2017 (5) TMI 1721 - HC - Indian Laws

Court grants leave to defend with deposit condition, upholds invoices as contracts, addresses dual capacity issue.

The court granted leave to defend to the defendants, imposing a condition to deposit Rs. 2,77,26,742 within six weeks. It held that the invoices formed ... Condonation of delay of 25 days in filing the leave to defend - plea of defendants is that there is no written contract between the parties and, therefore, the case is not covered under Order 37 of CPC - HELD THAT:- There is no dispute to the fact, in the present case, that the defendants had placed an order upon the plaintiff and as per the practice, followed by both for a long period, the defendants paid advance money equivalent to 50% of the total value of the goods for which invoices were raised. There is also no dispute that the goods were supplied under these invoices to the defendant and thereafter commercial invoices were raised by the plaintiff. On examination of the relevant document, it is clear that the contentions and arguments of plaintiff find support from these documents. The alleged Distributorship Agreement (Article 2.03 & Appendix A) clearly envisages that it was not an exclusive Distributorship Agreement and was valid for 2 years only. The defendants have failed to place on record any other documents to show that the plaintiff or its sister concern had entered into an exclusive Distributorship Agreement with it. Defendants cannot withheld the money with the object of pressurising the plaintiff to enter into any agreement. Once it has, against invoices, released the advance money (50% of the value) and received the good without any demur or complaint, the defendants are liable to pay the balance due amount raised by plaintiff against commercial invoices. The invoices, as is clear from the document itself, are a valid contract between the parties. It contains offer, acceptance and the consideration of such agreement as defined in Section 2(h) of the Indian Contract Act, 1872. The defendants have also argued that where there is a violation of the legal provisions, a decree in terms of Order 37 CPC cannot be passed and even the suit is liable to be dismissed. It is argued that the plaintiff had failed to comply with provisions of Order 37 Rule 3(4) read with Appendix B Form No. 4A as summons of judgment is not supported by the affidavit of the plaintiff and a defective summons of judgment was served on defendants and defect cannot be cured and so suit be treated as normal suit and no decree can be passed under Order 37 CPC. In the present case, as is evident, the plaintiff even did not make any effort to substitute the affidavit of its Advocate with that of its own - it is apparent from the totality of facts and circumstances of the case, more particularly the issue that the summons for judgments suffers with legal infirmity, it is a fit case to grant leave to defend to the defendants. Application disposed off. Issues Involved:1. Leave to defend under Order 37 Rule 3(5) CPC.2. Condonation of delay under Section 5 of the Limitation Act.3. Validity of the suit under Order 37 CPC based on invoices.4. Alleged exclusive distributorship agreement and its breach.5. Dual capacity of an advocate acting as a constituted attorney.6. Compliance with Order 37 Rule 3(4) CPC and Appendix B Form No. 4A.Detailed Analysis:Issue 1: Leave to Defend under Order 37 Rule 3(5) CPCThe defendants filed applications for leave to defend the suit, arguing that the plaintiff's suit based on invoices does not fall under the provisions of Order 37 CPC. They contended that there was no written contract, and the invoices alone do not constitute a contract. They also raised multiple defenses, including the existence of an exclusive distributorship agreement and alleged breaches by the plaintiff. The court, however, found that the invoices formed a valid contract and that the defendants had acknowledged their liability in emails. The court granted leave to defend but imposed a condition that the defendants deposit the claimed amount of Rs. 2,77,26,742 with the Registrar General within six weeks.Issue 2: Condonation of Delay under Section 5 of the Limitation ActThe defendants sought condonation of a 25-day delay in filing the application for leave to defend. They attributed the delay to the bulky record and court closures during Deepawali. The court condoned the delay, accepting the reasons provided by the defendants.Issue 3: Validity of the Suit under Order 37 CPC Based on InvoicesThe plaintiff argued that the suit was maintainable under Order 37 CPC as the invoices constituted written contracts. The court agreed, citing previous judgments that supported the view that invoices containing detailed terms and conditions are valid contracts under Order 37 CPC. The court rejected the defendants' reliance on the Simba case, distinguishing it based on the facts.Issue 4: Alleged Exclusive Distributorship Agreement and Its BreachThe defendants claimed that the plaintiff had breached an exclusive distributorship agreement by appointing another dealer. The plaintiff countered that there was no exclusive agreement and that any such agreement had expired. The court examined the relevant documents and found that the distributorship agreement was not exclusive and had expired. The court held that the defendants could not withhold payment to pressurize the plaintiff into an exclusive agreement.Issue 5: Dual Capacity of an Advocate Acting as a Constituted AttorneyThe defendants argued that the summons for judgment was defective as it was supported by an affidavit from the plaintiff's advocate, not the plaintiff. They cited cases where courts held that an advocate could not act in dual capacity. The court agreed, noting that the affidavit of the advocate did not satisfy the requirements of Order 37 Rule 3(4) CPC. The court emphasized that compliance with procedural requirements is mandatory.Issue 6: Compliance with Order 37 Rule 3(4) CPC and Appendix B Form No. 4AThe court found that the summons for judgment did not comply with Order 37 Rule 3(4) CPC, as it was not supported by the plaintiff's affidavit. The court cited the Satish Kumar case, which held that such a defect is incurable. Consequently, the court treated the suit as a normal suit and granted leave to defend to the defendants, subject to the condition of depositing the claimed amount.Conclusion:The court granted leave to defend to the defendants, conditional upon depositing Rs. 2,77,26,742 within six weeks. The court emphasized the importance of procedural compliance under Order 37 CPC and found that the invoices constituted valid contracts. The court also addressed the issue of dual capacity of an advocate and the alleged exclusive distributorship agreement. The applications for leave to defend and condonation of delay were disposed of accordingly.