C/FA/531/1986 CAV JUDGMENT DATED: 17/07/2026

Reserved On : 29/04/2026

Pronounced On : 17/07/2026

IN THE HIGH COURT OF GUJARAT AT AHMEDABAD

R/FIRST APPEAL NO. 531 of 1986

With

R/FIRST APPEAL NO. 1093 of 1987

FOR APPROVAL AND SIGNATURE:

HONOURABLE MR. JUSTICE BHARGAV D. KARIA

and

HONOURABLE MR.JUSTICE L. S. PIRZADA

==========================================================

Approved for Reporting Yes No

✓

==========================================================

HOUSE OF DUBARY & ORS.

Versus

THE OFFICER LIQUIDATOR OF HANSPA KNIT (P) LTD., & ORS.

==========================================================

Appearance:

ADVOCATE NOTICE NOT RECD BACK for the Appellant(s) No. 2

MR C B UPADHYAYA(3508) for the Appellant(s) No. 3,4

MR ND NANAVATI(507) for the Appellant(s) No. 1

MR ABHIJIT P JOSHI(1330) for the Defendant(s) No. 1

MR PRANAV G DESAI(290) for the Defendant(s) No. 6

MR SH SANJANWALA(729) for the Defendant(s) No. 7

MS PJ DAVAWALA(240) for the Defendant(s) No. 1

NOTICE NOT RECD BACK for the Defendant(s) No. 2,3

NOTICE SERVED for the Defendant(s) No. 4,5,8

==========================================================

CORAM:HONOURABLE MR. JUSTICE BHARGAV D. KARIA

and

HONOURABLE MR.JUSTICE L. S. PIRZADA

CAV JUDGMENT

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(PER : HONOURABLE MR. JUSTICE BHARGAV D. KARIA)

Sr.

No.

Particulars Paragraph

nos.

1) Introduction 1 to 5

2) Facts

a) Plaint 6 to 31

b) Written statement of

defendant nos. 1 to 4

32 to 43

c) Counter claim 44 to 52

d) Written statements of

defendant nos.5 and 6

53 to 54

e) Written submissions of

Appellant no.2

55 to 65

3) Issues framed by the Trial

Court and summary of

findings

66

4) Oral Evidence 67 to 75

5) Orders passed by the Trial

Court and orders in appeals

76 to 82

6) Submissions of appellants-

defendants

83 to 100

7) Submissions of the

respondent-plaintiff

101 to 144

8) Points for Determination 145

9) Reasons

Analysis of points for

determination and findings

1) Points for Determination

no. 1 to 4

146 to 168

2) Point for Determination 169 to 172

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No.5

3) Point for Determination

no.6

173 to 204

4) Points for Determination

No.7 and 8

205 to 210

5) Point for Determination

no.9

211 to 219

6) Point for Determination

No.10

220 to 222

7) Point for Determination

no.11

223 to 230

10) Conclusion 231 to 236

1) Introduction

1.Heard learned advocate Mr.C.B. Upadhyaya for

the appellants and learned advocate

Mr.Abhijit Joshi for the respective

respondent.

2.These matters are cross appeals and for the

sake of convenience, facts are recorded from

First Appeal No.531 of 1986.

3.First Appeal No.531 of 1986 is filed by the

defendant nos. 1 to 4 being aggrieved by

Judgment and Order dated 31.01.1986 passed by

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Civil Judge (Senior Division) Kutchh at Bhuj

in Special Civil Suit No.120 of 1979 partly

allowing the suit in favour of the plaintiff

- respondent no.1 – M/s. Hanspa Knit (P) Ltd.

(Under Liquidation) represented through

Official Liquidator for decree of sum of

Rs.49,81,336/- from the appellants- defendant

nos. 1 to 4 with running interest at the rate

of 12% per annum from the date of the suit

till realisation. Counter claim filed by the

appellants is rejected.

4.First Appeal No.1093 of 1987 is filed by

plaintiff M/s. Hanspa Knit (P) Ltd. (in

liquidation) being aggrieved by Judgment and

Order dated 31.01.1986 passed by Civil Judge

(Senior Division) Kutchh at Bhuj in Special

Civil Suit No.120 of 1979 so far as not

allowing freight and other charges and

dismissing the suit qua defendant nos. 5 and

6.

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5.Since both the appeals are cross appeals

arising out of a common Judgment, First

Appeal No.531 of 1986 is treated as a lead

matter. F or the sake of convenience,

appellant nos. 1 to 4 are referred to as the

defendant nos. 1 to 4 and respondent no.1 is

referred to as the plaintiff whereas

respondent nos. 7 and 8 are referred to as

defendant nos. 5 and 6. Respondent nos. 2 and

3 are ordered to be deleted vide order dated

24.07.1995 whereas respondent nos. 4 to 6 are

joined as defendant nos. 4,5 and 6 in the

counter claim filed by the appellants.

2)Facts

a) Plaint

6.The plaintiff was a private limited company

registered under the provisions of Companies

Act, 1956 (For short “the Companies Act”) and

was engaged in assembling and manufacturing

of radio, transistors, car radios, cassettes,

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transistors etc. having its factory at

Gandhidham, Kandla in Kandla Free Trade Zone

District Kutch, Gujarat designated under the

provisions of the Customs Act, 1962 (For

short “the Customs Act”).

7.The plaintiff was holding license under the

provisions of the Customs Act to carry out

its business in Sector-1, Kandla Free Trade

Zone. The plaintiff was importing semi

finished components technically known as SKDs

in Semi Knocked Down Form from abroad and

thereafter assembled the same for export and

the plaintiff was not entitled to make any

domestic sales in India.

8.The defendant nos. 2, 3 and 4 are brothers

who were carrying on the business of export

of various items in the name and style of

“House of Dubary” -defendant no.1. Defendant

nos.2, 3 and 4 are also the partners of

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defendant no.1 firm as averred in the plaint.

Defendant no.5 M/s. Airfreight (P) Ltd. is a

company registered under the Companies Act

and carrying out its business at Mumbai as

Clearing and Forwarding Agent. Defendant

no.6-New Bank of India is a Scheduled Bank

situated at Delhi and had issued Irrevocable

Letters of Credit (LCs) in favour of the

plaintiff at the request and on account of

defendant no.1-firm.

9.The plaintiff filed Special Civil Suit No.

120 of 1979 to recover a sum of

Rs.62,91,245.18 from the defendants jointly

and severally.

10. It is averred in the plaint that i n

December, 1977, 6 Yugoslavian buyers were

brought by defendant no.2 at the factory of

the plaintiff for negotiation regarding

export of electronic goods to Yugoslavia.

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Thereafter, pursuant to further negotiation

at Bombay, Delhi and Hongkong, defendant nos.

1 to 4 agreed to act as Export House and

placed orders in their own name for reason of

expediency subject to goods being exported to

Yugoslavia. On 04.10.1978, defendant nos. 1

to 4 placed an order with the plaintiff for

supply of goods amounting to US$ 781521.14

equivalent to Rs.62,91,245.10. Thereafter on

05.10.1978, four confirmed Irrevocable

Letters of Credit (LCs) were opened by

defendant no.6 -New Bank of India, Delhi in

favour of the plaintiff. As per the LCs, the

plaintiff was to complete the shipment by

10.10.1978 and negotiation by 30.10.1978 and

goods were to be shipped from Kandla Port.

Thereafter, LCs were amended by letter dated

09.10.1978 by defendant no.6 -New Bank of

India by correcting the last date of shipment

as 01.12.1978 and last date for negotiation

to be 30.12.1978. Thereafter, New Bank of

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India - defendant no.6 further amended LCs by

letters dated 14.10.1978, 20.10.1978 and

18.11.1978 by amending the shipment by air

from Bombay Airport to Theossaloniki (Greece)

Airport.

11. The plaintiff through its Forwarding

Agent namely M/s. Dawn India made first

consignment of following shipments from

Kandla:

Inv. No.Date Qnty

(Sets)

Model Amount U.S.

$

A.R.4

Forms

HK/01 22/11/78 12,900

sets

SITTAR 98,040.00 Hans/Exp/

01/78-79

HK/02 22/11/78 5000 setsPANASIA 40,000.00 Hans/Exp/

02/78-79

HK/03 25/11/78 4995 sets “ 39,960.00 Hans/Exp/

03/78-79

HK/04 25/11/78 1906 sets “ 14,485.60 Hans/Exp/

04/78-79

HK/05 2/12/78 8000 setsSITAR 60,800.00 Hans/Exp/

05/78-79

HK/06 3/12/78 10000 setsPANASIA 80,000.00 Hans/Exp/

06/78-79

Total 3,33,285.60

12. Aggregate value of the aforesaid

consignment was US $333,285.60 equivalent to

Rs.26,80,327.55. The plaintiff received the

said amount from defendant no.6 for and on

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behalf of defendant no.1.

13. The plaintiff thereafter dispatched the

second consignment from Kandla Free Trade

Zone to defendant no.5 - M/s. Airfreight (P)

Ltd. for export at Bombay through M/s. Vijay

Transport Co. for export by air.

14. The aggregate value of second

consignment was US$ 2,60,863.00 equivalent

to Rs.20,99,947.01.

15. The plaintiff dispatched the goods in

part for third consignment to defendant no.5

M/s. Airfreight (P) Ltd. through M/s. Vijay

Transport Co. from Kandla Free Trade Zone to

Bombay.

16. Aggregate value of the third consignment

is US$ 4,30,510.14 equivalent to

Rs.34,65,606.60.

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17. As the defendants did not pay the amount

of second and third consignment, the

plaintiff filed the suit on 21.05.1979 for

recovery of Rs.62,91,245.18 together with

interest at the rate of 15% from 17.12.1978

to 05.05.1979 and running interest at the

rate of 15% per annum till realisation.

18. It is the case of the plaintiff that

after the plaintiff exported the first

consignment from Kandla by ship to Yugoslavia

through the Clearing and Forwarding Agent

M/s. Dawn India, defendant nos. 1 to 4

persuaded the plaintiff to export the goods

by air through defendant no.5 as defendant

no.5 was giving 30 days credit for payment of

freight to defendant nos. 1 to 4 as the goods

were to be exported on FOB basis.

19. The plaintiff agreed to the suggestion

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to export the goods by air through defendant

no.5 - M/s. Airfreight (P) Ltd. who was

Clearing and Forwarding agent of defendant

nos. 1 to 4 from Bombay airport to Greece

airport. Accordingly, plaintiff sent the

second consignment after removing the goods

from Kandla Free Trade Zone under Form A.R.4

issued by Customs Department to M/s. Vijay

Transport Co. to Bombay to defendant no.5 so

as to export to Yugoslavia by air.

20. It is the case of the plaintiff that

though defendant no.5 was required to send

the goods for and on behalf of the plaintiff

by air but it did not forward the Airway bill

to the plaintiff but the same was forwarded

to defendant no.1 which shows the collusion

between defendant nos. 1 to 4 and defendant

no. 5. It is also the case of the plaintiff

that in the Airway bill in the column of

shippers, name of defendant no.1 “House of

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Dubary” was mentioned by defendant no.5.

Because of such collusion between defendant

nos. 1 to 4 and defendant no. 5, defendant

no. 6 made the payment received from the

negotiating bank of Yugoslavia in the account

of defendant no.1 “House of Dubary”.

21. It is also the case of the plaintiff

that the goods sent by the plaintiff was

entitled to exemption from duty only if the

exporter is having factory within Kandla Free

Trade Zone and it would amount to an offence

to mention the name of defendant no.1 under

the column of shippers name and address in

the airway bill.

22. It is a normal trade practice in a case

where a manufacturer is exporting the goods

at the instance of an Export House, the

foreign buyer would give Letter of Credit

from his banker in favour of the Export House

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in India and the bankers of the Export House

would give Letter of Credit in favor of the

manufacturer and hence, the Airway Bill in a

case where the goods are exported by air and

Bill of Lading in case where the goods are

exported by the ship are the most important

documents of title. The Airway Bill or the

Bill of Lading, as the case may be, is

therefore, required by the manufacturer

exporting the goods to be produced through

the negotiating bank to the LC opening Bank

along with the bank draft and documents drawn

on the LC opening bank through the

negotiating bank. The LC opening bank on

receipt of Airway Bill, bank draft and the

documents would make payment to the

manufacturer of the value of the goods

exported.

23. However, it is the case of the plaintiff

that in facts of the case, the LC opening

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bank i.e. defendant no.6 as well as the

plaintiff who had manufactured the goods for

export and defendant no.1 Export House

through whom the export was made were

required to follow the prescribed procedure.

Therefore, defendant no.6 received Letters of

Credit drawn in its favour by the bankers of

Yugoslavian buyers i.e. “Manufacturer Hanover

Trust”, a leading American Bank of

International repute. Defendant no.6-New Bank

of India had drawn LCs in favour of the

plaintiff and was expected to honour the LCs

and pay the amount thereof to the plaintiff

on production of bank draft and the documents

to the defendant no.6 through negotiating

bank i.e. State Bank of India at Kandla.

24. It is the case of the plaintiff that

though defendant no.6 being in full knowledge

of true facts and after having received the

original Airway Bill showing the name of the

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plaintiff in the column of shippers, should

not have paid the entire amount received from

the bankers of Yugoslavian buyers to

defendant no.1. The plaintiff has therefore,

alleged that defendant nos. 1 to 4 as well as

defendant no.6 New Bank of India are liable

to pay the amount covered by LCs drawn by

defendant no.6 in favour of the plaintiff

insofar as the value of the second

consignment exported by defendant no.5 to the

Yugoslavian buyers through Air on 27.12.1978

amounting to US $ 2,60,863=00 equivalent to

Rs.20,99,947.01.

25. It is the case of the plaintiff that

defendant nos. 1 to 4 and defendant no.6 has

thus committed a fraud on the plaintiff by

appropriating the credit of the entire amount

received from the bankers of Yugoslavian

buyers in the account of defendant no.1-

“House of Dubary”. The plaintiff therefore,

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insisted from defendant nos.1 to 4 to agree

and assure that payment due to the plaintiff

would be made latest by March or April, 1979

but the defendant nos. 1 to 4 failed to keep

their assurance and did not pay the amount of

US$ 2,60,863=00 equivalent to

Rs.20,99,947.01.

26. Regarding the third consignment

forwarded by the plaintiff between December

30, 1978 to January 11, 1979 comprising of 6

parcels through M/s. Vijay Transport Co. to

defendant no.5 Air Freight Pvt. Ltd. as a

Clearing and Forwarding Agent of the

plaintiff, same were exported after delay of

more than four to five months by defendant

nos. 1 to 4, and as such defendant nos. 1 to

5 are jointly and severally liable for the

amount of the third consignment.

27. It is the case of the plaintiff that

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defendant no.5 ought to have sent the

original airway bill to the plaintiff but

deliberately forwarded the same to defendant

nos. 1 to 4 and hence defendant no.5 is

guilty of conversion and misappropriation of

the goods sent by the plaintiff for export

purpose to defendant no.5 at Mumbai.

28. It is the case of the plaintiff that

between January 13, 1979 to May 3, 1979,

plaintiff as well as the custom authorities

of Kandla Free Trade Zone addressed several

communication to the defendant no.5. M/s.

Airfreight (P) Ltd. calling upon the

information for withholding the goods by

defendant no.5. The plaintiff also called

back the third consignment to Kandla from

Mumbai. However no response was given by

defendant nos. 1 to 5.

29. The plaintiff by letter dated 27.04.1979

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also requested the Assistant Collector of

Customs International Area Cargo Complex,

Export department, Mumbai putting on record

that defendant no.5 inspite of repeated

requests failed to advise the plaintiff of

dispatch of the cargo under AR-6 to 11 and

AR-12 to 20 regarding second and third

consignment respectively.

30. The plaintiff by another letter dated

14.04.1979 placed on record that defendant

no.5 was warned of the legal liability of its

action in keeping cargo and preparing false

documents and also informed the customs

authority that the defendant no.5 is called

upon to return cargo under AR-12 to 20 along

with relevant documents. By letter dated

24.04.1979, the plaintiff informed the

Assistant Collector of Custom ,Kandla Free

Trade Zone giving details of AR-4 Form from

AR-12 to 20 regarding the third consignment

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that the goods have been sent to defendant

no.5 but the same were not exported till that

date and further steps are required to take

back the goods from the defendant no.5.

31. The Assistant Collector of Customs

Kandla Free Trade Zone by letter dated

03.05.1979 also informed the defendant no.5

that goods are kept in an unauthorised manner

for a period of more than four months since

the goods were under customs export bonds and

threatened the defendant no.5 for action

under the provisions of the Customs Act and

called upon defendant no.5 to deliver the

consignments back to the plaintiff since the

goods were not exported and the plaintiff

being the owner of the goods did not wish to

export the goods and intended to bring them

back to Kandla Free Trade Zone. The customs

authorities also warned defendant no.5 for

holding the bonded goods illegally. However,

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in spite of such communication from the

plaintiff and the customs authorities,

defendant no.5 exported the goods by air to

Yugoslavian buyers but did not send the

airway bills to the plaintiff nor returned

the AR-4 Forms showing the proof of export to

the plaintiff. It is the case of the

plaintiff that amount of the sale

consideration of goods of the third

consignment was received in the account of

defendant no.1.

b) Written statement of defendant nos. 1 to 4

32. The defendant nos. 1 to 4 filed the

written statement at Exh.29 raising various

preliminary objections as under:

1) The plaint has not been signed and

verified by a duly authorised person.

2) The Trial Court did not have territorial

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jurisdiction to try the suit or entertain it

or grant any relief thereunder.

3) No notice of demand was ever served by the

plaintiff upon the defendants, hence the suit

is premature.

4) That the plaint suppresses material facts

as well as relevant details and as such, is

mala fide, false and frivolous to the

knowledge of the plaintiff and is liable to

be dismissed outright with special costs and

exemplary cost as provided under section 35

of the Code of Civil Procedure, 1908.

5) The suit is bad for mis-joinder of parties

inasmuch as the plaintiff cannot claim any

amount collectively, jointly and severally

and for that matter alternatively from

defendant nos. 1 to 4 representing one group

and defendant nos. 5 to 6 as separate

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entities.

6) On ex-facie reading of para no. 14(i) to

(v) of the plaint, total aggregate of the

figures does not tally with the claim made of

Rs.62,91,245.18.

7) The suit amount has not been properly

valued for purposes of Court fees and

jurisdiction.

33. Apart from preliminary objections, it

was contended by the defendant nos. 1 to 4

that there was no evidence of any privity of

contract whereby the plaintiff was entitled

to receive the alleged amount from defendant

nos. 1 to 4.

34. It was contended that the suit is liable

to be stayed under section 10 of the Code of

Civil Procedure, 1908 as separate suit for

declaration negating the claim of the

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plaintiff had already been filed by the

defendants in the Courts at Delhi which was

pending for trial.

35. It was contended that the plaintiff did

not come to the Court with clean hands and

there is no equity in his favour.

36. It was contended that as per section 20

of the Code of Civil Procedure, 1908, place

of suing shall be where the defendants

actually and voluntarily reside and carry on

the business and work for gain or where the

cause of action wholly or in part arose and

therefore, the Court at Kuchchh at Bhuj has

no territorial jurisdiction as negotiation

between the parties took place only at three

places i.e. Bombay, Delhi and Hongkong.

37. It was also contended that plaintiff has

no locus standi to institute the suit on his

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own volition or free will at Bhuj as the

plaintiff has failed to show as to how

defendant nos. 5 and 6 could be impleaded as

party.

38. It was also contended that though it is

an admitted position that amount of

Rs.26,80,327.50 pertaining to first

consignment has already been received by the

plaintiff then how that amount can be again

claimed by the plaintiff.

39. It was further contended on behalf of

defendant nos. 1 to 4 that the plaintiff is

not entitled to claim any amount as LCs have

expired on 30.12.1978. It was also contended

that the terms and conditions of LCs was

contract between the parties and in absence

of any LCs, defendants are not liable to pay

any amount to the plaintiff.

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40. It was also contended that defendant

no.5 was only Clearing and Forwarding Agent

of defendant nos. 1 to 4 therefore, there was

no obligation or moral duty to handover the

airway bill to the plaintiff and plaintiff

has no locus standi to ask for such

documents.

41. It was also the case of the defendants

that plaintiff has committed gross violation

of terms and conditions of the back to back

LCs and realising that default and lapses

have been made, have dumped the unsalable

goods with defendant no.5 and on the contrary

defendants have incurred freight charges and

demurrage and filed counter claim claiming

that the defendants have suffered loss to the

tune of US$ 13,60,644.17 equivalent to Rs.

1,08,85,152.00.

42. It was contended that the defendants are

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not liable for the claimed amount as total

value claimed by the plaintiff is CIF value

which come into operation without costs,

insurance and freight. Since the plaintiff

has not paid freight/ chartered charges or

insurance charges nor there is any averment

in the plaint to that effect and therefore,

such amount cannot be claimed by the

plaintiff. It was further contended that the

defendants have held the plaintiff to export

the goods but the amount of freight,

demurrage etc. paid by defendant no.1 was

required to be adjusted and the Managing

Director of the plaintiff Mr. Hasmukh Khatri,

has flown out of country due to indebtedness

as there were liabilities of the banks and

Gujarat Financial Corporation, State Bank

and other institutions with which the

plaintiff was associated in the course of its

business.

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43. It was therefore, claimed that when the

Letter of Credits have expired on 30.12.1978

there was no contract between the parties and

the goods were exported at the cost and risk

of the plaintiff by defendant no.5 directly

and defendant nos. 1 to 4 only helped the

plaintiff to clear the goods as the plaintiff

did not have enough finance to pay the

freight and other charges. It was therefore,

contended that all the matters prior to

30.03.1979 stand waived of by doctrine of

estoppel, waiver, forfeiture and

acquiescence.

c) Counter claim

44. The defendant nos. 1 to 4 filed their

suit in form of counter claim under the

provisions of Order VIII Rule 6 (a) and (b)

read with section 151 of Code of Civil

Procedure. In the counter claim, defendant

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nos. 1 to 4 are plaintiffs and Hasmukh

Brothers (HK) Hongkong, M/s. Hanspa Knit(P)

Ltd., Shree Hasmukh C Khatri, Shree P.U.Oza,

Shree A.C. Pota and State Bank of India,

Kandla Free Trade Zone, Gandhidham-Kutch were

joined as defendant nos. 1 to 6 respectively.

45. In para no.5 of the counter claim, it

was averred that various irrevocable Letters

of Credit opened in their favour by a

Government Enterprise “SOLUN” Import-Export,

Gevgelija, Yugoslavia of US$ 2,284,465.00

equivalent to Rs.2,27,31,800/-. It is further

averred that Hasmukh Brothers (HK) assured

and agreed to assemble the items as per the

order in factories located in Hongkong and

accordingly, irrevocable Letters of Credit

dated 20.06.1978 and 21.06.1978 in favour of

the said firm were opened and in turn Letters

of Credit were opened by the defendant no.1

firm “House of Dubary” as stated in para no.9

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of the counter claim. However, Hasmukh

Brothers (HK) failed to supply the goods but

assured to execute the orders under the said

Letters of Credit through sister concern

plaintiff M/s. Hanspa Knit (P) Ltd. located

at Kandla.

46. It is further averred that upon

assurance given by the plaintiff M/s. Hanspa

Knit (P) Ltd., 7 Letters of Credit in favour

of Hasmukh Brothers (HK) were withdrawn and

three Letters of Credits were opened in

favour of Hasmukh Brothers (HK) and 4 Letters

of Credit were opened in favour of M/s.

Hanspa Knit (P) Ltd. stipulating the period

of supply upto 20.12.1978.

47. Regarding the first consignment sent on

22.11.1978, it was claimed that there was

violation of the implied terms and conditions

agreed upon of sending the consignment

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through charter aircraft and therefore, there

was a loss of Rs.51,013 (US$ 6,376.66

approximately). A claim for refund was also

made for Rs.1,44,846.90 on the ground of

failure to supply total quantity of goods.

48. Regarding the second consignment as per

details given in para no.15 of the counter

claim, M/s. Hansa Knit (P) Ltd. sent the

goods to clearing agent M/s. Air Freight (P)

Ltd. at Bombay on 27.12.1978 on its own which

was exported to SOLUN Import-Export after

great persuasion in the month of May, 1979.

49. The third consignment was also exported

in May,1979 after paying airfreight and

incurring other miscellaneous expenses. By

letters dated 22.05.1979, 24.05.1979 and

19.06.1979 SOLUN Import-Export raised dispute

regarding the shortage in quantity and defect

in quality of the goods as stated in para 19

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and 20 of the counter claim. Therefore, a

claim of US$ 59,375.00 equivalent to

Rs.4,75,000/- in respect of second

consignment and US$ 56,250.00 equivalent to

Rs.4,50,000/- in respect of third consignment

for making various correspondence and

contacting SOLUN Import-Export personally and

other necessary miscellaneous expenses during

the course of transaction was raised. Claim

for demurrage of US$ 7,500(Rs.60,000) and

payment made to clearing and forwarding agent

M/s Dawn India for US$ 7500 (Rs.60,000) and

US$ 5,250 respectively was also raised.

Interest claim at the rate of 18% per annum

on US$ 21,754.60 i.e. US$ 93,915.03 (Rs.

7,51,326.64 approximately) was raised.

Further claim for loss of goodwill,

reputation and future business due to

negligence and misconduct of M/s. Hanspa Knit

(P) Ltd. and others was raised at the rate of

20% on US$ 1,440,960 amounting to US$

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288,192.0 (Rs.23,05,536 approx) further claim

of demurrage of Rs. 432,288.00

(Rs.35,27,680/- approx.) was raised. Thus

total claim of US$ 13,60,644.17

(Rs.1,08,85,152) was made.

50. It was also claimed that as the CCIE did

not grant license to “House of Dubary”, it

had to transfer the Letter of Credit for

about Rs. 82 Lacs issued by Yugoslavian

buyers in the name of its sister concern

Dubary Exports sustaining heavy loss of Rs.

22 Lacs.

51. It was therefore, prayed that Suit no.

120 of 1979 should be dismissed and counter

claim of Rs.1,08,85,152 together with

interest at the rate of 18% per annum should

be decreed. The declaratory suit filed before

Delhi High Court is placed on record at Exh.

442.

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52. The plaintiff also filed the written

statement to the counter claim denying the

facts stated therein and reiterated the facts

stated in the plaint and also denied that

M/s. Hasmukh Brothers (HK) has any connection

with the 2

nd

and 3

rd

consignment which were

admittedly exported for which payment has

been received from the Yugoslavian buyers.

The other defendants in the counter claim

also filed their written statement denying

the claim made in the counter claim.

d) Written statements of defendant nos.5 and 6

53. Defendant no.5 filed its reply at Exh.35

wherein similar contention has been raised as

raised by defendant nos. 1 to 4.

54. Defendant no.6 also filed its written

statement at Exh.38 contending that draft

drawn by the plaintiff on defendant no.1 was

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submitted through State Bank of India, Kandla

along with papers and the details of the same

are narrated in paragraph no.9 of the written

statement. It was contended that plaintiff is

not entitled to any relief and requested the

suit be dismissed with cost.

e)Written submissions of Appellant no.2

55. Appellant no.2 – defendant no.2 Shakar

Darbari has filed written submission vide

email dated 09.06.2026 through his power of

attorney holder Ms.Raj Darbari. It was

submitted in the written statement that

chronology of events narrated therein from

1979 onwards reveal a systematic pattern of

fraud, suppression and abuse of process that

has resulted in appellant no.2 - defendant

no.2 Shakar Darbari and others being deprived

of property.

56. It was further contended that there is

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no Official Liquidator who is appointed for

the plaintiff company which is under

liquidation and therefore, notice issued by

the Registry was upon a non-existent entity

as the plaintiff company was ordered to be

wound up on 10.07.2000.

57. Reliance was placed on the decision in

cases of (i) S.P. Chengalvaraya Naidu v.

Jagannath reported in (1994) 1 SCC 1, (ii)

A.V. Papayya Sastry v. Government Of A.P.

reported in (2007) 4 SCC 221 and (iii) Ram

Chandra Singh v. Savitri Devi reported in

(2003) 8 SCC 319. Relying upon the aforesaid

decisions, it was submitted that the alleged

fraud is not curable by subsequent event

including actual appointment of Official

Liquidator in 2000. It was also pointed out

that the plaintiff company had become a

defunct company in 1983 and therefore, such

company cannot sue as it is equivalent to

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deceased natural person. In support of such

submission, reliance was placed on the

following decisions:

(i) Purtabpore Co. Ltd. v. Cane Commissioner

of Bihar reported in (1969) 1 SCC 308.

(ii) Cotton Corporation of India Ltd. v.

United Industrial Bank Ltd. reported in

(1983) 4 SCC 625.

(iii) Dale & Carrington Invt. (P) Ltd. v.

P.K. Prathapan reported in (2005) 1 SCC 212.

58. It was further alleged that decree dated

31.01.1986 was passed ex-parte in favour of

the company that had ceased to exist in law

since 1983 and the Trial Court was misled

into believing that a living company was

prosecuting its claims. Reliance was placed

on the following decisions:

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i) Sushil Kumar Sabharwal v. Gurpreet Singh

reported in (2002) 5 SCC 377.

ii) State Bank of Travancore v. Kingston

Computers reported in (2011) 11 SCC 524.

iii) A.R. Antulay v. R.S. Nayak reported in

(1988) 2 SCC 602.

59. It was alleged that advocates appearing

for the plaintiff were not authorised. It was

also pointed out that in 2019, a statement

was made before the Court that appellant no.2

- defendant no.2 Shakar Darbari had expired

which was a false statement and thereafter on

an application being filed on 20.12.2024,

vide order dated 09.07.2025, the abatement

order was recalled, resulting into

deprivation of right to access justice for

six years which constitute a grave violation

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of Article 21 of the Constitution of India.

60. Reference was also made to the

background of the appellants-defendants and

the respondent-plaintiff vis-a-vis national

character of the family of “House of Dubary”

and the plaintiff company and its Director.

61. Thereafter reference is made to medical

emergency of Shakar Darbari aged 76 years who

was diagnosed with pancreatic cancer and had

undergone major surgical procedure lasting

for 10 hours and requires immediate access to

funds for continuous treatment. Reliance was

placed on decision in case of Paschim Banga

Khet Mazdoor Samity v. State of West Bengal

reported in (1996) 4 SCC 37.

62. Referring to above submissions,

following summary was made of legal

propositions:

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“a) A decree obtained by a defunct,

non-existent company is void ab

initio and a nullity: Sushil Kumar

Sabharwal (supra).

(b) Notice issued to a non-existent

Official Liquidator confers no

jurisdiction: A. V. Papayya Sastry

(supra).

(c) Fraud on the court vitiates all

proceedings: S.P. Chengalvaraya

Naidu (supra); A. V. Papayya Sastry

(supra); Ram Chandra Singh (supra).

(d) A company without a Board of

Directors cannot authorise

litigation: Dale & Carrington

(supra); State Bank of Travancore

(supra); Patel Roadways (supra).

(e) The ROC's failure under

mandatory Section 560(3) is a breach

of statutory duty: Purtabpore Co.

Ltd. (supra). Winding up of a

defunct company is futile: Cotton

Corporation (supra).

(f) Deprivation of property for 47

years without authority of law

violates Article 300A. Restitution

mandatory: Southeastern Coalfields

(supra).

(g) A 40-year pendency violates

Article 21: Hussainara Khatoon

(supra). Denial of livelihood

violates right to life: Olga Tellis

(supra).

(h) Abatement without a death

certificate violates Order XXII Rule

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4 CPC and Article 21.

(i) The Court must correct its own

errors ex debito justitiae: A.R.

Antulay (supra).

(j) Courts must refuse assistance to

economic offenders: Tapas D. Neogy

(supra). Right to emergency medical

care is fundamental: Paschim Banga

Khet Mazdoor Samity (supra).”

63. It was therefore, prayed to set aside

the Judgment and Decree dated 31.01.1986

passed in Special Civil Suit No.120 of 1979

and further prayed for immediate release of

money deposited in Fixed Deposits with State

Bank of India with interest.

64. It is also prayed to dismiss the Cross

appeal and initiate proceedings under section

340 of the Code of Criminal Procedure, 1973

for fraud practiced upon the Court and award

compensation of Rs. 50 crores with exemplary

cost of Rs. 10 crore and further pass

strictures against the advocates who appeared

for the company in liquidation without

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sanction under section 446 of the Companies

Act, 1956.

65. Considering the order passed by this

Court dismissing Civil application filed by

the Appellant No.2 contending similar

averments , these submissions are not

required to be dealt with as the appeal filed

by the defendant nos. 1 to 4 was heard at

length and is hereby decided considering

submissions made by the learned advocates of

both the sides.

3)Issues framed by the Trial Court and summary

of findings

66. The Trial Court framed following issues

at Exh. 218 and findings on the issues are

also recorded in para no.48 of the judgment

which are summarised as under:

Issue

No.

ISSUES FINDINGS

1) Whether the def. Nos. 1 In the

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to 4 prove that the

plaintiff Hanspa Knit

(P) Ltd., has been

committed the breach of

contract ?

If so, they are

entitled to recover the

amount as claimed in

the counter claim ?

negative

2) Whether the plaintiff

M/s. Hanspa Knit (P)

Ltd., is entitled to

all or any reliefs on

basis of the

allegations as made in

the plaint?

Yes. As per

order

2-(A) Whether this

court has jurisdiction

to entertain the suit

of the plaintiff Hanspa

(P) Ltd., against the

defts.?

In the

affirmative

(2-B) Whether it is

proved that the

deft.Nos. 5 & 6 of the

suit are not necessary

or proper parties and

that the suit is bad?

Defendant no.5

and 6 are

necessary and

proper parties

as the nature

of the suit.

(2-C) Whether the deft.

Nos. 1 to 4 prove that

there was no privity of

contract between the

parties ?

In the

negative.

(2-D) Whether the deft.

Nos. 1 to 4 prove that

the contract in

question is void on the

ground of the violation

law and regulation.

No

(2-E) Whether the deft. No

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Nos. 1 to 4 prove that

the plaintiff M/s.

Hanspa Knit (P) Ltd.,

is estopped in view of

the letter dated 16-3-

79 from recovery of the

suit amount?

(2-F) Whether the

plaint signed and

verified by Shree A.C.

Pota is legal and

valid?

If, not, what effects?

Yes. In the

affirmative

(2-G) Whether the suit

is maintainable in the

present form?

In the

affirmative

3) What order and decree

regarding to the suit

and counter claim?”

As per order

4)Oral Evidence

67. Both the sides produced documentary

evidence and examined witnesses who were

cross examined during the trial.

68. The plaintiff has examined Anilbhai

Chandubhai Pota at Exh. 276, the then

Director who is also cross examined on behalf

of the defendants.

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69. In his examination-in-chief, Anilbhai

Chandubhai Pota has produced the orders

placed by the defendant nos. 1 to 4 which

were exhibited as Exh. 278 to Exh.281. Letter

of confirmation of those orders is produced

at Exh.282. Letters of Credit are produced at

Exh.283 to 289 and 290 to 309. Invoices and

documents of the second consignment at Exh.

310 to Exh.315. Documents of third

consignment are at Exh. 316 to 317. Amount of

sale consideration received by the defendant

nos. 1 to 4 in their bank account which is

kept in Fixed Deposit in Sundry account and

bank statement thereof is produced at Exh.

318 which is received in two parts. First

with regard to goods of standard quality and

second part when dispute of standard quality

was given up by the buyers and entire amount

was received. Copies of AR-4 Forms are

produced from Exh. 319 to 322. Fixed Deposit

Receipts of the amount received by defendant

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no.1 are produced at Exh. 323. Copies of

letter of the State Bank of India along with

documents returned to defendant no.6 being

Exh. 324 and 325. Telex messages are produced

from Exh. 326 to 333 regarding communication

for confirmation. Notice issued by the

customs authorities to defendant nos. 1 to 5

on 08.10.1979 and its reply is given by

defendant nos. 1 to 4 at Exh.334 to Exh. 336.

Order of penalty dated 02.01.1981 passed by

Special Officer of the Customs Department

upon defendant nos. 1 to 4 at Exh. 337. Telex

Message of defendant nos. 1 to 4 accepting

the mistake and agreement for payment at

Exh.338. Copies of communication between the

plaintiff and defendant no.5 is produced at

Exh. 339 to 348. Copy of communication

between customs officer and defendant no.5 at

Exh. 349. Telex message from the defendants

at Exh.350. Freight bill of spare part sent

by the plaintiff to Yugoslavian buyer

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regarding 2

nd

and 3

rd

consignment at Exh.352.

Details of letter dated 26.10.1978 of the

defendants having agreed to extend the period

for delivery of goods received by the

plaintiff on 17.12.1978 at Exh.353. Telex

messages between the parties from 12.12.1978

to 30.04.1979 at Exh.354 to 368. Letter

written by Customs authority to defendant

no.5 at Exh. 369.

70. In the cross examination and re-

examination, witness of the plaintiff denied

that the plaintiff was liable to pay the

airfreight. It was also denied that due to

financial crisis, defendant nos. 1 to 4 paid

the airfreight.

71. The witness of the plaintiff also placed

on record letter dated 10.03.1979 addressed

to defendant no.5 to return the goods which

is exhibited as Exh. 450. Various documents

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containing the communication by the plaintiff

for export of third consignment were

exhibited from Exh. 453 to Exh. 461.

72. Witness of the plaintiff denied the

contentions of the defendants whereby it was

proposed that counter claim placed by

defendant nos. 1 to 4 was part of the letter

at Exh. 205.

73. It was contended on behalf of the

plaintiff that though defendant nos. 1 to 4

have received the payment from Yugoslavian

buyers, same was not paid to the plaintiff,

inspite of the fact that it was known to the

defendants that the manufacturer who exported

the goods was the plaintiff and therefore, by

collusion, the defendants have deprived the

plaintiff of its legitimate dues, inspite of

having full knowledge of the true facts and

having received original airway bill showing

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the name of the plaintiff in column of

shippers and therefore, the defendants could

not have retained the entire amount received

from Yugoslavian buyers and as such, all the

defendants are jointly and severally liable

for the amount claimed by the plaintiff of

Rs.62,91,245.18.

74. The defendants have examined one witness

defendant no.4 Deepak Durbari. In his

examination in chief, he reiterated the

contentions in the written statement and has

placed the original partnership deed at Exh.

416, letter dated 19.06.1979 at Exh. 417,

Letter received from Yugoslavian buyers at

Exh.418, Copies of certificate of export at

Exh. 420 to 425, Copies of airway bill of 1

st

consignment at Exh.426, copies of invoice of

2

nd

consignment at Exh. 427 to 428, Copies of

telegram and telex message of the transaction

entered into by Hasmukh Brothers (HK) from

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Exh. 429 to Exh. 435.

75. In the cross examination made on behalf

of the plaintiff, defendant no.4 has accepted

the documents with counter claim which are

exhibited at Exh. 437 to 441.

5) Orders passed by the Trial Court and orders

in appeals

76. The Trial Court after considering oral

and documentary evidence led by both the

sides partly allowed the suit in favour of

the Plaintiff as under:

“ORDER

The documents mark-202/6,

mark413/32, mark-413/33, mark-413/45 and

mark-466/ (1) are hereby permitted and

allowed to be exhibited.

The Special Civil Suit No 120 of 1979

is hereby partly allowed and decreed.

The plaintiff M/s Hanspa Knit (P)

Ltd., Kandla, Gandhidham Kachchh is

entitled to recover the sum of Rs.

49,81,336-00 (Rupees forty nine lac,

eighty one thousand three hundred thirty

six only.) from the defendant Nos. 1 to 4

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with running interest at rate of twelve

per cent per annum from the date of the

suit till realization.

It is therefore ordered that the

defendant Nos. 1 to 4 shall pay the amount

of Rs. 49,81,33 with running interest at

rate of twelve percent per annum from the

date of the suit till date of the payment

to the plaintiff.

The rest of the claim and that suit

against the defendant Nos. 5 & 6 stand to

be dismissed.

It is hereby ordered that the

defendant Nos. 1 to 4 are restrained to

take money from standing sundry account in

New Bank of India Ltd., D-47 Defence

Colony., New Delhi and be directed to be

deposited the entire amount lying in such

sundary account of New Bank of India Ltd.,

New Delhi, in the court for payment and

satisfaction of the decree passed against

them in Special Civil Suit No. 120 of

1979.

It is further ordered that the

sixth defendant New Bank of India Ltd., D-

47, Defence Colony, New Delhi is

prohibited to pay any money standing and

lying in sundry account to the defendant

Nos. 1 to 4 and be directed to be

deposited all money lying in such sundry

account, into court within three months

from the date of this order for the

payment and satisfied decree passed

against the defendant Nos.1 to 4.

The defendant Nos. 1 to 4 shall

bear their own costs and costs of the

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plaintiff and that the defendant Nos 5 & 6

shall bear their own costs.

Decree will be draw accordingly in

favour of the plaintiff in Special Civil

Suit No. 120 of 1979.

The counter claim by way of the

cross suit which being filed by House of

Dubary and partners thereof is liable to

be dismissed and it is hereby dismissed.

The plaintiffs in the counter claim

by way of the cross-suit shall bear their

own costs and costs of the defendants.

Decree will be drawn accordingly.”

77. Being aggrieved by the Judgment and

Decree, First Appeal No.531 of 1986 is filed

by the original defendant nos. 1 to 4

challenging the Judgment and Decree dated

31.01.1986 passed by the Trial Court and

First Appeal 1093/1987 was filed by plaintiff

company under liquidation.

78. The appeal was admitted by order dated

11.04.1986 [Coram : Hon’ble Mr. Justice M.B.

Shah and Hon’ble Mr. Justice R.A. Mehta (As

their Lordships Were Then)].

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79. Thereafter by order dated 02.11.2006,

notice was issued to the Official Liquidator.

It appears that the matter was thereafter

taken for regular final hearing from 2018

onwards and the matter was adjourned from

time to time on one ground or the another,

either time was being sought by the

appellants-defendants or by the respondent.

80. It appears that Civil Application

No.1094 of 1986 was filed for stay wherein

interim order was passed by the Division

Bench on 28.04.1986 calling upon the New Bank

of India, Delhi to transfer an amount of Rs.

37.5 Lacs to the State Bank of India, Main

Branch, Ahmedabad to be invested in the name

of the Additional Registrar, High Court of

Gujarat which was transferred on 17.06.1986.

Civil Application No.2256/1986 was filed by

the plaintiff with a prayer to permit the

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withdrawal of the amount of Rs. 37.5 Lacs

which was standing in the name of Additional

Registrar, High Court of Gujarat, pursuant to

the order dated 28.04.1986 or in the

alternative to invest the amount of

Rs.37,67,420/- in any nationalised bank for a

period as may be specified by the Court. It

was also prayed to direct the New Bank of

India, to transfer Rs. 30 Lacs standing in

the Fixed Deposit account of the defendant

nos. 1 to 4 together with interest or in the

alternative to issue injunction against the

bank from operating and/or withdrawing any

amount from the Fixed Deposit account.

81. This Court (Coram: Hon’ble Mr. Justice

I.C. Bhatt and Hon’ble Mr. Justice J.P.

Desai, As their Lordships were then) by order

dated 23.09.1988 directed to deposit the

amount received by the Additional Registrar

with the Bank of Baroda, Navrangpura branch,

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Ahmedabad for a period of three months which

was renewed from time to time.

82. It is reported that as per the latest

status report obtained from State Bank of

India, GHCC Branch, Sola, if fixed deposit is

encashed prematurely, the payment amount will

be about Rs.7,14,70,627/- approximately

[(P)1,91,04,323/- + (I)5,23,66,304/-)

6)Submissions of appellants-defendants

83. Learned advocate Mr. C.B. Upadhyaya on

behalf of the appellants- original defendant

nos. 1 to 4 submitted that the Trial Court

lacked territorial jurisdiction under section

20 of the Code of Civil Procedure, 1908 and

that the most fundamental and threshold

challenge to the impugned judgment is that

the learned Trial Court at Bhuj lacked

territorial jurisdiction to entertain and try

the suit. The entire proceedings are

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therefore, a nullity and the decree is void

ab initio. It was submitted that Section 20

of the Code of Civil Procedure provides that

a suit may be instituted in a Court within

whose local limits the defendant resides,

carries on business, or personally works for

gain; or any of the defendants resides,

carries on business, or personally works for

gain; or the cause of action, wholly or in

part, arises. It was submitted that in the

present case, neither the Appellants-

defendants who are at New Delhi nor the cause

of action which took place at Delhi/Bombay

had any connection with Bhuj as the Place of

Contract Formation was Delhi and not Kandla.

However, the Trial court held that the

contract was formed at Kandla, relying upon

the letter dated 18.11.1978 (Ex. 205) written

by the Plaintiff which is erroneous finding.

It was submitted that the Trial court gave

the reason that on 04.10.1978, the orders

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were placed by Defendants No. 1 to 4, which

constituted the 'proposal' within the meaning

of the Indian Contract Act, 1872, and that

the letter dated 18.11.1978 stipulating

various conditions constituted the

'acceptance' by the Plaintiff, thereby

forming the contract at Kandla.

84. It was submitted that this reasoning is

fundamentally misconceived because as per

Sections 2, 3 and 4 of the Indian Contract

Act, 1872, a proposal is accepted either

expressly or impliedly by the acceptor. It

was submitted that in the present case, there

was no separate contract between the parties

with regards to the sale of goods and it is

an admitted position in the plaint itself

that the sale of goods was to take place on

the terms of the Letters of Credit which were

to be opened by Defendants No. 1 to 4 in

favour of the Plaintiff. The precondition for

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the execution of the confirmed order was the

opening of the Letters of Credit in favour of

the Plaintiff and the Letters of credit were

opened on 05.10.1978 in Delhi by New Bank of

India at the request of Defendants No. 1 to

4. It was submitted that when the plaintiff

accepted the Letters of Credit as the

beneficiary, the proposal of Defendants No. 1

to 4 was accepted. It was further submitted

that admittedly, the Letters of Credit were

opened in Delhi and therefore, the place of

contract was Delhi and not Kandla and the

Trial Court's conclusion that the place of

contract was Kandla is erroneous and

misconceived.

85. It was submitted that before the first

shipment was made on 27.11.1978, the Letters

of Credit (which were the only terms of the

contract between the parties) were amended

and modified on 09.10.1978, 14.10.1978,

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20.10.1978, and 18.11.1978, all of which were

communicated to the Plaintiff with sufficient

knowledge. Therefore, the letter dated

18.11.1978 at Exh.205 written by the

Plaintiff, which the Trial Court relied upon

as the ‘acceptance’, was written after the

contract had already been concluded through

the Letters of credit and therefore, reliance

on this letter to determine the place of

contract is, therefore, legally untenable.

86. Learned advocate Mr. Upadhyaya for the

appellants- defendant nos. 1 to 4 submitted

that place of performance of the contract was

Bombay and not Kandla and the finding of the

Trial Court that the place of delivery of

goods was Kandla, relying upon Sections 36

and 39 of the Sale of Goods Act, 1930 is

erroneous as the Letters of credit were

amended to permit shipment by air from Bombay

Airport to Greece Airport. It was submitted

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that this condition was stipulated in the

Letters of Credit and was made aware to the

Plaintiff and therefore, the place of

performance of the contract, as per the

conditions of the Letters of Credit, was

Bombay and not Kandla. Furthermore, it is an

admitted position in the plaint that

Defendant no.5-M/s. Airfreight (P) Ltd. acted

in its capacity as the agent of the Plaintiff

and was holding the goods as an agent of the

Plaintiff and the delivery of goods would

only be effected when the goods were

airlifted from Bombay, and not at Kandla and

therefore, the place of performance was

Bombay.

87. It was further submitted that Sections

36 and 39 of the Sale of Goods Act can only

be pressed into service in the absence of any

express contract with regards to the delivery

of goods whereas in the present case, the

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Plaintiff himself admitted that the delivery

of goods was to be handed over at Bombay. It

was therefore submitted that the benefit of

Sections 36 and 39 of the Sale of Goods Act

is not available to the Plaintiff. It was

submitted that however, the Trial Court

ignored that the goods were transported to

Defendant no.5-M/s. Airfreight (P) Ltd. in

terms of the conditions of the Letter of

Credit so as to export the goods from Bombay

which would be the final proof of delivery.

Therefore, the provisions of Sections 36 and

39 of the Sale of Goods Act cannot be pressed

into service to conclude that the goods were

delivered at Kandla.

88. Learned advocate Mr. Upadhyaya for the

appellants-defendants submitted that the

place of payment of consideration was Delhi

and not Kandla. However, the Trial Court

committed an error in holding that since the

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negotiating bank was to make payment in

favour of the Plaintiff at Kandla, the

performance of the contract had taken place

at Kandla.

89. It was submitted that the privity of

contract between the negotiating bank and the

Plaintiff is entirely different from the

privity of contract between the Plaintiff and

the Defendants. It was submitted that the

negotiating bank acts as an agent of the LC

Opening Bank (New Bank of India, Delhi) and

the LC Opening Bank is the party primarily

liable to the beneficiary under the LCs.

Therefore, the place of payment under the

contract was Delhi, where the LC Opening Bank

was located.

90. Learned advocate Mr. Upadhyaya for the

appellants-defendants submitted that, the

cause of action, in its entirety, arose in

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Delhi (contract formation and payment) and

Bombay (performance). Therefore, the Trial

Court at Bhuj had no jurisdiction whatsoever

to entertain the suit and therefore, the

entire proceedings are void and the decree is

a nullity.

91. In support of his submission, reliance

was placed on the following decisions:

1) Bhagwandas Goverdhandas Kedia v.

Girdharilal parshottamdas & Co. reported in

AIR 1966 SC 543.

2) A.b.C. Laminart Pvt. Ltd. v. A.P.

Agencies reported in AIR 1989 SC 1239.

3) Union of India v. Ladulal Jain reported

in AIR 1963 SC 1681.

4) Patel Roadways ltd. v. Prasad Trading Co.

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reported in AIR 1991 SC 1514.

92. Learned advocate Mr. Upadhyaya for the

appellants-defendants submitted that the

Trial Court erred in holding that the

contract was independent of the Letters of

Credit. It was submitted that the Letters of

Credit are individual contracts independent

of the terms and conditions of the underlying

contract of sale. However, in the present

case, the only terms and conditions of the

contract which have been placed into service

by the Plaintiff were the terms and

conditions of the Letters of Credit. No other

contract was executed between the parties. It

was submitted that as per the Letters of

Credit, the goods were to be delivered from

Bombay Airport to Greece Airport and this

condition was stipulated in the Letters of

Credit and was made aware to the Plaintiff.

Therefore, the terms of the Letters of Credit

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were the terms of the contract between the

parties, and the Trial Court's finding that

the contract was independent of the Letters

of Credit is erroneous. It was submitted tha

the Letters of Credit, as amended, had a

specific expiry date for shipment being

01.12.1978 and for negotiation of documents

being 30.12.1978. The Plaintiff dispatched

the second consignment on 27.12.1978, after

the Letters of Credit had expired and the

third consignment was dispatched in January-

April 1979, months after the Letters of

Credit had expired. It was therefore,

submitted that there was, no valid contract

under which the Plaintiff could claim payment

for the second and third consignments.

93. Learned advocate for the appellants-

defendants submitted that the counter-claim

filed by the defendants was wrongly held to

be barred under section 69 of the Indian

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Partnership Act, 1932 and the Trial Court had

wrongly dismissed the defendants' counter-

claim of Rs.1,08,85,152/- solely on the

ground that M/s. “House of Dubary” was not a

registered partnership firm, invoking the bar

under Section 69(3) of the Indian Partnership

Act, 1932.

94. It was further submitted that the bar

under Section 69 does not apply to the

counter-claim as the counter-claim is not a

'suit' within the meaning of Section 69(1)

and (2) of the Indian Partnership Act because

it is a proceeding incidental to the main

suit. It was submitted that the appellants-

defendants were not instituting a separate

suit, they were defending the Plaintiff's

claim and asserting their own rights arising

from the Plaintiff's breach in the same

proceedings. It was submitted that the

counter-claim is covered under sub-section

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(4) of Section 69 of the Indian Partnership

Act as an exception and Sub-section (4)(b)

provides that the section shall not apply to

any suit or claim of set off not exceeding

one hundred rupees in value. It was submitted

that though the amount exceeds Rs. 100, the

counter-claim is in the nature of a defensive

claim arising from the same transaction, and

the spirit of the exception should be

applied. Learned advocate Mr. Upadhyaya for

the appellants-defendants submitted that the

Trial Court's interpretation is inconsistent

as the Plaintiff sued the Appellant-firm as a

legal entity under Order XXX of the CPC and

the Trial Court passed a decree against the

firm and its partners, however, it is legally

untenable to recognize the firm for the

purpose of being sued but to de-recognize it

for the purpose of its own claim in the very

same suit. It was submitted that if the firm

can be a defendant, it can also be a claimant

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in a counter-claim. It was further submitted

that, the right to defend a suit is a

fundamental right and to deny the appellants-

defendants the right to prosecute their

counter-claim, which arises from the very

same transaction and is intrinsically linked

to the Plaintiff's claim, amounts to denying

them an effective right to defend. It was

submitted that the bar under Section 69 of

the Partnership Act was not intended to be

used as a sword by the Plaintiff to unjustly

enrich itself. It was submitted that though

the Trial Court relied upon the case of

Babulal Dhandhania v. Gautam and Co. reported

in AIR 1950 Cal. 391 and in case of Ajit

Kumar Maity v. Naranarainath Jana reported in

AIR 1955 Cal. 224 to hold that the counter-

claim is barred, however, learned advocate

for the appellants-defendants submitted that

these cases do not apply to the facts of the

present case and that the counter-claim is

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not a proceeding to enforce a right arising

from the contract in the same manner as a

suit but it is a defensive claim arising from

the plaintiff's own breach of contract.

Referring to the decision in case of

Vishwanath Lohia v. Allahabad Bank (AIR 1979

All. 12) relied upon by the Trial Court to

hold that a counter-claim has the same effect

as a cross-suit, learned advocate Mr.

Upadhyaya for the appellants-defendants

submitted that even if the counter-claim is

treated as a cross-suit, it is still

maintainable because the cause of action for

the counter-claim is the plaintiff's breach

of contract, which is different from the

cause of action in the main suit and the

counter-claim is intrinsically linked to the

main suit and cannot be separated from it.

95. In support of his submissions, reliance

was placed on the following decisions:

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1) Raptakos Brett & Co. ltd. v. Ganesh

Property reported in AIR 1998 SC 3085.

2) Haldiram Bhujiawala v. Anand Kumar Deepak

Kumar reported in AIR 2000 SC 1287.

3) Jagdish Chandra Gupta v. Kajaria Traders

(India) Ltd. reported in AIR 1964 SC 1882.

4) M/s. Shreeram Finance Corporation v.

Yasin Khan reported in AIR 1989 SC 1769.

5) Babulal Dhandhania v. Gautam and Co.

reported in AIR 1950 Cal 391.

96. Learned advocate Mr. Upadhyaya for the

appellants-defendants submitted that it was

the plaintiff and not the defendants, who was

in breach of contract. It was submitted that

the Trial Court erred in law in holding that

the defendants committed breach of the

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contract by not getting the Letters of Credit

extended and by diverting the airway bills.

It was submitted that this finding of Trial

Court is perverse and contrary to the

evidence on record as the breach was

committed by the plaintiff, and not the

defendants, as the plaintiff dispatched the

second and third consignments after the

Letters of Credit had expired, without any

valid contractual basis. It was submitted

that the plaintiff also changed its clearing

and forwarding agent from M/s. Dawn India

(its own agent) to Defendant no.5-M/s.

Airfreight (P) Ltd.( the appellants' agent)

without the defendants' consent and the

plaintiff also failed to ensure that the

goods were exported in compliance with the

terms of the Letters of Credit. It was

therefore, submitted that the appellants-

defendants were under no obligation to accept

or pay for goods shipped in violation of the

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fundamental terms of the contract hence, the

Trial Court's finding that the appellants-

defendants were liable, tantamount to

creating a new contract for the parties,

which is impermissible in law.

97. Learned advocate Mr. Upadhyaya for the

appellants-defendants submitted that the

Trial Court has erred in holding that the

defendants committed fraud by submitting

forged airway bills and exporting goods in

their own name as this finding is not

supported by the evidence on record. It was

submitted that Section 17 of the Indian

Contract Act, 1872, defines ‘fraud’ as the

suggestion as to a fact of that which is not

true by one who does not believe it to be

true, the active concealment of a fact by one

having knowledge or belief of the fact, a

promise made without any intention of

performing it, any other act fitted to

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deceive or any such act or omission as the

law specially declares to be fraudulent. It

was further submitted that, the Trial Court

itself has held in Para 65-66 of the impugned

Judgment that the defendants were not in a

position to dominate the will of the

plaintiff and that the transaction cannot be

considered unconscionable. It was submitted

that the Trial Court further found that the

plaintiff had come forward on its own accord

to send the goods through M/s. Vijay

Transport Co. from Kandla to Bombay and

delivered the same to Defendant no.5-M/s.

Airfreight (P) Ltd. and there was no

inducement from the defendants. Therefore,

the allegation of fraud is not proved. It was

submitted that the appellants-defendants

acted in good faith to carry out the export

of goods as per the contract, however, the

dispute arose because the plaintiff was

unable to pay the air freight charges in

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advance, which was a requirement under the

Letters of Credit and the appellants-

defendants permitted defendant No. 5 to take

delivery of the airway bill on payment of

freight which was a commercial arrangement

and not fraud.

98. Learned advocate Mr. Upadhyaya for the

appellants-defendants submitted that the

decreed amount is arbitrary and based on

manifest errors as the Trial Court decreed a

sum of Rs.49,81,336/- with 12% interest which

is arbitrary and based on manifest errors of

calculation and law as the Trial Court failed

to account for the fact that no valid

contract existed for the second and third

consignments, as the Letters of Credit had

expired. It was submitted that the Trial

Court also did not consider the costs borne

by the defendants in connection with the

export of goods or the losses suffered by the

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appellants-defendants due to the plaintiff's

breach of contract or the payments already

made by the defendants to the plaintiff for

the first consignment. It was further

submitted that the decreed amount includes

amounts for the third consignment for which

there was no clear evidence of delivery or

acceptance in accordance with any valid

contract and therefore, the Trial Court's

calculation is, arbitrary and unsupported by

evidence.

99. Learned advocate Mr. Upadhyaya for the

appellants-defendants submitted that the

Trial Court has incorrectly fastened joint

and several liability as the plaintiff's suit

alleged that the appellants - Defendant nos.

1 to 4 were jointly and severally liable

along with the clearing agent -Defendant 5

and the New Bank of India -Defendant 6. It

was submitted that the Trial Court could not

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have exonerated defendant nos. 5 and 6 from

any liability in its findings. It was

submitted that there is a logical and legal

contradiction because when the agents through

whom the alleged fraud or breach was

committed are not liable, the principal

cannot be held liable on the same cause of

action and therefore, the findings of the

Trial Court are not tenable on this issue.

100.Learned advocate Mr. Upadhyaya

therefore, prayed to quash and set aside the

impugned Judgment and Decree dated 31.01.1986

and dismiss the Civil Suit No. 120 of 1979

filed by the original plaintiff- respondent

no.1 as being without jurisdiction and

without merits. It was also prayed to allow

the counter claim filed by the appellants-

defendants and pass a decree in their favour.

In the alternative, it was prayed to reduce

the decreed amount to the extent of

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legitimate claims and set-offs of the

appellants-defendants.

7)Submissions of the respondent-plaintiff

101.Learned advocate Mr. Abhijit Joshi for

plaintiff – respondent no.1 submitted that

the question of jurisdiction has arisen on

the basis of the averments made in the

plaint, written statement, counter claim,

rejoinders and the correspondence which took

place between the parties. It was submitted

that the place of suing in the suit arising

out of a contract is governed by Section 20

of Code of Civil Procedure, which states that

suits to be instituted where cause of action

arises wholly or partly, in other words, the

bundle of essential facts which are necessary

for the plaintiff to prove, before the

plaintiff can succeed in the suit, refers

entirely to the grounds set-forth in the

plaint as cause of action. It was submitted

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that clause (c) of Section 20 of Code of

Civil Procedure makes it clear that a suit

may be instituted within the local limits of

whose jurisdiction the cause of action wholly

or in part arises. It was therefore,

submitted that the making of the contract,

itself is part of the cause of action and the

determination of the place where the contract

was made is part of cause of action. It was

further submitted that as set out in the

plaint, the contract was finally concluded on

accepting the orders by the plaintiff at

Kandla, Gandhidham, Kuchchh and admittedly,

there was a contract between the parties that

the delivery of the goods would take place by

shipment from Kandla and therefore, in such

circumstances, the admitted position is that

the goods were to be lifted by shipment from

Kandla but subsequently, on the request of

the defendants, the goods were lifted by Air

from Bombay and even the plaintiff had agreed

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to lift the goods by Air from Bombay on the

same terms and conditions of the contract. It

was therefore, submitted that the whole cause

of action arose at Kandla. It was submitted

that there is another aspect of the matter,

that the defendants, requested the plaintiff

to deliver the goods at Bombay by Air, hence,

it is clear that the defendants had requested

to lift the goods by Air from the Bombay.

102.It was submitted that in the present

case, there is nothing to show that the

terms and conditions of the contract were

altered for the payment of the goods as the

terms of the contract were that the price of

the goods should have been paid by LC Opening

bank to State Bank of India at Kandla,

therefore, the place of payment was certainly

at Kandla and not at Bombay. It was submitted

that there were preliminary negotiations at

Bombay, Delhi and Hongkong and then the

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Letters of Credit were opened and orders were

placed by the defendants and these orders

were accepted by the plaintiff at Kandla. It

was submitted that this would show that the

acceptance of the offer was made at Kandla.

It was submitted that this being so, it is

clear that the cause of action had arisen at

Kandla and therefore, Court at Bhuj would

also have jurisdiction to entertain the suit

filed by the plaintiff.

103.Learned advocate Mr. Joshi for the

respondent no. 1 submitted that the suit is

based upon the breach of the contract for

recovery of the price of the second and the

third consignments from the defendants Nos.1

to 4. It was submitted that the suit is based

on two counts, first, the breach of contract

and second, the damage resulting from the

tort have been mentioned in the plaint. It

was submitted that admittedly, the goods of

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third consignment were sent from Kandla to

Bombay for the purpose of the export to the

defendant No.5, through M/s. Vijay Transport

Co. therefore, the Civil Judge (S.D.) at Bhuj

would have jurisdiction to try and decide the

suit on all counts, and hence issue No.2-A is

rightly decided in the affirmative.

104.Learned advocate Mr. Joshi submitted

that the contract was entered between the

plaintiff and the defendants Nos.1 to 4 and

under the contract, the components of

electronic goods which were being imported,

were to be exported after assembling to six

Yugoslavian buyers and the goods relating to

third consignment were sent through M/s.

Vijay Transport Co. from Kandla to Bombay by

the plaintiff as the name of the consignor

and the name of defendant No.5 was mentioned

as consignee in the consignment note. It was

submitted that nowhere in goods consignment

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note of M/s. Vijay Transport Co., the name of

the defendant No.1 was mentioned as

consignee. Thus, the defendant No.5 received

the goods from M/s. Vijay Transport Co. for

and on behalf of the plaintiff as the agent

of the plaintiff but the defendant Nos.1 to 5

acted in collusion with each other because

the defendant No.5 deliberately did not send

the Airway bill to the plaintiff but sent the

said Airway bill to the defendant No.1, and

thereby defrauded the plaintiff. It was

further submitted that the defendant No.5,

ought not to have mentioned the “House of

Dubary”, New Delhi in the Column of

"Shipper", in the Airway bill as the

defendant No.5 was well aware that the goods

were forwarded by the plaintiff from Kandla

Free Trade Zone which were exempted from

Custom duty, as the plaintiff was having

license and the goods were lying within the

vicinity of the Free Trade Zone Kandla.

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Learned advocate Mr. Joshi further submitted

that the witness on behalf of the respondent

-original plaintiff- namely Shree Anilbhai

Chandubhai Pota who was examined at Ex.276,

has stated that the factory of the plaintiff

company was situated within the limits of

Free Trade Zone of Kandla, and all the

benefits of the Free Trade Zone Kandla were

availed and plaintiff was not liable to pay

customs duty for imports and exports of the

goods. It was submitted that Shree Anilbhai

Chandubhai Pota had also stated that the

defendants Nos.2 to 4 had placed four orders

in name of the defendant No. 1 who opened the

said Letters of Credit produced at Ex.278 to

281 which bears the signature of the

defendant No.3. It was further deposed by the

said witness that the defendants Nos.1 to 4

also gave confirmation of those orders and

the letter of confirmation of the orders is

produced at Ex.282. It was submitted that the

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said witness has also stated that the

Yugoslavian buyers were supposed to open the

Letters of Credit in favour of the defendant

No.1, in the Bank of Defendant No.1 i.e. New

Bank of India, New Delhi -Defendant No.6. It

was further deposed that out of those seven

orders, relating to the Letters of Credit,

the defendant No.1 opened four letters of

credit in favour of the plaintiff's bank –

i.e. State Bank of India, Kandla which are

produced at Exh.290 to Exh.309, along with

other papers. It was also deposed that the

goods relating to the second and third

consignments were supplied through the

defendant No.5 and the defendant No.5 was

supposed to send the Airway bills for the

second and third consignments to the

plaintiff, however, the defendant No.5 did

not send those Airway bills and sent to

defendants Nos.1 to 4. It is also stated in

the deposition that the defendants Nos.1 to 4

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had then submitted those Airway bills

directly to the defendant No.6 New Bank of

India, New Delhi and the Airway bills were

forged and goods were exported on the basis

of the fabricated documents. It was also

submitted that, the custom authorities had

issued notice to the defendants Nos.1 to 4

and recorded their statements which are

produced at Exh.334 to Exh. 336. The witness

of the plaintiff has also said that the

defendants Nos.1 to 4 were also prosecuted

for the breach of the provisions of the

Customs Act and were held guilty for the same

and the Judgment thereof is produced at

Exh.337, thereafter the defendants Nos.1 to 4

had preferred the appeal before Board of

Revenue at New Delhi and the said appeal was

allowed and the order of punishment against

the defendants Nos.1 to 4 was set aside. It

was further submitted that the defendant No.5

was bound to export the goods relating to

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third consignment within one month and if it

was not possible then the goods should have

been returned at Kandla. However, the goods

of third consignment were detained for about

five months and were not exported within the

stipulated time limits, therefore, various

letters were written to the defendant No.5

asking to return the goods of the third

consignment at Kandla, but defendant No.5 did

not give any heed to the said letters which

are produced at Exh.339 to Exh.347. It was

submitted that the plaintiff company also

wrote a letter to Assistant Customs Collector

at Bombay and at Kandla which is placed at

Exh.348, and therefore the Assistant Customs

Collector at Kandla wrote the letter at

Exh.349 to the defendant No.5 and informed

the defendant No.5 to return the goods at

Kandla. The witness has also stated that

therefore the defendant No.5 sent telex

message and thereby gave threat, that they

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would cancel other orders. Copies of

correspondence took place between the

plaintiff and the defendants Nos.1 to 5 are

produced at Exhs.450 to 460.

105.Learned advocate for the plaintiff -

respondent no. 1 submitted that the documents

produced at Exhs. 328, 335, 336, 339 to 349,

357 to 358, 369, 443, 451 to 456 and 459 460

clearly proves that the respondent-original

plaintiff was not liable to pay the Air

Freight relating for second and third

consignments but the defendant No.1, had to

make the payments thereof. It was submitted

that the Letters of Credit were amended on

F.O.B. basis and Air Freight was to be paid

by “House of Dubary” - appellant No.1

Company. In this regard, reliance was placed

on the Telex message at Exh.357 dated

4.12.1978 to show that the defendant No.1

agreed to pay airfreight on F.O.B. basis and

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therefore, there was no question to pay the

airfreight by the respondent-plaintiff for

the second and third consignments. It was

therefore, submitted that the respondent-

plaintiff was not liable to pay airfreight

when goods were handed over to the defendant

No.5, for the purpose of the export as the

carriers.

106.It was further submitted that the goods

relating to third consignment were sent

through M/s. Vijay Transport Co., Gandhidham,

via Truck bearing registration No. GTY 3883

from Kandla to Bombay on 9.12.1978 showing

plaintiff as "Consignor" in goods consignment

note and showing the name of M/s. Dawn India

as consignee and therefore, M/s. Dawn India

as the representative of the plaintiff handed

over the goods to the defendant No.5, on

27.12.1978 for the purpose of exporting those

goods to Yugoslavian buyers. It was submitted

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that the defendant No.5 was the carrier and

the plaintiff was the owner of the goods and

the goods were handed over for shipment,

subject to the payment of airfreight by the

defendant No.1 and the goods were to be

exported to Yugoslavia via Athens (Greece) on

behalf of the plaintiff.

107.It was submitted that the plaintiff

wrote the letter vide Exh.339 dated 13.1.1979

to the defendant No.5 to remit all the

documents to the plaintiff and also informed

the defendant No.5 that the defendant No.5

would be responsible for all payments and

would be answerable to the customs

authorities. It was submitted that thereafter

the plaintiff wrote another letter at Exh.

342 dated 3.3.1979 to the defendant No.5 and

requested him to call upon the documents from

the defendant No.1 and requested to hand over

the same to the plaintiff so as to enable the

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plaintiff to negotiate with the Bank. It was

submitted that both the plaintiff and the

Customs Authorities intimated by writing

several letters and by Telex messages to the

defendant No.5, and requested to return the

goods at Kandla, however, the goods were

lifted and exported to Yugoslavia by using

the name of the defendant No.1, as the

consignor in the Airway bill at Exh. 317 of

the third consignment.

108.It was therefore, submitted that in view

of the facts emerging from the record and

documentary evidence produced before the

learned Trial Court, it is not in dispute

that the name of the defendant No.1, has been

shown in the airway bill at Exh.317 in the

column "shipper's name and address" as “House

of Dubary” New Delhi, India, and the cargo

was lifted from Bombay on 4.5.1979 whereas

the Airway bill at Exh.315 which is in-

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respect of second consignment has shown in

the column "shipper's name and address" of M/

s. Hanspa Knit (P) Ltd., “House of Dubary”,

Kandla Free Trade Zone, Gandhidham Kachchh,

New Delhi India and the second cargo was

lifted on 27.12.1978 and it is also not in

dispute that the Airway bill was delivered to

the defendant No.1, by the defendant No.5,

and it was not sent to the plaintiff.

109.It was further submitted that the goods

relating to the third consignment were

exported by the defendant No.5 from Bombay to

Yugoslavia via Ethens (Greece) and those

goods were intended to be exported to

Yugoslavian buyers under the orders as placed

by the defendant No.1, being the agent of the

said foreign purchasers, accordingly, those

goods were delivered to the defendant No.5,

on 27.12.1978 by the plaintiff through its

own clearing and forwarding agent M/s. Dawn

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India, but the defendant No.5 deliberately

and in collusion with the defendants Nos.1 to

4 did not do so. It was therefore, submitted

that the plaintiff demanded back the

possession of the goods from the defendants

Nos.1 to 5 in terms of the letter at Exh.369,

however, subsequently on 4.5.1979, the said

goods were exported and delivered to

Yugoslavian buyers.

110.It was also submitted that the defendant

No.6 i.e. New Bank of India was also liable

to make the payments of the second and third

consignments under the Letters of Credit on

receipt of the actual amounts from the Bank

of the Yugoslavian buyers, however, the

defendant No.6 failed to do so and supported

the defendant No.1, in releasing the payment

in personal account of the defendant No.1,

which is nothing but collusive fraud on the

part of the defendants. It was submitted that

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the Yugoslavian buyers opened seven

irrevocable Letters of Credit towards the

payments of the goods as the photocopies of

such Letters of Credit are produced at Exh.

283 to Exh.289, however, in turn, the

defendant No.6 - New Bank of India opened

four Letters of Credit in favour of the

plaintiff in the State Bank of India, Branch

office Kandla. It was submitted that the

photocopies of such Letters of Credit along

with the documents produced at Exh. 290 to

Exh.309 clearly shows that the defendant

No.1, opened four Letters of Credit valued at

US$ 18,67,488-75 equivalent to Rs.

1,49,47,909-00 in favour of the plaintiff for

supply of the goods as mentioned in the said

Letters of Credit namely, Radio Cassette,

Transistor Radio, Car Radio, Cassettes etc.

It was pointed out that the Letters of Credit

at Exh. 290, Exh.295, Exh.300 and Exh.305

were issued on 5.10.1978 and price was fixed

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on C.I.F. basis for export from Kandla to

THESSALONIKI (Greece), but subsequently, the

date and the time was extended up to 14

th

December, 1978 and 30

th

December, 1978,

respectively without altering the terms and

conditions of the Letters of Credit. It was

submitted that the documents relating to this

amendment are produced at Exh.294, Exh.299,

Exh.302 and Exh.307 and after the said

amendment which was carried out on

14.10.1978, further amendment was carried out

on 28.10.1978 with regard to mode of shipment

and amended mode of shipment was by Air from

Bombay Airport to THESSALONIKI (Greece)

Airport.

111.Learned advocate Mr. Joshi for the

respondent submitted the plaintiff has filed

the suit to recover the price of the second

and third consignments from the defendants

Nos.1 to 4 on the ground that the defendants

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Nos.1 to 4 were working as the agents of the

Yugoslavian buyers and worked as the export

house for the plaintiff and therefore, the

Yugoslavian buyers opened the Letters of

Credit in the name and in favour of the

defendant No.1, which are on record at Exh.

283 to Exh.289 dated 20.6.1978 and 21.6.1978

and after that the defendant No.1 placed four

orders with the plaintiff at Exh. 278 to

Exh.281 on 4.10.1978 and not only that, but

the defendant No.1, also opened four Letters

of Credit in favour of the plaintiff through

the defendants No.6 - New Bank of India Ltd.,

New Delhi which are also placed at Exh. 290,

Exh.292, Exh.295, Exh.298, Exh.300, Exh.301,

Exh.305 and Exh.306. It was further

reiterated that the defendant No.1 asked the

confirmation of those orders and the

plaintiff in turn made the confirmation in

terms of the letter at Exh. 282, hence, the

contract was concluded as per the Letter of

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Credit which is produced at Exhs. 282. It was

submitted that it has been specifically

stated by the plaintiff that the original

Letters of Credit which were opened by

Yugoslavian buyers in favour of “House of

Dubary” New Delhi, and defendant No.1 in turn

opened seven Letters of Credit in the name

and in favour of M/s. Hasmukh Brothers (HK),

Hongkong as per at Exh. 374 to Exh.380 on

4.9.1978 ,however, M/s. Hasmukh Brothers (HK)

Ltd., was unable to perform the entire

contract work, hence as per mutual consent of

all the parties, it was decided to open three

Letters of Credit in the name and in favour

of M/s. Hasmukh Brothers (HK), Hongkong and

four Letters of Credit to be opened in the

name and in favour of the

respondent/plaintiff – i.e. M/s. Hanspa Knit

(P) Ltd., therefore, the Letters of Credit at

Exh. 381, Exh.383 and Exh.386 were opened in

name and in favour of M/s. Hasmukh Brothers

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(HK) on 5.10.1978 and four Letters of Credit

at Exh.290, Exh.295, Exh.300 and Exh.305 were

opened in the name and in favour of the

plaintiff.

112.It was further submitted that it was not

possible to supply the entire goods of the

orders, within specified time and therefore,

the plaintiff requested to extend the time

limit up to 20.12.1978 for the shipment and

such time limit was extended by the letter at

Exh. 253 dated 26.10.1978, accordingly, the

plaintiff supplied the goods in three parts

on 22.11.1978, 25.11.1978 and on 12.12.1978

relating to the first consignment and that

the amount in Indian Rs.26,80,327.50 was paid

by the defendants Nos. 1 to 4 on the payments

received from Yugoslavian buyers under the

Letters of Credit as per the contract,

however, the plaintiff did not receive its

payment of second and third consignments and

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therefore the present suit is filed.

113.Learned advocate Mr. Joshi for the

respondent no. 1 submitted that the claim has

been setup in Para No.10 of the plaint for an

amount of US$ 64,80,50-00 for the second

consignment and has relied upon the invoices

which are at Exh. 310 to Exh.312 and the

Airway bill which is at Exh. 315. It was

submitted that it is an admitted position

that the defendant No.1, has already received

the payment of goods from Yugoslavian buyers

and agreed to pay such amounts of the second

consignment to the plaintiff in March, 1979

or latest by first week of April, 1979 in

terms of letter at Exh. 205, but the payments

were avoided even after the assurances were

given by the defendants Nos.1 to 4. In

respect of the third consignment, it was

submitted that the defendant No.1 sent the

goods to Yugoslavian buyers as per the Airway

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bill at Exh.317 dated 4.5.1979 and while

sending the goods, the defendants

deliberately and willfully omitted to mention

the name of the plaintiff in shipper's column

of the Airway bill and mentioned the name of

defendant No.1 in the shipment sent by the

defendant No.1, therefore, the plaintiff has

set up the claim of the total amount of US$

1,79,157-82, by giving the details in Para

No.13 of the plaint in respect of third

consignment and has relied upon the documents

produced at Exh. 317 and Exh.325 i.e. the

Invoice, Packing List, Inspection

Certificates, Certificate of Origin and

AirWay Bill. It was submitted that though the

defendant No.1 had already received the

entire amount of third consignment from

Yugoslavian buyers during the pendency of the

suit, but no payment was made to the

plaintiff and thereby committed the breach of

the contract.

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114.Learned advocate Mr. Joshi in reply to

the contention of the defendants that the

plaintiff failed to supply the goods within

the specified time limit and even after

extending the time limits and therefore,

there was a breach of the contract on the

part of the plaintiff and the defendants are

not liable for any loss to the plaintiff or

not liable to pay any money/dues as claimed

in the suit, referred to deposition of Mr.

Deepak Darbari on behalf of the defendants

Nos.1 to 4, at Exh. 415 wherein he has

admitted that Mr. Deepak Darbari was the

partner in year the 1978 but retired from the

partnership as a partner, and it was admitted

that the partnership firm is being registered

for the purpose of the Income Tax and not

registered under the Partnership Act. It was

alleged that the plaintiff failed to supply

the goods relating to second and third

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consignments within stipulated time limit and

defendants have not renewed the Letters of

Credit either in favour of the plaintiff or

in favour of M/s. Hashmukh Brothers (HK) to

submit that Deepak Darbari has falsely

contended the appellants/original defendants

has not intimated the respondent/plaintiff to

send the goods of second and third

consignments and not made any fresh contract

thereof and did not give any consent even

after sending the goods of second and third

consignment and that the defendant No.1 has

paid the freight, insurance premium and borne

the expenses of handling the goods for the

second and third consignments and also paid

the demurrage of the goods. It was therefore,

submitted that except deposition of the

defendant no.2 there is no other documentary

evidence on record to prove such allegations.

115.Learned advocate Mr. Joshi further

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submitted that the contentions which are put

forth by the appellants/defendants are

required to be examined in relation to and in

respect of the evidence available on the

record and as a matter of fact, there is

voluminous evidence which proves that the

second and third consignments were exported

to Yugoslavian buyers under the contract and

not exported at the personal risk of the

plaintiff.

116.It was submitted that the defense put

forth by the appellants/defendants is totally

against the documentary evidence and it is

with a view to avoid the liability thereof,

and the entire correspondence which took

place between the parties clearly shows that

the goods were sent under F.O.B. to the

defendant No.5 for the purpose of export to

Yugoslavian buyers and the Yugoslavian buyers

accepted those goods under the contract and

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under the Letters of Credit, the amount was

paid to the defendant No.1. It was submitted

that it is also clear from the correspondence

that the defendant No.1, entered in to an

agreement with the defendant No.5, for the

arrangement of the charter on basis of F.O.B.

contract as intimated and it is also clear

from the evidence that the plaintiff was

repeatedly asking the defendant No.5 to

export the goods of third consignment, but

defendant No.1 delayed to export the same

because Yugoslavian buyers wanted to re-

validate their license and due to that reason

there was delay in exporting the goods.

117.It was submitted that it is further

clear from the correspondence that the

Yugoslavian buyers had intimated to the

defendant No.1, to pay the price of the

second consignment and the defendant No.1,

promised the Yugoslavian buyers to pay such

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amount to the plaintiff immediately,

accordingly the defendant No.1, gave the

assurance to the plaintiff that they would

make the payment of the second consignment at

end of March or first week of April 1979. It

was pointed out from the evidence that under

the terms of the contract, the defendant

No.1, has to make the payment of the goods to

the plaintiff on receiving the same from

Yugoslavian buyers though Bank to Bank, but

the defendant No.1 did not make the payment

of the second consignment even after

receiving the payment from Yugoslavian buyers

and kept in its own account of the

partnership firm, hence it was submitted that

the entire correspondence as well as the oral

evidence on the record leave no doubt that

the plaintiff was ready and willing to act as

per the terms of the contract and accordingly

acted upon it also. It was submitted that

oral evidences of the witness Deepak Darbari

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is self-contradictory against the

correspondence which took place between the

parties to the contract, therefore, the

defendants Nos.1 to 4 only with a view to

avoid their liabilities got up such defense,

evidence and arguments which is nothing but

an afterthought.

118.It was therefore submitted that the

learned Trial Court has rightly come to the

conclusion that the defendants Nos.1 to 4

committed default in making payments, and it

is also quite clear that the defendant No.1,

was not having any grievance about the delay

in performance of the contract when it was

agreed with the consultant of the Yugoslavian

buyers to extend the time limits of the

contract and that extension was made

voluntarily. It was submitted that the

defendants agreed to take the delivery of

goods of the second and third consignments

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even after the expiration of the time limit

and not complained at any time for the delay

in the correspondence and accepted the

delivery even after expiry of time limit.

119.It was therefore submitted that keeping

in view the documentary evidences, it is

impossible to accept the version of Mr.

Deepak Darbary that there is no such breach

of the contract by the defendants and

defendants are not liable to make any payment

to the plaintiff.

120.It was further submitted that, the

plaintiff has properly and sufficiently

explained about the outstanding amount which

is payable by the defendants to the plaintiff

under writing which is on record at Exh. 205

and that cogent evidence at Exh.205 is duly

supported by other documentary evidence and

the oral evidence, hence there was no reason

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for the learned Trial Court to discard such

cogent and reliable evidence against the

absurd, vague and baseless oral statement of

Mr. Deepak Darbari.

121.It was submitted that the documentary

evidence produced by the plaintiff clearly

establishes that the defendants committed

breach of the contract and committed default

and they were trying to avoid the legitimate

dues of the plaintiff under the contract

though admittedly the appellants/defendants

have received the entire money of the

consignments from Yugoslavian buyers.

Therefore, the learned Trial Court has

rightly given the findings that the

defendants Nos.1 to 4 has committed the

breach of the contract and the plaintiff is

entitled to recover the payment of second and

third consignments from the defendants Nos. 1

to 4.

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122.Learned advocate Mr. Joshi submitted

that the defendant No.1 firm namely “House of

Dubary” and the partners thereof have filed

the counter claim by way of a cross-suit for

recovery of the sum as damages from the

plaintiff, however from the oral evidence of

Mr. Deepak Durbari, it is evident that firm

namely, “House of Dubary” is only registered

for the purpose of Income Tax Act and not

registered under the provisions of the Indian

Partnership Act. It was submitted that the

plaintiff has taken the plea that the cross-

suit is barred by the Section 69 of the

Indian Partnership Act for the want of the

registration of the partnership firm namely,

“House of Dubary”.

123.It was submitted that the provision of

Section 69 of the Indian Partnership Act is

mandatory which provides that the

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unregistered firm shall not be entitled to

institute any suit or in form of the Counter

Claim or the cross suit to enforce the right

arising from the contract. It was therefore

submitted that the effect of the Section 69

is that the suit by the unregistered firm is

bad in law and not tenable at its inception

as Section 69 does not confer any right and

debars the unregistered firm from filing the

suit.

124.It was submitted that once the Court is

satisfied that the firm is not registered,

the Court must treat the suit or cross-suit

as if it has not been filed and Court should

proceed to dismiss it and in the present case

the firm namely, “House of Dubary” is not

registered under the provisions of the Indian

Partnership Act then the counter claim by way

of the cross suit is not maintainable. It was

therefore submitted that the learned Trial

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Court has rightly rejected the Counter Claim

of the defendants.

125.Learned advocate Mr. Joshi for the

respondent no. 1 submitted that the liability

for the freight, insurance etc. relating to

the second and third consignments is of the

defendant No.1 firm because the firm took the

delivery of the goods at Bombay through their

agent defendant No.5, however, the defendants

have failed to prove that they are not liable

to pay freight, insurance etc. as the

defendant No.5 -M/s. Air Freight (P) Ltd. has

not come forward to support the case of the

defendant No.1 firm “House of Dubary” and has

remained absent and there is only the bare

words of Mr. Deepak Darbary that the

demurrage was paid by defendant no.1 firm

without any corroborative evidence on record.

It was submitted that the plaintiff has taken

the plea from the beginning in the

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correspondence that the defendant No.1 firm

“House of Dubary” was not empowered to keep

the goods in private godown against the

provisions of Customs Act which is also

evident from the record as the defendants had

withheld the goods on their own against the

instructions of the plaintiff and it is clear

from the correspondence that the defendant

No.1 firm “House of Dubary” wrote the letter

dated 5.12.1978 addressing to the plaintiff

wherein it was clearly mentioned that the

plaintiff would not be liable for the

demurrage, and this admission on the part of

the defendants is sufficient to exonerate the

plaintiff from the responsibility of the

demurrage and therefore, learned Trial Court

has correctly held that the defendants are

not entitled to set off for the amount of

demurrage from the plaintiff's claim.

126.Learned advocate Mr. Joshi for the

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respondent no. 1 submitted that in all

respect the appellants (original defendants)

have failed to prove that the plaintiff has

committed breach of the contract, on the

contrary, it is clearly proved and

established by the plaintiff that the

defendant No.1 firm and its partners have

committed the breach of the contract and have

not paid the dues to the plaintiff namely,

M/s. Hanspa Knit (P) Ltd., and withheld the

legitimate payment of the plaintiff even

after receiving the payment from Yugoslavian

buyers without any substantial reasons.

127.Learned advocate Mr. Joshi for the

respondent no. 1 in light of the facts of the

present case submitted that the Court may

allow the total claim of the respondent

(original plaintiff) for an amount of

Rs.62,91,245.18 from all the defendants Nos.1

to 6 of the Original Special Civil Suit

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No.120/1979 with running interest 12% per

annum from the date of filing of the Suit

till the date of the payment and prayed for

allowing the First Appeal No.1093/1987 and

dismissing the First Appeal No.531/1986.

128.Learned advocate Mr. Joshi for the

plaintiff raised preliminary objection

regarding the maintainability of appeal. It

was submitted that the appeal filed by the

appellants (original defendant nos. 1 to 4)

is not maintainable as per Section 69 of the

Partnership Act, more particularly, the

provisions of Section 69(2) of the

Partnership Act, 1932 which is as under: -

"Section 69(2) - No suit to enforce

a right arising from a contract

shall be institute in any Court by

or on behalf of a firm against any

third party, unless the firm is

registered and the persons suing are

or have been shown in the Register

of Firms as partners in the firm."

129.It was submitted that in the present

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case it is categorically admitted by Deepak

Dubari in his deposition (Exh-415) and also

admitted in his cross examination that the

partnership firm namely, “House of Dubary”

defendant No.1 is not a registered

partnership firm. It was submitted that the

learned Trial Court has rightly come to the

conclusion in Para No.110 of the Judgment.

It was therefore submitted that in view of

aforesaid factual matrix as well as

provisions of law, the present Appeal filed

by the appellants herein deserves to be

dismissed on this ground alone without

entering into merits of the matter.

130.In support of his submission reliance

was placed on the judgments of the Hon'ble

Apex Court in case of Loonkaran Sethiya and

Ors. Versus Ivan E. John and Ors. , reported

in MANU/SC/0048/19 76 and in case of Jagdish

Chander Gupta Versus Kajaria Traders (India)

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Ltd., reported in MANU/SC/0047/1964.

131.Learned advocate for respondent no. 1-

plaintiff submitted that on one hand, the

appellants-defendants have contended that,

Trial Court is not having jurisdiction, and

on the other hand the appellants-defendants

had filed their counter claim before the same

Court. It was therefore submitted that once

the defendants have filed their counter claim

before the Bhuj Court, then the defendants

are estopped from raising the contentions

about the jurisdiction of the Bhuj Court. It

was further submitted that the appellants-

defendants herein cannot blow hot and cold

both together as once they submitted

themselves to the jurisdiction of the Bhuj

Court by way of filing the counter claim, it

is crystal clear that the defendants have

accepted the jurisdiction of the Court at

Bhuj-Kutchh and therefore, defendant nos. 1

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to 4 are not legally entitled to raise the

contentions about the jurisdiction of the

Trial Court to try and decide the suit.

132.It was submitted that if the appellants-

defendants were of the firm opinion and

belief that the Court at Bhuj is having no

jurisdiction in any case and only the Court

at Bombay is having jurisdiction, then in

that case, they ought to have filed an

independent suit before the Civil Court at

Bombay instead of filing counter claim before

the Bhuj Court. It was therefore submitted

that when the defendants themselves submitted

and accepted the jurisdiction of the Bhuj

Court by way of filing counter claim, which

is nothing but a substantial suit in nature,

the contentions of the appellants-defendants

on the ground of jurisdiction is baseless and

not tenable in eye of law. Learned advocate

for the respondent no. 1 places reliance on

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the provision of Section 19 of the Code of

Civil Procedure, 1908 which reads as under: -

"Section 19 - Suits for compensation for

wrongs to person or movables

When a suit is for compensation for

wrong done to the person or to movable

property, if the wrong was done within

the local limits of the jurisdiction of

one Court and the defendant resides, or

carries on business, or personally works

for gain, within the local limits of the

jurisdiction of another Court, the suit

may be instituted at the option of the

plaintiff in either of the said Courts."

133.It was submitted that the aforesaid

provision itself provides an option to the

plaintiff to institute the suit in either of

the Courts. It was further submitted that the

making of a contract is part of cause of

action, and performance of a contract is also

a part of cause of action, hence a suit in

respect of the breach can always be filed at

the place where the contract was made or it

should have performed or where its

performance is completed. Not only that, even

part of cause of action arises where money is

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expressly or impliedly payable under the

contract. In support of the aforesaid

submission, reliance was placed on the

judgment of the Hon'ble Apex Court, in the

matter of A.B.C. Laminart Pvt. Ltd. and Ors.

Versus A.P. Agencies, Salem,

MANU/SC/0001/1989. Therefore the learned

Trial Court has rightly decided the issue

No.2-A in affirmative on the point of

jurisdiction.

134.With regard to the applicability of

provisions of Sale of Goods Act, learned

advocate for the plaintiff submitted that it

is an admitted position that, the goods of

second and third Consignments were delivered

through M/s. Vijay Transport Co. at Bombay to

the defendant No.5, who was the clearing and

forwarding agent of the appellants herein. It

was submitted that at the instance of the

appellants-defendants the goods of second and

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third consignments were sent to defendant

No.5 for the purpose of export to Yugoslavian

buyers, which prima facie is deemed to be a

delivery of the goods to the buyer. In

support of this submission, Section 39 of

Sale of Goods Act, 1930 was referred to which

reads as under: -

"39(1) Delivery to carrier or

wharfinger- Where, in pursuance of a

contract of sale, the seller is

authorised or required to send the

goods to the buyer, delivery of the

goods to a carrier, whether named by

the buyer or not, for the purpose of

transmission to the buyer, or

delivery of the goods to a

wharfinger for safe custody, is

prima facie deemed to be a delivery

of the goods to the buyer."

135.It was submitted, that the learned Trial

Court has rightly come to the conclusion that

goods of second and third consignments are

transmitted and delivered to the defendant

No.5 who has received the goods as the agent

of the appellants herein and therefore the

appellants-defendants are liable to make the

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payment of the second and third consignments

to the respondents (original plaintiff).

136.With regard to the contention of the

appellants-defendants that the Goods of

second and third consignments were never

delivered in time by the plaintiff and

therefore the goods were not exported at

Yugoslavia in time and the appellants herein

has not received any payment towards the

second and third consignments, the question

of any payment to the plaintiff for the

second and third consignments does not arise

at all, learned advocate Mr. Joshi for the

Respondent No.1 submitted that the said

contention is totally misleading and

misguiding and completely against the

evidence available on record as well as the

written statement filed by the Defendant

No.6-New Bank of India which is the Bank of

the appellants herein. It was submitted that

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the Exh.318 which is a photocopy of Bank

Account of the appellants-defendants with

their Bank i.e. Defendant No.6 clearly shows

the receipt of money from M/s. SOLUN during

the pendency of the suit, moreover, the

Statement of Account of the appellants-

defendants with their Banker i.e. Defendant

No.6, are produced at Exh.386 to Exh.393

which it is important piece of evidence about

the payments received by the appellants-

defendants from the Yugoslavian buyers.

Learned advocate for the plaintiff referred

to and relied upon the Written Statement of

the defendant No.6 at Exh.38 and more

particularly, in Para No.11, the Defendant

No.6 wherein it was categorically admitted

and stated on oath as under: -

"The answering Defendant is not

aware of the circumstances under

which the first Defendant came in

possession of the Airway Bill which

he handed over to the answering

Defendant along with his Drafts

drawn on his foreign buyers, for

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purpose of collection of their Draft

amounts by the answering Defendant.

The Defendant No.1 had submitted his

drafts for US $ 1,09,960/-, US $

1,02,820/ and US $ 1,00,000/- drawn

in his foreign buyers along with

necessary documents including the

Airway Bill No. 098-2561-9996 in

which the name of House of Dubary

appeared as one of the shippers.

Answering Defendant forwarded the

same on 27/12/78 to the Bank of

foreign buyer for payment. The

answering Defendant got payment of

these Drafts on or about 14/2/1979,

30/1/1979 and 30/1/1979 respectively

in the account of Defendant No.1 and

gave credit of the same to Defendant

No.1 in their account. Defendant

No.1 has utilized the credits so

given by the answering Defendant by

making various withdrawals therefrom

with the result that there now

stands a debit balance in their said

account with the answering

Defendant."

137.It was submitted that from the perusal

of the admission of the defendant No.6, it is

clear that whole defense put-forth by the

appellants-defendants about non-receipt of

the payment of the second and third

consignments from the foreign buyers is

totally false, frivolous and vexatious, hence

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the learned Trial Court has rightly come to

the conclusion that the appellants-defendants

have failed to make the payment of second and

third Consignments to the respondents and the

appellants-defendants are correctly held

liable for the payment of second and third

consignments.

138. Learned advocate for the respondent-

plaintiff submitted that the contention of

the appellants-defendants that there is no

privity of contract with the respondent is

not valid assuming without admitting that

there is no existence of privity of contract

between the appellants-defendants and

respondent-plaintiff, then in that case how

and on what basis the defendants have filed

their counter claim in the said Special Civil

Suit No.120/1979 and demanded the damages

from the plaintiff.

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139.It was submitted that in fact, the

contentions raised by the appellants-

defendants itself is self-contradictory and

not tenable in eye of law. It was submitted

that there is enough evidence on record which

clearly proves that the contract was in

existence between the parties and the

defendants committed breach of the contract

and had not paid the amount of the second and

third consignment, though it was received

from the Yugoslavian buyers, and it was

credited in the accounts of the Appellants-

defendants by their Bank i.e. New Bank of

India (defendant- No.6) and the plaintiff has

sufficiently proved the said aspect by

producing the statement of accounts of the

appellants herein, before the Trial Court,

which contains the entries of the receipt of

the amount of the second and third

consignment.

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140.Learned advocate Mr. Joshi with regard

to the contention of the appellants-

defendants that the learned trial Judge has

wrongly come to the conclusion and committed

a grave error by imposing liability of

Freight, Insurance etc. on the appellants-

defendants submitted that, as a matter of

fact, the liability of Freight, Insurance

etc. is not at all imposed upon the

appellants-defendants, on the contrary on

bare perusal of the observations made by the

learned trial Judge in Para Nos.137, 139 of

the Judgment, it proves that the total amount

of Rs.7,22,446-00 towards Freight, Insurance

etc. is disallowed by the learned trial Judge

and the said amount is deducted from the

total claim of Rs.62,91,245-00. It was

further submitted that since the learned

trial Judge has disallowed the amount of

Rs.7,22,446-00, therefore in the Cross Appeal

No.1093/1987, the appellant of the said

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Appeal has raised one of the grounds in Para

No.4, as under: -

"(4): That the learned Judge

seriously erred in deducting

Rs.1,91,646/ and Rs.5,30,800/- by

way of freight charges from the

price of the goods defendants Nos.1

to 4 were held liable and to which

amount the plaintiffs were held

entitled to realize from the said

defendants. It is submitted that the

said finding of the learned Judge

with regard to freight charged

payable for the second and third

consignment is not supported by any

evidence on record."

141.It was therefore submitted that it is

misconception of the part of the appellants-

defendants that the learned trial Judge has

wrongly fastened the liability of the

Freight, Insurance etc. on the appellants-

defendants as, out of the total claim of

Rs.62,91,245.18 for the second and third

consignment, the learned trial Judge only

allowed the claim of Rs.49,81,336 and

remaining amount of Rs.13,09,909 is

disallowed by the learned trial Judge, which

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includes the amount of Rs.7,22,446 of

Freight, Insurance etc.

142.Insofar as First Appeal No.1093/1987, it

was submitted that since the learned trial

Judge has partly allowed the suit and

therefore the appellants have preferred the

cross Appeal with a prayer to allow the total

claim of the appellants for an amount of

Rs.62,91,245.18 and also prayed to allow the

Special Civil Suit no.120/1979 against all

the defendant nos.1 to 6 jointly and

severally with the running interest @12% per

annum from the date of filling of the Suit

till the date of the payment/realization of

the dues of the appellants. Hence in view of

legal submission made, facts narrated and the

relevant and important documentary evidence

relied upon, it was submitted to allow the

First Appeal No.1093/1987 and dismiss the

First Appeal No.531/1986.

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143.Learned advocate Mr. Joshi for the

Plaintiff submitted that the defendant No.6

deposited an amount of Rs.37,67,420/- with

the Trial Court, Bhuj, which as per the

knowledge of the plaintiff was later

transferred to the Registry of this Court in

compliance of Para No.145 of the impugned

Judgment of the Trial Court and the

directions were given which are as under:

“....... I find that the amount of

Rs.37,67,420-00 is at present and still

lying in the sundry account in the New

Bank of India Ltd., Defense Colony New

Delhi, and that amount being received

towards the value of the goods of the

third consignment and that amount is

liable to be realized towards the

satisfaction of the decree in favour of

the Plaintiff in Special Sult

No.120/1979 and it is therefore on the

ground of justice and equity required to

be directed the Defendant No.6 as to be

deposited such lying amount in sundry

account in this Court for the payment

and satisfaction of the decree...”

144.It was further submitted that in view of

the above, the amount which is lying with the

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Registry of this Court may please be directed

to pay the said amount with accrued interest

to the Office of the Respondent No.1 i.e.

Official Liquidator, so that the respondent

No.1-Official Liquidator can settle the dues

of the workers as well as of the secured and

unsecured creditors of the Company in

Liquidation as per the provisions of the

Companies Act, 1956 accordingly dismiss the

First Appeal No.531/1986.

8)Points for Determination

145.Considering the submissions of both the

sides and oral and documentary evidence on

record, following points for determination:

1) Whether the Trial Court has committed

an error in assumption of jurisdiction to

entertain the suit under section 20 of

the Code of Civil Procedure, 1908?

2) Whether the place of contract

formation is Delhi or Kandla?

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3) Whether the place of performance of

contract was at Bombay or Kandla?

4) Whether the place of payment was Delhi

or Kandla?

5) Whether the appellants defendants were

in breach of contract or not?

6) Whether the Trial Court erred in law

in holding that contract was independent

of Letters of credit?

7) Whether the decreed amount is

arbitrary and based on manifest error or

not?

8) Whether the Trial Court was just and

correct in decreeing the suit for

Rs.49,81,336/- and disallowing the claim

of the plaintiff for Rs.13,09,909/-?

9) Whether the Trial Court committed an

error in holding that counter claim was

barred under section 69 of the Indian

Partnership Act, 1932?

10) Whether the Trial Court was justified

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in fastening the joint and several

liability upon the defendant nos. 1 to 4

only while exonerating defendant nos. 5

and 6?

11) Whether the decree passed by the

Trial Court for Rs.49,81,336/- is just

and proper?

9)Reasons

Analysis of points for determination and

findings

146.Having heard the learned advocates and

having perused the impugned Judgment and

Order and oral and documentary evidence

available on record, it would be necessary to

summaries the chronology of events and

relevant evidence placed on record by the

parties:

Sr

No

Date / Period Event Exhibit

1. December 1977 The defendant no. 2 came to the

factory of the plaintiff at Kandla

with Six Yugoslavian buyers so as

to negotiate for export of

electronic goods to Yugoslavia.

-

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2.1977 – 1978 Further negotiations were made

between the parties at different

places and it was agreed that

defendant no. 1 firm would act as

an export house by placing the

orders in its name for export of

the goods to Yugoslavia.

-

3.20.06.1978 Seven Irrevocable Letters of

Credit were issued by Yugoslavian

Buyers in favour of the defendant

no. 1 firm.

283 to

289

4.04.09.1978 The defendant no. 1 firm issued

seven irrevocable Letters of

Credit in favour of sister concern

of the plaintiff Hasmukh Brothers.

374 to

380

5.04.10.1978 Defendant Nos. 1 to 4 placed an

order for supply of goods worth

US$ 7,81,522.14 equivalent to Rs.

62,91,245.10

278 to

281

6.05.10.1978 Four Letters of Credit were opened

by the defendant no. 6 Bank in

favour of the Plaintiff wherein

terms of the Contract regarding

shipment by 01.10.1978 and

negotiation of documents by

20.10.1978 was mentioned and the

goods were to be shipped from

Kandla Port.

290, 295,

300, 305

7.09.10.1978 The defendant no. 6 Bank amended

Letters of Credit by extending the

shipment date to 01.12.1978 and

last date of negotiation of

documents was extended to

30.12.1978.

-

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8.14.10.1978 As per the negotiations between

the parties, it was agreed that

the shipment would be sent by Air

from Bombay Airport for export of

the goods to Yugoslavia and

accordingly the Letters of Credit

were amended.

-

9.26.10.1978 Letter of the defendant no. 1 firm

to extend the period of Letters to

Credit to complete the delivery of

the goods.

353

10.18.11.1978 Letter of the Plaintiff for

acceptance of the order placed by

the defendant no. 1 firm on

04.10.1978

282

11.October –

November 1978

The plaintiff shipped the first

consignment of goods through its

clearing agent M/s. Dawn India for

value of US$ 3,33,285.60

equivalent to Rs. 26,80,327.50.

The payment for the first

consignment was received by

plaintiff and there is no legal

dispute regarding the first

consignment.

-

12.04.12.1978 Telex message of Hasmukh brothers

to pay airfreight by defendant no.

1 firm and for the amendment of

the Letter of Credit on FOB basis.

357

13.07.12.1978 Airfreight Private Limited was

appointed as a clearing and

forwarding agent instead of Dawn

India for the remaining Letter of

Credits by the defendant no. 6.

467

14.07.12.1978 The defendant no. 1 firm by telex

message informed the defendant no.

361

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5 to hold the goods until further

advice till the license of the

Yugoslavian buyer was not

revalidated.

15.15.12.1978 Telex message of the defendant no.

1 accepting the liability to pay

demurrages.

356

16.18.12.1978 Telex from the defendant no. 1

firm to plaintiff cancelling of

order of models of Indian Star and

Ganges.

360

17.19.12.1978 Export invoices were issued by the

defendant no. 1 firm.

310 to

314

18.27.12.1978 Plaintiff dispatched the goods for

second consignment from Kandla to

defendant no. 5 Airfreight Private

Limited. The Airway bills were

also issued by the defendant no. 5

in name of the plaintiff and

defendant no. 1 firm.

315 to

317 & 325

19.16.03.1979 Letter of the defendant no.1 firm

informing the plaintiff that the

goods will be exported subject to

validation of license of the

Yugoslavian buyers.

205

20.06.04.1979 Letter of defendant no. 1

informing the Hasmukh brothers

that the goods would be shipped

after the licenses are

revalidated.

326

21.26.04.1979 Letter to defendant no. 1

requesting to arrange Letter of

Credit in favour of the plaintiff.

327

22.30.04.1979 Letter of the defendant no. 1 to

Hasmukh brothers informing that

the goods would be lifted between

10

th

and 15

th

May, 1979

329

23.30.04.1979 Plaintiff had written a letter to 348

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the Asst. Collector of Customs,

Bombay for detention of the goods

by the defendant no. 5.

24.01.05.1979 Letter from defendant no. 1

seeking clarification.

330

25.02.05.1979 Letter addressed to defendant no.

1 by the plaintiff for providing

the clarification.

331

26.03.05.1979 Letter written by Asst. Collector

of Customs, Bombay to defendant

no. 5 Airfreight Private Limited.

349

27.04.05.1979 The defendant No. 5 exported the

goods which were

retained for approximately 5

months at the request of the

defendant no. 1 firm.

316 & 317

28.21.05.1979 Special Civil Suit No. 120 of 1979

was filed before the Civil Judge

(S.D.), Bhuj by the plaintiff

claiming Rs. 62,91,245.18.

3

29.24.05.1979 Defendant no. 1 firm filed the

counter-claim for Rs.

1,08,85,152/- for damages and

reimbursement of expenses from the

plaintiff.

105

30.12.06.1979 Special Investigation and

Intelligence Branch of Bombay

Customs issued show-cause notice

under section 108 of the Customs

Act, 1962 upon the defendant no.1

firm.

334

31.19.06.1979 Yugoslavian buyers informed the

defendant no. 1 by letter

requesting the confirmation

regarding deduction of 2% for the

defective goods.

417

32.26.06.1979 Appointment of commissioner to

take inventory of the account of

41

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defendant no.1 from the books of

defendant no.6.

33.26.06.1979 Defendant no.1 to 4 were

restrained from realizing any

consideration of third consignment

received from the Yugoslavian

buyers.

42

34.22.08.1979 Payment intimation from Yugoslavia

buyers to the defendant no.1 firm.

418

35.1980 Criminal Complaint was filed by

Assistant Collector of Customs

against defendants nos. 1 to 5

443

36.02.01.1981 Order-in-Original was passed by

the Customs authorities against

unauthorised export of goods by

defendant no.1 firm.

337

37.31.01.1986 The trial court decreed the

Special Civil Suit No. 120 of 1979

decreeing in favour of the

plaintiff Rs. 49,81,336/- with 12%

interest and dismissed the

counter-claim.

481

147.From the above chronology of events,

there is no dispute between the parties

regarding the first consignment as the

plaintiff exported the goods through its own

clearing and forwarding agent M/s. Dawn India

for value of US$ 3,33,285.60 equivalent to

Rs.26,80,327.50. The plaintiff has duly

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received the payment of the said amount from

New Bank of India- defendant no.6.

148.Therefore, the dispute between the

parties pertains only with regard to 2

nd

and

3

rd

consignment. As per the amended terms of

Letters of Credit, last date for shipment was

01.12.1978. The plaintiff dispatched the

goods from Kandla on 27.12.1978 which was

after 26 days from the expiry of Letters of

Credit. Goods were sent to defendant no.5

M/s. Airfreight (P) Ltd. through transporter

M/s. Vijay Transport Co. from Kandla to

Bombay for export by Air.

149.The third consignment was dispatched

from Kandla to Bombay through M/s. Vijay

Transport Co. on 27.12.1978 for export from

Bombay to Yugoslavia by defendant no.5.

Defendant no.5 retained the goods for about 5

months and ultimately exported the same to

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Yugoslavia in May, 1979. No payment was

received by the plaintiff for export of the

second and third consignment and thereafter

the suit for recovery was filed by the

plaintiff and counter claim for damages was

filed by the defendants.

150.In view of above facts, with regard to

Points for Determination no. 1 to 4 for

objections raised by the appellants-defendant

for assumption of jurisdiction by the Trial

Court to entertain the suit filed by the

plaintiff is required to be considered. In

order to consider such objection, it would be

germane to refer to the relevant provisions

of relevant Acts:

CODE OF CIVIL PROCEDURE, 1908

SECTION 16 : Suits to be instituted

where subject-matter situate.

Subject to the pecuniary or

other limitations prescribed by any

law, suits-

(a) for the recovery of

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immovable property with or

without rent or profits,

(b) for the partition of

immovable property,

(c) for foreclosure, sale or

redemption in the case of a

mortgage of or charge upon

immovable property,

(d) for the determination of any

other right to or interest in

immovable property,

(e) for compensation for wrong

to immovable property,

(f) for the recovery of movable

property actually under

distraint or attachment, shall

be instituted in the Court

within the local limits of whose

jurisdiction the property is

situate:

Provided that a suit to obtain

relief respecting, or

compensation for wrong to,

immovable property held by or on

behalf of the defendant may,

where the relief sought can be

entirely obtained through his

personal obedience, be

instituted either in the Court

within the local limits of whose

jurisdiction the property is

situate, or in the Court within

the local limits of whose

jurisdiction the defendant

actually and voluntarily

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resides, or carries on business,

or personally works for gain.

Explanation.-In this section

"property" means property

situate in

[India.]

SECTION 19 : Suits for compensation

for wrongs to person or movables.

Where a suit is for compensation

for wrong done to the person or

to movable property, if the

wrong was done within the local

limits of the jurisdiction of

one Court and the defendant

resides, or carries on business,

or personally works for gain,

within the local limits of the

jurisdiction of another Court,

the suit may be instituted at

the option of the plaintiff in

either of the said Courts.

SECTION 20 : Other suits to be

instituted where defendants reside

or cause of action arises.

Subject to the limitations

aforesaid, every suit shall be

instituted in a Court within the

local limits of whose

jurisdiction-

(a) the defendant, or each

of the defendants where

there are more than one, at

the time of the commencement

of the suit, actually and

voluntarily resides, or

carries on business, or

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personally works for gain;

or

(b) any of the defendants,

where there are more than

one, at the time of the

commencement of the suit,

actually and voluntarily

resides, or carries on

business, or personally

works for gain, provided

that in such case either the

leave of the Court is given,

or the defendants who do not

reside, or carry on

business, or personally work

for gain, as aforesaid,

acquiesce in such

institution; or

(c) the cause of action,

wholly or in part, arises.

[Explanation].-A corporation shall

be deemed to carry on business at

its sole or principal office

in

[India] or, in respect of any

cause of action arising at any place

where it has also a subordinate

office, at such place.

SALE OF GOODS ACT, 1930

SECTION 36 : Rules as to delivery

(1) Whether it is for the

buyer to take possession of

the goods or for the seller

to send them to the buyer is

a question depending in each

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case on the contract,

express or implied, between

the parties. Apart from any

such contract, goods sold

are to be delivered at the

place at which they are at

the time of the sale, and

goods agreed to be sold are

to be delivered at the place

at which they are at the

time of the agreement to

sell, or, if not then in

existence, at the place at

which they are manufactured

or produced.

(2) Where under the contract

of sale the seller is bound

to send the goods to the

buyer, but no time for

sending them is fixed, the

seller is bound to send them

within a reasonable time.

(3) Where the goods at the

time of sale are in the

possession of a third

person, there is no delivery

by seller to buyer unless

and until such third person

acknowledges to the buyer

that he holds the goods on

his behalf: Provided that

nothing in this section

shall affect the operation

of the issue or transfer of

any document of title to

goods.

(4) Demand or tender of

delivery may be treated as

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ineffectual unless made at a

reasonable hour. What is a

reasonable hour is a

question of fact.

(5) Unless otherwise agreed,

the expenses of and

incidental to putting the

goods into a deliverable

state shall be borne by the

seller.

SECTION 39 : Delivery to carrier or

wharfinger

(1) Where, in pursuance of a

contract of sale the seller is

authorised or required to send

the goods to the buyer, delivery

of the goods to a carrier,

whether named by the buyer or

not, for the purpose of

transmission to the buyer, or

delivery of the goods to a

wharfinger for safe custody, is

prima facie deemed to be a

delivery of the goods to the

buyer.

(2) Unless otherwise authorised

by the buyer, the seller shall

make such contract with the

carrier or wharfinger on behalf

of the buyer as may be

reasonable having regard to the

nature of the goods and the

other circumstances of the

case(s). If the seller omits so

to do, and the goods are lost or

damaged in course of transit or

whilst in the custody of the

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wharfinger, the buyer may

decline to treat the delivery to

the carrier or wharfinger as a

delivery to himself, or may hold

the seller responsible in

damages.

(3) Unless otherwise agreed,

where goods are sent by the

seller to the buyer by a route

involving sea transit, in

circumstances in which it is

usual to insure, the seller

shall give such notice to the

buyer as may enable him to

insure them during their sea

transit, and if the seller fails

so to do, the goods shall be

deemed to be at his risk during

such sea transit.

CONTRACT ACT, 1872

SECTION 2 : Interpretation clause.

In this Act the following

words and expressions are

used in the following

senses, unless a contrary

intention appears from the

context :-

(a) When one person

signifies to another

his willingness to do

or to abstain from

doing anything, with a

view to obtaining the

assent of that other to

such act or abstinence,

he is said to make a

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proposal:

(b) When the person to

whom the proposal is

made signifies his

assent thereto, the

proposal is said to be

accepted. A proposal,

when accepted, becomes

a promise:

(c) The person making

the proposal is called

the "promisor", and the

person accepting the

proposal is called the

"promisee":

(d) When, at the desire

of the promisor, the

promisee or any other

person has done or

abstained from doing,

or does or abstains

from doing, or promises

to do or to abstain

from doing, something,

such act or abstinence

or promise is called a

consideration for the

promise:

(e) Every promise and

every set of promises,

forming the

consideration for each

other, is an agreement:

(f) Promises which form

the consideration or

part of the

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consideration for each

other are called

reciprocal promises:

(g) An agreement not

enforceable by law is

said to be void:

(h) An agreement

enforceable by law is a

contract:

(i) An agreement which

is enforceable by law

at the option of one or

more of the parties

thereto, but not at the

option of the other or

others, is a voidable

contract:

(j) A contract which

ceases to be

enforceable by law

becomes void when it

ceases to be

enforceable.

SECTION 3 :Communication, acceptance

and revocation of proposals.

The communication of proposals,

the acceptance of proposals, and

the revocation of proposals and

acceptances, respectively, are

deemed to be made by any act or

omission of the party proposing,

accepting or revoking, by which

he intends to communicate such

proposal, acceptance or

revocation, or which has the

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effect of communicating it.

SECTION 4 : Communication when

complete.

The communication of a proposal

is complete when it comes to the

knowledge of the person to whom

it is made.

The communication of an

acceptance is complete,-

as against the proposer, when it

is put in a course of

transmission to him, so as to be

out of the power of the

acceptor; as against the

acceptor, when it comes to the

knowledge of the proposer.

The communication of a

revocation is complete,-

as against the person who makes

it, when it is put into a course

of transmission to the person to

whom it is made, so as to be out

of the power of the person who

makes it;

as against the person to whom it

is made, when it comes to his

knowledge.”

151.The contention raised on behalf of the

appellants-defendants that for assumption of

jurisdiction by the Trial Court to entertain

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the suit only Letters of Credit issued by the

defendant no.6 New Bank of India stipulating

the terms of contract are required to be

considered, is concerned, on perusal of

section 19 read with clause (c) of section 20

of the Code of Civil Procedure, it is not in

dispute that goods have been dispatched by

the plaintiff from Kandla. Moreover, so far

as transaction of first consignment out of

four Letters of Credit issued by defendant

no.6 Bank, transaction has taken place at

Kandla for which the payment is also received

at Kandla by the plaintiff and there is no

dispute with regard to the transaction of

first consignment which is one of the part of

the goods agreed to be sold by the plaintiff

to defendant nos. 1 to 4 for which, four

Letters of Credit were opened stipulating the

terms and conditions of the contract.

152.On perusal of the terms and conditions

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stipulated in Letters of Credit placed on

record at Exh. 290 to 309 including the

letters of amendment of the Letters of Credit

issued by defendant no.6 in favour of the

plaintiff’s bank State Bank of India, Kandla

are considered, it is discernible that terms

of Letters of Credit are only for the purpose

of payment to be negotiated so as to complete

the transaction of sale of goods between the

parties. The cause of action wholly or in

part can said to have been arisen out of

bundle of essential facts necessary for the

plaintiff to prove if traversed in order to

support the right to the judgment of the

Court. It refers entirely to the grounds set

forth in the plaint as the cause of action.

Clause (c) of section 20 of the Code of Civil

Procedure, clearly stipulates that suit may

be instituted where the cause of action,

wholly or in part arises. In the facts of the

case, part of the cause of action can be said

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to have arisen at Kandla when defendant no.2

had brought along with him 6 Yugoslavian

buyers to the factory of the plaintiff in

December, 1977 at Kandla. Thereafter, further

negotiation had taken place at various places

i.e. Bombay, Delhi and Hongkong between the

parties. Orders were placed firstly before

M/s. Hasmukh Brothers (HK) and 7 Letters of

Credit were opened. However, as M/s. Hasmukh

Brothers (HK) could not fulfill the contract,

it was agreed between the parties to enter

into contract for supply of the goods by the

plaintiff who is sister concern of M/s.

Hasmukh Brothers (HK) and three Letters of

Credit were confirmed in favour of M/s.

Hasmukh Brothers (HK) on 05.10.1978 and

remaining four Letters of Credit were

confirmed in favour of the plaintiff vide

Exhs. 290, 295, 300 and 305 and on opening of

such four Letters of Credit in favour of the

plaintiff through State Bank of India,

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Kandla, four orders were placed by defendant

no.1 with the plaintiff vide letters dated

04.10.1978 Exh. 278 to Exh. 281 taking

confirmation from the plaintiff. It is also

not in dispute that after placing four

orders, defendant no.2 had come to Kandla and

discussed regarding shipment and on basis of

such discussion, the plaintiff vide letter

dated 18-19.11.1978 confirmed four orders. It

is, therefore, a clear part performance of

the contract at Kandla as contract was

finally concluded on accepting the orders by

the plaintiff at Kandla, Gandhidham-Kutch.

Therefore, reliance placed by the defendants

only on Letters of Credit for contending that

other circumstances and facts are to be

ignored and only terms and conditions of

Letters of Credit and place of issuance of

Letters of Credit is required to be

considered to determine the jurisdiction of

the Court, is contrary to the facts proved by

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the plaintiff regarding part performance of

the contract at Kandla.

153.It is pertinent to note that merely

opening Letters of Credit is not sufficient

but thereafter action taken by the plaintiff

by letter dated 18.11.1978 confirming the

orders placed by the defendants, accepting

the offer at Kandla, would be sufficient to

confer jurisdiction upon the Civil Court at

Kutch-Bhuj within whose territorial

jurisdiction, part performance of the

contract had taken place.

154.The Trial Court was therefore, justified

in holding that only Letters of Credit alone

are not required to be considered but in

substance who placed orders and accepted the

orders as the orders were in form of the

offer and that offer was accepted on part of

the plaintiff is material.

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155.The Trial Court was also justified in

considering the transaction while observing

that negotiations were to be made for just

arrangement for fixing the terms and

conditions of the contract and in connection

of such discussions or negotiations, Letters

of Credit were required to be opened in

favour of the first defendant.

156.It is also required to be consider the

entire chain of events which had taken place

between the parties for sale of goods

manufactured in Free Trade Zone at Kandla.

The contention of the defendants that merely

manufacturing of goods at Kandla and dispatch

by the plaintiff for export to Bombay cannot

be considered as part performance of the

contract, is not tenable because performance

of contract is part of the cause of action.

It is also not in dispute that payment has

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been received for the first consignment by

the plaintiff at Kandla which is integral

part of the entire contract and as per the

averments made in the plaint and documents

placed along with the plaint as well as oral

and documentary evidence led by the parties,

it cannot be said that only the terms and

conditions stipulated in Letters of Credit

would determine the jurisdiction of the

Court.

157.The suit in respect of realisation and

recovery of the price can always be filed at

the place where the contract should have been

performed or where its performance is

completed. If the contract is to be performed

at the place where it is made then the suit

on the contract is required to be filed at

the said place however, in a contract of sale

of goods, the place where the goods have to

be delivered, is also the place of

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performance and the Court of that place would

have jurisdiction to entertain the suit in

respect of the dispute of the contractual

rights of the plaintiff.

158.In the facts of the case, from perusal

of the Letters of Credit at Exh. 290 to 309,

it appears that it was initial contract that

the goods were shipped from Kandla to Greece

accompanied by all necessary documents as

mentioned therein. However, parties

subsequently agreed to permit the shipment by

Air from Bombay to Yugoslavia and such

arrangement was made for the purpose of

expedient delivery to the buyer.

159.From the correspondence between the

parties, it is evident that place of shipment

is from Kutch and the performance of the

contract was to be made at Kandla, Kutch.

Therefore, it is not in dispute that cause of

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action or part of cause of action had taken

place at Kandla which is material for the

plaintiff to prove to succeed. The plaintiff

has therefore, rightly been held to have

proved that originally contract between the

parties was to ship the goods from Kandla

which was agreed to be changed for shipment

of goods by Air from Bombay. Therefore, it

cannot be said that since the place of

delivery of goods has been shifted from

Kandla, the Court at Bhuj would not have

jurisdiction. In fact, the goods were

dispatched from Kandla to Bombay for export.

Merely because goods are to be airlifted from

Bombay would not be a fact against the

plaintiff to hold that goods were delivered

at Bombay and therefore, there was no cause

of action which had taken place at Kandla. We

are therefore of the opinion that the Trial

Court was justified in holding that whole

cause of action had arisen at Kandla and

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merely because goods were delivered to

defendant no.5 at Bombay, it cannot be

considered that goods have not been delivered

from Kandla.

160.The Trial Court has rightly referred to

and relied upon the provisions of section

39(1) of the Sale of Goods Act, 1930 to turn

down the contention of the defendants that

the goods delivered by the plaintiff was

received at Bombay for the purpose of export

and therefore, cause of action had arisen at

Bombay only. The undisputed facts are that

goods were handed over to the transporter

M/s. Vijay Transport Co. to carry them at

Bombay as per the amended clause of Letters

of Credit. Therefore, as per the provisions

of section 39(1) of the Sale of Goods Act,

when the goods are delivered to the carrier

for the purpose of transmission to the buyer

then prima facie delivery of goods would be

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deemed to have been made to the buyer at

Kandla.

161.Reliance placed on behalf of the

plaintiff on the decision in case of Harshad

Chiman Lal Modi v. DLF Universal Ltd. and

another reported in (2005) 7 Supreme Court

Cases 791, therefore, would not be applicable

in facts of the case. However, it would be

fruitful to refer to the observations made by

Hon’ble Apex Court on applicability of

sections 16, 19 and 20 of the Code of Civil

Procedure to determine the jurisdiction which

would be helpful to determine the issue on

hand as under:

“14. Having heard learned counsel

for the parties and having

considered the relevant provisions

of the Code as also the decisions

cited before us, in our opinion, the

order passed by the trial court and

confirmed by the High Court deserves

no interference. As stated above, it

is an admitted fact that the suit

relates to the recovery of immovable

property, a plot admeasuring 264 sq.

mtrs. in the Residential Colony -

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DLF Qutub Enclave Complex, Gurgaon.

It is not in dispute by and between

the parties that the property is

situate in Haryana. It is no doubt

true that the defendants are having

their head office at Delhi. It is

also true that the agreement was

entered into between the parties at

Delhi. It also cannot be denied that

the payment was to be made at Delhi

and some installments were also paid

at Delhi. The pertinent and material

question, however, is in which court

a suit for specific performance of

agreement relating to immovable

property would lie-

15. Now, Ss. 15 to 20 of the Code

contain detailed provisions relating

to jurisdiction of courts. They

regulate forum for institution of

suits. They deal with the matters of

domestic concern and provide for the

multitude of suits which can be

brought in different courts. Section

15 requires the suitor to institute

a suit in the court of the lowest

grade competent to try it. Section

16 enacts that the suits for

recovery of immovable property, or

for partition of immovable property,

or for foreclosure, sale or

redemption of mortgage property, or

for determination of any other right

or interest in immovable property,

or for compensation for wrong to

immovable property shall be

instituted in the court within the

local limits of whose jurisdiction

the property is situate. Proviso to

Sec. 16 declares that where the

relief sought can be obtained

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through the personal obedience of

the defendant, the suit can be

instituted either in the court

within whose jurisdiction the

property is situate or in the court

where the defendant actually or

voluntarily resides, or carries on

business, or personally works for

gain. Section 17 supplements Sec. 16

and is virtually another proviso to

that section. It deals with those

cases where immovable property is

situate within the jurisdiction of

different courts. Section 18 applies

where local limits of jurisdiction

of different courts is uncertain.

Section 19 is a special provision

and applies to suits for

compensation for wrongs to a person

or to movable property. Section 20

is a residuary section and covers

all those cases not dealt with or

covered by Ss. 15 to 19.

16. Section 16 thus recognizes a

well established principle that

actions against res or property

should be brought in the forum where

such res is situate. A court within

whose territorial jurisdiction the

property is not situate has no power

to deal with and decide the rights

or interests in such property. In

other words, a court has no

jurisdiction over a dispute in which

it cannot give an effective

Judgement Proviso to Sec. 16, no

doubt, states that though the court

cannot, in case of immovable

property situate beyond

jurisdiction, grant a relief in rem

still it can entertain a suit where

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relief sought can be obtained

through the personal obedience of

the defendant. The proviso is based

on well known maxim "equity acts in

personam, recognized by Chancery

Courts in England. Equity Courts had

jurisdiction to entertain certain

suits respecting immovable

properties situated abroad through

personal obedience of the defendant.

The principle on which the maxim was

based was that courts could grant

relief in suits respecting immovable

property situate abroad by enforcing

their judgments by process in

personam, i.e. by arrest of

defendant or by attachment of his

property.”

162.Another aspect for deciding the

jurisdiction of the Court for part

performance is where the money is expressly

or impliedly payable under the contract. In

the facts of the case, admittedly price

consideration was payable at Kandla as per

the stipulation in Letters of Credit stating

that State Bank of India, Kandla to receive

the payment and in fact, for first

consignment the payment has been received at

Kandla. Section 36 of the Sale of Goods Act

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clearly lays down that in absence of contract

to the contrary, goods sold are to be

delivered at the place at which they are at

the time of sale read with section 32 of the

said Act which lays down that unless

otherwise agreed, delivery of the goods and

payment of the price are concurrent

conditions. Therefore, in the facts of the

case when the terms of the contract is and

was that price of the goods should have been

paid to the plaintiff’s bank at Kandla and as

such, place of payment was at Kandla and not

at Bombay, therefore, even on this count,

considering the place of payment would confer

jurisdiction to the Court to entertain the

suit.

163.In view of the facts emerging from the

record, the part cause of action has arisen

at Kandla being place of performance and

place of payment, because the plaintiff has

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accepted the contract at Kandla, performed

the contract by dispatching the goods from

Kandla and receiving the payment at State

Bank of India, Kandla. Therefore, reliance

placed by the plaintiff on decision in case

of Bhagwandas Goverdhandas Kedia v.

Girdharilal Parshottamdas & Co. (supra) would

not be applicable in facts of the case as the

plaintiff has proved part performance of the

contract that the place of contract place of

performance and place of payment was at

Kandla.

164. Reliance placed on decision in case of

A.B.C. Laminart Pvt. Ltd. v. A.P. Agencies

(supra) would also not be applicable in the

facts of the case because in view of

provision of clause (c) of section 20 of the

Code of Civil Procedure, suit can be filed

where part of cause of action arises.

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165.Similarly, reliance placed on decision

in case of Union of India v. Ladulal

Jain(supra) wherein it is held that the place

of performance of a contract is determined by

the terms of contract and not by the place

where goods are handed over to carrier, would

also not be applicable in facts of the case

because terms of contract clearly stipulate

the goods to be shipped from Kandla which

were later on changed to shipment from Kandla

to airlifting from Bombay which would not

change the nature of contract more

particularly, when the goods were sent to the

clearing and forwarding agent - defendant

no.5 who was appointed by the defendant no.1

for the purpose of export of goods as per the

terms of negotiation carried out between the

parties.

166.Reliance placed on the decision in case

of Patel Roadways ltd. v. Prasad Trading Co.

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(supra) would also not be applicable to the

facts of the case as it cannot be said that

contract stipulated a specific place of

delivery then that place determines the

jurisdiction and not the place of initial

handing over to a carrier. In the facts of

the case, the place of shipment was changed

from Kandla to Bombay and that would not

divest the jurisdiction of the Court at Bhuj-

Kutch when as part performance, the payment

is also received by the State Bank of India

at Kandla.

167.The Trial court has also considered the

transaction as bundle of essential facts to

conclude that there was part performance of

the contract at Kandla and therefore, it

cannot be said that the cause of action had

not arisen at Kandla. The Trial Court was

therefore, justified in considering the

entirety of facts and circumstances while

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dismissing the contention of the defendants

that only terms and conditions of the

contract were the terms and conditions of the

Letters of Credit and therefore, the Trial

Court would not have any jurisdiction. Such a

contention raised on behalf of the plaintiff

is nothing but an effort to consider the

entire issue in a truncated manner by only

referring to the Letters of Credit ignoring

the vital fact that goods have been

dispatched from Kandla through carrier of the

plaintiff to the clearing and forwarding

agent at Bombay for export by Air. Therefore,

it cannot be said that the goods were not

dispatched from Kandla taking into

consideration the provisions of section 39(1)

of the Sale of Goods Act which is relied upon

by the Trial Court only to show that there

was a part performance of the contract at

Kandla.

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168.The contention of the defendants that

when the goods were dispatched for second and

third consignment, Letters of Credit had

expired is also not tenable in view of the

fact that the plaintiff had participated in

execution of the export of second consignment

and third consignment dispatched by the

plaintiff and further the contention of the

defendants cannot be accepted considering

only that Letters of Credit had expired,

ignoring transactions which had taken place

and not denied by the defendants regarding

export of goods dispatched by the plaintiff

from Kandla to Bombay and as such, the

technical plea of the defendants that because

Letters of Credit had expired and there was

no contract and therefore, Court has no

jurisdiction, is not tenable as such

contention of the defendants is dehors the

facts and is liable to be rejected.

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169.With regard to Point for Determination

No.5 that defendants nos. 1 to 4 and not the

plaintiff were in breach of contract, the

Trial Court on the basis of the oral and

documentary evidence led by the parties has

categorically arrived at the conclusion that

the defendants have committed breach of the

contract by retaining the goods with the

defendant no.5 who was appointed by defendant

no.1 as clearing and forwarding agent,

coupled with the fact that even after export

of the goods, airway bill was prepared by

defendant no.5 in name of defendant no.1

instead of plaintiff so as to negotiate the

Letters of Credit with the LC opening bank

by defendant no.1 to get the payment directly

from Yugoslavian buyers.

170.The Trial Court has analysed the facts

and has come to the following conclusion in

the impugned order as under:

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“60)..... The main point for

consideration in this case is

whether of the omission of the name

of the plaintiff to write first and

then mentioned the name of the first

deft., in Air-way bill was a part of

cause of action which was resulted

the damage and on that ground,

entitled the plaintiff to bring the

suit in the present court for the

tortious act. It is now clear from

the above of completed action and is

wide enough to take in the result as

the basis for the purpose of

restitution. According to the

plaintiff, if the fifth deft. was

not made the forged document i.e.

Air way bill showing in shipper

column of the name of the first

deft., as the consigner then the

first deft., was entitled to be

converted the money of the goods in

their own account of the New Bank of

India but the sixth deft., New Bank

of India was bound to remit the said

money to the plaintiff's bank i.e.

State Bank of India Kandla in terms

of the letters of credit and that

the plaintiff had to receive at

least value of the goods in time but

the change was permitted the first

deft., to be converted the said

money for their own use otherwise

not restrained by the order of the

injunction of the court. The learned

advocate for the defts., has

submitted that the light in which

the matter shall be considered is

different. It is contended that the

sequence of writing the name in Air

way bill was not given the right to

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the first deft., but the first

deft., was exporter of the goods to

Yugoslavian Buyer in terms of the

contract and was entitled to recover

the money from the buyer through

Bank to Bank and received the money

accordingly and nothing more. It is

therefore contended that there was

no consequential effect resulted to

damage or injury to the plaintiff.

On the other hand, it is submitted

on the part of the plaintiff that

the term "cause of action" is much

wider and for the present purpose,

it shall be understood to mean the

bundle of facts constituting the

cause of effect in resulting the

damage for the tortious act. I am

inclined to take the view that the

fact of the deprivation of the

property would be one of the bundle

of the facts which is necessary to

be proved in order to entitled the

plaintiff to file the suit against

the defts., Apart from this in

determining whether the court has

jurisdiction, or not, the court

shall always consider the matter on

the pleadings as they stand. I have

therefore carefully considered the

plaint and the written statement.

Admittedly the goods of third

consignment were sent from Kandla to

Bombay for the purpose of the export

to the fifth deft., in Vijay

Transport and that the said goods

were entrusted along with the

necessary documents to the deft.,

No.5 which were lifted after five

months and during the course of such

delay, the goods were kept in godown

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so that the plaintiff wrote the

several letters addressing to the

fifth deft., that the goods were

required under the provisions of the

custom Act to be lifted within one

month otherwise to be returned back

to the plaintiff even if the goods

were not returned back to the

plaintiff and were exported after

five months by Air way bill

mentioning the name of the first

deft. as the shipper which was

resulted to be moved the custom

authorities and the suit. I

therefore quite agree with the

submission of the plaintiff that the

plaintiff deprived to be received

the goods back and resulted in the

consequent to damage. Therefore this

court has jurisdiction to try the

suit on all counts, In view of this

findings and in result thereof I

decide issue No.2 in the

affirmative.

(61).....In the present case, the

plaintiff has set up the case in the

plaint that the contract was entered

between the plaintiff and the deft.

Nos. 1 to 4 and under such contract,

the electronic goods which being

imported were to be exported to six

Yugoslavian buyers so that the deft.

Nos. 1 to 4 had placed the orders

for the same. The said goods were

exported to Yugoslavian buyers as

per rules and regulations of the

customs in Free Trade Zone of

Kandla. It was understood during the

negotiations that the Yugoslavian

buyers would in their turn obtain

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the requisite import license for

importing such goods in Yugoslavia

and would open necessary letters of

credit in favour of the first deft.,

House of Dubary and then the deft.,

Nos. 1 to 4 would in their turn open

the letters of credit in favour of

the plaintiff It was also understood

during the negotiations that the

plaintiff would deliver the goods

against of subsisting and valid

letters of credit and under rules

and regulations of Free Trade Zone

Kandla. Therefore, the plaintiff

would export the goods under their

own clearance of customs in AR-4

form. It was further understood in

the negotiations that the goods

would be transported under requisite

transfer permits and AR-4 forms

under the provisions of the Customs

Act by road to the clearing and

forwarding agent at Bombay and that

the goods would be exported by the

clearing and forwarding agent from

Bombay to Yugoslavia via Athen

(Greece) in name of the plaintiff.

It has further set up in the plaint

that under such terms and conditions

of the contract and understanding

between the parties, the Yugoslavian

buyers had opened the letters of

credit in favour of the first

defendant House of Dubary and then

the deft., Nos. 1 to 4 in their turn

opened the letter of credit in

favour of the plaintiff through

their Bankers i.e., the deft., No.6

New Bank of India Limited, New Delhi

Therefore the deft. No.6 is the

opening Bank. It has further set up

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the facts in the plaint that the New

Bank of India, New Delhi has been

opened the four letters of credit on

5-10-78 in favour of the plaintiff

as described more particularly in

paragraph No.6 of the plaint.

According to those letters of

credit, the goods were to be shifted

not later than 10-10-78 and bills

would be negotiated on or before 30-

10-78. It has further stated in the

plaint that the date of shipment and

negotiation of the documents were

extended up to 1-12-78 and 30-12-78

respectively. This extension was

conveyed by the deft., No.6 New Bank

of India, New Delhi vide letter

dated 9-10-78. The deft. No.6 had

thus amended the letters of credit

by the letters dated 14-10-78, 20-

10-78 and 18-11-78. Under this

circumstance, it was belief on the

part of the plaintiff that the

Yugoslavian buyer had got to be

extended their own letters of credit

in favour of the first deft. It has

also set up in the plaint that the

plaintiffs have their own clearing

and forwarding agent namely M/s.

Dwan India.

(61)......In the present case, the

plaintiff has set up the case in the

plaint that the contract was entered

between the plaintiff and the

deft.Nos.1 to 4 and under such

contract, the electronic goods which

being imported were to be exported

to six sex Yugoslavian buyers so

that the deft., Nos. 1 to 4 had

placed the orders for the same. The

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said goods were exported to

Yugoslavian buyers as per rules and

regulations of the customs in Free

Trade Zone of Kandla. It was

understood during the negotiations

that the Yugoslavian buyers would in

their turn obtain the requisite

import license for importing such

goods in Yugoslavia and would open

necessary letters of credit in

favour of the first defendant House

of Dubary and then the deft. Nos. 1

to 4 would in their turn open the

letters of credit in favour of the

plaintiff. It was also understood

during the negotiations that the

plaintiff would deliver the goods

against of subsisting and valid

letters of credit and under rules

and regulations of Free Trade Zone

Kandla. Therefore, the plaintiff

would export the goods under their

own clearance of customs in AR-4

form. It was further understood in

the negotiations that the goods

would be transported under requisite

transfer permits and AR-4 forms

under the provisions of the customs

Act By road to the clearing and

forwarding agent at Bombay and that

the goods Would be exported by the

clearing and forwarding agent from

Bombay to Yugoslavia Via, ATHENS

(Greece) in name of the plaintiff.

It has further that the goods had

duly exported through the said M/s.

Dawn India the 26,90,327-50

shipments from Kandla dated 22-11-

78,22-11-78, 25-11-78, 25-11-78 and

2-12-78 which being aggregated value

of Indian rupees to paise. The

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plaintiff has already received the

said amount in respect of the first

consignment through sixth deft. New

Bank of India, New Delhi for and on

behalf of the first deft. These

goods were expected to be exported

by ship however, by letter dated 14-

10-78, the letters of credit were

amended and permitted shipment by

Air from Bombay Airport to

THEOSSALONIKI (Greece) Air port and

Air way bill was to be made to the

order of " "Makosped" SKOPJE Notify

Solun (DVGELAJA) Yugoslavia. Further

by letter dated 27-11-78, the sixth

deft., had amended the letter dated

14-10-78 so as to read "shipment by

Air from Bombay Airport to Athens

Airport (Greece) permitted one

original and two copies of the air

way bill made out to the order of

Makosped Skopje Notify Solun

(DGELALJA) Yugoslavia marked freight

prepaid would require. It has

further set up the facts that the

deft. Nos. 2 to 4 had persuaded and

prevailed upon the plaintiff for

further shipment by Air to be made

through the fifth deft., as the

clearing and Forwarding Agents which

would provide the 30 days facility

for the payment of freight even

though the representatives of the

plaintiff were hesitating to accept

the change of the clearing and

forwarding agents as suggested by

the deft. Nos. 2 to 4 but at last,

the plaintiff relied upon the

bonafide of the deft. Nos. 1 to 4

and agreed with suggestion to export

the goods by Air through the fifth

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deft. It has stated in the plaint

that the plaintiff was unaware

whether the deft. Nos. 1 to 5 were

closely associated. It is now

alleged that the goods relating to

third consignment were sent through

M/s. Vijay Transport from Kandla to

Bombay by the plaintiff as the

consignment consigner of mentioning

in consignment note and mentioned as

the consignee of the fifth deft.,

and thereby the goods were sent to

the fifth deft. It is alleged that

no where in goods consignment note

of Vijay Transport Company was

mentioned the name of the first

defendant as consignee. It is

therefore alleged that the fifth

defendant had received the goods

from Vijay Transport Company for and

on behalf of the plaintiff and as

the Agent of the plaintiff. It has

now set up in the plaint that the

receipt of the goods covered by the

goods consignment notes of Vijay

Transport Company so that the fifth

defendant did not entitle to receive

or to hold or to deal or to dispose

of the goods under the instructions

of or at the instance of the first

deft. It is therefore alleged that

the fifth defendant had to be

exported the goods by Air to

Yugoslavian Buyer and that the fifth

deft., did so for and on behalf of

the plaintiff. It is now alleged in

the plaint that the deft. Nos. 1 to

5 were acted in collusion with each

other and disabled the plaintiff

from drawing the documents on the

opening Bank because the fifth

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defendant was not sending the Air

way bill to the plaintiff but parted

with, the said Air way bill to the

first deft., and defrauded the

plain- tiff which was resulted not

to be realized the payments by

drawing the documents on the

negotiation Bank, i.e. the

deft.No.6. on this background of the

facts, it is alleged the fraud by

collusion between the deft., Nos. 1

to 5. It has further set up the

facts in the plaint that the goods

relating to the third consignment

notes were exported by Air on 27-12-

78 by the fifth deft., to M/s.Solun

Export company, (DVGELAJA,

Yugoslavia even not sent the Airway

Bills but parted with the deft.,

Nos. 1 to 4 and in the said Air way

bills, mentioned in the column of

shippers name and address as House

of Dubary instead of M/s. Hanspa

Knit (P) Ltd., House of Dubary

Kandla Free Trade Zone, Gandhidham

Kachchh, New Delhi India,. It is

therefore alleged that the fifth

deft., could not have mentioned in

the column of "shipper" the House of

Dubary, New Delhi "At the most, in

view of the letters of credit the

fifth deft., could have mentioned

after the name of the plaintiff

House of Dubary and not to be

described House of Dubary as the

shipper at all. It has further set

up the case in the plaint that the

fifth deft., knew that the goods

were forwarded by the plaintiff from

Kandla Free Trade Zone which were

exempted from Custom duty only if

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the exporter of the goods would be

within Free Trade Zone, Kandla.”

171.From the above findings of facts on

analysis of evidence done by the Trial Court,

we do not find any infirmity in the same and

therefore, no interference is called for in

the findings arrived at by the Trial Court

that the defendants had committed breach of

contract. The contention raised on behalf of

the appellants-defendants that the plaintiff

dispatched the second and third consignment

after Letters of Credit had expired without

any contractual basis and the plaintiff

changed the clearing and forwarding agent

from M/s Dawn India to defendant no.5 without

the consent of the defendant no.1 and

plaintiff failed to ensure that the goods

were exported in compliance to the terms of

Letters of Credit, are contrary to the

subsequent events which had taken place from

December, 1978 to May, 1979 as enumerated in

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detail by the Trial Court on the basis of

evidence led before it.

172.We are therefore, of the opinion that

the Trial Court cannot be said to have

committed any error in holding that the

defendant nos. 1 to 4 have committed breach

of contract which was subsisting even after

expiry of Letters of Credit. It appears that

the defendants in order to be discharged from

the liability of payment have raised such

flimsy contention with regard to the expiry

of Letters of Credit or change of agent in

spite of the admitted fact that defendant

no.5 was the clearing and forwarding agent

appointed by the plaintiff.

173.Point for Determination no.6 refers to

the issue as to whether contract was

independent of Letters of Credit or not.

Contention raised on behalf of the defendants

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that the Trial court has erred in holding

that the contract was independent of the

Letters of Credit is also without any basis

as the Trial Court has arrived at a

conclusion regarding issue no.2(D) and 2(E)

to the effect that so far as first

consignment is concerned, there is no dispute

between the parties.

174. The second and third consignment

originated from the purchase orders as well

as followed by Letters of Credit determining

the terms of contract. Merely because Letters

of Credit have expired would not result in

termination of the contract when both the

parties have carried out the transactions

originally agreed upon. On perusal of the

oral evidence of Mr.Anilbhai Chandubhai Pota

at Exh. 276, it is deposed that the defendant

no.1 firm had issued four purchase orders on

04.10.1978 (Exh. 278 to Exh.281) which was

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confirmed by the plaintiff by letter dated

28.11.1978 (Exh.282) and upon confirmation

defendant no.1 firm opened seven Letters of

Credit by the Yugoslavian buyers “SOLUN”

Import-Export, Gevgelija, from the Bank of

Rajasthan, Delhi (Exh.283 to Exh.289) in name

of defendant no.1 which were transferred to

New Bank of India-defendant no.6. Defendant

no.1 in turn opened the Letters of Credit

through its LC Opening Bank – New Bank of

India -defendant no.6 in favour of the

plaintiff (Exh.290 to Exh.309).

175.On perusal of these documents which are

exhibited before the Trial Court as per the

deposition of the witness of the plaintiff,

heavy reliance is placed on behalf of the

advocate of the defendants that the terms and

conditions mentioned in Letters of Credit

would govern the terms of the contract

regarding the shipment of goods by the

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plaintiffs. On perusal of each of the Letters

of Credit at Exh.290 to Exh.309 only relevant

condition is regarding the date of Letters of

Credit stated as 10.10.1978 which was

subsequently extended by mutual consent of

both the sides. Another condition which is

referred to and heavily relied upon by the

defendants is with regard to shipment by air

from Bombay Airport to Greece Airport was

permitted by amending the original Letter of

Credit as per letter dated 14.10.1978

(Exh.303) so far as Letter of Credit

No.13/1978 and 14/1978 was concerned which

are relevant for second and third

consignment. It appears that rest of the

Letters of Credit were not amended. So far as

first consignment is concerned, shipment was

made from Kandla port by extending the date

of shipment upto 01.12.1978 for submission of

the documents upto 30.12.1978. It is true

that after 30.12.1978, Letters of Credit were

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not enforceable.

176.From the facts emerging from the record,

shipment of first consignment was made by the

plaintiff on 22.11.1978 and thereafter as per

the mutual agreement between the parties,

second and third consignment were sent

through M/s. Vijay Transport Co. to defendant

no.5 so as to export the same by Air by

preparing the bills by the plaintiff, in turn

defendant no.1 also prepared the bills which

are placed on record at Exh.310 to Exh.315

regarding second consignment and Exh.316 and

Exh.317 for the third consignment.

177.On perusal of the Airway bill prepared

by defendant no.5 which is in the name of

defendant no.1 and not the plaintiff it

appears that admittedly the goods were

manufactured by the plaintiff and sent for

export from Kandla Free Trade Zone, invoice

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no. HK/0778-79 of 8.12.1978 along with

packing list for 10966 Radio Transistors

Model “North Star” 220 packages along with

inspection and quality certificates were

issued by the plaintiff which are placed

before defendant no.6 by defendant no.1 for

the Letters of Credit which were issued by

defendant no.6 New Bank of India. Even

certificate of origin was also provided by

Administrative Officer Kandla Free Trade Zone

for export of goods on 08.01.1979 in respect

of second and third consignment which were

admittedly sent by the plaintiff for export.

178.From the facts emerged from the record,

it also appears that in spite of the goods

having been received by defendant no.5 M/s.

Air Freight (P) Ltd. same were not exported

as defendant no.1 firm did not complete the

required procedure being Export House of the

plaintiff who was supposed to carry out the

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export of the consignment.

179.It appears that thereafter only in the

month of May, 1979, defendant no.1 was able

to see that the goods which are lying with

the defendant no.5 were exported. In the

backdrop of the above facts, claim of the

defendants for incurring various expenditures

as stated in counter claim were not

considered by the Trial Court except the

freight charges which were borne by defendant

no.1 for export of the second and third

consignment.

180.Regarding the issue of payment received

by defendant no.1 firm from Yugoslavian

buyers for second and third consignments is

concerned, the witness of the plaintiff has

deposed that defendant no.5 has forwarded

freight bills to defendant no.1 instead of

the plaintiff and before the plaintiff can

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submit the bills before the bank, defendant

no.1 had already encashed Letters of Credit

opened by the Yugoslavian buyers.

181.At this stage, it is pertinent to note

that during the pendency of the suit, interim

order was passed to keep the money received

by the defendant no.6 bank in Sundry account

and accordingly amount of Rs.33,82,509.08 on

06.09.1979 and amount of Rs.3,84,911.47 on

07.06.1986 were kept in sundry account by

defendant no.6 and copy of the statement of

Sundry account is placed at Exh.318. The

Trial Court while disposing the suit has

directed to transfer this amount which during

the pendency of the appeal has been now

invested by the Registry in the Fixed Deposit

with State Bank of India.

182.On perusal of the deposition of witness

no.1 of the plaintiff – Anilbhai Chandubhai

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Pota, it is deposed in the examination-in-

chief that payment of third consignment was

received by defendant no.1 in two parts as

Yugoslavian buyers made the first payment as

per the standard quality of the goods

received and dispute of quality was raised

regarding some part of the goods and withheld

the payment, subsequently such dispute was

given up and entire payment was made by the

foreign buyer. He has also referred to Form

A.R.4 which is placed on record at Exh.319 to

Exh.321. It was also pointed out that the

carbon copy was sent to the plaintiff, and

the original were kept by defendant no.5 M/s.

Airfreight (P) Ltd. He has also identified

Fixed Deposit Receipt (FDR) for 2

nd

consignment taken out by defendant nos. 1 to

4 at Exh. 323.

183.By referring to letter dated 06.10.1988

at Exh.324, it was stated that State Bank of

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India has returned the unpaid bill received

by it from defendant no.6 New Bank of India

along with original certificate issued by the

Customs department sent by the plaintiff

along with the goods. Witness of the

plaintiff also referred to telex messages at

Exh.326 to Exh.333 in which it is disclosed

that the goods would be shifted after

licenses are re-validated by the buyer. Telex

messages are from 06.04.1979 to 03.05.1979

for not exporting the goods by defendant nos.

1 to 5. Thereafter notice dated 08.10.1979

was issued by the plaintiff and notices were

also issued by the Customs Officer and reply

was given by defendant nos. 1 to 4 and order

of the Special Officer of Customs dated

02.01.1981 against defendant nos. 1 to 4

which was challenged by defendant nos. 1 to 4

before the Board of Revenue who set aside the

adjudication order. These documents are

placed on record from Exh.334 to 337. The

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plaintiff has also made efforts for return of

the goods through Customs Officer. Documents

thereof are placed on record from Exh.339 to

Exh. 349 and thereafter in the month of May,

1979, it was decided by the plaintiff to file

the suit. Even spare parts were sent to the

Yugoslavian buyers by the plaintiff and bill

for Airfreight was placed at Exh.352.

184.Reference was also made to telex

messages between the parties from Exh.353 to

Exh. 368. Thus, the witness of the plaintiff

proved that the goods sent by the plaintiff

was exported but no payment was made.

185. No cross examination of the witness of

the plaintiff was made on behalf of defendant

nos. 1 to 4 as advocate was not present.

However, cross examination was made on behalf

of defendant no.6 - New Bank of India

regarding the extension of the Letters of

Page 189 of 236

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Credit wherein it is deposed by the witness

that defendant nos. 1 to 4 did not pay the

amount of the goods and further denied that

no amount is sent by the Yugoslavian buyers

for the goods manufactured by the plaintiff

which were exported by defendant no.5 for 2

nd

and 3

rd

consignment. Regarding counter claim

of the defendant nos. 1 to 4, witness also

deposed in examination in chief to the effect

that the plaintiff had informed defendant

no.5 to return the goods which is placed on

record at Exh.451 and letter dated 10.03.1979

which is at Exh No. 452 and letters dated

30.04.1979, 09.05.1979 at Exh. 453 to

Exh.455, letter written to Air India to

export the goods through air cargo is also

placed at Exh.456 and reply given by the Air

India is placed at Exh.457. Even the customs

officer has written letter to the plaintiff

for return of goods as it was sent from

Kandla Free Trade Zone without payment of

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duty. Said letters are placed from Exh.458 to

460.

186.Considering such documents, it was

deposed that the details given in para no. 20

of the counter claim are not true and correct

and defendant nos. 1 to 4 have concocted the

story of damages to raise exaggerated counter

claim.

187.In the cross examination, carried out on

behalf of defendant nos. 1 to 4, witness has

reiterated the facts which were deposed in

examination in chief and deposed that goods

sent by the plaintiff was of good quality and

same was to be exported at the cost and

liability of the plaintiff. However, it was

admitted by the witness that airfreight,

demurrages and handling charges were not paid

by the plaintiff company and the goods of

second and third consignment were sent from

Page 191 of 236

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Kandla after the expiry of Letters of Credit.

However, it was denied that defendant no.1

firm did not inform the plaintiff company to

send the goods of second and third

consignment. It is also denied that defendant

no.1 firm was not liable to export the goods

of 2

nd

and 3

rd

consignment and the plaintiff

company was liable to receive the amount as

agreed between Hasmukh Khatri and defendant

no.1 firm. It was also denied by the witness

that the plaintiff company was not liable to

pay demurrage amount to defendant no.1 firm

for 3

rd

consignment.

188.The witness has also denied that there

was any negligence on part of the plaintiff

as well as it was also denied that goods of

2

nd

and 3

rd

consignment was sent through

defendant no.1 firm on the basis of

collection and after expiry of the Letters of

credit, no facilities can be obtained from

Page 192 of 236

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the bank and there was no correspondence made

by the plaintiff company with Yugoslavian

buyers. Thus, the witness has not accepted

any suggestion made on behalf of the

defendants regarding the counter claim and

reiterated what is stated in examination in

chief.

189.Witness no.1 of defendant no.6- Devraj

Indraprasad Anand deposed in examination in

chief that defendant “House of Dubary” opened

the account in New Bank of India, Defense

colony branch, in the year 1978 and at that

time only two partners Deepak Darbari and

Ravi Darbari were declared. Letters of Credit

were issued on 05.10.1978 wherein date of

shipping was fixed as 01.12.1978 and date of

submission of document was fixed as

20.12.1978. It was also deposed that for 2

nd

consignment, the defendant firm submitted

consignment documents like airway bills

Page 193 of 236

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invoices, packing list etc. on 27.12.1978 and

in airway bill, one of the name of shipper

was shown as “House of Dubary” and such

documents were sent to Yugoslavian bank and

out of three bills of exchange, payment of

two bills of exchange were received on

30.01.1979 and the date of payment of third

bill was fixed on 14.02.1979 and after

receipt of the amount by the bank, the same

was credited in the account of the defendant

firm. It was deposed that the documents were

in the name of defendant firm and therefore,

the plaintiff was not entitled to receive

such amount, and the amount was permitted to

be withdrawn by the defendant no.1 firm, and

the defendant firm adjusted the amount

against the outstanding dues of the bank. It

was also deposed that 3

rd

consignment was sent

through airway bill dated 04.05.1979 and the

documents were deposited with the bank on

09.05.1979 and in the airway bill only name

Page 194 of 236

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of “House of Dubary” was stated as shipper.

190.It also emerges from record that payment

for 3

rd

consignment was also received from

Yugoslavian buyers by the defendant no.6 Bank

and in view of stay order granted, payment of

3

rd

consignment of about Rs. 37 Lacs were not

paid to the defendant firm but the said

amount was kept in sundry account. It was

deposed that payment of 3

rd

consignment could

not be made by the bank as the airway bill,

inspection and Letters of Credit had expired

and there was no agreement between the

plaintiff and defendant firm with the bank

for making payment directly to the plaintiff.

191. In the cross examination of the said

witness of defendant no.6, it was admitted on

the basis of documents at Exh.283 to Exh.289,

which pertains to Letters of Credit opened by

the Yugoslavian buyers in Bank of Rajasthan,

Page 195 of 236

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Janpath Branch at New Delhi in the name of

“House of Dubary” and Letters of Credit of

Rajasthan bank, as an agent collected the

papers and Letters of Credit through

defendant firm to the New Bank of India and

on the basis of such documents, New Bank of

India issued Letters of Credit in favour of

defendant firm.

192.It was also admitted that for 3

rd

consignment, airway bill was not sent to the

State Bank of India, but invoices and packing

list etc. was sent to the State Bank of

India. It was also admitted that the

documents stated in Exh.325 were received by

defendant no.6 bank. When document at Exh.318

was shown to the witness of defendant no.6,

it was admitted that it was copy of sundry

account and no interest is paid in sundry

account and such amount is kept for non-use

purpose by the bank.

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193.Regarding Court Commissioner, it was

admitted that papers of the Court

Commissioner were signed by him and the Court

Commissioner had inspected the accounts of

the bank and the report is placed at Exh.400.

Witness also agreed that as per Exh.388, 2

nd

consignment amount of three bills was

deposited which was credited on 31.01.1979,

01.02.1979 and 27.02.1979 and amount of FDR

from Commissioner’s report was pertaining to

the 2

nd

consignment.

194.It was also admitted that name of

defendant no.1 firm was mentioned as shipper

of the plaintiff and accordingly, the amount

received from Yugoslavian buyer was deposited

in the account of the defendant no.1 firm.

195.Witness no.1 of defendant nos. 1 to 4

Deepak Darbari at Exh.415 has submitted his

Page 197 of 236

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examination in chief wherein it is deposed

that after expiry of Letters of Credit, the

plaintiff sent the goods for 2

nd

consignment

without consent of the defendants and

therefore, such goods were not exported. It

was also deposed that amount of freight,

demurrages and handling charges were paid by

defendant no.1 firm though same was to be

paid by the plaintiff. It is also deposed

that such amount paid by the defendant nos. 1

firm is stated in counter claim. It is also

deposed that for 2

nd

consignment, the amount

was received from Yugoslavian buyers however,

as Letters of Credit had expired, same was

deposited in the account of defendant no.1.

196.With regard to 3

rd

consignment, it was

deposed that the plaintiff informed defendant

no.1 firm when the goods reached from Kandla

to Mumbai and it was informed by the

plaintiff that such goods were to be exported

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on their own and after Hasmukh Khatri

requested for negotiation with regard to 3

rd

consignment, defendant no.1 paid the amount

of airfreight etc. as there was no financial

facility with the plaintiff. It was also

deposed that defendant no.1 firm paid

clearing, handling service demurrage amount

for 3

rd

consignment which was to be paid by

the plaintiff and the said amount is stated

in the counter claim. It was therefore,

deposed that as the plaintiff was required to

pay the charges of freight, demurrage etc.,

amount received from Yugoslavian buyers was

adjusted against such charges to be received

from the plaintiff by deducting the amount to

be payable to the plaintiff and as defendant

no.1 firm could not earn profit of about Rs.

20 Lacs had the plaintiff sent the goods

within the period of Letters of Credit, the

said amount was included in the counter claim

filed by the defendant nos. 1 to 4.

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197.Various documents were placed on record

regarding the payment made by defendant no.1

firm from Exh.420 to Exh.425. In the cross

examination, it was admitted by the witness

of defendant nos.1 to 4 that defendant no.1

firm is not registered under the Partnership

Act and only counter claim was filed on

behalf of the firm and its partner. It was

also admitted that defendant no.1 firm is

keeping the account books at Delhi office and

is also paying the income tax. It is also

admitted by the witness of defendants in the

cross examination that at the time of export

of 3

rd

consignment, free shipping bill was

obtained and A.R.4 Form was not submitted. It

was also admitted that defendant no.1 firm

had exported the goods for 3

rd

consignment at

the cost of the plaintiff by obtaining the

free shipping bill in the name of defendant

no.1 firm.

Page 200 of 236

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198.However, it was denied that A.R.4 Form

was not utilised as Yugoslavian buyers were

not able to pay the amount of 3

rd

consignment

as Letters of Credit had expired.

199.It was also admitted that Exh.310 to

Exh.314 are photocopies of invoices of 2

nd

consignment which were sent to Yugoslavia and

Exh.315 is airway bill of the 2

nd

consignment.

It was also admitted that the amount of 3

rd

consignment was received in part. It was also

deposed that amount of freight, handling

services of 2

nd

and 3

rd

consignment was to be

borne by the plaintiff.

200.It was admitted by the witness that no

amount was deducted by Yugoslavian buyers

with regard to 2

nd

consignment and there is no

outstanding payment to be made by Yugoslavian

buyers regarding any goods which were

exported for 2

nd

and 3

rd

consignment.

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201.Thus, the witness of defendant nos. 1 to

4 admitted that goods of 2

nd

consignment and

3

rd

consignment were exported by defendant

no.1 firm and payment was received from

Yugoslavian buyers which was not paid to the

plaintiff as defendant no.1 was required to

recover the amount of freight and other

charges from the plaintiff.

202.From the above analysis of the oral and

documentary evidence on record, it cannot be

said that the Trial Court has erred in law in

holding that contract was independent of

Letters of Credit.

203.So far as the first consignment exported

by the parties, transaction and relation

thereto was over as per the terms of the

Letters of Credit. However, so far as 2

nd

and

3

rd

consignment which are admittedly exported,

Page 202 of 236

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Letters of Credit had already expired and

inspite such fact being known to everyone

that Letters of Credit had expired, 2

nd

consignment was also exported and payment was

received from the Yugoslavian buyers and

third consignment was detained by defendant

no.5 Clearing and Forwarding Agent for about

four months and ultimately, the said

consignment was also exported and defendant

no.1 firm received the payment by encashing

the Letters of Credit on the basis of airway

bill in its name without utilising the A.R.4

Form which were sent by the plaintiff firm

along with the goods.

204.Thus, the defendant no.1 firm exported

the goods of 2

nd

and 3

rd

consignment without

considering the Letters of Credit which were

issued in favour of the plaintiff. Hence , it

cannot be said that the Trial Court has erred

in holding that contract was independent of

Page 203 of 236

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Letters of Credit.

205.Points for Determination No.7 and 8

raise a very important issue as to whether

the decretal amount is arbitrary and based on

manifest error or not and whether the trial

Court was just and correct in decreeing the

suit for Rs.49,81,336/- and disallowing the

claim of the plaintiff for Rs.13,09,909/-.

After considering the evidence on record, the

Trial Court has rightly concluded that the

plaintiff was entitled to the amount of 2

nd

and 3

rd

consignment as observed in para no.

137 of the impugned judgment and order as

under:

“(137).... I have carefully examined

the plaint and the recital of the

cross suit along with the

documentary evidence and gone

through particularly the relevant

invoice at Exhts. 310,312 and 314

along with air way bill at Ex.315

and found that three cargo were sent

in the second consignment and

thereby supplied the goods viz.,

2000 pieces of venus model, 10996

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pieces of the model North Stars and

10,000 pieces of the model panasia

at rate per piece in US dollar 8.50,

43,6985, 8,00 respectively. The

C.I.F. price value was in total US

Dollars 93,466-00, 87,397-00 and

80,000 respectively. It was the

understanding that the firm House of

Darbary should have been arranged

for the insurance and therefore be

deducted one percent of such price

value C.I.F. For the deduction of

such one percent it was necessary to

be deducted in US Dollar 934.66,

873.97 and 800 respectively from C.

I.F. value of these items. After

deduction, it will be found that in

US Dollars the balance amount will

be 92,531.34, 86,523-03 and 79,200-

00 respectively.

If we will be converted the balance

value of the dollars into Indian

rupees then it will be Rs.7,71,094-

50 paise, R.7,21,025-00 paise and

Rs. 6,60,000-00 paise respectively

of the value on basis C & F. I find

that the total value on basis C & F

of the goods relating to the second

consignment will be of Rs.

21,52,119-50 paise. In the present

case it is now no longer in dispute

that the items as to be shown on

page No.11 in paragraph No.110 of

the plaint are not entirely second

consignment but on the contrary, it

is admitted position that the item

"shella" and the item "Binoculars"

are not relating to the contract

with the plaintiff but are related

with the contract M/s. Hashmukh

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Brothers and the said Hashmukh

Brothers had supplied the item

Shella and the item Binoculars even

wrongly and by mistaken to be

mentioned in the plaint. According

to the parties, the goods as to be

shown above were sent in the second

consignment out of the total items

as mentioned in the plaint and the

remaining goods relating to item

"khashmir" and the item "victory"

and the item "venus" pieces 3000

were sent in the third consignment

along with othe goods. On basis of

this fact, I have found that the

firm House of Dubary had received

the total amount of Rs. 34,49,578-07

paise including the item of "shella"

and the item of Binoculars of the

second consignment from Yugoslavian

buyers which being credited in the

account of the firm in New Bank of

India Ltd., New Delhi as per Ex.388

showing the same in red ink circle.

This shows that this total amount of

Rs. 34,49,578-07 paise was including

the value of the goods "shella" and

Binocular which being supplied by

Hashmukh Brothers and therefore it

will be required to be deducted from

the total amount of Rs. 12,92,87-96

paise out of such total balance.

After deducting such amount, we will

get the total amount of Rs.

21,56,570-71 paise which will be the

amount of the second consignment as

received by the firm House of Dubary

as per vide Ex. 388 from the

Yugoslavian buyers. I have already

stated above that the firm House of

Dubary paid the chatter freight for

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the second consignment of the amount

Rs. 1,91,646-00 If we will deduct

this amount of freight, of the

total amount of Rs. 21,56,570.71

paise then will be got the amount of

Rs. 19,64,924-71 paise. It shows

that the amount of Rs. 19,64,924-71

is less than the total value on

basis C & F of Rs.21,52,119-50

paise. This being so, it is now

clear that the firm House of Dubary

had at all not received any amount

towards the freight and insurance

from Yugoslavian buyers. If it was

the contract on basis of F.O.B.

then the firm House of Dubary was

certainly received the amount which

being spent after the freight and

insurance for the second consignment

from Yugoslavian buyers when

Yugoslavian buyers did not pay such

freight and insurance to the firm

House of Dubary which would go to

show that the goods of second

consignment were supplied by the

plaintiff under the original

contract on basis C.I.F. It is

therefore clear that the plaintiff

had to be paid the insurance and

charter freight of the second and

third consignment and it was the

provisional accommodation and was

given the facility to the plaintiff

by the firm House of Dubary with

bonafide to be exported the goods

even after expiration of the time

limit of the contract on basis of

C.I.F and not F.O.B. without

altering the essence and foundation

or nature of the contract on basis

of C.I.F. I therefore disagree with

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the submission of the learned

advocate Shree Bheda for the

plaintiff that the firm House of

Dubary and partners there were

liable to pay the insurance freight

and handling charges of the goods

The defence story is found most

probable and convincing and it is

fully supported by the oral and

documentary evidence on record.

206.With regard to the amount for 2

nd

consignment, Trial Court has rightly observed

that amount of Rs.26,00,863/- mentioned in

para no. 10 of the plaint is not correct and

correct amount would be Rs.19,60,473.50 as

per the Letters of Credit on the basis of CIF

without deducting 1% value of insurance as

per the correspondence as under:

“138).....I have found from the

evidence that the plaintiff is only

entitled to get the amount of

5.19,60.473-50 paise for the goods

relating to the second consignment

from the deft., Nos. 1 to 4 only and

not the amount of Rs. 26,0,863-00 as

claimed and mentioned in the plaint.

The claim of the plaintiff is no

correct towards the second

consignment. I have found that the

facts as to be furnished on page-

No.11 in paragraph No.10 of the

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plaint are not correct and it is

contrary even on basis of the

accounts which have been produced by

the plaintiff itself under mark

202/6 (on page No.5 to 7). I have

carefully examined the statement of

the accounts mark 202/6 and found

that the plaintiff has shown the

value on basis C & F eventhough

mentioned in the plaint the value on

basis C.I.F. without deducting the

one percent value of the insurance

as per the correspondence. I have

further found that the invoice H.K.

No.8 and the invoice H.K.No.9

relating to the item "Shella" and

the item "Binoculars" are not

entered into books of account of the

plaintiff even if mentioned in the

plaint covering such two items as to

be supplied by the plaintiff, where

there was no orders and contract for

the same with the plaintiff but the

orders were under the con tract with

M/s. Hashmukh Brothers.”

207.Regarding 3

rd

consignment, the Trial

Court has held that the plaintiff is entitled

to the amount of Rs.30,20,912.75 after

deducting freight of Rs.5,30,806/- as under:

“139).....As regards to third

consignment is concerned, it is

clear that the goods were sent to

Yugoslavian buyers on 4-5-79 vide

air-way bill ex, 317. The invoice at

Ex. 316 speaks that in the third

consignment, the goods were sent

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viz. A Car Radio cassettes Model

venus 3000 pieces at rate per piece

in US Dollars 51-41, (2) Transistor

Radio Model panasia 6000 pieces at

rate per piece in US dollars 10-00

(3) Transistor Radio Model Tele

star, 5000 pieces at rate per piece

in US dollars 17,76 (4) radio

cassettes Model Kashmir, 2499 pieces

at rate per piece in US Dollars

42,49 (5) Radio cassettes Model

victory. 2500 pieces at rate per

pieces in US dollars 40-32. Now

these items are tally with the facts

as mentioned on page-11 and on page

20 in paragraphs Nos. 10 and 13 of

the plaint and it is found that the

goods as mentioned above were sent

in the third consignment as per the

invoice vide Ex. 316 by the Air-way

bill vide Ex. 317 to Yugoslavian

buyers. But the plaintiff has shown

the price value of such goods in the

plaint on basis of C.I.F. without

deducting one percent of the charges

insurance as per the correspondence.

I have found from the accounts mark-

202(6) that the plaintiff has

entered the price value of such

goods into its own books of account

on basis C&F after deducting the one

percent charges of the insurance. It

is therefore clear that the price

value of the goods as to be

mentioned is not on based. C & F but

on basis C.I.F. which is not as per

terms of the contract. I have

therefore taken total value on

basis, C & F from the accounts mark

202 (6) (on- pages 8 to 13) in US

dollars 42,6475-53 equivalent in

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Indian Rs. 35,51,712-75 paise. It is

now necessary to be deducted the

amount of the freight of Rs.

5,30,800 so that we will get the

figure of Rs. 30,20,912-75 paise of

the value on basis F.O.B. The

plaintiff has claimed of Rs.

34,65,606-60 which is incorrect but

will be entitled to get only the

amount of Rs. 30,20,912-75 paise

towards the goods relating to third

consignment on basis F.O.B. and not

more.”

208.The Trial Court has also rejected the

claim of the defendants regarding Rs.60,000/-

towards demurrages, Rs. 10 Lacs towards

defects in goods on coming to the conclusion

that no deduction was made by Yugoslavian

buyers from the payment of 3

rd

consignment

which is proved by the plaintiff from the

evidence on record and the defendants have

therefore, failed to prove that the plaintiff

has committed breach of contract but it has

also been established that defendant nos. 1

to 4 have not paid the money to the plaintiff

and withheld the money even after receiving

from Yugoslavian buyers.

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209.Thus, the Trial Court has passed the

decree for Rs.49,81,336/- (for 2

nd

consignment

Rs.19,60,473.50 and for 3

rd

consignment

Rs.30,20,912.75).

210.In view of aforesaid findings of the

Trial Court which is borne out from the oral

and documentary evidence on record, it cannot

be said that decretal amount is arbitrary and

based on manifest error. There is no error in

arriving at decretal amount of Rs.49,81,336/-

awarded by the Trial Court.

211.Point for Determination no.9 pertains to

counter claim raised by defendant no.1 by

filing the written statement under Order VIII

Rule 6(A) of the Code of Civil Procedure,

1908 raising a claim of Rs.1,08,85,152/-.

212.Learned advocate Mr. Joshi appearing for

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the plaintiff raised preliminary objection

regarding the maintainability of the appeal

filed by the defendant nos. 1 to 4 contending

that First Appeal with counter claim itself

would not be maintainable in view of bar

contained under section 69 of the Indian

Partnership Act, 1932.

213.Learned Trial Judge while answering

issue no.2(G) at para no. 119 and 122 of the

impugned judgment and order has discussed

this issue and answered that counter claim is

not maintainable on the premise that the

defendant no.1 partnership firm was not

registered under the provisions of the

Partnership Act, 1932. Section 69 and section

69A of the Partnership Act reads thus:

“69. EFFECT OF NON-REGISTRATION. -

(1) No suit to enforce a right

arising from a contract or conferred

by this Act shall be instituted in

any Court by or on a behalf of any

persons suing as a partner in a firm

against the firm or any person

alleged to be or to have been a

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partner in the firm unless the firm

is registered and the person suing

is or has been shown in the Register

of Firms as a partner in the firm :

Provided that the requirement of

registration of firm under this sub-

section shall not apply to the suits

or proceedings instituted by the

heirs or legal representatives of

the deceased partner of a firm for

accounts of the firm or to realise

the property of the firm.

(2) No suit to enforce a right

arising from a contract shall I be

instituted in any court by or on

behalf of a firm against any third

party unless the firm is registered

and the persons suing are or have

been shown in the Register of Firms

as partners in the firm.

(2A) No suit to enforce any right

for the dissolution of a firm or for

accounts of a dissolved firm or any

right or power to realise the

property of a dissolved firm shall

be instituted in any Court by or on

behalf of any person suing as a

partner in a firm against the firm

or any person alleged to be or have

been a partner in the firm, unless

the firm is registered and the

person suing is or has been shown in

the Register of Firms as a partner

in the firm :

Provided that the requirement of

registration of firm under this sub-

section shall not apply to the suits

or proceedings instituted by the

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heirs or legal representatives of

the deceased partner of a firm for

accounts of a dissolved firm or to

realise the property of a dissolved

firm.

(3) The provisions of sub-sections

(1), (2) and (2A) shall apply also

to a claim of setoff or other

proceedings to enforce a right

arising from a contract but shall

not affect

(a) the firms constituted for a

duration upto six months or with a

capital upto two thousand rupees;

or;

(b) the powers of an official

assigned, receiver or Court under

the Presidency Towns Insolvency Act,

1909, or the Provincial Insolvency

Act, 1920, to realise the property

of an insolvent partner.

(4) This section shall not apply -

(a) to firms or partners in firm

which have no place of business in

the territories to which this Act

extends, or whose places of business

in the said territories are situated

in areas to which, by notification

under section 56 this Chapter does

not apply, or OF GUJARAT

(b) to any suit or claim of set-off

not exceeding one hundred rupees in

value which, in the presidency

towns, is not of a kind specified in

section 19 of the Presidency Small

Cause Courts Act, 1882, or outside

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the Presidency towns, is not of a

kind specified in the Second

Schedule to the Provincial Small

Cause Courts Act, 1887, or to any

proceeding in execution or other

proceeding incidental to or arising

from any such suit or claim.

Comment: "...Thus, the persons

suing, namely, the current partners

as on the date of the suit were not

shown as partners in the Register of

Firms. The result is that the suit

was not maintainable in view of the

provisions of sub-sec. (2) of S. 69

of the said Partnership Act..." M/s.

Shreeram Finance Corporation,

Appellants v. Yasin Khan AIR 1989

SUPREME COURT 1769

Section69A PENALTY FOR CONTRAVENTION

OF SECTION 60, 61, 62, OR 63.

If any statement, intimation or

notice under sections 60, 61, 62 or

63 in respect of any registered firm

is not sent or given to the

Registrar, within the period

specified in that section, the

Registrar may, after giving notice

to the partners of the firm and

after giving them a reasonable

opportunity of being heard, refuse

to make the suitable amendments in

the records relating to the firm,

until the partners of the firm pay

such penalty, not exceeding ten

rupees per day, as the Registrar may

determine in respect of the period

between the date of expiry of the

period specified in sections 60, 61,

62 or as the case may be, 63 and the

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date of making the amendments in the

entries relating to the firm.”

214.A plain reading of the above provision

would indicate that no suit to enforce a

right arising from a contract or conferred by

the Act shall be instituted in any Court by

or on a behalf of any persons suing as a

partner in a firm against the firm or any

person alleged to be or to have been a

partner in the firm unless the firm is

registered.

215.Section 58 of the Partnership Act

mandates as to how registration of a firm may

be effect and the non-consequence of

registration is traceable to section 69. The

said provision is mandatory in character, and

its effect is to render a suit in respect of

a right under the Contract which he entered

into a partner of a unregistered firm as

being void. The Hon'ble Apex Court in the

Page 217 of 236

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case of Loonkaran Sethia etc. versus Mr. Ivan

E. John and Others reported in AIR 1977 SC

336 has held that Section 69 is mandatory in

character and its effect is to render a suit

filed by the plaintiff in respect of a right

vested in him or acquire by him under the

contract which he entered into as a partner

in a unregistered firm, whether existing or

dissolved as void. It has been further held

in para 21 as under:-

“21. A bare glance at the section is

enough to show that it mandatory in

character and its effect is to

render a suit by a plaintiff in

respect of a right vested in him or

acquired by him under a contract

which he entered into as a partner

of an unregistered firm whether

existing or dissolved, void. In

other words, a partner of a

erstwhile unregistered part- nership

firm cannot bring a suit to enforce

a right arising out of a contract

falling within the ambit of section

69 of the Partnership Act. In the

instant case, Seth Suganchand had to

admit in unmistakable terms that the

firm 'Sethiya & Co.' was not

registered under the Indian

Partnership Act. It cannot also be

denied that the suit out of which

Page 218 of 236

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the appeals have arisen was for

enforcement of the agreement entered

into by the plaintiff as partner of

Sethiya & Co. which was an

unregistered firm. That being so,

the suit is undoubtedly a suit for

the benefit and interest of the firm

and consequently a suit on behalf of

the firm. It is also to be borne in

mind that it was never pleaded by

the plain- tiff, not even-in the

replication, that he was suing to

recover the outstandings of a

dissolved firm. Thus the suit was

clearly hit by section 69 the

Partnership Act and was not

maintainable."

216.While examining as to embargo contained

under sub-section 3 of Section 69, wherein

the expression "other proceedings" is found.

The Apex Court in the case of M/s. Umesh Goel

versus Himachal Pradesh Cooperative Group

Housing Society Ltd. reported in AIR 2016 SC

3116, has held :

"8. Having heard learned counsel for

the appellant as well the respondent

and having bestowed our serious

consideration to the respective

submissions, the various decisions

relied upon and the provisions

contained in the Partnership Act,

the Interest Act, Civil Procedure

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Code and Arbitration Act, we are of

the view that the submissions of Mr.

Dhruv Mehta, learned Senior Counsel

for the appellant merit acceptance.

xxx

10. Though, some of the decisions

which were cited before us dealt

with Section 69(3) of the

Partnership Act, in the instance we

wish to analyze the said sub-section

along with the other components of

the said Section 69. When we read

sub-section (3) of Section 69

carefully, we find that as rightly

contended by Mr. Dhruv Mehta,

learned Senior Counsel for the

appellant, the provisions of sub-

sections (1) and (2) have been

impliedly incorporated in sub-

section (3). When the opening set of

expression in sub-section (3) states

that the provisions of sub- sections

(1) and (2) shall apply, there is no

difficulty in accepting the said

submission of learned Senior Counsel

for the appellant that the entirety

of the said two sub-sections should

be held to be bodily lifted and

incorporated in sub-section (3). It

is difficult to state that any one

part of sub-sections (1) and (2)

alone should be held to be

incorporated for the purpose of sub-

section (3). Therefore, we are

convinced that when we read sub-

section (3) it is imperative that

all the ingredients contained in

sub-sections (1) and (2) should be

read into sub-section (3) and

thereafter apply the said sub-

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section when such application is

called for in any matter.

xxx

12. The question for our

consideration is by virtue of sub-

section (3) whether the expression

"other proceedings" contained

therein will include Arbitral

proceedings and can be equated to a

suit filed in a Court and thereby

the ban imposed against an

unregistered firm can operate in the

matter of arbitral proceedings. If

sub- sections (1) and (2) are

virtually lifted whole hog and

incorporated in sub-section (3), it

must be stated that it is not the

mere ban that is imposed in sub-

sections (1) and (2) that alone is

contemplated for the application of

sub-section (3). In other words,

when the whole of the ingredients

contained in sub-sections (1) and

(2) are wholly incorporated in sub-

section (3), the resultant position

would be that the ban can operate in

respect of an unregistered firm even

relating to a set off or other

proceedings only when such claim of

set off or other proceedings are

intrinsically connected with the

suit that is pending in a Court. To

put it differently, in order to

invoke sub-section (3) of Section 69

and for the ban to operate either

the firm should be an unregistered

one or the person who wants to sue

should be a partner of an

unregistered firm, that its / his

endeavour should be to file a suit

in a Court, in which event even if

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it pertains to a claim of set off or

in respect of 'other proceedings'

connected with any right arising

from a contract or conferred by the

Partnership Act which is sought to

be enforced through a Court by way

of a suit then and then alone the

said sub-section can operate to its

full extent.

13. As far as the construction of

the said sub-section (3) of Section

69 is concerned, we are able to

discern the above legal position

without any scope of ambiguity. To

be more precise, the condition

precedent for the operation of ban

under sub-section (3) is that the

launching of a suit in a Court of

law should be present and it should

be by an unregistered firm or by a

person claiming to be partner of an

unregistered firm either to a claim

for set off in the said suit or any

other proceedings intrinsically

connected with the said suit.

14. In the event of the above

ingredients set out under sub-

sections (1), (2) and (3) being

fulfilled then and then alone the

ban prescribed against an

unregistered firm under Section

69(1), (2) and (3) would operate and

not otherwise.”

217.The Hon'ble Apex Court concluded that

the expression "other proceedings" occurring

in section 69(3) of the Act does not having

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application to the ban imposed under said

section, the proceedings initiated for

arbitral proceedings as well as arbitration

award.

218.Thus, the counter claim filed by first

defendant for payment of Rs. 1,08,85,152/- by

the plaintiffs in favour of the defendant

itself was not maintainable and consequently

the appeal preferred by first defendant

insofar as rejection of the counter claim by

the trial court which is the subject matter

of the appeal No. 531 of 1986 would not be

maintainable. However, insofar as the appeal

filed challenging the judgment and decree of

the suit being decreed for a sum of Rs.

49,81,336/- against defendant Nos. 1 to 4,

the correctness and legality of the same can

be assailed by defendant Nos. 1 to 4,

inasmuch the decree being joint and several,

the appeal filed under section 96 of CPC by

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defendant nos. 1 to 4 would be maintainable.

219.Thus, we are of the opinion that the

trial Court was justified in rejecting the

counter claim filed by defendant nos. 1 to 4.

However, merely by rejecting the counter

claim we cannot be oblivious to the facts of

the case that expenses incurred by the

defendant no.1 firm for export of 2

nd

and 3

rd

consignment which were liable to be borne by

the plaintiff cannot be denied to the

defendant no.1 firm. We have therefore,

considered this aspect while deciding point

no.11.

220.Point for Determination No.10 pertains

to exonerating defendant nos. 5 and 6 from

joint and several liability from making the

payment of the decretal amount by the Trial

Court is justified or not as raised in First

Appeal No.1093/1987 filed by the plaintiff.

Page 224 of 236

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221. The contention raised on behalf of the

plaintiff that defendant no.6 was also party

to the breach of contract committed by

defendant nos. 1 to 4 was dealt with by the

Trial Court in para no. 94 as under:

“94)...... The question for

consideration in this case is whether

the six deft., New Bank of India is

liable for the fraud as to be committed

by the deft., Nos. 1 to 5 regarding to

their consignment whereby is the six

deft., committed negligence in tort.

The learned advocate Shree Bheda for

the plaintiff submits that the New Bank

of India was liable to make the

payments of the second and third

consignments under the letters of

credit on receipt the actual amounts

from the Bank of the Yugoslavian buyers

even if failed to do so and permitted

the first deft., to be converted the

said moneys in personal account of the

first deft., which being amounted of

the conversion on basis of the fraud

and collusion of the defts., Now on the

facts and circumstances of the case

before us., the Yugoslavian buyers

opened the irrevocable seven letters of

the credit towards the payments of the

orders of the goods in favour of the

first deft. The Zerox copies of such

letters of credit are produced by the

deft., which are exhibited vide Exhts.,

283 to 289. After that, in turn, the

New Bank of India opened the four

letters of credit in favour of the

Page 225 of 236

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plaintiff in the State Bank of India,

Branch office Kandla. Zerox copies of

such letters of credit along with the

documents are produced by the defts.,

which are exhibited vide exhts. 290 to

309. This shows that Bank of India was

opening bank and the State India was

advising Bank. It appears from the

letters of credit vide Exhts., 290 to

309 that the first deft., opened four

letters of credit valued at U.S.

Dollars 1,867,488-75 equivalent to

Indian rupee 1,49,47,909-00 in favour

of the plaintiff for supplying the

goods as mentioned in the said letters

of the credit namely Radio cassette

Transistor Radio, Car Radio, Cassettes

etc., and proportionate payment as to

be made to beneficiary for any part of

shipments made. For such payments are

required the following documents.

Commercial invoice, one origin and five

copies (2) packing list, one origin and

five copies (3) certificate of origin

one original and two copies from Indian

Chamber of Commerce (4) Inspection

quality certificate, one original and

two copies as issued by House of Dubary

New Delhi (5) Insurance Policy in U.S.

Dollars for 40 percent above the C. I.

F. value of the shipment one original

and three copies in assignable form

endorsed in Bank. Insurance to cover

all risks from seller's warehouse to

party's warehouse (6) original and two

copies of the bill of lading marked

freight prepaid, made out to the order

of Makosped skopje. Notify solun,

Gavgelija, Yugoslavia (7) All the

documents will be marked name of

shipper A/c House of Dubary, New Delhi,

India (8) we (New Bank of India Ltd.)

will remit the proceeds to the

negotiating Bank of the OD/DC buying

Page 226 of 236

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rate prevailing on the day of the

documents are negotiated under the

above letter of credit therein are

received by us.”

222.In view of the aforesaid finding of the

Trial Court, We do not find any infirmity in

findings of the Trial Court as the same is

based on oral and documentary evidence. So

far as defendant no.5 M/s. Airfreight (P)

Ltd. is concerned, it was appointed by

defendant no.1 as a Clearing and Forwarding

Agent and was acting as an agent of the

plaintiff as well as defendant no.1 firm for

the export of goods and there is no oral and

documentary evidence to show that defendant

no.5 is liable for not exporting the goods

inspite of the instructions either from the

plaintiff or defendant no.1 firm. In such

circumstances, the Trial Court has rightly

come to the conclusion that the suit stands

dismissed qua defendant nos. 5 and 6. In our

opinion, the Trial Court has rightly

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concluded that the rest of the suit and the

claim stands dismissed against defendant

nos.5 and 6.

223.Point for Determination no.11 pertains

to whether the decree passed by the Trial

Court for Rs.49,81,336/- is just and proper.

224.At this stage, it is pertinent to note

that on appreciation of oral and documentary

evidence on record, the Trial Court has not

granting set off of the expenses borne by the

defendant no.1 firm for export of the goods

of 2

nd

and 3

rd

consignment through defendant

no.5. However, from the findings which emerge

from the facts on the basis of oral and

documentary evidence, amount of expenditures

incurred by defendant no.1 firm are required

to be considered to be set off against the

amount of decree passed by the Trial Court in

favour of the plaintiff. The amount paid by

Page 228 of 236

C/FA/531/1986 CAV JUDGMENT DATED: 17/07/2026

defendant no.1 firm for export of second and

third consignment is discernible from the

counter claim of defendant nos. 1 to 4 which

is supported by the oral evidence of the

defendant no.2 as analysed herein above.

225.Therefore, for the purpose of rendering

substantial justice to see that the amount

spent by defendant no.1 firm for export of

goods of second and third consignment on

behalf of the plaintiff is required to be

reimbursed to defendant no.1 firm and to

that extent the decretal amount is required

to be modified.

226. The plaintiff in the cross examination

of the defendant no.2 could not extract any

contradictory facts for the payment of

airfreight, demurrage etc. for export of the

2

nd

and 3

rd

consignment made by the defendant

no.1 firm. Even the witness of the plaintiff

Page 229 of 236

C/FA/531/1986 CAV JUDGMENT DATED: 17/07/2026

in his deposition has admitted that amount of

freight, demurrage, handling charges etc. for

export of 2

nd

and 3

rd

consignment were paid by

defendant no.1 firm.

227.In view of analysis of oral and

documentary evidence made herein above and

considering the submissions of both the

learned advocates, we have to consider as to

whether the decree passed by the Trial Court

for Rs.49,81,336/- is just and proper or not.

As we have noted while considering the point

no.9 for determination while upholding the

findings of the Trial Court that the counter

claim of defendant no.1 firm is not

maintainable, however, we are of the opinion

that the expenses incurred by it for export

of the 2

nd

and 3

rd

consignment by the

defendant no.1 firm are required to be

reimbursed.

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C/FA/531/1986 CAV JUDGMENT DATED: 17/07/2026

228.On perusal of the documents placed along

with the counter claim and considering the

deposition of the defendant no.2, it appears

that defendant no.1 firm has incurred the

following expenditures:

Rs.4,75,000/-

(US$ 59,375.00)

Towards airfreight

charges in respect of 2

nd

consignment (First

Charter)

Rs.4,50,000/-

(US$ 56,250.00)

Airfreight charges in

respect of 3

rd

consignment

(Second Charter)

Rs.1,53,990.08

(US$ 19,248.76)

For goods returned by

Yugoslavian buyers

Rs.1,77,128/-

(US$ 22141.00)

As per letter dated

19.06.1979 of Yugoslavian

buyers for not supplying

spare parts

Rs. 60,000/-

(US$ 7500.00)

For demurrage charges

Rs.50,000/- For clearing and

forwarding charges

Rs.13,66,118/- Total

229.The above expenses are considered to be

paid by defendant no.1 on the basis of the

documents placed on record. Though the

counter claim is rejected by the Trial Court,

the documents placed along with the counter

Page 231 of 236

C/FA/531/1986 CAV JUDGMENT DATED: 17/07/2026

claim are considered by the Trial Court in

the impugned judgment and order in para no.

137 reproduced here-in-above. The Trial Court

has also considered the amount of Rs.

60,000/- paid by the defendant no.1 firm

towards demurrage charges in para no.140 of

the judgment and order and has rejected the

claim of Rs. 10 Lacs on the ground that the

plaintiff has supplied the goods which were

not upto the mark of standard in para no. 141

of the judgment and also referred to Exh. 318

that by the letter by Yugoslavian buyers

remitted the amount of Rs.3,84,711/- which

was withheld for the defective goods. Even

reference was made to letter at Exh. 418

where value of defective goods have been

shown in US$ 65,595 and towards the value of

defective goods Yugoslavian buyers had paid

amount of Rs.3,84,711/- and has come to the

conclusion that the entire amount had been

paid and the Yugoslavian buyers had not

Page 232 of 236

C/FA/531/1986 CAV JUDGMENT DATED: 17/07/2026

deducted any money towards the defective

goods. Accordingly, the Trial Court has held

that the claim for defective goods does not

survive.

230.Regarding the deficit goods, it was

observed by the Trial Court in para no. 141

of the judgment that as per the Letter at

Exh. 418, goods worth US$ 8291 equivalent to

Rs.65,000/- were sent under the insurance

with full value on the basis of C.I.F. and

therefore, the defendants would be entitled

to take legal course for recovery of damages

against the insurance company. However, such

findings of Trial Court cannot be accepted as

ultimately the plaintiff was responsible for

the payment of deficit goods. In that view of

the matter, we hold that the aforesaid amount

is required to be reimbursed to the defendant

no.1 firm by the plaintiff.

Page 233 of 236

C/FA/531/1986 CAV JUDGMENT DATED: 17/07/2026

Conclusion

231.In view of foregoing analysis, we are of

the opinion that amount of Rs. 13,66,118/- is

required to be further reduced from the

decretal amount of Rs.49,81,336/- awarded by

the Trial Court.

232.Therefore, the decree is accordingly

modified to the extent of Rs.36,15,218/-

(Rs.49,81,336-Rs.13,66,118).

233.We, therefore, hold that the decretal

amount as per the decree passed by the Trial

Court is modified at Rs.36,15,218/- together

with proportionate interest accrued therefrom

as per the order passed by the Trial Court.

234.As per the status report of FDR-25 as

issued by State Bank of India dated

30.06.2026, principal value of FDR is Rs.

1,91,04,023/- and accrued interest is

Page 234 of 236

C/FA/531/1986 CAV JUDGMENT DATED: 17/07/2026

Rs.5,23,66,304/- and therefore, total amount

on said FDR is Rs.7,14,70,627/- with running

interest which may accrue till the date of

premature encashment.

235. As the decree is modified to the extent

of Rs.36,15,218/-, the plaintiff will be

entitled to the said decretal amount along

with accrued interest thereon from the amount

deposited in Fixed deposit with the State

Bank of India, High Court Complex Branch. The

balance amount, out of the total amount

deposited by defendant no.6 bank i.e.

Rs.1,52,202/- [Rs.37,67,420-Rs.36,15,218]

together with proportionate interest accrued

thereon to be bifurcated from the amount to

be realised on premature encashment of Fixed

Deposit till the date of realisation shall

be paid to defendant nos. 1 firm and

remaining amount to be paid to the plaintiff.

Ordered accordingly.

Page 235 of 236

C/FA/531/1986 CAV JUDGMENT DATED: 17/07/2026

236.Appeals stand disposed of in the

aforesaid terms. Decree stands modified

accordingly. No order as to cost.

(BHARGAV D. KARIA, J)

(L. S. PIRZADA, J)

RAGHUNATH R NAIR

Page 236 of 236