Calcutta High Court
Npr Finance Limited vs Deepak Jhunjhunwala on 6 April, 2016
Author: Harish Tandon
Bench: Harish Tandon
IN THE HIGH COURT AT CALCUTTA
ORDINARY ORIGINAL CIVIL JURISDICTION
ORIGINAL SIDE
G.A. 957 of 2009
With
C.S. 97 of 2003
NPR FINANCE LIMITED
-VS-
DEEPAK JHUNJHUNWALA
CORAM: HON'BLE MR. JUSTICE HARISH TANDON
For the Petitioner Mr. Abhrajit Mitra, Sr. Adv.,
Mr. Soumabho Ghosh, Adv.,
Mrs. Sonia Sharma, Adv.,
Ms. Madhumanti Chakraborty, Adv.,
For the Respondent Mr. Aniruddha Mitra, Adv.,
Mr. Saunavo Basu, Adv.,
Mr. Sajjan Kr. Kassena, Adv.
Date 06.04.2016
Harish Tandon, J.:
The plaintiffs have filed an application under Chapter 13A of the Original Side Rules for summary judgment.
The plaint case proceeds that in and about the month of February, 2006 the plaintiff lent and advance various sums aggregating Rs. 5 Crore 24 Lacs on the request of the defendant on an agreed rate of interest. It was agreed that the interest would be payable on monthly basis on production of the bills by the plaintiff upon the defendant. The entire sum was advanced between February, 2000 and March, 2001 and the account confirmation for the accounting year 1999-2000 would corroborate the said facts as it contains the amount outstanding as on that date. The defendant regularly paid the interest up to the month of January, 2001 and further partly paid the interest for the month of February. On 7th May, 2001 the defendant paid a further sum of Rs. 2 Crores. The plaint case further proceeds that certain shares were pledged by way of a security and were replaced from time to time depending upon the fluctuation in the market price thereof. On and from the month of May, 2001 the defendant neglected to repay the loan and declined to give adequate security for the loan amount. It is stated that at the time of default in payment of interest and the principal amount 23000 shares of DSQ Software, 90000 shares of DSQ Biotech and 11000 shares of HFCL (Himachal Futuristic Communication Ltd.) were in the hands of the plaintiff. The plaintiff recalled the loan and communicated to the defendant to clear off all the outstanding. On the instruction of the defendant 23000 shares of DSQ Software, 90000 shares of DSQ Biotech were sold in the month of November, 2001 and the sale proceeds were adjusted in protanto satisfaction of the then plaintiff's dues. The plaintiff could realize a sum of Rs. 26,88,192.20 paisa from the sale proceeds and the same was brought to the notice of the defendant. Even thereafter the defendant did not pay either the interest or the principal amount and a notice dated 20th February, 2003 was issued upon the defendant to clear off the entire dues within 3 days from the date of receipt thereoff. Subsequently, the remaining shares were sold at a prevalent market price through a registered broker and in such process the plaintiff could only realize a further sum of Rs. 2,73,350/- which was again adjusted against the outstanding. It is thus stated that after adjustment of the sale proceeds from the aforesaid shares, there is still an oustanding to the extent of 3,61,04191.80 paisa. The present suit is filed for recovery of the said amount together with an interest at the rate of 16.5% per annum.
In the instant application, the plaintiff asserts that the writ of summons was served on the defendant on 23rd March, 2009 and the defendant entered appearance on 27th March, 2009 and within the time so prescribed, the present application has been taken out. It is, further stated that the defendant has no defence against the claim and prayed for a summary judgment for the aforesaid amount along with interest.
In the affidavit-in-opposition, the defendant admitted the loan of Rs. 5 Crore 24 Lacs but denied the terms and conditions stated by the plaintiff. It is categorically stated that the said amount was advanced to the defendant which the defendant agreed to repay with interest at the rate to be mutually agreed upon subject to the condition that the plaintiff will sell off the shares received from the defendant in case the value of shares becomes equal to the amount advanced. It is further stated that in the event, the defendant discharges his obligation towards repayment of interest and principal, chunk of shares which had been transferred in the Demat Account of the plaintiff would be reverted back to the Demat Account of the defendant. There is a clear denial of pledge of both shares as security for the loan amount. According to the defendant, the plaintiff was permitted to exercise the right to sale the shares held in its Demat Account and therefore denies and disputes the allegation of the plaintiff that those shares were pledged as security for the loan amount. It is, however, stated that if those shares could have been sold in the month of March, 2001, it would have fetched more amount than what the plaintiff allegedly received in selling between November, 2001 to February, 2002.
In reply the plaintiff demonstrated the price of those shares during the relevant month in order to demonstrate that if those shares were sold in the month of March, 2001 it would not fetch the price which the plaintiff received by selling thereafter.
On the backdrop of the aforesaid facts, it is submitted on behalf of the plaintiff that there is no defence available to the defendant and therefore the plaintiff is entitled to summary judgment. The learned Advocate of the defendant vehemently submits that the sale of those shares are in violation of Section 176 of the Contract Act as no notice was served upon the defendant. It is, further submitted that a triable issue is raised, which amounts to good defence and the defendant should be granted unconditional leave to defend. To buttress the aforesaid submissions, the reliance is placed upon a judgment of this Court rendered in case of Karunamoyee Devi & Anr. -Vs- Dr. J. Chatterjee reported in AIR 1949 CALCUTTA 479 and a judgment of the Supreme Court in case of M/s Mechalec Engineers and Manufacturers -Vs- M/s Basic Equipment Corporation reported in AIR 1977 SC 577.
It is, therefore, submitted that in absence of any notice before effecting sale of the pledged, shares the sale would be rendered void and placed reliance upon the following judgments:-
1. Hindusthan Bank Ltd. & Anr. -Vs- Surendra Nath Dey & Ors.
reported in AIR 1932 CALCUTTA 524;
2. Hulas Kunwar -Vs- Allahabad Bank reported in AIR 1958 CALCUTTA 644;
3. Sri Raja Kakarlapudi Venkata Sudarsana Sundara Narasayyamma Garu (died) & Ors. -Vs- Andhra Bank Ltd. reported in AIR 1960 ANDHRA PRADESH 273;
4. Prabhat Bank Ltd. & Anr. -Vs- Babu Ram reported in AIR 1966 ALLAHABAD 134;
5. T.S. Kotagi -Vs- Tahsildar, Gadag & Ors. reported in AIR 1985 KARNATAKA 265.
The defendant thus submits that the requirement of notice is not a mere formalities but mandatory in nature resulting into the sale to be declared void.
At the first blush, the argument appears attractive but after perusing the respective stands of the parties the aforesaid argument is advanced at the Bar more particularly at the behest of the learned Advocate representing the defendant without pleadings in support thereof. There is a clear admission on the part of the defendant to have received a loan of 5 Crore 24 Lacs from the defendant. Admittedly there is no written document executed at the time of lending the money to the defendant. The defendant categorically admitted that the said amount was advanced by the plaintiff on oral agreement. In order to ascertain the terms and conditions the conduct of the parties are relevant factors. It is not denied that the defendant paid interest on monthly basis as and when the bills for interest are raised by the plaintiff. The bills which are annexed in reply clearly show the rate of interest at 16.5% per annum, which have been paid by the defendant.
According to the plaintiff, the aforesaid shares were pledged as security and have been sold at the instruction of the defendant and the sale proceeds had been adjusted and / or appropriated in protanto satisfaction of the then outstanding. On the other hand, the defendant says that those shares were transferred to the plaintiff with an absolute right to sale the moment the price of those shares became equivalent to the outstanding and it is only on payment of the interest and the principal amount those shares shall be re-transferred in the Demat Account of the defendant. The case of a pledge has been totally negetived by the defendant. Section 176 of the Contract Act is activated where the movable property is placed for money lent and advance and entitled the pawnee to institute a suit for recovery of the debt and may sale the things pledged on giving reasonable notice of sale to the pawner. There is no quarrel to the proposition of law that the Pawnee has a right of action on his debt notwithstanding possession by him of the goods pledged. It is a reciprocal obligation when the entire loan is paid to return the goods pledged. The pawner may have a good defence if he showed the payment of the debt and the Pawnee has refused to return the good pledged. The pawner does not become entitle to possession of the good pledged without tendering the amount due to the Pawnee. The support can be lend from the observation of the Supreme Court in AIR 1967 SC 1322 which runs thus:--
"A contract of pawn thus carries with it an implication that the security is available to satisfy the debt and under this implication the pawnee has the power of sale on default in payment where time is fixed for payment and where there is no such stipulated time on demand for payment and on notice of his intention to sell after default. The pawner however has a right to redeem the property pledged until the sale. If the pawnee sells, he must appropriate the proceeds of the sale towards the pawner's debt, for, the sale proceeds are the pawner's monies to be so applied and the pawnee must pay to the pawner any surplus after satisfying the debt. The pawnee's right of sale is derived from an implied authority from the pawner and such a sale is action for his debt notwithstanding possession by him of the goods pledged. But if the pawner tenders payment of the debt the pawnee has to return the property pledged. If by his default the pawnee is unable to return the security against payment of the debt, the pawner has a good defence to the action. This being the position under the common law, it was observed in Trustees of the Property of Ellis and Co v. Dixon Johnson, 1925 AC 489, that if a creditor holding security dues for the debt, he is under an obligation on payment of the debt to hand over the security, and that if, having improperly made away with the security he is unable to return it to the debtor he cannot have judgment for the debt."
All the judgments relied upon by the defendant uniformly held that if the pawner makes a default in payment of debt in respect of which the goods are pledged, the pawnee may bring a suit against the pawner upon the debt or may sale the things pledged on giving pawner reasonable notice of the sale. It is also not in dispute that such notice must be clear and specific indicating the intention of the pawnee to dispose of the security. It would be an ideal formality to deal with each of the cases cited by the defendant. The defendant categorically denies the pledge of those shares as security for the loan and have proceeded on the stand that those shares were transferred to the plaintiff with clear stipulation that in the event of default of payment of interest or the principal the plaintiff is at liberty to sale the same and to realise the sale proceeds against the outstanding dues. The right to sale the shares are clearly admitted negativing the stand of the plaintiff that those shares were kept as security for the loan amounts. There is no foundation in the affidavit- in-opposition regarding non compliance of Section 176 of the Contract Act nor there is any whisper that the sale of those shares to be declared as void. Furthermore, it would appear that the reasonable bast price of those shares were received by the plaintiff and it can be safely held that in absence of notice the defendant has not suffered any loss. This Court, therefore, hold that the defendant has not made out any plausible defence on Section 176 of the Contract Act.
The scope under Chapter 13A of the High Court Original Side Rules is wider than the provisions contained under Order 37 of the Code of Civil Procedure. The first and foremost distinction which can be drawn is that an application under Chapter 13A is maintainable on an implied contract which is absent under Order 37 of the Code. The reliance can be placed upon a judgment of this Court in case of Karunamoyee Dasi (Supra) where the scope under Chapter 13A has been summarized as under:-
"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 on 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 affidavity does not positively and immediately make it clear that he has a defence yet shows 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 secured 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."
The aforesaid quotes have received sanction from the Supreme Court in case of Mechalec Engineers & Manufacturers (Supra) in Paragraph 8 thereof.
On the discussion made above, this Court does not find that the case of the defendant falls within the Clauses (a) and (c) but squarely comes within Clause (e) thereof.
This Court, therefore directs the defendant to deposit a sum of Rs. 3 Crore 62 Lacs with the Registrar (Original Side) of this Court within 4 (four) weeks from date, in default, the plaintiff shall be entitled summary judgment for the said amount along with an interest at the rate of 16.5% per annum from the date of an institution of the suit till realization. Subject to the compliance as above the defendant shall be permitted to file written statement within 3 (three) weeks from the date of deposit of money with the Registrar (Original Side).
The application is thus disposed of.
There shall be no order as to costs.
(Harish Tandon, J.)