A Witness Without Knowledge is No Witness at All: Delhi High Court Dismisses Recovery Suit Over Expo Stall Contract Due to Infirm Testimony and Non-Joinder

Today, On November 4, 2025, the Division Bench of the Delhi High Court comprising Justice Nitin Wasudeo Sambre and Justice Anish Dayal delivered a significant ruling, upholding the dismissal of a ₹7.86 lakh recovery suit by a textile company over an alleged contractual failure in setting up exhibition stalls at an international trade fair in Frankfurt, Germany.

The Court affirmed that a plaintiff must discharge the burden of proof through competent and knowledgeable testimony, and held that the non-joinder of a necessary party involved in execution of the contract was fatal to the claim. In doing so, the Court reiterated fundamental principles under the Indian Evidence Act, 1872 and the Code of Civil Procedure, 1908, while dismissing the appeal with no costs.

“Testimony Must Stem From Personal Knowledge, Not Mere Authorization”: SPA Holder’s Evidence Rejected

“A Special Power of Attorney holder must possess personal knowledge of the transaction to competently testify in a civil recovery suit,” observed the High Court, while underlining the evidentiary failure that doomed the appellant’s case.

The Court emphasized that testimony under Sections 101 to 106 of the Indian Evidence Act, 1872 must be cogent and based on firsthand experience, and that authorization alone is insufficient if the witness cannot demonstrate factual knowledge of the matter. Referring to the examination of Mr. Deepak Kumar, who appeared as PW-1 under a Special Power of Attorney issued by the appellant company, the Court found his testimony “infirm, inchoate, weak, non-determinative and unhelpful.”

Notably, PW-1 admitted he was a salesman, had never visited the company’s office in Chennai, did not know who managed international exhibitions in the company, and had no direct interaction with either the respondent or the third-party contractor Mr. Anuj Gautam. Crucially, he did not attend the Frankfurt expo, where the alleged breach occurred, nor did he possess any documentary proof apart from the SPA.

The Court held:

“A bare perusal of the testimony of the PW-1 and the cross-examination would incontrovertibly bear out that PW-1 had absolutely no knowledge of the transaction… his testimony fails to meet the evidentiary threshold.”

Citing A.C. Narayanan v. State of Maharashtra (2014) 11 SCC 790 and National Small Industries Corporation Ltd. v. State (2009) 1 SCC 407, the Bench clarified that power of attorney holders must not only be authorized but must also personally know the facts and circumstances of the transaction to be credible witnesses.

“Non-Joinder of Necessary Party Renders Suit Unsustainable”: Failure to Implead Third-Party Contractor Held Fatal

“No effective adjudication can take place in the absence of the executing party who performed the contract. The suit was rightly dismissed for non-joinder,” held the Court, applying the proviso to Order I Rule 9 CPC.

In its detailed judgment, the High Court noted that the appellant/plaintiff was fully aware that the actual stall fabrication work was referred by the respondent to one Mr. Anuj Gautam of M/s Mavonorm Exhibits Pvt. Ltd., who allegedly failed to execute the job. Despite this, the appellant did not implead him or his firm as a party to the proceedings.

The Court emphasized that where the dispute revolves around the execution of a contract by a third party, who had been involved with the knowledge and consent of the plaintiff, such third party becomes a necessary party for adjudicating the issue of liability or deficiency in service.

Quoting Order I Rule 9 CPC:

“No suit shall be defeated by reason of the misjoinder or non-joinder of parties... Provided that nothing in this rule shall apply to non-joinder of a necessary party.”

The Court found the transfer of funds (₹7.50 lakh) by the respondent to Mr. Gautam’s account substantiated by bank records and acknowledged in cross-examination. Importantly, the appellant’s own director, Mr. Milind Mungikar, had introduced Mr. Gautam and authorized the transfer, yet neither was he examined as a witness nor was Mr. Gautam impleaded.

Admissions Alone Insufficient to Fix Liability Without Proof of Breach

“Admission of receipt of funds is not admission of liability to refund. Plaintiff must still prove unjust retention,” ruled the Court while rejecting reliance on Section 58 of the Evidence Act.

The appellant had argued that the defendant had admitted receipt of ₹10.88 lakhs and only refunded ₹3.27 lakhs, and that such partial refund constituted an admission of liability under Section 58 of the Indian Evidence Act. However, the Court clarified that:

“Admission of receipt alone is insufficient – Plaintiff must still prove that balance was unjustifiably retained and not paid to third party as instructed.”

The respondent consistently maintained that the funds were forwarded to the executing vendor on instructions of the appellant’s director, and there was no express or implied admission of liability for the remaining amount.

Pre-Institution Mediation Procedurally Complied, But Merits Deficient

The Court acknowledged that the appellant attempted pre-institution mediation under Section 12A of the Commercial Courts Act, 2015. While the respondent did not participate, the Court held that procedural compliance was not in question and that the claim ultimately failed on merits due to lack of proof and non-joinder.

Misplaced Reliance on Approbation-Reprobation and Equitable Doctrines

Rejecting the appellant’s argument that the respondent could not "approbate and reprobate" by disowning liability while sending recovery notices to the third-party vendor, the Court observed that no inconsistency was shown in the respondent's conduct. It distinguished the authorities relied upon:

• Karunesh Kumar, Dhanjeet Singh Sandhu, and Murugesan were held inapplicable, as they concerned waiver, estoppel, and inconsistent conduct by State entities, not commercial disputes requiring proof of contract performance and specific liability.

“The aforementioned decisions, being based on distinct factual and legal contexts, have no application to the present controversy which turns on evidentiary insufficiency and non-joinder of a necessary party.”

In dismissing the appeal, the High Court affirmed that corporate litigants must produce witnesses with actual knowledge of the transactions in question, and that litigation over breach of contracts involving third-party performance must involve all necessary parties for effective adjudication. The failure to do so—both substantively and procedurally—proved fatal to Zen Linen’s case.

The Court ruled: “Aside from the controversy arising out of the non-joinder of parties, the appellant/plaintiff has been unable to prove its case.”

Accordingly, the appeal was dismissed with the pending application rendered infructuous and no order as to costs.

Date of Decision: November 4, 2025