Plaintiff Must Prove Commercial Recovery Claim With Material Particulars And Invoices; Mere Statement Of Accounts Insufficient: Karnataka High Court

High Court of Karnataka, in a significant ruling dated March 25, 2026, held that an employer is well within its rights to deduct demurrage charges and excess freight costs from a contractor's pending bills and security deposits if the contractor breaches the transport agreement.

A division bench comprising Chief Justice Vibhu Bakhru and Justice C.M. Poonacha observed that a plaintiff seeking recovery of money in a commercial suit must establish the basis of its claim through concrete documentary evidence, failing which the suit is liable to be dismissed.

Prakash Parcel Services Limited, the plaintiff, entered into an agreement in 2008 with BEML Limited to transport materials from Chennai Port to various BEML worksites. Following disputes over alleged delays and the plaintiff's failure to deploy trailers, BEML engaged alternate transporters, incurred heavy demurrage charges from port authorities, and subsequently recovered these losses by encashing the plaintiff's bank guarantees, earnest money deposits, and pending bills. After an initial arbitration proceeding was terminated, the plaintiff filed a commercial suit for the recovery of over Rs. 1.18 crores, which the Commercial Court dismissed for lack of material particulars and supporting evidence.

The primary question before the High Court was whether the plaintiff had adequately proved its claim for the recovery of the principal amount and interest. The court was also called upon to determine whether the defendant was legally justified under the contract in deducting excess freight and demurrage charges from the amounts otherwise payable to the plaintiff.

The High Court noted that the plaintiff had merely relied upon a statement of accounts and a demand letter written by itself to the defendant to claim the massive sum, without producing any foundational documents to substantiate the entries. The bench emphasized that apart from the ledger extracts, the plaintiff failed to produce any actual invoices, consignment notes, or other materials to demonstrate the factual basis of the principal amount claimed. "No documents like invoices, etc., have been produced in support of the amounts claimed vide the statement of accounts."

Conversely, the court examined the specific stipulations of the executed transport agreement, which explicitly empowered the defendant to engage alternate carriers at the sole risk and cost of the plaintiff in the event of a failure to deploy vehicles within the stipulated time. The bench observed that the agreement clearly permitted the employer to debit the excess freight charges incurred in making alternate arrangements directly from the defaulting carrier's pending or subsequent bills. "In the event the carrier fails to deploy vehicles within stipulated time, BEML or BEML's supplier will have right to transport goods. through alternate carries at the sole risk and cost of contracted carrier."

The High Court noted that the defendant had adequately justified its deductions by producing substantial documentary evidence, including numerous communications putting the plaintiff on notice regarding the breaches and the resulting halt in production. The bench pointed out that the defendant successfully proved the actual expenses incurred towards freight and port penalties by placing on record 88 distinct bills issued by the Chennai Port Trust and its clearing agents, which went entirely unimpeached during cross-examination. "It is clear from the aforementioned that the defendant has adequately proved that it had incurred expenses towards freight charges and demurrage and hence, was justified in deducting the sum of `29,61,000/-."

Validating the Commercial Court's approach, the appellate bench held that since the defendant had pleaded that the specific quantum was due towards damages and produced adequate material to back its claim, the recovery made through the encashment of the bank guarantee and retention of the earnest money deposit was legally sound. The court concluded that the plaintiff miserably failed to demonstrate any flaw in the trial court's appreciation of evidence. "The Commercial Court was justified in coming to the conclusion that the plaintiff has not proved the amount due and payable by it."

Dismissing the commercial appeal, the High Court affirmed the judgment of the Commercial Court, holding that the plaintiff failed to demonstrate that the decree was in any manner erroneous. The ruling reinforces the principle that in commercial disputes, monetary claims must be strictly corroborated by underlying invoices, and clear contractual clauses permitting the recovery of consequential damages will be enforced by the courts.

Date of Decision: 25 March 2026