IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED : 31-7-2008 CORAM THE HONOURABLE MR.JUSTICE M.CHOCKALINGAM AND THE HONOURABLE MR.JUSTICE R.SUBBIAH O.S.A.Nos.256 and 258 of 2000 and CMP Nos.13963 and 14039 of 2000 and 19487 and 19488 of 2002 M/s.Tea Land 3-A Pollock Street Calcutta 700 001. .. Appellant in both appeals vs 1.M/s.Sugesans Sales International Pvt. Ltd., 38, Rajaji Road Madras 600 001. .. 1st Respondent in OSA 256/2000 2.V.R.Parekh (died) 3.Tarak V.Parek (R3 brought on record as LR of the deceased second respondent vide order of Court dated 26.2.2008 in CMP Nos.2603 & 2604/07) .. Respondents 2 & 3 in both appeals 4.M/s.Sugesans Overseas a partnership firm represented by its Partner Vijoy K.Sheth, 38 Rajaji Road Madras 600 001. .. 1st Respondent in OSA 258/2000 Original side appeals preferred under Order XXXVI Rule 1 of Original Side Rules and Clause 15 of the Letters Patent against the https://hcservices.ecourts.gov.in/hcservices/ judgment and decree of this Court in C.S.Nos.116 and 437 of 1984 dated 4.1.2000. For Appellant : Mrs.K.Priya for Mr.A.K.Mylsamy For Respondents : Mr.E.S.Govindan for R3 No appearance for R1 COMMON JUDGMENT (Judgment of the Court was delivered by M.CHOCKALINGAM, J.) This judgment shall govern these two appeals in O.S.A.Nos.256 and 258 of 2000. These appeals challenge a judgment of the learned Single Judge of this Court made in C.S.Nos.116 and 437 of 1984 granting a decree in favour of the plaintiffs. 2.The Court heard the arguments put forth by the learned Counsel for the appellant. Despite service of notice, there was no representation on the side of the first respondent. The Court heard the learned Counsel for the third respondent, who is added as the legal representative of the second respondent. 3.The plaint averments in C.S.No.116 of 1984 are as follows: The plaintiff is a company engaged in import of various raw materials required by industries and factories. In October 1980, the second defendant introduced the first defendant to the plaintiff stating that the first defendant has been granted additional license dated 15.12.1978, to the value of Rs.50,25,698/- by the licensing authorities permitting the first defendant to import drugs included in Appendix 9 of ITC Policy. Believing this, the plaintiff agreed to finance upto Rs.30,25,698/- and share the profits with the firs defendant. An agreement dated 10.10.1980 was entered into between the parties in this regard. The first defendant is to give an irrevocable letter of authority in favour of the plaintiff. It was agreed that out of anticipated profit of Rs.24,20,558.40, both the plaintiff and the first defendant would equally share the same. It was computed as Rs.12,10,279.20 each. A letter of authority dated 10.10.1980, was handed over to the plaintiff. Thereafter, the plaintiff also paid a sum of Rs.6,05,139.60 by way of demand draft. But for the assurance given by the first defendant with regard to genuineness of the license, the plaintiff would not have parted with the said amount. The plaintiff also opened letters of credit in favour of various foreign suppliers to the tune of Rs.29,55,779/-. While the matter stood thus, the plaintiff received a telegram dated 10.12.1980, from the first defendant informing them that the first defendant has been served with a show cause notice dated 29.11.1980, from the Joint Chief Controller of Imports and Exports, Calcutta. In that show cause notice it was alleged that the license was forged and the import of palm oil is a canalized item. The endorsement on the license was not for palm oil but for drugs. The licensing authority https://hcservices.ecourts.gov.in/hcservices/ cancelled the license vide order dated 5.5.1981. There were exchange of notices between the parties. Under the circumstances, the first defendant is liable to return the amount of Rs.6,05,139.60 paid by the plaintiff, along with interest. The plaintiff also suffered damages to the tune of Rs.12,10,279.20. Hence, the suit. 4.The suit was resisted by the first defendant by filing a written statement stating that he applied and received an import license dated 15.12.1978 for import of items appearing in Appendix 5 and 7; that on or about February 1979, the first defendant gave an application to the authorities concerned for endorsement of license covering import of drugs; that it was denied; that subsequently, believing the representation made by the second defendant, the first defendant handed over fresh application to the second defendant; that in the last week of September 1980, the second defendant informed the first defendant that endorsement and revalidation of the license till 31.12.1980 have been obtained from the licensing authorities; that the first defendant was served with a show cause notice dated 29.11.1980; that the license was cancelled, and he preferred an appeal before the appellate authority; that the same was also dismissed; that he never represented to the plaintiff that the license and the endorsement made thereon were in order; that only after making enquiries with regard to genuineness of the license, the plaintiff has entered into a contract; that the plaintiff agreed to pay compensation for the utilization of the license; that the first defendant never gave assurance to the plaintiff, and it was the second defendant who introduced the plaintiff to him; that the plaintiff ought not to have placed orders in late November, 1980 and December 1980 because they have already come to know about the doubts raised by the licensing authority about the genuineness of the license; that he is not liable either for any damages or to refund the amount received from the plaintiff, and hence the suit was to be dismissed. 5.The plaint averments in C.S.No.437 of 1984 are in the same lines. The plaintiff in this suit has paid a sum of Rs.4 lakhs to the first defendant. 6.The first defendant filed a written statement with the same allegations as found in the written statement in C.S.No.116 of 1984. 7.On the above pleadings, the trial Court framed five issues in C.S.No.116/84 and six issues in C.S.No.437/84. The parties went on trial. The learned trial Judge after hearing the submissions made and considering the evidence both oral and documentary, has decreed both the suits in favour of the plaintiffs as against the first defendant. Hence, these appeals at the instance of the first defendant. 8.The points that would arise for consideration are: (i) Whether the plaintiffs are entitled for refund of the amount paid by them to the first defendant? (ii) Whether the plaintiffs are entitled for damages? https://hcservices.ecourts.gov.in/hcservices/ 9.Advancing arguments on behalf of the appellant/first defendant, the learned Counsel would submit that the learned trial Judge while holding that the agreements between the parties were binding upon them, ought not to have passed a decree directing the appellant to refund the amounts; that the agreements itself provided that any sum paid by the plaintiff was not refundable; that the question of interest would not arise; that the agreements itself were in violation of clause 5 of the Import (Control) Order, Import Export (Control) Act and Import Policy; that the letters of authority issued pursuant thereto should not stand in its own; that the object and the consideration for the contract being illegal, the plaintiffs are not entitled to any decree or reliefs in the suits; that the original license after endorsement was handed over by the second defendant to the plaintiffs; that no exception has been taken thereto by the plaintiffs, and the second defendant though entered appearance, did not file any written statement controverting such statements; that the plaintiffs were acting in collusion with the second defendant, and the appellant on the assurance of the second defendant had transferred the license of a consideration and had nothing further to do in the matter; that a show cause notice was issued to the first defendant to return the license, and since the plaintiffs wrongfully and illegally withheld the license, it was cancelled, and the first defendant was debarred and suffered loss and damage thereby; that the plaintiffs agreed not to claim any refund for non-utilization of the license for any reason whatsoever; that the learned trial Judge had not taken into consideration the evidence both oral and documentary, and hence, the judgment of the learned trial Judge has got to be set aside. 10.The Court heard the learned Counsel for the third respondent on the above contentions. 11.From the pleadings put forth by the parties and materials available and submissions made, the following factual events are noticed as admitted: The plaintiff in C.S.No.116 of 1984 is a private limited company, and the plaintiff in C.S.437 of 1984 a firm. Both the concerns were sister concerns. The companies are dealing with the importation of materials and supplying the imported materials to industries. The first defendant, a partnership firm, had its office at Calcutta dealing with tea and tea products and is also exporting the same to foreign countries. The first defendant was given a license, Ex.P2, by the Deputy Chief Controller of Imports and Exports, Calcutta, permitting to import items appearing in Appendix 5 and 7 subject to the condition that any single item should not exceed the value of Rs.2 lakhs. Ex.P2 license dated 15.12.1978, was granted in favour of the first defendant on 28.11.1978, and it was valid upto 31.12.1979. An endorsement was alleged to have been made in the license in September 1980 in order to import items included in Appendix 9 in respect of drugs and the validity of the license was also extended from 31.12.1979 to 31.12.1980. Further, it was claimed to have obtained a valid license issued by the Chief Controller of Imports and Exports permitting to import drugs as could be seen in Appendix 9 and the value of the license was to the extent of Rs.50,25,698/-. https://hcservices.ecourts.gov.in/hcservices/ 12.From the available materials, it could be seen that the first defendant has granted two letters of authority under Ex.P1 on 10.10.1980, and Ex.P42. The execution of the agreementd and the grant of letterd of authority given to and relied on by the plaintiffs in both the cases is not in dispute. A perusal of these two documents would clearly reveal that they were given to the plaintiffs by the first defendant, the first one for Rs.30 lakhs and the second one for Rs.20 lakhs, and both were in respect of Ex.P2, license, referred to above. The total value of the license as stated above was to the extent of Rs.50,25,698/-. These two documents Exs.P1 and P42, letters of authority, are the main documents on which the plaintiffs have rested the case. A perusal of these documents would clearly reveal that they have got identical terms and conditions. It is also admitted by D.W.1 that along with those letters of authority, Ex.P2, the license, was also handed over to the plaintiffs. From the perusal of these two documents Exs.P1 and P42, it would be quite clear that the plaintiffs were given right to exploit Ex.P2, the license. The first defendant has irrevocably authorised the plaintiffs to dispose of the imported items and consignments to actual users, get payments from them, deal with the customers and other authorities, make payments of foreign bills, customs duty, etc., and clear the consignments and also to deal with all other matters which were deemed fit under the circumstances. It was also agreed that after the disposal of the imported items of consignment, the plaintiffs should provide photostate copies of the certificates/license issued by the Director of Industries or SSI/DGTD or any other Industrial Licensing Authority from each of the actual users along with the copies therefor in respect of the delivery challans. 13.In respect of Ex.P1, letter of authority, the plaintiffs undertook to pay a sum of Rs.12,10,279.20 and in respect of Ex.P42, letter of authority, the plaintiffs undertook to pay a sum of Rs.8 lakhs. Both these amounts were termed as compensation payable to the first defendant for utilization of the license under Ex.P2. Thus, it is not in dispute that the first defendant agreed to receive Rs.20 lakhs and odd as consideration for permitting the plaintiffs to finance the project and to execute the actual import. It was agreed that the expected profits should be shared among the plaintiffs and the first defendant equally. The anticipated profit was fixed at Rs.24 lakhs. The plaintiffs agreed to pay half of the profit which was anticipated. Accordingly, the plaintiffs have paid to the first defendant a sum of Rs.6,05,139.98 and Rs.4 lakhs respectively as consideration and also agreed to pay the balance 50% of the profit later. On 10.10.1980, the first defendant raised a debit note on the plaintiffs for a sum of Rs.12,10,279.20 towards compensation payable to the first defendant for allowing the utilization of Ex.P2 license. Apart from that, the plaintiff in C.S.116/84 paid a sum of Rs.6,05,139.60 to the first defendant by way of issuing a draft. The same has also been acknowledged by the first defendant under Ex.P4 dated 13.10.1980. Equally, the other plaintiff has paid Rs.4 lakhs being the 50% of the compensation for the other letter of authority, and Ex.P46 is the receipt given by the first defendant in favour of the plaintiff. These are the two amounts claimed by the plaintiffs alleging that the defendants are liable to return the same along with https://hcservices.ecourts.gov.in/hcservices/ the damages for the reasons stated in the plaint. 14.Concededly, the first defendant was the license holder. The license, Ex.P2, would indicate that the first defendant was permitted to import drugs included in Appendix 9. A perusal of the license under Ex.P2 would go to show that there was an additional endorsement. It would also appear from the said endorsement as if it was made by the Chief Controller of Imports and Exports, New Delhi, namely one Miss.Grewal. According to the department, the said endorsement was found to be a forged or fabricated one. The case of the plaintiffs was that the contract was entered into not only on the assumption, but also on the assurance that the endorsement was true, genuine and also valid upto 31.12.1980, and the importation of drugs as per the license could be done upto the value approximately Rs.50,25,698/-. Based on the license under Ex.P2, the two letters of authority Exs.P1 and P42, were handed over by the first defendant. It is also pertinent to state that the license Ex.P2, containing the said endorsement was also handed over. The plaintiffs admittedly have paid huge amounts to the first defendant as found under the receipts issued by the first defendant. Following the same, the plaintiffs have also placed orders with the foreign suppliers for importation of the drugs to the value of about Rs.39 lakhs. That apart, the plaintiffs have also opened letters of credit which could not be revoked since they are unrevocable as evident from Exs.P28 to P37, and the banks were duty bound to honour them. While the matter stood thus, the plaintiffs received Ex.P8, letter of the first defendant dated 10.12.1980, along with the copy of the show cause notice dated 29.11.1980, issued by the Joint Chief Controller of Imports and Exports. Only from the said communication, the plaintiffs came to know that the first defendant was served with the show cause notice by the Joint Chief Controller of Imports and Exports wherein the first defendant was directed to produce the license Ex.P2, dated 15.12.1978. 15.A perusal of Ex.P10, show cause notice, would reveal that the same was sent on 29.11.1980. The contention of the first defendant that the same was served only on 10.12.1980 and hence on the very day, a copy of the show cause notice along with the letter Ex.P8 was forwarded to the plaintiffs cannot be accepted. The first defendant was careful enough in not producing the postal cover in which the show cause notice was received by him. Had the first defendant sent the copy of the show cause notice dated 29.11.1980, immediately to the plaintiffs, the plaintiffs would have avoided opening letters of credit in favour of the foreign suppliers which were made on 3.12.1980 and 4.12.1980 respectively. Thus, the first defendant after the service of the show cause notice calling upon him to produce the license, has acted so. Ex.P10, show cause notice, in clear terms indicated that the license could be amended only by the licensing authority in the manner consonant with the the Imports (Control) Regulations. Further it was also pointed out that it came to the knowledge of the Joint Chief Controller of Imports and Exports that the first defendant firm has forged the license with an endorsement for import of palm oil in the description column of the license without making necessary request for amendment of the license by the licensing authority. It is also pointed out that the license in question was not used for importation of palm oil since the item https://hcservices.ecourts.gov.in/hcservices/ was a canalized one. 16.According to the show cause notice, the first defendant has committed offences enumerated in Clause (x) (c) (cc) (D) of Import (Control) Order, 1955. The said firm or any bank or any other party having interest in the said import license was called upon to show cause within 15 days from the date of the issuance of the show cause notice why action should not be taken to cancel the license. The authorities finally found that the license was granted to the first defendant in the year 1978 for importation of the items included in Appendix 5 and 7, and the same was availed by the first defendant. Even as per the admission of D.W.1, on two occasions, the first defendant applied for additional endorsement in the license to accord permission for importing drugs included in Appendix 9; but, the same was rejected by the Chief Controller of Imports and Exports. The Chief Controller of Imports and Exports, New Delhi, has found that the endorsement found in Ex.P2, the license, was a forged one, and the same was also confirmed by the Joint Chief Controller of Imports and Exports, Calcutta. The signature of Miss.Grewal and the seal of her office namely Joint Chief Controller of Imports and Exports, Calcutta, were found to be forged in Ex.P2, license. Under such circumstances, the first defendant cannot be permitted to plead ignorance of the same. In order to escape the liability, the first defendant has come forward with the false defence plea that Ex.P2, license, was handed over to the second defendant who promised him to get the necessary endorsement for importing drugs, and accordingly, it was done believing his words, and it was also the second defendant who negotiated with the plaintiffs in which the first defendant had no role. All these contentions have got to be rejected. 17.It is pertinent to point out that there was not even a single communication in between the first defendant and the second defendant before the endorsement found in Ex.P2. It was claimed by the first defendant that an agreement was entered into with the second defendant in the month of September 1979. But, no material was available to accept the same. From the available materials, it would be quite clear that the agreement was entered into between the plaintiffs and the first defendant, and payments were received by the first defendant and receipts have been issued. All would go to show that having a clear knowledge that the additional endorsement found in Ex.P2, license, was a forged one, the first defendant made the plaintiffs believe that the additional endorsement found in Ex.P2, was a true and genuine one, and on the strength of that, the plaintiffs have also acted and parted with the amounts. Thus, it can be well stated that the first defendant, having been in possession of the license from the year 1978 which remained unutilised for which it was originally issued and having applied twice for the importation of the drugs and having failed, has placed the license Ex.P2, with the forged endorsement along with the two letters of authority, and he has also sent the show cause notice belatedly, thereby made the plaintiffs to open the letters of credit. 18.As far as the transaction between the plaintiffs and the first defendant was concerned, the second defendant was an utter stranger, and in order to escape from the liability, the first defendant has made a vainful attempt to rope in the second defendant. The learned https://hcservices.ecourts.gov.in/hcservices/ trial Judge has correctly found that the second defendant was not liable in any way. The first defendant in order to avoid the consequences, has placed the entire blame upon the plaintiffs attributing a role to the second defendant which was thoroughly imaginary. 19.The contentions put forth by the appellant's side that the plaintiffs were fully aware of the entire circumstances, and only after knowing the consequences of the same, they have entered into such contract, and the plaintiffs were also guilty of breach of contract since they have not paid the balance 50% of the anticipated profit of compensation as agreed by the parties, and having breached the agreement, the plaintiffs should not be allowed to claim under the agreement all have been rightly rejected by the learned trial Judge. The circumstances would clearly indicate that only on the representation and assurance that the endorsement found in Ex.P2, license, was true and genuine, the first defendant has given the letters of authority under Exs.P1 and P42. It remains to be stated that the plaintiffs had also parted with huge amounts and also have opened letters of credit with foreign companies. Hence it would be quite clear that the plaintiffs have acted only on the misrepresentation of the first defendant believing it to be true. 20.The other contention that the plaintiffs were guilty of breach of contract does not require consideration even for a moment. On the strength of a false misrepresentation and on the basis of a forged endorsement found in Ex.P2, the first defendant has got 50% of the anticipated profit of compensation. Having obtained 50% of the anticipated profit, the first defendant cannot be permitted to say that the plaintiffs have not paid the other part of the profit. The available materials would clearly indicate that the first defendant has entered into an agreement with the plaintiffs and has made them to believe that the endorsement was true and genuine; but, it was clear to the knowledge of the first defendant that it was a forged one, and thus, he allowed all the consequences to follow and made the plaintiffs suffer damages. Under the circumstances, the plaintiffs were entitled to get back the amount paid to the first defendant. The learned trial Judge was perfectly correct in coming to the conclusion that the plaintiffs never committed any breach of agreement, and on the contrary, the first defendant was liable to pay back the amount received by him. 21.From the evidence, it is quite clear that the plaintiffs have parted with a sum of Rs.6,05,139.60 in respect of the letter of authority in C.S.No.116 of 1984, and also parted with a sum of Rs.4 lakhs in respect of letter of authority in C.S.No.437 of 1984. Those amounts have got to be paid back with interest at 18% per annum since it was a commercial transaction. Therefore, the learned trial Judge has correctly found that the plaintiffs are entitled for the refund of those amounts namely Rs.6,05,139.60 in C.S.No.116 of 1984 and Rs.4 lakhs in C.S.No.437 of 1984 along with interest at 18% per annum from 5.5.1981 till the date of decree and thereafter at 9% per annum till realisation. This Court is unable to see any merit in these appeals, and they are liable to be dismissed. 22.In the result, both these original side appeals are dismissed https://hcservices.ecourts.gov.in/hcservices/ confirming the judgment of the learned trial Judge and leaving the parties to bear their costs. Consequently, connected CMPs are also dismissed. Sd/ Asst.Registrar /true copy/ Sub Asst.Registrar To The Sub.Assistant Registrar, Original Side, High Court, Madras. 1 CC To Mr.E.S.Govindan , Advocate, SR NO.41500 1 CC To Mr.A.K.Mylsamy, Advocate, SR NO.41434 O.S.A.Nos.256 and 258 of 2000 bv(co) pmk/21.8.2008. https://hcservices.ecourts.gov.in/hcservices/