Delhi District Court
M/S. Smart Chip Limited vs M/S. Pacl India Limited on 20 April, 2013
IN THE COURT OF JITENDRA KUMAR MISHRA, ADDL.
DISTRICT JUDGE CENTRAL-09: TIS HAZARI COURTS: DELHI
CS N0. 245/06.
UID No. 02401C1046602004.
M/s. Smart Chip Limited
A company incorporated
under the provisions of
The Companies Act, 1956
Through its Director
Shri Alok Mukherjee
Having its office at 3rd
Building, Top Floor
Chandiwala Estate
Kalkaji, New Delhi-110 019
........... Plaintiff
Versus
1. M/s. PACL India Limited
Having their office at PACL
House, B-1/5, Paschim Vihar
New Delhi-110 063
2. Mr. Nirmal Bhangu, Managing
Director of PACL India Limited
Having his office at
PACL House, B-1/5, Paschim
Vihar, New Delhi-110063.
......... Defendants
Date of institution of suit : 13.11.2006.
Date of reserving for order : 04.04.2013.
Date of judgment : 20.04.2013.
JUDGMENT
CS No. 245/06
M/s. Smart Chip Ltd. Vs. M/s. PACL India Ltd. Page 1
1. This is a suit filed by the plaintiff for recovery of Rs. 5,98,846.81.
2. Brief facts of the case are :
a) Plaintiff is a company incorporate under the Companies Act 1956. The plaint is instituted by Shri Alok Mukheree, who works as a whole time Director and has been authorized to sign, verify and to institute the present suit. He has also been authorized to pursue the matter vide board resolution dated 25/03/2004.
b) Defendant no. 1 is a company incorporated under the Companies Act, 1956 and defendant no. 2 is the Chairman of defendant no. 1 and has the responsibility for day to day affairs and business of defendant no. 1. The officers of defendant no. 1 and defendant no. 2 have induced and misrepresented the plaintiff to part with valuable consideration and supplied goods without ever having the intentions to pay for the same and hence they have been arraigned as defendants. The purchase orders were issued by defendant no. 1 at the instance of defendant no. 2 and the entire commercial negotiations and requests for sale of the goods between the plaintiff and defendant no. 1 was done by the officers of defendant no. 2.
c) Plaintiff is one of India's most reputed and fastest growing high technology ISO 9001-2000 certified companies. It inter-alia provides telecom and non-telecom based 'smart-cards' which have versatile applications. A smart card is a generic name for a credit card sized plastic card which has an embedded micro-chip that has the capabilities of a computer and can store extensive data in a secured manner. The telecom based smart cards are used by cellular companies for providing mobile services whereas the non telecom based smart cards have varied applications and are used in a number of sectors like the transport sector, in Identity-Attendance-Access control cards, in E-Governance etc. The plaintiff has achieved the CS No. 245/06 M/s. Smart Chip Ltd. Vs. M/s. PACL India Ltd. Page 2 largest market share in the smart card systems in India and its products are operating in more than 30 countries and employ around 58,000 employees around the world.
d) One of the goods of the plaintiff is to supply and implementation of Biometric Time Attendance Systems (B-TAS) for institutions, departments and companies both in the public and private sector. The defendant was keen to obtain the advantage of B-TAS in its offices.
The defendants entered into commercial negotiations with the plaintiff and vide letter dated 18/03/2005 placed purchase order for implementation of B-TAS by the plaintiff in the various offices of defendant no. 1 near Paschim Vihar, New Delhi. The said letter was for the purchase of various hardwares i.e. contactless cards, software application, biometric terminals, card reader, SAM card. The payment schedule was agreed.
e) The letter dated 18.03.2005/purchase order enclosed a cheque of Rs. 1,80,000/- which represented approximately 30% of the total purchase order value. The total consideration for the goods in the said purchase order amounted to Rs. 6,17,760/- and balance was promised to pay at the time of delivery of the goods.
f) The defendant received the delivery of the hardware, software and all the contract goods therein in proper functioning and condition in accordance to the purchase order. No dispute or objection was raised regarding the quality and quantity of the hardware supplied even till date also. The last consignment was received by the defendants on June 16, 2005. Despite reminders, the defendant evaded from payment. The plaintiff has written number of correspondences dated 22/05/2006, 01/08/2006 and 03/07/2006. However, none of the above correspondences received any reply from the defendants. A formal notice to the defendants on 21/09/2006 was issued but despite notice CS No. 245/06 M/s. Smart Chip Ltd. Vs. M/s. PACL India Ltd. Page 3 the defendants evaded and neglected the payment of the amount to the plaintiff.
3. Written statement filed by defendant no. 1 wherein it is stated that defendant no. 2 is not holding any post with the defendants. It is further stated that the purchase order dated 18/03/2005 was issued by Mr. Vinay Sarup, Chief Executive who is no more working with the defendant. The said contract for supply of biotech system was due to a collusion between the said CEO and the principle officer of the plaintiff as they were in good relations with each other and out of courtesy Mr. Vinay Sarup was influenced to place the alleged order on the plaintiff. It is further stated that the plaintiff has supplied the alleged goods in June 2005 and Mr. Vinay Sarup has resigned in March 2006. The plaintiff has sent first reminder to the defendant in May 2006 i.e. after his resignation. The plaintiff had no intention of completing part of his agreement and the plaintiff has misappropriated the advance amount already given by the defendant. The goods/ articles/machines supplied by the plaintiff were not equipped with the required software and as such the said machines had been lying idle since the date of their supply. The plaintiff failed to take any step despite many requests and reminders. A letter dated 03/07/2006, the plaintiff itself admits that the work is not still completed. It is denied that Sh. Alok Mukherjee is authorized to sign, verify and to institute the suit. It is further stated that there is no post or designation as Chairman in defendant no. 1. Issue of letter dated 18/03/2005 by defendant no. 1 is admitted. Supply of various hardware equipment which are necessary for the implementation of B-TAS is denied. It is stated that only Bio-metric Terminals have been provided and the required software has not been installed by the plaintiff which has made the said terminals useless and valueless for defendant no. 1.
CS No. 245/06M/s. Smart Chip Ltd. Vs. M/s. PACL India Ltd. Page 4 Thus the said Bio-metric terminals are nothing but junk machines which have no use and utilization without requisite software. Rest of the averments made in the plaint are also denied.
4. Replication to the written statement of defendant no. 1 is filed by the plaintiff wherein the averments made in the plaint are re-iterated and affirmed and the contents made by the defendant in the written statement are denied. It is again re-iterated that defendant no. 2 was the decision maker and chief interlocutor with the plaintiff.
5. Written statement filed by defendant no. 2 wherein it is stated that defendant no. 2 had entered into contract with the plaintiff in his official capacity and hence could not be held personally liable for any act which was allegedly done by officials of defendant no. 1. He has nothing to do with the day to day affairs of defendant no. 1 and has not entered into any transaction with the plaintiff in any capacity whatsoever. It is stated that plaintiff has wrongly impleaded defendant no. 2. It is further stated that defendant no. 2 is not holding any post in defendant no. 1 and hence he has been improperly and illegally impleaded and the suit is liable to be dismissed for mis-joinder of the parties. It is further stated that defendant no. 2 never entered into any transaction with the plaintiff. Rest of the contents of the plaint are also denied.
6. Replication to the written statement of defendant no. 2 is filed by the plaintiff wherein the averments made in the plaint are re-iterated and affirmed and the contents made by the defendant in the written statement are denied. It is further stated that at all material times, defendant no. 2 was responsible for running the affairs of defendant no. 1 and could not absolved of the personal liability towards the plaintiff.
7. My ld predecessor by order dated 11/02/2008 framed following issues :
CS No. 245/06M/s. Smart Chip Ltd. Vs. M/s. PACL India Ltd. Page 5 "(i) Whether the plaintiff is entitled to recover an amount of Rs. 4,37,760/- from the defendants? OPP.
(ii) Whether the plaintiff is entitled to the relief of interest?
OPP.
(iii) Whether there is no cause of action to file the present suit? OPD.
(iv) Whether the plaint is bad for mis-joinder of parties? OPD.
(v) Relief, if any."
8. To prove his case, the plaintiff examined Sh. Alok Mukherjee as PW1 who tendered his evidence by way of affidavit Ex. PW1/1. He also tendered in evidence Budgetary Estimate for The Attendance system as Ex. PW1/A, purchase order dated 18/03/2005 as Ex. PW1/B, postal receipts as Ex. PW1/C. This witness was cross-examined by the ld counsels for the defendants, separately. The plaintiff further examined Ms. Sumita Chopra as PW2. She was also cross-examined by ld counsels for both the defendants, separately. My ld predecessor by order dated 20/10/2010 closed PE.
9. Thereafter, defendant examined Ms. Parveen Singh, AR of defendant no. 1 as DW1 who tendered her evidence by way of affidavit Ex.
DW1/1. She was cross-examined by ld counsel for the plaintiff as well as defendant no. 2. Thereafter, by separate statement, AR of defendant no. 1 closed DE on behalf of defendant no. 1. Defendant no. 2 examined Sh. Harsh Gautam, his power attorney who tendered his evidence by way of affidavit Ex. DW2/A. He also relied upon documents Ex. DW2/1 which is extract of the minutes of the meeting held on 01/12/2006 of defendant no. 1. DW2 was cross-examined by ld counsel for the plaintiff and thereafter, power of attorney of defendant no. 2 closed DE on behalf of defendant no. 2.
10. I have gone through the entire record of the case including pleadings of the parties, evidence led by the parties and documents proved by the CS No. 245/06 M/s. Smart Chip Ltd. Vs. M/s. PACL India Ltd. Page 6 parties during trial. My issuewise findings are :
11. Issues No. 1 and 3 :
Issue No. 1 : Whether the plaintiff is entitled to recover an amount of Rs. 4,37,760/- from the defendants? OPP.
Issue No.3 : Whether there is no cause of action to file the present suit? OPD.
For the convenience towards disposal, I am going to dispose of both these issues by common findings. Onus to prove issue no. 1 is upon the plaintiff whereas onus to prove issue no. 3 is upon the defendant. Ex. PW1/1 is similar to the averments made in the plaint. During cross-examination, it is stated that negotiation and finalization regarding the system took place in the premises of defendant no. 1. He has admitted that he never visited the premises of plaintiff in respect of this contract. He has further admitted that no correspondence was ever taken place with defendant no. 2. He has further admitted that the representative or the engineers of the plaintiff obtained the confirmation from its customers after the installation of the system but he denied the suggestion that no confirmation letter is obtained by the representative of the plaintiff from defendant no. 1. He has further stated that letter dated 16/06/2005 evidences the fact that confirmation of installation was duly obtained. On the record Mark B is photocopy of letter dated 16/06/2005. He denied the suggestion that letter dated 16/06/2005 does not contain any confirmation of installation of the system. When photocopy of Mark B is perused, it is observed that it is merely a delivery note but there is nothing mentioned about the confirmation of installation of the system. He denied the suggestion that system was not equipped with the requisite software at the time of its installation at the premises of defendant no. 1 or the information of improper function was conveyed by defendant CS No. 245/06 M/s. Smart Chip Ltd. Vs. M/s. PACL India Ltd. Page 7 no. 1 to the plaintiff. He further denied the suggestion that engineers of the plaintiff did not visit the premises of defendant despite having information regarding improper installation of the system. He further admitted that Sh. Vinay Sarup, Chief Executive was dealing with the plaintiff. He further denied the suggestion that no letter dated 16/06/2005 was issued by the plaintiff. He has stated that he was not at the level to see the physical function of the machine. PW2 stated that she was not aware about the facts of the purchase order from defendant no. 1 to the plaintiff. She has stated that the negotiation for the purchase order from defendant no. 1 to the plaintiff on 18/03/2005 was in her presence. In cross-examination, she has stated that she was not aware whether system was properly installed or supplied to the defendant. She has further stated that she did not have any knowledge regarding the complete supply of order dated 18/03/2005, its proper implementation/commission and working of the system at defendant no. 1's office. She has stated that she did not have any appointment letter showing her as Manager System with the plaintiff.
Affidavit of DW1 i.e. Ex. DW1/1 state about the similar averments as stated in the written statement. During cross-examination, DW1 has stated that she did not know whether defendant no. 1 has ever issued any notice or letter regarding any defect in supply made by the plaintiff pursuant to order dated 18/03/2005. She has admitted that purchase order dated 18/03/2005 was issued by the defendant. It is also admitted that the plaintiff supplied the goods in June, 2005. She has denied the suggestion that plaintiff made the supply of the goods in accordance with purchase order dated 18/03/2005 and no notice or letter regarding defect in supplied goods was issued to the plaintiff. In further cross-examination, she has stated that she did not know as to what was supplied in June, 2005 by the plaintiff and whatever was CS No. 245/06 M/s. Smart Chip Ltd. Vs. M/s. PACL India Ltd. Page 8 supplied has made part of the record as she was not working with defendant no. 1 in 2005. She has admitted that the goods supplied to the defendant is with the defendant only. Thus, it is admitted case of DW1 that the plaintiff had supplied goods to defendant no. 1. However, it is the case of defendant no.1 that the goods were not working properly i.e. software was not installed and for this reason, the same was not in working condition. But DW1 admitted that no letter or notice regarding defect in supply by the plaintiff pursuant to Ex. PW1/B was issued to the plaintiff. No witness has been brought on the record who could depose on behalf of the defendant that the goods were supplied defectively as during cross-examination, it is stated by DW1 that he did not know what was supplied in June, 2005 by the plaintiff and whatever was supplied, is with the defendant. Therefore, in such circumstances, if the goods were supplied defectively then a person who could depose on behalf of defendant no. 1 that the goods were supplied defectively and could say about the defects, no such witness has appeared on behalf of defendant no. 1. Section 114 illustration
(g) states :
"That evidence which could be and is not produced would, if produced, be unfavourable to the person who withholds it."
In such circumstances, this court is of the considered opinion that if that evidence has not been brought then as per illustration as referred herein above, the court has to presume that the evidence is not produced by defendant no. 1 only if what would have been produced then it would be unfavourable to defendant no. 1. The goods were supplied, admittedly in 2005 but no complaint regarding defect of goods was made by defendant no. 1 to the plaintiff as the same has not been proved. Section 41 (1) of Sale of Goods Act states:
"41 Buyer's right of examining the goods.-(1) Where goods are delivered to the buyer which he CS No. 245/06 M/s. Smart Chip Ltd. Vs. M/s. PACL India Ltd. Page 9 has not previously examined, he is not deemed to have accepted them unless and until he has had a reasonable opportunity of examining them for the purpose of ascertaining whether they are in conformity with the contract."
Thus, as per Section 41 of Sale of Goods Act, a reasonable opportunity was available to defendant no. 1 to examine the goods. Section 41 (2) of the Act further states :
"41(2) Unless otherwise agreed, when the seller tenders delivery of goods to the buyer, he is bound, on request, to afford the buyer a reasonable opportunity of examining the goods for the purpose of ascertaining whether they are in conformity with the contract."
A reasonable opportunity and time was available to defendant no. 1 to ascertain whether those goods were in conformity with the contract i.e. Ex. PW1/B. Section 42 of the Act further states :
"42. Acceptance.- The buyer is deemed to have accepted the goods when he intimates to the seller that he has accepted them, or when the goods have been delivered to him and he does any act in relation to them which is inconsistent with the ownership of the seller, or when, after the lapse of a reasonable time, he retains the goods without intimating to the seller that he has rejected them."
Thus, in this case, defendant no. 1 did not act after a lapse of a reasonable time and he retained the goods without intimating to the seller i.e. plaintiff that he has rejected those goods i.e. the goods supplied by the plaintiff according to Ex. PW1/B. No such letter has been proved by defendant no. 1 that he intimated regarding the defect of goods to the plaintiff despite having reasonable brought to examine the goods according to Section 41 of the Sale of Goods Act. In such circumstances, this court is of the considered opinion that defendant no. 1 is not able to prove that the goods as supplied by the plaintiff were of defect quality as no such evidence has been brought on the CS No. 245/06 M/s. Smart Chip Ltd. Vs. M/s. PACL India Ltd. Page 10 record. Therefore, issue no. 1 is being answered in favour of the plaintiff to the effect that the plaintiff is entitled to recover Rs. 4,37,760/- i.e. balance consideration of the goods as supplied according to Ex. PW1/B.
12. Issue No. 2.
Whether the plaintiff is entitled to the relief of interest ? OPP.
Onus to prove this issue is upon the plaintiff. In para 10 of Ex. PW1/1, the plaintiff has claimed interest @ 24%. No contract for interest has been proved by the plaintiff. In such circumstances, this court is of the considered opinion to the effect that the plaintiff is not able to prove that the plaintiff had ever sought about the confirmation of installation was duly obtained. Therefore, in view of this conduct of the plaintiff, in my considered opinion interest @ 8% p.a. from the date of filing of the suit till realization will serve the end of justice. This court taken into account the conduct of the plaintiff to the effect that being a supplier of the goods, it was the duty of the plaintiff to take care the specification of its customer and the plaintiff is not able to prove such specification. In such circumstances, this issue is disposed of with these observations.
13. Issue No. 4Whether the plaint is bad for mis-joinder of parties? OPD.
Onus to prove this issue is upon the defendant. It is the case of defendant no. 2 that he is not a necessary party to the present suit. During cross-examination, it is stated by PW1 that he has not filed any document showing that defendant no. 2 is Director/Managing Director/ Chairman of defendant no. 1. It is further stated that there is no document on record which is directly addressed to defendant no. 2 and CS No. 245/06 M/s. Smart Chip Ltd. Vs. M/s. PACL India Ltd. Page 11 vice versa by defendant no. 2 to the plaintiff pertaining to the transaction. A suggestion was given that defendant no. 2 was neither Director/Managing Director/Chairman of defendant company or holding any post and the suggestion was denied. Defendant no. 2 himself not appeared to depose rather he appointed his power of attorney on his behalf whose evidence recorded as DW2. It is stated in Ex. DW2/A in para 4 that defendant no. 2 was not holding any post with defendant no. 1 or defendant no. 2 did not induce or misrepresented the plaintiff to part with valuable consideration. Perusal of file shows that there is no document on the record which was addressed to defendant no. 2 in his personal capacity. In such circumstances, this court is of the considered opinion that the plaintiff is not able to discharge the onus to prove this issue and accordingly this issue is answered against the plaintiff and in favour of the defendant.
14. Issue No. 5.
Relief.
In view of the observations made herein above, the suit of the plaintiff is decreed for a sum of Rs. 4,37,760/- along with interest @ 8% p.a. from the date of filing of the suit till realization. Plaintiff shall also be entitled for proportionate costs of the suit. Decree sheet be prepared accordingly. File be consigned to record room.
Announced in the open (Jitendra Kumar Mishra) court on 20/04/2013. Additional District Judge-09 Central District, Tis Hazari Courts Delhi CS No. 245/06 M/s. Smart Chip Ltd. Vs. M/s. PACL India Ltd. Page 12 CS No. 245/06 20/04/2013 Present : None.
Vide separate order announced in the open court today, the suit of the plaintiff is decreed for a sum of Rs. 4,37,760/- along with interest @ 8% p.a. from the date of filing of the suit till realization. Plaintiff shall also be entitled for proportionate costs of the suit. Decree sheet be prepared accordingly. File be consigned to record room.
(Jitendra Kumar Mishra) Additional District Judge-09 Central District, Tis Hazari Courts Delhi/20.04.2013 CS No. 245/06 M/s. Smart Chip Ltd. Vs. M/s. PACL India Ltd. Page 13