Food Corporation of India V. Arhita Association

RSA/1417/2009

AI Insights

The case revolves around a dispute between the Food Corporation of India (FCI) and the Arhita Association concerning unpaid charges for the transportation and handling of paddy during the 1997-98 season. The Arhita Association, having been engaged by FCI after the original contractor failed to perform, claimed various charges amounting to Rs. 18,08,326, which included loading, transportation, and unloading fees, along with interest. The FCI contested the suit on grounds including the non-joinder of necessary parties and the maintainability of the suit, arguing that the association was not a registered entity. The trial court and the lower appellate court found in favor of the plaintiffs, leading to the present appeal by FCI.

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 799600 (HC-CHANDIGARH)
• Appeal Type: Others
• Pronouncement Date: 11-05-2012
• Assessment Year: misc
• Other Referred Cases: Loonkaran Sethia etc. vs. Mr. Ivan E. John and others etc., Pal Singh and others vs. Uma Mehta and others, Devi Chand and others vs. Gram Panchayat Bodhni, Rajinder Parshad (Dead) by L.Rs. vs. Darshana Devi, Gopal Krishnaji Ketkar vs. Mohd. Haji Latif, Virsa Singh and another vs. Balwant Singh and others
• Laws Referred To: Indian Partnership Act, 1932, Indian Evidence Act, 1872
• Result in Favour of: Respondent
• Court: HIGH COURT
• Department Lawyers: SANDEEP KHUNGER
• Assessee Lawyers: HARI PAL VERMA
• Keywords: Food Corporation of India; Loading Charges; Non-joinder of necessary parties; Arhita Association; Paddy transportation; Suit maintainability
• Section: 138; 69(2)

Judgement Text

"RSA No. 1417 of 2009 1 IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH RSA No. 1417 of 2009 DATE OF DECISION: May 11, 2012 Food Corporation of India and others .........APPELLANT(S) VERSUS Arhita Association and others ......RESPONDENT(S) CORAM: HON'BLE MR. JUSTICE G.S. SANDHAWALIA Present: Mr. Hari Pal Verma, Advocate, for the appellants. Mr. Sandeep Khunger, ADvocate, for the respondents. G.S. SANDHAWALIA, J. 1. The present appeal has been filed by the defendants, who are aggrieved against the concurrent findings of the Courts below whereby, the suit for recovery of `12,16,285.24 paise has been decreed in favour of the plaintiffs alongwith interest @ 6% per annum from the date of submission of bills. The plaintiffs, who are numbering 52, filed the suit for recovery of amount of `18,08,326 i.e. `12,16,285.24 paise as balance amount of loading charges, transportation charges, charges of putting marka on gunny bags, charges of unloading of wooden crates and unloading of gunny bales and ` 5,92,040.76 paise as interest @ 18% per annum. 2. The case set up by the plaintiffs was that the District Manager, Food Corporation of India, Ferozepur had engaged one RSA No. 1417 of 2009 2 Mali Ram as a contractor for loading and transportation of paddy from Mandi Talwandi Bhai during Kharif season 1997-98 and the procurement season started in the month of September 1997 and huge quantity of paddy was procured which piled up in the market yard of Talwandi Bhai. The contractor Mali Ram appointed by the defendant-corporation did not lift any paddy and Arihtia Association, Talwandi Bhai submitted an application on 25.09.1997 expressing their readiness to lift the paddy @ 115% ASOR as thefts were taking place and it was in the interest of smooth running of the paddy season. The said application was recommended for its acceptance by Quality Inspector posted in Mandi Talwandi Bhai, Assistant Manager Quality Control, Talwandi, Assistant Manager Depot A.M. (F) as per the proposed rates and on the instructions of the officials of the defendant-Corporation, the Arhtia Association lifted the paddy stock of Kharif season 1997-98 and transported the same to the destination. The plaintiffs loaded and transported 3,18,863 bags and 2,53,693 kattas and submitted separate bills of loading to the tune of `2,80,476.85 paise. The Assistant Manager (Storage), vide letter dated 01.08.1998, requested the Assistant Manager (Accounts), Food Corporation of India, Ferozepur to make the payment by withholding 20% of loading of the kattas till further orders besides `10,000 against the security and the Food Corporation of India, Ferozepur paid the plaintiffs a sum of `1,72,102 through cheque dated 01.08.1998 and withheld the balance amount of `1,08,374.85 paise besides `10,000 deducted as security amount. Thereafter, the RSA No. 1417 of 2009 3 plaintiffs submitted a separate bill of `10,46,408.44 paise in respect of transportation charges but no amount from this bill had been paid. The plaintiffs had put marka on the gunny bags at the instructions of the staff of the Food Corporation of India and a separate bill of `49,231.90 paise had been raised and for unloading the wooden crates, a separate bill of `1,250 was submitted. The plaintiffs unloaded gunny bales for which a separate bill of `10,120.50 paise was also submitted and the said bills have not been paid despite repeated requests and accordingly, the claim was made for `12,16,285.24 paise on account of loading charges, transportation charges, charges for putting marka on gunny bags, charges of unloading of wooden crates and charges of unloading gunny bales. The interest was also claimed @ 18% per annum as per the usage and custom and accordingly claimed `5,92,040.76 paise as interest. The Arhtia Association and its members had loaded the paddy, transported it, had put marks on gunny bags, unloaded the wooden crates, gunny bales and all the members had authorized its President to claim the amount and notice dated 10.06.2000 was also served upon the defendants and accordingly, the suit was filed by all the plaintiffs. 3. The suit was contested by filing written statement and various objections were taken including non-joinder of necessary parties namely Mali Ram, the Transport Contractor and it was admitted that the plaintiffs were allowed to work on day-to-day basis but the presence of Mali Ram was necessary since Mali Ram had RSA No. 1417 of 2009 4 also filed a suit for recovery for the same period and work which was pending. The suit was objected to being not maintainable as the plaintiffs were not competent to file the suit and the Arhtia Association was not registered. The fact of the paddy piling up in the market yard of Talwandi Bhai and the request to allow the Katcha Arhtia Association to lift the paddy was admitted but it was till the MTC arrangement was made and the payment to Arhtias made in pay office after obtaining proper acknowledgment of paddy receipts from Assistant Manager (D). It was contended that Mali Ram had joined duties on 29.09.1997 and worked upto 02.10.1997 and Mali Ram did not lift paddy on 03.10.1997 and 04.10.1997 and thereafter did not turn up. The District Manager, Food Corporation of India had written letter dated 09.10.1997 whereby he directed the Quality Inspector that if the MTC fails to lift the stocks on day-to-day basis, the work be got done at his risk and costs to safeguard the purchased paddy stocks from unwanted rains/damages. On 09.10.1997, the Katcha Arhtia Association was asked to start the work of lifting paddy on day-to-day basis by the Quality Inspector and the paddy was lifted by Arhtia Association since Mali Ram did not turn up. It was contended that Mali Ram had also filed a suit for permanent injunction against the Food Corporation of India and he also filed a suit for recovery against the defendants. The plaintiffs had submitted a bill for `74,548.67 paise out of which `48,147 were paid after deducting `14,910 (20% withheld on account of loading of kattas, `10,000 on account of security, `1,491 as income tax) and the RSA No. 1417 of 2009 5 plaintiffs submitted second bill for `1,26,485.57 paise out of which `1,23,955 were paid and `2,530 were deducted on account of income tax, thus the plaintiff was paid `1,72,102. Thereafter, the plaintiffs submitted bill for `2,80,476.85 paise and claimed net `1,08,374.85 paise after adjusting `1,72,102 already received. It was further pleaded that the plaintiffs did not prefer any bill on account of transportation and that there was shortage of 572 quintals and 35 Kgs. in reconciliation statement, copy of which was attached and defendants were entitled to recover the cost of the same which came to `5,73,065.43 paise. The bill for `49,231.90 paise was pending and further a bill of `2,150 was pending for payment on account of unloading of wooden crates and the plaintiffs preferred a bill for unloading of bales for `10,120 and the admissible amount came only to `6,746.70 paise and all the bills were under process. However, regarding transportation charges, the same could be processed only after its submission subject to the reconciliation statement. Thus, it was admitted that the bills of `2,150, `10,120.50 paise, `49,231.90 paise and `1,08,374.85 paise were pending and the plaintiffs had not preferred the bill for `10,46,408.44 paise regarding transportation charges till date and it can be considered only on its submission. The defendants were entitled to recovery of `5,73,065 on account of shortage of paddy weighing 572 quintals and 35 Kgs. The claim of the plaintiffs for interest was also denied. 4. The plaintiffs filed replication, wherein the presence of Mali Ram was denied as being not necessary and it was pleaded that RSA No. 1417 of 2009 6 the plaintiffs have already submitted the bills of the work done by them. It was also stated in the replication that the suit was filed by all the members of the Association, who were arrayed as plaintiffs no. 2 to 52 and the Association was not registered. The right of Mali Ram to claim any amount was denied and it was for the Food Corporation of India to defend the suit and the plaintiffs had no concern with the same and the amount of bills had been illegally withheld by the defendants. The factum of not submitting the bill of `10,46,408.44 paise was denied and it was specifically alleged that the same was properly verified by the officials of the Food Corporation of India posted in the Mandi and other field staff including the Assistant Manager (Depot), and who forwarded the same to the office of the District Manager for the payment and there was no shortage of 572 quintals and 35 Kgs., as alleged. The plaintiffs were never associated in any reconciliation statement and the bags had been lifted at the instance of the officials of the defendants posted in Mandi and delivered at the destination as directed by them and there was no loss of any bag in transit and there was neither any question of shortage. The plaintiffs had never been informed about any shortage and it was for the first time the ground had been taken in the written statement. The defendants did not reply to the notice served by the plaintiffs before the institution of the suit. Accordingly, it was pleaded that the defendants have unnecessarily withheld the payment of the amount of the bills and the plaintiffs were entitled for the same. On the basis of the pleadings, the trial Court framed the following RSA No. 1417 of 2009 7 issues:- “1. Whether the plaintiffs are entitled to recover a sum of Rs. 18,08,326/- as alleged in the suit? OPP 2. Whether the plaintiffs are entitled to interest, if so, at what rate? OPP 3. Whether the suit is bad for non-joinder of the necessary parties? OPD 4. Whether the suit is not maintainable? OPD 5. Whether the suit has been preferred by the competent persons? OPP 6. Relief.” 5. The plaintiffs examined Gurdas Mal PW-1 and Nathu Ram PW-2 whereas the defendants examined Sham Sunder DW-1 and closed their evidence. The trial court came to the conclusion that it was admitted that the paddy had piled up in the market yard and the contract of transportation with Mali Ram had failed and the proposal was accepted by the District Manager vide Ex.P-2 and the plaintiffs were allowed to transport the paddy to the godowns. It was noticed that the carbon copy of the bill Ex.P-8 was on the file and the letter from the officials of the department was Ex.P-9 and a legal notice had been served upon the defendants but the same had not been replied and there was no correspondence calling upon the plaintiffs to submit the bill if it was not in the possession of the defendants. The statement of the defendants' witness was taken into consideration whereby he identified the signatures of Mr. O.P. Uppal RSA No. 1417 of 2009 8 on the letter Ex.P-9 and accordingly, it was held that the defendants could not hold out that they were not in the receipt of the bill and it could not be processed. The defence of the shortage was also brushed aside on the ground that there were mere allegations in the written statement and there was nothing on record in the form of evidence and neither the records had been produced in the Court as to what was the shortage on which date and the records being available with the defendants, an adverse inference had to be drawn against the defendants. The cross examination of the plaintiffs was also taken into consideration to hold that he was not questioned regarding the shortage in his cross examination and reliance was placed upon Devi Chand and others vs. Gram Panchayat Bodhni, 1995 (2) CCC, 480 and Rajinder Parshad (Dead) by L.Rs. vs. Darshana Devi, 2001 (3) CCC 622 and accordingly, it was held that the plaintiffs have succeeded in proving that they have transported the paddy and the bills were pending with the defendants and defendants could not prove that there was any shortage regarding the same. Accordingly, the suit was decreed keeping in view that the plaintiffs were entitled for 6% per annum interest for the non-receipt of their dues which was `12,16,285.24 paise. The objection of the defendant that the plaintiff is not a registered association was rejected on the ground that the plaint was signed by all the 52 plaintiffs and they have provided the services for transportation of paddy and they were entitled to claim their dues. Since the plaintiffs had not claimed themselves to be a firm, the authorities relied upon RSA No. 1417 of 2009 9 by the defendants were rejected and it was held that the suit was maintainable. The plaintiffs' witnesses were never suggested or confronted with any evidence of shortage of 572 quintals and 35 kgs of paddy and they had categorically said in their examination-in-chief that there was no shortage of paddy stock when they were unloaded at the destination. Since the plaintiffs had taken the responsibility to clear up the market yard, which was lying piled up with paddy and was creating obstruction in the procurement proceedings and it was only a one time venture by the association and its' members, Mali Ram the Transporter, was held not to be a necessary party and accordingly vide judgment and decree dated 03.05.2005, the Additional Civil Judge (Sr. Divn.), Ferozepur decreed the suit. 6. The defendants filed an appeal before the lower appellate court, which has been dismissed on 20.11.2008 by the Additional District Judge, Ferozepur and resultantly, the present regular second appeal has been filed. 7. Counsel for the appellants has vehemently contended that the suit was not maintainable since the society was not registered and in view of Section 69 (2) of the Indian Partnership Act, 1932 (for short 'The Act'). Reliance has been placed upon Loonkaran Sethia etc. vs. Mr. Ivan E. John and others etc., AIR 1977 SC 336. The second submission made is that the judgment of the lower appellate court is not a reasoned judgment and it has not discussed the evidence on record and, therefore, the appeal should be allowed and the case should be remanded back to the lower RSA No. 1417 of 2009 10 appellate court for fresh decision on merits. Reliance has also been placed upon Pal Singh and others vs. Uma Mehta and others, 1997 (Suppl.) CCC 140. 8. The submission of the counsel for the appellants is liable to be rejected outrightly. Admittedly, in the present case, all the members of the association have also been impleaded as plaintiffs and all of them have signed the plaint and vakalatnama. Section 69 of the Act talks of a suit instituted in any Court on behalf of any person suing him as a partner in a firm and in case the firm is not registered, the right to enforce a right has been restricted. In the present case, plaintiff no. 1 is just an association of persons and are not a firm who were doing business as such together. Section 4 of the Act defines the status of partnership, partner and firm and further talks about business carried out collectively by the said persons. In the present case, there was no such business which was being carried out by the plaintiffs and they had come together in a situation to ease the burden of the corporation and for their own convenience. Section 4 of the Act reads as under:- “4. Definition of “partnership”, “partner”, “firm” and “firm name”.-- “Partnership” is the relation between persons who have agreed to share the profits of a business carried on by all or any of them acting for all. Persons who have entered into partnership with one another are called individually “partners” and RSA No. 1417 of 2009 11 collectively a “firm”, and the name under which their business is carried on is called the “firm name”. 9. The judgment relied upon in Loonkaran's case (supra) pertains to amounts which were due whereby the parties were carrying on business as partners of the mills and it was in such circumstances, Section 69 of the Partnership Act was taken into consideration. In the present case, as noticed above, the facts are totally different. The defendants' transporter had run away and was not carrying out his work. A notice had been served upon him whereby, the corporation itself had asked him that they would get the work done from some other person at his risk and costs. It was in such circumstances that the plaintiffs had done the transportation of the paddy on the basis of which, the claim has been filed. This is an admitted position by the defendant-corporation itself. The only defence taken was that the bill of `10,46,408.44 paise had not been submitted and the rest of the bills were under process and there was a shortage of 572 quintals and 35 Kgs of paddy. Para no. 5 of the written statement reads as under:- “5. That para No. 5 of the plaint as stated is wrong and denied. It is wrong that the plaintiff is entitled to the amounts claimed in this para of the plaint. The bill of Rs. 2150/-, Rs. 10120, Rs. 49231.90, Rs. 1,08,374.85 are pending. It is worth to mention here that the plaintiffs are entitled to Rs. 6746.70 P out of Rs. 10,120-05 as stated in para No. 4 of the written RSA No. 1417 of 2009 12 statement. The plaintiff has not preferred the Bill for Rs. 10,46,408/- regarding transportation charges till today and that will be considered only on its submission. It is worth to mention here that the answering defendants are entitled to recovery Rs. 5,73,065/- on account of shortage of paddy weighing 572 Qtl 35 Kg. as stated above.” 10. The same was rebutted by filing a replication and in the evidence specifically, it was proved that the bill had been submitted which was Ex.P-8. A perusal of Ex.P-9 from the record which had been summoned, it would be clear that it is addressed to the District Manager, Food Corporation of India, Ferozepur and goes on to show that the transportation charges bills for Mandi Talwandi Bhai for the year 1997-98 were forwarded for `10,46,408.44 paise and the said officer was asked to sanction the bill for a total amount of `11,54,783.29 paise to the Arhtia Association after proper scrutiny as the balance amount of `1,08,374.85 paise was on account of labour charges. Ex. P-9 is reproduced as under:- “To, The District Manager, Food Corporation of India, Ferozepur. Subject:- Forwarding the Transportation Charges bill and loading charges bill of Mandi Talwandi Bhai. Reg. Sir, Kindly find enclosed herewith the Transportation charges bill and loading paddy Gr 'A' 97.98, the distance of various RSA No. 1417 of 2009 13 storage points of Talwandi Bhai has measured by the Three Officer Committee constituted by yourself. The details of the bills are as under:- B/s Transportation Rs. Ps. (1)318863 B/S 2,58,866-25 (2)253693 Katts 2,27,835-35 Total 4,86,701-60 115 ASOR 5,59,706-84 Total amount 10,46,408-44 (Ten lac forty six thousand four hundred eight and paisa forty four only) (1) Labour charges of 318863 B/s 79,715-75 @ 00-25 paise 253693 kattas 50,738-60 @ 00-20 paise 1,30,454-35 115% ASOR 1,50,022-50 Total 2,80,476-85 Paid by cheque no. 0508680 (-) 1,72,102-00 paid Dt. 1.8.98 Balance 1,08,374-85 (one lac eight thousand three hundred seventy four & paise 85 only) So, you are requested to kindly sanction the bill of transportation and balance of loading charges of paddy Gr. 'A' 97-98 in c/o WB Mandi Total Rs. 1154783-29 only (Rupees eleven lac fifty four thousand seven hundred eighty three and paise twenty nine only) to M/s. Arhita Association, Talwandi Bhai, after proper scrutiny at your level. This is for your information and n/action please. Yours faithfully. Enc:- AA.” RSA No. 1417 of 2009 14 11. Thereafter, legal notice dated 10.06.2000 was also served Ex. P-10 which has admittedly not been replied to. The cross examination of the witness Sham Sunder Sharma, Assistant Manager, Food Corporation of India shows that the witness has admitted that as per the record, the District Manager has allowed to get the work done by the Arhtia Association on day-to-day basis and the work was allotted to the plaintiffs and an amount of `1,72,102 was also paid against two bills of `78,548.67 paise and `1,26,485.57 paise and an agreement with the Arhtia Association was also entered into which has been placed on record as Ex.D1/1, which was in pursuance of the meeting held by the officials of the defendant- corporation, who forwarded the same to the District Manager on 25.09.1997 Ex.D-1. The witness of the corporation has admitted that the bill of `9,231.90 paise was lying in the file and the bill of `2,150 and `10,120.50 paise and the payment of the same had not been made till today. That the witness has deposed that the bill of `10,46,408.44 paise was not submitted and also volunteered that no such bill was submitted but he admitted that Ex.P-8 contained the signatures of their officials on both the sides in which there is mention that there was shortage in recovery of 572 quintals and 35 kgs of paddy. However, in cross-examination, the witness has deposed that he could not say if any notice regarding shortage of recovery was sent or not and it was correct that there was no such notice available on the file. He also admitted that he did not know if any suit had been filed by the defendant for recovery of amount on RSA No. 1417 of 2009 15 account of shortage against the plaintiff. Thus, from the deposition of the sole defendant's witness, it would be clear that there was nothing on record to show that there was any shortage of paddy for which the payment was being denied. Once the defendants had pleaded that there was a shortage and payment was being stopped because of that account, it was for them to plead and prove the same and give the details of the same but, as discussed in detail, nothing has come forth and neither any such exercise was carried out in which the plaintiffs were associated and, therefore, the amount could not be denied to the plaintiff-association. 12. The submission of the counsel for the defendants that the lower appellate court has not discussed the evidence is without any merit in view of what has been discussed above that the defendants had failed to prove on record any evidence apart from the affidavit filed by the witness, which was copy of the written statement in the form of deposition by way of affidavit, which would be clear from the record. The documents which have been placed on record by the defendants in the form of Ex.D-1/1, D-2, D-3 and D-4 do not in any way support them as there is no proof of any shortage. Ex.D-5 is the suit filed by Mali Ram, Contractor, which was for recovery and the same was dismissed vide judgment and decree dated 28.05.2003 Ex. D-5 and D-6 on the ground that the plaintiff had failed to lead any evidence and the evidence was closed under Order 17 Rule 1 CPC. 13. The Hon'ble Apex Court, in Rajinder Parshad's case (supra) has held that where the witnesses have not been cross RSA No. 1417 of 2009 16 examined on a relevant point, then under Section 138 of the Indian Evidence Act, 1872 the examination-in-chief is to be taken as true. In the present case, only a suggestion was put to the witness PW-2 that there was shortage of paddy and that the defendants were entitled to recovery the economic costs, which was denied by the witness. The Hon'ble Supreme Court of India in Gopal Krishnaji Ketkar vs. Mohd. Haji Latif, AIR 1968 SC 1413 has held that party who withholds important documents in its possession which can throw lights on the facts in issue, then the Court shall draw an adverse inference against the said party. In the present case, it was for the defendant-corporation to bring on record the said material to show that there was any shortage and once they had failed to do so, the Courts below have rightly drawn an adverse inference against the corporation. This Court in Virsa Singh and another vs. Balwant Singh and others, 2008 (4) ICC 702 also held that once a document was shown to be in existence, and the same had not been produced in court then no oral evidence with regard to its contents were admissible and an adverse inference had to be drawn against the party withholding the same. 14. That the judgment rendered in Pal Singh's case (supra) is not applicable as in that case, the Court had held that the plaintiff has to prove his case independently and he could not take advantage of the weakness of the defence. In the present case, as noticed above, the defendants have put up a case of shortage and they themselves have failed to prove the same. RSA No. 1417 of 2009 17 15. Accordingly, keeping in view the above facts and circumstances and in the absence of any substantial question of law arising for consideration, the present appeal is hereby dismissed since an adverse inference has to be drawn against the defendants, who had the best evidence in their possession and since they failed to produce the same. The judgments and decrees of the Courts below are upheld. 11.05.2012 (G.S. SANDHAWALIA) shivani JUDGE RSA No. 1417 of 2009 18 "