Authority: High Court of Judicature at Madras

Order Date: 26-10-2026

Case Overview

  • Plaintiff: Salma Export Import Agency, a partnership firm (Managing Partner Abdul Basith), seeking recovery of Rs5,18,74,602 with 24% p.a. interest from Eastern Chrome Tanning Corporation Private Ltd (first defendant) and its directors (defendants 2‑8).
  • Background: Supplies of leather and leather products were made to the first defendant during FY 2013‑2014, creating an outstanding liability of Rs8,75,71,447 as on 31‑03‑2014.
  • The first defendant issued five cheques (Nos. 863073‑863077) dated 09‑01‑2015 for Rs4,25,00,000; all were dishonoured for “Funds Insufficient” on 10‑01‑2015 and again on 31‑03‑2015 and 07‑04‑2015.
  • Plaintiff served a legal notice on 24‑04‑2015; defendants replied on 14‑05‑2015 denying liability.
  • Criminal proceedings under Section 138 NI Act were initiated, later withdrawn after a Memorandum of Understanding (MoU) dated 09‑11‑2015, wherein defendants acknowledged liability and agreed to settle, including authorising sale of a Bangalore flat.
  • Partial payments received: Rs2,31,96,000 (bank transfer on 05‑04‑2016), Rs25,00,008 (discounted LC on 22‑04‑2016), Rs25,00,670 (discounted LC on 01‑07‑2016), totalling Rs2,81,96,678. An earlier payment of Rs75,00,000 was also cited, making aggregate receipts Rs3,56,96,678.
  • Despite these receipts, plaintiff claimed Rs5,18,74,602 remained outstanding as of 01‑07‑2016.
  • The suit was filed on 10‑06‑2019, invoking Section IV Rules 1‑2 of O.S. Rules and Section VII Rules 1‑2 of CPC, seeking joint and several liability and costs.
  • Defendants raised several defenses: limitation (claim barred as three‑year period expired on 09‑11‑2018), lack of personal liability, denial of MoU execution by individual directors, and that the corporate veil should not be lifted.
  • Defendant 4 (Kandrikar Ameenur Rahman) died on 06‑05‑2021; Mohammed Akmal was impleaded as legal representative (defendant 8) on 06‑07‑2021.
  • The Court framed four issues: (i) limitation, (ii) misjoinder of parties, (iii) entitlement to recovery and joint‑several liability, (iv) other reliefs.
  • Evidence presented included plaintiff’s witnesses (P.W.1 A.B. Mouinuddin) and documents Ex.P1‑Ex.P5, and defendant’s witness (D.W.1 Hafeezur Rahman) and documents Ex.D1‑Ex.D3.
  • The plaintiff argued the last payment on 01‑07‑2016 satisfied Section 19 of the Limitation Act, resetting the limitation period; the defendants contested the existence and attribution of that payment.
  • The Court examined the ledger entry for Rs25,00,670 (Union Bank of India A/c No.31047) and found no independent proof that the payment was made by the defendants or their authorised agent.
  • The Court noted that the plaintiff had not produced the letter of credit, discounting advice, or bank statements to substantiate the claim.
  • Earlier applications for summary judgment on limitation (Nos. 617 and 131 of 2020) were dismissed on 17‑02‑2020, but the Court held that the limitation issue remained open for trial.

Final Outcome

  • The Court held that the plaintiff failed to prove a qualifying payment on 01‑07‑2016; consequently, the suit filed on 10‑06‑2019 is barred by limitation.
  • The Court found no basis to lift the corporate veil; no personal liability of directors 2‑8 was established.
  • The suit is dismissed with costs; no decree for Rs5,18,74,602 or interest is granted.

Topics: Limitation, Corporate Veil, Civil Suit