Delhi High Court
M/S Klg Systel Ltd. vs M/S Fujitsu Icim Ltd. on 23 April, 2001
Equivalent citations: 2001VAD(DELHI)58, AIR2001DELHI357, 92(2001)DLT88, AIR 2001 DELHI 357, (2001) 92 DLT 88
Author: Vikramajit Sen
Bench: Vikramajit Sen
ORDER Vikramajit Sen, J.
1. By this application the Defendant has prayed for the grant of leave to defend the present summary suit filed under Order xxxvII of the Code of Civil Procedure (hereinafter referred to as 'the CPC'). It is contended by the Defendant that out of the contracted sale consideration of approximately Rs.25 lakhs the Defendant has already paid approximately Rs.19 lakhs, at which stage it was discovered that the software supplied by the Plaintiff was defective. It is submitted that at this juncture the Plaintiff offered to supply another software programme but by that time the Defendant had already incurred damages stipulated in its contract with the party to whom the software had to be supplied. Each party knew of the other, as well as their respective contractual obligations. It was also argued that Order xxxvII of the C.P.C. was not attracted as no written agreement is available for reliance viz a viz the summary suit. territorial jurisdiction was assailed on the foundation that the Purchase Order dated 2nd August, 1994 was issued by the Defendant for supply to be effected in Cochin, and no part of the cause of action had arisen in Delhi. The Defendant's Branch office in Delhi had no connection with the transaction, and that the plaint does not aver any such role. Order xxxvII of the C.P.C. does not apply since the Purchase Order envisages that 'billing instructions' were to be issued separately, on the basis of the satisfaction of Fertilizers and Chemicals Travancore Ltd. (hereinafter referred to as 'the FACT'). It is submitted that the Plaintiff has admitted the failure of the software package. It is then contended that Fact Engineering and Design Organization (hereinafter referred to as 'the FEDO') is a necessary party. It is stated that time was of the essence of the contract and its performance had not been completed. AS FACT was not satisfied with the software package it levied damages of Rs.9,30,375/- on the Defendant and also encashed a Bank Guarantee of Rs.5.12 lakhs. It has been highlighted that despite specific Orders dated 31st July, 1998, the Plaintiff has failed to file the original of Annexure-II dated 25th August, 1994 and should not be allowed to rely on it. (However, on a perusal of the file it appears that this document was filed on 18th August, 1998.) Learned counsel for the Defendant has further argued that the software 'Autovesl' was not satisfactory and 'Isogen' was not supplied at all. Reliance was placed on Indian Biotech Co. (P) Ltd. v. Assam State Co-op Marketing & Consumers Federation Ltd., and Delhi Travels & Tours V. Motorola India Ltd., . In the former case the provisions of the Sale of Goods Act, 1930 (hereinafter referred to as 'the Act) were not even considered. In the latter, the decision to grant leave to defend rested on the appreciation of the facts of the case, and hence is of no assistance to the Defendant/Applicant.
2. The contention of Mr. S.N. Kumar, Learned Senior Counsel appearing for the Plaintiff is that the suit is maintainable under Order xxxvII of the CPC as the complete contract is available in the shape of the invoice. He has submitted that the contract between the parties envisages the supply of seven items all of which were supplied. The controversy about Autovesl was of the Defendants making, inasmuch as despite an order for this software they had subsequently requested for an alternate software, namely, Pvelite. Although, the Plaintiff was not contractually obligated to substitute Autovesl with Pvelite, because of the Defendant's request the Plaintiff even complied with this fresh requirement. It has been submitted, and not controverter by the Defendant, that in fact even Pvelite was supplied by the Plaintiff to the Defendant. It is contended that 'Autovesl' was not unsatisfactory in any respect, and that this alleged controversy has been generated only because of the Defendant's desire to substitute the supply. He has contended that there is no documentary proof whatsoever in respect of the Defendant's contention that Autovesl was imposed on it by FACT and no evidence that any payment was made pursuant to this claim for damages. He, therefore, submits that the projected defense is a complete moonshine which is clearly evident from the fact that out of the consideration of Autovesl of approximately Rs.26,00,000/- the Defendant had already paid approximately Rs.19,00,000/-. Thereafter, the Defendant developed dishonest intentions. Mr. Kumar, learned counsel appearing on behalf of Defendant, drew attention to the fact that the dishonesty of the Defendant is manifest from the fact that it had attempted to by-pass the Plaintiff and deal directly with the Plaintiff's Principal in the United States of America. The Defendants reverted to the Plaintiff only when the Principal wrote back to them advising them to deal only with the Plaintiff, since it had already spent considerable time and effort on the contract. He further submitted that this Court had territorial jurisdiction because the purchase order was dispatched by the Defendant to the Plaintiff at Delhi and was accepted here. He relied on the provisions of Section 20 of the Code of Civil Procedure. These facts were clearly stated in Paragraph 19 of the Plaint and these averments have not been denied.
3. The provisions of law relevant for the grant of leave to defend are as follows:
Order xxxvII Rule 3 (5) "(5) The defendant may, at any time within ten days from the service of such, summons for judgment, by affidavit or otherwise disclosing such facts as may be deemed sufficient to entitle him to defend, apply on such summons for leave to defend such suit, and leave to defend may be granted to him unconditionally or upon such terms as may appear to the Court or Judge to be just:
Provided, that leave to defend shall not be refused unless the Court is satisfied that the facts disclosed by the defendant do not indicate that he has a substantial defense to raise or that the defense intended to be pout up by the defendant is frivolous or vexatious:
Provided further that, where a part of the amount claimed by the plaintiff is admitted by the defendant to be due from him, leave to defend the suit shall not be granted unless the amount so admitted to be due is deposited by the defendant in Court."
4. Analogous provisions are also to be found in the Delhi Rent Control Act, and since they have generated considerable judicial scrutiny it would be advantageous to reproduce them:
Section 25B(5) "(5) The Controller shall give to the tenant leave to contest the application if the affidavit filed by the tenant discloses such facts as would disentitle the landlord from obtaining an order for the recovery of possession of the premises on the ground specified in clause (c) of the proviso to sub-section (1) of section 14, or under section 14A"
5. The approach which the Court must adopt, while dealing with cases brought under Order Xxviii of the C.P.C. has been set down by the Supreme Court in the celebrated judgment of M/s. Michalec Engineers and Manufacturers Vs. M/s. Basic Equipment Corporation, . Five conditions have been postulated:
"(a) If the defendant satisfies 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 "Court or furnishing security.
(d) If the defendant has no defense, or if the defense is sham or illusory or practically moonshine, 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, the Court may show mercy to the defendant by enabling him to try to prove a defense but at the same time protect the plaintiff by imposing the condition that the amount claimed should be paid into Court or otherwise secured."
6. In Mrs.Raj Duggal vs. Ramesh Kumar Bansal, , the Court had opined as follows:
"Leave is declined where the Court is of the opinion that the grant of leave would merely enable the defendant to prolong the litigation by raising untenable and frivolous defenses. The test is to see whether the defense raises a real issue and not a sham one, in the sense that if the facts alleged by the defendant are established there would be a good or even a plausible defense on those facts. If the Court is satisfied about that leave must be given. If there is a friable issue in the sense that there is a fair dispute to be tried as to the meaning of a document on which the claim is based or uncertainly as to the amount actually due or where the alleged facts are of such a nature as to entitle the defendant to interrogate the plaintiff or to cross-examine his witnesses leave should not be denied. Where also, the defendant shows that even on a fair probability he has a bona fide defense, he ought to have leave. Summary judgments under Order 37 should not be granted where serious conflict as to matter of fact or where any difficulty on issues as to law arises. The Court should not reject the defense of the defendant merely because of its inherent implausibility or its inconsistency."
7. In its earlier judgment in Santosh Kumar vs. Bhai Mool Singh, , the Court had perspicuously observed that "the learned judge has failed to see that the stage of proof can only come after the defendant has been allowed to enter an appearance and defend the suit, and that the nature of the defense has to be determined at the time when the affidavit is put in. At that stage all that the Court has to determine is whether "if the facts alleged by the defendant are duly proved" they will afford a good, or even a plausible, answer to the plaintiff's claim. Once the Court is satisfied about that, leave cannot be withheld and no question about imposing conditions can arise; and once leave is granted, the normal procedure of a suit, so far as evidence and proof go, obtains."
8. Most recently, after reviewing its previous decisions on the subject, the Apex Court had indicated the approach to be adhered to in the grant of leave to defend/contest, albeit in the context of the Delhi Rent Control Act, in Inderjeet Kaur vs. Nirpal Singh, 89 (2001) Delhi Law Times 27 (SC) in the following words:
"We are of the considered view that at a stage when the tenant seeks leave to defend, it is enough if he prima facie makes out a case by disclosing such facts as would disentitle the landlord from obtaining an order of eviction. It would not be a right approach to say that unless the tenant at that stage itself establishes a strong case as would non-suit the landlord leave to defend should not be granted when it is not the requirement of Section 25B(5). A leave to defend sought for cannot also be granted for mere asking or in a routine manner which will defeat the very object of the special provisions contained in Chapter IIIA of the Act. Leave to defend cannot be refused where an eviction petition is filed on a mere design or desire of a landlord to recover possession of the premises from a tenant under Clause (e) of the proviso to Sub-section (1) of Section 14, when as a matter of fact the requirement may not be summarily resulting in great hardship to him and his family members, if any, although he could establish if only leave is granted that a landlord would be disentitled for an order of eviction. At the stage of granting leave to defend parties rely on affidavits in support of the rival contentions. Assertions and counter assertions made in affidavits may not afford safe and acceptable evidence so as to arrive at an affirmative conclusion one way or the other unless there is a strong and acceptable evidence available to show that the facts disclosed in the application filed by the tenant seeking leave to defend were either frivolous, untenable or most unreasonable. Take a case when a possession is sought on the ground of personal requirement, a landlord has to establish his need and not his mere desire. The ground under Clause (e) of the proviso to Sub-section (1) of Section 14 enables a landlord to recover possession of the tenanted premises on the ground of his bona file requirement. This being an enabling provision, essentially the burden is on the landlord to establish his case affirmatively. In short and substance wholly frivolous and totally untenable defense may not entitle a tenant to leave to defend but when a friable issue is raised a duty is placed on the Rent Controller by the statute itself to grant leave. At the stage of g ranting leave the real test should be whether facts disclosed in the affidavit filed seeing leave to defend prima facie show that the landlord would be disentitled from obtaining an order of eviction and not whether at the end defense may fail. It is well to remember that when a leave to defend is refused, serious consequences of eviction shall follow and the party seeking leave is denied an opportunity to test the truth of the averments made in the eviction petition by cross-examination."
9. It is in this background that the Defendant's pleas for grant of leave to defend the summary suit should be considered. If the Defendant has raised such pleas to defeat the suit that require evidence to be produced to substantiate them, it would not be proper to prejudge the issue by preconsidering the possible evidence and then arriving at a conclusion against the Defendant. But if the defense is predicated on evidence that is legally and statutorily barred from being considered, or where the defense is itself contrary to any law and would therefore be ignored at the end of the Trial, no purpose would be served by granting leave to defend and thus postponing and procrastinating the inevitable decreeing of the suit or petition. Such action would defeat the intendment of the statute itself. On 18.8.1998 the Plaintiff filed the original Purchase Order dated 2.8.1994, and carbon copies of Invoice No. 113 dated 25.8.1994 and No. 126 dated 26.10.1994. The salient terms of the Purchase Order, which was issued to the Plaintiff at its Delhi office were that Autoplant Software was to be supplied for FEDO, Cochin and this included both Autovesl and Isogen. The price was Rs.25,79,820/- of which 50% was to be paid immediately and the balance after the successful installation at FEDO. A warranty for one year was stipulated. In strict conformity of this Purchaser Order, the first Invoice-cum-Delivery Challan was dated on 25.8.1994 for the sum of Rs.15,92,260/- and two months later the second Invoice-cum-Delivery Challan for the sum of Rs.10,90,752/- in respect of Isogen was issued, notably from New Delhi. The Defendant paid only Rs.19,23,908.80 in five Installments, the last one being on 25.7.1995, quite obviously much after the supply was made.
10. Section 20 of the C.P.C. recognizes the territorial jurisdiction of Courts, inter alia, wherever the cause of action wholly or in part arises. The Defendant/Applicant has admitted that it has a Branch office at 5A Bahadur Shah Zafar Marg, New Delhi and 5 Sansad Marg, New Delhi, and therefore the present case is not of the genre where the Defendant has been put to a disadvantage because of the Plaintiff's choice of filing the suit in New Delhi. Even if the convenience consideration is set apart, I am satisfied that the cause of action had arisen in Delhi. The Plaintiff has asserted in the Plaint that the order was accepted in Delhi, and this fact has not even been denied or even traversed by the Defendant/Applicant. It is immaterial whether dealings between the parties were through the Defendant's Madras office, or that delivery of the software was to be effected in Cochin. It is trite to state that the cause of action arises at different times, and at different places, and any of these would be a legitimate venue for suing. No friable issue therefore arises on this account.
11. The Defendant/Applicant has also challenged the maintainability of the suit under Order xxxvII of the C.P.C., stating that "there is no debt or liquidated demand in money payable to defendant-Company (sic. read Plaintiff)) and/or based on a written contract". It is no longer res integra that Invoices/Bills are 'written contracts' within the contemplation of this Order. Reference is directed to Messrs. Punjab Pen House vs. Samrat Bicycle Ltd., , Corporate Voice (Pvt.) Ltd. vs. Uniroll Leather India Ltd., , and Beacon Electronics vs. Sylvania and Laxman Ltd., 1998 (3) Apex Decisions (Delhi) 141. There is, thus, no hesitancy in holding that the present suit is a suit which should be tried under the summary procedure of Order xxxvII of the C.P.C.
12. The disputes between the parties cannot be decided do hors the sundry provisions of the Sale of Goods Act. Part-payment to a substantial extent has been made by the Defendant/Applicant. When a buyer such as the Defendant/Applicant asserts that the merchandise/goods were defective, it is not open to it to withhold payment once the delivery is accepted; since they are deemed to have been accepted by operation of law. In Nagandas Mathuradas vs. N.V. Valmamohomed and Others, AIR 1930 Bombay 249, in the opinion of the Bench, the Buyer was playing fast and loose inasmuch as the initial credit entry recorded in favor of the Seller was subsequently reversed. The fact that a substantial part payment had been made by the Defendant to the Plaintiff was found very relevant, in this context. It reiterated the view approved by the House of Lords that "if a buyer orders goods of a certain description, and the seller delivers goods of a different description, it is open to the buyer to reject them. But if he does not reject them but keeps the goods, even if he does so in ignorance of the fact that they are of a description different from that provided for by the contract he is debarred from rejecting the goods thereafter, and can only fall back upon a claim for damages, as upon a breach of warranty." These observations apply, a fortiori, where the goods supplied were according to the specifications, and their price had been substantially paid. Autovesl and Isogen were ordered by name, and were supplied. Due to reasons of obsolescence, Pvelite was subsequently preferred by the Defendant, but this preference cannot be considered as a valid defense for withholding payment. It would still be so even if either Autovesl or Isogen proved to be of little usefulness to the Defendant, so long as what was supplied strictly corresponded to these two programmes/merchandise. Chapter IV of the Act must be kept in mind when disputes of the present nature call to be decided. In particular, Section 34 envisages that delivery of even a part of the goods would operate as a delivery of the whole, unless the former is clearly severed from the rest. The Defendant/Applicant should have recorded a caveat that the software could be treated as having been accepted only upon delivery of Pvelite. This could not be possible since Pvelite was not part of the contract. Alternatively, the Defendant/Applicant could have declined to accept the part delivery if that is how it viewed the situation. The intervening period of several months is significant and clearly fatal to the projected defense. The offer to supply Pvelite cannot have the effect of invalidating the initial contract.
13. Is the Court expected to take into consideration the dealings inter se the Defendant/Applicant and its customer, namely FACT. The Purchase Order of FACT on the Defendant is dated 20th July, 1994; the Plaintiff is not even mentioned therein. Thereafter the Defendant had issued its Purchase Order dated 2nd August, 1994 to the Plaintiff at its New Delhi office and payment was to be made by the Defendant. FEDO was only mentioned in the context of delivery. The Plaintiff's Invoice was issued to the Defendant, which was liable to clear the consideration and has infact made substantial payments. Although in the Delivery Clause there is an indirect mention that FEDO can claim damages for late supply by the Defendant, and that the latter can make a corresponding claim on the Plaintiff, the present dispute raised by the Defendant at best concerns unsuitability of the software, and not late supply thereof. The Defendant has placed reliance on correspondence exchanged between itself and FEDO which is one year (Annexure-B) and two year later (Annexure-C). Such events cannot be taken into contemplation in an action for the price of goods, where the property in the goods has passed to the buyer and the buyer wrongfully neglects or "refuses to pay for the goods according to the terms of the contract" (see Section 55 of the Act). Sections 41 and 42 of the Act conjointly indicate that if defects in the goods are not recorded within a reasonable time, they will have been deemed to have been accepted. Furthermore, by making substantial payments for the price of the goods the Defendant has acted in a manner which would render it inconsistent for the Plaintiff to still claim ownership thereon. On a careful reading of the Act, it appears that the intendment is generally that the price of the goods must be paid and if there is a subsequent defect (in contradistinction to a defect detected within a reasonable time of the delivery) the remedy that is envisaged is for the Buyer to sue for damages. This is obviously impregnated with sound commonsense and business ethics. In the present case, raising questions pertaining to the suitability of the supply after one year is not reasonable. A friable issue does not arise because what was supplied by the Plaintiff was what was ordered by the Defendant, if it did not suit the latter's requirements the Plaintiff cannot be made responsible and liable. Significantly, it has not been shown that any legal action has been filed even by FEDO for recovery of damages from the Defendant. Some prima facie evidence of such an action should have been filed by the Defendant to justify the grant of leave to defend.
14. Even if the defense as to delay in supply is considered, time allegedly being of the essence, this also does not raise a gamut of disputed facts necessitating the holding of a trial. Section 11 of the Act prescribes that stipulations as to time are to be gathered from the contract. Since the Defendant has filed the Purchase Order with FEDO it can be perused; no stipulation that time is of the essence is immediately evident. The contract between the parties stipulate that delivery "should" be made by 10.8.1994, i.e. within four weeks of the Letter of Intent, and upon failure liquidated damages would be imposed. It would be reasonable to expect such a complaint to have raised at least within a month. To judicially countenance complaints raised after several months would tantamount to violating the legislatures intent of an expeditious disposal of commercial complaints. Leave to defend should be granted only if a valid defense, requiring a trial, is disclosed. Such a defense if entertained may be allowed subject to terms. However, in the present case the defense in essence is of the unsuitability of Autovesl and Isogen, and not delay in their supply. No friable issue has arisen. The present case is what was envisaged in category (d) of the decision of the Supreme Court in the M/s. Michalec Engineers case (supra).
15. In this analysis the Defendant's application is dismissed. The suit is decreed with costs.