*IN THE HIGH COURT OF DELHI AT NEW DELHI
+ I.A.13552/2007 in CS(OS) 1802/2001
% Date of decision: 20.11.2008
M/S SAVEENA ENTERPRISES PVT. LTD ... Plaintiff
Through: Mr. Sanjay Poddar & Mr. Ramesh Ray,
Advocates
Versus
M/S KALATEX AND OTHERS .... Defendants
Through: Mr. H.S. Phoolka, Sr. Advocate & Ms.
Sunita Tiwari, Advocate
CORAM :-
HON'BLE MR. JUSTICE RAJIV SAHAI ENDLAW
1. Whether reporters of Local papers may
be allowed to see the judgment? Not necessary
2. To be referred to the reporter or not? Not necessary
3. Whether the judgment should be reported
in the Digest? Not necessary
RAJIV SAHAI ENDLAW, J.
1. The defendants seek leave to defend the suit for recovery of
Rs.24,75,607/- instituted under order 37 of the CPC.
2. It is the case in the plaint that the plaintiff has, from time to
time, sold/supplied goods to the defendant No.1 of which the other
defendants are the partners.
I.A.13552/2007 in CS(OS) 1802/2001 Page 1 of 10
3. The plaintiff is stated to have affected the sale on credit. The
plaintiff claims to have raised the bills for the goods sold from time to
time and the defendants are stated to have acknowledged the bills in
token of having received delivery of goods, and made payments from
time to time. As per the table set out in the plaint, the dates of the
bills of goods sold and delivered by the plaintiff to the defendants is
from 20th November, 1997 to 13th February, 1998. The table shows
transactions thereafter also of issuance of cheques by the defendants
to the plaintiff and issuance of a debit note by the plaintiff to the
defendants of the goods returned by the defendants. It is further the
case in the plaint that as per the agreement, the payment was to be
made within 45 days of the bill. As per the aforesaid table, as on 13th
February, 1998, i.e. till the date of the supplies, a sum of
Rs.20,81,875/- was due from the defendants to the plaintiff; as on 18th
August, 1998, a principal sum of Rs.14,24,352 was due and as on 9 th
August, 2001, after adding interest @24% per annum from July, 1998
to 9th August, 2001, a sum of Rs.24,75,607/- was shown due from the
defendants to the plaintiff.
4. It is further the case of the plaintiff that the plaintiff on 21st
August, 1998 sent a letter to the defendant No. 1 for confirming the
balance outstanding against the defendant No. 1 and the defendant
No. 1 sent a balance confirmation to the plaintiff through fax on 22 nd
August, 1998 and as per which balance confirmation, as per the
account books of the defendant No.1, as on 31st March, 1998 a sum of
Rs.21,75,142/- was due from the defendant No.1 to the plaintiff. In
this regard, it may be stated that as per the statement of accounts set
out by the plaintiff in the plaint, as on 23rd February, 1998 a sum of
Rs.21,75,602/- is shown due from the defendant.
I.A.13552/2007 in CS(OS) 1802/2001 Page 2 of 10
5. It is stated that the defendants have vide fax aforesaid admitted
an ascertained amount as due and payable to the plaintiff as on 31 st
March, 1998. The two cheques for Rs.5 lacs each stated to have been
issued by the defendants to the plaintiff were dishonoured leading to
the institution of complaints of offences under section 138 of the
Negotiable Instruments Act in the year 2000 itself before the court at
Ghaziabad.
6. It is the case in the plaint itself that the defendants were
acquitted in the said complaint cases vide judgment dated 20th
December, 2000 against which the plaintiff is stated to have preferred
revision. The plaintiff after the dismissal of the complaint cases, on
20th August, 2001 instituted the present suit. Para 13 of the plaint is
as under:
“That the plaintiff is filing the above suit for
recovery of Rs.24,75,607.00 based on the
written agreement between the parties as
contemplated under order 37 of the CPC”.
7. In para 16 of the plaint, it is stated that the cause of action for
the suit accrued to the plaintiff on the dates on which the defendants
failed to make payment of the outstanding amount of the bills and also
on 22nd August, 1998 when the defendants admitted the liability in
writing.
8. The defendants seek leave to defend on inter-alia following
grounds:-
I.A.13552/2007 in CS(OS) 1802/2001 Page 3 of 10
i) t
hat the suit does not fall within the ambit of and is not
maintainable under Order 37 of the CPC.
ii) t
hat the claim in suit is barred by time, the supply is
alleged between 20th November, 1997 to 13th
February, 1998 and the rejected goods were received
back on 30th July,1998 and the suit filed more than
three years thereafter is ex-facie barred by time.
iii) T
he plaintiff has sought to extend the time by fax
communication dated 22nd August, 1998 original
whereof has not been filed and the photocopy cannot
be the basis of institution of a suit under order 37 of
the CPC and in any case the same has been
fabricated.
iv) A
ny agreement for payment of interest is denied
v) I
t is denied that the goods were supplied in time and it
is claimed that the defendants suffered owing to the
same.
vi) I
t is stated that post dated cheques were received by
the plaintiffs which were not returned by the plaintiff
in spite of taking back the rejected goods.
vii) T
he statement of accounts set out by the plaintiff in the
plaint is denied and reliance is placed on the
judgment dismissing the complaints under section
138 of the Negotiable Instruments Act.
viii) I
t is stated that the plaintiff did not intend to sue for
recovery of money and the suit has been filed with the
malafide intention only after the dismissal of the
complaints.
9. The plaintiff has filed reply to the application for leave to
defend in which the plaintiff in response to the ground of the claim
being barred by time has relied upon the confirmation vide fax dated
22nd August, 1998 of the defendant and further stated
“even otherwise, the last transaction took place
between the parties on 18.07.1998 when the debit note
I.A.13552/2007 in CS(OS) 1802/2001 Page 4 of 10
was issued by the defendants and the period of
limitation would thus start from the close of the year in
the financial year ending 31st March, 1999 and the suit
is admittedly within the period of three years even from
this date”.
10. The senior counsel for the defendants and the counsel for
the plaintiff have been heard. Besides the judgments cited during the
course of arguments, the counsel for the plaintiff has after the order
was reserved also filed copies of additional judgments along with
index. From a reading of the plaint, in my view, the suit would be
maintainable under order 37 of the CPC only on the basis of the fax
communication dated 22nd August, 1998 containing an admission of
liability and not on the basis of the bills. The counsel for the plaintiff
has relied upon DHL Worldwide Express Vs. Associated Buying
Service 79 (1999) DLT 168, G.E. Capital Services India Vs. G.
Neuro Med Diagnostic Centre Pvt. Ltd. 2007 (8) AD (Delhi) 464,
Rajender Kumar Khanna Vs. Oriental Insurance Co. 41 (1990)
DLT 176, Lohman Rausher GMBH Vs. Medi Sphere Marketing
Pvt. Ltd. 117 (2005) DLT 95, KLG Systel Ltd. Vs. Fujitsu ICIM Ltd.
92 (2001) DLT 88, M/s. M.D. Overseas Ltd. Vs. M/s Uma Shanker
Kamal Narayan AIR 2006 Delhi, 361 and the order dated 10th
February, 2006 in I.A. No.11284 of 2003 in CS (OS) 1221 of 2002 of
this court to contend that a suit under order 37 of the CPC would lie
on the basis of bills of supply of goods coupled with a statement of
accounts and on the parameters to be followed in grant of leave to
defendants and imposition of conditions while granting leave to
defend and has contended that though the defence of the defendants
is ex-facie false as borne out from the contemporaneous
correspondence, copies whereof though not referred to in the plaint
or filed therewith, were subsequently filed and stated to be forming
part of application for summons for judgment, if at all leave is to be
I.A.13552/2007 in CS(OS) 1802/2001 Page 5 of 10
granted, the same ought to be on condition of deposit. The counsel,
during the course of hearing had also relied upon Ramjan Ali Vs.
Khawja Meer Ahmed AIR 1940 Patna 6 on section 19 of the
Limitation Act.
11. Per contra, the senior counsel for the defendants has
relied upon M/s Sunil Enterprises Vs. SBI Commercial &
International Bank AIR 1998 SC 2317, State Bank of Saurashtra
Vs. Ashit Shipping Services Pvt. Ltd. AIR 2002 SC 1993 and John
Impex Pvt. Ltd. Vs. Surender Singh (2003) 9 SCC 176 (though with
respect to leave to defend under Rent Act) and urged that in the
present case, the defence of the defendants cannot be said to be
frivolous.
12. The law is now settled that a suit under order 37 of the
CPC, would lie on the basis of bills evidencing an agreement of sale of
goods. I, however, do not find the plaintiff to have instituted the
present suit on the basis of the said bills. A suit under order 37 on
the basis of bills would be maintainable when the amount of the bills
is claimed. In the present case, it is not the amount of the bills but
the amount claimed due after taking into account the payments made
and the value of the goods returned. Such amount due ceases to have
a character of the bill amount and upon dispute being raised by the
opposite party, the suit under order 37 would not be maintainable.
The suit has been instituted on the basis of a statement of accounts
coupled with admission of liability. It is the case of the plaintiff itself
that the bills were payable within 45 days of the date of the bill. As
aforesaid, the last of the bills alleged is of 13th February, 1998. The
I.A.13552/2007 in CS(OS) 1802/2001 Page 6 of 10
suit was instituted more than three years after 45 days of the last bill.
Article 15 of the Schedule 1 of the Limitation Act prescribes a period
of three years to institute a suit for the price of goods sold and
delivered to be paid after the expiry of a fixed period of credit,
commencing from the date when the period of credit expires. Section
18 of the Limitation Act extends the period of limitation from the date
when an acknowledgement of liability is made in writing. The
acknowledgement of liability claimed by the plaintiff in the present
case is not of liability for payment of the amount of any bills but of the
amount due under the statement of accounts. The fact that the
plaintiff has not sued on the bills but on a statement of accounts
coupled with acknowledgment is further borne out from the portion
earlier set out of the reply of the plaintiff to the application for leave
to defend whereby also the plaintiff has sought to bring the claim in
suit within time applying the Articles in Schedule 1 of the Limitation
Act relating to a suit for accounts. A suit for the balance due on an
account does not fall within the domain of order 37 of the CPC.
13. Thus as aforesaid, the suit under order 37 would lie only
on the acknowledgment dated 22 August, 1998 alleged by the
plaintiff. The plaintiff claims to have filed the original fax dated 22nd
August, 1998 containing admission of liability in the proceedings
under section 138 of the Negotiable Act and has filed a certified copy
thereof in this court. The senior counsel for the defendants on
instructions has denied that the original fax has been filed in those
proceedings and has argued that only a photocopy has been filed in
those proceedings also.
I.A.13552/2007 in CS(OS) 1802/2001 Page 7 of 10
14. Though, the counsel for the plaintiff has on the basis of
the contemporaneous correspondence argued that the fax dated 22nd
August, 1998 is in the normal course of the ensuing commercial
correspondence between the parties and that the said fax ought to be
believed by this court but the fact remains that the suit was not filed
basing on the said correspondence and copies thereof were not even
filed along with the suit. I do not consider it appropriate to consider
such correspondence at this stage.
15. In my view, the defendants are entitled in this case to
unconditional leave to defend for the following reasons:-
A. T
he plaintiff having for a period of more than three
years not instituted the suit for recovery of money and
having instituted the same only after dismissal of the
complaints under section 138 of the Negotiable
Instruments Act.
B. T
he decision whether the claim in suit within time or
not is dependent upon the fax dated 22nd August, 1998
aforesaid, the existence and dispatch whereof by the
defendant is seriously disputed.
C. T
he fax being signed by the “authorized representative”
of the defendants and not by any of the partners of the
defendants.
D. T
he name of the said authorized representatives of the
I.A.13552/2007 in CS(OS) 1802/2001 Page 8 of 10
defendants having not been disclosed anywhere, even
though the plaintiff has in contemporaneous
correspondence shown another letter purportedly
signed by the same authorized representative.
E. T
he complaint under section 138 of the Negotiable
Instruments Act with respect to the cheques given by
the defendants for payment of nearly the entire
principal amount claimed to be due having been
dismissed by the first court. Even though, the copy of
the said judgment has not been placed on the file but
the factum is admitted. On further inquiry, it has been
revealed that the complaints have been dismissed on
merits after recording of evidence and cross-
examination of witnesses. The fax forming the basis of
claim of the plaintiffs in the present suit and denied by
the defendants was admittedly before that court also.
That court has after trial not found offence U/s 138
Negotiable Instruments Act to have been not
committed by the defendants. Thus in the face of one
court after trial having disbelieved the principal
amount to have been due from the defendants to the
plaintiff, even though the revision against the same is
stated to be pending, the defence of the defendants is
not found to be such as to deprive the defendants of
an opportunity to lead evidence.
16. In Babbar Vision India Pvt. Ltd. Vs. Rama Vision Ltd.
99 (2002) DLT 556 Division Bench of this court has held that when
I.A.13552/2007 in CS(OS) 1802/2001 Page 9 of 10
defence raises a triable issue, leave must be granted unconditionally,
whether the defence is legal or equitable and even though it may not
ultimately turn out to be a good defence. The Apex Court also in
Milkhi Ram India Pvt. Ltd. Vs. Chaman Lal Brothers AIR 1965
SC1698 held that only when the court comes to the conclusion that
the defence is a sham one or is a fantastic or highly improbable,
would the court be justified in putting the defendant upon terms
before granting leave to defend. In the present case in the light of the
judgment of the court first trying the offence under section 138
Negotiable Instruments Act in favour of the defendants and in the
light of the claims in suit but for the alleged acknowledgement being
barred by the time, the defence is not found to be a sham or a
fantastic defence.
17. The application of the defendants is thus allowed, the
defendants are granted unconditional leave to defend.
RAJIV SAHAI ENDLAW
JUDGE
November 20, 2008
PP
I.A.13552/2007 in CS(OS) 1802/2001 Page 10 of 10