Full Judgment
IN THE HIGH COURT AT CALCUTTA (ORDINARY ORIGINAL CIVIL JURISDICTION) ORIGINAL SIDE GA No.3957 of 2015 With GA No.313 of 2016 In C.S. No.162 of 2015 SAVITRI PROPERTIES PVT. LTD. Vs. AVANI PROJECTS & INFRASTRUCTURE LTD. BEFORE: The Hon’ble JUSTICE SUDIP AHLUWALIA Dated:
29. h April, 2016 Appearance: Mrs. Manju Agarwal, Adv. Mr. Biswanath Chatterjee, Adv. Mr. B. Menot, Adv. … for the Plaintiff(s) Mr. Aniruddha Mitra, Adv. …. for the Defendant(s) The Court: - GA No.3957 of 2015 is an application filed on behalf of the defendant in the original CS No.162 of 2015 praying for time to file its Written Statement in the suit, while GA No.313 of 2016 was filed on behalf of the Plaintiff seeking summons for judgment in terms of Order XXXVII Rule 3(4) of the Code of Civil Procedure.
2. The plaintiff had filed the suit under Order XXXVII C.P. Code for recovery of an amount of Rs.21,98,438/- along with certain ancillary reliefs. It transpires that the defendant had entered appearance in the suit on the 25th of August 2015, and duly notified the Plaintiff’s Advocate on the very next day i.e., 26th of August. However the plaintiff filed the application seeking summons for judgment in terms of Order XXXVII Rule 3(4) being the present GA No.313 of 2016 only on 18th of January 2016.
3. By that time the defendant had already filed its GA No.3957 of 2015 seeking extension of time for filing its Written Statement. During its pendency, the plaintiff approached the Court praying for summons for judgment by way of GA313of 2016, against which the defendant has filed its Affidavit - in - Opposition in which it has been contended that it is entitled to defend the Suit unconditionally in view of the facts revealed from its side. Both of these applications have therefore been taken up together as the result in GA No.313/2016 is liable to directly affect the outcome of the defendant’s application.
4. The background of the matter is that both the parties are registered Companies. The substance of the plaintiff’s claim is that it had originally lent an amount of Rs.20,00,000/- (Twenty Lacs) for a period of 123 days from 12/8/2011 to 12/12/2011 to the defendant on the latter’s request. It was agreed to be returned back after the stipulated time along with interest at the rate of 12% per annum. The defendant accordingly granted receipt for the loan amount and also delivered two postdated cheques to the plaintiff. One cheque was for the loan amount of Rs.20 Lacs itself, while the other was for the interest amounting to Rs. 72, 789/- towards the admissible agreed interest minus an amount of Rs. 8088/- being the Tax Deductible at Source (TDS). However subsequently at the request of the defendant the loan was continuously extended from time to time at the same rate of interest till the 23rd of December 2013, after which it was again extended on two occasions, but at an enhanced the rate of interest which was agreed at 15% per annum.
5. For most of the time since the loan was originally granted, the defendant satisfactorily paid the interest as agreed upon by postdated cheques, and even issued confirmation letters at the end of the financial years 2011-12, 2012-13 and 2013-14. However at the request of the defendant, the postdated cheque towards interest for the period 22nd of June 2014 to 21st of October 2014 was deposited by the plaintiff only on 17th of December 2014, as the defendant claimed to be undergoing some financial stringency at the relevant time when the interest had actually become due. But the cheque was dishonoured on account of ‘insufficiency of funds’. However subsequently on 27th of January 2015, the defendant deposited the interest in the plaintiff’s Bank Account by way of an NEFT transaction. The defendant also subsequently delivered a fresh cheque for the original loan amount of Rs. 20 Lacs towards the return of the same on 1st of February 2015, but again requested the plaintiff to deposit the same later on, as it was again suffering from some financial stringency. The plaintiff therefore deposited the said cheque on 27th of March, 2015. But again it was dishonoured due to ‘insufficiency of funds’.
6. The plaintiff therefore sent two separate notices to the defendant. The first was the legal notice dated 17th of April 2015 in which the requisite admissible amount was demanded. The second was a Notice under Section 138(b) read with S.141 of the Negotiable Instruments Act dated the 22nd of April 2015. Reply to the aforesaid notices dated the 1st of May 2015 was then sent on behalf of the defendant in which it denied any liability to pay any amount to the plaintiff, and certain new facts were mentioned in the reply. The same will be referred to later on, as the basis of the defendant’s substantive defence to the plaintiff’s claim is founded on those very facts/allegations. The plaintiff through its Advocate then sent two separate replies dated 25th of May and 1st of June 2015 denying all the claims/allegations raised by the defendant, and subsequently filed the suit.
7. The defendant has admitted the plaintiff’s claim regarding the original grant of loan and the repayment of interest by way of post dated cheques from time to time. There is no dispute up to the period ending on the 21st June 2014. Subsequently however, according to the defendant, sometime in September - October 2014, both the parties mutually agreed that the plaintiff would acquire interest in one unit of the defendant’s upcoming Real Estate Project by the name of ‘Avani Aspire’, which would subsequently be sold off at substantial profit with the defendant’s help and assistance. For this purpose an amount of Rs. 25 Lakhs was agreed to be invested by the plaintiff in the defendant’s Project, and the loan amount of Rs. 20 Lacs was agreed to be adjusted towards the investment, and it was further agreed that the balance amount would be paid by the plaintiff shortly and the formal agreement would be executed in due course. However there was some delay in formalising the Agreement on account of which it was mutually decided by the parties in January 2015 that no interest would be paid on the deposited amount after October 2014. The defendant nevertheless issued a fresh cheque of Rs. 20 Lacs only as a ‘Security’, which the plaintiff was required to return back later. But the plaintiff violated this understanding and surreptitiously deposited the cheque in Bank which therefore got dishonoured.
8. This Court is now to consider whether the facts made out on behalf of the defendant can be regarded as a substantial defence as would entitle it to grant of leave to defend the suit in terms of Order XXXVII Rule 3(5) of the Code of Civil Procedure.
9. In “Mechelec Engineers & Manufacturers Vs. Basic Equipment Corporation" (MANU/SC/0043/1976 = 1977 AIR577 1977 SCR (1)1060), the Trial Court had granted such leave unconditionally to the defence side in a suit instituted under Order 37 of the Civil Procedure Code. The order was however set aside by the High Court. In reversing the High Court's decision, the Supreme Court revisited the settled law in this regard and went on to restore the order of the Trial Court, observing inter alia -
“8. In Smt. Kiranmoyee Dassi v. Dr. J.
Chatterjee, (1945) 49 Cal WN246at p. 253, Das. J., after a comprehensive review of authorities on the subject, stated the principles applicable to cases covered by order 17 C.P.C. in the form of the following propositions (at p. 253): "(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, shews 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 plaintiff's 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 se- cured 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".
9. The case before us certainly does not fall within the class (e) set out above. It is only in that class of case that an imposition of the condition to deposit an amount in Court before proceeding further is justifiable..”
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10. In “Mrs. Raj Duggal Vs.Ramesh Kumar Bansal”. (MANU/SC/0393/1990 = AIR 1990 SC2218 1991GLH(1)138, 1991 Supp (1) SCC191, again the Supreme Court set aside the High Court's order affirming the decision of the Trial Court declining leave to the appellant to defend the suit under Order 37 Rule 2 by observing -
“3. Leave is declined where the Court is of the opinion that the grant of leave would merely enable the Defendant to prolong the litigation by raising untenable and frivolous defences. The test is to see whether the defence raises a real issue and not a same one, in the sense that it the facts alleged by the Defendant are established there would be a good of even a plausible defence on those facts. If the Court is satisfied about that leave must be given. If there is a triable issue the sense that there is a fair dispute to be tried as to the meaning of a document on which the claim is based or uncertainty as to the amount actually due or where the alleged facts are of such a nature as to entitle the Defendant to interrogate the Plaintiff or to cross-examine his witnesses cave should not he denied. Where also the Defendant shows that even on a fair probability he has a bona fide defence, he ought to have leave. Summary judgment under Order 37 should not be granted where serious conflict as to matter of fact or where any difficulty on issues as to law arises. The Court should not reject the defence of the Defendant, merely, because of its inherent implausibility or its inconsistency.
4. On a consideration of the material in this case -we have looked into the defence sought to be raised and the criminal complaint earlier lodged -- we think that a triable issue arises. On the analogous provisions of Order 14 of the Rules of Supreme Court in England it was held that where the defence can be described as more than "shadowy" but less than "probable" leave to defend should be given. (See pages 146 and 147 of the Supreme Court Practice, 1988).”
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11. In “M/s. Sunil Enterprises and Anr. Vs. SBI Commercial and International Bank Ltd.”
. (MANU/SC/0334/1998 = AIR1998 SC2317 again, the judgments of the Trial as well as High Court refusing leave to defend the suit under Order 37 were set aside after revisiting the same five propositions quoted in “Mechelec Engineers”. (supra), with the observations -
“4. The position in law has been explained by this Court in Santosh Kumar vs. Bhai Mool Singh AIR [1958]. SC321 1958 SCR1211 Milkhiram (India) (P) Ltd. vs . Chaman Lal Bros. AIR 1965 SC1698 and Mechelec Engineers & Manufacturers. v. Basic Equipment Corporation (1976) 4 SCC678 AIR 1977 SC577 The propositions laid down in these decisions may be summed up as follows:a) If the defendant satisfies the Court… b) …. c) …. d) …. e) If the defendant has no defence …. or otherwise secured. In fact in identical matters on the file of the said High Court is summary suit No.2963 of 1990 Dena Bank vs. M/s. Sunil Enterprises and summary suit No.1153 of 1989 Bank of India vs. Mahendra Sarabhai Choksi, leave to defend had been granted to defendants.
5. In those cases the circumstances arising are that the Bill of Exchange were accepted by the defendant even though they had already discharged earlier Bills of Exchange as and when they were due and the bank had continued to pay out such large amounts of Bills of Exchange accepted by the party who is already a defaulter. It is also contended that some of the Bills of Exchange were mere secondary documents and, therefore, these matters require examination. It cannot be said that the defence raised by the appellants is totally defenseless or moonshine or illusory as noticed earlier in the course of this order. Therefore, the view taken by the High Court that appellants have absolutely no prima facie case may not be correct. And in the circumstances, we allow appeals set aside the order made by the Division Bench and the judge on the original side of the Bombay High Court and dismiss the Summons for Judgment, grant leave and direct unconditional leave to the defendant to defend the suit. Appeals, therefore, stand allowed accordingly.”
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12. The ratio of all the decisions quoted above may thus be summed up that leave to defend should ordinarily not be refused if the defendant is able to put up a case giving rise to a triable issue provided the defence is “more than shadowy”. though it may be “less than probable”.. The Court should however satisfy itself that it is not a case in which the defendant has no defence or the defence is illusory or sham or practically moonshine, although the Court “may show mercy to the defendant by enabling him to try to prove a defence but at the same time protect the plaintiff imposing the condition that the amount claimed should be paid into Court or otherwise secured”..
13. From its side, the plaintiff has cited the decision of the Supreme Court in “V.K. Enterprises Vs. Shiva Steels”. (MANU/ SC/ 0567/ 2010 = AIR 2010 SC2885 in which leave to defend the suit had been refused by the Trial Court as well as the High Court. The Supreme Court after going through the case made out by the defence side affirmed the decisions observing inter alia -
“8. Order XXXVII C.P.C. has been included in the Code of Civil Procedure in order to allow a person, who has a clear and undisputed claim in respect of any monetary dues, to recover the dues quickly by a summary procedure instead of taking the long route of a regular suit. The Courts have consistently held that if the affidavit filed by the defendant discloses a triable issue that is at least plausible, leave should be granted, but when the defence raised appears to be moonshine and sham, unconditional leave to defend cannot be granted. What is required to be examined for grant of leave is whether the defence taken in the application under Order XXXVII Rule 3 C.P.C. makes out a case, which if established, would be a plausible defence in a regular suit. In matters relating to dishonour of cheques, the aforesaid principle becomes more relevant as the cheques are issued normally for liquidation of dues which are admitted. In the instant case, the defence would have been plausible had it not been for the fact that the allegations relating to the interpolation of the cheque is without substance and the ledger accounts relating to the dues, clearly demonstrated that such dues had been settled between the parties. Moreover, the issuance of the cheque had never been disputed on behalf of the Petitioner whose case was that the same had been given on account of security and not for presentation, but an attempt had been made to misuse the same by dishonest means.
9. Against such cogent evidence produced by the plaintiff/respondent, there is only an oral denial which is not supported by any corroborative evidence from the side of the Petitioner. On the other hand, the ledger book maintained by the Respondent and settled by the Petitioner had been produced on behalf of the Respondent in order to prove the transactions in respect of which the cheque in question had been issued by the Petitioner.
10. In our view, the defence raised by the Petitioner does not make out any triable issue and the High Court, has dealt with the matter correctly and has justifiably rejected the Petitioner's application under Order XXXVII Rule 3 C.P.C. and the same does not call for interference by this Court. The Special Leave Petition is, therefore, dismissed, but without any order as to costs.”
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14. The defence side has sought to distinguish the aforesaid decision by contending that previous judgments on the point were not considered in this decision, that it does not lay down any law, nor has any ratio, and that on facts it differs to the extent that no defence in the case cited was disclosed by the defence said, but in the present case the defendant has not acknowledged any liability whatsoever, and thereby has been able to put up a bona fide and good defence.
15. In the opinion of this Court however, the decision aforesaid is clearly not in conflict with any of the previous decisions relied upon by the defence side. On the contrary, it seeks to underline the importance of looking into documents relied upon by the parties for the purpose of assessing whether or not a good triable issue is likely to arise in view of the defence sought to be disclosed. Here it would be relevant to note that virtually all the allegations made out in the plaint case are founded on documents. The plaintiffs have placed on record various communications issued by the defendant including the letters, Account confirmation Slips and cheques to substantiate its case that the loan was granted on interest which was paid up from time to time by the defendant by way of several postdated cheques. The series of communications and cheques issued by the defendant exactly tally with the plaintiff’s claim even chronologically. It must also have to be remembered that there need not necessarily be any documents created in respect of transactions concerning movable properties or money simpliciter. But registration/execution of formal documents is mandatory when any Right in relation to an immovable property is sought to be created. To that extent therefore, on the face of it, the defendant’s claim of an agreement between the parties around September - October 2014 for adjustment of the loan amount granted by the plaintiff as part payment towards its booking of an immovable property in the Real Estates Scheme of the defendant, falls flat in view of the non-existence of any document whatsoever in support of such alleged agreement.
16. Considering this aspect of the matter, this Court by its Order dated 18th February 2016 had on its own granted an opportunity to the defendant to specify whether there were any documents in support of its defence as indicated in the application.
17. On the subsequent date the defendant did place on record a document to support its defence. It happens to be an extract from its own ‘Booking Sheet’ concerning the flats/units of its Housing Project by the name of ‘Avani Aspire’. The same goes to reveal that a Flat in Block B being ‘GR H’ has been booked in the name of the plaintiff Company. Still there is no actual document in the form of the alleged agreement between the parties as claimed by the defendant. On the other hand, the booking existing in the name of the plaintiff Company is seen to be made only on the “2nd of September 2015”., which is long after the suit had already been filed, and the defendant had also entered appearance therein. On the face of it therefore, the sole document relied upon by the defendant in support of its claim is manifestly absurd since there is no question of any agreement being entered into between the parties after the plaintiff had already filed the suit in which the story of such alleged agreement had been specifically denied. In these circumstances therefore, the defence sought to be put up by the defendant ex facie appears to be "moonshine”. and visibly trumped up.
18. Consequently, this Court finds no merit in the defendant's application being GA39572015 which is accordingly dismissed, while the plaintiff's application for summons for judgment (GA313of 2016) is allowed. The judgment and decree in terms of prayers (a) and (c) in the Master’s Summons thereto is accordingly granted in favour of the plaintiff. (SUDIP AHLUWALIA, J.)