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Grafitek International v. K.K. Kaura
Factual and Procedural Background
The present case involves an application seeking leave to defend a suit for recovery filed under the summary procedure of Order 37 CPC. The plaintiff instituted the suit based on written contracts evidenced by purchase orders and payments made by cheques related to the purchase and export of blank video cassettes. The defendants challenged the authority of the person who filed the suit on behalf of the plaintiff, alleging defects in the power of attorney, and also questioned the maintainability of the suit under Order 37 CPC. The suit progressed to the stage where summons for judgment were to be issued, and the court considered objections related to the authorization and procedural aspects of the suit.
Legal Issues Presented
- Whether the power of attorney executed in favor of Mr. Ravi K. Maggon, who instituted the suit, was valid despite not being notarised initially and whether subsequent ratification cured any defect.
- Whether the suit filed under Order 37 CPC is maintainable given the nature of the contract and claims involved.
- Whether the delay in ratification of the power of attorney (two years after institution of suit) affects the authority to defend the suit.
Arguments of the Parties
Defendants' Arguments
- The power of attorney filed with the suit was not notarised and thus Mr. Ravi K. Maggon lacked authority to institute the suit.
- The defect in the power of attorney is not curable, and the plaintiff should have filed a fresh suit after obtaining a duly notarised power of attorney.
- Ratification of the power of attorney after two years is unreasonable and does not validate the prior actions.
- The suit is not maintainable under Order 37 CPC as it is not based on bills of exchange, hundies, promissory notes, or liquidated debts arising from written contracts.
- The defendants claimed entitlement to Rs. 10,50,000/- based on supplies made on personal guarantees and disputed the plaintiff’s claims.
Plaintiff's Arguments
- The initial power of attorney, though not notarised, was valid and the defect was cured by subsequent notarised ratification before summons for judgment were served.
- Notarisation is procedural and raises only a presumption of authority; lack of notarisation does not negate authority to institute suit.
- The suit is maintainable under Order 37 CPC as it is based on written contracts evidenced by purchase orders and payments made by cheques.
- The defendants’ plea regarding supplies made on personal guarantees is a new and sham contention raised only in the leave to defend application.
- Payments for goods were duly made, negating the defendants’ counter-claims.
- Defendant No. 2 raised a triable issue regarding export of goods based on instructions from Mr. Arun Nayyar, entitling the defendant to contest subject to furnishing a bank guarantee.
Table of Precedents Cited
| Precedent | Rule or Principle Cited For | Application by the Court |
|---|---|---|
| D.H.M Framji and others v. The Eastern Union Bank Ltd., A.I.R (38) 1951 Punjab 371 | Duty of parties to produce proof of authority by power of attorney; original or certified copy should be on record. | Emphasized the necessity of proof of authority; court noted that fresh power of attorney was filed, curing defect. |
| Chunilal Bhagwanji v. Kanmal Lalchand, A.I.R (31) Bombay 201 | Validity of power of attorney and authority to institute suit; defects in authority cannot be cured by amendment and require fresh suit. | Distinguished on facts; held that the present case involved ratification and was procedural, unlike the cited case. |
| Madura Municipality through Commissioner v. K. Alagirisami Naidu, A.I.R 1939 Madras 957 | Reasonableness of delay in ratification of authority. | Rejected defendants’ reliance; held that ratification before summons for judgment was served was acceptable. |
Court's Reasoning and Analysis
The court began by addressing the challenge to the authority of Mr. Ravi K. Maggon, who filed the suit under a power of attorney that was not initially notarised. It noted that Section 85 of the Indian Evidence Act creates a presumption in favor of documents executed and authenticated before a Notary Public, but the absence of notarisation does not ipso facto negate authority. The court observed that a fresh notarised power of attorney was filed two years after the suit’s institution but prior to the issuance of summons for judgment, effectively ratifying the earlier actions.
The court distinguished the defendants’ reliance on precedent involving minors and next friends, emphasizing the factual differences and procedural context. It held that procedural defects such as delayed ratification should not be interpreted strictly if justice demands otherwise.
Regarding maintainability under Order 37 CPC, the court accepted the plaintiff’s submission that the purchase orders constituted written contracts supporting a suit for recovery. It acknowledged the defendants’ raised triable issues concerning supplies made on instructions of Mr. Arun Nayyar but conditioned their leave to contest on furnishing a bank guarantee.
The court ultimately prioritized the interests of justice over rigid procedural strictness, allowing the defendants to contest the suit subject to conditions and setting timelines for pleadings and further proceedings.
Holding and Implications
The court granted leave to the defendants to contest the suit under Order 37 CPC, subject to furnishing a bank guarantee of Rs. 9 lakhs within one month.
The decision allows the defendants to defend the suit despite initial procedural defects in the power of attorney, recognizing that such defects were cured before critical procedural stages. The court clarified that notarisation is procedural and not determinative of authority per se. The suit was held maintainable under Order 37 CPC based on written contracts evidenced by purchase orders and payments. No new legal precedent was established; the ruling primarily affects the parties by permitting contest of the suit under specified conditions.
J.D Kapoor, J.— Through this application leave to defend the suit for recovery filed under the summary procedure of Order 37 CPC has been sought on multifarious grounds.
2. At the outset, Mr. I.C Kumar, learned counsel for the defendants has challenged the authority of Mr. Ravi K. Maggon who has filed the present suit as the power-of-attorney does not state that it was executed before a Notary Public nor does it bear any authentication by a Notary Public. It is pertinent to mention here that along with the suit a power of attorney was filed which was not notarised and a fresh power of attorney was filed on 29.7.2000 along with application for issuing summons for judgment.
3. Section 85 of Indian Evidence Act postulates that the court shall presume that every document purporting to be power of attorney and to have been executed before, and authenticated by, a Notary Public or any court, Judge, Magistrate, (Indian) Counsel or Vice Counsel or representative of the Central Government, was so executed and authenticated.
4. In D.H.M Framji and others v. The Eastern Union Bank Ltd., Chittagong, A.I.R (38) 1951 Punjab 371, an objection was taken that the person who originally authorised the Advocate to act on behalf of the decree holder had no authority to do so and the question to be determined was on the legality & propriety of a power of attorney given. It was held that it is the duty of the parties to produce before the court proof in favour of their submissions and the original power of attorney ought to be kept on the file or at least a photographic copy or a certified copy of its ought to have been produced.
5. It is a settled law that power of attorney must be strictly perused and construed as giving only such authority as it confers expressly or by necessary implication. However, in the instant case, though a fresh power of attorney ratifying the power to file the suit and all steps taken by Mr. Maggon was filed after two years of institution of the suit with the application seeking service of summons for judgment. In other words, defect was cured before summons for judgment were served upon the defendants.
6. Mr. I.C Kumar, learned counsel for the defendants has contended that such a defect is not curable and the only alternative left to the plaintiff was to file a fresh suit after the power of attorney was got duly notarised. In support of this contention, Mr. Kumar has placed reliance upon Chunilal Bhagwanji v. Kanmal Lalchand, A.I.R (31) Bombay 201 wherein the facts were different and distinguishable. The question before the Bench was one of procodure.
7. The aforesaid suit was filed by a minor by his next friend, his aunt. The defendant had executed a promissory note in favour of a firm known as Kisan Baf and Sukalchand Kanmal of which plaintiff claimed to be the owner. The plaint was signed and verified by one Saremal and it was presented by a pleader Mr. Thakor, whose vakalatnama had been signed by Saremal. The case of the plaintiff was that Saremal was the duly authorized agent of Bai Dhapu to present the plaint, to sign it and to appoint a pleader, Saremal being authorized so to act under the power of attorney. It was under these circumstances held that for the purpose of appointing a recognised agent to take some step in the suit, the next friend is to be regarded as a party to the suit within the meaning of Order 3 Rule 1 CPC. The next friend of a minor can appoint a recognised agent. The next friend has no right to execute a general power of attorney in respect of the minor's property. A general power of attorney would not enable the attorney to file suit in the name of unspecified minors using the guarantor's name as next friend. It was further observed that a person acting under such a power of attorney has no authority either to present the plaint or to sign it and if the plaint is presented by somebody who has no authority to present it, it is not a valid plaint and further that such a defect cannot be cured by amendment as the only course is to file a fresh suit.
8. In the insant case, the crucial question that requires to be determined is whether Mr. Ravi K. Maggon has been authorised to file and institute the suit or not. The very fact that actions of Mr. Ravi K. Maggon were ratified by way of fresh power of attorney which was duly notarised shows that the earlier power of attorney was in order but for its notarization.
9. Merely because the power of attorney is not duly notarised does not mean that the concerned person was not authorised to institute the suit. Notarization raises presumption as to its authentication and no more. Notarisation of power of attorney is a matter of procedure and raises the presumption of authority of the person to institute the suit. In other words it does not mean that power of attorney executed in favour of a particular person but not duly notarised does not confer power upon the person to institute the suit. The objection taken by the learned counsel is that the said power of attorney does not bear any authentication by a Notary Public and therefore Mr. Maggon had no authority to file the present suit and as a consequence such a suit was never properly instituted.
10. The importance of power of attorney without notarisation cannot be undermined but at the same time if such a defect is removed subsequently during the pendency of the suit and that too. is followed by ratification of the authority of a person who has been authorized to institute the suit, it is not such a fatal infirmity that would hit at the maintainability of the suit itself.
11. Mr. Kumar has also raised the objection that ratification should be done within a reasonable period but in the instant case, ratification of action of Mr. Ravi K. Maggon by way of fresh notarized power of attorney was done after a period of two years and thus, by no stretch of imagination can be termed as a reasonable period. In this regard reliance placed by Mr. Kumar upon Madura Municipality through Commissioner v. K. Alagirisami Naidu, A.I.R 1939 Madras 957 cannot come to the rescue as I do not find any substance in this contention. In the instant case which is suit under Order 37 CPC, ratification was carried out before the summons for judgment were to be duly served upon the defendants No substantial proceedings have commenced. The most material stage to defend the suit is when summons for judgment are ordered to be served upon the defendants.
12. At this stage and for the purpose of granting leave to contest such an objection as raised by Mr. Kumar cannot be taken into consideration.
13. However, any provision which governs the procedure should not be subjected to strict legal interpretation but should be interpreted in a manner so as to meet the interests of justice and not scuttle them. In a suit for recovery, the objection taken by the defendant cannot form basis for graining leave particularly when defect is cured before defendant is given opportunity to disclose all those facts which according to him entitle him to contest the claims of the plaintiff.
14. The second objection is with regard to the maintainability of the suit under Order 37 CPC. According to the learned counsel, it is neither a suit upon Bills of Exchange nor Hundies nor Promissory Note nor for recovery of any debt/liquidated payment arising out of any written contract and as such the suit does not fall within the ambit of Order 37 CPC.
15. The plaintiff is a firm engaged in the business of export of various commodities including printing machines and its spare parts. The plaintiff was associated with the defendants for the purchase of blank video cassettes. The plaintiff purchased these blank video cassettes from the defendants and exported the same. The plaintiff has filed the instant suit on the basis of written contracts as embodied in the purchase orders dated 27.7.1995 & 9.9.1995 and also the payments made by cheques dated 13.7.1995, 28.7.1995, 22.8.1996, 20.9.1995 and 12.10.1995 The advance payment was to be made by the plaintiff to the defendants to enable the latter to commence the manufacture of video cassettes since they were in huge quantities. Such advances were paid and later adjusted against the actual invoiced amount.
16. In the perception of Mr. Rajeev Nayar, learned senior counsel for the plaintiff, payments were made to the defendants under the purchase orders and since purchase orders constitute written contract, the suit is maintainable under Order 37 CPC. These purchase orders were counter signed by the defendants through its partners.
17. According to the defendants, they are entitled to Rs. 10,50,000/- as the defendants had supplied one container of blank video cassette on the request of plaintiff to its customer M/s Twintrac Limited, London (U.K) on their personal guarantee through M/s. Murtaza Baquer Muhebi Electronics, Dubai and M/s. Murtaza Baqer Muhebi Electronics has held up Rs. 9 lakh of defendant No. 3, M/s Kay Electronics (E.Q.U).
18. The contention of Mr. Nayar, learned senior counsel for the plaintiff revolves mainly around the purchase orders dated 27.7.1995 & 9.9.1995 which according to him is a written contract inasmuch as all the terms and conditions agreed to between the parties are recorded therein and have been countersigned by one of the partners and the plea that on the request of the counsel the defendants had supplied huge quantity of blank video casette to its customer M/s. Twintrac Limited on their personal guarantee through M/s. Murtaza Baqer Muhebi Electronics is being raised for the first time in the application for leave to defend. The plea is sham and not available to the defendants because no correspondence was addressed by the defendants prior to the filing of the suit in this regard. Secondly payment in respect of this transaction was made vide bill invoice dated 24.7.1995 It is further contended by Mr. Nayar that payment for 840 cartons of blank video tapes was duly made and therefore the counter-claim of the defendant is baseless.
19. However to counter this contention, Mr. Kumar, has pointed out that on the instructions of Mr. Arun Nayyar, President of the plaintiff, the defendants supplied goods to M/s. Sonakshi Exports, another export house and now to say that Mr. Nayar did not instruct in this regard is an act of wriggling out. So much so plaintiff did not instruct in this regard in writing and, therefore, the plaintiff cannot escape the legal consequence of letter dated 5.5.1995 by terming it as a disputed document.
20. On the contrary, Mr. Rajiv Nayar contends that two claims relate to M/s. Twintrac Limited & M/s. Sonakshi Exports. So far as M/s. Twintrac Limited is concerned, an amount of 9,30,132.40 is towards the transaction in relation to M/s Twintrac Limited for which no goods have been supplied and the counter-claim of M/s. Twintrac Limited which has been raised in advance, the entire payment in respect of that has already been paid to the defendants. So far deliveries made to M/s. Sonakshi Exports are concerned, the defendants case is that these supplies were made on the instructions of Mr. Arun Nayar based on some letter written by him on 16.9.1996 Even if this claim is a disputed claim as alleged by the defendants, the first claim of Rs. 9,30.132.40 is not a disputed amount and to that extent, the defendants should be directed to deposit that amount as condition of contest the suit.
21. There is no denying the fact that purchase orders in this case are written contracts. This view receives support from 2001 D.LT(Volume 92) page 88, 1993 D.R.J(Volume 27) page 253, AIR 1992 (Del) page 1 and AIR 1983 (Karnataka) page 1. However, the nature of plea raised by the defendants shows that on the representation of Mr. Arun Nayyar, the defendants exported the goods directly to M/s Sonakshi Exports. Accordingly, defendant No. 2 is granted unconditional leave as the defendant has raised triable issue with regard to export of articles on the basis of letter of Mr. Arun Nayar that may entitle the defendant to prefer a counter-claim but subject to furnishing bank guarantee of Rs. 9 lakhs within a period of one month.
IA is disposed of.
S. 1549/98
Let written statements be filed within six weeks. Replication be filed within four weeks thereafter.
Renotify on 24th May, 2002.
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