Shellz INDIA Private Limited vs. Starco Metaplast PVT LTD & Ors.

Held

The High Court held that the Appellant had raised a triable issue regarding the quality of the goods supplied, particularly concerning Invoice No. GST/1222. The Court referred to Supreme Court judgments emphasizing that leave to defend should ordinarily be granted unless the defence is frivolous or vexatious, and that even triable issues should generally lead to leave being granted, possibly with conditions. The Court found that material on record indicated complaints about the quality of goods and correspondence to show that goods were not of standard quality for at least one invoice. Therefore, the issue of whether the goods were of standard quality was a matter for trial. Consequently, the impugned judgment of the Trial Court was set aside. The Appellant was granted conditional leave to defend, requiring them to deposit the decretal amount after deducting Rs. 7,46,934/- (the value of goods under Invoice No. GST/1222) along with up-to-date interest with the Trial Court. A fresh bank guarantee for the remaining amount was also directed to be furnished within three weeks. The Trial Court was directed to dispose of the suit within two years.

Facts

Shellz India Private Limited (Appellant) is appealing a judgment from the Commercial Court that rejected its application for unconditional leave to defend and stay of suit. The Respondent No. 1, Starco Metaplast Pvt Ltd, had filed a suit under Order XXXVII of the CPC for the recovery of Rs. 1,25,30,133/-. The Respondent claimed that the Appellant had placed orders for Poly Vinyl Chloride (PVC) films, which were supplied on credit. The Appellant acknowledged the amount due. The Appellant's defence was that the PVC films supplied were of defective quality, causing a foul burnt smell in their confectionery product, and that they had informed the Respondent and conducted laboratory tests. The Appellant had also filed separate suits for damages and to honour market claims. The Commercial Court decreed the suit, holding that the Appellant had accepted and used the goods, and that its defence was frivolous.

Key Issues

1. Whether the Appellant is entitled to unconditional leave to defend the suit filed under Order XXXVII of the CPC, considering the defence raised regarding the quality of goods supplied, as per the principles laid down in relevant Supreme Court judgments. 2. Whether the Appellant has raised a triable issue concerning the quality of PVC films supplied by the Respondent, which warrants granting leave to defend, potentially with conditions. Contentions of the Appellant: The Appellant argued that leave to defend should not ordinarily be refused unless there is no defence at all and no triable issue arises. They highlighted that a separate suit for recovery on grounds of spurious goods had been filed and presented a laboratory report dated 13.12.2021 indicating defective quality of the PVC films. They relied on the principle that even in cases of doubt about the genuineness of triable issues, leave could be granted with conditions, and denying leave is not the rule. Contentions of the Respondent: The judgment does not record specific arguments made by the Respondent in this appeal, but the Trial Court's reasoning, which the Respondent likely supported, was that the Appellant had used all the goods, none were returned, and rejection was not within the stipulated 15 days from the invoice date, thus accepting the goods as per Section 42 of the Sale of Goods Act.