Fixity Packaging Indus. P. Ltd. & Ors Vs. Udyen Jain (HUF)  INSC 1402
(6 August 2009)
COURT OF INDIA RECORD OF PROCEEDINGS Petition(s) for Special Leave to Appeal
(Civil) No(s).13489/2009 (From the judgement and order dated 08/05/2009 in WP
No. 8234/2009 of The HIGH COURT OF JUDICATURE AT BOMBAY) M/SFIXITY PACKAGING
INDUSTRIES PVT. LTD. & ORS. Petitioner(s) VERSUS SPL.RECOVERY
OFFICER,K.U.COOP.BK.LD.&ORS Respondent(s) (With prayer for interim relief)
Date: 06/08/2009 This Petition was called on for hearing today.
MR. JUSTICE S.B. SINHA HON'BLE MR. JUSTICE DEEPAK VERMA For Petitioner(s) Mr.
P.S. Narasimha, Sr. Adv.
Shwetank Sailakawal, Adv.
Udaya Kumar Sagar, Adv.
Respondent(s) Mr. Shekhar Naphade, Sr. Adv.
R. Sharma, Adv.
hearing counsel the Court made the following ORDER Leave granted.
appeal is disposed of in terms of the signed order with no order as to costs.
GUPTA) (PUSHAP LATA SR. P.A. BHARDWAJ) COURT MASTER [SIGNED REPORTABLE ORDER IS
PLACED ON THE FILE.] REPORTABLE IN THE SUPREME COURT OF INDIA CIVIL APPELLATE
JURISDICTION CIVIL APPEAL NO. OF 2009 ARISING OUT OF SLP(C) NO. 13489 OF 2009
M/S FIXITY PACKAGING INDUSTRIES PVT. LTD & ORS. .... APPELLANTS VERSUS
UDYEN JAIN (HUF) .... RSPONDENT
in a suit for recovery for a sum of Rs. 2,66,39,028/- are before us aggrieved
by and dissatisfied with a judgment and order dated 08.05.2009 passed by the
High Court of Judicature at Bombay in Writ Petition No. 8234 of 2008.
herein filed the aforementioned suit inter alia on the premise that the cheques
issued by the appellants herein for the said amounts, when presented to the
bank stood dishonoured. The suit was filed in terms of Order XXXVII of the Code
of Civil Procedure.
filed an application praying for leave to defend in the said suit. The learned
trial judge framed the following question for its consideration.
prima facie triable issue exists in defendant's favour for granting leave to
defend? If yes, whether conditional or unconditional?"
In a very
detailed judgment, it was opined that for all intent and purpose the
defendants-appellants have no defence. The learned trial judge rejected a
contention raised on behalf of the defendants even with regard to
maintainability of account as a summary suit. It was opined:- "Further
more apart from the cheques in question there are statements of accounts and
the document of balance confirmation in the form of acknowledgement of
indebtedness followed by categorical admissions in the notice reply Exh-3/20.
If at all these facts are cumulatively taken into consideration in all its
seriousness, there appears not even a little scope to find out any sort of such
questions which would be required to be decided on the strength of evidence. On
the contrary all the aforesaid documents undoubtedly point out towards
categorical admissions on defendant's part for which no inference prevails in a
fashion of availability of plausible, good or reasonable defence. It is in such
a situation the case in hand is squarely covered by a situation of total
absence of any plausible defence and the contentions claiming availability of
defence are nothing but sham and illusory pretending that whatever questions in
concern with maintainability of summary suit, misjoinder of parties, locus
standi of plaintiff, want of cause of action and no forms a triable issues in
the matter. Being so, the conclusion emerges only in a fashion of non
entitlement of leave to defend the suit."
arriving at the aforementioned finding, it was held :
considering the facts that series of transactions had taken place in between
parties to suit and that defendant No. 1 on various occasions had also made
repayment of the loan amount, transferred his individual liability in the loan
account of defendant No. 1 company, the contentions in concern with
helplessness of defendants to make repayment because of financial crunch and so
on, there appears reason to give an opportunity to defend out of mercy so that
they may attempt to prove and establish their respective contentions. But at
the same time as the transaction has its nexus with advancement of loan amount
and as the plaintiff has been deprived of the money blocked in the hands of
defendants, who must have derived undue advantage of the situation in the form
of unjust, enrichment, plaintiff's rights need to be adequately protected, while
showing such mercy, by granting leave to defend. Hence, the point is replied
accordingly with the order to follow:
Application is allowed subject to condition of depositing an amount of Rs.
2,00,00,000/_(Two crores) out of total suit claim of Rs. 2,66,39,028/- (Two
crores sixty six lacs thirty nine thousand and twenty eight) in this proceeding
within a period of two months, failing in which order granting liberty to
defend shall stand automatically revoked, and plaintiff shall be entitled to
sign the judgment.
Defendants are further directed to furnish on record written statement within
the aforesaid period.
3) In the
event of compliance of the order Asstt. Superintendent would invest the said
amount in a fixed deposit in any Nationalised bank for a period of one
aforementioned premise, it was directed the appellants to deposit a sum of Rs.
2,00,00,000/-(two crores) out of a total suit claim of Rs. 2,66,39,028/- in the
proceeding within a period of two months from the date of passing of the said
order. A writ petition was filed by the appellants questioning the legality
and/or validity of the said order. The High Court noticed all the contentions
raised on behalf of the appellants. It, furthermore, also noticed a decision of
this Court in Sunil Enterprises & Anr. v. SBI Commercial &
International Bank Ltd. reported in (1998) 5 SCC 354 where the law has been
laid down in the following terms:- "(a) If the defendant satisfies the
court that he has a good defence to the claim on merit, the defendant is
entitled to unconditional leave to defend.
the defendant raises a tribal issue indicating that he has fair and bona fide
or reasonable defence, although not a possibly good defence, the defendant is
entitled to unconditional leave to defend.
the defendant discloses such facts as may be deemed sufficient to entitle him
to defend, that is, if the affidavit discloses that at the trial he may be able
to establish a defence to the plaintiff's claim, the court may impose conditions
at the time of granting leave to defend - the conditions being as to time of
trial or mode of trial but not as to payment into court or furnishing security.
defendant has no defence, or if the defence is sham or illusory or practically
moonshine, the defendant is not entitled to leave to defend."
that the learned trial judge has granted conditional leave having regard to the
facts and circumstances of this case as the same was voluntary not reasonable
or fair defence. The High Court opined that the learned trial judge has not
committed any error in passing the said condition or order.
Narasimha, the learned senior counsel appearing on behalf of the appellants
would contend that assailing it is a case where conditions were required to be
reposed for granting leave to defend in terms of Order XXXVII Rule 3(v) of the
Code of Civil Procedure, the conditions imposed being wholly unreasonable, this
Court should interfere therewith. Our attention, furthermore, has been drawn to
the fact that at least two other parties namely Mrs. Dolly Tehmuras Mistri and
Mr. Kaikhusru Jehangirji Daruwala have filed two complaint petitions before the
Judicial Magistrate First Class, Court No. VII, Pune under Section 138 of the
Negotiable Instruments Act claiming that the cheques issued in their favour for
a sum of Rs. 40,00,000/- (Rupees forty lacs only) and Rs. 50,00,000/- (Rupees
fifty lacs only) respectively had bounced.
Shekhar Naphade, the learned senior counsel appearing on behalf of the
respondent, however, urged that the learned trial judge for our intent and
purpose has found that appellants have no defence at all in the suit
proceedings:- (1)issuance of cheque in favour of the respondents is not in
balance amount payable by the appellants to the respondent mentioned in a
statement has also not been disputed; and (3)they have not raised any defence
in reply to the notice of demand served upon them.
submitted that from a perusal of the judgment of the learned trial judge it
would be evident that the appellants have no defence in the suit at all. The
learned trial judge in his judgment, as indicated hereinbefore has taken into
consideration the entire fact of the matter. It referred to the two cheques
being Exhibit 3/9 and Exhibit 3/10 dated 15.10.2006 and 1.1.2006 respectively
which are said to be the subject matter of the aforementioned complaint
petitions filed by Mrs. Dolly Tehmuras Mistri and Mr. Kaikhusru Jehangirji
Daruwala opined that if there had been no transaction by and between the
parties, there was no reason as to why the said cheques have been issued. The
individual loan transaction between the plaintiff and defendant No. 1 with
regard to the residual amount of Rs. 4,00,000/- parted by him in his individual
capacity having been transferred to the loan account of defendant No. 1-
company has already been taken into consideration whereunder not gone into the
details of the matter inasmuch as it has also been found that the other cheques
issued by the appellant had bounced. The learned trial judge was also at pains
to reject the contention raised on behalf of the appellants that only because a
criminal proceeding under Section 138 of the Negotiable Instruments Act had
been issued the same would come in the way of filing of the civil suit:-
"It has been contended on behalf of defendants that plaintiff had already
availed a remedy under Section 138 of Negotiable Instruments Act for which he
is entitled to get unconditional leave to defend the suit. In fact there is no
rule that merely because of initiating criminal action, individual is entitled
to unconditional leave. But what is to be seen as to whether there is available
any plausible defence, which appears not any way available, particularly when
documents Exh-3/8 to 3/13 and 3/20 are taken into consideration."
therefore, with respect, are not in a position to agree with the finding of the
learned trial judge that leave should be granted by way of mercy, and are,
therefore, not in a position to interfere therewith as the plaintiff-respondent
did not challenge that aspect of the matter before the High Court. We are,
therefore, of the opinion that clause (c) of paragraph 4 in Sunil's case
(supra) which reads as under:
If the defendant discloses such facts as may be deemed sufficient to entitle
him to defend, that is, if the affidavit discloses that at the trial he may be
able to establish a defence to the plaintiff's claim the court may impose
conditions at the time of granting leave to defend the conditions being as to
time of trial or mode of trial but not as to payment into court of furnishing
applicable to the facts and circumstances of this case. We are not oblivious of
the fact that ordinarily the conditions imposed for grant of leave to defend in
a suit filed under Order XXXVII of the Code of Civil Procedure should not be
unduly onerous when leave to defend is granted. The conditions imposed
thereunder unsustainably should not be onerous. As a result whereof, the
defendant would not be able to defend the action for all intent and purpose.
Each case, however, has to be considered on its own merits. We, therefore, are
of the opinion that it is a fit case where while quashing order passed by the
learned trial judge as also the High Court, We, in exercise of our jurisdiction
under Article 136 of the Constitution of India, should modify the impugned
order in the following terms: - (i) The appellant shall deposit a sum of Rs.
1,10,00,000/- (Rupees One Crore ten lakhs only) before the learned trial judge
within a period of two months from today.
Within the aforementioned period, the appellant should deposit a further sum of
Rs. 90,00,000/- (Rupees ninety lacs only) which shall be deposited before the
trial judge who shall in turn invest the same in a fixed deposit so as to
enable the successful party i.e. the plaintiff- respondents or the complainants
in the other two cases referred to us hereinbefore to be compensated from the
said option, in the event, either the suit or the said complaint petition are
decided in their favour.
appeal is disposed of in the aforesaid terms with no order as to costs.
.......................J [S.B. SINHA]
.......................J [DEEPAK VERMA]
AUGUST 06, 2009.
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