Prabha Mishra vs Consortium Finance & Leasing ...
1998 Latest Caselaw 112 Del

ORDER

Manmohan Sarin, J.

1. By this judgement, I would be disposing of two revision petitions, one filed by Mrs.Prabha Mishra and the second by Consortium Finance & Leasing Limited, against the impugned order dated 29.8.1996, passed by the learned Additional District Judge. The learned Additional District Judge, by the impugned order, granted leave to contest to Mrs. Prabha Mishra (hereinafter referred to as the 'defendant') to defend the summary suit for recovery, filed by M/s.Consortium Finance & Leasing Limited, (hereinafter referred to as the 'plaintiff') subject to her depositing a sum of Rs.67,788/- within two months.

2. The facts giving rise to these revision petitions may be briefly noted:

(i) Plaintiff instituted the suit under Order xxxvII of the Code of Civil Procedure, for recovery of the sum of Rs.1.30 lakhs, against the defendant. The case of the plaintiff company was that the defendant had submitted a proposal for finance of the purchase of a new Maruti Car, which was accepted by the plaintiff and a hire-purchase agreement dated 10.8.1992 was executed between the parties. Under the said hirepurchase agreement, plaintiff financed a sum of Rs.1,53,924/- (Rs.One lakh fifty three thousand nine hundred and twenty four only) to the defendant, which was recoverable in 12 monthly instalments of Rs.12,827/- each, commencing from 10.8.1992. Defendant was also liable to pay interest @3 per cent per month on overdue charges under the Agreement. A promissory note in the sum of Rs.1,53,924/- dated 10.8.1992 was also executed by the defendant.

(ii) Plaintiff alleged that out of the total sum of Rs.1,53,924, recoverable from the defendant, defendant only paid a sum of Rs.86,136/-, leaving a balance of Rs.67,788/-. Defendant was also liable to pay the overdue charges for late payments, which amounted to Rs.59,575/- as on 12.7.1995.

(iii) Accordingly, plaintiff filed a suit for recovery of Rs.1,30,000/-, based on a written contract dated 10.8.1992 and the promissory note dated 10.8.1992.

(iv) Defendant belatedly applied for grant of leave to defend the suit, the delay being of 35 days.

(v) Vide the impugned order dated 29.8.1996 the learned Additional District Judge, while condoning the delay of 35 days in seeking leave to defend the suit, granted conditional leave to the defendant to defend the suit, as noted earlier.

3. Plaintiff in his revision petition had assailed the condensation of delay in seeking leave to defend. However, the same was not pressed during arguments and, hence, is not being considered while disposing of these revision petitions.

4. While in CR.908/96, filed by Smt.Prabha Mishra, it is contended that she was entitled to unconditional leave to defend the suit; in CR.1075/96 M/s.Consortium Finance & Leasing Ltd. has assailed the impugned order on the ground that the court having reached the finding that no triable issues had arisen and that the defense sought to be raised by Smt.Prabha Mishra was sham and a moonshine, the suit ought to have been decreed.

5. Learned counsel for the defendant has contended before me that the hire-purchase agreement and the promissory note in question dated 10.8.1992 were not executed on 10.8.1992. It was urged that the plaintiff's case that a proposal was given in August 1992, resulting in the aforesaid agreement and promissory note, was false. It was in July 1992, that the car had been financed. It was delivered on 22.7.1992 and had been registered on 24.7.1992. The insurance cover for the car also commenced from 24.7.1992. According to the learned counsel for the defendant, the above facts falsified the case of the plaintiff regarding execution of the hire-purchase agreement and promissory note on 10.8.1992. Besides, it was urged, that a sum of Rs.44,000/- had been paid by the defendant to the plaintiff in cash on 17.7.1992, intended as a security, which was to be returned and adjusted. A further sum of Rs.42,495/- in cash was paid on 29.7.1992 to the plaintiff by the defendant.

6. In the application moved by the defendant before the learned Additional District Judge, seeking leave to defend the suit, it was stated that the plaintiff had defrauded the hirer/defendant and a sum of Rs.1,97,457/- had been re-paid by the defendant against the total finance of Rs.1,53,924/-. Plaintiff, on the other hand, had claimed that payment of only Rs.86,136/- out of the total hire purchase instalments amounting to Rs.1,53,924/- had been received, thus, leaving a balance of Rs.67,788/-. In respect of the payments of Rs.44,000/- on 17.7.1992 and 42,495/- on 29.7.1992, claimed by the defendant in para (9) of the application seeking leave to defend, plaintiff had only stated that the contents of the said para were wrong and denied and averred that payment of only Rs.86,136/-, as per details given in the statement of account, was made by the defendant.

7. In the proceedings before the Trial Court, defendant had tendered photocopies of the receipts for the aforesaid payments claimed. As regards the payment of Rs.44,000/- the receipt is said to be on the reverse of a visiting card of an employee of the plaintiff. During the course of hearing of these revision petitions, plaintiff had admitted the payment of Rs.42,495/- as being towards the margin money and towards the additional charges as well as the charges for registration and documentation etc. Payment of Rs.44,000/- on 17.7.1992 was denied. Plaintiff was directed to file an affidavit, vide order dated 18.9.1997, and the defendant was also given an opportunity to file the reply. Parties had filed their respective affidavits with regard to this clarification.

8. From a perusal of the affidavit filed by the plaintiff, the following position emerges:

The price of the car payable to M/s.Pesco Automobiles was Rs.1,61,580/-. Defendant made payment of Rs.42,495/- on 29.7.1992 towards margin money of Rs.30,580/-; registration charges of Rs.2,785/-; documentation charges of Rs.2,620; and holding cost of Rs.6,420/-. The amount financed by the plaintiff was Rs.1,31,000/-, recoverable in 12 equated monthly instalments of Rs.12,827/-, inclusive of interest, totalling Rs.1,53,924/-. It is against this sum of Rs.1,53,924/- that a total payment of Rs.86,136/- is claimed to have been made by the defendant, leaving a balance of Rs.67,788/-.

9. It is in the background of the aforesaid facts, that we have to consider the submissions made by learned counsel for the defendant, who, as noted earlier, has submitted that plaintiff's entire case of documents having been executed on 10.8.1992 stood falsified and no presumption under Section 118 of the Negotiable Instruments Act could be raised in favour of the plaintiff. Learned counsel also assailed the impugned order on the ground that the trial court had no jurisdiction to direct filing of the documents and then evaluate the evidence and determine the credibility of the said documents. He submitted that the trial court had exceeded its jurisdiction in returning a finding that on the basis of perusal of the documents, that the amount claimed to be re-paid by the defendant was not correct. Learned counsel also contended that defendant was entitled to unconditional leave to contest and to show during trial that payment of Rs.44,000/- claimed to have been made by her in cash had been received by the plaintiff through its Manager, which amount was required to be adjusted. He urged that the promissory note did not bear any rate of interest. A photostat copy of the bank statement was tendered during the hearing, showing withdrawal of the sum of Rs.44,000/- from the bank account of the defendant.

10. I have given my thoughtful consideration to the submissions made by learned counsel for the parties. I have also perused the record. One thing that clearly emerges is that defendant does not dispute the factum of receipt of finance for the car. Admittedly, the sum of Rs.1,31,000/- had been financed by the plaintiff. The explanation given by the finance company for the sum of Rs.42,495/-, viz. Rs.30,580/- being towards margin money; Rs.2,785/- being for registration charges; Rs.2,620 being for documentation charges; and holding cost of Rs.6,420/-, is borne out from the documents on record and appears to be credible. The bone of contention here is defendant's claim that Rs.30,580/- had to be adjusted against the instalments payable, which does not appear to be correct. It is also worth recognising that the defendant/hirer does not claim that the promissory note or the hire-purchase agreement is not signed or executed by her. Her contention is that the margin money, etc. was received in July 1992 and the insurance and registration of the car was also done at that time, and, hence, the factum of transaction having transpired in August 1992 and the date of Promissory Note and Agreement is not correct. Margin money, insurance and registration charges being paid earlier cannot negate or obliterate the factum of the subsequent execution of documents i.e. hire-purchase agreement and the pronote, which is otherwise admitted.

11. There is also merit in the contention of learned counsel for the plaintiff that the trial court erred in ignoring condition No.(3) of the hire-purchase agreement while making a direction for deposit of Rs.67,788/- only and not securing the claim in the suit for interest. While it is true that Promissory Note did not carry any rate of interest, condition No.(3) of the hire-purchase agreement clearly specified the liability of the hirer @3 per cent per month on the outstanding amounts on delayed payments under the agreement. The summary suit by the plaintiff was based on a written contract, viz. the hire-purchase agreement as well as the promissory note. The Hire Purchase agreement stipulated the rate of interest agreed between the parties. The plaintiff's claim for interest on delayed instalments, therefore, also deserved to be considered for purposes of security while granting leave to contest.

12. Learned counsel for the plaintiff, on the other hand, had submitted that the trial court having once reached the conclusion that the defense raised was sham and moonshine, should have decreed the suit in its entirely.

13. Learned counsel for the defendant has cited a number of authorities, viz. ; and . It is, however, not necessary to go into the same, for the disposal of these revision petitions. Reference may be made to the principles as laid down by the Apex Court in Mechalec Engineers & Manufacturers Vs. M/s. Basic Equipment Corporation . The Apex Court in para 8 of the said judgment initiated the following principles for grant of leave to defend:-

(a) If the defendant satisfies the Court that he has a good defense 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 bonafide or reasonable defense although not a positively good defense the plaintiff is not entitled to sign judgment and the defendant is entitled to unconditional leave to defend.

(c) If the defendant disclosed 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 has a defense, yet, shews such a state of facts as leads to the inference that at the trial of the action he may be able to establish a defense to the plaintiff's claim the plaintiff is not 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 defense or the defense 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 defense or the defense 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 defense to proceed if the amount claimed is paid into Court or otherwise secured and given leave to the defendant on such condition, and thereby show mercy to the defendant by enabling him to try to prove a defense."

Further in Raj Duggal Vs. Ramesh Kumar Bansal , the Apex Court observed as under:-

"Leave is declined where the Court is of the opinion that the grant of leave would merely enable the defendant to prolong the litigation by raising untenable and frivolous defenses. The test is to see whether the defense raises a real issue and not a sham one, in the sense that if the facts alleged by the defendant are established there would be a good or even a plausible defense on those facts. If the Court is satisfied about that leave must be given. 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 or uncertainty as to the amount actually due or where the alleged facts are of such a nature as to entitle the defendant to interrogate the plaintiff or to cross-examine his witnesses leave should not be denied. Where also, the defendant shows that even on a fair probability he has a bonafide defense, he ought to have leave. Summary judgments under Order 37 should not be granted where serious conflict as to matter of fact or where any difficulty on issues as to law arises. The Court should not reject the defense of the defendant merely because of its inherent implausibility or its inconsistency."

14. In the light of the foregoing principles for grant of leave to contest and discussion in paras 9 to 11 and in particular the following -

(i) the defendant's claim of having not received the credit of the payment of Rs.44,000/-, said to be acknowledged on the reverse of the visiting card of the representative of the plaintiff; (ii) non-mentioning of any rate of interest in the promissory note and the submission of the defendant that the rate of 3% per month in the agreement on outstanding payments being grossly excessive; (iii) the defendant having been able to show that the registration, insurance and payment of margin money in the card was prior to the execution of the promissory note and the Hire Purchase agreement, it cannot be said that this is a case where the defense of the defendant is absolutely sham and moonshine and leave should be declined and suit decreed. It would be recalled that out of sum of Rs.1,53,924, payable under the Hire Purchase Agreement, the plaintiff admits payment of Rs.86,136/- leaving a balance of Rs.67,778/-. A further sum of Rs.59,575/- is claimed as interest in the suit on outstanding payments under the agreement @ 3% per month. It is to be recognised that the total finance under the agreement was Rs.1,31,000/- and the 12 Hire Purchase Instalments amounted to Rs.1,53,924/- included therein the element of interest also. Thus the sum of Rs.1,53,924/- included the principal amount financed as well as interest. The sum of Rs.59,575/- computed @ 3% per month on the delayed payments is assailed as grossly excessive against law and not recoverable.

15. Keeping the above factors in mind as well as the defendant's claim of having paid Rs.44,000/-, which the defendant would have an opportunity to prove during trial, an appropriate order in the present case would be to direct the defendant apart from the deposit of Rs.66,788/-, as ordered by the trial court, to furnish further security for 50% of the interest amount as claimed in the suit i.e. for Rs.30,000/-.

16. Accordingly, CR.908/96, filed by the defendant seeking unconditional leave to contest, is dismissed and CR.1075/96, filed by the plaintiff is partly allowed, to the extent that the defendant is directed to furnish in addition security in the sum of Rs.30,000/- to the satisfaction of the trial court in addition to the deposit of Rs.67,778/-. The time for making the payment and furnishing of the security of Rs.30,000/- is extended by six weeks from today. In case the defendant fails to deposit the amount or to furnish the security, the leave to contest shall stand refuses and suit shall stand decreed.