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United Commercial Bank Vs. Rathi Fibres and Fabrics Ltd. and Others - Court Judgment

LegalCrystal Citation
SubjectCompany
CourtDelhi High Court
Decided On
Case NumberI.A. Nos. 1519, 1185, 3602, 3629 of 1980 and 932 and 933 of 1981, in Suit No. 747 of 1979
Judge
Reported in[1983]54CompCas625(Delhi); 21(1982)DLT57b
Acts Delhi High Court (Original Side) Rules, 1966 - Rule XII; Code of Civil Procedure (CPC), 1908 - Order 37
AppellantUnited Commercial Bank
RespondentRathi Fibres and Fabrics Ltd. and Others
Cases ReferredPrintpak Machinery Ltd. v. Jay Kay Paper Congeters
Excerpt:
.....with chapter xv of delhi high court (original side) rules - in the present case that involved the suit for recovery of money, it was ruled that there was nothing in the rules framed by the high court that can be termed as inconsistent with the amended provisions of order 37 of the code, with respect to additional type of suits - section 13: [altamas kabir & cyriac joseph,jj] custody of child - welfare of child vis--vis comity of courts - the minor girl child of 3 1/2 years was brought to india by her mother. the minor girl was a citizen of u.k. being born in u.k. her parents had set up their matrimonial home in u.k. and had acquired status of permanent residents of u.k. the child with her mother was supposed to return to u.k. but the mother cancelled her tickets and remained behind in..........as it existed before the amending act of 1976, envisaged that summary procedure was applicable to suits based on negotiable instruments. the defendant could not appear or defend the suit unless he obtained leave of the court. the same had to be applied for within ten days from service of summons in terms of art. 159 of the limitation act, 1908, and art. 118 of the limitation act, 1963. 16. the delhi high court on its constitution in the year 1966, framed rules applicable to the original side suits in exercise of the powers available under ss. 122 and 129, cpc, and s. 7 of the delhi high court act, 1966. chapter xv of these rules dealt with summary suits, and its provisions were held applicable to all suits upon 'bills of exchange, hundis or promissory notes'. this was substantially the.....
Judgment:

1. In this suit brought under O. 37, CPC, for the recovery of Rs. 18,65,287.38, all the defendants have by different applications, sought leave to defend the suit. It is these applications which have now come for determination.

2. The main application is by defendant No. 2 bearing I.A. No. 1519 of 1980. The other defendants have in their applications bearing I.A. Nos. 1185, 3603, 3629 of 1980 and 932 and 933 of 1981, adopted the grounds taken by defendant No. 2.

3. The suit is filed by the United Commercial Bank, and is based upon three accounts which defendant No. 1 company had opened with it in the year 1972. Defendants Nos. 2 to 9 were directors of defendant No. 1 and had stood as guarantors for the discharge of the amounts due under those accounts.

4. First of these accounts was a cash credit facility which though initially was to the extent of Rs. 7,36,000, was later enhanced to Rs. 10,36,000. Various documents with regard to this account were executed by the defendants. They included promissory notes, deed of guarantee/indemnity by defendants Nos. 2 to 9 and a letter of confirmation of the indebtedness to the extent of Rs. 15,02,667.23 as on November 2, 1976. The interest agreed was 4% over and above the Reserve Bank of India rate of lending subject to a minimum of 11%.

5. The other two accounts were bill purchase facility with a limit up to Rs. 5,00,000 and clean purchase limit of Rs. 50,000. The former was against bills accompanied with railway and motor transport receipts, while the latter related to outstation/local third party cheques. According to the plaintiff, the amounts due under these two accounts as on March 31, 1979, were as follows :

Rs. 61,405.01 and Rs. 81,236.36, totalling Rs. 1,42,641.37.

6. The suit was, thereforee, brought for the recovery of Rs. 18,65,287.38, being the sum total of amounts due under the three accounts. These amounts include interest which had accrued at the agreed rates.

7. There was also a mention, para. No. 8 of the plaint, of two other loan facilities, known as term loan and bridging loan. However, no relief with regard to them is claimed in this suit on the ground that already a suit has been instituted by the Haryana Financial Corporation in a court at Gurgaon in which the defendants had got the present bank also imp leaded as a party because of a tripartite arrangement said to be existing.

8. The defendants have asserted that in view of the provisions contained in Chap. XV of the Delhi High Court (Original Side) Rules, and the decision of a Full Bench of this court in the case of Printpak Machinery Ltd. v. Jay Kay Paper Congeters, : AIR1979Delhi217 , the suit is not maintainable under O. 37, CPC. The latter provisions are contended to be wholly inconsistent and incompatible with the former rules. It has also been pleaded that the Haryana Financial Corporation is necessary party, and principles of s. 10, CPC, cover the case. An interim attachment of the mortgaged properties, it is stated, has already been issued by the Gurgaon court, and as they have become custody legis of the court, they cannot be treated as available for being proceeded against in realisation of the amounts claimed in this suit.

9. The defendants have further stated that the hypothecated goods against which the cash credit facility was allowed, were burnt by fire on or about October 3, 1976. Defendant No. 1 had obtained an insurance policy with the plaintiff-bank as the co-beneficiary with the right of the plaintiff to receive the money paid by the insurance company. The plaintiff, however, it is alleged, did not fully co-operate with defendant No. 1 in furnishing all necessary documents and materials with the result that the plaintiff failed and neglected to pursue and realise the claim amounting approximately to Rs. 4 lakhs.

10. The plaintiff, it is next averred, has not come with clean hands as, apart from not supplying the copies of the documents mentioned in paras. Nos. 9 to 12 of the plaint, it had not co-operated with defendant No. 1 when it had offered to liquidate or reduce the legitimate outstandings by sale of plant and machinery at the factory premises. The factory of defendant No. 1, it is stated, has become a sick unit, and, thereforee, cannot be burdened with the imposition of penal interest.

11. It is also pointed out that the plaintiff did not allow revision facilities to defendant No. 1 in order to carry out further confirmed orders and undertakings, and thus made it to suffer huge financial losses, overheads and depreciation of plant and machinery.

12. It has also been stated that defendants Nos. 3 to 6 and 9 resigned from the office of the directorship of defendant No. 1.

13. The plaintiff in reply has controverter these grounds on which permission for leave to defend is sought.

14. The first controversy to be decided in the present case is whether the suit on the basis of guarantee/indemnity deed is maintainable under O. 37, CPC, against defendants Nos. 2 to 9, and further is sustainable with regard to the bill purchase facility and clean purchase account. There have been no promissory notes executed by the defendants with regard to these two accounts. It is only with regard to the cash credit account that a promissory note and a letter of confirmation of the indebtedness exists.

15. Order 37, CPC, as it existed before the Amending Act of 1976, envisaged that summary procedure was applicable to suits based on negotiable instruments. The defendant could not appear or defend the suit unless he obtained leave of the court. The same had to be applied for within ten days from service of summons in terms of art. 159 of the Limitation Act, 1908, and art. 118 of the Limitation Act, 1963.

16. The Delhi High Court on its constitution in the year 1966, framed rules applicable to the original side suits in exercise of the powers available under ss. 122 and 129, CPC, and s. 7 of the Delhi High Court Act, 1966. Chapter XV of these Rules dealt with summary suits, and its provisions were held applicable to all suits upon 'bills of exchange, hundis or promissory notes'. This was substantially the same as in existence in the then O. 37, CPC. However, the period of 10 days for appearing and applying for leave to defend was enlarged from 10 to 20 days. Rule XII of these Rules further provided that the provisions of O. 37, CPC, would apply so far as they were not inconsistent with the provisions contained in the rules framed by the High Court.

17. A number of changes were introduced in O. 37 of the CPC by the Amending Act, 1976. As a result all that the defendant is required to so on being served with summons is merely to enter an appearance within 10 days. Thereafter, the plaintiff must serve 'summons for judgment' on the defendant, and it is only then that the defendant has to apply for leave to defend within 10 days of that service.

18. The contention of the defendants in the present case has been that so far as defendants Nos. 2 to 9 are concerned, the High Court Rules on the original side based upon guarantee bonds, nor they allow such suits based on written contracts or debts. In the circumstances, this suit, it is pleaded, is misconceived against them. Even with regard to defendant No. 1, it is pointed out that the latter two accounts do not have any promissory note, hundi or bill of exchange, and, thereforee, are beyond the scope of these rules. In support reliance has been placed upon the Full Bench decision of this court in the case of Printpak Machinery Ltd. v. Jay Kay Paper Congeters, : AIR1979Delhi217 . It was held in this decision that in the event of inconsistency between the provisions contained in the original side rules of this court, and those contained in the CPC, the former would prevail. The Civil Procedure (Amending) Act, 1976, was considered to have made no difference in this respect.

19. I am, however, of the considered opinion that this decision of the Delhi High Court does not come much to the aid of the aid of the defendants. In that case, the suit was based upon a cheque given by the defendant. It was in the nature of a bill of exchange. To such a suit, the provisions contained in both the original side rules of the court and the CPC were attracted. Even treated such suits as summary suits. The controversy, however, was confined to whether the defendant was obliged to appear and seek leave to defend within 20 days of the service of the original notice of the suit, or that he must appear within 10 days as envisaged by the CPC, and then the plaintiff was obliged to serve upon him the summons for judgment. Since the two procedures prescribed were inconsistent, the one laid in the CPC being more elaborate, if not cumbersome, and retaining the shorter period of limitation of 10 days in terms of the Limitation Act, it was held that by virtue of r. XII (of the O.S. Rules), the provisions of the CPC could be invoked only if they were not inconsistent with the original side rules framed by the court.

20. Now, in the present case, the controversy does not revolve around this procedural aspect. Instead, it concerns given effect to the enlarged ambit of the nature of summary suits introduced by the Civil Procedure (Amending) Act, 1976. Under this, while retaining the character of suits based upon negotiable instruments as summary suits, certain other types of suits are also treated as summary suits. They are those based upon written contracts, guarantees or fixed sums of money and debts. To this extent, the provisions are new, and there is nothing in the Rules framed by the High Court which can be considered as inconsistent or incompatible. It need hardly be impressed that anything in absentia cannot be considered to be something positive as to treat that as incompatible with a positive injunct elsewhere. The Rules do not envisage that, apart from suits based upon negotiable instruments, no other suits can be treated as summary suits. Had that been the case, it could be said that under r. XII, the amended provisions of the CPC could be entirely ignored. As this has not been the position, it cannot be said that the treatment by these amending provisions of certain additional types of suits as summary suits comes in conflict in any manner with the original side rules. Those Rules do not contain anything inconsistent with the amended provisions of the CPC with respect to these additional types of suits. They are, thereforee, as well applicable.

21. It could only be with regard to the mode of procedure and service of summons for judgment in suits based upon an additional cause of action that the defendants could perhaps insist that so far as they were concerned, they were entitled to the procedure embodied in the amending provisions of the CPC. A dual procedure with respect to part of the claims, in the circumstances, perhaps, would have been necessary. However, the defendants have not taken any such plea in their applications that they should as well have been served with summons for judgment. Moreover, when they have already applied for leave to defend, that service, it seems, becomes redundant.

22. I, thereforee, hold that the present suit can be treated as a summary suit.

So far as the contention of some of the defendants that they ceased to be directions of the defendant-company in the year 1979, their liability is not invoked on the basis of these directorships. Instead, it is the guarantee bond executed by them which renders them liable.

23. Adverting to the other grounds on which permission for leave to defend is sought. I find that so far as the Haryana Financial Corporation, and the suit instituted in the Gurgaon Court, they are not relevant inasmuch as the plaintiff is not seeking any relief in this suit with regard to the term loan and bridging loan accounts which are the subject-matter of the tripartite arrangement in that suit.

24. Providing of additional or revised facilities to the defendants was entirely a matter to be independently agreed upon bilaterally between the parties. Since the plaintiff is not shown to have agreed to them, the existing liabilities could not thereby be eliminated or curtailed. It has also not been shown that any penal interest has been claimed by the plaintiff, or that the defendants could not liquidate wholly or partly their liability for breach of any obligation by the plaintiff.

25. As regards the insurance amount, the hypothecated goods were lying with the defendants at their premises, and as per their own showing, they were co-beneficiary under the insurance policy. It was for them to have as well agitated the matter with the insurance company. The non-payment of any amount by the latter could not eliminate the liability due to the plaintiff.

26. The result, thereforee, is that all the applications of the defendants for leave to defend are dismissed. The suit of the plaintiff shall stand decreed with costs. The plaintiff will be entitled to interest at the rate of 12% per annum from the date of the institution of the suit till realisation.


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