SBI FACTORS & COMMERCIAL SERVICES LTD v. ISP AT STRUCTURAL

ORDER

30.07.2012 I.A.No. 11767/2009 (U/o 37 R 4 CPC filed by D-2 and 3.

1. This is an application filed under Order 37 Rule 4 CPC for setting aside of the judgment and decree of this Court dated 15.12.2006 whereby the suit of the plaintiff under Order 37 CPC was decreed on account of failure of the defendants, including the applicants/defendant Nos.2 and 3, to file their applications for leave to defend.

2. On being served of the summons of the suit, the defendants entered appearance through counsel as noted in the order sheet dated 27.11.2000. >1 Summons for judgment were thereafter issued. For 8.5.2001,'the service CS(OS) No. 1636/2000 Page I of 8 report was that the defendants could not be served as they were not residing at the given address. Thereafter, though there are some defaults on behalf of the plaintiff, however, the court even issued court notice to the counsel for the defendant who failed to appear in spite of his being served. Ultimately, summons for the judgment were directed to be effected by the publication and which publication was done in two newspapers. One in 'The Statesman', New Delhi Edition for 15.6.2005 and qua the defendant nos. 2 to 4 in Amar Ujala (Punjab Edition) on 1.9.2006.

3. Though, the suit was filed as under Order 37 CPC, this aspect escaped the attention of a learned Single Judge of this court as it was not so pointed out, and consequently, the case was fixed for filing of the affidavit by way of evidence by the plaintiff vide order dated 11.10.2006. This affidavit by way of evidence was filed on behalf of the plaintiff, and the plaintiff proved and exhibited the necessary documents. I may note that the subject suit was a suit for recovery of money on a factoring agreement as per which the defendant sells the goods to its customers but receives money of the invoices in advance from the plaintiff/finance company by discounting the invoices i.e. defendant receives the money from the plaintiff for the invoices and the plaintiff company thereafter receives the money of the invoices from the CS(OS) No. 1636/2000 Page 2 of 8 - customers of the defendant no. 1.

4. On 5.12.2006 noting that the plaintiff had duly proved its case in terms of the affidavit by way of evidence filed, however, noting that the suit !J was under Order 37 CPC, the suit was decreed as the applications for leave to defend were not filed by the defendants after service of the summons for judgment by publication.

5. Now the present application has been filed seeking to setting aside the judgment and decree dated 15.12.2006 making essentially the following averments (i) The plaintiff did not make sufficient effort for service of the defendants of summons for judgment and the order for publication was not justified. (ii) The counsel appearing for the defendants was guilty of negligence as he did not pursue the case properly on behalf of the defendant. (hi) The applicant/defendant nos. 2 and 3 have a good case on merits as stated in para 23 of this application.

6. In my opinion, the application is a gross abuse of process of law. When the summons for judgment were issued, the defendants somehow or the other seem to have got a service report that they have left the address, CS(OS) No. 1636/2000 however, the fact of the matter is that the defendants had not left the stated address inasmuch as admittedly (and this being not disputed) the defendants are still as on today very much present at the address which is stated in the plaint. The result was that the plaintiff was put to unnecessary expense of publication in two newspapers. Not only that, negligence (and if I say so deliberate negligence) of the applicants/defendants is writ large because in the application under Order 37 Rule 4 CPC it is not stated as to for the long period of time from filing appearance till the present application was filed, what was the correspondence/communication by these defendants with their then lawyer, with respect to the suit. As is not unusual in these cases of recovery of monies, all endeavors are made by the defendants who have to pay moneys to delay and drag the suit. Merely making averments that their earlier counsel was negligent," in my opinion, will not help the defendants, because, in cases such as the present, there is also a bounden duty of the defendants , at least at some infrequent intervals, to pursue their advocate with respect to the status of the case. For a few weeks or a few months the defendants may not keep in touch, however, once this period expands to more than a year, ! am not able to accept the explanation of the blame being laid at the door of the earlier counsel. Further, an aspect to be noted is that in CS(OS) No. 1636/2000 . Page 4 of 8 . . Order 37 CPC, it is provided that once appearance is entered, the summon for judgment need only be "left" at the stated address. The object of this provision is to avoid any delay in trial of an Order 37 suit for which a special procedure is carved out. The fact of the malafides of the defendants can also be seen from the fact that its earlier counsel did not appear even after court notice was issued to him pursuant to the orders of this Court.

7. In my opinion, therefore, it does not lie in the mouths of the defendants to show that the ex parte decree has been wrongly passed against them and they have not been validly served of the summons for judgment. I also, discard in limine the arguments on behalf of the defendant nos. 2 and 3 that once there is a subsequent order for service, an earlier order of service stands waived though of course the argument is really such which I fail to understand inasmuch as since it is reported that the defendants were not found at the given address, the only way in which service could have been effected was by substituted service, and which was done.

8. In my opinion, the application is also misconceived inasmuch as now it is settled law that an application under Order 37 Rule 4 CPC must also contained the necessary ingredients as to why leave to defend should be granted as held in the case of Rajni Kumar Vs. Suresh Kumar Malhotra & CS(OS) No. 1636/2000 Page 5 of8 Anr. (2003) 5 SCC 315 wherein the Supreme Court has clarified that the expression "special circumstances" as found under Order 37 Rule 4 CPC means stating merits on which leave to defend would have been granted. With regard to the merits firstly I must bring on record the crucial fact that the plaintiff in the plaint has made necessary averments with respect to the defendants acknowledging debt in writing under the signatures, and on which aspect there is no denial in the present application under Order 37 Rule 4 CPC. The only averments which have been made by the applicants on this aspect are contained in para 23 of the application which read aS under:- not maintainable "23. That without prejudice to the aforementioned submissions, the plaintiff submits that the present suit is even otherwise the following reasons/grounds: - a) The present suit s devoid of any cause of action and no cause of action whatsoever has been pleaded by the Plaintiff in the present suit. A bare perusal of the plaint would show that the plaint is lacking in material particulars and even fails to give a single instance of any of the defendant's customers failing to make the payment and also fails to give a single instance of benefit under the factoring agreement being given to the Defendants. b) Except for a bald assertion that most of Defendants' clients did not make payment to the Plaintiff, the Plaintiff even does not mention: CS(OS) No. 1636/2000 Page 6of8 ^ I) What payments were made by the Plaintiff to the Defendant no.l as pre-payments and on behalf of which customers and for which invoices; Which of Defendant no.l's customers failed to make the II) payment to the Plaintiff; III) What payments was defendant no.l liable to make and in lieu of which pre-payments by the Plaintiff to Defendant . no.l; IV) The suit does not contain any statement of accounts to show as to what amount is pending/outstanding against the Defendants, and, if so, how. That the Plaintiff has not come to the Hon'ble Court c) with clean intention and has tried to mislead the court into believing that the applicants have signed the deed of guarantee dated 09.01.1998 and 02.02.1998. No such has been signed by the applicants." In my opinion, the aforesaid para 23, with its various sub-paras are only in the nature of negative defences and there is no denial with respect to this specific averment in the plaint of the defendant no.l being granted factoring financing facility and that the defendant no.l in fact enjoyed such facility and took monies from the plaintiff. Vague averments do not justify grant of leave to defend in cases such as the present especially where there is no denial of the written acknowledgment of debt. Once monies have been borrowed they have to be repaid. Of course, some businessmen think that money borrowed is money earned, however, obviously a Court cannot CS(OS) No. 1636/2000 Page 7 of 8 , \ \ subscribe to such a view.

9. I may finally state that there is a prayer in this application that referring the matter to arbitration under Section 8 of the Arbitration and Conciliation Act, 1996, and which prayer I need not look into inasmuch as, the ex parte decree has otherwise being sustained by me, and this prayer would have been examined only if the suit was revived by allowing the application which is being disposed of by this order. This prayer for reference of the disputes in the suit to arbitration is accordingly rejected. J - •

10. In view of the above, the present application is dismissed with costs of ? 25,000/-. Costs be paid within two weeks from today. I.A No. 11768/2009 (U/S 5 of the Limitation Act filed by D-2 & 3) Since I have heard the application under Order 37 Rule 4 CPC of the applicants/defendant Nos.2 and 3, counsel for the plaintiff very fairly does not oppose this application and therefore, this application for condonation of delay is allowed subject to just exceptions. JULY 30,2012 CS(OS) No. 1636/2000 VALMIKI J. MEHTA, J