Madras High Court
M/S.Santhosh Textile Process vs Page 1 Of 63 on 15 June, 2023
Author: S.S. Sundar
Bench: S.S. Sundar
A.S.No.965 of 2015
IN THE HIGH COURT OF JUDICATURE AT MADRAS
Reserved on : 10.01.2023
Pronounced on : 15.06.2023
CORAM :
THE HONOURABLE MR. JUSTICE S.S. SUNDAR
AND
THE HONOURABLE MR. JUSTICE A.A.NAKKIRAN
A.S.No.965 of 2015
and
M.P.No.1 of 2015
1.M/s.Santhosh Textile Process,
a Partnership Firm,
represented by its Partner C.Shanmughasundaram,
S.F.No.165, Kulathupalayam, Mangalam Road,
Tiruppur – 641 687.
2.C.Shanmugasundaram,
Partner of M/s.Santhosh Textile Process,
“Santhosh Priya” S.F.No.68/2,
S.A.Khaday Layout, Angeripalayam Road,
Tiruppur – 641 602.
3.C.Udhayasankar,
Santhosh Priya S.F.No.68/2,
S.A.Khaday Layout, Angeripalayam Road,
Tiruppur – 641 602. ... Appellants
Vs.
Page 1 of 63
https://www.mhc.tn.gov.in/judis
A.S.No.965 of 2015
M/s.Veena Texchem Industries,
a Partnership Firm,
represented by its Partners,
1.S.Umarani
2.Rushyendramani ... Respondent
[C.Udhayasankar, originally shown as 2nd respondent
in the appeal, cause title of which was accepted vide
order of Court dated 31.07.2015 in M.P.No.1 of 2015
in A.S.SR.No.62593 of 2015, was later transposed
and is shown as 3rd appellant in the appeal vide
order of Court dated 24.08.2015 in M.P.No.2 of 2015
in A.S.SR.No.62593 of 2015]
Prayer : Appeal Suit filed under Section 96 of Code of Civil Procedure
against the judgment and decree dated 27.04.2015 in O.S.No.112 of 2008
on the file of the III Additional District Court at Pondicherry.
For Appellants : Mr.T.P.Manoharan
Senior Counsel
for Mr.T.M.Naveen
For Respondent : Mr.R.Saseetharan
JUDGMENT
S.S. SUNDAR, J.
Defendants 1 to 3 in the suit in O.S.No.112 of 2008 on the file of the III Additional District Court at Pondicherry, are the appellants in the above appeal.
Page 2 of 63 https://www.mhc.tn.gov.in/judis A.S.No.965 of 2015
2.The respondent/plaintiff is a partnership firm represented by its partners S.Umarani and Rushyendramani. The respondent as plaintiff filed the suit in O.S.No.112 of 2008 on the file of III Additional District Court at Pondicherry, for recovery of a sum of Rs.91,83,588/- together with interest @ 12% p.a. on the sum of Rs.76,33,905.25 from the date of suit till the date of realisation and for costs.
3.Brief facts that are stated in the plaint are as follows :
3.1.The plaintiff is a registered partnership firm which is registered under the provisions of the Indian Partnership Act, 1932. The plaintiff is carrying on business in the manufacture, stock and sale of specialty Textile Auxiliaries and they have their place of business in Puducherry at Kurumbapet, and Industrial Estate at Mettupalayam, Puducherry.
3.2.The 1st defendant is a partnership firm in which defendants 2 and 3 are partners. The 1st defendant is having a dyeing unit at Kulathupudur in Tiruppur. The plaintiff supplied goods which were transported from Puducherry to the place of business of 1st defendant. The plaintiff was Page 3 of 63 https://www.mhc.tn.gov.in/judis A.S.No.965 of 2015 sending quality goods to the defendants. As per the Books of Accounts maintained by the plaintiff in its regular course of business, a sum of Rs.76,33,905.25 is due and payable by defendants to the plaintiff towards supply of goods. There were transactions between plaintiff and 1 st defendant to the tune of Rs.1,35,70,258.25. The 1st defendant had made payments in part by way of Demand Drafts and cheques to the tune of Rs.59,46,353/-
and the balance payable by the defendants to the plaintiff is Rs.76,33,905.25.
3.3.The plaintiff was repeatedly calling upon the defendants to pay the balance amount as per the accounts. The plaintiff wrote a letter to the 1 st defendant on 17.01.2007, enclosing the details of accounts, and subsequently, another letter to the 1st defendant pointing out that it will be assumed that the defendant had accepted the balance if no reply is received from the defendant within a fortnight. The defendant did not issue any reply and hence, it is presumed that the defendant had accepted and acknowledged the liability. Thereafter, the plaintiff was forced to issue a legal notice through their counsel on 09.06.2007 calling upon the 1st defendant to settle the amount to which the defendants issue a false and untenable reply. Page 4 of 63 https://www.mhc.tn.gov.in/judis A.S.No.965 of 2015 3.4.Though partners of the plaintiff firm, namely Kalaiselvi and Rushyendramani, are the wives of one Mallikarjunan and Selvaraj respectively, plaintiff is not aware that the said Selvaraj and Mallikarjunan were in-charge of the day-to-day affairs of the 1st defendant firm. The plaintiff never knew that Selvaraj and Mallikarjunan were partners of the 1 st defendant. To the knowledge of plaintiff, defendants 1 and 2 alone are the partners of 1st defendant firm.
3.5.The sales effected by plaintiff to the defendants from 28.01.2006 to 18.12.2006 have been duly intimated to the Central Excise Department and the defendant had also verified and signed the same in token of its correctness in Form-ER1. Plaintiff were transporting goods from Puducherry to the 1st defendant's place of business through “Nikhil Transports”. Delivery of consignments had also been effected in the defendant's place and the person-in-charge of office has also signed in token of delivery of consignments in the backside of consignee lorry receipt.
3.6.The plaintiff requested the defendants to deliver the 'C' Forms as Page 5 of 63 https://www.mhc.tn.gov.in/judis A.S.No.965 of 2015 per the Statute but they were evading and neglecting to furnish the 'C' Forms to the plaintiff and that therefore, the plaintiff would also initiate civil and criminal prosecution against the defendants for not furnishing 'C' Forms.
3.7.The contention of defendant in the reply notice that the husbands of partners of plaintiff firm have manipulated the documents, is false.
4.The defendants filed a detailed written statement repudiating the plaint averments. Every averment in the plaint is denied specifically. It is the case of defendants that the 1st defendant firm commenced its business with effect from 26.08.1994 with five partners including one Selvaraj and Mallikarjunan. It is the specific case of defendants that the said two partners of 1st defendant firm Mallikarjunan and Selvaraj are none other than the husbands of Kalaiselvi and Rushyendramani respectively, who are the partners of plaintiff firm. It is the specific case of the defendants that the said Selvaraj and Mallikarjunan were in charge of the entire day-to-day affairs of the 1st defendant firm. It is stated that Selvaraj and Mallikarjunan were dyeing masters and due to their expertise, they had been inducted as working partners in the 1st defendant firm. It is the case of defendants that, Page 6 of 63 https://www.mhc.tn.gov.in/judis A.S.No.965 of 2015 right from its inception till the retirement of Selvaraj and Mallikarjunan on 05.02.2007, they were working partners looking after the day-to-day management of the 1st defendant, as evident from the Partnership Deed dated 26.08.1994 and the subsequent document relating to the reconstitution of partnership due to the retirement of the partners from the 1st defendant firm. It is stated that, even as per the plaintiff's documents, the purchase orders were placed only by the husbands of partners of plaintiff and therefore, the case of plaintiff that they were not aware of the fact that Selvaraj and Mallikarjunan are partners of 1st defendant firm, is false.
5.It is also contended by the defendants in their written statement that the lorry receipt of Nikhil Transports on its overleaf contained the signatures of plaintiff's husbands. It is also contended by the defendants that one Arsan Transport, which is subsequently changed as Nikhil Transports, is operated by one K.Santhanam and the said Santhanam is none other than the husband of one Umarani, who is also a partner of plaintiff firm. In the written statement, it is pointed out that the trucks that are referred to in the invoices and LR Receipts stand in the name of Santhanam. The booking, Page 7 of 63 https://www.mhc.tn.gov.in/judis A.S.No.965 of 2015 transport and receipt were all done either by Santhanam, Mallikarjunan or Selvaraj. It is pointed out by the defendants in the written statement that none of the lorry receipts disclose that there was interstate transport of the goods and hence, there is no legal proof that the goods were in fact delivered to the 1st defendant. Since all the documents relating to the plaintiff are either signed or prepared by the three individuals, namely the husbands of three partners of plaintiff firm, it is specifically contended that there is criminal conspiracy among Santham, Mallikarjunan and Selvaraj, Umarani, Rushyendramani and Kalaiselvi to misappropriate the funds of 1 st defendant. All the purchase orders emanated from the 1 st defendant were signed either by Mallikarjunan or Selvaraj. It is contended that these purchase orders have been made to one Arsan Traders in which Santhanam was the Proprietor. Stating that the purchase orders in normal practice should be placed with the plaintiff consignor, the defendants contended that two of the erstwhile partners of 1st defendant firm, in collusion with Santhanam, have placed the purchase orders through a commission agent/broker to make excess claim. Without prejudice to the serious allegations of collusion among the partners of the plaintiff firm, the retired partners of the 1st Page 8 of 63 https://www.mhc.tn.gov.in/judis A.S.No.965 of 2015 defendant firm and the Proprietor of Nikhil Transports and Arsan Traders run by the Proprietor of Nikhil Transports, the defendants also submitted that all the goods supplied to the 1st defendant were of substandard quality and there is a loss of nearly 72% to the 1 st defendant already, as the defendants have ascertained the same from other suppliers, as the amount shown in the invoices are exorbitant and the 1st defendant would not have suffered 72% loss if the 1st defendant had purchased goods from other sources.
6.Though it is admitted that one K.A.Santhakumar and R.Muthu Srinivasan were also partners of M/s.Akhil Traders, it is contended by the plaintiff that the two partners are employees of Santhanam, the husband of Umarani, one of the partners of plaintiff firm. It is the definite case of 1 st defendant that Akhil Traders and Arsan Traders were owned and operated by Santhanam, the husband of Umarani, and an amount of Rs.36,79,784/- has been paid by way of self-cheques and cheques in favour of Akhil Traders by Mallikarjunan and Selvaraj, who are the erstwhile partners of 1 st defendant. Santhanam, in collusion with Mallikarjunan and Selvaraj, has Page 9 of 63 https://www.mhc.tn.gov.in/judis A.S.No.965 of 2015 prepared fake bills to the tune of Rs.36,86,000/- and thereby, the erstwhile partners have misappropriated a huge sum from the 1 st defendant. Several other allegations were also made by defendants as against the erstwhile partners of 1st defendant, by name Mallikarjunan and Selvaraj, alleging misappropriation by creating/fabricating records.
7.Another firm by name Arsan Chemical Corporation is referred to in the written statement filed by the defendants as a firm comprising of three partners, namely, Santhanam, Mallikarjunan and Selvaraj. A specific allegation is made that a sum of Rs.42,13,219/- has been paid by Mallikarjunan and Selvaraj on behalf of 1st defendant firm, even though Arsan Traders are not manufacturers, but only traders of chemicals, and they have misappropriated a huge sum by way of commission from other suppliers by regularly supplying goods to 1st defendant. It was suggested by defendants that the two partners by name Mallikarjunan and Selvaraj have placed orders through M/s.Arsan Traders to enable M/s.Arsan Traders to get commission for every good supplied to the 1st defendant. Referring to the fact that the husbands of partners of plaintiff firm are partners of Arsan Page 10 of 63 https://www.mhc.tn.gov.in/judis A.S.No.965 of 2015 Chemical Corporation and husbands of two of the partners of plaintiff firm are the erstwhile working partners of 1st defendant firm, a specific stand is taken by the defendants that the plaintiff, in collusion with the erstwhile partners of 1st defendant firm, have created and produced all documents to support a fake claim against the 1st defendant. It is further stated that other partners of 1st defendant firm found several irregularities and hence, Mallikarjunan and Selvaraj were made to retire from the 1st defendant firm on 05.02.2007 and that all the transactions alleged in the plaint were only during the time when the husbands of partners of plaintiff firm were in charge of the entire day-to-day affairs of the 1st defendant firm. It is repeatedly stated in the written statement that the documents referred to in the plaint are all created and manipulated only for the purpose of filing the suit.
8.A reply statement was also filed by the plaintiff reiterating their contentions on the basis of documents which are referred to in the plaint itself. In the reply, there is no dispute with regard to the involvement of different firms and the relationship between the partners of the plaintiff firm Page 11 of 63 https://www.mhc.tn.gov.in/judis A.S.No.965 of 2015 and the erstwhile partners of the 1st defendant firm.
9.During the pendency of the suit, defendants filed an application in I.A.No.343 of 2009 to implead Mallikarjunan, Selvaraj and Santhanam in the suit stating about the relationship between the partners of the plaintiff firm and the erstwhile partners of the 1 st defendant. The said application was dismissed by the trial Court on the ground that the suit is not based on the management of 1st defendant firm and that the plaintiff can always examine the parties as witness on their side to prove their case and it is the plaintiff who is competent to decide against whom they want relief.
10.Before the trial Court, another application in I.A.No.233 of 2013 was filed by the defendants to issue summons to the partners of plaintiff firm to cause their personal attendance before the Court to give evidence. The said application was also dismissed by the trial Court by relying upon a few precedents for the proposition that the practice of calling upon the opposite party as witness will not be in the interest of justice and it is not open to a person to compel the presence of his opponent by issuing witness summons. Page 12 of 63 https://www.mhc.tn.gov.in/judis A.S.No.965 of 2015
11.Before the trial Court, the Power of Attorney Agent of the partners of the plaintiff firm, who is also the Manager of plaintiff firm, was examined as P.W.1. On behalf of plaintiff, Exs.A1 to A17 were marked. On behalf of defendants, one D.Kathirvel, who is the Finance Manager of 1 st defendant, was examined as D.W.1. On behalf of defendants, Exs.B1 to B13 were marked.
12.The trial Court framed the following issues :
i. Whether the suit is maintainable ?
ii. Whether there is any valid cause of action in the suit ? iii. Whether the plaintiffs are entitled for judgment and decree ? iv. To what other reliefs, the parties are entitled to ? The following additional issues were also framed before the trial Court :
i. Whether the plaintiff supplied Textile Auxiliaries to the first defendant and if supplied, whether the goods were poor or sub-standard quality ?
ii. Whether the first defendant had incurred loss of 72% as stated in the written statement and if so, whether the first defendant firm is liable to pay the suit claim ?Page 13 of 63
https://www.mhc.tn.gov.in/judis A.S.No.965 of 2015 iii. Whether there was any collusion, fraud, criminal conspiracy among the plaintiff, Santhanam, the partners of the first defendant, viz., Selvaraj and Mallikarjunan ? iv. Whether there was any arbitration proceeding as stated in the written statement and if so when was the award passed and what is the finding of the Arbitrators ?
v. On what date the alleged partners Mallikarjunan and Selvaraj were expelled and on what terms ?
vi. When was the new firm of the first defendant reconstituted and who are the Managing Partners of the first defendant firm ? vii.Whether the suit claim is true ?
viii.Whether the suit as framed is maintainable ? ix. Whether plaintiff is entitled to the judgment and decree as prayed for ?
x. To what reliefs, the parties are entitled to ?
13.The trial Court accepted almost all the documents filed by the plaintiff as genuine and therefore, held that the plaintiff have proved their case by documentary evidence. Referring to the purchase orders, invoices, lorry waybill, Returns submitted by plaintiff to the Central Excise Department, computer generated ledger account of the plaintiff, delivery receipts, and the documents for payment of freight charges to the Page 14 of 63 https://www.mhc.tn.gov.in/judis A.S.No.965 of 2015 transporter, the trial Court answered all the issues in favour of plaintiff. On the question of collusion, fraud and criminal conspiracy among the partners of plaintiff firm and the erstwhile partners of 1 st defendant, the trial Court rejected the contentions of the defendants on the ground that the accusation made against the erstwhile partners and Santhanam is only an imaginary story to cheat the plaintiff. Since the defendants have not filed any revision as against the order dismissing the application filed to implead the erstwhile partners of 1st defendant and Santhanam as defendants in the suit and no steps were taken by defendants to examine them as witness, the contention of defendants referring to the relationship between the erstwhile partners of 1st defendant and the partners of plaintiff firm is not considered as a serious or relevant fact by the trial Court. Stating that the entire case pleaded by the plaintiff is based on records, the trial court held that the records are sufficient to prove the case of plaintiff and therefore, held that the plaintiff is entitled to get a decree as prayed for.
14.Aggrieved by the judgment and decree of the trial Court decreeing the suit accepting the entire claim, defendants 1 to 3 in the suit in Page 15 of 63 https://www.mhc.tn.gov.in/judis A.S.No.965 of 2015 O.S.No.112 of 2008 preferred the above appeal.
15.Mr.T.P.Manoharan, learned Senior Counsel appearing for the appellants, grounded his whole case by mainly submitting that all the documents filed by the plaintiff in support of their case are manipulated and fabricated by the retired partners of 1st defendant firm in collusion with their own wives, who are the partners of plaintiff firm, with the connivance of Santhanam (husband of Umarani), who is the Proprietor of Nikhil Transports.
16.Having regard to the relationship between the parties and the fact that two of the retired partners of 1st defendant were in-charge of the day-to- day affairs of the 1st defendant firm in all its activities as working partners, it is probable that records could have been manipulated to support the claim of plaintiff. However, mere possibility may not be conclusive to reject the plaintiff's claim. Having regard to the admitted facts and the arguments advanced by the learned Senior Counsel appearing for the appellants and Mr.R.Saseetharan, learned counsel appearing for the respondent, this Court Page 16 of 63 https://www.mhc.tn.gov.in/judis A.S.No.965 of 2015 is forced to consider the documents filed on either side meticulously.
17.From the pleadings, issues framed by the trial Court, grounds raised in this appeal and the arguments advanced by the learned counsels on either side, the following points arise for determination before this Court :
i. Whether the plaintiff supplied Textile Auxiliaries to the 1st defendant as pleaded by the plaintiff and as seen from the documents ?
ii. Whether the documents produced on the side of plaintiff in support of the suit claim can be relied upon safely to sustain the suit claim ?
iii. Whether the judgment of the trial Court is vitiated for the failure to focus on the real issues and on erroneous appreciation of documents, ignoring the peculiar case where defendants bona fidely suspect the genuineness of suit transaction and the documents relied upon by the plaintiff ? Point Nos.(i) and (ii) :
18.This Court, while considering the nature of dispute in this case, finds that the 1st defendant firm was constituted under Ex.B8-Partnership Deed dated 26.08.1994. One P.Selvaraj and P.Mallikarjunan, who are Page 17 of 63 https://www.mhc.tn.gov.in/judis A.S.No.965 of 2015 brothers, were also partners of the firm. It is stated that these two partners are experienced in dyeing business and therefore, they were inducted as working partners to manage all the affairs of the 1st defendant firm. From the Partnership Deed, dated 26.08.1994, it is seen that only the two partners, namely P.Selvaraj and P.Mallikarjunan, were given remuneration for their services as working partners. It is stated that these two partners P.Selvaraj and P.Mallikarjunan should actively devote their time and attention to the business of the partnership firm. The firm was again reconstituted under Ex.B9 dated 01.07.1999. The remuneration for the two partners, viz., P.Selvaraj and P.Mallikarjunan was increased from Rs.36,000/- p.a. to Rs.72,000/- p.a. Again, the partnership was reconstituted under Ex.B10 dated 15.09.2005 with identical terms. In all the Partnership Deeds, P.Selvaraj and P.Mallikarjunan were consistently holding 22.5% share in the profit in the partnership getting 22.5% each.
19.Further, it is admitted that dispute arose among the partners of the 1st defendant firm and by a Retirement Deed dated 05.02.2007, marked as Ex.B11, P.Selvaraj and P.Mallikarjunan, who were partners from 1994 to Page 18 of 63 https://www.mhc.tn.gov.in/judis A.S.No.965 of 2015 January 2007, retired from the partnership business. From the terms of the Retirement Deed, it is seen that the erstwhile partners retired from the firm pursuant to an Award passed by the Arbitrator. It is relevant to refer to Clauses 10 to 14 of the Retirement Deed :
“10)The Retiring Partners were in-charge of the day-to- day management of the business of the firm and assure the Continuing Partners that all business transactions were duly recorded therein and that there are no liabilities of the firm other than those recorded in the books of the firm as on this date.
11)The Retiring Partners undertake to settle, personally from out of their resources, any liability contracted in the name of the firm on account of purchases and or services (but not any Statutory liability) before the date of their retirement from the firm and not recorded in the books of the firm that may surface in future and to indemnify the Continuing Partners from all proceedings, costs, claims and expenses in respect thereof.
12)The retiring partners shall transfer all the land and building situated in the dyeing unit (more specifically marked Page 19 of 63 https://www.mhc.tn.gov.in/judis A.S.No.965 of 2015 in the plan and mentioned in the schedule hereunder) originally bought from out of the funds of the firm and belonging to the firm but standing in the individual/joint names of the Retiring Partners as per the Registered sale deeds to the continuing partners/firm/nominee as the Continuing Partners may decide.
13)The Retiring Partners undertake;
i. To return the 62.5 KVAgenset (held by them in their possession) ii. To return back the original RC book of Qualis car (No.TN39U6409) without encumbrance/hypothecation. iii. To clear all personal loans obtained in the firm name (or) personal name guaranteed by the firm without the consent of continuing partners and/or not recorded in the books of accounts of the firm.
iv. To be responsible for missed cheque bearing number 883604 dated 24.06.2006.
14)The Continuing Partners undertake to obtain release of the below mentioned personal land documents in the names of the Retiring Partners from State Bank of Mysore, Tirupur, given as security for the loans availed in the name of the firm and handover the same to them.” Page 20 of 63 https://www.mhc.tn.gov.in/judis A.S.No.965 of 2015 After retirement of Selvaraj and Mallikarjunan, a fresh Partnership Deed was entered into on 02.05.2007 with the continuing partners under Ex.B12.
20.From the Retirement Deed, it can be inferred without any difficulty that Mr.Selvaraj and Mr.Mallikarjunan were in actual control and were in- charge of the entire business of the 1st defendant firm and its affairs right from Day-1 as working partners. Apart from getting fabulous amount as per the terms of the Retirement Deed, several assets of the firm which are enumerated in the document were given to the outgoing partners, of course, with the assurance that the said Selvaraj and Mallikarjunan will not claim any right over the assets of the firm as detailed from the document Ex.B11.
21.We have seen that Selvaraj and Mallikarjunan were the working partners who were in exclusive control of day-to-day affairs of the 1st defendant firm, taking a special remuneration for them as per the Partnership Deed. In the course of evidence, it is admitted that P.Selvaraj is Page 21 of 63 https://www.mhc.tn.gov.in/judis A.S.No.965 of 2015 the husband of Rushyendramani and P.Mallikarjunan is the husband of Kalaiselvi, the partners of plaintiff firm. A few documents were filed to show that both Rushyendramani and Kalaiselvi were residing in the residential quarters constructed within the premises of 1 st defendant firm. One Santhanam was carrying on transport business originally in the name of “Arsan Transport” and the name was subsequently changed as “Nikhil Transports”. The lorry receipts produced by the plaintiff would be only from 04.04.2006. It is admitted by P.W.1 that he has not produced any lorry receipts for the period upto March, 2006. From the invoices, it is seen that, earlier, the goods were transported through Arsan Transports and later, from April, 2006, the goods were stated to have been transported through Nikhil Transports. The 1st receipt under the bunch of Ex.A12 would show that Nikhil Transports has collected amounts for the delivery effected for the period in February, 2006. Therefore, there is no difficulty in accepting the case of defendants that the Nikhil Transports was the transporter who was allegedly engaged by the plaintiff to transport all the goods supplied by plaintiff to the 1st defendant. It is also evident that the plaintiff has not produced lorry receipts to show that the goods transported for the period Page 22 of 63 https://www.mhc.tn.gov.in/judis A.S.No.965 of 2015 prior to April, 2006, have been actually delivered by the then transporter.
22.It is admitted that all the purchase orders were issued by the two partners namely P.Selvaraj and P.Mallikarjunan. In the cross-examination of P.W.1, it is admitted that all these purchase orders are routed through either M/s.Arsan Traders or M/s.Arsan Chemical Corporation, in which P.Selvaraj, P.Mallikarjunan and the owner of Nikhil Transports by name K.Santhanam, are partners. Though the fact whether P.Selvaraj and P.Mallikarjunan are partners of either Arsan Chemical Corporation or Arsan Traders is not supported by any document, it is admitted by P.W.1 that the erstwhile partners of 1st defendant firm are also partners of either Arsan Chemical Corporation or Arsan Traders. It is also admitted that M/s.Arsan Chemical Corporation and Arsan Traders are not manufacturers, but they are traders getting a commission for every sale through them. It is admitted in the plaint as well as by P.W.1 that the orders were placed not directly by sending the purchase orders to plaintiff, but by sending the purchase orders to Arsan Traders in which K.Santhanam is a partner. The wife of Santhanam, by name Umarani, is stated to be the working partner of the plaintiff. She Page 23 of 63 https://www.mhc.tn.gov.in/judis A.S.No.965 of 2015 happens to be the wife of K.Santhanam to receive orders from the 1st defendant and to forward the same through fax to the plaintiff. The specific allegation made in the written statement that a substantial amount to the tune of nearly Rs.36 Lakhs from the 1st defendant firm is paid by the retired partners P.Selvaraj and P.Mallikarjunan to Arsan Traders as seen from the cheques issued by erstwhile partners of 1st defendant, is not in dispute.
23.By placing orders through an intermediary like a broker or commission agent, the 1st defendant will certainly lose substantial amount of money by way of commission. Having regard to the fact that P.Selvaraj and P.Mallikarjunan have paid by way of cash to a trader knowing fully well that such practice would result in abnormal hike in prices, this Court finds that P.Selvaraj and P.Mallikarjunan have never conducted themselves as true partners with the sense of responsibility or obligation as partners fulfilling the statutory requirements under the provisions of Indian Partnership Act. Several specific allegations made against P.Selvaraj and P.Mallikarjunan in the written statement, though generally denied by the plaintiff by way of reply statement, P.W.1, during evidence, has pleaded ignorance about the Page 24 of 63 https://www.mhc.tn.gov.in/judis A.S.No.965 of 2015 allegations made against the erstwhile partners of 1st defendant, who are also the husbands of partners of plaintiff firm. Even the plaintiff has not denied or controverted the specific statement that the erstwhile partners of 1st defendant firm have paid substantial amounts to Nikhil Transports, Arsan Chemical Corporation or Arsan Traders, whereas, all these payments are not necessary if the 1st defendant were to purchase goods from the manufacturers directly.
24.The 1st defendant has specifically referred to the details of commission or discount paid by 1st defendant through the fraudulent activities of P.Selvaraj and P.Mallikarjunan. Though fraud against P.Selvaraj and P.Mallikarjunan is pleaded with reference to different contexts, this Court finds some force in the submissions of learned Senior Counsel appearing for the appellants that P.Selvaraj and P.Mallikarjunan have administered the 1st defendant firm in such a way to exploit the 1st defendant for their personal gain in utter disregard to the duties and obligations of every partner of the firm.
Page 25 of 63 https://www.mhc.tn.gov.in/judis A.S.No.965 of 2015
25.With this conduct focussed by the learned Senior Counsel, this Court finds several inconsistencies and lack of prudence while marking several documents and relying upon the presumptive value of such documents. Let us consider the documents filed by the plaintiff one by one :
25.1.The plaintiff filed Ex.A1, dated 20.06.2009, which is just a Special Power of Attorney given by the partners of plaintiff firm in favour of P.W.1 who is working as a Manager in plaintiff firm.
25.2.Ex.A2 shows that the plaintiff firm was registered with the Registrar of Firms, Puducherry, on 21.06.2005.
25.3.Ex.A3 is stated to be the ledger account copy of plaintiff firm generated from the computer. It is the contention of plaintiff that Ex.A3-
ledger account was prepared in the usual course of business. It is seen that Ex.A3 are loose sheets generated from computer. This document Ex.A3, Page 26 of 63 https://www.mhc.tn.gov.in/judis A.S.No.965 of 2015 when standing alone, is inadmissible in evidence for want of certificate as contemplated under Section 65B of Indian Evidence Act, which reads as follows :
“65B. Admissibility of electronic records.
(1) Notwithstanding anything contained in this Act, any information contained in an electronic record which is printed on a paper, stored, recorded or copied in optical or magnetic media produced by a computer (hereinafter referred to as the computer output) shall be deemed to be also a document, if the conditions mentioned in this section are satisfied in relation to the information and computer in question and shall be admissible in any proceedings, without further proof or production of the original, as evidence of any contents of the original or of any fact stated therein of which direct evidence would be admissible.
(2) The conditions referred to in sub-section (1) in respect of a computer output shall be the following, namely.
(a) The computer output containing the information was produced by the computer during the period over which the computer was used regularly to store or process information for the purposes of any activities regularly carried on over that period by the person having lawful control over the use of the Page 27 of 63 https://www.mhc.tn.gov.in/judis A.S.No.965 of 2015 computer;
(b) During the said period, information of the kind contained in the electronic record or of the kind from which the information so contained is derived was regularly fed into the computer in the ordinary course of the said activities;
(c) Throughout the material part of the said period, the computer was operating properly or, if not;
then in respect of any period in which it was not operating properly or was out of operation during that part of the period, was not such as to affect the electronic record or the accuracy of its contents; and
(d) The information contained in the electronic record reproduces or is derived from such information fed into the computer in the ordinary course of the said activities.
(3) Where over any period, the function of storing or processing information for the purposes of any activities regularly carried on over that period as mentioned in clause (a) of sub-section (2) was regularly performed by computers, whether-
(a) By a combination of computers operating over that period; or
(b) By different computers operating in succession over that period; or Page 28 of 63 https://www.mhc.tn.gov.in/judis A.S.No.965 of 2015
(c) By different combinations of computers operating in succession over that period; or
(d) In any other manner involving the successive operation over that period, in whatever order, of one or more computers and one or more combinations of computers, All the computers used for that purpose during that period shall be treated for the purposes of this section as constituting a single computer; and references in this section to a computer shall be construed accordingly.
(4) In any proceedings where it is desired to give a statement in evidence by virtue of this section, a certificate doing any of the following things, that is to say-
(a) Identifying the electronic record containing the statement and describing the manner in which it was produced;
(b) Giving such particulars of any device involved in the production of that electronic record as may be appropriate for the purpose of showing that the electronic record was produced by a computer;
(c) Dealing with any of the matters to which the conditions mentioned in sub-section (2) relate, And purporting to be signed by a person occupying a Page 29 of 63 https://www.mhc.tn.gov.in/judis A.S.No.965 of 2015 responsible official position in relation to the operation of the relevant device or the management of the relevant activities (whichever is appropriate) shall be evidence of any matter stated in the certificate; and for the purposes of this sub-section it shall be sufficient for a matter to be stated to the best of the knowledge and belief of the person stating it.
(5) For the purposes of this section, -
(a) Information shall be taken to be supplied to a computer if it is supplied thereto in any appropriate form and whether it is so supplied directly or (with or without human intervention) by means of any appropriate equipment;
(b) Whether in the course of activities carried on by any official, information is supplied with a view to its being stored or processed for the purposes of those activities by a computer operated otherwise than in the course of those activities, that information, if duly supplied to that computer, shall be taken to be supplied to it in the course of those activities;
(c) A computer output shall be taken to have been produced by a computer whether it was produced by it directly or (with or without human intervention) by means of any appropriate equipment.
Explanation. For the purposes of this section any reference to information being derived from other information shall be a reference to its being derived therefrom by calculation, comparison or any other process.” Page 30 of 63 https://www.mhc.tn.gov.in/judis A.S.No.965 of 2015 25.4.It is useful to refer to a judgment of Hon'ble Supreme Court in the case of Anvar P.V. v. P.K.Basheer and others reported in (2014) 10 SCC 473, wherein, the Hon'ble Supreme Court has ruled as follows :
“14.Any documentary evidence by way of an electronic record under the Evidence Act, in view of Sections 59 and 65A, can be proved only in accordance with the procedure prescribed under Section 65B. Section 65B deals with the admissibility of the electronic record. The purpose of these provisions is to sanctify secondary evidence in electronic form, generated by a computer. It may be noted that the Section starts with a non obstante clause. Thus, notwithstanding anything contained in the Evidence Act, any information contained in an electronic record which is printed on a paper, stored, recorded or copied in optical or magnetic media produced by a computer shall be deemed to be a document only if the conditions mentioned under sub- Section (2) are satisfied, without further proof or production of the original. The very admissibility of such a document, i.e., electronic record which is called as computer output, depends on the satisfaction of the four conditions under Section 65B(2). Page 31 of 63 https://www.mhc.tn.gov.in/judis A.S.No.965 of 2015 Following are the specified conditions under Section 65B(2) of the Evidence Act:
(i) The electronic record containing the information should have been produced by the computer during the period over which the same was regularly used to store or process information for the purpose of any activity regularly carried on over that period by the person having lawful control over the use of that computer;
(ii) The information of the kind contained in electronic record or of the kind from which the information is derived was regularly fed into the computer in the ordinary course of the said activity;
(iii) During the material part of the said period, the computer was operating properly and that even if it was not operating properly for some time, the break or breaks had not affected either the record or the accuracy of its contents; and
(iv) The information contained in the record should be a reproduction or derivation from the information fed into the computer in the ordinary course of the said activity.
15.Under Section 65B(4) of the Evidence Act, if it is Page 32 of 63 https://www.mhc.tn.gov.in/judis A.S.No.965 of 2015 desired to give a statement in any proceedings pertaining to an electronic record, it is permissible provided the following conditions are satisfied:
(a) There must be a certificate which identifies the electronic record containing the statement;
(b) The certificate must describe the manner in which the electronic record was produced;
(c) The certificate must furnish the particulars of the device involved in the production of that record;
(d) The certificate must deal with the applicable conditions mentioned under Section 65B(2) of the Evidence Act; and
(e) The certificate must be signed by a person occupying a responsible official position in relation to the operation of the relevant device.
16.It is further clarified that the person need only to state in the certificate that the same is to the best of his knowledge and belief. Most importantly, such a certificate must accompany the electronic record like computer printout, Compact Disc (CD), Video Compact Disc (VCD), pen drive, etc., pertaining to which a statement is sought to be given in evidence, when the same is produced in Page 33 of 63 https://www.mhc.tn.gov.in/judis A.S.No.965 of 2015 evidence. All these safeguards are taken to ensure the source and authenticity, which are the two hallmarks pertaining to electronic record sought to be used as evidence. Electronic records being more susceptible to tampering, alteration, transposition, excision, etc. without such safeguards, the whole trial based on proof of electronic records can lead to travesty of justice.” 25.5.Ex.A3 is not the original account and it appears to be generated from the office computer of the plaintiff. When Ex.A3 is not supported by a certificate and it is not marked through the concerned person who was maintaining the accounts, this Court is unable to rely upon Ex.A3 which is inadmissible in evidence.
25.6.Ex.A4 is dated 17.01.2007. By this letter, the plaintiff has requested the 1st defendant to confirm the balance outstanding as Rs.76,33,905.25 as on 15.01.2007.
25.7.Under Ex.A5 dated 19.01.2007, Mr.P.Selvaraj, who is the retiring partner, has confirmed the balance as on 19.01.2007. It is pertinent Page 34 of 63 https://www.mhc.tn.gov.in/judis A.S.No.965 of 2015 to mention that, though the previous letter under Ex.A4 dated 17.01.2007 is pleaded in the plaint, this confirmation by P.Selvaraj on behalf of 1 st defendant was not even pleaded. This document Ex.A5 must be a fabricated document and P.Selvaraj, along with another partner, has done enough damage and caused loss to the 1st defendant while acting as working partner of 1st defendant.
25.8.Thereafter, the plaintiff sent a letter under Ex.A6, dated 14.05.2007, requesting the 1st defendant to confirm the balance. The recitals are identical with document Ex.A4. This document is supported by a receipt by M/s.Professional Couriers to show that the letter is delivered to the 1st defendant.
25.9.Thereafter, Ex.A7 suit notice, dated 09.06.2007, was issued by the plaintiff to the defendants. In this notice, it is stated that a sum of Rs.76,33,905.25 is due and payable by the defendants as on 18.12.2006. This statement is crucial. Even Ex.A3-the statement of accounts would show that, as on 18.12.2006, the amount is more than Rs.76,33,905/-. Only Page 35 of 63 https://www.mhc.tn.gov.in/judis A.S.No.965 of 2015 after the receipt of substantial payments on 28.12.2006 to the tune of Rs.7,59,336/- and a further sum of Rs.7,56,225/- on 02.01.2007, the amount is reduced to Rs.76,33,905.25. This statement in the notice is not explained by the counsel nor by the plaintiff during trial.
25.10.After the receipt of suit notice under Ex.A7, the defendants caused a reply through an Advocate on 29.06.2007, which is marked as Ex.A8. The defendants repudiated the averments in the suit notice. Even though the reply notice is not elaborate, it is seen that there is a specific allegation that the claim is based on false and fabricated documents prepared collusively with the help of erstwhile partners of 1st defendant.
25.11.Ex.A9 series are the lorry receipts issued by Nikhil Transports. This Court perused the originals. Considering the document Ex.A9 series, this Court finds that these lorry receipts are the consignee copies of LRs which are supposed to be meant for the consignee for their records. If it is a case where the lorry receipts are to be sent through post by the seller or Page 36 of 63 https://www.mhc.tn.gov.in/judis A.S.No.965 of 2015 person booking the goods, delivery by the transporter will be subject to production of this consignee copy of LRs. In this case, it is relevant to mention the nature of evidence of P.W.1. P.W.1 has deposed as follows :
“,d;th!; jahhpf;Fk;nghnj yhhpf;Fhpa ouh!;nghh;l; urPJk; jahh; bra;ag;gLk;/ ruf;Ffis mDg;g[k;nghJ v';fs; epWtdj;jpw;F fd;rpdh; vd;w mog;gilapy; yhhp ouhd;!;nghh;l; urPJ mry; tH';fg;gLk;/ ruf;Ffis bgWgtUf;F yhhp ouhd;!;nghh;l; fd;rpdh; fhg;gp tH';fg;gLk;/ yhhp ouhd;!;nghh;l; 3?tJ fhg;gp ruf;F Vw;Wk; yhhpf;F tH';fg;gLk;/ mjd;gpwF ruf;Ffis Vw;wp epf;fy; yhhp ouhd;!;nghh;l; ruf;F Vw;wp v';fs;
FnlhDf;F tUk;/ ruf;Ffis Vw;wp bry;y
tUk;nghJ yhhpapd; cila ouhd;!;nghh;l;Lf;fhd
fd;rpdh; urPJk; yhhp ouhd;!;nghh;l;Lf;fhd urPJk;-
fd;rpdUf;fhd ,d;th!; urPJk;-yhhp ,d;th!; urPJk;
bgw;Wf;bfhz;L mDg;gg;gLk;/
///
epf;fy; ouhd;!;nghh;l;od; chpikahsh;jhd; murd;
ouhd;!;nghh;l;od; epWtdh; Mthh;/ ,d;th!; mry;
,d;th!; ,d;th!; ouhd;!;nghh;l;lh; fhg;gp yhhp
uprpg;l;fk;bgdp yhhp urPJ ouhd;!;nghh;l;lh; fd;ildh;
yhhp urPJ fhg;gp v';fsplk; ,Uf;Fk;/ nfhh;l;oy; yhhp
urPJ Mtz';fis jhf;fy; bra;atpy;iy/
fd;brdpf;F mspf;fg;gl;l urPJfis nfhh;l;Lfspy;
jhf;fy; bra;Js;nshk;/”
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A.S.No.965 of 2015
Therefore, the consignee copy of the lorry receipts, which are meant for 1st defendant if the goods were to be delivered to the 1 st defendant, are not supposed to be with the plaintiff. Having regard to the nature of evidence, the production of Ex.A9 series by plaintiff is not explained by P.W.1. On the backside of every lorry receipt, someone has signed on behalf of 1st defendant. The plaintiff could have called him in evidence, as the transporter Nikhil Transports has acquittance with 1 st defendant's men who signed Ex.A9 series. In the absence of a valid explanation, as to how Ex.A9 series which are supposed to be with the 1st defendant, the documents Ex.A9 series cannot be accepted to prove actual transportation of goods.
25.12.One of the important admission of P.W.1 is regarding the absence of check-post seal in any of the lorry receipts under Ex.A9 series.
P.W.1 has admitted as follows :
“gpujpthjp epWtdk; jpUg;g{hpy; cs;sJ/ tpahghuk; midj;Jk; xU khepyj;jpypUe;J ntW khepyj;jpw;Fk;
bry;Yk;nghJ brf;ngh!;k; v';F cs;sJ vd;W
bjhpahJ/ brf; ngh!;l; ,y;yhj tHpapYk; bry;yyhk;/
yhhp urPJfspy; brf;ngh!;l; rPy; vjpYk; ,y;iy
(vf;!;gpl; V9) brf;ngh!;l; Ma;tpd;nghJ ouhd;!;nghh;l;
Page 38 of 63 https://www.mhc.tn.gov.in/judis A.S.No.965 of 2015 yhhp urPJ ,d;!;thrpy; brf;ngh!;l; rPy; nghlg;gl;oUf;Fk;/”
It is surprising to note that the transport receipts/invoices are relating to interstate sale and hence, the documents under Ex.A9 without the seal of check-post in any of them, raises a strong doubt as to the genuineness of the document, particularly in the absence of valid explanation with reference to the statutory requirement and the system as it is understood in the commercial parlance throughout the country.
25.13.When question as to the genuineness of the claim based on supply of goods is raised by the defendant and when serious allegations are raised that the erstwhile partners of 1st defendant played active role in collusion with their own wives, this Court should be cautious while appreciating the evidentiary value of every document and its admissibility.
Since none of the lorry receipts produced under Ex.A9 series contains the check-post seal and more than 160 receipts were filed, this Court is of the view that the document Ex.A9 cannot be accepted as genuine document surfaced during the actual transport of commodities from Puducherry, where the plaintiff was carrying on business to Tiruppur, the place of 1st defendant. Page 39 of 63 https://www.mhc.tn.gov.in/judis A.S.No.965 of 2015 25.14.Ex.A10 are the purchase orders. It is not in dispute that every purchase order is signed either by P.Selvaraj or P.Mallikarjunan. The purchase orders have emanated from the 1st defendant firm with the signature of the retired partners, namely P.Selvaraj or P.Mallikarjunan. These purchase orders are addressed to the plaintiff. When it is admitted by plaintiff that purchase orders were placed through Arsan Traders or Arsan Chemical Corporation run by the husband of Umarani, there is no necessity to draw the purchase order addressed to the plaintiff. When the evidence of 1st defendant is that a substantial amount has been siphoned off to the collaborators namely the erstwhile partners of 1st defendant firm and the Proprietor of Nikhil Transports to take commission for the goods supplied by various manufacturers, this Court finds force in the arguments of learned Senior Counsel for the appellants that the purchase orders alone will not have any evidentiary value, as it is possible for the willing erstwhile partners of the 1st defendant to collude with the plaintiff for making a huge claim against the 1st defendant when they were made to retire after a serious dispute.
Page 40 of 63 https://www.mhc.tn.gov.in/judis A.S.No.965 of 2015 25.15.Next document is Ex.A11, copy of sale invoices of plaintiff. The sale invoices under Ex.A11 series shows that several invoices have been prepared by the plaintiff from 28.01.2006 to 16th December, 2006. These invoices issued in the name of 1st defendant may be a piece of evidence to show that the goods were sold by plaintiff to the 1 st defendant. First of all, we have seen the evidence of P.W.1 to the effect that the plaintiff have obtained the consignee copy of lorry receipts from the transport company and marked them in this case. Ex.A11 series of sales invoices issued by plaintiff are to prove the actual sale. The sale invoices appears to have been issued by plaintiff. We have seen that there are no supporting documents to prove transportation upto March, 2006. The lorry receipts produced by the plaintiff under Ex.A9 series are from 04.04.2006. However, the sale invoices show the sale effected from 28.01.2006. Though the sale invoices under Ex.A11 series show sales made on 03.07.2006, 14.07.2006, 25.07.2006 and 31.07.2006, corresponding lorry receipts are not produced by the plaintiff. Document Ex.A11 series tallies with the accounts marked by the plaintiff as Ex.A3. The case of the plaintiff is that the sale invoices Page 41 of 63 https://www.mhc.tn.gov.in/judis A.S.No.965 of 2015 show the sale as per the purchase orders issued by the 1st defendant. When purchase orders clearly reveal the fraudulent attitude of the husbands of partners of plaintiff, the sale invoices alone will not prove the actual supply of goods, especially when the sale invoices can be easily prepared.
25.16.Ex.A12 are the receipts. Though the documents are shown as copies of delivery bills, Ex.A12 would only show the receipt of freight charges, transport charges from plaintiff for the delivery of goods through their transport vehicle. It is to be pointed out that the transport charges for the goods supplied was collected by Nikhil Transports. Therefore, Nikhil Transports was the one who was doing business even under the name Arsan Transports and the connection between Arsan Traders, Arsan Chemical Corporation, Nikhil Transports, Nikhil Traders stands proved by Ex.A12 series.
25.17.The case of the plaintiff is that the sale invoices are also supported by Ex.A13, the Returns submitted by the plaintiff. Ex.A13 are the Returns submitted by the plaintiff firm for the sale. The documents Page 42 of 63 https://www.mhc.tn.gov.in/judis A.S.No.965 of 2015 under Ex.A13 also show that the plaintiff has actually paid Excise Duty for all the invoices including the invoices under which the goods were allegedly sold to the 1st defendant firm. With the attitude of retired partners of 1 st defendant firm and the plaintiff, this Court is unable to believe every document on its face. The Excise Returns under Ex.A13, of course, shows payment of corresponding Excise Duty towards the alleged sale under Ex.A11. However, it is admitted by the plaintiff that defendants have not furnished 'C' Forms for the period from April, 2006. The issue regarding 'C' Forms was raised only after the filing of the suit. After finding that the 1st defendant has failed to furnish 'C' Forms to cover the disputed suit transactions, a criminal complaint was lodged by the plaintiff against the defendants which was taken on file in C.C.No.45 of 2014 by the learned Judicial Magistrate No.II, Puducherry.
25.18.Learned counsel for the respondent relied upon Ex.A14 which is also ledger accounts maintained by the 1st defendant firm for all the transactions between the plaintiff and the 1st defendant. Ex.A14, of course, are the statement of accounts that emanated from the 1st defendant's Page 43 of 63 https://www.mhc.tn.gov.in/judis A.S.No.965 of 2015 computer as certified by one of the partners of 1st defendant. During the pendency of suit before the trial Court, the plaintiff filed an application to call for the document and pursuant to the direction of the trial Court, Ex.A14 seems to have been produced and marked through P.W.1. This document normally would have been a reliable document to prove the suit transaction and the liability of 1st defendant. This Court may lead to a finding that Ex.A14 is a clinching document to prove the liability of 1st defendant as seen from the accounts maintained by the 1st defendant. Except a contention that the 1st defendant has no possible explanation to deny Ex.A14, there is no specific denial by the plaintiff, when a technical objection is raised regarding admissibility of the document. Though the document Ex.A14 is produced by defendant pursuant to notice, the genuineness of ledger is objected and no steps were taken by plaintiff to establish the admissibility of the document in terms of Section 65B of Evidence Act, particularly Sub-Section (2) of Section 65B.
25.19.Learned counsel for the respondent relied upon the document under Ex.A15 which is the Form-C declaration. Surprisingly, this document Page 44 of 63 https://www.mhc.tn.gov.in/judis A.S.No.965 of 2015 was issued by P.Selvaraj, the erstwhile partner of 1st defendant on behalf of 1st defendant. Quite surprisingly, on the backside of Ex.A15, Selvaraj has signed below the endorsement showing every sale from 28.01.2006 to 01.03.2006. We have no corresponding lorry receipts to prove the transportation or delivery of goods from 28.01.2006 to 01.03.2006. Therefore, Ex.A15 cannot be of much credence, as it is signed by Selvaraj. Assuming that Ex.A15 supports the actual sale, there is no quarrel that the appellant has paid substantial amount namely more than Rs.50 Lakhs by Demand Drafts or cheques issued by P.Selvaraj or P.Mallikarjunan to plaintiff for the alleged supplies.
25.20.Learned counsel appearing for the respondent relied upon the petition filed in Crl.O.P.No.14993 of 2014 by 1st defendant marked along with the notice issued by this Court to the plaintiff as Ex.A16. In the petition, the appellant has stated about the pendency of suit filed by the plaintiff for recovery based on the invoices for supply of goods to 1st defendant. In the petition to quash the criminal case, the appellant has stated as follows :
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https://www.mhc.tn.gov.in/judis A.S.No.965 of 2015 “6. ... In the said invoices, it is clearly mentioned that it is necessary to send Sales tax Declaration Form C immediately, otherwise all taxes will be debited to the purchasers account. In view of such clause, filing of complaint alleging commission of offence in respect of amount of C Form is a clear abuse of the process of the Court and the proceedings before the learned Judicial Magistrate No.II are liable to be quashed.” 25.21.From this, it is contended by the counsel appearing for the respondent that the appellant has admitted the invoices and the sales effected as per the invoices. The tendency of every accused in quash petition under Section 482 Cr.P.C. is to project that no offence is made out on the facts alleged in the complaint or that it is a pure civil dispute. It is only in this peculiar context, the defendant have stated that it is a civil liability even if the accused fails to send sales tax declaration in Form-C. However, in this case, when supply itself is disputed by appellants, the appellants cannot be compelled to furnish sales declaration in Form-C so that the respondent will now get proof for actual supply. In the context in which the petition under Section 482 Cr.P.C. was filed, this Court is unable to find an admission and Page 46 of 63 https://www.mhc.tn.gov.in/judis A.S.No.965 of 2015 we also agree with the explanation offered by the learned Senior Counsel while referring to the document Ex.A16.
25.22.Ex.A17 is the copy of Income Tax Returns stated to have been submitted by 1st defendant for the Assessment Year 2007-2008. This document might have been obtained from the Auditor of the 1st defendant or from the erstwhile partners of 1st defendant firm. However, though the 1st defendant has accounted several amounts by showing them as expenditure/liability, it is seen that the big amounts towards the current account of P.Selvaraj and P.Mallikarjunan, Arsan Chemical Corporation, Arsan Transports, Nikhil Transports and Veena Texchem Industries are shown as “disputed amounts-erstwhile partners”. Therefore, it cannot be said that the 1st defendant has admitted its liability under the alleged sale of goods supplied by plaintiff to the 1st defendant.
26.Learned counsel appearing for the respondent focussed much on Page 47 of 63 https://www.mhc.tn.gov.in/judis A.S.No.965 of 2015 the document Ex.B1 series. Ex.B1 are the series of invoices which appears to be the exact copies of Ex.A11 invoices. It is the case of appellants that these documents were also available in the 1 st defendant firm as part of records left by retired partners. Sum and substance, the argument is that the retiring partners have implanted several documents and records to give true colour to the false claim. Learned Senior Counsel appearing for the appellants pointed out the document Ex.B1 series were marked to show that only in seven invoices the seal of the security people in defendant firm is available. The sale invoices which are supposed to be handed over by the transporter along with consignee copy of lorry receipt were not actually delivered to the persons who were in-charge of the godown or the security.
This Court cannot ignore the submission of the learned Senior Counsel appearing for the appellants.
27.With the peculiar facts of this case as found from the pleadings and documents, this Court has seen that the plaintiff has filed documents either authored, signed or prepared either by the plaintiff or by the husbands of partners of plaintiff, who are also the erstwhile partners of 1 st defendant. Page 48 of 63 https://www.mhc.tn.gov.in/judis A.S.No.965 of 2015 Admittedly, the partners of the plaintiff firm are not examined to avoid embarrassment. This Court is convinced that the husbands of partners of plaintiff firm have caused substantial loss to the 1st defendant for their personal gain. When the partners of the plaintiff were residing in the quarters provided for the partners of 1st defendant, which are just within the business premises of 1st defendant, this Court is convinced that the plaintiff could have easily fabricated documents. In the peculiar facts and circumstances of this case, the plaintiff ought to have examined the authors/signatories of documents and let in evidence to prove actual supply of goods/delivery. When there is no 'C' Form furnished by 1st defendant who disputes the suit transaction and none of the lorry receipts or the invoices contains the verification seal of any of the check-posts, which is not just one and more than 160 lorry receipts that were not subject to any verification by the check-post, especially when all the transactions are interstate transactions, the case of the defendants appears to be more probable.
28.Learned counsel appearing for the respondent submitted that the case pleaded by the defendants in the written statement is that the goods Page 49 of 63 https://www.mhc.tn.gov.in/judis A.S.No.965 of 2015 were not supplied in conformity with the purchase orders and that the goods supplied were of sub-standard quality which resulted in excess charges. Since the 1st defendant contended that there was a huge cut upto 72% in the profit margin of 1st defendant firm on account of purchasing the products from plaintiff, counsel for respondent submitted that the 1st defendant has indirectly admitted the case of plaintiff regarding actual supply and delivery of materials. This Court has carefully examined the pleadings. The appellant has cautiously stated that the said alternative submission is without prejudice to the main submission that the documents, lorry invoices, and other documents had been fabricated by the husbands of partners of plaintiff firm, namely, P.Selvaraj and P.Mallikarjunan in collusion with the husband of another partner of plaintiff firm, namely Santhanam.
29.Learned counsel appearing for the respondent also submitted that the documents filed by the plaintiff under Ex.A13 is corroborated by Ex.A14. As pointed out already, the document Ex.A14 may not be a genuine account prepared based on the actual delivery effected at the premises of 1st defendant. This Court has also considered Ex.B1 series and Page 50 of 63 https://www.mhc.tn.gov.in/judis A.S.No.965 of 2015 the case of 1st defendant is more probable and acceptable. There could have been clinching documents and other evidence to prove the actual delivery. Most of the documents filed by the plaintiff are self-serving and it is possible for the insiders namely erstwhile partners of 1st defendant to manipulate, create and fabricate documents, as they were in full control of affairs of the 1st defendant firm. When that is the situation, having regard to the fact that none of the lorry receipts contains the seal of check-post or the interception of Central Excise Department or Commercial Tax authorities, this Court is unable to accept the case of plaintiff regarding physical supply/delivery of goods at the 1st defendant's premises.
30.Learned counsel appearing for the respondent/plaintiff referred to the document Ex.A6 and submitted that there is no reply to this letter by 1st defendant. As seen from the sequence of events and documents, the husbands of partners of plaintiff firm retired in February, 2007. The discrepancy between the documents Ex.A4 and Ex.A3 as pointed out earlier has not been explained by the learned counsel appearing for the respondent. The suit transaction is for the period from January, 2006 to December, 2006. Page 51 of 63 https://www.mhc.tn.gov.in/judis A.S.No.965 of 2015 Even before March, 2006, goods worth Rs.19 Lakhs have been supplied by plaintiff to the 1st defendant. In the normal course of business transaction between the plaintiff and the 1st defendant, there must have been demand immediately after every supply in February and March, 2006, reminding the 1st defendant that they are liable to pay a huge amount which is due even by the end of March, 2006. Between April, 2006 to December, 2006, absolutely there is no correspondence or demand letter from the plaintiff even though a huge amount became due. If there was actual sale and goods worth more than Rs.76 Lakhs had been supplied over and above the small amounts occasionally paid by the plaintiff, there would have been exchange of communication at least to confirm actual delivery then and there. The plaintiff has commenced its business only in 2005 and started supplying from January, 2006. How could a huge amount be allowed to accumulate ? How could any one afford ? The husbands of partners of plaintiff firm have paid substantial amount as partners of 1st defendant to their own firm by way of commission. Since there was no one to check the managing partners of 1st defendant, they have gone to the extent of placing orders through a stranger, even though the erstwhile partners of 1st defendant who placed Page 52 of 63 https://www.mhc.tn.gov.in/judis A.S.No.965 of 2015 orders are none other than the husbands of partners of plaintiff firm who are supposed to see each other every day.
31.Learned counsel appearing for the respondent relied upon a few judgments for the proposition that every act of a partner on behalf of firm under implied authority is binding on the firm. In Maganti Raja Babu v. Vijaya Bank and others reported in AIR 2010 Andhra Pradesh 54, a Division Bench of Andhra Pradesh High Court has held that the principle of extension of acknowledgment by a partner on behalf of the firm under implied authority can extend even to any other profit making business.
32.Learned counsel appearing for the respondent relied upon a few judgments for the proposition that Ex.A3 is admissible in evidence under Section 34 of the Indian Evidence Act and that there are substantial evidence to corroborate the statement of accounts and that the trial Court has accepted the evidence in favour of plaintiff to hold that the statement of accounts have been proved.
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33.This Court need not consider the judgments which are cited before this Court by the learned counsel for the respondent, as the facts in the case are peculiar and different. The law as has been reiterated by the Hon'ble Supreme Court in Chandradhar Goswami and others v. The Gauhati Bank Ltd. reported in AIR 1967 SCC Pg.1058 is that, unless there are further evidence to prove payment of money which may appear in the books of account, no person can be charged with liability merely on the basis of entries in the books of account. In other words, entires alone under Section 34 of the Indian Evidence Act would not be sufficient to charge any person with liability. It is also settled that person who prepares the account should be examined to prove that the accounts were prepared in the regular course of business. When a document is relied upon as a book of account, it should be established that it is foolproof and supported by corresponding entries in all other documents supposed to be maintained. In the present case, the document Ex.A3 is found inadmissible by this Court earlier in view of the specific provisions of Section 65B of Indian Evidence Act. All the documents are not foolproof, in the sense, this Court is not in a position to Page 54 of 63 https://www.mhc.tn.gov.in/judis A.S.No.965 of 2015 accept every document on the face of it, in view of the peculiar circumstances and the specific plea of defendants about the possible manipulation and fabrication of records by the retiring partners of 1 st defendant firm who were actually in-charge of day-to-day affairs of the firm during the relevant period.
34.Learned counsel appearing for the respondent relied upon a judgment of a Division Bench of this Court in the case of R.Subramanian v. ICICI Bank Ltd. and others reported in 2019 (2) CTC Pg.1. This Court, in the said case relating to the statement of accounts produced by the Bank along with the certificate under Section 4 of Bankers' Books Evidence Act, 1891, held that production of certificate under Section 65B can be relaxed. That judgment has no application to the present facts.
35.Every other judgment relied upon by the learned counsel appearing for the respondent cannot be applied to the facts for the reasons stated above.
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36.This Court, considering the overall circumstances and the evidence both oral and documentary, is of the view that the case of appellants appears to be more probable and the plaintiff has failed to prove the transaction with acceptable evidence to the satisfaction of this Court. Actual supply or delivery of goods is not substantiated in this case. Therefore, Point Nos.(i) and (ii) are answered in favour of the appellants to hold that the plaintiff has not proved actual supply of Textile Auxiliaries to the 1 st defendant as pleaded by them and that the documents produced on the side of plaintiff in support of the suit claim, cannot be held upon by this Court. Point No.(iii) :
37.The trial Court failed to appreciate the specific case pleaded by the 1st defendant and the admitted facts. The trial Court has taken for granted every document filed by the plaintiff as a document which is issued/acknowledged in the course of business. The trial Court has framed unnecessary issues to be misled. The trial Court, considering the fact that document Ex.B1 tallies with Ex.A11, came to the conclusion that Ex.B1 is sufficient to dislodge the case of defendants disputing the entire transaction. Page 56 of 63 https://www.mhc.tn.gov.in/judis A.S.No.965 of 2015 The document Ex.B1 was marked by defendants through P.W.1 just to point out that the delivery seal is not available in any document except a few and that therefore, Ex.A11 cannot be accepted as proof for delivery or to prove every transaction referred to in the invoices. The trial Court further observed that the defendants failed to produce certain documents which are called for by plaintiff and that therefore, adverse inference should be drawn against the defendants. Absolutely, there is no discussion by the trial Court as to the nature of documents that are sought to be produced and the relevance of the documents in relation to the suit claim. In the present case, every document that is brought out or surfaced is authored by the erstwhile partners of 1st defendant, who are none other than the husbands of partners of plaintiff firm, and therefore, the trial Court ought to have focused all the attending circumstances while considering documents. This Court finds that the trial Court has not considered the possibility of erstwhile partners of 1 st defendant fabricating the documents to suit the plaintiff's case, as they are the beneficiaries of the suit claim. The trial Court failed to see want of proper explanation, absence of check-post endorsements in any of the invoices. Page 57 of 63 https://www.mhc.tn.gov.in/judis A.S.No.965 of 2015
38.The trial Court observed that, once accounts and invoices produced by the plaintiff matches with the accounts produced by the defendants, defendants cannot have a locus standi to challenge the same. First of all, the accounts under Ex.A3 is not admissible. The documents Ex.A11 and Ex.B1 series are not supported by documents to prove delivery of materials at the 1st defendant's premises. It is in these circumstances, the delivery lorry receipts and the documents filed by the plaintiff without any endorsement or the seal of check-post, ought to have been considered by the trial Court before jumping into conclusions. The trial Court has failed to consider the conduct of the retired partners who are the husbands of partners of plaintiff firm, especially their fraudulent conduct to deceive the partnership firm in which they were partners by placing every order through a broker, which is another firm or organisation in which they themselves are partners, just to escalate the bill and to make an illegal profit to the prejudice of the 1st defendant firm. When the conduct of erstwhile partners are that bad, the suit claim cannot be allowed unless it is established with foolproof documents.
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39.The plaintiff has examined only P.W.1, the Manager, who is the author of all the invoices and other documents relied upon by the plaintiff. However, his evidence about the transport through Nikhil Transports would show how artificial it is. The evidence of P.W.1 did not even tally with the documents filed by the plaintiff. The conclusion of the trial Court that the suit transaction is proved by plaintiff on the basis of documents filed by plaintiff, indicates total non-application of mind and the probabilities. The trial Court believed Ex.B1 as a document to corroborate Ex.A11, when Ex.B1 was produced just for a different purpose and the trial Court has never focussed its attention to the real issues and absence of explanations for all the odds.
40.The trial Court then observed that the defendants should not have allowed Selvaraj and Mallikarjunan to retire from the firm, if they have really fabricated the accounts and records to misappropriate the funds of 1 st defendant. Here, the fraud alleged is not by the plaintiff, but by the partners of the 1st defendant to help the plaintiff to get a decree for a substantial amount. The suit claim was after retirement of husbands of partners of Page 59 of 63 https://www.mhc.tn.gov.in/judis A.S.No.965 of 2015 plaintiff firm. Therefore, the observations and findings of the trial Court are only perverse and this Court is unable to sustain any of the findings of the trial Court. Hence, this Court is of the view that the judgment of the trial Court is vitiated for the failure to focus on the real issues and for erroneous appreciation of documents, ignoring the peculiar case where defendants bona fidely suspect the genuineness of suit transaction and the documents relied upon by the plaintiff. Point No.(iii) is answered in favour of appellants/defendants.
41.Therefore, for all the reasons stated above, this Court is inclined to set aside the judgment and decree of the trial Court. In fine, this Appeal Suit is allowed and the judgment and decree of the trial Court, dated 27.04.2015, in O.S.No.112 of 2008, is set aside and the suit stands dismissed. No order as to costs. Consequently, connected miscellaneous petition is closed.
(S.S.S.R., J.) (A.A.N., J.)
15.06.2023
mkn
Internet : Yes
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A.S.No.965 of 2015
Index : Yes / No
To
1.The III Additional District Judge,
Puducherry.
2.The Section Officer, | with a direction to send back the
VR Section, High Court, | original records to the Court below
Chennai. | forthwith
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A.S.No.965 of 2015
S.S. SUNDAR, J.
and
A.A.NAKKIRAN, J.
mkn
Pre-Delivery Judgment in
A.S.No.965 of 2015
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A.S.No.965 of 2015
15.06.2023
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