Calcutta High Court
Central Bank Of India vs P.K. Agencies Limited on 29 January, 2004
Equivalent citations: (2004)2CALLT170(HC), 2004(4)CHN595, [2006]130COMPCAS680(CAL)
Author: Dilip Kumar Seth
Bench: Dilip Kumar Seth
ORDER Dilip Kumar Seth, J.
1. In this appeal, the judgment and decree dated March 26, 1991, passed in Suit No. 297 of 1987 under Chapter XIII-A of the Original Side Rules (OS Rules) is under challenge. It is alleged that a sum of Rs. 20 lakhs was deposited with the bank by the plaintiff for being transmitted to a foreigner's account which was kept in fixed deposit and in respect of which the plaintiff had executed a document of lien. Ultimately, the Reserve Bank of India refused permission to transmit the amount to the foreigner's account. In the circumstances, the plaintiff was entitled to refund of the said amount, which the defendant bank, being the appellant herein, could not retain. In the circumstances, an application under Chapter XIII-A of the OS Rules was taken out by the plaintiff/respondent for a decree on admission through a summary procedure provided therein. The learned Judge, on the oral prayer of the plaintiff, had called for records from the Reserve Bank of India, which were produced, Mr. Bachawat, appearing for the respondent, contended that this was not objected to by the defendant/appellant. Having examined those documents, the Court found that the defendant had no defence, therefore, refused leave to defend and decreed the suit on admission on various grounds to which we shall refer at a latter stage.
2. Mr. Hiranmoy Dutt, learned counsel appearing on behalf of the appellant Bank, submits that it is not necessary to make out a good defence. It is only if the defendant is able to make out a case that he has a defence through a triable issue raised, in that event, no decree under Chapter XIII-A could be signed. He relied on the decisions in Mechalec Engineers & Manufacturers v. Basic Equipment Corporation, ; Mrs. Raj Duggal v. Ramesh Kumar Bansal, and Sunil Enterprises and Anr. v. SBI Commercial & International Bank Ltd., in support of his contention.
Respondent's submission:
3. Mr. Bachawat, learned counsel appearing on behalf of the respondent, on the other hand, points out that Rule 6 of Chapter XIII-A of the OS Rules empowers the Court to sign a decree unless the defendant, by affidavit or otherwise is able to satisfy the Court that the defendant has a good defence to the plaintiffs claim oh merit or disclose such facts as may be deemed sufficient to entitle him to defend. The leave to defend is not available only on the mere asking. He also relied on Rule 5 to contend that in the process of determining a question under Chapter XIII-A, the Court can call for records and examine witnesses and in this case records were so called for without any objection and were examined. From the materials, he points out that there is nothing to indicate that this process was ever objected to by the defendant. He further contended that the materials that have been disclosed go to show that there was no defence, which could enable the defendant to raise any triable issue. In support of his contention that the question is to be weighed with on the basis of the affidavits and that it is to be decided on the basis of the existing facts as on the date, he relied on the decision in Banque De Paris Et Des Pays-Bos (Suisse) S.A. v. Costa De Naray and Christopher John Walters, (1984)1 Lloyd's Law Reports 21.
The question:
4. Both the learned counsel took us through the materials on record as has been included in the Paper Book as well as in the Supplementary Paper Book in order to support their respective contentions. We have gone through the same. It appears that the question involved in this case is confined within a very small compass only to the question of examining as to whether the provisions of Rules 5 and 6 of Chapter XIII-A could lend aid to the judgment under appeal or whether the defendant was able to make out a good defence or raise a triable issue or not.
Chapter XIII-A: Scope:
5. These questions are to be dealt with within the scope and ambit of affidavits as provided in Rule 5, inasmuch as when an application under Chapter XIII-A is taken out in reply to the summons, the defendant has to show cause by affidavit against such application. In the affidavit, the defendant has to state whether the defence goes to the whole or to part only or to what part of the plaintiff's claim and shall specifically deal with all matters of fact. Thus, Clause (b) of Rule 5 empowers the Court to deal with the question as raised in the affidavit and weigh the materials only on the strength of the affidavit without undertaking the process of trial as is required in a suit. The procedure is a summary one. The right of defence is attempted to be taken away without permitting the defendant to raise his defence or to defend the claim of the plaintiff. This is a procedure, which is exceptional in nature and a deviation from the normal course of adversary system. Therefore, this power is required to be exercised with care and caution. It is only in cases where, in fact, there is no defence available to the defendant to defend the claim or where the defence sought to be raised is sham or illusory or practically a moonshine third procedure is available. Such power is exercised so as to prevent the litigation to be dragged on allowing the defendant to raise a sham or illusory or practically moonshine defence for delaying or lengthening or abusing the process by raising untenable or frivolous defence. At the same time, these provisions take away the defendant's valuable right to defend. Therefore, the Court's duty is to examine whether there is a defence or a triable issue has been raised or the defence or issues raised are sham or moonshine. It cannot undertake elaborate process and decide questions requiring some amount of proof or investigation, inasmuch as, the process does not permit the defendant to defend at this stage, due to which the proof or investigation would be incomplete and inappropriate.
Whether a third party can be examined:
6. Clause (c) of Rule 5 empowers the Court, when the Judge thinks it fit, to order the defendant and in case where the defendant is a corporation, any officer thereof, to attend and be examined upon oath.
The Court may also direct production of any lease deed, book or document, copy or extract therefrom. This production can be asked for from the defendant. Mr. Bachawat contended that this production of documents or examination can be extended even to third parties when the defendant refers to particular documents in his affidavit. Mr. Dutt further contends that this power of examination in Clause (c) does not extend to the examination of a third party even though the defendant might have referred to certain document issued by the third party.
6.1. The scheme of Clause (c) of Rule 5, as it appears to us, cannot be extended to a person other than those, which have been mentioned in the clause itself. The clause specifically says the defendant and where the defendant is a corporation, its officer, who can be ordered to attend or be examined or be asked to produce the relevant documents. The expression "defendant" used in Clause (c) cannot be stretched to include persons who are not defendants in the suit. The reference to documents issued by third parties would not make a third party a defendant within the meaning of the expression used in Clause (c) to enable the Court to order such person to attend or be examined or to produce any document.
6.2. The scheme of Chapter XIII-A does not permit the plaintiff to do anything more than making an application on affidavit stating that in his belief there is no defence to the claim. The proviso also limits the right where written statement is filed except in case mentioned in it. The right of the plaintiff does not extend to do anything more beyond the affidavits. It cannot call for records or examine witness, which are part of process of a regular trial. At the same time, the scheme permits the defendant to show cause by affidavit and may produce records etc. in terms of Clause (b) Rule 5 thereof. The scheme of the rules does not permit the Court to consider any affidavit except those by the plaintiff and the defendant. The Court cannot require attendance or examination of anyone other than the defendant. The expression "by affidavit or otherwise" in Rule 6 is to be read in the context of Clause (c). The expression "otherwise" cannot connote anything more than what is permitted under the rules. Since a right is being denied; the rules are to be interpreted strictly as expressed. The Court cannot add to it something beyond the scope of these rules.
6.3. That apart the word "defendant" used in Clause (c) cannot be stretched to include witnesses of the plaintiff or the defendant. In this case, the bank was asked to appear at the behest of the plaintiff to produce documents. This is in effect examination of witness for production and proof of documents on behalf of the plaintiff. This is done without any opportunity to the defendant to defend. In exercise of Clause (c), the Court cannot do so, whether opposed or not. Omission to oppose will not enable the Court to assume a jurisdiction it lacks.
Leave to defend: Extent of examination:
7. Rule 6 prescribes that the leave to defend can be refused and the judgment is to be pronounced in favour of the plaintiff only if the defendant, by affidavit or otherwise, fails to satisfy the Court that he has a good defence to the claim on merit or he fails to disclose such facts which may be deemed sufficient to entitle him to defend. The good defence is a matter of satisfaction and the sufficiency is a deemed sufficiency. It is not necessary that the defendant has to prove that he has a good defence or that this defence must be sufficient to enable him to succeed. It would be enough if he can satisfy that he has a fair or bona fide or reasonable defence although not a positively good defence. The Court is required to examine whether the defendant discloses such facts as may be sufficient to entitle him to defend viz. although the affidavit may not positively and immediately make it clear that he has a defence, yet shows such a state of facts as leads to the inference that at the trial of the action he may be able to establish a defence or even a plausible defence to the plaintiff's claim. It has to see whether there is a triable issue in the sense that there is a fair dispute to be tried as to the meaning of a document in which the claim is based or whether the facts are of such nature as to entitle the defendant to interrogate the plaintiff or cross-examine his witnesses, or whether any serious conflict as to matters of fact or any difficulty on issues as to law arises. It is the fair probability that the defendant has a bona fide defence, which is required to be examined. If the facts are sufficient to lead the Court to answer these questions in the affirmative, the leave cannot be denied. This sufficiency of such defence is a deemed sufficiency, which is again dependant on the satisfaction of the Court. The satisfaction may be objective but it is something different from conclusive proof. Therefore, it is not necessary that one has to make out a positively good defence to seek leave to defend.
7.1. When the right to defend is being denied, as already observed, and such power is to be exercised with little care and caution, the Court has to confine itself within the scope of the affidavits as disclosed and not beyond, unless along with the affidavits such documents are produced by the parties. In case it is necessary to call for records from third parties or to rely on certain materials or to examine witness or affidavits by third parties, in that event, it shows that a triable issue has been raised. The calling for the records from the Reserve Bank of India and examination of those documents and examination of affidavit filed by it, itself shows that the Court cannot pass an order on the basis of the affidavits filed by the defendant. It has to examine the defence so raised by the defendant in the affidavit but not through examination of a third party or by calling for records from a third party or requiring the third party to file affidavit and examining the same. This itself indicates the raising of a triable issue.
The legal proposition: As settled by the Apex Court:
8. These questions are already settled principles of law. Here we have the benefit of the decision in Mechalec Engineers & Manufacturers, (supra), which lays down the principles to be followed while considering the question of granting leave to the defend viz.:
"(a) If the defendant satisfies the Court that he has a good defence to the claim on its merits the plaintiff is not entitled to leave to sign judgment and the defendant is entitled to unconditional leave to defend.
(b) If the defendant raises a triable issue indicating that he has a fair or bona fide or reasonable defence although not a positively good defence, the plaintiff is not entitled to sign Judgment and the defendant is entitled to unconditional leave to defend.
(c) If the defendant discloses such facts as may be deemed sufficient to entitle him to defend, that is to say, although the affidavit does not positively and immediately make it clear that he has a defence, yet, shows such a state of facts as leads to the inference that at the trial of the action he may be able to establish a defence to the plaintiff's claim the plaintiff is not entitled to judgment and the defendant is entitled to leave to defend but in such a case the Court may in its discretion impose conditions as to the time or mode of trial but not as to payment into Court or furnishing security.
(d) If the defendant has no defence or the defence set up is illusory or sham or practically moonshine then ordinarily the plaintiff is entitled to leave to sign judgment and the defendant is not entitled to leave to defend.
(e) if the defendant has no defence or the defence is illusory or sham or practically moonshine then although ordinarily the plaintiff is entitled to leave to sign judgment, the Court may protect the plaintiff by only allowing the defence to proceed if the amount claimed is paid into Court or otherwise secured and give leave to the defendant on such condition, and thereby show mercy to the defendant by enabling him to try to prove a defence. (1945)49 Cal WN 246, Rel. on."
8.1. This has been reiterated in Mrs. Raj Duggal, (supra) while dealing with Order 37 Rule 2 of the Code of Civil Procedure, which is similar to those of Chapter XIII-A of the OS Rules, with the following observation:
"Leave to defend the suit brought under Order 37, Rule 2, Code of Civil Procedure is declined where the Court is of the opinion that the grant of leave would merely enable the defendant to prolong the litigation by raising untenable and frivolous defences. The test is to see whether the defence raises a real issue and not a sham one, in the sense that if the facts alleged by the defendant are established there would be a good or even a plausible defence on those facts. If the Court is satisfied about that leave must be given. If there is a triable issue in the sense that there is a fair dispute to be tried as to the meaning of a document on which the claim is based or uncertainty as to the amount actually due or where the alleged facts are of such a nature as to entitle the defendant to interrogate the plaintiff or to cross-examine his witnesses leave should not be denied. Where also, the defendant shows that even on a fair probability he has a bona fide defence, he ought to have leave. Summary judgments under Order 37 should not be granted where serious conflict as to matter of fact or where any difficulty on issues as to law arises, the Court should not reject the defence of the defendant merely because of its inherent implausibility of its inconsistency."
8.2. The same proposition has been repeated in Sunil Enterprises & Anr., (supra) following Santosh Kumar v. Bhai Mool Singh, ; Milkhiram (India) (P) Ltd. v. Chamanlal Bros., AIR 1965 SC 1968 and Mechelec Engineers & Manufacturers v. Basic Equipment Corporation, .
8.3. Mr. Bachawat had relied on the principle laid down in Banque De Paris Et Des Pays-Bas-(Suisse) S.A. (supra) as quoted below:
"It is of course trite law that Order 14 proceedings are not decided by weighing the two affidavits. It is also trite the mere ascertain in an affidavit of a given situation which is to be the basis of a defence does not, ipso facto, provide leave to defend; the Court must look at the whole situation and ask itself whether the defendant has satisfied the Court that there is a fair or reasonable probability of the defendants' having a real or bona fide defence."
8.4. But this decision does not help us to support the contention of Mr. Bachawat having regard to the facts and circumstances of the case, as we shall be discussing hereafter.
The principle and the precedent case:
9. Having regard to the above proposition, we find from the judgment under appeal itself that the Court had proceeded on the basis of the documents produced by the Reserve Bank of India which were not part of the proceedings or were not called for through regular process and the judgment is based on the basis of the finding arrived at on perusal of the original records. We further find that an affidavit was asked for from the Reserve Bank of India and the affidavit so filed was also taken into consideration and was disbelieved. The Court had held that the order by the Reserve Bank of India, through its letter dated January 14, 1986, as wholly illegal. Whether such order is legal or illegal cannot be decided within the scope and ambit of the procedure envisaged under Chapter XIII-A and that too in a case where this order was not under challenge and the Reserve Bank was not a party to the proceedings and had no opportunity to defend the validity of its order. The very letter itself shows that there are some defences available to the defendant for withholding the money since admittedly the defendant bank is bound to carry out the direction by the Reserve Bank of India and it cannot be said that the direction given by the Reserve Bank of India is illegal except through a due process of law. Whether this document is legal or illegal is not within the scope of the suit in between the parties until the suit goes to trial.
9.1. It had also held that the refusal of permission by the Reserve Bank of India was violative of Section 9(1)(f)(i) of the Foreign Exchange Regulation Act. Whether the refusal of permission to transmit was violative of Section 9(1)(f)(i) of the Foreign Exchange Regulation Act or not was also a question which was to be decided having regards to the facts and circumstances of the case on proper proof and on evidence. It cannot be decided in a summary procedure on the basis of affidavits without allowing the defendant or the Reserve Bank of India to defend the question as the case may be.
9.2. Then again if the refusal of permission was illegal then the amount was liable to be transmitted to the foreigner's account. It cannot be refunded. This also indicates the making out of a bona fide defence.
9.3. The other question that the lien could not be relied upon because of the fact that at that point of time the plaintiff had nothing due to the bank and the alleged foreign decree was not in existence. But the fact remains that this amount was deposited by the plaintiff as pleaded in paragraph 5 of the plaint for being transmitted to the foreigner's account in London subject to permission of the Reserve Bank of India. There are certain other documents, which go to show that this amount was intended for settling the dues of the bank against S.L. Sethia Liners Limited. These are questions, which definitely raise triable issues leading to raise not only a fair or plausible or bona fide defence but a good defence within the meaning of the ratio decided in Mechalec Engineers & Manufacturers (supra). The very Judgment itself holds that the amount was deposited for earning interest and for no other purpose, which contradicts the statement made in paragraph 5 of the plaint. It is the plaintiffs case that this amount was deposited for being transmitted to a foreigner's account subject to permission and after the permission is refused, the plaintiff claimed that the bank had no right to withhold the same. Having regard to such facts, it cannot be said that the defendant had failed to raise a triable issue or a good defence within the meaning of Rule 6 as discussed above.
Order:
10. In the circumstances, the appeal succeeds. The judgment under appeal is hereby set aside. Having regard to the facts and circumstances of the case, leave is granted to the defendant to defend the suit. The written statement be filed within a period of four weeks. There will be no order as to costs.
Parties shall act on a signed copy of the minutes of the operative portion of this dictated order on the usual undertakings.
Rajendra Nath Sinha, J.
11. I agree.