Allowed

M/s Anadigi Instruments Pvt. Ltd., v. M/s. Industrial Sales

Telangana HC9 Sept 2011CCCA/191/2003

Case brief

AI extract

What is this about?

In this civil appeal, the first defendant appealed against a decree granting recovery of Rs.70,760 to the plaintiff for alleged unauthorized expenditures. The trial court found an oral agreement, but the High Court held the claim failed due to lack of cogent evidence, unauthenticated loose sheets, and absence of corresponding credit notes or acknowledgments for debit notes.

What did the court decide?

The suit in O.S. No. 1012 of 1986 is dismissed; no costs awarded to any party.

M/s Anadigi Instruments Pvt. Ltd., Vs… — Contract and Commercial Disputes | Telangana HC (2011)

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THE HON’BLE SRI JUSTICE B. CHANDRA KUMAR

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C.C.C.A No. 191 of 2003

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Judgment:

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In this appeal, the first defendant in the original suit is challenging the judgment and decree dated 30.12.2002 passed in O.S. No. 1012 of 1986 by the IV Senior Civil Judge, City Civil Court, Hyderabad, whereby and whereunder a decree has been passed for a sum of Rs.70,760-06 ps., with interest at 12% p.a., from the date of suit till the date of realisation.

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The parties hereinafter will be referred to as they are arrayed before the trial Court for the sake of convenience.

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The plaintiff is doing business in Television sets and Radios and are wholesale dealers for M/s. Bush India Limited, Bombay. The first defendant is a manufacturer of “Digiana” brand television sets in black and white and Colour. By mutual agreement, the plaintiff was appointed as the wholesale dealer for the first defendant to sell and market “Digiana” brand television sets in Tamil Nadu in November 1984. Having done business for some time, in August 1985 the first defendant requested the plaintiff to furnish bank guarantee for Rs.10,00,000/- and also a letter of undertaking stating that the plaintiff would be in need of 350 television sets per month from September 1985. Accordingly, the plaintiff furnished the bank guarantee for Rs.10,00,000/- from the Bank of Baroda, which is the second defendant in the suit. The bank guarantee will be enforceable in case of any default of payment by the plaintiff. The first defendant had also set-up a local office in Madras and the plaintiff was placing orders for goods through the local office and also on telephone by directly

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dealing with the first defendant.

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It is the case of the plaintiff that the first defendant requested the plaintiff to attend the work of advertisement and publicity on their behalf. On the advise of the first defendant and on their behalf, the plaintiff was meeting the expenditure for advertisement and publicity and debited the same to the first defendant’s account from time to time vide debit note Nos.522, 5039, 5030, 5032, 5033 and 5037. Thus, the plaintiff has spent a substantial sum of Rs.5,04,138-85 ps., towards advertisement and publicity. The further case of the plaintiff is that from November 1984 to July 1986 the plaintiff has incurred an expenditure to an extent of Rs.77,019-60 ps., and debited the same to the first defendant as per the debit note No.5031, dated 31.07.1986. The plaintiff claimed

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Rs.1,10,804-32 ps., towards the payment of local sales tax made by it and debited the same to the account vide debit note Nos.938 and 939, dated 31.03.1986. The plaintiff also claimed difference of amount towards reduction of price, vide debit note No.481, dated 10.06.1985 for an amount of Rs.5,000/- and Rs.61,200/- vide debit note No.521, dated 26.06.1986. The plaintiff also claimed an amount of Rs.45,15835 ps., towards debit note No.5002, dated 21.04.1986 and Rs.20,23816 ps., vide debit note No.5004, dated 17.05.1986 towards correction of variations in the bills.

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It is also the case of the plaintiff that the first defendant purchased some components required by them from M/s. Victor Multi Solder Private Limited for a sum of Rs.46,580-75 ps., and paid the said amount as per the advise of the first defendant and raised debit note No.934, dated 31.03.1986 for Rs.26,580-76 ps., and debit note No.935, dated 31.03.1986 for Rs.20,000/-, totaling to Rs.46,580-76 ps. The plaintiff also claimed an amount of Rs.19,050/- towards supply of

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television sets at concessional rates to M/s.Madhu Advertisement and few others and raised debit note Nos.676 and 677, dated 26.08.1985 and 799 dated 06.01.1986. The plaintiff also claimed Rs.43,987-50 ps., towards incentives given to the dealers vide debit note Nos.482, 535 and 5036, dated 10.06.1985, 26.08.1985 and 08.08.1986 respectively. The plaintiff also claimed to have issued a cheque for Rs.11,811/- at the request of the first defendant and raised a debit note No.5006, dated 17.05.1986. The plaintiff also claimed Rs.2,565/- vide debit note No.5008, dated 17.05.1986 towards the payment of carton charges.

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The further case of the plaintiff is that the plaintiff was remitting the amounts towards cost of the television sets supplied after taking into account the debit notes and a substantial sum of Rs.9,37,615-58 ps., was spent for the benefit of the first defendant. The further case of the plaintiff is that instead of settling the accounts and closing the business the first defendant adopted devious means with ulterior motive and it is also the case of the plaintiff that at the end of July 1986 when the first defendant wanted to severe the connections with the plaintiff, the plaintiff has paid Rs.4.15 lakhs in the presence of one V.V. Subrahmanyam and Srinivasan by bank drafts on 30^th and 31^st July 1986 and 6^th and 8^th August 1986 hoping to receive bank guarantee cancelled. However, the first defendant resorted to illegal means and demanded the second defendant bank for payment of Rs.20,00,000/on account of the bank guarantee given by the plaintiff. The plaintiff’s specific case is that the defendants are liable to pay Rs.70,760-06 ps., with interest at 18% p.a., from 08.08.1996 as per commercial practice.

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The first defendant filed a detailed written statement. The specific case of the first defendant is that they never entered into any written or oral agreement with the plaintiff to undertake the work of

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advertisement and publicity. The specific case of the defendant is that the plaintiff failed to pay the huge amount of Rs.23,00,000/- as per the terms and conditions of the letter of undertaking and therefore the defendant has every right to invoke the bank guarantee for Rs.10,00,000/- for the default committed by the plaintiff in not making payment of TV sets received by it. Various amounts claimed by the plaintiff as averred in the plaint have been specifically denied by the defendant. It is also denied that there was only a sum of Rs.4,17,000/is due by the end of July 1986 and that the first defendant agreed to cancel and return the bank guarantee in the presence of the persons as stated by the plaintiff.

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The trial Court framed the following issues.

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1. Whether the plaintiff is entitled to recover the suit amount from defendant No.1?

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2. Whether the plaintiff is entitled to perpetual injunction against defendant No.2?

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3. Whether the defendant No.1 is entitled to compensatory costs as claimed?

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4. To what relief.

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On behalf of the plaintiff, PWs.1 to 3 were examined and Exs.A1 to A135 were marked and on behalf of the defendants, DW.1 was examined and Exs.B1 to B10 were marked.

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The lower Court, on consideration of the entire oral and documentary evidence, came to the conclusion that the plaintiff has substantiated its contention that they have spent nearly Rs.5,00,000/for advertisement and publicity of T.V sets of the first defendant and the circumstances show that there was an oral agreement between the plaintiff and the first defendant and the same is enforceable in law. The lower Court also came to the conclusion that the evidence on record proves that the plaintiff has undertaken the work of

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advertisement on behalf of the first defendant and accordingly decreed the suit.

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Though an issue was framed as to whether the plaintiff was entitled to perpetual injunction against defendant No.2, since the suit is decreed only for Rs.70,760-06 ps., there is no need to refer the other averments of the parties with regard to bank guarantee.

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The only point that arises for consideration is whether the plaintiff is entitled for recovery of the suit amount from defendant No.1?

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The learned counsel for the appellant/defendant No.1 submitted that the lower Court has failed to consider that the plaintiff has not placed any oral and documentary evidence to show that there was an agreement between the parties and that the plaintiff was directed to incur expenditure for advertisement. The main submission of the learned counsel for the appellant is that in case of debit notes, there must exist a corresponding credit note from the supplier in addition to the acknowledgment of the debit note and in the absence of any such acknowledgment and credit note, the Court cannot draw a conclusion on the existence of any contract to incur such expenditure. It is further submitted that the business transactions between the plaintiff and the first defendant came to an end and their relations were strained about six months before institution of the suit and therefore the possibility of creating documents for the purpose of the suit was not taken into account by the lower Court. It is also submitted that the original ledger or day book was not produced in support of the claim of the plaintiff. It is further submitted that most of the documents produced by the plaintiff are nothing but entries made on a white sheet for the crucial period and the said documents have not been proved by producing original ledger or day book which are being maintained in the regular course of business transaction. Relying on the judgment of this Court

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in M. Krishna Rao v. M.L. Narasikha Rao^[1] , it is submitted that loose account sheets cannot be treated as books of account kept in regular course of business. It is further submitted that when the plaintiff himself claimed that he has cleared the entire amount due to the first defendant by paying Rs.4.15 lakhs and if really any such amounts are due by the first defendant, the plaintiff would have certainly withheld the amounts due to him before making final payment. It is also submitted that the evidence of PW.3 that he had received a sum of Rs.1,28,000/- towards advertisement charges from PW.1 does not pertain to any advertisement ordered by the first defendant and the same does not bind the first defendant and any payments made by PW.1 without the consent of the first defendant does not bind the first defendant. It is also submitted that the plaintiff cannot be permitted to adduce any evidence contrary to Ex.A1 in view of the provisions of Section 91 of the Evidence Act. It is also submitted that the lower Court has not considered several contradictions in the evidence of PWs.1 to 3. It is submitted that the findings of the lower Court are not based on evidence. It is also submitted that there is no evidence to show that Ex.A4 was served on the first defendant and that there is no signature of the first defendant in the debit notes.

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The learned counsel for the respondent/plaintiff submitted that the first defendant himself admitted about the payment of sales tax and that the entries have been made basing on the original ledger and day book and that the entries of the day book and entries made in Ex.A24 are tallied by the Court Officer and certified to be true copy and therefore the statement of accounts in Ex.A24 cannot be doubted. It is further submitted that the evidence on record clinchingly establishes that the first defendant from time to time gave instructions to the plaintiff to spend amount for advertisement and to make payments to various

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persons and as per the directions of the first defendant only the plaintiff made payments and issued debit notes from time to time. It is further submitted that after settlement of accounts, the defendants agreed to receive Rs.4.15 lakhs, but however with mala fide intention tried to invoke the bank guarantee and that the plaintiff had verified all the accounts and claimed the amount and the claim of the plaintiff is based on valid vouchers and the payments made by the plaintiff to various parties under valid receipts and that all those transactions have been entered into account books and the lower Court has rightly decreed the suit.

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Learned counsel for the appellant further submitted that no issue with regard to “whether the plaintiff is entitled for cash discount?” was framed. On the other hand, learned counsel for the respondent submitted that omission to frame an issue as required under Order 14 Rule 1 CPC would not vitiate the trial in a suit where the parties went to trial fully knowing the rival case and led evidence in support of their respective contentions.

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Learned counsel for the respondent has relied on a decision reported in R. Puthunainar Alhithan v. P.H. Pandian^[2] , wherein the Apex Court, while dealing with an election petition, has discussed certain principles with regard to appreciation of evidence and it was held as follows.

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“Section 3 of the Evidence Act provides that a fact is said to be "proved" when, after considering the matters before it, the Court either believes it to exist, or consider its existence so probable that a prudent man ought, under the circumstance of the particular case, to act upon the supposition that it exists; a fact is said to be "disproved" when, after considering the matter before it, the Court either believes that it does not exist, or considers its non-existence so probable that a prudent man ought, under the circumstances

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of the particular case, to act upon the supposition that it does not exist; a fact is said to be "not proved" when it is neither proved nor disproved. Therefore, the Court, after considering the evidence before it, either believes the fact to exist or consider its existence so probable as a prudent man ought, under the circumstances available on the facts in the case on hand, to act upon the supposition that the existence of the fact is so probable that a Court can act upon that evidence.”

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It was further held as follows.

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“that to draw an inference that a fact in dispute has been established, there must exist, on record, some direct material facts or circumstances from which such an inference could be drawn. The standard of proof required cannot be put in a strait-jacket formula. No mathematical formula can be laid on the degree of proof.”

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There is no dispute with regard to the principles laid down in the above said decision. It is also not in dispute that where the parties went to trial fully knowing the rival case and led evidence in support of their respective contentions and to refute the contentions of the other side, omission to frame an issue as required under Order 14 Rule 1 CPC would not vitiate the trial. Therefore, there is no dispute with regard to the principles laid down in the decisions relied on by the learned counsel for the respondent reported in Kannan (Dead) by LRs v. V.S. Pandurangam (Dead) by LRs^[3] , Sayeda Akhtar v. Abdul Ahad^[4] , and in T. Krishna Goud v. Sabiha Kamaluddin^[5] .

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Coming to the facts of this case, it is not in dispute that the first defendant is the manufacturer of “Digiana” brand television sets and that the plaintiff who is also doing business in television sets had entered into an agreement with the first defendant to sell and market the said brand television sets in Tamilnadu in November 1984. It is also not in dispute that the plaintiff has given an undertaking for

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purchase of TV sets as in Ex.A1 and subsequently furnished bank guarantee for Rs.10,00,000/- for the purpose of performance of the terms and conditions of Ex.A1. Ex.A2 is the bank guarantee furnished by the bank to the first defendant on behalf of the plaintiff. It appears that from 1984 to 1986 the parties did the business and that the main dispute arose when the first defendant claimed that an outstanding amount of Rs.23,00,000/- is payable by the plaintiff by August 1986 and made attempts to invoke the bank guarantee. The specific case of the plaintiff is that as per the oral instructions of the first defendant, the plaintiff had spent amount towards advertisement, sale incentives etc. Whereas, the specific case of the first defendant is that there is no such agreement or directions to the plaintiff to incur expenditure towards advertisement.

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As seen from the plaint averments itself the specific case of the plaintiff is that when the first defendant wanted to severe connections with the plaintiff, the plaintiff requested for return of the bank guarantee and finalization of the accounts and at the end of July 1986 an amount of Rs.4.15 lakhs was paid to the first defendant and the first defendant agreed to cancel and return the bank guarantee on payment of the said amount and that the plaintiff in the presence of V.V. Subrahmanyam of Vahini Radio Electricals and Srinivasan of T.V. Electronics, Madras, who are also dealers, paid the said amount by bank drafts on 30^th and 31^st July 1986 and 6^th and 8^th August 1986. Admittedly, the dispute arose when subsequently the first defendant made a demand for payment of Rs.10,00,000/- on account of bank guarantee. Admittedly, all the claims made by the plaintiff are pertain to the period prior to 31^st July 1986. If that is the case the plaintiff failed to explain as to how still an amount of Rs.70,760-06 ps., was due from the first defendant when they have finalized their accounts and when the plaintiff paid an

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amount of Rs.4.15 lakhs to the first defendant. The lower Court seems to have not considered this aspect in proper perspective. Of course, the first defendant did not accept that they have received an amount of Rs.4.15 lakhs after finalization of the accounts. This circumstance creates a doubt as to whether the claims of the plaintiff are genuine or not. Admittedly, the suit has been filed on 04^th September 1986 and it appears that the differences between the parties arose at least two or three months prior to the date of filing of the suit. Therefore, the possibility of creating loose sheets of account books cannot be ruled out. Admittedly, Ex.A25 contains two types of sheets. The first four pages are with rows and other pages are loose sheets. So in view of the decision relied on by the learned counsel for the appellant in M. Krishna Rao v. M.L. Narasikha Rao (1 supra), much importance need not be given to these loose sheets, though there is an endorsement of the Court Officer that they were compared with the original accounts. There is no explanation as to why the loose sheets have been added. It is true that as per Section 34 of the Indian Evidence Act, entries in the books of account which are kept in the regular course of business are relevant, but when loose paper sheets are filed, the same cannot be treated as part of books of account.

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As seen from Ex.A18, the Asian Publicities informed the first defendant that they have received certain amounts vide different cheques from the plaintiff on behalf of the first defendant and credited to the account of the first defendant. When the first defendant (DW.1) was questioned about the same, he replied that he is not aware whether Ex.A18 was addressed by the Asian Publicities. The specific case of the first defendant is that they were directly placing orders for advertisement and paying amounts to the advertisers. Ex.A3 also reveals that Victor Multi Core Solder Pvt. Ltd., addressed a letter

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informing the first defendant that they have received demand draft vide No.861645, dated 26.08.1985 from the first defendant and credited the same to their account. With reference to the Bill No.56/TNMI/122, dated 02.11.1985, DW.1 stated that he does not remember whether the bill pertains to his firm. However, the number shown in the statement of accounts at entry dated 02.11.1985 is not tallying with the number of the bill as referred above. Thus, a reading of the evidence of DW.1 reveals that except the payments towards the sales tax and except his admission that he has received legal notice under Ex.A86 and he does not remember whether he has given reply to the same or not, nothing has been elicited in the evidence of DW.1 to discredit the contentions of the first defendant.

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A reading of the entire evidence gives an impression that the plaintiff has not furnished the copies of statement of debit notes for various payments said to have been made by them on the account of the first defendant company. The plaintiff claims that under Ex.A3 they have paid some amounts to Victor Multi Core Solder Pvt. Ltd., and Ex.A4 is the statement of debit notes. Admittedly, copy of Ex.A4 was not sent to the first defendant. Moreover, PW.1 admitted that Ex.A4 statement was prepared just prior to the filing of the suit. Ex.A20 is the office copy of debit note dated 08.08.1986 for Rs.42,898-70 ps., claiming to be the advertisement amount given to various advertisement dealers. Ex.A24 is the copy of statement of account. Several entries made in Ex.A4 are not tallying with the entries made in Ex.A24. PW.1 admitted that he has not served copy of Ex.A24 on the first defendant. PW.1 claims that there are number of letters from the first defendant requesting to pay the amount on its behalf. He has admitted that he has not filed any such letters. Ex.A29 is the reminder from Madhu Advertisement to the first defendant with a copy marked to the plaintiff.

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He has also admitted that copy of Ex.A29 is not served on the first defendant. PW.1 also admitted that he has not filed any document to show the contract between the first defendant and Asian Publicities in respect of Exs.A18 and A32. Ex.A18 is the certificate issued by the Asian Publicities and Ex.A32 is also a receipt of the Asian Publicities for the payments said to have been made by the plaintiff on behalf of the first defendant. PW.1 has also admitted that the copies of Exs.A67 to A70, which are the letters said to have been received from Swamy Publicity Service, are not served on the first defendant. The plaintiff claims that Exs.A89 and 90 are the letters of Southern Railway for display of hoardings. However, PW.1 admitted that Exs.A89 and 90 are not addressed to the first defendant. Of course, the recitals of Ex.A90 go to show that the copy of the same is marked to the first defendant. PW.1 has also admitted that he has not filed any credit notes of the first defendant and that he has not insisted credit notes for Exs.A5 to A9, A11, A12, A14, A16, A17, A20 and A22.

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I have also gone through the evidence of PWs.2 and 3. It appears that PWs.2 and 3 have received certain amounts from the plaintiff for advertisement. The evidence of PW.2 shows that there is settlement between the parties and that the plaintiff paid an amount of Rs.4.15 lakhs to the first defendant in his presence and asked to discharge the bank guarantee. PW.2 also admitted that in case of increase in business both the plaintiff and defendant would get benefit. Therefore, it appears that the advertisement would benefit the supplier as well as the dealer. The evidence of PW.3 reveals that the advertisements were booked in the name of the first defendant as per the oral instructions and that when he asked the first defendant he directed him to approach PW.1 for payment and in turn he approached PW.1 and received an amount of

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Rs.1,28,000/-. During the cross-examination, PW.3 admitted that there is no written order and based on faith only he did the advertisement work for the first defendant. He claims that he had sent the original of Ex.A29 to the first defendant under certificate of posting. But, subsequently, he admitted that it was written on Ex.A29 that it was sent by registered post. Ex.A29 is the reminder letter said to have been sent to the first defendant marking copy of the same to the plaintiff.

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It is the case of the first defendant that they themselves ordered advertisement with several agencies and they do not remember the names of the advertisers with whom orders were placed. In view of these facts and circumstances, though it appears that there were some transactions between the parties with regard to advertisement and the first defendant is also a party to those transactions, but on that account itself the version of the plaintiff cannot be accepted in toto. As discussed above, when the plaintiff, admittedly, paid an amount of Rs.4.15 lakhs to the first defendant towards final settlement of accounts and when he did not make these claims at the time of paying Rs.4.15 lakhs to the first defendant when he had an opportunity to deduct the amounts due from the first defendant and to pay the remaining amount, the subsequent claims without cogent evidence cannot be accepted.

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Though a reading of the entire material gives an impression that certain payments seems to have been made by the plaintiff as per the instructions of the first defendant, but it is clear that copies of several debit notes were not furnished to the first defendant. It appears that in case of debit note, there exists a corresponding credit note from the supplier. Moreover, there is no acknowledgment of several debit notes by the first defendant. In the absence of any such acknowledgment or credit note, it appears that the lower Court erred in believing the said

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debit notes. Though the version of the first defendant that he never instructed the plaintiff to pay any amounts to the advertisers or to the sales tax department cannot be believed, but the debit notes on which the plaintiff is basing its claim cannot be relied upon unless the copies of the same have been served on the first defendant or acknowledgment showing the service of debit notes filed or corresponding credit notes are made available to the Court. In view of the above discussion, I hold that the plaintiff has failed to prove its case and the suit is liable to be dismissed.

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Accordingly, the appeal stands allowed. Consequently, the suit in O.S. No. 1012 of 1986 on the file of the IV Senior Civil Judge, City Civil Court, Hyderabad, is dismissed. However, in the circumstances, no costs.

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B. CHANDRA KUMAR, J.

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Date: 09^th September 2011 Nsr

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[1] AIR 2003 A.P. 498

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