Structural Waterproofing ... vs Continental Foundation Joint ...
2003 Latest Caselaw 261 Del

JUDGMENT

Vikramajit Sen, J.

1. This order shall dispose of all the above mentioned applications. I.A. 11228/2002 has been filed by the Plaintiff under Order XXXIX Rules 1 and 2 of the Code of Civil Procedure and accompanies the plaint. On 18.12.2002 the Defendants were restrained from selling, agreeing to sell, alienating or parting with possession of the property bearing Nos. Continental House, 28-29, Nehru Place, New Delhi-110019.

2. I.A. 224/2003 is for the issuance of Summons for Judgment. Since the question of whether to grant Leave to Defend to the Defendants shall be addressed in these Orders. This application stands disposed of.

 3. I.A. 569/2003 has been filed by the Defendants   under Order VII Rule 11 praying for the  dismissal of the suit  and   also for the  initiation of    criminal contempt.  Counsel for  Defendants,  however,  has not argued or pressed the prayer for  Contempt of Court. 
 

 4. I.A. 1247/2003 has been filed  by Defendant   Nos.  2 seeking Leave to Defend.  Defendant Nos. 1 and 3 have  filed  an  affidavit seeking Leave to Defend without  a   formal application.  The  affidavit filed by Defendants 1 and 3  be numbered as   an interim application. 
 

 5. The Plaintiff's  case is that  Defendants  2 and 3 had    constituted  a  Joint Venture in the name and style of Defendant   Nos.  1,  all three of them doing business from the   same premises i.e. Continental House, 28-29, Nehru Place, New Delhi-110019.  It has been averred   that Defendant Nos. 2 and 3 represented to the Plaintiff  that in case Defendant   Nos.  1 failed to make  payment, they would be liable for  it.   It has been further alleged that   the Defendants placed  oral orders   from time to time for the supply of    Resin  Capsules  and  Cement  Capsules etc.    In the Purchase Orders it has been mentioned  that    interest at the  rate of 25 per cent will be  charged   on the   outstanding beyond thirty days of  delivery.    All the  Invoices pertaining to the  claim have been  filed  in original amounting to Rs.18,86,679.83.   All the supplies were made by the Plaintiff  from B-29, Sector 4, District Goutam Budhnagar, Noida (U.P.).   Neither the  receipt of these Invoices nor   supplies  made  against it have been   denied. 
 

 6. The contention of Defendants  1  and 3 is that  they had  paid  a  sum of Rs.21,14,243 to M/s. Cico Technologies  Limited on 13.2.2002. Although this  was challenged by the Plaintiffs earlier, it is no longer in dispute   consequent  upon the filing  of  an affidavit  along  with  the Statement of Account of Citibank, New Delhi by Defendants 1 and 3.    The contention of these  Defendants, however, is   that with the  payment of the said  sum  to Cico Technologies  Limited, all their liabilities  against the sundry bills   detailed   in Annexure P-II stood fully  and finally discharged.  It has been contended by learned counsel  for  these  Defendants  that there has been material suppression of facts in  that  the plaint does  not mention a  formal settlement whereby the businesses of  Plaintiff family were divided.  According to the Defendant, this division took place by virtue of Memorandum of Understanding (MoU) dated 1.2.2000 between Shri Sumit Gupta and Shri  Amit Gupta, sons of late Shri Santosh Ranjan Gupta and Smt. Dipti Gupta, the widow of late  Santosh Ranjan Gupta.  The terms of the MoU were, inter alia,  as   follows:
   

              "The  assets & liabilities  of SWC, New Delhi and Noida will be taken over by SG Group and Ag Group respectively as under: 
   

 a) The Factory at B-29, Sector-IV, Noida (U.P.) will go to SG Group.  It is   agreed  between the parties that AG will shift  the Lab  which is  presently at H-76, Sector-IX, Noida  Factory and the ISCREW MIXTURE Machine, either to B-29 Factory or any other   location as suggested by SG Group along with the  existing  facilities of ISI and ISO. 
 

 b) The Factory at 11-76/Sector-IX, Noida and H-78/Sector-IX, Noida will go to AG Group (Any liability during  and after the aforesaid transfer will be borne by AG Group). 
 

 c)  All  the  assets & liabilities attached to B-29/Sector-IX, Noida Factory will be  taken  over by SG Group.  While all the  assets and liabilities  attached to H-76 and H-78 Factories will go to AG Group.  The assessment of assets and liabilities attached to the  factories  will be   determined  by an independent  person and should be  accepted by both  the  SG and AG Groups. 
 

 d) All the  assets   and liabilities of SWC, New Delhi (Contract Divn.) and CES will   taken over by SG Group. 

 

 e) The residential house at S-29 Greater Kailash-II, New Delhi-110048, which under   the   occupation of Sh. Amit Gupta  and family will remain under their  absolute  possessions and    out of the control of SG Group and the   same will be   transferred to Sri Amit Gupta or to   the  Company, fully owned and  controlled by AG Group (The factory at 11-76/Sector-IX, Noida  and 11-78/Sector-IX, Noida will go to AG Group.  Any liability during  and  after the   aforesaid  transfer will be borne    by AG Group). 
 

 f)  The AG Group will sign a DEED OF DISCLAIMER  that  they will not use any of the  product name  as mentioned in the Annexure-I of the MOU."   
 

 7. It has been further   disclosed  in the application  for Leave to Defend that  family disputes came up  before this Court   in Suit   Nos.   1118/2001.  By the Order   dated 11.7.2001 Hon'ble Justice J.D. Kapoor had observed, inter alia,  that  "without  going into this  aspect of the matter   whether the Memorandum of Understanding was   executed by way of playing fraud or  coercion but  in view of the  fact that each  and  every term of Memorandum of Understanding  has been acted upon and  given effect    to by both the  parties,  the plaintiff is  not entitled to  interim injunction against the terms of settlement." It has been jointly stated  by counsel for the parties  that this Order was unsuccessfully assailed before the Division Bench  of this Court and thereafter by Special Leave Petition before the Hon'ble Supreme Court.   Keeping the MoU as well as  the Orders in perspective, the Defendants  1  and 3 were advised to make   the payment of the  amounts   outstanding against   the nine bills  to M/s. Cico Technologies Limited  and  they did  so in February 2002.   Failure to disclose these  facts, according to counsel  for Defendants 1  and 3, calls for the  dismissal of the suit.   It  has also been contended   that the  plaint   does not disclose cause of action inasmuch as    all the   facts leading up  to the   filing   of the suit  have not been   disclosed.   It has also been contended that Cico Technologies Limited was   a   necessary party and since  it has not been imp leaded the suit  deserves to be  dismissed.  The claim as   articulated in the  plaint  is   directed only towards   Defendants 1 and 3.   I find no merit in this  submission.    Along with the plaint the  Plaintiff's  letter   dated 17.10.2000 has been filed, the  contents of which  are   relevant  and    are  reproduced  below:- 
   

  "...  We would also like to bring your kind  attention that there has been restructuring in our company (SWC) and  a  company by the name of CTL (CICO Technologies Ltd) which has  separated from SWC and has been writing to our esteem clients asking them to make the payment in the name of CTL.  However, this is totally illegal and we would  request you to  kindly  do not make  any payment to them. 
 

  You may kindly note that    they have also written letters to our esteem clients on the letter head of  `THE STRUCTURAL WATERPROOFING COMPANY PVT LTD'(SWC) that  payment/orders   should be placed in the name of CTL.  If they have written  a letter of such nature to you, kindly ignore the same as it is illegal.  We  are   taking separate action to this  effect.  Kindly  let us know if they have  written such letter to your esteemed   organisation. 
 

  We  would   once  again request you to kindly release our payment and place your valuable order on us."  
 

 It  was  for   this   reason  that I.A. 569/2003 under Order VII Rule 11 of the Code of Civil Procedure has been filed.    So far as this objection  is  concerned I   find no merit  in it.  The  suit   is for   recovery of money  against  bills   and supplies  made.   Internecine  disputes  between  the Plaintiff and his brother are of little  relevance whatsoever. 
 

 8. In reply to  the contention of the Defendants  that   payment  to Cico Technologies  Limited could afford a   valid   discharge  to the  Defendants   liability to the Plaintiff, namely, M/s. Structural Waterproofing Company Private Limited, learned counsel for the Plaintiff has   relied heavily on the   correspondence  exchanged between the parties prior to the   making of the  payment.  In its  letters   dated 11.12.2000 & 22.1.2001 a  demand  for  release  of  Rs.18,86,679.83 was addressed  to Defendant   Nos.  1.    In the letter   dated  1.2.2001 the   demand for payment  had been made and it had been spelt out  that the  Plaintiff    had  "neither  engaged nor authorised   anybody and  not to speak of Cico Technologies Limited (CTL) to collect our dues from you.  Once  again  we request  to release the payment   within 15 days".     A  request for  payment is also  evident from its  letter  dated 17.2.2001  addressed to Defendant   Nos.  1.   It is also relevant to mention   that  Annexure P-4 is  Defendant   Nos.  1's  letter dated April 2, 2001 in which it has   confirmed   that   a sum of Rs.18,86,679.83 is the balance standing  in favor of the Plaintiff in its  Books.   My attention   has also been drawn to Annexure P-7 which is  Defendant   Nos.  1's  letter   dated March 28. 2002 under cover of  which  `C Forms'  dated 28.3.2002 in  respect of purchases  made   against the nine bills  were forwarded to the Plaintiff.  If the  version of the   Defendant is accepted, there would be  no justification  of  sending the  `C Forms' to the Plaintiff and not to Cico Technologies Limited. 
 

 9. The question is whether Defendants  1  and 3 are  entitled to Leave  to Defend.  On the   basis of the pleadings and the  documents  filed along with it,   it  is  not possible    to     come to any conclusion  other than that supplies were made by the Plaintiffs and it  was,  therefore, entitled to  receive payment for the supplies.  The Defendants argument  that   Cico Technologies Limited was entitled  to the payment, on a  perusal  of  MoU holds  no  water as it was  not  open to this  party to adjudicate upon the rival claims in the  Plaintiffs family.    If it was  in any doubt  as to the payment, keeping in view several letters addressed to it by the Plaintiff  challenging  the propriety of the demand of Cico Technologies Limited, it  could  perhaps have withheld   the payment  awaiting a   direction from the  appropriate Court.  If Defendants 1  and 3  were eager to make payment it could have  done so by initiating  an interpleader suit and  could have   deposited the  same  in the Court  leaving it to the Plaintiff  and Cico Technologies Limited to prove  their entitlement thereto.  As I see it  these Defendants have chosen to  side  with M/s. Cico Technologies Limited.   It has been contended by counsel for the Plaintiff,   and not denied by the Defendants, that  the Advocates for the  Defendants as well as   for M/s. Cico Technologies Limited are the same, thus  making  out  a  foundation for the partiality.  Even when the payment was being made to Cico Technologies Limited the Defendants, perhaps sensing  a  possible  dispute in the future, had received  an indemnity from Cico Technologies Limited  against  the   claims  in the  suit. 
 

 10. Since it is not in dispute that the supplies   were made   by the Plaintiff Company, and since the Defendant had   confirmed  the outstanding   to the Plaintiff as late as on April 2, 2001,  and  since the Plaintiff  had  repeatedly demanded this  amount   and had also put the Defendants    the notice and caution  that Cico Technologies Limited was not entitled to payment  against    the supplies  made, I find that no   grounds have been shown for   granting     Leave to Defend to Defendants 1  and 3.  The defense  which has been put forward, so far  as  the   sums  against  the nine bills  is  in the genre   of `moonshine'.    The suit is   for the  recovery  of Rs.33,01,689.03 which includes  interest  at the  rate of  25 per cent   per  annum.  So far as  the  interest is  concerned, keeping in perspective the   competing  claims    of the Plaintiff and Cico Technologies Limited I am not inclined  to   pass  a   decree on this claim.   In these  circumstances Defendants  1  and 3  are directed to deposit the said sum of  Rs.18,86,679.83 with the Registrar General of this Court within  four weeks from today.  Upon making this deposit these Defendants 1 and 3 shall be entitled   to file   their  Written Statement within six  weeks thereafter.  Replication, if any, be  filed  within four weeks  thereafter.   
 

11. The defense of Defendant Nos. 2 is that no cause of action has been shown against him and that the Orders as well as supplies related to Defendants 1 and 3. However, since there is an averment that Defendant Nos. 2 had agreed to make payment in case Defendant Nos. 1 failed to clear the outstandings, this is a matter which can be substantiated only in the trial. It is also not in dispute that Defendant Nos. 2 along with Defendant Nos. 3 has constituted a Joint Venture. This has been so stated in all the correspondence addressed by Defendant Nos. 1. The liability of Defendant Nos. 2 is yet to be established. However, the Plaintiff cannot be non-suited on these counts. Since there is no written document directly admitting the liability of the Defendant Nos. 2 I am of the opinion that Defendant Nos. 2 should be granted unconditional Leave to Defend. I order accordingly.

12. The question which remains is whether the interim orders passed by Hon'ble Mr. Justice S.K. Agarwal should be confirmed or modified or recalled. Admittedly Defendant Nos. 1, who is undoubtedly a principal debtor, is a Joint Venture of Defendants 1 and 3. All the Defendants share the same business address i.e. Continental House, 28-29, Nehru Place, New Delhi. Counsel for Defendants were unable to disclose whether Defendant Nos. 1 is a duly constituted company or a registered partnership firm. The result is that there is a serious doubt as to whether recoveries could be effected against Defendant Nos. 1, or for that matter Defendant Nos. 3. In my view the interim orders, therefore, deserve to be confirmed and I order accordingly.

13. All applications stand disposed of in the above terms.

Suit Nos. 1948/2002

14. List the matter for further consideration on 22.4.2003.