TaxTMI 
TaxTMI 
2020 (5) TMI 736
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....e by the Defendant No.1 the Plaintiff had issued an offer letter incorporating the terms and conditions of the loan facility. The Defendant No.1 accepted the offer and thereupon a loan agreement came to be executed between the parties on 29th December, 2017. The loan agreement inter alia provided for the tenure of the loan, the interest on the amount to be advanced, the action to be initiated by the Plaintiff in the event of default, the securities to be provided by the Defendant and the guarantors. The Defendant No. 2 executed a letter of guarantee on 29th December, 2017 and irrevocably and unconditionally agreed to pay on demand the outstanding amount payable by the Defendant No. 1 along with interest and other charges. Likewise, the Defendant No. 3 executed a letter of guarantee of even date in the capacity of a corporate guarantor and undertook to discharge the liability of Defendant No. 1. Upon execution of the aforesaid documents the Plaintiff disbursed an amount of Rs. 29 Crores to the Defendant No.1 on 29th December, 2017. The Defendant Nos. 4 and 5, which are the companies incorporated under the Companies Act, have executed a Pledge Agreement in favour of the Plaintiff on ....
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.... interest was also said to be not borne out by the contract between the parties. Resultantly, a summary suit for recovery of the said amount is not tenable. 5. The Defendant No. 1 filed an additional affidavit in reply on 19th December, 2019. The Defendant No. 1 contended that the financial assistance extended to Defendant No. 1 was a mere subterfuge. The Defendant No. 1 took a bold defence that the Plaintiff had extended the facility of Rs.29 Crore to Defendant No. 1 for the purpose of transferring the said amount to M/s. Vedraj Cement Ltd. The Defendant No. 1 had accordingly transferred the said amount of Rs. 29 Crore to M/s. Vadraj Cement Ltd. Thus the Defendant No. 1 was a mere conduit. The Defendant No.1 could not have been extended such a huge loan facility of Rs. 29 Crores as she had no financial credentials. Since the Plaintiff has become the defacto promoter of M/s. Vadraj Cement Ltd., consequent to latter's winding up, the Plaintiff cannot institute a suit for recovery of the amount which was in fact advanced to M/s. Vadraj Cement Ltd. Thus according to Defendant No.1 there is no outstanding debt from Defendant No.1. 6. The additional affidavit of Defendant No. 1, t....
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....mmary suit on the strength of those instruments is not sustainable. Two, the Plaintiff has invoked the pledge and exercised the voting rights. Thus a suit for recovery of the amount without giving credit for the value of the shares over which the Plaintiff professes to exercise the voting rights is not tenable. 8. In contrast to this, Dr. Saraf, the learned Senior Counsel for the Plaintiff submitted that none of the aforesaid submission warrants consideration. First and foremost, there is no pleading in any of the affidavits in support of the aforesaid submissions. On the contrary, the additional affidavit of defendant No.1, the principal borrower, indicates that there is no dispute about the transaction and the extension of loan facility by the Plaintiff to the Defendants. In the circumstances, according to the learned Senior Counsel, the Defendants are not entitled to leave to defend the suit as there is no defence whatsoever and the Plaintiff is entitled to a Summons for Judgment. Even otherwise according to the learned Senior Counsel the first submission based on the insufficiency of stamp on the instruments in question has been consistently held by the Courts to be a techni....
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....the facts of the said case following two questions arose for consideration before the Supreme Court : 2 Two questions arise in this appeal : viz., (1) whether the first respondent pledged certain quantity of aero scraps purchased by him from military authorities at Bamrauli Depot, Allahabad and delivered possession thereof to the appellant under an agreement of pledge entered into between them" ; and (2) whether the appellant was entitled to any relief when his case was that the first respondent never delivered to him the said goods and the said agreement never ripened into a pledge?." 13. In the aforesaid case, the trial Court had held that there was no completed contract of pledge as the first Respondent had failed to deliver the said goods. On an Appeal, the High Court held that the said goods were delivered to the Appellant and the said agreement did not rest at a mere agreement to pledge but ripened into a pledge and that the Appellant was not entitled to any relief in view of his stand that the said goods were never pledged with him and were therefore not in his possession. 14. The Supreme Court, after analyzing the facts and evidence, adverte....
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.... than he bargained for under the, contract of pledge. The pawnee therefore can sue on the debt retaining the pledged goods as collateral security. If the debt is ordered to be paid he has to return the goods or if the goods are sold with or without the assistance of the court appropriate the sale proceeds towards the debt. But if he sues on the debt denying the pledge, and it is found that he was given possession of the goods pledged and had retained the same, the pawner has the right to redeem the goods so pledged by payment of the debt. If the pawnee is not in a position to redeliver the goods he cannot have both the payment of the debt and also the goods. Where the value of the pledged property is less than the debt and in a suit for recovery of debt by the pledgee, the pledgee denies the pledge or is otherwise not in a position to return the pledged goods he has to give credit for the value of the goods and would be entitled then to recover only the balance." (emphasis supplied) 16. Reliance was also placed on a judgment of Delhi High Court in the case of GTL Ltd. vs. IFCI Ltd. and Ors. [2011 (126) D.R.J. 3 1994] wherein an identical proposition was expounded. 17. Ther....
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....he instruments being insufficiently stamped. The learned counsel for Defendant Nos. 1 to 5 urged with a degree of vehemence that the insufficiently stamped instruments cannot be clothed with the character of a written contract envisaged by the provisions contained in Order 37 Rule 1(2)(b)(i). The instruments which are insufficiency stamped, according to learned counsel for Defendant Nos.1 to 5, do not satisfy the requirement of the contract as they are not legally enforceable till the requisite stamp duty is paid thereon. Mr. Joshi, would urge that the course adopted by this Court in a series of judgments of impounding the insufficiently stamped instruments and granting a conditional leave to defend the suit is not legally sustainable. 21. To buttress this submission, the learned counsel for Defendant Nos. 1 to 5 placed a very strong reliance on a recent judgment of the Supreme Court in the case of Garware Wall Ropes Ltd. vs. Coastal Marine Constructions and Engineering Ltd. [2019 (3) M.L.J. 405] The learned counsel for Defendant Nos. 1 to 5 led special emphasis on the observations of the Supreme Court in Para 19 of the judgment, which read as under: "19. When an arb....
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.....S. (Supra) requires re-consideration as the attention of this Court was not brought to a judgment of the learned single judge of this Court in the case of Yogendra Patwardhan vs. Handelwal Hermann Electronics Ltd. [1989 Mh.L.J. 310] wherein this Court had observed as under: "5 What is to be noted is that a Summary Suit is a suit on a document. Therefore, if the document itself is not admissible or cannot be acted upon, for want of proper stamp, no Summary Suit can lie. There is a basic different between an ordinary suit in which a document is to be tendered in evidence, and a Summary Suit which is a suit on the document itself. In all ordinary suits, documents may be tendered and the question of admissibility of documents would then arise and the Court will then decide the question according to the Stamp Act. But in a summary suit at the time of the filing of the suit, the document itself upon for want of requisite stamp, the suit is not maintainable as a summary Suit. That is why in a summary suit, if there is no defence to the suit, on production of the document itself, a decree is passed without recording any evidence as such. But the document must be such as can be ac....
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.... is part of the instrument. Section 35 of the Stamp Act is distinct and different from Section 49 of the Registration Act in regard to an unregistered document. Section 35 of the Stamp Act, does not contain a proviso like Section 49 of the registration Act enabling the instrument to be used to establish a collateral transaction. 20. The Scheme for Appointment of Arbitrators by the Chief Justice of Gauhati High Court, 1996 requires an application under Section 11 of the Act to be accompanied by the original arbitration agreement or a duly certified copy thereof. In fact, such a requirement is found in the scheme/rules of almost all the High Courts. If what is produced is a certified copy of the agreement/contract/instrument containing the arbitration clause, it should disclose the stamp duty that has been paid on the original. Section 33 casts a duty upon every court, that is, a person having by law authority to receive evidence (as also every arbitrator who is a person having by consent of parties, authority to receive evidence) before whom an unregistered instrument chargeable with duty is produce, to examine the instrument in order to ascertain whether it is duly stamped....
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....5, especially the insertion of sub-section (6A) in Section 11 of the principal Act, which prescribed that the Court shall confine itself to examination of the existence of an agreement, held that the question of impounding of the instrument unstamped or insufficiently stamped need not be considered by the Judge who is hearing Section 11 application, but by an Arbitrator, who is appointed under Section 11. 77. It would be contextually relevant to note that the Full Bench of this Court in the case Gautam Landscapes (supra) has also considered the impact of the legislative change brought about by insertion of sub-section (6A) and held that the issue as to whether sufficiency or otherwise of the stamp-duty on the agreement can be left to the decision of the Arbitral Tribunal (paragraph 102). The Full Bench further observed in 'paragraph 110' that even the decision in SMS Tea (supra) cannot be made applicable to the application fled after 23 rd October, 2015. On the aforesaid premise, the Full Bench held that before passing fnal order on an application under Section 11(6) of the Act, the Court was not required to await the adjudication by the stamp authorities where there is an....
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....ducted therefrom. A profitable reference in this context can be made to the decision of the Constitution Bench in the case of Union of India vs. Chajju Ram (dead) By LRs. and others 21 , wherein the Supreme Court in paragraph 23 has observed thus: "23. It is now well settled that a decision is an authority for what it decides and not what can logically be deducted therefrom. It is equally well settled that a little difference in facts or additional facts may lead to a different conclusion." 83. The aspect of insufficiency of stamp-duty and the bar incorporated by the provisions of Section 34 of the Stamp Act, 1958, is required to be considered in the backdrop of the special procedure prescribed in Order XXXVII of the Code for expeditious resolution of disputes based on negotiable instrument and written contracts etc. Indisputably, adjudication of deficit stamp-duty is within the province of the authorities under the Stamp Act, 1958. The adjudication orders are amenable to appeals and revisions. Can the Court stay its hands off and not consider the aspect of grant of leave till the question of proper stamp-duty is finally adjudicated? 84. An answer to afor....
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....n the context of summary suit, cannot be interpreted to mean the entire proceedings starting with institution of the suit by lodging a plaint. In a summary suit, the "trial" really begins after the Court or the Judge grants leave to contest the suit. Therefore, the Court or Judge dealing with the summary suit can proceed up to the stage of hearing the summons for judgment and passing the judgment in favour of the plaintiff if (a) the defendant has not applied for leave to defend and/or if such application has been made and refused or if (b) the defendant who is permitted to defend fails to comply with the conditions on which leave to defend is granted. 86. Placing heavy reliance upon the aforesaid proposition, it was urged by Dr. Saraf that at the stage of summons for judgment, it is not peremptory to defer the consideration where the instrument is either unstamped or insufficiently stamped. The said objection, in the backdrop of the nature of the summary procedure, wherein at the stage of the summons for judgment the Court has to consider the nature of the defence sought to be putforth by the defendant, cannot be stated to be a defence in the strict sense of the term and ....
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.... of I.L.F.S (Supra) this Court has considered all the submissions including the one now sought to be canvassed. The reasons for adopting the course of impounding the instrument and granting conditional leave to defend the suit including the necessity of harmonizing the provisions contained in Order 37 of the Code and Section 34 of the Stamp Act, 1958 have been spelled out. I am not impelled to accede to the submission that the points urged by Mr. Joshi in this case warrant reconsideration of the aforesaid view. Thus the course adopted by this Court in the case of I.L.F.S. (Supra) can be legitimately adopted in this case as well. 29. The conspectus of the aforesaid consideration is that none of the legal submissions sought to be urged by Mr. Joshi warrant an unconditional leave to defend the suit. On facts, as indicated above, the claim of the Plaintiff of extension of the loan facility is explicitly admitted. 30. The pronouncement of the Supreme Court in the case of IDBI Trusteeship Service Limited Vs. Hubtown Limited [(2017) 1 SCC 568] , especially the proposition expounded in para 17.6 that, "if any part of the amount claimed by the plaintiff is admitted by the defendant to....