Pack, Mumbai & Anr Vs. Ratnakar Bank Ltd.  Insc 380 (10 August 2001)
K.G.Balakrishna R.C. Lahoti, J.
Appeal (civil) 5237 of 2001 Special Leave Petition (civil)
16073 of 1999 Special Leave Petition (civil) 16075 of 1999
is a scheduled bank (non-nationalised). The first appellant is a sole
proprietary concern. The second appellant is the proprietor of the first
appellant. In January, 1990 the respondent filed a suit, for recovery of its
dues, against the appellants. According to the respondent the appellants were
sanctioned a cash credit limit of Rs.3,50,000/- for which purpose a demand
promissory note dated 17.8.1985 was executed by the appellants in favour of the
of hypothecation dated 17.8.1985 hypothecating the stock of raw-materials and
finished goods and a deed of mortgage of property dated 14.8.1985 mortgaging
the appellants's bungalow situated in Andheri (West) and a few other documents
are also said to have been executed by appellants in favour of respondent. On 24th January, 1990 an amount of Rs.7,61,798.68 p. was
allegedly outstanding against the appellants for the recovery whereof a suit on
the Original Side of High Court of Bombay was filed by the respondent.
March, 1995 a learned Single Judge, sitting on the Original Side, passed a
decree under Order 8 Rule 10 of the CPC against the appellants "in terms
of prayers clause (a), (c)(ii), (d)(i) and (i)" with costs quantified at
Rs.4026/-. The decree read with the prayer clause of the plaint, briefly
stated, shows that following reliefs were granted by the Court to the
respondent against the appellants:- a) The defendants were ordered and decreed
to pay to the plaintiff the sum of Rs.7,61,786.68 p. 'together with interest
thereon at the rate of 19.5 % per annum compounded quarterly or at such other
rate as the Court may deem fit and proper from the date of filing of the suit
till the date of payment or realisation.' (c)(ii) appointment of Receiver on
the bungalow situated in Andheri West.
an injunction restraining the defendants from alienating, encumbering or
parting with possession over the abovesaid bungalow.
of the suit.
24th November, 1997 the learned Single Judge on a motion made by the respondent
and without issuing any notice to the appellants passed the following order:-
"order dated March 3, 1995 stands modified to the extent that in the order
in place of prayers (c)(ii) and (d)(i), the same should read as prayers (h)(i)
and (b)(ii), (e), (f) and (i). Court Receiver appointed in execution of
decree." The order dated 24.11.1997 read with the prayer clause of the
plaint reveals that in place of the reliefs stated as clauses (c)(ii) and (d) (i)
abovesaid, the learned Judge now granted the following reliefs to the
respondent against the appellants:- (b)(ii) a declaration that the plaintiffs
have a first charge over the bungalow situated in Andheri (West) as per the
mortgage created by defendant no.2 in favour of the plaintiff.
Court Receiver authorised to sell the hypothecated goods and sale proceeds be
appropriated in satisfaction of the decree with personal decree against the
defendants for the amount remaining, if any.
Court Receiver authorised to hold sale of the bungalow and appropriate the said
proceeds in satisfaction of the decree with a personal decree for the remaining
amount, if any.
appears that the defendants (appellants) were trying to negotiate a settlement
with the respondent bank setting out the fortuitous circumstances which had
resulted in the defendants having fallen in arrears, also setting out the
family circumstances which deserved a sympathetic consideration on the part of
the bank but the proposal made by the defendants was not evoking any favourable
response. The defendants pleading their ignorance of the decree and setting out
the reasons for their default in contesting the suit moved the learned Single
Judge for setting aside the ex-parte decree. By order dated 4.2.1999 the
learned Single Judge refused to accept notice of motion taken out by the
defendants stating that the remedy of the defendants laid only in filing an
appeal. The defendants did file an appeal. However, by the impugned order dated
26.7.1999 a Division Bench of Bombay High Court refused to entertain the appeal
and dismissed the same as barred by time.
aggrieved defendants filed a petition for special leave invoking the
jurisdiction of this Court under Article 136 of the Constitution. During the pendency
of SLP also the appellants gave an offer for settlement of the dispute
proposing to tender an amount of Rs.8,36,000/- in full and final settlement of
the decree. The break-up of the amount offered by the defendant-appellants is
Payment of Principal Amount Rs.3,50,000
Interest @ 12% p.a. upto date Rs.1,26,000 of suit
Interest @ 10% p.a. from 1991 till 2000 (for 10 years) Rs.3,50,000
Cost of Suit Rs. 10,000 -------------- Rs.8,36,000 ========
On 19th November, 1999 this Court directed special leave
to be granted and the operation of the impugned decree to be stayed subject to
the appellants depositing a sum of Rs.7,61,000/- with the Registrar of this
Court. The amount was deposited as ordered. The respondent-bank was put on
notice about the amount tendered by appellants by way of deposit in this court.
Learned counsel for the parties appearing before this Court tried to settle the
matter. Learned counsel for the respondent-bank took several adjournments for
seeking instructions in the matter of settlement from the respondent- bank but
the latter gave no response. On 10.5.2001 this Court directed the Managing
Director of respondent-Bank to appear in person in the Court so as to settle
the matter. On 16.7.2001 the Chairman-cum-Managing Director of the
respondent-bank did appear but only to state that the proposal made by the
appellants was not acceptable to the bank and bank was not agreeable to
such circumstances leave to appeal has been granted and the learned counsel for
the parties have been heard on merits.
heard learned counsel for the parties we are satisfied that the High Court was
not justified in refusing to set aside the ex- parte decree dated 3.3.1995 as
modified on 24.11.1997.
perusal of the affidavit filed by the defendant-appellants in support of notice
of motion seeking setting aside of the ex-parte decree did make out a case for
allowing the notice of motion. We have no reason to disbelieve the bona fides
of the defendant-appellants.
were making a genuine effort with the respondent-bank for settlement of the
dispute. They were justifiably hopeful of the settlement because their offer
was reasonable and the family and the business circumstances of the appellants
brought to the notice of the respondent-bank should have normally evoked
sympathy of the respondent-bank on humanistic considerations. There was nothing
wrong in the appellants expecting that the respondent-bank would, instead of
indulging in litigation, settle the matter giving such just and equitable
relief to the appellants as they deserved. There was no counter proposal made
nor the appellants' proposal was at any time turned down by any written
communication made by the respondent- bank.
from the facts and circumstances stated in the affidavit in support of notice
of motion the interest of justice also demanded the decree being set aside.
order dated 3.3.1995 relief (a) set out in the plaint was granted 'as it was',
without specifying the exact decretal amount and the rate of interest allowed
by the Court. Such of the prayers as were not granted by decree dated 3.3.1995
would be deemed to have been refused and to that extent the suit shall be
deemed to have been dismissed. More than two years and eight months later the
Court could not have, on a mere notice of motion, substituted almost a new
decree in place of the old one by granting such reliefs as were not granted
earlier and that too without noticing the defendant-appellants.
amend a decree cannot be exercised so as to add to or subtract from any relief
granted earlier. A case for setting aside the decree was earlier made out. In
the facts and circumstances of the case the Division Bench ought to have taken
a liberal view of the events and entertained the appeal for consideration on
merits by condoning the delay in filing the same. However, that was not done.
We are satisfied that grave injustice has been done to the appellants by
denying them an opportunity of hearing and contesting the suit on its merits.
We are also of the opinion that the respondent-bank ought to have taken a reasonable
stand and should have sympathetically considered the proposal of the appellants
which was not lacking in bona fides and in the interest of avoiding litigation
and early recovery of outstanding debts the respondent should have compromised
the suit. Even if the appellants' proposal was not acceptable to the
respondent, at least a counter-proposal should have been made in which case
across the table discussion between the parties with the assistance of their
learned counsel would have brought out a mutually accepted resolution and an
end to the litigation. We are constrained to observe that this litigation is
being perpetuated because of the unreasonable and rigid attitude of the
ordinary course we would have remanded the matter back to the Division Bench
for hearing the appeal but we are of the opinion that that course is
unwarranted. As we are satisfied that decree dated 4.3.1995 and the order dated
24.11.1996 amending the decree __ both suffer from serious legal infirmities and
error of jurisdiction and as such the same deserve to be set aside; more so
when we are also satisfied on the affidavit of the defendant-appellants that
there was a sufficient cause for their non-appearance in the suit.
the foregoing reasons the appeals are allowed. The judgment of the High Court
dated 26.7.1999, the decree dated 3.3.1995 and the order 24.11.1997are all set
aside. The suit is restored on the file of the High Court. It shall be taken up
for hearing and decided afresh after affording the defendant-appellants an
opportunity of contesting the suit on its merits. The amount of Rs.7,61,000/-
deposited by the appellants with the Registry of this Court shall be refunded
to the appellants as the decree has been set aside and settlement has failed.
Costs up to this stage shall be borne by the parties as incurred. Before
parting we expect the respondent- bank to take a sympathetic view of the
appellants' proposal and still try to reach a settlement. The High Court may
also make an effort to settle the dispute by trying a conciliation. In any
case, we make it clear that on the abovesaid amount of Rs.7,61,000/- interest
shall cease with effect from 31.7.2000, the date on which the respondent- bank
had notice of the deposit and yet it unreasonably refused to accept the tender
of such amount.