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M/S Star Paper Mills Limited v. M/S Beharilal Madanlal Jaipuria Ltd.

Civil Appeal · 2021 INSC 902Decided 16 Dec 2021
Civil Appeal No. 4102 of 2013
Justice Hemant Gupta · Justice V. Ramasubramanian

Background

Star Paper Mills, a paper manufacturer, sued its Delhi wholesale dealer for recovery of over Rs. 96 lakh for paper supplied on credit between late 1985 and early 1986, which the dealer failed to pay. The trial court decreed the suit in the manufacturer's favour, but the Delhi High Court's Division Bench reversed this in an intra-court appeal, holding that the manufacturer had failed to prove it was a registered dealer in Delhi and branding the transactions as fictitious. The manufacturer appealed to the Supreme Court.

Decision Breakdown

The Supreme Court held that the High Court's Division Bench had gravely erred, since the dealer-defendant had never disputed the manufacturer's dealer registration in its written statement, and had in fact admitted its own signatures on invoices, debit notes and sales-tax (ST-1) forms proving receipt of the goods. The defence of "duress" in signing hundreds of documents over three months was found wholly unbelievable and unsupported by any contemporaneous complaint. The Court restored the trial court's view that the onus to prove transactions were fraudulent lay on the party alleging fraud (the dealer), which it failed to discharge, and accordingly set aside the High Court's order, decreeing the suit for recovery with interest.

Lesson Learnt

A party who signs invoices, delivery documents and statutory tax forms in the ordinary course of business cannot later disown the underlying transaction merely by alleging "duress," without any contemporaneous complaint or supporting evidence: courts place the burden of proving fraud on whoever alleges it.

Official source (sci.gov.in)View Judgment (PDF)

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