* IN THE HIGH COURT OF DELHI AT NEW DELHI + RFA(OS) 5/1999 M/S. RAJ CYLINDER AND CONTAINERS PVT. LTD Appellant Through: Mr. [ENTITY], Advocate. Versus M/S.HINDUSTAN GENERAL INDUSTRIES AND ORS. Respondents Through: Mr. [ENTITY] with Mr. [ENTITY] and Mr. [ENTITY], Advocates. % Date of Decision : September 18, 2013 CORAM: HON'BLE MS. JUSTICE [ENTITY] HON'BLE MS. JUSTICE [ENTITY] JUDGMENT
: [ENTITY], J.
1. The Appellant seeks to assail the judgment of the learned Single Judge dated August 21, 1998 dismissing the suit of the Appellant.
2. The facts relevant for the decision of the Appeal may be delineated as follows. The Appellant, M/s. [ENTITY] and the Respondent No.1 (i.e. M/s. [ENTITY]) entered into a contract whereunder the Respondent No.1 was to supply to the Appellant machinery including a 300 tonne deep drawing press. The Respondent No.1 had written a letter No.UKM/1315 dated 26th October, 1979 to the Appellant giving quotation for the supply of Deep Drawing Mechanical Single Crank Press 300 M/T Capacity, Circle Cutting Machine, Trimming Machine, Joggling Machine, Fixtures for Hydrostatic Testing of LPG Cylinders and Shot Blasting Machine Cylinders mentioning the delivery period, terms of payment and taxes. The Appellant by the letter dated 2nd November, 1979 accepted the said offer. The price of each machine was mentioned therein. The delivery period was fixed at 3 months and the terms of payment, etc. were also mentioned. The Appellant in connection therewith deposited with Respondent No.1 a sum of ` 4,05,000/- by way of advance. The Respondent No.1 had earlier placed contract for the manufacture of the machine on M/s. Swadeshi Engineering Company, Mayapuri, New Delhi and supplied material worth ` 91,482.96 and made cash payment of ` 60,000/- to the said M/s. Swadeshi Engineering Company, in all, in the shape of material and cash ` 1,51,482.96. The Appellant had from time to time paid ` 4,05,000/- to the Respondent Company as advance starting from 2.11.1979 with cash payment of ` 30,000/-. The details of the payments as set out in paragraph 3 of the plaint are as under:-
"2-11-79 30,000.00 23.11.79 - Cheque No. 283902 NBI 15,000.00 28.11.79 - Cheque No. 283903 20,000.00 28.11.79 - Cheque No. 3905 30,000.00 2.1.80 - Cheque No. 3908 30,000.00 6.5.80 Cash 20,000.00 7.5.80 Cheque No.3910 20,000.00 8.5.80 Cash 20,000.00 12/19.5.80 Cash 12/5 50,000.00 19.5.80 Cash 19/5 20,000.00 23.5.80 Cheque 3911 10,000.00 10.8.80 Cash 35,000.00 10.11.80 Cash for Elec. Bill 17,000.00 9.12.80 Cheque 3914 100,000.00 417,000.00 Less received cash on 13.11.1980 12,000.00 405,000.00"
3. It is the case of the Appellant that out of the machines which were to be supplied to the Appellant by the Respondent No.1, one circuit cutting machine was bought by Respondent No.1 from Bombay costing ` 23,500/- which was delivered to the Appellant, [ENTITY]. Thus, the Respondent No.1 had supplied machinery of the value of ` 23,500/- to the Appellant and spent ` 1,51,482.96 as set out hereinabove, leaving a balance of ` 2,30,017.04 out of the advance paid by the Appellant to the Respondent No.1. The Appellant alleges that it is this balance which is payable by the Respondent Nos.1 to 3 to the Appellant along with interest @ 18% calculated from 20.12.1980 till the date of suit amounting to ` 1,24,200/-, in all ` 3,54,217.04. The Respondents having failed to pay this amount to the Appellant, the Appellant vide resolution of its Board of Directors dated 14.1.1984 decided to file the present suit through Shri [ENTITY], its Managing Director. According to the Appellant, the Respondent No.2, i.e. Shri [ENTITY] (since deceased through his legal heirs) and the Respondent No.3 (Shri [ENTITY]) had undertaken to secure the supply of the said machinery by the Respondent No.1 to the Appellant vide Agreement dated 24.1.1981 (Ex.PW6/1) entered into between the Respondent Nos.2 and 3 on the one hand and Shri [ENTITY] and Shri [ENTITY], i.e., Chairman and the Managing Director of the Respondent No.1/M/s. [ENTITY] on the other hand. The said Agreement related to the sale of shares of the Respondent No.1 Company by the latter to the former to the extent of 72% of the total shareholding of the Company. The said Agreement was duly signed by the Respondent Nos.2 and 3 who became directors of the Respondent No.1 Company by virtue of the said Agreement having purchased the majority shareholding. The clause of the said Agreement relied on by the Appellant for fastening liability upon the Respondent Nos.2 and 3 is, for the sake of reference, reproduced hereunder:-
"(vii) There is a pending contract from M/s. [ENTITY] & Containers (Pvt.) Ltd., for supply of machinery as per the copy of the order annexed. The contract shall be executed and supply made by the company to the said [ENTITY] as per the terms of the agreement and the supply to be completed as early as possible and with that in view Mr. [ENTITY] shall be entitled to supervise the execution of the said work through the authority of the company so that the work which has been completed to the extent of 80% is completely executed under the supervision and care to avoid any complaint on the part of M/s. [ENTITY] and Containers (Pvt.) Ltd. One Machine known as 300 tonne deep drawing press is being manufactured by M/s. Swadeshi Engg. Company, Mayapuri, New Delhi as per the order of M/s. Hindustan General Industries to be delivered to M/s. [ENTITY] and Containers (Pvt.) Ltd. The advance payment by [ENTITY] stands mentioned in the books of the accounts which may be in the neighbourhood of about 3/4 lakhs and the balance payment shall be payable by [ENTITY]. There will be no profit and loss to the company in this transaction."
4. The suit was contested by the Respondent No.1 Company as well as by the Respondent Nos.2 and 3 by filing written statements. A number of pleas in defence were raised by the Respondents, which were countered in the replications filed by the Appellant to their written statements. On the pleadings of the parties, the following issues were framed for consideration by the learned Single Judge:-
"1. Whether the suit is properly instituted?
2. Whether the suit is barred by limitation?
3. Whether there is any privity of contract between the plaintiff and defendants 2 & 3?
4. Whether the plaintiff entered into a contract with defendant No.1 for supply of machinery being 300 tonne Deep Drawing Press and other machinery on no profit no loss basis, and whether the plaintiff deposited with defendant No.1 a sum of Rs. 4,05,000/- as advance towards the same?
5. What were the terms of the agreement for supply of the aforesaid machinery to the plaintiff by defendant No.1?
6. What is the effect of agreement dated 24.1.1981 between Mr. [ENTITY] and Shri [ENTITY] on the one part and defendants 2 and 3 on the other part for transfer of shares of defendant No.1 vis-a-vis the agreement for sale of machinery in question?
7. Whether defendant No.1 had placed orders with Swadeshi Engineering Company, Maya Puri for manufacture of 300 tonne Deep Drawing Press to be supplied to the plaintiff and whether defendant No.1 paid a sum of Rs. 60,000/- and supplied certain machinery parts valued at Rs. 91,482.95 to Swadeshi Engineering Company and if so, to what effect?
8. Whether the plaintiff were entitled to take delivery of the aforesaid machinery direct from M/s Swadeshi Engineering Company and whether the plaintiff made any further payment to M/s Swadeshi Engineering Company and if so, to what effect?
9. Whether issues 7 & 8 can be decided in the absence of Swadeshi Engineering Company and for that matter is not Swadeshi Engineering Company a necessary party to the suit?
10. Whether the plaintiff received one circuit cutting machine of the value of Rs.23,500/- from defendant No.1 under the aforesaid contract and if so, to what effect?
11. Whether the plaintiff is entitled to a sum of Rs. 2,30,017.04 (Rs. 4,05,000/- minus Rs. 1,51,482.96 and minus Rs. 23,500/-) under the aforesaid contract with defendant No.1?
12. Whether the plaintiff is entitled to any interest and if so, at what rate and for what period?
13. Relief."
5. The present Appeal is confined to the findings rendered by the learned Single Judge on Issue Nos.1 to 6 and Issue Nos.11 to 13. Issue Nos.7, 8, 9 and 10 were deleted vide order dated August 4, 1998 on the statement made by learned counsel for the parties that it would not be necessary for this Court to give any findings on the said issues and as such the said issues be deleted.
6. We have heard Mr. [ENTITY], learned counsel for the Appellant and Mr. [ENTITY], learned counsel for the Respondent on the issues adjudicated by the learned Single Judge and pleas raised by the Appellant to challenge the findings thereon. We proceed to record our conclusions issue-wise as under:-
7. ISSUE NO.1 "Whether the suit is properly instituted?"
The Appellant disputes the findings rendered by the learned Single Judge on Issue No.1 relating to the proper institution of the suit and in order to prove that the suit has been properly instituted has taken us through the evidence of PW6, Mr. [ENTITY], who has deposed to the fact that the suit was instituted by Mr. [ENTITY], Managing Director of the Appellant Company, for the recovery of the amount payable by the Respondents by way of advance for the purchase of the machinery. He deposed that a resolution was passed by the Board of Directors on January 14, 1984 authorizing the filing of the suit, being Ex.PW6/3. The Appellant also relies upon the statement of PW7 Shri [ENTITY], which is to the same effect.
8. Learned counsel for the Respondents, on the other hand, contended that the suit has been instituted on the basis of resolution dated 14.1.1984 (Ex.PW6/3) of the Appellant Company which authorizes Mr. [ENTITY] for filing of a suit against the Respondent No.1/Company only. There is no mention in the resolution that he had been authorized to file a suit against the Respondent Nos.2 and 3. [SECTION] of the [ACT] requires that the suit on behalf of a Corporation can only be filed through a person duly authorized by it. In the absence of a resolution in favour of Shri [ENTITY] authorizing him to file a suit against the Respondent Nos.2 and 3, the present suit cannot be said to be a properly instituted suit against the Respondent Nos.2 and
3. Reliance in this context was placed on the decisions rendered in [PRECEDENT]; [PRECEDENT]; [PRECEDENT]; and [PRECEDENT].
9. A bare look at the Board resolution dated 14.1.1984 (Ex.PW6/3), in our opinion, shows that vide the said resolution Shri [ENTITY] was authorized to file suit for the recovery of the balance of the advance paid against M/s. [ENTITY], i.e., the Respondent No.1 Company. No authority was conferred on him authorizing him to file a suit against the Respondent Nos.2 and 3. The learned Single Judge was, therefore, right in holding that the present suit is not a properly instituted suit against the Respondent Nos.2 and 3.
10. ISSUE NO.3 "3. Whether there is any privity of contract between the plaintiff and defendants 2 & 3?"
Assailing the findings rendered by the learned Single Judge on Issue No.3 relating to privity of contract, learned counsel for the Appellant contended that the learned Single Judge had erred in holding that there was no privity of contract between the Appellant and the Respondent Nos.2 and 3. In this context, learned counsel heavily relied upon Clause (vii) of the Agreement dated 24th January, 1981 reproduced hereinabove and para 7 of the plaint wherein it is asserted that all the Defendants (Respondents) were jointly and severally liable for the suit amount as Defendant Nos.2 and 3 (Respondent Nos.2 and 3) had undertaken to secure the supply of the machinery to the Plaintiff (Appellant). This they had undertaken on behalf of the Defendant No.1 Company (Respondent No.1). In the circumstances, they were liable for the suit amount. To put it differently, it is urged for and on behalf of the Appellant that the Respondent Nos.2 and 3 had stood as guarantors for the proper execution of the contract entered into between the Appellant and the Respondent No.1 Company, being the directors of the Respondent No.1 and in the case of failure of the Respondent No.1 to return the balance advance payment made by the Appellant, the same can be recovered from the Respondent Nos.2 and 3.
11. Per contra, learned counsel for the Respondents submitted that the reliance placed upon the agreement dated 24th January, 1981 by the Appellant was wholly misplaced. The purport of said Agreement was that Shri [ENTITY], Shri [ENTITY] and certain others had sold their shareholding in the company to the Respondent Nos.2 and
3. It was a sale of shares simplicitor by an Agreement between the majority shareholders of the company with the Respondent Nos.2 and 3, to which the Respondent No.1 Company was not a signatory. The Respondent No.1 Company being a legal entity in its own right, the Appellant would not be entitled to claim any amount against the Respondent Nos.2 and 3 merely by virtue of their having purchased shares from the erstwhile shareholders. The Respondent Nos.2 and 3 were not even the directors of the company at the time when the Respondent No.1 had entered into a contract with the Appellant for the supply of machinery and had they been directors even then they could not have been held personally liable for the obligations of the company. Reliance in this context is placed by the learned counsel for the Respondents on a judgment of this Court reported in [PRECEDENT], [PRECEDENT], wherein it is held that in the absence of an averment in the plaint that the directors were guarantors for the amount claimed in the suit, liability cannot be fastened on the directors of a company. A company is an entity distinct from its directors and shareholders. In the absence of an instrument fastening liability, liability can be fastened on directors of a company only when malfeasance or misfeasance is established.
12. Reliance was also placed upon the following judgments to contend that there was no privity of contract between the Appellant and the Respondent Nos.2 and 3 and in the absence of an averment in the plaint that the Directors were being made liable in their capacity as guarantors no contractual liability can be fastened upon them:-
(i) [PRECEDENT].
(ii) [PRECEDENT].
13. It was urged that it is well settled since [PRECEDENT] that shareholders of the company are distinct from the company of which they hold shares, and this principle has been reiterated and re-adopted from time to time in a number of cases (See Mrs. [PRECEDENT], [PRECEDENT] and [PRECEDENT]).
14. A bare look at the Agreement Ex.PW6/1 shows that an Agreement between Shri [ENTITY], Chairman of Respondent No.1 Company and Shri [ENTITY], Managing Director of Respondent No.1 Company as the 'Vendors' [on their behalf and on behalf of their friends, relatives, other directors and associates, who are registered shareholders of Respondent No.1 Company] and Shri [ENTITY] and Shri [ENTITY], i.e., the Respondent Nos.2 and 3 as 'Vendees' was entered into on 24th January, 1981. It further shows that the said Shri [ENTITY] and Shri [ENTITY] and other shareholders sold majority of their shares through this Agreement in favour of the Respondent Nos.2 and 3. It was in their individual capacity that Shri [ENTITY] and Shri [ENTITY] entered into the said Agreement to sell their shares in the Respondent No.1 Company to the Respondent Nos.2 and 3. The Respondent No.1 Company admittedly was not a party to the said Agreement nor the Appellant, which is also a legal entity, was a party to the said Agreement. We, therefore, have no hesitation in affirming the finding of the learned Single Judge that there is no privity of contract between the Appellant and the Respondent Nos.2 and 3. It is clear from a bare reading of the Agreement dated 24.1.1981 that as on 24.1.1981, the Respondent Nos.2 and 3 did not hold any shares in the Respondent No.1. They were also not its Directors and were in fact complete strangers to Respondent No.1 and lacked any capacity to bind the Respondent No.1 in any manner. Furthermore, neither the Respondent No.1 nor the Appellant were parties to the Agreement. Clause (vii) of the Agreement, extracted above, also shows that no indemnity or guarantee was extended by the Respondent Nos.2 and 3. Thus, no such condition or obligation can be artificially read into the Agreement which was intrinsically an Agreement relating to transfer and sale of shares.
15. ISSUE NO.2 "Whether the suit is barred by limitation?"
The contention of the learned counsel for the Respondent No.1 is that the present suit is barred by limitation. According to him, [SECTION] of the [ACT] which provides that when a suit is filed for the balance of the money advanced in payment of goods to be delivered is applicable to the present case and the period of limitation would thus start running from the date when the goods ought to be delivered. Learned counsel for the Appellant, on the other hand, contends that the suit has been filed well within time on January 20, 1984, i.e., within three years from the date of the execution of the Agreement dated January 24, 1981 (Ex.PW6/1). As per him, [SECTION] of the [ACT] would apply and not [SECTION] of the said Act.
16. A look first at [SECTION] and [SECTION] of the [ACT], which read as under:-
[SECTION] Description of suit Period of limitation Time from which period begins to run
13. For the balance Three years When the goods of money advanced in ought to be delivered.
payment of goods to be delivered [SECTION] Description of suit Period of limitation Time from which period begins to run
113. Any suit for Three years When the right to sue which no period of accrues.
limitation is provided elsewhere in this Schedule
17. It is also contended by the Appellant's counsel that the last entry in the books of account of the Respondent No.1 in connection with the account of the Plaintiff is Ex.D12 (the entries being Ex.D3 to Ex.D12). The said entry is dated December 11, 1980, on which date payment of ` 1 Lac was made by the Appellant to the Respondent No.1. The said payment has been adverted to in para 3 of the plaint. The entry being in the nature of an acknowledgment, the suit is well within time. Finally, it is contended that letter dated January 23, 1981 (Ex.PW6/2) is also in the nature of an acknowledgment in that it acknowledges that an amount of ` 3,81,500/- was advanced by the Appellant to the Respondent No.1 Company.
18. The admitted case of the parties is that the Appellant placed the order on the Respondent No.1 vide letter dated November 2, 1979 (Ex.D1) which constitutes the contract between the parties. One of the stipulations of the said order was that the machines at serial Nos.1 to 6 in the order were to be supplied within three months from the date of the order, meaning thereby that the said machines were to be supplied by February 2, 1980. Thus, the period of limitation in the present case would commence running from February 2, 1980 and it came to an end on February 2, 1983. The present suit was filed on January 20, 1984 and thus by virtue of the provisions of [SECTION] is barred by time. We are unable to agree with the counsel for the Appellant that [SECTION] of the [ACT] would come to his rescue. It is trite that the said Article is a residuary Article which would come into operation only in those few cases where no limitation is provided in the Schedule under the [ACT]. This certainly is not a case of that nature.
19. Adverting next to the contention of learned counsel for the Appellant that the Respondent Company acknowledged its liability to supply the machinery vide Agreement dated January 24, 1981 and consequently the period of limitation would start running from the said date, we find this to be misconceived. The said Agreement is an Agreement for the sale and purchase of shares inter se the majority shareholders of the Company who were stakeholders to the extent of 72% of the shares of the Company to a new set of shareholders. The Company was not a party to the said Agreement and in fact was not even a confirming party to the Agreement. The Agreement was at no point of time endorsed by the Company either by passing a resolution or by incorporating the same in its Articles of Association and by no stretch can be taken to be an Agreement amounting to an acknowledgment of liability by the Respondent Company. The Company not being a party to the said Agreement, the question of acknowledgment by the Company does not arise and thus this document is of no avail to the Appellant.
20. As regards the reliance placed on the last entry in the books of account of the Respondent in connection with the account of the Appellant dated December 11, 1980, this entry too can be of no assistance to the Appellant. The suit was filed in January, 1984 and even if the entry of 9.12.1980 is taken into account the suit is barred by limitation.
21. Insofar as the letter dated January 23, 1981 written by Shri [ENTITY], who was then acting as Managing Director of the Respondent No.1 Company to the Appellant (Ex.PW6/2) is concerned wherein there is stated to be an acknowledgment that a sum of ` 3,81,500/- is due to the Appellant from the Respondent, the said letter has been rightly disbelieved by the learned Single Judge as fabricated by the Appellant in collusion with [ENTITY]. Suffice it to note that Shri [ENTITY], son of Shri [ENTITY], who was the author of the said letter and who was the Managing Director of the Respondent No.1 Company as on 23.1.1981, is the real brother of Shri [ENTITY], who is the Managing Director of the Appellant Company and who has instituted the present suit on behalf of the Appellant Company. Admittedly, on the very next day, i.e., on 24.1.1981, Shri [ENTITY] and Shri [ENTITY] sold their shareholding in the Respondent No.1 Company to third parties and thus the possibility of collusion between the Appellant Company and Shri [ENTITY] cannot be ruled out. Then again, admittedly the said letter was written on January 23, 1981 wherein Shri [ENTITY] stated that a sum of ` 3,81,500/- was due to the Appellant from the Respondent. However, on the next day in the Agreement dated January 24, 1981 (Ex.PW6/1), to which Shri [ENTITY] was a party, there is a reference to advance payment made by [ENTITY] (Appellant) to the Respondent No.1, which is reflected to be "in the neighbourhood of about ` 3/4 Lacs and the balance payment shall be payable by [ENTITY]" (Vide clause
(vii) of agreement dated 24.1.1981). The fact that the exact amount is not spelt out, as rightly observed by the learned Single Judge, also goes to show that letter dated 23rd January, 1981 was subsequently fabricated.
22. We accordingly affirm the findings of the learned Single Judge in respect of Issue No.2 and hold that the suit is barred by time.
"4. Whether the plaintiff entered into a contract with defendant No.1 for supply of machinery being 300 tonne Deep Drawing Press and other machinery on no profit no loss basis, and whether the plaintiff deposited with defendant No.1 a sum of Rs. 4,05,000/- as advance towards the same?"
"5. What were the terms of the agreement for supply of the aforesaid machinery to the plaintiff by defendant No.1?"
"6. What is the effect of agreement dated 24.1.1981 between Mr. [ENTITY] and Shri [ENTITY] on the one part and defendants 2 and 3 on the other part for transfer of shares of defendant No.1 vis-a-vis the agreement for sale of machinery in question?"
The substratum of the case of the Appellant is that the goods in question being machinery were to be supplied to the Appellant by the Respondent No.1 on no profit no loss basis as set out in the Agreement dated January 24, 1981 (PW6/1). In fact, the right of the Appellant to receive refund of the amounts advanced by him is inextricably tied to the assertion of the Appellant that the machines were to be supplied on no profit no loss basis. Significantly, however, the contract of sale dated 2.11.1979 Ex.D1, which enumerates the terms and conditions of sale, does not contain the said provision and there is no reference therein to the supply of machines on no profit no loss basis. The said contract, i.e., Ex.D1 is between the Appellant and the Respondent No.1 and it stands to reason that a subsequent Agreement entered into on 24th January, 1981 between persons who were not parties to the contract Ex.D1 cannot override the original contract (Ex.D1). The Agreement of 24th January, 1981 irrefutably was for the sale and purchase of shares, which shares were sold by the Ex-Directors of the Respondent No.1, namely, Shri [ENTITY] and Shri [ENTITY] to the Respondent Nos.2 and 3, who were non-shareholders. Hence, the recital in the said Agreement of no profit no loss basis is meaningless and irrelevant. The Respondent No.1 Company, it is stated at the risk of repetition, was not a party to the Agreement. Admittedly also, the Respondent No.1 Company did not pass any resolution adopting the said Agreement or in any manner endorsing the said Agreement. The terms and conditions of the said Agreement and in particular the term relating to the supply of machinery on no profit no loss basis were to the detriment of the Respondent No.1. The Respondent No.1 at no point of time agreed to the supply of machinery on no profit no loss basis to the Appellant, and thus the Agreement dated 24.1.1981 cannot be deemed to be binding on the Respondent No.1.
24. This brings us to the aspect of what were the terms of the Agreement for supply of machinery to the Appellant by the Respondent No.1. The Appellant in para 2 of the plaint has asserted that the Respondent No.1 after oral discussions had, on 26.10.1979, given the quotation for LPG cylinders plant/machinery and that this quotation was further followed by letter dated 2.8.1980 as the revised quotation, which was accepted by the Appellant. In the written statement filed by the Respondent No.1, it was denied that any revised quotation was received by it or that it had contracted to supply the machinery on no profit no loss basis. The Respondent No.1 pleaded that the quotation given by the Respondent No.1 on 26.10.1979 was accepted by the Appellant on 2.11.1979 vide Ex.D1. PW6 Mr. [ENTITY], in his cross-examination was unable to deny that Ex.D1 was the order placed by the Appellant on the Respondent No.1. Thus, there is no room for doubt that the terms of Agreement for the supply of machinery to the Appellant by the Respondent No.1 are governed by document Ex.D1. We, therefore, hold that the Appellant has failed to prove that the machine was to be supplied on terms other than those contained in document Ex.D1.
25. The only other aspect of the matter which remains to be considered is whether the Appellant deposited with the Respondent No.1 a sum of ` 4,05,000/-. It is the case of the Appellant that the Appellant had from time to time made payments to the Respondent No.1 as advance starting from 2.11.1979. The details of the payment are set out in para 3 of the plaint, which have been reproduced by us in para 2 (supra). Suffice it to state that the Appellant asserted and the Respondent No.1 denied the following payments purportedly made by the former to the latter:-
(i) 2.11.1979 ` 30,000/- (Cash) (ii) 7.5.1980 ` 20,000/- (Cheque) (iii) 10.8.1980 ` 35,000/- (Cash) (iv) 10.11.1980 ` 17,000/- (Cash)
The Appellant has also asserted that an amount of ` 12,000/- had been refunded by the Respondent No.1. This too has been denied by the Respondent No.1.
26. The Appellant in support of the case has produced the following documents:-
(i) Document marked 'A' dated 2.11.1979 being a photocopy of a receipt allegedly issued by PW-4 Mr. [ENTITY], Accountant of the Respondent No.1;
(ii) Receipt Ex.PW-4/3 dated 7.5.1980 for ` 20,000/-;
(iii) Receipt Ex.PW-4/2 dated 10.8.1980 for ` 35,000/-; and
(iv) Receipt Ex.PW-4/1 dated 10.11.1980 for ` 17,000/-.
27. The Respondents assert that the aforesaid documents, which are on the letterhead of the Respondent No.1 and bear the initials of Shri [ENTITY], the Personnel Officer of the Respondent No.1, have been fabricated by the Appellant sometime after Mr. [ENTITY], who was the Managing Director of the Respondent No.1, became a Director and Chairman of the Appellant on 6.2.1981. Mr. [ENTITY], the Managing Director of the Appellant is his younger brother. The executants of the receipts, namely, Mr. [ENTITY] (PW4) is a close relation of Mr. [ENTITY] and Mr. [ENTITY].
28. At the outset, we note that the evidence of PW4 Shri [ENTITY], who has proved the aforesaid receipts, has been disbelieved by the learned Single Judge and we think rightly so. We encapsulate the reasons for the rejection of the evidence of the said witness which weighed with the learned Single Judge and which have also found favour with us:-
(i) It has emerged in the statement of PW4 Shri [ENTITY] that the Respondent No.1 maintained proper receipt books containing serial numbers. The receipts Ex.PW4/1 to Ex.PW4/3 and Mark 'A' relating to the four disputed payments are admittedly not from the said receipt books and this creates serious doubt about the authenticity of the receipts.
(ii) Admittedly, the said receipts were typed at the residence of Shri [ENTITY], father of Shri [ENTITY] and Shri [ENTITY].
(iii) Shri [ENTITY] (PW4) candidly admitted his relationship with Shri [ENTITY] and Shri [ENTITY] and stated that his father (i.e. father of [ENTITY]) and Shri [ENTITY], father of Shri [ENTITY], are cousins. To be noted at this juncture that this fact is denied by PW6 Shri [ENTITY] in his statement made on oath.
(iv) Shri [ENTITY] (PW4) further admitted during the course of his cross-examination that in his capacity as Secretary of the Respondent No.1 Company, he did not ordinarily receive cash except in case of emergency. It is an admitted fact that all the disputed payments were in cash/bearer cheques.
(v) PW4 Shri [ENTITY] has been unable to show if he had issued similar receipts for any amount to any other person.
(vi) PW4 Shri [ENTITY] states that Shri [ENTITY] had given him the money in 1980 and asked him to issue receipts in the name of the Appellant. Shri [ENTITY], PW7 however states that he had paid the monies to Shri [ENTITY] in the presence of his father and got receipts issued from Shri [ENTITY]. The evidence of Shri [ENTITY] is thus in direct contrast to the evidence of Shri [ENTITY].
(vii) PW4 Shri [ENTITY] deposed that the amounts received by him vide receipts Ex.PW4/1 to Ex.PW4/3 might have been handed over by him to persons working in the accounts department and in this context he mentioned the names of Mr. [ENTITY], Mr. [ENTITY] and Mr. [ENTITY].
Mr. [ENTITY] appeared in the witness box as DW1 and stated that he invariably made an entry when he received any payment in the account books of the Respondent No.1 Company. Admittedly, there are no entries in the account books of the Respondent No.1 Company with regard to the payment of the disputed amounts.
(viii) Ex.PW4/3, which is the receipt dated May 7, 1980 with regard to payment of ` 20,000/- shows that the said amount was received vide cheque No.283910 dated May 7, 1980 drawn on the New Bank of India, Tolstoy Marg Branch, New Delhi, photocopy whereof is Ex.PW1/3. A look at Ex.PW1/3 shows that the said cheque was drawn in favour of self by Shri [ENTITY] and this fact is admitted by PW6 Shri [ENTITY].
(ix) As regards receipt Ex.PW4/2 dated August 10, 1980 for a sum of ` 35,000/-, admittedly the payment in respect of the same was received by the Respondent No.1 Company prior to February 6, 1981, on which date PW6 [ENTITY] states he became the Director of the Appellant Company. Admittedly also, all the alleged payments were made prior to the date of his becoming Chairman/Director of the Appellant Company. Hence, it stands to reason that he could not have made payments on behalf of the Appellant Company. Yet, PW2 Shri [ENTITY] has stated in his cross-examination that he was making the entries in the account books at the behest of Shri [ENTITY] as no payment was made in his (PW2's) presence.
(x) Ex.PW4/1 is the third receipt with regard to payment of ` 17,000/- in cash as is reflected in para 3 of the plaint. However, a look at the evidence of PW6 [ENTITY] shows that the said payment is alleged to have been made through a cheque vide Ex.PW1/1, which was issued by Shri [ENTITY], director of the Plaintiff/Appellant Company payable to self or the bearer and was got encashed by Shri [ENTITY] (PW6).
(xi) As regards the fourth payment of ` 30,000/- vide Mark 'A', the same cannot be read in evidence. Suffice it to note that the said payment has not been recorded in the account books of the Respondent No.1 Company nor it finds mention in the account of the Appellant in which other payments have been duly reflected.
29. From the aforesaid, we are of the view that the learned Single Judge rightly concluded that only a sum of ` 3,50,000/- only was received by the Respondent No.1 from the Appellant as against the sum of ` 4,05,000/- referred to in para 3 of the plaint.
30. We accordingly affirm the finding of the learned Single Judge on Issue Nos.4, 5 and 6.
"11. Whether the plaintiff is entitled to a sum of Rs. 2,30,017.04 (Rs. 4,05,000/- minus Rs. 1,51,482.96 and minus Rs. 23,500/-) under the aforesaid contract with defendant No.1?"
"12. Whether the plaintiff is entitled to any interest and if so, at what rate and for what period?"
"13. Relief."
In view of our findings rendered on Issues No.1 to 6, Issues Nos.11, 12 and 13 must inevitably be decided against the Appellant and in favour of the Respondents.
32. There is no merit in the appeal, which is accordingly dismissed.
[ENTITY] JUDGE [ENTITY] JUDGE September 18, 2013 km