1 pps IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION SUIT NO.255 of 1985 DCM Shriram Consolidated Limited, having their registered office at Kanchenjunga Building, 18 Barakhamta Road, New Delhi- 1 and branch office at Sir Vithaldas Chambers, 16 Bombay Samachar Marg, Fort, Bombay 400 001 ..Plaintiffs versus 1. Shree Venkatesh Textiles, a firm carrying on business at 89/91, Old Hanuman Lane, Bombay 400 002 and also having office at 63, Ghoga Street, 3rd Floor, Fort, Bombay 400 001. 2. Synthetic Traders, a firm carrying on business at 336, New Cloth Market, Ahmedabad and now at 357 Kalbadevi Road 2nd Floor, Bombay 2 3(a). Satya Prakash Laxman Swarup Agrawal, residing at 1st floor, Jeevan Vihar, Manav Mandir Road, Malabar Hill, Bombay 400 006, being one of the heirs of Laxman Swarup Ramdas Agrawal, other two heirs being defendant Nos.4 and 5 herein. 2 4. Ved Prakash Laxman Swarup Agarwal, partner of first Defendants firm and the second Defendants firm and residing at Flat No.61, 6th floor, Sunflower Building, Cuffe Parade, Bombay 400 005 5. Gyan Prakash Laxman Swarup Agarwal partner of first Defendants firm, residing at 1st floor, Jeevan Vihar, Manav Mandir Road, Malabar Hill, Bombay 400 006 6. Smt. Kusum Rani Satya Prakash Agarwal, partner of the first Defendants firm residing at Flat No.65, 6th floor, Sunflower Building, Cuffe Parade, Bombay 400005 ..Defendants Mr.N.V.Moye for the Plaintiffs Mr.D.R.Jhuria for the Defendants CORAM : S.J.VAZIFDAR, J. DATE : 17th AUGUST, 2009. ORAL JUDGMENT: 1. The suit is filed to recover a sum of Rs, 12,93,000/- together with interest on Rs. 6,00,000/- at the rate of 21% per annum from the date of the suit till payment. 2. Defendant No.1 and Defendant No.2, Synthetic Traders are partnership firms. The original 3 Defendant No.3 was a partner of both the firms. Defendant No.3 died leaving behind three sons i.e. Defendant Nos.3A, 4 and 5. Defendant Nos.4 and 5 were already parties to the suit. Defendant No.3A was impleaded in the place of Defendant No.3. Defendant Nos.3A, 4 and 5 are also therefore liable for the debts of the deceased Defendant No. 3. Defendant No.4 is a parther of Defendant Nos.1 and 2. Defendant Nos.5 and 6 are partners of Defendant No.1. PLAINTIFFS CASE: 3. During the period March 1978 to June 1979 Defendant Nos.1 and 2 purchased textiles from the Plaintiff s unit at New Delhi, on wholesale basis and sold the same to their customers. In respect of these transactions the Plaintiff raised invoices. The Defendants returned certain goods in respect whereof credit notes were issued. Credit in any event was given in respect of certain claims. According to the Plaintiffs, the balance amount due and payable by the Defendants 4 was Rs.25.82 lakhs. The Defendants raised further claims which the Plaintiffs did not agree to. 4. Ultimately, the Plaintiff and Defendant Nos.1 and 2 agreed to the mediation of a common friend in the industry one Radhakrishnaji Ruia for settling the dispute. A settlement was arrived at between the Plaintiff and Defendant Nos.1 and 2 as recorded in a writing dated 17th January, 1982 in Mumbai. It is necessary at this stage to set out the agreement in its entirety as a substantial part of the claim as well as the defence is based only on the same. The agreement reads as under: 1) The Co. agrees to accept Rs. 8 lacs in full and final settlement of all outstanding dues from these firms, subject to conditions given below and these firms agree that they have no further subsisting claim whatsoever against the company in respect of supplied made to them. 2) The aforesaid Rs.8 lacs shall be paid as follows: a) Rs. 2 lacs to be paid by 31/1/82 by means of transfer from Oriental Bank, Canara Bank and Balance by cheque. b) Balance Rs. 6 lacs to be paid by six monthly instalments of Rs.1 lac each, commencing w.e.f. 30/9/82. The last 5 instalment shall be due on 31.3.1985. 3) The aforesaid sum of Rs.8 lacs is being accepted subject to the following terms and conditions:- a) The liability of both these firms shall be joint & several. b) The firms shall ensure & effect mortgage of flat No.61 on 6th floor, in Sunflower Building, Cuffe Parade, Bombay 400 005 in favour of Company latest by 30/4/1982. c) On non payment of any instalment on due date, interest shall be payable at 21% p.a from the date of default till payment of instalment. d) Notwithstanding payment by instalments, if payment of any instalment which has fallen due along with interest, is not make within six months from its due date, then the entire balance amount shall become due at once with interest at 21% p.a. From 30.6.1979 till payment. In such contingency, the company will be entitled to enforce the mortgage in its favour after giving one months notice and take vacant possession of the mortgaged flat & sell the same by inviting tender and after defraying all expenses of sale and legal proceedings, adjust the amount due to it from the sale proceeds and hold the firms liable for balance if any & surplus if any will be paid to the said firms. e. In case the mortgage is not effected by 30/4/82, then this settlement will come to an end and company will not be bound to accept Rs.8 lacs as agreed to and will 6 have the right to make full claim. 4.Resumption of trade with the firms on cash basis will be considered by the company after Rs.2 lacs are paid by 31/1/82 and mortgage is effected. Party promises to liquidate outstanding due under this settlement at an early date in case trade is resumed. 5. The Plaintiff s entire case is based only on this writing dated 17th January, 1982. It is not necessary, therefore, to deal with the accounts maintained by the parties in respect of the said transactions. This is not a suit for an account. Nor is this a suit at the foot of the account. 6. Pursuant to the settlement, Defendant Nos.1 and 2 issued cheques dated 25th January, 1982 in the sum of Rs.23,801/- and a draft of Rs.15,000/-. An amount of Rs.82,430.40 was transferred from the Defendant s Bill Marketing Scheme Account with Oriental Bank of Commerce, Mumbai and a sum of Rs. 78,769.18 was transferred from the Bill Market Scheme Account with Oriental Bank of Commerce, Ahmedabad. Thus, the aggregate amount of Rs. 2,00,000/- was paid by the Defendants to the 7 Plaintiff under the said settlement. 7. A further instalment of Rs.1,00,000/- was issued on 30th September, 1982. The Defendants failed to pay the sum and under cover of a letter dated 1st October, 1982 issued two cheques in the sum of Rs. 15,000/- each dated 30th October, 1982 and 30th November, 1982 and a cheque of Rs.10,000/- dated 31st December, 1982. The said cheques were dishonoured. Despite the Plaintiffs request to forward their drafts for the said amount, the Defendants failed to do so. Thereafter, no further payments were made by the Defendants. 8. Defendant NO.1 by a letter dated 28th January, 1983 confirmed the settlement dated 17.1.1982 but expressed their inability to make payment in view of the financial difficulties consequent inter alia upon the closure of the textile mills in Mumbai. According to the Plaintiff, in the letter it was falsely contended that the Plaintiffs were to resume their business with Defendant Nos.1 and 8 2. I will deal with the relevant clause in this regard in the said settlement. 9. In the plaint it is averred that in view of the failure of the Defendants to make payment in accordance with the settlement dated 17th January, 1982 it was entitled to claim and recover from the Defendants the full balance in the account but that considering the financial position of the Plaintiffs it restricted its claim to the admitted amount as stated in the settlement. 10. The plaint also refers to the Defendants liability to create a mortgage as security to ensure repayment of the said amounts. It is not necessary however to consider the same as the Plaintiff has not sought any relief in this regard. DEFENDANTS CASE 11. The Defendants filed a common written statement. 9 12. It is contended that the suit is bad for misjoinder of parties. This contention is really irrelevant for as will be seen even if it is well founded it would make no difference to the liability of original defendant No.3. 13. According to the Defendants the suit is barred by the law of limitation. 14. In the written statement it is contended that the Managing Director of the Plaintiff had approached Defendant No.4 to boost the sales of the Plaintiff in Mumbai and Gujrat on consignment basis; it was agreed between them that the first defendant would boost the sales of the Plaintiff in Maharashtra and Gujrat and that accordingly the Plaintiff s mills used to send the consignment to the first Defendants, which in turn at the instance of the Plaintiff s Managing Director used to inflate the value of their invoices enormously with a view to enable the Plaintiff to get large advances from its banker. Thereafter the Plaintiff s mills used 10 to give credit to the first respondent in respect of such inflated and bogus invoices and relative hundies. A similar arrangement also existed between the Plaintiff and the Defendant No.2. 15. The written statement thereafter refers to credit notes issued by the Plaintiff alleging that the same were on account of the inflated and bogus hundis prepared by the Plaintiff s as aforesaid. The Defendants have also alleged that the sum of Rs.20,50,000/- stood adjusted towards the Plaintiff s claim at one stage of Rs.22,51,663.56 leaving a balance amount of only Rs.2,01,663.56. Thereafter the Defendants paid another sum of Rs. 2,00,000/-. In the final analysis, therefore, according to the Defendants on taking of accounts between the parties there is only a sum of Rs. 1663.56 payable by them to the plaintiff. 16. In the last sentence of paragraph 5 of the written statement it is contended that the suit is virtually for accounts. I am unable to agree. As 11 stated above, this is not a suit for accounts or a suit at the foot of the account. The Plaintiff s cause of action is based on the settlement dated 17th January, 1982. 17. As regards the settlement dated 17.1.1982 the defendants have alleged that the same was on account of the undue pressure of the said Radhakishan Ruia and the signatures of Defendant Nos.3 and 4 therein were procured by coercion, undue influence and pressure and by playing fraud. It is alleged that the said writing constitutes merely a tentative settlement and not a conclusive contract, as one of the material terms which was to be incorporated in the final agreement was that the defendant would not make the said payments on their own but that the same would be adjusted slowly and gradually out of the earnings from the new and fresh and subsequent transactions that would resume and follow between the plaintiffs and defendant Nos.1 and 2. It is alleged that it is only on that basis and on account of undue 12 pressure and undue influence and coercion that the signatures of the 3rd and 4th defendants were procured on the writing dated 17.1.1982. The letters dated 1.10.1982 and 28.1.1983 referred to in the plaint were admitted. 18. The defendants have denied that the plaintiff is the successor of DCM Silk Mills and have therefore denied any privity with the plaintiff. It is not necessary to deal in detail with the written statement in so far as it refers to the details of the accounts prior to the settlement. If the settlement is not valid the suit must be dismissed. If, on the other hand, it is valid the same must be enforced. Nor is it necessary to deal with the written statement in so far as it refers to the mortgage, for the plaintiff has not sought to enforce the same. 19. By an Order dated 23.2.2006 S.U.Kamdar,J (as he then was) appointed the Commissioner for recording evidence. I do not find any separate order 13 recording that the issues have been framed. The parties, however, agree that the issues were settled as per the draft issues of the defendants, as modified by the learned Judge. The same have been signed and dated by the learned Judge at the foot of the second page as well as on the reverse of the second page with the endorsement Issues Settled . The learned Judge has also settled the issues by making alterations on the draft issues tendered by the defendants. The issues are as follows: Issues 1. Do the defendants prove that the suit is barred by limitation? 2. Do the defendants prove that the suit is bad for misjoinder of parties? 3. Do the Plaintiffs prove that the dispute between the parties was referred to mediation of Shri Radhakrishnaji Ruia wherein it was agreed between the parties on 17..1982 that the Defendants should pay to the Plaintiffs a sum of 14 Rs.8 lacs in full and final settlement of the Plaintiffs claim as follows: a) Rs.2 lacs to be paid on 3.1.1982 and b) The balance of Rs.6 lacs to be paid by 6 monthly instalments of Rs.1 lac each commencing from 30.9.1982 and last instalment being payable on 31/3/1985. 4. Do the Plaintiffs prove that the Defendants were to mortgage with the plaintiffs their flat No.61 on 6th floor in Sun-flower Building. Cuffe Parade, Mumbai 400 005 by 30.4.1982 in order to secure the above referred payments to the Plaintiffs. 5. Do the defendants prove that the Plaintiffs were to start trade with the defendants on payment of the first instalment of Rs.2 lacs to them? 6. Do the Plaintiffs prove that two cheques of Rs.15,000/- each dated 31.10.1982 and 31.12.1982 respectively and one cheque of Rs.10,000/- dated 31.12.1982 all 15 drawn on Oriental Bank of Commerce, Mumbai towards payment on 2nd instalment due on 30.9.1982 were dishonoured by the Defendants. 7. Do the Plaintiffs prove that the Defendants confirmed the said settlement dated 17.1.1982 by their letter dated 28.1.1983. 8. Whether Defendants prove that the settlement dated 17.1.1982 being a tentative settlement and not on stamp paper and in which the signatures, procured of Defendant No.3 and Defendant No.4 were under undue influence and coercion is a valid and legal settlement. 9. Whether the Defendants prove that after taking all accounts, a balance of Rs. 1633 is due and payable by the defendant to plaintiff. 10. Whether the Plaintiffs prove that there is a privity of contract between the 16 Plaintiff and Defendants in respect of suit transaction. 11. Relief, if any Re: Issue No.1 20. The suit was filed on 23rd January, 1985. The settlement on which the suit is based is dated 17th January, 1982. Under clause 2(b) thereof the balance amount of Rs.6,00,000/- which is claimed in the suit was payable in six monthly instalments of Rs.1,00,000/- each commencing from 30.9.1982. Thus, the suit is filed within the period of limitation in any view of the matter. 21. In the circumstance issue No.1 is answered in the negative. Re: Issue No.2 22. This issue is really academic. It makes no 17 difference to the liability of original Defendant No.3 even if answered in the affirmative regarding his business as the alleged sole proprietor of Defendant No.2. 23. According to the Defendants at the relevant times, Defendant No.2 was the sole proprietory firm of Defendant No.3. The transactions between the Plaintiffs and Defendant No.2 had been carried out at Ahmedabad and it was falsely contended in the plaint that Defendant No.2 carried on business in Mumbai. It is therefore contended that this Court has no jurisdiction to try the suit in respect of Defendant Nos.2 and 3. 24. The contention even if well founded would make no difference to the liability of original Defendant No.3 for he was a partner of both, Defendant No.1 and Defendant No.2 and under the said settlement dated 17th January, 1982 Defendant Nos.1 and 2 are jointly and severally liable in respect of the amounts stated therein (Clause 3A). Thus, original 18 Defendant No.3 would have been liable for the said amount/ the amount claimed in the suit even as a partner of Defendant No.1. There is therefore no question of misjoinder of parties. 25. In the circumstances issue No.2 is answered in the negative. Re: Issue Nos.3, 6, 7 and 8. 26. Defendant No.1 did not deny the fact that the disputes between them were referred to the mediation of the said Radhakrishnaji Ruia. They however contend that they executed the agreement/settlement dated 17.1.1982 under coercion. 27. It is difficult to accept the case of coercion for more than one reason. Firstly, the written statement does not disclose particulars regarding the undue pressure allegedly exercised by the said Ruia. Nor does it contain any particulars 19 regarding any fraud having been played by the Plaintiff or by the said Ruia as regards the said settlement dated 17.1.1988. Even assuming that the said Ruia was an eminent personality in the textile industry, that by itself cannot indicate, much less establish his having forced the Defendants into signing the settlement. Even in the oral evidence there are no particulars as to the manner in which the Defendants were coerced by either the Plaintiff or the said Ruia. It is pertinent to note that Defendant Nos.3 and 4 who signed the settlement were not even examined. 28. It was then contended that the use of the words Tentative settlement arrived at in the settlement dated 17.1.1982 established that there was no conclusive contract/settlement between the parties. Added to this, it was contended, in paragraph 1 of the settlement itself it is stated that the agreement will be made on stamp paper and then finalised. This, according to Mr. Jhuria established that no final settlement was arrived 20 at. 29. I am unable to agree with this submission. The agreement contained all the essential terms and conditions to make it a concluded contract. Mr.Jhuria was unable to indicate any essential term missing in the settlement. The mere use of the words tentative settlement is not conclusive. Nor is the fact that the agreement was to be finalised on a stamp paper indicative of the same not being a concluded contract. Considering the facts of the case and the nature of the documents, the requirement of the agreement being made on a stamp paper is merely formal in nature. It was not a term of the bargain between the parties. 30. The contention is belied by the fact that the parties acted upon the agreement dated 17.1.1982. The Plaintiff gave up its right to an account and to payment on the basis of accounts between the parties. The Defendants thereby benefited by the 21 same. What is more important is what followed. 31. By a letter dated 1.10.1982 (Exhibit B-9/B-10) addressed to the Plaintiff, Defendant No.2 stated :- Further the mills account of Shri Venkatesh Textile (Defendant No.1) and Synthetic Traders (Defendant No.2) which was settled with him before Shri Ruiaji at Rs.8,00,000/- ( Rupees Eight Lakhs) and at that time had made payment of Rs.2,00,000/- (Rupees Two Lakhs) and the remaining sum was settled to be paid in instalments. 32. This letter establishes that the Defendants themselves considered the settlement dated 17th January, 1982 as final and binding between the parties. The letter does not refer to the settlement as being merely tentative. It in fact indicates that the sum of Rs.2,00,000/- was paid pursuant to the settlement. This also establishes that the parties had acted pursuant to the settlement and had accepted the same. 22 33. What follows in the said letter dated 1st October, 1982 further establishes the same. The letter states that the Defendants were enclosing three cheques in the sum of Rs.15,000/-, Rs.15,000/- and Rs.10,000/-. This payment was also obviously pursuant to the said settlement. There is nothing to indicate that the payments were on some other account. 34. The said cheques were dishonoured. The Plaintiff informed the Defendants about the same. In reply, by a letter dated 28th January, 1983 Defendant No. 1 stated that the textile mills were lying closed for a year on account of which trade had been badly effected. The position of the trade, it was stated, was very bad. The Defendant agreed to send a draft in lieu of the said three cheques. This was therefore also pursuant to and in furtherence of the settlement. 35. In the circumstances, the Defendant s contention 23 that the Agreement dated 17.1.1982 was only tentative and had not come into effect is rejected. 36. It was then submitted that the agreement was conditional upon the Plaintiff resuming business with Defendant Nos.1 and 2. I am unable to agree. 37. I will deal with this aspect in detail while discussing issue No.5. I have answered issue No.5 in the negative. My findings in regard to issue No.5 support Mr. Moye s contention that the agreement dated 17.1.1982 was not conditional upon the Plaintiff resuming trade with Defendant Nos.1 and 2. 38. Mr.Jhuria relied upon a letter dated 28.1.1983 (Exhibit P-12), wherein Defendant No.1 stated that it was discussed in the presence of the Plaintiffs with the said Ruia, that new business will start with the Plaintiff and the money will be adjusted along with it. In the said letter Defendant No.1 24 also requested the Plaintiff to start delivery of goods to them and that the remaining amount of Rs. 6,00,000/- would be adjusted as early as possible. 39. Firstly, this contention was raised after the settlement of 17.1.1982. The document dated 17.1.1982 must be construed on its own terms. Assuming that there is anything stated in the letter dated 28.1.1982, contrary thereto it would make no difference. Further, to my mind, the letter dated 28.1.1982 does not even indicate anything contrary to the settlement dated 17.1.1982. It does not indicate that the Plaintiff was bound to resume business with Defendant Nos.1 and 2 and that in the event of it failing to do so, the settlement would be affected in any manner. 40. Lastly, it was contended that settlement dated 17.1.1982 has come to an end and was of no effect by virtue of clause 3(e) . 25 41. This clause is for the benefit of the Plaintiff and not for the benefit of the Defendant. This is clear from the fact that it provides that in the event of the mortgage not being effected, the Plaintiff will not be bound to accept the amount of Rs.8,00,000/- agreed to in the writing. It does not entitle the Defendants to avoid their obligations therein for their default. This is further supported by the fact that clause 3(e) expressly provides that in the event of the Defendants failing to create a mortgage the Plaintiffs would have the right to make a full claim. The clause does not permit the Defendants to avoid the settlement and relegate the parties to a claim on accounts. The Plaintiff, having had the option, chose not to exercise at. In the circumstances, the settlement continued to bind the parties. 42. Mr.Juria relied upon the following cross examination in support of his contention that the agreement was only tentative. 26 Q.52. Attention of the witness is drawn to plaint, Exhibit A . The said document which is purported settlement arrive between the parties starts with the words Tentative Settlement ? A. Certain changes were made with pen before signing of the document by the Defendants and the Plaintiffs in my presence and whatever is written on the document, the Plaintiffs abide by it. Q.56. I put it to you that there is no such agreement/settlement was arrived by and between the parties? A.