Tata Finance Ltd. vs Viniyoga International Ltd. & ...
1999 Latest Caselaw 329 Del

ORDER

K.S. Gupta, J.

1. This appeal by the plaintiff/appellant is directed against the order dated 19th February, 1998 of learned Single Judge ordering issue of ordinary summons in the suit filed under the provisions of Order xxxvII CPC.

2. We are of the view that the appeal can be disposed of without issuing notices to the defendants/respondents as summons in the suit had not been issued. The impugned order was passed only when the plaint was taken up for consideration.

3. Material portion of the order under appeal reads:-

"It appears that this part of the agreement is itself unconscionable and is opposed to the underlying public policy not to allow exorbitant rate of interest as is evident from Illustration (b) of Section 19A of Contract Act deeming provisions in Section 34 CPC and Section 80 Negotiable Instruments Act; Art. 39(c) of the Constitution, and lack of any precedent awarding interest over and above the rate at which moneys are lent by banks on commercial transaction...

In view of the above discussion the claim of the plaintiff relating to 3% discount charges of the bill per month alongwith further interest per month is beyond the terms of contract and not arising out of the contract. Consequently, it cannot be treated to be covered by the provisions of sub-rule (2) of Rule (1) of Order 37 CPC. It may further be mentioned that defendant No. 2 does not appear to be personally liable. Defendant No. 1 is a limited company, Mr. Vinay Bagla, defendant No. 2 is said to be the Chairman and Managing Director of defendant No. 1. From para 18 it does not appear that there is any cause of action against defendant Nos. 2 & 3. Therefore the maintainability of the suit of the plaintiff against defendant Nos. 2 & 3 could be a matter of serious doubt. In any case in absence of any agreement to stand surety for payment by the defendant No. 1 and without laying foundation to ignore the corporate veil suit under Order 37 cannot be filed against defendant No. 2. Nor, interest could be claimed at the said rate against any of the defendants in absence of agreement."

4. It has been pointed out by Sh. Neeraj Kaul appearing for the plaintiff/appellant that defendant No.1/respondent No. 1 in the covering letters dated 12th August, 1996 and 11th October, 1996 to the Bills of Exchange dated 12th August, 1996 and 11th October, 1996 expressly agreed to pay overdue discount charges @ 3% per month and the same by expressing as interest has been claimed in the suit. The plaintiff has not claimed interest over and above the overdue discount charges as observed by the Single Judge. He has further pointed out that the transaction in suit is a commercial one between two companies and, therefore, grant of interest at the contractual rate of 3% per month ought to be the rule to be ignored only in rarest of rate cases. Single Judge thus erred in holding that the interest rate charged is unreasonable and opposed to public policy. In that behalf our attention has been drawn by Sh. Kaul to the decisions in Utsav Lal Gupta Vs. Firm Mohan Bros., , Vijaya Bank Vs. S. Bathija, , Syndicate Bank Vs. West Bengal Cement Ltd., AIR 1989 Delhi 107 and S.K. Engineering Works Vs. New Bank of India, AIR 1987 Pun. & Har. 1990. It has also been pointed out that defendant No.3/respondent No. 3-company is the drawer of both the Bills of Exchange in question while defendant No. 2/respondent No. 2, besides being Chairman & Managing Director of both the defendants 1 & 3, issued two cheques for Rs. 25 lakhs each towards repayment of the amount covered by both the Bills of Exchange which on presentation were bounced. According to the learned counsel by seeking amendment of the plaint, liability against defendant No. 2 for the suit amount is sought to be fastened additionally on the ground of his being a guarantor of defendant No. 1 company. Defendants 2 & 3 are thus jointly and severally liable to pay the suit amount alongwith defendant No. 1 company. Thus the view expressed by the Single Judge that maintainability of the suit against both the said defendants 2 & 3 could be a matter of serious doubt, is totally erroneous. It is claimed that the suit is legally maintainable under the provisions of Order xxxvII CPC.

5. Having perused both the Bills of Exchange in question, covering letters annexed thereto and also the averments made in the plaint, we are of the view that the suit, out of which the present appeal arises, is prima facie maintainable under Order xxxvII CPC. Without touching the merits of the submissions referred to above, we are also of the opinion that in the facts and circumstances of the case, at the stage of issuing summons, the questions which have been dealt with in the impugned order, ought not to have been gone into by the Single Judge and the order under appeal thus deserves to be set aside.

6. Consequently, the appeal is allowed. The impugned order is set aside. In place of ordinary summons, summons in Form 4 in Appendix B CPC will now be issued to the defendants by the learned Single Judge treating it to be a suit under Order xxxvII, CPC and not as an ordinary suit.