Supreme Court Grants Leave to Defend in Commercial Contract Dispute
The Supreme Court of India recently delivered a significant judgment in the case of B.L. Kashyap and Sons Ltd. vs. M/S JMS Steels and Power Corporation & Anr.. The case revolved around a commercial contract dispute in which the appellant, B.L. Kashyap and Sons Ltd., sought leave to defend a money recovery suit filed by JMS Steels and Power Corporation under Order XXXVII of the Code of Civil Procedure, 1908 (CPC). The Supreme Court ruled in favor of the appellant, granting them the right to defend themselves in trial court proceedings.
Background of the Case
The dispute arose from the supply of 200 tons of steel by JMS Steels and Power Corporation for a construction project named ‘MIST’ at Plot No.1, Sector 143-B, Noida. The supplies were made based on two purchase orders issued by B.L. Kashyap and Sons Ltd. (the contractor working on the project) on behalf of the project owner, Mist Avenue Private Limited.
The plaintiff (JMS Steels) claimed that payments for these supplies were due and sought to recover Rs. 89,50,244/- through a summary suit under Order XXXVII CPC, arguing that there were written contracts in the form of invoices and purchase orders.
Arguments by the Petitioner (B.L. Kashyap and Sons Ltd.)
- The appellant contended that it was merely a contractor acting on behalf of Mist Avenue Private Limited, and the primary responsibility for payment lay with the project owner.
- They argued that under Section 230 of the Indian Contract Act, 1872, an agent cannot be held liable for contracts entered into on behalf of a principal.
- The appellant also pointed out that the invoices were addressed to them but marked ‘C/o Mist’, indicating that the supplies were meant for the project owner.
- They relied on previous judgments, such as Prem Nath Motors Limited v. Anurag Mittal and V.K. Enterprises v. Shiva Steels, to assert that an agent is not personally liable when acting on behalf of a principal.
Arguments by the Respondent (JMS Steels and Power Corporation)
- The plaintiff argued that the appellant had placed the purchase orders, received the goods, and thus had a direct liability to pay for the supplies.
- They claimed that both the contractor (appellant) and the project owner were jointly and severally liable for the payments.
- The plaintiff maintained that the purchase orders and invoices constituted written contracts, justifying the summary suit under Order XXXVII CPC.
Observations of the Supreme Court
The Supreme Court carefully examined the arguments presented and observed:
“The appellant-defendant has raised triable issues, particularly concerning its liability, and the defense of the appellant cannot be said to be frivolous or vexatious altogether.”
The Court further noted:
“The mere fact that the delivery address of the goods was at the site owned by the project owner does not automatically imply liability of the contractor unless it is established that the contractor was independently responsible for payments.”
The Court held that the High Court and Trial Court had erred in denying the appellant’s request for leave to defend, as there were legitimate questions regarding contractual liability.
Final Judgment
The Supreme Court allowed the appeal, stating:
“The impugned judgment and decree passed by the High Court and the Trial Court are set aside; the appellant is granted leave to defend; and the amount of Rs. 40,00,000/- deposited by the appellant shall be treated to be a deposit towards the condition for leave to defend.”
The Trial Court was directed to proceed with the suit only against B.L. Kashyap and Sons Ltd. while determining liability in a full-fledged trial.
Implications of the Judgment
- The ruling reinforces the importance of granting leave to defend when triable issues exist, ensuring a fair trial for all parties.
- It clarifies the role of contractors in construction projects and limits their liability when acting as agents for project owners.
- The judgment underscores the principle that summary suits should not be used to bypass legitimate contractual defenses.
Petitioner Name: B.L. Kashyap and Sons Ltd..Respondent Name: M/S JMS Steels and Power Corporation & Anr..Judgment By: Justice Dinesh Maheshwari, Justice Vineet Saran.Place Of Incident: New Delhi.Judgment Date: 18-01-2022.
Don’t miss out on the full details! Download the complete judgment in PDF format below and gain valuable insights instantly!
Download Judgment: b.l.-kashyap-and-son-vs-ms-jms-steels-and-p-supreme-court-of-india-judgment-dated-18-01-2022.pdf
Directly Download Judgment: Directly download this Judgment
See all petitions in Contract Disputes
See all petitions in unfair trade practices
See all petitions in Judgment by Dinesh Maheshwari
See all petitions in Judgment by Vineet Saran
See all petitions in allowed
See all petitions in Remanded
See all petitions in supreme court of India judgments January 2022
See all petitions in 2022 judgments
See all posts in Corporate and Commercial Cases Category
See all allowed petitions in Corporate and Commercial Cases Category
See all Dismissed petitions in Corporate and Commercial Cases Category
See all partially allowed petitions in Corporate and Commercial Cases Category
