Case Note & Summary
The appeal before the Supreme Court arose from a suit for recovery of money filed by United Bank of India against the principal debtor and guarantors. The bank's branch at Ambala Cantt. advanced a loan of Rs. 50,000 to respondent no.1 on 12.04.1984 for business purposes, against execution of a demand promissory note, hypothecation of goods agreement, and other documents. Respondent no.2 and one Suresh Kumar, husband of respondent no.3, stood as guarantors. The agreed interest was 18% per annum with quarterly rests. When default occurred, the bank filed a suit for recovery of Rs. 1,40,553.91 including principal and interest. The respondents denied taking the loan, claimed blank documents were signed, denied the interest rate, and challenged the authority of Sh. L.K. Rohatgi to sign and file the plaint on behalf of the bank. Respondent no.2 additionally contended that her guarantee was limited to Rs. 50,000. Suresh Kumar died during pendency, and his widow was impleaded but proceeded ex parte. The trial court framed nine issues, decided issues 1, 2 and 7 against the bank, but held issues 3,4,5 and 6 in its favour; yet, because issue no.1 regarding due signing and verification was decided against the bank, the suit was dismissed. The first appellate court reversed findings on issues 2 and 7, holding that the loan, execution of documents and interest rate were proved, but upheld the trial court's decision on issue no.1 and dismissed the appeal. The High Court dismissed the regular second appeal in limine. The Supreme Court considered the sole question whether the plaint was duly signed and verified. It held that a corporation can sue and be sued, and under Order 6 Rule 14 CPC a pleading must be signed by the party and its pleader. Since a company is a juristic entity, Order 29 Rule 1 CPC provides that the Secretary, Director or other principal officer who can depose to facts may sign and verify on behalf of the corporation. Even without a formal letter of authority or power of attorney, such officer can sign by virtue of office. Further, a corporation can ratify the act of an officer signing pleadings, expressly or impliedly, and the court can infer ratification from the conduct of the trial. The Supreme Court found that the suit was filed in the bank's name, full court fee was paid, documentary and oral evidence was led, and trial continued for about two years, making it unreasonable to presume lack of authority. The lower courts should have exercised power under Order 41 Rule 27(1)(b) CPC to direct production of a power of attorney or examine a competent witness. Dismissing a genuine claim on a curable technical defect would be a travesty of justice. The appeal was allowed; issue no.1 was held wrongly decided, and the suit was decreed in accordance with the first appellate court's findings on other issues, with costs to the appellant.
Headnote
A) Civil Procedure - Plaint Signature and Verification by Corporation - Authority of Officer - Code of Civil Procedure, 1908, Order 6 Rule 14 and Order 29 Rule 1 - A corporation is a juristic entity and can sue and be sued; pleadings must be signed by party and pleader, and Order 29 Rule 1 permits secretary, director, or principal officer who can depose to facts to sign and verify without formal letter of authority or power of attorney by virtue of office. The trial court wrongly held that plaint signatory L.K. Rohatgi lacked valid authority. Held that an officer covered by Rule 1 can sign on behalf of corporation, and the plaint was duly signed and verified (Paras 9-11). B) Civil Procedure - Ratification of Pleadings - Implied Ratification by Conduct - Code of Civil Procedure, 1908, Order 6 Rule 14 - A corporation can ratify the act of its officer in signing pleadings, expressly or impliedly, and court can infer ratification from circumstances and conduct of trial. The suit was filed in the name of the bank, court fee paid, evidence led for about two years, making it reasonable to conclude ratification. Held that appellant bank ratified the action of L.K. Rohatgi in signing the plaint by continuing with the suit (Paras 10-11). C) Civil Procedure - Curable Procedural Defects - Rejection of Genuine Claim on Technicality - Code of Civil Procedure, 1908, Order 41 Rule 27(1)(b) - Suits by public corporations should not be defeated on mere technicality; procedural defects not going to root of matter are curable. Lower appellate court should have exercised power under Order 41 Rule 27(1)(b) to direct production of power of attorney or examine witness. Held that dismissal of suit on issue no.1 was wrong and suit decreed in accordance with appellate findings (Paras 9-12).
Issue of Consideration
Whether the suit for recovery of money filed by the appellant bank was properly instituted, specifically whether the plaint was duly signed and verified by a competent person
Final Decision
The Supreme Court allowed the appeal, held that issue no.1 was wrongly decided, and decreed the suit in accordance with the findings of the lower appellate court on the other issues. The appellant was also entitled to costs.
Law Points
- A suit by a corporation is not liable to be dismissed for want of formal authority if the signatory is an officer under Order 29 Rule 1 CPC
- corporation can ratify such signing expressly or impliedly
- procedural defects not going to root of matter are curable and should not defeat just cause
- appellate court has power under Order 41 Rule 27(1)(b) CPC to allow additional evidence to prove authority
