TaxTMI 
TaxTMI 
TaxTMI 
2020 (5) TMI 736
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....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 26th February, 2018 and thereby pledged 10....
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....he 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, the principal borrower is, in a sense, a complete and....
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.... 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 technical defence and not worthy of granting leave. As regards....
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....tion 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, adverted to the second question, extracted above, and enunciated the legal position in the followin....
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....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. There can be no quarrel with the proposition that once the Pawnee invokes the pledge and sells the security the Pawnee....
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....at 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 arbitration clause is contained "in a contract", it is significant that the agreement only becomes a contract if it is enforceable by law. W....
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....se 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 acted upon." 26. Mr.Amrut Joshi further urged that in view of the clear and explicit observations of the Supreme Court in para 19 in the case of Garware Wall....
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....t 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. If the court comes to the conclusion that the instrument is not duly stamped, it has to impound the document and deal with it as per Section 38 of the Stamp Act." 74. The Supreme Court also summed u....
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....amped 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 objection as to subject document being not adequately stamped. 78. In Garware (supra), the Supreme court was principally dealing with the question as to whether the decision in SMS Tea (supra) has also been done away by the expression, "notwithsta....
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....at 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 aforesaid question warrants a harmonious construction of the provisions contained in Section 34 of the Stamp Act and the provisions contained in Order XXXVII of the Code. Even in the case of Garware (supra) the Supreme Court adverted to the principle of harmonious construction. The Supreme Court thus o....
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....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 constitutes a mere technical objection. Thus, the course adopted by the learned Single Judges, in the cases referred to above, of impounding the document and sending it for adjudication simultaneously with the passing of order of grant of leave, cannot be said to be unsustainable. Nor it would cause any prejudice to....
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.... 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 be due from him, leave to defend the suit, (even if triable issues or a substantial defence is raised), shall not be granted unless the amount so admitted to be due is deposited by the defendant in Court" governs the facts of the case. Thus I am persuaded to grant a conditional leave to defend the suit subject to deposit of the principal....