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TMI Blog2015 (9) TMI 1738X X X X Extracts X X X X X X X X Extracts X X X X ..... t in the City Civil Court at Ahmedabad being Summary Suit No.5402/1998 stating that the plaintiff company is inter alia engaged in the sale of silver and gold bullion. The defendant No.1 is a partnership firm and the defendants No.2 to 4 are its active partners who are actively engaged in the day to day affairs of the defendant No.1 firm. That the plaintiff company was selling silver and gold bullion to the defendant No.1 firm acting through the defendants No.2 to 4 - partners and raised bills against the respective supply of which part payment was also made by the defendants. The defendants vide Bill No.44 dated 8th October, 1996 purchased 51 bars of silver weighing 1516.55 kilograms valued at Rs.1,05,61,405/- and issued cheques for Rs.25,61,405/- and Rs.26,00,000/-. Both the cheques were cleared and thus, the outstanding amount against Bill No.44 on 10th October, 1996 was Rs.54,00,000/-. The defendants had issued three post-dated cheques towards the balance amount of Rs.54,00,000/- against Bill No.44, one for Rs.9,00,000/-, the second for Rs.25,00,000/- and the third for Rs.20,00,000/-. Out of these three cheques, two cheques were deposited on 12th October, 1996 and one cheque wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0,00,000/- dated 30th October, 1996 came to be issued by the defendants, which upon presentation, came to be cleared. Therefore, an amount of Rs.96,03,766/- remained due and payable as on 30th October, 1996 besides the interest thereon from the due date till its realisation. It appears that the plaintiff thereafter once again presented all the above five cheques before the bank, however, the same came to be returned on 13th November, 1996 with the remarks "funds insufficient". The plaintiff company, therefore, issued legal notice under section 138 of the Negotiable Instruments Act, 1881 (hereinafter referred to as "the NI Act") on 27th November, 1996 by registered post A.D. as well as by speed post which was duly served upon the defendants, but the amount was not paid. It is the case of the plaintiff that on the contrary, a reply dated 10th December, 1996 came to be sent creating a false defence in order to wriggle out of their obligation to make payment. The plaintiff company, therefore, filed five criminal complaints in the court of the learned Metropolitan Magistrate, Ahmedabad. Since a huge amount of Rs.96,03,766/- was due and payable since 30th October, 1996, the plaintiff ins ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... payable by the defendant, with or without interest, arising,- (i) on a written contract; or (ii) on an enactment, where the sum sought to be recovered is a fixed sum of money or in the nature of a debt or other penalty; or (iii) on a guarantee, where the claim against the principal is in respect of a debt or liquidated amount only; (iv) suit for recovery of receivables instituted by any assignee of a receivable. It was submitted that in view of the above provisions, suits which can be filed under rule 1(2)(b) of Order XXXVII are those which arise out of a written contract whereas, the plaintiff apart from the principal amount has also claimed interest thereon, in respect of which there is no written contract. Therefore, the claim of the plaintiff is not based on a written contract. Reference was made to rule 2 of Order XXXVII of the Code to point out that a plaint in respect of a suit to which Order XXXVII applies, should contain a specific averment that no relief, which does not fall within the ambit of that rule has been claimed in the plaint. It was submitted that though in the case at hand, the relief in respect of the interest clearly does not fall within the ambit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ises a triable issue. The court, accordingly, held that in view thereof, unconditional leave to defend had rightly been granted by the City Civil Court. It was, accordingly, urged that the reliefs claimed in the summary suit being beyond the scope of Order XXXVII rule 1 (2) of the Code, the trial court was not justified in granting conditional leave to defend and directing the defendants to deposit Rs.50,00,000/-. 5.1 Reference was made to the decision of this court in Ficom Organics Ltd. v. Laffans Petrochemicals Ltd., 2000 (99) CC 471, wherein it was submitted by the learned counsel by placing reliance upon two decisions of this court reported in 1992 G.L.H. (U.J.) 7 and 1985 G.L.H. (U.J.) 2, that if there is no agreement for interest and interest is claimed on the basis of custom or trade, the defendant would be granted unconditional leave to defend a summary suit as a suit for a claim inclusive of interest without any contract for such interest or without any such legal liability would not be maintainable as a summary suit. The court observed that the said decisions were based on a previous decision which was rendered on the basis of provisions of order XXXVII, rule 1 of the C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... proposition that it is well settled that if a subsequent coordinate Bench of equal strength wants to take a different view, it can only refer the matter to a larger Bench, otherwise the prior decision of a coordinate Bench is binding upon the subsequent Bench of equal strength. It was, accordingly, submitted that the trial court was not justified in not granting unconditional leave to defend. 6. Opposing the petition filed by the defendants as well as appearing in the petition filed by the plaintiff, Mr. P.A. Medh, learned advocate for the plaintiff invited the attention of the court to the facts of the case to submit that each claim is based on a bill; therefore, each bill would constitute a written contract. Reference was made to the averments made in the memorandum of the petition filed by the defendants and more particularly paragraph 6 thereof, to point out it is an admitted fact that the amount due could not be repaid to the plaintiff. It was submitted that the cheques issued in respect of such amount came to be dishonoured and therefore, this suit is based upon a negotiable instrument as contemplated in clause (a) of sub-rule (2) of rule I of Order XXXVII of the Code. &nbs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nciated in the case of S. Kiranmoyee Dassi v. Dr. J. Chatterjee, (1945) 49 Cal WN 246, for the proposition that 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 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. Reference was also made to the second proviso to rule 3(5) of Order XXXVII of the Code which provides that where a part of the amount claimed by the plaintiff is admitted by the defendant to be due from him, leave to defend the suit shall not be granted unless the amount so admitted to be due is deposited by the defendant in court. It was pointed out that in the subsequent judgment, this court has not taken into consideration the aspect of amendment as well as the decision of this court in the case of Ficom Organics Ltd. v. Laffans Petrochemicals Ltd. (supra), and therefore, the issue regarding the amendment was never considered by the Benches ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... It was submitted that in Chlochem Ltd. v. Lifeline Industries Ltd. (supra), this court has taken a view in paragraph 22 that in view of the claim of interest, the dispute does not fall in any of the sub-clauses of sub-rule 2 of Order XXXVII rule 1 of the Code and that this alone raises a triable issue warranting grant of unconditional leave to defend. It was submitted that the view adopted by the Bombay High Court is not the view of this court, and that the law as laid down by this court is required to be followed by this court. 8. The facts as emerging from the record reveal that it is an admitted fact that the principal amount of Rs.96,03,766/- is due and payable by the defendants to the plaintiff. In connection with such amount, five cheques were issued by the defendants which came to be dishonoured, pursuant to which, the plaintiff has filed the summary suit for the principal amount of Rs.96,03,766/- together with a claim of interest of Rs.44,76,502/- at the rate of 24% per annum. Before the trial court, the defence raised on behalf of the defendants was that an MOU had been entered by the parties to the suit along with other creditors of the defendants' company and it is only ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the backdrop of the facts and contentions noted hereinabove: firstly, whether the trial court was justified in granting conditional leave to defend when the claim for interest was not backed by any written contract; and secondly, whether the trial court was justified in directing the defendants to deposit only Rs.50,00,000/- when the entire principal amount of Rs.96,03,766/- had been admitted by them. It is only if the first question is answered in the negative, that the second question would be required to be answered. 12. As noticed hereinabove, the principal amount of Rs.96,03,766/- claimed in the summary suit has not been disputed by the defendants. The sole ground raised in the petition filed by the defendants is that the claim of interest, not being based upon a written contract, could not have been made in a summary suit. Placing reliance upon the decision of this court in the case of Zonal Manager v. Akhilbhai B. Mehta (supra), it has been contended that the claim of the amount of interest at the rate of 24% per annum takes the dispute out of the scope of summary suit and, therefore, the trial court committed a jurisdictional error in granting conditional leave to defend ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the petitioner as had been held by the City Civil Court. 14. In Ficom Organics Ltd. v. Laffans Petrochemicals Ltd. (supra), this court has clearly held that the two decisions of this court in 1992 G.L.H. (U.J.) 7 (sic.1982) and 1985 G.L.H. (U.J.) 2, on which reliance had been placed for contending that if there is no agreement for interest and interest is claimed on the basis of custom or trade, the defendant would be granted unconditional leave to defend a summary suit as a suit for a claim of interest without any contract for interest or without any such legal liability would not be maintainable as a summary suit, are per incuriam having been rendered without noticing the amendment in Order XXXVII rule 1 whereby the words "with or without interest" came to be inserted. It may be noted that in neither of the latter decisions, the decision of this court in the case of Ficom Organics Ltd. v. Laffans Petrochemicals Ltd. (supra) holding that the decision in the case of National Textile Corporation v. Shri Rajendra Sankalchand & Parikh (supra) is per incuriam has been cited or considered. It is this decision in the case of National Textile Corporation v. Shri Rajendra Sankalchand & ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... st and hence, when a suit is instituted on a negotiable instrument, a claim for interest can be made in view of section 80 of the Act and does not need a written contract in that regard. Besides, in the opinion of this court, where the interest claimed by the plaintiff is on the amount in respect of which cheques have been issued by the defendants, such claim is governed by section 80 of the Negotiable Instruments Act and consequently, the claim of interest made by the plaintiff is a claim of interest under an enactment, therefore, such claim can also be said to be governed by the provisions of Order XXXVII rule 1(2)(b)(ii) of the Code. Accordingly, no relief which does not fall within the ambit of rule 2 of Order XXXVII of the Code can be said to have been claimed in the plaint. Therefore, having regard to the facts of the present case, it cannot be said that the claim of interest is beyond the scope of Order XXXVII of the Code. While it is true that the claim of interest is higher than that provided under the statute, however, that by itself, would not take the suit outside the scope of Order XXXVII of the Code. The requirement under sub-rule (2)(a) for the purpose of maintaining ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Lifeline Industries Limited (supra), the only option left to this court is to refer the matter to a Larger Bench, does not merit acceptance. 18. In the light of the above discussion, the first question which arises out of the petition filed by the defendants is, therefore, required to be answered in the affirmative namely, that the trial court was justified in granting conditional leave to defend to the defendants when the claim for interest was not backed by any written contract in view of the fact that the claim of the plaintiff was based upon bills of exchange (cheques). 19. Proceeding to the next question which arises out of the petition filed by the plaintiff, it may be noted that insofar as the liability to pay the principal amount of Rs.96,03,766/- is concerned, the same is not in dispute. In this regard, it may be germane to refer to the second proviso to sub-rule (5) of rule 3 of Order XXXVII of the Code which provides that where a part of the amount claimed by the plaintiff is admitted by the defendant to be due from him, leave to defend the suit shall not be granted unless the amount so admitted to be due is deposited by the defendant in court. Thus, from the language ..... X X X X Extracts X X X X X X X X Extracts X X X X
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