Bengaluru court directs United Breweries to pay ₹15.6 crore to former C&F agent

A Bengaluru commercial court recently directed United Breweries Limited (UBL) to pay ₹15.62 crore to its former carrying and forwarding (C&F) agent Phoenix Marketing, after dismissing UBL’s ₹8.57 crore recovery suit against the agency..The judgment, delivered by Additional City Civil & Sessions Judge Sumangala S Basavannour on April 24, came in a contractual dispute arising from a long-standing distribution relationship covering the Delhi and Haryana regions..UBL had alleged that Phoenix failed to remit sale proceeds collected from the market and was liable under “del credere” and “pure agent” agreements entered between 2008 and 2015. It claimed that Phoenix had delayed or defaulted on forwarding payments collected from retailers and sought recovery of ₹6.74 crore in principal along with interest, taking the total claim to ₹8.57 crore.Phoenix, in response, filed a counterclaim of ₹15.62 crore, comprising ₹11.35 crore in unpaid commissions, reimbursements and refundable security deposits, as well as ₹4.26 crore in interest. The court upheld Phoenix’s claim in full..A key issue in the dispute was whether Phoenix operated as a del credere agent, which under Indian commercial law implies an agent who not only facilitates sales, but also guarantees payment to the principal if the buyer defaults. UBL argued that Phoenix had taken on this risk and was, therefore, liable for market outstandings. UBL relied heavily on the label of the agreements and the defendant’s signatures to claim that Phoenix had been appointed as a del credere agent. The Court initially noted:“On perusal of these agreement and renewal agreement it is clear that the plaintiff company i.e., United Breweries Limited entered into Del-credre agreement from 04.07.2008 from Delhi region and Haryana region… it is clear from the document the defendant put signature on del-credre agreement and also renewal agreement… Hence, it is proved from the document the defendant has entered into del-credre agreement with the plaintiff.”Yet, it went on to clarify the legal nature of a del credere agency:“The Del-credre agent is a type of principal-agent relationship wherein [the agent] acts not only as the sales person or broker… but also as a guarantor of credit extended to the buyer…A del credre agent only becomes liable to pay the principal amount [on] buyer default.”Citing precedents, the COurt reiterated that extra commission and guarantee of performance are essential to establish del credere liability.“There was nothing to indicate any extra commission was paid to the respondent for acting as a del credre agent, which is, as noted… one of the conditions for the del credre agent.”.The Court found that UBL failed to provide material particulars about the alleged dues from market retailers:“The plaint lacks the essential and material particulars which would give an effective cause of action… [It] does not disclose the details about the transaction i.e., purchase order, invoices, whether they have received advances and no details of alleged breach of contract by the defendant.”Although UBL filed internal statements purporting to show market outstanding, the Court noted:“These documents are prepared by the plaintiff and… are not confirmed by the defendant… Further, the plaintiff have not produced ledger extract to show that the outstanding amount as on 31.03.2016.”The Court concluded:“In the absence of the pleadings, the claim of the plaintiff for recovery… cannot be granted and plaintiff is not entitled for any relief claimed in this suit.”.With this ruling, the Court:Dismissed UBL’s ₹8.57 crore suit in full;Allowed Phoenix Marketing’s counterclaim for ₹15.62 crore, including interest;Held that Phoenix was not a del credere agent and could not be saddled with recovery risk; andDirected UBL to pay the counterclaimed amount with applicable interest..United Breweries was represented by Advocate Ajith Shetty.Gandhi & Partners have represented Phoenix Marketing..[Read Judgment]