Delhi District Court
Imperial Auto Industries Ltd vs Skoda Auto Volkswagen India Pvt. Ltd on 24 August, 2024
-1-
IN THE COURT OF SH. VIDYA PRAKASH
DISTRICT JUDGE (COMMERCIAL COURT)-02, NEW
DELHI DISTRICT, PATIALA HOUSE COURTS, NEW
DELHI.
CNR NO. : DLND01-003068-2021
CS (Comm.) No. 150/2021
IN THE MATTER OF:-
Imperial Auto Industries Limited
Having Its Registered Office At:
202, Kushal Bazar, 32-33,
Nehru Place,
New Delhi-110019.
Corporate Office At:
13/6, Delhi-Mathura Road,
Faridabad, Haryana-121001
Through Its Authorized Representative
...PLAINTIFF
VERSUS
1 M/s. SKODA AUTO Volkswagen India Pvt. Ltd.
Having its registered office at:
3rd Floor, Wing-A, Silver Utopia,
Cardinal Gracious Road,
Chakala, Andheri (East), Mumbai
Maharashtra-400099
2 M/s. Audi India P Ltd.
A division of Volkswagen Group Sales India Pvt. Ltd.
Silver Utopia 4th Floor
Cardinal Gracious Road,
Chakala, Andheri (East), Mumbai
Maharashtra-400099
3 M/s. Volkswagen Group Sales India Pvt. Ltd.
Silver Utopia 4th Floor,
Cardinal Gracious Road,
Chakala, Andheri (East), Mumbai
Maharashtra-400099
CS (Comm.) No: 150/2021 Page 1 of 71
-2-
4 Mr. Balbir Singh, Dhillon
Head of Audi India
SKODA AUTO Volkswagen India Pvt. Ltd.
3rd Floor, Wing-A, Silver Utopia,
Cardinal Gracious Road,
Chakala, Andheri (East), Mumbai,
Maharashtra-400099
5 Mr. Nitin Kohli
Head of Sales operations- Audi India
SKODA AUTO Volkswagen India Pvt. Ltd.
3rd Floor, Wing-A, Silver Utopia,
Cardinal Gracious Road,
Chakala, Andheri (East), Mumbai,
Maharashtra-400099
6 Mr. Michael Frisch
Vice President Region Overseas-Audi AG
Audi AG Auto
Union-StraBe 1,
85045 Ingolstadt,
Germany.
7 Mr. Gurpartap Boparai
Managing Director
SKODA AUTO Volkswagen India Pvt. Ltd.
3rd Floor, Wing-A, Silver Utopia,
Cardinal Gracious Road,
Chakala, Andheri (East),
Maharashtra-400099
8 Mr. Herbert Diess
Chairman of the board of management of
Volkswagen Group
Berliner Ring 2,
38440 Wolfsburg,
Germany
9 M/s. Audi Delhi Central
DLF Capitol Point, Baba Kharak Singh Marg,
Connaught Place,
New Delhi-110001
CS (Comm.) No: 150/2021 Page 2 of 71
-3-
10 M/s. Zenica Cars India Pvt. Ltd.
2nd Floor, Orchid Centre Sector-53,
Golf Course Road,
Gurugram-121001
Haryana.
[Note: Defendant nos. 2 to 8 stood deleted from the array of
parties, vide order dated 23-12-2022 and suit was adjourned sine
die qua defendant no.10, vide order dated 16-08-2022]
...DEFENDANTS
Date of Institution : 26-03-2021
Date of reserving Judgment : 21-08-2024
Date of pronouncement of Judgment : 24-08-2024
JUDGMENT
1. The plaintiff has filed the present suit for recovery of Rs.75,87,729/- (Rupees Seventy Five Lacs Eighty Seven Thousand Seven Hundred & Twenty Nine Only ) along with pendent lite and future interest @ 18% per annum from the date of the filing of the suit till realization of the amount against the above named defendants.
2. At the outset, it may be mentioned that the plaintiff had initially filed the present suit against as many as ten defendants. However, during the course of trial, the defendants nos. 2 to 8 were deleted from the arrays of the parties vide order dated 23-12-2023 passed by Ld. Predecessor of this Court. Furthermore, the suit qua defendant no.10 was adjourned sine die with liberty to the parties to revive it in accordance with provisions of IBC CS (Comm.) No: 150/2021 Page 3 of 71 -4- including proviso to Section 14 thereof on happening of any of the events specified therein entitling parties for revival of the proceedings or continuation of the suit, vide order dated 16-08-2022 passed by Ld. Predecessor of this Court in view of order dated 22/03/2021 of Hon'ble National Company Law Tribunal (in short NCLT), Chandigarh Bench, Chandigarh in case CP. (IB) No. 263/Chd/Hry/2018 titled 'Volkswagen Finance Private Limited vs Zenica Cars India Private Limited ' wherein the Hon'ble Adjudicating Authority had declared moratorium in terms of sub-section(1) of S. 14 of IBC qua defendant no.10.
FACTS OF THE CASE:
3. Succinctly stated, the plaintiff, which is a company duly incorporated under the Companies Act, 1956, has claimed itself to be one of India's largest integrated manufacturer and assembler of fluid transmission products. It is the case of the plaintiff that in order to strengthen its share in Asian Automobile Markets, the Skoda Auto VW Group had inter alia set up defendant no. 2, which is fully responsible for the brands Skoda Auto VW passenger cars, Audi, Porsche and Lamborghini in the areas of Sales, Marketing, After-Sales, Dealer Network and Public Relations. In order to meet its business needs and further to build its dealership work, the defendant no.3 had duly appointed defendant no.9 namely M/s Audi Delhi Central being managed by defendant no.10 namely M/s Zenica Cars CS (Comm.) No: 150/2021 Page 4 of 71 -5- India Pvt. Ltd. as its authorized dealer in Central Delhi to act on its behalf and further accept payment for the delivery of new cars and to extend after sales services on its behalf, and the same was widely publicised on the official website of defendant nos.2 and 3.
4. Pursuant to such representations/advertisements and marketing as also its past experience with the said luxury car brand, the Plaintiff Company through its officer namely Mr. Julius Denzil Natal, contacted the said Defendant Nos. 9 & 10, being the Authorized dealer of Defendant No.2 Audi India, a division of Defendant No.3 above named, for purchase of an Audi Vehicle, for the official use of one of the Directors of the Plaintiff company. It was specifically represented to the Plaintiff by Defendant No.9, that it was duly authorized to act on behalf of the Defendant Nos. 2 & 3, to accept payments for the delivery of new cars and further to provide after sales services on behalf of Audi India. The said Defendant No.9 facilitated the booking of the same through its AGM- Sales namely, Sh. Aditya Nayyar. Accordingly, Sh. Aditya Nayyar, vide his email communication dated 25.01.2018, shared a proforma Invoice with said Mr. Julius, enumerating thereunder, the Ex-Showroom price of the vehicle of the below mentioned specifications:
CS (Comm.) No: 150/2021 Page 5 of 71 -6-Model No. Audi Q7 40 TFSI Quattro MY 2018 Package Premium Plus Exterior Carrara White Interior Pistachio Beige
5. It is stated that as per the Pro-forma Invoice dated 25.01.2018, the Defendants had quoted the Ex-Showroom price of the said vehicle at Rs.71,08,000/- and 'after commercial-rebate', the price was reduced to Rs.50,50,000/- to be paid as full and final cost against the purchase of the subject vehicle. Copy of Email and pro-forma invoice, both dated 25.01.2018 are stated to be annexed as Annexure-B and Annexure-C respectively. Further, it is stated that pursuant to the receipt of said Pro-Forma invoice, the Plaintiff company made the entire payment of Rs.50,50,000/- on 30.01.2018 via RTGS from the bank account of the Plaintiff Company, towards the purchase of the said vehicle, which was duly credited into the account of the authorized dealership of the Defendant Nos.2 & 3, i.e., Defendant No.10 afore-named. It was further stipulated in the 'Terms and Conditions' of the said Invoice that the car will be delivered only against the payment in full. Consequently, after having made the complete payment, the Plaintiff Company reasonably expected the Defendants to deliver the said car within 15 days, as was repeatedly assured. However, despite numerous reminders and requests to inter alia share the Tax Invoice as well as deliver the subject Vehicle, the Defendants paid no heed to the same and kept CS (Comm.) No: 150/2021 Page 6 of 71 -7- dilly-dallying the delivery on one pretext or other. Furthermore, sometime in the month of September 2018, to the utter shock of the Plaintiff, the Defendant No.3 acting through its division Audi India (Defendant No.2), cancelled the dealership of M/s Zenica India Pvt. Ltd. (Defendant No.10). Resultantly, the dealership to manage Audi Delhi Central (Defendant No.9) was also ceased, owing to some disputes inter-se between the Defendant nos. 2 & 3 and the said dealership. It is further stated that after cancellation of the said dealership, which had accepted an exorbitant amount of Rs.50,50,000/- on behalf of the Defendant Nos. 2 & 3 (now Defendant No.1), it was incumbent upon the said Defendant Nos. 1-3 along with their respective heads/ Managing Director/ Chairman (Defendant Nos.4-8) to duly deliver the vehicle of the above mentioned specifications, to the Plaintiff under a contractual obligation. However, despite numerous communications addressed to the Defendant No.3 as well as its division Audi India (Defendant No.2), as to the status of the delivery of the said vehicle, followed by a Legal Notice dated 09.06.2019 served via speed post, the said Defendants neither made any attempt to provide/ deliver the vehicle to the Plaintiff nor have refunded/remitted the sale consideration amount of Rs.50,50,000/- along with interest, back to the Plaintiff Company.
6. Thus, it is alleged that in utter disregard and breach of the terms and covenants of the Pro-Forma Invoice dated CS (Comm.) No: 150/2021 Page 7 of 71 -8- 25.01.2018, the Defendants have wrongly withheld a substantial sum of Rs.50,50,000/- which sum was duly paid in advance by the Plaintiff for the provision of Vehicle in terms of the said Agreement. It is further alleged that the Defendants have not only wrongly withheld the afore-stated sum but have additionally rendered themselves jointly and severally liable to pay interest on the aforesaid amount computable @ 18% p.a. w.e.f. 15.02.2018 (15th day from the date of payment towards the said purchase) till realization and thus, has claimed Rs.25,37,729/- towards interest computed @ 18% per annum from 15.02.2018 till filing of the suit.
7. Further, it is averred that during this entire period, in a bid to get back the money advanced for the purchase of an Audi car, supposedly "a combination of accessible luxury, high levels of comfort and dynamic automotive refinement", the Plaintiff Company, through its official namely Mr. Julius Denzil Natal, had relentlessly tried to contact Audi support, numerous existing dealerships of the Defendant Nos.2 & 3, but in vain. Rather, contrary to the expectations from a world-renowned brand which boasts of its sophisticated and seamless after-sales service, nobody answered the distress calls on the said helpline/customer support number. Even if there was an occasional answer, the same was not directed at resolution of the issue, but resulted in every division shirking from its responsibility to refund/release the money of the Plaintiff.
CS (Comm.) No: 150/2021 Page 8 of 71 -9-8. It is pertinent to mention here that sometime in March 2020,the Defendant No.10 sent reply dated 09.03.2020 to the Legal Notice sent by the Plaintiff. In the said reply, the Defendant No.10 has inter-alia admitted the factum of booking of the subject Car, however at the same time, it has alleged that the Defendant No.3 (now Defendant No.1), vide its letter dated 05.09.2019, had terminated the Agreement executed between M/s Zenica and Audi India (Defendant No.2), pursuant thereto, the said Defendant is unable to deliver or sell any vehicle(s) of Audi brand, w.e.f. 05-09-2019. It is further admitted by the Defendant No. 9 that the subject payment in the sum of Rs. 50,50,000/- had already been paid and transferred to the Defendant No.3 (now, Defendant No.1) by the said Defendant/erstwhile Dealership. It is stated that the Defendant Nos. 1-8 have neither sent any reply to the said notice despite receipt of the same, nor they complied with the said Notice.
9. On these facts and circumstances, the plaintiff has claimed that it is entitled to the refund of the ' principal amount' in the sum of Rs.50,50,000/- along-with interest computable at 18% per annum w.e.f.15.02.2018 till realization, and thus, has sought recovery of total sum of Rs.75,87,729/- [Rs.50,50,000/- towards principal amount + Rs.25,37,729/- towards interest computed @ 18% per annum from 15.02.2018 till date of filing of the suit] along with pendente lite and future interest @ 18% per annum from CS (Comm.) No: 150/2021 Page 9 of 71 -10- the date of filing of the suit till its realization, besides costs of the proceedings.
10. Summons of the suit were issued to the defendants.
The defendant nos. 1 to 8 and 10 put their appearance through their respective counsels. Considering the fact that despite efforts, the defendant no.9 namely M/s Audi Delhi Central could not be served by way of ordinary manner, it was directed to be served by way of publication in newspaper (1) Navbharat Times (Hindi edition); and (2) Times in India (English edition), vide order dated 10-11-2021. Accordingly, the said defendant was served through publication in aforesaid newspapers, both dated 02-12-2021. Since, the said defendant had failed to file written statement within maximum period of 120 days from the date of said service through publication, therefore, the defence of the said defendant was struck off, vide order dated 23-12-2022, passed by Ld. Predecessor of this Court. It may also be noted that none had appeared in this case on behalf of said defendant throughout the trial.
11. Further, as already noted above, considering the fact that vide order dated 22-03-2021, Hon'ble NCLT had declared Moratorium including for institution of suits or continuation of pending suit proceedings against the defendant no.10, the application u/s 151 CPC read with S. 14 of the Insolvency & Bankruptcy Code, 2016 of the defendant no.10 was allowed, vide order dated 16-8-2022. Consequently, the suit qua defendant no.10 was adjourned CS (Comm.) No: 150/2021 Page 10 of 71 -11- sine die with liberty to the parties to revive it in accordance with provisions of IBC including proviso to Section 14 thereof on happening of any of the events specified therein entitling parties for revival of the proceedings or continuation of the suit.
12. Further, the defendant nos.2 to 8, who were employees/directors of the defendant no.1, were deleted from the arrays of defendants as they were not necessary and proper parties for adjudication of the present suit, on an application moved on their behalf under Order I Rule 10 CPC read with S. 151 seeking their deletion, vide detailed order dated 23-12-2022 passed by Ld. Predecessor of this Court.
13. Thus, it emerges from the record that suit was contested mainly by defendant no.1 namely M/s Skoda Auto Volkswagen India Pvt. Ltd. The defendant no.1, in its written statement, took various preliminary objections, inter alia, that the suit qua defendant no.1 is not maintainable as it does not have any role to play in the matter of claims, contentions and allegations in the present suit as there is no privity of contract between the plaintiff and the defendant no.1. It is stated that suit does not disclose any cause of action against the defendant no.1 as there is no deficiency of service on the part of the defendant no.1 and thus, the suit is liable to be dismissed. It is stated that averments and grievances of the plaintiff are against defendant nos. 9 and 10 and there is no CS (Comm.) No: 150/2021 Page 11 of 71 -12- allegation against defendant no.1 and thus, the suit suffers from the vice of mis joinder of parties and deserves to be dismissed. It is also stated that the defendant no.1 carries its business on Principal-to-Principal basis, it is only liable/ responsible for manufacturing quality of the vehicles, and provides customers through its dealers, a warranty for certain period on the vehicles sold by such dealers upon certain terms and conditions. It is further stated that accepting of bookings of the cars from the customers, delivering the cars to the customers, giving benefit of any prevailing schemes/ discount to the customers, issuance of retail invoices to the customers, etc. are the activities that come within the exclusive domain and prerogative of the dealer of the defendant no.1. The defendant no.1 claimed that it does not deal with/or is concerned with the end customer at the time of sale and delivery of the car, which is in exclusive domain of the vehicle selling dealer viz. Defendant nos. 9 and 10 herein (retail process). The defendant no.1 delivers the cars to its dealers pursuant to the requests placed by it from time to time (wholesale process).
14. Similarly, in 'Parawise Reply', the aforesaid defendant has denied the contents of Para nos. 1 to 5, however, stated that the defendant No. 3 has merged with Defendant No. 1 and the defendant No. 2 is Division of defendant No. 1 and not separate entity. It is averred that SKODA AUTO Volkswagen India Pvt. Ltd. i.e. defendant no.1, which is a CS (Comm.) No: 150/2021 Page 12 of 71 -13- company duly registered under the Companies Act 1956, inter-alia deals in Importing. Marketing. Sale and Servicing of Audi vehicles, through its dealers across India appointed on 'Principal-to-Principal basis'. For this purpose, the Defendant No.1 had appointed Zenica Cars India Pvt. Ltd. in Central Delhi & Gurgaon i.e. defendant nos. 9 & 10 (herein also referred to as "Erstwhile Dealer") in the present case vide Agreement dated 28th September, 2015. The defendant nos. 9 & 10 are same entity ( herein after collectively referred to as defendant No.10). The defendant no.1 has further stated that the defendant no.10 has ceased to be an Authorized Dealer with effect from 5th September, 2018 and a Public Notice was issued to this effect on 6th September, 2018 informing the customers and general public about closure of the Dealership. It is further stated that the defendant no.1 was constrained to terminate the Dealership Agreement of defendant no. 10 due to various violations of the Dealership Agreement, including improper handling of customer concerns, non-availability of the sufficient finance to order the Cars and imminent damage to the reputation of Audi India from news reports, that an FIR had been registered by the Economic Offences Wing. Delhi Police, against defendant no. 10 and followed by the arrest of Directors of defendant no.10 in pursuance of a complaint filed by HDFC Bank, for allegedly forging loan documents and cheating and inducing the bank to extend loans to the tune of Rs.140 crores since 2008. These news reports were circulated across all media CS (Comm.) No: 150/2021 Page 13 of 71 -14- houses and newspapers, and also by Association referenced the Audi dealership, which were being run by defendant no.10.
15. It is further stated that for appointment of dealers, the defendant No.1 enters into specific "Dealer Agreement", which is purely on "Principal to Principal basis". No agency or partnership etc. is created as a result thereof. In this regard, the defendant no.1 has referred and relied upon Article 3(2)(1) on Page 7 of Dealership Agreement dated 28 September 2015 signed between defendant no.1 and defendant no. 10. In view thereof, it is stated that said Dealer i.e. defendant no.10, shall conclude all business especially the retail transactions with the Customer arising out of this Agreement as an independent entrepreneur acting in its own name and on its own account. The relationship between the defendant no.1 and the said Erstwhile Dealer i.e. defendant no.10 is purely on Principal to Principal basis and the defendant no.1 is not liable for any acts of commission/ omission of the said Dealer and its representatives. The relevant page no. 7 of agreement executed between defendant no.1 with the defendant no.10 is stated to be marked and annexed as Annexure - D.
16. Further, the defendant no.1 has also denied the contents of Para nos. 6, 7, 8, 9 & 10, while claiming that it is important to understand the difference between Wholesale and Retail Process. The defendant no.1 stated that in wholesale process, Authorized Dealers and defendant no.1 CS (Comm.) No: 150/2021 Page 14 of 71 -15- mutually agree for selling certain numbers of cars to end customers, as per the mutually agreed Sales Target signed with defendant no.1 at the beginning of every year. Accordingly, Authorized Dealers through NADCON (Ordering system of Audi India) are made aware of production plan and Dealer can place order as per production plan that are available in the online system of defendant no.1. Further, as per its Company policy, the dealer can raise demand in NADCON for blocking a car of particular model and Vehicle Identification Number (VIN) which is subject to full payment of car, by the Dealer or where Dealer is under financing arrangement (which was the case for defendant no.10) by Volkswagen Finance Pvt. Ltd. (VWFPL) on behalf of the Dealer in the present case. Subject to fulfillment of aforesaid two conditions, the defendant no.1 invoices car in the name of Dealer and wholesale process is completed. Once the car is invoiced to the dealer, the entire retail process viz. advertisement, out calling prospects, explanation of car features, specification, sales, are carried out by the Dealer. In case, if customer agrees to buy the car, the terms agreed between Dealer and the Customer are entered in the Sales Contract. Thereafter, Car Insurance formalities, Car Loan formalities (in case customer is buying car on Finance) Payment of Road Tax, process of Registration of Car with local transport office, obtaining of TC or Permanent Registration number etc. is carried by Dealer on behalf of the customer. After completing the necessary aforesaid CS (Comm.) No: 150/2021 Page 15 of 71 -16- formalities, the car gets ready to be delivered to the customer. The defendant no.1 has stated that above mentioned process of Retail Transaction is carried between customer and Dealer and defendant no.1 has no role in the entire process. Thus, it is stated that 'Wholesale Process' is between defendant no.1 and defendant no.10, whereas 'Retail Process' is between plaintiff and defendant no.10. It is further stated that as per retail delivery records submitted by defendant no.10 in the salesforce.com i.e. the Systems maintained by defendant no.1 in January 2018, defendant no.1 had wholesale and delivered two Audi cars to defendant no.10 in the name of plaintiff, the details of which are as under:-
VIN No. VIN No.
WAUZKH4MXJY000133 WAUZKH4MXJY000164
Engine No.: CYR 047856 Engine No.: CYR 048476
Date of Sale: 31-01-2018 Date of Sale: 25-01-2018
Reg. No.: HR26DN9009 Reg. No.: HR26CQ0001
Mode: Audi Q7 40 TFSI Mode: Q7 3.0 TDI
quattro
17. It is further stated that Plaintiff in its own submission in suit has agreed that advance was paid to defendant no.10 and Bank Declaration annexed at Annexure D to the suit, shows that the alleged amount was transferred to defendant no.10. Further, the communication annexed by plaintiff at Annexure B to the suit, is between the plaintiff and representatives of defendant no.10, which substantiates the fact that defendant no.1 was not aware of the alleged transaction as there was no involvement of defendant no.1 and defendant no.1 was never privy to the said transaction.
CS (Comm.) No: 150/2021 Page 16 of 71 -17-The defendant no.10 has neither recorded any booking in name of Plaintiff nor any advance as alleged by the Plaintiff, except for the details of two Vehicles that were delivered by defendant no.10 to the plaintiff. Further, as claimed by the plaintiff, the total amount of car was paid to defendant No. 10 in the month of January 2018 and it is totally surprising that after paying such an high amount to automotive dealer, the plaintiff did not take any steps to follow up for the delivery for almost 7 to 8 months by which time the dealerships of defendant no. 10, were closed. The plaintiff has not produced any follow-up communications addressed to defendant no.1, informing regarding alleged transaction with defendant no.10. Further, as per Plaintiff's own submission in Para 10 of the suit, the plaintiff was aware of fact that defendant no. 10 has ceased to be Dealer of defendant no.1 in September 2018. The plaintiff never communicated regarding alleged transaction with defendant no.1, which substantiates the fact that defendant no.1 had no knowledge of alleged transaction between the plaintiff and defendant no.10, as defendant no.1 was never a privy to said transaction.
18. It is further stated that as recorded in the systems by defendant no. 10, it had delivered two Q7 model cars to plaintiff in and around same time as that of plaintiff making the full payment of the car purchase value to defendant 10, therefore, it can be presumed that the transaction for car purchase was concluded between CS (Comm.) No: 150/2021 Page 17 of 71 -18- defendant no. 10 and the plaintiff by delivery of Vehicle. However, the plaintiff deceitfully is claiming that no delivery was made against the said payment made to defendant No. 10. There is not even a whisper about other Audi vehicles purchased by the plaintiff from defendant no.10. Therefore, all the transactions between plaintiff and defendant no. 10 are of a fishy nature and the plaintiff is trying to exploit the process of law to secure some undue gain from unconnected third parties i.e. defendant no.1.
19. The defendant no.1, though, admitted service of legal notice dated 9th June, 2019, however, stated that entire contents thereof are all false and baseless claims, contentions and allegations and purely an afterthought. It is stated that as per submission of plaintiff in Para 9 of the suit, the plaintiff was aware of termination since the time of publication of Notice in newspapers i.e. 5th September, 2018 and despite being aware of termination of dealership of defendant no.10, the plaintiff company had approached defendant no.1 by way of a legal notice after 10 months of Termination of Dealership Agreement of defendant no.10 and after 18 months from the date of alleged transaction, which shows that entire suit of the plaintiff is an afterthought.
20. The defendant no. 1 has denied the contents of Para nos.12, 13 & 14 of the plaint and stated that as per plaintiff's own submission and Bank Certificate annexed as Annexure D to the suit, the advance has been paid to CS (Comm.) No: 150/2021 Page 18 of 71 -19- defendant no.10. Further, it is submitted that plaintiff is blindly relying on reply to the legal notice sent by defendant no.10 which, claims that the alleged amount was paid by defendant no. 10 to defendant no. 1 without substantiating or providing any documentary proof of such a transfer. It is reiterated that apart from two vehicles already delivered by defendant No. 10 to the plaintiff which have been referred to above, no other booking was recorded in the name of plaintiff and neither the plaintiff, nor defendant no.10 has paid any amount to defendant no.1, so there is no question of withholding alleged advance or refund of alleged advance amount with payment of interest thereon as claimed and demanded by the plaintiff.
21. With reference to Para nos. 16, 17 and 18, the defendant no.1 has denied the contents thereof in totality and stated that to its surprise in pending Arbitration Proceedings between defendant no. 1 and defendant no.10, arising out of termination of Dealership Agreement, defendant no.10 has not claimed any Rs.50,50,000/- in its Counter Claim towards alleged advance collected from the plaintiff. It is claimed that Letter dated 9th March, 2020 from defendant no.10 annexed at Annexure F to the plaint, is self- contradictory to the statement of claims of defendant no. 10 filed in the Arbitral Proceedings.
22. Further, it is stated that entire suit of Plaintiff is based completely on incorrect and fundamentally flawed premise CS (Comm.) No: 150/2021 Page 19 of 71 -20- that defendant no.10 was an agent of defendant no.1 and defendant no.1 is required to repay plaintiff an amount of Rs.50.50,000/-, which plaintiff alleges to have paid to defendant no.10. It is reiterated that amount of Rs.50,50,000/- paid towards alleged booking of the Car by the plaintiff, was never paid to it by defendant no.10 and therefore, there is no question of refund of alleged amount either Principal Amount or Interest as claimed and demanded by the plaintiff by way of the present suit.
23. Similarly, the defendant no.1 has denied the contents of remaining paras of the plaint and has put forth its defence that arrangement between the defendant no.1 and defendant no.10 was on a 'Principal-to-Principal arrangement' and not on 'Principal-to-Agent arrangement' as alleged in the suit and thus, it is not liable to refund the advance that too paid to defendant no.10 by the plaintiff, which was never credited to the defendant no.1.
24. The plaintiff has filed replication to the aforesaid written statement, thereby denying the contents of the said written statement and reiterating the facts and averments made in the plaint.
ISSUES:
25. From pleadings of the parties, the following issues were framed, vide order dated 21.01.2023, passed by Ld. Predecessor of this Court:-
CS (Comm.) No: 150/2021 Page 20 of 71 -21-i. Whether the plaintiff is entitled for recovery of Rs. 75,87,729/- from defendants? If so, from which of the defendants? OPP.
ii. Whether the plaintiff is entitled for any interest from defendants? If so, at what rate; for which period and from which of the defendants? OPP iii. Relief.
26. In support of its case, the plaintiff has examined two witnesses namely Sh. Binu Abraham and Sh. Julius Denzil Natal as PW-1 and PW-2 respectively, who are its employees.
27. PW-1 led his examination-in-chief by way of affidavit (Ex.PW1/A) and deposed in terms of the averments made in the plaint. He has relied upon the following documents:-
Sr. Details of documents Exhibit
No.
1. Copy of Board Resolution dated Ex.PW1/1
20.3.2020
2. Copy of e-mail dated 25.1.2018 Ex.PW1/2
3. Copy of pro-forma invoice dated Ex.PW1/3
25-01-2018
4. Certificate issued by the bankers of the Ex.PW1/4
plaintiff regarding execution of debit transaction of Rs.50,50,000/- from its CS (Comm.) No: 150/2021 Page 21 of 71 -22- Sr. Details of documents Exhibit No. account in favour of defendant no.10
5. The relevant bank statement from Ex.PW1/5 25-01-2018 to 01-02-2018
6. Office copy of legal notice dated Ex.PW1/6 09-06-2018 along with original postal (Colly.) receipt and tracking reports downloaded from the website of Indian Post
7. Copy of reply dated 09-03-2020 of Ex.PW1/7 defendant no.10
28. PW-1, in his cross-examination conducted on behalf of defendant no.1, has denied the suggestion that defendant no.10 was not authorized by defendant no.1 to accept payments on its behalf or that nothing of that sort was publicized as alleged in Para no.3 of Ex.PW1/A. He stated that Sh. Aditya Nayyar was an employee of defendant no.10.Proforma invoice and quotation of the car in question were received through e-mail by the plaintiff. Payment of Rs.50,50,000/- was made by plaintiff to defendant no.10. Reminders and requests referred to in Para no.9 of Ex.PW1/A, were so sent to defendant nos. 9 and 10. He admitted that no contract was entered between plaintiff and defendant no.1. He stated that Mr. Julius (PW2) had gone at Audi Dealership and also had tried CS (Comm.) No: 150/2021 Page 22 of 71 -23- through Customer Care to contact Audi Support as detailed in Para no.14 of Ex.PW1/A. He stated that he had neither gone, nor he himself had tried through Customer Care to so contact. He stated that he was not aware of any claim of plaintiff before Corporate Insolvency Resolution Process (in short CIRP) and/or before Insolvency Resolution Professional (in short IRP) before Hon'ble NCLT, Delhi with respect to the claim involved in the present suit. He stated that since he is not aware, so he cannot admit or deny that the plaintiff has laid claim before Corporate Insolvency Resolution Process (in short CIRP) and/or before Insolvency Resolution Professional (in short IRP) before Hon'ble NCLT, Delhi with respect to the claim in this suit or that the same was accepted by IRP.
29. PW-2 Sh. Julius Natal also led his examination-in-chief by way of affidavit (Ex.PW2/A) and deposed in terms of the averments made in the plaint. He has proved Certificate u/s 65-B of Indian Evidence Act, 1872 as Ex.PW2/1.
30. PW-2, in his cross-examination, has stated that he had never gone to Audi Support and he had never tried to contact Audi support with respect to the claim in the suit. He stated that only he has access to the computer system allotted to him in the plaintiff company and no other plaintiff company official has access to it. He himself had taken out the printouts.
31. On statement of counsel of plaintiff, PE was closed vide CS (Comm.) No: 150/2021 Page 23 of 71 -24- order dated 01-3-2020.
32. Defendants' evidence was led, during which, the defendant no.1 has examined its AR namely Sh. Shailesh Bhardwaj as DW1. He led his examination-in-chief by way of affidavit (Ex.D1W1/A) and deposed in terms of the averments made in the written statement. He relied upon following documents:-
Sr. Details of documents Exhibit/Mark
No.
1 Copy of Board Resolution dated Ex.D1W1/1
30-1-2020
2 Copy of Order dated 05-9-2020 in Ex.D1W1/2
respect of approval amalgamation of
all three Indian entities forming the
defendant no.1 w.e.f. 01-4-2019 by
Hon'ble NCLT
3 Copy of relevant extracts of Ex.D1W1/3
dealership agreement dated 28-9-2015
4 Copy of public notice dated Ex.D1W1/4
05-9-2018
5 A copy of wholesale invoice in Ex.D1W1/5
respect of bookings recorded by
defendant no.10 in respect of two
vehicles, which were duly delivered to
it by defendant no.1 in January, 2018
33. At this stage, it may be noted that during course of CS (Comm.) No: 150/2021 Page 24 of 71 -25- evidence, DW1 could not produce originals of documents which are referred to in affidavit and exhibited as Ex.D1W1/1, Ex.D1W1/3, Ex.D1W1/4 and Ex.D1W1/5 and thus, these documents were de-exhibited and were marked as Mark D1W1/1, Mark D1W1/3, Mark D1W1/4 and Mark D1W1/5 respectively.
34. In his cross-examination, DW1 denied that Mark D1W1/1 is incorrect copy of Board Resolution of defendant no. 1 company and that he was not duly authorized to sign, verify and file pleadings on behalf of defendant no.1/company. He stated that defendant no.1 company through officials carries out due diligence of prospective dealerships of defendant no. 1 company. Before giving the dealership of Audi Delhi Central, Audi Gurgaon, Audi Approved Plus, Audi Service Gurgaon to defendant no. 10; due diligence was carried out by defendant no.1. He admitted that name of defendant no.10 was published and marketed as a dealer on the official website of defendant no.1 company and that customers can only approach the exclusive authorized dealership to purchase Audi cars. He further admitted that defendant no.1 does not even have single showroom where customers can approach to purchase Audi cars and that dealerships of defendant no. 1 are the face of brand since defendant no.1 does not directly deal with the customers. He further stated that the defendant no.1 had not retained any employee of defendant no.10 after termination of dealership agreement of CS (Comm.) No: 150/2021 Page 25 of 71 -26- defendant no.10 by defendant no. 1. He feigned ignorance as to whether Mr. Aditya Nayyar who dealt with the plaintiff and had complete knowledge of the transaction, was not only retained in Audi New Delhi West, but was also promoted to the position of DGM/Head of Sales and that Mr. Nayyar had ever worked with defendant no.1 or defendant no.9 in the period from September, 2018 to August, 2019. He denied that he had given evasive answers regarding Mr. Aditya Nayyar. He further stated that defendant no.10 was appointed as an authorized dealer by defendant no.1 on 28.09.2015. Defendant no.1 had not got registered any First Information Report (FIR) u/s 154 Cr.P.C. against defendant no.10 or its employees. He admitted that defendant no.1 had a system, which maintained retail delivery records of the cars sold by the dealership. He stated that in the above system of defendant no.1, there were entries regarding the two Audi cars, which are detailed in the table of Para no.9 of the written statement of defendant no.1.
35. DW1 further denied that despite having the knowledge in their software salesforce.com; the defendant no.1 did not reply to the legal notice. It may, however, be noted that DW1 produced original dealership agreement dated 28-9-2015 with amendments and photocopy thereof was placed by him on record during his cross-examination on the asking of counsel for the plaintiff and its original was shown, on which copy thereof was exhibited as CS (Comm.) No: 150/2021 Page 26 of 71 -27- Ex.DW1/PA. He stated that there was no clause of bank guarantee in Ex.DW1/PA.
36. Thereafter, on statement of counsel of defendant no.1, DE was closed on 12-04-2023.
37. I have already heard Ld. Counsel of plaintiff and Ld. Counsel of defendant no.1. I have also gone through the material available on record including the written submissions and the authorities cited at the Bar and relied upon by the parties.
38. My issue-wise findings are as under:-
ISSUE NO.1
39. Firstly, I shall take up the issue no.1, which is reproduced hereunder:-
Issue no. (i) - Whether the plaintiff is entitled for recovery of Rs.75,87,729/- from defendants? If so, from which of the defendants? OPP.
40. The onus to prove this issue has been placed upon the plaintiff. As already noted above, in order to discharge the aforesaid onus and to prove its case, the plaintiff has examined two witnesses, who deposed during their examination-in-chief by way of affidavits - Ex.PW1/A and Ex.PW2/A on the identical lines as averred in the plaint that despite having paid the entire payment against the sale of car, the defendants did not deliver/supply the car to the CS (Comm.) No: 150/2021 Page 27 of 71 -28- plaintiff and thus, the plaintiff is entitled to the refund of said amount with interest @ 18% per annum.
PLAINTIFF'S ARGUMENTS:
41. While opening the arguments, Ld. Counsel of plaintiff referred to the pleadings of the parties; evidence, oral as well as documentary, led by both the sides and the documents proved during the course of trial. At the outset, Ld. Counsel of plaintiff assailed the testimony of DW1 namely Sh. Shailesh Bhardwaj on the ground that defendant no.1 has failed to establish that said witness was duly authorized or competent to sign and verify the written statement on its behalf and/or to depose on its behalf, as the said witness failed to prove any Board Resolution passed by defendant no.1 company in his favour, during trial. He, therefore, submitted that the entire testimony of DW1 should be discarded on this ground.
42. Ld. Counsel of plaintiff further argued that the defendant no.10 was acting as an agent on behalf of defendant no.1 company - manufacturer, as it was granted exclusive dealership by manufacturer i.e. the defendant no.1 company herein. For the said purpose, he not only referred to and relied upon relevant clauses appearing in the Dealership Agreement (Ex.DW1/PA), but, also relied upon cross-examination of DW1 which reads as under:-
"It is correct to suggest that name of defendant no.10 was published and marketed as a dealer on the official website of defendant no.1 company. It is correct to CS (Comm.) No: 150/2021 Page 28 of 71 -29- suggest that customers can only approach the exclusive authorized dealership to purchase Audi cars. It is further correct to suggest that defendant no.1 does not even have single showroom where customers can approach to purchase Audi cars. It is correct to suggest that dealerships of defendant no.1 are the face of brand since defendant no.1 does not directly deal with the customers."
43. Ld. Counsel of plaintiff further argued that defendant no.1 cannot plead ignorance about the acts of commission/ omission of its authorized dealer in order to evade its liability to pay the suit amount to the plaintiff. For the said purpose, he pointed out that the defendant no.1 issued Public Notice dated 06-09-2018 (Mark D1W1/3) thereby informing the public at large about termination of dealership of defendant no.10 w.e.f. 05-09-2018. He contended that once defendant no.1 claimed in said Public Notice that defendant no.10 was no more authorized to undertake any transaction / booking of Audi cars w.e.f. 05-09-2018, it necessarily lead to the inference that defendant no.1 admitted its liability for the acts and transactions entered into on its behalf by its authorized dealer i.e. defendant no.10 herein, prior to 05-09-2018. He, therefore, submitted that defendant no.1 was well aware of the transaction in question regarding sale of Audi car by its authorized dealer i.e. defendant no.10 to the plaintiff company. He also pointed out that Mr. Aditya Nayyar, who was previously working with defendant nos.9 and 10, was retained by defendant no.1 even after cancellation of the dealership of defendant no.10 and the same goes to show that defendant no.1 was acting in collusion with CS (Comm.) No: 150/2021 Page 29 of 71 -30- defendant no.10 and throughout had complete knowledge of the transaction in question.
44. Although, Ld. Counsel of plaintiff also made submission regarding culpability of the officers/employees of defendant no.1 by claiming that they had acted in collusion with defendant no.10 and its employees, since the defendant no.1 never came forward to lodge any First Information Report (FIR) against defendant no.10, which clearly points out to the mala fide and dishonest intention on the part of defendant no.1, however, said submission is not relevant for the purpose of deciding the subject matter involved in the present suit.
45. It was pointed out that there was lack of due diligence on the part of defendant no.1, which appointed defendant no.10 as its authorized dealership in the year 2015 despite pendency of an FIR against defendant no.10 registered at P.S. Economic Offence Wing pursuant to the complaint of HDFC Bank, for allegedly forging loan documents and cheating and inducing the bank to extend loans to the tune of Rs.140 crores since 2008.
46. Ld. Counsel of plaintiff further argued that the defendant no.1 was duly served with legal notice dated 09-06-2019 [Ex.PW1/6 (Colly.)] before filing of the present suit but still it chose not to send any reply thereto and therefore, same amounts to admission of the contents of the said legal notice on the part of defendant no.1. Based on all CS (Comm.) No: 150/2021 Page 30 of 71 -31- these submissions, Ld. Counsel of plaintiff vehemently submitted that the plaintiff has been able to discharge the burden to prove this issue on the basis of pre-ponderence of probability and thus, is entitled to the decree as prayed for.
47. In support of his aforesaid submissions, Ld. Counsel of the plaintiff also relied upon the following judgments:-
(i) "Tas Engineering Co. Pvt. Ltd. v. M/s G. & T. Resources World Wide", bearing RFA No. 90/2022 decided on 26-7-2011 by Hon'ble Delhi High Court;
(ii) "R. S. Shekhawat v. Delhi Race Club (1940) Ltd ."
bearing RFA No. 592/2017, decided on 11-10-2017 by Hon'ble Delhi High Court;
(iii) "Tata Motors Ltd. v. Antonio Paulo Vaz" bearing Civil Appeal No.574/2021 Arising out of SLP(C) 10220/2020, decided on 18-2-2021 by Hon'ble Apex Court; and
(iv) "Fiat India Ltd. v. Amardeep Motors Ltd." reported as 2005 SCC Online NCDRC 157.
DEFENDANT NO.1'S ARGUMENTS:
48. While repelling the aforesaid arguments advanced on behalf of the plaintiff, Ld. Counsel of defendant no.1 submitted that the dealership agreement dated 28-9-2015 CS (Comm.) No: 150/2021 Page 31 of 71 -32- (Ex.PW1/PA) was executed between defendant nos.1 and 10 and heavily relied upon relevant Article 3(2)(1) thereof, in order to bring home his point that defendant no.10 was appointed as a dealer of defendant no.1 strictly on a Principle-to-Principle basis, to sell the cars manufactured by defendant no.1 to the end customers. He further pointed out that as per Business Model of defendant no.1/company-manufacturer, said company does not directly sell vehicles to the end customers. Instead, it authorizes its dealers to sell vehicles to the end customers. Even, if a purchase request is received by defendant no.1/company-manufacturer directly from a customer, it forwards the same to its authorized dealer. Thus, it is submitted that defendant no.1 does business with its dealers on a wholesale basis, whereas the dealer does business with the end customers on a retail sale basis. Ld. Counsel further submitted that defendant no.1- manufacturer and authorized dealers mutually agree to sell certain number of cars to the end customers, as per mutually agreed Sales Target signed with defendant no.1 at the beginning of the year. The Authorized Dealers, through NADCON (Ordering system of Audi India), are made aware of production plan and can place order as per production plan that are available in the online system of defendant no.1. The Authorized Dealer raises requests in NADCON for blocking a car of particular model. The car is accordingly blocked for the said dealer. The blocked car gets released in favour of such dealer only when the full CS (Comm.) No: 150/2021 Page 32 of 71 -33- payment is received by defendant no.1 from said authorized dealer. Subject to fulfillment of aforesaid two conditions, the defendant no.1 invoices car in the name of Dealer and wholesale process is completed. Once the car is invoiced to the authorized dealer, the second stage of the business triggers i.e. retail sale to the end customers by the authorized dealers and the defendant no.1 does not have any effective role or control over such retail sales as the entire retail process viz. advertisement, out calling prospects, explanation of car features, specification, sales, are completely within the exclusive domain of the authorized dealers. In case, if customer agrees to buy the car, the terms agreed between Dealer and the Customer are entered in the Sales Contract. Thereafter, Car Insurance formalities, Car Loan formalities (in case customer is buying car on Finance) Payment of Road Tax, process of Registration of Car with local transport office, obtaining of TC or Permanent Registration number etc. is carried by Dealer on behalf of the customer. After completing the necessary aforesaid formalities, the car gets ready to be delivered to the customer. Thus, in the context of present case, it is submitted that 'Wholesale Process' is between defendant no.1 and defendant no.10, whereas 'Retail Process' is between plaintiff and defendant no.10. Therefore, it is vehemently contended that the defendant no.1 entered into Dealership Agreement dated 28-9-2015 (Ex.PW1/PA) by virtue of which, the defendant no.1 and defendant no.10 were to operate on purely CS (Comm.) No: 150/2021 Page 33 of 71 -34- Principal-to-Principal basis and no master-servant relationship or agency relationship or partnership etc. has been created as a result thereof. For the said purpose, Ld. Counsel of defendant no. 1 heavily relied upon the relevant extracts of the said dealership agreement i.e. Article 3(2) of Business Entity of the Dealer.
49. After referring to the aforesaid clause appearing in Dealership Agreement and pointing out wholesale process and retail process as noted above, Ld. Counsel of defendant no.1 company-manufacturer vehemently argued that the defendant no.10 was contractually obligated to conclude all business transactions, more particularly, retail transactions with the end consumers like plaintiff company, arising out of the dealership agreement as an independent entrepreneur acting in its own name and on its own account. He pointed out that there was no privity of contract between the plaintiff and the defendant no.1-manufacturer, even as per the own case put forth by the plaintiff company. He contended that it is the case of plaintiff that it had booked the Audi car with defendant no.10 and has paid entire value of the said car in the bank account of defendant no.10. He, therefore, urged that since relationship between the defendant no.1-manufacturer and its authorized dealer i.e. the defendant no.10 was being on 'Principal-to-Principal' basis, the defendant no.1 cannot be held liable for any act of commission/ omission on the part of its dealer and/or any of its representatives including CS (Comm.) No: 150/2021 Page 34 of 71 -35- defendant no.10.
50. It was further argued by Ld. Counsel of defendant no.1 that Mr. Aditya Nayyar with whom representative of plaintiff company communicated and/or on whose representation, the Audi car in question was booked with defendant no.10, was never employed with defendant no.1 at any point of time and therefore, the defendant no.1 is not bound for any act of commission/ omission on the part of said employee. He further argued that the defendant no.1 is separate and independent legal entity and the plaintiff company has failed to prove that payment of Rs.50,50,000/- was made by it in the bank of defendant no.1, or that any such amount was ever transferred by defendant no.10 to defendant no.1 at any point of time and also that in the absence of any legal contract existing between the plaintiff and the manufacturer and in view of the fact that payment of Rs.50,50,000/- was never received by defendant no.1 at any point of time, the defendant no.1 has no legal liability either to refund the said amount and/or to pay any interest becoming due thereupon to the plaintiff company under the law.
51. He further argued that the plaintiff company has failed to lead any evidence showing that it ever contacted or communicated whatsoever with defendant no.1 concerning the transaction in question at any point of time. For the said purpose, Ld. Counsel referred to the relevant portions of the testimonies of PW1 and PW2, which read CS (Comm.) No: 150/2021 Page 35 of 71 -36- as under:-
Statement of Sh. Binu Abraham (PW1):
Mr. Julius had gone at Audi Dealership and also had tried through customer care to contact Audi Support as detailed in para 14 of Ex.PW1/A. I had not gone there nor I had tried through customer care to so connect.
Statement of Sh. Julius Denzil Natal (PW2): I had never gone to Audi Support. I have never tried to contact Audi Support with respect to the claim in the suit.
52. Ld. Counsel further argued that defendant no.1 cannot be fastened with liability to pay the suit amount to the plaintiff merely on the basis of some reply purportedly sent by defendant no.10 to the legal notice got issued by the plaintiff company. He further argued that defendant no.1 was not privy to the said reply, thereby enabling defendant no.1 to ever give any clarification in that regard. Further, it was submitted that the plaintiff company failed to summon the relevant person who had signed the said reply and/or at whose behest the said reply was issued and thus, it cannot be said that the plaintiff company has been able to prove the contents of said reply in accordance with law of evidence. Based on all these submissions, Ld. Counsel of defendant no.1 vehemently argued that the plaintiff has failed to discharge the initial burden of proving this issue even on the basis of preponderance of probability and thus, is not entitled to the decree as prayed for.
53. To buttress his aforesaid submissions, Ld. Counsel of CS (Comm.) No: 150/2021 Page 36 of 71 -37- defendant no.1 has placed reliance upon the following judgments:-
(i) "Indian Oil Corporation v. Consumer Protection Council", reported as Kerala (1994) 1 SCC 397;
(ii) "Tata Motors Ltd. v. Antonio Paulo Vaz & Ors", reported as AIR 2021 SC 1149 [same judgment is also relied upon by the plaintiff];
(iii) "Sabiha Sultana & Ors. v. Ahmad Aziz & Anr."
bearing CS (OS) 2958/2011 decided on 31-8-2017 decided by Hon'ble Delhi High Court; and
(iv) "The Swadeshi Cotton Mills Co. Ltd. v. The Government of U.P. & Ors.", reported as MANU/SC/0662/1972.
54. At this juncture, it would be apposite to mention the admitted position, which emerges on record by way of pleadings of the parties and the evidence led during the course of trial. Same is summarized as under:-
(i) The plaintiff company had received Proforma Invoice dated 25-1-2018 (Ex.PW1/3) along with e-mail dated 25-1-2018 (Ex.PW1/2) from Mr. Aditya Nayyar, AGM-Sales of defendant nos. 9 and 10;
(ii) As per said Proforma Invoice, after commercial rebate, the plaintiff company was required to pay CS (Comm.) No: 150/2021 Page 37 of 71 -38- ex-showroom price of Rs.50,50,000/-, towards full and final cost against the purchase of Audi Car bearing model Q7 40 TFSI Quattro MY 2018, as per its description/specification mentioned in the said proforma invoice;
(iii) The plaintiff company paid the entire ex-showroom price of Rs.50,50,000/- on 30-1-2018 by directly transferring the said amount through RTGS in the bank account of defendant no.10. This fact is not specifically denied by defendant no.1 company;
admitted by defendant no.10 in its reply dated 09-03-2020 (Ex.PW1/7) to the legal notice and also duly established on record from the Bank Certificate (Ex. PW1/4) and the Bank Statement (Ex.PW1/5) of the bank account of the plaintiff company;
(iv) Despite making entire payment towards sale price of the aforesaid Audi car, the defendant no.10 (who was undisputedly an authorized dealer of defendant no.1 company i.e. manufacturer), failed to deliver the aforesaid vehicle to the plaintiff company;
(v) The defendant no.1 cancelled the dealership of defendant no.10 through Public Notice dated 05-09-2018 w.e.f. 06-9-2018 (Mark D1W1/4).
(vi) The plaintiff got issued legal notice dated 09-6-2019 [Ex.PW1/6 (Colly.)] upon all the defendants including defendant no.1 company;
CS (Comm.) No: 150/2021 Page 38 of 71 -39-(vii) The aforesaid legal notice was duly served upon the defendant no.1 company, which is duly established vide tracking reports, which is part of documents [Ex.PW1/6 (Colly.)] proved by PW1 during the course of trial and in view of admission made in its written statement, as well as in affidavit filed by the defendant no.1 concerning admission-denial of the documents of plaintiff;
(viii) The defendant no.1 failed to send any reply to the said legal notice; and
(ix) The defendant no.10, in its reply dated 09-03-2020 [Ex.PW1/7], admitted receipt of full sale price of Rs.50,50,000/- from the plaintiff company, but, with further stand that said amount was duly transferred to defendant no.1 and showing its inability to deliver the said vehicle on account of cancellation of its dealership by defendant no.1/ manufacturer.
55. Now, I shall proceed to deal with the contentious issues and actual controversy involved in this suit. The defendant no.1 has disputed its liability to refund the amount of Rs.50,50,000/- along with interest, as claimed in this suit, mainly on the ground that there was no privity of contract between plaintiff and defendant no.1. For this purpose, the defendant no.1 has heavily relied upon the relevant clause of Dealership Agreement dated 28-09-2015[Ex. DW1/PA], in order to highlight the issue that dealings between CS (Comm.) No: 150/2021 Page 39 of 71 -40- defendant no.1 and its authorized dealer i.e. defendant no.10 was on principal-to-principal basis. For this purpose, Ld. Counsel of defendant no.1 also drew attention of this Court to the relevant clause appearing in said Dealership Agreement.
56. On the contrary, Ld. Counsel of plaintiff, while repelling the aforesaid contention, argued that defendant no.1 can not be allowed to escape from its liability to pay the suit amount on the basis of said clause.
57. In view of above noted rival submissions made on behalf of both the sides and defence/stand taken by defendant no.1, it would not only be relevant but also necessary to examine the true scope and import of the relevant terms and conditions contained in Dealership Agreement dated 28-09-2015 purportedly executed between the manufacturer i.e. defendant no.1 and the authorized dealer i.e. defendant no.10. The relevant terms and conditions of said Dealership Agreement dated 28-09-2015 (Ex. DW1/PA) are being reproduced here, as under:-
Article 1 - Definitions (5) Customer as used in this Agreement shall mean any end user, to whom the Supplier, Dealer or Manufacturer provides the Contractual Products.
II. Dealer's Obligations and Legal Status Article 3 - Principles of Performance
1. Basic Obligations (1) The Dealer shall use his best efforts to maintain the reputation of the Contractual Products to promote the sales thereof, and shall observe the business policy of the Supplier and comply with the rules set CS (Comm.) No: 150/2021 Page 40 of 71 -41- forth by the Supplier.
(2) The Dealer shall be responsible for promoting sales, exploiting the potential of the market for the Contractual Products, providing after sales service superior to that provided by competitors and maintaining a stock of Audi Genuine Parts commensurate with the needs in his Main Territory of Responsibility and in accordance with the Supplier's Guideline(s). The contents of such Supplier's Guideline(s) shall be within the scope of the rights and obligations under this Agreement.
2. Business Entity of the Dealer (1) The Dealer shall perform his obligations under this Agreement as an independent entrepreneur, on his own behalf and for his own account. The Dealer is not authorized to act on behalf of the Supplier. It is further expressly agreed that this arrangement is purely on a "Principal to Principal basis. The Dealer has no right or authority to bind Supplier under any contract or by any representation whatsoever, whether express or implied, with any third parties, or to assume any obligation, express or implied, in relation to any third parties, on behalf of the Supplier. The Dealer is solely responsible for all expenditures, liabilities and obligations, legal compliances, costs, etc, incurred or assumed by it for the establishment and conduct of its operations.
(2) The Dealer shall fund his operations with the liquidity commensurate with his business requirements as set forth in Appendix 1, maintain its business entity for as long as this Agreement remains in force, and ensure that a balanced financial structure is maintained at all times. Dealer shall provide Supplier all actual information about Dealer's financial status as and when mandated by Supplier. Dealer shall infuse fresh funds to facilitate expansion of operations and setting up of new facilities as agreed between the Supplier and Dealer or procurement of equipment's needed for smooth running of the business.
(3) At no time will the Dealer allow his equity to go below 25% and will infuse fresh funds immediately into the business to restore the equity balance if any irregularities are observed by the Dealer or Supplier.
CS (Comm.) No: 150/2021 Page 41 of 71 -42-Irregularities in the equity percentage must be corrected by the Dealer within 4 weeks of such irregularity being brought to the Dealer's notice by Supplier (4) The Dealer shall conduct his activities under this Agreement separately from other business activities, and shall agree to all necessary measures in this respect with the Supplier in advance. In particular, the Dealer shall employ sufficient personnel for sales and services, who are independent from the Dealer's other business activities, conduct their own marketing, after sales service and advertising activities exclusively for the Audi brand in order to achieve its own business objectives, and maintain appropriate facilities in this respect and also provide training as per the Supplier's Guidelines provided by the Supplier from time to time.
(5) xxx (6) xxx (7) xxx (8) xxx (9) It shall be obligatory on the part of the Dealer to ensure that the provisions of any guidelines / circulars / bulletins by whatever name called notified / issued by Supplier are being complied with by the Dealer and its employees and agents without any deviation. The Supplier's Guidelines consisting of the latest Operational Standards, Service Standards and Dealer Standards, Manuals, etc. of the Supplier which are binding on the Dealer are provided separately from this Agreement.
Xxxxx Article 7 - Warranty (1) The Dealer shall provide warranty for all justified warranty claims submitted to Dealer by a customer, pursuant to the Supplier's Terms of Warranty (Appendix 4) as amended from time to time. The Dealer shall inform the Supplier without delay of any warranty claim that could give rise or has given rise CS (Comm.) No: 150/2021 Page 42 of 71 -43- to litigation. The Dealer shall also proactively support the Supplier in such cases by providing documents, repair order forms, correspondence, etc. in a timely manner, as and when demanded by the Supplier. Further, Dealer shall also obtain concurrence of the Supplier on legal documents such as written statements, replies, rejoinders, etc. prior to its finalization in order to enable the Supplier to conclude its written legal representations. (2) The Dealer undertakes to honour any court verdicts, judgments or terms of settlements granted by any courts and wherever such verdicts and judgments are "joint and several" in nature, the Dealer shall bear an equal proportion of such amounts without XXXXXX to supplier. In event of failure by the Dealer to honour the court verdict or bear the equal portion of the "joint and several" liabilities, the Supplier shall be entitled to fulfill the court verdict by bearing the entire costs of the same and charging back the entire costs of proportionate costs, as the case may be to the Dealer.
3) The Dealer's obligation to support the Supplier and honour court verdicts, judgments, etc. as mentioned in sub-clause 1 and 2 above shall not be limited to warranty issues but shall include any and all complaints that customers of Contractual Product may have against the Supplier or Dealer, as the case may be.
(4) In accordance with its Terms of Warranty as amended from time to time, the Supplier shall provide warranty that the Contractual Products are free from defects in material and workmanship,even if the Contractual Products were sold by another Dealer in the Sales Organization.
(5) All work done under warranty shall be performed by exclusively using Audi Genuine Parts, Accessories and Merchandise (and not spurious or counterfeit Parts, Accessories and Merchandise) and at the expense of the Supplier. The settlement of warranty claims and payments for working time and materials shall be made in accordance with the Supplier's Guidelines as issued from time to time.
(6) xxx CS (Comm.) No: 150/2021 Page 43 of 71 -44- (7) xxx Article 9 - Customer Relationship Management (CRM) (1) The Dealer shall take part in the Supplier's CRM program like Skelta, DMS (Salesforce.com, etc.) which is made up of basic programs, additional modules and supporting management tools. (2) The Dealer undertakes, within the scope of the legal provisions on exchanging customer data, to play an active part in the basic programs provided by the Supplier.
(3) xxx (4) xxx (5) xxx (6) Both parties shall at all times ensure transparency in their dealings with the other party regarding the programs, processes and the customer data as saved on the Supplier's Systems.
(7) The Dealer understands that the Audi Customer database is the property of Supplier. Dealer undertakes to provide all such customer data as and when required by Supplier. The customer details of new cars sold / used cars traded / cars serviced on monthly basis shall also be submitted to the Supplier immediately after the month end.
(8) The Dealer shall take part in all the Customer Satisfaction Surveys (including but not limited to mystery shopping activities and quality audits) undertaken by the Supplier and provide authenticated customer data to the Supplier.
(9) xxx xxxx Article 12 - Information and Reporting (1) xxx (2) The Dealer shall submit to the Supplier a monthly report, as prescribed by the Supplier. The Dealer shall also provide to the Supplier such other information, CS (Comm.) No: 150/2021 Page 44 of 71 -45- as requested by the Supplier at any time, which relates to the Sales and After Sales service of the Contractual Products. In particular, the Dealer shall provide to the Supplier, periodically or when necessary, the information set forth in Items (a) though (i) below:
(a) Pre sales data such as prospective customer lists, leads etc., complete customer records and sales records and other materials such as monthly sales reports, marketing reports and monthly financial results;
(b) stock on hand, stocks at various dealer locations/facilities, demonstrator car & courtesy car details:
(c) technical matters;
(d) After sales records & service documents pertaining to vehicles:
(e) information concerning companies in the same business;
(f) sales promotion activities;
(g) matters related to the personnel;
(h) xxx
(i) xxx (3) xxx (4) xxx (5) Dealer shall submit to the Supplier the duplicate copies of the tax filings of the Dealer enterprise, its business reports, its balance sheet and profit and loss statement, and any other annexed specifications requested by the Supplier, all of which have been all duly audited by a chartered accountant or tax consultant, within four (4) months from the settlement of the annual and semiannual financial results, and shall also report on its financial and cost situation, as well as grant the Supplier access to its books and vouchers for examination. Disclosure of a short-term income statement is part of the Dealer's reporting obligations. If requested by the Supplier, CS (Comm.) No: 150/2021 Page 45 of 71 -46- Dealer shall submit an un-audited interim balance sheet and profit and loss statement for each fiscal quarter or such other period as the Supplier may specify within thirty days after each quarter or such period, as appropriate. If requested by the Supplier, Dealer shall provide the same financial reporting for any entity or group of entities that, directly or indirectly, owns 50% or more of Dealer's voting securities or other ownership interests. The Dealer shall immediately submit Form "C" to the Supplier as and when demanded by the Supplier. In case Dealer fails to submit such Forms and documents to the Supplier upon demand, the Dealer shall forthwith pay to the Supplier all such amounts as the Supplier would claim as tax benefit under the respective forms or documents under any prevailing law. Dealer shall also be liable to pay an interest @ 12% on such payments. Supplier reserves the right to deduct any payments under this Agreement from any dues, if any payable by the Supplier to the Dealer. (6) Dealer shall maintain a sound financial structure with a working capital level and financing capability that satisfy the operating requirements of Dealer. In particular, the working capital level and financing capability must be sufficient for meeting the assurances given by Dealer in the Dealer's Annual Business Plan under this Agreement as well as the Audi Standards and the Supplier's requirements. At no time may Dealer's working capital dedicated to its operations related to the Contractual Products be less than the amount specified by the Supplier from time to time. The Dealer shall also ensure that any expansion of business operations, including facilities & equipment is funded separately and funds from the current operations, including working capital maintained for such already running operations, are not used. The Dealer will ensure that debt-to-equity ratio in any new expansion is 1:1.
(7) Dealer represents and warrants that it will not create, grant or issue any security, charge or rights over or affecting any substantial part or the whole of the business, assets or undertakings of Dealer (other than liens in the ordinary course of business) without or in violation of the terms of the Supplier's prior consent. Dealer shall notify the Supplier of its intent to take any such measure at least sixty days prior to the intended date of that measures.CS (Comm.) No: 150/2021 Page 46 of 71 -47-
(8) xxxx (9) xxxx (10) xxxx (11) xxxx (12) The Supplier shall be entitled to the right of set-off. The Supplier may exercise such right in any manner, including but not limited to, by setting-off and/ or appropriating, any guarantee, security or deposits held by it, or any amount(s) or credit(s) available to the balance of the Dealer; whether under this Agreement or any other agreement (s) or arrangement(s) between the parties hereto whatsoever; against any outstanding dues or amount(s) owed to the Supplier by the Dealer under this Agreement or any other agreement(s) or arrangement(s) whatsoever.
Xxxxx Article 26 - Procedure upon Termination of the Agreement (1) xxx (2) xxx (3) xxx (4) Upon and/or following the termination of this Agreement, the Dealer shall without delay:-
(a) xxxx
(b) xxxx
(c) at the Supplier's request, assign to the Supplier or to third party designated by the Supplier, any pending sales and after - sales orders of the Customers of the Dealer not yet executed, and handover to the Supplier or to the third party designated by the Supplier, free of charge, the customer vehicles and all related documents (e.g. names, addresses, purchase contracts, or the like) needed for the execution of such orders or for the provision of services to Customers, after the completion of the necessary proceedings thereof.
Unless specifically agreed between the parties, the CS (Comm.) No: 150/2021 Page 47 of 71 -48- Dealer shall immediately from the date of termination / expiry stop accepting Contractual Products for service/ repair at its workshop;
(d) xxxx
(e) xxxx
(f) As to those vehicles whose titles are still withheld by the Dealer, if the Dealer has no outstanding credit as to any of such vehicles, Dealer shall urge the user of such vehicle to promptly complete the procedures to transfer the title of such vehicle from the Dealer to the user.
(g) xxxx
(h) Promptly provide Supplier its final statement of accounts, pertaining to the dealership operations, updated till the date of termination, to enable both parties to reconcile and close all pending accounts
(i) Provide supplier with details of all open legal notices and litigations pertaining to the Audi business and also details of any commitments made to Customers pending fulfillment (extended warranty, goodwill jobs, free accessories, etc.)
(j) xxxx
(k) xxxx (5) Upon termination / expiry of Agreement, apart from setting all dues, an amount will be held back by Supplier from the Dealer's dues as a contingency fund to settle pending and future customer claims arising to Supplier due to actions/ omissions on the part of the Dealer. The exact amount to be held back shall be explicitly communicated by the Supplier at the time of reconciliation of accounts.The remainder of the contingency fund amount shall be returned by Supplier to Dealer without any interest upon completion of a period of 04 (four) years post dated of termination/ expiry.
58. It may be noted here that in the aforesaid dealership agreement, Audi India, a division of Volkswagen Group CS (Comm.) No: 150/2021 Page 48 of 71 -49- Sales India Private Limited and Zenica Cars India Private Limited (defendant no. 10) have been referred to as the "Supplier" and "Dealer" respectively. It may also be noted that after amalgamation, the Audi India is now known as SKODA AUTO Volkswagen India Pvt. Ltd. i.e. the defendant no.1 herein.
59. On due consideration of the relevant terms and conditions of Dealership Agreement, as reproduced hereinabove, this Court is of the view that stand taken by defendant no.1 for refuting its liability to pay the suit amount is without any basis and same deserves to be rejected for the following reasons:-
(i) The said dealership agreement is essentially between defendant no.1 and its authorized dealer i.e. defendant no.10 alone and therefore, the plaintiff is neither privy to the said dealership agreement, nor can be bound by any of such terms and conditions going against its (plaintiff) interest;
(ii) Even as per the terms and conditions of dealership agreement, as already reproduced above, the defendant no.1 was duty bound to meet its obligation towards end consumers, which arise out of the transactions entered into between its authorized dealer and end consumers.
(iii) The conjoint reading of Articles/Clauses which deal with definition part of consumers, dealer and CS (Comm.) No: 150/2021 Page 49 of 71 -50- supplier, as also providing for basic obligations of authorized dealer and supplier, read with Articles 7, 9, 26 of the Agreement, would make it abundantly clear that the dealer is bound to deal with Audi cars exclusively and is expressly prohibited to deal with any other type of cars. Not only this, the dealer is required to actively involve himself in the marketing, sales promotion and advertisements for Audi brand in order to achieve the business objectives.
(iv) Article 7 of the Agreement clearly stipulates that in the event of failure by the Dealer to honour the court verdict, judgment or bear the equal portion of the "joint and several" liabilities, the Supplier [defendant no.1 herein] shall be entitled to fulfill the court verdict by bearing the entire costs of the same and charging back the entire costs or proportionate costs, as the case may be to the Dealer. Thus, the defendant no.1, by virtue of this particular clause, would be jointly and severally liable along with defendant no. 10 to honour the Court verdict, judgment and terms of settlements granted by any Court of law and in case of failure of its authorized dealer to pay its proportionate share, it would at the first instance honour the entire liability in terms of the Court verdict by bearing the entire costs and then shall, CS (Comm.) No: 150/2021 Page 50 of 71 -51- in turn, be entitled to get itself reimbursed to the extent of proportionate costs to be borne by its authorized dealer.
(v) Further, Article12 of the Agreement provides that the dealer shall submit to the supplier a monthly report, as prescribed by the supplier and any other information, as requested by the supplier at any time, which relates to the sales and after sales services of the contractual products. It further specifically provides that the dealer shall provide the supplier, periodically or when necessary, the information set forth in items (a) to (i) thereof, inter alia, pre sale data such as prospective customer lists, leads etc., complete customer records and sales records and other material such as monthly sales reports, marketing reports and monthly financial results; stock on hand, stocks at various dealer locations/ facilities, demonstrator car and courtesy car details.
(vi) Article 26 (c) of the Agreement clearly provides that in the event of termination of the dealership agreement, the dealer shall be duty bound, at the request of supplier, to provide relevant details with regard to pending sales and after sales orders of the customers which are yet not executed and all related documents e.g. (names, addresses, purchase contracts, or the like) needed for the execution of CS (Comm.) No: 150/2021 Page 51 of 71 -52- such order or for the provision of service to the customers after the completion of the necessary proceedings thereof.
(vii) Further, Clause 26 (h) of the Agreement states that the authorized dealer is duty bound to provide final statement of accounts updated till date, on termination of its dealership, to the supplier. Article 26 (5) would further show that upon termination / expiry of the agreement, apart from settling all dues (emphasis supplied), an amount will be held back by supplier from the dealer's dues as a contingency fund to settle pending and future customer claims arising to supplier due to actions/ omissions on the part of the dealer.
(viii) It is nowhere the case of defendant no.1 that its dealer i.e. defendant no.10 did not submit the requisite records including monthly reports containing the requisite details including details of the customers to whom Audi cars were sold during the month of January, 2018 either in the succeeding month of February, 2018 or at any other subsequent date, as was mandatorily required in view of Article 12 of the Agreement. That being so, it was incumbent upon defendant no. 1 to produce the said relevant record in the Court in order to substantiate its defence that its dealer i.e. defendant no.10 neither conveyed any information regarding sale of the CS (Comm.) No: 150/2021 Page 52 of 71 -53- Audi car in question to the plaintiff, nor transferred any amount against any such vehicle in its (defendant no.1) account. Having failed to do so, an adverse inference is liable to be drawn against defendant no.1 to the effect that production of such records would have shown that defendant no.10 had conveyed the relevant information about sale of Audi car in question by it to the plaintiff, to defendant no.1.
(ix) Further, DW1 namely Sh. Shailesh Bhardwaj has categorically admitted during his cross-examination dated 12-4-2023 that defendant no.1 had a system which maintains retail delivery records of the cars sold by its dealership. Not only this, he further deposed that in the said system of defendant no.1, there were entries regarding two Audi cars, as detailed in the table mentioned in Para no.9 of its written statement. The entire such record would have been available with the defendant no.1, however, the same has been deliberately withheld by it by not producing the same before the Court. No reason or any explanation whatsoever has been furnished by defendant no.1 for not producing the same in the Court. Even during the course of arguments, this Court had asked this question to the Counsel appearing on behalf of said defendant,but, no answer/ explanation was offered on its behalf.
CS (Comm.) No: 150/2021 Page 53 of 71 -54-Thus, an adverse inference is liable to be drawn against defendant no.1 that in case such record would have been produced before the Court, same would have clearly disclosed the factum of sale of the Audi car in question, as also the factum of its sale price received from the plaintiff, having been further transferred by defendant no.10 to the account of defendant no.1.
(x) Thus, the contention of defendant no.1 that dealings between defendant no.1 and defendant no.10 was on principal-to-principal basis would not apply to the plaintiff. Such a stipulation in the dealership agreement would apply in respect of transactions between the manufacturer i.e. the defendant no.1 and its authorized dealer i.e. the defendant no.10 and not beyond that. Hence, it is not open for defendant no.1 to deny its liability on the pretext that the sale price of the vehicle in question, was paid by the plaintiff to defendant no.10.
(xi) Apart from what has been noted above, the entire testimony of DW1 i.e. the sole witness examined by defendant no.1, deserves to be discarded for the simple reason that he failed to prove Board Resolution dated 30-1-2020 in accordance with law of evidence. In the chief-examination of said witness recorded on 12-04-2023, it is mentioned that DW1 had failed to produce original of Board Resolution CS (Comm.) No: 150/2021 Page 54 of 71 -55- referred to as Ex.D1W1/1 in his affidavit in evidence (Ex.D1W1/A) and consequently, said document i.e. Board Resolution was de-exhibited and same was marked as Mark D1W1/1.
(xii) It may be noted here that neither defendant no.1 company, nor DW1 namely Sh. Shailesh Bhardwaj at any point of time during the course of trial ever made written request seeking leave of the Court to produce original Minutes Book containing Board Resolution dated 30-1-2020. In this regard, reference can be made to the provision contained in Order XXIX Rule 1 CPC, which clearly provides that in suits by or against a Corporation, the pleadings should be signed and verified on behalf of such corporation by its Secretary or by any Director or other Principal Officer of the Corporation who is able to depose to the fact of the case. Further, S. 118 (10) of The Companies Act, 2013 provides that every company must observed and followed the Secretarial standards regarding general and board meetings that are mentioned by the Institute of Companies Secretary of India in terms of S. 3 of the Company Secretaries Act, 1980. Thus, it was obligatory on the part of defendant no.1 to produce original Minutes Books, if any, containing the Board Resolution dated 30-1-2020 purportedly passed in favour of DW1. Having failed to do so, same would CS (Comm.) No: 150/2021 Page 55 of 71 -56- give rise to an inference that no such Board Resolution would have been passed in favour of DW1. In any case, the defendant no.1 has failed to establish that Sh. Shailesh Bhardwaj was duly authorized to sign and verify the written statement on its behalf and also to represent it in this matter or that he was competent to depose on its behalf during the course of trial.
In view thereof, the entire defence put up by defendant no.1 by way of its written statement, as also the entire testimony of DW1 Sh. Shailesh Bhardwaj are liable to be ignored/discarded in the eyes of law.
(xiii) Not only this, all the documents, except the relevant order regarding amalgamation of Defendants nos.1 to 3, which is Ex. D1W1/2, are not proved and have been simply marked as Mark D1W1/1 and D1W1/3 to D1W1/5 and thus, said documents cannot be read for the benefit of defendant no.1. However, the plaintiff can always rely upon and take advantage of these documents under the law.
(xiv) Once it is held that the testimony of DW1 Sh.
Shailesh Bhardwaj cannot be read in evidence, the heavy reliance placed by defendant no.1 on Article 3 (2) of the dealership agreement providing for relationship between it (defendant no.1) and defendant no.10 on principal-to-principal basis, also CS (Comm.) No: 150/2021 Page 56 of 71 -57- gets frittered away.
(xv) No doubt, the plaintiff through its witnesses failed to establish that it had sent letters/e-mails to defendant no.1 regarding status of delivery of Audi car in question, as averred in the plaint. However, it is duly established on record that the plaintiff got issued legal notice dated 09-6-2019 upon defendant no.1 before institution of the suit. It is an undisputed fact that the defendant no.1 failed to give any reply to the said legal notice. No plausible explanation whatsoever is forthcoming from the side of defendant no.1 in this regard. Although, counsel of defendant no.1 attempted to wriggle out of the said situation by submitting that said legal notice was got issued by the plaintiff to defendant no.1 after considerable gap of about 10 months of Termination of Dealership Agreement of defendant no.10 and after 18 months from the date of alleged transaction, which shows that the entire case of the plaintiff is an afterthought. There is an apparent fallacy in the said argument for the simple reason that issuance of legal notice by plaintiff to defendant no.1 even after a gap of 18 months from the transaction in question, would not be of any adverse impact to the case of the plaintiff as it is a specific case of the plaintiff that it was making efforts by taking up the matter not only with the defendant no.10 but also with the CS (Comm.) No: 150/2021 Page 57 of 71 -58- officers/ representatives of defendant no.1. It was obligatory on the part of the defendant no.1 to give reply to said legal notice thereby clearing its said stand to the plaintiff. Having failed to do so, an adverse inference is liable to be drawn against defendant no.1. While saying so, this Court is also fortified by the judgments of Hon'ble Delhi High Court in case titled as "TAS Engineering Co.(Pvt.) Ltd. v. M/s G & T Resources World Wide" bearing RFA No. 90/2022 decided on 26-07-2011 and 'Kalu Ram v. Sita Ram' reported as 1980 RLR (Note) 44, as are also being relied upon by the plaintiff.
(xvi) At this juncture, it may be noted that the defendant no.1 has raised an interesting defence in its written statement to the effect that as per retail delivery records submitted by defendant no.10 in the salesforce.com i.e. the Systems maintained by defendant no.1 in January 2018, the defendant no.1 had wholesale and delivered two Audi cars to defendant no.10 in the name of plaintiff, as per their details mentioned therein. In corresponding reply to relevant Para in its replication, the plaintiff has vehemently denied this fact. The plaintiff has categorically stated that it had purchased only two Audi cars from defendant no. 10 in the month of January, 2018, out of which Audi Car bearing registration no. HR26CQ0001 was delivered on CS (Comm.) No: 150/2021 Page 58 of 71 -59- 25-01-2018 for which payment of Rs.50,00,000/- was made on 05-1-2018 and of Rs.50,00,000/- was made on 17-1-2018. However, the other Audi car i.e. the vehicle in question for which same purchase price of Rs. 50,50,000/- was paid through RTGS on 31-01-2018 to defendant no.10, was never delivered to it.
(xvii) It is the own case of defendant no.1 that as per requisite procedure being followed as per the terms and conditions of dealership agreement, it was only after receipt of price of vehicle sold by its authorized dealer to the end customer, the defendant no.1 used to book such vehicle and used to provide delivery thereof to its authorized dealer. At the cost of repetition, it may be noted that the defendant no.1 has stated in its written statement itself that as per its Company policy, the dealer can raise demand in NADCON for blocking a car of particular model and Vehicle Identification Number (VIN) which is subject to full payment of car, by the Dealer or where Dealer is under financing arrangement (which was the case for defendant no.10) by Volkswagen Finance Pvt. Ltd. (VWFPL) on behalf of the Dealer in the present case. Subject to fulfillment of aforesaid two conditions, the defendant no.1 invoices car in the name of Dealer and wholesale process is completed.
CS (Comm.) No: 150/2021 Page 59 of 71 -60-During the course of arguments,specific query was put to Ld. Counsel of defendant no.1 as to why the said defendant failed to produce the relevant records/ documents pertaining to payment receipts by said defendant from defendant no.10. In response thereto, clarification note dated 21-8-2024 has been filed, wherein it is mentioned that sale of subject vehicle was effected from defendant no.1 to defendant no.10 on 25-1-2018 and an invoice (Ex.D1W1/5) (sic) was also issued in this regard, which categorically states the price paid by defendant no.10 (through its financing authority) to defendant no.1 for the subject vehicle. However, in the next immediate para no.7 thereof, it is claimed that advance paid by plaintiff to defendant no.10 has not been received by defendant no.1 and as such, there does not exist any documentary evidence to prove the same, and also that onus was upon plaintiff to prove that such payment was actually received by defendant no.1. Again, it seems that two mutually contradictory stands have been taken by defendant no.1 on this count. Once, there is an admission regarding receipt of price of the subject vehicle from defendant no.10 by defendant no.1, it is not understandable as to how the defendant no.1 can be allowed to agitate that it never received the advance payment made by plaintiff to defendant no.10 against the subject vehicle.
CS (Comm.) No: 150/2021 Page 60 of 71 -61-It may be noted that description of Audi Car having Engine No.CYR047856 as mentioned in the Proforma Invoice (Ex.PW1/3), duly matches with the description of one out of said two Audi cars, which as per details mentioned in the written statement filed by defendant no.1 and Tax Invoice No. A180375329 dated 25-01-2018 [Mark D1W1/5], as was claimed to have been delivered by defendant no. 1 to defendant no. 10 in the name of the plaintiff. The defendant no.1 would have issued Tax Invoice (Mark D1W1/5) in favour of defendant no.10 i.e. its authorized dealer only after having received the entire sale price from it and otherwise not. Thus, it would falsify the defence raised by defendant no.1 that it had never received any amount against the Audi car in question for which entire sale price was paid by plaintiff company directly in the bank account of its authorized dealer i.e. defendant no.10.
(xviii) Although, Ld. Counsel of defendant no.1 placed heavy reliance on the judgment dated 28-11-2023 passed in CS No.28/2021 titled as " Imperial Auto Industries Pvt. Ltd. v. Skoda Auto Volkswagen India Pvt. Ltd.& Anr." by the concerned District Court, Gurugram, Haryana, in order to bring home its point that similar suit filed by plaintiff herein against defendant no.1 based on identical facts, has CS (Comm.) No: 150/2021 Page 61 of 71 -62- already been dismissed and therefore, the present suit also deserves to be dismissed. However, there is no substance whatsoever in the said submission. Firstly, the said judgment is delivered by the Court of Ld. District Judge, Gurugram, Haryana and thus, it has no binding effect on this Court. Secondly, the said suit is shown to have been dismissed on different grounds altogether as in that suit, the plaintiff herein had failed to prove the factum of paying the booking amount against the subject vehicle involved in that suit to the authorized dealer, as the plaintiff failed to file the requisite certificate in terms of S. 65 B of Indian Evidence Act in respect of electronic record document i.e. Statement of Account (Ex.PW1/3), and in view thereof, the said Court did not consider said document.
Moreover, it was also found that during cross-examination, the witnesses examined by the plaintiff were unable to explain as to why the relevant entries showing payment of booking amount as appearing in said statement of accounts, was hand written when the other entries were printed therein. Consequently, the said other Court disbelieved the case of the plaintiff regarding payment of booking amount against the subject vehicle to the authorized dealer of defendant no.1. However, same is not the case herein as the plaintiff has been able to established on the basis of CS (Comm.) No: 150/2021 Page 62 of 71 -63- preponderance of probability that it had duly transferred the amount of Rs.50,50,000/- through RTGS from its bank account to the bank account of defendant no.10 and this fact is rather also admitted by defendant no.1 in this case.
(xix) Moreover, once it is established on record that defendant no.1 had received entire sale price against Audi car in question booked by the plaintiff with its authorized dealer i.e. the defendant no.10, then the onus shifted upon defendant no.1 to prove that said car was actually delivered by its authorized dealer to the plaintiff company. As already noted above, there is no evidence as such led from the side of defendant no.1. For the sake of arguments, even if the testimony of DW1 namely Sh. Shailesh Bhardwaj is considered, this Court finds that his entire testimony is completely silent in this regard. Hence, this Court is of the view that the defendant no.1 has miserably failed to prove that it had actually delivered two Audi cars in the name of the plaintiff to its authorized dealer i.e. defendant no. 10 in the month of January, 2018. It seems that the defendant no.1 has taken two mutually contradictory stands in its written statement by claiming on the one hand that no such amount paid by plaintiff to defendant no.10, was ever received by it from defendant no. 10 and at the same time, by pleading that it had delivered two CS (Comm.) No: 150/2021 Page 63 of 71 -64- Audi cars in the name of the plaintiff to defendant no.10 in the month of January, 2018.
(xx) It has come on record during cross-examination of DW1 Sh. Shailesh Bhardwaj that due diligence is always carried out by the manufacturer company before appointing any person as its authorized dealer. Same would lead to an inference that defendant no.1 would have also carried out due diligence before appointing defendant no.10 as its authorized dealer. However, the defendant no.1 has claimed in its written statement that it had terminated dealership of defendant no.10 on coming to know that defendant no.10 had committed cheating and fraud with the bank to the tune of crores of rupees, for which FIR was also registered with Economic Offences Wing, Delhi Police. Same would show that defendant no.1 either failed in its obligation to carry out due diligence before appointing defendant no.10 as its authorized dealer or alternatively, the defendant no.1 was hand in glove with defendant no.10 in collecting amounts from end consumers against bookings of the Audi cars and subsequently terminating the dealership agreement of defendant no.10 in order to escape from liability to refund back the amounts taken from the end consumers. In either of such eventualities, the defendant no.1 is jointly and severally liable CS (Comm.) No: 150/2021 Page 64 of 71 -65- along with defendant no.10 to refund the sale price paid by said end consumers like plaintiff in this case. Had it been the case where defendant no. 1 had no complicity with its authorized dealer/defendant no.10 at any point of time, then, the least what was expected from it was to take suitable action against defendant no.10 immediately while terminating the dealership agreement of defendant no.10 for the simple reason that it enjoys formidable goodwill and reputation in the market and had already become a brand name which is known for its quality and unique features in respect of Audi cars being manufactured by it. However, the defendant no. 1 chose not to take any such action against defendant no. 10 for the reasons within its special knowledge.
(xxi) As already noted above, the defendant no.10 was one of the authorized dealers of the defendant no.1 manufacturer during the relevant period. In view of these facts and circumstances and on giving holistic interpretation to the entire terms and conditions appearing in Dealership Agreement, this Court is of the view that the defendant no.10 was in fact acting as an agent of defendant no.1 company while dealing with public at large i.e. end consumers including plaintiff herein. That being so, the defendant no.1 company is jointly and severally liable for acts and omissions done by its authorized CS (Comm.) No: 150/2021 Page 65 of 71 -66- dealer i.e. defendant no.10. In view thereof, this Court is of the opinion that the defendant no.1 is equally liable under the law to refund the sale price amount of Rs.50,50,000/- paid by the plaintiff directly in the bank account of its authorized dealer i.e. defendant no.10 company against the sale of vehicle in question, which was never delivered to the plaintiff by either of the defendants.
(xxii) Further, the defendant no.1 has claimed in the written statement itself that it does not deal with/or is concerned with the end customer at the time of sale and delivery of the car, which is in exclusive domain of the vehicle selling dealer viz. Defendant nos. 9 and 10 herein, it being a part of the retail process. DW1 Sh. Shailesh Bhardwaj has also categorically admitted during his cross-examination dated 12-04-2023 that end customer can only approach the exclusive authorized dealership to purchase Audi Cars. Not only this, he also admitted that the defendant no.1 does not have even single showroom where the customer can approach to purchase Audi Cars and also that dealerships of defendant no.1 are the face of its brand since defendant no.1 does not directly deal with the customers. In this backdrop, there is no reason as to why the defendant no.1 can be allowed to escape from its liability to refund the amount in question to CS (Comm.) No: 150/2021 Page 66 of 71 -67- the plaintiff company. After all, the defendant no.10 was appointed as its authorized dealer by defendant no.1 and that too after carrying due diligence in terms of the relevant Article(s) of the Dealership Agreement Ex.DW1/PA. In view thereof, there was no occasion for the end consumers, like plaintiff company in this case, to directly book Audi Car from the defendant no.1 company. The plaintiff company had no other option but to purchase the Audi car in question manufactured by defendant no.1 herein through its authorized dealer i.e. defendant no.10. In case, such authorized dealer of defendant no.1 indulges into any of the malpractices by not supplying the Audi car despite having received the entire sales price thereof, it does not lie in the mouth of defendant no.1 to evade its liability to refund the amount to the plaintiff company by taking lame excuses of the relevant Article(s) which provides for relationship between it and its authorized dealer to be on principal-to-principal basis.
60. In the matter of Tata Motors Ltd. (supra), which has been relied by both the sides, Hon'ble Apex Court has held in Para no. 28 of the Judgment that unless the manufacturer's knowledge is proved, a decision fastening liability upon the manufacturers would be untenable, given that its relationship with the dealer, in the facts of that case, were CS (Comm.) No: 150/2021 Page 67 of 71 -68- on principal to principal basis. In the case in hand, the defendant no. 1 would have been well within its right to deny its liability to pay the suit amount in case it would not have the requisite knowledge about the transaction in question, as held by Hon'ble Apex Court in the said judgment. However, it has already been held by this Court in the preceding paras of this judgment that the defendant no. 1 not only had due knowledge about the transaction in question, but, it was also duly served with Legal Notice dated 09.06.2019 from the side of plaintiff company, thereby duly calling upon it to refund the amount paid against same price of the Audi Car in question to its authorized dealer i.e., defendant no. 10 through RTGS. The other cited judgments relied on behalf of defendant no. 1, are also thus distinguishable on facts and circumstances of the present case and hence, would be of no help to the case of defendant no. 1 herein. The facts of the present case, in the opinion of this Court, would be covered by the decision in the case of Fiat India Ltd. (supra) delivered by Hon'ble NCDRC, as relied on behalf of the plaintiff company.
61. In view of all these reasons, this Court is of the view that defendant no.1 is equally liable along with defendant no.10 to refund the sale price of the vehicle in question to the plaintiff.
62. This brings me down to the next question as to which of the defendants would be liable to pay the suit amount to CS (Comm.) No: 150/2021 Page 68 of 71 -69- the plaintiff. As already noted above, the defendant nos. 2 to 8 have already been deleted from the array of the defendants, whereas, the suit is already adjourned sine-a die qua the defendant no.10. Hence, it is held that presently, the defendant no. 1 is liable under the law to pay/refund the amount of Rs. 50,50,000/- to the plaintiff company.
63. The issue no.1 is decided in the aforesaid terms.
ISSUE NO.2
64. Now, I shall take up the issue no.2, which reads as under:-
Issue no. (ii) - Whether the plaintiff is entitled for any interest from defendants?If so, at what rate; for which period and from which of the defendants? OPP
65. The onus to prove the aforesaid issue was placed upon the plaintiff. The plaintiff has claimed interest @ 18% per annum w.e.f. 15-2-2018 till realization of the amount for wrongly withholding the said amount and for causing loss to the plaintiff. Indisputably, there is no contractual agreement existing between the parties regarding the rate of interest in case of default in refunding the sale price and/or for not delivering the Audi car after receiving the entire sale price. No doubt, the transaction in question is commercial in nature, however, this Court is of the view that interest @ 18% per annum, as claimed by the plaintiff, CS (Comm.) No: 150/2021 Page 69 of 71 -70- is on higher side. Keeping in view the nature of transaction between the parties and the overall facts and circumstances of the case, this Court is of the view that interest of justice would be met by awarding interest @ 12% per annum from 15-02-2018 till the date of institution of this suit. Further, the pendente lite and future interest at the same rate is also awarded in favour of the plaintiff till realization of the amount.
66. Further, in view of findings on issue no.1 hereinabove, the plaintiff is entitled to recover such interest from defendant no.1, for the time being in view of the fact that the defendant nos. 2 to 8 have already been deleted from the array of the defendants, whereas, the suit is already adjourned sine-a die qua the defendant no.10. The issue no.2 stands decided in these terms.
RELIEF:
67. In the light of the aforesaid discussion, Court is of the view that the plaintiff has been able to prove its case on the basis of preponderance of probability. The suit is decreed in favour of the plaintiff and against the defendant no. 1 and thus, the following reliefs are granted:-
(i) The plaintiff is entitled to recover Rs.50,50,000/-
[Rupees Fifty Lacs and Fifty Thousand only] from the defendant no.1;
(ii) Interest is awarded in favour of the plaintiff and against the defendant no.1 @ 12% per annum from CS (Comm.) No: 150/2021 Page 70 of 71 -71- 15-02-2018 till realization of amount;
(iii) Cost of the suit is also awarded in favour of the plaintiff.
68. Keeping in view the fact that the suit is adjourned sine-a-
die qua defendant no. 10 vide order dated 16.08.2022, the plaintiff shall be at liberty to get the suit revived qua said defendant, if so permissible under the law.
69. Decree sheet be prepared accordingly.
70. File be consigned to Record Room, after due compliance.
Digitally signedAnnounced in the open Court VIDYA by VIDYA PRAKASH On 24th Day of August, 2024. PRAKASH Date: 2024.08.24 17:30:35 +0530 (VIDYA PRAKASH) DISTRICT JUDGE (COMMERCIAL COURT)-02 PATIALA HOUSE COURTS, NEW DELHI CS (Comm.) No: 150/2021 Page 71 of 71