Delhi District Court
M/S Vijaya Plastics vs M/S B N Sons And Ors on 14 March, 2026
IN THE COURT OF SH. DEVENDER KUMAR JANGALA,
DISTRICT JUDGE (COMMERCIAL COURT)-01,
NORTH WEST, ROHINI, NEW DELHI
CS (COMM) No. 17/22
CNR NO.DLNW010000612022
M/S VIJAYA PLASTICS
AT G-236,FIRST FLOOR,
SECTOR-5, BAWANA INDUSTRIAL AREA,
DSIIDC, DELHI-110039
THROUGH ITS PARTNER SH. AJAY KANT AGGARWAL
...........PLAINTIFF
VERSUS
1. M/S B.N. SONS
A PARTNERSHIP FIRM THROUGH ITS PARTNERS
2. SH. MAYANK SOMANI (PARTNER)
AT FLAT NO.403, DAMODAR SAPPHIRE BIHARI
MARG,
BANI PARK, EARTH APARTMENT,
JAIPUR-302016, RAJASTHAN
3. SH. RAJAT SOMANI (PARTNER)
AT FLAT NO.G-2, D-101
SAPPHIRE ANAND, MEERA MARG,
BANI PARK, JAIPUR-302016, RAJASTHAN
.......DEFENDANTS
SUIT FOR RECOVERY OF RS. 60,09,224/- (RUPEES SIXTY lakhs
NINE THOUSAND TWO HUNDRED AND TWENTY FOUR
ONLY) ALONG WITH INTEREST @ 24% P.A. AND ALSO FOR
FUTURE AND PENDENT LITE INTEREST
Date of institution of Suit : 06.01.2022
Digitally signed
by DEVENDER
DEVENDER KUMAR
KUMAR JANGALA CS (Comm.) No.17/22 M/s Vijaya Plastics Vs. M/s BN Sons and Ors. 1/51
JANGALA Date:
2026.03.14
16:14:20 +0530
Date of hearing of final argument : 12.02.2026
Date of Judgment : 14.03.2026
JUDGMENT
1. The present suit has been filed by the plaintiff against
the defendants for recovery of Rs. 60,09,224/- (Rs. Sixty lakhs Nine
Thousand Two Hundred Twenty Four) alongwith pendentelite and
future interest.
2.1 Brief facts: The facts of the case in brief are that the
Plaintiff is a partnership firm duly registered with the Registrar of
Firms. Sh. Ravi Kant Aggarwal and Sh. Ajay Kant Aggarwal are the
partners of the said firm. It is stated that Sh. Ajay Kant Aggarwal has
been authorized by Sh. Ravi Kant Aggarwal vide Special Power of
Attorney dated 22.12.2021 to engage advocate, to file, sign, verify
the present suit. It is stated that the Plaintiff’s Firm is having reputed
name in the market and doing its business under the name and style
of M/s Vijaya Plastics (partnership firm).
2.2 It is stated that the defendant No. 2 and 3 being the
partners of defendant No. 1, who are responsible for the day-to-day
affairs of defendant No.1, and in due course of business, placed
orders for purchase of goods with the Plaintiff’s Firm. That the
Plaintiff’s Firm duly supplied/sold the goods ordered by the
defendant No. 2 and 3 by raising various invoices.
2.3 It is stated that the Plaintiff’s Firm has been maintaining
a true and correct statement of accounts in respect of the transactions
with the defendants and as per the said statement of account, the
defendants are liable to make the payment of the outstanding amount
CS (Comm.) No.17/22 M/s Vijaya Plastics Vs. M/s BN Sons and Ors. 2/51
of Rs.60,09,224/- as on March, 2018 with regard to goods supplied
by the Plaintiff’s Firm to the defendants.
2.4 It is stated that the Plaintiff’s Firm had number of times
requested the defendants to clear the outstanding amount by personal
visit and as well as the telephonic communication but defendant No.2
and 3 on one or other pretext lingered the matter.
2.5 It is stated that the defendants while receiving the goods
vide invoices, specifically agreed that 24% interest will be charged, if
the payment is not made within the stipulated time from the date of
delivery of the goods and therefore the defendants are liable to make
the payment of the aforesaid amount alongwith the interest @24%
p.a. from the date it became due till its actual realization.
2. 6 It is stated that the plaintiff has been requesting the
defendant to make the payment of the outstanding amount but the
defendant always gave evasive replies and did not clear the
outstanding due amount. However, in response to the request of the
plaintiff, the defendant acknowledged that the defendant owe the
outstanding amount towards the plaintiff.
2.7 It is stated on persistent demand, the defendant No.2 and
3 issued cheques bearing Nos. 411971 of Rs.11,76,084/-, cheque
bearing 411972 of Rs. 12,00,000/- and cheque bearing No.411973 of
Rs. 12,00,000/- all dated 24.01.2018 drawn on Indian Overseas Bank
in favour of the Plaintiff’s Firm in discharge of their part liabilities
and further assured to the Plaintiff’s Firm that they will make the
remaining payment after the encashment of above said cheques.
CS (Comm.) No.17/22 M/s Vijaya Plastics Vs. M/s BN Sons and Ors. 3/51
2.8 It is stated that at the time of issuance of said cheques,
the defendants had assured the Plaintiff’s Firm that the said cheques
will be duly honoured on its presentation. That the Plaintiff’s Firm
presented the aforesaid cheques for encashment with its banker.
However, the said cheques were returned unpaid vide returning
memos dated 09.02.2018 with the remarks “Insufficient Funds”.
2.9 It is stated that the Plaintiff’s Firm got issued a legal
notice dated 17.02.2018, sent on 19.02.2018 and 22.02.2018 through
its counsel by Regd. A/D as well as courier to the defendants but
despite that, the defendants have neither paid the outstanding amount
nor paid any heed to the legal notice issued by and on behalf of the
plaintiff.
2.10 That the plaintiff firm has already filed a complaint
cases U/s Section 138 NI Act against the defendants, which is
pending adjudication before the court of Ld. M.M., North-West,
Rohini Courts, Delhi.
2.11 It is stated that the defendants are liable to pay the entire
outstanding amount of Rs.60,09,224/- along with interest @24% p.a.
to the Plaintiff’s Firm. That the plaintiff firm has gone through the
procedure of pre-litigation mediation and the defendants were served
with the notices issued by DSLSA (N-W) but despite service of the
notices, the defendants have failed to appear and a non-starter
certificate dated 22.12.2021 was issued.
2.12 It is stated that the cause of action for filing of the
present suit has arisen in favour of the plaintiff and against the
CS (Comm.) No.17/22 M/s Vijaya Plastics Vs. M/s BN Sons and Ors. 4/51
defendants firstly when the defendants in due course of business,
placed orders with the Plaintiff’s Firm. That it further arose on supply
of goods by the plaintiff. It further arose when the defendants
accepted the goods without any protest. It further arose when the
defendant No.2 and 3 in discharge of their liability have issued
cheques bearing Nos. 411971 of Rs.11,76,084/-, cheque bearing
411972 of Rs.12,00,000/- and cheque bearing No.411973 of Rs.
12,00,000/- all dated 24.01.2018 drawn on Indian Overseas Bank in
favour of the Plaintiff’s Firm. That it further arose when the said
cheques were dishonoured vide returning memos dated 09.02.2018. It
further arose when the defendant failed to pay the outstanding
amount to the Plaintiff firm after reminders and also when legal
notice dated 17.02.2018, sent on 19.02.2018 and 22.02.2018 was
served up on the defendants. That the cause of action further arose
when the Plaintiff firm filed a complaint U/s 138 NI Act against the
defendants.
2.13 It is stated that the transaction between the parties took
place at Delhi and the cause of action also arose at Delhi and the
plaintiff has its office at Delhi and working for gain at Delhi, hence,
this court has the territorial jurisdiction to try and entertain the
present suit.
2.14 It is stated that the suit is within limitation as the
limitation starts from the date when the cheques bearing No.411971
and 411972 were returned dishonored vide returning memo dated
09.02.2018. That the Plaintiff firm was required to file the present
suit on or before 08.02.2021 but due to the pandemic caused by
COVID-19 and lockdown, could not file the present suit within
CS (Comm.) No.17/22 M/s Vijaya Plastics Vs. M/s BN Sons and Ors. 5/51
prescribed time, however the Hon’ble Court Supreme Court Of India
in SUO MOTO WRIT PETITION(CIVIL) No.3/2020, has excluded
the limitation period w.e.f.15.03.2020 till 01.01.2022 and after
excluding the condoned period, the suit of the plaintiff is within the
limitation period.
2.15 With the aforesaid submissions, the plaintiff has filed the
present suit for recovery for a sum of Rs. 60,09,224/- along with
interest @ 24% p.a and future and pendent lite interest @18% p.a. till
its actual realization of the outstanding amount. The plaintiff has also
prayed for the cost of the suit.
3. Vide order dated 06.01.2022 the summons of the suit
were issued to the defendants. The defendant no.1 is a partnership
firm and the defendants no.2 and 3 are partners thereof. On being
served the defendants no.2 and 3 put the appearance through counsel
and filed written statement.
WRITTEN STATEMENT
Written statement of defendant no.2(Sh. Mayank Somani)
4.1 The defendant no.2 in his written statement has stated
that the plaintiff is guilty of concealment of material facts and
suppression of truth. That the plaintiff has not come to the Court with
clean hands. That the suit is bad in law and in facts and
circumstances of the case and, therefore, liable to be dismissed. It is
admitted that the defendant no.2 &3 are the partners of Defendant
no.1 Firm through a Partnership Deed dated 10.12.2015. It is further
submitted that as per clause 13 of the Partnership Deed, a partner
CS (Comm.) No.17/22 M/s Vijaya Plastics Vs. M/s BN Sons and Ors. 6/51
shall give one month notice in writing to the firm and other partners
before retiring. That the Defendant No.3 retired from the firm viz.
Defendant no.1 on 11.05.2018. Hence the Defendant no.3 cannot
simply escape from liabilities from the Defendant no.1 & 2. That
being an existing partner Defendant No.3 is equally liable under the
Partnership Act. That the claim made by the plaintiff is wrong, bad
and untenable in the given facts and circumstances of the case and
there is nothing to substantiate the alleged claim of the plaintiff. That
the alleged claim is baseless, without any substance, vexatious and
frivolous and, therefore, liable to be dismissed summarily.
4.2. It is stated that the present suit has been settled between
the parties on 16/07/2018 on a letter head issued by the plaintiff M/s
Vijaya plastics and as per language of the said letter head nothing
remains on side of defendants. That all liabilities have been cleared
between the parties and M/s Vijay Plastic has to return the surety
cheques to the defendant firm. That the plaintiff has not come to this
Court with clean hands. That the suit is bad in law and in facts and
circumstances of the case and, therefore, liable to be dismissed. The
averments on merits are denied.
Written statement of defendant no.3(Sh. Rajat Somani)
4.3 The defendant no.3 in his written statement has pleaded
that the present suit is nothing but gross misuse of process of law,
inspite of knowing very well that the answering defendant has
already been retired from the partnership firm and entire liability was
taken by the defendant no.1 & 2. Hence the present suit is liable to be
dismissed against defendant no.3.
CS (Comm.) No.17/22 M/s Vijaya Plastics Vs. M/s BN Sons and Ors. 7/51
4.4 It is stated that the plaintiff has no locus-standi to file the
present suit against defendant no.3 who has already retired from the
partnership firm and these facts were well within the knowledge of
the plaintiff. That the plaintiff has not come to the court with clean
hands and has suppressed material facts. That the defendant No. 3
was the partner of defendant No. 1 firm through partnership deed
dated 10.12.2015 and he has already retired from the said
partnership firm vide Deed of Retirement-cum-admission to
partnership dated 11.5.2018, therefore, the defendant No. 3 is having
no liability towards the defendant No. 1 firm. It is stated that the suit
of the plaintiff against the defendant is based on totally false and
fabricated story and filed just to extort the money and unnecessary
harassment.
4.5 It is stated that the suit of the Plaintiff is not
maintainable as the Plaintiff has twisted, concealed and distorted the
true facts for the purpose of achieving the desire illegal object against
the defendant no.3 despite having no concern with the disputes
between the plaintiff and the defendant no.1 & 2 particularly when
the defendant no.2 given undertaking to have the entire
responsibilities. The averments on merits are denied. It is prayed that
the suit may kindly be dismissed against defendant no.3.
5. Neither any separate appearance nor any written
statement has been filed on behalf of defendant no.1/firm.
REPLICATION
6. The plaintiff filed detailed replication to the written
statements of the defendants no.2 and 3, thereby reaffirming his
CS (Comm.) No.17/22 M/s Vijaya Plastics Vs. M/s BN Sons and Ors. 8/51
claim and denying the stand of the defendant. It is prayed that the
decree as prayed in the plaint may kindly be passed.
7. On completion of pleadings, following issues were
framed vide order dated 23.01.2023:
1. Whether plaintiff is entitled to recover Rs.60,09,224/- from
defendant? O.P. P.
2. Whether plaintiff is entitled to recover interest from
defendant, if yes, at what rate of interest and for which period?
O.P.P.
3. Whether the defendant no.3 has already retired from the
partnership firm and therefore he is not liable to pay any
amount to plaintiff? O.P.Ds.
4. Relief
EVIDENCE IN THE MATTER:
8. In exercise of power u/o. XV A Rule 6 (o) and (p) CPC,
Court appointed Local Commissioner namely Sh.P. C. Ranga, Ld.
Retired District Judge, who has been pleased to record the evidence
in this matter.
PLAINTIFF EVIDENCE:
9. Sh. Ajay Kant Aggarwal, one of the partner of the
plaintiff firm has examined himself as PW-1. He tendered his
evidence by way of affidavit Ex. PW1/1. In his affidavit Ex. PW1/1
the PW-1 has reiterated the contents of the plaint and re-affirmed his
claim. PW1 has relied upon the following documents viz. SPA Ex
PW-1/A along with its E-STAMP PAPER, certified copy of CC NO.
4521/2018 U/S 138, N.I. Act. is Ex PW-1/B (Colly), printed copy of
CS (Comm.) No.17/22 M/s Vijaya Plastics Vs. M/s BN Sons and Ors. 9/51
two Supreme Court orders marked as X & Y, copy of the email Ex
PW-1/D, Statement of accounts is Ex PW1/E and Certificate U/S 65B
Indian Evidence Act Ex PW-1/F.
10. The PW-1 was cross-examined at length by Ld. Counsel
for defendants no.2 and 3 on different dates.
11. No other witness was examined on behalf of plaintiff
and PE was closed on 21.09.2023.
DEFENDANT EVIDENCE
12. On the other hand defendant no.2 Sh. Mayank Somani
examined himself as DW1. He tendered his evidence by way of
affidavit Ex. DW1/A. He relied upon the document Ex. CW1/D2.
DW1 was cross-examined at length by Ld.counsel for plaintiff. No
other witness was examined and DE on behalf of defendant no. 2 was
closed on 06.08.2024.
13. The defendant no.3 in his defence has examined himself
as DW2. He also tendered his evidence by way of affidavit Ex.
DW2/A. He relied upon the documents mark X and copy of extract
of register of firms Ex. DW2/1.
14. Final arguments at length were advanced by Ms. Tanisha
Verma and Ms. Vidisha Verma, Ld.counsel for plaintiff, Sh. Yogesh
Basta, Ld.counsel for defendant no.2 and Sh. Anil Sharma,
Ld.counsel for defendant no.3 through video conferencing. Written
arguments on behalf of plaintiff are also filed. Record perused.
CS (Comm.) No.17/22 M/s Vijaya Plastics Vs. M/s BN Sons and Ors. 10/51
15. It is argued on behalf of plaintiff that the plaintiff has
successfully discharged the burden of proving his claim by
documentary as well as oral evidence. That the defence taken by
defendant no.3 holds no ground as the outstanding amount relates to
the period when the defendant no.3 was partner in the defendant no.1
firm. That the defendants have failed to pay the outstanding dues.
That even if the contention of defendant no.2 regarding settlement is
considered as true, there is nothing on record to show that the
remaining amount of Rs.35 lakhs was waived off by the plaintiff.
That the defendant no.2 also denied existence of any documents to
this effect during his cross-examination. That another debacle
committed by the defendant no. 2 while manufacturing the alleged
settlement letter is that he mentioned that the plaintiff had agreed to
return the cheques issued by defendant no.1 but the fact is that the
same was not possible for the plaintiffs as the plaintiffs had already
filed the said cheques in the court in Ct. Cases/4521/2018 (NI Act
complaint). It is argued that over a period of 4 years, the defendant
no. 2 never got any complaint registered against the plaintiff for
allegedly misusing the cheques given by him to the plaintiff. That the
entire series of events goes out to show that the defence of the
defendant no. 2 is a sham and completely after-thought. It is argued
that the defence taken by the defendants fall to the ground and the
fact remains that the defendants owe an amount of Rs. 60,09,224/-
along with interest @24% p.a. and future and pendent lite interest
@18% p.a. to the plaintiff. It is prayed that the suit may kindly be
decreed in favour of plaintiff, as prayed.
16. On behalf of defendant no.2 it is argued that the
defendants have already made the payment in terms of settlement and
CS (Comm.) No.17/22 M/s Vijaya Plastics Vs. M/s BN Sons and Ors. 11/51
nothing is outstanding. It is argued that that the present suit is liable
to be dismissed as the Plaintiff has suppressed material facts and has
not approached this Court with clean hands. That the Plaintiff failed
to disclose that the disputes between the parties were fully and finally
settled on 16.07.2018 through a written communication issued on its
own letterhead, clearly stating that nothing remained due from the
Defendants and that the surety cheques were to be returned. That
once there has been accord and satisfaction, no cause of action
survives. It is argued that in view of the settlement dated 16.07.2018,
no liability survives against any of the Defendants.
17. On behalf of defendant no.3 it is argued that the suit
against Defendant No. 3 is a misuse of the process of law, as he had
already retired from Defendant No. 1 firm vide Deed of Retirement-
cum-Admission dated 11.05.2018. That after his retirement, he had
no role, control, or connection with the affairs of the firm, and the
entire responsibility was undertaken by Defendant Nos. 1 and 2. That
the Plaintiff was fully aware of this fact, yet deliberately impleaded
Defendant No. 3, thereby suppressing material facts and not
approaching the Court with clean hands. It is argued that the suit is
not maintainable against Defendant No. 3 and is liable to be
dismissed qua him with costs.
18. I have considered the submissions made by Ld.counsel
for parties and perused the entire material on record and my
issuewise findings are as under:-.
ISSUE NO.1
1. Whether plaintiff is entitled to recover Rs.60,09,224/- from
CS (Comm.) No.17/22 M/s Vijaya Plastics Vs. M/s BN Sons and Ors. 12/51
defendant? O.P. P.
19. The onus to prove this issue was upon the plaintiff. The
plaintiff examined PW1 Sh. Ajay Kant Aggarwal, one of the partner
of the plaintiff firm, in support of its case. The Court shall first take
up the aspect of Limitation which is a legal issue and which the court
is required to determine, for the purpose of deciding the entitlement
of plaintiff to the relief claimed. The plaintiff has filed the present
suit for recovery of Rs. 60,09,224/- arising out of commercial
transactions between the parties. The defendants had issued three
cheques bearing Nos. 411971 of Rs.11,76,084/-, 411972 of
Rs.12,00,000/- and 411973 of Rs. 12,00,000/- all dated 24.01.2018
drawn on Indian Overseas Bank in favour of the Plaintiff’s Firm M/s
Vijaya Plastics towards discharge of their liability, which were
dishonoured on 09.02.2018 with remarks ‘Insufficient Funds’. The
plaintiff issued a legal notice dated 17.02.2018, sent on 19.02.2018
and 22.02.2018 through Courier as well as Regd. A/D. The plaintiff
had to file the present suit on or before 08.02.2021 from the date of
dishonour of cheque. The plaintiff has also relied upon the orders
passed by the Hon’ble Supreme Court in Suo Motu Writ Petition
(Civil) No. 3 of 2020 – In Re: Cognizance for Extension of
Limitation, whereby the period of limitation stood excluded due to
the COVID-19 pandemic from 15.03.2020 till 28.02.2022. The
present suit has been filed by the plaintiff on 04.01.2022. After
excluding the period of 715 days covered by the said order of the
Hon’ble Supreme Court, the present suit is well within the prescribed
period of limitation under the Limitation Act, 1963 and is therefore
maintainable.
CS (Comm.) No.17/22 M/s Vijaya Plastics Vs. M/s BN Sons and Ors. 13/51
20. The Court shall now examine the aspect of territorial
jurisdiction of this Court. The plaintiff has pleaded that the orders
were received at Delhi, the goods were supplied from Delhi and the
registered office of the plaintiff company is situated within the
territorial jurisdiction of this Court. The statement of account Ex.
PW1/E has been maintained at Delhi in the ordinary course of
business. The unrebutted testimony of PW-1 confirms that the
business dealings were conducted from Delhi and the supplies were
effected from Delhi. It is also the case of the plaintiff that the cheques
issued by the defendants towards discharge of liability were handed
over in connection with the said commercial transactions and the
dishonour of the said cheques resulted in initiation of proceedings
under Section 138 of the Negotiable Instruments Act before the
competent court at Rohini Courts, Delhi. Since a substantial part of
the cause of action arose within the territorial jurisdiction of this
Court. Hence this Court has the territorial jurisdiction to entertain and
try the present suit in terms of Section 20(c) CPC.
21. It is necessary to consider the law pertaining to
discharge of burden of proof of the issues as relevant and applicable
to the Civil Jurisdiction. In the binding authority of the Hon’ble
Supreme Court of India, in M/s. Gian Chand & Brothers and Another
v. Rattan Lal@ Rattan Singh: [2013] 3 S.C.R. 601; it has been laid
down:-
1.3. It is well settled principle of law that a person
who asserts a particular fact is required to
affirmatively establish it. The burden of proving the
facts rests on the party who substantially asserts the
affirmative issues and not the party who denies it but
the said principle may not be universal in its
application and there may be an exception thereto.
CS (Comm.) No.17/22 M/s Vijaya Plastics Vs. M/s BN Sons and Ors. 14/51
22. The various aspects of proving the facts of a case and
exceptions, if any, have been duly considered by Hon’ble Supreme
Court of India in Anil Rishi vs Gurbaksh Singh in Appeal (civil)
2413 of 2006 on 2 May, 2006, wherein the binding legal position has
been reinforced as under :-
“Pleading is not evidence, far less proof. Issues are
raised on the basis of the pleadings. Indisputably, the
relationship between the parties itself would be an
issue. The suit will fail if both the parties do not
adduce any evidence, in view of Section 102 of the
Evidence Act. Thus, ordinarily, the burden of proof
would be on the party who asserts the affirmative of
the issue and it rests, after evidence is gone into, upon
the party against whom, at the time the question
arises, judgment would be given, if no further
evidence were to be adduced by either side.”
It has been further laid down (supra) :-
“A distinction exists between a burden of proof and
onus of proof. The right to begin follows onus
probandi. It assumes importance in the early stage of
a case. The question of onus of proof has greater
force, where the question is which party is to begin.
Burden of proof is used in three ways : (i) to indicate
the duty of bringing forward evidence in support of a
proposition at the beginning or later; (ii) to make that
of establishing a proposition as against all counter
evidence; and (iii) an indiscriminate use in which it
may mean either or both of the others. The
elementary rule is Section 101 is inflexible. In terms
of Section 102 the initial onus is always on the
plaintiff and if he discharges that onus and makes out
a case which entitles him to a relief, the onus shifts to
the defendant to prove those circumstances, if any,
which would disentitle the plaintiff to the same.”.
23. As per law of the land, the onus to prove is upon the
plaintiff and if the plaintiff discharges that onus and makes out a case
to entitle him to the relief asserted, in these circumstance, the onus
shifts upon the defendant to prove such circumstances which may
CS (Comm.) No.17/22 M/s Vijaya Plastics Vs. M/s BN Sons and Ors. 15/51
disentitle the plaintiff to the relief claimed.
24. In civil litigation, it is sufficient for the plaintiff to
discharge the burden laid upon it successfully, if the plaintiff is able
to prove its case by preponderance of probabilities. It is the law of
land as re-affirmed by the Hon’ble Apex Court in Adiveppa V.
Bhimappa (2017) 9 SCC 586. Hon’ble Supreme Court of India in
Adiveppa (supra) was pleased to uphold that:
“It is a settled principle of law that the initial burden
is always on the plaintiff to prove his case by proper
pleadings and adequate evidence (oral and
documentary) in support thereof.”
Thus, the burden to prove the case as per law entirely lies upon the
plaintiff, by way of documentary and oral evidence.
25. In the present case, the plaintiff has pleaded that it is a
partnership firm engaged in the business of manufacturing and
trading PVC compounds and that the defendants were regular
purchasers of goods supplied by the plaintiff. The plaintiff has further
pleaded that in the course of business several invoices were raised
against the defendant firm and as per the statement of account
maintained in the ordinary course of business, an amount of Rs.
60,09,224/- remained outstanding against the defendants as of
January 2018 with regard to goods supply by the Plaintiff’s Firm to
the defendants.
26. The plaintiff has relied upon documentary evidence
forming part of the record. The Statement of accounts Ex PW1/E
reflects the outstanding amount due from the defendants. Section 34
CS (Comm.) No.17/22 M/s Vijaya Plastics Vs. M/s BN Sons and Ors. 16/51
of the Indian Evidence Act, 1872 (hereinafter referred to as “IEA”)
(now Section 28 of the Bharatiya Sakshya Adhiniyam, 2023,
hereinafter referred to as “BSA”) makes it clear that entries in books
of account regularly maintained by the plaintiff is not a conclusive
piece of evidence and is to be corroborated with independent
documentary evidence. However, in the present case, the said
requirement of corroboration stands satisfied from the admissions
made by the defendants themselves during the course of cross-
examination.
Effect of Admissions in Cross-Examination:
27. Contrary to above situation, during the course of cross-
examination of DW-1 / defendant no. 2, DW-1 admitted the invoices
raised towards Defendant no. 1 forming part of Ex. PW-1/B (Colly.).
The defendant has not denied averment made by the plaintiff that the
defendant firm had an outstanding liability of Rs. 60,09,224/-
towards the plaintiff as reflected in the statement of account Ex. PW
1/E.
28. At this stage, relevant sections of IEA, 1872 are required
to be examined. Section 17 IEA, 1872 defines an admission as a
statement made in the oral, documentary or electronic form
suggesting an inference to the fact in issue or relevant fact. (now
Section 15 BSA, 2023). Admission is a statement made by the parties
to the legal proceedings either oral or documentary or contained in
electonic form which suggest an inference to the fact in issue and
relevant fact. Section 58 IEA (Section 53 of BSA) provides about the
facts which are admitted need not to be proved. Section 58 IEA
exactly similar to Section 53, BSA is provided as under for ready
CS (Comm.) No.17/22 M/s Vijaya Plastics Vs. M/s BN Sons and Ors. 17/51
reference:
“58. Facts admitted need not be proved.
No fact need be proved in any proceeding which the parties
thereto or their agents agree to admit at the hearing, or which,
before the hearing, they agree to admit by any writing under
their hands, or which by any rule or pleading in force at the
time they are deemed to have admitted by their pleadings:
Provided that the Court may, in its discretion, require the facts
admitted to be proved otherwise than by such admissions.”
29. Thus, Section 58 IEA provides that the facts admitted by
the pleadings or otherwise are not required to be proved. The
rationale is fundamental: a party’s own words against itself carry the
highest evidentiary weight and relieve the adversary of the burden of
proving the admitted fact. The proviso to Section 58 specifically
gives discretion to the court to require the facts admitted to be proved
otherwise than by such admission. The Hon’ble Supreme Court in
Narayan Bhagwantrao Gosavi v. Gopal Vinayak Gosavi, AIR 1960
SC 100 held that admissions constitute the best evidence against the
maker if satisfactorily explained. The relevant portion is provided as
under:
“12. In the present case, the burden of proof need not detain us for
another reason. It has been proved that the appellant and his
predecessors in the title which he claims, had admitted on numerous
occasions that the public had a right to worship the deity, and that the
properties were held as Devasthan inams. To the same effect are the
records of the revenue authorities, where these grants have been
described as Devasthan, except in a few cases, to which reference
will be made subsequently. In view of all these admissions and the
revenue records, it was necessary for the appellant to prove that the
admissions were erroneous, and did not bind him. An admission is
the best evidence that an opposing party can rely upon, and though
not conclusive, is decisive of the matter, unless successfully
withdrawn or proved erroneous. We shall now examine these
admissions in brief and the extent to which they went and the number
of times they were repeated.”
CS (Comm.) No.17/22 M/s Vijaya Plastics Vs. M/s BN Sons and Ors. 18/51
(Emphasis supplied in Bold)
30. The cross-examination of DW-1, Sh. Mayank Somani (defendant
No. 2), conducted before the Local Commissioner on 25.07.2024 and
06.08.2024, yielded admissions that go to the root of every factual
dispute in this suit.
31. The admissions extracted from DW-1 are, in their totality, of
extraordinary significance. The starting point is DW-1’s admission in
cross-examination dated 25.07.2024 that “it is correct that the
defendant firm had the liability of Rs. 60,09,224/- towards the
plaintiff till January 2018.” This admission alone, read with his
subsequent confirmation at Q-6 that “the balance shown at the foot
of the ledger account as on 31.03.2018 i.e., Rs. 60,09,224/- is
correct”, establishes the outstanding liability as an admitted fact that
requires no further proof under Section 58 IEA. Taken together with
the statement of account Ex. PW1/E and the invoices in Ex. PW-1/B
(Colly.) evidence which the defendants have never disputed, the
existence of the debt of Rs. 60,09,224/- as on 31.03.2018 stands
established beyond any serious contest. Narayan Bhagwantrao
Gosavi (supra) provides that an admission is the best evidence an
opposing party can rely on and is decisive unless withdrawn or
proved erroneous. These admissions have not been withdrawn.
32. Accordingly, the admissions of DW-1 conclusively
establish the existence of the outstanding liability of ₹60,09,224/- as
on 31.03.2018 and form a crucial factual foundation upon which the
Court must examine the subsequent conduct of the defendants,
particularly the issuance of cheques dated 24.01.2018 acknowledging
the said liability.
CS (Comm.) No.17/22 M/s Vijaya Plastics Vs. M/s BN Sons and Ors. 19/51
Legal presumption arising from issuance of cheques acknowledging
liability:
33. The issuance of the three cheques on 24.01.2018 towards
discharge of the outstanding liability furnishes an independent pillar
of the plaintiff’s case and simultaneously undermines the first of the
defendants’ defences. Under Section 118 of the Negotiable
Instruments Act, 1881 (hereinafter referred to as “NI Act“), every
negotiable instrument is presumed to have been made for
consideration. Under Section 139 NI Act, it is further presumed that
the holder of a cheque received it in discharge of a legally
enforceable debt or liability. These are rebuttable presumptions, but
the burden of displacing them rests upon the drawer, on the standard
of a preponderance of probabilities. The aforesaid legal position has
been succinctly explained by the Hon’ble Supreme Court in
Dattatraya v. Sharanappa, decided on 07.08.2024, reported as (2024)
8 SCC 573. The relevant portion is provided as under:
“18. As the presumption contemplated by virtue of Section
118 of the NI Act, 1881 entails, Section 139 was similarly
introduced to provide for a presumption that the holder of
cheque had received the issued cheque concerned towards
discharging of the liability of the drawer, either in whole or in
part. Therefore, at this juncture, it is ideal to make a reference
to Section 118 of the NI Act, 1881, which is reproduced as:
“118. Presumptions as to negotiable instruments.–Until the contrary
is proved, the following presumptions shall be made–
(a) of consideration : that every negotiable instrument was made or
drawn for consideration, and that every such instrument when it has been
accepted, indorsed, negotiated or transferred, was accepted, indorsed,
negotiated or transferred for consideration;
(b) as to date : that every negotiable instrument bearing a date was
made or drawn on such date;
CS (Comm.) No.17/22 M/s Vijaya Plastics Vs. M/s BN Sons and Ors. 20/51
(c) as to time of acceptance : that every accepted bill of exchange was
accepted within a reasonable time after its date and before its maturity;
(d) as to time of transfer : that every transfer of a negotiable
instrument was made before its maturity;
(e) as to order of indorsement : that the indorsements appearing upon
a negotiable instrument were made in the order in which they appear
thereon;
(f) as to stamp : that a lost promissory note, bill of exchange or
cheque was duly stamped;
(g) that holder is a holder in due course : that the holder of a
negotiable instrument is a holder in due course:
Provided that, where the instrument has been obtained from its lawful
owner, or from any person in lawful custody thereof, by means of an
offence or fraud, or has been obtained from the maker or acceptor thereof
by means of an offence or fraud or for unlawful consideration, the burden
of proving that the holder is a holder in due course lies upon him.”
19. Chapter XIII of the NI Act, 1881, of which Section 118
is a part, lays down special rules for evidence to be adduced
within the scheme of the Act herein. As the text of the said
provision showcases, it raises a rebuttable presumption as
against the drawer to the extent that the negotiable instrument
concerned was drawn and subsequently accepted, indorsed,
negotiated, or transferred for an existing consideration, and the
date so designated on such an instrument is the date when the
negotiable instrument concerned was drawn. It is also further
presumed that the same was transferred before its maturity and
that the order in which multiple indorsements appear on such
an instrument, that is, the deemed order thereon. Lastly, the
holder of a negotiable instrument is one in its due course,
subject to a situation where the instrument concerned while
being obtained from a lawful owner and from his or her lawful
custody thereof through undertaking of an offence as
contemplated under any statute or through the means of fraud,
the burden to prove him or her being a holder in due course,
instead, lies upon such a holder.
CS (Comm.) No.17/22 M/s Vijaya Plastics Vs. M/s BN Sons and Ors. 21/51
20. Accordingly, to begin with, the bare provision of
Section 139 of the NI Act, 1881 is reproduced herein below:
“139. Presumption in favour of holder.–It shall be presumed, unless
the contrary is proved, that the holder of a cheque received the cheque, of
the nature referred to in Section 138 for the discharge, in whole or in part,
of any debt or other liability.”
The aforesaid presumption entails an obligation on the court conducting
the trial for an offence under Section 138 of the NI Act, 1881 to presume
that the cheque in question was issued by the drawer or accused for the
discharge of a particular liability. The use of expression “shall presume”
ameliorates the conundrum pertaining to the right of the accused to
present evidence for the purpose of rebutting the said presumption.
Furthermore, the effect of such presumption is that, upon filing of the
complaint along with relevant documents, thereby prima
facie establishing the case against the drawer, the onus of proof shifts on
the drawer or accused to adduce cogent material and evidence for
rebutting the said presumption, and as established in Laxmi
Dyechem v. State of Gujarat [Laxmi Dyechem v. State of Gujarat, (2012)
13 SCC 375 : (2012) 4 SCC (Cri) 283] , based on preponderance of
probabilities.
21. While describing the offence envisaged under Section
138 of the NI Act, 1881 as a regulatory offence for largely
being in the nature of a civil wrong with its impact confined to
private parties within commercial transactions, the three-Judge
Bench in the decision of Rangappa [Rangappa v. Sri Mohan,
(2010) 11 SCC 441 : (2010) 4 SCC (Civ) 477 : (2011) 1 SCC
(Cri) 184] highlighted Section 139 of the NI Act, 1881 to be an
example of a reverse onus clause. This is done so, as the Court
expounds, in the light of Parliament’s intent, which can be
culled out from the peculiar placing of act of dishonour of
cheque in a statute having criminal overtones. The underlying
object of such deliberate placement is to inject and enhance
credibility of negotiable instruments. Additionally, the reverse
onus clause serves as an indispensable “device to prevent
undue delay in the course of litigation”. While acknowledging
the test of proportionality and having laid the interpretation of
Section 139 of the NI Act, 1881 hereof, it was further held thatCS (Comm.) No.17/22 M/s Vijaya Plastics Vs. M/s BN Sons and Ors. 22/51
an accused cannot be obligated to rebut the said presumption
through an unduly high standard of proof. This is in light of the
observations laid down by a coordinate Bench in Hiten P.
Dalal v. Bratindranath Banerjee [Hiten P.
Dalal v. Bratindranath Banerjee, (2001) 6 SCC 16 : 2001 SCC
(Cri) 960] , whereby it was clarified that the rebuttal ought not
to be undertaken conclusively by an accused, which is
reiterated as follows : (SCC p. 25, para 23)
“23. In other words, provided the facts required to form the basis of a
presumption of law exist, no discretion is left with the court but to draw
the statutory conclusion, but this does not preclude the person against
whom the presumption is drawn from rebutting it and proving the
contrary. A fact is said to be proved when,
after considering the matters before it, the court either believes it to
exist, or considers its existence so probable that a prudent man ought,
under the circumstances of the particular case, to act upon the supposition
that it exists [ Section 3, Evidence Act] .
Therefore, the rebuttal does not have to be conclusively
established but such evidence must be adduced before the court
in support of the defence that the court must either believe the
defence to exist or consider its existence to be reasonably
probable, the standard of reasonability being that of the “prudent
man”.”
22. Therefore, it may be said that the liability of the defence
in cases under Section 138 of the NI Act, 1881 is not that of
proving its case beyond reasonable doubt.
23. In light of the aforesaid discussion, and as underscored
by this Court recently in the decision of Rajesh Jain v. Ajay
Singh [Rajesh Jain v. Ajay Singh, (2023) 10 SCC 148 : (2023)
4 SCC (Civ) 567 : (2024) 1 SCC (Cri) 1] , an accused may
establish non-existence of a debt or liability either through
conclusive evidence that the cheque concerned was not issued
towards the presumed debt or liability, or through adduction of
circumstantial evidence vide standard of preponderance of
probabilities.
…
CS (Comm.) No.17/22 M/s Vijaya Plastics Vs. M/s BN Sons and Ors. 23/51
24. Since a presumption only enables the holder to show
a prima facie case, it can only survive before a court of law
subject to contrary not having been proved to the effect that a
cheque or negotiable instrument was not issued for a
consideration or for discharge of any existing or future debt or
liability. In this backdrop, it is pertinent to make a reference to
a decision of three-Judge Bench in Bir Singh v. Mukesh
Kumar [Bir Singh v. Mukesh Kumar, (2019) 4 SCC 197 :
(2019) 2 SCC (Civ) 309 : (2019) 2 SCC (Cri) 40] , which went
on to hold that if a signature on a blank cheque stands admitted
to having been inscribed voluntarily, it is sufficient to trigger a
presumption under Section 139 of the NI Act, 1881, even if
there is no admission to the effect of execution of entire
contents in the cheque.
…
27. A comprehensive reference to Sections 118, 139 and 140 of
the NI Act, 1881 gives birth to a deemed fiction which was
also articulated by this Court in K.N.
Beena v. Muniyappan [K.N. Beena v. Muniyappan, (2001) 8
SCC 458 : 2002 SCC (Cri) 14] as follows : (SCC p. 459, para
6)
“6. … Under Section 118, unless the contrary was proved, it is to be
presumed that the negotiable instrument (including a cheque) had been
made or drawn for consideration. Under Section 139 the court has to
presume, unless the contrary was proved, that the holder of the cheque
received the cheque for discharge, in whole or in part, of a debt or
liability. Thus in complaints under Section 138, the court has to presume
that the cheque had been issued for a debt or liability. This presumption is
rebuttable. However the burden of proving that a cheque had not been
issued for a debt or liability is on the accused. The Supreme Court
in Hiten P. Dalal v. Bratindranath Banerjee [Hiten P.
Dalal v. Bratindranath Banerjee, (2001) 6 SCC 16 : 2001 SCC (Cri) 960]
has also taken an identical view.”
28. Furthermore, on the aspect of adducing evidence for
rebuttal of the aforesaid statutory presumption, it is pertinent to
cumulatively read the decisions of this Court
in Rangappa [Rangappa v. Sri Mohan, (2010) 11 SCC 441 :
(2010) 4 SCC (Civ) 477 : (2011) 1 SCC (Cri) 184] and Rajesh
CS (Comm.) No.17/22 M/s Vijaya Plastics Vs. M/s BN Sons and Ors. 24/51
Jain [Rajesh Jain v. Ajay Singh, (2023) 10 SCC 148 : (2023) 4
SCC (Civ) 567 : (2024) 1 SCC (Cri) 1] which would go on to
clarify that the accused can undoubtedly place reliance on the
materials adduced by the complainant, which would include
not only the complainant’s version in the original complaint,
but also the case in the legal or demand notice, complainant’s
case at the trial, as also the plea of the accused in the reply
notice, his Section 313CrPC, 1973 statement or at the trial as
to the circumstances under which the promissory note or
cheque was executed. The accused ought not to adduce any
further or new evidence from his end in the said circumstances
to rebut the statutory presumption concerned.”
34. Coming back to the facts of the present case, the
defendants seek to rebut the presumptions by the plea that the
cheques were given as “security” and not towards discharge of any
liability. This plea must be examined against what DW-1 admitted. At
Q-5 in the cross-examination dated 06.08.2024, DW-1 was shown his
written statement and evidence affidavit and was asked whether the
plea of security cheques was mentioned in either of those documents.
After going through the court record, DW-1 himself answered in
answer to Q.5: “this fact has not been mentioned in my written
statement as well as evidence affidavit.” A defence that finds no
mention in the pleadings, that is not set out in the evidence affidavit,
and that surfaces for the very first time during cross-examination
cannot constitute a genuine rebuttal of a statutory presumption. It is,
and can only be, an afterthought. The presumptions under Sections
118 and 139 NI Act accordingly remain wholly unrebutted, and the
cheques stand as additional evidence of the defendants’ liability in
discharge of the outstanding dues.
CS (Comm.) No.17/22 M/s Vijaya Plastics Vs. M/s BN Sons and Ors. 25/51
35. In view of the aforesaid legal position, the issuance of
the cheques by the defendants operates as a clear acknowledgment of
the subsisting liability and attracts the statutory presumptions under
the NI Act. The defendants have failed to place any cogent material
on record to rebut these presumptions. Consequently, the existence of
the outstanding liability stands further reinforced.
36. The Court must therefore now examine the principal
defence raised by the defendants, namely the alleged settlement dated
16.07.2018, which is relied upon to contend that the liability stood
discharged.
Examination of the Alleged Settlement Defence Dated 16.07.2018
37. The Court now turns to the settlement defence, the centrepiece of
defendant No. 2’s case which requires more detailed examination, not
because it has any inherent merit, but because it is necessary to
demonstrate, step by step, how entirely it falls apart under legal and
factual scrutiny. The defendant’s entire case rests on Mark-X, a
document dated 16.07.2018 purportedly on the plaintiff’s letterhead,
which defendant No. 2 says evidences a full and final settlement of
all outstanding dues. Before one can even reach the question of what
the document says, the law requires that its execution be proved.
38. In the present case, the entire claim of the Defendants is based
on Settlement dated 16.07.2018 allegedly occurred between the
Plaintiff firm and the defendants marked as Mark X while contending
that the disputes between the parties stood resolved and that no
CS (Comm.) No.17/22 M/s Vijaya Plastics Vs. M/s BN Sons and Ors. 26/51
liability survives. It is a settled principle of law that merely marking a
document during trial does not dispense with the requirement of
proving its execution and contents. A document which is only marked
but not proved cannot be treated as substantive evidence.
39. The plaintiff has categorically denied execution of the
said document and has disputed the signatures appearing on it. Once
the execution of a document is specifically denied, the burden lies
upon the party relying on such document to prove its execution in
accordance with law.
40. The Hon’ble Supreme Court of India in Veena Singh v.
District Registrar / Additional Collector (F/R) and Anr, decided on
10.05.2022, reported as (2022) 7 SCC 1 has succinctly explained the
pre-requisites of execution of document or instrument. The Hon’ble
Court held that the execution of a document does not stand admitted
only on account of signing of a person. Thus, even if a person’s
signature on the document is admitted, the execution of a document
can be denied if the parties did not agree to or understand the
contents of the said document while signing it. The relevant portion
of Veena Singh (supra) is reproduced as follows:
“C.3. Meaning of “execution”
50. Section 35(1)(a) of the Registration Act uses the expression
“admit the execution of the document”, while Section 35(3)( a) uses the
expression “denies its execution”. Similarly, Section 72(1) has adopted
the expression “denial of execution”, while Section 73(1) uses the
expression “denies its execution”. However, the word “execution” itself is
not defined by the Registration Act.
CS (Comm.) No.17/22 M/s Vijaya Plastics Vs. M/s BN Sons and Ors. 27/51
51. Before us, two possible interpretations have been urged
by the parties:
(i) First, that “execution” is tantamount to “signing” a document.
Hence, once a person admits to their signature on a document, they admit
to having executed it; and
(ii) Second, that “execution” cannot be equated with merely signing a
document. Hence, even if a person’s signature on the document admitted,
they can still deny its execution if they did not agree to or understand the
contents of the document while signing it.
We must now decide which of these two interpretations should be
adopted by this Court.
52. The first interpretation of “execution” is supported by
the definition provided in the Stamp Act, 1899 (“the Stamp
Act“). Section 2(12) defines “executed” and “execution” in the
following terms:
“2. (12) Executed and execution.–“Executed” and “execution”, used
with reference to instruments, mean “signed” and “signature” and
includes attribution of electronic record within the meaning of Section 11
of the Information Technology Act, 2000 (21 of 2000);”
However, since the Registration Act has been enacted for a purpose
different from the Stamp Act, the definition under the Stamp Act is not
conclusive.
56.Mulla’s The Registration Act [ Justice K.
Kannan, Mulla’s The Registration Act (LexisNexis, 2012) p.
416.] notes the following in relation to the meaning of
“execution” [ Justice K. Kannan, Mulla’s The Registration
Act (LexisNexis, 2012), pp. 254-56.] :
“Admission of Execution
… It is submitted that the mere proof or admission that a person’s
signature appears on a document cannot by itself amount to execution of
the document…
Where a person had signed a document after being aware of the
nature of the document, he has executed the document, and, it is
submitted, the Registrar cannot go into the question whether the
document has been obtained by coercion; but when a signature has been
obtained by false representations and the ostensible executant did not sign
CS (Comm.) No.17/22 M/s Vijaya Plastics Vs. M/s BN Sons and Ors. 28/51
with the intention of being bound by the terms of the document, such a
person cannot be said to have executed the document.”
(emphasis supplied)
58. This understanding of the phrase “execution” is also
adopted by textbooks in relation to the law of evidence.
Section 68 [ “68. Proof of execution of document required by
law to be attested.–If a document is required by law to be
attested, it shall not be used as evidence until one attesting
witness at least has been called for the purpose of proving its
execution, if there be an attesting witness alive, and subject to
the process of the Court and capable of giving
evidence:Provided that it shall not be necessary to call an
attesting witness in proof of the execution of any document,
not being a will, which has been registered in accordance with
the provisions of the Indian Registration Act, 1908 (16 of
1908), unless its execution by the person by whom it purports
to have been executed is specifically denied.”] of the Evidence
Act, 1872 (“the Evidence Act“) prescribes the requirement for
proving that a document has been executed. The proviso to
Section 68 stipulates that it shall not be necessary to call an
attesting witness to prove the execution of a document if it has
been registered under the Registration Act, provided that its
execution is not specifically denied by the person who is
purported to have executed it. In relation to this
provision, Sarkar’s Law of Evidence notes [ Sudipto Sarkar and
Dr H.R. Jhingta, Sarkar : Law of Evidence-In India, Pakistan,
Bangladesh, Burma, Ceylon, Malaysia & Singapore : Vol. 1
(LexisNexis, 2016).] :
“The term “execution” is not defined in any statute. It means
completion i.e. the last act or acts which complete a document and in
English law this is known as “signing, sealing and delivering”. The
ordinary meaning of executing a document is signing it as a consenting
party thereto.
***
[s 67.4] Meaning and Proof of “Execution”
***
CS (Comm.) No.17/22 M/s Vijaya Plastics Vs. M/s BN Sons and Ors. 29/51
Execution consists in signing a document written out and read over
and understood and does not consist of merely signing a name upon a
blank sheet of paper …”
59. Similarly, Ratanlal and Dhirajlal’s treatise on the law of
evidence states as follows [ N. Vijayraghavan and Sharath
Chandran, Ratanlal & Dhirajlal : The Law of
Evidence (LexisNexis, 2021).] :
“[s 67.3] Execution of Document — Meaning
***
Execution of a document is something different from mere signing of
the document. The term execution is not defined …The ordinary meaning
of executing a document is signing it as a consenting party thereto …
Execution of the document means that the executant must have signed or
put his thumb mark/impression, only after the contents of the document
have been fully stated and read by the executant before he put his
signature thereon. Mere admission of the initial by the executant would
not be tantamount to an admission of execution of the document.”
63. In Sayyapparaju Surayya v. Koduri
Kondamma [Sayyapparaju Surayya v. Koduri Kondamma,
1949 SCC OnLine Mad 227] , a Division Bench of the Madras
High Court, while construing the provisions of Sections 35(1)
(a) and (b) of the Registration Act, observed : (SCC OnLine
Mad)
“The admission required therefore is admission of the execution of
the document. … It is not enough for the person, who is the ostensible
executant, to admit his signature on a paper on which, it may be, the
document is ultimately engrossed. The identity of the papers on which the
signature occurs is not sufficient. If a man says that he signed a blank
paper on the representation that it was required for presenting a petition,
as in the present case or if a man signs a completed document on the
representation that his signature or thumb impression is required as an
attesting witness, that admission of the signature or thumb impression in
those circumstances cannot be construed to be an admission of the
execution of the document. Far from its being an admission, it is a clear
and unambiguous denial of the execution of the document. He must
CS (Comm.) No.17/22 M/s Vijaya Plastics Vs. M/s BN Sons and Ors. 30/51
admit, in order to attract the provisions of Section 35(1) that he signed the
document … The admission of execution therefore must amount to an
admission that the person admitting entered into an obligation under the
instrument; in other words, that he had executed the document, signed it
as a sale deed, mortgage deed, or a lease deed, as the case may be.”
64. In Jogesh Prasad Singh v. Ramchandar Prasad
Singh [Jogesh Prasad Singh v. Ramchandar Prasad Singh, 1950
SCC OnLine Pat 31] (“Jogesh Prasad Singh”), a Division
Bench of the Patna High Court noted that the meaning of the
phrase “execution” of a document had been well settled by
another Division Bench of the High Court in Ebadut
Ali v. Mohd. Fareed [Ebadut Ali v. Mohd. Fareed, 1916 SCC
OnLine Pat 99 : AIR 1916 Pat 206 : 35 IC 56] (” Ebadut Ali”).
The decision of the Division Bench in Ebadut Ali [Ebadut
Ali v. Mohd. Fareed, 1916 SCC OnLine Pat 99 : AIR 1916 Pat
206 : 35 IC 56] , which was cited with approval in Jogesh
Prasad Singh [Jogesh Prasad Singh v. Ramchandar Prasad
Singh, 1950 SCC OnLine Pat 31] , held : (Ebadut Ali
case [Ebadut Ali v. Mohd. Fareed, 1916 SCC OnLine Pat 99 :
AIR 1916 Pat 206 : 35 IC 56] , SCC OnLine Pat para 11)
“11. … In our view, execution consists in signing a document written
out and read over and understood, and does not consist of merely signing
a name upon a blank sheet of paper. To be executed a document must be
in existence; where there is no document in existence, there cannot be
execution. … Where an executant clearly says that he signed on blank
paper and that the document which he had authorised is not the document
which he contemplated, the statement is a denial not an admission, of
execution.”
65. Adverting to the above decisions and to the views of the
Calcutta [Mohima Chunder Dhur v. Jugul Kishore
Bhuttacharji1881 SCC OnLine Cal 1 : ILR (1881) 7 Cal 736] ,
Orissa [Uma Devi v. Narayan Nayak, 1984 SCC OnLine Ori
94] and Assam High Court [Bhutkani Nath v. Kamaleswari
Nath, 1971 SCC OnLine Gau 53 : AIR 1972 Assam &
Nagaland 15] , the Single Judge of the Karnataka High CourtCS (Comm.) No.17/22 M/s Vijaya Plastics Vs. M/s BN Sons and Ors. 31/51
in N.M. Ramachandraiah [N.M. Ramachandraiah v. State of
Karnataka, 2007 SCC OnLine Kar 192] emphasised that the
execution of the document does not mean merely signing it,
but signing it after having understood its contents in their
entirety : (N.M. Ramachandraiah case [N.M.
Ramachandraiah v. State of Karnataka, 2007 SCC OnLine Kar
192] , SCC OnLine Kar para 15)
“15. Therefore, the law is well settled. Execution of a document does
not mean merely signing, but signing by way of assent to the terms of the
contract embodied in the document. Execution consists in signing a
document written out and read over and understood, and does not consist
of merely signing a name upon a blank sheet of paper. It is a solemn act
of the executant who must own up the recitals in the instrument and there
must be clear evidence that he put the signature after knowing the
contents of document fully. To be executed, a document must be in
existence; where there is no document in existence there cannot be
execution. Mere proof or admission that a person’s signature appears on a
document cannot by itself amount to execution of a document.
Registration does not dispense with the necessity of proof of execution
when the same is denied. Thus, execution of document is not mere
signing of it.”
(emphasis supplied)
66. The understanding of the Karnataka High Court in N.M.
Ramachandraiah [N.M. Ramachandraiah v. State of Karnataka, 2007 SCC OnLine
Kar 192] is consistent with precedents emanating from the Privy Council and
various High Courts in India. In Privy Council’s decision in Puran Chand
Nahatta v. Monmotho Nath Mukherjee [Puran Chand Nahatta v. Monmotho Nath
Mukherjee, 1927 SCC OnLine PC 100] , Viscount Sumner, while construing the
provisions of Section 35 of the Registration Act, observed : (Puran Chand
Nahatta case [Puran Chand Nahatta v. Monmotho Nath Mukherjee, 1927 SCC
OnLine PC 100] , SCC OnLine PC)
“By Section 35 of the Registration Act, registration is
directed when certain persons have appeared, have been duly
identified, and have admitted the execution of the document
propounded, and the necessary persons are “the persons
executing the document”. The appellant contends that in these
words executing means and means only “actually signing”. Their
CS (Comm.) No.17/22 M/s Vijaya Plastics Vs. M/s BN Sons and Ors. 32/51
Lordships cannot accept this. A document is executed, when
those who take benefits and obligations under it have put or
have caused to be put their names to it. Personal signature is
not required, and another person, duly authorised, may, by
writing the name of the party executing, bring about his valid
execution, and put him under the obligations involved. Hence
the words “person executing” in the Act cannot be read merely
as “person signing”. They mean something more, namely, the
person, who by a valid execution enters into obligation under
the instrument. When the appearance referred to is for the
purpose of admitting the execution already accomplished,
there is nothing to prevent the executing person appearing
either in person or by any authorised and competent attorney
in order to make a valid admission. Their Lordships have failed
to find in the scheme of the Act anything repugnant to this
construction. Any other would involve risk of confusion and
might even defeat the statutory procedure by multiplying the
persons who have to be traced and induced to attend, either
by themselves or by some representative.”
(emphasis supplied)
67. In Ghasita Ram Bajaj v. Raj Kamal Radio Electronic [Ghasita Ram
Bajaj v. Raj Kamal Radio Electronic, 1973 SCC OnLine Del 109] , a Single Judge
of the Delhi High Court, while differentiating between signatures on ordinary
documents and documents stamped in accordance with the law relating to
negotiation of instruments, observed that in the case of ordinary documents :
(SCC OnLine Del para 8)
“8. … The meaning of execution of a document ordinarily
implies that a person making his signature by way of execution
knew or should have known the nature of the document which
he was signing.”
…
73. The “execution” of a document does not stand admitted
merely because a person admits to having signed the
document. Such an interpretation accounts for circumstances
where an individual signs a blank paper and it is later
converted into a different document, or when an individual is
CS (Comm.) No.17/22 M/s Vijaya Plastics Vs. M/s BN Sons and Ors. 33/51
made to sign a document without fully understanding its
contents. Adopting a contrary interpretation would unfairly put
the burden upon the person denying execution to challenge the
registration before a civil court or a writ court, since
registration will have to be allowed once the signature has been
admitted.”
41. Applying the aforesaid legal principles to the facts of the
present case, the alleged settlement letter Mark X has not been
proved by the defendants in the manner required by law. The plaintiff
has denied the signatures appearing on the document and has
specifically alleged that the said document is fabricated. Despite such
denial, the defendants have failed to produce any attesting witness or
independent witness to prove the execution of the alleged settlement
letter. No handwriting expert has been examined and no scientific
evidence has been produced to establish the authenticity of the
alleged signatures. Furthermore, the document has merely been
marked as Mark X and has not been formally proved as an exhibited
document through admissible evidence. It is a settled principle of law
that a document marked during trial without proper proof does not
automatically become evidence of its contents.
42. In the absence of proof of execution, the alleged
settlement letter cannot be relied upon by this Court. The burden to
prove the authenticity of the document lay squarely upon the
defendants and the defendants have failed to discharge the said
burden. Consequently, the alleged settlement letter dated 16.07.2018
remains an unproved document and cannot be treated as evidence of
settlement or discharge of liability. Thus, the defence of settlement
raised by the defendants does not inspire confidence and fails to rebut
the plaintiff’s claim regarding the outstanding amount.
CS (Comm.) No.17/22 M/s Vijaya Plastics Vs. M/s BN Sons and Ors. 34/51
43. Even granting the defendants the most charitable
assumption, despite the failure to prove execution, proceeding to
examine the settlement defence on its merits, the defence crumbles
under the weight of its own factual inadequacies, each of which
emerges directly from DW-1’s own cross-examination. This Court
examines those inadequacies in sequence, noting as it does so how
each one connects to and compounds the others.
44. The first and most fundamental infirmity is that the
settlement, as it is now put forward, was never pleaded with the
specificity that the law requires. While defendant No. 2’s written
statement does make a general reference to the settlement letter of
16.07.2018, neither the written statement nor the evidence affidavit
of DW-1 mentions the specific settlement amount of Rs. 25,00,000/-
or that the payment was made in cash. DW-1 himself admitted at Q.
5 that the plea of security cheques was absent from his pleadings, and
further admitted in Q. 10 that “the factum of alleged settlement” was
also not mentioned in his written statement or evidence affidavit. In
Q-8, the specific claim that Rs. 25,00,000/- was paid in cash first
surfaced in DW-1’s statement recorded before the court in the Section
138 NI Act proceedings on 10.07.2024, i.e., Mark X1, more than six
years after the alleged settlement and more than two years after the
filing of the present suit. This is precisely what the law means when
it speaks of a case being an afterthought. A party who genuinely
settled a debt of Rs. 60,09,224/- for Rs. 25 lakhs in cash would have
pleaded that fact, with particulars of the payment, from the very first
day. The complete absence of these particulars from the pleadings is
not an oversight, but an admission that the defence did not exist when
CS (Comm.) No.17/22 M/s Vijaya Plastics Vs. M/s BN Sons and Ors. 35/51
the pleadings were filed and was manufactured much later.
45. The second infirmity is that the alleged cash
payment of Rs. 25,00,000/- is not merely unpleaded, it is wholly
unsubstantiated by any documentary evidence. It is pertinent to
mention here that it is flatly contradicted by DW-1’s own admitted
course of dealing. When asked about business payments, DW-1
admitted unequivocally: “It is correct that all the payments in the
course of business transactions were done by the firm via bank
transfers only.” (Q-6) Throughout the entire commercial relationship
between the parties, every payment was made by bank transfer. And
yet this payment, the most significant alleged payment, the payment
that purportedly wiped out Rs. 60 lakhs of debt, is said to have been
made entirely in cash, leaving no trace whatsoever. DW-1 admitted at
Q-12 that no document showing the source of the cash has been
placed on record; at Q-13 that the payment is not reflected in the ITR
of either the firm or defendant No. 2 personally; and at Q-22 that no
document evidencing payment of Rs. 25,00,000/- has been produced.
A payment of Rs. 25 lakhs made in cash, departing from the
established practice of bank transfers, leaving no receipt, no bank
record, no ITR entry, and no source of funds, this is not a gap in the
evidence; it is evidence itself. It points to one conclusion: no such
payment was ever made.
46. The third infirmity strikes at the face of the
document Mark X itself, which upon examination turns out to say
far less than the defendant claims. DW-1 admitted at Q-11 that Mark
X does not mention any settlement amount of Rs. 25,00,000/-. The
document states only, in general terms, that all outstanding dues stand
CS (Comm.) No.17/22 M/s Vijaya Plastics Vs. M/s BN Sons and Ors. 36/51
settled as on 16.07.2018 without specifying what was paid, in what
mode, or how a liability of over Rs. 60 lakhs was discharged.
Furthermore, DW-1 admitted at Q-7 that Mark-X does not bear the
signature of defendant No. 3, Sh. Rajat Somani, whose “verbal
consent” DW-1 claims to have obtained. No formal settlement deed
was executed. There is not a single independent witness to the
alleged settlement. A transaction involving the purported discharge of
a liability exceeding Rs. 60 lakhs by cash payment of Rs. 25 lakhs
and alleged waiver of Rs. 35 lakhs, placed before a court of law
without a receipt, without a bank record, without a settlement deed,
without a witness, and without the signature of one of the allegedly
settling parties, cannot by any standard of reasonable proof be
accepted as a genuine settlement.
47. The fourth infirmity concerns DW-1’s conduct in
the years following the alleged settlement, the conduct that is wholly
irreconcilable with the version of a party who genuinely believes that
a settlement has been concluded in his favour. The three cheques on
which defendant No. 2 now faces criminal prosecution under Section
138 NI Act are the very cheques which he claims he surrendered as
security, and whose return he says the plaintiff promised. If that
promise was genuine, one would expect defendant No. 2 to have
relentlessly pursued the return of those cheques, since the continued
prosecution under Section 138 NI Act exposed him to criminal
liability. Yet DW-1 admitted at Q-14 that he has produced no
document to show he ever asked the plaintiff to return the cheques
after 16.07.2018. He admitted at Q-15 that he has made no complaint
to any authority against the plaintiff for not returning the cheques.
Strikingly, DW-1 admitted at Q-19 that he came to know about the
pendency of the Section 138 NI Act case only around the year 2020,
CS (Comm.) No.17/22 M/s Vijaya Plastics Vs. M/s BN Sons and Ors. 37/51
yet even after acquiring this knowledge, he took no action and made
no demand for return of the cheques for the remaining years. At Q-20
and Q-21, he admitted that mobile no. 9414068200 belongs to M/s
B.N. Sons and that WhatsApp messages sent from that number to the
plaintiff on 30.07.2018, just days after the alleged settlement were
sent by him alone. These messages, now on record as Ex. DW1/P1
(Colly.), were sent by DW-1 after the date of the alleged settlement,
and the contents of those messages would naturally be expected to
reflect the state of the relationship between the parties at that time.
He admitted at Q-3 that he made no written correspondence even
about the dishonour of the cheques for four months after 09.02.2018.
He admitted at Q-4 that he did not reply to the plaintiff’s email dated
12.02.2018 Ex. PW-1/D, claiming the firm’s email IDs were not used
by him, a claim directly contradicted by his own admission that email
ids [email protected], [email protected] and
[email protected] belong to M/s B.N. Sons. This unbroken
pattern of silence and inaction, no demand, no complaint, no follow-
up, no legal notice, nothing spanning more than four years after the
alleged settlement is not the behaviour of a person who genuinely
believed a settlement had protected him. It is the behaviour of a
person who concocted the settlement defence long after the cause of
action had crystallised.
48. For a settlement to operate as a valid accord and
satisfaction discharging the original contractual obligation, it must be
proved to the same standard as any other contract, by clear, cogent
and reliable evidence. The accord and satisfaction must be
established by showing that the parties consciously and voluntarily
entered into a binding settlement agreement that clearly extinguishes
the earlier liability. The defendants have failed at every point; the
CS (Comm.) No.17/22 M/s Vijaya Plastics Vs. M/s BN Sons and Ors. 38/51
document is unproved; the payment is unproved and contradicted by
admitted conduct; the settlement was not pleaded; the document itself
is internally deficient; it contains a physically impossible term; and
the defendants’ own conduct for four years afterwards contradicts any
genuine belief in a settlement. The plea of accord and satisfaction is
rejected in its entirety.
49. There is one further dimension that buttresses the
plaintiff’s case and condemns the defendants’ conduct, viz., the
deliberate non-production of the bank statement of M/s B.N. Sons
pertaining to Indian Overseas Bank. This bank statement would have
been the single most direct and objective piece of evidence on the
question of the alleged cash payment. A cash withdrawal of Rs. 25
lakhs would have left an unmistakable entry. When DW-1 was called
upon to produce it at Q-1, he declined. At Q-2 he said the account
was closed. Yet he simultaneously admitted that the account was
operative in February 2018, and he has placed on record no document
to establish that the account was subsequently closed. Section 114(g)
IEA (now Section 119(g) BSA) empowers the Court to presume that
evidence which could be and is not produced would, if produced, be
unfavourable to the person who withholds it. The Hon’ble Supreme
Court in Union of India v. Ibrahim Uddin, (2012) 8 SCC 148
explained that the issue of drawing adverse inference is to be decided
by taking into consideration the pleadings and by deciding whether
the document withheld has any relevance and whether its omission
would directly establish the case of the other side. The relevant
portion of Ibrahim Uddin (supra) is provided as under:
“24. Thus, in view of the above, the law on the issue can be
summarised to the effect that the issue of drawing adverse
inference is required to be decided by the court taking intoCS (Comm.) No.17/22 M/s Vijaya Plastics Vs. M/s BN Sons and Ors. 39/51
consideration the pleadings of the parties and by deciding
whether any document/evidence, withheld, has any relevance
at all or omission of its production would directly establish the
case of the other side. The court cannot lose sight of the fact
that burden of proof is on the party which makes a factual
averment. The court has to consider further as to whether the
other side could file interrogatories or apply for inspection and
production of the documents, etc. as is required under Order 11
CPC. Conduct and diligence of the other party is also of
paramount importance. Presumption of adverse inference for
non-production of evidence is always optional and a relevant
factor to be considered in the background of facts involved in
the case. Existence of some other circumstances may justify
non-production of such documents on some reasonable
grounds. In case one party has asked the court to direct the
other side to produce the document and the other side failed to
comply with the court’s order, the court may be justified in
drawing the adverse inference. All the pros and cons must be
examined before the adverse inference is drawn. Such
presumption is permissible, if other larger evidence is shown to
the contrary.”
50. Recently, Hon’ble High Court of Delhi in
Koninklijke Philips N.V. v. MAJ (RETD) Sukesh Behl, decided on
20.02.2025, reported as 2025 SCC OnLine Del 1121 while restating
the settled position of law has held that facts which lie within the
special knowledge of a party must be proved by that party in terms of
Section 106 of the Evidence Act. The Court further observed that
under Section 114 of the Evidence Act, particularly Illustration (g),
an adverse inference may be drawn where a party deliberately
withholds material evidence which, if produced, would be
unfavourable to its case. Relying upon the judgments of the Hon’ble
Supreme Court in Ibrahim Uddin (supra) and National Insurance Co.
Ltd. v. Jugal Kishore (1988) 1 SCC 626, the Hon’ble High Court in
Koninklijke Philips N.V. (supra) emphasized that a party in
possession of relevant documents cannot avoid its obligation to place
CS (Comm.) No.17/22 M/s Vijaya Plastics Vs. M/s BN Sons and Ors. 40/51
the same before the Court under the guise of technical burden of
proof. It was further held that deliberate suppression of material
records and evasive conduct during cross-examination justify
drawing an adverse inference against the defaulting party, and the
law does not permit any litigant to derive benefit from its own failure
to disclose relevant evidence. The relevant portion is reproduced as
follows;
“VI.II.IV. Effect of the Defendants’ wilful withholding of information
255. In Rajnesh v. Neha (2021) 2 SCC 324, the Supreme Court
held that details regarding a party’s income, assets, and
liabilities fall within special knowledge. Consequently, under
Section 106 of the Evidence Act, the burden of proving such
facts shifts to the party possessing this special knowledge. This
principle was also affirmed in by this Court in Kusum Sharma
v. Kumar Mahinder Sharma, 2020 SCC OnLine Del 931.
However, the question as to whether the burden to prove a
particular matter is on the Plaintiff or the Defendant would
depend upon the nature of the dispute. Under Section 114 of
the Evidence Act, the Court is empowered to presume the
existence of facts based on the natural course of business
conduct. Specifically, Section 114(g) allows the Court to draw
an adverse inference when a party withholds evidence that, if
produced, would likely be unfavourable to them. In Union of
India v. Ibrahim Uddin, (2012) 8 SCC 148, the Supreme Court
affirmed that adverse inference may be drawn against a party
that deliberately suppresses documents or evidence crucial to
the opposing party’s case. The Court further emphasized that
when a party defies a court’s order to produce relevant
documents, the Court can draw an adverse inference against
them. In National Insurance Co. Ltd., New Delhi v. Jugal
Kishore, (1988) 1 SCC 626, the Supreme Court emphasized
that it is the duty of the party which is in possession of a
document that would be helpful in doing justice in the cause to
produce the said document, and such party should not be
permitted to take shelter behind the abstract doctrine of burden
of proof.
CS (Comm.) No.17/22 M/s Vijaya Plastics Vs. M/s BN Sons and Ors. 41/51
258. Thus, while the absence of precise sales data constrains
the Court from quantifying damages strictly based on actual
losses, the legal principles discussed above warrant a different
approach. The Defendants’ deliberate failure to disclose
critical sales and revenue data, despite specific directions,
constitutes a wilful attempt to suppress material evidence and
obstruct the Plaintiff’s claim. The Defendants’ non-disclosure,
compounded by evasive responses in cross-examination, leaves
no doubt that an adverse inference must be drawn against
them. The law does not permit an infringer to benefit from its
own suppression of evidence. Since precise financial records
have been withheld, this Court is entitled to proceed with an
approximate, but fair damages calculation based on the best
available evidence. The Defendants cannot now evade liability
by asserting the absence of exact sales figures, when this
omission is of their own making. Accordingly, the Court shall
determine the damages through a combination of reasonable
estimation, adverse inference, and extrapolation from the
limited disclosed figures. In doing so, reliance shall also be
placed on industry benchmarks, comparable licensing
arrangements, and the Plaintiff’s licensing history to ensure a
just, equitable, and rational assessment of the damages owed.”
51. Reverting to the facts of the present case, the bank
statement of the defendant firm, the one document that would have
resolved the central factual dispute has been deliberately kept back.
This Court draws a strong adverse inference under Section 114(g)
IEA. If the bank statement been produced, it would have conclusively
established the absence of any cash withdrawal of Rs. 25 lakhs
around July 2018, thereby exposing the claim of cash payment as
false. The non-production of ITR records reinforces this inference.
The defendants cannot be permitted to benefit from the very
suppression of the evidence that would have destroyed their defence.
This Court also notes that Section 106 IEA provides that facts
especially within the knowledge of a party must be proved by that
party. The financial records of the defendant firm are peculiarly
within the defendant’s knowledge, and the failure to produce them
CS (Comm.) No.17/22 M/s Vijaya Plastics Vs. M/s BN Sons and Ors. 42/51
must fall against the defendants.
52. Stepping back and looking at the evidence as a
whole, the picture that emerges is clear and consistent. The plaintiff
has produced its books of account in the ordinary course of business,
supported by invoices and a Section 65B certificate. The outstanding
liability of Rs. 60,09,224/- as on 31.03.2018 is expressly admitted by
DW-1 in the most direct terms possible. The cheques dishonoured on
09.02.2018 carry statutory presumptions of liability under Sections
118 and 139 NI Act that remain unrebutted. The security cheque plea
was never pleaded and was an afterthought, admitted as such by
DW-1 himself. The settlement defence rests on an unproved
document whose execution was denied by the plaintiff, which does
not mention the alleged settlement amount, which does not bear the
signature of one of the alleged settling parties, which contains a
physically impossible stipulation, which was supported by a claim of
cash payment flatly contradicted by the admitted course of dealing
and belied by the complete absence of any financial record, which
was never pleaded with specificity, and which is contradicted by four
years of silence and inaction by defendant No. 2. The bank statement,
the one document that would have resolved the central factual
question, has been deliberately withheld and the adverse inference
under Section 114(g) IEA must be drawn. The defendants have not
merely failed to discharge the shifted evidentiary burden. They have
through their own admissions and conduct, actively confirmed the
plaintiff’s case.
53. On a comprehensive consideration of the
pleadings, the oral and documentary evidence on record, the
admissions of DW-1, and the applicable legal principles, this Court
CS (Comm.) No.17/22 M/s Vijaya Plastics Vs. M/s BN Sons and Ors. 43/51
finds that the plaintiff has successfully established on a
preponderance of probabilities the existence of a legally enforceable
debt of Rs. 60,09,224/- against the defendants. The defence of
security cheques is an afterthought. The settlement defence is
unproved, internally incoherent, physically impossible in part, and
contradicted by the defendants’ own conduct. The adverse inference
under Section 114(g) IEA operates against the defendants. The
defendants have utterly failed to discharge the burden of disproving
the plaintiff’s case.
Issue No. 1 is accordingly decided in favour of the plaintiff and
against the defendants.
ISSUE NO. 2
2. Whether the plaintiff is entitled to recover interest from the
defendants, if yes, at what rate and for which period? (O.P.P.)
54. The plaintiff has claimed interest at the rate of
24% per annum from the date the liability became due, along with
pendent lite and future interest at 18% per annum. The power to
award interest in a money decree is governed by Section 34 of the
Code of Civil Procedure, 1908. Section 34(1) CPC vests the Court
with discretion to award interest at such rate as the Court deems
reasonable on the principal sum adjudged, from the date of the suit to
the date of the decree. Section 34(2) provides for a default rate of 6%
per annum where the decree is silent, though the Court retains the
power to award a higher rate where the circumstances so warrant,
particularly in commercial matters where the denial of interest results
in unjust enrichment of the defaulting party.
55. The plaintiff has pleaded that 24% per annum was
CS (Comm.) No.17/22 M/s Vijaya Plastics Vs. M/s BN Sons and Ors. 44/51
the agreed rate under the terms of the invoices. However, no separate
contractual document expressly stipulating that rate has been proved
in evidence beyond the statement of account, which reflects only the
principal outstanding. The claim for interest at 24% per annum
cannot, therefore, be sustained as an agreed contractual rate. That
said, the commercial nature of the transactions, the duration of the
default being running since 2018 and the manifest loss suffered by
the plaintiff in being kept out of a substantial sum for an extended
period all weigh in favour of a rate of interest above the statutory
default. Having regard to all these circumstances and the discretion
vested in this Court under Section 34 CPC, this Court considers it
just and equitable to award pre-suit interest at the rate of 9% per
annum on the principal sum of Rs. 60,09,224/- from the date the
liability became due i.e., on 31.03.2018, to the date of institution of
the suit, i.e., on 06.01.2022, along with pendent lite interest at 9% per
annum on the principal sum from the date of institution of the suit till
the date of realisation.
Issue No. 2 is accordingly decided in favour of the plaintiff. The
plaintiff is entitled to interest on the principal sum of Rs. 60,09,224/-
at the rate of 9% per annum from 31.03.2018 till the date of
realisation.
ISSUE NO. 3
3. Whether defendant No. 3 has already retired from
the partnership firm and therefore is not liable to pay any
amount to the plaintiff? (O.P.Ds.)
56. The burden of this issue rests particularly upon
DW-2 / defendant No. 3 Sh. Rajat Somani himself, who pleads
CS (Comm.) No.17/22 M/s Vijaya Plastics Vs. M/s BN Sons and Ors. 45/51
retirement to establish both the fact of retirement and its legal
consequences as against the plaintiff, a third-party creditor.
Defendant No. 3 claims that he retired from M/s B.N. Sons on
11.05.2018 vide Deed of Retirement-cum-Admission and that after
retirement the entire liability was taken over by defendants No. 1 and
2, absolving him of all liability.
57. The starting factual point is inescapable: the entire
outstanding liability of Rs. 60,09,224/- relates to commercial
transactions and goods supplied during the financial period
01.04.2017 to 31.03.2018. Defendant No. 3 was admittedly a partner
of defendant No. 1 firm throughout this entire period. His retirement
took effect only on 11.05.2018, more than a month after the close of
the relevant financial year. The liability therefore accrued entirely
during the period of his partnership. DW-1 confirmed that the
balance of Rs. 60,09,224/- as on 31.03.2018 is correct, and DW-2
himself confirmed in his cross-examination dated 08.07.2024 that he
was a partner of the firm from 2015 till 11.05.2018. Section 25 of the
Indian Partnership Act, 1932 (herinafter referred to as “PA”) is
unambiguous. Every partner is jointly and severally liable for all acts
of the firm done while he is a partner. The liability of defendant No. 3
for the outstanding dues having thus accrued during the period of his
partnership, he is jointly and severally liable for such dues under
Section 25 PA.
58. The question is then whether defendant No. 3’s
retirement on 11.05.2018 discharged him from this pre-existing
liability towards the plaintiff. This question is answered by Section
32 Partnership Act. Section 32(2) provides that a retiring partner may
be discharged from liability to any third party for acts of the firm
CS (Comm.) No.17/22 M/s Vijaya Plastics Vs. M/s BN Sons and Ors. 46/51
done before his retirement, but only by an agreement made between
the retiring partner, the third party, and the partners of the
reconstituted firm. Section 32(3) provides that, notwithstanding
retirement, the retiring partner and the reconstituted firm continue to
be liable as partners to third parties until public notice of the
retirement is given. The combined effect of these provisions is that a
retiring partner’s liability towards third-party creditors for pre-
retirement acts of the firm is not automatically extinguished by
internal retirement. It requires either a binding tripartite agreement
with the creditor under Section 32(2), or the giving of public notice
under Section 32(3). In the absence of both, the retiring partner
remains liable.
59. The admissions of DW-2 in cross-examination
dated 08.07.2024 comprehensively close this issue against him. He
admitted that he did not inform the plaintiff of his retirement in
writing. He admitted that no public notice of retirement was given.
He admitted that no agreement was executed between him and the
plaintiff firm as required under Section 32(2). He admitted that he did
not participate in any meetings of the firm after his retirement and
had no concern with its affairs. He admitted that he never received
any legal notice from the plaintiff. These admissions leave nothing to
be decided in his favour.
60. Thus, the admitted fact is that no public notice
under Section 32(3) was issued. A telephonic communication to the
plaintiff, even if taken at face value, cannot constitute the public
notice required by that provision. The purpose of public notice under
Section 32(3) is to discharge the retiring partner from liability to all
third parties who deal with the firm. It must therefore be of a general
CS (Comm.) No.17/22 M/s Vijaya Plastics Vs. M/s BN Sons and Ors. 47/51
and public character, not a private bilateral communication to one
creditor. No tripartite agreement with the plaintiff under Section
32(2) was ever executed. The internal arrangement by which
defendant No. 3 claims the liability was taken over by defendants No.
1 and 2 is a matter entirely between those partners and binds only
them. It cannot operate to discharge defendant No. 3’s liability
towards the plaintiff, who was never a party to and never consented
to that arrangement.
61. The Hon’ble Supreme Court in Ashutosh v. State
of Rajasthan, decided on 30.08.2025, reported as (2005) 7 SCC 308
has authoritatively held that partners are jointly and severally liable
for acts of the firm done during the period of partnership and such
liability is not extinguished merely by retirement in the absence of
compliance with the statutory requirements. The relevant portion is
provided as under:
“13. Under Section 25, the liability of the partners is joint and
several. It is open to a creditor of the firm to recover the debt
from any one or more of the partners. Each partner shall be
liable as if the debt of the firm has been incurred on his
personal liability.
14. The judgment in the case of Dena Bank v. Bhikhabhai
Prabhudas Parekh & Co. [(2000) 5 SCC 694] can be
beneficially referred to in the present context. Two questions
arose for consideration by this Court in this case. Firstly,
whether the recovery of sales tax dues amounting to Crown
debt shall have precedence over the right of the Bank to
proceed against the property of the borrowers mortgaged in
favour of the Bank. Secondly, whether property belonging to
the partners can be proceeded against for recovery of dues on
account of sales tax assessed against the partnership firm under
the provisions of the Karnataka Sales Tax Act, 1957. We are
concerned only with regard to the second question. In para 18,CS (Comm.) No.17/22 M/s Vijaya Plastics Vs. M/s BN Sons and Ors. 48/51
R.C. Lahoti, J. (as he then was) observed as under: (SCC p.
706)
“18. The High Court has relied on Section 25 of the Partnership Act,
1932 for the purpose of holding the partners as individuals liable to meet
the tax liability of the firm. Section 25 provides that every partner is
liable, jointly with all the other partners and also severally for all acts of
the firm done while he is a partner. A firm is not a legal entity. It is only a
collective or compendious name for all the partners. In other words, a
firm does not have any existence away from its partners. A decree in
favour of or against a firm in the name of the firm has the same effect as a
decree in favour of or against the partners. While the firm is incurring a
liability it can be assumed that all the partners were incurring that liability
and so the partners remain liable jointly and severally for all the acts of
the firm.”
15. In the case of ITO (III) v. Arunagiri Chettiar [(1996) 9
SCC 33] this Court considered the question as to whether an
erstwhile partner is liable to pay the tax arrears due from the
partnership firm pertaining to the period when he was a
partner. The Madras High Court has held that he is not.
Disputing the correctness of the said judgment, the Revenue
came in appeal before this Court. This Court while allowing
the appeal and setting aside the judgment of the High Court
observed as follows: (SCC p. 33)
“Section 25 of the Partnership Act does not make a distinction
between a continuing partner and an erstwhile partner. Its principle is
clear and specific viz. that every partner is liable for all the acts of the
firm done while he is a partner jointly along with other partners and also
severally. Therefore, it cannot be held that the said liability ceases merely
because a partner has ceased to be partner subsequent to the said
period.””
62. Applying the aforesaid legal principles to the facts
of the present case, the evidence on record shows that the outstanding
liability claimed by the plaintiff relates to the financial period
01.04.2017 to 31.03.2018, during which defendant no.3 admittedly
continued to be a partner of the defendant firm. Therefore, the
liability in question arose at a time when defendant no.3 was actively
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associated with the firm and participated in its business transactions.
During the course of cross-examination, defendant no.3 admitted that
no public notice regarding his alleged retirement from the partnership
firm was issued. In the absence of such public notice, the retirement
of defendant no.3 cannot affect the rights of third parties who had
dealings with the firm prior to such retirement.
63. It is also pertinent to note that the plaintiff had
been dealing with the firm during the period when defendant no.3
was admittedly a partner and therefore the plaintiff was entitled to
proceed against all partners of the firm for recovery of the
outstanding dues. Consequently, the defence taken by defendant no.3
regarding his retirement from the partnership firm does not absolve
him from liability towards the plaintiff for transactions which
occurred during the subsistence of the partnership. Accordingly,
defendant no.3 remains jointly and severally liable along with the
other defendants for payment of the outstanding amount claimed by
the plaintiff.
Accordingly, issue No. 3 is therefore decided against defendant
No. 3 and in favour of the plaintiff.
ISSUE NO. 4
“RELIEF”
64. In view of the findings returned on Issue Nos. 1, 2 and 3,
the suit of the plaintiff is decreed with costs against defendants No. 1,
2 and 3 jointly and severally. The defendants are directed to pay to
the plaintiff a sum of Rs. 60,09,224/- (Rupees Sixty Lakhs Nine
Thousand Two Hundred and Twenty Four only) towards the principal
outstanding amount, along with pre-suit/pendentelite and future
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interest @ 9% per annum on the said principal amount from
31.03.2018 till its realization.
The plaintiff shall also be entitled to the costs of the suit.
Decree sheet be drawn accordingly on deposit of deficient court fees.
File be consigned to the record room after due compliance.
Announced in the open Court today
on this 14th day of March, 2026
(DEVENDER KUMAR JANGALA)
District Judge (Commercial Court)-01
North-West/Rohini/New Delhi
14.03.2026
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