Unconditional Leave to Defend Denied: A Court's Stance on Frivolous Defences in Summary Suits.


09 April 2025 Summary Suits >> Civil & Consumer Law  

In a recent decision of Conceptum Logistics India Pvt Ltd v/s Samrajaya Global Shipping Services., concerning a summary suit for the recovery of Rs. 4,70,63,169.61, a defendant's application for unconditional leave to defend was dismissed. The case highlights the rigorous standards applied by Indian courts in evaluating the genuineness of a defence in summary proceedings under Order XXXVII of the Civil Procedure Code, 1908 (CPC).

The Plaintiff's Claim:

The plaintiff initiated the summary suit to recover a principal amount of Rs. 1,83,00,000/- and Rs. 2,59,02,476.61 in interest, along with future and pendente lite interest at a rate of 24% per annum. The core of the plaintiff's claim revolved around a logistics contract entered into on August 27, 2020, for shipping cargo from Mumbai to Angomas, Chile, for USD 165,000.
 
 

According to the plaintiff, despite having paid `1,23,98,146/- to the defendant on October 27, 2020, the defendant failed to remit corresponding freight charges to the carrier, Intermarine. This led to the cargo being detained and the plaintiff incurring substantial additional expenses, including demurrage, detention, storage, and other charges, totaling USD 186,059.83, which they paid to Intermarine on January 18, 2021, on the defendant's behalf to mitigate losses.

Following these payments, the plaintiff raised an invoice for Rs. 2,89,73,311.92 on January 28, 2021. The plaintiff asserted that the defendant made a part payment of Rs. 40 lakhs and subsequently entered into a Memorandum of Understanding (MOU) on February 2, 2021, acknowledging a liability of Rs. 2.5 crores and agreeing to a payment schedule with 24% interest on default. Despite this, only 67 lakhs were paid in scattered installments, leaving Rs. 1,83,00,000/- outstanding, which, with interest, amounted to Rs. 4,42,02,479.61.

The Defendant's Defence:

The defendant, a limited liability partnership in logistics, sought unconditional leave to defend, arguing several points:
Payment Discrepancy: While acknowledging the initial contract, the defendant claimed that despite an agreement to ship 721 CBM, only 670 CBM was transported, and the plaintiff did not pay for the excess volume.
COVID-19 Impact: The defendant attributed delays and inability to pay Intermarine upfront to the COVID-19 pandemic's impact on market conditions and their financial health. They claimed to have requested the plaintiff to clear Intermarine's invoices with an assurance of repayment.
Coercion and Undue Influence: The central plank of the defendant's defence was that the MOU dated February 2, 2021, and subsequent payments were made under coercion and undue influence, specifically under threat of criminal proceedings against their managing partners. They claimed that threatening messages were sent and that a police complaint was filed against them, which was later withdrawn upon an alleged settlement agreement for Rs. 2.5 crores.
MOU Revocation: The defendant also contended that the plaintiff unilaterally revoked the February 2, 2021, MOU on February 16, 2021, and instructed them to destroy the original MOU and post-dated cheques.
Lack of Supporting Documents: The defendant argued that the plaintiff failed to provide supporting documents for the reimbursement invoice and that their demands were inconsistent. They maintained they only owed Rs. 1.7 crores, which they had already paid.

Court's Analysis and Decision:

The Court, after hearing both sides, meticulously applied the principles governing the grant of leave to defend in summary suits, as articulated by the Supreme Court in cases like B.L. Kashyap & Sons Ltd. v. JMS Steels & Power Corporation & Anr. and IDBI Trusteeship Services Ltd. v. Hubtown Ltd. The core principles emphasize that granting leave to defend is the ordinary rule, and denial is an exception, reserved for cases where the defendant has no substantial defence or raises frivolous/vexatious issues.

The Court's analysis focused on the defendant's plea of coercion and undue influence concerning the February 2, 2021 MOU. The Court found this defence lacking credibility for several reasons:

Timing: The defendant executed the agreement in 2021 but raised the coercion claim only in the leave to defend application filed in April 2024, without any prior communication disputing the agreement on these grounds.
Post-MOU Conduct: The defendant made scattered payments of Rs. 67 lakhs subsequent to the MOU, which contradicted their claim of coercion and the alleged revocation of the MOU. The Court noted that even after the purported revocation on February 16, 2021, payments of Rs. 40 lakhs and Rs. 15 lakhs were made.
Commercial Sophistication: Given that both parties were established commercial entities, the Court found no "skew of power, influence or heft" that would prevent the defendant from raising the issue of coercion earlier through legal channels, such as a criminal complaint or a civil suit for cancellation of the MOU.
Admitted Liabilities: The Court noted that the defendant admitted entering the logistics contract, receiving initial payment, agreeing to pay Intermarine, and subsequently requesting the plaintiff to clear Intermarine's dues. These admissions undermined their later claim of not owing anything beyond Rs. 1.7 crores.
Citing legal precedents, the Court reiterated that the relationship between a debtor and a creditor does not inherently imply that the debtor's will is dominated by the creditor. Furthermore, a claim of coercion over a prolonged period without any contemporaneous legal action by the aggrieved party is generally considered a "sham and moonshine defence."
Consequently, the Court concluded that the defendant failed to establish a substantial defence or raise bona fide triable issues. The defence presented was deemed an "afterthought" and lacked the necessary substance and genuineness.

Conclusion:

The application for unconditional leave to defend was dismissed, reinforcing the judiciary's commitment to expediting commercial disputes and preventing the misuse of legal procedures to delay legitimate claims. The judgment underscores that while courts are lenient in granting leave to defend to allow genuine disputes to be heard, they will not tolerate frivolous or vexatious defences aimed at avoiding clear contractual obligations.
The case is now listed for further proceedings on May 13, 2025, before the Joint Registrar (Judicial).