IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION SUIT SUIT SUIT NO.1973 OF 1989 NO.1973 OF 1989 NO.1973 OF 1989 Pieco Electronics & Electricals Ltd. .. Plaintiff Vs. Ramesh Agarwal & Ors. .. Defendants Mr.Girish Desai with Ms.Mili Thakkar alongwith Mr.Hemang Engineer i/by M/s.Gordhandas & Fozdar for the plaintiff. Ms D. Jahangir for the 1st defendant. CORAM CORAM CORAM : A.S.OKA, J. : A.S.OKA, J. : A.S.OKA, J. DATE DATE DATE : 03rd & 06th October 2008. : 03rd & 06th October 2008. : 03rd & 06th October 2008. ORAL JUDGMENT: . The plaintiff company has filed this suit for a recovery of sum of Rs.16,42,583.75/- together with interest thereon at the rate of 20% per annum from the date of filing of the suit till realisation. The plaintiff company has prayed for a joint and several decree against the defendants. In the alternative, the plaintiff company has prayed for a decree against the 1st and 2nd defendants in the sum of Rs.11,95,216.90/- together with further interest on the sum of Rs.07,67,362.49/- at the rate of 20% per annum and a decree in the sum of Rs.04,47,367.15/- against the 1st and 3rd defendants together with further interest on the sum of Rs.03,00,633.09/- at the rate of 20% per annum from the date of filing of the suit till realisation. 2 2. According to the case of the plaintiff company, the first defendant was carrying on business in the firm name and style of M/s.R.D.Sales Agencies as a sole proprietor thereof at Mhow, Indore in State of Madhya Pradesh. The 2nd defendant bank is a statutory corporation established under the provisions of the State Bank of Indore (Subsidiary Bank) Act, 1959. The 3rd defendant is also a bank constituted under the provisions of the Banking Companies (Acquisition and Transfer of Undertaking) Act, 1970. The 4th defendant is also a banking company incorporated and registered in United Kingdom having a place of business at Bombay. 3. According to the plaintiff company by an agreement in writing dated 18th June 1982, the 1st defendant was appointed by the plaintiff as a dealer for sale of products of the plaintiff in the State of Madhya Pradesh. According to the case of the plaintiff company, under the dealership agreement entered into between the plaintiff and 1st defendant, the 1st defendant placed various orders with the plaintiff from time to time. As per the said orders placed by the 1st defendant, the plaintiff company supplied its products to the 1st defendant. The receipt of the said goods was duly acknowledged by the 1st defendant. According to 3 the plaintiff company the 1st defendant accepted the invoices raised by the plaintiff in respect of the goods sold and delivered to the 1st defendant and agreed to pay the amounts payable thereunder to the plaintiff company. It is alleged that from the date of execution of the dealership agreement till September 1986, the plaintiff company sold and delivered diverse quantities of goods and products to the 1st defendant and received payments from time to time by cheques drawn by the 1st defendant in favour of the plaintiff either upon the 2nd defendant or 3rd defendant at Manpur and/or Mhow where the 1st defendant was holding bank accounts. It is alleged that the 2nd and 3rd defendants to whom the the said cheques were sent by the plaintiff’s bankers for collection and realisation had agreed to collect and realise the amounts of the said cheques from the account of the 1st defendant. It is alleged that the 2nd and 3rd defendants had agreed to remit the amounts collected to the plaintiff’s bankers as agents and/or sub-agents of the plaintiffs. 4. According to the plaintiff company, for the period between 01st November 1986 and 28th February 1987, the 1st defendant forwarded to the plaintiff in Bombay 16 cheques in the aggregate sum of Rs.12,66,139.49/- drawn on 2nd and/or 3rd defendants on 4 account of the price of the goods sold and delivered by the plaintiff prior to 30th September 1986. Out of the said 16 cheques first ten were drawn by the 1st defendant upon the 2nd defendant at Mhow branch while the remaining six cheques were drawn by the 1st defendant upon the branch of the 3rd defendant at Manpur. The plaintiff company deposited the said 16 cheques with the 4th defendant for collection under bills discounting facility extended by the 4th defendant to the plaintiff. According to the plaintiff, the 2nd and 3rd defendants had agreed to realise and collect the amounts payable under the said cheques and forward and remit the amounts to the 4th defendant. 5. According to the plaintiff company all 16 cheques were returned dishonoured by the 2nd and 3rd defendants respectively by the bankers of the 1st defendant with the remarks "not arranged for" and/or "refer to the drawer". It is alleged that the cheques were returned after considerable delay ranging between two months to four months of the cheques being accepted by the 2nd and 3rd defendants for collection. As there was a delay on the part of the 2nd and 3rd defendants, correspondence was made between the 4th defendant on one hand and 2nd and 3rd defendants on the other hand. It is stated that the 4th defendant had repeatedly called 5 upon the 2nd and 3rd defendants to realise the cheques and issue remittances. It is alleged that the 2nd and 3rd defendants continued to withhold and failed and neglected to inform either the plaintiff or the 4th defendant as to the fate of the 10 cheques which were sent to the 2nd and 3rd defendants for collection. By letter dated 04th March 1987, the 2nd defendant confirmed that the said cheques were still lying with them. It is stated that no reason was disclosed as to why the cheques were retained by the 2nd defendant. It is alleged that even the 3rd defendant failed to inform the 4th defendant any reason for failure to return 6 cheques for a long time. It is alleged that as the 2nd and 3rd defendants failed and neglected to intimate to the plaintiff their failure to realise the amounts payable under the cheques, the plaintiff company was misled and the company continued to the supply of goods to the defendant. 6. The plaintiff company has relied upon letter dated 10th June 1987 sent by the 1st defendant by which the 1st defendant confirmed and admitted his liability to pay to the plaintiff company the amounts payable under the said 16 cheques. It is alleged that by further letter dated 27th June 1987 addressed by the 1st defendant to the plaintiff company, the 1st defendant 6 confirmed the liability and assured to clear the same by 20th July 1987. 7. According to the plaintiff company, some time on 4th or 5th April 1988 the 1st defendant was called at the Head Office of the plaintiff company to sort out the issue of outstanding dues. In the said meeting, the plaintiff company agreed to give credit to the 1st defendant for a sum of Rs.1,77,934.17/- on the 1st defendant agreeing to clear the balance dues by making an initial payment of Rs.3,00,000/- by 15th April 1988 and thereafter by monthly instalments of Rs.1,00,000/- each. According to the plaintiff company, the 1st defendant failed and neglected to comply with the aforesaid assurances and the said fact was recorded by the plaintiff company in its letters dated 03rd August 1987 and 22nd August 1988 respectively addressed to the 1st defendant. 8. As the 1st defendant failed and neglected to abide by the assurances, the plaintiff company by its advocate’s letter dated 13th October 1988 called upon the 1st defendant to pay overdue amount with interest at the rate of 20% per annum. By letter dated 16th December 1988 the 1st defendant confirmed his indebtedness and agreed to furnish a bank guarantee to 7 the extent of Rs.01,00,000/- to Rs.03,00,000/- and agreed to remit the outstanding amount by monthly instalments of Rs.50,000/- to Rs.01,00,000/- each within a period of 24 months. There was a further letter dated 04th February 1989 sent by the 1st defendant in which he stated that there was delay in remitting the agreed amounts on account of his illness. According to the plaintiff company, as the 1st defendant failed to abide by his assurances, a letter dated 01st May 1989 was sent by the advocate for plaintiff to the 1st defendant calling upon him to pay sum of Rs.10,88,225.32/- with interest thereon at the rate of 20% per annum. 9. According to the plaintiff company, the 2nd and 3rd defendants as bankers were under an obligation to intimate the reasons for non collection and non realisation of the amounts payable under the said 16 cheques which they had received for collection and/or realisation. It is alleged that the 2nd and 3rd defendants not only failed to intimate the reasons but failed to return the said cheques to the plaintiff or the 4th defendant within a reasonable time. According to the plaintiff company, the 2nd and 3rd defendants have acted negligently and carelessly and failed to exercise due care and caution which they were supposed to exercise as bankers. The allegation is that the 8 action of withholding and keeping back the cheques by the 2nd and 3rd defendants is not only deliberate and dishonest, but the 2nd and 3rd defendants have acted in collusion with the 1st defendant who was having accounts with the 2nd and 3rd defendants. It is stated that as a result of delay on the part of 2nd and 3rd defendants, the plaintiff company continued to supply goods to the 1st defendant. If the plaintiff company had knowledge of the dishonour of the cheques, the company would not have otherwise supplied the goods to the 1st defendant. The contention is that the 2nd and 3rd defendants were bound in law as bailees and/or bankers to realise the amounts under the said cheques promptly and to remit the same to the plaintiff. 10. The case of the plaintiff is that the loss caused by the 2nd and 3rd defendant was assessed at Rs.16,42,583.75/- inclusive of interest thereon. The particulars of the said amount have been set out in Exhibit ‘I’ to the plaint. As per Exhibit ‘I’, the plaintiff claimed a sum of Rs.12,10,673.43/- being the principal amount payable under the 16 dishonoured cheques. The plaintiff gave credit of Rs.01,77,934.17/- to the 1st defendant and claimed interest at the rate of 20% per annum from the date of the cheque totally amounting to Rs.05.75,588.47/-. The plaintiff company 9 claimed a sum of Rs.09,24,292.62/- from the 1st and 2nd defendants being the principal amount of 10 cheques referred to in the plaint. The plaintiff gave a credit in the sum of Rs.01.56.930.13/- and claimed interest at the rate of 20% per annum from the respective dates of the cheques totally amounting to Rs.04,27.854.41/-. Thus, the plaintiff claimed a sum of Rs.11,95,216.60/- from the 1st and 2nd defendants. 11. The 1st defendant contested the suit by filing his written statement. The 1st defendant contended that as he was not having an office or residence at Mumbai, no part of cause of action against the said defendant has arisen in Mumbai. It was contended that the suit was not maintainable on account of misjoinder of parties as well as misjoinder of causes of action. The 1st defendant admitted that he was the dealer in electrical goods and was at all relevant times carrying on business in the name and style of M/s.R.D.Sales Agencies as a sole proprietor thereof. The 1st defendant did not dispute that under the agreement dated 18th June 1982, the plaintiff company pursuant to the orders and instructions placed by the 1st defendant from time to time sold and supplied products to the 1st defendant. The 1st defendant accepted that from time to time the 1st defendant made payment by cheques to the plaintiff. 10 12. The 1st defendant however denied that between 01st November 1986 and 28th February 1987 the 1st defendant forwarded 16 cheques to the plaintiff as alleged by the plaintiff in the plaint. The 1st defendant denied that the plaintiff company has sold and supplied the 1st defendant the goods of the value as set out in the said cheques. The 1st defendant, therefore denied the fact that the cheques were dishonoured. The 1st defendant also denied that a meeting was held in the office of the plaintiff on 04th or 05th April 1988 and that the 1st defendant agreed to clear the balance as alleged by the plaintiff. The 1st defendant denied to have given any assurances to the plaintiff. The 1st defendant denied to have issued letters dated 15th December 1988 and 04th February 1989 which were relied upon by the plaintiff. Though the 1st defendant did not dispute the receipt of advocate’s notice dated 01st May 1989, he denied the correctness of the demand made by the said notice. The 1st defendant denied the claim of the plaintiff and also denied that the 2nd and 3rd defendants acted in collusion with him. The 1st defendant denied that any cause of action or any part of cause of action arose in Mumbai. It is contended that the suit has been wrongly filed in this Court and if a leave under clause XII of the Letters Patent was 11 granted, the same needs to be revoked. 13. The 2nd defendant contended that the plaintiff had no cause of action against the said defendant. The 2nd defendant contended that the said defendant had no privity of contract with the plaintiff. It was contended that though the said 10 cheques issued by the 1st defndant were dishonoured, as per the prevailing banking practice, the 2nd defendant Bank was entitled to hold back the said cheques upon promise made by the 1st defendant to provide sufficient funds to enable the 2nd defendant to honour the cheques. 14. The issues were settled on 07th July 2004. The issues settled by this Court read thus: (1) Whether defendant no.1 was appointed as a dealer by the plaintiffs for sale of their products, namely, electrical goods for Madhya Pradesh area on the terms and conditions recorded per dealership agreement dated 18th June 1982 being Exh.A to the plaint as alleged in paragraph 1 of the plaint? (2) Whether under the aforesaid dealership agreement, the plaintiffs sold and delivered to 12 defendant no.1 their diverse electrical goods during the said dealership agreement as per the orders of defendant no.1 as alleged in paragraph 3 of the plaint? (3) Whether in respect of the goods sold and delivered by the plaintiffs to defendant no.1, defendant no.1 issued 16 cheques as per Exh.B-1 to B-16 to the plaint of the aggregate value of Rs.12,66,139.49 on account of the price of the goods sold to him drawn in favour of the plaintiffs on defendant nos.2 and 3 bank who were the bankers of defendant no.1 as alleged in paragraph 5 of the plaint? (4) Whether 10 cheques so drawn by defendant no.1 in favour of the plaintiffs of the value of Rs.9,24,292.62 on defendant no.2 which were presented to defendant no.2 through defendant no.4 as the plaintiffs’ bankers were returned dishonoured by defendant no.2 bank after considerable delay as alleged in paragraphs 6,7 and 8 of the plaint? (5) Whether the remaining 6 cheques handed over by the plaintiffs to defendant no.3 through 13 defendant no.4 were similarly returned dishonoured by defendant no.3 after a delay as alleged in paragraphs 6 and 7 of the plaint? (6) Whether the defendant nos.2 and 3 having delayed the return of the dishonoured cheques Exh.B to the plaint to the plaintiffs, are the defendant nos.2 and 3 are liable to the plaintiffs in damages as alleged? (7) Whether the plaintiffs are entitled to recover from defendant no.1 Rs.16,42,583.75 together with interest at the rate of 20% p.a as per the particulars of claim Exh.I to the plaint? (8) Whether the plaintiffs are entitled to recover from defendant nos.3 and 4 Rs.11,95,216.90 and Rs.9,24,292.62 together with interest at the rate of 20% p.a respectively together with interest as per the particulars of claim annexed and marked Exh.K to the plaint? (9) To what reliefs the plaintiffs are entitled? 14 15. It must be stated here that on 06th June 1989, a leave was granted by this Court in favour of the plaintiff under clause XII of the Letters Patent. At this stage, it must be also noted that the 1st defendant had taken out a chamber summons for revoking the leave granted in clause XII of the Letters Patent. By the order dated 13th April 2005 passed by this Court in the said Chamber Summons No.1035 of 2004, the 1st defendant was permitted to withdraw the chamber summons with liberty to raise the issue of jurisdiction at the time of trial of the suit. 16. The plaintiff adduced evidence by examining one Mr.Farokh Nariman Bhiwandiwalla as its only witness. None of the defendants have adduced any evidence. 17. The learned counsel appearing for the plaintiff has taken me through the pleadings, notes of evidence and documents on record. He pointed out that though sufficient opportunity was made available by this Court to the 1st defendant, the said defendant has not adduced any evidence. He pointed out from the written statement of the 1st defendant that the execution of dealership agreement and contractual relationship between the plaintiff company and the 1st defendant has been admitted. He pointed out that secondary evidence of the 15 said agreement was adduced by the plaintiff by producing true xerox copy of thereof as the original agreement has been misplaced. He submitted that the said document has been duly proved by the evidence of the witness Mr.Farokh examined by the plaintiff. 18. He submitted that after this Court had granted a leave under clause XII of the Letters Patent, the issue of jurisdiction is no longer open and the chamber summons taken out by the 1st defendant for revoking the grant of leave has been withdrawn by the 1st defendant. 19. The learned counsel appearing for the plaintiff submitted that in paragraph 5 of his written statement, the 1st defendant has admitted that pursuant to orders placed by the 1st defendant, the plaintiff company from time to time sold and supplied its products to the 1st defendant. He submitted that though the 1st defendant disputed the allegation that the 16 cheques were issued by him, the 1st defendant did not step into witness box to dispute his signatures on the said cheques. He pointed out that the plaintiff company has produced the original cheques. Inviting my attention to paragraph 7 of the written statement of the 1st defendant, he submitted that the 1st defendant has only disputed the contents of the cheque and has thereafter not adduced 16 any evidence. He submitted that the original cheques have been duly proved in the examination in chief of witness Mr.Farokh and therefore the fact that the 1st defendant issued 16 cheques has been duly proved. 20. He invited my attention to the letter dated 16th September 1987 which records all the particulars of the dishonoured cheques. He submitted that if the letters dated 10th June 1987, 27th June 1987 and 22nd August 1988 sent by the 1st defendant are read with the letter dated 16th December 1988 sent by the 1st defendant to the plaintiff, it is clear that the entire claim of the plaintiff was admitted by the 1st defendant. He submitted that the 1st defendant did not enter the witness box to dispute the signatures on the said letters and to dispute the correctness of the contents of the said letters. He submitted that legal notices sent on behalf of the plaintiff are not replied to by the 1st defendant. His submission is that the defence of the 1st defendant is frivolous. 21. He also invited my attention to the material on record as against the 2nd and 3rd defendants. He pointed out that there was a gross negligence on the part of 2nd and 3rd defendants. The plaintiff company has suffered loss as the plaintiff company continued to 17 supply the goods to the 1st defendant as the 2nd and 3rd defendants did not inform the plaintiff about the dishonour of the cheque. He pointed out that no relief was being claimed against the 4th defendant. He has also tendered on record written submissions. 22. The learned counsel appearing for the 1st defendant submitted that the original dealership agreement relied upon by the plaintiff is not produced and no case has been made out for permitting secondary evidence to be adduced in respect of the dealership agreement. She submitted that the alleged copy of dealership agreement produced by the plaintiff is not proved to be a true copy of the original. She submitted that on the copy of the alleged dealership agreement produced by the plaintiff, apart from the 1st defendant, the name of one Dinesh appears as a partner. She pointed out that though name of the said gentleman appears as a partner of the said defendant, the 1st defendant has purportedly signed the said document as a proprietor of M/s.R.D.Sales Agencies. The submission is that the execution of the said document is not duly proved. Inviting my attention to the cross examination of the said witness Farokh, she submitted that the said witness had no personal knowledge of the transaction involved in the suit and the said witness admitted in 18 cross examination that he was deposing only on the basis of record available with the plaintiff. She invited my attention to the reply of the witness to question no.14 by which he admitted that he had no personal knowledge of the execution of the said agreement relied upon by the plaintiff. She pointed out that by way of reply to question no.16, the said witness of the plaintiff reiterated that he had no personal knowledge of the said document signed by the 1st defendant. She submitted that the only witness examined by the plaintiff had no personal knowledge of the suit transaction and he was ignorant about the contents of the said documents. 23. She invited my attention to various averments made in the plaint including an averment in which reliance was placed on invoices issued by the plaintiff. She submitted that the said invoices specifically relied upon in the plaint have not been produced. She submitted that apart from the fact that there was no evidence on record to show that 16 cheques were issued by the plaintiff, evidence in the form of memorandum of return of cheques has not been adduced by the plaintiff. She submitted that there was no evidence on record to show that the cheques were issued by the 1st defendant and that the same were dishonoured. She submitted that even the cheque return memorandums were not filed on 19 record by the plaintiff company. She pointed out that even the statement of the alleged running account referred to in the plaint has not been produced. Inviting my attention to the two legal notices issued on behalf of the plaintiff, she submitted that there was no evidence on record to show that the notices were received by any of the defendants. She submitted that even the particulars of the cheques which were allegedly dishonoured have not been incorporated in notices. Inviting my attention to the annexure to the letter dated 16th September 1987 allegedly sent by the 4th defendant to the plaintiff she submitted that the annexure to the said letter does not bear either the signature of authorised representative of the 4th defendant or a rubber stamp of the 4th defendant bank. She invited my attention to letters dated 10th June 1987 and 27th June 1987 allegedly sent by the 1st defendant to the plaintiff and pointed out that there is no