Shri Narender Gupta vs M/S. Reliance Polycrete Ltd. & ...
2011 Latest Caselaw 137 Del

         THE HIGH COURT OF DELHI AT NEW DELHI

%            Judgment Reserved on: January 10, 2011
             Judgment Pronounced on: January 11, 2011

+           CS(OS) No. 1588/2008

SHRI NARENDER GUPTA                              .....Plaintiff

                            - versus -

M/S. RELIANCE POLYCRETE LTD.
& ORS.                                        .....Defendants

Advocates who appeared in this case:
For the Plaintiff:      Mr. Rajeev Kumar
For the Defendants:     Mr. M.M.Ansari, Adv. for D-1 to
                        D-4.
                        None for D-5.

CORAM:-
HON'BLE MR JUSTICE V.K. JAIN

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 Digest?

V.K. JAIN, J

CS(OS) No. 1588/2008 & IAs 515/2010, 516/2010, 517/2010 & 3106/2010

1. This is a suit for recovery of Rs.46,82,000/-. It is

alleged in the plaint that defendant No.1 - Reliance Polycrete

Ltd. is an associate of defendant No.5 -Punjab Agro

CS(OS)No.1588/2008

Foodgrains Corpn. Ltd. in terms of an agreement dated

30.6.2005 between them for rendering services for

export/domestic sale of Indian Wheat. Defendants 2 to 4

are directors of defendant No.1. It is alleged in the plaint

that defendants 1 to 4 induced the plaintiff to part with a

sum of Rs.2.40 crores for supply of wheat and pursuant

thereto the aforesaid amount was deposited by the plaintiff

with defendant No.5 in the account of defendant No.1.

Defendant No.5 issued two orders; one for release of 2500

MT of wheat and the other for release of 1250 MT of wheat,

to the plaintiff, in the account of defendant No.1. Vide letter

dated 23.8.2005, defendant No.5 informed the plaintiff

about refund of his money and sought an affidavit from him

for release of an amount of Rs.20,218,000/- in favour of

defendant No.1, to the effect that he shall not claim any

financial compensation or wheat stock from defendant No.5.

The plaintiff submitted the affidavit accordingly and a

cheque of Rs.2,02,18,000/- was issued by defendant No.5

in favour of defendant No.1 which released that amount to

the plaintiff leaving an outstanding balance of

Rs.37,82,000/-. After due discussion amongst the

defendants, defendant No.1 issued a cheque of CS(OS)No.1588/2008

Rs.46,82,000/- to the plaintiff comprising principal amount

of Rs.37,82,000/- and interest on that amount amounting

to Rs.9 lakhs. When presented to the bank, the cheque was

dishonoured for want of sufficient funds. Another cheque of

Rs.2 lakhs was thereafter issued by defendant No.1 to the

plaintiff which also was dishonoured for want of funds. The

plaintiff has, therefore, filed this suit under Order XXXVII of

CPC for recovery of Rs.46,82,000/-.

2. IA 3106/2010 has been filed by defendants 1 to 4

seeking leave to contest the suit. In their application for

leave to contest, these defendants have claimed that there

was no contract between defendant No.1 and the plaintiff for

supply of any food item. It is further alleged that the

cheque for Rs.46,82,000/- as also the cheque for Rs.2 lakhs

were issued by defendant No.1 to defendant No.5 after filling

the cheque amount, but without filling the name of the

payee of the cheques. It is further alleged that the plaintiff

in collusion with defendant No.5, prepared these cheques in

his favour and on coming to note of it, defendant No.1 asked

defendant No.5 to return those cheques to it. On the failure

of defendant No.5 to return the cheques, defendant No.1

stopped the payments of the cheque. It is further alleged CS(OS)No.1588/2008

that the covering letter was also not issued by defendant

No.1 or defendant No.2 and was prepared by the plaintiff in

collusion with defendant No.5, as defendant No.1 used to

send blank letter heads with the signatures of defendant

No.2 to defendant No.5 for business purposes. It is,

however, admitted that the signatures of defendant No.2 on

the covering letters appear to be genuine.

3. IA 516/2010 has been filed by defendant No.5

seeking leave to contest the suit. Vide IA 515/2010,

defendant No.5 has sought condonation of delay in filing

memo of appearance whereas condonation of delay in filing

leave to appeal has been sought by defendant No.5 vide IA

517/2010. In its application for leave to contest, defendant

No.5 has alleged that it had no role whatsoever in the

contract/deal between the plaintiff and defendant No.1. It

is further alleged that the associate agreement dated

30.5.2005 was executed between defendant No.1 and

defendant No.5, but, since defendant No.1 could not

arrange the required amount, the agreement was terminated

on its request and the lease orders issued to it were

cancelled. It is further alleged that an amount of Rs.13.2

crores which defendant No.1 had deposited with defendant CS(OS)No.1588/2008

No.5 was duly refunded to it. It has been pointed out that

release orders for wheat were issued by defendant No.5 in

favour of defendant No.1 and not in favour of the plaintiffs.

It is also alleged that defendant No.1 has not only

acknowledged the receipt of payment, it also indemnified

defendant No.5 vide indemnity bond vide 24.8.2005.

4. In M/s Mechalec Engineers and Manufactures v.

M/s Basic Equipment Corporation (1977) 1 SCR 1060, the

Supreme Court set out the following principles:-

"(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

CS(OS)No.1588/2008

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 leave 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."

5. Coming to the application of defendant No.1 for

leave to contest, it is an admitted case of the parties that

two cheques one of Rs.46,82,000/- and the other of Rs.2

lakhs were issued by defendant No.1. The plea taken by

defendant No.1 is that though the amount of the cheques

CS(OS)No.1588/2008

was filled by it, the name of the payee was left blank and the

cheques were delivered to defendant No.5. However, the

application/affidavit filed by defendants 2 to 4 does not

disclose as to why these two cheques were delivered by

defendant No.1 to defendant No.5. This is not their case in

the application/affidavit filed by them that they owed the

amount of these cheques to defendant No.5. This is also not

their case that these two cheques were issued by defendant

No.1 to defendant No.5 towards some advance payment or

towards some other contractual obligation towards

defendant No.5. Defendant No.5 does not support the case

of defendant No.1 that the aforesaid two cheques were

delivered to it by defendant No.1. In these circumstances, it

appears highly improbable that these cheques were issued

by defendant No.1 to defendant No.5 and not to the plaintiff.

6. Defendant No. 1 is a Limited Company and

defendant No. 5, which is a subsidiary of Punjab Agro

Industries Corporation, as is evident from the documents

placed on record, appears to be a Government company. No

reason has been given by defendant No. 1 for leaving the

name of the payee blank in the cheques issued by it.

Ordinarily, a company is not likely to issue cheques leaving CS(OS)No.1588/2008

the name of the payee blank on them and nor is a

Government company like defendant No.5 likely to accept

cheques in which the name of the payee is left blank. It is,

therefore, difficult to accept that the name of the payee was

left blank when these cheques were issued by defendant No.

7. The plaintiff issued a legal notice dated 21st March,

2006 to the defendants before filing this suit. In para 7 of

the notice, it was specifically stated that defendants issued

a cheque of Rs 46,82,000/- to the plaintiff comprising Rs

37,82,000/- towards principal sum of Rs 9,00,000/-

towards interest. It was further stated in para 8 of the notice

that defendant No. 2 had also issued a letter confirming that

the cheque was in respect of refund of the balance due

amount and interest therein and had also given an

undertaking that the cheque was good for payment and

would be clear on presentation. The plaintiff has also placed

on record copies of postal receipts and certificates of

posting, whereby this notice was sent to the defendants as

also the A.D. cards, whereby receipts of the notice was

acknowledged by defendant No. 2 Shri S.K. Jain, Managing

Director of defendant No.1. The receipt of this notice had

not been denied in the application/affidavit of defendant CS(OS)No.1588/2008

No.1. No reply was sent by defendant No. 1, disputing issue

of cheque of Rs 46,82,000/- by it to the plaintiff or issue of

letter by defendant No. 2 to the plaintiff undertaking that

the cheque, when presented to the bank, would be

encashed.

In these circumstances, it appears to me that

defendant No. 1 has no worthwhile defence with respect to

the cheques issued by it to the plaintiff.

8. As regards the letter written by defendant No. 2,

CMD of defendant No. 1, to the plaintiff, the case of

defendant No. 1 is that blank letterhead with signature of

defendant No. 2 on them used to be kept by them with

defendant No. 5 and has been misused by defendant No. 5

by forging this letter using a blank letterhead with signature

of defendant No. 2 on it. The genuineness of the signature of

defendant No. 2 on the letter has, however, not been

disputed by defendant No. 1. It is difficult to accept that

defendant No. 1, which is a company, used to keep blank

letterheads with signature of its CMD on them with

defendant No. 5. No particular reason has been given by

defendant No.1 for keeping blank letterheads with signature

of its CMD on them with defendant No. 5. Even otherwise, CS(OS)No.1588/2008

it is unacceptable that defendant No. 5 would be keeping

blank letterheads of defendant No. 1 with signature of its

Managing Director on them with it and would then part with

such signed letterheads to the plaintiff. It would be

worthwhile to note here that there is no dispute that the

plaintiff had deposited a sum of Rs 2.40 crores with

defendant No. 5 in the account of defendant No. 1 and out

of that only a sum of Rs 20,21,8000/- was paid by

defendant No. 5 to defendant No. 1 and that too after

obtaining an affidavit from the plaintiff to the effect that the

aforesaid cheque in the name of defendant No. 1 had been

received by him on account of refund which he had

deposited with defendant No. 5 through defendant No. 1 on

account of purchase of wheat from defendant No. 5 and he

would not claim any financial compensation from defendant

No. 5 nor would he file any legal/criminal case against it. In

these circumstances, the inevitable conclusion is that the

amount of Rs 46,82,000/- was agreed to be paid by

defendant No. 1 to the plaintiff and it was towards payment

of that amount that the cheque in question was issued by it

to the plaintiff.

9. The case of the defendant N. 1 is that on coming to CS(OS)No.1588/2008

know that the cheques which it had kept with defendant No.

5 had been handed over by it to the plaintiff, the payment of

cheques was stopped by it. However, the Bank Memo dated

16th January, 2006, pertaining to cheque of Rs 46,82,000/-,

shows that the cheque was dishonoured for want of

sufficient funds. It was only when presented for the second

time that the cheque was returned on 14 th March, 2006

with the endorsement "payment stopped by drawer".

Similarly, cheque of Rs 2 lakh was also returned for want of

sufficient funds vide cheque return Memo dated 23 rd

February, 2006. This is yet another circumstance which

corroborates the case set up by the plaintiff and falsifies the

plea taken by defendant No. 1.

10. In these circumstances, I am satisfied that no

triable issue has been raised by defendant No.1, it has no

plausible defence to the case of the plaintiff and the defence

set up by it is absolutely highly improbable and is

practically sham and bogus. The plea taken in the

application filed by defendant No. 1 does not make out a

bona fide defence to the case of the plaintiff. The averments

made in the application/affidavit of defendant No. 1 do not

indicate any reasonable likelihood of the defendant being CS(OS)No.1588/2008

able to defeat the claim of the plaintiff in case leave to

defend is granted to it.

Hence, following the guidelines laid down by Supreme

Court in M/s Mechalec Engineers and Manufactures, I

am of the view that defendant No. 1 is not entitled to leave

to contest the suit.

IA No. 3106/2010, to the extent it pertains to

defendant No.1 M/s Reliance Polycrete Ltd., is dismissed.

As far as defendant Nos. 2 to 4 are concerned since

they are only Directors of defendant No. 1 and, therefore,

are not personally liable to pay amount of cheque to the

plaintiff, the plaintiff is not entitled to any decree against

them.

As far as defendant No. 5 is concerned, admittedly, it

is a separate company and there is no privity of contract

between the plaintiff and defendant No. 5. This is plaintiff's

own case that amount of Rs 2.40 crores was deposited by it

with defendant No. 5 in the account of defendant No. 1.

Admittedly, cheque of Rs 20,21,8000/- was issued by

defendant No. 5 in the name of defendant No. 1 and not in

the name of the plaintiff. The cheques, on which the suit is

based, were issued by defendant No. 1 and not by defendant CS(OS)No.1588/2008

No. 5. Thus, there is no privity of contract between the

plaintiff and defendant No. 5. Moreover, vide his affidavit

submitted to defendant No. 5, the plaintiff undertook not to

file any legal/criminal case against defendant No. 5 and

subsequently agreed that he will claim no financial

compensation from it. Therefore, the plaintiff is not entitled

to any decree against defendant No.5.

For the reasons given in the preceding paragraphs,

a decree for recovery of Rs 46,82,000/- with costs and

pendente lite and future interest at the rate of 12% is

hereby passed in favour of the plaintiff and only against

defendant No.1. The suit against other defendants is

dismissed, without any order as to costs. The suits as well

as the applications stand disposed of accordingly.

(V.K. JAIN) JUDGE

JANUARY 11, 2010 'sn'/bg

CS(OS)No.1588/2008