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West Bengal Decorating Co. v. Damodar Das Daga Opposite Party.
Factual and Procedural Background
The plaintiff instituted a suit in the City Civil Court (Com. Suit No. 510 of 1979) for recovery of the price of goods sold and delivered together with interest, invoking Order 37, Civil Procedure Code (C.P.C.). The Registrar referred the question of maintainability under Order 37 to the Bench. By order dated January 11, 1980, the court held that the unpaid price of goods sold is in the nature of a "debt" and, relying on the Sale of Goods Act, concluded that the suit fell within the scope of the amended provisions of Order 37.
Summary procedure under Order 37 was thereafter adopted. After summons were served, the defendant appeared and filed an application under sub-rule (5), R.3, O.37 for leave to defend unconditionally, alleging the plaintiff's claim was fictitious and asserting a substantial defence, and contending the suit was not within Order 37. That application was filed late; the defendant explained the delay and sought condonation.
By order dated September 23, 1981, the learned Judge allowed the defendant leave to defend on condition of furnishing cash security of Rs. 11,500 (the amount of the claim). The defendant challenged both impugned orders (the January 11, 1980 order classifying the suit under Order 37 and the September 23, 1981 order granting leave to defend on security) by filing two revisional applications. The challenge to the January 11 order was filed late and accompanied by an application under Section 5 of the Limitation Act for condonation of delay. All applications were heard together on notice to the plaintiff.
Legal Issues Presented
- Whether a suit for recovery of the price of goods sold and delivered falls within the meaning and scope of Order 37 of the Code as amended (i.e., whether the claim is a "debt" or "liquidated demand in money" arising on a written contract or on an enactment).
- Whether the order dated September 23, 1981 granting leave to defend on furnishing security was proper, in particular whether the learned Judge considered whether the defendant had made out a substantial defence.
- Whether the delay in filing the revisional application against the January 11, 1980 order should be condoned under Section 5 of the Limitation Act (procedural issue).
Arguments of the Parties
Petitioner's (Defendant's) Arguments
- The suit did not come within the meaning of Order 37 of the Code and therefore summary proceedings under that Order were not appropriate.
- The plaintiff's claim was fictitious and the defendant had a substantial defence to be tried.
- The application for leave to defend was filed late; an explanation for delay was provided and condonation was sought.
Respondent's (Plaintiff's / Mr. Tandon's) Arguments
- In view of the amended provisions of Order 37, the suit for recovery of price falls within the class of suits contemplated by Order 37.
- By referring to Section 55 of the Sale of Goods Act, it was contended that the claim arises under the provisions of that Act (i.e., the seller may sue for price where property has passed and buyer wrongfully neglects to pay).
- Reliance was placed on an analogous provision in Chapter XIIIA of the Rules of the High Court at Calcutta and on the case of Mitra Mukherjee & Co. v. Ajit Kumar (AIR 1963 Cal 9) to support the proposition that a suit for recovery of price of goods sold and delivered may be treated as a summary suit under that regime (arguing analogy with summary procedures).
Table of Precedents Cited
| Precedent | Rule or Principle Cited For | Application by the Court |
|---|---|---|
| Mitra Mukherjee & Co. v. Ajit Kumar, AIR 1963 Cal 9 | Considered in relation to summary procedure under Chapter XIIIA of the Calcutta High Court Rules; dealt with appealability of an order directing furnishing of security to the extent of the claim. | The court observed the decision was considered in its proper context: it related to Chapter XIIIA (which covers suits on express or implied contracts) and primarily addressed appealability of a security order. The court held the decision did not determine classification under the specific clause of Rule 1 and that Chapter XIIIA differs from Order 37 (Order 37 requires a written contract; Chapter XIIIA allows express or implied contracts). Therefore the Mitra Mukherjee case was not decisive to bring the present suit within Order 37. |
Court's Reasoning and Analysis
The court proceeded in the following steps, each based on material expressly found in the opinion:
- Procedural relief: The court first considered the Section 5 Limitation Act application and, on the defendant's explanation that the January 11, 1980 order was passed before service and was thought to be administrative, held that the delay in challenging that order should be condoned in the peculiar circumstances.
- Statutory text of Order 37: The court examined the amended text of sub-rule (2), Rule 1, Order 37. It identified the relevant categories: (a) suits on bills/hundies/promissory notes (not applicable), and (b) suits seeking only to recover a debt or liquidated demand arising (i) on a written contract or (ii) on an enactment where the sum is a fixed sum or in the nature of a debt other than a penalty.
- Application to the facts: The court excluded clause (a) and concluded clause (b)(i) (written contract) could not apply because the plaintiff had not founded the claim on a written contract. That left clause (b)(ii) (debt arising on an enactment) as the only remaining possible basis for Order 37 applicability.
- Interpretation of Section 55, Sale of Goods Act: The court considered the plaintiff's reliance on Section 55 of the Sale of Goods Act (which permits the seller to sue for the price where property has passed and buyer refuses to pay). The court reasoned that Section 55 enables a remedy but the underlying cause of action — the right to recover the price — arises from the contract of sale and its breach, not from the enactment itself. The court explained the legal principle that a cause of action "arises under" an enactment only if it arises out of and depends on the enactment so that the plaintiff's right to recover stands on the enactment; that condition was not met here.
- Distinction from Chapter XIIIA and Mitra Mukherjee: The court compared Order 37 with Rule 1 of Chapter XIIIA of the Calcutta High Court Rules. Although wording appears similar, Chapter XIIIA's clause (i) covers contracts "express or implied" while Order 37's clause (i) covers only "written contracts." The Mitra Mukherjee decision, the court noted, arose under Chapter XIIIA and dealt with appealability of a security order; it did not decide classification under the specific clause and was therefore not a binding authority to extend Order 37 to implied-contract claims.
- Conclusion from statutory interpretation: Because the plaintiff did not base the claim on a written contract and because the claim did not arise on an enactment (in the requisite sense), the court concluded the suit did not fall within Order 37 as amended. Consequently, the earlier order of January 11, 1980 classifying the suit under Order 37 could not be sustained.
- Effect on the subsequent order: Given the primary order (January 11, 1980) was invalid, the court held the later order (September 23, 1981) granting leave to defend on furnishing security must also fail. The court also observed that the learned Judge who made the September 23 order had not apparently considered whether the defendant had shown a substantial defence — a point that would have been relevant had the suit properly been within Order 37.
Holding and Implications
Holding: Revision allowed; both impugned orders (dated January 11, 1980 and September 23, 1981) are set aside.
Implications (direct effect on the parties):
- The suit must proceed under the ordinary (non-summary) procedure rather than under Order 37.
- Because the defendant has already entered appearance (in response to the previous summons issued under Order 37), the defendant need not be served afresh.
- The defendant is to be directed to file his defence, if any, forthwith.
- There will be no order as to costs.
- The order is to be communicated to the court below forthwith.
Broader precedent: The opinion did not purport to lay down a new broad precedent beyond its statutory interpretation in these facts; its conclusions are limited to the interpretation and application of Order 37 and Section 55 of the Sale of Goods Act in the circumstances of this case.
B.C Chakrabarti, J.:— These two revisional applications, both at the instance of the defendant of Com. Suit No. 510 of 1979 of the City Civil Court, are directed against two Orders dated Jan. 11, 1980 and September 23, 1981.
2. The plaintiff opposite party instituted the above suit for recovery of price of goods sold and delivered together with interest, under O. 37, C.P.C The learned Registrar of that court being not certain whether such a suit could be instituted under O. 37, placed the matter before the Bench for orders. The court by its order dated January 11, 1980, held that the unpaid price of goods sold is in the nature of a ‘debt’ and the liability arises out of an enactment, viz. the Sale of Goods Act, Hence, in view of the amended provisions of O. 37 it was held that the suit came within the perview of that order.
3. Thereafter the summary procedure for suits under O. 37 was adopted and the summons having been served, the defendant petitioner entered appearance and filed an application under sub-rule (5), R. 3, O. 37 praying for leave to defend the suit unconditionally. The defendant claimed in the said application that the plaintiff's claim was fictitious and that the defendant had a substantial defence to put forth. If was also claimed that such a suit could not come within the meaning of O. 37 of the Code. This application for leave to defend was filed beyond time and the defendant also explained the reason for the delay and prayed for condonation of the same.
4. By the order dated Sept. 23, 1981 the learned Judge, held “the cause shown by the defendant for the delay in filing the application for leave is considered sufficient. Permission should therefore be granted to the defendant to defend the suit on furnishing security to the extent of Rs. 11,500.”
5. On such findings the learned Judge allowed the defendant's application and granted leave to defend the suit on condition of furnishing cash security of Rs. 11,500 which represented the total claim in the suit.
6. Being aggrieved the defendant filed a revisional application challenging the propriety and correctness of the Order. Subsequently a separate application was filed challenging the order dated January 11, 1980 by which order the suit was found to be governed by the provisions of Order 37 of the Code. This second application was obviously filed beyond time and was accompanied by an application under Section 5 of the Limitation Act.
7. All the applications Have been heard together on notice to and upon contest by the plaintiff opposite party.
8. In the application under Section 5 of the Limitation Act, it has been pleaded that the order dated January 11, 1980 was passed before the summons was served on the defendant, that the defendant was under the impression that the order was passed by the learned Judge in his administrative capacity and that while entering appearance the defendant had challenged the jurisdiction of the court, in passing the order permitting the suit to continue under the summary procedure. Having heard the learned Advocates, we are inclined to condone the delay in challenging the first order in the peculiar circumstances of the case.
9. The delay being condoned we are now concerned with the more important question namely whether such a suit really comes within the meaning of O. 37. The contention of the petitioner is that it does not while Mr. Tandon in opposing the applications contends that in view. Of the amended provisions of the Code, the suit falls well within the class of suits contemplated by Order 37.
10. Before coming to consider this aspect of the matter, we may at once point out that the second order dated September 23, 1981 suffers from an apparent infirmity in so far as the learned Judge does not appear to have at all considered whether or not the defendant had succeeded in making out a substantial defence at all. But this however is a question which we may be required to consider if at all it is found that the suit comes within the meaning of Order 37.
11. Admittedly the suit could not come under the provisions of Order 37 as it stood prior to amendment. By the amendment, the scope of Order 37 has been enlarged and extended to include the specified classes of suits enumerated in the amended provisions.
12. Sub-rule (2) of Rule 1 of Order 37 as it now stands reads as follows:
“(2) 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 a 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;
………………………”
13. It is obvious that clause (a) has no application. In invoking clause (b) sub-clause (i) also has to be excluded because it is nobody's case that the claim is founded on a written contract. Therefore the suit may be held to come under Order 37 only if if can be shown that the plaintiff is seeking to recover, by the suit, a debt or a liquidated demand in money arising on an enactment.
14. By referring to Section 55 of the Sale of Goods Act, Mr. Tandon contends that the claim arises under the provisions of the said Act. In fact that was the finding of the learned Judge when he passed the first order impugned before us. Section 55(1) of the said Act provides as follows “where under a contract of sale the property in the goods has passed to the buyer and the buyer wrongfully neglects or refuses to pay for the goods according to the terms of the contract, the seller may sue him for the price of the goods”. It is apparent upon a reading of the section aforesaid that the claim for the price of the goods really arises from the terms of the contract of sale. It would be unreasonable to hold that because the Act enables the seller to sue the buyer for the price, the claim must be held to arise on the enactment. That it is not so is apparent on the language of the section itself. A cause of action does not arise under or on an enactment unless it arises out of and depends on the enactment, so that the plaintiff must show both in stating and in proving his case that his right to recover stands on the enactment. In our view the claim of the nature as made in this suit cannot be said to arise on an enactment. It arises from the contract of sale and the breach thereof.
15. Mr. Tandon drew our attention to a somewhat analogous provision contained in Chapter XIIIA of the Rules of the High Court at Calcutta in its Original Side and argued upon a reference to the case of Mitra Mukherjee & Co. v. Ajit Kumar, AIR 1963 Cal 9, that a suit for recovery of price of goods sold and delivered really falls within the category of a summary suit contemplated by Chapter XIIIA of the Rules.
Rule 1 of Chapter XIIIA reads as follows:—
“1. The provisions of this Chapter shall not be applicable save to suits.—
(A) in which the plaintiff seeks to recover a debt or liquidated demand in money payable by the defendant with or without interest arising—
(i) on a contract express or implied; 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
………………………”
16. In spite of the seemingly similar words used in the Rule aforementioned and the provisions of Order 37 of the Code, there is a world of difference in so far as cl. (i) is concerned. Clause (i) of Order 37 relates to a suit arising on a written contract whereas cl. (i) of R. 1 of Chapter XIIIA relates to a suit arising on a contract express or implied. The case of Mitra Mukherjee & Co. (supra) has to be read in the context of this difference. This apart, that case, though arising out of a claim for recovery of price of goods sold and delivered, and brought under Chapter XIIIA of the High Court Rules (Original Side), considered the question of appealability of an order directing furnishing of security to the extent of the claim in the suit. It holds that such an order is appealable and if on appeal such an order is set aside, the decree that was drawn up pursuant to the non-compliance with the order, will automatically disappear. The decision did not consider under which particular clause of Rule 1, the suit was categorised as a summary suit. The trial proceeded on the footing that it was a summary suit. It is likely and that seems to be more plausible, that it was so held because the claim rested on a contract of sale which was implicit on the transaction itself. Since Chapter XIIIA also relates to suits arising on a contract express or implied, it may be that such a suit was found to be governed by Chapter XIIIA, of the Rules. But there is no such provision in Order 37 of the Code, Suits arising on an implied contract are outside its scope. It will bear repetition that in the suit before us the plaintiff does not appear to have founded his claim on a written contract. An implied contract is outside the perview of Order 37. We have found already that the claim of the plaintiff cannot be said to arise on an enactment. Therefore it is difficult to see how such a suit could come within the meaning of Order 37.
17. Such being our view, the order dated January 11, 1980 can hardly be sustained. If that order fails, and fail it must, the subsequent order dated September 23, 1981 must necessarily fail.
18. In the result the revisional applications succeed. Both the impugned orders are hereby set aside. The suit should now proceed under the ordinary procedure. Since the defendant has already entered appearance, although in response to a summons issued under Order 37, it will not be necessary to serve him afresh. The defendant may now be directed to file his defence. If any, straightway.
19. The applications are thus disposed of.
20. There will be no order for costs.
21. The order be communicated to the court below forthwith.
Anil K. Sen, J.:— I agree.
Revision allowed.
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