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IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION
SUMMONS FOR JUDGMENT NO.361 OF 2007
WITH
SUMMARY SUIT NO.929 OF 2007
Smita Conductors Ltd. ....Plaintiff
V/s.
Prabhudas Liladhar Pvt. Ltd. & Anr. ....Defendants
Mr.Virag Tulzapurkar with Mrs.Sowmya Srikrishna i/b Kanga & Co. for the
Plaintiff.
Mr.V.J. Mehta with Ms.A. Nityananthi Nadar i/b Divyakant Mehta &
Associates for Defendant No.1.
CORAM : S.J. VAZIFDAR, J.
DATE : 6TH AUGUST, 2009.
ORAL JUDGMENT :-
1. The suit is filed to recover from Defendant No.1 a sum of Rs.
28,45,027/- together with further interest at 15% p.a. on the principal sum of
Rs.19,67,105/- from 15.3.2004 to the filing of the suit and thereafter at 18%
p.a. till payment. Defendant No.2 is only a formal party for the reasons
referred to later.
2. There is absolutely no dispute as to the liability of Defendant No.
1 to pay the amount claimed in the suit. Nor is there any dispute as to the
amount claimed. Apart from questioning the jurisdiction of this Court, the only
defence on merits is that the time or occasion for Defendant No.1 to pay the
amount has not arrived.
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3. The Plaintiff is a member of Defendant No.2, Raheja Center
Premises Co-operative Society Limited. The Plaintiff owns three units being
unit Nos.701, 702 and 703 admeasuring 3600 sq.ft. in aggregate in the
building, Raheja Center.
4(A). Defendant No.1 filed a suit in this Court being suit No.2091 of
2000 for specific performance of an agreement in terms of a draft leave and
licence agreement entered into between the Plaintiff and itself.
(B). By an order dated 26.5.2000, the suit was disposed of in terms of
the consent terms signed by the Plaintiff and Defendant No.1 and their
advocates.
(i). Under the consent terms, Defendant No.1 was allowed to use and
occupy the said premises as per the terms and conditions of the draft leave
and licence agreement which was annexed thereto. The consent terms
recorded that on execution thereof, Defendant No.1 herein had paid the
Plaintiff herein a sum of Rs.43,00,000/- towards the balance security deposit.
The aggregate security deposit was Rs.48,00,000/-.
(ii). Clause 3 of the consent terms provided that Defendant No.1 in
addition to the licence fees or compensation had also agreed to pay to the
Plaintiff “……….. municipal taxes as provided in clause 3 of the draft
agreement annexed as Exhibit-A to the consent terms”. The said clause 3
reads as under :-
“3. The Licensee shall pay to the Licensor
maintenance charges, non-occupation charges and municipal
taxes from the society bills but will not be liable to pay any
amount towards the sinking fund, repair fund or major repair
fund or any charges which are not attributable to the
occupation of the premises by the Licensee. The licensee
shall also pay any increase in maintenance charges or::: Downloaded on – 09/06/2013 14:52:13 :::
3municipal taxes if the same are increased due to the reason
or as a result of the licence hereby granted for the period oftheir occupation only.” (emphasis supplied)
5. A formal leave and licence agreement dated 20.12.2000 was
executed between the Plaintiff and Defendant No.1 which incorporated by
reference the above consent decree including the draft leave and licence
agreement annexed thereto as Annexure-A. Annexed to these documents
were the consent decree and the order of this Court.
6(A)(i). The Bombay Municipal Corporation (B.M.C.) by a notice dated
29.3.2001, informed the society, Defendant No.2, that the ratable value of the
said building had been increased to Rs.1,99,02,055/- for the year 2001-2002.
The society raised a complaint with the B.M.C. against the same. Defendant
No.2 by a circular dated 9.6.2001 informed all its members about the same.
Defendant No.2 stated that the society had lodged a formal complaint against
the increase in the ratable value and added :-
“But it shall be the duty of the members concerned to
take appropriate action against the same or accept the
assessment already made by the Bombay MunicipalCorporation and pay the increased tax”.
(Emphasis including the underlining is as per original)
(ii). By a letter dated 27.6.2002, Defendant No.2 reiterated the above
and stated that the society is supposed to collect the full amount from the
concerned members as per the bills/tax charged by the B.M.C. for their
respective taxes. Defendant No.2 stated that pursuant to its representations,
the ratable value had been reduced substantially and as a consequence
thereof, the property tax payable by the Plaintiff had been reduced to Rs.
12.50 per sq.ft. per month for the said premises let-out to Defendant No.1.
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Defendant No.2 stated that in case the Plaintiff desire to challenge even this
rate, it was free to do so, but that the tax amount would have to be paid
immediately and in case of any favourable decision, refund could be obtained.
7. The Plaintiff by its letter dated 9.9.2002 in turn informed
Defendant No.1 the above facts and requested it to forward a cheque for an
additional amount to be paid in accordance with the terms of the leave and
licence agreement/consent decree referred to above.
8(A). Defendant No.2 by a letter dated 30.4.2003 informed the Plaintiff
inter-alia that the B.M.C. had also levied higher property taxes for the
premises let-out ; that the same was challenged by the society by filing a Writ
Petition in this Court and that the B.M.C. thereafter sent the revised notices.
Defendant No.2 clarified that as far as it was concerned, the liability vested
with the concerned member and that it would collect the same from the
member.
(B). The Plaintiff by its letter dated 5.5.2003, informed Defendant No.1
the above development and stated that the above liability would be to its
account.
(C). By a letter dated 8.5.2003, addressed to the first Defendant, the
Plaintiff inter-alia stated that the B.M.C. would levy the property taxes at
higher rates for which the first Defendant would be liable. In paragraph 4 of
the letter, the Plaintiff stated that it is the responsibility of Defendant No.1 to
make satisfactory provision for the discharge of such liabilities before the
expiry of the period of the leave and licence agreement on 25.5.2003, failing
which such amount as may be necessary would be deducted from the deposit
of Rs.48,00,000/- lying with the Plaintiff.
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9. Defendant No.1 by its reply dated 12.5.2003 confirmed that the
additional property tax, if any, payable by it for the period of the agreement
will be paid by it as per the consent terms.
10. It is important to note that the Plaintiff was fully secured at this
stage by virtue of holding the security deposit of Rs.48,00,000/- against any
default on the part of Defendant No.1 in failing to pay the taxes/additional
B.M.C. taxes. In the event of any failure by Defendant No.1 in paying the
same in accordance with its admitted liability the Plaintiff had to do no more
than to deduct the same from the security deposit.
11.
Defendant No.1 however desired that the Plaintiff return the
security deposit till the B.M.C. finalized its demand. The Plaintiff did not have
to accede to this request. But as a gesture of undoubted generosity it did on
the faith and trust of the representation of Defendant No.1. Defendant No.1
has unfortunately betrayed the faith and trust reposed in it.
12. Defendant No.1 executed a Corporate Guarantee dated 24.5.2003
in favour of the Plaintiff in order that the Plaintiff would refund the entire
amount of security deposit of Rs.48,00,000/- at the end of the licence period. I
will read the document as a contract of indemnity and not a guarantee though
for convenience, I will continue to refer to it as a guarantee. Clauses 6 to 10
read as under :-
“6. PLPL confirms and agrees that even after its
vacating the office premises, it is still liable to pay to SCL
municipal taxes as provided in the said agreement for the
period from 26th May, 2000 to 25th May, 2003.
7. PLPL has requested SCL not to deduct any
amount towards aforesaid liability, since the amount of the
aforesaid liability has not been finally ascertained and has
assured SCL that as and when the said society and/or Brihan::: Downloaded on – 09/06/2013 14:52:13 :::
6Mumbai Municipal Corporation makes any demand for the
same on SCL, PLPL shall forthwith, without raising anydispute regarding the validity and/or quantum and/or
otherwise, unconditionally and irrevocably pay the same to
SCL. For any delay in payment PLPL will be liable to payinterest @ 15% per annum.
8. PLPL has also agreed that it will execute a
Corporate Guarantee in favour of SCL.
9. In the premises aforesaid SCL, on the PLPL
handing over the vacant and peaceful possession of the
office premises to SCL, on 25th May, 2003, has refunded the
security deposit of Rs.48,00,000/- (Rupees Forty Lacs Only)
to PLPL, without any deduction.
10. Now in consideration of aforesaid, PLPL hereby
undertakes and agrees to SCL that as and when the said
society and/or Brihan Mumbai Municipal Corporation makes
any demand on SCL for municipal taxes as specified in
clause No.3 of the Leave and Licence Agreement. PLPL shallforward without raising any dispute regarding the validity
and/or quantum and/or otherwise in respect thereof,
unconditionally and irrevocably pay the said amount on
demand to SCL in Mumbai. For any delay in payment, PLPL
shall also pay interest @ 15% per annum. SCL will beentitled to recover the aforesaid amount from PLPL in terms
of Consent decree passed by the High Court, Bombay, in theabove suit No.2091 of 2000.”
13. In the meanwhile hearings were held by the concerned authorities
in respect of the complaints made by Defendant No.2 against the increase in
the ratable value. Eventually the B.M.C. by its letter dated 6.3.2004, finalized
the ratable value for the entire premises. Pursuant thereto, the society made
a demand upon the Plaintiff in the sum of Rs.23,08,211/- for the period
25.5.2000 to 25.5.2003. The Plaintiff in turn informed Defendant No.1 of the
same and requested it to pay the same. Despite further representations by
the society, the ratable value was not changed. As a result thereof, the
Plaintiff by yet another letter dated 19.3.2004, requested Defendant No.1 to
pay the demand of Rs.23,08.211/-.
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14. Defendant No.1 by a letter dated 23.3.2002, did not deny its
liability qua the Plaintiff but requested the Plaintiff to advice Defendant No.2
to appeal against the demand for additional property taxes and also
requested the Plaintiff not to insist for the payment of the said amount.
15. Ultimately, pursuant to the representations and queries by
Defendant No.2 and the Plaintiff, the B.M.C. by a letter dated 3.3.2007
furnished the particulars regarding the ratable value and the property tax
payable specifically in respect of the said three units given on leave and
licence by the Plaintiff to Defendant No.1. As per this statement, the amount
payable stood finally crystallized to the amount claimed in the suit namely Rs.
19,67,105/-.
16. Defendant No.2 – society has paid the property taxes including in
respect of the Plaintiff’s premises to the B.M.C. and has raised a demand
against the Plaintiff in its quarterly bills. Despite repeated requests, Defendant
No.1 failed and neglected to pay the said amount.
17. In view of the above documents and the undertakings, there can
be no doubt that Defendant No.1 is bound and liable to pay the claim in suit to
the Plaintiff. What is important to note is that under the guarantee and in
particular clause 10 thereof, Defendant No.1 had undertaken and agreed to
pay any demand made by the B.M.C. to the Plaintiff for the municipal taxes as
specified in clause 3 of the leave and licence agreement without raising any
dispute regarding the validity and/or quantum and/or otherwise in respect
thereof. Moreover, this undertaking was unconditional.
18. It was submitted on behalf of Defendant No.1 that the Plaintiff and
Defendant No.2 ought to have challenged the fixation of the ratable value as
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well as the property taxes further.
19. I am unable to agree. In view of the above, this defence is merely
with a view to avoiding the payment.
20. It was then submitted that the amount claimed by the B.M.C. had
not crystallized. Firstly, in view of what is stated above, the statement is not
well founded even in fact. The letter from the B.M.C. dated 3.3.2007 removes
the doubt in this regard,if any. The exact amount claimed by the B.M.C. is
claimed in the suit. That in future in some challenge, there may hypothetically
be a refund of the amount is no ground for denying the Plaintiff a decree for
the sum which at present stands crystallized. This is more so in view of the
express unconditional terms inter-alia of the Corporate Guarantee and even of
the earlier undertakings contained in the consent terms, leave and licence
agreement as well as the correspondence.
21. The next defence is that this Court has no jurisdiction to try this
suit in view of Section 41 of the Presidency Small Causes Act, 1884, which
reads as under :-
“41. Suits or proceedings between licensors and licensees or
landlords and tenants for recovery of possession of
immovable property and licence fees or rent, except to those
to which other Acts apply to lie in Small Cause Court.-
(1) Notwithstanding anything contained elsewhere in this Act
but subject to the provisions of sub-section (2), the Court ofSmall Causes shall have jurisdiction to entertain and try all
suits and proceedings between a licensor and licensee, or a
landlord and tenant, relating to the recovery of possession of
any immovable property situated in Greater Bombay, or
relating to the recovery of the licence fee or charges or rent
therefore, irrespective of the value of the subject matter of
such suits or proceedings.
(2) Nothing contained in sub-section (1) shall apply to suits or
proceedings for the recovery of possession of any immovable::: Downloaded on – 09/06/2013 14:52:13 :::
9property, or of licence fee or charges of rent thereof to which
the provisions of the Bombay Rents, Hotel and LodgingHouse Rates Control Act, 1947, the Bombay Government
Premises (Eviction) Act, 1955, the Bombay Municipal
Corporation Act, (the Maharashtra Housing and AreaDevelopment Act, 1976, or any other law for the time being in
force, apply.)”
22. The claim in the present case is not based on the leave and
licence agreement alone. It is also based inter-alia upon the Corporate
Guarantee dated 24.5.2003. The Corporate Guarantee is independent of the
leave and licence agreement. In fact the Corporate Guarantee correctly
construed dealt with the rights and liabilities of the parties after the leave and
licence agreement had come to an end. Indeed even the security deposit
under the leave and licence agreement had been refunded as stated in clause
9 of the Corporate Guarantee. It was in consideration inter-alia of the same
that the Corporate Guarantee was executed.
23. The present suit is not to recover possession of the premises. Nor
is it one to recover compensation under the leave and licence agreement at
least in so far as the cause of action therein is based on the corporate
guarantee and not under the leave and licence agreement. Even assuming
that the amounts due under the corporate guarantee pertain to the leave and
licence agreement they are not part of the compensation due under the leave
and licence agreement. Thus Section 41 does not bar the jurisdiction of the
Court to entertain the suit.
24. Lastly, it was submitted that the suit is not maintainable as it is
based on a contract of indemnity. Mr.Mehta relied upon the judgment of the
Supreme Court in the case of State Bank of Saurashtra v. Ashit Shipping
Services (P) Ltd. and another, 2002(4) SCC 736 in support of his
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submission that a suit on an indemnity can never be filed under the provision
of Order 37 of the Code of Civil Procedure. The submission and the reliance
upon the judgment of the Supreme Court in this regard are not well founded.
25. I have proceeded on the basis that the Corporate Guarantee in
the present case is in fact an indemnity and not a guarantee. In the case
before the Supreme Court also, the document was construed to be an
indemnity bond. It is important however to note the facts in that case.
(A). The first Respondent therein was the Plaintiff who was an agent
of one M/s.Palm Oil Transportation Pvt. Ltd. for their vessel which arrived at
the Kandla Port carrying timber consigned to various parties. The second
Respondent sent the first Respondent a bond which inter-alia requested the
first Respondent to deliver the goods to one M/s.Vasani Brothers despite the
fact that the relevant bills of lading had not arrived. By the bond the second
Respondent agreed to indemnify the first Respondent in respect of any
liability or loss or damage which the first Respondent may sustain by reason
of delivering the goods in accordance with the said request and to pay to the
first Respondent the amount of any loss which inter-alia the first Respondent
may incur as a result of so delivering the goods. By the bond, the second
Respondent also agreed to purchase and deliver to the first Respondent bills
of lading duly endorsed. On the said bond the following notation appeared
with the stamp of the Appellant bank and the signature of their Manager :-
“We, the undersigned, hereby join in the above indemnity and
jointly and severally guarantee due performance of the above
contract and accept all the formalities expressed therein”.
The second Respondent took delivery of the cargo but never
delivered to the first Respondent the duly discharged bills of lading.
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Thereupon the first Respondent contending that the said indemnity was a
guarantee filed a summary suit thereon.
(B). It is important to note that in the affidavit in reply to the Summons
for Judgment, the bank inter-alia contended that the endorsement on its
behalf on the said indemnity bond was in violation of its procedure, without
due sanction or permission, in excess of the Branch Manager’s power and
fraudulently obtained in collusion and with the assistance of the then Branch
Manager. It was further contended that there were discrepancies in the
documents. What is important to note is that there was no rejoinder filed by
the first Respondent/Plaintiff. The Supreme Court therefore at the end of
paragraph 7 of the judgment held that there was thus no denial of the
averments made in the affidavit in reply filed by the Appellant bank. The trial
Court refused leave to defend and the Gujrath High Court dismissed the
bank’s revision application against the said order terming the Appellant bank’s
defence as sham.
(C). The Supreme Court proceeded on the basis that the document
was an indemnity and not a guarantee. The Supreme Court in paragraph 13
observed that the document was contrary to the normal practice, the Manager
of the bank having merely affixed the stamp and signed under a paragraph
which stated that they have joined in the indemnity. The Supreme Court also
observed that the averment that the documents submitted to the negotiating
bank were not negotiated as there were discrepancies was not denied. The
Supreme Court also held that the serious allegations of fraud and collusion
and that the document did not exist in the records of the Appellant bank were
not defences which could be characterized as sham and constitute triable
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issues. The Supreme Court therefore held that the bank ought to have been
granted leave to defend.
26. Mr.Mehta however placed strong reliance upon the following
observations of the Supreme Court in paragraphs 14 and 15 :-
“14. As stated above, prima facie, the document
appears to be an indemnity bond. In cases of indemnitiesthe question of making good the loss arises only when there
is proof that loss is suffered. In this behalf the wording of
Order 37 is relevant. Rule 1 of Order 37 reads as follows:
“1. Courts and classes of suits to which the Order is to
apply.–(1) This Order shall apply to the following courts,
namely–
(a) High Courts, City Civil Courts and Courts of Small
Causes; and
(b) Other courts:
Provided that in respect of the courts referred to in clause
(b), the High Court may, by notification in the Official
Gazette restrict the operation of this Order only to suchcategories of suits as it deems proper, and may also, from
time to time, as the circumstances of the case may require,by subsequent notification in the Official Gazette, further
restrict, enlarge or vary, the categories of suits to be brought
under the operation of this Order as it deems proper.
(2) Subject to the provisions of sub-rule (1), the Order
applies to the following classes of suits, namely–
(a) suits upon bills of exchange, hundies and promissory
notes;
(b) suits in which the plaintiff seeks only to recover a debt or
liquidated demand in money payable by the defendant, with
or without interest, arising,–
(i) on a written contract; or
(ii) on an enactment, where the sum sought to be recovered
is a fixed sum of money or in the nature of a debt other than
a penalty; or
(iii) on a guarantee, where the claim against the principal is
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13in respect of a debt or liquidated demand only.”
It is to be seen that under sub-rule (2)(iii) of Rule 1 of Order
37 a claim could be made on the basis of a guarantee.
Significantly, Order 37 CPC does not provide for a claimbased on an indemnity bond. The reason is obvious. In
cases of claims on indemnity bonds the loss would first
have to be proved. Thus a summary procedure cannot be
adopted in such cases.
15. Mr.Chidambaram relied upon the case of Oil &
Natural Gas Corpn. Ltd. v. SBI, Overseas Branch (2000)6
SCC 385. In this case the question was whether leave to
defend could have been granted in a summary suit based
on an unconditional bank guarantee. This Court held thatsuch bank guarantees must be honoured unless fraud had
been played. This Court held that in the absence of anyfraud leave to defend should not be granted in cases of
unconditional bank guarantees. There can be no dispute
with the above proposition. However, this decision is based
on the law regarding unconditional bank guarantees. Courtshave consistently held that unconditional bank guarantees
must be honoured by the banks. In the present case, it is
not clear whether the document is an indemnity or a
guarantee. In any event, there is no unconditional bank
guarantee. Even if the document is held to be a guarantee itis only on proof of loss. Also in this case fraud has been
alleged. Thus the authority is of no assistance to the 1strespondent.
27. I do not read the judgment of the Supreme Court as holding that
irrespective of the nature of an indemnity bond, a summary suit is not
maintainable on the basis thereof or that in such cases unconditional leave
ought to be granted irrespective of the terms and conditions thereof. Nor do I
read the judgment of the Supreme Court as holding that all cases of a
guarantee may be filed under the provisions of Order XXXVII Rule 1(2)(b)(iii).
The maintainability of a suit on a guarantee or an indemnity under Order
XXXVII would depend upon the terms and conditions of the guarantee or the
indemnity. Further a summary suit on a guarantee is not maintainable only
under Order XXXVII Rule 1(2)(b)(iii). Depending on the terms and conditions
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of the guarantee and the nature of its invocation, it could also be
maintainable under Order XXXVII Rule 1(2)((b)(i). For the same reason a
summary suit would also be maintainable under Order XXXVII Rule 1(2)(b)(i)
on an indemnity depending on the terms thereof and the nature of its
invocation.
28. A suit on a guarantee can be filed under Order XXXVII Rule 1(2)
(b)(iii) only where the claim against the principal is in respect of a debt or
liquidated demand only. Thus where there is no debt or liquidated demand
against the principal, a suit on a guarantee under Order XXXVII Rule 1(2)(iii)
is not maintainable. There are however guarantees under the terms whereof
the guarantor agrees to pay the sum stipulated therein or any sum to be
stipulated by the creditor. Indeed in commercial transactions it is such
guarantees that are predominantly furnished. A summary suit even on such a
guarantee is maintainable though there is no claim again the principal in
respect of a debt or liquidated demand. A summary suit on such a guarantee
though not maintainable under Order XXXVII Rule 1(2)(b)(iii) would be
maintainable under Order XXXVII Rule 1(2)(b)(i). This is for the reason that
the amount so stipulated in such a guarantee or by the creditor being
authorized to do so as per the terms of the guarantee though not a debt or
liquidated demand against the principal, would constitute a debt or a
liquidated demand in money payable by the guarantor/surety on a written
contract viz. the guarantee.
29. In O.N.G.C. v. S.B.I. (2000) 6 SCC 385 referred to in paragraph
15 of the above judgment the Supreme Court in fact dealt with precisely such
a guarantee. Under the terms thereof, the S.B.I. bound itself to irrevocably
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and unconditionally pay to the O.N.G.C. on demand in writing without
demur or protest and irrespective of any dispute between the O.N.G.C. and
the principal debtor a sum of money upto a stipulated limit on account of any
liquidated damages from the principal debtor to the O.N.G.C. In the case
before the Supreme Court, the loss could only have been determined in a
trial. This is clear from the terms of the indemnity bond in that case. It was to
indemnify any liability, loss or damage which the Respondent may sustain.
There was nothing therein which determined or enabled the determination of
the liability, loss or damage qua the principal except by means of an action
instituted in a Court. The liquidated damages not having been ascertained
when the suit was filed, would not constitute a debt or liquidated demand
against the principal as required under Order XXXVII Rule 1(2)(b)(iii). It
however, constituted a liquidated demand in money payable by the
Defendant i.e. the guarantor on a written contract namely the contract of
guarantee. It is a liquidated demand as under the terms of the guarantee, the
surety was entitled to stipulate the amount payable by the guarantor and
such sum was agreed under the terms of the guarantee to be payable without
demur. In O.N.G.C. v. S.B.I., it was also held by the Supreme Court that the
encashment of an unconditional bank guarantee does not depend upon the
adjudication of the disputes between the creditor and the principal debtor and
that where the beneficiary shall be the sold judge on the question of breach of
contract, the bank shall pay the amount covered by the guarantee on
demand without demur. This principle was applied to the defence raised by
the S.B.I. even in a summary suit and the Supreme Court rejected the relief
granted by the High Court to the S.B.I. to defend the suit unconditionally.
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30. As regards the maintainability of a suit under Order XXXVII Rule
1(2)(b)(i), an indemnity is no different from a guarantee. Indeed the provision
would apply to any written contract where the other conditions thereof are
also satisfied. There is nothing in Order XXXVII Rule 1(2)(b)(i) which excludes
from its ambit a suit on an indemnity. There is absolutely no proposition that a
summary suit based on an indemnity is not maintainable. Nor is there any
absolute proposition that unconditional leave to defend ought to be granted in
a Summons for Judgment taken out in a suit based on an indemnity
irrespective of the nature thereof. This would depend upon the nature of the
indemnity. Where the amount is ascertained and crystlized as per the terms
of the contract of indemnity as in the present case, a summary suit is
maintainable on a written contract of indemnity not under Order XXXVII Rule
1(2)(b)(iii) but under Order XXXVII Rule 1(2)(b)(i). The observations of the
Supreme Court in State Bank of Saurashtra’s case are in respect of Order
XXXVII Rule 1(2)(b)(iii) and also where in respect of an indemnity there is no
debt or liquidated demand in money. Indeed the provisions of Order XXXVII
Rule 1(2)(b)(iii) can never apply to an indemnity on the plain terms thereof
which expressly refer only to a guarantee.
31. What is important to note is the observations of the Supreme
Court that the reason why normally a summary suit on an indemnity bond
cannot be maintainable is that the loss would first have to be proved and that
the summary procedure therefore cannot be adopted in such cases. The
present case however is different. I have already referred to clause 10 of the
Corporate Guarantee under which it is not any general or unascertained
amount that Defendant No.1 has agreed to indemnify the Plaintiff. In clause
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10, Defendant No.1 has guaranteed/indemnified the Plaintiff in respect of any
demand on the Plaintiff for the municipal taxes by the B.M.C. or the society.
The amount remained undecided or unascertained only till the demand was
made. The demand admittedly has been made. Thus in the present case,
there is no question of proving any loss. The demand is established and
admitted. The judgment of the Supreme Court would not apply in a case such
as this.
32. In the present case, the Defendant had undertaken and agreed
unconditionally and irrevocably to pay the Plaintiff any demand made upon
the Plaintiff by the society or the B.M.C. In other words in the present case
the indemnity was to the extent of the demand for municipal taxes by the
society or the B.M.C. The present case is not one where the indemnity could
have been invoked only upon the determination of the quantum at a trial in a
properly instituted proceeding in a court of law. It stood determined upon the
mere demand thereof by the society or the B.M.C. The determination of the
extent of Defendant No.1’s liability under the corporate guarantee/indemnity
was not dependent upon the determination of the loss in an action but upon
the mere demand of the municipal taxes by the B.M.C. or the society. That
such a demand has been made is not disputed. This is further clear from the
fact that the amount so demanded was to be paid by the first Defendant to the
Plaintiff “without raising any dispute regarding validity and/or quantum and/or
otherwise in respect thereof.”
33. Before passing the final order, it is necessary to note that though
not bound to do so, Mr.Tulzapurkar, with a view to leave no room for
grievance made the following statements which are accepted :-
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“(i). The Plaintiff shall if called upon to do so by
Defendant No.1 and upon payment of the claim in suit
execute a “Special Power of Attorney” in favour of Defendant
No.1 only empowering to take such steps/remedies as are
available in law to challenge the revision of property taxes by
the MCGM. Such Special Power of Attorney shall stand
automatically cancelled unless Defendant No.1 takes such
steps/remedies as are available to challenge the revision of
property taxes within sixteen weeks from the execution
thereof. Defendant No.1/nominee shall not use and undertake
not to use the Special Power of Attorney for any other
purpose.
(ii). The execution of the Special Power of Attorney
mentioned above shall be conditional upon Defendant No.1
executing an indemnity in favour of the Plaintiff indemnifying
the Plaintiff against any action taken and/or any
claim/demand made on the Plaintiff or any loss/damage/injury
suffered by the Plaintiff by reason of Defendant No.1’s use of
such Special Power of Attorney. In the event of any such
claim/action/demand being made or loss arising, Defendant
No.1 shall and do make payment to the Plaintiff of such sum
as may be demanded by the Plaintiff on demand, without
demur and raising any dispute.
(iii). In the event of the Plaintiff receiving any refund
from MCGM/Defendant No.2 as result of further
revision/reduction of property taxes relating to the period 26th
May, 2000 to 25th May, 2003, the Plaintiff shall and
undertakes on receipt of such refund, to pay over such sum
refunded to Defendant No.1.”
(iv). Any amount that the Plaintiff may recover in the
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present case would be utilized only for the purposes of
paying the said demand by Defendant No.2/B.M.C. less any
amount that the Plaintiff may already have paid to them.
34. The compilation of the original documents is taken on record and
marked Exhibit-A collectively. None of the documents are disputed. The
Plaintiff shall be entitled to withdraw the original documents upon substituting
the same with the copies thereof certified by its advocates to be true copies.
The same shall be done in the presence of the Defendants and/or their
advocates.
35.
In the circumstances, leave to defend is refused, the Summons
for Judgment is made absolute and the suit is decreed as prayed. However
interest throughout shall be at the rate of 15% p.a.
36. Refund as per rules.
37. Mrs.Srikrishna states that the Plaintiff will not seek to execute the
decree till 30.9.2009.
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