LexSTATE BANK OF SAURASHTRA versus M/S. ASHIT SHIPPING SERVICES (P.) LTD. AND ANR.
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A B c D E F G H STATE BANK OF SAURASHTRA v. MIS. ASHIT SHIPPING SERVICES (P.) LTD. AND ANR. APRIL 12, 2002 [SYED SHAH MOHAMMED QUADRI AND S.N. V ARIA VA, JJ.] Code of Civil Procedure, 1908-0rder 37 Rule I-Summary Procedure- Leave to defend-Grant of-On facts, summary suit filed-Application for leave to defend-Courts below refusing to grant leave to defend-Whether document is indemnity or guarantee not clear-Document appears to be indemnity bond for which loss has to be proved first thus summary procedure cannot be applied-Also \j document is, held to be guarantee it is only on proof of loss-There is also an allegation of fraud, leave to defend could not have been refused Certain goods were shipped on a vessel, for which respondent No. 1 is an agent Respondent No. 2 sent a bond to respondent No.1 indemnifying them and requesting delivery of goods for which bill of lading was to be delivered. On the bond, Manager of the appellant-Bank affixed his stamp and signed it stating that it joined in the indemnity. Thereafter Respondent No. 2 took delivery of the cargo but did not deliver the discharged bill of lading. Respondent No. 1 then wrote to appellant-Bank terming the document as indemnity/guarantee and that if bill of lading is not delivered would invoke the indemnity/guarantee. Respondent No. 1 filed summary suit Appellant- Bank filed application for leave to defend. Appellant-Bank alleged commission of fraud by respondent No.1 in collusion with respondent No. 2. and their Manager. Appellant Bank had also set out in their application for leave to defend, that the documents submitted to the Negotiating Bank had not been negotiated as there were discrepancies in these documents. Respondent No. 1 did not file any rejoinder. Hence there was no denial of these averments. Trial Court refused leave to defend. Revision Petition was also dismissed. Hence the present appeal. Disposing of the appeal, the Court HELD: 1.1. Appellants had set out in their application for leave to defend that the documents submitted to the negotiating Bank were not 1074 ·- .... ~ - --r-- ---- -- STATE BANK OF SAURASHTRA I' ASHIT SHIPPING SERVICES (P.) LTD 1075 negotiated as there were discrepancies in those documents. To this averment A there was no reply or denial by respondent No. 1. Appellants have made serious allegations of fraud and collusion. They had stated that such, a document did not exist in their records. This was not a defence which could be characterised, at this stage, as sham or illusory or practically moonshine. These triable issues should not have been summarily rejected by the trial court B and/or the High Court. (1081-C-DI 1.2. In the instant case, there is a dispute as to whether the document is a guarantee or merely an indemnity. Respondent No. 1 termed the document to be an indemnity guarantee. Appellants denied that the document was a Guarantee. On the face of it the document appears to be an indemnity and C not a guarantee. The Court was, therefore, required to consider the nature and meaning of the document which by itself necessitated granting of leave to defend. [1080-H; 1081-A] 1.3. Primafacie the document appears to be an indemnity bond. Under ' sub-rule (2)(iii) of Rule (1) of Order 37 CPC a claim could be made on the D basis ofa guarantee. Significantly Order 37 CPC does not provide for a claim · ~ based on an indemnity bond. 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. [1082-D) 1.4. In the instant case, it is not clear whether the document is an indemnity or a guarantee. Even if the document is held to be a guarantee it is only on proof of loss. However, in the instant case there is an allegation of ~ fraud. Thus leave to defend could not have been refused to the appellant-Bank. However, leave to defend is not granted to respondent No. 2 since he is not E before this Court. (1082-F, G; 1083-B) F Mecha/ec Engineers and Manufactures v. Basis Equipment Corporation, AIR (1977) SC 577; Raj Duggal v. Ramesh Kumar Bansal, AIR (1990) SC page 2218 and Kam/esh Kohli v. Escortrac Finance and Investment Ltd, [2000] l SCC 324, referred to. Oil and Natural Gas Corpn. Ltd v. SB!. Overseas Branch, (2000) 6 SCC 385, distinguished. CIVIL APPELLATE JURISDICTION Civil Appeal No. 2662 of G 2002. H 1076 SUPREME COURT REPORTS [2002] 2 S.C.R. A From the Judgment
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