1. This appeal is by defendants No.1 and 2 before the Court of the XIV Additional City Civil Judge at Bangalore (CCH.No.28) (hereinafter for brevity referred to as the Trial Court ). The present respondent No.1 as a plaintiff had instituted a suit against the present appellants arraigning them as defendants No.1 and 2 and five other defendants as defendants No.3 to 7 in O.S.No.9913/2005 for recovery of a sum of Rs.4,84,359/- along with interest there upon at the rate of Rs.9% per annum.
2. The summary of the case of the plaintiff in the Trial Court was that, it is a Company incorporated under the Companies Act, 1956 (hereinafter for brevity referred to as the Act ). The defendants No.1, 2, and 3 are also registered Companies under the same Act. The plaintiff - Company was engaged in the business of freight forwarder and renders service of the shippers like the defendants for freight and other services in respect of the said carriage undertaken by them. The defendants No.1 and 2 who are the Shippers entrust the cargo either in their name or in the names of their agents including M/s. Web International Cargo on their account. The plaintiff Company as a freight forwarder, in turn, entrusted the cargo to the actual carrier who issues Air Way Bill or air consignment note to the shipper or to their agents.
3. In the instant case, the carriage was done by the plaintiff Company itself for the defendants. Accordingly, all the communications were sent to them for confirmation.
It is further the case of the plaintiff Company that the plaintiff Company vide Air Way Bill (AWB) No.618 BLR 3076 4930 transported the cargo and delivered it in good order and condition at Los Angeles (USA), through Singapore Airlines - Cargo. In that regard, the plaintiff raised an invoice bearing No.A/028508 dated 09-10-2002 for a sum of Rs.5,43,792/-. In order to discharge the said liability, the defendant No.1 issued a cheque for a sum of Rs.5,40,126/- and acknowledged the liability. However, when presented for realisation, the said cheque came to be dishonoured for insufficiency of funds. When the same was brought to the notice of the defendants, they requested for representation of the same. Accordingly, when it was presented again, it was disnohoured once again for insufficiency of funds. This made the plaintiff - Company to institute a Criminal Case for the offence punishable under Section 138 of the Negotiable Instruments Act, 1881 (hereinafter for brevity referred to as N.I. Act ) against the defendants which Criminal Case was pending as on the date of filing of the suit.
The plaintiff has also stated that in order to reduce their liability, the defendants have paid a sum of Rs.80,000/- on 14-12-2008. The defendant No.4 was representing defendants No.1 and 2 at Bangalore as Branch Manager, defendant No.5 was the Manager (Operations) and Defendant No.7 was the Vice President of Defendants No.1 and 2. All of them were categorically participating in the business of defendant No.1 - Company. The defendants No.3 and 4 were holding key posts at the relevant point of time. Defendant No.3 was using the trade licence of defendant No.1 Company including CHA licence and IATA authorisation without any authority. The defendant No.3 had executed Air Way Bill through IATA agents like the plaintiff showing themselves as the shippers and gave a post-dated cheque of the defendant No.1. The Air Way Bill of defendant No.1 was misused and defendants No.3 to 7 were misleading the clients. With this, the plaintiff Company contended that the defendants are jointly and severally liable to pay it a total sum of Rs.5,84,359/-.
4. In response to the suit summons served upon them, the defendants appeared through their counsel in the Trial Court. However, it was only Defendant No.1 - Company which filed its Written Statement and the remaining defendants adopted the said Written Statement even for them also.
5. In its Written Statement, the defendant No.1 Company, though admitted that defendants No.1 and 2 were Companies incorporated under the Act, however, it denied its alleged relationship with defendant No.3. It categorically denied that the defendant No.1 had ever entrusted the cargo in the name of the third defendant on its account or on the account of the second defendant. It also denied that the carriage was done by the plaintiff and the invoice was raised on the defendants. The first defendant apart from denying all other plaint averments specifically stated that there was no privity of contract between it and the plaintiff - Company. It further contended that defendant Nos.1 and 2 were not the signatories to the cheque in question.
Further, the defendant No.1 in its Written Statement also contended that defendant Nos.4, 5, and 7 have acted fraudulently when they were serving in their respective capacities with defendants No. 1 and 2. After noting their fraudulent acts, defendants No. 1 and 2 have terminated their services. It is for these reasons, the alleged illegal acts of the defendants No.4, 5 and 7 were without any authority and therefore are not binding on defendant No.1.
The defendant No.1 in its Written Statement further stated that defendant No.7 was appointed in the capacity of the Vice President Cargo with the second defendant to look after their entire cargo operations. The defendant No.4 was a Branch Manager of Travel Division of the first defendant Company and having custody of all the documents.
Defendant No.1 has in its Written Statement given a detailed account of the alleged fraudulent acts said to have been committed by defendants No.4 to 7 against the interest of defendants No.1 and 2. With this, the defendant No.1 prayed to dismiss the suit of the plaintiff.
6. Based on the pleadings of the parties, the Trial Court framed the following issues for its consideration:-
1. Whether plaintiff proves that they are entitled for freight and other charges for the services rendered by the plaintiff to the defendant sum of Rs.5,43,792/-?
2. Whether plaintiff proves that the 1st defendant issued cheque for Rs.5,40,126/- and which was dishonoured as contended in para 6 and 7 of the plaint?
3. Whether the suit is barred by limitation?
4. Whether the defendants 1, 2 and 6 prove that the plaintiff has filed this suit in collusion with defendants 3, 4, 5 and 7 as contended in para 19 of the Written Statement?
5. Whether plaintiff is entitled for interest at the rate of 9% per annum?
6. Whether plaintiff is entitled for the reliefs sought?
7. What order or decree?
7. In support of its suit, the plaintiff Company examined one Prakash, its Power of Attorney holder as PW-1 and got marked documents from Exs.P-1 to P-18. On behalf of the first defendant Company its Branch Manager Sri. Asifulla Khan was examined as DW-1 and got marked documents from Exs.D-1 to D-8.
8. After hearing both side, the Trial Court by its judgment and decree dated 27-08-2011 answered issues No.1, 2, 5 and 6 in the affirmative and issues No.3 and 4 in the negative and decreed the suit of the plaintiff - Company with costs. It is against the said judgment and decree, the defendants 1 and 2 in the Trial Court have preferred this appeal.
9. Lower Court records were called for and the same are placed before this Court.
10. Though initially the appeal has been filed as against six respondents, however, during the pendency of the appeal, notice to respondent Nos. 2 to 6 was dispensed with at the request of the appellants vide order dated 21-03-2014. As such, the present appeal is confined only as against respondent No.1 (plaintiff).
11. Heard the arguments of the learned counsel for the appellants/defendants No.1 and 2.
12. Since the respondent No.1, represented by Power Attorney holder, even after service of notice had remained absent and did not engage the services of any Advocate nor present in person when the case was taken up and no argument was addressed from the side of the said respondent.
13. Perused the materials placed before this Court including the memorandum of appeal and the impugned judgment.
14. For the sake of convenience, the parties would be henceforth referred to with the ranks they were holding before the Trial Court respectively.
15. The main point of the learned counsel for the appellants/defendants 1 and 2 is that, there is no privity of contract between defendant No.1 and 2 (appellants) and the plaintiff. Merely because a cheque at Ex.P-6 is said to have been issued from the account of the defendant No.2, by that itself, it cannot be inferred that defendant No.2 was in any way liable to the plaintiff.
He further submitted that when the defendant has taken a specific plea that it was defendant Nos.4 to 6 who were managing the affairs of defendant No.3 and also for a short period were working for defendant Nos.1 and 2, and have played fraud and misused the cheque of the plaintiff, in such a situation, the burden of proving the alleged privity of contract and alleged service by the plaintiff to the defendant Nos. 1 and 2 was on the shoulder of the plaintiff Company which it failed to discharge. However, the Trial Court being carried away with the fact that the dishonoured cheque at Ex.P-6 was standing in the name of defendant No.2, has held that both the defendants No.1 and 2 along with other defendants are liable to the plaintiff - Company.
16. In the light of the materials placed and the arguments addressed, the points that arise for my consideration in this appeal are:
1] Whether the plaintiff Company has proved that the defendants No.1 and 2 are also liable to it in a sum of Rs.5,43,792/-?
2] Whether the judgment and decree under appeal warrants any interference at the hands of this Court?
17. It is not in dispute that the plaintiff Company is a freight forwarder and the Defendant Nos. 1 and 2 are shippers. It is also not in dispute that at the relevant point of time, the defendants No.4, 5, 6 and 7 were under the services of defendants No.1 and 2. It is also an admitted fact that the cheque at Ex.P-6 has been issued from the account of defendant No.2 Company and the same has been returned dishonoured. It is in the light of these undisputed facts the case has to be analysed.
18. Pw-1 Prakash, in his Examination-in-chief in the form of Affidavit evidence has reiterated the contentions taken up by the plaintiff - Company in its plaint. Apart from stating that the plaintiff is a freight forwarder and defendants No.1 and 2 are Shippers, PW-1 has stated that the plaintiff - Company had carried cargo vide Air Way Bill (AWB) No.618 BLR 3076 4930 and discharged the same in good order and condition at Los Angeles (USA), through Singapore Airlines. In that regard, an invoice bearing No.A-28508 dated 09-10-2002 for a sum of Rs.5,43,792/- was raised by the plaintiff Company.
The witness has further stated that, towards the dischargal of the amount due, the defendants issued a cheque to it drawn on ICICI Bank Limited, Bangalore Branch, for a sum of Rs.5,40,126/-. The said cheque when presented for realisation, was twice dishonoured. In that regard, the plaintiff has also instituted a Criminal Case before the XV Metropolitan Magistrate at Chennai in C.C.No.5903/2003, which case is still pending.
The witness has also stated that during the pendency of the Criminal Case, the defendants have made a payment of a sum of Rs.80,000/-. The witness alleged that defendants No.4, 5 and 7 were serving defendants No.1 and 2 in various capacities. Those three officials took away some of the business from defendants No.1 and 2 and formed the third defendant -Company.
PW-1 further stated that defendants No.1 and 2 terminated the services of defendants No.4 to 7 on 22-04-2003. According to PW-1, it is also brought to the notice of plaintiff – Company that defendants No.3 to 7 had misused the office position and the trade licence of defendants No.1 and 2. However, PW-1 stated that the defendants in order to deprive the plaintiff - Company of its lawful dues, are alleging against each other and attempting to shift the liability.
In his support, PW-1 got marked a photocopy of Air Way Bill at Ex.P-2; a copy of the confirmation letter of plaintiff said to have been sent to the defendant No.1 at Ex.P-3; a single sheet document titled AIR - MANIFEST at Ex.P-4; a photocopy of invoice said to have been issued by the plaintiff to the defendant No.3 at Ex.P-5; the alleged dishonoured cheque in original at Ex.P-6; several e-Mail correspondences at Exs.P-7 to P-12(a). Letter said to have been issued by the plaintiff to the defendants after the dishonour of the cheque is marked at Ex.P- 13. Banker s endorsement regarding dishonour of the cheque is at Ex.P-14. A copy of the legal notice said to have been sent by the plaintiff to the defendants after dishonour of the cheque is marked at Ex.P-15; a copy of the letter shown to have been issued by the defendant No.1 to All Airlines at Bangalore was marked at Ex.P-16; a photo copy of private complaint under Section 200 of the Code of Criminal Procedure, 1973, said to have been filed by the plaintiff against defendant No.1 and others was marked at Ex.P17 and a receipt dated 14-12-2002 issued by the plaintiff R. Company for having received a sum of Rs.80,000/- from the defendant No.1.
This witness was subjected to a detailed cross-examination where he has given some more details about the alleged transactions.
19. Dw-1 Asifulla Khan in his evidence has reiterated the contentions taken up by defendant No.1 in its Written Statement. He has specifically denied that there was any business transactions between the defendants No.1 and 2 with the plaintiff - Company. He categorically stated that neither the first defendant nor the second defendant has issued any cheque to the plaintiff - Company. He stated that at no point of time, the defendants 1 and 2 have accepted any work from the plaintiff - Company. On the other hand, he contended that defendants No.4, 5 and 7 have acted detrimental to the interest of the defendants No.1 and
2. They have issued a communication to All Airlines at Bangalore on 22-04-2003.
DW-1 has also stated that defendants No.4, 5 and 7 have diverted the business of defendants No.1 and 2 and started their own Company. After giving several details of the alleged fraudulent acts said to have been committed by defendants No.4,5 and 7 which was earlier stated by defendant No.1 - Company in its Written Statement, DW-1 stated that, in no way, the defendants No.1 and 2 were liable to the suit claim.
In his support, he got marked three copies of the order said to be pertaining to the termination of defendants No.4, 5 and 7 at Exs.D-2, D-3 and D-4 respectively. A certified copy of the order sheet in Criminal Case No.367/2003 was marked at Ex.D-5. A certified copy of the complaint dated 21-12-2004 and which is in Marathi language was marked at Ex.D-6. A true copy of the verification statement in P.C.No.42/2004 was marked at Ex.D-7. A copy of Criminal Complaint No.367/Misc/2003 was marked at Ex.D-8.
20. An analysis of the pleading of the parties and the evidence placed before the Court would clearly go to show that the entire case of the plaintiff Company is based on the alleged invoice said to have been raised by it at Ex.P-5 and a dishonoured cheque at Ex.P-6. In order to show that the plaintiff Company as a freight forwarder was providing services to the defendants No.1 and 2 who are the shippers, the plaintiff - Company has not produced any document. However, in order to show that the service in question which was the carriage of goods to Los Angeles (USA), the plaintiff - Company has produced a photocopy of the Air Way Bill (Air Consignment Note which is marked at Ex.P-2).
21. A perusal of the said document (Ex.P-2) would go to show that the said Air Consignment Note shows the name of the shipper as that of defendant No.3 and not that of defendant Nos. 1 and 2. Similarly, the confirmation letter issued by the plaintiff - Company in that regard, a copy of which is also marked at Ex.P-3, also goes to show that the said confirmation is made not showing either the name of defendant No.1 or defendant No.2, as the shippers or signatories, but it is defendant No.3 alone which is shown as the shipper. The said consignment note is marked for the kind attention of defendant No.3, but not either defendant No.1 or defendant No.2.
Similarly, the AIR MANIFEST document, a copy of which is at Ex.P-4 also goes to show that the name of the shipper is that of defendant No.3 and not that of either defendant No.1 or defendant No.2.
22. Lastly and more importantly, the important document which the plaintiff solely relies upon which is a copy of the invoice raised by it also shows the name of defendant No.3 only. It is the defendant No.3 which is shown to be liable to pay the amount shown in the said invoice. No where the name of either defendant No.1 or defendant No.2 is anywhere mentioned in any of these important and basic documents at Exs.P-2 to P-5. Therefore, when defendants No.1 and 2 have clearly, categorically and specifically denied that in no manner and at no point of time, they had any business relationship with the plaintiff - Company, then, it was incumbent upon the plaintiff to prove that defendants No.1 and 2 had business transactions with it. However, as observed above, none of the documents from Ex.P-2 to P-5 stands in support of the plaintiff - Company to show that Defendants No.1 and 2 had any contractual relationship with it.
23. Added to the above, what cannot be ignored is of the fact that PW-1 in his cross examination apart from admitting a suggestion that the invoice was raised by the plaintiff not against either defendant No.1 or defendant No.2, but it was against defendant No.3 only, has also admitted a suggestion as true that defendant Nos. 1 and 2 were not the shippers and it was defendant No.3 who was the shipper. Further, the very same witness also has stated that the plaintiff has not raised any invoice against defendants No.1 and 2. Thus, apart from the very documents produced by the plaintiff at Exs.P-2 to P-5, even the evidence of PW-1 in his cross-examination also goes to show that the shipper was not defendants No. 1 and 2, but it was defendant No.3. In such a case, it was necessary and incumbent upon the plaintiff to prove that defendant No.3 was a part of the activities of the defendants No.1 and 2 and in its ownership, as such, defendant Nos.1 and 2 were liable to the plaintiff. However, that was neither the plaint averment nor the evidence of PW-1. On the contrary, it is the case of the plaintiff throughout that defendants No.4 to 7 were working for defendants No.1 and 2, who by independently establishing and incorporating a Company at defendant No.3 and making use of the trade licence of defendants No. 1 and 2, they were cornering the customers of defendants No.1 and 2 for themselves. Even if such a plaint averment is taken on its facial value, the said averment by itself makes it clear that the main allegation of the plaintiff is against defendants No.3 to 7 but not against defendants No.1 and 2.
24. It is also interesting to note that as already observed above, it is the defendant No.1 alone who has filed its Written Statement. Defendant Nos.2 to 6 have adopted the very same Written Statement for them also by filing a separate memo as could be seen in the impugned judgment, which means defendants No.2 to 6 have admitted and endorsed the stand taken by the defendant No.1 in its Written Statement. As already observed above, the defendant No.1 in its Written Statement itself, has clearly stated that the alleged business transaction has never taken place between the plaintiff on one hand and defendants No.1 and 2 on the other hand. The said Written Statement has kept the identity of defendant Nos.1 and 2 with that of defendant No.3 separately throughout.
The said Written Statement further alleges various fraudulent acts on the part of defendants No. 4 to 7 including the issuance of cheque at Ex.P-6 to the plaintiff - Company without the knowledge, notice and consent of defendants No.1 and 2. When defendants No.3 to 6 have adopted the very same Written statement, it amounts to admission on the part of the defendants 3 to 6 that defendant No.3 was an independent entity from that of defendants No.1 and 2 and that the said defendant No.1 had no role to play in the alleged consignment of goods to Los Angeles (USA) or in the act of alleged issuance of cheque at Ex.P-6. As such, in the very pleading itself, the defendants No.3 to 6 have given a clean chit to defendant Nos. 1 and 2 by adopting the Written Statement of defendant No.1 - Company.
25. Even in the cross-examination of DW-1 also, nothing was suggested to the witness to the effect that defendant No.3 was either controlled or managed by defendants No.1 and 2 and that issuance of cheque at Ex.P-6 was to the knowledge and consent of defendants No.1 and 2. On the other hand, it was suggested to the witness that the cheque was given to the plaintiff by defendants No.4 and 5. By making that suggestion, and also eliciting more details from DW-1 in his cross-examination to the effect that defendants No.5 to 7 had misused their power while serving under defendants No.1 and 2, the plaintiff - Company itself has further weakened its case by eliciting those statements in the cross-examination of DW-1.
26. It was also elicited in the cross-examination of PW-1 that there is no document to show that defendant No.3 was the agent of defendants No.1 and 2. Thus, it was elicited in the cross- examination of PW-1 from the defendants side that except making a bald plaint averments, the plaintiff had no evidence to prove its contention, more particularly, that the goods mentioned in the invoice at Ex.P-5 were shipped at the instance of defendants No.1 and 2 and that in that regard, it was defendants No.1 and 2 also who were liable to pay invoice amount to the plaintiff.
27. Interestingly, when the case of the plaintiff in the plaint is that the cheque (at Ex.P-6) was issued by the defendants, however, in the cross-examination of PW-1, the witness has stated that he does not know whether defendants No.4 to 7 issued the cheque at Ex.P-6 without the authority of defendants No.1 and
2. However, PW-1 has also stated in the very same cross-examination that it was defendants No.4 to 7 who are the signatories to the said cheque. The said statements made by none else than PW-1 in his cross-examination supports the contention of the defendants that the alleged cheque at Ex.P-6 was not issued by either defendant No.1 or defendant No.2, but, the same was issued by its then employees, i.e. defendants No.4 and 7 by misusing their power and position and in that manner, PW-1 in his cross-examination has contributed himself for weakening the case of the plaintiff.
28. The said admissions or unclear statements from PW-1 in his cross-examination have not stopped there itself. In his cross-examination, he has further admitted a suggestion that the management of defendants No. 1 and 2 is different from defendant No.3 - Company. By so admitting, he has failed to show any nexus with the documents at Exs.P-2 to P-5 which are standing in the name of defendant No.3 with defendants No.1 and 2 - Companies. To the height of this, PW-1 in the same cross-examination has stated that he does not know whether there is no contract of agency between the defendants 1 and 2 as one party and defendant No.3 as another party. He also stated that he does not know whether defendant No.3 is a stranger to defendants No.1 and 2. Thus, the said statements clearly go to support the contention of the defendants No.1 and 2 that, the defendant No.3 Company is a stranger to them and that defendants No.1 and 2 had never been a Shipper of Cargo as alleged by the plaintiff by relying upon the documents at Exs.P-2 to P-5. In such an event, since the entire suit claim of the plaintiff is mainly based upon the invoice at Ex.P-5 and in view of the fact that the said invoice does not stand in the name of defendants No.1 and 2 but stands in the name of defendant No.3 - Company, which even according to PW-1 is a different Company and a separate entity, the liability of defendants No.1 and 2 under the said invoice cannot be smelt or identified.
29. However, the Trial Court without analysing these aspects in its proper perspective, has mainly banked upon the dishonoured cheque at Ex.P-6 which undisputedly was issued from the account of defendant No.2 and held that all the defendants are jointly and severally liable to the plaintiff to the suit claim.
30. With respect to the said cheque at Ex.P-6, when the entire case of the parties under the litigation is seen, it is the contention of the defendants No.1 and 2 from the beginning that, defendants No.4 to 7 were working under them for a short duration and at that particular point of time they were in charge of the documents and papers of the defendants No.1 and 2 including the cheques. It is defendants No.4 to 7, who misused their power and position for issuing the said cheque to the alleged transaction of defendant No.3, under the alleged invoice at Ex.P-5 to the plaintiff.
31. The analysis made in the previous paragraph wherein it is observed that the plaintiff Company has failed to establish any privity of contract between it and defendants No.1 and 2, on the other hand, the defendants 1 and 2 could able to establish that they are independent of defendant No.3 and in no way related to the alleged business transaction under Ex.P-5, then, merely because the said cheque is shown to have been issued from the account of defendant No.2 by itself would not make defend
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ant No.2 liable to pay the said amount to the plaintiff. In such an event, when the defendants No.1 and 2 have shown and established the reasons and circumstances under which the said cheque came into the hand of the plaintiff, as such, the presumption which could be drawn in favour of the plaintiff under Sections 118 and 139 of the N.I. Act, also stands rebutted. In such an event, it is for the plaintiff to establish that at least under preponderance of probabilities, the plaintiff has made out a case. 32. However, as observed above, the plaintiff has failed even in such an attempt also. Even though the plaintiff Company in its attempt to prove its case against the defendants though has relied upon few more documents which are in the form of e-Mail correspondences and marked at Exs.P-7 to P12(a), but the defendant No.1 has categorically denied that those e-mails pertain to it. It has specifically stated that it is not in receipt of any of those e-Mails. Thus the last hope of the plaintiff- Company that it could gain some support through those alleged e-Mail correspondences also could not stand on its legs. Consequently, the plaintiff has failed to prove that the defendants No.1 and 2 were liable to pay it the suit claim. 33. However, the Trial Court without analysing the evidence in its proper perspective was carried away only of the fact that the defendants 4 to 7 were working under defendants 1 and 2 for some time and the cheque at Ex.P-6 was shown to have been issued from the account of defendant No.2. This has led the Trial Court to give an erroneous finding to the issues framed by it which consequently has resulted in holding the defendants No.1 and 2 also as liable along with the other defendants to pay the suit claim to the plaintiff - Company. 34. In view of the fact that since the said finding of the Trial Court in holding the defendants 1 and 2 (present appellants) as liable against the plaintiff for the suit claim now proved to be erroneous, the impugned judgment and decree confining to the present appellants (defendants 1 and 2) deserves to be set aside by allowing this appeal. Accordingly, I proceed to pass the following:- O R D E R [i] The appeal is allowed in part; [ii] The judgment and decree dated 27-08-2011 passed in O.S.No.9913/2005 on the file of XIV Additional City Civil Judge at Bangalore (CCH.No.28), is hereby set aside, confining the same to the present appellants who were defendants No.1 and 2 in the suit in O.S.No.9913/2005; [iii] The remaining part of the decree remains unaltered. [iv] The refund of Court Fee, if any, to the appellants to be in accordance with law; [v] Draw the modified decree accordingly. Registry to transmit a copy of this judgment along with the Lower Court records to the concerned Trial Court, without delay.