HC Delhi (31.05.2005) in Bharat Forge Ltd. vs Onil Gulati [Equivalent citations: AIR 2005 Delhi 369, IV (2005) BC 201, 121 (2005) DLT 357, 2005 (83) DRJ 140] held that;
we have noticed the invoices clearly contain the terms of supply and other requisite terms, price for effecting the sale of goods is given. The invoices have been acted upon, accepted and partly paid. In these circumstances, the preliminary objection raised as to the non maintainability of the suit under Order 37 is devoid of merit.
Excerpts of the order;
# 1. By this order, IA.3107/03, moved by the defendant under Order xxxvII Rule 3(5) read with Section 151 CPC, for grant of leave to contest, is being decided.
# 2. Plaintiff has filed the above suit for recovery of Rs. 26,29,858/- (Rs.twenty six lacs twenty nine thousand eight hundred fifty eight only) from the defendant under Order xxxvII of the Code of Civil Procedure as a summary suit. Plaintiff is a manufacturer of steel forgings and finished machine products. Plaintiff claims to have supplied to the defendant Crank shafts. The suit amount represents the balance outstanding price of the goods supplied amounting to Rs. 20,72,722, together with interest thereon at 18% per annum w.e.f. 29th September, 2002 to 11th April, 2002 i.e., the date of institution of the suit. Plaintiff also claims pendente lite and future interest at 18% per annum on the suit amount.
# 3. Plaintiff avers that it had raised bills/invoices amounting to Rs. 23,80,588/- (Rs.twenty three lacs eighty thousand five hundred eighty eight only), which were duly received and accepted by the defendant. The particulars of the invoices, totalling Rs. 23,80,588/- are given in para 4 of the plaint. Defendant in discharge of his liability issued, towards part payment of the outstanding amount, a cheque of Rs. 2,54,820/- dated 23.1.2001, drawn on Indian Bank, Kashmere Gate, New Delhi and promised to clear the balance outstanding at the earliest. The said cheque was dishonoured. Defendant was duly notified of the same. Defendant thereupon issued a bank draft of Rs. 50,000/- and three cheques bearing Nos. 179193 dated 5.6.2001 for Rs. 1,50,000/-, 174207 dated 10.11.2001 for Rs. 52,618/- and 174206 dated 10.11.2001 for Rs. 55,248/-, totalling Rs. 2,57,866/-. The bank draft and the aforesaid cheques were duly encashed, leaving a balance of Rs. 20,72,722/-(Rs.twenty lacs seventy two thousand seven hundred twenty two only). Plaintiff claims to be entitled to interest at 18% per annum w.e.f. 29.9.2000 till institution of the suit and for pendente lite and future interest at the same rate. Plaintiff, accordingly, has claimed interest of Rs. 5,57,636/- on the principal amount of the suit.
# 4. Plaintiff has averred in the plaint that the suit is filed under order xxxvII CPC being based on the written contract, bills/invoices, issued by the plaintiff, which were duly acknowledged by the defendant.
# 5. After issuance of summons for judgment, defendant had been duly served and had entered appearance. IA.3107/2003, seeking unconditional leave to contest has been moved. The application was moved on 10.3.2001. It is supported with the affidavit of one Sh. Sanjay Kumar Gulati, who claims to be the power of attorney holder and brother of the defendant. Defendant claims the suit to be an abuse of legal process, wherein the plaintiff has suppressed material facts. It is denied that there is any amount due. It is claimed that plaintiff, in fact, has to refund excess amount lying with it, after adjusting the amount for the defective and other materials returned. The suit, it is claimed, is filed without due authority. It is claimed that the suit is not maintainable under Order xxxvII CPC. Further several friable issues, arise requiring evidence. Hence, unconditional leave to contest ought to be granted.
# 6. Defendant claims that plaintiff has failed to take into account the goods for a total sum of Rs. 12,80,259/-, returned by him to the plaintiff on account of plaintiff's sister concern M/s.Azalya Enterprises (P) Ltd., Pune, on the condition that the said amount shall be credited to the account of the defendant with the plaintiff as M/s.Azalya Enterprises (P) Ltd., has wound up its activities. It is further averred that plaintiff has failed to take into account the goods for a sum of Rs. 3,06,121/-, which were duly returned. Again, it is contended that plaintiff has not taken into account the damaged goods for a sum of Rs. 4,25,283/-, to be replaced by the plaintiff. Bill Nos. 6001 dated 29.11.2000 for a sum of Rs. 2,12,326/-, 6002 dated 30.11.2000 for a sum of Rs. 1,67,405/-, 6003 dated 30.11.2000 for a sum of Rs. 2,12,326/-and 6004 dated 30.11.2000 for a sum of Rs. 3,43,739/-, totalling Rs. 9,35,796/- are stated to be false and fabricated ones, since no material had been purchased by the defendant against these bills. Without prejudice, defendant avers that the said bills pertain to transactions and for supplies to Jaipur, which would be outside the territorial jurisdiction. Defendant also avers that plaintiff vide letter dated 29.1.2003 had asked the defendant for confirmation of the outstanding balance as Rs. 9,77,143/-. Lastly, while denying the letter dated 19.11.2000, it is contended that even if the suit was based on the said letter and invoices, it would not fall within the ambit of order xxxvII CPC.
# 7. In reply to the application for leave to contest, plaintiff has averred that the defenses sought to be raised are sham and bogus. Defendant with a view to escape his liability has left the country with children and has been attempting even to sell immovable properties. The said Mr. Sanjay Kumar Gulati, who has filed the application and affidavit, seeking leave to contest has never dealt with the plaintiff. He was not aware of the facts and is not competent to swear the affidavit. It is also pleaded that the application for leave to contest is barred by limitation. However, this has not been substantiated and this point was not pressed.
# 8. Regarding the claim of having returned the goods valued at Rs. 12,87,000/- to the plaintiff on account plaintiff's sister concern M/s.Azalua Enterprises (P) Ltd., defendant is trying to mix up other transactions which the defendant might have entered into with M/s.Azalya Enterprises (P) Ltd. Plaintiff company and M/s.Azalya Enterprises (P) Ltd., are two separate and independent distinct companies and any transaction entered into by the defendant with M/s.Azalya Enterprises (P) Ltd., would be separate and distinct. It cannot be linked up with the present suit. Plaintiff also denies that M/s.Azalya Enterprises (P) Ltd., was wound up or that any agreement or condition was agreed by it to credit any amount of the defendant with the plaintiff. The denial of non receipt of bill Nos. 6001,6002,6003 and 6004, is stated to be false and wrongful. The goods were duly delivered to the defendant,who has acknowledged the receipt thereof. As regards the balance confirmation having been sought for the sum of Rs. 9,77,143.94, plaintiff has explained that the said confirmation was only in respect of the "machine component division" of plaintiff, as would be apparent from letter dated 29.1.2003. Defendant has attempted to create confusion by deliberately ignoring the confirmations for remaining amounts, as sought in letters dated 29.1.2003 and 22.2.2003, which had been produced on record along with reply to the application, as Annexures A-1 to A-4.
# 9. I have heard learned Senior Counsel for the defendant in support of the application and Senior Counsel for the plaintiff in opposition to the application for leave to contest. Coming to the question of whether the application for leave to contest discloses friable issues, so as to entitle the defendant to defend the suit or not, let us first consider the preliminary objections raised. Counsel for the defendant has urged that the suit filed is not maintainable on the basis of the invoices, as also the letters dated 19.12.2000, which fall outside the ambit of Order xxxvII CPC, requiring to be based on a written contract. Learned senior counsel for the plaintiff submits that plaintiff's suit is based on the bills/invoices, issued by it, which were duly received and acknowledged by the defendant. Plaintiff, apart from the invoices, filed two letters dated 19.12.2000, addressed to the Delhi Office and Jaipur Office of the defendant, giving particulars of the invoices for supplies made to Delhi branch and Jaipur branch of the defendant. The letters were duly acknowledged by the defendant, sole proprietor of M/s.Gulati Automobiles. The receipt of invoices and goods, therefore, stand duly acknowledged. The invoices carry the following terms:-
"1. Please send us your appropriate declaration, if any, under the Delhi Sales tax Act and the Central Sales Tax Act.
2. If the proper declaration is not received within one month from the date of billing our debit note will be sent for the difference of the tax.
3. Payment should be made by a 'Crossed Cheque' made paybale to Bharat Forge Limited.
4. Our risk ceases soon after the goods leave our premises."
# 10. Apart from the above four conditions, embodied in the four invoices, they carried the description of the goods and prices. Crank Shafts being goods within the meaning of Sale of Goods Act, the requirement under Section 4 of the Sale of Goods Act for transfer of property in goods was only an agreement by the seller to transfer to the purchaser the goods for a price. A fortiori, contract for sale need only to specify the description of the seller, the purchaser, the goods in question and the agreed price, besides the expression of the intent to sell and transfer. In the instant case, all the above requirements were duly met by the invoices together with the four conditions. The Statute itself provides for rights and liabilities of the parties under Sections 6 to 17 of the Act, including implied conditions as to the quality or fitness etc. Learned counsel, therefore, submits that in order to constitute a contract for sale of goods, it was not necessary for a formal written contract document to contain each and every provision, which governs the parties to the contract. The essential requirement of a written contract for sale of goods, therefore, duly stood satisfied with the invoices and letters of 19.12.2000.
# 11. That an invoice which incorporates the particulars of seller, purchaser, description of goods, weight, quantity, rates and price including sales tax and other dues, accompanied with additional terms as noticed in the present case would be regarded as a written contract on acceptance by the respondent is no longer res integra. Reference may usefully be made to the following judgments:-
(i) 2nd 1982 I Delhi, 320, Mrs. Sushila Mehta v. Sh. Bansi Lal Arora relevant paras 9,10 and 11
(ii) AIR 1992 Delhi I, Punjab Pen House v. Samarat Bicycle Ltd.
(iii) 67 (1997) DLT 13, Daya Chand Uttam Prakash Jain and Anr. v. Santosh Devi Sharma.
(iv) 1998 III AD (Delhi) 141, Beacon Electronics v. Sylvania & Laxman Ltd.
(vi) 2004 (76) DJR, 208, Indian Iron & Steel Company Ltd. v. Nada Brothers and Ors.
# 12. Defendants in support of their proposition that a suit based on invoices was not maintainable under the summary procedure had relied on the decision in A.R. Electronic Pvt. Ltd. v. R.K.Graphics Pvt. Ltd., reported at 2002(V) AD (Delhi) 651 and Simba F.R.P. (P) Ltd. v. Department of Tourism, Lucknow, U.P. Reported at 1995 (34) DRJ 273.
In the first case on facts the Court had reached the conclusion that the invoice apart from the price being given did not contain any terms and conditions entered into between the parties regarding the supply of goods and its payment. It was concluded that by no stretch of reasoning the invoices which were bereft of terms of supply could be treated as written contract between the parties as envisaged under clause (b) of Sub-rule (2) of Order 37 CPC. The second case was a decision by this Bench where again on facts it was found that suit which was based on the quotation and correspondence entered into did not constitute a written contract so as to be tried under Order 37 CPC. The Court reached the conclusion that based on the correspondence, there was no concluded agreement with regard to important and significant terms such as delivery, advance payment of price, freight and other charges. It could not be said that there was a concluded written contract which could be made the basis of a suit under Order 37 CPC. These cases, therefore, are no assistance to the defendant.
# 13. In the instant case, as we have noticed the invoices clearly contain the terms of supply and other requisite terms, price for effecting the sale of goods is given. The invoices have been acted upon, accepted and partly paid. In these circumstances, the preliminary objection raised as to the non maintainability of the suit under Order 37 is devoid of merit.
# 14. Considering the pleas sought to be raised of return of goods, defendant has prima facie failed to demonstrate that the goods for the value of Rs. 3,06,121/- were returned to the plaintiff. Barring some photocopies of certificates issued by the defendant itself have been produced on record. These are supported with some cash receipt of transporters, regarding boxes containing rejected material being sent. There is no written correspondence with regard to the goods being defective or being returned. No receipt or acknowledgment by the plaintiff of having received the returned goods has been enclosed. There is nothing produced on record to show that the defendant at any stage disputed its liability. Rather cheques issued in part payment were dishonoured for which the defendant issued fresh cheques, as noted earlier. There is nothing to support the defendants contention at this stage that the acknowledgment of liability as recorded in letters dated 19.12.2000 was false or forged. The said letters are duly signed by defendants and contain the acknowledgment of the amounts billed and due and receipt of material together with their seal. It is also significant that the defendant has, till the filing of the suit, not raised any specific claim in writing in this regard.
# 15. As far as the claim for having returned goods for a total sum of Rs. 12,80,259/- on account of plaintiff's sister concern M/s Azalya Enterprises (P) Ltd., the defendant has no doubt filed photocopies mentioning Code numbers of materials which carry the endorsement by the plaintiff. However, the said photocopies only carry the RR number which would signify the railway receipt. There is nothing in writing to show that such an agreement as is contended by the defendant was actually entered into.
# 16. Having noticed the factual aspects let me notice the legal principles evolved by judicial pronouncements for grant of leave to contest for summary suits. In Mechalec Engineers and Manufacturers v. Basic Equipment Corporation, AIR 1977 SC 577, the Surpeme Court set out the principles applicable in the form of following propositions:-
"(a) If the defendant satisfies the Court that he has a good defense to the claim on its merits the plaintiff is not entitled to leave to sign judgment and the defendant is entitled to unconditional leave to defend.
(b) if the defendant raises a friable issue indicating that he has a fair or bona fide or reasonable defense although not a positively good defense the plaintiff is not entitled to sign judgment and the defendant is entitled to unconditional leave to defend.
(c) If the defendant discloses such facts as may be deemed sufficient to entitle him to defend, that is to say, although the affidavit does not positively and immediately make it clear that he had a defense, yet shows such a state of facts as leads to the inference that at the trial of the action he may be able to establish a defense to the plaintiff's claim the plaintiff is not entitled to judgment and the defendant is entitled to leave to defend but in such a case the Court may in its discretion impose conditions as to the time or mode of trial but not as to payment into Court or furnishing security.
(d) If the defendant has no defense or the defense set up is illusory or sham or practically moonshine then ordinarily the plaintiff is entitled to leave to sign judgment and the defendant is not entitled to leave to defend.
(e) If the defendant has no defense or the defense is illusory or sham or practically moonshine then although ordinarily the plaintiff is entitled to leave to sign judgment, the Court may protect the plaintiff by only allowing the defense to proceed if the amount claimed is paid into Court or otherwise secured and give leave to the defendant on such condition, and thereby show mercy to the defendant by enabling him to try to prove a defense.
In Mrs. Raj Duggal v. Ramesh Kumar Bansal, AIR 1990 Supreme Court 2218 it was held:
"3. Leave is declined where the court is of the opinion that the grant of leave would merely enable the defendant to prolong the litigation by raising untenable and frivolous defenses. The test is to see whether the defense raises a real issue and not a sham one, in the sense that if the facts alleged by the defendant are established there would be a good or even a plausible defense on those facts. If the Court is satisfied about that leave must be given. If there is a friable issue in the sense that there is a fair dispute to be tried as to the meaning of a document on which the claim is based or uncertainty as to the amount actually due or where the alleged facts are of such a nature as to entitle the defendant to interrogate the plaintiff or to cross-examine his witnesses leave should not be denied. Where also, the defendant shows that even on a fair probability he has a bona fide defense, he ought to have leave. Summary judgment under Order 37 should not be granted where serious conflict as to matter of fact or where any difficulty on issues as to law arises. The Court should not reject the defense of the defendant merely because of its inherent implausibility or its inconsistency.
# 17. The defendants in the present suit while claiming an agreement reached for credit to be given on account of return of goods to M/s Azalea Enterprises (P) Ltd., by plaintiff, have not produced any documentation in support of the said agreement/understanding. Yet in view of photocopies of acknowledgments showing return of goods to the plaintiff, it should not result in the defendant being totally non-suited without an opportunity being granted to the defendant to prove the defense set up. Similar would be position with regard to the claim for return of goods for which photocopies of consignment notes have been produced. The defendant has failed to specify the extent and the value of the goods except giving the bald figures in the application for leave to contest.
In these circumstances, in my view, this would be a case which would fall within the category (e) of Mechalec Engineers and Manufactures v. Basic Equipment Corporation (Supra). Defendant can, therefore, be permitted to defend the suit only on terms and after securing and protecting the interest of the plaintiff.
In view of the foregoing discussion and keeping in view the legal principles as enunciated hereinbefore, IA. No. 3107/03 is allowed and leave to contest is granted, subject to the defendant depositing a sum of Rs. 20,72,722/- (Rs.twenty lacs seventy two thousand seven hundred twenty two only) in Court within two months from today. In case, defendant fails to deposit the amount, as aforesaid, within the stipulated period, leave to contest shall stand refused and suit shall stand decreed in the sum of Rs. 26,29,858/- (Rs.twenty six lacs twenty nine thousand eight hundred fifty eight only) together with pendente lite and future interest @ 18% per annum on the principal amount of the suit with cost, in favor of the plaintiff and against the defendant.
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