M/S STAR PAPER MILLS LIMITED versus M/S BEHARILAL MADANLAL JAIPURIA LTD. & ORS. on 16 December 2021

SUPREME COURT REPORTS

[2021] 9 S.C.R.

AM/S STAR PAPER MILLS LIMITED

v.

M/S BEHARILAL MADANLAL JAIPURIA LTD. & ORS.

(Civil Appeal No. 4102 of 2013)

BDECEMBER 16, 2021

[HEMANT GUPTA AND V. RAMASUBRAMANIAN, JJ.]

Suit – Recovery suit – Respondent was a wholesale dealer ofthe appellant-company and was purchasing paper from the appellant– Huge stocks lifted by the respondent – Payments defaulted – SuitCfor recovery filed by appellant – Decreed by Single Bench – Orderset aside by Division Bench – On appeal, held: Respondents allegedthat the bills were raised on the basis of fictitious and fraudulenttransactions however, failed to discharge the onus of proof –Invoices, debit note and ST-1 Form were issued only after the receiptDof goods – Receipt of goods is proved by such documents whichwere stamped and signed by the respondents – Respondents’ standthat the documents were signed under duress is untenable – Orderof Division Bench set aside – Suit decreed – Delhi Sales Tax Act,1975 – ss.4(2)(a)(v), 14 – Delhi Sales Tax Rules, 1975 – r.7.

EDelhi Sales Tax Act, 1975 – s.4(2)(a)(v) – Scope of – Discussed– Delhi Sales Tax Rules, 1975 – r.7.

Deeds and Documents – Examination of author of a document– When not required – Discussed – Suit.

Deeds and Documents – Documents maintained in the regularFcourse of business – Proof of – Held: It is not necessary for thewitness to be signatory of such documents or that such documentswere executed in his presence – Suit.

Allowing the appeal, the Court

GHELD: 1.1 The witness of the respondent has admitted hissignatures on the ST-1 Form, invoice and debit notes. Therespondent company denied the signatures of its representativeonly on the Delivery Challan. The respondents alleged that thealleged bills have been raised on the basis of fictitious andfraudulent transactions. Since such stand was of the respondents,H

the onus of proof of such issue was on the respondents. It is therespondents who have alleged the transaction as fraudulent.The onus of proof was on the respondents but the respondentshave failed to discharge the same. [Paras 12, 13 and 15][1082-A-C, G-H]

1.2 The reasoning of the Division Bench that the witnessexamined by the appellant was not in Delhi when the transactionstook place is wholly irrelevant to determine whether the invoices,debit notes and ST-1 Form are proved or not. It is not a case ofmere exhibition of documents. Such documents were proved bya witness as such documents were kept by the appellant in theirordinary course of business. All these documents are stampedand counter-signed by the representatives of the respondents.Such documents have come from the records of the appellant. Itis not necessary for the witness to be signatory of such documentsor such documents were executed in his presence. Thedocuments were maintained in the regular course of business ofthe appellant. There is no dispute about the maintenance andproduction of such documents. The account books were notproduced by the respondents to discharge the onus on them.Therefore, the adverse inference had to be drawn against therespondents rather than against the appellant who are not relyingupon the entries in the account books alone to maintain suit butreliance is on the invoices, debit note as well as ST-1 Form whichhad been issued only after the receipt of goods. Though therespondents have denied the receipt of goods but the receipt ofgoods is proved by numerous documents stamped and signed bythe respondents. [Paras 14, 16][1082-D-F; 1083-C-E]

2. Section 4(2)(a)(v) of the Delhi Sales Tax Act, 1975excludes the sale made to the registered dealer from the taxableturnover. Rule 7 of the Delhi Sales Tax Rules, 1975 allows thedealer to claim deduction from his turnover if he files a declarationin ST-1 Form duly filled in and signed by the purchasing dealer ora person authorized by him in writing. The respondents haveadmitted that no sales tax is payable by a dealer to a dealer. Bynecessary implication, the respondents are admitting theappellant to be a dealer as also the respondents to be dealerunder the Delhi Sales Tax Act, 1975. It is only on account of A

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Asales made by a dealer to a dealer that the sales tax is not payableas the incidence of payment of tax would be when the goods aresold to a consumer. The respondents as wholesaler, were gettingthe benefit of trade discount, which is an agreed term of sale.[Paras 17-19][1083-E; 1084-C-D, F-H]

B3. The High Court, in the impugned judgment erred inholding that the appellant had not examined the author of thedocuments. Such reasoning is absolutely erroneous as in thewritten statement, the respondents had not denied theirsignatures on the documents referred to by the appellant butpleaded duress in executing of these large number of documents.CThe respondent had led no evidence in respect of fraud or duressapart from self-serving statement. The consignment of goods wassent from the month of November 1985 to January 1986. Therespondent had signed large number of documents during thisperiod. However, no complaint was made to any person orDauthority or even to the plaintiff. Such a stand is wholly bereft ofany truth and is thus rejected. Large number of documents suchas invoices, debit notes and ST-1 Form spread over 3 months isunbelievable to be an exercise of duress. The order of the DivisionBench of the High Court dated 28.5.2012 is set aside. The suit isdecreed. [Paras 20-22][1084-H; 1085-A-C, E]E

Subhra Mukherjee and Another v. Bharat Coking CoalLtd. and Others (2000) 3 SCC 312: 2000 (3) JT 55;Ishwar Dass Jain v. Sohan Lal (2000) 1 SCC 434 :[1999] 5 Suppl. SCR 24 – held inapplicable.

Case Law ReferenceF

[1999] 5 Suppl. SCR 24held inapplicablePara 11

CIVIL APPELLATE JURISDICTION : Civil Appeal No.4102of 2013.

From the Judgment and Order dated 28.05.2012 of the High CourtGof Delhi at New Delhi in RFA (OS) No.26 of 2008.Vijay Hansaria, Sr. Adv., Gaurav Jain, Ms. Abha Jain, Advs. forthe Appellant.Rajesh Yadav, Sr. Adv., Anuj P. Agarwala, Nishant Anand, PramodHB. Agrawala, Advs. for the Respondents.

The Judgment of the Court was delivered by HEMANT GUPTA, J.

1. The present appeal is directed against an order passed in anintra-court appeal by the Division Bench of the High Court of Delhi atNew Delhi on 28.5.2012 whereby the judgment and decree passed bythe learned Single Bench of the High Court was set aside and the suitfiled by the appellant-plaintiff was dismissed. The learned Single Benchdecreed the suit of the appellant for a sum of Rs.96,41,765.31 along withsimple interest @ 15% p.a. from the date of institution of the suit i.e.,5.10.1987, till the date of payment, on the principal amount ofRs.71,82,266/-.

2. The appellant filed a suit for recovery of Rs.96,41,765.31 onthe ground that appellant is a manufacturer of various varieties of Kraft,writing and printing papers which are sold to customers throughwholesalers. The appellant sellsits products through direct payment orpayment against hundies payable on due date with the bank by suchwholesalers. Respondent-defendant No. 1 was a wholesale dealer ofthe appellant company in the territory of Delhi since 1984 and waspurchasing paper from the Delhi Sales Office of the appellant as well asfrom its mills situated at Saharanpur. The tentative stock lifted byrespondent no. 1 was worth Rs.15-20 lakhs per month. The respondentswere making regular payments and were enjoying immense confidenceof the appellant. The appellant further explained the terms of the paymentin the plaint filed. The terms of the sale of paper to respondent No. 1were stated to be through limited credit of 45-60 days as well as throughhundi documents. Fifteen days interest-free credit facility from the dateof delivery was available and thereafter interest was charged. Any defaultof payment carried interest @ 21 % p.a. from the date of delivery till thedate of payment and further penal interest @ 3 %.

3. The Respondent No. 1 lifted huge stocks in the month ofNovember 1985 to January, 1986 but did not make the due payments.Even some of the hundi documents were dishonored. The appellantsupplied goods worth Rs.72,27,079/- by 189 consignments against theterm of direct payment. The goods were duly received by respondentno.1 with the signatures of respondent no. 2, its director, but they defaultedin making the payments. The respondents made a payment ofRs.2,99,480/- for 9 consignments by hundi documents but the hundi A

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Adocuments were also returned by the bank unpaid. It was pointed outthat since respondent No. 1 was a wholesaler, they were getting tradediscount of Rs.700-750 per ton. Thus, the appellant claimed the followingamount:

4. In the written statement, it was alleged that the appellantcompany was owned and controlled by the family of Bajoria headed byCS.S. Bajoria prior to May 1986. The said family was closely connectedto the respondents. The appellant installed a paper manufacturing mill atSaharanpur in 1935-36 and offered dealership to the respondents forDelhi and Bombay markets. The dealership of Bombay was given up inor about 1955-56. The management of the appellant changed in May,1986. It was asserted by the respondents that the appellant has notDrendered true and proper receipts and a sum of Rs.45 lakhs are duefrom the appellant. It was also alleged that the bills raised by the appellantare based on fictitious transactions which are tainted with fraud, deceitand circumvention of law. Such transactions are therefore against publicpolicy and void ab initio. The respondents further alleged that in 1972-E73, the Managing Director of the appellant approached Shri NagarmalJaipuria and suggested that therespondents should receive certain billsdrawn on them inasmuch as the appellant intended to sell certain qualityof paper in open market at prices higher than the Mill price. The goodscould not be taken out from the Mill unless accepted by one of thewholesalers or dealers. At the threat of termination of the wholesalerFagreement, the respondents agreed for such proposal. The respondentsaverred as under:

“10. Near about the same time, the plaintiff, in addition to theselling of papers in cash in open market, also indulged in tax evasionthe sales tax on direct sale from Saharanpur was 4%. The salesGtax if the goods were transported to Delhi Depot of the plaintiffand sold from the said depot was Nil. Thus, there was a net taxsaving of the value of the goods sold in the open market at Delhi.There is no sales tax leviable on the sale of paper from the Dealerto Dealer at Delhi. If the sales were made directly fromSaharanpur the Sales Tax leviable was 4%. The dealer to dealerH

transaction of sale did not attract payment of anysales taxwhatsoever at Delhi. The Plaintiff in addition to making profit bysale of paper in the open market at the price higher than the Millprice also wanted to pocket the sales tax which would haveordinarily been payable had the sales been made from their Millsat Saharnapur. This whole ingenious scheme and device wastainted with fraud and the Jaipuria under undue influence andcoercion were made to submit to the illegal transactions whichwere indulged in by the Bajorias/Plaintiff.”

5. One of the issues framed after completion of pleadings waswhether the alleged bills forming the claim in the suits have been raisedon the basis of the fictitious and fraudulent transactions. The suit hasbeen dismissed by the Division Bench on such issue inter-alia on theground that documents had not been proved by summoning the person,who had issued such large number of documents (Ex-P1 – Ex-P976).

6. The appellant filed an affidavit of Shri A.S. Bhargava, Retainer,formerly General Manager-Management Services on 8.12.2003. In suchaffidavit, the appellant has produced 976 documents including copies ofall the invoices, debit notes, delivery challan, ST-1 Form, interest debitnotes, letter of the respondents, credit notes and the statement of accounts.All the invoices are stamped and signed by the respondents. The appellantalso produced ST-1 Form in respect of each of the invoices stamped andsigned by respondents. In the cross-examination, the witness stated thatin case of sale transaction by the company/manufacturer with anywholesaler, the sales tax can be avoided against ST-1 Form. However, ifthe manufacturer would sell these goods directly to any retailer orconsumer, sales tax would be payable. He further deposed that he hasnot placed on record the copies of the books of accounts and that theBills-cum-Challans have not been acknowledged by the respondentsintheir presence. He stated that the respondentsused to lift the materialfrom their godown. He further deposed that sales tax number is givenon the top of the invoices though he could not say if the sales tax numberis not of Delhi but of Calcutta. He further stated that the transactions inthe suit were from Delhi and no transaction took place from Saharanpur.The suggestion that the suit transactions are fictitious was denied.

7. The respondents produced an affidavit of Shri R.C. Jaipuria inevidence. It was stated that the books of accounts were not producedfor the reason that the office of the respondents was reconstructed duringthe period 1993-1995 when there were torrential rains and the records A

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Akept on the open roof got spoiled and eaten by pests. Though, it is averredthat income tax, sales tax returns of these years have been finalized onthe basis of destroyed books of accounts. The respondents have deniedthe receipt of goods and produced documents Ex. DW-1/1 to Ex.DW-1/5. He accepted his signatures on the invoices, ST-1 Form and the debitnotes but denied signatures on the delivery challans as not of any of theBemployee of the respondents. It was stated that signatures got signedfrom him on large number of documents under pressure and duress inthe circumstances stated in his affidavit. He admitted that books ofaccounts pertaining to transactions in question have not been filed. Hedenied that the respondents had not paid a sum of Rs.2,72,08,398.29 toCthe plaintiff between the period 1.5.1985 to 19.3.1987. In respect ofsignatures on ST-1 Form, he deposed that he used to sign such formsunder duress and bear his signatures.8. On the basis of the evidence led, the learned Single Benchdecreed the suit. However, the first appeal was accepted inter alia on

Dthe ground that the appellant has failed to prove that it was registered asa dealer with the Sales Tax Authorities in Delhi and it failed to provehaving any godown in Delhi. Since the appellant has failed to prove thatit was a registered dealer, it could not effect any sale of paper at Delhiwithout paying Central Sales Tax. The Division Bench of the High Courtheld as under:E“31. We may summarize. The respondent No.1 has failed to provethat it was registered as a dealer with the Sales Tax Authorities inDelhi. It failed to prove having any godown at Delhi. As per thelaws applicable to Sales Tax, unless respondent No.1 proved beinga dealer registered at Delhi, it could not effect any sale of paperFat Delhi without paying Central Sales Tax. It is obvious thatrespondent No.1 surreptitiously removed its goods from its mill atSaharanpur not under the cover of the invoices raised in favour ofthe appellant, for the reason these invoices show an intra-citysale and not an inter-city sale. The respondent No.1 has not ledany evidence with respect to goods receipts pertaining toGmovement of goods from its mill at Saharanpur to Delhi and muchless shown delivery by any transporter to the appellant. Theaforesaid has been totally ignored by the learned Single Judgeand therefrom it is apparent that the sales were fictitious i.e.appellant was shown as a name-lender. Respondent No.1 managedHto cheat the revenue.”

9. Learned counsel for the appellant argued that the finding of theHigh Court is patently erroneous as the respondents have not deniedthat the appellant is a dealer in the State of Delhi which is evident fromPara 10 of the written statement reproduced above. It was further pointedout that the respondents have not disputed the registration of the appellantin the written statement nor any issue was framed about the appellantbeing a registered dealer in Delhi. Therefore, the High Court had madeout a new case for the respondents when such case was not even referredto in the written statement filed.

10. The appellant had filed a registration certificate as the resellerdealer in Delhi as Annexure P/12 along with an application to producesuch certificate. The said certificate shows that the appellant wasregistered as a Dealer under Section 14 of the Delhi Sales Tax Act,1975. The nature of business being Reselling of Paper and Boards only.There is a mention of godown in the registration certificate as well.

11. Learned counsel for the respondents supported the judgmentof the learned Division Bench and relied upon judgment of this Courtreported as Subhra Mukherjee and Another v. Bharat Coking CoalLtd. and Others[1] to contend that the onus of proof whether transactionswere genuine and bonafide has to be discharged by the appellant. Learnedcounsel for the respondents also relied upon the judgment of this Courtreported as Ishwar Dass Jain v. Sohan Lal[2] to contend that the appellanthas not produced account books but only extracts which are not admissiblein evidence and hence suit was rightly dismissed by the High Court inappeal.

12. We have heard learned counsel for the parties and find thatthe Division Bench of the High Court has gravely erred in law in acceptingthe appeal of the respondents on wholly erroneous and untenable grounds.Each of the invoices produced bears the registration No. S.T. No. 36/102499/08/84 and also bears the stamp and signatures of the ManagingDirector/ Director of the respondents. Apart from such invoice, theappellant has proved the debit note which has also been stamped andsigned by the Managing Director/ Director. The ST-1 Form also bearsthe stamp and signature of the Director of the respondents. Such ST-1Form bears the invoice number and the date as well as the value of the 1 (2000) 3 SCC 312

2 (2000) 1 SCC 434

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Agoods. The witness of the respondent has admitted his signatures on theST-1 Form, invoice and debit notes. The respondent company has onlydenied the signatures of its representative only on the Delivery Challan.

13. The judgments referred to by the learned counsel for therespondents are not applicable in the present case. The respondentsBhave alleged that the alleged bills have been raised on the basis of fictitiousand fraudulent transactions. Since such stand was of the respondents,the onus of proof of such issue was on the respondents. Such issuenecessarily implies that the raising of the invoices is not in dispute but itwas alleged that such bills are fictitious and fraudulent. The onus ofproof of issue no. 4, whether the defendant no.1 accepted the bills withoutCactual delivery of goods to it is also upon the respondents as it is theirstand that the bills were accepted without actual delivery of goods.

14. The reasoning of the Division Bench that the witness examinedby the appellant was not in Delhi when the transactions took place iswholly irrelevant to determine whether the invoices, debit notes and ST-D1 Form are proved or not. It is not a case of mere exhibition of documents.Such documents were proved by a witness as such documents werekept by the appellant in their ordinary course of business. All thesedocuments are stamped and counter-signed by the representatives ofthe respondents. Such documents have come from the records of theEappellant. It is not necessary for the witness to be signatory of suchdocuments or such documents were executed in his presence. Thedocuments were maintained in the regular course of business of theappellant. In fact there is no dispute about the maintenance and productionof such documents. The witness of the respondent has admitted theexecution of all the invoices, debit notes and ST-1 Form which bear theirFstamp and also the signatures of the authorized representative. Therefore,the reasoning given by the High Court is bereft of any merit.

15. The judgments referred to by the learned counsel for therespondents are not applicable to the facts of the present case at all. InSubhra Mukherjee, it was held that a person who attacks a transactionGas sham, bogus and fictitious must prove the same. It is the respondent,who have alleged the transaction as fraudulent. In fact, in the aforesaidcase, the transaction of sale was found to be bogus and appeal of thealleged purchasers was dismissed. Thus, the onus of proof was on therespondents but the respondents have failed to discharge the same.

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16. In Ishwar Dass Jain, it was suit for redemption of usufructuarymortgagee which was dismissed by the High Court. The appellant beforethis Court was the plaintiff. The defence of the respondent was thatthere was no relationship of mortgagor and mortgagee between theparties but that the relationship was as landlord and tenant. It was thedefendant who has not produced his books of accounts to show that hewas paying various amounts as rent to the appellant every month. Inthese circumstances, the extract of accounts produced by the respondentwas found to be unbelievable and the suit decreed. In fact,the respondentsin the written statement itself denied that they do not have the accountbooks as they got damaged in rain and eaten by pests when they werekept on the roof of a building during the process of reconstruction. Suchdefence on the face of it appears to be made up defence. The accountbooks were not produced by the respondents to discharge the onus onthem. Therefore, the adverse inference had to be drawn against therespondents rather than against the appellant who are not relying uponthe entries in the account books alone to maintain suit but reliance is onthe invoices, debit note as well as ST-1 Form which had been issuedonly after the receipt of goods. Though the respondents have denied thereceipt of goods but the receipt of goods is proved by numerousdocuments stamped and signed by the respondents.

17. Section 4(2)(a)(v) of the Delhi Sales Tax Act, 1975 excludesthe sale made to the registered dealer from the taxable turnover, whichreads thus:

“(2) For the purposes of this Act, “taxable turnover” means thatpart of a dealer’s turnover during the prescribed period in anyyear which remains after deducting therefrom,—

(a) his turnover during that period on—

(i) sale of goods ……………………….

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(v) sale to a registered dealer-

(A) of goods of the class or classes specified in the certificate ofregistration of such dealer, as being intended for use by him asraw materials in the manufacture in Delhi of any goods, otherthan goods specified in the Third Schedule or newspapers,- AB

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A(1) for sale by him inside Delhi; or

(2) for sale by him in the course of inter-State, trade or commerce,being a sale occasioning, or effected by transfer of documents oftitle to such goods during the movement of such goods from Delhi;or B(3) for sale by him in the course of export outside India being asale occasioning the movement of such goods from Delhi, or asale effected by transfer or documents of title to such goodseffected during the movement of such goods from Delhi, to placeoutside India and after the goods have crossed the customs frontiersCof India; or”

18. Rule 7 of the Delhi Sales Tax Rules, 1975 allows the dealer toclaim deduction from his turnover if he files a declaration in ST-1 Formduly filled in and signed by the purchasing dealer or a person authorizedby him in writing. The said Rule reads thus:D“7. Conditions subject to which a dealer may claim deduction fromhis turnover on account of sales to registered dealers. –

(1) A dealer who wishes to deduct from his turnover the amountin respect of sales on the ground that he is entitled to make suchdeduction under the provisions of sub-clause (v) of clause (a) ofEsub-section (2) of section 4, shall produce- (a) copies of the relevant cash memos or bills according at thesales are cash sales or sales on credit; and (b) a declaration in Form ST-1 duly filled in and signed by theFpurchasing dealer or a person authorised by him in writing:”

19. The respondents have admitted that no sales tax is payable bya dealer to a dealer. By necessary implication, the respondents areadmitting the appellant to be a dealer as also the respondents to be dealerunder the Delhi Sales Tax Act, 1975. It is only on account of sales madeby a dealer to a dealer that the sales tax is not be payable as the incidenceGof payment of tax would be when the goods are sold to a consumer. Therespondents as wholesaler, were getting the benefit of trade discount,which is an agreed term of sale.

20. The High Court, in the impugned judgment erred in holdingthat the appellant had not examined the author of the documents. SuchH

reasoning is absolutely erroneous as in the written statement, therespondents had not denied their signatures on the documents referredto by the appellant but pleaded duress in executing of these large numberof documents. The witness examined by respondent no.1 in his crossexamination admitted his signature or that of the representative ofcompany on invoices, debit notes and on ST-1 Form. The respondenthad led no evidence in respect of fraud or duress apart from self-servingstatement. The consignment of goods was sent from the month ofNovember 1985 to January 1986. The respondent had signed large numberof documents during this period. However, no complaint was made toany person or authority or even to the plaintiff. It is a denial of receipt ofgoods without any basis raised only in the written statement filed. Suchstand is wholly bereft of any truth and is thus rejected.

21. The debit notes stamped and signed by the respondents werein respect of trade discount on the wholesale price mentioned in theinvoice. Having accepted the trade discount, which is evident from thestamp and signatures not only on the debit notes but also on the invoiceas well as on ST-1 Form, shows that the goods were actually lifted bythe respondents for which payment has not been made. The respondentshave taken up wholly untenable ground that the documents were signedunder duress. Large number of documents such as invoices, debit notesand ST-1 Form spread over 3 months is unbelievable to be an exerciseof duress. The stand of the respondents is wholly untenable andunjustifiable in law and is only to defeat the legitimate claim raised bythe appellant. The High Court in the appeal has gravely erred in settingaside the reasoned order of the learned Single Bench on the groundswhich were not even raised by the respondents.

22. In view of the said fact, the order of the Division Bench of theHigh Court dated 28.5.2012 is set aside. The suit is decreed for recoveryof Rs.96,41,765.31 and future interest on the principal sum ofRs.71,82,266/- @ 9% p.a. from the date of filing of the suit till realisation.The appeal is thus hereby allowed.

Divya Pandey

Appeal allowed.

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