MANU/DE/0692/2006

Equivalent Citation: II(2006)BC250, 128(2006)DLT51, 2006(87)DRJ799

IN THE HIGH COURT OF DELHI

IA 13116/2000 in CS (OS) No. 1444/2000

Decided On: 20.02.2006

Appellants: Mediterranean Shipping Company, S.A. and Anr.

Vs.
Respondent: Margra Industries Ltd.

Hon'ble Judges/Coram:
Sanjay Kishan Kaul, J.

Counsels:
For Appellant/Petitioner/plaintiff: Inderbir S. Alag, Adv

For Respondents/Defendant: Sudhir K. Makkar, Adv.

Case Note:

Civil - Leave to Defend - Order 37 of the Code of Civil Procedure 1908 (CPC) -
plaintiff was shipliner who carried on consignment for defendant - Agreement
was signed by the parties according to which plaintiff waived substantial
amount of detention charges subject to defendant destuffing - Consignment
arrived at Delhi but defendant failed to destuff the containers - Defendant
took delivery of the containers but some of them were illegally detained by
the defendant - plaintiff had filed suit under Order 37 of CPC for recovery of
demurrage charges Along with interest - Suit was decreed in favor of plaintiff
- Hence, present application for leave to defend and setting aside of the
decree - Held, defendant did not enter appearance within time, Therefore,
question of service of summons of judgment in prescribed format did not arise
as the occasion for the same under the provisions of Order 37 of the Code
would arise only after the address of service was filed within ten days -
defense sought to be raised by defendant was false - Defendant failed to
make out a case for either grant of leave to defend or for recall of decree
passed - Hence, application dismissed

JUDGMENT

Sanjay Kishan Kaul, J.

IA 13116/2000 (under Order 37 Rule 4 CPC)

1. The plaintiff filed a suit for recovery of a sum of Rs. 60,25,112/- under the
provisions of Order 37 of the Code of Civil Procedure, 1908 (hereinafter referred to as
'the said Code') along with pendente lite and future interest. This claim is based on the
conditions of Bill of Lading No. 1831279 dated 30.9.1998 and an agreement dated
21.2.2000.

06-10-2016 (Page 1 of 9 ) www.manupatra.com SINHA MEHRA and ASSOCIATES

2. plaintiff No. 1 is a ship-liner engaged in transportation of goods/cargo in enclosed
containers by sea. plaintiff No. 2 is the agent of plaintiff No. 1 in India.

3. M/s Marmoles Ronimar, Spain approached the plaintiff No. 1 at their office in Spain
with a request to carry consignment of rough marble slabs and blocks by twelve 20'
containers for the defendant herein which was the notified party for the consignment.
The plaintiff No. 1 carried the consignment to Mumbai, the port of discharge and the
defendant was informed about the arrival of the cargo. The consignment had to be
carried to Delhi at the request of defendant. There are stated to be certain disputes
which arose between the defendant and the Customs authorities with the result that
the cargo could not be cleared and the defendant even filed writ proceedings before
this court being CWP 7313/1999 for release of the cargo but the same was dismissed
by the Division Bench on 11.2.2000. The defendant also filed another Writ Petition No.
7314/1999 seeking a writ of mandamus against Union of India to undertake the
exercise of fixation of reasonable demurrage charges in conformity with government
recommendations and RBI circulars. plaintiff No. 2 is stated to have been added as a
respondent in both these proceedings but was subsequently deleted at the request of
the defendant.

4. The consignment arrived at Delhi on 14.1.1999 and it is stated that the defendant
was entitled to five free days for clearing and lifting cargo where after the defendant
was liable to pay the charges for the container per day as per tariff charts of the
plaintiff. The containers were, however, not destuffed and the defendant did not take
delivery of the cargo despite request of the plaintiff. In July, 1999, the defendant is
stated to have approached the plaintiffs for waiver of detention charges and the
plaintiff as a gesture of goodwill is stated to have agreed to waive detention charges
and on receipt of the agreed amount, issued delivery order dated 7.7.1999. The
defendant still failed to destuff the containers with the result that the plaintiff was not
able to utilise and circulate the containers for its business purposes.

5. The defendant is stated to have made a request in June, 2000 for further waiver of
detention charges from 7.7.1999. The plaintiff in turn is stated to have agreed to
charge a lumpsum of Rs. 4,21,097/- as the detention charges from 7.7.1999 to
25.1.2000 and thus, agreed to waive substantial amount of detention charges subject
to the defendant destuffing and releasing of containers by 28.2.2000. This is stated to
be incorporated in the agreement dated 21.1.2000. Clause 2 of the agreement
provided that in case of failure of the defendant to destuff and release the containers
on or before 28.2.2000, the agreement would become non-est and the plaintiffs would
be entitled to claim such container detention charges as were prescribed under the
Karmahom Conference in respect of the entire amount of detention of the
consignment.

6. The defendant took delivery of the containers after executing the indemnity bond
and the same were taken to the factory of the defendant on 25.1.2000 and were
required to be returned within 7 days as per Clause 6 of the indemnity bond. However,
only 8 containers were returned and released to the plaintiff and four containers are
stated to have been illegally and unlawfully detained by the defendant. Despite
repeated requests, the balance four containers have not been released. (The
containers were released subsequently in 2001 during the pendency of the suit.)

7. A legal notice dated 17.2.2000 was issued by the defendant stated to be raising the
issue of the agreement dated 21.1.2000 being signed under protest. Not only that, the
defendant demanded refund of a sum of Rs. 2,10,548/- and Rs. 60,000/- with interest
at 24% per annum failing which the defendant threatened to hold the four containers.

06-10-2016 (Page 2 of 9 ) www.manupatra.com SINHA MEHRA and ASSOCIATES

This was not agreeable to the plaintiff who reminded the defendant of its obligations
under the agreement. Criminal complaint is also stated to have been lodged by the
plaintiff for illegal detention of container.

8. The plaintiffs have claimed the entire amount of detention charges under Karmahom
Conference at the rate of US$ 48 per day per container, amounting to Rs. 60,25,312/-
till 30.6.2000 as detention/demurrage charges along with interest at the rate of 24%
per annum from the date the amount became due and payable to the plaintiff.

9. Summons were issued in the suit on 11.7.2000 and the defendant was served on
19.7.2000. The defendant did not enter appearance and is 8429/2000 was filed by the
plaintiff seeking a decree in the suit on account of failure of the defendant to enter
appearance. This application came to be considered on 17.11.2000 by the court which
noticed the fact that on a subsequent date on 14.9.2000 a vakalatnama had been been
filed by the counsel on behalf of the defendant. The defendant had failed to enter
appearance within 10 days and thus the learned Judge was of the view that the
plaintiff was entitled to a decree under Sub-rule (3) of Rule 2 of Order 37 of the Code.
The defendant had not even taken care to serve the learned counsel for the plaintiff
with an intimation of his entering appearance on behalf of the defendant. The suit was
decreed for a sum of Rs. 16,25,312/- along with interest at 15% per annum w.e.f.
10.7.2000. The decretal amount was subsequently corrected by the order dated
12.12.2000 to Rs. 60,25,312/-.

10. The defendant has thereafter filed the present application seeking setting aside of
the decree dated 17.11.2000. The plea raised in the application is that the agreement
dated 17.11.2000 was entered into under protest as it was obtained under duress and
coercion and that the dispute between the parties did not fall within the mandate of
Order 37 of the Code. It is stated that the service was not effected as per provisions
contained in Order 29 Rule 2 of the Code.

11. The defendant claims to have paid a sum of Rs. 3,26,528/- on 10.7.1999 to the
plaintiff as container detention charges at the rate of US$ 4 per container per day. The
defendant is stated to have been in extreme difficulty on account of the alleged illegal
detention of the cargo by the Customs authorities. On 12.1.2000 the defendant is
stated to have made a further payment of Rs. 1.98 lakhs but the plaintiff coerced the
defendant to enter into an agreement dated 12.1.2000. It is in these circumstances
that the legal notice dated 17.2.2000 is stated to have been sent.

12. The defendant claims that it was not served at its registered office though the
mandate of Order 29 Rule 2 of the Code is that in case of service on corporation, the
same should be done by leaving it or sending it by post addressed to the corporation at
the registered office. The said provision reads as under:

2. Service on corporation.-- Subject to any statutory provision regulating

service of process, where the suit is against a corporation, the summons
may be served --

(a) on the secretary or on any director, or other principal officer

of the corporation, or

(b) by leaving it or sending it by post addressed to the

corporation at the registered office, or if there is no registered
office then at the place where the corporation carries on

06-10-2016 (Page 3 of 9 ) www.manupatra.com SINHA MEHRA and ASSOCIATES

 business.

13. The defendant claims to have come to know of the matter being listed on
8.12.2000. Managing Director of the defendant became aware of filing of the suit on
13.9.2000 and accordingly instructed the counsel to enter appearance on 14.9.2000.
The defendant under a misconception waited for the date of hearing on 8.12.2000 but
when the counsel for the defendant inspected the file on 5.12.2000, he came to know
that the suit had been decreed on 17.11.2000.

14. The defendant claims that after entering appearance, it was required to be served
with the summons of judgment which was never done.

15. The defendant claims that the suit is not maintainable under Order 37 of the Code
and has thus relied upon the judgment of A.R. Electronic Pvt. Ltd. v..K. Graphics Pvt.
Ltd. MANU/DE/0259/2002 : 97(2002)DLT913 where in para 11 is was observed as
under:

Since the suit is not triable under Order 37, CPC, as a necessary corollary
the summons in the prescribed Form IV Appendix B, CPC sent and served on
the defendant would be inconsequential. A decree could not be passed
against the defendant on its failure to enter appearance within 10 days from
the date of the service. No presumption of admission which arises under
Order 37 Rule 2, CPC could be drawn in favor of the case of the plaintiff
pleaded in the plaint on the basis of which the suit was decreed against the
defendant.

16. It is in view of the said allegations that the defendant has sought setting aside of
the ex parte judgment and decree dated 17.11.000.

17. The application has been strongly resisted on behalf of the plaintiff who contends
that the same is only a dilatory tactic as no sufficient cause has been shown by the
defendant for not meeting the requirements of Order 37 of the Code. The defendant is
stated to have acted upon agreement dated 21.1.2000 and thus it has been stated that
it does not lie in the mouth of the defendant to plead that the agreement has been
signed under protest. The service is stated to have been effected in accordance with
law and the defendant, for all purposes, had been mentioning its office at Noida on all
the correspondences, documents and letter heads and the defendant had been so
served.

18. In so far as is 8429/2000 is concerned, it was pointed out that the same was filed
on 17.8.2000 and at that stage there could be no occasion to serve the counsel for the
defendant with any advance copy as the defendant had not entered appearance in
accordance with the Order 37 of the Code, no copy of such entering of appearance had
been served on the plaintiff and in fact the defendant only filed a vakalatnama on
14.9.2000.

19. A specific reference has been made to the effect that at no stretch of time was it
ever represented that the address of the defendant was other than D-1, Sector 11,
Noida as the defendant was under an obligation to mention the registered office on its
letter head. It is only now that a case is sought to be put up that the registered office
is somewhere else which is described as 'Near Primary School, Village Gharoli, Delhi-
110096' which is a completely vague address.

06-10-2016 (Page 4 of 9 ) www.manupatra.com SINHA MEHRA and ASSOCIATES

20. The application was listed from time to time and the proceedings recorded inter
alias on 1.3.2002 show that the court asked the counsel for the plaintiff to take
instructions whether the plaintiff would be willing to concede the application on deposit
of half the amount and for balance half, bank guarantee be furnished. The counsel had
expressed his willingness but the counsel for the defendant took some time to obtain
instructions. Thereafter, various dates were taken by the counsel for the defendant to
obtain instructions or the matter was adjourned at the request of the defendant or for
some other reason.

21. The counsel appearing for the defendant sought discharge which was allowed by
the order dated 14.3.2005 and once again the new counsel took time to obtain
instructions. Finally, on 26.4.2005, the counsel for the defendant stated that they were
not ready and willing to deposit half the amount and furnish bank guarantee for the
balance amount but would prefer to invite the judgment on the merits of the case.

22. The application was listed for hearing on 19.7.2005 when learned counsel for the
defendant contended that an application under Order 37 Rule 4 of the Code had to be a
composite application and the decision thereon would necessarily have to be
composite. Thus reply on merits should also be filed by the plaintiff. In this behalf,
learned counsel referred to the judgment of the apex court in Rajni Kumar v. Suresh
Kumar Malhotra and Anr. MANU/SC/0255/2003 : [2003]3SCR66 . It is observed in
para 10 as under:

It is important to note here that the power under Rule 4 of Order 37 is not
confined to setting aside the ex parte decree, it extends to staying or setting
aside the execution and giving leave to appear to the summons and to
defend the suit. We may point out that as the very purpose of Order 37 is to
ensure an expeditious hearing and disposal of the suit filed there under,
Rule 4 empowers the Court to grant leave to the defendant to appear to
summons and defend the suit if the Court considers it reasonable so to do,
on such terms as Court thinks fit in addition to setting aside the decree.
Where on an application, more than one among the specified reliefs may be
granted by the Court all such reliefs must be claimed in one application. It is
not permissible to claim such reliefs in successive petitions as it would be
contrary to the letter and spirit of the provision. That is why where an
application under Rule 4 of Order 37 is filed to set aside a decree either
because the defendant did not appear in response to summons and
limitation expired, or having appeared, did not apply for leave to defend this
suit in the prescribed period, the Court is empowered to grant leave to
defendant to appear to the summons and to defend the suit in the same
application. It is, Therefore, not enough for the defendant to show special
circumstances which prevented him from appearing or applying for leave to
defend, he has also to show by affidavit or otherwise, facts which would
entitle him leave to defend the suit. In this respect, Rule 4 of Order 37 is
different from Rule 13 of Order 9.

23. The plaintiff thus filed reply even on merits of the application. Apart from what was
stated earlier, the plaintiff pointed out that it was the own averment of the defendant
that a draft agreement was first sent to the defendant and it is only thereafter the
same was filed and acted upon which contained the charges for detention put as per
the Karmahom Conference. Not only that, the defendant had taken possession of the
containers, made payments and sought deletion of the name of the plaintiffs from the
writ proceedings. As far as the dispute between the defendant the Customs authorities
is concerned, it was stated that the same was a matter between the said two entities.

06-10-2016 (Page 5 of 9 ) www.manupatra.com SINHA MEHRA and ASSOCIATES

The plaintiff has specifically denied that there were any charges at the rate of US$ 2
per day per container or of US$ 4 which were charged. The matter was a pure
commercial transaction which was acted upon by the parties. The defendant would be
entitled to rebate on the terms and conditions but had failed to abide by the terms and
conditions.

24. The matter was heard at some length on merits and once again the issue was
raised whether there could be some agreement between the parties about the terms
and conditions but learned counsel for the defendant was categorical that the
defendant would like to invite the judgment on merits and I thus proceed to decide the
case on the merits of the pleadings and the contentions of the parties.

25. The first aspect to be considered is whether the defendant has been able to show
any justification for not taking steps to file the address of service within stipulated time
as prescribed under Order 37 of the Code. The service report has been perused which
clearly shows that the defendant has been served on 19.7.2000. There is no
Explanation forthcoming as to why from the said date till 13.9.2000 there was absence
of knowledge of the service with the defendant. The only plea raised is that the service
is not in conformity with the Order 29 Rule 2 CPC.

26. I am unable to persuade myself to agree with the submissions of the learned
counsel for the defendant. The address which the defendant has used for all
communications with the plaintiff is one where the defendant has been served. The
service on the said address is under seal of the defendant Corporation and is thus
signed by duly authorised person. A plea cannot be accepted that the seal of the
defendant company was with an unauthorised person. The provisions of Rule 2 of
Order 29 of the Code prescribe that service can be on a principal officer of the
corporation and the person holding the seal of the defendant corporation would be the
duly authorised person to receive such summons.

27. An important aspect to note is that this plea of a different address at Delhi is
sought to be raised first time by the defendant and there is substance in the plea of
the defendant that the address itself is completely vague as set out above. No service
could have been effected at such a vague address 'Near Primary School, Village
Gharoli, Delhi-110096. One fails to understand how the concerned authorities for
prescribing a registered office of the company could have accepted such an address. All
the relevant communications with the defendant are at the Noida address and in all its
letter heads the defendant has given the Noida address. The legal notice of the
defendant sent through counsel dated 17.2.2000 also gives the address of the
defendant where the defendant has been served.

28. The defendant not having entered appearance within time, the question of service
of summons of judgment in prescribed format did not arise as the occasion for the
same under the provisions of Order 37 of the Code would arise only after the address
of service was filed within ten days. The plaintiff was well within its rights to apply for
passing of a decree in view of the failure of the defendant to enter appearance in
accordance with law. At the stage when is 8429/2000 was filed on 17.8.2000 even the
vakalatnama on behalf of the defendant had not been filed and thus there could be no
occasion for any service on the defendant of the said application.

29. I am thus of the considered view that the defendant has failed to make out a case
for not entering appearance within prescribed time.

06-10-2016 (Page 6 of 9 ) www.manupatra.com SINHA MEHRA and ASSOCIATES

30. Despite the aforesaid, I have also considered the matter on merits. The transaction
in question is purely a commercial transaction. The containers of the plaintiff have
been utilised to import the goods. The defendant being a sea-liner, the containers are
used in circulation. The availability of the container after the delivery of goods is a
necessity of the nature of trade of the plaintiff. Thus, the stipulated dates for taking
delivery and de-stuffing the containers are all material aspects in the nature of
business of the plaintiff. The defendant was fully aware of this fact.

31. The dispute between the defendant and the Customs authorities is something
which is for the said two parties to settle. The plaintiff cannot suffer as a consequence
thereof. The defendant after impleading plaintiff No. 2 as a party in fact sought
deletion of the said party. The Customs authorities wanted certain conditions to be
fulfilled by the defendant and even the Division Bench of this court found in favor of
the Customs authorities whereby the direction was made to deposit Rs. 10 lakhs in
cash and give a bank guarantee of Rs. 15 lakhs. The defendant cannot make out a
case that because it was under an obligation to comply with the orders of the court and
had to meet the obligations of the Customs authorities towards the goods, the
agreement entered into with the plaintiff on 21.1.2000 was under duress or pressure.
The defendant in the application itself has set out that a draft of such an agreement
was sent by the plaintiff to the defendant and it was only thereafter signed.

32. A material aspect is that the defendant has acted upon the said agreement and
taken advantage of the same. Payments have been made, containers have been taken
possession of and concessions have been sought in case the containers were returned
within stipulated time.

33. The terms of the agreement are extremely clear. The specific clauses of agreement
dated 21.1.2000 are as under:

) That the Shipping Line would release the delivery order to the consignee in
respect of the consignment covered by the Bill of Lading No. MSCUB
1931279 on the payment of Rs. four lacs twenty one thousand and ninety
seven only. The said delivery order would be valid till 25th January, 2000.

) That the present settlement is subject to the condition that the consignee
would have the container destuffed and released to the Shipping Line on or
before 28.2.2000, failing which the present agreement would become non
est / of no consequence and the Shipping Line would be entitled to claim
such container detention charges as are prescribed under the Karmahom
Conference in respect of the entire amount of detention of the consignment.

) That the consignee will have the name of the Shipping Line deleted/
dropped from the array of the Respondents in Civil Writ No. 7313/7314 of
1999 pending before the Hon'ble High Court of Delhi. The consignee also
undertakes and assures the Shipping Line that all proceedings against the
Shipping Line would be dropped in case they are pending before any other
authority, Court or any other judicial forum in respect of this cargo.

34. The clauses made it clear that in case the containers were not destuffed and
released on or before 28.2.2000, the plaintiff would be entitled to the charges under
the Karmahom Conference for the entire amount of detention of the consignment. The
concession was made by the plaintiff despite the fact that the defendant had failed to
avail of the concessions made even earlier by the plaintiff. The payments which have

06-10-2016 (Page 7 of 9 ) www.manupatra.com SINHA MEHRA and ASSOCIATES

been claimed by the plaintiff in the suit are as per the said norms and as stipulated in
the agreement dated 21.2.2000.

35. In my considered view, it cannot be said that the mere allegation of the defendant
that the agreement was under duress or pressure or force is sufficient to raise a triable
issue. As stated above, both the parties have conducted themselves in a manner and
have acted on the agreement and now for the defendant to state that the agreement is
not binding as it was obtained under force and coercion is only an attempt to evade its
financial liability.

36. The parameters and principles to be kept in mind for grant of leave to contest were
set out by the apex court in Mechalec Engineers and Manufacturers v. Basic Equipment
Corporation MANU/SC/0043/1976 : [1977]1SCR1060 as under:

(a) If the defendant satisfies the Court that he has a good defense 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 defense although not a positively good defense 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 defense, yet, shows
such a state of facts as leads to the inference that at the trial of the action
he may be able to establish a defense 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 defense or the defense 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 defense or the defense is illusory or sham or

practically moonshine then although ordinarily the plaintiff is entitled to
have to sign judgment. The Court may protect the plaintiff by only allowing
the defense 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 defense.

37. If the aforesaid parameters are applied to the present case, there is little doubt
that the defense sought to be raised by the defendant is a clear moonshine apart from
being false and an after-thought to evade its liability. The defendant cannot act on the
agreement and thereafter claim that it was under duress and pressure specially when
admittedly a draft of the agreement was first sent and thereafter it was finalised and
signed. The fact that the defendant who was under certain commercial compulsions
arising from its financial liability to the Customs authorities and the directions passed
by the Division Bench of this court will not cast a doubt or nullify the agreement. The
debt due is as per the agreement.

06-10-2016 (Page 8 of 9 ) www.manupatra.com SINHA MEHRA and ASSOCIATES

38. The debt due is as per the written contract to be read along with the Bill of Lading
dated 30.9.1998 and the rates stipulated under Karmahom Conference have to be
necessarily read as part of the agreement by incorporation since it is so provided in the
agreement.

39. I am thus of the considered view that the defendant has failed to make out a case
for either grant of leave to defend or for recall of the decree passed on 17.11.2000.

40. The application is dismissed with costs of Rs. 5,000/-.

Manupatra Information Solutions Pvt. Ltd.

06-10-2016 (Page 9 of 9 ) www.manupatra.com SINHA MEHRA and ASSOCIATES