V.S. Gurumani vs V.M. Sundaram

Gita Mittal, J.—By this judgment, I propose to dispose of the present suit filed under the provisions of Order 37 of the Code of Civil Procedure, 1908 seeking a recovery of Rs. 21,38,158/- by the summary procedure. The claim is based on dishonouring of twenty cheques issued by the defendant which were for the total sum of Rs. 14,81,000/- and interest thereon to the extent of Rs. 6,57,158/-.

The defendant could not be served by ordinary process and by registered cover despite efforts in this behalf. Accordingly, service on the defendant was effected by the alternative mode by issuance of a proclamation under Order 5 Rule 20 of the Code of Civil Procedure. The summons were published in the Delhi Edition of the Statesmen dated 8th August, 2006. The service was accepted as adequate service by the order dated 24th August, 2006. Inasmuch as the defendant failed to enter appearance, the matter was placed before this Court on the 6th of October, 2006.

For failure to enter appearance in accordance with law, in accordance with the provisions of Order 37 of the Code of Civil Procedure, this Court ought to have proceeded to judgment. However, perusal of the record shows that the cheques which were the basis of the present suit were not filed in original, on the plea that the same stand filed in proceedings taken by the plaintiff against the defendant u/s 138 of the Negotiable Instruments Act, in the Court of the learned Metropolitan Magistrate. In these circumstances, by order passed on 6th October, 2006, it was observed that the negotiable instruments which were the basis of the suit had to produced or proved on record in accordance with law. In these circumstances, in the absence of the original documents, the plaintiff was directed to file its examination in chief on affidavit in support of its case and given liberty to summon the records from the concerned courts to prove the documents relied upon.

In compliance with the order passed by this Court on 6th October, 2006 the plaintiff filed his own affidavit and also summoned the records of the cases pending in the various courts where the plaintiff had filed complaints u/s 138 of the Negotiable Instruments Act.

The defendant has remained unrepresented and has failed to contest the suit claimed.

I find that the suit is premised on the plea that the defendant as a member of the Institute of Chartered Accountant of India had claimed to be engaged in portfolio advisory and consultancy services and developed such a relationship with the plaintiff. The plaintiff consequently entrusted to the defendant, in two lots shares worth a total sum of Rs. 22,26,061/- firstly in April and Secondly in October, 2000 for their management by him. The defendant undertook to pay to the plaintiff a minimum guarantee return @ 24% per annum payable every month. Any amount in excess of the returns over 24% p.a. was agreed to be shared equally between the parties. After October, 2000, the defendant defaulted in payment of the returns and consequently the plaintiff demanded return of his shares.

The matter was resolved when the parties entered into an agreement of liability and schedule of payment dated 7th July, 2001. The defendant confirmed entrustment of the shares worth Rs. 22,26,061/- and the agreement that a minimum guarantee return of 24% would be paid by the defendant in this agreement. The defendant also confirmed that the minimum guarantee returns totalling approximately Rs. 4,80,000/- as on 31st August, 2001 were due and payable to the plaintiff. Defendant also confirmed that return @ 24% per annum on Rs. 22,26,061/- were payable to the plaintiff. By this agreement, the defendant agreed to remit these amounts to the plaintiff in 12 equal installments commencing from 31st August, 2001. The defendant also agreed to give a promissory note supported by post dated cheques for the full amount which were to be drawn on a joint account to be opened by the defendant with the plaintiff. The cheques were to be issued latest by 30th July, 2001 while interest @ 1% p.a. was agreed to be paid by the defendant on delayed payment. The defendant also undertook to transfer shares which have been listed in this agreement to the plaintiff in 10 approximately equal monthly lots starting from 31st of August, 2001. The parties had agreed that either the share themselves or equivalent value to be paid through demand draft payable in Delhi was to be paid to be plaintiff. Valuing the shares at the average of the share values prevailing during the calender year 2001, the parties had agreed to take the average of the share value till 31st July, 2001.

It is noteworthy that the shares have been listed in this agreement which is exhibit PW.1/1, the parties had agreed that the defendant would prepare the final accounts statement and hand over the same to the plaintiff by the 29th July, 2001. In case of any further payment to be made to the plaintiff on account of trading profits which had been agreed to be shared equally by both parties, the schedule for the same was required to be worked out and suitably documented.

The defendant also executed a promise in writing dated 28th July, 2001, to transfer to the plaintiff shares in different companies obtained approximately equal monthly loss which has been set out in the promise and included the following:

PROMISSORY NOTE TO BE DISCHARGED IN INSTALMENTS

Shares as listed below July 28, 2001

I, V.M. Sundaram, son of K.M. Viswanathan, resident of D3/3509, Vasant Kunj, NEw Delhi 110070 (including my heirs, successors, legal representatives and assignees) hereby and severally promise to transfer to V.S. Gurumani, son of V.S. Mani, resident at E 19, Geetanjali Enclave, New Delhi 110017 shares as listed below in ten approximately equal monthly lots shares as listed below for value received, with the first such lot to be transferred on August 31, 2001:

Company Name Quantity

Hindustan Lever 1600 Reliance Industries 149 Reliance Petroleum 3300 Henkel Spic 3600 HDFC Bank 460 Gujrat Ambuja Cement 200 Tata Elxsi 400 IVC 250 Zee Television 60 Hughes Tele.com 9000 Nestle 200 Telco 500 Nath Seeds 1000 GE Shipping 300 SRG Infotech 1000 L and T 400 New Delhi July 28, 2001 (V.M. Sundaram) Debtor

The defendant also promised to pay to the plaintiff the sum of Rs. 40,000/- per month without interest commencing from the 31st of August, 2001 and each succeeding installment without interest thereon to be paid on the last day of each following month till payment of the sum of Rs. 4,80,000/-. In case of any one of the installment being in arrear for three days, the said installment of Rs. 40,000/- would become payable immediately with interest thereon at the rate of 1% p.m. till payment.

In addition to the above, the defendant issued to the plaintiff as security for discharge of this liability, twenty post dated cheques drawn on the State Bank of Hyderabad, Kailash Colony, New Delhi. The defendant defaulted in its promise to transfer the shares. He also repeatedly requested the plaintiff not to present the cheques on the ground that he was in the process of arranging funds and would inform the plaintiff as to when the cheques should be presented. The plaintiff deferred presentation of the cheques till February, 2002 and then, realising that he was being taken for a ride, the plaintiff first presented for collection a group of cheques on 4th February, 2002 and thereafter the remaining cheques from time to time. The cheques when tendered for honouring to the drawee bank, were all dishonoured by the State Bank of Hyderabad, Kailash Colony, New Delhi on the ground of insufficiency of funds. The first dishonouring took place on 5th of February, 2002.

The plaintiff has established on record that he served upon the defendant notices demanding the amount of the dishonoured cheques by registered acknowledgment due course as well as by UPC at the two known addresses. The details of the cheques, their date and amounts as also the dates of their dishonouring and the dates of the notices are referred as follows:

----------------------------------------------------------------------------------- Sl. Cheque Page Date Amount Date of dishonour Date of Regd No. No. notice AD Receip t& UPC ----------------------------------------------------------------------------------- i 971601 P-27 16.9.2001 Rs. 41,000/- 5.2.02 & 11.3.2002 26.3.02 Pg.33, (P-28) (P.30-32) 34 ----------------------------------------------------------------------------------- ii 971602 P-42 16.10.2001 Rs. 40,000/- 5.2.02 & 23.4.02 6.5.02(P. Pg.47, (P-43) 44-46) 48 ----------------------------------------------------------------------------------- iii 971603 P-50 16.11.2001 Rs. 40,000/- 5.2.02 Pg-24 & 20.5.02 Pg.54, 9.5.02 (P-51) (P.52-54) 55 ----------------------------------------------------------------------------------- iv 971604 P-66 16.1.2002 Rs. 40,000/- 5.2.02 & 15.6.02 25.6.02 P.61, (P-58) (P.59-60) 62 ----------------------------------------------------------------------------------- v 971605 P-75 16.2.2002 Rs. 40,000/- 5.2.02 & 13.7.02 27.7.02 P.70, (P-67) (P. 68, 69) 71 ----------------------------------------------------------------------------------- vi 971606 P-84 16.3.2002 Rs. 40,000/- * Deposited on 31.8.02 P.80, 13.8.02 (P.76) (P.78-79) 81 17.8.02 (P.77) ----------------------------------------------------------------------------------- vii 971607 P-94 16.4.2002 Rs. 40,000/- * Deposited on 25.9.02 P.90, 14.5.02 (P.83) (P.88-89) 91 16.9.02(P.86) ----------------------------------------------------------------------------------- viii 971608 P-106 01.6.2002 Rs. 60,000/- * Deposited on 28.10.02 P.100- 14.10.02 (P.95) (P.98-99) 101 16.10.02 (P.96) ----------------------------------------------------------------------------------- ix 971609 P-117 16.7.2002 Rs. 1,00,000/- -------------- 10.12.02 (P.111- --28.11.02 (P.107) P.109-110) 112 ----------------------------------------------------------------------------------- x 971610 P-27 01.10.2001 Rs. 1,00,000/- -------------- 02.1.03 P.121- -18.12.02 (P.118) (P.119-120) 122 ----------------------------------------------------------------------------------- xi 971611 P-42 01.11.2001 Rs. 1,00,000/- 5.2.02 & 11.3.02 26.3.02 Pg.33- (P.28) (P.30-32) 34 ----------------------------------------------------------------------------------- xii 971612 P-50 01.12.2001 Rs. 1,00,000/- 5.2.02 & 23.4.02 6.5.02 (P. Pg.47- (P.43) 44-46) 48 ----------------------------------------------------------------------------------- xiii 971613 P-57 01.1.2002 Rs. 1,00,000/- 5.2.02 Pg. 25 & 20.5.02 Pg.54, 9.5.02 (P.51) (P.52-54) 55 ----------------------------------------------------------------------------------- xiv 971614 P-66 01.2.2002 Rs. 1,00,000/- 5.2.02& 15.6.02 25.6.02 Pg.61, (P.58) (P.59, 60) 62 ----------------------------------------------------------------------------------- xv 971615 P-75 01.3.2002 Rs. 1,00,000/- 5.2.02& 13.7.02 27.7.02 Pg.70, (P.67) (P.68, 69) 71 ----------------------------------------------------------------------------------- xvi 971616 P-84 01.4.2002 Rs. 1,00,000/- -------------- 31.8.02 Pg.80, 17.8.02 (P.77) (P.78, 79) 81 ----------------------------------------------------------------------------------- xvii 971617 P-94 01.5.2002 Rs. 1,00,000/- -------------- 25.9.02 Pg.90- 16.9.02 (P.77) (P.88, 89) 91 ----------------------------------------------------------------------------------- xvii 971618 P-106 01.6.2002 Rs. 1,00,000/- -------------- 28.10.02 Pg. 16.10.02 (P.97) (P.98-99) 100- 101 ----------------------------------------------------------------------------------- xix 971619 P-117 01.7.2002 Rs. 1,00,000/- -------------- 10.12.02 Pg. 28.11.02 (P.108) (P.109- 111- 110) 112 ----------------------------------------------------------------------------------- x 971620 Rs. 1,00,000/- -------------- 0.2.1.03 Pg. 18.12.02(P.118) P.119- 121- 120) 122 ----------------------------------------------------------------------------------- Tota Rs. 14,81,000/- -----------------------------------------------------------------------------------

In these circumstances, the defendant has failed to pay the amount of Rs. 14,81,000/- which was the amount of the dishonoured cheques.

The plaintiff has also urged in the plaint that in terms of Section 80 of the Negotiable Instruments Act, 1881, the plaintiff is entitled to interest calculated at the rate of 18% p.a. from the date of the cheque till payment of the amount. It works out to an amount of Rs. 6,57,158/- till the date of filing of the suit.

It is noteworthy that the plaintiff has summoned the records of the various complaints filed by him u/s 138 of the Negotiable Instruments Act, 1881 before the court of the Magistrate wherein the originals of the cheques as well as the bank slips giving the reasons for the dishonouring of the cheques by the drawee bank as well as the cheque deposit slip, legal notices, the postal receipts, A.D. Cards as well as the envelopes which were returned back as unclaimed were filed in the criminal complaint. Certified copies thereof have been placed before this Court which were exhibited in accordance with law upon summoning of the record of the complaint including the afore-noticed documents. The plaintiff in this manner has proved the agreement and the promises by the defendant as Exhibit PW1/1 to PW1/3; Certified copies of the twenty cheques as Exhibit PW1/4 to PW1/23; Certificate dated 15th February, 2005 issued by the State Bank of Hyderabad regarding the date of deposit of the cheque as Exhibit PW1/24; the memos issued by the bank giving the reasons for the dishonouring of the cheques as Exhibit PW1/25 to PW1/40; Certified copies of the cheque deposit slips as Exhibit PW1/41 to PW1/43; the certified copies of the legal notices have been proved as Exhibit PW1/44 to PW1/53; the registered acknowledgment due postal slip as Exhibit PW1/54 to PW1/63; the UPC certificates as Exhibit PW1/64 to PW1/73; the certified copies of the envelopes received back as unclaimed as Exhibit PW1/74 to PW1/81 and the AD cards as Exhibit PW1/82 to PW1/86.

Undoubtedly, by virtue of the provisions of Rule 3 Order 37 of the Code of Civil Procedure, the plaintiff was entitled to bring and maintain the present suit and have the same adjudicated by the summary procedure provided under Order 37 of the Code of Civil Procedure. However, in the facts and circumstances of the case and for the afore-noticed reasons, the plaintiff was required to prove its case by leading evidence. The claim and evidence of the plaintiff is unrebutted and undisputed. In these circumstances, there can be no manner of doubt that the plaintiff had adequately established its case. The defendant has clearly and unequivocally admitted its liability in the agreement, promises afore-noticed as also the cheques which have been issued by him which stand dishonoured.

There can also be no disputing the liability of the defendant to pay interest on the amount of cheques which he has wrongfully deprived the plaintiff of. The defendant has also agreed to make payment of interest in the agreement noticed hereinabove. However, the plaintiff has confined its claim of interest to the interest payable under the Negotiable Instruments Act, 1881. In these circumstances, the plaintiff would be entitled to the amount of interest to the tune of Rs. 6,57,158/- as prayed for.

Accordingly, I hereby pass a decree for recovery in favour of the plaintiff against the defendant for a sum of Rs. 21,38,158/-.

The plaintiff shall also be entitled to pendente lite and future interest at the rate of 12% per annum with effect from 1st of February, 2005 till payment.

The plaintiff would be entitled to the cost of the suit which are quantified at Rs. 60,000/-.