Calcutta High Court
Savitri Properties Pvt. Ltd vs Avani Projects & Infrastructure Ltd on 29 April, 2016
Author: Sudip Ahluwalia
Bench: Sudip Ahluwalia
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: 29th 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 GA 313 of 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 AIR 577, 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 WN 246 at 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.."
10. In "Mrs. Raj Duggal Vs.Ramesh Kumar Bansal"
(MANU/SC/0393/1990 = AIR 1990 SC 2218,
1991GLH(1)138, 1991 Supp (1) SCC 191), 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)."
11. In "M/s. Sunil Enterprises and Anr. Vs. SBI
Commercial and International Bank Ltd."
(MANU/SC/0334/1998 = AIR1998 SC 2317) 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] SC 321: 1958 SCR 1211, Milkhiram (India) (P)
Ltd. vs . Chaman Lal Bros. AIR1965SC1698 and
Mechelec Engineers & Manufacturers. v. Basic
Equipment Corporation (1976) 4 SCC 678: AIR 1977
SC 577. 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."
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 SC 2885)
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."
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 GA 3957/2015 which is accordingly dismissed, while the plaintiff's application for summons for judgment (GA 313 of 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.)