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J.K Enterprise v. Prithviraj Ratanchand Mehta And Another
Structured Summary of the Opinion
Factual and Procedural Background
The Civil Revision Application challenges the correctness of the order dated 30th January, 1989, which granted conditional leave to defendant No. 1 in Summary Suit No. 1785 of 1988 (City Civil Court, Bombay). The suit was instituted by the first respondent/plaintiff claiming Rs. 45,410/- under three bills: Bill No. 101 dated 9-1-1985 for Rs. 19,482; Bill No. 105 dated 16-1-1985 for Rs. 9,702; and Bill No. 108 dated 18-1-1985 for Rs. 9,714. The plaintiff alleged that goods were delivered for processing earlier than the dates shown on the bills and sent two notices (16th April, 1985 and 5th September, 1985) to the first defendant with no response. The suit was filed on 8th January, 1988 and summons for judgment was taken out on 8th July, 1988.
The first defendant admitted receipt of the goods as per the bills and that the goods were supplied for processing at the place instructed by the defendants. The defence pleaded that the goods were of inferior quality and had weaving defects, rendering either no liability or reduced liability to pay the claimed amount. The trial Judge found the defence of defendant No. 1 to be "illusory, sham and moonshine" and therefore not a case for unconditional leave. The trial Judge directed defendant No. 1 to deposit Rs. 25,000 and to deposit the admitted claim of Rs. 5,718 (with liberty to the plaintiff to withdraw only the Rs. 5,718). Aggrieved, defendant No. 1 filed the present Civil Revision Application.
Legal Issues Presented
- Whether the order dated 30th January, 1989 granting conditional leave to defendant No. 1 in Summary Suit No. 1785 of 1988 was correct.
- Whether the claim to recover the price of goods supplied falls within Order 37, sub-rule (2) — i.e., whether it arises out of a "written contract" or "an enactment" as required by the opening paragraph of sub-rule (1) of Rule 2 of Order 37.
- Whether the defence put forward by defendant No. 1 is bona fide or is an illusory/sham defence such that a condition for leave (deposit) was justified.
Arguments of the Parties
Petitioner's (Defendant No. 1 / Mr. Shah) Arguments
- The case falls under Order 37, sub-rule (2), which, as interpreted, requires that the claim arise out of a written contract or an enactment (as indicated in sub-rule (1) of Rule 2 of Order 37).
- Because the suit seeks to recover the price of goods supplied, it is not a claim arising under a written contract or an enactment; therefore, the requirements of Order 37 do not permit the imposition of the condition that was ordered by the trial Judge.
- Reliance was placed on two Supreme Court judgments: "Santosh Kumar v. Bhai Mool Singh, 1985 SCR 1211" and "Mechelec Engineers and Manufacturers v. Basic Equipment Corporation, (1976) 4 SCC 687" to support the petitioner's position regarding leave and the appropriateness of conditions.
Respondent's (Plaintiff / Mr. Parekh) Arguments
- Relied upon an unreported judgment of this Court: "Summons for Judgment No. 23 of 1976, in Suit No. 1405 of 1975, decided on 9th April, 1976" (Jaishree Chemicals). That decision was said to have given an extended meaning to the words "arising on a written contract or on an enactment", allowing writings such as challans, receipts acknowledging receipt of goods, and subsequent bills to constitute a "written contract" or else render the claim actionable under section 70 of the Indian Contract Act as an enactment.
- Argued that under the reasoning in Jaishree Chemicals the plaintiffs had a statutory claim under section 70 (Indian Contract Act) because the goods were delivered not gratuitously and the defendants enjoyed the benefit, making them liable to pay compensation.
Table of Precedents Cited
| Precedent | Rule or Principle Cited For | Application by the Court |
|---|---|---|
| Summons for Judgment No. 23 of 1976, in Suit No. 1405 of 1975, decided on 9th April, 1976 | Extended meaning of the words "Written contract" under Order 37; alternatively the amount payable could be due under an enactment — specifically section 70 of the Indian Contract Act where goods were delivered non-gratuitously and benefit was enjoyed by recipient. | The Court relied on this authority to reject Mr. Shah's first contention and held that the Jaishree Chemicals decision supported treating bills/receipts/challans as sufficient writings or alternatively as giving rise to a statutory claim under section 70. |
| Santosh Kumar v. Bhai Mool Singh, 1985 SCR 1211 | Illustrates a case where defendants admitted execution of a cheque but pleaded it was collateral security and set out detailed payments, leading the Supreme Court to grant unconditional leave. | The Court distinguished the facts of Santosh Kumar from the present case, concluding that the comparison was inapposite and that Santosh Kumar did not support the petitioner's position. |
| Mechelec Engineers and Manufacturers v. Basic Equipment Corporation, (1976) 4 SCC 687 | Shows that where a defendant has a real defence (not illusory or sham), imposition of conditions for leave is not justified; the High Court had erred in interfering under section 115 CPC in that case. | The Court held that the ratio of Mechelec was not of assistance to Mr. Shah in the facts of the present case because the present trial Judge had found the defence to be illusory and therefore imposition of a condition was justified. |
Court's Reasoning and Analysis
The Court proceeded in the following steps, relying solely on the material and authorities cited in the opinion:
- The principal short point identified was the correctness of the trial Judge's order dated 30th January, 1989 granting conditional leave to defendant No. 1.
- The Court examined the petitioner's primary contention that Order 37, sub-rule (2) requires a written contract or an enactment and that the present claim for price of goods does not arise from either. The Court considered the respondent's reliance on the Jaishree Chemicals judgment.
- The Jaishree Chemicals decision was treated as authoritative for an extended interpretation of "written contract" to include writings from which an enforceable agreement can be deduced (for example, challans, receipts, bills) and, alternatively, for treating the plaintiffs' claim as arising under section 70 of the Indian Contract Act where goods were delivered non-gratuitously and benefit was enjoyed by the defendants.
- On that basis the Court concluded that the petitioner's first contention lacked merit.
- The Court then considered the two Supreme Court decisions relied on by Mr. Shah. Santosh Kumar was examined and distinguished on facts: in Santosh Kumar the defendants had provided specific dates, cheque numbers and a concrete plea that payments had been made, which led the Supreme Court to grant unconditional leave. The Court found the present facts not comparable to Santosh Kumar.
- Mechelec Engineers was considered; in that case the Supreme Court found a bona fide defence and held that the High Court had erred in interfering with discretion. The present Court concluded that Mechelec's ratio did not assist the petitioner because, unlike Mechelec, the trial Judge here found the defence to be illusory or sham.
- Having rejected the petitioner's legal contentions and distinguished the authorities relied upon, the Court saw no reason to interfere with the trial Judge's exercise of discretion. The Court therefore upheld the conditional leave order and set out the consequential directions for deposit, withdrawal, filing of written statement and further procedure.
Holding and Implications
Holding: The Civil Revision Application is rejected and the trial Judge's conditional leave order dated 30th January, 1989 is maintained. Leave to defend is granted to defendant No. 1 subject to the condition that defendant No. 1 deposits Rs. 25,000 and the admitted claim of Rs. 5,718 in the trial Court within 8 weeks, with liberty to the plaintiff to withdraw only the Rs. 5,718; the balance is to be kept in Court. The order granting leave to defendant No. 2 is maintained.
Implications:
- defendant No. 1 must comply with the deposit directions within 8 weeks; plaintiff may withdraw the admitted Rs. 5,718; the balance will remain in Court.
- defendant No. 1's leave to defend is conditional upon making the deposits; the Written Statement must be filed within 4 weeks after the expiry of the 8-week deposit period.
- Usual order for discovery and inspection will follow; the suit is to be placed for trial as a commercial cause.
- No order as to costs was made.
- The Court did not purport to lay down any new legal precedent; the decision upholds the trial Judge's exercise of discretion on the facts and authorities before it.
Order accordingly.
1. The short point raised in the present Civil Revision Application is regarding the correctness or otherwise of the order dated 30th January, 1989, granting conditional leave to defendant No. 1 in Summary Suit No. 1785 of 1988. The said Summary Suit No. 1785 of 1988 was instituted by the first respondent/plaintiff in the City Civil Court, Bombay, claiming a sum of Rs. 45,410/- due under three bills as under:—
(1) Bill No. 101, dated 9-1-1985 = Rs. 19,482.00.
(2) Bill No. 105, dated 16-1-1985 = Rs. 09,702.00.
(3) Bill No. 108, dated 18-1-1985 = Rs. 09,714.00.
The contention of the plaintiff is that the goods were delivered for processing on date earlier than the date mentioned on the bill as the date of the receipt of the goods by the defendant No. 1. The plaintiff himself had sent the first notice on 16th April, 1985, followed by the second notice sent through his Advocate, on 5th September, 1985. Unfortunately, it appears that there was no response from the first defendant to either of these two notices. The suit was filed on 8th January, 1988. Then summons for judgment was taken out on 8th July, 1988. The first defendant raised certain contentions, some of which were technical, which need not be gone into at this stage. As far as the merits are concerned, the contentions sought to be raised were that the goods were found to be of an inferior quality and suffered from some weaving defects and hence, the defendants were either not liable to pay the amount claimed or were liable to pay the lesser amount. The fact that the goods were initially delivered to the defendants as per the details mentioned in the 3 bills, referred to above, were not disputed. The fact that the goods were supplied for processing at the particular place, as per the instructions of the defendants, could also not be seriously disputed. What was disputed was the fact that the goods supplied were of inferior quality which necessitated certain adjustment.
2. Relying upon these pleas, the learned trial, Judge came to the conclusion that as far as the first defendant was concerned, the defence appeared to be illusory, sham and moonshine and hence, under the circumstances it was not a case for grant of unconditional leave. The learned trial Judge, therefore, directed the defendant No. 1 to deposit a sum of Rs. 25,000/- as also to further deposit the admitted claim of Rs. 5718/- with liberty to the plaintiff to withdraw the said amount of Rs. 5718/- only. Being aggrieved by this order dated 30th January, 1989, the present C.R.A is filed by the 1st defendant.
3. Mr. Shah, the learned counsel appearing for the petitioner, has raised two principal contentions. In the first place. Mr. Shah's contention is that this is a case falling under Order 37, sub-rule (2). There has, therefore, necessarily to be a written contract or an enactment, as indicated in the opening para of sub-rule (1) of Rule 2 of Order 37. According to the learned counsel inasmuch as the claim in the present suit is to recover the price of the goods supplied to the defendants, it would not be a claim under a written contract or an enactment. On the contrary, Mr. Parekh, the learned counsel appearing for the plaintiff, has invited my attention to an unreported judgment of this Court in Summons for Judgment No. 23 of 1976, in Suit No. 1405 of 1975, decided on 9th April, 1976. The facts in the said case of Jaishree Chemicals, decided on 9th April, 1976, were somewhat similar to the facts in this case: where in respect of goods supplied to the defendants, the plaintiffs had relied upon the challans, receipt at the foot thereof acknowledging the receipt of the goods and the bills subsequently sent by the plaintiffs mentioning the price, the receipt whereof was not denied, as also the subsequent conduct of the parties. A perusal of the said judgment would show that the words “arising on a written contract or on an enactment” have been given an extended meaning as under:—
“Now it is possible to give two answers to this contention. In the first place the words “Written contract” occurring under the amended provisions must be given an extended meaning and if it is possible to spell out an agreement enforceable at law to do something to be found in writings which bind the parties, then surely such agreement would emanate from what may be considered to be a “Written contract”. Even if the conclusion is that there was no written contract between the parties, it is possible to urge that the amount payable to the plaintiffs i.e the amount mentioned in the bills was due to them on an enactment; the enactment in this case would be the Indian Contract Act and the relevant provisions would be section 70 thereof. In this case, therefore, it is clear that the plaintiffs have delivered the goods to the defendants not intending to do so gratuitously and the defendants have enjoyed the benefit of them and under the provisions of section 70, which is a statutory provision, the defendants are liable to pay compensation in respect of such goods to the plaintiffs.”
In the light of the above judgment, I am of the opinion that the first contention raised by Mr. Shah has no merit.
4. The learned counsel Mr. Shah then placed reliance upon two judgments of the Supreme Court viz.:—
(i) Santosh Kumar v. Bhai Mool Singh, 1985 SCR 1211; and
(ii) Mechelec Engineers and Manufacturers v. Basic Equipment Corporation, (1976) 4 SCC 687.
Now, a perusal of the facts in Santosh Kumar's case would show that though the defendants in that case had admitted the execution of the cheque, they had pleaded that the cheque was given as a collateral security for the price of the goods which the plaintiff had supplied to the defendants. It was further-contended by the defendants that the goods were actually paid for, at times in cash and at times by cheque and that the dishonoured cheque had really served its end. The defendants in Santosh Kumar's case had set out the exact date on which, according to them, payments have been made by cheques and had given the cheque numbers. Relying on these facts, the Supreme Court observed at page 1216 of the report as under:—
“Now, what is the position here? The defendants admitted execution of the cheque but pleaded that it was only given as collateral security for the price of goods which the plaintiff supplied to the defendants. They said that those goods were paid for by cash payments made from time to time and by other cheques and that, therefore, the cheque in suit had served its end and should now be returned. They set out the exact dates on which, according to them, the payments had been made and gave the numbers of the cheques.”
It was in these facts that the Supreme Court came to the conclusion that despite the fact that the suit was based on a dishonoured cheque, unconditional leave had to be granted to the defendants without giving security. I do not think that there can be any comparison between the facts of the present case and the facts in Santosh Kumar's case.
5. In the 2nd case before the Supreme Court viz. Mechelec Engineers' case, though the suit was based on a cheque, the defendant firm while admitting the issue of the cheque by its managing partner denied any privity of contract with the plaintiff/firm. The defendant in that case had its own version as to the reason and purpose for which the cheque was drawn. In the opinion of the Supreme Court, it was not a case where it could be said that the defendant had no defence or that his defence was illusory, sham or practically moonshine. The Supreme Court finally concluded in Paras 8 and 9 of the judgment at page 690 of the Report that it was only in cases falling under certain classes that an imposition of the condition was justified. In the facts of the case before the Supreme Court, the Supreme Court further came to the conclusion that the High Court in its jurisdiction under section 115 of the Code of Civil Procedure had erred in interfering with the discretionary order that was passed by the Addl. District Judge of Delhi granting unconditional leave. I do not think that the ratio of the said Supreme Court judgment is of any assistance to Mr. Shah.
6. In view of the above facts, I do not see any reason to interfere with the discretion exercised by the learned Judge in the present case. In the result, the Revision Application is liable to be rejected. Accordingly, the defendant No. 1 is directed to deposit the amount of Rs. 25,000/- as also the admitted claim of Rs. 5718/- in the trial Court within 8 weeks from today, with liberty to the plaintiff to withdraw the amount of Rs. 5718/- and the balance being kept in the Court. Leave to defend is accordingly granted to the defendant No. 1 on the said condition. As far as the order granting leave to defendant No. 2 is concerned, the said order is maintained. The Written Statement to be filed within 4 weeks after the expiry of the said period of 8 weeks from today. Usual order for discovery and inspection thereafter. The suit to be placed for trial as a commercial cause. Rule discharged. No order as to costs.
Order accordingly.
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