Dream Creations & Ors vs Pali Ram
2011 Latest Caselaw 1578 Del

06.
*      IN THE HIGH COURT OF DELHI AT NEW DELHI

+      RFA 124/2010
%                                     Judgment dated 18.3.2011.
DREAM CREATIONS & ORS                                    ..... Appellants
              Through :         Mr. K. Sunil, Adv.
                   versus
PALI RAM                                                 ..... Respondent

                   Through :    Mr. Rajiv Gupta, Adv.
       CORAM:
       HON'BLE MR. JUSTICE G.S.SISTANI

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

2. To be referred to Reporter or not?

3. Whether the judgment should be reported in the Digest? G.S.SISTANI, J (ORAL)

1. Present appeal is directed against the judgment and decree dated

20.01.2010 passed by learned Additional District Judge, Delhi, in

Suit No.353/2009, whereby the application filed by the appellant

(defendant before trial court) for leave to defend was dismissed

and the suit was decreed in the sum of `12,71,200/- along with

pendente lite interest @ 9%, per annum in favour of the respondent

(plaintiff before the trial court) and against the appellant herein.

2. Brief facts necessary to be noticed for disposal of the present

appeal are that vide an agreement/quotation of work dated

30.11.2007 the respondents were to supply fit and install stainless

steel section for the appellants at the Picadilly Hotel New Delhi. The

respondent filed a suit under the Provisions of Order XXXVII Rules 1

and 2 of the Code of Civil Procedure (hereinafter referred to as

"CPC") for recovery for `12,71,200/-, against the appellants herein,

is on the basis of three invoices bearing Nos.(i) 366 for `25,34237/-;

(ii) 374 for `7,82,154/-; and (iii) 376 for `10,54,809/-, dated

14.6.2008, 29.07.2008 and 1.8.2008, respectively, and on the basis

of statement of account for supply of stainless steel section,

stainless steel railings and stainless steel flats to the appellant

herein. The invoices/challan were duly received by the appellant in

respect of the said material alongwith the material. Consequent to

the summons being issued the appellant filed its memo of

appearance and thereafter summons for judgment were issued.

The appellant filed an application for leave to defend under Order

XXXVII Rule 3 (5) of the CPC. Learned trial court by a Judgment and

decree dated 20.1.2010 rejected the application on the ground that

no triable issue was raised by the appellant herein.

3. Learned counsel for the appellants submit that a reading of the

agreement entered into between the parties would show that

respondent was not only to supply the material but also to provide

installation, fitting and finishing in respect of the same. It is the

case of the appellants that a payment of `30.0 lakh was paid as

advance and a payment of another `5.0 lakh had already been

made by cheque. However, on realizing that the material supplied

was not as per the specifications agreed upon, the appellants later

stopped the payment of cheque. It is further submitted by counsel

for the appellant that on account of the material being defective

and rusted the appellants had to engage services of another

agency and incur additional expenditure. Counsel next submits

that in the circumstances that the terms of the work

order/agreement were not complied with, a mere reliance on the

invoices would not make the suit maintainable under the provisions

of Order XXXVII of CPC. Counsel next submits that the said invoices

do not contain detailed terms and conditions for supply of material

and accordingly they could not be solely relied upon to set the

controversy at rest. According to the appellants the main dispute is

that the respondent failed to perform his part of the contract as

agreed upon and it was only due to this reason that the payment

was not made. The counsel next submits that the learned trial court

despite noting that the agreement clearly and specifically

mentioned that all material of stainless steel will be of grade 304

and the same shall be fitted and installed, did not place reliance on

the terms of the said agreement and passed the order merely on

the basis of the invoices/challans. In view of the aforesaid, the

counsel states that the learned trial court has exceeded its

jurisdiction and failed to appreciate the triable issues, which had

been raised by the appellant.

4. Learned counsel for the appellant further submits that had the

respondent supplied material as per specification the rusting would

not have occurred and hence the respondent miserably failed to

comply with the terms and conditions of the work order/agreement,

which were given for the purposes of execution of the work at

Piccadly Hotel, Janak Puri District Centre, New Delhi. Counsel next

submits that on account of lapses on the part of the respondent,

appellants had to complete the said project and had to incur extra

expenditure for scaffolding and for which excessive charges have

been incurred and the respondent is liable to pay for the same. It

is in respect of this expenditure and excess payments that a

counter claim was filed by the appellants however due to the

application for leave to defend being dismissed the counter claim

too was dismissed.

5. Learned counsel for the respondent has relied upon various

invoices, photocopies of which have been placed on record of this

court and originals of which have been filed before the trial court

along with statements, which suggest that the entire material has

been accepted by the appellant without any protest or demur and

admittedly not a single communication was addressed by the

appellant to the respondent at any point of time making any

grievance with regard to quality of material supplied. Counsel for

the respondent further submits that complete silence on the part of

the appellant would show that they were satisfied with the

material, which had been supplied by the respondent to them.

Counsel also submits that trial court has rightly considered the

application for leave to defend and rejected the same.

6. I have heard counsel for the parties and also perused the

documents placed on record and also the judgment dated

20.1.2010 passed by learned trial court. In this case, respondent

had raised three invoices bearing Nos.(i) 366 for `25,34237/-; (ii)

374 for `7,82,154/-; and (iii) 376 for `10,54,809/-, dated 14.6.2008,

29.07.2008 and 1.8.2008, respectively. Out of the total sum of

`42,71,200/-, the appellants had paid `30.00 lakhs, in advance, on

various occasions, through cheques till 13.8.2008, leaving a

balance of `12,71,200/- as on 28.8.2008. On 21.8.2008, the

appellants had issued another cheque in the sum of `5.00 lakhs in

the name of respondent, the payment of which cheque was later on

stopped.

7. The law with regard to deciding an application for leave to defend

is well settled. The defendant is not entitled to leave to defend

where the defendant fails to establish the facts alleged by him and

the defence raised by him is illusory and practically moonshine. In

Sunil Enterprises and Anthr v. SBI Commercial and International

Bank Ltd reported in (1998) 5 SCC 354 ,the apex court observed:

"4. The position in law has been explained by this Court in Santosh Kumar v. Bhai Mool Singh1, Milkhiram (India) (P) Ltd. v. Chamanlal Bros.2 and Mechelec Engineers & Manufacturers v. Basic Equipment Corpn.3 The propositions laid down in these decisions may be summed up as follows:

(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 mode 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 to 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."

8. Further in the case of Mrs. Raj Duggal v. Ramesh Kumar Bansal

reported in 1991 Supp 1 SCC 191 and more particularly in para 3

thereof, the Apex Court observed:

"3. Leave is declined where the court is of the opinion that the grant of leave would merely enable the defendant to prolong the litigation by raising untenable and frivolous defences. The test is to see whether the defence raises a real issue and not a sham one, in the sense that if the facts alleged by the defendant are established there would be a good or even a plausible defence on those facts. If the court is satisfied about that leave must be given. If there is a triable issue in the sense that there is a fair dispute to be tried as to the meaning of a document on which the claim is based or uncertainty as to the amount actually due or where the alleged facts are of such a nature as to entitle the defendant to interrogate the plaintiff or to cross-examine his witnesses leave should not be denied. Where also, the defendant shows that even on a fair probability he was a bona fide defence, he ought to have leave. Summary judgments under Order 37 should not be granted where serious conflict as to matter of fact or where any difficulty on issues as to law arises. The court should not reject the defence of the defendant merely because of its inherent implausibility or its inconsistency."

9. A similar view was expressed in Defiance Knitting Industries (P) Ltd.

v. Jay Arts reported in (2006)8 SCC 25 wherein the court observed

that "if the court is satisfied that the facts disclosed by the

defendant do not indicate that he has a substantial defence to raise

or that the defence intended to be put up by the defendant is

frivolous or vexatious, it may refuse leave to defend altogether."

10. The present appeal has to be decided on the touch stone of the law

laid down by the Apex court. In the present appeal the scope of

work/agreement entered into between the parties is not in dispute.

It is further not in dispute that the material was supplied which is

evident from invoices/challan duly signed by the appellant. Along

with the application for leave to defend not a single communication

has been placed in support of the plea that the material was not as

per the specifications. An amount of `30.0 lakh was paid as

advance out of a total of `42,71,200 Lakh. I find no force in the

submission of counsel for the appellant that appellant

communicated orally and over telephone to the respondents that

the material was not as per specifications and the agreement stood

frustrated. I also find no merit in the plea raised by the counsel for

the appellant as it is highly improbable for a commercial entity to

accept material worth over `42.0 lacs, that is not as per the agreed

terms and conditions and it is even more improbable that the same

is not communicated to the other party in writing. It is trite law that

leave to defend application may be refused if it appears to the

court that allowing the same would only increase the litigation and

drag a litigant into useless and time consuming litigation and

thereby deny him the timely enjoyment of his rights.

11. Based on the facts of the case, the settled position of law and in

the absence of any document filed along with the application for

leave to defend to show that the material supplied by the

respondent to the appellants was either defective or not as per the

specifications. The fact that no steps were taken before the filing of

the suit to inform the respondents of the deficiency in material,

accordingly it appears that the defence sought to be raised by

counsel for the appellants is sham and moonshine. From the facts

put on record it appears that the plea of deficiency in performance

of the contract on part of the respondents is an afterthought.

Accordingly, I am of the view that there is no infirmity in the

judgment passed by learned trial court by virtue of which the trial

court has dismissed the application for leave to defend.

Accordingly, appeal stands dismissed.

12. Learned counsel for the appellant submits that counter claim filed

has been rejected on the ground that no written statement has

been filed. Counsel further submits that at the time of filing of the

counter claim he has affixed the necessary court fee. It will be open

for the appellant to take recourse to such remedies, which may be

available to the appellants, in accordance with law, for agitating

their counter claim.

G.S. SISTANI, J.

March 18, 2011 'msr'