Delhi High Court
Punjab And Sind Bank vs S.K. Tulshan on 29 October, 1990
Equivalent citations: ILR1991DELHI293
JUDGMENT P.K. Bhari, J.
1. In these two suits brought under Order 37, Civil Procedure Code, by the plaintiff-bank, the defendant in each suit has moved an application for leave to defend the suit. As common questions of fact and law have been argued in both these matters, they are being disposed of by this common judgment.
2. In Suit No. 596 of 1986, the plaintiff-bank has prayed for recovery of Rs. 36,17,530 on the averments that the defendant has obtained overdraft facility against his current account which was opened on October 16, 1973, at the plaintiff's branch at "H" Block, Connaught Circus, and in November, 1973, he was granted the said overdraft facility to the extent of Rs. 5 lakhs against security of shares of various companies and in consideration of the same, the defendant executed a demand promissory note and various other documents enumerated in para 5 of the plaint. On December 31, 1976, the amount due in the said account was to the tune of Rs. 7,89,643.93, which was confirmed by the defendant in writing and the defendant, on June 30, 1977, executed fresh documents including a promissory note in consideration of the amount due on that date. On April 3, 1980, the amount due in that account was Rs. 12,76,001.33 and, in consideration of the said amount, the defendant executed renewal documents, including a demand promissory note and, on March 24, 1983, the amount due in the account was Rs. 22,14,392.10, which was confirmed by the defendant in writing and, again, in consideration of the said amount, the defendant executed fresh documents, including a demand promissory note. It was pleaded that the defendant had pledged/mortgaged/charged 60,000 shares of Madhusudan Limited (now known as Hindustan Transmission Products Ltd.) and substantial shares of the Laxmi Commercial Bank, now amalgamated with the Canara Bank and 3,000 shares of Mysore Chemical Works Ltd. The defendant had agreed that the shares could be sold by the bank for the repayment of its amount due. So, it was pleaded that, at the time of filing of the suit, the amount in the suit became due which the defendant had failed to pay. Hence a decree for the said amount and interest pendente lite and till realisation was prayed for.
3. In Suit No. 597 of 1986, it was pleaded that the defendant was granted overdraft facility to the extent of Rs. 5 lakhs and, in consideration of the same, the defendant executed documents on January 21, 1974, including a demand promissory note and other documents detailed in para 4 of the plaint. In that account, on December 31, 1976, Rs. 7,63,843.95 was due which balance was duly confirmed in writing by the defendant and, on June 30, 1977, in consideration of the said balance amount, the defendant executed fresh loan documents, including the demand promissory note. On May 5, 1980, the amount due in the said account was Rs. 12,36,293.90, which was duly acknowledged by the defendant in writing and he executed fresh documents, including a demand promissory note in consideration of the said amount. On March 18, 1983, the amount due in that account was Rs. 16,54,000 which was duly acknowledged in writing by the defendant and he executed fresh documents, including a promissory note in consideration of the said subsisting amount. As security for repayment of the said amount, the defendant had pledged 80,000 shares of Madhusudan Limited, now known as Hindustan Transmission Produced Ltd., 1,295 shares of the Laxmi Commercial Bank, now amalgamated with the Canara Bank and 2,000 shares of Mysore Chemical Works Ltd. It was pleaded that despite reminders and the notices, the defendant has failed to pay the amount. Hence, a decree was asked for recovery of Rs. 25,33,768 along with costs and pendente life interest and future interest.
4. In both the matters, counsel for the defendants contended that both the suits are not maintainable under Order 37, Civil Procedure Code, inasmuch as the suits are not based on any promissory notes and the claims arising in the suits do not arise from any written contract. It was pleaded that, in fact, the promissory notes had been taken from the defendants only as a security for the repayment of a balance sum remaining unpaid. It is also contended by learned counsel for the defendants that shares of substantial value were lying with the plaintiff-bank in both the accounts which covered more than the amount advanced, yet the plaintiff-bank did not take steps to sell off those shares in order to clear the account and despite the fact that, in 1979, the plaintiff-bank was asked to sell those shares, still the plaintiff did not care to sell off the shares and allowed the value of the shares to go down and that the defendant is entitled to claim damages from the plaintiff as the plaintiff had negligently allowed the pledged security to deteriorate in value and thereby causing enormous loss to the defendant. It was argued that, in case the defendant is granted leave to defend, the defendant would consider the question of filing a counter-claim against the plaintiff-bank for recovery of damages. Counsel for the defendant has also pointed out that the defendant had, in 1982, approached Mr. Mohinder Singh, chairman of the plaintiff-bank, who was told about the omissions and commissions of the plaintiff-bank and was requested to slash down the interest rate from the year 1974 and Mr. Mohinder Singh wanted the defendant to pay a substantial amount before he could consider the matter and also persuaded the defendant to execute fresh blank documents. The defendant had paid a substantial amount in pursuance of the said assurance but later on Mr. Mohinder Singh did not do anything in the matter and one Mr. Kohli, who was assistant general manager and one Mr. B. B. Suri of the plaintiff-bank were aware of the defendant's efforts to settle and liabilities, at different stages by the sale of the aforesaid shares. Learned counsel for the defendant has vehemently argued that the above facts raise friable issues and thus the defendant should be granted unconditional leave to defend both the suits.
5. Learned counsel for the plaintiff, on the other hand, contended that the suits are based on promissory notes executed for consideration and are maintainable under Order 37, Civil Procedure Code. He has cited the judgment of a single judge of this court in Corporation Bank v. Anil Traders (Suit No. 621 of 1984 - decided on October 15, 1985) and also a judgment of a Division Bench of this court in Krishna and Company v. Bank of India (RIA) (O.S. No. 10 of 1981 - decided on August 25, 1982). He has also contended that the plea of counter-claim cannot be allowed to be raised in order to obtain leave to defend as the provisions of Order 37 are a complete code which do not contemplate entertainment of any plea of counter-claim to enable the defendant to obtain leave to defend the suit. He has also argued that this plea of counter-claim is also bogus and a sham one and barred by limitation.
6. The first question to be seen in the present case is whether the suits are maintainable under Order 37, Civil Procedure Code, or not. In the case of Corporation Bank v. Anil Traders (Suit No. 621 of 1984 - decided on October 15, 1985), the suit was brought for recovery of amounts by the bank on the basis of similar types of documents executed. A contention was raised before the court that the promissory notes executed were not the basis of the initial documents which had been executed simply by way of security. The court opined that, initially, the demand promissory note was in the nature of a collateral security but after the amounts had been withdrawn, it was the consideration for the execution of the promissory note that the demand promissory note becomes the basis of the filing of the suit under Order 37, Civil Procedure Code. So it was held that the suit was competent under Order 37, Civil Procedure Code.
7. In the case of Krishna and Company v. Bank of India (RIA) (O.S. No. 10 of 1981 - decided on August 25, 1982) also, the suit was of the same type where also the documents had been renewed from time to time. The Division Bench held that the loan is to be deemed to have been advanced in consideration of the promissory notes. It was held that it may be that the loan was given later but the consideration was to be treated as for the promissory notes. If was further held that the moment it is shown that the full amount of the consideration for the promissory note stood advanced, the promissory note becomes actionable and a suit could be brought under Order 37, Civil Procedure Code. It was also held by the Division Bench that under the amended Order 37, Civil Procedure Code, not only can the suit under the said provision be brought upon bills of exchange, hundis and promissory notes but it can also be brought for recovery of a liquidated amount based on written contract. Where, besides the promissory notes, the defendants had executed agreements to repay the loan contemporaneously with the promissory notes, the claim can be considered to be based on the written contract and the suit would be maintainable under Order 37, Civil Procedure Code. Following these two judgments, I hold that the suits under Order 37, Civil Procedure Code, are maintainable.
8. The crucial question which arises for decision in the present cases is whether, in order to determine whether any friable issue arises in the pleas raised in the leave to defend application, the court could or could not take notice of the pleas of the defendant that the defendant is entitled to file a counter-claim against the plaintiff. Order 37, rule 5, Civil Procedure Code, is to the following effect :
"(5) The defendant may, at any time within ten days from the service of such summons for judgment, by affidavit or otherwise, disclosing such facts as may be deemed sufficient to entitle him to defend, apply on such summons for leave to defend such suit, and leave to defend may be granted to him unconditionally or upon such terms as may appear to the court or judge to be just ..."
9. So, the only thing to be seen in the leave to defend application/affidavit of the defendant is whether the same discloses such facts as may be deemed sufficient to entitle him to defend. The filing of a counter-claim is not an action in defense on the face of it. Under Order 8, rule 6A, Civil Procedure Code, in an ordinary suit, a defendant, in addition to his right of pleading set off, has been given a right to file a counter-claim against the plaintiff based on any right or claim in respect of a cause of action accruing to the defendant against the plaintiff but before the defendant has delivered his defense. The counter-claim could be also in the nature of a claim for damages. It is evident that the counter-claim has to be filed in an ordinary suit before the defendant delivers his defense.
10. Learned counsel for the defendants has made reference to para 414 of volume 37 of Halsbury's Laws of England which summarises the English law on the said subject, mentioning that the mere fact that the defendant raises a counter-claim does not entitle him to leave to defend and the same will be disregarded if it is frivolous, untenable or totally foreign to the action and, on the other hand, if it is a plausible or an arguable counter-claim, the court may give the plaintiff judgment on the claim with costs, but with a stay of execution pending the trial of the counter-claim. It is also mentioned therein that, in an action on a dishonoured bill of exchange or a cheque, the plaintiff is entitled to judgment on his claim without a stay of execution pending the trial of a counter-claim for damages for breach of another contract or the commission of a tort, for a bill exchange is to be treated as cash unless there is total failure of consideration.
11. Mr. Chandhoik, on the other hand, has brought to may notice the English law particularly Order 144 which clearly contemplates entertainment of a counter-claim in summary suits. Order 14(3)(2) contemplates granting of a decree to the plaintiff but staying the execution till the decision on the counter-claim is given. Order 14(3)(2) is also worded differently. Its relevant portion reads as follows :
"Unless on the hearing an application under rule 1 either the court dismisses the application or the defendant satisfies the court with respect to the claim, or the part of a claim, to which the application relates that there is an issue or question in dispute which ought to be tried or that there ought for some other reason to be a trial of that claim or part ..."
12. So, no benefit can be taken from the law prevalent in England as the provision of summary suits in England appear to be different from the provisions contained under Order 37, Civil Procedure Code. It is also to be kept in view that the defendant is not legally bound to file any counter-claim. Assuming for the sake of argument that the defendant is granted leave to defend on the assumption that he has some prima facie good case for raising a counter-claim against the plaintiff and the defendant, after the grant of leave to defend, fails to file the counter-claim. In that situation, it is not explained by learned counsel for the defendants as to what the court could do if no trial is to take place in respect of the counter-claim; the grant of leave to defend to the defendant becomes illusory causing unnecessary delay in the disposal of the summary suit. As already mentioned above, the provision of Order 37, on the face of it, did not contemplate entertainment of any counter-claim from the defendant. If the defendant has any such counter-claim against the plaintiff, he can very well bring a separate suit in that respect. If the Legislature had intended that the plea of the defendant regarding his counter-claim should also be taken note of while deciding the application for leave to defend, it would have made its mind clear by incorporating the same language under Order 37(3) (5) as it appears in the English law. So the omission of the Legislature to use the same language under Order 37, Civil Procedure Code, as is there under the English law, would rather support the contention of learned counsel for the plaintiff that the Legislature did not intend that the plea of a counter-claim should be entertained in a suit brought under Order 37, Civil Procedure Code.
13. It is also pertinent to mention that, in the case of Krishan and Company v. Bank of India (RIA) (O.S. No. 10 of 1981 - decided on August 25, 1982), the single judge has held that there could be no adjustment of the claim for damages against the loan meaning thereby that no counter-claim was entertainable in a summary suit under Order 37, Civil Procedure Code, till leave to defend the application is allowed. The Division Bench did not express any view on this aspect of the case because the Division Bench held that the counter-claim on the face of it was barred by limitation. Hence the Division Bench did not go into the question whether the plea of counter-claim should be entertained while deciding the leave to defend application in a summary suit or not.
14. However, a single judge of this court in Bramec Suri P. Ltd. v. Shri Smith Chem [1981] Rajdhani LR 60, has held that :
"It is the defense with regard to course of dealings and cause of action set up in the plaint which has to be taken into account while granting such permission. Extraneous controversies and different causes of action cannot justify enlargement of the scope and purpose of the summary action brought under Order 37."
15. In the said case, the suit was brought on hundis. The defendant wanted to set up a plea that certain payments were due to him from the plaintiff arising from the same contract on the basis of which hundis had been issued, which hundis were dishonoured. The court did not allow such defense to be raised.
16. I am of the view that, in any suit brought under Order 37, Civil Procedure Code, while considering the facts mentioned in the affidavit of the defendant seeking leave to defend the suit, the court is not to consider the facts which may entitle the defendant to file any suit for damages against the plaintiff's claim or a counter-claim on the same aspect.
17. In the present cases, it is also to be mentioned that the defendants had taken the plea that, in August, 1979, the defendants had in writing asked the plaintiff to sell off the shares and the plaintiff neglected to do so and allowed the value of the shares to deteriorate causing enormous loss to the defendants. But it is also not disputed that, in 1983, the defendants executed documents. So any, lapse of the plaintiff occurring prior to the execution of fresh documents does not furnish a cause of action to the defendants to claim any damages from the plaintiff-bank because the defendants had executed documents in 1983 categorically admitting their liability. In both the application, there is no specific plea taken that, after execution of the documents in 1983, the plaintiff has been in any manner negligent in dealing with the shares of the defendants. No prices of the shares pledged at different times have been indicated in the applications so as to show prima facie that the plaintiff-bank had acted negligently in dealing with the shares. It is true that the plaintiff-bank, after obtaining orders of this court during the pendency of the suit, had sold the shares pledged with it by the defendant and some shares of the defendant could not be sold as they had become valueless but these facts would not go to show that the plaintiff-bank has been prima facie negligent in dealing with the pledged shares so as to cause loss to the defendants. Hence, I hold that this plea of counter-claim of the defendants appears to be a bogus one. I hold that the defendants are not entitled to get any leave to defend in these two cases. I dismiss both the applications.
18. Suit No. 596 of 1986 :
The leave to defend application has been dismissed. Admitting the facts stated in the plaint as correct, I decree the suit for recovery of Rs. 36,17,530 with costs and pendente lite interest and future interest at 20% per annum from the date of the suit till realisation. The plaintiff-bank shall make due adjustments in accordance with law in respect of the amount realised by sale of shares during the pendency of the suit.
19. Suit No. 597 of 1986 :
The leave to defend application has been dismissed. Admitting the facts stated in the plaint as correct, I decree the suit for recovery of Rs. 25,33,768 with costs and pendente lite interest and future interest at 20% per annum from the date of the suit till realisation. The plaintiff-bank shall make due adjustments in accordance with law in respect of the amount realised by sale of shares during the pendency of the suit.