Delhi HC Upholds ₹3.02 Lakh Software Licence Decree, Finding Buyer’s Emails Showed It Wanted A Better Deal, Not Different Software

The respondent brought a summary suit under Order XXXVII of the Code of Civil Procedure, 1908 (CPC), claiming ₹3,02,080 for a VMware software licence supplied to the appellant under a purchase order dated 13 August 2024.

The appellant sought leave to defend, alleging that the product supplied differed from the product ordered and relying, among other things, on a difference between the purchase order’s HSN/SAC code and the invoice’s code.

It also objected that the purchase order contained an arbitration clause.

The Commercial Court rejected the leave application and decreed the claim with interest at 12% per annum.

The appellant challenged that decision under Section 96 CPC and Section 13(1) of the Commercial Courts Act, 2015.

1. Whether the appellant raised a genuine triable issue warranting leave to defend the summary suit, particularly as to whether the software supplied differed from the software ordered.

2. Whether the arbitration clause in the purchase order precluded the suit where the appellant had not applied under Section 8 of the Arbitration and Conciliation Act, 1996 before seeking leave to defend.

3. Whether the Commercial Court’s decree, including interest at 12% per annum, warranted appellate interference.

Section 96 CPC, read with Section 13(1) of the Commercial Courts Act, 2015 and Order XLI CPC, provided the basis for the appeal.

In a suit under Order XXXVII CPC, the principles stated in IDBI Trusteeship Services Ltd. v. Hubtown Ltd., (2017) 1 SCC 568, and B.L. Kashyap and Sons Ltd. v. JMS Steels and Power Corporation, (2022) 3 SCC 294, establish that leave to defend is ordinarily granted where the defendant raises a fair or reasonable triable issue; refusal is appropriate where there is no substantial defence or genuine triable issue and the defence is frivolous or vexatious.

Section 8 of the Arbitration and Conciliation Act, 1996 requires a party seeking referral to arbitration to apply no later than the date of submitting its first statement on the substance of the dispute; the Trial Court relied on this requirement in rejecting the appellant’s arbitration objection.

Applying the leave-to-defend principles, the High Court found that the appellant did not identify correspondence showing that it had objected to the nature of the software supplied when it was delivered, activated, or invoiced.

The difference in HSN/SAC codes, without material showing that the ordered and supplied software were actually different, did not establish a genuine triable issue.

The correspondence instead showed that the appellant sought cancellation of the invoice because it had obtained better commercial terms, supporting the conclusion that it was attempting to avoid payment rather than raising a bona fide dispute.

The Court found no basis to interfere with the Trial Court’s treatment of the arbitration objection or the decree; it did not separately elaborate on the challenge to the interest rate.

It declined to interfere with the judgment and decree and dismissed the appeal, along with the pending applications.