Document's Author Need Not Be Examined If Signature Is Not Denied : Supreme Court

The Supreme Court has observed in its judgment delivered on December 16 that the examination of the author of a document is not required, if they had not denied their signature on the document, but only pleaded duress in execution of the same.

"The High Court,in the impugned judgment, erred in holding that the appellant had not examined the author of the documents. Such reasoning is absolutely erroneous as in the  written statement, the respondents had not denied their signatures on the documents referred to by the appellant but pleaded duress in executing of these large number of documents", the Court's judgment stated.

The Supreme Court also reiterated that the onus to prove that a transaction is sham, bogus and fictitious is on the person who makes such a claim.

A bench comprising Justices Hemant Gupta and V. Ramasubramanian allowed an appeal assailing the order passed by the Division Bench of Delhi High Court setting aside the decree of the Single Judge for the sum of Rs. 96,41,765.31 along with simple interest @ 15% p.a., from the date of institution of suit till the payment of the principal amount.

Factual Background

The appellant filed a recovery suit for a sum of Rs. 96,41,765.31. The Single Judge of the Delhi High Court allowed the suit and passed a decree for the sum along with simple interest. It was eventually set aside by the Division Bench on the ground that the appellant had failed to establish that it was a registered dealer with the Sales Tax Authorities in Delhi and therefore, it could not have sold papers in Delhi without paying Central Sales Tax.

Appellant's/Plaintiff's case

The appellant manufactured writing and printing papers which were sold to customers through wholesalers. The appellant sold its products against direct payment or payment by means of hundies. The respondent no. 1, its wholesaler dealer in Delhi, which purchased paper from its Delhi Sales Office and its mills in Saharanpur, lifted a stock of about Rs. 15-20 lakh per month. The sale made to the respondent no. 1 was through limited credit of 45-60 days as well as hundi. Interest was charged after fifteen days from the date of delivery. The rate of interest was 21% p.a., from the date of delivery till the date of payment along with penal interest of 3%. As a wholesaler, the respondent no. 1 got a trade discount amounting to Rs. 700-750 per ton.

For the stock lifted during the period from November, 1985 to January, 1986, the respondent no. 1 did not make the due payments against the 189 consignment worth Rs. 72,27,079 received by it. Moreover, the hundies for 9 consignments worth Rs. 2,99,480 were also dishonoured. Therefore, the claim of the appellant stood at Rs. 96,41,765.31 (principal amount Rs. 71,82,266+Interest on outstanding bill Rs. 24,59,499.31).

By way of an affidavit, the appellant tendered 976 documents including stamped and signed invoices, delivery challan, deposit notes, ST-1 form etc. In cross-examination the appellant clarified that in sale transactions by manufacturer with wholesaler, the sales tax was exempted, but sale transactions directly between the manufacturer and customer would be taxed.

Respondents'/Defendants' case

The appellants had adduced bills based on fictitious transactions, which are void in law. It was in fact the appellant who owed Rs. 45 lakh to the respondents. The respondents also alleged that the appellant had coerced them to sign documents and on the basis of the same had indulged in tax evasion. As the sale directly made from Saharanpur would be levied with a sales tax of 4%, the appellants used to take out the goods from the Mill in the name of the respondents and would sell it from appellant's Delhi depot in the open market at a higher profit.

By way of an affidavit, the respondents had vouched that they could not adduce their book of account as they were spoiled by torrential rains and were eaten by pests. The receipt of goods and the signature on delivery challans were denied. It was alleged that the ST-1 Forms and certain other documents were signed under duress.

Contention raised by the appellant

It was argued that neither the respondents disputed the sales tax registration of the appellant, nor was an issue framed in this regard. However, the Division Bench had set aside the decree on the basis of non-registration under the Sales Tax Act. The Court was apprised that a registration certificate was filed by the appellant which made it clear that it was registered as a dealer under Section 14 of the Delhi Sales Tax Act, 1975.

Contention raised by the respondent

Placing reliance on Subhra Mukherjee and Another v. Bharat Coking Coal Ltd. and Others (2000) 3 SCC 312, it was contended the onus of proof that the transaction was genuine was on the appellant, which it had failed to establish. Citing Ishwar Dass Jain v. Som Lal (2000) 1 SCC 434, it was averred that the appellant did not place books of accounts, but only extracts which would not be admissible in evidence.

Analysis of the Supreme Court

The documents were proved by the appellant

The Court observed that each invoice had the sales tax registration number and the same were stamped and signed by the respondents. The debit notes and ST-1 forms were also stamped and signed by the respondents. The Court noted that it was the respondents who had claimed that the transactions were fictitious and fraudulent, therefore the onus was on them to establish the same. It was further emphasised by the Court, that the appellant had indeed proved the documents maintained in regular course of business by a witness.

Proper application of the Subhra Mukherjee judgment

On a perusal of the ratio in Subhra Mukherjee, the Court noted that therein it was held that a person attacking the transaction as sham has to prove it. Therefore, it opined that in the case at hand, the onus was on the respondents to show that the transaction was fraudulent, which it did not discharge.

Ishwar Dass Jain's judgment distinguished

The Court emphasised that in Ishwar Dass Jain the relation between the parties were that of mortgagor and mortgagee, whereas admittedly in the present case the relationship between the appellant and the respondents was that of landlord and tenant. Moreover, the respondents could not prove rent paid by it. Admittedly, they did not have the records.

"Therefore, the adverse inference had to be drawn against the respondents rather than against the appellant who are not relying upon the entries in the account books alone to maintain suit but reliance is on the invoices, debit note as well as ST-1 Form which had been issued only after the receipt of goods."

The appellant is also a dealer

By stating that the sales tax is not levied on transactions between two dealers as per the Delhi Sales Tax Act and Rules, the respondent had admitted that the appellant was also a dealer.

The documents were never contested by the respondents

The Court opined that the examination of the author of a document is not required, if they had not denied their signature on the document, but only pleaded duress in execution of the same. The respondents' witness in cross-examination admitted his signatures on the documents. Pertinently, the Court observed that the signature on the debit note on the basis of which the respondents were enjoying trade discounts was also disputed by them. The claim of duress, non receipt of goods, without an iota of evidence were considered by the Court to be bald statements made by the respondents.

[Case Title: M/s. Star Paper Mills Limited v. M/s. Beharilal Madanlal Jaipuria Ltd. And Ors. Civil Appeal No. 4102 of 2013]

Citation : LL 2021 SC 762

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