Lucky Electrical Sto... v. Ramesh Steel House, ...

1. This revision petition is directed against the order of the III Assistant Judge, City Civil Court, Madras, rejecting the application for grant of unconditional leave to defend filed by the present petitioners-defendants (hereinafter referred to as the defendants) in O.S. No. 1523 of 1982 filed by the plaintiff. The plaintiff had filed the summary suit under Order 37 of the Code of Civil Procedure against the defendants for recovery of a sum of Rs. 11,525 with interest at 18 per cent per annum on Rs. 6,800 from the date of suit till realisation. The claim of the plaintiff was based on a credit bill of the value of Rs. 9,709.37 which according to the plaintiff represented a credit sale made on 1.9.1979 in respect of certain goods purchased by the defendants. According to the plaintiff, the defendants had agreed to pay the said amount within thirty days with interest at 18 per cent per annum and they also promised to send a 'C'-Form and to pay 6 per cent sales tax on the bill amount. The plaintiff had alleged that the defendants had returned goods of the value of Rs. 2,609.57 and had made cash payment of Rs. 299.80 and had failed to pay the balance amount as also to send the 'C'-Form. Thus, a sum of Rs. 6,800 was said to be due towards principal and Rs. 600 on account of sales tax and Rs. 4,125 for interest. The total claim thus came to Rs. 11,525.

2. The defendants disputed that the plaintiff was a registered firm or that Babulal who purported to represent the plaintiff-firm was a partner. This itself was a triable issue, according to the defendants. An unusual defence was raised that the bill was made for a smaller amount in order to avoid sales tax and to cheat the Revenue. A substantial defence raised was that the invoice was neither an order nor a contract and as such the suit was not maintainable as a summary suit under Order 37 of the Code of Civil Procedure. Repayment of Rs. 9,252.92 was pleaded and the actual total amount earlier due was said to be Rs. 10,713.89. It was pleaded that payments were made against cheques, but the cheques were not returned by the plaintiff and therefore the plaintiff was not entitled to rely upon the cheques. It was also contended that on the basis of such cheques an under-chapter suit would not be maintainable.

3. A further affidavit was filed by Babulal stating that the suit claim arose out of a contract under which the defendants had purchased stainless steel goods. The registration number of the plaintiff-firm was also given. The story of payments in lieu of cheques was denied and it was stated that no details of the alleged payments were given. It was also stated that if in fact payments were made the defendants would have made demand for the return of those cheques.

4. It appears that after the application of the defendant for grant of leave to defend the suit was rejected, a decree in the suit has been passed already. Initially, therefore, I was inclined to take the view that the revision itself had become infructuous as admittedly no appeal has been filed against the decree passed.

5. The plaintiff is not represented in this Court and though served no appearance has been entered by any counsel on plaintiff's behalf. A question which was raised and argued at the tearing was whether the revision had not become infructuous as the defendants have not filed any appeal against the decree passed subsequent to the order rejecting the application for unconditional leave, Since the plaintiff was not represented I had requested Mr. Padmanabhan and Mr. Sundaravaradan, Members of the Bar, to assist me in deciding as to whether the decree stands automatically set aside if the order rejecting the application for unconditional leave is once set aside.

6. The main contention raised by Mr. Shah on behalf of the defendant was that the plaintiff was required to be put to strict proof of the fact that the suit was based on a written contract and invoice by itself was not a contract and that by resorting to the summary procedure in filing the suit the right of defence of the defendants has been taken away. It was also argued that the plea which the defendants took that there was understatement of the bill amount with a view to defraud the Revenue was itself a triable issue. The other triable issue, according to the defendants, was whether the plaintiff was a registered partnership firm and that the person who sent the goods was only a party. On these grounds, according to Mr. Shah, the defendants were entitled to an unconditional leave to defend.

7. It was conceded that the defendants have not filed any appeal, but, according to Mr. Shah, if the order refusing unconditional leave is set aside, then, consequently, the decree also must stand set aside; and he has relied on the decision of the Delhi High Court in Siri Krishnan Bhardwaj v. Manohar Lal Gupta A.I.R. 1977 Del. 226, and observations made by this Court in a Division Bench decision in G. Sundaram Chettiar v. P.A. Valli Ammal 68 M.L.J. 16 : A.I.R. 1935 Mad. 43 as well as in Kota Kanakayya v. Kamepalli Lakshmayya (1950)2 M.L.J. 379 : . Reliance was also placed on the decision of Sathiadev, J. in G. Madanlal v. P. Padma Bai (1987)100 L.W. 300.

8. In Siri Krishnan Bhardwaj's case, A.I.R. 1977 Del. 226 a Division Bench of the Delhi High Court has held that the effect of refusal of leave to appear and defend is that statutorily the allegations in the plaint have to be treated as admitted and a decree has to follow. In such a case, the decree is consequential on the earlier order refusing to grant leave and if the earlier order is set aside the latter order must also fall. In paragraph 15 of the judgment, Prakash Narain, J. (as he then was) with whom Pritam Singh Safeer, J. agreed, has observed as follows:

When leave is refused to the defendant to appear and defend a suit under Order 37 C.P.C., the effect of the refusal of leave to appear and defend is that the allegations in the plaint by a deeming provision stand admitted. The allegations in the plaint being admitted, a decree has to follow. This means that the decree follows as a consequence of the earlier order of refusal to grant leave to appear and defend. In my opinion, when a subsequent order, even if it be a decree, is a consequential order to an earlier order and the earlier order is set aside the latter order must also fall and directions to that effect have to be given.

In Sundaram Chettiar"s case 68 M.L.J. 16 : A.I.R. 1935 Mad. 43, the question which fell for consideration before the Division Bench of this Court was whether in an appeal filed under the Letters Patent against an order passed by a learned single Judge confirming the order of the Master, refusing leave to defend unconditionally but granting conditional leaves to defend, the condition being that the defendant should within one week from the date of the order pay the amount claimed in the plaint into Court, the Court had power to grant an order for stay of execution of the decree though no appeal had been presented against the decree which was passed by the trial Court on failure of furnishing security fixed in modification of the order of the Master. Dealing with that contention, the Division Bench observed that at first sight the contention appeared to be right and noticed a further argument that if in the appeal before the Division Bench it was held that the order of the learned single Judge was upheld the conditional order was held to be wrong, then the latter order, viz., the decree which was passed in consequence of it was of no force. This argument was raised on the strength of the decisions in Lakshmi v. Maru Devi I.L.R. 31 Mad. 29, Ramuvien v. Veerappudayan I.L.R. 37 Mad. 455 22 M.L.J. 217, and TalebaL v. Abdul Aziz I.L.R. 57 Cal. 1013. Referring to these decisions, the Division Bench observed as follows:

It is quite true that those cases were cases in which a preliminary decree had been passed but it seems to me, although I say so with some hesitation, that the same effect must be given to cases where a wrong order has resulted in a wrong decree. Clearly, if in this case, the order which is under appeal and which in my opinion was a wrong order had not been made, the defendant would have been given leave to defend and the result might have been quite different to what it has been. I am, therefore, of the opinion, though as I said before, I came to this opinion with some hesitation that it is competent in such a case as this for the Appellate Court to entertain an application for stay of proceedings Under Order 41, Rule 5, Civil Procedure Code. At the same time, Sub-clause (3) of that rule prevents an order for stay of execution being made unless security has been given by the appellant for the due performance of such decree or order as may ultimately be binding upon him. It appears to me that the provision is mandetory and that, no security having been given, it is impossible for this Court to order stay of execution; and stay of execution must accordingly be refused.

It is true that in Sundaram Chettiar"s case, 68 M.L.J. 16 : A.I.R. 1935 Mad. 43 as a fact, the Court declined to grant stay of execution because the mandatory provision in Order 41, Rule 5(3) was not complied with. However, important are the observations that if the order of refusal of grant of unconditional leave is set aside, the consequent decree also becomes infirm. To the same effect are the observations of Viswanatha Sastri, J. in Kota Kanakayya And Anr. v. Kamepalle Lakshmayya in which the learned Judge after referring to the decision in Sundaram Chettiar's case 68 M.L.J. 16 : A.I.R. 1935 Mad. 43, considered that decision as laying down, and in my view correctly, that if the order refusing to grant unconditional leave to defend was found to be erroneous and was set aside on appeal, the result would be to render the decree passed as a consequence of the refusal of leave to defend ineffective, even though the decree itself had not been appealed against.

9. It is no doubt true that in Mrs. Ramaben Bhagubhai Patel v. The Hindustan Electric Co. Ltd. , Chandrachud, J. (as he then was in the Bombay High Court) took the view that the Court which has passed a decree under Order 37, Rule 2 would become functus officio with the passing of the decree, like any other Court which passes a decree under Order 20 of the Code and if the defendant is aggrieved by the decree his proper remedy would be to file an appeal against the decree. These observations were made in the context of the question as to whether the provisions of Order 37, Rule 4 of the Code of Civil Procedure apply to a case in which a decree has been passed under Order 37, Rule 2(2) for failure of the defendant to comply with the terms of the conditional order. It is in that context that it was held that the Court which passed a decree in a summary suit had jurisdiction to set it aside only in cases covered by Order 37, Rule 4 and not in any other case. The question as to whether an infirmity is created in the decree passed in a summary suit if the defendant fails to comply with the conditional order granting leave or on his application for unconditional leave to defend being rejected, did not arise for decision in that case.

10. In Madanlal's case, (1987)100 L.W. 300, Sathiadev, J., held that the revision application which was directed against an order granting conditional leave to defend on deposit of Rs. 1,500 by the defendant does not become infructuous on the ground that the suit itself had been decreed Ex Parte on the failure of the defendant to comply with the condition. The learned Judge held that the Court had committed a material irregularity in the exercise of its jurisdiction by imposing a condition of deposit of Rs. 1,500 in an arbitrary manner. Consequently, the learned Judge allowed the revision petition and ordered restoration of the suit to the file of the trial Court and directed it to be disposed of on its own merits.

11. In the light of these decisions, I must proceed on the assumption that the revision petition does not become infructuous and has to be decided on its own merits.

12. On merits, it appears to me that it would be too superficial a view to hold that no written contract exists in the instant case. The contention appears to be that a written contract as contemplated by Order 37, Rule 1, C.P.C. must be a contract which is signed by both parties. Now, the relevant part of Order 37, Rule 1(2) reads as follows:

Subject to the provisions of Sub-rule (1), the Order applies to the following classes of suits, namely:

(a) suits upon bills of exchange, hundies and promissory notes;

(b) suits in which the plaintiff seeks only to recover a debt or liquidated demand in money payable by the defendant, with or without interest, arising,

(i) on a written contract; or

(ii) on an enactment, where the sum sought to be recovered is a fixed sum of money or in the nature of a debt other than a penalty; or

(iii) on a gurantee, where the claim against the principal is in respect of a debt or liquidated demand only.

Under Clause (b), under Rule 1(2), a summary suit can be filed to recover a liquidated demand in money payable by the defendant, arising on a written contract. What is necessary for the purposes of this case is that a liquidated demand in money must arise on a written contract. A written contract or a contract in writing need not always be a contract signed by both parties. The Court of Appeal in T.A. Ruf and Company Ltd. v. Pauwels (1919)1 K.B. 660, was called upon to construe the words "contract in writing". The facts of that case were that by contract dated 28th February, 1918 Pauwels had sold to Ruf & Company a quantity of soap. The terms of the contract were contained in a sold note signed only by Pauwels. At the foot of the sold note were the words "Please confirm the above". A dispute arose under the contract as to non-delivery of part of the soap and was referred to arbitration in accordance with the clause contained in the note. In the award made by the arbitrators there was a recital that "by a contract in writing made by Alphonse Pauwela with T.A. Ruf & Co. Ltd., dated the 28th day of February, 1918, Alphonse Pauwels contracted to sell and deliver" a certain quantity of soap to Ruf & Co. at a certain price and that a dispute had arisen which was referred to arbitration. By the award which was against the purchasers the purchasers were directed "to pay the costs of the reference, arbitration and award, including 361.15s. our fees and expenses in regard to the said arbitration, as we consider that their conduct in not confirming in writing the contract was probably the cause of the dispute". This award was sought to be set aside on the ground that "it is bad in law and shows error on its face and shows further that there was no legal contract binding on the parties". The Divisional Court ordered the award to be set aside on the ground that on the face of the award the arbitrators had treated as a contract in writing binding upon both parties that which was signed by one of the parties only and was therefore not a contract in writing. Ruf & Company appealed against this judgment. Warrington, L.J. in his judgment referred to the fact that though written confirmation was not sent by the purchasers, the arbitrators had come to the conclusion that there was a parol acceptance by Ruf & Co. of the terms of the sold note, and observed as follows:

Taken in conjunction with the rest of the award they seem to me to indicate that the arbitrators found that Ruf & Co. had confirmed the contract though not in writing, and if so they may quite properly refer to the contract as a "contract in writing". Although the memorandum of it was signed by one party only.

Duke, L.J. in a separate judgment observed at page 670:

As to the suggestion which was made that the words "contract in writing" import a contract made by means of a writing or writings signed by both parties, I do not think the words necessarily have that meaning. A document purporting to be an agreement may be an agreement in writing sufficient to satisfy the requirements of an Act of Parliament though it is only verified by the signature of one of the parties: In Re Jones (1895)2 Ch. 719. Here the question is one of a bargain for the sale of goods. I doubt whether the objection which is here set up to avoid a business transaction would have been sufficient to support a special demurrer before the passing of the Common Law Procedure Acts.

The appeal was allowed and the award was restored. There is, therefore, sufficient authority to indicate that even though the invoice of the bill is not signed by the other party to the contract, as a result of the acceptance of the goods delivered in pursuance of the invoice the demand for the price of goods admittedly received by the purchaser on the basis of the invoice must be held to arise on "written contract". Even according to the defendants, they had received goods in pursuance of their order and the goods were expressly supplied to them. According to them, the amount due was Rs. l0,713.89 out of which they had paid Rs. 9,252.92. Beyond this bare statement there is nothing to show how and when such payments were made. Therefore, the defendant's vague plea with regard to the payment of Rs. 9,252.92 without disclosure of any details cannot be said to make out any triable issue. The defendants having admitted that a sum of Rs. 10,713.89 was due would undoubtedly be entitled to an opportunity to show that there was repayment. At best, they may be entitled to a conditional leave to defend on the deposit of the admitted amount.

13. Dispute as to the status of the plaintiff as a registered firm did not, in my view, raise any triable issue because the plaintiff had disclosed the details about the registration of the firm in the original plaint itself.

14. On the facts of the present case, therefore, it appears to me that the order of the learned III Assistant Judge wholly rejecting the application for leave to defend needs to be set aside. Instead, I order that the defendants will be entitled to leave to defend the suit on their depositing a sum of Rs. 10,000 within a period of one month from today. On their deposit of Rs. 10,000 in the trial Court, the order of the trial Court refusing the application for leave to defend shall stand set aside and the suit will be restored to file and be tried on merits.

15. The revision petition is thus allowed to the extent indicated above. Since there is no appearance on behalf of the plaintiff, there will be no order as to costs.

16. I must express my appreciation of the assistance given by Mr. Padmanabhan and Mr. Sundaravaradan at my instance in this case.