Telangana High Court

Samala Venu vs Flycon Blocks Pvt. Ltd. on 14 June, 2024

          *THE HON'BLE SRI JUSTICE SUJOY PAUL

      + CIVIL REVISION PETITION No.1094 OF 2024

% 14-06-2024


# Samala Venu
                                                 ...Petitioner
vs.


$ Flycon Blocks Pvt. Limited and Another
                                            ... Respondents


!Counsel for the Petitioner: Sri Nirmal Kumar Pandey

^Counsel for Respondents: Sri D.Mahadava Rao


<Gist :


>Head Note :


? Cases referred
1.    AIR 2007 (NOC) 470 (DEL.)
2.    AIR 2001 RAJ. 67
3.    AIR 2022 SC 785
4.    (2021) 6 SCC 413
5.    (2003) 2 SCC 111
6.    (2017) 1 SCC 568
                                2                              SP,J
                                                    Crp_1094_2024



     IN THE HIGH COURT FOR THE STATE OF TELANGANA
                         HYDERABAD
                             ****
         CIVIL REVISION PETITION No.1094 OF 2024



Between:
Samala Venu
                                                ...Petitioner
vs.


Flycon Blocks Pvt. Limited and Another
                                               ... Respondents


JUDGMENT PRONOUNCED ON: 14.06.2024


           THE HON'BLE SRI JUSTICE SUJOY PAUL


1.     Whether Reporters of Local newspapers
       may be allowed to see the Judgments?        :


2.     Whether the copies of judgment may be
       Marked to Law Reporters/Journals?           :


3.     Whether His Lordship wishes to
       see the fair copy of the Judgment?          :



                                            ___________________
                                               SUJOY PAUL, J
                                    3                                SP,J
                                                          Crp_1094_2024

           THE HONOURABLE SRI JUSTICE SUJOY PAUL

           CIVIL REVISION PETITION No.1094 OF 2024

ORDER:

The petitioner herein filed a summary suit vide

O.S.No.131 of 2023 before XXVII Additional Chief Judge, City

Civil Court at Seunderabad (for short, Court below) under

Order VII Rule 1 read with Section 26 of CPC for recovery of

Rs.3,80,48,150/-. The respondents herein filed an

application vide I.A.No.2413 of 2023 under Order XXXVII

Rule 3(5) read with Section 151 of CPC seeking permission to

defend the case unconditionally. After hearing both the

parties, by impugned order dated 16.02.2024, the Court

below allowed the said application and permitted the

defendants to defend themselves unconditionally.

Challenging the said order, this petition is filed under Article

227 of the Constitution.

2. The petitioner herein is the plaintiff and the respondents

herein are the defendants in the said suit. For the sake of

convenience, the parties hereinafter shall be referred to as

they are arrayed in the said suit.

4 SP,J Crp_1094_2024

Brief Facts:

3. Draped in brevity, the relevant facts are that the plaintiff

averred before the Court below that defendant No.2 had

friendship with one Mr.Allamsetty Raghunath. Defendant

No.2 is Shareholder and Director of defendant No.1, Flycon

Block Private Limited. Defendant No.1 approached said

Allamsetty Raghunath requesting for advancing loan for his

business activity. A promise was made by defendant No.2 to

Allamsetty Raghunath that loan amount being advanced by

him from time to time would be cleared by defendant No.2

progressively. It is also averred in the plaint that the

defendants agreed and assured to repay the hand loan

amounts to said Allamsetty Raghunath along with interest @

36% per annum i.e., 3% per month. The different amounts

were paid by Allamsetty Raghunath to the defendants on

different dates. In total, Rs.60,63,000/- were paid by

Allamsetty Raghunath to the defendants between 25.01.2007

to 13.09.2008.

4. In the plaint, it is further stated that defendant No.2 has

executed a demand promissory note on a Rs.100/- stamp

paper on 24.04.2011 acknowledging that an amount of

Rs.1,05,84,000/- was due to be paid by the defendants to 5 SP,J Crp_1094_2024

said Allamsetty Raghunath as on that date and they promised

to clear the said amount on or before 24.05.2011. In

addition, the defendants also issued five cheques drawn on

Bank of India, Secunderabad Branch. The description of the

said cheques was mentioned in para No.3 of the plaint. If

interest is calculated between 13.09.2008 to 24.11.2011, the

date when calculation was made, it carries an interest of

Rs.1,81,880/-. It is urged that interest @ 3% per month was

discussed and agreed being the contractual rate of interest

which was required to be paid by the defendants to Allamsetty

Raghunath.

5. It is further averred in the plaint that since the

defendants allegedly did not honour their undertaking to

repay the said amount on or before 24.05.2011, although

Allamsetty Raghunath was unhappy, did not insist for

payment due to his friendship and acquaintance with the

defendants. Allamsetty Raghunath again discussed about

modalities of payments with the defendants for which the

defendants agreed to execute a demand promissory note

dated 25.01.2018 and also agreed to pay the amount of

Rs.2,53,16,550/-. The said amount is arrived at between

Allamsetty Raghunath and the defendants after calculating 6 SP,J Crp_1094_2024

the interest @ 3% per month. This amount was also not paid

in discharge of promissory note dated 25.01.2018. Another

promissory note dated 18.01.2021 was executed for an

amount of Rs.3,18,63,230/- by including the interest @ 3%

per month. This promissory note was also not translated into

reality and hence, yet another promissory note dated

09.01.2023 to repay the amount of Rs.3,62,29,350/- with

same rate of interest was executed.

6. It is further averred in the plaint that the defendants

failed to pay the amounts covered under the promissory note

dated 09.01.2023. By calculating the interest, it is submitted

that the defendants are bound to pay interest @ 3% per

month on the principal amount till the date of realisation.

Furthermore, it is urged that Allamsetty Raghunath has

executed an 'assignment deed' assigning the aforestated debt

in his favour by way of said deed dated 14.11.2023 in favour

of the plaintiff and the plaintiff, being the assignee of debt of

Allamsetty Raghunath, is entitled to recover the aforesaid

amount along with future interest from the defendants. The

plaintiffs' sent a legal notice dated 15.11.2023 demanding the

said amount, but it went in vain.

7 SP,J Crp_1094_2024

7. The plaintiffs filed the instant summary suit under the

provisions of Order VII Rule 1 read with Section 26 of CPC.

The bone of contention of the plaintiff in the plaint is that the

defendants do not have any defence to defend the above suit

relating to financial transaction based on promissory notes. If

such defence is pleaded before the Court, the same will be

only for the purpose of defending the suit without any merits.

8. The defendants entered appearance and filed

I.A.No.2413 of 2023 under Order XXXVII Rule 3(5) read with

Section 151 of CPC seeking permission to defend the case

unconditionally. The parties were heard on this application,

and by impugned order, the Court below allowed the same.

Contentions of the Petitioner/Plaintiff:

9. Learned counsel for the petitioner/plaintiff submits that

the Court below has erred in allowing the application filed by

the defendants. The defendants did not dispute the existence

of their signatures on the promissory note and assignment

deed. In absence thereof, there was no occasion for the Court

below to grant the permission to the defendants to defend the

case unconditionally. It is urged that the case was an open

and shut one and the Court below should have decided it in a

summary manner.

8 SP,J Crp_1094_2024

10. The next submission of learned counsel for the

petitioner/plaintiff is based on Section 130 of the Transfer of

Property Act, 1882, Section 20 of the Negotiable Instruments

Act, 1881 and Section 25(3) of the Contract Act, 1872. By

reading the relevant Sections, learned counsel for the

petitioner submits that the law creates a presumption in

favour of the petitioner/plaintiff and hence, the Court below

was not justified in allowing the application of the defendants.

In support of his contentions, he placed reliance on the

judgment of the Delhi High Court in Sh.Vipin Gupta Vs.

Sh.Prem Singh 1 and the judgment of Rajasthan High Court

in Sapna Saree Centre Vs. Bank of Rajasthan Ltd. 2. Lastly,

it is submitted that the Court below has not clearly pointed

out any triable issue on the strength of which such

permission to defend could have been granted. In a cursory

manner, the Court below opined that the judgment cited by

the petitioner/plaintiff are based on different facts, but what

were those different facts and how those judgments are

distinguishable is not spelt out in the impugned order. Thus,

the impugned order be interfered with.

1 AIR 2007 (NOC) 470 (DEL.) 2 AIR 2001 RAJ. 67 9 SP,J Crp_1094_2024

Stand of the respondents/defendants:

11. Learned counsel for the respondents/defendants placed

reliance on Order XVVII Rule 3(5) of CPC and urged that the

language of aforesaid provision makes it clear that it is the

prerogative of the Court to decide whether the permission to

defend can be granted or not. In a case of this nature where

the defendant has raised various objections in his affidavit

before the Court below, the Court below was perfectly justified

in passing the impugned order. The attention of this Court is

drawn on various paragraphs of the affidavit dated

07.12.2023 filed before the Court below. It is submitted that

the point involved in this case is no more res integra and the

Apex Court in B.L.Kashyap and Sons Ltd. Vs. JMS Steels

and Power Corporation & Others 3 and S.Natarajan Vs.

Sama Dharman 4 has drawn the curtains on the issue.

FINDINGS:

12. Before dealing with rival contentions, it is apposite to

reproduce Order XXXVII Rule 3(5) of CPC which reads as

under:

"The defendant may, at any time within ten days from the service of such summons for judgment, by affidavit or otherwise disclosing such facts as may be deemed sufficient to entitle him to defend, apply on such

3 AIR 2022 SC 785 4 (2021) 6 SCC 413

10 SP,J Crp_1094_2024

summons for leave to defend such suit, and leave to defend may be granted to him unconditionally or upon such terms as may appear to the Court or Judge to be just:

Provided that leave to defend shall not be refused unless the Court is satisfied that the facts disclosed by the defendant do not indicate that he has a substantial defence to raise or that the defence intended to be put up by the defendant is frivolous or vexatious:

Provided further that, where a part of the amount claimed by the plaintiff is admitted by the defendant to be due from him, leave to defend the suit shall not be granted unless the amount so admitted to be due is deposited by the defendant in Court."

(Emphasis Supplied)

13. In nutshell, the case of the plaintiff is that said

Allamsetty Raghunath has given money to the defendants on

various occasions. As per plaint averments, the various sums

of money given to the defendants by said Allamsetty

Raghunath on different dates are as under:

"a. An amount of Rs.24,00,000/- on 25.01.2007. b. An amount of Rs.6,00,000/- on 07.03.2007. c. An amount of Rs.10,00,000/- on 10.03.2007. d. An amount of Rs.10,63,000/- on 31.09.2008. e. An amount of Rs.5,00,000/- on 08.09.2008. f. An amount of Rs.5,00,000/- on 13.09.2008."

14. The defendants in their aforesaid affidavit took a

categorical stand and urged that the suit documents were

obtained by force. Hence, the said documents are not valid

and cannot be enforced in law. A clear objection was taken

that suit is barred by law and a time barred claim cannot be

enforced. The alleged original claimant Allamsetty Raghunath 11 SP,J Crp_1094_2024

had not paid any amount and had no right to claim any

amount, and therefore, assignor has no right to seek any

remedy before the Court below. It is further averred that

amounts were allegedly paid in the year 2007/2008 and no

information is given as to what was the mode of payment.

The alleged promissory note was obtained in the year 2011

promising to pay the interest. Some blank papers/documents

were obtained by Allamsetty Raghunath which are now being

used by the plaintiff to extort money.

15. A plain reading of the stand taken by the plaintiff and

defendants, prima facie, shows that they are at loggerheads

on the question of limitation, on the enforceability of the

documents and whether the same were obtained under

pressure, coercion, etc. In this backdrop, it is to be seen

whether the Court below was justified in allowing the

application permitting the defendants to defend themselves

unconditionally.

16. As noticed above, learned counsel for the

petitioner/plaintiff submits that in absence of existence of any

triable issue, such a permission to defend should not have

been granted to the defendants. The order of the Court below

needs to be examined on this aspect.

12 SP,J Crp_1094_2024

17. A bare perusal of the order of the Court below shows

that it was clearly recorded that the defendants have stated

that suit claim cannot be accepted. A huge amount of Rs.4

crores is involved and the defendants are disputing the

authenticity of notarised assignment deed made by the

assignor Allamsetty Raghunath in favour of the plaintiff just

before filing of the suit. The 'Demand Promissory Note' dated

24.04.2011 is invalid as it contains non-judicial stamp

purchased a day after on 25.04.2011.

18. In para 14 of the impugned order, the Court below

recorded that there are so many triable and contentious

issues between the parties. In this background, if permission

to the defendants to defend is not granted, the very object and

purpose of Order XXXVII Rule 3(5) of CPC would be

frustrated. Then, the Court below considered the judgments

cited by the plaintiff in para 15. In para 16, it assigned

certain reasons for not accepting the said judgments. Thus, it

is not correct to contend that the Court below has not

assigned any reason whatsoever for distinguishing the

judgments cited by the petitioner/plaintiff.

19. It is noteworthy that in the case of Sh.Vipin Gupta

(supra), the genuineness of the documents/cheques and 13 SP,J Crp_1094_2024

existence of signatures were not in dispute. However, in that

case, there was no defence that the suit documents were

obtained under pressure, coercion or threat. Interestingly,

the objection relating to limitation was also absent in the case

of Sh.Vipin Gupta (supra). Similarly, in the case of Sapna

Saree Centre (supra), the sham and illusory defence was not

accepted.

20. In the instant case, whether the defence is sham or

illusory cannot be decided in a summary trial. This Court

says so because it is trite that the question of limitation is a

mixed question of fact and law {see Shakti Bhog Food

Industries Ltd. Vs. Central Bank of India (2020) 17 SCC

260}. This question needs to be determined after recording

evidence.

21. Apart from this, in the case of Sapna Saree Centre

(supra), the Rajasthan High Court upheld the order of the

trial Court declining leave to defend because in the peculiar

facts of that case, the defendant therein had failed to set up

any triable issue by raising plausible pleas in their

application. This is equally settled that a singular different 14 SP,J Crp_1094_2024

fact may change the precedential value of a judgment (see

Bhavnagar University Vs. Palitana Sugar Mill (P) Ltd. 5.

22. At the cost of repetition, in the instant case, whether the

suit documents were obtained by Allamsetty Raghunath by

pressure or not is a question of fact which needs to be

determined during the course of trial apart from decision on

the question of limitation. These are certainly triable issues

which were taken note of by the trial Court.

23. In IDBI Trusteeship Trusteeship Services Ltd. v.

Hubtown Ltd. 6, the Apex Court held as follows :

"17. Accordingly, the principles stated in para 8 of Mechelec case [Mechelec Engineers & Manufacturers v. Basic Equipment Corpn., (1976) 4 SCC 687] will now stand superseded, given the amendment of Order 37 Rule 3 and the binding decision of four Judges in Milkhiram case [Milkhiram (India) (P) Ltd. v. Chamanlal Bros., AIR 1965 SC 1698], as follows:

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."

5 (2003) 2 SCC 111 6 (2017) 1 SCC 568 15 SP,J Crp_1094_2024

24. The Apex Court in the case of B.L.Kashyap and Sons

Ltd. (supra) opined as under:

"17. It is at once clear that even though in the case of IDBI Trusteeship, this Court has observed that the principles stated in paragraph 8 of Mechelec Engineers' case shall stand superseded in the wake of amendment of Rule 3 of Order XXXVII but, on the core theme, the principles remain the same that grant of leave to defend (with or without conditions) is the ordinary rule; and denial of leave to defend is an exception. Putting it in other words, generally, the prayer for leave to defend is to be denied in such cases where the Defendant has practically no defence and is unable to give out even a semblance of triable issues before the Court."

(Emphasis Supplied)

25. This judgment in no uncertain terms makes it clear that

grant of leave to defend with or without condition is the

ordinary rule and denial of leave to defend is an exception. In

view of ratio decidendi of the above judgment, it can be safely

held that in a case of this nature where factual matrix are in

serious dispute and question of limitation is to be determined,

it cannot be said that there exists no triable issue before the

Court below. Putting it differently, it cannot be said that

defendants have practically no defence.

26. The scope of interference under Article 227 of the

Constitution is limited. If impugned order suffers from any