M/s. Kone International (P) Ltd. and others vs Syndicate Bank

The present Civil Revision has been filed by the defendant;, inter alia alleging that the condition of furnishing the Bank Guarantee imposed by the learned trial Court while granting the leave to defend vide impugned order dated 21-9-1993 was illegal and they have prayed that they should be permitted to defend the suit without any condition.

The plaintiff Bank filed a suit for recovery of Rs. 24,36, 804.87 under Order 37 of the CPC against M/ s. Kona International Private Ltd., through Shri Surinder Kumar, Managing Director, Smt. Savitri Devi was arrayed as defendant No. 3 in the said suit being guarantor, Smt. Savitri Devi died and her legal representatives were brought on record. The defendant petitioners filed an application for leave to defend under provision of Order 37 of CPC and the learned trial Court while disposing of the said application came to the conclusion that the legal representatives of the Guarantor were not party to the loans transaction and could not be aware of the Guarantee deed and, thus, triable issue arises on the basis of application and the reply. It has been further concluded by the trial Court that it could not be said that the defence which the defendants wanted to raise was frivolous. However, while granting the permission to contest the suit a condition of furnishing bank guarantee of the amount of suit was imposed by the trial Court vide impugned order. The matter is short and the facts are by and large undisputed for the limited purpose of disposal of revision petition.

After hearing the counsel for the parties and perusing the material on the record, I am disposing of the revision petition finally.

The learned counsel for the defendant petitioners relied upon the authority of Hon''ble the Supreme Court reported as Mechelec Engineers and Manufacturers Vs. Basic Equipment Corporation, . On the other hand learned counsel for the respondent Bank has relied upon a single Bench judgment of this Court reported as Central Bank of India, Chandigarh v. M/s. Rajinder Dass & Co. 1991 I.S.J. 157 as a matter of fact the learned single Judge of this court while deciding the Central Bank of India''s case (supra) also relied upon the judgment of Supreme Court in M/s. Mechalec Engineers and Manufacturers case (supra).

The short question for consideration in this case is whether the condition of furnishing the Bank Guarantee to the tune of suit amount was in tune with the principle laid down by Hon''ble the Supreme Court or not. The Hon''ble Supreme Court in M/s. Mechalec Engineers and Manufacturers case (supra) laid down the following five principles for dealing with the matter of granting leave to defend in case under Order 37 Rule 3 of the CPC :--

"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 raises a triable issue indicating that he has a fair or bana 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 interference 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."

The perusal of aforementioned principles would show that in cases covered by Sub-para (a) & (b) above, leave to defend the suit can be granted unconditionally, whether the defendant satisfied that he has good defence to the claim on merits or he has a fair and bonafide or reasonable defence though not positively good. In the category of cases covered by sub-para (c) above where subsequently at the trial the defendant may be able to establish a defence to the plaintiff''s claim that he would not be entitled to the judgment, leave to defend can be granted but discretion is given to the Court to impose conditions as to the time or mode of trial but not as a payment into court or furnishing security, In the category of cases falling under para (d) above the defendant is not entitled to leave to defend if he has no defence or the defence set up is illusory or sham or practically moonshine. Even in such category of cases where the defendant has no defence or such defence is illusory or sham or moonshine the case would fall under category (e) and leave to the defend can be granted to contest the suit enabling him to try the defence, if the amount claimed is paid into court or otherwise secured.

I have to see whether the present,case falls under which para reproduced above and it will depend upon its own facts and circum-stahces, undisputedly the learned trial Court has come to the conclusion that the legal representatives of the deceased Guarantor were not party to the loan transaction. They could not be aware of the Guarantee deed which according to the plaintiff was executed by their mother Smt. Savitri Devi. Thus triable issue arises on the basis of application and the reply, the learned trial Court has further reached the conclusion that it cannot be said that the defence which the defendants want to raise is frivolous. Therefore, I am of the view that the case of the defendants is covered by sub-para (b) and the learned trial Court should have granted permission, to contest the suit unconditionally, more so, when it has not recorded any reason as to why the condition of furnishing bank guarantee of the amount of the suit was ordered. Except for the portion of last sentence of the impugned order, there is not a word in the discussion as to why the banK guarantee was being demanded.

The case relied upon by the learned counsel for the respondent reported as Central Bank of India''s case (supra) is distinguishable on facts of the said case. It is observed by the learned single Judge of this Court in para 8 of the judgment that there was no specific challenge made to any of the entries in the accounts statement furnished by the plaintiff relating to the loan accounts. Only the general allegation was levelled in the application regarding the accounts and the account of interest calculated and due and that was not a case involving the legal heirs of either of the party. The ratio of the said judgment is not applicable to the present case.

In view of the foregoing discussion, the impugned order dated 21-9-1993 is quashed and the revision petition is allowed, However; these orders will not preclude the plaintiff Bank from taking appropriate steps as and when h feels the necessity in terms of Order 38 Rule 5 of the Code of Civil Procedure, Parties are left to bear their own costs.

Revision allowed.