It is also being contended by Mr. Rajeev Sawhney, learned senior counsel for the Defendants that a summary suit under Order xxxvII C.P.C. is not permissible on the basis of a running account. This case has not been set up in either of the affidavits of the Defendants seeking Leave to Defend. Since it is legal in nature, I have considered it nevertheless. In my opinion, keeping in view the pronouncements in Daya Chand Uttam Prakash Jain & Another v. Santosh Devi Sharma (supra) this contention is not of substance and is rejected.
IN THE HIGH COURT OF DELHI
IA Nos. 968/99 and 1939/00 in Suit No. 1567/97
Decided On: 25.03.2003
Reliance Industries Ltd.
Vs.
Imperial Pigments (P) Ltd.
Vs.
Imperial Pigments (P) Ltd.
Coram:
Vikramajit Sen, J.
Vikramajit Sen, J.
Not only a written acknowledgement of debt by Defendant No. 2 but as a complementary feature, several cheques aggregating to the sum of Rs. 1.90 crores. So far as cheques are concerned, the Negotiable Instruments Act stipulates that there shall be a presumption as far as consideration for their issuance is concerned. This aspect of the case has not been answered by the Defendants. Although there is no material available on the record to indicate that deliveries were not effected, I need not go into this question since it is not the Defendants case that the bounced cheques were in respect of another series of transactions. Moreover the plethora of documentary evidence admitting and assuming liability cannot be ignored.
It is also being contended by senior counsel for the Defendants that a summary suit under Order xxxvII C.P.C. is not permissible on the basis of a running account. This case has not been set up in either of the affidavits of the Defendants seeking Leave to Defend. Since it is legal in nature, I have considered it nevertheless. Counsel for respondent has also relied on Sections 25, 126, 127 of the Indian Contract Act. In the Plaint it has been pleaded that the plaintiffs are entitled to claim interest at the rate of 24 per cent per annum as per the company's policy. Counsel for respondent has challenged this claim on the grounds of it being unilateral. I do not propose to go into this question in detail at the present stage and am of the opinion that interest at the rate of 12 per cent per annum should be calculated on the total quantum of the cheques which have been issued and thereafter dishonoured.
Leave to Defend is granted to the Defendants conditional on either of the Defendants depositing a sum of Rupees One Crore and Ninety Lakhs together with the interest thereon calculated at the rate of twelve per cent per annum from the date of the issuance of each of the cheque.
JUDGMENT
Vikramajit Sen, J.
1. By these Orders, I shall dispose off the Defendants applications (under Order xxxvII Rule 3(5) read with Section 151 of the C.P.C. praying for Leave to Defend the Suit) being IAs No. 968/99 [filed by Defendant No. 2] and I.A. 1939/00 [filed by Defendant No. 1].
2. The first question to be addressed is whether the parties had entered into a ' written contract ' on the breach of which this summary suit is founded. The plaintiff argues that all the terms of the parties engagement have been reduced to writing and can be found on the reverse side of each of its Invoices. I had the occasion to consider this very contention in the case titled KLG Systems Ltd. vs . Fujitsu ICIM Ltd., MANU/DE/0406/2001 : AIR2001Delhi357 . My conclusion was that " it is no longer rest integra that invoices/bills are ' written contracts' within the contemplation of this Order. Reference is directed to Messrs. Punjab Pen House v. Samrat Bicycles Ltd., MANU/DE/0001/1992 : AIR1992Delhi1 Corporate Voice (Pvt.) Ltd. v. Uniroll Leather India Ltd., MANU/DE/0450/1995 : 60(1995)DLT321 and Beacon Electronics v. Sylvania and Laxman Ltd., 1998 (3) A D 141." I may only add that if the transaction in question is covered by a single invoice or bill the party relying on it should be in a position to indubitably disclose that the adversary's attention was specifically drawn to the terms on the back of the bill, and that it consented to be bound to those terms by failing to lodge any demur. One must not lose sight of the reality that a person does not always read a bill or invoice from its start to its finish, especially the reverse side. Where the bill is preceded by a delivery challan which does not contain all the terms of the transaction, this presumption may be an exception. However, where there have been a series of transactions in respect of which identical terms are printed on the bill, especially where both parties are commercial entities, this presumption would become irresistible. In the case at hand, several supplies have been made and each one is covered by identical and replicated terms. I am in no manner of doubt that a written contract can be found in these invoices such as would sufficiently attract the rigours of Order xxxvII of the C.P.C.
3. The next point is obviously whether the Defendant's liability towards the sums claimed in the summary suit, or any lesser sums, is apparent on the face of the record. The Court must eschew a minute investigation into the rival cases, and if there is reasonable doubt in its mind, if there is only a preponderant possibility in the veracity of the plaintiff's claim, leave should be granted. The approach advocated by the Hon'ble Supreme Court in Mechalec Engineers & Manufacturers v. Basic Equipment Corporation, MANU/SC/0043/1976 : [1977]1SCR1060 should be adhered to since the spectrum of possibilities has been spelt out in that judgment. These have been adumbrated in this celebrated judgment to comprise- " (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 trivial 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 has 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". On the basis of these pronouncements, I am of the view that if the Court is presented with an acknowledgement of debt by the Defendant, no penumbra for speculation remains and the plaintiff is entitled to leave to sign judgment.
4. The plaintiff has filed the Invoices on which the suit is founded. Thirty-two Invoices pertain to M/s. Sai Polymers, 307, Guru Hari Kishan Nagar, Pashmi Vihar, New Delhi-110041, but this party has not been impleaded as a Defendant. There are several Invoices pertaining to Defendant No. 1. The plaintiff has also filed a letter dated 1.3.1995 addressed to it and authored by Defendant No. 2 on behalf of Defendant No. 1. In this letter Defendant No. 2 has voluntarily assumed "the responsibility of IMPERIAL PIGMENTS PVT. LTD. Business with RELIANCE INDUSTRIES LTD. IN P.V.C. RESIN THE ENTIRE LIABILITY IS MINE. The Business is done through M/s. Aqua Cross Enterprises Pvt. Ltd.". Similarly, the plaintiff has filed another letter which has been authored by Defendant No. 2 on behalf of Defendant No. 1 and is dated 24.8.1995. In this letter the failure to make payment was recorded and fifteen cheques were forwarded with a request to permit the Defendants to start making payment from 10th Septemberonwards. These cheques were dishonoured on presentation. The letter dated March 7, 1996 is of significance, and the relevant portions read thus:-
"Dear Sir,
This refers to our Reconciliation of Accounts with your Consignment Agent M/s. Aqua Cross Enterprises Pvt. Ltd. and in this regard I wish to confirm the following:-
1. In respect of M/s. Chemicals India's outstandings which has been duly cleared, any interest liability arising thereof, as per your company policy up to the extent of the principal amount of Rs.55 lacs, will be paid by us.
2. In respect of M/s. Sai Polymers, we accept the outstanding liability as on date of Rs. 61,62,867/- as per the enclosed statement of accounts Along with overdue interest as per the company policy over and above the principal amount. This amount Along with overdue interest will be paid by us. Accordingly, this outstanding amount Along with overdue interest may be transferred to our account in your books.
3. With reference to your letter of March 4, 1996 regarding pending credits of Rs. 94,19,036/- to our accounts, the matter is now absolutely clear to us and appropriation as given by you in your letter is acceptable to us. Therefore, we have no further queries in this regard and no claims stand against the above credits accordingly.
4. We also confirm the outstanding balance in respect of M/s. Imperial Pigments Pvt. Ltd. as on date as per enclosed statement of account, which includes the interest incidence as per your company policy up to September 30, 1995. Any further interest liability on the overdue outstandings will be paid by us.
5. In any case as per our understanding, the total liability in respect of the foregoing will not exceed Rs. 1,97,63,430.00 (Rupees one crore ninety seven lacs sixty three thousand four hundred thirty only) towards principal amount plus interest, as mentioned above."
This was again repeated in the Defendants letter dated March 11, 1996. Sai Polymers had also addressed a letter dated March 16, 1996 to the plaintiffs informing them that its debit balance of Rs. 61,62,867/-along with overdue interest is the liability of Defendant No. 1. The commitment to make payment has, however, not been adhered to by the Defendants. Apart from these letters the plaintiff has placed on record the original cheques of Defendant No. 1 signed by Defendant No. 2 for a total of Rs. 1.90 crores, all of which have not been honoured.
5. Mr. Rajiv Sawhney, learned Senior counsel appearing on behalf of both Defendants, has contended that these letters do not constitute an enforceable guarantee as there is no consideration Therefore and no Stamp Duty has been paid thereon. It has also been contended that M/s. Aqua Cross Enterprises Private Limited is a necessary party since in the plaint itself it has been averred that the plaintiff had appointed various Del Credre/Consignment Agents, one of whom was M/s. Aqua Cross Enterprises Private Limited. It is his further submission that deliveries were not made to the Defendants by the Agent and documents were drawn up only to puff-up and exaggerate the sales allegedly made by the said Agent.
6. In this context reliance has been placed by Mr. Valmiki Mehta, learned Senior counsel appearing on behalf of plaintiff, on a decision rendered by S.N. Kapoor, J. in Daya Chand Uttam Prakash Jain & Another v. Santosh Devi Sharma, MANU/DE/0483/1997 : 67(1997)DLT13 where it has been held that a summary suit predicated on an "acknowledgement" signed by one partner is maintainable and that such a document fully conforms to the rigours of a written contract. An acknowledgement witnesses the consensus ad idem between the parties as also a promise to pay back by consideration. I am in respectful agreement with the views of my learned Brother and find that they apply on all fours to the case in hand. In the present case I have before me not only a written acknowledgement of debt by Defendant No. 2 but as a complementary feature, several cheques aggregating to the sum of Rs. 1.90 crores. So far as cheques are concerned, the Negotiable Instruments Act stipulates that there shall be a presumption as far as consideration for their issuance is concerned. This aspect of the case has not been answered by the Defendants. Although there is no material available on the record to indicate that deliveries were not effected, I need not go into this question since it is not the Defendants case that the bounced cheques were in respect of another series of transactions. Moreover the plethora of documentary evidence admitting and assuming liability cannot be ignored.
7. In these circumstances the reliance of Mr. Sawhney on Dentsply India Pvt. Ltd. v. M/s. Excel International & others, 2001 5 AD 84 can be of no avail to the Defendants. Reliance has also been placed by Mr. Sawhney on my decision rendered in M/s. S.V. Electricals Limited v. M/s. Sylvania & Lakshman Limited, MANU/DE/0870/2000 : AIR2000Delhi156 , but I fail to find any application of that decision on the facts before me. On the contrary that decision goes against the Defendants case inasmuch as I had favored the view that since that suit was not based either on dishonoured cheques or on `Hundis' it was not maintainable under Order xxxvII of the Code of Civil Procedure. In that case, so far as dishonoured cheques were concerned not even a single one had been filed, and so far as Hundis were concerned none of them had been accepted by the Defendants. By reverse reasoning, where a suit is based on dishonoured cheque, there can be no gainsaying that it is maintainable under the summary procedure of the Order xxxvII CPC.
8. So far as the non-impleadment of Messrs Aqua Cross Enterprises Private Limited is concerned, in view of the provisions contained in Chapter V and Section 213 in particular of the Indian Contract Act, since the Defendants were fully aware that the plaintiff was the principal, impleadment of the agent was not necessary.
9. Reliance has also been placed on certain letters of Defendants placed on the record as annexures to the affidavit of Dr. Anis Ansari, who is stated to be one of the Directors of Defendant No. 1. It has been deposed that by registered letters dated April 20, 1995 to the Managers of the Bank of Rajasthan and the Union Bank of India they had been informed that the "authority of Mr. K.K.Karnani has been withdrawn." This affidavit further states that this information was also conveyed to the plaintiff by the Defendant's letter dated 20.4.1995. The Defendant's case is that Defendant No. 1 never placed any order for supply of goods upon the plaintiff after 24.4.1995 and Therefore no amounts are payable. It has also been averred that since Defendant No. 2 had ceased to be the authorised signatory of Defendant No. 1 any cheques issued by him after 24.4.1995 was "on his own behalf and not on behalf of the answering Defendant No. 1." Defendant No. 1 has also denied any connectivity with Messrs Sai Polymers, Chemical India or Malav Polymers, and accordingly has disowned any assumption of liability for the outstandings of these firms. This is in the face of the plaintiffs submission that ownership of Defendant No. 1 and these firms is predominantly held by Defendant No. 2. It is indeed easy for Defendant No. 2 to have dispelled these allegations, but no effort in this context has been made. In this manner, the letter of Defendant No. 2 is disowned by Defendant No. 1. Significantly, no Explanation or details are forthcoming as to the authority that Defendant No. 2 had in Defendant No. 1 and as to whether any action had been taken against Defendant No. 2 by Defendant No. 1 in respect of his unauthorised actions by which Defendant No. 1 had been exposed to a staggeringly large liability. It is remarkable, to say the least, that both Defendants are represented by the same Advocate. In the course of the hearing held, on 6.8.2002 the request of learned counsel for the Defendants that Defendant No. 1 be permitted to urge the pleas taken by Defendant No. 2 was allowed. In the Orders dated 2.9.2002 it has been noted that the Defendants have placed reliance on the Resolution dated 24.4.1995 purported to have been passed by them. The original was directed to be filed along with an affidavit of the concerned officer of the company within two weeks. Although the affidavit of Dr. Anis Ansari has been filed, the Resolution has not been placed on record. It must, Therefore, be presumed that no such Resolution was passed. Furthermore, the details of these six cheques ought to be considered. The first cheque is dated 10.9.95 drawn on The Bank of Rajasthan Ltd. for a sum of Rs. 10,00,000/-; it was dishonoured since there were insufficient funds. The second cheque is dated 10.2.1996 also drawn on The Bank of Rajasthan Ltd. for a sum of Rs. 15,00,000/- and was dishonoured on the ground that the payment had been stopped by the drawer. The third cheque is also drawn on The Bank of Rajasthan Ltd. and is dated 30.3.96 and was for a sum of Rs. 10,00,000/-; it was dishonoured on the ground that the funds were insufficient. The fourth, fifth and sixth cheques are dated 31.1.1996 for a sum of Rs. 70,00,000/-, Rs. 60,00,000/- and Rs. 25,00,000/- respectively drawn on the Union Bank of India which were also dishonoured on the grounds of insufficient funds. Three considerations immediately emerges - firstly if the authority of Defendant No. 2 had been withdrawn, why was he still in possession of the cheque books; secondly why were these cheques dishonoured on the grounds of insufficiency of funds; and thirdly why, in the hiatus between 24.4.1995 and the date of these cheques, was the old regime so far as Defendants are concerned, been restored. No satisfactory Explanation is forthcoming on these issues. The defense that the authority of Defendant No. 2 had been withdrawn falls in the category of moonshine.
10. It is also being contended by Mr. Rajeev Sawhney, learned senior counsel for the Defendants that a summary suit under Order xxxvII C.P.C. is not permissible on the basis of a running account. This case has not been set up in either of the affidavits of the Defendants seeking Leave to Defend. Since it is legal in nature, I have considered it nevertheless. In my opinion, keeping in view the pronouncements in Daya Chand Uttam Prakash Jain & Another v. Santosh Devi Sharma (supra) this contention is not of substance and is rejected. Mr. Sawhney has also relied on Sections 25, 126, 127 of the Indian Contract Act. In the Plaint it has been pleaded that the plaintiffs are entitled to claim interest at the rate of 24 per cent per annum as per the company's policy. Mr. Sawhney has challenged this claim on the grounds of it being unilateral. I do not propose to go into this question in detail at the present stage and am of the opinion that interest at the rate of 12 per cent per annum should be calculated on the total quantum of the cheques which have been issued and thereafter dishonoured.
11. In these circumstances, Leave to Defend is granted to the Defendants conditional on either of the Defendants depositing a sum of Rupees One Crore and Ninety Lakhs together with the interest thereon calculated at the rate of twelve per cent per annum from the date of the issuance of each of the cheque. The deposit be made within four weeksfrom today.
Suit No. 1567 Of 1997
12. If the deposit is made as ordered, the Defendants shall file their Written Statementswithin four weeks from the date of the deposit. Replication be filed within four weeksthereafter. If the deposit is not made, the suit shall stand decreed as prayed for.
13. Renotify the matter for consideration on 11th July, 2003.
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