Delhi District Court
Purple Paper Products Pvt. Ltd vs Narsingh Dass And Co on 28 November, 2024
IN THE COURT OF MS. ILLA RAWAT :
DISTRICT JUDGE COMMERCIAL COURT-03: (CENTRAL) :
TIS HAZARI COURT (EXTN. BLOCK) : DELHI.
CS (COMM) No. 2050/22
CNR No. DLCT010121302022
In the matter of :-
Narsingh Dass & Co.
Through its Special Power of Attorney
Sh. Narenderr Kumar Deswal
Regd. & Mkt. Office,
3980/9, Chawri Bazar,
Delhi-110006. ..........Plaintiff
Versus
Purple Paper Products Pvt. Ltd.
Through its Managing Director
205, Jain Bhawan
18/12, W.E.A. Karol Bagh, New Delhi-110005
Also at:-
Plot No.560, Sector-8
I.M.T. Manesar,
Gurugram (West), Haryana
Also at:-
619/69 Chattarpur Village,
New Delhi-110074 .......Defendant
AND
CS (COMM) No.2050/2022 & COUNTER CLAIM NO. 5/2023 Pg. 1 / 54
Digitally signed
ILLA by ILLA RAWAT
Date:
RAWAT 2024.11.28
16:56:48 +0530
Counter Claim No. 5/2023
CNR No. DLCT010019732023
In the matter of :-
Purple Paper Products Pvt. Ltd.
At : N-2/9, Jacranda Marg,
DLF City, Phase-II,
Gurugram-122002
Through its Authorized Representative
Mohd.Zeyaul Haque Khan .......Claimant
Versus
Narsingh Dass & Co.
Partnership Firm
Through its Partners
At : 3980/9, Chawri Bazar,
Delhi-110006. ..........Respondent
Date of Institution : 25.08.2022 (Suit)
06.02.2023 (Counter claim)
Judgment reserved on : 19.11.2024
Judgment pronounced : 28.11.2024
SUIT FOR RECOVERY OF RS.1,25,83,851/-
AND
COUNTER CLAIM FOR RS.1,27,07,975/-
JUDGMENT
1. The present suit has been filed by the Plaintiff for CS (COMM) No.2050/2022 & COUNTER CLAIM NO. 5/2023 Pg. 2 / 54 Digitally signed ILLA by ILLA RAWAT Date:
RAWAT 2024.11.28 16:56:50 +0530 recovery of Rs.1,25,83,851/- from the defendant.
2. Briefly stated facts of the case as averred in the plaint are that the plaintiff is a reputed paper merchant firm. The present suit has been filed by plaintiff through its Special Attorney Sh. Narender Kumar Deswal who is stated to have been authorized by Sh. Ram Awtar Gupta, one of the partners of plaintiff, by virtue of a Power of Attorney.
3. The defendant is stated to be a registered private limited company and was one of the customers of the plaintiff. The plaintiff and defendant were having business transactions with each other since 13.03.2003. It is averred in the plaint that the orders were placed by defendant at the office of plaintiff at Chawri Bazar through its Director Prashant Bhikhan and sometimes through its officials including Md. Zeyal Haque Khan. On many occasions telephonic purchase orders were also placed for supply of paper. The plaintiff firm supplied the ordered goods on time and to the satisfaction of defendant and raised invoices against such supplies. The defendant made payment sometimes bill wise and at other times made part payment to plaintiff. Thus an outstanding amount of Rs.80,62,890/- became due and payable from defendant to plaintiff which the defendant was liable to pay alongwith interest @ 24% p.a. w.e.f. the due date of each pending bill as per terms so printed on each invoice.
4. The plaintiff has alleged that after repeated requests defendant issued cheques bearing no.000786 dated 10.06.2019, 000787 dated 11.06.2019 and 000788 dated 12.06.2019 for Rs.20,17,560/-, Rs.29,76,451/- and Rs.30,68,879/-, totaling to CS (COMM) No.2050/2022 & COUNTER CLAIM NO. 5/2023 Pg. 3 / 54 Digitally signed ILLA by ILLA RAWAT Date:
RAWAT 2024.11.28 16:56:44 +0530 Rs.80,62,890/-, all drawn on Yes Bank Ltd., Fortune Global Arcade, Mehrauli Gurgaon Road, Sikanderpur, Gurugram, Haryana-122002 which when presented by plaintiff with its bankers HDFC Bank Ltd., 73-75/1, 60/1, Chawri Bazar, Delhi-110006 for encashment on 18.06.2019, 19.06.2019 and 20.06.2019 respectively, were returned back dishonoured with reasons "Return as per customer/Rm mail request, as per CTS alteration other then date is not allowed, Return as per customer/Rm mail request, respectively". Thereafter the defendant handed over another cheque bearing no.640571 dated 25.06.2019 drawn on its bank in complete discharge of its principal liability with assurance that the said cheque would be duly honoured. Upon assurance of the defendant, plaintiff presented cheque no.640571 in its bank for encashment on 26.06.2019, however, the said cheque was also returned back dishonoured with reasons "funds insufficient".
5. The plaintiff has averred that it issued a legal demand notice dated 12.07.2019 to defendant in respect of dishonoured cheque bearing no.640571. In response thereto defendant wrote an email dated 26.07.2019 assuring to work out some payment plan to settle the pending bills for future smooth functioning of business between the parties. The plaintiff too wrote email dated 20.08.2019 to defendant and provided a schedule to resolve the dispute but defendant did not respond positively. In such a situation, plaintiff had to file a complaint U/s 138 of NI Act against defendant and its directors at Tis Hazari Court.
6. The plaintiff has then averred that being a member CS (COMM) No.2050/2022 & COUNTER CLAIM NO. 5/2023 Pg. 4 / 54 Digitally signed ILLA by ILLA RAWAT Date:
RAWAT 2024.11.28 16:56:48 +0530 of Paper Merchant Association (Regd.) it brought these facts to the notice of Association where after the General Secretary of the Association prevailed upon defendant to clear the legitimate amount outstanding towards plaintiff within 10 days of letter dated 27.02.2020. Despite having received the said letter of demand, defendant failed to pay the outstanding amount to the plaintiff thus compelling plaintiff to file a claim with the arbitrator appointed by the Paper Merchant Association (Regd.) in terms of Clause 11 printed on each invoice so raised in the name of defendant against supply of goods made to it. The said arbitration proceedings were challenged by the defendant by filing a petition U/s 14 of Arbitration & Conciliation Act, 1996 (hereinafter referred to as A&C Act). The petition bearing OMP (I) (COMM) 4/2021 titled as "Purple Paper Products Pvt. Ltd. vs. Narsingh Dass & Co. & Anr.", was allowed by then DJ (Commercial), Central Tis Hazari vide order dated 10.03.2022 inter-alia accepting the challenge to the arbitration proceedings by the defendant on the ground that there did not exist any arbitration proceedings between the parties. Accordingly, the mandate of the arbitrator Sh. Satya Narayan Gupta was terminated.
7. The plaintiff has further averred that it initiated pre- institution mediation proceedings with Central District Legal Services Authority on 18.05.2022. The defendant failed to appear and join mediation proceedings despite service of notices and hence a non-starter report dated 16.08.2022 was issued. Thus aggrieved by the acts of the defendant, plaintiff has filed the present suit praying for a decree in sum of Rs.1,25,83,851.00 CS (COMM) No.2050/2022 & COUNTER CLAIM NO. 5/2023 Pg. 5 / 54 Digitally signed ILLA by ILLA RAWAT Date:
RAWAT 2024.11.28 16:56:46 +0530 (Rs.80,62,890/- towards the principal outstanding and Rs.45,20,961/- towards interest @ 18% p.a. w.e.f. 28.06.2019 to 10.08.2022).
8. The defendant has contested the suit by filing a detailed written statement. The maintainability of plaintiff's suit has been challenged by defendant on several grounds. Firstly, it is claimed that the suit of plaintiff is barred by resjudicata since the same dispute was referred for arbitration by invoking the arbitration clause as per Clause 11 printed on each invoice issued by plaintiff against the defendant. The said proceedings were contested by defendant and hence second suit filed by plaintiff on same cause of action for the same amount between the same parties is barred under the principle of res judicata.
9. The next objection raised by defendant is that the plaintiff has filed the present suit without any cause of action. The documents relied upon by plaintiff are not correct and do not bring out the correct factual position. The defendant has also challenged the maintainability of the suit filed by plaintiff on the ground of limitation. It is claimed that the plaintiff's suit pertains to alleged pending invoices from 07.01.2019 to 26.04.2019 whereas the present suit has been filed on 23.08.2022, beyond the stipulated period of limitation and is hence barred by limitation.
10. The defendant has then given its own version of the factual matrix. While admitting that there had been business transactions between the parties, it is alleged that defendant suffered huge losses/damages due to supply of substandard, defective, inferior quality and damaged goods/raw material (raw CS (COMM) No.2050/2022 & COUNTER CLAIM NO. 5/2023 Pg. 6 / 54 Digitally signed ILLA by ILLA RAWAT Date:
RAWAT 2024.11.28 16:56:46 +0530 paper) by the plaintiff. The fact that material supplied by plaintiff was defective/damaged was duly informed by defendant to the plaintiff, orally, telephonically as well as through written communication i.e. vide letter dated 09.10.2018 and 16.04.2019 alongwith details of specific invoices against which defected material had been supplied alongwith quantified detail of losses suffered by defendant due to supply of damage/defective raw material. As 40-50% of the material supplied vide specified invoices was damaged, it adversely effected the production by defendant as the same was reduced by 60% thereby causing substantial loss of business to the defendant.
11. The defendant has alleged that the factum of supply of defective raw material was duly acknowledged by plaintiff and that defendant was assured that matter would be resolved at the earliest over telephonic conversations and meetings held between the parties and also by way of written communications from plaintiff vide letter/reply dated 25.10.2018 and 07.05.2019 in reply to defendant's letter dated 09.10.2018 and 16.04.2019 respectively. It is claimed that plaintiff had already received excess payment of Rs.32,58,982/- from defendant against the defective material supplied to the defendant and that this fact had been duly acknowledged by the plaintiff. It is alleged that despite assuring that excess payment of Rs.32,58,982/- would be adjusted in the invoices raised by plaintiff against future purchase/supply, plaintiff kept issuing invoices for further transactions without any adjustment/concession/discount in lieu of excess payment received by it and thereby created a huge fictitious outstanding amount in its books of account against the CS (COMM) No.2050/2022 & COUNTER CLAIM NO. 5/2023 Pg. 7 / 54 Digitally signed ILLA by ILLA RAWAT Date:
RAWAT 2024.11.28 16:56:45 +0530 defendant despite having admitted factum of supply of damaged goods to the plaintiff.
12. The defendant has elaborated upon damages suffered by it by stating that Air India was one of its biggest and high value client and that defendant had contract for Rs.2,48,96,150/-, for supply of paper napkins, facial tissues, TP rolls with Air India from 04.10.2018 to 03.10.2020 vide contract no.74002942 dated 26.09.2019. The defendant was to supply the said paper products to Air India at Delhi, Mumbai and Kolkata and 3,39,00,000/- EA @ Rs.20.40/50 EA (i.e. 6,78,000/- units) amounting to Rs.1,38,31,200/- were to be supplied at Delhi only. Due to actual shortage of raw material, on account of supply of defective goods by plaintiff, the defendant was able to supply only 3,22,647 (approx.) units against 6,78,000/- units amounting to Rs.65,82,019/- against the total value of Rs.1,38,31,200/- thereby causing outright loss of Rs.72,49,181/- apart from loss of reputation and future business opportunities. The defendant was further compelled to purchase raw material from other suppliers at much higher rate than the existing market rate as an emergent measure to fulfil the commitments with other clients which caused further loss and damage to the defendant.
13. The defendant has averred that apart from financial loss suffered by it due to deliberate act of omission by plaintiff, it also suffered huge mental agony and loss of reputation built by it over several years. The Air India, one of the defendant's biggest client warned defendant of strict and stringent action for non- compliance of terms of contract for non-supply of paper goods. Emails dated 20.03.2019, 12.09.2019, 11.02.2019, 22.05.2019, CS (COMM) No.2050/2022 & COUNTER CLAIM NO. 5/2023 Pg. 8 / 54 Digitally signed ILLA by ILLA RAWAT Date:
RAWAT 2024.11.28 16:56:47 +0530 29.03.2019, 23.03.2019 and 22.05.2019 have been relied upon in this regard by the defendant. It is stated that ultimately vide email dated 11.03.2020, Air India invoked termination clause of the contract and placed the defendant under notice period of three months on the grounds of erratic and short supply which was on account of supply of defective/damaged raw material by plaintiff which adversely effected the production of defendant company.
Similar adversity was faced by defendant in respect of orders received from several other clients. The defendant has quantified its loss at Rs.72,49,181/- and has alleged that it was purely on account of supply of defective raw material/goods by plaintiff which adversely effected the productions of goods by the defendant.
14. While admitting that cheques bearing no.000786 dated 10.06.2019, 000787 dated 11.06.2019 and 000788 dated 12.06.2019 for Rs.20,17,560/-, Rs.29,76,451/- and Rs.30,68,879/-, totaling to Rs.80,62,890/-, had been issued by it, the defendant claims that said blank cheques were issued by it long time back for security purposes during initial years of business and had not been issued towards any legally enforceable liability of defendant towards plaintiff. There was no agreement/arrangement between plaintiff and defendant that plaintiff would be at liberty to use the cheques in question for clearance of any such outstanding amount of the defendant. It is also denied that defendant had handed over cheque bearing no.640571 dated 25.06.2019 to plaintiff towards discharge of its principal liability. It is claimed that when defendant came to know of misuse of its cheques by plaintiff, it made phone call to CS (COMM) No.2050/2022 & COUNTER CLAIM NO. 5/2023 Pg. 9 / 54 Digitally signed ILLA by ILLA RAWAT Date:
RAWAT 2024.11.28 16:56:52 +0530 plaintiff and requested plaintiff not to misuse the cheques given to the plaintiff as security. Despite such requests, plaintiff misused the cheques issued by defendant to raise a false claim against the defendant.
15. The defendant has further averred that during the period from 2018-2019 disputes arose between plaintiff and defendant with respect of supply of defective material by the plaintiff. The defendant duly informed plaintiff about it through oral as well as written communications dated 09.10.2018 and 16.04.2019. Pursuant thereto plaintiff abruptly and without any prior notice/intimation stopped supply of raw material to defendant after 26.04.2019 which adversely effected and delayed the production of the defendant company. The defendant tried to reach out the partners of the plaintiff firm to resolve any dispute/issue at the end of plaintiff. Consequent to persistent efforts by Sh. Sudarshan Singh, Director of defendant company, a meeting was held between Sh. Sudarshan Singh and Zeyaul Haque Khan from defendant company and Sh. Satya Pal Gupta, partner of plaintiff firm alongwith officials of plaintiff firm on 23.07.2019. In the said meeting, it was agreed that the rates of raw material would be revised and new rates would be given keeping in view excess payment of Rs.32,58,982/- already received by the plaintiff firm. Meeting dated 23.07.2019 was followed by email dated 26.07.2019, sent by defendant to plaintiff conveying the decision taken and conclusion arrived at in the said meeting for smooth functioning of business in future.
The defendant was, however, astonished to receive an email dated 07.08.2019, in response to its email dated 26.07.2019, CS (COMM) No.2050/2022 & COUNTER CLAIM NO. 5/2023 Pg. 10 / 54 Digitally signed ILLA by ILLA RAWAT Date:
RAWAT 2024.11.28 16:56:49 +0530 wherein plaintiff completely retracted from mutual decision taken in meeting held on 23.07.2019.
16. The defendant claims that it always made payment on time to plaintiff for raw material purchased from it and even the payment against invoices specified in letters dated 09.10.2018 and 16.04.2019, though plaintiff had supplied damaged raw material vide said invoices, were made in time except invoice dated 16.02.2019 (NDCO/B3929), 26.02.2019 (NDCO/B4045), 28.03.2019 (NDCO/B4455) and 09.04.2019 (NDCO/C135). It is reiterated that instead of giving adjustment for excess payment of Rs.32,58,982/- and having admitted supply of damaged material, the plaintiff has created a huge outstanding in its books of account against defendant. It is the defendant who is entitled to recover a sum of Rs.1,27,07,957 from the plaintiff i.e. Rs.32,58,982/- towards excess payment, Rs.21,99,812/-
towards interest @ 18% per annum for period from May 2019 till January 2023 against supply of defective material and Rs.72,49,181/- towards loss of business/damages and litigation expenses for which a separate counter claim has been filed.
17. The defendant has also challenged the maintainability of the plaintiff suit on the ground that person authorized to file the suit has not been so authorized by all the partners of the plaintiff firm.
18. On merits, averments made in the plaint have been denied. It is reiterated that defendant suffered huge losses in business and reputation due to supply of defective goods by the plaintiff. It is again denied that defendant had issued three CS (COMM) No.2050/2022 & COUNTER CLAIM NO. 5/2023 Pg. 11 / 54 Digitally signed ILLA by ILLA RAWAT Date:
RAWAT 2024.11.28 16:56:46 +0530 cheques in favour of plaintiff in discharge of his liability or that it had subsequently issued cheque bearing no.640571 dated 25.06.2019 to plaintiff, also towards discharge of its principal liability. Based on facts averred in the written statement, it is prayed that suit of plaintiff be dismissed.
19. Plaintiff has filed replication reiterating averments made in the plaint and denying contra averments made in the written statement. It is admitted that petition U/s 14 of A&C Act bearing no. OMP (I) (COMM) No.4/2021 titled as 'Purple Paper products Pvt. Ltd. Vs. M/s Narsing Dass & Co.' was allowed by the concerned Court vide order/judgment dated 10.03.2022. It is, however, submitted that principle of resjudicata would not be attracted as the arbitration proceedings did not culminate by passing an award on merits. Since the defendant never accepted existence of arbitration clause, it cannot be permitted to take a plea of existence of such a clause at this stage. It is also averred that as per constitution and rules of the Paper Merchant Association (Regd.) Delhi, there has to be an express consent between the parties for referral of matter to arbitration as and when a dispute arises between the member and a non-member. Since defendant, a non-member, did not give consent for settling the matter through arbitration and had specifically denied existence of any arbitration agreement, the defendant cannot be permitted to take a plea of the suit being barred by principle of res judicata.
20. The authority of Mohd. Zeyaul Haque Khan to file written statement on behalf of defendant has been challenged. It is averred that the documents relied upon by the plaintiff are CS (COMM) No.2050/2022 & COUNTER CLAIM NO. 5/2023 Pg. 12 / 54 Digitally signed ILLA by ILLA RAWAT Date:
RAWAT 2024.11.28 16:56:51 +0530 correct and as per the factual position. The objection regarding suit of plaintiff being barred by limitation has also been controverted. It is denied that plaintiff had supplied defective goods to the defendant. It is further denied that defendant had made any oral or written communication to plaintiff regarding supply of alleged defective goods. The defendant's letters dated 09.10.2018 and 16.04.2019 are stated to be forged and fabricated as also are the signatures of Sh. Shivanand Gupta, partner of plaintiff firm thereupon. It is alleged that defendant has forged and fabricated various communications to create some sort of defence to plaintiff's claim and that it had never had any telephonic conversations or meetings with plaintiff regarding alleged defective goods. It is denied that defendant had made excess payment to plaintiff. Rest of the factual averments made in the written statement have also been controverted on merits.
Relying upon and reiterating the averments made in the plaint, it is prayed that suit of plaintiff be decreed.
Counter Claim
21. The counter claimant/defendant has filed a counter claim for recovery of Rs.1,27,07,975/- against the respondent/plaintiff. The counter claim has been filed by claimant through Mohd. Zeyaul Haque Khan.
22. It is averred in the counter claim that claimant and respondent were having business transactions wherein claimant purchased raw material from respondent for producing finished paper products like paper napkin, facial tissue etc. Respondent is stated to be the largest supplier of raw material to the claimant CS (COMM) No.2050/2022 & COUNTER CLAIM NO. 5/2023 Pg. 13 / 54 Digitally signed ILLA by ILLA RAWAT Date:
RAWAT 2024.11.28 16:56:48 +0530 and hence it is claimed that the production of claimant was directly dependent on supply of raw material by the respondent firm. It is further averred that during the period from 2018-19 around 40-50% of raw material supplied by the respondent was found defective/damaged or of no use and that this fact was duly informed by claimant to respondent orally as well as written communications/letters dated 09.10.2018 and 16.04.2019 with details of specific invoices against which the defective material had been supplied alongwith quantified details of loss incurred by the claimant due to supply of damaged/defective raw material.
23. It is further averred that due to supply of defective/damaged raw material by the respondent, production by claimant was adversely effected and due to it claimant was unable to complete orders received from its clients and suffered substantial loss and damage in terms of money and reputation. It is claimed that supply of defective material was duly acknowledged by respondent with assurance to claimant that matter would be resolved at earliest. Pursuant to telephonic conversations and meetings held at the office of claimant and written communication by respondent through letters/reply dated 25.10.2018 and 07.05.2019 claimant was assured that excess payment of Rs.32,58,982/- would be adjusted in the invoices raised against future purchase/supply.
24. It is alleged that despite having received excess payment of Rs.32,58,982/-, against defective material supplied to it by the claimant, respondent kept issuing invoices for further transactions without any adjustments/concessions/discounts in lieu of excess payment and created a huge fictitious outstanding CS (COMM) No.2050/2022 & COUNTER CLAIM NO. 5/2023 Pg. 14 / 54 Digitally signed ILLA by ILLA RAWAT Date:
RAWAT 2024.11.28 16:56:47 +0530 in its books of account against the claimant.
25. It is then averred that claimant was having a contract worth Rs.2,48,96,150/- with Air India, its biggest and high value client, from 04.08.2018 to 03.10.2020 to provide paper napkins, facial tissues, TP rolls etc. Due to acute shortage of raw material on account of supply of defective material by respondent, the claimant was only able to supply 3,22,647/- (approx) units, amounting to Rs.65,82,019/- against 6,78,000/- units, valued at Rs.1,38,31,200/- and suffered outright loss of Rs.72,49,181/- apart from loss of reputation and future business opportunities. Besides it, claimant was also compelled to purchase raw material from other supplier at much higher rate than the existing market rate as an emergent measure to fulfill the commitments with other clients and suffered further loss and damage. The claimant has relied upon emails dated 20.03.2019, 12.02.2019, 11.02.2019, 22.05.2019. 29.03.2019, 23.03.2019 and 23.05.2019 with Air India in this regard. It is alleged that ultimately, vide email dated 11.03.2020, Air India invoked termination clause in respect of Contract no.74002942 and placed the claimant under notice period of three months on the grounds of erratic and short supplies. The termination of said contract is alleged to be directly attributable to supply of defective and damaged raw material supplied by the respondent. It is alleged that despite having knowledge of these facts, respondent filed false and frivolous suit against the claimant wherein it alleged that claimant had handed over blank cheques bearing no.000786, 000787 and 000788 towards discharge of liability of claimant towards the respondent whereas in fact the said cheques had been CS (COMM) No.2050/2022 & COUNTER CLAIM NO. 5/2023 Pg. 15 / 54 Digitally signed ILLA by ILLA RAWAT Date:
RAWAT 2024.11.28 16:56:50 +0530 handed over by claimant to respondent several years ago as security as per prevailing business practice and were never meant for presentation. The respondent also made a false claim that claimant had handed over cheque bearing no.640571 dated 25.06.2019 to it towards discharge of principal liability. It is averred that respondent misused the cheques issued by claimant with pre-mediated mind to initiate false criminal proceedings against the claimant and that when claimant came to know of the alleged misuse of the cheques by respondent, it gave a telephonic call to respondent and requested respondent not to misuse the said cheques despite which respondent proceeded to do so.
26. It is further averred in the counter claim that respondent abruptly and without any prior notice/intimation to claimant stopped supply of raw material to the claimant after 26.04.2019 due to which production of claimant company got further adversely effected. Thereafter claimant reached out to the partner of the respondent firm to resolve existing disputes/issues.
Pursuant to the efforts of Sh. Sudarshan Singh, director fo claimant company, a meeting took place between Sh. Sudarshan Singh alongwith Sh. Zeyaul Haque Khan and Sh. Satyapal Gupta, partner of respondent firm alongwith other officials of respondent firm on 23.07.2019 wherein it was agreed between the parties that rates of raw material would be revised and new rates would be given keeping in view excess payment of Rs.32,58,982/- already received by the respondent. The meeting dated 23.07.2019 was followed by email dated 26.07.2019 sent by claimant to respondent wherein the decision taken and conclusion arrived at in the meeting dated 23.07.2019 was CS (COMM) No.2050/2022 & COUNTER CLAIM NO. 5/2023 Pg. 16 / 54 Digitally signed ILLA by ILLA RAWAT Date:
RAWAT 2024.11.28 16:56:45 +0530 conveyed for smooth functioning of business in future. The claimant was, however, astonished to received email dated 07.08.2019, in reply to its email dated 26.07.2019, wherein respondent completely retracted from mutual decision taken in meeting dated 23.07.2019.
27. It is averred that claimant always made payment for raw material purchased from respondent in time and even made payment against invoices specified in letters dated 09.10.2018 and 16.04.2019, through which damaged raw material was supplied. Only payment in respect of invoices dated 16.02.2019 (NDCO/B3929), 26.02.2019 (NDCO/B4045), 28.03.2019 (NDCO/B4455) and 09.04.2019 (NDCO/C135) was not made.
28. The claimant has thus raised a claim for recovery of Rs.1,27,07,975/- against the respondent i.e. Rs.32,58,982/-
towards excessive payment, Rs.21,99,812/- towards interest @ 18% per annum from May 2019 till January 2023 on excess payment and Rs.72,49,181/- towards loss of business, money, damages and litigation expenses.
29. The respondent has contested the counter claim by filing written statement. Relying upon pleadings in the plaint filed in the main suit i.e. CS (COMM) 2050/2022 titled as 'Narsingh Dass & Co. Vs. Purple Paper Products Pvt. Ltd.', the maintainability of the counter claim has been challenged on the ground that claimant has concealed material fact from the Court and that its claim is based on false and fabricated documents. The counter claim is also challenged on the ground of limitation and want of proper verification.
CS (COMM) No.2050/2022 & COUNTER CLAIM NO. 5/2023 Pg. 17 / 54 Digitally signed ILLA by ILLA RAWAT Date:
RAWAT 2024.11.28 16:56:48 +0530
30. On merits, authority of Sh. Zeyaul Haque Khan to file the counter claim has been challenged. Though it is admitted that there were business transactions between the parties wherein claimant purchase raw material from respondent, it is denied for want of knowledge that claimant used to purchase said material for producing finished paper products like paper napkins, facial tissue etc. or that the production by claimant was dependent on supply of raw material from the respondent firm. It is denied that during the period from 2018-19, around 40-50% of raw material supplied by respondent was found defective/damaged or was of no use to the claimant or that this fact was duly informed by claimant to the respondent orally and through written communications i.e. letters dated 09.10.2018 and 16.04.2019 with details of specific invoices against which the defective material had been supplied with quantified details of loss incurred by claimant due to alleged supply of damaged/defective raw material. It is alleged that letters dated 09.10.2018 and 16.04.2019 are forged and fabricated documents and that signatures of Sh. Shivanand Gupta, then partner of respondent, upon the said documents are forged and fabricated. It is further denied that production of claimant was reduced/effected upto 60% due to supply of defective/damaged raw material by the respondent or that respondent had acknowledged factum of supply of defective raw material in any manner whatsoever. It is denied that any telephonic conversation or meeting was held at the office of respondent or that there were any written communications between the claimant and respondent. The letters/reply dated 25.10.2018, 07.05.2019, 09.10.2018 and CS (COMM) No.2050/2022 & COUNTER CLAIM NO. 5/2023 Pg. 18 / 54 Digitally signed ILLA by ILLA RAWAT Date:
RAWAT 2024.11.28 16:56:52 +0530 16.04.2019 are stated to be forged and fabricated documents. It is further denied that respondent had received any excess payment from the claimant or that it had supplied defective/damaged raw material to claimant thereby causing huge business/financial loss to the claimant or that it had ever assured the respondent that alleged excess amount of Rs.32,58,982/- would be adjusted in invoices raised against future purchase/supply or that respondent kept issuing invoices for future transactions without any adjustment/concessions/discount in lieu of excess payment.
31. The respondent has further denied that Air India was one of the biggest and high value client of the claimant. It is claimed that claimant has forged and fabricated contract no.7402942 dated 26.09.2018 stated to have been given to it by Air India. The emails dated 11.02.2019, 12.02.2019, 20.03.2019, 23.03.2019, 29.03.2019, 22.05.2019 and 23.05.2019 exchanged between claimant and Air India are also stated to be forged and fabricated. It is alleged that claimant is guilty of its own wrong and failed to fulfil its business commitments with its customers and is falsely shifting responsibility onto the respondent. The email dated 11.03.2020 sent to claimant by Air India is also stated to be false and fabricated. It is denied that claimant had suffered loss of business, clients, reputation and damages to the extent of Rs.72,49,181/- on account of supply of defective raw material/goods by respondent. The claimant's assertion that it had handed over blank cheques bearing no.000786, 000787, 000788 and 640571 by way of security, just to maintain business relations between the parties, is also controverted. It is claimed that respondent had issued demand notice U/s 138 of N.I. Act in CS (COMM) No.2050/2022 & COUNTER CLAIM NO. 5/2023 Pg. 19 / 54 Digitally signed ILLA by ILLA RAWAT Date:
RAWAT 2024.11.28 16:56:49 +0530 respect of dishourned cheque bearing no.640571 dated 25.06.2019 drawn on Yes Bank Ltd. for Rs.80,62,890/- and thereafter claimant, through its director and Manager, had meeting with the partner of respondent at respondent's office wherein claimant assured that respondent to clear all its dues subject to terms stated in their email dated 26.07.2019. In response to the same, respondent replied to claimant vide email dated 07.08.2019 which was never replied to by the claimant and thus respondent had no alternative but to sue claimant company alongwith its directors U/s 138 of N.I. Act and subsequently under the provisions of A&C Act. The arbitration proceedings initiated by respondent were, however, challenged by claimant and the mandate of appointed arbitrator was terminated by the concerned Court. It is denied that in meeting was held on 23.07.2019, it was agreed that rates of raw material were to be revised or that new rates would be given keeping in view any excess amount of Rs.32,58,982/- received by the respondent firm. It is claimed that emails placed on record by respondent reveal the correct factual position for they do not find mention of any excess amount as alleged by the claimant. Denying rest of the averments made in the counter claim also on merits, it is prayed that the counter claim filed by the claimant be dismissed.
32. The counter claimant has filed replication reiterating averments made in the claim petition and has denied counter averments made in the written statement filed by the respondent.
33. From the pleadings of parties, following issues were framed in CS (COMM) No. 2050/22:-
1) Whether the suit of plaintiff is barred by res judicata in CS (COMM) No.2050/2022 & COUNTER CLAIM NO. 5/2023 Pg. 20 / 54 Digitally signed ILLA by ILLA RAWAT Date:
RAWAT 2024.11.28 16:56:46 +0530 view of preliminary objection No.1 in the written statement? (OPD)
2) Whether the suit of plaintiff is barred by limitation?
(OPD)
3) Whether the suit of plaintiff is liable to be dismissed for suppression of material facts as detailed in para 6 of preliminary objections to the written statement? (OPD)
4) Whether the plaint has been signed and verified and suit instituted by a duly authorized person? (OPP)
5) Whether plaintiff is entitled to decree of recovery of Rs.80,62,890/- against the defendant, as prayed for?
(OPP)
6) Whether plaintiff is entitled to interest. If yes, at what
rate and for which period? (OPP)
7) Relief.
Simultaneously, following issues were framed in the counter claim bearing no.5/2023:-
1) Whether the counter claim is barred by limitation?
(OPR)
2) Whether the counter claim is bad for proper verification of the counter claim? (OPR)
3) Whether the counter claimant is entitled to decree of recovery of Rs.1,27,07,975/- against the respondent inclusive of excess payment of Rs.32,58,982/- stated to have been received by respondent by counter claimant, as prayed for? (OPCC)
4) Whether counter claimant is entitled to interest. If yes, at what rate and for which period? (OPCC) CS (COMM) No.2050/2022 & COUNTER CLAIM NO. 5/2023 Pg. 21 / 54 Digitally signed ILLA by ILLA RAWAT Date:
RAWAT 2024.11.28 16:56:45 +0530
5) Relief.
34. The plaintiff examined Sh. Narender Kumar Deswal, its AR, to prove its case while defendant examined Md. Zeyaul Haqua Khan, its AR to prove its defence. On 23.08.2024, counsels for parties prayed that since counter claim filed by defendant was directly connected with the main suit and the lis in both the main case and counter claim was between the same parties, evidence recorded in main suit be also read in respect of the counter claim filed by the defendant. Accordingly, common evidence was recorded in both the matters.
35. In order to prove its case, the plaintiff has examined its AR Sh. Narender Kumar Deswal as PW-1. The said witness tendered his affidavit Ex.PW-1/A and relied upon the following documents:-
S.No. Details of documents Exhibit number
1. True copy to copy of registration of the Ex.PW-1/1 (Colly).
plaintiff firm
2. Original SPA dated 12.08.2022 Ex.PW-1/2.
3. Certified copy of pending invoices from Ex.PW-1/3 to 07.01.2019 to 26.04.2019 with office copies Ex.PW-1/44 and some photocopies of consignor's copy respectively.
with acknowledgement and true photocopies of tempo's bills
4. Original cheques bearing nos.000786, Ex.PW-1/45 to 000787, 000788 with cheque return memos Ex.PW-1/51 dated 21.06.2019, 20.06.2019 and 25.06.2019 respectively. and certified copy of cheque bearing no.640571
5. Certified copy of cheque return memo dated Ex.PW-1/52.
27.06.2019 of cheque bearing no.640571
6. Certified copy of office copy of the legal Ex.PW-1/53 to notice dated 12.07.2019, regd. A.D. receipts Ex.PW-1/58 dated 15.07.2019, tracking reports, email respectively. dated 26.07.2019 written by the defendant and CS (COMM) No.2050/2022 & COUNTER CLAIM NO. 5/2023 Pg. 22 / 54 Digitally signed ILLA by ILLA RAWAT Date:
RAWAT 2024.11.28 16:56:51 +0530 email dated 20.08.2019 written by the plaintiff
7. True copy of Statement of Accounts with Ex.PW-1/59 and interest calculation sheet Ex.PW-1/60 respectively.
8. True photocopy of the letter dated 27.02.2020 Ex.PW-1/61.
9. Certified copy of order dated 10.03.2022 Ex.PW-1/62 (colly).
10. Replication filed by the plaintiff Ex.PW-1/63.
11. True photocopy of application under Section Ex.PW-1/64 to 14 of Arbitration and Conciliation Act, 1996 Ex.PW-1/69 and PMA: Constitution and Rules respectively.
12. Original copy of Non-Starter Report dated Ex.PW-1/70 16.08.2022
13. Certificate under Section 65-B of Evidence Ex.PW-1/71.
Act
36. During his cross-examination, the PW1 denied that plaintiff had supplied defective material to the defendant or that defendant had immediately approached Sh. Shivanand Gupta, deceased partner of the plaintiff firm, to take back the defective goods and/or to return the excess amount to the defendant.
37. When put letters dated 25.10.2018 and 07.05.2018, Mark-P and P1 respectively, the PW1 denied that the said letters bore signatures of Sh. Shivanand Gupta. He further denied that vide letter/reply dated 25.10.2018 and 07.05.2018, Sh.Shivanand Gupta had acknowledged that goods supplied by plaintiff were defective.
38. The PW1 admitted that the plaintiff had initiated arbitration proceedings against defendant for recovery of the suit amount and that the defendant had filed reply to plaintiff's claim in the arbitration proceedings. He deposed that defendant had not filed letters, Mark-P and P1, with its reply in the arbitration CS (COMM) No.2050/2022 & COUNTER CLAIM NO. 5/2023 Pg. 23 / 54 Digitally signed ILLA by ILLA RAWAT Date:
RAWAT 2024.11.28 16:56:49 +0530 proceedings nor had it preferred any counter claim in the arbitration proceedings.
39. During his further cross-examination, PW1 deposed that there was another case pending between the parties in the Court of Sh. Sanjeev Kumar Aggarwal, Ld. DJ/CC-01, Central District wherein also he had appeared as a witness on behalf of plaintiff. He clarified that in the said case defendant was a proprietorship concern and not a company. He denied that he had given statement in said case that defendant had filed a counter claim. He volunteered to state that statement, if any, was with respect to said case and not the present case.
40. During his further cross-examination, PW1 termed it correct that Sh. Shivanand Gupta was alive and an active partner of plaintiff firm when the transaction in present case took place between the plaintiff and defendant. After death of Sh.Shivanand Gupta, his son became partner in the plaintiff firm. At the time the transaction in the present case took place, Sh. Abhinav Gupta son of Sh. Shivanand Gupta was actively participating in the business of the firm even though he was not the partner. He termed it correct that presently plaintiff partnership firm had five partners who were all family members/real brothers and that the arbitration proceedings ended without passing of an award. He volunteered to state that copy of the final order has been placed on record. Sh. Shivanand Gupta had all the rights as a partner of the firm to deal with the customers of the firm. Sh. Shivanand Gupta expired in the year 2020. He termed it correct that during the lifetime of Sh. Shivanand Gupta, plaintiff firm had not filed CS (COMM) No.2050/2022 & COUNTER CLAIM NO. 5/2023 Pg. 24 / 54 Digitally signed ILLA by ILLA RAWAT Date:
RAWAT 2024.11.28 16:56:48 +0530 the present case. He volunteered to state that Plaintiff firm had initiated arbitration proceedings as well as a case U/s 138 of N.I. Act. The claim petition in arbitration proceedings was signed by Sh. Satpal Gupta, elder brother of Sh. Shivanand Gupta. The PW1 denied that Sh.Shivanand Gupta never agreed to initiate any kind of legal proceedings against the defendant or that Sh. Shivanand Gupta was well aware that the goods supplied by plaintiff to defendant were defective. He further denied that the proceedings against defendant commenced pursuant to Sh. Abhinav Gupta joining as a partner in the plaintiff firm or that Sh. Abhinav Gupta was acting with malafide intention.
41. When asked about the partnership deed of the plaintiff firm, which was executed upon Sh. Abhinav Gupta becoming a partner of the plaintiff firm, the PW1 stated that he did not have copy of the same. He admitted that plaintiff firm is dealing with paper and that the present case was also with respect to supply of paper material by the plaintiff firm to the defendant. He denied that defendant had informed the plaintiff firm on 09.10.2018 and 16.04.2019 regarding the supply of defective material or that in response to defendant's complaint, Sh.Shivanand Gupta issued letters Mark-P and P1. He further denied that Sh. Shivanand Gupta had assured the defendant company that it would be compensated for defective goods or that talks of settlement were going on between the plaintiff firm and defendant company when Sh. Shivanand Gupta had expired.
42. During his further cross-examination, PW1 deposed that no meeting took place between Sh. Shivanand Gupta and representatives of the defendant in the year 2018-19 with respect CS (COMM) No.2050/2022 & COUNTER CLAIM NO. 5/2023 Pg. 25 / 54 Digitally signed ILLA by ILLA RAWAT Date:
RAWAT 2024.11.28 16:56:45 +0530 to transactions in the present case. The PW1 explained his role in the working of plaintiff firm by stating that he was looking after accounts in the plaintiff firm. He was present in all the meetings of Sh. Shivanand Gupta. The PW1 denied that a meeting had taken place between Sh. Shivanand Gupta and Sh. Zia-ul-Haq Khan, Sh. Sudarshan and Sh. Prashant Bhikhane i.e. representatives of the defendant in the year 2018-19 with respect to transactions in the present case. He volunteered to state that said meeting had taken place between Sh. Satpal Gupta and the representatives of defendant and that he (PW1) was also present in said meeting but not Sh. Shivanand Gupta. The meeting between Sh. Satpal Gupta and the representatives of defendant was arranged so that defendant could work out the manner in which due amount was to be paid to the plaintiff. The PW1 denied that the meeting was called by representatives of defendant to resolve their claim of defective goods or that in said meeting Sh. Shivanand Gupta was present or that he had assured that the defendant would be compensated for defective goods supplied to it. The PW1 denied that plaintiff was not entitled to recover any sum of money from the defendant.
43. No other witness was examined on behalf of plaintiff.
44. In order to prove its case, defendant has examined its AR Md. Zeyaul Haque Khan as DW-1. The said witness tendered his affidavit Ex.DW-1/A and relied upon the following documents:-
S.No. Details of documents Exhibit number
1. Photocopy of certificate of Incorporation Mark DW1/A CS (COMM) No.2050/2022 & COUNTER CLAIM NO. 5/2023 Pg. 26 / 54 Digitally signed ILLA by ILLA RAWAT Date:
RAWAT 2024.11.28 16:56:44 +0530 of Purple Paper Products Pvt. Ltd. has been filed in the counter claim
2. Original Board Resolution dated Ex. DW1/2.
30.01.20223
3. Photocopy of letter dated 09.10.2018 Ex. DW1/3 (colly).
4. Office copies of invoices dated Ex. DW1/4 to Ex.
18.01.2018, 07.02.2018, 27.02.2018, DW1/18. 20.03.2018, 06.04.20218, 27.04.2018, 22.05.2018, 20.06.2016, 13.07.2018, 25.07.2018, 06.08.2018, 21.08.2018, 31.08.2018, 15.09.2018, 29.09.2018
5. Photocopy of letter dated 16.04.2019 EX. DW1/9 (colly)
6. Office copy of invoices dated 18.10.2018, EX. DW1/20 to Ex.
13.11.2018, 26.11.2018, 07.01.2019, DW1/28. 14.01.2019, 16.02.2019, 26.02.2019, 28.03.2019, 09.04.2019
7. Letters/replies dated 25.10.2018 and Ex. DW1/29 and 07.05.2019 sent by plaintiff to defendant Ex. DW1/30. company
8. Print out of contract no. 74002942 dated Ex. DW1/31 (colly).
26.09.2018 between Air India Ltd. and the defendant
9. Print out of E-mails dated 20.03.2019, Ex. DW1/32 to Ex.
12.02.2019, 11.02.2019, 22.05.2019, DW1/38 29.03.2019, 23.03.2019 & 23.05.2019 sent by Air India to defendant
10. Print out of E-mail dated 11.03.2020 Ex. DW1/39 written by the concerned official of the Air India to defendant
11. Replication filed in the counter claim Ex. DW1/40
45. During his cross-examination, the DW1 deposed that he was employed with defendants since July 2017 and was posted in Purchase Department where he was looking after purchase of raw material by the defendant company. He admitted that copy of master data of defendant company had not been placed on record. He denied that he was not authorized to depose on behalf of defendant company or that board resolution Ex.DW1/2 was a forged and fabricated document. The DW1 CS (COMM) No.2050/2022 & COUNTER CLAIM NO. 5/2023 Pg. 27 / 54 Digitally signed ILLA by ILLA RAWAT Date:
RAWAT 2024.11.28 16:56:51 +0530 deposed that he was not looking after the accounts for the defendant company.
46. During his further cross-examination, DW1 deposed that the defendant company maintained accounts of its clients and the parties with whom business transactions were carried out. He admitted that ledger account statement of transactions between the plaintiff and defendant company had not been placed on record by the defendant. He was aware of the transactions between the plaintiff and the defendant as far as they pertained to the Purchase Department. He admitted that print out of documents filed by defendant company were not taken out by him. He volunteered to state that they were handed over to him by the accounts department of the defendant company.
47. During his further cross-examination, DW1 deposed that the defendant company is assessed for Income Tax and that the accounts of defendant company were verified by an Chartered Accountant namely BHS & Company. He admitted that ITR of defendant company for the years it was transacting with plaintiff had not been placed on record. He further admitted that no legal notice was given to plaintiff regarding the alleged losses suffered by the defendant company.
48. In response to question as to why the defendant company did not return the alleged defective material to plaintiff at any point of time, the DW1 deposed that plaintiff had refused to take back the material and told them to use the same and that they would given adjustment for the same to defendant later on. The DW1 denied that plaintiff company never supplied defective CS (COMM) No.2050/2022 & COUNTER CLAIM NO. 5/2023 Pg. 28 / 54 Digitally signed ILLA by ILLA RAWAT Date:
RAWAT 2024.11.28 16:56:49 +0530 material to the defendant or that there was no question of taking back any such material. He admitted that plaintiff is only a supplier/seller and not manufacturer of goods. He admitted that plaintiff used to purchase paper from paper mill and supplied the same to the defendant company. He volunteered to state that on one occasion plaintiff had brought the officials of mill from which it had purchased the paper to their office premises and told them that the paper was defective. He denied that plaintiff never brought any official of the paper mill to the premises of defendant to point out defective paper. He admitted that defendant did not issue any debit note in respect of alleged defective goods to plaintiff.
49. At this stage, a Court question was asked from DW1 as to whether defendant had made complaint regarding defective goods in writing or said complaints were verbal only. The DW1 responded by stating that the defendant used to make telephonic complaints to the plaintiff. The DW1 denied that letter dated 09.10.2018 i.e. Ex. DW1/3 and letter dated 16.04.2019 i.e. Ex. DW1/19 were false and fabricated document. He further denied that signatures of Sh. Shivanand Gupta, deceased partner of plaintiff, had been forged and fabricated on Ex.DW1/3 and Ex.DW1/19. He volunteered to state that Sh. Shivanand Gupta expired in the year 2020.
50. The DW1 denied that the reply dated 25.10.2018 i.e. Ex. DW1/29 and reply dated 07.05.2019 i.e. Ex. DW1/30 were forged and fabricated by the defendant. He further denied that signatures of Sh. Shivanand Gupta have been forged and fabricated in the said letter or that the letter head of the plaintiff CS (COMM) No.2050/2022 & COUNTER CLAIM NO. 5/2023 Pg. 29 / 54 Digitally signed ILLA by ILLA RAWAT Date:
RAWAT 2024.11.28 16:56:50 +0530 firm, on which the letters Ex. DW1/29 and Ex. DW1/30 were written was also forged and fabricated or that due to this reason original of Ex. DW1/29 and Ex. DW1/30 had not been produced in the court.
51. During his further cross-examination, DW1 deposed that the plaintiff firm had lastly transacted with defendant company in 26.04.2019. He admitted that Air India terminated the contract of defendant company vide E-mail dated 11.03.2020 i.e. Ex. DW1/31. Prior to E-mail Ex. DW1/31 Air India had written various mails to defendant company regarding the defective paper and short supplies. He admitted that copies of said E-mails had not been placed on record of this case. He denied that Air India never wrote an E-mail regarding defective material to the defendant company or that since plaintiff did not supply any material to defendant company after 26.04.2019, the plaintiff had nothing to do with complaint of defective material, if any, made by Air India to the defendant company while terminating the contract vide E-mail Ex. DW1/31.
52. When put cheques Ex.PW1/45, Ex.PW1/47, Ex.PW1/49 and Ex. PW1/51, the DW1 deposed that said cheques had been issued by the authorized signatory of the defendant company i.e. Sh. Prashant Bhikhane. The DW1 expressed his inability to state if plaintiff had got issued a legal notice against defendant company when cheque Ex. PW1/51 dt. 25.06.2019 for Rs. 80,62,890/- was dishonored. He denied that plaintiff had got issued legal notice Ex. PW1/53. He admitted that he along with defendant's director Sudarshan Singh had visited plaintiff's premises on 23.07.2019 and that the said meeting was reflected CS (COMM) No.2050/2022 & COUNTER CLAIM NO. 5/2023 Pg. 30 / 54 Digitally signed ILLA by ILLA RAWAT Date:
RAWAT 2024.11.28 16:56:47 +0530 from defendant's E-mail dt. 26.07.2019 i.e. Ex. PW1/57.
53. When put E-mail Ex. PW1/57, DW1 admitted that there is nothing mentioned therein regarding defective material. He volunteered to state that it was agreed in the said meeting that plaintiff would compensate defendant for defective goods by way of discount in future supplies. He admitted that E-mail Ex.PW1/57 did not find mention of any such term whereby plaintiff was to give discount to defendant in future supplies against alleged defective goods. He further admitted that defendant had received E-mail dated 20.08.2019 i.e. Ex. PW1/58 from plaintiff and that E-mail Ex. PW1/58 found mention as to how defendant company was to make payment to the plaintiff. He then admitted that there was nothing mentioned in the said E-mail with regard to defendant being compensated by discount in future supplied and that E-mail Ex. PW1/58 was not replied to by the defendant. The DW1 denied that since defendant failed to comply with terms of settlement mentioned in Ex PW1/58, the plaintiff, was compelled to file the present suit. The DW1 further denied that percentage of damaged goods given in para no. 4 of his affidavit Ex. DW1/A as well as the percentage of fall in production of defendant mentioned therein were false and fabricated. He further denied that contents of para no. 7 of his affidavit Ex. DW1/A were false or that defendant did not make excess payment of any amount to the plaintiff. He denied that defendant had filed a false counter claim of Rs. 1,27,07,975/- against the plaintiff.
54. During his further cross-examination, DW1 admitted that arbitration proceedings were initiated between CS (COMM) No.2050/2022 & COUNTER CLAIM NO. 5/2023 Pg. 31 / 54 Digitally signed ILLA by ILLA RAWAT Date:
RAWAT 2024.11.28 16:56:51 +0530 plaintiff and defendant before Paper Merchant Association. The DW1 was not aware if the emails, letters, replies filed by defendant company in this suit were filed in the said arbitration proceedings by the defendant or not. He admitted that proceedings under Section 138 NI Act were pending against the defendant in respect of cheque Ex. PW1/51. He denied that he was deposing falsely being an employee of the defendant.
55. No other witness was examined on behalf of defendant.
56. Arguments were addressed by Sh. Vinay Mohan Sharma, Counsel for the plaintiff/respondent and Sh. Satish Bajaj and Sh.C.M. Kapoor, counsels for defendant/counter claimant. Written submissions were also filed on behalf of parties.
57. Counsel for plaintiff/respondent has argued on the lines of averments made in the plaint as well as evidence produced on record by the plaintiff.
58. Counsel for plaintiff has contended that defendant has failed to clear the outstanding amount payable by it to the defendant despite repeated requests and demand. The plaintiff had initiated arbitration proceedings against the defendant to resolve the dispute between the parties, however, defendant challenged the said proceedings by filing a petition U/s 14 of A&C Act which was allowed by concerned Court and the mandate of the arbitrator was terminated. Since the arbitration proceedings did not culminate into an award on merits, the plea of res judicata taken by defendant has no substance.
CS (COMM) No.2050/2022 & COUNTER CLAIM NO. 5/2023 Pg. 32 / 54 Digitally signed ILLA by ILLA RAWAT Date:
RAWAT 2024.11.28 16:56:46 +0530
59. It is also contended that suit of plaintiff has been filed well within limitation since the last cheque was issued by the defendant on 25.06.2019. The plaintiff had initiated pre- litigation proceedings on 18.05.2022 and was issued non-starter report on 16.08.2022. The present suit was filed on 25.08.2022 and hence the suit is well within limitation. The plaintiff has disclosed correct fact in the plaint. The receipt of goods vide invoices and the invoices themselves have not been denied. The plea that plaintiff had supplied defective goods to defendant has been taken as an afterthought. The defendant never filed any of the alleged communications, filed in the present case, with the reply filed by it in the arbitration proceedings and this itself brings out the fact that these communications/replies are forged and fabricated. The issuance of cheques by the defendant has also not been denied. The defence taken by defendant that the cheques were issued by way of security is a sham. In all, the plaintiff has succeeding in proving its case against the defendant and it is prayed that suit of plaintiff be decreed as prayed for. The counter claim filed by it be dismissed in light of judgment dated 02.09.2024 passed by Hon'ble High Court in case of Aditya Birla Fashion and Retail Limited vs. Mrs. Saroj Tandon, CM (M) 459/2023 & CM APPL. 13679/2023.
60. Per contra, counsel for defendant/counter claimant has contended that plaintiff has concealed material fact that it had supplied defective/damaged goods to the defendant. The plaintiff was major supplier of raw material to the defendant and due to supply of defective/damaged goods by the plaintiff, the production of paper goods/napkins etc. by defendant was reduced CS (COMM) No.2050/2022 & COUNTER CLAIM NO. 5/2023 Pg. 33 / 54 Digitally signed ILLA by ILLA RAWAT Date:
RAWAT 2024.11.28 16:56:44 +0530 by 60%. As defendant was unable to supply finished products to its clients/customers including Air India, its reputation was adversely effected. While Air India terminated its contract with defendant, defendant was forced to purchase raw material from other suppliers in market at much higher rate to keep its commitment to other clients and thereby suffered heavy losses. Relying upon various communications including letters, Mark-P and P1, it is contended that Sh. Shivanand Gupta (since deceased), erstwhile partner of plaintiff had himself assured defendant that it would be given concessions/discount/adjustment in sum of Rs.32,58,982/- in future, invoices but after his death, the intention of plaintiff became dishonest and they filed the present case against the defendant. For this purpose they even misused the cheques issued by defendant towards security and also filed case U/s 138 of N.I. Act against defendant as an arm twisting tactic. In these facts and circumstances, it is contended that plaintiff is not entitled to any relief in the suit filed by it and it is prayed that defendant's counter claim be allowed.
61. In rebuttal, counsel for plaintiff/respondent has contended that at no point of time defendant intimated to the plaintiff about alleged damaged/defective goods nor did it offer to return or actually returned the said goods to the plaintiff. The defendant has utilized the goods supplied by plaintiff and now has taken a plea that the goods supplied were damaged/defective to avoid making payment for the said goods to the plaintiff. The defence taken by defendant cannot be believed and hence plaintiff is entitled to decree as prayed for.
62. I have heard the learned Counsels for the parties and CS (COMM) No.2050/2022 & COUNTER CLAIM NO. 5/2023 Pg. 34 / 54 Digitally signed ILLA by ILLA RAWAT Date:
RAWAT 2024.11.28 16:56:50 +0530 have also perused the record as well as written submissions filed on behalf of parties and my findings on aforesaid issues are as under:-
CS (COMM) 2050/2022:-
ISSUE NO.1:-
Whether the suit of plaintiff is barred by res judicata in view of preliminary objection No.1 in the written statement? (OPD)
63. Onus of proving this issue was on defendant. It is admitted by the parties that they were having business transactions with each other since a long time. The defendant used to purchase raw material/paper from plaintiff for production of products which it supplied to its customers/clients.
64. The plaintiff was aggrieved as defendant failed to clear the outstanding amount payable by it to the plaintiff and being a member of Paper Merchant Association (Regd.) requested for intervention of the Association. It appears that pursuant to the request made by plaintiff, the General Secretary of the Association, vide its letter dated 27.02.2020, prevailed upon defendant to clear the outstanding dues of the plaintiff within 10 days of receipt of the said letter. When defendant failed to comply, arbitration proceedings were initiated against it by the plaintiff. The arbitrator was appointed by the Association as per Clause 11 printed on each invoice raised in the name of defendant by the plaintiff against the supplies of goods made to it. The defendant filed reply to plaintiff's claim in the arbitration proceedings and also challenged the appointment of arbitrator by filing a petition U/s 14 of A&C Act.
CS (COMM) No.2050/2022 & COUNTER CLAIM NO. 5/2023 Pg. 35 / 54 Digitally signed ILLA by ILLA RAWAT Date:
RAWAT 2024.11.28 16:56:52 +0530
65. Vide order dated 10.03.2022, Ex.PW1/62, the petition U/s 14 of A&C Act filed by the defendant was allowed and the mandate of sole arbitrator Sh. Satya Narayan Gupta was terminated. Since the mandate of the arbitrator itself was terminated there was no adjudication on merits of the dispute referred to the said arbitrator for neither any further proceedings were conducted nor any award was passed pursuant to order dated 10.03.2022 passed by the concerned Court. The plaintiff thereafter initiated pre-litigation mediation proceedings and filed the present suit. In these circumstances, the plea taken by defendant that suit of plaintiff is barred by res judicata is not sustainable. This issue is accordingly decided in favour of plaintiff and against the defendant.
ISSUE NO.2:-
Whether the suit of plaintiff is barred by limitation? (OPD)
66. Onus of proving this issue was on defendant. The defendant claims that since the plaintiff's suit pertains to alleged pending invoices from 07.01.2019 to 26.04.2019 and the present suit has been filed only on 23.08.2022, the same is way beyond the prescribed limitation of three years and ought to be dismissed being barred by limitation.
Per contra, counsel for plaintiff has contended that defendant had in the first instance issued cheques bearing no.000786 dated 10.06.2019, 000787 dated 11.06.2019 and 000788 dated 12.06.2019 for Rs.20,17,560/-, Rs.29,76,451/- and Rs.30,68,879/- respectively, totaling to Rs.80,62,890/-, all drawn on Yes Bank Ltd., Fortune Global Arcade, Mehrauli Gurgaon Road, Sikanderpur, Gurugram, Haryana-122002 which when CS (COMM) No.2050/2022 & COUNTER CLAIM NO. 5/2023 Pg. 36 / 54 Digitally signed ILLA by ILLA RAWAT Date:
RAWAT 2024.11.28 16:56:52 +0530 presented by plaintiff with its bankers HDFC Bank Ltd., 73-75/1, 60/1, Chawri Bazar, Delhi-110006 for encashment on 18.06.2019, 19.06.2019 and 20.06.2019 respectively, were returned back dishonoured. Thereafter the defendant handed over another cheque bearing no.640571 dated 25.06.2019 for Rs.80,62,890/-, drawn on its bank in complete discharge of its principal liability with assurance that the said cheque would be duly honoured. When presented cheque no.640571 was also returned back dishonoured with reasons "funds insufficient" on 26.06.2019. It is stated that since defendant had lastly made payment to plaintiff vide its cheque dated 25.06.2019 and the plaintiff had also spend period from 18.05.2022 to 16.08.2022 in pre-institution mediation proceedings, the suit of plaintiff was filed well within the period of limitation.
67. There is considerable force in the submissions made by counsel for plaintiff. The plaintiff has placed on record certified copy of cheque bearing no.640571 alongwith its cheque returning memo on record as Ex.PW1/51 and Ex.PW1/52 respectively. The cheque Ex.PW1/51 is dated 25.06.2019 and is for principal amount of Rs.80,62,890/- for which suit has been filed by plaintiff. The period of limitation would thus begin to run from 25.06.2019. It is also a matter of record, as is also evident from Non-starter report, Ex.PW1/70, that plaintiff had spent period from 18.05.2022 to 16.08.2022 in pre-institution mediation proceedings which has to be excluded from limitation period. Thus computing the period of limitation, the suit of plaintiff is apparently within limitation.
68. Even otherwise, as per order dated 10.01.2022 CS (COMM) No.2050/2022 & COUNTER CLAIM NO. 5/2023 Pg. 37 / 54 Digitally signed ILLA by ILLA RAWAT Date:
RAWAT 2024.11.28 16:56:52 +0530 passed by Hon'ble Supreme Court in Suo Moto Writ Petition (Civil) No.3 of 2020 titled In Re: Cognizance for Extension of Limitation, (2022) 3 SCC 117, plaintiff would also be entitled to benefit of exclusion of period from 15.03.2020 till 28.02.2022 in computation of limitation for the purposes of filing of the suit.
Thus by virtue of the above noted judgment of Hon'ble Supreme Court also the suit of plaintiff is well within limitation. This issue is thus decided in favour of plaintiff and against the defendant.
ISSUE NO.3:-
Whether the suit of plaintiff is liable to be dismissed for suppression of material facts as detailed in para 6 of preliminary objections to the written statement? (OPD)
69. The onus of proving this issue was on defendant. The defendant has alleged that plaintiff has concealed material fact that it had supplied substandard, defective, inferior quality and damaged goods/raw material (raw paper) to defendant regarding which plaintiff was informed telephonically, from time to time as well as vide letters dated 09.10.2018 and 16.04.2019, Ex.DW1/3 (Colly) and Ex.DW1/9 (Colly) respectively. The defendant had given details of specific invoices against which defective material had been supplied alongwith the quantified details of loss suffered by it in these two letters. It is claimed that pursuant to these letters, Sh. Shivanand Gupta, one of the partners of plaintiff had sent replies/communications dated 25.10.2018 and 07.05.2019, Mark-P and Mark-P1 respectively admitting that plaintiff had supplied defective raw material to defendant. It is further alleged that plaintiff had received excess payment of Rs.32,58,982/- against the defective material CS (COMM) No.2050/2022 & COUNTER CLAIM NO. 5/2023 Pg. 38 / 54 Digitally signed ILLA by ILLA RAWAT Date:
RAWAT 2024.11.28 16:56:48 +0530 supplied to defendant which was to be adjusted in invoices raised against future purchase/supply, however, plaintiff kept issuing invoices for further transactions with malafide intentions without giving any adjustments/concession/discount in lieu of excess payment already received by it. Due to defective material supplied by plaintiff, defendant could not supply paper napkins, facial tissues, TP Roll to Air India in terms of contract no.74002942 dated 26.09.2018 and ultimately Air India terminated its contract with the defendant. Besides Air India defendant could also not keep up its commitment to other clients despite the fact that it had to purchase raw material from other suppliers at much higher rate. In this manner, defendant suffered financial loss of Rs.72,49,181/- besides loss of reputation and business.
70. It is also claimed that cheques bearing no.000786 dated 10.06.2019, 000787 dated 11.06.2019 and 000788 dated 12.06.2019 for Rs.20,17,560/-, Rs.29,76,451/- and Rs.30,68,879/- respectively, totaling to Rs.80,62,890/-, all drawn on Yes Bank Ltd., Fortune Global Arcade, Mehrauli Gurgaon Road, Sikanderpur, Gurugram, Haryana-122002 as well as cheque bearing no.640571 dated 25.06.2019 were given by defendant to plaintiff for security purposes and not towards any legally enforceable liabilities. The plaintiff deliberately and willfully misused the cheques given by defendant. Claiming that plaintiff has concealed these material facts, it is stated that plaintiff is not entitled to any relief in the present suit.
71. Needless to state that these assertions of concealment of material facts by defendant, taken by defendant CS (COMM) No.2050/2022 & COUNTER CLAIM NO. 5/2023 Pg. 39 / 54 Digitally signed ILLA by ILLA RAWAT Date:
RAWAT 2024.11.28 16:56:51 +0530 in its written statement, have been refuted by plaintiff in replication. The testimony of witnesses examined by both the parties has also been reproduced at length in foregoing paragraphs.
72. Primarily defendant has relied upon letters/communications dated 09.10.2018 and 16.04.2019, Ex.PW1/3 (Colly) and Ex.PW1/9 (Colly) to claim that plaintiff had supplied defective/damaged raw material/paper to it due to which its production fell by 60% and it could not keep up its commitment to various customers including Air India.
73. It is noteworthy that plaintiff and defendant had been communicating with each other through email yet the defendant never sent any email to plaintiff with regard to supply of alleged defective goods. It is claimed that letters dated 09.10.2018 and 16.04.2019, Ex.PW1/3 (Colly) and Ex.PW1/9 (Colly) were delivered to Sh. Shivanand Gupta, partner of the plaintiff (since deceased), who acknowledged that poor quality of material had been supplied to the defendant, by the plaintiff vide letters dated 25.10.2018 and 07.05.2019 i.e. Mark-P & Mark-P1 respectively. The plaintiff has disputed that Sh.Shivanand Gupta, then partner of plaintiff ever had a meeting with the Director/representatives of defendant or that plaintiff had received letters Ex.PW1/3 (Colly) or Ex.PW1/9 (Colly) from defendant. It is alleged that these letters were forged and fabricated by defendant later on and hence do not form part of defendant's reply to plaintiff's claim in the arbitration proceedings. The plaintiff has specifically denied that Ex.PW1/3 CS (COMM) No.2050/2022 & COUNTER CLAIM NO. 5/2023 Pg. 40 / 54 Digitally signed ILLA by ILLA RAWAT Date:
RAWAT 2024.11.28 16:56:49 +0530 (Colly) and Ex.PW1/9 (Colly) were received by Sh. Shivanand Gupta or bear his signatures thereupon. It is further denied that letters dated 25.10.2018 bad 07.05.2019, Mark-P & P1, were even written and sent by Sh. Shivanand Gupta to defendant.
Even the letterhead upon which Mark-P & P1 have been written is disputed to be that of the plaintiff's company.
74. The defendant has merely filed photocopy of letters dated 09.10.2018 and 16.04.2019, Ex.DW1/3 (Colly) and Ex.DW1/9 (Colly) respectively. Both these letters were apparently hand delivered to the plaintiff company yet they do not bear any seal of the plaintiff company and are claimed to have been received and signed by Sh. Shivanand Gupta (since deceased). In these circumstances, it was imperative that defendant produced office copies of Ex.DW1/3 (Colly) and Ex.PW1/9 (Colly) which, as per defendant, had original signatures of Sh. Shivanand Gupta, then partner of plaintiff, who is stated to have received the same. There is no explanation forthcoming from defendant as to why office copies of these letters, with original signatures of Sh. Shivanand Gupta, have not been produced by the defendant. Similarly, for reasons best known to defendant, original of Mark-P & P1, claimed to have been written by Sh. Shivanand Gupta, in response to defendant's letters/communications, Ex.DW1/3 (Colly) and Ex.DW1/9 (Colly) have not been produced.
75. Since defendant has failed to produce office copies of letters/communications, Ex.DW1/3 (Colly) and Ex.DW1/9 (Colly) as well as original of letters, Mark-P & P1, all of which had original signatures of Sh. Shivanand Gupta (since deceased), CS (COMM) No.2050/2022 & COUNTER CLAIM NO. 5/2023 Pg. 41 / 54 Digitally signed ILLA by ILLA RAWAT Date:
RAWAT 2024.11.28 16:56:53 +0530 then partner of plaintiff, an adverse inference is liable to be drawn against the defendant for not having produced the best evidence which was in its possession.
76. The defendant rather tried to circumvent its responsibility of producing office copies of letters/ communications, Ex.DW1/3 (Colly) and Ex.DW1/9 (Colly) as well as original of letters, Mark-P & P1, by filing an application U/s 45 and 73 of Indian Evidence Act for taking specimen signatures/original specimen of signatures of Late Sh. Shivanand Gupta for opinion of handwriting expert, however, since defendant itself failed to produce the best evidence i.e. the documents with original signatures of Sh.Shivanand Gupta and further failed to furnish any reasonable explanation for non production thereof, the defendant was not entitled to use the process of Court to collect evidence on its behalf and to fill in lacuna in its case by filing such an application.
77. The defendant has admitted that it had business transactions with plaintiff and had been supplied raw paper by the plaintiff vide invoices from 07.01.2019 to 26.04.2019, copies of which alongwith consignor's copy and tempo bills, have been placed on record by plaintiff as Ex.PW1/3 to Ex.PW1/44. Some of the original invoices have been filed by defendant and have been exhibited as Ex.DW1/4 to Ex.DW1/18 and Ex.DW1/20 to Ex.DW1/28 by DW1/Mohd. Zeyaul Haque Khan, AR of defendant.
78. As per the mandate of Section 41 of the Sale of Goods Act, the purchaser not having inspected the goods in CS (COMM) No.2050/2022 & COUNTER CLAIM NO. 5/2023 Pg. 42 / 54 Digitally signed ILLA by ILLA RAWAT Date:
RAWAT 2024.11.28 16:56:50 +0530 question prior to delivery, has a right to inspect the same on delivery and report defects within a reasonable time of delivery. If not rejected within reasonable time, mandate of Section 42 stipulates that the purchaser would be deemed to have accepted the goods. Section 41 and Section 42 of the Sale of Goods Act read as under:-
"41. Buyer's right of examining the goods.-
(1) Where goods are delivered to the buyer which he has not previously examined, he is not deemed to have accepted them unless and until he has had a reasonable opportunity of examining them for the purpose of ascertaining whether they are in conformity with the contract.
(2) Unless otherwise agreed, when the seller tenders delivery of goods to the buyer, he is bound, on request, to afford the buyer a reasonable opportunity of examining the goods for the purpose of ascertaining whether they are in conformity with the contract.
42. Acceptance.- The buyer is deemed to have accepted the goods when he intimates to the seller that he has accepted them, or when the goods have been delivered to him and he does any act in relation to them which is inconsistent with the ownership of the seller, or when, after the lapse of a reasonable time, he retains the goods without intimating to the seller that he has rejected them."
79. Even otherwise, from perusal of the invoices in question and the terms and conditions mentioned on their backside it is seen that one of the conditions mentioned thereupon is :-
"2. The buyer will in every case, examine the goods on taking delivery and thereafter will have no claim against the company concerning the nature of quality of goods unless notice of same is given in writing to the company within seven days of the receipt of the goods."
CS (COMM) No.2050/2022 & COUNTER CLAIM NO. 5/2023 Pg. 43 / 54 Digitally signed ILLA by ILLA RAWAT Date:
RAWAT 2024.11.28 16:56:47 +0530
80. Since all the invoices placed on record bear signatures of officials of defendant, the above noted term would be binding on the defendant. Admittedly, defendant did not inform the plaintiff about the alleged defect in the quality of the goods within the period stipulated in invoices but continued to wait for inordinate time to inform the plaintiff about it. The alleged letters, Ex.DW1/3 (Colly) and Ex.DW1/9 (Colly) which defendant claims it had written to plaintiff have not been proved to have been so written. Similarly the claimed replies written by Sh. Shivanand Gupta (since deceased), vide letters Mark-P and P1, could also not be proved to have been so written to acknowledge that plaintiff had supplied defective goods to the defendant.
81. Per contra, plaintiff has proved that defendant had written email dated 26.07.2019, Ex.PW1/58, summarizing the terms agreed upon between the parties in a meeting held on 23.07.2019 between 1.00 to 3.00 pm at the office of plaintiff at Darya Ganj. Contrary to defendant's claim that Sh. Shivanand Gupta, partner of plaintiff (since deceased) was present in the meeting, the email Ex.PW1/57, finds mention that Sh. Satyapal Gupta, partner of plaintiff accompanied by heads of Legal and Accounts departments of plaintiff were present in the meeting and it was concluded as under:-
"1) The current supply of the material shall be made on immediate payment basis and the rates shall be offered accordingly.
2) Payment of outstanding dues shall be made bill wise.
One bill of outstanding bills shall be paid every month during the current financial year. There after the amount of repayment shall be increased.
CS (COMM) No.2050/2022 & COUNTER CLAIM NO. 5/2023 Pg. 44 / 54 Digitally signed ILLA by ILLA RAWAT Date:
RAWAT 2024.11.28 16:56:49 +0530
3) Fresh competitive market rates of material based on immediate payment shall be offered to continue the supplies on regular basis."
82. Pursuant thereto plaintiff had sent an email dated 20.08.2019, Ex.PW1/58, wherein following conditions were put forth to resolve the dispute of pending payment by defendant to the plaintiff.
"1. You will issue Undated Cheques of all our outstanding till now from both the accounts. (Outstanding being handed over to you in meeting)
2. You will make payment in Indigo Hyiegene account of Rs.500000/- every month and after receipt of payment we will return you the Undated cheque of that month in lieu of payment received.
3. Fresh dealing will only be started once we received of Rs.500000/- in Indigo Hyiegene account.
4. Dealings in Purple Paper Products P Ltd. will be started on the condition that for each order for supply of goods you would make advance payment i.e. 25% more payment than the actual price of the purchase order, so that the said extra amount (25%) would be adjusted towards the old outstanding dues i.e. if you make payment of Rs.10,00,000.00 we will supply you goods worth Rs.750000/- and adjust Rs.250000/- towards the old outstanding."
83. Apparently, the defendant never responded to plaintiff's email, Ex.PW1/58, dated 20.08.2019. Although defendant attempted to put forth email, Ex.PW1/57, written by defendant as that summarizing admission of supply of defective goods by plaintiff, pursuant to meeting dated 23.07.2019, the contents of defendant's email, Ex.PW1/57 and email, Ex.PW1/58 sent by plaintiff in reply thereto, do not reflect any such conclusion as was also admitted by DW1 during his cross- examination.
CS (COMM) No.2050/2022 & COUNTER CLAIM NO. 5/2023 Pg. 45 / 54 Digitally signed ILLA by ILLA RAWAT Date:
RAWAT 2024.11.28 16:56:45 +0530
84. The defendant's plea that cheques bearing no.000786, 000787, 000788 and 640571 were issued by way of security also does not hold good for DW1 has admitted during his cross-examination that cheques, Ex.PW1/45, Ex.PW1/47, Ex.PW1/49 and Ex.PW1/51 had been issued by Sh. Prashant Bhikane, Authorized Signatory of the defendant. There is thus implied admission that all the particulars on said cheques were duly filled up when handed over to plaintiff. Moreover, the fact that cheques, Ex.PW1/45, Ex.PW1/47 and Ex.PW1/49 are of actual outstanding amount of Rs.80,62,890/- and similarly cheque Ex.PW1/51, which was issued after plaintiff informed defendant of dishonour of cheques, Ex.PW1/45, Ex.PW1/47 and Ex.PW1/49, is also of the outstanding amount of Rs.80,62,890/-, could not be explained by the defendant. Nothing has been placed on record by the defendant from which it can be concluded that there was practice, in the line of business in which it (defendant) and plaintiff were engaged in, to issue blank cheques towards security amount. Any cheque issued towards security amount would even otherwise would have had an amount specified thereupon commensurate with the revenue/quantum/flow of business between the parties. It is difficult to comprehend that defendant would issue blank cheques towards security amount, in favour of plaintiff for exactly the same amount as was outstanding against it towards plaintiff. Even otherwise if this practice was to be followed by defendant, with other suppliers also, defendant would be flooded with unwarranted litigation.
85. It is noteworthy that at no point of time, defendant CS (COMM) No.2050/2022 & COUNTER CLAIM NO. 5/2023 Pg. 46 / 54 Digitally signed ILLA by ILLA RAWAT Date:
RAWAT 2024.11.28 16:56:47 +0530 returned the defective goods to the plaintiff nor initiated any legal proceedings against the plaintiff for supply of alleged defective goods and/or for misusing the cheques which defendant claims were issued to plaintiff merely by way of security. Even the debit notes were never issued by defendant in respect of alleged defective goods. It would also appear that defendant never maintained any statement of account in respect of transactions with the plaintiff for no such statement of account has been placed on record. The losses claimed to have been suffered by defendant ought to have been reflected from the income tax returns filed by the defendant for DW1 has stated that defendant company is assessed to income tax and its accounts were verified and maintained by Chartered Accountant. No income tax returns of defendant, for relevant years, have been placed on record to prove that defendant had suffered loss of income and business, on account of defective goods, alleged to have been supplied by the plaintiff.
86. In all, the defendant has completely failed to prove that 40-50% of material supplied by plaintiff to it was defective or that due to it defendant's production was reduced by 60% or that due to this there was substantial loss of business to the defendant. The defendant has further failed to prove that it had informed plaintiff of supply of alleged defective goods by writing letters Ex.DW1/3 (Colly) and Ex.DW1/9 (Colly) or that Sh.Shivanand Gupta (since deceased), then partner of plaintiff, had acknowledged the supply of defective goods by writing letters Mark-P and P1. The defendant has further failed to prove that plaintiff had assured that it would given adjustment of excess CS (COMM) No.2050/2022 & COUNTER CLAIM NO. 5/2023 Pg. 47 / 54 Digitally signed ILLA by ILLA RAWAT Date:
RAWAT 2024.11.28 16:56:51 +0530 payment of Rs.32,58,982/- to defendant in future supplies or that plaintiff continued to raise further invoices without giving any adjustment/concession/discount to defendant. The defendant has further failed to prove that it had suffered any loss of business and reputation on account of supply of defective/damaged goods by the plaintiff. Even the alleged contract by Air India appears to have been terminated on 11.03.2020 whereas plaintiff firm had lastly transacted with defendant company on 26.04.2019. As regards the other customers, nothing has been placed on record by defendant from which it can be concluded that defendant suffered similar loss of business due to supply of alleged defective/damaged goods by plaintiff. The defendant has completely failed to discharge onus of proving this issue and hence the same is decided in favour of plaintiff and against the defendant.
ISSUE NO.4:-
Whether the plaint has been signed and verified and suit instituted by a duly authorized person? (OPP)
87. Onus of proving this issue was on plaintiff. The plaint has been signed and verified and suit instituted by Sh. Narender Kumar Deswal, who is stated to be authorized in this regard by virtue of SPA, Ex.PW1/2, dated 12.08.2022, issued by Sh. Ram Avtar Gupta, one of the partners of the plaintiff firm. Although counsel for defendant has contended that PW1 Sh. Narender Kumar Deswal was required to be authorized by all the partners of the plaintiff firm, the contention raised by counsel for defendant cannot be sustained for as per Section 18 of Indian Partnership Act, 1932, every partner of firm is the agent of the CS (COMM) No.2050/2022 & COUNTER CLAIM NO. 5/2023 Pg. 48 / 54 Digitally signed ILLA by ILLA RAWAT Date:
RAWAT 2024.11.28 16:56:44 +0530 firm for the purposes of business of the firm. Further, as per Section 19 of the Act, every partner has implied authority to act as an agent of the firm.
88. The SPA, Ex.PW1/2, issued in favour of Sh. Narender Kumar Deswal has been signed by Sh. Ram Avtar Gupta, one of the partners of plaintiff, who has signed for himself as well as other partners of the firm as is reflected from the recitals in Ex.PW1/2. The name of Sh. Ram Avtar Gupta is mentioned in Ex.PW1/1 i.e. Form-A issued by Registrar of the Firms as one of the partners of the firm. Hence, Sh. Ram Avtar Gupta was fully authorized to appoint Sh. Narender Kumar Deswal as Attorney of plaintiff firm to sign and verify the plaint, to institute the suit on behalf of plaintiff firm and to depose as a witness in the case. This issue is decided in favour of the plaintiff and against the defendant.
ISSUE NO.5:-
Whether plaintiff is entitled to decree of recovery of Rs.80,62,890/- against the defendant, as prayed for? (OPP)
89. Onus of proving this issue was on plaintiff. The plaintiff has examined PW1/Sh. Narender Kumar Deswal to prove its case. The testimony of PW1/Sh. Narender Kumar Deswal as well as documents relied upon by plaintiff have been reproduced at length in foregoing paragraphs. As already observed while deciding issue no.3, defendant has admitted that it was having business transactions with the plaintiff since long and having received goods from plaintiff vide invoices raised from time to time. The claim of plaintiff has merely been CS (COMM) No.2050/2022 & COUNTER CLAIM NO. 5/2023 Pg. 49 / 54 Digitally signed ILLA by ILLA RAWAT Date:
RAWAT 2024.11.28 16:56:45 +0530 challenged on the ground that 40-50% of the goods supplied by plaintiff to defendant were defective due to which production of defendant was reduced by 60% and hence it was unable to keep up its commitment to its customers for supply of products.
90. The entire defence taken by defendant to challenge the claim of plaintiff has been thoughtfully considered while deciding issue no.3 to conclude that defendant has not been able to substantiate and/or justify non-payment of the claimed amount to the plaintiff. Thus based on the testimony of PW1 and documents, placed on record by plaintiff, and proved in accordance with law by PW1, the only conclusion that can be drawn is that plaintiff has succeeded in proving that it is entitled to recover a sum of Rs.80,62,890/- from the defendant. This issue is accordingly decided in favour of the plaintiff and against the defendant.
ISSUE No.6:-
Whether plaintiff is entitled to interest. If yes, at what rate and for which period? (OPP)
91. The plaintiff has also prayed for grant of interest @ 18% per annum w.e.f. 28.06.2019 although as per invoices Ex.PW1/3 to Ex.PW1/44, plaintiff was entitled to charge interest @ 24% per annum if payment was not made on due date. The interest @ 18% p.a. claimed by plaintiff, however, appears to be on higher side. The interest of justice would be served if plaintiff is granted simple interest @12% per annum on the principal amount of Rs.80,62,890/- from the date of dishonour of cheque no.640571 i.e. 28.06.2019, till realization of the decretal amount, as prayed for by plaintiff.
CS (COMM) No.2050/2022 & COUNTER CLAIM NO. 5/2023 Pg. 50 / 54 Digitally signed ILLA by ILLA RAWAT Date:
RAWAT 2024.11.28 16:56:44 +0530 COUNTER CLAIM NO. 5/2023 :-
ISSUE No.1:-
Whether the counter claim is barred by limitation? (OPR)
92. Onus of proving this issue was on respondent, however, except for bald plea nothing has been substantiated by the respondent/plaintiff in support of challenge to counter claim being barred by limitation.
Order VIII Rule 6A of the Code of Civil Procedure ("CPC") provides that a defendant in a civil suit may set up a counter-claim involving any claim in respect of a cause of action accruing to the defendant against the Plaintiff. As per Order VIII Rule 6A of CPC, the counter-claim must be set up either before or after the filing of the suit but before Defendant has delivered its defence. The counter claim has been filed by defendant on 06.02.2023 alongwith written statement in CS (COMM) 2050/2022, hence the same is well within limitation. This issue is decided in favour of the counter claimant and against the respondent.
ISSUE No.2:-
Whether the counter claim is bad for proper verification of the counter claim? (OPR)
93. Onus of proving this issue was on respondent.
However, the respondent could not point out any specific infirmity in the verification of the counter claim.
Perusal of the counter claim reveals that the same is duly verified in terms of Order VI Rule 15A CPC as all the pages CS (COMM) No.2050/2022 & COUNTER CLAIM NO. 5/2023 Pg. 51 / 54 Digitally signed ILLA by ILLA RAWAT Date:
RAWAT 2024.11.28 16:56:50 +0530 of the plaint in counter claim are signed by the counter claimant. Further, the counter claim was accompanied with statement of truth U/o VI Rule 15A & Order XI-Rule 3 of First Schedule of CPC, 1908. Hence, this issue is decided in favour of the counter claimant and against the respondent.
ISSUE No.3:-
Whether the counter claimant is entitled to decree of recovery of Rs.1,27,07,975/- against the respondent inclusive of excess payment of Rs.32,58,982/- stated to have been received by respondent by counter claimant, as prayed for? (OPCC)
94. Onus of proving this issue was on counter claimant.
While deciding issue no.3 in the main suit bearing CS (COMM) 2050/2022, it has already been held that defendant/counter claimant could not prove that it had paid an excess amount of Rs.32,58,982/- to the plaintiff against the defective material supplied by plaintiff to the defendant or that it had suffered loss of Rs.72,49,181/- apart from loss of reputation and future business opportunities due to shortage of raw material on account of supply of defective goods by plaintiff or that it is entitled to recover a sum of Rs.1,27,07,957 from the plaintiff i.e. Rs.32,58,982/- towards excess payment, Rs.21,99,812/- towards interest @ 18% per annum for period from May 2019 till January 2023 against supply of defective material and Rs.72,49,181/- towards loss of business/damages.
95. Counsel for respondent/plaintiff has relied upon judgment passed by Hon'ble High Court in case of Aditya Birla Fashion and Retail Limited vs. Mrs. Saroj Tandon (supra) CS (COMM) No.2050/2022 & COUNTER CLAIM NO. 5/2023 Pg. 52 / 54 Digitally signed ILLA by ILLA RAWAT Date:
RAWAT 2024.11.28 16:56:47 +0530 wherein it has been held as under :-
"57. In view of above said discussion, it clearly emerges out that process of pre-institution mediation is mandatory for every suit involving a commercial suit and no distinction can be drawn when it comes to a counter- claim involving a commercial dispute and not contemplating any urgent relief. As per the mandate of Patil Automation Private Ltd. (supra), any such suit, which has been filed without taking recourse of Section 12-A of Commercial Courts Act, needs to be rejected under Order VII Rule 11 CPC."
It was, however, clarified that as declared in case of Patil Automation Private Ltd. v. Rakheja Engineers Private Limited : 2022 SCC OnLine SC 1028, the cut-off date would be 20th August, 2022.
96. In the instant case, the defendant had filed the counter claim on 06.02.2023 which is much beyond the cut-off date of 20.08.2022 without taking recourse of Section 12A of the Commercial Courts Act, 2015 (hereinafter referred to as CC Act, 2015). Counsel for defendant/counter claimant has not filed any judgment wherein the above cited judgment has been set aside or a different view has been propounded. Accordingly, the counter claim filed by the defendant is even otherwise not maintainable for want of compliance with mandatory provision of Section 12A of CC Act, 2015.
97. Since the counter claimant has not been able to substantiate and/or justify its claim against the respondent/plaintiff, the only conclusion that can be drawn is that counter claimant has miserably failed to prove that it is entitled to recover a sum of Rs.1,27,07,957/- from the respondent/plaintiff. The counter claim filed by it is even otherwise not maintainable for want of compliance of Section 12A of CC Act, 2015. This CS (COMM) No.2050/2022 & COUNTER CLAIM NO. 5/2023 Pg. 53 / 54 Digitally signed ILLA by ILLA RAWAT Date:
RAWAT 2024.11.28 16:56:52 +0530 issue is accordingly decided in favour of the respondent and against the counter claimant.
ISSUE No.4:-
Whether counter claimant is entitled to interest. If yes, at what rate and for which period? (OPCC)
98. Since it has been held while deciding issue no.3 that counter claimant is not entitled to claim any amount from respondent/plaintiff, the question of his being entitled to interest also does not arise. This issue is decided against the counter claimant.
R E L I E F:-
99. In view of the findings on foregoing issues, suit is decreed in the sum of Rs.80,62,890/- (Rupees Eighty Lakhs Sixty Two Thousand Eight Hundred Ninety only) in favour of plaintiff and against defendant alongwith interest @ 12% per annum thereupon from 28.06.2019 till realization of the decreetal amount. The defendant will further pay the full costs of the suit and additionally Rs.1,000/- spent by the plaintiff in DLSA for invoking pre-institution mediation.
Further, the counter claim filed by counter claimant/defendant is dismissed. The cost of counter claim shall be borne by counter claimant.
Decree sheet be prepared accordingly. File be consigned to record room after due compliance. Announced in the open Court on 28th Day of November, 2024.
(ILLA RAWAT) District Judge Commercial Court-03 Central District, THC, Delhi.
CS (COMM) No.2050/2022 & COUNTER CLAIM NO. 5/2023 Pg. 54 / 54 Digitally signed ILLA by ILLA RAWAT Date:
RAWAT 2024.11.28 16:56:46 +0530