IDBI TRUSTEESHIP SERVICES LTD VS. HUBTOWN LTD. Judgments Supreme Court On Suit For Recovery Of Money- The petitioner, being a debenture trustee, filed a summary suit against the defendant in the Bombay High Court to enforce rights arising out of Corporate Guarantee which was executed by the defendant. A Nederlandse Financiering – Maatschappij Voor Ontwikkelingsladen (FMO) invested equity shares and compulsory convertible debentures of Vinca Developer Pvt. Ltd. (Vinca) which entitled FMO to 99% of the shareholding interest in Vinca and the remaining equity was held by Hubtown Ltd. Proceeds from FMO were utilized by the Vinca to subscribe to OPCDs (optionally partially convertible debentures) of its subsidiaries. Such redemption of OPCDs was guaranteed by Hubtown ltd. IDBI Trusteeship was a debenture trustee of these OPCDs. When the subsidiaries failed to redeem the OPCDs, Hubtown were to give the money as being a guarantor however, it resisted to give such payment. The defendant had put up the contention that since the Indian Exchange Control Regulation has permitted only the offshore investors to make equity investments without returns and thus the investment by FMO itself was illegal. The defendant filed for leave to defend as it raised the defences which required a trial to examine the case.

The Supreme Court held that the guarantee that was established was between two Indian entities and thus was valid and the investment by FMO can be constituted to be illegal. The Court held that the defense that is raised is at the best “plausible but improbable“. The Court held that “”Para 17.3

Thus, the defendant was asked to provide security for Rs. 4.18 billion to the Bombay High Court or to deposit the principal sum. Through this decision, the Court has in regard to the foreign investment in India held the validity of structured equity transactions which is secured on the basis of debt obligations and guarantees of Indian obligor. Judgments Supreme Court On Suit For Recovery Of Money
INDIAN BANK VS. MAHARASHTRA STATE CO-OPERATIVE MARKETING FEDERATION LTD.

The issue which arose, in this case, was whether Section 10 of CPC which bars to further proceed with the trial of the subsequently instituted suit is applicable to summary suits or not. The respondents applied to the petitioner (Bank) to open an irrevocable letter of credit for a sum of Rs. 3,78,90,000 in favour of M/s Shankar Rice Mills. The Bank had filed a summary suit against the respondents for obtaining a decree for Rs. 4,96,59,160/- alleging that the amount is recoverable under the said letter of credit. The respondent seeks to stay on such a suit as a case against the Bank had already been instituted for the recovery of Rs. 3,70,52,217/- before the filing of a summary suit. Judgments Supreme Court On Suit For Recovery Of Money
A learned Single Judge of Bombay High Court held that Section 10 of CPC is only applicable to regular or ordinary suits and not to summary suits under order 37 of the Code. The Hon’ble Court also held that there was no merit in the defense raised by the respondents and thus the Respondents were granted conditional leave to defend the suit upon depositing Rs. 4 Crores in the Court. The appeal went to Divisional Judge bench in High Court and it gave a contrary judgment where the Court held that Section 10 of CPC includes summary suits as well and thus the Court put a stay on the summary suit until the prior suit is disposed off.

The Court held that regarding Section 10 of CPC it has to be kept in mind that the object of the said section is to avoid concurrent courts from trying two parallel suits and to find inconsistent findings. The object of both the provisions i.e. Section 10 and Order 37 are quite different- where section 10 provides for a general ambit to all categories of cases, Order 37 is restricted to certain classes of cases. The Court held that under Order 37 the trial begins after the defendant is given permission to leave to defend otherwise without a trial judgment is passed. Thus, the word ‘trial’ under section 10 of the said Act cannot be interpreted to mean the entire proceedings with the institution of a suit by lodging the plaint. In case of summary suits, it only starts after the leave to defend the case has been granted to the defendant. Thus, the Court held the decision of Single Judge Bench of Bombay High Court to be valid and the summary suit was allowed with the defendant being granted conditional leave to defend the suit. Judgments Supreme Court On Suit For Recovery Of Money
SUDIN DILIP TALAULIKAR VS. POLYCAP WIRES PVT. LTD.

The present case dealt with the question of the power of the Court to grant leave to defend in a case of a commercial dispute where the case encloses the sham or moonshine defense. The respondent supplied electrical cables to the appellant and the outstanding dues for such transactions came out to be Rs. 34,24,633/- and for another transaction to be as Rs. 1,88,377/-. A cheque given by the appellant was dishonored and the notice for the same was given by the respondent. A case under Sec. 138 of the Negotiable Instruments Act (NI) was filed by the respondent. While the case being in the pendency, the respondent instituted a summary suit for a sum of Rs. 36,13,410/- with an additional claim of Rs. 64,18,609. The prosecution under the Act was withdrawn and the appellant provided the defense that there were no dues payable and it required the respondent to show original documents material to the complaint. The Civil Judge, as well as the High Court, granted the leave to defend for a triable defence as the appellant had not disputed a commercial relationship.

The Court held that in a case where the Court is satisfied that a plausible or probable defence and a defence which is not considered a sham or moonshine but leaves certain doubt in the mind of the Court then the conditional leave to defend may be granted. In another scenario, if the defendant discloses such facts which prima facie appears to be a reasonable defence, then also the Court may grant leave to defend. The Court held that in the second scenario there is discretion on the Court and such power of discretion is not absolute. The object of the Summary Suit is expeditious disposal of a commercial dispute and thus the Court is required to maintain delicate balance between the respective rights and contentions so that the ultimate purpose of such suit is not defeated.

SUNIL ENTERPRISES AND ORS. VS. SBI COMMERCIAL AND INTERNATIONAL BANK LTD.

In the present case, an appeal as made out of an order made by the High Court of Bombay where a decree has been passed against the appellants for a sum of Rs. 37,51,519.43/- with interest and other charges. The respondents had brought a suit on bills of exchange where the appellants were the acceptors. A sales Corporation discounted the bills of exchange and the respondents made payments to the Sales Corporation on the basis of those bills of exchange. Since the respondent was not paid in the time period provided, they filed a summary suit for the same. The appellants sought the leave to defend the suit on the basis that Bills of Exchange were executed without consideration as neither goods were sold nor supplied in the transaction. The respondents pointed out the fraud in the corporation itself and the appellants for the goods transaction. The Court analyzed various provisions which are to be taken in mind for providing leave to defend the suit to the defendant-

1. If the defendant is able to satisfy the Court that he has good defense based on merits.
2. If the defendant raises a triable issue.
(In both of the above cases, unconditional leave to defend the case is permitted.)
1. If the defendant discloses such facts as may seem to be sufficient to defend, the Court may impose conditions such as time of trial or mode of trial but not of payment.
2. If the defendant has no defence and the defence is sham or moonshine, the defendant is not entitled to defend.
3. If the defendant has no defence, the Court may show mercy and can grant leave to defend by imposing the condition to submit the amount claimed to be paid to the Court.
The Court observed that in the present case, the Bills of exchange were accepted by the defendant even though they had already been discharged earlier Bills of Exchange and the Bank had continued to pay out such large amount of Bills of Exchange accepted by a party who is already a defaulter. Thus, the Court held that it cannot be held that the defence by the respondents is a sham or moonshine or does not have any value and so the Court reversed the judgment given by the High Court and provided the defendant with the permission to leave to defend the suit.

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VINOD KUMAR SABOO VS. SUDARSHAN VISHWANATH MALPANI AND ORS.

A partnership deed was entered into between the appellant and the respondent. The respondent had filed a suit for recovery of Rs. 40 lakhs and later appellant had taken out notice and questioned the jurisdiction. The learned Single Judge directed to deposit the full amount of Rs. 40 lakhs and aggrieved by such order the appellant filed an appeal. The Court is required to look into facts and circumstances of each case while passing such orders. The Court recognized that the defence that has been raised by the defendant is triable and not a sham or bogus.

The Court held that “The willingness of one party after the lapse of period so prescribed, that itself cannot be the reason to accept that settlement agreement dated 2 August 2000, is revived and/or still in existence. The Summary Suit, therefore, so filed, based upon the agreement, cannot be stated to be the document and or that acknowledgment to pass a conditional order. It is wrong for observing that the settlement Agreement dated August 2 2000, provides for a liquidated sum, as and when due and payable by the original-Defendant to the original-Plaintiff.”

The Court acknowledged that the defendant has been able to provide with triable issues and thus, before passing any such order to deposit any kind of sum or payment, the defendant should be given an opportunity for the trial. Considering this, the Court granted the appellant unconditional leave to defend the suit.

[1] IDBI Trusteeship Services Ltd vs. Hubtown Ltd., Civil Appeal No.10860 of 2016 decided on November 15, 2016
[2] Indian Bank vs. Maharashtra State Co-operative Marketing Federation Ltd., MANU/SC/0350/1998
[3] Sudin Dilip Talaulikar vs. Polycap Wires Pvt. Ltd , 2019 SCC OnLine SC 857.
[4] Sunil Enterprises and Ors. vs. SBI Commercial and International Bank Ltd., MANU/SC/0334/1998
[5] Vinod Kumar Saboo vs. Sudarshan Vishwanath Malpani and Ors., MANU/MH/0542/2017

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