IN THE HIGH COURT OF DELHI AT NEW DELHI SUBJECT : CODE OF CIVIL PROCEDURE

IN THE HIGH COURT OF DELHI AT NEW DELHI SUBJECT : CODE OF CIVIL PROCEDURE Judgment reserved on : 25th May, 2006 Date of decision : July 27th, 2006 RFA No. 139/2005 Sh. Ajay Kumar Grover... Appellant through : Mr. Rajeev Tyagi with Mr. Himanshu Mitra, Advocates. Bank of Baroda and Ors....Respondents through : Mr. Tariq Muneer, Advocate. Mr. Rakesh Malhotra, Advocate. CORAM: VERSUS HON'BLE MR. JUSTICE SWATANTER KUMAR HON'BLE MR. JUSTICE S.L. BHAYANA S.L. BHAYANA, J. 1. This is an appeal arising out of the order of the learned Additional District and Sessions Judge, Delhi dated 08.11.2004 wherein the learned Additional District Judge has dismissed the application of the appellant for leave to defend the suit and has decreed the suit of the respondent/plaintiff. The brief facts of the case are that the respondent/plaintiff bank filed a suit under Order 37 of the Code of Civil Procedure against the appellant and respondent Nos. 2, 3, 4 and 5 for a sum of Rs.7,39,866/-. The respondent/plaintiff bank has alleged that respondent No.2 M/s. Arun Sales Corporation is a partnership firm and respondent Nos. 3 and 4 and the appellant are its partners. It is further the case of the plaintiff bank that respondent No.2 firm had been dealing in all kinds of electronics and mechanical instruments. The respondent firm was maintaining the overdraft account No.31005 with the plaintiff bank. It is further the case of the plaintiff bank that the respondent No.5, P.K. Khurana stood as guarantor to the repayment of the loan against overdraft facility granted to the respondent firm. It is the case of the plaintiff bank that on the request of respondent No.2 firm, overdraft facility of Rs.4,00,000/- was sanctioned on 10.06.2001. The respondents No.2 to 5 and the appellant executed the loan documents. The respondent No.2 to 5 and the appellant also deposited the original title deed of property bearing No.34C, Pocket A, Vikaspuri, New Delhi with the plaintiff bank. Thereafter, a request was received from the respondents for enhancement of the overdraft facility and consequently, the facility was enhanced from Rs.4,00,000/- to Rs.6,00,000/-

on 26.09.2001. After availing the overdraft facility of Rs.6,00,000/-, defendants failed to pay the amount to the plaintiff bank. Consequently, the plaintiff bank filed a suit in the sum of Rs.7,39,866/- against the defendants. The summons for judgment were served on all the defendants. All the defendants moved an application for leave to defend under Order 37 sub-clause 5. However, all the defendants admitted in the application that the overdraft facility was advanced by the plaintiff bank to the defendants and the said facility was enjoyed by the defendants as well as its partners. The application moved by all the defendants was dismissed by the learned Trial Court by impugned order and decreed the suit of the plaintiff bank. 2. We have heard the arguments advanced by learned counsel for the appellant and respondents and have perused the record carefully. The counsel for the appellant has submitted that the learned trial court has not applied its mind while dismissing the application of the appellant for leave to defend the suit. He has further submitted that the appellant has raised triable issue before the learned trial court but the learned trial court did not appreciate the same while dismissing the application of the appellant for leave to defend the suit. He has further submitted that respondent No.1 bank cannot be allowed to take advantage of their own wrongs and respondent Nos.3 to 5 cannot be allowed to go scot-free despite their having mis appropriated the hypothecated / pledged assets of respondent No.1 bank in connivance with the officials of the respondent No.1 bank. He has further submitted that the learned trial court ignored the fact that had the respondent No.1 bank proceeded against the respondent Nos.3 to 5 by recovering the amount from the proceeds of the hypothecated / pledged assets, it alone would have been sufficient to satisfy the entire claim of the respondent No.1 bank but the respondent No.1 bank did not take any action in this regard and did not act against the hypothecated / pledged assets with the bank as the officials of the respondent No.1 bank were hand in glove with respondent Nos.3 to 5 and the attitude of the officials of the respondent No.1 bank necessitated filing of the present suits against all the defendants including the appellant. All these issues are triable issues which have been raised by the appellant before the learned trial court but the learned trial court has ignored the same and has dismissed the application of the appellant for leave to defend and has decreed the suit of the respondent No.1 bank. Learned counsel for the appellant has prayed that the impugned order passed by the learned trial court should be set aside and the appellant should be given a chance to defend the suit on merits. On the other hand, learned counsel for the respondent has submitted that the appellant has not denied that he is partner of the firm. The appellant has not denied that the firm had availed the overdraft facility from the bank. The appellant has also not denied that the respondents were granted overdraft facility of Rs.4,00,000/- initially on 10.06.01. It was enhanced to Rs.6,00,000/- later on i.e. on 26.09.01. The appellant and the respondents have not denied the signing of the documents in favour of the plaintiff bank with regard to the repayment of the overdraft facility i.e. demand promissory note, letter of continuing security, letter of undertaking, instrument of hypothecation of goods, letter of authority, general undertaking and general form of guarantee. The appellant and other respondents have also not denied having utilized the overdraft facility from the respondent No.1 bank. The counsel for the respondent has further submitted that the issues raised by the appellant are not relevant for the determination of the controversy in suit. The issues raised by the appellant and the

respondents partners and guarantors have been raised on account of their internal differences with each other. The counsel for the respondent bank has further submitted that it is the prerogative of the respondent bank to choose the method of recovery of the amount from its debtors. The respondent No.1 bank has filed the suit after giving legal notice to the appellant and all the other defendants when they failed to make the payment. 3. Counsel for the plaintiff bank has further submitted that the plea raised by the appellant and other defendants that the bank officials got signed blank documents from them is no defence in the eyes of law and these issues raised by the appellant and other defendants are sham and moon shine and these issues are not triable issues and, therefore, their application for leave to defend has been rightly dismissed by the trial court. 4. We have gone through the record. We have also gone through the application for leave to defend moved by the appellant before the learned trial court under Order 37 rule 3 (5) of the Code of Civil Procedure. In the entire application, the appellant has nowhere denied that the overdraft facility was not availed by the firm in which he was a partner. The appellant has only submitted that the other defendants Nos. 2, 3 and 5 are responsible for bungling in the firm and they have siphoned off the money of the firm and had defrauded the bank. It shows that there was internal fighting between the appellant and defendant Nos.2, 3 and 5 who are partners in the firm. The appellant has not denied the sanction of overdraft facility to the defendant firm. The appellant has admitted that the overdraft facility was availed by the defendant No.1 firm. He has alleged that the other partners had siphoned off the funds of the firm illegally and unauthorisedly in collusion with the officials of the plaintiff bank. The appellant has also submitted in the said application that Sh. O.P. Verma, Manager was not posted there when the loan was granted and is not aware of the facts of the case. He has also stated that no power of attorney from the Board of Directors of the plaintiff bank was given to Mr. Rupert A. Almeida nor the same had been filed alongwith the plaint. All these issues raised by the appellant are neither triable issues nor they go to the root of the case. Rather, the issues raised by the appellant are only frivolous in nature. It is admitted case of both the parties that the overdraft facility was granted by the plaintiff bank to the defendant No.1 firm of which the appellant is one of the partners. It is also admitted case of both the parties that at the time of availing the overdraft facility, the appellant and other respondents who are the partners of the firm had signed various documents which included demand promissory note, letter of continuing security, letter of undertaking, instrument of hypothecation of goods, letter of authority, general undertaking and general form of guarantee. It is also admitted case of both the parties that the overdraft facility was availed by the defendant No.1 firm and despite legal notice sent to them, the appellant and the defendants have failed to repay the loan amount advanced to them by the plaintiff bank. If the issues raised by the appellant are not substantial, the appellant is not entitled to be granted leave to defend by the court. This view find support from the judgment reported in 40 (1990) DLT 497 titled in Punjab and Sind Bank Vs. M/s. Ram Prakash Jagdish Chander and Ors. in which this court has held as under : The first point raised on behalf of the defendants is that as per the averments made in a plaint itself there is no allegation if at the time of initially taking the facilities from the plaintiff bank the defendants executed any documents. Initially the facilities were taken

in February, 1979 as alleged in para 3 of the plaint. Therefore, learned counsel for the defendants has urged that it was not possible to believe the plaintiff bank when in the plaint it is nowhere stated if any documents were executed at the time of initially taking the loan in 1979. This argument on the face of it seems to be quite plausible. In fact, as per the normal practice prevailing in banks, the loan facilities of any type are generally not granted to a party without the due execution of any document. However, the Court is not debarred from looking into subsequent circumstances. It is clearly alleged in para 7 of the plaint that at the request of the defendants the plaintiff bank had discounted two cheques dated March 28 and 31, 1980 in the name of defendant No.1 drawn on Punjab and Sind Bank, Kalba Devi Road, Bombay for Rs.55,000/- and Rs.45,000/- respectively. The bank further stated that the proceeds of these two cheques so purchased by the plaintiff bank were credited to the cash credit account maintained in the name of defendant No.1 from where those amounts were withdrawn during the operation of the cash credit account by the defendants. The defendants do not say in their application that they did not withdraw these amounts from the cash credit account. The plaintiff bank has further stated in para-9 of the plaint that on November 19, 1982 when a sum of Rs.1.50,518.80 was due and payable by the defendants, in the cash credit account and another sum of Rs.1,00,000/- was due in the bill discounting facility account, the defendants 2 and 3 as partners of defendant No.1 executed various documents including the demand promissory note. In this respect the defendants do not deny if they did not offer for purchase the aforesaid two cheques to the plaintiff bank. They further admit that in November, 1982 they did sign certain printed proforma on assurances given by the then Manager of the plaintiff bank, when the defendants approached the plaintiff bank for grant of credit facilities. However, it is not stated what assurance was given to the defendants by the Manager. The defence that the defendant's signatures were obtained on blank proforma is not only untrustworthy but also does not raise any triable issue. Under Section 20 of the Negotiable Instruments Act, 1881, it is provided that when a person signs and delivers to another a paper stamped in accordance with the law relating to negotiable instruments either wholly blank or having written thereon an incomplete instrument he gives prima facie authority to the holder of such an instrument to complete upon it a negotiable instrument for any amount which may be covered by the stamp affixed on it. The person so signing is made liable upon such an instrument in the capacity in which he signed it to any holder in due course. The defendants did not raise their little finger to point out if their signatures were obtained on any blank documents by the then Manager of the plaintiff bank. The present suit was filed in 1984. Till then the defendants chose to keep silent about their signatures having been obtained on blank documents. The only irrestible conclusion, therefore, is that the plea now sought to be raised by the defendants to the effect that their signatures were obtained on blank documents is merely a sham plea, devoid of any force and as such cannot be deemed to raise any triable issue. Therefore, simply because no documents were got executed by the plaintiff bank from the defendants in 1979 will not give rise to a presumption that even in 1982 that initial mistake was not rectified by the bank authorities when they purchased two cheques from the defendants for being credited in the bills discounting facility and also got executed the demand promissory note and other documents in the cash credit account facility. Therefore, I do not see any merit in this defence raised by the defendants. Another plea taken up by the defendants is that it is yet to be proved by the

plaintiff that the plaint has been signed, verified and filed by a duly authorised agent of the bank. Unless the burden of proof in that respect is discharged by the plaintiff bank, it is not entitled to grant of decree. To rebut this argument, learned counsel for the plaintiff has contended that Sh. Gajender Singh who has signed, verified and instituted this plaint as an attorney of the plaintiff, holds a valid power of attorney in his favour. Sh. Gajender Singh who has signed, verified and instituted this plaint as an attorney of the plaintiff, holds a valid power of attorney in his favour. Sh. Gajender Singh has sworn an affidavit in this respect in reply to the application filed by the defendants for leave to defend the suit. He categorically states in his affidavit that he not only holds a valid power of attorney in his favour to sign, verify and institute the plaint but the same has the force of a statutory regulation of which Court can take even judicial notice. He further swore in the affidavit that the power of attorney in his favour has been registered under the Registration Act. The plaintiff has also filed an authorization at page 46 of the documents filed in favour of S/Sh. Gajender Singh and H.S. Rana executed by Sh. Kulwant Singh, General Manager (Credit). It says that Sh. Kulwant Singh being authorised by Resolution No.1598 of the Board of Directors, authorised the aforesaid two officers jointly and severally to sign, verify the plaint and institute the present suit against the defendants. In order to be entitled to the grant of leave to defend, I am of the view that the defendants must satisfy the Court that they have a good defence to the claim on merits. This they should disclose by stating such facts as may be deemed sufficient to entitled them to defend the suit. This plea raised by the defendants even otherwise is not a plea which affords him a defence to the claim on its merits filed on behalf of the plaintiff bank. If such a plea is accepted as one raising a triable issue or a good defence to the claim in suit then it will not be possible at all in any suit filed by any bank under Order 37 to grant a decree in its favour. Therefore, taking into consideration the totality of circumstances under this head, I am of the view that this plea does not raise any triable issue. No other point was urged before me. In view of the aforesaid discussion, I hold that this application does not raise any triable issue and the plaintiff is entitled to the grant of a decree under Order 37 CPC. Plaintiff is, therefore, granted a decree for recovery of Rs.3,95,912.70 with costs of the suit and pending and future interest at the rate of 12% per annum on the decretal amount. (Emphasis supplied) 5. This view also finds support from the observation made by this court in the judgment reported in?96 (2002) DLT 424 titled in Vinod Kumar and Anr. Vs. Keshav Anand? it has been held as under : It cannot be gainsaid that there is no hard and fast rule for grant or refusal of leave to defend. Every case has to be decided or examined on its own facts. If the facts set up by the defendant fail to disclose substantial defence or raise triable issues, leave should normally be refused. If the facts set up by the defendant disclose such defence which has fair chances of success or has potential to dislodge the case of the plaintiff, then the defendant is entitled to leave to contest. Though it is the discretion of the Court either to refuse or grant leave and discretion should not be exercised arbitrarily, whimsically and capriciously. If the defendant tenor of defence raised by the defendant blows hot and cold and is self contradictory, he forfeits his right of leave to defend the suit. Nature of defence should be substantial and not frivolous. The plea of the defendant that his

signatures were obtained on blank papers is of beaten plea. Once a party executes a cash receipt, it binds itself by way of written contract. However, in the instant case, defendant has issued a cheque in favour of Palvinder Singh which itself show that he has taken a loan. On the same premise, defendant has no case which entitles him to leave to contest because of his having executed cash receipts. It appears that after having faced criminal proceedings initiated by Palvinder Singh, defendant did not issue cheques in favour of the plaintiffs against the loan taken by him. In these circumstances, defendant is not entitled to leave to contest on plea of chit fund and obtaining of his signatures by Palvinder Singh on blank papers etc. The application has no merit and is dismissed. As a consequence, suit is decreed for Rs.10,44,000/- with cost along with pendente lite and future interest @ 24% per annum till realisation. Decree sheet be prepared accordingly. (Emphasis supplied) 6. In view of discussions made above, we are of the considered view that the defence raised by the appellant before the learned trial court is not substantial defence and is only a sham or a moon shine. The appellant has failed to convince us that he has raised any triable issues which can entitle him for unconditional or conditional leave to defend the suit. There is no merit in the appeal filed by the appellant. The appeal is ordered to be dismissed. The parties are left to bear their own costs. Trial court record be sent back. File be consigned to record room. Sd/- (S.L.BHAYANA) JUDGE Sd/- (SWATANTER KUMAR) JUDGE