Tej International Limited vs Dawood Shoes Pvt. Ltd.
2001 Latest Caselaw 1833 Del

JUDGMENT

V.S. Aggarwal, J.

1. Tej International Ltd has filed the present suit for recovery of Rs. 8,99,798.00 against the defendant Dawood Shoes Pvt. Ltd. The suit has been filed under Order 37 of the Code of Civil Procedure. It as been alleged that the plaintiff is engaged in the manufacturing and sale of the pairs of shoes and defendant company is engaged in the business of trading of shoes. The plaintiff has a long standing business dealing with the defendant. The plaintiff has been supplying the pairs of shoes to the defendant from time to time as per the purchase orders. The plaintiff received a purchase order dated 2nd July, 1996 at the head office of New Delhi of the plaintiff. The representative of the defendant came to the head office and clarified that out of the said purchase order 1224 pairs of shows be supplied to the defendant. The goods were to be sent through road transport. Accordingly, the plaintiff supplied the pair of shoes as per specifications amounting to Rs. 6,34,248/-. The goods were sent to the defendant through the transporter M/s Jaipur Golden Transport Co. Ltd. The defendant is alleged to have accepted the said bill of exchange/hoondi but the payment is stated to have not been made. It is asserted that defendant had been written to the plaintiff that on account or certain deficiency in the goods they have deducted 25% of the bill amount. In this process the price of the goods besides interest calculated at the rate of 18% from 24th October, 1996 to 19th February, 1999 has been claimed.

2. In pursuance to the notice having been issued the defendants preferred an application seeking leave of defend the suit. It is not in dispute that plaintiff had agreed to supply the shoes of the agreed quality and according to the sample description approved by the defendant. The agreement is stated to have been entered into at Bombay where the purchase order was signed. It has been pleaded that no part of the cause of action had arisen at Delhi. In addition to that the defendants claim is that in utter violation of the terms of agreement the plaintiff supplied goods which were defective and were of inferior quality. It did not conform to the specifications of the agreement between the parties. The contract as such as breached. The upper and the lower soles were of inferior quality. On receipt of the defective goods the defendants represented to the plaintiff that the goods were defective and of inferior quality. The defendant offered inspection to the plaintiff with respect to the quality of goods, the plaintiff with mala fide and ulterior motives rejected the defendants offer of joint inspection. Thereafter the plaintiff did not remove the defects nor replaced the goods and sent a notice of demand. A reply in this regard had been sent. It is denied in these circumstances that plaintiff was entitled to recover the amount. On these broad facts permission is claimed to contest the suit.

3. Plaintiff has filed a reply and denied that goods were defective or that the cause of action had not arien at Delhi. The plaintiffs claim is that signed purchase order dated 7th July, 1996 was received by the plaintiff at its head office. It was accepted at the head office at Nehru Place. The other assertions of the plaint were reiterated controverting the contentions of the defendant. By this order IA 6233/99 seeking leave to defend is proposed to be disposed.

4. The principles as to under what circumstances leave to defend is to be granted or not had been considered by the Supreme Court in the well known decision of Mechalec Engineers & Manufacturers v. Basic Equipment Corporation . The Supreme Court held that only in cases where defense is patently dishonest or so unreasonable that suit is expected to succeed the discretion should be exercised giving leave to contest unconditionally. The conditions were laid by the Calcutta High Court in the case of Kiranmoyee Dassi v. J Chatterjee (1945) 49 Calcutta Weekly Notes 246 had been approved in paragraph 8, it reads:-

(a) If the defendant satisfies the Court that he has a good defense to the claim on its merits the plaintiff is not entitled to leave to sign judgment and the defendant is entitled to unconditional leave of defend.

(b) If the defendant raises a friable issue indicating that he has a fair or bona fide or reasonable defense although not a positively good defense the plaintiff is not entitled to sign judgment and 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 to say, although the affidavit does not positively and immediately make it clear that, he had a defense, 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 defense 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 time or mode of trial but not as to payment into Court or finishing security.

(d) If the defendant has no defense or the defense set up is illusory or sham or practically moonshine then ordinarily the plaintiff is entitled to leave to sign judgment and the defendant is not entitled to leave to defend.

(e) If the defendant has no defense or the defense set up is illusory or sham or practically moonshine then ordinarily the plaintiff is entitled to leave to sign judgment, the Court may protect the plaintiff by only allowing the defense 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 try to prove a defense.

5. The same question was considered by the Supreme Court subsequently in the case of Raj Duggal v. Ramesh Kumar Bansal . Herein the Supreme Court held that leave is only declined when court is of the opinion that grant of leave would merely enable the defendant to prolong the litigation by raising untenable and frivolous defenses. It prescribed as to whether defense raises a real issue or a sham one. The court in paragraph 3 held:-

3. 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 the 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 uncertainty as to the amount actually due or where the alleged facts are of such a nature as the 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.

6. From the aforesaid it is patent that only where the court comes to the conclusion that the defense is sham, bogus or a moonshine, leave to defend would be refused. If it is illusionary even the leave to defend would be refused. But where the defense discloses such facts as may be deem sufficient to enable him to defend, in that event leave to defend can be granted. It of course varies with the facts and circumstances of each case as to whether it has to be granted unconditionally or certain conditions can be imposed. If there is a friable issue in the sense that there is a dispute to be tried the leave to defend can indeed be granted unconditionally.

7. Reverting back to the facts of the present case at the outset it was pointed that the defendant/applicant himself had written on 11th October, 1996 to the plaintiff that goods have been received. it was pointed that the quality of the goods was poor and that they would like to deduct 25% of the bill amount. On the strength of this reply it was urged that at least 75% of the payment is due to the plaintiff. In addition to that the attention of the court has also been drawn towards the reply sent to the notice of demand whereby the defendant denied the payment to be made and reiterated that the goods were defective. At this stage without expressing any further opinion it is patent that there is a friable issue which was a controversy raised at the threshold when the goods were supplied that the same were of poor quality. It is therefore a friable issue as to how much would be due to the plaintiff. It cannot in these circumstances be held that the defense is totally sham or that it does not require any further probing.

8. The next question obviously comes up for consideration is as to whether permission should be granted unconditionally or some conditions should be imposed on the defendant. As already referred to above in the letter that had been written by the defendant though it was complained that the goods were of poor quality but still deduction of 25% had been claimed. As referred to above though it is a matter to be looked into still it is not appropriate therefore to grant permission to contest without imposing conditions.

9. Accordingly, leave to defend is granted to the defendant on the defendant furnishing a security to the sum of Rs. 5 lakhs to the satisfaction of the Registrar of this court within a month. In case the same is furnished, written statement can be filed within the next four weeks.

10. 10. List on 23rd March, 2002.