TMI Blog2022 (1) TMI 1311X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. Leave to defend - HELD THAT:- 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 Court, while applying the principles for grant of leave to defend, as delineated in the case of IDBI Trusteeship (supra), the appellant was not entitled to the leave to defend. Thus, it could be seen that in the case of substantial defence, the defendant is entitled to unconditional leave; and even in the case of a triable issue on a fair and reasonable defence, the defendant is ordinarily entitled to unconditional leave to defend. In case of doubts about the intent of the defendant or genuineness of the triable issues as also the probability of defence, the leave could yet be granted but while imposing cond ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lant-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. Relevant factual and background aspects 3. The relevant factual and background aspects of the matter are as follows: 3.1. The plaintiff-respondent No. 1 filed the subject suit in terms of Order XXXVII of the Code of Civil Procedure, 1908 ( CPC ) while stating itself to be a registered partnership firm manufacturing and supplying a wide variety of iron and steel products. According to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t 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 name of plaintiff. It was also submitted that though the invoices were addressed to the defendant No. 2 but, they also mentioned C/o Mist , which substantiated the stand of the plaintiff. 3.6. The appellant-defendant No. 2 moved a separate application seeking leave to defend. It was contended in this application that the appellant had been working as civil contractor under the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion. 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 issue. The Trial Court also rejected the contention that the summary suit under Order XXXVII CPC was not maintainable as the plaintiff did not present the aforementioned cheques for encashment while observing that the suit was not merely based on the two cheques issued by the defendant No. 1, but was also based on the purchase orders and invoices raised for supply of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... endant 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 fact that there is a joint and several liability of the appellant/defendant no.2 with the respondent no.2/defendant no.1 will not mean that to enforce this joint and several liability, the subject suit could not have been filed both against the appellant/defendant no.2 and the respondent no.2 herein. Once liability is joint and several of the appella ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... riefly 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 the defendant No. 1, cannot be held liable for payment to the plaintiff, in terms of Section 230 of the Indian Contract Act, 1872 which provides that an agent cannot be held liable for the contract executed on behalf of the principal. The learned counsel has referred to the decision of this Court in the case of Prem Nath Mot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aintiff 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 on its behalf. As regards the payments earlier made by the defendant No. 1, the submission has been that such payments were made on the request of the defendant No. 2 when it had shown deficiency in cash flow and requested to make payment to the vendors including the plaintiff. 11.1. On behalf of the defend ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndant 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 Court, while applying the principles for grant of leave to defend, as delineated in the case of IDBI Trusteeship (supra), the appellant was not entitled to the leave to defend. 16. The High Court took note of the fact that the Trial Court relied upon the decision in Mechelec Engineer s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... therwise 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 defendant raises triable issues indicating that he has a fair or reasonable defence, although not a positively good defence, the plaintiff is not entitled to sign judgment, and the defendant is ordinarily entitled to unconditional leave to defend. 17.3. Even if the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... able 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 principal sum together with just and requisite interest. 17.2. Thus, it could be seen that in the case of substantial defence, the defendant is entitled to unconditional leave; and even in the case of a triable issue on a fair and reasonable defence, the defe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 Court dated 18.09.2017 by way of a separate appeal, being RFA No. 743 of 2018, that was considered and dismissed by the High Court by the judgment and order dated 05.09.2018. Interestingly, the High Court dismissed the said appeal with the finding that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Taking these factors into account and, looking to the nature of claim and the nature of defence sought to be raised as also the fact that the appeal filed by the defendant No. 1 had been dismissed by the High Court, we find it just and proper to grant leave to defend to the appellant-defendant No. 2 while leaving it open for the Trial Court to pass appropriate orders regarding treatment of the said amount of Rs. 40,00,000/- deposited by the appellant in terms of the order passed by this Court. 21.1. As the appellant is being granted leave to defend, we are not dealing with other contentions urged on behalf of the appellant concerning its liability; and all the relevant aspects are left open for consideration of the Trial Court. 22. Accordingly, this appeal succeeds and is allowed in the manner that impugned judgment and order dated 11.05.2018 as passed by the High Court and the impugned judgment and decree dated 18.09.2017 as passed by the Trial Court, insofar relating to the present appellant (defendant No. 2), are set aside; the appellant is granted leave to defend; and the amount of Rs. 40,00,000/- deposited by the appellant shall be treated to be a deposit towards the c ..... X X X X Extracts X X X X X X X X Extracts X X X X
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