' FAISAL ARAB, J.---This High Court Appeal arises from interlocutory order dated 4-7-2011 passed on an application filed under Order XXXIX, rule 1 & 2, C.P.C. In respondent No, l's Suit bearing No,1660 of 2010. The application was allowed and restraining orders were passed against the appellant.
2. Briefly stated the facts of the case are that the appellant is a State run oil marketing company.
The respondent No,1 is appellant's dealer since 1993 and has been purchasing petroleum products from the appellant for his two filling stations located in Hyderabad.
3. The appellant detected an accounting fraud when the credit notes issued-by the Credit Control and Billing Department were scrutinized. In accounting practices where supplier is required to reduce the debit balance of his customer for any reason, he issues credit note. The amount of credit note is then credited to the account of the customer. There can be variety of reasons for issuing credit notes. The supplies that were made to a customer may have been returned back on account of being defective or were not of the required specifications or there could be short supply.
There can also be a case where a supplier may have launched an incentive scheme and the customer has achieved the purchase target which entitles the purchaser for a bonus or trade discount. Thus to adjust the account of the customer or give credit to his account for any similar reason, credit notes are issued which upon entry in the accounts books reduces the amount receivables from a customer or' creates the credit balance in his favour, as the case may be.
4. In the present case it all started when Mr. Muhammad Ali Ashraf, the Deputy General Manager of the Credit Control and Billing department reported to his superiors that two employees of his department i,e, respondent No,2 (Executive CCB) and respondent No,3 (Senior Officer CCB) have issued fake credit notes on the basis of which credit entries were first made in the accounts of large corporate customers like WAPDA, OGDC and NLC and the amounts so credited to their accounts were then in fragmented form transferred to the accounts of seven dealers including respondent No 1. The credit entries that were ,so transferred unduly created credit balances in favour of these seven dealers, which were then utilized to adjust the price of oil supplied to them.
Thus for, the supplies that were so adjusted, the appellant ended up receiving nothing for the reason that credit balances were created in favour of seven dealers not because the appellant truly owed the amount to such dealers but creation of credit balance in their account was the result of a concealed fraud.
5. The detection of this fraud financially affected the appellant only as the credit entries initially made in favour of bulk consumers like WAPDA, OGDC and NLC on the basis of fake credit notes stood reversed when all such credit entries were subsequently transferred to the accounts of seven dealers. Thus the undue benefit created on the basis of fake credit notes initially in favour of appellant's bulk consumers like WAPDA, OGDC and NLC was ultimately transferred to the account of seven dealers which included the account of respondent No 1. This indirect approach in: committing the fraud was adopted in order to camouflage the direct nexus of credit entries made from fake credit notes and make the fraud hard to detect. It was nevertheless detected which led to filing of a complaint with the Federal Investigation Agency (FIA) on 1-4-2010 and as a result thereof F.I.R. No, 05 of 2010 was registered. Apart from initiating criminal proceedings, the appellant also served legal notices on respondent No,1 listing the details of 29 fraudulent supplies that were adjusted against fictitious credit entries made from the fake credit notes and demanded the return of the defrauded amount. The respondent No,1 in his reply to the legal notices denied having committed any such fraud. The respondent No,1 then applied for pre-arrest bail from the trial court, but the same was declined in June 2010. The respondent No,1 then moved bail application before this Court which too was dismissed in August 2010. This led to his arrest. While in jail, the respondent No,1 vide letter dated 17-8-2010 sent a proposal to the appellant, agreeing to pay back the price of supplies that were adjusted on the basis of credit notes. This offer was accepted by the appellant vide its letter dated 24-8-2010. In terms of the compromise, the parties executed settlement agreement in presence of their counsel before the trial court at the time when the respondent No,1 was seeking post arrest bail. The respondent No,1 handed over 57 post-dated cheques to the Appellant on 26-8-2010 and in return obtained appellant's consent for grant of his post-arrest bail.
The respondent No,1 was thus admitted to bail on 4.-9-2010 by the trial Court and released.
6. Not long after his release on bail, the respondent No,1 filed civil suit in this Court on 27-10-2010 from which the present High Court Appeal has arisen. In the suit respondent No,1 claimed that in September, 2009, the respondents Nos. 2 to 4, approached him and narrated the benefits of an incentive scheme said to be launched by the appellant. It is the case of respondent No,1 that respondents No,2 to 4 told him that under the incentive scheme payments for the supplies were to be made through online transfer of funds to a designated bank account (which was of respondent No,4) instead of banking instruments like Demand Draft and in return the respondent No,1 would be entitled to a 10% commission in contrast to prevalent 4% commission. It is further the case of respondent No,1 that he became interested in availing the benefit under the incentive scheme, placed orders for a number of supplies, made online payments in the designated bank account number of respondent No,4 and availed 10% commission. The respondent No,1 then claimed that on 6-12-2009, he was informed that the incentive scheme has run its course and would no longer be available. The respondent No,1 therefore claimed that if any fraud has been committed the same was committed by respondents Nos.2 to 4 and it was only on account of his involvement in criminal case that he was coerced into entering into a compromise and compelled to issue post- dated cheques to the appellant. In the suit the respondent No,1 filed an application (C.M.A. No,11075 of 2010) under Order XXXIX, Rules I & 2, C.P.C. And sought restraint orders against encashment of the post-dated cheques and termination of his dealership contract.
7. The appellant resisted the injunction application on the ground that respondent No,4 in whose personal account online transfers were made by respondent No,1 for the disputed 29 supplies was never an employee of the appellant nor authorized to receive payment on its. Behalf. The appellant also denied the very existence of incentive scheme and stated that its incentive schemes are never launched orally as was claimed by respondent No,1 but are well publicized through publicity tools and no businessm an of ordinary prudence would accept verbal launch of incentive scheme by a State owned enterprise. The appellant maintained that as the respondent No,1 was himself a party to the rip-off therefore when the fraud was eventually unearthed, the appellant took prompt action against respondent No,1 and other dealers. Who were involved in similar fraud, all of whom then agreed to return the amount in instalments by issuing post dated cheques. It is the case of the appellant that other dealers are abiding by the terms of their respective compromise, which in all essential terms are similar to the one that had been entered into with the respondent No,1 but it is the respondent No,1 who intends to wriggle out of his contractual commitment and filed the suit on false and fabricated grounds.
8. In the entire scam, the credit entries made on the basis of fake credit notes were undisputedly shown the source of payments for the 29 disputed supplies and these disputed: supplies undeniably ended up at the filling stations of respondent No,l. Therefore, the only thing which needs to be examined is whether the respondent No,1 succeeded in establishing prima facie case in his favour. The payment for the disputed supplies had to be shown. Whether there was sufficient material on record to accept respondent No, is story of incentive scheme under which payments for the disputed supplies were required to be made through online transfers into the bank account of an individual i,e, respondent No,4. If the respondent No,1 was himself not involved in the whole scam and was trapped by respondents Nos.2 to 4 then it should have immediately occurred to him that why should he be making payment for the purchase of oil in the personal account of an individual and why not directly in the account of the appellant which is a State run establishment?
A businessm an is not that naive to be duped like this It may be mentioned here that for its regular supplies, the respondent No,1 during the disputed period i,e,, froth 8-10-2009 to 5-12-2009 purchased 28 supplies at 4% commission only. Why would respondent No,1 continue to order supplies on normal 4% commission when he could have easily. Availed 10% commission by ordering supplies under the incentive scheme? This leads to the presumption that wherever possible payments for the supplied oil were adjusted against fraudulent credit note entries side by side; with the normal course of making payment, through Demand Draft. This conduct on the contrary provides reasons to believe that respondent No,1 was himself a party to the whole scam which deprived the appellant the price of 29 disputed supplies that were delivered at respondent No,l's two filling stations. Like with any other fraudulent transaction, the risk of criminal prosecution and civil liability A is always there once the footprints of fraudulent transaction are traced to one's door and this exactly what has happened in the present case.
9. The learned single Judge however in the impugned the injunction application filed by respondent No,1 in the suit. One of the reasons which prevailed with the learned Single Judge in allowing injunction application was that had the respondent No,1 been an active participant in the fraud he would not have made online payment in full into the account of respondent No,4 and would have remitted only the share of his alleged cc-conspirators. We disagree with such reasoning. Had the respondent No,1 chosen not to transfer the requisite full payment then he would have himself demolished his own version that payments for the deliveries under the disputed incentive scheme were to be made through online transfers. In such a case he could not have even made out an arguable case that all payments were made through online transfers as required under the incentive scheme. Hence he was left with no option but to demonstrate that the price of disputed supplies were made in full through online transfers. The factum of transfer of full price of disputed supplies cannot in itself establish that respondent No,1 was not an active participant in the fraud. One cannot rule out the involvement of respondent No,1 in the scam merely because he made full on-line payment. Furthermore, online transfer of the price for disputed supplies in the account of an individual i,e,, respondent No,4 does not mean that respondent No,1 was paying the amount from his own financial resources. One can withdraw and redeposit the same amount again and again in order to demonstrate genuineness of a transaction. Thus, online payment in full and that too in the account of an individual, who has no connection with the appellant, was not sufficient to establish prima facie case in favour of the respondent No,
1. The respondent No,1 made online transfers in the name of an individual and not to the appellant. We may point out here that the learned Single Judge in his order has also observed that demand for on line payment in the name of an individual should have alerted the respondent No,1 that something was seriously amiss and we agree with such observation. Had the respondent No,1 not a party to the fraud he should not have agreed to make payments in the personal account of an individual but should have done his due diligence before taking any further step. Why believe in an incentive scheme which was never publicized and required payments belonging to a State-run organization to be made in favour of an individual? Why believe in an incentive scheme, which give exorbitant concession only if supplies are paid through online transfer? The respondent No,1 being a dealer since 1993 is well aware that no payment of a State-run establishment like the appellant is ever to be paid into an individual's account. The appellant has devised a set procedure for placement of orders, delivery and payment of its petroleum products to its customers. The respondent No,1 has himself been making payment to the appellant for regular supplies through bank instruments like Demand Drafts directly to the appellant. We cannot loos'e sight of the fact that under the alleged incentive scheme 29 transactions occurred during the period from 8-10-2009 to 5-12-2009 for which payments were made through online transfers into the account of an individual i,e,' respondent No,4 and during this very period the respondent No,1 made payment for 28 supplies for a 4% commission through banking instruments drawn in the name of the appellant. The questions that also come to our minds are, 2 was the story of incentive scheme, as narrated in the suit by respondent No,1 really believable? To get a 10% commission instead of 4% only because payments for the supplies were required to be remitted through online transfer and that too in the bank account of an individual instead of the appellant directly. Was the offer of a nature that a prudent businessman would blindly accept it or would it leave him baffled? It appears that the whole story of incentive scheme was conceived so that if fraud is detected at any stage, the respondent No,1 can deny his. Involvement. It is also not believable that when a huge benefit in .The form. Of 10% commission is available to a dealer under the so-called incentive scheme, he would still order supplies at the normal 4% commission also?
The answers to all such questions lead to only one presumption i,e, The respondent No,1 was himself a party to the fraud and was in league with rest of the respondents.
10. We also cannot lose sight of the fact that the respondent No,1 after rejection of pre-arrest bail application by the trial Court as well as by this Court saw no other option but to propose to the appellant a settlement vide letter dated 17-8-2010 whereby he agreed to make payment for the disputed supplies in installments. This offer was accepted by the appellant vide its letter dated 24- 8-2010. In terms of the compromise, which was confirmed by the parties before the trial court on 26-8-2010, the respondent No,1 handed over 57 post-dated cheques to the appellant. The Courts are bound to maintain sanctity of contractual commitments. No specific instance of coercion or intimidation is attributed in the plaint to any of the functionaries of the appellant which forced the respondent No,1 to issue post-dated cheques against his wish. In this background it is very difficult to assume that compromise was a result of coercion and not entered into with free consent. When all the above discussed circumstances are taken into consideration in their totality the same prima facie weigh more in favour of Appellant's case rather than the respondent No,
1. The plea of irreparable loss is always subject to making out a prima fade case in order to entitle a person to seek interim injunction in a matter. Unless it is shown that a litigant has a prima facie case, grant of injunction on the plea of irreparable loss would be of no legal significance. In the present case we are left with no other option but to assume that respondent No,1 failed to make out prima facie case in his favour, hence his injunction application was liable to be dismissed.
11. Vide short order dated 02.11.2011 we allowed this Appeal and these are the reasons for the same.
1.2. We may clarify here that adverse observations with regard to respondents' case in this decision are only tentative in nature based on examination of present record. The trial court while deciding the suit shall finally take into consideration the evidence that is to come on record.