National Horticulture Board vs M/S Global Industries Limited & ...
2012 Latest Caselaw 2116 Del

$~21
*IN THE HIGH COURT OF DELHI AT NEW DELHI

+      I.A. No. 11691/2002 (u/O 37 R 3(5) CPC) in CS(OS)
       411/2002

                                       Decided on 28th March, 2012.

       NATIONAL HORTICULTURE BOARD            ..... Plaintiff
                      Through: Mr. Sanjeev Singh, Adv.
               versus

       M/S GLOBAL INDUSTRIES LIMITED &
       ORS.                              ..... Defendants
                     Through: Mr. Anil Sharma, Adv. for
                              D-1.
                              Mr. Hem C Vashisht, Adv.
                              for D-2 & D-3.

Coram:
HON'BLE MR. JUSTICE A.K. PATHAK

A.K. PATHAK, J. (ORAL)

1. By this order I shall dispose of an application under Order 37

Rule 3 Sub Rule 5 of the Code of Civil Procedure (CPC, for short)

filed by the defendants for grant of leave to defend.

2. Plaintiff has filed this suit under Order 37 of the Code of

Civil Procedure, 1908 (CPC for short) for recovery of

`1,76,68,908/- together with pendentilite and future interest @ 18%

per annum and costs against the defendants.

3. It may be noted here that during the pendency of suit

defendant no.1-company has been wound up by the High Court of

Punjab & Haryana, vide order dated 28th February, 2008 passed in

Company Petition No. 151/2003. Pursuant to the said order Official

Liquidator has been appointed. Defendant no.1 is, thus, being

represented through the Official Liquidator. Vide order dated 27th

August, 2010, Single Judge of High Court of Punjab & Haryana has

granted permission to the plaintiff to continue with the present suit,

subject to the condition that any decree, which may be passed, shall

not be executed against the assets of the company (in Liquidation),

without the permission of said Court.

4. It is alleged that the plaintiff is a Society registered under the

Societies Registration Act, 1860 and has been formed by the

Government of India, Ministry of Agriculture, inter alia, for the

purpose of promoting, developing and supporting horticulture

activities by rendering financial assistance to various institutions

engaged in horticulture activities including processing of fruits and

vegetables and floriculture. Defendant no. 1 is a company

registered under the provisions of the Companies Act, 1956 having

its registered office at Flat No. 10, Gauri Apartments, 3-4, South

End Lane, near Aurangzeb Road, New Delhi - 110011. Defendant

nos. 2 and 3 had guaranteed the due payment of the loan extended

to defendant no. 1 by the plaintiff.

5. Vide application dated 9th August, 1994 defendant no. 1

requested the plaintiff to grant financial assistance for its integrated

floriculture project. Vide Letter of Intent/sanction dated 3rd

February, 1995 plaintiff granted term loan of `76 lacs to defendant

no.1. Loan Agreement dated 13th February, 1995 was executed by

the defendant no. 1 whereby it had agreed to pay the principal sum

in five equal yearly installments of `15,20,000/- each commencing

from 31st March, 1997. It was further agreed that whole principal

amount would be refunded latest by 31st March, 2001. Defendant

no. 1 further agreed to pay service charges @ 4% per annum on the

outstanding loan amount. Defendant no.1 further agreed that, in

case of default of payment of any installment of principal amount as

per the schedule, the entire amount of term loan or balances then

due including the outstanding service charges and penal interest will

become forthwith due and payable by defendant no. 1. Defendant

no. 1 also created first charge by way of hypothecation in favour of

the plaintiff on all its movable properties including movable

machinery, machinery spares, tools, accessories etc. by executing

an agreement to this effect on the same day. Demand Promissory

Note was also executed on 13th February, 1995. Defendant no. 1

further created pari pasu charge and joint equitable mortgage of its

immovable property situated on a plot of land measuring 17 acres 2

Canal and 8 marlas at Village Abhaypur to Garhi Bazidpur

Permitline, P.O. Damdama, District Gurgaon, Haryana, in favour of

plaintiff, Haryana State Industrial Development Corporation

Limited (HSIDC) and Canara Bank, 74, Janpath, New Delhi.

6. Defendant nos. 2 and 3 extended their personal guarantee and

executed Guarantee Agreement dated 13th February, 1995.

7. Subsequently, defendant no. 1 again approached the plaintiff

and requested for further financial assistance vide application dated

27th June, 1995. This request was also considered by the plaintiff

and loan of `24 lacs was sanctioned vide Letter of Intent/sanction

dated 8th October, 1996. Defendant no.1 again executed Loan

Agreement dated 9th October, 1996. Defendant nos. 2 and 3

executed Guarantee Agreement dated 9th October, 1996 to secure

this loan as well. The second loan amount of `24 lacs was also

repayable in five equal yearly installments of `4.80 lacs each

commencing from 31st October, 1997 till the payment of the whole

principal amount. Defendant no. 1 was also to square up this loan

latest by 31st October, 2001. Service charge @ 4% per annum on

the outstanding loan amount was agreed in respect of the second

loan transaction as well. Letter of hypothecation was executed on

9th October, 1996 for covering this loan as well. Demand

Promissory Note for `24 lacs was executed on 9th October, 1996.

On execution of the aforesaid documents loan of `24 lacs was

disbursed in two installments of `15 lacs and `9 lacs on 27th

November, 1996 and 12th December, 1996 respectively.

8. After availing the amount of `1 crore defendants failed to

adhere to the financial discipline. Vide letters of

acknowledgment/revival dated 27th June, 1997, 22nd June, 2000, 21st

July, 1999 and 4th October, 1999, defendants acknowledged their

liability to pay all the outstanding in respect of the advances made

by the plaintiff to defendant no.1 under the aforesaid loan

agreements. However, defendants failed to clear the dues of the

plaintiff. Legal notice dated 17th April, 2000 sent by the plaintiff

through its lawyer did not bring any fruitful results.

9. As on 15th January, 2002 following amount was due and

payable by the defendants:-

         Principal                          `1,00,00,000/-

         Service Charges for 1994-95        `38,312/-

         Service Charges for 1995-96        `3,04,000/-

         Service Charges for 1996-97        `3,04,000/-




         Service Charges for 1997-98          `4,31,397/-

        Service Charges for 1998-99          `4,00,000/-

        Service Charges for 1999-2000        `4,00,000/-

        Service Charges for 2000-2001        `4,00,000/-

        Penal Interest on Principal & `57,34,344/-
        Service Charges (Upto 15-1-
        2002)                         `1,80,12,053/-

        Less: Service Charge received `3,43,145/-
        on 18-4-1996
        Total amount outstanding as on 1,76,68908/-
        15.01.2002

10. In Mechalec Engineers & Manufacturers vs. Basis Equipment

Corporation (1997) 1 SCR 1060, Supreme Court has held that the

question of granting leave to defend has to be considered in the

light of following principles:-

a) If the defendant satisfies the Court that he has a good defence 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 raised a triable issue indicating that he has a fair or bona fide or reasonable defence although not a positively good defence 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 has a defence, yet, shows such a state of facts as leads to the inference that at the trial of the action he may be able to establish a defence to the plaintiff's claim the plaintiff is not entitled to judgment and the defendant is entitled to leave no defend but in such a case the Court may in its discretion impose condition as to the time or mode of trial but not as to payment into Court or furnishing security.

d) If the defendant has no defence or the defence 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 defence or the defence is illusory or sham or practically moonshine then although ordinarily the plaintiff entitled to leave the sign judgment, the Court may protect the plaintiff by only allowing the defence to proceed if the amount claimed is paid into Court or otherwise secured and give to the defendant on such condition, and thereby show mercy to the defendant by enabling him to try to prove a defence.

11. In Raj Duggal vs. Ramesh Kumar Bansal AIR1990SC2218,

Apex Court has been held that leave to defend must be declined

where the Court is of the opinion that grant of leave would enable

to prolong the litigation by raising untenable and frivolous

defences. It has been held that the test is to see whether the defence

raises a real issue and not a sham one. It has been further held that

when there is a plausible defence leave to defend must be granted.

It has been held that if there is a dispute as to the meaning of a

document or uncertainty as to the amount actually due or the facts

are of such a nature as to entitle the defendant to interrogate the

plaintiff or to cross-examine his witness leave should not be denied.

12. In the backdrop of the above settled legal position, it has to

be seen as to whether the defendants have been able to disclose

triable issues or that the defence raised by them is sham, frivolous

and moonshine.

13. It is alleged that plaintiff had taken signatures of the

defendants on certain blank documents and the contents whereof

have been filled up by the plaintiff later on as per its own

convenience, thus, the documents were not binding on the

defendants. In my view, this plea does not raise any triable issue.

No prudent persons is expected to sign on blank documents.

Defendants were carrying on business and cannot feign their

ignorance about the consequences of signing blank documents. It is

highly improbable that the defendants would have signed the blank

documents merely on asking of plaintiff. It is also not understood as

to why the officials of plaintiff, which was formed by the

Government, would take signatures of the defendants on blank

documents and manipulate the same. That apart, this plea has been

raised for the first time when the plaintiff has filed this suit for

recovery of its dues. No complaint was made either to the higher

officials of the plaintiff or any other concerned authority, within a

reasonable time from the date when plaintiff's officials had

allegedly taken signatures of the defendants on blank documents,

inasmuch as, it is not in dispute that the amounts mentioned in the

documents had been released to the defendant no. 1 and loan has

been availed by it. It appears that this plea has been taken as an

afterthought and same cannot be accepted being a sham plea. In

Dinesh Kumar Vs. S.N.Chit Fund Pvt. Ltd. 1999 (78) DLT 671 a

learned Single Judge of this court held that it cannot be believed

that petitioner would have signed a blank printed form of agreement

of guarantee without caring for the contents and their implications.

In Indian Bank vs. Cheese Wafers (India) Pvt. Ltd.1998 (76)

DLT 892 it has been held that "defendants did not raise even a

whisper after signing this letter of acknowledgement of liability,

therefore, now to contend that the documents signed by the

defendants were blank, which were subsequently filled up, is only

an afterthought to cover their acknowledgement which they have

made in the year 1992. Why the defendants chose to keep silent

about their signatures having been obtained on blank documents.

This plea was taken at the time of filing of the application for leave

to defend not earlier at any stage. Conclusion, therefore, is that plea

now sought to be raised by the defendants to the effect that the

signatures were obtained on blank documents, is merely a sham

plea and devoid of any force". Accordingly, in my view, the plea of

the defendants having signed blank documents does not raise any

triable issue.

14. Next contention of learned counsel for the defendants is that

the loan agreement, demand promissory note and other related

documents are without consideration and not binding on the

defendants, thus, the suit filed by the plaintiff on the basis of said

written documents is liable to be dismissed. It is alleged that the

first loan agreement, demand promissory note and other related

documents for `76 lakhs were signed on 13th February, 1995;

whereas the loan amount was disbursed to defendant no.1 on 14th

February, 1995. Similarly, loan agreement, demand promissory note

etc. in respect of second loan of `24 lakhs were executed on 9th

October, 1996; whereas amount was released to defendant no. 1 in

two installments on 26th November, 1996 and 12th December, 1996

respectively. I do not find any force in this contention of learned

counsel either. It cannot be said that the loan agreement, demand

promissory loan and other related documents are without

consideration more so, when defendants have admitted that the

amount involved in the said documents was indeed released to

defendant no.1, after execution of the documents. Thus, it cannot

be said that loan agreement, demand promissory notes etc. were

without any consideration. There is no law that the loan amount has

to be released simultaneously upon execution of the relevant loan

documents. It is not the case of the defendants that the amounts

disbursed to defendant no. 1 are not connected with the documents

relied upon by the plaintiff. Accordingly, this plea of the

defendants is also baseless and does not raise any triable issue.

15. As per the defendants, the suit is barred by time. The issue of

limitation is mixed question of law and fact and requires evidence;

thus, unconditional leave to defend the suit has to be granted. This

plea raised by the defendants is contrary to the documents placed on

record which have been duly signed by the defendants. Two loan

transactions are involved in this case. First loan was sanctioned on

3rd February, 1995. Documents were executed on 13th February,

1995. Loan amount was disbursed on 14th February,1995.

Defendants have executed revival /acknowledgment letters on two

occasions in respect of this loan transaction. First set of revival

letters have been executed by the defendants on 27th June, 1997,

that is, within a period of three years from 13th February, 1995. In

view of the execution of the revival letters, the period of limitation

is extended by another three years with effect from 27 th June, 1997.

Thereafter, second set of revival letters were executed by the

defendants on 22nd June, 2000. In view of this, period of limitation

stood extended by another three years i.e. upto June, 2003. As

regards second loan transaction of `24 lacs is concerned, loan

documents were executed on 9th October, 1996. Revival letters in

respect of this loan have been executed on 21st July, 1999, that is,

within the period of three years from the date of execution of the

loan documents; Meaning thereby, the period of limitation in

respect of second loan stood extended upto July, 2002. Suit has

been filed on 29th January, 2002, thus, is within the period of

limitation. No evidence is required to be adduced in view of

original documents on record.

16. Learned counsel has next contended that the documents were

executed in Gurgaon within the State of Haryana, inasmuch as, the

mortgaged property was also situated in Gurgaon, thus, Delhi courts

have no jurisdiction to entertain and try this suit. In this case no

relief relating to an immovable property has been claimed, thus

territorial jurisdiction of the court will not be governed by Section

16 of CPC. Plaintiff has filed this suit only for recovery of money,

thus, territorial jurisdiction of the Court is attracted under Section

20 (a) CPC since defendant nos. 2 and 3 had been residing at Delhi

at the time when suit was filed. Section 20 (a) envisages filing of

suit, not falling under the categories as specified under Section 15

to 19, in a court within the local limits of whose jurisdiction the

defendant or each of the defendant where there are more than one,

at the time of commencement of the suit actually and voluntarily

resides, or carries on business, or personally works for gain. It has

not been alleged in the application that addresses of the defendants

no.2 and 3, as given in the plaint, are wrong. Accordingly, the plea

taken by the defendants to this effect also does not raise any triable

issue.

17. The next contention of counsel for the defendants that

HSIDC and Canara Bank are necessary and proper party since the

plaintiff was claiming pari pasu charge over the properties of

defendant no.1, also has no force. Defendants cannot raise this plea

at this stage since their application for impleadment of Canara Bank

and HSIDC has already been dismissed by a Single Judge of this

Court on 9th November, 2005. It was specifically held by this order

that HSIDC and Canara Bank were neither necessary nor proper

party to the suit. Defendants cannot be permitted to rake up this

issue again. In the leave to defend application, defendant nos. 2

and 3 have denied that they had guaranteed the due repayment of

loan extended to the defendant no.1. However, their this plea is

contrary to the documents placed on record. Guarantee Agreements

in respect of both the loan transactions have been placed on record.

Defendant nos. 2 and 3 have not disputed their signatures on these

personal guarantee bonds, thus, it cannot be said that defendant nos.

2 and 3 have not personally guaranteed the credit facilities extended

to defendant no.1. This point also does not raise any triable issue.

18. Learned counsel for the defendants has further contended that

during the pendency of suit, plant and machinery of defendant no. 1

was auctioned on 31st November, 2002 by HSIDC for `1.36 crores

and out of the sale proceeds a sum of `30,19,695/- was given to

plaintiff since it was having pari pasu charge over the assets of

defendant no.1. This fact was concealed by the plaintiff, inasmuch

as, it has not been stated as to when this amount was received by the

plaintiff. Thus, the amount claimed in the suit is uncertain,

therefore, unconditional leave to defend the suit has to be given to

the defendants. Reliance has been placed on Raj Duggal (supra).

This argument of the learned counsel may appear convincing at the

first blush but has no force. It is not the case that the assets of

defendant no.1were sold by the HSIDC prior to filing of the present

suit and a sum `30,19,695/- was received by the plaintiff was not

given adjustment of at the time of filing the suit. Any amount

received during the pendency of the suit can be given adjustment of

from the decretal amount.

19. It has been further contended that the loan documents did not

provide for charging of penal interest. Plaintiff has included

`57,34,344/- towards the penal interest. Whether plaintiff is

entitled to charge penal interest and on what basis can be resolved

only after a full-fledged trial, for which purpose unconditional leave

to defend is required to be granted. Counsel for the plaintiff

submits that he has got instructions from his client not to press the

claim of penal interest amounting to `57,34,344/-. Since the claim

of penal interest has been given up, no triable issue arises on this

point.

20. Learned counsel for the defendants has further contended that

the plaintiff had extended soft loan to defendant no.1. As the name

suggest soft loan cannot carry any liability of interest. I do not find

any force in this contention either. Plaintiff has not charged any

interest but has only claimed service charges @ 4% per annum on

the outstanding loan amount in terms of the loan documents.

Service charges cannot be equated with „interest‟. That apart,

defendants having signed the documents and agreeing to pay the

service charges @ 4% per annum on the outstanding loan, now

cannot be permitted to contend that this amount was not payable by

them. In the similar facts, plaintiff had filed a suit bearing CS(OS)

No. 390/2002 against M/s M.R. Mashrooms & Agro Forms Pvt.

Ltd. & Ors. for recovery of money under Order 37 CPC. Similar

plea was raised by the defendants in the said case which has been

answered by this Court vide judgment dated 6th April, 2009 passed

in the said case in the following manner:-

"Mr. Aggarwal, counsel appearing on behalf of the defendants, has further argued that in terms of the loan agreement dated 20.03.1995, the loan granted by the plaintiff to defendant no. 1 was a soft loan and, therefore, according to him, this soft loan could not carry any liability for payment of interest. I need not go into this argument of the counsel for the defendants because the plaintiff has not claimed any interest on the principal amount. What it has claimed is service charges at 4% per annum on the outstanding loan amount. Service charges cannot be equated with interest. The service charges have been claimed by the plaintiff in terms of the loan agreement between the parties dated 20.03.1995. Therefore, even if we assume that the soft loan granted by the

plaintiff to defendant no. 1 was not to carry any interest still it does not make any difference to the right of the plaintiff to recover this loan amount or the liability of the defendants to repay it in terms of the loan agreement. This plea of the defendants that the loan was a soft loan also does not raise any triable issue."

21. No other argument has been advanced by the learned counsel

for the defendants nor any other point has been pressed in support

of leave to defend application.

22. For the foregoing reasons, I do not find any merit in the leave

to defend application. In my view, aforementioned pleas, raised by

the defendants, are baseless, frivolous, sham and moonshine and do

not raise any triable issue.

23. It is not in dispute that defendant no. 1 had taken loan from

the plaintiff to the tune of `1 crore i.e. first loan of `76 lacs and

second loan of `24 lacs. It is also not in dispute that loan amount

was disbursed to defendant no.1 and was duly availed by it. It is

also not the case of the defendants that the loan amount was repaid.

Plaintiff has given details of the amount due and outstanding

against defendant no.1 in the plaint under different heads.

Defendants have failed to give any explanation to show that this

amount was repaid fully or in part. As regards claim of penal

interest is concerned, plaintiff has already given up the same.

24. In the light of above discussions, leave to defend application

is dismissed, consequently, a decree shall follow. From the

averments made in the plaint and the documents filed therewith,

plaintiff has made out a case for passing a decree in its favour in the

sum of `1,19,34,564/- (i.e. `1,76,68,908/- - `57,34,344/-). This

amount is payable by the defendant no.1 as principal borrower and

defendant nos. 2 and 3 as guarantors, jointly and severally.

Accordingly, I pass a joint and several decree in the sum of

`1,19,34,564/- (Rupees One Crore Nineteen Lacs Thirty Four

Thousand Five Hundred Sixty Four Only) in favour of the plaintiff

and against the defendants together with costs and pendente lite and

future interest @ 4 % per annum, that is, equivalent to service

charges, till realization of the decretal amount. Adjustment of

`30,19,695/- (Rupees Thirty Lacs Nineteen Thousand Six Hundred

Ninety Five Only) received by the plaintiff during the pendency of

the suit, shall be given while executing the decree. Decree sheet be

drawn accordingly.

A.K. PATHAK, J.

MARCH 28, 2012 ga