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Radha Mohan and anr. Vs. Radha Fancy Stores and ors. - Court Judgment

LegalCrystal Citation
SubjectCommercial
CourtDelhi High Court
Decided On
Case NumberSuit No. 1334 of 1981
Judge
Reported in23(1983)DLT269
ActsCode of Civil Procedure (CPC), 1908 - Order 37; Stamp Act, 1899 - Sections 35
AppellantRadha Mohan and anr.
RespondentRadha Fancy Stores and ors.
Advocates: I.D. Garg and; Harnam Das, Advs
Cases ReferredSunder Lal v. General Engg. Works
Excerpt:
.....have been brought by the plaintiffs in respect of separate promissory notes. (c) an unconditional leave to defend must be given if the facts disclosed by the defendant indicate that he has a substantial defense to raise, which means that defense so railed has good chance of success or has good potentiality to dislodge the plaintiff or which is bona fide and honest one and raises such question of law or of facts which require thorough judicial scrutiny. if the defendants were so sure of that defense, they could have very well refuesd to agree to pay a sum of rs. l,00,000.00 .(16) the suit is not bad for misguide of causes of action and partics, the cause of action in favor of the plaintiffs is the same. works, air1982delhi220 .it was held that if a defendant raises prima facie valid..........notes. (6) summons to the defendants were issued. the defendants came up with an application for leave to defend which is 1.a. 301 of 1982. the defendants pray that they should be given unconditional leave to defend. they urge that both the promissory notes, which form the basis of the suit, are inadmissible in evidence for want of proper stamp. they explain that the promissory notes are payable otherwise on demand and as such they should be stamped as bill of exchange while the same has not been done. they also plead that the suit is bad for misjonder of causes of action and parties and that separate suit should have been brought by the plaintiffs in respect of separate promissory notes. according to them, a sum of rs. 28,000.00 only and a further sum of rs. 5000.00 was due to the.....
Judgment:

G.R. Luthra, J.

(1) The plaintiffs have brought a suit for recovery of Rs. l,12,800.00 along with pendente lite and future interest @ l2/o p.a.

(2) The plaintiffs and defendants Nos. 2 and 3 were partners and were carrying on business under the name and style of M/s. Radha Fancy Store, defendant No. I in shop Nos. 67-68, outside Moti Bazar, Chandni Chowk, Delhi. The plaintiffs retired from that partnership in consideration of payment of a sum of Rs. l,00,000.00 in the following manner :- Rs. 40.000.00 by cheque dated October 10, 1980 in favor of plaintiff No. 1. Rs. 10,000.00 by cheque dated October 10, 1980 in favor of plaintiff No. 2. Rs. 50,COO.00 to be paid to plaintiff No. I after one year of October 10, 1980. Rs. 50,000.00 to be paid to plaintiff No. 2 within one year of October 10, 1980.

(3) In respect of the aforesaid transaction, a deed of release dated October 10, 1980 was executed between the parties. In that deed, there was an incorporation of promise of the defendant Nos. 2 and 3 to pay the balance amount of Rs. 1,00,000.00 within one year there after. Further, defendant Nos. 2 and 3 also executed one promissory note and receipt for Rs. 50.000.00 in favor of plaintiff No. I and another promissory note and receipt for the same amount in favor of plaintiff No. 2.

(4) According to the plaintiffs, on the basis of the aforesaid documents, the defendants became liable to pay to the plaintiffs a sum of Rs. l,00,000.00 with interest(c) 12% p.a. on or before October, 1981. However, the payment was not made and, thereforee, the present suit was brought. The plaintiffs claim Rs. 1,00,000.00 as principal and a further sum of Rs.12,800.00 as interest from October 10, 1980 till the institution of the suit.

(5) The suit was brought under the provisions of Order 37 of the Code of Civil Procedure (hereinafter referred to as the 'Code') since the suit was on the basis of a contract in writing (release deed) and two promissory notes.

(6) Summons to the defendants were issued. The defendants came up with an application for leave to defend which is 1.A. 301 of 1982. The defendants pray that they should be given unconditional leave to defend. They urge that both the promissory notes, which form the basis of the suit, are inadmissible in evidence for want of proper stamp. They explain that the promissory notes are payable otherwise on demand and as such they should be stamped as bill of exchange while the same has not been done. They also plead that the suit is bad for misjonder of causes of action and parties and that separate suit should have been brought by the plaintiffs in respect of separate promissory notes. According to them, a sum of Rs. 28,000.00 only and a further sum of Rs. 5000.00 was due to the plaintiffs in terms of the account books, while much more (Rs.50,000.00 ) was paid and that, thereforee, they arc not entitled to any further amount. They have also put forward a defense that it was the obligation of the plaintiffs to ice that the tenancy rights of the shops, in which partnership business was being carried on, are transferred in favor of defendant Nos.2 and 3, that the said obligation was never discharged and that, thereforee, the plaintiffs are not entitled to any amount on the basis of the release deed and the promissory note.

(7) The aforesaid application was contested by the plaintiffs.

(8) The main emphasis of the learned counsel for the defendants at the time of arguments was on the point of inadmissibility of both the promissory notes on the ground of deficiency of stamps. It is Article 49 of Schedule I of the Indian Stamps Act which provides for the stamp duty on a promissory note. The said Article reads as under :

'49.Promissory Note as defined by Section 2(22)(a) When payable on demand- (i) When the amount or value does Ten naye paise. not exceed Rs. 250. (ii) When the amount or value ex- Finteen naye paisecceds Rs. 250, but does not exceed Rs. 1000. (iii) in any other case Twenty five naye paise. (b) when payable otherwise than on de- The same duty as a Bill of mand. Exchange (No. 13) for the same amount payable otherwise than on demand.'

(9) It is apparent from the above that when a promissory note is payable otherwise than on demand, the stamp duty is the same as a Bill of Exchange mentioned at Item No. 13 of Schedule 1. In the present case, it is the case of the plaintiffs themselves that the promissory notes were payable after a period of one year from October 10, 1980. Obviously, thereforee, they were not payable on demand. Hence, the stamp duty should have been as laid down for Bill of Exchange in Article 13 which says that such duty shall be Rs. 20.00 for a Bill of Exchange of the value exceeding Rs. 500.00 but not exceeding Rs. 1,000.00 and Rs. 20.00 for every additional. RS.IOOO.00 or part thereof in excess of Rs. 1,000.00 . Calculating in the said manner, the stamp duty on each promissory note should have been Rs. 1,000.00 . The stamp actually affixed is of 60p. on each promissory note.

(10) According to Section 35 of the Stamp Act, if any instrument i deficiently stamped, the same can be admitted in evidence if there is payment of the deficient stamp duty plus penalty equal to 10 times of such deficiency. But this concession is not available to any promissory note or an instrument chargeable with a duty not exceeding 10 np. Hence, the promissory notes in the present case arc inadmissible in evidence and also cannot be admitted in evidence under Section 35 of the Indian Stamp Act.

(11) But the effect of the aforesaid finding is that the promissory notes cannot form the basis of the suit and it is the release deed which becomes the basis of the suit on which the plaintiffs have to fall back upon. Learned counsel for the plaintiffs also stated at the time of arguments that the plaintiffs had no objection to make the release deed ai the basis of the suit because it was that instrument which recorded the terms of the retirement of the plaintiffs from partnership and that it was the said instrument which incorporated the consideration for the defendants to agree to pay Rs. l,00,000.00 within one year from October 10, 1980.

(12) The fact as to whether the promissory notes are the basis of the suit or not has also a bearing on the point if the provisions of Order 37 of the Code are applicable or not. Both the Delhi High Court (Original Side) Rules and the provisions of Order 37 of the Code arc applicable to the promissory notes. It is Chapter Xv of the Original Side Rules which deals with suits based on promissory notes, hundis and bills of exchange. A full bench of this Court in M/s Print pak Machinery Ltd. v. Jay Kay Paper Congeters, : AIR1979Delhi217 it was held that the original side Rules override the provisions of the Code when there is inconsistency. thereforee, had the promissory notes been the basis, original side rules were applicable. Now that it has been found that promissory notes cannot form the basis of the suit and it is the written contract in the shape of release deed which ii applicable, the provisions of Order 37 of the Code apply.

(13) 'LN Harpra shad & Co. Ltd. v. Allahabad Bank, : AIR1983Delhi280 , I found that following arc the principles in respect of grant of leave to defend:

(A) It is discretionery with the court either to refuse or to grant leave to defend unconditionally or upon such terms as may appear to the court to be just. But the aforesaid exercise of the discretion should be judicial and not arbitrary and whimsical.

(B) In case the defense intended to be put up in frivolous or vexatious leave to defend must be refused.

(C) An unconditional leave to defend must be given if the facts disclosed by the defendant indicate that he has a substantial defense to raise, which means that defense so railed has good chance of success or has good potentiality to dislodge the plaintiff or which is bona fide and honest one and raises such question of law or of facts which require thorough judicial scrutiny.

(D) If the facts set up by the defendant do not disclose a substantial defense, leave should normally be refused or else on account of mercy as provided for in the Supreme Court judgment 0043/1976 : [1977]1SCR1060 or due to a desire to exclude even remote chance of injustice to the defendant, leave to defend may be granted subject to the condition of deposit of amount claimed by the plaintiff or furnishing a security in respect of that amount or deposit of part of that amount and furnishing security for the payment of balance.

(E)Where a part of the amount claimed by the plaintiff is admitted by the defendant to be due from him, leave to defend the suit shall not be granted unless the amount so admitted to be due it deposited by the defendant in court.

(14) It is apparent that so that unconditional leave to defend can be given, the case must fall under clause (e) reproduced above. It is to be seen if in the present case the defense raised is bona fide and honest one and raises such questions of law or of facts which require thorough judicial scrutiny. The defendants do not deny about the retirement of the plaintiffs from partnership and their consequent promise to pay a sum of Rs. 1,50,000.00 to the plaintiffs out of which a sum of Rs. 50,000.00 was paid and the balance of Rs. l,00,000.00 was still payable. They also do not deny the execution of the release deed. They here raised dishonest and frivolous defense. They say that if accounts of the partnership were gone into, a sum of Rs. 33,000.00 could have been found due to the plaintiffs. If the defendants were so sure of that defense, they could have very well refuesd to agree to pay a sum of Rs. 1,50,000.00 . In fact, on the retirement of a partner, there are a number of considerations for the purpose of finding out the amounts payable to a retired partner. There is evaluation of share in goodwill, tenancy rights, amount of profit due and prospects of profit etc. Hence, the evaluation of the share of the plaintiffs at Rs. 1,50,000.00 cannot be said to be excessive, even if we take if for granted that that matter of evaluation can now be gone into which, in fact, cannot be done.

(15) The other defenses raised by the defendants are equally dishonest and frivolous. There is not even a word in the release deed executed by the defendants in favor of the plaintiff that the plaintiffs had agreed or undertaken to get the tenancy rights of the shop transferred in favor of the defendants so as to be entitled to the amount of Rs. l,00,000.00 .

(16) The suit is not bad for misguide of causes of action and partics, The cause of action in favor of the plaintiffs is the same. That cause of action is comprised in the release deed evidencing the retirement of the plaintiffs from the partnership in consideration of their getting Rs. 1,50,000.00 .

(17) I have held above that the defenses intended to be put up by the defendants arc frivolous and dishonest. In such a case, clause (b) of the principles reproduced above applies and the leave to defend must be refused.

(18) Learned counsel for the defendants relied upon a judgment of this court in Sunder Lal v. General Engg. Works, : AIR1982Delhi220 . It was held that if a defendant raises prima facie valid contentions like non-maintainability of the suit etc., then he is entitled to leave to defend without any condition like furnishing of bank guarantee. Learned counsel for the defendant contended that in the present case, promissory notes were inadmissible in evidence for want of proper stamps and that, thereforee, the suit was not maintainable and as such the defendants were entitled to unconditional leave to defend.

(19) But as I have already held, that inadmissibility of the promissory note has no effect on the suit because then the suit becomes based on the release deed and the defense raised by the defendants are frivolous.

(20) Under these circumstances I reject the application (I.A.301/82) of the defendants and pass a decree for Rs. l,12,800.00 with costs in favor of the plaintiffs and against the defendants. The plaintiffs will also be entitled to interest @ 9/o p.a. from the date of the institution of the suit till the date of the payment of the amount to them.

(21) Both Suit No. 1334/81 & I.A.301/82 stand disposed of. Suit decreed.


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