Mahesh Kumar Wadhwa vs Mr Bimal Luthra
2008 Latest Caselaw 2218 Del

     *IN THE HIGH COURT OF DELHI AT NEW DELHI

+                    IA.No.3300/2007 in CS(OS) 2083/2006

%11.12.2008                      Date of decision : 11.12.2008

MAHESH KUMAR WADHWA                                       ..... Plaintiff
                                  Through: Mr, Siddharth Yadav, Advocate

                                      Versus

MR BIMAL LUTHRA                                           ..... Defendant
                          Through:     Mr Dinesh Garg with Mr Kapil Sekhri
                                       and Ms Rachna Agrawal, Advoctes.


CORAM :-
HON'BLE MR. JUSTICE RAJIV SAHAI ENDLAW

1.    Whether reporters of Local papers may
      be allowed to see the judgment?   YES

2.    To be referred to the reporter or not? YES

3.    Whether the judgment should be reported
      in the Digest?                        YES


RAJIV SAHAI ENDLAW, J.

1. The defendant seeks leave to defend the suit under Order 37

CPC instituted for recovery of Rs 32,91,100/- on the basis of two

promissory notes for Rs 14,55,000/- and Rs 4,75,000/-, with interest

at 24% per annum.

2. The plaintiff approached the court pleading that the defendant

is the husband of the cousin of the father-in-law of Shri Manohar Lal

Wadhwa, brother of the plaintiff.

3. It was further pleaded that the defendant approached the

plaintiff through the said Shri Manohar Lal Wadhwa for a friendly

loan to help the defendant in a financial crisis; the plaintiff, on the

request of his brother, claims to have given a friendly loan of Rs

IA.No.3300/2007 in CS(OS)2083/2006 Page No. 1 of 8 14,55,000/- in cash to the defendant on 5th November, 2003 and a

further friendly loan of Rs 4,75,000/-, also in cash on 16th February,

2004; the defendant is stated to have further assured to repay the

said loan as early as possible and to pay interest to the plaintiff at

24% per annum; the defendant is stated to have executed pronotes

in favour of the plaintiff and to have "also executed a receipt of the

amount in the presence of Shri M.L. Wadhwa on both the dates i.e.,

5th November, 2003 and 16th February, 2004".

4. The plaintiff, upon the default of the defendant to refund the

monies or pay interest, claims to have got issued a notice dated 6th

February, 2006 to the defendant. The defendant is stated to have

issued a reply dated 2nd March, 2006 denying the loan and setting up

a false defence. The plaintiff thus instituted the suit under Order 37.

5. The defendant has sought leave to defend on the ground that

the suit is based on forged and fabricated documents and to

pressurize the defendant into withdrawing the complaint stated to

have been made by the defendant with the police authorities against

Shri Manohar Lal Wadhwa, brother of the plaintiff, of the offences of

misappropriation of monies alleged to have been committed by Shri

Manohar Lal Wadhwa, while in the employment of the defendant. It

is stated that the plaintiff had no means to give the loans stated to

have been given in cash; it is further alleged that the plaintiff has not

shown the loan to the income tax authorities. The defendant also

pointed out in the application for leave to defend that the two

promissory notes filed by the plaintiff before this court, each had two

parts i.e., a receipt and the promissory note; that there were no

signatures of the defendant on the receipt part and the signature on

IA.No.3300/2007 in CS(OS)2083/2006 Page No. 2 of 8 the promissory note part "are either forged or promissory note is

made by lifting signed revenue stamps from any other

documents/vouchers of the defendant's firm by Shri Manohar Lal

Wadhwa while in the employment of the defendant and thereafter

affixing the same on the promissory note part". It is further pleaded

that the promissory notes are without consideration and the

provisions of Section 269 SS of the Income Tax are also invoked to

argue that there could be no loan of more than Rs 20,000/- in cash.

The counsel for the defendant, during the hearing, also relied on

Bharat Nidhi Limited v Shital Prasad Jain 2002 Dishonour of

Cheque Reporter 197 (Delhi) and Love Kumar Sethi v Deluxe

Stores 145 (2007) DLT 275 DB.

6. The counsel for the plaintiff, in rejoinder, has argued that the

receipt portion of the pronotes being unsigned is immaterial

inasmuch as the receipt of money in cash is admitted in the

promissory note part also. The inconsistencies between the reply to

the legal notice and the application for leave to defend vis-a-vis the

allegation of the monies alleged to be embezzled by the brother of

the plaintiff are also pointed out. The plaintiff has denied that his

brother Shri Manohar Lal Wadhwa was, at any time, in the

employment of the defendant. It is also argued that the defendant

has not filed a single document to show the complaint, if any, or

proceedings, if any, lodged by the defendant against Shri Manohar

Lal Wadhwa, and as a counter blast whereto the present suit is

alleged to have been filed.

IA.No.3300/2007 in CS(OS)2083/2006 Page No. 3 of 8

7. In my view, even though the defendant has, in the leave to

defend, admitted his signatures on the two documents on the basis

whereof this suit under Order 37 has been filed, the defendant is

entitled to unconditional leave to defend for the following reasons:

A. The signatures of the defendant on both promissory notes are contained only on the revenue stamps affixed on the said promissory notes and there are no signatures whatsoever on the body of the promissory note itself. The way the signatures of the defendant are, it was quite possible to affix the revenue stamps bearing the signatures of the defendant on the documents filed before this court. Section 4 of the Negotiable Instruments Act requires a Promissory Note to be signed by the maker. Such signature has to be in such a way as to acknowledge the contract contained therein and to be a part of the instrument or to show authorship of document. Here the signatures are not on the document but only on the adhesive stamp affixed on the document. The reason normally for putting some part of signature on the stamp is to cancel the same. Such cancellation can be done independently also under section 12 of the Stamp Act. But where signatures are on the stamp only, as in the present case, a triable issue arises as to whether such signatures were intended to be or were signatures on the instrument.

B. Though the plaintiff has denied that his brother was in the employment of the defendant but the relationship between the parties is admitted. It is not as if the parties were strangers to each other so as to make the availability to the plaintiff of the revenue stamps bearing the signatures of the defendant an impossibility.

C. Even though the plaintiff has alleged a friendly loan but the parties nevertheless executed documents. Not only so,the agreement of payment of interest at 24% per annum is also alleged and which can by no means be said

IA.No.3300/2007 in CS(OS)2083/2006 Page No. 4 of 8 to be a friendly rate of interest. In the face of the plea of the parties executing documents and agreeing to payment of commercial rate of interest, the documents cannot be viewed as having been executed casually in a friendly atmosphere. The pronote pleaded is the standard form pronote available in the market and which comprises of two parts i.e. a receipt and a promissory note. It is again not as if the receipt part of the document was not filled up or discarded by the parties. The same is also filled up. If that were to be so, no explanation is offered as to why the said receipt portion was not signed or as to why the promissory note part of the document was not got properly signed i.e., with the signatures appearing partly on the document and partly on the revenue stamp as is the norm.

D. There is also no explanation as to why such large sums of monies were transacted in cash.

E. The plaintiff has not filed a single document to show the availability of cash in such large volume with him on the dates alleged.

F. A party who transacts in such casual manner, does so at his own peril. The purport of Order 37 is to provide benefit of summary procedure to plaintiffs who take care to have their transactions properly documented in accordance with law. The summary procedure is intended to encourage due recording / documentation in the course of trade/commerce. A person who while lending / advancing money makes a proper valid bill of exchange hundi, promissory note or a contract was intended to be bestowed advantage of quicker recovery of money without protracted trial. A party to avail of such significant benefit ought to take care in the making and execution of the document and lend money by cheque only, so as to eliminate defences of denial. The abridgement of

IA.No.3300/2007 in CS(OS)2083/2006 Page No. 5 of 8 procedure of trial for adjudication of factual disputes in Order 37 is an exception and cannot be extended to cases where the document itself is suspect or leaves scope for denial of receipt of money. The banking sector has developed immensely in the country over the years, with all having access to the banks. In these modern times transactions in large sums of monies, in cash and through non banking channels will always remain open to challenge and cannot claim preference in procedure for adjudication. To hold otherwise would be to give encouragement to such transactions, which otherwise need to be curbed. With the introduction of Section 138 in the Negotiable Instruments Act, judicial notice can be taken of the fact that normally post dated cheques in refund of monies lent/advanced are taken. Even if the plaintiff was lending money in cash, the plaintiff in the normal course would have been expected to take cheques for refund. All these circumstances in the present case lead me to the conclusion aforesaid. Nothing said here should however be understood as laying down that Order 37 CPC would not be applicable wherever transaction is in cash. If the cash is explained and supported by other documents, action would lie. However, in this case notwithstanding specific plea in leave to defend application that the plaintiff had no means and had not disclosed the said monies in his income tax returns, the plaintiff has in his reply evaded answering the said pleas and also not filed any document to controvert the same. There cannot be two stands permitted to any party, one for purposes of taxation and other for litigation.

G. There is a gap of more than 3 months between the two transactions claimed by the plaintiff. Since no date for refund is specified, ordinarily in such transactions interest would be payable monthly. Interest at the rate of 24% per annum on Rs 14,55,000/- would be at the rate of Rs 29,100/- per month. If the defendant had not paid any interest for 3 months to the plaintiff, there is no explanation as to why further amounts were advanced/ loaned by the plaintiff to the defendant.

IA.No.3300/2007 in CS(OS)2083/2006 Page No. 6 of 8 H. Though the transaction is supposed to have taken place in the presence of the brother of the plaintiff but the documents are not signed as witness by the brother of the plaintiff or by any other person. Since the plaintiff has claimed relationship with the defendant through plaintiff's brother, in the ordinary course the plaintiff would be expected to take signatures of his brother whose presence is admitted, as a witness.

I. The plaintiff took a plea of receipt as well as the pronote having been executed by the defendant. However, the document does not show the receipt to have been executed.

8. Undoubtedly, the stand of the defendant in reply to the legal

notice and in the written statement is inconsistent and the defendant

also has not placed before the court any police complaint stated to

have been filed against the brother of the plaintiff. The counsel for

the defendant, on inquiry, stated that the complaint though made

was not pursued because the defendant shifted from Delhi to

Chandigarh. However, since it is the plaintiff which has approached

this court, it has to be, at this stage, seen whether the case is such

which does not require an opportunity to be given to the defendant

to contest the claim of the plaintiff and to immediately decree the

suit against the defendant. I do not find the case to be falling in that

category.

9. The next question which arises is as to whether any condition

is to be imposed on the defendant. The Division Bench of this court

in Babbar Vision India Pvt. Ltd. Vs. Rama Vision Ltd. 99 (2002)

DLT 556 held that when defence raises a triable issue, leave must be

IA.No.3300/2007 in CS(OS)2083/2006 Page No. 7 of 8 granted unconditionally, whether the defence is legal or equitable

and even though it may not ultimately turn out to be a good defence.

10. It was further held that if conditions are imposed even where

triable issues are raised, the same will make grant of leave illusory.

Only where defence is not bonafide - conditions can be imposed.

Reference can also be made to Milkhi Ram India Pvt. Ltd. Vs.

Chaman Lal Brothers AIR 1965 SC 1698 in holding that only if

upon consideration of material placed before it, the court comes to

the conclusion that the defence is a sham one or is a fantastic or

highly improbable, it can be justified in putting the defendant upon

terms before granting leave to defend

11. Looked at in this light, I do not find this case to fall in the

category of requiring imposition of conditions. The application for

leave to defend is thus allowed. The defendant is granted

unconditional leave to defend.

RAJIV SAHAI ENDLAW (JUDGE) December 11, 2008 M

IA.No.3300/2007 in CS(OS)2083/2006 Page No. 8 of 8