TaxTMI 
TaxTMI 
2022 (1) TMI 1311
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....ondent No. 2 was arrayed as defendant No. 1. 2.1. It may be noticed at the outset that the Trial Court had passed the judgment and decree dated 18.09.2017 with its finding that no triable issues had been raised by the defendants and hence, they were not entitled to the leave to defend. In the impugned judgment and order dated 11.05.2018, the High Court has affirmed the decree in relation to the appellant-defendant No. 2. Hence, the questions involved in the present appeal are confined to the prayer for leave to defend sought for by the appellant. However, it is also relevant to notice that the other defendant (who is respondent No. 2 herein) had also filed an appeal against the said judgment and decree dated 18.09.2017 (being RFA No. 743 of 2018), which was dismissed by the High Court by its separate judgment and order dated 05.09.2018. The said judgment and order dated 05.09.2018 is not under challenge before us but, we shall refer to the same at the relevant juncture and in relation to the implications of the findings therein. 2.2. For the purpose of continuity of narration and discussion, the parties shall also be referred herein with reference to their status in the suit. Re....
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.... the purchase orders were issued only by the defendant No. 2; that the invoices in question were raised by the plaintiff in the name of the defendant No. 2; that neither the purchase orders nor the invoices were bearing the signatures of the defendant No. 1; and that all the dealings were between plaintiff and defendant No. 2, where no legal liability was to be discharged by defendant No. 1. It was contended that the defendant No. 1 was rather a stranger to the contract in question. 3.5. In opposition to the contentions sought to be urged by the defendant No. 1, the plaintiff contended, inter alia, that the application filed by defendant No. 1 was an attempt to shy away from its responsibility by shifting the same on the defendant No. 2. In support of this contention, the plaintiff placed its ledger account as also the statement of account of defendant No. 1 which, according to the plaintiff, demonstrated that the payment of goods delivered to the defendant No. 2 had been made by the defendant No. 1. It was contended by the plaintiff that if there was no agreement between the plaintiff and the defendant No. 1, there was no reason for the defendant No. 1 to issue the cheques in the....
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....liable to pay the costs of goods, material or articles procured and arranged for by the contractor. The Trial Court further observed that the purchase orders had been placed by defendant No. 2 on plaintiff at the instance of defendant No. 1 and the goods were indisputably supplied at the site address of defendant No. 1, who was the ultimate beneficiary of the transaction. It was also noted that the bills raised for such supplies had been liquidated by the defendant No. 1. The contention urged on behalf of the defendant No. 1 that there was no privity of contract was rejected with reference to the facts that the defendant No. 1 had been making payments to the plaintiff; and reference was made to various payments made through cheques and demand drafts from time to time. The Trial Court observed that the transactions clearly indicated that the materials were being supplied by the plaintiff to the site address of defendant No.1 and the defendant No. 1 had been making payments directly to the plaintiff. Hence, the Trial Court held that the defence sought to be raised by the defendant No. 1, of want of privity of contract, was without any substance and was not giving rise to any triable ....
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....iable and the suit was maintainable under Order XXXVII CPC because the invoices for their total value were written contracts, containing specified amount of liability of the appellant-defendant No. 2 for payment to the plaintiff-respondent No. 1. As regards the cheques in question, the High Court observed that though the cheques were issued by the defendant No. 1, yet a suit under Order XXXVII of CPC would lie against the defendant No. 2 because there was no such requirement in Order XXXVII CPC that the cheques which are issued for payments ought to be of the person against whom the liability is claimed. The High Court further observed that as per Section 2 (d) of Indian Contract Act, 1872 consideration under a contract need not flow/pass only between the parties to a contract. The High Court also observed that even if the cheques were not presented, the suit would be maintainable under Order XXXVII CPC because there was no such requirement that the cheque ought to be dishonored for filing a summary suit. The High Court further observed on the maintainability of the summary suit even when there was a joint and several liability of the defendants in the following words: - "9. The ....
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.... a genuine triable issue, because if there was no liability of the appellant/defendant no. 1 then, where was the question of making payments regularly by the appellant/defendant no.1 to the respondent no.1/plaintiff." Rival Contentions 8. Reverting to the case at hand, which pertains to the appellantdefendant No. 2, we may briefly take note of the rival submissions in this appeal. 9. Learned senior counsel for the appellant-defendant No. 2 has contended that liability for payment against the material supplied by the plaintiff was not that of the appellant-defendant No. 2 but had been of the defendant No. 1, which was evident from the fact that the plaintiff itself had pleaded that the liability to pay for the supplies made by it was that of the defendant No. 1. Thus, according to the learned counsel, the impugned decree proceeds rather contrary to the plaintiff's own case and cannot be sustained. 9.1. Learned counsel for the appellant has further submitted that the appellant was only acting as an agent of the defendant No. 1, as the agreement for supply of steel was between plaintiff and defendant No. 1; and the appellant, having issued the purchase orders only on behalf of th....
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....he liability upon each other. 11. In different dimensions to the above, the learned counsel appearing for the defendant No. 1 (respondent No. 2 herein) has contended that under the construction agreement executed between the defendant No. 2 and defendant No. 1, the payments toward supply of material by the plaintiff were to be made by the defendant No. 2. The learned counsel would submit that the appellant-defendant No. 2 had placed purchase orders with the plaintiff and invoices were raised by the plaintiff in the name of defendant No. 2 and hence, there was no privity of contract between the plaintiff and defendant No. 1. The mere fact that the defendant No. 2 was carrying out the work of the defendant No. 1 and the invoices mentioned the name of the project where the goods were to be delivered would not make the defendant No. 1 liable to make payment to the plaintiff. It has also been submitted that there was no role of the defendant No. 1 because neither its consent was taken at the time of execution of agreement for the supply of goods nor the rates of steel were discussed; and the purchase orders and invoices also do not bear the name of the defendant No.1 or any signatures ....
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....t take away the entitlement of the plaintiffrespondent No. 1 to maintain the summary suit in terms of Order XXXVII CPC. This is apart from the fact that while asserting joint and several liability of the defendants, the plaintiff has also relied upon the cheques said to have been issued by defendant No. 1, which were allegedly not presented as per the request of the said defendant No. 1. 14.2. In the overall facts and circumstances of the case, the contention against maintainability of the summary suit in terms of Order XXXVII CPC cannot be accepted and to that extent, we find no reason to consider any interference in the decision of the High Court. However, the question still remains as to whether the appellant is not entitled to leave to defend? 15. In regard to the question of leave to defend, as noticed, the High Court has observed that the appellant would not be entitled to such leave because no triable issues were arising out of the defence sought to be taken by the appellant. The High Court has also observed that the defences were frivolous and vexatious; and were raised only in order to deny the just dues of seller of the goods, i.e., the plaintiff. According to the High ....
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.... has no defence or the defence is illusory or sham or practically moonshine then although ordinarily the plaintiff is entitled to leave to sign judgment, the court may protect the plaintiff by only allowing the defence to proceed if the amount claimed is paid into court or otherwise secured and give leave to the defendant on such condition, and thereby show mercy to the defendant by enabling him to try to prove a defence." 16.2. In the case of IDBI Trusteeship (supra), this Court modulated the aforementioned principles and laid down as follows: - "17. Accordingly, the principles stated in para 8 of Mechelec case [Mechelec Engineers & Manufacturers v. Basic Equipment Corpn., (1976) 4 SCC 687] will now stand superseded, given the amendment of Order 37 Rule 3 and the binding decision of four Judges in Milkhiram case [Milkhiram (India) (P) Ltd. v. Chamanlal Bros., AIR 1965 SC 1698 : (1966) 68 Bom LR 36] , as follows: 17.1. If the defendant satisfies the court that he has a substantial defence, that is, a defence that is likely to succeed, the plaintiff is not entitled to leave to sign judgment, and the defendant is entitled to unconditional leave to defend the suit. 17.2. If the....
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.... before the Court. 17.1. As noticed, if the defendant satisfies the Court that he has substantial defence, i.e., a defence which is likely to succeed, he is entitled to unconditional leave to defend. In the second eventuality, where the defendant raises triable issues indicating a fair or bonafide or reasonable defence, albeit not a positively good defence, he would be ordinarily entitled to unconditional leave to defend. In the third eventuality, where the defendant raises triable issues, but it remains doubtful if the defendant is raising the same in good faith or about genuineness of the issues, the Trial Court is expected to balance the requirements of expeditious disposal of commercial causes on one hand and of not shutting out triable issues by unduly severe orders on the other. Therefore, the Trial Court may impose conditions both as to time or mode of trial as well as payment into the Court or furnishing security. In the fourth eventuality, where the proposed defence appear to be plausible but improbable, heightened conditions may be imposed as to the time or mode of trial as also of payment into the Court or furnishing security or both, which may extend to the entire prin....
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....iff about joint and several liability of the defendants, the High Court concluded that the defences were frivolous and vexatious. The Trial Court had observed that the defendants failed to raise any triable issues. It appears that while recording such conclusions, the Trial Court as also the High Court totally omitted to consider that the appellant-defendant No. 2 has been contesting its liability with the assertion that it had only been the contractor executing the work of defendant No. 1. Even as per the plaint averments and plaintiff's assertions, the defendant No. 1 had made various payments from time to time against the supplies of the building material. The cheques, allegedly towards part payment against the supplies made by the plaintiff, had been issued by the defendant No. 1. In the given set of circumstances, the conclusion of the High Court that the defence raised by the appellant was frivolous or vexatious could only be treated as an assumptive one and lacking in requisite foundation. 19. At this juncture, we may also refer to a significant feature of the case that the defendant No. 1 (respondent No. 2 herein) had questioned the same judgment and decree of the Trial Co....