1 IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINRY ORIGINAL CIVIL JURISDICTION SUMMONS FOR JUDGMENT NO. 187 OF 2008 IN SUMMARY SUIT NO. 707 OF 2009 M/s. Hero Exports ... Plaintiff Vs. M/s.Amulya Exports Ltd. ... Defendant Mr. Niranjan Pandit alongwith Mr. Mohandas i/b M/s. Joy Legal Consultant for the plaintiff Mr. R.D.Soni i/b M/s.Khaitan & Jayakar for the defendant CORAM : A.A. SAYED, J DATE : JULY 2, 2009 P.C.: 1. This Summons for Judgment is taken out by the plaintiff to enter a judgment in their favour against the defendant for a sum of Rs. 65,02,929.71 p. as per the particulars of the claim, together with further interest @ 18% per annum on the principal amount of Rs. 46,28,419.72 p. from the date of institution of the suit till payment and/or realization. 2. The case of the plaintiff is that they have placed purchase order with the defendant-company for 700 MT of Cold Rolled Steel Galvanized Non-Alloy Coils for US$ 6,37,000/-, which goods were to be shipped from Mumbai to Mozambique and accordingly defendant supplied the goods for 2 shipment and raised 3 Commercial Invoices on the Plaintiff of the total amount of Rs. 2,78,65,169.55 p. According to the plaintiff the terms and conditions stipulated in the Invoices was that the goods should be of the quality mentioned in Invoices and of "sea worthy packing" before being loaded for shipment. Accordingly, as against the Purchase Order of the plaintiff, the defendant shipped the said Steel Coils to the plaintiff and the same was delivered to the plaintiff's foreign buyer at Mozambique. The said goods was shipped in July and August, 2005 from Mumbai to Mozambique. The plaintiff has relied upon three Bills of Lading confirming the shipment dated 3.7.2005 and 12.8.2005. The plaintiff thereafter paid the amount covering the Invoices to the defendant for the supply of the said goods. However, after the Steel Coils were delivered to the foreign buyer in or around July-August, 2005, the foreign buyer found that the goods did not conform to the standards and/or the specifications and quality as mentioned in the Invoices and that the said goods were defective and the Zinc coating on the steel coils had peeled off even prior to the delivery of the goods to the foreign buyer at the port of destination and the goods had been inadequately packed and suffered severe damage during transportation to the port of destination. 3. It is the further case of the plaintiff, that the plaintiff on receiving 3 complaint from the foreign buyer in respect of the standard and quality of the goods, sent their Chief Executive Officer to Mozambique to determine the extent of damage of the good and on inspection, it was found that not only the zinc coating had peeled off but the same resulted in accumulation of white rust on the surface of the goods leading to further degradation of the goods. It was also discovered that the packing of the goods were so inadequate that it resulted in additional damage to the goods and the defendant did not ensure that the said goods were packed in a manner so as to withstand the rigours of a sea voyage. 4. The plaintiff therefore, engaged the services of M/s. Sunbeam Auto Ltd. who conducted the chemical analysis of the sample of the goods and submitted report dated 22nd December, 2005, which revealed that the iron content in the zinc used to galvanize the goods were 3.33% which was exceptionally in excess of the industry norm of less than 1% for the same. It was also formed that the mass of zinc coating was 1926 gm/m2 in some parts of the goods instead of 120 gm/m2 as specified. It appears that the foreign buyer had also engaged services of a Surveyor, who submitted their report dated 25th January, 2006 and which confirmed the findings of the report submitted by M/s. Sunbeam Auto Ltd., and that the report revealed that there was severe rusting on account of peeling off of the 4 zinc coating due to defective galvanizing and manufacturing process. It was also stated in the report that the defects in the goods were of the nature generated at the factory during manufacturing process. 5. According to the plaintiff, since the foreign buyer did not make full payment and deducted an amount of Rs. 46,28,419.72 ps. and raised debit note for the said amount, the plaintiff demanded the amount from the defendant company. Since the defendant Company failed and neglected to pay the amount inspite of repeated reminders, ultimately the plaintiff addressed letters through their advocate to the defendant calling upon them to pay the said amount. However, the said letters were not replied to and the said amount has remained to be paid by the defendant to the plaintiff. 6. The plaintiff has also filed winding up petition in the High Court being Company Petition No. 451 of 2007 and by order dated 6th September, 2007, the said petition is admitted and is pending. Thus, according to the plaintiff, they are entitled to the sum as claimed by them in the particulars of claim. Hence the present suit and Summons for Judgment. 7. Affidavit in reply is filed by the defendant opposing the Summons for Judgment, wherein it is stated that the Summons for Judgment is not 5 maintainable under Order 37 of CPC. It is stated that the plaintiff is claiming damages against the defendant under the garb of Summary Suit, which cannot be permitted. It is stated that the plaintiff is seeking to recover a sum which has been deducted by the plaintiff's foreign buyer for the alleged defective goods supplied to the plaintiff by the defendant. It is stated that the Purchase Order does not indicate or mention any specific requirement with respect to the packaging and the goods were packed as per the standard policy and were delivered at Mumbai Port. It is stated that the plaintiff ought to have pointed out, if at all, the goods were defective at the time when the goods reached the Port at Mumbai and not after the goods have been delivered to the foreign buyer and it would amount to deemed acceptance by the buyer under section 42 of Sale of Goods Act, 1930, if the buyer does not intimate the seller about the rejection of goods by them. Defendant has relied upon 3 Mill Test Certificates certifying that the goods were in accordance with the requirements of the material specifications. It is further stated that as soon as the goods were delivered at the Port at Mumbai, the liability of the defendant ceases as the contract was on the basis of Free on Board (FOB). It is further pointed out that the goods were supplied by the defendant in the month of April/May and the same were shipped by the plaintiffs in the month of July/August. There was every possibility of the goods being destroyed during that period. 6 According to the plaintiff it must be presumed that the payment was made by the plaintiff after satisfying themselves that the goods were in proper condition etc. It is further stated that insofar as the report of the Chemical Analysis and the Surveyor's report are concerned, the said reports that the reports are of December, 2005 and January, 2006 i.e. several months after the goods were received by the foreign buyer and the said Certificates cannot form the basis to come the conclusion that the goods were defective at the time of delivery. It is further stated that the plaintiffs have waited two years before filing the present Summary Suit and that the same is only an after thought. Insofar as the Company Petition is concerned, that is still pending. It is thus stated that the defendant has a valid defence and therefore the defendant be granted unconditional leave to defend the suit. The plaintiff has also filed a rejoinder reiterating the facts stated in the Summons for Judgment. 8. The learned Counsel for the plaintiff pointed out that in the Invoices it is also mentioned that the goods are required to be in" Standard Export Sea Worthy Packed Coils". The learned Counsel further pointed out that the coils are in the form of rolls and coated with Zinc and it was not possible for the plaintiff to take inspection of the said goods at the Mumbai Port. The learned Counsel submitted that even the notices of the plaintiff's advocate 7 have not been replied and the claim of the plaintiff therefore is deemed to have been admitted. The learned Counsel pointed out the two reports to submit that the goods were found defective and the goods were severely rusted wherever the zinc coatings were peeled off. The learned Counsel relied upon the letter dated 21-11-2005 of the foreign buyer ( Exh. J to the plaint) to submit that the material was sold in the open market by the foreign buyer at discounted rate and the loss of USD 100617.82 equivalent to Rs. 46,28,419.72 p. has been deducted from the money payable by the foreign buyer to the plaintiff and, therefore the amount claimed is an ascertained amount. The learned Counsel submitted that there is no valid defence raised by the defendant and urged that the Summons for Judgment be made absolute and suit be decreed as prayed. 9. On the other hand, the learned Counsel for the defendant submitted that the claim of the plaintiff is in the form of damages and, therefore, it cannot fall within the ambit of provisions of Section 37 Rule 2 of the CPC. He submitted that it cannot be said that the amount claimed by the plaintiffs is a debt or liquidated demand payable by the defendant to the plaintiff within the meaning of Order 37 inasmuch as the amount claimed by the plaintiff is in fact in the form of loss occasioned to the foreign buyer, after selling the goods in market at discounted rate and it is this loss which is 8 deducted by the foreign buyer from the plaintiff, is what is being claimed in the suit. He submitted that there is no agreement for payment of any interest which is claimed by the plaintiff. 10. Learned Counsel for the defendant further submitted that the Mill Test Certificates which are annexed to the affidavit in reply also disclose that the material was manufactured and tested in accordance with the requirement at the time of delivery date. It is therefore submitted that the goods supplied were very much as per specification and required standards. The learned Counsel submitted that there is a possibility that the goods were damaged as the goods may not have been handled properly by shipper and/or when they were kept in the warehouse by the foreign buyer. The learned Counsel submitted that the Reports relied upon by the plaintiff do not disclose that the goods were defective at the time of arrival of the goods at the port of destination of the foreign buyer and the said Reports are of December, 2005 and January, 2006, whereas the goods were supplied in the month of April/May, 2005. The learned Counsel also submitted that there is no privity of contract between the plaintiff and the defendant in so far as it relates to non-payment by the foreign buyer to the plaintiff. The learned Counsel submitted that evidence will be required as far as alleged loss or damage and in so far as the correctness of the reports produced by the 9 plaintiff more particularly as these reports were unilateral reports. It is submitted that, in insofar as the interest is concerned, there is no basis for charging the interest and that too @ 18% per annum. The learned Counsel for the defendant placed reliance upon the decision in the case of the M/s Mechelec Engineering & Manufacturers V/s M/s Basic Equipment Corporation, (1976) 4 SCC 687. The learned Counsel for the defendant contended that there are triable issues involved and, therefore unconditional leave to defend the suit ought to be granted to defendant and Summons for Judgment be dismissed. 11. I have heard the learned Counsel for parties and perused the material on record. 12 The claim of the plaintiff in the suit is essentially for recovery of the amount which has been deducted by the foreign buyer from the amounts due and payable by the foreign buyer to the plaintiff in respect of the sale of the goods in question supplied by the defendant. The amount which is deducted is towards the loss occasioned to the foreign buyer after the goods were allegedly found to be defective by the foreign buyer and therefore sold in the market by foreign buyer at a discounted rate. There is nothing on record to determine as to how the amount of Rs. 46,28,419.72 10 has been arrived at by the foreign buyer. In fact the said goods have been allegedly sold by the foreign buyer in open market at a discounted rate at certain price. However the price at which the goods were sold is not stated and there are no particulars on record as to how the loss occasioned was arrived at. The word of the foreign buyer cannot be accepted as a gospel truth in absence of any material in that regard. Evidence would certainly be required to prove as to what was the extent of the loss, if any, caused to the foreign buyer of which the plaintiff is claiming refund from the defendant. Evidence would also be required whether the goods were having manufacturing defect or that the damage, if any, to the goods was caused because improper storage before shipment or mishandling of the shipper or improper storage by the foreign buyer. 13 The entire claim of the plaintiff is based upon letter dated 21.11.2005 (Exh. J to the plaint) written by the foreign buyer to the plaintiff. This letter is written after a period of 3/4 months from the date of receipt of the goods i.e. around July/August. The relevant portion of the letter is reproduced hereunder :- " The above material when de-sealed was found damaged and rusted due to poor packing and galvanizing. We have therefore sold the material in the market at discounted rate and the loss of USD 1,00,617.82 is deductible from the money payable to your company". 11 14 From the above, it is obvious that what the foreign buyer has done is to deduct the amount of alleged loss caused to them after the material was sold in the market at a discounted rate, from the amount payable by the foreign buyer to the plaintiff. Thus, in other words what the plaintiff is seeking in the present suit, is to recover the loss caused to them as a result of the alleged loss caused to the foreign buyer. To my mind prima facie the learned Counsel for the defendant would be right in contending that the claim of the plaintiff is nothing but a claim for damages and the present suit would not fall within the ambit of a summary suit as contemplated under Order 37 of CPC. 15. Insofar as the two reports are concerned, the same cannot be relied upon at this stage to pass a decree. The reports are unilateral reports and of a date after a period of 4/5 months of the goods having reached the foreign buyer. Curiously, the report/certificate of the Surveyor dated 25th January, 2006 annexed at Exh. I to the plaint indicates that the inspection of the goods was allegedly carried out by them on 24th January, 2006 whereas the letter dated 21-11-2005 of the foreign buyer annexed at Exh. J to the plaint clearly states that the material was already sold in the market before 21-11-2005 i.e. much prior to the alleged inspection. Moreover, the 12 possibility of goods being damaged and/or further damaged in the warehouse/storage of the foreign buyer, cannot be ruled out completely. There is no explanation as to why the plaintiff did not have the quality of goods checked out before the goods were to be shipped. For that purpose the plaintiff's representative ought to have visited the premises of the defendant and inspected the goods whereever the same were manufactured and/or packed, before dispatch for the shipment. It also cannot be ruled out that the goods could have been mishandled during the transit. It is to be noted that the defendant is relying upon three Mill Test Certificates to prove that the goods were of standard quality. 16. Having regard to the nature of transaction between the plaintiff and the defendant, it is to be noted that the defendant was merely to supply goods and there was no question of the defendant owing any amount to the plaintiff. It therefore cannot be said that the defendant owed any amount to the plaintiff in respect of the said transaction. Infact it was the other way round and the plaintiff has paid the amounts to the defendant under the Invoices of the defendant. Thus in the present case it cannot be said that the plaintiff is seeking only to recover a debt or liquidated demand in money payable by the defendant as contemplated in Order 37 Rule 1(2)(b). The plaintiff is clearly seeking compensation/damages for the loss suffered by 13 them. This is also apparent from the para 15 of the letter of the plaintiff's Advocate dated 25-07-2006 addressed to the defendant which letter is annexed at Exh. L to the plaint. The material portion is reproduced hereunder:- "Given the above facts , you are hereby formally put to notice, that, by supplying sub-standard quality steel coils, you have committed breach of your contract with our client, and if you do not pay to our client a sum of Rs. 46,28,419.72 on account of direct financial loss incurred by our client." 17. The case in hand would certainly require investigation for which a full fledged trial would be necessary. 18. Considering the facts and circumstances of the case, in my view the defendant has raised valid and bona fide defence. Triable issues are involved in the suit. The defendant would thus be entitled to unconditional leave to defend the suit. Hence, the following order. ORDER (i) The defendant is granted unconditional leave to defend the suit. (ii) The suit to stand transferred to the list of suits of commercial causes. (iii) Written statement to be filed within 16 weeks. (iv) Affidavit of Documents to be filed within eight weeks thereafter. 14 Discovery and Inspection thereafter within 10 weeks. 19 Summons for Judgment is dismissed. [A.A.SAYED, J.]