Delhi High Court
Mmtc Limited vs M/S Kashish Associates & Ors on 18 October, 2016
$~5
* IN THE HIGH COURT OF DELHI AT NEW DELHI
% Judgment Dated: 18th October, 2016
+ CS(OS) 47/2013
MMTC LIMITED ..... Plaintiff
Through Ms. Surekha Raman, Advocate
versus
M/S KASHISH ASSOCIATES & ORS ..... Defendants
Through Mr. Rishi Manchanda, Advocate for
defendant no.1.
Mr. Jitendra Kumar, Mr. Ranjith
Ramesh Nair, Advocates for
defendants no.2 and 3 along with Mr.
Pawan Kumar, Chief Manager.
CORAM:
HON'BLE MR. JUSTICE G.S.SISTANI
G.S.SISTANI, J (ORAL)
(IA.10504/2013) under Order XXXVII Rule 3(5) CPC by defendant no.1)
and IA.8128/2013 under Order XXXVII Rule 3(5) CPC by defendant
no.2 and 3)
1. Plaintiff has filed the present suit under the provisions of Order XXXVII
of the Code of Civil Procedure. The present suit is based on two bank
guarantees which were furnished by the defendant no.1 in favour of the
plaintiff. The plaintiff is a Government of India enterprise and claims to
be one of the largest international trading company of India engaged
inter alia in the manufacture, sale, import, export and marketing of
ferrous and non-ferrous metal and minerals.
2. Defendant no.1 is a trading company and a partnership concern of which
Mr. Kashish Kumar Rastogi is the proprietor. Defendant no.1 had
approached the plaintiff in the year 2006 for drawal of gold under its
CS(OS).47/2013 Page 1 of 9
Open General License (OGL) Scheme on loan basis and outright sale
schemes. The defendant no.1 has been lifting gold from time to time.
Defendant no.1 had furnished amongst others the following financial
bank guarantees issued by defendant no.2, Bank of India to secure the
repayment of the gold loan that was being drawn:
Sl.No. Bank Guarantee No. Amount Date of Date of Validity
(Rs.) Issue
1. 60247FIBGO80055 20,000,00 24.10.2008 20.04.2009
extended from
time to time, the
last extension
being issued on
15.03.2011 with
the validity
/claim period
upto
20.04.2012.
2. 60241FIBG110014 90,000,00 25.04.2011 24.04.2012
3. 60241FIBG110016 90,000,00 26.04.2011 25.04.2012
3. It is the case of the plaintiff that on receipt of the aforesaid bank
guarantee no.60241FIBG110014 dated 25.04.2011 for Rs.90 lakhs, the
plaintiff had sought confirmation from defendant no.2 vide letter bearing
no. MMTC/JRO/BG/KA/11-12 dated 25.04.2011, which was duly
confirmed. Similarly, the plaintiff had sought confirmation of bank
guarantee no. 60241FIBG110016 dated 26.04.2011 for Rs.90 lakhs.
Further, as per the plaint, under the (OGL) Scheme and upon application
made by defendant no.1 for supply of gold under the loan scheme and on
the basis of securities/bank guarantees furnished, the plaintiff delivered
quantities of gold to defendant no.1 on loan basis aggregating to 11 kgs
for which payment became due from the month of March 2012, which
remained unpaid. The plaintiff thereafter upon the non receipt of
payment from defendant no.1 vide letter bearing no. MMTC/JRO/OGL-
CS(OS).47/2013 Page 2 of 9
LOAN/KA/2011-12 dated 21.03.2012 invoked the bank guarantees
referred to in para 2 aforegoing.
4. In response to the invocation letter, the defendant no.2 honoured its
liability in respect of the bank guarantee No. 60247FIBGO80055 by
issuing a pay order of Rs.20 lakhs. However, the remaining bank
guarantees were not encashed by defendants no.2 and 3 on the ground
that the said bank guarantees were forged and did not originate from the
bank and they were not even in the computer system of the bank. The
plaintiff also addressed communication to the Chairman and Managing
Director of defendant no.2 on 03.04.2012 and 10.05.2012. However, no
response was received. Legal notice was also issued. No satisfactory
response was received.
5. An application (IA.10504/2013) under Order XXXVII Rule 3(5) of the
Code of Civil Procedure seeking leave to defend has been filed by
defendant no.1. As per the application seeking leave to defend, the case
of defendant no.1 is that defendant no.1 had furnished bank guarantee to
secure the loan. Defendant no.1 has not disputed or denied the
relationship between defendant no.1 and the plaintiff. Defendant no.1
has admitted having furnished the bank guarantees to secure repayment
of the gold loan, which was drawn from time to time. Para 8 of the leave
to defend discloses the details of the bank guarantees which were
furnished by defendant no.1 to secure the loan which has been granted.
Defendants no.2 and 3 bank have also filed an application
(IA.8128/2013) seeking leave to defend. Affidavit of one of the
signatories of the bank guarantees has been filed.
6. IA 8128/2013 has been filed by defendants no.2 and 3 Bank seeking
unconditional leave to defend. The stand of the bank in their application
for leave to defend, based on the record, is that the bank guarantees do
CS(OS).47/2013 Page 3 of 9
not originate from the bank and they are forged and fabricated.
7. The law and the parameters for grant of leave to defend to contest are
well-settled. The Apex Court in the case of M/s.Mechelec Engineers &
Manufacturers v. M/s.Basic Equipment Corporation, reported at AIR
1977 SC 577 has drawn up the parameters to be considered by the court
while dealing with the application for leave to defend. Relevant paras of
the judgment read as under:
"8. In Smt. Kiranmoyee Dassi and Anr. v. Dr. J. Chatterjee 49
C.W.N. 246 , Das. J., after a comprehensive review of authorities
on the subject, stated the principles applicable to cases covered
by order 37 C.P.C. in the form of the following propositions (at
p. 253):
(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 raises 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, shews 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 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 defence or the defence set up is
illusory or sham or practically moonshine then ordinarily
CS(OS).47/2013 Page 4 of 9
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 is entitled to leave to 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 leave to the
Defendant on such condition, and thereby show mercy to
the Defendant by enabling him to try to prove a defence."
8. It would also be useful to refer to the case of V.K. Enterprises v. Shiva
Steels, reported at (2010) 9 SCC 256,wherein the Supreme Court had, in
a matter with somewhat similar facts, upheld the order passed by the trial
court where leave was rejected. Paragraphs 8 to 10 of the judgment read
as under:
"8. Order XXXVII C.P.C. has been included in the Code of Civil
Procedure in order to allow a person, who has a clear and
undisputed claim in respect of any monetary dues, to recover the
dues quickly by a summary procedure instead of taking the long
route of a regular suit. The Courts have consistently held that if
the affidavit filed by the defendant discloses a triable issue that is
at least plausible, leave should be granted, but when the defence
raised appears to be moonshine and sham, unconditional leave to
defend cannot be granted. What is required to be examined for
grant of leave is whether the defence taken in the application
under Order XXXVII Rule 3 C.P.C. makes out a case, which if
established, would be a plausible defence in a regular suit. In
matters relating to dishonour of cheques, the aforesaid principle
becomes more relevant as the cheques are issued normally for
liquidation of dues which are admitted. In the instant case, the
defence would have been plausible had it not been for the fact
that the allegations relating to the interpolation of the cheque is
without substance and the ledger accounts relating to the dues,
clearly demonstrated that such dues had been settled between the
parties. Moreover, the issuance of the cheque had never been
disputed on behalf of the Petitioner whose case was that the same
had been given on account of security and not for presentation,
CS(OS).47/2013 Page 5 of 9
but an attempt had been made to misuse the same by dishonest
means.
9. Against such cogent evidence produced by the
plaintiff/respondent, there is only an oral denial which is not
supported by any corroborative evidence from the side of the
Petitioner. On the other hand, the ledger book maintained by the
Respondent and settled by the Petitioner had been produced on
behalf of the Respondent in order to prove the transactions in
respect of which the cheque in question had been issued by the
Petitioner.
10. In our view, the defence raised by the Petitioner does not
make out any triable issue and the High Court, has dealt with the
matter correctly and has justifiably rejected the Petitioner's
application under Order XXXVII Rule 3 C.P.C. and the same
does not call for interference by this Court. The Special Leave
Petition is, therefore, dismissed, but without any order as to
costs."
9. Present applications filed by defendants no.1 and defendants no.2 and 3,
respectively, are to be decided on the touchstone of the law laid down by
the Apex Court. The claim of the plaintiff is based on three bank
guarantees, which were furnished by defendant no.1 through the
defendants no.2 and 3.
10. In this case, the plaintiff is a Government of India enterprise. Defendant
no.1 was registered with the plaintiff in the year 2006 for drawal of gold
under its Open General License (OGL) Scheme on loan basis and
outright sale schemes. Defendant no.1 has been lifting gold from time to
time on loan basis. In respect of the drawal of gold on loan basis,
defendant no.1 has been furnishing bank guarantees from the scheduled
banks to secure repayment of gold loan that was being drawn.
11. As per the plaint, three bank guarantees, details of which have been
extracted in para 2 aforegoing, were furnished by the plaintiff through
defendant no.2, Bank of India. At the request of defendant no.1, upon
furnishing of bank guarantees, the plaintiff delivered quantities of gold
to defendant no.1 on loan basis, aggregating to 11 kilograms, for which
payment became due in March, 2012, which amount remains unpaid.
Consequent, upon the non-receipt of payment from defendant no.1, the
plaintiff had vide letter bearing no.MMTC/JRO/OGL-LOAN/KA/2011-
12 dated 21.3.2012 invoked the three bank guarantees, which was
delivered on the same day.
12. While defendant no.2 forwarded a pay order for Rs.20.00 lakhs but
expressed its inability to make payment with regard to other two bank
guarantees in the sum of Rs.90.00 lakhs, each, on the ground that the
same have not been issued by their Branch and, thus, denied their
liability.
13. In the application seeking leave to defend filed by defendant no.1, the
relationship between the plaintiff and defendant no.1 has not been
denied. It has also not been denied that defendant no.1 had been
furnishing financial bank guarantees from scheduled banks to the
plaintiff to secure repayment of the gold loan that was drawn from time
to time. Defendant no.1 has also admitted that to secure gold on loan,
defendant no.1 had furnished three bank guarantees, which were issued
by defendants no.2 and 3, as stated by the plaintiff in the plaint.
Defendant no.1 has also stated in the application for leave to defend that
in the year 2011 disputes have arisen between defendant no.1 and
defendants no.2 and 3 Bank. The bank has recalled the loan and after
recalling the loans it has taken recourse to the proceedings before the
Debt Recovery Tribunal and possession of two prime properties of the
defendant no.1 have been taken.
14. It is the case of defendant no.1 that the bank guarantees handed over by
defendant no.1 to the plaintiff are genuine bank guarantees.
15. In this background, the defence of defendant no.1 is to be tested. The
short issues, which arise for consideration before this Court, are that
whether defendant no.1 has been able to raise a triable issue or not,
whether the defence is bona fide or not and whether the defence is
moonshine or sham.
16. Having regard to the facts that defendant no.1 has not disputed the
relationship, he had secured gold loan from the defendant no.2 bank and
three bank guarantees furnished by defendant no.1 to the plaintiff for
gold received, the amount due is thus not disputed. In the light of the
affidavit filed by the bank that the two bank guarantees for Rs.90.00
lakhs, each, do not originate from the bank, they cannot be termed as
legal tender. It is primarily for defendant no.1 explain how the bank
guarantees were procured for it is only defendant no.1, who would gain
by furnishing a fabricated bank guarantee.
17. In my view, the defence sought to be raised by defendant no.1 is sham,
moonshine and not plausible. Accordingly, the IA.10504/2013 filed by
defendant no.1 seeking leave to defend is dismissed.
18. The suit is decreed against the defendant no.1 with pendente lite and
future interest @ 10%.
19. As far as the application IA.8128/2013 seeking leave to defend of
defendants no.2 and 3bank is concerned, having regard to the defence
which has been raised, the application is allowed. Unconditional leave
to contest is granted to defendants no.2 and 3 bank.
CS(OS) 47/2013
20. Written statement be filed within four weeks. Replication be filed within
four weeks thereafter. Original documents be filed within the same
period.
21. List before the Joint Registrar for admission/denial of documents on
06.12.2016.
22. List before the Court for framing of issues on 02.02.2017.
G.S.SISTANI, J
OCTOBER 18, 2016
pst
