Kushalbhai Mahojibhai Patel Vs. A Firm
of Mohmadhussain Rahimbux  INSC 45 (11 March 1980)
FAZALALI, SYED MURTAZA
CITATION: 1981 AIR 977 1980 SCR (3) 22
Privity of Contract-Supply made by appellant
Plaintiff to respondent defendant of 268 Bengali Maunds of Tobacco and accepted
by the latter-Four cheques issued by the latter covering the value bumped-No
document was executed to evidence the contract-Whether suit for recovery of
money is maintainable, for want of privity of contract?- Onus of proof is on
the defendant in such cases by producing best evidence like Books of Accounts.
In the money suit filed by the
appellant-plaintiff to recover the value of tobacco sold to
respondent-defendant after the four cheques covering the value of tobacco and
issued by latter bumped, the defendant took a plea of nonexistence of privity
of contract and while admitting both the receipt of the tobacco from and
issuance of cheques to plaintiff, explained the tobacco had been supplied to
defendant by the plaintiff at the instance of another Firm R. K. Patel with
whom the defendant had placed the order for the supply of the tobacco and that
the four cheques were issued in favour of plaintiff at the instance of Firm
"R. K. Patel", in respect of another transaction for the supply by
that Firm of 900 bags of tobacco, which transaction later failed.
The Trial Court decreed the suit after
rejecting the evidence and pleadings of the defendant. In appeal the High Court
reversed the judgment and set aside decree of the trial Court.
Allowing the appeal by certificate, the Court
HELD : Supply of the goods by the plaintiff
to the defendant and the issuance of cheques by the latter in favour of the
former shifted the onus of proof on the point of privity of contract to the
defendant. The fact that the goods had been sent to the defendant by the
plaintiff and had been received by the former was admitted on all hands and was
sufficient to raise a presumption, till the contrary was proved, that an order
had been placed for the supply of the goods with the plaintiff by the defendant
firm. The plaintiff could thus bank on the said fact for the purpose of
discharging the initial onus which lay on him to prove the privity of contract
between the parties and it was for the defendant to rebut the presumption which
the fact raised. [27 G-H, 28 A] (ii) The books of account maintained by the
defendant being the best evidence available in proof of the stand of the
defendant firm that no order had been placed by it with the plaintiff the
failure of the defendant to place on record those books is a clincher. Non
production of these books by the defendant raises a presumption against it that
if such evidence had been produced, the same would have gone against the case
propounded by it, more 23 so when the defendant fails to bring witnesses to the
transactions set up by it into witness-box and examine them.
[28 A-C, 29 A-E]
CIVIL APPELLATE JURISDICTION : Civil Appeal
No. 1376 of 1970.
From the Judgment and Decree dated 29th/30th
October, 1969 of the Gujarat High Court in Appeal No. 795/61.
D. V. Patel, T. U. Mehta and M. V. Goswami
for the Appellant.
Dr. W. S. Barlingay and A. G. Ratnaparkhi for
The Judgment of the Court was delivered by
KOSHAL, J-This appeal by certificate granted by the High Court of Gujarat under
sub-clause (a) of clause (1) of Article 133 of the Constitution of India is
directed against its judgment dated the 29th/30th October, 1969, accepting a
first appeal preferred by the defendant firm to it and dismissing the
plaintiff's suit which had been decreed by the trial court.
2. The said suit was filed on the 24th
November, 1958, in the court of the Civil Judge, Senior Division, Nadiad, by
one K. M. Patel for the recovery of Rs. 38,718/- from the defendant firm on
account of the price of 225 bags of tobacco weighing 268 Bengali maunds at the
rate of Rs. 112/- per such maund and interest thereon. The case set out in the
plaint was that the tobacco in question had been purchased by the defendant
firm on the 28th of November, 1955, that the same was despatched to the
defendant firm by train from Anklav railway station on the 1st of December,
1955, on which date a bill for Rs. 30,523/- covering the price of the goods and
incidental expenses was sent to the defendant firm, that the goods were
received by the defendant firm who failed to pay for the same, that ultimately
the defendant firm gave to the plaintiff four cheques, each for Rs. 5,000/-
drawn on a banking company of Santa but that all of them were dishonoured on
presentation. In addition to the said amount of Rs 30,523/-, the plaintiff
claimed Rs. 8,195/- on account of interest at the rate of 9 per cent per annum
for the period preceding the suit. He further prayed for award of future
interest and costs.
3. The defendant firm denied the plaintiff's
claim in toto. It averred in the written statement that no goods had been
received by it from the plaintiff and that it had given no cheques to him.
According to the defendant firm the goods in question had been purchased by it
from a firm carrying on business in the name and style of `R. K. Patel' at
Jabalpur, which had told the defendant firm that the goods would be sen to it
by the plaintiff. In relation to the four cheques the defendant firm stated
that on the 29th November, 1957, it had entered into 24 a transaction for the
purchase of 900 bags of tobacco from firm R. K. Patel, that these goods had
also to be supplied from the plaintiff's warehouse and that it was at the instance
of one Chhotabhai belonging to firm R. K. Patel that the four cheques were
issued by the defendant firm in the name of the plaintiff and given to
Chhotabhai, although the agreement for the purchase of 900 bags of tobacco was
4. On the pleadings of the parties the main
question which arose for determination was whether a privity of contract
existed between them in relation to the sale and purchase of the goods in
dispute in regard to which no document was admittedly executed.
5. At the trial the plaintiff examined only
one witness besides himself. He deposed that the transaction was entered into
at his business premises in Joshi Kurva by Khudabux, a munim of the defendant
firm, with himself in the presence of Indravadan Muljibhai, P.W. 2 who
supported that stand. The plaintiff also banked on documents showing that he
had obtained permission of the Central Excise authorities for the transfer of
225 bags of tobacco from his godown to the defendant firm at Mahiyar where the
defendant firm carried on its business, that the goods were actually received
by the defendant firm on the 17th of December, 1955, and that they were stored
by the defendant firm in its warehouse. The plaintiff produced his cash book
which contained an entry (exhibit 54) indicating that an amount of Rs. 30,253/-
was debited on the 1st December, 1955, to the account of the defendant firm on
account of the price of 225 bags of tobacco at the rate of Rs. 112/- per
Bengali maund and incidental expenses. The ledger entry (exhibit 55) conforms
to the cash book entry.
On the other hand, Abdul Halim Haji Rahimbux,
one of the partners of the defendant firm appeared as its sole witness who
denied that any contract had been entered into by it with the plaintiff for the
supply of the disputed tobacco through Khudabux or otherwise. According to the
witness Khudabux was not an employee of the defendant firm at the relevant time
although it was admitted that he had acted as a munim for the defendant firm
earlier to and also some time after November, 1955. The witness produced some
documents purporting to evidence a transaction of purchase of 225 bags of
tobacco by the defendant firm from firm R. K. Patel. These documents consisted
mainly of three letters and a bill. Letter exhibit 124 bears the date 19th
November, 1955, and is signed by Chhotabhai. It informs the defendant firm that
225 bags of tobacco had been purchased by the writer and that the same would be
booked the defendant firm within 25 a period of eight days. Another letter
(exhibit 125) is dated the 17th of December, 1955. This is also signed by
Chhotabhai and states that the tobacco had already been despatched to the
defendant firm. Bil exhibit 126 is dated 4th of January, 1956 and states the
price of 225 bags of tobacco as Rs. 30,361-14-0. The only other letter worth
mention is exhibit 119. It is dated the 13th September, 1958 and states that
accounts had been settled between firm R. K.
Patel and the defendant firm so that firm R.
K. Patel owed a sum of Rs. 340-2-0 to the defendant firm. The letter
specifically mentions that the disputed transaction formed part of the
settlement of accounts.
6. In the above state of the evidence the
trial court accepted the plea of the plaintiff that an order for the supply of
the disputed tobacco was placed by the defendant firm with the plaintiff as
alleged by the latter. The plaintiff was further held entitled to interest but
at the reduced rate of 6 per cent per annum. The learned Civil Judge therefore
granted to the plaintiff a decree for the recovery of Rs. 35,986.33 with
proportionate costs of the suit and also directed that the plaintiff would
receive interest at the said rate from the date of the suit till the date of
realisation of the decretal amount.
7. The High Court did not believe the word of
the plaintiff that an order had been placed with him by Khudabux acting on
behalf of the defendant firm. In doing so the High Court gave reasons which may
be summarised as under :
(i) The plaint did not mention that the
defendant firm had placed the order in question through Khudabux acting as its
(ii) Although the order was of considerable
magnitude and the only transaction of its kind to be entered into between the
parties it was not authenticated by Khudabux in writing.
(iii) The plaintiff would not have remained
silent for two years in regard to the money due to him.
(iv) The evidence does not disclose any other
occasion on which Khudabux may have acted as the agent of the defendant firm.
(v) Bill exhibit 56 and entries in the
plaintiff's account books (exhibits 54 and 55) do not mention the name of
(vi) No letter from the defendant firm to the
plaintiff acknowledging the receipt of the goods at Mahiyar has been placed on
(vii) No notice of dishonour of the cheques
was sent by the plaintiff to the defendant firm.
26 (viii) The plaintiff would not have sent
the goods without demanding advance payment or earnest money.
(ix) Khudabux has not been produced by the
plaintiff in the witness box. Plaintiff's own munim Ashabhai who is said to
have been present at the time of the alleged agreement also does not figure as
(x) The testimony of Indravadan does not
The High Court then took up for examination
the evidence produced by the defendant firm and accepted letters exhibits 119,
124 and 125 as also bill exhibit 126 at their face value. In this connection
the High Court remarked that it was difficult for it to imagine that the
defendant firm could have manufactured the letter-heads of firm R. K. Patel.
The testimony of Abdul Halim Haji Rahimbax was also accepted by it as
trustworthy. It was urged before the High Court on behalf of the plaintiff that
the failure of the defendant firm to produce its own account books and those of
firm R. K. Patel, as well as Chhota-bhai, was fatal to its case. The argument
was rejected with the observation that it was for the plaintiff to have the
said account books produced and to examine Chhotabhai as a witness. It noted
the admissions made by the defendant firm's own witness to the effect that
Khudabux had been in its employment both before and after the transaction in
dispute but remarked that there was nothing to indicate that Khudabux was in
the employment of the defendant firm on the crucial date, i.e., the 28th of
November, 1955, or that he had authority from the defendant firm to place the
disputed order. It refused to believe that the railway receipt and the bill for
the price of the goods (exhibit 56) along with the covering letter (exhibit 57)
were sent by the plaintiff to the defendant firm at Mahiyar. It examined the
account books of the plaintiff and rejected them as unreliable mainly on the
grounds that the cash book was maintained in fortnightly instalments and not on
a daily basis and that the four cheques above mentioned were made the subject
matter of entries therein long after their issuance. The story of the cheques
having been given to the plaintiff by the defendant firm in part payment of his
dues was also discredited. In this connection it was observed :
"....It is difficult for us to believe
that if the plaintiff was suffering any damage at the instance of the defendant
on account of the defendant on account of the dishonour of these cheques, he
would have really remained content as if with trusting his destiny and trusting
the defendant....if the plaintiff had obtained these cheques after making
several attempts to recover 27 the amount due to him, as he states in his
deposition, he would have taken immediate action against the defendant after
the dishonour of the cheques....".
The High Court further remarked :
".... The cheques must have reached the
plaintiff not directly from the defendant but through some other route and it
is clear that he must have complained of their dishonour to the person from
whom they arrived in his hands. His silence after the cheques were dishonoured
also indicates in the same direction.
Absence of any correspondence with the
plaintiff throughout a period of more than two years also indicates in the same
Two main contentions were pointedly raised
before the High Court: (1) that the supply of the goods by the plaintiff to the
defendant firm and the issuance of cheques by the latter in a favour of the
former shifted the onus of proof on the point of privity of contract to the
defendant firm, and, (2) that the failure of the defendant firm to produce the
best evidence which was available to it in the form of its own and firm R. K.
Patel's account Books should have been treated as a clincher.
The first contention was turned down with the
remark that the plaintiff could not be deemed to have discharged the initial
onus which was on him to prove privity of contract because he had failed to put
Khudabux in the witness-box. The second was repelled for the reason that the
defendant firm could not be deemed to have withheld any document when there was
no notice given by the plaintiff to it for production thereof.
8. It was in the above premises that the High
Court passed the impugned judgment.
9. After hearing learned counsel for the
parties at length we are of the opinion that the very approach of the High
Court to the determination of the crucial question in the case, namely, that of
privity of contract between the parties, is erroneous. The fact that the goods
had been sent to the defendant firm by the plaintiff and had been received by
the former was admitted on all hands and was sufficient to raise a presumption,
till the contrary was proved, that an order had been placed for the supply of
the goods with the plaintiff by the defendant firm; and it was immaterial
whether the person actually placing the order was a partner of the defendant
firm or a person authorised by it. The plaintiff could thus bank on the said
fact for the purpose of discharging the initial onus which lay on him to prove privities
of 28 contract between the parties and it was for the defendant firm to rebut
the presumption which the fact raised as stated above. In rejecting the first
of the two main contentions raised before the High Court on behalf of the
plaintiff, therefore, the High Court fell into a serious error.
The same is true of the second main
contention which was raised by learned counsel for the plaintiff and was turned
down by the High Court. In the circumstances of the case it was the duty of the
defendant firm to place its books of account on record, those books being the
best evidence available in proof of the stand of the defendant firm that no
order had been placed by it with the plaintiff.
The production of letters exhibits 119, 124
and 125 and bill exhibit 126 does not serve the purpose sought to be achieved.
In the absence of such production they are loose documents which could have
come into existence even after the suit was filed, if Chhotabhai chose to
oblige the defendant firm and colluded with it. And there is intrinsic evidence
available in letter exhibit 119 that such was the case. That letter purports to
have come into existence on the 14th of September, 1958, i.e., about three
months and a half after the defendant firm had been informed of the plaintiff's
claim through a notice dated the 27th of May, 1958, and that claim had been
repudiated by the defendant firm. The contents of the letter are tell-tale and
may be reproduced in extenso :
"To "Bhai Mohammad Hussain Rahim
Bux of Mahiar written from Jabalpur by R.K. Patel of Jabalpur whose salutations
to you be pleased to accept. Further it is learnt that on the date 13-9-58 the
account is made by the partner of our firm Shri Chhotabhai Patel upto the date
12-9-58 by taking into account the balance of Rs. 75/- seventy five at the end
of 1954-55 and balance of Rs. 340-2-0 are found due by us. The same is agreed.
The price of 225 bags of tobacco of Khushalbhai Mahijibhai Patel of Joshikuva
(Anklav) is also included in the said account and so Rs. 340-2-0 are found
balance payable by us including the said amount and if any dispute arises
subsequently in the said account we shall be responsible in every way about the
"It is respectfully to be stated that
this note is written while in sound state of mind so that it may remain as
authority and may become useful when required.
"Chhotabhai Khushalbhai Patel
"Partner R. K. Patel "Jabalpur "Date 14-9-58." 29 Had the
accounts been really settled as the letter claimed, there is no reason at all
why a copy of the settlement, which must, in the very nature of things, have
contained a statement of all the transactions covered by it was not furnished
to the court. Such a statement must have been provided by firm R. K. Patel to
the defendant firm who was entitled to scrutinize the correctness of the
settlement and point out any inaccuracies therein to firm R. K. Patel.
Besides, we fail to understand why the
transaction disputed before us came in for special mention in letter exhibit
119 when no other transaction covered by the settlement found a place therein.
The conclusion is irresistible that the letter had been procured merely to
serve as evidence in rebuttal of the plaintiff's case and not because any settlement
really took place.
10. If the case propounded by the defendant
firm at the trial is correct, its account books must be containing entries to
the effect that the agreement of purchase of 225 bags of tobacco was entered
into with firm R. K. Patel and not with the plaintiff and that sometime in
December, 1955, the account of firm R. K. Patel was credited with the amount of
the price of the goods. Entries would further be available therein indicating
unmistakably the periods for which Khudabux was admittedly employed with the
defendant firm. The non-production of those books by the defendant firm and the
production by it of stray letters and a bill constitute failure on its part to
produce the best evidence and a presumption has therefore to be raised against
it that if such evidence had been produced, the same would have gone against
the case propounded by it. The matter does not end there. The failure of the
defendant firm to bring Chhotabhai and Khudabux into the witness-box and the
fact that it made no attempt to have the account books of firm R. K. Patel (the
entries in which account would perhaps have clinched the matter in dispute)
must be similarly construed and a presumption drawn that this evidence also
would have gone against the defendant firm.
11. The view we have just above taken of the
approach of the High Court is sufficient to dislodge its judgment and for a
restoration of the decree passed by the trial court.
We may add, however, that apart therefrom the
impugned judgment suffers from another serious defect and that is that the
appreciation of the evidence of the parties is based more on conjectures than
logic. We may give a few instances. The absence of the name of Khudabux from
the plaint is immaterial because pleadings are required merely to state facts
and not the evidence through which they are to be proved. The relevant fact was
that an agreement for the purchase of goods had been entered into by the
defendant firm with the plaintiff. The manner in which that 30 contract came into
being was a matter of evidence which need not have formed part of the plaint.
Again, the circumstances that the agreement of purchase was not reduced to
writing, that Khudabux was not shown to have acted as the agent of the
defendant firm on any other occasion and that the name of Khudabux does not
appear in entries exhibits 54 and 55 do not disclose any abnormality when it is
borne in mind that goods were actually supplied by the plaintiff to the
defendant firm and were received by the latter. The other reasons given by the
High Court in disbelieving the plaintiff's word that the order for the supply
of goods had been placed with him by Khudabux are equally untenable. In this
connection it is to be noted that no plausible reason can be found for the plaintiff
recording in his books the name of the defendant firm as the purchaser if the
goods had really been sold to firm R. K. Patel. We may point out that the name
of the defendant firm as the purchaser is entered in the cash book maintained
by the plaintiff and it is no reason at all for that book to be rejected as
unreliable that it is maintained on a fortnightly and not daily basis.
The failure of the plaintiff to demand
advance payment or earnest money and to keep quiet for a long period of time
are also not relevant matters in view of the admitted fact of the supply of the
goods by the plaintiff to the defendant firm and its failure to produce on
record its own books of account and those of firm R. K. Patel.
12. The four cheques issued by the defendant
firm in favour of the plaintiff furnish another very important circumstance in
derogation of the claim made by the former.
The explanation furnished by its solitary
witness that they were issued at the instance of Chhotabhai to whom they were
delivered does not inspire confidence in us, the main reason therefor being
again the non-production of the account books of the two firms-a reason which
makes us repel as untenable the inference drawn by the High Court (from the
plaintiff's failure to act immediately after the dishonour of the cheques) that
"the cheques must have reached the plaintiff not directly from the
defendant but through some other route".
13. There is no reason whatsoever for us to
believe that if the case of the defendant firm was true the plaintiff would
have made out the story given by him in the plaint, absolved the real debtor of
the responsibility to pay and claimed his dues from some one not at all liable
for them. Firm R. K. Patel being the party liable to the plaintiff, according to
the case set up by the defendant firm, the plaintiff could not be expected to
make false entries in this account books and file a suit not against firm R. K.
Patel but against the defendant firm 31 14 For the reasons stated we have no
hesitation in accepting this appeal, setting aside the impugned judgment and
restoring the decree passed by the trial count with a direction that the
plaintiff will be entitled to his costs throughout.
S R. Appeal allowed.