Vijaya Home Loans Ltd. vs M/S. Crown Traders Ltd. And ...
2001 Latest Caselaw 657 Del

ORDER

A.K. Sikri, J.

1. The plaintiff had filed the instant suit being No. 1854/96 under order xxxvII of Code of Civil Procedure. The suit was for recovery of Rs.49,35,184/- together with pendentelite and future interest on the principal amount of Rs. 32,56,630/- as well as cost. Since defendants could not be served be ordinary process, service by publication was ordered in an application moved by the plaintiff under Order V Rule 20 of Code of Civil Procedure. Defendants were served summons under Order xxxvII of Code of Civil Procedure by publication in 'Statesmen' on 30th November, 1996. As inspite of service defendants did not enter appearance within ten days of service of the summons on them, the plaintiff moved an application for passing decree for the suit amount which was allowed and judgment and decree dated 21st August, 1997 was passed decreeing the suit for Rs. 49,35,184/- with interest pendentelite and future interest till realisation at the rate of 22 per cent per annum on Rs.32,56,630/- and the costs against the defendants.

2. This IA (2592/98) has been filed by the defendants under provisions of Order xxxvII Rule 4 read with Section 151 of Code of Civil Procedure for setting aside ex-parte judgment and decree dated 21st August, 1997 and grant of leave to enter appearance and defend the suit .Notice in this application was served upon the plaintiff who filed reply contesting the application. In the application it is stated that there was no proper service on the defendants and in fact the address of the defendants as mentioned in the plaint itself was incorrect. This wrong address i.e. C-7. Greater Kailash-I, New Delhi was furnished by the plaintiff insptie of knowledge to the effect that defendant No.1 had shifted its place of business from this address to M-49, Greater Kailash-1, New Delhi. Similarly address of defendant No.2 was wrongly mentioned as R-7, Greater Kailash, New Delhi insptie of having full knowledge of the fact that she had shifted to A-6, Poorvi Marg, Vasant Vihar, New Delhi much prior to the filing of the suit. It was also submitted that counsel for the plaintiff who filed the plaint and appeared at the relevant time also had personal knowledge about the correct address of the defendants where thy had shifted as he had been acting as counsel for and on behalf of defendants as well as husband of defendants NO.2 not only prior of the filing of the suit but even thereafter. Thus on the following premise the defendant is seeking setting aside of ex-parte judgment and decree:

i) wrong and incorrect address of defendants have been willfully furnished by plaintiff in the plaint with mala fide intention to mislead this court;

ii) the service report regarding attempt to effect the service on defendants through ordinary process is defective and the service reports are contradictory;

iii) the service of defendants effected through publication in the English daily "The Statesman" on November 30, 1996 is defective and illegal;

iv) the judgment and decree dated 21st August, 1997 has been obtained by plaintiff by practicing fraud and by misleading this court; and

v) the suit of the plaintiff is ex-facie false, frivolous, not maintainable in law, barred by limitation, hit by provisions of Section 34, Code of Civil Procedure and is based upon incorrect statement of facts.

3. The defendants have also dilated the aforesaid aspects in the application as well as oral submissions. It is submitted that communication dated 20th May, 1996 was sent by the defendants to the plaintiff by registered post communicating the change of address. Copy of the said letter is annexed as Annexure-A along with the original postal receipt dated 21st May, 1996 as Annexure-B. In order to show the knowledge of plaintiff's counsel about the current addresses of the defendants, certain documents are also filed. It is also averred that there is no specific denial of non-receipt of communication dated 20th May, 1996 by the plaintiff in reply to the application. The defendants have also submitted that in view of these facts, it was not a case of effecting substituted service on the defendants under Order V Rule 20 of Code of Civil Procedure and orders to this effect were obtained by mis-representation. Further in any case, Rule 8 contained in Chapter-VII-B, Volume-IV of Delhi High Court Rules and Orders which provides for sending copy of the newspaper where the notice is published to the defendants under postal certificates was also not complied with.

4. In the reply filed by the plaintiff to the aforesaid IA various allegations made in the IA are denied. The plaintiff has attempted to show that all possible efforts were made to serve the defendants through the ordinary process and when these efforts failed application under order V Rule 20 of Code of Civil Procedure was filed for substituting service. In fact inspite of best efforts, the plaintiff cold not obtain the present address of the defendant No.1 inasmuch as the plaintiff even verified from the office of the Registrar of Companies in order to ascertain the change of address but it transpired that the defendants had not effected any change of their address of registered office in the records of Registrar of Companies. Therefore, the defendants were rightly served by substituted service. In so far as allegations against their counsel who had filed the case on behalf of the plaintiff, the same are denied.

5. It may be mentioned at this stage that after this IA was filed, the learned counsel for the plaintiff who was appearing at that time sought discharge from the case by moving an application under Rule 5 of Chapter V of Delhi High Court (Original Side) Rules, 1967 stating that in view of such allegations and the manner in which counsel was dragged into the litigations between the plaintiff and defendants he did not want to continue in the case. Along with the application affidavit was filed by the counsel denying having any knowledge about the shifting of the defendants from their earlier address to the new place or his professional dealings or regular basis with Mr. Atul Bansal, husband of the defendants No.2. There is no reason not to disbelieve the counsel for the plaintiff and therefore, this part of the submission needs to be rejected.

6. The record shows that the summons were initially sent to the defendants at the addresses given in the plaint by registered AD post as well as by ordinary process. The summons sent to defendant No.1 through registered AD post were returned back with the postal remarks 'no such firm at the given address'.The process server also reported that the premises were closed since long. Likewise summons sent to defendants No.2 also could not be served and the remarks were that she had gone out of Delhi (in fact as it transpires now, she had shifted her residence). In these circumstances when the defendants 1 and 2 could not be served at the given addresses, the court passed the order of service on the defendants by publications. However, it now transpires that the defendants 1 and 2 had shifted from the addresses given by the plaintiff in the plaint. The defendants have, in the instant application, stated that the factum of change of addresses of the defendants was communicated to the plaintiff by letter dated 21st May, 1996 sent through registered post. The original postal receipt dated 21st May, 1996 is also annexed. Significantly in reply to this application the plaintiff has not specifically denied the receipt of this letter although it is stated at one place that the letter is fabricated. When the letter was sent by registered post, the presumption in law would be that it was received by the addressee namely the plaintiff in this case. It was therefore necessary for the plaintiff atleast to specifically deny the receipt of this letter. Whether the plaintiff gave the addresses of the defendants from which the defendants have already shifted willfully or it was a bonafide mistake is an aspect which need not be gone into. Fact remains that before filing of the suit the defendants had shifted their place of work/residence. Therefore the summons sent of the defendants at these places were naturally could not be served on them. In so far as service by publication in newspaper is concerned, it is the cases of the defendants the defendants do not subscribe to 'Statesmen' wherein the notice was published and in the absence of correct addresses of the defendants they did not come to know of this publication or they were sent any copy of this newspaper as is mandatorily required under Schedule-7 Vol.II of Delhi High Court Rules and Orders. Therefore there is a lurking doubt about the proper service of the summons of the suit under Order xxxvII on the defendants.

7. Order xxxvII provides that after decree is passed under sub-rule (3) of Rule 2 thereof the court may, under 'special circumstances' set aside the decree and may give leave to defend to appear to the summons and to defend the suit if it deems reasonable to do. The 'special circumstances' will depend on the fact of each case and it is not possible to give exhaustive definition of 'special circumstance'. The words are wide, comprehensive and flexible. When the application for setting aside a decree passed under Sub-rule(3) of Rule 2 of Order xxxvII is preferred and the court entertains a reasonable doubt about the proper service of summons on the defendants, the court may set aside such a decree. It does not need any elaboration that it the case set up by the defendants is that there was no due service of summons in the suit and the defendants are able to establish this plea, then it may be as a 'special circumstances' as contemplated under Rule 4 of Order xxxvII Code of Civil Procedure.

8. In the instant case there is a dispute as to whether the defendants had informed the plaintiff about the change of their addresses or not. The defendants have projected a letter sent by registered post to the plaintiff in this respect. Although the plaintiff has stated that he said letter is fabricated one. The defendants have produced the original of the postal receipt signifying the sending of the letter by registered post to the plaintiff. In normal course there would be a presumption that such a letter was received by the plaintiff. There are certain other circumstances as well which weigh in favor of the defendants. After the publication of notice in the 'Statesman', the provisions of Rule 8 contained in Schedule-7B, Volume-V of the Delhi High Court Rules and Orders were not complied with. The aforesaid aspects taken individually may not show 'special circumstances' the cumulative effects of all these factors would constitute 'special circumstances' and one may inter from these circumstances that the defendants did not come to know of the filing the pendency of this suit and since there was no service, defendants could not enter appearance.

9. It may be mentioned at this stage that in invoking Rule 4 of Order xxxvII, the defendants will have to satisfy two conditions namely, i) there was no proper service of summons in the suit or that they were prevented by sufficient cause from getting leave to defend the suit and ii) that they have substantial defense to raise in the suit. The 'special circumstances' mentioned in Rule 4 only contemplate the aforesaid conditions which the defendants must satisfy to enable them to get the decree set aside and get leave to defend the action [Refer : (1986) 1 Madras Law Journal 108]. Therefore, it is also necessary to examine as to whether defendants have been able to fulfill the second condition about the substantial defense to raise in this suit.

10. While dealing with second aspect, it would be appropriate to first notice the averments made in the plaint on the basis of which present Suit has been filed by the plaintiff. The plaintiff and the defendant no.1-Company entered into an Agreement dated 17th March, 1991 as per which the parties had decided to develop the property comprising of land ad-measuring 1000 sq.yds approximately bearing municipal no.64-B,Greater Kailash, Part-I, New Delhi by demolishing the then existing construction therein and making construction of a multi storeyed department. AS per the agreement, 12 flats were to be constructed. The plaintiff under-wrote the sale of all the flats. The plaintiff, pursuance to the aforesaid agreement between the parties, disbursed the amount of Rs.1.5 crores to the defendants no.1, details of which are given in para 6 of the plaint and this fact is not in dispute. The plaintiff also identified three prospective buyers with whom the defendants no.1 was to enter into an agreement to sell. An amount of Rs.55.12 lakhs was collected by the plaintiff from these prospective buyers.

11. However, both the parties mutually rescinded the agreement by entering into another Agreement dated 30th June, 1992. As per this Agreement, the defendant no.1 agreed to pay back to Rs.1.5 crores to the plaintiff. Since a sum of Rs. 55.12 lakhs was collected by the plaintiff from the three prospective buyers, the defendants no.1 assumed this liability and accordingly this amount was deposited from Rs.1.5 crores. Thus as per the Agreement, the defendant no.1 agreed to pay a sum of Rs.94.88 lakhs (Rs. 1.5 crores - Rs. 55.12 lakhs) together with interest in the following manner:-

a Rs. 20,00,000/- (Rupees Twenty Lakhs only) shall be repaid within 45 days of execution of this Agreement.

b. Rs. 45,00,000/- (Rupees Forth Five lakhs only) be repaid together with interest thereon at the rate of 22% (Twenty Two percent) calculated from this Agreement till the date of actual payment thereof, by or before 31.8.92.

c. The balance amount of Rs. 29,88,000/- (Rupees Twenty Nine Lacs Eighty Eight Thousand only) shall be repaid together with in interest thereon @ 22% (Twenty Two percent) calculated from the date of execution of this Agreement till the date of actual payment thereof by or before 31.12.1992.

12. However, as per the averments made in the plaint, since the defendant no.1 did not pay back the amount of Rs.55.12 lakhs to the prospective purchasers and since that amount was collected by the plaintiff from the prospective purchasers, the plaintiff was forced to refund the said amount to the prospective purchasers and intimation to this effect was given to the defendants no.1 who was called upon the make the payment of Rs.55.12 lakhs as well with this liability of defendant no.1 again stood at of Rs.1.5 crores. According to the plaint, the defendant no.1 re-paid the first Installment of Rs.20 lakhs within the stipulated time of 45 days. However, it failed to effect repayment of second and third Installment within the prescribed time. Payments which were made thereof from time to time are mentioned in Annexure P-1 to the plaint. The plaintiff states that the defendant no.1 was liable to pay interest @ 22% per annum on the delayed payment as per the Agreement dated 30th June, 1992. Thus, in the Statement (Annexure P-1) the amount is appropriated towards interest as it became payable from time to time and only the balance amount out of the amount paid by the defendant no.1 each time was appropriated towards principal. In this way a sum of Rs. 32,56,630/- still remains to be paid by the defendant no.1 to the plaintiff. Since the defendant no.1 did not make the payment present Suit is filed for recovery of Rs. 49,35,630/- after adding interest @ 22% per annum of Rs. 32,56,630/-.

13. In the leave to defend the application filed by the defendant no.1, it is stated that the defendants have paid the amount in terms of Agreement dated 30th June, 1992. The plaintiff is claiming an amount of Rs.55.12 lakhs which is not payable inasmuch as after the Agreement dated 30th June, 1992 was signed between the parties the plaintiff completely extricated itself from the transaction with flat buyers and therefore, there ceased to be privity of contract between the plaintiff and the flat buyers. The defendants did not ask the plaintiff to make the payment to the flat buyers and the plaintiff has failed to adduce on record any documentary evidence to this effect. The payment is made, if any, without knowledge of the defendants. Therefore, according to the defendants, the defendants are not liable to make this payment of Rs.55.12 lakhs and if this amount is deducted no amount is payable by the defendants to the plaintiff.

14. It is not in dispute that under the first Agreement dated 7th March, 1991 it is the plaintiff who had arranged for the three prospective buyers and had also taken an amount of Rs.55.12 lakhs from these three prospective purchasers of the flats. Therefore, notwithstanding the second Agreement dated 30th June, 1992 between the plaintiff parties, the prospective purchasers could still insist the plaintiff to refund the amount given by them. Faced with this situation, the plaintiff had to make the payment. The plaintiff has placed on record original letters of the three prospective buyers acknowledging the payment made to them which is paid by means of A/c. payee cheques. In fact, letter dated 17th February, 1993 was written by the plaintiff to the defendant no.1 in which it is stated that the prospective buyers had agreed to withdraw and as per the commitment in the Agreement, the defendant no.1 was to refund their amount latest by 31st May, 1993.

15. Therefore, the defendant no.1 cannot be permitted to say that it could have forfeited the amount of the prospective buyers and nothing was payable. Not only this the defendant no.1 was made payment of Rs.1.55 crores to the plaintiff. This amount also stands admitted. If the defendants had to make the payment of Rs. 94.88 lakhs only and the plaintiff had repaid the amount to the prospective buyers unauthorisedly and without the tacit consent of the defendants, the defendants no.1 would not have made the payment to the plaintiff on this account. Making the payment of Rs.1.55 crores shows that even after adjusting interest payable against the amount of Rs. 94.88 lakhs payable as per Agreement dated 30th June, 1992, the defendant no.1 continued to make further payments. That is why as against the grant of Rs. 55.12 lakhs, the total amount remained to be payable came down to Rs. 32,56,630/- only. It would be significant to not that the defendant no.1 had written letter dated 7th March, 1995 to the plaintiff admitting having paid an amount of Rs.1.55 crores and asking for refund of Rs.5 lakhs, as according to the defendant no.1 amount payable was Rs. 1.5 crore only. This letter itself shows that the defendant no.1 had agreed to make the payment of Rs.55.12 lakhs also. Otherwise, the amount payable would not have been Rs.1.5 crores and it should have been, according to the defendants, Rs. 94.88 lakhs only. it is clear that while writing such a letter, the defendant no.1 was not taking into account the interest payable. Therefore, up to 7th March, 1995 the stand of defendant no.1 was not that amount of Rs. 55.12 lakhs is not payable. In so far as payment of interest is concerned, that was payable as per the interest is concerned, that was payable as per the Agreement dated 30th June, 1992 itself. The defense now taken in the application for leave to defend therefore clearly goes contrary to the defendant no.1 on his own stand taken in its letter dated 7th March, 1995. In the face of that letter, the defendants cannot now be permitted to state that the plaintiff had refunded an amount of Rs. 55.12 lakhs to the prospective buyers of their own and without any authority of the defendant no.1. By paying, the amount in question, the defendant no.1 acquiesced into the same the accepted the liability.

16. However, the defendants have taken the plea that the Suit is time barred. The defendants have also pointed out that in the Statement of account (Annexure P-1) the plaintiff has deposited an amount of Rs.55.12 lakhs on 5th May, 1993 and calculated the interest thereon whereas the amount was refunded to the prospective buyers not in lumpsum but by staggered payments on different dates on or after 5th May, 1993.

17. Therefore, keeping in view the facts and circumstances of this case although the plaintiff would be entitled to leave to defend but it has to be conditional i.e. subject to deposit of Rs. 32,56,630/- in this Court within a period of eight weeks and security for the balance amount.

18. IA stands accordingly disposed of.

S.No. 1854/96

19. Let written statement be filed within eight weeks. Replication be filed within four weeks thereafter. Parties may file documents within twelve weeks from today.

20. List before the Joint Registrar for admission and denial of document on 21st September, 2001.

21. List before the Court for framing of issues on 16th October, 2001.