2018 (3) TMI 558 - HC - Indian Laws

Whether the suit is not maintainable under Order XXXVII CPC because in the agreement dated 6.5.2013 there is no amount which is stated of the sum of ₹ 38,45,961/- and which amount the plaintiff claims to have paid as the sales tax dues to the appropriate authority on account of failure of the defendant to supply the C-Forms? - Held that - it is an undisputed position that in terms of Clause 8 of the agreement dated 6.5.2013 the defendant undertook to supply the necessary C-Forms to the plaintiff - on the one hand the agreement dated 6.5.2013 requires the defendant to submit the C-Forms and which C-Forms were not supplied, on the other hand the monetary value of the C-Forms though not specifically stated in the agreement dated 6.5.2013, however the crystallized amount of ₹ 38,45,961/- being the amount paid by the plaintiff to the sales tax department is not disputed by the defendant in the present leave to defend application - as per Clause 8 of the agreement dated 6.5.2013 the liability of differential tax will be borne by the defendant and this is in so many clear words provided in this Clause 8 - the contention of the defendant is rejected that plaintiff is not entitled to the amount of ₹ 38,45,961/- as claimed in the present suit. The subject suit is a commercial suit under the Commercial Courts, Commercial Division and Commercial Appellate Division of High Courts Act, 2015. Section 35 CPC has been amended by the legislature with respect to commercial cases filed under this Act. Courts are mandated to impose actual costs as also costs under different headings including for the defendant frivolously defending the suit. Accordingly while dismissing the leave to defend application, and in view of the fact that plaintiff has been harassed by the frivolous defences of the defendant who in spite of his liability is failing to pay the requisite amount to the plaintiff, the leave to defend application is dismissed with actual costs. The leave to defend application is dismissed.

Summary

Issues Involved:
1. Delay in filing the application.
2. Claim for money decree under Order XXXVII CPC.
3. Non-supply of C-Forms and differential tax/VAT claim.
4. Termination of business relationship and settlement agreement.
5. Defenses raised by the defendant for leave to defend.
6. Applicability of Sections 91 and 92 of the Indian Evidence Act.
7. Limitation period for filing the suit.
8. Grant of leave to defend based on Supreme Court precedents.
9. Costs and interest awarded to the plaintiff.

Detailed Analysis:

1. Delay in Filing the Application:
The court noted that there was no opposition to the application for delay, and thus, it was allowed and disposed of.

2. Claim for Money Decree under Order XXXVII CPC:
The plaintiff sought a money decree for ?1,13,10,000/- as the balance amount payable under a written contract dated 6.5.2013, and an additional ?38,45,961/- for differential tax/VAT due to the defendant's failure to supply C-Forms.

3. Non-Supply of C-Forms and Differential Tax/VAT Claim:
The plaintiff argued that the defendant was obligated to provide C-Forms under the Central Sales Tax Act, 1956, as per the agreement dated 6.5.2013. The defendant failed to provide these forms, leading the plaintiff to pay ?38,45,961/- to the sales tax authorities. Clause 8 of the agreement explicitly stated that the defendant would be liable for differential sales tax if C-Forms were not supplied.

4. Termination of Business Relationship and Settlement Agreement:
The business relationship between the parties was terminated on 30.11.2012. Subsequently, a full and final settlement agreement was entered into on 6.5.2013, where the defendant agreed to pay ?1,30,00,000/- to the plaintiff. The defendant paid only ?65,00,000/-, leaving a balance of ?65,00,000/-, which was claimed in the suit along with the differential tax amount.

5. Defenses Raised by the Defendant for Leave to Defend:
The defendant sought unconditional leave to defend, raising several defenses:
- The plaintiff had to collect goods worth ?4 crores from the defendant's warehouse and promised discounts.
- The plaintiff could not claim ?38,45,961/- as it was not a liquidated liability in the agreement.
- Payment was contingent on the defendant selling the stocks.
- The plaintiff's fault in obtaining C-Forms.
- The suit was barred by time.
- Lack of territorial jurisdiction, which was later given up by the defendant.

6. Applicability of Sections 91 and 92 of the Indian Evidence Act:
The court held that the terms of the agreement dated 6.5.2013 could not be contradicted by oral evidence as per Sections 91 and 92 of the Indian Evidence Act. The defendant's claims of additional agreements or terms were legally barred and rejected.

7. Limitation Period for Filing the Suit:
The court rejected the defendant's argument that the suit was barred by limitation. The suit was filed within three years from the date when the amounts became payable under the agreement (31.5.2013), thus within the limitation period.

8. Grant of Leave to Defend Based on Supreme Court Precedents:
The court referred to the Supreme Court judgment in IDBI Trusteeship Services Ltd. Vs. Hubtown Ltd., which outlined principles for granting leave to defend. The court found the defendant's defenses to be frivolous, vexatious, and not raising any genuine triable issues, thus dismissing the leave to defend application.

9. Costs and Interest Awarded to the Plaintiff:
The court mandated the imposition of actual costs on the defendant for frivolously defending the suit. The plaintiff was awarded a decree for ?65 lacs plus ?38,45,961/- with 18% per annum simple interest till payment, considering the commercial nature of the transaction and the defendant's failure to pay the dues.

Conclusion:
The court dismissed the defendant's leave to defend application, decreed the suit in favor of the plaintiff for the claimed amounts, and awarded costs and interest, emphasizing the defendant's liability under the agreement and the frivolous nature of the defenses raised.