Gujarat High Court
Chlochem Ltd vs Lifeline Industries Ltd on 1 August, 2014
Author: Abhilasha Kumari
Bench: Abhilasha Kumari
C/SCA/13041/2012 CAV JUDGMENT
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
SPECIAL CIVIL APPLICATION NO. 13041 of 2012
FOR APPROVAL AND SIGNATURE:
HONOURABLE SMT. JUSTICE ABHILASHA KUMARI
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1 Whether Reporters of Local Papers may be allowed to Yes
see the judgment ?
2 To be referred to the Reporter or not ? Yes
3 Whether their Lordships wish to see the fair copy of the No
judgment ?
4 Whether this case involves a substantial question of No
law as to the interpretation of the Constitution of India,
1950 or any order made thereunder ?
5 Whether it is to be circulated to the civil judge ? No
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CHLOCHEM LTD....Petitioner(s)
Versus
LIFELINE INDUSTRIES LTD....Respondent(s)
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Appearance:
MS MANISHA LAVKUMAR, ADVOCATE for the Petitioner
MR P P MAJMUDAR, ADVOCATE for the Respondent
MR SP MAJMUDAR, ADVOCATE for the Respondent
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CORAM: HONOURABLE SMT. JUSTICE ABHILASHA
KUMARI
Date: 01/08/2014
CAV JUDGMENT
1. Rule. Mr.S.P.Majmudar, learned advocate, waives Page 1 of 20 C/SCA/13041/2012 CAV JUDGMENT service of notice of Rule for the respondent. On the facts and in the circumstances of the case and with the consent of learned counsel for the respective parties, the petition is being heard and decided, finally.
2. The challenge in this petition under Articles 226 and 227 of the Constitution of India is to the order dated 27.07.2012, passed by the learned Chamber Judge, Court No.6, City Civil Court, Ahmedabad ("the City Civil Court"), below the application at Ex.22, in Summary Suit No.554 of 2011, whereby unconditional leave to defend has been granted to the respondent (original defendant).
3. The petitioner is the original plaintiff, having filed Summary Suit No.554 of 2011 in the City Civil Court against the respondent, for recovery of dues amounting to Rs.68,65,618/, along with interest amounting to Rs.7,07,904/, that is, for a total amount of Rs.75,73,512/. The respondent filed an affidavit for leave to defend, raising a dispute as to the quality of Page 2 of 20 C/SCA/13041/2012 CAV JUDGMENT goods supplied to the respondent and also challenging the interest on delayed payments. By the impugned order, the City Civil Court granted unconditional leave to defend, to the respondent. Aggrieved thereby, the petitioner is before this Court.
4. Ms.Manisha Lavkumar, learned advocate for the petitioner, has submitted that the respondent has admitted its outstanding dues payable to the petitioner vide letter dated 25.11.2010. A perusal thereof would go to show that the respondent has mentioned the cheques that have been given by it and in the body of the letter, has asked the petitioner to send the statement of accounts in detail, so as to enable it to make the payment on schedule. It is submitted that the contents of this letter have been misread by the City Civil Court while passing the impugned order. The respondent was very well aware that the cheques issued by it were dishonoured for insufficient funds and its liability has clearly been admitted. Page 3 of 20 C/SCA/13041/2012 CAV JUDGMENT
5. That, the respondent has raised a defence that the goods supplied by the petitioner were of inferior quality, only after the filing of the summary suit. There is nothing on record to show that the respondent has complained about this aspect to the petitioner, earlier. In the leave to defend application, the respondent has stated that the goods are lying in the godown and the petitioner was informed to take them away as they are of inferior quality. However, no documents have been produced in support of the said defence. The cheques issued by the respondent have clearly been dishonoured. This aspect, coupled with the admission by the respondent, is sufficient to show that the respondent has not raised any triable issue. The City Civil Court, therefore, ought not to have granted unconditional leave to defend. The petitioner ought to have been directed to deposit the claim amount or a reasonable amount, if the City Civil Court thought it fit to grant leave to defend.
6. In support of the above submissions, reliance Page 4 of 20 C/SCA/13041/2012 CAV JUDGMENT has been placed upon the following judgments:
(a) Unreported judgment of Delhi High Court in M/s.Shyam Dri Power Ltd. v. Bhav Shakti Steel Mines Private Limited - Company Petition No.475 of 2009, decided on 09.08.2012.
(b) Sify Ltd. v. First Flight Couriers Ltd.
(2008)4 SCC 246.
(c) V.K.Enterprises And Another v. Shiva Steels - (2010)9 SCC 256
7. Mr.S.P.Majmudar, learned advocate for the respondent, has strongly opposed the submissions advanced on behalf of the petitioner, by submitting that the suit, itself, cannot be tried as a summary suit as there is no contract regarding interest between the parties. The suit is liable to be tried as a longcause suit as the claim for interest takes it out from the ambit of summary proceedings. In support of this submission, reliance has been placed upon a judgment of this Court in Zonal Manager v. Akhilbhai B.Mehta - 2002(2) GCD (UJ) (Guj.).
8. It is further submitted that from no angle can the letter dated 25.11.2010, written by the respondent to the petitioner, asking the Page 5 of 20 C/SCA/13041/2012 CAV JUDGMENT petitioner for a statement of accounts, be construed as an admission of any liability. The cheques issued by the respondent were given to the petitioner as a security, as is the usual trade practice. The petitioner was specifically asked by the respondent, by way of this letter, not to include them in the statement of accounts. However, those cheques have been added in the statement of accounts by the petitioner, along with the interest.
9. That, no amount is mentioned in the letter dated 25.11.2010, therefore, it cannot be stated that the respondent is admitting any liability for any amount. In fact, the respondent has asked the petitioner to prepare proper accounts as the accounts prepared by the petitioner show an inflated figure, by including the cheques given as security by the respondent. The respondent does not admit the accounts of the petitioner.
10. That, the respondent has categorically stated in the affidavit for leave to defend that nothing is due and payable by the respondent. The Page 6 of 20 C/SCA/13041/2012 CAV JUDGMENT respondent has denied the accounts of the petitioner as being false. Moreover, a sizeable amount has already been paid by the respondent to the petitioner. The petitioner has included late interest payment in the statement of accounts. There is no agreement between the parties regarding interest, therefore, this part of the account is illegal and unjustified and wrong debits have been made in the account by the petitioner.
11. That, the City Civil Court has correctly considered that the defence raised by the respondent is a triable issue and that the letter dated 25.11.2010, only corroborates the fact that the defendant has not admitted the statement of accounts of the plaintiff.
12. The findings rendered of the City Civil Court are based on an analysis of the accounts and it cannot be said that the letter dated 25.11.2010, has been misconstrued. In fact, it has been properly construed.
13. It is next submitted that in a summary suit, the Page 7 of 20 C/SCA/13041/2012 CAV JUDGMENT amount has to be a liquidated amount, otherwise, it ought to be tried as a longcause suit, as held by this Court in Ratilal B.Shah And Co. v. Pari Prafulchandra Kantilal - 1983(1) GLR 700. The City Civil Court has, therefore, rightly granted unconditional leave to defend.
14. Referring to the provisions of Order 37, Rule 1, subrule 2(b) of the Code of Civil Procedure, 1908 ("the Code"), learned advocate for the respondent has further submitted that when the correctness of an amount is disputed, it is not a liquidated demand, therefore, the suit cannot be tried in a summary form. The suit has not been filed for the cheque amounts but is based on accounts. The figure in the statement of accounts is much more than that of the cheques. The cheques have been wrongly included in the statement of accounts by the petitioner in spite of the fact that the respondent had informed the petitioner not to do so.
15. Distinguishing the judgments relied upon by the learned advocate for the petitioner, it is Page 8 of 20 C/SCA/13041/2012 CAV JUDGMENT submitted that the judgment of the Delhi High Court in Company Petition No.475 of 2009 has been passed in a windingup petition. The parameters of Section 433, read with Section 433 of the Companies Act, 1956, are different from the summary procedure delineated in Order 37 of the Code. According to the learned advocate for the respondent, this judgment is not applicable to the facts of the present case.
16. It is further submitted that the defence regarding inferior quality of the goods can only be raised at the time of filing the affidavit for leave to defend. Whether the defence is ultimately accepted by the Trial Court, or not, is to be seen during the Trial. The Court would frame an issue to this effect. At this stage, the Court has rightly not opined on this issue as the suit is still at large.
17. Lastly, it is submitted that the City Civil Court has committed no jurisdictional error in granting unconditional leave to defend. The Court has the power and the discretion to pass Page 9 of 20 C/SCA/13041/2012 CAV JUDGMENT the impugned order, and such power and discretion have been exercised judiciously. If the petitioner is aggrieved, the suit can be expedited. However, the impugned order, as it stands, does not call for interference under the supervisory jurisdiction of this Court.
18. In rejoinder, learned advocate for the petitioner has mostly reiterated the submissions advanced earlier.
19. This Court has heard learned counsel for the respective parties, perused the averments made in the petition, contents of the impugned order and other documents on record.
20. If the prayer made in the plaint of the suit filed by the petitioner is perused, it is clear that the petitioner is claiming interest along with the amount due and further interest at the rate of 6% per annum over the total amount of Rs.75,73,512/, which includes the principal claim, plus the interest.
21. In Zonal Manager v. Akhilbhai B.Mehta (supra), Page 10 of 20 C/SCA/13041/2012 CAV JUDGMENT this Court has held as below:
"7. Having heard both the learned advocates and having gone through the facts of the case and record it will have to be decided whether the present dispute as has been raised by the plaintiff is falling within the ambit of Order37 Rule1 of the Civil Procedure Code. It was urged that the suit is filed for liquidated amount of 24 days Earned Leave and therefore it falls within the ambit of Order37. Perusing Order37 Rule1 Sub sec.(2) it is clear that the dispute falls in none of the subclause of Subrule(2) of Rule1 of Order37. It is not the suit for recovery of liquidated amount but the amount of interest at the rate of 24% has also been sought to be recovered by the plaintiff respondent.
The case is clearly covered by the
unreported decision of this Court as
reported in the matter of National Textile Corporation Ahmedabad vs. Shri Rajendra Sankalchand and Parikh, as reported in 1982 GLH (UJ)7 wherein the Court in unequivocal terms ruled that in order to succeed in getting the amount of interest the opponentplaintiff will have to prove his case by evidence and this cannot be permitted in a Summary Suit and, therefore, in view of the claim of interest amount made Page 11 of 20 C/SCA/13041/2012 CAV JUDGMENT by the plaintiff in the suit the suit cannot be said to be Summary Suit and consequently not triable as Summary Suit. Claiming of the amount in the present case at the rate of 24% takes out the dispute of the scope of Summary Suit and therefore the learned Judge committed a jurisdictional error to grant conditional leave. Not only that, neither the dispute can be termed as liquidated demand as envisaged by the Order37 Rule 1(2) but the claim of interest is also a triable issue and takes the suit out of the ambit of the Summary Suit. On this ground alone this Revision Application is required to be allowed, irrespective of the fact that even if it is Summary Suit there were triable issues.
8. In this view of the matter, since the suit filed by the plaintiff is not falling within ambit of Summary Suit the order passed by the learned trial Judge to defend the suit on condition is without jurisdiction and erroneous and is required to be set aside. In this view of the matter, this Revision Application is allowed. The order impugned passed by the City Civil Court for issuing summons for judgment which is dated 17.12.1991 is set aside and consequently Page 12 of 20 C/SCA/13041/2012 CAV JUDGMENT the order impugned which is dated 12.1.2000 granting conditional leave to defend is also set aside. Rule is made absolute. No order as to costs."
22. The principles of law enunciated in the above quoted judgment would squarely apply to the facts of the present case. Learned advocate for the petitioner has not chosen to distinguish this judgment or to make any submissions regarding the aspect regarding charging of interest. There is no denying the fact that not only has the petitioner claimed interest in the suit but the statement of account prepared by the petitioner, a copy of which is annexed to the petition, also clearly shows that interest claimed for late payment of interest has been debited to the account of the respondent and interest of Rs.7,07,904/ has been added to the principal claim of Rs.68,65,618/. There is no material on record to show that there is an agreement between the parties regarding the claim of interest. Moreover, the claim for interest cannot be said to be a liquidated demand.
Page 13 of 20 C/SCA/13041/2012 CAV JUDGMENT
23. A perusal of Order 37, Rule 1, subrule 2 of the Code makes it clear that the dispute does not fall in any of the subclauses of subrule 2, in view of the claim of interest made by the petitioner. This alone raises a triable issue. Therefore, in the view of this Court, unconditional leave to defend has rightly been granted by the City Civil Court.
24. In Ratilal B.Shah And Co. v. Pari Prafulchandra Kantilal (supra), the case before the Court was regarding a dispute to the amount claimed in the account prepared by the plaintiff. The defendant therein challenged the correctness and accuracy of the account. As the case of the defendant was that the account was inaccurate, this Court held that the Trial Court was not justified in granting conditional leave to defend. The relevant extract of the judgment is reproduced hereinbelow:
"4. In view of the fact that the defendants case is that this was an "account stated" and that the plaintiff is liable to render true and correct account, it would be Page 14 of 20 C/SCA/13041/2012 CAV JUDGMENT premature to hold any specific amount being due from the defendants to the plaintiff. In the circumstances of the case, the learned trial Judge was not justified in imposing a condition that the defendants should deposit a sum of Rs.20,901/ and allow the defendants to defend on that conditions only. In this matter, the defendants are entitled to an unconditional leave to defend because, at this stage, it is not possible to say as to what amount would be found to be due and payable by the defendants to the plaintiff. The defendants are, however, directed to file their written statement within four weeks from the day on which this writ is received by the lower Court and the trial Court is directed to take up this case immediately for hearing and dispose of the suit not later than 31st March 1983. Writ to be sent to the lower Court forthwith."
25. The present is also a case where the account prepared by the petitioner has been seriously disputed by the respondent, therefore, the principles of law enunciated by the Court in the abovequoted judgment would apply squarely to the present case.
26. Learned advocate for the petitioner has laid Page 15 of 20 C/SCA/13041/2012 CAV JUDGMENT great emphasis upon the letter dated 25.11.2010, written by the respondent to the petitioner. This letter merely records the request of the respondent to send the statement of account in detail so as to enable it to make payments on schedule. This cannot be construed as an admission of liability. There is a note at the bottom of the letter which specifically requests the petitioner not to include the cheques of the respondent that have not been cleared in the statement of account. No amount is mentioned in the contents of the said letter. The context of the note is with regard to noninclusion of the cheques in the statement of accounts. This cannot be considered to be an admission of liability that any amount is outstanding from the respondent to the petitioner, as has rightly been held by the City Civil Court.
27. The judgments cited on behalf of the petitioner may now be considered.
28. The judgment of High Court of Delhi in M/s.Shyam Dri Power Ltd. v. Bhav Shakti Steel Page 16 of 20 C/SCA/13041/2012 CAV JUDGMENT Mines Private Limited in Company Petition No.475 of 2009, has been rendered in a Company Petition for windingup under Sections 433 read with Section 434 of the Companies Act, 1956. The Delhi High Court has held that the defence set up by the respondent therein that the goods were defective, has been taken for the first time after the windingup petition had been filed and there was no communication on record to show that the defect had ever been communicated to the petitioner. The said judgment has been rendered within the parameters of Sections 433 and 434 of the Companies Act, 1956, in a petition for windingup. The observations made by the Delhi High Court in that judgment would not be relevant in the context of a summary suit under Order 37 of the Code. Whether the defence put up by the respondent herein is ultimately found to be a good one, or not, is for the Trial Court to see at the time of the final decision of the suit. The said judgment would, therefore, not have any bearing on the present case, especially as there is no finding of the Trial Page 17 of 20 C/SCA/13041/2012 CAV JUDGMENT Court in the impugned order regarding the defence set up by the respondent herein that the goods supplied by the petitioner were defective.
29. In Sify Ltd. v. First Flight Couriers Ltd. (supra), the Supreme Court held that the concerned High Court was not justified in setting aside the order of the Civil Court granting conditional leave to defend as the plea of deficiency in service was taken for the first time in two years and the record revealed that the respondentdefendant therein was liable to pay for the services rendered by the appellant. This judgment turns on its own facts. The present case does not pertain to deficiency in service but is solely based upon the statement of accounts prepared by the petitioner which is disputed by the respondent. This judgment, therefore, would not come to the aid of the petitioner.
30. In V.K.Enterprises And Another v. Shiva Steels (supra), the case before the Supreme Court was that the petitionerdefendant settled the Page 18 of 20 C/SCA/13041/2012 CAV JUDGMENT accounts against the respondent and acknowledged the liability in respect of the said amount. Thereafter, a cheque issued by the petitioner towards partpayment of the dues was dishonoured. The petitioner alleged interpolation of the cheque but failed to prove it. On the other hand, the ledger accounts relating to dues produced by the respondent plaintiff demonstrated that such dues had been settled between the parties. In such circumstances, it was held that the petitioner did not succeed in making out a triable issue and the Trial Court and the High Court correctly rejected the application for leave to defend. The facts in the present case are not at all on a similar footing. In the present case, after scrutinising the evidence on record, the City Civil Court has granted unconditional leave to defend. This judgment would not be applicable in the factual matrix of the present case.
31. The cumulative effect of the above discussion is that this Court, after analysing the material on record and perusing the impugned order of the Page 19 of 20 C/SCA/13041/2012 CAV JUDGMENT City Civil Court, does not find that the said Court has committed any error of law or jurisdiction while granting unconditional leave to defend. The findings of the City Civil Court that the claim of the respondentdefendant raises a triable issue indicating that it has a fair and reasonable defence, are just and proper.
32. Resultantly, the petition deserves to be rejected. It is, accordingly rejected. Rule is discharged. There shall be no orders as to costs.
(SMT. ABHILASHA KUMARI, J.) sunil Page 20 of 20