On February 7, 2019, the Hon’ble High Court at Calcutta passed a judgment in the matter of J.K. Engineering Pvt. Ltd. v. ANE Industries Pvt. Ltd. (G.A. 2522 of 2016 in C.S. 213 of 2016).

Issue

Can an application under Order XII Rule 6 of the Code of Civil Procedure, 1908 (‘CPC’) be decided on the basis of purported admissions contained in TDS Certificates and Forms 26AS?

Facts in brief

This was an application by the plaintiff/petitioner under Order XII Rule 6 of the CPC, praying for judgment on purported admissions of liability by the defendant. The plaintiff and the defendant had entered into a Memorandum of Understanding (‘MOU’) for removal of shale at Tirap Colliery. The MOU contemplated a back to back arrangement between the plaintiff and the defendant, whereby the defendant would subcontract the work of removal of shale to the plaintiff and upon the defendant obtaining payment from the principal employer, make payment to the plaintiff after keeping a margin of 12.5%.

The dispute in the instant application was regarding the rate agreed to be retained by the defendant before making payments to the plaintiff. The defendant relied on the rate as mentioned in the MOU, i.e. 12.5% while the plaintiff claimed that in the transactions subsequent to the MOU, the rate retained has continuously been 5%. The plaintiff relied upon its TDS Certificates and Forms 26AS, besides certain Working Notes and emails, to claim that the same would show that a rate of 5% had been kept by the defendant as commission. The plaintiff thus prayed for final judgment and decree for a sum of Rs. 13,64,26,682/- on the basis of such purported admissions by the defendant.

Judgement

The Learned Judge noted that in several judgments such as S.P. Brothers v. Biren Ramesh Kakadia, (2009) 1 BomCR 453 and Utility Powertech Ltd. v. Amit Traders, (2018) SCCOnline Del 9606, it has been held that a TDS Certificate is primarily to acknowledge the deduction of tax at source and does not refer to any amount of loan or interest payable on the principal amount. Therefore, TDS does not constitute an admission of liability inasmuch as TDS can be deducted even on the expectation of estimated liability. Further, the Hon’ble Bombay High Court in ACTAL v. India Infoline Ltd., MANU/MH/1768/2012 and the Hon’ble Andhra Pradesh High Court in Electro Flame Ltd. v. Mittal Founder Pvt. Ltd., AIR 1998 AP 203 held that tax declaration certificates are only an admission of a jural relationship between the debtor and the creditor, which is not the same as acknowledgment of liability of specific amount outstanding to the alleged creditor, unless the books of accounts of the alleged debtor reflects the debt.

Therefore, the Learned Judge held that the TDS certificates relied upon by the plaintiff cannot be held to be an admission of the defendant’s liability and an order under Order XII Rule 6 of the CPC cannot be passed basis the same, as the standards of proof of liability under such provision is very high and any admission in that regard must be categorical [as observed by the Hon’ble Supreme Court in Himani Alloys Ltd. v. Tata Steel Ltd., (2011) 15 SCC 273)]. However, the Learned Judge further held that the Working Notes relied upon by the plaintiff did contain clear admissions by the defendant to the extent of certain invoices, being invoice series 32-39, and decree was passed in favour of the plaintiff to the limited extent of such invoices. The application was thus partly allowed.