CASA 2 STAYS PVT. LTD. vs COMFIA ECOM PRIVATE LTD.
IN THE HIGH COURT OF DELHI AT NEW DELHI
% Judgment delivered on:13.05.2024
+ RFA(COMM) 187/2023 &CAV 445/2023
CASA 2 STAYS PVT. LTD. ….. Appellant
versus
COMFIA ECOM PRIVATE LTD. ….. Respondent
Advocates who appeared in this case:
For the Appellant : Mr. Harish Malik, Advocate
For the Respondent :Ms. Tanu Singhal, Mr. Nilansh Singhal, and Mr. Deepak Kumar, Advocates.
CORAM
HONBLE MR JUSTICE VIBHU BAKHRU
HONBLE MS JUSTICE TARA VITASTA GANJU
JUDGMENT
VIBHU BAKHRU, J
1. The appellant (defendant in the suit hereafter also referred to as the defendant) has filed the present appeal impugning a judgment and decree dated 21.03.2023 (hereafter the impugned judgment) as corrected by an order dated 09.08.2023, delivered by the learned Commercial Court in CS(COMM) No.83/2022 captioned Comfia Ecom Private Limited v. Casa 2 Stays Private Limited. In terms of the impugned judgment, the learned Commercial Court has decreed a sum of ?8,49,385/- along with interest at the rate of 18% per annum from the date of filing of the suit till realization of the decretal amount in favour of the respondent (plaintiff in the suit hereafter also referred to as the plaintiff). Additionally, the learned Commercial Court also decreed costs quantified at ?32,640/- in favour of the plaintiff.
2. The impugned judgment as originally delivered had decreed an amount of ?5,91,906/-. However, the said figure was corrected in terms of the order dated 09.08.2023 passed by the learned Commercial Court pursuant to an application preferred by the plaintiff under Section 152 of the Code of Civil Procedure, 1908 (hereafter the CPC). The defendant also impugns the said order dated 09.08.2023 in the present appeal.
3. The plaintiff had filed the said suit [CS (COMM) 83/22] for recovery, alleging that it had supplied goods (T-shirts) to the defendant. However, the amounts payable in terms of the invoices raised were not fully discharged. It claimed that the dispute between the parties, essentially, related to the supply of 2500 number of T-shirts, which were covered under an invoice dated 30.06.2018 (Ex.PW-1/2A) for an amount of ?5,70,725/-.
4. The plaintiff had also produced the ledger account of the defendant as maintained in its books of account for the period 01.04.2018 to 22.08.2020, which reflected the outstanding amount of ?5,91,906/- (Ex.PW-1/6). The learned Commercial Court accepted that the plaintiff had established that the amount as reflected was owed by the defendant to the plaintiff and accordingly, decreed the aforesaid amount. In addition, the learned Commercial Court also accepted that the plaintiff was entitled to pre-suit interest quantified at ?2,57,479/- and accordingly, rendered the impugned judgment.
5. The defendant disputes its liability to pay the amount as claimed by the plaintiff and assails the impugned judgment on several grounds. The defendant contends that the impugned judgment had proceeded on an erroneous premise that the plaintiff had maintained a running account whereas no such assertion was made in the plaint. The defendant also claims that the goods supplied by the plaintiff were defective and were returned. Therefore, the amount as claimed by the plaintiff was not payable. In addition, the defendant claims that the learned Commercial Court had erred in allowing pre-suit interest at the rate of 18% per annum on the basis that the plaintiff was covered under the Micro, Small and Medium Enterprises Development Act, 2006 (hereafter MSMED Act). However, no such averment was made in the plaint.
6. The learned counsel for the defendant had assailed the impugned judgment principally, on the ground that the ledger account (Ex.PW-1/6) had reflected a credit balance of ?7,29,402/- as on 05.06.2018. The next entry in the ledger account was a debit entry of ?5,70,725/- in respect of Bill No.CR1240 (Ex.PW-1/2A) leaving a credit balance of ?1,58,677/-. The learned counsel for the defendant earnestly contended that this clearly reflected that the payments were made in advance and therefore, the invoice in question (Bill No.CR1240 on which plaintiffs claim was founded) was paid in advance. He submitted that the plaintiffs suit was thus, required to be dismissed.
7. Before addressing the controversy, it is relevant to briefly note the context in which the disputes arise.
FACTUAL CONTEXT
8. The plaintiff claims that it runs an online apparel store by the name of Poptailor Corporate Apparel and manufactures customized clothing as per requirements of its clients. The defendant operates a chain of hotels in India and had placed orders for supply of apparel to be delivered at different locations in the country.
9. The plaintiff filed the above-mentioned suit inter alia claiming that the defendant had placed an order dated 30.06.2018 for manufacture and delivery of 2500 number of T-shirts of various sizes customized as per its requirement. The total value for the said Purchase Order was ?5,70,725/-, which was payable on delivery of the goods. The plaintiff claims that it had made clear to the defendant that the goods once sold were not returnable and that the plaintiff being an establishment, under the MSMED Act, would be entitled to an interest at the rate of 18% per annum after 45 days of the delivery of the goods.
10. The plaintiff claimed that it had delivered 2500 number of T-shirts against the afore-mentioned purchase order, which was duly received and acknowledged by the defendant. However, the defendant had not made the payment against the said delivery. The plaintiff claimed that since there was an already running business relationship between the parties, it did not raise any immediate objection towards non-clearance of the dues of ?5,70,725/- but it made several efforts thereafter through formal and informal channels for clearance of the said dues.
11. The plaintiff also claims that the defendant had cleared various amounts in respect of various other completed transactions; however, the invoice dated 30.06.2018 in respect of the 2500 number T-shirts remained unpaid.
12. The plaintiff served a legal notice dated 27.07.2019 (Ex. PW-1/7) calling upon the defendant to pay a sum of ?6,73,455.5 payable as on 27.07.2019. The said amount included ?5,70,725/- towards the principal amount and ?1,02,730.5 towards interest. However, the defendant did not clear the said dues. The plaintiff claimed that as on 30.05.2019, an amount of ?8,49,385/- including the outstanding balance of ?5,91,906/- towards principal amount and an amount of ?2,57,479/- towards interest at the rate of 18% per annum was payable. The plaintiff also claimed pendente lite and future interest.
13. The defendant filed its statement of defence disputing the claim made by the plaintiff. The defendant denied that the plaintiff had supplied the goods in question 2500 T-shirts. It also denied that the goods were received and acknowledged by the defendant. It claimed that the goods were never delivered on time and the goods so delivered were always of a bad quality. The defendant also claimed that the goods delivered by the plaintiff did not conform to the agreed design and quality and that the plaintiff had changed the design of the T-shirts as per its whims and fancies. It claimed that the defendant had paid all the legitimate dues to the plaintiff.
14. The defendant also referred to an e-mail dated 21.05.2018 (Ex D-4) informing the plaintiff that the colour of the goods supplied were fading and getting discoloured. The plaintiff was also informed that it was making yellow T-shirts which was not approved by the defendant.
IMPUGNED JUDGMENT
15. The learned Commercial Court framed the following issues for consideration:
1. Whether plaintiff is entitled to the recovery of Rs.5,91,906/- towards balance amount for supply of goods to the defendant? OPP
2. Whether plaintiff is entitled to interest claimed @ 18%per annum w.e.f. July, 2019 till the filing of the suit, amounting to Rs.2,57,479/- from the defendant? OPP
3. Relief including cost.
16. The parties led their evidence. The plaintiffs authorized representative Sh. Nilanshu Singhal (PW-1) tendered his affidavit by way of evidence on 24.11.2022 (Ex. PW1/A) and referred to various documents. He was also cross-examined by the defendants counsel. The authorized representative of the defendant Mr. Tushar Chawla (DW-1) also tendered his evidence by way of affidavit (Ex.DW1/6). He too was cross-examined.
17. The learned Commercial Court evaluated the evidence led by the parties and considered the issues. The learned Commercial Court observed that the pleadings were not drafted properly, however, the Court is required to not only consider the pleadings but evaluate the documents and evidence brought on record as well. The learned Commercial Court noted that it was the plaintiffs case that the defendant had cleared various amounts on various occasions and the dispute was confined to the invoice dated 30.06.2018, which had not been cleared. The learned Commercial Court rejected the contention that the payment for the said invoice was made in advance as the credit balance outstanding in the ledger account (Ex.PW-1/6) reflected a balance of ?1,58,677/- as on 30.06.2018 after accounting for the debit entry of ?5,70,725/- on account of supply of goods. The Court found that there were several transactions between the parties; goods were supplied against various order and the payments were made. Thus, the ledger account (Ex.PW-1/6) reflected a running account and the same showed a closing balance of ?5,91,906/-. The learned Commercial Court found that the defendant had admitted the invoice CR1240 (Ex.PW-1/2A) and there was no dispute that the defendant was in possession of 2500 number of T-shirts in respect of which the said invoice was raised.
18. The learned Commercial Court rejected the defendants contention that the entire goods supplied were defective as the e-mail relied upon by the defendant reflected that only twenty-two shirts were found to be defective. Additionally, the learned Commercial Court also observed that the defendant had not produced ledger account of the plaintiffs in its books and had in fact relied on the entries made in the ledger account produced by the plaintiff.
19. Thus, issue no.1 was decided in favour of the plaintiff. The learned Commercial Court also accepted the plaintiffs claims for interest at the rate of 18% per annum having regard to the provisions of the MSMED Act. Accordingly, issue no.2 was also decided in favour of the plaintiff.
20. The learned Commercial Court also held that the plaintiff is entitled to pleaders fee and litigation expenses of ?22,000/- and court fees of ?10,640/- (aggregating of ?32,640/-). In addition, the learned Commercial Court awarded interest at the rate of 18% per annum from the date of the filing of the suit till realization of the decretal amount of ?5,91,906/- which was subsequently corrected to read as ?8,49,385/- by order dated 09.08.2023.
REASONS & CONCLUSION
21. The learned counsel appearing for the defendant disputed the plaintiffs claim and assailed the impugned judgment on the grounds that (a) the defendant had paid the invoice No.CR1240 (Ex.PW-1/2A) for a sum of ?5,70,725/- as the said amount was covered by the advances paid earlier. He relied on the ledger account produced by the plaintiff (Ex.PW-1/6). He submitted that the goods supplied against the invoice No.CR1240 were of extremely low quality, the colour of the T-shirts supplied was different from the one selected by the defendant and the colours had bled heavily on washing, making the said T-shirts unwearable. He submitted that the plaintiff had agreed to take back the goods but no such measures were taken by the plaintiff. He submitted that since the plaintiff had not pleaded any default other than in respect of the invoice No.CR1240 dated 30.06.2018 in respect of the 2500 T-shirts and the said amount stood paid, the suit was required to be rejected. He also contended that the learned Commercial Court had erred in proceeding on the basis that the defendant was maintaining a running account as no such case was pleaded. He also stated that the defendant had not proved that it was a medium or small-scale enterprise covered under the MSMED Act and therefore, interest at the rate of 18% per annum could not be awarded.
22. The facts as obtaining from the pleadings and the evidence led by the parties clearly establish that the parties had a business relationship. The plaintiff had expressly pleaded that there were prior running business relations with the defendant and therefore, at the material time it had not raised any objection regarding non clearance of the dues of ?5,70,725/-. The defendant had also produced the ledger account (Ex.PW-1/6). PW1 was cross-examined on behalf of the plaintiff, however, no question or suggestion was put to him, which would indicate that the defendant was disputing the said ledger account. On the contrary, he was shown the said ledger account (Ex.PW1/6) and called upon to note the credit entries as reflected in the ledger account. The questions put to him in regard to ledger account (Ex.PW1/6) and PW1s response to the same are set out below:
Q. Is it correct that on 01.05.2018 an amount of Rs.5,28,058/-; on 05.06.2018 amount of Rs.2,94,777/-; on 05.06.2018 amount of Rs.2,73,357/-; on 05.06.2018 amount of Rs.4,77,226/-, defendant company has advanced to the plaintiff company as reflected in ledger Ex.PW1/6?
Ans. It is correct.
Q. I put it to you that on 30.06.2018 advanced amount was adjusted towards CR1240 amounting to Rs.5,70,725/- and the advance balance amount was shown as Rs.1,58,677/- as reflected in ledger Ex.PW1/6. What you have to say.
Ans. It is Correct.
Witness is shown para 4 of evidence affidavit Ex.PW1/A from point A to B.
23. The said questions clearly indicate that far from contesting the ledger account (Ex.PW1/6), the defendant was relying upon the same in support of his claim that the invoice No.CR1240 (Ex.PW-1/2A) was paid.
24. Whilst it is correct that the credit balance of the defendant standing in the books as on 30.06.2018 exceeded the amount of the invoice, it is also apparent that the parties were not treating the said invoice as fully paid. The business relationship between the parties did not cease and it is nobodys case that the plaintiff did not supply goods after 30.06.2018 or that the debit entries reflected in the ledger account (Ex.PW1/6) after 30.06.2018, were incorrect entries.
25. The e-mail dated 14.11.2018 (Ex.PW1/5B) indicates that the parties were in discussion with regard to one invoice for a sum of ?5,70,725/-. The total outstanding amount as reflected was ?30,72,573/-. A tabular statement set out in the said e-mail is set out below:
Clear to Pay
1926818
Clear to pay after PODs are provided
575030
Recharge Refresh T-Shirt Order
570725
Element Guestline Linan Order
21181
Total Outstanding
3072573
26. The above statement indicates that an amount of ?19,26,818/- was acknowledged as payable; an amount of ?5,75,030/- would be paid after the proof of delivery was provided by the plaintiff; and amounts of ?5,70,725/- and ?21,181/- was on account of two other items/orders. There is no serious dispute as to the said e-mail.
27. The plaintiff has also referred to an e-mail dated 15.11.2018 referring to the data shared with the defendant and requesting for the closure of the payment regarding the amount of ?5,70,725/-. The said e-mail (Ex.PW1/5D) reads as under:
Hi Saurabh Sir
Greetings of the day!
As per the data shared by Ashish yesterday. I saw that there is a disputed amount of INR 570,725 for Recharge Refresh T-Shirts.
Request you to please close the same so that the amount can be processed. Also, since the payment is delayed for a longer time now, we have faced many losses for same as youre aware. Hence, request you to clear the amount for processing.
Let me know if any detail is needed.
28. It is thus clear that although the ledger account reflected the debit entry of ?5,70,725/-, the parties had understood that the payments made were not to be adjusted against the said claim as the same was in discussion. If the defendants claim that the invoice No.CR1240 of ?5,70,725/- was paid and the ledger account (Ex.PW1/6) as produced, is accepted (which has been proved by the plaintiff and not questioned by the defendant), the defendant would nonetheless be required to pay the balance outstanding.
29. It is also noticed that the written statement filed by the defendant is contradictory. The defendant had denied receiving the supply of goods of 2500 number of T-Shirts. However, it also claimed that goods supplied were not of good quality. The said claims are mutually inconsistent. If the defendant did not receive the goods, there is no question of it objecting to the quality of the goods.
30. The exchange of e-mails relied upon by the defendant do not support the defendants claim that it had not received the goods. The defendant had relied on an e-mail dated 21.05.2018 (Ex.D-3) complaining that the shirts were fading. It had called upon the plaintiff to keep a check on this issue and if the complaints were received in the future the whole lot would be returned. The defendant also stated that in respect of the complaint received, it would forward the size number and quantity for its replacement. The said e-mail was sent at 5:14 PM. On the same day, that is, 21.05.2018, the defendant sent an e-mail at 6:27 PM (Ex. D-4) complaining about the colour of the T-shirts supplied by the plaintiff. It stated: the Yellow Ts in a colour which has not been approved by us. The plaintiff acknowledged the said mails and responded on the same date at 6:43 PM. It assured the defendant that the matter was noted and would be taken up on priority for correction and all T-Shirts supplied in the future will have the original colour (Ex.D-1). It is relevant to note that the said mails did not relate to the order of the 2500 T-Shirts covered under the invoice dated 30.06.2018 and were in respect of prior supplies. The defendant had also relied upon a subsequent e-mail dated 10.07.2021, inter alia, setting out the shirt sizes and quantities required. The e-mail indicates that in all, the defendant had asked for replacement of 22 (Twenty-Two) T-Shirts in various sizes (that is, fourteen for males and eight for females). It is apparent that the said e-mail was not in continuation of the earlier e-mail or in respect of the same supply. The defendant had also produced an e-mail dated 09.07.2018 forwarding a complaint regarding 15 to 20 uniforms sent and copying the same to the plaintiff for its replacement. The plaintiff had responded to the said e-mail on the same date marking a copy of the same to one of its employees to take back the stock and resend the same. The defendant had sent an e-mail on the next date, that is on 10.07.2018, setting out the details of the shirt sizes and the quantities required. The said e-mail indicated that the defendant had complained in respect of twenty-two shirts of different sizes (fourteen for males and eight for females). This chain of e-mails clearly indicates that the grievance was only in regard to twenty-two shirts. However, it does not mention from which lot.
31. There is no communication from the defendant claiming that it had not received the goods in question goods covered under the invoice (PW1/2A). PW1 was cross-examined and confirmed that the defendant had not returned the defective goods.
32. It is clear from the evidence led by the parties that the goods in question were supplied to the defendant but the same were never returned to the plaintiff. In his cross-examination, DW-1 was specifically cross-examined regarding Ex.DW1/4 (e-mail dated 10.07.2018). He claimed that the said products were from the batch of 2500 T-Shirts and were found to be defective. However, he acknowledged that the goods were never returned. He was specifically asked as to the whereabouts of the said T-Shirts. To which he responded that they were in different locations. The questions put to him in this regard and his responses to the same are reproduced below:
Q. Were the lot was returned?
Ans. The defendant had asked the plaintiff to return it. The plaintiff acknowledged to return the whole batch but no action was taken by the plaintiff.
Q. Did you make any effort to return the lot to the plaintiff?
Ans. We wrote emails to the plaintiff to get the lot back, however, even after acknowledging the same, plaintiff did not take the lot back.
Q. Where are these T shirts now?
Ans. The defendant is in possession of all 2500 T shirts, at different locations, as and where it was directed to be delivered.
33. It is clear from the above that the goods were admittedly received by the defendant and the same were not returned back to the plaintiff. Although, the defendant has relied on the e-mail dated 10.07.2018 (Ex.DW1/4) and has suggested that the entire lot was defective but there is no correspondence on record to indicate that the entire lot was found to be defective. As noted above, admittedly, the defendant had not taken any steps to return the goods in question. A plain reading of the e-mail dated 10.07.2018 indicates that the defendant had referred to only twenty-two shirts. The e-mails sent on 09.07.2018 and 10.07.2018 (Ex.DW1/2 and Ex.DW1/4) do not indicate that the defendant had called upon the plaintiff to take back all the goods supplied by it.
34. We thus concur with the decision of the learned Commercial Court that the subject dispute is in respect of the order of 2500 T-Shirts and the non-payment of the invoice dated 30.06.2018 (Ex.PW1/2A) in respect of the said goods. The goods in question were received by the defendant and continue to be in the possession of the defendant. Although, the said invoice has been entered into in the ledger account maintained by the plaintiff, the payment in respect of the said invoice was not processed (as is evident from Ex.PW1/5B).
35. We concur with the decision of the learned Commercial Court that the plaintiff was entitled to a sum of ?5,91,906/- as reflected in the ledger account maintained by the plaintiff (Ex.PW1/6).
36. The next question to be examined is whether the plaintiff was entitled to a pre-suit interest at the rate of 18% per annum. The defendant contends that the plaintiff had not established that it was a medium or a small-scale enterprise and therefore pre-suit interest at the rate of 18% could not be awarded.
37. It is relevant to refer to paragraph 5 of the plaint and the defendants pleadings in its written statement traversing the same. The same are set out as under:
Paragraph 5 of the plaint:
5. That defendant was further made clear that the goods once sold are not returnable, upon any defaults in clearing the due payments, the plaintiff being an establishment under the MSME policy of the govt, defendant shall be liable to pay an interest @18% p.a. upon each default, after the passage of 45 days since the delivery of the goods.
Written Statement on behalf of defendant:
5. The contents of Para No. 5 of the Plaint are also denied. It is denied that it was ever told to Defendant that once the goods are sold, they will not be returnable. It is further denied that Defendant was ever apprised of the fact that it will be liable to pay an interest @ 18% p.a. upon default. It is submitted that Plaintiff has very cunningly only incorporated the Pleadings suitable for his case.
38. It is clear from the above that the defendant had denied that it was informed that the goods sold were not returnable. The defendant had contested the plaintiffs claim for interest at the rate of 18% per annum solely on the basis that the defendant was not informed that interest at the rate of 18% per annum would be payable upon default. The defendant did not contest that the plaintiff was an establishment under the MSMED Act.
39. There is no dispute that the plaintiff had also sent a legal notice dated 27.07.2019 and called upon the defendant to pay a sum of ?6,73,455/- which included the principal amount of ?5,70,725/- and interest amounting to ?1,02,730/-. The defendant thus had notice of the interest claimed by the plaintiff much prior to the institution of the suit. In view of the above, we concur with the decision of the learned Commercial Court to accept the plaintiffs claim for pre-suit interest at the rate of 18% per annum.
40. The appeal is unmerited and, accordingly, dismissed.
VIBHU BAKHRU, J
TARA VITASTA GANJU, J
MAY 13, 2024
gsr
RFA (COMM) No.187/2023 Page 17 of 17