Gujarat High Court
M/S. Kapsun Industries vs M/S. Avni Finance on 18 September, 2025
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IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
R/SPECIAL CIVIL APPLICATION NO. 13050 of 2025
FOR APPROVAL AND SIGNATURE:
HONOURABLE MR. JUSTICE MAULIK J.SHELAT
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Approved for Reporting Yes No
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M/S. KAPSUN INDUSTRIES & ANR.
Versus
M/S. AVNI FINANCE & ANR.
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Appearance:
NISARG S SHAH(8886) for the Petitioner(s) No. 1,2
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CORAM:HONOURABLE MR. JUSTICE MAULIK J.SHELAT
Date : 18/09/2025
ORAL JUDGMENT
1. Heard learned advocate Mr. Nisarg S. Shah for the
petitioners.
2. The present writ application is filed under Article 227 of
the Constitution of India seeking following reliefs :-
"(A) YOUR LORDSHIPS be pleased to issue a writ of certiorari or
any other appropriate writ or order or direction; quashing and setting
aside of the order dated 25/07/2025 passed below Exh. 14, in
Summary Suit No. 1126 of 2024, currently pending before the Ld. City
Civil and Sessions Court at Ahmedabad, produced at Annexure A; and
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be pleased to grant unconditional leave to defend below Exh. 14 in
Summary Suit No. 1126 of 2024.
(B) That pending hearing and final disposal of the captioned writ
petition YOUR LORDSHIPS be pleased to stay the implementation
and execution of the impugned order dated 25/07/2025 passed below
Exh. 14, in Summary Suit No. 1126 of 2024, currently pending before
the Ld. City Civil and Sessions Court at Ahmedabad, produced at
Annexure A; and YOUR LORDSHIPS further be pleased to stay the
proceedings of the Summary Suit no. 1126 of 2024, currently pending
before the Ld. City Civil and Sessions Court at Ahmedabad ;
(C) Any other appropriate relief deemed just, fit and proper may
please be granted in the interest of justice."
3. The parties will be referred as far as possible as per
their original position in the suit.
4. The petitioners herein are original defendants No.1 & 2,
whereas respondent No.1 herein is original plaintiff and
respondent No.2 is original defendant No.3 of Summary Suit
No. 1126 of 2024 pending before the City Civil Court,
Ahmedabad.
Facts of the case
5. The plaintiffs, claiming to be licensed holder -
moneylenders under the Gujarat Money Lenders Act, 2011
(hereinafter referred to as "the Act, 2011"), who financed a
loan in favour of defendant No.1 in the year 2014-15. It is the
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case of the plaintiffs that money was lent from time to time,
upon which interest was charged. The ledger account of
defendant No.1 was prepared by the plaintiffs and duly
signed by the partner of defendant No.1. According to the
plaintiffs, when the amount remained due and payable in the
year 2022, the defendants issued two cheques of Rs. 20 lakhs
and Rs. 19 lakhs, which were dishonoured.
5.1 It is further averred in the plaint that defendant No.1-
firm, vide its letter dated 04.06.2022, agreed that the
amount due and payable as on 31st March, 2022, would be
Rs. 37,10,000/-. It was further stated that on calculating the
interest up to 15.07.2022, the amount comes to Rs.
39,00,000/-, for which the aforesaid cheques were issued. It
is also stated in the said letter that an additional sum of Rs.
5,00,000/- was advanced by the plaintiffs to the defendant-
firm on 04.06.2022, for which a promissory note and a
cheque were executed.
5.2. However, as referred above, cheques were
dishonoured, and consequently, a criminal complaint under
Section 138 of the Negotiable Instruments Act, 1881
(hereinafter referred to as "the Act, 1881") came to be filed
against the defendant. Such complaint was instituted in the
year 2022 and as on date, the same is pending. Thereafter, to
recover the amount due and payable as on date i.e. 31 st
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March, 2023 Rs. 54,48,000/-. The suit in question came to be
filed.
5.3 On appearing in the suit and so also, on receiving of
summon for judgment, the defendant appears to have filed
impugned leave to defend the application.
5.4 After hearing the parties, the trial Court vide its order
dated 25.07.2025 partly allowed such leave to defend
application whereby, granted conditional leave in favour of
defendant to defend the suit on condition to deposit Rs.
37,10,000/- within a period of 30 days from the date of
impugned order. Hence the present writ application filed at
the instance of defendants No.1 & 2 only.
Submission of the petitioners-defendant No.1 & 2
6. Learned advocate Mr. Nisarg Shah would submit that the
impugned order passed by the trial Court is ex facie
erroneous, perverse, contrary to the settled legal position,
and beyond the jurisdiction vested in it. It is submitted that
when triable issues are raised by the petitioners, the trial
Court is required to grant unconditional leave to defend the
suit in favour of defendants.
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6.1 Learned advocate Mr. Shah would further submit that
there was no written agreement between the parties
regarding the payment of any interest. In such
circumstances, charging interest and including the same in
the claim by way of a summary suit would not be admissible.
Accordingly, triable issues arise with respect to the liability
of the defendants to pay interest.
6.2 Learned advocate Mr. Shah would further submit that,
since the plaintiff, being a money lender licensed under the
Act, 2011, was required to maintain proper records, including
a detailed statement in the prescribed form along with the
rate of interest charged from the defendant-firm against the
loan financed by him, failure to do so goes to root of the
matter requires trial. It is submitted that the plaintiff has
neither maintained such records nor produced them before
the trial Court. This itself constitutes a triable issue, and
therefore, the trial Court ought to have granted
unconditional leave.
6.3 Learned advocate Mr. Shah would further submit that,
as per Sections 21 and 22 of the Act, 2011, when the plaintiff
has neither maintained the prescribed statement of records
nor supplied the same to the petitioners, and has further
failed to charge interest not in accordance with the
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provisions of the Act, 2011, the defendant-firm is entitled to
unconditional leave to defend.
6.4 Learned advocate Mr. Shah would further submit that,
in the cross-examination of the plaintiff conducted by the
defendant-firm in the pending criminal complaint filed under
Section 138 of the Negotiable Instruments Act, the plaintiff-
financer categorically admitted that he had not maintained
such records and had not produced them before the
competent authority under the Act, 2011.
6.5 Learned advocate Mr. Shah would further submit that,
when there is no written agreement regarding the payment
of interest, no suit of recovery can be filed as a summary suit
under Order 37, Rule 1 of the CPC. It is submitted that even
where a written agreement is executed between the parties,
the defendant-firm would be entitled unconditional leave to
defend the suit, as there is no clarification regarding the
interest charged on the principal amount allegedly due and
payable by them.
6.6 Learned advocate Mr. Shah would further submit that,
under the garb of the Money Lending Act, coupled with the
excessive interest charged by the plaintiff on the amount
allegedly due and payable, the plaintiff is not entitled to
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secure a decree without granting the defendant-applicant
unconditional leave to defend the application. It is
respectfully submitted that, from the cross-examination of
the plaintiff undertaken before the Criminal Court under
Section 138 of the N.I. Act, it emerges on record that the
plaintiff had neither maintained statements as per the Act,
2011 nor charged interest lawfully. This constitutes a triable
issue, and unconditional leave to defend the summary suit
should have been granted.
6.7 Learned advocate Mr. Shah would further submit that,
as per Section 27 of the Act, 2011, it is mandatory for the
Court to frame issues regarding any contravention by the
plaintiff of Sections 21 and 22 of the Act, 2011, and until
such issues are decided in favor of the plaintiff, the
defendant is entitled to unconditional leave to defend the
suit.
6.8 Learned advocate Mr. Shah would respectfully submit
that there are multiple aspects of the facts and
circumstances of the case which were completely overlooked
by the trial Court, thereby resulting in a serious error of law
in granting conditional leave to defend the application by
directing the defendants to deposit a sum of Rs. 37,10,000/-,
alleged to be due and payable as the closing balance on 31st
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March, 2022.
6.9 Learned advocate Mr. Shah would further submit that
all the ledger accounts submitted on record by the plaintiff,
which bear the signature of the partner of defendant No.1-
firm, were obtained under duress and coercion. As such, the
petitioners-defendants have been made scapegoat at the
instance of the money lender, who coerced them into signing
such statements of account and also forcefully obtained
from them the letter dated 04.06.2022, which has been
relied upon by the plaintiff and produced in the summary
suit.
6.10 To buttress his arguments, learned advocate Mr. Shah
would refer and rely upon the decisions of the Hon'ble Apex
Court as well as this Court.
(i) Sudin Dilip Talaulikar Vs. Polycap Vires Private
Limited and others reported in (2019) 7 SCC 577.
(ii) Mohan Ishardas Shamnani and another Vs. Shani
Alias Kumar Ghanshyam Harjani and another passed in
Special Civil Application No. 9701 of 2013 dated
10.09.2025.
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6.11 Making the above submissions, learned advocate
Mr. Shah would request this Court to allow the present writ
application.
Point for determination
" Whether in the facts and circumstances of the present
case, is there any irregularity, illegality and or any jurisdictional
error committed by the trial Court while partly allowing
impugned leave to defend application, whereby the
defendants directed to deposit sum of Rs. 37,10,000/- as a
condition to leave to defend the summary suit ?
Analysis
7. The facts observed hereinabove are not in dispute. The
plaintiff is a moneylender holding a licence issued by the
competent authority under the Act, 2011. It is further not in
dispute that money lent (loan) was financed by the plaintiff
to Defendant No.1 - the firm. The ledger account of the
defendant-firm, prepared by the plaintiff for the period from
1st April, 2016 to 31st March, 2024, has been produced on
record by the plaintiff. It appears that the defendant-firm
duly signed such statements/ledger accounts up to 31st
March, 2022, albeit disputed that its under coercion.
Nonetheless, fact remains that neither any notice to that
effect nor complaint filed by defendants against plaintiff till
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date.
8. It further appears that closing balance as on 31st
March, 2022 was Rs. 37,10,000/-. As such, from a bare
reading of the ledger statements on record do suggest that
interest was charged by the plaintiff and duly reflected from
time to time in each statement duly signed by the
defendant-firm, without raising any dispute so far interest
charged by plaintiff.
9. Furthermore, the letter dated 04.06.2022 appears to
have been issued on the letterhead of the defendant-firm,
wherein there is a clear admission by the defendant-firm of
the amount reflected in the ledger account, i.e., Rs.
37,10,000/-, whereby accepted that such amount due and
payable by defendant-firm as on 31st March, 2022. The letter,
consisting of both pages of the letterhead of defendant-
firm, further indicates that the defendant-firm agreed not
only interest charged by plaintiff but also agreed that as on
15.07.2022, total amount including interest due to Rs. 39
lakhs. To discharge such legal liability, the defendant-firm, as
stated in said letter, issued two cheques of Rs. 20 lakhs and
Rs. 19 lakhs respectively, both of which were dishonoured.
10. Prima facie, in view of the aforesaid, it cannot be
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accepted, as alleged by the defendants, that there was no
written contract between the parties regarding the payment
of interest and anything higher charged by plaintiff than not
permissible in law. It remain undisputed that between 2022
till filing of lead to defend, defendants have never
questioned the claim of plaintiff either by filing any
complaint/suit/counterclaim etc before any authority or
court.
11. The criminal complaint under Section 138 of the N.I.
Act filed by the plaintiff against the defendants are pending
before the competent court, this Court does not wishes to
comment further on it inasmuch as, the cross-examination of
the plaintiff in such criminal complaint, though produced on
record before this Court with this writ application, it was
never placed before the trial Court alongwith leave to
defend application.
11.1. Learned advocate Mr. Shah candidly submitted that no
such evidence regarding the cross-examination of the
plaintiff in the criminal complaint was made part of the leave
to defend, nor was it produced before the trial Court in
support of the case of defendant.
11.2. In light of the aforesaid facts and circumstances of
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the case, such evidence cannot be looked into by this Court
at this stage, having not been produced before the trial
Court and so also when no special leave obtained by the
petitioners to place such evidence before this Court.
12. Be that as it may, the facts remain that ledger account
duly signed by the defendant-firm and so also the aforesaid
letter dated 04.06.2022 was prima-facie confirmed the fact
that money was financed by the plaintiff to defendant-firm
and as on 31st March, 2022, the amount due and payable
including interest of Rs. 37,10,000/- agreed upon by the
defendant-firm. Such amount is ordered by trial Court to be
deposited by defendants as conditional leave to defend the
suit by defendants.
13. So far as the argument canvassed by the learned
advocate for the petitioners that such signature on the
ledger account and having so received the aforesaid letter
dated 04.06.2022 on letterhead of defendant-firm by duress
and coercion at the instance of the plaintiff, when this Court
put simple question to the learned advocate Mr. Shah for the
petitioners that any criminal complaint in this regard ever
filed by the defendant-firm either before police authority or
any competent authority who having issued license under
the Act, 2011. Leaned advocate Mr. Shah, under the
instruction of his client, would reply that no such complaint
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till date was filed by the defendant-firm against the plaintiff.
If it be so mere allegation of duress and coercion by plaintiff
upon defendant-firm would not amount to triable issue as
such, this defence may be plausible but improbable in
absence of any material particulars.
14. Likewise, with regard to the alleged contravention of
Sections 21 and 22 of the Act, 2011, upon a close reading of
the leave to defend filed by defendants, it would not appear
that such ground was ever raised or pressed into service by
the defendant-firm before the trial Court. What appears to
have been pleaded in leave to defend is that, "the maximum
interest chargeable by a money lender stands prescribed,
and if any higher rate is charged, such a contract becomes
void and nugatory. " It further stated that as per the
provisions of law, no cumulative interest would be
chargeable. Nonetheless, there is no specific allegation/
defence that in the present case, the plaintiff has in fact
charged any such higher interest which would in
contravention of Act, 2011, so much so calculated a
cumulative interest. Having observed above, mere allegation
without any substance and having not substantiated such
defence by the defendant-firm, would not automatically
entitled them to get unconditional leave as prayed for.
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14.1 According to my view, when defendant-firm has not
set up the defence so argued before this Court in record to
contravention of Section 21 and 22 of the Act, 2011 in clear
terms, at this stage, it cannot be permitted to raise being
new plea. A new plea which requires factual inquiry having
not taken as specific defence while submitting leave to
defend, cannot be allowed that too in a writ application filed
under Article 227 of the Constitution of India.
15. The same way, submission with respect to Section 27 of
the Act, 2011, at this stage, in absence of specific pleading
raised by the defendant-firm in its defence before trial
Court, this Court would not like to go into it as such an issue
may be agitated by defendants when filed its written
statement. Nonetheless, its true that as per Section 27 of the
Act, 2011, the Court requires to frame such an issue as to
whether the money lender has complied with the provisions
of Section 21 & 22 of the Act, 2011 or not ?. The bare reading
of Section 27 of the Act, 2011 would imply that in every suit
of recovery at instance of licence-moneylender the Act, 2011
apply, it would be incumbent upon the Court to frame the
aforesaid issue of Section 27 (i)(a) of the Act, 2011.
15.1 Nevertheless, when question of grant of
conditional / unconditional leave to defend germane in the
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summary suit, the trial Court requires to take note of settle
principle of law in regards to grant such leave either putting
condition upon defendant or without putting any such
condition on shoulder of defendant thereby can grant
defendant unconditional leave to defend the suit.
15.2 As stated above, considering facts of the present
case, in absence of any specific plea raised by defendants in
its leave to defend as regards to any contravention of
Section 21 and 22 by the plaintiff, it would be premature to
say that act of plaintiff would be in contravention of Section
21 or 22 of the Act, 2011. In any case, the provisions of
Section 27 of the Act, 2011 would not come to the rescue of
the present petitioners having failed to plead any
contravention of the Act, 2011.
16. The another facet of the case needs consideration
that whenever a negotiable instrument in the form of a
cheque issued by the drawer, there arises a legal
presumption as to its issuance towards a legally enforceable
debt or liability of the drawer. [See : Section 139 of Negotiable
Instruments Act, 1881], the defendant is supposed to discharge
such presumption by leading appropriate evidence during
the course of trial. As on date, criminal complaints filed
against defendants for dishonor of cheques in question
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pending, such legal presumption stands against defendants
and in favour of plaintiff.
17. At this stage, it would be apt to refer and rely upon the
decisions of the Hon'ble Apex Court in the case of IDBI
Trusteeship Service Ltd. Vs. Hubtown Ltd reported in
(2017) 1 SCC 568 reported in 2017 1 SCC 568, wherein after
analyzing the law, the issue germane in the present case held
thus.
"17.1 If the defendant satisfies the Court that he has a substantial
defence, that is, a defence that is likely to succeed, the plaintiff is not
entitled to leave to sign judgment, and the defendant is entitled to
unconditional leave to defend the suit;
17.2 If the defendant raises triable issues indicating that he has a fair
or reasonable defence, although not a positively good defence, the
plaintiff is not entitled to sign judgment, and the defendant is ordinarily
entitled to unconditional leave to defend;
17.3 Even if the defendant raises triable issues, if a doubt is left with
the trial judge about the defendant's good faith, or the genuineness of
the triable issues, the trial judge may impose conditions both as to time
or mode of trial, as well as payment into court or furnishing security.
Care must be taken to see that the object of the provisions to assist
expeditious disposal of commercial causes is not defeated. Care must
also be taken to see that such triable issues are not shut out by unduly
severe orders as to deposit or security;
17.4 If the Defendant raises a defence which is plausible but
improbable, the trial Judge may impose conditions as to time or mode of
trial, as well as payment into court, or furnishing security. As such a
defence does not raise triable issues, conditions as to deposit or
security or both can extend to the entire principal sum together with
such interest as the court feels the justice of the case requires.
17.5 If the Defendant has no substantial defence and/or raises no
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genuine triable issues, and the court finds such defence to be frivolous
or vexatious, then leave to defend the suit shall be refused, and the
plaintiff is entitled to judgment forthwith;
17.6 If any part of the amount claimed by the plaintiff is admitted by
the defendant to be due from him, leave to defend the suit, (even if
triable issues or a substantial defence is raised), shall not be granted
unless the amount so admitted to be due is deposited by the defendant
in court."
( Emphasis supplied )
18. If this Court consider the ratio laid down in the
aforesaid decision so as to apply on the facts of the present
case, it would be clear that defendant-firm cannot allow to
claim any unconditional leave to defend, inasmuch as
defendant failed to show any of its defence thereby its case
falls in para-17.1 or 17.2 of said decision.
19. So far as the judgment so relied upon by the learned
advocate for the petitioners in the case of Sudin Dilip
Talaulikar (supra), as such, it would not be applicable to the
facts of the present case, inasmuch as in the case before the
Hon'ble Apex Court, commercial dealing between the parties
ended on 03.06.2011 and no justified reason as to why to
clear any such outstanding payment made through the
cheque issued as late as on 01.03.2014. In this peculiar
background of facts, the Hon'ble Apex Court observed that it
does not appeal to logic or reason much less to the usual
practice in commercial dealing and when no explanation
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furnished on the part of the respondent (plaintiff of that),
and so also noticed that signature and contents of the
cheques are in different writing. Further, one important fact
came to be noticed that in that case, after the launch of
prosecution against the petitioner-defendant the same was
unconditionally withdrawn. Even, the defective goods were
returned back to the respondents, and as such the
respondents-plaintiffs also been paid/received balance due
of Rs. 5 lakh. All these undisputed facts before the Hon'ble
Apex Court, so in light of that the Hon'ble Apex Court please
to grant unconditional leave to defend in favour of the
defendant.
19.1. Whereas, as observed hereinabove, neither
prosecution in form of criminal complaint under Section 138
of N.I. Act against the defendant are being withdrawn nor
any counter complaint lodged by the defendant against
plaintiff in regards to interest money charged by plaintiff
and or its admission by defendants, so also obtained such
cheques / letter dated 04.06.2022/ signature on the ledger
account, under duress and coercion. These are some of the
distinguishing facts germane from the record of the present
case. So, according to my view, the judgment cited by the
learned advocate for the petitioners would not be applicable
to the facts of the present case, thus, not helpful to him.
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20. At last attempt, learned advocate for the petitioners
would place reliance upon the decision of this Court passed
in in the case of Mohan Ishardas Shamnani (supra) [Special
Civil Application No. 9701 of 2013] would also not helpful to
his case, inasmuch as in the cited case, the facts were clear
like a day whereby, it remain undisputed on record that
there was no rate of interest fixed between the parties
inasmuch as giving hand loan to defendant, there was no
written agreement between the plaintiff and defendant as
regards any interest to be charged that too at the rate of
24% interest. So, in such peculiar facts and circumstances,
this Court granted unconditional leave in favour of the
defendant of that case. As observed and stated herein
above, such is not facts of the case on hand. Accordingly, this
decision also would not carry the case of defendants
anymore.
21. Having so observed hereinabove and when none of the
arguments so canvassed by the learned advocate Mr. Shah
for the petitioners appeal to this Court, it would not like to
interfere with the impugned order passed by the trial Court
while exercising its power under Article 227 of the
Constitution of India.
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22. Thus, considering peculiar facts and circumstances of
the present case, with its leave to defend, having not
submitted any material on record to show any fair and
reasonable defence, and prima-facie even not able to show
any substantial defence in support of its leave to defend, it
would be gainsaid that the conditional leave granted by trial
Court would be just and proper. According to my view,
allowing defendant-firm to go for trial with imposition of
condition by trial Court vide its impugned order, cannot be
either erroneous, arbitrary and or any jurisdictional error.
23. Having so observed herein above, I am of the view that
there is neither any irregularity, illegality nor any perversity
on the part of the trial Court while partly allowing leave to
defend application filed by the petitioners herein. As such no
interference requires of this Court in its supervisory power
conferred under Article 227 of the Constitution of India.
Conclusion
24. In light of the aforesaid peculiar facts and
circumstances of the case and in view of foregoing reasons, I
do not find any reason to interfere with the order impugned
in the present writ application, having not found any
irregularity, illegality and or any jurisdictional error
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committed by trial Court while partly allowing leave to
defend application, whereby allowed the defendants to
defend summary suit, albeit by granting conditional leave. I
am of the view that present writ application is bereft of any
merit requires to be rejected, which is hereby rejected.
25. Consequently, the impugned order dated 25.07.2025
passed by the City Civil & Sessions Court, Ahmedabad City
below Exh. 14 in Summary Suit No. 1126 of 2024 is hereby
confirmed. No order as to costs.
Sd/-
(MAULIK J.SHELAT,J)
SALIM/
