w w w . L a w y e r S e r v i c e s . i n

M/s. J.R. Sharma Overseas Ltd. v/s Abner Pharmaceuticals Ltd.

Company & Directors' Information:- J R SHARMA OVERSEAS LIMITED [Active] CIN = U74899DL1989PLC034628

Company & Directors' Information:- JR PHARMACEUTICALS PVT LTD [Active] CIN = U24232OR1992PTC003129

Company & Directors' Information:- J.R. OVERSEAS PRIVATE LIMITED [Strike Off] CIN = U99999DL1998PTC094608

    IA Nos. 2268 of 1995, 3773 of 1995 & 3805 of 1997 in CS(OS) 1736 of 1994

    Decided On, 12 January 2005

    At, High Court of Delhi


    For the Plaintiff: R.S. Sharma, Advocate. For the Respondent: Ashish Bhagat, Ms. Manisha Suri, Advocates.

Judgment Text

Pradeep Nandrajog, J.

The present order disposes of the 3 captioned interim applications, one filed by the defendant and the other two filed by the plaintiff. Suit has been filed by the plaintiff invoking the provisions of Order XXXVII of the Code of Civil Procedure. By and under IA No. 2268/1995, defendant prays for leave of this Court to defend the suit. By and under IA Nos. 3773/1995 and 3805/1997, plaintiff prays for a decree on admission.

2. Suit is based on a written acknowledgement of the defendant dated 23.6.94. The same reads as under:

'JR Sharma Overseas P. Ltd.

Darya Ganj

New Delhi

Kind Attn: Mr. Gopal Sharma

Dear Sir,

This is with reference to the discussion the undersigned had with you.

We had received advance of Rs. 21 lacs from you for execution of order of Ampicillin Trihydrate. The advance was utilised by us to augment the capacity of our plant according to your needs.

Thereafter, we understand that you could not lift the material due to lack of orders. However, we acknowledge the advance received by us and shall return the same in view of maintaining our relations.

We sincerely regret that at the moment we are unable to cooperate with you in spite of our best efforts. However, we are to receive financial assistance from our financial assistance. The same is expected to be received by the end of September. Hence, we assure you that we shall commence repayment of your advance from October and shall repay the entire amount at the earliest.

In the meantime you are requested to bear with us.

Thanking you,

Yours faithfully,

for Abner Pharmaceuticals Ltd.



3. Backdrop to the acknowledgement aforesaid, as pleaded in the plaint is that the plaintiff company is a merchant exporter dealing in mainly pharmaceutical goods and medicines. Defendant company is a manufacture of medicines and pharmaceutical goods. As per the plaint, in the year 1991, defendant approached the plaintiff with a proposal that it could manufacture high quality Ampicillin Trihydrate. Plaintiff placed its requirement of bulk quantity of Ampicillin Trihydrate. Defendant expressed to the plaintiff that it was short of finds to manufacture bulk quantity of Ampicillin Trihydrate and desired some funds. Being in urgent need for supply to its customers and in particular foreign buyers, plaintiff agreed to advance money to the defendant. By and under 5 cheques dated 5.11.1991, 16.11.1991, 7.12.1991, 29.2.1992 and 2.5.1992 in the sum of Rs. 2,00,000/-, Rs. 1,00,000/-, Rs. 1,00,000/-, Rs. 5,00,000/- and Rs.12,00,000/- each, plaintiff advanced a total sum of Rs. 21,00,000/- to the defendant. It is alleged that the defendant neither manufactured, much less supplied Ampicillin Trihydrate to the plaintiff and as a consequence thereof, plaintiff suffered loss of business and goodwill with its customers.

4. It is alleged in the plaint that Sh.Vivek Gupta, Director of the defendant acknowledged receipt of advance in sum of Rs. 21,00,000/- from the plaintiff for executing order of Ampicillin Trihydrate. He acknowledged, in writing, liability of the defendant to repay to the plaintiff the said sum of Rs. 21,00,000/-.

5. Prayer made in the suit is to pass a decree in favour of the plaintiff and against the defedant in sum of Rs. 21,00,000/- together with interest @ 24% per annum.

6. As noted, by and under IA No. 2268/95, defendant seeks leave of this Court to defend the suit.

7. In the application, defendant has admitted execution of the letter dated 23.6.1994 written by Sh.Vivek Gupta, Director of the defendant.

8. Grounds on which leave to defend is prayer for is that it was the plaintiff which desired of the defendant to manufacture Ampicillin Trihydrate. Total quantity required by the plaintiff was 60 M.T. It was stated by the plaintiff that the medicine required was for export to Russia. Since manufacturing capacity of the defendant was limited, plaintiff desired that defendant should increase its manufacturing capacity. Rs. 21,00,000/- was paid by the plaintiff to the defendant as earnest money. Defendants spent substantial amount in expanding the capacity of its plant. Due to political turmoil in the earnest Soviet Union, orders received by the plaintiff for supply to Soviet Union were cancelled. Plaintiff never gave raw material for the manufacture of medicine. Plaintiff was to supply the raw material. In anticipation of the orders from the plaintiff, defendant did not accept the offer from the open market.

9. It is further stated that being aware of the fact that it was the plaintiff which was in breach of the contract, plaintiff never demanded return of the money advanced.

10. In respect of the acknowledgement dated 23.6.1994, it is pleaded that plaintiff expressed its serious accounting and tax difficulty in explaining payment of Rs. 21,00,000/-. Plaintiff desired that defendant should return Rs. 21,00,000/- to the plaintiff and in return, since plaintiff was expecting an order of over Rs.15 crores to European countries, services of defendant would be utilized for execution of the orders which would be obtained by the plaintiff. Accordingly, defendant wrote the letter dated 23.6.1994. It is specifically pleaded by the defendant as under:

'It was written in good faith since an assurance had been given for helping the defendant with the future order, as described above.'

11. It is further pleaded by the defendant:

'That all the money amounting to Rs. 21,00,000/- which was advanced as earnest money by the plaintiffs was to be adjusted towards the manufacturing charges on completion of which the defendant was to receive Rs.1.2 crores.

That the plaintiff was to supply the entire quantity to Russia and it was an export contract. The defendants spent entire earnest money on plant and machinery and staff but the plaintiff did not supply the raw material to the defendant and whenever the defendant approached the plaintiff, the defendant was assured of supply of raw materials.'

12. Defendant has annexed two documents with its reply being Annexures A and B. Annexure A reads as under:

'Certificate of manufacture and free sale-

This is to confirm and declare that we, Abner Pharmaceuticals Limited, based at C-2/41, Safdarjung Development Area, New Delhi are engaged in production of listed drugs at our premises at Vill. Deri Machha, Dadri, Distt Ghaziabad-U.P. in accordance with G.M.P. Standards and after duly being authorized to do so by the Drug Authorities, Health Ministry of India, under the supervision of competent and trained personnel.

We hereby authorise and nominate M/s. JR Sharma Oversea Pvt. Ltd., New Delhi to handle free sales of our said products in the International Market and confirm that the agreement will be valid for 2 years and will be renewed after its expiry upon mutual consent of both the parties.


1. Ampicillin Trihydrate.



(Vivek Gupta)'

13. Annexure B reads as under:

'The Manager,

State Bank of Bikaner & Jaipur,

G-72, Conn. Circus,

New Delhi-110 001

Dear Sirs,

We have an agreement with M/s. Abner Pharmaceuticals Ltd., r/o at C-2/41, S.D.A. New Delhi-110 016, for purchase of Ampicillin Trihydrate from them for the purpose of export. Since the company has to import certain raw-materials, you are requested to open foreign L/Cs on our behalf earmarking our L/C limits upto Rs. 15 lacs. We further undertake to pay the full amount along with over due interest and other charges, If M/s. Abner Pharmaceuticals Ltd., fail to retire the bills on presentation/due date. This undertaking is irrevocable and you have our authority to debit our account or to recover the amount from us, in case of default by M/s. Abner Pharmaceuticals Ltd.

Thanking you,

Yours faithfully,

for J.R. Sharma Overseas Pvt. Ltd.



14. During arguments, learned Counsel for parties accepted the authenticity and execution of Annexure A and Annexure B filed by the defendant along with its application seeking leave to defend.

15. Learned Counsel for the parties were ad idem that where a liquidated demand in money arose out of a written contract, suit would be maintainable under Order XXXVII Rule 1, C.P.C.

16. Sub-rule (3) of Rule 2 of Order XXXVII reads as under:

'The defendant shall not defend the suit referred to in Sub-rule (1) unless he enters an appearance and in default of his entering an appearance the allegations in the plaint shall be deemed to be admitted and the plaintiff shall be entitled to a decree for any sum, not exceeding the sum mentioned in the summons, together with interest at the rate specified, if any, up to the date of the decree and such sum for costs as may be determined by the High Court from time-to-time by rules made in that behalf and such decree may be executed forthwith.'

17. Clause (b) of Sub-rule (1) of Rule 2 of Order XXXVII requires a plaint presented under Order XXXVII to contain a specific averment that no relief which does not fall within the ambit of this Rule has been claimed in the plaint.

18. Perusal of Sub-rule (3) of Rule 2 of Order XXXVII would reveal that if a defendant does not enter appearance in a summary suit, allegations in the plaint shall be deemed to be admitted. This would entitle the plaintiff to a decree for a sum mentioned in the summons together with interest at the rate specified upto the date of the decree.

19. In a summary suit, the plaintiff has to specifically aver that no relief has been claimed beyond the ambit of Order XXXVII. If there is a claim of interest, claim for interest must also arise out of the instrument, enactment or guarantee on which the suit is based.

20. Written acknowledgement of the liquidated debt on which plaintiff places reliance does not contain any provision for payment of interest, much less interest @ 24% per annum.

21. Defendant would thus be entitled to defend the suit on the issue of interest which has been claimed by the plaintiff.

22. Incidentally, I may note that while pleading cause of action, plaintiff has fallen back on the 5 cheques issued by it to the defendant, besides pleading cause of action on the written acknowledgement dated 23.7.1994.

23. Suit has been filed on 5th August, 1991. While pleading cause of action, date of cheque in sum of Rs.1,00,000/- stated in para 5 of the plaint to be cheque dated 7.12.1991 has been pleaded as arising on 12.7.1991 when the cheque was stated to have been issued.

24. If cause of action is pleaded on the basis of the cheques issued in favour of the defendant, statutory interest payable under the Negotiable Instruments Act would be 18% per annum. Additionally, suit, in so far it seeks recovery under the cheque dated 12.7.1991 would be prima facie barred by limitation.

25. On the alternative cause of action pleaded, defendant would be entitled to leave to defend.

26. Even in respect of the written acknowledgement dated 26.6.1994, it has to be noted that the defendant has prefaced the acknowledgement by writing in the document itself that it had received advance for execution of order of Ampicillin Trihydrate. Advance was utilized to augment the capacity of the plant of the defendant according to need of plaintiff. Plaintiff did not lift the material.

27. Recording aforesaid, written acknowledgement proceeds to assure the plaintiff that the advance would be returned.

28. Defendant has sought to explain the document aforesaid.

29. At this stage, issue arises whether the pleas of the defendant are legally permissible and would they require evidence to be led.

30. In my opinion, where the defendant raises pleas to defeat the suit which would require evidence to be produced to substantiate the same, it would be improper to pre-judge the issue by pre-considering the possible evidence and as a consequence arriving at conclusions against the defendant. Where the defence is based on evidence that is legally and statutorily barred for being considered, or where the defence is contrary to law, alone, can the Court refuse leave to defend, subject to a general evaluation of the defence in the context of it being moonshine.

31. Both parties are ad idem that the plaintiff had overseas contracts for supply of Ampicillin Trihydrate and required the defendant to manufacture Ampicillin Trihydrate for it. Neither party has filed the original contract, if entered into between the parties, or documents showing exchange of correspondence on the issue. It is the categorical case of the plaintiff that it had export orders and defendant agreed to manufacture Ampicillin Trihydrate for it. Plaintiff claims to have advanced Rs. 21 lacs on various dates to the defendant towards the contract between the plaintiff and the defendant. Defendant responds by acknowledging receipt of payment but stating that the amount so utilized was to augment its manufacturing capacity. Defendant pleads breach of contract by the plaintiff. Defendant has also pleaded facts to explain the written acknowledgement dated 23.6.1994. Defendant has categorically pleaded that plaintiff had assured lifting of material for supply to European countries for which plaintiff claimed that it had received export orders.

32. Acknowledgement has to be seen in the backdrop of the fact that payments were received by the defendant from July, 1991 to May, 1992 and the plaintiff took no action for recovery. Obviously, there was some understanding between the parties. On 23.6.1994, defendant wrote the letter in question.

33. On the pleadings, defendant would be entitled to lead evidence to show the circumstances under which it wrote the letter dated 23.6.1994.

34. As far as IA Nos. 3773/1995 and 3805/1997 being applications under Order XII Rule 6, CPC filed by the plaintiff, I may only note that Order XII Rule 6, CPC comes into play where admission of a fact has been made either in the pleading or otherwise orally or in writing. The admission has to be categori

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cal and without exception. 35. The fact that the defendant has admitted execution of the document dated 23.6.1994 by itself is not an admission which attracts Order XII Rule 6, CPC for the simple reason that the defendant, having accepted execution of the document, has sought to explain the same. If explanation were to be accepted, defendant would succeed in evading liability under the document. 36. Defendant has admitted having received Rs. 21 lacs from the plaintiff. This factor has to be considered in the context whether conditional or unconditional leave to defend should be granted. 37. In view of the defence laid by the defendant, onus would be on the defendant to prove the case set up. In my opinion, though it is entitled to leave to defend, leave has to be conditional, in that, plaintiff has to be secured the sum in the suit if the plaintiff were to succeed. 38. IA Nos. 3773/1995 and 3805/1997 stand dismissed. 39. IA No. 2268/95 is disposed of granting conditional leave to defend to the defendant. Defendant would be permitted to file a written statement within four weeks from today subject to the defendant securing a sum of Rs. 21 lacs by way of either a bank guarantee issued by a scheduled bank in favour of the Registrar of this Court. Bank guarantee to be in the sum of Rs. 21 lacs; or by pledging in favour of the Registrar of this Court a fixed deposit receipt issued by a scheduled bank or any Government security, or by creating a charge on immovable property in sum of Rs. 21 lacs within a period of 3 weeks from today. 40. No costs.