Bombay High Court
Rajesh Laxmichand Udeshi @Bhatia vs Pravin Hiralal Shah on 16 July, 2012
Author: Chief Justice
Bench: Mohit S. Shah, N.M. Jamdar
kambli 1 appl(l)202.12
IN THE HIGH COURT OF JUDICATURE AT BOMBAY.
ORDINARY ORIGINAL CIVIL JURISDICTION
APPEAL (L) NO.202 OF 2012
IN
SUMMONS FOR JUDGMENT NO.308 OF 2010
IN
SUMMARY SUIT NO.673 OF 2010
...
Rajesh Laxmichand Udeshi @Bhatia ...Appellant
v/s.
Pravin Hiralal Shah ...Respondent
...
Mr.Sanjay Jain with Mr.Ramesh Jain for Appellant.
Mr.Prateik Parija i/b M/s.Ashwin Ankhad & Associates for the
Respondent.
...
CORAM: MOHIT S. SHAH, C.J. &
N.M. JAMDAR, J.
DATE : 16 July 2012.
ORAL JUDGMENT (Per Chief Justice)
This appeal is directed against the judgment and order dated 20 October 2011 of the learned single Judge of this Court in summons for judgment in the summary suit filed by the respondent herein for an amount of Rs.67,10,000/- together with interest at the rate of 12% p.a. on the principal sum of Rs.61,00,000/-. The learned single Judge has, by the impugned judgment and order, made this summons for judgment absolute and decreed the suit in the sum of Rs.61,00,000/- together with interest at the rate of 12% p.a. from 29 April 2009 till payment and/or realization with costs.
1 of 1
::: Downloaded on - 09/06/2013 18:49:23 :::
kambli 2 appl(l)202.12
2. The parties had entered into Memorandum of
Understanding (MOU) dated 12 May 2009, under which the appellant/defendant was to sell to the plaintiff a flat for consideration of Rs.8.46 crores. It is the case of the plaintiff that the defendant represented that he along with his father and brother had tenancy right in the flat and that the defendant had an authority to enter into MOU.
3. The plaintiff paid aggregate amount of Rs.61,00,000/- by two cheques- cheque dated 6 April 2009 for Rs.11,00,000/- as earnest money and cheque dated 29 April 2009 for Rs.50,00,000/- as part payment. However, the defendant's father and brother did not agree to the MOU being implemented and also denied the defendant's authority to enter into such MOU. The plaintiff's case is that in the circumstances the defendant issued three cheques for sum of Rs.61,00,000/- towards repayment of the amounts paid by the plaintiff to the defendant being cheque dated 30 June 2009 for Rs.25,00,000/-, another cheque dated 5 July 2009 for Rs.25,00,000/- and third cheque dated 10 July 2009 for Rs.11,00,000/-. When the cheques were presented with the plaintiff's banker between October and December 2009, all the cheques were dishonoured.
4. In his affidavit-in-reply dated 20 October 2011, the defendant stated that "the alleged cheques were lying with the plaintiff for security purpose only for some other transactions and the plaintiff misused the same. The same is clear from the date mentioned thereon." The defendant did not give any particulars of the other transactions in respect of which the three cheques were allegedly given by the 2 of 2 ::: Downloaded on - 09/06/2013 18:49:23 ::: kambli 3 appl(l)202.12 defendant to the plaintiff. As noted by the learned single Judge, it was not the defence that in respect of the alleged transaction or in respect of MOU, the defendant had subsequently made any payment to the plaintiff. The defendant also contended that interest could not be claimed from 6 April 2009 as the amounts were advanced only on 29 April 2009.
5. After hearing the learned counsel for the parties, the learned single Judge allowed the summons for judgment and passed aforesaid order decreeing the suit in the sum of Rs.61,00,000/- with interest at the rate of 12% p.a. from 29 April 2009 till payment.
6. The learned counsel for the appellant has submitted that the learned single Judge ought to have held that the following defences of the appellant raises triable issues and therefore unconditional leave is required to be granted:-
(a) The receipts purported to have been issued by the defendant in favour of the plaintiff acknowledging receipt of Rs.61,00,000/- have been disputed in the affidavit-in-reply. The signature on the MOU is also disputed as stated in the affidavit-in-reply.
(b) As per the MOU the defendant had agreed to sell only his share in the flat in question and therefore there was no representation that the defendant had right and authority to enter into MOU on behalf of his father and brother. Hence, there was no cause of action for the plaintiff to either terminate the MOU or to claim refund of Rs.61,00,000/-. Under the MOU, the last date for implementation of 3 of 3 ::: Downloaded on - 09/06/2013 18:49:23 ::: kambli 4 appl(l)202.12 MOU was 10 July 2009 and, therefore, there could not have been any liability of the defendant under the MOU before 10 July 2009. Hence the very fact that the cheques were issued on or before 10 July 2009 indicates that the cheques were issued in respect of some other transaction. In absence of affidavit-in-rejoinder, the defendant's case was required to be accepted.
(c ) The MOU was not sufficiently stamped and therefore also the suit founded on the plaintiff's claim under the MOU is not maintainable. Therefore also unconditional leave ought to have been granted to the defendant.
(d) On behalf of the appellant reliance is also placed on several decisions referred to hereinafter.
7. On the other hand, the learned counsel for the respondent-
plaintiff submitted that the suit was based on cheques admittedly issued and dishonoured. The signatures on three cheques are not disputed. The affidavit-in-reply did not refer to any other alleged transaction in respect of which three cheques were issued. The plaintiff had no occasion to file affidavit-in-rejoinder, as the affidavit-in-reply was filed by the appellant on the date of hearing of the summons for judgment and in any case the defendant had not given particulars of the alleged other transaction. Hence there was no need for the plaintiff to file the rejoinder.
4 of 4
::: Downloaded on - 09/06/2013 18:49:23 :::
kambli 5 appl(l)202.12
8. Before we proceed to consider the rival submissions and the judgments cited by the parties, it needs to be noticed that the suit is based on the cheques issued by the appellant, which were dishonoured.
Paragraph 20 of the plaint makes this position clear.
"20. In the circumstances, the plaintiff submits that there is due and payable from the defendant to the plaintiff principal outstanding amount of Rs.61,00,000/- under the above cheques; (ii) interest @ 12 p.a. on the above cheques from the respective dates of its dishonour, till the date of filing of suit and (iii) further interest at the rate of 12% p.a. on the principal amount of Rs.61,00,000/- from the date of filing of the suit till the date of realization".
9. Order 37 Rule 1 of the Civil Procedure Code specifies the classes of suits which can be tried by way of summary procedure. Sub- rule 2(a) specifies that the summary procedure will apply to the suits filed upon bills of exchanges, hundis and promissory notes. Thus, it is clear that the present suit which is based on the cheques given by the appellant which were dishoured, can be tried by way of summary procedure. The only question is whether the learned single Judge was right in decreeing the suit without granting leave to defend the suit to the appellant.
10. Mr.Sanjay Jain, learned counsel for the appellant contended that where the defence appears reasonably plausible, the Courts should allow the defendant to file his written statement and contest the suit and depriving the right to file a written statement should be resorted to in rare circumstances. The learned counsel firstly relied on the decision of the Apex Court in Santosh Kumar v/s. Bhai Mool Singh, 1958 SCR 1211. Relying on this judgment, the learned counsel 5 of 5 ::: Downloaded on - 09/06/2013 18:49:23 ::: kambli 6 appl(l)202.12 submitted that it is only in cases of `no defence' that the leave to defend should be refused. The learned counsel further relied on the judgments of the Apex Court in Raj Duggal v/s. Ramesh Kumar Bansal, 1991 Supp(1) SCC 191 and in State Bank of Saurashtra v/s. Ashit shipping Services (P) Ltd. (2002) 4 SCC 736. The learned counsel submitted that the Apex Court has adopted the test laid down in Order 14 of the Rules of Supreme Court in England, where it was held that where the defence can be described as more than "shadowy" but less than "probable", leave to defend should be granted. The learned counsel further submitted that the test laid down in Mechelec Engineers & Manufactures v/s. Basis Equipment Corporation, (1976) 4 SCC 687 has been followed consistently by the Apex Court. In Mechelec Engineers (supra) the Apex Court has laid down certain propositions and according to the learned counsel if the propositions therein are applied to the facts of the present case, leave to defend ought to have been granted to the appellant. Relying on the judgment of a Division bench of this Court in Appeal No.873 of 1984 (Har Kishore Jain & Sons Pvt. Ltd. v/s. Bank of Baroda) dated 13 November 1984, the learned counsel contended that even a defence such as improper stamping has been accepted as good enough defence to grant leave to defend.
11. There can be no two views about the tests laid down as to in which cases leave to defend is to be granted and in which cases it is to be refused. Weightage to be given to a defence that is raised will depend on the facts of each case. Once the plaintiff has placed the documentary material on record showing that the plaintiff has a case in law, merely because the defendant indicates that he has certain defence, leave is not to be granted automatically, but the Court is required to find 6 of 6 ::: Downloaded on - 09/06/2013 18:49:23 ::: kambli 7 appl(l)202.12 out whether such defence even at its face value has some credibility. The defendant must produce on record some material in furtherance of his defence, so as to enable the Court to judge the credibility of the defence, albeit, prima facie.
12. In the present case, the suit is based on the cheques that were dishonoured. The parties entered into a transaction for sale of tenancy rights of a flat. The appellant is the tenant along with his brother and father in the said flat. The appellant received a sum of Rs.61,00,000/- towards part consideration and having been unable to convey any rights in respect of the flat, he tried to return the money by way of three cheques, which were dishnourned. It is on these dishonoured cheques that the summary suit has been filed. The effect of dishonoured cheques in law and its effect on summary procedure thus needs to be considered.
13. The Negotiable Instruments Act, 1881 was enacted for defining and amending the law relating to promissory notes, bills of exchange and cheques. Chapter XIII of the Act contains special rules of evidence including section 118(a) providing that until the contrary is proved, it shall be presumed that every negotiable instrument was made or drawn for consideration. The said Act, however, did not provide for any penalties in case of dishonour of cheques. By Amending Act of 1988, with effect from 1.4.1989, Parliament inserted Chapter XVII providing for "penalties in case of dishonour of certain cheques for insufficiencies of funds in the accounts". Section 138 lays down that when a cheque issued by the party is dishonoured under the circumstances specified therein, then offence under Section 138 is 7 of 7 ::: Downloaded on - 09/06/2013 18:49:23 ::: kambli 8 appl(l)202.12 deemed to have been committed. This Section also provides for punishment and grant of compensation. To make this provision really effective, the Legislature has incorporated a presumption of law by way of Section 139 of the Negotiable Instruments Act that when a cheque is dishonoured, there shall be a statutory presumption as regards existence of a debt or liability. Section 139 of the Negotiable Instruments Act reads as under:
139. Presumption in favour of holder:- It shall be presumed, unless the contrary is proved, that the holder of a cheque received the cheque of the nature referred to in section 138 for the discharge, in whole or in part, of any debt or other liability.
14. The object of introducing Chapter XVII in the Negotiable Instruments Act was to ensure that persons drawing cheques to do so with responsibility by making the lapse to honour the commitment, a criminal offence. In Goa Plast (P) Ltd. v. Chico Urrsula D'Souza, 2004(2) SCC 235 and in various other decision, the Supreme Court has noticed that it is now well-known that the object of the provision of section 138 of the Act is for proper and smooth functioning of business through banking transactions. In particular, that the use of cheques as negotiable instruments would primarily depend upon the integrity and honesty of the parties. It was noticed that cheques were misused as a device interalia for defrauding the creditors and stalling the payments.
It was also noticed in a number of decisions of the Supreme Court that dishonour of a cheque by the bank causes incalculable loss, injury and inconvenience to the payee and the entire credibility of the business 8 of 8 ::: Downloaded on - 09/06/2013 18:49:23 ::: kambli 9 appl(l)202.12 transactions within and outside the country suffers a serious setback.
The Supreme Court also noticed that the remedy available in a civil court is a long-drawn process and an unscrupulous drawer normally takes various pleas to defeat the genuine claim of the payee.
15. When a summary suit instituted is based on a cheque which is dishonoured, effect of Sections 138 and 139 of Negotiable Instruments Act raising statutory presumption that the cheque was issued in discharge of a liability, is a relevant consideration to be kept in mind. The said Sections cast a burden upon the defendant to rebut the presumption. Summary suits instituted on cheques which are dishonoured will, therefore, stand on a higher footing than summary suits instituted on the basis of other documents. In such cases, the Court will have to take into consideration the statutory presumption which is raised when the cheques are dishonoured. The object behind providing a statutory presumption under the Negotiable Instruments Act has to be kept in mind while judging the credibility of a defence raised by the defendant in summary suit. Thus, the test of more than "shadowy" and less than "probable" as adverted to by the Apex Court cannot apply in cases where the law requires a person to explain certain state of affairs. The judgments which are relied upon by the learned counsel do not consider the effect of the statutory presumptions raised under the Negotiable Instruments Act when a cheque is dishonoured. In our opinion, when a cheque is dishonoured, the Court is enjoined with the duty to scrutinize the defence put up by the defendant with a much higher degree of care and circumspection. Such summary suits cannot be treated as on par with the cases instituted on contracts or invoices etc. where such statutory presumptions do not operate.
9 of 9
::: Downloaded on - 09/06/2013 18:49:23 :::
kambli 10 appl(l)202.12
16. The legislative intent behind enactment of Sections 138 and 139 of the Negotiable Instruments Act is to prevent abuse of the banking system. Thus, one who issues a cheque extends a solemn promise to pay. Based on this promise and action, the recipients arrange their affairs and quite often enter into further transactions. Unless extra ordinary circumstances are made out, one who issues cheque is deemed to have undertaken to pay. Negotiable Instruments Act enforces the promise strictly by raising statutory presumption and treating it as an offence. This provision elevates a cheque to a higher status than the other instruments, such as written contract etc. ig to which no such statutory presumption is attached. What needs to be emphasized is that presumption in respect of a dishonoured cheque places a higher burden on the defendant to elucidate the defence than the burden which is cast on a defendant where the suit is filed on the basis of ordinary instruments. In the cases based on dishonour of cheques, the defendant must satisfy the conscience of the Court and cannot take shelter behind the rules formulated primarily in respect of suits based on ordinary instruments. The Court while exercising the discretion to grant leave or otherwise to the defendant in such cases, cannot be oblivious of the legislative intent to place the promise made through a cheque on a higher pedestal than the promise made through an ordinary instrument. This is not to state that moment a Summary Suit is lodged based on a dishonoured cheque, it must be decreed without anything more. What needs to be emphasised is that the fact that there is a statutory presumption attached to the dishonoured cheque will constitute an important ingredient while considering the question whether leave to defend should be granted in cases of dishonoured cheques and the Court must scrutinise the defence strictly. The object of the summary 10 of 10 ::: Downloaded on - 09/06/2013 18:49:23 ::: kambli 11 appl(l)202.12 procedure is ultimately to see that the defendant does not needlessly prolong the litigation by creating untenable, frivolous and casual defences so as to deprive the plaintiff of the monies due to him.
17. The distinction regarding suits based on dishonoured cheques is also indicated by the Apex Court in V.K.Enterprises and anr.
v/s. Shiva Steels, (2010) 9 SCC 256, wherein the Apex Court has held as under:
10. Order 37 CPC 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.
11. What is required to be examined for grant of leave is whether the defence taken in the application under Order 37 Rule 3 CPC 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 interpretation 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.
(emphasis supplied)
11 of 11
::: Downloaded on - 09/06/2013 18:49:23 :::
kambli 12 appl(l)202.12
18. Keeping the above position in mind, we have considered the defence raised by the appellant before the learned single Judge. The only defence that is raised by the appellant in this regard is that the cheques were given as security for "some other transaction". The appellant was obliged to give some particulars as to the "some other transaction". No such explanation is forthcoming. Thus, considering the quality of defence, the learned single Judge has come to the conclusion that this is a case of "no defence". We are in agreement with this view. When the cheques were dishonoured and presumption was raised and the appellant wanted the Court to believe that he has a defence, in as much as, the cheques were issued as a security for some other transaction, least he could have done was to give some details of such transaction. The appellant cannot treat the legislative intent behind the statutory presumptions lightly and then try to rely upon the principles enunciated in cases where no such statutory presumption is raised.
19. The defence that the three cheques were issued by 10 July 2009 without consideration, because the defendant's liability under MOU was not to commence till that date is equally untenable. MOU provided that the conveyance was to be exactly by the date upon the plaintiff pays the defendant the balance sale consideration by 10 July 2009. Hence the defendant could have avoided his liability under MOU on account of failure on the part of the plaintiff to offer the balance consideration to the defendant by 10 July 2009. The plaintiff, however, found to his dismay on receiving letter dated 21 December 2009 from the defendant's father and brother that they denied the defendant's 12 of 12 ::: Downloaded on - 09/06/2013 18:49:23 ::: kambli 13 appl(l)202.12 authority to transfer the tenancy in the flat in question. In view of this precarious position, the plaintiff naturally pursued the matter with the defendant and succeeded in getting the refund of Rs.61,00,000/- by three cheques dated 30 June, 5 July and 10 July 2009 as indicated in para 3 hereinabove. This explanation given by the plaintiff, duly supported by the aforesaid letter from the defendant's father and brother, is more than sufficient to show the defendant's liability to refund Rs.61,00,000/-.
20. Since the suit is based upon the dishonoured cheques, as amply borne out by para 20 of the plaint, quoted hereinabove, the defence of insufficient stamp on MOU is of no consequence. Reference to MOU in the plaint is only for the purpose of giving factual background in which the cheques were issued and the consideration for the same. That would, however, not shift the burden, of proving that the cheques were issued without consideration, cast by the law on the drawee of the cheque from the drawer to the payee of the cheque.
21. In view of the above discussion, we are of the view that the learned single Judge was fully justified in giving the finding that the amounts which were paid by the plaintiff to the defendant were received by the defendant and that the defence raised by the appellant/defendant that the dishonoured cheques were issued in respect of some other transaction was not a bonafide defence. The cheques were issued by the defendant in discharge of his liability and presumption under Section 139 of the Negotiable Instruments Act, 1881 is clearly available to the plaintiff. No credible defence has been urged by the appellant/defendant in his affidavit-in-reply, which would entitle him to get leave to defend, much less unconditional leave to defend.
13 of 13
::: Downloaded on - 09/06/2013 18:49:23 :::
kambli 14 appl(l)202.12
22. In any view of the matter, having regard to the plaintiff's case as set out in para 20 of the plaint, quoted hereinabove, we modify the operative part of the order passed by the learned single Judge and the same shall be substituted by the following order:
"The defendant shall pay to the plaintiff the principal outstanding amount of Rs.61,00,000/- under the above three cheques with interest at the rate of 12% p.a. from the respective dates of their dishonour till filing of the suit and further interest at the rate of 12% p.a. on the principal amount of Rs.61,00,000/- from the date of filing of the suit till the date of realization."
23. Subject to above modification, the appeal is dismissed.
CHIEF JUSTICE (N.M. JAMDAR, J.) 14 of 14 ::: Downloaded on - 09/06/2013 18:49:23 :::