S.M.S. Udyog Ltd. vs Flistex Magnetics Ltd.
2003 Latest Caselaw 120 Del

JUDGMENT

S. Mukerjee, J.

1. This application (IA No.468/2001) has been filed by the plaintiff with the prayer for striking out the defendce of the defendant, on the ground of non-production of ledger and accounts by defendant in violation of the undertaking given to this Court in the order dated 19.9.2001.

2. The main suit filed by the plaintiff is for recovery of Rs.55 lakhs on account of the alleged non-payment by the defendant company of the charges falling due on account of (i) "Liquid Nitrogen" actually supplied by the plaintiff (ii) fixed facility charges payable by the defendant and (iii) the compensation in lieu of short lifting/non-lifting of material in terms of agreement dated 16.3.1992 as executed between the parties.

3. During the course of arguments, it has been admitted that the only surviving dispute between the parties, is primarily regarding the liability of the defendant on account of the short-lifting/non-lifting of minimum quantity of liquid nitrogen in terms of the agreement dated 16.3.1992.

4. In fact, as recorded in the order dated 21.9.1995 of this Court after hearing the parties, the defendant has been already directed to pay certain admitted amount to the plaintiff. On 26.9.1995, the defendant paid Rs.4,72,500/- to the plaintiff, which amount was accepted without prejudice to the rights of the plaintiff.

5. According to the plaintiff's averments in the application, even leaving aside the amount claimed on account of the short-lifting/non-lifting of material, being Rs.46,51,671.20, there were still other dues to the tune of Rs.11,10,875.00, on account of the outstanding amount for actual gas supplied, besides Rs.7,85,900 on account of fixed facility charges.

6. From the total of these two other outstanding amounts, even after deducting Rs.4,72,500/- paid by the defendant on 26.9.1995, still the outstanding balance of Rs.14,25,875/- remained payable by way of what the plaintiff describes to be admitted liability required to be paid in terms of the orders already passed by this Court.

7. From the perusal of the order sheets, relating to the hearing dated 26.9.1995 and of a number of occasions thereafter, the defendant was asked to give it's response on the subject of the outstanding amounts, in the context of a statement of which had been handed over by the plaintiffs counsel, to the defendant in the Court as far back as on 26.9.1995.

8. The plaintiff filed an application being IA No.1404/99 under Order 11 Rules 12 and 14 read with Section 151 CPC, for necessary directions to be issued to the defendant to discover on oath the relevant account books in their power of possession, and also for production of ledger accounts of the plaintiffs as forming part of the account books of the defendant, for the years 1992 to 1999.

9. Vide order dated 19.9.2000, this Court had recorded the undertaking of learned counsel for the defendant assuring the filing of the true copy of the accounts in the Court and that too within four weeks from the said date.

10. The plaintiff's application for discovery and protection, was disposed of on the said undertaking of learned counsel for the defendant, and acting on the undertaking, the main suit was directed to be listed on 14.3.2001 for framing of issues.

11. The period of four weeks, as per undertaking given by the defendant through its counsel, expired in the third week of October, 2000. after waiting for almost a further period of two months, this application (IA No.468/2001), was filed by the plaintiff on 16.1.2001, praying for the defense of defendant to be struck off.

12. The plaintiff/applicant vehemently contends that the defendant has admittedly not complied with either the order dated 19.9.2000 or the subsequent order dated 22nd May, 2001 by which the defendant was directed to produce the proper statement of accounts, supported by affidavit of the defendant, specifically stating that there is no transaction between the parties after August, 1995 and that in the ledgers/books of accounts maintained by the defendant to plaintiff whether any transaction is shown after this date.

13. Once again in the order dated 22nd May, 2001 a further period of four weeks time was granted for the said purpose.

14. It is not disputed that the defendant is under a statutory obligation to maintain regular books of account in the normal course of business. These accounts were also be audited on regular basis and necessary balance sheets etc. were to be filed with the concerned authorities. The plaintiff further emphasises that since the manufacturing unit of the defendant was located in the NOIDA Export Promotion Zone, there was as such a good amount of record and paper-work relating to supplies made by the plaintiff to the defendant, and therefore very little scope remained for actual dispute except as a result of the malafides of the defendant in withholding the said records from this Court.

15. The plaintiff further submits that the defendants are deliberately delaying and dragging the proceedings since they have no good defense on merits. The defendant's application made under Section 34 of the Indian Arbitration Act 1940 for stay of this suit, was withdrawn after consuming about four years time. Thereafter the written statement was still not filed and rather there was also default of appearance resulting in the orders directing the ex-parte proceedings against the defendant.

16. Vide order dated 12.8.1999, the earlier order dated 5.2.1999 directing ex-parte proceedings against the defendant, was set aside. Once again, the defendant was directed to file affidavit regarding compliance made with order dated 26th September, 1995, within a period of four weeks from the said order.

17. Thereafter, the plaintiff filed an application (IA No.3548/2000) for an early hearing of the suit or for listing IA No.1424/2001 under Order 4 Rules 12 and 14 at an early date, so that the same could be disposed off.

18. While hearing this application on 19.9.2000, the undertaking of the counsel for the defendant regarding filing true copy of accounts pertaining to the plaintiff, was recorded, and thereupon on the basis of the said undertaking, the alleged date of loss was June 2001, the report was allegedly noted on 13th August, 2001 which is a gap of more than two months. Furthermore, according to the learned counsel for the plaintiff, the bare reading of the police complaint itself shows that the same is false. It only refers to the loss of some books, and not to the loss of voluminous account books such as cash books, ledgers, day books etc starting for the year 1992 onwards for the entire period, the dealings between the defendant which is specifically cited subject to the discovery part, by giving an undertaking to the Court regarding protection as recorded in the order dated 19.9.2000. It may be unfortunate that the Court did not notice and the plaintiff also was not carefully never insisted upon an order for both discovery and production.

19. Be that as it may, this technical lacuna is relied upon in terms of the judgments cited by the defendants, the provisions of the Order 11 Rule 21 which covered only three eventualities viz of refusal to answer interogatories, or an order to make discover on oath, or thirdly the refusal to permit the inspection of documents under Rule 18 of Order 11. In particular, reliance is placed on reported decisions,where it has been held that the provisions of Order 11 Rule 21, was not applicable to the event of non-compliance with an order under Order 11 Rule 14 CPC. In case, the plaintiff were to rely on the provisions of Order 11 Rule 14 as having been violated, then in terms of the said cited judgments, the recourse of Order 11 Rule 21 would be clearly ruled out.

20. Perhaps envisaging this difficulty in the way, the plaintiff has moved the present application under Section 151 CPC, and not under Order 11 Rule 21 CPC. It is therefore, to be seen whether the inherent powers of the Court, will encompass the striking out of defense of a party, such as the defendant in the present case, upon it being established that the said party, is acting in willful defiance/non-compliance of an undertaking given to the Court, of course upon the same resulting in substantial prejudice to the opposite party.

21. Section 151 of CPC expressly provides that nothing in the Code, shall be deemed to limit, or otherwise affect, the inherent powers of the Court to make such orders as may be necessary to meet the needs of justice or to prevent the abuse of the process of the Court.

22. It is well settled that the inherent powers of the Court are in addition or complementary to the powers expressly conferred upon the Court by the Code of Civil Procedure. No doubt there are provisions for striking out the defense, or requiring the Court to render judgment against the defaulting party, in terms of Order 8 Rule 10, Order 10, Order 11 Rule 21 and Order 16 Rule 20 etc. At the same time, it would not imply that just because of such contingencies being specified in relation to some types of defaults all the other kind of defaults are not provided for and/or even serious cases where established, should go un-punished.

23. In the present case, there were a series of orders starting from the month of September 1995 on the subject of the defendant bringing before the Court, the position regarding the outstanding dues even as per the defendant's own records, viz, the books of accounts and entries therein, as repeatedly insisted upon by the plaintiffs. Furthermore, the plaintiff had pleaded categorically the amount accruing, and received year by year as stated from para 10 onwards of the plaint and the defendant had only given, what was being described by the plaintiff, to be just a vague reply by not coming out with the specifics.

24. In this background, it may be noted that when the defendant gave an undertaking, through counsel, to produce the documents as referred to in the plaintiffs application, and as recorded in the Order dated 19th September, 2000, it was crystal clear to the defendant that this was a most crucial aspect, and that there was atleast finally on 19th September, 2000 a time-bound direction to comply with the requisition of the plaintiff, which had by then become the undertaking of the defendant.

25. The defendant did not comply with the undertaking within the period of four weeks from 19.9.2000. No application for extension or enlargement of time was filed. Thereafter also, for a period of almost six months the defendant did not make any compliance with the solemn undertaking given to this Court.

26. Not only that, the direction was thereafter reiterated by this Court on 22.5.2001, and the defendant's stand as reflected in the proceedings dated 22.5.2001, also indicates that the defendant had no dispute or objection regarding making compliance with its undertaking given to the Court on 19.9.2000, which compliance was otherwise also defendant's bounden duty after it gave an undertaking through counsel, much after various earlier orders concentrated on this specific aspect of the position reflected in the admitted accounts of the defendant itself.

27. The defendant claims as per the contentions of the counsel during the arguments, that the entire books of accounts including all the supporting records, cash books, ledgers, day books etc, are all lost. The police report is as late as on 13.8.2001, i.e. even beyond one month after the order dated 22.5.2001. furthermore, the text of the police complaint does not bear out the stand so taken by the defendant's counsel during the arguments.

28. On a totality of consideration of the police complaint, the successive affidavits, the contentions adopted from time to time as recorded in the various order sheets, and also the absence of any application by the defendant seeking discharge from the undertaking on account of the drastic change of circumstances, this Court gets a clear impression that the defendant is trying to take the Court for a ride.

29. After adopting various tactics for delaying/prolonging the case for more than six years, even the solemn undertaking given to the Court, has not been complied with. The explanation furnished is wishy-washy and full of holes.

30. In these circumstances, I consider this to be a fit case where the inherent powers of the Court are required to be invoked in the interest of justice and to prevent abuse of the process by striking out the defense of the defendant under Section 151 of the Code of Civil Procedure.

31. No doubt, the passing of an order by this Court by striking out the defense of the defendant, will not obviate the necessity for plaintiffs producing its own evidence and proving its case. The defendant will also be entitled to participate in the proceedings to the extent to which, as a party whose defense is struck off, it is entitled to do so.

32. However, in the peculiar facts and circumstances of the present case, which have been highlighted above, and in the context of the various orders passed, and the background in which the undertaking was given and the manner in which it has been flouted, without any even an iota of explanation why or under what circumstances the accounts admittedly available in 19.9.2000, were not filed in the court either in October 2000 or immediately thereafter or atleast immediately after 22.5.2001, when the said order was reiterated and a specific time limit fixed for production of the same. As such the defendant cannot be allowed to play with the Court and/or to cause abuse of the process of the Court and/or to deliberately and defiantly not comply with the solemn undertaking given to this Court.

33. Since orders under Section 151 CPC are orders in the interest of justice by way of inherent powers of the Court, and so that the defendant may not be prejudiced if otherwise it has a good defense, I further direct that this order passed by me today striking out the defense of the defendant, shall be kept in abeyance and/or shall not have the effect of shutting the defense of the defendant, in case the defendant were to deposit in this Court within a period of four weeks from the date of this order, the entire suit amount by way of a pay order drawn in favor of Registrar of this Court, which amount will be retained by way of its deposit initially for a period of six months, and thereafter renewed from time to time till the disposal of the suit. The idea being that the only reason for defendant prolonging the case, would then be substantially tackled and also in the interest of justice the equities will be balanced by placing the defendant as subject to penalty but not shutting out the defense. In the event deposit is not made within a period of four weeks as stipulated, the orders striking out the defense of the defendant, shall then remain operative, and the matter will then be listed for filing of affidavit of evidence by the plaintiff in the manner of an affidavit of ex-parte evidence on 9.1.2003.

34. On the other hand, in case the payment is deposited in the Court by the defendant, then the case shall proceed as a contested matter and will be listed before Joint Registrar for admission/denial of documents on the said date, i.e., 10.3.2003. The application (IA No.468/2001) stands disposed of in the above terms. dusty under signatures of Court Master/P.S. On payment of charges.