Rashtriya Mahila Kosh vs Youth Charitable Organisation ...

on 8 September, 2005
Author: S Kumar Bench: S Kumar JUDGMENT Swatanter Kumar, J. 1. By this order, I would dispose of IAs. 5879/2005 ( ought to have filed under Order 37 Rule 3 CPC) & 372/2005 both the applications filed by the defendants seeking leave to defend in the present suit along with IAs. 5880/2005 (ought to have filed for condensation of delay in entering appearance) and 46/2005 for condensation of delay in filing the applications for leave to defend as well as IA 398/2005 filed by plaintiff under Order 37 Rule 3(4) CPC seeking issuance of summons for judgment as common controversy arises for consideration in all these applications for leave to defend being the primary application for consideration and other applications being necessary or consequential thereto. 2. Before I proceed to discuss the merits of these applications it will be useful to bring forward all the facts giving rise to the present suit and the applications. 3. The plaintiff is a registered society and carrying on its activities under the directions of the Department of Women and Child Development, Ministry of Human Resources Development, Government of India having its office at 1, Abul Fazal Road, Bengali Market, New Delhi-110 001. One of the objects of this society is to advance loan to the poor women through non-governmental organisations. Mr. R.S. Mangapathy is one of the Deputy Directors of the plaintiff society and is fully empowered to sign and verify the plaint and institute the present suit on behalf of the society vide resolution dated 10th February, 2003. Defendant No.1 is a registered society while defendants 2 and 3 are its executive Secretary and President respectively. They had approached the plaintiff at Delhi and had applied for a loan under the Revolving Fund Scheme. On the request and persuasion of the defendants, the plaintiff vide its sanction letter dated 29th March, 2001 sanctioned a loan of Rs.75,00,000/- to defendant No.1 on the condition of execution of loan documents by the defendants.

4. Defendant No.1 through its Executive Secretary executed an arrangement letter-cum-guarantee bond in favor of plaintiff and also a demand pronote dated 18th April, 2001 for a sum of Rs.75,00,000/- and thereby promised to repay the said amount along with interest @8% with quarterly rests. Different documents were executed and the amount was disbursed to the defendants. After disbursement of the loan, the plaintiff received a complaint form the President of Telugu Desam Party, Vishakapatnam, Andhra Pradesh that the loan advanced by the plaintiff to defendant No.1 has been obtained by forging the signatures of the Sarpanch of the villages and as such the loan is being utilised by the defendant No.2 and 3 for their personal gains. An investigating agency was directed to submit a report and after receipt of the report, the plaintiff called upon the defendants to repay the entire loan amount to the plaintiff as the loan had been availed of by misrepresentation and on the basis of forged and fabricated documents. Vide legal notice dated 2nd April, 2003, the plaintiff called upon the defendants to repay the entire loan amount. Having failed to recover its dues, the plaintiff has instituted the present suit for recovery of Rs.41,16,514/- with interest pendentalite and future @15% p.a. 5. The case of the applicants/defendants in the application for leave to defend is that, after the alleged loan was sanctioned, the defendants had selected the real beneficiaries, who belonged to the below poverty line families as per the criteria laid down by the plaintiff society. Some events which were beyond the control of the answering defendants took place as there were political fractions in the villages selected by the plaintiff for disbursement of such loan and disturbance was created by such people resulting in unnecessary harassment to the defendants. The defendant being the nodal agency of the plaintiff for grant of loan to the needy people as per the plaintiff's norms was being targeted by these peoples, who started maligning the name of the defendants. It was denied that there was forgery or fabrication in the process of obtaining the loan and disbursement thereof. Correct facts have been brought to the notice of the plaintiff vide letter dated 3rd April, 2002 and it was stated that enquiries were made from the villages where no RMK loan was granted or disbursed. The defendant society is not the actual beneficiary of the loan sanctioned by the plaintiff. The loan was disbursed to the beneficiaries as per the terms and conditions of the loan and the policy decision of the plaintiff. It is denied that the

amount of Rs.41,16,514/- is due to the plaintiff from the defendants. They have also denied that the defendants are liable to pay Rs.3,36,779/- as interest. It is specifically averred that the defendants have paid back to the plaintiff Rs.25 lakhs in the month of September, 2004 and these facts have been withheld by the plaintiff from the Court. 6. It is stated that the application for leave to defend filed by the defendants raises friable issues and the defendants are entitled to leave to defend unconditionally. It is stated that this Court has no territorial jurisdiction to entertain and decide the present suit. The application for issuance of summons for judgment being based on incorrect facts is liable to be dismissed. Furthermore, there is no agreement between the parties to pay interest compounding @8% p.a. with quarterly rests and the interest claimed at different places is different and as such the suit of the plaintiff is not maintainable. Lastly, it is submitted that the suit itself is premature as the defendants have not committed any breach of the terms of the agreement and have paid a sum of Rs.25 lakhs in September, 2004 itself and as such the plaintiff does not disclose any acceptable cause of action in favor of the plaintiff and against the defendants. 7. In the application for condensation of delay, the defendants have stated that they received the summons for judgment along with affidavit in the evening at around 5.30 P.M on 15th December, 2004 through a Courier Agent and by that time, their counsel had left the office. Counsel for the defendants came to his office on 16th February, 2004 and was given the courier packet containing the application for summons for judgment along with the affidavit. Counsel for the defendant then and there drafted application for leave to defend and the same was completed till 8.30 to 9.00 P.M. On 17th December, 2004, the counsel was able to send the application to the defendants for signatures at Village Yellamanchali, Visakhapatnam District, Andhra Pradesh, which took sometime and was received on 19-20th December, 2004. The application for leave to defend was filed on 16th January, 2005. The other application being IA 5880/2004 is for condoning the delay in filing the appearance after summons in the suit were received by the defendants. It is stated that summons were received on 19th August, 2004 along copy of the plaint. It took some time to the society to finanlise and take appropriate steps after taking approval of the competent

authority as the office of society is located at a distance of more 2000 K.Ms. and the delay of 6 days in filing the appearance is stated to be bonafide. There is some delay in filing the applications for entering the appearance by the defendant as well as seeking leave to defendant. The reasons for delay as explained in the applications under consideration apparently appears to be bonafide and genuine. The society is a nodal agency and is located at a far bid place. There does not appear to be any malafide or intentional delay on the part of the defendant society and in the circumstances of the case they have been able to show sufficient cause for condensation of delay in filing their respective applications. No reply on behalf of the plaintiff-non-applicant has been filed to these applications and as such there is no reason for this court to disbelieve the averments made in the applications for condensation of delay, which are duly supported by the affidavit of the concerned person. 8. Consequently, I would condone the delay both in filing the appearance as well as in application for leave to defend as well as in entering appearance in accordance with the provisions of the Code. 9. Now coming to the merits of the application for leave to defend. The first and foremost issue, which is to be considered by the Court is whether this Court has territorial jurisdiction to entertain and decide the present suit. No doubt the plaintiff is a society having its office at Delhi and it had considered the application of the defendant society for grant of loan at Delhi. Letter dated 29th March, 2001 was issued by the plaintiff to the defendant at Village Yellamanchali, Visakhapatnam District, Andhra Pradesh and was received by the defendants at that place and compliance to the conditions stated therein were completed by the defendants at that place itself. 10. The agreement between the parties, which is a very foundation of the case of the plaintiff was also signed at Andhra Pradesh and the parties had purchased the stamp papers also at that place. Thus, the final agreement, which is the essence of the entire cause of action was executed by the parties at Village Yellamanchali, Visakhapratnam District, Andhra Pradesh. Thereafter, the loan was disbursed to the defendants in Andhra Pradesh. The same was to be utilised for further

disbursement to the beneficiaries at Andhra Pradesh. To be more precised, at least at this stage of the case where the Court is to take a prima facie view it is difficult to say that any substantial or integral cause of action had arisen within the territorial jurisdiction of this Court. May be after leading the oral and other documentary evident, which are not at the record of this case, the plaintiff can establish the averments made in the plaint. The defendants applicants have been able to raise a friable issue. The plea of interest raised by the defendant also deserves to be considered. In the letter of sanction standards for charging rate of interest have been provided. As per the sanction letter dated 29th March, 2001, the rate of interest chargeable on RMK finance from NGO's is 8% p.a. On their own showing of the plaintiff, they have charged interest @8% p.a. with quarterly rests. In the plaint the plaintiff has claimed interest @15% pendentalite and future again on the strength of the documents. In the notice dated 2nd April, 2003 served by the counsel for the plaintiff on the defendant they had claimed a Sum of Rs.56,95,537/- and asked the defendants to pay the said amount. no claim was raised in the said notice with regard to future interest. 11. Keeping in view the different claims being raised by the plaintiff in its different documents, it is difficult at this stage to determine without proper evidence as to what rate of interest the plaintiff is entitled to. Thus, it also becomes a friable issue. 12. The learned counsel appearing for the plaintiff relied upon clause 28 of the agreement to say that in the event of any dispute between the parties, the Courts at Delhi shall have the exclusive jurisdiction is a term of contract binding between the parties and as such this Court has the territorial jurisdiction to decide the case. It is settled principles of law that clause of exclusive jurisdiction will be binding between the parties only if the cause of action otherwise arises within the territorial jurisdiction of that court. As there are serious doubts as to whether any integral or substantial cause of action has arisen within the territorial jurisdiction of this Court, the contention of the plaintiff cannot be conclusively accepted at this stage. 13. The last contention raised on behalf of the applicant-defendants also has some merits. The loan was sanctioned and disbursed to the defendants in terms of letter of sanction and the loan was repayable in installments. In the letter

dated 18th October, 2001, which is the letter of disbursement of loan and deals with revised Revolving Fund Scheme, under clause 4 the principal loan installment of Rs.18,75,000/- was payable on 31st March, 2004. According to the defendants, he has paid a sum of Rs.25 lakh in the month of September,2004 and they had every intention to repay the loan as per terms of agreement and it was a case where earlier defaults could easily be condoned in favor of the defendants as per the policy of the plaintiff itself. The fact of repayment of Rs.25 lakh has not been disputed. The suit was instituted in this Court on 15th March, 2004 i.e. even prior to the date when the defendants could pay the installments due as per the terms of agreement. What is the merit of the report submitted to the plaintiff by its agency and to what extent the recalling of the loan was correct in light of the alleged political rivalries in the small villages of Andhra Pradesh is again a matter which can be answered only after the parties have been permitted to lead evidence in detail. At this stage, reference can be made to a recent judgment of this Court in the case of Car-O-Liner AB Vs. TTC Laser Machines Pvt. Ltd. (CS (OS) No. 630/2004) delivered on 4th August, 2005 where this Court had discussed in some detail the circumstances and principles which would govern grant and/or refusal of leave to defend a suit. 14. In the case of Mrs. Ramesh Rani Vs. Harish Malhotra 1999 (3) PLR 453, the court held as under : "This rule vests pervasive judicial discretion in the Court to grant, refuse or grant conditional leave to defend, the suit, by the defendant. This discretion, of course, has to be exercised in accordance with settled principles of law. Where the Court exercises its discretion either way, it must have a direct nexus and relation to the contents and specific pleadings of the parties. Leave has to be granted in relation to the subject matter of the claim in the suit and normally not in relation to part thereof, unless such severance is called for in the given facts and circumstances of each case. For example, where the Court finds that part of the claim raised in the suit by the plaintiff at least prima facie seems to be satisfied on the basis of a valid counter claim or other documentary evidence, which would show partial satisfaction of the amount.

Obviously, there is dual purpose sought to be served under the specific provisions of Order 37 of the Code of Civil Procedure. One is to provide expeditious disposal of the claim of the party by adopting recourse to summary procedure, while the other is to provide a safeguard to the interest of the plaintiff by granting or refusing or granting additional leave to defend to the other party. In other words, if the Court is satisfied with the claim of the plaintiff and the fact that the defendant has only sham or moonshine defense, the Court may refuse to grant leave to defend and pass the decree forthwith. But in some cases depending on the nature of the defense, the Court may grant leave with or without condition. This would obviously depend on the facts and circumstances of each case. The Court strikes a balance between the case of the plaintiff and the defense raised by the defendant. The interest of justice demand that interest of no party should be jeopardised. Where the interest of the plaintiff is to be secured there defendant should also have a fair chance to prove his defense. In a case titled as M/s Sunil Enterprises and Anr. Versus SBI Commercial & International Bank Ltd. J.T. 1998 (3) S.C. 641, the Hon'ble Supreme Court reiterated the principles enunciated in the case of Santosh Kumar Versus Mool Singh (1958) S.C.R. 1211 and spelt out the factors and circumstances, which the Court must consider while granting leave to defend the suit. The principles stated are as under :4. The position in law has been explained by this Court in Santosh Kumar V. Mool Singh (1958) SCR 1211, Milkhiram (India) Private Ltd. V. Chaman Lal Bros. and Michalec Eng. & Mfg. V. Bank Equipment Corporation . The propositions laid down in these decisions may be summed up as follows:(a) If the defendant satisfies the Court that he has a good defense to the claim on merits, the defendant is entitled entitled to unconditional leave to defend. (b) If the defendant raises a friable issue indicating that he has a fair or bonafide or reasonable defense, although not a possibly good defense, 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, if the affidavit discloses that at the trial he may be able to establish a defense 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. (d) If the defendant has no defense, or if the defense is sham or illusory or practically moonshine, the defendant is not entitled to leave to defend. (e) If the defendant has no defense or the defense is illusory or sham or practically moonshine, the court may show mercy to the defendant by enabling him to try to prove a defense but at the same time protect the plaintiff imposing the condition that the amount claimed should be paid into Court or otherwise secured. In fact in identical matters on the file of the said High Court in summary suit No.2963 of 1990 Dena Bank V. M/s Sunil Enterprises and Summary suit No. 1153 of 1989 Bank of India V. Mahendra Sarabhai Choksi, leave to defend had been granted to defendants. The Hon'ble Apex Court noticed that unless the defense raised was totally defenseless or moonshine or illusory, the Court may grant conditional or even unconditional leave. In the case of International Computer's Consultants Versus Home Computers Services (P) Ltd. 1997 (3) P.L.R. 10, a Division Bench took the view that once friable issues are raised with bonafide and firm defense, leave should be granted. But if the defense is frivolous or vaxatious, leave should be refused. Where there is reasonable doubt and the Court feel it just reasonable, the Court may impose such condition while granting the leave, as it may deem fit and proper. Applying the said principle to the present case, I have no hesitation in affirming the view taken by the learned trial court though not dealt with in detail in the impugned judgment, that the defendant may have raised friable issue but it lacks bonafide. It was for the defendant-applicant to explain and show that the claim of

the plaintiff in relation to the giving of loan by cheque was fictitious and as such cheques were not encashed in their account. Judicial discretion to be exercised by the Court has to create a balance so that none of the parties to the lis suffer avoidable prejudice. The learned trial court had granted conditional leave to the defendant-applicant in which I see no error of the jurisdiction. But a question that remains to be answered is whether the condition imposed while granting the leave is fair and equitable? Answer to this has to be in the negative in the facts and circumstances of the present case. 15. Above principles of law are well ennunciated and accepted principles. 16. Learned counsel appearing for the plaintiff- applicant has relied upon a judgment of Court in the case of 106 (2003) DLT 304 to contend that this Court has jurisdiction and complete case of the applicant is a shame defense, thus, leave prayed for should be rejected. 17. This case is of no help to the plaintiff on the facts of the present case. In that case the Court had held as a matter of fact that the conclusion of the contract was enacted between the parties at Delhi and the payment of commission was also payable at Delhi within the territorial jurisdiction of this Court. I have already mentioned the facts that agreement was signed at Andhra Pradesh and was to be performed at Andhra Pradesh and the loan was also disbursed at Andhra Pradesh. Therefore, prima-facie no finding to that extent can be recorded in favor of the plaintiff. 18. For the reasons aforestated, the application for leave to defend filed by the defendants is allowed unconditionally and that for summons for judgment filed by the plaintiff is rejected. 19. All the IAs are accordingly disposed of in the above terms.