Hari Shankar Banka vs Caltex (India) Ltd.

Banerjee, J.—This is an appeal against an order of Ray, J., disposing of an application for final judgment, under Chap. XIIIA of the Original Side Rules, with an order upon the Defendant to furnish security for Rs. 34,000 within six weeks.

Facts in so far as material are hereinafter stated in brief. The Plaintiff-Respondent company carry on the business of marketing and distribution of petroleum products and of selling such products through dealers and distributors. One of their distributors was Banwarilal & Brothers at Rourkela in the State of Orissa. The said Banwarilal & Brothers became indebted to the Plaintiff-Respondent for a sum of Rs. 77,562-74 P. on account of price of petroleum products delivered by the Plaintiff company. The Defendant Appellant is the uncle of Banwarilal, the proprietor of Banwarilal & Brothers. On the Plaintiff-Respondent having had decided to take steps against the Banwarilal & Brothers, the Defendant-Appellant approached the Plaintiff-Respondent company and induced them to desist from taking such steps, by offer of the following guarantee, which was accepted by the Plaintiff-Appellant:

In consideration of your having, at my request, agreed (?) not to take any steps against Messrs. Banwarilal and Brothers, Rourkela, in connection with a sum of Rs. 77,562-74 (Rupees Seventy-seven Thousand Five Hundred and Sixty Two and Seventy Four Paise only) due from them to you on account of Petroleum products sold and delivered to them I, Hari Shankar Banka, son of Late Mr. Juthalal Banka of Ambagan, Rourkela, hereby undertake and guarantee to make payment to you of the said sum of Rs. 77,562-74 P. payable by the said Messrs. Banwarilal and Brothers, Rourkela, in the manner following:

(i) A sum of Rs. 25.000 (Rupees Twenty Five Thousand only) will be paid by me on or before the 9th December, 1964.

(ii) A further sum of Rs. 18,000 (Rupees Eighteen Thousand only will be paid by me on or before 28th December, 1964.

(iii) The balance then remaining due shall be paid by me in 2 (Two) monthly instalments of Rs. 17,000 (Rupees Seventeen Thousand only) and Rs. 17,562-74 (Rupees Seventeen Thousand Five Hundred and Sixty Two and Seventy Four Paise only) the first of such monthly instalments to be paid on or before January 25, 1965 and the last instalment to be paid on or before February 25, 1965.

(iv) In default of payment of any amount of instalments in the manner as aforesaid, the entire amount then remaining unpaid shall become payable by me to you at once and you will be at liberty to stand upon your legal rights.

A contract of guarantee to the above effect was executed on December 7, 1964. The Defendant-Appellant made the first two payments of Rs. 25,000 and Rs. 18,000 as agreed upon but failed to pay the remaining two instalments of Rs. 17,000 and Rs. 17,562-74 P. Thereupon, the Plaintiff-Respondent filed suit No. 489 of 1965, against the Defendant-Appellant for recovery of Rs. 34,562-74 P. being the amount of the balance due under the contract of guarantee, with interest and costs.

The Defendant-Appellant filed a written statement and therein alleged, inter alia, as hereinafter stated:

Para 4.

(a) In or about November 1964 the Plaintiff arbitrarily, wrongfully and in breach of the said agreement dated 27th June, 1958, stopped the supply of its products to the Banwarilal & Brothers.

(b) With a view to ascertain the reason for such illegal act and to obtain restoration of supply of the said goods the Defendant, for and on behalf of his nephew the said Banwarilal Agarwalla, called at the office of the Plaintiff in Calcutta on or about 7th December 1964. At the said office the Plaintiff through the servants or agents represented to the Defendant that unless the Defendant signed the said document being annexure ''A'' to the plaint, and agreed to make payment in terms thereof the Plaintiff, would institute criminal proceedings and/or civil actions against the said Banwarilal Agarwalla and would also implicate the Defendant in such proceedings or actions.

(c) Out of concern for the safety and welfare of his said nephew and out of fear and anxiety for his own personal safety and reputation, the Defendant affixed his signature to the said document. The Defendant denies that the stamp paper on which the letter is set out was sold to or purchased by the Defendant or that the Defendant has anything to do with premises No. 7, Canning Street, Calcutta. The said document was prepared by the Plaintiff, its servants, or agents and the Defendant merely affixed his signature thereto in the manner and in the circumstances aforesaid.

(d) At or before the execution of the said document it was orally agreed by and between the Defendant and the Plaintiff, its servants or agents that not only would the Plaintiff not commence criminal proceedings or any civil action against the Defendant or his said nephew Banwarilal Agarwalla but that the Plaintiff would commence and continue the supply of its products to the said Banwarilal & Brothers at Rourkela.

(d) Thereafter on or about 9th December, 1964, under similar duress, coercion, intimidation, fear and threat of criminal prosecution and civil action the Defendant paid to the Plaintiff a sum of Rs. 25,000 on the clear understanding and/or arrangement or agreement that the Plaintiff would supply its products to the said Banwarilal & Brothers and would not cause any trouble or harassment to the Defendant or to his said nephew by way of criminal proceedings or civil action or otherwise or at all.

Para 5.

With further reference to paragraph 3 of the plaint the Defendant states that upon the taking of true and faithful accounts between the Plaintiff and the said Banwarilal & Brothers in respect of their dealings and transactions under the said agreement dated the 27th July, 1958, and in view of the payment made by the later to the former nothing whatever is due or payable by the said Banwarilal & Brothers to the Plaintiff. The Defendant states that at the time of institution of this suit and/or even prior thereto the said Banwarilal & Brothers was not a debtor vis-a-vis the Plaintiff and by reason thereof the guarantee, if any, given by the Defendant to the Plaintiff under the said document dated the 7th December, 1964, has become non-existent, null and void and the Defendant has been discharged from any liability or obligation to the Plaintiff in respect of the said document.

Para 6.

With reference to paragraph 4 of the plaint the Defendant denies that the Plaintiff did not take any steps against Banwarilal & Brothers as falsely alleged therein. The Defendant states that the Plaintiff, its servants or agents maliciously and illegally failed and neglected to commence the supply of Petrol and Petroleum products to the said Banwarilal & Brothers and thereby caused serious loss and damage to the said business.

Thereupon, on November 24, 1965, the Plaintiff-Respondent took out a Master''s summons, under Chap. XIIIA of the Original Side Rules, for an order of refusal of leave to the Defendant-Appellant to defend the suit and for a final judgment for the amount claimed, on the ground that there was no defence to the claim. The Defendant-Respondent showed cause thereto alleging that there was a good and complete defence to the claim. The nature of the defence as emphasised upon was the same as in written statement but with the following two additions, namely, (i) that far from anything remaining due and owing by Banwarilal & Brothers to the Plaintiff, the Plaintiff was indebted to Banwarilal & Brothers for Rs. 39,364-27 P. under an agreement dated June 27, 1958, and (ii) that Sales Manager and Depot Operator of the Plaintiff at Rourkela were prosecuted u/s 420 read with Section 34 of the Indian Penal Code and the latter was convicted and sentenced to a term of imprisonment as well as to fine, on the evidence, inter alia, of accounts submitted by Banwarilal & Brothers.

The learned trial Judge apparently was not satisfied that the Defendant-Appellant had such a defence as to entitle him to defend the suit unconditionally. He, therefore, exercised his discretion under Rule 9 of Chap. XIIIA and directed the Defendant to furnish security for Rs. 34,000 to the satisfaction of the Registrar within six weeks, in default to suffer a final judgment for the amount in claim. Aggrieved by the order the Defendant-Appellant filed this appeal.

Mr. P.K. Das, learned Counsel for the Appellant, invited our attention to three English decisions, namely, Wing v. Thurlow 10 T.L.R. 53, Jones v. Stone (1894) A.C. 122 and Contract Discount Corporation Ltd. v. Furlong (1948) 1 A.E.R. 274; two decisions of this Court, namely, Radhakissen Goenka v. Thakursi Das Khemka 30 C.W.N. 288 and Kiranmoyee Dassi v. Dr. J. Chatterjee 49 C.W.N. 246 and to a decision of the Supreme Court on an analogous provision, namely, Order 37, Rule 3 of the CPC in Santosh Kumar Vs. Bhai Mool Singh, and on those authorities contended for the following propositions as to the scope of Chap. XIIIA of the Original Side Rules:

(a) If the Defendant satisfies the Court that he has a good defence to the claim, on its merits, the Plaintiff is not entitled to leave to sign judgment and the Defendant is entitled to unconditional leave to defend.

(b) If the Defendant raises a triable issue indicating that he has a fair or bona fide or reasonable defence, although not a positively good defence, the Plaintiff is not entitled to sign judgment and the Defendant is entitled to unconditional leave to defend.

(c) If the Defendant discloses such facts as may be deemed sufficient to entitle him to defend, that is to say, although the affidavit does not positively and immediately make it clear that he has a defence yet shows such a state of facts as leads to the inference that at the trial of the action he may be able to establish a defence to the Plaintiff''s claim, the Plaintiff is not entitled to judgment and the Defendant is entitled to leave to defend but in such a case the Court may in its discretion impose conditions as to the time or mode of trial but not as to payment into Court or furnishing security.

(d) If the Defendant has no defence or the defence set up is illusory or sham or practically moonshine then ordinarily the Plaintiff is entitled to leave to sign judgment and the Defendant is not entitled to leave to defend.

(e) If the Defendant has no defence or the defence is illusory or sham or practically moonshine then, although ordinarily the Plaintiff is entitled to leave to sign judgment, the Court may protect the Plaintiff by only allowing the defence to proceed if the amount claimed is paid into Court or otherwise secured and give leave to the Defendant on such condition, and thereby show mercy to the Defendant by enabling him to try to prove a defence. 49 C.W.N. 246 at p. 253 - Kiranmoyee v. Dr. J. Chatterjee.

On the above propositions, he further argued that the defence of the Defendant fell under category (a) or (b) stated above and that the learned trial Judge should have allowed unconditional leave to defend. He relied in particular on the following passage from the judgment of the Supreme Court in Santosh Kumar Vs. Bhai Mool Singh, :

Whenever the defence raises a triable issue leave must be given and when that is the case it must be given unconditionally, otherwise the leave may be illusory.

Now, a CPC must be regarded as only such, that is to say, something designed to facilitate justice and further its ends, not a penal enactment for punishment and penalties. Ordinarily proceedings that affect the lives and property of people should not be conducted at their back and they should not be precluded from participating in them--subject, however, to exceptions clearly defined.

The provisions of Chap. XIIIA applies to cases of limited description, namely:

Rule 1. The provisions of this Chapter shall not be applicable save to suits

(A) in which the Plaintiff seeks to recover a debt or liquidated demand in money payable by the Defendant with or without interest arising

(i) on a contract express or implied; or

(ii) on an enactment where the sum sought to be recovered is a fixed sum of money or in the nature of a debt other than a penalty; or

(iii) on a guarantee where the claim against the principal is in respect of a debt or a liquidate demand only; or

(iv) on a trust; or

(B) for the recovery of immoveable property with or without a claim for rent or mesne profits by a landlord against a tenant whose term has expired or has been duly determined by notice to quit or has become liable to forfeiture for non-payment of rent or against persons claiming under such tenant.

Only in such suits the Plaintiff may, on affidavit made by himself or by any other person who can swear positively to the facts verifying the cause of action and the amount claimed, if any, and stating that in his belief there is no defence to the claim, apply to the Judge for final judgment. Against such a prayer the Defendant may show cause. Upon such application the Judge may, unless the Defendant by affidavit or otherwise, as the Judge may direct, shall satisfy him that he has a good defence to the claim on its merits or disclose such facts as may be deemed sufficient to entitle him to defend, make an order refusing leave to defend and forthwith pronounce judgment in favour of the Plaintiff. Rules 7, 8, and 9 of Chap. XIIIA invest the Judge with the discretion to allow any one or more of several Defendants, who alone has or have a good defence, to defend and to pronounce final judgment against others who have not, or to pronounce final judgment in respect of part of the claim to which the defence set up does not apply, or to give leave to defend conditionally or subject to such terms as to security, or time or mode of trial or otherwise as the Judge may think fit. This is in general the scheme of Chap. XIIIA.

In this appeal, we are concerned with the discretion invested in the Judge to allow leave to defend on furnishing security. The Supreme Court has now explained the scope of this discretion in the context of almost similar discretion under Order 37, Rule 3(3) of the CPC (as amended by the Bombay High Court) in the case of Milkhiram (India) Private Ltd. and Others Vs. Chamanlal Bros., in the following language:

Learned Counsel relied upon a decision of this Court in Santosh Kumar Vs. Bhai Mool Singh, , and particularly upon a passage (at p. 1216 of S.C.R. : at p. 324 of A.I.R.). That was a casein which the Court of Commercial Subordinate Judge, Delhi, had held that the defence raised a triable issue but that defence was vague and was not bona fide because the Defendant had produced no evidence to prove his assertion. For these reasons the Court granted leave to defend the suit on the condition of the Defendant giving security for the entire claim in the suit and costs thereon. This Court held that the test is to see whether the defence raises a real issue and not a sham one, in the sense that, if the facts alleged by the Defendant are established, there would be a good or even a plausible defence on those facts. If the Court is satisfied about that leave must be given unconditionally. This Court further held that the trial Court was wrong in imposing a condition about giving security on the ground that documentary evidence had not been adduced by the Defendant. This Court pointed out that the stage of proof can only arise after leave to defend has been granted and that the omission to adduce documentary evidence would not justify the inference that the defence sought to be raised was vague and not bona fide. While dealing with the matter Bose, J., who spoke for the Court, observed (at p. 1216 of S.C.R. : at p. 324 of A.I.R.):

Taken by and large, the object is to see that the Defendant does not unnecessarily prolong the litigation and prevent the Plaintiff from obtaining an early decree by raising untenable and frivolous defences in a class of cases where speedy decisions are desirable in the interests of trade and commerce. In general, therefore, the test is to see whether the defence raises a real issue and not a sham one, in the sense that if the facts alleged by the Defendant are established there would be a good or even a plausible defence on those facts.

The latter part of the observations of the learned Judge have to be understood in the background of the facts of the case this Court was called upon to consider. The trial Judge being already satisfied that the defence raised a triable issue was not justified in imposing a condition to the effect that the Defendant must deposit security because he had not adduced any documentary evidence in support of the defence. The stage for evidence had not been reached. Whether the defence raises a triable issue or not has to be ascertained by the Court from the pleadings before it and the affidavits of parties and it is not open to it to call for evidence at that stage. If upon consideration of material placed before it the Court comes to the conclusion that the defence is a sham one or is fantastic or highly improbable it would be justified in putting the Defendant upon terms before granting leave to defend. Even when a defence is plausible but is improbable the Court would be justified in coming to the conclusion that the issue is not a triable issue and put the Defendant on terms while granting leave to defend. To hold otherwise would make it impossible to give effect to the provisions of Order 37 which have been enacted, as rightly pointed out by Bose, J., to ensure speedy decision in cases of certain types. It will be seen that Order 37, Rule 2 is applicable to what may be compendiously described as commercial causes. Trading and commercial operations are liable to be seriously impeded if, in particular, money disputes between the parties are not adjudicated upon expeditiously. It is these considerations which have to be borne in mind for the purpose of deciding whether leave to defend should be given or withheld and if given should be subjected to a condition.

Now, keeping in view the explanation of the law as laid down in the above quoted extract, we need examine the nature of the defence put up by the Defendant-Appellant in the instant case. The execution of the guarantee itself is not disputed by the Defendant-Appellant. He, however, desires to escape from the liability thereunder on the plea that the guarantee was taken from him under intimidation, coercion, fraud and misrepresentation, as hereinbefore set out. Now, the Defendant-Appellant is an adult male person, neither illiterate nor living under any physical or mental disability. To say, that he could be intimidated or coerced, as alleged, or to say that he was gullible enough to swallow the misrepresentation, is to make an improbable case which, however, may not be beyond the realm of possibility. Nevertheless, his pleading in this respect is defective. In the case of Bishandeo Narain v. Seogine Rai (1952) S.C.A. 388 the Supreme Court was pleased to observe:

Now if there is one rule which is better established than any other, it is that in cases of fraud, undue influence and coercion, the parties pleading it must set forth full particulars and the case can only be decided on the particulars as laid. There can be no departure from them in evidence. General allegations are insufficient even to amount to an averment.

In cases of coercion, the Supreme Court further indicated in the case above, the particulars must include the nature of the threat, the date, time and place when it was administered, the circumstances in which it was administered and the name of the person who administered the threat. In the instant case, the Defendant generally speaks that ''Plaintiff through its servants or agents'' threatened him with criminal prosecution without naming the particular person or persons who did so. This is vague enough which makes the plea in the written statement unworthy of consideration. Then again the oral agreement to continue supply to Banwarilal & Brothers, as in para. 4(a) of the written statement, has not been pleaded with full particulars and suffers from the same defect as in respect of the plea of coercion or intimidation. Also the plea misrepresentation of the state of accounts suffers from equal defectiveness. In the affidavit, in answer to the summons for final judgment, the Defendant-Appellant introduced an improvement. In place of the plea that Banwarilal & Brothers were not indebted to the Plaintiff-Respondent, the Plaintiff-Respondent was sought to be shown as indebted to Banwarilal & Brothers. Why this plea was not taken in the written statement does not appear. Also, it is improbable that the Defendant-Appellant would elect to pay on large sums of money under the agreement said to have been extracted from him. According to the Plaintiff-Respondent the Defendant paid Rs. 25,000 and Rs. 18,000, in all Rs. 43,000 under the guarantee. The Defendant, however, denied payment of Rs. 18,000, in para. 7 of the written statement. This is again improbable. There is no reason why a Plaintiff would admit payment of a sum of money, which it never received, particularly where there is no question of limitation involved.

For all these reasons, we feel that the defence is improbable although it may be within the realm of possibility or plausibility. If in these circumstances, the learned trial Judge directed the Defendant to furnish security in exercise of his discretion under Rule 9 of Chap. XIIIA, we do not think that he did not exercise his discretion correctly.

Before we close this judgment, we need notice a point as against the maintainability of the prayer for summary judgment argued by Mr. Das. He contended that the affidavit, in support of the prayer for summary judgment, was not affirmed properly because the deponent was a person other than the person who had verified the written statement. He tried to draw inspiration for this argument from the language by Rule 3 of Chap. XIIIA. We do not think that this is an argument of substance. There is nothing in Rule 3, which debars a person knowing the facts constituting the cause of action from affirming an affidavit as done in this case.

For the reasons stated above we dismiss this appeal with costs.

Masud, J.

I agree.