2003 (3) TMI 749 - HC - Indian Laws

Summary

Issues Involved:
1. Existence of a written contract.
2. Defendant's liability towards the sums claimed.
3. Enforceability of the letters as guarantees.
4. Non-impleadment of a necessary party.
5. Authority of Defendant No. 2 and the validity of cheques issued.
6. Suitability of a summary suit based on a running account.
7. Entitlement to interest claimed by the Plaintiff.

Detailed Analysis:

1. Existence of a Written Contract:
The primary issue was whether the parties had entered into a 'written contract' which forms the basis of the summary suit. The Plaintiff argued that the terms of engagement were detailed on the reverse side of each Invoice. The Court referenced previous judgments, including KLG Systems Ltd. vs. Fujitsu ICIM Ltd., and concluded that invoices/bills are considered 'written contracts' within the meaning of Order xxxvII of the C.P.C. The Court emphasized that repeated transactions under identical terms strengthen the presumption of a written contract, especially when both parties are commercial entities.

2. Defendant's Liability Towards the Sums Claimed:
The Court examined whether the Defendant's liability for the claimed sums was apparent. The approach from Mechalec Engineers & Manufacturers v. Basic Equipment Corporation was adopted, outlining scenarios where leave to defend should be granted or denied. The Court noted that the Plaintiff presented several invoices, letters acknowledging debt, and dishonoured cheques, which collectively demonstrated the Defendant's liability. The Defendant's failure to provide a substantial defense led the Court to lean towards granting the Plaintiff the right to sign judgment.

3. Enforceability of the Letters as Guarantees:
The Plaintiff submitted letters from Defendant No. 2, assuming liability for the debts. The Defendants argued that these letters did not constitute enforceable guarantees due to lack of consideration and unpaid stamp duty. However, the Court found that the letters, coupled with dishonoured cheques, indicated a clear acknowledgment of debt. The Court referenced Daya Chand Uttam Prakash Jain & Another v. Santosh Devi Sharma, supporting the view that such acknowledgments conform to the requirements of a written contract.

4. Non-impleadment of a Necessary Party:
The Defendants contended that M/s. Aqua Cross Enterprises Private Limited, a consignment agent, was a necessary party. The Court dismissed this argument, citing Chapter V and Section 213 of the Indian Contract Act, which state that the principal (Plaintiff) can be sued without involving the agent, as the Defendants were aware of the Plaintiff's principal status.

5. Authority of Defendant No. 2 and the Validity of Cheques Issued:
Defendant No. 1 claimed that Defendant No. 2's authority was revoked and thus any cheques issued were unauthorized. The Court found this defense unconvincing, noting that the cheques were dishonoured due to insufficient funds, not unauthorized issuance. The lack of action against Defendant No. 2 by Defendant No. 1 for alleged unauthorized actions further weakened this defense.

6. Suitability of a Summary Suit Based on a Running Account:
The Defendants argued that a summary suit under Order xxxvII C.P.C. is not permissible based on a running account. The Court rejected this contention, referencing the decision in Daya Chand Uttam Prakash Jain & Another v. Santosh Devi Sharma, which upheld the maintainability of such suits.

7. Entitlement to Interest Claimed by the Plaintiff:
The Plaintiff claimed interest at 24% per annum based on company policy. The Defendants challenged this as unilateral. The Court did not delve deeply into this issue at the current stage but decided that interest at 12% per annum should be calculated on the total amount of dishonoured cheques.

Conclusion:
The Court granted conditional leave to defend, requiring the Defendants to deposit Rs. 1.90 crores plus 12% interest per annum within four weeks. If the deposit is made, the Defendants are to file their Written Statements within four weeks, followed by the Plaintiff's Replication. Failure to deposit would result in the suit being decreed as prayed. The matter was renotified for consideration on 11th July 2003.