Recovery Suit Fails as Seller Could Not Prove Outstanding Dues Despite Proving Supply

Seller Omitted Later Payments From Account Statement; Delhi High Court Rejects ₹7.68 Lakh Recovery Claim

Facts

Jagdish Singh Dawar, proprietor of M/s Indersons, was engaged in trading electrical goods. He claimed that he supplied electrical materials to Mohammad Laik, proprietor of M/s Power Tech Electricals, through various invoices issued between January and May 2011.

According to the plaintiff’s statement of account, ₹7,68,227 remained unpaid against the goods supplied.

The defendant had earlier issued a cheque of ₹1,50,000 towards his alleged liability. The cheque was dishonoured, following which the plaintiff issued a legal notice and initiated proceedings under Section 138 of the Negotiable Instruments Act, 1881.

The defendant claimed that the dispute arising from the cheque case was subsequently settled. Under that settlement, he paid ₹1,65,000 through three cheques of ₹65,000, ₹50,000 and ₹50,000, all of which were encashed by the plaintiff.

The plaintiff nevertheless filed a civil suit seeking recovery of ₹7,68,227 with interest at 18% per annum.

The Additional District Judge dismissed the suit. It held that the plaintiff had failed to prove that the invoices were accepted by the defendant or that the claimed amount remained outstanding.

Jagdish Singh Dawar challenged that dismissal before the Delhi High Court. During the appeal, he died and was represented by his legal heirs.

Issues

1. Whether the plaintiff proved that electrical goods were supplied to and received by the defendant.
2. Whether the invoices and delivery challans were sufficiently proved in the civil proceedings.
3. Whether the statement of account established that ₹7,68,227 remained due.
4. Whether the plaintiff was required to produce an updated statement of account reflecting all later payments.
5. Whether the ₹1,65,000 paid after settlement of the cheque dishonour case represented full and final settlement or only partial payment.
6. Whether entries in a party’s own books of account could, without independent corroboration, establish the outstanding liability.
7. Whether the defendant’s failure to produce his own books of account entitled the plaintiff to a recovery decree.
8. Whether the Trial Court correctly dismissed the recovery suit.

Petitioner’s Arguments

The appellant-plaintiff argued that the Trial Court had wrongly rejected his claim despite documentary and oral evidence proving the transactions.

He submitted that:

• The invoices and delivery challans established the supply of electrical goods.
• The defendant had admitted purchasing and receiving goods from the plaintiff.
• Once delivery was admitted, no further independent acknowledgment on each invoice or challan was required.
• The defendant did not specifically deny the statement of account or challenge its authenticity.
• The written statement contained only general and evasive denials, contrary to Order VIII Rule 3 CPC.
• The defendant failed to produce bank statements, books of account or other records proving payment of the full outstanding amount.
• The Trial Court had itself found that the defendant failed to establish that ₹1,65,000 was paid in full and final settlement.
• After rejecting the defendant’s settlement defence, the Trial Court should have decreed the recovery suit.
• The statement of account showed a deficit of ₹7,68,227 and was supported by the invoices and evidence of the plaintiff, his son and the firm’s finance manager.

The appellant therefore sought reversal of the Trial Court’s judgment and a decree for the claimed amount with interest.

Respondent’s Arguments

The defendant argued that no amount remained outstanding.

He contended that:

• All payments towards the goods supplied had already been made.
• The recovery suit was filed merely to extract additional money.
• The dispute relating to the dishonoured cheque had been amicably settled.
• Under that settlement, ₹1,65,000 was paid through three cheques and encashed by the plaintiff.
• The Section 138 proceedings were withdrawn after the settlement.
• The plaintiff’s statement of account was incomplete and did not reflect payments made after the period covered by it.
• A payment of ₹40,000 made through RTGS was also not reflected in the plaintiff’s account.
• The plaintiff failed to establish through complete and reliable records that ₹7,68,227 remained due after adjusting all payments.

Analysis of the Law

Standard of Proof in a Civil Recovery Suit

The High Court observed that civil disputes are decided on the standard of preponderance of probabilities.

The plaintiff was not required to prove the transactions beyond reasonable doubt. If the invoices, delivery challans, oral evidence and conduct of the parties collectively made the supply of goods more probable than not, the transactions could be treated as proved.

The Court disagreed with the Trial Court’s conclusion that delivery had not been proved merely because the delivery challans did not bear the defendant’s acknowledgment.

The defendant had never clearly pleaded that the goods were not supplied or delivered. His defence was that the dues had already been paid. This implied acknowledgment of the underlying supply transactions.

The invoices and challans were also proved through the plaintiff and his witnesses and were not effectively challenged in cross-examination.

Plaintiff Must Prove the Outstanding Balance

Although the Court accepted that the supply of goods had been proved, it held that this did not automatically establish the exact outstanding amount.

The decisive question was not merely whether goods had been supplied, but whether ₹7,68,227 still remained unpaid after accounting for every payment made by the defendant.

The burden of proving the amount claimed remained upon the plaintiff.

Incomplete Statement of Account

The plaintiff relied upon a statement of account reflecting bill-wise transactions and an outstanding amount of ₹7,68,227.10.

However, the Court found that the statement did not present a complete picture.

The defendant asserted that:

• His last payment was made in January 2013;
• A payment of ₹40,000 was made through RTGS; and
• Three settlement cheques totalling ₹1,65,000 were issued in February and March 2013.

These later payments were not reflected in the plaintiff’s statement of account.

The Court noted that although the statement was described as covering transactions up to 30 June 2012, it did not incorporate or reconcile payments admittedly received in 2013.

The plaintiff should therefore have produced an updated account showing:

• The original invoices;
• Every payment received;
• The adjustment of the ₹1,65,000 settlement amount;
• Any RTGS payments; and
• The final balance, if any.

Entries in Books of Account Are Not Sufficient by Themselves

The Court applied Section 34 of the Indian Evidence Act, 1872.

Entries in regularly maintained books of account are relevant, but they cannot alone impose liability upon a person. They must be supported by independent or corroborative evidence.

Accordingly, even though the plaintiff’s statement of account was relevant, it could not conclusively prove the claimed balance when later admitted payments were omitted.

Plaintiff Must Succeed on the Strength of His Own Case

The Court rejected the argument that the plaintiff should succeed because the defendant did not produce his own accounts.

The burden remained on the plaintiff to prove the exact amount due.

Weakness in the defendant’s evidence or failure to produce his books did not relieve the plaintiff of the obligation to produce a complete and reliable account.

Effect of Settlement in the Cheque Case

The Court noted that the cheque dishonour complaint was settled after payment of ₹1,65,000.

However, the plaintiff’s legal notices and evidence did not clearly state that this amount was received only as part payment while a much larger balance continued to remain due.

There was also no settlement document or contemporaneous record showing that the civil claim for ₹7,68,227 survived independently after the cheque case was closed.

This absence weakened the plaintiff’s assertion that a substantial balance remained recoverable.

Precedent Analysis

Chandradhar Goswami v. Gauhati Bank Ltd., 1966 SCC OnLine SC 255

The Supreme Court held that a person cannot be made liable solely on the basis of entries in books of account maintained by the claimant.

Under Section 34 of the Evidence Act, such entries are relevant but require independent corroboration.

The Delhi High Court relied upon this principle because the plaintiff’s statement of account was incomplete and did not reflect all subsequent payments.

Harish Mansukhani v. Ashok Jain, 2009 (109) DRJ 126 (DB)

The Delhi High Court held that merely raising invoices and recording them in a statement of account is insufficient unless the plaintiff also establishes the underlying transactions and delivery.

The judgment further clarified that a plaintiff must prove his own case and cannot succeed merely because the defendant did not produce his books of account.

In the present case, the Court distinguished the delivery aspect to some extent because supply had not been genuinely denied. However, it applied the principle that the plaintiff must independently prove the outstanding liability.

Devender Bhati v. Chander Kanta, 2015 SCC OnLine Del 14224

The Trial Court had relied upon this decision while considering the evidentiary value of invoices and proof of transactions.

The High Court accepted the broader requirement that a civil recovery claim must be supported by credible evidence rather than uncorroborated internal records.

Court’s Reasoning

The High Court found that the Trial Court had gone too far in concluding that the plaintiff failed to prove the supply of goods.

The defendant’s own case was that payment had been made for the goods. He did not seriously dispute the invoices, delivery challans or the fact that commercial transactions had taken place.

The testimony of the plaintiff, his son and the finance manager also remained substantially unchallenged regarding the supply.

However, proving supply was only one part of the plaintiff’s case.

To obtain a money decree, the plaintiff also had to prove the exact unpaid balance. On this point, the evidence was deficient.

The plaintiff relied upon a statement of account that did not include later admitted payments. In particular:

• The three cheques totalling ₹1,65,000 were not reflected.
• The alleged ₹40,000 RTGS payment was not reconciled.
• No updated account was filed after settlement of the cheque case.
• The plaintiff did not explain how the settlement payments were appropriated.
• There was no clear contemporaneous assertion that the ₹1,65,000 settlement was only a part payment.

The Court therefore held that the statement of account was incomplete and could not reliably establish that ₹7,68,227 remained due.

Since the plaintiff failed to prove the precise outstanding liability, the dismissal of the suit was ultimately justified, even though the Trial Court’s reasoning concerning proof of delivery was not entirely correct.

Conclusion

The Delhi High Court dismissed the appeal and upheld the dismissal of the recovery suit.

It held that:

• The plaintiff had sufficiently established the supply and delivery of electrical goods.
• The Trial Court was not justified in rejecting the invoices merely because the delivery challans lacked the defendant’s acknowledgment.
• Nevertheless, the plaintiff failed to prove that ₹7,68,227 remained outstanding.
• The statement of account was incomplete because it did not reflect admitted later payments.
• Entries in the plaintiff’s own accounts could not, without complete and corroborative evidence, establish liability.
• The settlement of the cheque case and payment of ₹1,65,000 were not properly reconciled.
• The defendant’s failure to produce his own books of account could not cure defects in the plaintiff’s case.

The appeal and pending applications were accordingly dismissed.

Case Details

Case: Jagdish Singh Dawar (Deceased) Through Legal Representatives v. Mohammad Laik
Court: High Court of Delhi at New Delhi
Case Number: RFA 117/2020
Judge: Hon’ble Ms. Justice Neena Bansal Krishna
Date: 29 June 2026
Result: Appeal dismissed; Trial Court’s dismissal of the ₹7,68,227 recovery suit upheld because the plaintiff failed to prove the exact outstanding balance through a complete and updated statement of account.

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