Gujarat Lease Financing Ltd. vs Abdulla Akbarali & Co. And Ors.
- CitationAIRONLINE 2002 SC 117
Ratio decidendi
The rule this decision rests on
Where a suit is filed under Order 37 CPC for recovery of money and an application for leave to defend is made, the existence of an injunction restraining disposal of collateral security (shares) that has become valueless does not constitute a triable issue sufficient to warrant granting unconditional leave to defend; the court must examine whether there is a genuine dispute on the merits of the debt claim itself rather than granting leave based merely on the existence of ancillary orders or circumstances collateral to the principal claim for recovery.
Written by Miss Lucy from the judgment below, not taken from a headnote.
Judgment
As delivered
2. In the instant case. the appellant had filed a suit under Order 37 CPC against the respondents for recovery of money. As per the appellant, loan had been granted to the respondents and when they failed to repay the same, the suit had to be filed for recovery thereof along with interest on the principal amount. The respondents filed an application for leave to defend. Curiously enough, the trial court granted unconditional leave by holding that an injunction had been issued, restraining the respondents from transferring the shares of M/s. Volvo Steel Ltd. and, therefore, that was a ground for granting unconditional leave. It may here be noticed that according to the respondents, the loan so obtained was used for purchasing the shares of M/s. Volvo Steels Ltd. It is stated by Mr. R.P. Bhatt, learned senior counsel for the respondents that the company-M/s. Volvo Steel Ltd. has become sick and is before the B.I.F.R. The shares of the said company are more or less of no value. The challenge to the order granting unconditional leave failed before the High Court. Hence, these appeals.
3. It was sought to be contended in this Court that the loan was in effect given to M/s. Volvo Steels Ltd. and not to the three respondents in their individual capacity. On 29th November, 2001, order was passed directing to place on record the balance sheets of M/s. Volvo Steels Ltd. in order to ascertain whether in the said balance sheets, this amounts was shown as due and payable by the company to the appellant herein.
4. Mr. Bhatt states that the balance sheets do not disclose such date of affairs. This being so, it is quite evident that the loan was taken by the respondents in their individual capacity. The mere fact that an injunction had been granted restraining the disposal of valueless shares of M/s. Volvo Steels Ltd. cannot be a reason for granting unconditional leave. There does not appear to be any triable issue and there was no occasion for the court to show any indulgence.
5. We, accordingly, allow these appeals, set aside the orders of the trial court and the High Court whereby unconditional leave has been granted. The trial court will not proceed in accordance with law.
6. No costs.
This page reproduces a public judgment and a summary of it. It is research material, not legal advice, and it is no substitute for advice from an advocate on your own facts.
Research this judgment with Miss Lucy
Ask what it holds, what has followed it, and what it means for your matter — in plain English, with the citations.
Try Miss Lucy free