Case Note & Summary
The plaintiff, IDBI Trusteeship Services Ltd., filed a summary suit under Order 37 of the Code of Civil Procedure, 1908, against the defendant, Hubtown Ltd., for recovery of Rs. 532,11,29,364.05 with interest at 14.75% per annum. The plaintiff acted as debenture trustee for optionally convertible debentures (OPCDs) issued by Amazia Developers Pvt. Ltd. and Rubix Trading Pvt. Ltd., which were wholly owned subsidiaries of Vinca Developers Pvt. Ltd. The defendant, along with its promoters, held 90% shareholding in Vinca. The defendant executed a corporate guarantee in favour of the plaintiff to secure the OPCDs. The issuers defaulted in payment, and the plaintiff invoked the guarantee. The defendant sought leave to defend, raising several defences including that the guarantee was not invoked properly, that the plaintiff had no locus standi, and that there were pending proceedings before the Company Law Board. The court examined the nature of summary proceedings under Order 37 and the principles for granting leave to defend. It held that the defendant's defences were sham and moonshine, not raising any genuine triable issue. The court noted that the defendant had admitted the execution of the guarantee and the default. The pending proceedings did not affect the liability under the guarantee. Consequently, the court allowed the summons for judgment and entered judgment for the plaintiff for the claimed amount with interest.
Headnote
A) Civil Procedure - Summary Suit - Leave to Defend - Order 37 Rule 3 CPC - Triable Issue - Sham Defence - The court examined whether the defendant raised a triable issue or a sham defence. Held that where the defence is frivolous or moonshine, the court may enter judgment for the plaintiff. The defendant's contentions regarding non-receipt of notice, disputed liability, and pending proceedings were found to be without substance and did not raise any genuine triable issue. (Paras 1-30) B) Contract Law - Corporate Guarantee - Liability of Guarantor - Sections 126, 128 Contract Act, 1872 - The plaintiff as debenture trustee sought enforcement of a corporate guarantee executed by the defendant. The court held that the liability of a guarantor is co-extensive with that of the principal debtor, and the defendant was liable to pay the amounts due under the debentures. The defence that the guarantee was not invoked properly was rejected. (Paras 10-25) C) Debentures - Debenture Trustee - Rights and Powers - Section 117 Companies Act, 2013 - The plaintiff, as debenture trustee, was entitled to enforce the security and recover the amounts due. The court held that the trustee acts for the benefit of debenture holders and has the authority to sue for recovery. (Paras 5-15)
Issue of Consideration
Whether the Defendant has raised any triable issues entitling it to unconditional leave to defend the summary suit for recovery of money under a corporate guarantee.
Final Decision
The court allowed the Summons for Judgment and entered judgment for the plaintiff against the defendant for the sum of Rs. 532,11,29,364.05 with interest at 14.75% per annum from the date of the suit until payment.
Law Points
- Summary suit under Order 37 CPC
- Leave to defend
- Triable issue
- Sham and moonshine defence
- Debenture trustee
- Corporate guarantee
- Recovery of debt
