w w w . L a w y e r S e r v i c e s . i n



M/s. Radiance Media P. Ltd., rep. By its authorised Signatory N. Srinivasan, Chennai v/s M/s. Magic Frames, Partnership Firm, reg. By its Partner R. Sarath Kumar, Chennai

    A. Nos. 2906, 2907, 2909 & 2910 of 2017 & O.A. No. 540 of 2017 in C.S. No. 393 of 2017

    Decided On, 17 July 2017

    At, High Court of Judicature at Madras

    By, THE HONOURABLE MR. JUSTICE V. PARTHIBAN

    For the Plaintiff: V.T. Gopalan, Senior Counsel for M/s. S.R. Bhagawat Krishna, R. Murugan, Advocates. For the Defendant: M/s. Rugan, Arya, Advocates.



Judgment Text

1. The applicant in O.A. 540 of 2017 is the plaintiff herein. The suit has been laid for passing judgment and decree for the following reliefs, viz.,

a. directing the defendants to pay a sum of Rs. 2,00,00,000/- (Rupees Two Crores only) along with interest at the rate of 18% p.a. since the date of return of cheques unpaid till the date of realization of the amount; and

b. directing the defendants to pay the costs of the suit.

2. Along with the suit, the applicant/plaintiff has also filed original application in O.A.No.540 of 2017, seeking grant of interim injunction, restraining the 3rd respondent/defendant or his agents from in any manner encumbering or creating third party rights with regard to the suit schedule property.

3. This Court, upon consideration of the reasons assigned in the affidavit filed in support of the Original Application by the applicant/plaintiff and having satisfied that the applicant/plaintiff has made out prima facie case, granted interim injunction as prayed for.

4. On notice, the respondents/defendants entered appearance through their counsel and filed the following applications, for the following reliefs, viz.,

i) A.No.2906 of 2017: To vacate the order of interim injunction dated 25.5.2017 passed in O.A.No.540 of 2017 in C.S.No.393 of 2017;

ii) A.No.2907 of 2017: To treat the suit C.S.No.393 of 2017 as an ordinary suit under Order IV Rule 1 of O.S. Rules;

i) A.No.2909 of 2017: To stay further proceedings in C.S.No.393 of 2017 under Order 7 of O.S. Rules, pending disposal of the application to treat the suit as an ordinary suit under Order IV Rule 1 of O.S. Rules; and

ii) A.No.2910 of 2017: To reject the plaint in C.S.No.393 of 2017 or in the alternative to dismiss the suit as not maintainable.

5. All the above captioned applications are taken up for hearing together for disposal on request made by the learned counsels appearing for the parties.

6. For the sake of convenience, the parties herein are described as applicant/plaintiff and the respondents/defendants.

7. The case of the applicant/plaintiff is as follows:

The respondents/defendants herein have collectively approached the applicant/plaintiff seeking grant of financial assistance for production of a feature film, titled "Production No.4". According to the applicant/plaintiff, the plaintiff which is a company incorporated under the Companies Act, engaged in the business of production and distribution of films and also in lending money for film production activities. In response to the request of the respondents/defendants, the applicant/plaintiff agreed to provide financial assistance to the tune of Rs. 1.50 Crores. This amount was paid by way of a Cheque bearing No.002502 dated 5.11.2014 drawn on Kotak Mahindra Bank. In respect of the said transaction, a loan agreement was entered into between the parties on 5.11.2014 agreeing to repay the same with interest at 36% p.a. as interest on the loan amount as per the Clause 3 of the loan agreement. As per Clause 4 of the loan agreement, the borrower shall repay the entire loan amount with outstanding amount along with other dues by 31.3.2015. Further, as per the loan agreement dated 5.11.2014, the respondents/defendants had agreed that all the revenues from world Satellite rights, television relating screening and broadcasting, cable television DTH Television, Digital Broadcasting, Video, VCD and DVD etc., for the said feature film shall vest with the applicant/plaintiff and further, the respondents/defendants have also undertaken that they shall not to alienate such rights vested with the applicant/plaintiff to third parties.

8. In accordance with the loan agreement, the respondents/defendants have not repaid the loan and defaulted the payment amount borrowed by them in to. While so, the respondents/defendants once again approached the applicant/plaintiff for grant of further financial assistance and promised to execute a mortgage deed to that effect for both the outstanding amount with interest and for the fresh loan requested by them. In response to the said request, the applicant/plaintiff had extended further financial assistance to the tune of Rs. 1.00 Crore on the basis of mortgage deed dated 21.1.2016 and also written undertaking given by the second respondent/defendant on 21.1.2016.

9. The case of the applicant/plaintiff was that the original amount due and payable by the respondent/defendants was to the tune of Rs. 2,39,29,960/- towards outstanding loan amount coupled with interest and with the additional loan amount of Rs. 1 Crore, thereby, the total amount became payable to the tune of Rs. 3,39,29,960/-. As per the terms of the mortgage deed dated 21.1.2016, the second respondent/second defendant representing the other partners and the firm, have mortgaged the properties as mentioned in sub para (b) of para 5 of the plaint. After executing the mortgage deed on 21.1.2016, the respondents/defendants have also on the same day, given an undertaking and the relevant portion is also extracted in para 6 of the plaint which reads as follows:

"i) Acknowledged the Morgage Deed dated, 21.01.2016 entered with the plaintiff and the sum of Rs. 3,39,29,960/- due by as on 21.01.2016 apart from the further interest payable on monthly basis.

ii) Undertook to grant right of possession and use and enjoy all the three properties referred to in the Mortgage Deed dated, 21.01.2016 including the right to receive the rents, income and profits thereof and the same shall not be in any manner adjusted or be claimed to set off any claims of the plaintiff.

iii) All the three documents pertain to scheduled properties in the Mortgage Deed dated, 21.01.2016 shall be handed over immediately.

iv) Undertook to provide more movable and immovable properties as securities.

v) Undertook not to create any charge, alienate, encumber or in any manner seek possession or any proceeds from the three scheduled properties referred to in the Mortgage Deed dated, 21.01.2016 prior to the discharge of the loan amount.

vi) Undertook that the present undertaking shall form part of the Mortgage Deed dated, 21.01.2016.

vii) Further undertook that, on behalf of the 1st defendant herein of which the 2nd defendant is one of the partners, all rights, copy right, revenues and claims in respect of the feature film "Pambu Sattai" produced by and vesting with M/s. Magic Frames) arising from the theatrical exhibition, satellite rights and audio rights shall rest with the plaintiff for the entire duration of the undertaking and no right shall be exercised or alienated without the express consent of the plaintiff in writing, and the said feature film shall not theatrically exhibited until discharge of all obligations under the Mortgage and Undertaking."

10. In spite of demands and passage of considerable time, no instalment towards principal amount was paid by the respondents/defendants in terms of the original loan agreement and in terms of their subsequent undertaking. Therefore, in March 2017, the applicant/plaintiff approached and insisted the respondents/defendants borrowers to pay entire amount immediately. In response, the respondents/defendants instructed the applicant/plaintiff to encash the cheques given by them to him for a sum of Rs. 2.00 Crores as part payment. The said cheques which were originally issued by the first respondent/defendant which is the partnership firm, duly signed by the 2nd respondent/defendant. In the meanwhile, it appears that the respondents/defendants had released feature film titled "Pambu Sattai" on 24.3.2017 without even informing the applicant/plaintiff. In such circumstances, the applicant/plaintiff caused a notice requesting the respondents/defendants to pay the loan amount with interest to the tune of Rs. 3,84,40,440/- on 26.4.2017 and in response to the same, the respondents/defendants requested the applicant/plaintiff to encash the cheques given to them for a sum of Rs. 2 Crores. Unfortunately, the said cheques when presented in May 2017, were returned by the bank on 9.5.2017 with an endorsement 'payment stopped' by the drawer. Since the conduct of the respondents/defendants was not satisfactory and it appears that they were dragging the matter without settling any amount borrowed by them and even after the cheques were returned, no repayment was forthcoming, the applicant/plaintiff has laid the suit under Order 7, Rule 1 of the Madras High Court Original Side Rules in short, ('the O.S. Rules') r/w XXXVII Rule 1 and 2 of CPC on the basis of Negotiable Instruments given by them as security since in the circumstances of the case, the respondents/defendants are seriously attempting to alienate and encumber the property mortgaged to the applicant/plaintiff to third party and no part of the amount borrowed by them has been settled in terms of the loan agreement dated 5.11.2014 and also undertaking given by them on 21.1.2016, the applicant/plaintiff has come forward with the suit and also prayed for grant of interim protection, pending disposal of the civil suit.

11. Per contra, the case of the respondents/defendants is as follows:

The applicant/plaintiff is not entitled to the interim relief of injunction as sought for and also not entitled to maintain the suit. The applicant/plaintiff cannot rely upon the loan agreement in view of the subsequent development, namely, deed of mortgage dated 21.1.2016 entered into between the applicant/plaintiff and respondents/defendants. After the deed of mortgage, the earlier loan agreement stood superseded and the cheques, according to the respondents/defendants which were given under the loan agreement, cannot be used and presented before the bank when the mortgage was subsisting. Even assuming the loan agreement could be relied upon for the purpose of laying the suit, there was an agreement for referring the matter before the Arbitration under the Arbitration and Conciliation Act 1996 in terms of Clause 12.8 of the loan agreement. Moreover, the deed of mortgage was subsisting till 19.06.2018 and therefore, the suit was premature and liable to be rejected.

12. According to the respondents/defendants, there was no whisper in the plaint as to when the cheques were really handed over to the applicant/plaintiff and there was also no mention about how additional loan was paid/given under the deed of mortgage dated 21.1.2016. It is further stated that there was a joint venture agreement between the parties in order to adjust the dues payable under the mortgage deed. The proposal emanated from the applicant/plaintiff, was not equitable as the same was one sided and when the same was declined by the respondents/defendants, the applicant/plaintiff had presented the undated cheques as if they were given under the deed of mortgage. Therefore, the respondents/defendants rightly issued instructions to the bank to stop the payment. Without disclosing the actual facts, the applicant/plaintiff has approached this Court with unclean hands by suppressing the material facts for being considered by this Court and therefore, the applicant/plaintiff is not entitled to the discretionary relief of interim order. According to the respondents/defendants, the so-called Rs. 1.00 Crore alleged to have been advanced under the deed of mortgage was contrary to fact and this was fortified by the fact that the manner of payment in respect of said Rs. 1.00 Crore was not mentioned in the plaint at all. Moreover, the interest was exorbitant under the Tamil Nadu Prohibition of Charging Exorbitant Interest Act, 2003 and the respondents/defendants are entitled to initiate appropriate proceedings under the said Act against the applicant/plaintiff. If reasonable interest is payable on the original amount borrowed from the applicant/plaintiff towards mortgage loan, it would be less than Rs. 2.00 Crores and hence, there is no enforceable debt under the Negotiable Instruments Act. When the mortgage was still subsisting, no money decree can be granted. According the respondents/defendants, in view of the subsequent action of the parties in entering into the mortgage agreement, the earlier loan agreement stands discharged.

13. The sum and substance of the case of the respondents/defendants resisting the claim of the applicant/plaintiff is that as the application for interim injunction was prompted by mala fides, the same is vexatious, frivolous and that by suppressing the relevant material facts, the orders have been obtained on the basis of unjust claim. According to the respondents/defendants, there was no disclosure of date of issue of cheques and date of part payment received by the applicant/plaintiff and at the same time, there was no denial of Rs. 40 lakhs paid to applicant/plaintiff in their rejoinder and there was deliberate suppression of actual value of the property in question and there was no mention anywhere about the cheques given by the respondents/defendants in the police complaint or in the notice. In view of unenforceable debt, the grant of interim injunction without proper averments in the affidavit filed in support of the injunction application, cannot be countenanced both on facts and on law. In such view of the matter, the interim injunction grated by this Court is liable to be vacated.

14. Heard the learned senior counsel appearing for the applicant/plaintiff and the learned counsel appearing for the respondents/defendants and perused the entire materials placed before this Court.

15. The respondents/defendants have also taken out three applications apart from vacating the said application. According to the respondents/defendants, the suit cannot be maintained under Order 7, Rule 1 of the O.S. Rules in view of the disputed questions of fact and also in view of no acknowledgement of liability towards the debt claimed by the applicant/plaintiff. In the said circumstances, the suit laid under the provision, Order 7, Rule 1 of the O.S. Rules, is per se not maintainable and the same if at all maintainable, has to be converted into ordinary suit under Order IV Rule 1 of the O.S. Rules. It is also the case of the respondents/defendants that there was no specific cause of action for recovery of the money from the respondents/defendants in view of the admitted position of the subsisting mortgage agreement between the applicant/plaintiff and the respondents/defendants and the said mortgage agreement was subsisting till 19.6.2018 and an option is available for the plaintiff to bring the property for sale if the mortgagor fails to redeem the mortgage. Hence, as the suit is laid without proper cause of action, the plaint is therefore, required to be rejected.

16. Shri V.T. Gopalan, learned senior counsel appearing for the applicant/plaintiff would at the outset submit that the respondents/defendants had borrowed a sum of Rs. 1,50,00,000/- under loan agreement dated 5.11.2014 with the condition of repayment of loan agreement by 31.3.2015. The learned senior counsel particularly drew the attention of this Court to Clause Nos.2 and 3 of the loan agreement indicating the interest rate payable on the principal amount borrowed under the agreement. The learned senior counsel would also drew attention of this Court to the Clauses contained in the mortgage deed dated 21.1.2016. According to the learned senior counsel, the respondents/defendants had given an undertaking of acknowledgement of debt executed under mortgage deed dated 21.1.2016 for a sum of Rs. 3,39,29,960/- and the said undertaking shall form the part and parcel of the mortgage deed dated 21.1.2016. As per the undertaking dated 21.1.2016, the same was executed on behalf of the 1st respondent/1st defendant and for and on behalf of respondents/defendant Nos.2 to 4, who are the partners. The learned senior counsel would submit that one partner can represent all the partners in the firm and therefore, in the instant case, the 2nd respondent/2nd defendant who has given the undertaking will also equally bind the firm as well as other partners and therefore, there cannot be any escape from the liability towards payment of debt payable to the applicant/plaintiff.

17. The learned senior counsel would rely upon the decision of the Hon'ble Supreme Court reported in 2007 (7) SCC 434 (Tanna & Modi v. CIT, Mumbai XXV and Others). He particularly drew the attention of this Court to para 19 of the judgment, which holds that under the Partnership Act, a partner represents the firm and he has an implied authority in terms of Section 19 thereof and, thus, any action taken by any partner of the firm vis-a-vis the firm, unless otherwise specified, binds the firm itself. Therefore, he would emphasize the fact that in the instant case, the agreement/undertaking given by the 2nd respondent/2nd defendant is on behalf of the firm and after having executed the agreement consciously, he cannot be allowed to escape from the liability on account of the objections which, otherwise, cannot be countenanced in law.

18. The learned senior counsel would further contend that the cheques issued for discharge of loan, were dishonoured with an endorsement 'stop payment' and according to the learned senior counsel, even the 'stop payment' instruction given by the person who issued cheques, would nevertheless attract the provisions of 138 and 139 of the Negotiable Instruments Act in short, ('N.I. Act') and the person who issued such instructions can always be proceeded against both criminal and civil. In support of his contention, the learned senior counsel would rely upon two judgments, viz., reported in (2010) 11 SCC 441 (Rangappa v. Sri Mohan and another) in (2014) 13 SCC 18 (Pulsive Technologies Private Limited v. State of Gujarat and Others). As far as the first decision is concerned, the learned senior counsel specifically would draw attention of this Court to para 28 of the judgment, which reads as under:

"28. In the absence of compelling justifications, reverse onus clauses usually impose an evidentiary burden and not a persuasive burden. Keeping this in view, it is a settled position that when an accused has to rebut the presumption under Section 139, the standard of proof for doing so is that of 'preponderance of probabilities'. Therefore, if the accused is able to raise a probable defence which creates doubts about the existence of a legally enforceable debt or liability, the prosecution can fail. As clarified in the citations, the accused can rely on the materials submitted by the complainant in order to raise such a defence and it is conceivable that in some cases the accused may not need to adduce evidence of his/her own."

19. As regards the other decision is concerned, the Hon'ble Supreme Court has clearly held in para 7 that even the instruction "stop payment" issued by the person to the bank would make him liable for the offence punishable under Section 138 of N.I. Act in case cheque is dishonoured on that count. In such circumstances, learned senior counsel would submit that there is a clear enforceable debt and only in respect of recovery of the debt, the suit has been laid.

20. The learned senior counsel would next contend that as per Order 7, Rule 1 of the O.S.Rules, it is permissible to file the suit under the said provision if any money payable by the defendant arising inter alia on a negotiable instrument, pronote, bond etc., in a prescribed format. The said provisions is extracted below for the sake of clarity of the issue to be adjudicated.

"Order 7, Rule 1:

A suit to recover a debt or a liquidated demand in money, evidenced by a document, or any money payable by the defendant with or without interest, arising on a negotiable instrument or on a bond or a contract for payment of a liquidated amount of money evidenced by a document, or on a guarantee where the claim arises against the principal in the manner aforesaid, may, in case the plaintiff desires to proceed hereunder, be instituted by presenting a plaint in the form prescribed.

For the purpose of this order "Liquidated demand" means a demand for the amount stated or so expressed that the ascertainment of the amount is a mere matter of calculation."

21. Therefore, the learned senior counsel would contend that the suit is perfectly maintainable as the same has been filed on the basis of negotiable instrument and there cannot be any valid legal objections to the laying of the suit under the said provision. The attempt of the respondents/defendants for conversion of the said suit into ordinary suit, is clear case of dragging the suit proceedings which will ensure to the advantage of the respondents/defendants. According to the learned senior counsel, the attempt of the respondents/defendants in filing the applications seeking conversion of the present suit into ordinary suit vis-a-vis for rejection of the plaint, are absolutely without any legal basis and cannot be entertained.

22. Shri V.T. Gopalan, learned senior counsel would further contend that the application for conversion of the present suit into ordinary suit and the rejection of the plaint are per se is not maintainable without resorting to the other provisions of the Order 7, Rule 1 of the O.S. Rules. In effect, the learned senior counsel would lay emphasis that unless an application for leave to defend the suit under Order 7, Rule 6 is filed and having the same adjudicated, it is not open to the respondents/defendants to file any application, seeking for conversion of the present suit into an ordinary suit and so is the case for rejection of the plaint. In support of his contention, the learned senior counsel heavily relied upon the decision reported in 2013 (4) CTC 59 (S. Ramesh Babu v. P. Changaiah). In the said decision, a Division Bench of this Court has categorically held after adverting to the various decisions of the Hon'ble Apex Court and other High Courts, that the defendant having not filed application under Order 7, Rule 6 , cannot file an application under Order 7, Rule 7 of the O.S. Rules, seeking to raise issues covered in the earlier Rule into the subsequent Rule.

23. For the purpose of better clarity of the interesting legal issue raised in the present applications, the relevant extract in the above cited decision contained in paragraphs 5.1 to 5.9 is extracted hereunder:

"5.1. Order 7 of the Madras High Court Original Side Rules envisages a special procedure in respect of certain suits. Therefore, it is not meant for all types of suits. This position is made clear under Order 7, Rule 1 of the Original Side Rules. Order 7, Rule 1 of the Original Side Rules categorises the types of suits, that would come under its purview. For example, a suit to recover the debt or a liquidated demand in the money, supported by a document or any money payable by the defendant arising on Negotiable Instruments are few of the suits that would come under Order 7, Rule 1 of the Original Side Rules. In other words, if a suit is not one classified under Order 7, Rule 1, then, it cannot be termed as a summary suit. To put it differently, the nature of the suit and the requirement of the evidence are the required ingredients to bring under Order 7 of the Madras High Court Original Side Rules.

5.2. Order 7, Rule 2 of the Madras High Court Original Side Rules delineates the procedure to be followed in a summary proceeding. It reiterates the position that in a summary suit instituted procedure envisaged under Rules 3 to 6 and thereafter, 8 and 9 will have to be followed. The only exception is Rule 7. The reason is that when an application filed under Rule 7 is allowed, then the suit gets treated as an ordinary suit. Consequently for exercising such a power, no stage is required. In other words, the power under Rule 7 can be exercised at any time. It is not controlled by Rules 3 to 6 and thereafter, Rules 8 and 9, in so far as procedures are concerned.

5.3. Rules 3 to 5 of the Madras High Court Original Side Rules are procedural in nature and they also prescribe a period of time limit. Now coming to the Rule 6 of the Madras High Court Original Side Rules, it gives a right to the defendant to seek a leave to defend. This right has to be exercised by way of an application supported by such evidence. The evidence is the one which a defendant desires to place before the Court. Therefore, Rule 6 (1) of the Madras High Court Original Side Rules makes it clear that the defendant has to produce some evidence as he desires to produce before the Court. Thereafter, the Master may grant a leave to defend. The decision of the learned Master can be conditional or unconditional as a particular case would warrant. As per Rule 6 (3) of the Madras High Court Original Side Rules, the Master shall pass a decree if the defendant does not appear or when an application seeking leave to defend is rejected. Therefore, Rule 6 of the Madras High Court Original Side Rules makes it clear that the Master has to satisfy on the prima facie material to be produced by the defendant while considering the application filed for leave to defend.

5.4. Now let us have a look at Rule 7 of the Madras High Court Original Side Rules. On a very plain reading, it does look to operate totally on a different field. When a plaint is presented, it would become a summary suit only when it is admitted or marked as a suit under Order 7 of the Madras High Court Original Side Rules. In other words, the averments made in the plaint and the nature of the suit will have to satisfy Order 7, Rule 1 before getting admitted or marked as a suit therein. If such a suit is wrongly marked or admitted as summary, then at any stage it can be directed to be treated as an ordinary suit by the order of the Court. Such a power can be exercised by a Court on its own volition or on an application by either of the parties. This is the scope of Order 7, Rule 7 of the Madras High Court Original Side Rules.

5.5. Now, let us analyse together all the provisions contained under Order 7 of the Madras High Court Original Side Rules. As discussed above, the parameters mentioned under Order 7, Rule 6 are distinct and separate. In other words, the defendant has to satisfy the learned Master that an application filed under Order 7, Rule 6 of the Madras High Court Original Side Rules is liable to be allowed based upon the evidence produced by him. Thereafter, the Master can grant either a conditional or unconditional leave. Therefore, the Master is bound to consider the materials produced by the defendant. This is the sum and substance of scope of Order 7, Rule 6 of the Madras High Court Original Side Rules. Therefore, Order 7, Rule 6 of the Madras High Court Original Side Rules cannot escape the rigour of Orders 3 to 5, wherein procedures have been contemplated to be followed within the time prescribed.

5.6. Hence, we are of the considered view that the attempt made by the appellant to import of Order 7, Rule 6 of the Madras High Court Original Side Rules into Order 7, Rule 7 of the Madras High Court Original Side Rules, cannot be accepted. Order 7, Rule 7 of the Madras High Court Original Side Rules does not speak about any evidence. This power is given to the Court either on its own motion or on an application to be made by either of the parties to see whether Order 7, Rule 1 is complied with properly. We feel that the words used in Order 7, Rule 7 of the Madras High Court Original Side Rules that it can be exercised "at any stage" and the reference made specifically only to a "suit" coupled with a direction to the Registry to "treat a summary suit as an ordinary suit" would have substantial meaning. It merely enables a mistake committed in marking or admitting a suit as a summary one to be treated as a regular suit. It is a procedure for rectification by which the character of the suit changes.

5.7. While construing a provision, the basic Rule of interpretation is that such a provision either as a whole or in part conveys the purpose and meaning, intended by the legislation. A Court of law cannot ignore a provision to make it redundant, stale, unworkable and otiose. Considering the rule of harmonious construction, the Honourable Apex Court in Union of India v. Brigadier P.S. Gill (2012) 4 Supreme Court Cases 463 has observed as follows:

"17. Each word used in the enactment must be allowed to play its role howsoever significant or insignificant the same may be in achieving the legislative intent and promoting legislative object....."

5.8. Further more, a provision has to be read in the context of the scheme and not in isolation. The Honourable Apex Court, in O.P. Singla and Another v. Union of India and Others (1984) 4 Supreme Court Cases 450, has held as follows:

"17. If the matter were to rest with the proviso, its interpretation would have to be that it does not prescribe a quota for direct recruits: it only enables the appointment of direct recruits to substantive posts so that, they shall not hold more than one-third of the total number of substantive posts in the Service. However, it is well recognised that, when a rule or a section is a part of an integral scheme, it should not be considered or construed in isolation. One must have regard to the scheme of the fasciculus of the relevant rules or sections in order to determine the true meaning of any one or more of them. An isolated consideration of a provision leads to the risk of some other interrelated provision becoming otiose or devoid of meaning. That makes it necessary to call attention to the very next rule, namely, Rule 8. It provides by clause 2 that:

"The seniority of direct recruits vis-a-vis promotees shall be determined in the order of rotation of vacancies between the direct recruits and promotees based on the quotas of vacancies reserved for both categories by Rule 7 provided that the first available vacancy will be filled by a direct recruit and the next two vacancies by promotees and so on."

(emphasis supplied)

This provision leaves no doubt that the overall scheme of the rules and the true intendment of the proviso to Rule 7 is that one-third of the substantive posts in the Service must be reserved for direct recruits. Otherwise, there would neither be any occasion nor any justification for rotating vacancies between direct recruits and promotees. Rule 8 2), which deals with fixation of seniority amongst the members of the Service, provides, as it were, a key to the interpretation of the proviso to Rule 7 by saying that the proviso prescribes "quotas" and reserves vacancies for both categories. The language of the proviso to Rule 7 is certainly not felicitous and is unconventional if its intention was to prescribe a quota for direct recruits. But the proviso, as I have stated earlier, must be read along with Rule 8 (2) since the two provisions are interrelated. Their combined reading yields but one result, that the proviso prescribes a quota of one-third for direct recruits."

Therefore, applying the rule of interpretation, we have no hesitation in holding that Order 7, Rule 6 of the Original Side Rules cannot be imported into Order 7, Rule 7 .

5.9. What the appellant seeks before us is to avoid not only Order 7, Rule 6 of the Original Side Rules but the other provisions of Order 7 as well. In other words, what he seeks is a remedy notwithstanding the period of limitation provided under Order 7 for making an application seeking leave to defend. Such a course adopted by the appellant cannot be permitted in law. As discussed above, the assessment of evidence can never be an issue under Order 7, Rule 7 of the Original Side Rules. In other words, it is applicable only for a rectification of an earlier decision in admitting or marking a suit as a summary suit. It is akin to the power of review. This has to be decided based upon the averments in the plaint alone. Perhaps that is the reason why Order 7 Rule of the Original Side Rules does not speak about leave at all. It does not deal with the right of the defendant to seek leave. On the contrary, it deals with proper exercise of the right of the plaintiff to maintain a summary suit. Therefore, we have no hesitation in holding that the defendant, who has not filed an application under Order 7, Rule 6 of the Original Side Rules, cannot file an application under Order 7, Rule 7 of the Original Side Rules seeking to raise issues covered in the earlier rule into the subsequent rule. Similarly he cannot be permitted to get over the period of limitation prescribed by making an application under Order 7, Rule 7 of the Original Side Rules. The averments made in the present case are not sufficient to invoke Order 7, Rule 7 of the Original Side Rules. In other words, the averments made by the appellant are not pertaining to non conformity of a summary suit covered under Order 7, Rule 1 of the Original Side Rules. When the appellant has not filed the application under Order 7, Rule 6 of the Original Side Rules within the time prescribed, then he loses his right to defend the suit. The moment such a right is lost, resultantly a right accrues to the plaintiff to get a decree on the averments made in the plaint. Such a right accrued is a vested right. It vests with the plaintiff under the statute. Therefore, it cannot be nullified by taking recourse to another provision, which does not authorise the defendant to seek leave on the basis of the evidence sought to be produced by him."

24. In the above circumstances, the learned senior counsel would submit that as pointed in the interim injunction application and also in the plaint filed in support of the suit, it became absolutely imperative and necessity in order to secure the loan amount, to obtain interim injunction for safe guarding the right of the applicant/plaintiff pending disposal of the suit. This Court having considered the circumstances of the case, has granted the interim injunction and also was of the view that by the grant of interim order, no prejudice is going to be caused to the respondents/defendants. This is more so when the liability of the respondents/defendants towards the applicant/plaintiff has not been disputed and the respondents/defendants have merely embarked upon raising all technical objections which have no legal legs to stand on.

25. As regards the issue of post dated cheques are concerned, the learned senior counsel would rely upon the Hon'ble Supreme Court reported in (1993) 4 SCC 424 (Anil Kumar Sawhney v. Gulshan Rai) wherein, the Hon'ble Supreme Court has clearly held that if the object of bringing Section 138 of the Act on the statute has to be fulfilled then the only interpretation which can be given to clause (a) of proviso to Section 138 of the Act is that a postdated cheque shall be deemed to have been drawn on the date it bears.

26. In such circumstances, the learned senior counsel would urge this Court to make the interim injunction absolute and dismiss the other three applications filed by the respondents/defendants as devoid of legal substance and merits.

27. Per contra, Shri K. Ravi learned counsel appearing for the respondents/defendants would submit that the applicant/plaintiff has not made out any prima facie case for grant of interim injunction. According to the learned counsel, there is no averment in the plaint as to the purpose for which, the cheques were given and in the absence of such details, there was no enforceable debt and as such, the suit itself is not maintainable and therefore, the interim injunction which was granted, is not legally sustainable. According to the learned counsel, the cheques were issued in 2014, which were undated towards the security of the repayment of earlier loan which was taken under the loan agreement dated 5.11.2014 and the said averment having not been disputed by the applicant/plaintiff in their reply statement, the suit which is laid on the basis of the dishonoured cheques cannot be maintained in law and in such event, the question of grant of interim injunction in favour of the applicant/plaintiff would not arise. The learned counsel also would submit that upon execution of the mortgage deed subsequently on 21.1.2016, the earlier loan gets discharged and no money decree can be granted in the subsisting mortgage since the loan amount payable under the mortgage was to be paid only on or before 18.6.2018, failing which, the mortgagee shall be entitled to foreclose the mortgage and shall become the absolute owner of the mortgaged property. He would further submit that notice which was issued prior to institution of the suit, there was no mention about the cheques dishonoured and hence the institution of the suit on the basis of the negotiable instrument is invalid in law. According to the learned counsel, the term used in the mortgage deed is only 'consideration' and not 'loan' and hence from the date of presentation of cheques that too unilaterally after filing up the dates by the applicant/plaintiff, there was actually no debt to be discharged and hence, the suit as it framed, cannot be maintained at all. As regards the grant of interim injunction is concerned, there were no proper averments or pleadings establishing the balance of convenience in favour of the applicant/plaintiff and also there was no specific averment that irreparable injury would be caused to the applicant/plaintiff if the interim injunction sought for is refused. According to the learned counsel, in case of mortgage by conditional sale, the mortgagor cannot be forced to pay any amount to the mortgagee before or even after due date. As regards the proposition of mortgagor cannot enforce and pay any sum to the mortgagee, the learned counsel relied upon the following three decisions, viz.,

i) AIR 1917 Nag 57 (Anandrao v. Tukaram and others)

ii) AIR 1920 Nag 184 (Narahar v. Narain)

iii) AIR 1939 All 260 (Bishan Datt Singh and another v. Matura Prasad and another)"

28. In the first decision cited supra, it was held that the mortgagee is not entitled to any personal decree since mortgage is by conditional sale, as in the present case.

29. In the second decision cited supra, as regards the mortgage by conditional sale, in the absence of any express covenant, the mortgagee is not entitled to personal decree against the mortgagor even by implication. No personal liability can be presumed in such mortgage deed.

30. In the third decision cited supra also, the Hon'ble Supreme Court held that in the absence of personal covenant to pay to the mortgagee, he was not entitled to personal decree.

31. In the above circumstances, the learned counsel would urge this Court that the present suit is misconceived as there is no actual enforceable debt as against the respondents/defendants and as such the applicant/plaintiff is not entitled to grant of interim injunction and he cannot be allowed to enjoy such interim injunction any further. He would also contend that the properties in question which are under the mortgage are worth more than Rs. 3.50 Crores and suit claim was only for Rs. 2.00 Crores and hence, the present injunction not to encumber the property will work great hardship to the respondents/defendants and the applicant/plaintiff has deliberately under valued the property in order to secure the interim order in his favour from this Court. The learned counsel would also contend that there are many vital facts which were not placed before this Court by the applicant/plaintiff for seeking indulgence for grant of interim order and the interim order being equitable remedy pending adjudication of the rights of the parties, such remedy cannot be granted at the instance of the applicant/plaintiff who has suppressed many facts. In the said circumstances, he would pray to vacate the interim order.

32. As regards the liability of the other partners of the firm is concerned, the learned counsel would submit that there is nothing in the mortgage deed or undertaking dated 21.6.2016 disclosing that the second respondent/second defendant had executed the same on behalf of the firm and other partners. Even by implication, it cannot be inferred so. According to the learned counsel, the undertaking was purely executed by the second respondent/second defendant on his own behalf only and not on behalf of the firm or not on behalf of the other partners.

33. As regards the rejection of the plaint is concerned, the learned counsel would submit that there was no cause of action for laying the suit and the same is barred under Section 5 of the Arbitration and Conciliation Act since the case of the plaintiff was based on the cheques issued under the earlier loan agreement dated 5.11.2014, wherein, there was a provision for referring the dispute for arbitration (Clause 12.8) of the loan agreement. According to the learned counsel for the respondents/defendants, in the counter, they have clearly stated that the cheques were given in 2014 itself, which fact was also not disputed by the applicant/plaintiff. Moreover, upon execution of the deed of mortgage, the earlier loan stood automatically discharged and as such, the cause of action based on earlier loan or cheques given for such loan, does not give any cause of action for laying the suit. In support of his contention, the learned counsel would rely upon the decision reported in "AIR 1959 SC 1362 (The Union of India v. Kishorilal Gupta and Bros)".

34. In the above referred decision, it emphasized the fact of doctrine of "accord and satisfaction", which meant that the mortgage deed which was executed subsequent to the loan agreement, the earlier loan obtained got automatically discharged. In that view of the matter, the learned counsel also submitted that the plaint is liable to be rejected on the basis of the averments contained in the plaint itself. He further contended that the suit itself is liable to be dismissed for suppression of many material facts like, repayment of part loan amount particularly, Rs. 40 lakhs being repaid which was also acknowledged, but not found mention in the plaint. He would rely upon the judgment of the Hon'ble Supreme Court reported in 2010 (4) SCC 728 (Oswal Fats and Oils Limited v. Additional Commissioner (Admn.) and Others), particularly para 20 therein, which is extracted below:

"20. It is settled law that a person who approaches the Court for grant of relief, equitable or otherwise, is under a solemn obligation to candidly disclose all the material/important facts which have bearing on the adjudication of the issues raised in the case. In other words, he owes a duty to the court to bring out all the facts and refrain from concealing/suppressing any material fact within his knowledge or which he could have known by exercising diligence expected of a person of ordinary prudence. If he is found guilty of concealment of material facts or making an attempt to pollute the pure stream of justice, the court not only has the right but a duty to deny relief to such person."

35. The above para would clearly make the plaintiff ineligible for grant of any relief. The learned counsel for the respondents/defendants would further contend that the first respondent firm as it is not liable for any claim by the applicant/plaintiff since there was nothing in the crucial document, namely, the mortgage deed and the memorandum of undertaking dated 21.1.2016 to show that the second respondent/second defendant was representing as a partner of the firm, the said undertaking binds both the partners as well. According tot the learned counsel, the execution of the said document is only personal capacity of the second defendant under Section 19 of the Partnership Act.

36. Learned counsel would also submit that as regards the continuation of interim injunction, principle of law is well settled as enunciated in its decision by the Hon'ble Supreme Court reported in "AIR (2012) 6 SCC 792 (Best Sellers Retail India Pvt. Limited v. Aditya Birla Nuvo Limited & others)" in paragraphs 29 and 30 as follows:

"29. Yet, the settled principle of law is that even where prima facie case is in favour of the Plaintiff, the Court will refuse temporary injunction if the injury suffered by the Plaintiff on account of refusal of temporary injunction was not irreparable.

"30. In Dalpat Kumar and Anr. v. Prahlad Singh and Ors. : (1992) 1 SCC 719 this Court held:

"5. .... Satisfaction that there is a prima facie case by itself is not sufficient to grant injunction. The Court further has to satisfy that noninterference by the Court would result in "irreparable injury" to the party seeking relief and that there is no other remedy available to the party except one to grant injunction and he needs protection from the consequences of apprehended injury or dispossession. Irreparable injury, however, does not mean that there must be no physical possibility of repairing the injury, but means only that the injury must be a material one, namely, one that cannot be adequately compensated by way of damages.

37. The learned counsel would also finally submit that the stipulation of interest in the loan agreement attracts the provisions of the Tamil Nadu Prohibition of Charging Exorbitant Interest Act, 2003 and as such, the total amount allegedly due to the plaintiff is not enforceable in law.

38. In the above said circumstances, the learned counsel appearing for the respondents/defendants would pray to vacate the interim injunction granted in favour of the applicant/plaintiff and for conversion of the suit into ordinary suit and not under Order 7, Rule 1 of the O.S. Rules and also to reject the plaint and in such circumstances, to grant stay of all further proceedings of the suit.

39. It is to be noted that the argument of the learned counsel in regard to application for attachment before judgment is not dealt with by this Court specifically in this order since this Court was not called upon to decide the same presently.

40. Upon consideration of all the submissions made by the learned respective counsel appearing for the parties and upon perusing all the relevant materials and the pleadings available on record, this Court is of the firm view that there is considerable force and conviction in the arguments advanced by the learned senior counsel for the applicant/plaintiff as against the respondents/defendants herein.

41. As regards the issue of grant of interim order by this Court, the applicant/plaintiff has clearly spelt out the reasons for seeking interim protection in para 10 of the plaint and also brought about the conduct of the respondents/defendants while constantly evading the payment of any amount that became due and payable to the applicant/plaintiff. As rightly contended by the learned senior counsel for the applicant/plaintiff, the respondents/defendants have not made any sincere efforts towards discharge of the liability on one hand and on the other, without obtaining any consent or informing the applicant/plaintiff, they had released the theatrical exhibition of their feature film 'Pambu Sattai' which amounted to going back from their promise meted out to the applicant/plaintiff. The said action on the part of the respondents/defendants prima face appear to be clear violation of undertaking and also amounted to committing breach of trust. In such circumstances, apprehending that pending disposal of the suit, his efforts to recover the amount would be frustrated, the applicant/plaintiff approached this Court, seeking grant of interim injunction and upon consideration of all the materials and since the applicant/plaintiff has made out prima facie case, this Court has granted interim order in A.No.540 of 2017 on 25.5.2017.

42. As regards the objections raised by the respondents/defendants about the maintainability of the suit under Order 7, Rule 1 of the O.S.Rules are concerned, it ought to be noted that since the suit was laid based on the dishonoured cheques which were admittedly issued by the respondents/defendants, the same would come within the purview of the provision under Order 7, Rule 1 of the O.S.Rules which provision has been extracted supra. Moreover, as rightly contended by the learned senior counsel for the applicant/plaintiff that for conversion of the present suit into ordinary one under Order IV Rule 1 of the O.S.Rules cannot be resorted to without adverting to other provisions of Order 7 particularly Rule 6 therein. As narrated above supra, the conclusion of the Division Bench of this Court, on this legal aspect, which is in extenso extracted supra, would unequivocally demonstrate that the application for conversion of the suit under Order 7, Rule 1 into ordinary suit is not maintainable without resorting to other provisions of Order 7, Rule 6 of O.S.Rules and as such, the application filed by the respondents/defendants for conversion of the suit into ordinary one, is liable to be rejected. However, a feeble attempt has been made by the learned counsel for the respondents/defendants, contending that the decision of the Division Bench reported in 2013 (4) CTC (cited supra) would not be a conclusive statement of law on the issue, does not carry any conviction of this Court as such, the argument advanced by the learned counsel for the respondents/defendants is only for the purpose of the case of the respondents/defendants and it does not make any legal sense for its acceptance. In the said circumstances, the prayer sought for conversion of the suit of the present suit into ordinary one is per se not maintainable. Even otherwise, as stated above, as far as laying the suit under Order 7, Rule 1 of O.S.Rules, all the pleadings are available for the plaintiff particularly in the case of admitted liability and the objections which are attempted to put forth on behalf of the respondents/defendants are too technical for their acceptance in order to non-suit the applicant/plaintiff. Even assuming in law that technical objections do matter and have to be given credence to, it is to be noted that the present objections sought to be put forth, are nothing but, a brazen attempt by the respondents/defendants to wriggle out from the liability of repayment of the loan amount which, they are liable to pay to the applicant/plaintiff. This same conclusion holds good for the application taken out by the respondents/defendants for rejection of the plaint, that all the objections which were taken for rejection of the plaint, are devoid of substance as there is clear cause of action spelt out in the plaint and also there is a prima facie material for laying the suit for enforceable debt as against the respondents/defendants. Since this Court is of the firm view that the applications for conversion of present suit into ordinary one and the rejection of the plaint are not maintainable i

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n view of non-exercise of other provisions of Order 7 of the O.S.Rules and the citations which were relied upon by the learned counsel for the respondents/defendants would not be of any use for advancing their case. On the other hand, as stated supra, the order passed by the Division Bench of this Court on the aspect of Order 7, Rule 1 to 6 and 7 of the O.S.Rules, is very clear and unambiguous which would completely negate the case of the respondents/defendants. 43. In regard to the submissions of the learned counsel for the respondents/defendants that there is no enforceable debt in view of the subsequent mortgage deed dated 21.1.2016 is concerned, it is to be noted that de hors the provisions of the deed of mortgage, the cheques which were issued by the respondents/defendants when presented in the competent bank, came to be dishonoured at the instance of the drawer of the cheques, namely, the respondents/defendants herein. Such action on the part of the respondents/defendants gives right of monetary claim by the applicant/plaintiff and the suit is therefore, rightly laid on the basis of dishonoured instrument under Order 7, Rule 1 of O.S. Rules. In the said circumstances, it cannot be construed that the parties have to resort to arbitration clause as provided for in the original loan agreement dated 5.11.2014. Once the cheques given by a person were found to be dishonoured, a prima facie conclusion would be that there is admission, unless, the same is rebutted categorically by the person who issued the cheques. In the instant case, it is admitted fact that the loan has been obtained by the respondents/defendants and whether the same has been completely discharged by subsequently entering into mortgage agreement, is the matter of trial and this Court is presently called upon to decide whether there is any prima face material for allowing or disallowing the applications. In the said circumstances, this Court once again is of the firm view that there appears to be prima facie case set up by the applicant/plaintiff for grant of interim order of injunction and also the fact that by such order, no prejudice would likely to cause even remotely to the respondents/defendants. 44. As regards the contention that whether the partnership firm is also liable for discharge of the liability is concerned, on a perusal of the documents, memorandum of undertaking, deed of mortgage and the series of the documents, etc., would prima facie disclose that these documents have been executed by the 2nd respondent/2nd defendant on his behalf and on behalf of the partnership firm vis-a-vis the partners concerned. Since it is only a prima facie finding without delving too deep into the disputed questions of fact, which is enough for grant of interim protection to the applicant/plaintiff pending disposal of the main suit. In fact, the citation relied upon by the learned senior appearing for the applicant/plaintiff on the issue of binding nature on the issue of whether the partnership is also liable along with partners, this Court finds considerable force in the contention and also would rely upon the same for the sake of arriving at a prima facie conclusion that the partnership is also liable towards discharge of debt which is payable to the applicant/plaintiff. 45. As regards the contention of the respondents/defendants on the aspect of concealing of material facts, this Court does not find any merit in such contention as no material facts were withheld from this Court by the applicant/plaintiff which would make him ineligible for grant of interim protection. This Court is also of the prima facie opinion that there is a clear case made out and the balance of convenience is entirely in favour of the applicant/plaintiff and hence, the interim order already granted need not be disturbed at the instance of the respondents/defendants, who have clearly come forward with plethora of technical objections only with a view to frustrate the claim of the applicant/plaintiff. 46. As regards the contention that once the mortgage deed is replaced, earlier loan automatically gets discharged and in the circumstances, there cannot be any enforceable debt which can be the basis of the suit claim, is concerned, it ought to be noted or seen that the suit is based only on the dishonoured cheques under Order 7, Rule 1 of the O.S. Rules, de hors the mortgage deed and therefore, the citations relied upon by the learned counsel for the respondents/defendants on the aspect of whether the personal decree can be obtained against the mortgagor in the absence of any specific covenant, cannot be of any help for them to advance their case. 47. In the upshot of the above narrative and discussion, both on the legal aspects and the factual issues, this Court does not find any merit in the contentions of the respondents/defendants put forth in support of all the captioned four applications filed by them. While so, this Court is also of the view that there is considerable force in the contention put forth by the learned senior counsel appearing on behalf of the applicant/plaintiff and the interim order passed by this Court on 25.5.2017 is entitled to be continued and accordingly, the same is, therefore, made absolute. In view of the above finding, all the four applications filed by the respondents/defendants are dismissed as devoid of substance and merit, with exemplary costs of Rs. 2 lakhs (Rupees Two lakhs) payable by the respondents/defendants to the applicant/plaintiff on or before 15.08.2017. As far as the application for attachment before judgment is concerned, the Office is directed to issue notice to the respondents/defendants.
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