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RFA No. 605/2015

Inventa Cleantec Pvt. Ltd. v. Amit Mudgal

2016 SCC OnLine Del 5144

In the High Court of Delhi at New Delhi

(BEFORE RAJIV SAHAI ENDLAW, J.)

Inventa Cleantec Pvt. Ltd. .…. Appellant

Mr. Ashim Vaccher, Adv.
v.
Amit Mudgal .…. Respondent
Mr. Manu Nayar and Ms. Meenakshi Chopra, Advs.
RFA No. 605/2015
Decided on September 15, 2016
RAJIV SAHAI ENDLAW, J.:— This first appeal under Section 96 of the Code of Civil
Procedure, 1908 (CPC) impugns a decree dated 30th May, 2015 of the Court of the
Additional District Judge (ADJ)-03 (Central), Tis Hazari Courts, Delhi for recovery of
Rs. 4,79,371/- along with interest at 12% per annum from the date of filing of the suit
th
i.e. from 13 October, 2014 till realisation in Suit No. 290/2014 under Order 37 of the
CPC filed by the respondent, for recovery of Rs. 5,49,678/- with pendente lite and
future interest @ 24% per annum, as a consequence of dismissal of the application
filed by the appellant for leave to defend.
2. Notice of the appeal was issued and subject to the appellant depositing a sum of
Rs. 3,18,183/- with this Court and which is reported to have been deposited,
nd
execution stayed. Vide subsequent order dated 22 February, 2016 the Trial Court
record was requisitioned, the ad interim order made absolute and the appeal admitted
for hearing and considering the fact that in the event of the appeal being allowed the
matter will have to be remanded the appeal posted for hearing on 11th May, 2016.
3. The counsels were heard on 11th May, 2016. However certain proposals for
th
settlement were also exchanged on that date; hence the matter adjourned to 16
th
May, 2016. No settlement could be arrived at between the parties and on 16 May,
2016 judgment was reserved.
4. The respondent instituted the suit from which this appeal arises, for recovery of
Rs. 5,49,678/-, as aforesaid under Order 37 of the CPC pleading (i) that the
respondent/plaintiff is in the business of stainless steel pipes, pipe fittings and
industrial valves and the appellant/defendant had been placing orders on the
respondent/plaintiff from time to time and the respondent/plaintiff supplying the said
goods to the appellant/defendant as per the orders placed; (ii) that a sum of Rs.
4,79,371/- was outstanding from the appellant/defendant as per bills/invoices/ledger
accounts maintained by the respondent/plaintiff; (iii) that in lieu of the aforesaid
outstanding and for discharge of his legal liability, the appellant/defendant issued
cheques for Rs. 1,50,000/-, Rs. 68,183.20p and Rs. 1,00,000/- in favour of the
respondent/plaintiff; (iv) that the respondent/plaintiff presented the said cheques for
clearance but the same were returned unpaid for the reason “payment stopped by the
drawer”; (v) though the appellant/defendant had been meting out assurances to make
payment but had not paid; and, (vi) that besides the principal amount of Rs.
4,79,371/-, a sum of Rs. 70,307/- was also due from the appellant/defendant to the
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st
respondent/plaintiff towards interest at 24% per annum w.e.f. 21 February, 2014 till
filing of the suit.
5. The appellant/defendant entered appearance in the suit and thereafter applied
for leave to defend pleading (i) that the respondent/plaintiff was the regular supplier
of stainless steel raw material and pipes to the appellant/defendant and payment was
done on account basis; (ii) dispute arose when the goods supplied by the
respondent/plaintiff to the appellant/defendant were rejected by the
appellant/defendant due to their inferior quality; (iii) the rejected material was
negotiated to be returned to the respondent/plaintiff with a Debit Note which was
accepted by the respondent/plaintiff; (iv) the balance amount was paid through two
cheques which were dishonoured by the appellant/defendant's banker as the balance
material supplied by the respondent/plaintiff was also rejected and the payment of the
cheques stopped; (v) that the suit was not maintainable under Order 37 of the CPC;
(vi) the Courts at Delhi had no territorial jurisdiction; and, (vii) that the plaint does
not conform to the requirements of Order 37 of the CPC.
6. Though a reply of the respondent/plaintiff to the application of the
appellant/defendant for leave to defend as well as the rejoinder of the
appellant/defendant thereto are on the record of the Trial Court but neither did the
counsels during the hearing refer thereto nor is any need felt to refer thereto.
7. The learned ADJ dismissed the application of the appellant/defendant for leave to
defend and axiomatically decreed the suit finding/observing/holding (i) that the claim
of the respondent/plaintiff in the suit was for outstanding price of the goods sold; (ii)
the appellant/defendant had neither disputed the placing of the purchase order nor
the receipt of the goods nor the issuance of the cheques in discharge of the liabilities
and had also admitted stopping payment of the said cheques; (iii) the statement of
account placed on record and the invoices signed on behalf of the appellant/defendant
were not disputed; (iv) it had not been shown that there was a condition or stipulation
in the contract that the payments would be subject to rejection or approval of the
goods that were delivered; (v) a perusal of the documents filed by the
respondent/plaintiff show the invoices raised by the respondent/plaintiff to have been
signed by both the parties; (vi) such invoices have been held by the Courts to be
written contract between the parties; (vii) as per the term of the invoices they were
subject to Delhi Courts jurisdiction; (viii) the suit was very well within the ambit of
Order 37 of the CPC; (ix) the claim in the suit was for outstanding amount that
remained payable against the goods admittedly received by the appellant/defendant
and against which payments were also released through cheques; (x) the plea that the
payment of the cheque was stopped because the goods were rejected is not tenable;
(xi) thus no triable issue arises; (xii) “in a suit filed under summary procedure, filing
of the statement of account along with the negotiable instruments admittedly issued
by the defendant is sufficient to establish the claim, particularly when the signatures
on such cheques are not disputed and stopping payment for the cheques is admitted”;
and, (xiii) though the respondent/plaintiff had claimed interest at 24% per annum but
award of interest at 12% per annum appeared appropriate.
8. The counsel for the appellant/defendant has argued that of the three cheques,
the cheque for Rs. 1,50,000/- was not even presented by the respondent/plaintiff for
payment.
9. On enquiry it was informed (i) that no proceedings under Section 138 of the
Negotiable Instruments Act, 1881 also were taken out by the respondent/plaintiff; (ii)
that the learned ADJ has proceeded on the erroneous premise that the suit was for
recovery of the entire amount of the cheques; (iii) that the cheques were of a total
value of Rs. 3,18,183/- only while the principal amount claimed in the suit was of Rs.
4,79,371/-; (iv) that the learned ADJ has not considered that the suit was not even
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maintainable under Order 37 of the CPC; and, (v) that the suit in fact was for recovery
of the balance due at the foot of the account and which has been held by this Court in
GE Capital Services India v. Dr. K.M. Veerappa Reddy 224 (2015) DLT 1 and in
judgment dated 23rd January, 2012 in RFA No. 202/2011 titled K.&K Health Care Pvt.
Ltd. v. Pehachan Advertising to be not maintainable under Order 37 of the CPC. (I may
add that the same Hon'ble Judge has further expounded on the subject in IFCI Factors
Ltd. v. Maven Industries Ltd. 225 (2015) DLT 32).
10. Per contra the counsel for the respondent/plaintiff has drawn attention to the
documents filed by the respondent/plaintiff on the Trial Court record and comprising of
invoices raised by the respondent/plaintiff on the appellant/defendant and the account
of the appellant/defendant maintained in the ledger of the respondent/plaintiff
showing a sum of Rs. 4,79,371/- to be outstanding after adjusting the payments
made by the appellant/defendant from time to time against the amount of the invoices
raised by the respondent/plaintiff on the appellant/defendant. Reliance is placed on (i)
Fiitjee Ltd. v. Dr. Kanwal Sujit (2012) 191 DLT 408; (ii) SICOM Ltd. v. Prashant S.
Tanna AIR 2004 (Bom) 186; and, (iii) Krishan Lal Arora v. Gurbachan Singh 2015
Supreme (Del) 2160.
11. As would be obvious from the above, before addressing the question whether
the plea of the appellant/defendant of rejection of the goods constitutes a triable
issue, the first question to be adjudicated is the maintainability of the suit under Order
37 of the CPC. If the suit were to be held to be not maintainable under Order 37 of the
CPC, the question of whether the plea of rejection of the goods raises a triable issue
will not arise as in that case the suit will have to be tried as an ordinary suit.
12. The counsel for the appellant/defendant is found to be correct in his contention
that the learned ADJ has not really addressed the issue of maintainability of the suit
though a lip service has been paid thereto. A reading of the order of dismissal of the
application for leave to defend indicates that the learned ADJ proceeded on the
premise that the cheques issued were for the entire amount claimed in the suit. The
fact that the cheques issued were for a lesser amount than claimed as principal
amount due in the suit appears to have been glossed over.
13. To be fair to the counsel for the respondent/plaintiff, he also sought to justify
the maintainability of the suit as for recovery of balance amount due of the invoices
raised and not as based on the dishonoured cheques. Though the invoices are not
bearing the signatures of the appellant/defendant at the places earmarked thereon for
“Customer's Signatures” but it was stated that the signatures otherwise appearing on
five of the nine invoices of one Mr. Murari Lal are on behalf of the appellant/defendant
and that the appellant/defendant in any case had not disputed the said invoices or
receipt of the goods thereunder. In response to a Court query, it was stated that once
a suit under Order 37 lies for recovery of such invoice amount, there was no reason
why it should not lie for the balance of the total amount of the invoices after adjusting
the payments made from time to time.
14. Though the plaintiff is found to have filed the invoices along with the plaint but
the plaint is conspicuously silent with respect thereto. In the plaint, neither the dates
of the invoices nor the amount of the invoices is pleaded. What is pleaded is the dates
and amounts and other particulars of the cheques and the return memos of the
cheques and the impression sought to be conveyed is, of the suit under Order 37
being on the basis of the said cheques and which impression indeed prevailed with the
learned ADJ. Ordinarily if a suit claim under Order 37 of the CPC would be made on the
basis of the amount of the invoices constituting a written contract, the particulars of
the invoice would be pleaded in the plaint. Though the summons of a summary suit as
also of other suits are also required to be accompanied with the documents filed
therewith but in the absence of any particulars of the written contract on the basis
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whereof claim under Order 37 of the CPC is made, a defendant while applying leave to
defend may not be sufficiently cautioned to respond with respect thereto.
15. Rather, the plaint expressly pleads “The present suit of the plaintiff is based on
Bills/Invoices/Ledger Accounts between both the parties”, “That a sum of Rs.
4,79,371/- (Four Lakh Seventy Nine Thousand Three Hundred Seventy One Rupees
only) is outstanding against the defendant as per Bills/Invoices, Ledger Accounts
maintained by the plaintiff, and defendant is liable to pay the same”. The
respondent/plaintiff does not unequivocally plead the suit to be based on invoices and
has sued also on Ledger Account. The respondent/plaintiff does not plead that the
invoices bear the signature of the appellant/defendant and constitute a written
contract. It is also not pleaded that the appellant/defendant signed the ledger in
acknowledgment of correctness of entries therein or in admission of liability for the
amount shown outstanding therein. Thus, from a reading of the plaint, the suit cannot
be said to be falling in any of the categories prescribed in Order XXXVII Rule 1(2) and
summons under Order XXXVII ought not to have been issued. If the suit, on a reading
of the plaint, is found to be not maintainable under Order XXXVII, it cannot become
maintainable on a reading of the application filed for leave to defend. The admission in
the application for leave to defend though may entitle a plaintiff to a decree on
admission is otherwise incapable of converting a suit which on averments in plaint is
not maintainable under Order XXXVIII, maintainable thereunder.
16. The respondent/plaintiff here, is found to have sued for balance price, as
outstanding in the account of the appellant/defendant in the ledger of the
respondent/plaintiff, of the goods sold, supplied and delivered and such a suit does
not fall in Order XXXVII Rule 1(2), to be maintainable thereunder. It was so held by
this Court in Dentsply India Pvt. Ltd. v. Excel International 92 (2001) DLT 145 and by
me in Mahinder Kumar v. Anil Kumar.
17. Once it is found that the suit is not based on invoices for the reason of the
respondent/plaintiff having not chosen to plead the invoices as forming the basis of
the claim, the need to go into the question, whether the appellant/defendant is
entitled to leave to defend or not, as aforesaid, does not arise. I may however record
that I have in TTK Prestige v. India Bulls Retail Services Ltd. 2013 (136) DRJ 217 held
a suit under Order XXXVII on the basis of invoices to be maintainable for a lesser
amount than of the invoices, after adjusting the payments made to be maintainable.
To the same effect is the judgment of this Court in Bharat Forge Ltd. v. Onil Gulati
2005 (83) DRJ 140 and Dura-Line India Pvt. Ltd. v. BPL Broadband Network Pvt. Ltd.
AIR 2004 Delhi 186. In the latter judgment it was also held that merely because the
plaintiff, in the plaint, besides referring to the invoices on the basis of which suit had
been filed also averred it maintains a running account, would not change the nature of
the suit to one based on a running account. This judgment was recently followed in
Bijender Chauhan v. Financial Eyes (India) Ltd.. However in the present case the
plaintiff as aforesaid has not mentioned the invoices at all.
18. The order of the learned ADJ dismissing the application for leave to defend and
consequently the money decree can thus not be sustained.
19. The appeal succeeds and is allowed. The impugned order dismissing the
application of the appellant/defendant for leave to defend and the consequently the
money decree are set aside. The suit is remanded and ordered to be treated as an
ordinary suit.
20. The parties to bear their own costs.
21. Decree sheet be prepared.
22. The Trial Court file requisitioned in this Court be sent back forthwith.
23. The appellant/defendant to file written statement within 30 days of today with
advance copy to the counsel for the respondent/plaintiff.
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24. The parties to appear before the Court of the Additional District Judge (Central)
th
03, Tis Hazari Courts, Delhi on 19 October, 2016.
25. The amount deposited by the appellant/defendant in this Court with interest
accrued thereon be refunded to the appellant/defendant.
———
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