1989 PLP 1633 (CLC)

Rupees 12.5 million excess temporary limit from 1‑4‑1986 to 3‑11‑1986 on the following terms and conditions:‑ (i) Against pledge but if sold on credit then personal/insurance guarantee to be provided. (ii) Pesticides 25% margin, property 50% margin cash Nil margin. (iii) Inland Letter of Credit for Imported Material on 275 DA Basis:‑ (a) Amount Rs.60 million. (b) Security. (i) Collateral /legal mortgage for each 0.1 million totalling Rs.1.2 million of property valuing Rs.75 millions. (ii) Equitable mortgage of the remaining value of the same property. (iii) Hypothecation of stocks upto Rs.7.5 million. (III) Foreign Imported Letter of Credit Limit of 180 to 300 days on DA. Basis. (a) Amount Rs.10 million. (b) Legal mortgage of 0.1 million‑‑total value of property Rs.30 million remaining amount by equitable mortgage. It is further averred in the plaint that although the adjustment was made by the firm on due dates and enough securities were provided to the Bank under which the goods were sold and distributed by the plaintiff to the dealers/growers and enough securities in the form of legal and equitable mortgage, insurance and personal guarantee had been provided by the firm to cover and secure the financing facilities afforded by the defendant in different forms, yet the Bank arbitrarily, unilaterally, illegally and immorally introduced and imposed pledge conditions and subjected the goods imported on local and foreign letter of credit and sprayers of the value of Rs.60 and 70 lacs imported by the firm through letter of credit to illegal conditions of pledge whereas the firm was in urgent need of sprayer for supply to the customers. The Bank illegally and in violation of the settled agreement, forced the firm to get the same release on cash payment and when the cash was paid for the release of sprayer, the Bank did not physically release the same and illegally kept them as securities against cash financing account. Exactly the same was done to the imported purchased goods on local and foreign L.C.S. including item known as arrivo, hitting at the very root of settled arrangements and the basis of business operation of firm and thereby completely ruined and destroyed the entire structure of business operation and thus paralysed highly flourishing and well‑established structure of firm causing immense and huge financial loss as well as the shock to its continuing business operation and loss of credibility with customers and also subjected: the firm to humiliation and destruction. The plaintiff has claimed Rs.21 crore, the suit money, as damages.

2. In accordance with the summary procedure provided for in Order XXXVII C.P.C. summons in Form No.4 in Appendix B requiring the Bank to obtain leave from the Court within 10 days from service thereof, to appear and defend the suit, were issued. The Bank within 10 days of the service of the summons has applied for leave to defend the suit through this miscellaneous petition on the grounds that the suit was filed with mala fide intention to prolong the recovery of bank's dues by causing harassment, that the bank had not violated the settled arrangements; that payment of L.C. dated 5‑2‑1988 amounting to Rs.94,52,556 was to be made by the Firm on 25‑3‑1986, yet it did not make payment so the Bank was constrained to make payment to the beneficiary by creating forced PLS PAD; that the Firm had executed letter of pledge for availing termporary enhanced cash finance facility of Rs.12,500 Millions within the over all limit of Rs.20.00 Millions and pledged the goods. There, was thus no justification for deviation from the terms and conditions of the pledge and sanction advice for Rs.20.00 Millions for cash finance: that the cash finance facility of Rs.7.500 millions against the hypothecation could not be adjusted by the Firm to 30‑12‑1986; that the Firm had accepted the facility against pledge, so it could not ask for hypothecation instead of pledge; that the claim of damages is fictitious, frivolous and that the Firm has misused the hypothecated goods and has not deposited the entire sale proceeds and a sum of Rs.28,21,450 is still outstanding against it. In the supporting affidavit, the Bank simply stated the contents of the application for leave to defend the suit, were correct and true. In reply to the application for leave to defend, the Firm has refuted the allegations of default and deviation from settled agreement levelled by the Bank against it.

3. From the aforesaid state of affairs, it is very much obvious that the parties have blamed each other for the violation of the settled agreement between them and as such there are likely to arise triable issues to go for trial. The controversy cannot be properly appreciated and finally decided unless the plaintiff is called upon to prove its claim and the defendant is prodded an opportunity to rebut the same. The leave application discloses facts as would make it incumbent upon the Firm to prove its claim and rebut the facts stated in the application. Learned counsel for the plaintiff has candidly conceded the suit as framed does require proof through evidence and it is a fit case for grant of leave to defend the suit. For these reasons I have come to the conclusion that the Bank is entitled to appear and defend the suit.

4. Learned counsel for the parties are bitterly at war on the question as to whether permission to appear and defend the suit should be conditional or not. Learned counsel for the applicant Bank/argued that it was pre‑eminently a case for unconditional leave to defend, inasmuch as, the defendant is a Bank created under a statute with a very high liquidity and position and no loss could be caused to Firm even if the suit is decreed and that the amount of damages allegedly caused by it, are yet to be ascertained. Conversely, the learned counsel for Firm maintained that it is a case of High handedness on the part of the Bank in that although enough securities in the form of legal and equitable mortgage, insurance and personal guarantee had been provided by the Firm to cover and secure the financing facilities afforded by the Bank and the Firm had been making adjustment on due dates yet the Bank unilaterally, arbitrarily, u‑justly imposed pledge conditions and subjected the goods including sprayers and arrivo imported on local and foreign letter of credit to illegal conditions and refused to release the same unless payment in cash was made and when the cash was paid for the release of the goods which were urgently needed for supply to the customers, the Bank did not release the same and instead illegally retained them as security against cash financing account. Learned counsel submitted that by its illegal and unreasonable attitude, the Bank adamantly and maliciously has paralysed the highly flourishing business and well‑established structure of the firm causing heavy financial loss and serious injuries to its credibility, good‑will, and reputation. So the leave must be subjected to the extreme conditions of depositing the entire suit money in the Court.

5. Rule 3 of Order XXXVII C.P.C. empowers the Court to give unconditional leave or subject to such terms inter alia, as to the payment into Court or giving security, as it thinks fit. The scope of this provision of law has been examined and explained in a number of judgments of superior Courts. Since H the facts of different cases seldom coincide, so, no specific rule has been laid down for determining the question as to how discretion vested in the Court with regard to the imposition of condition, be exercised. This question wholly depends upon the facts and circumstances of each case. Having reviewed the application for leave to defend, supporting affidavit, plaint and the reply to the application for leave to defend and the documents annexed therewith and considering the distinction between governing principles, for grant of conditional or unconditional leave, I have not been able to persuade myself to agree with the learned counsel for the Bank, for the reasons that the Firm's allegations of unilateral imposition of pledge condition by the Bank, force cash payment, breach of promise to release the goods on payment of cash, deceitful retention of goods which were to be delivered to the consumers after cash payment by the Bank and of violation of the settled terms although enough securities in the form of legal and equitable mortgage, insurance and personal guarantee had been provided by the Firm to cover and secure the financing facilities provided by the Bank and of causing heavy financial loss, destruction and humiliation, against the Bank, neither appear to be beseless nor are based on vague or frivolous averments and that the defence taken in the application for leave to appear, appears to be controvertible; that the contention of the learned counsel that since the defendant is a Bank with a very high liquidity and position, therefore, imposition of condition while granting leave to appear is uncalled for, is devoid of force and substance as it is the quality of the defence and not the status of the defendant which should be the governing factor. Furthermore, it would be in consonance with the rule of law and administration of justice that in the matter of imposition of condition, there should be no discrimination between a Banking Company and a borrower. In a suit for money filed by borrower against the Bank, the latter does not deserve special or preferential treatment by the Court. The relevant law does not prohibit the imposition of conditions on a particular Bank. The Banking Company does not enjoy statutory privilege and protection in the matter of grant of leave to defend or imposition of conditions thereto. There will be no difficulty for the Bank to fulfil the condition which may be imposed and thus imposition of condition will not render the grant of leave illusory.

6. The next question of terms to be imposed for grant of leave to defend falls for determination. There are serious allegations of high handedness against the Bank. Keeping in mind that it is a case for the recovery of suit money as damages, so the proposed conditions must accord with the situation. I grant leave to appear and defend the suit subject to the defendant's depositing Rupees one crore, i.e. 1/21 of suit money in the Court and furnishing guarantee by other bank of its choice, to the tune of Rupees 10 crore on or before 4‑1‑1989. Since the exact amount of damages suffered by the Firm is not ascertainable at this stage, so I have not imposed extreme condition of payment into Court to the entire amount or of furnishing bank guarantee or security equal to the suit money i.e. Rupees 21 crore.

7. For further proceeding, to come up on 8‑1‑1989. M.Y.H./A‑471/L Conditional leave granted.