Case: Jayesh Nagindas Doshi Vs. Ashapura Aluminium Limited &amp; Others

defence has been taken belatedly in the reply to the Summons for Judgment; and(iii) The Appellant had structured the entire transaction and having unauthorizedly issued instructions for remitting funds abroad, owned up responsibility to avoid the legal consequences. The letter dated 10 December 2009, it was urged, was issued only in order to avoid being faced with proceedings under Section 138.12. The material on record indicates that on 30 June 2009 a meeting was held. In attendance at the meeting, among other persons, was a Director of the First Respondent, Mr.Chetan Shah as well as Mr.Hemant Chitre, who was the second signatory to the letter that was issued to Yes Bank Limited subsequently authorizing the remittance of Euros 1,10,000. The minutes of the meeting have not been disclosed with the plaint and subsequently have come to be filed by the appellant together with the affidavit-in-reply to the Summons for Judgment. The minutes, which are not disputed, would indicate that a detailed reference to the nature of the transaction and to the structure under which the transaction was to take place has been made. On 9 October 2009 a letter was addressed by the Appellant to Yes Bank authorizing remittance of funds in the amount of Euros 1,10,000. There are two signatories to the letter, including the Appellant and another officer of the First Respondent, Hemant Chitre, who was also a party to the meeting which was held on 30 June 2009. As noted earlier, that meeting was also attended by Mr.Chetan Shah, a Director of the First Respondent. On 16 October 2009 a communication was addressed to the Managing Director of the First Respondent, which was to be attended by Mr.Chetan Shah. The letter made a specific reference to the fact that a remittance had been made by the First Respondent to facilitate the issuance of a bank guarantee by HDFC Bank London. Therefore, from the material on record it cannot be asserted that transmission of funds abroad was something which was carried out by the Appellant on his sole authority and power and without the knowledge of the First Respondent. Mr.Chetan Shah who is a Director of the First Respondent and who was a party to the meeting and to the correspondence significantly, has neither verified the plaint nor the rejoinder which was filed in response to the reply of the Appellant to the Summons for Judgment. In the affidavit-in-reply that was filed to the Summons for Judgment, there is a detailed reference to the discussions which had taken place with the officers of the company including Mr.Chetan Shah in paragraph 5(f) and 5(g). There is a specific reference to the fact that a post dated cheque in the amount of Rs.85.00 lakhs had been procured from the Second Defendant. In paragraph 18 of the rejoinder that has been filed by the First Respondent it has been stated that the post dated cheque of Rs.85.00 lakhs was taken by way of security against the transfer of Euros 1,10,000 which cheque was subsequently dishonoured. The case of the First Respondent is that the transmission of funds took place without consulting the Board or the authorities of the First Respondent.13. Now it is in this background that the case of the First Respondent would have to be evaluated. The defence of the Appellant is that the transaction, far from being unauthorized, was to the knowledge of the First Respondent and of its Director, Mr.Chetan Shah. This defence raises a triable issue and cannot be regarded as frivolous or sham. As a matter of fact, as noted earlier, the defence is sought to be substantiated on the basis of the material on record.14. Section 118 of the Negotiable Instruments Act, 1881 raises a rebuttable presumption that every negotiable instrument has been made or drawn for consideration. As was held by the Supreme Court in Bharat Barrel and Drum Manufacturing Company Vs. Amin Chand Payrelal (1999)3-SCC-35), the presumption under Section 118(a) can be rebutted by the Defendant by proving non existence of the consideration, by raising a probable defence. If the Defendant discharges the initial onus of showing that the existence of consideration was doubtful or that it was illegal, the onus would shift upon the Plaintiff who would be obliged to prove it as a matter of fact and upon its failure to do so, would be disentitled to the grant of relief under the Negotiable Instruments Act, 1881. The Appellant was a CFO of the First Respondent whose letter of resignation dated 11 September 2009 was to come into effect, as decided by the First Respondent, on 30 November 2009. The letter dated 26 November 2009 was issued barely a few days before the Appellant was to leave the service and the defence that the letter was procured only to enable the Appellant to leave service cannot be regarded as improper or moon shine.15. Moreover, as we have noted earlier, the suit which has been instituted by the First Respondent is not merely for the recovery of an amount of Rs.50.00 lakhs representing the dishonoured cheque but is for the recovery of the entire amount of Euros 1,10,000 (equivalent to Rs.75.65 lakhs) together with interest. If the Appellant fails to comply with the condition which has been imposed by the learned Single Judge, a decree would follow for the entirety of the claim in the suit.16. For these reasons, we are of the view that the learned Single Judge was in error in coming to the conclusion that the defence is completely sham, bogus and moon shine. There was no justification, in our view, for directing the Appellant to deposit an amount of Rs.50.00 lakhs for being granted leave to defend the suit. The Appellant has raised a bona fide triable defence. Having regard to the decision of the Supreme Court in M/s.Mechelec Engineers and Manufacturers Vs. M/s.Basic Equipment Corporation (1976)4-SCC-687), the Appellant was entitled to unconditional leave to defend. The defence raises triable issues and cannot be regarded as sham.

Decision (1 = appeal accepted, 0 = rejected): 1

Explanation:
1[ds]12. The material on record indicates that on 30 June 2009 a meeting was held. In attendance at the meeting, among other persons, was a Director of the First Respondent, Mr.Chetan Shah as well as Mr.Hemant Chitre, who was the second signatory to the letter that was issued to Yes Bank Limited subsequently authorizing the remittance of Euros 1,10,000. The minutes of the meeting have not been disclosed with the plaint and subsequently have come to be filed by the appellant together with theto the Summons for Judgment. The minutes, which are not disputed, would indicate that a detailed reference to the nature of the transaction and to the structure under which the transaction was to take place has been made. On 9 October 2009 a letter was addressed by the Appellant to Yes Bank authorizing remittance of funds in the amount of Euros 1,10,000. There are two signatories to the letter, including the Appellant and another officer of the First Respondent, Hemant Chitre, who was also a party to the meeting which was held on 30 June 2009. As noted earlier, that meeting was also attended by Mr.Chetan Shah, a Director of the First Respondent. On 16 October 2009 a communication was addressed to the Managing Director of the First Respondent, which was to be attended by Mr.Chetan Shah. The letter made a specific reference to the fact that a remittance had been made by the First Respondent to facilitate the issuance of a bank guarantee by HDFC Bank London. Therefore, from the material on record it cannot be asserted that transmission of funds abroad was something which was carried out by the Appellant on his sole authority and power and without the knowledge of the First Respondent. Mr.Chetan Shah who is a Director of the First Respondent and who was a party to the meeting and to the correspondence significantly, has neither verified the plaint nor the rejoinder which was filed in response to the reply of the Appellant to the Summons for Judgment. In thethat was filed to the Summons for Judgment, there is a detailed reference to the discussions which had taken place with the officers of the company including Mr.Chetan Shah in paragraph 5(f) and 5(g). There is a specific reference to the fact that a post dated cheque in the amount of Rs.85.00 lakhs had been procured from the Second Defendant. In paragraph 18 of the rejoinder that has been filed by the First Respondent it has been stated that the post dated cheque of Rs.85.00 lakhs was taken by way of security against the transfer of Euros 1,10,000 which cheque was subsequently dishonoured. The case of the First Respondent is that the transmission of funds took place without consulting the Board or the authorities of the First Respondent.13. Now it is in this background that the case of the First Respondent would have to be evaluated. The defence of the Appellant is that the transaction, far from being unauthorized, was to the knowledge of the First Respondent and of its Director, Mr.Chetan Shah. This defence raises a triable issue and cannot be regarded as frivolous or sham. As a matter of fact, as noted earlier, the defence is sought to be substantiated on the basis of the material on record.14. Section 118 of the Negotiable Instruments Act, 1881 raises a rebuttable presumption that every negotiable instrument has been made or drawn for consideration. As was held by the Supreme Court in Bharat Barrel and Drum Manufacturing Company Vs. Amin Chand Payrelalthe presumption under Section 118(a) can be rebutted by the Defendant by proving non existence of the consideration, by raising a probable defence. If the Defendant discharges the initial onus of showing that the existence of consideration was doubtful or that it was illegal, the onus would shift upon the Plaintiff who would be obliged to prove it as a matter of fact and upon its failure to do so, would be disentitled to the grant of relief under the Negotiable Instruments Act, 1881. The Appellant was a CFO of the First Respondent whose letter of resignation dated 11 September 2009 was to come into effect, as decided by the First Respondent, on 30 November 2009. The letter dated 26 November 2009 was issued barely a few days before the Appellant was to leave the service and the defence that the letter was procured only to enable the Appellant to leave service cannot be regarded as improper or moon shine.15. Moreover, as we have noted earlier, the suit which has been instituted by the First Respondent is not merely for the recovery of an amount of Rs.50.00 lakhs representing the dishonoured cheque but is for the recovery of the entire amount of Euros 1,10,000 (equivalent to Rs.75.65 lakhs) together with interest. If the Appellant fails to comply with the condition which has been imposed by the learned Single Judge, a decree would follow for the entirety of the claim in the suit.16. For these reasons, we are of the view that the learned Single Judge was in error in coming to the conclusion that the defence is completely sham, bogus and moon shine. There was no justification, in our view, for directing the Appellant to deposit an amount of Rs.50.00 lakhs for being granted leave to defend the suit. The Appellant has raised a bona fide triable defence. Having regard to the decision of the Supreme Court in M/s.Mechelec Engineers and Manufacturers Vs. M/s.Basic Equipment Corporationthe Appellant was entitled to unconditional leave to defend. The defence raises triable issues and cannot be regarded as sham.