Friday 28 December 2012

when no relief is claimed against wife of plaintiff, she is neither necessary nor proper party to suit

suit filed by the plaintiff was for recovery of the amount advanced to the defendant as a loan. No relief has been claimed by the plaintiff against the wife of the defendant. The wife of the defendant had signed two agreements and had agreed to keep the collateral security for the loan and agreeing not to revoke the said security until the amount of Rs.50 lacs with interest was paid. The present suit was not filed for enforcement of collateral security which was jointly owned by the defendant with his wife. In my opinion, since no relief has been claimed in the present suit for enforcement of the joint collateral security and no relief has been claimed by the plaintiff against the wife of the defendant, she is neither necessary nor proper party to the suit. In my view therefore, this defence raised by the defendant is not a bona fide defence.

Bombay High Court
Mr. Mohandas I. Chatlani vs Varad L. Ullal on 10 August, 2012
Bench: R.D. Dhanuka



ORAL JUDGMENT :
By the above Summons for Judgment, the plaintiff has prayed for judgment to be entered in favour of the plaintiff in the suit against the defendant in the sum of Rs.72,68,750/- as more particularly set out in the particulars of claim together with further interest on the principal sum of Rs.50 lacs at the rate of 16.5% p.a., from the date of filing of the suit till payment and/or realization and costs of the suit.
2 Summons for Judgment No.425 of 2010

2. The suit has been filed on the basis of written contracts dated 26 June 2006 and 8 February 2007 between the plaintiff and the defendant.
3. According to the plaintiff, during the period between 31 May 2006 and 27 November 2006 plaintiff had given advance of Rs. 50 lacs to the defendants as set out in the plaint by various cheques which were issued in favour of the defendant and were credited to his account and debited to the account of the plaintiff. On 26 June 2006 collateral agreement came to be entered into between the plaintiff and the defendant. It was recorded that the defendant had borrowed or sought to borrow sum of Rs.50 lacs from the plaintiff by various cheques. It was recorded that the defendant had offered the property namely 303, Status Apartment, Yari Road, Versova, Andheri (West) Mumbai 400 061 in the ownership of defendant and his wife as collateral security for the said sum of Rs. 50 lacs together with interest at the rate of 16.5% p.a. It was recorded that the said arrangement was valid for the period of one year from the date of last cheque. According to the plaintiff, the said document is also signed by the wife of the defendant thereby agreeing to keep her joint property as collateral security for the loan and further agreeing not to seek revocation until the said amount of Rs. 50 lacs with interest was paid. On 8 February 2007 another collateral agreement similar to agreement dated 26 June 2006 came to be executed by and between the plaintiff and defendant. According to 3 Summons for Judgment No.425 of 2010
plaintiff, the defendant had issued in favour of plaintiff, TDS certificate in respect of the interest on the said loan. However, no interest has been paid by the defendant to the plaintiff. The Plaintiff had relied upon the TDS certificate dated 31 March 2008 issued by the defendant showing interest of Rs.2,66,631/- and showing payment of tax deducted at source of Rs.26,663/- on such amount of interest and having deposited the same vide challan no. 90 on 31 March 2008.

4. By his advocate's letter dated 8 May 2010, the plaintiff called upon the defendant to pay the sum of Rs.71,49,332/- together with interest on Rs.50 lacs. On 11 May 2010 the plaintiff through his advocate corrected the typographical error crept in the letter dated 8 May 2010. On 24 May 2010, the defendant through his advocate informed the plaintiff's advocate that one partner of his Advocate's firm was out of India and the defendant shall deal with the letters addressed by the plaintiff through his advocate on his return. In the meanwhile, the defendant denied the demand of the plaintiff in the sum of Rs.71,49,332/-.

5. According to plaintiff when the summons for judgment was being served upon the defendant, the defendant by his advocates letter dated 16 September 2010 gave reply to the letter dated 8 May 2010 and 11 May 2010 and denied 4 Summons for Judgment No.425 of 2010
the claim of the plaintiff. On 29 October 2010, plaintiff through his advocate denied the allegations made by the defendant. The defendant has filed affidavit in reply on 14 December 2011 and sur-rejoinder dated 4 February 2012. Plaintiff has filed rejoinder dated 20 January 2012.

6. I have considered the submissions advanced on behalf of the plaintiff and defendant and perused the pleadings and record filed by both the parties with the assistance of the learned counsel appearing for the parties.
7. The learned senior counsel for the defendant submits that as the last payment alleged to have been made by the plaintiff to the defendant was on 6 th July, 2006 and the suit having been filed on 25 June 2010, the same is barred by law of limitation. The learned counsel for the plaintiff invited my attention to the collateral agreement dated 8 February 2007 which records the loan to the tune of Rs.50 lacs obtained by the defendant from the plaintiff. It is agreed that the said arrangement was valid till 30 September 2007. Admittedly the suit has been filed on 25 June 2010. The cause of action would have arisen only after 30 September 2007. The defendants have issued TDS certificate on 31 March 2008. In my opinion, the suit filed on 25 June 2010 is within time and is not barred by law of limitation.
5 Summons for Judgment No.425 of 2010

8. The learned senior counsel appearing for the defendant submits that the alleged agreement dated 8 February 2007 was unenforceable against the defendant alone as the said agreement was alleged to have been signed by his wife Mrs. Jayanti V. Ullal and she was not joined as party defendant though she was a necessary and/or proper party to the suit. It is submitted that the suit was therefore, bad for non-joinder of necessary and/or proper party to the suit and on this ground alone, the defendant was entitled to unconditional leave to defend the suit. On the other hand, the learned counsel for the plaintiff submits that the suit filed by the plaintiff was for recovery of the amount advanced to the defendant as a loan. No relief has been claimed by the plaintiff against the wife of the defendant. The wife of the defendant had signed two agreements and had agreed to keep the collateral security for the loan and agreeing not to revoke the said security until the amount of Rs.50 lacs with interest was paid. The present suit was not filed for enforcement of collateral security which was jointly owned by the defendant with his wife. In my opinion, since no relief has been claimed in the present suit for enforcement of the joint collateral security and no relief has been claimed by the plaintiff against the wife of the defendant, she is neither necessary nor proper party to the suit. In my view therefore, this defence raised by the defendant is not a bona fide defence.
6 Summons for Judgment No.425 of 2010

9. The learned senior counsel for the defendant next submitted that according to the plaintiff, there exists alleged collateral security for repayment of the alleged dues of the plaintiff and therefore, plaintiff cannot maintain the suit as a summary suit. It is submitted that the plaintiff has not given up his rights in collateral securities mentioned in Exh. A and B to the plaint. The learned senior counsel relied upon the judgment of this Court in the case of State Industrial and Investment corporation of Maharashtra Ltd. Vs. Hargovind Vithaldas and Ors.1 On the other hand, the learned counsel appearing for the plaintiff submits that though plaintiff has not given up his claim in respect of collateral securities, the summary suit filed by the plaintiff is maintainable. It is submitted that that the plaintiff is not bound to proceed against the collateral security and/or release the same before maintaining the suit as a summary suit. The learned counsel placed reliance on the judgment of this court in Suraj Sanghi Finance Ltd. Vs. Credential Finance Ltd. and Ors.2 and M/s. Elegant Capitals Pvt. Ltd. Vs. In Cablenet (Andhra) Limited3. This Court in the case of Suraj Sanghi Finance Ltd. (supra) has held thus :
"An adjustment of security perhaps could be a good defence available for granting conditional leave considering the nature of security and the amounts 1 1990 Mh.L.J. 74
2 Air 2002 Bombay 481
3 201291) ALL MR 305
7 Summons for Judgment No.425 of 2010
involved. It however, does not mean that the Summary suit cannot be filed if otherwise the other predicates of Order 37 of Civil Procedure Code are satisfied. To maintain a summary suit all that plaintiff must show is that the suit falls within the predicates of Order 37. In the instant case, the suit is based on the receipt and agreement acknowledging the intercorporate loan and is secured by collateral securities as referred to earlier. To my mind therefore, the argument advanced on behalf of the defendant that the plaintiff had securities available and they had to first proceed against securities and or release them before maintaining a suit as summary suit, is clearly devoid of merits. Also not sustainable is the argument that the security had to be given up. Under Section 176 of the Indian Contract Act, plaintiff has a right to retain pledged goods, until such time defendants makes payments and then only need return of the pledged goods. The judgment of the Division Bench of this Court construing Section 176 has clearly held that a plaintiff has a right to file a suit for recovery of money without proceeding against pledged goods or other collateral securities. This right conferred on the plaintiff under Section 176 to my mind does not whittle down the right to maintain a suit as summary suit as long as plaintiff satisfies the Court that the suit is based on a written agreement, acknowledgment of debt or based on the negotiable instrument. That contention therefore, has to be rejected."
10. This court in the case of Elegant Capitals Pvt. Ltd. (supra) has reiterated the law laid down in the case of Suraj Sanghi Finance Ltd.
11. In the case of State Industrial and Investment Corporation of Maharashtra 8 Summons for Judgment No.425 of 2010
Ltd. (supra), relied upon by the learned senior counsel for the defendant, admittedly the debt of the plaintiff was fully secured by the defendant company and the value of the security was much more than the debt. Recording such finding, this Court in the said judgment held that where the debt was fully secured and more than it's worth, it was not necessary that this Court should have passed an order for deposit as such. In this case the defendant has disputed the existence of such collateral security having been given to the plaintiff. The defendant has not placed any document on record to show that the value of of such immovable property, on which there was already a charge created in favour of ICICI Bank, was more than the debt of the plaintiff and that the plaintiff was fully secured. In my opinion, the facts in the case of State Industrial Investment (Supra) are clearly distinguishable. The plaintiff has a right to file a suit for recovery of money without proceeding against the collateral securities given by the defendant. In my opinion, since the present suit is filed under Order XXXVII Rule (2)(b)(i) and the parties having entered into written contracts which are at Exh. A and B to the plaint, the suit is maintainable as a summary suit. The Plaintiff is not bound to give up the collateral security. I am therefore, of the view that there is no substance in this defence raised by the defendant that the suit is not maintainable as summary suit.
9 Summons for Judgment No.425 of 2010

12. The learned senior counsel for the defendant submits that the plaintiff and his family members are majority share holders of the company known as M/s. Sai Siddhi Impex Pvt. Ltd. (for short "Company") which is closely held company of the plaintiff. It is submitted that in view of the close and cordial relations between plaintiff and defendant and the plaintiff being reluctant to advance such large amount to the said company, the sum of Rs. 33 lacs was routed through the account of the defendant to the account of the said company. It is submitted that on 31 March 2008 large sum of Rs.2,12,76,142.50 was due and payable by the said company to the defendant. During the period between 29 March 2007 and 18 April 2007 by four different cheques sum of Rs.33 lacs has been re-paid by the defendant to the plaintiff. As far as collateral agreements at Exh. A and B to the plaint are concerned, it is submitted that the said agreements were executed only for the comfort of the plaintiff, in order to justify the alleged transaction as alleged loan to the Income Tax authorities and were not to be acted upon. In the affidavit in reply, the defendant denied the signature of himself and his wife on the agreement dated 8 February, 2007. It is submitted that the account of the defendant was treated as a conduit. The learned senior counsel submitted that the fact that the said company was closely held company of the plaintiff and his family members and that the plaintiff and his family members are 10 Summons for Judgment No.425 of 2010
majority share holders of the said company is not controverted by the plaintiff in his rejoinder filed on 20 January 2012. In support of his plea that the said sum of Rs. 33 lacs was repaid to the plaintiff by the defendant, the learned counsel placed reliance on the certificate dated 3 December 2011 and 5 December 2011 issued by the Union Bank of India certifying that the sum of Rs. 33 lacs was debited to the account of the defendant and credited to the joint account of the plaintiff with Mrs. Sunita Motwani. The learned counsel submits that though the plaintiff has not disputed the factum of receipt of Rs. 33 lacs from the defendant, it is alleged that the said payment was towards another loan transaction of Rs. 46 lacs between plaintiff and the said company. The learned counsel submitted that the said certificate alleged to have been issued by the said company, shows that the plaintiff had transactions with the said M/s. Sai Siddhi Impex Pvt. Ltd. The learned counsel therefore, submits that the documents on record indicate that the sum of Rs. 33 lacs was paid by the plaintiff to the defendant and defendant in turn had made that payment to the said company. The said company thereafter made payment to the defendant. The defendant thereafter returned the sum of Rs. 33 lacs to the plaintiff which shows that the account of the defendant was a conduit and was in order to justify the alleged transaction as alleged loan, to the Income Tax Authorities.
11 Summons for Judgment No.425 of 2010

13. The learned counsel for the plaintiff, on the other hand, submits that on one hand it is pleaded by the defendant that the agreement at Exh. A to the plaint was given only for comfort and on the other hand, the defendant has disputed the signature of himself and his wife on the agreement. The learned counsel submitted that in the letter dated 16 September 2010 which was by way of reply to the letter dated 8 May 2010 and 11 May 2010, the defendant did not deny the signatures on the agreement dated 8 February 2007. On the contrary, it was pleaded that both the agreements were made only as a comfort for the plaintiff so as not to show any linkage between the said company and the plaintiff. The learned counsel submits that in the said letter, the defendant had pleaded that the sum of Rs. 33 lacs was paid over to the said company. The learned counsel submits that the affidavit filed by the defendant contains various false and inconsistent statements. It is submitted that the defendant has not denied issuance of TDS certificate showing the amount of interest acknowledged by the defendant on the amount borrowed and the tax deducted on such interest having been paid to the Government. He submits that the defendant has not disputed in his sur-rejoinder the existence of the certificate dated 14 January 2012 issued by M/s. Sai Siddhi Impex Pvt. Ltd. The learned counsel also placed reliance upon the resolution passed in the meeting of the Board of Directors of the said company held on 18 May 12 Summons for Judgment No.425 of 2010
2006 showing that the defendant was authorized signatory of the said company. The learned counsel submits that the defendant in his sur-rejoinder has admitted the fact that the defendant was authorized signatory and was in the management of the affairs of the said company between the period 2006-08.
14. In my opinion, the record indicates that various cheques in the sum of Rs. 33 lacs were issued by the plaintiff in favour of the defendant and were admittedly credited to the account of the defendant. If according to the defendant, his account was conduit and the said agreements were made only as a comfort to the plaintiff, the defendant could have placed the same on record in writing or could have terminated the same in an ordinary course. On the contrary, defendant had issued TDS certificate in favour of the plaintiff thereby admitting such liability. Though no payment of interest was paid to the plaintiff, the defendant had deducted the tax at source on payment of such interest payable to the plaintiff and had deposited the same with the Government. The defendant has not denied issuance of such certificate in favour of the plaintiff. The defendant has himself admitted that during the period between 2006 and 2008, the defendant was authorized signatory and was in the management of the affairs of M/s. Sai Siddhi Impex Pvt. Ltd. The defendant has not disputed the certificate dated 14 January 2012 issued by M/s. 13 Summons for Judgment No.425 of 2010
Sai Siddhi Impex Pvt. Ltd certifying that the sum of Rs. 33 lacs paid by the defendant to the plaintiff was in respect of another loan transaction of Rs. 46 lacs between the plaintiff and the said company. Defendant who is stated to have obliged the plaintiff and to justify the transaction as alleged loan to the Income Tax authorities can not escape his liability. In my opinion, the defence raised by the defendant is not a bona fide defence and the same is illusory.
15. As far as loan of Rs.17 lacs is concerned, the learned counsel for the defendant submits that the said amount was received from joint account of the plaintiff with his family members and thus joint holders of such accounts were necessary and proper parties to the suit. The plaintiff not having joined the said joint account holders as parties to the suit, the suit is bad for non joinder of necessary parties and the said non-joinder is fatal to the suit filed under Order 1 rule 9 of Code of Civil Procedure. On the other hand, the learned counsel for the plaintiff submits that in the letter dated 16 September 2010, the defendant had flatly denied the receipt of Rs. 17 lacs from the plaintiff. The defendant has not alleged any repayment in respect of the payment of Rs. 17 lacs. The learned counsel placed reliance upon the certificate issued by the banker of the plaintiff showing payment of Rs.17 lacs credited to the account of the defendant and debited to the account of the 14 Summons for Judgment No.425 of 2010
plaintiff jointly held with his family members. The learned counsel submits that it is not the case of the defendant that he had repaid any amount to the family members of the plaintiff or had issued any separate TDS certificate in favour of the family members of the plaintiff. It is submitted that it is not in dispute that the plaintiff was joint account holder with his family members and from such accounts, said sum of Rs. 17 lacs was given to the defendant as a loan.
16. In my opinion, in view of the fact that the plaintiff had advanced sum of Rs. 17 lacs to the defendant and the defendant had issued TDS certificate in favour of the plaintiff and had never treated the said loan as if the loan on behalf of the joint account holders of the plaintiff, said joint account holders are neither necessary parties nor proper parties to the suit. I am therefore, of the opinion that there is no substance in this defence raised by the defendant and the same is totally sham, illusory and moonshine. The defendant has failed to repay the said amount of Rs. 17 lacs to the plaintiff. Therefore, the defendant is not entitled to unconditional leave to defend the suit.
17. I, therefore, pass the following order :
(a) Defendant is granted conditional leave to defend the suit upon defendant depositing sum of Rs. 50 lacs in this Court within eight weeks from today. The defendant is directed to file written statement within four weeks from the date 15 Summons for Judgment No.425 of 2010
of such deposit as directed. Upon such written statement being filed, the suit stands transferred to the list of commercial causes.
(b) The parties then shall complete the discovery and inspection within four weeks thereafter. On such completion of discovery and inspection, the parties shall have liberty to have the suit placed on board for early hearing. (c) Upon such deposit of the amount as directed, the Prothonotary and Senior Master is directed to invest the same in the fixed deposit of a Nationalized Bank initially for the period of two years and thereafter for the like period after obtaining orders from this court.
(d) In the event of defendant failing to deposit the amount as directed, the plaintiff would be at liberty to apply for appropriate orders. (e) Summons for Judgment is accordingly disposed of in the aforesaid terms. (f) There shall be no order as to costs.
R.D. DHANUKA,J.
H.V. Nilegaonkar
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