We find that thereafter, the learned Single Judge has proceeded to deal with other grounds. We feel and, hold that an order permitting the withdrawal of deposited amount, by way of interim arrangement pending the suit and subject to conditions cannot be said to be a decree nor final order in the suit and therefore, this contention raised on behalf of the respondent is rejected.
1.These two appeals which arise from the same summary suit i.e. Summary Suit No.702/92 can be conveniently disposed of by a common judgment and order.
2. The brief and relevant facts which give arise to the filing of the aforesaid appeals can be summarised as under:--
(a) In February 1996, Modiluft Limited (hereinafter referred as the "Original Defendant") approached Leela Capital and Finance Limited (hereinafter referred to as the "Original Plaintiff) for grant of an Inter Corporate Deposit in the sum of Rs. 5 crores for a period of 90 days with interest .at the rate of 27% per annum.
(b) The said loan was granted by the plaintiff to the defendant on 20-2-1996 on terms which were recorded in writing in a letter dated 20-2-1996 addressed by the plaintiff to the defendant. The acceptance of the terms by the defendant was given at the foot of this letter itself. In order to secure the deposit, it was contemplated that the defendant would issue post-dated cheques for the interest and principal amount. Further, security by way of equity shares of listed companies with 50% margin was provided for in the said terms. The amount of Rs. 5 crores was given by the plaintiff to the defendant by a cheque dated 19-2-1996 drawn on State Bank of India and its receipt was further evidenced by a receipt executed by the defendant. The defendant also executed a Demand Promissory Note dated 19-2-1996 promising to pay to the plaintiff the principal sum of Rs. 5 crores along with interest thereon at the rate 27% per annum after 90 days i.e. on 19-5-1996.
(c) On 21-2-1996, the defendant replaced the two original cheques for the amount of Rs. 5 crores and Rs. 25,63,151/~ with substitute cheques. This was done as the original cheques which represented the principal and interest amount had been drawn on a Delhi Bank. The replacement cheques were drawn on a bank inMumbai.
(d) On 10-5-1996, in spite there being an express provision against a rollover of the deposit, the defendant sought extension of the deposit for a period of three months and enclosed a cheque for an amount of Rs. 25,63,151/- towards interest for the period 19-5-1996 to 19-8-1996. The defendant also enclosed another cheque for an amount of Rs. 5 crores and requested the plaintiff not to deposit the earlier cheque for Rs. 5 crores while stating that the earlier cheque towards interest could be deposited.
(e) On 15-5-1996, the plaintiff wrote to the defendant stating that the payment should be without any roll-over and that it would be depositing the earlier cheques and returning the new cheques.
(f On 18-5-1996, the defendant requested the plaintiff to give it one month's time to pay the amount of Rs. 5 crores and not to deposit the cheque on 19-5-1996. The plaintiff rejected this request made by the defendant on the very same date i.e. 18-5-1996.
(g) On 19-5-1996, the plaintiff presented the aforesaid cheques which were returned with the remarks "Funds expected".
(h) On 30-5-1996, the plaintiff again presented the aforesaid two cheques for payment. The cheque for the interest amount was honoured. However, the cheque for the amount of Rs. 5 crores was dishonoured with remarks "Insufficient fund".
(i) On 7-6-1996, the plaintiff issued an Advocates notice to the defendant to pay amount of the dishonoured cheque together with interest.
(j) On 4-12-1996, the plaintiff lodged the aforesaid Summary Suit No. 702/97 in this Court for recovery of sum of Rs. 5,67,68,493.23 along with interest at the rate of 27% per annum.
(k) On 5-2-1997, in an unconnected happening, Indian Oil Corporation filed a winding up petition against the defendant in the Delhi High Court bearing Company Petition No. 68/97.
(1) On 23-4-1997, the plaintiff requested the defendant to sign fresh transfer deeds in respect of the shares lodged by way of security with the Plaintiff.
(m) On 30-6-1997, the plaintiff took out a Summons for Judgment and the affidavit of their officer one Mr. Jayant Athawale was filed in support thereof.
(n) On 6-7-1997, the defendant communicated to the plaintiff that they could not sign the fresh transfer deeds in respect of the shares which were held by the plaintiff by way of security.
(o) On 5-5-1998, the defendant affirmed the reply to the Summons for Judgment which was sworn by one Mrs. Yash Kolhi.
(p) On 29-4-1998, the Delhi High Court appointed the Official Liquidator as the Provisional Liquidator in Company Petition No. 68/97.
(q) In 1999, the appeal came to be filed by the defendant against the order of the Delhi High Court appointing the Provisional Liquidator.
(r) On 6-9-1999, the Delhi High Court directed the defendant to deposit 25% of the admitted amount by 31-12-1999 failing which the winding up of the defendant was to follow.
(s) On 2-1-2000, a sum of Rs. 7 crores was deposited in the Delhi High Court by the defendant.
(t) On 8-5-2000, a Single Judge of the Delhi High Court passed an interim order inter alia directing that decrees/final orders, if any, shall not be executed without the leave of the Court.
(u) On 16-11-2000, the Summons for Judgment filed by the plaintiff was disposed of by Judgment passed by the Single Judge directing the defendant to deposit Rs. 5 crores by November 2001 in 4 equal instalments of Rs. 1.25 crores each commencing at the end of February 2001 as a condition for grant of leave to the defendant to defend the said suit. The order clarified that any one default in paying such instalments would entitle the appellant to pray for a decree. The said order further directed that the amount deposited should be invested in a nationalized bank. It may be stated here that the amount of Rs. 5 crores was directed to be deposited on the express footing that the said amount was an admitted amount.
(v) On 13-2-2001, the defendant filed an appeal being Appeal No. 240/2001 against the aforesaid order dated 16-11-2000.
(w) On 23-4-2001, the Division Bench of this Court dismissed the defendant's appeal No. 240/2001 by observing that amount of Rs. 5 crores which has been directed to be deposited was an admitted amount. When Counsel for the plaintiff applied for liberty to withdraw the undisputed amount, if deposited, the Division Bench granted liberty to apply to the learned Single Judge.
(x) In May 2001, an S.L.P. was filed in the Supreme Court of India by the present defendant against the order of the Division Bench dated 23-4-2001.
(y) On 13-8-2001, the S.L.P. filed by the defendant came to be summarily dismissed by the Supreme Court.
(z) By 29-8-2001, the defendant had deposited Rs. 3.75 crores in this Court after obtaining some extensions.
(z1) On 6-10-2001, in pursuance of the liberty given by the Division Bench of this Court to file an application for withdrawing the money, the plaintiff filed Chamber Summons No. 1293/2001 for permission to withdraw the money deposited by the defendant.
(z2) On 30-10-2001, pending the hearing and disposal of this Chamber Summons, the plaintiff and the defendant entered into terms by which an amount of Rs. 6.37 crores was payable by the defendant to the plaintiff towards full and final settlement of the plaintiffs claim. Out of this, Rs. 5 crores was appropriable towards principal and Rs. 1.37 crores represented interest at a reduced and lower rate of 5% per annum on the principal amount calculable from 20-5-1996 to 31-10-2001. Even this reduced interest of Rs. 1.37 crores was payable in quarterly instalments for a period of two years commencing from the date on which the defendant company resumed operation of flights and in case, the operation of flights was not resumed within a period of one year from the dale of recording the consent terms, then the interest amount was payable within three years from the date of recording of the consent terms in the High Court.
(z3) On 9-11-2001, a Single Judge of this Court (Baam, J.) after hearing both sides granted liberty to the defendant to withdraw Rs. 3.75 crores after recording the statement of the counsel for the plaintiff that the 75% shares would be returned to the defendant or their Advocates.
(z4) On 15-11-2001, the plaintiff returned 75% shares to the Advocates for the defendant.
(z5) On 28-11-2001, one Kishore Gupta claiming to be a person appointed as a Director of the defendant company on 27-11 -2000, filed Chamber Summons No. 1508/2001 praying for stay of the order dated 9-11-2001 and further praying for order restraining the plaintiff from withdrawing the amount of deposit.
(z6) On 29-11-2001, the final instalment of Rs. 1.25 crores was deposited in this Court by the defendant.
(z7) On 21-12-2001, an order was passed in the Chamber Summons No. 1508/2001 by another Single Judge of this Court (J. A. Patil, J.) granting a stay to the order dated 9-11-2001 passed by Baam, J. in Chamber Summons No. 1293/2001 by making chamber Summons No. 1508/2001 absolute in terms of prayer clauses (a), (b) and (d). The present appeal No. 220/2002 has been filed by the plaintiff against this order dated 21-12-2001 passed in the Chamber Summons filed by Kishore Gupta who claimed to be one Director of the defendant.
(z8) Subsequently, by a further order dated 21-12-2001, the learned Single Judge of this Court (J. A. Patil, J.) finally disposed of Chamber Summons No. 1293/2001 by holding that no order was necessary in this Chamber Summons. This order was obviously in view of the final order dated 21-12-2001 passed in Chamber Summons No., 1508/2001. By the order dated 21-12-2001, the defendant was further directed to restore to the plaintiff company the shares which had been handed over by the plaintiff to the defendant under the order of Baam, J. dated 9-11-2001. It is therefore clear that the Chamber Summons No. 1293/2001 was not specifically disposed of on merits but was disposed of as a consequence of the order passed by the learned Single Judge of this Court in Chamber Summons No. 1508/2001. Appeal No. 219/2002 has been preferred by the plaintiff against the final order passed by the Single Judge of this Court in Chamber Summons No. 1293/2001.
3. In this matrix of facts, the main contentions raised on behalf of the plaintiff/appellant in these two appeals can be summarised as follow :--
(a) That Mr, Kishore Gupta, was neither a party to the Summary suit nor a person authorised by the defendant company to intervene or file a Chamber Summons.
He had, therefore, no locus to file Chamber Summons No. 1508/2001, specially when, the money belonged to the company which was represented in the Summary suit and which had not preferred an appeal against the order granting withdrawal passed by Baam J. on 9-11-2001.
(b) That in any case, the amount deposited in this Court was an admitted amount which had been an Inter Corporate Deposit granted as far back as 20-2-1996. It was contended that the company had suffered great loss of interest and that since this money admittedly belonged to the plaintiff company, this Court should exercise its power to allow the plaintiff company to withdraw the amount so that the money could be utilised for their commercial use pending the suit.
4. Insofar as the original defendant and Mr. Kishore Gupta (the applicant in Chamber No. 1508/2001 and respondent No. 2 in Appeal No. 220/2002), common submissions were made by Shri Tulzapurkar. In fact, two Advocates appeared on behalf of the company. One of the Advocates appearing on behalf of company stated that they had filed their vakalatnama earlier, had never challenged the order of withdrawal granted by Justice Baam and were willing to submit to any order of the Court. However, Shri Tulzapurkar Claimed to appear as Counsel for both the defendant company as well as Mr. Kishore Gupta instructed by another firm of Advocate's who had filed their vakalalnama later. Instead of shutting him out on technical grounds, we chose to hear him at length. His contentions can be briefly summarised as follows :--
(a) That Mr. Kishore Gupta was a Director of the company and notwithstanding the fact that he was not authorised by resolution of the board of directors of the company, even if the money deposited did not belong to him personally, he could still file the Chamber Summons as he was duty bound to protect the interest of the company.
(b) That it was the contention of the defendant in the reply to the Summons for Judgment that the plaintiff did not sell the shares at an appropriate time, thereby causing loss to the defendant and that, therefore, the defendant had pleaded a set off in the suit. That in view of such set off being claimed, the amount directed to be deposited and invested should not be allowed to be withdrawn.
(c) That in any case notwithstanding the fact that the amount was an admitted amount, this Court had no power to direct the withdrawal of the amount after the Summons for Judgment had been finally decided, particularly when the order on the Summons for Judgment directed not only deposit but investment of the amount deposited.
(d) That any order permitting the withdrawal of the amount deposited would be in violation of the order passed by the Single Judge of the Delhi High Court directing that decrees/final orders, if any, should not be executed without the leave of the Court.
5. Taking into account the rival contentions of the parties, we now proceed to deal with the issues raised before us.
6. The first issue we deal with as to whether Mr. Kishore Gupta, a Director of the Company could have filed a chamber summons and whether such a chamber summons could have been entertained when Mr. Kishore Gupta was not a party to the Summary Suit. We find from the record that even till today, Mr, Kishore Gupta has not been added as a party to the summary suit. The suit has been filed by the plaintiff company against the defendant for recovery of liquidated payment arising out of a written agreement dated 20-2-1996, the Promissory Note dated 19-2-1996 and the cheque dated 19-5-1996. It is an admitted position before us that when these documents were executed, Mr. Kishore Gupta was not even a Director of the defendant company. He claims to have become a Director much later i.e. 27-11-2000. In our opinion, Mr. Kishore Gupta was not a necessary or proper party in the summary suit. In any case, he was never added as a party under the provision of Order 1, Rule 10 of the Civil Procedure Code, 1908. We fail to understand as to how a person who is not a party to the suit could file a chamber summons seeking substantial reliefs and as to how such reliefs could have been granted without adding the said person as party to the suit. When we asked the counsel for defendant as to under which provision of law, a person who is not a party to a suit could seek reliefs from the Court, no specific provision or authority in this regard could be pointed out to us. Counsel for the defendant could only say that Mr. Kishore Gupta was interested in the welfare of the defendant company and therefore, he could have filed such a chamber summons. We are unable to accept this argument as a commercial suit cannot be treated on par with public interest litigation in which the question of locus standi is treated on a different footing. We find that in the chamber summons filed by Mr. Kishore Gupta, there was not even a prayer for being added as party. We find that these aspects of the matter has not been dealt with at all in the impugned judgment dated 21-12-2001 passed by the learned Single Judge in Chamber Summons No. 1508/2001. In the circumstances, we hold the Chambers Summons No. 1508/2001 was not maintainable in law and could not have been entertained as the same was filed by a person who was not a party to the suit.
7. The second issue raised on behalf of the appellant is that in any case, chamber summons made by Mr. Kishore Gupta could not have been entertained as the company was already represented and Mr. Kishore Gupta was only one amongst several Directors of the Company who had not been specifically authorised by the company to file the said chamber summons. In this regard, Counsel for Mr. Kishore Gupta fairly conceded that there was no resolution of the company authorising Mr. Kishore Gupta to file Chamber Summons No. 1508/2001. In this regard, Counsel for the plaintiffs placed reliance on three authorities. The first was of the decision of the Delhi High Court in the case of Nibro Limited v. National Insurance Company Ltd. reported in 7997 Company Cases page
388. In that case, a suit had been filed on behalf of the company by a person who was a Director and the question raised was as to whether the said Director was required to be authorized by a Board Resolution to file the suit. It was observed by the Delhi High Court as under :--
"It is well-settled that under Section 291 of the Companies Act, 1956, except where express provision is made that the powers of a company in respect of a particular matter are to be exercised by the company in general meeting, in all other cases the board of directors are entitled to exercise all its powers. Individual directors have such powers as are vested in them by the memorandum and articles. It is true that ordinarily the Court will not non-suit a person on account of technicalities. However, the question of authority to institute a suit on behalf of a company is not a technical matter. It has far reaching effects. It often affects the policy and events of a company. Thus, unless a power to institute a suit is specifically conferred on a particular director, he has no authority to institute a suit on behalf of the Company. Needless to say that such a power can be conferred by the board of directors only on passing resolution in that regard."
In that case, after making the aforesaid observations, the suit on behalf of the plaintiff company came to be dismissed.
The second case relied upon by the plaintiff is a decision of the Madras High Court in the case of K. N. Sankaranarayanan and Anr. v. Shree Consultation and Services Pvt. Ltd. and others reported in (1994) 80 Company Cases Page 558. In this case, the company petition had been instituted in the name of the company by one Chandra Prakash Sodhani claiming to be the director of the company. The said Chandra Prakash Sodhani had verified the petition and had signed the same. It was argued on behalf of the original respondents that since the petitioner was a company, the institution of any proceedings on its behalf should have been authorised by its board of directors. The learned Single Judge of the Madras High Court after reproducing the ratio in the case of Nibro Limited v. National Insurance Company Limited proceeded to allow the appeal and dismissed the company petition as having been filed without any valid authority. One more decision cited on behalf of the appellants is a decision of the Madras High Court in the case of Swadharma Swarajya Sangh v. Indian Commerce and Industries Co. Pvt. Ltd. reported in 7999 (98 Company cases) page 151. In this case, a suit had been filed by a company without a resolution of Board of Directors authorising a particular director to file a suit. It was held that the suit was not maintainable as the same was not filed by the person authorised under Order 29, Rule 1 of Civil Procedure Code. The decision in this case, however, turned on certain articles of the memorandum and articles of association.
In the present case, nothing has been shown to us to indicate that Mr. Kishore Gupta was authorised by the company to file a chamber summons. On the contrary, it has been fairly conceded that no authority had been given to him by the Board of Directors.
The learned Single Judge ignored the decisions cited by holding that the chamber summons had been taken out by Mr. Kishore Gupta not on behalf of the defendant company but in his individual capacity as one of the directors of the defendant company and that the reliefs prayed in the chamber summons were directed not against defendant company of which Mr. Kishore Gupta was a director, but against the plaintiff company. We find that this reasoning is not proper as the Director in his individual capacity would not be a necessary or proper party in a summary suit where the company in which he is a director is the defendant. Further, the nature of the relief which such individual Director had sought in the chamber summons would have no bearing on the question of authority and locus standi of such Director to file such chamber summons. In the circumstances, we hold that Mr. Kishore Gupta had no authority and therefore, no locus standi to file Chamber Summons No. 1508/2001.
8. The third issue raised before us as to whether the order permitting the withdrawal of the amount could be said to be in violation of order dated 8-5-2000 passed by the Single Judge of the Delhi High Court. This contention canvassed on behalf of the respondent has not even been accepted by the learned Single Judge. In this regard, the finding of the learned Single Judge is as follows :--
"The applicant has referred to the order dated 8-5-2000 passed in Company Application No. 550/2000 whereby it was directed that decrees and final order, if any, shall not be executed without the leave of the Court. The plaintiff company was a party to the said company application. Shri Chagla further pointed out what was prohibited by the said order is the execution of the decree and final order. He pointed out that order dated 9-11-2001 is neither a decree nor final order and therefore, the prohibition contained in the order 8-5-2000 passed by the Delhi High Court cannot operate against the plaintiff. Technically, the submission of Shri Chagla is correct but the matter does not end there ........."
We find that thereafter, the learned Single Judge has proceeded to deal with other grounds. We feel and, hold that an order permitting the withdrawal of deposited amount, by way of interim arrangement pending the suit and subject to conditions cannot be said to be a decree nor final order in the suit and therefore, this contention raised on behalf of the respondent is rejected.
9. That brings us to the last issue as to whether in a summary suit, the amount directed to be deposited can be permitted to be withdrawn. In the present case, we find that the learned Judge while deciding the summons for judgment directed the deposit of Rs. 5 crores because the said amount was an admitted amount. This order was challenged in appeal and merged with the appellate order passed by the Division Bench of this Court in which not only the appeal came to be dismissed on the ground that no interference was called for against deposit of admitted amount but liberty was granted to the plaintiff by the Division Bench specifically permitting the plaintiff to apply for withdrawal of the deposit. It was clearly in pursuance of such express liberty granted by the Division Bench that the plaintiffs preferred Chamber Summons No. 1293/2001 for withdrawal of the amount. Advocate for the respondent placed reliance in the case of M/s. Classic Strips Pvt. Ltd, v. Arrow Converters Pvt. Ltd. an unreported ruling of this Court in Appeal No. 109/94 delivered on 14-2-1994. A perusal of the facts of that case would indicate that in a summary suit, the Chamber Judge had granted conditional leave on appellants depositing sum of Rs. 25 lacs with the Prothonotary and Senior Master. The order passed by the Chamber Judge had been carried in appeal before the Division Bench of this Court and the appellate Court had reduced the amount to Rs. 15 lacs. The defendant had carried the matter in a S.L.P. but the same had ended in dismissal. The matter was then again placed before the learned chamber Judge to ascertain whether the amount had been deposited and taking advantage of this fact, a request was made on behalf of the plaintiff for a direction to the Prothonotary and Senior Master to handover amount of Rs. 15 lacs to the plaintiff and this was acceded to. The Division Bench in this case laid down that the procedure followed would entitle the parties to recover the amount before obtaining decree and should not be adopted. In that case, the Division Bench held that the defence in the case could not have been said to be frivolous.
10. In our opinion, insofar as the aforesaid Division Bench judgment holds that a procedure which would entitle the parties to recover the amount before obtaining decree should not be adopted, the same does not appear to be an absolute position in law and such observations must be confined to the procedure as followed in the facts of the aforesaid case. We have noted that in the case of Raj Duggal v. Ramesh Kumar Bansal reported in 1991 Supp (1) SCC 191, the Apex Court permitted the plaintiff to be paid the amount pending the suit and even before a final decree was passed. Operative portion of the order passed by the Supreme Court in the aforesaid case is as under :--
"The appeal is, accordingly, allowed and the appellant granted leave to defend the suit on condition that the amount of Rs. 20,000 deposited in this case pursuant to the earlier orders made in this proceeding shall, during the pendency of the suit, be paid to and retained by the respondent-plaintiff subject to the condition that if ultimately respondent-plaintiff fails in his suit he shall be liable to restitute the said sum of Rs. 20,000 to the appellant defendant with interest thereon at 9 per cent per annum."
We may also mention that relying upon the aforesaid judgment of the Apex Court in the case of Raj Duggal v. Ramesh Kumar Bansal reported in 7997 Supp (1) SCC 191, this Court has permitted the plaintiff to withdraw amounts before passing of the final decree in few judgments which have been brought to our notice. The first of such judgment is the judgment of the Single Bench of this Court passed in Summons for Judgment No. 164/2000 in Summary Suit No. 5502/99 in the case of Suraj Sanghi Finance Ltd. v. Credential Finance Ltd. and others delivered on 3-6-2002 (since reported in 2002(4) Mh.LJ. 770). The second of such judgment is another judgment of the Single Bench of this Court in the case Motorola India Ltd. v. Kiklu L Malani in Summons for Judgment No. 234/2000 in Summary Suit No. 544 of 2000 passed on 11-6-2002 (since reported in 2002(4) Mh.LJ. 717).
Further in the latter two judgments of the Single Judge, the plaintiff was allowed liberty to withdraw the amount because leave was granted as a mercy as per proposition No. 5 laid down by the Apex Court in Mechalec Engineers and Manufacturers v. M/s Basic Equipments Corporation, . In, our opinion, the present case of the plaintiff stands on a different and higher footing as the amount directed to be deposited was an admitted amount.
11. We find that the facts in present case can be said to be distinguishable from the facts of the case relied upon. The two distinguishing factors are as under:--
(a) That in the present case, the appellate Court dealing with the order passed in the summons for judgment itself granted liberty to the plaintiff to apply for a withdrawal of the amount. In another words, the further proceedings i.e. Chamber summons No. 1293/2001 for withdrawal was taken out in pursuance of such specific liberty, in our opinion, the orders passed therein are, therefore, in continuation and by way of an extension to the orders passed on the summons for judgment.
(b) That quite apart from the aforesaid, in the present case, the deposit was directed in respect of an admitted amount.
Insofar as admitted amounts are concerned, we are of the opinion that such amounts are treated on a completely different footing under Order 37 of the Civil Procedure Code. In this connection, it would be relevant to reproduce Order XXXVII(3)(5) (seconded proviso) as under :--
"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."
Rule 222 of the Bombay High Court (Original Side) Rules, 1980 which deals with summary suits also has some relevance to our further findings and therefore, we reproduce the said rule :--
"222. Judgment for part of claim.--If it appears that the defence set up by the defendant applied only to a part of the plaintiff's claim, or that any part of the claim is admitted, the plaintiff shall have Judgment forthwith for such part of his claim as the defence does not apply to or as is admitted, subject to such terms, if any, as to suspending execution, taxation of costs, or otherwise, as the Judges may think fit, and the defendant may be allowed to defend as to remaining claim of the plaintiff."
13. In our opinion, when both under Rule 222 as well as under the provisions of Order 12, Rule 6, insofar as admitted amounts are concerned, the power of the Court can extend to the passing of a decree, but if a Court chooses not to exercise or does not exercise such power, it is still open for the Court, in law, in an appropriate case by the use of power under Section 151 for the Court to permit the plaintiff to withdraw an admitted amount, subject to appropriate conditions if the Court thinks necessary. We make these observations mindful of the observations of the Supreme Court in the case of Ramkarandas Radhavallabh v. Bhagwandas Dwarkadas reported in A/7? 7965 SC 1144 wherein the Apex Court while considering a case under Order XXXVII laid down that the inherent powers of the Court under Section 151 should be exercised by the Court in very exceptional circumstances for which the code does not lay down any procedure. We find the present case to be one of the nature where the powers under Section 151 are required to be exercised in the background and circumstances of the case,
14. We also find that the position in respect to monies deposited under an conditional order based on an un-admitted amount is different from the position which obtains in respect of the deposit of an admitted amount. In the former case, the amount directed to be deposited is an approximation based upon the subjective satisfaction and discretion of the Court but in the latter case, the amount directed to be deposited is an ascertained amount duly admitted by the defendant himself as due and payable to the plaintiff. In the present case, we find that the defendant company having obtained a loan as far back on 20-2-1996, has successfully resisted the repayment of the amount through legal devices which we have held to be improper and untenable. If such protection is granted to a dishonest defendant, the litigants are likely to loose faith in the judicial system and monies which could be utilised for business and commerce would lie locked up for years together while the suits remain pending a final disposal.
15. The plea taken on behalf of the respondent that they have claimed a set off because the plaintiff did not sell the shares given by way of security, does not impress us. It is well settled that a creditors remedy of proceeding to dispose of securities is separate and distinct from his right to peruse legal remedies to recover the money through the process of law. (See State Bank of India v. Smt. Neela Ashok Naik, 2000(1) Mh.LJ. 801 = AIR 2000 Bombay 151 Division Bench). We cannot also lose sight of the fact that the defendant company created hurdles in giving fresh transfer forms in respect of the shares when called upon to do so. In any case, in our opinion, the plaintiff company was within its rights to seek the recovery of the money due to it by the filing of the present summary suit.
16. The last question that remains is as to what order would be just and proper. In this connection reliance has been placed on the order passed by the Apex Court in the case of Raj Duggal v. Rameah Kumar Bansal reported in 1991 Supp (1) SCC 191. In that case, the Apex Court while granting leave directed the amount deposited to be paid and to be retained by the respondent-plaintiff subject to the condition that if ultimately the plaintiff failed in his suit, he would be liable to restitute the said deposited amount to the defendant with interest thereon at 9% per annum. In the present case, we intend to impose a similar condition to be incorporated in a undertaking.
17. It is, therefore, ordered as under :--
"The appeals are allowed with costs and the appellant/plaintiff Leela Capital and Finance Limited is permitted to withdraw the amount of Rs. 5 crores deposited in this Court upon furnishing an undertaking that they will restitute the said amount of Rs. 5 crores or such part thereof with 9% interest, to the defendant, if and as directed by this Court at the time of the final decision in the suit and subject to the further condition that all the shares given by the defendant to the plaintiff by way of security and remaining with the plaintiff will be given back to the defendant by the plaintiff within a period of eight weeks from the date of this Judgment. Grant of certified copy of this judgment and order is expedited."
After the judgment was pronounced, a prayer was made for stay of the judgment. For the reasons mentioned in the judgment as also from the attending circumstances, we do not feel any justification for staying the judgment. Hence, request is rejected,
Prothonotary and Senior Master and parties to act on the authenticated copy of this order.
Print Page
Bombay High Court
Leela Capital And Finance Ltd. vs Modiluft Limited on 1 November, 2002
Equivalent citations: AIR 2003 Bom 111, 2003 (2) BomCR 683
Bench: V Palshikar, R Mohite
1.These two appeals which arise from the same summary suit i.e. Summary Suit No.702/92 can be conveniently disposed of by a common judgment and order.
2. The brief and relevant facts which give arise to the filing of the aforesaid appeals can be summarised as under:--
(a) In February 1996, Modiluft Limited (hereinafter referred as the "Original Defendant") approached Leela Capital and Finance Limited (hereinafter referred to as the "Original Plaintiff) for grant of an Inter Corporate Deposit in the sum of Rs. 5 crores for a period of 90 days with interest .at the rate of 27% per annum.
(b) The said loan was granted by the plaintiff to the defendant on 20-2-1996 on terms which were recorded in writing in a letter dated 20-2-1996 addressed by the plaintiff to the defendant. The acceptance of the terms by the defendant was given at the foot of this letter itself. In order to secure the deposit, it was contemplated that the defendant would issue post-dated cheques for the interest and principal amount. Further, security by way of equity shares of listed companies with 50% margin was provided for in the said terms. The amount of Rs. 5 crores was given by the plaintiff to the defendant by a cheque dated 19-2-1996 drawn on State Bank of India and its receipt was further evidenced by a receipt executed by the defendant. The defendant also executed a Demand Promissory Note dated 19-2-1996 promising to pay to the plaintiff the principal sum of Rs. 5 crores along with interest thereon at the rate 27% per annum after 90 days i.e. on 19-5-1996.
(c) On 21-2-1996, the defendant replaced the two original cheques for the amount of Rs. 5 crores and Rs. 25,63,151/~ with substitute cheques. This was done as the original cheques which represented the principal and interest amount had been drawn on a Delhi Bank. The replacement cheques were drawn on a bank inMumbai.
(d) On 10-5-1996, in spite there being an express provision against a rollover of the deposit, the defendant sought extension of the deposit for a period of three months and enclosed a cheque for an amount of Rs. 25,63,151/- towards interest for the period 19-5-1996 to 19-8-1996. The defendant also enclosed another cheque for an amount of Rs. 5 crores and requested the plaintiff not to deposit the earlier cheque for Rs. 5 crores while stating that the earlier cheque towards interest could be deposited.
(e) On 15-5-1996, the plaintiff wrote to the defendant stating that the payment should be without any roll-over and that it would be depositing the earlier cheques and returning the new cheques.
(f On 18-5-1996, the defendant requested the plaintiff to give it one month's time to pay the amount of Rs. 5 crores and not to deposit the cheque on 19-5-1996. The plaintiff rejected this request made by the defendant on the very same date i.e. 18-5-1996.
(g) On 19-5-1996, the plaintiff presented the aforesaid cheques which were returned with the remarks "Funds expected".
(h) On 30-5-1996, the plaintiff again presented the aforesaid two cheques for payment. The cheque for the interest amount was honoured. However, the cheque for the amount of Rs. 5 crores was dishonoured with remarks "Insufficient fund".
(i) On 7-6-1996, the plaintiff issued an Advocates notice to the defendant to pay amount of the dishonoured cheque together with interest.
(j) On 4-12-1996, the plaintiff lodged the aforesaid Summary Suit No. 702/97 in this Court for recovery of sum of Rs. 5,67,68,493.23 along with interest at the rate of 27% per annum.
(k) On 5-2-1997, in an unconnected happening, Indian Oil Corporation filed a winding up petition against the defendant in the Delhi High Court bearing Company Petition No. 68/97.
(1) On 23-4-1997, the plaintiff requested the defendant to sign fresh transfer deeds in respect of the shares lodged by way of security with the Plaintiff.
(m) On 30-6-1997, the plaintiff took out a Summons for Judgment and the affidavit of their officer one Mr. Jayant Athawale was filed in support thereof.
(n) On 6-7-1997, the defendant communicated to the plaintiff that they could not sign the fresh transfer deeds in respect of the shares which were held by the plaintiff by way of security.
(o) On 5-5-1998, the defendant affirmed the reply to the Summons for Judgment which was sworn by one Mrs. Yash Kolhi.
(p) On 29-4-1998, the Delhi High Court appointed the Official Liquidator as the Provisional Liquidator in Company Petition No. 68/97.
(q) In 1999, the appeal came to be filed by the defendant against the order of the Delhi High Court appointing the Provisional Liquidator.
(r) On 6-9-1999, the Delhi High Court directed the defendant to deposit 25% of the admitted amount by 31-12-1999 failing which the winding up of the defendant was to follow.
(s) On 2-1-2000, a sum of Rs. 7 crores was deposited in the Delhi High Court by the defendant.
(t) On 8-5-2000, a Single Judge of the Delhi High Court passed an interim order inter alia directing that decrees/final orders, if any, shall not be executed without the leave of the Court.
(u) On 16-11-2000, the Summons for Judgment filed by the plaintiff was disposed of by Judgment passed by the Single Judge directing the defendant to deposit Rs. 5 crores by November 2001 in 4 equal instalments of Rs. 1.25 crores each commencing at the end of February 2001 as a condition for grant of leave to the defendant to defend the said suit. The order clarified that any one default in paying such instalments would entitle the appellant to pray for a decree. The said order further directed that the amount deposited should be invested in a nationalized bank. It may be stated here that the amount of Rs. 5 crores was directed to be deposited on the express footing that the said amount was an admitted amount.
(v) On 13-2-2001, the defendant filed an appeal being Appeal No. 240/2001 against the aforesaid order dated 16-11-2000.
(w) On 23-4-2001, the Division Bench of this Court dismissed the defendant's appeal No. 240/2001 by observing that amount of Rs. 5 crores which has been directed to be deposited was an admitted amount. When Counsel for the plaintiff applied for liberty to withdraw the undisputed amount, if deposited, the Division Bench granted liberty to apply to the learned Single Judge.
(x) In May 2001, an S.L.P. was filed in the Supreme Court of India by the present defendant against the order of the Division Bench dated 23-4-2001.
(y) On 13-8-2001, the S.L.P. filed by the defendant came to be summarily dismissed by the Supreme Court.
(z) By 29-8-2001, the defendant had deposited Rs. 3.75 crores in this Court after obtaining some extensions.
(z1) On 6-10-2001, in pursuance of the liberty given by the Division Bench of this Court to file an application for withdrawing the money, the plaintiff filed Chamber Summons No. 1293/2001 for permission to withdraw the money deposited by the defendant.
(z2) On 30-10-2001, pending the hearing and disposal of this Chamber Summons, the plaintiff and the defendant entered into terms by which an amount of Rs. 6.37 crores was payable by the defendant to the plaintiff towards full and final settlement of the plaintiffs claim. Out of this, Rs. 5 crores was appropriable towards principal and Rs. 1.37 crores represented interest at a reduced and lower rate of 5% per annum on the principal amount calculable from 20-5-1996 to 31-10-2001. Even this reduced interest of Rs. 1.37 crores was payable in quarterly instalments for a period of two years commencing from the date on which the defendant company resumed operation of flights and in case, the operation of flights was not resumed within a period of one year from the dale of recording the consent terms, then the interest amount was payable within three years from the date of recording of the consent terms in the High Court.
(z3) On 9-11-2001, a Single Judge of this Court (Baam, J.) after hearing both sides granted liberty to the defendant to withdraw Rs. 3.75 crores after recording the statement of the counsel for the plaintiff that the 75% shares would be returned to the defendant or their Advocates.
(z4) On 15-11-2001, the plaintiff returned 75% shares to the Advocates for the defendant.
(z5) On 28-11-2001, one Kishore Gupta claiming to be a person appointed as a Director of the defendant company on 27-11 -2000, filed Chamber Summons No. 1508/2001 praying for stay of the order dated 9-11-2001 and further praying for order restraining the plaintiff from withdrawing the amount of deposit.
(z6) On 29-11-2001, the final instalment of Rs. 1.25 crores was deposited in this Court by the defendant.
(z7) On 21-12-2001, an order was passed in the Chamber Summons No. 1508/2001 by another Single Judge of this Court (J. A. Patil, J.) granting a stay to the order dated 9-11-2001 passed by Baam, J. in Chamber Summons No. 1293/2001 by making chamber Summons No. 1508/2001 absolute in terms of prayer clauses (a), (b) and (d). The present appeal No. 220/2002 has been filed by the plaintiff against this order dated 21-12-2001 passed in the Chamber Summons filed by Kishore Gupta who claimed to be one Director of the defendant.
(z8) Subsequently, by a further order dated 21-12-2001, the learned Single Judge of this Court (J. A. Patil, J.) finally disposed of Chamber Summons No. 1293/2001 by holding that no order was necessary in this Chamber Summons. This order was obviously in view of the final order dated 21-12-2001 passed in Chamber Summons No., 1508/2001. By the order dated 21-12-2001, the defendant was further directed to restore to the plaintiff company the shares which had been handed over by the plaintiff to the defendant under the order of Baam, J. dated 9-11-2001. It is therefore clear that the Chamber Summons No. 1293/2001 was not specifically disposed of on merits but was disposed of as a consequence of the order passed by the learned Single Judge of this Court in Chamber Summons No. 1508/2001. Appeal No. 219/2002 has been preferred by the plaintiff against the final order passed by the Single Judge of this Court in Chamber Summons No. 1293/2001.
3. In this matrix of facts, the main contentions raised on behalf of the plaintiff/appellant in these two appeals can be summarised as follow :--
(a) That Mr, Kishore Gupta, was neither a party to the Summary suit nor a person authorised by the defendant company to intervene or file a Chamber Summons.
He had, therefore, no locus to file Chamber Summons No. 1508/2001, specially when, the money belonged to the company which was represented in the Summary suit and which had not preferred an appeal against the order granting withdrawal passed by Baam J. on 9-11-2001.
(b) That in any case, the amount deposited in this Court was an admitted amount which had been an Inter Corporate Deposit granted as far back as 20-2-1996. It was contended that the company had suffered great loss of interest and that since this money admittedly belonged to the plaintiff company, this Court should exercise its power to allow the plaintiff company to withdraw the amount so that the money could be utilised for their commercial use pending the suit.
4. Insofar as the original defendant and Mr. Kishore Gupta (the applicant in Chamber No. 1508/2001 and respondent No. 2 in Appeal No. 220/2002), common submissions were made by Shri Tulzapurkar. In fact, two Advocates appeared on behalf of the company. One of the Advocates appearing on behalf of company stated that they had filed their vakalatnama earlier, had never challenged the order of withdrawal granted by Justice Baam and were willing to submit to any order of the Court. However, Shri Tulzapurkar Claimed to appear as Counsel for both the defendant company as well as Mr. Kishore Gupta instructed by another firm of Advocate's who had filed their vakalalnama later. Instead of shutting him out on technical grounds, we chose to hear him at length. His contentions can be briefly summarised as follows :--
(a) That Mr. Kishore Gupta was a Director of the company and notwithstanding the fact that he was not authorised by resolution of the board of directors of the company, even if the money deposited did not belong to him personally, he could still file the Chamber Summons as he was duty bound to protect the interest of the company.
(b) That it was the contention of the defendant in the reply to the Summons for Judgment that the plaintiff did not sell the shares at an appropriate time, thereby causing loss to the defendant and that, therefore, the defendant had pleaded a set off in the suit. That in view of such set off being claimed, the amount directed to be deposited and invested should not be allowed to be withdrawn.
(c) That in any case notwithstanding the fact that the amount was an admitted amount, this Court had no power to direct the withdrawal of the amount after the Summons for Judgment had been finally decided, particularly when the order on the Summons for Judgment directed not only deposit but investment of the amount deposited.
(d) That any order permitting the withdrawal of the amount deposited would be in violation of the order passed by the Single Judge of the Delhi High Court directing that decrees/final orders, if any, should not be executed without the leave of the Court.
5. Taking into account the rival contentions of the parties, we now proceed to deal with the issues raised before us.
6. The first issue we deal with as to whether Mr. Kishore Gupta, a Director of the Company could have filed a chamber summons and whether such a chamber summons could have been entertained when Mr. Kishore Gupta was not a party to the Summary Suit. We find from the record that even till today, Mr, Kishore Gupta has not been added as a party to the summary suit. The suit has been filed by the plaintiff company against the defendant for recovery of liquidated payment arising out of a written agreement dated 20-2-1996, the Promissory Note dated 19-2-1996 and the cheque dated 19-5-1996. It is an admitted position before us that when these documents were executed, Mr. Kishore Gupta was not even a Director of the defendant company. He claims to have become a Director much later i.e. 27-11-2000. In our opinion, Mr. Kishore Gupta was not a necessary or proper party in the summary suit. In any case, he was never added as a party under the provision of Order 1, Rule 10 of the Civil Procedure Code, 1908. We fail to understand as to how a person who is not a party to the suit could file a chamber summons seeking substantial reliefs and as to how such reliefs could have been granted without adding the said person as party to the suit. When we asked the counsel for defendant as to under which provision of law, a person who is not a party to a suit could seek reliefs from the Court, no specific provision or authority in this regard could be pointed out to us. Counsel for the defendant could only say that Mr. Kishore Gupta was interested in the welfare of the defendant company and therefore, he could have filed such a chamber summons. We are unable to accept this argument as a commercial suit cannot be treated on par with public interest litigation in which the question of locus standi is treated on a different footing. We find that in the chamber summons filed by Mr. Kishore Gupta, there was not even a prayer for being added as party. We find that these aspects of the matter has not been dealt with at all in the impugned judgment dated 21-12-2001 passed by the learned Single Judge in Chamber Summons No. 1508/2001. In the circumstances, we hold the Chambers Summons No. 1508/2001 was not maintainable in law and could not have been entertained as the same was filed by a person who was not a party to the suit.
7. The second issue raised on behalf of the appellant is that in any case, chamber summons made by Mr. Kishore Gupta could not have been entertained as the company was already represented and Mr. Kishore Gupta was only one amongst several Directors of the Company who had not been specifically authorised by the company to file the said chamber summons. In this regard, Counsel for Mr. Kishore Gupta fairly conceded that there was no resolution of the company authorising Mr. Kishore Gupta to file Chamber Summons No. 1508/2001. In this regard, Counsel for the plaintiffs placed reliance on three authorities. The first was of the decision of the Delhi High Court in the case of Nibro Limited v. National Insurance Company Ltd. reported in 7997 Company Cases page
388. In that case, a suit had been filed on behalf of the company by a person who was a Director and the question raised was as to whether the said Director was required to be authorized by a Board Resolution to file the suit. It was observed by the Delhi High Court as under :--
"It is well-settled that under Section 291 of the Companies Act, 1956, except where express provision is made that the powers of a company in respect of a particular matter are to be exercised by the company in general meeting, in all other cases the board of directors are entitled to exercise all its powers. Individual directors have such powers as are vested in them by the memorandum and articles. It is true that ordinarily the Court will not non-suit a person on account of technicalities. However, the question of authority to institute a suit on behalf of a company is not a technical matter. It has far reaching effects. It often affects the policy and events of a company. Thus, unless a power to institute a suit is specifically conferred on a particular director, he has no authority to institute a suit on behalf of the Company. Needless to say that such a power can be conferred by the board of directors only on passing resolution in that regard."
In that case, after making the aforesaid observations, the suit on behalf of the plaintiff company came to be dismissed.
The second case relied upon by the plaintiff is a decision of the Madras High Court in the case of K. N. Sankaranarayanan and Anr. v. Shree Consultation and Services Pvt. Ltd. and others reported in (1994) 80 Company Cases Page 558. In this case, the company petition had been instituted in the name of the company by one Chandra Prakash Sodhani claiming to be the director of the company. The said Chandra Prakash Sodhani had verified the petition and had signed the same. It was argued on behalf of the original respondents that since the petitioner was a company, the institution of any proceedings on its behalf should have been authorised by its board of directors. The learned Single Judge of the Madras High Court after reproducing the ratio in the case of Nibro Limited v. National Insurance Company Limited proceeded to allow the appeal and dismissed the company petition as having been filed without any valid authority. One more decision cited on behalf of the appellants is a decision of the Madras High Court in the case of Swadharma Swarajya Sangh v. Indian Commerce and Industries Co. Pvt. Ltd. reported in 7999 (98 Company cases) page 151. In this case, a suit had been filed by a company without a resolution of Board of Directors authorising a particular director to file a suit. It was held that the suit was not maintainable as the same was not filed by the person authorised under Order 29, Rule 1 of Civil Procedure Code. The decision in this case, however, turned on certain articles of the memorandum and articles of association.
In the present case, nothing has been shown to us to indicate that Mr. Kishore Gupta was authorised by the company to file a chamber summons. On the contrary, it has been fairly conceded that no authority had been given to him by the Board of Directors.
The learned Single Judge ignored the decisions cited by holding that the chamber summons had been taken out by Mr. Kishore Gupta not on behalf of the defendant company but in his individual capacity as one of the directors of the defendant company and that the reliefs prayed in the chamber summons were directed not against defendant company of which Mr. Kishore Gupta was a director, but against the plaintiff company. We find that this reasoning is not proper as the Director in his individual capacity would not be a necessary or proper party in a summary suit where the company in which he is a director is the defendant. Further, the nature of the relief which such individual Director had sought in the chamber summons would have no bearing on the question of authority and locus standi of such Director to file such chamber summons. In the circumstances, we hold that Mr. Kishore Gupta had no authority and therefore, no locus standi to file Chamber Summons No. 1508/2001.
8. The third issue raised before us as to whether the order permitting the withdrawal of the amount could be said to be in violation of order dated 8-5-2000 passed by the Single Judge of the Delhi High Court. This contention canvassed on behalf of the respondent has not even been accepted by the learned Single Judge. In this regard, the finding of the learned Single Judge is as follows :--
"The applicant has referred to the order dated 8-5-2000 passed in Company Application No. 550/2000 whereby it was directed that decrees and final order, if any, shall not be executed without the leave of the Court. The plaintiff company was a party to the said company application. Shri Chagla further pointed out what was prohibited by the said order is the execution of the decree and final order. He pointed out that order dated 9-11-2001 is neither a decree nor final order and therefore, the prohibition contained in the order 8-5-2000 passed by the Delhi High Court cannot operate against the plaintiff. Technically, the submission of Shri Chagla is correct but the matter does not end there ........."
We find that thereafter, the learned Single Judge has proceeded to deal with other grounds. We feel and, hold that an order permitting the withdrawal of deposited amount, by way of interim arrangement pending the suit and subject to conditions cannot be said to be a decree nor final order in the suit and therefore, this contention raised on behalf of the respondent is rejected.
9. That brings us to the last issue as to whether in a summary suit, the amount directed to be deposited can be permitted to be withdrawn. In the present case, we find that the learned Judge while deciding the summons for judgment directed the deposit of Rs. 5 crores because the said amount was an admitted amount. This order was challenged in appeal and merged with the appellate order passed by the Division Bench of this Court in which not only the appeal came to be dismissed on the ground that no interference was called for against deposit of admitted amount but liberty was granted to the plaintiff by the Division Bench specifically permitting the plaintiff to apply for withdrawal of the deposit. It was clearly in pursuance of such express liberty granted by the Division Bench that the plaintiffs preferred Chamber Summons No. 1293/2001 for withdrawal of the amount. Advocate for the respondent placed reliance in the case of M/s. Classic Strips Pvt. Ltd, v. Arrow Converters Pvt. Ltd. an unreported ruling of this Court in Appeal No. 109/94 delivered on 14-2-1994. A perusal of the facts of that case would indicate that in a summary suit, the Chamber Judge had granted conditional leave on appellants depositing sum of Rs. 25 lacs with the Prothonotary and Senior Master. The order passed by the Chamber Judge had been carried in appeal before the Division Bench of this Court and the appellate Court had reduced the amount to Rs. 15 lacs. The defendant had carried the matter in a S.L.P. but the same had ended in dismissal. The matter was then again placed before the learned chamber Judge to ascertain whether the amount had been deposited and taking advantage of this fact, a request was made on behalf of the plaintiff for a direction to the Prothonotary and Senior Master to handover amount of Rs. 15 lacs to the plaintiff and this was acceded to. The Division Bench in this case laid down that the procedure followed would entitle the parties to recover the amount before obtaining decree and should not be adopted. In that case, the Division Bench held that the defence in the case could not have been said to be frivolous.
10. In our opinion, insofar as the aforesaid Division Bench judgment holds that a procedure which would entitle the parties to recover the amount before obtaining decree should not be adopted, the same does not appear to be an absolute position in law and such observations must be confined to the procedure as followed in the facts of the aforesaid case. We have noted that in the case of Raj Duggal v. Ramesh Kumar Bansal reported in 1991 Supp (1) SCC 191, the Apex Court permitted the plaintiff to be paid the amount pending the suit and even before a final decree was passed. Operative portion of the order passed by the Supreme Court in the aforesaid case is as under :--
"The appeal is, accordingly, allowed and the appellant granted leave to defend the suit on condition that the amount of Rs. 20,000 deposited in this case pursuant to the earlier orders made in this proceeding shall, during the pendency of the suit, be paid to and retained by the respondent-plaintiff subject to the condition that if ultimately respondent-plaintiff fails in his suit he shall be liable to restitute the said sum of Rs. 20,000 to the appellant defendant with interest thereon at 9 per cent per annum."
We may also mention that relying upon the aforesaid judgment of the Apex Court in the case of Raj Duggal v. Ramesh Kumar Bansal reported in 7997 Supp (1) SCC 191, this Court has permitted the plaintiff to withdraw amounts before passing of the final decree in few judgments which have been brought to our notice. The first of such judgment is the judgment of the Single Bench of this Court passed in Summons for Judgment No. 164/2000 in Summary Suit No. 5502/99 in the case of Suraj Sanghi Finance Ltd. v. Credential Finance Ltd. and others delivered on 3-6-2002 (since reported in 2002(4) Mh.LJ. 770). The second of such judgment is another judgment of the Single Bench of this Court in the case Motorola India Ltd. v. Kiklu L Malani in Summons for Judgment No. 234/2000 in Summary Suit No. 544 of 2000 passed on 11-6-2002 (since reported in 2002(4) Mh.LJ. 717).
Further in the latter two judgments of the Single Judge, the plaintiff was allowed liberty to withdraw the amount because leave was granted as a mercy as per proposition No. 5 laid down by the Apex Court in Mechalec Engineers and Manufacturers v. M/s Basic Equipments Corporation, . In, our opinion, the present case of the plaintiff stands on a different and higher footing as the amount directed to be deposited was an admitted amount.
11. We find that the facts in present case can be said to be distinguishable from the facts of the case relied upon. The two distinguishing factors are as under:--
(a) That in the present case, the appellate Court dealing with the order passed in the summons for judgment itself granted liberty to the plaintiff to apply for a withdrawal of the amount. In another words, the further proceedings i.e. Chamber summons No. 1293/2001 for withdrawal was taken out in pursuance of such specific liberty, in our opinion, the orders passed therein are, therefore, in continuation and by way of an extension to the orders passed on the summons for judgment.
(b) That quite apart from the aforesaid, in the present case, the deposit was directed in respect of an admitted amount.
Insofar as admitted amounts are concerned, we are of the opinion that such amounts are treated on a completely different footing under Order 37 of the Civil Procedure Code. In this connection, it would be relevant to reproduce Order XXXVII(3)(5) (seconded proviso) as under :--
"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."
Rule 222 of the Bombay High Court (Original Side) Rules, 1980 which deals with summary suits also has some relevance to our further findings and therefore, we reproduce the said rule :--
"222. Judgment for part of claim.--If it appears that the defence set up by the defendant applied only to a part of the plaintiff's claim, or that any part of the claim is admitted, the plaintiff shall have Judgment forthwith for such part of his claim as the defence does not apply to or as is admitted, subject to such terms, if any, as to suspending execution, taxation of costs, or otherwise, as the Judges may think fit, and the defendant may be allowed to defend as to remaining claim of the plaintiff."
13. In our opinion, when both under Rule 222 as well as under the provisions of Order 12, Rule 6, insofar as admitted amounts are concerned, the power of the Court can extend to the passing of a decree, but if a Court chooses not to exercise or does not exercise such power, it is still open for the Court, in law, in an appropriate case by the use of power under Section 151 for the Court to permit the plaintiff to withdraw an admitted amount, subject to appropriate conditions if the Court thinks necessary. We make these observations mindful of the observations of the Supreme Court in the case of Ramkarandas Radhavallabh v. Bhagwandas Dwarkadas reported in A/7? 7965 SC 1144 wherein the Apex Court while considering a case under Order XXXVII laid down that the inherent powers of the Court under Section 151 should be exercised by the Court in very exceptional circumstances for which the code does not lay down any procedure. We find the present case to be one of the nature where the powers under Section 151 are required to be exercised in the background and circumstances of the case,
14. We also find that the position in respect to monies deposited under an conditional order based on an un-admitted amount is different from the position which obtains in respect of the deposit of an admitted amount. In the former case, the amount directed to be deposited is an approximation based upon the subjective satisfaction and discretion of the Court but in the latter case, the amount directed to be deposited is an ascertained amount duly admitted by the defendant himself as due and payable to the plaintiff. In the present case, we find that the defendant company having obtained a loan as far back on 20-2-1996, has successfully resisted the repayment of the amount through legal devices which we have held to be improper and untenable. If such protection is granted to a dishonest defendant, the litigants are likely to loose faith in the judicial system and monies which could be utilised for business and commerce would lie locked up for years together while the suits remain pending a final disposal.
15. The plea taken on behalf of the respondent that they have claimed a set off because the plaintiff did not sell the shares given by way of security, does not impress us. It is well settled that a creditors remedy of proceeding to dispose of securities is separate and distinct from his right to peruse legal remedies to recover the money through the process of law. (See State Bank of India v. Smt. Neela Ashok Naik, 2000(1) Mh.LJ. 801 = AIR 2000 Bombay 151 Division Bench). We cannot also lose sight of the fact that the defendant company created hurdles in giving fresh transfer forms in respect of the shares when called upon to do so. In any case, in our opinion, the plaintiff company was within its rights to seek the recovery of the money due to it by the filing of the present summary suit.
16. The last question that remains is as to what order would be just and proper. In this connection reliance has been placed on the order passed by the Apex Court in the case of Raj Duggal v. Rameah Kumar Bansal reported in 1991 Supp (1) SCC 191. In that case, the Apex Court while granting leave directed the amount deposited to be paid and to be retained by the respondent-plaintiff subject to the condition that if ultimately the plaintiff failed in his suit, he would be liable to restitute the said deposited amount to the defendant with interest thereon at 9% per annum. In the present case, we intend to impose a similar condition to be incorporated in a undertaking.
17. It is, therefore, ordered as under :--
"The appeals are allowed with costs and the appellant/plaintiff Leela Capital and Finance Limited is permitted to withdraw the amount of Rs. 5 crores deposited in this Court upon furnishing an undertaking that they will restitute the said amount of Rs. 5 crores or such part thereof with 9% interest, to the defendant, if and as directed by this Court at the time of the final decision in the suit and subject to the further condition that all the shares given by the defendant to the plaintiff by way of security and remaining with the plaintiff will be given back to the defendant by the plaintiff within a period of eight weeks from the date of this Judgment. Grant of certified copy of this judgment and order is expedited."
After the judgment was pronounced, a prayer was made for stay of the judgment. For the reasons mentioned in the judgment as also from the attending circumstances, we do not feel any justification for staying the judgment. Hence, request is rejected,
Prothonotary and Senior Master and parties to act on the authenticated copy of this order.
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