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Judgment
MANMEET PRITAM SINGH ARORA, J:
The present petition has been filed under Article 227 of the Constitution of India challenging the order dated 06.04.2023 (‘impugned order’) passed by the Additional District Judge-03, South District, Saket Court, New Delhi (‘Trial Court’) in CS No. 476/2022, titled as Shri Nivashan Ganesh v. Baroda Cricket Association (‘Summary Suit’) whereby the Trial Court has allowed the application of the Respondent herein seeking leave to defend filed under Order XXXVII Rule 3 (5) of the Code of Civil Procedure, 1908 (‘CPC’), thereby granting conditional leave to defend to the Respondent herein, subject to the condition of depositing an amount of Rs 20,00,000/- by way of an FDR in the name of the Court.
The Petitioner herein is aggrieved by the impugned order and contends that the Respondent’s application seeking leave to defend ought to have been dismissed and the suit ought to have been decreed in his favour.
The Summary Suit has been filed by the Petitioner under Order XXXVII of CPC, seeking a recovery of Rs. 64,35,000/- against the Respondent.
The Petitioner herein is the original Plaintiff and the Respondent herein is the original Defendant in the Civil Suit, pending adjudication before the Trial Court.
For the sake of convenience, the parties herein are being referred to as per their rank and status before the Trial Court.
Brief facts leading to filing of present petition are as under:
The Summary Suit arises out of the claim of the Plaintiff that the Defendant through its Chartered Accountant i.e., K.C. Mehta and Co., engaged the Plaintiff to appear on behalf of the Defendant before the Supreme Court of India in Income Tax Appeals being Civil Appeal No. 19394 of 2020 and Special Leave Petition (SLP) No 1486 of 2020 (collectively referred to as ‘Income Tax Appeals’), which were pending before that Court. It is stated in the plaint that various conferences in this regard were held and written submissions were settled by the Plaintiff. It is asserted in the plaint that the fees to be charged by the Plaintiff were set out from time to time and in that regard, three memorandums of fees dated 24.07.2021, 04.08.2021 and 11.09.2021 (collectively referred to as ‘invoices’) were sent to K.C. Mehta and Co., who accepted the same without any objection and forwarded the said invoices to the Defendant to pay the same. It is stated that the Plaintiff also appeared for the Defendant in the said Appeals and despite issuance of three invoices aggregating to Rs. 64,35,000/-, the Defendant refused to pay the aforesaid amount. In view of the continued failure of the Defendant with a request to clear the outstanding dues in respect of the aforesaid invoices, the Plaintiff filed the Summary Suit against the Defendant.
After receipt of summons, the Defendant filed its application seeking leave to defend filed under Order XXXVII Rule 3(5) of CPC. In its defence, the Defendant has denied having any engagement with the Plaintiff to appear on behalf of the Defendant before the Supreme Court in the Income Tax Appeals. Instead, it has been averred that K.C. Mehta and Co. unilaterally approached the Plaintiff without any authorization and consent of the Defendant, for settlement of written submissions and engagement of the Plaintiff to appear before the Supreme Court in the Income Tax Appeals.
It is further averred that no terms and conditions of fee structure of the Plaintiff for alleged conferences and appearances before the Supreme Court were ever sent to Defendant by K.C. Mehta and Co. and only a preliminary and introductory conference was held with the Plaintiff on 08.02.2021 upon the insistence of K.C. Mehta and Co. for considering the engagement of the Plaintiff. Amongst other grounds Defendant also challenged the maintainability of the Summary Suit filed by the Plaintiff under Order XXXVII of CPC on the ground that emails filed on record does not suggest any written contract between the parties and due to absence of a written contract to pay any pre-decided amount or crystalized amount as fees, a summary procedure cannot be invoked by the Plaintiff.
The Trial Court, by the impugned order, observed that in view of the defence pleaded by the Defendant in its application seeking leave to defend, the very engagement of the Plaintiff and the quantum of fees towards Plaintiff’s professional services has become clouded. Moreover, after perusal of the documents placed on record, the Trial Court opined that it appears prima facie that there is no admitted liability between the Plaintiff and the Defendant and there is nothing meaningful on record, to reflect that the fees was settled between the parties. The Trial Court further noted that the Defendant in its defence has raised various contentions such as non-joinder of party i.e. K.C. Mehta and Co., privity of contract between the parties to the suit qua the maintainability of the Summary Suit filed by the Plaintiff and other triable issues which in its considered opinion can only be adjudicated once evidence is led by the parties to the Summary Suit. On these grounds, the Trial Court, therefore, granted leave to the Defendant to defend the Summary Suit, subject to condition of deposit of Rs 20,00,000/-.
Feeling aggrieved by the aforesaid observations of the Trial Court, the Plaintiff has filed the present suit before this Court.
It is an admitted position that the Defendant has since deposited the sum of Rs 20,00,000/- before the Trial Court as directed vide impugned order dated 06.04.2023.
Arguments of the Plaintiff
The Plaintiff appeared in person and addressed arguments. He stated that the Trial Court has failed to appreciate the important aspects of the matter that were agitated and reflected by the Plaintiff in his reply to the application seeking leave to defend filed by the Defendant.
He stated that the Summary Suit under Order XXXVII CPC has been filed due to the non-payment of three invoices dated 24.07.2021, 04.08.2021 and 11.09.2021 aggregating to Rs. 64,35,000/-
He stated that the Plaintiff was engaged by K.C. Mehta and Co., a leading firm of chartered accountants based in Vadodara to appear on behalf of the Defendant in the Income Tax Appeals before the Supreme Court. He stated that the paper-books of the Income Tax Appeals were voluminous and were sent to him by K.C. Mehta and Co. under the specific instructions of the Defendant as is documented in the emails filed on record. He stated that Mr. Ajit Patel, an office bearer of the Defendant was duly copied on the emails engaging the Plaintiff and forwarding the paper-books. He stated in fact, a joint video conference was held on 08.02.2021 with Mr. Bhavin Marfatia, partner of K.C. Mehta and Co. and Mr. Ajit Patel, the representative of the Defendant and Mr. Kabir Hathi, Advocate of the Defendant as well participated in the said meeting.
He stated that thereafter, by email dated 13.02.2021, Mr. Bhavin Marfatia, partner of K.C. Mehta and Co., sent written submissions to the Plaintiff for settlement, and the work was duly completed by the Plaintiff. He stated that Mr. Bhavin Marfatia issued an email dated 19.02.2021 recording his due satisfaction with the settled written submissions sent back by the Plaintiff.
He stated that the three invoices were sent by the Plaintiff to K.C. Mehta and Co., which were in turn approved and forwarded by K.C. Mehta and Co. to the Defendant with instruction to pay the same. He relies upon the email dated 13.09.2021 addressed by K.C. Mehta and Co. to the Plaintiff. He also relied upon the contents of the letter dated 28.06.2022 addressed by K.C. Mehta and Co. to the Plaintiff confirming that the invoices have been sent to the Defendant with a request to make payments. He stated that no objection was raised by the Defendant to the said invoices up to the filing of the underlying suit in July, 2022.
He stated that K.C. Mehta and Co. throughout acted as Defendant’s agent and representative in engaging the Plaintiff, accepting the Plaintiff’s invoices and further calling upon the Defendant to make payments towards the invoices raised. He stated that K.C. Mehta and Co.’s actions are binding upon the Defendant and render the Defendant liable to pay the amounts agreed to be paid by K.C. Mehta and Co.
He stated that the application filed by the Defendant under Order XXXVII Rule 3(5) of CPC seeking leave to defend contains false statements, which are evident on the face of the record; and in this regard, he relied upon the emails and WhatsApp messages exchanged between the Plaintiff and representatives of the Defendant to evidence the falsity of the statements pleaded in the said application. He stated that in view of these false statements, the deponent of the application seeking leave to defend Mr. Ajit Jaywant Lele has perjured himself and in fact this Court must initiate perjury proceedings against him. He stated that taking a false stand in the leave to defend also disentitles the Defendant from any consideration in proceedings under Order XXXVII of CPC and thus, the application seeking leave to defend ought to have been rejected.
He stated that the falsity of the pleas raised by the Defendant in the leave to defend can be clearly established by the emails placed on record. He stated, however, the Trial Court in the impugned order has not dealt with the said plea of perjury raised by the Plaintiff.
Arguments of the Defendant
In reply, Mr. Kabir Hathi, learned counsel for the Defendant stated that the present suit filed under Order XXXVII CPC for recovery of the fees of Rs 64, 35,000/- raised through three invoices, is not maintainable. He stated that the emails exchanged between K.C. Mehta and Co. and the Plaintiff cannot be construed as a written contract under Order XXXVII Rule 2(1)(b) of CPC.
He stated that even on perusal of the said emails relied upon by the Plaintiff, it is apparent that there is no admission of liability to pay; there is no liquidated demand to be recovered and there is no written contract to pay between the parties. He stated that in the emails there was no agreement with respect to the fees structure or the Court appearances referred to in the three invoices. He stated, thus, these emails placed on record cannot be relied upon to prove any written contract. He stated thus, the Plaintiff could have at best filed an ordinary civil suit for recovery of money.
He stated that the documents on record only prove that a virtual conference was held between the parties on 08.02.2021. He stated that there are no documents on record evidencing that the Plaintiff was instructed/engaged to represent Defendant on 10.02.2021 or 17.02.2021 or 02.08.2021 or 24.08.2021 before the Supreme Court. He stated that there is no document to show that an agreement was entered between the parties as regard the schedule of fees charged in the said invoices. He stated that there is, thus, no admitted liability between the Plaintiff and the Defendant. He stated sending the invoices to K.C. Mehta and Co. cannot justify invoking the summary procedure under XXXVII of CPC.
He stated that the impugned order passed by the Trial Court is in consonance with the evidence on record. He stated that the Trial Court has rightly held that even if the engagement of the Plaintiff is assumed, the schedule of agreed fees between the parties has not been proved on record. He stated that there is no error in the impugned order warranting exercise of supervisory jurisdiction of this Court under Article 227 of the Constitution of India. He relied upon the judgment of the Supreme Court in Garment Craft v. Prakash Chand Geol1.
He further relied upon the following judgments (i) IDBI Trusteeship services Limited v. Hubtown Limited2; (ii) BL Kasyap and Sons Ltd. v. JMS Steel & Power Corporation Ltd.3 to contend that leave to defend shall ordinarily be granted; and (iii) GE Capital Services India v. May Flower Healthcare Pvt Ltd.4 (iv) Yogesh v. Ranjit5 to contend that the Summary Suit filed by the Plaintiff is not maintainable under Order XXXVII of CPC in absence of a written contract between the parties.
Findings and Analysis
This court has heard the submissions of parties and perused the record. The parties have filed written submissions in support of their arguments.
The Plaintiff has filed the underlying suit under Order XXXVII of CPC for recovery of an amount of Rs. 64,35,000/- under the three invoices drawn on the Defendant through K.C Mehta and Co. for his professional engagement as a senior counsel to appear before Supreme Court in Civil Appeal No. 19394/2020 and SLP No. 1486/2020 titled C.I.T. vs. Baroda Cricket Association.
The first invoice dated 24.07.2021 is for a sum of Rs. 39.60 lakhs for (i) perusal of the record of the said Income Tax Appeals as well as the appearances before the Supreme Court on 10.02.2021 and 17.02.2021, (ii) video conferences held with Mr. Bhavin Marfatia, partner of K.C. Mehta and Co. as well as the representatives of Defendant on 04.02.2021, 07.02.2021, 08.02.2021 as well as 12.02.2021 and (iii) for drafting of two sets of written submissions.
The second invoice dated 04.08.2021 is for a sum of Rs. 13.75 lakhs for (i) perusal of the record as well as the appearance before the Supreme Court on 02.08.2021 and (ii) teleconferences with Mr. Bhavin Marfatia, partner of K.C. Mehta and Co. on 31.07.2021 and 01.08.2021.
The third invoice dated 11.09.2021 is for a sum of Rs. 11 lakhs for perusal of the record and preparation for the final hearing scheduled before the Supreme Court on 24.08.2021.
Each of the bills also contains a component of 10% towards clerkage.
The Plaintiff has placed on record emails dated 01.02.2021, 04.02.2021, 08.02.2021, 11.02.2021, 13.02.2021 and 19.02.2021, exchanged with Mr. Bhavin Marfatia, partner of K.C. Mehta and Co. and duly copied to Mr. Ajit Patel, an office bearer of Defendant, evidencing the Plaintiff’s engagement upon instructions of the Defendant for the Income Tax Appeals pending before the Supreme Court. In few of these emails, Mr. Kabir Hathi, Advocate engaged by the Defendant to appear in the same Income Tax Appeals before the Supreme Court has also been copied by Mr. Bhavin Marfatia.
In fact, Mr. Kabir Hathi, Advocate has himself corresponded with the Plaintiff herein by email dated 19.02.2021 in respect of the written submissions to be filed in the Income Tax Appeals.
In the first email dated 01.02.2021, Mr. Bhavin Marfatia, partner of K.C. Mehta and Co. has categorically written that he is forwarding the case files of the Income Tax Appeals to the Plaintiff on the instructions of the client, i.e., the Defendant and Mr. Ajit Patel, the office bearer of the Defendant has been duly copied in the said email. The image of email, as available in the record, is reproduced hereinbelow for reference:
This email was followed by an email dated 04.02.2021, wherein Mr. Bhavin Marfatia, partner of K.C. Mehta and Co. apprised the Plaintiff with respect to the contact and details of Advocate-on-Record engaged by the Defendant for the Income Tax Appeals. In this email, as well, Mr. Ajit Patel, the office bearer of the Defendant is duly copied. The image of email, as available in the record, is reproduced hereinbelow for reference:
The emails 01.02.2021, 04.02.2021, 08.02.2021, 11.02.2021, 13.02.2021 and 19.02.2021 filed by the Plaintiff and referred to hereinabove are not disputed by the Defendant. However, the Defendant during the arguments has raised a principal defence that K.C. Mehta and Co. had no authority or permission to engage the Plaintiff to represent the Defendant in the Income Tax Appeals before the Supreme Court and consequently the Defendant is not liable for payment of the invoices.
Principal-Agent relationship between the Defendant and K.C. Mehta and Co.
The first question for consideration before this Court, therefore, is whether on the basis of the emails placed on record can it be said that K.C. Mehta and Co. had authority to act on behalf of the Defendant as their agent to engage the Plaintiff to represent the Defendant before the Supreme Court in the Income Tax Appeals and the Plaintiff was reasonably induced to believe that the acts of K.C. Mehta and Co. were within the scope of their authority. For, the sequitur of finding this issue in favour of the Plaintiff would be that Defendant would then become bound by the acts of K.C. Mehta and Co. in engaging the Plaintiff and approving the invoices raised by the Plaintiff.
At this stage it will be apposite to refer to Sections 182 and 187 of the Indian Contract Act, 1872 which reads as under:
“182.“Agent” and “principal” defined.—An “agent” is a person employed to do any act for another, or to represent another in dealings with third persons. The person for whom such act is done, or who is so represented, is called the “principal” .
187.Definitions of express and implied authority.— An authority is said to be express when it is given by words spoken or written. An authority is said to be implied when it is to be inferred from the circumstances of the case; and things spoken or written, or the ordinary course of dealing, may be accounted circumstances of the case.”
Before proceeding further, it would be relevant to refer to affidavit dated 20.05.2024 filed by the Defendant in these proceedings stating K.C. Mehta and Co. is a consultant of the Defendant and is engaged by Defendant to represent them before various Income Tax Authorities, after issuing necessary authorization and approval in their favour. The relevant portion of the affidavit dated 20.05.2024 reads as under:
“3.It is most respectfully stated that KC Mehta and Co., Chartered Accounts are consultants of Baroda cricket Association and are engaged to represent before various income tax authorities after issuing necessary authorization and approval.”
(Emphasis Supplied)
The Defendant has also placed on record an extract of WhatsApp messages exchanged on 30.07.2021 between Mr. Ajit Patel, office bearer of the Defendant, Mr. Bhavin Marfatia, partner of K.C. Mehta and Co. and a third person whose identity is not disclosed (presumably Mr. Kabir Hathi, Advocate), discussing the engagement of the Plaintiff for the upcoming hearing on 02.08.2021 in the Income Tax appeals. The existence of the WhatsApp group evidences that Mr. Bhavin Marfatia, partner of K.C. Mehta and Co. was actively engaged by the Defendant as a consultant for the Income Tax Appeals before the Supreme Court.
The Plaintiff has also placed on record WhatsApp messages exchanged between Plaintiff’s court clerk and Mr. Kabir Hathi, Advocate on 02.08.2021, which again evidences Plaintiff’s clear understanding that he was led to believe that Plaintiff has been engaged to appear in the Income Tax Appeals on behalf of the Defendant for the hearing dated 02.08.2021.
The contents of the admitted emails placed on record and the WhatsApp messages dated 30.07.2021 and 02.08.2021, leaves no manner of doubt that Mr. Bhavin Marfatia, partner of K.C. Mehta and Co. engaged the Plaintiff to represent the Defendant in the Income Tax Appeals on the instructions of the Defendant and kept the Defendant consistently informed about the said engagement.
The contention of the Defendant that its consultant K.C. Mehta and Co. had no authority to engage the Plaintiff is a false plea without any merit. The active and direct involvement of Mr. Ajit Patel, the office bearer of Defendant throughout the engagement of the Plaintiff for the Income Tax Appeals since February, 2021 with Mr. Bhavin Marfatia, partner of K.C. Mehta and Co can be clearly established from the emails dated 01.02.2021, 04.02.2021, 08.02.2021, 11.02.2021, 13.02.2021 and 19.02.2021 and aforementioned WhatsApp message dated 30.07.2021. In view of the direct engagement of the Defendant in the appointment of the Plaintiff, the plea of the Defendant that a senior counsel could only be engaged through an Advocate-on-Record does not arise for consideration in the facts of this case. There is no bar in law for the Defendant to directly engage a senior counsel of its choosing directly or through its Consultant or through its Advocate-on-record. The assertion of the Defendant in its application for leave to defend disputing the engagement of the Plaintiff is, therefore, ex-facie contrary to the undisputed emails on record and the learned Trial Court failed to appreciate this fact while passing the impugned order.
The aforesaid facts and documents on record also show that the relationship between K.C. Mehta and Co. and the Defendant is that of the principal and the agent as contemplated in Section 182 of the Indian Contract Act, 1872. This is also borne out from the contents of the Defendant’s affidavit dated 20.05.2024 filed in these proceedings, wherein they have admitted that K.C. Mehta and Co. is engaged by them as a consultant.
Ostensible Authority of K.C. Mehta and Co. to bind the Defendant for the liability arising out of the engagement of the Plaintiff
As already recorded hereinabove that the Plaintiff had raised three invoices upon the Defendant and the said invoices were sent through Mr. Bhavin Marfatia, partner of K.C. Mehta and Co. The said three invoices contained details of the work carried out by the Plaintiff including the appearances, conferences and settlement of the written submissions qua the Income Tax Appeals. The three invoices were approved by Mr. Bhavin Marfatia, partner of K.C. Mehta and Co. and forwarded to the Defendant with request for payment. In this regard, the Plaintiff has placed on record the emails dated 01.04.2022, 11.09.2021 and 13.09.2021 exchanged between the Plaintiff and Mr. Bhavin Marfatia, partner of K.C. Mehta and Co.
The plaintiff has also placed on record the letter dated 28.06.2022 issued by Mr. Bhavin Marfatia, partner of K.C. Mehta and Co. to the Plaintiff reiterating that he has forwarded each invoice to the Defendant with the request for making payment. The contents of this letter are reproduced here under:
“To Mr.S.Ganesh Senior Advocate B-11, Gulmohar Park New Delhi-110049
Re: Baroda Cricket Association-Supreme Court Matters CA No. 19394/2020 & SLP 1486/2020
Dear Sir,
I regret to inform you that despite numerous reminders from us, the Baroda Cricket Association is not paying the fees for the supreme Court Income-tax Appeals for which we had engaged you on their instructions. We had forwarded to them each Memo of Fees received from you and requested them to make payment. This is for your information please.
For K.C.Mehta & Co. Ltd. Chartered Accountants.
Bhavin Marfatia Partner Baroda, 28th June 2022”
(Emphasis Supplied)
The conjoint reading of the emails dated 13.09.2021, 01.04.2022 and the letter dated 28.06.2022 issued by Mr. Bhavin Marfatia, partner of K.C. Mehta and Co. shows that Mr. Bhavin Marfatia confirmed the veracity of the contents of the invoices with respect to the conferences held, appearances of the Plaintiff before the Supreme Court and the written submission settled by Plaintiff. This act of Mr. Bhavin Marfatia, partner of K.C. Mehta and Co. also shows approval of the rates at which the fees was charged by the Plaintiff from the Defendant towards the appearances, conferences, settlement of written submissions, clerkage, etc.
The Defendant’s argument that K.C. Mehta and Co. acted without authority in accepting the plaintiff’s invoices and forwarding the same for payment is without merit. The Defendant in its affidavit dated 20.05.2024 has stated that it has not registered any formal or written protest with K.C. Mehta and Co. for engaging the Plaintiff or forwarding the subject invoices to them for payment. In the affidavit, the Defendant admits that it continues to transact with K.C. Mehta and Co. for all its Income Tax matters before the department and authorities without any demur. The relevant portion of the affidavit reads as under:
“4.It is most respectfully stated that Baroda Cricket Association has not issued any written communication to KC Mehta and Co., Chartered Accountants to register our protest or objection to the alleged engagement since Baroda Cricket Association was under a bona fide belief that K.C. Mehta and Company had conveyed to the Petitioner the reservation of Baroda Cricket Association on any involvement of the Petitioner in the matter. Moreover, no invoice was also raised until 24th July, 2021 and therefore there was no reason for the Baroda Cricket Association to object or complaint against KC Mehta and Co. Baroda Cricket Association has also not issued any written communication to KC Mehta and Co., Chartered Accountants to object to the invoices raised and sent by the Petitioner to K.C Mehta and Company since the same were never accepted by the Baroda Cricket Association. Baroda Cricket Association disputed its liability to pay towards these invoices. The objection to these invoices was communicated orally to KC Mehta and Co., Chartered Accountants immediately on being intimated verbally by KC Mehta and Co., Chartered Accountants of receiving the first invoice dated 24.7.2021, I respectfully state that the non-acceptance, objection, and denial to pay towards the first and subsequent invoices was communicated orally and was in the knowledge of KC Mehta & Co., Chartered Accountants.
5.It is most respectfully stated that the Baroda Cricket Association has not filed any complaint with the Institute of Chartered Accountants against KC Mehta and Company, Chartered Accountants.”
(Emphasis Supplied)
The conduct of the Defendant in not raising any written objection or lodging a formal protest with K.C. Mehta and Co. for engaging the Plaintiff and approving as well as forwarding the invoices for payments to the Defendant evidences that the objection raised in the leave to defend application with respect to the authority of K.C. Mehta and Co. to engage the Plaintiff is a false and vexatious defence and intended to mislead the Court. The absence of filing any complaint about K.C. Mehta and Co. with Institute of Chartered Accountant, is also indicative of the fact that Defendant had no grievance with the acts of K.C. Mehta and Co., in engaging the Plaintiff or approving the invoices sent by the Plaintiff.
The emails filed by the Plaintiff show that the Defendant has positively allowed K.C. Mehta and Co. to transact with the Plaintiff on his behalf and that this conduct of the Defendant and K.C. Mehta and Co. induced the Plaintiff to believe that the Defendant has authorized K.C. Mehta and Co. to acknowledge the Defendant’s obligations towards the Plaintiff, in the facts of this case.
As per Section 237 of the Indian Contract Act, 1872, even where the agent has done acts without the authority on behalf of the principal and thereby induced the third person to believe that such acts were within the scope of the agent’s authority, then as well the principal is bound by the commitment made by the agent. Section 237 of the Indian Contract Act, 1872 reads as under:
237. Liability of principal inducing belief that agent’s unauthorized acts
were authorized.— When an agent has, without authority, done acts or incurred obligations to third persons on behalf of his principal, the principal is bound by such acts or obligations, if he has by his words or conduct induced such third persons to believe that such acts and obligations were within the scope of the agent’s authority.
In this regard, it would be relevant to refer to the judgment of Armagas Ltd. v. Mundogas S.A.6 of the House of Lords cited with approval by the Supreme Court in LIC v. Rajiv Kumar Bhasker7, wherein paragraphs 37 and 40 read as under:
“37.Yet again in Armagas Ltd. v. Mundogas S.A. [1986 AC 717 : (1986) 2 All ER 385 : (1986) 2 WLR 1063 (HL)] the House of Lords pointed out that even in the absence of any express contract of agency in relation to the transaction made with the third party, ostensible authority may be presumed, stating: (All ER pp. 389j-390a)
“Ostensible authority comes about where the principal, by words or conduct, has represented that the agent has the requisite actual authority, and the party dealing with the agent has entered into a contract with him in reliance on that representation. The principal in these circumstances is estopped from denying that actual authority existed. In the commonly encountered case, the ostensible authority is general in character, arising when the principal has placed the agent in a position which in the outside world is generally regarded as carrying authority to enter into transactions of the kind in question. Ostensible general authority may also arise where the agent has had a course of dealing with a particular contractor and the principal has acquiesced in this course of dealing and honoured transactions arising out of it.” ……….
40.Agency as is well settled, is a legal concept which is employed by the Court when it becomes necessary to explain and resolve the problems created by certain fact situations. In other words, when the existence of an agency relationship would help to decide an individual problem, and the facts permits a court to conclude that such a relationship existed at a material time, then whether or not any express or implied consent to the creation of an agency may have been given by one party to another, the Court is entitled to conclude that such relationship was in existence at the time, and for the purpose in question. [See Establishing Agency by GHL Fridman — 1968 (84) Law Quarterly Review 224 at p. 231.]” (Emphasis Supplied)
Mr. Bhavin Marfatia, partner of K.C. Mehta and Co. thus, evidently had the ostensible authority from the Defendant, which led the Plaintiff to believe that Mr. Bhavin Marfatia, partner of K.C. Mehta and Co. was authorised to engage the Plaintiff to appear in the Income Tax Appeals before the Supreme Court, settle the monetary terms of the engagement, accept the invoices, approve the same and acknowledge the outstanding payments payable by the Defendant in favour of the Plaintiff towards his professional fees.
Approved/Certified Bills by agents are written documents and becomes payable by principal and recovery thereunder is maintainable under Order XXXVII CPC
In the facts of this case, this Court has hereinabove concluded that on the basis of the undisputed emails and WhatsApp messages filed by the Plaintiff and Defendant, it is evident that Mr. Bhavin Marfatia, partner of K.C. Mehta and Co. was the agent of the Defendant. Therefore, since Mr. Bhavin Marfatia, partner of K.C. Mehta and Co. accepted the invoices issued by the Plaintiff, approved the contents of the invoices and forwarded the same to the Defendant with instructions for payment, the Defendant is now estopped from alleging that the Plaintiff was neither engaged by the Defendant nor the financial terms of Plaintiff’s engagement were settled between the parties.
In this regard the legal principle of certification of invoices by an agent is held to be binding on the principal as laid down by the Coordinate Bench of this Court in Adharshila v. SPA Lifestyle Pvt. Ltd.8 relying on Pact India v. Sanjiv Bhasin9 would become appropriate in the instant case wherein it was observed as under:
“12.Having heard the learned counsel for the petitioner and having perused the paper book, I am of the view that on 05th May, 2008, the final bill had been certified by the Project Management Consultant of the respondent company. In my opinion, once the bill had been certified, then the amount becomes payable as the said final bill was a written document not only prepared by the petitioner but also certified by an agent of the respondent and it would have the same character as if the said bill had been signed by both the parties namely, the petitioner and the respondent. In reaching this conclusion, I am fortified by a judgment of this Court in Pact India v. Sanjiv Bhasin, (2001) 5AD (Delhi) 667 wherein it has been held as under : -
“9.As already mentioned, the defendant himself agrees that once the bill is certified by the Architect amount there under becomes payable. Final bill, which is a written document, prepared by the plaintiff on being certified by the Architect i.e. the agent of the defendant will have the character as if the said bill is signed by both the parties, namely by plaintiff and by the defendant though his authorised agent, the Architect and it would be a written contract acknowledging the debt or liquidated demand in money payable by the defendant to the plaintiff. The suit therefore would be clearly covered by Order XXXVII. In Mrs. Sushila Mehta v. Shri Bansi Lal Arora, ILR 1982 Delhi 320, this court has held that the receipt executed by defendant acknowledge in receipt of certain amount from the plaintiff for the purpose of allotment of shares as application money clearly amounts to contract. (Also see Food Corporation of India v. Bal Krishan Garg, 21 (1982) DLT 167). Therefore, I am of the view that no triable issue is raised by the defendant and he is not entitled to any leave to defend the suit. The plaintiff is entitled to a decree.” (Emphasis Supplied)
The Coordinate Bench in Pact India v. Sanjiv Bhasin (supra) also held that a suit filed on the basis of invoices approved/certified for payment by the agent form a written document and a suit filed under Order XXXVII CPC on the basis of the approved invoices is maintainable.
The Defendant during arguments disputed the conferences mentioned in the invoices dated 24.07.2021 and 04.08.2021. However, the invoices state that each of the conferences was attended by Mr. Bhavin Marfatia, whether by video or through telephone. Mr. Bhavin Marfatia has approved the invoices and forwarded the same to the Defendant for payment. The said act of Mr. Bhavin Marfatia evidences that he confirms that the conferences were indeed held.
Similarly, with respect to the appearances before the Supreme Court on 10.02.2021, 17.02.2021 and 02.08.2021 as well Mr. Bhavin Marfatia has approved the fees for the said appearances. The appearance of the Plaintiff for the date 10.02.2021 is admitted on record. The Defendant has contended that on 17.02.2021, the matter was not taken up for hearing and on 02.08.2021, the appearance of Plaintiff is not recorded. In the opinion of this Court, the agreement between the Plaintiff and K.C. Mehta and Co. to raise invoice for date of 17.02.2021 on which matter was not taken up is a matter of contract and it is apparent from the record that K.C. Mehta and Co. approved the charges for the said appearance. The Plaintiff has placed on record WhatsApp chat between the Plaintiff’s Court clerk and Mr. Kabir Hathi, Advocate to prove his appearance on 02.08.2021. The non-recording of the appearance of the Plaintiff in the order sheet despite appearance is a reasonable possibility; however, the overriding factor is that K.C. Mehta and Co. approved the charges for the said appearance dated 02.08.2021.
The settlement of written submission is not in dispute and is also documented in emails dated 11.02.2021, 13.02.2021 and 19.02.2021
Acknowledgement of Invoices issued by the Plaintiff to Defendant through K.C. Mehta and Co. forms written contract between the Parties
The objection of the Defendant that the present suit under Order XXXVII of CPC is not maintainable in the absence of a written agreement or a liquidated demand is also without any merits. As noted hereinabove, the invoices sent by the Plaintiff to K.C. Mehta and Co. was accepted and approved by them for the quantum of work recorded therein and the quantum of fees claimed by the Plaintiff for the said work. K.C. Mehta and Co. was acting as the agent of the Defendant and its act of approval of the invoices binds the Defendant. In view of the approval of the contents of the invoices and its forwarding by the K.C. Mehta and Co. to Defendant with instructions for making payment, the amount of the invoices, therefore, becomes a written document which represents a crystalized and liquidated demand, which has been approved/certified by the agent of the Defendant. The invoices having been issued by the Plaintiff, accepted and approved by the agent, i.e., K.C. Mehta and Co., thus, signifies a written contract between the parties to make payment to the Plaintiff.
In this regard it would be relevant to refer to the judgments of this Court in M/s Panjab Pen House v. Samrat Bicycles Limited10, Corporate Voice Private Limited v. Uniroll Leather India Limited11, Beacon Electronics v. Sylvania and Laxman Limited12, KLG Systel Limited v. Fujitsu ICIM Ltd.13 and Bharat Forge Ltd. v. Onil Gulati14 wherein it has been categorically held that invoices/bills of a plaintiff which have been duly acknowledged by the defendant form a written contract within the contemplation of Order XXXVII of CPC and a summary suit is maintainable.
In view of the aforesaid judgment, the reliance placed by the Defendant on the judgments GE Capital Services India v. May Flower Healthcare Pvt Ltd. (supra) and Yogesh v. Ranjit (supra) is not attracted to the facts of this case as in none of these cases the plaintiff’s claim was based on approved invoices. In GE Capital Services India v. May Flower Healthcare Pvt Ltd (supra), the plaintiff relied upon a ledger account to maintain the claim and in Yogesh v. Ranjit (supra) an oral agreement was relied upon by the plaintiff therein. Thus, the said facts are distinguishable.
Frivolous and Vexatious Defence pleaded by the Defendant
In the prevalent litigation practice the engagement of a senior counsel such as the Plaintiff for appearances before the Court(s) or conferences or settlement of pleadings herein is commonly done on oral instructions of the client/party to its Advocate-on-Record or a consultant assisting the client/party such as K.C. Mehta and Co. or directly by the client/party. The invoices are raised by the senior counsel on the client/party through the Advocate-on-Record or the consultant, who acts as the agent of the client. It is the bounden obligation of the Advocate-on-Record or the consultant to approve the charges of legal fees mentioned in the invoices before forwarding the same to the client/party for payment. The act of the Advocate-on-Record or the consultant in forwarding the invoices to the client with instructions for payment, leads to an inescapable conclusion that the quantum of work mentioned in the invoice and the amount of fees charged represent the agreed schedule of charges between the senior counsel and the said Advocate-on-Record or the consultant as well as the certification of the services rendered by the senior counsel.
The essence of the dispute appears to be dissatisfaction of the Defendant with the quantum of charges raised by the Plaintiff vis-à-vis the perceived lack of value of services received from the Plaintiff. The distinct impression, the Court got while hearing the argument was that as per the Defendant, the charges levied were exorbitant. However, in the opinion of this Court, the said objections of the Defendant would not take away from the entitlement of the Plaintiff to recover the amount due since the Defendant’s agent i.e., K.C. Mehta and Co., who engaged the Plaintiff, approved the fees charges of the Plaintiff and was satisfied with the services rendered by the Plaintiff. The Defendant cannot be permitted to resile from the contractual liability assumed by it while authorizing K.C. Mehta and Co. to engage the services of the Plaintiff.
In the facts of the present case, the Defendant admittedly received all the three invoices raised by the Plaintiff from K.C. Mehta and Co. with instructions for payments. However, on its own admission, Defendant never communicated its written objection to the said invoices to the Plaintiff or even K.C. Mehta and Co. It is admitted that the written objection to the invoices was raised for the first time only by way of application seeking leave to defend in the underlying suit. Therefore, the defences raised in leave to defend application on the face of it, is an afterthought and a sham defence raised with the sole purpose to defeat the legitimate claim of the Plaintiff.
In ordinary circumstances, if the Defendant would have promptly lodged its objections at the contemporaneous time with K.C. Mehta and Co. for accepting, approving the three invoices and forwarding the invoices, the objections now raised could be said to raise a triable issue. However, as noted above, no written objections were lodged by Defendant and instead Defendant continues with an amiable business relationship with K.C. Mehta and Co. without any hiccup, which is evident from the contents of its affidavit dated 20.05.2024. This inaction of the Defendant evidences that the allegation of the Defendant in its application for leave to defend that K.C. Mehta and Co. engaged Plaintiff without its consent is false and malicious. Such defence is clearly a moonshine and bogus. In ordinary course, Defendant would have lodged its protest with K.C. Mehta and Co. for exposing it to the plaintiff’s claims if it actually believed that the said claims were unauthorised. However, absence of lodging of such a protest or initiation of action against K.C. Mehta and Co. belies the defence raised in the application seeking leave to defend. In this regard the statement of the counsel for Defendant recorded on 16.05.2024 is relevant and the same reads as under:
“2.He states on instructions that K.C. Mehta & Co., Baroda continue to remain the consultants of Respondent (i.e., Baroda Cricket Association) and are regularly engaged by Baroda Cricket Association to represent them before the Assessing Officer (AO) in the Income Tax Department. He states that Baroda Cricket Association has not issued any communication to K.C. Mehta & Co. registering a protest or objection with respect to the engagement of the Petitioner/plaintiff as well as invoices raised by the Petitioner in the year 2021 for the SLP (in question) either before or after filing of the underlying suit till date.
3.He states that Respondent has not filed any complaint with the Institute of Chartered Accountant protesting against the action of K.C. Mehta & Co. for engaging the Petitioner/plaintiff in the SLP (in question) or for forwarding Petitioner/plaintiff’s invoices to the Respondent for payment in the years 2021 and 2022; and for exposing the Respondent to the current litigation.
4.The statement of the counsel for the Respondent is taken on record. He is directed to file an affidavit of the Respondent to this effect prior to the next date of hearing.”
The aforesaid statement was also confirmed by the affidavit dated 20.05.2024 filed by the Defendant subsequently.
The reference placed by the Defendant on the Supreme Court Rules, 2013 to allege that Plaintiff solicited work contrary to the said Rules is not established in the facts of this case. In fact, citing the said Rule and the submission that in the absence of a written schedule of payment of fees signed between the parties, the Plaintiff herein is only entitled to fees structure mentioned in the said Supreme Court Rules are all arguments intended to embarrass the Plaintiff and do not find any favour with this Court. The reservation or hesitation, if any, the Defendant had in engaging the Plaintiff to represent it in the Income Tax Appeals for appearance before the Supreme Court for arguments was not communicated to the Plaintiff at any time prior to 22.08.2021 and after the same was communicated by K.C. Mehta and Co. to the Plaintiff, admittedly, the Plaintiff stopped appearing in the Income Tax Appeals.
The Supreme Court in the case IDBI Trusteeship services Limited v. Hubtown Limited15 has observed that if the defendant raises a frivolous or vexatious defence, then leave to defend the suit shall be refused and the plaintiff will be entitled to the judgment forthwith. The relevant para of the Judgment read as under:
“17.Accordingly, the principles stated in para 8 of Mechelec case [Mechelec Engineers & Manufacturers v. Basic Equipment Corpn., (1976) 4 SCC 687] will now stand superseded, given the amendment of Order 37 Rule 3 and the binding decision of four Judges in Milkhiram case [Milkhiram (India) (P) Ltd. v. Chamanlal Bros., AIR 1965 SC 1698 : (1966) 68 Bom LR 36] , as follows:
17.1.If the defendant satisfies the court that he has a substantial defence, that is, a defence that is likely to succeed, the plaintiff is not entitled to leave to sign judgment, and the defendant is entitled to unconditional leave to defend the suit
17.2.If the defendant raises triable issues indicating that he has a fair or reasonable defence, although not a positively good defence, the plaintiff is not entitled to sign judgment, and the defendant is ordinarily entitled to unconditional leave to defend.
17.3.Even if the defendant raises triable issues, if a doubt is left with the trial Judge about the defendant's good faith, or the genuineness of the triable issues, the trial Judge may impose conditions both as to time or mode of trial, as well as payment into court or furnishing security. Care must be taken to see that the object of the provisions to assist expeditious disposal of commercial causes is not defeated. Care must also be taken to see that such triable issues are not shut out by unduly severe orders as to deposit or security.
17.4.If the defendant raises a defence which is plausible but improbable, the trial Judge may impose conditions as to time or mode of trial, as well as payment into court, or furnishing security. As such a defence does not raise triable issues, conditions as to deposit or security or both can extend to the entire principal sum together with such interest as the court feels the justice of the case requires.
17.5.If the defendant has no substantial defence and/or raises no genuine triable issues, and the court finds such defence to be frivolous or vexatious, then leave to defend the suit shall be refused, and the plaintiff is entitled to judgment forthwith.
17.6.If any part of the amount claimed by the plaintiff is admitted by the defendant to be due from him, leave to defend the suit, (even if triable issues or a substantial defence is raised), shall not be granted unless the amount so admitted to be due is deposited by the defendant in court.”
(Emphasis supplied)
Similarly, the Supreme Court in BL Kashyap and Sons Ltd. v. JMS Steel & Power Corporation Ltd.16 has observed as under:
“33.2.Thus, it could be seen that in the case of substantial defence, the defendant is entitled to unconditional leave; and even in the case of a triable issue on a fair and reasonable defence, the defendant is ordinarily entitled to unconditional leave to defend. In case of doubts about the intent of the defendant or genuineness of the triable issues as also the probability of defence, the leave could yet be granted but while imposing conditions as to the time or mode of trial or payment or furnishing security. Thus, even in such cases of doubts or reservations, denial of leave to defend is not the rule; but appropriate conditions may be imposed while granting the leave. It is only in the case where the defendant is found to be having no substantial defence and/or raising no genuine triable issues coupled with the court's view that the defence is frivolous or vexatious that the leave to defend is to be refused and the plaintiff is entitled to judgment forthwith. Of course, in the case where any part of the amount claimed by the plaintiff is admitted by the defendant, leave to defend is not to be granted unless the amount so admitted is deposited by the defendant in the court.
33.3.Therefore, while dealing with an application seeking leave to defend, it would not be a correct approach to proceed as if denying the leave is the rule or that the leave to defend is to be granted only in exceptional cases or only in cases where the defence would appear to be a meritorious one. Even in the case of raising of triable issues, with the defendant indicating his having a fair or reasonable defence, he is ordinarily entitled to unconditional leave to defend unless there be any strong reason to deny the leave. It gets perforce reiterated that even if there remains a reasonable doubt about the probability of defence, sterner or higher conditions as stated above could be imposed while granting leave but, denying the leave would be ordinarily countenanced only in such cases where the defendant fails to show any genuine triable issue and the court finds the defence to be frivolous or vexatious.”
(Emphasis Supplied)
In the facts of this case, since this Court has concluded that the defence raised by the Defendant is false and vexatious, the leave to defend sought by the Defendant is liable to be refused.
The learned Trial Court in its impugned order observed that trial was required to establish the privity of contract between the parties as also the agreement between the parties with respect to the quantum of fees. However, as noted hereinabove, this Court finds that the admitted documents on record evidence that the engagement of the Plaintiff by K.C. Mehta and Co. was on the instructions of the Defendant and to latter’s express knowledge as is evident from the plethora of emails placed on record including the WhatsApp messages. In addition, the quantum of fees or the schedule of fee also stood established since the invoices were duly accepted as well as approved by K.C. Mehta and Co. and forwarded to the Defendant with instructions to make payment.
In view of the finding of this Court that K.C. Mehta and Co. had the ostensible authority to act as the agent of the Defendant, K.C. Mehta and Co. is not a necessary party in view of Section 230 of Indian Contract Act, 1872. Significantly, the Defendant has not filed any application for seeking impleadment of K.C. Mehta and Co. and therefore the non-impleadment of K.C. Mehta and Co. was a non-issue in the facts of this case.
This Court is conscious that the power under Article 227 of the Constitution of India is intended to be used sparingly. However, the Supreme Court has in Surya Dev Rai v. Ram Chander Rai17 held that this power must be exercised by the High Court, when it appears that the impugned order has resulted in failure of justice especially when the Trial Court has failed to exercise its jurisdiction.
Further it would be also relevant to refer to a recent judgment of Supreme Court in Puri Investments v. Young Friends & Co.18 wherein the Supreme Court approved the High Court’s enunciation with respect to the principles of law on the scope of interference by supervisory Court in the decisions of the fact-finding forum which reads as under:
“14…….The High Court was conscious of the restrictive nature of jurisdiction under Article 227 of the Constitution of India. In the judgment under appeal, it has been recorded that it could not subject the decision of the appellate forum in a manner which would project as if it was sitting in appeal. It proceeded, on such observation being made, to opine that it was the duty of the supervisory Court to interdict if it was found that findings of the appellate forum were perverse. Three situations were spelt out in the judgment under appeal as to when a finding on facts or questions of law would be perverse. These are:—
(i)Erroneous on account of non-consideration of material evidence, or
(ii)Being conclusions which are contrary to the evidence, or
(iii)Based on inferences that are impermissible in law.
15.We are in agreement with the High Court's enunciation of the principles of law on scope of interference by the supervisory Court on decisions of the fact-finding forum……….”
(Emphasis Supplied)
The parameters set out in the aforesaid judgment by the Supreme Court are attracted in the facts of this case since the Trial Court has failed to consider material admitted evidence on record which proved the claim of the Plaintiff.
The leave to defend application of the defendant as recorded herein, therefore, does not disclose a substantial defence and rather the application for leave to defend and the arguments raised are indicative of the defence being frivolous and vexatious. Therefore, the application for leave to defend is liable to dismissed and the Summary Suit prayer clause (a) is hereby decreed in favour of the Plaintiff. The Plaintiff has not sought any pre-suit interest or pendente lite interest. It is accordingly directed that the Plaintiff will be entitled to the suit amount as per Summary Suit prayer clause (a) which shall be paid by the Defendant within two (2) weeks failing which the Defendant will become liable to pay interest at 12% per annum with effect from the date of this judgment.
Accordingly, the present petition is allowed. Pending applications, if any, stands disposed of.
Footnotes
- 1.(2022) 4 SCC 181
- 2.(2017) 1 SCC 568
- 3.(2022) 3 SCC 294
- 4.dated 31.8.2012 passed in CS(OS) No. 2589/2011
- 5.2018 (4) MLJ 35
- 6.[1986 AC 717 : (1986) 2 All ER 385 : (1986) 2 WLR 1063 (HL)]
- 7.(2005) 6 SCC 188
- 8.2011 SCC OnLine Del 183
- 9.2001 SCC OnLine Del 1555
- 10.ILR (1990) II Delhi, Paragraph 5
- 11.1995 SCC OnLine Del 665, Paragraphs 6, 7 and 8
- 12.(1998) 45 DRJ 439, Page 443
- 13.ILR (2001) I Del 436, Paragraph 10
- 14.2005 (83) DRJ 140, Paragraphs 11 and 13
- 15.(2017) 1 SCC 568
- 16.(2022) 3 SCC 294
- 17.(2003) 6 SCC 675
- 18.2022 SCC OnLine SC 283