2018 (7) TMI 2283 - HC - Indian Laws

Dishonor of Cheque - insufficient funds - parties entered into a settlement on two occasions but the appellants did not comply with the terms of settlement - HELD THAT - In the present case, the appellants (defendants in the suit) were duly served with the summons for judgments and admittedly the appellant did not file the leave to defend within the prescribed period of ten days. Surprisingly, the Joint Registrar, without any application on behalf of the appellants granted further time beyond ten days prescribed to the defendants to file leave to defend by an order dated 15.11.2016. When the matter was listed on 28.11.2016, it was noticed that leave to defend had not been filed. No time was extended and thereafter the matter was adjourned from time to time to enable the parties to resolve the matter. The provisions of the Order XXXVII of the Code are no doubt extremely stringent. The same are to be followed strictly, as the suits falling in this Chapter, as the heading suggests, are Summary suits, based on a written contract or dishonour of cheque etc. It may be noted that the parties entered into a settlement on two occasions but the appellants did not comply with the terms of settlement. The matter was listed before the Single Judge on 10.1.2018, when the same was adjourned at the request of the counsel for the appellants, it was made clear that no adjournment would be granted on the next date. Despite an express direction having been given, no steps were taken by the counsel of the appellants to ensure that the applications were placed on record. Sequence of events narrated hereinabove would show the conduct of the appellants as to how the appellants have succeeded in delaying the matter, which is evident from the facts that the appellants did not fulfil their financial liability; the cheques issued by the appellants to secure the loan were dishonoured; the appellants thereafter entered into an amicable settlement with the respondent and offered to pay Rs.3,22,02,660/- along with pendente lite interest and future interest at the rate of 24%, per annum; deed of compromise was executed and again post-dated cheque was handed over by the appellant to the respondent, which was also dishonoured due to insufficient funds. Since the settlement was not honoured by the appellants, the respondent was forced to file a suit under the provisions of Order XXXVII of the Code. In the suit, the appellants again entered into a settlement with the respondent vide Compromise/Settlement deed dated 23.12.2016, and agreed to pay the sum of Rs.2,38,61,907/- by way of two post-dated cheques, which cheques were also dishonoured on account of insufficient funds. There are no infirmity with the view taken by the Single Judge that in the absence of leave to defend objection, with regard to jurisdiction and the plaintiff being a money lender, could not have been considered - once the appellant had entered into a settlement with the plaintiff and no plea of jurisdiction was raised at that point of time, the appellant cannot be allowed to raise the same at this stage. Appeal dismissed.

Summary

Issues Involved:
1. Filing of appeal under Section 96 of the Code of Civil Procedure, 1908.
2. Recovery suit under Order XXXVII of the Code for Rs.4,38,00,617/-.
3. Dishonour of post-dated cheques.
4. Settlement agreements and their breach.
5. Application for leave to defend and condonation of delay.
6. Jurisdiction of the Court.

Detailed Analysis:

1. Filing of Appeal under Section 96 of the Code of Civil Procedure, 1908:
The appellants filed an appeal under Section 96 of the Code of Civil Procedure, 1908, read with Section 10 of the Delhi High Court Act, 1966, against the judgment dated 11.01.2018 passed by a Single Judge of the High Court in CS (OS) No.66/2016.

2. Recovery Suit under Order XXXVII of the Code for Rs.4,38,00,617/-:
The respondents instituted a suit under Order XXXVII of the Code for the recovery of Rs.4,38,00,617/- along with pendente lite and future interest at the rate of 24% per annum, based on a loan agreement dated 24.2.2010. The appellants had borrowed Rs.2,50,00,000/- for two months and provided post-dated cheques, which were dishonoured due to insufficient funds.

3. Dishonour of Post-Dated Cheques:
The dishonoured cheques led the respondents to file complaints under Sections 138, 141, and 142 of the Negotiable Instruments Act. Despite entering into multiple settlements, the appellants failed to honor the terms, resulting in the filing of the recovery suit.

4. Settlement Agreements and Their Breach:
The parties entered into several settlements, including a deed of compromise dated 31.8.2013, which was not honored by the appellants. Another settlement on 23.12.2016 also failed to be honored, leading to the suit being decreed in the absence of any application seeking leave to defend.

5. Application for Leave to Defend and Condonation of Delay:
The appellants claimed to have filed an application for leave to defend along with an application for condonation of delay on 5.12.2016. However, these were not on record. The Joint Registrar had granted further time beyond the prescribed ten days to file leave to defend, but the appellants failed to do so within the extended period.

6. Jurisdiction of the Court:
The appellants contended that the court lacked territorial jurisdiction as the entire cause of action occurred in Uttar Pradesh, and the agreement conferred exclusive jurisdiction to the Courts at Uttar Pradesh. However, this objection was not raised during the settlements.

Judgment Analysis:

Absence of Leave to Defend:
The court noted that the appellants were duly served with summons for judgment but did not file leave to defend within the prescribed period. The Joint Registrar's order extending time was without any application from the appellants. The court found no force in the appellants' submission that their application for leave to defend should be taken on record.

Stringent Provisions of Order XXXVII:
The court emphasized that the provisions of Order XXXVII are stringent and must be followed strictly. The appellants' failure to comply with the terms of settlement and their delay tactics were highlighted.

Conduct of the Appellants:
The court observed that the appellants' conduct demonstrated a pattern of delaying the matter and not fulfilling their financial liabilities. The dishonoured cheques and breached settlements illustrated this behavior.

Settlement Terms:
The court noted that the appellants had admitted their liability and agreed to pay Rs.2,38,61,907/- as full and final settlement. The failure to honor the settlement led to the suit being decreed.

Jurisdiction Objection:
The court dismissed the jurisdiction objection, stating that it was not raised during the settlement and could not be considered in the absence of leave to defend.

Conclusion:
The appeal was dismissed with costs of Rs.25,000/-, and the court upheld the Single Judge's decision to decree the suit due to the appellants' failure to file leave to defend and their breach of settlement terms.