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PETITIONER: KUSHALBHAI MAHOJIBHAI PATEL

       Vs.

RESPONDENT: A FIRM OF MOHMADHUSSAIN RAHIMBUX

DATE OF JUDGMENT11/03/1980

BENCH: KOSHAL, A.D. BENCH: KOSHAL, A.D. FAZALALI, SYED MURTAZA

CITATION:  1981 AIR  977            1980 SCR  (3)  22

ACT:      Privity of  Contract-Supply made by appellant Plaintiff to respondent defendant of 268 Bengali Maunds of Tobacco and accepted by  the latter-Four  cheques issued  by the  latter covering  the  value  bumped-No  document  was  executed  to evidence the  contract-Whether suit for recovery of money is maintainable, for  want of  privity of  contract?-  Onus  of proof is  on the  defendant in  such cases by producing best evidence like Books of Accounts.

HEADNOTE:      In the  money suit  filed by the appellant-plaintiff to recover the  value of  tobacco sold  to respondent-defendant after the  four cheques  covering the  value of  tobacco and issued by  latter bumped,  the  defendant  took  a  plea  of nonexistence of privity of contract and while admitting both the receipt  of the  tobacco from and issuance of cheques to plaintiff,  explained  the  tobacco  had  been  supplied  to defendant by  the plaintiff  at the instance of another Firm R. K. Patel with whom the defendant had placed the order for the supply  of the  tobacco and  that the  four cheques were issued in favour of plaintiff at the instance of Firm "R. K. Patel", in  respect of another transaction for the supply by that Firm  of 900  bags of  tobacco, which transaction later failed.      The Trial  Court decreed  the suit  after rejecting the evidence and  pleadings of the defendant. In appeal the High Court reversed  the judgment  and set  aside decree  of  the trial Court.      Allowing the appeal by certificate, the Court ^      HELD :  Supply of  the goods  by the  plaintiff to  the defendant and  the issuance  of cheques  by  the  latter  in favour of  the former shifted the onus of proof on the point of privity  of contract  to the defendant. The fact that the goods had  been sent  to the  defendant by the plaintiff and had been  received by  the former  was admitted on all hands and was sufficient to raise a presumption, till the contrary was proved,  that an order had been placed for the supply of the goods  with the  plaintiff by  the defendant  firm.  The plaintiff could  thus bank  on the said fact for the purpose of discharging  the initial  onus which  lay on him to prove the privity  of contract  between the parties and it was for

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the defendant  to  rebut  the  presumption  which  the  fact raised. [27 G-H, 28 A]      (ii) The  books of  account maintained by the defendant being the  best evidence  available in proof of the stand of the defendant  firm that no order had been placed by it with the plaintiff  the failure  of the  defendant  to  place  on record those  books is  a clincher.  Non production of these books by  the defendant raises a presumption against it that if such evidence had been produced, the same would have gone against the case propounded by it, more 23 so when  the defendant  fails  to  bring  witnesses  to  the transactions set up by it into witness-box and examine them. [28 A-C, 29 A-E]

JUDGMENT:      CIVIL APPELLATE JURISDICTION : Civil Appeal No. 1376 of 1970.      From the  Judgment and  Decree dated 29th/30th October, 1969 of the Gujarat High Court in Appeal No. 795/61.      D. V.  Patel, T.  U. Mehta  and M.  V. Goswami  for the Appellant.      Dr. W.  S. Barlingay  and A.  G.  Ratnaparkhi  for  the Respondent.      The Judgment of the Court was delivered by      KOSHAL, J-This  appeal by  certificate granted  by  the High Court  of Gujarat under sub-clause (a) of clause (1) of Article 133 of the Constitution of India is directed against its judgment  dated the 29th/30th October, 1969, accepting a first appeal  preferred by  the defendant  firm  to  it  and dismissing the  plaintiff’s suit  which had  been decreed by the trial court.      2. The  said suit was filed on the 24th November, 1958, in the court of the Civil Judge, Senior Division, Nadiad, by one K.  M. Patel  for the  recovery of Rs. 38,718/- from the defendant firm  on account  of the  price  of  225  bags  of tobacco weighing 268 Bengali maunds at the rate of Rs. 112/- per such maund and interest thereon. The case set out in the plaint was  that the  tobacco in question had been purchased by the  defendant firm  on the  28th of November, 1955, that the same  was despatched to the defendant firm by train from Anklav railway  station on  the 1st  of December,  1955,  on which date a bill for Rs. 30,523/- covering the price of the goods and  incidental expenses  was sent  to  the  defendant firm, that the goods were received by the defendant firm who failed to  pay for  the same,  that ultimately the defendant firm gave  to the  plaintiff  four  cheques,  each  for  Rs. 5,000/- drawn  on a banking company of Santa but that all of them were  dishonoured on  presentation. In  addition to the said amount  of  Rs  30,523/-,  the  plaintiff  claimed  Rs. 8,195/- on account of interest at the rate of 9 per cent per annum for  the period  preceding the suit. He further prayed for award of future interest and costs.      3. The  defendant firm  denied the plaintiff’s claim in toto. It  averred in the written statement that no goods had been received by it from the plaintiff and that it had given no cheques to him. According to the defendant firm the goods in question had been purchased by it from a firm carrying on business in the name and style of ‘R. K. Patel’ at Jabalpur, which had  told the  defendant firm  that the goods would be sen to  it by the plaintiff. In relation to the four cheques the defendant  firm stated  that on the 29th November, 1957, it had entered into

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24 a transaction  for the  purchase of 900 bags of tobacco from firm R.  K. Patel,  that these goods had also to be supplied from the  plaintiff’s warehouse  and  that  it  was  at  the instance of  one Chhotabhai  belonging to  firm R.  K. Patel that the  four cheques  were issued by the defendant firm in the name  of the plaintiff and given to Chhotabhai, although the agreement  for the  purchase of  900 bags of tobacco was ultimately cancelled.      4. On  the pleadings  of the  parties the main question which arose  for determination  was  whether  a  privity  of contract existed  between them  in relation  to the sale and purchase of  the goods  in dispute  in regard  to  which  no document was admittedly executed.      5. At the trial the plaintiff examined only one witness besides himself. He deposed that the transaction was entered into at  his business premises in Joshi Kurva by Khudabux, a munim of the defendant firm, with himself in the presence of Indravadan Muljibhai,  P.W. 2  who supported that stand. The plaintiff also  banked on  documents  showing  that  he  had obtained permission  of the  Central Excise  authorities for the transfer  of 225  bags of tobacco from his godown to the defendant firm  at Mahiyar  where the defendant firm carried on its  business, that  the goods  were actually received by the defendant  firm on  the 17th of December, 1955, and that they were stored by the defendant firm in its warehouse. The plaintiff produced  his cash  book which  contained an entry (exhibit 54)  indicating that  an amount of Rs. 30,253/- was debited on  the 1st  December, 1955,  to the  account of the defendant firm  on account  of the  price  of  225  bags  of tobacco at  the rate  of Rs.  112/- per  Bengali  maund  and incidental expenses.  The ledger entry (exhibit 55) conforms to the cash book entry.      On the  other hand,  Abdul Halim  Haji Rahimbux, one of the partners  of the  defendant firm  appeared as  its  sole witness who  denied that  any contract had been entered into by it  with the  plaintiff for  the supply  of the  disputed tobacco through  Khudabux or  otherwise.  According  to  the witness Khudabux  was not  an employee of the defendant firm at the  relevant time  although it  was admitted that he had acted as  a munim for the defendant firm earlier to and also some time  after November,  1955. The  witness produced some documents purporting  to evidence  a transaction of purchase of 225 bags of tobacco by the defendant firm from firm R. K. Patel. These documents consisted mainly of three letters and a bill.  Letter exhibit  124 bears  the date  19th November, 1955, and  is signed by Chhotabhai. It informs the defendant firm that  225 bags  of tobacco  had been  purchased by  the writer and  that the same would be booked the defendant firm within 25 a period  of eight  days. Another  letter (exhibit  125)  is dated the  17th of  December, 1955.  This is  also signed by Chhotabhai and  states that  the tobacco  had  already  been despatched to  the defendant  firm. Bil exhibit 126 is dated 4th of  January, 1956  and states  the price  of 225 bags of tobacco as  Rs. 30,361-14-0.  The only  other  letter  worth mention is exhibit 119. It is dated the 13th September, 1958 and states that accounts had been settled between firm R. K. Patel and the defendant firm so that firm R. K. Patel owed a sum of  Rs.  340-2-0  to  the  defendant  firm.  The  letter specifically mentions  that the  disputed transaction formed part of the settlement of accounts.      6. In  the above  state of the evidence the trial court accepted the  plea of  the plaintiff  that an  order for the

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supply of  the disputed  tobacco was placed by the defendant firm with  the plaintiff  as  alleged  by  the  latter.  The plaintiff was  further held  entitled to interest but at the reduced rate  of 6  per cent  per annum.  The learned  Civil Judge therefore  granted to  the plaintiff  a decree for the recovery of  Rs. 35,986.33  with proportionate  costs of the suit and  also directed  that the  plaintiff  would  receive interest at the said rate from the date of the suit till the date of realisation of the decretal amount.      7. The  High Court  did not  believe the  word  of  the plaintiff that an order had been placed with him by Khudabux acting on behalf of the defendant firm. In doing so the High Court gave reasons which may be summarised as under :      (i) The  plaint did not mention that the defendant firm had placed  the order in question through Khudabux acting as its agent.      (ii) Although  the order  was of considerable magnitude and the  only transaction  of its  kind to  be entered  into between the  parties it was not authenticated by Khudabux in writing.      (iii) The  plaintiff would not have remained silent for two years in regard to the money due to him.      (iv) The  evidence does not disclose any other occasion on which  Khudabux may  have  acted  as  the  agent  of  the defendant firm.      (v) Bill  exhibit 56  and entries  in  the  plaintiff’s account books  (exhibits 54  and 55) do not mention the name of Khudabux.      (vi) No letter from the defendant firm to the plaintiff acknowledging the  receipt of  the goods at Mahiyar has been placed on the record.      (vii) No notice of dishonour of the cheques was sent by the plaintiff to the defendant firm. 26      (viii) The  plaintiff would  not have  sent  the  goods without demanding advance payment or earnest money.      (ix) Khudabux has not been produced by the plaintiff in the witness  box. Plaintiff’s own munim Ashabhai who is said to have  been present  at the  time of the alleged agreement also does not figure as a witness.      (x)  The  testimony  of  Indravadan  does  not  inspire confidence.      The  High  Court  then  took  up  for  examination  the evidence produced by the defendant firm and accepted letters exhibits 119,  124 and 125 as also bill exhibit 126 at their face value.  In this connection the High Court remarked that it was  difficult for  it to imagine that the defendant firm could have  manufactured the  letter-heads  of  firm  R.  K. Patel. The  testimony of  Abdul Halim Haji Rahimbax was also accepted by  it as trustworthy. It was urged before the High Court on  behalf of  the plaintiff  that the  failure of the defendant firm to produce its own account books and those of firm R.  K. Patel,  as well as Chhota-bhai, was fatal to its case. The argument was rejected with the observation that it was for  the  plaintiff  to  have  the  said  account  books produced and  to examine  Chhotabhai as  a witness. It noted the admissions  made by  the defendant firm’s own witness to the effect  that Khudabux  had been  in its  employment both before and  after the  transaction in  dispute but  remarked that there  was nothing to indicate that Khudabux was in the employment of  the defendant firm on the crucial date, i.e., the 28th  of November,  1955, or  that he had authority from the defendant  firm to  place the disputed order. It refused to believe  that the  railway receipt  and the  bill for the price of  the goods  (exhibit 56)  along with  the  covering

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letter (exhibit  57) were  sent  by  the  plaintiff  to  the defendant firm  at Mahiyar. It examined the account books of the plaintiff  and rejected them as unreliable mainly on the grounds that  the cash  book was  maintained in  fortnightly instalments and  not on  a daily  basis and  that  the  four cheques above  mentioned were  made the  subject  matter  of entries therein  long after their issuance. The story of the cheques having  been given to the plaintiff by the defendant firm in  part payment  of his  dues was also discredited. In this connection it was observed :           "....It is difficult for us to believe that if the      plaintiff was  suffering any  damage at the instance of      the defendant on account of the defendant on account of      the dishonour  of these  cheques, he  would have really      remained content  as if  with trusting  his destiny and      trusting the defendant....if the plaintiff had obtained      these cheques after making several attempts to recover 27      the amount  due to him, as he states in his deposition,      he  would  have  taken  immediate  action  against  the      defendant after the dishonour of the cheques....".      The High Court further remarked :      ".... The  cheques must  have reached the plaintiff not      directly from  the defendant  but  through  some  other      route and  it is  clear that he must have complained of      their dishonour to the person from whom they arrived in      his  hands.   His  silence   after  the   cheques  were      dishonoured  also  indicates  in  the  same  direction.      Absence  of   any  correspondence  with  the  plaintiff      throughout  a  period  of  more  than  two  years  also      indicates in the same direction....".      Two main  contentions were  pointedly raised before the High Court:  (1)  that  the  supply  of  the  goods  by  the plaintiff to  the defendant firm and the issuance of cheques by the  latter in a favour of the former shifted the onus of proof on  the point  of privity of contract to the defendant firm, and,  (2) that  the failure  of the  defendant firm to produce the  best evidence  which was available to it in the form of  its own and firm R. K. Patel’s account Books should have been treated as a clincher.      The first  contention was  turned down  with the remark that the  plaintiff could  not be  deemed to have discharged the initial  onus which  was on  him  to  prove  privity  of contract because  he had  failed  to  put  Khudabux  in  the witness-box. The second was repelled for the reason that the defendant firm  could not  be deemed  to have  withheld  any document when  there was no notice given by the plaintiff to it for production thereof.      8. It  was in  the above  premises that  the High Court passed the impugned judgment.      9. After  hearing learned  counsel for  the parties  at length we  are of  the opinion that the very approach of the High Court  to the  determination of the crucial question in the case,  namely, that  of privity  of contract between the parties, is erroneous. The fact that the goods had been sent to the defendant firm by the plaintiff and had been received by the  former was  admitted on all hands and was sufficient to raise  a presumption,  till the contrary was proved, that an order  had been  placed for  the supply of the goods with the plaintiff  by the  defendant firm; and it was immaterial whether the  person actually placing the order was a partner of the  defendant firm  or a  person authorised  by it.  The plaintiff could  thus bank  on the said fact for the purpose of discharging  the initial  onus which  lay on him to prove privity of

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28 contract between  the parties  and it  was for the defendant firm to  rebut the  presumption which  the  fact  raised  as stated above.  In  rejecting  the  first  of  the  two  main contentions raised  before the  High Court  on behalf of the plaintiff, therefore,  the High  Court fell  into a  serious error.      The same  is true  of the  second main contention which was raised  by learned  counsel for  the plaintiff  and  was turned down  by the  High Court. In the circumstances of the case it  was the  duty of  the defendant  firm to  place its books of  account on  record, those  books  being  the  best evidence available  in proof  of the  stand of the defendant firm that no order had been placed by it with the plaintiff. The production of letters exhibits 119, 124 and 125 and bill exhibit  126  does  not  serve  the  purpose  sought  to  be achieved. In  the absence  of such production they are loose documents which  could have  come into  existence even after the suit  was filed,  if  Chhotabhai  chose  to  oblige  the defendant firm  and colluded with it. And there is intrinsic evidence available  in letter  exhibit 119 that such was the case. That  letter purports  to have  come into existence on the 14th  of September, 1958, i.e., about three months and a half after  the defendant  firm had  been  informed  of  the plaintiff’s claim  through a  notice dated  the 27th of May, 1958, and  that claim  had been  repudiated by the defendant firm. The  contents of  the letter  are tell-tale and may be reproduced in extenso :      "To      "Bhai Mohammad Hussain Rahim Bux of Mahiar written from      Jabalpur by R.K. Patel of Jabalpur whose salutations to      you be  pleased to accept. Further it is learnt that on      the date  13-9-58 the account is made by the partner of      our firm Shri Chhotabhai Patel upto the date 12-9-58 by      taking into  account the  balance of  Rs. 75/-  seventy      five at  the end  of 1954-55 and balance of Rs. 340-2-0      are found  due by  us. The same is agreed. The price of      225 bags  of tobacco of Khushalbhai Mahijibhai Patel of      Joshikuva (Anklav) is also included in the said account      and so  Rs. 340-2-0  are found  balance payable  by  us      including the  said amount  and if  any dispute  arises      subsequently  in   the  said   account  we   shall   be      responsible in every way about the same.           "It is respectfully to be stated that this note is      written while  in sound  state of  mind so  that it may      remain  as   authority  and   may  become  useful  when      required.                                "Chhotabhai Khushalbhai Patel                                         "Partner R. K. Patel                                                    "Jabalpur                                              "Date 14-9-58." 29      Had the  accounts been  really settled  as  the  letter claimed, there  is no  reason at  all  why  a  copy  of  the settlement, which  must, in  the very nature of things, have contained a  statement of all the transactions covered by it was not  furnished to  the court. Such a statement must have been provided  by firm R. K. Patel to the defendant firm who was entitled to scrutinize the correctness of the settlement and point  out any inaccuracies therein to firm R. K. Patel. Besides, we  fail to understand why the transaction disputed before us  came in for special mention in letter exhibit 119 when no  other transaction covered by the settlement found a place therein.  The  conclusion  is  irresistible  that  the letter had  been procured  merely to  serve as  evidence  in

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rebuttal  of  the  plaintiff’s  case  and  not  because  any settlement really took place.      10. If the case propounded by the defendant firm at the trial is  correct, its  account  books  must  be  containing entries to  the effect that the agreement of purchase of 225 bags of  tobacco was  entered into with firm R. K. Patel and not with the plaintiff and that some time in December, 1955, the account of firm R. K. Patel was credited with the amount of  the  price  of  the  goods.  Entries  would  further  be available therein  indicating unmistakably  the periods  for which Khudabux  was admittedly  employed with  the defendant firm. The  non-production of  those books  by the  defendant firm and  the production  by it  of stray letters and a bill constitute failure  on its part to produce the best evidence and a presumption has therefore to be raised against it that if such evidence had been produced, the same would have gone against the  case propounded  by it. The matter does not end there. The failure of the defendant firm to bring Chhotabhai and Khudabux  into the witness-box and the fact that it made no attempt  to have  the account  books of  firm R. K. Patel (the entries  in which  account would  perhaps have clinched the matter  in dispute)  must be  similarly construed  and a presumption drawn  that this  evidence also  would have gone against the defendant firm.      11. The  view we  have just above taken of the approach of the High Court is sufficient to dislodge its judgment and for a  restoration of  the decree passed by the trial court. We may  add, however,  that  apart  therefrom  the  impugned judgment suffers  from another  serious defect  and that  is that the  appreciation of  the evidence  of the  parties  is based more  on conjectures  than logic.  We may  give a  few instances. The  absence of  the name  of Khudabux  from  the plaint is  immaterial because  pleadings are required merely to state  facts and  not the evidence through which they are to be  proved. The  relevant fact  was that an agreement for the purchase of goods had been entered into by the defendant firm with the plaintiff. The manner in which that 30 contract came into being was a matter of evidence which need not have formed part of the plaint. Again, the circumstances that the  agreement of  purchase was not reduced to writing, that Khudabux  was not  shown to  have acted as the agent of the defendant  firm on  any other occasion and that the name of Khudabux does not appear in entries exhibits 54 and 55 do not disclose  any abnormality  when it is borne in mind that goods  were  actually  supplied  by  the  plaintiff  to  the defendant firm  and were  received by  the latter. The other reasons  given   by  the  High  Court  in  disbelieving  the plaintiff’s word  that the order for the supply of goods had been placed  with him  by Khudabux are equally untenable. In this connection  it is  to be noted that no plausible reason can be  found for  the plaintiff  recording in his books the name of the defendant firm as the purchaser if the goods had really been  sold to firm R. K. Patel. We may point out that the name  of the  defendant firm as the purchaser is entered in the  cash book  maintained by  the plaintiff and it is no reason at  all for  that book  to be  rejected as unreliable that it  is maintained on a fortnightly and not daily basis. The failure  of the  plaintiff to  demand advance payment or earnest money  and to  keep quiet  for a long period of time are also  not relevant  matters in view of the admitted fact of the supply of the goods by the plaintiff to the defendant firm and  its failure  to produce on record its own books of account and those of firm R. K. Patel.      12. The  four cheques  issued by  the defendant firm in

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favour of  the  plaintiff  furnish  another  very  important circumstance in  derogation of the claim made by the former. The explanation  furnished by its solitary witness that they were issued  at the instance of Chhotabhai to whom they were delivered does not inspire confidence in us, the main reason therefor being again the non-production of the account books of the  two firms-a reason which makes us repel as untenable the inference  drawn by the High Court (from the plaintiff’s failure to  act  immediately  after  the  dishonour  of  the cheques) that  "the cheques  must have reached the plaintiff not directly  from the  defendant  but  through  some  other route".      13. There  is no  reason whatsoever  for us  to believe that if  the  case  of  the  defendant  firm  was  true  the plaintiff would  have made out the story given by him in the plaint, absolved  the real  debtor of  the responsibility to pay and claimed his dues from some one not at all liable for them. Firm  R. K.  Patel  being  the  party  liable  to  the plaintiff, according  to the  case set  up by  the defendant firm, the  plaintiff could  not be  expected to  make  false entries in  this account  books and  file a suit not against firm R. K. Patel but against the defendant firm 31      14 For  the reasons  stated we  have no  hesitation  in accepting this  appeal, setting  aside the impugned judgment and restoring  the decree  passed by  the trial count with a direction that  the plaintiff  will be entitled to his costs throughout. S R.                                         Appeal allowed. 32