Skip to content


Sushila Mehta Vs. Bansi Lal Arora - Court Judgment

LegalCrystal Citation
SubjectCommercial
CourtDelhi High Court
Decided On
Case NumberInterim Application No. 3032 of 1981 and Suit Appeal No. 93 of 1981
Judge
Reported inILR1982Delhi320
ActsCode of Civil Procedure (CPC), 1908 - Order 37, Rule 1; High Court Original Side Rules - Rule 19
AppellantSushila Mehta
RespondentBansi Lal Arora
Advocates: P.H. Parekh,; Arun Mohan,; Kailash Vasdev,;
Cases ReferredBasic v. Engineers Mechalec
Excerpt:
.....the original side of the high court-claim for interest can be joined with claim for amount under suit.; a suit under order 37 rule 1, code of civil procedure was filed by the plaintiff alleging that the plaintiff paid rupees one lac to defendant no. 1 as application money for shares in a proposed private limited company. receipt of the amount was not disputed by the defendants, but rs. 20,500 were stated to have been transferred to some other account on instruction of the plaintiff.; the defendant applied for leave to defend under order 37 rule 3(5) of the code of civil procedure saying that the suit is not maintainable under order 37 c.p.c. s the same has not been instituted on the basis of a negotiable instrument or a written contract. it as also contended that as defendant no. 2,..........she is entitled to' is the-refund of the amount of rs. 59,500. now that her right to take back her money is admitted, i can see no good defense to the suit,(8) in the leave application it is admitted that the cheque of rs. 20,000 which was said to .have been dishonoured in the notice of mr. seth has been paid by the bank to the defendants. this makes the amount of rs. 79,500 to which the plaintiff is entitled. rs. 59,509 the defendants were ready to pay to her as admitted in mr. seth's notice dated-2nd october. 1980. the sum of rs.20,000 is now admitted to have been received in the leave application. the defendants must thereforee he asked to deposit rs. 79,500 in court before they .can be given leave to defend the suit. this is what i have done.(9) mr. narola on behalf of the defendants.....
Judgment:

Avadh Behari, J.

(1) The plaintiff, Mrs. Sushila Mehta, has brought this' suit for the recovery of Rs. 1,36,000 under Order 37 of the Code of Civil Procedure. To this suit there are two defendants (i) Bansi Lal Arora and (ii) Mayar Cinema Private Limited. The suit is based on a document dated 26th August, 1978 styled as 'Receipt'. This receipt is admittedly signed by Bansi Lal Arora, defendant No. 1. It reads as follows:

RECEIVED a sum of rupees one lac only as per detail giv'en below from Smt. Susheela Mehta W/o Maj. General K. K. Mehta R/o D-304, defense Colony, New Delhi as application money for allotment of shares in the proposed private limited company under the name and style of M/s, Mayur Cinema (P) Limited having its registered office at 2] 7, An-' sari Road, New Delhi-110002 and proprietor of plot No. I, Rajindra Place, New Delhi. Rs. 48,000 by Bank draft of 18-8-78. Rs. 20,000 by way of cheque of 22-8-7S. Rs. 20,000 by way of cheque of 26-8-78. Rs. 12,000 in cash. Rs. 1,00,000 Total.

The plaintiff seeks to recover this amount of Rs. 1,00.000 together with interest of Rs'. 36,000. 2nd (1982) I Delhi Mrs. Sushila Mehta v. SHRl Bansi Lal Arora 323

(2) The defendants have made an ..implication under Order 37 Rule, 3x5) of the Code of Civil Procedure for leave to defend the suit. It is this application which I heard. At the conclusion of the arguments on 21st October, 1981 I gave leave' to the .Defendants to defend the suit on their depositing in court Rs. 79,500 within 15 days. Now I give my reasons.

(3) The execution of the document dated 26th August, 1978 is not disputed by the defendants. Both in the affidavit and. the rejoinder affidavit of Bansi Lal Arora, there is no denial that this receipt was executed by him. Nor is the receipt of the amount of Rs. 1,00,000 disputed. What has' been pleaded is that the plaintiff initially paid Rs. 1,00,000 to the defendants for allotment of 2000 shares of the value of Rs. 2,00,000. The payment of Rs. 1,00,000 was only a part payment. Out of this amount of Rs. 1,00,000 at the direction of the plaintiff a sum of Rs'. 20,500 was transferred to another account of bookings where she had booked a commercial flat in a building proposed to be built by the company which is 'the proprietor of the plot No. I, Rajindra Place'. It is admitted that there is' a transfer entry of Rs. 20,000 and a separate receipt was issued turn this' amount, though it is contended that that was done 'inadvertently.'

(4) It appears to me that there is a dispute between the parties regarding this sum of Rs. 20,500. The plaintiff says that it was not out of tie amount of Rs. 1,00,000 which she had paid on 26th August, 1978, that she -took Rs. 20,500 and asked the defendants to deposit the same in the account of the commercial, flat. Her case is that she paid -separately from her pocket another sum of Rs. 20,500 for booking a commercial flat for which a separate receipt was issued to her. On this I thought that I should give unconditional leave to the defendants and I have done so.

(5) As regards the admitted amount of Rs. 79,500 I am of the opinion that there is Ho substantial defense to the suit. It is clearly and unequivocally admitted that the amount was received. Mr. Narula, learned couns'el turn the defendants, says that though it is so he disputes the liability to pay: He denies that the defendants are liable to pay the amount received. I have to see on what grounds he disputes the liability to pay the amount of Rs. 79,500 which he acknowledges to have received from the plaintiff, some by cheques' and some by draft. The defense raised is that the plaintiff applied for shares and she is entitled to. have the shares but. she is not entitled to the refund of money- It is said in the leave application : 'even now the, defendants' are ready to allot , shares to the plaintiff'as.a'nst: 0043/1976 : [1977]1SCR1060 Equipment, Basic v. Engineers Mechalec (See Das,J. R. S. of words the use shiae ,tomoon a defense, sham is this that me to appears It consideration.? entire to?

(6) There is an important document on the file which clinches the issue. The plaintiff's counsel Mr. P. H. Parekh: & Co.. issued' 3 notice dated 2nd September, 1980 to Bansi Lal Arora. He is also the director-in-charge of the company, defendant N0. 2, and 'he has made the application for leave to defend on ' behalf of and No. 2 as well. He was called, upon to pay. He sent a reply to this notice through his.ad'vocate, Mr. G-L- Seth dated 2nd October, 1980. In the reply the receipt of Rs. 1,00,000 was admitted to have been issued to the plaintiff. It was stated that out of the amount of Rs. 1,00,000 mentioned in the receipt, one cheque of Rs. 20,000 was dishonoured and was returned unpaid. Rs. 20,500 was said to have been deposited by the plaintiff as earnest money for booking a commercial flat. It was admitted that a sum of Rs. 59,500 was with the defendants and this amount they were prepared to pay to her. The notice says : 'Your client well-advised to receive the balance of Rs. 59-500 from my client above-named which amount was offered to her .more than ones'.' And again, 'Your client' can collect an amount of Rs. 59,500 from my client at any time she so desires or is convenient to her.

(7) There are clear admissions. This notice is referred to in the plaint. There is no denial any where that: this' notice was sent by Mr. G. L. Seth under instructions of the defendants. I should straightway hold on this notice that! the plaintiff is entitled to receive Rs. 59,500 from the defendants because this is what they told her on 2nd October, 1980 that they are prepared to pay this amount to her. As regards the allotment of shares it was said that 'as your client: did not pay the 'balance to make up the initial deposit of Rs'. 1,00,000 the proposal for allotment of shares to your client could not be considered, even.' thereforee, there is no question of allotment of shares now. The plaintiff was told by Mr, Seth in his notice that she is not entitled to any shares' and that all that she is entitled to' is the-refund of the amount of Rs. 59,500. Now that her right to take back her money is admitted, I can see no good defense to the suit,

(8) In the leave application it is admitted that the cheque of Rs. 20,000 which was said to .have been dishonoured in the notice of Mr. Seth has been paid by the bank to the defendants. This makes the amount of Rs. 79,500 to which the plaintiff is entitled. Rs. 59,509 the defendants were ready to pay to her as admitted in Mr. Seth's notice dated-2nd October. 1980. The sum of Rs.20,000 is now admitted to have been received in the leave application. The defendants must thereforee he asked to deposit Rs. 79,500 in Court before they .can be given leave to defend the suit. This is what I have done.

(9) Mr. Narola on behalf of the defendants argued that the defendants were entitled to unconditional leavs. Ht: raised a number of points in support of his submission. In the first place he said that' the present suit under Order 37 Civil Procedure Code was not maintainable because it was a suit not upon any negotiable instrument nor upon a 'written contract'. Order 37 Rule I Cpc says that the Order applies to the following clases of suits', namely.:

(A)suits upon bills of exchange, bundles and promissory notes; suits in which the plaintiff seeks only to recover a debt or liquidated demands in money payable by the defendant, with or without interest, arising, (i) on a written contract, or. . ... .

(10) The question is whether the receipt dated 26th August, 1978 is a 'written contract' or not. In my opinion it clearly is. The plaintiff paid the application money for allotment of shares. The defendants accepted it, though it is' true that defendant N0. 2 came into existence a few months later. The ' payment of Rs. 1,00,000 by the plaintiff as application money and its acceptance by the defendants constitutes a contract. It may be labelled as a receipt but that does' not mean that it is not a contract. '

(11) It was said that it has not been pleaded that the suit is based on a .written contract This is not required by any provision of law. The Court has' to find out whether the 'suit has been brought upon a negotiable instrument or a written contract-or an enactment or a guarantee to which Order 37 Civil Procedure Code applies. The acknowledgement of Rs. 1,00,000 by the defendants for the purpose of allotment of shares as application money thereforee clearly amounts to a contract. Becaus'e it is their, own case that the plaintiff paid money for allotment of shares and they accepted it. - There was 'consensus of mind.' And 'consensus of mind' leads to a contract, as Lord Caizns said. (Cundy V. Lindsay (1878) 3 AC 459. There was promise. There was consideration. There was acceptance. All the elements essential for the formation of the contract are present. What more is needed to make a contract. It was not a nudum pactum.

(12) Secondly, it was said that the suit is against two defendants and there is a Joint claim against them. Counsel said that there is no possibility of a contract with defendant No. 2 and, thereforee,' he is entitled to leave. This is nowhere pleaded. The company has affirmed the contract made before its forma- corporation by Bansi Lal Aroa, its promoter and director-in-charge. A private limited company was formed by husband and wife in October, 1978. The leave application has been made on behalf 'of both the defendants by Bansi Lal Arora and it has not been asserted that defendant No. 2 is not liable to pay on the ground that it made no contract with the plaintiff. From the leave application it appears that the company ratified the contract and the Board of Directors agreed to allot shares to the plaintiff if she paid the balance consideration. This is what is stated in the leave application, though in the notice of Mr. Seth it was said that there is no question of allotment of shares and the plaintiff can take back her Rs. 59,500. From these inconsistent pleas one thing is clear. It is this that the defense is bogus.

(13) Thirdly, counsel argued that Order 37 Civil Procedure Code did not apply and Chapter Xv of the Original Side Rules applies to the case. He said that the Rules of the High Court do not permit the plaintiff to bring a suit on the 'written contract' and thereforee, the suit cannot proceed. There is no substance in this contention. The suit is under Order 37 Civil Procedure Code. In so far as the Code is not inconsistent with the Original Side Rules the Code applies'. Merely because the plaintiff has. referred to 'Chapter Xv fo the Rules of 'the High Court does not mean that the plaintiff is not entitled to sue on the 'written contract' hinder Order 37 of the Code.

(14) I was referred to the Full Bench decision in M/s. Printpak Machinery Ltd. v. M/s. Jay Kay Paper Congeters, : AIR1979Delhi217 (FB). The full bench has said that in-the event of inconsistency, the original .side rules prevail on the original side of this court and not the Code of Civil Procedure. But here there is no inconsistency between the two. They are not mutually repugnant or contradictory. Both can stand side by side. In this respect the amending Act of '1976 has enlarged the scope of R. I of O.37 by including written contract, enactment and guarantee within its scope. Rule 12 of Ch. Xv and Rule 19 of Ch. I of the Original Side Rules make the provisions of the Code applicable to the original side. Provisions of O.37 are expressly made applicable in so far as they are not inconsistent with Ch. XV. I am of opinion that there is no inconsistency between the 'renovated Code' and the original side rules on bringing a suit on a written contract'. I, thereforee, hold that the plaintiff is entitled to sue on the written contract.

(15) Fourthly, counsel submitted that assuming that the plaintiff is entitled to sue for recovery of Rs. 1,00,000 on a written- contract, she is not entitled to join the claim for Rs. 36,000 which, he said,-, is a claim in the nature of damages. I do not agree. It is a' claim for interest. Whether she is entitled to interest or not is another question. Order 37 Rule I says that the plaintiff can 'recover a debtor liquidated demand in money payable by the defendant, with or without interest, arising on a written contract.' The claim for interest can be joined with a claim for money under Order 37 Rule .1 (2)(b)(i) Civil Procedure Code. This is clear from the statute.

(16) Fifthly counsel contended that there ought to have been a specific averment in the;-plaint in terms of Rule .2(l) (b) of Order 37 Civil Procedure Code that 'no relief which does not fall within the ambit of this rule has been claimed in the plaintif'. This is not a fatal flaw. This averment can be introdaced.by amendment. At best this is a procedural defect. It can be remedied. Procedure is the hand-maiden of justice. The rules of the court are not our masters. They are servants of justice. What the court bag, to see is' whether there is any relief claimed by the plaintiff which falls Outside the ambit of Rule 1. If there is no such relief, the suit ought to proceed under Order 37 Civil Procedure Code.

(17) Lastly, counsel said that in summons issued to the defendants it was' stated that 'the suit is based on a 'bank receipt and acknowledgment'. This is an erroneous description of the document dated 26th August, 1978. The erroneous description in the summons is not fatal to' the suit. The suit remains a suit on a 'written contract'. If the court comes 'to' that conclusion then the suit is validity instituted under Order 37 CPC.

(18) These are highly technical arguments. They do not answer the point in substance. The point in substance is whether the facts disclosed by the defendants show that they have a substantial defense to raise. Our procedural rules are now a days much less' formalistic and more flexible, as they should be. The two provisos to sub-rule (5) to Rule 3 of Order 37 Civil Procedure Code are a guide to the court. The sub-rule is in these words:

(5)The defendant may, at any time within the days from the service of such summons for judgment, by affidavit or otherwise disclosing such facts as may be deemed sufficient to entitle him to defend, apply on such summons for leave to defend such suit, and leave to defend may be granted to him unconditionally or upon such terms as may appear to the court or Judge to be just : Provided that leave to defend shall not be refused unless the Court is satisfied that the facts disclosed by the defendant do not indicate that he has a substantial defense to raise or that the defense intended to be put up by the defendant is frivolous or vexatious. Provided further that, 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 is deposited by the defendant in court.

(19) The provisos are addressed to the court. They say that leave should not be refused if the facts disclosed by the defendant indicate that he has a substantial defense to raise. 'Substantial' is a strong word. The defense should be 'substantial'. It should be strong, solid, of real worth. Not frivolous or vexatious. On the fact's of this case I have come to the conclusion that the defendants have no substantial defense to raise so far as the admitted amount of Rs. 79,500 is concerned. This sum they do not dispute they received. They merely say that they are not liable to pay. No good reason is shown why the plaintiff is' not entitled to he 'return of this money. At no time she was offered .shares. At no time she was asked to pay call money. In the notice she was advised to take back her money. When the suit is brought there is a complete somersault.

(20) The second proviso says that 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 is deposited by the defendant in court. From the notice of Mr. Seth and the application for leave to defend it is abundantly dear that the amount of Rs. 79.500 the defendants are bound to return to the plaintiff because in the notice they themselves invited her to come and take that money from them. Now it is acknowledged that the amount really received from her is RS. 79,500 because the dishonoured cheque has; been encased admittedly by the defendants.

(21) In paragraph 15 of the affidavit of Bansi Lal it is said that the defendants were prepared to pay Rs. 59.500 to the plaintiff 'in full and final settlement of the entire account under both the heads', namely, the share account and the plot account. But this assertion i's clearly contrary to the notice of Mr. Seth. It is difficult for the defendants to get out of the position they took in the noice. There he plaintiff's claim was admitted to the extent of Rs. 59,500, which after the receipt of the amount of Rs. 20,000 has become Rs. 79,500. To this claim of the plaintiff the defendants have no substantial defense to raise.

(22) MR..PAREKH and Mr. Arun Mohan on behalf of the plaintiff stated that they had no objection if unconditional leave Is granted to the defendants as regards the sum of Rs. 20,500.

(23) For these reasons, the defendants are granted leave to defend the suit on their depositing in court a sum of Rs. 79,500 within 15 days from 21st October, 1981. There will be no order as to costs on this application for leave to defend. Costs will abide the event.


Save Judgments// Add Notes // Store Search Result sets // Organizer Client Files //