Delhi High Court
Goyal Mg Gases Ltd. vs Premium International Finance Ltd. And ... on 31 July, 2006
Equivalent citations: II(2007)BC147, 138(2007)DLT259, AIR 2007 (NOC) 920 (DEL.)
Author: Gita Mittal
Bench: Gita Mittal
JUDGMENT Gita Mittal, J.
1. This application has been filed under the provisions of Order 37 Rule 4 read with Rule 3(7) of the Code of Civil Procedure. The defendant No. 2, Shri Sumaj Jain thereby seeks setting aside of the ex parte judgment/decree dated 29th August, 2000/11th October, 2000 and stay of the execution proceedings in Execution Case No. 234/2002. The applicant has also sought condensation of the delay of one day in filing the Memo of Appearance and leave to defend the suit.
2. The plaintiff herein is a private limited company incorporated under the provisions of the Companies Act, 1956. It is the claim of the plaintiff that it had been approached by the defendant No. 1/company for grant of financial assistance in the form of bill discounting facility. On terms and conditions contained in the plaintiff's letter dated 12th September, 1995, the plaintiff had agreed to provide bill discounting facility to the defendant No. 1 to the extent of Rs. 55.0 lacs. Terms were duly accepted for and on behalf of defendant No. 1 whereby a binding contract between the parties came into existence.
3. The defendant No. 2 applicant herein, is alleged to have furnished a personal guarantee as a Managing Director of the Company which deed was executed on the 15th of September, 1995. The defendant No. 1 was required to provide additional security by pledging the shares of M/s Dhanam Trades and Agencies Ltd., M/s Charismatic Trade Links Ltd. and M/s Oasis (India) Ltd. arrayed as the defendant Nos. 3 to 5 before this Court, as security with the plaintiff.
4. Several documents were executed for and on behalf of defendant No. 1 for securing the facility granted to it. These included a demand promissory note and a letter of continuity by a duly authorized person; post dated cheques for the payment of the principal amount; post dated cheques to the extent of 15% of the principal amount towards payment of liquidated damages with a covering letter in case of failure to repay the amounts on the due date; letters pledging the equity shares of defendant Nos. 3 to 5 with resolutions of the respective Board of Directors; bills of exchange (hundi) duly stamped and accepted and signatures thereon duly attested; invoices drawn by the drawers together with the goods receipts; challans and lorry receipts duly completed in all respects; and an undertaking that in respect of these bills/invoices, the defendant No. 1 had not sought earlier discounting facilities.
5. As per the agreement between the parties, the bill discounting facility was available only for a period of 105 days. The plaintiff has claimed that in the event of default, the principal amount was payable with penal interest at the rate of 48 per cent per annum from the date of maturity, that is after the expiry of 105 days till the date of payment. As the defendant No. 1 failed to fulfill the commitment and cheques issued by defendant No. 1 towards discharge of its liability were dishonoured, the plaintiff alleged that the defendants comprising of the principal debtor, guarantor and sureties became jointly and severally liable to pay the amount of Rs. 55.0 lacs of bill discounting facility advanced by the plaintiff with interest at the rate of 48 per cent per annum and damages of Rs. 8.25 lacs. The plaintiff had issued a registered letter dated 13th January, 1996 calling upon the defendants to pay to it a sum of Rs. 63.25 lacs together with interest.
However, in the suit, the prayer was restricted to the amount of Rs. 55.0 lacs which was being claimed towards the bill discounting facility and pendente lite and future interest at the rate of 24 per cent per annum from the date of suit till realization of the amount.
6. The suit was filed against M/s Premium International Finance Ltd. (as defendant No. 1) and Shri Sumaj Jain, M/s Dhanam Trades and Agencies Ltd., M/s Charismatic Trade Links Ltd. and M/s Oasis (India) Ltd. as defendant Nos. 2 to 5 respectively. The suit was filed under the summary procedure available to a plaintiff under the provisions of Order 37 of the Code of Civil Procedure (hereinafter referred to as the CPC) on 22nd September, 1998. The admitted position is that the defendant Nos. 1 and 2 were served with the summons in the suit in the prescribed format on the 22nd of February, 1999. The summons had notified the date of hearing as 7th May, 1999. Memo of Appearance on behalf of defendant No. 2 was served upon the counsel for the plaintiff on the 4th of March, 1999. However, the same was filed in this Court by the office of the counsel of the defendant No. 2 only on 5th March, 1999.
7. When the suit was listed before the Joint Registrar (A) on the 7th May, 1999 in the presence of the counsel of the plaintiff, the following order was passed:
Defendants 1 and 2 have filed memo of appearance which are taken on record without prejudice. Fresh summons in the prescribed form under Order 37 to defendants 3 to 5 on the fresh address to be given and on PF, RC in two weeks. dusty.
Thereafter, the matter was adjourned for the service of defendants 3 to 5 to the 1st of October, 1999. On the 18th of February, 2000, the plaintiff's application (being I.A. No. 1753/2000), seeking substituted service of defendant Nos. 3 to 5 by publication of a citation in newspaper, was granted. The matter was directed to be re-notified on 8th August, 2000 for which date the report of service of defendant Nos. 3 to 5 was awaited. It was thereupon ordered that if process of fixation are not issued, fresh steps may be taken in this regard within one week.
8. In the meantime, the plaintiff sent advance copy of an application being I.A. No. 8642/2000 dated 7th August, 2000, under Section 151 of the Code of Civil Procedure to counsel for the defendant No. 2 by registered acknowledgment due post. In this application, it was contended that the defendant Nos. 1 and 2 were served with the summons in the suit on the 22nd of February, 1999 but they did not enter appearance within ten days. According to the plaintiff, they filed appearance through counsel vide diary No. 7243 dated 5th March, 2000 which was after the statutory period and no application for condensation of delay was filed by the defendant Nos. 1 and 2. The plaintiff therefore prayed that the court shall pass a decree for Rs. 55.0 lacs against the defendants with interest at the rate of 24 per cent per annum from the date of filing of the suit till the date of payment thereof. The acknowledgment due card addressed to Mr. Kamal Mohan Gupta, Advocate, at the address which was disclosed in the memo of appearance filed on court record, bears some signature in receipt which is dated 9th August, 2000.
9. I.A. No. 8642/2000 was listed before the court on the 29th August, 2000 for the first time. No notice thereof was issued on this application even though the application dated 7th August, 2000 was filed only on 18th August, 2000 and listed ten days thereafter. On the same date, the court held that the defendant Nos. 1 and 2 did not file any application for condensation of delay in entering appearance and therefore, the defendants having failed to enter appearance within the statutory period, cannot defend the suit in law and the allegations in the plaint are deemed to be admitted and the application was allowed. The plaintiff was held entitled to a decree as prayed for against defendant Nos. 1 and 2. Therefore, a decree was passed in favor of the plaintiff as against the defendant Nos. 1 and 2 for a sum of Rs. 55.0 lacs with interest at the rate of 24 per cent per annum from the date of filing of the suit till payment thereof.
10. Despite the decree having been passed, the plaintiff waited for more than 2 years and opted to file Execution Case No. 234/2002 only in the year 2002. This court issued notice to the judgment debtor including the present defendant No. 2. It has been contended by defendant No. 2 that he was away on a business tour since the first week of November, 2002 wherefrom he returned only on the 6th of January, 2003. The summons were received in his absence in his office and that the office of the applicant had instructed the retainer counsel Mr. Rajesh Arora to appear in the court on 9th December, 2002 in compliance with the notice received in the execution case. The applicant submits that immediately on return, he contacted Mr. Kamal Mohan Gupta, Advocate who had been engaged to defend the suit on behalf of applicant and had filed memo of appearance. However, Mr. Kamal Mohan Gupta, Advocate had been seriously ill due to nephritic problem and could not explain anything. In these circumstances, the applicant instructed Mr. Rajesh Arora, Advocate to ascertain the facts from the court. A vakalatnama was signed in his favor and Mr. Rajesh Arora, Advocate inspected the court record on 8th January, 2003. The defendant No. 2/applicant has stated that it was on the 8th of January, 2003 when information was received by him for the first time that the memo of appearance filed on behalf of the applicant was late by one day i.e. it was filed on 5th of March, 1999 instead of 4th March, 1999 up to which date the same could have been filed by the counsel Mr. Kamal Mohan Gupta and consequently an ex parte decree dated 29th August, 2000 was passed without issuance of the summons for judgment which the defendant No. 2 was awaiting.
11. In this application, the defendant No. 2 has objected to the manner in which service of summons was effected upon him on the 22nd of February, 1999. It has been contended that these summons were not accompanied by a copy of the plaint nor any document and as such, the same was no service in the eyes of law.
Learned Counsel for defendant No. 2 submits that for this reason, no decree could have been passed against the applicant. Additionally, it has been submitted that Mr. Rajesh Arora, Advocate had to reconstruct the whole record. Apart from reconstruction of the record, the defendant No. 2 has stated that the defendant No. 1-company was wound up on 22nd May, 1998 under orders of the Company Court and that an official liquidator has been appointed. All the records of defendant No. 1 company were with the official liquidator resulting in a lot of time being spent to obtain the copies of the relevant record with regard to the claim of the plaintiff in the suit and repayments made by defendant No. 1 in the year 1996 itself. Tracing out the copies of the correspondence exchanged between the parties was also a time consuming exercise.
12. In these circumstances, the defendant No. 2 submits that the present application was filed on 30th January, 2003 praying for setting aside the ex parte decree dated 29th August, 2000. The applicant has submitted that the application has been filed within thirty days from the date of receipt of knowledge about passing of the ex parte decree on 8th January, 2003 and consequently, the same is within the prescribed period of limitation.
13. This application has been vehemently contested on behalf of plaintiff who has submitted that the defendant No. 2, at no point of time since the service of the summons on 22nd February, 1999 till the date of passing of the decree ever challenged the validity of the service which was effected. It has been contended that no credence deserves to be given to the objection of the defendant No. 2 in the application that it was not served in accordance with law.
14. Mr. Sandeep Sharma, learned counsel for plaintiff has also challenged the submission on behalf of defendant No. 2 that the counsel Mr. Kamal Mohan Gupta was severely sick and that the delay in not filing the memo of appearance by the clerk of the counsel on 4th March, 1999 deserves to be condoned. It has been submitted that the counsel inspected the record on 20th January, 2000 and 20th July, 2000 clearly showing that he was not so incapacitated so as to render him unable to address his professional obligations. The plaintiff also submits that the judgment/decree dated 29th August, 2000 was as per the mandatory provisions of Order 37 of the CPC and that the court has no option but to pronounce the judgment in the light of the delay in filing memo of appearance by the defendant No. 2. In this behalf, the plaintiff further submits that there was no legal requirement for the plaintiff to file I.A. No. 8642/2000 bringing the delay to the court's notice and that the decree could have been passed de hors such application. It is further submitted that the defendant No. 2 was aware of the objection taken by the plaintiff as the copy of I.A. NO. 8642/2000 was sent to the correct address of the counsel for the defendant No. 2 and duly received in his office. For this reason, it is contended that the defendant No. 2 was conscious of the delay in filing the memo of appearance. It has been contended that no steps were taken to seek condensation of delay even after receipt of this application and consequently the ex parte decree dated 29th August, 2000 deserves to be maintained.
15. Having given my considered thought to the submissions made on behalf of both parties, I find that the law provides a stringent time bound schedule to be followed by the parties for taking different steps while prosecuting and defending a suit which has been filed under Order 37 of the CPC. The procedure provided is summary and aimed at expeditious adjudication and disposal of the suit. Undoubtedly, dalliance of the defendant cannot be countenanced and negligence would defeat any assertion of bona fide. However, it is well settled that rules of procedure are handmaiden to the ends of justice and cannot be permitted to defeat the substantial rights of the parties. At the same time, the time requirement being strict, there is a special duty cast on the court to ensure that the claim which is being espoused by the plaintiff is legally tenable and that the plaintiff has laid the necessary pleadings and material on record to satisfy the requirements of Order 37 to enable the court to pronounce judgment at the earliest.
16. A suit under Order 37 of the CPC is instituted by presenting a plaint which has to satisfy the requirements of Order 37 Rule 2 thereof. Thereafter, Order 37 Rule 3 mandates that the plaintiff shall, together with the summons under Rule 2, serve on the defendant a copy of the plaint and annexures thereto. The consequence of failure to serve summons as required by law fell for consideration before this Court in entitled Hans Raj v. Lakhi Ram. In this pronouncement, the court was considering an application by the defendant for setting aside of an ex parte decree inter alia on the ground of non-service of the summons as required by order 37 of the CPC. In this behalf, the court held thus:
6. It is obvious that the non-service of summons under provisions of Order 37, CPC would by itself be a special circumstance entitling the defendant/petitioner to ask for setting aside the decree. On the summons sent through ordinary process the Process Server had reported that defendant was reported to be out of station and this information was given by the wife. But the Process Server's report nowhere indicates that the summons were ever tendered to the wife. Summons sent by registered post came with the remarks that addressee is not available despite repeated approach. In a suit brought under Order 37, CPC, it is all the more important for the plaintiff to show that the fact that the suit was filed under summary procedure was specifically brought to the notice of the defendant because in these cases he has to put an appearance within a period of ten days. There is nothing on record to show that either the summons were tendered to the wife of the petitioner or she was told that defendant has to appear before Court within a period of ten days. A perusal of the order sheets reveal that on several dates either the "Process fee was not filed by the plaintiff or annexures were not furnished as a result of which summons could not be issued. As regards substituted service it is clear from the perusal of copy of the newspaper"Statesman" dated 21.10.1995 that copy of the annexures namely the alleged loan agreement dated 24.3.1994 were not published in the newspaper. While dealing with the service of summons in the suit under Order 37 CPC, this Court in the case of Pubjab and Sind Bank v. Ramji Das Khanna and Anr. took the view that where a process server has affixed only the copy of summons without affixing the copy of plaint and annexures thereto and the Registrar of the Court has not held any inquiry to determine whether service under the circumstances was sufficient, the service of summons is insufficient and it is a sufficient circumstance to set aside a decree. The Court took note of relevant rules of the CPC and the High Court rules in this regard. Order 37, CPC specifically provides that in a suit under Order 37, CPC, the plaintiff shall together with the summons under Rule 2, serve the defendant with a copy of the plaint and annexure thereto. Thus where only summons have been affixed without affixing copy of the plaint and annexures thereto, the service is not in accordance with the provisions of Order 37 Rule 3 (1), CPC and this would be a sufficient ground to set aside the decree. The same view is taken by another bench of this Court in the case of New Bank of India v. Master Steel Marketing Co. . It was a case of the substituted service. It was held that where only copy of summons was published without publishing copy of the plaint and annexures thereto, the service was not in accordance with law. As against this, learned counsel for the respondent has relied upon the decision in the case of EMESS Advertising Service v. The Hindustan Times Ltd. AIR 1998 Delhi 14. It was an ordinary suit for recovery and not under the provisions of Order 37, CPC. In that case publication was held to be sufficient. It is clearly distinguishable as it was rendered in the context of an ordinary suit in which case publication of summons is enough. In the case of an ordinary suit there is no need to affix copy of the plaint and the annexures thereto but in a suit brought under Order 37, CPC it is mandatory that plaintiff shall together with summons serve on the defendant a copy of the plaint and annexures thereto. It appears that learned District Judge was not satisfied with the explanation regarding date of knowledge of the decree given supported by the affidavit of the petitioner /defendant. If at all learned Additional District Judge felt requisite details are lacking, the petitioner could have been directed to file additional affidavit or lead evidence regarding circumstances under which he came to know about the decree. Summary rejection of the petitioner's application under the circumstances was uncalled for more so when defendant denied the very cause of action viz. the execution of the agreement dated 24.3.1994. In his application for setting aside the decree as well as for leave to defend, the petitioner denied the loan transaction. Bare look at the agreement renders it suspicious as it has so many cutting which are unsigned. The only eye-witness who allegedly signed the loan agreement namely Radhey Shyam has filed two self contradictory affidavits in this regard. Under the circumstances, the defense raised by the defendant /petitioner cannot be said to be moonshine. The defendant's case, if proved, will non-suit the plaintiff/respondent.
17. In the instant case, the defendant was admittedly served with the summons as back as on 22nd of February, 1999. Though the copy of the summons available on the record does not disclose as to whether copy of the plaint and the annexures of the documents was enclosed, however, it is a fact that no objection was laid by the defendants on receiving the summons. Even in the memo of appearance which was filed by the counsel on 4th March, 1999, no objection has been noted or taken that the summons were not accompanied by the copy of the plaint and the other documents required to be served. There is no communication addressed to counsel for the plaintiff or the plaintiff over the period during which the suit remained pending that copy of the plaint or documents was not received by the defendant No. 2.
18. Mr. Sandeep Sharma, learned counsel for the plaintiff has drawn my attention to the registered covers which were submitted by the plaintiff for service of the defendants in accordance with law. These registered covers having been returned unserved by the postal authorities are available on the court record. Perusal of these covers show that the same contained not only the copy of the summons in the prescribed format but also a copy of the plaint and photocopies of some documents.
19. However, perusal of the record of this Court shows that the plaintiff had filed process fee on the 11th of February, 1999 on which it has stated the purpose of filing as 'notice to the respondents (sets enclosed with registered A.D. covers).' The service report of the defendants on the summons which had been sent on this process fee has been filed with an affidavit of service dated 10th March, 1999. Shri P.C. Arya, an employee of the plaintiff-company has deposed on affidavit that service of defendants 1 and 2 was effected by process server while summons of the other defendants could not be served. This service was admittedly effected on the 22nd of February, 1999. The summons of defendants 3 to 5 which have been returned unserved are not accompanied with any paper book. Even as per the process fee form filed by the plaintiff, it is apparent that five copies were enclosed with five registered covers and there was no additional copy for service through the process server. Service on defendant No. 2 has been effected through the process server and an affidavit of service in this behalf was filed by the plaintiff. The registered covers were returned unserved. Therefore, though normally, failure to make an objection on the part of the defendant would defeat the objection that the summons were not served with a copy, however, in the instant case the objection is supported by the record of this Court and therefore the same deserves to be upheld.
20. In this view of the matter, I have no hesitation in holding that the summons which were served on the defendant No. 2 on 22nd February, 1999 were not accompanied by copy of the plaint and the annexures or the documents relied upon by the plaintiff.
21. Learned Counsel for the plaintiff has placed strong reliance on the inspections conducted of the court record by the office of Mr. Kamal Mohan Gupta, Advocate pursuant to the application dated 20th January, 2000. Such inspection was conducted on the 21st of January, 2000. This would have revealed only the order dated 7th of May, 1999 whereby the memo of appearance on behalf of defendant No. 2 has been taken on record. The objection to the memo of appearance was taken by the counsel for the first time when he filed I.A. No. 8642/2000 on 7th August, 2000.
So far as defendant No. 2 and counsel was concerned, they would be of the impression that the memo of appearance was in accordance with law having been taken on record or that, objections thereto, if any, stood waived.
22. Furthermore, when the matter was listed on 8th August, 2000, the next date on which the suit was to be listed was 11th of October, 2000. It was because the plaintiff filed I.A. 8642/2000 that the case was listed on 29th August, 2000 which was not a scheduled date of hearing and the ex parte decree was passed without any notice of this application to the defendant No. 2. In my view, the memo of appearance having been taken on record on 7th May, 1999 without any objection by the plaintiff and the matter having remained pending for over a year, interest of justice would merit that the notice of the listing of I.A. No. 8642/2000 be sent to the defendant No. 2/non-applicant.
23. The plaintiff has submitted that advance copy of this application was sent to the counsel for the defendant by registered post. This application was sent on 7th August, 2000. An acknowledgment card bearing a signature and date of receipt as 9th August, 2000 has also been placed before this Court. The signature on the acknowledgment card are in vernacular. Assuming for the moment that, this application was actually received in the office of the defendant's counsel. However, it is a fact that this application was not filed immediately but only on 16th August, 2000 and re-filed on 22nd August, 2000. It was also not listed on the fixed date of hearing which was 11th of October, 2000 but on 29th August, 2000. There is no dispute that the normal practice adopted in the court is to issue court notice of an application when it is listed. This is more so when the application was not even filed for immediate hearing. The counsel for defendant No. 2 could have very well assumed that the plaintiff did not intend to actually file or press the application.
24. Furthermore, in a suit under Order 37 of the CPC, the defendant would normally expect to be served with the summons for judgment after its memo of appearance had been taken on record to file leave to defend by the plaintiff.
25. Coming to the contention that no application was necessary to point out the delay in filing the memo of appearance, this submission would be of substance but for the conduct of the plaintiff after the filing of the memo of appearance by defendant No. 2. The order dated 7th May, 1999 taking the memo on record was passed by the Joint Registrar in the presence of the plaintiff and no objection was taken. 'Without prejudice' loses significance when no objection is taken by the plaintiff for over a year till August, 2000. The admitted position is that counsel for the defendant has inspected the record on 21st February, 2000 when it would have been informed that the memo of appearance was on record. 'Without prejudice' could very well relate to the pleas on the merits of the matter. The plaintiff was bound to have objected to the memo being taken on record.
26. The defendant No. 2 has contended that it had been advised that the memo of appearance had been filed in accordance with law and the plaintiff was required to serve summons for judgment in accordance with law upon the defendant No. 2 or its representative whereupon further steps in the suit by it were necessitated.
27. It is noteworthy that dispatch of a correctly addressed document by registered post raises a rebuttable presumption of service. In the instant case, counsel to whose office the application was sent by post on 7th August, 2000 has filed an affidavit stating that the application was never received in his office. It is not even the plaintiff's case that the acknowledgment due card bears the signatures of the counsel. The onus therefore would be on the plaintiff to establish that the AD card was signed by someone in the office of the counsel.
In 1996 (V) AD (Delhi) 108 entitled Smt. Chander Kanta Singhal v. Kapadia Exports, the court held that presumption of service had to be drawn in the light of the suggestion put by the defendant to the plaintiff in evidence. There is no such material before this Court.
28. The procedure for appearance of defendant is provided under Rule 3 Order 37. The plaintiff is required to serve upon the defendant together with the summons under Rule 2, a copy of the plaint and annexures thereto. Upon such service, the defendant may, at any time within ten days of such service, enter an appearance either in-person or by pleader and, in either case, he shall file in court an address for service of notices on him.
Sub-rule 3 of rule 3 of Order 37 postulates that on the date of entering the appearance, notice of such appearance shall be given by the defendant on the plaintiff's pleader, or, if the plaintiff sues in-person, to the plaintiff himself, either by a notice delivered at or sent by a prepaid letter directed to the address of the plaintiff's pleader or of the plaintiff, as the case may be.
29. In the instant case, defendant Nos. 1 and 2 through counsel had served a notice of appearance dated 4th March, 1999 on their behalf upon the counsel for the plaintiff giving an address for the service of notices upon them and entering appearance in the suit. This memo of appearance is available on record and was duly served in the office of the counsel for the plaintiff on the 4th of March, 1999. Despite this service, however, the memo was filed in court on behalf of the plaintiff by the office of the counsel on the 5th of March, 1999. The admitted position is that the ten days from the date of service within which the memo was required to be filed were expiring on the 4th March, 1999. Therefore, its filing on the 5th of March, 1999 was late by one day.
30. The entire basis of passing of the ex parte decree on 29th August, 2000 was that the memo of appearance on behalf of the defendant was filed late by one day. Order 37 of CPC permits condensation of delay for special circumstances which are brought before the court by the defendant. The defendant in the instant case, stated that memo of appearance was duly prepared within the period prescribed by law and was even served on counsel for the plaintiff within such period on the 4th of March, 1999. This position is not disputed even by the plaintiff. However, the memo was filed by clerk of the counsel for reasons beyond the control of the defendant on the 5th of March, 1999.
31. The question which arises for consideration is the procedure which the court has to follow upon the defendant failing to enter appearance within the period prescribed by law. It would be useful to notice the requirements of the statute as laid down in order 37 rule 2 (3) which reads as follows:
(3) The defendant shall not defend the suit referred to in Sub-rule (1) unless he enters an appearance and in default of his entering an appearance the allegations in the plaint shall be deemed to be admitted and the plaintiff shall be entitled to a decree for any sum, not exceeding the sum mentioned in the summons, together with interest at the rate specified, if any, up to the date of the decree and such sum for costs as may be determined by the High court from time to time by rules made in that behalf and such decree may be executed forthwith.
The condensation of delay has to be considered looking at the specificities of the suit and not only the basis of the broad principles laid down which may in some cases go against equity and justice. In entitled Aradhana Textiles Pvt. Ltd. v. Vishnu Textiles Traders and Ors., where the delay in making application for leave to defend was due to ignorance of the lawyer, the delay was condoned subject to payment of costs.
It is a well settled principle of law that fault which could be attributable to a lawyer should not prejudice the litigant. It was so held in entitled Rafiq and Anr. v. Munshi Lal and Anr.
32. The legislature has envisaged the contingency where delay occurs on reasonable grounds on the part of the defendant in entering appearance or in applying the leave to defend suit.
Sub-rule 37 of Rule 3 of Order 37 has been incorporated for such an eventuality. The court has been empowered to excuse the delay by the defendant in entering appearance if sufficient cause is shown by the defendant.
33. In entitled Method Training and Investment Ltd. v. Shree Ambica Jute Mills Ltd., the court was considering sufficiency of cause for delay in filing the leave to defend application. In this case, it was held that where an application for leave to defend was presented before the officer of the court within the time prescribed but was filed before the court after the expiry of the prescribed period, the date for presenting the application in court would be taken as a date on which the application was placed before the court and the application would be considered to be within the time prescribed under order 37 as the courts could not be so technical.
Similarly, in entitled Harikrishna Punaroor v. Seaview Tourist Home, Mangalore; entitled Haryana Brewaries Ltd. v. The Aluminium Mfg. Co. Ltd. and Anr. and entitled West Bengal Decorating Co. v. Damodar Das Daga, delay for non-appearance for sufficient cause was condoned.
In the instant case, no mala fide can be attributed to the defendants for the delay in filing of Memo of Appearance. The defendants have contended that they had approached the counsel repeatedly. Because of his sickness or for other reason, he was unable to take steps in the matter till the last date i.e. 4th March, 1999. Counsel for the defendant who was to contest the matter has filed an affidavit stating that he was ailing on account of problems with his kidney and not able to attend to his work properly. Even otherwise, for the purposes of effecting filing after preparation of pleadings and documentation, counsels rely on court clerks. There is no reason to disbelieve the submission on behalf of the counsel for the defendants that it was by the clerical lapse that the memo was not filed on the 4th of March, 1999 but was filed on the 5th of March, 1999, hence late by merely a single day. The statutory provisions itself provide for condensation of delay. Admittedly, advance copy of the memo was received by the plaintiff within time. Admittedly, the Memo of Appearance was prepared and the defendants signed the vakalatnama in favor of the counsel which was admittedly served on counsel for the plaintiff on the same day. The defendant Nos. 1 and 2 have stated on affidavit that they were of the reasonable expectation that the same would be filed in court on the 4th of March, 1999 and were secure in the belief that they have authorized counsel and also taken all reasonable and prudent steps as were required by law to be taken by them and as such, were of the firm belief that their matter was in safe hands and well looked after.
34. There is no dispute that service of the Memo of Appearance was effected on the 4th of March, 1999 itself upon counsel for the plaintiff at the address in the premises of this Court. The defendants as well as counsel have sworn an affidavit that it was on account of a clerical lapse that the memo was not filed by him on the 4th March, 1999 but on the 5th March, 1999. The explanation rendered by the applicants is credible and deserves to be believed. As to what weighed in the mind of the clerk for not filing the memo of appearance on the 4th March, 1999 cannot be ascertained with any certainty, whether it was for want of knowledge of the imperativeness and the legal requirement that the same be filed on the 4th March, 1999 or ignorance about the limitation expiring on the 4th of March, 1999 or whether it was because the registry had closed for the day by the time he served the memo on the counsel or whether it was because of sheer negligence in discharge of his duties, is in the realm of speculation. Be that as it may, no negligence or fault, however, can be attributed to either the defendants or the counsel for the non-filing of the memo of appearance on the 4th of March, 1999. The fact however remains that though the memo of appearance was filed on record on the 11th day from the service of the summons of the suit on the defendants, so far as the plaintiff was concerned, it had received the notice of the memo of appearance within the period of limitation admittedly.
35. In the instant case, no objection was taken by the counsel for the plaintiff when the memo was taken on record on 7th of May, 1999. No objection was taken for more than one year thereafter. In these circumstances, the defendant/applicant has made out a case for condensation of one day's delay in filing memo of appearance.
36. The plaintiff having obtained the decree dated 29th August, 2000 also took no steps in the matter for a long period till he filed the execution being Execution Case No. 234/2002. The defendant No. 2 has submitted that he has no knowledge of passing of the ex parte decree. The plaintiff however places strong reliance on an inspection form on record which is dated 20th July, 2002. This inspection form has been filed by a counsel without disclosing who he was representing merely terming the same as on behalf of the 'defendants'. The vakalatnama of such counsel is not on record and obviously the defendant No. 2 would not be bound by such inspection by a counsel who it had not authorized or empowered to represent it in the matter.
37. The contention of the defendant No. 2 that it had requested Mr. Rajesh Arora, Advocate to appear in the matter after the 6th of January, 2003 is supported by the vakalatnama and the inspection form on record. There is no denial by the plaintiff that the defendant No. 1 was ordered to be wound up by an order dated 22nd May, 1998 of the Company Court in Company Petition No. 256/1997. Therefore a question with regard to the maintainability of the suit against the defendant No. 1, leave of the company court as also sufficiency and propriety of service on the defendant No. 1 also arise for consideration.
The plaintiff has been unable to place anything on record which would establish that the defendant Nos. 1 and 2 had any knowledge of passing of the ex parte decree dated 29th August, 2000 prior to 8th of January, 2003.
38. This matter has to be examined from yet another angle. In the application filed by the defendant No. 2, certain averments have been made on the merits of the case which inter alia include the following:
14. That it may also be submitted that though the plaintiff had sanctioned an amount of Rs. 55,00,000/- but paid an amount of Rs. 49,78,000/- after deducting a sum of Rs. 5,22,000/- as advance interest for the period for the period for which loan had been advanced to the defendant No. 1 company. The said sum of Rs. 49,78,000/- was paid by the plaintiff to the defendant No. 3 company in the month of September, 1995, which was repayable within 105 days, by the defendant No. 1 company.
15. The applicant respectfully submits that due to the financial crunch in the market, the said amount could not be paid as agreed between the parties. However, all efforts were made to repay the said amount of the plaintiff company and from March, 1996 to July, 19996 a total sum of Rs. 17,75,000/- has been paid by the company to the plaintiff including Rs. 5,20,000/- which amount was already deducted by the plaintiff, out of the was already deducted by the plaintiff, out of the total loan sanctioned while disbursing the amount of Rs. 49,78,000/- and proof whereof is annexed hereto marked as Annexure -'A'.
15.1. That the defendant No. 1 company, which gave to the plaintiff, its 4,65,000 shares by way of additional security against the loan have also transferred the said share to the plaintiff in their favor, the total value whereof at that point of time was Rs. 39,52,000/ as per Mumbai Stock Exchange, against the repayment of the loan. Thus the plaintiff has already received/ recovered a sum in excess of its advance given to the defendant No. 1 company. It may also be pointed out that in addition to the 4,65,000 shares of defendant NO.1 company, on their own showing the plaintiffs were also handed over 2,45,000 shares by defendant No. 3, 71, 1000 shares by defendant NO,5, of the defendant No. 1 company Along with the duly signed/executed transfer forms / deeds by the said defendants, for which no credit whatsoever has been given by the plaintiff to the defendants. The copy of the relevant letter of defendant No. 1 company with regard to the transfer of the shares in favor of the plaintiff company along with a photocopy of the daily official list of the Stock Exchange, Mumbai showing the rate of the share of the defendant No. 1 at the relevant period are annexed hereto marked as Annexure-'B' (Colly).
16. That the above facts with regard to the receipt of Rs. 17,75,000/- and transfer of shares to the tune of Rs. 39.50 lakhs have been deliberately concealed from this Hon'ble court by the plaintiff. The plaintiff has not approached this Hon'ble court with clean hands and as such is not entitled for any decree as claimed or otherwise. The applicant further submits that otherwise also no decree could have been passed without affording the present defendant an opportunity to defend the false, baseless and illegal claim raised by the plaintiff in the suit.
39. The defendant No. 2/applicant has submitted that the order of winding up having been passed against the defendant No. 1, no decree could have been passed without leave of the company court or impleading the official liquidator as a party to the suit.
40. The plaintiff has opted not to even deny these allegations let alone filing a reply to these averments. Other objections taken by the defendant No. 2 in this application also remain unrepudiated. So far as the stand of defendant No. 2 to the effect that several payments which were made to the plaintiff are not reflected in the plaint is concerned, it has been orally submitted by learned counsel for the plaintiff that these matters relate to accounting and the accounts of the parties can very well be settled in the execution proceedings.
41. Be that as it may, however, the fact therefore would be that the amount claimed in the suit was not actually due or payable by the defendants. The plaintiff has not correctly quantified the amount which the defendants were owing to the plaintiff. For this reason alone, the decree which was granted in favor of the plaintiff could not have been granted.
42. Furthermore, the suit of the plaintiff is based upon a written agreement purportedly executed between the parties as well as other documents in the nature of guarantee deed, promissory notes etc. The suit was based entirely on the written documents. In order to become entitled to a decree, the court had to be satisfied at the time of passing judgment and decree, firstly of the existence of such documentation and secondly, as to the legality and validity thereof.
43. It has been contended that there was no opposition to the suit and as a result, the averments made in the plaints were deemed to be admitted in law as per the provision of order 37 of the CPC. Consequently, according to the plaintiff, nothing further was required to be done other than to examine the averments in the plaint.
44. To my mind, this would not be the correct position in law. It would be the duty of the court to satisfy itself that the suit of the plaintiff was maintainable under Order 37 of the Code of Civil Procedure and to arrive at a conclusion that the plaintiff was entitled in law to the award of a decree in its favor even in a case where the defendant had failed to enter appearance or put in any kind of defense. A suit which rests wholly on written agreements and documentation, is required to be supported by such documents. The plaintiff before this Court, did not file the originals of the documents which it was placing reliance on. Only photocopies of the agreement, promissory note, hundi, guarantee deed etc. were filed before the court. Undoubtedly, a photocopy is at best secondary evidence of the original. Such photocopy can be looked at only if the original is not available or cannot be produced for good reason. However, the photocopy cannot take the place of an original documents which is deliberately not placed before the court. A suit under order 37 of the Code of Civil Procedure is necessarily required to be accompanied by the original documents which are the basis of the claim before the court.
45. In entitled Sudhir Engineering Company v. Nitco Roadways Ltd., this Court held that even admission of a document by the other side would not enable the court to dispense with formal proof so as to entitle a party to lead the document in evidence. In XII (1976) DLT 82 entitled S.P. Ray v. Union of India, the court defined the meaning of 'documents' and also set down what documents a party could call upon the other party to admit or deny.
46. The Code of Civil Procedure permits summary procedure to be adopted in respect of suits for recovery of a debt or a liquidated demand in money payable by the defendants. Where the defendant disputes the nature of documents or there were discrepancies in the purported negotiated documents, courts have held that the issues raised by the defendant were friable issues and leave to defend was granted to the defendants (re: State Bank of Saurashtra v. Ashit Shipping Services Pvt. Ltd. )
47. In Sunil Enterprises v. SBI Commercial and International Bank Ltd. , the Bank had continued to pay out large amounts of bills of exchange accepted by the party who was already a defaulter. The bills of exchange were accepted by the defendant even though they had discharged earlier bills of exchange as and when they were due. It was contended that some of the bills of exchange were merely secondary documents and, therefore, these matters required examination. In this case, the apex court held that the defense taken by the appellants could not be held to be totally defenseless or moonshine or illusory and therefore, the appellant-defendant was entitled to unconditional leave to defend the suit.
48. The scheme of Order 37 of the Code of Civil Procedure shows that the same is an enabling provision which has been enacted with the object to abridgment of the proceedings and the rapidity of disposal of certain claims. The provision of Order 37 provides certain rules of procedure to be applied after a plaint is admitted in the prescribed cases without altering in any way the nature of the suit or the jurisdiction of the courts.
A summary suit is a suit based on documents. If the document itself is not admissible or cannot be acted upon for any reason, the summary suit would not lie. In 1989 Maharashtra Law Journal 310 : 1988 Vol. 90 Bombay Law Reporter 560 entitled Yogendra Patwardhan v. Khandelwal Hermann Electronics Ltd., it was held that if the document was not admissible in evidence for want of proper stamp duty, the summary suit would not lie. The documents relied on must faithfully disclose the transaction and the summary suit should be based on such transaction alone.
49. Learned Counsel for the plaintiff has drawn my attention to the pronouncement of the Apex Court in entitled Rajni Kumar v. Suresh Kumar Malhotra to contend that under Order 37 Rule 4, the defendant has to show not only special circumstances which prevented him from appearing or applying for leave to defend but also facts which would have entitled him to leave to defend. In the instant case, the occasion to file leave to defend did not arise since the decree was passed as the memo of appearance was belated. However, on the admission before this Court that certain amounts received from the defendants have not been reflected and failure to file the original documents, it has to be held that the defendant has shown special circumstances entitling him to relief in the present application.
50. In my view, therefore, the instant case is a case where sufficient cause has been shown for the delay in entering appearance on the part of the defendant Nos. 1 and 2 and the same deserves to be excused within the meaning of the expression in Sub-rule 7 of Rule 3 of Order 37.
Accordingly, this application is allowed. The ex parte decree dated 29th August, 2000 passed in favor of the plaintiff as against the defendant Nos. 1 and 2 cannot stand and is hereby set aside. The delay in filing the memo of appearance by the defendants is hereby condoned. The parties shall stand relegated to the stage in the suit when the memo of appearance was filed by the defendant Nos. 1 and 2.