Delhi District Court
M/S Scj Plastics Ltd vs M/S Amitex Polymers Pvt. Ltd on 1 July, 2015
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IN THE COURT OF SHRI RAJ KUMAR CHAUHAN : ADDITIONAL DISTRICT
JUDGE04 : SOUTH DISTRICT : SAKET COURTS : NEW DELHI
Suit No. 28/13
In the matter of:
M/s SCJ Plastics Ltd.
F3/1011 Okhla Industrial Area,
PhaseI,
New Delhi110020 .......Plaintiff
Versus
M/s Amitex Polymers Pvt. Ltd.
Regd. Office at:
17, Tribhuvan Complex,
Ishwar Nagar
Friends Colony
New Delhi110065 ...............Defendant
Date of institution of the suit : 27.08.2012
Date reserved for judgment : 29.06.2015
Date of pronouncement of judgment : 01.07.2015
Suit for recovery of Rs. 16,23,300/ under order XXXVII CPC.
J U D G M E N T :
1. By this order, I propose to dispose off an application under order XXXVII Rule 3 (5) CPC wherein defendant has sought leave to defend the present suit filed by the plaintiff for recovery of Rs.16,23,300/ with interest. The plaintiff has instituted the present suit for recovery of above mentioned amount under order XXXVII CPC interalia alleging that the defendant M/s SCJ Plastics Ltd. Vs. M/s Amitex Polymers Pvt. Ltd. Contd....1 of 17 : 2 :
company has been purchasing from plaintiff company master batches even prior to 30.11.2010 and the defendant company had a running account with the plaintiff company; that on 30.11.2010, 03.12.2010 and 08.01.2011 vide invoices number 4315, 4388 and 4980, the defendant company had purchased from the plaintiff company master batches worth Rs. 11,32,698/. The defendant did not make the payment of the above mentioned supplied goods and as per terms and conditions of the invoices defendant is therefore liable to pay interest for the delayed payment @ 24% per annum; till the filing of the suit the defendant company was liable to pay Rs. 4,00,118/ as interest @ 24% per annum; the legal notice dated 07.08.2012 was sent to the defendant company which has been duly served upon the defendant on 09.08.2012 but no payment was made despite service of legal notice. Hence, the present suit is instituted under order XXXVII CPC for recovery of Rs.16,23,300/ alongwith pendente lite and future interest.
2. Summons of judgment were served upon the defendant and in pursuance of the said summons, the defendant filed the present application seeking leave to defend the present suit on the following grounds:
(a) That the present suit does not lie under order XXXVII CPC because apart from amount of three invoices with interest the plaintiff has also claimed additional sale tax @ 3% to the tune of Rs. 67,280/ and penalty @18% to the tune of Rs. 23,204/; the suit amount of additional sale tax and penalty is not mentioned in the invoice or in the sale agreement.
(b) Secondly, Mr. Rahul Jain, Director of the plaintiff company in July M/s SCJ Plastics Ltd. Vs. M/s Amitex Polymers Pvt. Ltd. Contd....2 of 17 : 3 :
2009 has approached the defendant and assured the defendant company that in future they will send a quality report of every batch alongwith bill/consignment; the master batches supplied to the defendant shall be of good quality and not substandard but the goods/master batches supplied through subject invoices were not accompanied with the quality test reports despite assurance and the master batches supplied through said invoices were found defective and substandard.
(c) Thirdly, the quality test reports were supplied very late and at that time the defendant has already used the material supplied by the plaintiff.
(d) Fourthly, as soon as the defendant came to know about the substandard quality of the goods supplied by the plaintiff through the subject invoices, the defendant has informed to the plaintiff through various telephonic talks but plaintiff failed to give any proper response.
(e) Fifthly, due to substandard material supplied by plaintiff, the defendant has suffered huge losses in the market because the goods prepared by defendant with defective material were returned by his customers/dealers.
(f) Sixthly, the plaintiff has also accepted on 01.06.2011 that they had supplied substandard material and caused losses to the defendant and further agreed to compensate by giving raw material 15 metric tonne of polypropylene reliance grade or amount to the tune of Rs. 14 lakhs against the subject invoices.
(g) Seventhly, defendant had already issued C forms to the plaintiff M/s SCJ Plastics Ltd. Vs. M/s Amitex Polymers Pvt. Ltd. Contd....3 of 17 : 4 :
against the other invoices but C forms for the concerned invoices could not be issued because the concerned sale tax authority of UP intimated the defendant that due to shortage of printing of C forms the same could not be issued by the Government.
3. It is therefore submitted that defendant has a valid defence and triable issues are raised, therefore, defendant is entitled to leave to contest the present suit.
4. In reply to the application the plaintiff has taken preliminary objection stating that it is settled law that in case the defendant has admitted the receipt of goods and the objection to the quality not raised at the time of delivery and further has not raised any objection to the documents submitted by the plaintiff, the defendant is not entitled to leave under order XXXVII CPC. The defendant has admitted the receipt of the goods and no objection to the quality was raised by the defendant at the time of delivery or even till filing of the present application and no reply was given to the letter of demand/legal notice. Hence, the application was not maintainable.
5. On merits all averments in the application has been controverted and denied stating that the defendant has taken false, baseless and frivolous defence in order to avoid the outstanding payment; in the invoices of plaintiff it was specifically mentioned that the sale of goods was subject to issuance of sale tax form C and as such the claim in lieu of sale tax form i.e. additional sale tax and penalty is very much covered and maintainable under order XXXVII CPC; no complaint was ever made by the defendant to the plaintiff regarding M/s SCJ Plastics Ltd. Vs. M/s Amitex Polymers Pvt. Ltd. Contd....4 of 17 : 5 :
the defect/substandard quality of the goods; the defendant has not suffered any loss in the market and has raised a false plea in that regard. It is therefore stated that the defendant has failed to raise any triable issue and plaintiff is entitled to the judgment.
6. Both the parties have filed written brief submissions alongwith relevant citations.
7. Written Arguments of Defendant: In his written arguments, Ld. counsel for defendant has submitted that for the same transaction and the issues in the present suit and the defence raised herein, the defendant company has already instituted a suit for recovery of Rs. 16,52,000/ against the plaintiff which is pending for evidence in the court of Sh. B R Bansal, Ld. ADJ, South East District, Saket Courts, New Delhi. It is further argued that the plaintiff company has supplied the defective goods which is of substandard quality and the said defect was duly informed telephonically to the plaintiff; the defendant has suffered huge losses in the market because of the products manufactured from defective material of poor quality were rejected by its customers. In addition it is stated that Sh. Manish Sinha came on 01.06.2011 to the Noida office of plaintiff company and accepted that the goods were of substandard quality and entered into a memorandum of meeting dated 01.06.2011 and agreed that the plaintiff will supply free of cost raw material 15 M.T of polypropylene reliance grade or amount to the tune of Rs. 14 lacs to compensate the goods of poor quality and the losses suffered by the defendant company; as per MoM dated 01.06.2011 entered into by Manish M/s SCJ Plastics Ltd. Vs. M/s Amitex Polymers Pvt. Ltd. Contd....5 of 17 : 6 :
Sinha on behalf of plaintiff, the plaintiff is bound to pay Rs. 14 lacs to compensate the defendant for the poor quality of the goods.
8. It is further argued that the amount of additional sale tax in lieu of C form and the penalty amount as claimed in the present suit is not a liquidated and ascertained amount and as such cannot be recovered under order XXXVII CPC. Regarding the interest amount claimed by the plaintiff, it is argued that the interest amount sought to be recovered on the outstanding invoices was exorbitant and penal in nature and as such the same is not recoverable per se without proof of loss and a triable issue is raised in terms of Section 73 & 74 of Indian Contract Act. The defendant has referred the following cases in support of its arguments:
(a) Mechalec Engineers & Manufacturers Vs. Basic Equipment Corporation (1997) 1 SCR 1060.
(b) Neeta Aggarwal Vs. R L Gupta 95 (2002) DLT 167 : In this case the leave was granted because the defective goods were returned by way of challans and the challans were disputed by the plaintiff to be forged and fabricated. It was held that whether the challans were fabricated was a triable issue.
(c) Murari Lal Rathore Vs. M/s Jagdamba Traders & Anr. III (2003) BC 435: In this case the defendant in their leave to defend application had set up a defence that the goods supplied were substandard and the same were not taken back despite notice, therefore, unconditional leave to defend the suit was granted.
M/s SCJ Plastics Ltd. Vs. M/s Amitex Polymers Pvt. Ltd. Contd....6 of 17 : 7 :
(d) Babbar Vision India Pvt Ltd. Vs. Rama Vision Ltd 99 (2002) DLT 556: In this case the defendant raised a defence that the picture tubes supplied by the plaintiff were defective and by atleast four letters the defective quality of the tubes were brought to the notice of the plaintiff. The unconditional leave to defend the suit was allowed by setting aside the judgment of the Hon'ble Single Judge.
(e) Hari Niwas Gupta Vs. Om Propmart Pvt Ltd. & Anr 187 (2012) DLT 285: In para no.30 it was held that: Order 37 CPC has been included in the Code of Civil Procedure in order to allow a person, who has a clear and undisputed claim in respect of any monetary dues, to recover the dues quickly by a summary procedure instead of taking the long route of a regular suit. If the affidavit discloses a triable issue by way of pleas which is at least plausible then the leave should be granted but, defence should be legal and even through it ultimately may not turn out to be a good defence.
The defendants in the present case have challenged the correctness of the facts of the plaint.
9. Written Arguments of Plaintiff: The plaintiff in his written arguments has argued that receiving of goods by three subject invoices worth Rs. 11,32,698/ is not disputed as it has been admitted in the leave to defend application that the defendant has used entire goods received from the plaintiff. It was further argued that the supply made by the plaintiff was accompanied with the test reports and the said fact was mentioned on the invoices that the test certificate was attached and no letter was written by the defendant to the plaintiff that the test certificates are ought to have been supplied was not supplied. It is further argued that the defendant has used M/s SCJ Plastics Ltd. Vs. M/s Amitex Polymers Pvt. Ltd. Contd....7 of 17 : 8 :
the entire goods and as per the Section 42 of Sale of Goods Acts it is deemed that the defendant has accepted the goods and is therefore liable to pay the price of the goods to the tune of Rs. 11,32,698/.
10. The plaintiff has put reliance on the case of M/s KIG Systel Ltd. Vs. M/s Fujitsu ICIM Ltd. AIR 2001 DELHI 357 in which it was held that the intendment is generally that the price of goods must be paid and if there is a subsequent defect (in contradiction to a defect detected within a reasonable time of the delivery) the remedy that is envisaged is for the buyer to sue for damages.
11. It is further argued that on the basis of false and frivolous Memorandum of Meeting (MoM) dated 01.06.2011, the defendant has already sued the plaintiff by way of separate suit bearing no. 57/2014 for recovery of Rs. 16,52,000/ and therefore liable to pay the plaintiff the price of goods which are admittedly received and used by the defendant.
12. It is further argued that the defendant is liable to pay interest @24% per annum because it has been stipulated in the invoices that on the delayed payment, interest @24% will be charged. The said condition was never opposed by the defendant and the transaction between the parties was commercial in nature. The said rate of interest is construed to be agreed rate of interest on the delayed payment. Reference and reliance has been placed upon the judgment of Hon'ble High Court in case titled Voltas Ltd & Anr Vs. Union of India & Ors 156 (2009) DLT 122. In para no.10 of the said judgment it has been held that the law is well settled that where the terms M/s SCJ Plastics Ltd. Vs. M/s Amitex Polymers Pvt. Ltd. Contd....8 of 17 : 9 :
and conditions on the invoices stipulate that interest at a certain rate per annum is payable, the said interest constitutes the agreed rate of interest. Therefore, the claim of the interest @15% per annum as per agreed rate was held not to be exorbitant and was allowed under order XXXVII CPC.
13. On the point of recovery of amount of additional sale tax in lieu of sale tax form C it was argued that the Hon'ble High Court of Delhi in case titled Food Corporation of India & Ors. Vs. Ram Babu Singhal Enterprises Pvt Ltd. reported as 119 (2005) DLT 442 (DB) was pleased to hold that claim of balance 6% of Central Sale Tax by the plaintiff on account of inability of appellant (defendant) to supply form C declarations inspite of repeated demands by the defendant and no justification shown as to why the amount was withheld or for withholding the balance amount are not plausible reasons and are against the record; the defence raised in that regard was without any basis and no triable issue was raised by the appellant in that regard.
14. It is further argued that despite the said judgment of the Hon'ble DB of the Hon'ble High Court of Delhi if the court is of the view that the claim of the plaintiff in respect of the sale tax form C is not maintainable/covered within the ambit of Order XXXVII CPC, the plaintiff is ready to give up its claim to the sale tax form C and has placed reliance in that regard in the case titled SICOM Ltd. Vs. Prashant S Tanang reported as 2004(3)RCR (Civil)399.
15. It is vehemently argued on behalf of plaintiff that the defendant has failed to raise any valid defence and the defence so raised in the application is M/s SCJ Plastics Ltd. Vs. M/s Amitex Polymers Pvt. Ltd. Contd....9 of 17 : 10 :
false, frivolous and practically moon shine and plaintiff was entitled to judgment.
16. I have considered the rival submissions and carefully gone through the plaint and the contents of the application and the reply therein. The very first defence raised by defendant in his application as well as in written arguments is that plaintiff company has supplied the defective goods which are of substandard quality. It is further alleged that the defendant came to know from its dealers about the substandard quality of the goods and had informed the plaintiff through various telephonic calls but the plaintiff failed to give any proper response to the defendant in that regard. The defendant has relied upon various cases as mentioned in his written arguments. The facts and circumstances for considering the defective supply of goods as a plausible defence in those cases are totally different from the facts and circumstances of the present case.
17. In the first case of Neeta Aggarwal (Supra) the defective goods were returned by way of challans whereas in the present case there was no return of the defective goods and the same was admittedly consumed by the defendant.
18. In the case of Murari Lal Rathore (Supra) the defective goods were not taken back despite notice given by the defendant to the plaintiff in that regard. Again no such notice regarding the defective goods have been given by the defendant to the plaintiff in the present case and no reply to M/s SCJ Plastics Ltd. Vs. M/s Amitex Polymers Pvt. Ltd. Contd....10 of 17 : 11 :
the legal notice for the payment of the due amount was made by the defendant and the plea of defective goods has been raised in the leave to defend application only.
19. In Babbar Vision India Pvt Ltd (Supra) the defendant has written four letters informing the plaintiff about the defective goods. Again there is no such letter written by the defendant to the plaintiff about the defective quality of the goods. It is simply stated in the application as well as in the written arguments that the defendant has informed the plaintiff through various telephonic calls. No such telephone number or the date and time of such telephonic calls have been mentioned in the application or in the written arguments. Even the defendant has chosen not to raise the said defence on affidavit as the leave to defend application is not on affidavit but otherwise because only a supporting affidavit has been filed alongwith leave to defend application. Therefore in the absence of any details of the telephonic conversation, date and time of the telephonic calls made, the said defence seems to be an after thought and is liable to be rejected.
20. The second defence raised by the defendant was that he has suffered huge loss in the market as the products prepared by the defendant from the material supplied by the plaintiff is of poor quality and the water tanks, pipes and fittings so prepared were returned by the client who were customers of defendant. Again there is no communication or material placed on record by the defendant in that regard. Nothing is alleged that such customer has filed any case for recovery of damages or made any claim on the basis of poor M/s SCJ Plastics Ltd. Vs. M/s Amitex Polymers Pvt. Ltd. Contd....11 of 17 : 12 :
quality of the goods supplied by the defendant which were manufactured and prepared by the defendant from the alleged substandard goods supplied by the plaintiff.
21. The next defence raised by the defendant is that the plaintiff has admitted the defects in the goods and has agreed to compensate the defendant in that regard by making the supply free of cost of raw material 15 metric tonne of polypropylene reliance grade or amount to the tune of Rs. 14 lakhs as compensation. The said averment has been totally controverted and denied by the plaintiff in reply to the leave to defend application. The said averment is not made on affidavit but otherwise. In the written arguments the defendant has elucidated and elaborated the said defence by stating that Sh. Manish Sinha Chief Manager Sale of the plaintiff company came on 01.06.2011 to the Noida office of the defendant company and accepted that the goods are of substandard quality and therefore entered into a settlement on 01.06.2011 and the parties have agreed that the plaintiff will for the defective goods so supplied, would supply free of cost raw material i.e. 15 metric tonne of polypropylene reliance grade or amount to the tune of Rs. 14 lakhs as compensation. The said averments are not made on affidavit and are not part of the leave to defend application.
22. Moreover, it is the case of the defendant that he has filed the Civil Suit for recovery of damages from the plaintiff on the basis of MoM dated 01.06.2011 and Sh. Manish Sinha has also been impleaded as one of the defendant. Ld. counsel for plaintiff has submitted that the said defence is misconceived, M/s SCJ Plastics Ltd. Vs. M/s Amitex Polymers Pvt. Ltd. Contd....12 of 17 : 13 :
false and frivolous and the defendant has already exercised their rights for claim of damages by filing the separate Civil Suit and the plaintiff is duty bound to make the payment of the price of the goods which has been admittedly consumed by it and is also liable to pay interest on the delayed payment as per the agreement on the said invoices.
23. Reliance has been placed on the case titled M/s KIG Systel Ltd. Vs. M/s Fujitsu ICIM Ltd. AIR 2001 DELHI 357 (Supra) which has been further relied by Hon'ble High Court of Delhi in its recent judgment delivered by the Hon'ble Mr. Justice Jayant Nath dated 23.07.2013 titled as Bijender Chauhan @ Bijender Kumar Vs. M/s Financial Eyes India Ltd IA No. 5269/2012 in CS(OS) 2576/2011. The contents of para no.12 and 13 of AIR 2001 Del. 357 has been relied and reproduced as under: "Para 12: The disputes between the parties cannot be decided to hors the sundry provisions of the Sale of Goods Act. Partpayment 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."
"Para 13: 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 within a reasonable time of the delivery) the remedy that it envisaged is for the Buyer to sure 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 latters'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."
24. The last defence raised in the application as well as in the written M/s SCJ Plastics Ltd. Vs. M/s Amitex Polymers Pvt. Ltd. Contd....13 of 17 : 14 :
arguments is that the plaintiff has included the claim of additional sale tax alongwith penalty and the rate of interest @ 24% per annum was exorbitant and penal in nature and was not recoverable. In that regard the Ld. counsel for plaintiff has put reliance on the case of Food Corporation of India & Ors. (Supra) & Voltas Ltd & Anr. (Supra).
25. In the former case the Hon'ble DB was pleased to hold that the defence raised regarding the claim of Central Sale Tax under order XXXVII CPC was without any basis and no triable issue was raised.
26. In the later case Hon'ble Ms. Justice Rewa Khetrapal was pleased to hold that where terms and conditions of invoices stipulate that interest at certain rate is payable the said interest constitute agreed rate of interest. In the said case the mutually agreed terms and interest payments @ 15% per annum of over due amount was held not to be exorbitant rate of interest.
27. Regarding the claim of additional sale tax and the penalty, Ld. counsel for plaintiff in the written arguments has stated that in case the court does not deem it fit to grant such relief the plaintiff be allowed to withdraw the said claim or to give up or forgo the said claim in the present suit.
28. Hence, for the purpose of deciding the present application, the plaintiff is permitted to withdraw its claim for recovery of additional sale tax alongwith penalty as claimed in the prayer clause.
29. It may be mentioned here that the principles for grant of leave to defend have been laid down by Hon'ble Supreme Court in the case of Mechalec M/s SCJ Plastics Ltd. Vs. M/s Amitex Polymers Pvt. Ltd. Contd....14 of 17 : 15 :
Engineers and Manufacturers Vs. Basis Equipment Corporation, AIR 1977 SC 577, it has been held that the question of granting leave to defend has to be considered in the light of following principles:
4. (a) If the defendant satisfies the court that he has a good defence 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.5.
6. (b) If the defendant raised a triable issue including that he has a fair or bona fide or reasonable defence although not a positively good defence the plaintiff is not entitled to sign judgment and the defendant is entitled to unconditional leave to defend.7.
8. (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 defence, 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 defence 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.9.
10. (d) If the defendant has no defence or the M/s SCJ Plastics Ltd. Vs. M/s Amitex Polymers Pvt. Ltd. Contd....15 of 17 : 16 :
defence set up is illusory or sham or practically moonshine then ordinary the plaintiff is entitled to leave to sign judgment and the defendant is not entitled to leave to defend.11.
12. (e) If the defendant has no defence or the defence is illusory or sham or practically moonshine then although ordinary the plaintiff is entitled to leave to sign judgment, the Court may protect the plaintiff by only allowing the defence 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 defence.
30. In view of above discussion, I am of the considered opinion that the defendant in this case has no defence or the defence set up is illusory, sham or practically moonshine and for that reason the defendant is not entitled to leave to defend the present suit and the plaintiff is entitled to the judgment. The application of defendant is liable to the dismissed and therefore the same is accordingly dismissed.
31. Since the leave to defend application is dismissed, accordingly, suit of the plaintiff is decreed in favour of plaintiff and against the defendant for sum of Rs.11,32,698/ alongwith interest @ 24% per annum w.e.f. 09.08.2012 i.e. the service of legal notice till the filing of the suit.
32. The question of granting of pendente lite and future interest governed by Section 34 CPC. In the fact and circumstances of the present case the end M/s SCJ Plastics Ltd. Vs. M/s Amitex Polymers Pvt. Ltd. Contd....16 of 17 : 17 :
of justice would be met if the plaintiff is allowed pendente lite and future interest @06% per annum from the filing of the present suit till the recovery of decreetal amount.
33. Cost of the suit is also allowed in favour of plaintiff and against the defendant.
34. Decree sheet be prepared accordingly.
35. File be consigned to record room after due compliance.
Dictated and announced in the
open court on 01.07.2015 (RAJ KUMAR CHAUHAN)
ADJ04 (South)
Saket Courts / New Delhi
01.07.2015
M/s SCJ Plastics Ltd. Vs. M/s Amitex Polymers Pvt. Ltd. Contd....17 of 17