Delhi District Court
Indolog Logistics Pvt Ltd vs Kanchan Vanijya Pvt Ltd on 4 December, 2024
Digitally
signed by
RAKESH
RAKESH PANDIT
PANDIT Date:
2024.12.04
16:35:42
1 +0530
IN THE COURT OF SH. RAKESH PANDIT, DISTRICT JUDGE
(COMMERCIAL)-04, SOUTH-WEST, DWARKA COURTS, DELHI
DLSW010118632023
CS (COMM) No. 554/2023
Indolog Logistics Pvt. Ltd.
Through its Director Mr. Vishal Singh
Plot No.249/1, Sector-24, Phase-II,
Dhulsiras, Dwarka, New Delhi-110077. .....Plaintiff
Versus
1 M/s Kanchan Vanijya Pvt. Ltd.
Address: 13/3, Mahendra Roy Lane,
Kolkata (WB), PIN - 700046.
2 Saurabh Gupta
Director of M/s Kanchan Vanijya Pvt. Ltd.
Address: 13/3, Mahendra Roy Lane,
Kolkata (WB), PIN - 700046.
3 Rajeev Gupta
Director of M/s Kanchan Vanijya Pvt. Ltd.
Address: 13/3, Mahendra Roy Lane,
Kolkata (WB), PIN - 700046.
4 Rashmi Gupta
Director of M/s Kanchan Vanijya Pvt. Ltd.
Address: 13/3, Mahendra Roy Lane,
Kolkata (WB), PIN - 700046. ..... Defendants
CS (COMM) No. 554/2023 Indolog Logistics Vs. Kanchan Vanijya Page 1 of 16
2
Date of institution : 15.12.2023
Received by this court : 18.12.2023
Date when order reserved : 25.11.2024
Date of Judgment : 04.12.2024
JUDGMENT
1 By this judgment, I shall dispose of suit for recovery of Rs.18,74,851.33/- along with interest filed by the plaintiff against the defendant.
2 The brief facts of the case as per plaintiff are that plaintiff is a duly incorporated company and appointed Sh. Vishal Singh to file the present suit and to represent it in other proceedings. As per plaintiff, it is engaged in the business of Domestic/International Logistics (Freight & Forwarding and Cargo Handling) Export & Import Services.
3 Defendant no.1 is also a company with defendants no. 2 to 4 as directors. As per plaintiff, plaintiff company offered services to defendant no.1 for Cargo shipment by air/sea for the delivery of goods of defendant no.1 at desired destinations. Invoices were raised for the services. As in business relations, invoices, credit notes and debit notes were issued. The invoices issued against defendant no.1 are mentioned in CS (COMM) No. 554/2023 Indolog Logistics Vs. Kanchan Vanijya Page 2 of 16 3 paragraph 8 of the plaint. Payments were made "on account". As per plaintiff, an amount of Rs.14,95,669.88/- was outstanding on 10.07.2022 as per the statement of account. Defendants are also liable to pay interest @24% per annum i.e. Rs.3,79,181.45/- i.e. Rs.18,74,851.33/-. When this amount was not paid, several emails were written and a legal demand notice dated 11.07.2023 was also issued. No payment was made. Plaintiff also initiated pre-litigation mediation with DLSA South-West. When none appeared on behalf of defendant, the same ended as "Non-Starter" on 17.10.2023.
The present suit is filed by the plaintiff seeking decree of recovery of money of Rs.18,74,851.33 along with ancillary reliefs.
4 In the written statement filed by defendant, it is stated that the suit is bad for non-joinder of a necessary party i.e. Affordable Luxury Group (ALG). It is stated that this ALG was the buyer of goods of defendant no.1. It was ALG who introduced defendant no.1 to the plaintiff that plaintiff is ALG's transit partner. ALG used to give instructions for sending goods to the plaintiff, for sending to different destinations. The transportation was on the basis of Free on Board (FOB). As per this arrangement, the plaintiff was to retrieve goods from the CS (COMM) No. 554/2023 Indolog Logistics Vs. Kanchan Vanijya Page 3 of 16 4 doorstep of defendant's factory and thereafter, they were to be sent to different destinations as per the demand of ALG. The payments were to be made by ALG and not the defendant no.1.
It is further stated that no amount is due towards the defendant no.1. It is stated that there exists no direct agreement between the plaintiff and the defendant no.1 regarding payment or billing. It is submitted that all the transactions with the plaintiff were initiated by ALG who used to give instructions regarding the sending of goods.
It is further submitted that defendant has not asked for any delivery of goods. Plaintiff is raising false invoices. It is stated that no amount is due towards the defendant.
5 In replication, plaintiff reiterated and reaffirmed the facts of the plaint and denied those of written statement.
6 From the pleadings of the parties and material on record, following issues were framed on 10.05.2024:-
1 Whether there was no privity of contract between the plaintiff and defendant no.1, if so its effect? OPD.
2 Whether the suit is bad due to non-joinder of
necessary party i.e. Affordable Luxury
Group(ALG/Buyer)? OPD.
3 Whether it was the duty of the plaintiff to take goods
from the footstep of factory of defendant and to transport to various destinations as directed by the CS (COMM) No. 554/2023 Indolog Logistics Vs. Kanchan Vanijya Page 4 of 16 5 ALG/buyer in terms of Free on Board (FOB) basis, if so, its effect? OPD.
4 Whether the plaintiff is entitled for recovery of money of Rs.18,74,851.33/- as prayed in paragraph (a) of prayer clause? OPP.
5 Whether the plaintiff is entitled for pendent-lite and future interest @24% per annum or at any other rate?
OPP.
6 Relief?
7 To prove its case, plaintiff examined Sh. Vishal Singh. He led examination-in-chief by way of affidavit and deposed in terms of the facts of the plaint and relied on following documents:-
Srl. Document/Particulars Exhibit(s) pages No. 1 Certified true copy of the Extract of the Board Ex.PW1/1 1 Resolution dated 24.11.2023 2 Invoices, Debit notes and credit notes Ex.PW1/2 (colly) 81 to Ex. PW 1/57 3 House Bill of Lading (HBL)/House Airway Bill Ex.PW1/58 95 (HA WB), Master Bill of lading (MBL)/Master to Airway Bill, Shippers Commercial Invoices & Ex.PW1/122 Packing Lists etc. 4 Outstanding letter, Sub-ledger statement & Ex.PW1/123 2 Bank Statement (colly) 5 Statement of Accounts & GSTR - 1 (Sales Ex.PW1/124 28 return) (colly) 6 Reminder E-mail for outstanding Ex.PW1/125 90 7 Confirmation of delivery/receipt of the subject Ex.PW1/126 2 & 30 goods/services through E-mail and e-mails in & relation to the due outstanding payable Ex.PW1/126A amount by defendant no. 1 to plaintiff (colly) CS (COMM) No. 554/2023 Indolog Logistics Vs. Kanchan Vanijya Page 5 of 16 6 8 E-mail business conversation along Ex.PW1/127 136 supportive attachment from February 2021 (colly) 9 Legal notice dated 11.07.2023 along with Ex.PW1/128 16 service receipt & Tracking report (colly) 10 Affidavit u/s 65 B of Evidence Act Ex.PW1/129 2 (colly) 11 Non-starter report Ex.PW1/130 1
8 No DE was led by defendant despite giving several opportunities. So, DE was closed vide order dated 18.11.2024. After the closure of evidence, final arguments were heard.
9 I have gone through the record, evidence and submissions forwarded by counsel for the parties.
10 My issue wise finding is as under:-
ISSUES NO. 1, 2 & 3Issue no. 1 Whether there was no privity of contract between the plaintiff and defendant no.1, if so its effect? OPD.
Issue no. 2 Whether the suit is bad due to non-joinder of necessary party i.e. Affordable Luxury Group(ALG/Buyer)? OPD.
Issue no. 3 Whether it was the duty of the plaintiff to take goods from the footstep of factory of defendant and to transport to various destinations as directed by the ALG/buyer in terms of Free on Board (FOB) basis, if so, its effect? OPD.
11 The onus to prove these issues were on defendant. It was the plea of defendant no.1 that ALG used to give CS (COMM) No. 554/2023 Indolog Logistics Vs. Kanchan Vanijya Page 6 of 16 7 instructions to the plaintiff and on those instructions, the plaintiff used to receive goods from the factory of the defendant and thereafter sent at different places, as per the instructions of ALG. It is further stated that some times, the invoices were directly raised on ALG. It is stated that in the present case, there was no privity of contract between the plaintiff and the defendant.
As far as the cross-examination of PW1 is concerned, plaintiff was the "forwarding agent" of ALG. The relationship of defendant towards the goods to be transported through plaintiff is in question no.9 & 10 which are as following Q9 Is it correct to say that defendants' company liability is limited to deliver the goods to the door steps only?
Ans. Yes. It is correct to say that the defendants' liability was to delivery the goods to the plaintiff's warehouse. Vol. It depends on incoterm of shipments.
Q10 What is incoterm of shipments as per the invoices? Ans. The payments which we received from ALG is free on board (FOG) and of those we received payments from defendant company is cost and freight (C& F).
12 Now as per these answers, it appears that defendant is also connected with the contracts of shipment given by ALG. So, there exists privity of contract with defendants also. Moreover, nowhere defendants had produced any document which suggest that plaintiff and ALG were the CS (COMM) No. 554/2023 Indolog Logistics Vs. Kanchan Vanijya Page 7 of 16 8 only contracting parties with the exclusion of defendant. So, defendant is necessary party.
13 From the abovesaid answers, it appears that two types of services were provided by the plaintiff i.e. FOB when directed by ALG and C & F when plaintiff is engaged with defendants. Now there is no evidence of the defendant on record to show that defendants are only involved in the FOB services which were done by plaintiff for ALG. So, in these circumstances, it is safely held that when plaintiff was engaged with defendants, it was C&F services. So, these services also bring the liability of defendants for payment.
These issues are decided in these terms.
ISSUES NO. 4 & 5Issue no. 4 Whether the plaintiff is entitled for recovery of money of Rs.18,74,851.33/- as prayed in paragraph (a) of prayer clause? OPP.
Issue no. 5 Whether the plaintiff is entitled for pendent-lite and future interest @24% per annum or at any other rate? OPP.
14 The onus to prove these issues were on plaintiff. Now during the course of the arguments, it is argued by Ld. counsel for the defendants that the plaintiff used to engage in double billing with the defendant i.e. it used to raise bill for a CS (COMM) No. 554/2023 Indolog Logistics Vs. Kanchan Vanijya Page 8 of 16 9 service on ALG as well as on defendant. It is stated that there was a reconciliation done between the parties. It is stated that the emails to this effect was filed by the plaintiff itself as part of Ex.PW1/127. It is stated that after "reconciliation", it was found that Rs.12,90,000/- was charged excessively and it was mutually agreed on 22.02.2023 that this amount will not be paid. It is stated that to this effect credit notes were issued by the plaintiff which are reflected in statement of account Ex.PW1/124 on 28.02.2023 (filed by the plaintiff itself). It is stated that no where in this suit, this fact is mentioned.
On the other hand, it is admitted by Ld. counsel for plaintiff that there was some reconciliation but as defendant did not pay any amount so the benefit of those credit notes was not extended to the defendant.
15 As far as issue of double billing is concerned, in evidence PW1 stated that there was instance of double billing, however, that was only once and for local transportation. So, the issue of double billing was not denied.
As far as these rival contention regarding "reconciliation" is concerned, there are emails of parties to this effect which are as follows:-
CS (COMM) No. 554/2023 Indolog Logistics Vs. Kanchan Vanijya Page 9 of 16 10 CS (COMM) No. 554/2023 Indolog Logistics Vs. Kanchan Vanijya Page 10 of 16 1116 From the email dated 22.02.2023 at 12:25 with subject matter "reconciliation", it was found that there was a demand of bill with figures 12,90,000/- + Rs.1,20,000/- total Rs.14,10,000/- + additional difference Rs.25,000/- with final total of Rs.14,35,000/-. This email was written by one Sh. Arup Pandit to klasseleather.com and indologindia.com. It is stated that this klasseleather belongs to defendant. So, this Arup Pandit is sending this email including one figure "12,90,000/-" to plaintiff as well as defendant.
17 In the trailing email dated 22.02.2023 at 12:32: from indologindia.com to Arup Pandit and klasseleather.com under the subject "reconciliation" stated "kindly make payment after deduction of "Rs.12,90,000/-". It may be noted that both these emails are part of Ex.PW1/127 filed by plaintiff. Now as per these emails, there was some reconciliation and Rs.12,90,000/- was deducted from the recoverables by plaintiff from defendant. It is admitted by the plaintiff that no business was done after 22.02.2023 between the parties. However, from the perusal of page 289C to 289E of Ex.PW1/124, it appears that several credit notes are mentioned in the statement of account. It is argued by Ld. counsel for defendant that these credit notes were issued in lieu of the "reconciliation" amount of CS (COMM) No. 554/2023 Indolog Logistics Vs. Kanchan Vanijya Page 11 of 16 12 Rs.12,90,000/- but the plaintiff had not given benefit of the same in the present case.
18 Now the total sum of the credit notes all dated 28.02.2023 is Rs.10,98,800/-. Nowhere plaintiff was able to explain as to how these credit notes were issued and for what purpose. The issuance of credit notes itself shows that some money was payable by the plaintiff towards defendant and the same should also have been adjusted at the time of filing of the present case.
19 Now the word used in the abovesaid emails is "reconciliation". The word reconciliation when used in business community means reconciliation of the statement of accounts maintained by respective parties. From the email dated 22.02.2023 at 12:32 it appears that the plaintiff itself is stating "deduction of Rs.12,90,000/-". So, this means that after reconciliation of account this amount was left, as not due, by the plaintiff/indolog against the defendant and the subsequent credit notes dated 28.02.2023 suggests that the plaintiff wanted to made straight his statement of account so as to incorporate this deduction in the form of credit notes. So, it appears that amount of Rs.12,90,000/- was not payable by the defendant to CS (COMM) No. 554/2023 Indolog Logistics Vs. Kanchan Vanijya Page 12 of 16 13 the plaintiff and it should have been deducted from the suit amount.
20 So, in these circumstances, plaintiff is not entitled for the suit amount but less amount. Plaintiff is only entitled for the principal amount after deducting Rs.12,90,000/-. So, the recoverable principal amount is Rs.14,95,669.88/- - Rs.12,90,000/- = Rs.2,05,669.88/-.
It is argued by Ld. counsel for defendant no.1 that defendant no.1 is a company, has a separate legal entity other than its Directors i.e. defendants no. 2 to 4. It is stated that defendants no. 2 to 4 have no liability. The law in this regard is explained by Hon. High Court of Delhi in RFA 14/2010 titled "Mukesh Hans & Ors. Vs. Smt. Uma Bhasin & Ors." DOD 16.08.2010. In paragraph 11, it is stated as under:-
Indubitably, a company incorporated under the Companies Act, whether as a private limited company or a public limited company, is a juristic entity. The decisions of the Company are taken by the Board of Directors of a Company. The Company acts through its Board of Directors, and an individual Director cannot don the mantle of the Company by acting on its behalf, unless he is so authorized to act by a special resolution passed by the Board or unless the Articles of Association so warrant. It is equally well settled that a Director of a Company though he owes a fiduciary duty to the Company, he owes no contractual duty qua third parties. There are, however, two exceptions to this rule. The first is where the Director or Directors make themselves personally liable, i.e., by execution of CS (COMM) No. 554/2023 Indolog Logistics Vs. Kanchan Vanijya Page 13 of 16 14 personal guarantees, indemnities, etc. The second is where a Director induces a third party to act to his detriment by advancing a loan or money to the Company. On the third party proving such fraudulent misrepresentation, a Director may be held personally liable to the said third party. It is, however, well settled that this liability would not flow from a contract, but would flow in an action at tort, the tort being of misrepresentation and of inducing the third party to act to his detriment and to part with money. Similarly in paragraph 16, it is stated as under:-
The next question which arises for consideration is whether the appellants as Directors made themselves personally liable for the dues of the Company. Reference in this context may be made to the judgment of this Court in Tristar Consultants vs. Customer Services India Pvt. Ltd. And Anr., 139 (2007) DLT 688. Paragraphs 28 to 30 of the said judgment, which are apposite, read as under:-
"28. To interpret the law as is sought to be projected by the petitioner would mean negation of the concept of a company being limited by its liability as per the memorandum and articles of association of the company. Other than where directors have made themselves personally liable i.e. by way of guarantee, indemnity, etc. liabilities of directors of a company, under common law, are confined to cases of malfeasance and misfeasance i.e. where they have been guilty of tort towards those to whom they owe a duty of care i.e. discharge fiduciary obligations. Additionally, qua third parties, where directors have committed tort. To the third party, they may be personally liable.
29. For example by making false representations about a company, a director induces a third party to advance a loan to the company. On proof of fraudulent misrepresentation, a director may be personally liable to the third party.
30. But this liability would not flow from a contract but would flow in an action at tort. The tort being of misrepresentation of inducement and causing injury to the third party having induced the third party to part with money."CS (COMM) No. 554/2023 Indolog Logistics Vs. Kanchan Vanijya Page 14 of 16 15
In the plaint no role is assigned to these Directors as to whether they have extended any contract of guarantee of presented themselves to indemnify the dues personally of defendant no.1. So, in these circumstances, there is no liability of defendants no. 2 to 4.
21 Now in the present case, the plaintiff has not brought the correct figures before the court, so plaintiff is not entitled for pendent-lite and future interest at commercial rate. So pendent-lite and future interest on the decreed amount is awarded @5% per annum. Similarly, plaintiff is not entitled for any cost of litigation.
These issues are decided in these terms.
RELIEF 22 In view of the aforesaid discussions, plaintiff is able to prove its case and thus following reliefs follows:-
(i) The suit of the plaintiff is decreed against the defendant no.1 for recovery of Rs.2,05,669.88/-.
(ii) Pendent-lite and future interest @5% is awarded on the decreed amount.CS (COMM) No. 554/2023 Indolog Logistics Vs. Kanchan Vanijya Page 15 of 16 16
23 Decree sheet be prepared accordingly.
24 File be consigned to Record Room.
Announced in the open court (Rakesh Pandit) on 04.12.2024 District Judge (Commercial Court)-04 SW/Dwarka/Delhi CS (COMM) No. 554/2023 Indolog Logistics Vs. Kanchan Vanijya Page 16 of 16