Mr. Jain submitted that as per the averments made in the plaint as also in the affidavit of summons for Judgment, suit is purportedly based on running account, maintained by the plaintiff of the transactions with the defendant in the books of accounts. Accordingly, he submits that the suit is based on running account and would not fall within the ambit of Order xxxvII CPC.
The said submission is misconceived. The suit is based on a written contract comprising the offer, its acceptance by issuance of purchase orders and raising of invoices in execution thereof. These constitute the written contract. The amounts claimed are those due in the suit under the above written contract. Additionally, reliance has been placed on the acknowledgment and confirmation of balance issued by the defendant. The mere averment in the plaintiff that the plaintiff also maintains a running account, reflecting the price of the goods supplied and the payments made therefore, does not change the nature of the suit as in one being based on a running account. The mere maintenance of a running account does not disentitle the plaintiff from filing the suit under Order xxxvII, CPC, based on a written contract and acknowledgment in writing.
Delhi High Court
Dura-Line India Pvt. Ltd. vs Bpl Broadband Network Pvt. Ltd. on 2 December, 2003
Equivalent citations: AIR 2004 Delhi 186, III (2004) BC 391
1. By IA No. 2294/2002, under Order xxxvII, Rule 3(5) read with Section 151 of the Code of Civil Procedure defendant seeks unconditional leave to contest the suit. Plaintiff M/s. Dura-Line India Pvt. Ltd.. formerly known as M/s. Bharti Dura-Line Limited, has Instituted the present suit under Order xxxvII, CPC, claiming a sum of Rs. 35,88,620 (Rs. Thirty five lacs eighty eight thousand six hundred twenty only) together with costs. Plaintiff also seeks pendehte lite and future interest at the rate of 24 per cent per annum.
Upon summons being issued under Order xxxvII CPC, defendant entered appearance accompanied with an application for condensation of delay in entering appearance. Vide order dated 14-2-20(32, delay in entering appearance was condoned. Plaintiff took out summons for judgment in response to which the defendant has filed the above application, seeking leave to contest.
2. Before considering the grounds urged in support of the application for unconditional leave to contest the suit, the facts in brief as they emerge from the plaint, application and admitted documents may be noted.
3. Plaintiffs case in brief is that it is engaged, inter alia, in the business of manufacturing and sale of "Permanently Solid Lubricated Silicore HDPE Telecom Ducts, its associated accessories, tools, cable jet, super get machines etc." Defendant approached the plaintiff and made enquiries regarding the supply of the above, products. Plaintiff gave its offer on 22-6-2000, setting out the price and other terms. Plaintiff reL vised the above offer vide its letter dated 25-10-2000. Defendant in response to the plaintiffs revised offer, issued five purchase orders, detailed as under :
(1) Purchase Order No. BIPL-P/1025/ PO1038 dated 21-9-2000
(ii) Purchase Order No. BIPL-P/1025/ PO1049 dated 9-10-2000
(iii) Purchase Order No. BIPL-P/1025/ PO1065 dated 8-11-2000
(iv) Purchase Order No. BIPL-P/1025/ PO1066 dated 8-11-2000
(v) Purchase Order No. BIPL-P/1025/ PO 1088 dated 15-12-2000
4. The goods, ordered by the defendant, were supplied by the plaintiff company and delivered to the defendant. Plaintiff has given in para 6 of the plaint, the details of the purchase orders, execution thereof and raising of the invoices in respect thereof. Plaintiff company also executed similar orders, received from another group company of the defendant, namely. M/s. BPL, Inovision Ltd. Correspondence was exchanged between the plaintiff and defendant. Reference in the correspondence, at times, is to the entire outstanding of the BPL group of companies. Plaintiff, however, is relying on the correspondence, relating to the dues of the defendant company.
5. Plaintiff company maintains a running account in its books of the dealings with the defendant, Plaintiff has produced on record the statement of account as also the confirmation of the statement of account, as given by the defendant (Annexure P. 22) appearing at page 107 of the paper book. Defendant confirmed a debit balance of Rs. 29,09,052/- (Rs. Twenty nine lacs nine thousand fifty two only), as due from the defendant to the plaintiff as on 26-9-2001. Plaintiff relies on letters dated 10-4-2001 and 8-6-2001. Defendant, in response, accepted that the amount has been outstanding for long and indicated end of May, 2001, as the date by which the outstanding amount of payment could be released. In the letter of 8-6-2001, the defendant expressed that due to internal compulsion, they were unable to give immediate payment schedule and requested the plaintiff to bear with them, assuming that they were drawing up the dues clearance plan and would intimate them shortly. Again, defendant vide its letter dated 3-7-2001, stated as under :--
"I pretty much understand your predicament. We are working on a solution, please bear with us. I know it may mean nothing to you until you see the money but I can assure you that there is not going to be an extensive delay."
6. Lastly vide letter dated 5-7-2001, (Annexure P. 18), defendant urged as under:--
"We note with concern our outstanding dues of Rs. : 31 lacs payable to you towards supply of HDPE ducts. Due to very tight liquidity situation that we are presently facing, we are unable to settle your dues. However, we would endeavor our best to clear part payment of Rs. 5 lacs during 2nd week of July, 2001. We request you to kindly bear with us.
7. Having noticed the factual matrix, let us consider the pleas raised by the defendant in the application for leave to contest and as urged before the Court by Mr. Sanjay Jain, learned counsel for the defendant.
Suit is based on running account and not maintainable within the ambit of Order xxxvII CPC.
Mr. Jain submitted that as per the averments made in the plaint as also in the affidavit of summons for Judgment, suit is purportedly based on running account, maintained by the plaintiff of the transactions with the defendant in the books of accounts. Accordingly, he submits that the suit is based on running account and would not fall within the ambit of Order xxxvII CPC.
The said submission is misconceived. The suit is based on a written contract comprising the offer, its acceptance by issuance of purchase orders and raising of invoices in execution thereof. These constitute the written contract. The amounts claimed are those due in the suit under the above written contract. Additionally, reliance has been placed on the acknowledgment and confirmation of balance issued by the defendant. The mere averment in the plaintiff that the plaintiff also maintains a running account, reflecting the price of the goods supplied and the payments made therefore, does not change the nature of the suit as in one being based on a running account. The mere maintenance of a running account does not disentitle the plaintiff from filing the suit under Order xxxvII, CPC, based on a written contract and acknowledgment in writing.
9. Point No. 11.
Courts at Delhi do not have territorial jurisdiction.
Mr. Sanjay Jain submitted that the contract between the parties is stated to be contained in the letter of offer of the plaintiff and the purchase orders issued by the defendant. The purchase orders provide, "Any dispute relating to the purchase orders shall be deemed to have arisen in Karnataka/ Kerala and shall be subject to adjudication by a competent Court in Karnataka/Kerala. Apart from the aforesaid specific term, Mr. Jain submits that the material part of cause of action had arisen in Bangalore, inasmuch as the contract was concluded at Bangalore from where the purchase orders were issued. The goods were dispatched by the plaintiff from Goa and supplied at Bangalore. Payments were also made from Bangalore. It was also pointed out that few of the invoices Issued by the plaintiff itself carried a legend "subject to Goa Jurisdiction." In the light of the foregoing, he submits that the jurisdiction could at best be in Karnataka, Kerala or Goa but not Delhi. He submits that except for the receipt of the purchase order in Delhi, no other part of cause of action had arisen in Delhi. In these circumstances, Delhi Courts would not have jurisdiction.
The plea of lack of Jurisdiction of Delhi Courts is again devoid of merit. It is not disputed that in response to the offer made from Delhi, the purchase orders issued by the defendant were received at Delhi. Hence the communication of the acceptance was at Delhi. Invoices raised by the plaintiff, which were accepted and on the basis of which certain payments are sought to be made carried the following clause :
"The parties hereto unconditionally and irrevocably agree to submit the exclusive jurisdiction competent of the Courts in New Delhi only with regard to any question or matter arising out of these terms and conditions and any other documents that may be executed by the parties hereto or any of them in pursuance hereof or arising herefrom."
10. Learned counsel for the plaintiff has also explained that to avail of benefit in sales tax some of the invoices carried the legend, "subject to Goa Jurisdiction". Most of the invoices carried the legend, "subject to Delhi jurisdiction". Apart from this, Clause 10, as noticed above, confined the Jurisdiction to New Delhi, as per the invoice raised after issuance of the purchase order. Payments have also been made at New Delhi. Undoubtedly, this is a case, where the material part of cause of action, namely, offer emanated from Delhi, acceptance by issuance of purchase order was received at Delhi. Contract was concluded at New Delhi. The payments have been received at Delhi. In a case, where the purchase orders or invoices carry conflicting clauses purporting to have exclusion of jurisdiction, at variance, provisions of Section 20 of the Code of Civil Procedure are applicable to resolve the issue.
11. The following observations of the Supreme Court in ABC Laminart Pvt. Ltd. v. A. P. Agencies, Salem, are relevant for this purpose :
"The jurisdiction of the Court in matter of a contract will depend on the situs of the contract and the cause of action arising through connecting factors. A cause of action is a bundle of facts which taken with the law applicable to them gives the plaintiff a right to relief against the defendant. It must include some act done by the defendant since In the absence of such an act ho Cause of action can possibly accrue. It is not limited to the actual infringement of the right sued on but includes all the material facts on which it is founded. It does not comprise evidence necessary for the plaintiff to prove to enable him to obtain a decree. Everything which if not proved would give the defendant a right to immediate judgment must be part of the cause of action. But it has no relief whatever to the defense which may be set up by the defendant nor does it depend upon the character of the relief prayed for by the plaintiff.
In a suit for damages for breach of contract the cause of action consists of the making of the contract, and of its breach, so that the suit may be filed either at the place where the contract was made or at the place where it should have been performed and the breach occurred. The determination of the place where the contract was made is part of the law of contract. Ordinarily, acceptance of an offer and its intimation result in a contract and hence a suit can be filed in a Court, within whose Jurisdiction the acceptance was communicated. The performance of a contract is part of cause of action and a suit in respect of the breach can always be filed at the place where the contract should have been performed or its performance completed. If the contract is to be performed at the place where actions are to be rendered and payment is to be made by the agent. Part of cause of action arises where money is expressly or impliedly payable under a contract. In cases of repudiation of a contract, the place where repudiation is received is the place where the suit would lie. If contract is pleaded as part of the cause of action giving jurisdiction to the Court where the suit is filed and that contact is found to be invalid, such part of cause of action disappears.
12. The contract having been concluded in Delhi, payments being received in Delhi, material part of cause of action had arisen in Delhi, Delhi Courts would have jurisdiction even if the term of invoice conferring exclusive jurisdiction to Goa is not considered. The plea and objection of defendant of lack of Jurisdiction is devoid of merit.
13. Point III.
Claim for interest at 24% in the absence of any agreement, exorbitant and not sustainable.
Defendant also questions the claim for interest at the rate of 24 per cent per annum. A perusal of the terms and conditions on the invoices show that interest at the rate of 24 per cent per annum was payable. Hence, the submission of Mr. Jain that there was no agreed rate of interest and the claim for interest at the rate of 24 per cent per annum is not correct as the conditions of invoice itself stipulated the rate of interest itself.
14. Point IV Delayed supplies, damages and loss suffered by the defendant raise friable issues entitling defendant to leave to contest.
Mr. Jain submits that defendant was part of a consortium, comprising BPL Broadband Network Pvt. Ltd., Spectranet Ltd. Spice Communications Ltd., Bharti Mobile Ltd., Indusind Media Communication Ltd. Defendant's objective was to provide an excellent fibre based IP network with additional capacity of fibres and bandwidth to lease out to other service providers as an infrastructure provider. It is in this connection that the defendant approached the plaintiff for supply of telecom ducts. Time was the essence of the contract. Defendant required digging of trenches on public roads, laying the cable ducts and restoring the dug up areas to their original condition for use of public. Hence, timely supply was critical. Plaintiff is stated to have delayed the supply time and again. The ducts were supplied only on 11-10-2001. Meanwhile, trenches got filled up by rain water. There was also short supply. The Bangalore Mahanagar Palika also imposed penalty for delay in completion of the work, amounting to Rs. 16 lacs out of which Rs. 3.3 lacs was imposed on the defendant, as its share.
15. The defendant has produced an inter-office dated 25th July, 2000, regarding damage to 3000 metres duct out of 24000 metres of duct received. It was mentioned in the memo that in view of the trenches being in a highly populated areas, the same would have to be closed temporarily to be reopened when replacement supplies were received from the plaintiff. The Purchase Department also wrote a letter dated 7th August, 2000, to the plaintiff complaining about the above damaged duct of 3000 metres. Thereafter, the defendant vide its letter of 3rd September, 2001 wrote to the plaintiff seeking reconciliation of quality of HDP duct supplied. The details of losses given in the letter are as under :--
Sri Purchase Order No. Loss suffered
No.
1. 1038 : delayed supplies Rs. 4.5 lakhs.
2. 1065 : damaged supplies
due to fire in the lorry Rs. 1.75 lakhs.
3. 1229 : damage to 3000 mts.
Duct Rs. 2.5 lakhs
16. Apart from this, the plaintiff also claimed Rs. 3.3 lakhs as penalty imposed by Bangalore Mahanagar Palika. The total loss thus claimed is Rs. 12.05 lakhs. The above claims on account of losses suffered for delayed supplies, damages for which only two letters dated 7th August, 2000 and 3rd August, 2001 are stated to have been written would have to be viewed along with the repeated acknowledgements of liability given by the defendants as noticed in paras 4-6 of the judgment hereinbefore. The first thing to be noticed is that the receipt of goods from the plaintiffs is not disputed, except for the belated claims sought to be raised on account of damaged supply, alleged short supply. As regards claim for 3000 meters of damaged duct it may be noticed that the price of the duct itself is Rs. 97,500/- while the loss claimed is Rs. 2.5 lakhs. As regards, the delay In supplies, it may be noticed that one of the terms of the invoice was that time was not the essence of the contract. The defendant in terms of Condition 11 of the invoice were entitled to raise debit notes in case of rejection, replacement and shortages were not made available within 60 days. There is nothing on record to show that the defendants raised any debit notes. The plain-tiff in the rejoinder has denied any loss being caused on account of short supply or delayed supplies. There is nothing on record to show that the penalty of Rs. 3.3 lakhs allegedly levied by Bangalore Mahanagar Palika was attributable to any defective or delayed supply by the defendants. The plaintiffs could have no liability for any penalty imposed on the defendant on account of latter's failures, which could even be for non-performance by the defendants, on account of variety of reasons not directly relatable to the plaintiffs supply. What is significant is that contemporaneously the defendants have acknowledged their liability. The defendants on their letterheads, as late as 27th September, 2001, have confirmed the debit balance in their books of Rs. 29,09,052/-. This is after the letter dated 3rd September, 2001. It is of no consequence that one or two of the acknowledgments have been written on the letter heads of another group of companies as long as it can be seen that it pertains to the defendants. Moreover, the acknowledgment of butstandings is also in the hand of the Chairman of the defendants' group of companies. The factum of acceptance of invoices based on agreed price, terms and conditions as also the acknowledgement of liability negate the plea of damages and losses now sought to be raised as essentially being an afterthought.
17. Let us look at the plea of the defendants in another perspective. The total claim sought to be raised is of Rs. 12.05 lakhs. The invoice contains a stipulation regarding payment of interest in the case of delayed payment @ 24% per annum. The interest Itself on the said amount would be over Rs. 14 lakhs which would more than off set, the amount claimed by way of damages to be proved by defendant. While as noticed earlier, the price of the duct which the defendant is claiming at Rs. 2.5 lakhs as damages suffered, is Rs. 97,500/- and there is no basis or particulars disclosed for the claim of Rs. 4.5 lakhs of damages as also for Rs. 3.30 lakhs claimed as penalty attributable to the plaintiff s breach.
18. The legal principles evolved by Judicial pronouncements for grant of leave to contest in a summary suit are fairly well settled. Reference is invited to Mechalee Engineers and Manufactures v. Basi Equipment Corporation , Mrs. Raj Duggal v. Ramesh Kumar Bansal, andFirm New Afghan Co. v. Firm Sadhu Singh Thakar Singh .
19. Applying the judicial principles, as enunciated into the facts of the present case and considering the nature of pleas and objections on maintainability, it is at best a case where defendants are to be permitted to establish a defense on the basis of damages and losses suffered on account of delayed or damaged supplies which has to be on terms.
20. Keeping in mind the facts and pleas as disclosed above, the order which commends to the Court is to direct the defendant to deposit, within four weeks, the acknowledged principal sum of Rs. 29,09,052/- as a condition precedent for grant of leave to contest, in case, the defendant fails to deposit the amount, as aforesaid, the application for leave to contest shall stand dismissed and suit decreed, as prayed,
21. IA No. 2294/02, accordingly, stands disposed of in above terms.
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