1 SJ-233-02.sxw IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION SUMMONS FOR JUDGMENT NO.233 OF 2002 IN SUMMARY SUIT NO.4441 OF 2001 The National Small Industries Corporation Limited, a Government of India Enterprise having its Head Office at NSIC Bhavan, Okhla Industrial Estate, New - Delhi 110 020 and having its Bombay Office at Prestige Chambers, Kalyan Street, Masjid (East), Mumbai – 400 009 . ..Plaintiff Vs 1. M/s.Bassein Metals Private Limited having its registered office at 103-A Wing, Charkop, Muskurahat Co-operative Housing Society Limited, I.M.P. Lane, Bar Breaker Nagar, Kandivli (West), Mumbai – 400 067. and another ..Defendants -- Ms.Usha Srivastava i/b.M/s.Consulta Juris, for plaintiff. Mr.Kamal Khata i/b. Mr.P.A.Sawant, for defendant. -- CORAM : R.G.KETKAR, J. 2 SJ-233-02.sxw RESERVED ON : 30 th JUNE, 2011 PRONOUNCED ON : 5 th AUGUST, 2011 JUDGMENT: By consent of the parties, Summons for Judgment is heard finally. The plaintiff has taken out this Summons for Judgment in Summary Suit No.4441 of 2001 praying that the judgment be entered for the plaintiff in the said suit against the defendants for the some of the principle amount of Rs.1,76,73,000/- and interest of Rs. 2,00,96,516.91/- as per the particulars of claim being Exhibit “N” to the plaint being the amount due and further interest @ 18% per annum or at any other rate as this Court deems fit on the principal amount of Rs.1,76,73,000/- from the date of filing of the suit till payment as set out in the plaint and costs. 2] The plaintiff instituted Summary Suit No.4441 of 2001 under Order XXXVII Rule 2 of the Code of Civil Procedure, 1908 (for short “C.P.C.”). The plaintiff is a Government of India Enterprise engaged in the business of promoting Small Scale Industries by providing them with the different kinds of assistance in the form of Hire Purchase, equipments leasing, raw material finance, bill discounting etc. which is popularly known as “Raw Material Assistance Scheme 3 SJ-233-02.sxw (for short “said scheme”). Defendant no.1 is a private limited Company incorporated under the Companies Act, 1956. Defendant no.2 is Director of defendant no.1 – Company and is also the guarantor for all the payments to be made by defendant no.1 to the plaintiff. 3] It is a case of the plaintiff that in the month of November, 1992 the defendants approached the plaintiff for the procurement of raw material under the said scheme. After verifying credentials of the defendants, the plaintiff agreed to provide the defendants with such raw material assistance from time to time depending upon their need subject to such terms and conditions as set out in the form of agreement. An agreement was executed on 9 th November, 1992 between the plaintiff and the defendants setting out therein the details of the terms and conditions under which the said scheme was to operate. The said agreement is annexed at Exhibit “A” to the plaint. 4] In addition to the above, defendant no.2 gave undertaking to the plaintiff giving liberty to plaintiff to dispose of the raw material in the event of default being committed by defendant no.1. The said 4 SJ-233-02.sxw undertaking dated 28 th November, 1992 is annexed at Exhibit “B” to the plaint. Defendant no.2 also executed personal guarantee inter alia guaranteeing repayment of raw material assistance and also confirming to discharge all the obligations under the agreement dated 9 th November, 1992. The personal guarantee is annexed at Exhibit “C” to the plaint. Plaintiff has, thereafter, gave details about working arrangement and modus operandi between the parties about opening of irrevocable Letters of Credit etc. It is further averred by the plaintiff that defendant no.2 visited the office of the plaintiff on 12 th & 13 January, 1999 to show bonafide to the defendants and executed Demand Promissory Note (for short “D.P.N.”) in favour of the plaintiff for a total sum of Rs.2,83,70,700.91 (Rs.Two Crores Eighty Three Lacs Seventy Thousand Seven Hundred and paise Ninety One only) on 13 th January, 1999. The said D.P.N. is annexed at Exhibit “H” to the plaint. Plaintiff has thereafter made reference to correspondence exchanged between the parties and thereafter, averred that the defendants issued cheque bearing No.6578 dated 14 th August, 1998 in the sum of Rs.Ninety lacs drawn on S.B.I. Bank, Vasai branch, Vasai in favour of the plaintiff and another cheque bearing no.657804 dated 14 th August, 1998 in the sum of Rs.1,77,80,849/- drawn on 5 SJ-233-02.sxw S.B.I. bank, Vasai branch. Upon depositing of these cheques, they were dishonoured and consequently, the plaintiff filed criminal proceedings under Section 138 of the Negotiable Instruments Act, 1881 (for short “the Act”) against the defendants. 5] The plaintiff issued Demand cum Winding Up notice dated 3 rd July, 2001 through its advocate and invoked D.P.N. dated 13 th January, 1999 calling upon the defendants to pay a sum of Rs. 3,68,29,634.91 being amount due as of today i.e.30 th June, 2011 with further interest thereon at the rate of 18% till the payment, within 21 days from the receipt thereof. The said notice dated 3 rd June, 2001 annexed at Exhibit “J” to the plaint. The defendants through their advocates gave reply on 21 st July, 2001 and sought inspection of various documents and denied their liability. The said reply is annexed at exhibit “K” to the plaint. The plaintiff thereafter issued notice through advocate on 6 th September, 2001 to defendant no.2 which was received by defendant no.2 on 15 th September, 2001. The said notice is annexed at exhibit “L” to the plaint. The defendants replied this notice through advocate on 24 th September, 2001 denying their liability. The said reply is at exhibit “M” to the plaint. The plaintiff 6 SJ-233-02.sxw has, therefore, instituted the present suit on 22 nd November, 2001 under Order XXXVII Rule 2 of C.P.C. principally on the basis of (i) agreement dated 9 th November, 1992; (ii)D.P.N. dated 13 th January, 1999; and (iii) Personal Guarantee executed by the defendants in favour of the plaintiff. Summons for Judgment was issued by this Court on 9 th January, 2002 and was received by the Sheriff of Mumbai on 19 th January, 2002. Summons was served on the defendants on 24 th January, 2002 and on behalf of the defendants appearance was entered on 1 st February, 2002. 6] On behalf of the defendants, affidavit-in-reply was filed by defendant no.2 Suresh Gupta, Director of respondent no.1 on 28 th March, 2011. The defendants contend that the documents on the basis of which present suit is instituted are incorrect, fabricated and manipulated documents and therefore, the plaintiff is not entitled to any relief under Order XXXVII Rule 2 of C.P.C. It is further contended that various triable issues arise and are required to be adjudicated and therefore, the Summons for Judgment is liable to be dismissed with costs. The defendants have made reference to various litigations filed by the plaintiff to recover alleged dues from 7 SJ-233-02.sxw the defendants. A reference is made to Company Petition No.921 of 2001 filed by the plaintiff for winding up of defendant no.1 Company, where outstanding amount of Rs.2,83,70,791/- is shown. The winding up petition was granted by this Court by order dated 11 th October, 2007 and Company Appeal No.287 of 2008 is pending for final hearing and disposal. Reference is also made to two complaints filed by the plaintiff under Section 138 of the Act. One of the complaints being CC No.408/S/2003 was dismissed by learned Magistrate, 20 th Court, Mazgaon, Mumbai on 7 th August, 2004 and the other complaint bearing no.859/SS/2005 is pending for adjudication. [] It is further averred that as far as the Statement of Accounts as of 30 th September, 1998, the outstanding dues in the account of the defendants was shown as Rs.2,83,70,700.91 and as per the fresh Statement of Account submitted at the Joint meeting held on 12 th/13 th January, 1999, the outstanding amount as on 30 th September, 1998 was shown as Rs.2,45,60,318.91. The amount covered by two cheques alleged to have been given by the defendants to the plaintiff against the outstanding amount of Rs.2,67,80,949/- whereas, the 8 SJ-233-02.sxw plaintiff claimed Rs.2,83,70,700.91 as per ledger balance of 31 st March, 1999. It is, therefore, contended that the plaintiff has not submitted true and correct statement of account and consequently, is not entitled to any reliefs under Order XXXVII of CPC. The defendants denied any claim under agreement dated 9 th November, 1992. Defendant No.2 denied that he is guarantor for payment to be made by defendant no.1 Company to the plaintiff. He further denied that he had executed any personal guarantee dated 9 th November, 1992 on stamp paper dated 13 th November, 1992. It is averred that the document relied upon by the plaintiff is fabricated and manipulated document to suit the plaintiff’s purpose. The defendants have further averred availability of two options under the said scheme of finance i.e.(i) Finance under bank guarantee and (ii) Irrecoverable inland letter of credit. The defendants chose second option i.e. Irrecoverable inland letter of credit. 7] The defendants have further averred about the transaction based upon the irrecoverable Letter of Credit and contended that the defendants have submitted the requisite documents and it was obligatory on the part of the plaintiff to send the documents within the 9 SJ-233-02.sxw stipulated time to the defendants’ bank namely State Bank of India to honour the payment under the Letter of Credit. The plaintiff, however, failed to send the documents within the stipulated time and thus, on account of failure on the part of the plaintiff, the plaintiff could not receive money against the Letter of Credit which was on account of negligence on the part of the plaintiff. 8] The defendants admitted joint meeting were held on 12 th and 13 th January, 1999. However, they contended that no D.P.N. was executed by the defendants for a sum of Rs.2,83,70,700.91. It is averred that the said D.P.N. is a fabricated document. It is further contended that since the complaints under Section 138 of the Act were filed by the plaintiff prior to 12 th and 13 th January, 1999, it is impossible to conceive that defendants would execute such a document. The plaintiff has used blank document so suit its purpose. It is further averred that the plaintiff has not referred to the alleged D.P.N. dated 13 th January, 1999 in their notice dated 21 st October, 1999 in as much as the plaintiff has addressed demand notice dated 30 th July, 2001. However, in the body of notice, the plaintiff has not mentioned about alleged D.P.N. and such D.P.N. is a fabricated 10 SJ-233-02.sxw document created by the plaintiff to suit their illegal purpose. On these among grounds, the defendants prayed for dismissal of Summons for Judgment. [] Along with the affidavit-in-reply, the defendants have enclosed (i) Letter dated 3 rd June, 1998 addressed by the Deputy Manager of the plaintiff to defendant no.1 at exhibit 1; (ii) Letter dated 22 nd June, 1998 addressed by the Deputy Manager of the plaintiff to defendant no.1 at exhibit 2; (iii) Judgment and order dated 7 th August, 2004 passed by the Learned Metropolitan Magistrate, 28 th Court, Mazgaon, Mumbai dismissing CC/408/S/2003 filed by the plaintiff under Section 138 of the Act. 9] The plaintiff has filed affidavit in rejoinder dated 7 th April, 2011 contending interalia that the D.P.N. is not a fabricated document and that against the dismissal of the complaint on 7 th August, 2004, the plaintiff has filed Appeal and the same is pending. 10] Having regard to the rival pleadings of the parties, following issues arise for my determination :- 11 SJ-233-02.sxw (i) Whether the plaintiff is entitled to leave to sign the judgment ? (ii) Whether the defendants are entitled to leave to defend unconditionally or subject to condition as to payment in the Court or furnishing security? (iii)What order? 11] Since issue nos.1 and 2 are interlinked, they can be decided together. Ms.Usha Srivastava, learned counsel for the plaintiff submitted that the defendants have not disputed the financial assistance given by the plaintiff to them. Dfendants have also not disputed receipt of goods pursuant to the financial assistance provided by the plaintiff. The defendants have also not shown that they have repaid any amount which is claimed by the plaintiff. She submitted that the suit instituted under Order XXXVII Rule 2 of the C.P.C. is based upon (i) the agreement dated 9 th November, 1992; (ii) Performance Guarantee dated 9 th November, 1992; and D.P.N. dated 13 th January, 1999. She submitted that defendant no.2 has signed 12 SJ-233-02.sxw the said D.P.N. on behalf of the defendants and the defendants have not disputed signature appearing on the said D.P.N. She has also invited my attention to the Company Petition No.921 of 2001 as also orders passed thereon. 12] On the other hand, Mr.Kamal Khata, learned counsel for the defendants has contended that the suit instituted by the plaintiff under Order XXXVII Rule 2 of C.P.C. is based upon the incorrect, fabricated and manipulated documents and hence, the plaintiff is not entitled to any relief thereunder since there are number of triable issues involved. Summary Suit is not maintainable and Summons for Judgment is liable to be dismissed. He has taken me through the reply filed by defendant no.2 as also the proceedings of Company Petition No.921 of 2001 and orders passed thereon. He has also relied upon the Full Bench decision of this Court in the case of Jyotsna K Valia Vs. M/s.T.S.Parekh & co., 2007(4) AIR Bom 738. 13] I have considered the rival submission made by learned counsel appearing for the parties. As noted earlier, the plaintiff has annexed D.P.N. dated 13 th January, 1999, the defendants have not 13 SJ-233-02.sxw disputed the signature of defendant no.2 appearing thereon. Plaintiff has issued notice dated 3 rd July, 2001 exhibit “J” and in particular in paragraph 4 thereof, it is specifically averred that the defendants have issued a D.P.N. In paragraph 6, it is further averred that the plaintiff has invoked D.P.N. and called upon the defendants to make good the total payment of Rs.3,68,29,634.91. The defendants have responded to this notice on 21 st July, 2001 and called upon the advocate for the plaintiff to give inspection of following documents:- (a) Agreement dated 9 th November, 1992 (b) Personal Guarantee. (c) Details of raw material and finance scheme (d) Details of Letter of Credit (Hundi). The defendants have neither asked for inspection of DPN nor disputed the existence of D.P.N. The defendants have also not sought any clarification and details of the said D.P.N. This was followed by notice dated 6 th September, 2001 issued on behalf of the plaintiff where, again reference to the issuance of D.P.N. by the defendants is made. This was replied by the defendants on 24 th 14 SJ-233-02.sxw September, 2001 and again the defendants have neither denied the existence of any D.P.N. nor contended that the said document is a fabricated document. The defendants also did not contend that signature/s was/were obtained on the blank papers and the said papers are being misused. No case is made out about not executing the D.P.N. on the ground that since the plaintiff had filed complaints under Section 138 of the Act prior to 12 th/13 th January, 1999 it was impossible for the defendants to execute the said document. This is to be appreciated on the backdrop of the fact that the defendants did not dispute joint meeting held on 12 th and 13 of January, 1999 between the Chairman/Managing Director, Executive Director, Regional Director, Finance Manager of the parties. 14] It is also relevant to advert to the proceedings of Company Petition No.921 of 2001. In paragraph 12 of that petition, the plaintiff specifically averred that defendant no.2 visited the office of the plaintiff on 12 th/13 th January, 1999 and executed D.P.N. in favour of the plaintiff for a total sum of Rs.2,83,70,700.91 after confirming ledger balance outstanding. The said D.P.N. was annexed at Exhibit “F” to the petition. The said Company petition was filed on 2 nd 15 SJ-233-02.sxw August, 2001. Affidavit-in-reply was filed by defendant no.2 and one Mr.Marcelino Pires, Directors of the Company on 28 th March, 2002. In this reply, the defendants admitted the joint meeting held on 12 th/13 th January, 1999 and it was contended that the said D.P.N. is a blank document though it was signed, it was for the one individual transaction and the plaintiff Company misused the said blank D.P.N. and on their own filled in amount of Rs.2,83,70,700.91. It was further averred that the joint meetings were held on 12 th and 13 th January, 1999 and the plaintiff agreed to give the detailed statement of outstanding amount and therefore, there was no question of signing D.PN. on 13 th January, 1999. The said D.P.N. is a manipulated and a fabricated document as it can be seen that the blank portion is filled up on a typewriter machine whereas, document is prepared on Computer. The plaintiff has filed rejoinder dated 4 th April, 2002 to the affidavit in reply filed by the defendants denying assertions of DPN dated 13 th January, 1999 was blank document amongst other contentions. 15] On 19 th April, 2002 Hon’ble Mr. Justice D.K.Deshmukh admitted 16 SJ-233-02.sxw the Company Petition. In paragraph 1 of that order it was observed as under :- “...........Admittedly, the respondents (defendants herein) had signed demand promissory note at the time of each supply of the raw materials. There is no dispute that the demand promissory notes have been signed on behalf of the respondents. Admittedly, no payment has been made by the respondents. Even under the letter of credit, as the raw materials were being supplied to the respondents, the liability to make the payment was of the respondents. Admittedly, the Corporation has not received any payment from anybody. Primary responsibility undoubtedly will be that of the respondents. The learned counsel for respondents stated before me that in any case the principal amount would be to the tune of Rs. 1,62,00,000/-. .......” 16] The company petition was ultimately disposed of on 11 th October, 2007 and after considering agreement dated 9 th November, 1992 and the D.P.N. dated 13 th January, 1999 showing amount of Rs. 2,83,70,700.91 due as of 31 st January, 1999 as also notice dated 3 rd July, 2001 and the reply of the defendants, Hon’ble Mr.Justice Anoop 17 SJ-233-02.sxw V. Mohta granted prayer clauses (a) and (b) of the Company petition and liberty was granted to the defendants to settle the matter within two months. 17] The company petition was thereafter listed on 7 th February, 2008 and since the defendants herein did not approach for settlement, it was observed that the order dated 11 th October, 2007 came into effect on expiry of 2 months from that date. The order dated 11 th October, 2007 was challenged by filing Appeal No.287 of 2008 and on 17 th September, 2008 the Appeal was admitted. The plaintiff challenged the said order dated 17 th September, 2008 by filing Petition for Special Leave Appeal (Civil) No.7733 of 2009. In the order dated 27 th March, 2009, the Apex Court, prima facie, found that there is admission liability on the basis of which the learned Company Judge of this Court had passed the order of winding up and since the Division Bench stayed the entire order unconditionally, the notice was ordered to be issued. Subsequently, on 5 th October, 2009, the Apex Court dismissed the Special Leave Petition as order impugned was an interim order and at that stage, the Apex Court found no reason to interfere. Having regard to the fact that the 18 SJ-233-02.sxw plaintiff herein is a Government of India Enterprise, the Apex Court requested this Court to expedite the hearing and dispose of the Appeal preferably within one year from the date of the order. The said Appeal is pending for final hearing and disposal. 18] While dealing with grant of leave to the defendant in a Summary Suit, the Calcutta High Court in the case of Kiranmoyee Dassi and another Vs. Dr.J.Chatterjee, AIR (36) 1949 Calcutta 479, laid down the following propositions: “(a) If the defendant satisfied the Court that he has a good defence to the claim on its merits the plaintiff is not entitled to leave to sign judgment and the defendant is entitled to unconditional leave to defend. (b) If the defendant raises a triable issue indicating that he has a fair or bonafide or reasonable defence although not a positively good defence the plaintiff is not entitled to sign judgment and the defendant is entitled to unconditional leave to defend. (c) If the defendant discloses such facts as may be deemed sufficient to entitle him to defend, that is to say, 19 SJ-233-02.sxw although the affidavit does not positively and immediately make it clear that he has a defence, yet, shews such a state of facts as leads to the inference that at the trial of the action he may be able to establish a defence to the plaintiff’s claim the plaintiff is not entitled to judgment and the defendant is entitled to leave to defend but in such a case the court may in its discretion impose conditions as to the time or mode of trial but not as to payment into court or furnishing security. (d) If the defendant has no defence or the defence set up is illusory or sham or practically moonshine then ordinarily the plaintiff is entitled to leave to sign judgment and the defendant is not entitled to leave to defend. (e) If the defendant has no defence or the defence is illusory or sham or practically moonshine then although ordinarily the plaintiff is entitled to leave to sign judgment, the court may protect the plaintiff by only allowing the defence to proceed if the amount claimed is paid into court or otherwise secured and give leave to the defendant on such condition, and thereby show mercy to the defendant by enabling him to try to prove a defence.” These propositions have been approved by the Apex Court in the 20 SJ-233-02.sxw case of Machelec Engineers and Manufacturers Vs. Basic Equipment Corporation, (1976) 4 SCC 687. 19] The learned counsel for the defendants strenuously contended that the defendants have good defence to the claim on its merits and consequently, the plaintiff is not entitled to leave to sign the Judgment and the defendants are entitled to unconditional leave to defend. At any rate, the defendants have raised triable issues indicating that it has a fair, bona fide and reasonable defence. The plaintiff is not entitled to unconditional leave to defend. 20] I have already noted that the plaintiff had issued notice on 3 rd July, 2001 wherein a specific reference is made in paragraphs 4 and 6 thereof to the execution of D.P.N. In fact, the plaintiff’s advocate had specifically set out therein that the plaintiff has instructed him to invoke the D.P.N. and called upon the defendants to make good total payment of Rs.3,68,29,634.91. The defendants responded to this notice through their advocate on 21 st July, 2001. Though the defendants called upon the plaintiff’s advocate to give inspection of 21 SJ-233-02.sxw the various documents, still they did not call upon the plaintiff’s advocate to give inspection of D.P.N. nor they disputed existence of D.P.N. It was also not contended that it is a fabricated document and the plaintiff has misused the signature of the defendants on blank document. In fact, this was the first available opportunity to the defendants to dispute the existence of the said D.P.N. as also to specifically comment upon the D.P.N. relied upon by the plaintiff. This has to be appreciated in the backdrop of the fact that the defendants are not disputing joint meetings held on