Anand Kumar vs Anil Arora
2005 Latest Caselaw 1275 Del

JUDGMENT

Swatanter Kumar, J.

1. The Plaintiff filed a Suit against the Defendants for recovery of Rs. 1,20,48,788/- with pendentelite and future interest @ 18% per annum under Order 37 of the Code of Civil Procedure. The Plaintiff filed an application being IA NO. 1468/2003 for amendment of the Plaint which was allowed vide order dated 5th February, 2003. By way of amendment they made certain additional averments and also claimed interest prior to the institution of the Suit. It is the case of the Plaintiff that he is engaged in the business of investments. Defendant No.2 which is a Company incorporated under the provisions of the Companies Act, 1956 with its registered office at 8/28 Abdul Aziz Road, WEA Karol Bagh, New Delhi. The Defendants are stated to be stock and share brokers having membership of the National Stock Exchange of India Limited. Defendant No.1 is the Director of the Defendant No.2. Plaintiff had friendly and cordial relations with Defendant No.1 and his brother Narender Kumar Arora for last more than a decade and the Defendant used to borrow money from the Plaintiff from time to time with utmost fair and frank dealings and therefore have attained a climate of mutual trust and confidence. During the dealings the defendant No.1 borrowed on behalf of Defendant No.2 loans of the following description :-

  Date       Amount           Cheque/            Pay Orders No.
06.01.00   Rs. 30,00,000/-  Federal Bank Ltd.  801710
10.01.00   Rs. 23,00,000/-   -do-              428168
18.2.2000  Rs. 30,03,600/-   -do-              428287
29.9.2000  Rs. 20,02,400/-   -do-              861590

 

2. The sum of Rs. 3,600/- out of Rs. 30,03,600/- was paid by the Defendant vide Cheque No. 380032 dated 14.07.2000, drawn on Canara Bank. 
 

3. Out of the said amount which was given to the Defendants by cheques the Defendants had executed promissory notes and had also paid a sum of Rs. 8 lacs on 24th March, 2000 as against the amount borrowed of Rs. 23 lacs on 10th January, 2000. This amount was paid by cheque. The Defendants paid part of the interest by different cheques during the period of 5.9.2000 to 28.6.2001 but in June 2001 they stopped making the payment of interest as well as the principal amount. Despite persuasions by the Plaintiff the Defendants had not cleared the liability. Defendant No.1 also issued cheques duly signed by him on behalf of the Defendant No.2 for an amount aggregating to Rs. 91 lacs on various dates, the details of which have been given in para 13 of the Plaint but later on the cheques were returned unpaid with the reason payment stopped by drawer. According to the Plaintiff the Defendants are liable to pay a sum of Rs. 1,20,48,788/- which includes Rs. 95,02,400/- on account of principal plus Rs. 25,46,388/- on account of interest. The Plaintiff also served a notice upon the Defendants on 5th January, 2002 annexed as Annexure E to the Plaint calling upon them to make the payment of the said amount with interest. Despite service of notice no response was received by the Defendants compelling the Petitioner to file the present Suit on the basis of the cheques. This is the pleaded case of the Plaintiff in the Plaint.

4. The Suit being under the provisions of Order 37 of the Code of Civil Procedure summons were issued to the Defendants who filed appearance and thereafter the Plaintiff filed an application being IA NO. 403/2004 praying for leave to judgment while IA 2810/2004 was filed by the Defendants under Order 37 Rule 3 of the CPC seeking leave to defend unconditionally. Thus, by this order I would dispose of both these applications.

5. The case of the Defendants in the application for leave to defend is that the transaction between the Plaintiff and the Defendants were relating to sale and purchase of shares. From time to time the amount which was due to either party as indicated in the settlement was recorded in the books maintained and in order to recover the debt balance as a consequence of some of these transactions for which the cheques in question were given by the Plaintiff on various dates to reduce the debt balance standing to his account.

6. Eventually, when the dealing between the parties ceased on 27th June, 2001 there was left a debt balance of Rs. 35,238.92 in the account of the Plaintiff. Therefore, the so called loan was not actually a loan but payment in adjustment of debt balance as a consequence of sale and purchase of shares on behalf of the Plaintiff.

7. In the written submission made on behalf of the Applicant it is admitted that 13 cheques were given by the Defendants but all these cheques were of blank dates. Thus, cheques were issued at the instance of the Plaintiff that he required some amount in consideration of the share and credit balance which the Plaintiff might be having with the Defendants. It is further the case of the Applicant that the Defendants had asked the Plaintiff to return the cheques and the promissory notes but he stated that they have been lost. Consequently, the Defendants stopped the payment of the said cheques vide letter dated 16th April, 2001 and 19th April, 2001.

8. It is specifically disputed and denied that cheques were issued before the dates of 1.10.2002, 21.10.2002 and 23.10.2002. According to the applicant these dates have been put by the Plaintiff without the consent of the Defendant-Applicant.

9. It is also stated that cheque numbers 380031 and 380032 of sums of Rs. 3,600/- and Rs. 5 lacs respectively were given by the Defendants to the Plaintiffs on 14.7.2000 and the cheque was encashed by the Plaintiff on 5.7.2000 as have been admitted in para 7.

10. The applicant has filed documents running into nearly 1000 pages showing the regular business dealings with the Plaintiff in relation to the share transactions. Few settlements entered into between the parties have also been placed on record. The counter foils of the cheque book in relation to the same series have also been placed on record to show that the cheques of that series were issued in the year 2000 and cheque numbers 380030-38 were issued on 14.7.2000. The cheques which are subsequent in number were issued in favor of the Plaintiff in October, 2002 and were duly encashed. In the statement of account filed on record, cheque number 132893 was issued on 3rd January, 2000 and another cheque number 132883 for Rs. 30 lacs was issued on 27.12.1999 which were encashed by the Plaintiff, as such the cheques in question as referred to in the Plaint could not have been issued in the year 2002. It is also pleaded case of the applicant that they have been dealing with the Plaintiff since the year 1996. In the year 2001 due to burst in the stock market the Plaintiff suffered huge losses and stopped dealing in shares through the Defendant. The transactions were relating to sale and purchase of shares and there was no loan transaction between the parties. It was to secure mutual interest and as per trade practice promissory notes were executed and blank cheques were given to the Plaintiffs and which were returned to the Defendants from time to time upon settlement of accounts. They were returned to the Plaintiff and or were destroyed once the payments were received and accounts between the parties were settled. It is stated that the present claim of the Plaintiff is an abuse and is based upon manipulation of documents.

11. From the huge documents which have been filed on record by the Defendant one fact is clear that parties have been having business dealings/transactions for considerably long period and large sums of money were transacted between parties in relation to their business from time to time. These facts are not even disputed before the Court now, as such the Plaintiff ought to have disclosed complete and full facts in his plaint. Even if the Suit was based upon cheques and was intended to be filed as a summary Suit under the provisions of Order 37 of the Code still it was obligatory upon the part of the Plaintiff to give complete and detailed facts. These all are material and relevant which would have a bearing on the matters in controversy. The Defendants have not disputed the fact that they had issued pro-notes as well as cheques in favor of the Plaintiff. The Defendants contend that the cheques were issued in regular course of business and were not even dated. The cheques were issued during the period of December 1999 to September 2000 and they have been misused by the Plaintiff by interpolating the date of 2002 as the cheques when issued had no date. It is also the defense of the Defendants that as per the practice and trade the pro-notes executed by the Defendant in favor of the Plaintiff were returned to him and were destroyed. Photocopies of some of the pro-notes were executed by the Defendant in favor of the Plaintiff has been placed on record. There is also no doubt that letter dated 16.4.2001 placed at Pg. 31 of the documents file show that the Defendants have stopped the payment of the cheques. Of course, no reasons have been stated, as now pleaded, that Plaintiff had informed the Defendants that cheques have been lost. Photocopies of some of the pro-notes relating to the period September and October, 1999 have been placed on record Along with the statement of account showing regular business between the parties. Most of the cheques including the 4 cheques in question have been shown in the statement of the accounts and as per the version of the Defendants the same have adjusted towards the outstanding in the name of the Plaintiff. The computerised duly certified statement of accounts of the Plaintiff at Pg. 27-28 of these entries have been shown to the credit of the Plaintiff and accounts were adjusted. Photocopy of the counter-foils of the cheque book have been placed on record to indicate that the cheques were issued in the year 2000 and not in the year 2002.

12. Photocopy of the bill for statement from time to time have been placed on record and some of them have been stated to be filed by the Plaintiff. Certainly the parties are into business transactions and the 4 cheques in question did not appear to be the sole transaction of loan between the parties, at least prima-facie. May be the Defendant-Applicant needs to face a trial to prove the averments, but ex-facie there is no dispute and denial to the issuance of the cheques and supporting pro-notes have not been signed and issued by the Defendants in favor of the Plaintiffs. Once these documents are admitted, the onus to show that they were not for consideration and were mere business transactions as per practice and trade is heavily on the Defendant Applicant. May the defense taken by the Defendants is a moonshine, but certainly is not a case where the Defendant can be granted leave unconditionally. According to the Plaintiff, the 4 cheques were not part of any business transaction to say a clean loan given by the Plaintiff to the Defendant supported by pro-notes. The application to repay the loan is absolute on the Defendants. The stoppage of payment of cheques made by the Defendant is of no consequence as it is a self serving document. No reason has been stated for stopping of payment of these cheques and in case no intimation thereof was given by the Defendant to the Plaintiff. In fact they have also placed letters on record empowering the Defendant No.1 to take loan from the Plaintiff for and on behalf of Defendant No.2. This is the undisputed document which will show that the parties were entering into loan transaction and not the sale and purchase of shares as pleaded by the Defendant-Applicant.

13. Counsel for the Applicant relies upon the judgment of this Court in the case of M/s Datt Enterprises Ltd. Vs. V.K. Dua & Anr. to contend that the defense taken by the applicant raises a friable issue as cheques were issued as a security. The applicant would thus be entitled to unconditional leave to defend. He also places reliance upon the case of M/s Mechalec Engineers & Manufacturers Vs. M/s Basic Equipment Corporation, in support of his contentions for seeking an unconditional leave. The Counsel appearing for the Plaintiff also relies upon the same judgment of the Supreme Court to state that the grounds for leave to defend are no longer but a moonshine and is a stand in apparent contradiction to the written documents of the Defendants itself and as such the leave to defend should be declined to the applicant. He also relies upon the judgment of the Supreme Court in Mrs. Raj Duggal Vs. Ramesh Kumar Bansal, to contend that the friable issue even if raised by the applicant in the present case is not of the nature which would justify grant of unconditional leave to the applicant in face of the fact that issuance of the pro-notes as well as the cheques are admitted.

14. It may be appropriate at this stage to refer to recent judgment of this Court pronounced in CS(OS) 791/2002 titled as 'M/s. Bush Boake Allen (India) Ltd. Vs. M/s. Mehtajee and Company & Ors.' where after discussing the above judgment of the Supreme Court, the Court held as under :-

15. There is no invoice on record wherein payment of interest is stated to be payable to the plaintiff from the defendants. The provisions of Order 37 of the Code are to be construed strictly and only a claim which is based upon a written contract can be allowed within these provisions. In absence of any written contract between the parties, about the payment of interest, the plaintiff cannot press the claim of interest in a suit under Order 37. Order 37 itself is a self-contained code and the plaintiff cannot rely upon custom in trade or the provisions of the interest for payment of interest. Thus the claim of the plaintiff for grant of interest is also declined. The plaintiff has prayed for award of interest @ 24% per annum pendente lite and future.

16. After amendment of 1976 of the Code the discretion to give leave to defend is delineated by the proviso. The first proviso to Order 37 Rule 3(5) provides that leave to defend shall not be refused unless the Court is satisfied that the facts disclosed by the defendant do not indicate that he has a substantial defense to raise or that the defense intended to be put forward is frivolous and vexatious. The second proviso to the said Rule further states that claim of the plaintiff if admitted by the defendant, the leave will not be granted unless such amount was deposited. The discretion of the Court is to be guided by well established principals of law, keeping in view the facts and circumstances of each case. But wherever the Court finds and satisfied that there is absence of substantial defense or that the defense is frivolous or vexatious, the Court would decline leave to defend to the applicant. The use of the expression good defense must be understood so as to include in its ambit reasonable friable issue and a bonafide stand. The good defense of the defendant has not to be a defense which is illusory or shown to be ex-facie unbelievable. Grant of leave to defend thus would be relateable to the content and value, in terms of law of the defense put forward by the defendant. The legislative intention in introducing the word good is to emphasise the need of a bonafide defense which is acceptable within the afore corners of law. A dispute raised for the sake of dispute or denial for the sake of denial with intent to delay the proceedings would be a category of cases which cannot fairly fall under this category. It is the duty of Court to amplify act of justice rather than jurisdiction or authority. It is a matter of common knowledge that denial by a party is the easiest method of delaying the proceedings before the Court and in fact without being subjected to rigors of high cost and penal loss. A plea which is put forward by the defendant should go to the root of the liability and must raise an issue which in law would be triable.

17. Admittedly, the cheques were issued in favor of the Plaintiff by the Defendants in consideration of the execution of the pro-notes. This is a clear admission on the part of the Defendant and the parties to prove that such cheques were not properly and validly issued for consideration or were of collateral security, is upon the Defendant.

18. In view of the law laid by the Supreme Court in the case of Harprasad Vs. Allahabad Bank, , it will be just fair and equitable to grant conditional leave to the Defendant-Applicant.

19. The friable issue raised by the Defendant-Applicant are not free of doubt. The defense taken may not be sham or moonshine but is a defense which defies even a common sence that if the cheques were given by the Defendants to the Plaintiff in business transaction where was the occasion for supporting such a liability by issuing pro-notes which at least prima facie is admissible of a liability with a contentment to repay the same with interest.

20. In the facts and circumstances of the present case it will be just and proper to protect the Plaintiff by imposition of a reasonable condition.

21. In view of the above discussion the application for leave to defend is allowed, the Defendant-Applicant is granted leave to defend the Suit subject to the condition that he shall furnish security of an immovable property to the satisfaction of the Registrar of this Court to the extent of the Suit amount within 4 weeks from today.

22. Consequently, the application for leave to judgment is dismissed.