Delhi High Court
National Small Industries Corp. Ltd. vs Myson Electronics P. Ltd. & Ors on 29 August, 2016
Author: Rajiv Sahai Endlaw
Bench: Rajiv Sahai Endlaw
*IN THE HIGH COURT OF DELHI AT NEW DELHI
% Date of decision: 29th August, 2016
+ CS(OS) 1164/2002
NATIONAL SMALL INDUSTRIES CORP. LTD. ..... Plaintiff
Through: None.
Versus
MYSON ELECTRONICS P. LTD. & ORS ..... Defendants
Through: Mr. Aseem Mehrotra, Adv. for D-2.
CORAM:-
HON'BLE MR. JUSTICE RAJIV SAHAI ENDLAW
IA No.10512/2016 (for exemption)
1.Allowed, subject to just exceptions.
2. The application is disposed of.
IAs No.10510/2016 & 10511/2016 (of D-2 Mr. Vinay Kumar Kaushik u/O 37 R-4 CPC and for condonation of 1075 days delay in applying therefor)
3. In this suit under Order XXXVII of Code of Civil Procedure, 1908 (CPC), on 13th August, 2013, as a consequence of the failure of the applicant/defendant No.2 to apply for leave to defend despite service of summons for judgment and as a consequence of dismissal of the application for leave to defend filed by the defendants/non-applicants No.1 & 3 to 5, a decree in favour of the plaintiff/non-applicant and against the defendants CS(OS) No.1164/2002 Page 1 of 15 jointly and severally, for recovery of Rs.27,24,945.59 paise with interest @18% per annum, was passed. On a subsequent application of the plaintiff under Section 152 of CPC, vide order dated 4th December, 2014, it was clarified that the interest payable by the defendants to the plaintiff was with effect from 1st April, 1992.
4. The claim of the plaintiff and which has been decreed, against the defendant No.1 was as a principal debtor and against the defendants No.2 to 4 was as guarantors and against the defendant No.5 was as legal heir of another guarantor.
5. The applicant/defendant No.2 in these applications for setting aside of the decree and for condonation of delay of 1075 days in applying therefor does not controvert having executed the deed of guarantee on the basis of which the plaintiff claimed against the applicant/defendant No.2 and which has been decreed. It is however the case of the applicant/defendant No.2, (i) that the applicant/defendant No.2 was merely an employee of a sister concern of the defendant No.1 and which sister concern and the defendant No.1 had common management; and, (ii) that the applicant/defendant No.2 was coerced by the said common management being his employers to sign CS(OS) No.1164/2002 Page 2 of 15 the guarantee deed. It is further the case of the applicant/defendant No.2 that the decree, insofar as against him, is liable to be set aside as the summons for judgment were never served upon him.
6. It is not as if the applicant/defendant No.2 had no inkling of the present suit. The applicant/defendant No.2 admits to in pursuance to the summons for appearance issued to him, having filed Vakalatnama of an advocate.
7. A perusal of the order sheet shows that vide order dated 19 th August, 2009, upon return of the summons for judgment issued to the applicant/defendant No.2 with the endorsement of the applicant/defendant No.2 having left the address at which the summons for appearance were sent to him and without leaving any fresh / new address, assumption was drawn by this Court that the applicant/defendant No.2 had been served with the summons for judgment.
8. The applicant/defendant No.2 finds no fault with the aforesaid order dated 19th August, 2009.
9. I may even otherwise record that Order XXXVII Rule 3(1) requires a defendant to, while entering appearance in the suit, file in the Court an CS(OS) No.1164/2002 Page 3 of 15 address for service of notices on him and Order XXXVII Rule 3(2) provides that unless otherwise ordered, all summons, notices and other judicial processes required to be served on the defendant shall be deemed to have been duly served on the defendant if are left at the address given by him for such service.
10. It is not the case of the applicant/defendant No.2 that the applicant/defendant No.2, while filing Vakalatnama in pursuance to the summons for appearance, filed any memorandum of appearance or filed any address for service of notices on him. No such memorandum of appearance or address form is found on record. In the absence of the applicant/defendant No.2 in compliance of Order XXXVII Rule 3(1) CPC having filed an address for service of notice on him, the address on which summons for judgment were to be served on the defendant under Order XXXVII Rule 3(2) CPC had to be the address at which summons for appearance were sent.
11. It is not in dispute that the summons for judgment were sent to the applicant/defendant No.2 at the same address at which the summons for appearance were sent and there can thus be no challenge to the legality of CS(OS) No.1164/2002 Page 4 of 15 the order dated 19th August, 2009 in the suit drawing the assumption that the applicant/defendant No.2 had been served with the summons for judgment.
12. Mention may be made of Kishan Bharwany Vs. V.P. Aggarwal (2002) 62 DRJ 731 where it was held by this Court that the purpose of filing address at the stage of entering appearance is to ensure that the summons for judgment are served upon defendant at the latest address as provided by the defendant, so as to avoid passing of the decree in his absence; if defendant intentionally furnishes such address on which he cannot be served, he does so at his peril; furnishing of address assumes additional importance if the summons of the suit are served by way of substituted service.
13. Though the counsel for the applicant/defendant No.2 does not dispute the aforesaid legal position but contends that an attempt should have been made to serve the summons for judgment on the applicant/defendant No.2 through the advocate whose Vakalatnama had been filed and the decree is liable to be set aside for the said course of action having not been followed.
14. Though the counsel for the applicant/defendant No.2 is unable to show any such requirement in law and the course of action suggested is also found to be in contravention of Order XXXVII Rules 3(1) & (2) of CPC but CS(OS) No.1164/2002 Page 5 of 15 a perusal of the order sheet again shows that inspite of the order dated 19 th August, 2009 having drawn assumption of service of summons for judgment on the applicant/defendant No.2, vide subsequent order dated 10 th May, 2011, summons for judgment were indeed ordered to be issued to the applicant/defendant No.2 at the address of the advocate whose Vakalatnama had been filed on behalf of the applicant/defendant No.2. However, vide subsequent order dated 25th July, 2011 it was held that the order dated 10 th May, 2011 of issuance for summons for judgment at the address of the advocate for the applicant/defendant No.2 was in ignorance of the earlier order dated 19th August, 2009; accordingly the service of summons for judgment on the applicant/defendant No.2 at the address of the advocate whose Vakalatnama has been filed, was dispensed with.
15. No challenge has been made by the counsel for the applicant/defendant No.2 to the said order dated 25th July, 2011 also.
16. It is thus not as if the Court, at the time of decreeing the suit against applicant/defendant no.2 for failure to apply for leave to defend and / or at the time of assuming the summons for judgment to have been served on applicant / defendant no.2 was not conscious of the possibility of serving the CS(OS) No.1164/2002 Page 6 of 15 summons for judgment at the address of the advocate whose vakalatnama had been filed. Not only was the Court fully conscious of the same but a decision was taken of the same being not required. In my view, „special circumstances‟ within the meaning of Order XXXVII Rule 4 of the CPC cannot be those which were in existence when the decree was passed.
17. The argument, of the applicant/defendant No.2 being not served with the summons for judgment for the reasons of the summons for judgment having not been sent at the address of the advocate for the applicant/defendant No.2, is to be rejected for another reason also. It is the case of the applicant/defendant No.2 that he left the employment of the sister concern of the defendant No.1 soon after the signing of the deed of guarantee; that thereafter he changed employment from time to time; that the Vakalatnama aforesaid filed by the applicant/defendant No.2 was of the advocate of the then employer of the applicant/defendant No.2 and whose employment the applicant/defendant No.2 left thereafter. It is not the case of the applicant/defendant No.2 that he had paid any professional fee to the advocate whose Vakalatnama had been filed or that he was in touch with the said advocate after the Vakalatnama had been filed. It thus emerges that even if the summons for judgment had been sent at the address of the said CS(OS) No.1164/2002 Page 7 of 15 advocate, the same would not have served any purpose. It is not the case of the applicant/defendant No.2 that he kept informing the said advocate of the changes in his employment and addresses from time to time. No prejudice has thus be caused to the applicant/defendant No.2 therefrom.
18. Even otherwise, as distinct from Order IX Rule 13 of CPC, Order XXXVII Rule 4 of CPC empowers the Court to set aside the decree only "under special circumstances". Supreme Court in Rajni Kumar Vs. Suresh Kumar Malhotra (2003) 5 SCC 315 held that the expression "special circumstances" is not defined in CPC nor is it capable of any precise definition by the Court because problems of human beings are so varied and complex; in its ordinary dictionary meaning, it connotes something exceptional in character, extraordinary, significant, uncommon; non-service of summons undoubtedly be a special circumstance; however in an application under Order XXXVII Rule 4 CPC, the Court has to determine the question, on the facts of each case, as to whether the circumstances pleaded are so unusual or extraordinary as to justify putting the clock back by setting aside of the decree. It was further held that it is not enough for the defendant to show special circumstances which prevented him from CS(OS) No.1164/2002 Page 8 of 15 appearing or applying for leave to defend; he has also to show by affidavit or otherwise, facts which would entitle him leave to defend the suit.
19. This Court also, in Jai Krishin Amar Vs. K.M. Capital Limited (2003) 70 DRJ 180, held that the legislature made a conscious departure when dealing with actions and litigations falling under Order XXXVII, which is a pandect of its own; while it is expected of an applicant/defendant, merely to show sufficient cause for his non-appearance on the date of hearing when the decree was passed in his absence, for setting aside such a decree passed in an ordinary suit, the requirement for obtaining the same relief in respect of a summary suit is justifiably more onerous and stringent. It was further held that if decrees passed in summary suits are to be dealt with the same latitude as under Order IX Rule 13 CPC, the object of expeditious disposal of such claims would be immediately defeated. It was also held that a defendant under Order XXXVII Rule 4 CPC has to satisfy twin conditions, namely, (i) of disclosing sufficient cause for non- appearance as also; (ii) existence of a substantial defence in the suit.
20. The applicant/defendant No.2, in my view, has neither shown sufficient cause for non-filing of leave to defend nor any substantial defence CS(OS) No.1164/2002 Page 9 of 15 to the suit. As aforesaid, the applicant/defendant No.2 admits his signatures on the deed of guarantee on the basis of which suit has been decreed against him. The defence pleaded of having been coerced to sign the same is not found such to entitle the applicant/defendant No.2 to leave to defend. The applicant/defendant No.2 claims to have left the employment during which he claims to have been so coerced long since and having changed several employers. He still did not take any steps for being relieved from the guarantee furnished by him. He did not institute any proceedings against the employers who are averred to have coerced him, not even after he became aware of the present suit from the summons for appearance and in response whereto the Vakalatnama aforesaid was filed. The only inference can be that this plea is only to defeat execution of the decree and the claim of the plaintiff, who acting on the guarantee of the applicant/defendant No.2, had meted out financial assistance to the defendant No.1.
21. Even otherwise, the applicant/defendant No.2 as a guarantor is entitled by virtue of Section 145 of the Contract Act, 1872 to recover from the principal debtor i.e. the defendant No.1 whatsoever sums the applicant/defendant No.2, as a guarantor pays under the decree. Section 146 of the Contract Act also entitles the applicant/defendant No.2 to recover the CS(OS) No.1164/2002 Page 10 of 15 decretal amount if any recovered from him from the defendants No.3 to 5, as co-guarantors.
22. It thus follows that the remedy if any for the deed of guarantee, on the basis of which decree has been passed against the applicant/defendant No.2, having been wrongfully got signed by the defendant No.1 and defendants No.3 to 5 from the applicant/defendant No.2 is against the defendant No.1 and defendants No.3 to 5 only and not against the plaintiff.
23. I may in this regard also notice the provisions of Sections 142 & 143 of the Contract Act. Section 142 of Contract Act provides that any guarantee which has been obtained by means of misrepresentation made by the creditor or with the knowledge and assent of the creditor concerning a material part of the transaction, is invalid. Section 143 provides that any guarantee which the creditor has obtained by means of keeping silence as to a material circumstance, is invalid. The reference to the creditor is to the person in whose favour the guarantee is given i.e. the plaintiff herein. The said provisions thus invalidate a guarantee only on misrepresentation or silence as to the material circumstance by the creditor and not of the principal debtor.
CS(OS) No.1164/2002 Page 11 of 15
24. Supreme Court recently also in Mahesh Kumar Joshi Vs. Madan Singh Negi (2015) 12 SCC 254 held that setting aside of ex-parte decree under Order XXXVII Rule 4 CPC cannot be allowed in a routine manner and special circumstances are required to be established. Earlier also, in TVC Skyshop Limited Vs. Reliance Communication and Infrastructure Limited (2013) 11 SCC 754 while reiterating Rajni Kumar supra it was held that the mere fact that one of the officials of the defendant had resigned and thus instructions for filing the leave to defend remained to be given, would not constitute a valid ground for negating the policy underlying Order XXXVII in general and Rule 3(5) in particular.
25. The counsel for the applicant/defendant No.2 has also argued that though the plaintiff in the plaint pleaded a notice invoking the guarantee to have been issued but no such notice has been filed by the plaintiff before this Court.
26. I fail to see as to how the same can be a special circumstance within the meaning of Order XXXVII Rule 4 CPC for setting aside of the decree. Even otherwise, the only effect of the notice of invocation of guarantee CS(OS) No.1164/2002 Page 12 of 15 having not been served on the applicant/defendant No.2 can be to not make the applicant/defendant No.2 liable for interest for any period before that.
27. I have enquired from the counsel for the applicant/defendant No.2, whether the applicant/defendant No.2 is ready to pay the principal amount without interest.
28. The answer is in the negative.
29. The aforesaid calls the bluff of the argument aforesaid of the counsel for the applicant/defendant No.2.
30. The counsel for the applicant/defendant No.2 then argues that in fact the financial assistance granted by the plaintiff to the defendant No.1 and re- payment whereof the applicant/defendant No.2 had guaranteed, was illegal being contrary to the policy / relevant scheme of the plaintiff and a result of the corrupt practices followed by the then managing director of the plaintiff. Attention in this regard is invited to the disciplinary proceedings taken by the plaintiff against its managing director and the orders of this Court with respect to the said disciplinary proceedings.
CS(OS) No.1164/2002 Page 13 of 15
31. The same again is irrelevant for the purposes of Order XXXVII Rule 4 of CPC. Monies were admittedly advanced by the plaintiff to the defendant No.1 and re-payment thereof by the defendant No.1 guaranteed by the applicant/defendant No.2. Even if there were any illegality in the loan agreement between the plaintiff and the defendant No.1 rendering the same void, the same would still not absolve the defendants including the applicant/defendant No.2 from their liability to restitute the amount so received from the plaintiff, including under Section 65 of the Contract Act. Reference in this regard can be made to Sri Tarsem Singh Vs. Sri Sukhminder Singh AIR 1998 SC 1400.
32. No ground thus for entertaining these applications is made out.
33. I have however, with a view to find out whether there is any possibility of liability of the applicant/defendant No.2 being restricted to a certain amount, enquired from the counsel for the applicant/defendant No.2, whether the applicant/defendant No.2 is willing to offer any amount to the plaintiff in satisfaction of the decree insofar as against the applicant/defendant No.2.
CS(OS) No.1164/2002 Page 14 of 15
34. The counsel for the applicant/defendant No.2 states that the applicant/defendant No.2 is merely an employee and has no assets and is not in a position to pay any amount.
35. For this reason also, no purpose will be served in issuing notice of the applications.
36. Dismissed.
No costs.
RAJIV SAHAI ENDLAW, J AUGUST 29, 2016 „bs‟..
CS(OS) No.1164/2002 Page 15 of 15