Date of judgement:
16 December 2021
Bench:
Justice Hemant Gupta
Justice V. Ramasubramanian
Parties:
Appellant – M/s. Star Paper Mills Limited
Respondent – M/s.Beharilal Madanlal Jaipuria Ltd. & Ors.
Subject
This judgement deals with the fact that if any document is signed, whether or not under duress, the examination of the author becomes irrelevant. The Court also said that if a party questions the validity of a document, the onus falls on that party itself to prove whether or not that document is authentic.
Legal Provisions
- Section 4(2)(a)(v), Delhi Sales Tax Act, 1975 –This sub clause defines taxable turnover as the turnover for a specific period of time which remains after reducing the company’s turnover during that period, on selling, to a registered dealer, in the territory of Delhi, or interstate or export while the, movement of those goods should be from Delhi (a) goods which are intended to be used as raw materials in the manufacture of any other goods; (b) goods for resale; (c) materials used for packaging.
- Rule 7, Delhi Sales Tax Rules, 1975 – This rule states that any dealer who claims the deductions from his turnover under the above section 4(2)(a)(v) will have to present (a) copies of the relevant cash memos or bills; (b) a declaration duly filled and signed by the purchasing dealer in Form ST-1.
Overview
- The appellant in this case was a paper manufacturing company who sold papers to wholesalers who in turn sold them to the customers.The appellant company was owned by Bajoria family who was close in relations with the respondents.The paper manufacturing mill was established in Saharanpur in 1935-36.
- The appellant only accepted direct payment or through hundies. Hundies are signed written documents which bound a certain person to pay a certain sum of money to the person mentioned in the document.
- When any goods were sold, the payment had to be made within 15 days from the date of delivery after which an interest @ 21% p.a. was charged with a penal interest of 3% till the date of payment.
- The sale of paper was made to the respondent which was through limited credit of 45-60 days and hundies.
- The appellant claimed that the respondent did not make any payments for any stock from November, 1985 to January,1986 against 189 consignments worth Rs. 72,27,079.
- The receipts of the goods showed the signature of respondent and his manager.Apart from this,hundies for 9 consignments worth Rs. 2,99,480 were also dishonoured.
- The appellant claimed for Rs. 71,82,266 (principal amount) and Rs. 24,59,499.31(interest on the principal amount).The respondents claimed that these bills were signed under duress and thus void.
- When this matter was brought into the Delhi High Court, a Single Bench judgement ordered the respondents (defendants) to pay the appellant (plaintiff) the principal amount along with the simple interest @ 15% p.a.
- The Respondents (appellants) then filed an appeal in the Division Bench of the Delhi High Court, where the appeal was allowed.
- The Division Bench set aside the judgement of the Single Bench stating that the appellant (respondent) was unable to prove its dealership with the Sales Tax Authorities and therefore it had to pay the Central Taxes.
- The hon’ble Division Bench noted that the documents which were produced by the appellant had been signed in the absence of the witnesses who supported its validity.
- The appellant argued before the Supreme Court that the issue was not related to the registration under Sales Tax Act. Even the respondents had not questioned it and setting this aside, the Division Bench of the Delhi High Court had given its judgement.
- The appellant clarified before the Supreme Court that when a transaction between manufacturer and wholesaler is made, it comes under non-taxable transactions under the Delhi Sales Tax Authority, but if the same goods were sold to the customers, the proceeds would be taxed.
- The respondents claimed that the appellant was trying to evade tax and thus lifted goods from its Saharanpur Mill in the name of the respondents and sold them at higher prices in the Delhi Depot Open market.
- On the other hand, the respondents claimed that it was the appellant who owed them Rs. 45 lakhs.
- Upon being asked to present their book of account, the respondents said that they were destroyed by torrential rains and pests.
- The respondents cited the Subhra Mukherjee & Anr. V. Bharat Cooking Coal Ltd. &Ors.to raise the point that it was the responsibility of the appellant to prove the authenticity of the transactions.
- Citing the Ishwar Dass Jain v. Som Lal, the respondents contended that since the appellant only placed extracts of the books of accounts, it was not admissible as evidence in the Court of Law.
Issues
- Whether or not these bills produced by the appellant were results of fraudulent transactions?
Judgement Analysis
- It was observed that the invoices along with the debit notes and Form ST-1 were signed and stamped by the respondents, which was admitted in the court by the witness of the respondent in cross examination.
- The Court further noted that signature on a number of documents over the course of 3 months cannot be forced.
- Moreover, the respondents had no witness of duress apart from his own statement, which can be false.
- The Court observed that a certificate indicating the appellant’s registration as a dealer under Section 14 of the Delhi Sales Tax Act, 1975, was filed.
- Further, all the invoices produced by the appellant had the Sales Tax registration number which further proved its dealership.
- In addition to this, the Apex Court emphasised that the validity of all the documents submitted by the appellant was proved by a witness whose presence was not required while those documents were signed.
- The Supreme Court also stated that since it was the respondents who questioned the authenticity of the documents, it was their responsibility to prove them wrong, which they have failed to do so.
- On the Subhra Mukherjee case too, the party questioning the validity of the document had to prove it before the court and the same shall be followed in this case too.
- The Court observed that in the Ishwar Dass Jain case, the relationship between the parties were that of the mortgagee and the mortgagor, while in this case it was that of the landlord and the tenant, and the tenant (respondent) had to give a proof of the payment of rent (consignment payment), which it had failed to do so.
- The Court finally said that the examination of the author of a document becomes irrelevant when the document is signed by the author, whether or not under duress.
- Observing that all these evidences like the entries in the account books, invoices, debit notes, and the Form ST-1 were in favour of the appellant, the Supreme Court ordered the respondents to pay a sum of Rs. 96,41,765.31, along with future interest on the principal amount Rs. 71,82,266 @ 9% p.a. from the date of filing the suit till the date of full payment and thus the appeal was allowed.
Conclusion
Whichever party questions the validity of any document produced in the Court of law has to further prove its point through proper evidences and witnesses. In this case, the respondents had failed to do that. The Court kept in mind the intricacies and the basis of our Judicial System and pronounced the judgement. The Court rightly pointed out the mistake of the Division Bench while making sure that justice is served.
