Karnataka High Court
Southern Sales And Services vs Sauermilch Design And Handels Gmbh on 2 December, 2021
Author: Alok Aradhe
Bench: Alok Aradhe
1
IN THE HIGH COURT OF KARNATAKA AT BENGALURU
DATED THIS THE 2nd DAY OF DECEMBER, 2021
PRESENT
THE HON'BLE MR. JUSTICE ALOK ARADHE
AND
THE HON'BLE MR. JUSTICE ANANT RAMANATH HEGDE
COMAP. No.19/2019
BETWEEN:
1. SOUTHERN SALES & SERVICES
A PARTNERSHIP FIRM AT NO.7/1,
1ST FLOOR, K H ROAD,
BENGALURU - 43.
2. SRI SHYAM GOENKA
PARTNER, SOUTHERN SALES &
SERVICES, AT NO.7/1,
1ST FLOOR, K H ROAD,
BENGALURU - 43.
3. SRI C S KEDIA
PARTNER, SOUTHERN SALES &
SERVICES, AT nO.7/1,
1ST FLOOR, K H ROAD,
BENGALURU - 43. .. APPELLANTS
(BY SRI.PRAMOD N KATHAVI, ADV.)
2
AND:
SAUERMILCH DESIGN & HANDELS GMBH
A COMPANY INCORPORATED AND
FUNCTIONING UNDER THE LAWS OF
GERMANY HAVING ITS OFFICE AT
KREUZGRUNDWEG 1
36100 PETERSBURG, GERMANY. ... RESPONDENT
(BY SRI.TEJAS, ADV. FOR M/S DUA ASSOCIATES, ADV. )
THIS APPEAL IS FILED UNDER SECTION 13(1-A) OF
THE COMMERCIAL COURTS ACT, 2015 PRAYING TO
SET ASIDE THE JUDGMENT AND DECREE DATED
07.08.2019 PASSED BY THE LXXXII ADDL. CITY CIVIL
AND SESSIONS JUDGE, BENGALURU (CCH 83) IN
COMMERCIAL O.S. No.6700/2003 TO THE EXTENT OF
THE DECREE IN FAVOUR OF THE
PLAINTIFF/RESPONDENT ENTITLING THE RESPONDENT
TO RECOVER A SUM OF DM 414,432.80 (EURO
211,896.13) (Rs.1,08,06,702.63) TOWARDS FREIGHT
COST OF RE-EXPORT OF GOODS AND SUM OF DM
213,325.1 (EURO 109,071.38) (RS. 55,62,640.03)
TOWARDS BALANCE CLAIM AMOUNT OF ADMITTED
SUM OF DM 680,000.00 WITH FUTURE INTEREST AT
8.5% P.A. FROM THE DATE OF SUIT TILL REALISATION
OF AMOUNT FROM THE APPELLANTS HEREIN AND ETC.
THIS APPEAL BEING HEARD AND RESERVED ON
29TH NOVEMBER, 2021 AND COMING ON FOR
PRONOUNCEMENT OF JUDGMENT THIS DAY, ANANT
RAMANATH HEGDE J., DELIVERED THE FOLLOWING:
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JUDGMENT
In this appeal the challenge by the defendants is to the part of the judgment and decree dated 07.08.2019 passed in Comm.O.S.No.6700/2003 on the file of the LXXXII Addl. City Civil & Sessions Judge, Bengaluru holding the defendants jointly and severally liable to pay a sum DM 414,432.80 (EURO 211,896.13) (Rs.1,08,06,702.63) along with interest @8.5% p.a.
2. The parties to this proceeding are referred to as per their ranking in the original suit.
3. Facts in brief:
Plaintiff is a Company incorporated in Germany. The 1st defendant is a partnership firm registered in India and the 2nd and 3rd defendants are its partners. The quality and colour of some consignment of home furnishing products supplied to the plaintiff by the 4 defendants, did not conform to the specifications of the plaintiff. This led to the dispute. After many discussions a settlement was arrived at wherein the defendants agreed to offer discount of DM 6,80,000.00 to the plaintiff to compensate for the defective materials supplied. The defendants were required to pay the said sum in 5 monthly equal installments commencing from March 2001. In addition to this, the plaintiff further made a claim that it has supplied some raw materials to the defendants, to expedite the delivery of products to the plaintiff and claimed that defendants have not the paid price of said raw materials. It is the further case of the plaintiff that defective goods supplied by the defendants were re- exported to the defendants in September 2001 and the freight charges are to be borne by the defendants and defendants failed to repay the said charges. 5
4. The demand notice sent by the plaintiff was not answered by the defendants. The plaintiff sued the defendants for recovery of Rs.3,86,52,156.42 (Euro 757,885.42) (DM 184,265,169). The suit was registered as O.S. No.6700/2003 and on establishment of Commercial Court, same was renumbered as Com.O.S. No.6700/2013.
5. The claim of the plaintiff can be classified under three different heads:
(a) Towards the cost of re-export of defective goods to the defendants amounting to Rs.1,08,06,702.63;
(b) Towards balance due in respect of discount agreed to be paid by the defendants on defective materials supplied, amounting to Rs.55,62,640.03;
(c) Towards cost of curtain rings, curtain tapes and sticker amounting to Rs.1,45,16,648.67.
6. The claims (a) and (b) referred above are granted by the Commercial Court. The claim (c) referred above is 6 rejected. The said rejection is not called in question by the plaintiff. To the said extent, judgment and decree of the Commercial Court has attained finality.
7. The defendants have questioned the judgment and decree in respect of claims (a) and (b) referred above.
8. It is also relevant to state that the suit was filed invoking Order XXXVII of Code of Civil Procedure. In the said suit, the defendants applied for a leave to contest the matter. Unconditional leave was granted to defend the suit. The plaintiff questioned this order granting unconditional leave to contest the matter. The said petition viz. CRP No.460/2005 was allowed by this court and the defendants were put to terms and were directed to deposit 55% of the admitted liability. The challenge to the order in CRP No.460/2005, was made in Civil Appeal No. 6046/2008 before the Supreme Court and same was 7 dismissed by Judgment dated 03.10.2008. The defendants have deposited Rs.90,03,200 on 16.01.2009 before the Commercial Court in terms of order passed in CRP No.460/2005. The claim of the plaintiff which is in dispute in this appeal is based on Ex.P.4, P16, Ex.P.6 and Ex.P.7. Exhibit P4 and Ex.P16 are undisputed documents.
9. The defendants contested the suit and disowned the liability under Ex.P.6 and Ex.P.7. The defendants would also contend that liability under Ex.P.4 and Ex.P.16 cannot be enforced as the said liability is admitted by the defendants subject to the condition that the plaintiff would continue business relationship with the defendants. Though the defendants admitted to offer DM 6,80,000.00 as discount for defective goods supplied by them and though they paid DM 4,66,674.19 towards partial discharge of liability admitted by them, the balance amount of DM 2,13,325.10 was not paid by them on the ground that the plaintiff did not continue the business 8 relationship with the defendants. Thus, the defendants have disowned the liability of DM 6,80,000.00 admitted under Ex.P.4 and Ex.P.16.
10. The defendants also contended that Ex.P.6 under which the plaintiff is seeking a decree to recover cost of re-export of defective goods is not executed by the defendants. Even execution of Ex. P.7 which reiterates the liability under Ex.P.4 is also denied. The defendants would further urge that Ex.P.6 and Ex.P.7 are concocted. As an alternative plea, the defendants further contended that even if Ex.P.6 and Ex.P.7 are held to be the documents executed by the defendants, then also the liability cannot exceed beyond DM 6,80,000.00 i.e. what is contained in Ex.P.4 and Ex.P.16. According to the defendants, the liability mentioned in Ex.P.6 and Ex.P.7 is already captured under Ex.P.4 and Ex.P.16. 9
11. In this appeal the defendants have also questioned the interest and the cost awarded by the Commercial Court.
12. The Commercial Court framed the following issues:
(1) Whether the defendants prove that they had agreed to pay DM 6,80,000.00 only on the assurance of the plaintiff to continue to place future orders for home furnishing products?
(2) Whether defendants further prove that as a good gesture and with assurance of the plaintiff to comply such commitments made payments in sum of DM 466,674.90 by October 2001?
(3) Whether the defendants further prove that as the very plaintiff committed breach of commitment, they are justified in not paying the balance?
(4) What decree or order?
13. We have heard the learned counsel appearing for the parties and in terms of the contentions raised at the bar, following points arise for consideration: 10
(i) Whether the defendants/appellants are able to establish that Ex.P.6 and Ex.P.7 are forged and concocted and no liability flows from the said documents?
(ii) Whether the defendants/appellants are able to establish that claim made under Ex.P.6 is covered in terms of settlement under Ex.P.4?
(iii) Whether the plaintiff is entitled to reimbursement of freight charges incurred towards re-export of defective goods?
(iv) Whether the admission of liability by the defendants in terms of Ex.P.4 is subject to rider that the plaintiff should continue business relationship with the defendants?
(v) Whether the interest @ 8.5% p.a. awarded by the Commercial Court is excessive?11
Discussion on Point No.(i)
14. To substantiate the claim that the documents at Ex.P.6 and Ex.P.7 are concocted, at the instance of defendants, expert's opinion was sought before the Commercial Court. Handwriting expert gave her report expressing inability to give her opinion on the disputed signatures marked at Ex.P.6a and Ex.P.7a. The defendants who were required to establish the plea of forgery, did not take any further steps to secure a definite opinion of the handwriting expert on the disputed signatures. The witness-DW1 examined on behalf of defendants, has admitted that Ex.P.6 and Ex.P.7 is also written on the letter head of the 1st defendant. There is no explanation as to how the letter head of the 1st defendant reached the plaintiff providing an occasion to the plaintiff to create the documents at Ex.P.6 and Ex.P.7. Thus, the Commercial Court has come to the conclusion that the documents are not forged. The authenticity of seal of 12 defendant no.1, appearing on Ex.P.6 and Ex.P.7 is not disputed. In the absence of any other materials to hold that the documents at Ex.P6 and P7 are concocted, we are not persuaded to take a different view on the basis of materials available on record on the plea of forgery raised by the defendants. Thus, point No.(i) is answered in the Negative.
DISCUSSION ON POINTS (ii) & (iii)
15. Plaintiff's claim to recover cost of re export of defective goods is based on Ex.P.6 dated 20.11.2001. This document is in the letter head of defendant No.1-firm. This document is the letter addressed by the defendants agreeing to pay DM 414,432.80 along with interest till December 2002. The learned counsel for the defendants has invited the attention of the Court to the statements made in the cross examination of PW1 at paragraphs 32 to
38. Based on the said oral evidence, learned counsel for 13 the defendants would contend that Ex.P6 contains the claim made under Ex.P4. On careful analysis of the statement found in Ex.P.4, which is explicit as to the nature and scope of settlement, it can be held that the statements found in paragraphs 32 to 38 are not conclusive to disbelieve the contents of Ex.P6 which bears the seal and signature of the authorised signatory of the 1st defendant that too on the letter head of the 1st defendant.
16. Claim based on Ex.P6 dated 20-11-2001 is relating to freight charges of re-export of defective materials. The defendants have raised the defence that all claims are agreed to be settled in terms of Ex.P4 dated 29- 10-2001 and P16 dated 22-02-2001. Ex.P.4 in explicit terms says that the liability of DM 6,80,000.00 is towards the supply of defective goods. In fact, it is relating to discount offered by the defendants, to compensate for the loss on account of supply of defective products. In Ex.P4, 14 on the top of the tabular column, the nature of settlement is explained. This explanation on the top of the tabular column refers to 'discount' offered by the defendants. The seal found in Ex.P.4 put by the plaintiff reads as under:
"Accepted for full and final settlement of above claim".
(Emphasis supplied) In the document at Ex.P16, dated 20.02.2001, the defendants have been asked by the plaintiff to pay DM.6,80,000.00 in five monthly installments starting from March 2001. This letter was sent from Germany and signature of authorised signatory of defendant no.1 is put on Ex.P16 along with the seal of defendant no.1. This document also makes it abundantly clear that the plaintiff would retain the defective goods. From Ex.P.4 and P16, both being undisputed documents, one can safely conclude that the settlement arrived at by the parties is relating to discount payable to the plaintiff on the defective goods supplied by the defendants. It also 15 emerges from reading of Ex.P16 that the parties agreed that plaintiff would retain the defective goods. However the suit filed by the plaintiff also includes a claim relating to cost of re export of the defective materials which is said to have been returned to the defendants in September 2001.
17. This being the claim, the question that needs to be answered is, whether the plaintiff agreed to return the defective goods at its own cost to the defendants?
18. It is seen from the records that the defendants in the written statement have taken a stand that the defective goods are not sent back to the defendants. However in the cross examination, the DW1 has admitted that defective goods are returned to the defendants by the plaintiff and are sold by the defendants. This leads to the inevitable inference that the original settlement in terms of Ex.P16 dated 22-02-2001, which allowed the plaintiff to retain the defective goods is modified in part 16 and later the parties agreed on return of goods to the defendants. However, there is no written contract in this regard. This settlement relating to return of the defective goods has to be inferred from the attendant circumstances and from Ex.P.6. This being the position, the next question that needs to be answered is, who has to bear the cost of re-export. The defective goods are returned because they were defective and not as per the specifications of the plaintiff. Since the goods supplied by the defendants were defective, the cost of re-export has to be borne by the defendants. The defendants have received the defective goods and sold it. In the circumstance of the case, asking the plaintiff to bear the cost of re export of defective goods sounds highly illogical. It is like rewarding the defendants for their the own fault. Having supplied the defective goods, the defendants cannot shirk the liability to bear the cost of re-export. If there were to be an express contract, fastening the liability of re-export on 17 the plaintiff, then the plaintiff had to bear the cost of re- export. The defendants have not raised plea of any such contract. There is no stand in the written statement explaining as to how, under what circumstances and on what terms defendants agreed to receive the defective goods which was once agreed to be retained by the plaintiffs. The act of plaintiff returning defective goods to the defendants cannot be termed as a gratuitous act on the part of the plaintiff in the absence such plea by the defendants. Instead of offering an acceptable explanation as to why and on what terms the defendants have received defective goods from the plaintiff, DW2-the partner of defendant No.1 has not offered any explanation and has tried to give an impression that he is unaware of goods being returned. This stand of DW2 who is the partner of defendant No.1 does not come to the rescue of the defendants. DW1 on the other hand has admitted that they have received the defective goods and same is sold by 18 them. Under the circumstances, there is no difficulty in holding that the cost of re-export has to be borne by the defendants. Thus, Point No.(ii) is answered in the negative and Point No.(iii) is answered in the affirmative. DISCUSSION ON POINT NO.(iv)
19. Coming to point No.(iv), referred above it is to be noticed that the defendants though have taken a contention that Ex.P.4 is executed subject to a rider that the plaintiff would continue the business relationship with the defendants, no such clause is found in any of the documents placed before the Court. No admission to this effect is elicited in cross examination of witness examined on behalf of the plaintiff. There is no other circumstance forthcoming from the evidence on record to support this contention of the defendants. Under the circumstances, point No.(iv) referred above is also answered against the defendants and in favour of the plaintiff. 19 DISCUSSION ON POINT No.(v):
20. The learned counsel for the defendants would urge that suit which is instituted in the year 2003 has been dragged on for many years on account of non-co- operation by the plaintiff and as such, would contend that the plaintiff is not entitled to interest. He would also urge that there is no clause in the agreement for payment of interest. Alternatively, he would contend that interest @ 8.5% p.a. is on higher side.
21. Section 3 of the Interest Act, 1978 and Section 34 of the Code of Civil Procedure would confer the powers on the Court to award appropriate interest depending upon the facts and circumstances of the case. The suit was filed in the year 2003 when the interest regime was much higher than 8.5% p.a. awarded by the Commercial Court. No doubt in recent years the interest rates have come down below 8.5% p.a. Considering the fact that the 20 transaction is a commercial transaction and considering the fact that the dispute arose on account of defective supply of goods, we deem that interest awarded by the Commercial Court is appropriate in the facts and circumstances of the case and does not call for interference in exercise of powers under the appellate jurisdiction. This view is also supported in terms of the ratio laid down by the Hon'ble Supreme Court, in the matter of ADITYA MASS COMMUNICATIONS PVT. LTD. Vs APSRTC (AIR 2003 SC 3411). Hence, Point (v) is answered in the negative.
OTHER CONTENTIONS RAISED BY THE DEFENDANTS:
22. The learned counsel appearing for the defendants would further urge that the Commercial Court erred in relying on the observations made in proceeding in CRP No.460/2005 which is confirmed by the Supreme Court in Civil Appeal No.6046/2008 to fasten the liability on the defendants. This contention of the learned counsel 21 for the defendants has to be accepted. The Commercial court could not have held that the plaintiff's case is established in view of the observations made in above referred CRP. It is to be noted that the CRP No.460/2005 was filed questioning the interlocutory order passed in the suit on an application under Order XXXVII of Code of Civil Procedure. It is settled position of law that any observations made in the proceeding on an interlocutory applications do not bind the Court while deciding the case on merits. However, it is to be noted that the said reason assigned by the Commercial Court referring to observations made in CRP No.460/2005 is not the only reason for the Commercial Court to uphold the claim of the plaintiff. Though, we disagree with the said reasoning of the Commercial Court, there is no scope to interfere with the final outcome of the suit, as judgment and decree under appeal is sustainable on four other reasons assigned by the Commercial Court.22
23. Learned counsel for the defendants also invited our attention to the notice at Ex.P.8 which is not a complete notice inasmuch as one page comprising paragraphs 9 to 13 is missing. He would further point out that reference to Ex.P.6 and Ex.P.7 in Ex.P.8 - notice is not found and Commercial Court has wrongly observed that there is a reference to Ex.P.6 and Ex.P.7 in the notice.
The Commercial Court further proceeds on the premise that the reply is not issued to the said notice and as such adverse inference has to be drawn against the defendants to the effect that defendants have admitted the claim of the plaintiff. Though, this Court is not in agreement with the aforesaid observation, no interference with the impugned judgment is warranted on this ground as the Commercial Court has accepted the claim of the plaintiff on the basis of other valid reasons discussed in the impugned judgment.
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24. The learned counsel for the plaintiff would also contend that the Commercial Court though took note of the fact that no specific issue relating to freight charges of defective goods was framed, the Commercial Court has proceeded to give a finding against the appellants without affording opportunity to lead evidence on the said issue.
25. We have gone through the judgment of the Commercial Court. The Commercial Court has given detailed reasons while answering Issue No.4 as to why there is no need to frame a specific issue, with regard to the payment of freight charges in respect of the defective goods. It is apparent from the records that the parties went to the trial with clear understanding of what the dispute is all about and have led evidence on the disputed points. Thus, no prejudice is caused to the appellants in not framing a specific issue and not allowing further evidence on the said issue. There is no scope for interference in the appeal 24
26. Accordingly, the following:
ORDER
(i) The impugned Judgment and Decree dated 07.08.2019 passed by the LXXXII Additional City Civil & Sessions Judge, Bengaluru City (CCH.83) in Com.O.S.No.6700/2003 is confirmed for the reasons assigned above and consequently, the appeal is dismissed.
(ii) The amount in deposit along with accrued interest, pursuant to the interim order dated 24.10.2019, passed in this appeal shall be released in favour of plaintiff-respondent after due verification.
(iii) The amount of Rs.90,03,200/- deposited in the original proceeding in terms of order passed in CRP No.460/2005 along with interest shall be 25 released in favour of plaintiff-respondent after due verification.
(iv) The appellants shall pay the balance decreetal amount in terms of the decree of this Court within a period of two months from the date of this judgment.
(v) The cost of this appeal payable to the plaintiff-
respondent is on defendants-appellants.
Sd/-
JUDGE Sd/-
JUDGE brn