Rathi Graphic & Technologies Ltd. vs Shri Sunil K. Jain & Anr.
2010 Latest Caselaw 1436 Del

9
*      IN THE HIGH COURT OF DELHI AT NEW DELHI

                                                                       Date of decision: 15.03.2010

+      CS(OS) 230/2008, I.A. No. 635/2008 (Under Order 37 Rule 3)

       RATHI GRAPHIC & TECHNOLOGIES LTD.                ..... Plaintiff
                       Through : Mr. Shiv Khorana, Advocate.

                       versus

       SHRI SUNIL K. JAIN & ANR.                        ..... Defendants
                         Through : Mr. Devadatt Kamat and Mr. Lakshyaved. R. Odhekar,
                         Advocates, for Defendant No.1.
       CORAM:
       MR. JUSTICE S. RAVINDRA BHAT

1.

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

2.     To be referred to Reporter or not?                     Yes.

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

S.RAVINDRA BHAT, J. (OPEN COURT)

1. The plaintiff sues the defendants in this summary suit, seeking a decree for

Rs.20,05,950/- along with pendent lite and future interest at 24% per annum.

2. The suit is premised upon certain transactions, which are said to have occurred between

the plaintiff and defendants. The plaintiff contends having supplied goods (to wit) toners,

required for Photostat, Xerox machines. It is submitted that the goods were purchased by the first

defendant, who is also the proprietor of the second defendant concern. According to the suit

contentions, the defendants had approached the plaintiff for appointment as super-

stockist/wholesale dealers, which request was declined. It is stated that the plaintiff indicated the

terms of the supply of goods, which included inter alia the stipulation that the defendants were to

CS(OS) 230/2008, I.A. No. 635/2008 Page 1 pay the billed amount within seven days of receipt of materials and that interest @ 2% per month

would be charged in the event of delayed payment or non-payment. The suit alleges that a series

of transactions in terms of this understanding took place, and alleges to an arrangement whereby

the defendants started to delay the payment from 30.06.2004. According to the allegations, the

defendants defaulted in payment on 10 invoices, details of which are set-out in para 7. They are

as follows:

   S.No.       Date of Purchase              Invoice No.                 Amount
1.            31.07.2004             859                            Rs.2,30,000/-
2.            31.07.2004             860                            Rs.1,43,750/-
3.            31.07.2004             861                            Rs.1,72,500/-
4.            31.07.2004             862                            Rs.1,43,750/-
5.            31.07.2004             863                            Rs. 1,72,500/-
6.            31.08.2004             1202                           Rs. 1,43,750/-
7.            31.08.2004             1208                           Rs. 28,750/-
8.            31.08.2004             1209                           Rs. 1,43,750/-
9.            31.08.2004             1210                           Rs. 1,43,750/-
10.           31.08.2004             1211                           Rs. 1,43,750/-
                                     Total                          Rs.14,66,250/-

3. The plaintiff submits that the defendants had issued 14 cheques, out of which 11 were

dishonored. The cheques that were dishonored are set-out in para 11. They are indicated in the

following terms:

     S.No.    Cheque No.       Drawn on            Date            Amount Rs.
      (a)       377586        ICICI Bank        29.01.2005         1,00,000.00/-
      (b)       377587        ICICI Bank        05.02.2005         1,00,000.00/-
      (c)       377588        ICICI Bank        12.02.2005         1,00,000.00/-
      (d)       377589        ICICI Bank        19.02.2005         1,00,000.00/-
      (e)       377590        ICICI Bank        26.02.2005         1,00,000.00/-
      (f)       377591        ICICI Bank        05.03.2005         1,00,000.00/-
      (g)       377592        ICICI Bank        12.03.2005         1,00,000.00/-
      (h)       377593        ICICI Bank        19.03.2005         1,00,000.00/-
      (i)       377594        ICICI Bank        26.03.2005         1,00,000.00/-
      (j)       377595        ICICI Bank        02.04.2005         1,00,000.00/-
      (k)       377596        ICICI Bank        09.04.2005         1,00,000.00/-
      (l)       377597        ICICI Bank        16.04.2005          66,250.00/-


CS(OS) 230/2008, I.A. No. 635/2008                                                       Page 2
                                                 Total                 11,66,250.00/-

4. The plaintiff refers to a Legal Notice issued to the defendants on 10.06.2005 under Regd.

Post A.D. cover, which did not elicit any response. In support of the suit, the plaintiff has filed

certain copies of the relevant invoices, and cargo receipts, said to have been issued by M/s.

Andhra Cargo Services (transporters, who are alleged to have delivered the goods to the

defendants), a copy of the legal notice, dated 10.06.2005 and certified copy of the Regd. Post

A.D. card. It is argued that the application preferred by the defendants does not disclose any

triable issue and the substantial contentions put forward by them pertain to non-receipt of the

notice; a disclaimer of the first defendant vis-à-vis any dealing with the second defendant, and

lastly that the cheques were issued to the plaintiff towards the loan said to have been disbursed to

a third party, Mr. Poonam Rathi. It is argued that none of these contentions disclose any triable

issue that entitles defendants to any relief, much less the leave to defend the suit.

5. The defendants in the application for leave to defend (I.A. No. 635/2008), on the other

hand, submit that the suit is singularly bereft of any particulars as to the supply of the goods

alleged. The defendants completely deny the transactions underlying the cheques, which are

subject matter of the suit (for which the plaintiff has also apparently moved criminal Courts in

Delhi, alleging commission of offences punishable under Section 141 of the Negotiable

Instruments Act, 1882). It is argued on behalf of the defendants that a comparison between

invoices, which are placed on the record and relied upon in the suit discloses that the alleged

transactions took place between 31.07.2004 and 31.08.2004, whereas the cargo receipts pertained

to a previous period. Learned counsel submits that no explanation is forthcoming in this regard

by the plaintiff. It is further emphasized that the cargo receipts do not itself evidence anything

except the documents alleged to have been issued. The defendants submit that there is no

CS(OS) 230/2008, I.A. No. 635/2008 Page 3 material to suggest that the alleged goods ever reached them or were accepted by anyone on their

behalf.

6. The principles on which the Court decides whether to grant or refuse leave to a litigant to

contest in a summary suit had been indicated in a decision of the Supreme Court in Mechelec

Engineers & Manufacturers v. Basic Equipment Corporation, 1976 (4) SCC 687, as well as in a

subsequent decision reported as M/s. Sunil Enterprises and Anr. v. SBI Commercial and

International Bank Ltd.,1998 (5) SCC 354. The same principles have been restated and applied

in later judgments. Briefly, the four criteria that the Courts in India have to follow are as follows:

"XXXXXX XXXXXX XXXXXX

a) If the defendant satisfies the Court that he has a good defence to the claim on merits, the defendant is entitled to unconditional leave to defend.

b) If the defendant raises a triable issue indicating that he has a fair or bona fide or reasonable defence, although not a possibly good defence, 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, if the affidavit discloses that at the trial he may be able to establish a defence to the plaintiff's claim, the court may impose conditions at the time of granting leave to defend the conditions being as to time of trial or made of trial but not as to payment into Court or furnishing security.

d) If the defendant has no defence, or if the defence is sham or illusory or practically moonshine, the defendant is not entitled to leave defend. (e) If the defendant has no defence or the defence is illusory or sham or practically moonshine, the Court may show mercy to the defendant by enabling him to try to prove a defence but at the same time protect the plaintiff imposing the condition that the amount claimed should be paid into Court or otherwise secured.

XXXXXX XXXXXX XXXXXX"

7. Having regard to the above principles, the Court has to discern whether the defendants'

arguments having existence of more than one triable issue is prima facie tenable. The plaintiff

CS(OS) 230/2008, I.A. No. 635/2008 Page 4 has, in support of the suit, filed on record certified copies of concerned cheques alleged to have

been dishonored by the defendants; copies of the bank invoices and the statement of accounts

reflecting the books of accounts maintained by it. It also places reliance on invoices of the

relative cargo receipts issued by the alleged courier. So far as the receipt of the legal notice is

concerned, the judgment of the Supreme Court in K. Bhaskaran v. Sankaran Vaidhyan Balan

and Another, 1997 (7) SCC 510, in this Court's opinion, concludes the issue. The first

defendant's plea of having no connection with the second defendant concern and a later

contention made in the rejoinder to the leave to defend application that the price indicated is

something less, is not credible, to say the least. The contention in the affidavit in support of the

leave to defend application is that the address of the first defendant is 26, Aziz Mulk, 1st Street,

Thousand Lights, Chennai 600 006. The plaintiff has annexed certified copies of Regd. Post

A.D., under cover of which legal notice is said to have been issued, as Ex. P-1/17, P-1/17A and

P-1/17B. On an application of principles indicated in K. Bhaskaran (supra), the logical

consequence is that the first defendant's disclaimer about no connection with the second

defendant is untenable and the Court has to conclude that the notice was also issued in this

regard and validly received by virtue of presumption, which becomes operative under Section 27

of the General Clauses Act, 1897.

8. As far as the substantive plea of the defendants, i.e. that the plaintiff has not disclosed

any material to say that the goods were actually supplied, is concerned, the plaintiff's contention

here is that the defendants have not challenged the issue of three cheques that were honored. The

defendants, on the other hand, contend that all the cheques were issued in relation to an alleged

loan. Viewed from the totality of the circumstances, the Court is of the opinion that the

defendants' plea, having regard to the non-receipt of any goods, as alleged by the plaintiff cannot

CS(OS) 230/2008, I.A. No. 635/2008 Page 5 be considered as insubstantial. No doubt, the plaintiffs have placed on record invoices, as well as

cargo receipts. But these by themselves, in the Court's opinion, do not establish anything except

the existence of such documents or that they were issued by the plaintiff and the concerned

carrier. It is not as if the carrier in this case has certified that the goods were delivered and had in

fact been received by the consignee, i.e. defendant or either of them. In the absence of such

material, and in the context of the defendants' denial of the entire transaction and the specific

denial about the receipt of goods, the Court discerns elements of triable issues as to whether

goods were indeed received by the defendants.

9. In view of the above conclusion, the Court is of the opinion that even though there is not

material prima facie at the moment to suggest that the case of loan put forward by the defendants

is credible, yet the defendants in this case cannot be styled as setting-up a "sham" case or

"moonshine" as understood within the formulation of the Supreme Court in Mechelec Engineers

& Manufacturers (supra). The Court is further of the opinion that having regard to the

circumstances and the facts as presented today, the defendants are entitled to leave but on

imposition of certain conditions. Accordingly, the defendants are granted leave to defend subject

to the condition that they shall deposit a sum of Rs.8,00,000/- in the Court, within six weeks

from today. An affidavit of compliance shall be filed simultaneously. The Registrar of this Court

is directed to keep the said amount in an interest bearing Fixed Deposit, to be renewed

periodically from time to time subject to further orders of this Court. I.A. No. 635/2008 is

allowed. The defendants are permitted leave to defend in the suit, in the above terms.

CS(OS) 230/2008

The defendants shall file written statement within the time specified in the Civil

Procedure Code (CPC), i.e. four weeks. Replication, if any, shall be filed four weeks thereafter.

CS(OS) 230/2008, I.A. No. 635/2008 Page 6 The parties are directed to file documents and indicate admission/denial thereto, by exchanging

affidavits, within ten weeks from today. List before the Joint Registrar on 24.05.2010, for

scrutiny.

List before the Court on 07.12.2010, for framing issues.

                                                                       S. RAVINDRA BHAT
                                                                                 (JUDGE)
       MARCH        15, 2010
       'ajk'




CS(OS) 230/2008, I.A. No. 635/2008                                                      Page 7