Srf Finance Ltd. vs Randeep Singh
1999 Latest Caselaw 1169 Del

ORDER

Manmohan Sarin, J.

1. By this order, I would be disposing of IA. 6234/99 filed by the de- fendants seeking leave to contest the suit. The plaintiff had initially filed this suit under Order xxxvII, for recovery of a sum of Rs. 9,68,651/- (rupees nine lacs sixty eight thousand six hundred and fifty one only). The plaintiff's case was that it had advanced a loan of Rs.10,23,750/- (rupees ten lacs twenty three thousand seven hundred and fifty only) to the defend- ant at an interest of 36% p.a. An agreement dated 5.10.1995 and a promisso- ry note of the said date were executed. The defendant is said to have pledged, 1970 equity shares of M/s. Smithkline Beecham Healthcare Limited. According to the plaintiff, there were defaults in payment by defendant and the plaintiff sold the equity shares that were pledged during the period September 1996 to November, 1996.

2. The plaintiff in the course of the proceedings and after summons in Appendix-B Form-IV had been issued, sought the permission of the court for amendment. The amendment was allowed vide orders 26.5.1998, by which the plaintiff reduced the suit amount to Rs. 7,77,350. The plaintiff also sought an amendment reducing the rate of interest payable on the amount advanced from 36% to 25%. The amendment was allowed without opposition from the defendant.

3. It is in the back drop of the foregoing facts that the defendant's application for leave to contest is to be considered. Learned counsel for the defendant Mr. Manmohan has urged before me that the defendant is entitled to unconditional leave to contest. He firstly submits that this is a clear case where the plaintiff had earlier filed a suit for recovery of a sum of Rs. 9,68,651/- and then sought an amendment reducing the amount to a sum of Rs. 7,77,350/- apart from seeking an amendment in the rate of inter- est from 36% to 25%. At this stage, the contention of the plaintiff may be noted that the institution of the suit for recovery of Rs. 9,68,657/- was an inadvertent error and in fact the plaintiff had given the credit of the price of the shares which were sold for Rs. 5,60,445/-. Learned counsel for the defendant further submitted that the plaintiff had a duty to minimise the loss to the defendant and in fact had the shares in question, which were lying with the plaintiff been sold in the month of January, 1996, when the alleged default occured, the prevailing market price was Rs. 690 per share, which could have even wiped out the entire loan. Learned counsel relies on explanation under Section 73 of the Indian Contract Act in this regard. Learned counsel also argued that the plaint suffered from several inherent defects inasmuch as it was not instituted by an authorised person and had been instituted and signed by a person in whose favour no authority has been disclosed. Learned counsel for the defendant argued that the promissory note was blank and that is why there was discrepancy in the rate of interest claimed initially and subsequently sought to be claimed.

4. Ms. Anjali Sharma, learned counsel for defendant in her rejoinder refuted the submissions saying that the defendant cannot be permitted to take advantage of the averments made in the original plaint as the amend- ment was allowed without opposition and the bona fides of the plaintiff were clear from the fact that even in the original plaint credit for the sale of shares was given. The amendment was sought bona fide since the amount for which the shares were sold was erroneously mentioned as Rs. 6,35,515/- while they had actually been sold at Rs. 5,60,455/-. Further the plaintiff bona fide itself reduced the rate of interest from 36% to the actual rate which was agreed at 25%. Learned counsel further states that no credence ought to be given to the defendants submission that it was a blank promissory note. In this regard reference to Section 20 of the Negotiable Instruments Act was invited.

5. Having considered the rival contentions raised before me, I am of the view that this is a case in which leave to contest ought to be granted on terms. Undoubtedly the plaintiff at first claimed a sum of Rs. 9,68,651/- which sum was subsequently reduced in the amended plaint to Rs. 7,77,350/-. Rate of interest originally claimed in the suit has been reduced from 36% to 25%. The allegation of the defendant is that it was a blank promissory note and this discrepancy in the rate of interest has arisen on that ac- count. The defendant has also set up a case that the prevailing price of shares during the relevant period was much higher and at one stage it was Rs. 690- per share, which could have completely wiped out the entire loan and left a surplus. On the aspect of the duty, if any of plaintiff to minimise the loss, counsel for the plaintiff relied on Bank of Maharashtra Vs. Racmann Auto (P) Ltd., Nanak Chand Ramkishan Das and Others Vs. Lal Chand Ganeshi Lal and Others.

6. Learned counsel submits that as a Pawnee of the shares the plaintiff had no duty to minimise the loss. The judgments in question have not considered the effect of the explanation to Section 73 of the Indian Contract Act. In any case these are questions which require consideration and a deeper examination, which can be done during trial and not at the stage of leave to contest. As regards the defendant's submission of the plaint being instituted without due authority of law and liable to be rejected on technical pleas of power of attorney of the signatory to the amended plaint not being on record, this is a plea, by which a just cause cannot be defeated. Reference may be invited in this regard 1997 SC 3 United Bank of India Vs. Naresh Kumar and Others.

7. The defendant as discussed above has disclosed facts and grounds in the application for leave to contest which raise triable issues, viz. legal duty of plaintiff to minimize the loss, if any; effect of failure to sell the shares at the time of alleged default; effect of reduction in suit amount and finally the discrepancy and reduction in rate of interest viewed in the light of allegation of execution of blank promissory note. While considering the aforesaid grounds and the submissions of plaintiff, one supervening fact which has to be kept in mind is that receipt of loan/consideration is admitted by the defendant.

8. Considering the facts and submissions as noted above and applying the principles laid down by the Apex Court for grant of leave to contest in M/s. Mechalec Engineers & Manufacturers Vs. M/s. Basic Equipment Corpora- tion and Mrs. Raj Duggal Vs. Ramesh Kumar Bansal . The defendant is granted leave to contest on its depositing in court a sum of Rs.6 lacs within 4 weeks. On amount being deposited within 4 weeks, the same be kept in a fixed deposit initially for a period of one year. In case defendant fails to deposit Rupees six lacs as directed, leave to contest shall stand refused and a decree shall follow for the suit amount together with interest and costs as prayed.

9. Application stands disposed of.