IN THE HIGH COURT OF DELHI AT NEW DELHI SUBJECT : CODE OF CIVIL PROCEDURE. IA No.991/2004, 6906/2005 & CS(OS)No.1710/2001 RESERVED ON :

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1 IN THE HIGH COURT OF DELHI AT NEW DELHI SUBJECT : CODE OF CIVIL PROCEDURE IA No.991/2004, 6906/2005 & CS(OS)No.1710/2001 RESERVED ON : DATE OF DECISION: Atul Anand... Plaintiff Through : Mr.A.B..Dial, Sr.Advocate with Ms.Sumiti Anand, Adv. Versus Nanak Food Industries & Ors.... Defendants Through: Mr.Pradeep Malhotra for D-2 Ms.Neelima Tripathy for Ds 6-9 None for defts.1, 3 to 5 PRADEEP NANDRAJOG, J. 1. Present order disposes of IA No.991/2004, being application filed by defendants 1, 3, 4 and 5 under Order 37 Rule 3(5) CPC and IA No.6906/2005 filed by defendant No.2 under Order 37 Rule 3(5) CPC. 2. Needless to state, said defendants seek leave to defend. 3. I would also be dealing with the request of defendants 6 to 9 to discharge the bank guarantees submitted by them pursuant to the order dated 8th January, Before dealing with the 2 applications which seek leave to defend, I deal with the request of defendants 6 to 9 for release of the bank guarantees. 5. Defendants 6 to 9 have no concern with the plaintiff. Suit filed by the plaintiff was against Nanak Food Industries, a partnership firm and its 4 partners who were impleaded as defendants 2 to On 24th August, 2001 defendants were restrained from alienating property No.A- 10/6, Vasant Vihar, New Delhi. The defendants 6 to 9 filed an application registered as IA No.11035/2002 seeking recall of the injunction order stating that much before 24th August, 2001 when the restrain order was passed, said defendants had entered into an

2 agreement to sell for purchase of the property and on requisite permission was obtained from the statutory authorities under the Income Tax Act. That the agreement to sell was entered into on for a total sale consideration of Rs.8.33 crores out of which Rs.84 lacs were paid when agreement to sell was entered into and that balance sale consideration in sum of Rs.7.49 crores was paid at the time of execution of the sale deed(s) on It was stated that on stamp papers in sum of Rs lacs were purchased on which sale deed(s) was executed. They stated that in view of the order dated , Sub-Registrar was not returning the sale deed(s) presented for registration on Notwithstanding that the suit invokes Order 37 CPC, said defendants who were not originally impleaded as defendants later on came to be impleaded as defendants. Their application was disposed of with a direction that on furnishing a bank guarantee by said defendants to secure the suit amount, sale deed which was registered by the Sub- Registrar would be handed over to them. 8. Qua said defendants only issue which needs to be decided is whether they are entitled to release of the bank guarantee furnished by them. 9. Law is clear on the subject and save and except noting one decision, I would be wasting precious judicial time in unnecessarily elaborating on the issue. 10. In the decision reported as (1990) 3 SCC 291 Vannarakkal Kallalathil Sreedharan Vs. Chandramaath Balakrishnan & Ors. taking note of the order 38 Rule 10 and Section 64 Code of Civil Procedure 1908 as also Sections 40 and 54 of the Transfer of Property Act, 1882 their Lordships of the Supreme Court held that under a contract of sale entered into before attachment the conveyance although after attachment, in pursuance of the contract passes good title to the purchaser in spite of the attachment. It was further held that agreement for sale creates an obligation attached to the ownership of property and since the attaching creditor is entitled to attach only the right, title and interest of the judgment debtor, the attachment cannot be free from the obligations incurred under the contract for sale. Referring to Section 64 of the Code of Civil Procedure, 1908 it was held that the said provision was intended to protect the attaching creditor, but if the subsequent conveyance is in pursuance of an agreement for sale which was before the attachment, the contractual obligation arising therefrom must be allowed to prevail over the rights of the attaching creditor. 11. On facts it was noted that the attachment was effected on but the agreement to sell was prior in point of time i.e But, sale deed was executed after It was held that the attachment could not affect the right of the purchaser. 12. Similar view has been consistently taken by various High Courts. Since we have an authoritative pronouncement from the Supreme Court, no useful purpose would be served in noting the decisions of various High Courts on the point.

3 13. The bank guarantee submitted on behalf of defendants 6 to 9 is accordingly directed to be released by the registry of this Court and returned to said defendants through their counsel on record. 14. Dealing with the main controversy, the suit in sum of Rs.31,26,464/- alleges that defendant No.1 is a partnership firm and defendants 2 to 5 are its partners. That at the request of the partnership firm, by way of loan, plaintiff gave a sum of Rs. 20 lacs by cheque No dated drawn on Canara Bank. That the loan was to be returned in 10 monthly installments of Rs. 2 lacs each commencing from % p.a. was to be paid. Overdue 3% per month was payable in case of default. It is further stated that 10 post dated cheques in sum of Rs.2 lacs each payable on the 25th day of each calender month from the month of July, 1998 till month of April, 1999 were issued. 15. Details of the said cheques issued by defendant No.1 have been set out in para 3 of the plaint. 16. For the interest to be paid, on reducing balance of the loan amount, it is stated that 10 cheques dated 25th of each calender month effective from the month of July, 1998 till the month of April, 1999 were issued as per details in para 3 of the plaint. Since tax was to be deducted at source as per provisions of Income Tax Act, interest reflected under the amount of cheque was minus the TDS figure. Details of the cheques issued on account of interest as per para 3 of the plaint are as under :- Date Amount (Rs.) TDS Net Amount Cheque No , , , , , , , , , , , , , , , , , , , , , , , , It is stated that on behalf of defendant No.1, defendants 3 and 4 executed a promissory note promising to pay to the plaintiff, on demand a sum of Rs.20 lacs together with 20% p.a. with overdue 3% per month. Defendants 3 and 4 also executed separate deeds of personal guarantee in favour of the plaintiffs on It is further stated that defendant No.3 handed over a cheque on bearing No drawn on Bank of India. Similarly, defendant No.4 also handed over a personal cheque No dated drawn on the Bank of India, Connaught Place. Both cheques were drawn in favour of the plaintiff. 18. Plaintiff states that the cheques dated towards refund of the principal sum and the interest for the first month were honoured by the banker of

4 defendant No.1 but the second cheque towards repayment of principal and interest, both dated , were dishonoured with the remarks 'insufficient funds'. 19. Stating that legal notice was served asking for clearance of the amounts due since none was paid, plaintiffs filed the suit to seek recovery of the balance principal sum of Rs.18 lacs together with the accrued interest at the agreed rate. 20. Notwithstanding that the plaintiff has stated that the accrued rate of interest was 20% per annum with a default that on monthly payments not being cleared overdue interest would 3% p.a., interest has been 23% p.a from the date of suit till realisation. While claiming the decree, plaintiff has claimed interest at same rate on the balance principal sum payable. Thus, Rs.18 lacs is the principal sum and Rs.13,26,464/- is the pre-suit interest. 21. I may note that before the suit was filed, defendant No.2 had died and his wife being the legal heir has been brought on record. There is some controversy as to date of death of defendant No.2. But that is irrelevant in as much as the plaintiff was not aware of the death of defendant No.2. When summons were sought to be served, it transpired that he had died. His wife was brought on record as his legal heir as his sons were already a party. Wife of defendant No.2 has filed IA No.6906/2005 praying for leave to defend. 22. Seeking leave to defend, defendants 1, 3, 4 and 5 have stated that on , and plaintiff received a sum of Rs.2 lacs, 1.5 lacs and 1.5 lacs respectively in cash. That said amount was not reflected in the plaint and therefore said defendants are entitled to leave to defend on said count. 23. Second ground urged is that except for 1st two cheques the other cheques were never presented for encashment and hence suit does not lie. 24. Third ground on which leave to defend has been urged is that the loan is in contravention of the Punjab Money Lenders Act as applicable in Delhi in as much as plaintiff does not have the requisite licence under the said Act. 25. Fourth ground taken is that since no equitable mortgage was created, suit cannot be tried in Delhi. Fifth ground taken is that the rate of interest as claimed was never admitted to be paid. Alternatively, it is prayed that the rate of interest is against public policy. 26. Defence taken by Balwant Kaur is that her husband had died when the suit was filed and being filed against a dead person, suit against defendant No.2 was a nullity. She has stated that she was never a party to the loan agreement. On merits she has taken a defence at par with other defendants. She has further stated that the plaintiff has not pleaded having received any payment under the promissory note and therefore the same could not be the foundation of the suit.

5 27. I fail to understand the pleas of the defendants pertaining to the so called mortgage for the reason suit seeks a money decree and is not a suit for foreclosure of the right to redeem a mortgage. 28. Head Office of defendant No.1 is stated to be A-10/6, Vasant Vihar which is also the residence of defendants 2 to 5. Thus, this court would have territorial jurisdiction to entertain the suit. Even otherwise the principal of law that a debtor must pay the creditor at the place of his residence would confer jurisdiction on this Court. 29. Turning to the second objection, cause of action pleaded in the plaint is in para 18 which reads as under :- 18. The plaintiff states that the cause of action firstly arose when the plaintiff advanced the loan to defendant No.1 on , the documents detailed above were executed on , the defendants issued the post dated cheques towards repayment of principal and the interest. It further arose when the cheques dated presented for payment in the defendants account were returned unpaid to the plaintiff by the defendants' Banker due to insufficiency of funds. It arose further from time to time when the defendants failed to repay the loan amount and the interest due to the plaintiff in spite of requests, demands and legal notice dated The cause of action is continuing. The suit is within limitation. 30. The cause pleaded is the loan advanced and its non repayment. To sustain the cause, return of the cheques issued towards interest and second installment is brought in aid. There was no use for the plaintiffs to present the other cheques for payment as admittedly there was no money in the account with the bank on whom the cheques were drawn. 31. Defendants have not denied the cheques issued by defendant No.1. They have not denied plaintiff's averments that there was no money in the account. 32. Plea of defendants 1, 3 to 5 that sum of Rs. 6 lacs was returned to the plaintiff in cash cannot be accepted by this court for the reason no receipt has been produced or relied upon to justify the defence. I may note that the plaintiff has denied that said sum was ever received. 33. Defendant No.1 is engaged in business and I presume that said defendant would be maintaining the records pertaining to monetary transactions. Under the Income Tax Act vide Section 269SS no loan exceeding Rs.20,000/- can be received or given in cash, nor its repayment can be in cash if amount is beyond Rs.20,000/-. It is not pleaded that any receipt or voucher was signed by the plaintiff when he received the money. 34. The plea of wife of defendant No.2 that her husband died when suit was filed and therefore suit against a dead person is not maintainable is untenable in law for the reason where, ignorant of the death of a person, a suit is filed, legal heirs can be brought on record subsequently, if not under Order 22 Rule 4 CPC, under Order 1 Rule 10 CPC. It would be a case of a person, inadvertently not impleaded as a party and

6 subsequently impleaded as a party. For purposes of limitation, Section 21 of the Limitation Act 1963 would come into force. Section 21 reads as under:- 21. Effect of substituting or adding new plaintiff or defendant.- (1) Where after the institution of a suit, a new plaintiff or, defendant is substituted or added, the suit shall, as regards him, be deemed to have been instituted when he was so made a party. Provided that where the court is satisfied that the omission to include a new plaintiff or defendant was due to a mistake made in good faith it may direct that the suit as regards such plaintiff or defendant shall be deemed to have been instituted on any earlier date. (2) Nothing in sub-section (1) shall apply to a case where a party is added or substituted owing to assignment or devolution of any interest during the pendency of a suit or where a plaintiff is made a defendant or a defendant is made a plaintiff. The proviso which was not a part of the corresponding Section 22 of the Limitation Act 1908 was inserted for the first time as a proviso to the corresponding Section under the 1963 Act. Wife of defendant No.2 has not shown that omission to include her name as a defendant was not bona fide or that the plaintiff was aware that her husband was dead when the suit was instituted. I would therefore treat that the suit against wife of deceased defendant No.2 was instituted as on date when suit was filed. I am fortified in the view which I had taken as per decisions of the Punjab and Haryana High Court and Andhra Pradesh High Court reported as AIR 1977 P&H 180 Joginder Singh & Ors. Vs. Krishan Lal & Ors. and AIR 1974 AP 185 P.B. Rammohanreddy & Anr. Vs. Chintan Achaiah & Ors The plea of the defendants that the suit is barred under the provisions of the Punjab Registration of Money Lenders Act, 1938 on the ground that the plaintiff does not have a licence to act as a money lender is neither here nor there for the reason defendants have nowhere pleaded in the applications seeking leave to defend that the plaintiff was engaged in the business of money lending. The Punjab Registration of Money Lenders Act, 1939 requires a person to obtain a licence to act as a money lender if the person is in the business of money lending. It was for the defendants to have made specific averments that the plaintiff was engaged in the business of money lending. The said Act does not prohibit casual advancing of loan by a person to a third party. Casual loans do not require a licence. 36. On the issue of interest, the cheques towards repayment of interest have not been denied as being issued by defendant No.1. The sums reflected in para 3 of the plaint evidence that the defendant No.1 agreed to pay 20% per annum. 37. Promissory note executed by defendant No.3 and 4 on behalf of defendant No.1 has not been denied. It reads as under:- On demand, we NANAK FOOD INDUSTRIES, represented by its partners Mr.Shivraj Singh and Mr.Omkar Singh having its office/dairy at KH No.2/17 and 2/23, Vill- Karawal Nagar, Delhi-94, hereby promise to pay Mr.ATUL ANAND, 8, VILL. HAUZ

7 KHAS, NEW DELHI, on order a sum of Rs.20,00,000/- (Rupees Twenty Lakhs only) with per annum (Overdue per month over and above normal rate of interest) payable monthly backended on the principal amount received on 25th June, The principal repayment will be in 10 monthly installments of Rs.2 lakh each starting from as per detail given in annexure-1 attached. 38. Personal guarantees given by defendant No.3 and 4 also record that loan taken by the firm was at per annum with 3% per month rate of default interest. I do not find the interest as contrary to public policy. 39. All partners are jointly and severally liable for the dues of the partnership firm and therefore defendants No. 2 and 5 as partners are equally liable notwithstanding that they have not given personal guarantees. Wife of deceased defendant No.2 being his legal heir is equally liable but only in respect of the estate of the deceased inherited by her, which issue has to await adjudication during execution. 40. No triable issues have been raised by the defendants. 41. The defence is nothing but a moon shine. 42. The IAs are dismissed. CS(OS) No.1710/2001 Suit is decreed as prayed for. Pendente lite and post decretal interest on the principal sum of Rs.18 lacs is awarded to the per annum. Plaintiff would be entitled to costs. Sd/- August 02, 2006 PRADEEP NANDRAJOG JUDGE.