IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED: 06.08.2008 CORAM: THE HONOURABLE MR.JUSTICE A.C.ARUMUGAPERUMAL ADITYAN A.S.Nos.198 of 2003 M/s.Windor Foods Pvt., Ltd., (in liquidation) NHW.No.8, Makarpura, Vadodra-390 014, rep by Official Liquidator Ahmedabad .. Appellant / 2nd Defendant -vs- 1.Lunkar Enterprises, .. 1st respondent / Plaintiff 34, Veerapa Street, Sowearpet, Chennai-600 079. 2.Mrs.Sudha Mohan, Proprietrix, M/s.Seshadri Associates, 30/1, North Boag Road, P.B.NO.4976, T.Nagar, Chennai-17. .. 2nd Respondent/1st Defendant (Cause title amended vide order of the Court dt 22.7.2008 made in CMP.1207/08) Prayer:- This Appeal has been filed under Section 96 of CPC against the judgment and decree dated 28.06.2002 passed in O.S.No.3763 of 1996 on the file of the IV Additional Judge, City Civil Court, Cehnnai. For appellant : Mr.T.K.Sheashadri, Senior Counsel for Mr.J.James, Adovate For respondents : Mr.V.R.Sridharan, Advocate (For R1) R2 - Exparte JUDGMENT This appeal has been directed against the decree and judgment in O.S.No.3763 of 1996 on the file of the IV Additional Judge, City Civil Court, Chennai. The second defendant in O.S.No.3763 of 1996 is the appellant herein. https://hcservices.ecourts.gov.in/hcservices/ 2.The averments in the plaint sans irrelevant particulars are as follows:- The plaintiff was appointed as the agent for distribution of D2's products viz., biscuits for a part of Tamil Nadu through D1- marketing agent of the second defendant for the entire Tamil Nadu, Kerala and Andhra Pradesh. This appointment was confirmed by the second defendant vide its letter dated 3.3.1984 to Canara Bank, Audiappa Naicken Street, Chennai-1. With the connivance of D1, D2 has terminated the agency of the plaintiff, without assigning any reason vide its letter dated 19.09.1984. Plaintiff in its letter dated 24.09.1984 has explained to D2 that the above said termination was illegal and unjust. But D2 has confirmed the termination of agency through a telegram dated 28.4.1984. Due to the above said illegal termination the plaintiff has suffered heavy loss in the business for the period of three months. During the said period the expected minimum profit will be Rs.98,860/02. The Stockists, who were appointed by the 1st defendant, to whom the plaintiff has supplied goods, which were purchased from the 2nd defendant for which the plaintiff has settled the entire amount with the defendants. The dealers/stockists who were appointed by the 1st defendant were directly under the control of the defendants and only to them the plaintiff could supply the products of the 2nd defendant. Now the plaintiff could not collect the dues from the dealers/stockists. The value of those goods comes to Rs.8,89,959/57. Defendants are liable to reimburse this amount to the plaintiff. The goods taken by the plaintiff from the 2nd defendant, which could not be delivered to the dealers/stockists, are lying at the godown of the plaintiff. At the request of the 2nd defendant these unsold goods were returned to the 1st defendant on 6.10.1984, who took possession of the some on behalf of the 2nd defendant. The value of the said returned goods comes to Rs.2,10,962/55. The said amount was not paid by the defendants to the plaintiff. Before the termination of agency goods valued at Rs.91,485/27 were returned by the plaintiff to the defendants at the request of the defendants on 9.7.1984, 11.08.1984 & 13.08.1984. The stock worth about Rs.30,724/65 were received back from Trichy. After giving credit to this, Rs.30,724/65, the defendants are liable to pay the plaintiff Rs.60,760/62. On 25.09.1984 the 1st defendant wrote a letter to the plaintiff promising to clear all the market outstanding and pay the same to the plaintiff by 20.10.1984. The 1st defendant undertook to pay the entire balance amount. The first defendant requested the plaintiff to despatch the remaining stocks with the plaintiff, promising to pay by 20.10.1984. The 1st defendant also assured that the entire amount due to the plaintiff would be settled before Deepavali of 1984. But, in spite of several assurances the defendants have not come forward to settle the claim till date, though the first defendant, has been collecting the dues from the dealers/stockists. The defendants are also liable to pay lorry freight, free goods supplied, Bank charges, travelling expenses which comes to Rs.1,00,485/13, as per the details given below:- https://hcservices.ecourts.gov.in/hcservices/ a)Lorry Freigh to be reimbursed Rs.38,529.70 b)Amount Exess paid Rs. 5,456.42 c)Free Goods supplied to parties In July Rs.4,543.42 In August Rs.2,096.06 In September Rs. 146.06 ___________ Rs. 6,785.54 d)Bank Charges Rs.16,113.52 e)Excess Investment Interest June to October 84 Rs.16,700.00 f)Penal Interest as on 22.8.1984 Rs.12,179.50 g)Trichy Cheque collection charges Rs. 575.50 h)Travelling expenses and sundry expenses Rs. 1,144.95 --------------- Rs.1,00,485.13 --------------- The plaintiff has received the followings amounts from the marketing agents and also from other parties:- a)Amount received through marketing agent Rs.5,87,000.00 b)Amount received from parties Rs.2,94,460.00 ----------------- Rs.8,81,460.68 ----------------- The defendants are liable to pay Rs.8,89,959/57, being the value of outstanding goods, Rs.2,10,962/55 towards the value of the returned goods, Rs.60,760/62 being the value of the returned stocks and Rs.1,00,485/13 towards lorry freight, excess paid amount, bank charges traveling expenses, etc as mentioned above. After giving credit to the above referred RS.8,81,46/68 the defendants are liable to pay the plaintiff Rs.3,80,707/19. For the said sum of Rs.3,80,707/19 the plaintiff has claimed 24% interest from 12.10.1984 to 22.9.1986 which comes to Rs.2,18,537/20, besides a sum of Rs.98,860/02 towards damages under the suit with 18% interest and costs. 3.The first defendant remained exparte. The second defendant in its written statement would contend that D2 is not aware of Sri.Mohanchand, the alleged partner of the plaintiff-partnership firm, representing the plaintiff. The second defendant is the company incorporated having its registered office at Baroda. D1 is the marketing agent of D2. D1, who is the marketing agent of D2 is not empowered to assist the plaintiff as the agent for D2 to distribute the products of D2 viz., biscuits for part of Tamil Nadu State through D1. The plaintiff is not the agent of D2, but was a dealer of D2 selling D2/s products as a dealer. Under the dealership https://hcservices.ecourts.gov.in/hcservices/ transaction, all the transactions with the plaintiff by D1 as Proprietrix of M/s.Seshadri Associates were direct sales to the dealer by the 2nd defendant and the 2nd defendant/s liability seized as soon as the sale transactions were completed. The 2nd defendant's liability did not exist in any way subsequent to the sale to the dealer. The plaintiff was not obliged to maintain account on behalf of the 2nd defendant. The plaintiff was not performing any transactions with the 3rd parties on behalf of the 2nd defendant and was not answerable to the 2nd defendant company for it sale to the parties. The 2nd defendant terminated only the dealership of the plaintiff and not the agency. Due to the termination of the dealership the plaintiff has not incurred any loss. The plaintiff never acted as an agent of the 2nd defendant. Even though the plaintiff was a dealer of the 2nd defendant there was no agreement of dealership entered into between the plaintiff and 2nd defendant. The plaintiff had no privity of contract or any part of agency with the defendant. The plaintiff was never answerable to the 2nd defendant for his sale to the third parties and accordingly was not accountable also. The plaintiff is not entitled to claim any damages much less Rs.98,860/02 towards the minimum loss of profit for three months from the 2nd defendant. The plaintiff cannot recover the money which is due from the dealers / stockists from the 2nd defendant. The plaintiff as the dealer had paid to the 2nd defendant on the sale of goods. The stockists / dealers were not under the direct control of the 2nd defendant to whom the plaintiff was supplying the products of the 2nd defendant. The 2nd defendant is not liable to reimburse Rs.8,89,956/57 being the amount due from stockits / dealers. The 2nd defendant's liability seized as soon as the sale was completed. The 2nd defendant's company is in no way responsible or liable for the credit extended by the plaintiff to the 3rd parties. The 2nd defendant is in no way liable for the wrong committed by the sub-agents to the plaintiff in default of payment and for the stocks which have not been delivered to the dealer/stockist, and which are lying at the godown. The plaintiff had purchased the goods from the 2nd defendant and as soon as the sale was completed the 2nd defendant is in no way liable for the goods of the plaintiff wherever it lies and for whatever manner they are being dealt with. The unsold goods were not returned to the 1st defendant as alleged in the plaint on 6.10.1984. The 2nd defendant is not aware whether the 1st defendant had received unsold goods worth Rs.2,30,962/55. The 2nd defendant is not liable for the sum of Rs.2,10,962/55. Before the termination of agency goods worth Rs.91,488/27 were not returned by the plaintiff to the defendants at the request of the defendants on 9.7.1984, 11.8.1984 & 13.8.1984. The goods worth Rs.30,724/65 were also not received back from Trichy. The 2nd defendant is not liable to pay Rs.60,760/62 to the plaintiff. The transaction between the plaintiff and the 1st defendant is a separate transaction, for which there is no privity of any contract with the 2nd defendant. The plaintiff was never authorized by the 2nd defendant to represent the 2nd defendant with the third parties. The allegation in the plaint that on 25.09.1984 the 1st defendant wrote a letter to the plaintiff promising to clear all the market outstanding and pay the same to the plaintiff https://hcservices.ecourts.gov.in/hcservices/ by 20.10.1984 are not admitted. Any arrangement made between the 1st defendant and the 2nd defendant in respect of the sale of goods ie., biscuits purchased from the plaintiff will not bind the 2nd defendant. The 2nd defendant is not aware whether the 1st defendant has assured the plaintiff to settle the dues before Dipavali of 1984. The 2nd defendant is not liable to pay any amount much less Rs.1,00,485.13 towards lorry freight, excess supply, bank charges & travelling expenses etc. The 2nd defendant is not liable to pay the plaintiff the amount mentioned at para 11 of the plaint. The amount of discharge pleaded by the plaintiff at para 12 of the plaint is also denied by the 2nd defendant. The 2nd defendant is not liable to pay Rs.3,80,707.19 with interest as claimed in the plaint much less the damages asked for in the plaint. Hence, the suit is liable to be dismissed with costs of the 2nd defendant. 4.On the above pleadings the learned trial Judge has framed as many as nine issues for trial. Before the learned trial Judge the partner of the plaintiff-firm was examined as P.W.1 and Ex.A.1 to Ex.A.49 were marked. On the side of the defendants, Executive Director of the 2nd defendant was examined as D.W.1. NO documentary evidence was marked on the side of the defendants. After scanning the evidence both oral and documentary the learned trial Judge has come to the conclusion that the plaintiff is entitled to the relief asked for in the plaint and accordingly, decreed the suit with 9% interest from the date of suit till the date of decree and with future interest at the rate of 6% per annum from the date of decree till the date of realization with proportionate costs, which necessitated the 2nd defendant to approach this court with this appeal. 5.The points for determination in this appeal are as follows:- 1)Whether the plaintiff is entitled to a sum of Rs.98,860/02 towards damages from the 2nd defendant? 2)Whether the 2nd defendant, appellant herein, is jointly and severally liable with the 1st defendant for the suit claim of Rs.3,80,707/10 with interest as awarded by the trial Court? 3)Whether the decree and judgment in O.S.No.3763 of 1996 on the file of the IV Additional Judge, City Civil Court, Chennai, is liable to be set aside for the reasons stated in the memoradum of appeal? 6.Point No.1 :- The learned counsel for the plaintiff submits that the plaintiff on the basis of Ex.A.6- notice of termination of agency, according to him an illegal one, had suffered heavy loss and three months' expected minimum profit alone comes to Rs.98,860/02, has claimed that the 2nd defendant is liable to pay the said sum of Rs.98,860/02 towards damages. The learned counsel for the plaintiff would contend that Ex.A.6-notice dated 19.9.1984 reads that it came into effect forthwith. But such a termination is illegal in lieu of Section 206 of the Indian Contract Act, 1872 because reasonable notice must by given to the agent by the principal before any termination of agency. Section 206 of the Indian Contract Act, 1872, reads as follows:- https://hcservices.ecourts.gov.in/hcservices/ "Reasonable notice must be given of such revocation or renunciation; otherwise the damage thereby resulting to the principal or the agency, as the case may be, must be made good to the one by the other." Since no reasonable notice was given under Ex.A.6, the claim of damages on the basis of Ex.A.6 by the plaintiff is not maintainable. The validity or otherwise of Ex.A.6 – Notice was not been considered by the learned Trial Judge. Since this curt is of the view that without reasonable time given under Ex.A.6-notice, the termination of the agency by D2 against the plaintiff under Ex.A.6 cannot be maintainable and there is absolutely no material placed before the Trial Court by the plaintiff to show that in lieu of Ex.A.6-notice he had incurred a loss much less Rs.98,860/02. P.W.1 has not deposed anything about the heavy loss incurred by him due to Ex.A.6-notice. Under such circumstances, the trial Court finding that the plaintiff is entitled to claim damages to the tune of Rs.98,860/02 is liable to be set aside and the same is hereby set aside. Hence, I hold on Point No.1 that the plaintiff is not entitled to Rs.98,860/02 towards the damages from the 2nd defendant. 7.Point No. 2:- Ex.A.1 is the letter written by D2 to D1, under which D2 has appointed D1 as the marketing agent for D2. Further, under Ex.A.1, D2 has authorized D1 to appoint C&F agent and dealer in Tamil Nadu, Kerala and Andhrapradesh, with a rider clause that the responsibility for such appointment of C&F agent by D1 lies only with him. Ex.A.2 is the sanction letter addressed by D2 to Manager, Canara Bank, dated 3.3.1984 under which D2 has authorized the plaintiff as their C&F agent for part of Tamil Nadu. Ex.A.3 is the letter written by D1 to plaintiff, under Clause-3, D1 has given an undertaking to the plaintiff to stand as a guarantor for C&F agent appointed of D1 on behalf of D2. The case of the plaintiff in a nutshell is that they have purchased goods (biscuits) produced by D2 and that they have distributed the goods through stockists / sub- agents appointed by D1, who is the agent of D2. The plaintiff has filed the suit for the recovery of dues from the sub-agents appointed by D1 on behalf of D2, for the supply of goods purchased by him from D2. In the plaint under several heads the plaintiff claimed a sum of Rs.3,80,707/19. The learned Senior Counsel Mr.T.K.Sheashadri appearing for the appellant / D2 in his submission would contend that since the plaintiff-company have not produced the relevant account books for the claim made under the plaint, the suit itself is not maintainable. Now we have to see from the available materials whether the plaintiff's claim is substantiated by documentary evidence. Under paragraph 8 of the plaint the plaintiff would claim that the goods purchased by him from the 2nd defendant under Ex.A.15 and Ex.A.20 could not be delivered to the dealers / stockist and those unsold goods were returned to the 1st defendant on 6.10.1984 and the value of those goods comes to Rs.2,10,962/55. Ex.A.19 is the relevant document produced by the plaintiff for the above said claim of Rs.2,10,962/55. Ex.A.19 is the letter written by the plaintiff to the 2nd defendant informing that as per the stock liquidation https://hcservices.ecourts.gov.in/hcservices/ programme they have returned the goods ie., 1356 tins of various products of D2 and 760 tins of various products of D2 to the value of Rs.1,27,907/65 plus Rs.83,054/90 = Rs.2,10,962/55. The delivered goods were received by the 1st defendant on behalf of the 2nd defendant. This document was produced by P.W.1. D.W.1 in the cross-examination would state that as per Ex.A.19 he has not received any goods from the plaintiff and he would state that he is not aware who has signed in Ex.A.19 on behalf of the 1st defendant. But there are rubber stamps of both D1 & D2 found in Ex.A.19. The 2nd defendant has not taken any steps to send the disputed signature in Ex.A.19 to a hand writing expert to get a report to prove that it does not contain the signature of the 1st defendant. Safely the 1st defendant remained exparte in this case. The 1st defendant has not comeforward to deny his signature contained in Ex.A.19. Under such circumstance, the 2nd defendant owes the amount under Ex.A.19 to the plaintiff. So as per Ex.A.19 the plaintiff is entitled to Rs.2,10,962/55. 7(a)The next claim of the plaintiff at paragraph 9 of the plaint is Rs.60,760/62. To substantiate the said claim of Rs.60,760/62 the plaintiff states that it is the value of the stock of goods returned by the plaintiff to the 2nd defendant on 9.7.1984, 11.8.1984 & 13.8.1984. Ex.A.14 was filed by P.W.1. Ex.A.14 is dated 9.7.1984 authored by the plaintiff and addressed to the 2nd defendant, which was also received by the 1st defendant. Both the rubber stamps of D1 & D2 are found in Ex.A.14. As per Ex.A.14 plaintiff has returned about 7 goods dealt under Ex.A.14. About 146 tins plus 5 cases of goods of various items of biscuits were returned by the plaintiff to the 2nd defendant. Even though in Ex.A.14 the prices for the goods mentioned under Ex.A.14 were not stated therein, on the basis of Ex.A.15 – invoices the value of the goods returned under Ex.A.14 were calculated as follows:- S.No. Product Details Quantity Rate per Tin Value 1 MandrainATP(Tins) 25 62.60 1565.00 2 Punch ATP (Tins) 25 62.60 1565.00 3 Beats ATP(Tins) 25 66.61 1665.25 4 Dues ATP (Tins) 30 62.06 1861.80 5 Alladin 21 57.07 1198.47 6 Punch ATC (Cases) 5 157.46 7 DayBreck ATP(Tin) 20 47.60 952.00 Total 8,807.52 Trade discount ( - ) 15% 1,321.13 ------------------- 7,486.39 ------------------- For the claims of 5 cases of Punch ATC there is no material available in Ex.A.15 to calculate the value. As per the above said calculation excluding the 15% trade discount, the amount due to the plaintiff comes to Rs.7,486/39 only. There is no other material placed by the plaintiff to show for the value of the goods returned on 11.8.1984 https://hcservices.ecourts.gov.in/hcservices/ and 13.08.1984. So under Ex.A.14 the plaintiff is entitled to a sum of Rs.7,486/36 only and the remaining claim to the tune of Rs.53,274/23 is to be rejected. 7(b) Under paragraph 11 of the plaint the plaintiff would claim reimbursement of lorry freight to the tune of Rs.38,529/70. Ex.A.13 is the lorry way bills. The learned counsel for the plaintiff has filed an abstract for Ex.A.13 bills to show that the lorry way bill charges produced by him under Ex.A.13 come to Rs.38,529/70. Under Ex.A.15, the plaintiff would claim Rs.5,456/42 being the amount paid in excess to the 2nd defendant. Even though the learned senior counsel appearing for the 2nd defendant would contend that there is no acknowledgment produced by the 2nd defendant for having received the above said excess amount, Ex.A.15 was also produced by P.W.1 before the trial Court. But there was no question challenging the credibility of Ex.A.15 was put to P.W.1 in the cross-examination by D2. On the other hand P.W.1 in the cross-examination would depose that the details contained in Ex.A.15 are reflected in his accounts. Even though the learned senior counsel for the 2nd defendant would contend that the plaintiff has failed to produce his account books, the 2nd defendant has not filed any application before the trial Court directing the plaintiff to produce the account books. On the other hand along with Ex.A.15 break up details were enclosed with the invoices for the goods purchased by the plaintiff from the 2nd defendant. 7(c)The next head of claim is a sum of Rs.6,785/54 being the free goods supplied to the parties by the plaintiff in the months of July – Rs.4,543/42, in August – Rs.2,096/06, & in September – Rs.146/06. To substantiate this claim the plaintiff has produced Ex.A.16. But in Ex.A.16 the details of free goods supplied in the month of July-1984, and August-1984 alone are available. No particulars in this regard for the month of September-1984 is not available. So the plaintiff is not entitled to claim Rs.146/06 under Ex.A.16. 7(d)Under the head Bank Charges on the basis of Ex.A.17, the plaintiff would claim Rs.19,113/52. Ex.A.17- Bank advices have been produced by P.W.1. Except the suggestion that D1 alone is liable for the amount claimed under Ex.A.17, in the cross-examination of P.W.1, there is no other material produced by the contesting defendant No.2 to show that the 2nd defendant is not liable to pay Ex.A.17 amount to the plaintiiff. Even D.W.1 has not repudiated the claim under Ex.A.17 by the plaintiff in his chief-examination. So as per Ex.A.17 the plaintiff is entitled to Rs.19,113/52. Under Ex.A.9 the plaintiff would claim excess investement interest for the period from June to October – 1984. Under Ex.A.9, the plaintiff has informed D2 that a sum of Rs.4.5 lakhs is the operating capital of D2 for the business, he had with D2 and subsequently in the month of June, the operating capital was enhanced to Rs.6.10 lakhs and in July it was further enhanced to Rs.6.15 lakhs and in August it was enhanced to Rs.6.20 lakhs and that it has been informed to D2 by the plaintiff https://hcservices.ecourts.gov.in/hcservices/ under Ex.A.9 that on behalf of D1 its Executive Manager Mr.Mohan had assured to pay 2% penal interest for the delayed payment for more than 45 days. So for the month of June for the operating capital of Rs.1.60 lakh for five months the penal interest comes to Rs.16,000/-, for Rs.5 thousand operating interest in the month of July at the rate of 2% interest for 4 months it comes to Rs.400/-, for the month of August for the operating capital of Rs.5 thousand at the rate of 2% interest for 3 months it comes to Rs.300/- (Total Rs.16,000/- + Rs.400/- + Rs.300/- = Rs.16,700/-). Under Ex.A.42, D1 has given an undertaking to the plaintiff to pay the outstandings before 20th October-1984, even though the said letter is dated 25th September- 1984. Under such circumstance, the penal interest under Ex.A.9 from the month of June 1984 is to be calculated for 5 months for the operating capital of Rs.1.60 lakh and for 4 months for the operating capital of Rs.5 thousand from July 1984 and for operating capital of Rs.5 thousand from August-1984 for a period of three months at the rate of 2% interest. The contention of the learned Senior counsel that the penal interest should be calculated only up to the month of September-1984 and not upto October-1984 cannot hold any water. 7(e)The plaintiff has claimed Rs.12,179/50 towards penal interest and for the said claim the plaintiff produced Ex.A.9, which gives detail for the penal interest for the outstandings including the particulars of invoices and the names of the parties and the details regarding the delayed payment and the rate of penal interest for Rs.3,96,975/35, which comes to Rs.12,179/50. 7(f)For the Trichy Cheque collection charges Rs.575/50 and Travelling expenses & Sundry expenses Rs.1,144/95 were also claimed by the plaintiff. But there is absolutely no material placed before the trial Court in support of those claims. So the above said two claims of Rs.575/50 & Rs.1,144/95 are to be rejected and the same are hereby rejected. 7(g)According to the plaintiff the total amount due