Delhi High Court

New Machine Co. Ltd. vs M/S. S.B. Air Controls Pvt. Ltd. on 13 February, 2009

Author: Manmohan Singh

*           HIGH COURT OF DELHI : NEW DELHI

+            IA No.6532/2006 in CS (OS) No.493/2006

%                     Judgment reserved on :          10th February, 2009

                      Judgment pronounced on :       13th February, 2009


     New Machine Co. Ltd.                            ..... Plaintiff
                   Through : Mr. Neeraj Sharma with Ms. Roopali
                             Singh & Ms. Archna Lakhotia, Advs.

                                  Vs

     M/s. S.B. Air Controls Pvt. Ltd               ...... Defendant
                     Through : Mr. Parkash C. Agarwal, Adv.

Coram:

HON'BLE MR. JUSTICE MANMOHAN SINGH

1. Whether the Reporters of local papers may
   be allowed to see the judgment?                                 Yes


2. To be referred to Reporter or not?                              Yes

3. Whether the judgment should be reported                         Yes
   in the Digest?

MANMOHAN SINGH, J.

1. By this order, I shall dispose of application IA No.6532/2006

under Order XXV Rule 1 CPC filed by the defendant.

2. The plaintiff, New Machine Co. Ltd., is a company

incorporated under the laws of Japan having its registered office at 2-8-1

Kehinjima, Ohta-Ku, Tokyo-143 003, Japan. The plaintiff has filed a

suit for recovery in the sum of JPY 68,00,309/- (together with pendente

lite and future interest) and damages.

3. The plaintiff is an international leader engaged inter alia in

the manufacture and supply of air, water, chemicals, oil and gas couplers

for industrial use in automotive, car and building air conditioners

(refrigerant charging, vacuum, etc.), white goods, aerospace,

engineering, engines, construction machinery, plastics, semiconductors

(high purity chemicals), chemical, medical equipment, railways,

shipbuilding, mould, air tools and other related OEM fields.

4. The plaintiff seeking express and unequivocal

representations and warranties, qua the capability and capacity of the

defendant company and on the assurances and guarantees given by the

defendant company regarding it‟s expertise and reputation, appointed

the defendant company as its distributor in India. As requested by the

defendant company, the plaintiff acknowledged its relationship with the

defendant company by issuing an authorization letter dated 10 th

February, 2000 to the defendant company.

5. In terms of the abovesaid agreement, the defendant company

placed purchase orders upon the plaintiff and against which the plaintiff

supplied the specified products to the defendant company on F.O.B.

basis from Japan. The defendant company cleared the goods supplied

from customs in India by paying the duty and all expenses and costs in

relation thereto, and then supplied these goods in turn to the customers

in India.

6. In the year 2002, the defendant company remitted the price of

the goods as supplied and invoiced by the plaintiff within the credit

period stipulated by the plaintiff. However, in 2003, the defendant

company defaulted in making payments for the goods supplied by the

plaintiff. In view of delay in payment, the plaintiff issued a reminder to

the defendant company asking for the amount of Japanese Yen 2.5

million that was due and payable by the defendant company to the

plaintiff for the goods supplied till then. However, no payment was

made to the plaintiff. Having received no reply of the reminder, the

plaintiff sent another reminder to the defendant company calling upon to

make good the payment due to it. Another reminder was issued in

February, 2003 wherein it was categorically stated that the payment was

being awaited by the accounts department of the plaintiff. The plaintiff

informed the defendant company that no further supply would be made

till all the outstanding payments were remitted by it to the plaintiff.

Thereafter, the plaintiff has filed this present suit for recovery.

7. The defendant company has filed this application under

Order XXV Rule 1 read with section 141 and 151 of the Code of Civil

Procedure, 1908 for security for costs. It is averred in the application

that the defendant‟s suit is for damages being Suit No.1652/2005 in

respect of loss of business, reputation and goodwill, breach of the sole

distributorship agreement. Since the plaintiff has a principal/registered

office in Japan, works for gain out of India, resides out of India and

also does not have any sufficient moveable or immovable property

within India, it is prayed in the application that the plaintiff should be

directed to furnish a security to the tune of Rs.66,39,516/- to the

satisfaction of the court till the pendency of the present suit.

8. This application has been opposed by the plaintiff by filing

the reply wherein it is submitted that the security as provided for in

Order XXV of the CPC is with respect to the costs incurred and likely

to be incurred by the defendant. It is further averred in the reply that

Section 25 of the CPC, which deals with „costs‟, specifically, provides

that the object of awarding costs to a litigant is to secure to him the

expenses incurred by him in litigation. As such, the term „cost‟ as

prescribed under Order XXV Rule 1 of the CPC relates to the cost of

litigation incurred by the defendant and not the entire claim of the

defendant as is sought to be enforced by the defendant by way of the

present application.

9. I have heard the learned counsel for the parties. In order to

appreciate the point involved, it is relevant to refer the provision of

Order XXV of Code of Civil Procedure which reads as under :

"When security for costs may be required from plaintiff :

1. At any stage of a suit, the Court may, either of its own motion or on the application of any defendant, order the plaintiff, for reasons to be recorded, to give within the time fixed by it security for the payment of all costs incurred and likely to be incurred by and defendant :

Provided that such an order shall be made in all cases in which it appears to the Court that a sole Plaintiff is, or (when there are more plaintiffs than one) that all the plaintiffs are, residing out of India and that such plaintiff does not possess or that no one of such plaintiffs possesses any sufficient immovable property within India other than the property in suit.

2. Whoever leaves India under such circumstances as to afford reasonable probability that he will not be forthcoming whenever he may be called upon to pay costs shall be deemed to be residing out of India within the meaning of the proviso to sub-rule (1).

11. It appears from the provisions of Order XXV that at any

stage of the suit, the court after assigning reason may direct any security

for payment of costs, if incurred or likely to be incurred by the

defendant and pass such order if the plaintiff does not reside and

possess any immovable property within India other than the property in

the suit. It is clear from the said provision that it is not a mandatory

provision that in every case of such a nature, the court must direct the

plaintiff to furnish security for costs. The mandate of this provision is

that in case, the court is satisfied that there is no resource to recover the

cost incurred and likely to be incurred by defendant in the facts and

circumstances of a particular case, it can pass the orders to the plaintiff

for furnishing security. The court has to exercise its discretion as per

the merits of each case, depending upon its own circumstances.

12. In the present case, as per the case of the plaintiff, the

defendants have not cleared the outstanding bills of the plaintiff for the

products supplied by the plaintiff from Japan to the defendant and suit

for recovery of the said amount has been filed by the plaintiff in this

Court. The claim in the suit filed by the defendant is for loss of

business, reputation, goodwill and breach of sole distributorship

agreement.

13. In the facts and circumstances of the present case, I feel that

the application is wholly false and frivolous and it is not required to pass

any order under the provisions of Order XXV Rule 1. It is the plaintiff

who has to recover the amount of the products supplied by them to the

defendant as alleged in the plaint. Even otherwise, how can the

defendant ask for the relief for the same amount against the party who

has filed the suit for recovery against him. The prayer sought by the

defendant in its application is against the provisions of Order 25 Rule 1

and cannot be granted. The learned counsel for the plaintiff has

referred the decision reported in 1893 by Queen's Bench Division [In

the court of appeal] Neck v. Taylor page 560 wherein the bench had

laid down the following principle of law :

"The rule laid down by the cases seems to be as follows. Where the counter-claim is put forward in respect of a matter wholly distinct from the claim, and the person putting it forward is a foreigner resident out of the jurisdiction, the case may be treated as if that person were a plaintiff, and only a plaintiff, and an order for security for costs may be made accordingly, in the absence of anything to the contrary. Where, however, the counter-claim is not in respect of a wholly distinct matter, but arises in respect of the same matter or transaction upon which the claim is founded, the Court will not, merely because the party counter-claiming is resident out of the jurisdiction, order security for costs; it will in that case consider whether the counter-claim is not in substance put forward as a defence to the claim, whatever form in point of strict law and of pleading it may take, and, if so, what under all the circumstances will be just and fair as between the parties; and will act accordingly. Therefore, the Court in that case will have a discretion. It is clear to me in the present case that the counter-claim is not in respect of a matter wholly distinct from and independent of that upon which the claim is based; on the contrary, it arises out of the very same transaction in respect of which the action is brought. It is, in reality, the defendant‟s defence to the action, though, as a matter of pleading, it is, and necessarily is, put forward by way of counter-claim. Under these circumstances, I think that the Divisional Court had a discretion in the matter, and I see no reason for thinking that they exercised such discretion otherwise than rightly.