Circutor Energy Management India Private Ltd. vs Cipsa Tec India Private Limited and Others

B.S. Patil, J.—Petitioner in this revision petition is the plaintiff in O.S. No. 4342/2013. He has filed this suit under Order XXXVII Rules 1 and 2 CPC as a summary suit based on four promissory notes issued by the defendant. Plaintiff has sought for recovery of a total sum of Rs. 28,25,261/- along with future interest.

The case of the plaintiff, in brief, is that plaintiff is a private limited company engaged in the business of marketing and sale of energy management devices; a lease agreement was entered into between the plaintiff and the defendant; plaintiff was earlier known as CIPSA-RIC India Private Limited and was later on changed its name as CIPSA TEC India Private Limited with effect from 03.03.2011; under the lease agreement plaintiff had paid a sum of Rs. 26,90,000/- to the 1st defendant towards interest free refundable security deposit; another sum of Rs. 4,20,000/- was deposited towards electricity connection as a refundable security deposit; it was agreed between the plaintiff and the 1st defendant that upon termination of the lease, the 1st defendant-Company would immediately refund the amount of Rs. 26,90,000/- and another sum of Rs. 4,20,000/-; on 01.08.2009, plaintiff terminated the lease by issuing a notice. The said termination, according to the plaintiff, was accepted by the 1st defendant; thereafter, plaintiff vacated the premises and handed over vacant physical possession of the same to the defendant on 27.10.2009, which has been confirmed by the 1st defendant by issuing a letter dated 27.10.2009; 1st defendant was obligated to refund the security deposit, totally amounting to Rs. 31,10,000/-.

Plaintiff further urged that pursuant to the discussions between the parties and on account of certain adjustments and payments, a sum of Rs. 21,74,879/- was agreed to be paid as dues payable by the 1st defendant to the plaintiff; after much persuasions, 2nd defendant acting for the 1st defendant proposed that four promissory notes would be executed by the 1st defendant undertaking to pay the amount in four installments; plaintiff relied upon the assurance made by defendants 1 and 2, and agreed for the said proposal. It is alleged that 1st defendant executed four promissory notes dated 04.04.2011, each for a sum of Rs. 5,43,719.75; these promissory notes were duly signed by the 2nd defendant as an authorized signatory of the 1st defendant and were handed over to the plaintiff.

1st defendant did not pay the amounts payable under each promissory note as and when they became due. When the plaintiff approached the 1st defendant, defendant sought time to repay the amount. Plaintiff issued legal notice on 04.04.2013. Though the legal notice was duly served, defendant did not reply. Hence, the plaintiff filed the suit invoking the provisions of Order XXXVII Rules 1 and 2 CPC.

In terms of the provisions contained under Order XXXVII Rule 3 CPC, plaintiff together with summons, served on the defendants copy of the plaint and annexures. Defendants entered appearance, whereupon the plaintiff served summons for judgment in Form No. 4A verifying the cause of action and amount claimed and stating that defendant had no defence at all. Thereafter, defendant filed an application seeking leave to defend the suit.

Defendant contended that the suit was barred by time; it was instituted by one B. Srinivas who was not the General Manager or authorized signatory of the plaintiff; suit was not filed against the other Directors of the defendant-Company; plaintiff had no right to terminate the tenancy; promissory notes were executed in favour of General Energy Management Solutions India Private Limited and not with the plaintiff and that the promissory notes were indeed not promissory notes and were not properly stamped. This application was resisted by the plaintiff by filing objections.

The Trial Court has allowed the application filed by the defendant by making following observations.

"There are triable issues which are raised by the defendants in a sense that there is a fair dispute to be tried as to the meaning of the defences. The materials, by way of affidavit, disclose the fact that the triable issues are in existence for adjudication of the suit. It is clear that all the facts as mentioned above by the defendants are sufficient to entitle the defendants to defend the suit which is evident in the affidavit affixed to the IA-1."

It is this order that is under challenge.

The respondent though served have remained unrepresented. Indeed, learned Counsel for the petitioner was permitted to serve the Counsel appearing for the respondent in the Trial Court. Despite service of notice on the learned Counsel who appeared for the defendant-respondent herein in the Trial Court, he has also not entered appearance. In the circumstances, I have heard the learned Counsel appearing for the petitioner.

The only question that arises for consideration is,

"whether the court below has violated the provisions contained under Order XXXVII Rule 3(5) CPC in passing the impugned order granting leave to the defendant to raise/put up defence?"

Order XXXVII Rule 3(5) CPC reads as under:

"(5) The defendant may, at any time within ten days from the service of such summons for judgment, by affidavit or otherwise disclosing such facts as may be deemed sufficient to entitle him to defend, apply on such summons for leave to defend such suit, and leave to defend may be granted to him unconditionally or upon such terms as may appear to the Court or Judge to be just:

Provided that leave to defend shall not be refused unless the Court is satisfied that the facts disclosed by the defendant do not indicate that he has a substantial defence to raise or that the defence intended to be put up by the defendant is frivolous or vexatious:

Provided further 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 is thus clear that where a suit has been instituted under Order XXXVII invoking summary procedure of the court, it is the duty of the court while considering the application seeking leave to defend filed by the defendant that the court has to be satisfied on the facts disclosed by the defendant, that he has a substantial defence to raise or that the defense intended to be put up is not frivolous or vexatious. The second proviso makes it clear that if a part of the amount claimed by the plaintiff is admitted, then the defendant is required to deposit the admitted amount before leave is granted to him to defend.

In the instant case, the court has not applied its mind to the nature of the defence taken by the defendant in their application seeking leave to defend. It has not referred to the important materials placed on record by the plaintiff as basis for its claim. Issue of promissory note in favour of the plaintiffs and execution of four promissory notes by the defendants is not disputed. Legal notice issued has also not been replied. The tenancy is terminated under mutual agreement and it is only upon termination of the tenancy and after delivery of possession to the plaintiff, as per the plaintiff''s assertion, four promissory notes were executed towards refund of security deposit. Unless the court applies its mind to the nature of the defence set up by the defendant and comes to the conclusion that the defence set up was substantially bona fide and not sham, illusory, vexatious or frivolous, permission would not be granted.

In other words, the permission could be refused in case the courts come to the conclusion that the defence set up by the defendant was not substantial and was frivolous, vexatious or sham. The contention regarding bar of limitation is also not dealt with. Similarly, the contention regarding Mr. B. Srinivas not being the General Manager or the Authorized Signatory of the plaintiff to file the suit, is not examined with reference to the authorization letter given by the company to Sri B. Srinivas, the resolution passed by the plaintiff-company authorizing him to file the suit.

Again, the other defence set up by the defendant in the application stating that other Directors of the defendant-company were not impleaded; the plaintiff had no right to terminate the tenancy or that the promissory notes were not properly stamped or with regard to the mistake in properly mentioning the name of the plaintiff in the promissory notes are not at all touched and referred to by the court below to come to the conclusion whether they tantamount to substantial defence or were just frivolous and vexatious defence put forward only to defeat the legitimate claim made by the plaintiff.

The minimum that the court below is required to do is to apply its mind to the nature of defence taken and discharge its duty enjoined on it in terms of Order XXXVII Rule 3(5) of CPC. It cannot be lost sight that the purpose and intent behind enacting Order XXXVII is to allow a person who has a clear and undisputed claim to recover the same quickly, instead of a filing a regular suit.

In the case of V.K. Enterprises Vs. Shiva Steels, AIR 2010 SC 2885 : (2010) 3 BC 718 : (2010) 8 JT 122 : (2010) 7 SCALE 758 : (2010) 9 SCC 256 : (2010) 9 SCR 647 : (2010) AIRSCW 4682 : (2010) 6 Supreme 180 , the Apex Court has while adverting to the object and intent behind enacting Order XXXVII, has held that the purpose behind such provision is to enable a clear and indisputable claim to be quickly decided by a summary procedure and only if the affidavit filed by the defendant disclosed a triable issue, then leave should be granted. Otherwise, if the defence raised appears to be moonshine and sham unconditional leave to defend cannot be granted.

In the instant case, the Trial Court has not discharged its duty by examining the nature of defence set up by the defendant before granting leave to the respondent. Although learned Counsel for the appellant contended that this Court may examine the merits of the defence and pass an order on merits, such an exercise cannot be undertaken in the revisional jurisdiction. It is for the trial court to re-examine the matter and pass appropriate orders in the light of the observations made above.

Hence, this revision petition is allowed. The impugned order is set aside. The application filed by the defendants seeking leave to defend is remitted for fresh consideration to the Trial Court, in the light of the observations made herein above.