2013 (7) TMI 1250 - HC - Indian Laws

Defendant's leave to defend dismissed in summary suit for Rs. 30,97,959 goods recovery under Order 37 CPC

Bijender Chauhan Versus Financial Eyes (India) Ltd.

Delhi HC dismissed defendant's application for leave to defend in a summary suit under Order 37 CPC. Plaintiff sought recovery of Rs. 30,97,959/- based on ... - The core legal questions considered in this judgment are:1. Whether the plaint complies with the mandatory procedural requirements under Order 37 Rule 2 of the Code of Civil Procedure (CPC) for a summary suit.2. Whether the defendant has established a prima facie defence based on the alleged supply of defective goods by the plaintiff, sufficient to grant leave to defend under Order 37 Rule 3(5) CPC.3. Whether a suit based on invoices and accompanied by a statement of account qualifies as a suit under Order 37 CPC or whether such suits based on statements of account are excluded from summary procedure.4. Whether invoices constitute 'written contracts' within the meaning of Order 37 CPC, thereby permitting a summary suit based on such invoices.5. The applicability of Sections 41 and 42 of the Sale of Goods Act, 1930, regarding the buyer's right to inspect goods and the deemed acceptance of goods if no rejection is communicated within a reasonable time.Issue 1: Compliance with Order 37 Rule 2 CPCThe defendant contended that the plaint did not comply with the mandatory requirement of making an inscription immediately below the suit number and title that the suit is under Order 37 CPC, thus invalidating the summary suit procedure.The Court examined the plaint and found that the heading explicitly stated: 'Suit under Order 37 Rule 2 of CPC for recovery of Rs. 30,97,959/- alongwith interest @ 18% on behalf of plaintiff.' This was held to satisfy the procedural requirement.The Court concluded that the contention was devoid of merit and the plaint complied with Order 37 CPC.Issue 2: Prima Facie Defence Based on Alleged Defective GoodsThe defendant asserted that the plaintiff supplied poor quality poly-pouches and cartons, causing losses and damage to the defendant's business reputation. The defendant relied on communications from its buyers and letters allegedly sent to the plaintiff pointing out defects and claiming damages.The Court scrutinized these contentions and evidence, noting:The defendant had received and utilized the goods over a period from April 2010 to January 2011 without any immediate rejection or protest.The defendant made substantial payments towards the invoices, indicating acceptance of goods.The communications relied upon by the defendant were not proven to have been dispatched to the plaintiff, lacked specificity regarding defects, and were contradicted by subsequent acceptance of further goods without protest.The Court relied on Sections 41 and 42 of the Sale of Goods Act, which provide that the buyer must inspect goods within a reasonable time and reject defective goods; failure to do so results in deemed acceptance.Precedents were cited, including judgments holding that a buyer who accepts goods and makes part payment cannot withhold the balance on the ground of alleged defects discovered later.Consequently, the Court held the defendant's defence of defective goods to be a sham, illusory, and without merit, not warranting leave to defend.Issue 3: Suit Based on Statement of Account and Its Maintainability under Order 37 CPCThe defendant argued that the suit was based on a statement of account which was unsigned and thus did not represent a liquidated sum payable, making the suit unsuitable for summary procedure under Order 37 CPC.The Court analyzed the plaint and found that the suit was primarily based on 20 invoices raised by the plaintiff, which detailed the goods supplied and amounts claimed. The statement of account was ancillary and did not form the basis of the claim.Relying on precedents, the Court distinguished cases where suits solely based on statements of account were held not maintainable under Order 37 CPC, clarifying that the present suit was based on invoices, which are binding written contracts.The Court rejected the defendant's contention and held that the suit was maintainable under Order 37 CPC.Issue 4: Whether Invoices Constitute Written Contracts under Order 37 CPCThe defendant contended that even if the suit was based on invoices, Order 37 CPC would not apply.The Court referred to established precedents holding that invoices/bills are 'written contracts' within the meaning of Order 37 CPC and suits based on such invoices for recovery of liquidated sums are maintainable as summary suits.The invoices in the present case contained full details of quantity and price, and no material facts therein were disputed.The Court held that the suit was properly instituted under Order 37 CPC based on these invoices.Issue 5: Application of Sections 41 and 42 of the Sale of Goods Act, 1930The Court examined the defendant's claim of defective goods in light of Sections 41 and 42:Section 41 grants the buyer the right to inspect goods upon delivery and report defects within a reasonable time.Section 42 deems the buyer to have accepted the goods if no rejection is communicated within a reasonable time and the buyer retains or uses the goods.The Court found that the defendant had ample opportunity to inspect and reject the goods but failed to do so within a reasonable time.The defendant's use of the goods for packaging and export was inconsistent with rejection and ownership of the plaintiff.Precedents were cited to reinforce that the defendant was deemed to have accepted the goods and could not withhold payment on grounds of alleged defects discovered belatedly.ConclusionsThe Court applied the principles governing leave to defend under Order 37 Rule 3(5) CPC, as summarized in the Supreme Court's decision in Mechalec Engineers & Manufacturers v. Basic Equipment Corporation:If the defendant shows a good or bona fide defence, leave to defend must be granted.If the defence is illusory, sham, or practically moonshine, leave to defend may be refused.The Court found that the defendant's defence was illusory and not bona fide. Granting leave to defend would only prolong litigation through frivolous pleas.The defendant failed to establish any plausible triable issue or defence on the merits.Significant Holdings'The defence of the defendant about the quality of goods supplied by the plaintiff being defective is a completely sham defence and absolutely without any merit.''Invoices/bills are 'written contracts' within the contemplation of Order XXXVII Rule 2 CPC.''The defendant is deemed to have accepted the goods in terms of the Sale of Goods Act by utilizing the goods and failing to reject them within a reasonable time.''The plaint has complied with the mandatory provisions of Order 37 Rule 2 CPC.''The present suit is maintainable as a summary suit under Order 37 CPC based on the invoices raised by the plaintiff.''Granting leave to defend would merely enable the defendant to prolong a litigation by raising frivolous and untenable pleas.'The Court dismissed the defendant's application for leave to defend and decreed the suit for Rs. 30,97,959/- along with pendente lite interest at 10% per annum and costs in favour of the plaintiff.