JUDGMENT
Gita Mittal, J.
1. By this judgment, I propose to decide I.A. No. 470/2005 filed by the defendants under the provisions of Order 37 Rule 3(5) of the Code of Civil Procedure, 1908 seeking leave to defend the present suit. In order to appreciate the issues raised in the application, it becomes necessary to notice certain essential facts.
2. Rashtriya Mahila Kosh, the plaintiff herein is a society registered under the Society Registration Act carrying on its activities under the directions of the Department of Women and Child Development of the Ministry of Human Resources Development, Government of India having its office at 1, Abul Fazal Road, Bengali Market, New Delhi-110001. Amongst the other activities of the plaintiff, it is contended that the plaintiff is engaged in advancing loans to the poor women through Non Governmental Organisations (NGOs).
3. The defendant no. 1 is a registered co-operative society located in Thiruvananthapuram in the State of Kerala. It is stated to have approached the plaintiff in the year 1994 through its Director, Mr. C. Christu Das, defendant no. 2 herein for a loan in the main loan scheme. Between the period from 21st March, 1994 and 14th March, 1997, vide three sanction letters dated 21st March, 1994, 30th September, 1994 and 14th March, 1997, the plaintiff sanctioned loan for a total sum of Rs. 58,42,730/- to the defendant no. 1 under the Main Loan Scheme. Towards these sanctions, the defendant no. 1 executed various documents including Memorandum of Agreements, Demand Pronotes etc. from time to time and agreed to be bound by the terms and conditions of the agreement and the sanction letters.
4. The plaintiff places reliance on guarantee deeds executed by the defendant no. 2 who had stood guarantor for the loan facility given to the defendant no. 1. The entire sanctioned loan was disbursed to the defendants by the plaintiff by Disbursement Advices between the period from 12th April, 1994 to 17th September, 1997 through demand drafts.
5. The plaintiff has further contended that a further loan amount of Rs. 20 lakhs in the category of Revolving Fund Scheme was sanctioned to the defendant no. 1 vide sanction letter dated 19th June, 1997 against execution of the Articles of Agreement dated 19th July, 1997 and a demand pronote of the same date by defendant no. 1 in favor of the plaintiff. The defendant no. 2 again executed a guarantee deed dated 19th July, 1997 in favor of the plaintiff and again promised to pay the loan amount to the plaintiff in the event of failure of defendant no. 1 to repay the same along with interest at the rate of 8% per annum.
It is submitted that the amount was again disbursed to the defendants vide Disbursement Advice dated 14th August, 1997.
6. There is no dispute that these loans were granted by the plaintiff to the defendants for the purpose of disbursement of the same to the members/self help groups within the period stipulated in the loan documents. As per the agreements executed by defendant no. 1, any amount which was not disbursed within the stipulated period by the defendant no. 1 in favor of the members/self help groups, was required to be refunded to the plaintiff by the defendants forthwith failing which, again penal interest at the rate of 8% per annum was chargeable besides the interest of 8% per annum in the loan agreement.
7. On account of failure of the defendants to maintain the financial discipline despite reminders dated 27th July, 2001 and 27th August, 2001, it has been pointed out that the defendants lastly paid a sum of Rs. 1 lakh on 8th July, 2002 in the Main Loan Scheme out of which a sum of Rs. 97,445/- was adjusted towards the principal and a sum of Rs. 2,555/- was adjusted towards interest. The defendants are also stated to have paid a sum of Rs. 30,246/- on 21st March, 2002 in the Revolving Fund Scheme which has been adjusted towards the interest by the plaintiff. As the defendants failed to make any payment in respect of the loans received by them, a legal notice was sent by the plaintiff on 19th September, 2003.
8. On failure of the defendants to comply with the notice demand, the plaintiff was constrained to file the present suit seeking recovery of Rs. 26,54,786/- against the defendants inclusive of the principal and the interest amounts.
9. The suit has been filed by the plaintiff under the provisions of Order 37 of the Code of Civil Procedure, 1908 which provides the summary procedure for effecting recovery of amounts. As per the prescribed procedure, the defendants have entered appearance and in answer to the summons for judgment, have filed the present application i.e. I.A. No. 470/2005 under Order 37 Rule 3(5) of the CPC. The principal objection taken to the suit is based on an objection to the territorial jurisdiction of this Court to entertain and adjudicate upon the subject matter of the suit. According to the defendants, the entire cause of action for filing the present suit arose in the State of Kerala which is outside the territorial jurisdiction of this Court.
10. It has further been contended that the defendant no. 1 had in fact implemented the micro-credit programme of the plaintiff for which purpose it had availed the loans under the main loan scheme and the revolving fund scheme. According to the defendants, this amount was disbursed to various micro-credit groups in the area of operation of the defendants in the State of Kerala. This disbursement was with a view to extend the financial facilities to poor women for their income generation activities. As per the scheme of the plaintiff, the beneficiaries of the disbursement belong to the low income group and that the defendants had done their utmost to strictly adhere to the repayment of the loan as per the repayment schedule. The default has occurred only because of the defaults by the beneficiaries who failed to repay the loan amount to the defendants as per the repayment schedule. The poor women who are the beneficiaries under the loans suffered huge losses as a result of natural calamities as flood, cyclone etc. which affected their repayment capacity. The defendants have stated that they have communicated the plaintiff of these facts along with sufficient reliable documents.
11. It has further been contended that on account of implied instructions from the Government of India, no strict documents of repayments and consequences of non-payment as per schedule could be procured from the poor women while disbursing the loans and that the defendants have abided by such instructions. The further submission is that all steps to recover the amounts from the women to whom the loans were disbursed have not evoked any fruitful result and that the list of the defaulters with the reasons for their non-payment of loans have been sent to the plaintiff on several occasions. According to the defendants, the Secretary of the Government of Kerala and officers of the Social Welfare Department are also satisfied with the real problem. On these facts, the defendants have contended that their defense raises friable issues and they are entitled to leave to defend the present suit unconditionally.
12. Reliance has been placed on the pronouncements of the Apex Court Enterprises and Anr. v. SBI Commercial and International Bank Ltd. and in South East Asia Shipping Co. Ltd. v. Nav Bharat Enterprises Pvt. Ltd. and Ors. and on the pronouncement of this Court in the judgment dated 8th September, 2005 rendered in I.A. No. 5879/2005 in CS (OS) No. 442/2004 entitled Rashtriya Mahila Kosh v. Youth Charitable Organisation and Ors. to contend that no part of cause of action had arisen in Delhi and as such, this Court does not have the territorial jurisdiction to entertain and adjudicate upon the subject matter of the case.
13. On the other hand, Mr. Mohinder Singh, learned Counsel for the plaintiff has contended that the defendants were disbursed the loan amount against disbursement advices. Reliance has been placed on a disbursement advice dated 28th April, 1997 whereby it is pointed out that the defendants received the disbursement advice by hand at Delhi. It has further been submitted that the defendants sent the documents to the plaintiff at Delhi which were signed by the plaintiff at Delhi. In this behalf, reference is made to an application for withdrawal which is undated but refers to a sanction letter dated 14th March, 1997 and 19th June, 1997 sent by the defendants.
14. Learned Counsel for the plaintiff has also placed reliance on copies of letters dated 7th August, 1997, 11th August, 1997, 10th September, 1997, 20th May, 1997 and 30th March, 1999 sent by the defendants to the plaintiff enclosing certain amounts which were payable by them. It has been therefore contended that these letters have established the fact that the amounts were payable to the plaintiff by the defendants at Delhi. According to learned Counsel for the plaintiff, in view of the letters dated 23rd March, 1999 and 20th May, 1999, the defendants had clearly admitted their liability to pay the claimed amount to the plaintiff and the defendants have no defense to the suit filed by the plaintiff and as such, the application seeking leave to defend merited summary rejection.
In support of these submissions, reliance is placed on the judicial pronouncements Continental and Eastern Agencies v. Coal India Ltd. and Ors.; Dura-line India Pvt. Ltd. v. BPL Broadband Network Pvt. Ltd.; AIR 2002 Kerala 397 Dr. Jose Paul and Anr. v. Jose and Ors.; State of Punjab v. A.K. Raha (Engineers) Ltd.; and AIR 1998 AP 381 Rajasthan State Electricity Board and Ors. v. Dayal Wood Works.
15. Having heard learned Counsels for the parties, I find that the present suit is based on agreements, guarantee deeds and pronotes which were executed by the defendants. The documents have been executed on the stamp papers and have been procured at Kerala. These documents also prima facie reflect that they have been executed at Kerala. The pronotes and guarantee deeds relied upon by the plaintiff also show that they have been signed by the defendants at Kerala. The payments which have been made by the plaintiff have admittedly been made through bank drafts. The copies of the bank drafts which have been placed on record show that the bank drafts are payable at Kerala. Therefore, so far as the contention of the plaintiff that these documents were executed at Delhi is concerned, the same is the matter which cannot be decided by a mere examination of the documents but would require evidence in support of the respective contentions. There is also no dispute that the loans have been issued to poor women needing micro-finance at Kerala as per the scheme of the plaintiff.
16. It is further noteworthy that the agreement dated 12th October, 1994 executed by defendant no. 1 stated that interest on the dues would be as was specified in the letter of sanction of the facility. The amount of the loan was sanctioned vide letter dated 30th September, 1994 wherein the rate of interest which the plaintiff could charge was 8% per annum. The plaintiff has based the suit claim on a demand made on the defendants by its legal notice dated 19th September, 2003 wherein it has been stated that repayment of the loan amount was to be effected by the defendants to the plaintiff with interest at the rate of 8% per annum with quarterly rates. The suit claim is based on such computation of the interest. I find that the suit also contains a prayer for a demand of future interest at the rate of 16% per annum from the date of filing of the suit.
17. So far as interest liability is concerned, in the plaint it has been alleged that the defendants were liable to pay 8% interest per annum and upon default by the defendants, the defendants are liable to pay penal interest at the rate of 8% per annum. Therefore, there is apparent variation in the claim made by the plaintiff at different places. In the light of such varying claims and pleas, the liability of the defendants towards interest cannot be also determined without evidence.
18. Undoubtedly, there is no clause restricting exclusive jurisdiction to any court contained in the agreements between the parties. I find that so far as the pronouncement of this Court Continental and Eastern Agencies v. Coal India Ltd. and Ors. and the pronouncements of the Apex Court reported in AIR 2002 Kerala 397 Dr. Jose Paul and Anr. v. Jose and Ors.; State of Punjab v. A.K. Raha (Engineers) Ltd.; and AIR 1998 AP 381 Rajasthan State Electricity Board and Ors. v. Dayal Wood Works. are concerned, the same considered adjudication of the objection with regard to jurisdiction after recording of evidence. In these cases, the plaintiffs have in fact, in their evidence established that the contracts were communicated to the plaintiff at Delhi and that the payments of the claims were to be effected by the defendants at Delhi.
It was upon consideration of the evidence which was led in all these cases, that the courts had returned categorical findings to the effect that the court where the suit had been filed has territorial jurisdiction as part of the cause of action had arisen there.
This is certainly not the position in the instant case. At this stage, this Court is called upon to merely examine the pleadings and the documents in the matter from the aspect of ascertaining as to whether the defense raised by the defendants raises any friable issues.
19. Learned Counsel for the plaintiff has relied on the common law rule that a debtor must seek the creditor for payment and for this reason also, placed reliance on State of Punjab v. A.K. Raha (Engineers) Ltd. Mr. V. Shekhar, learned senior counsel for the defendant has however contended that this general common law rule cannot be applied in abstract in the light of law which has evolved subsequently and that application of such a rule would work extreme hardship in the given facts to the defendants.
20. It is noteworthy that such an objection as to territorial jurisdiction of a court have repeatedly came up for consideration before the Supreme Court which has authoritatively laid down the applicable principles.
21. It is well settled that the territorial jurisdiction of a civil court would be ascertained having regard to the place of accrual of cause of action. This issue has fallen for consideration in a catena of judicial pronouncements by the Apex Court reported at State of Rajasthan v. Swaika Properties; Union of India v. Adani Export Ltd. and Ors.; National Textile Corporation Ltd. and Ors. v. Haribox Swalram and Ors.; Kusum Ingots & Alloys Ltd. v. Union of India and Anr.; Patel Roadways Limited Bombay v. Prasad Trading Company; Oil & Natural Gas Commission v. Utpal Kumar Basu and Ors.; South East Asia Shipping Company Ltd. v. Nav Bharat Enterprises Pvt. Ltd. Several pronouncements of Division Bench of this Court also have adjudicated upon this issue. In the judgments reported at 85 (1997) DLT 81 DB Sector 21 owners Welfare Association v. Air Force Naval Housing Board and Ors.; and (2003) 69 DRJ 98 A.K. Surekha and Ors. v. The Pradeshiya Investment Corporation of U.P. Ltd and Anr.; and (2004) 73 DRJ 104 Callipers Naigai Ltd. and Ors. v. Government of NCT of Delhi and Ors., this Court has considered the same issue.
22. I have had occasion to deal with this issue on two earlier occasions. In a decision rendered on 4th January, 2007 in Arbitration Application No. 242/2006 Rattan Singh Associates (P) Ltd. v. Gill Power Generation Co. Pvt. Ltd. and an earlier decision rendered on 23rd December, 2005 in Writ Petition (C) No. 5133/2005 Jai Ganesh Petroleum v. Union of India and Anr., upon a careful consideration of the principles laid down in the several judicial pronouncements noticed hereinabove, so far as the accrual of the place of cause of action which would enable a court to have territorial jurisdiction to adjudicate upon a lis relating thereto, the following principles had been culled out:
(i) making and signing of a contract is part of cause of action;
(ii) parties cannot by consent confer jurisdiction on a court;
(iii) In the case of several courts having jurisdiction, parties can legally agree to exclude the jurisdiction of any of such courts and elect to restrict territorial jurisdiction to one out of such courts which otherwise has jurisdiction;
(iv) the high court must be satisfied from the entire facts pleaded in support of the cause of action that those facts which constitute the cause or are necessary to decide the dispute have wholly arisen within its territorial jurisdiction, or, in any case, which have, atleast in part, arisen within its jurisdiction;
(v) each and every fact pleaded in the petition does not ipsofacto lead to the conclusion that those facts constitute cause of action vesting territorial jurisdiction upon the court to adjudicate upon the lis;
(vi) only those facts pleaded which have a nexus or relevance with the issues involved in the lis confer territorial jurisdiction on the court;
(vii) in determining an objection relating to lack of territorial jurisdiction, the court must take all the facts pleaded in support of the cause of action as pleaded in the petition into consideration without embarking upon an inquiry as to the correctness or otherwise to the fact that;
(viii) A question of territorial jurisdiction must be apparent on the facts pleaded in the petition, the source or otherwise of the averments made in the writ petition being immaterial. In matters where the parties have agreed to restrict jurisdiction to one or the other court out of several courts which may have territorial jurisdiction, such clause would be enforceable only if the litigation which has arisen falls within the domain of the subject matter which is being provided in such clause. The parties may have confined jurisdiction to litigation arising only under the agreement. In such cases, the court has to arrive at a finding that the litigation between the parties was within the domain of the clause confining jurisdiction. If it does not, then the territorial jurisdiction of the court could be barred;
(ix) The court must be satisfied that all relevant facts which have merely a substantial nexus with the lis are located within its territorial jurisdiction;
(x) Even if it were to be held that a court has jurisdiction, yet guided by principles of forum non-conveniens, the court may divert the parties to the court having a closer connection with the subject matter of the litigation. Residence of parties, location of evidence, situs of the dispute and such like considerations could guide the decision of the court to this effect.
(xi) To the above, yet another principle requires to be added. It also requires to be borne in mind that a trivial or insignificant part of the cause of action arising at a particular place or where it may have incidentally arisen, would not be sufficient to confer territorial jurisdiction on the court. It is the court within whose whose jurisdiction, the cause of action has substantially or predominantly arisen which would have territorial jurisdiction to adjudicate upon the lis.
23. My attention had been drawn to the judgment rendered in Engineering Projects (India) Ltd. v. Greater Noida Industrial Development and Anr. reported at 2nd (2004) II Delhi 88, wherein applying some of the principles noticed hereinabove, it was held that primacy has to be given to such place where the cause of action has mainly or substantially or predominantly arisen, in preference to or exclusion of a place where it has incidentally or partially arisen. This, the court held, has a a great pragmatic purpose and ensures convenience of investigation and minimization of expenses. It was noticed that the forum of convenience, from the perspective of the plaintiff, has been looked at askance. A fortiori, where the defendant does not have its principal or concerned office and the cause of action has not substantially and overwhelmingly arisen at that particular place, courts situated there should decline to exercise jurisdiction in preference to the court possessing an umbical connection with the cause of action. This will root out the pernicious practice of forum shopping.
24. In South East Asia Shipping Co. Ltd. v. Nav Bharat Enterprises Pvt. Ltd. and Ors., the apex court held that mere issuance of the bank guarantee at Delhi could not give rise to cause of action here.
25. Therefore, in order to hold that this Court has territorial jurisdiction to entertain and adjudicate upon the subject matter of the case, it is to be held that it is not a minor part of cause of action which has to arise within the territorial jurisdiction of this Court but a substantial part of cause of action has to arise within the territorial jurisdiction of this Court. As noticed above, it is well settled that the signing and execution of the agreement is a part of cause of action.
26. In the instant case, from a consideration of the material laid before this Court at this stage it is not possible to return a finding that the agreement has been executed at Delhi. This issue certainly requires evidence to be led on the respective contentions before a finding could be returned with regard to jurisdiction of this Court.
27. So far as the plea of the plaintiff with regard to general rule that the debtor must seek creditor is concerned, in my view, the mere fact that the demand for payments may have been sent by the plaintiff to the defendants at Delhi or that a demand draft payable at Kerala was collected at Delhi, would not be sufficient, without anything more, to apply such a rule and on this premise, to hold that this Court has the jurisdiction and the defendants were required to make all payments at Delhi.
28. I also find that the pleas similar to those raised before this Court have been the subject matter of a judicial pronouncement. The issues before the court in the judgment rendered on 8th September, 2005 in I.A. No. 5879/2005 in CS (OS) No. 442/2004 entitled Rashtriya Mahila Kosh v. Youth Charitable Organisation and Ors. are identical to the issues raised before this Court.
29. This case was also filed by the present plaintiff under Order 37 of the Code of Civil Procedure, 1908 against the defendants. The defendants had sought leave to defend on grounds similar to those raised by the present defendants including the plea relating to territorial jurisdiction of the court. In similar facts, this Court had arrived at a conclusion that the defendants have raised friable issues and granted unconditional leave to defend to the defendants.
30. So far as the issue with regard to the grant of unconditional leave to defend to the defendants is concerned, the court was guided by the following principles laid down by the Apex Court in (1958) SCR 1211 Santosh Kumar v. Mool Singh wherein the court summed them up thus:
(a) If the defendant satisfied the Court that he has a good defense to the claim on merits, the defendant is entitled to unconditional leave to defend.
(b) If the defendant raises a friable issue indicating that he has a fair or bonafide or reasonable defense, although not a possibly good defense, the defendant is entitled to unconditional leave to defend.
(c) If the defendant discloses such facts as may be deemed sufficient to entitle him to defend, that is, if the affidavit discloses that at the trial he may be able to establish a defense to the plaintiff’s claim, the court may impose conditions at the time of granting leave to defend the conditions being as to time of trial or mode of trial but not as to payment into court or furnishing security.
(d) If the defendant has no defense, or if the defense is sham or illusory or practically moonshine, the defendant is not entitled to leave to defend.
(e) If the defendant has no defense or the defense is illusory or sham or practically moonshine, the court may show mercy to the defendant by enabling him to try to prove a defense but at the same time protect the plaintiff imposing the condition that the amount claimed should be paid into court or otherwise secured.
31. These principles were reiterated by the Apex Court in Sunil Enterprises and Anr. v. SBI Commercial and International Bank Ltd. and in this view of the matter, I find that this application filed by the defendants requires to be allowed unconditionally.
32. In the instant case, I have already held that the defendants have raised friable issues in the application for leave to defend and consequently, would be entitled to the same. So far as imposition of conditions is concerned, it is noteworthy that one of the issues raised by the defendants relates to the territorial jurisdiction of this Court to entertain and adjudicate upon the subject matter of the present case. The aspect with regard to directing the defendant to meet certain conditions for leave to defend is concerned, it needs examination as to the impact of such directions and balancing of equities in case the court ultimately holds that this Court has no territorial jurisdiction to entertain and adjudicate upon the subject matter of the case.
33. I further find that the plaintiff has relied upon a pronouncement of this Court Dura-line India Pvt. Ltd. v. BPL Broadband Network Pvt. Ltd. In this case, the court had arrived at a conclusion that the contract had been concluded in Delhi and the payments have been received in Delhi and hence, material part of the cause of action has arisen in Delhi. For this reason, a finding was returned to the effect that this Court has the territorial jurisdiction to entertain and adjudicate upon the subject matter of the case.
However, bearing in mind the commercial nature of the transaction and the facts of the case, the court granted conditional leave to defend to the defendant.
34. Prima facie, it appears that the disbursement of the loan was effected by the defendants at Kerala. The bank drafts were encashable at Kerala. There is yet another aspect of the matter which requires consideration. The defendants have pointed out that the persons to whom the loans were advanced, were all women living at the level of poverty line. A list of the debtors has been enclosed by the defendants in this regard. The amounts of the loans are small and in some cases, even paltry, amounts. The difficulties expressed relate to non-payment by these poor women on account of natural calamities. The defendants have asserted that recovery by them were discouraged by the government authorities. Certainly, these aspects of the matter require to be considered and the merits of the respective contentions raised by the parties need to be examined more closely.
35. For all the foregoing reasons, the application for leave to defend filed by the defendants deserves to be allowed unconditionally.
Accordingly, I.A. No. 470/2005 is hereby allowed and the defendants are granted unconditional leave to contest the suit.