return (ITR) as stated in paragraph 2 of his Witness Statement (WS). He explained that he included all income and expenditure in his ITR without specifying the exact amount of loss incurred due to the plaintiff's actions. He also admitted to not sending any formal legal notice when a claim was made against the plaintiff but mentioned sending emails regarding the matter.
He deposed that he had received the legal notice regarding the CS No. 367/20 M/s A.S. Shoe Accessories Pvt Ltd through AR Vs. M/s Ess Aar Universal Pvt Ltd Digitally Page no. 23/42 signed by VIKAS VIKAS GARG Date:
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present matter from the plaintiff but he does not remember whether he replied the same or not. He denied that he did not give any reply to the said legal notice. He denied that Ex. DW-1/12 (containing 25 pages) are fabricated and manipulated documents prepared by him in order to defeat the legitimate claim of the plaintiff. He further denied that he is deposing falsely.
13. Defence evidence has been closed by the defendant and the case was listed for final arguments.
14. I have heard Ld counsels of both the parties and have carefully gone through the record and considered the relevant provisions of law.
Issue-wise Finding
15. Issue no.1
1. Whether the plaintiff is entitled to the suit amount alongwith interst as prayed? OPD.
Ld counsel for plaintiff submitted on the lines of his plaint and submitted that the case of plaintiff is crystal clear that plaintiff used to supply goods to the defendants and Rs. 25,47,008 are outstanding against defendant no.1 on running account between the parties. He further submitted that defendants are liable to pay interest at rate of 18% on that amount and he further prayed for pendente lite and future interest on that amount of Rs. 35,40,341/- at the same rate of 18%. He further submitted that it has been admitted by the CS No. 367/20 M/s A.S. Shoe Accessories Pvt Ltd through AR Vs. M/s Ess Aar Universal Pvt Ltd Digitally Page no. 24/42 signed by VIKAS VIKAS GARG Date:
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defendants that Rs. 25,47,008 is outstanding on the running account against the defendant and the defendant is liable to pay the interest on that amount.
Ld counsel for defendants also argued on lines of his written statement and argued that the goods supplied by the plaintiff were defective goods and due to which loss of more that 40 lac has been caused to the defendant. He further submitted that even the plaintiff has admitted a debit note of Rs. 20 lacs.
On that Ld. Counsel for plaintiff submitted that plaintiff failed to prove any defects in goods of plaintiff. He further submitted that no evidence has been led by the defendant to prove those defects. He further submitted that no expert has been examined by the defendants to prove the defects in goods supplied by the plaintiff. He further submitted that the plaintiff never admitted the debit note of Rs. 20 lacs. He further submitted that even no set off or counter claim has been filed. Ld counsel for plaintiff further submitted that no quantification of damages has been pleaded and proved.
Analysis:
It is an admitted case of the parties that the defendant used to purchase goods for manufacturing of shoes from the plaintiff and there was a running account in this regard and payment of Rs. 25,47,008 is outstanding against the defendant. Even the defendant himself filed Ex. D-3 account statement of plaintiff regarding defendant and was admitted by the plaintiff during admission and denial of documents. There is a relevant note in this regard in the CS No. 367/20 M/s A.S. Shoe Accessories Pvt Ltd through AR Vs. M/s Ess Aar Universal Pvt Ltd Digitally Page no. 25/42 signed by VIKAS VIKAS GARG Date:
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examination in chief of the defendant that he relied upon documents Ex. D1 to Ex. D5 as admitted by the plaintiff in admission and denial. There is no dispute regarding that amount except for a debit note of Rs. 20 lac. Case of the defendant is that the plaintiff has sent him defective goods and due to defective goods loss of more than 40 lakhs took place to the defendant and as per defendant even at one point of time the plaintiff entered a debit note of Rs. 20 lakhs in favour of the defendant. It is proved that goods were purchased from time to time and there is a balance of Rs. 25,47,008. Now onus to proof shifts on defendant to prove that goods supplied by the plaintiff were defective and he is entitled to set off his losses. Before discussing the defense of the defendant, it would be relevant to discuss the relevant provisions of law in this regard.
Section 16 & 59 of Sales of Goods Act, 1930 are relevant to be discussed here. The Section 16 is as follows:
16. Implied conditions as to quality or fitness Subject to the provisions of this Act and of any other law for the time being in force, there is no implied warranty or condition as to the quality or fitness for any particular purpose of goods supplied under a contract of sale, except as follows:-
(1) Where the buyer, expressly or by implication, makes known to the seller the particular purpose for which the goods are required, so as to show that the buyer relies on the seller's skill or judgment, and the goods are of a description which it is in the course of the seller's business to supply CS No. 367/20 M/s A.S. Shoe Accessories Pvt Ltd through AR Vs. M/s Ess Aar Universal Pvt Ltd Digitally Page no. 26/42 signed by VIKAS VIKAS GARG Date:
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(whether he is the manufacturer or producer or not), there is an implied condition that the goods shall be reasonably fit for such purpose:
Provided that, in the case of a contract for the sale of a specified article under its patent or other trade name, there is no implied condition as its fitness for any particular purpose.
(2) Where goods are bought by description from a seller who deals in goods of that description (whether he is the manufacturer or producer or not), there is an implied condition that the goods shall be of merchantable quality;
Provided that, if the buyer has examined the goods, there shall be no implied condition as regards defects which such examination ought to have revealed.
(3) An implied warranty or condition as to quality or fitness for a particular purpose may be annexed by the usage of trade.
(4) An express warranty or condition does not negative a warranty or condition implied by this Act unless inconsistent therewith.
Section 59 of Sales of Goods Act, 1930 is as follows:
59. Remedy for breach of warranty (1) Where there is a breach of warranty by the seller, or where the buyer elects or is compelled to treat any breach of a condition on the part of the seller as a breach of warranty, the buyer is not by reason only of such breach of warranty entitled to reject the goods; but he may-
(a) set up against the seller the breach of warranty in CS No. 367/20 M/s A.S. Shoe Accessories Pvt Ltd through AR Vs. M/s Ess Aar Universal Pvt Ltd Digitally Page no. 27/42 signed by VIKAS VIKAS GARG Date:
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diminution or extinction of the price, or
(b) sue the seller for damages for breach of warranty.
(2) The fact that a buyer has set up a breach of warranty in diminution or extinction of the price does not prevent him from suing for the same breach of warranty if he has suffered further damage.
It is clear from section 59 of sale of goods act, 1930 that buyer can set-off for breach of warranty or condition in answer to the suit of the plaintiff. In my opinion there is no need to file separate counterclaim or set-off on breach of warranty in diminution or extinction of the price and such set-off can be taken as defence to the answer to the suit of seller of goods.
In the present case it has to be seen whether the defendant proved that there has been any breach of any warranty or condition as per Section 16 of Sales of Goods Act, 1930. In the evidential affidavit of AR of the defendant, it is stated that due to defective goods of the plaintiff, defendant has suffered huge losses. It is further stated that the finished goods of the defendant have been returned by his customers. But those are only blatant statements. No evidence has been led to prove them. Neither of the customers has been examined as witness by the plaintiff. Even it is not deposed therein that for which defects in those soles, those soles were returned to the defendants by his customers and how those defects can be attributed to the plaintiff. It is deposed by the AR of defendant company that material supplied by plaintiff was of CS No. 367/20 M/s A.S. Shoe Accessories Pvt Ltd through AR Vs. M/s Ess Aar Universal Pvt Ltd Digitally Page no. 28/42 signed by VIKAS VIKAS GARG Date:
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inferior quality and was not upto the standards provided by the defendants. It is not pleaded and testified which standards were provided by the defendants. It is also deposed that the plaintiff has not supplied the desired goods. Again it is neither pleaded nor testified what is desired in regard to those goods. In paragraph 5 of the evidentiary affidavit of AR, it is deposed that "...Further, the dosing pigment plays a very important role in the process as the same can cause migration to the surface of the sole and can detach the finish from the surface of the sole". The defendant himself uses the word "can". He himself is not sure of the reason for such defect. He gave one probability of such migration and detaching. The defects were mainly shown in finished goods of defendants but no specific defect has been pointed in goods of plaintiff. There is allegation of changing of ingredients of pigments by the plaintiff but no such changes has been described. Even no evidence has been led to prove such migration, stickiness and detaching. No Independent expert has been examined. Moreover it may be a defect of the manufacturing process and other factors. Main thing is that alleged defects in products could not be named or described by the defendants. It is also alleged that the plaintiff earlier used to supply material from their Principal Sivam but the plaintiff itself started manufacturing of the same but basic ingredients were changed to save the cost. Assuming it is true that the plaintiff itself started manufacturing then it is not stated which ingredients have been changed and how change in ingredients made goods of the plaintiff defective. Even, it is not explained which CS No. 367/20 M/s A.S. Shoe Accessories Pvt Ltd through AR Vs. M/s Ess Aar Universal Pvt Ltd Digitally Page no. 29/42 signed by VIKAS VIKAS GARG Date:
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warranty or condition between the parties has been breached by the plaintiff.
The defendant further claims that the plaintiff, in response to changes in European Union regulations, supplied pigments with altered ingredients to comply with Reach Guidelines and as per defendant these changes led to defects in the soles, including stickiness, detachment of paint layers, and poor adhesion. It is also deposed that numerous customer complaints forced the defendant to retrieve shipments, send teams for repairs, and settle claims with affected customers. Again it is not mentioned which ingredients have been changed and no evidence has been led to prove any of the claims as made by the defendant. There is repetition of the allegation that the customer of the defendant has returned the goods of the defendant due to defective soles. No evidence has been led in this regard and nobody has been examined on behalf of any of such customers and it is not proved that defects in those goods are attributed to acts of plaintiff.
It is neither pleaded nor testified nor argued that defendant used to obtain raw materials only from the plaintiff and due to which I find force in the statement of the plaintiff in the replication that a sole is made with the help of a variety of raw materials / chemicals and the Plaintiff was not a sole supplier of materials for the Defendant and the Defendant used to purchase some materials from the Plaintiff and some materials from other suppliers and used to prepare finished goods with the help of different materials supplied by the different suppliers and further the customers of the Defendant CS No. 367/20 M/s A.S. Shoe Accessories Pvt Ltd through AR Vs. M/s Ess Aar Universal Pvt Ltd Digitally Page no. 30/42 signed by VIKAS VIKAS GARG Date:
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further use to finish / develop the soles /shoe products prepared by the Defendant in their own factories. It is clearly admitted by DW-1 in the third line of his cross-examination on 29.05.2003 that they purchase raw material from various suppliers and manufacture the footwear components from them and sell the same to different buyers. The method of preparation and the quantity of use of different chemicals also plays a vital role in the preparation of a good quality of soles / shoe product. In that scenario it can not be said with certainty that the poor quality materials supplied by the Plaintiff spoiled the whole product. Though the Plaintiff denies that the soles / products made by the Defendant was of poor quality or that the Defendant sustained losses in its business but still if the products of the Defendant were of poor quality it can not be said that it was because of the poor quality raw materials supplied by the Plaintiff as there were other suppliers also who were supplying variety of materials to the Defendant and the Defendant used to use all of them while preparing its Products.
Now let's examine the documents relied on by the defendant in its examination -in -chief. Ex. DW 1/2 is a copy of the reply of FDDI (Footwear Designing and Development Institute.) whereby it has been replied to the defendant that usage of Plasticizer in pigment increases the chances of migration on the surface of PU soles and consequently may create the problem of detachment of lacquer from the surface of CPU soles.
No witness has been examined from the FDDI. It is not clear how CS No. 367/20 M/s A.S. Shoe Accessories Pvt Ltd through AR Vs. M/s Ess Aar Universal Pvt Ltd Digitally Page no. 31/42 signed by VIKAS VIKAS GARG Date:
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the defendant relied on the same. Neither it is proved that the plaintiff has used the plasticizer nor that non using the same is an agreed condition or warranty between the parties. Nothing can be proved through that document. Ex. DW 1/3 alleges to be a copy of e-mail as relied on by the defendant. In that email Mr. Sudhir (defendant) purported to be taking some advice from Jack and Yani and some suggestions have been given to Mr. Sudhir. It is not proved that the plaintiff is using plasticizer as the base of pigment. Again non use of the same is not any condition or warranty. No witness has been examined to prove that e-mail. The above-said Jack and Yani have not been examined. Even otherwise that document is not sufficient for the defendant to prove his defence in this case. Exhibit DW 1 / 4 (ASSA CLAIM AMOUNT WORKING as on 25/12/14) and Ex. DW1/12 (Statement of expenses incurred on Catwalk 8581) are just calculation sheets without any signatures. The contents of the same have not been proved. No liability can be attributed to the plaintiff on the basis of the same. It cannot be taken as any evidence of quantification of damages. Document Exhibit DW 1 / 6 has also been denied by the plaintiff. As per the defendant that document is an e-mail between some Chinmoy Boss and Sudhir. No evidence has been led to prove the genuineness and authenticity of that alleged email. Even the certificate Ex. DW1/13 is also defective. That document cannot be relied on. Otherwise also there is no direct admission of the plaintiff in it. Even if the contents of documents are presumed to be proved then it cannot be said that the defendant has proved this issue in his favour. Documents CS No. 367/20 M/s A.S. Shoe Accessories Pvt Ltd through AR Vs. M/s Ess Aar Universal Pvt Ltd Digitally Page no. 32/42 signed by VIKAS VIKAS GARG Date:
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Exhibit DW1/7, Ex. DW1/8, Ex. DW1/9 and Ex. DW1/11 are also printouts of emails as per defendant but plaintiff has not admitted those documents. Those emails are purported to be communication either between plaintiff and defendant or between defendant and its customers. Again no evidence has been led to prove their genuineness and authenticity. No such customer has been examined. Even assuming them true, no liability can be attributed to the plaintiff on the basis of the same. Even the certificate u/s 65B of IEA as Ex. DW-1/13 is defective. Document Ex. DW1/5 is allegedly to be balance confirmation issued by the plaintiff but the same has been denied by the plaintiff in the court. It has not been proven. Even there are no pleadings in this regard. Ex. D2 has been admitted by the plaintiff but in that plaintiff refused to accept the debit note of Rs. 20 lacs.
Similarly with the remaining documents as relied on by the defendant, any breach of any conditions or warranties could not be proved. Nor said alleged admission of debit note could be proved by the plaintiff. Plaintiff even failed to quantify the damages which took place due to alleged defective goods. No expert has been examined. No quantification of damages has been proved. Defendant failed to prove breach of any condition or warranty. The defendant failed to discharge the onus to prove defects in goods and any consequent breach of any condition or warranty and hence plaintiff is entitled to Rs. 25, 47,008/-
Interest:
CS No. 367/20 M/s A.S. Shoe Accessories Pvt Ltd through AR Vs. M/s Ess Aar Universal Pvt Ltd Digitally Page no. 33/42 signed by VIKAS VIKAS GARG Date:
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The plaintiff claims simple interest @ 18% per annum from 3.02.2014 till filing of suit along with pendente lite and post lite interest with same rate of interest. Ex PW-1/B are invoices through which goods have been sold to the defendant. A paragraph titled as terms and conditions mentioned at foot of those invoices is relevant to decide the rate of interest. There are many invoices and some differences are there in some text but rate of interest is mentioned therein as @ 14% after the due date. Text of such para of one of the invoices is as follows:
Terms & Conditions:-
Payment to be made by DD/crossed cheque in favour of M/s A.S. Shoe Accessories Pvt. Ltd. Payble at Delhi. All dispute arising out of this transaction are subject to Delhi Jurisdiction. If we do not receive Form D1/C within time you shall be liable to pay us, sales tax as applicable along with interest on it. Payment after due date shall carry @ 14% interest p.a. We are not responsible for the quality of your end product using our product as raw material hence use our product only after testing. Goods once sold will not be taken back.
So the agreed rate of interest can be said to be 14%. In view of the same plaintiff is held to be entitled simple interest @ 14% per annum from 03.02.2014 to 4.04.2016 (date of filing of the suit) CS No. 367/20 M/s A.S. Shoe Accessories Pvt Ltd through AR Vs. M/s Ess Aar Universal Pvt Ltd Page no. 34/42 Digitally signed by VIKAS VIKAS GARG Date:
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Pendentlite and Future interest
Section 34 of CPC deals with pendente lite and future interests. Section 34 of CPC is as follows:
34. Interest.-- (1) Where and in so far as a decree is for the payment of money, the Court may, in the decree, order interest at such rate as the Court deems reasonable to be paid on the principal sum adjudged, from the date of the suit to the date of the decree, in addition to any interest adjudged on such principal sum for any period prior to the institution of the suit, with further interest at such rate not exceeding six per cent. per annum as the Court deems reasonable on such principal sum, from the date of the decree to the date of payment, or to such earlier date as the Court thinks fit:
Provided that where the liability in relation to the sum so adjudged had arisen out of a commercial transaction, the rate of such further interest may exceed six per cent. per annum, but shall not exceed the contractual rate of interest or where there is no contractual rate, the rate at which moneys are lent or advanced by nationalised banks in relation to commercial transactions. Explanation I.--In this sub-section, "nationalised bank"
means a corresponding new bank as defined in the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970 (5 of 1970).
Explanation II.--For the purposes of this section, a transaction is a commercial transaction, if it is connected with the industry, trade or business of the party incurring the liability.
(2) Where such a decree is silent with respect to the payment of further interest on such principal sum from the date of the decree to the date of payment or other earlier date, the Court shall be deemed to have refused such interest, and a separate suit therefor shall not lie.
Hon'ble Bombay high court while explaining section 34 of CPC in the case titled as Satish Solvent Extractions Private vs New India CS No. 367/20 M/s A.S. Shoe Accessories Pvt Ltd through AR Vs. M/s Ess Aar Universal Pvt Ltd Page no. 35/42 Digitally signed by VIKAS VIKAS GARG Date:
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Assurance Co. Ltd. Observed:
"....A plain reading of the above section clearly goes to show that in a decree for payment of money, the Court has the power to grant interest pendente lite and future interest. This power is, however, discretionary which is evident from the expression "may, in the decree, order interest" appearing in Sub-section (1). The discretion is both in regard to grant of interest and the rate of interest. The exercise of this power is not dependent upon a specific claim being made by the plaintiff for such interest. The Court has the power to grant interest pendente lite, whether claimed in the suit or not, if it is satisfied on the facts of the case that such interest should be granted. The question is one for the discretion of the Court, which it has to exercise judiciously having regard to the facts and circumstances of the case before it. Ordinarily interest pendente lite should be granted under Section 34 of the CPC unless there are cogent reasons for depriving the plaintiff of the interest during trial. In other words, grant of interest should be the rule-refusal exception. The discretion of the Court, as earlier stated is not only in the matter of grant of interest but also as to the rate of interest. The Court has also to fix the rate of interest. The discretion in the matter of future interest is however restricted to six per cent per annum except in commercial transactions where under the proviso it may be allowed at the contractual rate or bank rate in relation to such transactions..."
The present case is of commercial transactions. Considering the CS No. 367/20 M/s A.S. Shoe Accessories Pvt Ltd through AR Vs. M/s Ess Aar Universal Pvt Ltd Digitally signed by Page no. 36/42 VIKAS VIKAS GARG Date:
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facts and circumstances of the case plaintiff is also held to be entitled for pendente lite and future simple interest @ 9 % per annum.
In light of above discussion this issue is decided in favour of the plaintiff and against the defendant and the plaintiff is held to be entitled Rs. 25,47,008/- along with simple interest @ rate of 14% per annum from 03.02.2014 to 04.04.2016 and pendente lite and future simple interest @ 9% per annum.
Issue no.2
2. Whether this court has no territorial jurisdiction to adjudicate the present suit? OPD.
16. The onus of proof of this issue lies on defendant. Ld. Counsel for the plaintiff argued that the orders for the supply of goods were placed in Delhi at the office of the plaintiff. It is further stated that the registered office of the defendant no. 1 and the residence of defendant no. 2 fall within the territorial jurisdiction of this Court. It is further stated that the legal notice was sent by the Advocate of the plaintiff from his chamber situated in Dwarka Courts, Delhi. It is further argued that all the cause of actions arose in Delhi and within the jurisdiction of this Court, therefore, this Court has jurisdiction to try and entertain the present suit.
Ld. Counsel for the defendant argued that no order was placed in Delhi at the office of the plaintiff as alleged. It is further argued that the address of registered office of the defendant and the residence of the Director of the defendant does not confer any CS No. 367/20 M/s A.S. Shoe Accessories Pvt Ltd through AR Vs. M/s Ess Aar Universal Pvt Ltd Digitally Page no. 37/42 signed by VIKAS VIKAS GARG Date:
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jurisdiction upon the Court as the defendant is running its business from their establishment at Noida. It is further argued that the defendant had every time placed orders upon the plaintiff or its agents at the factory of the plaintiff at MIE, Bahadurgarh, Haryana, "C" Forms were issued by the defendant from Noida, the material was also supplied by the plaintiff from Barhi or Bahadurgarh and the same was received at Noida by the defendant. It is further argued that sending of legal notice also does not confer any jurisdiction upon any Court. It is further argued that the Court has no jurisdiction to try and adjudicate the present suit as neither the defendant's place of business is within the territorial limits of the Court nor any cause of action has arisen within the territorial limits of the Court and as such the plaint is liable to be rejected. It is further argued that as per the provisions of Section 20 CPC, it is not open to any party to confer jurisdiction on a court which has got none in law.
Ld. Counsel for the defendant relied upon the cases titled as Tata Motors Limited Vs. JSC VTB Bank Ltd and Patel Roadways Limited, Bombay Vs. Prasad Trading Company.
Analysis:- In the case of Tata Motors Limited Vs. JSC VTB Bank Ltd no issue of residence of company and registered office have been discussed. In the facts and circumstances of the present case it is relevant to discuss the decision of Hon'ble Delhi High Court in the case titled as N.V. Distilleries Pvt. Ltd. Vs Frost Falcon Distilleries Ltd. 2018:DHC:7284. In that case Hon'ble Delhi High Court Observed:
CS No. 367/20 M/s A.S. Shoe Accessories Pvt Ltd through AR Vs. M/s Ess Aar Universal Pvt Ltd Digitally signed by Page no. 38/42 VIKAS VIKAS GARG Date:
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"14. As would immediately become clear on a careful reading of the aforesaid, Supreme Court in Patel Roadways Ltd. (supra) though held the explanation to Section 20 of the CPC to be an explanation to Clause (a) thereof rather than to Clause (c) thereof but was concerned with only the alternative "carries on business", of the several alternatives in Clause (a). It was not the contention before the Supreme Court in Patel Roadways Ltd. supra that the place where the registered office of a corporation / company is situated is also the place where the corporation, if a defendant in the suit, "actually and voluntarily resides". Thus, no finding was returned in the said judgment on the said aspect. Supreme Court, in the context only of alternative "carries on business" in Clause (a) of Section 20 having held that by virtue of explanation, which also is only to, where a corporation shall be deemed to carry on business, having held that where a defendant company / corporation has its principal office at one place and subordinate office at another place and cause of action arises at a place where the subordinate office is located, suit has to be filed only in the Court within whose jurisdiction the company / corporation has its subordinate office and not in Court within whose jurisdiction it has its principal office, cannot be held to have also held that notwithstanding the word "or"
between the words "actually and voluntarily resides" or "carries on business" or "personally works for gain", the alternative of suing the corporation at the place where it actually and voluntarily resides is also not available. The judgment cannot be read as eclipsing the option given by the legislature to a plaintiff, under Section 20(a) of the Code, of suing at the place where the defendant, at the time of commencement of the suit, actually and voluntarily resides.
15. I have not come across any judgment holding that in case a defendant is a company or a corporation, only the CS No. 367/20 M/s A.S. Shoe Accessories Pvt Ltd through AR Vs. M/s Ess Aar Universal Pvt Ltd Page no. 39/42 Digitally signed VIKAS byDate:VIKAS GARG GARG 2024.02.23 16:13:28 +0530 option in Section 20(a) of the CPC, of "carries on business" is available and not the option of "actually and voluntarily resides". In Morgan Stanley Mutual Fund Vs. Kartick Das (1994) 4 SCC 225, it was held, as far as India is concerned, the residence of the company is where the registered office is located and normally cases should be filed only where the registered office of the company is situated. Again, in Dhodha House Vs. S.K. Maingi (2006) 9 SCC 41, it was reiterated that ordinarily the residence of the company would be where its registered office is. Once it is so, a company can always be sued under Section 20(a) of the CPC, in the Court within whose jurisdiction the registered office of the company is located. Not only as per the language of the explanation to Section 20 but even as per Patel Roadways Ltd., the explanation to Section 20 is attracted only to the alternative "carries on business" in Section 20(a) and not to the alternative "actually and voluntarily resides""
The findings above indicate that the court within whose territorial jurisdiction the registered office of the defendant company is located can indeed entertain the suit. In this instance, it is acknowledged that the registered office of the defendant company is situated in Preet Vihar, which falls within the territorial jurisdiction of the present court.
Considering the facts and circumstances of the case and ratio laid down in the case titled as N.V. Distilleries Pvt. Ltd. Vs Frost Falcon Distilleries Ltd (supra) this issue is decided in favour of the plaintiff against the defendant and it is held that this Court has CS No. 367/20 M/s A.S. Shoe Accessories Pvt Ltd through AR Vs. M/s Ess Aar Universal Pvt Ltd Page no. 40/42 Digitally signed by VIKAS VIKAS GARG Date:
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territorial jurisdiction on the subject matter of the suit.
Issue no. 3:- Whether the suit as framed is not maintainable? OPD (It is wrongly mentioned issue no 2 instead of issue no. 3 in the order sheet dated 14.12.2016).
17. The onus to proof of this issue lies on the defendant. Defendant in this regard pleaded in the first paragraph of his Written Statement:
"That the present suit filed by the plaintiff against the defendant is not maintainable as the same has neither been properly instituted nor the pleadings therein have been properly verified by any authorized person of the plaintiff company. Mr. Anoop Kumar has no power to institute any suit or to verify the pleadings in any suit against the defendant before any Court of law vide Board Resolution dated 15.03.2016 purportedly passed by the plaintiff company and as such the suit filed by the plaintiff company against the defendant is liable to be rejected outrightly."
Ex. PW1/A has been filed by the plaintiff and the same is minutes of meeting /resolution of plaintiff and through which Mr. Anup Dass has been expressly authorised to file and take various steps in relation to the present suit.
CS No. 367/20 M/s A.S. Shoe Accessories Pvt Ltd through AR Vs. M/s Ess Aar Universal Pvt Ltd Page no. 41/42 Digitally signed by VIKAS VIKAS GARG Date:
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The question of the suit's maintainability has been raised, with the burden of proof resting on the defendant. However, the defendant has not provided any explanation or evidence to support their claim that the suit is not maintainable. There are no other pleadings addressing this issue, nor has any evidence been presented in this regard. Consequently, the court rules in favor of the plaintiff and against the defendant on this issue also.
Relief:
18. In view of the aforesaid discussions and findings, this court is of the considered opinion that plaintiff has proved his case and therefore, he is entitled for the followings reliefs:
(i) A decree of Rs. 25,47,008/- is passed in favour of plaintiff and against the defendant no.1 along-with simple interest @ 14% per annum from 03.02.2014 till 04.04.2016 and pendente lite and future simple interest @ 9% per annum.
(ii) The Cost of suit is also awarded in favour of the plaintiff and against the defendant no.1.
Digitally
36. Decree sheet be prepared accordingly. VIKAS signed by VIKAS GARG Date:
GARG 2024.02.23 16:14:00 +0530 Pronounced in the open court (Vikas Garg) on 23.02.2024 ADJ-06 (EAST), KKD, Delhi 23.02.2024 CS No. 367/20 M/s A.S. Shoe Accessories Pvt Ltd through AR Vs. M/s Ess Aar Universal Pvt Ltd Page no. 42/42