Karnataka High Court
M/S Vittal Cashew Industries vs Tropical Industries International Pvt ... on 19 July, 2022
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IN THE HIGH COURT OF KARNATAKA AT BENGALURU
DATED THIS THE 19TH DAY OF JULY, 2022
BEFORE
THE HON'BLE MR. JUSTICE SACHIN SHANKAR MAGADUM
WRIT PETITION NO. 9481 OF 2022(GM-CPC)
BETWEEN:
1. M/S VITTAL CASHEW INDUSTRIES
A REGISTERED PARTNERSHIP FIRM
THROUGH ITS MANAGING PARTNER
MR. SANTHOSH KAMATH
HAVING ITS OFFICE AT B-109
INDUSTRIAL ESTATE, BAIKAMPADY
MANGALURU - 575 001
ALSO AT GAJANANA CHAMBERS
NEAR SAI MANDIR, HOSDURG
KANHANGAD, KASARGOD - 671 315
2. M/S VITTAL IMPEX
A REGISTERED PARTNERSHIP FIRM
THROUGH ITS PARTNER
MR. H GANESH KAMATH
HAVING ITS OFFICE AT GAJANANA CHAMBERS
NEAR SAI MANDIR, HOSDURG
KANHANGAD, KASARGOD - 671 315
ALSO AT 48, ISMAIL COMPLEX
GIN FACTORY ROAD,
THOOTHUKUDI- 628002
TAMIL NADU
...PETITIONERS
(BY SRI. ARUN SHYAM, SR.ADVOCATE FOR
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SRI.RAKESH KINI, ADVOCATE)
AND:
1. TROPICAL INDUSTRIES INTERNATIONAL PVT LTD
A COMPANY INCORPORATED UNDER THE PROVISIONS OF
THE COMPANIES ACT 1956
AND IS A SUBSIDY OF TROPICAL GENERAL INVESTMENTS
GROUP, HAVING ITS REGISTERED OFFICE AT F-04
AND 05, TRIVENI COMMERCIAL COMPLEX
SHEIKH SARAI PHASE - 1, NEW DELHI - 17
2. VINK CORPORATION DMCC
A COMPANY BASED IN DULAI, UAE
AND IS A PART OF THE TROPICAL GENERAL INVESTMENTS
GROUP HAVING ITS REGISTERED OFFICE AT
JUMEIRAH LAKE TOWER, DUBAIL UAE
BOTH REPRESENTED BY ITS AUTHORIZED SIGNATORY
MR ROHAN RAJ SAVARA
...RESPONDENTS
(BY SRI.SIDHARATH B MUCHANDI, ADVOCATE FOR C/R1
& 2)
THIS PETITION IS FILED UNDER ARTICLE 227 OF
THE CONSTITUTION OF INDIA PRAYING TO SET ASIDE
THE IMPUGNED ORDER DTD 20.04.2022 ANNEXURE-C IN
COM.O.S.NO.506 OF 2021, PASSED BY THE LEARNED IV
ADDITIONAL DISTRICT JUDGE AND COMMERCIAL COURT,
DK, MANGALURU AND ETC.,
THIS PETITION HAVING BEEN HEARD AND
RESERVED FOR ORDERS ON 13.07.2022, COMING ON FOR
PRONOUNCEMENT OF ORDERS THIS DAY, THE COURT
MADE THE FOLLOWING:
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ORDER
The captioned writ petition is filed by the defendants feeling aggrieved by the order of the learned Judge in refusing to grant leave to defend the suit before the IV Additional District Judge and Commercial Court, D.K., Mangaluru.
2. The facts leading to the case are as under:
The respondents-plaintiffs have instituted a recovery suit against the present petitioners. Plaintiffs allege that the present petitioners have entered into business arrangements with second respondent- plaintiff wherein the present petitioners collectively placed orders and entered into sales contracts for 2000 MT of dried raw cashew nuts. The respondents- plaintiffs have specifically alleged at Para 8 of the plaint that the present petitioners have failed to arrange necessary funds to clear the dues and duties 4 and failed to collect the consignment and as a consequence, the shipping company and the port authority has levied demurrage and retention charges against the consignment. Plaintiff alleges that the present petitioners have paid only for 631.65 MT under the original payment terms of cash against document. In relation to balance amount, it is alleged that petitioners requested the second respondent to change the payment terms and therefore, a settlement agreement was entered into and in terms of the settlement agreement dated 29.4.2019, the present defendants jointly and severally acknowledged their liability with respect to the remaining consignment. The respondents-plaintiffs allege that the present petitioners-defendants failed to comply the terms of settlement and hence, the present suit came to be filed.5
The plaintiffs/respondents have filed an application under Order XXXVII Rule 3(4) read with Section 151 of CPC. for summary judgment. The present petitioners in response to the application for judgment filed an affidavit seeking leave to defend the suit. The learned Judge having examined the rival contentions has declined to grant leave to the present petitioners to defend the suit and the application filed by the respondents-plaintiffs for summary judgment is allowed. This order is under challenge.
3. The learned Senior Counsel appearing for the petitioners would vehemently argue and contend that that the petitioners have good defence to claim on merit. Therefore, he would contend that the defendants are entitled for unconditional leave to defend. It is further contended that the respondents have illegally sold the cargo and therefore, the allegation by the respondents that they have incurred 6 loss is totally baseless. The transactions clearly indicate that the petitioners have made payments and the same is not refunded by respondents-plaintiffs nor goods are released. The plaintiffs have made a claim even in respect of goods which are not released in their favour. The respondents have high handedly sold the cargo without intimating the petitioners which invites penal consequences and therefore, to avoid a criminal case, the present suit is instituted.
To buttress his arguments, he has placed reliance on the following judgments:
"1. B.L.Kashyap & Sons Ltd. v. JMS Steels & Power Corpn., (2022) 3 SCC 294.
2. IDBI Trusteeship V.Hub Town Ltd., 2017(1) SCC 568.
3. Sundaram Finance Limited and Ors V. T.Thankam 2015 (14) SCC 444.
4. Swastik Gases Pvt.Ltd. Vs. Indian Oil Corporation Ltd. (2013) 9 SCC 32.7
5. B.E.Simoese Von Staraburg Niedenthal & Anr. Vs. Chhattisgarh Investment Ltd (2015) 12 SCC 225.
6. Dr. Jagmittar Sain Bhagat Vs. Dir. Health services, Haryana and Anr. (2013) 10 SCC
136.
7. Ameet Lalchand Shah and others Vs. Rishabh Enterprises and another (2018) 15 SCC 678.
8. Chloro Controls India Private Limited Vs. Severn Trent Water Purification INC. and Others. (2013) 1 SCC 641."
4. Placing reliance on the judgment of the Apex Court in the case of B.L.Kashyap & Sons Ltd .vs. JMS Steels & Power Corporation1 he would submit that the leave to defend is a rule and denial is an exception. He would further contend that the mother deed/agreement contains arbitration clause. Therefore, the parties have to be relegated to Arbitration and therefore, the present suit is not maintainable. He would further seriously contend that 1 (2022)3 SCC 294 8 the Mangaluru Court lacks jurisdiction as the parties have voluntarily subjected themselves to the jurisdiction of the Court at New Delhi. The respondents have deliberately suppressed the jurisdiction clause at Para 23 of the plaint. The learned Senior Counsel would further contend that the question relating to jurisdiction can be raised at any stage and would place reliance on the judgment rendered by the Apex Court in the case of Dr. Jagmittar Sain Bhagat .vs. Director, Health Services, Haryana and another2
5. Per contra, learned counsel appearing for respondents/plaintiffs repelling the contentions canvassed by the learned Senior counsel would place reliance on the additional documents which are placed before the Court. Placing reliance on the said documents, he would contend that the present 2 (2013) 10 SCC 136 9 petitioners-defendants have no substantial defence and in the counter affidavit filed to the application, the averments made in the affidavit does not indicate that it raises any genuine triable issues. He would further contend that the petitioners cannot now bank on the original agreement which contains an arbitration clause, which also contemplates the place of seat in the event of dispute. The learned counsel referring to the additional documents would point out that there was a rearrangement and the present petitioners- defendants have admitted their liability. Further, settlement agreement was entered into by the parties on 20.9.2019 and in the said agreement, the present petitioners-defendants have acknowledged their liability. Referring to clause 5(1) he would point out that petitioners have agreed in unequivocal terms to repay an amount of Rs.4,89,74,465.70. Referring to the legal notice, the learned counsel for the 10 respondents would contend that the petitioners have not referred to the legal notice and that the petitioners by notice were notified and were called upon to pay the admitted due payable to second respondent-plaintiff. On these set of grounds, he would contend that the petition is not maintainable and the same is liable to be rejected.
He has also placed reliance on the judgment in the case of B.L.Kashyap and Sons Limited (supra).
6. Heard the learned Senior counsel for petitioners and learned counsel appearing for respondents-plaintiffs. Perused the order under challenge. I have also examined the settlement agreement and other documents. I have also given my anxious consideration to the judgment cited by the petitioners and also the respondents. 11
7. It would be useful for this Court to cull out the relevant covenant in deed of rearrangement to deal with consignment, which is as under:
"NOW THIS DEED WITNESSES, and it is hereby mutually agreed by and between the parties and follows:
1. That, the First Party acknowledge his liability to be USD 1,189,519.92. The First Party declares and agrees that any amount paid or payable on account of Demurrages, Customs duties and warehouse charges and ancillary charges made in India in Indian currency which shall be paid or are payable to Second Party shall be on its account and promises to pay same. The First Party declares this undertaking acknowledgment and promise is in supersession of corresponding terms only and to be in consistence with earlier declarations made and are made voluntarily as per conscious resolution within the Firm and to it's full satisfaction and as per records shall bind the Firm/its Partners/associates/assigns etc."
Now let me refer to the relevant clauses in the settlement agreement wherein the present petitioners had acknowledged the payment obligations. Relevant clauses 3 to 5.2 are as under:
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" 3. Acknowledgement of Payment Obligations 3.1. The Buyers hereby acknowledge their obligation to pay back to Tropical, the sum of INR 3,50,00,000 (Indian Rupees Three Crore and Fifty Lakh) that has been advanced by Tropical to the Buyers hereby acknowledge their obligation to pay to Vink a sum of USD 2,415,181.51 (United States Dollars Two Million Four Hundred Fifteen Thousand One Hundred Eighty One and Fifty One Cents) in respect of the Remaining Consignment.
When converted, this amount represents INR 16,90,62,705.7 (Indian Rupees Sixteen Crores Ninety Lakhs Sixty Two Thousand Seven Hundred Five and Seventy Paisa).
4. Transfer of Title to the Remaining Consignment 4.1. Parties agree that the title of the remaining Consignment shall pass to Tropical simultaneously with the execution hereof and the Parties shall execute any necessary additional documents to consummate this transfer. Hereafter, Tropical shall be free to sell the Remaining Consignment to anyone without any restriction.
The consideration for the aforesaid transfer shall be INR.12,00,88,240.00 (Indian Rupees Twelve Crores Eighty Eight Thousand Two Hundred Forty), being the current market price of the Remaining Consignment on the date hereof. Subject to applicable law, the aforesaid consideration shall be transmitted directly by Tropical to Vink on behalf of the Buyers. 4.2. Tropical may, at its sole option, provide an opportunity to the Buyers to buy back the whole or a part of the Remaining Consignment at the 13 then prevailing market price, as and when needed. Provided that the stocks are available with Tropical.
5. Obligation to Pay the Difference Between the Contract Price and Market Price 5.1. Parties hereby agree that INR 4,89,74,465.70 (Indian Rupees Four Crores Eighty Nine Lakhs Seventy Four Thousand Four Hundred Sixty Five and Seventy Paisa), being the difference between A. The contract price agreed between the Buyers and Vink in respect of the Remaining Consignment, being INR 16,90,62,705.7: and B. The consideration under 4.1 being INR 12,00,88,240.00 remains due from Buyers to Vink Buyers hereby agree to pay the USD equivalent of the above amount of INR 4,89,74,465.70 (INR Four Crores Eighty Nine Lakhs Seventy Four Thousand Four Hundred Sixty Five and Seventy Paisa) to Vink within 45 (forty five) days from the Effective Date.
Buyer further agrees to pay INR 3,50,00,000 (Indian Rupees Three Crore and Fifty Lakhs) to tropical by on or before May 15, 2019.
The aforesaid sums shall be paid without any set-off or deduction of any nature whatsoever the event due to any applicable tax or other laws, the payor is obligated to deduct a sum before making any payment hereunder, it shall gross up the sum to be paid such that payee receives after deduction, the amount set forth herein." 14
Now, let me refer to the counter affidavit filed by the petitioners-defendants seeking leave to defend the suit. Para 4 would be relevant. The same reads as under:
"4. I say, as per the agreement between plaintiff and the defendants dated 09.08.2018 cargo 2000 mts. at 1370 USD was shipped in the month of September 2020. At that time the international market was crashed and hence we were able to clear 500 mts., upon arrival of cargo. Then as per the terms agreed between the plaintiff and the defendants we have agreed to pay demurrage, detention and clearing charges including GST in the name of the defendants agree to stock the cargo in Tuticorin warehouse of the plaintiffs. We had agreed that cargo will continue in the said warehouse till we clear remaining dues. We have requested the plaintiffs orally for extension and the plaintiffs have agreed."
8. In the light of the rival pleadings, this Court has to examine as to whether the petitioners are entitled for leave to defend the suit. On perusal of para 4 of the counter affidavit which is culled out supra, this Court prima facie would find that there is no possibility of substantial success of defence which 15 actually determines the grant or refusal of leave to defend. On bare reading of para 4 of the counter affidavit, this Court is of the view that the affidavit does not disclose a triable issue. The plea put forth in the counter affidavit is not even plausible to permit the present petitioners to defend the suit. On the contrary, the recitals in rearrangement document and settlement agreement which is culled out supra clearly indicate that there is absolutely no reasonable doubt that plaintiffs are entitled to press for the judgment. Therefore, in the present case on hand, it is inexpedient to allow the present petitioners to defend for mere purpose of delay. There is neither a substantial or good defence that would have entitled the petitioners to defend the suit.
9. The manner in which the counter affidavit seeking grant of leave is sought clearly indicates that the petitioners intend to prolong the litigation by 16 raising untenable and frivolous defences. The recitals in the rearrangement document and settlement agreement clearly indicate that petitioners have brought in a summary suit against the present petitioners and the documents set up by plaintiffs in unequivocal terms and faithfully disclose the transaction. The settlement agreement clearly indicates payment obligations and defendants have admitted the liability voluntarily and the settlement agreement is not at all in dispute. No reply notice is issued by the present petitioners.
10. It is in this background, this Court is of the view that the order under challenge is in accordance with law. No error is made out. The judgments cited by the learned counsel for the petitioners are not applicable. On the other hand, the judgment cited in the case of B.L.Kashyap and Sons Limited (supra) is squarely applicable to the case on hand. The 17 respondents-plaintiffs are entitled to proceed with the summary suit and the present petitioners-defendants are not entitled to defend the suit for want of substantial defence. The petitioners have failed to demonstrate that the trial Court erred in rejecting the defence of the petitioners-defendants herein. The Court should not reject the defence of the defendants merely because of its inherent implausibility or its inconsistency. None of the said ingredients are highlighted by the petitioner in the instant writ petition.
11. For the reasons stated supra, I pass the following:
ORDER The writ petition is devoid of merits and accordingly, stands dismissed.
Sd/-
JUDGE *alb/-