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Delhi High Court Clarifies Whether Summary Suit is Maintainable for Recovery Claims Based on Invoices and Ledger Accounts

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Case Title: Modern Construction Company Delhi v. Hitech Enterprises 

RFA(COMM) 76/2023 & CM APPL. 20581/2023  

Date of Decision: 24th August, 2023   

Coram: Hon’ble Mr. Justice Suresh Kumar Kait and Hon’ble Ms. Justice Neena Bansal Krishna  

 

Introduction 

The case revolves around an appeal filed in the High Court of Delhi against a judgment and decree passed in a suit under Order XXXVII of the Code of Civil Procedure, 1908 (CPC). 

Factual Background 

Hitech Enterprises, the respondent, a registered Partnership Firm engaged in trading and supplying construction material, including aggregates, supplied goods to Modern Construction Company Delhi, the appellant, pursuant to an Agreement. The goods were supplied from 03.08.2017 to 14.01.2019 through 280 sale invoices, totaling Rs. 72,19,425.50/-. The appellant made a partial payment of Rs. 48,78,736/- until 29.08.2020 but failed to pay the remaining principal amount of Rs. 23,40,689.50/- and the accrued interest. The respondent filed a suit under Order XXXVII Rule 3(5) of the Code of Civil Procedure, 1908, seeking recovery of Rs. 53,69,918.70/- along with interest at 18% per annum. The appellant, Modern Construction Company Delhi, filed the appeal against the respondent, Hitech Enterprises, after the lower court decreed the suit in favor of the respondent. 

Key Legal Issues 

The main legal issues revolved around the maintainability of the suit under Order XXXVII of CPC, whether the claims were based on individual invoices or a ledger account, jurisdiction of the court, the validity of the claimed interest rate of 18% per annum, and the quality of goods supplied. 

Court’s Analysis and Observation 

The Court analyzed whether the suit was based on invoices or a ledger account. It cited precedents to establish that invoices could be treated as written contracts, making suits under Order XXXVII CPC maintainable. However, the distinction between a “mutual account” and a “running and non-mutual account” was crucial. It emphasized that a mutual account involves reciprocal demands, while a non-mutual account reflects one party’s obligations.

The court examined whether the appellant had paid against specific invoices or made general payments. It clarified that a suit based on invoices could be maintainable under Order XXXVII CPC, but if the suit relied on a running and non-mutual account, it might not be maintainable under this order. The Court explored sections of the Indian Contract Act, 1872, relating to appropriation of payments and determined that the respondent’s claim was based on the ledger account, reflecting non-mutual transactions. It explained that when a debtor makes a payment without specifying the debt, the creditor may apply it at his discretion. The court noted that the respondent had appropriated payments in its ledger account based on these principles. The Court also addressed jurisdictional concerns raised by the appellant. 

 
Decision of the Court 

The Court held that the suit was based on the ledger account and not specific invoices. As a result, the claim was not suited for summary procedure under Order XXXVII of CPC. The Court allowed the appellant’s Leave to Defend, thereby setting aside the previous judgment and decree. It held that a part of the cause of action arose in Delhi, conferring territorial jurisdiction. The case was deemed to involve triable issues related to payment, jurisdiction, interest rate, and quality of goods. The parties were directed to appear before the Commercial Court for further proceedings. 

Conclusion 

This case highlights the importance of distinguishing between suits based on invoices and those relying on running and non-mutual accounts. It also underscores the relevance of territorial jurisdiction, appropriation of payments, and the principles of Sections 59 and 60 of the Indian Contract Act in commercial disputes. The court’s thorough examination of these aspects serves as a guiding precedent for similar cases involving recovery claims based on invoices and ledger accounts. 

 

“PRIME LEGAL is a full-service law firm that has won a National Award and has more than 20 years of experience in an array of sectors and practice areas. Prime legal fall into a category of best law firm, best lawyer, best family lawyer, best divorce lawyer, best divorce law firm, best criminal lawyer, best criminal law firm, best consumer lawyer, best civil lawyer.” 

Written by – Ananya Chaudhary 

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Bombay High Court granted a summary judgment in favour of the plaintiff due to the defendant’s non-appearance and non-response in a case under S.138 of NI Act

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Title: Gini Tex Private Limited v. Soham Fashion & Ors.

Decided on: 29TH AUGUST, 2023.

COMMERCIAL SUMMARY SUIT NO. 1383 OF 2019

CORAM: KAMAL KHATA, J.

Facts:

The plaintiff initiated legal proceedings in the Commercial Division under Order XXXVII of the Code of Civil Procedure 1908 (“CPC”), seeking a summary judgment against the defendants. The plaintiff’s claim amounted to Rs. 45,18,600/-, along with an interest rate of 24% per annum from March 31, 2019, until the complete realization of the claim. The basis of the claim was the sale and delivery of goods, against which cheques were issued.

Issues:

The central issues in the case were:

  1. Whether the defendants were liable to pay the claimed amount to the plaintiff for the goods supplied?
  2. Whether the plaintiff was entitled to a summary judgment under Order XXXVII of the CPC?

Contentions:

The plaintiff, represented by Ms. Puthran, argued that they were a manufacturer/supplier of fabrics, and the defendants regularly procured goods from them. An agreed credit period was established, and delayed payments incurred interest charges. The defendants accepted the goods and issued cheques, but these cheques were dishonoured, leading to payment demands and the issuance of notices under Section 138.

The plaintiff highlighted that the defendants had admitted outstanding amounts in a letter and had even proposed a payment schedule. However, the defendants failed to honour their commitments.

The defendants failed to respond to the legal proceedings despite being served with a writ of summons, leading to the plaintiff’s assertion that they were entitled to a summary judgment under Order XXXVII Rule 2 (3) of the CPC.

Decision:

The suit was decreed in favour of the plaintiff for the sum of Rs. 45,18,600/- along with the specified interest. The defendants were required to pay the plaintiff’s legal costs, amounting to Rs. 50,000/-, in addition to any shortfall resulting from the refund of court fees. The plaintiff was entitled to a refund of court fees as per the High Court Rules. The awarded costs would not accrue any interest. The court directed that the decree be drawn up promptly. The plaintiff was granted the liberty to execute the decree without waiting for its official sealing. The summary suit was concluded with the aforementioned terms.

In conclusion, the court granted a summary judgment in favour of the plaintiff due to the defendant’s non-appearance and non-response. This judgment entailed the payment of the claimed amount along with interest, legal costs, and other financial considerations, as outlined in the court’s decision.

“PRIME LEGAL is a full-service law firm that has won a National Award and has more than 20 years of experience in an array of sectors and practice areas. Prime legal fall into a category of best law firm, best lawyer, best family lawyer, best divorce lawyer, best divorce law firm, best criminal lawyer, best criminal law firm, best consumer lawyer, best civil lawyer.”

Written by- Aparna Gupta, University Law College & Dept. of Studies in Law

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