Summary suit must fit the written contract strictly; unsupported quarterly-rest interest defeated summary procedure against guarantors.

A summary suit was maintainable against the company because the board resolution, stamped receipt and undertaking together constituted a written contract for a liquidated demand, and the receipt was admissible. The guarantee was also duly stamped, but the claim for interest with quarterly rests was not clearly authorised by the written instrument, so the suit could not proceed as a summary suit against the guarantors on that footing; they were given unconditional leave to defend and the matter was relegated to the commercial cause procedure. The suit was not barred by section 446(2) of the Companies Act, 1956 because it was filed before appointment of the provisional liquidator. Delay in taking out summons for judgment did not by itself entitle the defendants to unconditional leave to defend.

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Issues: (i) whether the suit was maintainable as a summary suit against the company on the basis of the resolution, receipt and undertaking, and whether the receipt was duly stamped; (ii) whether the guarantee executed by the guarantors was duly stamped and whether the claim for interest with quarterly rests was within the scope of the summary procedure, so as to entitle the guarantors only to unconditional leave to defend; (iii) whether the suit was barred by section 446(2) of the Companies Act, 1956; and (iv) whether delay in taking out summons for judgment under the High Court Original Side Rules entitled the defendants to unconditional leave to defend.

Issue (i): whether the suit was maintainable as a summary suit against the company on the basis of the resolution, receipt and undertaking, and whether the receipt was duly stamped

Analysis: The Court held that a written agreement need not be confined to one document signed by both sides. A board resolution, a stamped receipt acknowledging the deposit and agreeing to pay principal with interest, and the undertaking to repay with interest together constituted an agreement in writing. The receipt was found to be properly stamped under the relevant stamp law and was admissible in evidence. Since the suit was founded on a written contract for a liquidated demand, it fell within the summary procedure. The company did not apply for leave to defend.

Conclusion: The suit was maintainable as a summary suit against the company and decree followed against it.

Issue (ii): whether the guarantee executed by the guarantors was duly stamped and whether the claim for interest with quarterly rests was within the scope of the summary procedure, so as to entitle the guarantors only to unconditional leave to defend

Analysis: The guarantee was held to be sufficiently stamped under the applicable stamp provisions and, on that ground, was capable of supporting a claim under the summary procedure. However, the prayer sought interest at 18% per annum with quarterly rests, which the Court distinguished from additional or penal interest. The contractual language in the guarantee did not clearly authorise capitalisation of interest at quarterly rests. In a summary suit, the claim must strictly fit the contract. Because the interest claim against the guarantors went beyond what was clearly supported by the written instrument, the suit could not proceed as a summary suit against them on that footing. The Court also rejected the contention that delay in moving summons for judgment automatically conferred unconditional leave, holding that leave depends on the merits of the disclosed defence and not merely on procedural delay.

Conclusion: The guarantors were entitled to unconditional leave to defend and the suit, as against them, was relegated to the commercial cause list.

Issue (iii): whether the suit was barred by section 446(2) of the Companies Act, 1956

Analysis: The Court held that permission of the Company Court under section 446(2) is required after a winding-up order or after appointment of a liquidator in the relevant sense. Here, the suit had been filed before the provisional liquidator was appointed. On that basis, the statutory bar was not attracted.

Conclusion: The suit was not barred by section 446(2) of the Companies Act, 1956.

Issue (iv): whether delay in taking out summons for judgment under the High Court Original Side Rules entitled the defendants to unconditional leave to defend

Analysis: The Court declined to treat delay in taking out summons for judgment as creating an automatic right to unconditional leave. It held that the power under the original side rules is discretionary and cannot override the settled principles governing leave to defend in summary suits. The nature of the defence remains the controlling factor.

Conclusion: Delay by itself did not entitle the defendants to unconditional leave to defend.

Final Conclusion: The company remained bound by the summary decree, while the guarantors were allowed to defend the claim in the ordinary commercial cause procedure because the interest claim exceeded what was clearly authorised by the guarantee.

Ratio Decidendi: In a summary suit, the claim must be strictly confined to a liquidated demand founded on a written contract, and a defence is to be tested by its substance; procedural delay in moving summons for judgment does not by itself confer an automatic right to unconditional leave to defend.

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