Mettur Beardsell Limited vs M/s. Salem Textiles Limited and 2 others

First defendant in O.S.No.999 of 1984 on the file of Principal Subordinate Judge, Salem, aggrieved by the decree for Rs. 3,37,662.47 with

interest thereon against all the defendants, preferred the above appeal before this Court

The case of the plaintiff as set out in the plaint is briefly stated hereunder:- The plaintiff has been supplying yarn to the first defendant between

21.6.82 and 12.4.83. As on 12.4.83 the sum due to the plaintiff from the first defendant was Rs. 3,74,299.37. After subsequent payments, the

ultimate balance due on account of the transaction is Rs. 3,30,258.64. The plaintiff has been repeatedly writing letters to the first defendant to pay

the amount and the first defendant has been sending amounts to the plaintiff. They sent a sum of Rs. 86,793.39 on 31.8.82, Rs. 59,451.20 on

24.9.82 and Rs. 1,14,054.93 on 13.10.82 and Rs. 66,987.78 on 16.11.82. On 17.12.82 they had written, a letter to the plaintiff mentioning their

requirement for January, 1983. On 14.12.82 they sent Rs. 1,48,388.06 by demand draft. On 15.3.83 the plaintiff wrote to the first defendant

confirming the sending of a telegram as follows:-'' Upto February, 1983 Rs. 3,02,275.25 is due from you. Request immediate payment"" and again

another letter. Thereafter, the first defendant informed the plaintiff that they could address letters as ""Mettur Textiles, Alexander Thread Division,

Post Box No.5, Mettur Dam. On 21.4.83 the plaintiff received a letter from Mettur Textiles, Alexander Thread Division, Mettur Dam stating that

in the light of the change in their management, they are awaiting finalisation if bank facilities and as soon as the same is completed, they will

discharge their outstandings. The plaintiff has no knowledge of the change in the management of the first defendant. The plaintiff supplied the goods

only to the first defendant. On 19.7.83 the plaintiff sent a registered notice to the Mettur Textiles Private Limited, Rukmani Sewing threads,

Silaiman, Madurai and Mettur Beardsell Limited, Madras-12, enclosing a copy of the account and asking for payment. By their own voluntary

undertaking, the second defendant has also agreed to repay the amounts due to the plaintiff, but the first defendant''s over-all liability to pay

remains and he is unaffected by the alleged change over. Again, the plaintiff wrote to the defendants 1 and 2 on December 10, 1983 calling upon

to pay the amount due immediately. As there was no response, finally, a legal notice was sent on 6.2.84 to all the defendants. All the defendants

have received the notice on 7.2.84 and 8.2.84. The first defendant has sent a reply on 21.3.84 wherein it is stated that the textile-company has

been constituted into a separate company now known as Mettur Textiles Industries Limited, that the company has taken over all, the assets and

liabilities of the division, that they are passing on their (plaintiffs) letter to M/s Mettur Textiles Industries Limited for verification and payment, if due.

The other defendants have not sent any reply. All the defendants, are liable to pay the suit claim. The plaintiff is a commercial institution which has

availed bank facilities at interest rates of 21 per cent per annum. The conditions of sale of the yarn to the first defendant was that the payment

should be made immediately or within a very short time. As the payments have not been received and the amounts have remained due from

12.4.1983 received and the amounts have remained due from 12.4.83 the plaintiff has been deprived of this huge amount from 12.4.83, the

plaintiff is entitled to interest at 21 per cent per annum by way of damages from the defendants for the amounts outstanding.

The first defendant alone filed a written statement wherein it is stated that the third defendant had taken over the assets and liabilities of the

Thread Unit at Mettur with effect from 1.1.1983. On and from 31.12.1982, the first defendant ceased to carry on the business of the Threat Unit.

The plaintiff was fully aware of this change. On and from 1.1.83 the first defendant had not placed any order and received any goods or made

payment. All orders were placed by the other defendants, goods were supplied only to the other defendants from whom payments were accepted

by the plaintiff. As on 31.12.82, the statement of account showed a nil balance. There was no liability on it at the time of transfer and the liabilities

were created by the other defendants with the plaintiff and the plaintiff have willingly supplied to the other defendants, the plaintiff is estopped at

this point of time from claiming any amount from the first defendant. On 21.4.83, the third defendant had interview the plaintiff that they have taken

over the company. Payments were made by the third defendant. The plaintiff had accepted these payments unconditionally. There was no protest

while receiving the payment. On 16.9.83, the first defendant had again advised the plaintiff about the taking over by the third defendant who had

undertaken to pay. Even after all these, the plaintiff had supplied goods under Invoice No.781 dated 27.9.83 to the third defendant and would

pretend as though it had no knowledge of what had happened. The plaintiff having had full knowledge of the transfer of business as and from

1.1.1983, having supplied goods to 3rd defendant and received payment from 3rd defendant, the first defendant is not liable to answer the suit

claim as the plaintiff had recognised the transfer and agreed to deal with the third defendant independently and without any recourse to the first

defendant. There is no agreement for payment of interest much less at 21 per cent per annum. Therefore, the claim of interest at 21 per cent or at

any other rate is illegal, unwarranted and unenforceable.

Defendants 2 and 3 failed to file written statement repudiating the claim of the plaintiff.

Before the sub court the plaintiff has examined one Bhaskar as P.W.1 and Exs. A-1 to A-38 documents were marked. On the side of the

defendants, no one was examined and no document marked. The learned Subordinate Judge, Salem, after framing necessary issues and after

considering the oral and documentary evidence, decreed the suit as claimed by the plaintiff against all the defendants and also granted Interest at

the rate of 12 per cent for the suit claim. Aggrieved by the judgment and decree of the trial Court, as stated earlier, the first defendant alone

preferred the above appeal.

Heard the learned senior counsel for the appellant and the learned counsel for the contesting first respondent.

Mr. G. Subramaniam, learned senior counsel for the appellant, after taking me through the pleadings of both parties and the findings of the trial

court, would contend that the Court below erred in holding (i) that the take over of the Thread Division of the first defendant Company by the 3rd

defendant on and from 1.1.1983 was not proved; (ii) that the change in management of the first defendant company would not bind the plaintiff;

and (iii) that the first defendant was also liable for the outstandings along with the defendants 2 and 3. He further contended that inasmuch as the

Thread Division of the first respondent Company was taken over by the third defendant company on and from 1.1.83, no order was placed by the

first defendant and goods were not received by them the Court below ought to have dismissed the suit as against the first defendant. He further

contended that the Court below ought to have held that the first defendant is not liable to pay any amount to the plaintiff as on me date of suit as it

was absolved of all liabilities consequent on taking over of the Thread Division by the third defendant. In any event, according to him, in the

absence of any contract regarding payment of interest, the claim for interest at the rate of 21 per cent cannot be sustained. On the other hand, Mr.

S. Kalyanaraman, learned counsel appearing for the contesting first respondent/plaintiff, would contend that in the light of the abundant oral and

documentary evidence let in by the plaintiff and in the absence of any evidence on the side of the first defendant, the Court below is justified in

granting the decree; accordingly prayed for dismissal of the appeal.

I have carefully considered the rival submissions.

It is the definite case of the plaintiff that they supplied yarn to the first defendant for the period between 21.6.82 and 12.4.83. It is also their case

that even after payment on two or three occasions, the ultimate balance due is Rs. 3,30,258.64. On the other hand, the first defendant, who is the

only contesting party, has taken a stand that on and from 31.12.82 they ceased to carry on the business of Thread Unit. In other words, the third

defendant had taken over the assets and liabilities of the Thread Unit at Mettur with effect from 1.1.83. It is also the case of the first defendant that

the plaintiff was fully aware of the change and on and from 1.1.83, the first defendant had not placed any order and received any goods or made

payment. It is also their case that from 1.1.83 onwards all orders were placed by the other, defendants, and goods were supplied only to the other

defendants from whom payments were accepted by the plaintiff. Accordingly, the first defendant asserts that there was no liability on it at the time

of transfer. No doubt, except the assertion in the written statement, first defendant has not let in oral or documentary evidence in support of their

defence. However, it is settled law that inasmuch as the plaintiff has laid the suit-claiming certain amount due from the defendants it is for the

plaintiff to prove its case by placing acceptable evidence. The only witness examined on the side of the plaintiff is P.W. 1 who is a Secretary of its

company. He deposes that as per Folio No.8 of Ledger accounts, the first defendant has to pay a sum of Rs.3,30,258. A Ledger has been

marked as Ex. A-1 through P.W.1. No doubt, there is a reference in Ex. A-1 regarding liability of the first defendant. Except the production of

Ledger (Parade) and marking a portion therein as Ex. A-1, the plaintiff has not substantiated their business transaction with the first defendant. Mr.

G. Subramaniam, learned senior counsel for the appellant, relying on a decision in Deluxe Road Lines v. S.K. Palani Chetty, 1992 (1) L.W.262,

would contend that on the basis of mere entry in the ledger Ex. A-1, it cannot be presumed that there was a supply of yarn and the first defendant

is liable to pay the value of the yarn supplied. In the said decision, Srinivasan, J., (as he then was) has held that it is well settled proposition of law

that mere production of account books will not be sufficient, to charge a person with any liability. His Lordship has further held that the

requirements of Section 34 of the Evidence Act will not be satisfied by the production of accounts simpliciter. Further, the person who wrote the

accounts has not been examined. Likewise, the person who is said to have made the payments mentioned in the accounts has not been examined.

It is only the Secretary who had nothing to do with either the payment or the writing of the accounts, has been examined. There is no explanation

for not examining the others. In such a circumstance, His Lordship has rightly held that mere production of accounts will not be sufficient to charge

any person with any liability and the requirement of Section 34 of the Indian Evidence Act will not be satisfied by the production of accounts

simpliciter. I have already stated that except the ledger, no other account book or books containing similar entries was filed before the Court. The

account books by themselves are not sufficient to charge any person with liability and the party has to show by some independent evidence that the

entries in his books represented the real and honest transactions and that the moneys paid or the transactions took place, in accordance with those

entries. Inasmuch as none connected with the account was examined, I am of the view that entry in the Ledger under Ex.A-1 is not sufficient to

accept the case of the plaintiff.

Now I shall consider whether any order was placed by the first defendant and goods were supplied by the plaintiff and received by the first

defendant after 1.1.83? P.W.1 in chief examination has deposed that,

A perusal of invoices Exs. A-19 to A-31 clearly show that there is no reference or details with regard to customers'' contact numbers and other

details including the date. In most of the invoices, the column mentioning customer contact number and date have been left blank. The learned

Subordinate Judge failed to consider this material aspect, Though in certain invoices, there is a reference regarding the details of customers''

contact numbers and date, in most of the invoices the particulars of which were not filled up. Though P.W.1 has spoken to the invoices Exs.A-19

and A-31, in view of the infirmities mentioned above, and in the absence of any other corroborative materials, the same cannot be accepted.

The plaintiff as well as the learned Subordinate Judge very much relied on a letter dated 17.12.82 from Mettur Beardsell Limited, Alexander

Thread Division, Mettur Dam to the plaintiff company which has been marked as Ex. A-32. P.W.1 has stated that under this letter (Ex. A-32), the

first defendant has prayed for supply of yarn for 1983. Learned senior counsel for the appellant, after reading Ex. A-32, would contend that no

order was made by the first defendant company and at any rate, in the absence of any intimation mentioning the final requirement, Ex. A-32 cannot

be construed as an offer made by them. In the light of the controversy, it is useful to refer the contents of Ex.A-32 which is a letter addressed to

the plaintiff,

Mettur Beardsell Ltd..Mettur Dam-2

Alexander Thread Division.

17.12.82.

M/s. Salem Textiles Limited,

66,I Ward, Brindavan I Cross,

Fair Lands, Salem 636 004.

Dear Sirs,

January 1983 Order

Please find below our tentative schedule of yarn requirement from you for the month of January 1983. Our final requirement will be intimated to

you on 31st December 1982.

2/30s Wet doubled grey yarn-17 Bales

4/20s Wet doubled grey yarn -2200 Kg.

13 3/56s Suvin doubled grey yarn-5 Bales

3/46s Suvin doubled grey yarn-3 Bales

Thanking you yours faithfully

for Mettur Beardsell Ltd.

Alexander Thread Division

Sd/-x x x

Manufacturing Manager.

It is clear that by the said letter dated 17.12.82, Mettur Beardsell Limited, Alexander Thread Division had intimated the plaintiff company their

tentative schedule of yarn requirement for the month of January, 1983 and their actual final requirement will be intimated to them on 31.12.82.

Admittedly, no order was made intimating their final requirement"" as claimed. In such a circumstance, based on Ex. A-32, it cannot be contended

that the first defendant had made an offer on 17. 12.82 for supply of certain quantity of yarn as claimed by the plaintiff. As per Sub-Section (1) of

Section 5 of Sale of Goods Act, 1930, a contract of sale is made by an offer to buy or sell goods for the price and the acceptance of such offer.

Ex. A-32 cannot be termed as an offer, in the absence of any evidence regarding the final requirement made by the first defendant. Accordingly, I

hold that even Ex. A-32 is not helpful to the case of the plaintiff.

Though P.W.1 has deposed that first defendant used to make a request through phone call and send invoices, admittedly, the same has not

been pleaded in the plaint by the plaintiff; accordingly the evidence of P.W.1 to this aspect cannot be accepted. As a matter of fact, P.W.1 has

admitted that there was no written order from the first defendant. In cross- examination, he has admitted that,

P.W.1 has also admitted that though in Ex.A-5, it is stated that first defendant is liable to pay Rs. 1,58,526-86, and the Alexander Thread Division

is liable to pay Rs. 2,11,751- 78, nothing has been mentioned in the account books. In this regard, P.W.1 has admitted that,

P.W.1 has also admitted that the letter dated 10.12.83-Ex. A-10, demanding payment of Rs. 3,30,258.54 had been addressed only to the third

defendant and copy alone was marked to the Accounts Officer, M/s Mettur Beardsell Limited, 47, Greams Road, Madras-6 and the

Manufacturing Manager, M/s Alexander Thread Division, Mettur Textiles Private Limited, Mettur Dam. It is clear from Ex. A-10 as well as the

evidence of P.W.1 the claim for payment had been made only to the defendants 2 and 3 and copy alone was marked to the first defendant which

also supports the case of the first defendant. Even under Ex. A-11 dated 13.12.83, the plaintiff made a claim to the second defendant claiming Rs.

3,30,258.54 by marking a copy to the Accounts Officer, M/s Mettur Beardsell Limited, Madras-4 and the Manufacturing Manager, M/s

Alexander Thread Division, Metlur Textiles Private Limited, Mettur Dam. Under Ex. A-16 dated 21.12.83, third defendant had agreed to pay the

entire amount to the plaintiff. This has been accepted by P.W.1.

Regarding the change of ownership and the fact of third defendant taking over the assets and liabilities of the Thread Unit at Mettur with effect

from 1.1.83, the plaintiff was very well aware of the same as evidenced para 6 of his plaint. In the letter dated 20.4.83 Ex,A-4, the first defendant

has informed the plaintiff that in the tight of the change in their management they were awaiting finalisation of bank facilities and as soon as the same

was completed, the outstandings will be discharged. Though the first defendant did not send any reply to the legal notice of the plaintiff dated

6.2.84, in respect of the letter written on 30.12.83 by the plaintiff, the third defendant has sent a reply intimating that they have taken over the

assets of Mettur Beardsell Company and they are in the final stage of squaring up the account with the said company. In the same letter, the third

defendant requested the plaintiff to send statement of accounts for their perusal and also requested them to bear with them for the delays in

payment. Further, even in para 6 of the plaint, there is a reference regarding the reply sent by the first defendant on 21.3.84, Ex. A-17 with

reference to the plaintiff''s notice dated 6.2.84. In the said reply Ex. A.17, the first defendant has specifically informed that the Textile Division has

been constituted into a separate company known as Mettur Textiles Industries (third defendant herein) and the said company has taken over all the

assets and liabilities of the division. The contents of Ex. A-17 dated 21.3.84 addressed to the plaintiff are relevant. They are:-

We are in receipt of your letter dated 6th February, 1984.

As your client is aware, the Textile Division has been constituted into a separate company now known as Mettur Textiles Industries Limited. This

company has taken over all the assets and liabilities of the division. We are passing on your letter to Mettur Textile Industries Limited for

verification and payment, if due.

Yours faithfully,

for Beardsell Limited.

All the above material facts are mentioned in the plaint itself. In such a circumstance, after knowing the change of the management and taking over

all the assets and liabilities of their textile division, the plaintiff is not entitled to claim the suit amount from the first defendant. The learned

Subordinate Judge merely on the ground that the first defendant failed to place oral and documentary evidence in support of their defence,

accepted the case of the plaintiff and decreed the suit against all the defendants. The materials relied on by the plaintiff itself would go to show that

after 1.1.1983, the first defendant has not placed any order nor goods were supplied to them. In such a situation the contrary conclusion arrived at

by the learned Subordinate Judge is liable to be set aside. It is made clear that the plaintiff can proceed against defendants 2 and 3 in respect of

their suit claim. Though Mr. S. Kalyanasundaram, learned counsel for the first respondent has stated that there is no evidence for change of

management and it is for their internal arrangements etc., in view of my discussion as well as the admission in the plaint and the evidence of P.W.1

coupled with the documents produced by the plaintiff itself, the said contention is liable to be rejected.

As regards grant of interest at 12 per cent, Mr. G. Subramaniam, learned senior counsel for the appellant, by relying on the admission of

P.W.1

as well as a Division Bench decision of this Court in (1) A.K. Srinivasa Naidu Vs. S. Jayarama Reddiar Firm, ; and (2) Ramalin Sha v. Bank of

Baroda, 2001 (I) CTC 662, would contend that in the absence of any provision for interest in all the invoices, the liability to pay interest, has not

arisen. In view of the conclusion reached above, namely, that the plaintiff is not entitled to the suit claim from the first defendant, it is unnecessary to

consider this issue.

15, In the light of what is stated above, the decree of the learned Subordinate Judge against the first defendant is set aside and the suit filed by the

plaintiff in so far as the first defendant is concerned is dismissed, The appeal is allowed with costs.