Delhi High Court
Rare Creations Limited vs Ambar International And Ors. on 10 January, 2005
Author: Mukul Mudgal
Bench: Mukul Mudgal
JUDGMENT Mukul Mudgal, J.
1. The plaintiff is a company incorporated under the Companies Act, 1956. The said company was incorporated on 19.4.1995 with the main object of taking over the running business of M/s Rare Creations a partnership firm. The suit relates to transactionswith defendant No. 1 and 2 which the said partnership firm had entered into. The defendant No. 1 is a company and is engaged in inter alia importing goods from India. The defendant No. 2 is the President of defendant No. 1.
2. The present suit has been filed for recovery of Rs. 41,12,960/- against the defendants No. 1 and 2 only. The defendants No. 3 to 7 are stated to be only pro-forma parties. The names of the defendants No. 5 to 7 were deleted from the array of partiesvide order dated 16.10.1998 and other defendants were proceeded against ex-parte as they have filed to put up their appearance and nor have they filed any written statement.
3. The case of the plaintiff is that it has been supplying goods to the defendants No. 1 and 2 pursuant to orders received by them vide Exhibit PW 1/3 and Exhibit PW 1/4 dated 22.12.1993 and 13.1.1994. The plaintiff raised its invoices for supply of goods vide Exhibit PW 1/5 to Exhibit PW 1/15 for a total sum of US $ 99935. The details of these invoices are also described in Annexure A to the plaint. The defendant No. 3, on behalf of the plaintiff had also supplied goods to the defendants 1 and 2 vde their invoices dated 5.1.1994 and 24.1.1994 as described in Annexure-B to the plaint for a total sum of US $ 35055. It is for this reason that the defendant No. 3 had been joined as a proforma party in the plaint. The defendant No. 3 vide ExhibitW 1/97 has confirmed that they have received payments for the said goods from the plaintiff, which has been given in the statement Exhibit PW 1/98. It is, therefore, the plaintiff who has to recover a sum of US $ 35,055 from defendants 1 and 2 on accounof goods supplied by defendant No. 3 to them.
4. According to plaintiff they issued several reminders to defendants No. 1 and 2 for payment of their dues in respect of the goods supplied to them and although the goods were received by the defendants 1 and 2, they have failed and neglected to make the payment for the same.
5. It is further the case of the plaintiff that on or about July 1994, the defendants No. 1 and 2 placed further orders for supply of 40,000 pieces of leather jackets. These orders are Exhibit PW1/20 and Exhibit PW 1/21. Since the defendants No. 1 and2 were already in default in making the payments for the goods supplied, the plaintiff insisted that the goods could be supplied only after letter of credit is established in their favor. That instead of establishing letter of credit, the defendant No. 1 is stated to have offered to the plaintiff at its own cost raw material namely fabric, zips, badges, lables etc. Thus for execution of these work, the plaintiff was to perform job work. The defendants No. 1 and 2 had also assured that payments for the goods already supplied would be duly made.
6. The plaintiff accordingly applied for and got an import license for import of goods i.e. the raw material to be supplied by defendants No. 1 and 2. There was substantial delay by defendants No. 1 and 2 in sending the raw material. The plaintiff hadto incur additional expenses of US $ 55,000 by way of demurrage, detention charges and other incidental expenses for releasing the goods. Exhibit PW 1/22 is a letter dated 31.10.1994 by which plaintiff had complained about delay in receiving fabric. Te bills and documents showing the said expenses having been incurred by the plaintiff are Exhibit PW 1/24 to Exhibit PW 1/79.
7. The details of these expenses are also mentioned in Annexure C to the plaint. The plaintiff, therefore, claims that a total amount of US $ 2,38,402 is due to them as per details given in Annexure-A, B and C to the plaint. The said Annexure also includes amounts claimed by the plaintiff due to them on account of interest which is stated to have been computed @ 24% per annum. The plaintiff has also claimed in the suit the losses and damages suffered by them on account of loss of profits due to the dfault of the defendants No. 1 and 2, which has been claimed for US $ 80,000. The plaintiff has claimed that the total amount due is Rs. 1,11,44,210/- in terms of Indian rupees. The exchange rate has been computed @ 1 $ = Rs. 35/- being the relevant preailing rate. The plaintiff has further in paragraph 19 of the plaint claimed adjustment of Rs. 70,31,250/- being the value of raw material and goods supplied by the defendants 1 and 2 to the plaintiff and thus after adjusting the said amount, the plaintif is claiming the amount of Rs. 41,12,960/- as the balance amount payable to them.
8. That after the defendants No. 1 and 2 were proceeded ex-parte, the plaintiff was called upon to lead evidence by way of affidavit, Shri M.K. Monga one of the Directors of the plaintiff has accordingly filed affidavit by way of evidence on 31.12.1997.He has deposed and proved the facts stated in the plaint. Shri M.K.Monga also filed additional affidavit dated 10.7.2002 along with the additional documents and has also filed a third affidavit on 24.5.2003 along with some additional documents.
9. Shri M.K. Monga in his testimony has on behalf of the plaintiff proved all the documents on the record as well as proved the averments made in the plaint. The fact of supply of goods to the defendants No. 1 and 2 of the value of US $ 99,935 as per Annexure-A to the plaint, is proved as per Exhibit PW 1/5 to Exhibit PW 1/15. The supply of goods to defendants no. 1 and 2 of the value of US $ 35,055 as described in Annexure B to the plaint stands established as per Exhibit PW 1/18 to Exhibit PW 1/19.The said goods were supplied to the defendants No. 1 and 2 by defendant No. 3 on behalf of the plaintiff and the defendant No. 3 has been fully paid for the supplies made as stated in the additional affidavit of Shri M.K. Monga as per the documents whichare Exhibit PW 1/97 and Exhibit PW 1/98. The expenses incurred by the plaintiff on account of detention, demurrage, port charges and clearance charges etc are Exhibit PW 1/24 to Exhibit PW 1/79 amounting to US $ 55,000 as deposed by Shri M.K. Monga. He has further stated in his affidavit filed on 31.12.1997 that out of the said sum of US $ 55,000, the defendants No. 1 and 2 have remitted only a sum of US $ 5000. Annexure C to the plaint, however, states that the amount due on account of the expensesincurred is US $ 55,000 which is, therefore, not correct since $ 5,000 are stated to have been received by the plaintiff.
Thus the amount due from the defendants NO. 1 and 2 on account of the said expenses for import of goods is sum found to be US $ 50,00. The plaintiff is claiming interest @ 24% per annum on the amounts due as per Annexure A, B and C to the plaint. Shri M.K. Monga in his affidavit states that interest has been claimed as the prevailing rate of interest on the date of transaction i.eyear 1994. However, interest @ 24% appears to be on a higher side. The plaintiff should be entitled only to interest @ 18% per annum on the said invoices amount. During the course of arguments counsel for the plaintiff has furnished the statementhowing computation of interest @ 18% up to the date of the suit and according to that statement the amount due to the plaintiff is as follows:-
1. Amount as per Annexure-A being theinvoice value of goods supplied to defendants US $ 99,935 Interest @ 18% p.a. w.e.f. July 1994 toSeptember, 1995. US $ 20,986
2. Amount as per Annexure B being the invoicevalue of goods supplied to defendants No. 1and 2 by defendant No. 3 on behalf of plaintiffs US $ 35,055 Interest @ 18% w.e.f. April, 1994 to September,1995 US $ 9,464
3. Amount as per Annexure C being expensesincurred on account of detention charges,demurrages, port charges and clearance etc. US $ 50,000 Interest @ 18% p.a. w.e.f. April 1995 toSeptember, 1995 US $ 4,950 Total US $ 2,20,390 Exchange rate 1 US $ = 35 Total amount converted in Rupees Rs. 77,13,650/-
10. The plaintiff also claims the loss of profits to the extent of US $ 80,000 equivalent to Rs. 28,00,000/- on account of breach of contract committed by the defendants 1 and 2. In this connection Shri M.K. Monga in his additional affidavit dated 10.7.2002 has stated in paragraph Nos. 5 to 7 thereof that on account of willful default in making payments by defendants No. 1 and 2, the plaintiff was unable to execute export orders, which it had in hand. The said purchase orders or contracts are Exhibit PW1/99 to Exhibit PW1/107.
According to plaintiff they suffered huge losses and could not execute these export orders on account of default committed by defendants No. 1 and 2. The plaintiff's banker, Bank of Maharashtra refused to extend further creditimits unless the limits availed by way of exports made to defendants No. 1 and 2 were cleared. In this connection, Bank of Maharashtra had sent a letter dated 20.6.1996 which is Exhibit PW 1/109. Vide Exhibit PW 1/85 dated 24.2.1995 Export Credit Guarntee Corporation of India Limited also intimated to the plaintiff that they have cancelled credit limit to the defendant No. 1. The plaintiff's business, therefore, was totally crippled. The details of the export orders which are Exhibit PW 1/99 to Exibit PW 1/107 are described in paragraph No. 2 of additional affidavit of Shri M.K. Monga dated 24.5.2003. The plaintiff was incurring huge losses and this information was also given to defendants No. 1 and 2 by the plaintiff vide their letters dated 121.1995 and 1.4.1995 which are Exhibit PW 1/84 and Exhibit PW 1/80. M.K. Monga in his affidavit dated 24.5.2003 filed on behalf of the plaintiff has stated that the plaintiff was reasonably expecting profit of at least 30% of the export orders mentionedin his affidavit. Accordingly to Shri M.K. Monga, 30% of the aggregate value of the export orders would come to US $ 96,000. However, the plaintiff has restricted its claim to only US $ 80,000. The plaintiff has also filed its balance sheet for theear 1993-94 and for the year 1994-95 which is filed and proved as Exhibit PW 1/112 and Exhibit PW 1/113. The balance sheet for the year ending 31.3.1994 shows the profit as Rs. 42,59,000/-. The transaction in question was during the year ending March, 194. The balance sheet for the year ending March, 1996 has also been filed and proved as Exhibit PW 1/92 which shows the loss of Rs. 35,60,000/-. The plaintiff, therefore, contends that the loss which it has suffered for the subsequent years is directlyttributable to the defendants. The plaintiff is thus entitled to the said loss of profit in the sum of US $ 80,000 equivalent to Rs. 28,00,000/- as deposed by Shri M.K. Monga in his affidavit. The total amount due to the plaintiff, therefore, would bes.1,05,13,650/-. The plaintiff has pleaded adjustment of a sum of Rs. 70,31,250/- as deposed by Shri M.K. Monga in his affidavit towards the value of imported goods. Thus after giving credit to defendants No. 1 and 2 for the sum of Rs. 70,31,250/- the blance amount due to the plaintiff, therefore, is a sum of Rs. 34,82,400/-.
11. The above testimony of the deponent is supported by the documents, which clearly proves and establishes that a sum of Rs. 34,82,400/- is due and payable to the plaintiff by the defendants on the date of filing of the suit. There is no rebuttal evidence adduced by the defendants and therefore, the evidence, produced by the plaintiff goes unrebutted and unchallenged. Therefore, the plaintiff is entitled to succeed.
12. In view of the aforesaid discussion, a decree deserves to be and is passed in favor of the plaintiff and against the defendants No. 1 and 2 jointly and severally for the sum of Rs. 34,82,400/- along with pendente lite and future interest @ 12% per annum.
13. The suit is accordingly decreed in the above terms with no order as to costs.
Let a decree be drawn up accordingly.