The High Court · 2025

1. J\tlr. Rayadu srinivasa Rao, Director, M/s. lndo lnfotech Ltd., Residinq at No. I - B, Aeroview.lp?{ry'en!s, Shanlal Buitding, ee,gumpet,-HyO-eraOaO rj)presented. by GpA Holder sri K. Bharatveer 5/o. taie sri k. dee-tnaian G^upta,^aged.about 52.years, Occ: Business, R/o. 409, VUaVJ foweL,-ib-Z_ 28711, Shanti Nagar, Hyderabad. SBH Colony, Srinagar Colony post, Hyderabad.

2. Smt. Bharathi Jaladanki, .Director, M/s. rndo rnfotech Ltd., Rl/o. prot No. 33, 3. [t{r. llrry_an3g,ari Rakesh Reddy, Director, M/s. lndo tnfotech Ltd., R/o. ptot 4. Mr..Gurredd.y Nallamilli, Director, M/s. lndo lnfotech Ltd, R/o. H.No. 5_4_585, No. 18/35, Officers Colony, Raniakrishnapuram, SecunderaUiO.- - ' -- ' 2nd Floor, Nampally, Hyderabad. .. Respondenis/ Gi.nOints Petition under section 1s1 cpc praying that in the cirr;umstances stated in the affidavit-filed in support of the petition, ine Hign court may oe preiset to vacate the Ad-lnterim order of stay dated o2-B-ro,to passed by this Hon'ble court in cccAMp.No. 77 oI 201o in cccA.No. 64 of ioog oy irsmissin! tne petition in cccA.MP.No. 7z of 20'10 in cccA.No. 64 of 2oo9 titeo bi the petitioners to meet the ends of justice and equity. Counsel for the Appellants in CCCA : SRl. S. RAVI Counsel for the Respondent in CCGA : SRI K. RAGHAVA CHARYULU The Court delivered the following Judgment : THE HON'BLE SRI JUSTICE ABHINAND KUMAR SHAVILI AND THE HON'BLE SMT. JUSTICE TIRUMALA DEVI EADA CITY CIVIL COURT APPEAL No.64 OF 2OO9 .IUDGMENT: (Per Hon'ble Snrf. Justice Tirunala Deui Eada) This is an appeal liled by the appellants being aggrieved by the judgment and decree, dated 13.11.2OO8, passed in O.S.No.36 of 2OO4 by the learned III Additional Chief Judge, City Civil Court at l{yderabad (for short "the trial Court").

2. The appellants herein are the defendants and the respondent herein is the ptaintifl before the trial Court and the parties herein are referred to as they were arrayed rn the suit before the trial Court for the sake of convenience and clarity.

3. The brief facts of the case before the trial Court are that the plaintiff is the business organization engaged in designing, developing, selling, licencing and marketing various software systems for Vibro-accoustic CAE and Optimization and related documentation and also in the business of developing, selling and marketing the related consulting and customized development services. The lst defendant company is registered under the Companies Act and defendants No.2 to 5 are its Directors on Board during the relevant period. The l"t defendant company 2 AKS,J & ETD,J CCCA No.64-2009 desired to obtain the right to sub-license the softwarc products of the plaintiff and to market the consulting and customized development services of the plaintiff in the Indian rnarket and therefore, the 1"t defendant company approached tl'r,: plaintiff as distributor and the plaintiff appointed the 1"t defenci:rnt company as its distributor vide agreement dated 01.06.1997. During the course of business, the l"t defendant placed vari<>us purchase orders and the plaintiff supplied them accordingll,' and the said relationship continued for a considerable period ol time, after which the lst defendant was terminated from the distributorship as it committed certain violations to the agreed terms and conditions. The plaintiff has not received the price ol the softr.r,are products supplied to the 1"t defendant company under various invoices as mentioned in the plaint. Thus, the lst defendant has fallen due to pay the suit amount. Inspite of sevr'ral demands made by the plaintiff, the lst defendant has not paid the amount. Finally, the plaintiff got issued a notice dated 0s.04. 2oo2 and the 1"t defendant company instead of making the paS.ments has replied on 09.o4.2oo2. Thus, the present suit is file,l claiming an amount of Rs.2, 1 1,86,590/- with interest at l8oh.

4. The lst defendant has filed written statemenl- denying the averments of the plaint and has contended that the defendants 2 3 AKS,J & ETD,J CCCA No.64 2009 to 5 are only the representatives of the lst defendant company and that they have no personal liability. They admitted that lst defendant is the distributor of plaintiff in India through an agreement dated 01.06.1997 and the defendant never violated the agreed terms and conditions of the agreement. Therefore, there is no cause of action to file the suit.

5. Defendant Nos.2 to 5 remained ex parte but the record shows that the 3.d defendant was permitted to participate in the trial without filing any written statement.

6. Based on the above pleadings, the trial Court has framed the following issues: " 1) Whether defendants 2 to 5 have no liability personally to the acts of the 1st defendant- company? If so, whether it is a lit case to lift corporate veil of the 1st defendant-company? 2) 3) 4l s) 6) Whether the 1st defendant violated terms of agreement dated 01-06- 1997? Whether the suit instituted on 15. L2.2OO3 is not within time? Whether as per the agreement, the Courts of Leuvan alone has jurisdiction to try the suit? Whether the plaintiff is entitled to suit claim? To what relieP" 4 AKS,J & ETD,J CCCA No.64 2009 7 . At the time of trial, the plaintiff got examine,l pW 1 and got marked Exs.Al to A46. On behalf of the defenclants, DW1 got examined and Ex.Bl was marked.

8. Basecl on the evidence on record, the trial Court has decreed the suit Aggrieved by the said judgment and decree, the present appeal is filed by the defendants.

9. Hear<l the submission of Sri S.Ravi, learned c<>unsel for thc appellants and Sri K.Raghava charyulu, learned ,lounsel for L]re respondent. 1o. The learned appellants counsel has submittr:d that thc trial court ought to have held that the plaintiff has failed to prove its case and tl-rat the defendants No.2 to 5 are not pt:rsonally liable. They further contended that the suit claim is barr,:d by limitarion and that the trial Court faited to appreciate the same. He further argued that the concept of corporate veil can be pir:rced only 'uvhen it is proverl that a corporate entity is abused for an unjust and inequitable purpose but the averments of the plainl- do not make out any case for lifting the corporate veil and no evidence rn,as adduced by the plaintiff but still the trial court has decreed the suit against defendant Nos.1 to 5, which is betd in rau,. He therefore, prayed to dismiss the suit by allowing this appeal a 5 AKS,J & ETD,J CCCA No.64_2009 1 1. The learned respondent counser has submitted that the trial court has appreciated the evidence on record and thus, decreed the suit and hence, prayed to uphold the same"

12. Based on the above rival submissions, this court frames the following points for consideration: 1 2) 3) whether the plaintiff is entitled to recover the suit amount from the defendants? If so, from which of the defendants? whether the judgment and decree of the trial court are sustainable in law and under the facts? To what reliep

13. POINT NO.I.: a) The plaintiffs case is that the lst defendant used to market the tonsulting and customized development services, of the plaintiff in the Indian Market and the lsr defendant is the distributor of the software developed by the praintiff, but the lst defendant failed to repay the amount for the software services extended by the ptaintiff, while the contention of the defendant is that the lst defendant has never violated any terms and that it is not liabre to pay any amount to the praintiff. Admittedly, the defendant No.1 is a distributor to the plaintiff company for various software systems and they have entered into an agreement and 6 AKS,J & ETD,J CCCA No.64-2009 accordingtotheplaintiff,itsuppliedsoftwaretol.tdefendant under invoices tiled in Exs'A3 to A14' b)Aperusalofthesaidexhibitsrevealsthatthelzareinvoices andorderformsandtheyclearlydisclosethatthey.arebilledto Indo-Infotech,inpursuanceofitspurchaseorde:'placedwith LMC. Thus, it reveals that the Indo Infotech plact:d a purchase orderandinpursuanceofwhichanorderformwasplacedanda billisissuedtolndoinfotechandtheend,usersnameisalso printedontherightsidecolumninthesaidinvoicesandtheprice under each bill is also displayed' Therefore' through these exhibitsthcplaintiffcouldplaceitonrecordtlratitsupplied certainsoftwareservicestothelstdefendantandthelst defendantinturnwassellingittotheendusers.Severalemails weresenttothelstdefendantunderExs.A2gtoA3landthel.t defendant is disputing these invoices and emails' c)PWldeposedaboutthesaidfactofinvoicesraisedbythelst defendantandnothingmaterialcouldbeeliciteclduringhiscross examinationtodisprovethesaidinvoices.F;x,t\2isthecopyof account-extract.Thecontentionofthedefenclantsisthatthe emails attained the colour of secondary evidence and thus' the said emails are not proved but it is borne out l>y record that the plaintiffafterobtainingordersoftheCourttoaclducesecondary 7 AKS,J & ETD,J CCCA No.64 2009 evidence with regard to emails they have filed the same, as the originals are not available with the plaintiff. Even if keeping these emails aside, the invoices under Exs.A3 to A14 prove that the lst defendant is the distributor and it has placed orders to the plaintiff and received supplies accordingly. d) DW1 in his cross examination has admitted the said transactions of receiving software from the plaintiff company and also about the non-payment of amount for the same. e) Exs.A32 and A33 are addressed by defendant No.l to the plaintiff company with a request for renewal of license to Sysnoise Software supplied to DMDE and there is also a reference to the purchase order. Ex.A4O is the legal notice issued by the defendant to plaintiff. At paragraph No.3 in Ex.A40 the defendant No.l has admitted that they have placed an order for supply of SYSNOISE 5.4 software to DMDE, Hyderabad and that an amount ol Rs.7.67 lakhs has been remitted by the lst defendant on i9.O5.200O and also that the software was defective right from the day of delivery and that the plaintiff has not rectified the same. A perusal of the e-mails reveals that time and again a mail was being sent to the 1st defendant saying that they would wait for the pay back proposal before taking any additional commitment and it has also intimated through its mail on |2.L2.2OOO that the 8 AKS,J & ETD,J CCCA No.64-2009 plaintilf company is not willing to give any additional commitment to Indo infotr:ch regarding the training as long as the:y do not have any clarity from the defendant about paying back the dues to the plaintiff company. Thus, there has been a constant communication between the two companies. 0 Certain terms and conditions are laid down under Ex.Al which is the Distributor Agreement for making payments. At clause No.8.3 of the said agreement, it is mentioned that the distributor will pay the plaintiff company by "bank transfer convertible to Belgian 'francs'and without further cha.rges", within a period of 30 days following the date of delivery. g) [t is revealed from the emails that, repeatedly the plaintiff has been making demands for months toge,:her but the defendants have failed to pay the same. Therefcrre, there is a violation o[ clause No.8.3 in the terms and conditions laid down under Ex.At. Thus, it is held that the defendant No.1 is liable to make payment to the plaintiff as claimed in the suit. h) It is lurther elicited that defendant No.l is a registered company and defendant Nos.2 to 5 are the direct.ors. The trial Court has fastened the liability against defendant Nos.2 to 5 in their personal capacity along with defendant No.1. I I ,I ) \ 9 AKS,J & ETD,J CCCA No.64_2009 i) In Suntl Bharti Mittal v. CBI7, the Apex Court has held that the directors/officers of the company cannot be made accused for corporate offences in the absence of allegations of their active involvement and also the same principle t\ras reaffirmed in the case of Sanjag Dutt u. Stolte of Haryana2, r,r,herein the Apex Court has held that the directors cannot be automatically held liable for the acts committed by a company unless specific statutory provisions impose such liability or their personal involvement is established. j) In the light of the said decision and in the facts and circumstances of the case, it is held that the defendant No.l company is liable to pay the amount claimed in the suit but defendant Nos.2 to 5 are not. Point no.1 is answered accordingly.

14. POINT NO.2: In view of the reasoned findings atrived at point No. 1, it is held that the judgment and decree passed by the trial Court need to be modified to the extent of fixing the liability only on defendant No. 1, while exonerating the defendants No.2 to 5. 'ArR 2015 sc 923 2 2025 LiveLaw (Sc) 32 :' 10 AKS,J & ETD,J CCCA No.64 2009 (. 1s. polrlI.Nq.s: ln the result, the appeal is partly allowed b.r modifying the judgment and decree, dated 13.11.2008 passed in o.S.No.36 of 2oo4 by the learned III Additional chief Judge, city civil court at Hyderabad, by fixing the liability solely on defendant No.1 and exonerating defendants No.2 to 5 from the liabilitv. No costs. Miscellaneous Applications, if any, pending in this appeal shall stand closed //TRUE COPY// Sd/- M. RAMANA KRISHNA JOINT REGISTRAR G SECTION OFFICER I i t. 1- The lll Additio_nal chief Judge, city Givit court, Hyderabad. 2. One CC to SRt. S. RAV|, Advocate tOpUCI 3. ONE CC tO SRI. K. RAGHAVA CHARVULU, AdVOCAIE TOPUC] 4. Two CD Copies To, kullkam g \ \ t .r", n .t .1 ::.. . , il* t. HIGH COURT DATED:17 tO4tZO2s + DECREE JUDGIt,IENT CCCA.No.64 of ZOO} PARTLY ALLOWIGN THE APPEAL WITHOUT COSTS t ...J f'. R Tt-iE s r' Y ,J 1 ! ilot, ?0fr -2 IN THE HIGH COURT FOR THE STATE OF TELANGANA AT HYOERABAD THIJRSDAY ,THE SEVENTEENTH DAY OF APRIL TWO THOUSAND AND TWENTY FIVE PRESENT THE HONOURABLE SRI JUSTICE ABHINAND KUMAR SHAVTLI AND THE HONOURABLE SMT JUSTICE TIRUMALA DEVI EADA ctw ctvtl couRT APPEAL NO: 64 OF 2009 Between:

1. lndo_.lnfotech Ltd.,_ -( A Company registered under the Companies Act, .1956), Registered Office Plot No. 33,-SBH Colony, Srinagar Colony post, Hyderabad.

2. M/s. Rayudu Srinivas Rao, Director M/s. lndo lnfotech Ltd., R/o. No. g-B, 4"_ryrlgry Apqrtmglts, Shanlal B.uitding, Begumpet, Hyderabad Rep.by its GPA Holder Sri.K.Bharatveer, S/o.Late K.Seeth'aiah Gupta, aged a6ou1 SZ yF,.Ocq B.usiness R/o. 409, Vijaya Towers, 1O-2-2Bil1: S-hanti Nagar, Hyderabad.

3. Smt. Bharathi Jaladanki, Directoi, M/s. lndo lnfotech Ltd., R/o. plot No. 33, SBH Colony, Srinagar Colony Post, Hyderabad.

4. Mr. Thayanagari Rakesh Reddy, Director, M/s. lndo lnfotech Ltd., R/o. plot No. 1B/35, Officers Colony, Ramakrishnapuram, Secunderabad.

5. Mr. Gureddy Nallamilli, Director, M/s. lndo lnfotech Ltd., R/o. H.No. 5-4-585, 2nd Floor, Nampally, Hyderabad. ...APPELLANTS/ Defendants AND M/s. LMS lnternational NV ( A body corporate Registered under the Laws in the Country of Belgium) Regd. Office, lnterleuvenlaan 68 Research park, Haasrode 2one.1,300'l Leuven-Belgium. ffice in lndia at No.63/1, Makam f!a4a, 3rd Main Road, 18th Cross Malleshwaram, Bangalore-560 055 Rep by Mr.Ferdinandus Van de Ven, Director of Finance, M/s. IMS lntemational NV ' ...RESPONDENTS/ Plaintiff Appeal Under Section 96 of CPC aggrieved by the Judgment and decree dated 13-11-2008 in O.S. No. 36 ol 2004 on the file of the Court of the lll Additional Ghief Judge, City Civil Court, Hyderabad. The appeal coming on for hearing, upon perusing the Memorandum of grounds filed in the Appeal, the Judgment and Decree of the Lower Court and the record in the case and upon hearing the arguments of Sri S. Ravi, 7 Advocate for the Appellants and Sri K. Raghava Charyutu, Advocate for Respondent. This Court doth order and decree as follows:

1. That the appeal be and hereby is parfly allowed by modifying the judgment and decree, dated 13-11-200g passed in o.S.No. 36 ot2004 by the learned lll Additional chief Judge, city Givit court at Hyderabad, by fixing the liabirity sorely on defendant No. 1 and exonerating defendants No. 2to S from the liability. 2. That there shall be no order as to costs in this appeal. //TRUE COPY// Sd/- M RAMANA KRISHNA JOINT REGISTRAR 6- SECTION OFFICER To

1. The lll Additional chief Judge, city civil court, Hyderabad. 2. Two C.D.Copies Kul/kamg HIGH COURT DATED: 1 7 1041202s DECREE CCCA.No.64 of 2009 PARTLY ALLOWT(}N THE APPEAL WITHOUT COSTS $-_