Delhi District Court
Housing Development Finance ... vs Hubtown on 30 October, 2019
IN THE COURT OF SH HARGURVARINDER SINGH JAGGI,
ADDL. DISTRICT JUDGE - 02, SOUTH WEST DISTRICT,
DWARKA COURTS, DELHI
CS DJ ADJ No. 516932/2016
CNR No.DLSW010004892012
IN THE MATTER OF:
1. Housing Development Finance Corporation Limited
Ramon House
H.T. Parekh Marg
169, Backbay Reclamation
Churchgate, Mumbai
Maharashtra - 400020
Having its Northern Regional Office at -
The Capital Court
Munirka, Old Palam Marg
New Delhi - 110067 ... Non-Applicant / Plaintiff
v.
1. Bhupender Singh
House No. B - 4/166
Yamuna Vihar
New Delhi - 110053
Also at:
Honda Siel Cars India Ltd.
Department Material Service
Plot No. A-1, Sector 40/41
Surajpur, Greater Noida,
District Gautam Budh Nagar
CS DJ ADJ No. 516932/2016
Page No. 1/47
Uttar Pradesh - 201306 ... Applicant / Defendant No.1
2. Nikhil Kumar
House No. 46
Tagore Gali, Babarpur
Delhi - 110032 ... Applicant / Defendant No.2
3. M/s Golf Course Sahkari Awas Samiti Limited
(A Society incorporated under Section 6
of the U.P. Co-operative Societies Act, 1965)
Through its Secretary
Having its Registered Office at -
C - 217, Sector - Beta - 1
Greater Noida, U.P.
Also at:
D - 162, 1st Floor
Sector - 10, Noida
Gautam Budh Nagar, U.P. ... Applicant / Defendant No.3
Date of filing of application(s): 23.01.2015
Date of order reserved: 04.10.2019
Date of pronouncement of order: 30.10.2019
ORDER
30.10.2019
1. This order shall dispose of an application moved by the defendants, namely, Bhupender Singh (hereinafter "defendant No. 1") and Nikhil Kumar (hereinafter "defendant No. 2") under Order XXXVII, Rule 4 of the Code of Civil Procedure, 1908 (hereinafter "CPC") seeking setting aside of decree dated 07.01.2013 and also CS DJ ADJ No. 516932/2016 Page No. 2/47 leave to defend the summary suit preferred by the plaintiff, namely, Housing Development Finance Corporation Limited (hereinafter "plaintiff").
2. The plaintiff had instituted a summary suit under Order XXXVII, CPC against the defendants, particularly, a money decree of ₹14,18,792/- (Rupees Fourteen lakhs eighteen thousand seven hundred and ninety two only) along with interest @18%p.a. from the date of the filing of the suit until the date of actual realisation against the defendant No. 1 and in the alternative a money decree of ₹13,60,000/- (Rupees Thirteen lakhs sixty thousand only) against the defendant No. 3 and a money decree of ₹58,792/- (Rupees Fifty eight thousand seven hundred and ninety two only) along with interest @18%p.a. from the date of the filing of the suit until the date of actual realisation against the defendant Nos. 1 and 2.
3. The plaintiff's money claim against the defendants lies on the bedrock of a loan agreement, tripartite agreement, promissory notes for the amount borrowed from the plaintiff. The facts urged in the plaint in a nutshell are that the defendant Nos. 1 and 3 approached the plaintiff for a housing loan by the defendant No. 1 for purchase of a flat bearing No. 2541, Fourth Floor, Shivkala Charms, Plot No. 7, Sector PI - II, Greater Noida, Uttar Pradesh - 201308 (hereinafter "flat") being constructed by the defendant No. 3. The plaintiff, defendant No. 1 and defendant No. 3 entered into a tripartite agreement dated 30.11.2010. The defendant No. 1 executed a general CS DJ ADJ No. 516932/2016 Page No. 3/47 power of attorney dated 30.11.2010 in favour of the defendant No. 2, who, being the constituted attorney, executed a dual rate home loan agreement on 02.12.2010 and the defendant No. 1 was thereafter allotted a loan account No. 600813035. The defendant No. 3 by letter dated 12.11.2010 marked plaintiff's lien on the flat. The plaintiff sanctioned a loan of ₹15,00,000/- (Rupees Fifteen lakhs only) to the defendant No. 1 with regard to the flat for a period of 240 months with a variable rate of interest. The plaintiff made a total disbursement of ₹13,60,000/- (Rupees Thirteen lakhs and sixty thousand only) to the defendant through a cheque No. 49272 dated 30.11.2010 drawn upon HDFC Bank, Suryakiran Building, New Delhi and the same was drawn in favour of the defendant No. 3. The defendant No. 2 issued promissory notes dated 01.12.2010 for the sanctioned amount of ₹15,00,000/- (Rupees Fifteen lakhs only) in favour of the plaintiff. The defendant No. 2 also signed and executed an indemnity bond dated 26.11.2010 on behalf of the defendant No. 1 in favour of the plaintiff. As per the terms and conditions of the loan agreement executed between the plaintiff and the defendant No. 1, the defendant No. 1 agreed to pay back the loan by equated monthly instalments (hereinafter 'EMI'). It was also agreed between the plaintiff and the defendant No. 1 that the repayment of the loan was to be done regardless of the stage of the construction of the defendant No. 3's project and also of the date of handing over of the possession of the flat. The defendant No.1 made the last EMI payment of ₹91,574/-
CS DJ ADJ No. 516932/2016 Page No. 4/47(Rupees Ninety one thousand five hundred and seventy four only) to the plaintiff on 10.05.2011. The plaintiff sent a loan recall notice to the defendant Nos. 1 and 2 on 24.09.2012 and demanded payment of the outstanding amount. The defendant Nos. 1 and 2 did not reply to the plaintiff's notice dated 24.09.2012. Thereafter, the plaintiff sent a demand notice dated 26.09.2012 to the defendant No. 3 for refund of amount owed by the defendant No. 1 directly to the plaintiff. The defendant No. 3 also failed to refund the amount to be adjusted against the defendant No. 1's loan account. As per the plaintiff, on 31.08.2012, the total amount due from the defendant No. 1 was ₹14,18,792/- (Rupees Fourteen lakhs eighteen thousand seven hundred and ninety two only).1 Hence, the present summary suit.
4. The plaintiff filed the plaint before the South West District on 21.11.2012 and the suit was instituted on 22.11.2012. The summons were issued to the defendants under Order XXXVII, CPC on 22.11.2012 for 07.01.2013.
5. On 07.01.2013, the court observed that the defendant Nos. 1 and 2 were served on 06.12.2012 and 07.12.2012, respectively, and with no appearance on their behalf on record, the summary suit against the defendant Nos. 1 and 2 was decreed under Order XXXVII, CPC along with cost and interest @9% p.a. from the date of the filing of the suit until the amount is recovered. Since the service report qua the 1 See paragraph No. 21 of the plaint. CS DJ ADJ No. 516932/2016 Page No. 5/47 defendant No. 3 was not received back, the court issued fresh summons to the defendant No. 3 for 06.02.2013.
6. The court vide order dated 30.01.2016 observed that the service effected upon the defendant No. 3 was in accordance with the judgment passed by the Hon'ble High Court of Delhi in Rajesh Arora v. Mukesh Jain,2 and with leave to defend on behalf of the defendant No. 3 on record within the prescribed period, the court decreed the plaintiff's summary suit against the defendant No. 3 along with interest @9% p.a. and costs of the suit.
7. However, the defendant Nos. 1 and 2 moved the present application under consideration i.e. an application under Order XXXVII, Rule 4, CPC seeking setting aside of decree and leave to defend the summary suit on 23.01.2015.
8. On 27.01.2015, the court issued notice of the aforesaid application to the plaintiff and stayed the execution proceedings pending against the defendant Nos. 1 and 2 until the next date of hearing. The stay of execution proceedings in terms of order dated 27.01.2015 continued until the next date of hearing and so on and so forth.
9. Now coming to the application moved by the defendant Nos. 1 and 2, the defendants have sought setting aside of the decree dated 07.01.2013 passed against them broadly on two grounds. Firstly, the service of summons upon the defendant Nos. 1 and 2 was not proper 2 2002 (63) DRJ 254 CS DJ ADJ No. 516932/2016 Page No. 6/47 service in accordance with law and they could not put in their appearance within the prescribed period. The defendant Nos. 1 and 2 gained knowledge about the decree passed against them only when they received notice from the executing court in the execution petition preferred by the decree holder (plaintiff herein). Secondly, the defendant Nos. 1 and 2 have triable issues in their favour and which wholly disentitle the plaintiff to seek judgment and decree against the defendant Nos. 1 and 2. The defendants in their defence have urged in their application under Order XXXVII, Rule 4, CPC of having disclosed substantial defence and triable issues and thus this court must consider the same to be an existence of special circumstances, and accordingly not only set aside the decree but also set aside the execution proceedings and consequentially grant unconditional leave to defend the suit to the defendant Nos. 1 and 2.
10. The underlying tenor of the defendant Nos. 1 and 2 in their application under Order XXXVII, Rule 4, CPC is that the plaintiff and the defendant No. 3 in collusion offered the flat to be sold, who had an arrangement of providing loans to the buyers of the flat, such as the defendant Nos. 1 and 2 herein. The defendant Nos. 1 and 2 in their application have averred that with the involvement of an institution of the stature of the plaintiff, the defendant Nos. 1 and 2 acted under the impression that the plaintiff had done its due diligence with regard to the defendant No. 3's project. The defendant Nos. 1 and 2 discovered that the officers of the plaintiff and the defendant No. 2 had connived CS DJ ADJ No. 516932/2016 Page No. 7/47 and submitted false report that the title of the flat purchased by the defendant Nos. 1 and 2 was clear, however, it was discovered that the flat had been overbooked and many flats in the defendant No. 3's project were sold to more than one buyer. The defendant Nos. 1 and 2 have averred in their application that National Housing Board issued a letter with regard to the connivance and collusion of the builder and the financial institution and defrauding of innocent flat purchasers, such as the defendant Nos. 1 and 2.
11. The defendant Nos. 1 and 2 have averred in their application that they had no other option than to surrender the flat to the defendant No. 3, who cancelled the flat and information with regard to the same was duly given to the plaintiff with the request that the balance amount can be recovered from the defendant No. 3, in consonance with Clause VII of the permission to create security interest including mortgage. It is averred by the defendant Nos. 1 and 2 that the plaintiff invoked Clause VII for recovering the amount from the defendant No. 3, who issued cheques to the plaintiff but the same were dishonoured.
12. The defendant Nos. 1 and 2 have also averred in their application that as per the tripartite agreement, upon surrender/cancellation of allotment of the flat, the amount paid to the builder (defendant No. 3 herein) by the plaintiff shall be recoverable from the defendant No. 3 and in case the payment is made directly to the defendant Nos. 1 and 2 by the defendant No. 3, the said amount should be paid by the defendant Nos. 1 and 2 to the plaintiff.
CS DJ ADJ No. 516932/2016 Page No. 8/4713. The defendant Nos. 1 and 2 have averred that they regularly made payments of the EMIs until the flat was not surrendered by them. The flat was surrendered by the defendant Nos. 1 and 2 only when they gained knowledge about the collusion and connivance between the defendant No. 3 and the plaintiff, they being cheated by them and defrauded of their hard earned money. It is also averred by the defendant Nos. 1 and 2 that they are entitled for ₹2,14,000/- (Rupees Two lakhs and fourteen thousand only) paid by them as down payment and EMIs towards the flat. It is also averred by the defendant Nos. 1 and 2 that they would prefer a counter-claim against the plaintiff once their leave to defend application is allowed.
14. The defendant Nos. 1 and 2 have averred in their application that the possession of the flat is with the builder (defendant No. 3 herein) and thus it is the defendant No. 3, who is liable to pay back the amount to the plaintiff and not the defendant Nos. 1 and 2. It is also averred by the defendant Nos. 1 and 2 that they have been cheated and trapped in a situation, to buy a flat, which has not yet been constructed and under all likelihood, whose construction would not be completed and above all the flat in question along with various other flats have been sold to multiple buyers at the same time. It is also averred by the defendant Nos. 1 and 2 that the matter was under the investigation of the Economic Offences Wing and FIR No. 62/2012 dated 08.06.2012 stands lodged against the officials of the plaintiff and the defendant No. 3.
CS DJ ADJ No. 516932/2016 Page No. 9/4715. The plaintiff in its reply to the application of defendant Nos. 1 and 2 has refuted all the averments made by them. The plaintiff has averred in its reply that the defendant Nos. 1 and 2 failed to file their appearance pursuant to the service of summons, as per the mandate of Order XXXVII, CPC. It is also averred by the plaintiff that the service of summons issued under Order XXXVII, CPC, was duly effected upon the defendant Nos. 1 and 2 at their addresses. It is also averred by the plaintiff that no case for setting aside of the decree dated 07.01.2013 is made out by the defendant Nos. 1 and 2.
16. The plaintiff has averred in its reply that the application moved by the defendant Nos. 1 and 2 is liable to be dismissed as the same neither discloses any facts nor any triable issues, whatsoever. It is averred by the plaintiff that the averments made in the application by the defendant Nos. 1 and 2 are an afterthought and utter abuse of process of law.
17. The defendant Nos. 1 and 2 filed their rejoinder to the plaintiff's reply to their application under Order XXXVII, CPC and reiterated that they have urged special circumstances under which the decree dated 07.01.2013 is bound to be set aside.
18. Sh. Sandeep Srivastava, learned counsel for the defendant Nos. 1 and 2 and Sh. Neeraj Kumar, learned counsel for the plaintiff advanced oral arguments at length on 29.04.2019, 06.07.2019 and 04.10.2019.
CS DJ ADJ No. 516932/2016 Page No. 10/4719. Sh. Srivastava, learned counsel for the defendant Nos. 1 and 2 submitted that the two main grounds urged by the defendants constitute to be "special circumstances" and thus, the decree passed against the defendant Nos. 1 and 2 be set aside. Learned counsel submitted that firstly, the service of summons upon the defendant Nos. 1 and 2 is defective and not in accordance with law. Secondly, the defendants have raised triable issues in their application under consideration and the defendant Nos. 1 and 2 must be granted unconditional leave to defend the summary suit preferred by the plaintiff against them.
20. Learned counsel for the defendant Nos. 1 and 2 submitted that the service reports dated 06.12.2012 and 07.12.2012 are not in accordance with law, as they are not the proper service reports, on the basis that they do not bear the signatures of any witness to the mode of service through which the summons were served upon the defendant Nos. 1 and 2. The learned counsel for the defendant Nos. 1 and 2 further submitted that they gained knowledge about the decree passed against them from the service of notice in the execution petition filed by the plaintiff herein.
21. The learned counsel for the defendant Nos. 1 and 2 submitted that with no witnesses in whose presence the service of summons was effected, there was no satisfaction of court, and thus the service was in contravention of Rule 15 of Order V, CPC. Learned counsel for the defendant Nos. 1 and 2 submitted that the process server did not CS DJ ADJ No. 516932/2016 Page No. 11/47 inform the wife of the defendant No. 1 and the bhabhi of defendant No. 2, upon whom the service of summons was effected about the nature of the suit, and particularly the summons served upon them were summons under Order XXXVII, CPC. The learned counsel further submitted that the service was not effected upon the adult member of the family, and thus the court erred by considering the service upon the women, as proper and adequate service.
22. The learned counsel for the defendant Nos. 1 and 2 submitted that there is no affidavit with regard to the service of summons and thus the court's satisfaction qua the service was misplaced. The learned counsel for the defendant Nos. 1 and 2 submitted that there is violation of Chapter 7, Part B of the Delhi High Court Rules. The learned counsel for the defendant Nos. 1 and 2 further submitted that due process was not followed for proceeding the defendant as ex parte.
23. Sh. Srivastava, learned counsel for the defendant Nos. 1 and 2 submitted that the procedural law is the handmaiden of justice and thus grave prejudice has been caused to the defendant Nos. 1 and 2, as they have suffered a money decree against them for non-compliance of procedural law, particularly, with regard to the service of summons.
24. The learned counsel further submitted that the suit for recovery of money filed by the plaintiff against the defendants was with regard to a loan advanced by the plaintiff to the defendant Nos. 1 and 2 for purchase of a flat which was launched and to be built by the defendant No. 3. The learned counsel for the defendant Nos. 1 and 2 submitted CS DJ ADJ No. 516932/2016 Page No. 12/47 that the project was pre-approved by the HDFC Bank Ltd. and with the permission to mortgage, the loan was directly disbursed to the defendant No. 3. The parties entered into a tripartite agreement and as per which only margin money was to be recovered from the defendant No. 1 and the balance amount was to be recovered from the defendant No. 3. The learned counsel further submitted that it is for that reason the plaintiff sought relief in clause (b) of the prayer clause to the plaint, which is an alternative relief to the main relief in the plaint.
25. The learned counsel for the defendant Nos. 1 and 2 submitted that there are triable issues involved and the defendants have substantial defence against the plaintiff's summary suit and thus the application moved by the defendant Nos. 1 and 2 under Order XXXVII, Rule 4, CPC, must be allowed. Learned counsel for the defendant Nos. 1 and 2 further submitted that the report of the National Housing Board corroborates the fact that the defendant Nos. 1 and 2 have been victims of fraud, as the flat in question and various other flats in the defendant No. 3's project had been financed twice and allotted to multiple individuals. Learned counsel for the defendant Nos. 1 and 2 submitted that to adjudicate the dispute and pass a money decree in favour of the plaintiff it is necessary to ascertain by a full-fledged trial that who financed the flat first, what all documents were prepared, signed and executed. The learned counsel for the defendant Nos. 1 and 2 submitted that fraud vitiates the money claim of the plaintiff, as the officers of the plaintiff along with the defendant No. 3 have been CS DJ ADJ No. 516932/2016 Page No. 13/47 charge-sheeted and are facing a criminal case for their illegal nexus. The learned counsel for the defendant Nos. 1 and 2 further submitted that it is relevant to ascertain whether any due diligence was conducted by the plaintiff before attracting innocent purchasers, such as the defendant No. 1 with a lucrative price of a flat and an offer for a loan, etc. The learned counsel further submitted that the plaint preferred by the plaintiff reeks of suppression of material facts and documents.
26. The learned counsel for the defendant Nos. 1 and 2 submitted that the defendants before this court have been defrauded by the plaintiff and defendant No. 3. The learned counsel further submitted that the status of the project was incomplete and yet the defendant No. 1 invested his hard earned money in the flat on the premise that the plaintiff has done its thorough due diligence of the defendant No. 3's project. However, the report of National Housing Board states that the total sanctioned flats were 150, but the flats funded not only by the plaintiff but also other banks and financial institutions were 350. The learned counsel for the defendant Nos. 1 and 2 submitted that the defendants have been victim of a larger conspiracy and connivance between the plaintiff and the defendant No. 3. The defendants have been fleeced of their hard earned money by the plaintiff and the defendant No. 3.
27. Sh. Srivastava, learned counsel for the defendant Nos. 1 and 2 placed reliance upon the judgment passed by the Hon'ble Supreme CS DJ ADJ No. 516932/2016 Page No. 14/47 Court in the case of IDBI Trusteeship Services Ltd. Vs. Hubtown Ltd.3 and pleaded that the defendant Nos. 1 and 2 not only have a prima facie case but also fair and reasonable defence. Learned counsel further submitted that for the adjudication of the dispute documentary evidence is necessary, as the plaintiff advanced loan against non- existent flats.
28. The learned counsel for the defendant Nos. 1 and 2 placed reliance upon the judgment passed by the Ld. Addl.District Judge - 03, New Delhi District, Patiala House Courts, Delhi in Housing Development Finance Corporation Limited v. Anugrah Omprakash Sharma & Anr. - C.S. No. 13/14 date of decision 19.08.2014, wherein the court decreed the suit in terms of the alternative relief/prayer sought by the plaintiff therein. Learned counsel further submitted that as per the tripartite agreement, the liability would be that of the builder (defendant No. 3 herein) in case of default of payment and not of the defendant Nos. 1 and 2.
29. Learned counsel further placed reliance upon the order passed by Ld. Addl.District Judge - 03, East District, Karkardooma Courts, Delhi in LIC Housing Finance Ltd. v. Neha Taneja & Ors. - C.S. No. 2981/16 date of decision 08.03.2017 and submitted that the present suit ought to be treated as an ordinary suit.
30. The learned counsel for the defendant Nos. 1 and 2 submitted that on perusal of the prayer clause of the plaint it is not disputed that the 3 (2017) 1 SCC 568 CS DJ ADJ No. 516932/2016 Page No. 15/47 plaintiff has sought an alternative relief, however, the court passed decree against the defendant and the decree is neither jointly nor severally. The learned counsel further submitted that in terms of the alternative prayer of the plaintiff, the defendant Nos. 1 and 2 are willing to pay an amount of ₹58,792/- (Rupees Fifty eight thousand seven hundred and ninety two only).
31. The learned counsel for the defendant Nos. 1 and 2 concluded his submissions by placing reliance upon the judgment passed by the Hon'ble Supreme Court in the case of Sudin Dilip Talaulikar v. Polycap Wires Pvt. Ltd.4 that in a summary suit, if the defendant discloses such facts of prima facie fair and reasonable defence, the court may grant unconditional leave to defend and the same concerns the subjective satisfaction of the court on basis of the materials placed before it.
32. Sh. Neeraj Kumar, learned counsel for the plaintiff contended the submissions advanced by the learned counsel for the defendant Nos. 1 and 2. Learned counsel for the plaintiff submitted that the service effected upon the defendant Nos. 1 and 2 was in accordance with law. The learned counsel further submitted that the defendant Nos. 1 and 2 failed to file their appearance before the court within the prescribed period of 10 days from the date of service of summons. The learned counsel for the plaintiff submitted that the application preferred by the 4 (2019) 7 SCC 577 CS DJ ADJ No. 516932/2016 Page No. 16/47 defendant Nos. 1 and 2 under Order XXXVII, Rule 4, CPC, is misplaced and is liable to be dismissed with exemplary cost.
33. The learned counsel for the plaintiff submitted that the grounds urged by the defendant Nos. 1 and 2 of the service not being in accordance with law is an afterthought. The learned counsel further submitted that the address mentioned by the plaintiff in the memo of parties to the plaint is the same address, which has been mentioned by the defendant Nos. 1 and 2 in their supporting affidavits to the present application under consideration. The learned counsel for the plaintiff submitted that thus it does not lie in the mouth of the defendant Nos. 1 and 2 to state that the service was not duly effected upon them.
34. Sh. Kumar, learned counsel for the plaintiff submitted that there is no lapse on the part of the concerned process server and the service of summons was duly effected upon the defendant Nos. 1 and 2 in terms of Rule 15 of Order V, CPC. The learned counsel for the plaintiff submitted that the arguments advanced by the learned counsel for the applicant/defendant Nos. 1 and 2 are fallacious.
35. The learned counsel further submitted that there is no averment in the application about the service effected upon the defendant Nos. 1 and 2 not being in accordance with law. The learned counsel for the plaintiff submitted that there is no averment in the application by the defendant Nos. 1 and 2 with regard to how applicant gained knowledge of ex parte decree passed against them. Learned counsel for the plaintiff further submitted that the service was duly made upon CS DJ ADJ No. 516932/2016 Page No. 17/47 the defendant Nos. 1 and 2 in accordance with Order V, Rule 15, 16, 18 and 19, CPC.
36. Learned counsel for the plaintiff to buttress his submissions placed reliance upon the Citibank N.A. v. Dinesh Aneja5 and Shafi Mallam v. Raj Pal Khari.6
37. The learned counsel for the plaintiff submitted that to seek setting aside of the decree dated 07.01.2013, the defendant Nos. 1 and 2 have to show the sufficient cause which prevented them from not filing their appearance within the prescribed period of 10 days, as per Order XXXVII, CPC.
38. The learned counsel for the plaintiff submitted that bald allegations of fraud are not sufficient cause or special circumstances of such nature which would entitle the defendant Nos. 1 and 2 to seek setting aside of the decree. The learned counsel for plaintiff further submitted that mere citing of fraud and or reiterating the word fraud does not absolve the defendant Nos. 1 and 2 and the decree cannot be set aside.
39. The learned counsel for the plaintiff placed reliance upon the judgment passed by the Hon'ble High Court of Delhi in Malayan Banking Berhad v. Allahabad Bank.7 The learned counsel for the plaintiff further submitted that the legal principles of fraud are well settled and thus the defendant Nos. 1 and 2 have to show the 5 2000 II AD (Delhi) 242 6 2016 (157) DRJ 499 7 237 (2017) DLT 177 CS DJ ADJ No. 516932/2016 Page No. 18/47 documents which reveal prima facie that fraud has been played upon the defendant Nos. 1 and 2. The learned counsel further submitted that knowledge is a must aspect for fraud and thus it cannot be pleaded and claimed in a vacuum that fraud has been played upon a party.
40. The learned counsel for the plaintiff further contented that the tripartite agreement amongst the parties ensure that the defendant Nos. 1 and 2 satisfied themselves and it was only after their satisfaction they borrowed the money from the plaintiff. The learned counsel for the plaintiff further submitted that the home loan agreement is not disputed and thus it does not lie upon the defendant Nos. 1 and 2 at this stage to allege that fraud had been played upon them and they are not liable to pay the outstanding amount of the loan.
41. The learned counsel for the plaintiff submitted that to understand the money claim of the plaintiff against the defendants, it is necessary that the business model and nature of the transaction entered amongst the parties be understood so that the smokescreen of fraud alleged by the defendant Nos. 1 and 2 may be dispelled. Learned counsel for the plaintiff submitted that usually, a builder enters into a perpetual lease with the Authority on the 80:20 ratio, and in case at hand the builder has defaulted and not the plaintiff and thus no fraudulent act can be attributable to the plaintiff.
42. The learned counsel for the plaintiff submitted that there is no statement, finding in the report of the National Housing Board against the plaintiff. Learned counsel further submitted that there is no CS DJ ADJ No. 516932/2016 Page No. 19/47 allegation against the plaintiff in the FIR and thus the submissions advanced by the learned counsel for the defendant Nos. 1 and 2 are self-serving.
43. The learned counsel for the plaintiff submitted that the alternative relief comes into play only when the flat allotment has been cancelled by the builder (defendant No. 3 herein). The learned counsel further submitted that the plaintiff wrote to the defendant No. 3 but the defendant No. 3 did not cancel the allotment of the flat. The learned counsel for the plaintiff submitted that it is for that reason the borrower of the loan (defendant No. 1 herein) and the guarantor (defendant No. 2 herein) are equally liable for the default of the loan.
44. The learned counsel for the plaintiff submitted that the written arguments filed by the defendant Nos. 1 and 2 are beyond the averments made in the application moved by the defendant Nos. 1 and 2 the application is completely silent about the aspect of service of summons.
45. On a parting note, learned counsel for the plaintiff placed reliance upon the judgments passed by the Hon'ble High Court of Delhi in Housing Development Finance Corporation Ltd. v. Sandeep Kumar and Anr.,8 wherein in a similar placed case it was held that no ground for leave to defend was made by the defendant No. 1 therein in his leave to defend application. The learned counsel for the plaintiff further submitted that decision dated 11.03.2015 passed by the Ld. 8 CS(OS) No. 2502/2012 date of decision 11.03.2015 :: 2015 SCC OnLine Del 8118 CS DJ ADJ No. 516932/2016 Page No. 20/47 Single Judge of the Hon'ble High Court of Delhi was upheld by the division bench in Sandeep Kumar v. Housing Development Finance Corporation Limited & Anr.9
46. Sh. Srivastava, learned counsel for the defendant Nos. 1 and 2 rejoined his arguments and submitted that the special circumstances have been specifically averred by the defendants in their application under consideration. The learned counsel for the defendant Nos. 1 and 2 placed reliance upon the judgment passed in the case of Rajni Kumar v. Suresh Kumar Malhotra.10 The learned counsel for the defendant Nos. 1 and 2 further submitted that the signatures of the sister-in-law of the defendant No. 1 are disputed, and thus the satisfaction of the court cannot be considered in a light manner and the service of summons cannot be held to be delivered in a mechanical manner, as the same is an important aspect and stage in any civil suit.
47. The learned counsel for the defendant Nos. 1 and 2 submitted that non-averment in an application is not fatal, and the knowledge of the decree passed against them was gained by the defendant Nos. 1 and 2 when they received the notice of the execution petition filed by the plaintiff herein. The learned counsel for the defendant Nos. 1 and 2 rejoined that the ground 'B' in the application squarely covers the aspect of service of summons being improper and the same not being in accordance with law. The learned counsel for the defendant Nos. 1 and 2 submitted that legal points can be urged at any stage. 9 RFA(OS) No. 50/2015 date of decision 25.08.2015 10 (2003) 5 SCC 315 :: AIR 2003 SC 1322 CS DJ ADJ No. 516932/2016 Page No. 21/47
48. The learned counsel for the defendant Nos. 1 and 2 submitted that with the alternative prayer of the plaintiff in the plaint, it is apparent any evident that there is deemed cancellation of allotment of flat by the defendant No. 3. The learned counsel for the defendant Nos. 1 and 2 further submitted that the plaintiff by legal notice dated 26.09.2012 11 not only cancelled the allotment but also sought that the refund be paid directly to the plaintiff.
49. The learned counsel for the defendant Nos. 1 and 2 placed reliance upon the pronouncements of Vijay Bhushan Chaudhary v. Shiv Charan Dass Sharma,12 Gurnam Singh & Anr. v. Kulbir Singh13 and Shivam Enterprises (M/s) v. M/s Creation Point 14 on the aspect of "special circumstances" and the legal principles which entitle the defendant Nos. 1 and 2 for unconditional leave to defend.
50. I have carefully perused the application under consideration moved by the defendant Nos. 1 and 2, plaintiff's reply to the application, defendant Nos. 1 and 2's rejoinder, their written submissions, case laws relied and the submissions advanced by the learned counsel for the parties. My findings and observations ensue in the following paragraphs.
51. His Lordship, Mr. Vikramajit Sen, J. (As his Lordship then was), in Grafitek International v. K.K. Kaura & Ors.15 befittingly observed 11 See page Nos. 65 - 66 of the list of documents and documents filed by the plaintiff. 12 2005 (Supp.) J.K.J. 534 13 53 (1994) DLT 313 14 2013 VI AD (Delhi) 405 15 2000 (56) DRJ (Suppl) 692 CS DJ ADJ No. 516932/2016 Page No. 22/47 the legal position, particularly the challenge posed to the court, while deciding an application under Order XXXVII, Rule 4, CPC, wherein the decree was set aside on the ground that only dasti service was insufficient service. The relevant extract of the judgment are reproduced as under:
"7. It is usually a difficult and delicate task to render a decision on applications for setting aside ex parte decrees. The competing interests of the plaintiff and defendant are broadingly (sic) omnipresent. Having obtained a decree the plaintiff ought not to be denied the enjoyment of its delectable fruits on flimsy grounds. There is always the lingering likelihood that service of summons were effected and that the defendant had not appeared in order to delay the proceedings. On the other hand a judicial decision taken without given the parties adequate opportunity to present its version of the facts and the law, in my opinion is a forensic abomination. The Court must fully satisfy itself that parties have been served. Otherwise it would tantamount to dereliction of duty."
52. With the above dictum in mind, I deem appropriate, to reproduce the relevant legal provisions for just decision of the application under consideration. Order XXXVII, Rule 2, CPC states as under:
"2. Institution of summary suits.-(1) A suit, to which this Order applies, may if the plaintiff desires to proceed hereunder, be instituted by presenting a plaint which shall contain,--
(a) a specific averment to the effect that the suit is filed under this Order;CS DJ ADJ No. 516932/2016 Page No. 23/47
(b) that no relief, which does not fall within the ambit of this rule, has been claimed in the plaint;and
(c) the following inscription, immediately below the number of the suit in the title of the suit, namely:-- "(Under Order XXXVII of the Code of Civil Procedure, 1908)".
(2) The summons of the suit shall be in Form No. 4 in Appendix B or in such other Form as may, from time to time, be prescribed.
(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.]"
53. The Rule 3(1) of Order XXXVII, CPC states that in a suit to which this Order applies, the plaintiff shall, together with the summons under Rule 2, serve on the defendant a copy of the plaint and annexures thereto and 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.
54. The consequence of default in filing appearance by the defendant post service of summons under Order XXXVII, CPC are that the CS DJ ADJ No. 516932/2016 Page No. 24/47 allegations in the plaint are deemed to admitted and the plaintiff is entitled to a decree.16
55. Order XXXVII, Rule 4, CPC reads as under:
"4. Power to set aside decree.- After decree the Court may, under special circumstances set aside the decree, and if necessary stay or set aside execution, and may give leave to the defendant to appear to the summons and to defend the suit, if it seems reasonable to the Court so to do, and on such terms as the Court thinks fit."
56. Order XXXVII, Rule 7, CPC states as under:
"7. Procedure in suits.- Save as provided by this Order, the procedure in suits hereunder shall be the same as the procedure in suits instituted in the ordinary manner."
57. Under Order XXXVII, Rule 4, CPC an ex parte "summary" decree can be set aside by the court under two contingencies, firstly, if it is satisfied that service has not been properly effected on the defendants, secondly, if sufficient grounds are shown to the Court that the decree ought to be set aside - See Grafitek International v. K.K. Kaura & Ors.17
58. Order XXXVII deals with summary procedure. Rule 4 thereof, provides a power to set aside the decree in summary proceedings. Because of the involvement of petty matters they are tried summarily, if defendant satisfies the court that it could not defend it properly or could not remain present and a decree is passed.
16 See Order XXXVII, Rule 2(3), CPC 17 2000 (56) DRJ (Suppl) 692, pp. 4 at p. 693 CS DJ ADJ No. 516932/2016 Page No. 25/47
59. The provisions in Order XXXVII, Rule 4, CPC provide for "special circumstance." In Ramkarandas Radhavallabh v. Bhagwandas Dwarkadas,18 the Hon'ble Supreme Court held that once an application under Order XXXVII, Rule 4, CPC is filed, the existence of "special grounds" is required to be there to set-aside the judgment and decree and in view of the specific provisions thereof, the provisions of Section 151 of the Code are not attracted.
60. "Special circumstances" means something of higher gravity than "sufficient cause", something beyond control of the person concerned or absolutely unavoidable circumstance. Thus, it is not synonymous with sufficient cause.
61. In L.R. Raja v. Sha Rikhabdas Suresh Kumar,19 while considering the case under Order XXXVII, Rule 4, CPC, the Hon'ble Madras High Court held as under:
"In invoking Order XXXVII, Rule 4, CPC, the defendant will have to satisfy two conditions; viz (1) there was no due service of summons in the suit or that he was prevented by sufficient cause from getting leave to defend the suit and (2) that he has a substantial defence to raise in the suit. Special circumstances mentioned in Order XXXVII, Rule 4 only contemplate the aforesaid conditions which the defendant must satisfy to entitle him to have the decree set aside and get leave to defend the action."
18 AIR 1965 SC 1144 19 1986 MLJ 108 CS DJ ADJ No. 516932/2016 Page No. 26/47
62. Therefore, in view of the above, the party seeking setting-aside the judgment under Order XXXVII, Rule 4, CPC, is required to satisfy the court that (i) he could not appear in the matter because of unavoidable circumstances; (ii) it was absolutely impossible for him to appear as the circumstances had been beyond his control, and (iii) he had the substantial defence, which could have been allowed to him to get the leave to defend in the suit.
63. The primary object underlying 'summary procedure' is to prevent unreasonable obstruction by the defendant who has no defence and to ensure speedy and expeditious disposal of cases where prompt decisions are desirable. Trading and commercial operations will be seriously impeded if money disputes between the parties are not adjudicated upon immediately.20
64. In the case at hand, the defendant Nos. 1 and 2 flanked a twin fold attack on the decree dated 07.01.2013. The first wave of attack launched by the defendant Nos. 1 and 2 is on the count of improper service of summons under Order XXXVII, CPC, as the same was not in accordance with law. The second wave is that the defendant Nos. 1 and 2 have not only raised triable issues but also have substantial defence, and thus unconditional leave to defend the suit may be granted to them.
20 (5) Summary Suits - Object, para 65.568, Civil Procedure, Halsbury's Laws of India, Vol. 5, Second Edn.
CS DJ ADJ No. 516932/2016 Page No. 27/4765. The provisions with regard to issue and service of summons are nestled in Order V of the Code.21 The rules qua service of summons are enshrined under Rule 9 - 30 of Order V, CPC. Rule 9 of Order V, CPC reads as under:
"9. Delivery of summons by Court.- Where the defendant resides within the jurisdiction of the Court in which the suit is instituted, or has an agent resident within that jurisdiction who is empowered to accept the service of the summons, the summons shall, unless the Court otherwise directs, be delivered or sent either to the proper officer to be served by him or one of his subordinates or to such courier services as are approved by the Court.
(2) The proper officer may be an officer of a Court other than that in which the suit is instituted, and, where he is such an officer, the summons may be sent to him in such manner as the Court may direct.
(3) The services of summons may be made by delivering or transmitting a copy thereof by registered post acknowledgment due, addressed to the defendant or his agent empowered to accept the service or by speed post or by such courier services as are approved by the High Court or by the Court referred to in sub-rule (1) or by any other means of transmission of documents (including fax message or electronic mail service) provided by the rules made by the High Court:
Provided that the service of summons under this sub-rule shall be made at the expenses of the plaintiff.
21 Order V - Issue and Service of Summons, the Code of Civil Procedure, 1908 CS DJ ADJ No. 516932/2016 Page No. 28/47 (4) Notwithstanding anything contained in sub-rule (1), where a defendant resides outside the jurisdiction of the Court in which the suit is instituted, and the Court directs that the service of summons on that defendant may be made by such mode of service of summons as is referred to in sub-rule (3) (except by registered post acknowledgment due), the provisions of rule 21 shall not apply.
(5) When an acknowledgment or any other receipt purporting to be signed by the defendant or his agent is received by the Court or postal article containing the summons is received back by the Court with an endorsement purporting to have been made by a postal employee or by any person authorised by the courier service to the effect that the defendant or his agent had refused to take delivery of the postal article containing the summons or had refused to accept the summons by any other means specified in sub-rule (3) when tendered or transmitted to him, the Court issuing the summons shall declare that the summons had been duly served on the defendant:
Provided that where the summons was properly addressed, pre-paid and duly sent by registered post acknowledgment due, the declaration referred to in this sub-rule shall be made notwithstanding the fact that the acknowledgment having been lost or mislaid, or for any other reason, has not been received by the Court within thirty days from the date of issue of summons.
(6) The High Court or the District Judge, as the case may be, shall prepare a panel of courier agencies for the purposes of sub-rule (1)."CS DJ ADJ No. 516932/2016 Page No. 29/47
66. Rule 10 of Order V, CPC, provides the mode of service, which is that the service of the summons shall be made by delivering or tendering a copy thereof signed by the Judge or such officer as he appoints in this behalf, and sealed with the seal of the Court.
67. Rule 12 of Order V, CPC, states that wherever it is practicable, service shall be made on the defendant in person, unless he has an agent empowered to accept service, in which case service on such agent shall be sufficient.
68. The contention amongst the defendant Nos. 1 and 2 and the plaintiff is that the decree dated 07.01.2013 must be set aside as the service of summons effected upon the defendant was defective and not in accordance with law. Whereas, the plaintiff has contended that the service was effected upon the adult family member of the defendant Nos. 1 and 2 and thus the service of summons was proper and in accordance with law.
69. I, am not in consonance with the submissions advanced by the learned counsel for the defendant Nos. 1 and 2 that the service upon the family members is good service provided it is on the adult family member. Post 1976 amendment of CPC, the adult male member of the family has been replaced by 'adult member' of defendant's family regardless of being male or female.
70. I, am also not in consonance with the submissions advanced by the learned counsel for the defendant Nos. 1 and 2 that there is no affidavit to the process servers' report. This court observes that the CS DJ ADJ No. 516932/2016 Page No. 30/47 process servers' report are in compliance of Rule 4, Part C, Ch.7, Processes - Civil Courts.22
71. The Rule 15 and Rule 16 of Order V, CPC are reproduced for ready reference:
"15. Where service may be on an adult member of defendant's family.-- Where in any suit the defendant is absent from his residence at the time when the service of summons is sought to be effected on him at his residence and there is no likelihood of his being found at the residence within a reasonable time and he has no agent empowered to accept service of the summons on his behalf, service may be made on any adult member of the family, whether male or female, who is residing with him. Explanation. --A servant is not a member of the family within the meaning of this rule.]
16. Person served to sign acknowledgement.--Where the serving officer delivers or tenders a copy of the summons to the defendant personally, or to an agent or other person on his behalf, he shall require the signature of the person to whom the copy is so delivered or tendered to an acknowledgment of service endorsed on the original summons."
[Emphasis added by underlining and highlighting of text]
72. On careful reading of Rule 15 it is observed that the Rule 15 of Order V, CPC, contemplates that where the defendant is absent at the time when the service of summons is to be effected on him at his residence and there is no likelihood of him being found at the 22 See Appendix I of Chapter 7, Processes - Civil Courts, Part F: Instructions Applicable to both Civil and Criminal Courts in Delhi [Vol. IV of High Court Rules and Orders] CS DJ ADJ No. 516932/2016 Page No. 31/47 residence within a reasonable time and he has no agent empowered to accept service of the summons on his behalf, service may be made on any adult member of the family, whether male or female, who is residing with him.
73. The condition for effecting service upon the adult family member of the defendant is permissible - (i) when the defendant is absent at that point in time when the service of summons is to be effected; (ii) there is no likelihood of him being found at the residence within reasonable time, and (iii) he has no agent empowered to accept service.
74. On perusal of the process server's report dated 06.12.2012 and 07.12.2012, this court finds and observes that the process server on the very first visit without determining the likelihood of the defendant not being found at the residence within a reasonable time straight away effected service of summons upon the family members of the defendant Nos. 1 and 2, respectively.
75. I, am of the considered view that Rule 15 cannot be read in isolation, merely for the reason that Rule 17 also provides a procedure to be adhered by the process server, when the defendant cannot be found after using all due and reasonable diligence, who is absent from his residence at the time when service is sought to be effected on him at his residence and there is no likelihood of his being found at the residence within a reasonable time. It is observed that the legislature has in its greater wisdom provided the keywords of 'there is no CS DJ ADJ No. 516932/2016 Page No. 32/47 likelihood of his being found at the residence within a reasonable time' both in Rule 15 and Rule 17 of Order V, CPC. It is observed that the process server without taking any steps to revisit once the respective defendants were not found present in person at the give addresses on his first visit itself effected service of summons on the family members of the defendant Nos. 1 and 2. It is observed and held that the process server did not exercise due and reasonable diligence and above all there is nothing in the reports of the process server, which reveal that the process server determined the likelihood of the defendant(s) not being found at their residence within reasonable time. This court finds that the process server in a mechanical manner on his very first, without making any effort to revisit to effect service upon the defendant(s) in person, effected service of summons under Order XXXVII, CPC on the family members of the defendant Nos. 1 and 2, respectively.
76. The Hon'ble High Court Rules, applicable to both civil and criminal courts in Delhi state that personal attention to matters connected with issue and service of processes must be strictly observed.23
77. His Lordship, I.D. Dua, J. in The Punjab Oil Expellers Company v. Madan Lal Nanda & Sons & Ors., 24 which is nothing short of a 'Pole Star' on the issue of service of processes, in an erudite 23 See Chapter 7, Processes - Civil Courts, Part F: Instructions Applicable to both Civil and Criminal Courts in Delhi [Vol. IV of High Court Rules and Orders] 24 AIR 1967 Del 28 CS DJ ADJ No. 516932/2016 Page No. 33/47 manner culled out the legal position. The relevant extract from the paragraph No. 6 of the judgment are reproduced in verbatim, as under:
"6. The issue and service of summons is provided in the Code of Civil Procedure in Order V, Chapter 7-B, Vol. IV, High Court Rules & Orders, also contains instructions on mode of service of processes by Civil Courts. Rule 1 of the Rules in sub-paragraph (a) of Chapter &-B provides that every attempt should be made to effect personal service in the first instance and failing that service, on an agent or a member of the family. The process-server should go again and again for this purpose, if there is time before the date fixed for scrutiny of service. It is emphasised that service in any of the ways enumerated in Order V, Rules 12 to 16 of the Code of Civil Procedure, should be insisted upon and service by affixation as provided in Order V, Rule 17, should not be allowed till after the date fixed for scrutiny. This rule prominently brings to the notice of the Courts below what is expressly enacted in Order V, Rule 12 of the Code, which lays down that wherever it is practicable, service shall be made on the defendant in person, unless he had an agent empowered to accept service, in which case, on such agent shall be sufficient. Under Rule 13 of Order V, in a suit relating to any business or work against a person who does not reside within the local limits of the jurisdiction of the Court from which the summons is issued, service on any manager or agent, who at the time of service, personally carries on such business or works for such person within such limits, is to be deemed good service. Rule 3 in Chapter 7-B(a), High Court Rules and Orders, Vol. IV, also imposes a duty on the plaintiff to use his best endeavour to discover the defendant's residence and satisfy the Court that the defendant is evading service and cannot be served in the ordinary way. The CS DJ ADJ No. 516932/2016 Page No. 34/47 matter of service is thus of primary importance as it is one of the fundamental rules of our law of procedure that parties should have a fair and reasonable notice of legal proceedings against them which they are entitled to defend. This rule has its roots in our sense of justice and fair play. For the purpose of ensuring that every effort is made to effect personal service, the Court has a duty, to pay personal attention to matters connected with the issue and service of processes and it may well be considered a dereliction of duty to leave this important function exclusively to the ministerial staff of the court, an attitude of indifference to this aspect on the part of the Court many not only delay disposal of suits but may, occasions, as in present case, result in unjustified ex- parte decree and orders, Part (b) of Chapter 7-B, particularly Rules 2 and 3 thereof, and Part (c) Rules 1 to 4, 'High Court Rules and Orders Vol. IV' contain important directions for the trial court which deserve compliance. For our present purpose, rule 3(v) of part
(c), Chapter &-B is directly in point which imposes and obligation on the Court to satisfy itself after taking the process server's affidavit or statement on solemn affirmation after further enquiry as may be necessary, that reasonable efforts were made without success to serve the defendant personally and then declare whether the summons were duly served. The legal position as just mentioned, seems to me to be incontestable. It is accordingly unnecessary to deal at length with the decisions cited, on behalf, of the petitioner. I would only briefly notice them Gopiram v. 1st Additional Income-
Tax Officer25lays down that under Order 5, Rule 17, Code of Civil Procedure, read with section 63, Income- Tax Act; the mere fact that the serving officer went to the defendant's address and found him absent is not sufficient to establish that the defendant could not be found. 25 AIR 1960 Cal 420 CS DJ ADJ No. 516932/2016 Page No. 35/47 Quseph Cherian v. K.G. Gopaljrishanan,26 provides that substituted service without using reasonable diligence to effect personal service is bad. Tripura Modern Bank v. Bansen & Co.,27 lays down that in case of service by affixation; it is not sufficient to state in the affidavit of service that the process-server was satisfied upon enquiry that the defendant could not be found at his residence within a reasonable time, Tota v. Badri Pershad,28 lays dow that where the petitioner being absent, the summons is affixed on the door of his house, the Court is not justified in holding that there was proper service notwithstanding previous refusal of the petitioner to accept service. In Mohan Lal v. Sunder Lal,29 a learned Single Judge held as invalid the service effected under Order V. Rule 17, merely on the process server being informed at the defendant's house that the latter had gone to a neighbouring town. Arjan Singh v. Hazara Singh,30 refers to the various provisions of Order V and the directions contained in Chapter 7-B, Vol. IV, High Court Rules and Orders, and lays down that attempt should, in the first instance, be always made to effect personal service and the process-server should go again and again to the place of service to achieve this purpose."
[Emphasis added by underlining and highlighting of text]
78. In view of the above observations and findings, the service of the summons is held be improper and defective, as the process server failed to make repeated visits to effect personal service upon the 26 AIR 1967 Trav Co. 257 27 AIR 1952 Cal 781 28 AIR 1930 Lah 192 29 AIR 1949 E.P. 295 30 (1965) 67 PLR 643 CS DJ ADJ No. 516932/2016 Page No. 36/47 defendant and above-all, as observed in the preceding paragraphs, the process server's report hopelessly fails to elicit the likelihood of the defendant(s) not being at their residence within reasonable time.
79. With regard to the reliance placed by the defendant Nos. 1 and 2, it is observed that the service being improper and defective has been held in favour of the defendant Nos. 1 and 2, I do not deem it relevant to deal with the reliance placed by the defendant Nos. 1 and 2 on the law reports of Vijay Bhushan Chaudhary v. Shiv Charan Dass Sharma31 and Gurnam Singh & Anr. v. Kulbir Singh.32
80. With the first obstacle being traversed successfully by the defendant Nos. 1 and 2, I deem appropriate to deal with the second limb of the twin prong attack launched by the defendant Nos. 1 and 2 on the decree dated 07.01.2013 under the realm of Order XXXVII, Rule 4, CPC, to determine whether the defendant Nos. 1 and 2 have urged substantial defence and raised triable issues, which would empower them to get the leave to defend the suit.
81. The plaintiff has preferred the present summary suit under Order XXXVII, CPC, against the defendants on the basis of loan agreement, promissory notes, indemnity bond and tripartite agreement.
82. In the application filed by the defendant Nos. 1 and 2 it is averred that in terms of the tripartite agreement, loan amount was paid by the plaintiff directly to the defendant No. 3 towards the payment of flat 31 2005 (Supp.) J.K.J. 534 32 53 (1994) DLT 313 CS DJ ADJ No. 516932/2016 Page No. 37/47 purchased by the defendant No. 1. The defendant Nos. 1 and 2 have also averred in their application that there exists a dispute between the defendant No. 3 and the Authority (read Noida Authority) and serious fraud had been played by the main actors - defendant No. 3 and the plaintiff. It is averred by the defendant Nos. 1 and 2 in their application that they themselves are victims of fraud, who had been fleeced and played upon by the plaintiff and defendant No. 3. The defence also urged by the defendant Nos. 1 and 2 is that the flat allotted to them had been sold multiple times to different buyers and the builder (defendant No. 3 herein) and the financier (plaintiff herein) are in close nexus.
83. The defendant Nos. 1 and 2 have averred in their application under consideration that ever since they gained knowledge about the fraud, the defendant No. 1 surrendered his allotment which was accepted by defendant No. 3. It is urged by the defendant Nos. 1 and 2 in their defence that not only the defendant No. 3 accepted and admitted its liability to return the loan amount to the plaintiff but also the plaintiff sought an alternative relief in the prayer clause of the plaint on the same lines.
84. The learned counsel for the defendant Nos. 1 and 2 contended that they had no liability to pay to the plaintiff and thus unconditional leave to defend should be granted to the defendant Nos. 1 and 2. The learned counsel for the defendant Nos. 1 and 2 had submitted that as per the tripartite agreement amongst the parties, it was agreed that in CS DJ ADJ No. 516932/2016 Page No. 38/47 case of default in repayment of loan to the plaintiff by the defendant No. 1, on account of cancellation of allotment of flat or for any other reason whatsoever loan amount shall be refunded directly to the plaintiff by the defendant No. 3, thus the plaintiff is not entitled to seek any money from the defendant Nos. 1 and 2.
85. The defendant Nos. 1 and 2 have averred in their application under consideration that there has been no default on their part and it is the defendant No. 3, who is liable to pay the outstanding amount to the plaintiff.
86. The Hon'ble Supreme Court's in its recent judgment in IDBI Trusteeship Services Ltd. Vs. Hubtown Ltd., 33 has laid down the principles for grant of leave to defend and these principles are as under:
"17. Accordingly, the principles stated in paragraph 8 of Mechelec's case will now stand superseded, given the amendment of Order XXXVII Rule 3, and the binding decision of four judges in Milkhiram's case, as follows:
17.1. If the defendant satisfies the Court that he has a substantial defence, that is, a defence that is likely to succeed, the Plaintiff is not entitled to leave to sign judgment, and the Defendant is entitled to unconditional leave to defend the suit.
17.2 If the defendant raises triable issues indicating that he has a fair or reasonable defence, although not a positively good defence, the Plaintiff is not entitled to 33 ibid.CS DJ ADJ No. 516932/2016 Page No. 39/47
sign judgment, and the Defendant is ordinarily entitled to unconditional leave to defend.
17.3 Even if the Defendant raises triable issues, if a doubt is left with the trial judge about the Defendant's good faith, or the genuineness of the triable issues, the trial judge may impose conditions both as to time or mode of trial, as well as payment into court or furnishing security. Care must be taken to see that the object of the provisions to assist expeditious disposal of commercial causes is not defeated. Care must also be taken to see that such triable issues are not shut out by unduly severe orders as to deposit or security.
17.4 If the Defendant raises a defence which is plausible but improbable, the trial Judge may impose conditions as to time or mode of trial, as well as payment into court, or furnishing security. As such a defence does not raise triable issues, conditions as to deposit or security or both can extend to the entire principal sum together with such interest as the court feels the justice of the case requires.
17.5 If the Defendant has no substantial defence and/or raises no genuine triable issues, and the court finds such defence to be frivolous or vexatious, then leave to defend the suit shall be refused, and the Plaintiff is entitled to judgment forthwith.
17.6 If any part of the amount claimed by the Plaintiff is admitted by the Defendant to be due from him, leave to defend the suit, (even if triable issues or a substantial defence is raised), shall not be granted unless the amount so admitted to be due is deposited by the Defendant in court."
CS DJ ADJ No. 516932/2016 Page No. 40/4787. At this stage, I deem appropriate to reproduce the relevant clauses of the tripartite agreement dated 30.11.2010 entered amongst the parties to the suit, which reads as under:
"3. The housing loan advanced to the borrower by HDFC shall be repayable by the borrower by way of Equated Monthly Instalments (EMI). The date of commencement of EMI shall be the first day of the month following the month in which the disbursement of the loan will have been completed and consequently the due date of payment of first EMI shall in such a case be the last day of the said following month. Till the commencement of EMI the borrower shall pay Pre-EMI, which is the simple interest on the loan amount disbursed calculated at the rate of interest as mentioned in the respective loan agreement of the Borrower.
4. That irrespective of the stage of construction of the Project and irrespective of the date of handing over the possession of the residential apartment to the Borrower by the Builder the Borrower shall be liable to pay to HDFC regularly each month the EMIs as laid down in the Loan Agreement to be signed by and between HDFC and the Borrower. The Borrower shall execute an indemnity and such other documents as may be required by HDFC in favour of HDFC in this regard.
5. The Borrower shall ensure to pay to the Builder his own contribution in full i.e. the cost of the flat minus the loan amount being disbursed by HDFC before availing of the disbursement from HDFC.
6. ... ... ...
7. ... ... ...CS DJ ADJ No. 516932/2016 Page No. 41/47
8. That if the Borrower fails to pay the balance amount representing the difference between the loan sanctioned by HDFC and the actual purchase price of the flat/residential apartment, or in the event of death of the Borrower or in the event of cancellation of the residential apartment for any reason whatsoever the entire amount advanced by HDFC will be refunded by the Builder to HDFC forthwith. The Borrower hereby subrogates all his rights for refund with respect to the said residential apartment in favour of HDFC.
9. Further if the Borrower commits a breach of any of the terms and conditions of this Tripartite Agreement it shall be treated as an event of default under the Agreement for Sale/Allotment cum Agreement for sale or any such agreement or document signed by and between the Borrower and the Builder for the sale of the said residential apartment.
That in the event of occurrence of default under the Loan Agreement which would result in the cancellation of the Allotment as a consequence thereof and/or for any reason whatsoever if the allotment is cancelled, any amount payable to the Borrower on account of such cancellation shall be directly paid to HDFC. However it is further agreed between the Parties that such payment made by the Builder directly to HDFC shall not absolve the Borrower from his liability to pay the residual amount, if any, from the outstanding under the Loan Agreement.
That the Borrower agrees that it unconditionally and irrevocable subrogates its right to receive any amount payable by the Builder to the Borrower in the event of cancellation in favour of HDFC and that the act of payment by the Builder to HDFC under this clause shall CS DJ ADJ No. 516932/2016 Page No. 42/47 amount to a valid discharge of the Builder of its obligation to pay the Borrower such cancellation amount.
Further that the parties agree that the Builder shall in no circumstances forfeit any amount over and above the amount equivalent to the Borrowers contribution towards the purchase consideration paid to the Builder. Borrower's contribution for the purpose of this clause shall mean and include the difference between the total cost of the residential apartment and the Loan amount as mentioned above.
10. Further, the Builder, in the in the event of default of repayment as mentioned in clause 2 and 3 hereinabove, shall on intimation by HDFC cancel the allotment of the residential apartment in favour of the borrower and refund all monies to HDFC directly under intimation to the borrower for appropriation and adjustment by HDFC against all monies due to it from the Borrower as mentioned above.
11. The Builder also confirms and undertakes that it shall submit to HDFC all documents for the Project as requested by HDFC and shall keep HDFC informed of the progress of the project and shall obtain a clearance from HDFC before handing over possession of the respective apartment to the borrower."
88. A conjoint reading of the above-stated clauses of the tripartite agreement clearly shows that it was at the request of the defendant No.1 that the plaintiff advanced a loan. There is an unconditional undertaking given by defendant No.1 that there would be no repayment default for any reason whatsoever including any issue CS DJ ADJ No. 516932/2016 Page No. 43/47 between defendant No.1 and defendant No.3. The payment of EMI was to be made by defendant No.1. Clause 4 clearly states that irrespective of the stage of construction, defendant No.1 shall be liable to pay the plaintiff regularly each month the EMI as laid down in the loan agreement. It is apparent any evident from reading the clauses of the tripartite agreement that it is defendant No.1 who is solely responsible. Clause 10 and 11 of the tripartite agreement appear to be for the benefit of the plaintiff rather than for the benefit of defendant No.1. The builder (defendant No. 3 herein) is obliged to refund all monies to the plaintiff to safeguard the plaintiff. The clause does not shift any liability from the defendant No.1 to defendant No. 3.
89. Likewise, the home loan agreement is exclusively between the plaintiff and the defendant No. 1, which records the obligations of the plaintiff and the defendant No.1, respectively and it stipulates the loan amount of ₹15,00,000/- (Rupees Fifteen lakhs only) sanctioned by the plaintiff to the defendant No. 1 with regard to the flat and the same to be repaid for a period of 240 months with a variable rate of interest.
90. Further as per the indemnity bond executed by the defendant No. 1, the defendant No. 1 agreed to indemnify the plaintiff at all times for all/any loss, which may be a direct or remote consequence of and/or arising out of any dispute between the indemnifier and the builder subsequent to the disbursement of loan by the plaintiff to the defendant No. 3 at the request of the defendant No. 1.
CS DJ ADJ No. 516932/2016 Page No. 44/4791. Assuming for the sake of arguments, even if defendant No. 3 was to return the money directly to the plaintiff and the defendant No. 3 having failed to do so, the same does not absolve the defendant Nos. 1 and 2 of their liability. In the light of the clauses noted above, indemnity bond and general power of attorney, it is evident that the defendant No. 1 took upon himself the responsibility of indemnifying the plaintiff and now he cannot summersault to say that it was the responsibility of the defendant No. 3 to repay and thus the plaintiff should recover the said amount from defendant No. 3. The same is an issue inter se the defendant Nos. 1, 2 and the defendant No. 3 qua which the plaintiff has no concern.
92. The reliance placed by the learned counsel for the defendant Nos. 1 and 2 particularly, Housing Development Finance Corporation Limited v. Anugrah Omprakash Sharma & Anr. - C.S. No. 13/14 date of decision 19.08.2014 and LIC Housing Finance Ltd. v. Neha Taneja & Ors. - C.S. No. 2981/16 date of decision 08.03.2017 are misplaced in terms of the judgment passed by the Division Bench of the Hon'ble High Court of Delhi in Sandeep Kumar v. Housing Development Finance Corporation Limited & Anr.34
93. It is observed that the reliance placed by the defendant Nos. 1 and 2 on the judgment passed by Shivam Enterprises (M/s) v. M/s Creation Point35 is erroneous, as in that case the Hon'ble High Court 34 RFA(OS) No. 50/2015 date of decision 25.08.2015 35 2013 VI AD (Delhi) 405 CS DJ ADJ No. 516932/2016 Page No. 45/47 held that there was no element of any any 'special circumstances' set up by the defendant in not entering appearance as per the provisions contained under Order XXXVII, CPC, and I fail to comprehend, how the same is applicable to the pleas urged by the defendant Nos.1 and 2.
94. This court observes that the Hon'ble High Court of Delhi not only in HDFC Ltd. v. Umesh Kumar Rai & Anr.36 but also in Housing Development Finance Corporation Ltd. v. Sandeep Kumar and Anr.,37 and Sandeep Kumar v. Housing Development Finance Corporation Limited & Anr.38 under the similar facts declined to grant leave to defend. It is observed that not only the Ld. Single Judge but also the Division Bench of Hon'ble High Court of Delhi in above- mentioned pronouncements rejected the argument that the borrower (defendant No.1 herein) has been duped by the builder (defendant No. 3 herein) and the bank (plaintiff herein) in collusion.
95. That said, the defendant Nos. 1 and 2 fail to muster the second obstacle to hold them entitled for setting aside the impugned decree and grant of a leave to defend the suit. In view of the above observations and findings, this court holds that no triable issues arise in favour of the defendant Nos. 1 and 2 and the defendant Nos. 1 and 2 also fail on the count of having any substantial and plausible defence, which would empower them for a leave to defend the suit. This court holds that no case for setting aside the decree dated 07.01.2013 is 36 CS (OS) No. 2894/2012 date of decision 02.09.2014 37 CS(OS) No. 2502/2012 date of decision 11.03.2015 :: 2015 SCC OnLine Del 8118 38 RFA(OS) No. 50/2015 date of decision 25.08.2015 CS DJ ADJ No. 516932/2016 Page No. 46/47 made out in favour of the defendant Nos. 1 and 2 and against the plaintiff.
96. Accordingly, the application moved by the defendant Nos. 1 and 2 under Order XXXVII, Rule 4, CPC, is dismissed in above terms. The stay of execution proceedings vide order dated 27.01.2015 and subsequent interim orders passed by this court is vacated. Interim applications, if any, are dismissed as infructuous. Parties to bear their own costs.
97. File be consigned to record room only after due compliance and necessary action, as per Rules.
Digitally signed by HARGURVARINDER HARGURVARINDER SINGH JAGGI
SINGH JAGGI Date: 2019.10.30 16:15:22
+0530
Pronounced in the open Court (Hargurvarinder Singh Jaggi)
on October 30, 2019 Addl. District Judge-02
South West District
Dwarka Courts Complex, Delhi
CS DJ ADJ No. 516932/2016
Page No. 47/47