Delhi District Court
M/S M.M. Agarwal & Sons vs M/S Kumar Electronics on 30 August, 2014
IN THE COURT OF SH. M.P. SINGH, SENIOR CIVIL JUDGE, RENT
CONTROLLER, (EAST), KARKARDOOMA COURTS, DELHI
Suit No. 195/12
Unique Case ID No. 02402C0220082012
M/s M.M. Agarwal & Sons
Through its Proprietor Sh. Vinod Aggarwal
F173, Jagat Puri, Delhi51 ........... Plaintiff
Versus
M/s Kumar Electronics
Through its Prop. Sh. P.P. Singh
17A, PocketI, Dilshad Garden,
Delhi95 ......... Defendant
SUIT FOR RECOVERY OF MONEY
Case filed on 06.08.2012
Arguments heard on 23.08.2014
Date of decision 30.08.2014
JUDGMENT
1. Invoking section 55 (1), Sale of Goods Act, 1930 plaintiff brought the instant action against the defendant for recovery of price of goods sold. Defendant's defence is that the goods supplied were of inferior quality and defective.
2. Facts may be recounted. Plaintiff firm, of which Sh. Vinod Aggarwal is the proprietor, deals in inverters, batteries etc. Defendant purchased inverters and batteries from the plaintiff as under: Suit no. 195/12 M/s M.M. Agarwal & Sons v. M/s Kumar Electronics Page 1/17
Sl. No. Bill No. Date Amount
1. 22 19.05.2010 Rs. 45,400/
2. 024 20.05.2010 Rs. 33,800/
3. 091 16.06.2010 Rs. 46,400/
4. 119 27.06.2010 Rs. 45,700/
5. 133 01.07.2010 Rs. 34,200/
6. 233 24.07.2010 Rs. 54,350/
7. 441 02.12.2010 Rs. 22,400/
Total - Rs. 2,82,250/
3. Defendant, in discharge of his liabilities, issued the following eight cheques.
Sl. No. Cheque No. Date Amount Status
1 409503 26.05.2010 Rs. 79,200/ Honoured
2 391204 06.07.2010 Rs. 46,400/ Honoured
3 391219 19.08.2010 Rs. 34,200/ Honoured
4 436109 04.11.2010 Rs. 11,500/ Honoured
5 436106 18.11.2010 Rs. 20,000/ Honoured
6 436107 22.11.2010 Rs. 20,000/ Dishonoured
7 436108 10.01.2011 Rs. 14,350/ Dishonoured
8 204687 15.02.2011 Rs. 20,000/ Dishonoured
Total amount encahsed through cheques - Rs. 1,91,300/
4. As would be evident, cheques no. 436107, 436108 and 204687 were returned dishonoured. First two of these three cheques were dishonoured Suit no. 195/12 M/s M.M. Agarwal & Sons v. M/s Kumar Electronics Page 2/17 with remarks 'payment stopped by drawer'. The third cheque bearing no. 204687 was dishonoured owing to 'insufficient funds'.
5. The defendant had issued one more cheque to the plaintiff, which was later returned to him, of the following description.
Sl. No. Cheque No. Date Amount Status
1 391205 20.07.2010 Rs. 45,700/ Cheque returned
6. Defendant had, in discharge of his liabilities, also made the following cash payments:
Sl. No. Date Amount Voucher No. 1 20.08.2010 Rs. 14,000/ 414 2 21.08.2010 Rs. 20,200/ 415 Total cash payment - Rs. 34,200/
7. As such, the defendant made total payment of Rs. 2,25,500/ to the plaintiff against the outstanding amount of Rs. 2,82,250/ leaving principal balance of Rs. 56,750/.
8. Apropos of the three dishonoured cheques, plaintiff issued a legal notice dt. 07.03.2011 to the defendant thereby calling upon the latter to pay him the amount of the dishonoured cheques within 15 days. On the payment not being made, plaintiff lodged a complaint under section 138, Negotiable Instruments Act, 1881 (for short 'NI Act') against the defendant. Vide judgment dt. 06.07.2012 the defendant stood acquitted of the offence under section 138, NI Act by the Court of Ld. Metropolitan Magistrate. Suit no. 195/12 M/s M.M. Agarwal & Sons v. M/s Kumar Electronics Page 3/17
9. Defendant, it is stated, is liable to pay Rs. 83,990/ (Rs. 56,750/ towards the principal sum and Rs. 27,240/ towards presuit interest up to July, 2012). On computation, it turns out that the plaintiff claims the interest component of Rs. 27,240/ at the rate of 2% per month over a period of two years. On the amount of Rs. 83,990/ plaintiff also claims interest at the rate of 2% per month thereon with effect from 01.08.2012 till its realization together with costs.
10. Defendant entered the contest. His stand is that the quality of the goods supplied by the plaintiff was inferior and defective and that he is ready to return the same to the plaintiff. He states that several times he complained to the plaintiff, whereupon the latter gave him an assurance to take back all the defective articles and then to accordingly settle the accounts. He alleges that this assurance of the plaintiff turned out to be hollow as he neither took back his defective articles nor settled the accounts. He points out that he has already been acquitted of the offence under section 138, NI Act, and that the present case is merely a tool to harass him.
11. Qua the aforesaid cheque bearing no. 204687 dt. 15.02.2011 of Rs. 20,000/, defendant states that he did not issue the same to the plaintiff. He further avers that he had stopped payment of the two cheques bearing no. 436107 and 43618 for the reason that the articles, against which they were issued, were of inferior quality. Defendant seeks dismissal of the suit.
12. In the replication, plaintiff has reaffirmed and reiterated the stand as Suit no. 195/12 M/s M.M. Agarwal & Sons v. M/s Kumar Electronics Page 4/17 set out in the plaint and refuted those made by the defendant in the written statement.
13. The issues, struck on 21.11.2012, are as follows:
1) Whether the goods supplied by the plaintiff was of inferior quality and defective? OPD
2) Whether the plaintiff is entitled to decree for an amount of Rs.
83,990/ as prayed for? OPP
3) Whether the plaintiff is entitled to the interest on the said amount, if yes then at what rate and for what period? OPP
4) Relief.
14. Sh. Vinod Aggarwal, examined himself as PW1. He relied on the following documents.
➢Ex. PW1/1 Certified copy of the ledger account of the defendant maintained by plaintiff.
➢Ex. PW1/2 (colly) Certified copies of bills no. 233 and 441. ➢Ex. PW1/3 (colly) Certified copies of the three dishonoured cheques.
➢Ex. PW1/4 (colly) Certified copies of bank return memos (4 in number).
➢Ex. PW1/5 Certified copy of legal notice dt. 07.03.2011. ➢Ex. PW1/6 and Ex. PW1/7 Certified copy of postal receipts. ➢Ex. PW1/8 Certified copy of UPC receipt.
➢Mark A Copy of the Sales Tax Registration Certificate of the Suit no. 195/12 M/s M.M. Agarwal & Sons v. M/s Kumar Electronics Page 5/17 plaintiff firm.
15. One Manoj Kumar, Assistant Ahlmad from the Court of Ld. Metropolitan Magistrate, stepped into the witness box as PW2. He appeared with the judicial file of the case under section 138, NI Act, wherein the defendant was acquitted. This judicial file contained originals of all the certified copies exhibited by PW1 (plaintiff), save the document Mark A.
16. Defendant examined himself as DW1. He relied on copy of the judgment dt. 06.07.2012 (Ex. DW1/1), wherein he had been acquitted of the offence under section 138, NI Act.
17. I have heard arguments at Bar and perused the record of the case.
18. Issuewise findings are as under:
19. Issue no. 1 - The issue is whether the defendant proves that merchandise supplied to him by the plaintiff were inferior and defective. It is not in dispute that the goods were received by the defendant. Once the goods are received by the defendant, the onus is squarely upon him to show that they were of inferior quality; and in addition thereto, he is also required to show that he had told the plaintiff to take back those goods (Naraingarh Suger Mills Ltd. vs. Krishna Malhotra, 190 (2012) DLT 253).
20. The defendant has miserably failed to show that the goods were of inferior quality and defective. Merely to aver that the goods were defective and of inferior quality would not suffice. Such an averment is required to be backed by some cogent material on record. On the contrary, there is Suit no. 195/12 M/s M.M. Agarwal & Sons v. M/s Kumar Electronics Page 6/17 material on record to show that this defence lacks substance. DW1 (defendant) admitted in his crossexamination that goods supplied were of Sukam Company, Microtech Company and Luminous Company. He also admitted that upon sale of the goods, the customer fills up warranty card and sends it to the concerned company. The point therefore is that if the customer finds the goods manufactured by Sukam Company, Microtech Company and Luminous Company to be defective, then he would invoke the warranty for which the manufacturing company would then have to do the needful. It is a matter of common knowledge that the warranty of goods, for a customer, begins from the point of time he purchases the same. And therefore if after purchase and within the warranty period, the goods are found to be defective, then it is the manufacturing company which would have to deal with the same.
21. I may also note at this stage that Ld. Metropolitan Magistrate, too, in the complaint case under section 138, NI Act had found the averment regarding defect in the merchandise to be not proved. The relevant extract out of the Judgment Ex. DW1/1 is as under.
Lastly, coming to the defence taken by accused that the articles supplied to him were out of guarantee period, the court found that, the said fact could not be proved by accused, though, his defence that cheque Ex. CW1/E does not belong to him, has been believed by the court. The witness failed to prove this defence as he failed to prove that any particular material which was supplied by complainant was defective/out of warranty period.
The testimony of DW1 and DW2 in this regard is general in Suit no. 195/12 M/s M.M. Agarwal & Sons v. M/s Kumar Electronics Page 7/17 nature and DW2 also failed to produce any bill to show that articles supplied by complainant were defective/out of warrant period.
22. What is therefore amply clear is that the defendant has miserably failed to prove that the merchandise had defects or were of inferior quality.
23. Even assuming that there were defects in the goods, yet the outcome of the present issue would not be any different. If there were defects, it was expected of the defendant to have at least brought the same to plaintiff's knowledge at the earliest or at any rate within a reasonable time. But, besides defendant's self serving ipse dixit, there is no cogent material on record to even remotely establish that the alleged defect in the goods were ever brought to plaintiff 's knowledge within a reasonable time. Defendant received the last tranche of goods vide bill dt. 02.12.2010 bearing no. 441 (Ex. PW1/2). But, upon receipt of even the last tranche containing the alleged defective goods, defendant did not get back to the plaintiff through any correspondence qua any defect. Plaintiff had issued legal notice dt. 07.03.2011 (Ex. PW1/5) to the defendant as a precursor to institution of the complaint under section 138, NI Act. Judgment Ex. DW1/1 of Ld. Metropolitan Magistrate would show that the defendant admits to have received the legal notice Ex. PW1/5. But, receipt of this legal notice Ex. PW1/5 too did not ring a bell in defendant's ears. The point therefore is that the defendant, even in response to this legal notice dt. 07th March, 2011 (Ex. PW1/5), never put across his grievance to the plaintiff visavis the alleged Suit no. 195/12 M/s M.M. Agarwal & Sons v. M/s Kumar Electronics Page 8/17 defects. It was only at the time of framing of notice under section 251 CrPC (notice framed on 27.06.2011 as revealed in the Judgment Ex. DW1/1) in the case under section 138, NI Act that he, for the first time, ventured to say that the goods were defective. The bottomline, therefore, is that between 02nd December, 2010 and March, 2011 (when the legal notice Ex. PW1/5 was served) there was never any correspondence from defendant's side to the plaintiff with regard to any defect. And even after March, 2011 till the framing of notice in June, 2011 he made no correspondence about the alleged defect. This time gap of more than six months (between 02.12.2010 and June, 2011) is clearly fatal to the defendant. The necessary inference thereof may very well be that there were no defects in the first place or that within a reasonable time the defendant did not detect the defect. And even if he had detected the defect, he did not put across his point to the plaintiff within a reasonable time. Course of normal human conduct and the law (conjoint reading of sections 41 & 42, Sale of Goods Act, 1930) require that defect in merchandise must be brought to consignee's knowledge within a reasonable time.
24. Furthermore, it is on record that defendant had made part payment, towards the supplied goods, to a substantial extent. As held in M/s KIG Systel Ltd. v. M/s Fujitsu ICIM Ltd., AIR 2001 Delhi 357 when a buyer asserts that goods are defective, it is not open to him to withhold the payment once the delivery is accepted; since they are deemed to have been Suit no. 195/12 M/s M.M. Agarwal & Sons v. M/s Kumar Electronics Page 9/17 accepted by operation of law. That apart, where a buyer buys goods of certain description and their price is substantially paid then it is not open to the buyer to revert later on, and that too after reasonable time, and assert that the goods were defective and therefore, he would reject them. In this regard, I may reproduce certain extracts out of the judgment in M/s KIG Systel Ltd. (supra).
12. The disputes between the parties cannot be decided de hors the sundry provisions of the Sale of Goods Act. Partpayment to a substantial extent has been made by the defendant/applicant. When a buyer such as the defendant/applicant asserts that the merchandise/goods were defective, it is not open to it to withhold payment once the delivery is accepted; since they are deemed to have been accepted by operation of law. In Nagandas Mathuradas v. N. V. Valmamohomed, AIR 1930 Bombay 249, in the opinion of the Bench, the Buyer was playing fast and loose inasmuch as the initial credit entry recorded in favour of the seller was subsequently reversed. The fact that a substantial part payment had been made by the defendant to the plaintiff was found very relevant, in this context. It reiterated the view approved by the House of Lords that "if a buyer orders goods of a certain description, and the seller delivers goods of a different description, it is open to the buyer to reject them. But if he does not reject them but keeps the goods, even if he does so in ignorance of the fact that they are of a description different from that provided for by the contract he is debarred from rejecting the goods thereafter, and can only fall back upon a claim for damages, as upon a breach of warranty." These observations apply, a fortiori, where the goods supplied were according to the specifications, and their price had been substantially paid. Autovesl and Isogen were ordered by name, and were supplied. Due to reasons of obsolescence. Pvelite was subsequently preferred by the defendant, but this preference cannot be considered as a valid defence for withholding payment. It would still be so even if either Suit no. 195/12 M/s M.M. Agarwal & Sons v. M/s Kumar Electronics Page 10/17 Autovesl or Isogen proved to be of little usefulness to the defendant, so long as what was supplied strictly corresponded to these two programmes/merchandise. Chapter IV of the Act must be kept in mind when disputes of the present nature call to be decided. In particular, Section 34 envisages that delivery of even a part of the goods would operate as a delivery of the whole, unless the former is clearly severed from the rest. The defendant/applicant should have recorded a caveat that the software could be treated as having been accepted only upon delivery of pvelite. This could not be possible since pvelite was not part of the contract. Alternatively, the defendant/applicant could have declined to accept the part delivery if that is how it viewed the situation. The intervening period of several months is significant and clearly fatal to the projected defence. The offer to supply pvelite cannot have the effect of invalidating the initial contract.
13. Is the Court expected to take into consideration the dealings inter se the defendant/applicant and its customer, namely FACT. The purchase Order of FACT on the defendant is dated 20th July, 1994; the plaintiff is not even mentioned therein. Thereafter the defendant has issued its purchase order dated 2nd August, 1994 to the plaintiff at its New Delhi office and payment was to be made by the defendant. FEDO was only mentioned in the context of delivery. The plaintiff's invoice was issued to the defendant, which was liable to clear the consideration and has in fact made substantial payments. Although in the delivery clause there is an indirect mention that FEDO can claim damages for late supply by the defendant, and that the latter can make a corresponding claim on the plaintiff, the present dispute raised by the defendant at best concerns unsuitability of the software, and not late supply thereof. The defendant has placed reliance on correspondence exchanged between itself and FEDO which is one year (AnnexureB) and two year later (AnnexureC). Such events cannot be taken into contemplation in an action for the price of goods, where the property in the goods has passed to the buyer and the buyer wrongfully neglects or "refuses to pay for the goods according to the terms of the contract" (see Section 55 of the Act). Sections 41 Suit no. 195/12 M/s M.M. Agarwal & Sons v. M/s Kumar Electronics Page 11/17 and 42 of the Act conjointly indicate that if defects in the goods are not recorded within a reasonable time, they will have been deemed to have been accepted. Furthermore, by making substantial payments for the price of the goods the defendant has acted in a manner which would render it inconsistent for the plaintiff to still claim ownership thereon. On a careful reading of the Act, it appears that the intendment is generally that the price of the goods must be paid and if there is a subsequent defect (in contradistinction to a defect detected within a reasonable time of the delivery) the remedy that is envisaged is for the Buyer to sue for damages. This is obviously impregnated with sound commonsense and business ethics. In the present case, raising questions pertaining to the suitability of the supply after one year is not reasonable. A triable issue does not arise because what was supplied by the plaintiff was what was ordered by the defendant, if it did not suit the latter's requirements the plaintiff cannot be made responsible and liable. Significantly, it has not been shown that any legal action has been fled even by FEDO for recovery of damages from the defendant. Some prima facie evidence of such an action should have been filed by the defendant to justify the grant of leave to defend. (Italicised for emphasis)
25. What is therefore amply clear is that when property in goods passes to the defendant and the defendant within a reasonable time does not get back to the plaintiff with regard to any defect, he is bound to make payment of the entire price. Furthermore, when the defendant makes substantial payment for the price of goods and he has acted in a manner which would render it inconsistent for the plaintiff to claim ownership thereon; then the former cannot withhold the remaining payment. As held in M/s KIG Systel Ltd. (supra), the remedy for the defendant, under the given facts and circumstances, is to sue the plaintiff for damages. Suit no. 195/12 M/s M.M. Agarwal & Sons v. M/s Kumar Electronics Page 12/17
26. DW1 (defendant) in his evidence stated that the plaintiff had supplied defective goods to one Sanjay also. However, that Sanjay did not step into the witness box. In any event, this statement will not come to the aid of the defendant in the absence of any cogent material to substantiate that the goods were indeed defective. That apart, Sanjay, it appears, has not brought any action before any court of law against the plaintiff for alleged supply of defective goods.
27. For the aforesaid multiple reasons, I hold that the defendant has miserably failed to prove that the merchandise was defective. Conversely, under the given facts and circumstances, the remedy for him is to sue the plaintiff for damages and not to refuse or neglect to pay the price thereof. This issue is thus answered against the defendant and in plaintiff's favour.
28. Issue no. 2 - This issue is as regards plaintiff's entitlement to claim Rs. 83,990/ from the defendant.
29. The purchase of plaintiff's goods by the defendant is not in dispute. It is also not in dispute that goods worth Rs.2,82,250/ were delivered to the defendant. DW1 (defendant) admits in his crossexamination that he had purchased goods worth Rs.2,82,250/ from the plaintiff during the period between 19.05.2010 to 02.12.2010.
30. However, the defendant takes the position that he has paid the entire amount of Rs.2,82,250/. In crossexamination of PW1, a suggestion was put to the effect that the entire payment of Rs.2,82,250/ had been made. Further, DW1 (defendant) in his crossexamination stated, "Whatever I had Suit no. 195/12 M/s M.M. Agarwal & Sons v. M/s Kumar Electronics Page 13/17 purchased from the plaintiff, I had paid entire amount." It cannot be gainsaid that once the defendant admits to have purchased goods worth Rs. 2,82,250/, then the onus is squarely upon him to prove that he paid the entire amount. However, the defendant has miserably failed to substantiate that he paid back the entire amount of Rs.2,82,250/. To begin with, this stand is quite contrary to the averment in the written statement wherein the defendant had stated that payment in respect of cheques no. 436107 and 436108 were stopped as the goods were not up to the mark and were of inferior quality. Therefore, how can the defendant then claim that he had made the entire payment, when the payment had been stopped on the ground that goods were of inferior quality? That apart, there is no material on record to prove that the entire payment of Rs. 2,82,250/ stands paid by the defendant.
31. The balance principal amount towards supply of goods, as per the plaintiff, is Rs. 56,750/. There is no material on record to show that defendant paid this principal balance amount. The defence that the goods were defective has been found to be without any substance. Defendant having retained the goods supplied, the property in the goods has already passed to him. In terms of section 55 (1), Sale of Goods Act, 1930 defendantbuyer cannot avoid his liability to pay the balance price of the goods once the property in the goods has already passed to him. In view thereof, the defendant is liable to pay to the plaintiff the balance principal amount of Rs.56,750/. He is wrongfully neglecting or refusing to pay the Suit no. 195/12 M/s M.M. Agarwal & Sons v. M/s Kumar Electronics Page 14/17 same.
32. There was a contention raised by the defendant that in view of his acquittal under section 138, NI Act, he is not liable to pay any money to the plaintiff. This argument is noted only to be rejected. The acquittal was from a criminal court. The findings of the criminal court are not binding upon this civil court. That apart, the issue before the criminal court was limited to the dishonoured cheques. In the case at hand, this civil court is adjudicating upon the rights and liabilities of the parties not on the basis of cheques alone but on the basis of the admissions of the defendant that he had received goods, the invoices, and various other materials on record. It also should be borne in mind that the parameters for adjudication of rights and liabilities before a civil court are vastly different from that before criminal court. And lastly, the criminal court had also found that the averment regarding defect in the supplied goods were not proved.
33. I therefore hold that the plaintiff is entitled to claim the balance principal amount of Rs. 56,750/ from the defendant. This issue is thus answered in plaintiff's favour.
34. On the principal amount of Rs.56,750/, the plaintiff has claimed pre suit interest Rs. 27,240/ @ 2% per month up to July, 2012. On computation, it turns out that the plaintiff claims the presuit interest component of Rs. 27,240/ at the rate of 2% per month over a period of two years. I am not inclined to award presuit interest at the rate of interest which the plaintiff claims. This claim to presuit interest shall be covered in the discussion on Suit no. 195/12 M/s M.M. Agarwal & Sons v. M/s Kumar Electronics Page 15/17 issue no.3.
35. I answer this issue in plaintiff's favour by holding that he is entitled to claim the balance principal amount of Rs. 56,750/ from the defendant.
36. Issue no. 3 - This issue concerns the interest that is to be awarded. The plaintiff has claimed interest @ 24% per annum. However, there is no document in writing to evidence that this was the agreed rate of interest. Nevertheless, the transaction in question is a commercial one. However, the Apex Court in a line of judgments has held that in view of changed economic scenario where there has been consistent fall in rates of interest, Courts must in accordance with the changed circumstances grant lesser rates of interest. These judgments are Rajendra Construction Co. v. Maharashtra Housing & Area Development Authority & Ors., 2005(6) SCC 678, McDermott International Inc. v. Burn Standard Co. Ltd. & Ors., 2006 (11) SCC 181, Rajasthan State Road Transport Corporation v. Indag Rubber Ltd., (2006) 7 SCC 700, Krishna Bhagya Jala Nigam Ltd. v. G.Harischandra, 2007 (2) SCC 720 and State of Rajasthan Vs. Ferro Concrete Construction Pvt. Ltd. (2009) 3 Arb. LR 140 (SC). To similar effect is Delhi High Court decision in M/s Jindal Realcon Pvt. Ltd & Ors . v. M/s Laxmi Narain Ram Dass & Co., (dt. of decision March 22, 2013 in RFA No.245/2012).
37. Considering the facts and circumstances, it is my view that interest of 9% per annum on the principal amount of Rs.56,750/ would suffice. The Suit no. 195/12 M/s M.M. Agarwal & Sons v. M/s Kumar Electronics Page 16/17 defendant would pay interest of 9% per annum on the principal amount of Rs.56,750/ from 03.12.2010 (last tranche of goods supplied on 02.12.2010) till its full and final realization. This issue thus stands decided in plaintiff's favour.
38. Relief - In view of the foregoing discussion, the suit of the plaintiff stands decreed. The defendant is liable to pay to the plaintiff principal sum of Rs. 56,750/. On this principal sum of Rs. 56,750/, the defendant shall pay interest of 9% per annum with effect from 03.12.2010 till full and final realisation of decreetal amount. Costs of the suit awarded to the plaintiff. Decree sheet be prepared. File be consigned to record room.
Announced in the open court (M.P. SINGH)
Dated:30.08.2014 SCJ/RC (East)
Karkardooma Courts, Delhi
Suit no. 195/12 M/s M.M. Agarwal & Sons v. M/s Kumar Electronics Page 17/17