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2018 DIGILAW 166 (BOM)

Industrial Aid v. Mohan Chains Limited

2018-01-17

SHALINI PHANSALKAR-JOSHI

body2018
JUDGMENT Dr. Shalini Phansalkar-Joshi, J. (Oral) - Rule. Rule is made returnable forthwith. Heard finally, at the stage of admission itself, by consent of Mr. Soman, learned counsel for the Petitioners, and Mr. Kapse, learned counsel for the Respondent. 2. By this Writ Petition, filed under Article 227 of the Constitution of India, the Petitioners are challenging the order dated 11th September 2017 passed by the Ad-Hoc Judge, City Civil Court, Borivali Division, Dindoshi, Mumbai, in Summons for Judgment No.75 of 2014 in a Summary Suit No.76 of 2014, thereby granting conditional leave to the Petitioners for defending the said Suit. 3. Respondent is a Company, whereas, Petitioner No.1 is a registered Partnership Firm. Respondent is engaged in the business of manufacturing ''tailor-made goods'', made of chains and accessories required mainly for industrial purposes. In the year 2002, Petitioner No.2, who is the Partner of Petitioner No.1, approached the Respondent for supply of the goods. Accordingly, in the financial year 2002-2003, the Respondent started selling tailor-made goods and raised invoices towards the said sale. During the course of business, Petitioner No.2 informed the Respondent that some tailor-made goods, so purchased, are further purchased by M/s. KSB Pumps Ltd. 4. It is the case of the Respondent that, in the year 2010, the Petitioners started committing default in payment of invoices and bills. When Respondent made inquiry with Petitioner No.2, assurance was given that payment will be made of all the outstanding invoices and bills. In January 2011, Petitioner No.2 also issued 13 cheques, each of different invoices of the amount totalling to Rs. 15,61,024/- in the name of the Respondent, duly signed by Petitioner No.2 and drawn on Shamrao Vithal Co-operative Bank, Pune. However, when the said cheques were deposited in the Bank, they were dishonoured. Hence, immediately thereafter, by issuing a notice dated 27th January 2011, giving all the particulars of the transactions, the cheques, the invoices etc., the Respondent made demand of the amount due. Petitioners failed to pay the said amount. Hence, Respondent filed a Suit before the Trial Court for recovery of the amount of Rs. 22,63,485/-, with interest at the rate of 12% thereon. Simultaneously, the Respondent also filed a Criminal Case, bearing C.C. No.501/SS of 2011, against the Petitioners in the Magistrate''s Court at Bandra, under section 138 of the Negotiable Instruments Act, 1881. 5. Hence, Respondent filed a Suit before the Trial Court for recovery of the amount of Rs. 22,63,485/-, with interest at the rate of 12% thereon. Simultaneously, the Respondent also filed a Criminal Case, bearing C.C. No.501/SS of 2011, against the Petitioners in the Magistrate''s Court at Bandra, under section 138 of the Negotiable Instruments Act, 1881. 5. When the Petitioners appeared, on receipt of the summons, they denied the claim of the Respondent, raising the first contention to the effect that, Mr. Anuj Gupta, who has filed the Suit, is not the Constituted Attorney of the Respondent, as no Power of Attorney is annexed to the plaint and there is also no Board Resolution passed by the Respondent - Company authorizing him to file the Suit. Secondly, it was submitted that, the necessary conditions laid down for institution of Summary Suit are not satisfied. Thirdly, it was contended that, the Petitioners have never issued alleged cheques in respect of the invoices. 6. In the alternate, it was submitted that, the cheques were given in good faith to the Respondent on the request of one Rajendra kumar Gupta, who is father of Anuj Gupta, so that he can avail overdraft facility from the Bank. The blank cheques were given without mentioning the date as well as the amount on the said cheques. It was submitted that, the Respondent has misused those cheques with a malafide intention to achieve unlawful gain. It was denied that the Respondent has raised any bills or invoices towards the delivery of ''tailor-made goods''. An attempt was also made to contend that, in Criminal Case bearing C.C. No. 501/SS of 2011, filed under section 138 of the Negotiable Instruments Act, 1881, Petitioner No.2 was acquitted and, therefore, it was submitted that, there is no case made out and the Summons for Judgment taken out by the Respondent be rejected and the Petitioners be allowed to file their pleadings on record. 7. The Trial Court, after considering the rival contentions advanced at bar, was pleased to reject the Summons for Judgment and having regard to the triable issues raised in the Suit, was pleased to grant conditional leave to the present Petitioners for defending the said Suit. The condition was to deposit the amount of Rs. 15,61,024/-, which was the principal amount. 8. The condition was to deposit the amount of Rs. 15,61,024/-, which was the principal amount. 8. The Petitioners, being aggrieved by the condition imposed by the Trial Court, have preferred the present Petition. The first submission advanced by learned counsel for the Petitioners pertains to authorization of Mr. Anuj Gupta to file the Suit. It is submitted that, though the Respondent has produced on record the copy of the ''Resolution'' dated 15th June 2011, showing that, in the place of Ramesh Kadam, who was earlier authorized to represent the Respondent-Company, now Mr. Anuj Rajendra kumar Gupta is appointed, the said ''Resolution'' clearly states that, Mr. A.R. Gupta is authorized to act, appear and represent the Respondent-Company in respect of the Criminal Case pending in the Metropolitan Magistrate''s Court, Bandra. The attention is invited to paragraph No.2 of the said ''Resolution'', which reads as follows :- "It is resolved that, Mr. Ramesh Kadam has left the Company. Hence, a Criminal Case pending in Metropolitan Court, Bandra. It is resolved that, Mr. A.R. Gupta shall be substituted and replaced in a Criminal Case as appear represent. He is authorised to act, appear and represent the Company, so that our Company take appropriate steps such as tendering evidence, filing documents etc. from the Hon''ble Court." 9. Here in the case, it is submitted that, there is no specific resolution passed by the Respondent-Company, authorizing Mr. A.R. Gupta to represent the Company in this Civil Suit. Whatever authorization was there was only for the purpose of Criminal Case. 10. Learned counsel for the Petitioners has, therefore, placed reliance on the two Judgments of the Delhi High Court; one that of M/s. Nibro Limited v. National Insurance Company Ltd., 172 ILR (1991) II Delhi , and, secondly, that of Rajghria Paper Mills Ltd. v. General Manager, Indian Security Press & Anr., 2000 (56) DRJ (Suppl) 764. 11. In the second Judgment of Rajghria Paper Mills Ltd. (Supra), the earlier judgment of M/s. Nibro Limited (Supra) is also referred. Learned counsel for the Petitioners has drawn attention of this Court to paragraph No.24 of the Judgment of M/s. Nibro Limited (Supra), wherein it was observed as follows :- "24. 11. In the second Judgment of Rajghria Paper Mills Ltd. (Supra), the earlier judgment of M/s. Nibro Limited (Supra) is also referred. Learned counsel for the Petitioners has drawn attention of this Court to paragraph No.24 of the Judgment of M/s. Nibro Limited (Supra), wherein it was observed as follows :- "24. It is well-settled that, under Section 291 of the Companies Act, except where express provision is made that the powers of a Company in respect of a particular matter are to be exercised by the Company in General Meeting - in all other cases, the Board of Directors are entitled to exercise all its powers. Individual Directors have such powers only as are vested in them by the Memorandum and Articles. It is true that, ordinarily the Court will not unsuit a person on account of technicalities. However, the question of authority to institute a suit on behalf of a Company is not a technical matter. It has far-reaching effects. It often affects policy and finances of the Company. Thus, unless a power to institute a suit is specifically conferred on a particular Director, he has no authority to institute a suit on behalf of the Company. Needless to say that, such a power can be conferred by the Board of Directors only by passing a resolution in that regard." 12. In view of these observations, the submission of learned counsel for the Petitioners is that, the absence of resolution passed by the Board of Directors of the Respondent-Company, authorizing Mr. A.R. Gupta to appear or represent the Company in the Civil Suit, goes to the root of the matter. The Suit itself suffers from basic defect and hence, it cannot be maintainable. Therefore, on this ground itself, the plaint was liable to be rejected. 13. However, perusal of the observations made by the Delhi High Court in paragraph No.26 of the Judgment in the case of M/s. Nibro Limited (Supra), which discloses that, in the said Judgment, Delhi High Court was considering the Appeal, which was preferred against the Decree of the Suit and hence, in the light of the same, it was observed that, even after the Suit was instituted, no resolution was passed by the Company ratifying the action of Mr. Jhajharia, who has instituted the Suit, and no such decision of the Board of Directors was placed on record in the said case. Jhajharia, who has instituted the Suit, and no such decision of the Board of Directors was placed on record in the said case. In the light thereof, it was held that, whatever defect has accrued in institution of the Suit was also not cured, even after the Suit was instituted and finally decided. Hence, this Judgment of the Delhi High Court cannot be an authority to hold that, if, at the time of filing of the Suit, there is no such authorization, or, there is no such resolution passed by the Company, authorizing a particular person to file a Suit, the Suit filed by the said person suffers from such an incurable infirmity that, even subsequent resolution cannot cure the said defect. Here in the case, the Suit is yet to be decided and, therefore, the Respondent can properly get the resolution passed, authorizing Mr. A.R. Gupta to represent the Respondent-Company. This defect, therefore, cannot be sufficient to reject the Suit. 14. The second contention raised by learned counsel for the Petitioners is pertaining to merits of the claim. However, as rightly held by the Trial Court, the Respondent has given sufficient details in the plaint, coupled with the details given in the notice issued prior to institution of the Suit, as to how the invoices were raised towards the delivery of the goods and Petitioners failed to pay the amount raised in the invoices. Petitioners have also issued the cheques, which, admittedly, came to be dishonoured. As regards the contention of the Petitioners that, those cheques were issued for availing the overdraft facility, that contention needs to be proved at the time of the trial, but, at this stage, the said contention cannot be accepted to dismiss the Suit. 15. Learned counsel for the Petitioners has then placed reliance on the Judgment in C.C. No.501/SS/2011 filed by the Respondent against the Petitioners, under section 138 of the Negotiable Instruments Act, 1881, in respect of dishonour of these cheques, particularly to paragraph No.28, of the said Judgment, wherein the learned Magistrate has discussed certain admissions given by Mr. A.R. Gupta in his cross examination. On the basis of the same, it is argued that, there was no such transaction, as he had admitted that the Respondent-Company has no document to show that it has delivered the goods in question to the Petitioners and the same were received by them. 16. A.R. Gupta in his cross examination. On the basis of the same, it is argued that, there was no such transaction, as he had admitted that the Respondent-Company has no document to show that it has delivered the goods in question to the Petitioners and the same were received by them. 16. However, in the first place, those admissions are yet to be tested in cross-examination of Mr. A.R. Gupta in this Suit. Merely because, on the basis of the said admissions, the Criminal Case has ended into acquittal of Petitioner No.2, that cannot be sufficient to hold that, the present Suit is also liable to be dismissed. As rightly observed by the Trial Court, the ''standard of proof'' required in the Criminal Case and in the Civil Suit being different and much lighter, the result of the Criminal Case cannot have much bearing on the outcome of the Civil Suit. 17. The impugned order passed by the Trial Court goes to show that, as the Petitioners have raised these triable issues, the leave was granted, rejecting the Summons for Judgment. However, having regard to the fact that, the amount was claimed towards the delivery of the goods and towards payment thereof, the cheques were issued, which came to be dishonoured, the Trial Court has rightly deemed it proper to grant conditional leave by directing the Petitioners to deposit the outstanding principal amount of Rs. 15,61,024/-. 18. The impugned order passed by the Trial Court being just, legal and correct, no fault can be found therewith. Hence, the Writ Petition, being without merits, stands dismissed. 19. At this stage, learned counsel for the Petitioners requests that the Petitioners may be granted four weeks time to deposit the principal amount of Rs. 15,61,024/-, as ordered by the Trial Court. The request is granted. 20. Rule is discharged.