IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION SUMMONS FOR JUDGMENT NO.369 OF 2008 IN SUMMARY SUIT NO.2107 OF 2008 Melwani Finance Ltd. ...Plaintiff Vs. Mrs. Devika Ulhas Mehta & Ors. ...Defendants --- Mr.D.D. Madon, Senior Counsel with Mr. R.M. Pardiwalla i/b. Mulla and Mulla & Craigie Blunt & Caroe for Plaintiff Ms. P.U. Bhadade for Defendant Nos.1 to 4 ---- CORAM: V.M. KANADE J. DATED 29TH AUGUST, 2009 P.C. 1. The Plaintiff is a company registered under the provisions of the Companies Act, 1956 and carrying on business of finance and investment. The Plaintiff has filed its summary suit under the provisions of Order XXXVII of the Code of Civil Procedure, 1908 for recovery of an amount of Rs.62,54,103/- together with further interest on the principal amount at the rate of 16.5% p.a. from the date of filing of the suit till payment and/or realisation. 2. After the writ of summons was served on the Defendants, a Chamber Summons was filed by the Defendants for condonation of delay caused in filing their appearance. The said Chamber Summons No.1125 of 2009 was allowed by order dated 21.8.2009. The Plaintiff, in the meantime, took out the summons for judgment and reply was filed by the Defendants in the said summons for judgment dated 9th July, 2009. 3. It is the case of the Plaintiff in the suit that at the request of the Defendant No.3, the Plaintiff entered into loan agreement dated 26th February, 2004 with the Defendant Nos.1 and 2 and the Plaintiff agreed to provide finance to the Defendant No.1 and 2 upto a total sum of Rs.60,00,000/-. According to the Plaintiff, it advanced a sum of Rs.45,00,000/- to the Defendant Nos.1 and 2 from time to time for their business of setting up a mineral water plant in Goa in the name and style of M/s. Devika Exim & Agro Products Pvt. Ltd. According to the Plaintiff, the Defendant No.3 in his individual capacity stood as a guarantor for repayment of the entire loan amount along with interest which was advanced by the Plaintiff to the Defendant Nos.1 and 2. The Plaintiff relied on the personal guarantee dated 16th November, 2004 executed by the Defendant No.3 in favour of the Plaintiff. According to the Plaintiff, the Defendants in discharge of their liabilities, issued a cheque of Rs.4,00,000/- towards part payment of the interest on the principal sum of Rs.45,00,000/-. However, the said cheque was dishonoured by the bankers of the Defendants and the Plaintiff had initiated the proceedings against the Defendants under section 138 of the Negotiable Instruments Act. It is the specific case of the Plaintiff that the said cheque was signed by the Defendant No.3. According to the Plaintiff, the Defendant No.3 in his capacity as Constituted Attorney of Defendant Nos.1 and 2 executed promissory note in favour of the Plaintiff for the sum of Rs. 5,00,000/- on 5th August, 2005 and further two promissory notes both dated 8th May, 2007 one in the sum of Rs.30,00,000/- and other in the sum of Rs.10,00,000/- aggregating to Rs.40,00,000/- It is Plaintiff's case, therefore, that the Defendants had executed promissory notes for the entire principal sum of Rs.45,00,000/- along with interest. Further it is the case of the Plaintiff that the Defendant No.4 i.e. Devika Exim & Agro Products Pvt. Ltd. issued a balance confirmation letter dated 8th May, 2007 confirming that an amount of Rs.45,00,000/- is appearing to the debit of the loan account of the Defendants as on 31st March, 2007 excluding accrued interest thereon. It is the case of the Plaintiff, therefore that the Defendants were bound and liable to repay the said loan amount on or before 25th February, 2007 along with interest at the rate of 16.5.% p.a. and having failed and neglected to repay the amount, the Plaintiff is entitled to claim recovery of the amount as liquidated sum of money with interest. 4. In the affidavit in reply, it is alleged that the loan was given to Defendant Nos.1 and 2 in their individual capacity. It was further stated that the personal guarantee which recites that the Defendant No.3 in his personal capacity agreed to stand guarantor to the loan which may be advanced to Defendant Nos.1 and/or Defendant No.4. It is further stated in the reply that the alleged confirmation letter dated 3.6.2007 was not confirmation of any dues by Defendant Nos.1,2 and 3 and that the said alleged confirmation letter executed by Defendant No.4 was not binding on Defendant Nos.1, 2 and 3. Further it is stated that Plaintiff had issued notices to Defendant Nos.1 to 4 making demand of money on the basis of clause 3 of the Mortgage Agreement and not on the basis of alleged promissory note or alleged deed of guarantee or alleged confirmation letter. It is further stated that from the notices which were issued by the Plaintiff, it is clear the transaction in question was a mortgage tranaction and the Plaintiff had suppressed the mortgage deed and unless specific averment in respect of the terms and conditions of the mortgage deed is pleaded, the summary suit filed against the Defendants under Order XXXVII is not maintainable. 5. I have heard both the Counsel at length. The learned Counsel appearing on behalf of the Plaintiff submitted that the suit was based on a written contract i.e. loan agreement, and the promissory notes. He further submitted that there was confirmation given by the Defendant No.3 acknowleging that the Defendants were liable to pay an amount of Rs.45 lacs with interest and in view of the written contract, promissory note and letter of confirmation, the Plaintiff is entitled to a decree as no triable issue has been raised by the Defendants. 6. On the other hand, the learned Counsel appearing on behalf of the Defendants submitted that the confirmation letter given by the Defendant No.4 which is a company incorporated under the Companies Act was not binding on the Defendants and that the Company had no authority to issue letter of confirmation. He further submitted that the Plaintiff has not produced on record any evidence to show that the said amount was due and payable and the suit in effect is for recovery of the amount paid to the Defendant Nos.1 and 2 and the Plaintiff, therefore, had to establish by leading evidence that the said amount was due and payable. He further submitted that the suit is barred by law of limitation as the suit was filed in 2008, the personal guarantee was given on 16.11.2004 and the promissory note at Exhibit 'C' was given by the Defendant No.1 on 5.8.2005. 7. I have heard both the Counsel at length. The Plaintiff is carrying on the business of finance and claimed to have financed certain amount from time to time to the Defendants. A loan agreemnt was executed between the parties on 26th February, 2004 in which the Plaintiff agreed to provide finance to Defendant Nos.2 to 4 in their invidual capacity of a total sum of Rs.60,00,000/- The Plaintiff, however, has not produced on record the amount which was actually advanced to the Defendant Nos.1 and 2 or an aknowledgment of having received the sum of Rs.45 lacs. The Plaintiff has not produced any record to show whether the said amount was repaid by the Defendants and, therefore, they are liable to repay the said amount of Rs.45,00,000/- with an interest at the rate of 16.5.% p.a. The letter of confirmation on which reliance is placed by the Plaintiff, has been issued by the Defendant No.4 which is a separate legal entity since the company has been registered under the Companies Act and, therefore, the said letter of confirmation cannot bind the Defendant Nos.1 and 2 to whom the loan was given in the individual capacity. Secondly, the notice which was issued by the Plaintiff refers to clause (3) of the mortgage agreement dated 26th February, 2004 entered into between Defendant Nos.1 and 2 in respect of payment of loan and the said amount was demanded in view of clause (3) of the mortgage agreement. The mortgage agreement has not been brought on record. In clause 3 of the loan agrement dated 26th February, 2004 even though a reference is made to the creation of equitable mortgage deed by depositing of title deeds in favour of the Lender, however, the fact remains that the notice dated 21st September, 2007, claims repayment in terms of clause 3 of the mortgage agreemnt and not the agreement which is annexed at Exhibit A to the plaint. In this view of the matter, therefore, the Defendants have raised a triable issue and are entitled to get unconditional leave to defend the suit. It is not possible to accept the contention raised by the Counsel appearing on behalf of the Plaintiff that the burden of proving that the amount claimed to have been paid by the Plaintiff was received and repayment was made by the Defendants to the Plaintiff, was on the Defendants alone and not on the Plaintiff. The agreement dated 26th February, 2004 states that the amount upto Rs.60,00,000/- would be advanced by the Plaintiff to the Defendant Nos.1 and 2. The burden is on the Plaintiff to show that the said amount was paid and received by the Defendant Nos.1 and 3 and that no repayment was made by the Defendants of the said loan. A reference is made to the dishonour cheques which were issued by the Defendant No.3 on behalf of the Defendant No.4 and according to the Plaintiff, criminal proceedings were initiated against the Defendant No.3 under section 138 of the Negotiable Instruments Act since it was signed by the Defendant No.3 on behalf fo the Defendant No.4. The Plaintiff has not produced any accounts regarding payment made to the Defendant Nos.1 and 2 by the Plaintiff and the non- payment by the Defendant Nos.1 and 2 of the said amount. The entire suit is based on the alleged documents given by the Defendant No.4 and not Defendant Nos.1 and 2. The Plaintiff, therefore, will have to establish that the said amount was advanced and was not repaid by the Defendants. 8. Taking into consideration all these circumstances, I am of the view that the Defendants are entitled to be granted unconditional leave. The Defendants are granted unconditional leave to defend the suit. The Defendants shall file their written statement within eight weeks from today. 9. Summons for Judgment is disposed of. V.M. KANADE J.