Nawn Estates Pvt. Ltd vs Maheswary Ispat Ltd on 5 September, 2013

[Cites 13, Cited by 1]

Calcutta High Court

Nawn Estates Pvt. Ltd vs Maheswary Ispat Ltd on 5 September, 2013

The Court: The suit is filed under Order 37 of the Code of Civil Procedure, 1908. The suit is based on a dishonoured cheque claimed to have been issued by the defendant to the plaintiff towards payment of price of goods sold and delivered. The summon in the prescribed form was issued on 17th April, 2013 giving 10 days time for the defendant to enter appearance and file written statement. The said summon was duly served upon the defendant on July 2, 2013 as it appears from the endorsement made on the reverse of the writ of summons. The defendant is aware of the pending proceeding.

The defendant did not enter appearance within the time specified in the writ of summons. The report of the Deputy Registrar dated 30th August, 2013 shows that the defendant has not entered appearance either in person or the advocate dated 29th August, 2013. 2

Although, the plaintiff is not obliged to adduce any evidence and could have claimed a decree on the basis of a strong presumption which is attached to the section by reason of Order 37 Rule 2 (3) of the Code of Civil Procedure, witness was present in Court on September 2, 2013 and adduced evidence on behalf of the said plaintiff.

The plaintiff has relied upon and produced the following documents in support of its claim namely :

(i)     The letter dated 4th May, 2010.

(ii)    The letter dated 19th February, 2011

(iii)   The letter dated 15th March, 2011

(iv)    Original cheque for a sum of Rs.35 lakhs, being cheque no.

502036, issued by the defendant in favour of the plaintiff dated 1st November, 2011 along with the intimation notice issued by the Bank of Baroda dated 5th January, 2012 and 9th March, 2012.

(v) Original cheque issued by the defendant in favour of the plaintiff for a sum of Rs.32,70,000/- being cheque No.502033 dated 7th November, 2011 drawn on Bank of Baroda along with the letter of intimation dated 5th January, 2012 and 9th March, 2012.

(vi) Legal notice dated 17th May, 2012

(vii) Legal notice dated 28th September, 2012

(viii) Letter dated 19th October, 2012 issued by Maheshwary Ispat Ltd.

The said documents are marked as Exbt.-A, B, C, D (collectively), E, F and G. 3 The witness has stated that the plaintiff used to procure supply of TMT Bars from the defendants. The plaintiff had entered into the agreement on 4th May, 2010 with the defendant for supply of 1200 MT of TMT Bars. The plaintiff had issued two several cheques being Cheque No.765353 dated 4th May, 2010 for sum of Rs.35,00,000/- (Rs. 35 lakhs only) as also post dated Cheque No.210883 dated 19th January, 2011 for a sum of Rs.32,70,000/- aggregating to Rs.67,70,000/- drawn in favour of the defendant on State Bank of Hyderabad being part payment in advance of the value of 1200 MT of TMT Bars calculated at the rate of 15,000 per MT inclusive of all taxes to be supplied by the defendant to the plaintiff. The witness has referred to the letter dated 4th May, 2010 being (Exbt. - A) and stated that in case of failure to deliver all materials within the agreed period, the defendant would be liable to pay interest on the amount advanced at the rate of 24% per annum for the delayed period. According to the witness the defendant had failed and neglected to supply the said materials and accordingly, in view of the failure to supply, the plaintiff is entitled to refund of the said sum of Rs.67,70,000/- along with interest at the rate of 24% per annum on the said sum. The plaintiff initially initiated a winding up proceedings after issuing a statutory notice dated April 16, 2012. In reply to notice issued under Sections 433 and 434 of the Companies Act, 1956 and also under the Interest Act dated 16th April, 2012 issued by the plaintiff, the defendant by a letter dated May 17, 2012 denied its liability. The said 4 defendant, however, contended that such money was paid as and by way of accommodation loan and, accordingly, the question of payment of principal and interest against the alleged advance for purchase of 1200 MT of TMT Bars could not arise.

It appears that initially a winding up proceeding was initiated and it was contended on behalf of the defendant that the plaintiff had never placed any purchase order of 1200 MT of TMT Bars at the rate mentioned in the letter dated 4th May, 2010. The winding up proceedings, however, was dismissed and the subject matter of the winding up has been relegated to the suit. The plaintiff appears to have issued a second notice dated 28th September, 2012, by which the defendant was called upon to pay a sum of Rs.67,70,000/-. This notice was the second notice of demand and a notice under Sections 433 and 434 of the Companies Act, 1956. The said second legal notice appears to have been replied on behalf of the defendant on 19th October, 2012 in which the defendant reiterated that the plaintiff extended an accommodation business loan to the defendant and there was no agreement for supply of TMT Bars by the defendant to the plaintiff. The witness has stated that the defendant had failed to deliver any goods to the plaintiff after issuance of the letter dated 15th March, 2011 in which the plaintiff asked the defendant to refund the total advance of Rs.67,70,000/- and payment of interest at the rate of 24% per annum for the period from 4th May, 2010 till date. The witness says that the 5 contents of this letter are true and correct. The witness has also stated that the defendant, subsequent to the letter dated 15th March, 2011, had issued two several cheques drawn on Bank of Baroda being Cheque No.502036 and 502033 dated 1st November, 2011 and 7th November, 2011 for a sum of Rs.35 lakhs and a sum of Rs.35.70 lakhs respectively and the said cheques were dishonoured on presentation and returned to the plaintiff with a endorsement insufficient balance. The witness has produced the original cheques as also from several notice of dishonour. The suit is based on the said two cheques that were dishonoured on presentation.

This is a suit under Negotiable Instruments Act and under Order 37 of the Code and plaint is drawn up in a form approximating the form set out for a suit of a like character.

The difference between the procedure of ordinary suit and of summary is well-known as in the case of the former the defendant requires no leave of court to defend suit and he is entitled to defend it as of right while in case of latter defendant is required to apply for leave to defend within 10 days of service of summons for judgment. In a summary suit, the defendant has no right to defend per se unless leave is granted to him by Court to defend suit. In the plaint, a specific averment is made to the effect that the suit is filed under Order 37 and no relief which does not fall within the ambit of the said rule has been claimed in the plaint. If the defendant has not indicated appearance in 6 the stipulated period under Order 37 Rule 2, C.P.C., the consequence indicates under Order 37 Rule 2 would follow and the plaintiff would be entitled to succeed in suit. (Mrinalini Dassi Vs. Kumar Surjendu Narayan Deb, ILR 1956 (1) Cal 197) The words "allegations in the plaint shall be deemed to be admitted" mentioned in Order 37, have been substituted for the Explanation contained in the old Section 532 of the 1882 Code. They embody an exception to the fundamental principle that a plaintiff must prove the case with which he comes to Court and dispense with such proof in view of the special nature of the documents mentioned in rule 1.

The effect of this words is to enable the plaintiff to succeed on his own allegations, though they may be of such a nature that had the defendant appeared and denied them, they would have to be proved by the plaintiff by leading evidence.

Such presumption having regard to the stringent provision of the statute is elevated to an undeniable position thereby forfeiting the right of the defendant to contest the suit in failure to enter an appearance in the suit within the stipulated period of 10 days in view of the stipulations mentioned in the summons. The mandatory duty cast upon the Court on failure to enter appearance is quite clear from the language of the said provision.

In a summary suit, if the defendant does not enter appearance within ten days of service of summons, the allegations in the plaint shall 7 be deemed to be admitted and the plaintiff shall be entitled to a decree not exceeding the sum mentioned therein together with interest at the rate specified.

The learned Single Judge of this Court in Universal Cable Ltd. Vs. West Bengal State Electricity Board reported in 1997 (2) C.W.N. 148 in dealing with a suit under the Negotiable Instruments Act, on the basis of the ratio laid down in AIR 1917 Cal 269 (J.B. Ross & Co. Vs. C.R. Scrivan & Ors.) stated:

"It is needless to mention that Order 37 is a special summary procedure which cannot be equated to that of the course of prosecution of a procedure in a regular suit. Otherwise there would have been no efficacy for notification or incorporation of Order 37 in the body of the Civil Procedure by way of separate species of procedure canvassed for disposal of the matter which comes under the four corners of the summary proceeding. In support of his contention Mr. Chatterjee has relied on a case of J.B. Ross & Co. v. C.R. Scrivan & Ors., reported in AIR 1917 Calcutta 269 where the Division Bench of this Court has held that a court cannot pass a decree except in suits on negotiable instrument governed by the provisions of Order 37 Rule 2. No decree can legally be given without evidence in a case where the defendant does not choose to contest except in suits on negotiable instruments governed by the provisions of Order 37 Rule 2 of the Code of Civil Procedure. We find even concurrence by Woodroffe J. who has been pleased to hold that 8 according to Rule 2 Sub-rule (2) of Order 37, in default of obtaining leave to appear and defend, the allegations of the plaint shall be deemed to be admitted and the plaintiff shall be entitled to a decree. In this context a reference may be made with regard to the provisions of Section 118 of the Negotiable Instruments Act and it may be compared to that of the provisions of Section 114 of the Evidence Act. The significant expression used in the body of Section 114 of the Evidence Act is that the court may presume existence of any fact and the said presumption is optional at the discretion of the court in Section 114 of the Evidence Act. In terms of Section 118 of the Negotiable Instrument Act it has been contended that unless contrary is proved, certain presumption shall be made under Section 118 of Negotiable Instrument Act. Section 118 of the Negotiable Instrument Act forecasts a mandatory provision about presumption but Section 114 of the Evidence Act makes reference to the discretion to be optionally exercised by the court. There is general option and the opinion of the same may be formed by the court about existence of any fact under Section 114 but such option is not to be found unless contrary is proved in respect of presumption flowing from certain species of Negotiable Instrument. The presumption about passing of for consideration in specified clauses of negotiable instrument is compulsory and not optional unless contrary is proved. Therefore, in the back ground of the same, the observation of Woodroffe J. assumed significance and therefore this Court is made to ponder about 9 construction of the provisions of Order 37 of the Code of Civil Procedure. This Court in the light of the discussion made above leans in favour of a construction that in absence of leave being put forward within the deadline, there is no other option left to the court but to pass a decree because the decree will follow as a matter of course and the court cannot fix it on the Board for hearing."

In J.B. Ross (supra), Justice Woodroffe in his Lordship's concurrent judgment have categorically stated that no decree can legally be given in any case without evidence except in cases of Order 37, C.P.C. According to Rule 2, Sub-Rule 2 of that order in default of obtaining leave to appear and defence in pursuance thereof, 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.

In view of the stringent provision contained in Order 37, Rule 2, Sub-Rules 2 and 3 and having regard to the fact that the defendant did not enter appearance in the aforesaid period and obtain any leave to defend, the plaintiff would be entitled to a decree as claimed in terms of the summons.

The issuance of cheque itself creates a strong presumption of a debtor-creditor relationship and such presumption is not dislodged even from the contents of the reply to the winding up notice although the defendant had disputed the claim on the basis of purchase agreement contained in the letter dated May 4, 2010 and contended that the 10 defendant was enjoying some loan facility but could not offer any explanation for issuance of such cheques which were dishonoured on presentation.

In Ramkarandas Radhavallabh Vs. Bhagwandas Dwarkadas reported in AIR 1965 SC 1144, the Hon'ble Supreme Court considered the scope of Order 37, Rule2(2) of the CPC and held that:

"On the merits too, we think that the contention is fallacious. It proceeds on the basis that when leave to defend has been refused to a defendant, the Court is bound to pass a decree. It seems to us that what sub-rule (2) of R.2 of O. 37 contemplates is that the Court will accept the statements in the plaint as correct and on those statements pass such decree as the plaintiff may in law be entitled to. If, for example, the plaint discloses no cause of action, the Court cannot pass any decree in favour of the plaintiff. If this were not so, the words "allegations in the plaint shall be deemed to be admitted" in sub-rule (2) of R.2 of O.37 would have been unnecessary. The Court in making a decree under sub-rule (2) of R.2 of O.37 has to keep the law in mind. If the law requires the Court to exercise a discretion on the facts deemed to be admitted, it will have to do so."

The Hon'ble Supreme Court in Ajay Bansal Vs. Anup Mehta and Others reported in 2007(2) SCC 275 considering on Order 37 Rule 3(5) held that a decree passed in a summary suit where leave to defend the 11 suit has been refused is almost automatic. The consequence of passing a decree cannot be avoided.

In view of the aforesaid and having regard to the fact that all the ingredients of Order 37 are present inasmuch as the plaintiff has been able to establish its claim in the suit. There shall be a decree for a sum of Rs.67,70,000/-. The plaintiff is, however, entitled to interest at the rate of 10% per annum from April, 2011 on the said principal sum till realisaion. Although it appears that the parties have agreed to payment of interest at the rate of 24 per cent per annum since in my view it would be unconscionable and inequitable to grant such relief in view of the provisions of the Interest Act and the nature of the transaction.

The suit is decreed accordingly. The Department is directed to draw up the decree as expeditiously as possible.

(SOUMEN SEN, J.) B.Pal

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Calcutta High Court