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HIGH COURT OF DELHI
Date of Decision: 08.05.2026
FALAK NAAZ & ORS. .....APPELLANTS
Through: Mr. Pawan Reley, Mr. Kashif Athar., Mr. Akshay Lodhi, Mr. Farak Mirza, Ms Simran Singh and Mr. Tanish Rawat Advs.
Through: Mr. Rajiv Bakshi, Ms. Kajal Sharma and Mr. Pranav Pareek, Advs.
HON'BLE MS. JUSTICE MANMEET PRITAM SINGH ARORA
MANMEET PRITAM SINGH ARORA, J. (ORAL)
JUDGMENT
1. The present appeal has been filed under Section 13 of the Commercial Courts Act, 2015, read with Order XLI Rule 1 of the Code of Civil Procedure, 1908, against the impugned judgment and final order dated 11.11.2024 passed by the District Judge (Commercial Court), North East District, Karkardooma Courts, Delhi in CS (Comm) No 51 of 2022. The Trial Court has passed a decree for a sum of Rs. 38,73,000/- along with pendent lite and future interest at 9% in favour of the Respondent (i.e., plaintiff).
2. Learned counsel for the Appellants sets up the Appellants’ case as follows: SHARMA 18:23
2.1. Appellant No. 1 is the widow of Late Mr Mohammad Shahid [‘deceased’], who was engaged in the cloth trading business and carried on business in the name and style of KGN Trading Company as its proprietor. Mr Mohammad Shahid expired due to COVID-19 in May, 2021. Appellant Nos. 2 to 5 are the minor children of the deceased. He states that Appellant No. 1, being a homemaker, was neither associated with the business of her deceased husband nor was aware of any alleged commercial transactions with the Respondent, who carries on business in the name and style of Pawan Garments.
2.2. He states that after the demise of the Late Mr Mohammad Shahid, the Respondent instituted the recovery suit for a sum of Rs. 38,73,000/- with interest at 18% per annum, based on unsubstantiated ledger entries, unaudited accounts and self-serving documents, without producing any purchase orders, delivery challans, acknowledgements or sale invoices to prove the alleged liability.
2.3. He states that the records of the firm of the late Mr Mohammad Shahid disclose no outstanding liability, and that the learned Trial Court erred in relying upon the GST records of the said firm, while rejecting the ledger, i.e., Ex. DW-1/1, which evidenced a credit balance of only Rs. 1,462/-.
2.4. He states that the onus to prove that no goods were delivered to the Respondent against the payment of Rs. 30 lakhs was on the Respondent (i.e., plaintiff in the suit); however, the Trial Court wrongfully shifted the onus on the Appellants to prove the delivery of goods. In this regard, reliance is SHARMA 18:23 placed on Soward v Leggatt[1], Nirmal Kumar Nawlakha vs. Sant Lal Mahto[2] and Stoney v. East Bourne R D Council[3] to contend that such a burden could not have shifted upon the Appellant (i.e., defendant) unless the Respondent (i.e., plaintiff) had first led sufficient prima facie evidence to prove non-receipt of goods.
2.5. He states that the ledger, i.e., Ex.PW1/1 produced by the Respondent was neither certified nor authenticated by a Chartered Accountant or Auditor, which constitutes a critical procedural prerequisite for its admissibility and evidentiary credibility.
2.6. He states that no formal demand Notice was served either upon the late Mr Mohammad Shahid during his lifetime or upon Appellant No. 1 before institution of the suit. He states that Appellant No. 1 was not afforded an adequate opportunity to effectively challenge the Respondent's insufficient evidence, contrary to the principles of procedural fairness.
2.7. He states that the impugned judgment is contrary to the pleadings, evidence on record, and is therefore liable to be set aside.
3. In reply, learned counsel for the Respondent relies upon the documentary evidence available on record to contend that the payment of an amount of Rs. 30 lakhs to Late Mr Mohammad Shahid is not in dispute and the Appellants failed to prove the delivery of any goods against the said amount. He states that no goods as alleged were delivered between 21.03.2021 and 28.03.2021. He refers to a legal notice dated 06.12.2021 (Ex. PW 1/4) served on the Appellant No. 1 before instituting the suit. He 7 CAR. & P. 613
16 P 622: AIR 1937 PAT 563 (1927) 1 CH 367,395 SHARMA 18:23 refers to the GST returns of the late Mr Mohammad Shahid to show that no alleged sales for March 2021 were declared with the concerned statutory authority.
4. This Court has heard the learned counsel for the parties and perused the record. The arguments have been addressed only on Issue No. 1 raised in the impugned judgment.
5. The Respondent filed the suit for recovery of the principal amount of Rs. 30 lakhs paid to Late Mr Mohammad Shahid, in two tranches, on 11.08.2020 and 19.10.2020. In the said suit, the Respondent has prayed for pre-suit interest of Rs. 8,73,000/- computed at 18% per annum with effect from 19.10.2019 till 30.05.2022 and also prayed for pendente lite and future interest.
6. In support of its claim for the principal amount of Rs. 30 lakhs, the Respondent pleaded that the sum of Rs. 10 lakhs and Rs. 20 lakhs were transferred to the deceased’s bank account through RTGS on 11.08.2020 and 19.10.2020, respectively. The proof of payment of the said entries has been led by bringing on record the bank statement, Ex.PW1/1, of the Respondent.
7. The Appellants filed their written statement and have not disputed receipt of the aforesaid payment of Rs. 10 lakhs and Rs. 20 lakhs. However, the Appellants have relied upon a ledger statement, Ex.DW1/1, in which it is reflected that goods equal to the value of Rs. 29,98,538/- through eight [8] invoices, all between 21.03.2021 and 28.03.2021, were supplied to the Respondent. The Appellants state that after adjusting the value of the aforesaid eight invoices, only a sum of Rs. 1,462/- was the credit balance in SHARMA 18:23 the ledger account of the Respondent as maintained by the firm of Late Mr Mohammad Shahid. Pertinently, Appellant did not file or produce the eight [8] invoices in support of the aforesaid entries in the ledger.
8. However, the Respondent argued that the entries of the aforesaid eight [8] invoices are false, and disputed the receipt of any goods qua the said eight [8] invoices. The Respondent, to substantiate its plea of non-receipt of any goods, summoned the GST record of the firm of the deceased to show that no GST return was filed by the late Mr Mohammad Shahid for the relevant period, March 2021, with respect to the alleged eight [‘8’] invoices.
9. Parties also led oral evidence wherein the Respondent appeared himself as PW-1 and proved the documents relied upon by it. Respondent also summoned an official Sh. Prakash Kumar from its bank, i.e., Central Bank of India, as PW-2, to prove its bank statement. Respondent also summoned Sh. Bir Singh, Inspector of GST, as PW-3, to produce the GSTR- 1 return of the late Mr Mohammad Shahid's firm, KGN Trading Company, for the period from December 2019 till March 2021. The Respondent, in pursuance of its cross-examination, also produced upon directions of the Court its audit record for the relevant assessment years 2019-2020, 2020-2021 and 2021-2022 to prove that the payment of Rs. 30 lakhs as an advance to Late Mr Mohammad Shahid’s firm KGN Trading Company was duly reflected in the said return.
10. Appellants heavily relied upon the evidence of an employee, Sh. Chaman Lal, who appeared as DW-2 to prove the entries in the ledger, i.e., Ex. DW1/1. Appellant No. 1 appeared as a witness and relied upon the SHARMA 18:23 ledger statement Ex. DW1/1 to contend that goods have been delivered against the eight invoices. Neither of the Appellants’ witnesses produced the eight invoices reflected in the ledger, nor any delivery challan, in support of the alleged delivery of goods.
11. The discussion of the Trial Court on the issue of the entitlement of the Respondent to recover the principal amount of Rs. 30 lakhs is under Issue No. 1, at paragraph nos. 15 to 22 of the impugned judgment dated 11.11.2024, which reads as under:
12. The Appellants do not dispute that they did not produce on record the purported eight invoices, listed in the ledger Ex. DW1/1 for proving the discharge of the liability of Rs. 30 lakhs. The Appellants also did not file delivery challans evidencing the delivery of goods.
SHARMA 18:23
13. The Appellants have argued that the error in the impugned judgment is that the Trial Court failed to appreciate that the burden of proof was on the Respondent to prove that no goods were received by it against the eight invoices shown in the ledger Ex. DW1/1 for the period 21.03.2021 to 28.03.2021.
14. We are unable to agree with the submissions of the Appellant. In our considered opinion, there is no error in the finding of the Trial Court with respect to the entitlement of the Respondent to recover the principal amount of Rs. 30 lakhs. The payment of Rs. 30 lakhs through bank transfer has been duly proved by the Respondent by leading cogent evidence of PW-2/Sh. Prakash Kumar, Chief Manager of the bank.
15. The Appellants admit the receipt of the said amount. However, the Appellants have raised a defence that the goods for the value of Rs. 29,98,538/- were supplied vide eight [‘8’] invoices between 21.03.2021 and 28.03.2021. The Appellants, except for producing the ledger Ex. DW1/1, which contains the entries, have not brought on record either the invoices or the challans evidencing the supply of the goods.
16. The Respondent has denied receipt of the goods. It has also led to evidence by summoning the inspector of GST as PW-3 to show that the late Mr Mohammad Shahid, the proprietor of KGN Trading Company, had not filed any GST return pertaining to the alleged eight invoices, whereas the said firm otherwise had filed GST returns.
17. In our considered opinion, the onus to prove supply of goods worth 29,98,538/- through eight invoices between 21.03.2021 to 28.03.2021 was upon the Appellants. The said onus has to be discharged by them by filing SHARMA 18:23 invoices and delivery challans or leading credible oral evidence. The Appellants admit that they do not have any documentary evidence to prove the delivery, and also no oral evidence was led to prove the delivery. The testimony of DW-2/Sh. Chaman Lal has been duly considered by the Trial Court and, in our opinion, rightly held to have not proved any delivery of goods.
18. We are unable to accept the Appellant’s submission that the onus to prove non-receipt of goods was on the Respondent, and only if he discharges the said onus, the onus would have shifted on the Appellants. The Respondent could not have proved the negative, though in this case, the Respondent in fact led evidence of the negative also by summoning PW-3, i.e., the Inspector of GST. The Appellant has no explanation for the nondeclaration of the said eight invoices with the statutory authority, though otherwise the firm KGN Trading Company admittedly held a GST number and was regularly filing its returns.
19. In these facts, the findings returned by the Trial Court that the entries in the ledger Ex. DW-1/1 produced by the Appellants is not proof of supply and delivery of goods is correct.
20. The Appellants have admitted that KGN Trading Company was liable to file GST returns and also admitted that there is no GST return for the period March 2021, and the alleged sales have not been reported for the said period, whereas all prior sales between the same parties, as reflected in the ledger account, were duly reflected to the GST department as observed by the Trial Court at paragraph no. 18 of the impugned judgment.
21. We therefore held that the findings of the Trial Court holding that the SHARMA 18:23 Respondent is entitled to recover a sum of Rs 30 lakhs is correct and require no interference.
22. We find that the Trial Court has awarded pendente lite and future interest at the rate of 9% per annum, which appears to be reasonable, keeping in view the commercial nature of the transaction between the parties. We, therefore, find no ground to interfere with the decree passed by the Trial Court to that extent. We, however, clarify that the pendente lite and future interest will be calculated on the principal amount of Rs. 30 lakhs.
23. However, we note that the Respondent herein had also claimed presuit interest at the rate of 18% per annum for the period from 19.10.2019 to 30.05.2022 and quantified the said amount as Rs. 8,73,000/-. Though the Trial Court has decreed the said claim at paragraph 25, we find that the impugned judgment does not contain any discussion or reasoning on this claim while adjudicating Issue No. 1 either for the period of claim or rate of interest.
24. The matter was listed for this purpose today, and counsels have given their clarification. Mr. Bakshi, learned counsel for the Respondent, states that the legal notice for the principal amount was made for the first time on 06.12.2021. He states that the Respondent would be satisfied if the interest claim for the pre-reference period is truncated with effect from 06.12.2021 till 04.06.2022 (i.e., the date of institution of the suit). He also states that the pre-suit interest be reduced to 9%, which will conform with the pendente lite and future interest. Learned counsel for the Appellant has not addressed any arguments SHARMA 18:23 on the rate of interest or the period of interest.
25. We have noted that the Respondent had indeed issued a legal notice dated 06.12.2021 calling upon the Appellant to pay a sum of Rs. 30 lakhs, and accordingly, we hold the Respondent is entitled to receive pre-suit interest with effect from 06.12.2021 until the date of institution of the suit at the rate of 9%. The rate of interest has been reduced from 18% to 9% as per the submission of the Respondent, and also, we are of the opinion that the rate of interest at 18% was high and not warranted in the facts of this case.
26. The decree shall stand modified to the extent of the aforesaid directions. The registry is directed to draw up a modified decree in accordance with this order.
27. Pending applications, if any, stand disposed of.
MANMEET PRITAM SINGH ARORA, J
V. KAMESWAR RAO, J