Tata Chemicals Limited vs M/S. Kshitish Bardhan Chunilal Nath & Ors.

For the appellants : Mr. Ratnanko Banerjee, Sr. Adv. Mr. Shaunak Mitra, Adv. Mr. Joydeb Ghorai, Adv., Mr. Suman Chatterjee, Adv., Mr. Diptesh Ghorai, Adv.

For the respondents 1 to 4 : Mr. Subhamoy Bhattacharya, Adv.,

in APO/128 of 2021 Mr. Shankar Mukherjee, Adv., Mr. Sarangam Chakraborty, Adv.

For the respondents 1 : Mr. Jishnu Chowdhury, Adv., in APO 129 of 2021 Mr. Syed Narul Arefin, Adv., Ms. Saswati Chatterjee, Adv., Mr. Saurodeep Chakraborty, Adv. Mr. Rahul Singh, Adv. 2

For the Respondent no.5 : Mr. Arindam Paul, Adv., in APO 128 of 2021 & Mr. Ovik Sengupta, Adv., respondent no.2 Ms. Parna Mukherjee, Adv., in APO 129 of 2021 Mr. Saswata Chatterjee, Adv.

Hearing Concluded on : 25th August, 2022 Judgment Date : 28th September, 2022

Soumen Sen, J.: By consent of the parties, both the appeals and the

applications are taken up together for consideration in view of the similarity

of issues involved in both the appeals and applications and are disposed of by

this common judgment.

TATA Chemicals Limited is the appellant in both the appeals.

In APO 128 of 2021, respondent No. 1 is a partnership firm of which

respondents Nos. 2 to 4 are partners and respondent No.5 was the Deputy

Manager (Accounts) of the Appellant.

In APO 129 of 2021, respondent No.1 Ashok Kumar Saha is the sole

proprietor of Ashok Sales Agency and Respondent No. 2 was the Deputy

Manager (Accounts) of the Appellant.

Deputy Manager (Accounts) of the appellants is the common

respondent in both the appeals.

For the sake of convenience, TATA Chemicals Limited shall be referred

to as "TATA," Kshitish Bardhan Chunilal Nath as "KBCN", Ashok Kumar Saha

as ASA and Sudip Kumar Singh shall be referred to as "SKS". 3

The appellant is aggrieved by the order dated 16th March, 2021 by

which the interim order of injunction initially passed on July 17, 2019

restraining the respondents from transferring, alienating and/or creating any

third party interest in respect of the properties mentioned in annexure "M" in

GA No. 725 of 2019 and Annexure "R" in GA No. 733 of 2019 respectively was

vacated.

The interim order was vacated at the final hearing of the injunction

application by a subsequent bench on the ground that the claim of the

plaintiff in both the matters is for an uncertained sum and is essentially a

claim on account of damages for the alleged wrongdoing of the defendants in

its dealings and transactions with the plaintiff and for such an un-

ascertained and un-liquidated amount for damages no order of injunction

could be granted.

TATA has assailed this order dated 16th March, 2021 and has prayed

for the restoration of the order dated 17th July, 2019.

Before we consider the respective submissions made on behalf of the

parties, it is necessary to briefly state the facts.

We first briefly summarize the facts in APO 128 of 2021.

TATA is, inter alia, engaged in manufacturing and marketing of

chemicals and fertilizers. TATA has a wide network of dealers throughout the

country to facilitate the sale of its products. KBCN and ASA were

distributors/dealers of TATA and had a long standing business relationship.

TATA, from time to time as a part of their sales promotion, had introduced 4

and extended incentives and/or benefits to its dealers by way of discounts

and/or rebates by issuing price circulars in respect of bulk fertilizers. In both

the suits the appellant claims that by reason of wrongful, collusive and illegal

acts of the dealers in connivance with SKS the plaintiff has suffered huge

losses and damages to the extent of illegal credit obtained by the dealers in

their dealings with the plaintiff/appellant on account of sale and purchase of

fertilizers supplied during the financial year 2014-15 to 2017-18. The

appellant has quantified such loss and damage in both the suit representing

the illegal credit obtained by both the dealers during the aforesaid period.

The appellant has stated that in order to promote sales it used to give

rebates/discounts marked as "credit" to KBCN. The amount of the rebate was

predetermined in price circulars issued by the appellant from time to time.

Price circulars are notified and supplied to the sales manager as and when

they are issued by the appellant who then informed the sale executives of the

relevant regions of such price circulars. The appellant has never given any

extra discount or rebates in any other mode or manner other than those

clearly specified in the price circulars. SKS, the respondent no.5, was the

Deputy Manager (Accounts) of the appellant who used to calculate and extend

the benefit of rebate/discount to KBCN. The credit notes were issued based

on price circulars. All the transactions were managed through the Systems

Applications Product enterprise resource planning software (in short 'SAP').

SKS on behalf of the appellant was supposed to issue credit notes based on

price circulars in the SAP. It is stated that as part of his job SKS used to

calculate and extend the benefit of such rebates and discounts which were 5

determined as per price circulars issued monthly, primarily to the

distributors, in respect of each of the products, depending on the business

requirements and management decisions. SKS used to upload the amount of

discounts and rebates in the form of credit notes in favour of the dealers

including distributors in the SAP system of the appellant using the unique

login ID issued to him by the appellant. Price circulars issued during the

financial year 2014-15, 2015-16, 2016-17 and 2017-18 (till June 2017) have

been disclosed in the petition.

In or about October 2016, the Regional Accounts team of the appellant

discovered that SKS had issued credit notes to these dealers in excess of their

entitlements, which were later reversed in December 2016, and the

appellant without doubting the integrity of SKS accepted such excess rebates

as a genuine error on his part. However, while validating the accounts in July

2017, various other irregularities were discovered in the appellant's accounts

with regard to the credit notes provided. During enquiry it transpired that

SKS had passed and issued considerable credit notes to the distributors in

excess of their entitlement in lieu of kickbacks that surfaced during further

investigation. As a result, the distributors had benefited in excess of what

they were entitled to in terms of rebates and discounts by way of a diminution

in their outstanding dues payable to the petitioner.

When approached, SKS acknowledged to miscalculating in recording

entries from October 2016 to June 2017 and claimed that these errors were

due to his carelessness and negligent conduct. This admission of wrong

recording is documented in an email he addressed to the appellant's 6

Controller-Agri business on July 25, 2017. Following that, the appellant

undertook an internal assessment to check the extra credits passed by SKS

over the previous three years, which revealed more information of SKS's

misdeeds and fraud.

In view of discovery of such misdeeds on September 5, 2017, SKS was

suspended. On and from July 2017 onwards, the appellant continued to

conduct business with the distributors on an advance against delivery basis.

On October 19, 2017, TATA recruited KPMG, a well-known audit KBCN,

to undertake an examination into the complete transactions connected to the

issuance of excess credit issued by SKS to all the dealers of the appellant.

On November 14, 2017, a meeting was held between the

representatives of the appellant and KBCN. KBCN claimed to have admitted

in the meeting that if there were any extra credit handed on to them, they

would repay them. The minutes of this meeting, as well as the month-by-

month reconciliation of accounting statements for the fiscal years 2015-16

and 2016-17, were forwarded to the distributor. In acknowledgement of their

liability KBCN had made an ad hoc payment of Rs. 1 crore to the appellant.

Subsequently on February 9, 2018, one of the partners of KBCN, namely

Krisnendu Bardhan the respondent no. 3 (hereinafter referred to as

'Krishnendu') met the appellant and admitted to receiving extra credit notes

amounting to Rs. 26 crores for the financial years 2015-2016 and 2016-2017.

He further mentioned in his acceptance letter that the employee colluded with

him and got cash payments of around Rs. 3 crores in exchange for the extra 7

credit. An additional payment of Rs. 50 lakhs was paid by KBCN to the

plaintiff on that day to demonstrate bona fide and intention to repay the

amount received by way of excess credit.

The appellant contends that there is no dispute between the parties in

respect of the quantities of goods (valued at Rs.218.18 crores) supplied by the

appellant from the year 2014 to June 2017. The same has been confirmed by

both the parties as would appear from Fertilizer Monitoring System (in short

'FMS') portal maintained by the Department of Fertilizers under the Ministry

of Chemicals & Fertilizers, Government of India. For the fertilizer sold and

supplied KBCN was entitled to a credit of Rs.8.55 crores as per the price

circulars issued by the appellant. The price circulars are disclosed in the

petition. However, credit provided by employee to KBCN for such supplies

from the year 2014 is Rs.40.32 crores which is in excess of the credit to which

KBCN was entitled to by Rs.31.77 crores.

The appellant claims that the respondents have all along been aware of

the excess rebate and have admitted to receiving such rebates and have

wilfully withheld such amounts which would be evident, inter alia, from the

following facts and course of conduct between the parties after the detection

of such irregularities:

a) The respondents have paid a sum of Rs.1.5 crores to the Appellant as refund for a part of the excess rebate provided by SKS which would be evident from: the writing dated February 9, 2018 of Krishnendu one of the partners of KBCN on behalf of KBCN, stating to have paid Rs.1 crore and undertaking to pay Rs.5 crores in 5 consecutive years and in 8

furtherance thereof paid Rs.25 lacs each on January 11, 2018 and February 9, 2018 respectively.

b) Krishnendu moreover had acknowledged the outstanding dues to TATA owing to excess credit being fraudulently received by KBCN as would be evident from the minutes of meeting between the said Krishnendu and officials of the TATA held on November 14, 2017 followed by payment of Rs.1.50 crores as stated above.

Krishnendu later by an email dated February 14, 2018 wrongfully

attempted to retract from his statement as an afterthought in order to cause

wrongful loss to the Appellant. The said purported retraction statements,

however, do not raise any dispute pertaining to reconciliation of accounts, as

would be evident from the:

a) Minutes of the meeting held on November 14, 2017 where Krishnendu had claimed that he did not have the required infrastructure to check all transactions.

b) The dues owing from KCBN across various districts, issued by the Appellant, for the purpose of balance confirmation as on March 15, 2018 have not been disputed.

c) KBCN did not dispute such balance confirmation letters, even in its subsequent letters dated April 4, 2018

d) The quantity of fertilizers purchased by KBCN had also been acknowledged by KBCN in FMS portal.

It is submitted that SKS has also admitted to have passed on excess

credit notes in the sum of Rs.22.5 crores in favour of two dealers and has

stated to have been paid around 25% as kickback in his writing of February

8, 2018. The said SKS in acknowledgement of his wrongdoing had even

offered his property at Ideal Regency to the appellant in order to enable the 9

appellant to realise a part of the claim or to adjust the value thereof towards

his liability.

Thus it is contended that there is no dispute with respect to quantity

of fertilizers purchased.

The appellant states that the respondents were aware that they are

wrongfully withholding the appellant's funds and further with mala fide

intention, by an e-mail dated 22nd March, 2018 one of the partners of KCBN

sought for reconciliation of the accounts to ascertain the amount of excess

rebate. After such reconciliation amounts the appellants issued letters dated

27th March, 2018 to the respondents stating amounts they were supposed to

pay to the appellant. However, by letters dated 4th April, 2018, KBCN

admitted to retract from their earlier statements and had wrongfully denied

that there was any fixed amount of rebate that was to be given as per price

circular and that any amount was being withheld by KBCN. The said

respondents again on 29th April, 2018 sent another letter demand for

reconciliation of accounts to ascertain the excessive rebate.

The appellant has disclosed e-mails exchanged between the Krishnendu

one of the partners of KBCN and the employee of the appellant which would

show that KBCN was always informed that rebate in excess of that fixed by

the price circulars were being extended to KBCN and its partners.

The appellant claims that respondents have all along being aware of the

excess rebate and have admitted to receiving such rebates and have wilfully 10

withheld such amounts as would be evident from the writings and admissions

mentioned above.

The appellant has disclosed the balance confirmation statement and the

subsequent communications for the relevant years to show that the

respondents had acknowledged its liability.

In APO 129 of 2021 ASA is the dealer.

It is stated that following similar modus operandi excess credit was

granted to him by SKS. It is stated that between 2014 and June 2017, goods

worth Rs.39.37 crores were supplied by TATA to ASA. ASA had duly

acknowledged supply of the fertilizers. In terms of price circulars, ASA was

entitled to a credit of Rs.1.52 crores. Despite the same, SKS of TATA had

extended credit facilities for such supplies from the year 2014 till 2017,

aggregating to Rs.4.55 crores which were in excess of the credit entitlement

by Rs.3.02 crores. In a meeting held between the appellant and the

representative of the distributor ASA on February 19, 2018 at the office of the

appellant, ASA acknowledged receiving excess credit. In furtherance of such

admission ASA voluntarily and unreservedly had made a part payment of

Rs.9,05,161 to TATA and recorded such fact in its letter dated February 19,

2018. Out of Rs. 69,27,600 ASA's representative had also agreed to pay the

remaining amount of Rs. 60,22,439/- in monthly instalments of Rs.

5,00,000/- each. The appellant alleged that ASA and SKS were fully aware of

such excess rebates and had admitted to receiving such rebates and had

wilfully withheld balance amounts.

11

The appellant notified ASA in a letter dated March 27, 2018 that excess

credit obtained by the said distributor for the financial years 2014-15 to

2017-18 (until June 2017) was in the amount of Rs. 2,49,87,636/-, based on

further investigation. Along with the letter dated March 27, 2018, the

appellant had also provided a reconciled ledger statement, which had been

prepared after ASA had made assurance for future payments.

The dealings and transactions between the appellant and ASA from

July 2017 till the appellant stopped supplying fertilizer to ASA had resulted in

ASA making total adjustments and payments of Rs. 3,66,06,076/- to the

appellant, and the appellant delivering items worth a total of Rs.

3,22,28,115/- to the ASA. Following adjustments, including repayments

made by ASA a total sum of Rs. 43,77,961/- had remained to the credit of

ASA in relation to such dealings. The appellant did not remit the money to

ASA, but instead used it to be a debt owed to ASA.

SKS in his statement dated February 8, 2018, alleged to have admitted

that excessive rebates were given to ASA. However, he was ready and willing

to refund the excess rebates to TATA. The said employee claimed to have even

offered his property in lieu of a refund to TATA Chemicals for such excess

rebates to both KBCN and ASA. However, subsequently by way of a clear

afterthought, the said employee, in his purported letter dated June 25, 2018,

retracted his admission and called upon TATA to withdraw the notice of

termination dated April 30, 2018, issued in view of his alleged misconduct.

TATA, however, has denied the existence of any letter dated January 9, 2018,

or January 12, 2018.

12

TATA claimed that ASA did not raise any dispute pertaining to the

reconciliation of accounts, which would be evident from the letter dated

March 27, 2018, issued by the appellant to ASA. ASA did not contend that he

could not verify the accounts in his subsequent letter dated March 29, 2018.

The said statement was accepted. The quantity of fertilizers purchased by

ASA had also been acknowledged by the agency in the FMS portal, evidencing

that there was no dispute with the quantity of fertilizers purchased.

TATA appointed a well-known Audit Firm, namely, KPMG, on October

19, 2017, to look into the issue of excessive rebates. KPMG submitted a

report wherefrom the modus operandi of respondents revealed that the said

respondents were in collusion and conspiracy with each other and had

availed of excess rebates. The reports disclosed, among other things, a large

amount of cash that the employee of appellants had received by perpetrating

a fraud upon the appellant. The report revealed several bank accounts in the

name of the said employee, transactions involving a large amount of cash

deposited into such bank accounts by the said employee, and investments

made by the said employee during this period above his declared income.

The report dated March 20, 2018 of KPMG, would reveal the following:

a) SKS had made aggregate Cash Deposits in excess of Rs. 1.27 crores in different bank accounts. SKS had several banks accounts, and the sums in excess of Rs. 1.27 crores had been deposited on review of bank statements of only around 10 bank accounts.

b) SKS had incurred expenditure of approximately Rs. 50 lakhs from his VISA Regalia credit card.

13

c) SKS had made aggregate cash deposits in excess of Rs.64 lakhs during the period of demonetization, that is, between November, 2016 and January, 2017.

d) Income tax returns of the employee for the assessment years 2015-2016 and 2016-2017 reflect gross total income of only Rs.

6,95,160/- and Rs. 7,69,284/- respectively.

e) SKS had made aggregate payments in excess of Rs. 45 lakhs towards premium for insurance policies.

f) SKS had invested aggregate sum of excess of Rs. 32 lakhs towards mutual funds and fixed deposits.

g) Equity transactions of around Rs. 3.42 crores had been carried out in the account of Pradip Kumar Singh (the father of the employee) in the financial year 2016-2017.

h) SKS had purchased jewellery worth around Rs. 47 lakhs using his credit card and bank accounts.

i) Public provident funds deposits in excess of Rs. 4 lakhs had been made by the employee during the material time.

In order to identify the gross discrepancies in the accounts and the

fraud that had been the perpetrated by the respondents in both the appeals

the appellant had appointed BDO India LLP ("BDO") on October 10, 2018 to

conduct a forensic audit of the appellant for the purpose of computation of

excess rebates that had been given. The report of BDO dated February 4,

2019, inter alia, shows-

i) Several emails were sent by SKS to Krishnendu with attached MS Excel workbooks showing calculations of the excess rebates given. 14

ii) Confidential and trade related information was shared by SKS to

KCNB.

iii) The total rebate that was given for business of Rs.218.18 crores with KBCN was Rs.40.32 Crores. KCBN was entitled to rebate of an amount of Rs.8.55 crores. The difference in the rebates that KBCN was entitled to and the rebates that were actually given at the instance of employee came to Rs.31,77,22,561/-.

iv) While computing rebates given by the appellant to other dealers, what was seen was for a business of Rs.284.47 crores, the rebate given was only Rs.11.74 crores whereas a dealer who had a business transaction of Rs.59.67 crores with TATA received a rebate of only Rs.2.30 crores.

The appellant has disclosed BDO report in order to demonstrate the

devious mechanism adopted by SKS and the connivance between the

respondents to make wrongful gain.

The report of BDO revealed various illegal and unauthorized

transactions between the respondents. The excess credit passed on in favour

of the dealer was also reflected and formed part of the BDO report. For

convenience relevant extract of the report of BDO in relation to KBCN and

ASA is mentioned below:

C.S. No. 50 of 2019

Financial Territory -24 Territory - Territory - 24 Total amount Year paraganas Hooghly paraganas of excess (south) (dealership (North) credit notes (Dealership code (Dealership issued code FK0995001) code FK0645001) FK2095001) 15

(Amount of (Amount of (Amount of excess credit excess credit excess credit notes issued) notes issued) notes issued)

2014-15 3,81,92,407/- 1,65,06,392/- 2,53,12,167/- 8,00,10,966/-

2015-16 5,70,64,071/- 3,55,35,672/- 3,09,57,407/- 12,35,57,150/-

2016-17 2,80,25,896/- 3,80,11,171/- 2,55,68,222/- 9,16,05,289/-

2017-18 57,11,203/- 48,05,366/- 1,20,32,586/- 2,25,49,155/- (till June)

Total 12,89,93,578/- 9,48,58,601/- 9,38,70,382/- 31,77,22,561/-

C.S. No. 51 of 2019

Financial Year Territory- Nadia (Dealership Code No.: FA0595001

2014-15 32,76,618/-

2015-16 1,63,66,140/-

2016-17 1,00,29,847/-

2017-18 (till June) 5,74,137/-

Total 3,02,46,742/-

TATA was unaware of the enormity of such fraud until the BDO filed

the report on February 4, 2019, and before that, it only had an initial

knowledge of unauthorized acts of extension of excess credit in June 2017;

KPMG was appointed to investigate the same.

16

After providing credit for the sums paid by the distributors, the

distributor no. 1 KBCN became liable for Rs. 28,25,48,558 and the

distributor no. 2 ASA for Rs. 2,58,68,781 till March 5, 2019.

The purported retraction of the employee in his letter dated June 25,

2018, according to the appellant, contains ex-facie false statements since

the employee had amassed substantial assets out of the ill-gotten funds

received in lieu of such excessive rebates and had admitted to having

received kickbacks from the dealers representing 25% of the value of the

excess credit rebates. The appellant was unaware of any purported letter

dated January 5, 2018, or January 12, 2018. Additionally, the appellants

state that the said employee had never visited the office of TATA on

February 11, 2018.

The appellant filed two suits for recovery of money both on March 5,

2019.

In the said proceeding, the appellant has filed an application for

injunction and attachment of certain immovable properties of the

respondents.

The documents that explicitly showed the alleged fraud committed by

the distributors and the employee were put forward by Mr. Ratnanko

Banerjee the Learned Senior Counsel appearing on behalf of the appellant

in both the actions. Mr. Banerjee has relied upon the emails exchanged

between the employee and the distributors from 2014 to 2017 as evidence,

claiming that each had an excel sheet detailing the amount of rebate the 17

distributors were due to receive, the amount actually paid to the

distributors and the difference between the two. These emails were

discovered from the employee's computer through forensic examination by

experts. Following that, Mr. Banerjee outlined the contents of the KPMG

and BDO reports, the first identifying the modus operandi and the second

estimating the precise excess rebate/credit earned by the distributors as a

result of the distributors' collaboration and fraud with the employee. It is

submitted that the plaintiff distributed price circulars to all its distributors

on a regular basis, and that they were all aware of such circulars and

thereafter payments were made on such price circulars.

Any claim that the distributors were unaware of the pricing circulars

was not true. Our attention is drawn to the documents pertaining to the

defendants' confessions as well as their readiness to return specified

amounts. The distributors made payments on an ad hoc basis, which

amounted to a further acknowledgment by them of their admission of

liability and refund of amounts received in excess of their entitlement. Mr.

Banerjee submits the retraction of the respondents is a clear afterthought

and contained false assertions with regard to lack of knowledge of pricing

circulars.

It is further submitted that ASA was evasive and had no explanation for

the minutes and excess credit statement that he received via email on

November 17, 2017. Reliance has been placed on balance confirmations

forwarded by the appellant, which were never disputed by the distributors. 18

The Learned Senior Counsel also submitted that the employee had used

his unlawful gains to make huge investments, acquire properties, and

make dealings and transactions that exceeded his declared income. The

declared income of the employee as submitted by the appellant would be

Rs. 6,95,160 and Rs. 7,69,284for the assessment year 2015-16 and

assessment year 2016-17 respectively. As per the last compensation

revision, SKS was to receive an annual compensation of Rs.11,09,472.

However, the assets acquired and investments made during this period

increased exponentially and disproportionate to the known source of

income. Mr. Banerjee submits that in the affidavit SKS has failed to justify

such enormous acquisition during aforesaid period under scanner and the

source of the fund can only be attributed to such unholy transactions.

Mr. Banerjee submits that on the basis of the report of KBCN and the

documents retrieved by the TATA, it was found that SKS has made

substantial gains at the expenses of the TATA and, in fact, 18 bank

accounts were opened in the name of SKS. Mr. Banerjee has referred to

paragraph 50 and the various sub paragraphs of G.A. 733 of 2019 to show

the enormity of the wealth both movable and immovable acquired by the

SKS out of the funds illegally procured from KBCN and ASA. It is

submitted that the deposits, payments and expenses by the SKS pertain to

the financial year 2014-18 (till June, 2017) however, did not constitute all

deposits, payments and expenses made by the said respondents. 19

Mr. Banerjee refers to paragraph 58 of G.A.No. 725 of 2019 at page 69

volume (I) to demonstrate the extent of assets acquired during the relevant

point of time. The summary of the extent of acquisitions are stated below:

(i) cash deposits in excess of Rs.1.20 crores (ii) cash deposits of around Rs.64 lacs made during the period of demonetarisation (iii) credit card expenses of around 50 lacs (iv) payment of insurance premium of insurance policies of around Rs.45 lacs (v) purchase of jewellery and other luxurious items of around 47 lacs (vi) immovable properties in the form of a flat 11D, Block E, Ideal

Regency, 46 Diamond Harbour Road and a flat at the 4th floor of premises no. 293/3A Diamond Harbour Road, Behala.

Mr. Banerjee submits that the source of the fund are the amounts

received by SKS as kick backs from the aforesaid two dealers. Significantly

the two reports clearly establish the link of funds to the acquisition of such

enormous wealth and all had happened during the period under

investigation. Mr. Banerjee submits that preliminary investigation as well

as a foreignsic audit report have clearly established the modus operandi

and by way of illustration Mr. Banerjee has referred to the email exchanged

between SKS and Krishnendu in respect of APO 128 of 2021 and email

exchanged between the SKS and ASA in respect of APO 129 of 2021 that

were retrieved from the computers of SKS. Mr. Banerjee submits that the

contemporaneous evidence available on record would unmistakably show

that all of them engineered mechanism with a clear intention to defraud the

TATA.

20

Mr. Banerjee has extensively taken us to the report filed by the KPMG

and BDO India LLP to demonstrate the mechanism through which excess

rebate was extended to KBCN and ASA by SKS with the motive to defraud

the appellant. Our attention is also drawn to specific email dated 18th

October, 2014 from SKS to ASA showing excess rebate extended to the

respective dealers namely, KBCN and ASA. Attachment of email observed

during forensic audit relating to disclosure of competitive dealer

information to KBCN and ASA were placed before us to show the complicity

between the parties.

The Learned Senior Counsel has contended that the claims in the suit

are entirely and precisely quantified as evidenced by the facts and

documents stated and disclosed in the pleadings, and the respondents

have not been able to detract from their position. It is the appellant's case

that the claim is for an ascertained and liquidated sum as would, inter alia,

appear from the relevant pleadings in the plaint and petition. The Learned

Judge has erred in failing to appreciate the appellant's claims as un-

liquidated damages. The Learned Counsel thus submits that the

appellant's case was fit for directing the respondents to secure the

appellant's claims. Thus, the appellant prays for restoring of the order

dated July 17, 2019 and setting aside the consequent order.

For the legal proposition that orders of injunction should protect the

claim in a money decree, the appellant has relied upon decision of the

Hon'ble Supreme Court in Rahul S. Shah v. Jinendra Kumar Gandhi 21

reported in (2021) 6 SCC 418 and of a Division Bench of this Court in

Harleen Jairath v. Prabha Surana reported in 2019(4) CHN 412.

Both the dealers and the employee of TATA contested the proceeding

before the learned Single Judge by filing affidavits.

Per Contra, Mr. Jishnu Chowdhury the Learned Counsel for ASA

submits that no money was payable to the plaintiff. The incentives and

discounts available were appropriate and extended by the plaintiff. In fact,

ASA was entitled to receive a sum of Rs. 2 crores on proper reconciliation of

accounts and has filed a counter-claim along with his written statement.

The circulars on which reliance has been placed were never communicated

to ASA. The circulars have been created and brought on record to deny the

legitimate dues of ASA and to create an illusion of a cause of action. The

alleged audit reports are tailor-made and inadmissible in evidence. No

opportunity was given to ASA to place proper facts before the auditor.

Mr. Chowdhury submitted that the claim is an ascertained sum of

money is completely belied by the documents relied upon by KPMG and

BDO. Our attention is drawn to summary of findings of BDO to show that

the discount is to be calculated on the invoiced amount on account of

freight discount and cash discount. Over and above a dealer may get an ad

hoc freight discount and additional price revision discount. The ultimate

amount is determined after adjustment of all these variables which are to

be prepared and executed by the accounts department. All these

transactions were closely scrutinised by different departments of TATA and 22

it is preposterous to suggest that SKS has extended any benefits to the

dealers de horse the circulars. The accounts are regularly audited and it is

unbelievable that the auditors ratified all such transactions without

reference to the price circulars and the trade practice. The dealers have a

chance at the trial to place evidence to show that whatever has been

received was part of their entitlement. They have not received any amount

illegally or in excess to their entitlement. The reports are now thrown at

the face of dealers which had no evidentiary value. Acceptance of such

report on its face value even at this stage would cause serious prejudice to

the respondents as it would be a denial of right to have a fair trial on the

issue raised by the respondents. The reports cannot be taken as

sacrosanct as it is based on information and data furnished by TATA

without any opportunity being given to any of the dealers to question the

basis of such investigation. Reliance are placed on documents that were

never shown to the respondents nor the auditors sought for any view from

the dealers on data furnished by TATA.

The learned counsel has submitted that the alleged admission of ASA

stands nullified in view of the fact that ASA, after the alleged date of

admission dated February 19, 2018, had made payment of a sum which is

far in excess of the admitted sums. Moreover, the appellant's claim is

unascertained and is in the nature of a claim in damages. For the

proposition that no order of attachment before judgment or injunction can

be passed in a claim for damages, the learned Counsel has relied on Raa

Projects Ltd., v. Seaways Shipping Ltd., reported in 2010 (4) C.H.N. Cal 23

34 Para 17; Jai Balaji Industries Ltd. v. Hyquip Systems (P) Ltd.

reported in 2010 (4) CHN 87 Para 8; Board of Trustees for the Port of

Kolkata v. Haldia Bulk Terminals Private Limited reported in 2013 (3)

CHN 200 Para 34).

The learned Counsel has strenuously argued that reports of KPMG

and BDO India L.L.P., appointed as auditors, cannot be relied upon until

the same is proved in accordance with law. These are merely the opinion of

experts and unless such opinion of experts are proved no reliance could be

placed on such reports in view of clear pronouncements of law in this

regard, which inter alia, would appear from the following decisions:

State of Himachal Pradesh v. Jai Lal & Ors., reported in (1999) 7

SCC 280 Para 19; Ramesh Chandra Agarwal v. Regency Hospital

Limited & Ors., reported in (2009) 9 SCC 709 Para 16, 21 and 22;

Keshav Dutt v. State of Haryana reported in (2010) 9 SCC 286 Para 19.

Mr. Chowdhury has argued that it is trite law that in a money suit the

Court in exercise of power conferred under Order 39 Rule 1(b) of the Code

can restrain the respondents from disposing of the property which is not

the subject matter of the suit it if appears that the respondent intended or

threatened to dispose of his property with a view to defraud his creditors

subject to the necessary averments with supporting materials in the plaint

and the application for injunction in terms of Order 39 Rule 1(b) of the

Code that the defendant threatened or intended to dispose of its property

with a view to defraud its creditors. In the instant case the statements 24

made in the plaint as also in the interlocutory application are extremely

vague. The claims of the alleged creditors whose debts the respondents

allegedly are unable to pay have not been disclosed and that it was also not

disclosed the manner and mode how the defendant intended to defraud its

creditors. Further, the Counsel contends that it was also not disclosed that

the respondent nos. 1 to 4 are in financial stringency or the proceeds of

dissipating properties to defraud any creditor. It is trite law that on the

basis of such vague allegation no order or direction for security or

injunction or an order of attachment can be passed against the

respondents.

Mr. Jishnu Chowdhury has painstakingly pointed out that in case of a

money suit, the Court permits attachment before judgment as prescribed

under Order 38 Rule 5 of the Code provided it fulfils and that certain

tests as laid down by the judicial pronouncements namely the judgments of

the Hon'ble Supreme Court in the matter of Raman Tech and Process

Engineering Company vs. Solanki Traders reported in (2008) 2 SCC

302 which has affirmed the judgment of this Hon'ble Court in the matter of

Prem Raj Mundra vs. Md. Manek Gazi reported in AIR 1951 Cal 156 ,

which ought to have been satisfied. It is argued that in the instant case no

such averments had been made by the appellant in its pleadings which can

satisfy the tests of Order 38 Rule 5 of the Code. Specific powers have

already been conferred under the Code under Order 39 Rule 1(b) read

with Section 94 thereof under which an injunction is possible to be

granted in case of a money suit provided the tests of the said provisions are 25

satisfied along with inherent powers of Section 151 of the Code. These

powers are not just any powers over the substantive right which any

litigant possesses, rather these are specific powers to be conferred on the

Courts for passing such order which would affect such right of a party and

such powers cannot come within the scope of inherent powers of the Court

in the matters and procedure.

The Learned Counsel rests his submission that as the claim of the

appellant is in the nature of damages and the same is required to be

ascertained and that for a claim of an un-liquidated amount in damages,

no order in the nature of attachment before judgment could be ordinarily

passed. Reliance is also placed on judgment of this Hon'ble Court, in the

case of Jai Balaji Industries Limited (supra)

The Learned Counsel for the parties have argued that from the

averments made in the plaint and the interlocutory application filed by the

appellant, including the documents disclosed therein by the appellant, it is

evident that the appellant had suppressed material documents and facts

before this Hon'ble Court as stated hereinabove and such suppressed facts

were a result of deliberate and wilful suppression because some of such

documents have been issued by and the facts relating thereto are in the

knowledge and notice of the appellant prior to the filing of the suit.

The Learned Counsel contends that fraud as alleged to have been

pleaded and/or sought to be pleaded by the appellant in the plaint and the

interlocutory application on the face of it shows that they involve serious 26

disputed questions of fact and as such the same are triable in nature and if

not admitted, needs to be adjudicated upon a detailed trial. Passing of an

order of injunction is an equitable relief that depends upon the Court's

discretion.

Mr. Chowdhury has submitted that having regard to the nature of

dispute the issues from the statements raised cannot be adjudicated upon

without a proper trial and that in such circumstances it is settled law that

the Court shall be refrained from passing any discretionary and equitable

relief. In this regard, reliance has been placed by the respondents on the

judgment of the Hon'ble Supreme Court in the matter of Air India Ltd. &

Ors., v Vishal Capoor & Ors., reported in 2005(13) SCC 42 (paragraph

34).

The learned counsel for KBCN Mr. Subhomoy Bhattacharya has

adopted the submission made on behalf of the ASA. KBCN in its objection

has stated that KBCN had been the top channel partner of the appellant for

more than 7 years with the largest volume of sales and being the highest

performing business associate for years in a row and having a long-

standing mutually rewarding business relationship with TATA. TATA had

sold and supplied fertilizers to KBCN which in turn had sold the same in

different territories of the State of West Bengal namely, North 24 Parganas,

South 24 Parganas and Hooghly.

It is alleged that a security deposit/bank guarantee was maintained

with the appellant and was to be refunded/returned to the dealer on expiry 27

or in the event of termination of the dealership agreement after adjusting

an outstanding payment due to the appellant/petitioner, but despite the

agreement expiring on March 31 2018, the said security deposit/bank

guarantee was not returned to KBCN nor any amount has been adjusted

against the impugned outstanding dues claimed by the appellant from

KBCN.

Ere the expiry of the agreement the appellant used to raise credit

notes from time to time in favour of KBCN, in order to pass on the

discounts, rebates and other accrued benefits in course of its business to

the channel partner. Such credit notes were non-convertible accounting

instruments which had never been converted into money. The benefits of

credit notes were always adjusted by the appellant in the next transaction

by and between the parties. In the event, excess credit notes were issued

and passed on by the appellant in favour of KBCN the same were adjusted

by raising debit notes by KBCN and similarly excess amount of credit notes

were adjusted too. It is therefore, contended that debit notes were used to

be raised only when there were accounting errors committed by the

appellant. While credit notes were de jure benefits passed by the appellant

to KBCN, debit notes were considered to be an instrument of correcting

accounting errors committed on the part of the appellant.

The learned Counsel argued that several correspondence and/or

emails were exchanged by and between the parties and throughout the

aforementioned communications KBCN had maintained that the alleged

claim of the appellant was erroneous, and reconciliation was mooted in 28

view of the longstanding relationship between the parties. Several

documents which are materials for the purpose of adjudication of the

instant disputes had been suppressed before the learned Single Judge in

the injunction application filed by the appellant. The relevant documents

would be the reply of KBCN dated November 27, 2017, email

communications dated January 16, 2018, January 28, 2018, January 29,

2018 and the letter dated May 2, 2018. The appellant had never replied to

the aforesaid emails. The email communication dated June 4, 2018 issued

by the appellant discloses the total account position in respect of the three

districts wherefrom it would appear that, after considering the entire

accounts a sum of Rs.3.30 crores was actually receivable by KBCN and

that the said documents were allegedly suppressed before the learned

Single Judge but handed over to the learned Single Judge on June 24,

2019 by KBCN and was subsequently disclosed in the affidavit in

opposition by the respondent.

After institution of the police complaint by the appellant there was an

extension of credit notes to the tune of Rs.29,53,89,000/- in favour of

KBCN by the appellant resulting in a situation where KBCN would stand to

receive a sum of Rs.3,30,88,402/- from the appellant. These facts would

clearly establish that the claim of the appellant is unsustainable and whole

issue is an outcome of mal-accounting practices on the part of the

appellant and different unilaterally instituted audit arrived at different

amounts allegedly receivable by the appellant from KBCN. 29

The Learned Counsel for the parties have submitted that the entire

litigation is arising out of an accounting mismatch and the account was

kept and maintained unilaterally having conducted unilateral audits. This

had forced KBCN and ASA to comply with the same denouncing the basic

principles of natural justice and without an opportunity of being heard.

Despite such being the situation, on April 26, 2018, the appellant had filed

a police complaint with the Shakespeare Sarani Police Station against

KBCN and its partners and ASA. TATA had raised an alleged claim of Rs.

31.81 Crores against KBCN and later such complaint was converted into a

First Information Report bearing No. 112 of 2018 dated April 26, 2018.

Curiously this sum got inflated into a sum of Rs. 34.36 crore following the

audit by B.D.O. India L.L.P. which was engaged by the appellant on

October 10, 2018 and despite the complaint of the appellant, there was an

extension of credit note to the tune of Rs. 29,53,89,000 in favour of KBCN

by the appellant resulting in the situation that KBCN stood to receive a

sum of Rs. 3,30,88,402 from the appellant and the same has already been

claimed by KBCN from the appellants. It is argued that the accounting

practices used by the appellant and its associates were archaic, unilateral

and primitive and during conducting the audits, no opportunity of hearing

was provided nor KBCN was allowed to peruse the accounts presented

before the said auditors. The learned Counsel has emphatically submitted

that the appellant had not placed the latest credit notes sent by them to

KBCN before its auditors resulting in the latter's claim of Rs. 3,30,88,401

from KBCN.

30

The allegation of fraud and collusion between KBCN and the employee

of TATA are baseless without any single document being produced in

support of such grave allegation. The laptop of the employee seized by the

appellant and the materials collected therefrom were not within the

knowledge or notice of KBCN and ASA and cannot form the basis of

injunction and attachment. Moreover the indenting value of such materials

are to be assessed of the trial as such materials cannot be accepted as

sacrosanct and cannot be treated as conclusive since KBCN is yet to

examine its correctness through the process of a cross-examination on the

said issue.

It is also submitted that the alleged reports of KPMG and B.D.O. India

L.L.P. are the expert's unilateral opinion based upon facts, figures, records,

documents and submissions which were presented before the auditors by

TATA without giving any opportunity to KBCN. Moreover, KPMG in its

report has given a disclaimer which would clearly show that the said report

cannot be considered as sacrosanct. The said alleged reports are hence

rebuttable in nature. The said auditors clearly did not consider the fresh

credit notes issued on June 4, 2018 which principally forms the counter

claim of KBCN against the appellant in the suit. The minutes of the

meeting dated November 14, 2017 could not also be relied upon as KBCN

had never signed the said minutes nor had agreed to the contents of the

said minutes. It is alleged that the said document is fabricated and

manufactured.

31

It is submitted that the two handwritten letters both dated of February

9, 2018 were obtained by undue influence, duress and coercion upon the

partners of its KBCN and one of the partners of KBCN being respondent no.

3 by the letter dated February 14, 2018 immediately retracted from the

aforesaid admissions and refuted the contents of the two documents relied

upon by the appellants. The amounts mentioned in the letter dated

February 9, 2018 as due and payable were obtained by coercion despite

KBCN being willing to reconcile.

The learned Counsel has argued that it is an unsecured money claim

simplicitor, besides being unascertained, un-crystallized and contains

glaring variations in the two audit reports. Regard being had to such facts,

it is submitted none of the claims of any of the parties shall be quantified,

unless the claims are assessed or evaluated on evidence at the trial. It is

submitted that the suit is essentially a suit for accounts and requires a

detailed trial. The Learned Counsel in furtherance of his arguments also

stated that in case of an unsecured claim simpliciter no injunction can be

granted unless it satisfies the tests of Order 39 Rule 1 (b) read with Section

94 of the CPC.

The Counsel for the employee Mr Ovik Sengupta, Advocate has

emphasised the very necessary fact that TATA had continued to do

business with the distributors even after discovery of the alleged fraud in

2017 would show that no impropriety or dishonesty was found in the

dealings and transactions between TATA and its distributors. He further

submits that the record pertaining to SKS assets show no relationship 32

between the suspected kickback money and the assets. He further argues

that the appellant's claim is in the nature of a money decree for

unascertained and un-liquidated damages because the appellant merely

demands damages from the employee.

In his submission he refers to the letter dated June 25, 2018 issued in

reply to the letter dated April 30, 2018 where it is evident from the

nomenclature of the post that his work was being supervised by higher

authorities and he did not have any subordinate under him. TATA has

admitted that 'Accounts Manager' and not 'Deputy Manager' were involved

in intimating the sales executive about the price circulars and that it is

evident that the SAP system was open to all the accounts managers to see

as to what credit notes were being issued to the various dealers;

supplementary to the same, there were timely audits carried out.

The Learned Counsel argued that the decision of making payment of

excess rebates was not that of the employee. The appellant reportedly

stated that price circulars were issued, containing the discounts available

for different products and these were furnished to the sales manager of the

team.

SKS also raised question as to why only in July 2017 verification of

the accounts was made with regard to credit notes issued and how it could

be alleged that SKS had issued credit notes to respondent no. 1 above its

entitlement where credit notes were found to be issued in excess of the

entitlement of the respondents in October 2016 by the Regional Accounts 33

Team and had been reversed in December 2016. Thus, the said team did

not find any anomaly in the credit notes issued in excess till December

2016 and only in July 2017 the same was verified.

SKS contends that TATA had a separate agreement, same being the

minutes of the meeting, with Khitish wherefrom it would appear that Tata

had agreed to grant instalment for return of money from KBCN. It is also

argued that there has been no dispute concerning the admission that ASA

also shall be refunding the excess credit passed on to him and that this

present case is in a guise of excessive coercion exercised by the appellant

on SKS.

It is also the case of the employee that the appellants scrutinized the

laptop of the said employee without providing any notice to the said

employee. Thus, the Learned Counsel for the employee pray that since the

appellant has not made a case for breach of contract, there is no occasion

or basis to claim damages.

SKS further asserts that no notice of the KPMG and the BDO report

was given to him, the report having been prepared without providing the

employee an opportunity to object to the same, and instead on February 8,

2018, his statements were coerced to be recorded at the office of KPMG.

This incident has been recorded in the letter dated June 25 2018, which

the appellants have reportedly suppressed.

SKS contended that the appellant had got purported information from

the employee's bank accounts without the consent of SKS. Although such 34

an act could be construed as an offense, it was utilized as a basis for the

allegation that the employee had received kickbacks from the dealers.

The said employee contends that TATA's annual reports are all

available in the public domain for the years 2014-15 and 2015-16 and that

the audit reports of TATA state that no material fraud on the Company has

been noticed during the year.

Additionally, it is asserted that the appellant has made out the

interlocutory application primarily like an application under Order 38 Rule

5 and that an application under Order 38 Rule 5 is available where the

matter involved is a claim for a liquidated sum of money like a money suit.

Furthermore, the case under Order 38 Rule 5 has to be on a very high

footing which has been mentioned and discussed in several judgments

passed by the Hon'ble Supreme Court of India and the Hon'ble High Court

at Calcutta.

The sum and substance of the argument advanced by the learned

Advocate for the parties is that a fair adjudication is not possible at the

interlocutory stage because of the complex nature of the dispute and the

claim for damages are an un-liquidated claim and the appellant in the

applications seeks to transform its claim for damages into a money claim

and unless the Court quantifies the damages which the appellant is

entitled to, no orders could be passed under Order 38 Rule 5 or under

Order 39 Rule 1(b). Mr. Chowdhury has argued that there has to be a

liquidated amount due and payable in both the aforesaid situations or 35

either. In this case, the appellant is not the creditor of the respondents. The

appellant has claimed on account of loss and damages alleged to have been

suffered which are yet to be quantified. TATA as of now is not a creditor in

relation to the respondents.

The essential dispute is with regard to the nature of the dispute and

the claim. If the claim is in essence on account of damages the discretion

exercised by the Learned Single Judge in recalling and vacating an interim

order passed by another single judge at the initial stage after hearing the

respondents whether was justified or warranted by the facts and

circumstances of the case.

We need to address first the nature and essence of the claim made in

both the suits. In both the suits TATA claim money decree for the excess

credit note issued in favour of its dealers. For understanding the nature of

the claim we may refer to some of the paragraphs mentioned in C.S. 50 of

2019, Tata Chemicals Limited vs. M/s. Kshitish Bardhan Chunilal Nath &

Ors.

The relevant paragraphs forming the basis of the claim are:

"36. The plaintiff had issued letters dated March 27, 2018 to the

various addresses of the defendant no.1, addressed to the defendant no.3,

inter alia, intimating reversal of excess credit issued to the defendant no.1

and for repayment of gains made illegally by the defendant no.1. After

preliminary reconciliation of the ledger statements in respect of the

defendant no.1 firm for the financial years 2014-15, 2015-16, 2016-17 and 36

2017-18 (till June 2017), the defendant no.1 was called upon to

repay/refund the amount which had been received illegally and

unjustifiably by way of excess credit notes received by the defendant no.1

from the plaintiff, through the defendant no. 5, which is as follows:

a) North 24 Paraganas: Excess credit to the tune of Rs.8,83,44,035,

out of which a sum of Rs.1,50,00,000/- had been repaid/refunded in three

instalments on January 9, January 11 and February 9, 2018.

b) South 24 Paraganas: Excess credit to the tune of Rs.12,00,37,798/-

received.

c) Hooghly: Excess credit to the tune of Rs.8,82,64,096/- received.

Copies of three letters all dated March 27, 2018 along with enclosures

thereto, are annexed and marked 'R1', 'R2' and 'R3' respectively.

48. The defendants have jointly and severally, and in collusion and

conspiracy with each other, perpetrated fraud upon the plaintiff, the

particulars whereof are as under:

i) The defendant nos. 1 to 5 have acted in concert and collusion with

each other in order to unjustly and illegally enrich themselves at the cost of

the plaintiff, inter alia, in the financial years 2014-15, 2015-16, 2016-17

and 2017-18, till June 2017.

ii) The defendant no.5 had illegally and wrongfully issued credit notes

in excess of the entitlement of the defendant no.1 in the financial years

2014-15, 2015-16, 2016-17 and 2017-18, till June 2017 to the extent of 37

Rs.8,00,10,965/-, Rs.12,35,57,149/-, Rs.9,16,05,289/- and

Rs.2,25,49,155/- respectively knowing that the defendant no.1 was not

entitled to the same and the defendant nos. 1 to 4 knowing that the said

defendants were not entitled to the same, took benefit of the same and

made secret profit and illegal gain at the expense of and to the detriment of

the plaintiff.

iii) The defendant no.5 had admittedly received kick backs from the

defendant no.1 and/or the defendant nos.1 to 4 to the extent of 25% of the

value of excess credit notes issued by the said defendant to the defendant

no.1 in the financial years 2014-15, 2015-16, 2016-17 and 2017-18 (till

June 2017) of around Rs.9 crores and thereby made secret profit and illegal

gain at the expense of and to the detriment of the plaintiff.

iv) The defendant nos. 1 to 4 had entered into a conspiracy with the

defendant no.5 to obtain excess credit notes than that to which they were

entitled in the financial years 2014-15, 2015-16, 2016-17 and 2017-18 (till

June 2017).

v) The defendants have actively concealed the fact that excess credit

note was being issued in respect of the account of the defendant no.1 by

the defendant no.5 with full knowledge that the defendant nos. 1 to 4 were

not entitled to the benefit of such credit notes.

vi) The defendant nos. 1 to 5 have cheated the plaintiff so as to obtain

for the defendant no.1 excess credit on account of the sale and purchase of

fertilizers by the defendant no.1 from the plaintiff. The defendant nos. 1 to 38

4 in collusion and conspiracy with the defendant no.5 have illegally

retained for themselves moneys which they were not entitled to by way of

excess credit.

vii) The defendant have connived with each other with an intention to

deceive the plaintiff on account of actual credit, which was to be received

by the defendant no.1 in connection with sale and purchase of fertilizers

from the plaintiff.

viii) The defendants, in collusion and conspiracy with each other, have

caused to be and/or the defendant no.5 has made entries in the digital

accounting records and systems of the plaintiff to suggest that the

defendant no. 1 was entitled to be issued and/or had been validly issued

credit notes for Rs.9,55,46,012/-, Rs.15,66,37,130/-, Rs.12,79,53,767/-

and Rs.2,31,10,546/- for the year 2014-15, 2015-16, 2016-17 and 2017-

18 (till June 2017) respectively.

ix) The defendants have acted in a manner fitted to deceive.

x) The plaintiff has suffered losses and damages due to such conduct

on the part of the defendants in issuing and receiving excess credit notes

than to which they were entitled to and taking the benefit of the same for

the years 2014-15, 2015-16, 2016-17 and 2017-18 (till June 2017)

respectively and thus made suggestions of fact which are not true and not

believed to the true by such defendants and thereby acted to the detriment

to the plaintiff.

39

xi) The defendants have acted in breach of trust and of the obligations

placed upon them.

xii) The defendants have otherwise committed several other acts of

fraud. The plaintiff reserves its right to give further and fuller particulars

of the fraud committed by the defendants upon full discovery being made.

Such acts of fraud have been committed at the office of the plaintiff at

Bishop's House, 51, Chowringhee Road, Kolkata- 700 071, and at the place

of business of the defendant nos. 1 to 4 at 27/1 Armenian Street, Kolkata-

700 001, both within the aforesaid jurisdiction.

54. The plaintiff states that the defendants are jointly and severally

liable to compensate the plaintiff for the entire sum as mentioned in

paragraph 55 hereinbelow. The plaintiff prays for a decree for the aforesaid

sum as against the defendants along with agreed interest thereon at the

rate of 18% per annum. The transaction was a commercial transaction and

the plaintiff has lost the use of such money, which was paid by way of

excess credit to the defendant nos. 1 to 4. The interest at the rate of 18%

per annum is a reasonable rate of interest.

55. The defendants had jointly and severally defrauded the plaintiff in

the sum of Rs.31.77 crores. Upon making adjustments, including of the

repayments made by the defendants, the plaintiff is entitled to a principal

sum of Rs.28,25,48,558/-. By reason of the aforesaid the plaintiff is

entitled to and claims the following sums, as per particulars hereunder: 40

Principal Rs.28,25,48,558/-

Interest at the rate of 18% per Rs.17,10,74,848/- annum on the principal sum till March 05, 2019

Total Rs.45,36,23,406/-

The plaintiff is also entitled to further interest at the rate of 18% per

annum on the above sum till realisation thereof."

In the said suit the plaintiff has prayed for a decree for a sum of

Rs.45,36,23,406/- against the defendants jointly and severally as stated in

paragraph 55 of the plaint along with interest and other consequential reliefs.

Similar averments with the necessary changes have been made in C.S.

51 of 2019 (Tata Chemicals Limited vs. Ashok Kumar Saha & Anr.). The

decree prayed for was for a sum of Rs.3,02,46,742/-. In the aforesaid

background the nature of the claim has to be assessed.

"Damages" as loosely understood connote the sum of money payable by

way of compensation, the issue being the amount of money to be paid as

compensation for the legally recoverable, pecuniary and non-pecuniary

losses. Damage has been frequently used to describe the losses for which

compensation is payable. It is based on the extent of the plaintiff's losses

(pecuniary and non-pecuniary) consequent on his injury and whether such

losses are recoverable at law. It is an award in money for a civil wrong. It is a

pecuniary loss suffered due to wrongful acts and conduct of the parties in

relation to the contract for sale of fertilizers. It is more in the nature of acting 41

in breach of faith and loss suffered due to manipulation of accounts by the

respondents. However, money claim is computed on the basis the amount

paid in excess by issuing credit notes. It represents the differential amount

by way of benefit actually receivable and had been received by way of excess

rebate/discount. If this additional benefit in terms of money is not to which

the dealers are entitled in terms of money it is a price deficit for the goods

sold and delivered. It may not be a clear case for a price of goods sold and

delivered strictu sensu although in effect it would be an amount representing

the differential price required to be paid to a vendor. The vendor would stand

in the position of an unpaid seller if the aforesaid approach is adopted. This

differential amount could be treated as a sum due, a sum for which there is

an existing obligation to pay and which is presently payable. A claim for

unliquidated damages does not give rise to a debt until the liability is

adjudicated and damages assessed by a decree or order of a court or other

adjudicating authority. Where there is a breach of contract, the party who

commits the breach does not eo instanti incur any pecuniary obligation nor

does the party complaining of the breach becomes entitled to a debt due from

the other party. The only right which the party aggrieved by the breach of

contract has is the right to sue for damages [See. Union of India v. Raman

Iron Foundry & Ors., reported at 1974(2) SCC 231: AIR 1974 SC 1265]

In the instant case the amount due can be objectively assessed.

The excess credit notes is the differential amount between the price of

goods receivable and actually received. The amounts are clearly

ascertainable and have been duly quantified by the plaintiff being the 42

aforesaid differential amount. There may be a dispute with regard to the

liability to pay such sum or not at all. This is not a claim on account of

any unliquidated damage. It is not arising out of a breach of contract. This

is in fact a claim of an unpaid vendor for the remaining part of the

consideration amount receivable for the goods sold and supplied. Merely

because a claim of the plaintiff is required to be adjudicated on the basis of

the excess credit notes for determination of amount actually receivable

towards the price of goods sold and delivered it does not become a claim for

unliquidated damages or a claim for an unascertained sum. In view thereof

we are unable to accept the submission made on behalf of the respondent

that the claim is on account of unascertained sum and sounds in damages.

Now we require to consider the prayer for injunction. The learned

Counsel for the appellants has fairly submitted that they did not insist for

attachment before judgment and for the present would be satisfied with an

order of injunction which was passed on 17th July, 2019 and continued

until it was vacated on 16th March, 2021. At the time of admission of the

appeal on April 30, 2021 the earlier interim order was restored and is still

in force.

It is clear from the order dated 17th July, 2019 that the interim order

was passed in favour of the appellant after the parties were extensively

heard on points that are now being urged before us. The documents that

are now relied by the appellants were part of the record of the interlocutory

proceedings. The respondents in the affidavits have not come out with any

material document to contradict the findings arrived by KPMG and later on 43

BDO during forensic audit. Both the reports would show that the

respondents have knowledge of the irregular transactions and they were

consulted before the reports were prepared. The e-mail exchanged between

SKS and the dealers during the period of investigation are not seriously

disputed. In the affidavit all the respondents have the opportunity to deny

the existence and contents of the e-mails exchanged between the parties

during the aforesaid period. SKS had created a separate Id with password

for the aforesaid transactions which clearly go to show that the said

mechanism was consciously adopted to benefit the parties. The acquisition

of assets by SKS during the aforesaid period of time without the source

being disclosed faithfully in the affidavits, is a clear pointer to such

interfere and a strong presumption of unscrupulous dealings. There was

no necessity for the dealers or SKS to admit receiving excess credit

contemporaneously. They were in the know of things. They were not at all

surprised having received the accounts showing excess credit during

reconciliation. The immediate reaction was conciliation and not denial.

Their stand in the affidavit was of confession and avoidance. They cannot

go together. We have repeatedly asked the learned Counsel for the dealers

whether for the earlier periods they had received credits over and above the

maximum cap earmarked for credit or rebates in the price circulars. We did

not receive any satisfactory answer. In fact, the respondents did not

disclose any document to show that prior to 2014 and for the undisputed

period they were receiving excess credit over and above the highest cap

mentioned on accounts of rebates for such period for the goods sold and

delivered. Both the reports have meticulously analysed the price circulars 44

for the aforesaid period and calculated the excess credit extended by SKS

to both the dealers for the aforesaid period. In fact, for the subsequent

period after unearthing the gross irregularities goods were supplied on the

basis of the rebates clearly specifying each of the price circulars on cash

basis. SKS could not offer any explanation for such excess rebate being

offered to the said two dealers. The defence of lack of knowledge of the said

price circulars or determination of the price based on such price circulars

is clearly not acceptable. All the respondents have either volunteer to

furnish securities or admitted to payment of differential amounts in

instalment and in furtherance thereof have either furnished securities or

made some payments until they subsequently retracted their statement. It

is submitted that the confessional statements were unusual, tailor made

and obtained under coercion. We are unable to accept such submission at

this stage since all of them could have contemporaneously lodged criminal

complaints against the officials of TATA for extracting such statement by

force. It is true that both the dealers have filed their written statement with

counter claim but that by itself, in our view, is not a factor for not granting

the order of injunction on a comparative analysis of the relative merits of

the case. On the basis of the materials on record we feel that the plaintiff is

entitled to some protection till the suit is decided. Interlocutory

applications are decided on affidavit evidence. The quality of the claim and

merits of the defence are decided on the material disclosed in the

pleadings. Ordinarily trial on evidence is not followed at the interlocutory

stage.

45

The growth of economic activities in it myriad forms have resulted in

significant changes in the Commercial Law. The commercial transactions

are primarily based on utmost good faith and confidence. It is important

that in a commercial relationship like any other relationship there must be

mutual trust, faith and respect. The evolution of granting credit for goods

supplied was a mercantile practice developed over the years based on such

trust and faith between the sellers and buyers. This was precisely what

has happened in the instant case. The business relationship between the

appellant and its dealers continued for a considerable period of time and

transactions between the parties are admitted and transactions were never

doubted by the appellant until the discovery of benefits of excess

credit/rebate/discounts being passed on to such dealers over and in excess

of price circulars with the active connivance of one of its employees. It is

not unusual for an organisation like TATA to repose complete faith and

confidence on one of its employees in relation to its dealings and

transactions with the buyers and authorising him to pass on such

admissible benefits on the basis of price circulars. Similarly good faith and

trust is reposed on dealers. However, truth has the ugly habit of raising its

head and eventually it raised its head in or around 2016 which led to the

appointment of two auditors in quick succession to verify the dealings and

transactions between the appellant and its two dealers.

At the interlocutory stage the court is not required to hold a mini trial.

An injunction is not a cause of action, like a tort or a breach of

contract but a remedy. "Injunctions are a supplementary remedy, granted 46

to protect the efficacy of court proceedings, domestic or foreign" (Lord

Bingham in Fourie vs. Le Rocex 2007 (1) W.L.R 320: 2007(1) All E.R.

1087).

In Harleen Jairath (supra) a Division Bench of our court had

considered this aspect in some detail. The relevant observations are:

"30. Order 39 deals with temporary injunction and interlocutory orders. Temporary or perpetual injunction is in the nature of preventive relief granted to a litigant quia timet, i.e., because he fears future possible injury. An injunction is a judicial proceeding operating in personam where-under a party is required to do, or refrain from doing, any particular act. It is a remedy in the form of an order of the Court addressed to a particular person that either prohibits him from doing or continuing to do a particular act (prohibitory injunction); or orders him to carry out a certain act (mandatory injunction). (See. Food Corporation of India v. Sukh Deo Prasad reported at (2009) 5 SCC 665: AIR 2009 SC 2330).

31. According to Wade & Forsyth: Administrative Law (2009), injunction is the standard remedy of private law for forbidding the commission of some unlawful act, e.g. a tort or breach of contract. Its sanction is imprisonment or fine for contempt of court, or attachment of property. Historically, it is an equitable remedy, since it derives from the former courts of Chancery, and accordingly it has a discretionary character. Now, even in England, it is statutory. In India, it is statutory in nature.

32. The need for such protection, however, has to be judged against the corresponding need of the defendant to be protected against injury resulting from exercising his own legal rights. The court must weigh one need against another and determine where the balance of convenience lies and may pass an appropriate order in exercise of its discretionary power. (See. Colgate Palmolive (India) Ltd. v. Hindustan Lever Ltd. (1999) 7 SCC 1: AIR 1999 SC 3105).

47

33. The discretion of the Court to grant a temporary injunction is subject to the fulfilment of the following considerations as stated in paragraph 30 in Seema Arshad Zaheer (supra) it is stated:

"30. ...... (i) existence of a prima facie case as pleaded, necessitating protection of plaintiff's rights by issue of a temporary injunction; (ii) when the need for protection of plaintiff's rights is compared with or weighed against the need for protection of defendant's rights or likely infringement of defendant's rights, the balance of convenience tilting in favour of plaintiff; and (iii) clear possibility of irreparable injury being caused to plaintiff if the temporary injunction is not granted. In addition, temporary injunction being an equitable relief, the discretion to grant such relief will be exercised only when the plaintiff's conduct is free from blame and he approaches the court with clean hands."

34. In the leading case of Polini v. Gray reported at (1879) 12 Ch D 438 : 41 LT 143, the principle behind grant of interim relief has been explained succinctly by Cotton, L.J. thus:

"It appears to me on principle that the court ought to possess that jurisdiction, because the principle which underlies all orders for the preservation of property pending litigation is this, that the successful party is to reap the fruits of that litigation, and not obtain merely a barren success."

35. While Order 39 Rule 1(a) and 1(c) refer to the property in dispute, Order 39 Rule 1(b) does not put any such restriction as it uses the phrase "to remove or dispose of his property with a view to divert his creditor." The property contemplated under Order 39 Rule 1(b) may not be the property in dispute in the suit. An injunction can also be granted by the court to restrain a threatened removal or disposal of property with a view to defrauding creditors. If the court is satisfied that the defendant intends to remove or dispose of his property and his intention in doing so is to defraud his creditors, injunction under Rule 1(b) can be granted (Padam Sen v. State of U.P. AIR 1961 SC 218). Such property may be movable or immovable. Unlike clause (a) the applicability of clause (b) is not restricted or limited to the "property in dispute in a suit." Hence, clause (b) can be invoked even if the property is wholly outside the subject matter of the suit. (Albert Judah Judah v. 48

Rampada Gupta, AIR 1959 Cal 715). Only thing is that threat or intention to remove or dispose of property to defraud creditors must be supported by sufficient particulars. (Anand Prasad Agarwalla v. Tarkerhwar Prasad, (2001) 5 SCC 568).

38. There is distinction between the provisions of Order 38, Rule 5 and Order 39, Rule 1(b) in that the former is intended to prevent a decree that may be passed being rendered infructuous while the latter is invoked where the defendant threatens to dispose of his property with a view to defraud creditors.

39. In decision of a Division Bench decision of our Court in Santosh Promoters (supra), the relative scope of both the sections have been lucidly discussed. It is stated:-

"Let us now try to find out the distinction between the provisions under order 39 Rule 1(b) of Civil Procedure code and the provision contained in Order 38 Rule 5 of the Code of Civil Procedure. At the very outset, we like to mention here that that those two provisions operate in different fields altogether. Order 38 Rule 5 of the Civil Procedure Code contemplates post decree consequences. While dealing with such an application, the Court is required to find out first as to whether there is strong possibility of passing a money decree in favour of the plaintiff. If the court is satisfied that there is every possibility of passing a money decree in favour of the plaintiff, then only the court can pass any order of attachment before judgment provided the Court is satisfied that the defendant is either trying to dispose of whole or any of his property or is about to remove the whole or any part of his property from the local limits of the jurisdiction of the Court, with an intent to obstruct or delay the execution of any decree that may be passed against him. Reading the said provision as a whole, we are of the view, that order of attachment before judgment cannot be passed by any Court unless the Court is satisfied about the conditions as mentioned above.

Simultaneously if we consider the provisions contained in Order 39 Rule 1(b), of the Civil Procedure Code we find that while passing an order of injunction, the Court is not required to find out as to whether there is every possibility of passing a decree in favour of the plaintiff in the suit. While considering the application for temporary injunction, the Court is only required to ascertain as to whether a prima facie case has been made out by the plaintiff in the suit. Prima facie case means an arguable case meaning 49

thereby that a reasonable dispute is raised before the Court which the Court is required to resolve ultimately in the suit. A prima facie case is distinguishable from a full-proof case. When the Court finds that a prima facie case is made out by the plaintiff then the Court passes an order of injunction so that the ultimate relief which is claimed by the plaintiff in this suit is not frustrated and the decree which may be passed in the suit will remain unexecutable.

Apart from making out a prima facie, the plaintiff is also required to prove that if the balance of convenience and inconvenience is weighed, that will be in favour of grant of injunction, and if injunction is not granted, the plaintiff will suffer irreparable loss and injury.

Again the order of attachment before judgment will continue even after the suit is decreed in favour of the plaintiff and re- attachment of the attached property in execution is not needed in view of Order 38 Rule 11 & 11A of the Civil Procedure Code. However, the order of attachment before judgment will stand withdrawn on furnishing security by the defendant or with the dismissal of the suit as per the provision contained in Order 38 Rule 9 of the Civil Procedure Code.

Order of temporary injunction is essentially different from the order of attachment before the judgment as it losses its force with the disposal of the suit, be it decreed or dismissed. Its operation cannot be extended beyond the disposal of the suit.

Thus, we hold that the Court's power to grant temporary injunction cannot be treated at par with its power to pass an order of attachment before judgment under Order 38 Rule 5 of the Code of Civil Procedure. Thus, while passing an order of temporary injunction, post decree consequences need not be considered by the Court, but while passing an order of attachment before judgment, the Court has to consider the post decree consequences. As such the standard of proof in case of attachment before judgment is higher then the standard of proof necessary to be discharged in case temporary injunction is sought for." (emphasis supplied)

Section 151 of CPC empowers the court to invoke its inherent

jurisdiction to prevent miscarriage of justice or to prevent abuse of process.

The purpose of Section 151 CPC is to ensure that substantive justice is not

defeated by hyper technicalities. The law courts are required to interpret to 50

the provisions to advance the cause of justice. The interpretation of such

an omnibus provision should not be crippled by a myopic vision as the

provision is intended to embrace all situations not specifically conferred on

the court by the code.

In Padam Sen v. State of U.P., reported in AIR 1961 SC 218 the

Apex Court had observed:

"8. ........The inherent powers of the Court are in addition to the powers specifically conferred on the Court by the Code. They are complementary to those powers and therefore it must be held that the Court is free to exercise them for the puposes mentioned in section 151 of the Code when the exercise of those powers is not in any way in conflict with what has been expressly provided in the Code or against the intentions of the Legislature. It is also well recognized that the inherent power is not to be exercised in a manner which will be contrary to or different from the procedure expressly provided in the Code." (emphasis supplied)

In Manohar Lal Chopra v. Rai Bahadur Rao Raja Seth Hiralal

reported at AIR 1962 SC 527 it was observed that:

"courts have inherent jurisdictions to issue temporary injunctions in circumstances which are not covered by the provisions of Order 39 CPC... It is well settled that the provisions of the Code are not exhaustive, for the simple reason that the legislature is incapable of contemplating all the possible circumstances which may arise in future litigation and consequently for providing the procedure for them ... The court exercises its inherent jurisdiction only when it considers it absolutely necessary for the ends of justice to do so." (emphasis supplied)

In issuing temporary injunctions, the tests to be applied are (i)

whether the plaintiff has a prima facie case, (ii) whether the balance of

convenience is in favour of the plaintiff, and (iii) whether the plaintiff would 51

suffer an irreparable injury if his prayer for temporary injunction is

disallowed.

The interlocutory remedy is intended to preserve in status quo the

rights of parties which may appear on a prima facie case.

The prima facie case at the ad interim stage not in the sense of

convincing the court that on the evidence before it the petitioner is more

likely than not to obtain a final injunction at trial. In American

Cyanamid Co. V. Ethicon Ltd. (1975) A.C. 396 has explained the law in

this regard. It is stated:

"The evidence available to the court at the hearing of the application for an interim injunction is complete. It is given on affidavit and has not been tested by oral cross examination. The purpose sought to be achieved by giving to the court discretion to grant such injunctions would be stultified if the discretion were clogged by a technical rule forbidding its exercise if on that incomplete untested evidence the court evaluated the chances of the claimant's ultimate success in the action at 50 per cent or less, but permitting its exercise if the court evaluated his chances at more that 50 per cent ..... there is no such rule ..... The court no doubt must be satisfied that ..... there is a serious questions to be tried....." (American Cyanamid at 406 G-407G) "If the extent of the uncompensatable disadvantage to each party would not differ widely it may not be improper to take into account in tipping the balance the relative strength of each party's case as revealed by the affidavit evidence adduced on the hearing of the application. This, however, should be done only where it is apparent on the facts disclosed by evidence as to which there is no credible dispute, that the strength of one party's case is disproportionate to that of the other party. The court is not justified in embarking on anything like a trial of the action on conflicting affidavits in order to evaluate the strength of either party's case." (emphasis supplied) [American Cynamid at 409B]

In the passing off case of Gurdina Group v. Associated Newspapers (CA,

20 January 2000, unreported) Robert Walker LJ said that in applying the 52

Americal Cyanamid principles the court may give "proper weight to a clear

view which the court can form at the time of the application for interim relief

(and without the need for a mini-trial or copious affidavit evidence) as to the

likely outcome at trial." (emphasis supplied) (See. Injunctions by David

Bean, Isabel Parry, Andrew Burns)

At the stage of deciding the application for temporary injunction, the

Court is not required to go into the merits of the case in detail. What the

Court has to examine is (i) the plaintiff has a prima facie case to go for trial;

(ii) the protection is necessary from that species of injuries known as

irreparable before his legal right can be established; and (iii) that the

mischief of inconvenience likely to arise from withholding injunction will be

greater than what is likely to arise from granting it. [See Harleen Jairath

(supra)]

There cannot be an absolute proposition that in a money claim no

order of injunction or attachment or receiver could be made. Order 38 to

Order 40 of the Code of Civil Procedure does not restrict the power of the

court to pass any order that a court is empowered to pass just because it is

a money claim. We have already discussed the circumstances when the

court can exercise any of such power.

If there were doubts about exercising power under any of the aforesaid

provisions, it can be safely stated that the court has inherent power to pass

an order of injunction or attachment upon an unimpeachable liquidated

claim being demonstrated and upon it being established that the

respondents are taking steps to improperly deny the realization of the

claim. When a huge sum of money is claimed and the plaintiff prima facie 53

establishes such amount he would be entitled to secure his interest

keeping in view the amount involved in the suit. (See. Rajendran & Ors.

v. Shankar Sundaram & Ors. reported at 2008 (2) SCC 724 (paragraphs

12 and 13) and Sourav Ganguly v. Mahuaa Media Pvt. Ltd. reported at

2015 (4) CHN (Cal) 509 (paragraph 43))

The very basis of an interlocutory relief is establishing a prima facie,

case, balance of convenience and comparative hardship. These are the

three pillars on which the claim for interlocutory reliefs are to be assessed.

The irretrievable damage likely to be caused is another factor which

could scale the balance of the final order that may be passed at the

interlocutory stage.

The plaintiff first has to cross the hurdle of prima facie case before the

other factors are taken into consideration. Undoubtedly, the facts

disclosed in the petition read with the initial admission of the dealers and

SKS and the two detailed reports clearly establish a strong prima facie case.

The confessional statement read with two reports and the acquisition of

properties by SKS holistically viewed lead to an inference of an unholy

nexus amongst the parties to make wrongful gain. It also prima facie

established the claim of the appellant in the nature of an unpaid vendor to

the extent of excess credit and/or unauthorised rebate dehors the price

circulars. The claim is quite substantial. Although there cannot be any

doubt that both the reports are expert opinion and such reports per se are

not admissible in evidence unless proved in accordance with law, for the 54

purpose of the interlocutory proceedings, the court can always look into

such expert opinion to satisfy its conscience about the merits of the claim.

A view on such reports at the interlocutory stage is permissible.

The appellate court will not lightly interfere with the discretion

exercised by the trial court in matters concerning interlocutory reliefs.

Ordinarily a discretion exercised by the trial court ought not to be

interfered with by the appellate court unless it is ex facie perverse,

unreasonable or contrary to law. In other words no reasonable person

conversant with the facts and law on the basis of the materials on record

could have passed such an order. It has to be demonstrably unjust, unfair

and arbitrary. When the interlocutory application was heard before the

another learned single Judge what appears to have impressed the learned

Single Judge was that the claim in the suit is in the nature of

unascertained sum and no order of injunction could be granted to secure a

claim of an unascertained sum. There cannot be any two opinion on the

issue that if there are serious questions to be tried for ascertaining the

amount that has become due and payable or if it is an unascertained sum

the court might be reluctant to pass any order securing such claim.

Ordinarily as a matter of prudence the court does not grant an order of

injunction in a money claim, although in exceptional circumstances such

power may be exercised, if it comes within the purview of order 38 Rule 5

and Order 39 Rule 1 and 2 of the Code of Civil Procedure. The court may

in appropriate cases in exercise of its inherent jurisdiction can pass

injunction at the interlocutory stage if the situation so demands. 55

We may briefly indicate the reasons that are discernible from the

judgment passed by the learned Single Judge on 17th July, 2019 granting

an order of injunction in favour of the appellant.

The Learned Single Judge had considered all the emails exchanged

between SKS and the distributors as the key documents since they lucidly

revealed the modus operandi adopted by the respondents. The discounts

due to distributors, the actual discounts extended to distributors, and the

difference/excess credit paid to distributors are all disclosed in the

interlocutory proceeding. The Single Judge had admonished the omission

of the counsel's reference to the same and decided to consider the emails

while adjudicating the case at the interim stage.

The second set of documents considered to be relevant by the learned

Single Judge was the admissions by Respondent no. 3 dated February 9,

2018, admission of distributor no. 2 dated 19th February, 2018, the

admission of the employee on July 25, 2017 and in the two letters dated

February 8, 2018 and the offer of employee to secure the plaintiff by a

letter handed over on February 12, 2018. It should be noted that the

respondent no. 3's admissions in APO 128 of 2021 were withdrawn by an

email written by the respondent no. 3 on February 14, 2018. The

respondent no. 3 indicated in this letter that the distributor no. 1 was

unaware of the pricing circulars in which the appellant provided the

method of computation or distribution of cash discounts, freights, and

other headings. In a meeting on November 14, 2017, he requested specific

of the extra credits so that he could reconcile them at his end, according to 56

the letter. The letter went on to detail the ad hoc payments of Rs.

1,50,00,000/- paid on various dates, as well as the fact that both of the

February 9, 2018 letters were given under duress and threat by respondent

no. 3. There is no retraction of the acknowledgment made by ASA on

February 19, 2018.

The third set of documents considered by the Learned Judge was the

two reports submitted by KPMG and BDO. The Learned Judge had

carefully examined both reports and concluded that they clearly revealed

and laid bare the respondents' method of operation in the alleged fraud, as

well as quantified the precise amount of extra credit passed on by the

employee to the distributors. Both of these reports were based on

documents recovered from the employee's computer and were categorical in

their conclusion that the appellant had been defrauded of a substantial

amount of money by way of excess credit passed on to the distributors by

the employee through a mechanism of fraud and collusion between the

distributors and the employee.

The Learned Single Judge observed that collusion and fraud

highlighted by the given documents were unimpeachable. These documents

were prima facie relied on by the forensic auditors and It was also observed

that ASA had never retracted his statement from February 19, 2018, but

the employee retracted his admission four months later, after his service

was terminated. It was the observation of the learned Judge that the

employee's retraction was a clear afterthought and hold no water. The

Court was of the opinion that ASA's confessions were withdrawn after five 57

days. However, the Court very pertinently observed that this retraction

does not explain the November 14, 2017 meeting. According to the Learned

Judge it was inconceivable in the commercial world that a dealer who has

been working with the appellant and receiving discounts and rebates for

almost two decades is not aware of the basis of the said discount/s. The

Learned Judge was of the view that fraud had been committed by the

respondent on the petitioner.

The observation of the learned Single Judge in this regard are:

"....The irregular manner in which the respondents have sought to hand over documents before this Court to obfuscate the case of the plaintiff has further strengthened my view. Mr. Jishnu Chowdhury appearing on behalf of the distributor no. 2 handed over a customer ledger for the period of February 1, 2018 to February 28, 2018 of the petitioner company in relation to the distributor no. 2 that showed that the outstanding closing balance was Rs. 25,71,639.62/-. He, however, could not explain the letter issued by the petitioner to the distributor no. 1 on March 27, 2018 (Annexure 'I' of G.A. No. 733 of 2019) wherein the petitioner had clearly indicated the excess credit for the relevant years to the tune of Rs. 2,49,87,636/-. The distributor no. 2 was unable to produce any document that was written in reply to the letter of the petitioner dated March 27, 2018. In relation to the distributor no. 1, Mr. Aniruddha Roy filed a bunch of documents that I have considered in great detail. The emails dated November 27, 2017, January 16, 2018, January 28, 2018 and January 29, 2018 (Annexure 'A', 'B', 'C' and 'D' of the list of documents) only indicates that the distributor no. 1 was seeking more time to reconcile the accounts with the petitioner. These emails only demonstrate different excuses made by the distributor no. 1 explaining his inability to reconcile the accounts. Annexure 'E' in the list of documents contains undated documents wherein the distributor no. 1 has disputed the balance payable by them to the petitioner. These documents being undated and containing no proof that the same were even sent to the petitioner cannot be relied upon by me at this stage. The other documents annexed to the list of documents filed by Aniruddha Roy also do not throw any light on the matter in hand. The documents produced by the respondents clearly bear no substance whatsoever and were easily explained by Mr. S. N. Mookherjee in his reply. In fact on closer examination of these documents, I am of the view that the respondents have made their case far worse. The documents that have been handed over to this Court clearly indicate that the respondents have attempted to muddy the waters and befuddle the Court as these documents do not assist them in any manner. This attempt of the respondents to create a cumulonimbus cloud to confuse this Court was not expected and amounts to a churlish act, to put it euphemistically. The 58

above acts, in my view was nothing but legal boondoggling, if one may use an American expression, and has consequently boomeranged on the respondents.

...In view of the fact that the petitioner has been able to prove a prima facie case of collusion and fraud by the respondents, the conduct of the respondents and the irreparable loss and injury that would be caused to the petitioner, I am of the view that the three tests for grant of ad interim temporary injunction are satisfied in the instant case, and accordingly, distributor no. 1 and distributor no. 2 are restrained from transferring and/or alienating and/or creating any third party interest in the properties mentioned in Annexure 'DD' in G.A. No. 725 of 2019 and Annexure 'R' in G.A. No. 733 of 2019 respectively.

45. In relation to the employee, I find that the employee was bound by the terms and conditions of his appointment letter as also the Tata Code of Conduct (Annexure 'B' of G.A 725 of 2019) that required him to function in a honest and ethical manner. It is to be noted that an employee in a responsible position owes a kind of fiduciary duty to the employer and the employer would have proprietary rights over ill gotten gains of the said employee. Even if one were not to follow the standards as indicated above, an employee would be liable for losses and damages the employer incurs due to the fraud committed by the employee. In the instant case, the admission of the employee on various occasions starting from July, 2016 to February 2018 leave no room for doubt that the employee has committed fraud on the petitioner in this case. His own admission that he received 25 per cent as kickback by way of his letter dated February 8, 2018 speaks volumes and the same is accentuated by the offer by the employee by letter dated February 9, 2018 to secure the petitioner by offering a flat owned by him. In light of the same, I restrain the employee from transferring the property mentioned in Annexure 'M' at page 515 of G.A. 725 of 2019. Keeping in mind the quantum of damages, I further restrain the employee from transferring the shares, mutual funds and fixed deposits lying in his own name. Keeping the balance of convenience and inconvenience in mind, the above ad interim injunction restraining the respondents from transferring the properties as indicated above shall be restricted to the extent of Rs. 10 crores for the distributor no. 1, Rs. 1 crore for the distributor no. 2 and Rs. 1 crore for the employee. In my view, the above amounts are required to be secured in favour of the petitioner by the respondents respectively. The respondents shall be at liberty to file appropriate application to secure the above amounts as indicated above, and upon such security being given, the restraining order against the party concerned may be lifted, subject to satisfaction of this Court. I make it clear that the ad interim orders passed above shall continue till disposal of the interlocutory applications or till passing of any modification order, whichever is earlier." (emphasis supplied)

It is thus clear that the findings are based upon consideration of the

conflicting affidavits and documents and on a prima facie, satisfaction that

the plaintiff has comparative advantage over the defendants. It is on 59

consideration of and evaluation of comparative strength of the parties that the

discretion was exercised in favour of the plaintiff.

The facts are overwhelmingly in favour of the appellant to justify an

interim order that continued for a considerable period of time and again

restored on April 30, 2021.

An unimpeachable claim for money being established the court in our

view is entitled to pass an order of injunction so that the decree passed

ultimately may not be rendered nugatory. It, however, shall depend upon

the facts and circumstances of each case.

Commercial morality has changed over a period of time and various

devices and mechanism are now being adopted to defraud creditors and in

our view the law must be interpreted to protect the interest of a creditor

when there is every likelihood that in the events the claim is not secured

the creditor might suffer irreparable loss and prejudice.

In Raa Projects Ltd. (supra) the application in the nature of

attachment before judgment was disallowed on the ground that it is

preposterous to suggest a high order in the nature of attachment before

judgment can be claimed in support of an unliquidated claim in damages.

The learned Single Judge doubted the form of the claim and was of the view

that the plaintiff had barked up a wrong tree in chasing them. The relevant

facts are stated in paragraph 3 to 5, the said paragraphs are:

"3. It is the plaintiff's case that the plaintiff shipped shrimps on board the vessel M.V. Tiger Creek. The plaintiff has relied on the relevant bill of lading which 60

is signed by the second defendant on behalf of the third defendant. According to the plaintiff, before the goods reached the discharge port of Southampton in the United Kingdom, the plaintiff's buyers declined to accept the goods; whereupon, the plaintiff obtained another contract from a party in Scotland. The plaintiff says that it advised the defendants (the use of the expression 'defendants' is loosely made in the plaint without always specifying the particular defendant involved) to carry the goods to Felixstowe rather than Southampton, without referring to the minor formalities that were required to be complied with upon the bill of lading indicating that the goods were to be discharged in Southampton.

4. The goods reached Southampton. The plaintiff abandoned its earlier demand that the goods be carried to Felixstowe. The plaintiff wanted the goods to be sent back to Calcutta. Correspondence followed between some of the parties and it is the general refrain in the plaint that the plaintiff made demands on the first and second defendants whether for the preservation of the goods or for expeditious steps to be taken for the return of the goods.

5. Finally, the plaintiff relies on a proforma bill of lading allegedly issued by the defendant No. 4. The plaintiff says that notwithstanding such proforma bill of lading, which, according to it, demonstrates a concluded contract, the goods were ultimately destroyed by the authorities in the United Kingdom for which a two-day notice was received from the defendants by the plaintiff. The plaintiff complains that it was due to the acts and conduct of the defendants that the plaintiff lost its goods and not only lost its investment of about Rs. 50,00,000/- but was also slapped with a demand to pay a sum in excess of £ 8,000 as costs of destruction of the goods."

The reason for denying such reliefs are on the facts stated above.

In the instant case, the facts are clearly distinguished.

In Karam Chand Thapar & Bros (supra) the claim was for unliquidated

damages against the appellant on account of alleged inferior goods supplied

by the appellant. The trial court directed furnishing of securities. The appeal

was allowed with the following observations:

61

"It is elementary that a claim in damages is, ordinarily, not secured by an order in the nature of attachment before judgment. A claim in unliquidated damages can scarcely call for an order of attachment. There are good reasons for such legal principle. For an order in the nature of attachment to be obtained, the party seeking such order should demonstrate an almost unimpeachable claim and the likelihood of the claim remaining unsatisfied unless security was furnished at the initial stage.

The allegation in this case is of supply of inferior goods. It has to be assessed whether such allegation would stand and, if so, to what extent. There can be no measure of assessing, at least at the interlocutory stage, the quantum of money that the claimant may be entitled to, if at all. In such circumstances, there is no possibility of any unimpeachable claim being demonstrated for an order in the nature of attachment being earned." (emphasis supplied)

In Jai Balaji Industries Ltd. (supra) the petitioner prayed for an order

in the nature attachment before judgment and contended that the conduct of

the respondent demands that the respondent be restrained from dealing with

or disposing of its only known immovable property in Hyderabad. The

agreement is with regard to fuel handling contract for a captive power plant.

The agreement recorded that the time was essence of the contract and clause

2.11 provided for payment of liquidated damages for delay in delivery. The

petitioner under such clause was entitled to deduct from the contract price a

sum equivalent to 0.5% of the total contract price for each week of delay until

actual performance upto a maximum deduction of 5% of the total contract

price. The right to deduct such amount by way of liquidated damages was

without prejudice to the other remedies to which the petitioner was entitled.

In the respondent's affidavit the basis of the plaint was questioned. The

respondent contended that it was forced to accept the repudiation of the

contract by reason of the conduct of the petitioner, particularly, in the 62

petitioner making delayed payments or refusing to make payment of the

amounts that had fallen due to the respondent.

It was on that backdrop the following observation was made:

"The claim in damages has to be ascertained. Apart from the amount indicated by way of liquidated damages, which may have been a genuine pre-estimate that was recorded by the parties, the rest of the claim has to be assessed. Even the amount claimed by way of liquidated damages, which is less than one per cent of the total claim, may overlap with the other claims, particularly as this is not a case where the work has 4 been completed after a delay but where the work has been abandoned altogether if the petitioner's version is believed; or the contract has been repudiated if the respondent's version is believed.

For a claim which is essentially for an unliquidated amount in damages no order in the nature of attachment before judgment is ordinarily passed. It is not necessary to consider the petitioner's contention that the respondent has not dealt with the statements contained in paragraph 20 of the petition. A strong prima facie case in support of the claim has first to be made out before the respondent's conduct can be gone into or any allegation as to the respondent's impecuniosity can be taken into consideration. Here, the petitioner's claim is for an unliquidated amount in damages which requires to be assessed and ascertained and it cannot be said that a strong prima facie case has been made out. In any event, the respondent has denied in its affidavit that it is in the process of selling any of its assets; that would imply that the respondent has denied that the respondent seeks to sell its office in the immediate future.

A very strong prima facie case is an essential first step to an order in the nature of attachment before judgment. Unless a near unimpeachable claim in money is apparent, there is no need to proceed to the second stage of assessing the conduct or financial capability of the respondent." (emphasis supplied)

In Board of Trustees for the Port of Kolkata (supra) the learned

Single Judge came to a findings that the ports claim is for damages of an 63

unliquidated sum upon the perceived abandonment of the agreement by the

contractor. However, significantly it was observed:

"............ A claim in damages ordinarily does not excite a court to consider a prayer for security or attachment, though there may not be any express law to prohibit an order of such nature. Unlike several other causes of action where a prima facie assessment may be more easily made, a claim in damages is rather more difficult to assess on mere affidavit evidence. The Port has first to establish that it is entitled to damages and then have the quantum thereof ascertained. It is possible that there could come a case where the claimant's entitlement to damages is apparent. The Port's claim in the present case is not of such exalted quality. On the evidence now presented by the parties, it can safely be said that both the Port and the contractor have suffered upon the agreement having been terminated. But the fact that the Port has suffered loss does not imply that it is entitled to recover it from the contractor. If such is the prima facie assessment on the basis of the material now brought by the parties, the Port falls well short of the quality of claim that it has to demonstrate to be entitled to the high order that it seeks. Further, the balance of convenience does not warrant that the contractor's machinery and equipment be either left to rot and wither in value or be directed to be sold in distress." (emphasis supplied)

In the instant case the appellant has not prayed for attachment before

judgment. The aforesaid judgments are to be read contextuary and it cannot

be read as a statute or an Euclid's Theorem. In fact, in the last referred

judgment the learned Single Judge has indicated the circumstances where an

order for security can be allowed. It would depend upon the quality of the

claim and the quality of the defence.

We have elaborately discussed the conduct of the parties and the

relevant facts which in our view justified the restoration of the interim order

as the refusal to pass any such order would cause greater hardship. The

appellant has fulfilled all the cardinal tests for an interim order which now 64

need to be restored and was allowed to continue by the appellate court on 31st

April, 2021.

In a fairly recent judgment the Hon'ble Supreme Court in Rahul S.

Shah v. Jinendra Kumar Gandhi & Ors. reported in 2021(6) SCC 418

quoted with approval the anxiety expressed by the privy council in General

Manager of the Raj Durbhunga v. Coomar Ramaput Sing reported in

1872 SCC Online PC 16 in which it was observed that the actual difficulties

of a litigant in India begin when he has obtained a decree. [See. Paragraph 9

of Rahul S. Shah (supra)] In the same paragraph the Hon'ble Supreme Court

noted similar observation made in Shub Karan Bubna v. Sita Saran Bubna

reported in 2009 (9) SCC 689 where the Hon'ble Supreme Court

recommended that the Law Commission and Parliament should bestow their

attention to provisions that enable seamless successful execution. It was on

consideration of the various provisions of the Code of Civil Procedure and the

likelihood of prejudice and inconvenience that a decree holder may likely to

face certain mandatory directions have been given in paragraph 42 which

reads:

"42. All Courts dealing with suits and execution proceedings shall mandatorily follow the below-mentioned directions:

1. In suits relating to delivery of possession, the court must examine the parties to the suit Under Order X in relation to third party interest and further exercise the power Under Order XI Rule 14 asking parties to disclose and produce documents, upon oath, which are in possession of the parties including declaration pertaining to third party interest in such properties. 65

2. In appropriate cases, where the possession is not in dispute and not a question of fact for adjudication before the Court, the Court may appoint Commissioner to assess the accurate description and status of the property.

3. After examination of parties Under Order X or production of documents Under Order XI or receipt of commission report, the Court must add all necessary or proper parties to the suit, so as to avoid multiplicity of proceedings and also make such joinder of cause of action in the same suit.

4. Under Order XL Rule 1 of Code of Civil Procedure, a Court Receiver can be appointed to monitor the status of the property in question as custodia legis for proper adjudication of the matter.

5. The Court must, before passing the decree, pertaining to delivery of possession of a property ensure that the decree is unambiguous so as to not only contain clear description of the property but also having regard to the status of the property.

6. In a money suit, the Court must invariably resort to Order XXI Rule 11, ensuring immediate execution of decree for payment of money on oral application.

7. In a suit for payment of money, before settlement of issues, the Defendant may be required to disclose his assets on oath, to the extent that he is being made liable in a suit. The Court may further, at any stage, in appropriate cases during the pendency of suit, using powers Under Section 151 Code of Civil Procedure, demand security to ensure satisfaction of any decree. (emphasis supplied)

For the present purpose the observation in paragraph 42.6 and 42.7 are

relevant.

What matters is whether there is sufficient likelihood that a judgment

will be obtained and it will be rendered ineffective unless the court grants an

injunction.

66

The order impugned considered the claim to be an unascertained sum

ignoring the fact that it is claimed towards realisation of amount that in the

ultimate analysis had remained unpaid. The plaintiff has quantified the sum

on the basis of the reports which clearly establish excess rebate/discount

granted to the respondents dealings. The reports are based on primary

documents and data recovered from the computer of SKS. SKS has not

seriously disputed the authenticity of the materials and data recovered from

his computer. The appellant's entitlement to such differential sum is

apparent. It is significant to mention that the dealers as well as employees

had admitted that they are the beneficiary of excess credit. The acquisition of

disproportionate assets by SKS coupled with the admission of the dealers

receiving excess credit in lieu of kickbacks complete the circle of complicity of

all the three persons in engineering a mechanism to make unjust gain. The

dealers received excess credit over and above their entitlement. The

argument on behalf of the dealers that they were not informed of any price

circular at any point of time since the business relationship developed is

extremely difficult to believe, having regard to the fact that none of the dealers

after the accounts are being disclosed had contemporaneously taken any

such plea. They developed this defence after disclosure of the accounts and

the reports. In a quagmire of despondency unsustainable plea of lack of

knowledge of price circulars and inadmissibly of the two reports are now

being raised without making any genuine attempt to clear the cobweb of

transactions and dealings between SKS and the dealers. The said reports

prima facie establish complicity and unholy nexus between them. The

respondent dealer had the opportunity to establish unworthiness of such 67

reports. On the contrary the dealers have admitted to have received excess

credit. This admission read with the other materials on record prima facie

clearly suggest that they were aware of the price circulars. The plaintiff is able

to make out a strong prima facie case.

The argument of Mr. Chowdhury that a dealer is entitled to discount

starting from freight charges to cash discounts and such discounts are

variable also cannot be accepted at this stage for the reason that they were

unable to show that even for the period when the circulars were admittedly in

force they have received credit over and above the maximum cap or the kind

of benefit that they enjoyed during the period in question. We have put

repeated questions to the learned Counsel for the dealers to disclose whether

they had received at any given point of time prior to the period in question

such extra benefits as the present but we did not receive any satisfactory

reply. The learned Single Judge in its order dated 17th July, 2019 also had

taken note of this fact.

Under such circumstances, both the appeals and the applications being

APO. No. 128 of 2021 with IA G.A. No. 1 of 2021 and APO. No. 129 of 2021

with IA G.A. No. 1 of 2021 are allowed.

The interim order passed on July 17, 2019 is restored and the interim

order passed at the time of admission of the appeal on April 30, 2021 is

confirmed. It is needless to mention that the views expressed and observation

made in this judgment shall not influence the learned Single Judge in

deciding the suit on merits and shall not influence the trial. 68

However, there shall be no order as to costs.

I Agree, (Soumen Sen, J.)

(Siddhartha Roy Chowdhury, J.)