Associated Switchgears & ... vs Emerson Network India (P) Ltd.
2008 Latest Caselaw 1171 Del

                             Unreportable
*             IN THE HIGH COURT OF DELHI AT NEW DELHI

+                             RFA (OS) No. 45 of 2008

%                                               Decided on : July 29, 2008

Associated Switchgears & Projects Pvt. Ltd.             . . . Appellant

                   through :                 Mr. Shiv Khorana, Advocate

              VERSUS

Emerson Network India (P) Ltd.                          . . . Respondent

                   through :                 Mr. Chetan Sharma, Sr. Adv.
                                             with Ms. Ramni Taneja, Advocate


CORAM :-
    THE HON'BLE MR. JUSTICE A.K. SIKRI
    THE HON'BLE MR. JUSTICE MANMOHAN SINGH

       1.     Whether Reporters of Local newspapers may be allowed
              to see the Judgment?
       2.     To be referred to the Reporter or not?
       3.     Whether the Judgment should be reported in the Digest?


A.K. SIKRI, J.         (ORAL)

1. A conditional leave to defend was granted to the appellant herein in

the suit filed by the respondent under Order XXXVII of the Code of

Civil Procedure, 1908. Order to this effect was passed on 3.11.2003.

The condition stipulated was that the appellant is to furnish a security

in the sum of Rs.20,00,000/- to the Registrar of this Court within 15

days of the said order and thereafter written statement was to be

filed within four weeks. The learned Single Judge has ultimately

passed judgment and decree dated 27.3.2006 on the ground that the

appellant did not furnish adequate security in the sum of

Rs.20,00,000/-, as directed. The appellant filed review application,

which was also dismissed by the learned Single Judge vide order

dated 25.1.2008, though decree was modified to some extent insofar

as adjustment of amount to the tune of Rs.2,25,000/-, which was

given by the appellant to the respondent on 31.1.2003, is concerned.

Challenging these orders, the present appeal is preferred.

2. The main ground on the basis of which the impugned judgment and

decree is challenged is that adequate security was furnished by the

appellant and, therefore, the condition stipulated in the order dated

3.11.2003 was satisfied. Before we consider this aspect, it would be

necessary to take stock of few material facts.

3. The respondent herein filed Suit No. 2598/2001 on the Original Side

of this Court, under Order XXXVII of the CPC, for recovery of a sum

of Rs.22,36,260.44p. with costs and interest. It was averred in the

plaint that the appellant placed six purchase orders with the

respondent for installation of UPS systems at the premises of M/s.

Hyundai and Daewoo companies. The respondent is the successor-

in-interest of M/s. Tata Liebert Ltd. The respondent has supplied

those UPS systems and thereafter raised invoices. The appellant only

made part payments, but failed to pay the balance in spite of

repeated requests and demands. The principal amount payable,

according to the respondent, was Rs.12,55,460.02p. Rest of the

amount claimed was on account of overdue interest. As per the

invoices, interest payable was 18% p.a. in case payment of the

invoices is not made within 30 days of their presentation. The

appellant filed an application for leave to defend questioning the

territorial jurisdiction of this Court as according to the appellant, the

suit should have been filed in Ghaziabad courts (UP). The locus of

the respondent to recover the amount in question was also

challenged as the supplies were made by M/s. Tata Liebert Ltd.

4. In the order dated 3.11.2003, the Court observed that these were

triable issues. On the other hand, it was also noted that insofar as

the appellant is concerned, it had received full payment from M/s.

Daewoo Motors with regard to the equipment supplied by the

respondent. It was for this reason, while granting leave to defend

the suit, the condition for furnishing a security in the sum of

Rs.20,00,000/- was imposed upon the appellant.

5. The appellant herein did not furnish the security within 15 days, as

directed, and only filed application seeking further time. Thereafter,

the appellant furnished immovable property at Nainital as security.

Without going into the details, it would be sufficient to point out

that the security, as furnished, was not found adequate and

ultimately on 6.2.2006, the Registrar General rejected the said

security observing that it was highly inadequate to secure the amount

of Rs.20,00,000/-. No doubt, the appellant has filed the valuation

report in respect of the said property. The respondent had also filed

the valuation report as per which the value of the property offered

was Rs.14.40 lacs. Another objection of the respondent was that

security was offered by one Shri Prakash Jain, who had not disclosed

his interest in the appellant company. After rejecting this security as

offered by the appellant, the Registrar General posted the case before

the Court for further orders on 24.2.2006.

6. The appellant herein challenged the order of the Registrar General by

filing OA No. 3/2006. This OA, along with the main suit, was listed

before the learned Single Judge on 23.2.2006. It seems that some

arguments were addressed on the adequacy of the security and the

orders passed by the learned Registrar General inasmuch as order

dated 23.2.2006 records: "At the reqruest of Mr. Khorana, who

wants to seek instructions in this matter with regard to providing

additional security for an amount of Rs.5 lacs, list on 27.3.2006."

No doubt, the learned Single Judge did not specifically remark that

he was endorsing the view of the Registrar General. But the tenor of

the aforesaid order clearly suggests that report of the Registrar

General was accepted as the counsel for the appellant herein was

asked to seek instructions for providing additional security for an

amount of Rs.5 lacs which was obviously to cover up the shortfall as

the property offered by the appellant herein was valued at Rs.14.5

lacs as per the valuation report submitted by the respondent. When

the matter came up on 27.3.2006, counsel for the appellant herein

made the statement that additional security had not been furnished.

From this the learned Single Judge opined that no serious attempts

were made by the appellant to furnish the security in terms of orders

dated 3.11.2003 though more than three years had passed. Even on

that date, instead of furnishing additional security, no satisfactory

explanation was coming forth from the counsel for the appellant

herein and in these circumstances holding that the condition for grant

of leave to defend had not been satisfied, the suit of the respondent

herein was decreed. In the review application filed against this

order, the appellant had additionally submitted that by allowing

interest of 9% on Rs.22,36,260.44p., the Court had granted interest

on interest and further that a sum of Rs.2,25,000/- paid by the

appellant to the plaintiff on 31.1.2003 had not been adjusted. This

review application was disposed of on 25.2.2008. The only

modification which is done is to give adjustment of Rs.2,25,000/-

thereby reducing this amount to Rs.22,36,260.44p.

7. In view the of the narration of events disclosed by us, we are in

agreement with the findings arrived at by the learned Single Judge

that the appellant could not furnish the security, as directed, while

granting the conditional leave to defend. We do not find any force

in the argument of learned counsel for the appellant that the order of

the Registrar General was challenged by filing OA No. 3/2006, which

had not been decided by the learned Single Judge before passing the

order. Order sheet dated 24.2.2006 as well as 27.3.2006 (on which

date the decree is passed) clearly record that these orders are not

only in the suit but also in OA No. 3/2006. It is clear that the order

of the Registrar General was accepted by the learned Single Judge

though there is no specific stipulation to that effect in the order.

However, this is a legitimate inference that can be drawn from the

reading of order dated 23.2.2006, as pointed out above. Therefore,

we are of the opinion that the learned Single Judge has rightly passed

the decree in the present case.

8. However, we are of the opinion that the interest @ 9% p.a. granted

to the respondent herein from the date of decree on entire amount

of Rs.22,36,260.44p. - Rs. 2,25,000/- would not be proper. The

interest should have been awarded on principal amount alone, i.e.

Rs.12,55,460.02p. Mr. Chetan Sharma, learned senior counsel

appearing for the respondent, fairly concedes to this course of action.

We may clarify that the amount of Rs.2,25,000/- paid by the

appellant on 31.1.2003 is to be appropriated first towards interest

and not towards the principle while calculating the interest.

9. Mr. Khorana also submitted that though in the invoices, rate of

interest is stipulated at 18%, but the interest, at the rate it is

calculated, comes to 21%. Mr. Chetan Sharma himself pointed out

that interest chargeable as per the invoices is 18% and he has no

objection if the pre-suit period interest is awarded at 18% on the

principle amount.

10. Having regard to these facts, the appeal is partly allowed and the

decree of the learned Single Judge is modified as under :-

"There shall be a decree of Rs.12,55,460.02p. The plaintiff shall also be entitled to interest @ 18% p.a. on all the six invoices, which shall be calculated 30 days after the dates mentioned in each invoice. The plaintiff shall also be entitled to pendente lite and future interest @ 9% p.a. on the principal amount of Rs.12,55,460.02p. The defendant shall be entitled

to adjust a sum of Rs.2,25,000/- give on 31.1.2003, which shall first be appropriated towards interest. The plaintiff shall also be entitled to proportionate costs."

11. The appeal is disposed of in the aforesaid terms.

(A.K. SIKRI) JUDGE

(MANMOHAN SINGH) JUDGE

July 29, 2008 nsk