2014 (2) TMI 1308 - HC - Companies Law

Dishonouring of cheques - Suit for recovery of a sum which comprises of principal amount and interest calculated at the rate of 12% p.a - Held that - None of the defences raised by the Defendant to the Summons for Judgment appears to be either substantial or bona fide. The defences can only be termed as illusory and moonshine. However, with a view to give an opportunity to the Defendant to prove his case at the trial and at the same time to protect the Plaintiffs, the Defendant can be appropriately granted leave to defend the suit on a condition of its depositing in the Court the principal amount of ₹ 67 crores claimed in the suit. 15. In the premises, the following order is passed (i) The Defendant is granted leave to defend the suit on, and subject to, the condition of deposit of ₹ 67 crores in the Court within a period of eight weeks from today; (ii) On such deposit being made, the suit to be transferred to the list of commercial causes; (iii) Written Statement to be filed within a period of six weeks thereafter; (iv) The amount deposited by the Defendant may be invested by the Prothonotory and Senior Master of this Court in a fixed deposit in a Nationalized Bank initially for a period of two years and thereafter to be renewed from time to time till the disposal of the present suit; (v) Suit to appear on board before the learned Judge taking commercial causes after fourteen weeks, i.e. on 16 June 2014.

Summary

Issues Involved:
1. Maintainability of the suit as a Summary Suit.
2. Nature of cheques issued (collateral security or negotiable instrument).
3. Validity of cheque presentment due to the death of the signatory.
4. Alleged undue influence in obtaining signatures.
5. Applicability of the Bombay Money Lenders Act, 1946.
6. Stamp duty on letters acknowledging loans.

Issue-wise Detailed Analysis:

1. Maintainability of the Suit as a Summary Suit:
The Defendant argued that the suit was not maintainable as a Summary Suit due to a running account between the parties. However, the court held that the suit was based on dishonoured cheques, not on any antecedent liability based on an account. The court clarified that a running account could form the consideration for a negotiable instrument, but the suit remained one based on dishonoured cheques, which is supported by lawful consideration.

2. Nature of Cheques Issued (Collateral Security or Negotiable Instrument):
The Defendant contended that the cheques were merely collateral security and did not amount to negotiable instruments. The court rejected this defence, stating that a cheque issued as security implies it should be honoured in case of non-payment of the secured amount. The court termed the defence as bogus.

3. Validity of Cheque Presentment Due to the Death of the Signatory:
The Defendant claimed that the cheques were invalidly presented as the signatory had expired before presentment. The court dismissed this argument, noting that the signatory was the Managing Director of a public limited company, and his death did not affect the validity of cheque presentment.

4. Alleged Undue Influence in Obtaining Signatures:
The Defendant suggested that the signatures on the documents might have been obtained under undue influence while the signatory was hospitalized. The court found this defence speculative and conjectural, noting that the cheques and related documents were drawn much before the alleged hospitalization. The court termed this defence as sham and moonshine.

5. Applicability of the Bombay Money Lenders Act, 1946:
The Defendant argued that the suit was barred under the Bombay Money Lenders Act, 1946, as the Plaintiffs did not hold a valid money lending licence. The court examined the definitions and provisions of the Act, concluding that the suit was not for recovery of a loan but was based on dishonoured cheques, which are negotiable instruments issued in consideration of an antecedent transaction. The court held that the suit was not barred under Section 10 of the Act and dismissed this defence as neither bona fide nor credible.

6. Stamp Duty on Letters Acknowledging Loans:
The Defendant contended that the letters acknowledging the loans were insufficiently stamped and could not be led in evidence. The court, having found no credible or bona fide defence to the suit based on negotiable instruments, did not consider this objection sufficient to raise a triable issue or offer any bona fide defence to the suit.

Conclusion:
The court found none of the defences raised by the Defendant to be substantial or bona fide, terming them illusory and moonshine. However, to provide an opportunity to the Defendant to prove its case at trial while protecting the Plaintiffs, the court granted the Defendant leave to defend the suit on the condition of depositing Rs. 67 crores in the court within eight weeks. The suit was to be transferred to the list of commercial causes upon such deposit, with further procedural directions provided.