R.J. Kochar, J.@mdashThe plaintiffs have prayed for an order and decree against the defendants to pay to the plaintiffs a sum of Rs. 5,67,68,433.23 as per particulars of claim Exh. N to the plaint together with further interest at the rate of 27% per annum on the principal sum of Rs. 5 Crores from the date of filing of the suit till payment and/or realisation and for costs of the suit.
2. On receipt of writ of summons, the defendants entered their appearance to contest the suit. Thereafter, the plaintiffs have taken out the present summons for judgment for a decree on the ground that the suit claim is an ascertained and liquidated claim and it arises from a written contract between the parties and that the defendants have no defence of any nature. In support of the summons for judgment an affidavit of Shri Jayant Athavale verifying the facts is filed by the plaintiffs. The defendants have filed affidavit in reply dated 5th March, 1998 of one Shri Ogale, resisting the summons for judgment and praying for unconditional leave to defend the suit on various grounds. The plaintiffs have filed their rejoinder dated 17th January, 2000. The defendants have filed surrejionder dated 29th January, 2000. Thereafter, the plaintiffs have filed an affidavit in further support of summons for judgment dated 3rd October, 2000 and the defendants have filed an affidavit of one Shri Patankar dated 10th October, 2000 in reply to the affidavit in further support of the summons for judgment.
3. I have heard the learned Counsel for both the parties. Both have taken me through the proceedings and both have relied upon certain judgments which I would refer to at the appropriate stage.
4. Shri Kapadia, the learned Counsel for the plaintiffs has submitted that on 19th ,1996 a sum of Rs. 5 Crores was lent by the plaintiffs to the defendants and who in turn executed a demand promissory note on the same date. On the next date i.e. 20th February, 1996, the plaintiffs had addressed a letter to the defendants recording the transaction between them for Rs. 5 Crores as inter-corporate deposit (ICD) for a period of 90 days and recording inter alia the rate of interest and equity shares of listed companies with 50% margin as security and there were other terms and conditions stipulated in the said letter, which was signed on behalf of the defendants accepting the aforesaid terms and conditions. It further appears that on the same date, the defendants have addressed a letter to the plaintiffs thanking them for the inter-corporate deposit and acknowledging the fact that they had accepted the terms and conditions mentioned in the letter. In this letter, the defendants had enclosed a post dated cheque dated 9th May, 1996 for Rs. 5 Crores towards repayment of the principal amount and another cheque for Rs. 25,63,151/- of the same date towards interest for the period of 90 days. The thirds enclosure pertains to equity share certificates along with transfer deed duly signed by the defendants to be kept as security with the plaintiffs with the following condition:---
"Equity share certificate along with transfer deed duly signed by us to be kept as security with you and in case there is a default in making payment, you shall have the right to sell the shares in the market and the proceeds of the realisation can be adjusted against the principal and interest amount. If anything balance thereafter, we shall be liable to pay. Your judgment on the sale shall be binding on us. List enclosed Annexed A."
4-A. As far as the first transaction is concerned, it appears to have ended at that stage. It further appears that the defendants were not able to make the necessary arrangement for repayment of the inter-corporate deposit on the due date without any roll-over and they therefore, made a request to permit roll-over. The plaintiffs, however, refused to accede to the request of the defendants for roll-over and they insisted to deposit the post dated cheques given by the defendants to them. In a letter dated 18th May, 1996, the request for roll-over was repeated with a reduced period of one month. It appears that the plaintiffs had declined to accept the said request also and they had deposited the post dated cheque for Rs. 5 Crores which was dishonoured, though however, another cheque for interest was honoured. A legal notice dated 7th June, 1996 was issued but it had no effect of any nature on the defendants and they failed to make any repayment of the inter-corporate deposit.
5. From this clear and undisputed facts, the learned Counsel has prayed for a judgment to be entered in favour of his clients. Shri Kapadia has also pointed out that there is no dispute of any nature in respect of the inter-corporate deposit- debt for Rs. 5 Crores to be paid by the defendants to the plaintiffs. He further pointed out the subsequent developments taken place at the instance of the defendant company in Delhi High Court, wherein they had applied for a scheme under the Companies Act and in those proceedings, the plaintiffs were known as creditors for a sum of Rs. 5 Crores as inter-corporate deposit.
6. The learned Counsel for the plaintiffs therefore prays for a decree on admission under Order XII, Rule 6 of the Code of Civil Procedure, 1908. He further tried to show that the defendants have taken contradictory stand in the present proceedings and the proceedings before the Delhi High Court. He also stressed the point that they had given up the security in the suit and they were not bound to sell the security shares u/s 176 of the Indian Contract Act. Shri Kapadia has relied upon the following judgments in support of his contentions:---
a)
b) 2000 102 CompCas 118 Uttam Singh Dugal & Co. Ltd. v. United Bank of India and others, on the point of decree on admission under Order XII, Rule 6 of the C.P.C. He stressed the point that admission of the debt need not be only in the proceedings but it can be anywhere else or on any other document and that the creditor is entitled to get decree on such admission. Shri Kapadia has heavily relied upon the scheme filed before the Delhi High Court in the Company Application No. 411/2000 for two points, that is, admission of the debt of Rs. 5 Crores shown as intercorporate deposit amongst other creditors which are enlisted in the Exh. 1 to the said scheme of compromise of Modiluft Ltd. with its creditors and on the basis of the said admission he has prayed for a decree on admission.
7. Shri Naphade, the learned Counsel for the defendants drawn my attention to the judgment of the Supreme Court in the case of
"It is always undesirable and indeed impossible, to lay down hard and fast rules in matters that affect discretion. But it is necessary to understand the reason for a special procedure of this kind in order that the discretion may be properly exercised. The object is explained in
According to Shri Naphade, the test to grant unconditional leave to the defendant is that he should establish such facts which would be a good or even a plausible defence on those facts .
The Supreme Court has even in later cases observed that the defence should be a real issue and not a sham one or a moonshine defence. The defendants should disclose such sufficient facts to enable themselves to get leave to defend conditionally or unconditionally. A substantial triable defence should be available to the defendants and that it should not be a frivolous or vexatious one, which the Supreme Court has described as moonshine. The defendants should be able to disclose a good or plausible defence as a triable issue.
8. Relying upon the aforesaid judgment of the Supreme Court, the learned Counsel for the defendants has pointed out that he has raised a good and plausible defence to get an unconditional leave to defend. He has raised the following triable issues:---
a) Under Rule 227 of the High Court (O.S.) Rules, 1980 as interpreted by certain old judgment that if the plaintiffs do not take out summons for judgment within a period of 6 months from the date of filing of the suit, the defendants become entitled to get unconditional leave to defend. He has pointed out that the suit was lodged on 4th December, 1996, it was admitted on 24th February, 1997 and summons for judgment was taken out on 30th June, 1997. According to Shri Naphade from the date of lodging of the suit more than 6 months had passed before the plaintiffs took out summons for judgment, and therefore, the defendants are entitled to get unconditional leave to defend. At this stage itself I may mention here that our Division Bench has interpreted recently the aforesaid Rule No. 227 of the High Court O.S. Rules, 1980 in the case of Bankay Bihari G Agarwal v. M/s. Bhagwanji Meghj & others, in reference in Summons for Judgment No. 548 of 1998 in Summary Suit No. 683 of 1994, reported in
9. The next point of defence which Shri Naphade, the learned Counsel for the defendants has argued is the written contract between the parties and the specific terms mentioned therein. He has pointedly drawn my attention to the letter dated 20th February, 1996 addressed by the defendants on the very same date when they had endorsed their acceptance of the terms and conditions mentioned in the letter written by the plaintiffs. Shri Naphade has pointed out that both the letters were of the same date and were mutually exchanged by the parties. According to the learned Counsel, Clause 3 of the said letter by the defendants to the plaintiffs is very clear. In that letter the defendants had handed over the shares as security with a specific authority and right to sell them in the market and to adjust the proceeds against the principal and interest in the event of defendants committing default in making payment. It was further agreed by the defendants that if there is any short fall they would be liable to make good the short fall. The defendants had also emphasised the term that the decision or judgment to sell the shares as would be taken by the plaintiffs was binding on the defendants. Shri Naphade has strenously urged that both the letters should be considered together as a contract between the parties. He further stated that the defendants had specifically authorised the plaintiffs to sell the shares if there was default on their part. They had also specifically made it clear that they will not dispute the decision or judgment of the plaintiffs to sell the shares. Shri Naphade has, therefore, pointed out that under the written contract to be considered from both these letters, the plaintiffs were specifically authorised and were given right to sell the shares on default committed by defendants and there was admittedly default committed by the defendants. The plaintiffs, therefore, should have sold the shares to realise the debt. Shri Naphade has pointed out that if the plaintiffs were to sell the shares at that time, they would have fetched more than Rs. 10 Crores as sale proceeds and the defendants would have been benefited to that extent. Shri Naphade points out that as the plaintiffs did not sell the said shares, the defendants have suffered huge loss to the tune of Rs. 5 Crores and his clients are, therefore, entitled to claim a set off. Shri Naphade has also submitted that if leave to defend the suit is not granted to the defendants, the defendants will not be in a position to claim set off under the written contract. Shri Naphade has tried to distinguish the judgement of the Delhi High Court, (supra) as according to him, the contract in that case contained such a stipulation while in the present case there is no stipulation. According to the learned Counsel, the plaintiffs were specifically given right and authority to sell the shares while no such authority existed in the case before the Delhi High Court.
10. Shri Naphade has also pointed out that if leave to defend the suit is not granted to the defendants, the defendants will not be entitled to lodge a counter claim and a valid set off which has arisen from the same transaction.
11. It was also submitted by Shri Naphade that the shares were not physically handed over to the defendants and therefore, it cannot be said that the plaintiffs had given up the security.
12. In my opinion, the defendants have certainly raised a triable issue on construction of written contract and also whether the second letter of the same date addressed by the defendants to the plaintiffs specifically authorising the plaintiffs to sell the shares exclusively at their own discretion can be considered together as a written contract. Do both the letters form a written contract or only the letter written by the plaintiffs to the defendants constitute a contract? If both the letters can be construed to be the basis of the contract, in that case, the defendants can be said to have raised a good and plausible defence. If finally they succeed to establish that both the letters constitute a written contract, they will have to be given leave to defend the suit and in case they succeed in doing so finally, another consequence which would flow is that of the question of counter claim or set off and finally it may so happen that the defendants may not become liable to pay the suit claim to the plaintiffs. It, therefore, cannot be said that the defendants have not raised a substantial defence or that the defence is frivolous or vexatious one. Coupled with the aforesaid facts we cannot lose sight of another crucial link that there was no reply sent by the plaintiffs to the aforesaid letter of defendants to the plaintiffs wherein they had specifically authorised the plaintiffs to sell the shares at the discretion of the plaintiffs. The plaintiffs had kept quiet leaving the defendants under the impression that the plaintiffs had accepted as one of the terms and conditions of the loan in the said letter. If the plaintiffs had no desire to accept the said term put forward by the defendants they could have point blank written to the defendants that they were not interested in selling the shares but they were interested in getting their hard cash from the defendants. This is a missing link which has created an impression on the defendants that the plaintiffs were authorised to sell the shares at him.
13. All these points require further scrutiny and therefore, the defendants are entitled to get leave to defend the suit but not unconditionally. There is unequivocal and clear cut admission on the part of the defendants that an amount of Rs. 5 Crores was payable to the plaintiffs. The fact of receipt of that amount is not disputed. The fact of dishonour of the cheque is not disputed. The fact that the plaintiffs are the creditors of the defendants to the tune of Rs. 5 Crores is well established. In these circumstances, it would not be just to grant unconditional leave to defend the suit to the defendants. I, therefore, direct the defendants to deposit in this Court a sum of Rs. 5 Crores within one year from today in four equal quarterly installments of Rs. 1.25 Crores by November 2001 to avail the conditional leave to defend the suit. It is clarified that any one default in paying such installments would entitle the plaintiffs to pray for a decree. The first such installment would be made by the end of February 2001.
14. As per the above directions if the defendants could deposit the said amount of Rs. 5 Crores in this Court by November 2001, they shall be entitled for conditional leave to defend the suit. The Prothonotary and Sr. Master, High Court is directed to deposit the said amount in fixed deposit of any nationalised bank initially for a period of 3 years and to be renewed thereafter from time to time till the final disposal of the suit.
15. On deposit of the aforesaid amount, the defendants shall file their written statement within a period of 12 weeks from November 2001. Parties to complete discovery and inspection of documents within a period of 8 weeks thereafter. Suit is transferred to commercial causes. Summons for judgement disposed of accordingly.
16. C.C. of the order expedited. All concerned to act on a copy of this order duly authenticated by the Chamber Registrar.
