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High Court Of Delhi
PUNJAB AND SINDH BANK - Appellant
Versus
S.K.TULSHAN - Respondent
Interim Application 85 of 1987
Decided On : 10/29/1990
ORDER 37 CPC - MAINTAINABILITY OF SUITS - LEAVE TO DEFEND - COUNTER-CLAIM - INTERPRETATION OF ORDER 37 RULE 3(5) - ENGLISH LAW ON COUNTER-CLAIMS - SCOPE OF SUMMARY SUITS - COURT'S DISCRETION IN GRANTING LEAVE TO DEFEND - PLEADING OF COUNTER-CLAIM AS A GROUND FOR LEAVE TO DEFEND - ANALYSIS OF CASE LAW - RELEVANCE OF DEFENDANT'S CONDUCT AND NEGLIGENCE IN DEALING WITH PLEDGED SHARES - ADJUDICATION OF SUITS ON ADMISSION OF FACTS IN PLAINT - AWARD OF DECREE WITH INTEREST AND COSTS.
Fact of the Case:
The plaintiff bank filed two suits under Order 37 CPC for recovery of amounts due on overdraft facilities granted to the defendant. The defendant applied for leave to defend, contending that the suits were not maintainable under Order 37 as they were not based on promissory notes or written contracts, and that the promissory notes were taken as security for the repayment of the balance sum. The defendant also claimed entitlement to file a counter-claim against the plaintiff for damages due to the plaintiff's alleged negligence in dealing with the pledged shares, causing a deterioration in their value.
Finding of the Court:
The court held that the suits were maintainable under Order 37 CPC, as the promissory notes executed by the defendant constituted the basis of the claims and were considered to be the consideration for the loans advanced. The court further held that the plea of counter-claim could not be entertained in a summary suit under Order 37, as the provisions of Order 37 did not contemplate the filing of counter-claims. The court also found that the defendant's plea of negligence by the plaintiff in dealing with the pledged shares was not supported by specific facts or evidence, and that the defendant had executed documents in 1983 admitting their liability, thereby waiving any cause of action for damages prior to that date.
Issues: 1. Whether the suits were maintainable under Order 37 CPC, considering the nature of the documents executed and the purpose of the promissory notes. 2. Whether the court could consider the defendant's plea of counter-claim in determining whether to grant leave to defend under Order 37 Rule 3(5). 3. Whether the defendant's allegations of the plaintiff's negligence in dealing with the pledged shares constituted a valid ground for leave to defend.
Ratio Decidendi: 1. The court relied on previous judgments of the Delhi High Court, holding that promissory notes executed as consideration for loans, even if initially taken as security, could form the basis of a suit under Order 37 CPC. 2. The court interpreted Order 37 Rule 3(5) strictly, holding that the defendant's affidavit in support of the leave to defend application should disclose facts sufficient to entitle the defendant to defend, and that the filing of a counter-claim was not an action in defense on the face of it. 3. The court found that the defendant's plea of negligence was not supported by specific facts or evidence, and that the defendant had executed documents in 1983 admitting their liability, thereby waiving any cause of action for damages prior to that date.
Final Decision: The court dismissed both the defendant's applications for leave to defend, holding that the defendants were not entitled to defend the suits. The court admitted the facts stated in the plaint as correct and decreed both suits in favor of the plaintiff bank, awarding the claimed amounts with costs, pendente lite interest, and future interest.
Based on the provided legal document, the following key points can be summarized:
The suits filed by the plaintiff bank under Order 37 CPC are maintainable, as they are based on promissory notes which constitute the consideration for the loans advanced. The courts have affirmed that promissory notes, even if initially taken as security, can serve as the basis for a suit under Order 37 CPC (!) (!) .
The scope of Order 37 CPC is limited to considering the facts disclosed in the defendant's affidavit that may entitle the defendant to defend. It does not extend to entertaining pleas of counter-claims or extraneous controversies at the stage of granting leave to defend (!) (!) .
The filing of a counter-claim is not an action in defense on the face of the application for leave to defend. The provisions of Order 37 CPC do not contemplate the entertainment of counter-claims in summary suits, and such claims should be brought through separate proceedings if they are to be pursued (!) (!) .
The court strictly interprets the provisions of Order 37 CPC, emphasizing that the defendant's affidavit should disclose facts sufficient to entitle them to defend. Pleas of negligence or damages, which are extraneous to the defendant's right to raise a defense, are not considered at this stage (!) (!) .
The defendant's plea that the plaintiff negligently allowed the security shares to deteriorate in value was found unsupported by specific facts or evidence, and the fact that the defendant executed documents in 1983 admitting liability was deemed to waive prior causes of action or damages (!) .
The court held that the omission of the legislature to explicitly incorporate the entertainment of counter-claims in Order 37 CPC indicates that such pleas are not to be considered at the leave to defend stage. If the defendant has a counter-claim, it should be initiated as a separate suit (!) .
The court emphasized that extraneous controversies, such as allegations of misconduct or negligence, cannot justify the extension of the scope of a summary suit brought under Order 37. The defense must be limited to facts that directly support the defendant's right to defend the suit (!) (!) .
In the specific cases, the court found that the defendant's pleas regarding negligence and damages were either unsupported or barred by the execution of fresh documents in 1983, which admitted liability. Therefore, these pleas were considered bogus or frivolous (!) .
As a result, the applications for leave to defend were dismissed, and the courts decreed the suits in favor of the plaintiff bank, awarding the claimed amounts with interest and costs. The courts also directed that adjustments be made in respect of shares sold during the pendency of the suits (!) (!) .
Overall, the legal principles reaffirm that in summary suits under Order 37 CPC, the scope for raising extraneous pleas, including counter-claims or damages unrelated to the core claim, is limited. Such issues should be pursued through separate proceedings if appropriate (!) (!) .
Please let me know if you need further analysis or specific legal advice related to this case.
( 1 ) IN these two suite brought under Order 37 Civil Procedure Code by the plaintiff bank, the defendant in each suit has moved application for leave to defend the suit. As common questions of fact and law have been argued in both these matters, hence they are being disposed of by this common Judgment.
( 2 ) IN Suit No. 596 of 1986, the plaintiff bank has played for recovery of Rs. 36,17,5301- on the averments that defendant had obtained overdraft facility against his current account which Was opened on October 16, 1973 at the plaintiffs branch at H Block, Connaught Circus and in November, 1973, he was granted the said overdraft facility to the extent of Rs. 5 lakhs against security of shares of various companies and in consideration of the same, the defendant executed a demand promissory note and various other documents enumerated in para 5 of the plaint. On December 31, 1976, the amount due in the said account was to the tune of Rs. 7,89,643. 93, which was confirmed by the defendant in writing and defendant on June 30, 1977 executed fresh documents including a promissory note in consideration of the amount due on that date. On April 3, 1980, the amount due in that account was Rs. 12,76,001. 33 and in consideration of the said amount, the defendant executed renewal documents, including a demand promissory note and on March 24. 1983, the amount due in the account was Rs. 22,14,392. 10, which was confirmed by the defendant in writing and again in consideration of the said amount, the defendant executed fresh documents, including a demand promissory note It was pleaded that the defendant had pledged/mortgaged/charged 60,000 shares of M/s Madhusudan Limited (now known as Hindustan Transnmission Products Ltd.) and substantial shares of Laxmi Commercial Bank, now amalgamated with Canara Bank and 3,000 shares of M/s Mysore Chemical Works Ltd. The defendant had agreed that the shares could be sold by the bank for the repayment of its amount due. So it was pleaded that at the time of filing of the suit, the amount in suit became due which defendant had failed to pay. Hence a decree for the said amount and interest pendente lite and till realisation was prayed for.
( 3 ) IN Suit No. 597 of 1986, it was pleaded that defendant was granted overdraft facility to the extent of Rs. 5 lakhs and in consideration of the same, the defendant executed documents on 21st January, 1974, including a demand promissory note and other documents detailed out in para four of the plaint, in that account on December 31, 1976, Rs. 7,63,843. 95 were due which balance was duly confirmed in writing by the defendant and on June 30, 1977, in consideration of the said balance amount, the defendant executed fresh loan documents, including the demand promissory -note. On 5th May, 1980, the amount due in the said account was Rs. 12,36,293. 90, which was duly acknowledged by the defendant in writing and he executed fresh documents, including a demand promissory note in consideration of the said amount. On March 18, 1983, the amount due in that account was Rs. 16,54,0001- which was duly acknowledged in writing by the defendant and he executed fresh documents, in cluding a promissory note in consideration of the Daid subsisting amount. As security for repayment of the said amount, defendant had pledged 80,000 shares of M/s Madhusudan Limited, now known as Hindustan Transmission Products Ltd. 1295 shares of Laxmi Commercial Bank. now amulgamated with Canara Bank and 2,000 shares of M/s Mysore Chemical Works Ltd. It was pleaded that despite reminders and the notices, defendants has failed to pay the amount. Hence a decree was asked for recoverd of Rs. 25,33. 768 along with costs and pendente lite interest and future interest.
( 4 ) IN both the matters, counsel for the defendants has contended that both the suite are not maintainable under Order 37 CPC inasmuch as the suits are not based on any promissory notes and the claims arising in the suits, do not
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