Jay Jain v. C AND S ELECTRIC LTD & ANR.

Delhi High Court · 22 Aug 2022 · 2022:DHC:3373-DB

Najmi Waziri; Vikas Mahajan

FAO(OS) (COMM) 193/2022

2022:DHC:3373-DB

civil appeal_dismissed Significant

AI Summary

The Delhi High Court upheld the dismissal of the application to reject the plaint, holding that the plaint disclosed a cause of action against the appellant under Order VII Rule 11 CPC.

Full Text

FAO(OS) (COMM) 193/2022
HIGH COURT OF DELHI
Date of Decision: 22.08.2022

FAO(OS) (COMM) 193/2022 & CM APPL. 32859/2022, CM

APPL. 32860/2022, CM APPL. 32861/2022, CM APPL. 36181/2022
& CM APPL. 36182/2022 JAY JAIN ..... Appellant
Through: Mr Deepak K. Singh and Mr Abhimanyu Kumar, Advocates.

VERSUS

C AND S ELECTRIC LTD & ANR. ..... Respondents
Through:

CORAM:

HON'BLE MR. JUSTICE NAJMI WAZIRI
HON'BLE MR. JUSTICE VIKAS MAHAJAN NAJMI WAZRI, J. (ORAL)
The hearing has been conducted through hybrid mode (physical and virtual hearing).

JUDGMENT

1. This appeal impugns the order dated 27.04.2022 dismissing the application of the appellant under Order VII Rule 11(a) & (c) of the Code of Civil Procedure, 1908 (CPC).

2. The case of the appellant is that the plaint does not disclose any cause of action and therefore the same is liable to be rejected. Elaborating on this submission, the learned counsel for the appellant submits that: (i) the plaintiff had sought recovery of monies from the 2022:DHC:3373-DB defendant no.1, a proprietorship concern of which Mrs. Rekha Jain was the proprietor; (ii) the appellant who was arrayed as the defendant no.2 was only an employee working on salary basis under the defendant no.1, and was appointed through the authorized signatory of the defendant no.1; (iii) the appellant is not related to the business of the defendant no.1, therefore no recovery proceedings are maintainable against him.

3. The defendants chose not to file their written statements and their right to file the same was closed. Thereafter, by an application under Order VII Rule 11 (a) and (c) of CPC the appellant (defendant) sought rejection of the plaint. While dismissing the application the impugned order notes, inter alia:- “…2. Counsel appearing on behalf of the nonapplicant/plaintiff submits that the defendant no.2 is the husband of the proprietor of the defendant no.I, Ms. Rekha Jain. Attention of the Court is drawn to the paragraph 24 of the plaint, wherein it has been specifically averred that both the defendant nos.[1] and 2 have committed a fraud upon the plaintiff. It has further been stated that the defendant no.2 was in-charge and responsible for the affairs of the defendant no. l. Even the reply to the legal notice dated 25th October, 2016 was issued by the defendant no.2 on behalf of the defendant no.1.

3. Right of the defendant no.2 to file written statement has also been closed vide order dated 25th April, 2019 passed by the Joint Registrar.

4. In light of the above, it cannot be stated that there is no cause of action averred in the plaint, in respect of the defendant no.2. There is no merit in the present application.”….

4. What is to be seen is that whether the suit was filed without any cause of action against the appellant. It is trite that while deciding an application under Order VII Rule 11 of CPC, seeking rejection of the plaint, the Court has to examine the plaint as a whole, in conjunction with the documents relied upon, to ascertain whether it discloses a cause of action. The case of the defendant in its written statement or averments in the Order VII Rule 11 (CPC) application would be irrelevant, at the stage of consideration of application. In Mayar (H.K.) Ltd. & Ors. Vs. Owners & Parties, Vessel M.V. Fortune Express & Ors., (2006) 3 SCC 100, while dealing with the question as regards the rejection of the plaint under Order VII Rule 11 of the CPC, the Supreme Court has observed as under:

“12. From the aforesaid, it is apparent that the plaint cannot be rejected on the basis of the allegations made by the defendant in his written statement or in an application for rejection of the plaint. The Court has to read the entire plaint as a whole to find out whether it discloses a cause of action and if it does, then the plaint cannot be rejected by the Court exercising the powers under Order VII Rule 11 of the Code. Essentially, whether the plaint discloses a cause of action, is a question of fact which has to be gathered on the basis of the averments made in the plaint in its entirety taking those averments to be correct………”

5. In the light of the above legal position, the examination of the plaint in its entirety will be warranted. Paragraphs 3, 16, 17 and 24 of the plaint which read as under:-

“3. The Defendant No.1, M/s Vidhi Electricals & Engineering Company, is a proprietorship concern of Mrs. Rekha Jain, having its Office at 5-2-327/1, Hyderabasti, R. P. Road, Secunderabad, Telangana (earlier a part of the erstwhile Andhra Pradesh). The Defendant No.2 Mr Jay Jain is the authorized signatory and representative of defendant No.1 Mrs. Rekha Jain, Proprietor and Mr Jay Jain, authorized signatory are jointly control and manage the affairs of the Defendant No.1 Company and they have been the in-charge of and fully responsible to the day-to-day affair of the Defendant No.1. 16. However, thereafter, despite the repeated requests and reminders, the defendants kept on deferring the payment of the aforesaid outstanding amounts on one pretext or other. The plaintiff was, as such, constrained to issue legal notice dated 25.10.2016, calling upon the defendants to pay the aforesaid outstanding amount of Rs. 78,59,859.92 along with interest from the date of the said amount become due and payable from the defendants to the plaintiff within 7 days of receipt of this notice, failing which appropriate legal actions would be taken against them. In spite of the service of the said notice, no payment was made by the defendants. 17. However, the defendant No.2, on behalf of the defendant No.1 sent reply dated 10.11.2016 to the aforesaid legal notice dated 25.10.2016, wherein the defendants neither denied nor disputed the supply of electrical equipment(s)/ good(s) to them nor have they denied nor disputed the outstanding amount of

Rs.78,59,859.92, due and payable by the defendants to the plaintiff, towards the supply of above said electrical equipment(s)/ goods to them. The defendants, however, purportedly alleged in its reply notice that sub-standard material were supplied to them, which are totally baseless, false, afterthought and are ex-facie motivated solely to avoid the bona-fide payments of the acknowledged outstanding amounts by the defendants to the plaintiff, as stated above. Even otherwise, it is not in dispute that the supplied electrical equipment(s)/ good(s) have been unequivocally accepted, used and utilized or otherwise dealt with by defendants without any objection, for their own benefits as such, the defendants are liable to pay the price of the said equipment(s)/ good(s) along with interest, as agreed in terms of the marketing policy acknowledged and signed by defendants.

24. That the plaintiff, vide the defendant’s reply dated 10.11.2016, which was addressed on the instructions of Defendant No,2, first time came to know that the defendants have committed fraud and cheating with the plaintiff, vis-a-vis on one hand, the defendants unequivocally and without any objection accepted the electrical equipment(s)/good(s) supplied to them but denying the payment on one pretext or the other and on the other hand, defendants surreptitiously not only sold the said good(s) to third party but also illegally misappropriated its sale proceed for their own benefits; the defendants as such caused wrongful gain to themselves and wrongful loss to the plaintiff. Since Ms. Rekha Jain, Prop. of defendant No.1 and Mr. Jay Jain defendant no.2 are both in charge of and responsible to the affair of the defendant No.1 company as apparent from their correspondences/notices and they have, as such, in active connivances and conspiracy with each other, committed the offense of fraud, cheating, criminal breach of trust and criminal misappropriation, with the plaintiff to part with the aforesaid good(s) and to suffer loss of the outstanding amounts, as stated above; so both the defendants are jointly and severely liable for the suit amounts with interest and costs.”

6. Upon a reading of the plaint, it is clear that there are specific averments in it contending that defendant nos. 1 and 2, in connivance with each other, have committed fraud upon and cheated the plaintiff. There is also an allegation of criminal breach of trust and criminal misappropriation against defendant no.2/appellant. It further avers that defendant no.2/appellant along with defendant no.1 was in-charge of and responsible for the affairs of the defendant no.1. It is also in the averments that the reply to the plaintiff’s legal notice had been given under the instructions of defendant no.2. Premised, inter alia, on the above assertions, the plaintiff seeks to hold both the defendants as jointly and severally liable for the suit amount with interest and costs.

7. In our opinion, taking the averments made in the plaint to be correct on their face value, it cannot be said that the suit is filed without any cause of action against the defendant no.2/appellant. The cause of action has been spelt out in the plaint in clear terms.

8. The appellant seeks to make out a case that he was not related to the business of the proprietorship concern and of late his marriage with Ms. Rekha Jain (proprietor of defendant no.1) has been dissolved by a decree of divorce but that could be a defense, which is not relevant at this stage of deciding an application under Order VII Rule 11 of the CPC.

9. In view of the above, there is no merit in the appeal. Accordingly, the appeal along with pending applications is dismissed.

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NAJMI WAZIRI, J VIKAS MAHAJAN, J AUGUST 22, 2022 MK /ak

Jay Jain v. C AND S ELECTRIC LTD & ANR.

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