CS(OS)No. 2497/1999 Page 1 of 43 THE HIGH COURT OF DELHI AT NEW DELHI % Judgment Reserved on: 21.12.2010 Judgment Pronounced on: 22.12.2010 + CS(OS) No. 2497/1999 ALOK GUPTA ..…Plaintiff - versus – M/S RUBFILA INTERNATIONAL LIMITED .....Defendant Advocates who appeared in this case: For the Plaintiff: Mr. Arun Birbal For the Defendant: Ms. V. Mohana CORAM:- HON’BLE MR JUSTICE V.K. JAIN 1. Whether Reporters of local papers may be allowed to see the judgment? Yes 2. To be referred to the Reporter or not? Yes 3. Whether the judgment should be reported Yes in Digest? V.K. JAIN, J 1. This is a suit for recovery of Rs.1351521/- and rendition of accounts and a Counter Claim for recovery of Rs 32,42,628/- The plaintiff, who is carrying business under the name and style of M/s Alok Enterprises claims that he was appointed as an agent by the defendant for the sale of its products in northern India and the defendant had CS(OS)No. 2497/1999 Page 2 of 43 agreed to pay a commission of 1% on the total sales made by him directly or made by the defendant on the orders procured through him, along with reimbursement of telephone and office expenses. It is further alleged that Smt. Renu Gupta, wife of the plaintiff was also appointed as an officer of the defendant company on a salary of Rs.10,000/- per month and the defendant had taken the premises of the plaintiff on rent of Rs.5,000/- per month for using it as its office. It is also alleged that all office expenses including the salary of Smt. Renu Gupta was paid by the plaintiff and was added to the account of the defendant, which its officers used to confirm from time to time. 2. It is further alleged that in a meeting held in the month of October 1997, at the factory of the defendant with the Managing Director and Marketing Manager of the defendant company, it was agreed that from 1st April 1997 the plaintiff will be paid commission at a revised rate, on slab basis. This was followed by a meeting in Delhi with the Managing Director of the defendant, when it was agreed that from 1st April 1998, the plaintiff will be paid commission at a revised rate of 2%. This was confirmed in a later meeting CS(OS)No. 2497/1999 Page 3 of 43 held in December 1998 between the plaintiff and Managing Director and Vice President of the defendant company. It is alleged that a sum of Rs.13,51,521/- is due to the plaintiff, whereas the defendant is claiming a sum of Rs.32Lacs from him. The plaintiff has accordingly claimed the aforesaid amount of Rs.13,51,521/- along with pendente lite and future interest on that amount. 3. The defendant has contested the suit. It is alleged in the written statement that there was no relationship of agent and principal between the parties. It is also alleged that the plaintiff has no locus standi to claim salary on behalf of some Smt. Renu Gupta and, therefore, the suit is bad for misjoinder for causes of action. On merits, it is alleged that in October 1996, the plaintiff, along with the his wife Smt. Renu Gupta, claiming themselves to be the owner of M/s Alok Enterprises, visited the defendant in Palakkad, Kerala and desired to become agent of the defendant in the entire Northern Region. The defendant, however, was not immediately agreeable to appoint them as agent since another firm was already functioning as its agent in the Northern territory. The defendant appointed Smt. Renu Gupta as its employee on 5th November 1996, on a monthly CS(OS)No. 2497/1999 Page 4 of 43 salary of Rs.10,000/-. It was also agreed that the plaintiff will get a special commission of 1% on the orders procured by him and no commission will be allowed on the material purchased by him for Alok Enterprises, though it was only an oral understanding and no agreement was executed between the parties. It is also claimed that the defendant had appointed Mr. Jacob Thomas to be stationed in Delhi for supervision and for canvassing their products in the Northern Region. It is further alleged that at the behest of Smt. Renu Gupta, the salary payable to her was adjusted from the balance receivable from the plaintiff. It is also claimed that the services of Smt. Renu Gupta were terminated w.e.f. 1st September 1998 and the amount which was payable to her was adjusted in the amount receivable by the defendant from the plaintiff. It is alleged in the written statement that for the purpose of obtaining Central Excise as well as Sales Tax registration, the premises of the plaintiff were shown as rented by the defendant, though there was no lease agreement between the parties and certain account adjustments were made in the amount paid by the plaintiff to the defendant. It is also claimed that the entire office expenses at Delhi were met by the defendant. CS(OS)No. 2497/1999 Page 5 of 43 4. The defendant has also filed a Counter Claim of Rs. 32,42,628/-. In the counter claim, it is alleged that it was agreed between the parties that Mrs Renu Gupta would get a special commission at 1% on the orders procured by her, but no commission will be allowed on the purchases made by the plaintiff for Alok Enterprises. It is also alleged that at the behest of Mrs Renu Gupta, the salary payable by the defendant to her was adjusted from the balance receivable from the plaintiff. The counter-claim represents Rs 29,52,317/- being the amount outstanding against the plaintiff in the account which he had with the defendant with respect to the goods purchased by him from time to time. This includes Rs 14,274/- towards price of the material alleged to have been taken by the plaintiff from D.R. Trading Company. Rs 22,588/- towards the price of the material taken back by the plaintiff from M.D.R. Tapes and Rs 1,49,615/- towards the price of the goods taken back by plaintiff from M/s H-Lon Industries. The balance amount of Rs 2,90,311/- represents interest at the rate of 12% per annum till the date of filing of the Counter Claim. 5. The following issues were framed on the pleadings of the parties:- CS(OS)No. 2497/1999 Page 6 of 43 i. Was the plaintiff appointed as an agent by the defendant for Northern India? If yes on what terms? OPP ii. Was Mrs. Renu Gupta, wife of the plaintiff employed by the defendant as a Marketing Executive at a monthly salary of Rs 10,000/- with further right to get special commission of 1% for the material supplied on bookings effected by her? OPD iii. To what amount, if any, is the plaintiff entitled to from the defendant? OPP iv. If issue No.3 is decided in favour of the plaintiff, whether plaintiff is entitled to any interest and at what rate? OPP v. To what amount is the defendant entitled to from the plaintiff? OPD vi. If issue No.5 is decided in favour of the defendant whether defendant is entitled to interest from the plaintiff and at what rate? OPD vii. Relief to the parties. 6. Issue No.1 The plaintiff has come in the witness-box as PW-1 and has also produced his wife Mrs Renu Gupta as PW-2. The defendant has products its Assistant Manager CS(OS)No. 2497/1999 Page 7 of 43 (Secretarial and Legal) Mr Sudhesh and has also produced a hand-writing expert Pandit Ashok Kashyap, who has been examined as DW-2. 7. In his affidavit, the plaintiff has alleged that in a meeting held on 04.11.1996 between him, his wife Mrs Renu Gupta, the Managing Director of the defendant and Shri R J Menon, Marketing Manager of the defendant, he was appointed as an agent in the Northern Region under an agreement between the parties. The terms of the agreement were reduced in to writing in the form of minutes of the meeting. He further stated that the defendant had initially agreed to pay a commission of 1% on the total business procured by him at Delhi. According to him, in the meeting held on 1st October, 1997 at Kerala factory of defendant in which he was represented by his wife, it was agreed that he will be paid commission of 2% instead of 1%, but shall not be reimbursed for the offices expenses. He also stated that reference in the minutes of the meeting held on 1st October, 1997 was to him only and in fact no commission was ever paid to his wife. He further stated that the commission at the rate of 2% was reiterated in the meeting held between him and the Managing Director of the defendant at Hotel CS(OS)No. 2497/1999 Page 8 of 43 Maurya Sheraton, New Delhi. 8. In rebuttal, DW-1 Mr Sudhesh has stated that in October, 1996, the plaintiff along with his wife Mrs Renu Gupta, claiming themselves to be the owner of Alok Enterprises visited their office in Palakkad, Kerala and expressed desire to become agent for the entire Northern Region. The defendants, however, were not immediately agreeable to appoint them as agents since M/s Filatex was their agent of Northern Region. The plaintiff represented that they could buy the products of the defendant and sell it to their customers, whereas Mrs Renu Gupta could act as the Marketing Executive for the defendant in Delhi. The defendant accordingly appointed Mrs Renu Gupta as its employee. It was also agreed that she would get special commission of 1% on the orders procured by her, but no commission would be payable on the material purchased for Alok Enterprises. According to him, there was no relationship of agency between the plaintiff and the defendant. He has also stated that the plaintiff has filed the present suit as a counter-blast to the criminal complaints which they have filed against him under Section 138 of Negotiable Instruments Act at Coimbatore. CS(OS)No. 2497/1999 Page 9 of 43 9. Ex.PW-1/36 purport to be the minutes of the meeting held at Palakkad, Kerala on 04th November, 1996. As per the minutes, four person, namely, the plaintiff Alok Gupta, his wife, Mrs Renu Gupta, Mr J.R. Rasiah and Mr R.J. Menon participated in the meeting. Clause 1 and 4 of the minutes which are relevant for this issue read as under:- “1. It was discussed that Alok Enterprises to appointed as an agent for the company with effect from 1st November, 1996 for entire Northern Region. 4. Alok Enterprises to be paid a commission of 1% of basic price for all orders procured to be supplied directly by the company and all material purchased by it for re-selling.” 10. The case of the defendant is that this document does not bear signature of Mr R.J. Menon. The handwriting expert produced by Pandit Ashok Kashyap has opined that the purported signature of Mr R.J. Menon on this document does not tally with his admitted signatures on the documents PW-1/24, PW 1/P-14 and PW-1/28. It has also come in the testimony of DW-1 that Mr R.J. Menon has since expired. The defendant has, however, not produced its Managing Director Mr J.R. Rasiah in the witness-box, to CS(OS)No. 2497/1999 Page 10 of 43 controvert the oral deposition of the plaintiff and no good reason has been assigned for not producing him in the witness-box. Since Mr R.J. Menon is stated to have died, it became more important for the defendant to produce Mr J.R. Rasiah in the witness-box to controvert the case stated by the plaintiff on oath. 11. Section 114(g) of the Evidence Act provides that the Court may presume that evidence which could be and is not produced would, if produced, be unfavourable to the person who withholds it. 12. In Enuga Lakshmamma Vs. Vennapuse Chinna Malla Reddy (Dead) by Lrs., 1985 (2) SCC 100, there was dispute with respect to the date of birth of the plaintiff/appellant. It was noticed that the father of the plaintiff/appellant was not produced as a witness. Supreme Court was of the view that non-examination of the father of the plaintiff/appellant on the most material issue, namely, the birth date of the plaintiff will have to be regarded as fatal to the plaintiff's case and the High Court was right in drawing adverse inference against the plaintiff on this aspect. In Iswar Bhai C. Patel @ Bachu Bhai Patel Vs. CS(OS)No. 2497/1999 Page 11 of 43 Harihar Behera & Anr. 1999 (3) SCC 457, the appellant did not enter the witness-box to deny on oath. The statement of defendant/respondent No.2 that it was at the instance of the appellant that he had advanced a amount of Rs 7,000/- to the appellant by issuing a cheque on the account of respondent No.1. The Court was of the view that the appellant having not entered the witness box and having not presented himself for cross-examination, an adverse presumption has to be drawn against him on the basis of the principles contained in Illustration (g) of Section 114 of Evidence Act. 13. Since the defendant has neither produced Mr. J.R. Rasiah in the witness-box nor given any explanation for not producing him, an adverse inference needs to be drawn against the defendant that had Mr J.R. Rasiah been produced in the witness box, he would not have controverted the deposition of the plaintiff with respect to the agreement reached between the parties in the meeting held on 04th November, 1996. 14. A reading of the minutes of the meeting held on 04th November, 1996 which is Ex. PW-1/36 does not convey a concluded contract for appointment of the plaintiff as the CS(OS)No. 2497/1999 Page 12 of 43 agent of the defendant though it does show that the matter was discussed in that meeting. It would be pertinent to note here that this is not the case of the defendant that no meeting in its office was held on 04th November, 1996 and the defendant has not filed any minutes of that meeting. In para 4(c) of the written statement, the defendant has specifically admitted that it was agreed during discussion in the meeting that the plaintiff would get a special commission of 1% on the orders procured by him though no commission would be allowed on the material purchases by him for his own firm M/s Alok Enterprises. Of course, the defendant claims this to be only an oral understanding. The admission made in the written statement leave no doubt that the defendant had agreed to pay commission to the plaintiff though no formal Agency Agreement was executed between the parties. 15. The clinching evidence which proves that the defendant had agreed to pay commission to the plaintiff is the Statement of Account filed by the defendant. Ex.DW- 1/11 is the Statement of Account filed by the defendant. This statement shows credit of Rs 1,40,914/- in the account of the plaintiff on September 18, 1997, towards commission CS(OS)No. 2497/1999 Page 13 of 43 for 1996-97. This entry has later been reversed on 25th March, 1998 with an endorsement “commission payable transferred to Renu Gupta‟s account”. Had the defendant not agreed to pay commission to the plaintiff, there could be no occasion for it to give credit of Rs 1,40,914/- in his account towards commission for the year 1996-97. 16. Ex.PW-1/24 is the minutes of the meeting held at the office of the defendant on 1.10.1997. Though during the course of admission/denial of documents, the defendant denied this document, it was relied upon by DW-2, Shri Ashok Kashyap as a document bearing admitted signature of defendant‟s employee late Shri R J Menon for the purpose of comparison of question signatures of Shri R J Menon on Ex.PW-1/36 to PW-1/40 and PW-1/42 to PW-1/44 with his admitted signatures. Paras 2, 8 and 9 of these minutes read as under:- 2. Sales Commission payable to Mrs. Renu Gupta, Marketing Executive as an incentive would be given on slab wise sale of entire Northern Region as given below as per turnover based on the basic price. There will be no other reimbursement expenditure towards maintenance of office, including telephone expenses. Upto 40 lacs – 1.5% CS(OS)No. 2497/1999 Page 14 of 43 Next 20 lacs – 2.0% Next 10 lacs and above -2.5% 8. The new set up to begin operation from 1st November, 1997. The Sales commission to the Marketing Executive will become operative with effect from 1.11.1997. 9. Rate of Commission from November, 1996 up to October, 1997 to be settled soon. It was mentioned that RIL agreed with Marketing Executive Mrs. Renu Gupta, a sales commission @1% of the basic price. However, based on actual expenditure it will be considered.” The defendant has not produced its Managing Director Mr. Rasiah to controvert the case of the plaintiff with respect to the decisions taken in that meeting. Hence, an adverse inference needs to be drawn against the defendant that had Mr. Rasiah come in the witness box, he would not have controverted these minutes. 17. Moreover, this is not the case of the defendant that no meeting was held in its office on 1st October, 1997. In para 6 of the plaint, the plaintiff alleged that in the meeting held in the month of October, 1997, at the factory of the defendant with Mr Rasiah, Managing Director and Mr Memon, Marketing Manager, it was agreed that from 1st April, 1997, the defendant will pay commission to the CS(OS)No. 2497/1999 Page 15 of 43 plaintiff at revised rate on slab basis. This allegation was not denied in para 6 of the written statement. While replying to para 6 of the plaint, the defendant merely stated that the contents of para 2 are matter of record and need no reply. Thus, the written statement itself contains an admission not only about payment of commission but also modification of the rate of commission so as to give commission at a revised rate, on slab basis. 18. The defendant also has specifically stated in the Counter Claim that it was agreed between the parties that Mrs Renu Gupta would get special commission at 1% on the orders procured by her. Relying upon Ex. PW1/24, it was contended by the learned counsel for the defendant that commission was payable to Mrs Renu Gupta and not to the plaintiff Shri Alok Gupta. The facts and circumstances of the case, in my view, indicate that the commission was actually payable to the plaintiff irrespective of whether it was paid in his name or in the name of his wife Mrs Renu Gupta. This is an admitted case that both, the plaintiff Alok Gupta and his wife Renu Gupta, had visited the office of the defendant and participated in the first meeting which was held on 04th November, 1996. In fact, the defendant has CS(OS)No. 2497/1999 Page 16 of 43 specifically alleged in the written statement that in October, 1996, the plaintiff alongwith his wife Mrs Renu Gupta “claiming themselves to be the owner of Alok Enterprises” visited its office in Palakkad, Kerala and desired to become agent of the defendant for the entire Northern Region, but, the defendant was not immediately agreeable to appoint “them” as agent. It is also alleged in the written statement that the salary payable to Mrs Renu Gupta was adjusted from the balance receivable from the plaintiff. It is also alleged that the service of Mrs Renu Gupta were terminated w.e.f. 1st September, 1998 and the amount which was payable to her was adjusted in the amount receivable by the defendant from the plaintiff. 19. Ex.PW-1/28 are the minutes of the meeting held at Hotel Maurya Sheraton on 27th July, 1998. Clause 3,6 and 15 of the minutes read as under:- “3. M/s Alok Enterprises will not be paid any commission for the material purchased in their name. They will be given a margin of Rs 5/kg. on all purchases and 2% commission on all other customers of entire northern region. 6. M/s Alok Enterprises promised to work for only RIL. CS(OS)No. 2497/1999 Page 17 of 43 15. If M/s Alok Enterprises shows excellent performance and clears all pending dues by Aug end, they can be considered for a sole selling agent from 1st Sept. onward.” The defendant has admitted the signatures of Mr R.J. Memon and Mr Jacob Thomas on this document during the course of admission/denial of documents on 09th December, 2009. Clause 3 referred above is yet another proof that the plaintiff was to be paid commission by the defendant and in the meeting held on 27th July, 1998, it was decided that the commission would be given to him at the rate of 2%, but he would get it only on the sale made ot other customer of Northern Region and he will not get any commission on the materials purchased in the name of Alok Enterprises. This meeting was attended not only by the plaintiff Alok Gupta, but also by his wife Mrs Renu Gupta. Admittedly, neither any salary was actually paid by the defendant to Mrs Renu Gupta nor was any commission paid to her. 20. From the facts and circumstances discussed above, it appears to me that both plaintiff Alok Gupta and Mrs Renu Gupta were working together and under an arrangement between the parties, commission was to be CS(OS)No. 2497/1999 Page 18 of 43 paid to the plaintiff which initially was fixed at 1%, was modified w.e.f. 1st November, 1997 so as to make it 1.5% on sale upto Rs 40 lacs, 2% on the sale for next Rs 20 lacs and 2.5% on the sale of next Rs 10 lacs and above. It was further modified in the meeting held on 27th July, 1998 when the plaintiff promised to work only for the defendant. Adjustment of the salary of Mrs Renu Gupta against receivables from the plaintiff is yet another circumstance, indicating that the plaintiff as well as his wife Mrs Renu Gupta were acting in unison and irrespective of whether the commission was to be paid in the name of the plaintiff and in the name of his wife Mrs Renu Gupta, the actual beneficiary was the plaintiff Alok Gupta. It would be pertinent to note her that Mrs Renu Gupta is not independently claiming either any commission or her salary from the defendant. She has come in the witness-box as PW-2 and has supported the case of the plaintiff. I find no merit in the contention of the learned counsel for the defendant that amount of commission can be claimed by Mrs Renu Gupta and not by the plaintiff. I, therefore, hold that though the plaintiff was not formally appointed as an agent of the defendant for the Northern Region, he was CS(OS)No. 2497/1999 Page 19 of 43 entitled to commission in terms of the agreement contained in the minutes of the meeting held on 04th November, 1996 (PW-1/36), 1st October, 1997 (Ex.P-1/24) and 27th July, 1998 (Ex.PW-1/28). 21. It was pointed by the learned counsel for the defendant that on Ex.PW-1/36 which purports to be the minutes of the meeting held at the office of defendant on 04th November, 1996, the address of the branch office of the defendant has been shown as F-11 Pandav Nagar though admittedly, the aforesaid premises had not been taken on rent by 04th November, 1996, which, in turn, indicates that Ex.PW-1/36 is the forged document. The contention of the learned counsel for the plaintiff in this regard was that though this document represents the minutes of the meeting held on 04th November, 1996, the minutes were recorded after the defendant had already taken the premises in F-11 Pandav Nagar on rent and, therefore, it cannot be said to be a forged document. I, however, need not go into this aspect of the matter since the evidence produced on record clearly proves that the defendant had agreed to pay commission to the plaintiff. It was also contended by the learned counsel for CS(OS)No. 2497/1999 Page 20 of