JUDGMENT
C.M. Nayar, J.
(1) The present suit has been filed by the plaintiff for recovery of Rs.24,20,000.00 against the defendants under the provisions of Order 37 of the Code of Civil Procedure.
(2) The brief facts of the case are that the plaintiff is the proprietor of the Firm in the name and style of M/s Nicolian Brothers. Defendant no. 1 is a Private Limited Company and defendant no.2 is the Managing Director of defendant no. 1. The plaint further avers that the plaintiff and defendants 1 and 2 were having good business relations and. as such, were dealing with each other. In the month of September, 1988, defendant no.2 approached the plaintiff and expressed that he was in financial crisis and he asked for a Short Term Temporary loan of Rs.20,00,000.00, carrying an interest at the rate of 21 per cent per annum. The plaintiff has also reiterated that defendant no.2 assured that the said loan would be returned on or before December 31, 1988, because the payment from the foreign party was expected before December 30, 1988.
(3) The plaintiff has reiterated that defendant no.2 and defendant no. 1 received two cheques for Rs. 10 lakhs each drawn on Union Bank of India bearing Nos. 134545 and 237344 dated September 3, 1988 and September 24, 1988 respectively. The cheques were received by the defendant no.2 and it is alleged that the cheques dated September 3, 1988 and September 24, 1988 form part of the written contract in the form of vouchers. The said vouchers were signed by defendant no.2.
(4) The summons in the suit were issued and the defendants have filed an application, being I.A.No. 9276/89, for Leave to Defend under the provisions of Order 37 Rule 3(5) of the Code of Civil Procedure. The defendants have alleged in the application that there was no contract between the plaintiff and the defendants and the present suit does not fall under the provisions of Order 37 Civil Procedure Code The receipt vouchers do not, in any manner, constitute a written contract and the suit is liable to be dismissed on this short ground. The receipt of the amounts is,however, not denied and reference may be made to para 4 of the application, which reads as under:- “THE plaint discloses no cause of action against the defendant. It is submitted that the plaintiff had since 1980-81 been requesting the defendant for financial assistance. Since the plaintiff had been introduced to the defendant by the defendant’s father-in-law, the defendant allowed him to use his office facilities in Moscow and New Delhi. It is submitted that the defendant has been doing business in the Ussr for several years. It is further submitted that the plaintiff through using the defendant’s office facilities, gained insight into the working of the defendant. Sometime in 1988, the plaintiff even stole a contract from the defendant by misrepresenting him in the Russian market. When the same was brought to the knowledge of the Russian buyers by the above named defendant, the contract was cancelled and further transferred to the defendant. It was the plaintiff sown submission that he was in any case unable to execute the export order and further asked the defendant in writing to accept the contract because of his considerable experience in the export of medical equipment to Ussr and other countries. For this purpose, the plaintiff further gave the defendant an advance payment of Rs-20 lacs towards the cost of executing the order. Immediately thereafter, the defendant opened a Letter of Credit in favor of the Austrian Suppliers for a sum of Rs. 40 lacs. However, with the sole intention to cheat and defraud the defendant, the plaintiff again tried to get back to the Russian buyers with further knowledge and once again tried to steal the contract.”
(5) The next ground which is taken by the defendants in the application is that the entire remarks on the receipt voucher filed with the plaint are forged. At the time, when the defendants signed the vouchers, only the name of the defendant company, M/s Nexim Exports Pvt. Ltd. was mentioned. Everything else was added later on and the same is absolutely forged.
(6) The reply to this application was filed by the plaintiff and the averments made in the plaint were reiterated and it was submitted that a receipt voucher does constitute a written contract and apart from the receipt vouchers, two cheques for Rs. 10 lacs each were issued and the same were duly encashed by the defendants and no relief, whatsoever, has been claimed which is not within the ambit of provisions of Order 37 of the Code of Civil Procedure.
(7) The learned counsel for the plaintiff has argued that the vouchers filed as annexures A.I and A.2 form written contract and the suit under Order 37 Civil Procedure Code is maintainable. He has reiterated that a written contract would be a contract where there is a consensus of mind about the terms of the agreement and these terms are adduced in writing in the form of two receipts, which will constitute a valid written contract, as envisaged under Order 37 Civil Procedure Code ., inasmuch as the receipts contain the terms of the contract entered into between the parties. The same read as follows: “DATED3.9.1988 1.Debit M/s Nexim Exports Pvt. Ltd, N.Delhi Being cheque paid as a Temporary Loan Interest @ 21% P.A.Rs.10,00,000.00 Credit Ubi Delhi By Cheque No. 134545 Rs.10,00,000.00 (Rupees Ten Lacs only)” “Dated 24.9.1988 2.Debit M/s Nexim Exports Pvt. Ltd, N.Delhi Being cheque paid as a Temporary Loan Interest @ 21% P.A.Rs.l0,00,000.00 Credit Ubi Delhi By Cheque No. 237344 Rs. 10,00,000.00 (Rupees Ten Lacs only)”
(8) The said vouchers/receipts were signed by the defendant no.2, who also as a consequence, got the two cheques for Rs.10,00,000.00 each encashed.
(9) The next point, which has been urged by the counsel for the plaintiff, is that the defendants have filed the application for Leave to Defend,which is defective, as the application is not supported by an affidavit of the defendant no.2, in accordance with the provisions of Order 37 Rule 3(5) Civil Procedure Code .
(10) The learned counsel for the defendants has argued that there is due compliance of the provisions of Order 37 Civil Procedure Code and the defendants were entitled to file an application for Leave to Defend, supported by an affidavit or otherwise disclosing such facts, as may be deemed sufficient to entitle them to defend the suit. When the matter was argued it was brought to his notice that the application for Leave to Defend was not supported by an affidavit of the defendant no.2, and it was filed along with the affidavit of the Court Clerk of counsel for the defendants. The counsel filed an application under Order 37 Rule 7 Civil Procedure Code on August 3, 1992, for condensation of delay to file the affidavit in support of Leave to Defend application and the said affidavit has been taken on record. The first application, filed by the defendants, is accordingly supplemented by the revised affidavit and I do not propose to reject the same on the facts and circumstances of the present case, and the matter is being disposed of on merits. The non filing of the affidavit of defendant no.2 is merely an irregularity and the proper affidavit as well as an application for condensation of delay having since been filed, it will not be necessary for me to reject the application for leave to defend on that ground alone.
(11) The next question, which arises for consideration is, whether, the receipts/vouchers by which the amounts were advanced to defendant no.2 constitute a written and valid contract. Reference is made to the judgment of this Court in Mrs.Sushila Mehta v. Shri Bansi Lal Arora I.L.R. (1982) I Delhi 320, wherein it was held that the amount paid and receipt given by the payee for allotment of shares in a proposed private limited company does constitute a written contract. The suit in this judgment was based on a document styled as ‘receipt’ and the receipt reads as follows: “RECEIVED a sum of rupees one lac only as per detail given below from Smt.Susheela Mehta wife of Maj. General K.K.Mehta R/o D-304, defense Colony, New Delhi as application money for allotment of shares in the proposed private limited company under the name and style of M/s Mayur Cinema (P) Ltd having its registered office at 2/7, Ansari Road, New Delhi/110002 and proprietor of plot No. 1, Rajindra Place, New Delhi. Rs.48,000.00 by Bank draft of 18/8/1978 Rs. 20,000.00 by way of cheque of 22/8/1978 Rs. 20,000.00 by way of cheque of 26/8/78 Rs. 12,000.00 in cash 1,00,000 Total”
(12) In the present case, the defendants have admitted that they signed thevouchers, which are in the form of the receipts, but it is contended that the receipts/vouchers do not, in any manner, constitute a written contract. The defense, which is sought to be raised is, that when the defendant signed the vouchers, only the name of the defendant company i.e. M/s Nexim Exports Pvt. Ltd. was mentioned. Everything else has been added later on and everything is forged. The defendants have in good faith signed the vouchers and the plaintiff is seeking to take advantage of the same by way of this suit.
(13) The counsel for the plaintiff has argued that the vouchers are supported by issuance of the cheques in favor of the defendants, which were duly encashed and the receipt of the amounts is not denied. The counsel for the defendants, on the contrary, has argued that the cheques, on the basis of which the suit is filed, were in favor of the defendants and the money was utilised by the defendants and such a suit cannot be called a suit based upon cheques. Reference is made to the judgment of this Court in Syed Moosa Emami v. Sunil Kumar Gilani and another Air 1982 Delhi 590. The following paragraph is relied upon which reads as under: “THE arguments of learned counsel is that his suit is on the basis of cheques. The ‘cheque’ is certainly a bill of exchange. But this suit is not based on ‘cheque’ because there is no cheque in favor of the plaintiff. The suit is in fact based on loan transaction. When somebody files a suit on the basis of bill of exchange, hundies or promissory notes the documents are annexed with the plaint and are drawn in favor of the plaintiff or endorsed in his favor. Here the cheques on the basis of which the suit is allegedly filed has already been honoured by the bankers of the plaintiff and were in favor of the defendant-respondents and the money was utilised by the defendants. Such a suit cannot be called a suit based upon a cheque.”
(14) Reference is also made to the judgment of this Court in Shri J.S.Sood v. Mrs. Prem Lata Mehta and another I.L.R. (1984) Ii Delhi 716. The plaintiff, in that case, had alleged that there was a verbal agreement, under which he agreed to finance the production of the film and in pursuance thereto, he made various payments to the defendants from time to time for this purpose. It was averred that though the whole finance of the production of the film was given by the plaintiff, there existed no written agreement between the parties to that effect. On the basis of the following writing of the defendants, the plaintiff had filed the suit under Order xxxvii of the Code of Civil Procedure: “J.S.Sood Globe Film Delhi Regarding:- Nadaniyan This is to certify that you have paid a sum of Rs.2 lakh in completion of picture Nadaniyan till date which will be repaid to you before release of the picture ‘NADANIYAN’. D.P.Wadhwa,J. considered the matter and held as follows: “AN agreement which is enforceable by law is a contract. An agreement requires a promisor, a promiseand consideration. Normally a written contract would be signed by both the parties. Though in some cases written contract might be spelt out from exchange of letters. A contract which is to be inferred or implied from certain documents may not be a written contract to which the provisions of Order xxxvii would apply. The reason being that earlier Order xxxvii was confined to negotiable instruments but by the amending Act of 1976 this order became applicable to written contract as well. Needless to say that Order xxxvii prescribes a summary procedure. In the summary procedure the Court cannot possibly infer contract from various documents though exchanged between the parties and treat that as a written contract and then adopt the summary procedure under Order xxxvII.”
(15) Reference may also be made to paragraph 12 of the said judgment wherein the learned Judge held that there should be a formal agreement, executed by the parties before it can be termed as a written contract. This paragraph reads as follows: “AS to whether the written contract maybe signed by both the parties does not call for decision in the present case though it appears that the words “written contract” envisage some sort of a formal document between the contracting parties. I would rather think that it would be a condition precedent that there should be a formal agreement executed by the parties and signed by them. Plaintiff’s own version is that it was a verbal contract and the document on the basis of which the suit has been filed merely acknowledges the money due under the aforesaid verbal contract. Such a writing may at best be a written acknowledgement which extends the period of limitation under Section 18 of the Limitation Act, 1963,but no more. Thus I do not think that such a document would fall within the definition of written contract and the provisions of Order xxxvii would not apply. It must, therefore, be held that the present suit is not maintainable under the summary procedure prescribed under Order xxxvII.”
(16) THE. law is clear that the vouchers of the plaintiff, signed by defendant no.2, may not in their own, in the strict legal sense, be termed as a written contract. The issuance of cheques and the subsequent encashment by the defendants will prove that the amounts were duly received by them and the defense raised by the defendants has also to be considered in accordance with the provisions of Order 37 Rule 3 (5) of the Code of Civil Procedure, which is reproduced as follows: “(5)The defendant may, at any time within ten days from the service of such summons for judgment, by affidavit or otherwise disclosing such facts as may he deemed sufficient to entitle him to defend, apply on such summons for leave to defend such suit. and leave to defend may be granted to him unconditionally or upon such terms as may appear to the Court or Judge to be just; Provided that leave to defend shall not be refused unless the Court is satisfied that the facts disclosed by the defendant do not indicate that he has a substantial defense to raise or that the defense intended to be put up by the defendant is frivolous or vexatious: Provided further that, where a part of the amount claimed by the plaintiff is admitted by the defendant to be due from him. leave to defend the suit shall not be granted unless the amount so admitted to be due is deposited by the defendant in Court.”
(17) The defendants have acknowledged the receipt of the amount from the plaintiff and they have not given any plausible explanation about the purpose of receipt of these stage amounts, except to say, that the plaintiff could not execute the export order and learned the defendants to accept the contract because of their considerable expertise in the as part of medical equipment to Ussr and other countries and for this purpose, the plaintiff gave the defends an advance payment of Rs.20 lacs towards the cost of executing the order and a Letter of credit in favor of the Austrian Suppliers for a sum of Rs.40 lacs was opened. There is no other explanation, as to how, this amount was utilised nor any documents have been placed on record by the defendants to justify or prove their contentions. They arc merely relying upon the contention that the suit under Order 37 Civil Procedure Code is not maintainable as the same is not based on a written contract.
(18) The Authorities cited by the counsel for the defendants are on their own facts and can have no application to the facts of the present case. The acknowledgment of money and the signing of vouchers clearly indicate that the amounts were received by the defendants. The defense raised by the party must be substantial and a good reason must be shown in this regard. The vouchers, in the circumstances of the case, can be termed as receipts and there is no denial of the execution of the same. The only defense, which is raised is that the suit amounts were received by the defendants to execute a contract on behalf of the plaintiff and that some of the words on the vouchers were added subsequently after defendant no.2 had signed and admitted receipt of the payments.
(19) Reference may be made to the judgment of the Supreme Court in M/s Mechalec Engineers & Manufacturers v. M/s Basic Equipment Corporation, , which refers to the principles, applicable to cases covered by the provisions of Order 37 of the Code of Civil Procedure by relying on the judgment in paragraph 8 in Sm. Kiranmoyee Dassi v. Dr. J. Chatterjee (1945) 49 Cal Wn 246. The case of the defendants clearly falls in the category of proposition (e) which reads as follows: “(E)If the defendant has no defense or the defense is illusory or sham or practically moonshine then although ordinarily the plaintiff is entitled to leave to sign judgment, the Court may protect the plaintiff by only allowing the defense to proceed if the amount claimed is paid into Court or otherwise secured and give leave to the defendant on such condition, and thereby show mercy to the defendant by enabling him to try to prove a defense.”
(20) The defendants, in view of the facts and circumstances of the case were asked to furnish the security to the satisfaction of the Registrar of this Court in terms of the order dated 1/12/1989.
(21) In view of the above, the defendants are granted Leave to defend the suit, subject to the following conditions: (A)Defendants shall renew the Bank Guarantee for half of the suit amount and keep the same alive, during the pendency of the suit; (b) The remaining half of the amount shall be deposited in the form of Fixed Deposit Receipt for a period of one year, which shall be renewed from time to time during the pendency of the suit: The said amount shall be deposited in nationalised Bank and the Fdr be furnished to the Registrar of this Court. (22) The above said conditions shall be complied with by the defendants within months from today. I.As. 9276/89 and 10220/92 stand disposed of in the above terms.