Manmohan Singh, J.@mdashBy this order, I shall dispose of application IA No. 6532/2006 under Order XXV Rule 1 CPC filed by the defendant.
2. The plaintiff, New Machine Co. Ltd., is a company incorporated under the laws of Japan having its registered office at 2-8-1 Kehinjima, Ohta-Ku, Tokyo-143 003, Japan. The plaintiff has filed a suit for recovery in the sum of JPY 68,00,309/- (together with pendente lite and future interest) and damages.
3. The plaintiff is an international leader engaged inter alia in the manufacture and supply of air, water, chemicals, oil and gas couplers for industrial use in automotive, car and building air conditioners (refrigerant charging, vacuum, etc.), white goods, aerospace, engineering, engines, construction machinery, plastics, semiconductors (high purity chemicals), chemical, medical equipment, railways, shipbuilding, mould, air tools and other related OEM fields.
4. The plaintiff seeking express and unequivocal representations and warranties, qua the capability and capacity of the defendant company and on the assurances and guarantees given by the defendant company regarding it''s expertise and reputation, appointed the defendant company as its distributor in India. As requested by the defendant company, the plaintiff acknowledged its relationship with the defendant company by issuing an authorization letter dated 10th February, 2000 to the defendant company.
5. In terms of the abovesaid agreement, the defendant company placed purchase orders upon the plaintiff and against which the plaintiff supplied the specified products to the defendant company on F.O.B. basis from Japan. The defendant company cleared the goods supplied from customs in India by paying the duty and all expenses and costs in relation thereto, and then supplied these goods in turn to the customers in India.
6. In the year 2002, the defendant company remitted the price of the goods as supplied and invoiced by the plaintiff within the credit period stipulated by the plaintiff. However, in 2003, the defendant company defaulted in making payments for the goods supplied by the plaintiff. In view of delay in payment, the plaintiff issued a reminder to the defendant company asking for the amount of Japanese Yen 2.5 million that was due and payable by the defendant company to the plaintiff for the goods supplied till then. However, no payment was made to the plaintiff. Having received no reply of the reminder, the plaintiff sent another reminder to the defendant company calling upon to make good the payment due to it. Another reminder was issued in February, 2003 wherein it was categorically stated that the payment was being awaited by the accounts department of the plaintiff. The plaintiff informed the defendant company that no further supply would be made till all the outstanding payments were remitted by it to the plaintiff. Thereafter, the plaintiff has filed this present suit for recovery.
7. The defendant company has filed this application under Order XXV Rule 1 read with Section 141 and 151 of the Code of Civil Procedure, 1908 for security for costs. It is averred in the application that the defendant''s suit is for damages being Suit No. 1652/2005 in respect of loss of business, reputation and goodwill, breach of the sole distributorship agreement. Since the plaintiff has a principal/registered office in Japan, works for gain out of India, resides out of India and also does not have any sufficient moveable or immovable property within India, it is prayed in the application that the plaintiff should be directed to furnish a security to the tune of Rs. 66,39,516/- to the satisfaction of the court till the pendency of the present suit.
8. This application has been opposed by the plaintiff by filing the reply wherein it is submitted that the security as provided for in Order XXV of the CPC is with respect to the costs incurred and likely to be incurred by the defendant. It is further averred in the reply that Section 25 of the CPC, which deals with ''costs'', specifically, provides that the object of awarding costs to a litigant is to secure to him the expenses incurred by him in litigation. As such, the term ''cost'' as prescribed under Order XXV Rule 1 of the CPC relates to the cost of litigation incurred by the defendant and not the entire claim of the defendant as is sought to be enforced by the defendant by way of the present application.
9. I have heard the learned Counsel for the parties. In order to appreciate the point involved, it is relevant to refer the provision of Order XXV of CPC which reads as under:
When security for costs may be required from plaintiff:
1. At any stage of a suit, the Court may, either of its own motion or on the application of any defendant, order the plaintiff, for reasons to be recorded, to give within the time fixed by it security for the payment of all costs incurred and likely to be incurred by and defendant:
Provided that such an order shall be made in all cases in which it appears to the Court that a sole plaintiff is, or (when there are more plaintiffs than one) that all the plaintiffs are, residing out of India and that such plaintiff does not possess or that no one of such plaintiffs possesses any sufficient immovable property within India other than the property in suit.
2. Whoever leaves India under such circumstances as to afford reasonable probability that he will not be forthcoming whenever he may be called upon to pay costs shall be deemed to be residing out of India within the meaning of the proviso to Sub-rule (1).
11. It appears from the provisions of Order XXV that at any stage of the suit, the court after assigning reason may direct any security for payment of costs, if incurred or likely to be incurred by the defendant and pass such order if the plaintiff does not reside and possess any immovable property within India other than the property in the suit. It is clear from the said provision that it is not a mandatory provision that in every case of such a nature, the court must direct the plaintiff to furnish security for costs. The mandate of this provision is that in case, the court is satisfied that there is no resource to recover the cost incurred and likely to be incurred by defendant in the facts and circumstances of a particular case, it can pass the orders to the plaintiff for furnishing security. The court has to exercise its discretion as per the merits of each case, depending upon its own circumstances.
12. In the present case, as per the case of the plaintiff, the defendants have not cleared the outstanding bills of the plaintiff for the products supplied by the plaintiff from Japan to the defendant and suit for recovery of the said amount has been filed by the plaintiff in this Court. The claim in the suit filed by the defendant is for loss of business, reputation, goodwill and breach of sole distributorship agreement.
13. In the facts and circumstances of the present case, I feel that the application is wholly false and frivolous and it is not required to pass any order under the provisions of Order XXV Rule 1. It is the plaintiff who has to recover the amount of the products supplied by them to the defendant as alleged in the plaint. Even otherwise, how can the defendant ask for the relief for the same amount against the party who has filed the suit for recovery against him. The prayer sought by the defendant in its application is against the provisions of Order 25 Rule 1 and cannot be granted. The learned Counsel for the plaintiff has referred the decision reported in 1893 by Queen''s Bench Division [In the court of appeal] Neck v. Taylor page 560 wherein the bench had laid down the following principle of law:
The rule laid down by the cases seems to be as follows. Where the counter-claim is put forward in respect of a matter wholly distinct from the claim, and the person putting it forward is a foreigner resident out of the jurisdiction, the case may be treated as if that person were a plaintiff, and only a plaintiff, and an order for security for costs may be made accordingly, in the absence of anything to the contrary. Where, however, the counter-claim is not in respect of a wholly distinct matter, but arises in respect of the same matter or transaction upon which the claim is founded, the Court will not, merely because the party counter-claiming is resident out of the jurisdiction, order security for costs; it will in that case consider whether the counter-claim is not in substance put forward as a defence to the claim, whatever form in point of strict law and of pleading it may take, and, if so, what under all the circumstances will be just and fair as between the parties; and will act accordingly. Therefore, the Court in that case will have a discretion. It is clear to me in the present case that the counter-claim is not in respect of a matter wholly distinct from and independent of that upon which the claim is based; on the contrary, it arises out of the very same transaction in respect of which the action is brought. It is, in reality, the defendant''s defence to the action, though, as a matter of pleading, it is, and necessarily is, put forward by way of counter-claim. Under these circumstances, I think that the Divisional Court had a discretion in the matter, and I see no reason for thinking that they exercised such discretion otherwise than rightly.
For these reasons, I think that the appeal should be dismissed.
14. It appears that this application is misconceived in view of reasons given above. The application is not maintainable and the same is dismissed with cost of Rs. 20,000/- to be paid by the defendant to the plaintiff within two weeks from today.
CS (OS) No. 493/2006
15. List the matter before Joint Registrar for direction on 9th April, 2009 for direction of plaintiff''s evidence.
