Research › Search › Judgment

Delhi High Court · body

2007 DIGILAW 1159 (DEL)

GULATI ASSOCIATES v. KEERAT LEASE FINANCE LIMITED

2007-05-28

SANJAY KISHAN KAUL

body2007
SANJAY KISHAN KAUL, J. ( 1 ) THE plaintiff has filed a suit under the provisions of Order 37 of the Code of civil Procedure, 1908 (hereinafter referred to as the said Code) for recovery of a sum of Rs. 23,10,000/- along with future interest @18% per annum. ( 2 ) IT is the case of the plaintiff that the defendant company is one of the promoters of a company M/s Domino Leathers Limited and in the year 1996 the said defendant company approached the plaintiff for promotion and marketing of the public issue of M/s Domino Leathers Limited and offered to the plaintiff to buy the shares of M/s Domino Leathers Limited, which shares were to be bought back at a price agreed between the parties. In this behalf an agreement dated 27. 2. 1996 is stated to have been executed. The original agreement has been titled as an Agreement of Safety Net by the defendant and two other companies in respect of the shares of M/s Domino Leathers Limited. The agreement was for the purchase of minimum of 7,50,000 lac shares and in view of the fact that the defendant was to buy back the shares, the defendant company handed over a post- dated cheque dated 1. 6. 1996 for Rs. 25. 00 lacs as security. The plaintiff claims to have performed part of its obligation by purchasing the shares of M/s Domino leathers Limited and since the defendant company did not take delivery of the shares and remit the money, the post-dated cheque for Rs. 25. 00 lacs was presented, which was dishonoured. ( 3 ) THE plaintiff claims that reconciliation of accounts took place between the parties on 8. 7. 1996 and again a post-dated cheque of Rs. 12,16,056/- dated 31. 8. 1996 including the principal and interest was issued in favour of M/s gulati Financial and Management Services Pvt. Ltd. , controlled by the proprietor of the plaintiff. The problem did not get resolved and neither delivery of shares were taken nor money paid with the result that the said cheque was presented and again bounced. ( 4 ) A legal notice was sent by the plaintiff and reply was exchanged and in the last week of June, 1997 both the parties sat together to once again resolve the differences whereby the cheque No. 333018 dated 30. 6. 1997 of Rs. 15. ( 4 ) A legal notice was sent by the plaintiff and reply was exchanged and in the last week of June, 1997 both the parties sat together to once again resolve the differences whereby the cheque No. 333018 dated 30. 6. 1997 of Rs. 15. 00 lacs in favour of the plaintiff, drawn on Bank of Patiala, Chandigarh as full and final settlement was issued. It is stated that the total amount payable was actually rs. 15,04,420/- for 2,03,300 shares of M/s Domino Leathers Limited, but the amount of Rs. 15. 00 lacs was accepted in full and final settlement. ( 5 ) THIS third cheque also bounced resulting in a legal notice dated 20. 9. 1997. This suit has thereafter been filed for this amount along with interest till the date of the suit calculated @18% per annum. ( 6 ) IN the application filed for leave to defend, the defendant has sought to point out the differences in the pleadings between the present suit and the complaint filed by the plaintiff under Section 138 of the Negotiable Instruments act, 1881. Learned counsel for the defendant states that there was no reference to the Agreement of Safety Net dated 27. 2. 1996. It is stated that the agreement is with more than one company. The agreement is also alleged not to have been signed by Mr. O. P. Gulati on behalf of the plaintiff, but by Mr. Nikhil Jain. The signature of the defendant is, however, not disputed. ( 7 ) IN substratum, the defence of the defendant is that the plaintiff was an under-writer for the shares. The cheque of Rs. 25. 00 lacs was issued as a security. Reconciliation did take place and the cheque for Rs. 12,16,056/- was issued towards the price of the shares but the shares were not delivered by the plaintiff and, therefore, the cheque was not honoured and finally after reconciliation it was agreed that a sum of Rs. 15. 00 lacs would be paid to the plaintiff in full and final settlement of the claim. To this extent, there is no discrepancy in the story of the plaintiff and the defendant. ( 8 ) THE only difference is that the defendant claims that the plaintiff never delivered the shares while the plaintiff claims to have delivered the said shares. 00 lacs would be paid to the plaintiff in full and final settlement of the claim. To this extent, there is no discrepancy in the story of the plaintiff and the defendant. ( 8 ) THE only difference is that the defendant claims that the plaintiff never delivered the shares while the plaintiff claims to have delivered the said shares. It is true that there is no document on record showing the delivery of the shares. Learned counsel for the plaintiff has drawn the attention of this court to the proceedings in respect of the complaint under Section 138 of the negotiable Instruments Act where Shri Onkar Singh of the defendant company initially sought to even deny the arrangement of under-writing. Not only that, when he was confronted with the procurement list which included the shares in question, he stated that he did not know whether the signatures appearing are his or not. ( 9 ) IT is no doubt true that at this stage of hearing of the application for leave to defend, there is no final trial taking place. The principles governing the granting of such leave have been settled as far back as in M/s Mechelec engineers and Manufacturers Vs. M/s Basic Equipment Corporation, 1976 4 SCC 687 by reference to an earlier judgment in the following terms: "8. In Smt. Kiranmoyee Dassi V. Dr. J. Chatterjee, AIR 1949 Cal 479, Das, J. , after a comprehensive review of authorities on the subject, stated the principles applicable to cases covered by Order 17 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 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 judgment and the defendant is entitled to unconditional leave to defend. (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 the plaintiff is 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. " ( 10 ) IF the pleas of the relevant parties are tested on this account, I am of the considered view that there is no doubt that there was a transaction between the parties whereby the plaintiff agreed to be the under-writer and cheques were issued to the plaintiff. The controversy is in respect of the delivery of the shares. There is no doubt no writing on this aspect but if on probabilities the matter is examined, it can hardly be said that the defendant would have issued a cheque of Rs. 15. 00 lacs in full and final settlement without taking delivery of the shares. The controversy is in respect of the delivery of the shares. There is no doubt no writing on this aspect but if on probabilities the matter is examined, it can hardly be said that the defendant would have issued a cheque of Rs. 15. 00 lacs in full and final settlement without taking delivery of the shares. This is more so since this was not an isolated incident but there is a past history where two earlier cheques of the defendant had bounced and the grievance made by the defendant even in respect of the second cheque was of non- delivery of shares. Not only that, in the proceedings under Section 138 of negotiable Instrument Act when being examined, the owner of the defendant gave evasive reply without categorically stating on the aspect that the procurement list bore his signatures where the shares in question were mentioned. ( 11 ) HOWEVER, simultaneously it cannot be lost sight of that this aspect to reach a final conclusion may require trial. In my considered view, the case falls within the parameters laid down in para (e) of M/s Mechelec Engineers and manufaturers case (supra) and the defendant ought to be given a chance to defend the suit, but subject to conditions to be imposed on the defendant. ( 12 ) I deem it appropriate to grant conditional leave to the defendant subject to deposit of the principal amount of Rs. 15. 00 lacs in Court within a period of eight weeks from today as requested by the learned counsel for the defendant. The plaintiff is permitted to withdraw the amount subject to security of restitution to the satisfaction of the Registrar of this Court. If no such security is furnished within six weeks of such deposit being made, the amount would be kept in an FDR and would enure for the benefit of the succeeding party. In such a case, the FDR to be taken up for a period of one year and to be kept renewed till further orders. The application is accordingly allowed.