Raj Narain and Others vs HBN Housing Finance Ltd.

Rajiv Sahai Endlaw, J.—The appeal impugns the money decree dated 25th February, 2012 against the appellants/defendants pursuant to the order of the same day of dismissal of the application filed by the three appellants/defendants for leave to defendant Suit No. 1405/11/10 filed by the respondent/plaintiff under Order 37 of the CPC (CPC), 1908. The appeal was accompanied with an application for condonation of 40 days delay in preferring the appeal. Notice of the appeal as well as of the application for condonation of delay was issued. The counsel for the respondent/plaintiff on 2nd July, 2013, without filing the reply opposed the application for condonation of delay. Vide order of the same day, subject to the appellants/defendants paying costs of Rs. 15,000/- to the counsel for the respondent/plaintiff as a condition for condonation of delay in preferring the appeal, the appeal as well as the application for condonation of delay were listed for hearing.

The counsel for the appellants/defendants has today paid the costs imposed vide order dated 2nd July, 2013 and in view thereof, the delay in preferring the appeal is condoned. After the counsel for the appellants/defendants has been heard for about ten minutes, the counsel appearing for the respondent/plaintiff states that he is not the arguing counsel and the matter be adjourned. For the failure of the counsel for the respondent/plaintiff to argue the appeal, the costs of Rs. 15,000/- which was paid today by the counsel for the appellants/defendants to the counsel for the respondent/plaintiff has been got returned to the counsel for the appellants/defendants. The counsel for the appellants/defendants has been heard and the Trial Court record has been perused to see whether any need for hearing the counsel for the respondent/plaintiff arises.

The respondent/plaintiff instituted the suit, from which this appeal arises, under Order 37 of the CPC, pleading:

(i) that the appellant/defendant No. 1 on 25th July, 2006 approached the respondent/plaintiff for extending loan facility of Rs. 5 lakhs and the appellants/defendants No. 2 & 3 agreed to be the guarantors;

(ii) that the respondent/plaintiff after considering the requirement of the appellant/defendant No. 1 sanctioned the loan of Rs. 5 lakhs on 27th July, 2006 at fixed rate of interest of 14% per annum for a period of 180 months repayable in Equitable Monthly Installment (EMI) of Rs. 7,778/- against the property;

(iii) that the three appellants/defendants executed Sanction/Approval letter dated 27th July, 2006, Home Loan Agreement dated 25th July, 2006, Power of Attorney dated 27th July, 2006, Guarantee Agreement dated 27th July, 2006, Demand Promissory Note and Letter of Continuity dated 27th July, 2006, Memorandum of Entry dated 27th June, 2006, Unregistered Equitable Mortgage in respect of property No. A-2, Khasra No. 151, Village-Mukundpur, Janta Vihar, New Delhi by deposit of title deeds, all in favour of the respondent/plaintiff;

(iv) that at the request of the appellants/defendants, additional loan was further extended for a sum of Rs. 50,000/- with EMI of Rs. 2400/-;

(v) that thus the total loan sanctioned/granted to the appellant/defendant No. 1 as on 1st August, 2007 was Rs. 5,50,000/-;

(vi) that on 20th October, 2008, a legal notice u/s 138 of the Negotiable Instruments Act, 1881 for cheque dated 1st October, 2008 for Rs. 7,778/- and for recovery of overdue EMIs of Rs. 1,06,670/- as on 1st October, 2008 was issued and thereafter a complaint of offence u/s 138 of Negotiable Instruments Act also filed but which was dismissed as withdrawn for the reason of the payment of the dishonoured cheque having been made on 5th October, 2009 and which was duly reflected and adjusted in the statement of account;

(vii) that several other cheques against the EMIs issued by the appellant/defendant No. 1 also bounced;

(viii) that as on 31st January, 2010, an amount of Rs. 7,04,542/- was due against the aforesaid loan, jointly and severally from the appellants/defendants.

Accordingly, the suit on the basis of the aforesaid documents for recovery of the said amount was filed.

Summons for appearance and thereafter summons for judgment were issued and in response whereto the appellants/defendants filed a joint application for leave to defendant, though accompanied by affidavit of each of the three appellants/defendants.

The counsel for the appellants/defendants states that the contents of all the three affidavits are the same. The appellants/defendants sought leave to defend on the grounds:

(a) that though the appellant/defendant No. 1 had taken a loan of Rs. 5 lakhs and Rs. 50,000/- from the respondent/plaintiff repayable in 180 installments and time for repayment of all of which installments had not yet expired, yet recovery proceedings had been initiated;

(b) that the appellant/defendant No. 1 was regularly paying installments "except for some installments";

(c) that the appellant/defendant No. 1 had paid Rs. 2500/- on 28th August, 2006 and again Rs. 2500/- each on 26th September, 2006 and 26th October, 2006 and Rs. 3500/- on 7th December, 2006 and again Rs. 3500/- on 28th December, 2006 and seven Installments with the amount of Rs. 7,778/- were paid till August, 2007 and afterwards again paid Rs. 2400/-, Rs. 10,000/-, Rs. 2400/- and Rs. 10,000/- each upto 20th February, 2009;

(d) that subsequently also the appellant/defendant No. 1 paid Rs. 1000/-, Rs. 2400/-, Rs. 2400/- till 20th November, 2009 and Rs. 2400/- on 26th April, 2009 and Rs. 10,000/- on 3rd May, 2010 "and many more Installments were paid to the bank which were not accounted for by the respondent/plaintiff;

(e) that at the time of taking the housing loan, the appellant/defendant No. 1 signed on certain blank papers and at the time of sanctioning of the loan "half of the amount was taken back by the agent of the manager of the said bank, on the pretext that the loan was sanctioned on this condition only. So, the respondent/plaintiff was left with only Rs. 2,50,000/-.

Though certain other pleas were also taken but since the counsel for the appellants/defendants has not addressed thereon, need is not felt to reproduce the same here.

Needless to state that the respondent/plaintiff filed a reply to the leave to defend application denying that blank papers were signed or that half of the loan amount was taken back by the agent of the manager of the respondent/plaintiff or that the loan was sanctioned on the said condition.

Neither any rejoinder to the aforesaid reply was filed by the appellants/defendants nor did the counsel for the appellants/defendants argue on the leave to defend application when the same was listed for hearing.

The learned Additional District Judge (ADJ) has vide the impugned order/judgment held:

(I) that the execution of the documents on which the suit was based (and which are found in original on the Trail Court record) had not been denied by the appellants/defendants;

(II) that the plea of the appellants/defendants of having signed the documents in blank was not convincing; reliance in this regard is placed on Vinod Kumar and Another Vs. Keshav Anand,

(III) that the sanctioning and grant of loan of total amount of Rs. 5,50,000/- was not in dispute;

(IV) that the factum of the appellants/defendants No. 2 & 3 standing as guarantors for repayment of the said loan amount was also not in dispute;

(V) that the plea of the appellants/defendants of having made any payments and the statement of account filed by the respondent/plaintiff along with the plaint being not correct, did not raise any triable issue.

The counsel for the appellants/defendants relying on certain passages of Santosh Kumar Vs. Bhai Mool Singh, as reproduced in Wada Arun Asbestos (P) Ltd. Vs. Gujarat Water Supply and Sewerage Board, has contended:

(A) that the appellants/defendants in the leave to defend application were not required to plead any proof and the pleas of the appellants/defendants in the leave to defend application, of they having been made to part with half of the loan amount to the agent of the manager of the respondent/plaintiff as a condition of sanction, and, of having made certain other payments towards repayment of loan are such which require an opportunity to be given to the appellants/defendants to lead evidence;

(B) that only in cross-examination of the appellants/defendants and their witnesses can it be determined whether the aforesaid pleas of the appellants/defendants are true or not;

(C) that no harm will be caused to the respondent/plaintiff if the matter is put down to trial;

(D) that the trial can be made time bound;

(E) that it is well nigh possible that the appellants/defendants may prove payment of half of the loan amount to the agent of the manager of the respondent/plaintiff by some credible evidence, say a video recording;

(F) that no notice was given by the respondent/plaintiff to the appellants/defendants prior to the institution of the suit;

(G) that the pleas aforesaid of the appellants/defendants are plausible.

On enquiry, whether the appellants/defendants have made a video recording, the counsel for the appellants/defendants states that not in the present case. On further enquiry, whether under any law or agreement entered into by the appellants/defendants with the respondent/plaintiff, there was any requirement to give notice, the counsel for the appellants/defendants admits that though there is no such requirement but contends that it is always prudent to give a notice prior to the institution of the suit. On yet further enquiry, as to whether the appellants/defendants have suffered any prejudice from non-service of such notice inasmuch as the suit, from which this appeal arises, was filed nearly three years ago in October, 2010, the counsel for the appellants/defendants states that the appellants/defendants could have lodged a complaint against the manager of the respondent/plaintiff who had taken back 50% of the loan amount. On yet further enquiry, whether in the last three years any such complaint has been made, the counsel states that not till now.

The plea of the appellants/defendants is of return of half of the loan amount to the agent of the manager of the respondent/plaintiff. Neither is the said agent named nor is a date given as to when the said amount was returned back; there is no plea of how the loan was disbursed; ordinarily, the loan in such cases is disbursed by making payment directly in the name of the seller of the house which the loan is buying with finance from the institutions as the respondent/plaintiff; there are no particulars whatsoever. Rather, at this stage, the counsel for the appellants/defendants interjects and states that the loan was disbursed in four Installments; if that is so, the plea should have been of payment of 50% of the loan disbursed on different occasions to the agent of the manager of the respondent/plaintiff. Moreover, it is not the case of the appellants/defendants that there was any condition in writing in the documents of such payment. Even if it were to be believed that the appellants/defendants have paid half of the loan amount to some agent of some manager of the respondent/plaintiff, though both of them are not named, the appellants/defendants, for the reason thereof, would not be entitled to offset the said amount from the loan repayable to the respondent/plaintiff. The transaction if any of the appellants/defendants with the agent of the manager of the respondent/plaintiff is distinct from the transaction of the appellants/defendants with the respondent/plaintiff. Thus, no case of putting the suit to trial for this reason is made out.

As far as the other plea, of having made certain other payments towards repayment of loan is concerned, though the respondent/plaintiff along with the suit filed a statement of account but it is not the plea that the payments made are not reflected in the statement of account. Rather, no discrepancy whatsoever in the statement of account on the Trial Court record is pointed out. Rather, the Trial Court record is found to contain twelve cheques issued by the appellant/defendant No. 1 in favour of the respondent/plaintiff and which were dishonoured on presentation. Nothing has been said, whether the payments, particulars of which have been given in the affidavits accompanying the leave to defend application are the payments by cheques which have been dishonoured.

Not only so, had any payment been made, receipts therefor would have been issued. No receipts or any other document in support of the payments allegedly made have been filed. The counsel for the appellants/defendants again argues that the filing of the leave to defend application is not the stage for filing of the documents and the appellants/defendants upon leave being granted will file the documents in the form of receipts issued by the respondent/plaintiff of the said payments. No receipts have been brought to the Court today also.

I am unable to agree with the contentions aforesaid of the counsel for the appellants/defendants. If such unsubstantiated and vague pleas were to be entitled to grant of leave to defend, I fail to fathom as to in which cases leave can be refused and if such an interpretation is to be taken, the same would render the provision of Order 37 of the CPC nugatory.

No error is thus found in the order/judgment of the learned ADJ.

No other argument has been raised. There is no merit in the appeal, which is dismissed. However, the counsel for the respondent/plaintiff having not argued, no order as to costs.

Decree sheet be drawn up.