M/S Ashok Commercial Enterprises vs M/S R.T.V. Films And Ors.
2001 Latest Caselaw 192 Bom

JUDGMENT

Dr. D.Y. Chandrachud, J.

1. The Summary Suit in the present case has been instituted for a decree (1) against Defendant Nos. 1 to 4 in the amount of Rs.2,82,13,643/ - together with interest at the rate of 18% per annum on the principal sum of Rs.2.70crores from the date of the suit until payment or realisation and (2) Defendant Nos. 1 to 5 in the sum of Rs.2,30,98,136/- with further interest on the principal sum of Rs.2.10crores together with interest at the rate of 18% per annum from the date of the suit until payment or realisation. The suit is based on Bills of Exchange which were drawn by the First Defendant which is a partnership firm of which the Second and the Third Defendants are partners. The Bills of Exchange have been accepted by the Fourth and the Fifth Defendants.

2. The First, the Second and the Third Defendants were producing two motion pictures in Hindi and the Plaintiffs advanced some time prior to 9th September, 1997, the amounts respectively of Rs. 2.70 crores and Rs. 2.10crores in respect of the two films. Agreement were entered into on 27th March, 1996 and 3rd July, 1996 under which the Plaintiffs agreed to advance certain sums of money in respect of the production of the two films. Thereafter, it is stated in para6 of the Plaint, by an agreement of 9th September, 1997 between the Plaintiffs and Defendant Nos. 1, 2 and 3, the aforesaid Defendants acknowledged that an amount of Rs.4.30crores was advanced to them which amount together with interest of Rs.55lakhs was due and payable. It may be stated that these agreements are not the foundation of the Summary Suit and leave under Order 2 Rule 2 of the Code of Civil Procedure, 1908 has been obtained by the Plaintiff on 28th January. 1999 to omit to sue in respect of reliefs other than those claimed in the Summary Suit.

3. Insofar as the Summary Suit is concerned, it has been stated that between 20th August, 1997 and 20th March, 1998, the First Defendant drew and issued Bills of Exchange in diverse amounts totally in the sum of Rs.4.80crores. The Second Defendant signed these Bills of Exchange for and on behalf of the First Defendant. The Fourth Defendant accepted Bills of Exchange in the aggregate amount of Rs.2.70crores while the Fourth and the Fifth Defendants accepted Bills of Exchange in the aggregate amount of Rs.2.10crores. The Bills of Exchange which have been accepted by the Fourth Defendant are annexed at Exh. B to B-21 to the Plaint, while those accepted by the Fourth and the Fifth Defendants jointly are annexed at Exh. C to C-13 to the Plaint, Certain cheques which were issued by the First, the Second and the Third Defendants are stated to have been dishonored upon presentation and Criminal Complaints under Section 138 of the Negotiable Instruments Act, 1881 are pending.

4. In para10 of the Plaint, it has been stated that on 2nd April. 1998, the Plaintiffs have received a sum of Rs.52lakhs from a concern known as Uttam Enterprises towards the claim of the Plaintiffs against Defendant Nos. 1, 2 and 3. It is stated that the Fifth Defendant had by a letter dated 2nd April, 1998 requested the plaintiff to adjust the amount of Rs.52lakhs towards the principal or interest or keep the same in suspense at the discretion of the Plaintiffs. In the Summary Suit, the Plaintiffs sue as holders of the Bills of Exchange and restrict their claim in the suit to the said Bills of Exchange. As stated earlier, leave under Order 2 Rule 2 to omit to sue under the agreements has been granted by this Court.

5. Affidavits in reply have Inter alia been filed by Defendant Nos. 1 to 4 as well as by Defendant No. 5. At outset, it merits recording that the First, Second. Third and Fourth Defendants do not dispute that a total amount of Rs.4.80crores has been paid by the Plaintiffs to the First Defendant. The Fourth Defendant does not dispute that he accepted the Bills of Exchange drawn by the First Defendant. The defence, however, is that the Plaintiffs were under the agreement required to fund the Defendants till the entire films were completed and released. The Plaintiffs it is submitted in defence, stopped further payment as a result of which, the films are lying incomplete and the Defendants have suffered a loss. Moreover, it is sought to be submitted that the Plaintiff is holding what is known as a "Laboratory Letter" and that the Bills of Exchange were executed as an additional security. Without the Laboratory Letter, the concerned laboratory processing the films will not release completed prints of the films. In the written notes of arguments, it has been sought to be submitted that the Laboratory Letter is to be given back to the First Defendant on the encashment of the Bills of Exchange though it has been fairly stated that this has not been reduced into writing between the Plaintiffs and the Defendants. Insofar as the understanding between the parties that the Plaintiff will continue to finance the films until they were completed, it is again stated in the written note of the submissions that the copies of the agreements are not available with the Defendants. In the circumstances, in the written note of submissions which is tendered on behalf of Defendant Nos. 1 to 4. It has been submitted that it is essential that the Defendants should get back the Laboratory Letter to enable them to complete the uncompleted films and if the Court in the Summons for Judgment directs the Defendants to pay an amount of Rs.4.80crores, the Plaintiffs should be directed to return the Laboratory Letter to the Defendants immediately. A subsidiary contention of the Defendants is that a loan in the amount of Rs.52lakhs was advanced for and on behalf of the First Defendant by the Fifth Defendant to an entity called 'Uttam Enterprises', which is an H.U.F. concern of which the Karla is the principal partner of the Plaintiffs. The submission is that the said amount of Rs.52lakhs should be credited to the account of the First Defendant with Interest. In the affidavit in reply, it has also been stated that the First Defendant has paid an amount of Rs.1.16crores though it is common ground that it has not been paid to the Plaintiff, but to the concern known as Uttam Enterprises.

6. On behalf of the Fifth Defendant, the defence is that Insofar as the amount of Rs.52lakhs is concerned, the Fifth Defendant has instituted a Summary Suit being Summary Suit No. 5581 of 1998 which is pending against the Plaintiffs and that the said amount is due and payable to the Fifth Defendant. The Fifth Defendant has denied that he has accepted the Bills of Exchange in the aggregate sum of Rs.2.10crores. The Fifth Defendant states that he was an employee Director of the First Defendant and was helping them in the course of their business activities and was acting under their instructions. He, however, states that he has no finance dealings with the Plaintiffs. Insofar as Exh. D to the Plaint is concerned, which is a letter allegedly written by the Fifth Defendant authorising the Plaintiffs to receive an amount of Rs.52lakhs from Uttam Enterprises, the Fifth Defendant states that the said letter is a forgery and that the name of the Fifth Defendant was typed on the blank letter-head of the First Defendant.

7. In evaluating the nature of the defence which has been put forth on behalf of the Defendants, the most significant aspect of the present case is that there is no denial of the fact that the First Defendant received an amount of Rs.4.80crores from the Plaintiffs. The First Defendant of which the Second and the Third Defendants are partners, does not deny that it has drawn Bills of Exchange in the total amount of Rs.4.80crores on which the suit is founded. The Fourth Defendant has similarly not denied that the Bills of Exchange have been accepted by him in his capacity as an acceptor. Insofar as the denial by the Fifth Defendant of his having accepted the Bills of Exchange in the total amount of Rs.2.10crores. It would be material to note that all the Bills of Exchange in the present case, were duly noted and protested by a Notary. The learned Counsel appearing on behalf of the Plaintiffs has tendered the original Bills of Exchange together with the notarial certificates protesting the Bills of Exchange for non-payment. The certificate by the Notary is that when the Bills were presented to the Fifth Defendant, he had admitted his signature, but expressed his inability to pay the amount due there under. In the affidavit in reply, there is no denial whatsoever of the fact that the signature on the originals of the Bills of Exchange is the signature of the Fifth Defendant or of the contents of the notarial certificate. All these documents, it must be stated, were available to the Fifth Defendant for inspection. Significantly, while the Fifth Defendant in his affidavit in reply has specifically stated that the letter purportedly written by him which is annexed at Exh. D to the Plaint by which an authorization was issued to the Plaintiffs to received an amount of Rs.52lakhs from Uttam Enterprises, is a forgery, there is no such a statement insofar as the Bills of Exchange or his signature thereon as acceptor are concerned. Indeed, the Fifth Defendant seeks to exclude his liability as an acceptor on the specious plea that he was merely acting on the instructions of Defendant Nos. 1 to 4, since he was an employee for several years. In these circumstances, the receipt of the moneys, execution of the Bills of Exchange and the acceptance thereof by the acceptors in the present case is clearly established.

8. At the hearing of the Summons for Judgment, the only point which was canvassed on behalf of the First to Fourth Defendants was that the Plaintiffs are in possession of the Laboratory Letter which is an important document of security insofar as the feature films are concerned, since without the 'Lab Letter', the completed prints will not be handed over by the Laboratory. Indeed, as already noticed earlier, in the written submissions of these Defendants, it has been stated that should this Court be inclined to direct the payment of Rs.4.80crores, then the Plaintiffs should be directed to return the Laboratory Letter. The learned Counsel appearing on behalf of the Plaintiffs has relied upon the Judgment of the Supreme Court in Lallan Prasad v. Rahmat Ali. The Supreme Court considered the position under Sections 172 to 176 of the Contract Act, 1872, which codifies the legal provision in relation to a pledge of goods. The Supreme Court held in para17 of its Judgment that under Section 173, a pawnee is entitled to retain the goods pledged as security for payment of debt, Under Section 176, the pawnee in case of default by the pawner, has a right to sue upon the debt and to retain the goods as collateral security; and to sell the goods after reasonable notice of the Intended sale to the pawner. In this context, the Supreme Court held as follows :

"It follows, therefore, that where a pawnee files a suit for recovery of debt, though he is entitled to retain the goods he is bound to return them on payment to the defendant. ...... The pawnee, therefore, can sue on the debt retaining the pledged goods as collateral security. If the debt is paid he has to return the goods with or without the assistance of the Court and appropriate the sale proceeds towards the debt."

On the basis of these observations. It has been submitted on behalf of the Plaintiffs and in my view, with justification, that the Plaintiffs are entitled to retain the Laboratory Letter as collateral security for the debt and would be liable to return the letter on payment of the debt. The learned Counsel appearing on behalf of the Plaintiffs has stated that the Plaintiffs would be in any event, ready and willing to return the letter of pledge so long as the debt due and owning to the Plaintiffs in the amount of Rs.4,80crores together with interest is duly secured either by the passing of the decree or upon an order of deposit being passed by the Court. However, the submission was that unless the amount of the debt is recovered or at least deposited in this Court, an occasion for the return of the Laboratory Letter would not arise. There is substance in this submission for as held by the Supreme Court, the person who pledges the goods to another would be entitled to the return of the goods which have been pledged upon the payment of the debt. As the Supreme Court held, the pawnee would not be entitled to a decree upon the negotiable instrument - a Promissory Note in that case, and also to retain the goods which have been pledged in his custody, and the pawnee would be bound to return the goods which have been pledged as against the recovery of the debt.

9. Insofar as the claim in the amount of Rs.52lakhs Is concerned, the Plaintiff has relied upon the letter at Exh. D to the Plaint by which the Fifth Defendant is stated to have authorised the Plaintiff to receive an amount of Rs.52lakhs from Uttam Enterprises. The Fifth Defendant has filed a Summary Suit against the Plaintiff for the return of the said amount and in that Summary Suit, unconditional leave to defend has been granted to the Plaintiffs herein. Insofar as the Plaintiffs are concerned, due credit has been given to the amount of Rs.52lakhs in respect of which they claimed an authorisation from the Fifth Defendant to adjust or retain the moneys. In any event, the claim of the Fifth Defendant to the recovery of the said amount of Rs.52lakhs is the subject matter of an independent suit which has been filed by the Fifth Defendant and will abide by the result of the said suit.

10. There is absolutely no substance in the defence to the effect that since the Plaintiffs had agreed to provide the entire funding for the two films, they are not entitled to the return of the amount of Rs.4.80crores. The suit has been filed on Bills of Exchange duly drawn by the First Defendant and accepted by the Fourth and the Fifth Defendants. As a holder of the Bills of Exchange, the Plaintiffs are entitled to the return of moneys due and payable there under.

11. Similarly, though the defence was not pressed at the stage of the oral arguments, there is no merit in the contention that the First Defendant had advanced an amount of Rs.1.16crores to the Plaintiffs. The amount was, it Is common ground, advanced to Uttam Enterprises which is an entity different from the Plaintiffs herein. Besides, there is neither a letter of demand, nor any proceedings instituted by the First Defendant for the return of those moneys. The transaction where under the moneys were allegedly paid by the First Defendant to Uttam Enterprises has not been disclosed in the Reply. That point, however, need not detain me any further since that has not been urged at the stage of hearing of the Summons for Judgment. In the circumstances, I am of the view that there is no defence to the claim in the suit and the defence which has been sought to be advanced is entirely illusory and sham. Besides the return of the principal amount of Rs.4.80crores, the Plaintiffs are statutorily entitled to interest at the rate of 18% per annum under Section 80 of the Negotiable Instruments Act, 1881. The suit was instituted on 5th October. 1998. The Plaintiffs have since received an amount of Rs.25lakhs. All these circumstances will have to be thrown in balance in considering the quantum of deposit for the grant of conditional leave to defend. In the facts and circumstances of the case, therefore, conditional leave is granted to the Defendants subject to the condition that an amount of Rs.4.80crores be deposited in this Court by Defendant Nos. 1 to 4 within a period of 16 weeks from today. Insofar as the Fifth Defendant is concerned, leave to defend shall be conditional on the deposit of an amount of Rs.2.10crores within the same period. It is, however, clarified that the amount of Rs.2.10crores which is required to be deposited by the Fifth Defendant is part of the larger sum of Rs.4.80crores in respect of which leave has been granted to Defendant Nos. 1 to 4 subject to the condition of the deposit.

12. On such deposit, the suit be transferred to the list of Commercial Causes. The Defendants shall file their Written Statement within 8 weeks thereafter. Inspection and discovery will be completed within 8 weeks thereafter.

13. In the event the amounts are deposited as aforesaid, the Prothonotary & Senior Master to Initially deposit the said amount in a Nationalized Bank, for a period of one year and thereafter, for equal successive periods, till the disposal of the suit.

14. On failure to deposit the aforesaid amount, liberty to the plaintiffs to apply for further orders.

15. Summons for Judgment is disposed of in the aforesaid terms. No costs.