Shri Rana Inderjit Singh vs M/S Kembiotic Laboratories & ...
2008 Latest Caselaw 1095 Del

*       IN THE HIGH COURT OF DELHI AT NEW DELHI

+                        IA.No.5319.2006 in CS(OS)83/2006

%                                   Date of decision :    22.07.2008

SHRI RANA INDERJIT SINGH                                   ....... Plaintiff
                        Through:              Mr R.K.Dhawan, Advocate

                                       Versus


M/S KEMBIOTIC LABORATORIES & OTHERS                        ........ Defendants
                                   Through : Mr Munish Tyagi, Advocate.

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 YES in the Digest?

RAJIV SAHAI ENDLAW, J

1. This is an application for leave to defend the suit for recovery

of Rs 53,50,000/- with future interest at 18% per annum from the

date of institution of the suit till realization, filed under the

provisions of Order 37 of the Code of Civil Procedure.

2. The suit has been filed on the basis of eleven dishonoured

cheques dated from 20th December, 2002 to 25th January, 2004, for

varying amounts totaling Rs 53,50,000/- issued by the defendant

No.1 firm, in which the defendant Nos 2 to 4 are partners, in the

name of the plaintiff. It is the case of the plaintiff that he is a

permanent resident of Canada and is engaged in export business

of Bio Chemical products and used to provide raw materials to the

defendants; that in the year 2001, the defendants offered the

plaintiff to collaborate with the defendants' business on 50% share

holding basis and requested the plaintiff to advance loan of Rs

53,50,000/- and assured the plaintiff that after receiving the said

amount from the plaintiff, requisite formalities will be carried out

by the defendant firm vis-a -vis the collaboration. The plaintiff

claims to have given a sum of US $ 113829.78 equivalent to Rs

53,50,000/- to the defendants and which are stated to have been

duly received by the defendant No. 2 as a partner of the defendant

No.1 firm. It is further pleaded that the defendant No.2 assured

the plaintiff that till the completion of the necessary formalities

with regard to the collaboration, the said amount of Rs 53,50,000/-

shall remain as loan with the defendants and upon the failure of

the defendants to complete the requisite formalities, the

defendants shall refund the said sum of Rs 53,50,000/- to the

plaintiff. It is further the case of the plaintiff that the defendants

failed to carry out the formalities of the collaboration inspite of

repeated assurances and reminders and upon the plaintiff

requesting the defendants to return the said amount, the

defendants in acknowledgment of their liability issued the

aforesaid cheques totalling Rs 53,50,000/- in favour of the plaintiff.

Upon dishonour of cheques, proceedings under Section 138 of

Negotiable Instruments Act were initiated by the plaintiff against

the defendants and thereafter the present suit was filed.

3. The defendants have applied for leave to defend on the

ground that the suit has not been instituted and the plaint has not

been signed and verified by the duly authorized person on behalf

of the plaintiff; the power of attorney on the basis of which the suit

has been filed authorized the attorney to only file complaints but

not the suit; the defendants have denied that there was any talk of

collaboration between the plaintiff and the defendants and further

denied that any sum of Rs 53,50,000/- was given by the plaintiff to

the defendants; that the plaintiff has not filed any document of

payment of the large sum of Rs 53,50,000/- to the defendants and,

in fact, has not even given the particulars of the payment; that if

the plaintiff claims to have given the money in Hong Kong, it could

not have been given in US dollars; that the plaintiff has not filed

any document of the plaintiff being in possession of US $

113829.78; that the plaintiff being an NRI could not have made

any investment in India, for which the amount is pleaded by the

plaintiff to have been given without obtaining the requisite

permissions from the Reserve Bank of India; that no payment in

foreign currency could even otherwise be made by the plaintiff, an

NRI to the defendants who are Indians; that the defendants had

been making purchases from the plaintiff and had been making

payments to the plaintiff bill-wise - however sometimes advance

payments were made by the defendants to the plaintiff and which

is evident from the letters of the plaintiff filed alongwith the

application for leave to defend; that though the plaintiff has in the

plaint pleaded collaboration on 50% share basis but in the notice

preceding the suit the plaintiff had stated collaboration on 15%

share basis. It is further the case in the application for leave to

defend that the last sale purchase transaction between the plaintiff

and the defendants was vide invoice dated 5th December, 2001,

payment whereof was made through Union Bank of India on 6th

May, 2002. Thereafter the business dealing between the parties

had broken down. The defendants claim that the plaintiff visited

India in October, 2002 and offered that he intended to invest a

sum of Rs53,50,000/- in the business of the defendants and asked

the defendants to give some kind of security for the said amount of

Rs 53,50,000/- to be invested by him and demanded postdated

cheques in the value of Rs 53,50,000/- as security but with the

condition that the aforesaid cheques shall not be presented in the

bank and will be kept as security towards investment to be made

by the plaintiff in the defendant No.1 firm. The defendants claim

that the plaintiff further assured that he will apply and get the

necessary permission from the Reserve Bank of India, but the

plaintiff never applied for or got the permission and hence did not

pay the sum of Rs53,50,000/- which was to be invested by him in

the defendant No.1 firm.

4. The plaintiff has filed the reply to the application for leave to

defend denying all the contents therein. Arguments in the

application for leave to defend were heard in part on 5 th March,

2007 when the following order was made :

"Learned counsel for the defendant has, during the course of arguments, submitted that amount in US dollars was paid in cash though no such pleas is taken in the leave to defend. Learned counsel for the plaintiff submits that this amount was deposited in the bank account of the defendant No.2. In support of the plea,

he will place on record the documents to show that the amount in US dollars was given to the defendant No.2. He also wants to file the photocopy of the passport of the plaintiff showing as on which dates the plaintiff visited India. These documents shall be filed along with affidavit within five weeks, as prayed, with advance copy of the same to the learned counsel for the defendant who may file reply within three weeks thereafter."

There appears to be a typographical mistake in the aforesaid

order. During the course of hearing, I have put the same to the

counsel for the parties and they both agreed that, in fact, during

the hearing on 5th March, 2007 it was the plaintiff who had

submitted that the amount in US dollars was paid in cash.

5. The counsel for the plaintiff after 5th March, 2007, sought

time on 4th May, 2007 for filing the documents. No documents

were filed and on 13th August, 2007 the counsel for the plaintiff

stated that no more documents were required to be filed in terms

of order dated 5th March, 2007.

6. The counsel for the defendants has urged the same argument

as noted above. Per contra the counsel for the plaintiff has argued

that admittedly the cheques were issued by the defendants and

there is a presumption in law that the cheques are issued for valid

consideration. He has further argued that the cheque in the form

of security would not have been given by several cheques but a

single cheque would have been given and the very fact that the

total sum of Rs 53,50,000/- was spread out over 11 cheques

spanning for over one and a half year indicated that the same was

towards refund of monies received. The counsel for the plaintiff

has further urged that the defence of the defendant of having

given the cheques by way of security, without having received any

money from the plaintiff, is highly improbable. The counsel for the

plaintiff has relied upon Syed Moosa Emami v Sunil Kumar

Gilani & another AIR 1982 Delhi 590; S.P. Chopra v Chopra

gems 118 (2005) DLT 536; Rajesh Ahuja v Manoj Mittal & Anr

59 (1995) DLT 823. The first of the said judgments is not apposite

to the facts of the case. The remaining two judgments are with

respect to the rate of interest in suits u/O XXXVII CPC.

7. On the aforesaid facts and applying the principles laid down

in Mechalec Engineers and Manufacturers v M/s Basic

Equipment Corporation AIR 1977 SC 577, it has to be

determined whether the defendants are entitled to leave to defend

and if so on what terms.

8. Mere possession of dishonoured cheques issued by the

defendant does not entitle the plaintiff to a decree under Order 37,

as the counsel for the plaintiff would argue. If that were to be so,

no leave to defend a suit on basis of dishonoured cheque would be

granted. However, if the facts as set out in leave to defend make

out a defence or a likely defence, leave is granted. It is to be

noticed that the payment of US dollars equivalent of Rs 53,50,000/-

by the plaintiff to the defendant is as integral a part of the plaint as

the dishonoured cheques. The plaintiff has utterly failed to place

on record any document or material to indicate that the said

amount of Rs 53,50,000/-equivalent to US $ 113829.78 was paid by

the plaintiff to the defendants. As aforesaid, at one stage during

the course of hearing, the plaintiff had sought opportunity to file

documents and affidavit in this regard but none was filed. In the

event of the plaintiff failing to establish any such payment and with

respect to which no document has been produced, the cheques

admittedly issued by the defendants to the plaintiff and which have

been dishonoured would cease to be for consideration. Section

139 of the Negotiable Instruments Act also provides for a

presumption only, that unless the contrary is proved, the holder of

a cheque received the cheque for the discharge of a debt/liability.

In the absence of anything whatsoever forthcoming from the

plaintiff showing the payment of Rs53,50,000/- to the defendant, it

cannot be said that the defendants can be condemned without

being given an opportunity to rebut the presumption. The denial

by the defendants, coupled with absence of any document of

payment raises a triable issue. Thus, in my view, the defendants

are entitled to leave to defend. Reliance in this regard can be

placed on M/s Datt Enterprises Limited v V.K. Dua 118 2005

DLT 408.

9. The next question which arises is whether any condition

ought to be imposed on the defendants. The Division Bench of this

court in Babbar Vision India P Ltd v Rama Vision Limited 99

(2002) DLT 556 held that when defence raises a triable issue leave

must be granted unconditionally whether the defence is legal or

equitable and even through it may not ultimately turn out to be a

good defence. There is absolutely nothing to show that the

defence is not bonafide in the present case. Admittedly the parties

have had commercial relations in the past and it is not as if the

plaintiff could not have been in possession of cheques issued by

the defendants, but for the reasons stated by the plaintiff. The

Division Bench in judgment supra 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,

can conditions be imposed. Reference can also be made to

Milkhiram India P Ltd v Chaman Lal Brothers AIR 1965 SC

1698 holding that if upon consideration of material placed

before it the Court comes to the conclusion that the defence is

a sham one or is fantastic or highly improbable it would be

justified in putting the defendant upon terms before granting

leave to defend.

10. Looked at in this light, I find that if the defendants are able

to prove that no sum of Rs 53,50,000/- allegedly paid by the

plaintiff to them was in fact paid, the suit of the plaintiff will fail.

Undoubtedly the plea of the defendants of having given the

cheques for Rs 53,50,000/- by way of security even before the

monies were paid by the plaintiff looks improbable. However, the

same is to be compared with the case of the plaintiff. The case of

the plaintiff of having paid the huge amount in US dollar

equivalent of Rs. 53,50,000/- to the defendants in cash and further

the failure of the plaintiff to be able to place any document before

the court to show that the plaintiff was possessed of such amount

or in fact had paid the same to the defendants make the case of the

plaintiff equally improbable. The plaintiff admits of being aware of

legal permission being required before he could invest monies, but

claims to have advanced monies to the defendants inspite of the

same. The defence of the defendants of money having not been

paid by the plaintiff because of permissions having not been

obtained is more in consonance with law and hence no malafides

can be attached to it. Thus the facts in the present case are of a

nature as to entitle the defendants to interrogate the plaintiff and

to cross examine his witnesses, within the parameters laid down in

Mrs Raj Duggal v Ramesh Kumar Bansal AIR 1990 SC 2218.

In Asia Today Limited and Another v Sinhal Metal Industries

Ltd & Anothers MANU/DE/1581/2006 another Single Judge of

this court held that where authority to institute suit was

challenged in leave to defend application; failure of plaintiff to file

documents showing such authority, raises a fair dispute entitling

the defendant to leave to defend.

Therefore, I am of the view that the present case does not

call for imposing any condition on the defendants while granting

leave to defend to them. The application of the defendant is

accordingly allowed and the defendants are granted leave to

defend the suit.

RAJIV SAHAI ENDLAW, JUDGE July 22, 2008 M