The State Trading Corporation Of ... vs Panipat Foods Ltd.
1986 Latest Caselaw 289 Del

JUDGMENT

Sunanda Bhandare, J.

(1) This revision petition is directed against the judgment and order of the Additional District Judge, Delhi dated 31st May 1986 whereby the application of the petitioner for leave to defend the suit filed by the plaintiff for recovery of Rs. 88,596.16 was dismissed.

(2) Panipat Foods Limited (plaintiff company) instituted a suit under Order 37 of the Civil Procedure Code . against the petitioner State Trading Corporation (defendant Corporation) for recovery of Rs. 88,596,16. In this suit the defendant Corporation filed an application under Section 34 of the Arbitration Act which was rejected by the trial court on 19th February 1986. Thereafter the plaintiff company applied for the service of summons of judgment and, therefore, the defendant Corporation filed an application for grant of leave to defend the suit as provided under Order 37 of the Civil Procedure Code . The trial court by the impugned order dismissed this application for leave to defend. The petitioner challenged this order of the trial court on five main grounds.

(3) The first plea taken was in respect of limitation. It was contended that the contract under which the recovery was sought to be made by the plaintiff company was dated 1st May 1980 and the suit was filed on 22nd October 1984 and, therefore, it was barred by limitation. The plaintiff company however refuted that the suit was barred by limitation on the ground that as per terms of the contract the remaining 5% of the price of the goods if the same was due to the suppliers was to be paid by the defendant Corporation to the suppliers not later than 60 days after the date of the receipt of the survey report and final acceptance of the goods. Therefore, the plaintiff company could not receive the balance amount of the suit from the defendant Corporation till after the expiry of the aforesaid period. The survey report was received by the defendant Corporation on 1st October 1980 and, therefore, the suit was within time. Leave to defend the suit on the ground that the suit was barred by limitation was rejected by the learned trial Judge on the ground that there is no elaboration in the leave application as to how the suit of the plaintiff company was barred by limitation and there was no denial by the defendant Corporation of the averments made by the plaintiff company in reply to the application for leave to defend.

(4) The second plea taken by the defendant Corporation was that as per clause 7 of the contract the defendant Corporation was entitled to recover any amount from the plaintiff company which was due to the defendant Corporation in any other contract. It was contended by the learned counsel that it was specifically stated in the leave application that another contract dated 30th July 1980 was entered into between the parties in which a sum of Rs. 3.5 lacs was alleged to be due from the plaintiff company to the defendant Corporation. This claim of the plaintiff company was contested by the plaintiff on the ground that no amount was due to the defendant Corporation from the plaintiff company on the date the suit was filed and, therefore, no leave to defend on that ground by granted. The learned trial Judge considered the clauses in the contract and came to the conclusion that the defendant Corporation having failed to prove that there was any amount due to the defendant Corporation from the plaintiff company the petitioner should not be given leave to defend on that ground.

(5) The third plea taken was in respect of maintainability of the suit under Order 37 of the Civil Procedure Code . on the ground that in a suit under Order 37 of the Civil Procedure Code no relief of interest which was beyond the terms of the contract could be claimed.

(6) Fourthly it was contended that the trial court had given a finding on the question of survey report on the basis of conjectures and surmises.

(7) Lastly it was contended that the trial court dismissed the leave application in a manner as if it was deciding the suit on merits.

(8) The principles to be followed while considering the question of granting leave to defend have been well-settled by the Supreme Court in Mechanic Engineers & Manufacturers v. M/s Basic Equipment Corporation, . In this case the Supreme Court has held that only in cases where the defense is patently dishonest or so unreasonable that it could not reasonably be expected to succeed or the defense is illusory or sham or practically moonshine that leave to defend should be refused and the plaintiff is entitled to sign judgment. The Supreme Court has further held that the defendant has to disclose only such facts as may be deemed sufficient to entitle him to defend and it is not necessary for the defendant to prove his case to the hilt at that stage.

(9) In the present case, it cannot be said that the defense of the petitioner/defendant Corporation in the application for leave to defend was illusory or sham. The defendant Corporation raised friable issues and disclosed sufficient facts to indicate that it has a fair defense. In my view the trial court in the present case exceeded its jurisdiction in finally deciding the issues on merits without granting to the defendant leave to defend the suit.

(10) The petition, therefore, has to be allowed. The order dated 31st May 1986 of the Additional District Judge, Delhi is set aside. The petitioner/defendant Corporation is granted leave to defend the suit. Parties will appear before the Additional District Judge, Delhi on 1st September 1986. No costs.

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