Adjustment of Security Deposit and Commission Obligatory Before Calculating Final Liability in Consignee Agency Disputes

The Appellant was appointed as a consignee agent for the Respondent in September 2011 to distribute pharmaceutical goods in Rajasthan

The Respondent alleged that the Appellant failed to remit sale proceeds for goods supplied against various invoices and Form-F

Consequently, the Respondent terminated the agency on 31.03.2014 and filed a recovery suit claiming a principal balance of Rs. 8,35,928.24 plus interest

Before the Trial Court, the Appellant failed to file a written statement or cross-examine witnesses (PW-1 and PW-2), leading the District Judge to decree the suit in full on 16.02.2023

The Appellant challenged the decree on grounds of territorial jurisdiction and professional misconduct by his previous counsel

1. Whether the Delhi High Court had territorial jurisdiction to entertain the suit given that the agency operated in Rajasthan

2. Whether the negligence of the Appellant’s counsel in failing to file a defense or lead evidence warrants setting aside the decree

3. Whether the Trial Court erred in calculating the outstanding liability by failing to account for adjustments previously admitted by the Respondent

The court applied Section 96 of the Code of Civil Procedure, 1908 (‘CPC’) regarding the right to appeal from original decrees

On territorial jurisdiction, the court followed the principle that a suit may be filed where the cause of action arises in part; since invoices were issued from Delhi and goods dispatched via Delhi, jurisdiction was established

Regarding the negligence of counsel, the court emphasized the duty of a litigant to be vigilant and ensure representation

For the quantification of the debt, the court applied the principle of judicial admissions and the requirement for plaintiffs to prove the exact quantum of liability based on their own prior correspondences

The court rejected the jurisdictional challenge because the Stock Transfer Notes and invoices (Ex.PW-1/3) originated from the Respondent's Shahpurjat, Delhi office, proving that part of the cause of action arose in Delhi

Regarding the counsel's misconduct, the court noted that the Appellant was aware of the proceedings as he had signed affidavits that were never filed; thus, he could not shift the entire burden of vigilance onto his advocate

A letter dated 12.11.2013 from the Respondent admitted that Rs. 3,67,037/- was liable to be adjusted against the Appellant’s dues for security deposits and commissions. The court held that the Respondent could not ignore its own previous admission of adjustment while filing a suit based on a ledger balance

The court partly allowed the appeal. The decree amount was reduced from Rs. 8,35,928.24 to Rs. 4,68,891.24 after applying the admitted adjustments of Rs. 3,67,037/-. Furthermore, the interest rate was reduced from 18% to 12% per annum, effective from 01.04.2014 until the date of payment