High Court of Gujarat
OFFICER LIQUIDATOR OF HANSPA KNIT (P) LTD.versusHOUSE OF DUBARY
- Disposal
- 46-ANY OTHER MODE @ FH
Holding
The appellate court affirmed the trial court's jurisdiction, found that the contract was formed and performed at Kandla, held that defendants 1‑4 breached the contract, declared the counter‑claim non‑maintainable under Section 69 of the Partnership Act, and modified the decree to reflect the defendants' incurred expenses.
Summary
The Gujarat High Court heard cross‑appeals arising from Special Civil Suit No. 120 of 1979 in which Hanspa Knit (P) Ltd., a company in liquidation, sought recovery of export proceeds from House of Dubary and its partners (defendants 1‑4) and other parties. The trial court had partially allowed the suit, awarding Rs 49,81,336 against defendants 1‑4, dismissing the counter‑claim and the claims against defendants 5‑6, and the appellants challenged the jurisdiction, the place of contract formation, performance and payment, and the validity of the counter‑claim under the Partnership Act. The appellate court held that the suit was correctly instituted in Bhuj because the contract was formed and performed at Kandla, and that defendants 1‑4 breached the contract by retaining the export proceeds. It also held that the counter‑claim was barred under Section 69 of the Indian Partnership Act, 1932, and that the decree should be reduced by the expenses incurred by defendant 1. Consequently, the decree was modified to Rs 36,15,218 and the appeals were disposed. No order as to costs was made.
Issues considered
- The trial court's jurisdiction under Section 20 of the Code of Civil Procedure, 1908
- Whether the place of contract formation was Delhi or Kandla
- Whether the place of performance of the contract was Bombay or Kandla
- Whether the place of payment was Delhi or Kandla
- Whether defendants 1‑4 committed a breach of contract
- Whether the contract was independent of the Letters of Credit
- Whether the decretal amount awarded by the trial court was arbitrary or based on manifest error
- Whether the counter‑claim was barred under Section 69 of the Indian Partnership Act, 1932
- Whether joint and several liability could be imposed on defendants 1‑4 while exonerating defendants 5‑6
Legislation cited
- Code of Civil Procedure, 1908s. 16, s. 19, s. 20
- Companies Act, 1956
- Customs Act, 1962
- Indian Partnership Act, 1932s. 69
- Sale of Goods Act, 1930s. 36, s. 39
Subjects
jurisdictioncontract formationletters of creditbreach of contractsale of goodspartnership actcounter‑claimdecree modificationjoint and several liabilitycustoms law
Judgment
C/FA/531/1986 CAV JUDGMENT DATED: 17/07/2026
Reserved On : 29/04/2026
Pronounced On : 17/07/2026
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
R/FIRST APPEAL NO. 531 of 1986
With
R/FIRST APPEAL NO. 1093 of 1987
FOR APPROVAL AND SIGNATURE:
HONOURABLE MR. JUSTICE BHARGAV D. KARIA
and
HONOURABLE MR.JUSTICE L. S. PIRZADA
==========================================================
Approved for Reporting Yes No
✓
==========================================================
HOUSE OF DUBARY & ORS.
Versus
THE OFFICER LIQUIDATOR OF HANSPA KNIT (P) LTD., & ORS.
==========================================================
Appearance:
ADVOCATE NOTICE NOT RECD BACK for the Appellant(s) No. 2
MR C B UPADHYAYA(3508) for the Appellant(s) No. 3,4
MR ND NANAVATI(507) for the Appellant(s) No. 1
MR ABHIJIT P JOSHI(1330) for the Defendant(s) No. 1
MR PRANAV G DESAI(290) for the Defendant(s) No. 6
MR SH SANJANWALA(729) for the Defendant(s) No. 7
MS PJ DAVAWALA(240) for the Defendant(s) No. 1
NOTICE NOT RECD BACK for the Defendant(s) No. 2,3
NOTICE SERVED for the Defendant(s) No. 4,5,8
==========================================================
CORAM:HONOURABLE MR. JUSTICE BHARGAV D. KARIA
and
HONOURABLE MR.JUSTICE L. S. PIRZADA
CAV JUDGMENT
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(PER : HONOURABLE MR. JUSTICE BHARGAV D. KARIA)
Sr. Particulars Paragraph
No. nos.
1) Introduction 1 to 5
2) Facts
a) Plaint 6 to 31
b) Written statement of 32 to 43
defendant nos. 1 to 4
c) Counter claim 44 to 52
d) Written statements of 53 to 54
defendant nos.5 and 6
e) Written submissions of 55 to 65
Appellant no.2
3) Issues framed by the Trial 66
Court and summary of
findings
4) Oral Evidence 67 to 75
5) Orders passed by the Trial 76 to 82
Court and orders in appeals
6) Submissions of appellants- 83 to 100
defendants
7) Submissions of the 101 to 144
respondent-plaintiff
8) Points for Determination 145
9) Reasons
Analysis of points for
determination and findings
1) Points for Determination 146 to 168
no. 1 to 4
2) Point for Determination 169 to 172
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No.5
3) Point for Determination 173 to 204
no.6
4) Points for Determination 205 to 210
No.7 and 8
5) Point for Determination 211 to 219
no.9
6) Point for Determination 220 to 222
No.10
7) Point for Determination 223 to 230
no.11
10) Conclusion 231 to 236
1) Introduction
1.Heard learned advocate Mr.C.B. Upadhyaya for
the appellants and learned advocate
Mr.Abhijit Joshi for the respective
respondent.
2.These matters are cross appeals and for the
sake of convenience, facts are recorded from
First Appeal No.531 of 1986.
3.First Appeal No.531 of 1986 is filed by the
defendant nos. 1 to 4 being aggrieved by
Judgment and Order dated 31.01.1986 passed by
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Civil Judge (Senior Division) Kutchh at Bhuj
in Special Civil Suit No.120 of 1979 partly
allowing the suit in favour of the plaintiff
- respondent no.1 – M/s. Hanspa Knit (P) Ltd.
(Under Liquidation) represented through
Official Liquidator for decree of sum of
Rs.49,81,336/- from the appellants- defendant
nos. 1 to 4 with running interest at the rate
of 12% per annum from the date of the suit
till realisation. Counter claim filed by the
appellants is rejected.
4.First Appeal No.1093 of 1987 is filed by
plaintiff M/s. Hanspa Knit (P) Ltd. (in
liquidation) being aggrieved by Judgment and
Order dated 31.01.1986 passed by Civil Judge
(Senior Division) Kutchh at Bhuj in Special
Civil Suit No.120 of 1979 so far as not
allowing freight and other charges and
dismissing the suit qua defendant nos. 5 and
6.
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5.Since both the appeals are cross appeals
arising out of a common Judgment, First
Appeal No.531 of 1986 is treated as a lead
matter. For the sake of convenience,
appellant nos. 1 to 4 are referred to as the
defendant nos. 1 to 4 and respondent no.1 is
referred to as the plaintiff whereas
respondent nos. 7 and 8 are referred to as
defendant nos. 5 and 6. Respondent nos. 2 and
3 are ordered to be deleted vide order dated
24.07.1995 whereas respondent nos. 4 to 6 are
joined as defendant nos. 4,5 and 6 in the
counter claim filed by the appellants.
2)Facts
a) Plaint
6.The plaintiff was a private limited company
registered under the provisions of Companies
Act, 1956 (For short “the Companies Act”) and
was engaged in assembling and manufacturing
of radio, transistors, car radios, cassettes,
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transistors etc. having its factory at
Gandhidham, Kandla in Kandla Free Trade Zone
District Kutch, Gujarat designated under the
provisions of the Customs Act, 1962 (For
short “the Customs Act”).
7.The plaintiff was holding license under the
provisions of the Customs Act to carry out
its business in Sector-1, Kandla Free Trade
Zone. The plaintiff was importing semi
finished components technically known as SKDs
in Semi Knocked Down Form from abroad and
thereafter assembled the same for export and
the plaintiff was not entitled to make any
domestic sales in India.
8.The defendant nos. 2, 3 and 4 are brothers
who were carrying on the business of export
of various items in the name and style of
“House of Dubary” -defendant no.1. Defendant
nos.2, 3 and 4 are also the partners of
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defendant no.1 firm as averred in the plaint.
Defendant no.5 M/s. Airfreight (P) Ltd. is a
company registered under the Companies Act
and carrying out its business at Mumbai as
Clearing and Forwarding Agent. Defendant
no.6-New Bank of India is a Scheduled Bank
situated at Delhi and had issued Irrevocable
Letters of Credit (LCs) in favour of the
plaintiff at the request and on account of
defendant no.1-firm.
9.The plaintiff filed Special Civil Suit No.
120 of 1979 to recover a sum of
Rs.62,91,245.18 from the defendants jointly
and severally.
10. It is averred in the plaint that in
December, 1977, 6 Yugoslavian buyers were
brought by defendant no.2 at the factory of
the plaintiff for negotiation regarding
export of electronic goods to Yugoslavia.
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Thereafter, pursuant to further negotiation
at Bombay, Delhi and Hongkong, defendant nos.
1 to 4 agreed to act as Export House and
placed orders in their own name for reason of
expediency subject to goods being exported to
Yugoslavia. On 04.10.1978, defendant nos. 1
to 4 placed an order with the plaintiff for
supply of goods amounting to US$ 781521.14
equivalent to Rs.62,91,245.10. Thereafter on
05.10.1978, four confirmed Irrevocable
Letters of Credit (LCs) were opened by
defendant no.6 -New Bank of India, Delhi in
favour of the plaintiff. As per the LCs, the
plaintiff was to complete the shipment by
10.10.1978 and negotiation by 30.10.1978 and
goods were to be shipped from Kandla Port.
Thereafter, LCs were amended by letter dated
09.10.1978 by defendant no.6 -New Bank of
India by correcting the last date of shipment
as 01.12.1978 and last date for negotiation
to be 30.12.1978. Thereafter, New Bank of
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India - defendant no.6 further amended LCs by
letters dated 14.10.1978, 20.10.1978 and
18.11.1978 by amending the shipment by air
from Bombay Airport to Theossaloniki (Greece)
Airport.
11. The plaintiff through its Forwarding
Agent namely M/s. Dawn India made first
consignment of following shipments from
Kandla:
Inv. No. Date Qnty Model Amount U.S.A.R.4
(Sets) $ Forms
HK/01 22/11/78 12,900 SITTAR 98,040.00 Hans/Exp/
sets 01/78-79
HK/02 22/11/78 5000 sets PANASIA 40,000.00 Hans/Exp/
02/78-79
HK/03 25/11/78 4995 sets “ 39,960.00 Hans/Exp/
03/78-79
HK/04 25/11/78 1906 sets “ 14,485.60 Hans/Exp/
04/78-79
HK/05 2/12/78 8000 sets SITAR 60,800.00 Hans/Exp/
05/78-79
HK/06 3/12/78 10000 sets PANASIA 80,000.00 Hans/Exp/
06/78-79
Total 3,33,285.60
12. Aggregate value of the aforesaid
consignment was US $333,285.60 equivalent to
Rs.26,80,327.55. The plaintiff received the
said amount from defendant no.6 for and on
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behalf of defendant no.1.
13. The plaintiff thereafter dispatched the
second consignment from Kandla Free Trade
Zone to defendant no.5 - M/s. Airfreight (P)
Ltd. for export at Bombay through M/s. Vijay
Transport Co. for export by air.
14. The aggregate value of second
consignment was US$ 2,60,863.00 equivalent
to Rs.20,99,947.01.
15. The plaintiff dispatched the goods in
part for third consignment to defendant no.5
M/s. Airfreight (P) Ltd. through M/s. Vijay
Transport Co. from Kandla Free Trade Zone to
Bombay.
16. Aggregate value of the third consignment
is US$ 4,30,510.14 equivalent to
Rs.34,65,606.60.
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17. As the defendants did not pay the amount
of second and third consignment, the
plaintiff filed the suit on 21.05.1979 for
recovery of Rs.62,91,245.18 together with
interest at the rate of 15% from 17.12.1978
to 05.05.1979 and running interest at the
rate of 15% per annum till realisation.
18. It is the case of the plaintiff that
after the plaintiff exported the first
consignment from Kandla by ship to Yugoslavia
through the Clearing and Forwarding Agent
M/s. Dawn India, defendant nos. 1 to 4
persuaded the plaintiff to export the goods
by air through defendant no.5 as defendant
no.5 was giving 30 days credit for payment of
freight to defendant nos. 1 to 4 as the goods
were to be exported on FOB basis.
19. The plaintiff agreed to the suggestion
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to export the goods by air through defendant
no.5 - M/s. Airfreight (P) Ltd. who was
Clearing and Forwarding agent of defendant
nos. 1 to 4 from Bombay airport to Greece
airport. Accordingly, plaintiff sent the
second consignment after removing the goods
from Kandla Free Trade Zone under Form A.R.4
issued by Customs Department to M/s. Vijay
Transport Co. to Bombay to defendant no.5 so
as to export to Yugoslavia by air.
20. It is the case of the plaintiff that
though defendant no.5 was required to send
the goods for and on behalf of the plaintiff
by air but it did not forward the Airway bill
to the plaintiff but the same was forwarded
to defendant no.1 which shows the collusion
between defendant nos. 1 to 4 and defendant
no. 5. It is also the case of the plaintiff
that in the Airway bill in the column of
shippers, name of defendant no.1 “House of
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Dubary” was mentioned by defendant no.5.
Because of such collusion between defendant
nos. 1 to 4 and defendant no. 5, defendant
no. 6 made the payment received from the
negotiating bank of Yugoslavia in the account
of defendant no.1 “House of Dubary”.
21. It is also the case of the plaintiff
that the goods sent by the plaintiff was
entitled to exemption from duty only if the
exporter is having factory within Kandla Free
Trade Zone and it would amount to an offence
to mention the name of defendant no.1 under
the column of shippers name and address in
the airway bill.
22. It is a normal trade practice in a case
where a manufacturer is exporting the goods
at the instance of an Export House, the
foreign buyer would give Letter of Credit
from his banker in favour of the Export House
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in India and the bankers of the Export House
would give Letter of Credit in favor of the
manufacturer and hence, the Airway Bill in a
case where the goods are exported by air and
Bill of Lading in case where the goods are
exported by the ship are the most important
documents of title. The Airway Bill or the
Bill of Lading, as the case may be, is
therefore, required by the manufacturer
exporting the goods to be produced through
the negotiating bank to the LC opening Bank
along with the bank draft and documents drawn
on the LC opening bank through the
negotiating bank. The LC opening bank on
receipt of Airway Bill, bank draft and the
documents would make payment to the
manufacturer of the value of the goods
exported.
23. However, it is the case of the plaintiff
that in facts of the case, the LC opening
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bank i.e. defendant no.6 as well as the
plaintiff who had manufactured the goods for
export and defendant no.1 Export House
through whom the export was made were
required to follow the prescribed procedure.
Therefore, defendant no.6 received Letters of
Credit drawn in its favour by the bankers of
Yugoslavian buyers i.e. “Manufacturer Hanover
Trust”, a leading American Bank of
International repute. Defendant no.6-New Bank
of India had drawn LCs in favour of the
plaintiff and was expected to honour the LCs
and pay the amount thereof to the plaintiff
on production of bank draft and the documents
to the defendant no.6 through negotiating
bank i.e. State Bank of India at Kandla.
24. It is the case of the plaintiff that
though defendant no.6 being in full knowledge
of true facts and after having received the
original Airway Bill showing the name of the
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plaintiff in the column of shippers, should
not have paid the entire amount received from
the bankers of Yugoslavian buyers to
defendant no.1. The plaintiff has therefore,
alleged that defendant nos. 1 to 4 as well as
defendant no.6 New Bank of India are liable
to pay the amount covered by LCs drawn by
defendant no.6 in favour of the plaintiff
insofar as the value of the second
consignment exported by defendant no.5 to the
Yugoslavian buyers through Air on 27.12.1978
amounting to US $ 2,60,863=00 equivalent to
Rs.20,99,947.01.
25. It is the case of the plaintiff that
defendant nos. 1 to 4 and defendant no.6 has
thus committed a fraud on the plaintiff by
appropriating the credit of the entire amount
received from the bankers of Yugoslavian
buyers in the account of defendant no.1-
“House of Dubary”. The plaintiff therefore,
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insisted from defendant nos.1 to 4 to agree
and assure that payment due to the plaintiff
would be made latest by March or April, 1979
but the defendant nos. 1 to 4 failed to keep
their assurance and did not pay the amount of
US$ 2,60,863=00 equivalent to
Rs.20,99,947.01.
26. Regarding the third consignment
forwarded by the plaintiff between December
30, 1978 to January 11, 1979 comprising of 6
parcels through M/s. Vijay Transport Co. to
defendant no.5 Air Freight Pvt. Ltd. as a
Clearing and Forwarding Agent of the
plaintiff, same were exported after delay of
more than four to five months by defendant
nos. 1 to 4, and as such defendant nos. 1 to
5 are jointly and severally liable for the
amount of the third consignment.
27. It is the case of the plaintiff that
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defendant no.5 ought to have sent the
original airway bill to the plaintiff but
deliberately forwarded the same to defendant
nos. 1 to 4 and hence defendant no.5 is
guilty of conversion and misappropriation of
the goods sent by the plaintiff for export
purpose to defendant no.5 at Mumbai.
28. It is the case of the plaintiff that
between January 13, 1979 to May 3, 1979,
plaintiff as well as the custom authorities
of Kandla Free Trade Zone addressed several
communication to the defendant no.5. M/s.
Airfreight (P) Ltd. calling upon the
information for withholding the goods by
defendant no.5. The plaintiff also called
back the third consignment to Kandla from
Mumbai. However no response was given by
defendant nos. 1 to 5.
29. The plaintiff by letter dated 27.04.1979
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also requested the Assistant Collector of
Customs International Area Cargo Complex,
Export department, Mumbai putting on record
that defendant no.5 inspite of repeated
requests failed to advise the plaintiff of
dispatch of the cargo under AR-6 to 11 and
AR-12 to 20 regarding second and third
consignment respectively.
30. The plaintiff by another letter dated
14.04.1979 placed on record that defendant
no.5 was warned of the legal liability of its
action in keeping cargo and preparing false
documents and also informed the customs
authority that the defendant no.5 is called
upon to return cargo under AR-12 to 20 along
with relevant documents. By letter dated
24.04.1979, the plaintiff informed the
Assistant Collector of Custom ,Kandla Free
Trade Zone giving details of AR-4 Form from
AR-12 to 20 regarding the third consignment
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that the goods have been sent to defendant
no.5 but the same were not exported till that
date and further steps are required to take
back the goods from the defendant no.5.
31. The Assistant Collector of Customs
Kandla Free Trade Zone by letter dated
03.05.1979 also informed the defendant no.5
that goods are kept in an unauthorised manner
for a period of more than four months since
the goods were under customs export bonds and
threatened the defendant no.5 for action
under the provisions of the Customs Act and
called upon defendant no.5 to deliver the
consignments back to the plaintiff since the
goods were not exported and the plaintiff
being the owner of the goods did not wish to
export the goods and intended to bring them
back to Kandla Free Trade Zone. The customs
authorities also warned defendant no.5 for
holding the bonded goods illegally. However,
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in spite of such communication from the
plaintiff and the customs authorities,
defendant no.5 exported the goods by air to
Yugoslavian buyers but did not send the
airway bills to the plaintiff nor returned
the AR-4 Forms showing the proof of export to
the plaintiff. It is the case of the
plaintiff that amount of the sale
consideration of goods of the third
consignment was received in the account of
defendant no.1.
b) Written statement of defendant nos. 1 to 4
32. The defendant nos. 1 to 4 filed the
written statement at Exh.29 raising various
preliminary objections as under:
1) The plaint has not been signed and
verified by a duly authorised person.
2) The Trial Court did not have territorial
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jurisdiction to try the suit or entertain it
or grant any relief thereunder.
3) No notice of demand was ever served by the
plaintiff upon the defendants, hence the suit
is premature.
4) That the plaint suppresses material facts
as well as relevant details and as such, is
mala fide, false and frivolous to the
knowledge of the plaintiff and is liable to
be dismissed outright with special costs and
exemplary cost as provided under section 35
of the Code of Civil Procedure, 1908.
5) The suit is bad for mis-joinder of parties
inasmuch as the plaintiff cannot claim any
amount collectively, jointly and severally
and for that matter alternatively from
defendant nos. 1 to 4 representing one group
and defendant nos. 5 to 6 as separate
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entities.
6) On ex-facie reading of para no. 14(i) to
(v) of the plaint, total aggregate of the
figures does not tally with the claim made of
Rs.62,91,245.18.
7) The suit amount has not been properly
valued for purposes of Court fees and
jurisdiction.
33. Apart from preliminary objections, it
was contended by the defendant nos. 1 to 4
that there was no evidence of any privity of
contract whereby the plaintiff was entitled
to receive the alleged amount from defendant
nos. 1 to 4.
34. It was contended that the suit is liable
to be stayed under section 10 of the Code of
Civil Procedure, 1908 as separate suit for
declaration negating the claim of the
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plaintiff had already been filed by the
defendants in the Courts at Delhi which was
pending for trial.
35. It was contended that the plaintiff did
not come to the Court with clean hands and
there is no equity in his favour.
36. It was contended that as per section 20
of the Code of Civil Procedure, 1908, place
of suing shall be where the defendants
actually and voluntarily reside and carry on
the business and work for gain or where the
cause of action wholly or in part arose and
therefore, the Court at Kuchchh at Bhuj has
no territorial jurisdiction as negotiation
between the parties took place only at three
places i.e. Bombay, Delhi and Hongkong.
37. It was also contended that plaintiff has
no locus standi to institute the suit on his
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own volition or free will at Bhuj as the
plaintiff has failed to show as to how
defendant nos. 5 and 6 could be impleaded as
party.
38. It was also contended that though it is
an admitted position that amount of
Rs.26,80,327.50 pertaining to first
consignment has already been received by the
plaintiff then how that amount can be again
claimed by the plaintiff.
39. It was further contended on behalf of
defendant nos. 1 to 4 that the plaintiff is
not entitled to claim any amount as LCs have
expired on 30.12.1978. It was also contended
that the terms and conditions of LCs was
contract between the parties and in absence
of any LCs, defendants are not liable to pay
any amount to the plaintiff.
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40. It was also contended that defendant
no.5 was only Clearing and Forwarding Agent
of defendant nos. 1 to 4 therefore, there was
no obligation or moral duty to handover the
airway bill to the plaintiff and plaintiff
has no locus standi to ask for such
documents.
41. It was also the case of the defendants
that plaintiff has committed gross violation
of terms and conditions of the back to back
LCs and realising that default and lapses
have been made, have dumped the unsalable
goods with defendant no.5 and on the contrary
defendants have incurred freight charges and
demurrage and filed counter claim claiming
that the defendants have suffered loss to the
tune of US$ 13,60,644.17 equivalent to Rs.
1,08,85,152.00.
42. It was contended that the defendants are
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not liable for the claimed amount as total
value claimed by the plaintiff is CIF value
which come into operation without costs,
insurance and freight. Since the plaintiff
has not paid freight/ chartered charges or
insurance charges nor there is any averment
in the plaint to that effect and therefore,
such amount cannot be claimed by the
plaintiff. It was further contended that the
defendants have held the plaintiff to export
the goods but the amount of freight,
demurrage etc. paid by defendant no.1 was
required to be adjusted and the Managing
Director of the plaintiff Mr. Hasmukh Khatri,
has flown out of country due to indebtedness
as there were liabilities of the banks and
Gujarat Financial Corporation, State Bank
and other institutions with which the
plaintiff was associated in the course of its
business.
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43. It was therefore, claimed that when the
Letter of Credits have expired on 30.12.1978
there was no contract between the parties and
the goods were exported at the cost and risk
of the plaintiff by defendant no.5 directly
and defendant nos. 1 to 4 only helped the
plaintiff to clear the goods as the plaintiff
did not have enough finance to pay the
freight and other charges. It was therefore,
contended that all the matters prior to
30.03.1979 stand waived of by doctrine of
estoppel, waiver, forfeiture and
acquiescence.
c) Counter claim
44. The defendant nos. 1 to 4 filed their
suit in form of counter claim under the
provisions of Order VIII Rule 6 (a) and (b)
read with section 151 of Code of Civil
Procedure. In the counter claim, defendant
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nos. 1 to 4 are plaintiffs and Hasmukh
Brothers (HK) Hongkong, M/s. Hanspa Knit(P)
Ltd., Shree Hasmukh C Khatri, Shree P.U.Oza,
Shree A.C. Pota and State Bank of India,
Kandla Free Trade Zone, Gandhidham-Kutch were
joined as defendant nos. 1 to 6 respectively.
45. In para no.5 of the counter claim, it
was averred that various irrevocable Letters
of Credit opened in their favour by a
Government Enterprise “SOLUN” Import-Export,
Gevgelija, Yugoslavia of US$ 2,284,465.00
equivalent to Rs.2,27,31,800/-. It is further
averred that Hasmukh Brothers (HK) assured
and agreed to assemble the items as per the
order in factories located in Hongkong and
accordingly, irrevocable Letters of Credit
dated 20.06.1978 and 21.06.1978 in favour of
the said firm were opened and in turn Letters
of Credit were opened by the defendant no.1
firm “House of Dubary” as stated in para no.9
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of the counter claim. However, Hasmukh
Brothers (HK) failed to supply the goods but
assured to execute the orders under the said
Letters of Credit through sister concern
plaintiff M/s. Hanspa Knit (P) Ltd. located
at Kandla.
46. It is further averred that upon
assurance given by the plaintiff M/s. Hanspa
Knit (P) Ltd., 7 Letters of Credit in favour
of Hasmukh Brothers (HK) were withdrawn and
three Letters of Credits were opened in
favour of Hasmukh Brothers (HK) and 4 Letters
of Credit were opened in favour of M/s.
Hanspa Knit (P) Ltd. stipulating the period
of supply upto 20.12.1978.
47. Regarding the first consignment sent on
22.11.1978, it was claimed that there was
violation of the implied terms and conditions
agreed upon of sending the consignment
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through charter aircraft and therefore, there
was a loss of Rs.51,013 (US$ 6,376.66
approximately). A claim for refund was also
made for Rs.1,44,846.90 on the ground of
failure to supply total quantity of goods.
48. Regarding the second consignment as per
details given in para no.15 of the counter
claim, M/s. Hansa Knit (P) Ltd. sent the
goods to clearing agent M/s. Air Freight (P)
Ltd. at Bombay on 27.12.1978 on its own which
was exported to SOLUN Import-Export after
great persuasion in the month of May, 1979.
49. The third consignment was also exported
in May,1979 after paying airfreight and
incurring other miscellaneous expenses. By
letters dated 22.05.1979, 24.05.1979 and
19.06.1979 SOLUN Import-Export raised dispute
regarding the shortage in quantity and defect
in quality of the goods as stated in para 19
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and 20 of the counter claim. Therefore, a
claim of US$ 59,375.00 equivalent to
Rs.4,75,000/- in respect of second
consignment and US$ 56,250.00 equivalent to
Rs.4,50,000/- in respect of third consignment
for making various correspondence and
contacting SOLUN Import-Export personally and
other necessary miscellaneous expenses during
the course of transaction was raised. Claim
for demurrage of US$ 7,500(Rs.60,000) and
payment made to clearing and forwarding agent
M/s Dawn India for US$ 7500 (Rs.60,000) and
US$ 5,250 respectively was also raised.
Interest claim at the rate of 18% per annum
on US$ 21,754.60 i.e. US$ 93,915.03 (Rs.
7,51,326.64 approximately) was raised.
Further claim for loss of goodwill,
reputation and future business due to
negligence and misconduct of M/s. Hanspa Knit
(P) Ltd. and others was raised at the rate of
20% on US$ 1,440,960 amounting to US$
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288,192.0 (Rs.23,05,536 approx) further claim
of demurrage of Rs. 432,288.00
(Rs.35,27,680/- approx.) was raised. Thus
total claim of US$ 13,60,644.17
(Rs.1,08,85,152) was made.
50. It was also claimed that as the CCIE did
not grant license to “House of Dubary”, it
had to transfer the Letter of Credit for
about Rs. 82 Lacs issued by Yugoslavian
buyers in the name of its sister concern
Dubary Exports sustaining heavy loss of Rs.
22 Lacs.
51. It was therefore, prayed that Suit no.
120 of 1979 should be dismissed and counter
claim of Rs.1,08,85,152 together with
interest at the rate of 18% per annum should
be decreed. The declaratory suit filed before
Delhi High Court is placed on record at Exh.
442.
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52. The plaintiff also filed the written
statement to the counter claim denying the
facts stated therein and reiterated the facts
stated in the plaint and also denied that
M/s. Hasmukh Brothers (HK) has any connection
with the 2nd and 3rd consignment which were
admittedly exported for which payment has
been received from the Yugoslavian buyers.
The other defendants in the counter claim
also filed their written statement denying
the claim made in the counter claim.
d) Written statements of defendant nos.5 and 6
53. Defendant no.5 filed its reply at Exh.35
wherein similar contention has been raised as
raised by defendant nos. 1 to 4.
54. Defendant no.6 also filed its written
statement at Exh.38 contending that draft
drawn by the plaintiff on defendant no.1 was
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submitted through State Bank of India, Kandla
along with papers and the details of the same
are narrated in paragraph no.9 of the written
statement. It was contended that plaintiff is
not entitled to any relief and requested the
suit be dismissed with cost.
e)Written submissions of Appellant no.2
55. Appellant no.2 – defendant no.2 Shakar
Darbari has filed written submission vide
email dated 09.06.2026 through his power of
attorney holder Ms.Raj Darbari. It was
submitted in the written statement that
chronology of events narrated therein from
1979 onwards reveal a systematic pattern of
fraud, suppression and abuse of process that
has resulted in appellant no.2 - defendant
no.2 Shakar Darbari and others being deprived
of property.
56. It was further contended that there is
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no Official Liquidator who is appointed for
the plaintiff company which is under
liquidation and therefore, notice issued by
the Registry was upon a non-existent entity
as the plaintiff company was ordered to be
wound up on 10.07.2000.
57. Reliance was placed on the decision in
cases of (i) S.P. Chengalvaraya Naidu v.
Jagannath reported in (1994) 1 SCC 1, (ii)
A.V. Papayya Sastry v. Government Of A.P.
reported in (2007) 4 SCC 221 and (iii) Ram
Chandra Singh v. Savitri Devi reported in
(2003) 8 SCC 319. Relying upon the aforesaid
decisions, it was submitted that the alleged
fraud is not curable by subsequent event
including actual appointment of Official
Liquidator in 2000. It was also pointed out
that the plaintiff company had become a
defunct company in 1983 and therefore, such
company cannot sue as it is equivalent to
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deceased natural person. In support of such
submission, reliance was placed on the
following decisions:
(i) Purtabpore Co. Ltd. v. Cane Commissioner
of Bihar reported in (1969) 1 SCC 308.
(ii) Cotton Corporation of India Ltd. v.
United Industrial Bank Ltd. reported in
(1983) 4 SCC 625.
(iii) Dale & Carrington Invt. (P) Ltd. v.
P.K. Prathapan reported in (2005) 1 SCC 212.
58. It was further alleged that decree dated
31.01.1986 was passed ex-parte in favour of
the company that had ceased to exist in law
since 1983 and the Trial Court was misled
into believing that a living company was
prosecuting its claims. Reliance was placed
on the following decisions:
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i) Sushil Kumar Sabharwal v. Gurpreet Singh
reported in (2002) 5 SCC 377.
ii) State Bank of Travancore v. Kingston
Computers reported in (2011) 11 SCC 524.
iii) A.R. Antulay v. R.S. Nayak reported in
(1988) 2 SCC 602.
59. It was alleged that advocates appearing
for the plaintiff were not authorised. It was
also pointed out that in 2019, a statement
was made before the Court that appellant no.2
- defendant no.2 Shakar Darbari had expired
which was a false statement and thereafter on
an application being filed on 20.12.2024,
vide order dated 09.07.2025, the abatement
order was recalled, resulting into
deprivation of right to access justice for
six years which constitute a grave violation
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of Article 21 of the Constitution of India.
60. Reference was also made to the
background of the appellants-defendants and
the respondent-plaintiff vis-a-vis national
character of the family of “House of Dubary”
and the plaintiff company and its Director.
61. Thereafter reference is made to medical
emergency of Shakar Darbari aged 76 years who
was diagnosed with pancreatic cancer and had
undergone major surgical procedure lasting
for 10 hours and requires immediate access to
funds for continuous treatment. Reliance was
placed on decision in case of Paschim Banga
Khet Mazdoor Samity v. State of West Bengal
reported in (1996) 4 SCC 37.
62. Referring to above submissions,
following summary was made of legal
propositions:
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“a) A decree obtained by a defunct,
non-existent company is void ab
initio and a nullity: Sushil Kumar
Sabharwal (supra).
(b) Notice issued to a non-existent
Official Liquidator confers no
jurisdiction: A. V. Papayya Sastry
(supra).
(c) Fraud on the court vitiates all
proceedings: S.P. Chengalvaraya
Naidu (supra); A. V. Papayya Sastry
(supra); Ram Chandra Singh (supra).
(d) A company without a Board of
Directors cannot authorise
litigation: Dale & Carrington
(supra); State Bank of Travancore
(supra); Patel Roadways (supra).
(e) The ROC's failure under
mandatory Section 560(3) is a breach
of statutory duty: Purtabpore Co.
Ltd. (supra). Winding up of a
defunct company is futile: Cotton
Corporation (supra).
(f) Deprivation of property for 47
years without authority of law
violates Article 300A. Restitution
mandatory: Southeastern Coalfields
(supra).
(g) A 40-year pendency violates
Article 21: Hussainara Khatoon
(supra). Denial of livelihood
violates right to life: Olga Tellis
(supra).
(h) Abatement without a death
certificate violates Order XXII Rule
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4 CPC and Article 21.
(i) The Court must correct its own
errors ex debito justitiae: A.R.
Antulay (supra).
(j) Courts must refuse assistance to
economic offenders: Tapas D. Neogy
(supra). Right to emergency medical
care is fundamental: Paschim Banga
Khet Mazdoor Samity (supra).”
63. It was therefore, prayed to set aside
the Judgment and Decree dated 31.01.1986
passed in Special Civil Suit No.120 of 1979
and further prayed for immediate release of
money deposited in Fixed Deposits with State
Bank of India with interest.
64. It is also prayed to dismiss the Cross
appeal and initiate proceedings under section
340 of the Code of Criminal Procedure, 1973
for fraud practiced upon the Court and award
compensation of Rs. 50 crores with exemplary
cost of Rs. 10 crore and further pass
strictures against the advocates who appeared
for the company in liquidation without
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sanction under section 446 of the Companies
Act, 1956.
65. Considering the order passed by this
Court dismissing Civil application filed by
the Appellant No.2 contending similar
averments , these submissions are not
required to be dealt with as the appeal filed
by the defendant nos. 1 to 4 was heard at
length and is hereby decided considering
submissions made by the learned advocates of
both the sides.
3)Issues framed by the Trial Court and summary
of findings
66. The Trial Court framed following issues
at Exh. 218 and findings on the issues are
also recorded in para no.48 of the judgment
which are summarised as under:
Issue ISSUES FINDINGS
No.
1) Whether the def. Nos. 1 In the
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to 4 prove that the negative
plaintiff Hanspa Knit
(P) Ltd., has been
committed the breach of
contract ?
If so, they are
entitled to recover the
amount as claimed in
the counter claim ?
2) Whether the plaintiff Yes. As per
M/s. Hanspa Knit (P) order
Ltd., is entitled to
all or any reliefs on
basis of the
allegations as made in
the plaint?
2-(A) Whether this In the
court has jurisdiction affirmative
to entertain the suit
of the plaintiff Hanspa
(P) Ltd., against the
defts.?
(2-B) Whether it is Defendant no.5
proved that the and 6 are
deft.Nos. 5 & 6 of the necessary and
suit are not necessary proper parties
or proper parties and as the nature
that the suit is bad? of the suit.
(2-C) Whether the deft. In the
Nos. 1 to 4 prove that negative.
there was no privity of
contract between the
parties ?
(2-D) Whether the deft. No
Nos. 1 to 4 prove that
the contract in
question is void on the
ground of the violation
law and regulation.
(2-E) Whether the deft. No
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Nos. 1 to 4 prove that
the plaintiff M/s.
Hanspa Knit (P) Ltd.,
is estopped in view of
the letter dated 16-3-
79 from recovery of the
suit amount?
(2-F) Whether the Yes. In the
plaint signed and affirmative
verified by Shree A.C.
Pota is legal and
valid?
If, not, what effects?
(2-G) Whether the suit In the
is maintainable in the affirmative
present form?
3) What order and decree As per order
regarding to the suit
and counter claim?”
4)Oral Evidence
67. Both the sides produced documentary
evidence and examined witnesses who were
cross examined during the trial.
68. The plaintiff has examined Anilbhai
Chandubhai Pota at Exh. 276, the then
Director who is also cross examined on behalf
of the defendants.
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69. In his examination-in-chief, Anilbhai
Chandubhai Pota has produced the orders
placed by the defendant nos. 1 to 4 which
were exhibited as Exh. 278 to Exh.281. Letter
of confirmation of those orders is produced
at Exh.282. Letters of Credit are produced at
Exh.283 to 289 and 290 to 309. Invoices and
documents of the second consignment at Exh.
310 to Exh.315. Documents of third
consignment are at Exh. 316 to 317. Amount of
sale consideration received by the defendant
nos. 1 to 4 in their bank account which is
kept in Fixed Deposit in Sundry account and
bank statement thereof is produced at Exh.
318 which is received in two parts. First
with regard to goods of standard quality and
second part when dispute of standard quality
was given up by the buyers and entire amount
was received. Copies of AR-4 Forms are
produced from Exh. 319 to 322. Fixed Deposit
Receipts of the amount received by defendant
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no.1 are produced at Exh. 323. Copies of
letter of the State Bank of India along with
documents returned to defendant no.6 being
Exh. 324 and 325. Telex messages are produced
from Exh. 326 to 333 regarding communication
for confirmation. Notice issued by the
customs authorities to defendant nos. 1 to 5
on 08.10.1979 and its reply is given by
defendant nos. 1 to 4 at Exh.334 to Exh. 336.
Order of penalty dated 02.01.1981 passed by
Special Officer of the Customs Department
upon defendant nos. 1 to 4 at Exh. 337. Telex
Message of defendant nos. 1 to 4 accepting
the mistake and agreement for payment at
Exh.338. Copies of communication between the
plaintiff and defendant no.5 is produced at
Exh. 339 to 348. Copy of communication
between customs officer and defendant no.5 at
Exh. 349. Telex message from the defendants
at Exh.350. Freight bill of spare part sent
by the plaintiff to Yugoslavian buyer
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regarding 2nd and 3rd consignment at Exh.352.
Details of letter dated 26.10.1978 of the
defendants having agreed to extend the period
for delivery of goods received by the
plaintiff on 17.12.1978 at Exh.353. Telex
messages between the parties from 12.12.1978
to 30.04.1979 at Exh.354 to 368. Letter
written by Customs authority to defendant
no.5 at Exh. 369.
70. In the cross examination and re-
examination, witness of the plaintiff denied
that the plaintiff was liable to pay the
airfreight. It was also denied that due to
financial crisis, defendant nos. 1 to 4 paid
the airfreight.
71. The witness of the plaintiff also placed
on record letter dated 10.03.1979 addressed
to defendant no.5 to return the goods which
is exhibited as Exh. 450. Various documents
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containing the communication by the plaintiff
for export of third consignment were
exhibited from Exh. 453 to Exh. 461.
72. Witness of the plaintiff denied the
contentions of the defendants whereby it was
proposed that counter claim placed by
defendant nos. 1 to 4 was part of the letter
at Exh. 205.
73. It was contended on behalf of the
plaintiff that though defendant nos. 1 to 4
have received the payment from Yugoslavian
buyers, same was not paid to the plaintiff,
inspite of the fact that it was known to the
defendants that the manufacturer who exported
the goods was the plaintiff and therefore, by
collusion, the defendants have deprived the
plaintiff of its legitimate dues, inspite of
having full knowledge of the true facts and
having received original airway bill showing
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the name of the plaintiff in column of
shippers and therefore, the defendants could
not have retained the entire amount received
from Yugoslavian buyers and as such, all the
defendants are jointly and severally liable
for the amount claimed by the plaintiff of
Rs.62,91,245.18.
74. The defendants have examined one witness
defendant no.4 Deepak Durbari. In his
examination in chief, he reiterated the
contentions in the written statement and has
placed the original partnership deed at Exh.
416, letter dated 19.06.1979 at Exh. 417,
Letter received from Yugoslavian buyers at
Exh.418, Copies of certificate of export at
Exh. 420 to 425, Copies of airway bill of 1 st
consignment at Exh.426, copies of invoice of
2nd consignment at Exh. 427 to 428, Copies of
telegram and telex message of the transaction
entered into by Hasmukh Brothers (HK) from
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Exh. 429 to Exh. 435.
75. In the cross examination made on behalf
of the plaintiff, defendant no.4 has accepted
the documents with counter claim which are
exhibited at Exh. 437 to 441.
5) Orders passed by the Trial Court and orders
in appeals
76. The Trial Court after considering oral
and documentary evidence led by both the
sides partly allowed the suit in favour of
the Plaintiff as under:
“ORDER
The documents mark-202/6,
mark413/32, mark-413/33, mark-413/45 and
mark-466/ (1) are hereby permitted and
allowed to be exhibited.
The Special Civil Suit No 120 of 1979
is hereby partly allowed and decreed.
The plaintiff M/s Hanspa Knit (P)
Ltd., Kandla, Gandhidham Kachchh is
entitled to recover the sum of Rs.
49,81,336-00 (Rupees forty nine lac,
eighty one thousand three hundred thirty
six only.) from the defendant Nos. 1 to 4
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with running interest at rate of twelve
per cent per annum from the date of the
suit till realization.
It is therefore ordered that the
defendant Nos. 1 to 4 shall pay the amount
of Rs. 49,81,33 with running interest at
rate of twelve percent per annum from the
date of the suit till date of the payment
to the plaintiff.
The rest of the claim and that suit
against the defendant Nos. 5 & 6 stand to
be dismissed.
It is hereby ordered that the
defendant Nos. 1 to 4 are restrained to
take money from standing sundry account in
New Bank of India Ltd., D-47 Defence
Colony., New Delhi and be directed to be
deposited the entire amount lying in such
sundary account of New Bank of India Ltd.,
New Delhi, in the court for payment and
satisfaction of the decree passed against
them in Special Civil Suit No. 120 of
1979.
It is further ordered that the
sixth defendant New Bank of India Ltd., D-
47, Defence Colony, New Delhi is
prohibited to pay any money standing and
lying in sundry account to the defendant
Nos. 1 to 4 and be directed to be
deposited all money lying in such sundry
account, into court within three months
from the date of this order for the
payment and satisfied decree passed
against the defendant Nos.1 to 4.
The defendant Nos. 1 to 4 shall
bear their own costs and costs of the
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plaintiff and that the defendant Nos 5 & 6
shall bear their own costs.
Decree will be draw accordingly in
favour of the plaintiff in Special Civil
Suit No. 120 of 1979.
The counter claim by way of the
cross suit which being filed by House of
Dubary and partners thereof is liable to
be dismissed and it is hereby dismissed.
The plaintiffs in the counter claim
by way of the cross-suit shall bear their
own costs and costs of the defendants.
Decree will be drawn accordingly.”
77. Being aggrieved by the Judgment and
Decree, First Appeal No.531 of 1986 is filed
by the original defendant nos. 1 to 4
challenging the Judgment and Decree dated
31.01.1986 passed by the Trial Court and
First Appeal 1093/1987 was filed by plaintiff
company under liquidation.
78. The appeal was admitted by order dated
11.04.1986 [Coram : Hon’ble Mr. Justice M.B.
Shah and Hon’ble Mr. Justice R.A. Mehta (As
their Lordships Were Then)].
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79. Thereafter by order dated 02.11.2006,
notice was issued to the Official Liquidator.
It appears that the matter was thereafter
taken for regular final hearing from 2018
onwards and the matter was adjourned from
time to time on one ground or the another,
either time was being sought by the
appellants-defendants or by the respondent.
80. It appears that Civil Application
No.1094 of 1986 was filed for stay wherein
interim order was passed by the Division
Bench on 28.04.1986 calling upon the New Bank
of India, Delhi to transfer an amount of Rs.
37.5 Lacs to the State Bank of India, Main
Branch, Ahmedabad to be invested in the name
of the Additional Registrar, High Court of
Gujarat which was transferred on 17.06.1986.
Civil Application No.2256/1986 was filed by
the plaintiff with a prayer to permit the
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withdrawal of the amount of Rs. 37.5 Lacs
which was standing in the name of Additional
Registrar, High Court of Gujarat, pursuant to
the order dated 28.04.1986 or in the
alternative to invest the amount of
Rs.37,67,420/- in any nationalised bank for a
period as may be specified by the Court. It
was also prayed to direct the New Bank of
India, to transfer Rs. 30 Lacs standing in
the Fixed Deposit account of the defendant
nos. 1 to 4 together with interest or in the
alternative to issue injunction against the
bank from operating and/or withdrawing any
amount from the Fixed Deposit account.
81. This Court (Coram: Hon’ble Mr. Justice
I.C. Bhatt and Hon’ble Mr. Justice J.P.
Desai, As their Lordships were then) by order
dated 23.09.1988 directed to deposit the
amount received by the Additional Registrar
with the Bank of Baroda, Navrangpura branch,
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Ahmedabad for a period of three months which
was renewed from time to time.
82. It is reported that as per the latest
status report obtained from State Bank of
India, GHCC Branch, Sola, if fixed deposit is
encashed prematurely, the payment amount will
be about Rs.7,14,70,627/- approximately
[(P)1,91,04,323/- + (I)5,23,66,304/-)
6)Submissions of appellants-defendants
83. Learned advocate Mr. C.B. Upadhyaya on
behalf of the appellants- original defendant
nos. 1 to 4 submitted that the Trial Court
lacked territorial jurisdiction under section
20 of the Code of Civil Procedure, 1908 and
that the most fundamental and threshold
challenge to the impugned judgment is that
the learned Trial Court at Bhuj lacked
territorial jurisdiction to entertain and try
the suit. The entire proceedings are
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therefore, a nullity and the decree is void
ab initio. It was submitted that Section 20
of the Code of Civil Procedure provides that
a suit may be instituted in a Court within
whose local limits the defendant resides,
carries on business, or personally works for
gain; or any of the defendants resides,
carries on business, or personally works for
gain; or the cause of action, wholly or in
part, arises. It was submitted that in the
present case, neither the Appellants-
defendants who are at New Delhi nor the cause
of action which took place at Delhi/Bombay
had any connection with Bhuj as the Place of
Contract Formation was Delhi and not Kandla.
However, the Trial court held that the
contract was formed at Kandla, relying upon
the letter dated 18.11.1978 (Ex. 205) written
by the Plaintiff which is erroneous finding.
It was submitted that the Trial court gave
the reason that on 04.10.1978, the orders
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were placed by Defendants No. 1 to 4, which
constituted the 'proposal' within the meaning
of the Indian Contract Act, 1872, and that
the letter dated 18.11.1978 stipulating
various conditions constituted the
'acceptance' by the Plaintiff, thereby
forming the contract at Kandla.
84. It was submitted that this reasoning is
fundamentally misconceived because as per
Sections 2, 3 and 4 of the Indian Contract
Act, 1872, a proposal is accepted either
expressly or impliedly by the acceptor. It
was submitted that in the present case, there
was no separate contract between the parties
with regards to the sale of goods and it is
an admitted position in the plaint itself
that the sale of goods was to take place on
the terms of the Letters of Credit which were
to be opened by Defendants No. 1 to 4 in
favour of the Plaintiff. The precondition for
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the execution of the confirmed order was the
opening of the Letters of Credit in favour of
the Plaintiff and the Letters of credit were
opened on 05.10.1978 in Delhi by New Bank of
India at the request of Defendants No. 1 to
4. It was submitted that when the plaintiff
accepted the Letters of Credit as the
beneficiary, the proposal of Defendants No. 1
to 4 was accepted. It was further submitted
that admittedly, the Letters of Credit were
opened in Delhi and therefore, the place of
contract was Delhi and not Kandla and the
Trial Court's conclusion that the place of
contract was Kandla is erroneous and
misconceived.
85. It was submitted that before the first
shipment was made on 27.11.1978, the Letters
of Credit (which were the only terms of the
contract between the parties) were amended
and modified on 09.10.1978, 14.10.1978,
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20.10.1978, and 18.11.1978, all of which were
communicated to the Plaintiff with sufficient
knowledge. Therefore, the letter dated
18.11.1978 at Exh.205 written by the
Plaintiff, which the Trial Court relied upon
as the ‘acceptance’, was written after the
contract had already been concluded through
the Letters of credit and therefore, reliance
on this letter to determine the place of
contract is, therefore, legally untenable.
86. Learned advocate Mr. Upadhyaya for the
appellants- defendant nos. 1 to 4 submitted
that place of performance of the contract was
Bombay and not Kandla and the finding of the
Trial Court that the place of delivery of
goods was Kandla, relying upon Sections 36
and 39 of the Sale of Goods Act, 1930 is
erroneous as the Letters of credit were
amended to permit shipment by air from Bombay
Airport to Greece Airport. It was submitted
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that this condition was stipulated in the
Letters of Credit and was made aware to the
Plaintiff and therefore, the place of
performance of the contract, as per the
conditions of the Letters of Credit, was
Bombay and not Kandla. Furthermore, it is an
admitted position in the plaint that
Defendant no.5-M/s. Airfreight (P) Ltd. acted
in its capacity as the agent of the Plaintiff
and was holding the goods as an agent of the
Plaintiff and the delivery of goods would
only be effected when the goods were
airlifted from Bombay, and not at Kandla and
therefore, the place of performance was
Bombay.
87. It was further submitted that Sections
36 and 39 of the Sale of Goods Act can only
be pressed into service in the absence of any
express contract with regards to the delivery
of goods whereas in the present case, the
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Plaintiff himself admitted that the delivery
of goods was to be handed over at Bombay. It
was therefore submitted that the benefit of
Sections 36 and 39 of the Sale of Goods Act
is not available to the Plaintiff. It was
submitted that however, the Trial Court
ignored that the goods were transported to
Defendant no.5-M/s. Airfreight (P) Ltd. in
terms of the conditions of the Letter of
Credit so as to export the goods from Bombay
which would be the final proof of delivery.
Therefore, the provisions of Sections 36 and
39 of the Sale of Goods Act cannot be pressed
into service to conclude that the goods were
delivered at Kandla.
88. Learned advocate Mr. Upadhyaya for the
appellants-defendants submitted that the
place of payment of consideration was Delhi
and not Kandla. However, the Trial Court
committed an error in holding that since the
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negotiating bank was to make payment in
favour of the Plaintiff at Kandla, the
performance of the contract had taken place
at Kandla.
89. It was submitted that the privity of
contract between the negotiating bank and the
Plaintiff is entirely different from the
privity of contract between the Plaintiff and
the Defendants. It was submitted that the
negotiating bank acts as an agent of the LC
Opening Bank (New Bank of India, Delhi) and
the LC Opening Bank is the party primarily
liable to the beneficiary under the LCs.
Therefore, the place of payment under the
contract was Delhi, where the LC Opening Bank
was located.
90. Learned advocate Mr. Upadhyaya for the
appellants-defendants submitted that, the
cause of action, in its entirety, arose in
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Delhi (contract formation and payment) and
Bombay (performance). Therefore, the Trial
Court at Bhuj had no jurisdiction whatsoever
to entertain the suit and therefore, the
entire proceedings are void and the decree is
a nullity.
91. In support of his submission, reliance
was placed on the following decisions:
1) Bhagwandas Goverdhandas Kedia v.
Girdharilal parshottamdas & Co. reported in
AIR 1966 SC 543.
2) A.b.C. Laminart Pvt. Ltd. v. A.P.
Agencies reported in AIR 1989 SC 1239.
3) Union of India v. Ladulal Jain reported
in AIR 1963 SC 1681.
4) Patel Roadways ltd. v. Prasad Trading Co.
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reported in AIR 1991 SC 1514.
92. Learned advocate Mr. Upadhyaya for the
appellants-defendants submitted that the
Trial Court erred in holding that the
contract was independent of the Letters of
Credit. It was submitted that the Letters of
Credit are individual contracts independent
of the terms and conditions of the underlying
contract of sale. However, in the present
case, the only terms and conditions of the
contract which have been placed into service
by the Plaintiff were the terms and
conditions of the Letters of Credit. No other
contract was executed between the parties. It
was submitted that as per the Letters of
Credit, the goods were to be delivered from
Bombay Airport to Greece Airport and this
condition was stipulated in the Letters of
Credit and was made aware to the Plaintiff.
Therefore, the terms of the Letters of Credit
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were the terms of the contract between the
parties, and the Trial Court's finding that
the contract was independent of the Letters
of Credit is erroneous. It was submitted tha
the Letters of Credit, as amended, had a
specific expiry date for shipment being
01.12.1978 and for negotiation of documents
being 30.12.1978. The Plaintiff dispatched
the second consignment on 27.12.1978, after
the Letters of Credit had expired and the
third consignment was dispatched in January-
April 1979, months after the Letters of
Credit had expired. It was therefore,
submitted that there was, no valid contract
under which the Plaintiff could claim payment
for the second and third consignments.
93. Learned advocate for the appellants-
defendants submitted that the counter-claim
filed by the defendants was wrongly held to
be barred under section 69 of the Indian
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Partnership Act, 1932 and the Trial Court had
wrongly dismissed the defendants' counter-
claim of Rs.1,08,85,152/- solely on the
ground that M/s. “House of Dubary” was not a
registered partnership firm, invoking the bar
under Section 69(3) of the Indian Partnership
Act, 1932.
94. It was further submitted that the bar
under Section 69 does not apply to the
counter-claim as the counter-claim is not a
'suit' within the meaning of Section 69(1)
and (2) of the Indian Partnership Act because
it is a proceeding incidental to the main
suit. It was submitted that the appellants-
defendants were not instituting a separate
suit, they were defending the Plaintiff's
claim and asserting their own rights arising
from the Plaintiff's breach in the same
proceedings. It was submitted that the
counter-claim is covered under sub-section
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(4) of Section 69 of the Indian Partnership
Act as an exception and Sub-section (4)(b)
provides that the section shall not apply to
any suit or claim of set off not exceeding
one hundred rupees in value. It was submitted
that though the amount exceeds Rs. 100, the
counter-claim is in the nature of a defensive
claim arising from the same transaction, and
the spirit of the exception should be
applied. Learned advocate Mr. Upadhyaya for
the appellants-defendants submitted that the
Trial Court's interpretation is inconsistent
as the Plaintiff sued the Appellant-firm as a
legal entity under Order XXX of the CPC and
the Trial Court passed a decree against the
firm and its partners, however, it is legally
untenable to recognize the firm for the
purpose of being sued but to de-recognize it
for the purpose of its own claim in the very
same suit. It was submitted that if the firm
can be a defendant, it can also be a claimant
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in a counter-claim. It was further submitted
that, the right to defend a suit is a
fundamental right and to deny the appellants-
defendants the right to prosecute their
counter-claim, which arises from the very
same transaction and is intrinsically linked
to the Plaintiff's claim, amounts to denying
them an effective right to defend. It was
submitted that the bar under Section 69 of
the Partnership Act was not intended to be
used as a sword by the Plaintiff to unjustly
enrich itself. It was submitted that though
the Trial Court relied upon the case of
Babulal Dhandhania v. Gautam and Co. reported
in AIR 1950 Cal. 391 and in case of Ajit
Kumar Maity v. Naranarainath Jana reported in
AIR 1955 Cal. 224 to hold that the counter-
claim is barred, however, learned advocate
for the appellants-defendants submitted that
these cases do not apply to the facts of the
present case and that the counter-claim is
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not a proceeding to enforce a right arising
from the contract in the same manner as a
suit but it is a defensive claim arising from
the plaintiff's own breach of contract.
Referring to the decision in case of
Vishwanath Lohia v. Allahabad Bank (AIR 1979
All. 12) relied upon by the Trial Court to
hold that a counter-claim has the same effect
as a cross-suit, learned advocate Mr.
Upadhyaya for the appellants-defendants
submitted that even if the counter-claim is
treated as a cross-suit, it is still
maintainable because the cause of action for
the counter-claim is the plaintiff's breach
of contract, which is different from the
cause of action in the main suit and the
counter-claim is intrinsically linked to the
main suit and cannot be separated from it.
95. In support of his submissions, reliance
was placed on the following decisions:
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1) Raptakos Brett & Co. ltd. v. Ganesh
Property reported in AIR 1998 SC 3085.
2) Haldiram Bhujiawala v. Anand Kumar Deepak
Kumar reported in AIR 2000 SC 1287.
3) Jagdish Chandra Gupta v. Kajaria Traders
(India) Ltd. reported in AIR 1964 SC 1882.
4) M/s. Shreeram Finance Corporation v.
Yasin Khan reported in AIR 1989 SC 1769.
5) Babulal Dhandhania v. Gautam and Co.
reported in AIR 1950 Cal 391.
96. Learned advocate Mr. Upadhyaya for the
appellants-defendants submitted that it was
the plaintiff and not the defendants, who was
in breach of contract. It was submitted that
the Trial Court erred in law in holding that
the defendants committed breach of the
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contract by not getting the Letters of Credit
extended and by diverting the airway bills.
It was submitted that this finding of Trial
Court is perverse and contrary to the
evidence on record as the breach was
committed by the plaintiff, and not the
defendants, as the plaintiff dispatched the
second and third consignments after the
Letters of Credit had expired, without any
valid contractual basis. It was submitted
that the plaintiff also changed its clearing
and forwarding agent from M/s. Dawn India
(its own agent) to Defendant no.5-M/s.
Airfreight (P) Ltd.(the appellants' agent)
without the defendants' consent and the
plaintiff also failed to ensure that the
goods were exported in compliance with the
terms of the Letters of Credit. It was
therefore, submitted that the appellants-
defendants were under no obligation to accept
or pay for goods shipped in violation of the
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fundamental terms of the contract hence, the
Trial Court's finding that the appellants-
defendants were liable, tantamount to
creating a new contract for the parties,
which is impermissible in law.
97. Learned advocate Mr. Upadhyaya for the
appellants-defendants submitted that the
Trial Court has erred in holding that the
defendants committed fraud by submitting
forged airway bills and exporting goods in
their own name as this finding is not
supported by the evidence on record. It was
submitted that Section 17 of the Indian
Contract Act, 1872, defines ‘fraud’ as the
suggestion as to a fact of that which is not
true by one who does not believe it to be
true, the active concealment of a fact by one
having knowledge or belief of the fact, a
promise made without any intention of
performing it, any other act fitted to
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deceive or any such act or omission as the
law specially declares to be fraudulent. It
was further submitted that, the Trial Court
itself has held in Para 65-66 of the impugned
Judgment that the defendants were not in a
position to dominate the will of the
plaintiff and that the transaction cannot be
considered unconscionable. It was submitted
that the Trial Court further found that the
plaintiff had come forward on its own accord
to send the goods through M/s. Vijay
Transport Co. from Kandla to Bombay and
delivered the same to Defendant no.5-M/s.
Airfreight (P) Ltd. and there was no
inducement from the defendants. Therefore,
the allegation of fraud is not proved. It was
submitted that the appellants-defendants
acted in good faith to carry out the export
of goods as per the contract, however, the
dispute arose because the plaintiff was
unable to pay the air freight charges in
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advance, which was a requirement under the
Letters of Credit and the appellants-
defendants permitted defendant No. 5 to take
delivery of the airway bill on payment of
freight which was a commercial arrangement
and not fraud.
98. Learned advocate Mr. Upadhyaya for the
appellants-defendants submitted that the
decreed amount is arbitrary and based on
manifest errors as the Trial Court decreed a
sum of Rs.49,81,336/- with 12% interest which
is arbitrary and based on manifest errors of
calculation and law as the Trial Court failed
to account for the fact that no valid
contract existed for the second and third
consignments, as the Letters of Credit had
expired. It was submitted that the Trial
Court also did not consider the costs borne
by the defendants in connection with the
export of goods or the losses suffered by the
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appellants-defendants due to the plaintiff's
breach of contract or the payments already
made by the defendants to the plaintiff for
the first consignment. It was further
submitted that the decreed amount includes
amounts for the third consignment for which
there was no clear evidence of delivery or
acceptance in accordance with any valid
contract and therefore, the Trial Court's
calculation is, arbitrary and unsupported by
evidence.
99. Learned advocate Mr. Upadhyaya for the
appellants-defendants submitted that the
Trial Court has incorrectly fastened joint
and several liability as the plaintiff's suit
alleged that the appellants - Defendant nos.
1 to 4 were jointly and severally liable
along with the clearing agent -Defendant 5
and the New Bank of India -Defendant 6. It
was submitted that the Trial Court could not
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have exonerated defendant nos. 5 and 6 from
any liability in its findings. It was
submitted that there is a logical and legal
contradiction because when the agents through
whom the alleged fraud or breach was
committed are not liable, the principal
cannot be held liable on the same cause of
action and therefore, the findings of the
Trial Court are not tenable on this issue.
100. Learned advocate Mr. Upadhyaya
therefore, prayed to quash and set aside the
impugned Judgment and Decree dated 31.01.1986
and dismiss the Civil Suit No. 120 of 1979
filed by the original plaintiff- respondent
no.1 as being without jurisdiction and
without merits. It was also prayed to allow
the counter claim filed by the appellants-
defendants and pass a decree in their favour.
In the alternative, it was prayed to reduce
the decreed amount to the extent of
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legitimate claims and set-offs of the
appellants-defendants.
7)Submissions of the respondent-plaintiff
101. Learned advocate Mr. Abhijit Joshi for
plaintiff – respondent no.1 submitted that
the question of jurisdiction has arisen on
the basis of the averments made in the
plaint, written statement, counter claim,
rejoinders and the correspondence which took
place between the parties. It was submitted
that the place of suing in the suit arising
out of a contract is governed by Section 20
of Code of Civil Procedure, which states that
suits to be instituted where cause of action
arises wholly or partly, in other words, the
bundle of essential facts which are necessary
for the plaintiff to prove, before the
plaintiff can succeed in the suit, refers
entirely to the grounds set-forth in the
plaint as cause of action. It was submitted
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that clause (c) of Section 20 of Code of
Civil Procedure makes it clear that a suit
may be instituted within the local limits of
whose jurisdiction the cause of action wholly
or in part arises. It was therefore,
submitted that the making of the contract,
itself is part of the cause of action and the
determination of the place where the contract
was made is part of cause of action. It was
further submitted that as set out in the
plaint, the contract was finally concluded on
accepting the orders by the plaintiff at
Kandla, Gandhidham, Kuchchh and admittedly,
there was a contract between the parties that
the delivery of the goods would take place by
shipment from Kandla and therefore, in such
circumstances, the admitted position is that
the goods were to be lifted by shipment from
Kandla but subsequently, on the request of
the defendants, the goods were lifted by Air
from Bombay and even the plaintiff had agreed
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to lift the goods by Air from Bombay on the
same terms and conditions of the contract. It
was therefore, submitted that the whole cause
of action arose at Kandla. It was submitted
that there is another aspect of the matter,
that the defendants, requested the plaintiff
to deliver the goods at Bombay by Air, hence,
it is clear that the defendants had requested
to lift the goods by Air from the Bombay.
102. It was submitted that in the present
case, there is nothing to show that the
terms and conditions of the contract were
altered for the payment of the goods as the
terms of the contract were that the price of
the goods should have been paid by LC Opening
bank to State Bank of India at Kandla,
therefore, the place of payment was certainly
at Kandla and not at Bombay. It was submitted
that there were preliminary negotiations at
Bombay, Delhi and Hongkong and then the
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Letters of Credit were opened and orders were
placed by the defendants and these orders
were accepted by the plaintiff at Kandla. It
was submitted that this would show that the
acceptance of the offer was made at Kandla.
It was submitted that this being so, it is
clear that the cause of action had arisen at
Kandla and therefore, Court at Bhuj would
also have jurisdiction to entertain the suit
filed by the plaintiff.
103. Learned advocate Mr. Joshi for the
respondent no. 1 submitted that the suit is
based upon the breach of the contract for
recovery of the price of the second and the
third consignments from the defendants Nos.1
to 4. It was submitted that the suit is based
on two counts, first, the breach of contract
and second, the damage resulting from the
tort have been mentioned in the plaint. It
was submitted that admittedly, the goods of
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third consignment were sent from Kandla to
Bombay for the purpose of the export to the
defendant No.5, through M/s. Vijay Transport
Co. therefore, the Civil Judge (S.D.) at Bhuj
would have jurisdiction to try and decide the
suit on all counts, and hence issue No.2-A is
rightly decided in the affirmative.
104. Learned advocate Mr. Joshi submitted
that the contract was entered between the
plaintiff and the defendants Nos.1 to 4 and
under the contract, the components of
electronic goods which were being imported,
were to be exported after assembling to six
Yugoslavian buyers and the goods relating to
third consignment were sent through M/s.
Vijay Transport Co. from Kandla to Bombay by
the plaintiff as the name of the consignor
and the name of defendant No.5 was mentioned
as consignee in the consignment note. It was
submitted that nowhere in goods consignment
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note of M/s. Vijay Transport Co., the name of
the defendant No.1 was mentioned as
consignee. Thus, the defendant No.5 received
the goods from M/s. Vijay Transport Co. for
and on behalf of the plaintiff as the agent
of the plaintiff but the defendant Nos.1 to 5
acted in collusion with each other because
the defendant No.5 deliberately did not send
the Airway bill to the plaintiff but sent the
said Airway bill to the defendant No.1, and
thereby defrauded the plaintiff. It was
further submitted that the defendant No.5,
ought not to have mentioned the “House of
Dubary”, New Delhi in the Column of
"Shipper", in the Airway bill as the
defendant No.5 was well aware that the goods
were forwarded by the plaintiff from Kandla
Free Trade Zone which were exempted from
Custom duty, as the plaintiff was having
license and the goods were lying within the
vicinity of the Free Trade Zone Kandla.
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Learned advocate Mr. Joshi further submitted
that the witness on behalf of the respondent
-original plaintiff- namely Shree Anilbhai
Chandubhai Pota who was examined at Ex.276,
has stated that the factory of the plaintiff
company was situated within the limits of
Free Trade Zone of Kandla, and all the
benefits of the Free Trade Zone Kandla were
availed and plaintiff was not liable to pay
customs duty for imports and exports of the
goods. It was submitted that Shree Anilbhai
Chandubhai Pota had also stated that the
defendants Nos.2 to 4 had placed four orders
in name of the defendant No. 1 who opened the
said Letters of Credit produced at Ex.278 to
281 which bears the signature of the
defendant No.3. It was further deposed by the
said witness that the defendants Nos.1 to 4
also gave confirmation of those orders and
the letter of confirmation of the orders is
produced at Ex.282. It was submitted that the
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said witness has also stated that the
Yugoslavian buyers were supposed to open the
Letters of Credit in favour of the defendant
No.1, in the Bank of Defendant No.1 i.e. New
Bank of India, New Delhi -Defendant No.6. It
was further deposed that out of those seven
orders, relating to the Letters of Credit,
the defendant No.1 opened four letters of
credit in favour of the plaintiff's bank –
i.e. State Bank of India, Kandla which are
produced at Exh.290 to Exh.309, along with
other papers. It was also deposed that the
goods relating to the second and third
consignments were supplied through the
defendant No.5 and the defendant No.5 was
supposed to send the Airway bills for the
second and third consignments to the
plaintiff, however, the defendant No.5 did
not send those Airway bills and sent to
defendants Nos.1 to 4. It is also stated in
the deposition that the defendants Nos.1 to 4
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had then submitted those Airway bills
directly to the defendant No.6 New Bank of
India, New Delhi and the Airway bills were
forged and goods were exported on the basis
of the fabricated documents. It was also
submitted that, the custom authorities had
issued notice to the defendants Nos.1 to 4
and recorded their statements which are
produced at Exh.334 to Exh. 336. The witness
of the plaintiff has also said that the
defendants Nos.1 to 4 were also prosecuted
for the breach of the provisions of the
Customs Act and were held guilty for the same
and the Judgment thereof is produced at
Exh.337, thereafter the defendants Nos.1 to 4
had preferred the appeal before Board of
Revenue at New Delhi and the said appeal was
allowed and the order of punishment against
the defendants Nos.1 to 4 was set aside. It
was further submitted that the defendant No.5
was bound to export the goods relating to
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third consignment within one month and if it
was not possible then the goods should have
been returned at Kandla. However, the goods
of third consignment were detained for about
five months and were not exported within the
stipulated time limits, therefore, various
letters were written to the defendant No.5
asking to return the goods of the third
consignment at Kandla, but defendant No.5 did
not give any heed to the said letters which
are produced at Exh.339 to Exh.347. It was
submitted that the plaintiff company also
wrote a letter to Assistant Customs Collector
at Bombay and at Kandla which is placed at
Exh.348, and therefore the Assistant Customs
Collector at Kandla wrote the letter at
Exh.349 to the defendant No.5 and informed
the defendant No.5 to return the goods at
Kandla. The witness has also stated that
therefore the defendant No.5 sent telex
message and thereby gave threat, that they
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would cancel other orders. Copies of
correspondence took place between the
plaintiff and the defendants Nos.1 to 5 are
produced at Exhs.450 to 460.
105. Learned advocate for the plaintiff -
respondent no. 1 submitted that the documents
produced at Exhs. 328, 335, 336, 339 to 349,
357 to 358, 369, 443, 451 to 456 and 459 460
clearly proves that the respondent-original
plaintiff was not liable to pay the Air
Freight relating for second and third
consignments but the defendant No.1, had to
make the payments thereof. It was submitted
that the Letters of Credit were amended on
F.O.B. basis and Air Freight was to be paid
by “House of Dubary” - appellant No.1
Company. In this regard, reliance was placed
on the Telex message at Exh.357 dated
4.12.1978 to show that the defendant No.1
agreed to pay airfreight on F.O.B. basis and
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therefore, there was no question to pay the
airfreight by the respondent-plaintiff for
the second and third consignments. It was
therefore, submitted that the respondent-
plaintiff was not liable to pay airfreight
when goods were handed over to the defendant
No.5, for the purpose of the export as the
carriers.
106. It was further submitted that the goods
relating to third consignment were sent
through M/s. Vijay Transport Co., Gandhidham,
via Truck bearing registration No. GTY 3883
from Kandla to Bombay on 9.12.1978 showing
plaintiff as "Consignor" in goods consignment
note and showing the name of M/s. Dawn India
as consignee and therefore, M/s. Dawn India
as the representative of the plaintiff handed
over the goods to the defendant No.5, on
27.12.1978 for the purpose of exporting those
goods to Yugoslavian buyers. It was submitted
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that the defendant No.5 was the carrier and
the plaintiff was the owner of the goods and
the goods were handed over for shipment,
subject to the payment of airfreight by the
defendant No.1 and the goods were to be
exported to Yugoslavia via Athens (Greece) on
behalf of the plaintiff.
107. It was submitted that the plaintiff
wrote the letter vide Exh.339 dated 13.1.1979
to the defendant No.5 to remit all the
documents to the plaintiff and also informed
the defendant No.5 that the defendant No.5
would be responsible for all payments and
would be answerable to the customs
authorities. It was submitted that thereafter
the plaintiff wrote another letter at Exh.
342 dated 3.3.1979 to the defendant No.5 and
requested him to call upon the documents from
the defendant No.1 and requested to hand over
the same to the plaintiff so as to enable the
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plaintiff to negotiate with the Bank. It was
submitted that both the plaintiff and the
Customs Authorities intimated by writing
several letters and by Telex messages to the
defendant No.5, and requested to return the
goods at Kandla, however, the goods were
lifted and exported to Yugoslavia by using
the name of the defendant No.1, as the
consignor in the Airway bill at Exh. 317 of
the third consignment.
108. It was therefore, submitted that in view
of the facts emerging from the record and
documentary evidence produced before the
learned Trial Court, it is not in dispute
that the name of the defendant No.1, has been
shown in the airway bill at Exh.317 in the
column "shipper's name and address" as “House
of Dubary” New Delhi, India, and the cargo
was lifted from Bombay on 4.5.1979 whereas
the Airway bill at Exh.315 which is in-
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respect of second consignment has shown in
the column "shipper's name and address" of M/
s. Hanspa Knit (P) Ltd., “House of Dubary”,
Kandla Free Trade Zone, Gandhidham Kachchh,
New Delhi India and the second cargo was
lifted on 27.12.1978 and it is also not in
dispute that the Airway bill was delivered to
the defendant No.1, by the defendant No.5,
and it was not sent to the plaintiff.
109. It was further submitted that the goods
relating to the third consignment were
exported by the defendant No.5 from Bombay to
Yugoslavia via Ethens (Greece) and those
goods were intended to be exported to
Yugoslavian buyers under the orders as placed
by the defendant No.1, being the agent of the
said foreign purchasers, accordingly, those
goods were delivered to the defendant No.5,
on 27.12.1978 by the plaintiff through its
own clearing and forwarding agent M/s. Dawn
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India, but the defendant No.5 deliberately
and in collusion with the defendants Nos.1 to
4 did not do so. It was therefore, submitted
that the plaintiff demanded back the
possession of the goods from the defendants
Nos.1 to 5 in terms of the letter at Exh.369,
however, subsequently on 4.5.1979, the said
goods were exported and delivered to
Yugoslavian buyers.
110. It was also submitted that the defendant
No.6 i.e. New Bank of India was also liable
to make the payments of the second and third
consignments under the Letters of Credit on
receipt of the actual amounts from the Bank
of the Yugoslavian buyers, however, the
defendant No.6 failed to do so and supported
the defendant No.1, in releasing the payment
in personal account of the defendant No.1,
which is nothing but collusive fraud on the
part of the defendants. It was submitted that
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the Yugoslavian buyers opened seven
irrevocable Letters of Credit towards the
payments of the goods as the photocopies of
such Letters of Credit are produced at Exh.
283 to Exh.289, however, in turn, the
defendant No.6 - New Bank of India opened
four Letters of Credit in favour of the
plaintiff in the State Bank of India, Branch
office Kandla. It was submitted that the
photocopies of such Letters of Credit along
with the documents produced at Exh. 290 to
Exh.309 clearly shows that the defendant
No.1, opened four Letters of Credit valued at
US$ 18,67,488-75 equivalent to Rs.
1,49,47,909-00 in favour of the plaintiff for
supply of the goods as mentioned in the said
Letters of Credit namely, Radio Cassette,
Transistor Radio, Car Radio, Cassettes etc.
It was pointed out that the Letters of Credit
at Exh. 290, Exh.295, Exh.300 and Exh.305
were issued on 5.10.1978 and price was fixed
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on C.I.F. basis for export from Kandla to
THESSALONIKI (Greece), but subsequently, the
date and the time was extended up to 14th
December, 1978 and 30th December, 1978,
respectively without altering the terms and
conditions of the Letters of Credit. It was
submitted that the documents relating to this
amendment are produced at Exh.294, Exh.299,
Exh.302 and Exh.307 and after the said
amendment which was carried out on
14.10.1978, further amendment was carried out
on 28.10.1978 with regard to mode of shipment
and amended mode of shipment was by Air from
Bombay Airport to THESSALONIKI (Greece)
Airport.
111. Learned advocate Mr. Joshi for the
respondent submitted the plaintiff has filed
the suit to recover the price of the second
and third consignments from the defendants
Nos.1 to 4 on the ground that the defendants
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Nos.1 to 4 were working as the agents of the
Yugoslavian buyers and worked as the export
house for the plaintiff and therefore, the
Yugoslavian buyers opened the Letters of
Credit in the name and in favour of the
defendant No.1, which are on record at Exh.
283 to Exh.289 dated 20.6.1978 and 21.6.1978
and after that the defendant No.1 placed four
orders with the plaintiff at Exh. 278 to
Exh.281 on 4.10.1978 and not only that, but
the defendant No.1, also opened four Letters
of Credit in favour of the plaintiff through
the defendants No.6 - New Bank of India Ltd.,
New Delhi which are also placed at Exh. 290,
Exh.292, Exh.295, Exh.298, Exh.300, Exh.301,
Exh.305 and Exh.306. It was further
reiterated that the defendant No.1 asked the
confirmation of those orders and the
plaintiff in turn made the confirmation in
terms of the letter at Exh. 282, hence, the
contract was concluded as per the Letter of
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Credit which is produced at Exhs. 282. It was
submitted that it has been specifically
stated by the plaintiff that the original
Letters of Credit which were opened by
Yugoslavian buyers in favour of “House of
Dubary” New Delhi, and defendant No.1 in turn
opened seven Letters of Credit in the name
and in favour of M/s. Hasmukh Brothers (HK),
Hongkong as per at Exh. 374 to Exh.380 on
4.9.1978 ,however, M/s. Hasmukh Brothers (HK)
Ltd., was unable to perform the entire
contract work, hence as per mutual consent of
all the parties, it was decided to open three
Letters of Credit in the name and in favour
of M/s. Hasmukh Brothers (HK), Hongkong and
four Letters of Credit to be opened in the
name and in favour of the
respondent/plaintiff – i.e. M/s. Hanspa Knit
(P) Ltd., therefore, the Letters of Credit at
Exh. 381, Exh.383 and Exh.386 were opened in
name and in favour of M/s. Hasmukh Brothers
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(HK) on 5.10.1978 and four Letters of Credit
at Exh.290, Exh.295, Exh.300 and Exh.305 were
opened in the name and in favour of the
plaintiff.
112. It was further submitted that it was not
possible to supply the entire goods of the
orders, within specified time and therefore,
the plaintiff requested to extend the time
limit up to 20.12.1978 for the shipment and
such time limit was extended by the letter at
Exh. 253 dated 26.10.1978, accordingly, the
plaintiff supplied the goods in three parts
on 22.11.1978, 25.11.1978 and on 12.12.1978
relating to the first consignment and that
the amount in Indian Rs.26,80,327.50 was paid
by the defendants Nos. 1 to 4 on the payments
received from Yugoslavian buyers under the
Letters of Credit as per the contract,
however, the plaintiff did not receive its
payment of second and third consignments and
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therefore the present suit is filed.
113. Learned advocate Mr. Joshi for the
respondent no. 1 submitted that the claim has
been setup in Para No.10 of the plaint for an
amount of US$ 64,80,50-00 for the second
consignment and has relied upon the invoices
which are at Exh. 310 to Exh.312 and the
Airway bill which is at Exh. 315. It was
submitted that it is an admitted position
that the defendant No.1, has already received
the payment of goods from Yugoslavian buyers
and agreed to pay such amounts of the second
consignment to the plaintiff in March, 1979
or latest by first week of April, 1979 in
terms of letter at Exh. 205, but the payments
were avoided even after the assurances were
given by the defendants Nos.1 to 4. In
respect of the third consignment, it was
submitted that the defendant No.1 sent the
goods to Yugoslavian buyers as per the Airway
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bill at Exh.317 dated 4.5.1979 and while
sending the goods, the defendants
deliberately and willfully omitted to mention
the name of the plaintiff in shipper's column
of the Airway bill and mentioned the name of
defendant No.1 in the shipment sent by the
defendant No.1, therefore, the plaintiff has
set up the claim of the total amount of US$
1,79,157-82, by giving the details in Para
No.13 of the plaint in respect of third
consignment and has relied upon the documents
produced at Exh. 317 and Exh.325 i.e. the
Invoice, Packing List, Inspection
Certificates, Certificate of Origin and
AirWay Bill. It was submitted that though the
defendant No.1 had already received the
entire amount of third consignment from
Yugoslavian buyers during the pendency of the
suit, but no payment was made to the
plaintiff and thereby committed the breach of
the contract.
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114. Learned advocate Mr. Joshi in reply to
the contention of the defendants that the
plaintiff failed to supply the goods within
the specified time limit and even after
extending the time limits and therefore,
there was a breach of the contract on the
part of the plaintiff and the defendants are
not liable for any loss to the plaintiff or
not liable to pay any money/dues as claimed
in the suit, referred to deposition of Mr.
Deepak Darbari on behalf of the defendants
Nos.1 to 4, at Exh. 415 wherein he has
admitted that Mr. Deepak Darbari was the
partner in year the 1978 but retired from the
partnership as a partner, and it was admitted
that the partnership firm is being registered
for the purpose of the Income Tax and not
registered under the Partnership Act. It was
alleged that the plaintiff failed to supply
the goods relating to second and third
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consignments within stipulated time limit and
defendants have not renewed the Letters of
Credit either in favour of the plaintiff or
in favour of M/s. Hashmukh Brothers (HK) to
submit that Deepak Darbari has falsely
contended the appellants/original defendants
has not intimated the respondent/plaintiff to
send the goods of second and third
consignments and not made any fresh contract
thereof and did not give any consent even
after sending the goods of second and third
consignment and that the defendant No.1 has
paid the freight, insurance premium and borne
the expenses of handling the goods for the
second and third consignments and also paid
the demurrage of the goods. It was therefore,
submitted that except deposition of the
defendant no.2 there is no other documentary
evidence on record to prove such allegations.
115. Learned advocate Mr. Joshi further
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submitted that the contentions which are put
forth by the appellants/defendants are
required to be examined in relation to and in
respect of the evidence available on the
record and as a matter of fact, there is
voluminous evidence which proves that the
second and third consignments were exported
to Yugoslavian buyers under the contract and
not exported at the personal risk of the
plaintiff.
116. It was submitted that the defense put
forth by the appellants/defendants is totally
against the documentary evidence and it is
with a view to avoid the liability thereof,
and the entire correspondence which took
place between the parties clearly shows that
the goods were sent under F.O.B. to the
defendant No.5 for the purpose of export to
Yugoslavian buyers and the Yugoslavian buyers
accepted those goods under the contract and
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under the Letters of Credit, the amount was
paid to the defendant No.1. It was submitted
that it is also clear from the correspondence
that the defendant No.1, entered in to an
agreement with the defendant No.5, for the
arrangement of the charter on basis of F.O.B.
contract as intimated and it is also clear
from the evidence that the plaintiff was
repeatedly asking the defendant No.5 to
export the goods of third consignment, but
defendant No.1 delayed to export the same
because Yugoslavian buyers wanted to re-
validate their license and due to that reason
there was delay in exporting the goods.
117. It was submitted that it is further
clear from the correspondence that the
Yugoslavian buyers had intimated to the
defendant No.1, to pay the price of the
second consignment and the defendant No.1,
promised the Yugoslavian buyers to pay such
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amount to the plaintiff immediately,
accordingly the defendant No.1, gave the
assurance to the plaintiff that they would
make the payment of the second consignment at
end of March or first week of April 1979. It
was pointed out from the evidence that under
the terms of the contract, the defendant
No.1, has to make the payment of the goods to
the plaintiff on receiving the same from
Yugoslavian buyers though Bank to Bank, but
the defendant No.1 did not make the payment
of the second consignment even after
receiving the payment from Yugoslavian buyers
and kept in its own account of the
partnership firm, hence it was submitted that
the entire correspondence as well as the oral
evidence on the record leave no doubt that
the plaintiff was ready and willing to act as
per the terms of the contract and accordingly
acted upon it also. It was submitted that
oral evidences of the witness Deepak Darbari
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is self-contradictory against the
correspondence which took place between the
parties to the contract, therefore, the
defendants Nos.1 to 4 only with a view to
avoid their liabilities got up such defense,
evidence and arguments which is nothing but
an afterthought.
118. It was therefore submitted that the
learned Trial Court has rightly come to the
conclusion that the defendants Nos.1 to 4
committed default in making payments, and it
is also quite clear that the defendant No.1,
was not having any grievance about the delay
in performance of the contract when it was
agreed with the consultant of the Yugoslavian
buyers to extend the time limits of the
contract and that extension was made
voluntarily. It was submitted that the
defendants agreed to take the delivery of
goods of the second and third consignments
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even after the expiration of the time limit
and not complained at any time for the delay
in the correspondence and accepted the
delivery even after expiry of time limit.
119. It was therefore submitted that keeping
in view the documentary evidences, it is
impossible to accept the version of Mr.
Deepak Darbary that there is no such breach
of the contract by the defendants and
defendants are not liable to make any payment
to the plaintiff.
120. It was further submitted that, the
plaintiff has properly and sufficiently
explained about the outstanding amount which
is payable by the defendants to the plaintiff
under writing which is on record at Exh. 205
and that cogent evidence at Exh.205 is duly
supported by other documentary evidence and
the oral evidence, hence there was no reason
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for the learned Trial Court to discard such
cogent and reliable evidence against the
absurd, vague and baseless oral statement of
Mr. Deepak Darbari.
121. It was submitted that the documentary
evidence produced by the plaintiff clearly
establishes that the defendants committed
breach of the contract and committed default
and they were trying to avoid the legitimate
dues of the plaintiff under the contract
though admittedly the appellants/defendants
have received the entire money of the
consignments from Yugoslavian buyers.
Therefore, the learned Trial Court has
rightly given the findings that the
defendants Nos.1 to 4 has committed the
breach of the contract and the plaintiff is
entitled to recover the payment of second and
third consignments from the defendants Nos. 1
to 4.
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122. Learned advocate Mr. Joshi submitted
that the defendant No.1 firm namely “House of
Dubary” and the partners thereof have filed
the counter claim by way of a cross-suit for
recovery of the sum as damages from the
plaintiff, however from the oral evidence of
Mr. Deepak Durbari, it is evident that firm
namely, “House of Dubary” is only registered
for the purpose of Income Tax Act and not
registered under the provisions of the Indian
Partnership Act. It was submitted that the
plaintiff has taken the plea that the cross-
suit is barred by the Section 69 of the
Indian Partnership Act for the want of the
registration of the partnership firm namely,
“House of Dubary”.
123. It was submitted that the provision of
Section 69 of the Indian Partnership Act is
mandatory which provides that the
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unregistered firm shall not be entitled to
institute any suit or in form of the Counter
Claim or the cross suit to enforce the right
arising from the contract. It was therefore
submitted that the effect of the Section 69
is that the suit by the unregistered firm is
bad in law and not tenable at its inception
as Section 69 does not confer any right and
debars the unregistered firm from filing the
suit.
124. It was submitted that once the Court is
satisfied that the firm is not registered,
the Court must treat the suit or cross-suit
as if it has not been filed and Court should
proceed to dismiss it and in the present case
the firm namely, “House of Dubary” is not
registered under the provisions of the Indian
Partnership Act then the counter claim by way
of the cross suit is not maintainable. It was
therefore submitted that the learned Trial
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Court has rightly rejected the Counter Claim
of the defendants.
125. Learned advocate Mr. Joshi for the
respondent no. 1 submitted that the liability
for the freight, insurance etc. relating to
the second and third consignments is of the
defendant No.1 firm because the firm took the
delivery of the goods at Bombay through their
agent defendant No.5, however, the defendants
have failed to prove that they are not liable
to pay freight, insurance etc. as the
defendant No.5 -M/s. Air Freight (P) Ltd. has
not come forward to support the case of the
defendant No.1 firm “House of Dubary” and has
remained absent and there is only the bare
words of Mr. Deepak Darbary that the
demurrage was paid by defendant no.1 firm
without any corroborative evidence on record.
It was submitted that the plaintiff has taken
the plea from the beginning in the
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correspondence that the defendant No.1 firm
“House of Dubary” was not empowered to keep
the goods in private godown against the
provisions of Customs Act which is also
evident from the record as the defendants had
withheld the goods on their own against the
instructions of the plaintiff and it is clear
from the correspondence that the defendant
No.1 firm “House of Dubary” wrote the letter
dated 5.12.1978 addressing to the plaintiff
wherein it was clearly mentioned that the
plaintiff would not be liable for the
demurrage, and this admission on the part of
the defendants is sufficient to exonerate the
plaintiff from the responsibility of the
demurrage and therefore, learned Trial Court
has correctly held that the defendants are
not entitled to set off for the amount of
demurrage from the plaintiff's claim.
126. Learned advocate Mr. Joshi for the
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respondent no. 1 submitted that in all
respect the appellants (original defendants)
have failed to prove that the plaintiff has
committed breach of the contract, on the
contrary, it is clearly proved and
established by the plaintiff that the
defendant No.1 firm and its partners have
committed the breach of the contract and have
not paid the dues to the plaintiff namely,
M/s. Hanspa Knit (P) Ltd., and withheld the
legitimate payment of the plaintiff even
after receiving the payment from Yugoslavian
buyers without any substantial reasons.
127. Learned advocate Mr. Joshi for the
respondent no. 1 in light of the facts of the
present case submitted that the Court may
allow the total claim of the respondent
(original plaintiff) for an amount of
Rs.62,91,245.18 from all the defendants Nos.1
to 6 of the Original Special Civil Suit
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No.120/1979 with running interest 12% per
annum from the date of filing of the Suit
till the date of the payment and prayed for
allowing the First Appeal No.1093/1987 and
dismissing the First Appeal No.531/1986.
128. Learned advocate Mr. Joshi for the
plaintiff raised preliminary objection
regarding the maintainability of appeal. It
was submitted that the appeal filed by the
appellants (original defendant nos. 1 to 4)
is not maintainable as per Section 69 of the
Partnership Act, more particularly, the
provisions of Section 69(2) of the
Partnership Act, 1932 which is as under: -
"Section 69(2) - No suit to enforce
a right arising from a contract
shall be institute in any Court by
or on behalf of a firm against any
third party, unless the firm is
registered and the persons suing are
or have been shown in the Register
of Firms as partners in the firm."
129. It was submitted that in the present
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case it is categorically admitted by Deepak
Dubari in his deposition (Exh-415) and also
admitted in his cross examination that the
partnership firm namely, “House of Dubary”
defendant No.1 is not a registered
partnership firm. It was submitted that the
learned Trial Court has rightly come to the
conclusion in Para No.110 of the Judgment.
It was therefore submitted that in view of
aforesaid factual matrix as well as
provisions of law, the present Appeal filed
by the appellants herein deserves to be
dismissed on this ground alone without
entering into merits of the matter.
130. In support of his submission reliance
was placed on the judgments of the Hon'ble
Apex Court in case of Loonkaran Sethiya and
Ors. Versus Ivan E. John and Ors., reported
in MANU/SC/0048/19 76 and in case of Jagdish
Chander Gupta Versus Kajaria Traders (India)
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Ltd., reported in MANU/SC/0047/1964.
131. Learned advocate for respondent no. 1-
plaintiff submitted that on one hand, the
appellants-defendants have contended that,
Trial Court is not having jurisdiction, and
on the other hand the appellants-defendants
had filed their counter claim before the same
Court. It was therefore submitted that once
the defendants have filed their counter claim
before the Bhuj Court, then the defendants
are estopped from raising the contentions
about the jurisdiction of the Bhuj Court. It
was further submitted that the appellants-
defendants herein cannot blow hot and cold
both together as once they submitted
themselves to the jurisdiction of the Bhuj
Court by way of filing the counter claim, it
is crystal clear that the defendants have
accepted the jurisdiction of the Court at
Bhuj-Kutchh and therefore, defendant nos. 1
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to 4 are not legally entitled to raise the
contentions about the jurisdiction of the
Trial Court to try and decide the suit.
132. It was submitted that if the appellants-
defendants were of the firm opinion and
belief that the Court at Bhuj is having no
jurisdiction in any case and only the Court
at Bombay is having jurisdiction, then in
that case, they ought to have filed an
independent suit before the Civil Court at
Bombay instead of filing counter claim before
the Bhuj Court. It was therefore submitted
that when the defendants themselves submitted
and accepted the jurisdiction of the Bhuj
Court by way of filing counter claim, which
is nothing but a substantial suit in nature,
the contentions of the appellants-defendants
on the ground of jurisdiction is baseless and
not tenable in eye of law. Learned advocate
for the respondent no. 1 places reliance on
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the provision of Section 19 of the Code of
Civil Procedure, 1908 which reads as under: -
"Section 19 - Suits for compensation for
wrongs to person or movables
When a suit is for compensation for
wrong done to the person or to movable
property, if the wrong was done within
the local limits of the jurisdiction of
one Court and the defendant resides, or
carries on business, or personally works
for gain, within the local limits of the
jurisdiction of another Court, the suit
may be instituted at the option of the
plaintiff in either of the said Courts."
133. It was submitted that the aforesaid
provision itself provides an option to the
plaintiff to institute the suit in either of
the Courts. It was further submitted that the
making of a contract is part of cause of
action, and performance of a contract is also
a part of cause of action, hence a suit in
respect of the breach can always be filed at
the place where the contract was made or it
should have performed or where its
performance is completed. Not only that, even
part of cause of action arises where money is
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expressly or impliedly payable under the
contract. In support of the aforesaid
submission, reliance was placed on the
judgment of the Hon'ble Apex Court, in the
matter of A.B.C. Laminart Pvt. Ltd. and Ors.
Versus A.P. Agencies, Salem,
MANU/SC/0001/1989. Therefore the learned
Trial Court has rightly decided the issue
No.2-A in affirmative on the point of
jurisdiction.
134. With regard to the applicability of
provisions of Sale of Goods Act, learned
advocate for the plaintiff submitted that it
is an admitted position that, the goods of
second and third Consignments were delivered
through M/s. Vijay Transport Co. at Bombay to
the defendant No.5, who was the clearing and
forwarding agent of the appellants herein. It
was submitted that at the instance of the
appellants-defendants the goods of second and
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third consignments were sent to defendant
No.5 for the purpose of export to Yugoslavian
buyers, which prima facie is deemed to be a
delivery of the goods to the buyer. In
support of this submission, Section 39 of
Sale of Goods Act, 1930 was referred to which
reads as under: -
"39(1) Delivery to carrier or
wharfinger- Where, in pursuance of a
contract of sale, the seller is
authorised or required to send the
goods to the buyer, delivery of the
goods to a carrier, whether named by
the buyer or not, for the purpose of
transmission to the buyer, or
delivery of the goods to a
wharfinger for safe custody, is
prima facie deemed to be a delivery
of the goods to the buyer."
135. It was submitted, that the learned Trial
Court has rightly come to the conclusion that
goods of second and third consignments are
transmitted and delivered to the defendant
No.5 who has received the goods as the agent
of the appellants herein and therefore the
appellants-defendants are liable to make the
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payment of the second and third consignments
to the respondents (original plaintiff).
136. With regard to the contention of the
appellants-defendants that the Goods of
second and third consignments were never
delivered in time by the plaintiff and
therefore the goods were not exported at
Yugoslavia in time and the appellants herein
has not received any payment towards the
second and third consignments, the question
of any payment to the plaintiff for the
second and third consignments does not arise
at all, learned advocate Mr. Joshi for the
Respondent No.1 submitted that the said
contention is totally misleading and
misguiding and completely against the
evidence available on record as well as the
written statement filed by the Defendant
No.6-New Bank of India which is the Bank of
the appellants herein. It was submitted that
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the Exh.318 which is a photocopy of Bank
Account of the appellants-defendants with
their Bank i.e. Defendant No.6 clearly shows
the receipt of money from M/s. SOLUN during
the pendency of the suit, moreover, the
Statement of Account of the appellants-
defendants with their Banker i.e. Defendant
No.6, are produced at Exh.386 to Exh.393
which it is important piece of evidence about
the payments received by the appellants-
defendants from the Yugoslavian buyers.
Learned advocate for the plaintiff referred
to and relied upon the Written Statement of
the defendant No.6 at Exh.38 and more
particularly, in Para No.11, the Defendant
No.6 wherein it was categorically admitted
and stated on oath as under: -
"The answering Defendant is not
aware of the circumstances under
which the first Defendant came in
possession of the Airway Bill which
he handed over to the answering
Defendant along with his Drafts
drawn on his foreign buyers, for
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purpose of collection of their Draft
amounts by the answering Defendant.
The Defendant No.1 had submitted his
drafts for US $ 1,09,960/-, US $
1,02,820/ and US $ 1,00,000/- drawn
in his foreign buyers along with
necessary documents including the
Airway Bill No. 098-2561-9996 in
which the name of House of Dubary
appeared as one of the shippers.
Answering Defendant forwarded the
same on 27/12/78 to the Bank of
foreign buyer for payment. The
answering Defendant got payment of
these Drafts on or about 14/2/1979,
30/1/1979 and 30/1/1979 respectively
in the account of Defendant No.1 and
gave credit of the same to Defendant
No.1 in their account. Defendant
No.1 has utilized the credits so
given by the answering Defendant by
making various withdrawals therefrom
with the result that there now
stands a debit balance in their said
account with the answering
Defendant."
137. It was submitted that from the perusal
of the admission of the defendant No.6, it is
clear that whole defense put-forth by the
appellants-defendants about non-receipt of
the payment of the second and third
consignments from the foreign buyers is
totally false, frivolous and vexatious, hence
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the learned Trial Court has rightly come to
the conclusion that the appellants-defendants
have failed to make the payment of second and
third Consignments to the respondents and the
appellants-defendants are correctly held
liable for the payment of second and third
consignments.
138. Learned advocate for the respondent-
plaintiff submitted that the contention of
the appellants-defendants that there is no
privity of contract with the respondent is
not valid assuming without admitting that
there is no existence of privity of contract
between the appellants-defendants and
respondent-plaintiff, then in that case how
and on what basis the defendants have filed
their counter claim in the said Special Civil
Suit No.120/1979 and demanded the damages
from the plaintiff.
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139. It was submitted that in fact, the
contentions raised by the appellants-
defendants itself is self-contradictory and
not tenable in eye of law. It was submitted
that there is enough evidence on record which
clearly proves that the contract was in
existence between the parties and the
defendants committed breach of the contract
and had not paid the amount of the second and
third consignment, though it was received
from the Yugoslavian buyers, and it was
credited in the accounts of the Appellants-
defendants by their Bank i.e. New Bank of
India (defendant- No.6) and the plaintiff has
sufficiently proved the said aspect by
producing the statement of accounts of the
appellants herein, before the Trial Court,
which contains the entries of the receipt of
the amount of the second and third
consignment.
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140. Learned advocate Mr. Joshi with regard
to the contention of the appellants-
defendants that the learned trial Judge has
wrongly come to the conclusion and committed
a grave error by imposing liability of
Freight, Insurance etc. on the appellants-
defendants submitted that, as a matter of
fact, the liability of Freight, Insurance
etc. is not at all imposed upon the
appellants-defendants, on the contrary on
bare perusal of the observations made by the
learned trial Judge in Para Nos.137, 139 of
the Judgment, it proves that the total amount
of Rs.7,22,446-00 towards Freight, Insurance
etc. is disallowed by the learned trial Judge
and the said amount is deducted from the
total claim of Rs.62,91,245-00. It was
further submitted that since the learned
trial Judge has disallowed the amount of
Rs.7,22,446-00, therefore in the Cross Appeal
No.1093/1987, the appellant of the said
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Appeal has raised one of the grounds in Para
No.4, as under: -
"(4): That the learned Judge
seriously erred in deducting
Rs.1,91,646/ and Rs.5,30,800/- by
way of freight charges from the
price of the goods defendants Nos.1
to 4 were held liable and to which
amount the plaintiffs were held
entitled to realize from the said
defendants. It is submitted that the
said finding of the learned Judge
with regard to freight charged
payable for the second and third
consignment is not supported by any
evidence on record."
141. It was therefore submitted that it is
misconception of the part of the appellants-
defendants that the learned trial Judge has
wrongly fastened the liability of the
Freight, Insurance etc. on the appellants-
defendants as, out of the total claim of
Rs.62,91,245.18 for the second and third
consignment, the learned trial Judge only
allowed the claim of Rs.49,81,336 and
remaining amount of Rs.13,09,909 is
disallowed by the learned trial Judge, which
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includes the amount of Rs.7,22,446 of
Freight, Insurance etc.
142. Insofar as First Appeal No.1093/1987, it
was submitted that since the learned trial
Judge has partly allowed the suit and
therefore the appellants have preferred the
cross Appeal with a prayer to allow the total
claim of the appellants for an amount of
Rs.62,91,245.18 and also prayed to allow the
Special Civil Suit no.120/1979 against all
the defendant nos.1 to 6 jointly and
severally with the running interest @12% per
annum from the date of filling of the Suit
till the date of the payment/realization of
the dues of the appellants. Hence in view of
legal submission made, facts narrated and the
relevant and important documentary evidence
relied upon, it was submitted to allow the
First Appeal No.1093/1987 and dismiss the
First Appeal No.531/1986.
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143. Learned advocate Mr. Joshi for the
Plaintiff submitted that the defendant No.6
deposited an amount of Rs.37,67,420/- with
the Trial Court, Bhuj, which as per the
knowledge of the plaintiff was later
transferred to the Registry of this Court in
compliance of Para No.145 of the impugned
Judgment of the Trial Court and the
directions were given which are as under:
“....... I find that the amount of
Rs.37,67,420-00 is at present and still
lying in the sundry account in the New
Bank of India Ltd., Defense Colony New
Delhi, and that amount being received
towards the value of the goods of the
third consignment and that amount is
liable to be realized towards the
satisfaction of the decree in favour of
the Plaintiff in Special Sult
No.120/1979 and it is therefore on the
ground of justice and equity required to
be directed the Defendant No.6 as to be
deposited such lying amount in sundry
account in this Court for the payment
and satisfaction of the decree...”
144. It was further submitted that in view of
the above, the amount which is lying with the
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Registry of this Court may please be directed
to pay the said amount with accrued interest
to the Office of the Respondent No.1 i.e.
Official Liquidator, so that the respondent
No.1-Official Liquidator can settle the dues
of the workers as well as of the secured and
unsecured creditors of the Company in
Liquidation as per the provisions of the
Companies Act, 1956 accordingly dismiss the
First Appeal No.531/1986.
8)Points for Determination
145. Considering the submissions of both the
sides and oral and documentary evidence on
record, following points for determination:
1) Whether the Trial Court has committed
an error in assumption of jurisdiction to
entertain the suit under section 20 of
the Code of Civil Procedure, 1908?
2) Whether the place of contract
formation is Delhi or Kandla?
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3) Whether the place of performance of
contract was at Bombay or Kandla?
4) Whether the place of payment was Delhi
or Kandla?
5) Whether the appellants defendants were
in breach of contract or not?
6) Whether the Trial Court erred in law
in holding that contract was independent
of Letters of credit?
7) Whether the decreed amount is
arbitrary and based on manifest error or
not?
8) Whether the Trial Court was just and
correct in decreeing the suit for
Rs.49,81,336/- and disallowing the claim
of the plaintiff for Rs.13,09,909/-?
9) Whether the Trial Court committed an
error in holding that counter claim was
barred under section 69 of the Indian
Partnership Act, 1932?
10) Whether the Trial Court was justified
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in fastening the joint and several
liability upon the defendant nos. 1 to 4
only while exonerating defendant nos. 5
and 6?
11) Whether the decree passed by the
Trial Court for Rs.49,81,336/- is just
and proper?
9)Reasons
Analysis of points for determination and
findings
146. Having heard the learned advocates and
having perused the impugned Judgment and
Order and oral and documentary evidence
available on record, it would be necessary to
summaries the chronology of events and
relevant evidence placed on record by the
parties:
Sr Date / Period Event Exhibit
No
1. December 1977 The defendant no. 2 came to the -
factory of the plaintiff at Kandla
with Six Yugoslavian buyers so as
to negotiate for export of
electronic goods to Yugoslavia.
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2. 1977 – 1978 Further negotiations were made -
between the parties at different
places and it was agreed that
defendant no. 1 firm would act as
an export house by placing the
orders in its name for export of
the goods to Yugoslavia.
3. 20.06.1978 Seven Irrevocable Letters of 283 to
Credit were issued by Yugoslavian 289
Buyers in favour of the defendant
no. 1 firm.
4. 04.09.1978 The defendant no. 1 firm issued 374 to
seven irrevocable Letters of 380
Credit in favour of sister concern
of the plaintiff Hasmukh Brothers.
5. 04.10.1978 Defendant Nos. 1 to 4 placed an 278 to
order for supply of goods worth 281
US$ 7,81,522.14 equivalent to Rs.
62,91,245.10
6. 05.10.1978 Four Letters of Credit were opened 290, 295,
by the defendant no. 6 Bank in 300, 305
favour of the Plaintiff wherein
terms of the Contract regarding
shipment by 01.10.1978 and
negotiation of documents by
20.10.1978 was mentioned and the
goods were to be shipped from
Kandla Port.
7. 09.10.1978 The defendant no. 6 Bank amended -
Letters of Credit by extending the
shipment date to 01.12.1978 and
last date of negotiation of
documents was extended to
30.12.1978.
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8. 14.10.1978 As per the negotiations between -
the parties, it was agreed that
the shipment would be sent by Air
from Bombay Airport for export of
the goods to Yugoslavia and
accordingly the Letters of Credit
were amended.
9. 26.10.1978 Letter of the defendant no. 1 firm 353
to extend the period of Letters to
Credit to complete the delivery of
the goods.
10. 18.11.1978 Letter of the Plaintiff for 282
acceptance of the order placed by
the defendant no. 1 firm on
04.10.1978
11. October – The plaintiff shipped the first -
November 1978 consignment of goods through its
clearing agent M/s. Dawn India for
value of US$ 3,33,285.60
equivalent to Rs. 26,80,327.50.
The payment for the first
consignment was received by
plaintiff and there is no legal
dispute regarding the first
consignment.
12. 04.12.1978 Telex message of Hasmukh brothers 357
to pay airfreight by defendant no.
1 firm and for the amendment of
the Letter of Credit on FOB basis.
13. 07.12.1978 Airfreight Private Limited was 467
appointed as a clearing and
forwarding agent instead of Dawn
India for the remaining Letter of
Credits by the defendant no. 6.
14. 07.12.1978 The defendant no. 1 firm by telex 361
message informed the defendant no.
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5 to hold the goods until further
advice till the license of the
Yugoslavian buyer was not
revalidated.
15. 15.12.1978 Telex message of the defendant no. 356
1 accepting the liability to pay
demurrages.
16. 18.12.1978 Telex from the defendant no. 1 360
firm to plaintiff cancelling of
order of models of Indian Star and
Ganges.
17. 19.12.1978 Export invoices were issued by the 310 to
defendant no. 1 firm. 314
18. 27.12.1978 Plaintiff dispatched the goods for 315 to
second consignment from Kandla to 317 & 325
defendant no. 5 Airfreight Private
Limited. The Airway bills were
also issued by the defendant no. 5
in name of the plaintiff and
defendant no. 1 firm.
19. 16.03.1979 Letter of the defendant no.1 firm 205
informing the plaintiff that the
goods will be exported subject to
validation of license of the
Yugoslavian buyers.
20. 06.04.1979 Letter of defendant no. 1 326
informing the Hasmukh brothers
that the goods would be shipped
after the licenses are
revalidated.
21. 26.04.1979 Letter to defendant no. 1 327
requesting to arrange Letter of
Credit in favour of the plaintiff.
22. 30.04.1979 Letter of the defendant no. 1 to 329
Hasmukh brothers informing that
the goods would be lifted between
10th and 15th May, 1979
23. 30.04.1979 Plaintiff had written a letter to 348
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the Asst. Collector of Customs,
Bombay for detention of the goods
by the defendant no. 5.
24. 01.05.1979 Letter from defendant no. 1 330
seeking clarification.
25. 02.05.1979 Letter addressed to defendant no. 331
1 by the plaintiff for providing
the clarification.
26. 03.05.1979 Letter written by Asst. Collector 349
of Customs, Bombay to defendant
no. 5 Airfreight Private Limited.
27. 04.05.1979 The defendant No. 5 exported the 316 & 317
goods which were
retained for approximately 5
months at the request of the
defendant no. 1 firm.
28. 21.05.1979 Special Civil Suit No. 120 of 1979 3
was filed before the Civil Judge
(S.D.), Bhuj by the plaintiff
claiming Rs. 62,91,245.18.
29. 24.05.1979 Defendant no. 1 firm filed the 105
counter-claim for Rs.
1,08,85,152/- for damages and
reimbursement of expenses from the
plaintiff.
30. 12.06.1979 Special Investigation and 334
Intelligence Branch of Bombay
Customs issued show-cause notice
under section 108 of the Customs
Act, 1962 upon the defendant no.1
firm.
31. 19.06.1979 Yugoslavian buyers informed the 417
defendant no. 1 by letter
requesting the confirmation
regarding deduction of 2% for the
defective goods.
32. 26.06.1979 Appointment of commissioner to 41
take inventory of the account of
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defendant no.1 from the books of
defendant no.6.
33. 26.06.1979 Defendant no.1 to 4 were 42
restrained from realizing any
consideration of third consignment
received from the Yugoslavian
buyers.
34. 22.08.1979 Payment intimation from Yugoslavia 418
buyers to the defendant no.1 firm.
35. 1980 Criminal Complaint was filed by 443
Assistant Collector of Customs
against defendants nos. 1 to 5
36. 02.01.1981 Order-in-Original was passed by 337
the Customs authorities against
unauthorised export of goods by
defendant no.1 firm.
37. 31.01.1986 The trial court decreed the 481
Special Civil Suit No. 120 of 1979
decreeing in favour of the
plaintiff Rs. 49,81,336/- with 12%
interest and dismissed the
counter-claim.
147. From the above chronology of events,
there is no dispute between the parties
regarding the first consignment as the
plaintiff exported the goods through its own
clearing and forwarding agent M/s. Dawn India
for value of US$ 3,33,285.60 equivalent to
Rs.26,80,327.50. The plaintiff has duly
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received the payment of the said amount from
New Bank of India- defendant no.6.
148. Therefore, the dispute between the
parties pertains only with regard to 2nd and
3rd consignment. As per the amended terms of
Letters of Credit, last date for shipment was
01.12.1978. The plaintiff dispatched the
goods from Kandla on 27.12.1978 which was
after 26 days from the expiry of Letters of
Credit. Goods were sent to defendant no.5
M/s. Airfreight (P) Ltd. through transporter
M/s. Vijay Transport Co. from Kandla to
Bombay for export by Air.
149. The third consignment was dispatched
from Kandla to Bombay through M/s. Vijay
Transport Co. on 27.12.1978 for export from
Bombay to Yugoslavia by defendant no.5.
Defendant no.5 retained the goods for about 5
months and ultimately exported the same to
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Yugoslavia in May, 1979. No payment was
received by the plaintiff for export of the
second and third consignment and thereafter
the suit for recovery was filed by the
plaintiff and counter claim for damages was
filed by the defendants.
150. In view of above facts, with regard to
Points for Determination no. 1 to 4 for
objections raised by the appellants-defendant
for assumption of jurisdiction by the Trial
Court to entertain the suit filed by the
plaintiff is required to be considered. In
order to consider such objection, it would be
germane to refer to the relevant provisions
of relevant Acts:
CODE OF CIVIL PROCEDURE, 1908
SECTION 16 : Suits to be instituted
where subject-matter situate.
Subject to the pecuniary or
other limitations prescribed by any
law, suits-
(a) for the recovery of
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immovable property with or
without rent or profits,
(b) for the partition of
immovable property,
(c) for foreclosure, sale or
redemption in the case of a
mortgage of or charge upon
immovable property,
(d) for the determination of any
other right to or interest in
immovable property,
(e) for compensation for wrong
to immovable property,
(f) for the recovery of movable
property actually under
distraint or attachment, shall
be instituted in the Court
within the local limits of whose
jurisdiction the property is
situate:
Provided that a suit to obtain
relief respecting, or
compensation for wrong to,
immovable property held by or on
behalf of the defendant may,
where the relief sought can be
entirely obtained through his
personal obedience, be
instituted either in the Court
within the local limits of whose
jurisdiction the property is
situate, or in the Court within
the local limits of whose
jurisdiction the defendant
actually and voluntarily
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resides, or carries on business,
or personally works for gain.
Explanation.-In this section
"property" means property
situate in [India.]
SECTION 19 : Suits for compensation
for wrongs to person or movables.
Where a suit is for compensation
for wrong done to the person or
to movable property, if the
wrong was done within the local
limits of the jurisdiction of
one Court and the defendant
resides, or carries on business,
or personally works for gain,
within the local limits of the
jurisdiction of another Court,
the suit may be instituted at
the option of the plaintiff in
either of the said Courts.
SECTION 20 : Other suits to be
instituted where defendants reside
or cause of action arises.
Subject to the limitations
aforesaid, every suit shall be
instituted in a Court within the
local limits of whose
jurisdiction-
(a) the defendant, or each
of the defendants where
there are more than one, at
the time of the commencement
of the suit, actually and
voluntarily resides, or
carries on business, or
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personally works for gain;
or
(b) any of the defendants,
where there are more than
one, at the time of the
commencement of the suit,
actually and voluntarily
resides, or carries on
business, or personally
works for gain, provided
that in such case either the
leave of the Court is given,
or the defendants who do not
reside, or carry on
business, or personally work
for gain, as aforesaid,
acquiesce in such
institution; or
(c) the cause of action,
wholly or in part, arises.
[Explanation].-A corporation shall
be deemed to carry on business at
its sole or principal office
in [India] or, in respect of any
cause of action arising at any place
where it has also a subordinate
office, at such place.
SALE OF GOODS ACT, 1930
SECTION 36 : Rules as to delivery
(1) Whether it is for the
buyer to take possession of
the goods or for the seller
to send them to the buyer is
a question depending in each
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case on the contract,
express or implied, between
the parties. Apart from any
such contract, goods sold
are to be delivered at the
place at which they are at
the time of the sale, and
goods agreed to be sold are
to be delivered at the place
at which they are at the
time of the agreement to
sell, or, if not then in
existence, at the place at
which they are manufactured
or produced.
(2) Where under the contract
of sale the seller is bound
to send the goods to the
buyer, but no time for
sending them is fixed, the
seller is bound to send them
within a reasonable time.
(3) Where the goods at the
time of sale are in the
possession of a third
person, there is no delivery
by seller to buyer unless
and until such third person
acknowledges to the buyer
that he holds the goods on
his behalf: Provided that
nothing in this section
shall affect the operation
of the issue or transfer of
any document of title to
goods.
(4) Demand or tender of
delivery may be treated as
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ineffectual unless made at a
reasonable hour. What is a
reasonable hour is a
question of fact.
(5) Unless otherwise agreed,
the expenses of and
incidental to putting the
goods into a deliverable
state shall be borne by the
seller.
SECTION 39 : Delivery to carrier or
wharfinger
(1) Where, in pursuance of a
contract of sale the seller is
authorised or required to send
the goods to the buyer, delivery
of the goods to a carrier,
whether named by the buyer or
not, for the purpose of
transmission to the buyer, or
delivery of the goods to a
wharfinger for safe custody, is
prima facie deemed to be a
delivery of the goods to the
buyer.
(2) Unless otherwise authorised
by the buyer, the seller shall
make such contract with the
carrier or wharfinger on behalf
of the buyer as may be
reasonable having regard to the
nature of the goods and the
other circumstances of the
case(s). If the seller omits so
to do, and the goods are lost or
damaged in course of transit or
whilst in the custody of the
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wharfinger, the buyer may
decline to treat the delivery to
the carrier or wharfinger as a
delivery to himself, or may hold
the seller responsible in
damages.
(3) Unless otherwise agreed,
where goods are sent by the
seller to the buyer by a route
involving sea transit, in
circumstances in which it is
usual to insure, the seller
shall give such notice to the
buyer as may enable him to
insure them during their sea
transit, and if the seller fails
so to do, the goods shall be
deemed to be at his risk during
such sea transit.
CONTRACT ACT, 1872
SECTION 2 : Interpretation clause.
In this Act the following
words and expressions are
used in the following
senses, unless a contrary
intention appears from the
context :-
(a) When one person
signifies to another
his willingness to do
or to abstain from
doing anything, with a
view to obtaining the
assent of that other to
such act or abstinence,
he is said to make a
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proposal:
(b) When the person to
whom the proposal is
made signifies his
assent thereto, the
proposal is said to be
accepted. A proposal,
when accepted, becomes
a promise:
(c) The person making
the proposal is called
the "promisor", and the
person accepting the
proposal is called the
"promisee":
(d) When, at the desire
of the promisor, the
promisee or any other
person has done or
abstained from doing,
or does or abstains
from doing, or promises
to do or to abstain
from doing, something,
such act or abstinence
or promise is called a
consideration for the
promise:
(e) Every promise and
every set of promises,
forming the
consideration for each
other, is an agreement:
(f) Promises which form
the consideration or
part of the
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consideration for each
other are called
reciprocal promises:
(g) An agreement not
enforceable by law is
said to be void:
(h) An agreement
enforceable by law is a
contract:
(i) An agreement which
is enforceable by law
at the option of one or
more of the parties
thereto, but not at the
option of the other or
others, is a voidable
contract:
(j) A contract which
ceases to be
enforceable by law
becomes void when it
ceases to be
enforceable.
SECTION 3 :Communication, acceptance
and revocation of proposals.
The communication of proposals,
the acceptance of proposals, and
the revocation of proposals and
acceptances, respectively, are
deemed to be made by any act or
omission of the party proposing,
accepting or revoking, by which
he intends to communicate such
proposal, acceptance or
revocation, or which has the
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effect of communicating it.
SECTION 4 : Communication when
complete.
The communication of a proposal
is complete when it comes to the
knowledge of the person to whom
it is made.
The communication of an
acceptance is complete,-
as against the proposer, when it
is put in a course of
transmission to him, so as to be
out of the power of the
acceptor; as against the
acceptor, when it comes to the
knowledge of the proposer.
The communication of a
revocation is complete,-
as against the person who makes
it, when it is put into a course
of transmission to the person to
whom it is made, so as to be out
of the power of the person who
makes it;
as against the person to whom it
is made, when it comes to his
knowledge.”
151. The contention raised on behalf of the
appellants-defendants that for assumption of
jurisdiction by the Trial Court to entertain
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the suit only Letters of Credit issued by the
defendant no.6 New Bank of India stipulating
the terms of contract are required to be
considered, is concerned, on perusal of
section 19 read with clause (c) of section 20
of the Code of Civil Procedure, it is not in
dispute that goods have been dispatched by
the plaintiff from Kandla. Moreover, so far
as transaction of first consignment out of
four Letters of Credit issued by defendant
no.6 Bank, transaction has taken place at
Kandla for which the payment is also received
at Kandla by the plaintiff and there is no
dispute with regard to the transaction of
first consignment which is one of the part of
the goods agreed to be sold by the plaintiff
to defendant nos. 1 to 4 for which, four
Letters of Credit were opened stipulating the
terms and conditions of the contract.
152. On perusal of the terms and conditions
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stipulated in Letters of Credit placed on
record at Exh. 290 to 309 including the
letters of amendment of the Letters of Credit
issued by defendant no.6 in favour of the
plaintiff’s bank State Bank of India, Kandla
are considered, it is discernible that terms
of Letters of Credit are only for the purpose
of payment to be negotiated so as to complete
the transaction of sale of goods between the
parties. The cause of action wholly or in
part can said to have been arisen out of
bundle of essential facts necessary for the
plaintiff to prove if traversed in order to
support the right to the judgment of the
Court. It refers entirely to the grounds set
forth in the plaint as the cause of action.
Clause (c) of section 20 of the Code of Civil
Procedure, clearly stipulates that suit may
be instituted where the cause of action,
wholly or in part arises. In the facts of the
case, part of the cause of action can be said
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to have arisen at Kandla when defendant no.2
had brought along with him 6 Yugoslavian
buyers to the factory of the plaintiff in
December, 1977 at Kandla. Thereafter, further
negotiation had taken place at various places
i.e. Bombay, Delhi and Hongkong between the
parties. Orders were placed firstly before
M/s. Hasmukh Brothers (HK) and 7 Letters of
Credit were opened. However, as M/s. Hasmukh
Brothers (HK) could not fulfill the contract,
it was agreed between the parties to enter
into contract for supply of the goods by the
plaintiff who is sister concern of M/s.
Hasmukh Brothers (HK) and three Letters of
Credit were confirmed in favour of M/s.
Hasmukh Brothers (HK) on 05.10.1978 and
remaining four Letters of Credit were
confirmed in favour of the plaintiff vide
Exhs. 290, 295, 300 and 305 and on opening of
such four Letters of Credit in favour of the
plaintiff through State Bank of India,
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Kandla, four orders were placed by defendant
no.1 with the plaintiff vide letters dated
04.10.1978 Exh. 278 to Exh. 281 taking
confirmation from the plaintiff. It is also
not in dispute that after placing four
orders, defendant no.2 had come to Kandla and
discussed regarding shipment and on basis of
such discussion, the plaintiff vide letter
dated 18-19.11.1978 confirmed four orders. It
is, therefore, a clear part performance of
the contract at Kandla as contract was
finally concluded on accepting the orders by
the plaintiff at Kandla, Gandhidham-Kutch.
Therefore, reliance placed by the defendants
only on Letters of Credit for contending that
other circumstances and facts are to be
ignored and only terms and conditions of
Letters of Credit and place of issuance of
Letters of Credit is required to be
considered to determine the jurisdiction of
the Court, is contrary to the facts proved by
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the plaintiff regarding part performance of
the contract at Kandla.
153. It is pertinent to note that merely
opening Letters of Credit is not sufficient
but thereafter action taken by the plaintiff
by letter dated 18.11.1978 confirming the
orders placed by the defendants, accepting
the offer at Kandla, would be sufficient to
confer jurisdiction upon the Civil Court at
Kutch-Bhuj within whose territorial
jurisdiction, part performance of the
contract had taken place.
154. The Trial Court was therefore, justified
in holding that only Letters of Credit alone
are not required to be considered but in
substance who placed orders and accepted the
orders as the orders were in form of the
offer and that offer was accepted on part of
the plaintiff is material.
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155. The Trial Court was also justified in
considering the transaction while observing
that negotiations were to be made for just
arrangement for fixing the terms and
conditions of the contract and in connection
of such discussions or negotiations, Letters
of Credit were required to be opened in
favour of the first defendant.
156. It is also required to be consider the
entire chain of events which had taken place
between the parties for sale of goods
manufactured in Free Trade Zone at Kandla.
The contention of the defendants that merely
manufacturing of goods at Kandla and dispatch
by the plaintiff for export to Bombay cannot
be considered as part performance of the
contract, is not tenable because performance
of contract is part of the cause of action.
It is also not in dispute that payment has
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been received for the first consignment by
the plaintiff at Kandla which is integral
part of the entire contract and as per the
averments made in the plaint and documents
placed along with the plaint as well as oral
and documentary evidence led by the parties,
it cannot be said that only the terms and
conditions stipulated in Letters of Credit
would determine the jurisdiction of the
Court.
157. The suit in respect of realisation and
recovery of the price can always be filed at
the place where the contract should have been
performed or where its performance is
completed. If the contract is to be performed
at the place where it is made then the suit
on the contract is required to be filed at
the said place however, in a contract of sale
of goods, the place where the goods have to
be delivered, is also the place of
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performance and the Court of that place would
have jurisdiction to entertain the suit in
respect of the dispute of the contractual
rights of the plaintiff.
158. In the facts of the case, from perusal
of the Letters of Credit at Exh. 290 to 309,
it appears that it was initial contract that
the goods were shipped from Kandla to Greece
accompanied by all necessary documents as
mentioned therein. However, parties
subsequently agreed to permit the shipment by
Air from Bombay to Yugoslavia and such
arrangement was made for the purpose of
expedient delivery to the buyer.
159. From the correspondence between the
parties, it is evident that place of shipment
is from Kutch and the performance of the
contract was to be made at Kandla, Kutch.
Therefore, it is not in dispute that cause of
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action or part of cause of action had taken
place at Kandla which is material for the
plaintiff to prove to succeed. The plaintiff
has therefore, rightly been held to have
proved that originally contract between the
parties was to ship the goods from Kandla
which was agreed to be changed for shipment
of goods by Air from Bombay. Therefore, it
cannot be said that since the place of
delivery of goods has been shifted from
Kandla, the Court at Bhuj would not have
jurisdiction. In fact, the goods were
dispatched from Kandla to Bombay for export.
Merely because goods are to be airlifted from
Bombay would not be a fact against the
plaintiff to hold that goods were delivered
at Bombay and therefore, there was no cause
of action which had taken place at Kandla. We
are therefore of the opinion that the Trial
Court was justified in holding that whole
cause of action had arisen at Kandla and
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merely because goods were delivered to
defendant no.5 at Bombay, it cannot be
considered that goods have not been delivered
from Kandla.
160. The Trial Court has rightly referred to
and relied upon the provisions of section
39(1) of the Sale of Goods Act, 1930 to turn
down the contention of the defendants that
the goods delivered by the plaintiff was
received at Bombay for the purpose of export
and therefore, cause of action had arisen at
Bombay only. The undisputed facts are that
goods were handed over to the transporter
M/s. Vijay Transport Co. to carry them at
Bombay as per the amended clause of Letters
of Credit. Therefore, as per the provisions
of section 39(1) of the Sale of Goods Act,
when the goods are delivered to the carrier
for the purpose of transmission to the buyer
then prima facie delivery of goods would be
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deemed to have been made to the buyer at
Kandla.
161. Reliance placed on behalf of the
plaintiff on the decision in case of Harshad
Chiman Lal Modi v. DLF Universal Ltd. and
another reported in (2005) 7 Supreme Court
Cases 791, therefore, would not be applicable
in facts of the case. However, it would be
fruitful to refer to the observations made by
Hon’ble Apex Court on applicability of
sections 16, 19 and 20 of the Code of Civil
Procedure to determine the jurisdiction which
would be helpful to determine the issue on
hand as under:
“14. Having heard learned counsel
for the parties and having
considered the relevant provisions
of the Code as also the decisions
cited before us, in our opinion, the
order passed by the trial court and
confirmed by the High Court deserves
no interference. As stated above, it
is an admitted fact that the suit
relates to the recovery of immovable
property, a plot admeasuring 264 sq.
mtrs. in the Residential Colony -
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DLF Qutub Enclave Complex, Gurgaon.
It is not in dispute by and between
the parties that the property is
situate in Haryana. It is no doubt
true that the defendants are having
their head office at Delhi. It is
also true that the agreement was
entered into between the parties at
Delhi. It also cannot be denied that
the payment was to be made at Delhi
and some installments were also paid
at Delhi. The pertinent and material
question, however, is in which court
a suit for specific performance of
agreement relating to immovable
property would lie-
15. Now, Ss. 15 to 20 of the Code
contain detailed provisions relating
to jurisdiction of courts. They
regulate forum for institution of
suits. They deal with the matters of
domestic concern and provide for the
multitude of suits which can be
brought in different courts. Section
15 requires the suitor to institute
a suit in the court of the lowest
grade competent to try it. Section
16 enacts that the suits for
recovery of immovable property, or
for partition of immovable property,
or for foreclosure, sale or
redemption of mortgage property, or
for determination of any other right
or interest in immovable property,
or for compensation for wrong to
immovable property shall be
instituted in the court within the
local limits of whose jurisdiction
the property is situate. Proviso to
Sec. 16 declares that where the
relief sought can be obtained
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through the personal obedience of
the defendant, the suit can be
instituted either in the court
within whose jurisdiction the
property is situate or in the court
where the defendant actually or
voluntarily resides, or carries on
business, or personally works for
gain. Section 17 supplements Sec. 16
and is virtually another proviso to
that section. It deals with those
cases where immovable property is
situate within the jurisdiction of
different courts. Section 18 applies
where local limits of jurisdiction
of different courts is uncertain.
Section 19 is a special provision
and applies to suits for
compensation for wrongs to a person
or to movable property. Section 20
is a residuary section and covers
all those cases not dealt with or
covered by Ss. 15 to 19.
16. Section 16 thus recognizes a
well established principle that
actions against res or property
should be brought in the forum where
such res is situate. A court within
whose territorial jurisdiction the
property is not situate has no power
to deal with and decide the rights
or interests in such property. In
other words, a court has no
jurisdiction over a dispute in which
it cannot give an effective
Judgement Proviso to Sec. 16, no
doubt, states that though the court
cannot, in case of immovable
property situate beyond
jurisdiction, grant a relief in rem
still it can entertain a suit where
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relief sought can be obtained
through the personal obedience of
the defendant. The proviso is based
on well known maxim "equity acts in
personam, recognized by Chancery
Courts in England. Equity Courts had
jurisdiction to entertain certain
suits respecting immovable
properties situated abroad through
personal obedience of the defendant.
The principle on which the maxim was
based was that courts could grant
relief in suits respecting immovable
property situate abroad by enforcing
their judgments by process in
personam, i.e. by arrest of
defendant or by attachment of his
property.”
162. Another aspect for deciding the
jurisdiction of the Court for part
performance is where the money is expressly
or impliedly payable under the contract. In
the facts of the case, admittedly price
consideration was payable at Kandla as per
the stipulation in Letters of Credit stating
that State Bank of India, Kandla to receive
the payment and in fact, for first
consignment the payment has been received at
Kandla. Section 36 of the Sale of Goods Act
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clearly lays down that in absence of contract
to the contrary, goods sold are to be
delivered at the place at which they are at
the time of sale read with section 32 of the
said Act which lays down that unless
otherwise agreed, delivery of the goods and
payment of the price are concurrent
conditions. Therefore, in the facts of the
case when the terms of the contract is and
was that price of the goods should have been
paid to the plaintiff’s bank at Kandla and as
such, place of payment was at Kandla and not
at Bombay, therefore, even on this count,
considering the place of payment would confer
jurisdiction to the Court to entertain the
suit.
163. In view of the facts emerging from the
record, the part cause of action has arisen
at Kandla being place of performance and
place of payment, because the plaintiff has
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accepted the contract at Kandla, performed
the contract by dispatching the goods from
Kandla and receiving the payment at State
Bank of India, Kandla. Therefore, reliance
placed by the plaintiff on decision in case
of Bhagwandas Goverdhandas Kedia v.
Girdharilal Parshottamdas & Co. (supra) would
not be applicable in facts of the case as the
plaintiff has proved part performance of the
contract that the place of contract place of
performance and place of payment was at
Kandla.
164. Reliance placed on decision in case of
A.B.C. Laminart Pvt. Ltd. v. A.P. Agencies
(supra) would also not be applicable in the
facts of the case because in view of
provision of clause (c) of section 20 of the
Code of Civil Procedure, suit can be filed
where part of cause of action arises.
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165. Similarly, reliance placed on decision
in case of Union of India v. Ladulal
Jain(supra) wherein it is held that the place
of performance of a contract is determined by
the terms of contract and not by the place
where goods are handed over to carrier, would
also not be applicable in facts of the case
because terms of contract clearly stipulate
the goods to be shipped from Kandla which
were later on changed to shipment from Kandla
to airlifting from Bombay which would not
change the nature of contract more
particularly, when the goods were sent to the
clearing and forwarding agent - defendant
no.5 who was appointed by the defendant no.1
for the purpose of export of goods as per the
terms of negotiation carried out between the
parties.
166. Reliance placed on the decision in case
of Patel Roadways ltd. v. Prasad Trading Co.
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(supra) would also not be applicable to the
facts of the case as it cannot be said that
contract stipulated a specific place of
delivery then that place determines the
jurisdiction and not the place of initial
handing over to a carrier. In the facts of
the case, the place of shipment was changed
from Kandla to Bombay and that would not
divest the jurisdiction of the Court at Bhuj-
Kutch when as part performance, the payment
is also received by the State Bank of India
at Kandla.
167. The Trial court has also considered the
transaction as bundle of essential facts to
conclude that there was part performance of
the contract at Kandla and therefore, it
cannot be said that the cause of action had
not arisen at Kandla. The Trial Court was
therefore, justified in considering the
entirety of facts and circumstances while
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dismissing the contention of the defendants
that only terms and conditions of the
contract were the terms and conditions of the
Letters of Credit and therefore, the Trial
Court would not have any jurisdiction. Such a
contention raised on behalf of the plaintiff
is nothing but an effort to consider the
entire issue in a truncated manner by only
referring to the Letters of Credit ignoring
the vital fact that goods have been
dispatched from Kandla through carrier of the
plaintiff to the clearing and forwarding
agent at Bombay for export by Air. Therefore,
it cannot be said that the goods were not
dispatched from Kandla taking into
consideration the provisions of section 39(1)
of the Sale of Goods Act which is relied upon
by the Trial Court only to show that there
was a part performance of the contract at
Kandla.
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168. The contention of the defendants that
when the goods were dispatched for second and
third consignment, Letters of Credit had
expired is also not tenable in view of the
fact that the plaintiff had participated in
execution of the export of second consignment
and third consignment dispatched by the
plaintiff and further the contention of the
defendants cannot be accepted considering
only that Letters of Credit had expired,
ignoring transactions which had taken place
and not denied by the defendants regarding
export of goods dispatched by the plaintiff
from Kandla to Bombay and as such, the
technical plea of the defendants that because
Letters of Credit had expired and there was
no contract and therefore, Court has no
jurisdiction, is not tenable as such
contention of the defendants is dehors the
facts and is liable to be rejected.
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169. With regard to Point for Determination
No.5 that defendants nos. 1 to 4 and not the
plaintiff were in breach of contract, the
Trial Court on the basis of the oral and
documentary evidence led by the parties has
categorically arrived at the conclusion that
the defendants have committed breach of the
contract by retaining the goods with the
defendant no.5 who was appointed by defendant
no.1 as clearing and forwarding agent,
coupled with the fact that even after export
of the goods, airway bill was prepared by
defendant no.5 in name of defendant no.1
instead of plaintiff so as to negotiate the
Letters of Credit with the LC opening bank
by defendant no.1 to get the payment directly
from Yugoslavian buyers.
170. The Trial Court has analysed the facts
and has come to the following conclusion in
the impugned order as under:
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“60)..... The main point for
consideration in this case is
whether of the omission of the name
of the plaintiff to write first and
then mentioned the name of the first
deft., in Air-way bill was a part of
cause of action which was resulted
the damage and on that ground,
entitled the plaintiff to bring the
suit in the present court for the
tortious act. It is now clear from
the above of completed action and is
wide enough to take in the result as
the basis for the purpose of
restitution. According to the
plaintiff, if the fifth deft. was
not made the forged document i.e.
Air way bill showing in shipper
column of the name of the first
deft., as the consigner then the
first deft., was entitled to be
converted the money of the goods in
their own account of the New Bank of
India but the sixth deft., New Bank
of India was bound to remit the said
money to the plaintiff's bank i.e.
State Bank of India Kandla in terms
of the letters of credit and that
the plaintiff had to receive at
least value of the goods in time but
the change was permitted the first
deft., to be converted the said
money for their own use otherwise
not restrained by the order of the
injunction of the court. The learned
advocate for the defts., has
submitted that the light in which
the matter shall be considered is
different. It is contended that the
sequence of writing the name in Air
way bill was not given the right to
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the first deft., but the first
deft., was exporter of the goods to
Yugoslavian Buyer in terms of the
contract and was entitled to recover
the money from the buyer through
Bank to Bank and received the money
accordingly and nothing more. It is
therefore contended that there was
no consequential effect resulted to
damage or injury to the plaintiff.
On the other hand, it is submitted
on the part of the plaintiff that
the term "cause of action" is much
wider and for the present purpose,
it shall be understood to mean the
bundle of facts constituting the
cause of effect in resulting the
damage for the tortious act. I am
inclined to take the view that the
fact of the deprivation of the
property would be one of the bundle
of the facts which is necessary to
be proved in order to entitled the
plaintiff to file the suit against
the defts., Apart from this in
determining whether the court has
jurisdiction, or not, the court
shall always consider the matter on
the pleadings as they stand. I have
therefore carefully considered the
plaint and the written statement.
Admittedly the goods of third
consignment were sent from Kandla to
Bombay for the purpose of the export
to the fifth deft., in Vijay
Transport and that the said goods
were entrusted along with the
necessary documents to the deft.,
No.5 which were lifted after five
months and during the course of such
delay, the goods were kept in godown
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so that the plaintiff wrote the
several letters addressing to the
fifth deft., that the goods were
required under the provisions of the
custom Act to be lifted within one
month otherwise to be returned back
to the plaintiff even if the goods
were not returned back to the
plaintiff and were exported after
five months by Air way bill
mentioning the name of the first
deft. as the shipper which was
resulted to be moved the custom
authorities and the suit. I
therefore quite agree with the
submission of the plaintiff that the
plaintiff deprived to be received
the goods back and resulted in the
consequent to damage. Therefore this
court has jurisdiction to try the
suit on all counts, In view of this
findings and in result thereof I
decide issue No.2 in the
affirmative.
(61).....In the present case, the
plaintiff has set up the case in the
plaint that the contract was entered
between the plaintiff and the deft.
Nos. 1 to 4 and under such contract,
the electronic goods which being
imported were to be exported to six
Yugoslavian buyers so that the deft.
Nos. 1 to 4 had placed the orders
for the same. The said goods were
exported to Yugoslavian buyers as
per rules and regulations of the
customs in Free Trade Zone of
Kandla. It was understood during the
negotiations that the Yugoslavian
buyers would in their turn obtain
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the requisite import license for
importing such goods in Yugoslavia
and would open necessary letters of
credit in favour of the first deft.,
House of Dubary and then the deft.,
Nos. 1 to 4 would in their turn open
the letters of credit in favour of
the plaintiff It was also understood
during the negotiations that the
plaintiff would deliver the goods
against of subsisting and valid
letters of credit and under rules
and regulations of Free Trade Zone
Kandla. Therefore, the plaintiff
would export the goods under their
own clearance of customs in AR-4
form. It was further understood in
the negotiations that the goods
would be transported under requisite
transfer permits and AR-4 forms
under the provisions of the Customs
Act by road to the clearing and
forwarding agent at Bombay and that
the goods would be exported by the
clearing and forwarding agent from
Bombay to Yugoslavia via Athen
(Greece) in name of the plaintiff.
It has further set up in the plaint
that under such terms and conditions
of the contract and understanding
between the parties, the Yugoslavian
buyers had opened the letters of
credit in favour of the first
defendant House of Dubary and then
the deft., Nos. 1 to 4 in their turn
opened the letter of credit in
favour of the plaintiff through
their Bankers i.e., the deft., No.6
New Bank of India Limited, New Delhi
Therefore the deft. No.6 is the
opening Bank. It has further set up
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the facts in the plaint that the New
Bank of India, New Delhi has been
opened the four letters of credit on
5-10-78 in favour of the plaintiff
as described more particularly in
paragraph No.6 of the plaint.
According to those letters of
credit, the goods were to be shifted
not later than 10-10-78 and bills
would be negotiated on or before 30-
10-78. It has further stated in the
plaint that the date of shipment and
negotiation of the documents were
extended up to 1-12-78 and 30-12-78
respectively. This extension was
conveyed by the deft., No.6 New Bank
of India, New Delhi vide letter
dated 9-10-78. The deft. No.6 had
thus amended the letters of credit
by the letters dated 14-10-78, 20-
10-78 and 18-11-78. Under this
circumstance, it was belief on the
part of the plaintiff that the
Yugoslavian buyer had got to be
extended their own letters of credit
in favour of the first deft. It has
also set up in the plaint that the
plaintiffs have their own clearing
and forwarding agent namely M/s.
Dwan India.
(61)......In the present case, the
plaintiff has set up the case in the
plaint that the contract was entered
between the plaintiff and the
deft.Nos.1 to 4 and under such
contract, the electronic goods which
being imported were to be exported
to six sex Yugoslavian buyers so
that the deft., Nos. 1 to 4 had
placed the orders for the same. The
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said goods were exported to
Yugoslavian buyers as per rules and
regulations of the customs in Free
Trade Zone of Kandla. It was
understood during the negotiations
that the Yugoslavian buyers would in
their turn obtain the requisite
import license for importing such
goods in Yugoslavia and would open
necessary letters of credit in
favour of the first defendant House
of Dubary and then the deft. Nos. 1
to 4 would in their turn open the
letters of credit in favour of the
plaintiff. It was also understood
during the negotiations that the
plaintiff would deliver the goods
against of subsisting and valid
letters of credit and under rules
and regulations of Free Trade Zone
Kandla. Therefore, the plaintiff
would export the goods under their
own clearance of customs in AR-4
form. It was further understood in
the negotiations that the goods
would be transported under requisite
transfer permits and AR-4 forms
under the provisions of the customs
Act By road to the clearing and
forwarding agent at Bombay and that
the goods Would be exported by the
clearing and forwarding agent from
Bombay to Yugoslavia Via, ATHENS
(Greece) in name of the plaintiff.
It has further that the goods had
duly exported through the said M/s.
Dawn India the 26,90,327-50
shipments from Kandla dated 22-11-
78,22-11-78, 25-11-78, 25-11-78 and
2-12-78 which being aggregated value
of Indian rupees to paise. The
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plaintiff has already received the
said amount in respect of the first
consignment through sixth deft. New
Bank of India, New Delhi for and on
behalf of the first deft. These
goods were expected to be exported
by ship however, by letter dated 14-
10-78, the letters of credit were
amended and permitted shipment by
Air from Bombay Airport to
THEOSSALONIKI (Greece) Air port and
Air way bill was to be made to the
order of " "Makosped" SKOPJE Notify
Solun (DVGELAJA) Yugoslavia. Further
by letter dated 27-11-78, the sixth
deft., had amended the letter dated
14-10-78 so as to read "shipment by
Air from Bombay Airport to Athens
Airport (Greece) permitted one
original and two copies of the air
way bill made out to the order of
Makosped Skopje Notify Solun
(DGELALJA) Yugoslavia marked freight
prepaid would require. It has
further set up the facts that the
deft. Nos. 2 to 4 had persuaded and
prevailed upon the plaintiff for
further shipment by Air to be made
through the fifth deft., as the
clearing and Forwarding Agents which
would provide the 30 days facility
for the payment of freight even
though the representatives of the
plaintiff were hesitating to accept
the change of the clearing and
forwarding agents as suggested by
the deft. Nos. 2 to 4 but at last,
the plaintiff relied upon the
bonafide of the deft. Nos. 1 to 4
and agreed with suggestion to export
the goods by Air through the fifth
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deft. It has stated in the plaint
that the plaintiff was unaware
whether the deft. Nos. 1 to 5 were
closely associated. It is now
alleged that the goods relating to
third consignment were sent through
M/s. Vijay Transport from Kandla to
Bombay by the plaintiff as the
consignment consigner of mentioning
in consignment note and mentioned as
the consignee of the fifth deft.,
and thereby the goods were sent to
the fifth deft. It is alleged that
no where in goods consignment note
of Vijay Transport Company was
mentioned the name of the first
defendant as consignee. It is
therefore alleged that the fifth
defendant had received the goods
from Vijay Transport Company for and
on behalf of the plaintiff and as
the Agent of the plaintiff. It has
now set up in the plaint that the
receipt of the goods covered by the
goods consignment notes of Vijay
Transport Company so that the fifth
defendant did not entitle to receive
or to hold or to deal or to dispose
of the goods under the instructions
of or at the instance of the first
deft. It is therefore alleged that
the fifth defendant had to be
exported the goods by Air to
Yugoslavian Buyer and that the fifth
deft., did so for and on behalf of
the plaintiff. It is now alleged in
the plaint that the deft. Nos. 1 to
5 were acted in collusion with each
other and disabled the plaintiff
from drawing the documents on the
opening Bank because the fifth
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defendant was not sending the Air
way bill to the plaintiff but parted
with, the said Air way bill to the
first deft., and defrauded the
plain- tiff which was resulted not
to be realized the payments by
drawing the documents on the
negotiation Bank, i.e. the
deft.No.6. on this background of the
facts, it is alleged the fraud by
collusion between the deft., Nos. 1
to 5. It has further set up the
facts in the plaint that the goods
relating to the third consignment
notes were exported by Air on 27-12-
78 by the fifth deft., to M/s.Solun
Export company, (DVGELAJA,
Yugoslavia even not sent the Airway
Bills but parted with the deft.,
Nos. 1 to 4 and in the said Air way
bills, mentioned in the column of
shippers name and address as House
of Dubary instead of M/s. Hanspa
Knit (P) Ltd., House of Dubary
Kandla Free Trade Zone, Gandhidham
Kachchh, New Delhi India,. It is
therefore alleged that the fifth
deft., could not have mentioned in
the column of "shipper" the House of
Dubary, New Delhi "At the most, in
view of the letters of credit the
fifth deft., could have mentioned
after the name of the plaintiff
House of Dubary and not to be
described House of Dubary as the
shipper at all. It has further set
up the case in the plaint that the
fifth deft., knew that the goods
were forwarded by the plaintiff from
Kandla Free Trade Zone which were
exempted from Custom duty only if
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the exporter of the goods would be
within Free Trade Zone, Kandla.”
171. From the above findings of facts on
analysis of evidence done by the Trial Court,
we do not find any infirmity in the same and
therefore, no interference is called for in
the findings arrived at by the Trial Court
that the defendants had committed breach of
contract. The contention raised on behalf of
the appellants-defendants that the plaintiff
dispatched the second and third consignment
after Letters of Credit had expired without
any contractual basis and the plaintiff
changed the clearing and forwarding agent
from M/s Dawn India to defendant no.5 without
the consent of the defendant no.1 and
plaintiff failed to ensure that the goods
were exported in compliance to the terms of
Letters of Credit, are contrary to the
subsequent events which had taken place from
December, 1978 to May, 1979 as enumerated in
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detail by the Trial Court on the basis of
evidence led before it.
172. We are therefore, of the opinion that
the Trial Court cannot be said to have
committed any error in holding that the
defendant nos. 1 to 4 have committed breach
of contract which was subsisting even after
expiry of Letters of Credit. It appears that
the defendants in order to be discharged from
the liability of payment have raised such
flimsy contention with regard to the expiry
of Letters of Credit or change of agent in
spite of the admitted fact that defendant
no.5 was the clearing and forwarding agent
appointed by the plaintiff.
173. Point for Determination no.6 refers to
the issue as to whether contract was
independent of Letters of Credit or not.
Contention raised on behalf of the defendants
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that the Trial court has erred in holding
that the contract was independent of the
Letters of Credit is also without any basis
as the Trial Court has arrived at a
conclusion regarding issue no.2(D) and 2(E)
to the effect that so far as first
consignment is concerned, there is no dispute
between the parties.
174. The second and third consignment
originated from the purchase orders as well
as followed by Letters of Credit determining
the terms of contract. Merely because Letters
of Credit have expired would not result in
termination of the contract when both the
parties have carried out the transactions
originally agreed upon. On perusal of the
oral evidence of Mr.Anilbhai Chandubhai Pota
at Exh. 276, it is deposed that the defendant
no.1 firm had issued four purchase orders on
04.10.1978 (Exh. 278 to Exh.281) which was
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confirmed by the plaintiff by letter dated
28.11.1978 (Exh.282) and upon confirmation
defendant no.1 firm opened seven Letters of
Credit by the Yugoslavian buyers “SOLUN”
Import-Export, Gevgelija, from the Bank of
Rajasthan, Delhi (Exh.283 to Exh.289) in name
of defendant no.1 which were transferred to
New Bank of India-defendant no.6. Defendant
no.1 in turn opened the Letters of Credit
through its LC Opening Bank – New Bank of
India -defendant no.6 in favour of the
plaintiff (Exh.290 to Exh.309).
175. On perusal of these documents which are
exhibited before the Trial Court as per the
deposition of the witness of the plaintiff,
heavy reliance is placed on behalf of the
advocate of the defendants that the terms and
conditions mentioned in Letters of Credit
would govern the terms of the contract
regarding the shipment of goods by the
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plaintiffs. On perusal of each of the Letters
of Credit at Exh.290 to Exh.309 only relevant
condition is regarding the date of Letters of
Credit stated as 10.10.1978 which was
subsequently extended by mutual consent of
both the sides. Another condition which is
referred to and heavily relied upon by the
defendants is with regard to shipment by air
from Bombay Airport to Greece Airport was
permitted by amending the original Letter of
Credit as per letter dated 14.10.1978
(Exh.303) so far as Letter of Credit
No.13/1978 and 14/1978 was concerned which
are relevant for second and third
consignment. It appears that rest of the
Letters of Credit were not amended. So far as
first consignment is concerned, shipment was
made from Kandla port by extending the date
of shipment upto 01.12.1978 for submission of
the documents upto 30.12.1978. It is true
that after 30.12.1978, Letters of Credit were
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not enforceable.
176. From the facts emerging from the record,
shipment of first consignment was made by the
plaintiff on 22.11.1978 and thereafter as per
the mutual agreement between the parties,
second and third consignment were sent
through M/s. Vijay Transport Co. to defendant
no.5 so as to export the same by Air by
preparing the bills by the plaintiff, in turn
defendant no.1 also prepared the bills which
are placed on record at Exh.310 to Exh.315
regarding second consignment and Exh.316 and
Exh.317 for the third consignment.
177. On perusal of the Airway bill prepared
by defendant no.5 which is in the name of
defendant no.1 and not the plaintiff it
appears that admittedly the goods were
manufactured by the plaintiff and sent for
export from Kandla Free Trade Zone, invoice
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no. HK/0778-79 of 8.12.1978 along with
packing list for 10966 Radio Transistors
Model “North Star” 220 packages along with
inspection and quality certificates were
issued by the plaintiff which are placed
before defendant no.6 by defendant no.1 for
the Letters of Credit which were issued by
defendant no.6 New Bank of India. Even
certificate of origin was also provided by
Administrative Officer Kandla Free Trade Zone
for export of goods on 08.01.1979 in respect
of second and third consignment which were
admittedly sent by the plaintiff for export.
178. From the facts emerged from the record,
it also appears that in spite of the goods
having been received by defendant no.5 M/s.
Air Freight (P) Ltd. same were not exported
as defendant no.1 firm did not complete the
required procedure being Export House of the
plaintiff who was supposed to carry out the
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export of the consignment.
179. It appears that thereafter only in the
month of May, 1979, defendant no.1 was able
to see that the goods which are lying with
the defendant no.5 were exported. In the
backdrop of the above facts, claim of the
defendants for incurring various expenditures
as stated in counter claim were not
considered by the Trial Court except the
freight charges which were borne by defendant
no.1 for export of the second and third
consignment.
180. Regarding the issue of payment received
by defendant no.1 firm from Yugoslavian
buyers for second and third consignments is
concerned, the witness of the plaintiff has
deposed that defendant no.5 has forwarded
freight bills to defendant no.1 instead of
the plaintiff and before the plaintiff can
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submit the bills before the bank, defendant
no.1 had already encashed Letters of Credit
opened by the Yugoslavian buyers.
181. At this stage, it is pertinent to note
that during the pendency of the suit, interim
order was passed to keep the money received
by the defendant no.6 bank in Sundry account
and accordingly amount of Rs.33,82,509.08 on
06.09.1979 and amount of Rs.3,84,911.47 on
07.06.1986 were kept in sundry account by
defendant no.6 and copy of the statement of
Sundry account is placed at Exh.318. The
Trial Court while disposing the suit has
directed to transfer this amount which during
the pendency of the appeal has been now
invested by the Registry in the Fixed Deposit
with State Bank of India.
182. On perusal of the deposition of witness
no.1 of the plaintiff – Anilbhai Chandubhai
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Pota, it is deposed in the examination-in-
chief that payment of third consignment was
received by defendant no.1 in two parts as
Yugoslavian buyers made the first payment as
per the standard quality of the goods
received and dispute of quality was raised
regarding some part of the goods and withheld
the payment, subsequently such dispute was
given up and entire payment was made by the
foreign buyer. He has also referred to Form
A.R.4 which is placed on record at Exh.319 to
Exh.321. It was also pointed out that the
carbon copy was sent to the plaintiff, and
the original were kept by defendant no.5 M/s.
Airfreight (P) Ltd. He has also identified
Fixed Deposit Receipt (FDR) for 2 nd
consignment taken out by defendant nos. 1 to
4 at Exh. 323.
183. By referring to letter dated 06.10.1988
at Exh.324, it was stated that State Bank of
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India has returned the unpaid bill received
by it from defendant no.6 New Bank of India
along with original certificate issued by the
Customs department sent by the plaintiff
along with the goods. Witness of the
plaintiff also referred to telex messages at
Exh.326 to Exh.333 in which it is disclosed
that the goods would be shifted after
licenses are re-validated by the buyer. Telex
messages are from 06.04.1979 to 03.05.1979
for not exporting the goods by defendant nos.
1 to 5. Thereafter notice dated 08.10.1979
was issued by the plaintiff and notices were
also issued by the Customs Officer and reply
was given by defendant nos. 1 to 4 and order
of the Special Officer of Customs dated
02.01.1981 against defendant nos. 1 to 4
which was challenged by defendant nos. 1 to 4
before the Board of Revenue who set aside the
adjudication order. These documents are
placed on record from Exh.334 to 337. The
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plaintiff has also made efforts for return of
the goods through Customs Officer. Documents
thereof are placed on record from Exh.339 to
Exh. 349 and thereafter in the month of May,
1979, it was decided by the plaintiff to file
the suit. Even spare parts were sent to the
Yugoslavian buyers by the plaintiff and bill
for Airfreight was placed at Exh.352.
184. Reference was also made to telex
messages between the parties from Exh.353 to
Exh. 368. Thus, the witness of the plaintiff
proved that the goods sent by the plaintiff
was exported but no payment was made.
185. No cross examination of the witness of
the plaintiff was made on behalf of defendant
nos. 1 to 4 as advocate was not present.
However, cross examination was made on behalf
of defendant no.6 - New Bank of India
regarding the extension of the Letters of
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Credit wherein it is deposed by the witness
that defendant nos. 1 to 4 did not pay the
amount of the goods and further denied that
no amount is sent by the Yugoslavian buyers
for the goods manufactured by the plaintiff
which were exported by defendant no.5 for 2nd
and 3rd consignment. Regarding counter claim
of the defendant nos. 1 to 4, witness also
deposed in examination in chief to the effect
that the plaintiff had informed defendant
no.5 to return the goods which is placed on
record at Exh.451 and letter dated 10.03.1979
which is at Exh No. 452 and letters dated
30.04.1979, 09.05.1979 at Exh. 453 to
Exh.455, letter written to Air India to
export the goods through air cargo is also
placed at Exh.456 and reply given by the Air
India is placed at Exh.457. Even the customs
officer has written letter to the plaintiff
for return of goods as it was sent from
Kandla Free Trade Zone without payment of
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duty. Said letters are placed from Exh.458 to
460.
186. Considering such documents, it was
deposed that the details given in para no. 20
of the counter claim are not true and correct
and defendant nos. 1 to 4 have concocted the
story of damages to raise exaggerated counter
claim.
187. In the cross examination, carried out on
behalf of defendant nos. 1 to 4, witness has
reiterated the facts which were deposed in
examination in chief and deposed that goods
sent by the plaintiff was of good quality and
same was to be exported at the cost and
liability of the plaintiff. However, it was
admitted by the witness that airfreight,
demurrages and handling charges were not paid
by the plaintiff company and the goods of
second and third consignment were sent from
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Kandla after the expiry of Letters of Credit.
However, it was denied that defendant no.1
firm did not inform the plaintiff company to
send the goods of second and third
consignment. It is also denied that defendant
no.1 firm was not liable to export the goods
of 2nd and 3rd consignment and the plaintiff
company was liable to receive the amount as
agreed between Hasmukh Khatri and defendant
no.1 firm. It was also denied by the witness
that the plaintiff company was not liable to
pay demurrage amount to defendant no.1 firm
for 3rd consignment.
188. The witness has also denied that there
was any negligence on part of the plaintiff
as well as it was also denied that goods of
2nd and 3rd consignment was sent through
defendant no.1 firm on the basis of
collection and after expiry of the Letters of
credit, no facilities can be obtained from
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the bank and there was no correspondence made
by the plaintiff company with Yugoslavian
buyers. Thus, the witness has not accepted
any suggestion made on behalf of the
defendants regarding the counter claim and
reiterated what is stated in examination in
chief.
189. Witness no.1 of defendant no.6- Devraj
Indraprasad Anand deposed in examination in
chief that defendant “House of Dubary” opened
the account in New Bank of India, Defense
colony branch, in the year 1978 and at that
time only two partners Deepak Darbari and
Ravi Darbari were declared. Letters of Credit
were issued on 05.10.1978 wherein date of
shipping was fixed as 01.12.1978 and date of
submission of document was fixed as
20.12.1978. It was also deposed that for 2nd
consignment, the defendant firm submitted
consignment documents like airway bills
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invoices, packing list etc. on 27.12.1978 and
in airway bill, one of the name of shipper
was shown as “House of Dubary” and such
documents were sent to Yugoslavian bank and
out of three bills of exchange, payment of
two bills of exchange were received on
30.01.1979 and the date of payment of third
bill was fixed on 14.02.1979 and after
receipt of the amount by the bank, the same
was credited in the account of the defendant
firm. It was deposed that the documents were
in the name of defendant firm and therefore,
the plaintiff was not entitled to receive
such amount, and the amount was permitted to
be withdrawn by the defendant no.1 firm, and
the defendant firm adjusted the amount
against the outstanding dues of the bank. It
was also deposed that 3rd consignment was sent
through airway bill dated 04.05.1979 and the
documents were deposited with the bank on
09.05.1979 and in the airway bill only name
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of “House of Dubary” was stated as shipper.
190. It also emerges from record that payment
for 3rd consignment was also received from
Yugoslavian buyers by the defendant no.6 Bank
and in view of stay order granted, payment of
3rd consignment of about Rs. 37 Lacs were not
paid to the defendant firm but the said
amount was kept in sundry account. It was
deposed that payment of 3rd consignment could
not be made by the bank as the airway bill,
inspection and Letters of Credit had expired
and there was no agreement between the
plaintiff and defendant firm with the bank
for making payment directly to the plaintiff.
191. In the cross examination of the said
witness of defendant no.6, it was admitted on
the basis of documents at Exh.283 to Exh.289,
which pertains to Letters of Credit opened by
the Yugoslavian buyers in Bank of Rajasthan,
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Janpath Branch at New Delhi in the name of
“House of Dubary” and Letters of Credit of
Rajasthan bank, as an agent collected the
papers and Letters of Credit through
defendant firm to the New Bank of India and
on the basis of such documents, New Bank of
India issued Letters of Credit in favour of
defendant firm.
192. It was also admitted that for 3rd
consignment, airway bill was not sent to the
State Bank of India, but invoices and packing
list etc. was sent to the State Bank of
India. It was also admitted that the
documents stated in Exh.325 were received by
defendant no.6 bank. When document at Exh.318
was shown to the witness of defendant no.6,
it was admitted that it was copy of sundry
account and no interest is paid in sundry
account and such amount is kept for non-use
purpose by the bank.
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193. Regarding Court Commissioner, it was
admitted that papers of the Court
Commissioner were signed by him and the Court
Commissioner had inspected the accounts of
the bank and the report is placed at Exh.400.
Witness also agreed that as per Exh.388, 2nd
consignment amount of three bills was
deposited which was credited on 31.01.1979,
01.02.1979 and 27.02.1979 and amount of FDR
from Commissioner’s report was pertaining to
the 2nd consignment.
194. It was also admitted that name of
defendant no.1 firm was mentioned as shipper
of the plaintiff and accordingly, the amount
received from Yugoslavian buyer was deposited
in the account of the defendant no.1 firm.
195. Witness no.1 of defendant nos. 1 to 4
Deepak Darbari at Exh.415 has submitted his
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examination in chief wherein it is deposed
that after expiry of Letters of Credit, the
plaintiff sent the goods for 2nd consignment
without consent of the defendants and
therefore, such goods were not exported. It
was also deposed that amount of freight,
demurrages and handling charges were paid by
defendant no.1 firm though same was to be
paid by the plaintiff. It is also deposed
that such amount paid by the defendant nos. 1
firm is stated in counter claim. It is also
deposed that for 2nd consignment, the amount
was received from Yugoslavian buyers however,
as Letters of Credit had expired, same was
deposited in the account of defendant no.1.
196. With regard to 3rd consignment, it was
deposed that the plaintiff informed defendant
no.1 firm when the goods reached from Kandla
to Mumbai and it was informed by the
plaintiff that such goods were to be exported
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on their own and after Hasmukh Khatri
requested for negotiation with regard to 3rd
consignment, defendant no.1 paid the amount
of airfreight etc. as there was no financial
facility with the plaintiff. It was also
deposed that defendant no.1 firm paid
clearing, handling service demurrage amount
for 3rd consignment which was to be paid by
the plaintiff and the said amount is stated
in the counter claim. It was therefore,
deposed that as the plaintiff was required to
pay the charges of freight, demurrage etc.,
amount received from Yugoslavian buyers was
adjusted against such charges to be received
from the plaintiff by deducting the amount to
be payable to the plaintiff and as defendant
no.1 firm could not earn profit of about Rs.
20 Lacs had the plaintiff sent the goods
within the period of Letters of Credit, the
said amount was included in the counter claim
filed by the defendant nos. 1 to 4.
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197. Various documents were placed on record
regarding the payment made by defendant no.1
firm from Exh.420 to Exh.425. In the cross
examination, it was admitted by the witness
of defendant nos.1 to 4 that defendant no.1
firm is not registered under the Partnership
Act and only counter claim was filed on
behalf of the firm and its partner. It was
also admitted that defendant no.1 firm is
keeping the account books at Delhi office and
is also paying the income tax. It is also
admitted by the witness of defendants in the
cross examination that at the time of export
of 3rd consignment, free shipping bill was
obtained and A.R.4 Form was not submitted. It
was also admitted that defendant no.1 firm
had exported the goods for 3rd consignment at
the cost of the plaintiff by obtaining the
free shipping bill in the name of defendant
no.1 firm.
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198. However, it was denied that A.R.4 Form
was not utilised as Yugoslavian buyers were
not able to pay the amount of 3rd consignment
as Letters of Credit had expired.
199. It was also admitted that Exh.310 to
Exh.314 are photocopies of invoices of 2nd
consignment which were sent to Yugoslavia and
Exh.315 is airway bill of the 2nd consignment.
It was also admitted that the amount of 3rd
consignment was received in part. It was also
deposed that amount of freight, handling
services of 2nd and 3rd consignment was to be
borne by the plaintiff.
200. It was admitted by the witness that no
amount was deducted by Yugoslavian buyers
with regard to 2nd consignment and there is no
outstanding payment to be made by Yugoslavian
buyers regarding any goods which were
exported for 2nd and 3rd consignment.
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201. Thus, the witness of defendant nos. 1 to
4 admitted that goods of 2nd consignment and
3rd consignment were exported by defendant
no.1 firm and payment was received from
Yugoslavian buyers which was not paid to the
plaintiff as defendant no.1 was required to
recover the amount of freight and other
charges from the plaintiff.
202. From the above analysis of the oral and
documentary evidence on record, it cannot be
said that the Trial Court has erred in law in
holding that contract was independent of
Letters of Credit.
203. So far as the first consignment exported
by the parties, transaction and relation
thereto was over as per the terms of the
Letters of Credit. However, so far as 2nd and
3rd consignment which are admittedly exported,
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Letters of Credit had already expired and
inspite such fact being known to everyone
that Letters of Credit had expired, 2nd
consignment was also exported and payment was
received from the Yugoslavian buyers and
third consignment was detained by defendant
no.5 Clearing and Forwarding Agent for about
four months and ultimately, the said
consignment was also exported and defendant
no.1 firm received the payment by encashing
the Letters of Credit on the basis of airway
bill in its name without utilising the A.R.4
Form which were sent by the plaintiff firm
along with the goods.
204. Thus, the defendant no.1 firm exported
the goods of 2nd and 3rd consignment without
considering the Letters of Credit which were
issued in favour of the plaintiff. Hence , it
cannot be said that the Trial Court has erred
in holding that contract was independent of
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Letters of Credit.
205. Points for Determination No.7 and 8
raise a very important issue as to whether
the decretal amount is arbitrary and based on
manifest error or not and whether the trial
Court was just and correct in decreeing the
suit for Rs.49,81,336/- and disallowing the
claim of the plaintiff for Rs.13,09,909/-.
After considering the evidence on record, the
Trial Court has rightly concluded that the
plaintiff was entitled to the amount of 2nd
and 3rd consignment as observed in para no.
137 of the impugned judgment and order as
under:
“(137).... I have carefully examined
the plaint and the recital of the
cross suit along with the
documentary evidence and gone
through particularly the relevant
invoice at Exhts. 310,312 and 314
along with air way bill at Ex.315
and found that three cargo were sent
in the second consignment and
thereby supplied the goods viz.,
2000 pieces of venus model, 10996
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pieces of the model North Stars and
10,000 pieces of the model panasia
at rate per piece in US dollar 8.50,
43,6985, 8,00 respectively. The
C.I.F. price value was in total US
Dollars 93,466-00, 87,397-00 and
80,000 respectively. It was the
understanding that the firm House of
Darbary should have been arranged
for the insurance and therefore be
deducted one percent of such price
value C.I.F. For the deduction of
such one percent it was necessary to
be deducted in US Dollar 934.66,
873.97 and 800 respectively from C.
I.F. value of these items. After
deduction, it will be found that in
US Dollars the balance amount will
be 92,531.34, 86,523-03 and 79,200-
00 respectively.
If we will be converted the balance
value of the dollars into Indian
rupees then it will be Rs.7,71,094-
50 paise, R.7,21,025-00 paise and
Rs. 6,60,000-00 paise respectively
of the value on basis C & F. I find
that the total value on basis C & F
of the goods relating to the second
consignment will be of Rs.
21,52,119-50 paise. In the present
case it is now no longer in dispute
that the items as to be shown on
page No.11 in paragraph No.110 of
the plaint are not entirely second
consignment but on the contrary, it
is admitted position that the item
"shella" and the item "Binoculars"
are not relating to the contract
with the plaintiff but are related
with the contract M/s. Hashmukh
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Brothers and the said Hashmukh
Brothers had supplied the item
Shella and the item Binoculars even
wrongly and by mistaken to be
mentioned in the plaint. According
to the parties, the goods as to be
shown above were sent in the second
consignment out of the total items
as mentioned in the plaint and the
remaining goods relating to item
"khashmir" and the item "victory"
and the item "venus" pieces 3000
were sent in the third consignment
along with othe goods. On basis of
this fact, I have found that the
firm House of Dubary had received
the total amount of Rs. 34,49,578-07
paise including the item of "shella"
and the item of Binoculars of the
second consignment from Yugoslavian
buyers which being credited in the
account of the firm in New Bank of
India Ltd., New Delhi as per Ex.388
showing the same in red ink circle.
This shows that this total amount of
Rs. 34,49,578-07 paise was including
the value of the goods "shella" and
Binocular which being supplied by
Hashmukh Brothers and therefore it
will be required to be deducted from
the total amount of Rs. 12,92,87-96
paise out of such total balance.
After deducting such amount, we will
get the total amount of Rs.
21,56,570-71 paise which will be the
amount of the second consignment as
received by the firm House of Dubary
as per vide Ex. 388 from the
Yugoslavian buyers. I have already
stated above that the firm House of
Dubary paid the chatter freight for
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the second consignment of the amount
Rs. 1,91,646-00 If we will deduct
this amount of freight, of the
total amount of Rs. 21,56,570.71
paise then will be got the amount of
Rs. 19,64,924-71 paise. It shows
that the amount of Rs. 19,64,924-71
is less than the total value on
basis C & F of Rs.21,52,119-50
paise. This being so, it is now
clear that the firm House of Dubary
had at all not received any amount
towards the freight and insurance
from Yugoslavian buyers. If it was
the contract on basis of F.O.B.
then the firm House of Dubary was
certainly received the amount which
being spent after the freight and
insurance for the second consignment
from Yugoslavian buyers when
Yugoslavian buyers did not pay such
freight and insurance to the firm
House of Dubary which would go to
show that the goods of second
consignment were supplied by the
plaintiff under the original
contract on basis C.I.F. It is
therefore clear that the plaintiff
had to be paid the insurance and
charter freight of the second and
third consignment and it was the
provisional accommodation and was
given the facility to the plaintiff
by the firm House of Dubary with
bonafide to be exported the goods
even after expiration of the time
limit of the contract on basis of
C.I.F and not F.O.B. without
altering the essence and foundation
or nature of the contract on basis
of C.I.F. I therefore disagree with
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the submission of the learned
advocate Shree Bheda for the
plaintiff that the firm House of
Dubary and partners there were
liable to pay the insurance freight
and handling charges of the goods
The defence story is found most
probable and convincing and it is
fully supported by the oral and
documentary evidence on record.
206. With regard to the amount for 2nd
consignment, Trial Court has rightly observed
that amount of Rs.26,00,863/- mentioned in
para no. 10 of the plaint is not correct and
correct amount would be Rs.19,60,473.50 as
per the Letters of Credit on the basis of CIF
without deducting 1% value of insurance as
per the correspondence as under:
“138).....I have found from the
evidence that the plaintiff is only
entitled to get the amount of
5.19,60.473-50 paise for the goods
relating to the second consignment
from the deft., Nos. 1 to 4 only and
not the amount of Rs. 26,0,863-00 as
claimed and mentioned in the plaint.
The claim of the plaintiff is no
correct towards the second
consignment. I have found that the
facts as to be furnished on page-
No.11 in paragraph No.10 of the
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plaint are not correct and it is
contrary even on basis of the
accounts which have been produced by
the plaintiff itself under mark
202/6 (on page No.5 to 7). I have
carefully examined the statement of
the accounts mark 202/6 and found
that the plaintiff has shown the
value on basis C & F eventhough
mentioned in the plaint the value on
basis C.I.F. without deducting the
one percent value of the insurance
as per the correspondence. I have
further found that the invoice H.K.
No.8 and the invoice H.K.No.9
relating to the item "Shella" and
the item "Binoculars" are not
entered into books of account of the
plaintiff even if mentioned in the
plaint covering such two items as to
be supplied by the plaintiff, where
there was no orders and contract for
the same with the plaintiff but the
orders were under the con tract with
M/s. Hashmukh Brothers.”
207. Regarding 3rd consignment, the Trial
Court has held that the plaintiff is entitled
to the amount of Rs.30,20,912.75 after
deducting freight of Rs.5,30,806/- as under:
“139).....As regards to third
consignment is concerned, it is
clear that the goods were sent to
Yugoslavian buyers on 4-5-79 vide
air-way bill ex, 317. The invoice at
Ex. 316 speaks that in the third
consignment, the goods were sent
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viz. A Car Radio cassettes Model
venus 3000 pieces at rate per piece
in US Dollars 51-41, (2) Transistor
Radio Model panasia 6000 pieces at
rate per piece in US dollars 10-00
(3) Transistor Radio Model Tele
star, 5000 pieces at rate per piece
in US dollars 17,76 (4) radio
cassettes Model Kashmir, 2499 pieces
at rate per piece in US Dollars
42,49 (5) Radio cassettes Model
victory. 2500 pieces at rate per
pieces in US dollars 40-32. Now
these items are tally with the facts
as mentioned on page-11 and on page
20 in paragraphs Nos. 10 and 13 of
the plaint and it is found that the
goods as mentioned above were sent
in the third consignment as per the
invoice vide Ex. 316 by the Air-way
bill vide Ex. 317 to Yugoslavian
buyers. But the plaintiff has shown
the price value of such goods in the
plaint on basis of C.I.F. without
deducting one percent of the charges
insurance as per the correspondence.
I have found from the accounts mark-
202(6) that the plaintiff has
entered the price value of such
goods into its own books of account
on basis C&F after deducting the one
percent charges of the insurance. It
is therefore clear that the price
value of the goods as to be
mentioned is not on based. C & F but
on basis C.I.F. which is not as per
terms of the contract. I have
therefore taken total value on
basis, C & F from the accounts mark
202 (6) (on- pages 8 to 13) in US
dollars 42,6475-53 equivalent in
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Indian Rs. 35,51,712-75 paise. It is
now necessary to be deducted the
amount of the freight of Rs.
5,30,800 so that we will get the
figure of Rs. 30,20,912-75 paise of
the value on basis F.O.B. The
plaintiff has claimed of Rs.
34,65,606-60 which is incorrect but
will be entitled to get only the
amount of Rs. 30,20,912-75 paise
towards the goods relating to third
consignment on basis F.O.B. and not
more.”
208. The Trial Court has also rejected the
claim of the defendants regarding Rs.60,000/-
towards demurrages, Rs. 10 Lacs towards
defects in goods on coming to the conclusion
that no deduction was made by Yugoslavian
buyers from the payment of 3rd consignment
which is proved by the plaintiff from the
evidence on record and the defendants have
therefore, failed to prove that the plaintiff
has committed breach of contract but it has
also been established that defendant nos. 1
to 4 have not paid the money to the plaintiff
and withheld the money even after receiving
from Yugoslavian buyers.
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209. Thus, the Trial Court has passed the
decree for Rs.49,81,336/- (for 2nd consignment
Rs.19,60,473.50 and for 3rd consignment
Rs.30,20,912.75).
210. In view of aforesaid findings of the
Trial Court which is borne out from the oral
and documentary evidence on record, it cannot
be said that decretal amount is arbitrary and
based on manifest error. There is no error in
arriving at decretal amount of Rs.49,81,336/-
awarded by the Trial Court.
211. Point for Determination no.9 pertains to
counter claim raised by defendant no.1 by
filing the written statement under Order VIII
Rule 6(A) of the Code of Civil Procedure,
1908 raising a claim of Rs.1,08,85,152/-.
212. Learned advocate Mr. Joshi appearing for
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the plaintiff raised preliminary objection
regarding the maintainability of the appeal
filed by the defendant nos. 1 to 4 contending
that First Appeal with counter claim itself
would not be maintainable in view of bar
contained under section 69 of the Indian
Partnership Act, 1932.
213. Learned Trial Judge while answering
issue no.2(G) at para no. 119 and 122 of the
impugned judgment and order has discussed
this issue and answered that counter claim is
not maintainable on the premise that the
defendant no.1 partnership firm was not
registered under the provisions of the
Partnership Act, 1932. Section 69 and section
69A of the Partnership Act reads thus:
“69. EFFECT OF NON-REGISTRATION. -
(1) No suit to enforce a right
arising from a contract or conferred
by this Act shall be instituted in
any Court by or on a behalf of any
persons suing as a partner in a firm
against the firm or any person
alleged to be or to have been a
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partner in the firm unless the firm
is registered and the person suing
is or has been shown in the Register
of Firms as a partner in the firm :
Provided that the requirement of
registration of firm under this sub-
section shall not apply to the suits
or proceedings instituted by the
heirs or legal representatives of
the deceased partner of a firm for
accounts of the firm or to realise
the property of the firm.
(2) No suit to enforce a right
arising from a contract shall I be
instituted in any court by or on
behalf of a firm against any third
party unless the firm is registered
and the persons suing are or have
been shown in the Register of Firms
as partners in the firm.
(2A) No suit to enforce any right
for the dissolution of a firm or for
accounts of a dissolved firm or any
right or power to realise the
property of a dissolved firm shall
be instituted in any Court by or on
behalf of any person suing as a
partner in a firm against the firm
or any person alleged to be or have
been a partner in the firm, unless
the firm is registered and the
person suing is or has been shown in
the Register of Firms as a partner
in the firm :
Provided that the requirement of
registration of firm under this sub-
section shall not apply to the suits
or proceedings instituted by the
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heirs or legal representatives of
the deceased partner of a firm for
accounts of a dissolved firm or to
realise the property of a dissolved
firm.
(3) The provisions of sub-sections
(1), (2) and (2A) shall apply also
to a claim of setoff or other
proceedings to enforce a right
arising from a contract but shall
not affect
(a) the firms constituted for a
duration upto six months or with a
capital upto two thousand rupees;
or;
(b) the powers of an official
assigned, receiver or Court under
the Presidency Towns Insolvency Act,
1909, or the Provincial Insolvency
Act, 1920, to realise the property
of an insolvent partner.
(4) This section shall not apply -
(a) to firms or partners in firm
which have no place of business in
the territories to which this Act
extends, or whose places of business
in the said territories are situated
in areas to which, by notification
under section 56 this Chapter does
not apply, or OF GUJARAT
(b) to any suit or claim of set-off
not exceeding one hundred rupees in
value which, in the presidency
towns, is not of a kind specified in
section 19 of the Presidency Small
Cause Courts Act, 1882, or outside
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the Presidency towns, is not of a
kind specified in the Second
Schedule to the Provincial Small
Cause Courts Act, 1887, or to any
proceeding in execution or other
proceeding incidental to or arising
from any such suit or claim.
Comment: "...Thus, the persons
suing, namely, the current partners
as on the date of the suit were not
shown as partners in the Register of
Firms. The result is that the suit
was not maintainable in view of the
provisions of sub-sec. (2) of S. 69
of the said Partnership Act..." M/s.
Shreeram Finance Corporation,
Appellants v. Yasin Khan AIR 1989
SUPREME COURT 1769
Section69A PENALTY FOR CONTRAVENTION
OF SECTION 60, 61, 62, OR 63.
If any statement, intimation or
notice under sections 60, 61, 62 or
63 in respect of any registered firm
is not sent or given to the
Registrar, within the period
specified in that section, the
Registrar may, after giving notice
to the partners of the firm and
after giving them a reasonable
opportunity of being heard, refuse
to make the suitable amendments in
the records relating to the firm,
until the partners of the firm pay
such penalty, not exceeding ten
rupees per day, as the Registrar may
determine in respect of the period
between the date of expiry of the
period specified in sections 60, 61,
62 or as the case may be, 63 and the
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date of making the amendments in the
entries relating to the firm.”
214. A plain reading of the above provision
would indicate that no suit to enforce a
right arising from a contract or conferred by
the Act shall be instituted in any Court by
or on a behalf of any persons suing as a
partner in a firm against the firm or any
person alleged to be or to have been a
partner in the firm unless the firm is
registered.
215. Section 58 of the Partnership Act
mandates as to how registration of a firm may
be effect and the non-consequence of
registration is traceable to section 69. The
said provision is mandatory in character, and
its effect is to render a suit in respect of
a right under the Contract which he entered
into a partner of a unregistered firm as
being void. The Hon'ble Apex Court in the
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case of Loonkaran Sethia etc. versus Mr. Ivan
E. John and Others reported in AIR 1977 SC
336 has held that Section 69 is mandatory in
character and its effect is to render a suit
filed by the plaintiff in respect of a right
vested in him or acquire by him under the
contract which he entered into as a partner
in a unregistered firm, whether existing or
dissolved as void. It has been further held
in para 21 as under:-
“21. A bare glance at the section is
enough to show that it mandatory in
character and its effect is to
render a suit by a plaintiff in
respect of a right vested in him or
acquired by him under a contract
which he entered into as a partner
of an unregistered firm whether
existing or dissolved, void. In
other words, a partner of a
erstwhile unregistered part- nership
firm cannot bring a suit to enforce
a right arising out of a contract
falling within the ambit of section
69 of the Partnership Act. In the
instant case, Seth Suganchand had to
admit in unmistakable terms that the
firm 'Sethiya & Co.' was not
registered under the Indian
Partnership Act. It cannot also be
denied that the suit out of which
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the appeals have arisen was for
enforcement of the agreement entered
into by the plaintiff as partner of
Sethiya & Co. which was an
unregistered firm. That being so,
the suit is undoubtedly a suit for
the benefit and interest of the firm
and consequently a suit on behalf of
the firm. It is also to be borne in
mind that it was never pleaded by
the plain- tiff, not even-in the
replication, that he was suing to
recover the outstandings of a
dissolved firm. Thus the suit was
clearly hit by section 69 the
Partnership Act and was not
maintainable."
216. While examining as to embargo contained
under sub-section 3 of Section 69, wherein
the expression "other proceedings" is found.
The Apex Court in the case of M/s. Umesh Goel
versus Himachal Pradesh Cooperative Group
Housing Society Ltd. reported in AIR 2016 SC
3116, has held :
"8. Having heard learned counsel for
the appellant as well the respondent
and having bestowed our serious
consideration to the respective
submissions, the various decisions
relied upon and the provisions
contained in the Partnership Act,
the Interest Act, Civil Procedure
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Code and Arbitration Act, we are of
the view that the submissions of Mr.
Dhruv Mehta, learned Senior Counsel
for the appellant merit acceptance.
xxx
10. Though, some of the decisions
which were cited before us dealt
with Section 69(3) of the
Partnership Act, in the instance we
wish to analyze the said sub-section
along with the other components of
the said Section 69. When we read
sub-section (3) of Section 69
carefully, we find that as rightly
contended by Mr. Dhruv Mehta,
learned Senior Counsel for the
appellant, the provisions of sub-
sections (1) and (2) have been
impliedly incorporated in sub-
section (3). When the opening set of
expression in sub-section (3) states
that the provisions of sub- sections
(1) and (2) shall apply, there is no
difficulty in accepting the said
submission of learned Senior Counsel
for the appellant that the entirety
of the said two sub-sections should
be held to be bodily lifted and
incorporated in sub-section (3). It
is difficult to state that any one
part of sub-sections (1) and (2)
alone should be held to be
incorporated for the purpose of sub-
section (3). Therefore, we are
convinced that when we read sub-
section (3) it is imperative that
all the ingredients contained in
sub-sections (1) and (2) should be
read into sub-section (3) and
thereafter apply the said sub-
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section when such application is
called for in any matter.
xxx
12. The question for our
consideration is by virtue of sub-
section (3) whether the expression
"other proceedings" contained
therein will include Arbitral
proceedings and can be equated to a
suit filed in a Court and thereby
the ban imposed against an
unregistered firm can operate in the
matter of arbitral proceedings. If
sub- sections (1) and (2) are
virtually lifted whole hog and
incorporated in sub-section (3), it
must be stated that it is not the
mere ban that is imposed in sub-
sections (1) and (2) that alone is
contemplated for the application of
sub-section (3). In other words,
when the whole of the ingredients
contained in sub-sections (1) and
(2) are wholly incorporated in sub-
section (3), the resultant position
would be that the ban can operate in
respect of an unregistered firm even
relating to a set off or other
proceedings only when such claim of
set off or other proceedings are
intrinsically connected with the
suit that is pending in a Court. To
put it differently, in order to
invoke sub-section (3) of Section 69
and for the ban to operate either
the firm should be an unregistered
one or the person who wants to sue
should be a partner of an
unregistered firm, that its / his
endeavour should be to file a suit
in a Court, in which event even if
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it pertains to a claim of set off or
in respect of 'other proceedings'
connected with any right arising
from a contract or conferred by the
Partnership Act which is sought to
be enforced through a Court by way
of a suit then and then alone the
said sub-section can operate to its
full extent.
13. As far as the construction of
the said sub-section (3) of Section
69 is concerned, we are able to
discern the above legal position
without any scope of ambiguity. To
be more precise, the condition
precedent for the operation of ban
under sub-section (3) is that the
launching of a suit in a Court of
law should be present and it should
be by an unregistered firm or by a
person claiming to be partner of an
unregistered firm either to a claim
for set off in the said suit or any
other proceedings intrinsically
connected with the said suit.
14. In the event of the above
ingredients set out under sub-
sections (1), (2) and (3) being
fulfilled then and then alone the
ban prescribed against an
unregistered firm under Section
69(1), (2) and (3) would operate and
not otherwise.”
217. The Hon'ble Apex Court concluded that
the expression "other proceedings" occurring
in section 69(3) of the Act does not having
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application to the ban imposed under said
section, the proceedings initiated for
arbitral proceedings as well as arbitration
award.
218. Thus, the counter claim filed by first
defendant for payment of Rs. 1,08,85,152/- by
the plaintiffs in favour of the defendant
itself was not maintainable and consequently
the appeal preferred by first defendant
insofar as rejection of the counter claim by
the trial court which is the subject matter
of the appeal No. 531 of 1986 would not be
maintainable. However, insofar as the appeal
filed challenging the judgment and decree of
the suit being decreed for a sum of Rs.
49,81,336/- against defendant Nos. 1 to 4,
the correctness and legality of the same can
be assailed by defendant Nos. 1 to 4,
inasmuch the decree being joint and several,
the appeal filed under section 96 of CPC by
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defendant nos. 1 to 4 would be maintainable.
219. Thus, we are of the opinion that the
trial Court was justified in rejecting the
counter claim filed by defendant nos. 1 to 4.
However, merely by rejecting the counter
claim we cannot be oblivious to the facts of
the case that expenses incurred by the
defendant no.1 firm for export of 2 nd and 3rd
consignment which were liable to be borne by
the plaintiff cannot be denied to the
defendant no.1 firm. We have therefore,
considered this aspect while deciding point
no.11.
220. Point for Determination No.10 pertains
to exonerating defendant nos. 5 and 6 from
joint and several liability from making the
payment of the decretal amount by the Trial
Court is justified or not as raised in First
Appeal No.1093/1987 filed by the plaintiff.
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221. The contention raised on behalf of the
plaintiff that defendant no.6 was also party
to the breach of contract committed by
defendant nos. 1 to 4 was dealt with by the
Trial Court in para no. 94 as under:
“94)...... The question for
consideration in this case is whether
the six deft., New Bank of India is
liable for the fraud as to be committed
by the deft., Nos. 1 to 5 regarding to
their consignment whereby is the six
deft., committed negligence in tort.
The learned advocate Shree Bheda for
the plaintiff submits that the New Bank
of India was liable to make the
payments of the second and third
consignments under the letters of
credit on receipt the actual amounts
from the Bank of the Yugoslavian buyers
even if failed to do so and permitted
the first deft., to be converted the
said moneys in personal account of the
first deft., which being amounted of
the conversion on basis of the fraud
and collusion of the defts., Now on the
facts and circumstances of the case
before us., the Yugoslavian buyers
opened the irrevocable seven letters of
the credit towards the payments of the
orders of the goods in favour of the
first deft. The Zerox copies of such
letters of credit are produced by the
deft., which are exhibited vide Exhts.,
283 to 289. After that, in turn, the
New Bank of India opened the four
letters of credit in favour of the
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plaintiff in the State Bank of India,
Branch office Kandla. Zerox copies of
such letters of credit along with the
documents are produced by the defts.,
which are exhibited vide exhts. 290 to
309. This shows that Bank of India was
opening bank and the State India was
advising Bank. It appears from the
letters of credit vide Exhts., 290 to
309 that the first deft., opened four
letters of credit valued at U.S.
Dollars 1,867,488-75 equivalent to
Indian rupee 1,49,47,909-00 in favour
of the plaintiff for supplying the
goods as mentioned in the said letters
of the credit namely Radio cassette
Transistor Radio, Car Radio, Cassettes
etc., and proportionate payment as to
be made to beneficiary for any part of
shipments made. For such payments are
required the following documents.
Commercial invoice, one origin and five
copies (2) packing list, one origin and
five copies (3) certificate of origin
one original and two copies from Indian
Chamber of Commerce (4) Inspection
quality certificate, one original and
two copies as issued by House of Dubary
New Delhi (5) Insurance Policy in U.S.
Dollars for 40 percent above the C. I.
F. value of the shipment one original
and three copies in assignable form
endorsed in Bank. Insurance to cover
all risks from seller's warehouse to
party's warehouse (6) original and two
copies of the bill of lading marked
freight prepaid, made out to the order
of Makosped skopje. Notify solun,
Gavgelija, Yugoslavia (7) All the
documents will be marked name of
shipper A/c House of Dubary, New Delhi,
India (8) we (New Bank of India Ltd.)
will remit the proceeds to the
negotiating Bank of the OD/DC buying
Page 226 of 236
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rate prevailing on the day of the
documents are negotiated under the
above letter of credit therein are
received by us.”
222. In view of the aforesaid finding of the
Trial Court, We do not find any infirmity in
findings of the Trial Court as the same is
based on oral and documentary evidence. So
far as defendant no.5 M/s. Airfreight (P)
Ltd. is concerned, it was appointed by
defendant no.1 as a Clearing and Forwarding
Agent and was acting as an agent of the
plaintiff as well as defendant no.1 firm for
the export of goods and there is no oral and
documentary evidence to show that defendant
no.5 is liable for not exporting the goods
inspite of the instructions either from the
plaintiff or defendant no.1 firm. In such
circumstances, the Trial Court has rightly
come to the conclusion that the suit stands
dismissed qua defendant nos. 5 and 6. In our
opinion, the Trial Court has rightly
Page 227 of 236
C/FA/531/1986 CAV JUDGMENT DATED: 17/07/2026
concluded that the rest of the suit and the
claim stands dismissed against defendant
nos.5 and 6.
223. Point for Determination no.11 pertains
to whether the decree passed by the Trial
Court for Rs.49,81,336/- is just and proper.
224. At this stage, it is pertinent to note
that on appreciation of oral and documentary
evidence on record, the Trial Court has not
granting set off of the expenses borne by the
defendant no.1 firm for export of the goods
of 2nd and 3rd consignment through defendant
no.5. However, from the findings which emerge
from the facts on the basis of oral and
documentary evidence, amount of expenditures
incurred by defendant no.1 firm are required
to be considered to be set off against the
amount of decree passed by the Trial Court in
favour of the plaintiff. The amount paid by
Page 228 of 236
C/FA/531/1986 CAV JUDGMENT DATED: 17/07/2026
defendant no.1 firm for export of second and
third consignment is discernible from the
counter claim of defendant nos. 1 to 4 which
is supported by the oral evidence of the
defendant no.2 as analysed herein above.
225. Therefore, for the purpose of rendering
substantial justice to see that the amount
spent by defendant no.1 firm for export of
goods of second and third consignment on
behalf of the plaintiff is required to be
reimbursed to defendant no.1 firm and to
that extent the decretal amount is required
to be modified.
226. The plaintiff in the cross examination
of the defendant no.2 could not extract any
contradictory facts for the payment of
airfreight, demurrage etc. for export of the
2nd and 3rd consignment made by the defendant
no.1 firm. Even the witness of the plaintiff
Page 229 of 236
C/FA/531/1986 CAV JUDGMENT DATED: 17/07/2026
in his deposition has admitted that amount of
freight, demurrage, handling charges etc. for
export of 2nd and 3rd consignment were paid by
defendant no.1 firm.
227. In view of analysis of oral and
documentary evidence made herein above and
considering the submissions of both the
learned advocates, we have to consider as to
whether the decree passed by the Trial Court
for Rs.49,81,336/- is just and proper or not.
As we have noted while considering the point
no.9 for determination while upholding the
findings of the Trial Court that the counter
claim of defendant no.1 firm is not
maintainable, however, we are of the opinion
that the expenses incurred by it for export
of the 2nd and 3rd consignment by the
defendant no.1 firm are required to be
reimbursed.
Page 230 of 236
C/FA/531/1986 CAV JUDGMENT DATED: 17/07/2026
228. On perusal of the documents placed along
with the counter claim and considering the
deposition of the defendant no.2, it appears
that defendant no.1 firm has incurred the
following expenditures:
Rs.4,75,000/- Towards airfreight
(US$ 59,375.00) charges in respect of 2nd
consignment (First
Charter)
Rs.4,50,000/- Airfreight charges in
(US$ 56,250.00) respect of 3rd consignment
(Second Charter)
Rs.1,53,990.08 For goods returned by
(US$ 19,248.76) Yugoslavian buyers
Rs.1,77,128/- As per letter dated
(US$ 22141.00) 19.06.1979 of Yugoslavian
buyers for not supplying
spare parts
Rs. 60,000/- For demurrage charges
(US$ 7500.00)
Rs.50,000/- For clearing and
forwarding charges
Rs.13,66,118/- Total
229. The above expenses are considered to be
paid by defendant no.1 on the basis of the
documents placed on record. Though the
counter claim is rejected by the Trial Court,
the documents placed along with the counter
Page 231 of 236
C/FA/531/1986 CAV JUDGMENT DATED: 17/07/2026
claim are considered by the Trial Court in
the impugned judgment and order in para no.
137 reproduced here-in-above. The Trial Court
has also considered the amount of Rs.
60,000/- paid by the defendant no.1 firm
towards demurrage charges in para no.140 of
the judgment and order and has rejected the
claim of Rs. 10 Lacs on the ground that the
plaintiff has supplied the goods which were
not upto the mark of standard in para no. 141
of the judgment and also referred to Exh. 318
that by the letter by Yugoslavian buyers
remitted the amount of Rs.3,84,711/- which
was withheld for the defective goods. Even
reference was made to letter at Exh. 418
where value of defective goods have been
shown in US$ 65,595 and towards the value of
defective goods Yugoslavian buyers had paid
amount of Rs.3,84,711/- and has come to the
conclusion that the entire amount had been
paid and the Yugoslavian buyers had not
Page 232 of 236
C/FA/531/1986 CAV JUDGMENT DATED: 17/07/2026
deducted any money towards the defective
goods. Accordingly, the Trial Court has held
that the claim for defective goods does not
survive.
230. Regarding the deficit goods, it was
observed by the Trial Court in para no. 141
of the judgment that as per the Letter at
Exh. 418, goods worth US$ 8291 equivalent to
Rs.65,000/- were sent under the insurance
with full value on the basis of C.I.F. and
therefore, the defendants would be entitled
to take legal course for recovery of damages
against the insurance company. However, such
findings of Trial Court cannot be accepted as
ultimately the plaintiff was responsible for
the payment of deficit goods. In that view of
the matter, we hold that the aforesaid amount
is required to be reimbursed to the defendant
no.1 firm by the plaintiff.
Page 233 of 236
C/FA/531/1986 CAV JUDGMENT DATED: 17/07/2026
Conclusion
231. In view of foregoing analysis, we are of
the opinion that amount of Rs. 13,66,118/- is
required to be further reduced from the
decretal amount of Rs.49,81,336/- awarded by
the Trial Court.
232. Therefore, the decree is accordingly
modified to the extent of Rs.36,15,218/-
(Rs.49,81,336-Rs.13,66,118).
233. We, therefore, hold that the decretal
amount as per the decree passed by the Trial
Court is modified at Rs.36,15,218/- together
with proportionate interest accrued therefrom
as per the order passed by the Trial Court.
234. As per the status report of FDR-25 as
issued by State Bank of India dated
30.06.2026, principal value of FDR is Rs.
1,91,04,023/- and accrued interest is
Page 234 of 236
C/FA/531/1986 CAV JUDGMENT DATED: 17/07/2026
Rs.5,23,66,304/- and therefore, total amount
on said FDR is Rs.7,14,70,627/- with running
interest which may accrue till the date of
premature encashment.
235. As the decree is modified to the extent
of Rs.36,15,218/-, the plaintiff will be
entitled to the said decretal amount along
with accrued interest thereon from the amount
deposited in Fixed deposit with the State
Bank of India, High Court Complex Branch. The
balance amount, out of the total amount
deposited by defendant no.6 bank i.e.
Rs.1,52,202/- [Rs.37,67,420-Rs.36,15,218]
together with proportionate interest accrued
thereon to be bifurcated from the amount to
be realised on premature encashment of Fixed
Deposit till the date of realisation shall
be paid to defendant nos. 1 firm and
remaining amount to be paid to the plaintiff.
Ordered accordingly.
Page 235 of 236
C/FA/531/1986 CAV JUDGMENT DATED: 17/07/2026
236. Appeals stand disposed of in the
aforesaid terms. Decree stands modified
accordingly. No order as to cost.
(BHARGAV D. KARIA, J)
(L. S. PIRZADA, J)
RAGHUNATH R NAIR
Original copy of this order has been signed by the Hon'ble Judges.
Digitally signed by: RAGHUNATH RAVINDRANATHAN NAIR(HC00196), PRINCIPAL PRIVATE SECRETARY, at High Court of Gujarat on 17/07/2026 18:05:37
Page 236 of 236
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