Delhi High Court

Sanjay Steel & Anr. vs Kapil Kumar Tayal & Anr. on 22 February, 2010

Author: P.K.Bhasin

*             IN THE HIGH COURT OF DELHI AT NEW DELHI
%                      RFA 417-418 OF 2006
+                            Date of Decision: 22nd February, 2010


#      SANJAY STEEL & ANR.                           ...Appellants
!                     Through: Mr. Sanjay Gupta, Mr. Ajay Monga
                               and Mr. Sumit Bansal, Advocates.


                                 Versus


$      KAPIL KUMAR TAYAL & ANR.                     ...Respondents
^                    Through: Mr. G.S. Tayal, Attorney of R-1.


     CORAM:
*    HON'BLE MR. JUSTICE P.K.BHASIN
1. Whether Reporters of local papers may be allowed to see the
   judgment?(No)

2. To be referred to the Reporter or not?(No)

3. Whether the judgment should be reported in the digest?(No)


                           JUDGMENT

P.K.BHASIN, J:

The respondent no.1 had filed a suit against the appellants and

respondent no.2 for recovery of Rs. 5,51,000/- under Order XXXVII of

the Code of Civil Procedure and the same came to be decreed

consequent upon the dismissal of appellants‟ application for leave to

defend which was moved under order XXXVII Rule(3) 5 CPC. The

appellants, who were defendants no. 1 and 2 in the suit, have

challenged the order dated 5th April, 2006 passed by the learned

Additional District Judge dismissing their application for leave to

defend the suit.

2. The respondent no.1(who shall hereinafter be referred to as

„the plaintiff‟) had filed a suit on the allegations that he had advanced

a cash loan of Rs.5,00,000/-(Rupees five lacs only) to the appellants

and respondent no.2(who shall be referred to as „the defendants‟) on

1st November,2004. Appellant no. 1 is a partnership firm and

appellant 2 and respondent no.2, both are brothers, were its partners

and there is some relationship also between them and the plaintiff.

The loan was repayable with interest @ Rs.1.20 per hundred and in

order to secure the repayment of the loan amount the defendants

had given to the plaintiff a post-dated cheque no. 499112 dated 8-

12-04 drawn on State Bank of Bikaner and Jaipur, Naraina Industrial

Area, Phase-II, New Delhi for Rs.5,00,000/-. The defendants had

executed a receipt also on 1st November, 2004 in token of their

having received the loan amount and in that receipt the defendants

had also agreed to re-pay the loan on demand. It was further

pleaded in the plaint that the plaintiff had called upon the defendants

to repay the loan amount on 1st December, 2004 along with interest

accrued thereupon as he was in urgent need of money and at that

time the defendants no. 2 and 3, who are now appellant no.2 and

respondent no.2 herein respectively, had told the plaintiff to present

the above referred post-dated cheque on its due date. However, on

presentation to the defendants‟ bank that cheque was dishonoured

and returned back to the plaintiff by his bank vide memo dated 15-

12-04 with the remarks „insufficient funds‟. The defendants having

failed to make the payment of the cheque amount as also the

interest on the loan amount despite their having been called upon to

make the payment vide notice dated 22nd December, 2004 the

plaintiff filed suit for recovery of Rs. 5,51,000/- out of which the

amount of Rs. 5,00,000/- was the principal loan amount and Rs.

51,000/- was claimed as interest.

3. In their application for leave to defend the suit filed under Order

XXXVII Rule 3(5) CPC the defendants had claimed that in January,

2002 the defendants required financial assistance as they had

suffered huge losses in their business. Plaintiff‟s father Mr. G.S.

Tayal, who was known to defendant no. 2, had approached the

defendants and had told them that he could arrange loan for them

for their business needs. Mr. G.S. Tayal at that point of time had take

some blank signed papers from the defendants and three advance

receipts of the total loan amount of Rs. 11,00,000/-. One receipt

dated 16th January, 2002 was for Rs. 4,00,000/- in favour of Mr. G.S.

Tayal, the second one was dated 31st January, 2002 for Rs.

2,00,000/- in favour of Mr. G.S. Tayal‟s son Mr. Devender Kumar

Tayal and the third receipt dated 16th January, 2002 was for Rs.

5,00,000/- in favour of Mr. G.S. Tayal‟s wife Smt. Munni Tayal. It was

further claimed that at the time of signing of these receipts by the

defendants Mr. G.S. Tayal had represented to them that he would

have the cheques for the loan amounts prepared and delivered to

them and at that time it was also the understanding arrived at that

the said amount of Rs. 11,00,000/- would become payable only after

31st March, 2006 and in order to secure the repayment of the loan

amounts Mr. G.S. Tayal had taken blank undated cheques from the

defendants to be kept only as a security and to be presented for

encashment only after 31st March, 2006. Subsequently, Mr. G.S.

Tayal had handed over the cheques for the afore-said loan amounts

to the defendants and the same were encashed. In October,2004 the

defendants required more money again Mr. G.S. Tayal told defendant

no. 2 that he could arrange more money also and at that time also he

had told the defendants that they will have to first execute receipts in

advance and thereafter he would deliver the cheques. Since the

defendants were not doubting the intentions of Mr. G.S. Tayal they

executed three receipts on 1st November, 2004 out of which one was

for Rs. 5,00,000/- in faovur of Mr. G.S. Tayal‟s son Kapil Kumar Tayal,

the plaintiff, second one was for Rs. 5,00,000/- in favour of Mr.

Devender Kumar Tayal and the third one was for Rs. 10,00,000/- in

favour of Mrs. Munni Tayal. This time, however, Mr. G.S. Tayal

despite having obtained the said three receipts from the defendants

did not give them the cheques on account of the loan amounts

mentioned in the said three receipts dated 1st November, 2004. The

defendants, in the afore-said circumstances, claimed that the cheque

for Rs. 5,00,000/-, on the basis of which the suit had been filed by

the plaintiff Kapil Kumar Tayal was without consideration and,

therefore, no suit could be filed on the basis of that cheque. It was

also pleaded that Mr. G.S.Tayal was a retired Government servant

and so he could not have arranged such a huge cash loan and the

source of loan required to be investigated by CBI.

4. The plaintiff filed reply to the application of the defendants for

leave to defend and re-iterated whatever had been pleaded by him in

the plaint while denying the averments made by the defendants in

their application that no loan amount had been paid to them in

November, 2004. It was further claimed by the plaintiff that the

defendants had issued the cheque dated 8th December, 2004

towards re-payment of the loan amount but the same had been got

dishonoured on presentation. It was further claimed that the

defendants had, in fact cheated not only the plaintiff but many other

innocent people also in the market and he had come to know that

many cases, civil as well as criminal, had been filed against the

defendants.

5. The learned trial Court in the impugned order rejecting the

leave to defend application of the defendants observed that the

defendants had categorically admitted the case of the plaintiff. This

observation of the learned trial Judge, however, is contrary to the

facts stated by the defendants in their leave to defend application

wherein they had, in fact, categorically claimed that no money was

actually advanced to them by the plaintiff in November,2004. They

had only admitted having signed the receipt dated 1st November,

2004. Similarly the defendants had also not admitted having issued

the cheque dated 8th December,2004 in favour of the plaintiff and

they had also not claimed, as observed by the trial Judge, that the

plaintiff was not entitled to the encashment of the cheque issued by

them prior to 31st March, 2006. The cheque which according to them

was to be presented after 31st March,2006 was the cheque given as

a security in the year 2002 when they had taken total loan of

Rs.11,00,000/- from Mr. G.S.Tayal who had at that time got the loan

amounts disbursed through his family members. The learned counsel

for the appellants had thus rightly contended that the trial Judge had

not read and understood the pleas raised in the leave to defend

application properly. On the other hand, Mr. G.S.Tayal, attorney of the

respondent no.1 supported the decision of the trial Court and argued

that in view of the fact that the defendants had admitted having

signed the receipt dated 1st November,2004 acknowledging the

receipt of Rs.5,00,000/- as loan from the plaintiff the defence that no

loan was in fact disbursed was rightly rejected being totally sham. It

was also contended that from which source the money was advanced

in cash by the plaintiff was not the concern of the defendants

although it had been claimed by the plaintiff in his reply to the leave

to defend application that he was a businessman and had money to

give to the defendants.

6. Regarding the principles to be followed by Courts while dealing

with leave to defend applications Hon‟ble Supreme Court in its

judgment reported as "Defiance Knitting Industries (P) Ltd. vs. Jay

Arts", (2006) 8 Supreme Court Cases 25 has observed (in para nos.

13 and 14) as under:

"13. While giving leave to defend the suit the court shall observe the following principles:

(a) If the court is of the opinion that the case raises a triable issue then leave to defend should ordinarily be granted unconditionally. See Milkhiram (India) (P) Ltd. v. Chamanlal Bros. The question whether the defence raises a triable issue or not has to be ascertained by the court from the pleadings before it and the affidavits of parties.

(b) If the court is satisfied that the facts disclosed by the defendant do not indicate that he has a substantial defence to raise or that the defence intended to be put up by the defendant is frivolous or vexatious it may refuse leave to defend altogether. Kiranmoyee Dassi v. Dr. J. Chatterjee (noted and approved in Mechaelec case).

(c) In cases where the court entertains a genuine doubt on the question as to whether the defence is genuine or sham or whether it raises a triable issue or not, the court may impose conditions in granting leave to defend.

14. In Raj Duggal v. Ramesh Kumar Bansal it was held as follows:

"3. Leave is declined where the court is of the opinion that the grant of leave would merely enable the defendant to prolong the litigation by raising untenable and frivolous defences. The test is to see whether the defence raises a real issue and not a sham one, in the sense that if the facts alleged by the defendant are established there would be a good or even plausible defence on those facts. If the court is satisfied about that leave must be given. If there is a triable issue in the sense that there is a fair dispute to be tried as to the meaning of a document on which the claim is based or uncertainty as to the amount actually due or where the alleged facts are of such a nature as to entitle the defendant to interrogate the plaintiff or to cross-examine his witnesses leave should not be denied. Where also, the defendant shows that even on a fair probability he has a bona fide defence, he ought to have leave. Summary judgments under Order 37 should not be granted where serious conflict as to matter of fact or where any difficulty on issues as to law arises. The court should not reject the defence of the defendant merely because of its inherent implausibility or its inconsistency." (emphasis supplied)

7. In the present case defendants had claimed in their leave to

defend application that the plaintiff‟s father had obtained some

blank cheques at the time of advancement of the loan in January,

2002 to be kept only as a security and the same were to be

represented for encashment only after 31st March, 2006. In the

reply to that application the plaintiff did not specifically deny that

claim of the defendants. Therefore, the possibility of the plaintiff

using one of those cheques for making the basis for filing the present

litigation cannot be totally ruled out at least at this stage. As noticed

already, there is some relationship also between the parties and

therefore, the claim of the defendants that receipts from them have

been obtained before advancement of the loan amount in November,

2004 also cannot be straightaway rejected as being improbable

defence. I also find substance in the plea raised on behalf of the

defendants that when in January, 2002 loan upto the extent of Rs.