Appeal dismissed: suit for balance payment on tax invoice maintainable under Order XXXVII CPC despite dishonoured cheque argument

The Delhi HC dismissed an appeal challenging maintainability of a suit under Order XXXVII CPC. The case involved a tax invoice for Rs. 13,54,554/- dated 03.10.2012, with Rs. 5,42,900/- already paid. The court held that a suit for the balance amount was maintainable under Order 37 CPC, rejecting appellant's argument that the suit was essentially based on dishonoured cheque proceeds. The court emphasized that pleadings must be read holistically, not piecemeal, and found no illegality in the trial court's order.

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1. ISSUES PRESENTED and CONSIDERED

The core legal questions considered by the Court are:

(a) Whether a suit filed under Order XXXVII of the Code of Civil Procedure (CPC) is maintainable when it is based on a balance amount due on an invoice after partial payment has been made by the defendant;

(b) Whether the suit based on a cheque dishonoured for part payment of the invoice amount can be entertained under Order XXXVII CPC for the balance amount;

(c) Whether the defence raised by the appellant, including claims of rectification promises and alleged complaints regarding software supplied, raise triable issues warranting leave to defend;

(d) Whether the assignment of rights from one plaintiff to another affects the maintainability of the suit under Order XXXVII CPC;

(e) The applicability and interpretation of precedents regarding suits under Order XXXVII CPC based on invoices, cheques, and statements of account.

2. ISSUE-WISE DETAILED ANALYSIS

(a) Maintainability of Suit under Order XXXVII CPC for Balance Amount on Invoice after Partial Payment

The legal framework involves the provisions of Order XXXVII CPC, which governs summary suits based on negotiable instruments, bills of exchange, promissory notes, or written contracts. The Court examined whether a suit for the balance amount due on an invoice, after part payment, can be treated as a suit under Order XXXVII.

Precedents relied upon include:

• Bijender Chauhan @ Bijender Kumar v. Financial Eyes (India) Ltd., where suits based on invoices were held maintainable under Order XXXVII CPC.
• Inventa Cleantec Pvt. Ltd. v. Amit Mudgal, where the Court held that suits under Order XXXVII based on invoices are maintainable even if the amount claimed is less than the invoice amount after adjusting payments.
• TTK Prestige v. India Bulls Retail Services Ltd., Bharat Forge Ltd. v. Onil Gulati, and Dura-Line India Pvt. Ltd. v. BPL Broadband Network Pvt. Ltd., which support the maintainability of such suits.
• IFCI Factors Ltd. v. Maven Industries Ltd., distinguished on facts, where a suit based on a statement of account was held not maintainable under Order XXXVII CPC, but the Court noted that suits based on invoices (written contracts) remain maintainable.

The Court interpreted that the suit in question was based on a written contract evidenced by the invoice dated 03.10.2012 for Rs. 13,54,554/-, out of which Rs. 5,42,900/- was paid. Hence, the suit for the balance amount is maintainable under Order XXXVII CPC. The Court emphasized that the plaint must be read as a whole, not piecemeal, rejecting the appellant's argument that the suit was essentially based on the balance of the cheque amount.

Key evidence included the tax invoice, delivery challan, signed installation and training reports, and payment records showing partial payment.

The Court concluded that the trial court rightly dismissed the application for leave to defend on this ground.

(b) Suit Based on Dishonoured Cheque and Partial Payment

The respondent's suit was founded on the dishonour of cheque no. 154189 for Rs. 13,35,000/-, with partial payment of Rs. 5,42,900/- made subsequently. The appellant contended that since part payment was made, the suit under Order XXXVII CPC is not maintainable for the balance amount.

The Court analyzed the nature of the cheque as a bill of exchange and the invoice as a written contract. It held that both documents support the maintainability of a summary suit under Order XXXVII CPC. The partial payment does not bar the suit for the balance amount.

The Court also noted the absence of any document disputing the validity of the invoice or the supply of software. The appellant's defence was characterized as "moonshine and unsubstantiated," lacking any credible evidence to raise triable issues.

(c) Defence of Rectification Promises and Alleged Complaints

The appellant argued that the partial payment was made on the promise that the respondent would rectify all problems with the software. The appellant also claimed that there were complaints from the end consumer (ITPO) regarding the software's performance.

The Court examined the evidence and found that the RTI reply indicated full payment from the end consumer in April 2013, implying that the work was complete and the software was accepted. The Court found the appellant's explanation for part payment implausible and did not find any supporting documents for complaints or claims of in-house training expenses borne by the appellant.

Therefore, the Court held that no triable issue was raised by the defence, and the application for leave to defend was rightly dismissed.

(d) Assignment of Rights and Its Effect on Maintainability

The appellant challenged the assignment of rights from plaintiff no. 2 to plaintiff no. 1, suggesting it might affect the suit's maintainability under Order XXXVII CPC.

The Court observed that the assignment was admitted by the appellant and supported by documents on record. It held that assignment of rights does not take the suit outside the purview of Order XXXVII CPC. Hence, this objection was unfounded.

(e) Precedential Interpretation and Application

The Court carefully distinguished the facts of the present case from IFCI Factors Ltd. v. Maven Industries Ltd., noting that the cited case dealt with suits based on statements of account rather than invoices or written contracts. The Court reaffirmed the principle that suits based on invoices (written contracts) and bills of exchange are maintainable under Order XXXVII CPC, even if the amount claimed is less than the invoice amount after adjusting payments.

The Court also cited Mist Avenue Pvt. Ltd. v. JMS Steels & Power Corporation & Ors. to support this stance.

3. SIGNIFICANT HOLDINGS

The Court held:

"An invoice acknowledged by the opposite party amounts to written contract and cheque is a bill of exchange. A suit under Order XXXVII CPC is maintainable on both these documents."

"Assignment of rights of plaintiff no. 2 in favour of plaintiff no. 1 is not an issue in dispute in this suit and does not bring it out of the purview of Order XXXVII CPC."

"The defence raised by the defendant is moonshine and unsubstantiated. Plaintiff no. 2 had supplied software to the defendant in terms of purchase order. The software was successfully installed and is being utilized by the end consumer i.e. ITPO. Defendant has failed to place on record any document which suggests that there were complaints from end consumer with respect to the software... No triable issue has thus been raised by the defendant."

"Admittedly, in the present case, there is on record a tax invoice bearing No. DL/2012-2013/0665 dated 03.10.2012 in the sum of Rs. 13,54,554/-, out of which an amount of Rs. 5,42,900/- was admittedly paid and thus suit for the balance of such tax invoice is maintainable under Order 37 CPC."

"The argument of learned counsel for the appellant viz. para 17 of the plaint reveals the suit is essentially based upon the balance of an impugned cheque, is however incorrect, as the plaint need to be read in total and not in piecemeal."

Accordingly, the Court dismissed the appeal and upheld the trial court's order rejecting leave to defend, confirming the maintainability of the suit under Order XXXVII CPC for the balance amount due on the invoice despite partial payment and the dishonour of the cheque.

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