Delhi High Court
M/S Hindustan Wires Ltd. vs M/S Ralson Industries Ltd. on 13 February, 2001
Equivalent citations: 2001IIIAD(DELHI)785, 90(2001)DLT747, 2001(58)DRJ71
Author: Mukul Mudgal
Bench: Mukul Mudgal
ORDER Mukul Mudgal, J.
1. This is an application, filed on behalf the defendant under Order xxxvII Rule 3(5) CPC, seeking leave to contest the suit.
2. The suit is filed under Order xxxvII CPC for recovery of Rs.79,60,730/- Along with pendente lite/future interest and costs of the suit.
3. The plaint avers as under:-
4. The suit is based upon the recovery of the price of material supplied by the plaintiff to the defendant from time to time. Consequently by a Reconciliation Statement dated 8th of May, 1996 one Shri P.S. Bhullar, General Manager (Accounts) on behalf of the defendant-Company admitted that the balance payable to the plaintiff was Rs.69,12,967.24. This balance acknowledged to be due as on 31.3.1996 comprised of Rs.41,69,505.19 by way of principal amount and Rs.15,78,618.70 on account of interest and Rs.11,64,753.35 towards other debits on account of defendant's indebtedness to the plaintiff. In spite of Demand Notice dated 4.5.1997 for the above amount sent by the plaintiff to the defendant, no steps were taken by the defendant to repay the amount acknowledged as due. The plaintiff has claimed interest @ 19% per cent as per the Agreement between the parties. Plaintiff has further claimed that the amount said to be recovered is debt or liquidated demand in money payable by the defendant arising out of the written agreement, i.e., the Reconciliation Statement issued by the defendant and consequently the suit was being filed under the Summary Procedure prescribed by Order xxxvII CPC. It is averred that no relief which does not fall within the ambit of Order xxxvII CPC has been claimed in the plaint.
5. Upon being served with the summons for judgment the defendant filed an application, IA.3466/99 for leave to defend. Apart from pleading lack of territorial jurisdiction which was not pressed at the time of arguments, it was claimed that Order xxxvII does not apply to the facts of the present case. In fact the plea of territorial jurisdiction is anyway not maintainable because the jurisdiction is to be judged on the pleas made in the plaint and this is clearly averred that the defendant has its principal place of business (Head Office at Delhi) and also works from Registered Office situated at Delhi. In fact the letter-head of the defendant(Annexure-A) clearly shows that the head office of the defendant is at New Delhi. It is further stated that an alleged Reconciliation Statement dated 8.5.1996 is neither a bill of exchange nor a promissory note and it cannot also amount to a written contract under the Contract Act and is also not a guarantee. It is further stated that the friable issues raised by the defendant are:-
(i) That the claim for interest which is not based on any Agreement or any specific agreement which is in dispute then the same itself is a friable issue as per the law laid down in Corporation Bank Vs Montana International & Others ;
(ii) That Shri P.S. Khullar, General Manager (Accounts) who has allegedly signed the Reconciliation Statement dated 8.5.1996 was never an employee of the defendant-Company. In support of this a statement issued by the Auditors of the Company has been filed stating that Mr. P.S. Khullar never had an actual, ostensible or accrued authority to issue any reconciliation statement on behalf of the defendant-Company. He was never an agent or employee of the defendant-Company and this was not alleged in the plaint;
(iii) That the Articles of Association of defendant-Company authorizes only the Director of the Company to borrow money or make admissions on behalf of the defendant-Company and Mr. Khullar is not alleged to be a Director or an authorized person to issue a statement on behalf of the defendant-Company;
(iv) That the alleged Reconciliation Statement is also fabricated & forged and the forgery is said to be committed by the company with or without the involvement of Mr. Khullar;
(v) That the filing of documents running into 50 pages by the plaintiff as a reply to the application for leave to defend the suit itself shows that these are friable issues and leave to defend ought, therefore, be granted.
(vi) In support of the above pleas, reliance has been placed on the judgments reported as Sunil Enterprises & Another Vs SBI Commercial & International Bank Ltd. ; Mechalec Engineers & Manufacturers Vs M/s Basic Equipment Corporation ; Santosh Kumar Vs Bhal Mool Singh ; Standard Chartered Bank Vs Mr. M.S. Handa & Others ; Corporation Bank Vs Montana International & Ors. and Nairs Arkimentals (P) Ltd. Vs New Delhi Hotels Ltd. .
6. It is stated that on the basis of the position of law laid down in the above judgments, the defendants have raised a friable issue and ought to be granted leave to defend. It is also contended that the defendant has a fair, bonafide and reasonable defense and is, therefore, entitled to unconditional leave to defend the suit.
7. The following passage from Sunil Enterprises (Supra) has been relied upon in particular:
"4(a) If the defendant satisfied the court that he has a good defense to the claim on merits, 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 possibly good defense, 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, if the affidavit discloses that at the trial he may be able to establish a defense to the plaintiff's claim, the court may impose conditions at the time of granting leave to defend the conditions being as to time of trial or mode of trial but not as to payment into or furnishing security."
8. The plea of the plaintiff is that claim is based on balance confirmation/reconciliation statement which amounts to an 'acknowledgment' of accounts and which is in writing as per the law laid down in Daya Chand Uttam Prakash Jain & Another Vs Santosh Devi Sharma ; Elvira Rodrigues Vs Godnicalo Hypolito Constancio AIR 1934 Privy Council 144 and Gharabharan Vs Sri Radha Kishan & Others .
9. In reply to the plea of the defendant/applicant that Mr. P.S. Khullar was not an employee of the defendant-Company, the plaintiff has relied upon the documents filed Along with the reply to the application for leave to defend. In particular, reliance has been placed upon a debit note issued by the defendant with the consent of the plaintiff which has not been honoured and has been left out of the Reconciliation Statement and this amounts to Rs.78,00,732.00. Furthermore the amounts paid by the defendant have been credited by the plaintiff to the tune of Rs.3,80,000/- plus Rs.5,66,000/-. Several documents signed by Mr. Khullar date from 1993 and one of these documents has enclosed demand draft of Rs.3,80,000/-, such as letter dated 23.8.96 to the plaintiff. In fact the aforesaid documents signed by Mr. Khullar start from 17.9.1993 and go right up to the Reconciliation Statement. Previously also Reconciliation Statements were issued by Mr. Khullar. Significantly some of these documents are the originals of statutory C-Forms issued by Shri Khullar signed as a Director and authorised signatory of the defendant on 16.12.1994 under the Central Sales Tax Act.
10. A perusal of the above documents clearly shows that the defendant's case that Mr. Khullar was not an employee nor authorised to correspond or acknowledge on behalf of the defendant is an afterthought prima facie lacking in bonafides and is clearly an attempt to wriggle out of the obligations arising out of the Reconciliation Statement. The plea that only a director of the Company could make admissions is also negated by Khullar's signing C-Forms as a Director of the Company.
11. The above documents also demonstrate that right from 1993 several documents have been signed by Mr. Khullar in his capacity as General Manager (Accounts). Some of these documents have enclosed payments such as the document dated 23.8.1996 enclosing a bank draft of Rs.3,80,000/-. The other documents are contemporaneous documents such as the statutory C-Forms. No satisfactory explanation has been given by the applicant/defendant regarding the above documents except for urging that the large number of these documents filed are in themselves sufficient for grant of leave to defend. This in my view is a wholly untenable plea. Just because the plaintiff relies upon a plethora of documents which advance its case, the defendant cannot be granted unconditional leave to defend. In my view even one of these contemporaneous documents such as the letter dated 23.8.1996 signed by Mr. Khullar is sufficient to deny leave to defend to the defendant/applicant. All the documents disputed by the defendant, which are signed by Mr. P.S. Khullar are on the letter-heads of the defendant and while terming the documents as possible forgery no plausible reason whatsoever has been given by the defendant/applicant why the documents are forged or how Mr. Khullar had access to these documents. Furthermore in the rejoinder the only significant plea taken by the defendant while replying to the effect of the documents signed by Mr. Khullar and relied upon by the plaintiff is that Mr. Khullar never had actual, accrued or ostensible authority to issue any Reconciliation Statement. This clearly is a frivolous plea because if this was so Mr. Khullar could not have issued the statutory C-Forms. Furthermore the mere certificate of the Auditor certifying that Mr. P.S. Khullar was not an employee of the defendant-Company nor authorised to issue any reconciliation statement is obviously a self-serving document and cannot be given any credence whatsoever. No logical basis for issuing such a negative certificate has been indicated in the said Auditor's Certificate. All that the Chartered Accountant's Certificate states that Mr. Khullar is neither an employee of the defendant-Company at present nor was an employee at any time earlier and this information was verified from the records of the defendant-Company and as per informations and explanations given to us by the Company. It is not possible to believe to accept a plea of the defendant based on this document which does not even state as to what, if any, record was looked at and what information and explanation was sought for by the Auditors from the Company. Furthermore the plea that the reconciliation statement falls out of the ambit of Order xxxvII of CPC is baseless. It is not in dispute that the reconciliation statement is in writing. In Daya Chand Vs Santosh Devi acknowledgement has been held to be a written contract. The above decision applies squarely to the facts of the present case.
12. In Mechalec Engineers & Manufacturers Vs M/s Basic Equipment Corporation the following position of law has been laid down:
"In Smt. Kiranmoyee Dassi v. Dr. J. Chatterjee AIR 1949 Cal 479, Das J., after a comprehensive review of authorities on the subject, stated the principles applicable to cases covered by Order 17 C.P.C. in the form of the 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 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......."
13. The pleas of the defendant raised in the application for leave to defend thus clearly amount to a moonshine and mala fide attempt to avoid the liability of acknowledgments made by one of its senior employees/directors and clearly show that the defendants have neither a fair nor a bona fide or nor a reasonable defense and are, therefore, not entitled to unconditional leave.
14. I am, therefore, of the view that this case falls within the ambit of law laid down by Mechelec Engineers' Case (Supra) at (d) and the defense of the defendant is moonshine and accordingly I am of the view that the the defendant can be granted leave to defend only upon deposit of sum of Rs.69,12,967.24 which is the principal amount reflected in the Reconciliation Statement given to the plaintiff by the defendant Along with letter dated 8th May, 1996.
15. Even though one of the documents dated 17th of February, 1997 filed Along with the plaint pleads that interest and negotiation charges were agreed to by the defendant as per Special Conditions, i.e., of the L.C. The L.C. itself has not been enclosed Along with the documents filed with the plaint. Therefore, prima facie in so far as quantum of interest is concerned the plaintiff has not been able to show how 19% per cent interest can be charged without trial. I am of the view that the defendant is entitled to leave to defend only on the question of quantum of interest as the plaintiff has not disclosed on what basis the interest has been claimed @ 19% on the sum of Rs.69,12,967.24. Accordingly, I am of the view that the defendant is entitled to grant of leave to defend the suit, subject to the deposit of sum of Rs.69,12,967.24 in this Court within four weeks from today.
16. Application is accordingly disposed of.
17. Suit No.124/9818. Written statement be filed within four weeks from today. Replication, if any, be filed within three weeks thereafter.
19. Original documents, if any, Along with list of witnesses be filed within six weeks from today. Thereafter the matter be list before the Joint Registrar on 23.4.2001 for admission/denial & scrutiny of documents.