IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED: 17.09.2008 CORAM: THE HONOURABLE MR.JUSTICE A.C.ARUMUGAPERUMAL ADITYAN A.S.No.98 of 2001 1.United Business Centre, rep by its partner K.N.Unnikrishnan Ayisha Complex, Banerjee Road, Ernakulam, Cochin-18. 2.K.N.Unnikrishnan, Partner, United Business Centre, Ayisha Complex, Banerjee Road, Ernakulam, Cochin-18. 3.Mrs.U.K.Radhamani, Ayisha Complex, Banerjee Road, Ernakulam, Cochin-18. .. Appellants / Defendants -vs- V.Kalyankumar & Company, rep by its Partner, V.Kalyankumar, 61, Sengoda Gounder Street, Angalamman Complex, Erode-1. .. Respondent / Plaintiff Prayer:- This Appeal has been filed under Section 96 of CPC against the decree and judgment dated 19.07.2000 in O.S.No.335 of 1996 on the file of the Principal Subordinate Judge, Erode. For appellants : Mr.A.K.Kumaraswamy, Advocate For respondent : Mr.P.Valliappan, Advocate JUDGMENT This appeal has been directed against the decree and judgment in O.S.No.335 of 1996 on the file of the Principal Subordinate Judge, Erode. 2.The averments in the plaint relevant for the purpose of deciding this appeal sans irrelevant particulars are as follows:- 2(a)The plaintiff is a registered firm doing business in the manufacture of lungies at Erode. The first defendant is a firm and the defendants 2 & 3 are the partners. The defendants used to https://hcservices.ecourts.gov.in/hcservices/ purchase lungies on credit at Erode since March-1995. During the credit business transactions the defendants had with the plaintiff from 10.4.1995 to 10.10.1995 they owe a sum of Rs.4,92,025/50 to the plaintiff. The plaintiff are maintaining true and correct accounts kept in the regular course of the business. The second defendant also doing a business at Erode under the name and style of M/s.United Distributors. Both the first defendant and the said M/s.United Distributors are sister concern managed by the 2nd defendant. For the above said outstanding of Rs.4,92,025/50 the 2nd defendant issued two cheques one dated 14.09.1995 for a sum of Rs.71,639/- bearing the Cheque No.479913 and another cheque dated 8.10.1995 for a sum of Rs.1,33,613/85 bearing the cheque No.479920. Both cheques were drawn on Federal Bank, Erode Branch in the account of M/s.United Distributors on behalf of the first defendant. As per the 2nd defendant's request, both the cheques were presented for enchashment on 1.11.1995 with the South Indian Bank Ltd., Erode. But the above said two cheques were dishonoured due to insufficient funds. The plaintiff issued a notice on 11.11.1995 under the Negotiable Instruments Act calling upon the defendants to pay the sum due under the said cheques. Since the defendants failed to pay the sum due under the above two cheques, the plaintiff filed a criminal complaint against the 2nd defendant under Section 138 of the Negotiable Instruments Act in C.C.No.67 of 1996 on the file of the Judicial Magistrate No.II, Erode. 2(b) On 1.11.1995, the first defendant issued a notice with false and frivolous allegations. The plaintiff issued a notice dated 11.11.1995 to the defendants. The defendants issued a reply notice to the plaintiff's counsel containing false and frivolous allegations. The plaintiff issued a suitable reply through his counsel on 17.11.1995. The allegations contained in the notice that the defendant issued a demand draft for Rs.1,33,613/85 in lieu of the cheque dated 8.10.1995 for a sum of Rs.1,33,613/85 is false and incorrect. The plaintiff adjusted the payment by demand draft dated 19.10.1995 towards the liability. The plaintiff has not violated any of the alleged terms and conditions of the agreement. The plaintiffs have executed the orders as desired by the defendants in accordance with the agreement and there is no violation as alleged in the notice. The defendants are not entitled to any damages. The suit is for the recovery of the price of the textile goods sold to the defendants on credit at Erode and hence the Debt Relief Acts are not applicable. Hence, the suit for recovery of Rs.5,40,685/50 with subsequent interest with costs. 3.The defendants in their joint written statement would contend as follows:- 3(a)The first defendant is the manufacturer of UBC Lungies and the plaintiff is the job worker/contractor of the 1st defendant under the terms and conditions of the job work contract dated 6.7.1995 executed between the plaintiff and the 1st defendant. The plaintiff was bound to make production of UBC Lungies in required quantities according to the exact specifications agreed upon and the samples approved. The plaintiff had undertaken to execute the orders of the 1st defendant in due course and make https://hcservices.ecourts.gov.in/hcservices/ timely supply of the finished goods and that he should not produce lungies of the same gray count, colour and design in excess of the requirement of the 1st defendant or supply of such lungies to any other party or sell in the open market. The first defendant has agreed to make payments of the price of the finished lungies supplied within 45 days from the date of delivery as per clause 12 of the agreement. That is the only liability of the 1st defendant to the plaintiff under the contract. Both parties had agreed that all payments by the 1st defendant should be by 'Account Payee' cheques or crossed demand draft on the basis of clause 13 of that agreement. The allegations that the plaintiff is maintaining true and correct accounts kept in the regular course of the business and that the defendants owe a sum of Rs.4,92,025/50 to the plaintiff during the period from 10.4.1995 to 10.10.1995 are false. These defendants owe no amount to the plaintiff. 3(b) The plaintiff has violated the terms of the agreement. The defendants have caused to send a notice to the plaintiff on 1.11.1995 stating the true and correct facts. The plaintiff has committed the breach of the terms of the contract dated 6.7.1995. The defendants had placed order for the supply of one lakh pieces of lungies for Onam season of 1995 to be supplied by the 1st of August 1995. The defendants had made wide publicity for the Onam season sales. The plaintiff did not supply the full quantity of the goods ordered by the defendants nor did the plaintiff inform their inability in advance as agreed upon in the agreement. The plaintiff made only the part supply of the order, that too after Onam season. Therefore, the defendants could not meet the seasonal requirement of the parties which seriously affected their business. The balance part supply was made by the plaintiff only after the Onam season. It was also not as per the order of the defendants. The plaintiff was prohibited from manufacturing excess quantities of the goods ordered by the defendant. 3(c) It was also prohibited to use the design used for UBC Lungies for the production of lungies to other parties. But it was learnt that the plaintiff had made UBC Lungies in excess quantities using lower quality gray and supplied the same to other parties for lesser price. As the plaintiff supplied lungies to other parties for lesser price with the same design print as that supplied to the defendants using lower quality gray the items supplied by the plaintiff and distributed by the defendants were returned to the defendants by the parties. The defendants were constrained even to recall such items from the parties. The defendants are ready to send back those recalled goods to the plaintiff, provided the plaintiff pays back the value of such goods. The defendants by their letter dated 22.6.1995 wanted the plaintiff to print one item of lungi at Bhuvaneswary Mills, Erode. The matter was discussed with the plaintiff and on the basis of that discussion for the above said purpose 3084.15 meters of gray was purchased from Sreecheeny Fabrices, Combatore, a sister concern of the plaintiff, as per the invoice No.1/11. The same was entrusted with the plaintiff to be handed over to the Bhuvaneswari Mills, Erode, for printing. The Bhuvaneswari Mills, Erode, informed that the goods https://hcservices.ecourts.gov.in/hcservices/ were ready for delivery after printing. Hence, the defendants paid Rs.55,500/- to the plaintiff and sent Rs.34,140/- by demand draft to the plaintiff to be paid to Bhuvaneswary Mills. Thus defendants paid a sum of Rs.89,640/- to the plaintiff on that account. The defendants gave instructions to Bhuvaneswari Mills to return the gray which was found unfit for printing to the plaintiff. The defendants also gave direction to the plaintiff to take delivery of those goods from Bhuvaneswary Mills. Though the plaintiff took delivery of the goods, plaintiff did not send the same to Ernakulam, through ABT parcel service as a self consignment under L/R. NO.38346 after preparing a bill in the name of the 1st defendant. The plaintiff did not send the lorry receipt to the defendants enabling the defendants to take delivery of the same from the ABT parcel service. Hence, the defendants filed a suit against this plaintiff before the Munsif Court, Ernakulam as O.S.No.1282 of 1995. The defendants filed IA.No.5890 of 1995 seeking delivery of the goods sent by the plaintiff and covered by L/R.No.38346. Though the plaintiff herein seriously contested the matter, the Court was pleased to allow the defendants to take delivery of the goods on furnishing security for Rs.82,860/-. The defendants furnished Bank guarantee to the Court and took delivery of the goods. The said case is pending trial. If the plaintiff is contesting the said case, the plaintiff is liable to pay back the sum of Rs.89,640/- together with interest at the rate of Rs.24% per annum from 27.09.1995 onwards. 3(d) The plaintiff approached the defendants on 14.9.1995 to settle the account and pay the amount. As there existed the above disputes with respect to the violation of the agreement defendants settled only two bills then. After allowing the discount the amount of those two bills come to Rs.1,52,851/50. The plaintiff demanded to pay the amount in cash. But the defendants were not amenable to pay the said amount in cash to the plaintiff because under the Income Tax Act the payment of amounts exceeding Rs.10,000/- by cash is prohibited. Further, under clause 13 of the Job Work Contract it was provided that all the payments should be by account payee che ques and demand drafts. All earlier payments to the plaintiff were also by A/C payee cheques and demand drafts. The plaintiff wanted to save time and save the bank charges to be paid for encashing outstation cheques at Erode. Therefore, at the request of the plaintiff, the defendants issued two account payee cheques drawn on the Federal Bank, Erode branch, to the plaintiff and also entrusted with the plaintiff, under stamped receipt as done earlier, a sum of Rs.1,52,851/50 to be deposited in the account of the defendant at the Erode branch of the Federal Bank for the purpose of providing sufficient fund to encash the above said cheques and for saving time. The cheques issued to the plaintiff were cheque No.479918 dated 14.9.1995 for Rs.71,039/- and cheque No.479919 dated 14.9.1995 for Rs.81,812/50 being the cost of two bills. The above said amount was withdrawn by the defendants from their account in Federal Bank, Ernakulam on 14.9.1994 itself and entrusted the same to the plaintiff. If the plaintiff had deposited the said amount of Rs.1,52,851/50 at the Federal Bank Erode, plaintiff could have encashed the above said two cheques at https://hcservices.ecourts.gov.in/hcservices/ Erode. But the plaintiff deposited only a sum of Rs.80,000/- on 16.9.1995 and encashed the cheque No.479919 for Rs.81,812/50. The plaintiff did not deposit the balance amount of Rs.72,851/50 in the Erode Bank as agreed upon. However, with dishonest intention and ulterior motive plaintiff presented the cheque No.479918 for Rs.71,039/- for encashment without depositing the cash entrusted with the plaintiff to be deposited in the Federal Bank, Erode. As the plaintiff is holding with him the entrusted balance amount of Rs.72,851/50, the defendants are not liable to pay the said amount or the amount covered by the dishonoured cheque No.479918 mentioned in the plaint. The cheque No.479913 and the amount shown as Rs.71,639/- in clause VI of the plaint are not correct. The correct No. is 479918 and the amount is Rs.71,039/-. 3(e)The plaintiff came to the defendants on 4.10.1995 requesting the defendants to settle all the accounts. After negotiation they settled the entire claim. The debit note was prepared on 4.10.1995. As per the debit note the total amount due to the plaintiff was fixed as Rs.5,33,613/85. The defendants paid Rs.4,00,000/- by way of Demand Draft on 4.10.1995 itself. After the payment of the said sum of Rs.4,00,000/- there was no balance of Rs.1,33,613/85. The defendant issued a cheque bearing No.479920 dated 8.10.1995 drawn on Federal Bank, Erode branch, for the said sum of Rs.1,33,613/85. With the issue of the said cheque the entire amount was settled to the plaintiff. Unfortunately the said cheque was dishonoured. Therefore, this defendant sent the demand draft No.62526 dated 19.10.1995 for the said sum of Rs.1,33,613/85, towards the amount covered under the cheque No.479920. The said demand draft was sent with the covering letter dated 20.10.1995 by registered post. The defendants have requested the plaintiff to adjust the said sum towards the liability of the said cheque No.479920 and requested the plaintiff to return the above said dishonoured cheque. But the plaintiff did not return the cheque. The defendant issued a notice through his counsel calling upon the plaintiff to return the cheque in his hand. The plaintiff did not send the cheques. On the other hand the plaintiff has filed a false and frivolous complaint with the cheques available with him. The criminal complaint was filed as C.C.No.67 of 1996 alleging that the cheques were dishonoured and the defendants are liable under Section 138 of the Negotiable Instruments Act. These defendants are contesting the said case. The plaintiff has given the said false complaint only with a view to compel the defendants to give up a claim of damages against them. The plaintiff violated the terms of the contract dated 6.7.1995. The plaintiff did not supply the goods for the Onam season. The defendants sustained a loss of business due to the non-supply of the goods by the plaintiff. The plaintiff also sold the cheap quality of the lungies to the third parties, with the trade name of the defendants printed on the lungies and misused the goodwill of the defendants and caused heavy loss to the defendants. These defendants estimated the loss to a tune of Rs.3,00,000/-. The plaintiff was liable to pay the said sum to these defendant. Therefore, there was a negotiation on 4.10.1995. The plaintiff and the defendants agreed the entire claim and it was settled. If the plaintiff dispute the settlement https://hcservices.ecourts.gov.in/hcservices/ dated 4.10.1995, the plaintiff will be liable to pay Rs.3,00,000/- as damages to these defendants. There is no cause of action to file the suit. Hence, the suit is liable to be dismissed. 4.On the above pleadings the learned trial Judge has framed three issues for trial before the trial. On the side of the plaintiff P.W.1 was examined and Ex.A.1 to Ex.A.104 were marked. D.W.1 was examined and Ex.B.1 to Ex.B.3 were marked on the side of the defendants. After going through the evidence both oral and documentary the learned trial Judge has decreed the suit as prayed for with costs. Even though the plaintiff has claimed 21% interest per annum in the plaint, the learned trial Judge has awarded only 12% interest from the date of suit till the date of decree and 6% future interest per annum from the date of decree till the date of realization. As against this, there is no cross- appeal preferred by the plaintiff. 5.Now the points for determination in this appeal are as follows:- 1)Whether a sum of Rs.4,92,025/50 was due from the defendants to the plaintiff towards purchase of the goods (lungies) for the period from 10.4.1995 to 10.10.1995 or the defendants have discharged the entire amount due to the plaintiff as per the settlement entered into between the plaintiff and the defendants on 04.10.1995? 2)Whether the decree and judgment of the learned trial Judge in O.S.No.335 of 1996 on the file of the Principal Subordinate Judge, Erode, is liable to be set aside for the reasons stated in the memorandum of appeal? 6.Point No.1:- The learned counsel appearing for the respondent would contend that the plaint filed by the plaintiff is bereft of any particulars regarding the purchase of the goods by the defendants from the plaintiff from 10.4.1995 to 10.10.1995. But the plaintiff would state in the plaint that only a sum of Rs.4,92,025/50 is the amount due for the above said period from the defendants in connection with the purchase of textile goods from the plaintiff. In support of his contention the learned counsel for the plaintiff has produced invoices and day books to show that the a sum of Rs.4,92,025/50 is the amount due from the defendants for the goods purchased by them for the period from 10.4.1995 to 10.10.1995. The plaintiff have produced following invoices :- Ex.A.26-invoice for a sum of Rs. 54,880.00 Ex.A.40-invoice for a sum of Rs. 1,70,623.50 Ex.A.52-invoice for a sum of Rs. 60,306.00 Ex.A.56-invoice for a sum of Rs. 69,690.00 Ex.A.60-invoice for a sum of Rs. 74,685.75 Ex.A.64-invoice for a sum of Rs. 27,241.25 Ex.A.68-invoice for a sum of Rs. 34,599.00 ------------------- Total Rs.4,92,025.50 ------------------- https://hcservices.ecourts.gov.in/hcservices/ The learned counsel appearing for the defendants relying on the evidence of P.W.1 would contend that as per the settlement entered into between the plaintiff and the defendants on 4.10.1995, the total amount due to the plaintiff was Rs.5,33,613/85 and on the same date a sum of Rs.58,813/90 was agreed to be deducted and out of the balance of Rs.5,33,613/85, a sum of Rs.4 lakhs was paid by the defendants by way of demand draft and that for the balance amount of Rs.1,33,613/85 the defendants gave a cheque, which was unfortunately dishonoured. Thereafter the defendants had issued another demand draft for Rs.1,33,613/- and thus have settled the entire amount due to the plaintiff. 6(a)On the other hand the learned counsel for the respondent would contend that as per the settlement arrived at between the parties on 4.10.1995, only the following amount is due as on 4.10.1995 :- Under Ex.A.58 a sum of Rs. 91,928.75 Under Ex.A.62 a sum of Rs. 80,860.00 Under Ex.A.67 a sum of Rs. 87,600.00 Under Ex.A.70 a sum of Rs.1,32,750.00 Under Ex.A.72 a sum of Rs.1,50,560.00 Under Ex.A.74 a sum of Rs. 48,729.00 ____________ Total Rs.5,92,427.75 ____________ and the said amount was agreed to be settled between the parties and the demand drafts for Rs.4 lakhs and for Rs.1,33,613/85 were given credit to the said amount of Rs.5,92,427/75 and the balance of Rs.58,813/90 was also agreed to be discounted and that the defendants have issued Ex.A.102 & Ex.A.103 to show that the amount due under Exs.A.58, 62, 67, 70, 72, 74 were settled on 4.10.1995. 6(b)The learned counsel appearing for the appellant would draw the attention of this Court to the evidence of P.W.1 and would contend that as per the settlement dated 4.10.1995 the entire amount due to the plaintiff has been settled. But the evidence of D.W.1 would go to show that even though in the written statement defendants would take a stand that as per the settlement dated 4.10.1995 the entire amount due to the plaintiff has been settled, D.W.1 would admit that a sum of Rs.4,92,025/50 worth of goods under seven bills were supplied by the plaintiff not up to the specifications of the defendants and hence the goods supplied under seven bills to the tune of Rs.4,92,025/50 were returned by the defendants on 14.10.1995 to the defendants. Further he would categorically depose that he had obtained acknowledgment from the plaintiffs for having returned those goods. But the defendants have not produced any material to show that the goods supplied under seven bills amounting to Rs.4,92,025/50 were returned to the plaintiff under acknowledgment. D.W.1 would further admit in the cross-examination that the suit has been filed for the amount of Rs.4,92,025/50 due under the above said seven bills. The plaintiff has produced those seven bills, which are exhibited as Exs.A.26, 40, 52, 56, 60, 64 & 68. So it is clear that the settlement https://hcservices.ecourts.gov.in/hcservices/ arrived at between the plaintiff and the defendants under Ex.A.102 & Ex.A.103 are relating to the amount due under Exs.A.58, 62, 66, 70, 72 & 74 and not for the suit claim. 6(c)The learned trial Judge has also decreed the suit only on the basis of Exs.A.26, 40, 50, 52, 56, 60, 64 & 68 and also awarded a reasonable interest of 12% per annum from the date of suit till the date of decree and 6% future interest per annum from the date of decree till the date of realization. I do not find any reason to interfere with the findings of the learned trial Judge, which does not suffer from any illegality or infirmity. Point No.1 is answered accordingly. 7.Point No.2:- In view of my findings in the earlier paragraphs, I do not find any reason to interfere with the Judgment and decree of the learned trial Judge in O.S.No.335 of 1996 on the file of the Principal Subordinate Judge, Erode. Point No.2 is answered accordingly. 8.In fine, the appeal is dismissed confirming the decree and judgment of the learned trial Judge in O.S.No.335 of 1996 on the file of the Principal Subordinate Judge, Erode. No costs. Sd/ Asst.Registrar /true copy/ Sub Asst.Registrar ssv To 1.The Principal Subordinate Judge, Erode. 2.The Section Officer, V.R.Section. High Court, Madras. 1 cc To Mr.P.Valliappan, Advocate, SR.52936 1 cc To Mr.A.K.Kumarasamy, Advocate, SR.53097 A.S.No.98 of 2001 VS(CO) SRA(22/10/2008) https://hcservices.ecourts.gov.in/hcservices/