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2002(3) Supreme 247
SUPREME COURT OF INDIA
(From Gujarat High Court)
Syed Shah Mohammed Quadri & S.N. Variava, JJ.
State Bank of Saurashtra -Appellant
versus
M/s Ashit Shipping Services (P.) Ltd. & Anr. -Respondents
Civil Appeal No. 2662 of 2002
(Arising out of SLP (C) No. 9895 of 2001)
Decided on 12-4-2002
Counsel for the Parties :
For the Appellant : K.N. Rawal, Additional Solicitor General, Sanjay Kapur, Mrs. Shubhra Kapur, Advocates.
For the Respondents : P. Chidambaram, Sr. Advocate, Ms. B. Vijaya Lakshmi Memon, Advocate.
Held : The law on the subject is well settled. In the case of Mechalec Engineers & Manufacturers v. Basis Equipment Corporation reported in AIR (1977) SC 577, it has been held that the question of granting leave to defence has to be considered in the light of following principles:
(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 raised 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, shows 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 sign judgment and the defendant is not 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. (Para 10)
In this case, as already set out hereinabove, there is a dispute as to whether the document is a guarantee or merely an Indemnity. The 1st Respondent termed the document to be an indemnity/guarantee. The Appellants denied that the document was a Guarantee. On the face of it the document appears to be an Indemnity and not a Guarantee. The Court was therefore required to consider the nature and meaning of the document. This by itself necessitated granting of leave to defend. (Para 12)
Held further : In our view, for the aforesaid reasons, leave to defend could not have been refused to the Appellants. We therefore set aside the impugned judgment dated 18th April, 2001 and the trial Court Order dated 30th October, 1996 and grant the Appellants leave to defend the suit. They shall file their written statement within a period of 8 weeks from today. The parties are at liberty to disclose documents within 4 weeks thereafter. The parties are at liberty to apply to the trial Court for expeditious hearing of the suit. (Para 16)
Held by clarification : We clarify that the leave to defend has been granted only to the Appellants. The 2nd Respondent is not before this Court. We have not considered the case of the 2nd Respondent. Merely because leave to defend is granted to the Appellant does not necessarily mean that the 2nd Respondent is also to be entitled as of right to leave to defend. We also clarify that all observations made herein are prima facie and that they shall not be taken into account at the final hearing of the Suit. The Appeal stands disposed of accordingly. There shall be no order as to costs. (Paras 17 & 18)
JUDGMENT
S.N. Variava, J.-Leave granted.
2. Heard parties.
3. Briefly stated the facts are as follows:
The 1st Respondent is working as an agent for one M/s. Palm Oil Transportation Pvt. Ltd., C/o M/s. Samta Shiping Agency P. Ltd., Singapore for their vessel MV Hec Ann which arrived at Kandla port on 20th June, 1995. The said ship was carrying logs of timber consigned to various parties under the following documents:
"(a) Bills of lading No. HA/9504/47 to 49 dated 30.5.95.
(b) Invoice Nos. VB 95003 dated 30.5.95 for US $ 10,566.43
Invoice Nos. VB 95003/Int of 30.5.95 for US $ 312.65
Invoice Nos. VB 95002
of 30.5.95 for US $ 5,029.23
Invoice Nos. VB 95002/Int
of 30.5.95 for US $ 148.81
Invoice Nos. VB 95001
of 30.5.95 for US $ 44,539.65
Invoice Nos. VB 95001/Int of 30.5.95 for US $ 1,317.89
$ 61, 914.66"
It appears that the 2nd Respondent sent to the 1st Respondent a Bond which, inter alia, provided as follows:
"The above goods were shipped on the above vessel by M/s. Matsui and Company (Hong Kong) Limited Hong Kong 59 pieces (and consign to the order) but relevant bills of lading has not yet arrived.
We hereby request you to deliver such goods to M/s. (Vasani Bros) Bhavnagar in accordance with our request.
1. To Indemnify you and held harmless in respect of any liability loss or damage or whatsoever nature which you may sustain by reason of delivering the goods of M/s. Vasani Brothers, Bhavnagar in accordance with our request.
2. To pay you on demand the amount of any loss on which the Master/agent of the vessel or any other of your services or agents whatsoever may incur as a result of delivering the goods aforesaid.
xxx xxx xxx
xxx xxx xxx
6. To produce and deliver to you the Bills of lading for the above goods duly endorsed as such as documents shall have arrived.
xxx xxx xxx
xxx xxx xxx
On the said Bond the following notation appears with the stamp of the Appellant Bank and the signature of their Manager:
"We the undersigned hereby join in the above indemnity and jointly and severally guarantee due performance of the above contract and accept all the formalities expressed therein.
Sd/-
Stamp and Signature of Bank."
4. The 1st Respondent claim that on the basis of this Bond they issued a Delivery Memo dated 14th June, 1995 to the 2nd Respondent. 2nd Respondent thereafter took delivery of the cargo. It further appears that the 2nd Respondent never delivered to the 1st Respondent the duly discharged bills of lading.
5. The 1st Respondent therefore wrote a letter dated 31st August, 1995 to the Appellants, terming the document as an indemnify guarantee. The 1st Respondent stated, in the latter, that if the bills of lading were not delivered they would invoke the guarantee. The Appellant replied to the said letter by the letter dated 16th September, 1995 and asked for copy of the Bond and delivery Orders. Further correspondence thereafter took place between the parties. The 1st Respondent then filed a summary Suit under Order 37 of the Code of Civil Procedure. They claimed a sum of Rs. 21,08,813.32 with interest of Rs. 1,62,450.02 upto filing of the suit and further interest from date of Suit till payment.
6. The Appellants and the 2nd Respondent filed applications for leave to defend. The 2nd Respondent has not come up in Appeal to this Court. We are thus only concerned with the application for leave to defend filed by the Appellants.
7. In the application for leave to defend the Appellant, inter alia, contended that the suit was for recovery of the price of th
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