K. Ramamoorthy, J.

1. The plaintiff has filed a suit under Order XXXVII CPC against the defendant for the recovery of Rs. 7 lacs arising out of a contract between the parties for the supply of what is called REP licences. The case of the plaintiff can be stated briefly in the following terms.

2. There was a tender issued by the plaintiff calling upon the interested persons for the supply of REP licences. In response to that tender the defendant by fax message dated 10.4.1991 offered to sale REP licences (non-flexible) at the value of Rs. 3 crores at a premium of 12.75% subject to the licence being valid upto 3-1/2 months. The defendant undertook to deliver the licences within 7 days as required by the plaintiff. On the same date, 10.4.1991, the plaintiff accepted the offer made by the defendant and directed the defendant to supply the REP licences (non-flexible) so as to reach the plaintiff on or before 17.4.1991. It is made clear in the letter that if the supply was not made by 17.4.1991 the plaintiff would be at liberty to forfeit the earnest money/security deposit without notice to the defendant.

3. On the same date, 10.4.1991 the defendant sent a cheque of Rs. 5,73,750 in favour of the plaintiff drawn on State Bank of Mysore, Whites Road Branch, Madras. This amount represents the earnest money/security deposit at 15% of the premium amount (12.75%) on Rs. 3 crores. The defendant also gave him validity of 3 months.

4. Pursuant to the terms of the contract the defendant delivered REP licences to the value of Rs. 2 crores and there remained delivery of licences for the value of Rs. 1 crore.

5. On 25.1.1996 the plaintiff gave notice to the defendant that owing to the default committed by the defendant in non supplying REP licences to the value of Rs. 1 crore. The plaintiff had to obtain from the open market on or before 23.5.1991 at a higher rate of premium at 18.75%. Consequently the plaintiff suffered a loss of Rs. 6 lacs. The plaintiff called upon the defendant to pay the sum of Rs. 6 lacs within 15 days from the date of receipt of the notice. It is asserted by the plaintiff that it was not under any obligation to return the REP licences worth Rs. 2 crores as the defendant did not make up the balance supply of REP licences worth Rs. 1 crore. It is also asserted that the plaintiff was not concerned with the prevailing rate of premium at the time of delivery of the licences by the defendant to the plaintiff because the defendant is bound by the offer made by it.

6. On the defendant not acting as per the terms of the contract the plaintiff sought to encash, the cheque issued by the defendant on 10.4.1991 for Rs. 5,73,750 towards earnest money/security deposit through its bank, namely, Canara Bank, Parliament Street, New Delhi. The cheque was dishonoured on 19.7.1991. The plaintiff issued notice to the defendant calling upon it to pay the amount.

7. On 23.8.1991 the plaintiff issued notice through its Counsel.

8. By letter dated 16.9.1991 the advocate on behalf of the defendant wrote to the plaintiff stating that a detailed reply would be sent a few days later but no reply has been sent by the defendant.

9. According to the plaintiff the following amount is due from the defendant:

(i) The amount of differential premium between the rate at which REP licences were contracted to be purchased from the defendant and the rate at which Rs. 1 crore worth of REP licences (non-flexible) were purchased from the market on default by the defendants 6,00,000 .

(ii) Including interest at the rate of 18% per annum from 18.4.1991 upto 5.5.1992 1,00,000 .

(iii) Further interest at the rate of 18% per annum on the above amounts and till the date of payment.

10. This claim is made on the basis of the contract in writing between the parties.

11. On summons of judgment being served the defendant filed I.A.No.9617/ 94 seeking leave to defend under Order XXXVI Rule 3(5) C.P.C. It is stated in the affidavit that this Court has no territorial jurisdiction to try the suit as no part of the cause of action has arisen between the jurisdiction of this Court. About the nature of the transaction the plea taken by the defendant in the affidavit is that there was an oral discussion with Mr. Dilip Verma of the plaintiff company. Para 10 of the affidavit reads as follows:

That again during further discussions, after accepting the defendants offer as aforesaid, Mr. Dilip Verma of the plaintiff indicated that their requirement maybe of the value of Rs. 3 (Three) Crores. He also asked the defendant to send a cheque for earnest money being 15% of the crores with an assurance that the said cheque would not be encashed and returned if the defendant fulfilled its commitment to supply licences of the value of Rs. 2 (Two) crores within seven days. Relying upon the above discussion and assurance, the defendant sent their Cheque No. 412729 dated 10.4.1991 for Rs. 5,73,750 in favour of the plaintiff, along with their letter No.HI-Q/L/5012/4/91 dated 10.4.1991, sent through Courier. It is submitted that acting upon their assurance, the plaintiff did not encash the said cheque.

12. The defendant admits that the time was extended for delivery of the REP licences whatever remained undelivered. In paragraph 13 in order to get over the terms of the contract an oral understanding is set up:

That the defendant personally delivered 250 licences to the plaintiffs factory at Gurgaon on 18.4.1991vide their letter No.HI-Q/L/2050/4/91 dated 18.4.1991, of the total value of Rs. 1,93,31,126 (Rupees One Crore Ninety Three Lakhs Thirty One Thousand One Hundred Twenty Six only), which was accepted by the plaintiff. The defendant sought some time to supply further licences to the plaintiff at which Mr. Dilip Verma, Manager (Materials) of the plaintiff at Gurgaon stated that their requirement would be met if the defendant could make up the supplies upto and around Rs. 2 (Two) crores. Mr. Dilip Verma also stated that they were in no immediate need of further licences but to complete at least the firm commitment of Rs. 2 (Two) crores, they would accept licences making upto the value of Rs. 2 (Two) crores.

13. The effect of this is that the plaintiff had orally agreed to act as per the request of the defendant.

14. In paragraph 14 of the affidavit it is stated that the defendant supplied licences of the total value of Rs. 2,24,58,730. It is stated in the same paragraph that out of this supply, for certain reasons the plaintiff returned back some licences totaling value of Rs. 20,94,841 (Rupees twenty lakhs ninety four thousand eight hundred forty one only) resulting in retention by them and net supply of licences of the value of Rs. 2,03,63,889 (Rupees Two crore three lakhs sixty three thousand eight hundred eighty nine only).

15. The defendant would not give any reason for the plaintiff returning these licences. In paragraph 15 in the petition the defendant had assumed and come forward with the case that the plaintiff in fact had no requirement of licences of the value of Rs. 3 crores by 17.4.1991. According to the defendant if the plaintiff was really in need of further licences the plaintiff would have purchased the balance from the market.

16. The plaintiff called for fresh tenders for the supply of non flexible licences in May, 1991 and the defendant gave its quotation on 24.6.1991 and the claim made by the plaintiff is clear and after thought. In other words, it is the case of the defendant that there was no loss suffered by the plaintiff on account of alleged failure on the part of the defendant in supplying REP licences to the value of Rs. 1 crore. It is also stated by the defendant that the claim for damages and interest cannot be sustained.

17. The plaintiff filed its reply. What is to be noticed is the reply to the defendants contention regarding the return of the licences to the tune of Rs. 20,94,841 as stated in paragraph 14 of the affidavit. In reply to this the plaintiff has clearly stated that the licences were being returned as the same were short of three months validity as required in the purchase order issued to the defendant. Therefore, the statement of the defendant in paragraph 14 that the defendant was not aware of the reason for return of licences is not a correct statement of fact and about the calling for fresh tenders the plaintiff had given reasons in paragraph 15 of the reply stating that plea taken by the defendant is not at all correct. The plaintiff had in fact bought licences worth 2 crores during the relevant period. Therefore, the plea by the defendant that the plaintiff had no need to purchase more than Rs. 2 crores licences and, therefore, the plaintiff cannot be stated to have incurred any loss is not a plea worth considering at the time of the trial.

18. The contract specifically states that It may be clearly understood that in case of failure to supply REP licences worth Rs. 3 crores latest by 17.4.1991 we will be at liberty to forfeit the earnest money/security deposit at our discretion without any further notice.

19. The fact that the defendant had issued the cheque for Rs. 5,73,700 is not disputed. But as noticed earlier an oral understanding is set up by the defendant.

20. Having regard to the allegations in the plaint and the affidavit filed in support of the leave to defend application and the reply filed by the plaintiff it is clear that there was a contract between the plaintiff and the defendant. Pursuant to the contract defendant gave a cheque towards earnest money/security deposit and the defendant allowed the cheque to be dishonoured and, therefore, the defendant is bound to pay the amount claimed by the plaintiff.

21. The principle relating to the grant of leave under Order XXXVII Rule 3 is well settled. The Supreme Court in M/s. Mechalec Engineers & Manufacturers v. M/s. Basic Equipment Corporation, AIR 1977 Supreme Court 577 had laid down the following principles:

(a) If the defendant satisfies the Court that he has a good defence to the claim on its merits the plaintiff is not entitled to leave to sign judgment and the defendant is entitled to unconditional leave to defend.

(b) If the defendant raises a triable issue indicating that he has a fair or bona fide or reasonable defence although not a positively good defence the plaintiff is not entitled to sign judgment and the defendant is entitled to unconditional leave to defend.

(c) If the defendant discloses such facts as may be deemed sufficient to entitle him to defend, that is to say, although the affidavit does not positively and immediately make it clear that he has a defence, yet, shows such a state of facts as leads to the inference that at the trial of the action he may be able to establish a defence to the plaintiffs claim the plaintiff is not entitled to judgment and the defendant is entitled to leave to defend but in such a case the Court may in its discretion impose conditions as to the time or mode of trial but not as to payment into Court or furnishing security.

(d) If the defendant has no defence or the defence set up is illusory or sham or practically moonshine then ordinarily the plaintiff is entitled to leave to sign judgment and the defendant is not entitled to leave to defend.

(e) If the defendant has no defence or the defence is illusory or sham or practically moonshine then although ordinarily the plaintiff is entitled to leave to sign judgment, the Court may protect the plaintiff by only allowing the defence to proceed if the amount claimed is paid into Court or otherwise secured and give leave to the defendant on such condition, and thereby show mercy to the defendant by enabling him to try to prove a defence.

22. Considering the facts of this case in the light of the principles adumbrated by the Supreme Court I have no hesitation in coming to the conclusion that there is no triable issue raised by the defendant in this case and having deliberately allowed issue a cheque without any funds and having allowed the cheque to be dishonoured, the defendant cannot run turn round and say that the plaintiff had not suffered any loss, leave should be granted without any condition.

23. The application 9617/94 is dismissed.

24. The plaintiff is entitled to the sum of Rs. 7 lacs claimed by it. But further question would arise whether the plaintiff could claim 18% interest from the date of suit (i.e. 10.7.1992) till the date of the realisation. The conduct of the defendant has not been good and a business organisation like the defendant ought to have taken care before agreeing to any terms stipulated by the plaintiff. As per the terms of the contract the defendant has offered to furnish security. That was done by the defendant knowing full well the consequences in the event of the defendant not acting according to the terms of the contract. The cheque when presented was dishonoured. Therefore, I am not able to pursuade myself to reduce the rate of interest claimed by the plaintiff from @ 18%. Consequently, the plaintiff shall be entitled to interest @ 18% per annum from the date of claim up to the date of the realisation. There shall be a decree directing the defendant:

(i) to pay to plaintiff the sum of Rs. 7 lacs (Rupees seven lacs) with interest @ 18% per annum from the date of the suit till realisation;

(ii) to pay to plaintiff the costs of the suit.