Delhi District Court
Harey Krishna Corporation vs Servotech Power Systems on 24 December, 2024
IN THE COURT OF MS. KIRAN BANSAL:
DISTRICT JUDGE (COMMERCIAL COURT-02
SHAHDARA DISTRICT
KARKARDOOMA COURTS : DELHI
Civil Suit (Comm) No. 272/2020
In the matter of:
M/s. Harey Krishna Corporation
(Through its authorized representative)
Having its office at
1/421, Plot No.32 & 33,
Gali No.6, Friends Colony Industrial Area,
New Delhi - 110095 .... Plaintiff
Vs.
Servotech Power Systems Ltd.
Having its office at:
806, 8th floor,
Crown heights, Hotel Crown Plaza,
Sector - 10, Rohini, Delhi - 110085 .... Defendant no.1
Mr. Raman Bhatia
Director of Servotech Power Systems Ltd.
R/o 357, Sector - 56, EHTP,
HISDC, Industrial Estate,
Kundli Sonipat,
Haryana - 131023 .... Defendant no.2 (Summons not issued)
Date of Institution :02.08.2019
Date of final arguments :08.11.2024
Date of conclusion :24.12.2024
CS (Comm) No. 272/2020 M/s. Harey Krishna Corporation Vs. Servotech Power Systems Ltd. Page No.1 of 28
JUDGMENT
1. The plaintiff has filed the present suit of recovery against the defendant for recovery of sum of Rs. 8,22,534/-. At the outset, it is pertinent to mention that initially the suit was filed under Order 37 CPC and not under Commercial Courts Act before the Court of Ld. District & Sessions Judge, Shahdara. However, vide order dated 02.08.2019, the present suit was treated as an ordinary suit and summon were issued to the defendant No.1. As defendant no.2 was director of defendant No.1, no summons were issued to defendant no.2.
1.2 Briefly stated the facts of the case are that plaintiff is stated to be a registered partnership firm having its office at 1/421, plot no. 32&33, Gali No.6, Friends Colony Industrial Area, New Delhi and is trading in PVC insulated copper (Cu) and aluminium (A1) wires and cables and is operating the website i.e. www.rheincables.in. It is stated that Sh. Vishnu Sharma, Accounts Manager is duly authorized signatory of plaintiff company authorized by board resolution dated 01.09.2011 to sign, verify, to swear affidavit and to do all such things as may be necessary for pursuit of the instant proceedings. Defendant no.2 is the Managing Director of Servotech Power Systems Ltd. i.e. defendant no. 1 and manages the business and its day to day activities including issuing instructions to his employee.
1.3 It is stated that defendant no. 2 approached the plaintiff at its registered address expressing his interest in buying PVC Insulated Copper and Aluminium wires of various specifications. Plaintiff accepted the said proposal of business CS (Comm) No. 272/2020 M/s. Harey Krishna Corporation Vs. Servotech Power Systems Ltd. Page No.2 of 28 and it was decided that the payment against the goods delivered to defendant by plaintiff shall be made within 7 days after receiving the goods. It is further stated that defendant no. 2 was directly responsible for managing day to day affairs of defendant no.1 and all the purchase orders were duly acknowledged and accepted by plaintiff and consequently, products were supplied and delivered to the defendants as per terms and conditions mentioned in the invoices. It is stated that the goods were in accordance to order placed and there was not even a single incident where defendants had any complaint qua the goods received by them and sent by plaintiff.
1.4 It is averred that plaintiff performed its part of obligation by delivering the products to defendants from time to time, accordingly, plaintiff raised various invoices corresponding to products supplied and delivered to defendant no.1 qua the orders placed by defendant no. 2. It is stated that as per agreed terms of payment, the defendants were required to remit payments towards supply of products within 60 days upon receipt of invoices failing which an additional interest of 18% per annum would be attracted. However, despite receipt of products, the defendants deliberately failed and are avoiding to release payments.
1.5 It is stated that post the last consignment qua invoice dated 23.03.2018, defendants entirely refused to pay back the plaintiff and upon constant persistence, defendant issued a cheque bearing no.844930 as full and final payment of outstanding amount of Rs.5,40,818/-. It is further stated that cheque was presented before the bank, but, was returned with advice "insufficient funds". Thereafter, plaintiff again requested CS (Comm) No. 272/2020 M/s. Harey Krishna Corporation Vs. Servotech Power Systems Ltd. Page No.3 of 28 the defendant no. 2 to clear his outstanding liability along with interest and again deposited the cheque for clearance, however, the said cheque again returned unpaid with noting "payment stopped by drawer".
1.6 Plaintiff has initiated the proceedings under Section 138 N.I. Act against the defendant which are stated to be pending in the Court of Ld. MM, Ms. Deepti Devesh, Karkardooma Courts. It is stated that till date the defendants have failed to honor their commitment and thus, the plaintiff is constrained to file the present suit for recovery of Rs.8,22,534.25/- including the net outstanding amount along with interest.
1.7 It is stated that the cause of action for filing the present suit arose when the plaintiff sent numerous reminders to defendants despite that defendants have failed to make the payment of outstanding amount. It is stated that valuation of the suit for the purpose of court fee and jurisdiction is fixed at Rs.8,22,534.25/- on which ad valorem court fee of Rs.10,396/- has been affixed.
1.8 Along with the plaint, an affidavit of Sh. Vishnu Sharma, Accounts Manager / AR of plaintiff is filed. Statement of truth was filed later on and was taken on record vide order dated 02.11.2022.
2. In the WS, it is stated that defendant is a company incorporated under laws of Companies Act and listed in National Stock Exchange is involved in various Government projects and known for its quality products. It is stated that defendant company focuses on quality goods and strives to achieve zero CS (Comm) No. 272/2020 M/s. Harey Krishna Corporation Vs. Servotech Power Systems Ltd. Page No.4 of 28 defect in the final product. It is stated that plaintiff firm had approached the defendant company and assured about its quality of goods i.e. ISI marked wires and cables and delivery and on the very same basis some orders were placed by the defendant company to check the tall claims made by plaintiff. It is stated that initially, the quality of the goods supplied was quite satisfactory, but, shortly it became unsatisfactory due to the reasons best known to the plaintiff.
2.1 It is stated that on various occasions, plaintiff firm supplied some goods without ISI mark printed on it and the same was taken as a human error by the plaintiff, but, the defendant company is a government supplier and has contractual obligations to use only ISI marked wires/cables in those goods. It is stated that defendant was conscious with technical requirements of tenders and did not use any goods which was not having ISI mark in government tender.
2.2 It is stated that goods sent by plaintiff vide invoice No. HKC/365-GST/17-18, dated 23.03.2018 was without ISI mark and not fit for use and defendant company had various discussion with plaintiff with respect to non ISI mark wire and plaintiff also updated that goods would not be used in any manner by defendant company until those are marked ISI by the plaintiff. It is stated that plaintiff took the entire lot along with those which were lying with the defendant company from the site of defendant company vide rejection out no. Rej. Out/066/17-18, dated 31.03.2018, amounting Rs.3,77,437/- and for this reason various rounds of meetings were done between the officers of plaintiff and the defendant company.
CS (Comm) No. 272/2020 M/s. Harey Krishna Corporation Vs. Servotech Power Systems Ltd. Page No.5 of 28 2.3 It is stated that having returned the goods vide Rej Out/066/17-18, dated 31.03.2018, the total outstanding payment in favour of plaintiff was Rs.8,39,988/- and that payment was made vide NEFT dated 23.04.2018, amounting to Rs.5,00,000/- and vide NEFT dated 12.07.2018, amounting to Rs.3,39,988/-. It is stated that initially the defendant company had given a cheque no.326082 for payment of Rs.3,39,988/-, however, the said cheque amount was credited via NEFT for the reason the said cheque was returned unpaid.
2.4 It is stated that the present case is inspired with an evil motive and to harass the defendant company because of non acceptance of non ISI marked goods from the plaintiff even on the discounted price. It is stated that defendant company is a victim of being innocent and the plaintiff is taking illegal benefits of cheque no.844930, amounting Rs.5,40,818/- which was illegally retained by the plaintiff to take illegal benefits by presenting the said cheque even after receipt of the payment against the said cheque via NEFT on 20.03.2018. Defendant has stated that since full and final payment of Rs.3,39,988/- was made via NEFT on 12.07.2018, therefore, there was no reason to give reply to that legal notice.
2.5 It is stated that defendant company has no liability to pay any amount to the plaintiff as no amount is due and payable in favour of plaintiff firm even as per own statement of plaintiff that cheque no. 844930 of Rs.5,40,818/- was given by defendant no. 1 after the last invoice dated 23.03.2018 as full and final settlement against the supplied goods. However, defendant no. 1 after issuance of said cheque also made a payment of Rs.5,40,818/- on 20.05.2018 through NEFT and further paid CS (Comm) No. 272/2020 M/s. Harey Krishna Corporation Vs. Servotech Power Systems Ltd. Page No.6 of 28 Rs.5,00,000 via NEFT on 23.04.2018 and Rs.3,39,988/- via NEFT on 12.07.2018. It is stated that post to final consignment between the parties for an amount of Rs.5,40,818/- then how could it be possible that the defendant company would make extra payment of Rs.2,99,170/- to the plaintiff and if it is so, the defendant company is entitled for recovery of extra payment of Rs.2,99,170/- made to the plaintiff.
2.6 It is stated that having made the payment qua the cheque bearing no.844930, the defendant company gave instructions to its banker for stop payment and the same was communicated to Sh. Pankaj Kochhar, however, the cheque was illegally used by plaintiff on the basis of false and baseless story.
2.7 It is further stated that the suit of the plaintiff is barred for non-compliance of provision under Section 69(2) of the Partnership Act, 1932. Plaintiff's firm is not a registered partnership firm on the date of filing of the present suit. It is further stated that the cheque number 844930 was given against the purchase order no. GST/PO/695/17-18 dated 25.12.2017 amount Rs.5,40,818/-, it was agreed between the parties that the plaintiff would inform the defendant company prior to present the cheque no.844930 without giving any information and the same was returned unpaid on 12.03.2018 and thereafter, the plaintiff's account was credited with Rs.5,40,818/- being the cheque value on 20.03.2018 via NEFT. Having made the payment qua the cheque amount of the cheque no.844930, the defendant company gave instructions to its banker for stop payment. It is further stated that the plaintiff has illegally used the cheque no.844930 in the month of June, 2018 and very amazingly loaded 18% interest to justify the outstanding of CS (Comm) No. 272/2020 M/s. Harey Krishna Corporation Vs. Servotech Power Systems Ltd. Page No.7 of 28 Rs.5,40,818/- without any basis.
2.8 Rest of the material contents of the plaint are denied by the defendant and prayer has been made for dismissal of the suit with exemplary cost.
3. Replication to the WS has not been filed. Defendant has admitted only the cheque and the return memos dated 23.03.2018 and 08.06.2018 and has denied the remaining documents filed by the plaintiff. The plaintiff has not filed any affidavit of admission/denial of documents of the defendant and thus, the documents of the defendant are deemed admitted by the plaintiff as per Order XI Rule 4 CPC as applicable to the Commercial Courts.
4. Vide order that 04.07.2024, the following issues were framed for consideration after completion of pleadings:
(i). Whether the suit is liable to be dismissed as it is hit by Section 69(2) of Indian Partnership Act, 1932 as plaintiff is an unregistered partnership firm?
(ii) Whether plaintiff is entitled to recovery of Rs.8,22,534 along with interest @ 18% per annum? OPP
(iii). Relief.
5. To achieve timely and expedient disposal in the present case, evidence was recorded by way of Court Commissioner as provided under Order 18 Rule 4 CPC and Order 15A Rule 6(l) CPC. In support of its case, plaintiff has examined Sh. Pankaj Kochar, Partner of Harey Krishna Corporation as PW-1 who tendered his evidence by way of CS (Comm) No. 272/2020 M/s. Harey Krishna Corporation Vs. Servotech Power Systems Ltd. Page No.8 of 28 affidavit which is Ex.PW1/A and has relied upon the following documents:
• Copy of Partnership Deed of plaintiff firm as Ex.PW1/1; • Copy of Purchase Orders as Ex.PW1/2 (colly); • Copy of Invoices raised by the plaintiff upon defendant for supply of goods as Ex.PW1/3 (colly);
• Copy of ledger account of defendants as Ex.PW1/4; • Copy of cheque as Ex.PW1/5;
• Return memo dated 13.03.2018 for the reasons 'Funds Insufficient' as Ex.PW1/6;
• Return memo dated 8th June,2018 as PW1/8; He was cross examined at length by counsel for defendant. No document has been exhibited as Ex.PW1/7.
5.1 Another witness Sh. Vishnu Sharma, AR of the plaintiff firm was examined as PW-2 who tendered his evidence by way of affidavit Ex.PW2/A and has relied upon the following documents:
• Board Resolution as Ex.PW2/1;
• Identity Card as Ex.PW2/2 (OSR);
• Purchase Order already exhibited as ExPW1/2 (OSR); • Invoices already exhibited as ExPW1/3;
• Copy of ledger already exhibited as ExPW1/4; • Certificate under Section 65B of Indian Evidence Act Ex.PW2/6;
Thereafter, PE was closed on the statement of plaintiff.
6. In rebuttal, defendant has examined Sh. Rupinder Kaur as DW-1 who tendered her evidence by way of affidavit Ex.DW1/A and relied upon the following documents:
• Board Resolution dated 06.01.2024 as Ex.DW1/1; CS (Comm) No. 272/2020 M/s. Harey Krishna Corporation Vs. Servotech Power Systems Ltd. Page No.9 of 28 • Board Resolution dated 21.09.2022 in favour of Ms. Priya Pandey as Ex.DW1/2;
• Rejection out no. Rej Out/066/17-18, dated 31.03.2018 amounting Rs.3,77,437/- as Ex.DW1/3;
• Ledger From 01.04.2017 to 31.03.2019 as Ex.DW1/4; • Bank Statement from 10.03.2018 to 12.07.2018 as Ex.DW1/5;
• Certificate under Section 65B of Indian Evidence Act as Ex.DW1/6;
• The order dated 07.05.2024 passed by Hon'ble High Court of Delhi in Crl. M.C. 535/2023 as Ex.PW1/D2; Thereafter, DE was closed on the statement of defendant.
7. The Court has heard ld. counsel for the plaintiff as well as ld. counsel for the defendant and have also gone through the records of the case. Written arguments filed on behalf of plaintiff and defendant. Plaintiff has relied upon the following cases:
(i) Arjun Panditrao Khotkar vs. Kailash Kushanrao Gorantyal & Ors. (Civil Appeal Nos. 20825-20826 of 2017, decided on 14.07.2020)
(ii) Vijaybai and Ors. vs. Shriram Tukaram and Ors. (1999) 1 SCC 693 decided on 20.11.1998
(iii) Hope Plantations Ltd. vs. Taluk Land Board, Peermade and Anr. (1999) 5 SCC 590 decided on 03.11.1998
(iv) Y.B. Patil and Ors. vs. Y.L. Patil (1976) 4 SCC 66, decided on 23.08.1976.
Findings on the issues :-
ISSUE No.(i). Whether the suit is liable to be dismissed as it is hit by Section 69 (2) of Indian Partnership Act, 1932 as plaintiff is an unregistered partnership firm?
CS (Comm) No. 272/2020 M/s. Harey Krishna Corporation Vs. Servotech Power Systems Ltd. Page No.10 of 28
9. It is the case of the plaintiff that the present suit has been filed on the basis of statutory liability u/s 138 Negotiable Instrument Act 1881. It is submitted by the plaintiff that the plaintiff has filed the present suit on the basis of dishonour of cheque bearing no. 844910 dated 10.03.2018 for an amount of Rs. 5,40,818/- which was presented on 07.06.2018 and the same was dishonoured on 08.06.2018. The plaintiff has also admitted the fact that the cheque no. 844930 has been presented twice and payment has been received only qua the first dishonour i.e. on 20.03.2018 and thereafter, it was again presented for outstanding liability on 07.06.2018.
10. Per contra, the defendant has submitted that during cross examination both PW-1 and PW-2 have admitted the fact that the payment against cheque no. 844930 dated 10.03.2018 for amount of Rs. 5,40,818/- which got dishonoured, was made to the plaintiff by the defendant through RTGS/NEFT. The defendant further submitted that on basis of above, the recovery being claimed by the plaintiff firm against the defendant company is on the basis of ledger with interest which is contractual in nature and not statutory, as defendant has already satisfied its statutory liability under Negotiable Instrument Act.
11. Perusal of record reveals that defendant has filed an application under Order 7 Rule 11 (d) CPC for the rejection of plaint on 13.03.2020, however, it was dismissed by this court vide order dated 08.07.2022 and it was rejected as at time of deciding application for rejection of plaint under order 7 rule 11
(d) CPC, only the averments of the plaint have to be considered and the evidences can not be taken into consideration for CS (Comm) No. 272/2020 M/s. Harey Krishna Corporation Vs. Servotech Power Systems Ltd. Page No.11 of 28 deciding application under Order VII Rule 11(d). Needless to say, that it has to be considered as Demurrer's claim. Also, the plaintiff in para-1 of the plaint has claimed itself to be a registered partnership firm. It was further observed in the said order dated 08.07.2022 as under :
"In the instant case there is no dispute that the defendant has issued cheque of Rs.5,40,818/ in discharge of its liability. The liability based on a cheque is statutory liability and not a contractual liability. The plaintiff in his plaint has categorically stated that the cause of action has arisen at the time when the defendant issued the cheque dated 10.03.2018 in favour of the plaintiff as full and final settlement. The cause of action also arose when the cheque was dishonored. Merely because the suit of the plaintiff is not for the cheque amount but for the interest as well, the present suit is not barred by Section 69 (2) of the Indian Partnership Act in so far as the cheque amount is concerned." ....(Emphasis Supplied)
12. However, vide order dated 04.07.2024, the court has framed three issues, including the issue whether the suit is liable to be dismissed as it is hit by Section 69(2) of Indian Partnership Act, as plaintiff is an unregistered partnership firm. On 10.07.2024, the plaintiff filed an application for deletion of issue no. 1 under order 14 Rule 5 CPC r/w 151 CPC and it was observed therein that the deeper interpretation of the rival submission is kept open and it would be decided at the time of final arguments under issue no. 1 and vide order dated 11.07.2024, the application filed by the plaintiff to delete the issue no. 1 was dismissed.
13. Before proceeding further it is pertinent to reproduce section 69 (2) of Indian Partnership Act, 1932. It is as follows:
"69. Effect of non-registration.
....
(2) No suit to enforce a right arising from a contract shall be instituted in any Court by or on behalf of a firm against any third party unless the firm is registered and the persons suing are or have been shown in the Register of Firms as partners in the firm."
CS (Comm) No. 272/2020 M/s. Harey Krishna Corporation Vs. Servotech Power Systems Ltd. Page No.12 of 28
14. Section 69 (2) specifically prohibits the filing of the suit by an unregistered partnership firm to enforce a right arising out of contract. It is well settled that the provision contained in section 69(2) is prohibitory and requires strict interpretation. In this regard Hon'ble Supreme Court has observed in the case of Seth Loonkaran Sethiya And Ors. vs Mr. Ivan E. John And Ors. on 20 October, 1976 AIR 1977 SC 336 as follows:
"20. A bare glance at the section is enough to show that it is mandatory in character and its effect is to render a suit by a plaintiff in respect of a right vested in him or acquired by him under a contract which he entered into as a partner of an unregistered firm whether existing or dissolved, void. In other words, a partner of a erstwhile unregistered partnership firm cannot bring a suit to enforce a right arising out of a contract falling within the ambit of Section 69 of the Partnership Act."
15. In the case of Ram Adhar v. Ram Kirat Tiwari AIR 1981 All 405, Hon'ble High court has observed while deciding the case as follows:
"13. The finding which has been recorded by the lower appellate Court, as seen above, is that what the two plaintiffs were seeking to recover from the defendant was the amount due to the partnership for the purchase of bricks by the defendant. The partnership, indisputably was not a registered one. On these facts it is clear that the plaintiffs could not bring the suit on account of the bar of Section 69(2) of the Act. The court below was justified in dismissing the suits on this ground. The appeals deserve to fail."
16. The Hon'ble Supreme Court in Purushottam v. Shivraj Fine Art Litho Works, (2007) 15 SCC 58 has observed the rationale behind Section 69 of the partnership as follows:
"97.
... 21. It would thus appear that registration of a firm was conceived as a protection to third parties dealing with a partnership firm. Registration ensured the certainty of existence of the firm and its membership, so that later an unsuspecting third party contracting with the firm may not run the risk of being CS (Comm) No. 272/2020 M/s. Harey Krishna Corporation Vs. Servotech Power Systems Ltd. Page No.13 of 28 defeated on discovery that neither the partnership firm nor its partners existed in fact. On the other hand, an unregistered firm could not bring a suit for enforcing its right arising from a contract."
17. Further the Hon'ble Delhi HC in the case of Sai Nath Enterprises v. North Delhi Municipal Corporation, 2015 SCC OnLine Del 14400, also relied upon in the case of Almass India vs. South Delhi Municipal Corporation CS(COMM) 66/2015 decided on 14.11.2022 by Hon'ble Delhi HC, has observed as follows:
"89. The provisions of Sub-sections (1) and (2) of Section 69 are substantive provisions intended to discourage the non-registration of firms. The provision in Section 69 (2) is mandatory. The Partnership Act is a special Act which makes the registration of a firm a condition precedent to the institution of a suit of the nature mentioned in it by or on behalf of a firm against a third party. It deals with the question as to when a firm can sue, or be sued by, a third party in respect of a right arising from a contract, and provides certain requirements as conditions precedent for the institution of the suit, viz. (a) that the firm is a registered firm, and
(b) the persons suing are or have been shown in the Register of Firms as partners in the firm.
90. It is evident that a suit by an unregistered firm is not maintainable and the bar under Section 69 of the Act hits at the very root or the very institution of the suit. If a firm is not registered or if the conditions specified in Section 69(2) are not complied with, the partners of the firm may file a suit, but then all of such partners will have to be joined as plaintiffs. When the conditions specified in Section 69(2) are satisfied, i.e. the firm must be registered and the persons suing must be or have been shown in the Register of Firms as partners of the firm, then a suit can be instituted by or on behalf of the partnership firm in the name of the firm."
18. From the above discussed law on the issue it is clear that, following are essentials in order to apply the rigour of Section 69 (2) of The Indian Partnership Act, 1932:
The firm is not registered;
The suit is against a third party, and CS (Comm) No. 272/2020 M/s. Harey Krishna Corporation Vs. Servotech Power Systems Ltd. Page No.14 of 28 The suit is for the enforcement of a right arising out of contract.
19. The plaintiff in his plaint has stated that the plaintiff is filing the present suit on basis of the contract executed between the parties in the form of invoices issued by the plaintiff and accepted by the defendant no. 2, the terms of which were mutually decided by the parties in July 2017 in Delhi. Para 24 of the plaint is as follows:
"That the instant summary suit is based on contract executed between the parties in the form of invoices issued by the plaintiff and accepted by the defendant no. 2, the terms of which were mutually decided by the parties in July 2017 in Delhi. Further the parties were engaged in regular transaction based on the annexed invoices and the said invoice include all the ingredients of a valid contract viz. Offer, acceptance and consideration....".
20. Since, after the perusal of the cross examination of the PW-1 and PW-2 it is clear that the payment for the dishonour of cheque dated 10.03.2018 was received by way of RTGS on 20.03.2018 and thereafter, to clear the alleged remaining outstanding dues, the plaintiff has re-presented the cheque on 07.06.2018 which returned dishonoured on 08.06.2018. Further, though in para 1 of the plaint, the plaintiff has stated itself to be a registered partnership firm, but during cross- examination, both PW-1 and PW-2 have admitted that the plaintiff firm is an unregistered firm. Also, in the evidence affidavit Ex PW 1/A, the plaintiff has omitted the word 'registered' and has only stated that the plaintiff is partnership firm. The relevant part of the cross examination of PW-1 and PW-2 is reproduced below:
Cross of PW-1 is as follows:
"It is correct that plaintiff firm is unregistered firm. CS (Comm) No. 272/2020 M/s. Harey Krishna Corporation Vs. Servotech Power Systems Ltd. Page No.15 of 28 ...
It is correct that the cheque number 844930 dated 10.03.2018 of Rs. 5,40,818/- was issued by the defendant for PO Number GST/PO/695/17-18 dated 25.12.2017 (Vol. the defendant is habitual for PO defaulter, the said cheque no. 844930 got dishonoured and thereafter they have made the RTGS of the said cheque only after several requests.)"
Cross of PW-2 is as follows:
"It is correct that plaintiff firm is unregistered firm. ...
It is correct that cheque number 844930 dated 10.03.2018 of Rs. 5,40,818/- was issued by the defendant for PO number GST/PO/695/17-18 dated 25.12.2017. It is correct that when the said cheque number 844930 got dishonoured, defendant have made the RTGS of said cheque."
21. PW1 and PW2 also admitted that defendant made payment against cheque through RTGS after the cheque got dishonoured for the first time on 13.03.2018 and thus, it is also in consonance with the averment of defendant stated in his WS that the payment of the cheque no. 844930 was made to plaintiff by way of RTGS on 20.03.2018. The defendant has also filed statement of account from 10.03.2018 to 12.07.2018 which is Ex. DW-1/5. Perusal of the same reveals that on 20.03.2018, the defendant has paid an amount of Rs.5,40,818/- by RTGS. It further solidifies the contention of the defendant, that the present suit is not based on the statutory liability but is based on contractual liability between the plaintiff and the defendant.
22. Plaintiff has also filed a ledger account and as per the ledger account Ex.PW1/4, the outstanding balance is Rs.8,22,534/- for which the present suit has been filed and as per this ledger account, an amount of Rs.4,45,097.25/- has been added on the debit side as interest and penalty on 12.07.2018. The plaintiff thus, is claiming amount not on the basis of cheque but on the basis of ledger balance which includes the interest also CS (Comm) No. 272/2020 M/s. Harey Krishna Corporation Vs. Servotech Power Systems Ltd. Page No.16 of 28 uptill 12.07.2018. Plaintiff had also filed a case u/s 138 N.I. Act on the basis of cheque and had filed a ledger in the Court of Ld. MM. The certified copy of that ledger has been obtained by the defendant and has been put to the plaintiff's witness during cross- examination. The said ledger is Ex.DW1/P1. Perusal of the said ledger Ex.DW1/P1 reveals that an amount of Rs.1,63,381/- was added on 12.07.2018 as interest and penalty so as to make the figure as Rs.5,40,818/- which was the cheque amount. The cheque was admittedly presented twice; once in the month of March and the same was returned back in the dishonour memo dated 13.03.2018. The payment qua the cheque amount was made by the defendant on 20.03.2018, soon after the dishonour of the cheque. The plaintiff after the said payment was not left with an outstanding balance of Rs.5,40,818/-, but as the cheque already had an amount written on it i.e. Rs.5,40,818/-, the plaintiff has added interest and penalty to the tune of Rs.1,63,381/- on 12.07.2018, as shown in ledger Ex.DW1/P1, so that the outstanding amount again becomes Rs.5,40,818/- which is the amount for which the cheque was already issued by the defendant. On what basis and at what rate this interest was calculated and how the amount of Rs.1,63,381/- as interest was arrived at has not been explained by the plaintiff at all and rather the plaintiff has filed a different ledger in the present Court Ex.PW1/4, in which on 12.07.2018, the interest and penalty has been debited as Rs.4,45,097.25/-. Certainly, the plaintiff was trying to represent the cheque and therefore, has very cleverly added Rs.1,63,381/- as interest and penalty after 12.07.2018 and has shown ledger outstanding as Rs.5,40,818/-. The cheque was subsequently dishonour on 08.06.2018 and if the cheque was already dishonour on 08.06.2018 and the interest and penalty has been added after/or on 12.07.2018, then on 08.06.2018, the CS (Comm) No. 272/2020 M/s. Harey Krishna Corporation Vs. Servotech Power Systems Ltd. Page No.17 of 28 outstanding balance was not Rs.5,40,818/-, but was Rs.7,17,425/- out of which an amount of Rs.3,39,988/- was paid on 12.07.2018.
22.1 Once the cheque was dishonoured on the first occasion i.e. on 13.03.2018 and the payment of the cheque amount was made by the defendant on 20.03.2018, the cause of action as far as cheque amount is concerned, did not survive. The outstanding balance remaining thereafter, included the amount of the sales made by plaintiff to the defendant on 23.03.2018 for an amount of Rs.3,43,149/-. An amount of Rs.5,00,000/- was again paid by defendant on 23.04.2018 and Rs.3,39,988/- was paid on 12.07.2018.
23. Therefore, it is clear that the suit of the plaintiff is not based upon the statutory liability rather it is based upon the outstanding dues, that is to say, the suit is based on ledger. In view of the above, it is settled law that a suit based on ledger/ contractual liability is not maintainable under section 69 (2) of Indian Partnership Act, being filed by an unregistered partnership firm. Hence, the suit is not maintainable and is hit by Section 69(2) of Indian Partnership Act as the suit is not based upon statutory liability but on the contractual liability and the plaintiff being an unregistered partnership firm can not institute the suit. Hence, the suit is not maintainable.
Issue no. (i), thus, decided in favour of defendant and against the plaintiff.
ISSUE No.(ii). Whether plaintiff is entitled to recovery of Rs.8,22,534 along with interest @ 18% per annum? OPP.
CS (Comm) No. 272/2020 M/s. Harey Krishna Corporation Vs. Servotech Power Systems Ltd. Page No.18 of 28
24. The present suit has been filed by the plaintiff for the recovery of amount of Rs. 8,22,534.25/- against the plaintiff on the basis of outstanding amount existing in ledger. Last sale is dated 23.03.2018. The period of limitation as prescribed by The Limitation Act, 1963 for filing the suits for recovery is three years. The present suit was filed on 02.08.2019. Thus, the present suit has been filed within the period of limitation, as prescribed under the law.
25. As far as territorial jurisdiction is concerned, ld. Counsel for plaintiff has argued that the purchase orders were received from the defendant at the office of the plaintiff which is situated within the territorial jurisdiction of the present Court and the goods were also supplied from the place which is within the territorial jurisdiction of the present Court. Moreover, payments from defendant have been received in the account of the plaintiff existing within the territorial jurisdiction of the present Court and therefore, applying the principle "debtor seeks creditor", the present Court has territorial jurisdiction to try and decide the present matter. Thus, the present suit has been filed within the territorial jurisdiction of the present court.
26. The suit is commercial in nature and squarely falls within the purview of Section 2 (1) (C) of Commercial Courts Act. As far as compliance of Section 12A is concerned the plaintiff has originally filed the suit as ordinary suit and later on it was transferred to Commercial court vide order date 06.01.2020 pursuance to order of the High Court of Delhi. Vide order dated 08.02.2023, the suit of the plaintiff was rejected due to non-compliance of Section 12A of the Commercial Courts, Act. However, said order was challenged before the Hon'ble CS (Comm) No. 272/2020 M/s. Harey Krishna Corporation Vs. Servotech Power Systems Ltd. Page No.19 of 28 High Court and decision dated 08.02.2023 of ld. Trial court was set aside and it was held that the suit is maintainable as it is filed on 02.08.2019 that is prior to judgement of Hon'ble SC in the case of M/S Patil Automation Private Ltd and Ors. Vs. Rakheja Engineers Private Ltd and since it operates prospectively, the suit will be considered as maintainable even if Section 12A has not been complied with.
27. The plaintiff has examined PW-1 Pankaj Kochar, partner of Harey Krishna Corporation and PW-2 Vishnu Sharma, AR of the plaintiff. It is the case of the plaintiff that after the last consignment qua invoice dated 23.03.2018, the defendant has entirely refused to pay back the plaintiff and upon constant persistence, defendant issued a cheque as full and final payment of outstanding amount of Rs. 5,40,818/- and the plaintiff has stated that the date of above said cheque is 07.06.2018, but, the cheque filed along with the plaint reveals that the cheque is dated 10.03.2018 of Rs. 5,40,818/-. During cross examination PW-1 has admitted that the cheque no. 844930 dated 10.03.2018 of Rs. 5,40,818/- was issued by the defendant for PO No. GST/PO/ 695/17-18 dated 25.12.17 and he volunteered that defendant is a habitual defaulter and the said cheque no. 844930 was dishonoured and thereafter, they have made the RTGS of the said cheque only after several requests and it is stated that on various occasions various cheques were dishonoured and only after dishonorment and requests they used to make payment. Relevant part of cross examination of the PW-1 is produced herein below:
"...
It is correct that after 10.03.2018 only one consignment of Rs.3,43,149/- was sent by the plaintiff to the defendant. It is correct that defendant company had made a payment of Rs. 5,00,000/- on 23.04.2018 and Rs. 3,39,988/- on dated 12.07.2018. CS (Comm) No. 272/2020 M/s. Harey Krishna Corporation Vs. Servotech Power Systems Ltd. Page No.20 of 28 ...
It is wrong to suggest that despite having no liability/ entitlement I have represented the cheque number 844930 with a view to cheat the defendant.
...
It is wrong to suggest that there is no basis of alleged claim/ suit amount mentioned by me in the plaint. It is wrong to suggest that as nothing is payable by the defendant to the plaintiff so no question of interest arises and further no interest rate was ever agreed (vol. interest at 18% pa is payable on delay payment as per prevailing market rate).
...
It is wrong to suggest that ledger Ex.PW-1/4 is false, frivolous and manipulated one that's why I have placed a different ledger in complaint u/s 138 NI Act (part of Ex. PW-1/D1 at page number
36) and further both the ledgers are false, fabricated and manipulated one as nothing is payable by the defendant to the plaintiff.
...
It is correct that the plaintiff firm has already been dissolved. It is correct that plaintiff firm itself applied for cancellation of its GST registration (Vol. it was surrendered not cancelled)."
28. Furthermore, during entire cross examination, it is nowhere revealed that the said cheque was issued by the defendant to clear the full and final settlement of outstanding dues, as stated in the plaint. In his affidavit of evidence, in para 10, PW-1 has stated that cheque bearing no. 844930 was issued towards full and final payment of the outstanding amount. PW-2 in his cross, has admitted that cheque no. 844930 dated 10.03.2018 of Rs. 5,40,818/- was issued by the Defendant for PO no. GST/PO/ 695/17-18 dated 25.12.17. It is further admitted that when the said cheque no. 844930 got dishonoured, the defendant has made the RTGS of said cheque. The relevant part of the cross examination of PW-2 is as follows:
"It is correct that plaintiff firm is unregistered firm. ...
It is correct that the cheque no. 844930 dated 10.03.2018 of Rs. 5,40,818/- was issued by the defendant for PO number GST/Po/695/17-18 dated 25.12.2017. it is correct that when the said cheque no. 844930 got dishonoured, defendant have made the RTGS of said cheque.
CS (Comm) No. 272/2020 M/s. Harey Krishna Corporation Vs. Servotech Power Systems Ltd. Page No.21 of 28 It is correct that after 10.03.2018 only one consignment of Rs.3,43,149/- was sent by the plaintiff to the defendant. It is correct that the defendant company had made a payment of Rs.5,00,000/- on 23.04.2018 and Rs.3,39,988/- on dated 12.07.2018. "
29. Even during cross of PW-2, he nowhere deposed that the cheque was issued for the full and final settlement of outstanding dues, which is contrary to what has been deposed by the PW-2 in para 9 of his affidavit of evidence. Even if the case of plaintiff as stated in plaint is accepted being true, then also the plaintiff is not able to explain as to why the above said cheque was re-presented upon its payment being made through RTGS. Also, as far as the amount claimed in the plaint is concerned, the plaintiff has not been able to prove how the outstanding amount has been calculated to be the amount of cheque dated 10.03.2018 ie Rs.5,40,818/- and there is no such averment/ pleadings in the plaint filed by the plaintiff, to this effect. As already observed, the suit of the plaintiff is not on the basis of the cheque, but is on the basis of ledger balance, as the payment of the cheque amount was made by the defendant through RTGS. Let us examine the facts of the case and the remaining documents to see whether the plaintiff is entitled to the suit amount as claimed.
30. The main defence of the defendant is that the goods were not ISI mark and they were rejected by the defendant and taken back by the plaintiff. The plaintiff has denied that they had taken back the goods from the defendant. According to the defendant, they had raised rejection out memo dated 31.03.2018 for an amount of Rs.3,77,437/-, the same has been exhibited as Ex.DW1/3. As already observed, the plaintiff has not filed any affidavit of admission/denial of the documents of the defendant and therefore, this document is deemed admitted by the plaintiff, CS (Comm) No. 272/2020 M/s. Harey Krishna Corporation Vs. Servotech Power Systems Ltd. Page No.22 of 28 but still it was for the defendant to have proved their defence that the goods were rejected by them and were handed over back to the plaintiff, once they had admitted that they had received of the goods as per the invoices on record including last consignment dated 23.03.2018. The related cross of PW1 and DW1 are reproduced herein below:
Cross of PW-1:
"It is correct that plaintiff deals in ISI mark wires and cables. (Vol. we also deal in non ISI mark, such as auto wires.) it is correct that plaintiff firm is unregistered firm.
...
It is correct that I had approached the defendant company and assured about its quality of gods i.e. ISI marked wires and cables and timely delivery. (vol. my team has approached) It is correct that on the basis of my representation the defendant company placed order upon the plaintiff firm. It is wrong to suggest that initially quality of goods was satisfactory but shortly it became unsatisfactory. I do not know that defendant company is a govt. supplier and has contractual obligations to use only ISI mark wires, cable in those good. It is wrong to suggest that things became worse when the plaintiff sent goods vide invoice dated 23.03.2018 as the entire lot was without ISI mark and not fit for use. It is wrong to suggest that various meetings happened between the parties (Vol. telephonic conversation took place). It is wrong to suggest that defendant company had various discussions with the plaintiff with respect to non ISI mark wires and the plaintiff was also made updated that those goods would not be used in any manner by the defendant company until those are marked ISI by the plaintiff. It is wrong to suggest that the plaintiff took entire lot along with those which were lying with the defendant company from the site of defendant company vide Rejection out dated 31.03.2018 amounting to Rs. 3,77,437/- and for this reason various rounds of meetings were done between the officers of the plaintiff's and the defendant company. It is correct that the cheque number 844930 dated 10.03.2018 of Rs. 5,40,818/- was issued by the defendant for PO Number GST/PO/695/17-18 dated 25.12.2017 (Vol. the defendant is habitual for PO defaulter, the said cheque no. 844930 got dishonoured and thereafter they have made the RTGS of the said cheque only after several requests.) ...
It is correct that after 10.03.2018 only one consignment of Rs.3,43,149/- was sent by the plaintiff to the defendant. It is correct that defendant company had made a payment of Rs. 5,00,000/- on 23.04.2018 and Rs. 3,39,988/- on dated 12.07.2018. ...
It is wrong to suggest that despite having no liability/ entitlement, I have represented the cheque number 844930 with a view to cheat the defendant.
CS (Comm) No. 272/2020 M/s. Harey Krishna Corporation Vs. Servotech Power Systems Ltd. Page No.23 of 28 ...
It is wrong to suggest that there is no basis of alleged claim/ suit amount mentioned by me in the plaint. It is wrong to suggest that as nothing is payable by the defendant to the plaintiff so no question of interest arises and further no interest rate was ever agreed (vol. interest at 18% pa is payable on delay payment as per prevailing market rate).
...
It is wrong to suggest that ledger Ex.PW-1/4 is false, frivolous and manipulated one that's why I have placed a different ledger in complaint u/s 138 NI Act (part of Ex. PW-1/D1 at page number
36) and further both the ledgers are false, fabricated and manipulated one as nothing is payable by the defendant to the plaintiff.
...
It is correct that the plaintiff firm has already been dissolved. It is correct that plaintiff firm itself applied for cancellation of its GST registration (Vol. it was surrendered not cancelled)."
Cross of DW-1:
"...
As per me perhaps the Purchase orders were issued by the defendant upon the plaintiff through email. It is correct that it was nowhere mentioned in the emails or the purchase orders that the goods required were only ISI marked goods. (Vol. The defendant is required to supply only ISI marked goods as per the tenders issued by Government to the defendant and it is understood that plaintiff shall supply ISI marked goods and the same may be communicated to plaintiff as well). The defendant has never provided the copy of the tenders procured by the defendant from the Government to the plaintiff. It is wrong to suggest that the defendant has never communicated to the plaintiff about its requirement of only ISI marked goods. The business dealings started between the parties in the year 2017. ...
It is correct that no document has been filed by me on record showing that the quality of the goods supplied by the Plaintiff was unsatisfactory.
...
It is wrong to suggest that all the goods supplied by the plaintiff to the defendant were ISI marked.
...
There were no fixed payment terms of the defendant with the plaintiff. (Vol. The same was to be mutually decided between the parties, however in PO it was mentioned as 70 days in PO). It is correct that the payment term was 60 days in some of the PO's. I do not remember whether the payments were made by defendant in time or not as per terms of PO. It is correct that all goods were received by the defendant company as per the invoices on record including last consignment dated 23.03.2018. CS (Comm) No. 272/2020 M/s. Harey Krishna Corporation Vs. Servotech Power Systems Ltd. Page No.24 of 28 ...
The complaint was raised by the defendant company in respect to defective lot as mentioned in Para 7 of my evidence affidavit. (Vol. That is why the plaintiff lifted the defective/ rejected goods from our premises). I do not remember the date when the rejected goods were lifted by the plaintiff from defendant. No document of such complaint was filed by me on record. No receiving/ acknowledgement was taken by the defendant company while the plaintiff lifted the rejected goods. (Vol. The parties were sharing good relations as such no receiving was taken). The defendant has raised the debit note in respect of the rejected goods. The said debit note was not filed on record, only rejection document Ex- DW 1/3 is filed.
...
I do not know whether the said debit note was shared by the defendant with the plaintiff. I do not know whether the rejection letter Ex- DW 1/3 were shared by the defendant by the plaintiff. I do not know whether the defendant reversed the GST availed in respect to rejected goods. It is correct that the said rejection letter Ex-DW1/3 does not mention the GST number of the Plaintiff. The rejection letter Ex-DW1/3 was issued in respect of entire lot of rejected goods dated 23.03.2018.
...
I do not know whether as on 10.03.2018 a sum of Rs. 14,15,094/- was outstanding payable by the defendant to the plaintiff. It is correct that only one order was supplied by the plaintiff to the defendant in the month of march 2018. It is wrong to suggest that rejection out letter Ex- DW 1/3 is forged and fabricated. ...
I do not know whether the payment towards the cheque of Rs. 3,39,988/- was made by the defendant after receipt of legal notice under section 138 NI Act. I do not know that the cheque of Rs. 3,39,988/- was initially dishonoured in June 2018."
31. Perusal of the above cross-examination of DW1 reveals that they have not proved that any debit note or any rejection letter was shared with the plaintiff by them or they had informed about the rejection of the goods to the plaintiff. Also DW1 has stated that the entire lot of goods received vide invoice dated 23.03.2018 was rejected. The goods supplied on 23.03.2018 were for an amount of Rs.3,43,149. If the entire lot was rejected, then how come the debit note is for an amount of Rs.3,77,437/- whereas the goods which were supplied vide last invoice were only of Rs.3,43,149/- and what other goods were rejected by the defendant and against which invoice the said CS (Comm) No. 272/2020 M/s. Harey Krishna Corporation Vs. Servotech Power Systems Ltd. Page No.25 of 28 rejected goods were supplied, has not been specifically stated by the defendant.
32. The defendant has only stated that vide rejection of memo amounting to Rs.3,77,437/-, the goods were rejected and were taken back by the plaintiff firm. No document regarding the goods being taken back by the plaintiff firm has been filed on record. The plaintiff is claiming an amount of Rs.3,77,437/- as principal and Rs.4,45,097/- as interest. Clearly the defendant is liable to pay the outstanding amount of Rs.3,77,437/- as principal. This plea of the defendant that they had rejected goods received vide invoice dated 23.03.2018 and had raised a rejection out memo is clearly an afterthought. If the goods supplied vide invoice dated 23.03.2018 were only rejected, then the rejection out memo should have been for an amount of Rs.3,43,149/- and not Rs.3,77,437/-. Once the defendant has admitted the receiving of all the goods from the plaintiff, the onus was upon the defendant to have established that the quality of goods supplied by the plaintiff was not inconsonance to the purchase orders placed and that the goods were returned by them to the plaintiff and also that the plaintiff had received the said goods back. Defendant has failed to establish its defence regarding remaining principal amount of Rs.3,77,437/- for which they have allegedly raised a rejection out memo. The other defence of the defendant is that the goods supplied were not of the quality as ordered and they were not ISI mark, but in the purchase orders Ex.PW1/2, there is nothing that the goods ordered by the defendant which were to be supplied by the plaintiff should have been of an ISI mark.
CS (Comm) No. 272/2020 M/s. Harey Krishna Corporation Vs. Servotech Power Systems Ltd. Page No.26 of 28
33. Even if it is presumed for the sake of arguments that the plaintiff knew that they were bound to supply ISI mark goods to the defendant, the onus was upon the defendant to have proved with cogent evidence that the goods received by them in pursuance to the purchase order and as per the invoices were returned by them to the plaintiff as they did not conform to their specification. Merely raising rejection out memo is not sufficient in this regard. There is nothing on record to establish that the goods were returned to the plaintiff by the defendant or that the plaintiff had received the said goods back. Plaintiff is thus, entitled to an amount of Rs.3,77,437/- as principal. As far as interest is concerned, plaintiff has claimed an amount of Rs.4,45,097/- as interest @18% p.a. There is no document placed on record in support of the claim of interest @18% p.a.. Even in the invoices, there is no such stipulation and nothing has been establish on record that there was no agreement between the parties that the defendant was liable to pay an interest @18% p.a. to the plaintiff for the delayed payment. However, as the plaintiff has been deprived of due amount by the defendant therefore, the plaintiff is entitled to interest at a reasonable rate.
34. It is thus, directed that the plaintiff is entitled to an amount of Rs.3,77,437/- as principal amount along with interest @9% p.a. As per the invoice, the payment was to be made within 70 days. It is therefore, directed that the defendant is liable to pay interest @9% p.a. from 02.06.2018 i.e. after 70 days of the last invoice on the principal amount of Rs.3,77,437/-.
Issue is thus, decided accordingly.
CS (Comm) No. 272/2020 M/s. Harey Krishna Corporation Vs. Servotech Power Systems Ltd. Page No.27 of 28 ISSUE No.(iii). Relief.
35. In view of above discussion, the court is of the opinion that as the plaintiff firm is not registered and in view the findings given in relation to the issue no.1, the suit of the plaintiff is not maintainable and hence, the plaintiff is not entitled for the money decree as prayed. Accordingly, the suit of the plaintiff is dismissed. No order as to costs.
File be consigned to Record Room.
Digitally signed by KIRANKIRAN BANSAL BANSAL Date:
2024.12.24 18:24:05 +0530 Announced in the open court (Kiran Bansal) on 24.12.2024 District Judge, Commercial Court-02 Shahdara, Karkardooma, Delhi/24.12.2024 CS (Comm) No. 272/2020 M/s. Harey Krishna Corporation Vs. Servotech Power Systems Ltd. Page No.28 of 28