IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED : 20.06.2011 CORAM THE HONOURABLE MR. JUSTICE S. PALANIVELU C.S.No.352 of 2003 M/s. Tractors & Farm Equipments Ltd., represented by its Vice President (Finance & Secretary) Mr.P.B. Sampath ... Plaintiff Vs 1.New Chandra Motors & Tractors rep.by its Managing Partner 2. Mr.Vinay Gupta Managing Partner 3. Mr.Sanjay Gupta Partner 4. Mr.Ajay Gupta Partner ... Defendants Civil Suit filed under Order VII Rule 1 of C.P.C. Read with order IV Rule 1 of O.S. Rules. For Plaintiff : Mr. Krishna Srinivasan for M/s. S. Ramasubramaniam and Associates For Defendants : Mr. P.R. Seetharaman for D1 to D4 JUDGMNET The Civil Suit is filed for a judgment and decree against the defendants for a sum of Rs.43,66,551.35 together with interest at 24% per annum from the date of plaint till the date of payment with costs. 2. The plaint averments, in brief, are as follows:- 2.(a) The plaintiff is engaged in the manufacture and sale of Agricultural Tractors and Farm Equipments under the brand name "MASSEY FERGUSON" & "TAFE", that the plaintiff has a very wide dealer network spread all over the country having 360 dealers through whom the tractors manufactured by the Plaintiff are being sold, that the dealers operate through dealership agreements that are entered between the dealer and the Plaintiff and the dealer is bound by such terms and conditions set out in the dealership agreement, that the first defendant, then known as M/s Chandra Motors & Tractors, was appointed as a "Dealer" on 29.11.1992 and the 2nd defendant and one Mr.Aswani Kumar were partners in the said firm, that dud to difference of opinion between the partners, Mr.Aswani Kumar had retired from the partnership, that thereafter defendants 2,3 and 4 constituted a ew Partnership under the name and style of the First Defendant and had submitted their proposal to be appointed as Dealer under cover of their letter dated 28.10.1994, along with a copy of the Partnership Deed, that the defendants were appointed as Probationary Dealers vide letter dt.09.12.1994 and thereafter they were appointed as dealers for the plaintiff vide Dealership Agreement dated 3.1.1996 for the District of Bareilly. 2.(b) The efforts of the defendants to sell the plaintiff's products and interest in the same, had been progressively declining and therefore the tehsils of Baheri and Nawabganj in Bareilly District were withdrawn from the purview of the Defendants' Dealership, that the officials of the plaintiff appraised the Defendants performance during the various review meetings and the Defendant was asked to improve upon their performance to that of the competitors' products in the area and the defendants have promised to do so, but they did not sell the average sold the previous years each year in the assigned territory, that the defendant was also not maintaining adequate floor stock fo the plaintiff's products for sale to customers though there has been increased demand of tractors in the territory and the defendants did not envisage any interest in improving the sales, that the decline of the plaintiff's products in the market is only due to the illegal action of the Defendant in trying to discontinue dealing with the products of the plaintiff, even while continuing to be a dealer of the plaintiff's products, has grossly affected the sales of the Plaintiff's products in the market as a result of which the competitors of the Plaintiff, are taking a lead in the market, due to the unscrupulous act of the defendant, that the defendant being a dealer of the plaintiff's products and having huge outstanding of Rs.43,66,551.35 to the plaintiff as on 18.12.2002, has chosen not to solicit sales and distributionship of the Plaintiff's products and that according to the Dealership Agreement entered between the plaintiff and the defendant, as per Clause 28, in case of any disputes arising between the parties, the courts in Chennai alone have exclusive jurisdiction to decide any dispute that may arise under the agreement. 3. In the written statement filed by the 1st, 3rd and 4th defendants, the following are averred:- 3.(a) The alleged dealership agreement between the parties was executed on 3.1.1996 and the same was terminated by the defendant by termination notice dated 29.11.1999, that the suit is hit by the provisions of Section 10 of C.P.C, inasmuch as these defendants have already filed a suit in the Court at Bareilly on the same subject matter against the plaintiff claiming a relief of Rs.60,000/- and that the plaintiff was aware of filing of the suit in Bareilly Court, but the plaintiff did not chose to file the present suit in this Court for more than a year and only after the expiry of one year from the date of their knowledge of the suit filed in the Bareilly Court, they chose to file the present suit. 3.(b) A perusal of the Dealership Agreement dated 3.1.1996, particularly clause-6 would show that there was no credit transfer of goods by the plaintiff to the defendant and in view of that the question of any outstanding liability by the defendant to the plaintiff would not arise at all, that the clause-16 of the said agreement deals with the termination of the agreement and clause-17 deals with the consequences of such termination, that the agreement was terminated by the defendant vide a notice on 29.11.1999 and by the said notice the agreement has come to an end and that in view of saving clause under Clause -17, the provisions of clause 28 dealing with the jurisdiction of the court has also come to an end. 3.(c) As per clause 26 of the Dealers Agreement, the agreement shall not remain in force for more than five years, that since the agreement has expired by efflux of time as per provision of clause-16 none of the provisions of the agreement could not be in force against each party, save and except to the provisions of clause 17 of the agreement and it is therefore submitted that by operation of clause 16 as well as by actual termination of the agreement by a notice dated 29.11.1999 issued by the defendant, all the provisions of the agreement has come to an end except to the extent protected by clause 17 of the agreement. 3.(d) The promise if any made by the defendant confirming to the terms and conditions of the agreement was based on counter promises made by the plaintiffs to confirm and act according to the terms and conditions of the agreement which was at the first instance violated by the plaintiff which lead to the termination of the agreement by the defendant by a notice dated 29.11.1999, that the plaintiff who had stopped supplying the tractors and spare parts as per the terms and conditions of the agreement way back from the month of April 1999 and suddenly without giving any notice to the defendant as required under the agreement, the plaintiff chose to appoint another dealer for districts of Baheri and Nawabgang and put a seal on the efforts that was made by the defendant for more than three years to bring a good market for the products of the plaintiff which had hardly had a good market in the northern states, that the defendant have invested and spent more than a sum of Rs.1 crore in setting up the showroom and extending other marketing to sell the products of the plaintiff and that the defendants have several times brought to the notice of the plaintiff erratic supply and poor quality of products which went into the deaf ears of the plaintiff and that no monies have ever become due to the plaintiff and if at all any money has become due and payable by the defendant to the plaintiff it was payable at Bareilly and received at Bareilly and therefore the cause of action in any in connection therewith would arise only at Bareilly and that the suit may be dismissed with costs. 4. In the light of the above said pleadings, the following issues have been framed by this Court:- 1. Whether the defendants have failed to perform as per the dealership agreement dated 03.01.1996? 2. Whether the defendants have breached the terms of the dealership agreement dated 03.01.1996? 3. Whether the suit is hit by Section 10 of Civil Procedure Code? 4. Whether the suit is barred by limitation? 5. Whether the defendants are liable to pay the sum of Rs.43,66,551.25 together with interest at 24% per annum from 18.12.2002 till the date of payments? 6. Whether this Court has jurisdiction to try the suit? 7. To what other reliefs, the parties are entitled to? Issue Nos.1, 2 and 5 5. The plaintiff is engaged in the manufacture and sale of Agricultural Tractors and Farm Equipments. Their products are marketed under the brand name "MASSEY FERGUSON" & "TAFE". The first defendant originally under the name and style of M/s. Chandra Motors & Tractors was appointed as a dealer on 29.11.1993. The second defendant one Mr.Aswani Kumar left the first defendant firm and the letter Ex.P.2 evidences his retirement. By means of Ex.P.3, the 2nd defendant intimated the plaintiff, the differences between the partners. A fresh proposal was sought for by the plaintiff under Ex.P.4 from the first defendant. Defendant 2 to 4 constituted a new partnership firm by name M/s.New Chandra Motors & Tractors and a partnership deed to this effect dated 28.10.1994 is Ex.P.5. 6. On 9.12.1994 a letter under Ex.P.6 was sent by the plaintiffs to the 1st defendant firm, enclosed therein the letter of Probationary appointment which is Ex.P.7. The defendants signed the probationary appointment order, accepting fresh appointment by letter dated 29.12.1994, that is Ex.P.8. By means of Exs.P.9 and P.10 letters, the plaintiff informed the defendants appointing them as dealers and sought for certain details. On 15.9.1995, the defendants submitted their promise to confirm to the terms of dealership agreement under Ex.P.11. Ex.P.12 is dated 3.1.1996, which is Dealership Agreement came to existence between the parties containing terms and conditions to be observed by them. Since the defendants had shown less interest in marketing the product of the plaintiff, two places namely,Baheri and Nawabganj in Bareilly District (U.P.) were withdrawn from the purview of the defendant's dealership which is dated 06.12.199 and the same is Ex.P.13. Upto this there is no debate. 7.But earlier to Ex.P.13, on 29.11.1999, the defendants sent a legal notice through their lawyer under Ex.D.1, terminating the dealership of the plaintiff. They have mentioned therein that without assigned any reasons, two tehsils were withdrawn from the defendants, that the plaintiff was not supplying the tractors, by means of which they were facing financial crisis and they had to terminate the dealership. Since the plaintiff violated the terms and conditions of the agreement, they have called upon the plaintiff to settle the account within a period of three months and also to take spare parts, implements, special tools, equipments, computers, etc., 8.Ex.P.15 is the statement of accounts showing that Rs.43,66,551.35 was payable by the defendants. Even though the plaintiff has produced the letter communications, the dealership agreement and the letter by them withdrawing two tehsils of Baheri and Nawabganj in Bareilly District, they have not produced any document to show in what way the amount is payable to them. To put it differently, it is explained that the plaintiff have not produced any voucher, invoices, delivery receipts nor any other material documents to show the despatch of products from their manufacturing unit to the defendants' address. Further they have not also produced any records to show that the defendants acknowledged the liability to pay this much of amount to the plaintiff. Excepting the statement of account, no document is forthcoming to show the alleged liability of the defendants. The plaintiff did not issue any pre-suit notice to the defendants to pay the amount. There is no pleading nor evidence to show that any demand was made for a specific sum of Rs.43,66,551.35 from the defendants. In these circumstances, this court is of the considered view that there is no basis to claim the suit amount from the defendants and the plaintiff has to be non-suited for the relief. 9.It is pleaded by the plaintiff that the defendants have breached the terms of agreement and failed to sell the plaintiff's products. But excepting this pleadings, in the plaint and ipse dixit of P.W.1, nothing is projected to establish the above said aspects. It is stated in the plaint that there was a sudden decline in the sales in that region, that the defendant did not sell the average sold the previous years, each year in the assigned territory and that the defendants was also not maintaining the adequate floor stock of the plaintiff's products for sale to customers though there has been increased demand of tractors in the territory. The said allegations are denied in the written statement. It is alleged in the written statement that the poor quality and unsatisfactory after sales service provided by the plaintiff including erratic supply of tractors and spare parts made it impossible for the defendants to improve the market conditions of their products. The plaintiff has not adduced sufficient evidence to show that there was a decline in the sales and the average sales was not reached by the defendants. 10.It is the further contention of the defendants that as per Clause-13 of the Dealership Agreement the relationship of the parties was not that of principal and agent but was of a seller and buyer, that the defendant has to first purchase the products from the plaintiff company and thereafter sell them in his territory. In this context, it is the strenuous contention of the defendant that as per Clause-6 of the agreement there is no scope for any credit sales by the plaintiff and the payment was made by the defendants in advance or at the time of delivery. 11.Clause 6 and 13 of the agreement read thus: "6. PRICE TO DEALER AND METHOD OF PAYMENT: (a) The Dealer shall pay the Company for the said products, at or before delivery, by such method of payment as may be required by the Company from time to time and at the prices specified in the Company's Dealer Price List current at the date of delivery. (b) The Dealer undertakes to place all orders upon the Company's standard order form for the time being in force." "13. DEALER IS NOT AN AGENT: The relationship between the company and the Dealer created by or subsisting as a result of this Agreement is not that of Principal and Agent but that of Seller and Buyer. The Dealer shall not represent himself/itself to be an agent of the Company for any purpose and shall ensure that his/its employees do not represent to be an agent/agents of the company for any purpose. Without prejudice to the generality of the foregoing neither the dealer nor any such employee shall have any right or authority to make or settle any claims by or against the company or pledge the credit of the company or give any warranty or make any representation on behalf of the company or subject the company to any obligation or liability of any kind." 12.From the above, it comes to light that the dealer was bound to pay the value of the products at the time of delivery and that the relationship between the parties is seller and buyer. The clause with regard to Method of Payment or any of the clauses in the Dealership Agreement, do not show that by credit the products can be obtained by the defendants. As already stated, there is no document on the side of the plaintiff to establish the value of the products and whether they were sent to the defendants on credit basis and there was outstanding from the defendants then and there. 13.By means of Ex.D.1, under clause 16 of the Dealership Agreement, the defendant have terminated the dealership. There is no denial on the part of the plaintiff as regards Ex.D.1. Neither in the plaint nor in the proof affidavit had the plaintiff denied Ex.D.1. In the cross examination of D.W.1, also no question was put to him with respect to Ex.D.1. The cumulative effect of the above said circumstances would go a long way to show that Ex.D.1 was accepted by the plaintiff as they did not sent any reply. After the receipt of the Ex.D.1 letter, the plaintiff has send Ex.P.13 letter withdrawing two Tehsils from Bareilly District. It is argued by the defendants that after the termination of the Dealership, Ex.P.13 has no effect. 14.It is in the evidence of plaintiff that the plaintiff company deliver tractors after the receipt of the entire amount and sometimes the amount will be collected after the delivery and that there is no acknowledgement to show that the defendants received any statement of Accounts. Worthwhile it is to note that the dues then and there payable by the defendant and the entire outstanding as on the date of suit claim were never put to the knowledge of the defendants at any point of time. In these circumstances, it is far-fetched contention that the defendants have failed to perform as per the terms of Dealership Agreement and they have breached the agreement. It is also observed that the averment as to the suit claim is due from the defendants remains unestablished. I answer all these issues in the negative. Issue No.3: 15.Much was said about the stay of the suit under Section 10 of C.P.C., in view of the previously instituted suit by the defendants in the Additional Civil Judge Court at Bareilly, the defendants filed a suit claiming Rs.60,435.27 in O.S.No.458 of 2000 against this plaintiff. A certified copy of the plaint is Ex.D.3. The present plaintiff, being the defendant in that case appeared through lawyer which is evident from the vakalat filed by them. The certified copy of the vakalat is Ex.D.6. It is not denied by the plaintiff that they did not appear in the case. 16.Section 10 of C.P.C. reads as follows:- "10. Stay of suit. No Court shall proceed with the trial of any suit in which the matter in issue is also directly and substantially in issue in a previously instituted suit between the same parties, or between parties under whom they or any of them claim litigating under the same title where such suit is pending in the same or any other Court in India having jurisdiction to grant the relief claimed, or in any Court beyond the limits of India established or continued by the Central Government and having like jurisdiction, or before the Supreme Court. Explanation- The pendency of a suit in a foreign Court does not preclude the Courts in India from trying a suit founded on the same cause of action." Before S.10 can apply to a particular case the following condition must be satisfied : (a) the matter / matters in issue should be substantially the same in the two suits; (b) the previously instituted suit should be pending in the same Court in which the subsequent suit is brought or in another Court in India having jurisdiction to grant the relief claimed; and (c) the two suits should be between the same parties or their representatives and these parties should be litigating in the two suits under the same title. 17.As far as the issue in both the cases is concerned, the main question is with regard to territorial jurisdiction to try the cases. The point of territorial jurisdiction is very much agitated by both the parties in both the cases. The plaintiff herein urges under Clause 28 of the Dealership Agreement, it is provided that the parties agree to submit any disputes or matters arising under or as a result of the agreement only to the Courts having jurisdiction in Madras City. Both the suits are pending, which are between the same parties and their claim is based on the dealership agreement. Hence, Section 10 can be made applicable to this case. 18.Section 10 would apply only if there is identity of the issue in both the suits. One test of the applicability of Section 10 to a particular case is, whether the final decision rendered in the previous suit, such decision would operate as res-judicata in the subsequent suit. While dealing with the import of Section 10 C.P.C., the Honourable Supreme Court in AIR 2005 SC 242 [National Institute of Mental Health & Neuro Sciences v. Parameshwara] has observed as follows: "The object underlying Section 10 is to prevent Courts of concurrent jurisdiction from simultaneously trying two parallel suits in respect of the -same matter in issue. The object underlying Section 10 is to avoid two parallel trials on the same issue by two Courts and to avoid recording of conflicting findings on issues which are directly and substantially in issue in previously instituted suit. The language of Section 10 suggests that it is referable to a suit instituted in the civil Court and it cannot apply to proceedings of other nature instituted under any other statute. The object of Section 10 is to prevent Courts of concurrent jurisdiction from simultaneously trying two parallel suits between the same parties in respect of the same matter in issue. The fundamental test to attract Section 10 is, whether on final decision being reached in the previous suit, such decision would operate as res-judicata in the subsequent suit. Section 10 applies only in cases where the whole of the subject matter in both the suits is identical. The key words in Section 10 are "the matter in issue is directly and substantially in issue" in the previous instituted suit. The words "directly and substantially in issue" are used in contra-distinction to the words "incidentally or collaterally in issue". Therefore, Section 10 would apply only if there is identity of the matter in issue in both the suits, meaning thereby, that the whole of subject matter in both the proceedings is identical." 19.In view of the law laid down by the Apex Court, if any final decision was obtained in the previously instituted suit which would operate as res-judicata in the subsequent suit. Section 10 C.P.C comes to play. As for this case, the point of jurisdiction has already been decided by a Court in Bareilly under its order Ex.D.10 and the same has become final by the conduct of the plaintiff. Hence, it can be observed that Ex.D.10 Order would operate as res-judicata in the present case. 20.In view of the pendency of the suit instituted earlier, the subsequently instituted suit has to be stayed as per Section 10 and even if an order or final decision is passed in a subsequent suit, it cannot be said to be contravention of law nor the decree passed in the subsequent suit is a nullity. This principle is laid down by the Honourable Supreme Court in AIR 2004 SC 3504 [Pukhraj D. Jain and others v. G. Gopalakrishna]. The operative portion of the judgement goes thus:- 'The object of the section is to prevent Courts of concurrent jurisdiction from simultaneously trying two parallel suits in respect of the same matter in issue. The section enacts merely a rule of procedure and a decree passed in contravention thereof is not a nullity. It is not for a litigant to dictate to the court as to how the proceedings should be conducted, it is for the court to decide what will be the best course to be adopted for expeditious disposal of the case. In a given case the stay of proceedings of later suit may be necessary in order to avoid multiplicity of proceedings and harassment of parties. However, where subsequently instituted suit can be decided on purely legal points without taking evidence, it is always open to the court to decide the relevant issues and not to keep the suit pending which has been instituted with an