-1- IN THE HIGH COURT OF JUDICATURE AT BOMBAY O.O.C.J. Short Cause Suit No. 537 of 1988 M/s Madhav Corporation, a registered partnership firm carrying on business at 402, Sujata Chambers 1/3, Abhechand Gandhi Marg Bombay 400 009 ..Plaintiff vs. Amritlal Chemaux Limited having their registered office at Rang Udyan Sitaladevi Temple Road Mahim, Bombay 400 016 ..Defendants Shri M.P.Vashi for plaintiffs Mr.Vaze for defendants CORAM: S.C.DHARMADHIKARI J CORAM: S.C.DHARMADHIKARI J CORAM: S.C.DHARMADHIKARI J 19th, 26th September,2007 19th, 26th September,2007 19th, 26th September,2007 and 3rd October, 2007 ORAL JUDGMENT: ORAL JUDGMENT: ORAL JUDGMENT: 1. The suit has been filed by the plaintiffs for recovery of a sum of Rs.3,50,000/- together with interest on Rs.2,98,000/- at the rate of 18% p.a. or at such other rate as this Hon’ble Court deems just and proper from the date of the suit till payment and costs. 2. The plaintiffs claim to be a partnership firm duly registered under the Indian Partnership Act, 1932. It carries on business, inter alia, as Importer and Exporter. The defendants are a -2- limited company registered under the Indian Companies Act, 1956. It is also recognised as Export House. The defendants are also carrying on business as importer and exporter. 3. The plaintiffs’ case is that on or about 21st September, 1984 pursuant to the discussions which the plaintiffs had with one Mr.Pratapbhai Jassani, broker of the defendants, the defendants offered to the plaintiffs their import licence bearing no.P/W/3003791 dated 24th June, 1983. The offer of the defendants was for the purpose of import of Propylene Glycol USP (hereinafter referred to as the "said product"). The plaintiffs’ further case is that CIF value of this product is Rs.8,25,000/- At the time when the defendants represented to the plaintiffs that their import licence was valid and that this product/material could be imported on the said licence. For utilisation of the said licence, according to the plaintiffs, the defendants desired that the plaintiffs should make payment of premium at the rate of 7.25% of the CIF value so also the margin amount of 5% of CIF value. This offer was accepted by the plaintiffs. The plaintiffs agreed to purchase the said licence from the defendants for the purpose of utilising the same for import of the said product. -3- 4. This arrangement was recorded by the plaintiffs in letter dated 21st September, 1984 and the plaintiffs forwarded the Intent of M/s Chemet bearing No.5247 dated 19th September, 1984 to the defendants for import of about 100 M.T. of the said product on the terms and conditions set out in the said Intent. Along with the said letter, the plaintiffs also forwarded to the defendants two cheques, both of the same date for premium amount as agreed. The cheques were of Rs.58,000/- and Rs.40,000/- respectively. The plaintiffs also instructed the defendants to establish the Letter of Credit with the conditions mentioned in the letter dated 21st September, 1984. 5. After encashment of the cheques the defendants opened the Letter of Credit with Indian Overseas Bank, Mahim Branch on 3rd October, 1984. 6. It is alleged by the plaintiffs that thereafter on or about 8th October, 1984, the defendants got antedated agreement in duplicate prepared in the format of letter purporting to be of 10th September, 1984 and got the same signed by the plaintiffs stating that the same was formal and usual. The case set up by the plaintiffs in para 5 -4- is that this agreement was signed in good faith and without reading its contents. On the same day, the defendants also got the indemnity bond signed in similar manner. It is plaintiffs’ case that the plaintiffs subsequently learnt that in the agreement dated 10th September, 1984 and indemnity bond the defendants incorporated several statements which were false to their knowledge. The defendants incorporated several terms which were never agreed upon. 7. However, at the same time, the plaintiffs did not dispute that pursuant to the said arrangement, consignments of the said product were imported by making payment. The defendants informed the plaintiffs that documents are having some discrepancies. Initially the plaintiffs were reluctant to accept the documents as there was gross delay in presenting the document. But since the plaintiffs had commitment in the market to deliver the goods, later on by their letter dated 31st December, 1984 they informed the defendants that the discrepancies were agreeable to them. It is the case of the plaintiffs that the goods had arrived earlier and were incurring demurrage but in the light of the above they agreed to accept the documents. They also instructed their clearing -5- Agent to clear the said goods. 8. It is the case of the plaintiffs that in the mean time they learnt through their clearing agent that the consignments of the said product imported on the defendants’ licence was not being cleared by Customs Authority on the ground that the material was wrongly imported. The licence was not valid for import of O.G.L. items (Open General Licence Items). The objection of the Customs Authorities was that the licence being additional licence OGL items were not permitted to be imported during extended period. This fact was put on record by the plaintiffs by their letter dated 12th January, 1985 and the defendants were requested to follow up the matter with the Customs Authorities for clearance of the consignments. The defendants had received this letter but, according to plaintiffs, there was no response. In the mean time the defendants by their letter dated 12th January, 1985 which was received by the plaintiffs on 14th January, 1985 replied to the plaintiffs’ letter dated 31st December, 1984 and informed the plaintiffs that they should make payment for retirement of the documents and in case the documents were not retired by making payment within two days the bankers will be instructed by the -6- defendants not to accept the documents. The plaintiffs pointed out to the defendants by their letter dated 14th January, 1985 their difficulty in clearance of the consignments from the customs authorities and raised an issue of invalidity of the licence. The contents of the letter are referred to in para 8 of the plaint. Thereafter, the plaint proceeds to allege that the plaintiffs informed the defendants that despite the difficulties with regard to the licence, the documents are returned by the defendants, they shall do so at their sole risk and responsibility. The plaintiffs will hold them responsible for the loss of profit and reputation so also for damages and loss that they may suffer. The plaintiffs, therefore, desired the defendants to first get the documents cleared from the customs authorities. However, there was no reply to the letter for a long time. 9. It is in these circumstances that the plaint alleges that the defendants put the plaintiffs to a wrongful loss by making wrongful gain for themselves. They offered licence to the plaintiffs for import of the said product knowing fully well that as against the said licence the said product could not be imported. There is suppression of -7- material defects in the licence by the defendants. For these false and fraudulent representations the defendant collected a sum of Rs.98,000/-. The plaintiffs thus estimate their damages at Rs.2,00,000/- for loss of profit at Rs.2/- per K.G. being difference in cost price and price that they would fetch by sale of the imported goods. The loss of reputation as head of damage is not separately assessed and total claim is restricted by the plaintiff to Rs.2,00,000/- and that is how the decree is claimed in the sum more particularly set out in the particulars of claim at Exh.F to the plaint with interest on the grounds stated in para 13 of the plaint. 10. Upon the plaint being lodged, the writ of summons was duly served on the sole defendants. The sole defendants filed their written statement in this Court on 25th April, 1990. Apart from stating that the plaint is not disclosing any cause of action so also raising the plea of Limitation, the written statement proceeds to state that the entire claim is false, frivolous and vexatious. The plaintiffs have not approached the Court with clean hands. The correspondence and relevant documents have been suppressed. -8- 11. While dealing with para 2 of the plaint, the written statement avers that on 21st September, 1984, discussion was held between the brokers acting on behalf of the defendants with the plaintiffs. It is true that the defendants offered to the plaintiffs their import licence. It is admitted that the licence was offered for import of the said product. The broker has been instrumental in introducing the parties. However, it is stated that the discussions were held much prior to 10th September, 1984 and not on 21st September, 1984. The terms were also agreed as stated in para 7 of the written statement. 12. The written statement alleges that in the course of a meeting prior to 10th September, 1984, the plaintiffs examined the import licence and satisfied themselves about the validity period thereof. It is only when all this was done that the terms and conditions were agreed upon and incorporated in the agreement in the form of letter dated 10th September, 1984. The terms and conditions are not disputed so also the fact of opening of Letter of Credit and payment of Rs.98,000/- However, the defendants have referred to several letters in para 7 of the written statement. It is stated that on 17th December, -9- 1984 vessel arrived with the said material on Board. This fact was duly informed by the defendants and there was no delay. However, the defendants were surprised to receive a letter dated 18th December, 1984 of the plaintiffs stating therein that the plaintiffs did not desire to accept the owners’ documents. Thus, the plaintiffs expressed their unwillingness to take delivery of the goods. The defendants thereafter sent a letter dated 19th December, 1984 in which events of 17th December, 1984 are recorded. Resumed on: 26.9.2007 13. In paras 7 and 8 of the written statement, the defendants allege that the plaintiffs were deliberately avoiding to take delivery. They took no positive steps to retire the documents but simply whiling away time. In fact, it was offered by the defendants that if plaintiffs incur any expenses on account of retirement of documents the defendants would have reimbursed the same. The defendants state that they were fully abiding by their obligations under the agreement. The defendants specifically allege that the plaintiffs have suppressed the correspondence mentioned in para 8 of the written statement. The defendants -10- urge that it was contractual obligation of the plaintiffs to pay the customs and other dues and unless they pay and discharge their liability, it was not possible for the defendants to clear the said consignments. 13. In para 9 of the written statement, the defendants urge that the agreement dated 10th September, 1984 was executed in the form of a letter which was confirmed, accepted and agreed by the plaintiffs. Once again, they accused the plaintiffs of suppressing the agreement and indemnity bond. The defendants deny any oral agreement allegedly arrived at on 21st September, 1984. The defendants submit that in absence of any particulars with regard to oral agreement and the persons who are responsible for the same, it is not possible to accept the version of the plaintiffs. The defendants submit that they would not undertake importing 100 MT of materials on behalf of the plaintiffs without any writing. Thus, there was no written agreement as stipulated in the foregoing paras of the written statement. 14. With regard to correspondence and more particularly the letter of January, 1985 the defendants urge that the plaintiffs acquisad and -11- admitted the agreement. Thus, it is the contention of the defendants that the plaintiffs have not alleged that the agreement dated 10th September, 1984 and Indemnity bond dated 8th October, 1984 were antedated. Such a plea was never raised in the correspondence and it is for the first time in plaint that the same has been raised as an afterthought. Thus, with regard to the averments in the plaint, there is a detailed written statement on record clarifying the entire position with regard to the consignments and denying liability to pay the sum as demanded. It is denied by the defendants that there was any defect in the licence. The pleading in that behalf in the written statement is that several consignments entered the Indian water with the aid of the said licence and it is inconceivable that any objection would be raised with regard thereto. In para 12 of the written statement, this is what the defendants have stated: "...the defendants are not aware of and do not admit that the plaintiffs had learnt through their clearing agents that the consignments of "Propylene Glycol USP" were not being cleared by the customs authority on the ground that the materials were -12- wrongly imported or that the additional licence of the defendants was not valid for import of OGL documents. The defendants are also not aware of and do not admit that there was any objection of the customs authority that the under additional licence, which the plaintiffs had satisfied themselves before entering into the said Agreement dated 10th September, 1984 the import of OGL item was not permissible during the extension period of validity." 15. Thus, by raising the aforesaid pleas, the defendants urged that the suit be dismissed. On the basis of the plaint and written statement filed in this Court, on 14th December, 2006 the following issues were framed. 1. Does the plaintiff prove that the agreement and indemnity bond dated 10th September, 1984 and 8th October, 1984 are false and fabricated and not binding on the plaintiff? 2. Does the plaintiff prove that there was any defect in the defendants’ licence? -13- 3. Does the plaintiff prove that the defendant is liable to refund the sum of Rs.98,000/- with interest @ 18% p.a.? 4. Does the plaintiff prove that the defendant is liable to pay damages of Rs.2,00,000/- with interest @ 18% p.a. to the plaintiff for loss of profit and reputation in market? 5. What decree and order? R E A S O N S 15A) This Court while framing the issues directed filing of Affidavit of Documents and completion of inspection. Thereafter the plaintiffs were to file the affidavit in lieu of examination in chief. This Court appointed a Commissioner to record evidence. 16. After completion of the above steps, the sole witness examined by the plaintiff was cross examined by the defendants. The defendants did not lead any evidence. -14- 17. The plaintiff examined Ketan S.Seth, one of its partners, and much emphasis has been laid on his deposition and more particularly paras 3 to 5 thereto. The plaintiffs’ witness states that the defendants offered the plaintiffs to import the said product of CIF value of Rs.8,25,000/- on the import licence bearing no.P/W/3003791. The witness states that on the defendants’ representation to the plaintiffs that the import licence was valid and the material/product could be imported against the same that the plaintiffs decided to import the same. . Further agreement also speaks of the acceptance of the offer of the defendants made to the plaintiffs to import 100 M.T. of the material. It is deposed that pursuant to this agreement, the indent of M/s Chemet dated 19th September, 1984 for import of about 100 M.T. of the said product was forwarded by the said letter dated 21st September, 1984 by the plaintiffs to the defendants along with two letters and two cheques, details of which are more particularly set out in para 4 of the deposition. It is also stated that the cheques were encashed and the defendants thereafter opened Letter of Credit (L/C) with Indian Overseas Bank, Mahim Branch on 3rd October, 1984. Further, the witness deposes that on or about 8th October, 1984 -15- the defendants got antedated agreement in the form of letter dated 10th September, 1984 signed by the father of the deponent and partner of the plaintiffs’ firm. 18. The witness further deposed that the material was imported and reached Mumbai in the month of December, 1984. The defendants desired that the plaintiffs should retire the documents by making payment. However, it is stated by the witness that the plaintiffs were reluctant to retire the documents as quantity was exceeding by 5 M.T. and there was gross delay in presenting the said documents. The witness further states that despite this reluctance on account of commitment made in the market, the plaintiffs agreed to retire the documents despite the discrepancies and delay. 19. Thereafter in para 7 of his deposition, the witness states thus: "....The objection of the Customs Authorities was that the said licence being an additional licence, the import of OGL items was not permitted during the extended period of validity thereof. The plaintiffs vide their letter dated 12.1.1985 placed all -16- the facts on record and requested the Defendants to follow up the matter with the customs authorities for clearance of the said material. The said letter is signed by my father, one of the partners of the plaintiffs. I am familiar with his signature and I identify the signature of the said letter. The contents of the said letter are correct." The witness thereafter speaks about the correspondence and states that the invalidity of the licence was a fact brought to the notice of the defendants through their broker Mr.Jassani during telephonic conversation and the defendants and the said Mr.Jassani suggested that the defendants would retire the documents and arrange to put the material in bond to avoid demurrage and other charges to which arrangement the defendants had agreed. The witness states that he made it clear to the said Mr.Jassani that he will hold the defendants responsible for the loss of profit, reputation and all other loss and damages. It is in such circumstances, he accuses the defendants of failing and neglecting to get the documents cleared from the customs authorities. In paras 9 and 10 of the deposition the witness of the plaintiffs states -17- thus: "9. I say that the Defendants themselves have vide their letter dated 25.4.1985 addressed to the Indenting Agent viz. M/s Chemet of the Foreign party pointed out that as the documents were received late and as there were discrepancies in the original documents with the letter of Credit, the bankers of the Defendants have returned the documents to the negotiating bank. The defendants have further stated that in view of an inordinate delay in receipt of the original documents, the discrepancies and in view of the heavy demurrage, the defendants had decided not to retire the documents and take delivery of the goods.... 10. I say that vide our Advocate’s notice dated 5.6.1985, the plaintiff called upon the defendants to refund the said amount of Rs.98,000/- wrongfully collected from the defendants to the plaintiffs. The plaintiffs also demanded further sum of Rs.2 (two) lacs as damages for the loss of profit with the plaintiffs had suffered in the transaction. Vide a reply dated 24.6.1995, -18- the defendants raised false contentions. ...." 20. This witness has been cross examined by the defendants. Reliance is placed upon his cross examination to demonstrate that the version of the plaintiffs has not been shaken in any manner. The witness has not been cross examined on vital issue is the submission. 21. Before the cross examination, the correspondence and the documents which are part of the pleadings have been admitted with their contents and, therefore, duly exhibited on record. Before me, there is no dispute that Exhibits P-1 to P-9 are the documents which have been tendered on behalf of the plaintiffs whereas the documents Exh.D-1 and Exh.D-2 are tendered on behalf of the defendants. From a perusal of the documents which have been filed by the defendants, several documents are admitted. Some are exhibited as Exh.D-3 to D-17. 22. Exhibit D-16 is the licence whereas Exh.D-17 are the copies of the plaint and judgment in City Civil Court Suit No.5846 of 1988. -19- 23. The entire cross examination is in question answer form. Cross examination reveals that the plaintiffs are in import and export business in chemicals like Propyline Glycole (the said product). The plaintiffs’ witness admits in the cross examination that the plaintiffs did not have any licence to import and export the produce like Propylene Glycol. In fact, he states that there was no such licence prior to 1984 and the practice of the plaintiffs was to utilise the licence that of the defendants and others for import. In reply to the question no.18 the plaintiffs’ witness states that he knew some of the export houses who have import licences and such information was available to him through brokers. However, the witness admits that the plaintiffs have no brokers. The practice when overseas supplier places any order on behalf of the plaintiffs is stated by him in answer to question nos. 21 and 22. In reply to question no.23, the witness states that the plaintiffs ensure that the licence was useful for the intended import by relying upon the assurance and reputation of the licence holder. The witness states that he had not personally instructed the Advocate to draft the plaint but his father did. The correspondence is also signed by his father. The witness of the plaintiffs admits that payment -20- for the imported goods will have to be made by the plaintiffs provided the import is proper. The witness admits that the plaintiffs were responsible for clearance of the goods, except the licence. With regard to the opening of the letter of credit and receipt of documents the witness admits that they have in deed been received. The discrepancies are also admitted. 24. Question No.36 is in the following term. Q.36: Did you make the payment? A: No, because the consignment which was sent was not getting cleared by the Customs due to deficiencies in the licence. Rest of the cross examination is not material save and except Question Nos.38 to 41 where the witness admits that earlier also a product Pyridine was imported and since there were some disputes a suit was filed in the City Civil Court which the plaintiffs lost. 25. I am not referring to other questions put in the cross examination save and except question no.65 which is posed and answered as under: -21- Q:65: Is it the same licence under which the suit goods were imported? A: The details of the licence were not provided to us at the time of opening the L/C. The licence was given to us when the goods arrived at Bombay Port and the said licence was given for the purpose of clearing the goods from the Customs after completing the process and formalities as were required at that time. 26. A suggestion was also put that the suit is false and frivolous which is of course denied. 27. The submission of Mr.Vashi appearing on behalf of the plaintiffs is that issue nos. 1 and 2 are proved in as much as the material produced by the plaintiffs and their witness so also his deposition shows that the agreement and indemnity bond are false and fabricated and not binding on the plaintiffs so also there was defect in the defendants’ licence. Mr.Vashi submits that the case put up in the written statement and denials therein are of no assistance because the defendants have not stepped into the witness box. The -22- defendants cannot rely upon any admission or contradiction in the version of the plaintiffs, more so, when the licence in question did not cover the item Propylene Glycol. He submits that the licence did not permit import of this item. Open General Licence (OGL) items did not mention the material which was imported by the plaintiffs. He submits that as on the date of the order placed