Mediterranean Shipping Company, ... vs Margra Industries Ltd.
2006 Latest Caselaw 303 Del

JUDGMENT

Sanjay Kishan Kaul, J.

IA 13116/2000 (under Order 37 Rule 4 CPC)

Page 0695

1. The plaintiff filed a suit for recovery of a sum of Rs. 60,25,112/- under the provisions of Order 37 of the Code of Civil Procedure, 1908 (hereinafter referred to as 'the said Code') along with pendente lite and future interest. This claim is based on the conditions of Bill of Lading No. 1831279 dated 30.9.1998 and an agreement dated 21.2.2000.

2. Plaintiff No. 1 is a ship-liner engaged in transportation of goods/cargo in enclosed containers by sea. Plaintiff No. 2 is the agent of plaintiff No. 1 in India.

3. M/s Marmoles Ronimar, Spain approached the plaintiff No. 1 at their office in Spain with a request to carry consignment of rough marble slabs and blocks by twelve 20' containers for the defendant herein which was the notified party for the consignment. The plaintiff No. 1 carried the consignment to Mumbai, the port of discharge and the defendant was informed about the arrival of the cargo. The consignment had to be carried to Delhi at the request of defendant. There are stated to be certain disputes which arose between the defendant and the Customs authorities with the result that the cargo could not be cleared and the defendant even filed writ proceedings before this court being CWP 7313/1999 for release of the cargo but the same was dismissed by the Division Bench on 11.2.2000. The defendant also filed another Writ Petition No. 7314/1999 seeking a writ of mandamus against Union of India to undertake the exercise of fixation of reasonable demurrage charges in conformity with government recommendations and RBI circulars. Plaintiff No. 2 is stated to have been added as a respondent in both these proceedings but was subsequently deleted at the request of the defendant.

4. The consignment arrived at Delhi on 14.1.1999 and it is stated that the defendant was entitled to five free days for clearing and lifting cargo where after the defendant was liable to pay the charges for the container per day as per tariff charts of the plaintiff. The containers were, however, not destuffed and the defendant did not take delivery of the cargo despite request of the plaintiff. In July, 1999, the defendant is stated to have approached the Page 0696plaintiffs for waiver of detention charges and the plaintiff as a gesture of goodwill is stated to have agreed to waive detention charges and on receipt of the agreed amount, issued delivery order dated 7.7.1999. The defendant still failed to destuff the containers with the result that the plaintiff was not able to utilise and circulate the containers for its business purposes.

5. The defendant is stated to have made a request in June, 2000 for further waiver of detention charges from 7.7.1999. The plaintiff in turn is stated to have agreed to charge a lumpsum of Rs. 4,21,097/- as the detention charges from 7.7.1999 to 25.1.2000 and thus, agreed to waive substantial amount of detention charges subject to the defendant destuffing and releasing of containers by 28.2.2000. This is stated to be incorporated in the agreement dated 21.1.2000. Clause 2 of the agreement provided that in case of failure of the defendant to destuff and release the containers on or before 28.2.2000, the agreement would become non-est and the plaintiffs would be entitled to claim such container detention charges as were prescribed under the Karmahom Conference in respect of the entire amount of detention of the consignment.

6. The defendant took delivery of the containers after executing the indemnity bond and the same were taken to the factory of the defendant on 25.1.2000 and were required to be returned within 7 days as per Clause 6 of the indemnity bond. However, only 8 containers were returned and released to the plaintiff and four containers are stated to have been illegally and unlawfully detained by the defendant. Despite repeated requests, the balance four containers have not been released. (The containers were released subsequently in 2001 during the pendency of the suit.)

7. A legal notice dated 17.2.2000 was issued by the defendant stated to be raising the issue of the agreement dated 21.1.2000 being signed under protest. Not only that, the defendant demanded refund of a sum of Rs. 2,10,548/- and Rs. 60,000/- with interest at 24% per annum failing which the defendant threatened to hold the four containers. This was not agreeable to the plaintiff who reminded the defendant of its obligations under the agreement. Criminal complaint is also stated to have been lodged by the plaintiff for illegal detention of container.

8. The plaintiffs have claimed the entire amount of detention charges under Karmahom Conference at the rate of US$ 48 per day per container, amounting to Rs. 60,25,312/- till 30.6.2000 as detention/demurrage charges along with interest at the rate of 24% per annum from the date the amount became due and payable to the plaintiff.

9. Summons were issued in the suit on 11.7.2000 and the defendant was served on 19.7.2000. The defendant did not enter appearance and IA 8429/2000 was filed by the plaintiff seeking a decree in the suit on account of failure of the defendant to enter appearance. This application came to be considered on 17.11.2000 by the court which noticed the fact that on a subsequent date on 14.9.2000 a vakalatnama had been been filed by the counsel on behalf of the defendant. The defendant had failed to enter appearance within 10 days and thus the learned Judge was of the view that Page 0697the plaintiff was entitled to a decree under Sub-rule (3) of Rule 2 of Order 37 of the Code. The defendant had not even taken care to serve the learned counsel for the plaintiff with an intimation of his entering appearance on behalf of the defendant. The suit was decreed for a sum of Rs. 16,25,312/- along with interest at 15% per annum w.e.f. 10.7.2000. The decretal amount was subsequently corrected by the order dated 12.12.2000 to Rs. 60,25,312/-.

10. The defendant has thereafter filed the present application seeking setting aside of the decree dated 17.11.2000. The plea raised in the application is that the agreement dated 17.11.2000 was entered into under protest as it was obtained under duress and coercion and that the dispute between the parties did not fall within the mandate of Order 37 of the Code. It is stated that the service was not effected as per provisions contained in Order 29 Rule 2 of the Code.

11. The defendant claims to have paid a sum of Rs. 3,26,528/- on 10.7.1999 to the plaintiff as container detention charges at the rate of US$ 4 per container per day. The defendant is stated to have been in extreme difficulty on account of the alleged illegal detention of the cargo by the Customs authorities. On 12.1.2000 the defendant is stated to have made a further payment of Rs. 1.98 lakhs but the plaintiff coerced the defendant to enter into an agreement dated 12.1.2000. It is in these circumstances that the legal notice dated 17.2.2000 is stated to have been sent.

12. The defendant claims that it was not served at its registered office though the mandate of Order 29 Rule 2 of the Code is that in case of service on corporation, the same should be done by leaving it or sending it by post addressed to the corporation at the registered office. The said provision reads as under:

2. Service on corporation.-- Subject to any statutory provision regulating service of process, where the suit is against a corporation, the summons may be served --

(a) on the secretary or on any director, or other principal officer of the corporation, or

(b) by leaving it or sending it by post addressed to the corporation at the registered office, or if there is no registered office then at the place where the corporation carries on business.

13. The defendant claims to have come to know of the matter being listed on 8.12.2000. Managing Director of the defendant became aware of filing of the suit on 13.9.2000 and accordingly instructed the counsel to enter appearance on 14.9.2000. The defendant under a misconception waited for the date of hearing on 8.12.2000 but when the counsel for the defendant inspected the file on 5.12.2000, he came to know that the suit had been decreed on 17.11.2000.

14. The defendant claims that after entering appearance, it was required to be served with the summons of judgment which was never done.

15. The defendant claims that the suit is not maintainable under Order 37 of the Code and has thus relied upon the judgment of A.R. Electronic Pvt. Ltd. v..K. Graphics Pvt. Ltd. Page 0698where in para 11 is was observed as under:

Since the suit is not friable under Order 37, CPC, as a necessary corollary the summons in the prescribed Form IV Appendix B, CPC sent and served on the defendant would be inconsequential. A decree could not be passed against the defendant on its failure to enter appearance within 10 days from the date of the service. No presumption of admission which arises under Order 37 Rule 2, CPC could be drawn in favor of the case of the plaintiff pleaded in the plaint on the basis of which the suit was decreed against the defendant.

16. It is in view of the said allegations that the defendant has sought setting aside of the ex parte judgment and decree dated 17.11.000.

17. The application has been strongly resisted on behalf of the plaintiff who contends that the same is only a dilatory tactic as no sufficient cause has been shown by the defendant for not meeting the requirements of Order 37 of the Code. The defendant is stated to have acted upon agreement dated 21.1.2000 and thus it has been stated that it does not lie in the mouth of the defendant to plead that the agreement has been signed under protest. The service is stated to have been effected in accordance with law and the defendant, for all purposes, had been mentioning its office at Noida on all the correspondences, documents and letter heads and the defendant had been so served.

18. In so far as IA 8429/2000 is concerned, it was pointed out that the same was filed on 17.8.2000 and at that stage there could be no occasion to serve the counsel for the defendant with any advance copy as the defendant had not entered appearance in accordance with the Order 37 of the Code, no copy of such entering of appearance had been served on the plaintiff and in fact the defendant only filed a vakalatnama on 14.9.2000.

19. A specific reference has been made to the effect that at no stretch of time was it ever represented that the address of the defendant was other than D-1, Sector 11, Noida as the defendant was under an obligation to mention the registered office on its letter head. It is only now that a case is sought to be put up that the registered office is somewhere else which is described as 'Near Primary School, Village Gharoli, Delhi-110096' which is a completely vague address.

20. The application was listed from time to time and the proceedings recorded inter alia on 1.3.2002 show that the court asked the counsel for the plaintiff to take instructions whether the plaintiff would be willing to concede the application on deposit of half the amount and for balance half, bank guarantee be furnished. The counsel had expressed his willingness but the counsel for the defendant took some time to obtain instructions. Thereafter, various dates were taken by the counsel for the defendant to obtain instructions or the matter was adjourned at the request of the defendant or for some other reason.

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21. The counsel appearing for the defendant sought discharge which was allowed by the order dated 14.3.2005 and once again the new counsel took time to obtain instructions. Finally, on 26.4.2005, the counsel for the defendant stated that they were not ready and willing to deposit half the amount and furnish bank guarantee for the balance amount but would prefer to invite the judgment on the merits of the case.

22. The application was listed for hearing on 19.7.2005 when learned counsel for the defendant contended that an application under Order 37 Rule 4 of the Code had to be a composite application and the decision thereon would necessarily have to be composite. Thus reply on merits should also be filed by the plaintiff. In this behalf, learned counsel referred to the judgment of the apex court in Rajni Kumar v. Suresh Kumar Malhotra and Anr. . It is observed in para 10 as under:

It is important to note here that the power under Rule 4 of Order 37 is not confined to setting aside the ex parte decree, it extends to staying or setting aside the execution and giving leave to appear to the summons and to defend the suit. We may point out that as the very purpose of Order 37 is to ensure an expeditious hearing and disposal of the suit filed there under, Rule 4 empowers the Court to grant leave to the defendant to appear to summons and defend the suit if the Court considers it reasonable so to do, on such terms as Court thinks fit in addition to setting aside the decree. Where on an application, more than one among the specified reliefs may be granted by the Court all such reliefs must be claimed in one application. It is not permissible to claim such reliefs in successive petitions as it would be contrary to the letter and spirit of the provision. That is why where an application under Rule 4 of Order 37 is filed to set aside a decree either because the defendant did not appear in response to summons and limitation expired, or having appeared, did not apply for leave to defend this suit in the prescribed period, the Court is empowered to grant leave to defendant to appear to the summons and to defend the suit in the same application. It is, therefore, not enough for the defendant to show special circumstances which prevented him from appearing or applying for leave to defend, he has also to show by affidavit or otherwise, facts which would entitle him leave to defend the suit. In this respect, Rule 4 of Order 37 is different from Rule 13 of Order 9.

23. The plaintiff thus filed reply even on merits of the application. Apart from what was stated earlier, the plaintiff pointed out that it was the own averment of the defendant that a draft agreement was first sent to the defendant and it is only thereafter the same was filed and acted upon which contained the charges for detention put as per the Karmahom Conference. Not only that, the defendant had taken possession of the containers, made payments and sought deletion of the name of the plaintiffs from the writ proceedings. As far as the dispute between the defendant the Customs authorities is concerned, it was stated that the same was a matter between the said two entities. The Page 0700plaintiff has specifically denied that there were any charges at the rate of US$ 2 per day per container or of US$ 4 which were charged. The matter was a pure commercial transaction which was acted upon by the parties. The defendant would be entitled to rebate on the terms and conditions but had failed to abide by the terms and conditions.

24. The matter was heard at some length on merits and once again the issue was raised whether there could be some agreement between the parties about the terms and conditions but learned counsel for the defendant was categorical that the defendant would like to invite the judgment on merits and I thus proceed to decide the case on the merits of the pleadings and the contentions of the parties.

25. The first aspect to be considered is whether the defendant has been able to show any justification for not taking steps to file the address of service within stipulated time as prescribed under Order 37 of the Code. The service report has been perused which clearly shows that the defendant has been served on 19.7.2000. There is no explanation forthcoming as to why from the said date till 13.9.2000 there was absence of knowledge of the service with the defendant. The only plea raised is that the service is not in conformity with the Order 29 Rule 2 CPC.

26. I am unable to persuade myself to agree with the submissions of the learned counsel for the defendant. The address which the defendant has used for all communications with the plaintiff is one where the defendant has been served. The service on the said address is under seal of the defendant Corporation and is thus signed by duly authorised person. A plea cannot be accepted that the seal of the defendant company was with an unauthorised person. The provisions of Rule 2 of Order 29 of the Code prescribe that service can be on a principal officer of the corporation and the person holding the seal of the defendant corporation would be the duly authorised person to receive such summons.

27. An important aspect to note is that this plea of a different address at Delhi is sought to be raised first time by the defendant and there is substance in the plea of the defendant that the address itself is completely vague as set out above. No service could have been effected at such a vague address 'Near Primary School, Village Gharoli, Delhi-110096. One fails to understand how the concerned authorities for prescribing a registered office of the company could have accepted such an address. All the relevant communications with the defendant are at the Noida address and in all its letter heads the defendant has given the Noida address. The legal notice of the defendant sent through counsel dated 17.2.2000 also gives the address of the defendant where the defendant has been served.

28. The defendant not having entered appearance within time, the question of service of summons of judgment in prescribed format did not arise as the occasion for the same under the provisions of Order 37 of the Code would arise only after the address of service was filed within ten days. The plaintiff was well within its rights to apply for passing of a decree in view of the failure of the defendant to enter appearance in accordance with law. At the stage Page 0701when IA 8429/2000 was filed on 17.8.2000 even the vakalatnama on behalf of the defendant had not been filed and thus there could be no occasion for any service on the defendant of the said application.

29. I am thus of the considered view that the defendant has failed to make out a case for not entering appearance within prescribed time.

30. Despite the aforesaid, I have also considered the matter on merits. The transaction in question is purely a commercial transaction. The containers of the plaintiff have been utilised to import the goods. The defendant being a sea-liner, the containers are used in circulation. The availability of the container after the delivery of goods is a necessity of the nature of trade of the plaintiff. Thus, the stipulated dates for taking delivery and de-stuffing the containers are all material aspects in the nature of business of the plaintiff. The defendant was fully aware of this fact.

31. The dispute between the defendant and the Customs authorities is something which is for the said two parties to settle. The plaintiff cannot suffer as a consequence thereof. The defendant after impleading plaintiff No. 2 as a party in fact sought deletion of the said party. The Customs authorities wanted certain conditions to be fulfillled by the defendant and even the Division Bench of this court found in favor of the Customs authorities whereby the direction was made to deposit Rs. 10 lakhs in cash and give a bank guarantee of Rs. 15 lakhs. The defendant cannot make out a case that because it was under an obligation to comply with the orders of the court and had to meet the obligations of the Customs authorities towards the goods, the agreement entered into with the plaintiff on 21.1.2000 was under duress or pressure. The defendant in the application itself has set out that a draft of such an agreement was sent by the plaintiff to the defendant and it was only thereafter signed.

32. A material aspect is that the defendant has acted upon the said agreement and taken advantage of the same. Payments have been made, containers have been taken possession of and concessions have been sought in case the containers were returned within stipulated time.

33. The terms of the agreement are extremely clear. The specific clauses of agreement dated 21.1.2000 are as under:

1) That the Shipping Line would release the delivery order to the consignee in respect of the consignment covered by the Bill of Lading No. MSCUB 1931279 on the payment of Rs. four lacs twenty one thousand and ninety seven only. The said delivery order would be valid till 25th January, 2000.

2) That the present settlement is subject to the condition that the consignee would have the container destuffed and released to the Shipping Line on or before 28.2.2000, failing which the present agreement would become non est / of no consequence and the Shipping Line would be entitled to claim such container detention charges as are prescribed under the Karmahom Conference in respect of the entire amount of detention of the consignment.

3) That the consignee will have the name of the Shipping Line deleted/ dropped from the array of the Respondents in Civil Writ No. 7313/7314 of Page 07021999 pending before the Hon'ble High Court of Delhi. The consignee also undertakes and assures the Shipping Line that all proceedings against the Shipping Line would be dropped in case they are pending before any other authority, Court or any other judicial forum in respect of this cargo.

34. The clauses made it clear that in case the containers were not destuffed and released on or before 28.2.2000, the plaintiff would be entitled to the charges under the Karmahom Conference for the entire amount of detention of the consignment. The concession was made by the plaintiff despite the fact that the defendant had failed to avail of the concessions made even earlier by the plaintiff. The payments which have been claimed by the plaintiff in the suit are as per the said norms and as stipulated in the agreement dated 21.2.2000.

35. In my considered view, it cannot be said that the mere allegation of the defendant that the agreement was under duress or pressure or force is sufficient to raise a friable issue. As stated above, both the parties have conducted themselves in a manner and have acted on the agreement and now for the defendant to state that the agreement is not binding as it was obtained under force and coercion is only an attempt to evade its financial liability.

36. The parameters and principles to be kept in mind for grant of leave to contest were set out by the apex court in Mechalec Engineers and Manufacturers v. Basic Equipment Corporation as under:

(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 to 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 the time or mode of trial but not as to payment into Court or furnishing 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 is illusory or sham or practically moonshine then although ordinarily the plaintiff is entitled to have 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 the defendant by enabling him to try to prove a defense.

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37. If the aforesaid parameters are applied to the present case, there is little doubt that the defense sought to be raised by the defendant is a clear moonshine apart from being false and an after-thought to evade its liability. The defendant cannot act on the agreement and thereafter claim that it was under duress and pressure specially when admittedly a draft of the agreement was first sent and thereafter it was finalised and signed. The fact that the defendant who was under certain commercial compulsions arising from its financial liability to the Customs authorities and the directions passed by the Division Bench of this court will not cast a doubt or nullify the agreement. The debt due is as per the agreement.

38. The debt due is as per the written contract to be read along with the Bill of Lading dated 30.9.1998 and the rates stipulated under Karmahom Conference have to be necessarily read as part of the agreement by incorporation since it is so provided in the agreement.

39. I am thus of the considered view that the defendant has failed to make out a case for either grant of leave to defend or for recall of the decree passed on 17.11.2000.

40. The application is dismissed with costs of Rs. 5,000/-.