Delhi High Court
Mr. Naresh Kumar Jain vs Alliaz Securities Ltd. on 13 December, 2005
Equivalent citations: II (2006) BC 556, 2007 137 CompCas 360 Delhi, 126 (2006) DLT 138
Author: S K Kaul
Bench: S K Kaul
JUDGMENT
Sanjay Kishan Kaul, J.
1. The plaintiff has filed a suit under the provisions of Order 37 of the Code of Civil Procedure, 1908 (hereinafter referred to as the Code) seeking recovery of a sum of Rs. 22,01,770.50. The claim arises from the shares owned by the plaintiff which were handed over to the defendant for sale. The shares related to 32 companies and have been set out in para `4' of the plaint. The share certificates were delivered along with transfer deeds on or about 10.07.1997 to the defendant and these shares were then sold by the defendant in the market. The plaintiff has also filed a copy of the delivery ledger of the defendant company showing the transaction.
2. The delivery of the shares to the defendant is not denied by the defendant but the stand of the defendant in the application for leave to defend is that some of the shares were returned back to the plaintiff on account of defects. In this behalf, along with a rejoinder, a letter dated 19.08.1997 of the defendant, acknowledged by the plaintiff is available which shows return of some shares of four companies. There is no other material placed on record by the defendant to show that the other shares handed over to them were returned back to the plaintiff on account of any defect.
3. The most important aspect to be considered is that the defendant company issued a cheque of Rs. 10,22,228.90 to the plaintiff on 08.08.1997, drawn on Canara Bank, Green Park Extension, New Delhi. This cheque was presented on the same day and was dishonoured on account of stop payment instructions of the defendant. The stand of the defendant in this behalf is that since the shares were returned, stop payment instructions were issued.
4. In so far as the question of delivery of shares to the defendant is concerned, as noted above the same are not in dispute. Whether some shares were returned on account of defect/signature, is a matter to be gone into at the stage of trial. The defendant, however, has failed to file any document to substantiate the plea other than one letter dated 19.08.1997 which returned only small portion of the total number of shares. The principal amount being value of the shares handed over to the defendant is Rs. 13,76,107/-. Apart from that is the claim of interest of the plaintiff. It can however not be disputed that the defendant handed over a cheque to the plaintiff for part payment of the amount (or the full payment of transacted shares as alleged by the defendant. This cheque was stopped for payment.
5. In considering an application for leave to contest, the nature of defense has to be seen. The parameters and principles to be kept in mind for grant of leave to contest were set out by the apex court in Mechalec Engineers and Manufacturers v. Basic Equipment Corporation, as under:
"(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 friable issue indicating that he has a fair or bona fide 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 discloses 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 had a defense, yet, shows 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 judgment and the defendant is 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 have 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 give leave to the defendant on such condition, and thereby show mercy to the defendant by enabling him to try to prove a defense."
6. In the present case, payment has been tendered through cheque at least for part of the principal claimed in the suit and thereafter stop payment instructions were issued by the defendant. There was no occasion to issue the cheque if the defendant had not in fact found amount due to the plaintiff. This is more so since the receipt of the shares for transfer is not disputed by the defendant and proof of return of shares on account of defects is only in respect of a small proportion of the shares. Apparently, the payment made was for the remaining shares. In such a case, the defendant cannot be entitled to unconditional leave to defend the suit. I fact, in a recent judgment of this court in CS (OS) No. 422/2002 Infrastructure Leasing & Financial Services Ltd. v. Mrs. Santosh Baweja decided on 10.11.2005, reliance was placed on a judgment of the learned Single Judge of Bombay High Court in Summary Suit No. 544/2000 titled 'Motorola India Limited. v. Kiklu I. Malani' decided on 11.06.2002. The proposition laid down is that a leave for seeking defense against the entire claim could not be permitted but would be conditional dependent upon the defendant securing the plaintiff in respect of undisputed amount.
7. In my considered view, at least to the extent of the value of the cheque of Rs. 10,22,228.90, the defendant must be directed to deposit the amount in Court and the amount be released to the plaintiff on furnishing of security for restitution of the amount.
8. In view of the aforesaid, I grant conditional leave to defend on deposit of Rs. 10,22,228.90 by defendant in Court within a period of four weeks from today. The plaintiff will be entitled to release of the amount on furnishing of security for restitution to the satisfaction of the Registrar.
9. The application stands disposed of.
CS (OS) No. 441/2000
10. Subject to deposit of amount as aforesaid, defendant to file written statement within 30 days from today.
11. Parties to file their original documents within the same period of time.
12. List before the Joint Registrar on 16th February, 2006, for admission/denial of documents when the parties shall ensure the presence of their various representatives to complete admission/denial.
13. List before the Court for framing of issues on 17th April, 2006.
14. The plaintiff and the authorised representative of the defendant, shall remain present for recording of statement before issues under Order 14 Rule 4 of the Code.
