Delhi District Court
Sharika Qadeer vs M/S Saroj International Leathers Pvt. ... on 16 January, 2025
IN THE COURT OF MS SAVITA RAO, DISTRICT JUDGE
COMMERCIAL COURT-01, SOUTH,
SAKET COURTS, DELHI
DLST010070062018
CS (Comm) No. 153/2019
In the matter of:-
Mrs. Sharika Qadeer
Proprietor of M/s Zaid International
A-159, Vikaspuri, New Delhi - 110018
..... Plaintiff
Vs.
M/s Saroj International Leathers (Pvt) Ltd.
Regd. Office at :
A-115, New Friends Colony, New Delhi - 110065
Also At:
I-68, Sector -9, Noida - 201301 (U.P.)
..... Defendant
Date of institution of the case : 22.10.2018
Date of final arguments : 17.12.2024 and 07.01.2025
Date of judgment : 16.01.2025
JUDGMENT
1. This is suit for recovery of Rs. 10,30,289/- (Rupees Ten Lacs Thirty Thousand Two Hundred and Eighty Nine Only) filed CS (Comm) No. : 153/2019 1/27 by the plaintiff against the defendant on the facts that defendant company which is in the business of manufacturing and exporting leather apparels, approached the plaintiff with request to provide sheep skin wet blue to the defendant. As per mutual agreement between the parties, sheep skin wet blue were delivered to the defendant as per the instructions of defendant and invoices in sum of Rs. 7,54,199/- were raised against the products delivered. Defendant also issued central tax form 'C' to the plaintiff dated 21.09.2017 against the delivery and invoice dated 24.10.2016 which clearly showed that there was no dispute with regard to the quality and quantity of goods supplied.
2. Prior to filing of the instant suit, plaintiff filed complaint under section 9 of the Insolvency & Bankruptcy Code before the National Company Law Tribunal, New Delhi. Said complaint was disposed off, as the defendant raised the issue pertaining to quality and the tribunal therefore could not have decided the dispute. The dispute was created by the defendant to avoid the proceedings under the Insolvency and Bankruptcy Code, whereas no such dispute was raised/existed.
3. Defendant failed to clear the payment towards good supplied despite repeated requests and reminders. Defendant after receiving the emails/whatsapp communication for payment, never raised the issue of quality and kept avoiding the payment . Legal notice dated 21.04.2018 sent to defendant did not yield any result. Hence, plaintiff was constrained to file the present suit against the defendant.
4. In written statement filed on behalf of defendant, it was stated that plaintiff through her husband had supplied 3010 pieces of Sheep Skin Wet Blue to the defendant on 05.10.2016. When CS (Comm) No. : 153/2019 2/27 defendant started processing the said consignment, it came to their notice that the supplied goods were of inferior and sub standard quality and 1/3rd of the goods supplied were infected with " Red Fungus" , whereas the remaining goods suffered from " tearing strength problem" as well as "fat/spew problem". Representative of defendant company, duly communicated the aforesaid problem to the plaintiff over telephone. Thereafter, husband of plaintiff visited the godown/warehouse of the defendant on 10.10.2016 and personally examined the goods as well as accepted that the supplied goods did not meet the technical standards. Husband of plaintiff, upon consulting with the plaintiff, accepted to replace the supplied goods.
5. Defendant company had been regularly following up with the plaintiff and her husband over telephone as well as vide written communications. Whatsapp communication dated 22.10.2016 had also been sent by Mr. Samir Sethi, Director of Defendant Company from his mobile number 9810006090 to husband of plaintiff on his mobile phone bearing no. 9810528361, categorically stating that quality of the goods was/is not acceptable by the defendant. Screenshot of said whatsapp communication was also filed on record.
6. It was further stated that thereafter plaintiff raised an invoice bearing no. 201 dated 24.10.2016 upon the defendant, assuring that the goods would be replaced. Defendant objected to the same over telephonic conversation on 29.10.2016, however, plaintiff requested the defendant not to reverse/cancel the invoice on the pretext that the plaintiff would replace the said goods. This communication was documented by defendant vide its letter dated 29.10.2016, given to the plaintiff. Further, vide communication CS (Comm) No. : 153/2019 3/27 dated 16.11.2017, plaintiff was repeatedly requested to take back its goods but plaintiff failed to do so.
7. It was further stated that the no amount whatsoever, much less a sum of Rs. 7,54,199/- was due as is being alleged by the plaintiff. The supplied material was of no use to the defendant and is infact still lying with the defendant in its godown, in the shape and form in which it was supplied.
8. In replication, contents of written statement were denied and those of plaint were reiterated and reaffirmed. It was further stated that the goods in question were at tannery M/s Sanjay Leather Karnal, therefore, the question of inspection of goods at the Godown/Warehouse of defendant does not arise. As further stated, the goods supplied by plaintiff were of good quality. On 19th October 2016, plaintiff requested the defendant to supply Form no. 38 for preparation of invoice of the goods already supplied to the defendant on 05.10.2016 and it was only thereafter i.e. on 22.10.2016 that defendant raised objection for the first time with regard to quality of goods. Husband of plaintiff contacted Mr. Samir Sethi and asked reasons for the same. Ultimately during the discussion, Mr. Sethi asked for discount, which the plaintiff refused and requested either to return the goods or take it on the same price. Mr. Sethi then requested the husband of plaintiff to visit the office of defendant at Noida on 24.10.2016, on which date, again the same request for discount was made by Mr. Samir Sethi and the same was again refused by plaintiff. Ultimately, defendant issued Form no. 38 dated 24.10.2016 and accepted invoice no. 201 dated 24.10.2016 as well as Mr. Sethi acknowledged the receipt of abovementioned invoice against the goods in question.
CS (Comm) No. : 153/2019 4/279. It was further stated that letters dated 16.11.2017 and 29.10.2017 are manipulated and fabricated documents without proof of mode of dispatch. Theory of defendant in entire written statement is based on its afterthought averment just to delay the present proceedings and to escape itself from making the genuine payment to the plaintiff. Plaintiff time and again requested the defendant to release the payment through Whatsapp and telephonically, but each time, defendant gave one reason or the other and delayed to release the payment. Plaintiff also sent email dated 04.01.2017 and again requested to release the payment as the same was delayed for more than five months. Defendant even after receiving said email, did not raise any question of quality or otherwise for not making the outstanding payment to the plaintiff.
10. Following issues were framed vide order dated 02.06.2022:
(1) Whether the plaintiff is entitled for recovery of the suit amount, as prayed for? OPP (2) Whether the plaintiff is entitled to the interest? If so, at what rate and for which period? (OPP) (3) Relief
11. Sh. Mohd. Qadeer, husband of Plaintiff was examined as PW1. He filed his evidence by way of affidavit Ex. PW1/A and relied upon following documents:-
1. SPA is Ex. PW1/1 (Colly)
2. Invoices are Ex. PW1/2 (colly) (OSR)
3. Goods issue note dated 5.10.2016 are Ex. PW1/3 (colly) (OSR)
4. Central Sales Tax Form "C" are Ex. PW1/4 (colly)
5. Copy of emails and whatsapps are Ex. PW1/5 (Colly) CS (Comm) No. : 153/2019 5/27
6. Copy of legal notice, postal receipt and tracking report are Ex. PW1/6 to Ex. PW1/9 (colly).
7. Certificate u/s 65-B of Indian Evidence Act is Ex.
PW1/9.
8. Copy of notice under Order XII Rule 8 CPC is Ex.
PW1/1012. In defence, Sh. Samir Sethi, AR/Director of defendant company was examined as DW1. He filed his evidence by way of affidavit Ex. DW1/A and relied upon following documents:-
1. Copy of Board Resolution dated 05.03.2019 as Ex. DW1/1.
2. Copy of Challan No. 095 as Ex. DW1/2.
3.Whatsapp Communication dated 22.10.2016 as Ex. DW1/3.
4. Record retrieved from True Caller as Ex. DW1/4.
5. Certificate U/s 65B of Indian Evidence Act as Ex. DW1/5.
6. Copies of communications dated 29.10.2016 and 16.11.2016 as Ex. PW1/X1 and Ex. PW1/X2.
7. Copy of reply filed by defendant before NCLT, Delhi as Ex. DW1/7.
8. Copy of reply dated 20.04.2018 alongwith postal receipt and tracking report is Ex. DW1/8 (colly.)
9. Copy of reply dated 03.05.2018 and email dated 03.05.2018, postal receipt and tracking report are Ex. DW1/9 (colly.)
10. Certificate U/s 63 of BSA, 2023 is Ex. DW1/10.CS (Comm) No. : 153/2019 6/27
Issue-wise findings are as under:
13. Issues No. 1 & 2: Business transaction between the parties pertaining to supply of Sheep Skin Wet Blue by plaintiff in favour of defendant is the admitted fact on record, whereby plaintiff had supplied 3010 pieces of Sheep Skin Wet Blue to the defendant on 05.10.2016. Plaintiff claimed that after receipt of the consignment, defendant sent it to M/s Sanjay Leather, Karnal vide goods receipt dated 5.10.2016.
14. On behalf of defendant, it was stated that after receipt of the material, when defendant started processing, it came to their notice that the supplied goods were of inferior and sub standard quality and 1/3rd of the goods supplied were infected with " Red Fungus", whereas the remaining goods suffered from " tearing strength problem" as well as "fat/spew problem". It was further explained that 'tearing strength problem' refers to a situation where the skin/goods did not possess the adequate strength and upon being processed, said skin kept tearing and further ' Fat Spew Problem' refers to a situation where the skin/goods contain excess proportion of fat, which upon being processed expels large quantities of fat, thereby rendering the goods useless for the defendant. According to defendant, this fact was duly communicated to the plaintiff over telephone. Subsequent thereto, husband of plaintiff visited the godown/warehouse of the defendant on 10.10.2016 and personally examined the goods and accepted that the supplied goods did not meet the technical standards and accepted to replace the supplied goods. Plaintiff did not replace the goods which was followed by whatsapp communication dated 22.10.2016 sent by defendant to husband of CS (Comm) No. : 153/2019 7/27 plaintiff reiterating that the quality of goods was not acceptable by the defendant.
15. Plaintiff denied with regard to any visit to godown of defendant on 10.10.2016 or any defect in the supply or their assurance to replace the supplied goods. It was stated that rather on 19.10.2016, plaintiff requested the defendant to supply Form no. 38 for preparation of invoice of the goods already supplied to the defendant vide challan no. 95 dated 05.10.2016. Vide email dated 19.10.2016 Ex. PW 1/5 (colly), defendant was informed to issue 38 Form. According to plaintiff, defendant had not raised any objection with regard to quality of the goods prior to 22.10.2016. Husband of plaintiff then contacted Mr. Samir Sethi on 22.10.2016 and asked reasons for the same, upon which defendant asked for discount, which the plaintiff refused and requested either to return the goods or take it on the same price. Husband of plaintiff was asked to visit the office of defendant at Noida on 24.10.2016, when defendant again requested husband of plaintiff for discount which was again refused by plaintiff and defendant was advised either to take the goods on the same price or return the goods. Ultimately, defendant issued Form no. 38 dated 24.10.2016 and accepted the invoice no. 201 of the even date. Defendant thereby acknowledged receipt of the said invoice against the goods in question.
16. DW1 in his examination before the court admitted that the goods were supplied by the plaintiff to the defendant on 05.10.2016 and that the invoice for the said goods was raised dated 24.10.2016. Nevertheless to the question that when did he raise the objection regarding defective goods for the first time, he answered that it was on 22.10.2016 but volunteered to state that this time, he had notified the plaintiff about the defective goods in writing through CS (Comm) No. : 153/2019 8/27 whatsapp. He reiterated that husband of plaintiff visited his premises and inspected the goods prior to sending of the written whatsapp message who accepted the defect and promised to replace the goods before 22.10.2016. He denied that plaintiff did not promise to replace the goods nor there was any defect in the goods.
17. In written statement, it was mentioned that the plaintiff and her husband had represented to defendant that they would supply the skin/goods in consonance with the requirement of the defendant and upon such representation and assurances of the plaintiff, defendant placed order upon the plaintiff. In Cross examination, nevertheless, DW1 stated about the previous business relationships between the parties as well, by submitting that the entire transaction was on good faith and plaintiff was their regular supplier having good relation with them . He stated that he had not filed any document other than the whatsapp message, wherein the defect in writing had been highlighted by him to the plaintiff and denied that the objection of defective goods was just to negotiate the price of the products, though volunteered to state that there was no question of any price negotiation as goods were intended for export and were required to meet the export standard. According to DW1, at the time of placing the order, they had informed the plaintiff about the standard of goods to be supplied which referred that the goods should not be stale, should not have any fungus and should not have any tearing problem, though standards were not informed in writing to the plaintiff.
18. PW1 while admitted that there was telephonic conversation prior to supply of goods and also after supply of the goods between him and defendant but denied that any defect in the sheep skins was telephonically communicated to him by defendant. He also denied CS (Comm) No. : 153/2019 9/27 that on 10.10.2016, he inspected the goods supplied at the godown of the defendant or accepted the defects or promised to replace the defective goods.
19. Ld. Counsel for defendant submitted that :
"there is not even a whisper by the Plaintiff in the plaint about the receipt of "Whatsapp message dated 22.10.2016 sent to the husband of the Plaintiff on his Mobile No.9810528361, by Mr. Samir Sethi, the Director of Defendant Company, from his Mobile No.9810006090. Whereas in the Replication, plaintiff has denied regarding any Whatsapp message dated 22.10.2016 sent to the Husband of the Plaintiff. However, in the same paragraph of the Replication, the Plaintiff submits that the Defendant had not raised any objection with regard to the quality of the goods prior to 22 October 2016. The objection was raised by the Defendant first time on 22nd October 2016. At the same time, during the course of his cross examination, PW1, again took a contradictory stand and stated that he was never told by the defendant on any date that the material was of inferior quality".
20. Ld. counsel for defendant further submitted that during the course of cross examination of PW1 he again took contradictory stand by stating that he was never told by the defendant on any date that the material was of inferior quality, whereas counsel for plaintiff put question to DW1 in his cross examination whether he had intimated the plaintiff about the defects in the goods, other than by whatsapp message, in writing with further suggestion that "it is wrong to suggest that except whatspp communication, there was no communication, with regard to defective goods.". Ld. Counsel for defendant submitted that aforementioned question and the suggestion put to DWI, in itself tantamounts to an admission on the part of the Plaintiff that on 22.10.2016 itself, the Defendant Company had notified to the Plaintiff, in writing, about the defects in the goods supplied by it.
CS (Comm) No. : 153/2019 10/2721. PW1 in his cross-examination, did not remember if he had received said message dated 22.10.2016 on whatsapp while acknowledging his mobile no. as 9810528361. Defendant placed on record downloaded true caller information Ex. DW1/4 with regard to said mobile number belonging to husband of plaintiff. PW1 denied that prior to 10.10.2016, he had been informed by the defendant that the material supplied by the plaintiff was of inferior quality. He sought to explain that he was never told by the defendant on any date that the material was of inferior quality, while admitting that the replication was signed and affirmed by his wife wherein it was mentioned that " the defendant has not raised any objection with regard to the quality of goods prior to 22nd October 2016". He was not able to answer whether the defendant did not inform him at all with regard to inferior quality of material or did not inform him so prior to 22.10.2016. He volunteered to state that defendant informed him with regard to inferior quality of material only in reply to legal notice and denied that he was informed prior to 10.10.2016 with regard to inferior quality of material.
22. DW1 reiterated that he had informed defects in the goods to the plaintiff vide telephonic communications and during their personal meetings besides whatsapp message. Defendant had relied upon, in the pleadings as well as in Affidavit of evidence, with regard to requests made to the plaintiff for replacement of the goods vide communications dated 29.10.2016 and 16.11.2017 Ex. PW1/X1 and Ex. PW1/X2 respectively. However, defendant did not clarify on record, vide which mode the said communication was made by defendant to the plaintiff. PW1 denied receipt of communication dated 29.10.2016 Ex. PW1/X1 and also the CS (Comm) No. : 153/2019 11/27 communication dated 16.11.2017 Ex. PW1/X2 from the defendant. He stated that he had never received these communications and defendant may explain the mode of sending letters to him. Despite the specific denial and objection taken by the plaintiff with regard to Ex. PW1/X1 and Ex. PW1/X2, defendant did not substantiate sending/delivery of the said communications to the plaintiff.
23. The fact nevertheless emerged on record that the defendant vide whatsapp communication dated 22.10.2016 had informed to the plaintiff with regard to Fungus percentage for nearly 1/3rd of the material and therefore it was not acceptable to them. However, did not establish on record the further communication dated 29.10.2016 and 16.11.2017.
24. Ld. Counsel for defendant submitted that :
" Plaintiff is also completely silent about the fact that the husband of the plaintiff Mr. Md. Qadeer, visited the godown/warehouse of the Defendant on 10.10.2016 and personally examined the goods. In the Replication, the Plaintiff denied such visit of her husband to the godown / warehouse on 10.10.2016 and / or his having examined the goods. However, during the course of the cross examination of DW1, the Counsel for the Plaintiff, gave a suggestion to DW1, to which, DW1 responded, that:
"It is correct that after my communication, Mohd. Qadeer visited my premises and inspected the goods, prior to my written whatsapp message."
This suggestion, in itself, implies that the Plaintiff admitted about the visit of her husband to the godown / warehouse of the Defendant to inspect the goods. This is again a material contradiction, on the part of the plaintiff, that PW1 did not visit the premises of the Defendant".
25. Ld. Counsel for defendant further submitted that the goods were admittedly supplied on 05.10.2016 and the fact of the same being of inferior and sub-standard quality, was immediately conveyed to the Plaintiff and in fact, on 10.10.2016, PW1, had visited the godown/warehouse of the Defendant, where the supplied CS (Comm) No. : 153/2019 12/27 goods were kept and had inspected the same and had accepted the defects in the good and had even assured to replace the said goods.
26. Ld. Counsel for defendant strongly emphasized with regard to alleged visit of the husband of plaintiff to the warehouse/godown of defendant on 10.10.2016 when according to defendant, plaintiff had examined the goods and also had assured for replacement of the goods. On behalf of Plaintiff, it was stated that the goods in question were at tannery M/s Sanjay Leather Karnal, therefore, the question of inspection of goods at the Godown/Warehouse of defendant did not arise. The oral assertion of the defendant with regard to visit of husband of plaintiff to their godown/warehouse on 10.10.2016 is categorically disputed by the plaintiff . Whatsapp message sent by defendant dated 22.10.2016 was subsequent to the alleged visit of the husband of plaintiff, however, it does not contain any reference to any such visit of the husband of plaintiff dated 10.10.2016 or his acknowledgment with regard to any defect in the goods and assurance for replacement of goods nor refers to any other telephonic communication between the parties. Whatsapp message dated 22.10.2016 Ex. DW1/3 seemingly invites the attention of the plaintiff to the following :
" 22.10.2016
1. D/D - 163 11%
2. One TACH - 352 23%
3. NAPPA - 255 16%
4. OUT - 120 8% RED FANGASH - 648 42%
-----------------------------------------------------------
1538 100%
CS (Comm) No. : 153/2019 13/27
I 455 15%
II 735 24%
III 570 19%
IV 294 10%
V FANGASH 943 32%"
27. Plaintiff thereby was informed that it was not acceptable and the confirmation was asked from the plaintiff. If the whatsapp message dated 22.10.2016 was preceded by the visit of the husband of plaintiff to the godown of defendant, inspection of the material, acknowledgement of the defects and the assurance to replace the same, the whatsapp message dated 22.10.2016 would not have been worded as noted above, without any reference to the visit, inspection, acknowledgment of defects and the assurance.
28. Besides that, despite the said communication dated 22.10.2016 by the defendant, the invoice was raised by the plaintiff dated 24.10.2016 Ex. PW1/2 (colly). In replication, plaintiff has pleaded that on 19.10.2016, plaintiff had requested defendant to supply form no. 38 for preparation of the invoice of the goods already supplied to the defendant vide challan no. 95 dated 05.10.2016. Defendant had not raised any objection with regard to quality of the goods prior to 22.10.2016 . Upon visit of the husband of plaintiff to the office of defendant on 24.10.2016, he was again requested for discount which was declined by the plaintiff. Thereafter, defendant issued Form no. 38 dated 24.10.2016 and accepted the invoice of the even date. Defendant acknowledged the receipt of the said invoice against the goods in question and thereafter there was no discussion with the defendant. Though in affidavit of evidence of plaintiff, this fact was not specifically CS (Comm) No. : 153/2019 14/27 mentioned and there was also no cross examination by the defendant on the said aspect i.e. pertaining to issuance of form no.
38. Form no. 38 was previously used under the VAT system to regulate movement of goods across state borders, which used to be issued by the buyer and provided to the seller to ensure tax compliance during the transport of goods. The said system is no longer applicable after the implementation of the GST w.e.f. 01.07.2017 after which e-way bill system has replaced the said forms for the movement of goods. Nevertheless, in the instant matter, it was prior to 01.07.2017 i.e. on 05.10.2016 when the form 38 was required to be issued.
29. Raising of invoice dated 24.10.2016 against the material supplied to the defendant is admitted fact on record. Defendant's submission nevertheless was that the defendant objected to the same over telephonic conversation dated 29.10.2016, however, plaintiff requested defendant not to reverse /cancel the invoice on the pretext that plaintiff shall replace the said goods. According to defendant, this communication was further documented by the defendant vide its letter dated 29.10.2016 sent to plaintiff, followed by another communication dated 16.11.2017. Albeit, as already discussed, defendant has failed to bring on record the proof of dispatch/sending/receipt of the letters dated 29.10.2016 and 16.11.2017 to/by the plaintiff. Having raised the dispute with regard to the defective quality of the goods, it was open for the defendant not to accept the invoice then and there and lodge its protest. However, nothing is on record to establish any such protest or objection raised by defendant. Plaintiff asserted that defendant had issued Cental Sales Tax Form 'C' Ex. PW1/4 to the plaintiff dated 21.9.2017 against the delivery and invoice dated 24.10.2016 which CS (Comm) No. : 153/2019 15/27 clearly showed that there was no dispute with regard to quality and quantity.
30. Ld. counsel for defendant submitted that the alleged reason mentioned in replication for non-payment on the part of the Defendant, is that the Defendant was asking for "discount", which the Plaintiff refused to grant and impliedly, it was for the said reason that the Defendant did not make the payment of the supplied goods. However, during the course of the cross examination of DW1, it was suggested by Counsel for the Plaintiff that the Defendant did not make the payment of the Invoice amount because the Defendant had not received the Sales Tax Refund. These contradictions are material and go to the root of the matter. The same also proves that the averments made by or on behalf of the Plaintiff are false and untrustworthy.
31. Ld. counsel for defendant further submitted that Defendant wanted to return the Invoice, however, it was on the request of the Plaintiff that the same was not returned, because the Plaintiff had informed that it had already booked the sale in Sale Books and had requested the Defendant to retain the Invoice with the understanding that the Plaintiff shall replace the goods, without raising any further invoice. Further, C-Form was issued by the Defendant, for the reason that since the Invoice had been entered by the Defendant Company in its Books of Accounts (on the assurance of the Plaintiff that the supplied goods would be replaced on the same invoice), it was necessary for the Defendant to issue C-Form. The Debit Note, as submitted, was not issued by the Defendant, since the Plaintiff had assured that the defective goods would be replaced.CS (Comm) No. : 153/2019 16/27
32. DW1 admitted that they had entered the invoice dated 24.10.2016 in their books of account Ex. PW1/2 but sought to explain that at that time they raised objection regarding defective goods and wanted to return the invoice but plaintiff requested that they had already booked sale in their books, as such, they should retain the invoice on the understanding that plaintiff shall replace these goods without raising any further invoice. Said request was made by plaintiff somewhere around the date of invoice itself.
33. DW1 also admitted that they had issued 'C' form, however, he sought to clarify that they had to issue 'C' forms since they had entered the invoice in their books, therefore it was necessary for them to issue C-form. He also admitted that they had not issued any debit note to the plaintiff with regard to transaction in question and also no debit note with respect to the present transaction has been issued till date. He again sought to clarify that they did not issue the debit note because the plaintiff had assured them that the defective goods would be replaced. He admitted that in their books of account, the payment for the invoice was still pending. He also admitted that even till date, they have communications with husband of plaintiff through whatsapp and they exchange wishes on festivals.
34. Plaintiff though sought to submit that there was some sales tax issue, because of which defendant had not made the payment to the plaintiff in time. DW1 was put the whatsapp communication between the witness and the husband of plaintiff Ex. DW1/X1, however, he stated that no sales tax issue had arisen pertaining to their company. In fact, plaintiff was a defaulter with the Sales Tax Department and in that context, they were not able to get the tax refund. He volunteered to state that the said refund pertained to CS (Comm) No. : 153/2019 17/27 some other invoices and not with respect to the invoice in question. As further stated by him, even in the whatsapp message, the reference to the appeal pertained to the appeal projected to have been filed by the plaintiff with the Sales Tax Authorities. He though did not remember whether the said tax issue was ultimately resolved or not and had shown his unawareness with regard to the receipt of tax refund from sales tax department in answer to the question put to him that they had received the tax refund from Sales Tax Department after the plaintiff had done necessary follow up with the Sales Tax Department. He nevertheless stated that the said tax refund had no concern with the transaction in question and also denied that defendant did not make the payment of the invoice in question because it had not received the Sales Tax Refund referred earlier.
35. PW1 at the same time, denied the suggestion that it was imperative for the defendant to issue C-Form since the material had been received by him. According to PW1, defendant could also have issued debit note for defective goods. He further denied the suggestion that defendant had issued C-Form on the basis of his assurance that the goods will be replaced. PW1 explained that C- Form was issued after approximately one year of supply of goods. According to PW1, the material had only six months shelf life and therefore, it could not be retained beyond that . PW1 though denied the suggestion that since material was of inferior and defective quality, it was of no use for the defendant since the date of its supply. Nevertheless while defendant in terms of its own case and the suggestion given to PW1, acknowledged and itself projected that the material was of inferior and defective quality, therefore was of no use to them. There being no rebuttal to the assertion of PW1 CS (Comm) No. : 153/2019 18/27 that material had only six month shelf life, thereby defendant was not required to keep waiting for the replacement of the material even after expiry of one year i.e. at the time of issuance of C-Form.
36. The purpose for issuance of C-Form was to provide the buyer and sellers of goods and services, concession on inter- state trade while filing the tax returns. In this form, the buyer declares the value of their purchases. If the buyer submits a "C" form, the less expensive Central Sales Tax rate will be applied to the central transaction. In these circumstances, there was no reason or requirement for the defendant to issue C-Form after one year of supply of the alleged defective material.
37. Ld. Counsel for plaintiff further submitted that no debit note was issued for the alleged defective goods to prove that the plaintiff supplied the alleged defective goods. Reliance was placed upon Top Forty Suspension Pvt. Ltd. Vs. Top Auto Pvt. Ltd. 2017 SCC Online Delhi 11772.
38. Contention of plaintiff is found correct on record that even otherwise defendant never issued debit note if the goods were alleged to be defective. The defendant did not issue any debit note and rather acknowledged that in their books of account the payment for the invoice was still pending. Ld. counsel for plaintiff also submitted that the objection with regard to defective goods was moon shine just to avoid legal dues of the plaintiff. It was also submitted that to prove that the goods which were supplied by plaintiff had been used by defendant and were not in their possession, plaintiff had filed application under Order XI Rule 12 r/w section 151 CPC for production of records i.e. Stock Register, Audited Complete Balance Sheet, Ledger Account etc. of the defendant company. Defendant did not file records / documents despite the order by Ld. CS (Comm) No. : 153/2019 19/27 Predecessor of this court dated 15.03.2023 which included Stock Register, Sales Invoice, Balance Sheet , Ledger Accounts etc. , therefore, the adverse inference ought to be drawn against the defendant for non production of the said records.
39. Ld. counsel for plaintiff also submitted that the Defendant after receipt of the goods from the Plaintiff on 05.10.2016 and more so after making entries in its books of account on 24.10.2016, and then issued C Form to the Plaintiff on 21.09.2017 as per the Sales Tax Act. Till date no debit note has been issued to the Plaintiff and the outstanding in the books of account of the Defendant shows outstanding for the invoice in question which is the admission of liability on the part of the defendant for the invoice in question.
40. Ld. Counsel for plaintiff further referred to Section 42 of Sales of Goods Acts that the buyer is deemed to have accepted the goods when he intimates to the seller that he has accepted them, or when the goods have been delivered to him and he does any act in relation to them which is inconsistent with the ownership of the seller, or when, after the lapse of a reasonable time, he retains the goods without intimating to the seller that he has rejected them.
41. Counsel for defendant, per contra, submitted that the defendant had conveyed with regard to defects in the consignment which amounted to rejection of the goods on part of defendant and cannot be considered the acceptance on his behalf.
42. Ld. counsel for plaintiff further submitted that admission in balance sheet is per-se an admission of liability and relied upon following:
(a) N.S. Atwal Vs. Jindal Steel 2013 SCC Online Delhi 3902:CS (Comm) No. : 153/2019 20/27
" 12. This Court in ESPN Software India (P) Ltd. v. Modi Entertainment Network Ltd., [2012] 173 Comp Cas 465 (Delhi), noted that:
"17. Admission in balance-sheet is per-se an admission of liability.............
XXXXXX XXXXXX XXXXXX
19. This entry clearly states that an amount of Rs. 8,00,04,000/- is due and payable by the respondent in accordance with the terms of the contract. This document has been signed by the directors of the company and its Company Secretary on 31.10.2002."
Similarly, in Bhajan Singh Samra v. M/s Wimpy International Ltd., [2012] 173 Comp Cas 455 (Delhi), the Court noted:
"13. Having heard the parties, this Court is of the opinion that the petitioning-creditor has to satisfy the Court that the debt on which the petition is based was due and payable on the date of the petition. Certainly a time barred debt cannot be the basis of a winding up petition.
However, admission of a debt either in a balance sheet or in the form of a letter duly signed by the respondent, would amount to an acknowledgement ..."
Similar findings have also been recorded by the Calcutta High Court in Bengal Silk Mills Co. v. Ismail Golam Hossain Ariff, AIR 1962 Cal 115, paragraph 12, and Rajah of Vizianagaram v. The Official Liquidator, Vizianagaram Mining Company Limited, Vizagapatam, AIR 1952 Mad 136. Indeed, the entry admits such liability towards JSPL for the amount claimed, and no explanation that may be provided, or circumstance surrounding the entry, can alter the fact of that liability. Thus, while this admission establishes liability, the fact is traced to the exchange of letters mentioned above, thus bringing the case within Order XXXVII CPC"
(b) Assets Reconstruction Vs. Tulip Star Hotels 2022 SCC Online SC 944 :
" 34. In Bishal Jaiswal (supra) this Court held that:
35. A perusal of the aforesaid sections would show that there is no doubt that the filing of a CS (Comm) No. : 153/2019 21/27 balance sheet in accordance with the provisions of the Companies Act is mandatory, any transgression of the same being punishable by law. However, what is of importance is that notes that are annexed to or forming part of such financial statements are expressly recognised by Section 134(7). Equally, the auditor's report may also enter caveats with regard to acknowledgments made in the books of accounts including the balance sheet. A perusal of the aforesaid would show that the statement of law contained in Bengal Silk Mills [Bengal Silk Mills Co. v. Ismail Golam Hossain Ariff, 1961 SCC OnLine Cal 128 : AIR 1962 Cal 115] , that there is a compulsion in law to prepare a balance sheet but no compulsion to make any particular admission, is correct in law as it would depend on the facts of each case as to whether an entry made in a balance sheet qua any particular creditor is unequivocal or has been entered into with caveats, which then has to be examined on a case by case basis to establish whether an acknowledgment of liability has, in fact, been made, thereby extending limitation under Section 18 of the Limitation Act."
43. In our view, the NCLAT erred in law in holding that the Books of Account of a company could not be treated as acknowledgement of liability in respect of debt payable to a financial creditor".
43. Ld. Counsel for plaintiff further submitted that the goods are deemed to be accepted when after receiving the goods C-Form was issued after more than 11 months of receipt of goods. Reliance was placed upon following:
(a) Satyapal Vs. Slick Auto Accessories 2014 SCC Online Delhi 998:
" 12. The fourth reason which is given by the trial court to hold that the goods were defective was that the goods were supplied in the month of July 2007 and C-Forms were supplied by the respondent no.CS (Comm) No. : 153/2019 22/27
1/defendant no. 1 to the plaintiff much later on 17.11.2007 and which would not have been done if the goods supplied would have been defective. I once again agree with this conclusion of the trial court and which is contained in para 40 of the judgment of the trial court which reads as under:
"40. In case the defendants later found out that they had suffered some losses on account of any lapse on the part of the plaintiff or on account of the defective material supplied by the plaintiff the only option available with the defendants was to sue for damages which they have not done till date. Even no counter claim for damages was filed by the defendants. Moreover the defendants have failed to establish that the goods in question was defective. The goods were supplied in the month of July 2007 and C-Forms were supplied by the defendants to the plaintiff on 17.11.2007 and therefore the version of the defendants appears to be improbable because had the goods been defective the defendants would not have issue C Forms to the plaintiff in November 2007."
(b) KLG Systel Vs. Fujitsu Icim 2001 SCC Online Delhi 440:
" 11. The disputes between the parties cannot be decided do hors the sundry provisions of the Sale of Goods Act. Part-payment to a substantial extent has been made by the Defendant/Applicant. When a buyer such as the Defendant/Applicant asserts that the merchandise/goods were defective, it is not open to it to withhold payment once the delivery is accepted; since they are deemed to have been accepted by operation of law".
44. Ld. Counsel for plaintiff further submitted that defendant retained the alleged defective goods for very long period and did not return the goods which also amounted to acceptance of goods and clearly fatal to the defence in context of statutory law i.e. section 41 and 42 of Sale of Goods Acts. Reliance was placed upon following:
(a) Lohmann Rausher Gmbh Vs. Medisphere Marketing 2005 SCC Online Delhi 39:
" 28. In the decision reported as AIR 1930 Bombay 249 Nagan Das Mathura Das v. N.V. Valmamohomed, view approved by the House of Lords was reiterated being:-CS (Comm) No. : 153/2019 23/27
"If a buyer orders goods of a certain description, and the seller delivers goods of a different description, it is open to the buyer to reject them. But if he does not reject them but keeps the goods, even if he does so in ignorance of the fact that they are of a description different from that provided for by the contract he is debarred from rejecting the goods thereafter, and can only fall back upon a claim for damages, as upon a breach of warranty."
29. The long gap after which goods were ostensibly rejected on the premise that they were defective/sub-standard is clearly fatal to the projected defense in the context of statutory law being Section 41 and 42 of the Sale of Goods Act" .
(b) Naraingarh Suger Vs. Krishana Malhotra 2012 SCC Online Delhi 1492 " 10. A reference to the aforesaid findings show that it is not disputed that goods were in fact received by the appellant/defendant. Once the goods were received, the onus of proof was upon the appellant/defendant to show that the goods were defective. It was also required to show that the defective goods were in fact returned to the respondent/plaintiff or the respondent/plaintiff was told to take away these defective goods" .
45. Defendant while asserted that the goods were still lying with them, whereas PW1 stated that he was not in position to answer if the material was still lying in the godown of defendant. He stated that he had supplied the material in 2016 and therefore, did not know what the defendant would have done with the material, though the material had only six months shelf life, therefore it could not be retained beyond that. Defendant despite the assertion that the material was still lying with them, did not bring on record any substantiation to the said assertion despite the plaintiff having moved application under Order XI Rule 12 r/w section 151 CPC.
46. Ld. counsel for defendant referred to the judgment dated 13.07.2018 passed in Company Petition no. IB-508 (ND)/2018 titled as Sharika Qadeer Vs. M/s Saroj International Leathers CS (Comm) No. : 153/2019 24/27 Private Limited which was filed by the plaintiff against the defendant before NCLT and quoted observation of Ld. NCLT that :
""The whatsapp messages fortify the Corporate Debtor's submission and there is nothing on record to show that remedial steps were taken by the Operational Creditor to replace the material."
47. It was submitted by Ld. counsel for defendant that no principal amount was thus, payable, by the Defendant to the Plaintiff, as the material supplied was defective, of inferior & sub- standard quality, not fit for use and since, no principal amount was payable, the question of payment of interest, also does not arise.
48. Plaintiff had filed the petition for initiation of Corporate Insolvency Resolution Process against the defendant. Defendant nevertheless raised the objection pertaining to the defect in material while relying upon the whatsapp communication dated 22.10.2016 and letters dated 29.10.2016 and 16.11.2017. Considering the objection raised by defendant, it was noted by Ld. NCLT that :
" 8.......In proceedings under the Code, the Adjudicating Authority is not required to go into the correctness of the dispute raised. As long as the defence is not mere moonshine, the existence of a dispute is enough to reject a petition under section 9 of the Code. The whatsapp message fortify the Corporate Debtor's submissions and there is nothing on record to show that remedial steps were taken by the operational creditor to replace the material. The aforesaid defence may or may not culminate in a decree against the Corporate Debtor, but that can only be ascertained through trial. In the present proceedings, the dispute raised is sufficient to reject the prayer for initiating Insolvency Resolution against the Corporate Debtor".
49. The disposal of the petition by Ld. NCLT was on different aspect as it was not open for Ld. NCLT to adjudicate the dispute between the parties. In the instant matter, defendant though has been able to point out communication of the alleged defect vide communication dated 22.10.2016 but has failed to establish on CS (Comm) No. : 153/2019 25/27 record the subsequent communication dated 29.10.2016 and 16.11.2017. Fact remains that after the alleged defect was conveyed to the plaintiff vide whatsapp communication dated 22.10.2016, defendant issued form 38, accepted the invoice, issued C-Form and also did not issue any debit note if there was any assurance by the plaintiff for replacement of the material which was not complied with. Defendant himself also did not make any effort for return of the material nor called upon the plaintiff to replace the material. Post raising of invoice, no dispute had ever been raised by the defendant with regard to any defect in the quality of the goods or sub-standard quality of the goods, followed by issuance of C- Forms. Whereas the outstanding is still existing in the account books of the defendant as admitted by DW1. Defendant has not returned the goods and no evidence brought on record that the goods were actually defective in terms of communication of defendant and non compliance of the assurance by plaintiff.
50. After submitting form 38, acceptance of invoice, issuance of C-Forms and not raising of any dispute, if still subsisting or in existence at the time of or even after raising of invoices till the issuance of demand notice upon the defendant by plaintiff and the existence of outstanding liability in the account books of defendant as on date, it is not open for the defendant to raise this dispute at this belated stage and in these circumstances, there is no escape available to the defendant to withhold payment of the plaintiff against the receipt of the material, whereby defendant is held liable to clear the outstanding.
51. Plaintiff has claimed interest @ 20% per annum on the outstanding amount from the date the payment became due i.e. 15 days from the date of invoice, till realization. Plaintiff has made CS (Comm) No. : 153/2019 26/27 basis of claim for interest @ 20% p.a. which was mentioned in invoice raised by plaintiff. There was no specific agreement between the parties for payment of interest at the said rate. Unilateral mention in the invoice does not entitle the plaintiff to claim interest at the above rate, which in considered opinion of this court, is on the higher side, considering the prevailing banking rates. Therefore, this court is inclined to grant interest @ 9% p.a. w.e.f. from the due date of the payment i.e. 15 days from the date of invoice, till realization. Both these issues are decided in favour of plaintiff and against the defendant.
52. Relief (Issue no. 3) : Instant suit is accordingly decreed with cost in favour of the plaintiff and against the defendant for an amount of Rs. 7,54,199/- (Rs. Seven Lacs Fifty Four Thousand One Hundred Ninety Nine Only) alongwith interest @ 9 % p.a. w.e.f. 09.11.2016 till realization.
53. Decree sheet be prepared accordingly. After completion of formalities, file be consigned to record room.
Digitally signed by savita rao savita rao Date: 2025.01.16 17:01:15 +0530 Announced in the open (SAVITA RAO) court on this Day DISTRICT JUDGE of 16th January 2025 (COMMERCIAL COURT)-01 SOUTH, SAKET COURTS, DELHI CS (Comm) No. : 153/2019 27/27