Dinesh Kumar Aggarwal vs Joginder Sethi
1997 Latest Caselaw 930 Del

JUDGMENT

J.B. Goel, J.

1. This is an application filed by defendants seeking leave to defend the suit. Plaintiff has filed a suit for recovery of Rs. 7,05,468/- under summary procedure of Order 37 of the Code of Civil Procedure (for short 'the Code'). His case is that he is doing business as Exports Surplus Cloth Merchant and the defendant No. 1 who is doing the business of garment fabrication and export had purchased cloth from him on credit vide bills dated 4.7.1995, 5.7.1995, 7.7.1995 and 11.7.1995 and towards these purchases two cheques, one dated 18.8.95 for Rs. 2,11,663/- and cheque dated 25.8.95 for Rs.2,82,805/- and later on third cheque dated 22.11.1995 of Rs. 2,11,000/- were issued. These cheques were presented for payment but were dishonoured. As a security for the payment of Rs. 7,65,000/- due from defendant No.1, defendant No.2, his wife mortgaged her property No. 6/292, Geeta Colony, Delhi on 30.8.1995 agreeing to pay the same with interest @ 36% per annum. The defendant had paid a sum of Rs. 20,000/- towards interest and credit of another Rs. 74,000/- was given against supply of clothes made by defendants to the plaintiff, out of which Rs. 20,000/- were adjusted towards interest and Rs. 54,000/- against the principal amount and Rs. 7,05,468/- remained due which has not been paid inspite of service of two notices of demand sent by the plaintiff.

2. The suit having been filed under Order 37, defendants have sought leave to defend. They have taken the pleas that there is no privity of contract with defendant No. 2; the mortgage deed dated 30.8.1995 is inadmissible in evidence being insufficiently stamped and not registered, it was not executed by the defendants, the rate of interest of 36% p.a. envisaged therein is not permissible under the law, the said document is a fabricated document and was obtained fraudulently; the suit for enforcement of mortgage is not maintainable under Order xxxvII; that the first two cheques are without consideration as the goods of four bills mentioned by the plaintiff were returned to him and he had undertaken not to present the same.

Plaintiff has denied these pleas.

3. Learned Counsel for the defendants has contended that the defense raised by defendants raises bona fide and triable issues and defendants are entitled to defend the suit. He has relied on Punjab and Sind Bank Vs. Seth Roller Flour Mills and Others, AIR 1988 Delhi 308.

Whereas learned Counsel for the plaintiff has contended that the suit against defendant No.1 is based on three dishonoured cheques issued by him against goods admittedly supplied and the defendant No. 2 is liable as a surety having undertaken to pay the same under the written agreement dated 30.8.1995, the said document is a security bond and is admissible in evidence, the goods as alleged were not returned, the plea to that effect is vexatious and false and no particulars about the return of the goods have been given. The notices of demand were sent after dishonour of the cheques to which no reply was given which also belies this plea. The defense raised is frivolous, vexatious, false, bogus and sham and no bonafide triable issue arises and as such the defendants are not entitled to leave to defend. He has relied on Anchal (Binny Showroom) Vs. Anand Prakash & Ors., 53 (1994) Delhi Law Times 348.

4. The first contention raised on behalf of defendant No. 2 is that the suit against defendant No. 2 is based on an inadmissible mortgage deed. Learned Counsel for the plaintiff has contended that the document is a security bond falling under Section 126 of the Indian Contract Act and the suit is not for enforcement of mortgage.

5. The plaintiff in the plaint as well as in the application for summons for judgment has pleaded that mortgage deed dated 30.8.1995 was executed by defendant No. 2 and she had secured the payment of the amount due from the defendant No. 1 by mortgaging her property No. 6/292, Geeta Colony, Delhi with the plaintiff. In this document dated 30.8.1995 placed on record, it has been stipulated that "first party i.e. defendant No. 2 has mortgaged the said property with the second party (plaintiff) for a sum of 7,65,000/-. It also recites that original documents of title of the property were also given to the plaintiff alongwith it. This document does not contemplate execution of another document of mortgage and apparently purports to create mortgage of the property to secure the payment of amount mentioned therein due from defendant No. 1 to the plaintiff. This document is not duly stamped nor is registered is a mortgage deed as compulsorily required under the Indian Registration Act. This is inadmissible in evidence and prima facie cannot be looked into for creating any liability against defendant No. 2 under it. The mortgage stands on a completely different footing than a surey bond. It is a transfer of interest in immovable property and is not a transaction of guarantee within the meaning of Section 126 of the Contract Act. Under Section 126 of the Contract Act, a person sought to be made liable as surety undertakes to perform the promise or discharge the liability of a third party in case of his default. The document dated 30.8.1995 does not contain any such promise or undertaking on the part of defendant No. 2 apart from mortgaging her property and no personal liability is created or arises under it. As such it cannot be said prima facie that liability against defendant No. 2 would be enforced as a surety on the basis of this inadmissible mortgage deed.

6. The plaintiff has claimed interest at the rate of 36% per annum apparently on the basis of this mortgage deed. This document does not purport to have been executed by defendant No. 1 and also being inadmissible in evidence it cannot be looked into for this purpose as well. Apart from this document there is no other written document between the parties agreeing for payment of interest at the rate of 36% p.a. In the absence of written agreement, the plaintiff would be entitled to interest under the Negotiable Instruments Act. The amounts adjusted as interest would have accrued as interest under the Negotiable Instrument Act till the suit was filed.

7. Defendant No. 1 has alleged that the goods of four bills mentioned in the plaint for which first two cheques were issued were returned to the plaintiff. No particulars about the date of return and the amount of the goods returned have been mentioned. It lacks in material particulars and is a vague plea. If the goods of these bills were returned, there would have been no occasion for issuing third cheque dated 22.11.1995 of Rs. 2,11,000/- towards part price of those very goods. It is not the case of the defendant that the third cheque issued is without consideration.

There is no explanation as to why these two cheques were not taken back and the third cheque was issued later on. The plaintiff has alleged that two notices of demand dated 22.11.1995 and 29.11.1995 both sent by registered post and under postal certificate of posting were duly served on the defendant. Receipt of these two notices has not been denied nor any reply is claimed to have been sent which was expected in the circumstances. The plea of return of goods thus cannot be said to be a bona fide plea. It is apparently vexatious, fantastic and highly improbable plea obviously intended to delay the claim of the plaintiff.

Leave in such circumstances would not be justified without imposing condition of depositing the suit amount with upto date interest and costs of the suit. Also defendant will not be entitled to leave to defend the suit unless the admitted amount of the third cheque of Rs. 2,11,000/- is deposited by him in Court under second Proviso to Sub-rule (5) of Rule 3 of Order xxxvII of the Code.

8. I, accordingly, partly allow this application. While leave to appear and defend is granted to defendant No. 2 unconditionally but leave is granted to defendant No. 1 on the condition of deposit within one month from today the suit amount of Rs. 7,05,468/- together with interest thereon at the rate of 6% p.a. from the date of the institution of the suit till deposit and also costs of the suit.

9. Nothing stated herein shall prejudice the rights and contentions of the parties on merit during trial of the suit.

S.No. 2907/95

10. Written statement by defendant No. 2 be filed within 4 weeks.

Be listed before the appropriate Bench for reporting compliance by defendant No. 1 and for further directions on 1st December, 1997.