$~5 * IN THE HIGH COURT OF DELHI AT NEW DELHI % + CS(OS) 47/2013 MMTC LIMITED Judgment Dated:
18. h October, 2016 ..... Plaintiff Through Ms. Surekha Raman, Advocate versus M/S KASHISH ASSOCIATES & ORS ..... Defendants Through Mr. Rishi Manchanda, Advocate for defendant no.1. Mr. Jitendra Kumar, Mr. Ranjith Ramesh Nair, Advocates for defendants no.2 and 3 along with Mr. Pawan Kumar, Chief Manager. CORAM: HON'BLE MR. JUSTICE G.S.SISTANI G.S.SISTANI, J (ORAL) (IA.10504/2013) under Order XXXVII Rule 3(5) CPC by defendant no.1) and IA.8128/2013 under Order XXXVII Rule 3(5) CPC by defendant no.2 and
3) 1. Plaintiff has filed the present suit under the provisions of Order XXXVII of the Code of Civil Procedure. The present suit is based on two bank guarantees which were furnished by the defendant no.1 in favour of the plaintiff. The plaintiff is a Government of India enterprise and claims to be one of the largest international trading company of India engaged inter alia in the manufacture, sale, import, export and marketing of ferrous and non-ferrous metal and minerals.
2. Defendant no.1 is a trading company and a partnership concern of which Mr. Kashish Kumar Rastogi is the proprietor. Defendant no.1 had approached the plaintiff in the year 2006 for drawal of gold under its CS(OS).47/2013 Page 1 of 9 Open General License (OGL) Scheme on loan basis and outright sale schemes. The defendant no.1 has been lifting gold from time to time. Defendant no.1 had furnished amongst others the following financial bank guarantees issued by defendant no.2, Bank of India to secure the repayment of the gold loan that was being drawn: Sl.No.Bank Guarantee No.Amount (Rs.) Date Issue of Date of Validity 1. 60247FIBGO80055 20,000,00 24.10.2008 20.04.2009 from extended time to time, the last extension being issued on 15.03.2011 with validity the /claim period upto 20.04.2012. 90,000,00 25.04.2011 24.04.2012 90,000,00 26.04.2011 25.04.2012 2.
3. 60241FIBG110014 60241FIBG110016 3. It is the case of the plaintiff that on receipt of the aforesaid bank guarantee no.60241FIBG110014 dated 25.04.2011 for Rs.90 lakhs, the plaintiff had sought confirmation from defendant no.2 vide letter bearing No.MMTC/JRO/BG/KA/11-12 dated 25.04.2011, which was duly confirmed. Similarly, the plaintiff had sought confirmation of bank guarantee No.60241FIBG110016 dated 26.04.2011 for Rs.90 lakhs. Further, as per the plaint, under the (OGL) Scheme and upon application made by defendant no.1 for supply of gold under the loan scheme and on the basis of securities/bank guarantees furnished, the plaintiff delivered quantities of gold to defendant no.1 on loan basis aggregating to 11 kgs for which payment became due from the month of March 2012, which remained unpaid. The plaintiff thereafter upon the non receipt of payment from defendant no.1 vide letter bearing No.MMTC/JRO/OGL- CS(OS).47/2013 Page 2 of 9 LOAN/KA/2011-12 dated 21.03.2012 invoked the bank guarantees referred to in para 2 aforegoing.
4. In response to the invocation letter, the defendant no.2 honoured its liability in respect of the bank guarantee No.60247FIBGO80055 by issuing a pay order of Rs.20 lakhs. However, the remaining bank guarantees were not encashed by defendants no.2 and 3 on the ground that the said bank guarantees were forged and did not originate from the bank and they were not even in the computer system of the bank. The plaintiff also addressed communication to the Chairman and Managing Director of defendant no.2 on 03.04.2012 and 10.05.2012. However, no response was received. Legal notice was also issued. No satisfactory response was received.
5. An application (IA.10504/2013) under Order XXXVII Rule 3(5) of the Code of Civil Procedure seeking leave to defend has been filed by defendant no.1. As per the application seeking leave to defend, the c ase of defendant no.1 is that defendant no.1 had furnished bank guarantee to secure the loan. Defendant no.1 has not disputed or denied the relationship between defendant no.1 and the plaintiff. Defendant no.1 has admitted having furnished the bank guarantees to secure repayment of the gold loan, which was drawn from time to time. Para 8 of the leave to defend discloses the details of the bank guarantees which were furnished by defendant no.1 to secure the loan which has been granted. Defendants no.2 and 3 bank have also filed an application (IA.8128/2013) seeking leave to defend. Affidavit of one of the signatories of the bank guarantees has been filed.
6. IA81282013 has been filed by defendants no.2 and 3 Bank seeking unconditional leave to defend. The stand of the bank in their application for leave to defend, based on the record, is that the bank guarantees do CS(OS).47/2013 Page 3 of 9 not originate from the bank and they are forged and fabricated.
7. The law and the parameters for grant of leave to defend to contest are well-settled. The Apex Court in the case of M/s.Mechelec Engineers & Manufacturers v. M/s.Basic Equipment Corporation, reported at AIR1977SC577has drawn up the parameters to be considered by the court while dealing with the application for leave to defend. Relevant paras of the judgment read as under: “8. In Smt. Kiranmoyee Dassi and Anr. v. Dr. J.
Chatterjee 49 C.W.N. 246 , Das. J., after a comprehensive review of authorities on the subject, stated the principles applicable to cases covered by order 37 C.P.C. in the form of the following propositions (at p. 253): (a) If the Defendant satisfies 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 bona fide or reasonable defence although not a positively good defence the plaintiff is not entitled to sign to unconditional leave to defend. the Defendant judgment and is entitled (c) If the Defendant discloses such facts as may be deemed sufficient to entitle him to defend, that is to say, 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 CS(OS).47/2013 Page 4 of 9 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.” 8. It would also be useful to refer to the case of V.K. Enterprises v. Shiva Steels, reported at (2010) 9 SCC256wherein the Supreme Court had, in a matter with somewhat similar facts, upheld the order passed by the trial court where leave was rejected. Paragraphs 8 to 10 of the judgment read as under: “8. Order XXXVII C.P.C. has been included in the Code of Civil Procedure in order to allow a person, who has a clear and undisputed claim in respect of any monetary dues, to recover the dues quickly by a summary procedure instead of taking the long route of a regular suit. The Courts have consistently held that if the affidavit filed by the defendant discloses a triable issue that is at least plausible, leave should be granted, but when the defence raised appears to be moonshine and sham, unconditional leave to defend cannot be granted. What is required to be examined for grant of leave is whether the defence taken in the application under Order XXXVII Rule 3 C.P.C. makes out a case, which if established, would be a plausible defence in a regular suit. In matters relating to dishonour of cheques, the aforesaid principle becomes more relevant as the cheques are issued normally for liquidation of dues which are admitted. In the instant case, the defence would have been plausible had it not been for the fact that the allegations relating to the interpolation of the cheque is without substance and the ledger accounts relating to the dues, clearly demonstrated that such dues had been settled between the parties. Moreover, the issuance of the cheque had never been disputed on behalf of the... Petitioner
whose case was that the same had been given on account of security and not for presentation, CS(OS).47/2013 Page 5 of 9 such cogent evidence produced by but an attempt had been made to misuse the same by dishonest means.
9. Against the plaintiff/respondent, there is only an oral denial which is not supported by any corroborative evidence from the side of the... Petitioner
. On the other hand, the ledger book maintained by the Respondent and settled by the... Petitioner
had been produced on behalf of the Respondent in order to prove the transactions in respect of which the cheque in question had been issued by the... Petitioner
10. In our view, the defence raised by the... Petitioner
does not make out any triable issue and the High Court, has dealt with the matter correctly and has justifiably rejected the... Petitioner
's application under Order XXXVII Rule 3 C.P.C. and the same does not call for interference by this Court. The Special Leave Petition is, therefore, dismissed, but without any order as to costs.” 9. Present applications filed by defendants no.1 and defendants no.2 and 3, respectively, are to be decided on the touchstone of the law laid down by the Apex Court. The claim of the plaintiff is based on three bank guarantees, which were furnished by defendant no.1 through the defendants no.2 and 3.
10. In this case, the plaintiff is a Government of India enterprise. Defendant no.1 was registered with the plaintiff in the year 2006 for drawal of gold under its Open General License (OGL) Scheme on loan basis and outright sale schemes. Defendant no.1 has been lifting gold from time to time on loan basis. In respect of the drawal of gold on loan basis, defendant no.1 has been furnishing bank guarantees from the scheduled banks to secure repayment of gold loan that was being drawn.
11. As per the plaint, three bank guarantees, details of which have been extracted in para 2 aforegoing, were furnished by the plaintiff through defendant no.2, Bank of India. At the request of defendant no.1, upon furnishing of bank guarantees, the plaintiff delivered quantities of gold CS(OS).47/2013 Page 6 of 9 to defendant no.1 on loan basis, aggregating to 11 kilograms, for which payment became due in March, 2012, which amount remains unpaid. Consequent, upon the non-receipt of payment from defendant no.1, the plaintiff had vide letter bearing no.MMTC/JRO/OGL-LOAN/KA/2011- 12 dated 21.3.2012 invoked the three bank guarantees, which was delivered on the same day.
12. While defendant no.2 forwarded a pay order for Rs.20.00 lakhs but expressed its inability to make payment with regard to other two bank guarantees in the sum of Rs.90.00 lakhs, each, on the ground that the same have not been issued by their Branch and, thus, denied their liability.
13. In the application seeking leave to defend filed by defendant no.1, the relationship between the plaintiff and defendant no.1 has not been denied. It has also not been denied that defendant no.1 had been furnishing financial bank guarantees from scheduled banks to the plaintiff to secure repayment of the gold loan that was drawn from time to time. Defendant no.1 has also admitted that to secure gold on loan, defendant no.1 had furnished three bank guarantees, which were issued by defendants no.2 and 3, as stated by the plaintiff in the plaint. Defendant no.1 has also stated in the application for leave to defend that in the year 2011 disputes have arisen between defendant no.1 and defendants no.2 and 3 Bank. The bank has recalled the loan and after recalling the loans it has taken recourse to the proceedings before the Debt Recovery Tribunal and possession of two prime properties of the defendant no.1 have been taken.
14. It is the case of defendant no.1 that the bank guarantees handed over by defendant no.1 to the plaintiff are genuine bank guarantees.
15. In this background, the defence of defendant no.1 is to be tested. The CS(OS).47/2013 Page 7 of 9 short issues, which arise for consideration before this Court, are that whether defendant no.1 has been able to raise a triable issue or not, whether the defence is bona fide or not and whether the defence is moonshine or sham.
16. Having regard to the facts that defendant no.1 has not disputed the relationship, he had secured gold loan from the defendant no.2 bank and three bank guarantees furnished by defendant no.1 to the plaintiff for gold received, the amount due is thus not disputed. In the light of the affidavit filed by the bank that the two bank guarantees for Rs.90.00 lakhs, each, do not originate from the bank, they cannot be termed as legal tender. It is primarily for defendant no.1 explain how the bank guarantees were procured for it is only defendant no.1, who would gain by furnishing a fabricated bank guarantee.
17. In my view, the defence sought to be raised by defendant no.1 is sham, moonshine and not plausible. Accordingly, the IA.10504/2013 filed by defendant no.1 seeking leave to defend is dismissed.
18. The suit is decreed against the defendant no.1 with pendente lite and future interest @ 10%.
19. As far as the application IA.8128/2013 seeking leave to defend of defendants no.2 and 3bank is concerned, having regard to the defence which has been raised, the application is allowed. Unconditional leave to contest is granted to defendants no.2 and 3 bank. CS(OS) 47/2013 20. Written statement be filed within four weeks. Replication be filed within four weeks thereafter. Original documents be filed within the same period.
21. List before the Joint Registrar for admission/denial of documents on 06.12.2016. CS(OS).47/2013 Page 8 of 9 22. List before the Court for framing of issues on 02.02.2017. OCTOBER18 2016 pst G.S.SISTANI, J CS(OS).47/2013 Page 9 of 9