Delhi District Court
Harsh International vs Coirfoam (India) Private Limited on 23 March, 2024
IN THE COURT OF Ms. NIRJA BHATIA
DISTRICT JUDGE (COMM.) (DIGITAL-07),
SOUTH-EAST DISTRICT, SAKET COURT, NEW DELHI
CS (Comm) 600/2022
Harsh International
having its Registered Office at:
S-277, GK-II, New Delhi-48.
..... Plaintiff
Vs.
Coirfoam (India) Private Limited
having its factory at:
14/6, Mathura Road, Faridabad (Haryana).
..... Defendant
Date of Institution: 02.06.2022
Arguments concluded on: 23.03.2024
Date of Judgment: 23.03.2024
JUDGMENT
Brief facts of the case By this judgment, I shall decide the present suit filed by M/s Harsh International (hereinafter to be referred as plaintiff) seeking relief of recovery of Rs. 80,21,924/- alongwith pendente lite and future interest against M/s Coirfoam (India) Pvt. Ltd. (hereinafter to be referred as defendant).
Gist of the plaint
2. The crux of the plaint are as below:
(i) Plaintiff is a duly registered partnership firm with Registrar of Firms, District South, New Delhi, having its registered office at S-277, GK-II, New Delhi-48 and its godown is situated at Khasra Harsh International Vs. Coirfoam (India) Pvt. Ltd. Page No. 1 of 45 No. 28/31, Gali No. 16, Libaspur, Delhi and is engaged in the business of sale of industrial chemical. Suit is institued through Sh. Puneet Lal, partner. Defendant is disclosed as a private limited company in business of manufacturing mattresses, cushions, pillows etc.
(ii) That the directors officials/ employee of the defendant company approached the plaintiff at its registered office and requested for supply of industrial chemical for the business purposes.
(iii) The entire terms of executing business were verbally and mutually agreed as below:
"Firstly, Defendant no. 2 and 3 places the Purchase Order upon the plaintiff specifying the details of the industrial chemicals required by the defendant, Secondly, Plaintiff prepare the consignment on the basis of said Order and will generate the Tax Invoice upon the defendant no. 1 and issue the E-way Bill, Thirdly, Defendant no. 2 and 3 transporter will collect the consignment from the Plaintiff and will deliver the consignment to the defendant no. 1, Lastly, Defendant no. 2 and 3 will make the payment to the Plaintiff by making the payments through bank transfer."
(iv) As per the mutual understanding, defendant was used to place the order verbally on the plaintiff and on the basis of said orders, plaintiff supplied the requisite industrial chemical on credit basis, 25 tax invoices were issued between 14.06.2021 to 01.04.2022. The same were received by the defendant.
(v) Plaintiff states that defendant always made on account payments to plaintiff by depositing the amounts into the Harsh International Vs. Coirfoam (India) Pvt. Ltd. Page No. 2 of 45 plaintiff's bank account maintained with Union Bank of India, GK-2, New Delhi.
(vi) Plaintiff after closing of each financial year was to get the account confirmation verified from the defendant. Accordingly, the director of the defendant himself confirmed the account statement for period w.e.f 01.04.2020 to 31.03.2021 and again vide e-mail dated 06.04.2022 defendant confirmed the account statement of the period from 01.04.2021 to 31.03.2022.
(vii) The plaintiff has been maintaining running ledger account in due course of its business in respect of transactions executed with the defendant wherein plaintiff has mentioned and recorded the details of all the tax invoices as well as the amounts received from the defendant. Plaintiff states that its books of accounts have been regularly audited and maintained in the ordinary course of business, as per which Rs. 80,21,924/- is outstanding and payable by defendant
(viii) Plaintiff states that defendant has been pursued and followed for clearing the outstanding amounts, though the defendant admitted the liability and assured to make the payment but failed to make the outstanding amounts.
(ix) It is averred that from the above conduct of the defendant, in not clearing the outstanding, it is apparent that defendant has no intentions to pay the amounts against the requisite goods.
(x) Plaintiff seeks recovery of Rs. 80,21,924/- alongwith interest of 18% p.a. Hence, an amount of Rs. 7,65,438/- is claimed towards interest from 14.06.2021 till 26.05.2022.
Harsh International Vs. Coirfoam (India) Pvt. Ltd. Page No. 3 of 45 Gist of written statement
3. The defendant has filed the written statement and has stated as below:
(i) It is stated that M/s Coirfoam (India) Pvt. Ltd. is a company incorporated under Companies Act as on 27.06.1978 and is bearing Corporate Identity Number U51909WB1978PTC031553 with Registrar of Companies at Kolkata (West Bengal) having its registered office at 3rd Floor, 59 N. S. Road, Kolkata, WB and corporate office at 14/6, Mathura Road, Faridabad, Haryana.
The written statement is instituted through Sh. Anuj Aggarwal, Director of defendant company.
(ii) The defendant admits that defendant is engaged in business of producing and manufacturing sleep products in form of spring and coir mattresses as well as rubberized foam and different types of mattresses. It is averred that defendant company is renowned mattress brand in Indian market with high profile clientele in is repertoire.
(iii) It is averred that the defendant alongwith Cozy Touch Poly Foams India Pvt. Ltd. and Springer Mattresses are "group entities" with some common partners and are involved in the business of creating and supplying goods and products of similar nature, while plaintiff is having a sister concern namely Kartikay Impex and both are common suppliers of raw material to defendant company and its group entities.
(iv) It is averred that plaintiff company supplies raw material in form of chemicals namely Polyol, TDI, Arcol Polyol and Polyol PPG to the defendant company for the purposes of producing foam in-house. Subsequently, the foam is either used by the Harsh International Vs. Coirfoam (India) Pvt. Ltd. Page No. 4 of 45 defendant to manufacture mattresses or supplied as it is to its clients.
(v) It is averred that plaintiff company and M/s Kartikay Impex are commonly operated by one Sh. Puneet Lal with whom Sh. Anuj Aggarwal, director of defendant, had been in constant communication. Both the parties had long standing fiduciary relationship which is allegedly abused by the plaintiff. It is averred that admittedly, both the parties had oral understanding over the last decade regarding placing orders, mode of delivery and payment terms etc., despite which the plaintiff company is in clear contravention to the terms and understanding and has maliciously filed the suit.
Preliminary Objections raised by the defendant
4. The defendant has raised preliminary objections as below:
(i) Territorial jurisdiction:
(a) It is stated that this Court is having no territorial jurisdiction to entertain the present suit. It is stated that the registered office of the defendant is situated at Kolkata, West Bengal and corporate office at Faridabad, Harayana wherefrom the defendant carries out its operation from the said location.
Defendant claims that suit is barred under the provisions of Section 20 CPC as the jurisdiction is not to be determined from the registered office of plaintiff, but from the registered office of defendant who never operated from the territory of Delhi and has had its registered office at Kolkata and corporate office at Faridabad. It is averred that in view thereof, the suit is not maintainable.
Harsh International Vs. Coirfoam (India) Pvt. Ltd. Page No. 5 of 45
(ii) Concealment of Facts:
(a) It is averred that plaintiff has concealed the material facts and has not approached the Court with clean hands as it is concealed in the suit filed by the plaintiff that the plaintiff supplied sub-standard and poor quality of raw material, due to which huge financial loss was caused to the defendant and refrained from making a word or whisper in the entire suit as to why the defendant did not make the payments towards the invoices which are claimed in the written statement as vexatious and against which plaintiff had assured replacement of entire sub-standard lot at no extra cost to compensate the defendant.
(iii) Suit not maintainable for unstamped ledger:
(a) It is averred that claim of plaintiff is not maintainable in the eyes of law as liability claimed is out of the unstamped, unacknowledged ledger statement of plaintiff company.
(b) It is alleged that the ledger relied upon by the plaintiff neither belongs to the defendant nor was issued from the official and registered e-mail ID of the defendant company and defendant cannot be bound by the said communication in any manner whatsoever. It is alleged that plaintiff in order to maintain its frivolous suit has manufactured and fabricated ledgers and orchestrated the service thereof upon plaintiff in apparent collusion and connivance with some unknown person.
Preliminary Submissions on behalf of defendant
5. The defendant then has raised the following preliminary submissions:
(i) Mis-statement of facts:
Harsh International Vs. Coirfoam (India) Pvt. Ltd. Page No. 6 of 45
(a) Defendant has alleged that the plaintiff has played fraud upon this Court by misstating facts, whereas the correct facts are that the defendant has been engaging the services of the plaintiff company for over a decade and parties had been a close personal associate for a long time. The plaintiff is one of the major suppliers of the chemical products such as Polyol, TDI, Arcol Polyol and Polyol PPG to the defendant company. The goods i.e. the chemicals are used by the defendant as raw material to product foam in the factory alongwith other raw materials.
(b) Defendant received multiple supplies against the orders placed from the plaintiff from time-to-time on different dates which was supplied at defendant's factory at Faridabad, Haryana.
However, the plaintiff supplied "sub-standard quality of chemicals" during March 2021 to June 2021 that resulted in monetary loss and loss of reputation to defendant company.
(c) It is claimed that during the period of March 2021 to 26.06.2021, the supplies of so-called high quality Polyol chemical received from plaintiff amounting to total of Rs. 34,30,000/- were used alongwith other raw material and chemicals procured from the external sources for producing foam. However, the foam produced during this period turned out to be of no use as it developed breaks, cracks and was discoloured and brittle. It is averred that upon investigation it was ultimately found that it was the Polyol chemical supplied by the plaintiff which was in fact sub-standard and of poor quality which resulted in the said breaks and cracks in the foam as it was discovered that the Polyol chemical supplied by the plaintiff during the said period, instead of being clear and transparent was translucent and yellowish in colour, signifying serious quality Harsh International Vs. Coirfoam (India) Pvt. Ltd. Page No. 7 of 45 issue in the lot supplied by the plaintiff during the period in question.
(ii) Facts not stated by Plaintiff:
(a) Defendant alleges that apart from mis-statement of facts, the plaintiff has not disclosed the entire set of facts. Plaintiff has concealed that quality issues were promptly brought to the knowledge of Sh. Puneet Lal, director of the plaintiff company, both telephonically and through WhatsApp, upon which Sh. Lal himself drafted a complaint message and requested the defendant to send the same on his email ID which was complied by the defendant company. The photos of sub-standard supplies and poor quality of foam alongwith the photograph of containers containing chemical i.e. Polyol, supplied by the plaintiff were duly shared with the plaintiff from time-to-time as and when it was requested on the pretext of sharing it with the Chinese personnel at the factory.
(b) Defendant stated that during the intervening period, Sh.
Punit Lal on behalf of plaintiff while acknowledging the quality issue in the Polyol lots supplied by them, assured the defendant that he will either replace the entire sub-standard lot or get the requisite adjustments qua the same. Sh. Punit Lal sought time for the same on the ground that there has been a massive shut down at China port due to Covid-19 issue as a result of which the fresh replacement supplies could not be arranged for some time.
(c) Defendant states that in order to cut down its losses and to somehow manage the delivery timeline of its customer, defendant company had to procure the Polyol chemical from external vendors over the counter which turned out to be much more expensive.
Harsh International Vs. Coirfoam (India) Pvt. Ltd. Page No. 8 of 45
(d) Defendant claims that the WhatsApp and e-mail exchanges between the parties during the period of June 2021 to September 2021 shows that plaintiff was aware of the sub- standard Polyol supplies made to defendant during the abovesaid period. It is averred, that, as the entire foam produced using the lot of Polyol supplied by the plaintiff turned out to be of no use, it was scraped due to paucity of space to store such quantity.
(e) The profit component suffered due to losses and costs in disposing of unusable stock. The deliveries were also delayed for pre-placed orders.
(f) Defendant claimed the quantum of its loss for Rs. 98,81,358/- on account of poor quality of foam product produced by using sub-standard lot of Polyol supplied by plaintiff which includes not only value of other raw material procured from the plaintiff but also the necessary ingredients, chemicals procured from the defendant company from external sources during the said period amounting to Rs. 54,28,573/-. Since the entire volume of foam was discarded the defendant suffered an additional loss of Rs. 5,01,429/- on account of other input costs in form of electricity and other running cost involved in the manufacturing of the defective foam. Defendant states that it had suffered additional losses amounting to Rs. 10,22,785/- on account of loss of profits, opportunity cost and additional cost etc. Besides having suffered on account of reputation as it lost face in front of their clients due to which their goodwill suffered. It is further averred that plaintiff and defendant are continuing with the business and there is no occasion shown by the plaintiff to have instituted the present suit.
(iii) Set-off claimed for Rs. 80,21,924/-:
Harsh International Vs. Coirfoam (India) Pvt. Ltd. Page No. 9 of 45
(a) On the above grounds, the defendant claimed a set-off of Rs. 80,21,924/- under Section 8 Rule 6 CPC against its dues arising lawfully out of the same transactions and states that Court fee of Rs. 80,670/- is being paid with the written statement. It is averred that from the exchange of communications, plaintiff has been fully aware of defendant's claim against sub-standard quality of material raised by the defendant.
(b) The para-wise reply has been wherein the contents of the plaint are disputed and it is stated that defendant company had entered into an oral agreement with the plaintiff whereby it was understood that the plaintiff was to supply the chemicals as and when the orders were placed by the defendant at the factory premises of defendant situated at Faridabad, whereafter the plaintiff was to raise invoice of the material supplied and raise bills and receipts for cost incurred. It is stated that defendant's transporter collected the consignment from the plaintiff and delivered it to the defendant. The documents of the plaintiff falsifies the claim made by the plaintiff that plaintiff supplied the requisite industrial chemical on credit basis only though the mentioned tax invoices were duly received by the defendant.
(c) It is stated that a running account has been maintained by the parties. The ledgers presented by the plaintiff are denied. Rest of the averrments made in the plaint are specifically denied. It is denied that books of accounts of plaintiff were regularly audited and maintained in ordinary course of business. It is reiterated that defendant is in debt of Rs. 80,21,924/- and states that defendant reserves its rights for filing a counter-claim.
(d) In view of the above, it is prayed that suit may be dismissed.
Harsh International Vs. Coirfoam (India) Pvt. Ltd. Page No. 10 of 45 Gist of the Replication to the written statement and written statement to set-off
(i) Replication to the written statement and written statement to the set-off has been filed by the plaintiff wherein it is stated that Sh. Punit Lal, partner of plaintiff firm, is also a director in M/s Kartikay Impex Pvt. Ltd., which both companies had sold different industrial chemicals to defendant as well as M/s Cozy Touch Poly Foams Pvt. Ltd. and M/s Springer Mattresses (a partnership firm). It is stated that Sh. Inderjeet Singh Khurana, director of defendant is director with M/s Cozy Touch and a partner of M/s Springer Mattresses. It is averred that he is the key person besides Sh. Anuj Aggarwal and Sh. Manish Kumar. It is averred that during the period when the relations between the parties were cordial, Sh. Inderjeet Singh Khurana issued the account ledger statement for a period of 01.04.2020 to 31.03.2021, duly signed by him which was exchanged vide emails dated 28.03.2022 and 06.04.2022. The account statement were sent from the email ID of defendant. It is averred that similarly, vide email dated 28.05.2022, account ledger statement for period from 01.04.2022 to 30.05.2022 was sent by Sh. Manish Kumar, internal auditor of defendant, which email was initially received at 01:50 PM on 28.05.2022 from Sh. Manish Kumar, whereafter plaintiff again received the same email at 01:51 PM on 28.05.2022 from the email ID of defendant. Plaintiff claims that defendant posted a false entry on 23.06.2021 which was not earlier existing in the previous account ledger statement which the defendant had sent through email. It is averred that for the above, the defendant officials are liable to be punished and prosecuted.
Harsh International Vs. Coirfoam (India) Pvt. Ltd. Page No. 11 of 45
(ii) Plaintiff further avers that it has also filed recovery suits against M/s Cozy Touch Poly Foams and M/s Springer Mattresses for having not paid the legitimate and admitted outstanding amounts which have been deliberately withheld by Sh. Inderjeet Singh Khurana and Sh. Anuj Aggarwal by preparing bogus and concocted stories of inferior quality of chemicals and engaging in preparation of false documents.
(iii) Plaintiff has detailed the process of procurement of chemicals and states that manufacturer of chemicals is situated at Korea which manufactures Polyol with the description - "PPG 3010 Polyol"; whereas the manufacturer situated in Singapore manufactures Polyol with the description - "Arcol Polyol 5613"
and manufacturer situated in China manufactures Polyol with description - "YT 5602 Polyol". The formula and usage of all three companies are similar in nature as the three Polyol have the molecular weight of 3,000. Drums of Polyol has been carrying uniform weight of 210 kg. Similarly, chemical namely TDI, drum has a uniform weight of 260 kg. Plaintiff states that it is important to mention that it sells the chemicals in sealed condition only and never in open drum. The sealed drums are sold in the open market.
(iv) Plaintiff claims that the WhatsApp message raised in reference by plaintiff was finalized by Sh. Punit Lal and sent on 26.06.2021 to Anuj Aggarwal which he forwarded back to Punit Lal on the same date of 26.06.2021. However, no test report establishing the poor quality of material was supplied to the plaintiff. It is averred that story of defendant qua the poor quality is false and fictitious in nature and is created just to deny the Harsh International Vs. Coirfoam (India) Pvt. Ltd. Page No. 12 of 45 rightful legitimate claim of plaintiff, then has reaffirmed the plaint and contents of the written statement are denied.
Reply to preliminary objections
(i) Reply to the preliminary objections have been furthered and it is claimed that defendant is mischievously intending to mislead the Court on false assertions. It is denied that plaintiff is guilty of abuse of process and plaint is without any cause of action. It is denied that present Court has no territorial jurisdiction to try and entertain the present suit and the plaint is liable to be returned under Order 7 Rule 10 CPC. It is further denied that plaintiff has concealed the material facts. It is denied that plaintiff is liable for any loss having been suffered by the defendant and/ or at any any stage plaintiff made any promise to defendant for replacing the entire sub-standard lot without any additional cost and to compensate the defendant for any loss.
(ii) While making para-wise submissions, it is denied that any sub-standard quality material was supplied during March 2021 to June 2021 which resulted in monetary loss or loss of reputation to the defendant. It is denied that due to chemical supplied, the majority of foam produced during this period turned out to be of no use and developed breaks, cracks and was discoloured and brittle. It is denied that Polyol chemical supplied by the plaintiff during the said period instead of being clear and transparent was translucent and yellowish in colour signifying serious quality issues. It is denied that any assurance was given by Sh. Punit Lal for replacement for which he sought time on the ground that there has been a massive shut down in China ports due to Covid-19 issue. It is denied that defendant had to scrap the Harsh International Vs. Coirfoam (India) Pvt. Ltd. Page No. 13 of 45 foam produced which was of poor quality due to paucity of space to store such huge quantity of foam since it was not usable and had no resale value. It is denied that defendant had to start the production from scratch to formulate and manufacture the foam.
It is denied that defendant has incurred a loss of Rs. 98,81,358/- on account of poor quality of foam produced by using sub- standard lot of Polyol supplied by plaintiff which includes not just the value of lot taken but worth necessary ingredients amounting to Rs. 54,28,573/-. It is denied that defendant suffered additional loss of Rs. 5,01,429/-. It is denied that the defendant suffered opportunity cost and incurred additional cost on account of input cost of Rs. 10,22,785/- . Rest of the submissions are denied and it is stated that defendant had made false plea and is not entitled to relief. It is denied that any counter-claim is liable to be filed against plaintiff.
Note of proceedings
6. The suit was filed on 02.06.2022. After completion of proceedings, process were directed vide order dated 02.06.2022. The defendant caused appearance on 02.09.2022 and filed the written statement as well as set-off. The affidavit of admission/ denial was then filed by the defendant as is taken note in the proceedings dated 10.11.2024. An application of plaintiff for placing on record additional documents was pending, both of which was then listed alongwith another application of urgent nature under Order 39 Rule 1 & 2 CPC of the plaintiff for disposal. Vide order dated 21.12.2022 my Ld. Predecessor was pleased to dismiss the application under Order 39 Rule 1 & 2 CPC. The application under Order 11 Rule 4 CPC dated Harsh International Vs. Coirfoam (India) Pvt. Ltd. Page No. 14 of 45 01.09.2022 and under Section 12-A dated 28.05.2022 were also allowed vide common order and additional documents were taken on record. The issues as below were framed on the same date i.e. 21.12.2022:
(i) Whether the plaintiff is entitled to recovery of Rs.
80,21,924/- from the defendant along with pendente lite and future interest as prayed? OPP
(ii) Whether the defendant is entitled to the set off for Rs. 80,21,924/- as claimed? OPD
(iii) Relief.
7. Parties were given opportunity for evidence. On behalf of plaintiff, PW-1 Sh. Punit Lal tendered his evidence by way of affidavit alongwith documents as below:
(1) Form A & B (Registration Certificate) issued by the Registrar of Firms as Ex. PW-1/1.
(2) GPA dated 20.05.2022 as Ex. PW-1/2.
(3) Copies of 25 tax invoices, receipt of articles and e-way bills and transport receipts as Ex. PW-1/3 (Colly). (4) Account ledger stated dated 01.04.2020 to 31.03.2021 and signature of Sh. Inderjeet Singh Khurana at point X as Ex. PW-1/4.
(5) Account statement dated 01.04.2021 to 31.03.2022 as Ex.
PW-1/5.
(6) Email dated 06.04.2022 as Ex. PW-1/6.
(7) Account Statement dated 01.04.2021 to 31.03.2022, Ex.
PW-1/7.
(8) Email dated 28.05.2022 as Ex. PW-1/8.
(9) Account statement dated 01.04.2021 to 31.03.2022 as Ex.
PW-1/9.
Harsh International Vs. Coirfoam (India) Pvt. Ltd. Page No. 15 of 45
(10) Account statement dated 01.04.2022 to 05.04.2022 as Ex.
PW-1/10.
(11) WhatsApp messages between Sh. Punit Lal and Anuj Aggarwal as Ex. PW-1/11.
(12) WhatsApp messages between Punit Lal and Manish Kumar as Ex. PW-1/12.
(13) Account statement dated 01.04.2021 to 31.03.2022 as Ex.
PW-1/13.
(14) Email dated 28.03.2022 as Ex. PW-1/14. (15) Email dated 28.05.2022 as Ex. PW-1/15. (16) Email dated 18.12.2021 as Ex. PW-1/16.
8. On behalf of defendant, DW-1 Sh. Anuj Aggarwal, DW-2 Sh. Inderjeet Singh Khurana, DW-3 Sh. Dhanjay Kumar and DW-5 Sh. Lal Chand Yadav tendered their evidence by way of affidavits.
9. DW-1 Sh. Anuj Aggarwal also exhibited the following documents:
(1) True print out of the defendant company's master data as Ex. DW-1/1.
(2) True print outs of the invoices raised by the plaintiff company upon the defendant company as Ex. DW-1 to Ex. DW-1/6.
(3) True print outs of invoices pertaining to raw material purchased by the defendant company as Ex. DW-1/7 to Ex. DW1/31.
Harsh International Vs. Coirfoam (India) Pvt. Ltd. Page No. 16 of 45 I propose to deal with the cross-examination at the stage of analysis of evidence in reference to final adjudication of the issues above.
Both Ld. Counsels made their respective final arguments. I have heard the same and have carefully perused the record. Discussion and Relief
10. The issue-wise analysis of the evidence and result of discussion is as under:
Issue No. 1, 2 and 311. By way of present suit, the plaintiff has raised cause of action for non-payment of "debt"/ dues against invoices Ex. PW-1/3 collectively (25 tax invoices).
12. To support its claim, after exhibiting the invoices as Ex. PW-1/3 (colly), the corroboration is proposed to be extended through ledger Ex. PW-1/4 from 01.04.2020 to 31.03.2021. It is further claimed to be signed by Sh. Inderjeet Singh Khurana at point X, the director of defendant as gesture of acknowledging its correctness. Another account statement Ex. PW-1/5 is indicating the details of account of transaction for period from 01.04.2021 to 31.03.2022. Both the account statements are relevant for carrying entries from the period during which the transactions in dispute took place. Ld. Counsel for defendant has raised objection to the mode of proof qua Ex. PW-1/4 and Ex. PW-1/5. There has been no objection qua the document Ex. PW-1/3 i.e. 25 invoices though which, the sale and supplies of chemical is made, which tantamounts to fact that the invoices as well as receipt of articles and e-way bills as well as transport receipts are deemed admitted qua correctness of contents. From the aforementioned, the factum of raising purchase order verbally, Harsh International Vs. Coirfoam (India) Pvt. Ltd. Page No. 17 of 45 intending to purchase the chemicals, as detailed in '25' tax invoices, agreement of parties for purchase at a specified rate stated in the tax invoices, alongwith their transportation at the end of plaintiff through e-way bills and transport receipts and its receipt at the end of defendant stood admitted.
13. However, the question in controversy has been raised post affirming the purchase of the aforementioned goods under Ex. PW-1/3, as the defendant has denied the liability on the ground of 'poor quality of chemicals' and resultant loss on which account set-off of Rs. 80,21,924/- is claimed.
Issue regarding quality
14. The defendant claimed that the quality of the chemicals received against invoices raised upon it and exhibited as Ex. PW-1/3 was not genuine and the dispute regarding the quality was raised and brought to the knowledge of the plaintiff who then assured to either replace the chemicals or adjust the payments accordingly. As the above is raised as a contention by defendant, the onus was upon defendant to prove the issue pertaining to quality and its entitlement for set-off/ adjustment. In the above endevour, during the cross-examination PW-1 Sh. Punit Lal dated 03.03.2023, he was specifically asked about the chemicals, that were supplied to the defendant. He stated that though he could not tell the names of all the chemicals, but can tell that Polyol, TDI, MDI and Polymeric Polyol were supplied. He stated that though his firm deals with many other chemicals but chemicals related to P.U industries are those which he has stated. He then stated specifically that the chemicals were received in sealed drums, and were delivered with an analysis Harsh International Vs. Coirfoam (India) Pvt. Ltd. Page No. 18 of 45 report from the manufacturer. He asserted that plaintiff supplied the chemicals to its buyers in same condition. He admitted that defendant always insisting on the top quality of chemical and stated that all chemicals imported by plaintiff were used to be of top quality. In response to a specific question that whether bad quality chemical can contribute to defective production, he partly admitted that there is a probability that any deficiency or issue of quality in the chemical supplied could adversely affect the production of foam, to be produced by the defendant but elaborated that the chemical imported by plaintiff were used to be of highest standard and there was 99.99% guarantee that there was no defect in the quality of chemical imported and supplied by the plaintiff. He added that no complaint of quality was ever received from any other buyer. He elaborated that many chemicals are added/ used in manufacturing of PU foam apart from the chemicals supplied by the plaintiff and the quality of other chemicals could affect that quality of foam produced by the defendant. He stated that though the plaintiff did not check the chemicals for composition and quality before supply as they were supplied in sealed drums, and analysis reports were supplied if required and in the present context he informed that analysis reports were supplied whenever demanded.
15. The plaintiff strengthened its stand that it had supplied the chemicals in sealed drums which were of the top quality with the assurance of supplying analysis report in case it was asked. Consequent to aforesaid it was also added by plaintiff that the foam manufactured by the defendant not only comprised the chemicals supplied by the plaintiff but many other chemicals which were not provided by the plaintiff. He also insisted that Harsh International Vs. Coirfoam (India) Pvt. Ltd. Page No. 19 of 45 though the quality or deficiency in the chemicals may cause the deficiency in the quality of the final product, there had been no complaint during the similar period/ tenure from any other recipient of the chemicals. The aforementioned brought the focus back on the defendant to prove that no other factor was a responsible contributor, to support his case. DW-1 Sh. Anuj Aggarwal, who appeared stated that though his educational qualification is in the field of advertisement/ marketing (BBA and MBA in marketing), he had experience to judge the reason for defect as he admitted that he has no educational qualification in the field of production of foam, he added that since he comes from a business family and had seen the process since childhood he has knowledge of production of foam. He stated specifically that Polyol, TDI, silicon, SO, calcium, polymer, color and MCL are required for production of foam.
16. It is admitted that the chemical was procured by defendant from different suppliers and only Polyol, TDI and polymer were procured and purchased from plaintiff. He stated that they were used to purchase the above named chemicals i.e. Polyol TDI and polymer from other suppliers also, however, added that during the particular period when the problem arose, they had purchased the Polyol. TDI and Polymer from no other vendor than plaintiff.
17. He claimed that problem occurred in the duration of March 2021 to June 2021 and added that in April 2021 the problem was informed to the partner of plaintiff Sh. Punit Lal. He stated that on being informed, Sh. Punit Lal had told the witness that he was procuring the chemicals in sealed drums and defendant should check by purchasing the chemicals and the Harsh International Vs. Coirfoam (India) Pvt. Ltd. Page No. 20 of 45 catalyst from other suppliers also. However, he did not elaborate that what efforts and steps were taken by him for checking/ examining the quality of the chemicals received from the plaintiff in sealed cover despite the advice of such nature specifically having been received. The defendant at that stage raised the complaint regarding the quality on assumption that material sent by plaintiff is of bad quality and is not usable for producing the foam, must have undertaken the steps for confirming the above assumption of poor quality of chemical received from plaintiff, more so, when it was insisted by the plaintiff/ supplier itself.
18. The piece of statement of both parties corroborated and confirmed that plaintiff at no stage had any intervention in the supply which was directly made to the defendant. It is note worthy at this stage, that despite the issue being raised as claimed by the defendant and having full knowledge of the manufacturing process as well as the quality of chemicals to be used in the process, the defendant did not ask for any quality report pertaining to chemical in question and never raised any doubt by even asking the plaintiff to share the quality report itself or called for it from the chemical manufacturer or supplier.
19. DW-1 in his further cross-examination revealed that during the process of manufacturing they conducted testing in "short batches", however, no elaboration qua the above testing process is stated. No such test reports are filed. It is not detailed that when, where, in whose presence, who conducted the tests. No other witness besides DW-1 Sh. Anuj Aggarwal who did not conduct any such short batches test nor stated that the tests were conducted in his presence nor clarified the process adopted for such tests. The statement that the testing was done in short Harsh International Vs. Coirfoam (India) Pvt. Ltd. Page No. 21 of 45 batches suggest and is presumptive to indicate that the testing was repeatedly done and tests were conducted of the short/small samples. In which view, the witness was duty bound to explain the name of the chemicals, the quantity and the result. Nothing of the said nature has been brought on record. It is requisite at this stage to take note that during his further cross-examination on 15.07.2023, he was specifically asked the method of testing in 'short batches' to which he gave the answer below:
"Ans 13. This answer refers to continuous foaming plant that we have in Una in which large quantities of chemicals are processed simultaneously. In Faridabad, we have a box foaming plant in which small quantities of chemicals compared to continuous foaming plant can be processed. The testing was conducted post the issues which rose in Una and Faridabad factories when the issues were pointed out to Mr. Lal, he and Mr. Khurana used to have regular meeting and then I was communicated by Mr. Khurana to process more foam from the latest material Mr. Lal had sent."
20. He was then enquired about the method of testing in box foam to which he stated that he has already answered. The perusal of the answer does not show any clear revelation of process of testing at which stage he was then specifically asked as under:
"Q-16. How can you say that the defect occurred due to bad quality of Polyol supplied by the plaintiff?
To which answer as below was received:
"Ans. We produced foam in the box plant using different permutations and combinations and we had a doubt that the Polyol supplied was defective as sometimes the foam would come out to be fine which was not even 20% of the total recovery."
Harsh International Vs. Coirfoam (India) Pvt. Ltd. Page No. 22 of 45
21. At which stage he was specifically directed by Ld. Predecessor by way of Court directions which is noted as below:
"Court Direction: Witness is directed to further explain and elaborate his answer."
To which following answer was received:...........
"Mr. Puneet Lal and Mr. Inderjeet Khurana was in touch. I did not know what talks were taking place between them. I was looking after the production. I used to receive messages from Mr. Khurana that I should use Polyol from different lots sent by Mr. Lal and I was also instructed to use Polyol from other suppliers. Mr. Lal used to tell Mr. Khurana about how to use the chemical. I followed those instructions. Sometime, the production using the chemical from the lots of the plaintiff used to be fine and sometimes the production was as low as 20%. There was no issue with the production using the Polyol supplied by the other vendors. Therefore, I can say that the problem in the quality of the foam was due to Polyol supplied by the plaintiff."
22. There has been no videography or photography of this testing process to show that the material supplied by the plaintiff only was utilized for conducting the said test, which become an issue when specially the quality of material supplied by the plaintiff only was put to doubt while the defendant was procuring the same chemicals from other vendors also. It was well within the domain of defendant to keep a record by videography through normal phone device to show that the material manufactured while using the chemicals supplied by the plaintiff were of poor quality which resulted in damaged manufacturing, however, the results were altered when the chemicals from other vendors were used. No such effort has been made. It is important to take note that the witness himself Harsh International Vs. Coirfoam (India) Pvt. Ltd. Page No. 23 of 45 admitted that they did not have any laboratory or testing facility at their factory at the relevant time.
23. While elaborating on the issue relating the quality, DW-1 efforted to explain that problem arose in March 2021 at Una (Himachal Pradesh) and there was no initial knowledge to reasons contributing to it. The problem then occurred at Faridabad in April 2021 when the issue was brought to the notice of plaintiff's partner, Punit Lal and he advised the defendant to track the chemical from other sources. He admitted that no written complaint was made prior to 26.06.2021, when the email Ex. PW-1/P-1 dated 26.06.2021 was written. The above indicated that till the time of writing a complaint against supply of poor quality chemical, the defendant did not have specific proof of its batch numbers to establish that the said were supplied only by plaintiff. He then admitted the same and stated "I do not have any document mentioning the batch number" and added by volunteering that "Punit Lal told me that he had talked to supplier in China. He suggested me to write an email to him. I shared a draft with him through WhatsApp. He sent the corrected draft to me with batch numbers. The batch numbers were mentioned by him. I accordingly prepared the email and sent him". However, interestingly, on being asked to show any document to prove that the chemical YT-5602 Polyol, batch No. 20210314225-5 and batch No. 2021030415-1 were supplied by the plaintiff to the defendant company were available with defendant.
24. He stated that he did not check the record for batch numbers before sending the emails and added that they have long standing business relations with them and they trusted them.
Harsh International Vs. Coirfoam (India) Pvt. Ltd. Page No. 24 of 45
25. The perusal of the above cross-examination even after the intervention made by the Ld. Predecessor imparting an opportunity to detail not only the process of manufacturing of foam but also to how it led to the assumption that material supplied by the plaintiff was defective and led to such results as brittle foam, breaking and/ or discoloured foam, unusable for manufacturing of mattresses despite which no clear cogent or direct answer was received. All through DW Sh. Anuj Aggarwal intended to shift the responsibility upon Sh. Inderjeet Singh Khurana, and Punit Lal (partner of plaintiff). He was then asked as how they were maintaining the record of the chemical qua which, it is alleged that foam was not properly formed during the testing phase to which he replied that production report is maintained, however, in the said report, the details of suppliers to show, whose chemicals was used were not mentioned. The witness added that however, they were using the chemicals which were supplied currently (at that time) to them except in May 2021 when there was a lockdown. The details of vendors whose chemical was being used on the date of production, could be made known from the details of supplier for particular batch of production/ testing. Despite stating the above, the defendant made no effort to bring any such production report suggesting that material which had turned out unusable was made using the batch of chemicals supplied by the plaintiff. He was then asked as whether the defendant was maintaining the stock register of the chemicals supplied by the plaintiff as well as the other vendors to which he replied that the defendant was not maintaining the record of batch numbers. The stock was updated Harsh International Vs. Coirfoam (India) Pvt. Ltd. Page No. 25 of 45 on tally. Whenever the tally software was used, entry was made. It is at this stage necessary to take note that no such record of stock kept in tally software is also produced to show that the stock received from the end of the plaintiff was utilized in producing or manufacturing of foam which had turned out unusable. Witness then admitted that despite the above issues, the defendant continued to purchase the chemicals including the Polyol up till March 2022. He then admitted that payments were also partly made for the chemicals purchased from the plaintiff even after June 2021. He claimed that prior to 26.06.2021, only oral/ verbal communication of complaints were made and the written communication by way of WhatsApp was entered first time only on 26.06.2021. No reason is stated for not making any written complaint prior to 26.04.2021, despite claiming that the issue was noticed as early as in March 2021 and again later in April 2021 at Faridabad. It is intriguing that while claiming that Sh. Punit Lal was a frequent visitor at their Faridabad factory, why the indulgence asked on 26.06.2021 was not asked earlier during April, which suggests the part of above statement is not probable.
26. DW-2 Sh. Inderjeet Singh Khurana, Director of defendant was asked specifically to state the exact dates of March 2021 to 26.06.2021 when plaintiff had supplied the Polyol chemical to the defendant, to which he averred that he cannot tell the exact dates, and the dates can be seen from the record. He was then asked to see the invoices and affirm that from defendant's exhibited invoices Ex. DW-1/2 to DW-1/6 dated 25.03.2021, 14.06.2021, 16.06.2021 and 18.06.2021, chemical Polyol had been supplied only on above months and no chemical Harsh International Vs. Coirfoam (India) Pvt. Ltd. Page No. 26 of 45 to the defendant company was made in the duration of April 2021, May 2021 as well as on 26.06.2021. However, instead of answering the above question, the witness claimed that Punit Lal was also making supplies from his other firm M/s Kartikay Impex, due to which he was not sure whether any supply had not been made by the plaintiff in April, May 2021 and/ or on 26.06.2021. However, he had to admit that from invoice Ex. DW- 1/2 to DW-1/6 (five invoices) no supply was made in April 2021, May 2021 and on 26.06.2021. He was then confronted with his statement in para 24 of his examination affidavit (Ex. DW-2/A) regarding supply of chemical made to defendant in April 2021, May 2021 and on 26.06.2021 and was asked that in light of his above cross-examination, this statement was incorrect, to which he asserted that his statement was correct as the supplies made against Ex. DW-1/2 to DW-1/6 were defective, which reflected the demeanor of witness in avoiding the answers and buttressing his own unsupported statements.
27. DW-2 admitted that against invoices Ex. DW-1/2 to DW-1/6 the defendant had availed tax input. It was admitted that no reverse entry was made qua tax invoices Ex. DW-1/2 to DW- 1/6. The perusal of aforementioned answer again reflected that defendant was not sure as the material received against invoices Ex. DW-1/2 to DW-1/6 was same material which had been used during March 2021 to June 2021. He was then specifically asked as whether the defendant got Polyol chemical tested against the invoices Ex. DW-1/2 to DW-1/6 from any laboratory to which he admitted that chemical were not got tested from any laboratory. He admitted that in the duration of April and June 2021, the defendant had purchased Polyol from their sister Harsh International Vs. Coirfoam (India) Pvt. Ltd. Page No. 27 of 45 concern M/s S. K. Poly Foams Pvt. Ltd. and M/s Cozy Touch in small quantities. He admitted that Polyol chemical was purchased from other supplier in the month of April and June 2021 and was not tested. He admitted that after June 2021 the purchases were made of Polyol from the plaintiff and stated that there was no problem with the supply made by the plaintiff after June 2021.
28. He volunteered that plaintiff had admitted that there was problem with two lots supplied by it after June 2021, however, no evidence qua this statement was brought. Moreover, for the first time this fact was stated in the cross-examination in the manner of an addition to the answer without detailing as to when the aforementioned exchange of communication took place between the parties, at which place was pertaining to which two lots. It is also not detailed that consequent to plaintiff's admission in June 2021 of defective supplies, why defendant did not seek any adjustment of payment against subsequent purchases made which continued till 2022. It is also not stated that when no such adjustment, replacement or return was undertaken by the plaintiff, what prevented the defendant from discontinuing the business with the plaintiff company. The aforementioned statement hence does not reveal any element of value in terms of probability and cannot be imparted any evidentiary value. The above statement is to be viewed with caution unless corroboration is received. Further, the defendant then claimed that plaintiff had agreed to supply more material from concerned vendor of China and had agreed to compensate the defendant, despite making above statement the defenant did not bring on record any material to suggest that steps in above direction were Harsh International Vs. Coirfoam (India) Pvt. Ltd. Page No. 28 of 45 asked from plaintiff and were insisted upon. Defendant did not show return of unutilized drums to plaintiff. It is not the case that conciliation of accounts reducing the value of defective lot was asked by way of any written communication.
29. In further pursuit of defendant to prove the allegations qua defective quality Sh. Lal Chand Yadav, worker of the defendant was brought as DW-5. He claimed that he is foamer, at monthly salary of Rs. 16,000/- and stated that he is employee of defendant since 2012. He admitted that he has no technical qualification in chemicals or manufacturing of foam as he did his B. Com and M.A. He did not know how many foamers were working before him and stated that since 2012 he is the sole foamer. He stated that in the defendant company 'box' foaming is done and stated that 'box' foaming and batch foaming are same. He then detailed the process of 'box' foaming. He was then enquired about the record/ production report of the manufacturing carried out to which he stated that the details qua the quantity of used chemical is with the accounts department. He stated that chemicals are received in "sealed condition". He stated that though the chemicals generally do not deteriorate, they may suffer deterioration after opening the seals, if not prevented from coming in contact with air. He stated that though there is a fixed time for consumption of chemical after opening the drum, as remaining chemical can be stored after closing the drum. He stated that Polyol was not tested from the laboratory. He was asked as what did he do with the dead lots (unusable drums), to which he stated that they were handed over to the store department. No videography or photography of dead lots was conducted. He was then confronted with WhatsApp message Harsh International Vs. Coirfoam (India) Pvt. Ltd. Page No. 29 of 45 Ex. DW-5/P-1. On being asked to produce any noting, note sheet or any other document to establish that the Polyol chemical was of poor quality as mentioned by the witness in para 8 of the affidavit he stated that there was no difference in the colour of Polyol in two drums. He took the photograph which is at point A of DW-1/32 and forwarded it to the management for examination. He had also sent the written report to the management that colour was different in Polyol from the two drums and that they should look into the issue. He was asked to show the report submitted by him, he answered that he had already submitted the report to the management which he cannot produce.
30. However, interestingly, DW-2 and DW-1 both omitted to bring any such written report handed over by the witness. From the aforementioned statements, it is hence revealed that at no stage the defendant has produced any lab report or check report of any third party. No report of any examination of material supplied by the plaintiff is even conducted at the factory of defendant. The method of testing in 'Short Batches' as claimed by DW-1 and DW-2 have not been detailed. There is no material to show that the end unusable product i.e. foam was manufactured from the material supplied by the plaintiff. There is no stock maintenance register either at the end of defendant's management and/ or at the manufacturer/ foamers level. It is not established from the supplies admitted that they were of the same batch which was used for manufacturing of the foam which allegedly was not usable. Interestingly, the defendant did not even produce the stock details of quantity of the manufactured material while claiming Harsh International Vs. Coirfoam (India) Pvt. Ltd. Page No. 30 of 45 consumption of one full drum. It is nowhere stated that the said material was shown at any time to PW-1 who as per the statement of defendant was regular visitor at their factory. The record of storing defected foam, the period of its storage and final process of its discard is also not stated. The defendant has not even orally stated as when and under what circumstances, on which date and at which particular place the material was discarded. The use of mode of discarding is again missing from any statement. It is casually stated that since the material was of no use, it was discarded without bringing any element of proof to the said statement. It is required to note that since the foam majorly contained chemical, it could not have been discarded without due permission and caution as otherwise it may have caused damage and risk to environment. At the stage of final arguments, Ld. Sh. Sonam Sharma, was vehemently suggesting that from the documentary evidence and moreover from the WhatsApp messages Ex. PW-1/11 (colly) and Ex. PW-1/12 (colly) admitted by the plaintiff the quality has been shown to be of poor in nature as from one of the photographs the mug containing Polyol chemical received from the end of the plaintiff is of translucent colour whereas it should have been clear. It is at that stage he was asked that if the quality was that bad that it was even visible to the naked eye of person clicking the photograph who in the above circumstance have been connected with manufacturing process having knowledge of the quality as is being stressed, what led the defendant to use such bad quality chemical when it was known already that such chemical was not up to mark and/ or was not of quality which would have given proper result. However, no reasons, as such, were furthered.
Harsh International Vs. Coirfoam (India) Pvt. Ltd. Page No. 31 of 45
31. The plaintiff in his cross-examination has stated specifically that in all stages the material supplied to defendant were under sealed drums. The defendant has not disputed the said fact in which case it is established that the seals were opened at the end of defendant only as at no stage the plaintiff had any participation in the process of manufacturing and supplying except at the stage of transportation. In which background, if the material was visibly not clear and was capable of raising suspicion about its quality for which the photographs had been taken, it was the duty of the defendant to ask the plaintiff to tender the quality search reports from the manufacturer and/ or confirm its quality through lab process. From the cross- examination of DW-2, he claimed that the plaintiff agreed to replace the batches received from China (through the admissibility and degree of reliance of this statement is already discussed in forgoing paras), however, even at that stage, the defendant did not make any effort to elaborate the batch number of the sealed drums to specifically connect the poor quality of material to the plaintiff. In circumstances above, the defendant has not been able to establish that the material supplied by plaintiff had resulted in the quality issues and on being used sub- standard, brittle and discoloured foam had been produced.
Issue regarding the set-off
32. Consequent to aforementioned as the purchase and delivery against the purchases admitted, the invoices Ex. PW-1/3 (25 invoices) alongwith proof of delivery by way of e-way bills, transport receipts and receipts of articles is received, the Harsh International Vs. Coirfoam (India) Pvt. Ltd. Page No. 32 of 45 defendant intriguingly got tempted to take a contrary stand when the following question was put to the witness PW-1:
"Q-5. I put it to you that you have already received the payments, under the invoices Ex. PW-1/3 (colly). What do you have to say?
33. The witness replied the above question in negative and denied that payment has been received. However, the tone and purport of the aforesaid question indicates the absence of any issue relating to quality, and/ or entitlement of defendant to withhold the money against the supply of alleged sub-standard quality. Rather by raising the aforesaid question, the earlier issue of chemical supplied by plaintiff being defective raised was completely given a go-by and a new/ different and altered defence was raised. It be observed at this stage, no such plea though was raised in the written statement and as it is this part of statement is to treated beyond pleadings. Nonetheless, the intent of the question is necessary for interpretation of demeanor of the cross-examination and is taken note.
34. As the defendant intended to create doubt of plaintiff's entitlement claiming it having been discharged and made good, the defendant was duty bound to bring the proof of such payment. However, no plea of such payment is either stated in written statement nor is supported during evidence.
35. Further, the issue regarding to quality was raised at an considerable delay, which in defence the defendant pleaded it having noticed the poor quality first time in the month of March which persisted till the months of April, May and up till June, the issue for first time is raised on 26.06.2021. Interestingly, the supplies of chemical from the plaintiff continued smoothly post Harsh International Vs. Coirfoam (India) Pvt. Ltd. Page No. 33 of 45 thereafter. The provisions of Sale of Goods Act mandate that any defect in quality must have been raised in reasonable time. However, admittedly no complaint is made despite claiming knowledge of bad quality in March 2021, for four months till June. The defendant kept silent for a duration of four months and continued to manufacture foam with defective chemical but did not bring any proof of defect or intimation to the plaintiff.
36. The statement of account Ex. PW-1/4 w.e.f 01.04.2020 to 31.03.2021 is admitted by DW-2 Sh. Inderjeet Singh Khurana. He affirmed that he had signed Ex. PW-1/4 at point 'X' on page 99. He affirmed that defendant had an opening balance of Rs. 44,66,613/- on 01.04.2021, which fact strengthened the plea that the accounts were being maintained against the invoices in a running account manner. The parties did not dispute that the accounts maintained at the end of plaintiff as well as defendant were both mutual and running account as certain receipts from the end of defendant in favour of plaintiff were also given credit. In view of aforesaid, the balance of Rs. 44,66,613/- must infer towards the fact that invoices were raised up till the date of 31.03.2021 i.e. around the alleged period when the defendant raised the issues of defective quality at its Una factory, in which case despite coming to know about supply of bad quality material no question mark on the entries made against the invoices through which such material was supplied is raised. While at one hand defendant claimed assurance of adjustment, nothing prevented it to make entries to corroborate the above agreement between parties. However, the entries are shown to have been kept in normal course and no set-off or adjustment is reflected.
Harsh International Vs. Coirfoam (India) Pvt. Ltd. Page No. 34 of 45
37. He was then asked about email communication and documents Ex. PW-1/6, Ex. PW-1/8, Ex. PW-1/15 and Ex. PW- 1/16, which is forwarded with account statements. Though he claimed that emails have not been sent on behalf of defendant company, no action such as criminal complaint has been lodged for probing their falsehood and no action is lodged. He was then asked about the WhatsApp chat exchanged between Punit Lal and Manish Kumar, Ex. PW-1/12 collectively, to which he stated that though he had gone through the WhatsApp chat, Sh. Manish Kumar is not their employee. He then admitted that Manish Kumar was working as an auditor for a particular period but not on regular rolls of the company. He denied having made any complaint against Manish Kumar. He admitted that in the balance sheet signed on the basis of auditor's report, there is no counter- claim of Rs. 98,81,358/- to which he stated that after instructing the Counsel to file the counter-claim a debit entry had been made in the accounts of plaintiff for Rs. 98,81,358/-. The auditor report was prepared accordingly. He was then inquired about email ID and he admitted that [email protected] is mentioned on the website of his company, though he claimed that it was not used for official communication. From the above cross- examination, it is however revealed that the emails Ex. PW-1/6, Ex. PW-1/8 and Ex. PW-1/16 were written by Sh. Manish Kumar to plaintiff and while the communication exchanged were made he was working with accounts of both sides. It is immaterial that the capacity to work was permanent or adhoc since he was engaging as official/ agent of defendant and was given access to email account of company to make communications. For absence of any action against him, it is Harsh International Vs. Coirfoam (India) Pvt. Ltd. Page No. 35 of 45 established that his acts were in furtherance and pursuance of the official record.
38. The witness is then cross-examined on the genuineness of email and its connection with Defendant company. His answers being relevant are extracted below:
"Q-7 I put to you that [email protected] is also an official email ID of the company which is used for official communication. What do you have to say? Ans. Sometime back we were changing our host server and there was a email crash for two days so this ID was created to continue communication. This is not a preferred email ID for official communication. We do not use this email ID officially.
Q-8. I put it to you that you have given wrong answer to question no. 7. I further put to you that the emain ID [email protected] has been in existence for several years. It has been in use for official communication and it is still being used for official communication. What do you have to say?
Ans. I never said that we have shutdown this email ID. It so happen that sometime there is lag in the server so as a backup we have to use this email ID as this is on Gmail domain.
Q-9. I put to you that the email ID [email protected] is still mentioned on the website of your company. What do you have to say? Ans. I do not know.
It is wrong to suggest that I am deliberately avoiding to give answers to the question no. 7 to 9.
Q-10. Who access the above mentioned email IDs? Ans. [email protected] is accessed by Mr. Ranjan Shukla and me. [email protected] is accessed by Mr. D. K. Jha and [email protected] is accessed by Mr. Ranjan Shukla in cases of emergency.
Q-11. Can anyone else access the above mentioned email IDs, apart from those who are mentioned in your answer above?
Harsh International Vs. Coirfoam (India) Pvt. Ltd. Page No. 36 of 45 Ans. General these email IDs are accessed by the designated people but in case of absence and emergencies, access can be provided to the other persons as well."
39. The bare perusal of above answers show that the email ID/ account used for email Ex. PW-1/6, Ex. PW-1/8 and Ex. PW-1/16 was maintained and was active with defendant in which background the genuineness of process of exchange is not dented.
40. He was then confronted in response to WhatsApp chat Ex. DW-1/32 in which he admitted that Ex. DW-1/32 is not a complete WhatsApp chat as he may have deleted some messages. He stated that the WhatsApp chat filed by the plaintiff may be correct. He then detailed that the pictures of Sh. Pankaj Arora have been shown continuously at point X on pages 88 to 91 Ex. DW-1/32. However, no reason is shown as how under his WhatsApp chat profile picture of Sh. Pankaj Arora is shown under the messages. The said fact makes the genuineness of chat doubtful as at page 89 the profile picture is shadowing over the communication also. He replied that he had taken the screenshot from his phone and handed over the same to his employee for print out, however, it is not explained as to how the screenshot is showing the profile picture of Pankaj Arora.
41. Now the aforesaid discussion brings me to the discussion on documents pertaining to accounts maintained. The defendant has simply relied upon Ex. DW-1/36 i.e. statement of ledger of plaintiff maintained w.e.f 01.04.2021 to 31.03.2022. Against the entry dated 23.06.2021, loss of stock of Rs. 98,81,358/- is shown. When the mail Ex. DW-1/33, which is returned at the instance of defective material is written only on Harsh International Vs. Coirfoam (India) Pvt. Ltd. Page No. 37 of 45 26.06.2021 at 02:48 PM, it is difficult to assume that defendant was aware about the occurrence i.e. the communication with plaintiff's partner on 26.06.2021 likely to take place on 23.06.2021, while admitting to have written for the first time about the quality of the material only on 26.06.2021. Rather taking an entry on 23.06.2021 and writing to plaintiff only on 26.06.2021 reflects that the communication was made in furtherance of a design to achieve an acknowledgment only to support a pre-entry. As otherwise, before even having brought the issue of defect of material, assessment of loss and its entry as debit/ adjustment to the account of plaintiff is intriguing. This makes the genuineness of the ledger doubtful as it indicates that the communication after 23.06.2021 are intentional.
42. Further, the defendant has filed another ledger of the duration of 01.04.2022 showing only one entry of Rs. 22,79,043/- which is not reflected in Ex. DW-1/36 page 1, which strengthens the earlier indication. It is taken note that the manner in which the entries are kept is also suggestive from the utilization of tax input against the invoices Ex. DW-1/2 to DW- 1/6 and its purpose is admitted by DW-2. He admitted that the defendant had taken the tax input of five tax invoices Ex. DW- 1/2 to DW-1/6. He stated that there has been no reverse entry of tax input qua the aforementioned tax invoices and added that reverse entry could be made only in case of total loss and stated that up to 20% of material was okay (at the cost of repetition it is noted that it has not been specifically stated). He then stated that GST-R 3B was filed in the present case as the Court had asked for all documents in support of their stand in furtherance of the urgent application moved by the plaintiff.
Harsh International Vs. Coirfoam (India) Pvt. Ltd. Page No. 38 of 45
43. The production report Ex. DW-1/38 is not shown to be premised on cogent connect. It is not clear who prepared this production report when DW-1 was himself not making any record of production which is claimed to be generated in tally software and not under his control. It is not stated who is operating the tally software and where from the data pertaining to stock is entered as no stock register is maintained at the end of foamer and the production report on the basis of which the entries in stock are made is produced.
44. DW-2 who had tendered Ex. DW-1/7 to Ex. DW-
1/32 has filed on record two print outs of invoices, however, the perusal shows that they are not pertaining to parties in dispute and are irrelevant. Moreover, the evidence pertaining to statement and pleadings specifically are to be ignored.
45. The material witness then in order to detail these account and preparation thereof is DW-3 Sh. Dhananjay Kumar He has been working with the defendant since lase 20 years as accountant. He was asked two questions pertaining to genuineness of the software for maintaining the books of account. In the first instance, he was asked about the notification issued by Ministry of Corporate Affairs dated 24.03.2021 for using the accounting software which shall have a feature of recording audit trail of each and every transaction, creating an added log of each change made in the books of accounts alongwith date when such changes are made and ensuring that audit trail could not be disabled. The witness replied that though he was aware of the notification, the feature had started w.e.f 01.04.2023 at which stage he was confronted with notification dated 24.03.2021. No denial in response to the said confrontation Harsh International Vs. Coirfoam (India) Pvt. Ltd. Page No. 39 of 45 was received, which tantamounted that the defendant was duty bound to track of the notification mandatorily post 01.04.2021. He was then asked that vide another notification dated 24.03.2021, Ministry of Corporate Affairs has directed that companies shall use such accounting software for maintaining its books of accounts which has feature of recording audit trail (added log facility) and the same has been operated throughout the year for all the transactions recorded in the software and the audit trail feature has not been tampered with and the audit trail has been preserved by the company as per statutory requirement to which he stated that he is not aware of the notification and audit trail feature had started on 01.04.2023. He was then confronted with notification Ex. DW-3/D-2. The witness offered no clarification thereupon. He stated that Ex. PW-1/4 i.e. statement prepared by the plaintiff is from the tally software. Same was his answer for Ex. PW-1/5. He stated that after the bills are passed and received by them, the entries are made in the software. He was asked whether each entry is posted on tally software, to which he replied in affirmative. He stated that he cannot state that post-dated/ back-dated entries are possible in tally accounting software prior to notification dated 24.03.2021. He denied that around the entry at point X in Ex. DW-1/6 (debit entry in favour of defendant against plaintiff of Rs. 98 lacs) is a false entry. He was shown the email sent from the end of defendant company dated 06.04.2022 against which the ledger account statement was forwarded. The email was already Ex. PW-1/6. However, the witness claimed that the company does not use the said email ID. It is pertinent at this stage to take note of this statement qua the above email ID having been made by Harsh International Vs. Coirfoam (India) Pvt. Ltd. Page No. 40 of 45 earlier witnesses DW-1 and DW-2. It is not specifically denied or disputed that email ID [email protected] was not the ID of defendant company and/ or not being accessed by its officials. It was not disputed that email ID was still in operation and/ or being continued with the defendant. It was not specifically denied that the email was not used by Manish Kumar, internal auditor, for forwarding the communication to plaintiff. The communication which has been confronted with the witness DW- 2 Sh. Inderjeet Singh Khurana and DW-3 Dhananjay Kumar have been denied. However, the perusal of documents show that the documents are pertaining to the accounts of plaintiff, which has been Ex. PW-1/4 from the period 01.04.2020 to 31.03.2021. The ledger Ex. PW-1/4 is admittedly signed by DW-2 himself at point X. The entry at the stage of closing balance is shown debit of Rs. 44,66,613/-. The said has been used as opening balance in Ex. PW-1/5 against entry of 01.04.2021. In contrast, the ledger filed by defendant does not show any such entry. Moreover, Ex. PW-1/6 is a forwarded message from [email protected] to plaintiff and is bearing date of 06.04.2022. It is again containing two attachments with subject of ledger, one of which is pertaining to plaintiff. The ledger is Ex. PW-1/7 and is showing entries w.e.f 01.04.2022 to 30.05.2022. The other communication at the end of Sh. Manish Kumar with subject of ledger account addressed to plaintiff is Ex. PW-1/8 and is pertaining to ledger of 2021.pdf, 2022-23.pdf, accountledger_hrashinternation.pdf. Which all documents have been exhibited by the plaintiff. The question now emerges is whether a bald denial with the said email ID is not being used as an official ID at the end of defendant and/ or Sh. Manish Kumar Harsh International Vs. Coirfoam (India) Pvt. Ltd. Page No. 41 of 45 was not on official rolls of the defendant would be sufficient to discredit the genuineness of the communication. In case of email communication, the same can be proved either by the sender or by the receiver. The recipient in this case is the plaintiff, Harsh International. It has brought the print out of the emails and has duly exhibited them as Ex. PW-1/6 to Ex. PW-1/14 and Ex. PW-1/15 and Ex. PW-1/16. The aforementioned communication are to be treated as genuine as they are also supported with statement of truth and disclosure of documents as mandated after the amendment of Commercial Courts Act in provisions of Order 6 Rule 15(3) CPC and relevant provisions in Civil Procedure Code.
46. The entries relied upon by defendant have already been observed above. Defendant has not brought any material to traverse the genuineness of the entries mentioned in the statement/ ledger forwarded by Sh. Manish Kumar which are in confirmity with the invoices. The defendant hence was duty bound to bring some cogent evidence to discredit the statement of Punil Lal who claimed himself to be the recipient of the aforesaid emails alongwith ledger accounts and/ or had made effort to summon Sh. Manish Kumar to make a clarification about the entries. In circumstances above, coupled with the statements of DW-3 Dhananjay Kumar, who admitted that the mandate issued under Ex. DW-3/D-1 notification dated 24.03.2021 were not being followed in letter and spirit, left a gap to show that the accounting practices, which were followed at the end of defendant were suffering from gaps and consequently the entries kept were not reliable and genuine. In circumstances as such, the entry of set-off against 23.06.2021 also inspires no Harsh International Vs. Coirfoam (India) Pvt. Ltd. Page No. 42 of 45 confidence. Moreover, there is no material to support any loss of stock as has been discussed in detail above and is not being reproduced for the sake of keeping brevity in judgment. In view of the above, no cogent material is shown in the plea of set-off.
Issue regarding jurisdiction
47. The defendant has denied the jurisdiction of present Court and has claimed that plaintiff is not entitled to any relief for the reason that no part of cause of action arose within the territorial jurisdiction of this Court. It was claimed that defendant's entity is based out of Una, Himachal Pradesh. It has been claimed that all the business orders were placed from Himachal Pradesh and deliveries were received at Himachal Pradesh, in view of which the plaintiff has been misguided in the filing the suit under the present jurisdiction. In cross-examination to PW-1, he denied the aforementioned contentions and stated that the defendant was carrying out its business from Faridabad where he has an office and was used to visit the said office very frequently. However, this part of statement was not found in the examination and/ or in plaint and is to be treated beyond pleadings.
48. The question now gains pertinence is whether in the absence of the aforementioned statement, the claim of the plaintiff will not maintainable? In this background, the provisions of Section 20 CPC are required to be observed, which is as below:
"Section 20. - Other suits to be instituted where defendants reside or cause of action arises.
Subject to the limitations aforesaid, every suit shall be instituted in a Court within the local limits of Harsh International Vs. Coirfoam (India) Pvt. Ltd. Page No. 43 of 45 whose jurisdiction (a) the defendant, or each of the defendants where there are more than one, at the time of the commencement of the suit, actually and voluntarily resides, or carries on business, or personally works for gain; or
(b) any of the defendants, where there are more than one, at the time of the commencement of the suit, actually and voluntarily resides, or carries on business, or personally works for gain, provided that in such case either the leave of the Court is given, or the defendants who do not reside, or carry on business, or personally works for gain, as aforesaid, acquiesce in such institution; or
(c)The cause of action, wholly or in part, arises."
49. The law in respect to the aforesaid is discussed in detail in Patel Roadways, Bombay Vs. Prasad Trading Co., 1992 AIR 1514.
50. The glance over the facts suggest that plaintiff in the pleadings stated that the orders were received at its office from defendant consequent to the personal visits of Sh. Inderjeet Singh Khurana, which fact is not specifically probed in cross- examination. It is also not disputed specifically and disspled in cross-examination that all the payments were realized and settled at plaintiff's Delhi Office wherefrom the deliveries were also directed and the statements of account were managed and maintained, the contentions that Delhi Court does not hold a territorial jurisdiction under Section 20 (C) CPC where a part of cause of action is revealed to have arisen in the jurisdiction of this Court, the defendant was duty bound to bring cogent material by way of evidence to dispute the same. Further, defendant did not dispute the deliveries of chemical being made/ offered from Delhi. No dispute of supplies or payments of account statements having been settled at Delhi is proved, in which background the Harsh International Vs. Coirfoam (India) Pvt. Ltd. Page No. 44 of 45 assertions that present Court holds no part of jurisdiction are not established as contented by the defendant.
51. Hence, issue No. 1 of the present suit is decided in favour of plaintiff. Plaintiff is held entitled to the relief of recovery of Rs. 80,21,924/-.
52. The set-off filed by the defendant is dismissed.
53. The interest @ 18% p. a in terms of the invoices is awarded pendete lite till realization alongwith cost on account of Court fee @ Rs. 80,670/-. As counsel's fee certificate is not filed, an amount of Rs. 10,000/- is awarded towards the same.
54. Decree sheet be accordingly drawn.
55. File be consigned to record room after completion of the necessary formalities.
Announced in open Court (Nirja Bhatia)
today on 23rd March, 2024 District Judge
(Comm. Court) (Digital-07)
South-East, Saket Court, New Delhi
Harsh International Vs. Coirfoam (India) Pvt. Ltd. Page No. 45 of 45