MANU/DE/0001/1992

Equivalent Citation: AIR1992Delhi1, (1990)ILR 2Delhi549

IN THE HIGH COURT OF DELHI

I. A. No. 1941 of 1989 and Suit No. 2545 of 1988
Decided On: 22.08.1990
Appellants:Punjab Pen House
Vs.
Respondent: Samrat Bicycle Ltd.
Hon'ble Judges/Coram:
R.L. Gupta, J.
Counsels:
For Appellant/Petitioner/plaintiff: H.L. Narula, Adv
For Respondents/Defendant: J. Lal, Adv.
Case Note:
The case dealt with the suit filed for the recovery of money under Order 37
Rule 1(2)(b) of the Civil Procedure Code, 1908 -The defendant had purchased
the goods on credit from the plaintiff and made the payments of bills - The
defendant in his objections, stated that the suit was not maintainable under
Rule 1 of Order 37 of the Code - It was specified that when the goods was
supplied through a bill on terms and conditions that was duly agreed to
between the parties, then in that case, it amounted to a written contract
between the parties - In view of the fact, it was ruled that the suit would be
covered by Clause (2) Sub-clause (b) of the Order 37 of the Code
ORDER
1. plaintiff has filed the present suit against the defendant under 0. 37 of the Code of
Civil procedure (hereinafter called 'Code) on the allegations that the plaintiff is a
registered partnership firm carrying on business under the name and style of M/ s.
Punjab Pen House with Sh. Mohan Lal Ghai as one of its registered partner. The
defendant had been purchasing goods on credit from the plaintiff from time to time and
had also been making the payment of the bills. The defendant is then alleged to have
purchased goods by three different bills dated 12-9-87, 17-11-87 and 19-11-87 for a
total amount of Rs. 6,17,945.80. The defendant made part payment of these bills
leaving a balance of Rs. 5,21,294.50 as on 30-7-1988. The defendant had also issued a
cheque dated 23-7-1988 drawn on the Punjab National Bank, Asaf Ali Road to wards
further part payment. But on presentation the cheque was dishonoured.
2. While changing and shifting its registered office from the Union Territory of Delhi to
the State of Uttar Pradesh, the defendant acknowledged in writing its liability for
payment of the aforesaid bills vide letter dated 20-2-1986. The defendant is also
alleged to have issued form 'H' under the Sales-tax Act for other bills but did not issue
the required form in respect of the aforesaid three bills. Therefore, he is also alleged to
be liable to pay sales-tax at the rate of 10% on the amount of these bills. In addition to
the above amounts, the plaintiff also claims interest at the rate of 24% per annum from
19-11-87 to 2-10-88 and also pending and future interest. The total claim of the

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plaintiff as detailed in para-6 of the plaint is for Rs. 6,70,479.50 P. It also includes cost
incurred in issuing a legal notice to the defendant.
3 . On being served, defendant moved present application for grant of unconditional
leave to defend the suit. It is stated in this application that this suit was not triable
under 0. 37 of the Code because it is neither based on any bill of exchange, Hundi or
promissory note nor for recovery of any debt or liquidated amount on the basis of any
written contract or any enactment or any guarantee as provided in 0. 37, R. 1 of the
Code. The defendant also claimed that the goods purported to be covered by the
aforesaid bills were in fact never received by the defendant at its place of business
namely Gauri Ganj where the plaintiff continues to make the supplies. The records of
the defendant maintained in this respect did not show if the goods covered by these
bills had actually been received. In, fact, the plaintiff had submitted duplicate bills at its
registered office and had assured the defendant that the goods had been supplied at its
factory site. It was on account of such an assurance of the plaintiff that the entry of the
bills was made by the defendant at its head office subject to clarification and intimation
from the factory site, if the goods covered by the aforesaid bills had been received or
not. The defendant had contemplated change of registered office from Delhi to Uttar
Pradesh and since at that time there were entries of the duplicate bills given to them by
the plaintiff that an entry was made in the books whereas, in fact, goods were never
received. Thus the defendant denied its liability to pay any amount to the plaintiff
including sales-tax, legal notice charges or interest.
4 . The plaintiff controverter the allegations of the defendant by filing a counter
affidavit. It was alleged that defense taken up was absolutely false and the goods
covered by the aforesaid bills were actually supplied to the defendant and since the
defendant had not. disclosed any substantial defense for leave to defend the application
should be rejected.
5. I have heard arguments advanced by learned counsel for the parties. One of the main
contentions raised on behalf of the defendant is that suit is not covered by any of the
provisions of R. I of 0. 37 of the Code. He cited a case of West Bengal Decorating Co. v.
Damodar Das Daga, MANU/WB/0095/1982 : AIR1982Cal386 wherein, according to the
learned counsel, it was held that a suit for recovery of price of goods sold and delivered
did not come within the meaning of 0. 37 of the Code. I have carefully gone through
this authority and 1, am of the view that it does not apply to the facts of the present
case. Initially, learned single Judge of that Court had admitted the suit under 0. 37 of
the Code. The High Court in the revision ultimately held that the suit actually could be
deemed to be based on an implied contract between the parties and not under any
express contract and, Therefore, it was outside the scope of 0. 37 of the Code.
However, in the present case there is a written contract between the parties upon the
basis of which the goods were allegedly supplied to the defendant. The terms of that
contract are provided in the bills themselves which are at pages 16, 17 and 18 of the
documents file and are as follows:
"(1) We can demand payment through Hundi, Bank Draft or VPP as and when
required by us.
(2) All the goods are purchased and sent at your entire risk and according to
your order.
(3) Interest will be charged from date of purchase at the rate of 24% per
annum on outstanding amount.

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 (4) We are not responsible for any loss or damage (that occurs in transit of the
goods sent by us through any traffic).
Therefore, it cannot be said that it was a case simplicities of the supply of goods by the
plaintiff to the defendant without any written terms and conditions between the parties.
In the case of Mrs. Sushila Mehta v. Sh. Bansi Lal Arora, (1982) 1 Delhi 320, this Court
dealt with a suit under 0. 37, R. I of the Code based on a receipt given by the payee for
allotment of shares in a proposed private limited company. A similar objection was
taken as in the present case. While dealing with this argument, this Court held, "the
plaintiff paid the application money for allotment of shares. The defendant accepted it.
Though it is true that defendant No. 2 came into existence a few months later. The
payment of Rs. 1 lac by the plaintiff as application money and its acceptance by the
defendant constitute a contract. It may be labelled as a receipt but that does not mean
that it is not a contract." Similarly in the present case, goods were supplied by plaintiff
to the defendant through the aforesaid three bills. Here even the terms and conditions
agreed to between the parties are given in these bills. Moreover, these bills bear
endorsement on behalf of the defendant about the receipt of the goods. Therefore, when
the goods are supplied through a bill on certain terms and conditions duly agreed to
between the parties, there is no escape from the conclusion that it amounts to a written
contract between the parties. Therefore, I am of the view that the suit is covered by cl.
(2) sub-cl. (b) of 0. 37 of the Code according to which the plaintiff seeks to recover a
debt or liquidated amount in money payable by the defendant with or without interest
arising on written contract. Learned counsel for the plaintiff also tried to cover the
present suit on the clause according to which recovery of a debt or liquidated money,
with or without interest is based on an enactment. In view of the aforesaid conclusion
by me that the suit is based on a written contract between the parties, I need not deal
with this argument in this case.
6 . The second limb of argument of the defendant is that actually goods were never
supplied to the defendant and the defendant had made an entry in its books of accounts
on an assurance given on behalf of the plaintiff that the goods had actually been
supplied in the factory of the defendant. This defense seems to be false on the face of
it. The reason is that these bills are dated 12-9-87, 17-11-87 and 19-11-87. There are
endorsements made on these bills on behalf of the defendant about the receipt of these
goods. The defendant then issued a special notice to the plaintiff under R. 36(i) & (ii) of
the Companies Act to the following effect:-
"To
M/s. Punjab Pen House,
82/30, Moti Nagar,
Najafgarh Road, New Delhi.
Sub: Special notice to Creditor in pursuance of Rule 36(2) of the Company Law
Board (Bench) Rules, 1975 regarding proposed alteration of the Company's
Memorandum of Association.
Dear Sir,
The Company proposes to make an application to the Company Law Board
(Bench) New Delhi under S. 17 of the Companies Act, 1956 (I of 1956) seeking
confirmation of the alteration in the Memorandum of Association of the
Company in terms of the special resolution passed by the company at its
General Meeting held on 10th February, 1988, a copy of which is enclosed, to

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 enable the company to shift its Regd. Office from the Union Territory of Delhi to
the State of Uttar Pradesh.
"2. The Company owes you a sum of Rupees 6,14,829.50 (Rupees six lacs
Fourteen thousand Eight hundred twenty nine) made up of Rs. 6,14,829.50
(Rupees Six lacs Fourteen thousand Eight hundred twenty nine) as principal as
on 20-2-1988 on account of .....
3 . If you desire to oppose the confirmation of the proposed alteration, please
deliver or cause to be delivered or send by Regd. Post your objections
supported by affidavit, original to the Bench Officer (Company Law Board) at
Shastri Bhavan, 5th Floor,' A 'Wing ,Dr. R. P. Pd. New Delhi-1 and a copy
thereof to the Company's Regd. Office mentioned above, within 21 days from
the date of receipt of this notice failing which please note that you will be
deemed to have consented to the alteration and the matter will be disposed of
ex parte accordingly.
Yours faithfully,
for Samrat Bicycles Limited
Sd/
(Sunita Mathur)
Asstt. Company Secretary
This letter is dated 20th February, 1988 i.e. it was written by the defendant after
complete three months of the alleged supply of goods by the plaintiff to the defendants.
If actually the goods had not been received by the defendant, as is now claimed, I fail
to see any earthly reason for the defendant to acknowledge that the defendant owed a
sum of Rs. 6,14,829.50 P. to the plaintiff as on 20-2-1988. The debt is then actually
proved by further conduct of the defendant in issuing an account payee cheque dated
23-7-1988 to the plaintiff for a sum of Rs. 25,000/- which on presentation was
dishonoured. This cheque is also filed by the plaintiff along with other documents. The
plaintiff then issued a legal notice to the defendant dated 14th September, 1988
mentioning about the purchase of goods on credit by the defendant and further that as
on 30-7-1988 a sum of Rs. 5,21,294.50 P. was still outstanding. The plaintiff further
mentioned in this notice that the defendant had acknowledged its liability for payment
of the amount vide his letter dated 20-2-1988. There was not a whisper from the
defendant and defendant preferred to keep silent even to this notice. All these
circumstances, Therefore, indicate that the defense now raised by the defendant about
the non-receipt of goods is merely illusory or moonshine. In fact, the defendant has no
defense to the claim made by the plaintiff. The plaintiff claims lesser amount than the
one acknowledged in writing by the defendant because the plaintiff says that defendant
had made part payments leaving an outstanding balance of Rs. 5,21,294.50 P. In
addition to that amount the plaintiff legitimately claims sales-tax at the rate of 10% and
also interest at the rate of 24% per annum on outstanding amount which is one of the
terms agreed to between the parties. The claim of Rs. 1100/towards issuance of legal
notice is also not on the higher side.
7. Taking all the circumstances into consideration, Therefore, I am of the view that this
suit is fully covered by 0. 37, R. I of the Code and the defendant has no plausible
defense to the claim made by the plaintiff. Therefore, the application for leave to defend
is hereby dismissed and the plaintiff is granted a decree for the recovery of Rs.
6,70,000/- costs and pending and future interest at the rate of 18% per annum.
8. Application dismissed.

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