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Relevant Factual and Background Aspects:
The plaintiff-respondent No. 1 filed a summary suit under Order XXXVII of the Code of Civil Procedure, 1908 (CPC), claiming joint and several liability of the defendants for the unpaid amount of Rs. 89,50,244/- for the supply of steel. The plaintiff asserted that the defendant No. 2 (appellant) issued purchase orders on behalf of defendant No. 1, who was the ultimate beneficiary of the goods supplied. The defendant No. 1 had issued cheques towards part payment, but no intimation was received to present them, leading to the filing of the suit.
Trial Court’s Findings:
The Trial Court rejected the defendants' applications for leave to defend, holding that the defendants were merely shifting the burden upon each other. It observed that the defendant No. 2 acted as an agent of defendant No. 1, and both were under obligation to make payments for the goods supplied. The suit was decreed in favor of the plaintiff.
High Court’s Findings:
The High Court upheld the Trial Court's decision, stating that the summary suit was maintainable under Order XXXVII CPC. It noted that the invoices constituted written contracts, and the cheques issued by defendant No. 1 supported the plaintiff's claim of joint and several liability. The High Court dismissed the appeal filed by appellant-defendant No. 2.
Supreme Court’s Analysis:
The Supreme Court affirmed the maintainability of the summary suit. It held that the plaintiff was entitled to maintain the suit based on written purchase orders and invoices. The assertion of joint and several liability and the issuance of cheques by defendant No. 1 further supported the plaintiff's claim. The Court found no reason to interfere with the High Court's decision on this issue.
2. Entitlement of the Appellant-Defendant No. 2 to Leave to Defend:Trial Court’s Findings:
The Trial Court denied leave to defend to both defendants, concluding that no triable issues were raised. It held that the defendant No. 2 acted as an agent of defendant No. 1, and both were liable for the payment.
High Court’s Findings:
The High Court also denied leave to defend to the appellant-defendant No. 2, finding the defences frivolous and vexatious. It applied the principles from the case of IDBI Trusteeship Services Ltd. v. Hubtown Ltd., concluding that the appellant did not raise any genuine triable issues.
Supreme Court’s Analysis:
The Supreme Court examined the principles for granting leave to defend as laid down in Mechelec Engineers & Manufacturers v. Basic Equipment Corporation and IDBI Trusteeship Services Ltd. v. Hubtown Ltd. It emphasized that denial of leave to defend is an exception and should be applied only when the defendant has no substantial defence or raises no genuine triable issues.
The Court found that the appellant-defendant No. 2 had raised triable issues concerning its liability, asserting that it acted only as a contractor for defendant No. 1. The appellant argued that the payments made by defendant No. 1 indicated its liability. The Supreme Court noted that the High Court's conclusion that the defences were frivolous or vexatious lacked foundation and was assumptive.
The Court highlighted the significant feature that the High Court, in a separate judgment, had dismissed the appeal of defendant No. 1, finding its defence frivolous or vexatious based on the regular payments made to the plaintiff. This reasoning could not be applied to the appellant-defendant No. 2, who had raised genuine triable issues.
Conclusion:
The Supreme Court allowed the appeal, set aside the impugned judgments of the High Court and the Trial Court concerning the appellant-defendant No. 2, and granted leave to defend. The amount of Rs. 40,00,000/- deposited by the appellant was treated as a condition for leave to defend, and the Trial Court was directed to proceed with the trial concerning the appellant-defendant No. 2 in accordance with law.
No order as to costs of the present appeal.
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