Delhi High Court
Shri Rana Inderjit Singh vs M/S Kembiotic Laboratories & Others on 22 July, 2008
Author: Rajiv Sahai Endlaw
Bench: Rajiv Sahai Endlaw
* IN THE HIGH COURT OF DELHI AT NEW DELHI
+ IA.No.5319.2006 in CS(OS)83/2006
% Date of decision : 22.07.2008
SHRI RANA INDERJIT SINGH ....... Plaintiff
Through: Mr R.K.Dhawan, Advocate
Versus
M/S KEMBIOTIC LABORATORIES & OTHERS ........ Defendants
Through : Mr Munish Tyagi, Advocate.
CORAM :-
HON'BLE MR. JUSTICE RAJIV SAHAI ENDLAW
1.Whether reporters of Local papers may be allowed to see the judgment? YES
2. To be referred to the reporter or not? YES
3. Whether the judgment should be reported YES in the Digest?
RAJIV SAHAI ENDLAW, J
1. This is an application for leave to defend the suit for recovery of Rs 53,50,000/- with future interest at 18% per annum from the date of institution of the suit till realization, filed under the provisions of Order 37 of the Code of Civil Procedure.
2. The suit has been filed on the basis of eleven dishonoured cheques dated from 20th December, 2002 to 25th January, 2004, for varying amounts totaling Rs 53,50,000/- issued by the defendant No.1 firm, in which the defendant Nos 2 to 4 are partners, in the name of the plaintiff. It is the case of the plaintiff that he is a permanent resident of Canada and is engaged in export business of Bio Chemical products and used to provide raw materials to the IA.No.5319.06 in CS(OS)83.2006 Page 1 of 9 defendants; that in the year 2001, the defendants offered the plaintiff to collaborate with the defendants' business on 50% share holding basis and requested the plaintiff to advance loan of Rs 53,50,000/- and assured the plaintiff that after receiving the said amount from the plaintiff, requisite formalities will be carried out by the defendant firm vis-a -vis the collaboration. The plaintiff claims to have given a sum of US $ 113829.78 equivalent to Rs 53,50,000/- to the defendants and which are stated to have been duly received by the defendant No. 2 as a partner of the defendant No.1 firm. It is further pleaded that the defendant No.2 assured the plaintiff that till the completion of the necessary formalities with regard to the collaboration, the said amount of Rs 53,50,000/- shall remain as loan with the defendants and upon the failure of the defendants to complete the requisite formalities, the defendants shall refund the said sum of Rs 53,50,000/- to the plaintiff. It is further the case of the plaintiff that the defendants failed to carry out the formalities of the collaboration inspite of repeated assurances and reminders and upon the plaintiff requesting the defendants to return the said amount, the defendants in acknowledgment of their liability issued the aforesaid cheques totalling Rs 53,50,000/- in favour of the plaintiff. Upon dishonour of cheques, proceedings under Section 138 of Negotiable Instruments Act were initiated by the plaintiff against the defendants and thereafter the present suit was filed.
3. The defendants have applied for leave to defend on the ground that the suit has not been instituted and the plaint has not IA.No.5319.06 in CS(OS)83.2006 Page 2 of 9 been signed and verified by the duly authorized person on behalf of the plaintiff; the power of attorney on the basis of which the suit has been filed authorized the attorney to only file complaints but not the suit; the defendants have denied that there was any talk of collaboration between the plaintiff and the defendants and further denied that any sum of Rs 53,50,000/- was given by the plaintiff to the defendants; that the plaintiff has not filed any document of payment of the large sum of Rs 53,50,000/- to the defendants and, in fact, has not even given the particulars of the payment; that if the plaintiff claims to have given the money in Hong Kong, it could not have been given in US dollars; that the plaintiff has not filed any document of the plaintiff being in possession of US $ 113829.78; that the plaintiff being an NRI could not have made any investment in India, for which the amount is pleaded by the plaintiff to have been given without obtaining the requisite permissions from the Reserve Bank of India; that no payment in foreign currency could even otherwise be made by the plaintiff, an NRI to the defendants who are Indians; that the defendants had been making purchases from the plaintiff and had been making payments to the plaintiff bill-wise - however sometimes advance payments were made by the defendants to the plaintiff and which is evident from the letters of the plaintiff filed alongwith the application for leave to defend; that though the plaintiff has in the plaint pleaded collaboration on 50% share basis but in the notice preceding the suit the plaintiff had stated collaboration on 15% share basis. It is further the case in the application for leave to IA.No.5319.06 in CS(OS)83.2006 Page 3 of 9 defend that the last sale purchase transaction between the plaintiff and the defendants was vide invoice dated 5th December, 2001, payment whereof was made through Union Bank of India on 6th May, 2002. Thereafter the business dealing between the parties had broken down. The defendants claim that the plaintiff visited India in October, 2002 and offered that he intended to invest a sum of Rs53,50,000/- in the business of the defendants and asked the defendants to give some kind of security for the said amount of Rs 53,50,000/- to be invested by him and demanded postdated cheques in the value of Rs 53,50,000/- as security but with the condition that the aforesaid cheques shall not be presented in the bank and will be kept as security towards investment to be made by the plaintiff in the defendant No.1 firm. The defendants claim that the plaintiff further assured that he will apply and get the necessary permission from the Reserve Bank of India, but the plaintiff never applied for or got the permission and hence did not pay the sum of Rs53,50,000/- which was to be invested by him in the defendant No.1 firm.
4. The plaintiff has filed the reply to the application for leave to defend denying all the contents therein. Arguments in the application for leave to defend were heard in part on 5 th March, 2007 when the following order was made :
"Learned counsel for the defendant has, during the course of arguments, submitted that amount in US dollars was paid in cash though no such pleas is taken in the leave to defend. Learned counsel for the plaintiff submits that this amount was deposited in the bank account of the defendant No.2. In support of the plea, IA.No.5319.06 in CS(OS)83.2006 Page 4 of 9 he will place on record the documents to show that the amount in US dollars was given to the defendant No.2. He also wants to file the photocopy of the passport of the plaintiff showing as on which dates the plaintiff visited India. These documents shall be filed along with affidavit within five weeks, as prayed, with advance copy of the same to the learned counsel for the defendant who may file reply within three weeks thereafter."
There appears to be a typographical mistake in the aforesaid order. During the course of hearing, I have put the same to the counsel for the parties and they both agreed that, in fact, during the hearing on 5th March, 2007 it was the plaintiff who had submitted that the amount in US dollars was paid in cash.
5. The counsel for the plaintiff after 5th March, 2007, sought time on 4th May, 2007 for filing the documents. No documents were filed and on 13th August, 2007 the counsel for the plaintiff stated that no more documents were required to be filed in terms of order dated 5th March, 2007.
6. The counsel for the defendants has urged the same argument as noted above. Per contra the counsel for the plaintiff has argued that admittedly the cheques were issued by the defendants and there is a presumption in law that the cheques are issued for valid consideration. He has further argued that the cheque in the form of security would not have been given by several cheques but a single cheque would have been given and the very fact that the total sum of Rs 53,50,000/- was spread out over 11 cheques spanning for over one and a half year indicated that the same was IA.No.5319.06 in CS(OS)83.2006 Page 5 of 9 towards refund of monies received. The counsel for the plaintiff has further urged that the defence of the defendant of having given the cheques by way of security, without having received any money from the plaintiff, is highly improbable. The counsel for the plaintiff has relied upon Syed Moosa Emami v Sunil Kumar Gilani & another AIR 1982 Delhi 590; S.P. Chopra v Chopra gems 118 (2005) DLT 536; Rajesh Ahuja v Manoj Mittal & Anr 59 (1995) DLT 823. The first of the said judgments is not apposite to the facts of the case. The remaining two judgments are with respect to the rate of interest in suits u/O XXXVII CPC.
7. On the aforesaid facts and applying the principles laid down in Mechalec Engineers and Manufacturers v M/s Basic Equipment Corporation AIR 1977 SC 577, it has to be determined whether the defendants are entitled to leave to defend and if so on what terms.
8. Mere possession of dishonoured cheques issued by the defendant does not entitle the plaintiff to a decree under Order 37, as the counsel for the plaintiff would argue. If that were to be so, no leave to defend a suit on basis of dishonoured cheque would be granted. However, if the facts as set out in leave to defend make out a defence or a likely defence, leave is granted. It is to be noticed that the payment of US dollars equivalent of Rs 53,50,000/- by the plaintiff to the defendant is as integral a part of the plaint as the dishonoured cheques. The plaintiff has utterly failed to place on record any document or material to indicate that the said IA.No.5319.06 in CS(OS)83.2006 Page 6 of 9 amount of Rs 53,50,000/-equivalent to US $ 113829.78 was paid by the plaintiff to the defendants. As aforesaid, at one stage during the course of hearing, the plaintiff had sought opportunity to file documents and affidavit in this regard but none was filed. In the event of the plaintiff failing to establish any such payment and with respect to which no document has been produced, the cheques admittedly issued by the defendants to the plaintiff and which have been dishonoured would cease to be for consideration. Section 139 of the Negotiable Instruments Act also provides for a presumption only, that unless the contrary is proved, the holder of a cheque received the cheque for the discharge of a debt/liability. In the absence of anything whatsoever forthcoming from the plaintiff showing the payment of Rs53,50,000/- to the defendant, it cannot be said that the defendants can be condemned without being given an opportunity to rebut the presumption. The denial by the defendants, coupled with absence of any document of payment raises a triable issue. Thus, in my view, the defendants are entitled to leave to defend. Reliance in this regard can be placed on M/s Datt Enterprises Limited v V.K. Dua 118 2005 DLT 408.
9. The next question which arises is whether any condition ought to be imposed on the defendants. The Division Bench of this court in Babbar Vision India P Ltd v Rama Vision Limited 99 (2002) DLT 556 held that when defence raises a triable issue leave must be granted unconditionally whether the defence is legal or equitable and even through it may not ultimately turn out to be a IA.No.5319.06 in CS(OS)83.2006 Page 7 of 9 good defence. There is absolutely nothing to show that the defence is not bonafide in the present case. Admittedly the parties have had commercial relations in the past and it is not as if the plaintiff could not have been in possession of cheques issued by the defendants, but for the reasons stated by the plaintiff. The Division Bench in judgment supra further held that if conditions are imposed even where triable issues are raised, the same will make grant of leave illusory. Only where defence is not bonafide, can conditions be imposed. Reference can also be made to Milkhiram India P Ltd v Chaman Lal Brothers AIR 1965 SC 1698 holding that if upon consideration of material placed before it the Court comes to the conclusion that the defence is a sham one or is fantastic or highly improbable it would be justified in putting the defendant upon terms before granting leave to defend.
10. Looked at in this light, I find that if the defendants are able to prove that no sum of Rs 53,50,000/- allegedly paid by the plaintiff to them was in fact paid, the suit of the plaintiff will fail. Undoubtedly the plea of the defendants of having given the cheques for Rs 53,50,000/- by way of security even before the monies were paid by the plaintiff looks improbable. However, the same is to be compared with the case of the plaintiff. The case of the plaintiff of having paid the huge amount in US dollar equivalent of Rs. 53,50,000/- to the defendants in cash and further the failure of the plaintiff to be able to place any document before IA.No.5319.06 in CS(OS)83.2006 Page 8 of 9 the court to show that the plaintiff was possessed of such amount or in fact had paid the same to the defendants make the case of the plaintiff equally improbable. The plaintiff admits of being aware of legal permission being required before he could invest monies, but claims to have advanced monies to the defendants inspite of the same. The defence of the defendants of money having not been paid by the plaintiff because of permissions having not been obtained is more in consonance with law and hence no malafides can be attached to it. Thus the facts in the present case are of a nature as to entitle the defendants to interrogate the plaintiff and to cross examine his witnesses, within the parameters laid down in Mrs Raj Duggal v Ramesh Kumar Bansal AIR 1990 SC 2218. In Asia Today Limited and Another v Sinhal Metal Industries Ltd & Anothers MANU/DE/1581/2006 another Single Judge of this court held that where authority to institute suit was challenged in leave to defend application; failure of plaintiff to file documents showing such authority, raises a fair dispute entitling the defendant to leave to defend.
Therefore, I am of the view that the present case does not call for imposing any condition on the defendants while granting leave to defend to them. The application of the defendant is accordingly allowed and the defendants are granted leave to defend the suit.
RAJIV SAHAI ENDLAW, JUDGE July 22, 2008 M IA.No.5319.06 in CS(OS)83.2006 Page 9 of 9