IN THE HIGH COURT OF GUJARAT AT AHMEDABAD SPECIAL CIVIL APPLICATION No. 1362 of 2004 For Approval and Signature:
HONOURABLE MR.JUSTICE J.B.PARDIWALA =================================================== ======
1 Whether Reporters of Local Papers may be allowed to see the judgment ?
2 To be referred to the Reporter or not ?
3 Whether their Lordships wish to see the fair copy of the judgment ?
Whether this case involves a substantial question of law
4 as to the interpretation of the constitution of India, 1950 or any order made thereunder ?
5 Whether it is to be circulated to the civil judge ?
=================================================== ====== GUJARAT ELECTRICITY BOARD - Petitioner(s) Versus SHIV CORPORATION - Respondent(s) =================================================== ====== Appearance :
MR MD PANDYA for Petitioner(s) : 1, MR KM PATEL for Respondent(s) : 1, =================================================== ====== CORAM : HONOURABLE MR.JUSTICE J.B.PARDIWALA Date : 01/08/2012 CAV JUDGMENT Gujarat Electricity Board seeks to challenge the impugned order passed by the Auxiliary Chamber Judge, Court No.15, City Civil Court, Ahmedabad dt. 11th October, 2003 in Summary Suit No.4165/2002 whereby the Court below granted conditional leave to defend to the petitioner-original defendant on condition of deposit of Rs.17,36,975/-. The Court below also permitted the respondent herein – original plaintiff to withdraw 50% of the said amount on furnishing Bank Guarantee for the said amount and also directed the petitioner to deposit the said amount within stipulated period.
2. Facts relevant for the purpose of deciding this petition may be summarized as under :
2.1) The petitioner is the original defendant, respondent is the original plaintiff who has instituted a Summary Suit No.4165/2002 under Order-
37 of C.P.C. to recover Rs.21,01,740/-. The case of the respondent-original plaintiff as set-out in the plaint is that the petitioner company is engaged in generating and distributing electricity. The erstwhile company, namely, Gujarat Electricity Board (GEB) had issued notification inviting tenders for supply and deliver of certain electrical goods under rate contract which was to subsist for 45 days. The respondent –original plaintiff had submitted his bid. Upon evaluation of all tenders received, respondent’s tender being the lowest was accepted. The accepted tender was to subsist minimum for a period of 45 days with an option to place a repeat order. It is the case of the respondent-original plaintiff that he was under contractual commitment to supply contractual quantity pursuant to the purchase orders placed from time to time. Contract between the parties stood concluded upon placement of order by the Board and its acceptance by the respondent.The respondent-original plaintiff has, in plaint, given various particulars about 26 orders placed by the Board in pursuance to the orders placed between 22/11/2001 to 29/11/2001 and supplied between 17/12/2001 to 26/12/2001 with total amount of invoice to the tune of Rs.17,36,975/-.The respondent-plaintiff supplied the goods to the Board but the Board refused to make payment on the ground that the Regional Stores Officer, Navsari one Shri F.J.Rana in collusion with the respondent and the sister concern of the respondent had practiced fraud and irregularities with respect to the transactions of purchases. It appears that the sum and substance of the defence of the petitioner is that the goods which were supplied by the respondent to the Board were not worth Rs.17,36,975/-, but they were worth only around Rs.7,01,025/-. Thus, according to the petitioner Board, the respondent is not entitled to Rs.16,43,900/-.
3. The respondent-plaintiff therefore, had to prefer a Summary Suit for recovery of Rs.21,01,740/- including interest.The Court below took into consideration the fact that the Board had already received the materials supplied by the respondent-plaintiff in the month of December, 2001 and after a period of 4 months, i.e. in April, 2002 decided not to accept the material and to return the same to the plaintiff. The Court below also took into consideration that the materials were checked by the Stores Officer and the Executive Engineer of the Board and cleared the same certifying it to be in order. Under such circumstances the Court below took the view that the defence of the petitioner-board could be termed as illusory and moonshine. The Court, therefore, granted conditional leave to defend to the petitioner-board asking the board to deposit a sum of Rs.17,36,975/- out of which the respondent- plaintiff has been permitted to withdraw 50% of the said amount on furnishing the bank guarantee of the said amount. The Court further directed that the petitioner shall also file his written statement within four weeks.
4. Being aggrieved and dissatisfied, this petition under article-227 of the Constitution has been preferred by the petitioner-original defendant.
5. Mr.Mayur Pandya, learned counsel appearing for the petitioner–original defendant vehemently submitted that the Court below failed to take into consideration the following triable issues at the time of hearing of the Leave to Defend Motion :
a) whether on the facts and circumstances of the case the Stores Officer had acted beyond the scope of his power and authority under law in issuing and accepting tenders in question and placing orders.
b) Whether on the facts and circumstances of the case on the record the Stores Officer and the respondent and sister concerns of the respondent had colluded together and played fraud in the matter of invitation and acceptance of tender and placing orders.
c) Whether the actions on the part of Stores Officer just few days prior to his retirement keeping in view the circumscribed authority approval of the Superintending Officer of the Board, and as per the Accounts Manual and Stores Purchase Code and Power delegations is legal, authorized and binding upon the Board or do they smack of there being transgression of power and illegality on the part of the Stores Officer as also collusion and fraud on the part of the Stores Officer and the respondent and other sister concerns to confer wrongful gain on the respondent and cause wrongful loss to the Board.
d) Whether when the Superintending Engineer whose power to purchase under circumstances for emergency purchases is circumscribed to Rs.3,00,000/- and that of Executive Engineer is Rs.1,00,000/- and when Regional Stores Officer has no independent power to purchase and the circle office can only effect purchases as per approval or within the authority delegated or approval granted to him was upto Rs.3,00,000/- action of Regional Stores Officer in inviting and accepting tenders and placing orders for Rs.16,00,000/-
was legally authorized and binding to the Board or was a step in the collusion and fraud on the part of Regional Stores Officer and respondent and its sister concerns.
e) Whether the non-issuance of corrigendum to the notice inviting tender after the unauthorized contravention breach being pointed-out and after the Regional Stores Officer having agreed to publish the same and continuing to process the tender further are indicative of the collusion and fraudulent desire.
f) Whether the way in which less than time as stipulated in the Accounts Manual was given, the way in which Siddhi Corporation’s tender were dealt with and kept out of consideration contrary to stipulation under the Board’s Purchase Code, the opening of tenders on 29/11/2002 prior to retirement of Shri Rana and not dispatching the letter to Siddhi Corporation about acceptance of tenders and placement of orders on the same date ignoring tender of M/s.Siddhi Corporation are significant aspects while considering illegality fraud and collusion as alleged.
g) Whether the conduct on the part of the respondent and sister concerns as is brought out strengthen the case of fraud and collusion.
h) Whether on comparison of rates quoted for the material in question being 3 times higher than market rate and accordingly tenders and placing orders by the Regional Stores Officer with the respondents and sister concerned indicate fraud-collusion with a view to cause wrongful loss to the Board and let the respondent and sister concerns earn wrongful gain.
i) Whether placement of the repeat orders after 9 months to the respondent/sister concern and limited orders on local dealers out of above parties on eve of retirement by said Stores Officer are relevant aspects in considering the aspect relating to fraud and collusion.
j) Whether in light of the facts’ and circumstances as set out the affidavit in support of prayer to grant unconditional leave to defend as summarized in Paras-3.2 to 3.11 the petitioner can be said o have a good defence or at least can be said to have raised triable issues and has a fair-bonafide reasonable defence entitling grant of unconditional leave to defend.
6. Mr.Pandya further submitted that it is a settled legal position that if the defendant discloses such facts as may be deemed sufficient to entitle him to defend, that is to say, although the affidavit does not positively and immediately make it clear the he has a defence, yet, shows such state of facts leading to the inference that at the trial he may be able to establish a defence to the plaintiff’s claim, the plaintiff is not entitled to judgment and the defendant is entitled to leave to defend but in such a case, the Court may in its discretion impose condition as to the time or mode, but not as to payment into court or furnishing security.
7. Mr. Pandya further submitted that impugned order suffers from the errors apparent from the face of the record. In support of his contentions Mr.Pandya relied upon–(i) AIR 1977 SC -577, (ii) AIR 1990 SC -2218 and (iii) 2002 (2) GLH -673.
8. On the other hand learned Senior Counsel Mr.K.M. Patel appearing for the respondent, vehemently submitted that no error, much less an error of law could be said to have been committed by the Court below in passing the impugned order warranting any interference at the end of this Court in exercise of supervisory jurisdiction under Article-227 of the Constitution. Mr.Patel submitted that his client had filled-in 16 different tenders for four items, out of which 11 were accepted by the Board in respect of requirement of five Divisions for which tenders were invited. Mr.Patel further submitted that the goods were supplied by the respondent to the petitioner-board between 17/12/2001 to 26/12/2001 whereas Shri F.J.Rana against whom allegations are leveled by the petitioner-board having acted in collusion with the respondent retired from service on 30/11/2001. According to Mr.Patel if Shri Rana has exceeded his authority in inviting tenders as pleaded by the petitioner, then under such circumstances the Company would not have accepted the material supplied between 17/12/2001 to 26/12/2001. Not only that in respect of goods supplied, the petitioner sent Store Receipt notes on 5/1/2002 signed by three different authorities certifying that the material was received in good condition and was in accordance with the specification laid down in the purchase order.
9. Mr.Patel invited my attention to the letter dated 4/5/2002 Annexure-R/2 written by the Executive Director to the respondent in which it is categorically stated that the competent authority has issued directions to the Superintending Engineer (O&M) Surat for making payment after verifying the quality of material.
10. Mr. Patel, therefore, urged that the judgment and order of the learned Chamber Judge granting conditional leave to defend to the petitioner is just and reasonable. There is no jurisdictional infirmity in the impugned order and the defence which has been put forward by the petitioner could not be termed as bonafide and genuine. Mr.Patel submitted that the petition being devoid of any merit deserves to be rejected. Mr.Patel in support of his contentions relied upon –(i) AIR 2009 SC -320 and (ii) 2002(1) SCC -319.
11. Before entering into the merit of this petition, I would like to look into the case law relied upon by learned counsel appearing for the petitioner in M/s Mechale Engineers and Manufacturers v. M/s. Basic Equipment Corporation, reported in AIR 1977, SC 477, whereby the Supreme Court laid down principles to be followed while considering the question of granting leave to defend. The Supreme Court made the following observations in part-8 :
“8. In S. Kiranmoyee Dassi v. Dr. J. Chatterjee, (1945) 49 Cal WN 246 at p. 253, Das, J., after a comprehensive review of authorities on the subject, stated the principles applicable to cases covered by Order 37, C.P.C. in the form of the following propositions (at p. 253):
"(a) If the defendant satisfies the Court that he has a good defence to the claim on its merits the plaintiff is not entitled to leave to sign judgment and the defendant is entitled to unconditional leave to defend.
(b) If the defendant raises a triable issue indicating that he has a fair or bona fide or reasonable defence although not a positively good defence the plaintiff is not entitled to sign judgment and the defendant is entitled to unconditional leave to defend.
(c) If the defendant discloses such facts as may be deemed sufficient to entitle him to defend, that is to say, although the affidavit does not positively and immediately make it clear that he had a defence, yet, shews such a state of facts as leads to the inference that at the trial of the action he may be able to establish a defence to the plaintiff's claim the plaintiff is not entitled to judgment and the defendant is entitled to leave to defend but in such a case the Court may in its discretion impose conditions as to the time or mode of trial but not as to payment into Court or furnishing security.
(d) If the defendant has no defence or the defence set up is illusory or sham or practically moonshine then ordinarily the plaintiff is entitled to leave to sign judgment and the defendant is not entitled to leave to defend.
(e) If the defendant has no defence or the defence is illusory or sham or practically moonshine then although ordinarily the plaintiff is entitled to leave to sign judgment, the Court may protect the plaintiff by only allowing the defence to proceed if the amount claimed is paid into Court or otherwise 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."
In Mrs. Raj Duggal v. Ramesh Kumar Bansal, reported in AIR 1990 SC 2218, the Supreme Court made the following observations in para-3 :
“Leave is declined where the Court is of the opinion that the grant of leave would merely enable the defendant to prolong the litigation by raising untenable and frivolous defences. The test is to see whether the defence raises a real issue and not a sham one, in the sense that if the facts alleged by the defendant are established there would be a good or even a plausible defence on those facts. If the Court is satisfied about that leave must be given. If there is a triable issue in the sense that there is a fair dispute to be tried as to the meaning of a document on which the claim is based or uncertainty as to the amount actually due or where the alleged facts are of such a nature as to entitle the defendant to interrogate the plaintiff or to cross-examine his witnesses leave should not be denied. Where also, the defendant shows that even on a fait probability he has a bona fide defence; he ought to have leave. Summary judgments under Order 37 should not be granted where serious conflict as to matter of fact or where any difficulty on issues as to law arises. The Court should not reject the defence of the defendant merely because of its inherent implausibility or its inconsistency.”
In State of Saurashtra v. Ms. Ashit Shipping Services (p) Ltd and another, reported in 2002(2)GLH 673 SC, the Supreme Court made the following observations in para-15 :
“15. Mr. Chidambaram relied upon the case of Oil and Natural Gas Corpn. Ltd. v. SBI, Overseas Branch, reported in (2000) 6 SCC 385. In this case the question was whether leave to defend could have been granted in a summary suit based on an unconditional Bank guarantee. This Court held that such Bank guarantees must be honoured unless fraud had been played. This Court held that in the absence of any fraud leave to defend should not be granted in cases of unconditional Bank guarantees. There can be no dispute with the above proposition. However, this decision is based on the law regarding unconditional Bank guarantees. Courts have consistently held that unconditional Bank guarantees must be honoured by the Banks. In the present case, it is not clear whether the document is an indemnity or a guarantee. In any event, there is no unconditional Bank guarantee. Even if the document is held to be a guarantee it is only on proof of loss. Also in this case fraud has been alleged. Thus the authority is of no assistance to the 1st Respondent.”
12. I shall now look into the judgments relied upon by learned counsel appearing for the respondent in Ouseph Mathal and others v. M. Abdul Khadir, reported in 2002(1) SCC 319, the Supreme Court explaining the scope of interference in a petition under Article 227 of the Constitution made the following observations in para-4 :
“4. It is not denied that the powers conferred upon the High Court under Articles 226 and 227 of the Constitution are extraordinary and discretionary powers as distinguished from ordinary statutory powers. No doubt Article 227 confers a right of superintendence over all courts and tribunals throughout the territories in relation to which it exercises the jurisdiction but no corresponding right is conferred upon a litigant to invoke the jurisdiction under the said Article as a matter of right. In fact power under this Article cast a duty upon the High Court to keep the inferior courts and tribunals within the limits of their authority and that they do not cross the limits, ensuring the performance of duties by such courts and tribunals in accordance with law conferring powers within the ambit of the enactments creating such courts and tribunals. Only wrong decisions may not be a ground for the exercise of jurisdiction under this Article unless the wrong is referable to grave dereliction of duty and flagrant abuse of power by the subordinate courts and tribunals resulting in grave injustice @page-SC113 to any party.”
In Southern Sales and Services and others v. Sauermilch Design and Handles Gmbh, reported in AIR 2009 SC 320, the Supreme Court made the following observations in para-17 :
“17. In the instant case, the High Court did not lack jurisdiction to pass an order with regard to the subject matter of dispute, though the order itself may be incorrect. There is, therefore, little scope for this Court to interfere with the directions given to the appellant herein to deposit in Court 55% of the admitted dues as a pre-condition to grant of leave to defend a suit. The judgment of the High Court impugned in this appeal does not warrant any interference since the trial Court had exercised its jurisdiction under the second proviso to sub-rule (5) of Rule 3 of Order 37 of the Code. The earlier concept of granting unconditional leave when a triable issue is raised on behalf of the defendant, has been supplemented by the addition of a mandate, which has been imposed on the defendant, to deposit any amount as admitted before leave to defend the suit can be granted. The question as to whether leave to defend a suit can be granted or not is within the discretionary powers of the High Court and it does not appear to us that such discretion has been exercised erroneously or with any irregularity which warrants interference by this Court.”
13. Having heard the learned counsel for the respective parties and having gone through the materials on record, the only question that falls for my consideration in this petition under Article-227 of the Constitution is as to whether the Court below committed any jurisdictional error or error going to the root of the matter in granting conditional leave to defend to the petitioner.
14. The picture that emerges from the materials on record is that the petitioner was in need of electrical equipments and appliances being a company engaged in generating and distributing electricity. The respondent-original plaintiff is also in the business of supply of electrical articles. The company floated tenders. The tenders which were filled-in by the respondent were accepted by the company. It appears that and it is not in dispute that the goods were supplied by the respondent to the petitioner board between 17/12/2001 to 26/12/2001. The allegation levelled by the company against its employee Shri F.J.Rana as regards colluding with the respondent herein by inflating the price of the goods does not appear to be of any substance. It needs to be stated that Mr.Rana retired in the month of November, 2001. Under such circumstances I find merit in the submission of Mr.Patel appearing for the respondent that the Board ought not to have accepted the material supplied by its client between 17/12/2001 to 26/12/2001. Not only that, but in respect of goods supplied, the petitioner also sent Store Receipt Notes on 5/1/2002 signed by three different authorities certifying that the material was received in good condition and was in accordance with the specifications laid down in the purchase order. These facts are not disputed by the petitioner. The only issue raised by the petitioner is that the value of the goods is just Rs.7.00 lacs and not Rs.17 lacs. I am of the view that having accepted the goods and also having used the goods, it would not be proper for the company to say that they would not make payment as per the tender conditions and agreement. It also appears that a letter was addressed by the petitioner on 19/10/2001 to the Stores Officer so far as the powers of the Superintendent to issue advertisement is concerned. However, it appears that thereafter no steps were taken by the petitioner company to see that the Stores Officer is proceeded with for the alleged act of misconduct. This aspect has also been taken into consideration by the learned Judge in Para-9 of its order.
15. Thus, in the overall view of the matter I find no jurisdictional infirmity in the impugned order passed by the Court below. No error, much less an error of law could be said to have been committed by the Court below in passing the impugned order warranting any interference at my end in exercise of Supervisory jurisdiction under Article-227 of the Constitution. For the reasons stated aforesaid this petition fails and is hereby rejected with no order as to cost. The interim relief granted, if any, stands vacated forthwith.
(J.B.PARDIWALA, J.) Ashish N.