K S WAHI Vs. GANGA EXPORTS

JUDGEMENT

(1.) This is an application for leave to defend filed by the defendants in a suit under Order XXXVII of the Civil Procedure Code filed by the plaintiff, Shri K.S. Wahi.

(2.) The case of the plaintiff averred in the plaint is as under: That the plaintiff had supplied raw cashew nuts to the defendants in the month of July 1997 by virtue of an agreement dated 6/07/1997 and as per the said agreement the goods were to be supplied from Abidjan (Ivory Coast) Port to Tuti Corin (India) Port having a gross weight of 48.52 MT and net weight 47,875 MT i.e. 64.5 bags containing 80 kgs. cashew nuts each. According to the agreement the defendants was to make payment of 91 % of the total value of the goods at the time of handing over the delivery order and the balance after taking delivery of the goods. The agreement also provided that if there was any damage beyond 10% as certified by SGS at loading port, the corresponding value of the raw nuts found damaged by sprouting, water damage or lose in weight as certified by the surveyors at landing port should be given by the sellers. On 1/08/1997 the said raw cashew nuts were delivered to the defendants at Tuticorin against invoice dated 6/07/1997 for a sum of Rs. 13,49,069.00. The plaintiff was given a cheque No. 695001 dated 31 st July 1997 for a sum of Rs. 12,27,994.00 on account by defendant No. 4. By the letter dated 31/07/1997 the plaintiff was assured that the cheque was by way of an asurance for payment. The plaintiff was assured that the payment will be made by a bank draft within a week of delivery of the goods. The plaintiff believed the defendants and waited. The goods supplied by the plaintiff were shifted to Panaruti. The plaintiff also reached Panaruti to receive payment. On 10/08/1997 the defendants gave a letter to the plaintiff seeking one month's time for making the entire payment of Rs. 13,49,069.00 but the plaintiff did not agree to grant any further time and threatened the defendants with a letter dated 10/08/1997 that he will report the matter to the police. On this a post dated cheque No. 947124 dated 31/08/1997 for a sum of Rupees ten lakhs was issued by the defendant No. 2 from his personal account to silence the plaintiff. The plaintiff was assured by defendant No. 2 that the cheque would be honoured. Defendant No. 2 also issued a letter certifying the good quality and quantity of the goods. The defendant No. 2 then sent a demand draft dated 26/08/1997 drawn on Karur Vyasa Bank, Karol Bagh New Delhi for a sum of Rs. five lakhs to the plaintiff. The plaintiff was further assured that the cheque No. 947124 dated 31/08/1997 for rupees ten lakhs is a guarantee for the balance payment. The plaintiff thereafter got the bank draft of Rs. five lakhs encashed and reminded the defendant about the balance payment due but the defendants did not make the balance payment of Rs. 8,49,069.00 which was the sum due after adjusting the sum of rupees five lakhs paid by the bank draft dated 26/08/1997. Consequently, the plaintiff .presented the cheque dated 31/08/1997 to his banker, Bank of Maharashtra, Karol Bagh, New Delhi on 4/10/1997 but the cheque was returned on 17/10/1997 with the remarks "insufficient funds". Accordingly a legal notice dated 22nd October 19.97 was issued to the defendants demanding the payment but without any result. The plaintiff also presented the cheque No. 695001 dated 31/07/1997 for a sum of Rs. 12,27,994 issued by defendant No. 4 and this time also the cheque was dishonoured. The plaintiff again served a legal notice to the defendants demanding the entire balance amount of Rs. 8,49,069.00 with interest and filed a criminal complaint under Section 138 of Negotiable Instrument Act which is pending in the Court of the Metropolitan Magistrate, Delhi where cognizance has been taken and summons issued to the defendant. Since cheque No. 947124 dated 31/08/1997 for Rs. 10 lakhs and cheque No. 695001 dated 31st July for Rs. 12,27,9947- were given by the defendants on an assurance to the plaintiff for liability of Rs. 13,49,0697- as per agreement dated 6/07/1997, and pursuant to the above assurance given by the defendants the defendants after receipt of the goods had also paid a sum of Rs. 5 lakhs and, therefore, the balance amount of Rs. 8,49,069.00 with interest was thus outstanding. The plaintiff had suffered a loss as his transaction was international in character and the rates for the dollar had in the meanwhile risen from Rs. 35.95 to Rs. 43 per dollar. Therefore the plaintiff laid the following claim in the plaint: Cost of the 47.875 MT of raw cashew nuts 13,49,069.00 Payment made vide DD drawn on Karur Vayaya Bank Ltd.', Karol Bagh, New Delhi. ' 5.00.000.00 Balance ' 08,49,069.00 Interest 02,11, 276.00 Cost of legal notices 4,400.00 Bank penalty for dishonouring of two cheques 5,630.00 Total 10.70.375.00 The plaintiff has also prayed for 18 per cent interest on the amount due and the. suit was thus filed under Order XXXVI I of the Code of Civil Procedure.

(3.) Consequent to the service of summons for judgment, an application being IA 12375 of 1999 was filed by the defendants for leave to defend and supported by Shri Sridhar Chitale, counsel for the defendant on the following pleas: (a) The first objection of the defendants was about the territorial jurisdiction of this Court on the plea that the contract was entered into at Kollam, Kerala and the delivery of the goods were taken by the defendants at Tuticurion Port, Tamil Nadu. It is stated that the goods were thereafter taken to Panruti, Tamil Nadu by the defendants and the plaintiff himself has admitted that the plaintiff went to Panruti for getting the payment. It was also said to be admitted that the plaintiff accompanied the goods to Panruti to take the demand draft. It is admitted by the defendants that the cheque No. 695001 dated 31/07/1997 for Rs. 12.27.994.00 was drawn on Indian Bank, Kollam and cheque No. 947124 dated 31/08/1997 for Rs. ten lakhs was drawn on Syndicate Bank, Mylapore, Madras and the demand draft for Rs. five lakhs was drawn on Karur Vyasya Bank Ltd., Chidambaram and was also sent to the plaintiff from Chidambaram itself. It is, therefore, stated that in view of the above no part of the cause of action has arisen in Delhi and the suit deserves dismissal on this ground itself. (b) On merits of the disputes it is stated that the cheques for Rs. 12,27,994.00 and Rs. 10 lakhs were not given in consideration for payment for the raw cashew nuts but only by way of a guarantee or assurance for performance of their part of the contract and after the surveyors report and detailed examination of the bags of the cashew nuts it was found that the raw cashew nuts were damaged and hence unprocessable and in a distress sale, which the plaintiff agreed to, a sum of Rs. 4,87,532.00 being the distress sale price was secured. It is further stated that the cheque for Rs. 12,27.9947- was not presented till the third week of October 1997, almost a period of two months after the goods were verified and found to be in bad condition. Similary the second cheque for Rs. ten lakhs dated 31/08/1997 was presented only on 4/10/1997. The late presentation of the cheques demonstrated that the cheques were not for payment but were by way of assurance. It is further stated that the plaintiff had given defective goods and had not performed his part of the contract and, therefore, the guarantee given to assure performance of such a contract by way of two cheques cannot be enforced. It is stated that the surveyors at the landing port clearly certified in their surveyor report dated 8/08/1997 (said to be received by the defendant on 11/08/1997) that the damage to the raw cashew nuts was beyond the acceptable 10 per cent at the landing port and the cheques were presented for encashment after the defendants realized that the raw cashew nuts supplied by the plaintiff were damaged beyond 50 per cent of the supplied goods and after the plaintiff had received the demand draft for a sum of Rs. five lakhs from the defendants. It is further stated that the defendants contacted the surveyor over the phone and were informed that the percentage of defective nuts were found to be in excess than that certified at the loading port and immediately upon receiving of such information the defendants conveyed the same to the plaintiff who was present in Panruti and, therefore, the plaintiff agreed to receive the payment after receipt of the Surveyor's Report. However, at the plaintiff's request a post dated cheque for Rs. ten lakhs as an assurance and not for any guarantee, was given on 10th August 1997 by the defendant No. 2 from his personal account. It was also stated that after getting the information from the surveyor on 8/08/1997 .the defendant got suspicious and opened all 645 bags individually which process is stated to have taken a month and was found that 50 per cent of the materials kept at the bottom of the bags were of extremely bad quality and not processable. It is further stated that the plaintiff agreed to the defendants disposing of the defective material which was done by a distress sale. The defendants had thus made the payment as per the realized value from the distress sale to the defendant. It is stated that one lakh of rupees were spent for this purpose by employing about 100 labourers and only Rs. 4,87,532.00 was received from the distress sale. Meanwhile the defendants had sent a payment of Rs. 5,00,000.00 to the plaintiff on 26/08/1997. The defendants thereafter sent a debit note on 5/09/1997 for the value of the nuts found damaged and requested the plaintiff to square up the accounts and return the cheques. It is further averred that the plaintiff had agreed that he will not present the cheques.