IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED :: 21-07-2008 CORAM THE HONOURABLE MR.JUSTICE V.DHANAPALAN APPEAL SUIT No.29 of 1992 International Steel House, D-29, Industrial Estate, Ambattur, Madras 600 058. ... Appellant/Defendant -vs- 1. Tamil Nadu Steels Limited, rep. by its Managing Director, Sri Ashok Kumar Gupta, Arakonnam-4. 2. The Official Liquidator, High Court, Madras. ... Respondents/Plaintiffs (R2 impleaded as party or respondent vide order of court dt.28.11.06 made in CMP 1446/06). Appeal filed under Section 96 of the Code of Civil Procedure praying to set aside the judgment and decree dated 21.08.1989 made in O.S.No.128 of 1986 on the file of the Subordinate Judge, Poonamallee. For Appellant : Mr.M.V.Venkataseshan For Respondents : Mr.V.Narayanasamy J U D G M E N T Aggrieved over the judgment and decree, dated 21.08.1989, made in O.S.No.128 of 1986 on the file of the Subordinate Judge, Poonamallee, the defendant has filed this appeal. 2. The case of the first respondent/ plaintiff is that, in due course of business, at the instance of the appellant/defendant, they had supplied 28.230 tonnes of carbon steel rods to the appellant under four invoices, dated 30.06.1983, 16.08.1983, 16.09.1984 and 26.08.1984 under direct credit; the appellant failed and neglected to pay the outstanding due under the aforesaid four bills to the tune of Rs.1,83,818.80 as per the statement of accounts, after crediting a https://hcservices.ecourts.gov.in/hcservices/ sum of Rs.24,000/- in respect of Invoice No.6358; the first respondent sent a reminder dated 05.06.1985 to the appellant giving the details of the bills and the amounts due thereunder; at the request of the appellant, they again sent a letter dated 19.06.1985 furnishing a complete statement of accounts showing the outstanding at Rs.1,83,818.80; since the appellant failed to pay the dues despite their reminder and letter, the first respondent caused Advocate's Notice dated 16.11.1985 on the appellant; having no response from the appellant, finding no other alternative, the first respondent instituted a suit in O.S.No.128 of 1986 for a direction to the appellant to pay them the outstanding amount of Rs.1,83,818.80 together with interest thereon at the rate of 18% per annum till the date of full realisation. 3. In the Written Statement, the appellant has stated that at a material point of time, when the first respondent was liable to pay to the appellant's sister concern viz., M/s.Metro Steel Rolling Mills, monies sufficient to cover the claim under the first two bills payable by the appellant, after due discussion and concurrence with the officials of the respective companies, the first respondent had appropriated the said monies in the hands of the appellant, which were due and payable to Metro Steel Rolling Mills towards the price payable under the two bills referred to by the first respondent in the plaint; the said arrangement was confirmed by the first respondent in letter dated 17.02.1984 addressed to M/s.Metro Steel Rolling Mills and it was further confirmed by their Accounts Department in letter dated 30.05.1985, according to which the amount due was not inclusive of the amount due under the first two bills. 3.1. According to the appellant, the materials supplied by the first respondent were quite different and far inferior in quality and hence they sent a telegram complaining about the poor quality of the materials supplied and seeking inspection of the same; they also sent a letter dated 11.10.1984, detailing the defects of the materials; in response to the complaint, the first respondent arranged inspection on 23.11.1984 and took sample from the material for analysis and on 11.12.1984, the first respondent advised the appellant to use the materials, as the carbon contents therein were not likely to affect; since the manufactured goods with the materials, namely, the white bars were rejected by their customers as of poor quality due to the defective raw materials supplied by the first respondent, the appellant made a part payment for a sum of Rs.24,000/- to the first respondent towards the used raw materials; the unused raw materials and refused raw materials were converted into end product and are all lying in the godown in spite of several requests made by the appellant for removal of the same and, therefore, they are not liable to pay the total price of Rs.87,968.80 towards 3rd and 4th bills. https://hcservices.ecourts.gov.in/hcservices/ 3.2. It is the further submission of the appellant that in any event when there is no contract for payment of interest charges on the price of the materials supplied, they are not liable to pay the interest charges. Therefore, they prayed for dismissal of the suit and for a direction to the first respondent to pay the appellant a sum of Rs.2,30,907.00 towards the defective raw materials. 4. The Trial Court, after analysing the material records and considering the facts and circumstances of the case, decreed the suit in favour of the first respondent, directing the appellant to pay the first respondent a sum of Rs.2,67,074.22 along with interest at the rate of 18% per cent per annum on the principal amount of Rs.1,83,818.00 from the date of filing of the suit till the date of realisation and also to pay a sum of Rs.23,026.75 as costs. 5. Learned counsel for the appellant would contend that the trial Court has erred in holding that the appellant is liable to pay the amount due under Exs.A1 and Ex.A2, Bills and it has also erred in assuming that Metro Steel Rolling Mills cannot receive monies from its customers directly and only the Canara Bank is entitled to receive all the payments made to Metro Steel Rolling Mills. He would further contend that the Lower Court has totally ignored the evidence of P.W.1, wherein he admitted in unambiguous terms that they were aware of the discounting facility the Metro Steel Rolling Mills had with Canara Bank and they refused to oblige Canara Bank in making payments to Canara Bank by paying to Metro Steel Rolling Mills and it ought to have held that the conduct of the first respondent in agreeing to adjust the money payable under Exs.A1 and A2 with the account of Metro Steel Rolling Mills would amount to accord and satisfaction of that contract and, therefore, the first respondent is not entitled to claim that amount from the appellant. 6. The mainstay of the learned counsel for the appellant is that when the first respondent has claimed only the amounts payable under Exs.A3 and A4, the trial Court ought to have held that the appellant is not liable to pay the amounts under Exs.A-1 and A-2. It is also his strenuous contention that the trial Court ought to have held that the first respondent is not entitled to claim the amounts due under Exs.A3 and A4, inasmuch as the materials supplied by the first respondent are defective, thereby causing loss to the appellant. Accordingly, he prayed for setting aside the judgment and decree of the trial Court, allowing the appeal. 7. In support of his contentions, learned counsel for the appellant has relied on the following decisions : (i) Machander vs. The State of Hyderabad, 1956 (1) MLJ 25 SC: https://hcservices.ecourts.gov.in/hcservices/ “4. ... We are not prepared to keep persons who are on trial for their lives under indefinite suspense because trial Judges omit to do their duty. Justice is not one- sided. It has many facets and we have to draw a nice balance between conflicting rights and duties. While it is incumbent on us to see that the guilty do not escape, it is even more necessary to see that persons accused of crime are not indefinitely harassed. They must be given a fair and impartial trial and while every reasonable latitude must be given to those concerned with the detection of crime and entrusted with the administration of justice, limits must be placed on the lengths to which they may go. Except in clear cases of guilt, where the error is purely technical, the forces that are arrayed against the accused should no more be permitted in Special Appeal to repair the effects of their bungling than an accused should be permitted to repair gaps in his defence which he could and ought to have made good in the lower Courts. The scales of justice must be kept on an even balance whether for the accused or against him, whether in favour of the State or not; and one broad rule must apply in all cases. ... “ (ii) K.Rajagopalan vs. Tamil Nadu Public Service Commission, 1978 TNLJ 51 : “... The fraud would vitiate every action and no rights will flow from out of such fraudulent actions. I am of the view that no exception should be taken to the impugned order.” (iii) B.Suresh Chand vs. State of Tamil Nadu, Chennai and another, 2006 (4) L.W. 409, Full Bench of this Court : “29. A reading of the above provisions show that the party must plead all material facts on which he means to rely at the trial. If any one of the material facts is omitted, the statement of claim is bad and it would mean no pleading and no cause of action for the suit. If material facts are not pleaded, a Court cannot permit evidence to be led. In Udhav Singh vs. Madhav Rao Scindia, 1977 (1) SCC 511, the Supreme Court has defined the expression “material facts” in the following words : “All the primary facts which must be proved at the trial by a party to establish the existence of a cause of action or his defence are material facts”.” https://hcservices.ecourts.gov.in/hcservices/ 8. In response, learned counsel for the first respondent has submitted that the appellant has failed to pay the dues to the first respondent and the submissions made by the appellant in his written statement that the first respondent supplied defective raw materials is false. According to the learned counsel, the Court below, after analysing all the materials, has rightly held in favour of the first respondent that the appellant is bound to pay the balance amount to the first respondent and, as such, the appeal is liable to be dismissed. 9. I have heard the learned counsel for the parties and also gone through the records. 10. It is not disputed that first respondent has supplied 28.230 tonnes of carbon steel rods to the appellant under four invoices Exs.A-1 to A-4, dated 30.06.1983, 16.08.1983, 16.09.1984 and 26.08.1984. But, the dispute is only with regard to payment thereof. According to the first respondent, a total sum of Rs.1,83,818.80 is due from the appellant against the four invoices. However, the case of the appellant is that the amount due under the first two invoices to the tune of Rs.1,19,850/- is adjusted by the first respondent in the account of Metro Steel Rolling Mills, which is a sister concern of the appellant, and the amount due under third and fourth invoices is not liable to be paid, as the material supplied by the first respondent is of inferior quality. 11. At this juncture, let us now examine whether the appellant is liable to pay the amount as claimed by the first respondent under the four invoices, namely, Exs.A-1 to A-4. 12. Ex.B-1 is the letter sent by the first respondent to Metro Steel Rolling Mills, which a sister concern of the appellant. In the said letter, the first respondent has stated that an amount of Rs.1,19,850/- is due from the appellant for quite a long time towards the bills Exs.A-1 and A-2 for supply of 19.975 tonnes of special steel rounds. It is also stated therein that as per the discussions they had with Mr.Subramaniam and Mr.Rajagopalan of the sister concerns of the appellant, they agreed that the conversion bills of Metro Steel Rolling Mills to the tune of Rs.1,19,850/- be adjusted against the appellant's outstanding amount. Accordingly, they adjusted the bills to the amount of Rs.82,406.24 and after adjusting the said amount of Rs.82,406.24, a balance of Rs.37,273.76 is still pending against the appellant. The letter also goes to the effect that the balance would be adjusted in the future conversion bills of Metro Steel Rolling Mills. That apart, P.W.1, who is the Sales Officer of the first respondent company, in his evidence, has admitted that the amount of Rs.1,19,850/- has been adjusted in the amount that has to be paid by the first respondent to Metro Steels. https://hcservices.ecourts.gov.in/hcservices/ 13. Exs.B-3, B-4, and B-5 are the letters sent by the first respondent to the appellant much later to the last transaction, as per which the amount due is only Rs.63,968.80 ps. Under Ex.B-6, which is also a letter sent by the first respondent to the appellant, the amount due from the appellant to the first respondent is only Rs.87,968.80, which is the amount due under the bills Ex.A-3 for a sum of Rs.36,375/- and A-4 for Rs.51,593.80, of which, even according to the first respondent, a sum of Rs.24,000/- was paid by the appellant, as could be acknowledged in Ex.B-2, dated 15.09.1984, thereby the amount remained due is only Rs.63,968.80. The said letter, Ex.B-6, is dated 30.05.1985. Further, even as per the plaint, the last bill is dated 16.09.1984, which shows that there are no transactions between the parties after 16.09.1984. Therefore, when the first respondent has claimed only the amounts payable under Exs.A-3 and A-4, it would prove that the amounts payable under Exs.A-1 and A-2 are adjusted and there did not exist any due out of the first two bills. This Court is at a loss to understand as to how the first respondent is entitled to claim the amounts under the first two bills, when the said amounts are already set off. Therefore, the approach of the trial Court, in holding that the appellant is liable to pay the amounts under Exs.A-1 and A-2, is to be highly deprecated. 14. Coming to the amounts claimed under Exs.A-3 and A-4, the contention of the learned counsel for the appellant is that the appellant is not liable to pay the same inasmuch as the materials sent are defective and causing loss to the appellant. 15. In this context, it is to be stated that in Exs.A-8 and A-9, Sale Orders, there is a specific condition that the goods should be taken only after inspection and no rejections would be accepted after the goods are despatched, irrespective of the reasons for such rejections, which fact is admitted by the first respondent in his evidence. However, as per the request made by the appellant, the first respondent deputed an inspector to the factory of the appellant and he, after an analysis of the materials, submitted a report stating that the materials supplied are well within the specification, which is not controverted to by the appellant, and, thereafter, the appellant utilised the said materials. The appellant, having utilised the material, cannot now take a different stand, stating that the materials supplied by the first respondent are of inferior quality and that the products manufactured by the appellant are rejected by the customers. D.W.1, in his evidence, has also stated that there is no proof of the products having been rejected by the customers. The appellant, in the written statement, has also claimed that they incurred a loss of Rs.2,30,907/- besides the part payment of Rs.24,000/-. If the appellant has really incurred such a loss, nothing prevented him from filing a suit or cross-objection against the first respondent, claiming damages, which is, admittedly, https://hcservices.ecourts.gov.in/hcservices/ not done. Therefore, the argument of the learned counsel for the appellant that the appellant is not liable to pay the amount due under the bills Ex.A-3 and A-4 does not merit acceptance. 16. Ex.A-6 is the letter sent by Canara Bank to the first respondent stating that under a Power of Attorney executed by Metro Steel Rolling Mills in favour of the bank, which was duly registered with the first respondent, for the bills of Metro Steel Rolling Mills which were discounted by the bank, the first respondent has to make payment to the bank for such bills and such bill amounts cannot be appropriated by the first respondent for the dues owed by the appellant, thereby calling upon the first respondent to pay that money immediately to the bank. 17. The said aspect cannot be gone into by this Court in this suit, for the reason that the issue has become res judicata, as the Canara Bank has initiated separate proceedings and got an order in its favour. 18. In view of my elaborate discussion in the foregoing paragraphs, this Appeal Suit is allowed in part, restricting the claim of the first respondent to Exs.A-3 and A-4 alone i.e., Rs.63,968.80. Though there is no agreement with regard to interest between the parties, since there is a condition that the amount should be paid within 30 days from the date of supply of the materials and the same is not complied with, this Court, on equity as well, keeping in view the commercial nature of the transactions, awards interest at the rate of 12% per annum as against 18% per annum granted by the trial Court, from the date of due till the date of realisation. No costs. Sd/- Asst. Registrar. /true copy/ Sub Asst. Registrar. dixit https://hcservices.ecourts.gov.in/hcservices/ To 1. The Subordinate Judge, Poonamallee. 2. The Section Officer, V.R.Section, High Court, Chennai-104. + 1 CC To Mr.M.V.Venkataseshan, Advocate SR NO.38818 A.S.No.29 of 1992 SS {CO} TP/14.8.08 https://hcservices.ecourts.gov.in/hcservices/