Standard Chartered Bank vs M.S. Handa And Ors.
1994 Latest Caselaw 608 Del

JUDGMENT

R.C. Lahoti, J.

(1) This order disposes of Ia 7907/94 and Ia 7548/94. Ia 7907/94 This calls for an interpretation of the term "Security". Whether a person or institution can himself provide a 'security' in response to a call of the Court or should a 'security' to be so must necessarily emanate from a surety i.e. a third person.

(2) It would be useful to notice briefly the facts in the background. The plaintiff bank filed a suit under Order 37 Civil Procedure Code against the three defendants namely, Mr M.S. Handa, Mr Ashwani Kapoor and Indian Overseas Bank. The plaintiff is a banking company incorporated in England but is having its branch offices at several places in India including one at 17, Sansad Marg, New Delhi. Vide order dated 143.93, this Court had allowed unconditional leave to defend to all the three defendants. There was an appeal preferred to the Division Bench being Fao 56/93. It was dismissed by the Division Bench on 17.8.93. The plaintiff had also filed a Special Leave Petition before the Supreme Court. Vide order dated 26.11.93, ( Civil Appeal No. 7172-74 and 7175 of 1993), their Lordships of the Supreme Court granted special leave and after hearing the parties, made the following order : "WE are of the view that in the facts and circumstances of this case the High Court was not justified in granting unconditional leave to defend to defendant I to 3. We modify the High Court order to the extent that leave to defend is granted to defendant 2 and 3 on their depositing Rs. I crore each before the trial court within two months from today. As and when the money is deposited the appellate bank may withdraw the same on furnishing security to the satisfaction of the trial court. The appeals are allowed to the above extent."

(3) On 27.1.1994, Indian Overseas bank defendant No.3, tendered an amount of Rs. I crore by way of a cheque and the Court directed the Registrar to accept the same. On 21.4.94, on an application filed by the plaintiff to withdraw the sum of Rs. I crore deposited by defendant NO.3, the court directed that the plaintiff may withdraw Rs. I crore after furnishing adequate security to the satisfaction of the Registrar of this Court.

(4) The plaintiff bank has now furnished the security and seeks order of the court enabling withdrawal of the sum of Rs. I crore deposited by defendant No.3 along with interest accrued thereon. The security has been filed in the shape of a bank guarantee No. 316/940322 dated 18.7.94 executed by the plaintiff bank through its manager and accountant. The relevant part thereof reads as under : "NOW therefore this guarantee witnesseth that we Standard Chartered Bank, hereby hold firmly bound unto the Registrar of the Hon'ble High Court of Delhi at New Delhi in suit No. 935 of 1990 for payment to it on demand without demur the amounts released to us as per the order of this Hon'ble High Court upon we being unsuccessful to suit no. 935 of 1990. We, standard Chartered Bank further guarantee that the guarantee herein contained shall not be effected by any change in the constitution of our bank and it is hereby agreed by us that this guarantee shall remain in full force till the disposal of the suit."

(5) On defendant No.3 having been noticed it has objected to the acceptance of this bank guarantee as security. The main contention of the learned counsel for defendant No.3 has been that security always implies furnishing of surety by a third person and a party cannot furnish security of its own. Reliance is placed on a Division Bench decision of Allahabad High Court in Sakhavar Hussaia vs. Rajjab and Anr .

(6) The term security is not to be found defined in CPC. Words & Phrases (Permanent Edition) Vol 38, at pages 469-71) defines security as under :- "SECURITY"is something which makes the enjoyment or enforcement of a right more secure or certain; that which secures and makes safe. Security is something which makes the enjoyment or enforcement of a right more secure or certain. A security on property is where a right over a property exists by virtue of which enforcement or liability or promise is facilitated or made more certain. The term security has no exactly defined legal definition. Generically the words has reference to written instruments, usually for the payment be money or evidences of a debt and being more than a mere promise of the debtor of a general liability on his part but having as collateral to it a place of property or some additional obligation "

(7) Corpus Jurisdiction Secundum (Vol. 79, page 941) defines 'security' in two senses. To quote : "THE word security may be used in two senses. In one sense it means protection; the state or condition of being secure; certainty; guarantee; safety. In its other sense the word security means. the instrument of protection or security; & c. .........The word security is also defined as meaning a person who becomes the surety for another or who engages himself for the performance of another's contract; one who becomes responsible for the obligation of another; a surety ; and it may be used in the sense of surety, i.e. a bond with surety or sureties."

(8) BLACK'S Law Dictionary, 6th Edn. defines security as protection; assurance; indemnification. The term is usually applied to an obligation, pledge, mortgage, deposit, lien, etc. given by a debtor in order to assure the payment or performance of his debt, by furnishing the creditor with a resource to be used in case of failure in the principal obligation. Collateral given by debtor to secure loan. Document that indicates evidence of indebtedness. The name is also sometimes given to one who becomes surety or guarantor for another.

(9) It is therefore clear that the use of the term security does not necessarily mean someone standing as surety or a security furnished by a third person. The basic idea is to offer a protection or assurance and make the enforcement of a right or obligation more secure, more certain, more safe.

(10) It is not uncommon to find securities being accepted by the court of law from the defendants judgment debtors or applicants in the form of a bond whereby the executant mortgages his properties in favor of the court and thereby satisfactorily assures and secures the performance of his obligation

(11) Bank guarantees are too often accepted as securities. In fact, in civil dispute the kink guarantees are more readily accepted as securities rather than a third person standing as surety, whenever a security is required because of the ease in securing enforcement of a bank guarantee and recovery of the amount there under. It is a different matter that in the case at hand the plaintiff happens to be a banking company- The bank guarantee furnished by the plaintiff unconditionally undertakes an obligation to be fulfillled and discharged at the instance of the Court. In the opinion of this Court, it satisfies the requirement of security.

(12) Sakhawat Huassin's case is a case peculiar on its own facts. The High Court of Allahabad has made certain observations, obiter in nature while decking with the case of an application seeking getting aside of an ex parte decree passed by a court of small causes. The observations vide para 7 are "WE may observe that in cases in which a personal liability to pay a certain amount has been created by a decree, the courts should not ordinarily accept a personal bond of the debtor himself be- cause such a bond gives no security worth the name to the decree holder. The bond merely creates a personal liability which has already been created by the decree itself."

(emphasises supplied) Vide para 7 there are the principles stated which lend strength to the view which I have already taken. To quote : "UNDER the proviso to Section 17 Small Causes Courts Act, the applicant has either to furnish cash security at the time of making an application for setting aside the ex parte decree or he may furnish such security as the Court may, on a previous application, have directed. In the present case, the Court was asked to permit the filing of the personal security bond. The Court did permit the applicant to file such a bound. The bond filed did contain a clause making the applicant personally liable to pay the amount of the bond. It was, therefore, a valid personal bond. All the requirements of the proviso to S. 17 were thus fully complied with".

The above quoted passage supports the view that a personal bond can be a security bond.

(13) The bank guarantee furnished by the plaintiff, though of its own, is held to be a 'security'. Let the plaintiff have the bank guarantee verified before the Registrar.

(14) It was also incidentally submitted by the counsel for the defendant that the interest accrued on the amount may not be released to the plaintiff more so when the bank guarantee dated 18.7.94 does not specifically undertake to secure the return of interest also. Suffice it to say that the interest goes with the principal and the bank guarantee which speaks of payment to High Court on demand without demur the amounts released, is enough to include a guarantee to return the amount with interest. The liability of the plaintiff bank under the bank guarantee shall extend to and cover the amount of interest accrued or to accrue on the principal amount also. The plaintiff bank is permitted to withdraw the amount with this condition.IA 7548/94

(15) This is an application under Order Ii Rule 14 Civil Procedure Code seeking production of certain documents from the custody of defendant No.3. The only ground on which the prayer for production of document has been resisted- by defendant No.3 is that on these documents the defendant No..3 holds a banker's lien and therefore cannot be compelled to produce the documents on record of the court. The resistance cannot be sustained. Under Order Ii Rule 14 Civil Procedure Code it is lawful for the court to order the production of such of the documents in the possession or power of a party as relate to any matter in question in the suit. The relevancy of the document at the trial is not disputed by defendant No.3. Merely because the documents are ordered to be produced in court the banker's lien if any is not lost. However, it is not necessary to have the original documents before the court. It would suffice if the photocopies are directed to be produced subject to an undertaking by defendant No.3 to produce the originals before the Court as and when required.

(16) Accordingly the application is allowed and defendant No.3 is directed to produce the certified true photocopies of documents referred to in the application in the court. As per rules governing the original side, the plaintiff shall also be provided with the copies of the documents. The defendant No.3 shall undertake to make the originals available to the court as and when required.