Delhi District Court
Goldsquare Sales Indian Pvt Ltd vs Sh. Nishit Kumar Jain on 11 March, 2025
IN THE COURT OF MS SAVITA RAO, DISTRICT JUDGE
COMMERCIAL COURT-01, SOUTH ,
SAKET COURTS, DELHI
CS (Comm) No. : 142/2019
DLST010035002018
In the matter of :
Gold Square Sales India Private Limited
Having its registered office at :
Plot no. 212 & 212-B, L.G.F. Rear Portion
Savitri Nagar, Malviya Nagar
New Delhi - 110017
Also Corporate Office At :
Plot No. 241, Udyog Vihar, Phase-I
Gurgaon- 122001, Haryana
..... Plaintiff
Versus
Sh. Nishit Kumar Jain
Proprietor of Adah Fashions
30-A, Plot no. 51-52, Jai Veer Ind. Estate
Near Daksheshwar Mahadev Temple
Pandesara, Surat - 394220, Gujrat
Also through Email IDs:
[email protected]
[email protected]
........ Defendant
Date of Institution : 19.05.2018
Date of Transfer to this Court : 02.08.2024
CS (Comm) No. : 142/2019 1/ 26
Date of Arguments : 20.01.2025, 03.02.2025
and 11.03.2025
Date of Judgment : 11.03.2025
JUDGMENT
1. This is suit for recovery in sum of Rs. 37,43,455/- (Rs. Thirty Seven Lacs forty Three Thousand Four Hundred and Fifty Five only) filed by plaintiff against the defendant on the facts that plaintiff Company is engaged in the business of providing web- platform facilities in which sellers can showcase their products to different buyers across India. As per the business practice, plaintiff has been purchasing the Products directly from various manufacturers / suppliers and simultaneously used to promote and market such products to the customers for obtaining purchase orders through its web portal. Since the orders were placed by the customers to the Plaintiff online, the ordered goods / products used to be sent to the respective customer within the stipulated period. Moreover, since the transactions were also being done on 'cash on delivery' basis, the products used to be sent by the plaintiff through the Cargo / Courier / Logistic Companies engaged by it in different regions and substantial amount also used to be incurred for said purpose.
2. Plaintiff used to have a back to back agreement with different e-commerce Companies/portals where the products were also being offered for sale and all such arrangement/agreements are/were based on the commitment given by the Plaintiff for supply/delivery of products and for promotion of products on the other web portal / e-commerce companies. Plaintiff used to incur expenses in marketing, support services and huge credits to the customers which was a heavy CS (Comm) No. : 142/2019 2/ 26 load on the Plaintiff. Inspite of offering/booking/selling the products at about two times of the actual purchase / offer cost of product, the own profit of the Plaintiff used to be about 20% of the purchase/supply cost and rest of the amount used to be incurred on the promotion, handling, maintenance of warehousing including salary of manpower maintained for efficient dispatch, supply and delivery of products.
3. Whenever, any product is not supplied / delivered on time and/or is returned by the customer due to any defect or inferior quality or otherwise, plaintiff was compelled to bear the cost of logistic/freight for return of product in addition to all the costs and expenses already paid and incurred by the Plaintiff in promotion and marketing. The profit was only marginal and sometimes it also resulted into heavy losses. Moreover, due to return of products or non-delivery of products on time and unavailability of products, the goodwill and reputation of Plaintiff also used to suffer immensely causing irreparable losses to the Plaintiff.
4. During the course of business transactions, defendant who is Proprietor of Adah Fashions came in contact with the Plaintiff whereby defendant offered to supply apparels under brand "Adah" and other products and after interactions including settlement of terms and conditions, plaintiff agreed to purchase the products from the Defendant on the prices as mutually agreed between the Parties and also other terms and conditions mutually agreed between them and stipulated in the Purchaser Order. Accordingly, Master Supplier Agreement dated 30.12.2014 was executed containing the terms and conditions.
CS (Comm) No. : 142/2019 3/ 265. As per the terms of Agreement, in case of return of any product by the customer, defendant had not been entitled for payment and it was bound to take back such product and thus the products were being supplied on sale or return basis. Moreover, Defendant also specifically agreed that for each undelivered/short delivery, inaccurate or improper quality product, it shall pay the liquidated damages @ Rs. 500/- for per product or the value of product, whichever is less.
6. Pursuant to the said Agreement and understanding, during their continuous business transactions till January 2016, plaintiff from time to time had been placing Purchase Orders upon the defendant for supply of ordered goods within the stipulated period. Despite repeated requests for quality of products, on number of occasion, during random quality check, the products supplied by the defendant were found of inferior and defective quality and accordingly, the same were returned by the Plaintiff to the Defendant and Debit Notes were also issued to the Defendant in this regard.
7. Due to late /defective supply of ordered products by Defendant or non-delivery of ordered products, various orders which were procured by the Plaintiff after spending huge amounts were cancelled. Further, whenever any Order was cancelled due to non-availability of product and/or due to inferior quality of product / delayed delivery, plaintiff used to give a Sorry Voucher of Rs. 250/- (Rupees Two Hundred Fifty only) to such customer and thus, the Plaintiff had been incurring additional amount to maintain its customer base and unsubstantiated losses. All such losses and damages suffered to the Plaintiff were directly attributable due to the act, omission CS (Comm) No. : 142/2019 4/ 26 and breach of contract on the part of the Defendant and the Defendant was bound to make good all such losses to the Plaintiff.
8. As stated, sum of Rs. 17,43,455/- (Rupees Seventeen Lacs Forty Three Thousand Four Hundred Fifty Five only) became due and payable by Defendant to the Plaintiff towards liquidated damages and the Defendant are liable to make good the same. Plaintiff further claimed an amount of Rs. 20,00,000/- (Rupees Twenty Lacs only) towards compensation on account of losses caused to it. Requests were made by plaintiff to defendant to make the payment of all the liquidated damages / losses and costs thereof, however defendant failed to pay its admitted debts and liabilities.
9. In written statement filed on behalf of defendant, it was submitted that as per understanding between the parties, defendant was expected to supply textile products of different style, variety and range. In addition to that, defendant used to check products of different manufacturers and used to supply the said products to the plaintiff after strict quality checks by the defendant. There was mutual understanding between the parties that the penalties would not be charged till there is some gross negligence as this would hamper the growth of the business of both the parties. This understanding made both the parties work in harmony for period of 3 years with dealings worth Rs 4,00,00,000/-(Rupees four crore). However, plaintiff was facing tough competition from Giant companies like flipkart and Amazon and was finding it difficult to survive in the market. As a result, the business started to fall and plaintiff started finding out CS (Comm) No. : 142/2019 5/ 26 ways to unnecessarily extract money from the various vendors, defendant being one of them.
10. It was further stated that the documents annexed with the suit such as sales invoice/purchase returns etc. are incomplete and defendant had not caused any loss of profits and goodwill to the plaintiff. It was denied that plaintiff used to give sorry vouchers of Rs. 250/- to their customers and was incurring additional amount to maintain its customer base. Plaintiff, as stated, is raising unnecessary, arbitrarily compensation claims which are de hors any reasonable proof of inferior quality products and thus the defendant is not liable to pay any amount. It was stated that plaintiff has instituted number of cases against the vendors including defendant with malafide intention to extract money.
11. It was further stated that this court does not have territorial Jurisdiction to try and entertain the present Suit as the Invoices issued by Defendant carries an Exclusive Jurisdiction Clause of Surat and thus the courts of Surat would have jurisdiction to try the present suit.
12. In replication, contents of written statement were denied and those of plaint were reiterated and reaffirmed.
13. Following issues were framed vide order dated 18.12.2019:
1) Whether the plaintiff is entitled to recover a sum of Rs. 37,43,455/- with interest , as prayed for? OPP
2) Whether the suit of the plaintiff is not maintainable in the present form? OPD
3) Relief CS (Comm) No. : 142/2019 6/ 26
14. In plaintiff's evidence, Sh. Sudhanshu Sekhar Nayak, AR of plaintiff was examined as PW1. He filed his evidence by way of affidavit Ex. PW1/A and relied upon following documents:-
1. Certified Copy of Resolution dated 02.08.2023 as Ex. PW1/1.
2. Certified copy of Board Resolution dated 04.04.2018 as Ex. PW1/2.
3. Master Supplier Agreement dated 30.12.2014 as Ex. PW1/3.
4.Copy of various purchase orders, goods receipt notes, invoices, debit notes etc as Ex. PW1/4 (colly) running into 886 pages.
5. Copies of Statement/Ledger showing transaction details, calculation of liquidated damages etc. as Ex. PW1/5 (colly) (running into 20 pages)
6.Master Supplier Agreement dated 30.12.2013 as Ex. PW1/6.
7.Certificate under section 65-B of Indian Evidence Act as Ex. PW1/7.
15. No witness was examined in defence on behalf of Defendant and DE was closed vide order dated 16.10.2024.
Issue-wise findings are as under:
16. Issue no. 1: Business transaction between the parties in pursuance to the Master Suppliers Agreement dated 30.12.2014 Ex. PW1/3, is admitted fact on record. Plaintiff had been issuing purchase orders and the defendant had been supplying material against the purchase orders. Invoices were raised by the defendant after supply of the material and the goods were received vide goods receipt notes by plaintiff. According to plaintiff, in terms of Master Suppliers Agreement dated 30.12.2014 Ex. PW1/3, defendant was required to supply the finished products strictly as per the specifications and quantity and within the time stipulated in the purchase orders. On supply of goods and on submission of CS (Comm) No. : 142/2019 7/ 26 invoice of valid/salable goods, defendant was entitled for the payment as per the agreed terms.
17. PW1 stated that as per the terms of the agreement, in case of return of any product by the customer, the defendant was not entitled for payment and was bound to take back such products .
Thus, products were being supplied on sale /return basis. For every undelivered/short delivery, inaccurate or improper quality product, defendant was to pay the liquidated damages @ Rs. 500/- per product or the value of the product, whichever was less. It was submitted that since substantial amount was being incurred by the plaintiff for promotion and marketing of products, the said amount of Rs. 500/- was agreed, being reasonable and justified amount towards liquidated damages.
18. As further submitted, in pursuance to the agreement and understanding, during their continuous business transactions till January 2016, plaintiff from time to time had been placing purchase orders. On number of occasions, during random quality check, the products supplied by the defendant were found of inferior and defective quality and accordingly, same were returned by the plaintiff to defendant and debit notes were issued by the defendant in this regard. Accordingly, defendant was not entitled for any payment of such products.
19. It was also stated by PW1 that whenever any order was canceled due to non availability of product and/or due to inferior quality of product/delayed delivery, plaintiff used to give sorry voucher of Rs. 250/- to such customer and thus the plaintiff had incurred additional amount to maintain its customer base and unsubstantiated losses. Further such cancellation of orders by the customers and return of goods, due to delay and/or defective CS (Comm) No. : 142/2019 8/ 26 products, had been causing unsubstantiated losses to the plaintiff which were directly attributable to the act, omission and breach of contract on the part of defendant. According to PW1, due to such breach of contract on the part of defendant and similar vendors, plaintiff who had business turnover of more than Rs. 100 Crores in the financial year 2014-2015 came down to about Rs. 68 Crores in the financial year 2015-2016 and only about Rs. 2 to 3 Crores in the financial year 2016-2017. Plaintiff had placed purchase orders worth Rs. 4,32,83,793/-for supply of products with 29,405/- pieces/products. According to PW1, plaintiff paid the amount of Rs. 3,46,53,142/- against the supply of goods/products. Defendant had raised invoices worth Rs. 4,25,05,005.44 but after return of some of the products due to deviation of specification/beyond purchase order, only products worth Rs. 3,74,60,309/- were accounted for, by the plaintiff. Further, products worth Rs. 24,04,266/- were found to be of inferior quality and were rejected in quality check and returned and thereafter further products were also rejected/returned by the customers and accordingly debit notes were issued to the defendant.
20. Plaintiff claimed deficiency in delivery of 3620 products i.e. 2086 being short deliveries and 1534 having been rejected in quality check/inferior quality, for which defendant was liable to pay liquidated damages @ Rs. 500/- or the cost of the product whichever was less, making the claim amount at Rs. 17,43,455/-. Plaintiff also claimed damages in sum of Rs. 20 lacs towards compensation on account of losses caused to it in terms of loss of business, Profit, Goodwill and Reputation and also withholding of payment. According to plaintiff, though the plaintiff was entitled to CS (Comm) No. : 142/2019 9/ 26 substantial amount, however it restricted its claim only to the amount of Rs. 20 lacs towards damages and compensation.
21. On behalf of defendant, it was submitted that the Master Supplier Agreement was executed on 30.12.2014 which was valid for a period of only one year. During this period, no penalties for liquidated damages were imposed on the defendant, as decided by both the plaintiff and defendant. It was submitted that plaintiff's claim for liquidated damages does not clarify whether the penalty is for one year or applied throughout the business period. Therefore, plaintiff cannot claim compensation for liquidated damages amounting to Rs. 17,43,455/- on the basis of said agreement. It was also submitted that defendant worked on wholesale basis with thin margins, with average price per unit of Rs. 1452/- over a four years period. Imposing a penalty of Rs. 500/- per unit would not have been commercially viable for the defendant as such penalty structure would have made it impossible for the defendant to sustain business and the business relationship with the plaintiff could not have continued under these conditions for four years.
22. It was also submitted that calculation of the claim for the recovery on account of allegedly defective goods is erroneous. Plaintiff has falsely stated that there was short delivery of 3620 products and that the penalty was imposed at the rate of Rs. 500/- per unit or the cost of the product. Further, calculation based on the number of products and the penalty imposed does not yield an accurate amount and does not match with the ledger account maintained by the defendant.
23. In terms of clause 9.1 of the Master Supplier Agreement Ex. PW1/3 dated 30.12.2014, it shall remain in force for the period of CS (Comm) No. : 142/2019 10/ 26 one year from the date of signing of the agreement. Clause 9.1 reads as under:
" This Agreement shall remain in force for a period of 1 (one) year from the date of signing of this agreement and may be terminated by either SUPPLIER or BUYER by providing written notification at least 60 (sixty) days in advance".
No further agreement or renewal of the same is placed on record by the plaintiff. PW1 stated that Master Supplier Agreement between the plaintiff and defendant was entered in the year 2015-2016 and the steps which were being followed for renewal of agreement, were through online mode or sometimes through hard copy. He stated that at the time of renewal of the agreement, on the request of vendor (defendant), plaintiff company continued the business with the defendant and later on agreement was renewed and was collected by the plaintiff from the defendant. Though no renewed agreement is brought on record, nevertheless, it is borne out of the record that parties continued their business transactions with each other, even post expiry of the agreement Ex. PW1/3.
24. Master Supplier Agreement Ex. PW1/3 also contains clause pertaining to liquidate damages, which reads as under:
"14. The supplier agrees to provide the buyer a sum of INR 500 (Five Hundred only) or the value of the product, whichever is less, per every product unit which is not delivered to the BUYER in accordance with the terms of the purchase order. "
25. Plaintiff had filed interrogatories on record to be answered by defendant. In response to the interrogatory with regard to the value of transactions pertaining to plaintiff and the value of returned/rejected goods in sales tax/VAT returns, it was answered that goods delivered to the plaintiff were exempted from Sales Tax/VAT, therefore, the value of transactions pertaining to plaintiff could not be shown in the sales tax/VAT Returns. As further stated, CS (Comm) No. : 142/2019 11/ 26 however value of the goods returned as well as good left unsold with the plaintiff and returned to defendant after 6 months to 18 months were adjusted as sales returns, as per the ledger maintained by defendant during the course of business with plaintiff. Defendant referred to the extracts from ledger pertaining to the sales figures for financial year 2012-2013 to 2015-2016, which are as follows:
Financial Year Sales Total Unit Sold Avg. Price
(Rs.) (Piece) (Rs. )
2012-13 3,38,715 329 1030
2013-14 8,99,584 775 1160
2014-15 2,33,17,901 15,371 1520
2015-16 1,79,84,686 12,817 1,400
Total 4,25,40,886 29,292 1,452
26. It was submitted that there was good rise in business with plaintiff and if defendant had not been providing good quality products, this much sale would not have been possible and it was because of the payment delay by plaintiff that defendant stopped doing business with plaintiff. Also , the average sale price for four years was just around Rs. 1400/- to Rs. 1475/- . So if the plaintiff had imposed the penalty of Rs. 500 per product on them, it was practically impossible for them to work with them. Therefore, they negotiated with plaintiff not to impose penalty to which plaintiff agreed. Nevertheless, any mutual understanding between the parties that the penalty would not be charged till there was some gross negligence as this would hamper growth of business of both the parties, is not proved on record by the defendant.
CS (Comm) No. : 142/2019 12/ 2627. It was submitted that plaintiff again tried to put penalty for sometime, but after their mail and telephonic conversation, plaintiff stopped charging the penalty as was reflected from emails.
28. Email dated 18.09.2015 refers to request of the defendant to look into the payments where there had been a penalty debit of Rs. 500 per pc. It was written that :
" ........We have been working towards fulfilling complete orders and replacements in time as well. However, sometimes, there are cases where pcs get short/damaged. Penalty of Rs. 500/pc is very denting on us. As you know we are not working on high margins".
Plaintiff was requested to reverse the debits to avoid business losses to defendant. Nine debit notes were attached with the email. However, any reply issued by plaintiff to the said request of defendant was neither placed on record by the defendant nor proved.
29. Defendant also in answer to the interrogatory pertaining to total amount of liquidated damages, answered that total liquidated damages @ Rs. 500 per produce or price of product were not applicable as agreed mutually after negotiations. Moreover, the payment accounts were reconciled by the plaintiff. Reconciliation Statement sent vide email dated 16.12.2014 was enclosed alongwith answer to the interrogatory. It was stated that there too, no penalties were imposed by the plaintiff on account of liquidated damages. In the meeting of February 17th , 2017 at plaintiff's office, plaintiff again reconciled, confirmed and agreed to the balance outstanding amount of Rs. 2,77,134/- by making 40% payment of Rs. 1,10,854/- vide UTR on February 17, 2017 after their confirmation on email of the final ledger, outstanding with them.
30. Alongwith written statement, defendant had placed on record email communication between the parties. Though defendant itself CS (Comm) No. : 142/2019 13/ 26 has not led any evidence on record. Nevertheless, email communication between the parties was not specifically disputed by the plaintiff.
31. Vide email dated Feb 12,2016, defendant wrote:
" Hi Sandeep, We have adjusted the payments made against the old invoices. The below invoices are still pending.
Total amount outstanding for Adah Fashion old Account is Rs. 6,33,872/- and for Pankaj Creation is Rs. 9000/-.
Kindly clear these issues asap and release payment against these bills".
32. Vide email dated Feb 17,2017, addressed to Madhur/Sandeep, it was conveyed by defendant:
" As discussed in today's meeting, we confirm on the below points. 40% Payment of due under Goldsquare in Adah Fashions against an amount of Rs. 277134/- to be paid today by Goldsquare after this mail confirmation.
There is a dispute note pending for an amount of Rs. 118873/- , data of which if not matched with Adah Fashions record or is not proved by Goldsquare to be true, will be paid to Adah Fashions.
An amount of Rs. 1,50,000/- due under Awari Technologies, 40% amount is being paid today after this mail confirmation.
An amount of Rs. 61,605/- under market place model is being paid completely as full amount under this model."
33. Vide email dated July 5, 2017, addressed to Madhur/Sandeep/Shahab, it was conveyed by defendant :
" As per the above meeting, we had received 40% payment against our outstanding and the balance is still unpaid after four months.
Adah Fashions- Outstanding Final (Rs. 2,77,134/-) Payment received- 110854/-, Balance Outstanding - Rs. 1,66,280/-
Adah Trendz (Awari Account)- Outstanding Rs. 1,50,000/- , Payment received - Rs. 60,000/-, Balance Outstanding- Rs. 90,000/-
Kindly clear these outstanding asap. This is due for a long time and we need our payment asap, else we will have to go legal for claiming out legitimate dues."
34. Vide email dated December 21,2017, sent by defendant to Shahad Rizwan with CC to Sandip Fashions, Anurag Sharma, Sandeep Jha and Madhur Kumar Agrawal, it was conveyed that:
CS (Comm) No. : 142/2019 14/ 26" We still havent received our balance payment as per above mail and after my team member met Madhur in your office in February 17.
Kindly clear our dues asap , its been very long.
If required, we will meet for the same in Goldsquare office for any clarification".
35. It was submitted by Ld. counsel for defendant that as per the email dated 05.07.2017 and others filed alongwith interrogatories, in a reconciliation meeting on 17.02.2017, plaintiff admitted to their outstanding and agreed to pay Rs. 2,77,134/- (other than a dispute note of Rs 1,18,873/- for which they never clarified, disagreed or paid) but only paid Rs.1,10,854/-, Plaintiff still owes Rs.1,66,280/- to defendant and Rs. 90,000/- to defendant's sister concern, Adah Trendz and has failed to clear the remaining dues.
36. To the specific reference of defendant to the email communications and with regard to the amount remained outstanding on the part of plaintiff, in replication, it was submitted that since the defendant has neither filed any counter claim nor has filed any civil suit, the said contention of defendant was stated to be baseless. It was submitted that without admitting the contention of defendant or any amount, in the event if any amount is receivable by the defendant from the plaintiff, same has no relevance with the amount receivable by the plaintiff from the defendant under the agreement.
37. Apparently, there was no specific denial to the email exchange between the parties whereby defendant has specifically asserted about reconciliation of the accounts upon which the liability of the plaintiff was made out. It cannot be said that the amount receivable by the defendant from the plaintiff was of no relevance with the amount receivable by the plaintiff since the reference by both the parties are to the same business transactions CS (Comm) No. : 142/2019 15/ 26 between the parties and specifically averred by the defendant with regard to reconciliation of the accounts.
38. Defendant though ought to have led evidence to establish its defence, nevertheless, plaintiff also cannot be benefited by not leading of evidence by defendant as plaintiff is also required to establish on record that there was short supply/defective goods for which debit notes were issued and the defendant was intimated. According to PW1, upon receipt of defective goods from defendant, they used to intimate defendant through email or through phone calls. He did not remember the exact units of defective goods which were received by the plaintiff from defendant. This witness did not remember the exact place of business of the defendant, exact amount as claimed by the plaintiff, date on which last GRN (Goods Receipt Note) was sent to the defendant by plaintiff and the period within which the plaintiff was required to make payment to the defendant on receipt of goods from defendant as per the agreed terms of Ex. PW1/3 .
39. Ld. counsel for plaintiff submitted that merely not remembering the exact dates of units purchase, number of units purchased, amount of defective goods etc. is no ground to disbelieve the witness, once all the documents were filed on record which cannot be negated otherwise.
40. It is correct that parties are relying upon the documents as available on record and the witness is not required to remember the exact dates or details for which the documentary evidence is on record. Parties are not at dispute pertaining to the value of material , return of the unused products by plaintiff for which plaintiff had raised debit notes and were also entered by defendant in its accounts as 'Sales Returns' . There is no dispute with regard to CS (Comm) No. : 142/2019 16/ 26 issuance of debit notes. Although some of the debit notes, part of Ex. PW1/254 had been raised in name of Hypnotex Private Limited and not in name of defendant. Ld. counsel for plaintiff upon clarification, submitted that the same was an inadvertent mistake and these documents did not belong to defendant. However, for the plaintiff to claim liquidated damages, it is required to establish on record that the intimation with regard to alleged deficiency was sent to the defendant in terms of agreement Ex. PW1/3.
41. Ld. counsel for defendant submitted that as per clause 10 of Master Supplier Agreement dated 30.12.2014, it was agreed by both the Plaintiff and Defendant that the notice was required to be given under the said agreement. However, plaintiff breached the terms of agreement and did not issue any notice to the defendant concerning any defective goods, quality issues, penalty etc, thus he is not entitled to claim any liquidated damages or compensation etc.
42. Ld. counsel for defendant also submitted that as per the master supplier agreement, sub clause 4.6, plaintiff had to inform the Defendant pertaining to shortage/inaccurate/improper quality products within 2 days from the receipt of the consignment. However, plaintiff never intimated the defendant pertaining to improper quality of products within 2 days as per the terms of agreement. Plaintiff used to return good after 6 months to 18 months which was evidently recorded as 'sale or returned' in the ledger account of the defendant, as was so mentioned in the reply filed by defendant to the interrogatories. It was further submitted that as per section 42 of the Sale of goods Act, 1930, the buyer deemed to have accepted the goods when the buyer keep the goods for reasonable time without bringing it into the knowledge of seller that he rejected them. Reliance was placed upon M/s Lohman CS (Comm) No. : 142/2019 17/ 26 Rausher Gmbh Vs M/s Medisphere Marketing Pvt Ltd.117(2005) DLT 95, wherein it was observed that if defendant did not reject goods within reasonable time, they would be deemed to have accepted goods. Long gap after which goods were ostensibly rejected on promise that they were defective is clearly fatal in context of statutory law. Relevant para of said judgment was quoted as below:
"21. As per the mandate of Section 41 of the Sale of Goods Act, the defendant not having inspected the goods in question prior to delivery. had a right to inspect the case on delivery and report defects within a reasonable time of delivery. If not rejected within reasonable time, mandate of Section 42 stipulates that the defendant would be deemed to have accepted the goods".
43. Irrespective of the fact that the Master Supplier Agreement dated 30.12.2014 Ex. PW1/3 had been renewed or not, parties transacted on the basis of the same beyond the period of one year. The agreement itself contains clause 14 for claim of liquidated damages whereby supplier had agreed to provide the buyer a sum of INR 500 (Five Hundred only) or the value of the product, whichever was less, per every product unit which was not delivered to the BUYER in accordance with the terms of the purchase order. Based upon this clause, plaintiff is seeking damages in sum of Rs. 17,43,455/- (Rupees Seventeen Lacs Forty Three Thousand Four Hundred Fifty Five only) alleging short delivery/defect in the goods. Nevertheless, same master supplier agreement also contains another clause 4.6 whereby clause 14 was to be operative only upon compliance of the condition as laid down in clause 4.6. Clause 4.6 is reproduced hereunder:
" If in a particular consignment, there is shortage/inaccurate/improper quality products shipment to the BUYER, the SUPPLIER would be wholly responsible to deliver the balance/replacement products to the BUYER at its own expenses. The BUYER may inform the SUPPLIER about such missing/inaccurate/improper quality products (as mentioned above in this CS (Comm) No. : 142/2019 18/ 26 clause) within 2 working days from receipt of the consignment and the SUPPLIER shall replace/replenish products within 2 (two) working days of the intimation. The LIQUIDATED DAMAGES as mentioned in clause 14 shall apply in case of the SUPPLIER missing this deadline".
44. Apparently, in terms of abovenoted clause 4.6, it was obligatory upon the plaintiff to inform defendant within two working days, upon which defendant was required to replace/replenish the products within two working days of the intimation. No such intimation made to defendant is part of record, which was pre-requisite for invocation of clause 14 of the agreement. Neither the intimation of alleged deficiency, nor the non action of defendant for replacement within two working days of intimation is proved on record by plaintiff , dis-entitling plaintiff to call for impositionof penalty as per clause 14.
45. Plaintiff has also stated about the issuance of sorry voucher in sum of Rs. 250 to every customer, whereby it had incurred additional amount to maintain its customer base and un-liquidated losses. However, no such sorry voucher issued by plaintiff to any of the customers due to alleged default by the defendant pertaining to inferior quality of the product/delayed delivery has been filed on record.
46. PW1 asserted that due to defective goods, they were loosing customers and used to issue sorry vouchers of Rs. 250/- for defective and non delivery of goods to their customers, however, conceded that plaintiff has not filed any sorry vouchers of Rs. 250/- for non delivery of goods to their customers, in the present suit. He did not remember whether the plaintiff had intimated the defendant about the sorry vouchers of Rs. 250/- which they used to issue to their customers due to receipt of defective goods from the defendant.
CS (Comm) No. : 142/2019 19/ 2647. Ld. counsel for plaintiff submitted that plaintiff has not made any claim with regard to amount incurred for issuance of sorry vouchers and the plaintiff's claim is for liquidated damages due to shortfall and defective quality in the material supplied by the defendant.
48. As already noted, plaintiff has not been able to establish on record the intimation of alleged defect in the supply by defendant to raise any claim with regard to the same. The other evidence in form of sorry vouchers having been issued to the customers due to the defective supply or delayed delivery by defendant has also not been brought on record by the plaintiff.
49. After the reconciliation of accounts in the year 2017, whereby the outstanding amount in sum of Rs. 1,10,854/- was payable by plaintiff, it is not open for the plaintiff to agitate for liquidated damages with regard to all the supplies and rejected products, if any, prior thereto and post dis-continuation of business relationship between the parties at least in absence of proof of any such intimation of deficiencies to defendant.
50. With regard to claim of plaintiff for damages and compensation for the losses suffered due to act, omission and breach of contract on the part of defendant, plaintiff as stated, has restricted its claim to the sum of Rs. 20 lacs to make good of such losses to the plaintiff although there was substantial loss of business and goodwill to the plaintiff because of the conduct of defendant. Plaintiff itself claimed raising of purchase orders in sum of Rs. 4,32,83,793/- for 29,405 products/pieces upon defendant. Plaintiff paid the amount of Rs. 3,46,53,142/- against supply of goods/products while defendant had raised invoices amounting to Rs. 4,25,05,005.44. As stated by PW1, after return of the products CS (Comm) No. : 142/2019 20/ 26 to the defendant, only products worth Rs. 3,74,60,309/- were accounted for, by the plaintiff, however products worth Rs. 24,04,266/- were found to be of inferior quality and rejected in quality check products and were returned, for which debit notes were issued to the defendant.
51. It was submitted that Rs. 20 lacs is being claimed by the plaintiff towards damages/compensation on account of loss of business, goodwill and reputation. Plaintiff also stated about its business turn over more than Rs. 100 Crores in the financial year 2014-15 which came down to about Rs. 68 Crores in the financial year 2015-16 and only about Rs. 2 to 3 Crores in the financial year 2016-2017.
52. Ld. counsel for defendant submitted that plaintiff has not provided any clear evidence to prove that the Plaintiff suffered damages, business loss, or loss of goodwill due to defective goods supplied by the Defendant. The Plaintiff has also failed to justify its claim for Rs. 20,00,000/- as compensation for alleged damages and business loss. Moreover, there is no sorry voucher on record, which would have been the key proof to show that the Plaintiff faced any business loss due to customer returns. In the absence of such evidence, the Plaintiff's claim for business loss is baseless and unsustainable in law.
53. It was further submitted by Ld. counsel for defendant that in the case of Fateh Chand vs. Balkishan Dass, 1963 SCC OnLine SC 49, the Hon'ble Apex Court observed that under Section 74 of the Indian Contract Act, 1872 compensation for breach of contract can be awarded even without proving actual damage, but it must be reasonable. The compensation cannot exceed the penalty stipulated in the contract. The Court must assess compensation based on the CS (Comm) No. : 142/2019 21/ 26 circumstances and the natural consequences of the breach but not in the case when there is no legal injury. The relevant para is reproduced herein below:
"10. Section 74 of the Indian Contract Act deals with the measure of damages in two classes of cases (i) where the contract names a sum to be paid in case of breach and (ii) where the contract contains any other stipulation by way of penalty. We are in the present case not concerned to decide whether a contract containing a covenant of forfeiture of deposit for due performance of a contract falls within the first class. The measure of damages in the case of breach of a stipulation by way of penalty is by Section 74 reasonable compensation not exceeding the penalty stipulated for. In assessing damages the Court has, subject to the limit of the penalty stipulated, jurisdiction to award such compensation as it deems reasonable having regard to all the circumstances of the case. Jurisdiction of the Court to award compensation in case of breach of contract is unqualified except as to the maximum stipulated; but compensation has to be reasonable, and that imposes upon the Court duty to award compensation according to settled principles. The section undoubtedly says that the aggrieved party is entitled to receive compensation from the party who has broken the contract, whether or not actual damage or loss is proved to have been caused by the breach. Thereby it merely dispenses with proof of "actual loss or damage"; it does not justify the award of compensation when in consequence of the breach no legal injury at all has resulted, because compensation for breach of contract can be awarded to make good loss or damage which naturally arose in the usual course of things, or which the parties knew when they made the contract, to be likely to result from the breach."
54. As further submitted, plaintiff has utterly failed to demonstrate any legal injury, harm, or loss suffered in the course of business. In the absence of such proof, the Plaintiff's claim for compensation is entirely unfounded, baseless, and devoid of merit. There is no justification for awarding damages, as no actual damage or loss has been shown to have occurred, rendering the Plaintiff's claim wholly speculative and without legal standing.
55. Reliance was also placed by Ld. counsel for defendant upon M/S. Kailash Nath Associates v. Delhi Development Authority, 2015 SCC Online SC 19, wherein it was observed that:
"43....Where a sum is named in a contract as a liquidated amount payable by way of damages, the party complaining of a breach can receive as reasonable compensation such liquidated amount only if it is a genuine pre- estimate of damages fixed by both parties and found to be such by the Court. In CS (Comm) No. : 142/2019 22/ 26 other cases, where a sum is named in a contract as a liquidated amount payable by way of damages, only reasonable compensation can be awarded not exceeding the amount so stated. Similarly, in cases where the amount fixed is in the nature of penalty, only reasonable compensation can be awarded not exceeding the penalty so stated. In both cases, the liquidated amount or penalty is the upper limit beyond which the Court cannot grant reasonable compensation.
56. The business transaction with defendant in terms of own submission of the plaintiff were worth Rupees three to four crores. PW1 stated that due to breach of contract on the part of defendant and similar vendors, plaintiff who had business turnover of more than Rs. 100 Crores in the financial year 2014-2015 came down to Rs. 2 to 3 Crores in the financial year 2016-2017. In these circumstances, any reduction in business turnover of plaintiff cannot be attributed to the defendant with whom the plaintiff was having business transactions worth only Rs. 4 crores in the year 2014-2015 when the plaintiff's business turnover, as stated, was more than Rs. 100 Crores. A supplier for the products less than or approximate four crores to the plaintiff cannot be the reason for the business losses in multiple numbers or crumbling of the business of the plaintiff, particularly in absence of evidence of any glaring deficiencies on the part of defendant during the course of businesss transactions between the parties. Having discussed as above, this issue stands decided against plaintiff.
57. Issue no. 2: It was submitted by Ld. counsel for defendant that the present suit is not maintainable as the jurisdiction lies exclusively in Surat in accordance with the terms of the sale invoices issued by the Defendant. With reference to section 20 of Civil Procedure Code 1908, it was submitted that the suit may be instituted in a Court within the local limits of whose jurisdiction the defendant actually and voluntarily resides or carries on business. In this case, the jurisdiction lies with Surat Court, as the defendant resides and runs his business CS (Comm) No. : 142/2019 23/ 26 there only and has supplied the goods from Surat only. Therefore, this court does not have the jurisdiction to adjudicate the present suit. It was further submitted that the cause of action for instant case did not arise in Delhi pertaining to the dispute between the Plaintiff and the defendant.
58. Reliance was placed upon Shridhar Vyapaar Private Limited v Gammon India Limited, the principle 2018 SCC OnLine Cal 11749, wherein it was observed that :
"10. The principle can be simplified thus; parties can be bound to an agreement containing a clause conferring exclusive jurisdiction on certain courts, if by their conduct subsequent to such selection, it can be shown that the parties intended to give effect to the contract. The exception being where despite such a clause and a consensus to act by it, the cause of action arose wholly and overwhelmingly in another jurisdiction and second, it would be oppressive to drag the parties to their chosen forum having regard to other factors."
59. Ld. counsel for plaintiff, per contra, submitted that the onus to prove the instant issue was on the Defendant, who did not lead any evidence to discharge its own onus to prove the same. It was submitted that unsubstantiated pleadings remain mere assertions without probative value and do not carry any weight in the eyes of the law. Consequently, defendant's unsubstantiated contentions remain unproved and are devoid of any evidentiary basis. Reliance was placed upon R.V.E. Venkatachala Gounder v. Arulmigu Viswesaraswami & V.P. Temple, (200x3) 8 SCC 752.
60. Ld. counsel for plaintiff further submitted that it is a settled principle of law that where a party fails to lead evidence in support of its pleadings, an adverse inference can be drawn against such a party. The defendant, despite having the onus to prove the issues framed against it, chose not to enter the witness box or lead any evidence. This conduct implies that the Defendant has no credible evidence to rebut the claims of the Plaintiff . For the abovesaid, CS (Comm) No. : 142/2019 24/ 26 reliance was placed upon Vidhyadhar v. Manikrao & Anr., (1999) 3 SCC 573.
61. Ld. counsel for plaintiff further submitted that though defendant has not led any evidence in support of his claim or objections and the issue of Jurisdiction has also not been framed by this Court, plaintiff, without prejudice to the other rights and contentions, submitted that as per Clause 12 of Master Suppliers Agreement, Delhi Courts have exclusive jurisdiction to entertain the present suit since the Master Suppliers Agreement signed by both parties expressly represents consensus ad idem, however, the jurisdiction clause in invoices is due to a pre-designed format and no indication that there is consensus ad idem.
62. Defendant has relied upon the invoices which restricted jurisdiction to the courts of Surat, however, the invoice is the document raised and created by the defendant without any mutual consent/agreement by the other party. Unilateral mention in the invoices does not have effect to restrict the jurisdiction to a particular court pertaining to the dispute between the parties. Further, the Master Supplier Agreement based upon which both the parties had derived their respective rights and responsibilities was executed at New Delhi. Master Supplier Agreement further contains the clause with regard to exclusive jurisdiction of the courts at Delhi. Besides the mention in the Master Supplier Agreement with regard to restriction of jurisdiction to Delhi Courts, part of cause of action having arisen within the jurisdiction of Delhi Courts following the execution of agreement within the territorial jurisdiction of Delhi Courts, suit filed by plaintiff is held to be within the territorial jurisdiction of this court. Issue no.2 stands decided in favour of plaintiff and against defendant.
CS (Comm) No. : 142/2019 25/ 2663. Relief (Issue no.3) :- Suit is dismissed with no order as to cost. Decree sheet be prepared accordingly. After completion of formalities, file be consigned to record room.
Digitally
signed by
savita savita rao
Date:
rao 2025.03.11
15:24:42
+0530
Announced in the open (SAVITA RAO)
court on 11.03.2025 DISTRICT JUDGE
(COMMERCIAL COURT)-01
SOUTH, SAKET COURTS, DELHI
CS (Comm) No. : 142/2019 26/ 26