Delhi District Court
Mrj Steels Private Limited vs M/S Dewan Chand Through Its Partners on 9 April, 2024
IN THE COURT OF Ms. NIRJA BHATIA
DISTRICT JUDGE (COMM.) (DIGITAL-07),
SOUTH-EAST DISTRICT, SAKET COURT, NEW DELHI
CS (Comm) 319/2022
MRJ Steels Pvt. Limited
through its Director Saurabh Juneja
having its registered office at:
T-2315 & T-2315A, Ashok Nagar,
Faiz Road, Karol Bagh, New Delhi
..... Plaintiff
Vs.
M/s Dewan Chand, a partnership firm
through its partner Sh. Vikram Kumar
S-11, Greater Kailash--II,
New Delhi.
..... Defendant
Date of Institution: 02.04.2024
Arguments concluded on: 19.03.2024
Date of Judgment: 09.04.2024
JUDGMENT
Brief facts of the case By this judgment, I shall decide the present suit filed by M/s MRJ Steel Pvt. Ltd. (hereinafter to be referred as plaintiff), a private limited company incorporated under the Companies Act, running its office from Faiz Road, Karol Bagh, New Delhi. The suit is instituted through Sh. Saurabh Juneja, against M/s Dewan Chand (hereinafter to be referred as defendant), a partnership firm represented through its partner Sh. Vikram Kumar.
M/s MRJ Steels Vs. M/s Dewan Chand Page No. 1 of 52
2. The suit is made over to the Court on grounds below:
(i) Plaintiff is engaged in trading of iron and steel goods and development of industrial, commercial and residential buildings.
(ii) The defendant is in business of executing construction contracts/ tenders in region of Delhi-NCR and is represented by Sh. Vikram Kumar.
(iii) Plaintiff states that in second week of September 2015, Sh.
Vikram Kumar partner of defendant approached the plaintiff's director at their registered office for purchase and supply of iron and steel material such as TMT bars, MS Channels, steel tube pipes etc. It was represented to plaintiff that defendant undertakes big construction contracts and has good reputation in market.
(iv) consequent to negotiation, defendant started placing orders on plaintiff for supply of requisite goods and material related to construction through purchase orders. Two such purchase orders are of date 30.09.2015 and 21.10.2015.
(v) Plaintiff supplied the material in terms of specifications agreed, and as per terms and conditions at the agreed rates and delivered at the construction site specified by the defendant from the period 22.02.2015 to 30.03.2015.
(vi) A running account was maintained between the parties.
(vii) Plaintiff states that at the time of dispatch of goods, plaintiff raised the invoices alongwith other documents for delivery of material at construction site as per the instruction of Sh. Vikram Kumar. Plaintiff states the details of the invoices as below:
"Invoice No. 42 dated 22.09.2015, Invoice No. 3 dated 06.10.2015, Invoice No. 4 dated 15.10.2015, Invoice No. 46 dated 21.10.20215, Invoice No. 239 dated 24.10.2015, Invoice No. 69 dated 27.10.2015, Invoice M/s MRJ Steels Vs. M/s Dewan Chand Page No. 2 of 52 No. 96 dated 02.11.2015, Invoice No. 246 dated
03.11.2015, Invoice No. 277 dated 17.11.2015 & invoice No. 319 dated 01.12.2015."
(viii) It is stated that up till 08.03.2019, defendant raised no issue or concern in respect of quality and quantity of goods supplied. On 08.03.2019 and subsequently, after a lapse of more than three years, Sh. Vikram Kumar partner of defendant with mala fide intentions, claimed that MS pipes supplied were not as per agreed specifications.
(ix) Plaintiff states that plaintiff had raised 10 invoices upon defendant company against which an amount of Rs. 84,34,309/- became due. The defendant made the payment of Rs. 55 lacs from 14.10.2016 till 08.03.2016, thereby leaving the outstanding of Rs. 29,34,309/-.
(x) It is averred that defendant did not make the payment of outstanding of Rs. 29,34,309/- despite repeated requests and personal visits of Sh. Arun Duggal, Manager of plaintiff and Saurav Juneja, Director as well as by exchange of repeated communication through phone, mails and personal meetings.
(xi) It is averred that on certain meetings, the officials of plaintiff suffered abuse and misbehaviour against which police complaints were made.
(xii) It is averred that despite all the efforts, the amounts remained outstanding. Efforts under Section 12-A of Commercial Courts Act have remained unutilized at the end of defendant who did not cause appearance despite service.
(xiii) Plaintiff has demanded interest @ 18% and has calculated it for Rs. 31,38,665.53 on principal of Rs. 29,34,309/-, thereby seeking the recovery of Rs. 60,72,975/- and cost.
M/s MRJ Steels Vs. M/s Dewan Chand Page No. 3 of 52
3. The written statement has been filed by defendant who has challenged the filing of the suit on the grounds as under:
(i) Defendant claims that proceedings are misuse of the process as after having failed with earlier attempts to create dispute under Insolvency and Bankruptcy Code (hereinafter IBC code) and under MSME Act 2006, the plaintiff is now making a failed attempt to file the present suit as a commercial dispute, which is not to be recognized.
(ii) Defendant claims that plaintiff has no clarity, concerning its grievance in commercial dispute in which event, it becomes difficult for defendant to address the actual issues and for this Court to decide the non-issues so raised.
(iii) defendant claims that plaintiff had initiated proceedings for mediation on 03.03.2019 and again 13.03.2020. The Rule 3(4) of CCA (pre-institution mediation and sub-Rules) Rules 2018 does not provide the second mediation in any manner and in which case as no second mediation could have happened, the plaintiff was to be put to strict proof for the same.
(iv) defendant claims that suit is barred by limitation in terms of articles related to provisions of Limitation Act 1903 and is not filed within prescribed time as per CPC.
(v) It is claimed that plaint is liable to be rejected under Order 7 Rule 11 CPC as it fails to disclose any cause of action.
(vi) defendant alleges major discrepancies in specifications and quantities raised in the demand notice and supply of material listed in the invoices raised and order placed.
(vii) defendant claims that due to discrepancies, there was inconvenience to the defendant which has cause great delay in M/s MRJ Steels Vs. M/s Dewan Chand Page No. 4 of 52 timely progress of work on account of which the defendant had also initiated proceedings by way of a counter-claim.
(viii) defendant claims to have been dragged in vexatious proceedings by way of counter-claim and states that defendant is entitled to exemplary cost as compensation under Section 35-A CPC.
(ix) defendant states that due to discrepancies in the specification and "unasked for quantities" released, the parties have to engage in reconciliation of accounts during the meetings. The plaintiff in spite of assuring to remove the excess quantity did not honour the commitment which led to material becoming scrap and loosing its value.
(x) It is averred that plaintiff has no cause of action in view of the aforesaid.
4. While replying on merits, the following is stated:
defendant admits that:
(i) Defendant admits that it is a partnership firm though it is denied that defendant approached the plaintiff firm and it is claimed that in turn the plaintiff had approached Sh. Vikram Kumar, partner of the defendant.
(ii) It is averred that documents filed by the plaintiff are misleading, fabricated with intentions of extracting money from the defendant.
(iii) defendant claims that notice placed on record shows that the sanction of acceptance of material would depend upon the test certificates issued for each consignment by the plaintiff as per agreed terms of the purchase orders. The test certificates never accompanied the supplies of whatever unsatisfactory delivery were made.
M/s MRJ Steels Vs. M/s Dewan Chand Page No. 5 of 52
(iv) defendant denies that material was delivered as per the instructions and to its satisfaction and reiterates that acceptance of material was subject to issuance of test certificate and upon receipt of exact material as mentioned in the orders.
(v) defendant denies that no concern over the issue of specifications, quantity or quality of goods was raised. It is claimed that through scrutiny of orders and items presented in the invoices it is clearly highlighted that the discrepancies and ignorance in maintaining quality requested by the defendant and excess delivery of quantity which aimed to exorbitantly and illegally raise the amount including charging more price than the market rates, were attributed to the plaintiff, which actually led in delay in timely progress of the work.
(vi) defendant claims that it had discussed the issue of discrepancies in its specifications and had also requested for return of the material.
(vii) it is claimed that immediately upon rejection of the material, plaintiff was informed and was requested to remove the material from the site.
(viii) It is denied that the defendant is liable to pay Rs.
39,34,309/- as the material supplied was inferior in quality and not confirming to requisites raised by the defendant. It is denied that Sh. Arun Duggal and Sh. Saurav Juneja visited the premises of defendant for the purposes of seeking the outstanding bill. It is claimed that they had come to collect the goods as they were informed of the discrepancies in the specifications.
(ix) it is denied that defendant misbehaved with the representative of the plaintiff. It is denied that any police complaint was made.
M/s MRJ Steels Vs. M/s Dewan Chand Page No. 6 of 52
(x) It is denied that any amount is liable to the paid. Defendant claims that suit is not maintainable and is liable to be dismissed.
Gist of the counter-claim filed by the defendant in CS (Comm) 106/2023
5. It is requisited at this stage to take note that defendant herein has also instituted a counter-claim and it shall be appropriate at this stage to take note of the gist of the contentions in addition to what has been stated in the written statement to the claim.
6. The defendant M/s Dewan Chand as counter-
claimant has prayed for relief of Rs. 2,45,00,526/- with an outstanding interest claimed @18% pendente lite and future interest on the ground that as on 22.08.2020 against the award of work contract for office building of AG, Uttrakhand at Kaulagarh, Dehradun against the claim lodged by CPWD qua the amount of Rs. 4,26,155/- for violation of clause 14 of the statement of recovery and rejection of applicable work against items 8.3.1 for amount of Rs. 9,08,866/-, against item No. 10.02 for amount of Rs. 5,57,415/-, against item No. 10.3.1 for amount of Rs. 1,53,090/- and has sought lease to rely on contents of the present claim in furtherance of the written statement to the claim made by the plaintiff M/s MRJ Steels.
7. It is averred that the present counter claim is arising out of aforementioned work i.e. the steel work in built up tabular trusses including cutting, hosting, fixing in position and applying a priming coat of approved steel primer, welded and bolted including special shaped washers etc. It is claimed that the discrepancies in the specifications were discussed immediately M/s MRJ Steels Vs. M/s Dewan Chand Page No. 7 of 52 with the plaintiff and from time-to-time in meetings held, the defendant/ counter-claimant requested the plaintiff about such discrepancies. Defendant states that the materials supplied were subject to test and after obtaining test certificates issued for each consignment/ material supplied which were never conducted. On the other hand, the defendant was supplied with inferior quality, sub-standard type of material which was rejected by defendant/ counter-claimant as mentioned against item No. 8.3.1 for amount of Rs. 9,08,886/-, item No. 10.2 for amount of Rs. 5,57,415/-, item No. 10.3.1 for amount of Rs. 1,53,000/-. It is claimed that the supply of sub-standard material resulted in delay in timely progress of work and led to the defendant's bearing additional cost due to scrapping of the supplies. It is averred that the plaintiff in the aforementioned circumstance is liable to pay the amount of Rs. 20,45,526/- for the work which was rejected by the department due to sub-standard material provided by the plaintiff.
8. It is averred that the plaintiff has acted contrary to contractual terms and obligations and has failed to fulfill the same, whereas the plaintiff was all through aware of the contractual obligations to supply the material as per the purchase orders. However, despite such knowledge, the plaintiff has been supplied the sub-standard material which caused rejection and led to excess supply which was not received back.
Gist of the written statement filed to the counter-claim
9. Written statement on behalf of the plaintiff to the present counter-claim is filed with the preliminary objections as below:
M/s MRJ Steels Vs. M/s Dewan Chand Page No. 8 of 52 Preliminary objections:
Counter-claim is barred by limitation and is abuse of process:
(i) Plaintiff states that the present counter-claim is an abuse of process. The contents of the counter-claim are vague and afterthought. It is averred that the counter-claim is hopelessly barred by time.
(ii) The plaintiff (defendant in counter-claim) has further averred that material were supplied by the plaintiff to defendant in the year 2015 whereas the present counter-claim has been filed on 28.04.2022, after lapse of about seven years.
(iii) The defendant at no stage ever complained of quality of material supplied. It is more than after four years of supply that defendant vide communication dated 08.03.2019, for the first time, as an afterthought and with mala fide intention, raised a vague assertion that MS Pipes supplied were not as per the specifications.
(iv) It is stated that the defendant/ counter-claimant has utterly failed to even aver and show as on what account the alleged amounts are due and payable by the defendant to the counter- claimant as no documentary support or counter-claim of the amount of Rs. 20,45,526/- is filed.
Reply on merits
10. While replying on merits, the submissions of claim raised by defendant are denied. It is stated that defendant has failed to show what damage has been caused. It is averred that the contents of the counter-claim are vague, wrong and denied as the plaintiff neither has any knowledge nor concern with the M/s MRJ Steels Vs. M/s Dewan Chand Page No. 9 of 52 work carried out by defendant/ counter-claimant. It is stated that the defendant has admitted the placing of orders for supply of materials which were duly supplied as per the orders and directions raised by the defendant from time-to-time. It is averred that at no point of time, defendant ever raised any dispute about the quality and make of material supplied which for the first time was raised after lapse of four years in March 2019. It is denied that defendant/ counter-claimant at any stage brought to the knowledge of plaintiff the discrepancies in the specifications and/ or requested for return of the material. It is further denied that material was discarded after the plaintiff did not lift the same as discussed and requested during various meetings held from time- to-time. Plaintiff has denied having supplied any inferior or sub- standard type of material. It is claimed that there is no document on record that the defendant/ counter-claimant ever offered to return the material supplied.
11. It is denied that PWD had rejected the work of counter-claimant. It is averred that counter-claimant has failed to produce any such document. It is averred that letter dated 10.04.2017 produced by the defendant/ counter-claimant in support of counter-claim is ante-date, forged and fabricated document. It is averred that no such letter was ever sent or received by the defendant. There is no proof of its sending or delivery having been placed on record by the defendant/ counter- claimant which is suggestive of it being a false document. It is denied that plaintiff at any stage was aware of any terms or obligation. It is claimed that a false story is being put forth by the defendant to avoid the liability. It is averred that a bare perusal of purchase order relied upon by the defendant/ counter-claimant M/s MRJ Steels Vs. M/s Dewan Chand Page No. 10 of 52 would show that neither any make nor brand of material has been defined/ written despite which the best brand of material, steel and MS pipes have been provided by the plaintiff to counter- claimant. Rest of the submissions have also been disputed.
Gist of replication to the written statement of counter-claim.
12. The replication then is filed and contents of the defence raised in the written statement to the counter-claim filed by the plaintiff has been disputed. It is argued that the defendant/ counter-claimant has suffered loss on account of material having been rejected by CPWD and the claim of plaintiff on the ground of it having no concern or knowledge would not absolve it of liability. It is claimed that plaintiff has made a false statement as it has full knowledge that defendant is embroiled in an arbitration proceedings initiated by CPWD. It is denied that the present counter-claim is barred by time. It is averred that defendant in its complaint dated 12.09.2016 had raised the issues at the earliest and the payments were not being made to the plaintiff since the material was not as per specifications and orders placed. It is averred that in the reply false assertions have been made. It is claimed that the accounts between the parties are yet to be finalized whereas the defendant/ counter-claimant has already placed on record the inspection report carried out by the Government department dated 07.04.2017 which decision and inspection was intimated to the plaintiff, and was found fault with the MS pipes supplied by the plaintiff which fact was duly telephonically informed.
13. Defendant alleges that plaintiff is continuing with its tactics to extort money and has sent erroneous communication M/s MRJ Steels Vs. M/s Dewan Chand Page No. 11 of 52 and has got notices issues under IBC Code as well as has raised the proceedings under MSME Act. The statements made by the plaintiff in the counter-claim have been disputed and contents have been reaffirmed.
Note of the proceedings
14. On filing of the present suit, the process was issued vide order 26.05.2022. Defendant with written statement filed a counter-claim which was clubbed with the present proceedings.
15. An application under Order 7 Rule 11 CPC was moved by defendant who also filed an application seeking condonation of delay in filing written statement. The application was allowed and delay was condoned vide order dated 07.01.2023.
16. The counter-claim was registered on 07.01.2023. The arguments on the application under Order 7 Rule 11 CPC were heard, however, it was observed that issues raised in application can be decided by framing an issue. Replication was then filed.
17. The suit as well as counter-claim bearing No. CS (Comm) 319/2022 and CS (Comm) 106/2023 were clubbed. Issues were framed on 02.09.2023 as below in both the suits:
(i) Whether the suit filed by M/s MRJ Steel Pvt. Ltd.
is within limitation? OPP
(ii) Whether M/s MRJ Steel Pvt. Ltd. is entitled to recover a sum of Rs. 29,24,309/- towards principal outstanding and Rs. 31,38,665/- towards interest @ 18% per annum for the period up to 14.02.2022?
OPP M/s MRJ Steels Vs. M/s Dewan Chand Page No. 12 of 52
(iii) Whether M/s MRJ Steel Pvt. Ltd is entitled for prendent-lite and future interest? If yes, on what amount and at what rate? OPP
(iv) Whether M/s MRJ Steel Pvt. Ltd. is entitled for the cost of suit i.e. CS (comm) 319/22? If yes, the quantum? OPP
(v) Whether the goods supplied by the M/s MRJ Steel Pvt. Ltd. to M/s Dewan Chand was not as per specifications and of the desired quality? If yes, its effect? OPD
(vi) Whether the counter-claim filed by M/s Dewan Chand is within limitation? OPD
(vii) Whether M/s Dewan Chand is entitled to recover a sum of Rs. 2,045,526/- from M/s MRJ Steel Pvt. Ltd. as claimed in the counter-claim i.e. CS (Comm) 106/23? OPD
(viii) Whether M/s Dwan Chand is entitled to pendete-lite and future interest? If yes, on what amount and at what rate? OPD
(ix) Whether M/s Dewan Chand is entitled for the cost of counter claim suit i.e. CS (comm) 106/23? If yes, the quantum? OPD
(x) Relief."
18. Parties were directed to lead evidence in the present suit (CS (Comm) 319/2022). After the case management hearing took place, the plaintiff led their evidence through examination affidavit.
19. Plaintiff examined Sh. Saurav Juneja as PW-1. Sh. Vikram Kumar appeared for defendant as DW-1.
M/s MRJ Steels Vs. M/s Dewan Chand Page No. 13 of 52 Gist of examination and cross-examination of PW-1
20. PW-1 Sh. Saurav Juneja, Director and AR of the plaintiff company filed his examination affidavit which is Ex. PW-1/A. He affirmed that the plaintiff is a company incorporated under the provisions of Companies Act. He further stated that he has been authorized by board of directors of the plaintiff by way of board resolution dated 16.12.2019 (Ex. PW-1/1) and all the related powers qua the present suit have been bestowed upon him. He revealed that in second week of September 2015, Sh. Vikram Kumar, partner of defendant, approached the plaintiff for purchasing of steel material and after negotiations, the orders were placed by defendant which was carrying on its work relating to construction. The purchase orders including dated 30.09.2015 and 21.10.2015 for purchase and supply of goods at Delhi and Dehradun were received, the copies of which have been exhibited as Ex. PW-1/2 and Ex. PW-1/3 respectively. Materials were supplied as per instructions and agreed specifications as well as terms and conditions to the defendant within agreed time at the construction site specified by the defendant between 22.09.2015 to 30.12.2015. PW-1 states that as goods were to be supplied in lot/ phases, running account was maintained. PW-1 then collectively tendered Ex. PW-1/4, invoices No. 42 dated 22.09.2015, No. 3 dated 06.10.2015, No. 4 dated 15.10.2015, No. 46 dated 21.10.2015, No. 239 dated 24.10.2015, No. 69 dated 27.10.2015, No. 96 dated 02.11.2015, No. 246 dated 03.11.2015, No. 277 dated 17.11.2015, No. 319 dated 01.12.2015 and stated that neither at the time of delivery of material against the aforementioned invoices nor up till M/s MRJ Steels Vs. M/s Dewan Chand Page No. 14 of 52 08.03.2019, defendant ever raised any issue or concern regarding quality and quantity of the supplied goods.
21. It is claimed that on 08.03.2019, for the first time after lapse of more than three years, the defendant raised the issue pertaining to quality. PW-1 asserts that the invoices Ex. PW-1/4 (colly) amounting to Rs. 84,34,309/- were raised from 22.09.2015 till 01.12.2015, however, defendant made payment from 14.10.2015 till 08.03.2016 for amount of Rs. 55 lacs only, leaving the balance of Rs. 29,34,309/-. He further stated on asking for the payments, partner of defendant Sh. Vikram Kumar misbehaved. A police complaint dated 12.09.2015 Ex. PW-1/5 was lodged and another complaint of 14.07.2017 was lodged which was Ex. PW-1/6. PW-1 states he recorded the calls, wherein the defendant admitted the liability which transcript is Ex. PW-1/7.
22. The prints out of the emails dated 23.02.2019 and 28.02.2019 when the request was made to defendant to clear the outstanding dues were made by the plaintiff are exhibited as Ex. PW-1/8 and Ex. PW-1/9. It is averred that defendant with mala fide intention raised the dispute regarding the quality vide email dated 08.03.2019 which was repeated in email dated 14.03.2019 (Ex. PW-1/10). The legal notice Ex. PW-1/11 was then sent to the defendant which was replied by the defendant vide Ex. PW- 1/12. An effort for pre-litigation mediation was made, however, non-starter report Ex. PW-1/13 was returned. It is stated that limitation for filing the suit has been extended by the Hon'ble Supreme Court in Suo Motu W. P. (C) No. 3 of 2020, which is now filed. It be observed that the aforesaid statement is in M/s MRJ Steels Vs. M/s Dewan Chand Page No. 15 of 52 support of the present suit bearing No. 319/2022 as well as in support of the counter claim.
23. PW-1 was then cross-examined by Sh. T. P. S. Kang, Ld. Counsel for the defendant, wherein he admitted that he was earlier the director of MRJ Steels and now he is director of MR Juneja Iron and Steel Pvt. Ltd. The accounts of MRJ Steels were closed on 18.04.2022. He stated that only the name of the company is changed whereas the accounts are same and if asked he can bring the same. He detailed that MRJ Juneja Iron and Steel Pvt. Ltd. is incorporated on 18.04.2022 and stated that tax returns are same and only the name change is carried out in the company. Rest of the specifications including financials, GST number etc. are also same. He detailed that in his examination affidavit, he did not mention the change of name of plaintiff company from MRJ Steels to MR Juneja Iron and Steel Pvt. Ltd, though he claimed that he has brought another affidavit which was then returned. He claimed ignorance regarding number of pre-institution mediations initiated at the end of the plaintiff and claimed that he has to check the record, though he asserted that only one pre-institution mediation was initiated. He admitted that copy of application filed before MSME council was not filed. He admitted that a notice under the provisions of IBC Code was sent, however, he stated that it was not proceeded as the plaintiff came to know that defendant is not a company but a firm. In response to the transcription, he stated that the transcription was of the record of call received on Samsung phone which he did not possess at the time of examination/ cross-examination. He was not aware of the model number and IMEI number of the phone. He had not mentioned the phone number from which he M/s MRJ Steels Vs. M/s Dewan Chand Page No. 16 of 52 had called and what was the phone number of the opposite party. He admitted that the police complaint made in 2016 and 2017 was not related to recovery of dues.
24. The witness was then asked regarding the accounts of MRJ Steels as well as MR Juneja Iron and Steel, to which he replied that he was only asked to check the memorandum of company which is same for both the companies. Qua purchase orders Ex. PW-1/2 and Ex. PW-1/3, he stated that the test certificates were to be provided directly to the buyer, in this case the defendant, and since the material was supplied by one of the biggest companies in India i.e. JSW, the steel from where does not leave without the test certificate, the material could not have been supplied without test certificate from JSW. Qua Ex. PW-1/4 (colly) (invoices), he was asked that presumptively the test certificates were supplied to M/s Dewan Chand, to which the witness stated that he has already replied in above answer, at which stage he was asked by the Ld. Predecessor by way of a Court question that if the billing is done through the plaintiff, whether they get the document from supplier and if yes, what documents do they receive. To which the witness replied that they get invoice in their name, weight slip from the supplier and C-form. He stated that test certificates are mandatory for each batch of the material produced by the companies and it is a practice to send the test certificates to the buyers with the material.
25. He added that if asked, he could also get the copy of test certificates from supplier but it had never been asked and such issue had never been raised as defendant never told them that they did not get the test certificates with the material. He M/s MRJ Steels Vs. M/s Dewan Chand Page No. 17 of 52 admitted that on invoice No. 42 (part of Ex. PW-1/4 colly) the name of the company which manufactured the TMT bars has not been mentioned. He admitted that on invoice No. 3 and 4 (part of Ex. PW-1/4 colly), the name of company is not mentioned which manufactures MS tubes or pipes. He admitted invoice No. 69 (part of Ex. PW-1/4 colly), the name of company which manufactures MS channel had not been mentioned. On invoice No. 96 (part of Ex. PW-1/4 colly) the company which had supplied the tubes had not been mentioned. However, he denied that the material supplied were not as per purchase order and were not in confirmity with the specifications of Government of Uttrakhand, which specifications were handed over to the plaintiff company while placing the purchase order towards additional conditions for structural steel for trusses issued by CPWD which was denied by the witness, who replied that material was supplied as per purchase order placed on phone and some times without any purchase order as well. He claimed that plaintiff was not aware who were the actual user, what specifications were requisited and no copy of specifications by CPWD was ever provided. He admitted though, that no running account has been placed, however, denied that running account is not maintained. It was denied that plaintiff had knowledge of the actual user which is established from email dated 28.02.2019 and claimed that material was supplied in 2015 whereas email sent was almost after four years. He denied that plaintiff failed to supply the material in terms of the specifications which led to its rejection vide report dated 07.04.2017 and stated that the material was supplied in 2015 as ordered by defendant and was carrying ISI mark. He doubted the communication and claimed that it is M/s MRJ Steels Vs. M/s Dewan Chand Page No. 18 of 52 not mentioned in the report that material was rejected for not being in accordance with the specification. He admitted that Ex. PW-1/2 purchase order dated 30.09.2015, ISI mark is not written, however, stated that Sh. Vikram Kumar, partner of defendant, always insisted that material be supplied with ISI mark due to which the plaintiff supplied the material of JD Industries which is an ISI marked. It was denied that JD industries is not equivalent brand to JSW. Witness claimed that material was supplied as per the asking of the defendant. It was affirmed vide email dated 08.03.2019, Ex. PW-1/10, defendant admitted the liability as it admitted the receipt of material and claimed that material was rejected and was of higher rate. Witness then also asserted the contents of email Ex. PW-1/9 and Ex. PW-1/10. Witness stated that last invoice raised is of 02.11.2015 and material must have been supplied on or around the same date. He detailed that last payment was received in March 2016 and was of amount of Rs. 2 lacs. The last supply was carried to defendant in December 2015 and total supply value of the supplies made was Rs. 86 lacs out which Rs. 55 lacs was received by March 2016. It was averred that payment was not made against a particular invoice but against the total outstanding.
Gist of defendant's evidence
26. DW-1 Sh. Vikram Kumar tendered his affidavit and DW-1 exhibited the below documents:
(1) Copies of purchase orders dated 30.09.2015 and 21.10.2015 as Ex. DW-1/2.
(2) Copy of email dated 08.03.2019 as Ex. PW-1/5. (3) Copy of reply dated 17.07.2017 as Ex. DW-1/7.
M/s MRJ Steels Vs. M/s Dewan Chand Page No. 19 of 52 (4) Copy of letter dated 10.04.2017 as Ex. PW-DW-1/8.
(The documents Ex. DW-1/1, DW-1/3, DW-1/4 and DW-1/6 have been de-exhibited).
27. A separate counter-claim for Rs. 20,45,526/- is filed alongwith claim for interest. He relied on the final bill, alongwith statement of recovery as DW-1/1. He claimed that the goods were not supplied in terms of purchase order dated 30.09.2015 and 21.10.2015 which were Ex. DW-1/2. He claimed that the defendant suffered losses on the basis of inspection note of Sh. N. L. Singh, Special DG (NR) for his visit to Dehradun, which he annexed as Ex. DW-1/3.
28. It is claimed that plaintiff has raised a false plea that counter-claimant has agitated the issue after four years. It is averred that the issue was persisting and the defendant had made a complaint on 12.09.2016 in the above context. He then relied on letter dated 10.04.2017 received as communication by CPWD qua rejection and email dated 08.04.2019 as Ex. DW-1/5. He claimed that as per the inspection report dated 07.04.2017, departmental authority found fault in MS pipes supplied by the plaintiff, which was duly informed on phone and vide letter dated 10.04.2017.
29. In cross-examination, he admitted that there is no document to show that plaintiff was immediately informed of the defects by him as stated in his examination-in-chief. He stated that there was no communication informing the plaintiff about there being no test having been conducted on the material as that fact was not within his knowledge.
30. He admitted that goods sent by the plaintiff were received at the site. He did not remember whether the goods sent M/s MRJ Steels Vs. M/s Dewan Chand Page No. 20 of 52 by the plaintiff were used by the defendant. He did not remember the goods were sent by plaintiff to one site or multiple site. He did not file any document on record regarding the rejection of goods being communicated to the plaintiff. He claimed that he had filed the documents on record in writing informing rejection to the plaintiff and relied on letter dated 10.04.2017 and added that there were verbal discussion wherein the plaintiff was asked to collect the goods which were rejected by the department. He admitted that there is no written communication to the said effect and further admitted that there is no written communication specifically informing for which particular project or buyer the goods were asked from to meet the specifications. He claimed that the purchase orders specifically mentioned the site where the goods were to be delivered with name of project which showed the purpose for which the supplies were meant. He admitted that there is no document on record to show that defendant shared the nomenclature of item, specification and/ or shared, approved structural drawings with the plaintiff, and volunteered that CPWD had standard specifications which were given to the plaintiff as the plaintiff was already supplying the materials as per specifications, but in this instance, plaintiff had changed the brand to local brand without the knowledge of the defendant which was then pointed out by SDG in his inspection report. However, prior thereto, the witness had admitted that he used to visit the site personally. He admitted that material was supplied in 2016. He did not remember how CPWD specifications were provided to the plaintiff but insisted that it was in the knowledge of the plaintiff. He claimed that no penalty is imposed against rejection of goods M/s MRJ Steels Vs. M/s Dewan Chand Page No. 21 of 52 as there were other reasons present involving the department. He could place the receipt of final outcome of the rejection due to which extension was given. He then stated that he had not personally checked the goods when they were delivered at the site as he did not visit the site everyday. Rest of the suggestions that the defendant did not suffer any loss on account of plaintiff were denied.
31. Though the parties have tendered their submissions orally as well as have filed written submissions, the gist of submissions is taken note as below.
Arguments on behalf of plaintiff
32. Plaintiff claimed that onus to prove the entitlement, interest and cost was upon the plaintiff by way of issue No. 2, 3 and 4, in pursuance to which plaintiff placed the running ledger (However at this stage, it be observed that no direction had been sought for placing on record the ledger nor the document was made part of the pleadings and hence, is to be discarded having been filed at the back of defendant and without due intimation/permission)).
33. Plaintiff then claimed that defendant has not denied the receipt of material supplied which fact is admitted in the cross-examination, however, has vaguely claimed that material were as per the specifications. It is averred that defendant has not brought any documentary proof to show any discrepancy in the quality and quantity which fact is admitted during cross- examination. It is averred that the reliance on fabricated and ante- dated document of 10.04.2017, Ex. DW-1/P-1 is made, whereas it is admitted by the defendant that there is no document on M/s MRJ Steels Vs. M/s Dewan Chand Page No. 22 of 52 record to show the mode of sending or delivery of the document dated 10.04.2017 to plaintiff, which is denied by the plaintiff. It is argued that the letter dated 07.04.2017 even otherwise does not suggest that the rejection was due to material supplied by the plaintiff. It is averred that defendant has never denied the liability for which the plaintiff has relied upon Ex. PW-1/7 (transcript of communication). It is alleged that said document is duly proved in evidence, the authenticity of which is not denied as the transcript is supported with Ex. PW-1/14. Answering to the claim being barred by limitation, it is argued by plaintiff that the supplies were carried out from September to December 2015. The defendant made the last payment on 18.03.2016. The liability has been admitted by the defendant on 11.08.2018 against Ex. PW-1/7, due to which the limitation shall commence from 11.08.2018. The proceedings for initiating the recovery were made on 13.03.2020 as per the provisions of Section 12-A of Commercial Courts Act. Pre-litigation mediation was not participated in by defendant despite two notices and non-starter report dated 04.12.2020 was issued. It is averred that consequent thereto, the lock-down was imposed and Hon'ble Supreme Court in Suo Motu writ petition (supra) directed the period of 15.03.2020 till 28.02.2022 shall be excluded for the purposes of limitation and shall deem to begin from 01.03.2022 and since the present suit is filed on 05.03.2022, it is within the period of limitation.
34. In response to issues No. 5, 7, 8 and 9, it is averred that the defendant has miserably failed to prove that the goods were not supplied as per the desired quality and specifications. No documentary evidence to controvert or suggest inferior M/s MRJ Steels Vs. M/s Dewan Chand Page No. 23 of 52 quality or quantity has been brought on record, which fact is admitted during cross-examination of defendant. It is averred that defendant has failed to bring on record any document to show on what account plaintiff is liable to pay the amounts claimed in the counter-claim. The defendant has also not brought any material to prove the quantum of losses allegedly having been suffered and any cost to contribute the same to the plaintiff. It is averred that there is no document to show the material was ever rejected and that such rejection was ever informed to the plaintiff. It is claimed that as an afterthought a communication after four years is made.
35. In response to issue No. 6, it is claimed that counter- claim filed by defendant after seven years of supply of material is barred by limitation. It is asserted that counter-claim is liable to be rejected and suit of the plaintiff is to be maintained.
Arguments on behalf of defendant
36. Ld. Sh. T. P. S. Kang, Counsel for the defendant has also filed written submissions in detail alongwith case law. Defendant has challenged the maintainability of the suit and has claimed that the plaintiff failed to answer whether the suit has been instituted duly under the provisions of Sales of Goods and covers the provisions of Indian Contract Act. It is alleged that suit is in contravention of provisions of Section 10 of the Contract Act as the plaintiff has violated the terms of offer which were accepted which had rendered the contract void. It is averred that the suit filed by the plaintiff is barred by the principles of res judicata as the plaintiff's plea of same nature and relief is rejected under MSME Act.
M/s MRJ Steels Vs. M/s Dewan Chand Page No. 24 of 52
37. It is averred that the plaintiff has not supported its claim by any statement of account to seek recovery of Rs. 60,72,975/-. After stressing the issues, it is claimed that the suit is barred by limitation and is liable to be rejected. It is averred that the plaintiff after having frustrated earlier two attempts through legal notice under IBC code and under MSME Act has lodged the present proceedings under the provisions of Commercial Courts Act. It is averred that under the provisions of Rule 3(4) of Commercial Courts (Pre-Institution Mediation and Settlement) Rules, 2018, the mediation attempted by the plaintiff could not have happened as already the said process was exhausted under MSME Act. It is claimed that the present suit is 'sheer abuse' of process of law and is being filed with a concealment of facts.
38. The defendant challenged the maintainability of the present suit on limitation and claimed that the suit is instituted beyond three years, which is apparent through the documents of plaintiff itself, exhibited as Ex. PW-1/4 (colly) and no advantage specially under the provisions of Article 14 of Limitation Act 1963 can be claimed since the last invoice is dated 05.12.2015 and in the absence of any statement of account, the limitation period expired on 05.12.2018, on which account the suit is liable to be rejected. It is averred that the invoice No. 42 dated 22.09.2015 is pre-dated to the purchase order dated 30.09.2015 and is hence a false and fabricated document. Reliance on the judgment of Sumeet Steel Traders Vs. Surender Enterprises and anr., AIR 2005 AP 345 was made. Defendant then claims that period of filing of suit is three years if taken from the last payment which was made on 08.03.2016 and assuming the above to be last transaction of parties, the suit is to be treated barred by M/s MRJ Steels Vs. M/s Dewan Chand Page No. 25 of 52 time on 08/09.03.2019. The counsel of defendant has doubted the correspondence dated 08.03.2019 of the defendant and claimed that as per the claim of plaintiff the said communication was forwarded on 14.03.2014 and there is nothing on record to prove that plaintiff received any communication dated 08.03.2019 and/ or any acknowledgement was ever received by the plaintiff.
39. It is stated that the plaintiff has not relied on any document, issued within period contemplated in law i.e. three years in terms of Section 18 of Limitation Act and the communication dated 14.03.2019, Ex. PW-1/10 is beyond the period of limitation. The reliance is then made on law laid down in Harjeet Vs. Bharat Hotels Limited and anr, RFA No. 666/2017, DOD 31.07.2017 by Hon'ble Delhi High Court, to claim that there is no document to show that the account between the parties was a running account. It is stated that in above circumstances, the claim of the plaintiff is not established.
40. While stressing the entitlement of the defendant to the counter-claim, it is claimed and asserted that all the material supplied by the plaintiff should have been delivered with test certificate with each consignment, whereas the invoices are not supported with test certificates and final sanction and approval of the material received. It is averred that material supplied was sub-standard and defendant requested the plaintiff to replace the material. The plaintiff was obligated to supply the finest quality of material but had failed to supply the same which was rejected during inspection of Government department dated 07.04.2017, which fact was intimated by defendant to plaintiff on phone as well as vide letter dated 10.04.2017. In view of aforesaid, it is M/s MRJ Steels Vs. M/s Dewan Chand Page No. 26 of 52 prayed that the suit of the plaintiff be dismissed and counter- claim be decreed.
Discussion and Relief The analysis of evidence and issue-wise discussion below.
41. Since the suit as well as counter-claim are arising out of claims for recovery against pending dues for sale/purchase, the dues are to be taken note as debts/ outstanding. In which context, the following is to be determined:
Whether the plaintiff has been able to prove debt, if yes through what mode; whether the plaintiff has been maintaining the account based as running account; effect of ledger not being proved and status of invoices: Both the parties have vehemently contested the claim of each other and since combined evidence is led, it shall be appropriate to deal with the issues in the suit initiated by M/s MRJ Steels (the plaintiff) and the claim raised by M/s Dewan Chand (counter-claimant) in the following manner.
42. It be observed that both the parties have brought one witness each. Sh. Saurav Juneja, AR/ director of M/s MR Juneja Iron and Steel Pvt. Ltd., formerly MRJ Steels, deposed as PW-1. He persistently claimed outstanding against the invoices collectively exhibited as Ex. PW-1/4. The details of invoices is pertinent at this stage to take note of and is extracted as below:
(i) Invoice No. 42 dated 22.09.2015
(ii) Invoice No. 3 dated 06.10.2015
(iii) Invoice No. 4 dated 15.10.2015
(iv) Invoice No. 46 dated 21.10.2015
(v) Invoice No. 239 dated 24.10.2015
(vi) Invoice No. 69 dated 27.10.2015 M/s MRJ Steels Vs. M/s Dewan Chand Page No. 27 of 52
(vii) Invoice No. 96 dated 02.11.2015
(viii) Invoice No. 246 dated 03.11.2015
(ix) Invoice No. 277 dated 17.11.2015
(x) Invoice No. 319 dated 01.12.2015
43. The period or duration in which all the in voices are raised is commencing from September 2015 and the last invoice is of 05.12.2015.
44. It is necessary to take note that while plaintiff claimed the suit to have been initiated based on running account, no account statement had been filed and a computer print out of a document purported as ledger of defendant is annexed with written submissions under the pretext "for assisting the Court". A short comment on the above has already been made and it is necessary to take note that the ledger/ account statement had never been made part of the pleadings either by any specific statement in the plaint and/ or by annexing the said document with the list of documents and has not been supported with statement of truth and admission/ denial stage. In which background, the statement of account which is now being proposed to be inserted and intended to be read as part of evidence in support of the claim under the pretext of assistance to Court is not permitted since no such permission was obtained and at no stage defendant has been given an opportunity to rebut the document which is purported to be inserted at his back after vehement objection has been raised of its non-filing in written submissions.
45. It is worthwhile to take note that the computer print out of ledger which had never been made part of the claim and/ or had not been made part of the documents either at any stage, M/s MRJ Steels Vs. M/s Dewan Chand Page No. 28 of 52 could not have been permitted to brought in evidence either, as being beyond pleadings as the opposite party at no stage would have got the opportunity to rebut, dispute or deny the said document.
46. The requisite case law in pursuance is noted as below:
"No amount of evidence could be looked into upon a plea which was never put forward (Siddik Mojamed Shah Vs. Mst. Saran, AIR 1930 Privy Council 57) [cited in Purana Theatre Vs. State of West Bengal and ors 25.09.1996.
Relied: 1977 LAB 823 (Delhi HC) Lachman Das Vs. Indian Express 1980 (41) FLR 95 Any finding of Tribunal would be perverse if it is based on no evidence.
1974 CLJ page 313.
1980 LAB IC 894 - Evidence beyond pleadings cannot be read for assessment otherwise, ultra ... as "audi alteram partem" rule and against fairness. Pleadings contain a right to know - 1980 LAB IC 894 "A party has a 'right to know' the case of adversry enabling him to meet the challanges".
1997 SCC (L&S) 279 page 296."
47. Further, it is necessary at this stage to take note that Ex. PW-1/10, email dated 08.03.2019, written by defendant/ counter-claimant M/s Dewan Chand, is heavily relied by the plaintiff. The purport of reliance though is to seek extension of limitation on which aspect I shall delve a little later, it is necessary to extract the contents of the mail below:
"Sir, We are in receipt of your mail dated 28.02.19, we apprise that your payment is not made due to non reconciliation of accounts. The account details are enclosed. You have unfortunately raised the bill to a higher rate, which is not acceptable.
M/s MRJ Steels Vs. M/s Dewan Chand Page No. 29 of 52 Also the material MS Pipes sent by you did not confirm to the specifications & we had to send them as department refused to allow us to use these this was apprised to you even at that stage."
48. From the bare reading of this email, it is apparent that both the parties knew that they were obligated of preparing the statements, ledger which as such is also mandated for a business entity. In circumstances, the plaintiff being a public limited company is governed by the provisions of Companies Act and relevant mandate under Income Tax Act as well for keeping the accounts in such form as provided om relevant Sections of Companies Act of 1996 as amended.
49. The definition "books of account" in Section 2(13) of Companies Act is extracted as below for required reference:
2. Definitions.-- In this Act, unless the context otherwise requires,--
(13) ―books of account includes records maintained in respect of--(i) all sums of money received and expended by a company and matters in relation to which the receipts and expenditure take place;
(ii) all sales and purchases of goods and services by the company;
(iii) the assets and liabilities of the company; and(iv) the items of cost as may be prescribed under section 148 in the case of a company which belongs to any class of companies specified under that section"
50. As earlier observed, the plaintiff being a private limited company, was duty bound to maintain a statement of account of transactions; a ledger carrying a gist of general entries and produce such statement of account. Needless to note that such ledger statement also must have been examined by auditors of company and external auditors, more so, when it intended to M/s MRJ Steels Vs. M/s Dewan Chand Page No. 30 of 52 be brought in for reliance in a suit for recovery of debt against a 'running account'.
51. In the absence of the statement of account, the plaintiff has proposed to rest its claim of outstanding on invoices which are Ex. PW-1/4 (colly), and are w.e.f 22.09.2015 till 05.12.2015. The Hon'ble High Court recently in case titled Modern Construction Company Vs. Hitech Enterprises, RFA (Comm) 76/2023 & CM Appl. 20581/2023, DOD 24.08.2023 by Hon'ble Delhi High Court, has in detail, discussed the definition of instruments such as invoices and ledger account. The term 'invoice' and its definition from Black's Law Dictionary 55th Edition is taken note of as below:
"A written account, or itemized statement of merchandise shipped or sent to a purchaser, consignee, factor, etc. with the quantity, value or prices and charges annexed, and may be as appropriate to a consignment or a memorandum shipment as it is to a sale. Joseph B. Cooper & Son, Inc v. Finlays Depts., Inc., 11 Misc. 2d 382, 174 N.Y.S. 2d 265, 269.
Document showing details of a sale or purchase transction.
A list sent to a purchaser, factor, consignee, etc., containing the items, together with the prices and charges of merchandise sent or to be sent to him. A writing made on behalf of an importer, specifying the merchandise imported, and its true cost or value."
52. An invoice is held a written contract is stressed in view of the law down in KglSystel Limited Vs. M/s Fujitsu Icim Limited, 2001 SCC OnLine Del 440, Indian Iron & Steel Company Lts Vs. Nada Brothers and ors, 2004 SCC OnLine
518. M/s MRJ Steels Vs. M/s Dewan Chand Page No. 31 of 52
53. The Hon'ble Court has then discussed the definition of 'ledger account' as defined in Black's Law Dictionary 55th Edition as below:
"A book of accounts, often referred to as a general ledger, in which a business records transactions; there being two parallel columns in each account, one for the debit entries, the other for the credits. Into this book are posted the items from the books of original entry or journals. The principal book of accounts of a business establishment in which all the transactions of each day are entered under appropriate heads so as to show at a glance the debits and credits of each account. Foothill Ditch Co. v. Wallace Ranch Water Co., 25 Cal. App. 2D 555, 78 P.2d 215, 220."
54. It has been held that where the plaintiff has filed the suit and is aiming for recovery of amount based on multiple invoices, part payments and lumpsum dues against a running balance in ledger accounts, it shall be construed that plaintiff has sued for the balance amount as outstanding due shown in the account of defendant in its ledger and such suit should be based on ledger account. Similar observations have been made in ITC Limited Vs. Mahavira Singla, 2023 SCC OnLine Del 882.
55. It is also taken note that in the plaint it is specifically stated by plaintiff that claim is filed against the residue of outstanding at the end of transactions in ledger and entries were kept as running account. By bringing all invoices w.e.f. 22.09.2015 till 05.12.2015 (10 in number) and exhibiting them collectively, the plaintiff had again intended to claim the payment in "lumpsum" and "residue" against the total invoice value of Rs. 84,34,309/-, out of which an amount of Rs. 55 lacs is claimed to have been realized. In the aforesaid, it became pertinent for the plaintiff to prove the debt from the ledger account by proving the M/s MRJ Steels Vs. M/s Dewan Chand Page No. 32 of 52 statement of account of the relevant period and establishing that the invoices Ex. PW-1/4 (colly) were shown in statement of account which was being maintained in normal course of business, to lend credence to Ex. PW-1/4 (colly). However, at the cost of repetition, it is observed that no corroboration to the invoices Ex. PW-1/4 (colly) is provided, except exhibiting them casually and relying on silence to its authenticity by defendant.
56. In above mode, the plaintiff has not supported the recovery of 'balance' 'due' claimed against the total outstanding of Rs. 84,34,309/-. It is now needed to analyze as whether the invoices itself are sufficient proof without any support of statement of account kept in due course should be treated as of outstanding claimed in "lumpsum".
57. It may be observed that while an invoice being a contract in writing must be a worthy proof of transaction stated therein for establishing, its terms and intent of agreement recorded therein, it may be capable of proving only that much. For a part of transaction beyond an invoice would need corroboration by such mode of document, through which the transaction is carried forward. In present case, after the essence, terms stated through an invoice is exhausted consequent to payment, the same instrument cannot be brought to prove a transaction subsequent or earlier which should be established with a document showing sequence of such contracts having been entered through ledger to establish the dues against, a past, or present transaction which must be specifically pleaded and clearly stated in the plaint. Merely by collective exhibition of invoices, the liability against all of them would not be constructed surviving automatically. The observation in Modern M/s MRJ Steels Vs. M/s Dewan Chand Page No. 33 of 52 Construction Vs. Hitech Enterprises (supra) which are relevant at this stage are noted below:
"24. Blacks Law Dictionary defines a "running account" as an open unsettled account, as distinguished from a stated and liquidated account. Running accounts mean 'mutual accounts' and 'reciprocal demands' between the parties, which accounts and demands remain open and unsettled.
25. The characteristics of a 'mutual account' were stated in the case of Hirada Basappa v. Gadigi Mudappa, (1871) VI MHCR 142 thus:
"To be mutual there must be transactions on each side creating independent obligations on the other, and not merely transactions which create obligations on the one side, those on the other being merely complete or partial discharges of such obligations."
29. The term "running and non-mutual account" on the other hand, has been explained in the case of Ranganathan v. Sarwana Store, 2018 SCC OnLine Mad 5897 that in case of a "running and non mutual account" between the buyer and seller, when goods are delivered by the seller to the buyer, the value of the goods is debited in the debit column and when amounts are paid by the buyer to the seller, they are entered in the credit column. The difference is continuously struck in the column for balance. In such a case, when the buyer defaults to make balance payment, the seller's action is not for the price of goods sold and delivered, but for the balance due at the foot of an account. The account is running as the amounts received from time to time are credited and the amounts still due is reflected as debit. Essentially, it is "non mutual" because the amounts being adjusted are those payable by one party. Its contradistinction, "Mutual account" implies that the credit - debit account is of both the parties."
M/s MRJ Steels Vs. M/s Dewan Chand Page No. 34 of 52
58. The provisions of Indian Contract Act in such cases where no statement of account is filed indicates that the payments realized by the plaintiff in 'lumpsum' is to be adjusted against the first liability accrued, as debt to the payer. In which background, the plaintiff was duty bound to prove the adjustment of the amounts received against the invoices commencing w.e.f September 2015 and no liability against the initial invoices till the payments realized from defendant is consumed and adjusted could have been claimed. In circumstances above, the plaintiff has failed to show that the principle of first-in first-out payment adjustment qua invoices having been followed, more so, when no specific principle of adjustment of payment received in lumpsum is proved to have been agreed between the parties. In which background, the provisions of Section 60 and 61 of Indian Contract Act are taken note of as below:
"Section 60 : Application of payment where debt to be discharged is not indicated.--Where the debtor has omitted to intimate and there are no other circumstances indicating to which debt the payment is to be applied, the creditor may apply it at his discretion to any lawful debt actually due and payable to him from the debtor, whether its recovery is or is not barred by the law in force for the time being as to the limitation of suits.
Section 61 : Application of payment where neither party appropriates.--Where neither party makes any appropriation, the payment shall be applied in discharge of the debts in order of time, whether they are or are not barred by the law in force for the time being as to the limitation of suits. If the debts are of equal standing, the payment shall be applied in discharge of each proportionally."
M/s MRJ Steels Vs. M/s Dewan Chand Page No. 35 of 52
59. In above reference, paras 32, 33, 34, 35, 36 and 37 are also required to be taken note from the law laid down in Modern Construction Vs. Hitech Enterprises (supra):
"32. In the event the debtor makes a payment without specifying the Invoice towards which the amount is paid, the apportionment of such a payment is made in accordance with the following provisions of the Indian Contracts Act, 1872:
"Section 60 : Application of payment where debt to be discharged is not indicated.-- Where the debtor has omitted to intimate and there are no other circumstances indicating to which debt the payment is to be applied, the creditor may apply it at his discretion to any lawful debt actually due and payable to him from the debtor, whether its recovery is or is not barred by the law in force for the time being as to the limitation of suits. Section 61 : Application of payment where neither party appropriates.--Where neither party makes any appropriation, the payment shall be applied in discharge of the debts in order of time, whether they are or are not barred by the law in force for the time being as to the limitation of suits. If the debts are of equal standing, the payment shall be applied in discharge of each proportionally."
33. The underlying principles of apportionment as contained in above sections according to Pollock & Mulla, Indian Contract Act, 12th Edition, is that when several debts are due owing to one person, any payment made by the debtor either with an express intimation or under circumstances from which an intimation may be implied, must be applied to the discharge of debt in the manner intimated or which can be implied from the circumstances.
34. Mulla proceeds to observe that "where several distinct debts are owed by a debtor to his creditor, the debtor has the right when he makes a payment to M/s MRJ Steels Vs. M/s Dewan Chand Page No. 36 of 52 appropriate the money to any of the debts that he pleases, and the creditor is bound, if he takes the money, to apply it in the manner directed by the debtor. If the debtor does not make any appropriation at the time when he makes the payment, the right of appropriation devolves on the creditor".
35. The Rule of Appropriation of money was summed up by Mr. T.L. Venkatarama Aiyar, J. (as he then was) in the Full Bench decision of the Madras High Court in Marimella Suryanarayana v. Venkataraman Rao (AIR 1953 Mad 458). It was stated:
"The principles governing appropriation of payments made by a debtor are under the general law well settled. When a debtor makes a payment, he has a right to have it appropriated in such manner as he decides and if the creditor accepts the payment, he is bound to make the appropriation in accordance with the directions of the debtor. This is what is known in England as the rule in 'Clayton's case" (1861) 1 Mar.572 :
35E.R. 781 and it is embodied in Section 59, Contract Act. But when the debtor has not himself made any appropriation, the right devolves on the creditor who can exercise it at any time, vide 'Cory Bros. & Co. v.
Owners of the Turkish Steamship 'Mecca', [1897] A.C. 286; and even at the time of the trial : Vide 'Symore v. Picket', [1905] 1 K.B.
715. That is Section 60, Contract Act. It is only when there is no appropriation either by the debtor or the creditor that the Court appropriates the payments as provided in Section 61, Contract Act."
36. In the case of Anmol Steel Processors Private Limited v. Colour Roof (India) Limited (2022 SCC OnLine Bom 116) the Bombay High Court analysed Section 60 and 61 of the Indian Contracts Act and observed:
"55. Under section 60 of the Indian Contract Act, where the debtor has omitted to intimate M/s MRJ Steels Vs. M/s Dewan Chand Page No. 37 of 52 and there are no settled circumstances undertaking the debt to be applied, the creditor may apply at his discretion to any lawful debt actually due and payable to him from the creditor, whether is regular or is not barred by law in force for the time being as to the limits of the suit"
"56. At this stage, it would be apposite to refer to section 61 of the Indian Contract Act which provides that where neither party makes any appropriation, the payment shall be applied in discharge of the debts in order of time, whether they are or are not barred by the law in force for the time being as to the limitation of suits. If the debts are of equal standing, the payment shall be applied in discharge of each proportionably."
37. Thus, to summarize where a debtor, owing several distinct debts to one person, makes a payment indicating that the payment is to be applied to the discharge of some particular debt, the payment must be applied accordingly in terms of Section 59 of the Contract Act. However, where the debtor omits to so intimate, the creditor may apply it at his discretion to any lawful debt actually due and payable to him from the debtor, whether its recovery is or is not barred by the law in force for the time being as to the limitation of suits, according to Section 60 of the Contract Act. Where neither party makes any appropriation, the payment shall be applied in discharge of the debts in order of time, whether they are or are not barred by limitation in terms of Section 61 of the Contract Act."
60. In summary, the plaintiff in absence of any specific agreement was duty bound to adjust the payments received against the initial invoices and could not have claimed the debt or outstanding either partially or fully against the same. In which background, the plaintiff was also duty bound to prove against which invoices the debt is still surviving and must have proved M/s MRJ Steels Vs. M/s Dewan Chand Page No. 38 of 52 the same in the above context as per law. Instead of proving the invoices, the plaintiff has merely exhibited all the invoices together.
61. As the record suggest, the aforementioned invoices are supported with purchase order Ex. PW-1/2 (colly) which are dated 30.09.2015 and 21.10.2015. The defendant on the other side has also relied upon purchase orders Ex. DW-1/2 and are dated 30.09.2015 and 21.10.2015. The defendant while exhibiting the purchase orders has doubted the veracity of the purchase order Ex. PW-1/2 dated 30.09.2015 and has claimed that no pre-dated invoice could have been issued by the plaintiff against a purchase order Ex. PW-1/2 (colly) and specifically of 30.09.2015 as the first invoice is of 22.09.2015. The defendant vehemently doubted the veracity of the invoices. In which background, the plaintiff was duty bound to prove the genuineness of each invoice separately. No effort in the said direction has been been made.
62. Plaintiff who had claimed that on certain occasions, the invoices were generated against the purchase orders received on phone has not detailed much to impart context. It is required to be taken note that none of the purchase order is finding the details against the date of receipt of purchase order and/ or the mode. Even if this invoice is made on the basis of a purchase order received on phone, the name of the caller, the date of receipt of the order etc., could have been stated in the invoice. In order to seek a conciliation of the purchase order, the plaintiff must have received the purchase order in writing from the defendant for keeping a track of the proof of invoices. The above is strengthened from the fact that the defendant has filed two M/s MRJ Steels Vs. M/s Dewan Chand Page No. 39 of 52 purchase orders dated 30.09.2015 and 21.10.2015 as Ex. DW-1/2 (colly) which are not filed by the plaintiff and suggest that the defendant had been issuing the purchase orders irrespective of raising them first, telephonically. In such circumstance, the pre- dated invoice of 22.09.2015 must have been supported with the purchase order of same date and/ or prior. In absence of which, raising of an invoice without any purchase order and suggesting no details of any sort, does not inspire confidence that the invoices were generated as per the expected accounting practice and were maintained accordingly.
63. PW-1, who is AR of plaintiff being director, has not brought his accountant and/ or the person responsible who would have issued the invoices and/ or would have received the orders on phone to prove the aforesaid invoices having been issued consequent to the purchase orders in due course. The comment, already is made, on the aspect that the invoices are not supported with any consequent entry to corroborate their correctness in the ledger pertaining to the defendant.
64. The bare reading of the terms and conditions on invoices show that the accrual of liability in favour of defendant is claimed immediately on delivery. The plaintiff has not proved the date of delivery of articles against any of the invoice. However, since the defendant has also not raised the dispute to the delivery and has rather claimed non-conciliation of accounts for incorrect deliveries against specifications, it is deemed that the deliveries against the invoices are to be presumed in favour of the plaintiff. The last invoice issued by plaintiff is dated 05.12.2015. The terms and conditions stated on the invoice, which is supported with the statement of truth filed by the M/s MRJ Steels Vs. M/s Dewan Chand Page No. 40 of 52 plaintiff in favour of his document show that the debt against the defendant is claimed due immediately on delivery of goods against invoice dated 05.12.2015 according to which if the goods are delivered alongwith invoice and no objection is raised by defendant at that stage, the defendant is to hold liability immediately and could be informed through a claim up till December 2018 as admittedly period of limitation for filing the present suit is three years. In which case, the plaintiff must have filed the present suit by or before 30.12.2018. The plaintiff has claimed that the suit is within time as the payments were realized by the plaintiff after December as well and it is claimed that last payment made by the defendant in favour of plaintiff was on 08.03.2016. It is claimed that since the last payment in favour of plaintiff was realized on 08.03.2016, the limitation is extendable up till 07.08.2019. However, the aforementioned is mere averrment. There is no proof that the plaintiff has received any payment against any of the invoices except of the admission of having received the lumpsum payment of Rs. 55 lacs. No statement of account as discussed above, no bank statements to show any receipt from the defendant have been filed, in which background a mere statement made orally of this nature cannot be treated be a sufficient proof. More so, it is a settled law and the rigors of law require a party to prove its part of plea.
65. There is no material to establish that any payment is realized or received by the plaintiff after last invoice of 05.12.2015 assuming that defendant may consume some time in receiving the delivery of articles and their inspection, another two weeks may be presumed as a reasonable time to convey acceptable or rejection whereafter liability shall be due forthwith M/s MRJ Steels Vs. M/s Dewan Chand Page No. 41 of 52 and limitation shall start running for plaintiff. However, the suit is filed much beyond that period.
66. The plaintiff then has claimed extension of limitation on the basis of the transcript Ex. PW-1/9. Ld. Counsel for the defendant though has not objected to its exhibition on record, a mere absence of an objection will not tantamount to its proof as is settled in R.V.E. Venkatachala Gounder v. Arulmigu Viswesaraswami & V.P. Temple, (2003) 8 SCC 752, as the transcript as it is incapable of read as a proof in view of following admissions of PW-1 in response to the questions as below:
"Q-13. Kindly refer to page no. 26 of the documents filed by you. This is a transcript of call recording dated 11.08.2018. how did you record this conversation? Ans. Through my phone.
Q-14. What is the model and make of the phone from which you allegedly recorded the conversation? Ans. It was a Samsung Phone which I do not have now. I do not remember the model number and IMEI number of the phone.
Q-15. Have you mentioned on these pages which was the phone number from which you called and what was the phone number of the opposite party on which you called?
Ans. No. Q-16. Did you file any police complaint regarding your phone?
Ans. No, as it was not a case of theft or loss of phone. I do not have the phone as I changed it. Now I do not have the said phone with me.
Q-17. Did you make any other police complaint against the defendant?
Ans. Yes. Two complaints were made. One in 2016 and the other in 2017. One complaint was made at PS M/s MRJ Steels Vs. M/s Dewan Chand Page No. 42 of 52 G. K. and the other at PS Paschim Vihar. Again said, both complaints were made at PS GK. I have placed on record copies of the two complaints."
67. In above background, mere filing of an affidavit or certificate under Section 65-B Indian Evidence Act would not satisfy the requisite of law laid and clarified in Arjun Pandit Rao Khotkar Vs. Kushanrao Goranyal & Ors, (2020) 7 SCC 1, for failure of plaintiff to show the verocity of the process of recording of the transcript and sterilization of instruments used. In circumstances above, the transcript is to be treated as a document which is not proved as per law and shall have no capacity to give any extension to the period of limitation. It is further requisited to take note that in the similar vein, plaintiff has heavily relied on document Ex. PW-1/5, a complaint made to the SHO, PS GK-II dated 12.09.2016 and a complaint Ex. PW- 1/6 dated 14.07.2017. Both the complaints are photocopies. No witness from the police station has been called to prove their receipt. The plaintiff himself admitted that both the complaints are not in pursuance of intention of recovery but are against the alleged misbehaviour of Sh. Vikram Kumar, partner of defendant, and accordingly have no such capacity to extend the period of limitation. It is, at this stage, required to be taken note that the limitation in suit arising of debt of money are extendable only if there is an acknowledgement of debt during the surviving period of limitation. No such acknowledgement is shown on record. The provisions of Section 18 of Limitation Act are extracted for reference as below:
"Section 18. Effect of acknowledgment in writing.-
M/s MRJ Steels Vs. M/s Dewan Chand Page No. 43 of 52 (1) Where, before the expiration of the prescribed period for a suit or application in respect of any property or right, an acknowledgment of liability in respect of such property or right has been made in writing signed by the party against whom such property or right is claimed, or by any person through whom he derives his title or liability, a fresh period of limitation shall be computed from the time when the acknowledgment was so signed.
(2) Where the writing containing the acknowledgment is undated, oral evidence may be given of the time when it was signed; but subject to the provisions of the Indian Evidence Act, 1872 (1 of 1872), oral evidence of its contents shall not be received."
68. In order to show that there is an acknowledgement of debt, the plaintiff has intended to prove an email Ex. PW- 1/10. Though, through the written arguments as well as oral arguments, Sh. T. P. S. Kang, Ld. Counsel for the defendant, has vehemently opposed sending of email dated 08.03.2019 and has claimed that the reference only of this email had been made in the email of defendant dated 14.03.2019 Ex. PW-1/10, though email dated 08.03.2019 is exhibited by defendant as well, as Ex. DW-1/5, which suggest to its existence and establishes its authenticity. However, it is interesting at this stage to take note that whether through email Ex. PW-1/10 an acknowledgement of debt in the first place is communicated and whether this acknowledgement, if it is so construed, is capable of extending the period of limitation? A reference to contents of the email Ex. PW-1/10 is already drawn and extracted in previous paras, the bare perusal of which does not show an intention of any acknowledgement of debt having been communicated by defendant. The language rather reflects that defendant has raised dispute on account of non-conciliation of the statements and has M/s MRJ Steels Vs. M/s Dewan Chand Page No. 44 of 52 doubted the specifications, thus has disputed the dues and any liability. The veracity of the correctness of the contents of the email, at this stage, is not called in question as both parties have relied upon it, however, it is suffice to take note that the contents do not bear any presumption of acknowledgement in favour of the plaintiff either. Accordingly, it is doubted that email dated 08.03.2019, Ex. PW-1/10 or Ex. DW-1/5 is capable of being referred as an acknowledgement of debt as is proposed by the plaintiff.
69. Further an analysis of above document Ex. DW-1/5 email dated 05.03.2019, on the aspect of limitation, it is offering no respite to plaintiff since the email is of 08.03.2019 and as discussed in detail above the limitation against the defendant and in favour of plaintiff, is not shown within the limitation available of three years from 2015 to December 2018 i.e. the time of the last invoice, subject to the stretch of period on account of assumption of credit for making payment post delivery of goods. In view of the above, the email Ex. PW-1/10 and consequent notices are not capable of extending limitation in favour of plaintiff as are not satisfying the requirement set by Section 18 of Limitation Act.
70. The notice Ex. PW-1/11, which is purportedly a legal notice of the demand issued under the provisions of IBC and the reply of defendant dated 22.03.2019 Ex. PW-1/12 is to be discarded as incompetent to extend limitation in favour of plaintiff furthering been sent after expiry of limitation. The plaintiff has claimed the advantage the law laid down by Hon'ble Supreme Court in Suo Motu (supra). However, admittedly the benevolent purport of the aforementioned judgment is not M/s MRJ Steels Vs. M/s Dewan Chand Page No. 45 of 52 applicable to the facts of the present case as the limitation expired much earlier in the year 2018 (December) itself whereas the accommodation on account of Covid-19 conditions were applied much later in 2020. In above background, the law above is not applicable to the circumstances stated herein.
71. In view thereof, the plaintiff has miserably failed to prove an existence of limitation in its favour to claim any relief against the outstanding purported.
Counter-claim:
72. In continuation of the aforementioned, it shall be appropriate to deal with the veracity of counter-claim raised by the defendant. The defendant while challenging the maintainability of the plaintiff's claim under the limitation admitted that the filing of its counter-claim is also hit by the law of limitation. During arguments, Ld. Counsel for the defendant admitted that the counter-claim is not maintainable on the aforementioned ground.
73. However, even otherwise, it is pertinent to take note of the evidence tendered for final adjudication of counter-claim and to deal with all the arguments raised in order to give finality to the discussions in the present judgment. It be observed that the defendant/ counter-claimant raised a counter claim of Rs. 20,45,526/-. The defendant did not bring any of its statement of account to show and prove any such liability against the plaintiff M/s MRJ Steels. The defendant/ counter-claimant then brought on record two purchase orders exhibited collectively as Ex. DW- 1/2 dated 30.09.2015 and dated 21.10.2015. It is relevant to note that by above purchase order no liability against plaintiff is M/s MRJ Steels Vs. M/s Dewan Chand Page No. 46 of 52 shown. Rather the purchase order Ex. PW-1/2 and Ex. PW-1/3 suggest a claim if liability against defendant. The purchase order do not suggest any detail beyond what is stated thereupon to lead to any inference of default assignable to plaintiff. No evidence is led by defendant that the deliveries were not in accordance with the purcahse order Ex. DW-1/2. It is needed to be noted that the purchase orders mention the terms and conditions below:-
"1. Payment 50 Days Against Ch. 068391 Rs. 20,00,000/- Dt. 16/10/2015.
2. Delivery period : immediate.
3. Test certificates will be issued for each consignment. Please sent in two lots. 1st lot of 20 Mt. To be send, 2nd lot of 30 Mt to be sent."
74. In the above background, as the delivery was immediate and it is not disputed that the articles were not delivered, the payment period available to the defendant was 15 days. In terms of the provisions of Sale of Good Act which is the relevant law applicable to the facts of the present case, the deliveries/ articles are deemed to have been accepted if the defendant/ counter-claimant had not raised any dispute regarding the specifications, quality or quantity of the delivered goods. At the cost of repetition, it is requisited to be taken note that an objection qua the quantity and quality for the first time is raised by the defendant against Ex. DW-1/4, wherein the following is stated:-
"To, MRJ Steel Pvt. Ltd.
A-32, Naraina Industrial Area, Ph-1, New Delhi-110028.
Reg. Rejection of non specified JD make ms pipe. Dear Sir, M/s MRJ Steels Vs. M/s Dewan Chand Page No. 47 of 52 We have come to know that you have supplied non specified JD make ms pipe, whereas we had ordered Jindal/JSW make & mentioned in the P.O that test certificates will be issued. Other material supplied by you under similar PO is of JSW make. We request you to kindly remove the same as the same is rejected by the department."
75. Ex. DW1/4 is a letter dated 10.04.2017 informing the plaintiff of rejection of non-specified JD make MS pipes. While intending to put the plaintiff under the burden for having supplied the wrong material, the objection to the material not matching the specification of the work contract of defendant, shall have been proved, first. Sh. Vikram Kumar, DW-1/Partner, admitted as "I personally visit the site" during the cross- examination. Consequent to above, it became his duty to check the specification of material being delivered, in terms of the work order. While communicating letter Ex. DW-1/4, there is no reference to any of the work order to show that the deliveries were not in consonance with the work order given to the plaintiff. A vague letter is forwarded without mentioning any details even of the delivered 'batch' and 'lot' etc. In which background, it is to be assumed that defendant did not raise any objection as there was no dispute to the specifications and/ or the material delivered was not confirming to the specifications stated in the purchase order. In the similar vein, the defendant has intended to rely heavily on document Ex. DW-1/3 which is written by Sh. N. L. Singh, Special Director General, Northern Railway and has stated 07.04.2017
76. At the threshold, it be observed that by mere exhibition of the said letter, will not tantamount that the letter is M/s MRJ Steels Vs. M/s Dewan Chand Page No. 48 of 52 proved in evidence. The defendant has then intended to rely on typed copy of the said document, however, the contents of the documents do not match with the defence raised as it does not doubt the specifications of the articles but is rather castigating the slow pace of work at which it was being undertaken after the award of the same in August 2010. The defendant admitted that he has received an extension, which rather belies the foundation of claim as admittedly no damage or loss of work is shown to give occasion for filing a counter-claim.
77. He has admitted that there has been no penalty levied on the defendant against the aforementioned letter. The defendant is not debarred. There is no proof that defendant did not receive the payment against the aforementioned work and/ or suffered any losses. In the absence of any damage having been suffered, how a counter-claim is made out against the plaintiff is not stated. Ld. Counsel for the defendant who has filed a lengthy written arguments on record, numbering 18 pages and has brought into context the provisions of Section 73 of Contract Act against plaintiff, omitting to read the import of said provision. In absence of any material to show that the defendant suffered any loss or accosted any damage attributable to the cause or knowledge of plaintiff, no part of the purported claim against the plaintiff is shown maintainable. In continuation, it shall be appropriate to take note that under the zeal the reliance is made on many non-applicable provisions and case law which cannot be treated as precedent as it is not premised on any of the facts attracted to the preset case and hence lengthy discussions thereupon are best avoided. In view thereof, there is no evidence to show that counter-claim is maintainable in view of the M/s MRJ Steels Vs. M/s Dewan Chand Page No. 49 of 52 discussions above. The suit of the plaintiff as well as counter- claim both are dismissed with no order to cost.
78. File be consigned to Record Room.
Announced in open Court (Nirja Bhatia)
today on 09th April, 2024 District Judge
(Comm. Court) (Digital-07)
South-East, Saket Court, New Delhi
M/s MRJ Steels Vs. M/s Dewan Chand Page No. 50 of 52
CS (Comm) 319/2022
MRJ Steels Vs. M/s Dewan Chand
09.04.2024
Present: Ld. Counsel for the plaintiff.
Ld. Counsel for the defendant.
Vide separate common judgment announced in open Court today, the suit of the plaintiff as well as counter-claim both are dismissed with no order to cost.
File be consigned to Record Room after completion of necessary formalities.
(Nirja Bhatia) District Judge (Commercial) (Digital-07) South-East, Saket Courts, Delhi 09.04.2024 M/s MRJ Steels Vs. M/s Dewan Chand Page No. 51 of 52 CS (Comm) 106/2023 M/s Dewan Chand Vs. MRJ Steels 09.04.2024 Present: Ld. Counsel for the plaintiff/ counter-claimant.
Ld. Counsel for the defendant.
Vide separate common judgment announced in open Court today, the suit of the plaintiff as well as counter-claim both are dismissed with no order to cost.
File be consigned to Record Room after completion of necessary formalities.
(Nirja Bhatia) District Judge (Commercial) (Digital-07) South-East, Saket Courts, Delhi 09.04.2024