Food Corporation of India vs umanath bhagat and mongal Chandra roy and Others

Sankari Prasad Das Ghosh, J.—This is an appeal by the plaintiff against an order of rejection of plaint by the learned Subordinate Judge, First Court. Hooghly, in a money suit. The suit has been filed by the plaintiff, Food Corporation of India against the respondent No. 1, a firm, of which the respondents Nos.2 and 3 are parties. The respondent No.4 is an employee under the plaintiff. He was the Sub-Inspector-in-Charge of a godown of the respondent No. 1 at Bandel. There was an agreement on 24.1.70 between the respondents Nos.2 and 3 and the Food Corporation of India, whereby the respondents Nos.2 and 3 were appointed Storing Agents of the Plaintiff for storage of F. C. I. Stocks in the godown of the respondents 2 and 3 at Bandel. The respondent No.4, Sub-Inspector, was in charge of the godown of the respondents No. I, 2 and 3 at Bandel on the basis of that agreement. The respondent No. 5 was an assistant, Grade I, in the accounts section of the District Manager, Food Corporation of India, Hooghly at Chinsurah. The allegation in the plaint was that as a result of collusion of the defendants No. 1, 2 and 3 with the defendants No.4 and 5 there was misappropriation and defalcation of huge quantities of rice and wheat sent to the godown of the respondent No.1 at Bandel in pursuance of that Agreement dated 24.1.70. The ''suit was filed for recovery of a sum of Rs.42 lakhs and odd on account of such misappropriation, misfeasance and defalcations.

After the filing of the suit a petition was filed for the respondents Nos. 1, 2 and 3 for rejection of the plaint under Order 7 Rule 11 CPC on the ground that the particulars of negligence, omission, commission, collusion, conspiracy or fraud or of misappropriation, misfeasance and defalcation were not given out in the plaint and as such, the plaint did not disclose any cause of action. It was also alleged in that petition under Order 7 Rule CPC that the plea taken by the plaintiff in the plaint for not referring their claim to arbitration on the Basis of the agreement dated 24.1.70 was wholly baseless. Both the parties were heard in the matter by the learned Subordinate Judge, who rejected the plaint on several considerations. According to him, the suit was based on some audit reports for the accounting years 1977-78, 1978-79 and 1979-80. No averment was, however, made in the plaint that Annexures I, II and III giving out the details of misappropriation and/or defalcation were prepared on the basis of these audit reports. The learned Subordinate Judge was swayed by the fact that these audit reports had not been furnished. He thought that Annexures I, II and III to the plaint did not reveal as to how double delivery against release orders issued on different dates had been made and when these double deliveries had been made. In the petition of objection against the petition under Order 7 Rule 11 C.P.C. the plaintiff had alleged at one place that they were not aware of the fact that the particulars of negligence and/or collusion, conspiracy and other offences were necessary for every case. This averment in that petition of objection was the subject matter of comment by the learned Subordinate Judge at several places in the impugned" order. For non-filing of the audit reports and for making such averment in the petition of objection by the plaintiff-apellant, the learned Subordinate Judge rejected the plaint. Being aggrieved, the present appeal has been filed.

Mr. Bhabra, the learned counsel for the appellant, has contended that the particulars given out in the plaint were sufficient to make out a case of fraud and that the learned Subordinate Judge was not justified in rejecting the plaint on the ground that the particulars of fraud had not been disclosed in the plaint". Mr. Maitra, the learned counsel for the contesting respondents, has, however, submitted on citing several case-laws that the particulars as mentioned in the plaint are not at all sufficient to amount to an averment of fraud in the plaint.

It is. now well-settled since the pronouncement of the Privy Council in the case of Gunga Narain Gupta v. Tiluckram Chowdhury (ILR 15 Calcutta 533) that genera] allegation, however strong the words, are insufficient to amount to an avernment of fraud of which the court can take notice. These principles have been reiterated in the case of Bishendo v. Seogeni Rai (AIR 1951 SC 280), referred to by the learned Judge in the court below. The question in this appeal is whether the averments in the plaint can be taken to be averments of fraud. While the contention of Mr. Bhabra is that these averments are sufficient to constitute averments of fraud, the contention of Mr. Maitra is that these averments are not at all sufficient, The test adopted by the Privy Council in the case of Gunga Narain Gupta (ILR 15 Calcutta 533) to decide as to whether the allegations in a plaint amount to averment of fraud is to strike out the words, "fraud", "deceit", and other similar words used in a plaint and to find out whether the other allegations in the plaint imply by themselves fraud or any illegal purpose. This test applied by the Privy Council in the case of Gunga Narain (supra) is the test to be applied also in this appeal to decide as to whether the allegations in the plaint amount to an averment of fraud. The case of Gunga Narain (supra) arose out of a suit by a judgment-debtor for setting aside a judicial sale. That suit was brought against two sets of defendants, one set being the judgment-creditors and the other set being the auction-purchasers. The suit was brought by the judgment-debtor against the decreeholders and the auction-purchasers to set aside the sale on the ground that the letter fraudulently and in collusion with two decree-holders prevented other persons from bidding'' at the sale. This fraud was denied in separate written statements filed for the two sets of defendants in the suit. The learned Subordinate Judge, who tried that suit, held that there was nothing to justify that the sale was brought about by fraud as there was previously an application by that judgment-debtor in this regard, which was rejected by the High Court on the ground that even if the decree-holders had prevented other persons from bidding at the sale, it would not be an irregularity in conducting the sale. To do away with such disposal of that application of the judgment-debtor by the High Court in describing it at best as an irregularity which did not vitiate the sale, the suit was brought by the judgment-debtor on describing this irregularity as fraud. The learned Subordinate Judge held that it would be improper to induce people to abstain from bidding at a sale, but it was hardly a fraudulent proceeding. The suit was, accordingly, dismissed by the learned Subordinate Judge. An appeal before the High Court by the judgment-debtor, was dismissed on the ground that it was not stated in the plaint as to what was the fraud on the part of the defendants-decree-holders. Subsequently, when the matter went to the Privy Council, the Privy Council held that if the words, "fraud", "deceit", "illegal and fraudulent acts", machinations" and so forth, which were used in a great superfluity in the plaint, were struck out, what would remain in the plaint would be nothing but allegation of certain acts, which might be unattended with any fraudulent or illegal purpose or character. It was on the basis of this test formulated by Their Lordships of the Privy Council that it was enjoined by Their Lordships that a plaint charging fraud must set forth particulars and general allegations would not amount to an averment of fraud.

Similarly, in the present appeal, if we strike out the words, "willful negligence", omissions", "commissions", "fraudulent", "fraud", "collusion", "deceptions" and similar words of this nature, as used in the plaint, what remains of the plaint would certainly make out a case of positive fraud meaning a meditated and intentional contrivance to keep the officers of the Food Corporation of India, who carry on physical verification of the F.C.I. (Food Corporation of India) stocks lying with the Storing Agent twice in each year, cm the basis of the book balance as per the records of the Storing Agent, ignorant of the real state of affairs. Though nothing could be detected on such physical verification of stock with the Storing Agent, it was only in 1980 when, on receipt of a letter, an investigation was ordered by the Regional Manager of the appellant-corporation. There was subsequently an investigation on and from 27.5.80 by the Vigilance Squad in the godown of the Stroing Agent at Bandel. On the basis of the findings of the Vigilance Squad, a F.I.R. was lodged with the Superintendent of Police, District Enforcement Branch, ''Hooghly. A police case, being Case No. 57 dated 30.7.80 of Chinsurah P.S. u/s 499, 120B, 420, 477A I.P.C. and Section 5(1)(d) of the Prevention of Corruption Act, 1947- was Regional Manager of the appellant-corporation. The Special Audit conducted of the stock accounts of the Storing Agent, Bandel for three years viz. 1977-78, 1978-79 and 1979-80. The allegation in the plaint is that from those audit reports it transpired that the Storing Agent, Bandel, had misappropriated stocks of the F.C.I. in collusion with its own employees by. (i) showing of fictitious issues of huge quantity of foodgrains by quoting release order numbers issued by the District Manager F.C.I. Hoghly, on other Storing Agents, which had been duly honoured by such Storing Agent, (ii) showing of double issues of stocks against single release orders issued on the Storing Agent, Beindel, by the District Manager, F.C.I., Hooghly, (iii) showing of fictitious deliveries in the books of account, not received by the recipient parties and (iv) not accounting for stocks duly received by the Storing Agent, Bandel, by road and rail movement, as well as (v) manipulating entries in the stock ledgers not supported by relevant entries in the issue and receipt registers of the respondent No. 1. On the basis of this special audit for these three years, the plaint was filed on 27.3.81, containing Annexures I, II and III, showing the details of misappropriation by various ways as mentioned in these three Annexures for these financial years, after sending of a demand notice dated 14.2.81 to the Storing Agent, Bandel, by the District Manager, Hooghly, being Annexure IV. It is to be stated, in this connection, that after the investigation by the Vigilance Squad began on and from 27.5.80, the respondents No.2 and 3 obtained an order from this court on 23.6.80 on an application under Article 226 of the Constitution, restraining the appellant-corporation from appointing any new Stroing Agent in place of the respondent No. 1 firm. This interim order dated 23.6.80 was subsequently modified by this court on 25.9.80. On 4.8.80, the respondents No.2 and 3 had also obtained an order from this court on an application under Article 226 of the Constitution restraining the concerned authorities from arresting the respondents No.2 and 3. Subsequently, demand notice dated 4.2.81 was sent to the respondent No. 1 firm and the suit was filed on 7.3.81. The details of the release orders with dates, railway receipts invoice umbers with dates, discrepancy between the stock-ledgers not supported (sic)y corresponding issue register for these three years, details of issue of higher variety of rice against realisation of lower variety against release orders with dates and other details about excess despatch by road by invoices (sic)ith dates are mentioned in the Annexures I, II and III and most of these (sic)etails are also mentioned in the demand notice sent to the respondent No. 1 firm. In these circumstances, one cannot but come to the conclusion (sic)lat there are sufficient particulars, in the plaint to show that fraud was (sic)mmitted on the appellant-corporation.

Fraud is infinite in variety. The fertility of man''s invention in wising new schemes of fraud is so great that the courts have always declined to define it, reserving to themselves the liberty to deal with it under whatever form it may present itself. Mr. Maitra has referred us to the provisions in section 17 of the Indian Contract Act and has contended that none of the ingredients mentioned in section 17 of the Contract Act can be found in the four corners of the plaint so as to make out a case of fraud. We are unable to accept this contention. The definition of "fraud", ''in section 17 of the Contract Act is an inclusive definition. u/s 17(4) of the Indian Contract Act, fraud includes "any other act, fitted to deceive". Fictitious issue of huge quantity of foodgrains by quoting release orders meant for other Storing Agents, double issues of stocks against single release orders, fictitious deliveries in books of accounts of foodgrains not received by the recipients and non-acccounting of stocks received by the Storing Agent by road and rail are undoubtedly acts fitted to deceive. On the basis of the test laid down by the Privy Council in the case of Gunga Narain (supra), we are, accordingly, of the opinion that there are sufficient particulars in the plaint to make out an averment of fraud against the respondent. It is to be stated, in this connection, that for the purpose of decision as to whether the plaint is to be rejected for absence of sufficient particulars regarding fraud or collusion or conspiracy, everything contained in the plaint must be taken to be true, as stated, leaving it for the defendant-respondent to show during the subsequent stages of the suit or trial of the suit that these allegations are wholly or partially false (Seth Kanhaya Lal v. National Bank of India Limited = 40 Indian Appeals 56 at page 63).

Mr. Bhabra drew our -attention to Form No. 18 in Appendix A of the CPC relaing to a suit on a bond for the fidelity of a clerk and contended that when the suit was for misappropriation, the plaint ought not to have been rejected. We are unable to accept the contention of Mr. Bhabra that Form No. 18 of Appexdix A of the CPC would apply to the facts of the suit. Even according to Order 6 Rule 4 CPC in all cases in which a party relies on any misrepresentation, fraud, breach of trust, wilful default undue influence and in all other cases in which particulars may be necessary beyond such as are exemplified in the Forms in Appendix A, those particulars with dates and items, if necessary, should be stated in the pleading. As such, in the absence of particulars, a plaint of the nature, out of which the suit arises, would not be sufficient compliance of the provisions of Order 6 Rule 4 C.P.C. Even then, when sufficient particulars in this regard in respect of misrepresentation or fraud or collusion have been given in the plaint, the plaint cannot be rejected.

The suit is not a suit involving a case of ordinary shortage. It has been filed not only against the defendant-respondent No. 1 firm and its partners but also against the respondents No. 4 and 5, employees of. the appellant-corporation. Though it is stated in the plaint that the criminal case arising out of F.I.R. lodged with the Superintendent of Police, District Enforcement Branch, Hooghly, is pending before the Sub-Divisional Judicial Magistrate, Hooghly, Sadar we are told by Mr. Maitra that the respondents No. 4 and 5 have since been discharged on the basis of a police report. Mr. Maitra went so far as to say that suspension orders on the respondents No. 4 and 5 have also been set aside by the Supreme Court with the result that the respondents No.4 and 5 are now working in, the appellant-corporation. The contention of Mr. Maitra is that when the respondents No.4 and 5 have since been discharged and when the suit is not a simple suit of misapropriation against the respondent No. 1 and its partners only, the plaint is to be rejected, as there can be no inference of collusion between the respondents'' No. 1, 2 and 3 and the respondents No.4 and 5, after their discharge, under the above order of the Supreme Court. We ''are unable to accept this contention. Assuming for the sake of argument that the respondents No. 4 and 5 have since been discharged from the criminal, case and that suspension orders on them have been revoked, the fact remains that the Civil Court is to find out, on a scrutiny of the averments made in the plaint of the present suit, as to whether any case of collusion between the respondents No. 1, 2 and 3 and the respondents No. 4 and 5 has been made out in the plaint. On a scrutiny of the plaint, we have no hesitation to say that a prima facie case of collusion between the respondents No.1, 2 and 3 and the respondents No.4 and 5 exists. It is stated in paragraph 3 of the plaint that the respondent No.4 was the Sub-Inspector in Charge of the godown of the respondent No. 1 firm at Bandel and that the respondent No. 5 was employed, amongst others, for maintaining accounts of the Storing Agent at Bandel. There used to be physical varification of stocks of the respondent No. 1 firm on 30th September and 3lst March of every year on the basis of the book balance in the records of the Storing Agent, in the absence of collusion between the respondents No.4 and 5 and the Respondents No. 1, 2 and 3 regarding maintenance of accounts and maintenance of the different registers and books of the respondent No. 1 firm, shortages and misappropriation of stocks could have been easily detected at the time of such physical verification. When such shortage or misappropriation on physical verification could not be detected on the basis of the book balance in the records of the respondent No. 1 firm, there cannot but be maintenance of these records of the respondent No. 1 firm in the manner these records are, unless there is collusion between the respondents No.4 and 5 and the respondents No. 1, 2 and 3.

Undoubtedly, there was an arbitration clause in the Agreement between the appellant-corporation and the respondents No. 1, 2 and 3 on 24.1.70. Though Mr. Maitra wanted to argue regarding this arbitration clause, he did not proceed with his arguments in the matter when his attention was drawn to section 34 of the Arbitration Act, 1940.

Mr. Maitra referred to several cases. He referred to the cases of V. S. Vishwavidyalaya v. Raj Kishore (AIR 1977 SC 615), Bharat Dharma Syndicate v. Harish Chandra. (AIR 1937 Privy Council 146), Chartered Bank v. Imperial Bank (AIR 1933 Calcutta 366), Swarna Lata v. K. L. F. and M. Works (P) Ltd., (AIR 1978 Calcutta 393), Chiranji Lal v. Jai Hind Investments (AIR 1979 SC 134), H. D. Vashishta v. Glaxo Laboraties (AIR 1979 SC. 134), L. A. Creet v. Firm Gangaraj-Gulraj (AIR 1937 Calcutta 129) and Atul Chandra v. E. B. C. Bank Ltd., (AIR 1960 Calcutta 309). We do not propose to discuss separately these cases as it is well-settled since the Privy Council decision in the case of Gunga Narain (ILR 15 Calcutta 533) that in cases of Fraud, undue influence and coersion, the parties pleading it must set forth full particulars and the same can only be decided on the particulars so laid. General allegations are insufficient even to amount to an averment of fraud of which any court on take notice, however strong the words in which they are stated. Mr. Maitra has also referred us to the case of Lakhi Prasad v. Nathmal (AIR 1969 SC 583) and has contended that there ought to have been full particulars in the plaint alike particulars required in an election petition u/s S3 of the Representation of the People Act, 1951. It is no doubt true that in the case of Lakhi Prasad (supra) it has, been decided by the Supreme Court that in order to sustain a plea of corrupt practice by "undue influence", as mentioned in section 123(2) of the Representation of the People Act, there must be pleading giving full particulars under the provisions of section 83(1)(b) of that Act, which may be compared with Order 6 Rule 4 C.P.C. It is, however, to be stated, in this connection, that a plaint in a civil suit need not be so elaborate as an election petition. The reason is that though at the time of trial of an election petition, High Court is to follow as nearly as possible the procedure applicable under the CPC for trial of suits, subject to the provisions of the Representation of the People Act and all the rules made thereunder, there is no necessity of filing of an affidavit along with the plaint, which is to be done in the case of an election petition alleging any corrupt practice, under the proviso to section 83(1 )(c) of the Representation of the People Act. Moreover, under the proviso to section 87(1) of the Representation of the People Act, High Court has the discretion to refuse, for reasons to be recorded in writing, to examine any witness or witnesses if it is of the opinion that the evidence of such witness or witnesses is not material for the decision of the petition or that the party tendering such witness or witnesses is doing so on frivolous ground or with a view to delay the proceeding. There is no such provision enabling a Civil Court under Order 18 C.P.C. to refuse to examine any witness. Be that as it may, an election petition is no doubt to contain the particulars, as mentioned in Order 6 Rule 4 C.P.C. The plaint in the present case also contains these particulars, as already stated, in accordance with Order 6 Rule 4 C.P.C. The plaint cannot, therefore, be rejected.

The learned Subordinate Judge in the court below has rejected the plaint also on the ground of non-filing of the audit reports on the basis of which the Annexures I, II and III to the plaint have been prepared. It is stated in paragraph 11 of the plaint that the plaintiff-appellant intends to rely on the reports of the Special Auditors and other documents connected with them and that they are not in position to file all these documents at present due to seizure by the Police of most of the documents in connection with the Chinsurah P.S. Case No. 57 dated 30.7.80 under sections 409/ 120B/420/477A I.P and section 5(1)(d) of the Prevention of Corruption Act, 1947. Moreover, under the provision of Order 6 Rule 2 CPC, every pleading is to contain a statement in a concise form of the material facts on which the party pleading reliefs for his claim or defence, as the case may be but not the evidence by which they are to be proved. Even in the case of L. A. Creet v. Firm Gangaraj-Gulraj (AIR 1937 Calcutta 129), relied on by Mr. Maitra, it has been decided by a Division Bench of this Court that it is not necessary that the plaint should disclose the evidence by which fraud is to be established. The report of the Special Auditors for the three years, 1977-78, 1978-79, 1979-80, will be evidence in the suit and if the plaintiff-appellant does not furnish these audit reports, the plaintiff-appellant will fail in the suit. If the plaintiff-appellant does not file these audit reports along with the plaint, for the reasons stated in the plaint, the plaint cannot be rejected, as done by the learned Subordinate Judge.

The learned Subordinate Judge laid much weight on the averments in the written objection filed by the appellant-corporation regarding the petition under Order 7 Rule 11 C.P.C. to the effect that the plaintiff did not know that the particulars of negligence and/or collusion, conspiracy or other offences committed by the defendants were to be given in every case. On the basis of these averments in the written objection filed by the appellant-corporation, the plaint cannot be rejected when it is further stated in paragraph 8 of the written objection that the particulars of misfeasance, misappropriation, defalcation and other offences have been given in the plaint completely and fully. We have already shown that such particulars have been given in the plaint. We have also shown that for the purpose of deciding as to whether the plaint is to be rejected, everything contained in the plaint must be taken to be true for the purpose of decision on a preliminary point as to whether the plaintiff has cause of action for filing the suit (Seth Kanhaya Lal v. National Bank of India Limited = 40 Indian Appeals 56 at page 63). In these circumstances, after the allegations in the plaint, there is no scope for directing the appellant-corporation to place on record the precise and specific details of the charges against the respondents as observed by the Privy Council in the case of Bharat Dharma Syndicate v. Harish Chandra (AIR 1937 Privy Council 146), arising out of an order of the Allahabad High Court for winding up of a company on the basis of a petition by an ordinary share-holder. The learned Subordinate Judge has observed that the Annexures I, II and III do not reveal as to how double deliveries against release orders have been made and when these double deliveries have been made. The particulars and dates of these release orders are mentioned in Annexures I, II and III to the plaint and it will be for the plaintiff to prove the allegations about double deliveries on different dates against the release order. This is to be proved by the appellant-corporation at the time of trial of the suit and not at the time of filing of the plaint. It will be sufficient to proceed with the suit if the allegations of fictituous deliveries and double deliveries are made in the plaint on stating the particulars and dates of the release orders.

We are, accordingly, of the opinion that the learned Subordinate Judge erred in directing the rejection of the plaint on the basis of the provision of Order 6 Rule 4 C.P.C.

The appeal is, accordingly, allowed with cost against the contesting respondents. The impugned order dated 27.1.82 passed by the learned Subordinate Judge is set aside. The learned Subordinate judge is directed to dispose of the suit as early as possible and within one year of the receipt of the lower court''s record in his court, as far as practicable.

Let the lower court records be ''sent down as soon as done with by a special messenger at the cost of the appellant-corporation, who is agreeable to bear the cost. Leave to move the Supreme Court is prayed for and is refused.

Prayer for stay of the operation of this order is also refused.

Sudhanshu Sekhar Ganguly, J.

I agree.