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2006 DIGILAW 1832 (DEL)

MOHD. ASHQIN v. RANBIR SINGH SIWAN

2006-10-10

S.L.BHAYANA, T.S.THAKUR

body2006
T. S. THAKUR, J. ( 1 ) THIS appeal arises out of a judgment and decree passed by the additional District Judge, Delhi whereby an application seeking leave to defend filed by the appellants under Order XXXVII Rule 3 has been dismissed and the suit for recovery of Rs. 5 lakhs with interest at 10% decreed with costs. ( 2 ) THE plaintiff"s case as set out in the plaint was that the defendant had approached him for financial assistance to the tune of Rs. 5 lakhs which amount was advanced to the defendants in terms of an agreement executed between the parties on 17th May, 2002. The agreement, inter alia, provided that the amount borrowed by the defendant would be utilized in the partnership business carried on by them and that out of the profits earned by the said partnership, the plaintiff would receive 40% while the remaining 60% would be shared by the two defendants. Clause 4 of the agreement executed between the parties admitted the receipt of Rs. 3 lakhs by the defendants out of the total amount of Rs. 5 lakhs and provided for payment of the remaining 2 lakhs within a period of two months thereof. In the event of failure of the plaintiff to make the payment of the balance amount of Rs. 2 lakhs, his share in the profit of partnership was to stand reduced by 7% which would then go to defendant Mohd. Ashqin taking his share from 35% to 42%. ( 3 ) APART from the agreement aforementioned, a partnership deed also, it appears, was executed on the very same date between the parties in which again, the receipt of Rs. 3 lakhs was acknowledged by the defendants while the balance of Rs. 2 lakhs was agreed to be paid to them within 2 months. What is significant is that although the document executed between the parties described the same to be a partnership, the plaintiff had taken no responsibility to share the loss, if any, suffered by the firm. The so-called partnership could be terminated by giving a notice of two months to the defendant whereupon the defendants were obliged to repay the entire amount of Rs. 5 lakhs borrowed by them from the plaintiff. ( 4 ) THE plaintiff"s case in the light of the above two documents was that it paid the entire amount of Rs. The so-called partnership could be terminated by giving a notice of two months to the defendant whereupon the defendants were obliged to repay the entire amount of Rs. 5 lakhs borrowed by them from the plaintiff. ( 4 ) THE plaintiff"s case in the light of the above two documents was that it paid the entire amount of Rs. 5 lakhs to the defendants but received his share of the commission/profits sometime whereafter the same was stopped forcing him to terminate the arrangement and demand the return of the money. Since the efendants had not arranged the payment of the amount borrowed by them, a suit became inevitable in which the plaintiff prayed for a decree with interest as already noticed above. ( 5 ) THE defendants appeared before the trial court and applied for grant of leave to defend the suit. Their case, primarily, was that although the defendants had borrowed Rs. 3 lakhs from the plaintiff, the latter had not arranged the remaining sum of Rs. 2 lakhs. The question of passing a decree for rs. 5 lakhs did not, therefore, arise according to the defendants. ( 6 ) THE trial court has upon consideration of the rival contentions dismissed the application seeking leave to defend and decreed the suit under order XXXVII. The court has, relying upon the decisions of the Supreme Court in m/s. Machalec Engineers and Manufacturers Versus M/s. Basic Equipment corporation, AIR 1977 SC 577 and that of this Court in Ganga Roller Flour Mills pvt. Ltd. Versus A. B. Industries, 94 (2001) DLT, 450 held that the defence of the defendants was a mere moonshine. While saying so, the court has taken note of the failure of the defendants to set up the plea regarding non-payment of Rs. 2 lakhs immediately after they were served with the notice terminating the arrangement and demanding Rs. 5 lakhs back from them. The present appeal as already noticed earlier calls in question the correctness of the said judgment and decree. ( 7 ) WE have heard learned counsel for the parties at some length and perused the record including the judgment under appeal. The legal position regarding the principles that govern the grant or refusal of leave to defend is fairly well-settled by the decisions referred to above. ( 7 ) WE have heard learned counsel for the parties at some length and perused the record including the judgment under appeal. The legal position regarding the principles that govern the grant or refusal of leave to defend is fairly well-settled by the decisions referred to above. Leave can be denied only if the defendant has no defence or the defence set up is illusory or sham or practically moonshine. In cases where a defence is substantial and the pleas raised by the defendants give rise to triable issues leave can and ought to be granted by the court. Whether or not the case falls in one or the other category, Justifying grant or refusal of leave thus depends upon the facts and circumstances of each case. ( 8 ) THE factual position in the present case is evident from the documents on record comprising the agreement executed between the parties in terms whereof a sum of Rs. 3 lakhs had been advanced to the defendants-appellants herein with another Rs. 2 lakhs promised within a period of 2 months from the date of the execution of the said agreement. There is no documentary evidence to show that Rs. 2 lakhs was actually advanced to the defendants by the plaintiff in terms of clause 4 of the agreement. Two circumstances, however, give rise to a clear inference that the said amount was paid. The first is that defendant-appellants did not raise the plea of non-payment of Rs. 2 lakhs in response to the notice served upon them by the plaintiff. In the ordinary course if the amount in question had not been paid to the defendant, they ought to have said so at the earliest opportunity. The plea suggesting regarding non-payment of Rs. 2 lakhs is rather belated and shall have to be examined more carefully. ( 9 ) THE second circumstance which is noteworthy in this regard is based on the working of the arrangement arrived at between the parties. Clause 4 of the agreement referred to earlier reads as under :"that the second party for some reasons presently has paid Rs. 3,00,000/- out of rs. 5,00,000/- to the First party towards financial assistance and balance Rs. 2,00,000/- shall be paid within two months hereof, failing which till the second party pays the said balance amount of Rs. Clause 4 of the agreement referred to earlier reads as under :"that the second party for some reasons presently has paid Rs. 3,00,000/- out of rs. 5,00,000/- to the First party towards financial assistance and balance Rs. 2,00,000/- shall be paid within two months hereof, failing which till the second party pays the said balance amount of Rs. 2,00,000/- His share in profit shall be reduced by 7% and said 7% share of profit shall go to Mohd. Ashqun and his share shall become 42%. " ( 10 ) IT is evident from the above that till such time the plaintiff did not advance Rs. 2 lakhs, his share of the profit was to be 33% as against 40% which he was to receive after making his full contribution of Rs. 5 lakhs. The plaintiff"s case is that for the first two months after the execution of the agreement, he was paid only 33% share out of the profit of the partnership. After two months, however, since he had already paid the amount of Rs. 2 lakhs envisaged under the agreement, he was paid his share of the profit in the partnership @ 40% as stipulated in clause 3 of the agreement. This factual aspect was clearly asserted by the plaintiff in the affidavit filed by him along with the reply to the application seeking leave to defend. The plaintiff's affidavit alleged:"it is further submitted that the plaintiff paid the sum of Rs. Lakhs in the month of July 2002 and accordingly from August onwards his share in the profits was given to him @ 40% The plaintiff continued to receive his share in the profits of the firm @ 40% till March 2003. This clearly establishes beyond doubt that the plaintiff had paid the balance amount of Rs. 2 lakhs also as otherwise his share in the profits would have been only 33% and not 40%. Copies of the statements showing payment of 40% of profits of the firm to the plaintiff from August 2002 to March 2003 are annexed herewith and marked as "annexure-P/1 (Colly ). " ( 11 ) IN the reply to the above, the defendant have simply stated as under :"para 7 of the affidavit filed by the plaintiff is wrong and denied as stated and the corresponding para of the affidavit filed by the defendants is correct and reaffirmed. " ( 11 ) IN the reply to the above, the defendant have simply stated as under :"para 7 of the affidavit filed by the plaintiff is wrong and denied as stated and the corresponding para of the affidavit filed by the defendants is correct and reaffirmed. It is submitted that as per the own admission of the plaintiff in the answering para, it requires evidence and also as per the own admission of the plaintiff, the terms of the partnership deed are relied upon by the plaintiff and the same cannot be adjudicated upon by simply reading the plaint of the present suit. The parties specially the defendant would be proving their case by leading evidence. The plaintiff is claiming that out of his business profits and his share of 40%, he has paid Rs. 2 lacs in the business, though, there is no such document to establish the claim of the plaintiff and as such, it again requires the evidence to be proved by leading the evidence by the parties. " ( 12 ) THERE is no clear denial of the fact that the plaintiff had paid a sum of Rs. 2 lakhs in the month of July 2002 or that from August, 2002 onwards, he was given 40% share in the profits of the partnership. There is also no denial of the fact that the plaintiff had continued to receive his share @ 40% till March 2003. ( 13 ) THE defendants have not even challenged the correctness or genuineness of the statement of accounts showing payment of 40% of profits of the firm to the plaintiff from August 2002 to March 2003. Simply stating that the defendants would establish their case by leading evidence, does not lead the defendants anywhere. They could have disputed the genuineness of the copies of the accounts filed by the plaintiff along with the rejoinder or else explained how the said accounts were conceding 40% profit earned by the partnership to the plaintiff. In the absence of any such challenge to the genuineness of the accounts or any explanation as to how the defendants were paying 40% out of the profits of the firm to the plaintiff, the inference is that the plaintiff was getting his share of 40% because he had paid the balance amount of Rs. 2 lakhs. In the absence of any such challenge to the genuineness of the accounts or any explanation as to how the defendants were paying 40% out of the profits of the firm to the plaintiff, the inference is that the plaintiff was getting his share of 40% because he had paid the balance amount of Rs. 2 lakhs. Such being the position, the defence sought to be set up by the defendants is nothing but sham and a mere moonshine. The court below was in that view of the matter justified in declining the grant of leave to the defendants and decreeing the suit. In the result, this appeal fails and is hereby dismissed but in the circumstances without any orders as to costs.