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2009 DIGILAW 77 (DEL)

JUKI SINGAPORE PTE LTD. v. JAY CEE ENTERPRISES PVT. LTD.

2009-01-20

RAJIV SAHAI ENDLAW

body2009
RAJIV SAHAI ENDLAW, J. 1. Application of the defendants for leave to defend a suit filed under Order 37 of the CPC is for consideration. The plaintiff instituted the suit impleading Corporation Bank as the defendant No.2. 2. It is the case in the plaint that the defendant No.1 approached the plaintiff for being appointed as the Incharge for sales and service of certain machines of the plaintiff for North India market operations; that MOUs dated 17th June, 1997 and 20th September, 2000 were executed by the parties; that pursuant to the said MOUs the plaintiff supplied sewing machines and various spare parts to the defendant No.1 in total amounting to USD 2,64,610.44. The details of invoices together with bills of lading and debit notes, credit notes raised by the plaintiff on the defendant No.1 against the supplies made during the relevant period were set out in para 9 of the plaint; it was further stated that the defendant No.1 was a habitual defaulter in making payment coercing the plaintiff to issue debit notes for interest accrued on the invoices @1.5% of the invoices value; that the defendant No.2 bank acting in connivance with the defendant No.1 released shipping documents in respect of invoice dated 11th August, 2002 of the value of USD 45,844 in favour of the defendant No.1 without acceptance of the documents and the defendant No.1 had failed to pay the value thereof also; thus the said amount of USD 45,844 was stated to be due from the defendant No.1 to the plaintiff in addition to the total outstanding of USD 2,64,610.44 as set out in para 9 of the plaint; that the defendant No.2 bank was also liable for the said USD 45,844 jointly and severally with the defendant No.1. 3. It is further the case in the plaint that commission of USD 32,424.93 and reimbursement of expenses of USD 2,784 was due from the plaintiff to the defendant No.1. It was thus stated that after adjusting the amounts due from the plaintiff to the defendant No.1, an amount of USD 2,29,401.51 was due from the defendant No.1 to the plaintiff. It is further the case in the plaint that the defendant No.1 admitted liability to pay USD 2,57,602 to the plaintiff in its letters dated 14th February, 2003 and 21st February, 2003. It is further the case in the plaint that the defendant No.1 admitted liability to pay USD 2,57,602 to the plaintiff in its letters dated 14th February, 2003 and 21st February, 2003. It was further pleaded that however upon failure of the defendant No.1 to pay the amounts, the plaintiff got legal notices issued to the defendant No.1 in response whereto the defendant No.1 as an after thought took false defences to the aforesaid claim. Inclusive of interest, a sum of USD 2,67,365.89 equivalent to Rs.1,23,30,914.85 was stated to be due to the plaintiff. 4. The plaintiff in para 17 of the plaint stated that the suit was filed under Order 37 of the CPC and no relief which did not fall within the ambit of the said rule had been claimed in the plaint. Even though the claim against the defendant No.2 bank was stated to be to the extent USD 45,844 only but in the prayer paragraphs the decree against both the defendants in the said sums of Rs.1,23,30,914.84 was claimed. 5. Both the defendants applied for leave to defend. On 15th December, 2005 the counsel for the plaintiff stated that since some deposits had been made by the defendant No.1 with the plaintiff during the pendency of the these proceedings and since these deposits covered the particular invoices because of which the defendant No.2 was impleaded, the defendant No.2 be deleted from the array of parties. The same was allowed. Thus, the suit survives against the sole defendant now. 6. Before proceeding to consider the application of the defendant for leave to defend, it is worthwhile to consider the maintainability of the suit under Order 37 of the CPC and which plea is taken in the application for leave to defend also. .7. Though the plaint states that the suit is filed under Order 37 of the CPC, as required to be stated under Rule 2 thereof, but it has nowhere been specified as to under which clause specified in Rule1 (2) of Order 37, the suit falls. During the course of arguments, it was argued that the suit was on the basis of the balance amount due on the invoices of sale of goods by the plaintiff to the defendant. Undoubtedly, it has been held by this court that a suit on the basis of such invoices lies under Order 37 of the CPC. During the course of arguments, it was argued that the suit was on the basis of the balance amount due on the invoices of sale of goods by the plaintiff to the defendant. Undoubtedly, it has been held by this court that a suit on the basis of such invoices lies under Order 37 of the CPC. However, the present is not a suit on the basis of invoices for the recovery of the amount thereof but is for recovery of balance due on an account between the parties as set out in para 9 of the plaint. The said account besides the invoices contains entries of debits and credits between the parties. Out of the amount due on the said account, the plaintiff claims to have deducted further amounts admitted to be due to the defendant and to have added the amount of another invoice, for which initially the defendant No.2 bank was also claimed to be liable. The matter does not end there; from the order dated 15th December, 2005 (Supra) it seems that certain other entries are there in the said account between the parties of the payments by the defendant to the plaintiff and for the reason whereof the plaintiff dropped the defendant No.2 bank from the array of parties. There is nothing to show as to what is the final amount claimed to be due on the aforesaid accounts between the parties. During the course of the hearing it was stated that a sum of Rs.40,17,000/- was paid during the pendency of the suit. However, there is nothing on record in that respect and ultimately an account may have to be taken of the same also. 8. In my view, a suit for recovery of such an amount does not qualify as a suit under Order 37 of the CPC. A suit, from the averments in the plaint has to fall under Order 37. The averments in the plaint in the present case do not show as to on what written contract the amounts sought to be recovered as a debt or liquidated demand in money is sought to be recovered. No single document has been referred to in the plaint, wherein the suit amount is contained as a debt due from the defendant to the plaintiff. 9. No single document has been referred to in the plaint, wherein the suit amount is contained as a debt due from the defendant to the plaintiff. 9. Order 37 of the CPC was intended to be an exception to the ordinary adversorial adjudicatory process adopted in this country and in which process certain delays owing to the requirement of giving opportunity of being heard and lead evidence were implicit. It was thought that where the suit was only for recovery of money on the basis of a document, the genuineness whereof could not be doubted or where owing to the existence of a written document disclosing the amount claimed in the suit, it was expedient to shift the onus to the defendant, it was enacted that the defendant would not be entitled to contest the suit till satisfies the court that he had a defence. However, I find myself unable to apply the said principles to the instant suit. I am unable to deduce from any document or documents the amount due. Merely because the claim is based on documents would not make the suit fall under Order 37 of the CPC. Claims in a large number of suits are based on documents but such suits do not fall under Order 37. Where a large number of documents have to be collated, interpreted and effect thereof to be adjudicated in juxta position of other documents, merely because the suit is based on documents would not make it fall under Order 37 of the CPC. That is the position in the present case. 10. I must record that it is the contention of the senior counsel for the plaintiff that the transactions between the parties constituting the cause of action for the suit are not disputed. It was thus contended that in the absence of the application for leave to defend controverting the invoices, the debit and credit entries and the commission due, the suit was maintainable under Order 37. 11. In a given case, where the defendant has unequivocally in writing admitted the balance due on an account, a suit under Order 37 may lie on the basis of the said writing which would then take the shape of a written contract to pay a liquidated amount. However, the same is not the position here. The plaintiff has not instituted the suit on the basis of the said writings. However, the same is not the position here. The plaintiff has not instituted the suit on the basis of the said writings. The writings dated 21st February, 2003 relied upon by the plaintiff disputes the claim of the plaintiff for interest; while it admits outstanding of USD 257602 against five invoices, it, at the same time, talks of settling the same in account and also talks of the claims of the defendant of USD 398533 against the plaintiff. The said writing can thus not be claimed to be a written contract to pay a debt or a liquidated demand in money. The plaintiff has also rightly nowhere in the plaint stated that the suit under Order 37 of the CPC has been filed on the basis of the said document. 12. That besides the aforesaid documents, as aforesaid averments in the plaint do not show any case under Order 37 of the CPC. Merely because the transaction between the parties are evidenced by documents would not make the suit fall under Order 37 of the CPC. 13. Even though the suit is found to be not falling under Order 37 of the CPC, the defence of the defendant is that the defendant was the agent of the plaintiff; that owing to breaches by the plaintiff, the agreement was terminated; that the defendant had been importing the machines and spare parts from the plaintiff as recommended by the plaintiff from time to time including by the representative of the plaintiff posted at the office of the defendant; that the plaintiff was to repurchase the unsold stocks and spare parts in terms of the business understanding; that the defendant was even now ready to deliver the unsold stocks but the plaintiff was illegally refusing to take back the same; that after adjusting the value of the unsold stocks only a sum of Rs.40,17,000/- would be payable by the defendant to the plaintiff and which the defendant has been willing to pay (as aforesaid during arguments it was stated that the said money has been paid). 14. 14. The crux of the disputes between the parties thus is whether the machines and spare parts were sold by the plaintiff to the defendant so as to make the defendant liable for price thereof to the plaintiff or whether the same were sent by the plaintiff to the defendant as an agent and with the understanding that the same shall be repurchased in the event of not being sold. 15. The senior counsel for the plaintiff has relied heavily on the invoices being made in the name of the defendant only to urge that it was a case of sale and there was no obligation on the plaintiff to repurchase the machines. However, in the face of the plaintiff itself in the plaint admitting commission being due and reimbursement of expenses being due from the plaintiff to the defendant, the said defence cannot be said to be no defence at all or a sham and vexatious defence within the meaning of the said expression as expounded by the Apex court in Mechelec Engineers and Manufacturers v Basic Equipment Corporation AIR 1977 SC 577 . I do not find the MOUs, being the only bilateral document between the parties, to be clear in this regard. In my view the said defence is bonafide and cannot be shut out without an opportunity to lead evidence. I do not find the said defence to be inconsistent with the said MOUs as contended by the senior counsel for the plaintiff. It is not as if the defendant was buying the said machines for its own use/consumption. The plaint itself states that the defendant was appointed Incharge of sales and service of plaintiffs products. It is also the admitted position that the representative of the plaintiff was functioning from the office of the defendant. The defendant has alo relied upon an unexecuted agreement between the parties, as per which also unsold stocks were to be taken back by the plaintiff from the defendant. Such arrangement is also not uncommon. An agent after the termination of its agency has no use whatsoever for the unsold stocks and spares in as much as upon termination of agency the agent has no use/market whatsoever for the same. .16. Undoubtedly, merely because the defendant has claims against the plaintiff is not a ground for grant of leave to defend. An agent after the termination of its agency has no use whatsoever for the unsold stocks and spares in as much as upon termination of agency the agent has no use/market whatsoever for the same. .16. Undoubtedly, merely because the defendant has claims against the plaintiff is not a ground for grant of leave to defend. However, when the very existence of the claimed amount is dependent upon the interpretation of the agreement between the parties, the said principle does not apply. 17. Arguments were also raised by on behalf of both the parties as to what transpired during the pendecy of the present suit. At one point of time during the course of hearings, various suggestions for amicable settlement here exchanged between the parties. The parties also filed affidavits on record in that regard. The defendant applied for amendment of the application for leave to defend to incorporated some of the said facts. The said application for amendment was disposed of by this court with the order that after the prescribed time the application for leave to defend could not be amended and whatsoever was on record would be looked at the time of adjudication of the application for leave to defend. It was the contention of the counsel for the defendant that whatever has transpired during the course of such talks of amicable settlement cannot be a part of evidence owning to the provisions of Section 23 of the Evidence Act. However, I do not consider it appropriate to deal with the said aspect, having held the suit to be not maintainable under Order 37 of the CPC and even otherwise finding the application to be disclosing grounds for leave to defend. 18. I may add that all suits where the defendant in his pleadings or otherwise admits the claim of the plaintiff though qualifying for a decree under Order 12 Rule 6 of the CPC may not qualify as suits under Order 37 of the CPC. 19. That since the suit itself being found to be not maintainable under Order 37 of the CPC, even though the aspect of leave to defend have also been considered, but the question of imposing any conditions on the defendant does not arise. The application for leave to defend the suit is allowed.