Reached Daily Limit?

Explore a new way of legal research!

Click Here
Delhi High CourtIndian Cases

Indian Iron And Steel Company Ltd. vs Nada Brothers [Along With Ia. No. 2408 In … on 22 July 2004

Print Friendly, PDF & Email

Delhi High Court
Indian Iron And Steel Company Ltd. vs Nada Brothers [Along With Ia. No. 2408 In … on 22 July, 2004
Equivalent citations: I(2005)BC481, 113(2004)DLT37, 2004(76)DRJ208
Author: R.C. Jain
Bench: R.C. Jain

R.C. Jain, J.

1. This order will govern the disposal of the above referred three applications moved on behalf of the respective defendant under Order 37 Rule 3(5) CPC read with Section 151 CPC seeking leave to defend the summary suits filed by the plaintiff.

2. The relevant facts and circumstances leading to the above applications in brief are that M/s Indian Iron & Steel Company Limited has filed the above referred three suits under the provisions of Rule 37 CPC for recovery of Rs. 63,85,547.37 paise (claim in Suit No. 2290/1994); Rs. 74,17,775.67 paise (claim in Suit No. 2335/1994); and for recovery of Rs. 16,18,344.47 (claim in Suit No. 2291/1994) with pendente lite and future interest with the averments and allegations that it is a Government company, a subsidiary of M/s Steel Authority of India Limited (SAIL), and the plaints have been signed and the suit instituted by authorised representative of the plaintiff namely Mr. N. Sarkar. The plaintiff, inter alia, is engaged in the business of supply of its iron and steel products to its consumers, traders and merchants on the terms and conditions contained in the delivery order, authorisation letter, gate pass and delivery note. Defendant a partnership firm is engaged in the business of manufacture of trailors for tractors, jeeps and steel fabrication and had been purchasing goods from the plaintiff initially against advance payment and subsequently on credit basis. During the period of 1992-93 the defendant purchased various items of iron and steel manufactured by the plaintiff on credit basis on the strength of delivery orders, authorisation letters and delivery notes and took delivery of the said goods. The defendant, however, failed to make the payment of the outstanding price of goods even after 30 days period and so they were called upon to make the payment of outstanding amounts through communications and ultimately through a legal notice but in vain.

3. The suits were registered as summary suits within the meaning of Order 37 CPC and summons for appearance were issued in the first instance and the defendants had put in appearance. Later pursuant to issuance of summons for judgment, the defendants have filed the above referred applications under Order 37 Rule 3(5) CPC for grant of leave to defend the said suits. The detailed facts and circumstances, reasons and the grounds on which the leave to defend has been sought are mentioned in the affidavit of the partner of the defendant. A careful perusal of the same would show that the defendants seek leave of the Court to defend the suits filed by the plaintiff mainly on the following grounds:

(i) The suits filed by the plaintiff are not summary suits within the meaning of Order 37 CPC;
(ii) Earlier suits filed by the defendant against the plaintiff for rendition of accounts etc. are pending in this Court and the proceedings stayed therein at the behest of the plaintiff as it was alleged that the plaintiff company had approached the BIFR for being declared as a sick company; and
(iii) The amount claimed in the suit is not due and payable by the plaintiff because the defendant is entitled to a rebate on the bills as per policy and compensation towards notional losses suffered by them.
4. I have heard Mr. Bhattacharya, learned counsel appearing for the plaintiff and Mr. Sanjay Gupta, learned counsel representing the defendant/applicant and have given my thoughtful consideration to their respective submissions.

5. Mr. Sanjay Gupta, learned counsel for the defendant has urged that the present suits are not covered by clause 2(b) of Order 37 CPC because no definite terms and conditions were agreed and arrived between the parties in respect of the alleged transactions and there existed no written agreement between the parties. On the other hand, Mr. Bhattacharya, learned counsel for the plaintiff has urged that plaintiff’s suits are summary suits for the recovery of unpaid price of goods supplied by the plaintiff to the defendant pursuant to a contract which was arrived between the parties through various documents like delivery order, authorisation letter and delivery note, pursuant to which the goods were supplied by the plaintiff and received by the defendant.

6. Order 37 Rule 2 provides what classes of the suits can be filed and tried under summary procedure and reads as under:-

“2. Institution of summary suits.__ (1) A suit, to which this Order applies, may if the plaintiff desires to proceed hereunder, be instituted by presenting a plaint which shall contain,__
(a) a specific averment to the effect that the suit is filed under this Order.
(b) that no relief, which does not fall within the ambit of this rule, has been claimed in the plaint; and
(c) the following inscription, mmediately below the number of the suit in the title of the suit, namely:
“(Under Order xxxvII of the Code of Civil Procedure, 1908)”.
(2) The summons of the suit shall be in Form No. 4 in Appendix B or in such other Form as may, from time to time, be prescribed.

(3) The defendant shall not defend the suit referred to in sub-rule (1) unless he enters an appearance and in default of his entering an appearance the allegations in the plaint shall be deemed to be admitted and the plaintiff shall be entitled to a decree for any sum, not exceeding the sum mentioned in the summons, together with interest at the rate specified, if any, up to the date of the decree and such sum for costs as may be determined by the High Court from time to time by rules made in that behalf and such decree may be executed forthwith.”

7. A bare look at the aforesaid provisions would make it abundantly clear that the summary procedure is applicable in respect of two classes of suit:

(i) The suits upon bills of exchange, the hundies and promissory notes;
(ii) The suit for recovery of dues or liquidated demand in money which is payable by the defendant out of written contract or an agreement, or a guarantee given in respect of debt or a liquidated demand.
8. The expression “written contract” appearing in the above referred clause does not necessarily mean a document containing detailed terms and conditions of the contract having signature of both the parties. Correspondence exchange between the parties can constitute a valid agreement. In the present case it is to be seen as to whether such an agreement came into being between the parties. It is not disputed that the plaintiff supplied different kinds of steel to the defendant by means of delivery order addressed to the defendant and the defendant obtained delivery of the goods through authorisation letter and delivery note in pursuance to the said delivery order. The delivery order clearly detailed out the description of the goods and quantity of the goods supplied and the value of the goods and the fact whether the goods were being supplied on credit or payment or advance payment. Receipt of the goods by the defendant pursuant to the delivery order and on the basis of authorization order would clearly constitute an agreement between the parties. The question as to whether invoices or bills are “written contracts” within the contemplation of Order 37 CPC is no longer open for debate and the question stands fully settled through a catena of judgments of this Court in M/s Punjab Pen House Vs. Samrat Bicycle Ltd. ; Corporate Voice (Pvt.) Ltd. Vs. Uniroll Leather India Ltd. ; Beacon Electronics Vs. Sylvania and Laxman Ltd., 1998(3) Apex Decisions (Delhi) 141 and KLG Steel Ltd. Vs. Fujitsu ICIM Ltd., wherein it has been held that such bills or invoices are written contracts within the meaning of sub-clause(2) of Rule 2 of Order 37. From the correspondence ensued between the parties after the supply of the goods, it would be further manifest that the plaintiff supplied the goods to the defendant under an agreement. This Court has, therefore, no hesitation in holding that the present suits filed by the plaintiff for the recovery of unpaid price of the goods under Order 37 CPC are summary suits and summary procedure can be applied to their trial.

9. So far as the next submission of learned counsel for the defendant that the defendant is entitled to leave to defend the summary suits because the defendant had earlier filed a suit for accounting against the present plaintiff which are pending in this Court and which have been stayed on the application of the plaintiff alleging that they have approached the BIFR, this Court is clearly of the opinion that there is no bar for the plaintiff to file the suit for recovery of the amount due to them. The bar of Section 22 is applicable to suits filed against the company which has approached the BIFR with application for declaring a sick unit and not vise-versa. Even otherwise mere filing of a suit for accounting by itself will not raise any friable issue and the defendant is called upon to show the existence of a friable issue in the present suit. I, therefore, see no merits in this contention of the defendant.

10. Mr. Sanjay Gupta, learned counsel for the defendant has next argued that in terms of the policy of the plaintiff, the plaintiff was entitled to the following concessions:

(i) Rebate on the bills as per policy; and
(ii) Compensation towards notional losses.
Counsel for the defendant could not point out that there existed any such policy of the plaintiff under which the dealers like the defendant were entitled to any rebate / concessions of the above kind. There is also nothing to show that there existed any agreement between the parties which allow such rebate on the bills and compensation towards notional losses.

11. Mr. Gupta, counsel for the defendant has referred to a few notices issued by the Steel Authority of India Limited (SAIL) in the year 1989-90 for sale of premium items to customers who have compensation liabilities. Reference has also been made to a similar notice dated 08.9.1994. Mr. Bhattacharya, counsel for the plaintiff has denied that the plaintiff had any such policy of granting compensation towards notional losses allegedly suffered by a dealer. On the other hand, he submitted that the plaintiff was not bound to compensate the defendant for any such notional losses alleged to have been incurred by the defendant. It is pertinent to note here that on the request of the defendant they were afforded a number of opportunities to produce their account books which could explain if the defendant had incurred any losses and had claimed any compensation towards the notional losses. Despite several opportunities the defendant has failed to file the said accounts and it was made clear to the defendant that non-production of the accounts by the defendant may call for an adverse inference against the defendant. On the face of this position, an adverse inference is warranted against the defendant for non-production of their accounts and it can be safely held that there was no liability on the part of the plaintiff to compensate the defendant for alleged notional loss. So far as the question of rebate is concerned, it would be apparent from the statement of accounts filed by the plaintiff that requisite rebate has been granted to the defendant on the purchase of various quantities of material and the net amount was worked out after settling the rebate amount. It is not disputed that the goods were not received by the defendant.

12. Learned counsel for the defendant has strongly urged that the question as to whether the defendant was entitled to any compensation towards the notional losses and, if so, to what extent, raises a friable issue and can only be answered after the defendant is granted leave to defend the suit and the parties go to a full-fledged trial. It is a settled legal position that if there is a friable issue, unconditional leave to defend must be granted and if the defense is false or frivolous, leave to defend should be refused altogether. In the case of M/s Michalec Engineers and Manufactures Vs. M/s Basic Equipment Corporation, the Supreme Court has laid down the principles about granting leave to defend, which need not be reproduced. For grant of leave to defend a summary suit for the recovery of money, the defendant must show that they have a substantial defense and a friable issue to raise that their defense is not frivolous or vexatious.

13. For the reasons as noticed above, this Court has no hesitation in holding that the defendant has miserably failed to show that they have a defense, what to talk of a substantial defense or a friable issue, in the present case.

14. Once it is found that the defendants are not entitled to leave to defend, the question which needs consideration is whether the plaintiff’s suits can be decreed in toto for the entire claim, i.e. the principal and interest. Mr. Bhattacharya, learned counsel appearing for the plaintiff has submitted that interest ranging from 18.5% to 21.5% have been charged on the outstanding amount after a period of 30 days of the supply of goods which rate of interest is stated to be in accordance with the policy of the plaintiff to charge 2% over and above the bank rate of interest. In the opinion of this Court the plaintiff is entitled to interest on the unpaid price of the goods as the payment of price was not made within 30 days of the receipt of the goods.

15. In the result, IA Nos.12490/95, 11264/95, 2408/96 & 8715/96 in CS(OS) No. 2290/94; IA Nos.11832/95, 4430/95 & 9479/98 in CS(OS) No. 2335/1994 and IA Nos.12489/95, 11267/95, 12477/96 & 8716/96 in CS(OS) 2291/94 are hereby dismissed and suits of the plaintiff are hereby decreed as under:

(i) Suit No. 2290/1994 for recovery of Rs. 63,85,547.37 with pendente lite and future interest @12% per annum with the cost of the suit;
(ii) Suit No. 2335/1994 for recovery of Rs. 74,17,775.67 with pendente lite and future interest @12% per annum with the cost of the suit; and
(iii) Suit No. 2291/1994 for recovery of Rs. 16,18,344.47 with pendente lite and future interest @12% per annum with the cost of the suit.
16. Decree sheets be drawn accordingly.

17. All pending applications are accordingly disposed of. Let copies of this order be placed on record of C.S.(OS) Nos. 2290/1994 and 2291/1994.