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TMI Blog1999 (3) TMI 491X X X X Extracts X X X X X X X X Extracts X X X X ..... efend should also be granted in favour of the defendant No. 1. The Court, it is pointed out, must also prima facie, come to the conclusion that the suit is maintainable as a summary suit even though the defendant No. 1 has not applied for leave to defend. On this background, few facts need to be stated. 2. It is the case of the plaintiffs-bank that the board of directors of the defendant No. 1 by resolution dated 8-5-1990 resolved to accept Inter-corporate Deposit from the plaintiff-bank for a period of 181 days as per terms and conditions decided by the plaintiffs. The plaintiff, thereafter advanced the said sum in respect of which the defendant No. 1 issued stamped receipt dated 17-5-1990. Under that receipt, the defendant No. 1 accepted that they have received from the plaintiff a sum of Rs. 50 lakhs on account of Inter-corporate Deposit for 181 days with interest rate of 18 per cent per annum with quarterly rests. By another document dated 16-5-1990, styled as undertaking, the defendant No. 1 agreed to pay principal amount with interest at the rate of 18 per cent per annum (quarterly rest) on due dates. The defendant Nos. 2 and 3 on 16-5-1990 by an agreement of guarantee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee. It is then again contended that there is no written contract based on which suit could be filed under order 37 rule 2 of the Code and hence the alleged guarantee is not enforceable in law and consequently also, the suit could not be filed under the provisions of order 37 rule 2. In view of that, it is contended that this Court should grant unconditional leave to the defendant. The defendant No. 3 has also filed his affidavit. Defences raised by him are more or less similar as that of defendant No. 2. It is the contention of this defendant that guarantee is not properly stamped and as such cannot be received in evidence. The bank guarantee when signed, was on a blank form and it was filled in by the plaintiffs after signing by the defendant, as such guarantee is not binding on the defendants. It is further contended that no notice was served on the defendants invoking the guarantee as no notice was served at the address given at the foot of the bank guarantee as required by the guarantee. The plaintiffs, it is pointed out, has not produced any books of account nor any copy of the accounts maintained and as such, also suit is not maintainable. The claim for interest, it is co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Causes; and ( b )Such other Courts as may be specifically empowered in this behalf by the High Court from time to time by a Notification in the Official Gazette: Provided that in respect of the Courts referred to in clause ( b ) , the High Court may, by notification in the Official Gazette, restrict the operation of this order only, to such categories or suits as it deems proper, and may also, from time to time, as the circumstances of the case may require, by subsequent notification in the Official Gazette, further restrict, enlarge, or vary, the categories of suits to be brought under the operation of this Order as it deems proper." (1-10-1983) and (1-10-1987)." Rule 2(1) of order 37, reads as under: "(1) All suits upon bills of exchange, hundies or promissory notes, and all suits in which the plaintiff seeks only to recover a debt or liquidated demand in money payable by the defendant with or without interest, arising on a written contract or on an enactment, where the sum sought to be recovered is a fixed sum of money or in the nature of a debt other than a penalty, or on a guarantee, where the claim against the principal is in respect of a debt or a liquidated deman ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat the defendant does not unnecessarily prolong the litigation and prevent and plaintiff from obtaining an early decree by raising untenable and frivolous defences in a class of cases where speedy decisions are desirable in the interest of trade and commerce. In general, therefore, the test is to see whether the defence raises real issue and not a sham one, in the sense that if the facts alleged by the defendant are established, there would be a good or even a plausible defence on those facts." The Apex Court thereafter observed as under: "Whether the defence raises a triable issue or not has to be ascertained by the Court from the pleadings before it and the affidavits of parties and it is not open to it to call for evidence at that stage. If upon consideration of material placed before it the Court comes to the conclusion that the defence is a sham one or is fantastic or highly improbable it would be justified in putting the defendant upon terms before granting leave to defend. To hold otherwise would make it impossible to give effect to the provisions of 0.37 which have been enacted, as rightly pointed out by Bose, J. to ensure speedy decision in cases of certain types. It ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aken by Mody J. in Central Bank of India Ltd. v. Femme Pharma Ltd. AIR 1982 Bom. 67. 8. With the above background, the contentions which have to be decided can be dealt with, not necessarily in the order in which they have been referred to earlier. The first contention is whether a decree can be passed against the defendant No. 1 in the absence of the defendant No. 1 applying for leave to defend. It has been contended by the defendant Nos. 2 and 3 that the Court must come to a conclusion that it is a summary suit, to pass a decree. If the Court does not come to that conclusion then merely because the suit is styled and filed as a suit under order 37 and defendant choses not to apply for leave to defend, cannot result in decree being passed against the defendant No. 1. In the instant case, it is contended that the defendant Nos. 2 and 3 have been sued as guarantors. It is only in the event that a decree can be passed against the defendant No. 1 or suit is maintainable against the defendant No. 1 would the suit be triable against the defendant Nos. 2 and 3 irrespective of the fact that suit under guarantee could have been filed against the defendant Nos. 2 and 3 also. It ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rought to my notice certain other decisions which need not be referred to in view of consistent judgments of this Court. To my mind, therefore, there is agreement in writing between the parties and as such, suit as filed by plaintiff against the defendant No. 1 is maintainable as a summary suit. Once it is held to be a suit falling within the predicate of order 37 in the absence of affidavit for leave to defend, decree must follow. Issue as to decree will be decided while disposing of the other contentions raised on behalf of the defendant Nos. 2 and 3. This will dispose of contentions ( a ) and ( c ). 9. The next major contention which needs to be considered is whether deed of guarantee has been properly stamped and if so, whether it can be considered as a guarantee as contemplated by amendment made by this Court to order 37 rule 3. The contention of the defendant Nos. 2 and 3 is that document has not been properly stamped in terms of the provisions of the Bombay Stamp Act, 1958. The guarantee was executed on 16-5-1990. What would be applicable would be article 37 of the Bombay Stamp Act. Article 37 of the Bombay Stamp Act makes the stamp fee payable on the letter of guara ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eved must show prejudice occasioned by such failure. In the instant case, the plaintiff has averred and this has not been denied by the defendant that letter was sent and duly received on behalf of the defendant invoking guarantee by the plaintiff. The fact remains that letter addressed to the defendant No. 3 invoking the guarantee was not sent at the address specified in the guarantee. There is no material to show that it was personally received by him. The material is that the letter addressed at the office of the defendant No. 1, was received there by someone. The effect of these defences will be con- sidered whilst considering whether leave to defend can be granted or not or with conditions. 11. The next contention which was seriously argued and in support of which a number of judgments were cited is about the scope of rule 227 of the High Court O.S. rules. The counsel for the defendants have pointed a large number of judgments starting with Femme Pharma Ltd.' s case ( supra ) . In that case, in Summons for Judgment, it was contended suit must be dismissed on failure to comply with requirement of rule 227 of the High Court O.S. Rules, 1980 corresponding to rule 220(4) of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t to apply afresh after amending the plaint and dropping the relief which was not maintain-able. I would also not be in agreement with the view taken by various Single Judges of this Court holding that if there is delay in taking out Summons for Judgment unconditional leave to defend may be granted as a matter of course. Under rule 227 of the High Court (O.S.) in the event after filing of summary suit, the plaintiff does not move within six months and apply for Summons for Judgment, discretion is given to the Court to dismiss the suit. Nowhere on reading or construction of the said rule, can it be construed that if suit could be dismissed it must follow that the defendant, who may have no defence in terms of the Judgment of the Apex Court in the case of Machalec Engineering has a right of getting unconditional leave. In the ordinary course, I would have referred the matter to a larger Bench for decision in view of the conflicting decisions between Vyas J. and other Single Judges. As pointed out earlier, however, the view taken by Nijjar J. that the view has been affirmed by the Division Bench does not find support from that case. The view has not taken into consideration the law ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... claim for interest at the rate at 6 per cent per annum. The Division Bench observed as under: "Under the Rules of this Court strict conditions are imposed on the Defendants in a summary suit. They must file their appearance in Court within a short specified period and failure to do so entitles the plaintiffs to obtain an ex parte decree against them. It must logically follow that there must be equally stringent requirements postulated on the plaintiffs. One of those requirements would be that they must not in the suit make a claim not warranted by the contract or under a statutory provision. If it can be demonstrated, as it can be in the instant case, that the plaintiffs have in the plaint made a claim for interest not warranted by the statutory provision or by the contractual document, then the suit must be one which cannot be accepted as a summary suit. If this can be done, it would follow that plaintiffs have filed as summary suit a suit which was not really a summary suit. Once this is demonstrated, one of the consequences must follow. The first and the more obvious is to grant to defendants unconditional leave to defend the suit and transfer the same to the appropriate ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed in the manner sought to be construed would run counter to the Division Bench decision referred to earlier in Randerian Singh (P.) Ltd. repro-duced earlier though in Milkhiram (India) (P.) Ltd. 's case ( supra ). Consid- ering order 37 as it stood before its amendment the Apex Court has observed that it is left to the discretion of the Trial Judge. Therefore, what will have to be examined is whether contention of the plaintiffs that the defendants had agreed to pay additional interest and contention of the defendant Nos. 2 and 3 that there is no provision for payment of com- pound interest with quarterly rests is provided for or not. Answer lies therein. 15. The expression used in the guarantee is 'such other rate of interest which may then be payable by the principal'. In the bracket also used expression including 'interest at additional or penal rate' on default by the principal in punctual payment of any instalment and/or interest". What Counsel contends is that this clause must be read to mean and include also interest with quarterly rest. This document was signed purportedly on 16-5-1990. I say purportedly as the date is handwritten unlike the rest of the terms whi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he earlier day, then the expression additional interest would mean additional interest after 17th. In the instant case no additional interest is claimed after 17th, but interest as of 17th at 18 per cent with quarterly rests. 16. An additional argument was raised that as provisional liquidator had been appointed in proceedings for winding up, the suit was not maintain-able under section 446(2) of the Companies Act. In the light of language of section 446(2) it is clear that there is no merit in the said contention. Permission under section 446(2) would be required in the event winding up order is made or after liquidator is appointed. In the present case, suit was filed before Provisional Liquidator was appointed and consequently no leave is required. This view is also the view taken by Dhanuka J. in Bank of Maharashtra v. Padma Alloy Castings Ltd. in Notice of Motion No. 466 of 1995 in Suit No. 4765 of 1994 with Company Application No. 561 of 1995 in Company Petition No. 467 of 1993 decided on 16-11-1991. 17. The plaintiff along with list of documents has produced a certified copy of the resolution of the board of directors of Padma Alloy Casting (P.) Ltd.; a receipt s ..... X X X X Extracts X X X X X X X X Extracts X X X X
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