Kunal Finance & Credit Private ... vs Vinayak Mica Export Company & Ors
2023 Latest Caselaw 1571 Cal/2

                 IN THE HIGH COURT AT CALCUTTA
                 (Ordinary Original Civil Jurisdiction)
                       COMMERCIAL DIVISION


Present:

The Hon'ble Justice Krishna Rao



                         IA No: GA 3 of 2021

                              In CS 4 of 2020


               Kunal Finance & Credit Private Limited
                                   Versus
                Vinayak Mica Export Company & Ors.




           Mr. Rupak Ghosh
           Mr. Sankarsan Sarkar
           Mr. Aditya Kanodiya
           Mr. Shayak Mitra
                                      ... For the plaintiff/petitioner.

           Mr. Krishnaraj Thaker
           Mr. Vikram Wadehra
           Ms. Swagata Roy
                                      ... For the defendants/respondents.

Hearing Concluded On : 11.04.2023

Judgment on : 14.07.2023

Krishna Rao, J.:

1. The plaintiff has filed the present application being G.A No. 3 of 2021

for summary Judgment for a sum of Rs. 1,05,81,972/- against the

defendants.

2. The plaintiff contended that the plaintiff is a nonbanking financial

company carrying on business of lending money. The plaintiff is duly

authorised by the Reserve Bank of India for the said business. The

defendant No.1 is a partnership firm and the defendant Nos. 2 and 3

are the partners of defendant No.1.

3. The defendants obtained loan of Rs. 50,00,000/- from the plaintiff on

April 4, 2011 with interest at the rate of 17% per annum. The said loan

was initially for a period of 120 days with the provision for renewal by

mutual agreement subject to the Defendants making payment of

interest accrued thereon from time to time. The plaintiff has transferred

an amount of Rs.50 lakhs by RTGS on April 4, 2011 and the

defendants have acknowledged the same through a receipt confirming

the interest at the rate of 17% per annum. Subsequently after re-

negotiation the interest rate was enhanced from 17% to 18% p.a. with

effect from December 1, 2011 and the defendants have started paying

the interest at the rate of 18% p.a. thereon.

4. The loan was renewed from time to time subject to the condition that

the defendants shall continue to make payments of interest quarterly to

the plaintiff. Till September 30, 2013, the defendants have paid the

interest on the said loan and the defendants have also deposited Tax

Deducted at Source (TDS) to the credit of the plaintiff on the interest

payable to the plaintiff. Since October 1, 2013, the defendants failed to

make payment of interest. The defendants requested for extension of

time for payment of interest as well as the principal amount. On April

1, 2014 the defendants have issued a confirmation of account

statement to the plaintiff.

5. In spite of several requests made by the plaintiff to the defendants to

repay the loan amount along with interest the defendants has failed to

do so, accordingly, the plaintiff has made a complaint to the Officer in

charge of Burrabazar Police Station, Kolkata, against the defendants on

November 29, 2016. When the defendants came to know about the

complaint, the defendants have approached the plaintiff and requested

the plaintiff to not to pursue with the complaint and have issued a

cheque being No. 298282 dated January 16, 2017 drawn on Canara

Bank, Chowringhee Branch amounting to Rs. 50 lakhs as part payment

and also undertook that they will pay the balance dues within January

31, 2017. The cheque issued by the defendants was dishonoured on

January 19, 2017 with the remarks "Insufficient Funds". After

dishonour of cheque, the plaintiff had initiated a proceeding against the

defendant under Section 138 of the Negotiable Instruments Act, 1881.

6. Mr. Rupak Ghosh, learned Advocate representing the plaintiff submits

that in accordance to the money receipt executed by the defendants

dated April 4, 2011, it is admitted that the defendants have received

Rs.50 lakhs through RTGS as loan and they will return the said

amount with interest at the rate of 17% per annum and subsequently

the interest rate was revised at 18% per annum. Till September 30,

2013, the defendants have paid the said interest which admits from the

TDS certificate and it further admits from the confirmation of account

issued by the defendants where in it was confirmed about the loan

amount and the interest thereto.

7. Mr. Ghosh further submitted that the defendants have issued a cheque

of Rs.50 lakhs dated January 16, 2017 which was subsequently

dishonoured. Mr. Ghosh further submits that after the dishonour of the

cheque, the plaintiff had issued a notice which was duly received by the

defendants but no reply was sent. Mr. Ghosh relied upon the judgment

reported in (2019) 4 SCC 197 (Bir Singh vs. Mukesh Kumar) and

submits that even a blank cheque leaf, voluntarily signed and handed

over by the accused, which is towards some payment, would attract

presumption under Section 139 of the Negotiable Instruments Act,

1881 in the absence of any cogent evidence to show that the cheque

was not issued in discharge of a debt.

8. Mr. Ghosh relied upon the judgment reported in (2021)5 SCC 283

(Kalamani Tex and Another vs. P. Balasubramanian) and

submitted that a probable defence needs to be raised, which must meet

the standard of "preponderance of probability", and not mere possibility.

He further submits that a bare denial of passing of consideration will

not aid the case of the accused.

9. Mr. Ghosh relied upon the judgment reported in 2021 SCC Online Ker

7647 (M.M Rajeev vs. O.K Eldhose and Others) and submitted that

even if the defendant's version is accepted as true, the filling up of the

dates in an otherwise filled and signed cheque, not being material

alteration, will not invalidate it.

10. Mr. Ghosh submits that there is no real defence available to the

defendants to dispute the claim of the plaintiff and thus this is a fit

case for passing a summary judgment and decree against the

defendants.

11. Per contra, Mr. Krishnaraj Thaker, learned Advocate appearing on

behalf of the defendants admitted that the loan facilities were availed by

the defendants which was renewed from time to time. Mr. Thaker

submits that sometimes in the month of November' 2013, it was agreed

between the plaintiff and the defendants that the defendants would

repay the loan on March 1, 2014 and at that point of time, the

petitioner has obtained an undated cheque No. 298282 drawn on

Canara Bank for a sum of Rs.50 lakhs in its favour. Mr. Thaker

submits that this was a common practice and the plaintiff assured that

the cheque would not be presented for encashment without the prior

consent in writing from the defendants.

12. Mr. Thaker submitted that the defendant No.1 Company suffered

financial loss and was unable to pay interest for the period between

October 1, 2013 and March 28, 2014, the defendants had requested for

renewal of the loan for a further period of six months but the plaintiff

refused to extend the time. He submits that as the plaintiff declined to

extend the time for repayment of loan amount, accordingly, it was

agreed between the parties sometimes in the month of March' 2014

that the defendant No.1 would sell and transfer the right, title and

interest of certain properties to the plaintiff at a negotiable

consideration amount of Rs. 1,25,00,000/- out of which the amount of

Rs.50 lakhs would be retained by the defendant No.1 as earnest money

and the plaintiff would pay the balance consideration of Rs. 75 lakhs

would be paid back to the defendant no.1 at the time of registration of

conveyance deed in favour of the plaintiff or its nominee. Mr. Thaker

submits that the description of the property is approximate 4.25 (four

point two five) D commercial land situated at Mauza Sihodih, Gaadi

Karharbari, P.S - Giridih (M), Paragana - Kharagdih, District Sub

Registrar Office and District Giridih comprises in Khata no. 81, Plot No.

758 Part, area recorded in LPC 31.87 D sold area 4.25 D, P.S No. 45

Halka No. 8, presently situated at ward No.11 and its Safe No.

SAF596383270820085038 Holding No. 0110001243000MO.

13. Mr. Thaker submitted that it was agreed between the parties that the

sale would be completed within one year. After the completion of the

sell, the plaintiff was to pay the balance amount of Rs. 75 lakhs and

thus the loan agreement between the parties stood novated by the said

agreement of sale. He submits that the plaintiffs have not come forward

for payment of the balance amount of Rs. 75 lakhs and thus the

respondents are entitled to received an amount of Rs. 75 lakhs from the

plaintiff on account of balance consideration of the landed property.

14. Mr. Thaker submitted that the plaintiff had informed the defendant No.

2 that the plaintiff would not complete the said transaction and

demanded a refund of the earnest money and accordingly the

defendants accepted the repudiation of the agreement for sale in

October 2016 and forfeited the earnest money. He further submits that

the cheque which the plaintiff is relying upon was not dated January

16, 2017. He submits that the cheque No. 298282 of Canara bank,

Chowringhee Branch, was made over to the plaintiff sometimes in or

about November 2013 and the said cheque formed part of a cheque leaf

book bearing No. 298201 to 298300 and the said cheque leaf book

which contained cheque No. 298282 was exhausted in 2013 itself. He

submits that the plaintiff to cover up its wrong repudiation of the

agreement for sale, which it had entered into with the defendant No.1.

The petitioner unlawfully inserted the date of January 16, 2017 in the

said cheque without consent of the defendants and is in breach of the

agreement between the parties.

15. Mr. Thaker submitted that there is a good defence settled by the

defendants which the defendants will prove during the trial and thus

no summary judgment can be passed in the present suit.

16. Mr. Thaker relied upon the judgement reported in a AIR 1949 Cal 479

(Kiranmayi Dasi vs. J. Chatterjee) and submitted that 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.

17. Mr. Thaker relied upon the judgment reported in 2004 SCC Online

Cal 40 (Central Bank of India vs. P.K Agencies Ltd.) and submitted

that 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.

18. Mr. Thaker relied upon the judgment reported in

Manu/WB/0467/1985 (Kapil Deo Pandey vs. Vasudeb Devshankar

Shukla) passed by the Hon'ble Division Bench of this Court and

submitted that it may be that the defence may not be positively a good

defence but it cannot be held to be unfair or malafide or unreasonable

defence or a defence which is bound to fail at the trial.

19. Heard the learned Counsel for the respective parties, perused the

materials on record and the judgments relied upon by the parties. The

question before this Court in the present case is, whether, the defence

set up by the defendants is illusory or sham or practically moonshine.

20. Upon complete reading of the plaint, written statement, present

application and the affidavit in opposition filed by the defendant. The

defendants have admitted with regard to the loan amount of Rs. 50

lakhs and the interest thereon. The defence set up by the defendant is

that initially the defendant had agreed to refund the amount along with

interest at the rate of 17% p.a. and subsequently at the rate of 18% p.a.

but due to the financial crisis, the defendants have offered to sell their

land for a total sum of Rs.1,25,00,000/- out of which the amount of Rs.

50 lakhs paid by the plaintiff is treated as advance and the plaintiff

agreed to pay the balance amount of Rs.75 lakhs to the defendants

within in a year. On receipt of the said amount within a year, the

defendants will register Conveyance Deed in favour of the plaintiff but

the plaintiff failed to pay the balance amount and accordingly the

amount paid by the plaintiff has been forfeited. It is the further case

that the cheque which the plaintiff has relied upon has not been given

in the year 2016 but it was given to the plaintiff as security in the year

2013 but the plaintiff has inserted the date of January 16, 2017 and

presented for encashment without the consent and knowledge of the

defendants.

21. The appellant relied on Smt. Kiranmayi Dasi (supra) wherein the

following principles were formulated for grant of summary judgment:

"(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 had 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 defence 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."

The aforesaid principles have been repeatedly approved of, adopted

and enunciated by different Courts of India including the Supreme

Court in Mechelec Engineers (supra) (paragraph 8). In the said

decision, the Hon'ble Supreme Court also approved of an old decision of

the English Courts in Jacobs vs. Booths Distillery Company (1901)

85 LT 262 (HL) wherein it was held that whenever a defence raises a

really triable issue, leave must be given. Subsequently, these principles

have also been followed by the Hon'ble Supreme Court in M/s Sunil

Enterprise and Anr vs. SBI Commercial & International Company

Ltd. reported in MANU/SC/0334/1998 : (1998)5 SCC 354 at

paragraph 4 and in State Bank of Saurashtra vs. Ashit Shipping

Pvt. Ltd. & Another reported in MANU/SC/0314/2002 : (2002) 4 SCC

736 at paragraph 10.

In the most recent decision of the Supreme Court, in IDBI

Trusteeship Services Limited vs. Hubtown Limited reported in

MANU/SC/1490/2016 : (2017) 1 SCC 568 the entire case law

pertaining to summary judgments has been reviewed and it has been

held at paragraph 17 as follows:

"17. Accordingly, the principles stated in para 8 of Mechelec case [Mechelec Engineers & Manufacturers v. Basic Equipment Corpn., MANU/SC/0043/1976 : (1976) 4 SCC 687] will now stand superseded, given the amendment of Order 37 Rule 3 and the binding decision of four Judges in Milkhiram case [Milkhiram (India) (P) Ltd. v. Chamanlal Bros., MANU/SC/0376/1965 : AIR 1965 SC 1698 : (1966) 68 Bom LR 36], as follows:

17.1. If the defendant satisfies the court that he has a substantial defence, that is, a defence that is likely to succeed, the plaintiff is not entitled to leave to sign judgment, and the defendant is entitled to unconditional leave to defend the suit.

17.2. If the defendant raises triable issues indicating that he has a fair or reasonable

defence, although not a positively good defence, the plaintiff is not entitled to sign judgment, and the defendant is ordinarily entitled to unconditional leave to defend.

17.3. Even if the defendant raises triable issues, if a doubt is left with the trial Judge about the defendant's good faith, or the genuineness of the triable issues, the trial Judge may impose conditions both as to time or mode of trial, as well as payment into court or furnishing security. Care must be taken to see that the object of the provisions to assist expeditious disposal of commercial causes is not defeated. Care must also be taken to see that such triable issues are not shut out by unduly severe orders as to deposit or security.

17.4. If the defendant raises a defence which is plausible but improbable, the trial Judge may impose conditions as to time or mode of trial, as well as payment into court, or furnishing security. As such a defence does not raise triable issues, conditions as to deposit or security or both can extend to the entire principal sum together with such interest as the court feels the justice of the case requires.

17.5. If the defendant has no substantial defence and/or raises no genuine triable issues, and the court finds such defence to be frivolous or vexatious, then leave to defend the suit shall be refused, and the plaintiff is entitled to judgment forthwith.

17.6. If any part of the amount claimed by the plaintiff is admitted by the defendant to be due from him, leave to defend the suit, (even if triable issues or a substantial defence is raised), shall not be granted unless the amount so admitted to be due is deposited by the defendant in court."

22. Order 37 Rule 2 of the Code of Civil Procedure which is similar to those

of Chapter XIIIA of the Original Side Rules of this Court. Leave to

defend the suit brought under Order 37, Rule 2 of the Code of Civil

Procedure,1908 is declined where the Court is of the opinion that the

grant of leave will 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

the facts alleged by the defendant to establish their case would be a

good or even a plausible defence on those facts. 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 on uncertainty as

to the amount actually due or where the alleged facts are of such

nature as to entitle the defendant to interrogate the plaintiff to cross-

examine his witnesses should not be denied. Where also, the defendant

shows that even a fair probability that he has a bona fide defence, he is

ought to be granted leave. Summary judgements under Order 37

should not be granted where serious conflict as to the matter of fact

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 or its inconsistency.

23. In the present case, this Court finds that the defendant had set up his

defence in the written statement and also disclosed the documents in

support of his defence. This Court is of the view that the defendant may

be given a chance to prove his defence only if the defendant secures the

claim of the plaintiff by depositing the amount with the Registrar of this

Court.

24. In view of the above, leave is granted to the defendant with the

condition to deposit a sum of Rs. 1,22,34,027/- with the Registrar

Original Side within two weeks from date and if the defendant secure

the said amount, the Registrar shall invest the said amount in the

interest-bearing fixed deposit of State Bank of India, High Court Branch

within a week and to keep the same in the safe custody.

25. GA No. 3 of 2021 is thus disposed of.

(Krishna Rao, J.)