As held by the Apex Court in Parimal Vs. Veena Bharti
(supra) sufficient means adequate or enough and the same has to be
viewed in the facts & circumstances existing in the case and duly
examined from the view point of a reasonable standard of a cautious
man. It also means that the party has not acted in negligent manner
or there was want of bonafide on its part or the party cannot be
alleged to have been not acting diligently or remaining inactive. The
test to be applied is whether the defendant honestly and sincerely
intended to remain present when the suit was called out for hearing
and did its best to do so. Sufficient cause as held by the Apex court is
thus the cause of which the defendant could not be blamed for his
absence and the applicant himself approached the court with a
reasonable defence.
HDFC Bank Ltd.
V/s
New India Assurance Co. Limited
NOTICE OF MOTION (L) NO.1835 OF 2014
IN
SUIT NO.2350 OF 2009
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION
HDFC Bank Ltd.
V/s
New India Assurance Co. Limited
CORAM: K.R.SHRIRAM, J.
DATED: 9th September 2014.
The plaintiff is a private bank registered under the
provisions of the Companies Act 1956. The defendant is a public
sector insurance company engaged in the business of general
insurance. Among the various insurance covers the defendants issue
one such cover is Bankers Indemnity Insurance.
2
The defendants had issued one such Bankers Indemnity
Insurance Policy to the plaintiff. Fraud was committed in the
plaintiff's branch office situated at Ravipuram Desam Kochi, Kerala
by its employee one T.M. Prajeeth who was the then Manager and
incharge of the extension counter of the said branch. The modus
operandi adopted by the said T.M. Prajeeth was to debit, without
authorization, the account of certain corporate customers of the
plaintiff and utilize those amounts to make payment to certain stock
exchange brokers for the settlement of the said employee T.M.
Prajeeth's personal share transactions. After lodging FIR against the
said T.M.Prajeeth, the plaintiff made a claim under the insurance
policy from the defendant in the sum of Rs.1,01,03,000/. The claim
was lodged by the plaintiff on 30.10.2002. No action was taken by
the defendant on the claim though some meetings and exchange of
correspondence happened. The defendant finally rejected the
plaintiff's claim under the Insurance Policy by letter dated 29.4.2006.
The suit was filed on 10.4.2009, i.e., within 3 years from the
rejection letter. Admittedly, the writ of summons was served upon
the defendant on or about 29.10.2009. As no written statement was
filed, by an order dated 17.6.2010 of the Prothonotary & Senior
Master, the suit was transferred to the list of undefended suits. The
suit got called out for exparte decree on 16.12.2013 and was stood
over to 6.1.2014 at the request of the plaintiff to file affidavit of
evidence and compilation of documents. On 20.1.2014, over 13
years after the claim was first lodged on the defendant, an exparte
decree was passed in favour of the plaintiff against the defendant in
terms of prayer clause(a).
3
The present Notice of Motion is taken out by the defendant
It is also necessary to state that the office of the Sheriff of
4
to set aside the exparte decree dated 20.1.2014.
Mumbai had issued warrant of attachment of the defendant’s assets
and in view thereof, the defendant has also furnished a bank
guarantee in favour of Prothonotary & Senior Master at the ad
interim stage to secure the plaintiff's claim in the sum of
Rs.2,41,30,271/ with further interest @ 12% p.a. on the principal
amount of Rs.1,01,03,000/ from 12.6.2014 till payment and/or
realization. The bank guarantee is issued by Corporation Bank, Fort
Branch on 28.8.2014 and is valid for one year with an undertaking to
renew the bank guarantee from year to year until the disposal of this
Notice of Motion and for a further period of six months thereafter.
5
The cause shown by the defendant for not filing the written
statement defending the suit is very short. According to the
defendant, when the writ of summons was served on 29.10.2009, as
is then general practice followed by the defendant, once the writ of
summons is received by the defendant's registered office, the same is
forwarded to the concerned office which had issued the policy and
the policy in the present case was issued by Mumbai Regional office
1 (MRO1). It appears that the said writ of summons was misplaced
and/or was not received by the Regional office of the defendant and
hence Regional office could not take steps to file appearance and
defend the suit.
Though to consider an application to set aside the exparte
6
decree does not require going into the merits of the case, the counsel
for the defendant also submitted that the claim of the plaintiff was
time barred in as much as clause12 of the terms and conditions of
the policy required the plaintiff to file the suit within 12 calendar
months from the date of rejection of the claim and if such claim has
not been made subject matter of the suit in a court of law within 12
been abandoned.
calendar months, the claim shall for all purposes be deemed to have
He also submitted that the risk was not covered and even if
it was covered the cover was only for Rs.50 lakhs whereas the
principal amount of the claim itself is in excess of Rs.1 crore.
He also submitted that the claim would also fall under the
exceptions in the policy and the above 3 points have not been
brought to the notice of the court. He submitted that the plaintiff has
suppressed these facts from the court and on that ground itself the
plaintiff should have been shown the door.
He also submitted that the fraud claimed happened over a
period between 11.5.2001 to 1.10.2002 and as the plaintiff bank has
quarterly audits, the bank should have detected during the audit that
something was amiss. Moreover, the claim was that the accounts of
corporate clients were being used for illegal transactions and
certainly corporate clients would have brought the same to the notice
of the plaintiff and the plaintiff's therefore should have found out
about the fraud allegedly purported by the plaintiff’s manager. He
matter and they have an excellent defence.
submitted that these facts are necessary to be considered in the
He also submitted that the courts should be liberal in
granting application for setting aside an exparte decree. For this, he
relied upon the judgment of the Apex Court in the matter of Parimal
V/s. Veena Bharti.1 As the plaintiffs have not come with clean hands
and disclose all the documents, exparte decree should be set aside.
For this he relied upon the Apex Court's Judgment of
S.P.Chengalvaraya Naidu Vs. Jagannath.2
He submitted that under Order 9 Rule 13 of the Code of
Civil Procedure, the defendant has to only show that he was
prevented by any sufficient cause and sufficient cause is that the
party had not acted in a negligent manner or there was want of
bonafide on its part in view of the facts and circumstances of the
case.
He also submitted relying on the Apex Court's Judgment in
the case of National Insurance Company Limited Vs.Sujir Ganesh
Nayak & Co.3 to submit that clause12 in the policy which provides
for 12 months outer limit to file a claim against the defendants was
valid in law.
7
Per contra, Mr.Tulzapurkar counsel for the plaintiff
submitted that the Notice of Motion was time barred. He submitted
1 2011 Law Suit (SC) 82 = 2011 (3) SCC 545
2 1993 Law Suit (SC) 908 = 1994(1) SCC 1
3 1997 Law Suit (SC) 522 = 1997 (4) SCC 366
that under Article123 of the schedule to the Limitation Act, the time
provided to apply to set aside an exparte decree was 30 days from
the date of decree since the defendants had been served the writ of
summons. He submitted that 30 days period expired in February
2014 whereas the Notice of Motion has been taken out in August
2014 and no justification for extension of time or for condoning the
delay has been made out in the Notice of Motion. He also submitted
that under this application, the court has to only see whether a
sufficient cause has been made out while setting aside the exparte
decree and a court cannot and should not go into the merits of the
8
case.
Mr. Tulzapurkar also submitted that the reason for not
entering appearance and for filing written statement as claimed in
the affidavit in support is that the defendant when it received the
writ of summons, forwarded the same to MRO1 but plaintiff's
Advocates’ letter dated 4.4.2014 was also received at the registered
office but they acted immediately. He also submitted that no
explanation has been put forth or sufficient cause is shown in the
affidavit in support.
9
On the merits, without prejudice to his submissions that
the court should not go into it for deciding this application,
Mr.Tulzapurkar submitted that the defendant's reliance on the
National Insurance Company Limited (supra) is misplaced since that
was preamendment of Section 28 of the Contract Act. He submitted
that in view of the amendment to the Contract Act that clause which
states that if a suit is not filed within a particular period, the claim is
deemed to have been waived, has been held to be void to that extent.
He relied upon an unreported judgment of the Delhi High Court in
the matter of M/s.Chander Kant & Co. v. The Vice Chairman DDA &
Ors.4 and an unreported judgment of our court in the matter of JSW
Steel Ltd. Vs. AL Ghurair Iron & Steel LLC. 5 He also submitted that
the risk covered under the policy also includes dishonesty, loss of
money and on security sustained by risk of the dishonest or criminal
act of the employee or the insured with respect to the loss of money
and/or security wherever committed and whether committed singly
or in connivance with others and that the same was committed in the
premises of the plaintiff's branch and the plaintiff had paid additional
premium of Rs.3,00,000/ and increased the amount insured to Rs.4
crores. He further submitted that none of the exceptions to the
policy are applicable and in any event those exceptions are even
mentioned in the repudiation letter of the defendant.
10
Before Mr.Tulzapurkar concluded, he submitted without
prejudice to his earlier submissions, if the court was inclined to allow
the Notice of Motion then the defendant should be permitted to
withdraw the amount by directing the Prothonotary and Senior
Master to encash the bank guarantee with liberty to secure the
4 Arbitration Petition No.246 of 2005 dated 26.5.2009
5 Arbitration Petition No.398 of 2014 dated 20.8.2014
defendant's claim particularly in view of the fact that the plaintiff has
11
a decree in their favour.
Before we proceed further, let us examine whether this
application is within time. Article 123 in the Schedule to the
Limitation Act, provides that an application to set aside an exparte
decree, where writ of summons has been served, has to be filed in 30
days from the date of the decree. Certainly this has not been
accomplished. But then should I condone the delay, if any, though
there is no such prayer? In my view even if there is no such prayer, if
the time lag between the date of decree and date of application is
explained the court should not be pedantic about it. Now has the
defendant so explained? I feel yes.
12
The counsel for the defendant submitted that the
defendant came to know about the exparte decree dated 20.1.2014
only when they received the letter dated 4.4.2014 from the plaintiff's
advocates, almost 2 & 1⁄2 months later. He could not have taken out
the present application without all the pleadings and other
proceedings in the matter. Immediately the defendant issued a letter
of authority dated 15.4.2014 to their advocate and by a letter dated
29.4.2014 the defendant's Advocate applied to the Prothonotary &
Senior Master to permit him to take inspection of the original court
papers. The Advocate went to take inspection. He was informed by
the inspection department that the said papers were not traceable
and no updates regarding the movement of the papers between
various departments have been found in the computer system and
whereabouts of the original papers were not known. He therefore,
applied once again to the Prothonotary & Senior Master by a search
praecipe dated 11.6.2014, copy whereof was served upon the
plaintiff's Advocates, requesting the Prothonotary & Senior Master to
13
give inspection/search of the original papers.
On 11.6.2014 inspection was not granted because the
concerned person was on leave but on 13.6.2014 the Advocate was
informed that the papers were found and he could take inspection in
the record department. Therefore, on 13.6.2014 after notice to the
plaintiff’s advocates, the Advocate of the defendant took inspection
on 13.6.2014 at 12.00 noon when only some documents filed by the
plaintiff were found but the affidavit of evidence was not found in
the record. Therefore, once again defendant's Advocate made
inquiry on 17.6.2014 and on 18.6.2014 he was informed that the
plaint, affidavit of service etc. were still not traceable.
14
Thereafter by a letter dated 20.6.2014, the Advocate for
defendant requested the plaintiff's Advocate to provide a copy of the
entire compilation of documents pertaining to the said suit including
the plaint, affidavit of service, summons, documents, evidence etc. In
the said letter, the fact that the plaintiff’s representatives were also
present when the defendant's Advocate tried to take inspection of the
record & proceedings is recorded. As there was no reply, the
defendant’s advocate sent another letter dated 30.6.2014 to the
plaintiff's Advocate followed by another letter dated 2.7.2014. There
was no response from the plaintiff's Advocate.
15
It appears that finally the documents were traced on or
about 2.7.2014 and the Advocate for the defendant applied for
certified copy of the record & proceedings on 9.7.2014. The
defendant's Advocate received certified copy on 7.8.2014 and the
present Notice of Motion was filed on 9.8.2014. It is indisputable
papers.
With these explanations, I am satisfied that sufficient /
16
that this application could not have been filed without receiving the
good cause is shown explaining the delay, if any, and in the interest
of justice the delay should be condoned.
17
Now moving forward, let us reproduce order IX Rule 13 of
CPC which reads as under:
“Setting aside decree exparte against defendant In any
case in which a decree is passed exparte against a
defendant, he may apply to the Court by which the decree
was passed for an order to set it aside; and if he satisfies
the court that the summons was not duly served, or that
he was prevented by any sufficient cause from appearing
when the suit was called on for hearing, the Court shall
make an order setting aside the decree as against him
upon such terms as to costs, payment into Court or
otherwise as it thinks fit, and shall appoint a day for
proceeding with the suit:
Provided that where the decree is of such a nature
that it cannot be set aside as against such defendant only
defendants also :
it may be set aside as against all or any of the other
[Provided further that no Court shall set aside a
decree passed ex parte merely on the ground that there
has been an irregularity in the service of summons, if it is
satisfied that the defendant had notice of the date of
hearing and had sufficient time to appear and answer the
plaintiff's claim]”
18
Therefore, the court shall set aside an exparte decree only
when the defendant satisfies the court that (a) summons was not
duly served or; (b) he was prevented by any sufficient cause for
appearing when the suit was called for hearing.
19
At the same time the Code is also very particular to state
that the court shall not set aside an exparte decree merely because
there has been some irregularity in the service of summons, if the
court is satisfied that the defendant had notice of the date of hearing
and had sufficient time to appear and answer the plaintiff’s claim.
Therefore, even if the summons served was irregular, if the
defendant had noticed the date of hearing and sufficient time to
appear and answer the plaint, the court shall not set aside a decree
passed exparte. Admittedly, writ of summons has been served and
there is no grievance about the irregularity of service in the service of
summons. Therefore, what we have to see is whether the defendant
was prevented by any sufficient cause from appearing.
20
In the matter of Parimal V/s. Veena Bharti (supra) the
under :
Apex court has in paragraph nos.8, 9, 10, 11 & 12 has stated as
8. It is evident from the above that an exparte decree
against a defendant has to be set aside if the party
satisfies the Court that summons had not been duly
served or he was prevented by sufficient cause from
appearing when the suit was called on for hearing.
However, the court shall not set aside the said decree on
mere irregularity in the service of summons or in a case
where the defendant had notice of the date and sufficient
time to appear in the court.
The legislature in its wisdom, made the second
proviso, mandatory in nature. Thus, it is not permissible
for the court to allow the application in utter disregard of
the terms and conditions incorporated in the second
9.
proviso herein.
"Sufficient Cause" is an expression which has been
used in large number of Statutes. The meaning of the
word "sufficient" is "adequate" or "enough", in as much as
may be necessary to answer the purpose intended.
Therefore, word "sufficient" embraces no more than that
which provides a platitude which when the act done
suffices to accomplish the purpose intended in the facts
and circumstances existing in a case and duly examined
from the view point of a reasonable standard of a cautious
man. In this context, "sufficient cause" means that party
had not acted in a negligent manner or there was a want
of bona fide on its part in view of the facts and
circumstances of a case or the party cannot be alleged to
have been "not acting diligently" or "remaining inactive".
However, the facts and circumstances of each case must
afford sufficient ground to enable the Court concerned to
exercise discretion for the reason that whenever the court
exercises discretion, it has to be exercised judiciously.
(Vide: Ramlal & Ors. v. Rewa Coalfields Ltd., AIR 1962 SC
361; Sarpanch, Lonand Grampanchayat v. Ramgiri Gosavi
& Anr., AIR 1968 SC 222; Surinder Singh Sibia v. Vijay
Kumar Sood, AIR 1992 SC 1540; and Oriental Aroma
Chemical Industries Limited v. Gujarat Industrial
Development Corporation & Another, (2010) 5 SCC 459).
10.
In Arjun Singh v. Mohindra Kumar & Ors., AIR
1964
SC 993, this Court observed that every good cause is a
sufficient cause and must offer an explanation for non
appearance. The only difference between a "good cause"
and "sufficient cause" is that the requirement of a good
cause is complied with on a lesser degree of proof than
that of a "sufficient cause". (See also: Brij Indar Singh v.
Lala Kanshi Ram & Ors., AIR 1917 P.C. 156; Manindra
Land and Building Corporation Ltd. v. Bhutnath Banerjee
& Ors., AIR 81964 SC 1336; and Mata Din v. A.
Narayanan, AIR 1970 SC 1953).
11. While deciding whether there is a sufficient cause or
not, the court must bear in mind the object of doing
substantial justice to all the parties concerned and that
the technicalities of the law should not prevent the court
from doing substantial justice and doing away the
illegality perpetuated on the basis of the judgment
impugned before it. (Vide: State of Bihar & Ors. v.
Kameshwar Prasad Singh & Anr., AIR 2000 SC 2306;
Madanlal v. Shyamlal, AIR 2002 SC 100; Davinder Pal
Sehgal & Anr. v. M/s. Partap Steel Rolling Mills (P) Ltd. &
Ors., AIR 2002 SC 451; Ram Nath Sao alias Ram Nath Sao
& Ors. v. Gobardhan Sao & Ors., AIR 2002 SC 1201;
Kaushalya Devi v. Prem Chand & Anr. (2005) 10 SCC
127; Srei International Finance Ltd., v. Fair growth
Financial Services Ltd. & Anr., (2005) 13 SCC 95; and
Reena Sadh v. Anjana Enterprises, AIR 2008 SC 2054).
12. In order to determine the application under Order IX,
Rule 13 Code of Civil Procedure 1908, the test has to be
applied is whether the defendant honestly and sincerely
intended to remain present when the suit was called on
for hearing and did his best to do so. Sufficient cause is
thus the cause for which the defendant could not be
blamed for his absence. Therefore, the applicant must
approach the court with a reasonable defence. Sufficient
cause is a question of fact and the court has to exercise its
discretion in the varied and special circumstances in the
case at hand. There cannot be a straitjacket formula of
universal application.”
21
(emphasis supplied)
Would I looking at the conduct of the defendant endorse
that the defendant had acted diligently or remained active or show
that they exercised reasonable standard of a cautious man or
honestly and sincerely intended to remain present or did its best to
do so or the defendant could not be blamed for its absence ? The
answer to each of this is no.
22
As held by the Apex Court in Parimal Vs. Veena Bharti
(supra) sufficient means adequate or enough and the same has to be
viewed in the facts & circumstances existing in the case and duly
examined from the view point of a reasonable standard of a cautious
man. It also means that the party has not acted in negligent manner
or there was want of bonafide on its part or the party cannot be
alleged to have been not acting diligently or remaining inactive. The
test to be applied is whether the defendant honestly and sincerely
intended to remain present when the suit was called out for hearing
and did its best to do so. Sufficient cause as held by the Apex court is
thus the cause of which the defendant could not be blamed for his
absence and the applicant himself approached the court with a
reasonable defence.
23
Let us examine the affidavit in support of the Notice of
Motion to see whether the defendant has laid down a sufficient
cause. The only cause shown is in paragraph nos.3 & 4 of the
affidavit in support of one Jawahar S.Tonk, Regional Manager of the
defendant dated 9.8.2014 which read as under :
“3 I say that sometime in October 2009 the writ of
summons was served upon the defendants at their Head
office. I say that it is the general practice followed by the
defendants that once a writ of summons is received by the
defendant's office the same is forwarded to the concerned
office which had issued the policy. In the present case the
concerned office, which issued the policy was under MRO
1(Mumbai Regional Office1) and accordingly the
defendants forwarded the said writ of summons to the
said office.
4 However, it appears that the said writ of summons was
misplaced / lost in transit and was not received by the
Regional office of the defendants. Therefore, the Regional
Office could not file their appearance and consequently
the written statement to oppose the said claim. I crave
leave to refer to and rely upon the Inward Register of the
Regional Office for the period 1st May 2009 to 31st
December 2010 to show that the said Writ of Summons
was not received by the Regional Office of the
Defendants.”
24
The defendant simply states that it was a general practice
followed by the defendant that when a writ of summons is received
they would forward it to the office that issued the policy and
accordingly the defendant forwarded it. The defendant is also
craving leave to refer to and rely upon the Inward Register of the
Regional office viz. MRO1 for the period 1.5.2009 to 31.12.2010 to
show that the said writ of summons was not received. No such
Inward Register was shown to the court during the hearing. Even if
the inward register was shown, it would not be of much help as it
would show no entry. What was required to be shown was that it
was sent as averred in the affidavit. At the same time I am not saying
just forwarding to MRO1 would have sufficed. It is very necessary
to observe that while the defendant craves leave to refer to and rely
upon the Inward Register of MRO1, there is not even a reference to
or whisper about any Outward Register in the office where the writ
of summons was served. Moreover, barring a bald statement of
general practice nothing more is stated. The defendant is a public
sector undertaking. Before such a general practice is adopted, it will
not be incorrect to expect that they would have issued a circular.
Further when such general practice of forwarding such an important
document like a writ of summons from a High Court is adopted,
there would be some inward entry of receipt or outward entry of
dispatch. Even if there is no Outward Register there is no evidence
whatsoever or explanation whether the writ of summons was placed
before the higher ups or not. If MRO1 could have an inward register
certainly the registered office or the office that received the writ of
summons will also have. If entry in the inward register of the
registered office is made before the writ of summons was dispatched
to MRO1, it will not be too much to expect that there would be an
outward register. There is no whisper about any of this in the
affidavit. The Bailiff's affidavit states that the writ of summons was
served upon one S.V. Sarvankar, Assistant from registry department
of the defendant. In ExhibitJ to the affidavit in support also the
defendant admit that the writ of summons was received by one S.V.
Sarvankar, Assistant from registry department. No affidavit of said
S.V. Sarvankar is filed to explain as to what he did after receipt of the
writ of summons and that he forwarded the same to MRO1. The
affidavit also does not explain why the affidavit of S.V. Sarvankar
could not be or is not filed. No explanation as to how it was sent to
MRO1 or whether said S.V. Sarvankar or anybody else follow up
with MRO1 as to whether they received the writ of summons or any
action was being taken in connection with the suit. There is no
explanation as to whether a noting was made in the registered office
about the summons having been received and the same was
forwarded to MRO1. At one point, an emotional pitch was made by
the counsel for the defendant that the defendant is a public sector
undertaking so show some leniency. In my view, law is the same
whether it is for public sector or private sector. On the contrary a
public sector undertaking and its employees should be over cautious
to a fault. What was received was a writ of summons from the High
Court to answer a claim in excess of Rs.1 crore. They cannot be
casual. The defendant, a public sector undertaking has been grossly
negligent and has not acted diligently. The head office or registered
25
defendant has been unconcerned and casual.
office of the defendant has behaved in a most cavalier manner. The
Reading the affidavit in support and the explanation given
by the defendant does not display any reasonable standard of a
cautious man has been exercised. The explanation given does not
show that the defendant acted diligently or remained active. The
explanation given does not show that the defendant honestly and
sincerely intended to remain present when the suit was called for
hearing or did its best to do so. The defendant simply claim to have
forwarded the writ of summons from the head office to MRO1 and
trying to show that the MRO1 did not receive but there is no
evidence to show that the defendant even forwarded the writ of
summons to MRO1.
26
In the circumstances, I am not satisfied that the defendant
has shown any sufficient cause to set aside the exparte decree.
Notice of Motion is dismissed with cost. The defendant to pay sum of
Rs.50,000/ as costs to the plaintiff which cost also to be recovered, if
not paid within two weeks, without interest together with and over
and above the decretal amount.
(K.R.SHRIRAM, J.)
Print Page
(supra) sufficient means adequate or enough and the same has to be
viewed in the facts & circumstances existing in the case and duly
examined from the view point of a reasonable standard of a cautious
man. It also means that the party has not acted in negligent manner
or there was want of bonafide on its part or the party cannot be
alleged to have been not acting diligently or remaining inactive. The
test to be applied is whether the defendant honestly and sincerely
intended to remain present when the suit was called out for hearing
and did its best to do so. Sufficient cause as held by the Apex court is
thus the cause of which the defendant could not be blamed for his
absence and the applicant himself approached the court with a
reasonable defence.
HDFC Bank Ltd.
V/s
New India Assurance Co. Limited
NOTICE OF MOTION (L) NO.1835 OF 2014
IN
SUIT NO.2350 OF 2009
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION
HDFC Bank Ltd.
V/s
New India Assurance Co. Limited
CORAM: K.R.SHRIRAM, J.
DATED: 9th September 2014.
The plaintiff is a private bank registered under the
provisions of the Companies Act 1956. The defendant is a public
sector insurance company engaged in the business of general
insurance. Among the various insurance covers the defendants issue
one such cover is Bankers Indemnity Insurance.
2
The defendants had issued one such Bankers Indemnity
Insurance Policy to the plaintiff. Fraud was committed in the
plaintiff's branch office situated at Ravipuram Desam Kochi, Kerala
by its employee one T.M. Prajeeth who was the then Manager and
incharge of the extension counter of the said branch. The modus
operandi adopted by the said T.M. Prajeeth was to debit, without
authorization, the account of certain corporate customers of the
plaintiff and utilize those amounts to make payment to certain stock
exchange brokers for the settlement of the said employee T.M.
Prajeeth's personal share transactions. After lodging FIR against the
said T.M.Prajeeth, the plaintiff made a claim under the insurance
policy from the defendant in the sum of Rs.1,01,03,000/. The claim
was lodged by the plaintiff on 30.10.2002. No action was taken by
the defendant on the claim though some meetings and exchange of
correspondence happened. The defendant finally rejected the
plaintiff's claim under the Insurance Policy by letter dated 29.4.2006.
The suit was filed on 10.4.2009, i.e., within 3 years from the
rejection letter. Admittedly, the writ of summons was served upon
the defendant on or about 29.10.2009. As no written statement was
filed, by an order dated 17.6.2010 of the Prothonotary & Senior
Master, the suit was transferred to the list of undefended suits. The
suit got called out for exparte decree on 16.12.2013 and was stood
over to 6.1.2014 at the request of the plaintiff to file affidavit of
evidence and compilation of documents. On 20.1.2014, over 13
years after the claim was first lodged on the defendant, an exparte
decree was passed in favour of the plaintiff against the defendant in
terms of prayer clause(a).
3
The present Notice of Motion is taken out by the defendant
It is also necessary to state that the office of the Sheriff of
4
to set aside the exparte decree dated 20.1.2014.
Mumbai had issued warrant of attachment of the defendant’s assets
and in view thereof, the defendant has also furnished a bank
guarantee in favour of Prothonotary & Senior Master at the ad
interim stage to secure the plaintiff's claim in the sum of
Rs.2,41,30,271/ with further interest @ 12% p.a. on the principal
amount of Rs.1,01,03,000/ from 12.6.2014 till payment and/or
realization. The bank guarantee is issued by Corporation Bank, Fort
Branch on 28.8.2014 and is valid for one year with an undertaking to
renew the bank guarantee from year to year until the disposal of this
Notice of Motion and for a further period of six months thereafter.
5
The cause shown by the defendant for not filing the written
statement defending the suit is very short. According to the
defendant, when the writ of summons was served on 29.10.2009, as
is then general practice followed by the defendant, once the writ of
summons is received by the defendant's registered office, the same is
forwarded to the concerned office which had issued the policy and
the policy in the present case was issued by Mumbai Regional office
1 (MRO1). It appears that the said writ of summons was misplaced
and/or was not received by the Regional office of the defendant and
hence Regional office could not take steps to file appearance and
defend the suit.
Though to consider an application to set aside the exparte
6
decree does not require going into the merits of the case, the counsel
for the defendant also submitted that the claim of the plaintiff was
time barred in as much as clause12 of the terms and conditions of
the policy required the plaintiff to file the suit within 12 calendar
months from the date of rejection of the claim and if such claim has
not been made subject matter of the suit in a court of law within 12
been abandoned.
calendar months, the claim shall for all purposes be deemed to have
He also submitted that the risk was not covered and even if
it was covered the cover was only for Rs.50 lakhs whereas the
principal amount of the claim itself is in excess of Rs.1 crore.
He also submitted that the claim would also fall under the
exceptions in the policy and the above 3 points have not been
brought to the notice of the court. He submitted that the plaintiff has
suppressed these facts from the court and on that ground itself the
plaintiff should have been shown the door.
He also submitted that the fraud claimed happened over a
period between 11.5.2001 to 1.10.2002 and as the plaintiff bank has
quarterly audits, the bank should have detected during the audit that
something was amiss. Moreover, the claim was that the accounts of
corporate clients were being used for illegal transactions and
certainly corporate clients would have brought the same to the notice
of the plaintiff and the plaintiff's therefore should have found out
about the fraud allegedly purported by the plaintiff’s manager. He
matter and they have an excellent defence.
submitted that these facts are necessary to be considered in the
He also submitted that the courts should be liberal in
granting application for setting aside an exparte decree. For this, he
relied upon the judgment of the Apex Court in the matter of Parimal
V/s. Veena Bharti.1 As the plaintiffs have not come with clean hands
and disclose all the documents, exparte decree should be set aside.
For this he relied upon the Apex Court's Judgment of
S.P.Chengalvaraya Naidu Vs. Jagannath.2
He submitted that under Order 9 Rule 13 of the Code of
Civil Procedure, the defendant has to only show that he was
prevented by any sufficient cause and sufficient cause is that the
party had not acted in a negligent manner or there was want of
bonafide on its part in view of the facts and circumstances of the
case.
He also submitted relying on the Apex Court's Judgment in
the case of National Insurance Company Limited Vs.Sujir Ganesh
Nayak & Co.3 to submit that clause12 in the policy which provides
for 12 months outer limit to file a claim against the defendants was
valid in law.
7
Per contra, Mr.Tulzapurkar counsel for the plaintiff
submitted that the Notice of Motion was time barred. He submitted
1 2011 Law Suit (SC) 82 = 2011 (3) SCC 545
2 1993 Law Suit (SC) 908 = 1994(1) SCC 1
3 1997 Law Suit (SC) 522 = 1997 (4) SCC 366
that under Article123 of the schedule to the Limitation Act, the time
provided to apply to set aside an exparte decree was 30 days from
the date of decree since the defendants had been served the writ of
summons. He submitted that 30 days period expired in February
2014 whereas the Notice of Motion has been taken out in August
2014 and no justification for extension of time or for condoning the
delay has been made out in the Notice of Motion. He also submitted
that under this application, the court has to only see whether a
sufficient cause has been made out while setting aside the exparte
decree and a court cannot and should not go into the merits of the
8
case.
Mr. Tulzapurkar also submitted that the reason for not
entering appearance and for filing written statement as claimed in
the affidavit in support is that the defendant when it received the
writ of summons, forwarded the same to MRO1 but plaintiff's
Advocates’ letter dated 4.4.2014 was also received at the registered
office but they acted immediately. He also submitted that no
explanation has been put forth or sufficient cause is shown in the
affidavit in support.
9
On the merits, without prejudice to his submissions that
the court should not go into it for deciding this application,
Mr.Tulzapurkar submitted that the defendant's reliance on the
National Insurance Company Limited (supra) is misplaced since that
was preamendment of Section 28 of the Contract Act. He submitted
that in view of the amendment to the Contract Act that clause which
states that if a suit is not filed within a particular period, the claim is
deemed to have been waived, has been held to be void to that extent.
He relied upon an unreported judgment of the Delhi High Court in
the matter of M/s.Chander Kant & Co. v. The Vice Chairman DDA &
Ors.4 and an unreported judgment of our court in the matter of JSW
Steel Ltd. Vs. AL Ghurair Iron & Steel LLC. 5 He also submitted that
the risk covered under the policy also includes dishonesty, loss of
money and on security sustained by risk of the dishonest or criminal
act of the employee or the insured with respect to the loss of money
and/or security wherever committed and whether committed singly
or in connivance with others and that the same was committed in the
premises of the plaintiff's branch and the plaintiff had paid additional
premium of Rs.3,00,000/ and increased the amount insured to Rs.4
crores. He further submitted that none of the exceptions to the
policy are applicable and in any event those exceptions are even
mentioned in the repudiation letter of the defendant.
10
Before Mr.Tulzapurkar concluded, he submitted without
prejudice to his earlier submissions, if the court was inclined to allow
the Notice of Motion then the defendant should be permitted to
withdraw the amount by directing the Prothonotary and Senior
Master to encash the bank guarantee with liberty to secure the
4 Arbitration Petition No.246 of 2005 dated 26.5.2009
5 Arbitration Petition No.398 of 2014 dated 20.8.2014
defendant's claim particularly in view of the fact that the plaintiff has
11
a decree in their favour.
Before we proceed further, let us examine whether this
application is within time. Article 123 in the Schedule to the
Limitation Act, provides that an application to set aside an exparte
decree, where writ of summons has been served, has to be filed in 30
days from the date of the decree. Certainly this has not been
accomplished. But then should I condone the delay, if any, though
there is no such prayer? In my view even if there is no such prayer, if
the time lag between the date of decree and date of application is
explained the court should not be pedantic about it. Now has the
defendant so explained? I feel yes.
12
The counsel for the defendant submitted that the
defendant came to know about the exparte decree dated 20.1.2014
only when they received the letter dated 4.4.2014 from the plaintiff's
advocates, almost 2 & 1⁄2 months later. He could not have taken out
the present application without all the pleadings and other
proceedings in the matter. Immediately the defendant issued a letter
of authority dated 15.4.2014 to their advocate and by a letter dated
29.4.2014 the defendant's Advocate applied to the Prothonotary &
Senior Master to permit him to take inspection of the original court
papers. The Advocate went to take inspection. He was informed by
the inspection department that the said papers were not traceable
and no updates regarding the movement of the papers between
various departments have been found in the computer system and
whereabouts of the original papers were not known. He therefore,
applied once again to the Prothonotary & Senior Master by a search
praecipe dated 11.6.2014, copy whereof was served upon the
plaintiff's Advocates, requesting the Prothonotary & Senior Master to
13
give inspection/search of the original papers.
On 11.6.2014 inspection was not granted because the
concerned person was on leave but on 13.6.2014 the Advocate was
informed that the papers were found and he could take inspection in
the record department. Therefore, on 13.6.2014 after notice to the
plaintiff’s advocates, the Advocate of the defendant took inspection
on 13.6.2014 at 12.00 noon when only some documents filed by the
plaintiff were found but the affidavit of evidence was not found in
the record. Therefore, once again defendant's Advocate made
inquiry on 17.6.2014 and on 18.6.2014 he was informed that the
plaint, affidavit of service etc. were still not traceable.
14
Thereafter by a letter dated 20.6.2014, the Advocate for
defendant requested the plaintiff's Advocate to provide a copy of the
entire compilation of documents pertaining to the said suit including
the plaint, affidavit of service, summons, documents, evidence etc. In
the said letter, the fact that the plaintiff’s representatives were also
present when the defendant's Advocate tried to take inspection of the
record & proceedings is recorded. As there was no reply, the
defendant’s advocate sent another letter dated 30.6.2014 to the
plaintiff's Advocate followed by another letter dated 2.7.2014. There
was no response from the plaintiff's Advocate.
15
It appears that finally the documents were traced on or
about 2.7.2014 and the Advocate for the defendant applied for
certified copy of the record & proceedings on 9.7.2014. The
defendant's Advocate received certified copy on 7.8.2014 and the
present Notice of Motion was filed on 9.8.2014. It is indisputable
papers.
With these explanations, I am satisfied that sufficient /
16
that this application could not have been filed without receiving the
good cause is shown explaining the delay, if any, and in the interest
of justice the delay should be condoned.
17
Now moving forward, let us reproduce order IX Rule 13 of
CPC which reads as under:
“Setting aside decree exparte against defendant In any
case in which a decree is passed exparte against a
defendant, he may apply to the Court by which the decree
was passed for an order to set it aside; and if he satisfies
the court that the summons was not duly served, or that
he was prevented by any sufficient cause from appearing
when the suit was called on for hearing, the Court shall
make an order setting aside the decree as against him
upon such terms as to costs, payment into Court or
otherwise as it thinks fit, and shall appoint a day for
proceeding with the suit:
Provided that where the decree is of such a nature
that it cannot be set aside as against such defendant only
defendants also :
it may be set aside as against all or any of the other
[Provided further that no Court shall set aside a
decree passed ex parte merely on the ground that there
has been an irregularity in the service of summons, if it is
satisfied that the defendant had notice of the date of
hearing and had sufficient time to appear and answer the
plaintiff's claim]”
18
Therefore, the court shall set aside an exparte decree only
when the defendant satisfies the court that (a) summons was not
duly served or; (b) he was prevented by any sufficient cause for
appearing when the suit was called for hearing.
19
At the same time the Code is also very particular to state
that the court shall not set aside an exparte decree merely because
there has been some irregularity in the service of summons, if the
court is satisfied that the defendant had notice of the date of hearing
and had sufficient time to appear and answer the plaintiff’s claim.
Therefore, even if the summons served was irregular, if the
defendant had noticed the date of hearing and sufficient time to
appear and answer the plaint, the court shall not set aside a decree
passed exparte. Admittedly, writ of summons has been served and
there is no grievance about the irregularity of service in the service of
summons. Therefore, what we have to see is whether the defendant
was prevented by any sufficient cause from appearing.
20
In the matter of Parimal V/s. Veena Bharti (supra) the
under :
Apex court has in paragraph nos.8, 9, 10, 11 & 12 has stated as
8. It is evident from the above that an exparte decree
against a defendant has to be set aside if the party
satisfies the Court that summons had not been duly
served or he was prevented by sufficient cause from
appearing when the suit was called on for hearing.
However, the court shall not set aside the said decree on
mere irregularity in the service of summons or in a case
where the defendant had notice of the date and sufficient
time to appear in the court.
The legislature in its wisdom, made the second
proviso, mandatory in nature. Thus, it is not permissible
for the court to allow the application in utter disregard of
the terms and conditions incorporated in the second
9.
proviso herein.
"Sufficient Cause" is an expression which has been
used in large number of Statutes. The meaning of the
word "sufficient" is "adequate" or "enough", in as much as
may be necessary to answer the purpose intended.
Therefore, word "sufficient" embraces no more than that
which provides a platitude which when the act done
suffices to accomplish the purpose intended in the facts
and circumstances existing in a case and duly examined
from the view point of a reasonable standard of a cautious
man. In this context, "sufficient cause" means that party
had not acted in a negligent manner or there was a want
of bona fide on its part in view of the facts and
circumstances of a case or the party cannot be alleged to
have been "not acting diligently" or "remaining inactive".
However, the facts and circumstances of each case must
afford sufficient ground to enable the Court concerned to
exercise discretion for the reason that whenever the court
exercises discretion, it has to be exercised judiciously.
(Vide: Ramlal & Ors. v. Rewa Coalfields Ltd., AIR 1962 SC
361; Sarpanch, Lonand Grampanchayat v. Ramgiri Gosavi
& Anr., AIR 1968 SC 222; Surinder Singh Sibia v. Vijay
Kumar Sood, AIR 1992 SC 1540; and Oriental Aroma
Chemical Industries Limited v. Gujarat Industrial
Development Corporation & Another, (2010) 5 SCC 459).
10.
In Arjun Singh v. Mohindra Kumar & Ors., AIR
1964
SC 993, this Court observed that every good cause is a
sufficient cause and must offer an explanation for non
appearance. The only difference between a "good cause"
and "sufficient cause" is that the requirement of a good
cause is complied with on a lesser degree of proof than
that of a "sufficient cause". (See also: Brij Indar Singh v.
Lala Kanshi Ram & Ors., AIR 1917 P.C. 156; Manindra
Land and Building Corporation Ltd. v. Bhutnath Banerjee
& Ors., AIR 81964 SC 1336; and Mata Din v. A.
Narayanan, AIR 1970 SC 1953).
11. While deciding whether there is a sufficient cause or
not, the court must bear in mind the object of doing
substantial justice to all the parties concerned and that
the technicalities of the law should not prevent the court
from doing substantial justice and doing away the
illegality perpetuated on the basis of the judgment
impugned before it. (Vide: State of Bihar & Ors. v.
Kameshwar Prasad Singh & Anr., AIR 2000 SC 2306;
Madanlal v. Shyamlal, AIR 2002 SC 100; Davinder Pal
Sehgal & Anr. v. M/s. Partap Steel Rolling Mills (P) Ltd. &
Ors., AIR 2002 SC 451; Ram Nath Sao alias Ram Nath Sao
& Ors. v. Gobardhan Sao & Ors., AIR 2002 SC 1201;
Kaushalya Devi v. Prem Chand & Anr. (2005) 10 SCC
127; Srei International Finance Ltd., v. Fair growth
Financial Services Ltd. & Anr., (2005) 13 SCC 95; and
Reena Sadh v. Anjana Enterprises, AIR 2008 SC 2054).
12. In order to determine the application under Order IX,
Rule 13 Code of Civil Procedure 1908, the test has to be
applied is whether the defendant honestly and sincerely
intended to remain present when the suit was called on
for hearing and did his best to do so. Sufficient cause is
thus the cause for which the defendant could not be
blamed for his absence. Therefore, the applicant must
approach the court with a reasonable defence. Sufficient
cause is a question of fact and the court has to exercise its
discretion in the varied and special circumstances in the
case at hand. There cannot be a straitjacket formula of
universal application.”
21
(emphasis supplied)
Would I looking at the conduct of the defendant endorse
that the defendant had acted diligently or remained active or show
that they exercised reasonable standard of a cautious man or
honestly and sincerely intended to remain present or did its best to
do so or the defendant could not be blamed for its absence ? The
answer to each of this is no.
22
As held by the Apex Court in Parimal Vs. Veena Bharti
(supra) sufficient means adequate or enough and the same has to be
viewed in the facts & circumstances existing in the case and duly
examined from the view point of a reasonable standard of a cautious
man. It also means that the party has not acted in negligent manner
or there was want of bonafide on its part or the party cannot be
alleged to have been not acting diligently or remaining inactive. The
test to be applied is whether the defendant honestly and sincerely
intended to remain present when the suit was called out for hearing
and did its best to do so. Sufficient cause as held by the Apex court is
thus the cause of which the defendant could not be blamed for his
absence and the applicant himself approached the court with a
reasonable defence.
23
Let us examine the affidavit in support of the Notice of
Motion to see whether the defendant has laid down a sufficient
cause. The only cause shown is in paragraph nos.3 & 4 of the
affidavit in support of one Jawahar S.Tonk, Regional Manager of the
defendant dated 9.8.2014 which read as under :
“3 I say that sometime in October 2009 the writ of
summons was served upon the defendants at their Head
office. I say that it is the general practice followed by the
defendants that once a writ of summons is received by the
defendant's office the same is forwarded to the concerned
office which had issued the policy. In the present case the
concerned office, which issued the policy was under MRO
1(Mumbai Regional Office1) and accordingly the
defendants forwarded the said writ of summons to the
said office.
4 However, it appears that the said writ of summons was
misplaced / lost in transit and was not received by the
Regional office of the defendants. Therefore, the Regional
Office could not file their appearance and consequently
the written statement to oppose the said claim. I crave
leave to refer to and rely upon the Inward Register of the
Regional Office for the period 1st May 2009 to 31st
December 2010 to show that the said Writ of Summons
was not received by the Regional Office of the
Defendants.”
24
The defendant simply states that it was a general practice
followed by the defendant that when a writ of summons is received
they would forward it to the office that issued the policy and
accordingly the defendant forwarded it. The defendant is also
craving leave to refer to and rely upon the Inward Register of the
Regional office viz. MRO1 for the period 1.5.2009 to 31.12.2010 to
show that the said writ of summons was not received. No such
Inward Register was shown to the court during the hearing. Even if
the inward register was shown, it would not be of much help as it
would show no entry. What was required to be shown was that it
was sent as averred in the affidavit. At the same time I am not saying
just forwarding to MRO1 would have sufficed. It is very necessary
to observe that while the defendant craves leave to refer to and rely
upon the Inward Register of MRO1, there is not even a reference to
or whisper about any Outward Register in the office where the writ
of summons was served. Moreover, barring a bald statement of
general practice nothing more is stated. The defendant is a public
sector undertaking. Before such a general practice is adopted, it will
not be incorrect to expect that they would have issued a circular.
Further when such general practice of forwarding such an important
document like a writ of summons from a High Court is adopted,
there would be some inward entry of receipt or outward entry of
dispatch. Even if there is no Outward Register there is no evidence
whatsoever or explanation whether the writ of summons was placed
before the higher ups or not. If MRO1 could have an inward register
certainly the registered office or the office that received the writ of
summons will also have. If entry in the inward register of the
registered office is made before the writ of summons was dispatched
to MRO1, it will not be too much to expect that there would be an
outward register. There is no whisper about any of this in the
affidavit. The Bailiff's affidavit states that the writ of summons was
served upon one S.V. Sarvankar, Assistant from registry department
of the defendant. In ExhibitJ to the affidavit in support also the
defendant admit that the writ of summons was received by one S.V.
Sarvankar, Assistant from registry department. No affidavit of said
S.V. Sarvankar is filed to explain as to what he did after receipt of the
writ of summons and that he forwarded the same to MRO1. The
affidavit also does not explain why the affidavit of S.V. Sarvankar
could not be or is not filed. No explanation as to how it was sent to
MRO1 or whether said S.V. Sarvankar or anybody else follow up
with MRO1 as to whether they received the writ of summons or any
action was being taken in connection with the suit. There is no
explanation as to whether a noting was made in the registered office
about the summons having been received and the same was
forwarded to MRO1. At one point, an emotional pitch was made by
the counsel for the defendant that the defendant is a public sector
undertaking so show some leniency. In my view, law is the same
whether it is for public sector or private sector. On the contrary a
public sector undertaking and its employees should be over cautious
to a fault. What was received was a writ of summons from the High
Court to answer a claim in excess of Rs.1 crore. They cannot be
casual. The defendant, a public sector undertaking has been grossly
negligent and has not acted diligently. The head office or registered
25
defendant has been unconcerned and casual.
office of the defendant has behaved in a most cavalier manner. The
Reading the affidavit in support and the explanation given
by the defendant does not display any reasonable standard of a
cautious man has been exercised. The explanation given does not
show that the defendant acted diligently or remained active. The
explanation given does not show that the defendant honestly and
sincerely intended to remain present when the suit was called for
hearing or did its best to do so. The defendant simply claim to have
forwarded the writ of summons from the head office to MRO1 and
trying to show that the MRO1 did not receive but there is no
evidence to show that the defendant even forwarded the writ of
summons to MRO1.
26
In the circumstances, I am not satisfied that the defendant
has shown any sufficient cause to set aside the exparte decree.
Notice of Motion is dismissed with cost. The defendant to pay sum of
Rs.50,000/ as costs to the plaintiff which cost also to be recovered, if
not paid within two weeks, without interest together with and over
and above the decretal amount.
(K.R.SHRIRAM, J.)
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