National Small Industries Corp. ... vs Myson Electronics P. Ltd. & Ors
2016 Latest Caselaw 5627 Del

          *IN THE HIGH COURT OF DELHI AT NEW DELHI

%                                         Date of decision: 29th August, 2016

+                                CS(OS) 1164/2002

       NATIONAL SMALL INDUSTRIES CORP. LTD.                      ..... Plaintiff
                   Through: None.

                                 Versus

    MYSON ELECTRONICS P. LTD. & ORS           ..... Defendants
                  Through: Mr. Aseem Mehrotra, Adv. for D-2.
CORAM:-
HON'BLE MR. JUSTICE RAJIV SAHAI ENDLAW

IA No.10512/2016 (for exemption)

1.

Allowed, subject to just exceptions.

2. The application is disposed of.

IAs No.10510/2016 & 10511/2016 (of D-2 Mr. Vinay Kumar Kaushik u/O 37 R-4 CPC and for condonation of 1075 days delay in applying therefor)

3. In this suit under Order XXXVII of Code of Civil Procedure, 1908

(CPC), on 13th August, 2013, as a consequence of the failure of the

applicant/defendant No.2 to apply for leave to defend despite service of

summons for judgment and as a consequence of dismissal of the application

for leave to defend filed by the defendants/non-applicants No.1 & 3 to 5, a

decree in favour of the plaintiff/non-applicant and against the defendants

jointly and severally, for recovery of Rs.27,24,945.59 paise with interest

@18% per annum, was passed. On a subsequent application of the plaintiff

under Section 152 of CPC, vide order dated 4th December, 2014, it was

clarified that the interest payable by the defendants to the plaintiff was with

effect from 1st April, 1992.

4. The claim of the plaintiff and which has been decreed, against the

defendant No.1 was as a principal debtor and against the defendants No.2 to

4 was as guarantors and against the defendant No.5 was as legal heir of

another guarantor.

5. The applicant/defendant No.2 in these applications for setting aside of

the decree and for condonation of delay of 1075 days in applying therefor

does not controvert having executed the deed of guarantee on the basis of

which the plaintiff claimed against the applicant/defendant No.2 and which

has been decreed. It is however the case of the applicant/defendant No.2, (i)

that the applicant/defendant No.2 was merely an employee of a sister

concern of the defendant No.1 and which sister concern and the defendant

No.1 had common management; and, (ii) that the applicant/defendant No.2

was coerced by the said common management being his employers to sign

the guarantee deed. It is further the case of the applicant/defendant No.2 that

the decree, insofar as against him, is liable to be set aside as the summons

for judgment were never served upon him.

6. It is not as if the applicant/defendant No.2 had no inkling of the

present suit. The applicant/defendant No.2 admits to in pursuance to the

summons for appearance issued to him, having filed Vakalatnama of an

advocate.

7. A perusal of the order sheet shows that vide order dated 19 th August,

2009, upon return of the summons for judgment issued to the

applicant/defendant No.2 with the endorsement of the applicant/defendant

No.2 having left the address at which the summons for appearance were sent

to him and without leaving any fresh / new address, assumption was drawn

by this Court that the applicant/defendant No.2 had been served with the

summons for judgment.

8. The applicant/defendant No.2 finds no fault with the aforesaid order

dated 19th August, 2009.

9. I may even otherwise record that Order XXXVII Rule 3(1) requires a

defendant to, while entering appearance in the suit, file in the Court an

address for service of notices on him and Order XXXVII Rule 3(2) provides

that unless otherwise ordered, all summons, notices and other judicial

processes required to be served on the defendant shall be deemed to have

been duly served on the defendant if are left at the address given by him for

such service.

10. It is not the case of the applicant/defendant No.2 that the

applicant/defendant No.2, while filing Vakalatnama in pursuance to the

summons for appearance, filed any memorandum of appearance or filed any

address for service of notices on him. No such memorandum of appearance

or address form is found on record. In the absence of the

applicant/defendant No.2 in compliance of Order XXXVII Rule 3(1) CPC

having filed an address for service of notice on him, the address on which

summons for judgment were to be served on the defendant under Order

XXXVII Rule 3(2) CPC had to be the address at which summons for

appearance were sent.

11. It is not in dispute that the summons for judgment were sent to the

applicant/defendant No.2 at the same address at which the summons for

appearance were sent and there can thus be no challenge to the legality of

the order dated 19th August, 2009 in the suit drawing the assumption that the

applicant/defendant No.2 had been served with the summons for judgment.

12. Mention may be made of Kishan Bharwany Vs. V.P. Aggarwal

(2002) 62 DRJ 731 where it was held by this Court that the purpose of filing

address at the stage of entering appearance is to ensure that the summons for

judgment are served upon defendant at the latest address as provided by the

defendant, so as to avoid passing of the decree in his absence; if defendant

intentionally furnishes such address on which he cannot be served, he does

so at his peril; furnishing of address assumes additional importance if the

summons of the suit are served by way of substituted service.

13. Though the counsel for the applicant/defendant No.2 does not dispute

the aforesaid legal position but contends that an attempt should have been

made to serve the summons for judgment on the applicant/defendant No.2

through the advocate whose Vakalatnama had been filed and the decree is

liable to be set aside for the said course of action having not been followed.

14. Though the counsel for the applicant/defendant No.2 is unable to

show any such requirement in law and the course of action suggested is also

found to be in contravention of Order XXXVII Rules 3(1) & (2) of CPC but

a perusal of the order sheet again shows that inspite of the order dated 19 th

August, 2009 having drawn assumption of service of summons for judgment

on the applicant/defendant No.2, vide subsequent order dated 10 th May,

2011, summons for judgment were indeed ordered to be issued to the

applicant/defendant No.2 at the address of the advocate whose Vakalatnama

had been filed on behalf of the applicant/defendant No.2. However, vide

subsequent order dated 25th July, 2011 it was held that the order dated 10 th

May, 2011 of issuance for summons for judgment at the address of the

advocate for the applicant/defendant No.2 was in ignorance of the earlier

order dated 19th August, 2009; accordingly the service of summons for

judgment on the applicant/defendant No.2 at the address of the advocate

whose Vakalatnama has been filed, was dispensed with.

15. No challenge has been made by the counsel for the

applicant/defendant No.2 to the said order dated 25th July, 2011 also.

16. It is thus not as if the Court, at the time of decreeing the suit against

applicant/defendant no.2 for failure to apply for leave to defend and / or at

the time of assuming the summons for judgment to have been served on

applicant / defendant no.2 was not conscious of the possibility of serving the

summons for judgment at the address of the advocate whose vakalatnama

had been filed. Not only was the Court fully conscious of the same but a

decision was taken of the same being not required. In my view, „special

circumstances‟ within the meaning of Order XXXVII Rule 4 of the CPC

cannot be those which were in existence when the decree was passed.

17. The argument, of the applicant/defendant No.2 being not served with

the summons for judgment for the reasons of the summons for judgment

having not been sent at the address of the advocate for the

applicant/defendant No.2, is to be rejected for another reason also. It is the

case of the applicant/defendant No.2 that he left the employment of the sister

concern of the defendant No.1 soon after the signing of the deed of

guarantee; that thereafter he changed employment from time to time; that the

Vakalatnama aforesaid filed by the applicant/defendant No.2 was of the

advocate of the then employer of the applicant/defendant No.2 and whose

employment the applicant/defendant No.2 left thereafter. It is not the case of

the applicant/defendant No.2 that he had paid any professional fee to the

advocate whose Vakalatnama had been filed or that he was in touch with the

said advocate after the Vakalatnama had been filed. It thus emerges that

even if the summons for judgment had been sent at the address of the said

advocate, the same would not have served any purpose. It is not the case of

the applicant/defendant No.2 that he kept informing the said advocate of the

changes in his employment and addresses from time to time. No prejudice

has thus be caused to the applicant/defendant No.2 therefrom.

18. Even otherwise, as distinct from Order IX Rule 13 of CPC, Order

XXXVII Rule 4 of CPC empowers the Court to set aside the decree only

"under special circumstances". Supreme Court in Rajni Kumar Vs. Suresh

Kumar Malhotra (2003) 5 SCC 315 held that the expression "special

circumstances" is not defined in CPC nor is it capable of any precise

definition by the Court because problems of human beings are so varied and

complex; in its ordinary dictionary meaning, it connotes something

exceptional in character, extraordinary, significant, uncommon; non-service

of summons undoubtedly be a special circumstance; however in an

application under Order XXXVII Rule 4 CPC, the Court has to determine

the question, on the facts of each case, as to whether the circumstances

pleaded are so unusual or extraordinary as to justify putting the clock back

by setting aside of the decree. It was further held that it is not enough for the

defendant to show special circumstances which prevented him from

appearing or applying for leave to defend; he has also to show by affidavit or

otherwise, facts which would entitle him leave to defend the suit.

19. This Court also, in Jai Krishin Amar Vs. K.M. Capital Limited

(2003) 70 DRJ 180, held that the legislature made a conscious departure

when dealing with actions and litigations falling under Order XXXVII,

which is a pandect of its own; while it is expected of an applicant/defendant,

merely to show sufficient cause for his non-appearance on the date of

hearing when the decree was passed in his absence, for setting aside such a

decree passed in an ordinary suit, the requirement for obtaining the same

relief in respect of a summary suit is justifiably more onerous and stringent.

It was further held that if decrees passed in summary suits are to be dealt

with the same latitude as under Order IX Rule 13 CPC, the object of

expeditious disposal of such claims would be immediately defeated. It was

also held that a defendant under Order XXXVII Rule 4 CPC has to satisfy

twin conditions, namely, (i) of disclosing sufficient cause for non-

appearance as also; (ii) existence of a substantial defence in the suit.

20. The applicant/defendant No.2, in my view, has neither shown

sufficient cause for non-filing of leave to defend nor any substantial defence

to the suit. As aforesaid, the applicant/defendant No.2 admits his signatures

on the deed of guarantee on the basis of which suit has been decreed against

him. The defence pleaded of having been coerced to sign the same is not

found such to entitle the applicant/defendant No.2 to leave to defend. The

applicant/defendant No.2 claims to have left the employment during which

he claims to have been so coerced long since and having changed several

employers. He still did not take any steps for being relieved from the

guarantee furnished by him. He did not institute any proceedings against the

employers who are averred to have coerced him, not even after he became

aware of the present suit from the summons for appearance and in response

whereto the Vakalatnama aforesaid was filed. The only inference can be that

this plea is only to defeat execution of the decree and the claim of the

plaintiff, who acting on the guarantee of the applicant/defendant No.2, had

meted out financial assistance to the defendant No.1.

21. Even otherwise, the applicant/defendant No.2 as a guarantor is

entitled by virtue of Section 145 of the Contract Act, 1872 to recover from

the principal debtor i.e. the defendant No.1 whatsoever sums the

applicant/defendant No.2, as a guarantor pays under the decree. Section 146

of the Contract Act also entitles the applicant/defendant No.2 to recover the

decretal amount if any recovered from him from the defendants No.3 to 5, as

co-guarantors.

22. It thus follows that the remedy if any for the deed of guarantee, on the

basis of which decree has been passed against the applicant/defendant No.2,

having been wrongfully got signed by the defendant No.1 and defendants

No.3 to 5 from the applicant/defendant No.2 is against the defendant No.1

and defendants No.3 to 5 only and not against the plaintiff.

23. I may in this regard also notice the provisions of Sections 142 & 143

of the Contract Act. Section 142 of Contract Act provides that any

guarantee which has been obtained by means of misrepresentation made by

the creditor or with the knowledge and assent of the creditor concerning a

material part of the transaction, is invalid. Section 143 provides that any

guarantee which the creditor has obtained by means of keeping silence as to

a material circumstance, is invalid. The reference to the creditor is to the

person in whose favour the guarantee is given i.e. the plaintiff herein. The

said provisions thus invalidate a guarantee only on misrepresentation or

silence as to the material circumstance by the creditor and not of the

principal debtor.

24. Supreme Court recently also in Mahesh Kumar Joshi Vs. Madan

Singh Negi (2015) 12 SCC 254 held that setting aside of ex-parte decree

under Order XXXVII Rule 4 CPC cannot be allowed in a routine manner

and special circumstances are required to be established. Earlier also, in

TVC Skyshop Limited Vs. Reliance Communication and Infrastructure

Limited (2013) 11 SCC 754 while reiterating Rajni Kumar supra it was held

that the mere fact that one of the officials of the defendant had resigned and

thus instructions for filing the leave to defend remained to be given, would

not constitute a valid ground for negating the policy underlying Order

XXXVII in general and Rule 3(5) in particular.

25. The counsel for the applicant/defendant No.2 has also argued that

though the plaintiff in the plaint pleaded a notice invoking the guarantee to

have been issued but no such notice has been filed by the plaintiff before this

Court.

26. I fail to see as to how the same can be a special circumstance within

the meaning of Order XXXVII Rule 4 CPC for setting aside of the decree.

Even otherwise, the only effect of the notice of invocation of guarantee

having not been served on the applicant/defendant No.2 can be to not make

the applicant/defendant No.2 liable for interest for any period before that.

27. I have enquired from the counsel for the applicant/defendant No.2,

whether the applicant/defendant No.2 is ready to pay the principal amount

without interest.

28. The answer is in the negative.

29. The aforesaid calls the bluff of the argument aforesaid of the counsel

for the applicant/defendant No.2.

30. The counsel for the applicant/defendant No.2 then argues that in fact

the financial assistance granted by the plaintiff to the defendant No.1 and re-

payment whereof the applicant/defendant No.2 had guaranteed, was illegal

being contrary to the policy / relevant scheme of the plaintiff and a result of

the corrupt practices followed by the then managing director of the plaintiff.

Attention in this regard is invited to the disciplinary proceedings taken by

the plaintiff against its managing director and the orders of this Court with

respect to the said disciplinary proceedings.

31. The same again is irrelevant for the purposes of Order XXXVII Rule

4 of CPC. Monies were admittedly advanced by the plaintiff to the

defendant No.1 and re-payment thereof by the defendant No.1 guaranteed by

the applicant/defendant No.2. Even if there were any illegality in the loan

agreement between the plaintiff and the defendant No.1 rendering the same

void, the same would still not absolve the defendants including the

applicant/defendant No.2 from their liability to restitute the amount so

received from the plaintiff, including under Section 65 of the Contract Act.

Reference in this regard can be made to Sri Tarsem Singh Vs. Sri

Sukhminder Singh AIR 1998 SC 1400.

32. No ground thus for entertaining these applications is made out.

33. I have however, with a view to find out whether there is any

possibility of liability of the applicant/defendant No.2 being restricted to a

certain amount, enquired from the counsel for the applicant/defendant No.2,

whether the applicant/defendant No.2 is willing to offer any amount to the

plaintiff in satisfaction of the decree insofar as against the

applicant/defendant No.2.

34. The counsel for the applicant/defendant No.2 states that the

applicant/defendant No.2 is merely an employee and has no assets and is not

in a position to pay any amount.

35. For this reason also, no purpose will be served in issuing notice of the

applications.

36. Dismissed.

No costs.

RAJIV SAHAI ENDLAW, J AUGUST 29, 2016 „bs‟..