BEHARILAL MADANLAL JAIPURIA Vs. STAR PAPERS MILLS LTD

JUDGEMENT

(1.) THE present first appeal assails the decree and judgment dated March 20, 2007 whereby the learned Single Judge has decreed suit filed by respondent No.1 in sum of Rs.96,41,765.31 along with simple interest @15% per annum from the date of institution of the suit till the date of payment.

(2.) THE respondent No.1 had filed a suit for recovery of money towards the price of goods allegedly sold by it to the appellant. It was the claim of respondent No.1 that it was a manufacturer of various types of papers and that the appellant was a whole sale dealer of paper and as a dealer was purchasing paper from the respondent No.1 and for which, respondent No.2, the Managing Director of the appellant personally approached the respondent No.1 in October, 1985 at the Saharanpur Mills for what was claimed to be a bulk order in the hands of the appellant for its customers. It was pleaded that respondent No.2 assured the respondent No.1 about prompt payment. It was further alleged that in the month of November and December, 1985 and January 1986 huge stocks were lifted by the appellant from the respondent No.1. The total value of the goods supplied was stated to be worth Rs.72,27,079/ - vide 189 consignments against the terms of direct payment. It was alleged that goods under the 189 consignments were duly delivered from the Delhi office of the respondent No.1.

(3.) THE appellant contested the suit by taking various pleas of law and of fact. In sum and substance, it was pleaded by the appellant that the suit of the respondent No.1 was based on fictitious and fraudulent transactions entered into between the parties. The appellant pleaded that the alleged bills in respect whereof suit had been filed were on the basis of fictitious transactions which were tainted with fraud, deceit and on circumvention of law. It was alleged that the transactions were against the public policy and void ab -initio. On facts it was stated that in reality no actual deliveries were made to the appellant against the bills which were the subject matter of the suit. The appellant stated that in or about 1972 -73 Shri B.P.Bajoria, the then Managing Director of the respondent No.1 approached Shri Nagarmal Jaipuria and suggested that the appellant and respondent No.2 and 3 should receive certain bills drawn on them inasmuch as the respondent No.1 intended to sell certain quantities of papers in the open market at prices higher than the mill rates. It was represented on behalf of the respondent No.1 that unless and until the bills were accepted by a wholesaler, the goods could not be taken out of the mills. As per the scheme of the respondent No.1, the goods were to be ostensibly sold to the appellant while factually they were sold by the respondent No.1 in the open market at a premium. It was thus stated by the appellant that since the price of paper was commanding good premium in the market it was lucrative business for the respondent No.1 to sell the goods in the open market by ostensibly showing them to be sold to the appellant as the respondent No.1 would also save sales tax @ 4% on direct sales from Saharanpur Mill to the appellant, as a wholesaler, which saving could not be made in case of sale from Saharanpur Mill directly to the customers. It was stated by the appellant that the respondent No.1 in addition to make the profit by sale in open market also wanted to pocket the sales tax. It was stated by the appellant that on behalf of the respondent No.1 it was threatened that if the said arrangement was not accepted, the wholesale distributorship agreement with the appellant would be terminated. The appellant states that under the said pressure and threat it succumbed to the illegal demands of the respondent No.1 and agreed to the arrangement in which goods would directly be sold in the open market and the appellant would be used as a conduit for the said illegal transaction. It is further stated by the appellant that the respondent No.1 compelled them to allow the bills to be raised in its name and to undergo formalities in its name so that the fraudulent scheme and device could not be caught by the authorities. It was pleaded by the appellant that the respondent No.1 had no godown or sales depot at Delhi from which the alleged supplies were made and that the challans, etc. were forged and fabricated documents. In this manner the appellant claims that no liability against fictitious bills can be foisted upon it.