Background
The case arose out of a commercial dispute between M/s New Chemical Industries Chemicals (“Appellant”) and Anil Jain (“Respondent”). The Respondent, carrying on business as M/s Jain Chemicals, had an established course of dealings with the Appellant, a partnership firm engaged in wholesale and retail trade of chemicals.
The present case arose from the three invoices raised by the Respondent in March 2016 amounting to ₹5,77,500 for supply of goods, which were allegedly dispatched from Nangloi, Delhi, in accordance with the specifications provided by the Appellant. The Appellant is stated to have acknowledged the transactions in their books of account.
Upon failure of the Appellant to make payment, the Respondent issued a legal notice dated 23.02.2019 claiming the principal amount along with interest at 18% per annum, aggregating to ₹8,89,350. In response, the Appellant contended that no goods were ever supplied and that the entries in books of account were mistakenly made by its Accountant and also reflected in their VAT returns. They further alleged that there was no acknowledgment of delivery and no supporting transport documents.
The Commercial Court, upon appreciation of evidence, decreed the suit in favour of the Respondent. Aggrieved, the Appellant preferred an appeal before the Delhi High Court challenging the decision of the Commercial Court.
Issues and Decision
Whether invoices can be disregarded as fictitious in absence of delivery proof, despite being reflected in accounts and forming basis for availing VAT input credit?
The Appellant contended that the Respondent had failed to discharge the burden of proving supply of goods, as no delivery receipts, transport documents, or acknowledgments were produced. The invoices produced by the Respondent do not contain the details of vehicle etc., which is generally expected in supply of large quantities of chemicals. It was further argued that invoices and statements of account are self-serving documents and cannot independently establish liability [¶16–21].
On the contrary, the Respondent submitted that the defence of the Appellant was an afterthought. It was highlighted that the Appellant had neither disputed the invoices contemporaneously nor replied to the legal notice. More importantly, the Appellant had availed VAT input credit on the basis of the very invoices now being disputed [¶22–25].
The Delhi High Court observed that while entries in books of account are not by themselves sufficient to fasten liability, they constitute relevant evidence and can be relied upon when corroborated by surrounding circumstances, including invoices and admissions of parties [¶29–31].
A crucial factor considered by the Court was the admission of the Appellant that VAT input credit had been availed on the invoices in question. The Court held that such conduct necessarily implies acknowledgment of the transactions and is inconsistent with the plea that the invoices were fictitious [¶35–38]. The Court further relied upon the principle of approbate and reprobate, i.e., accept benefits under a transaction and simultaneously deny its existence. The Appellant, having derived tax benefits, were estopped from disputing the genuineness of the invoices [¶43–44].
Addressing the absence of delivery acknowledgment or transport documents, the Court held that such absence is not determinative in commercial transactions, particularly where there is an explanation that such documents were to be maintained by the purchaser and where other evidence supports the transaction [¶39–42].
The Court also drew an adverse inference against the Appellant for failing to reply to the legal notice and for not raising any contemporaneous dispute regarding the invoices prior to institution of the suit [¶45–47].
Accordingly, the appeal was dismissed, subject to modification of the rate of interest.
Case Details
Case Name: Feroz Khan & Ors. v. Anil Jain
Court: Delhi High Court
Case No.: RFA (COMM) 162/2025
Neutral Citation: 2026:DHC:2631-DB
Date of Judgment: 30.03.2026
Coram: Justice Prathiba M. Singh & Justice Madhu Jain