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by sayum
08 May 2026 2:21 PM
In a significant ruling reinforcing the sanctity of proof even in ex parte proceedings, the Madras High Court holding that a preliminary ex parte decree passed in a “cryptic manner” without proper adjudication has “no legal sanctity.”
The Division Bench of Justice C.V. Karthikeyan and Justice K. Kumaresh Babu upheld the dismissal of a recovery suit filed by M/s. Coimbatore Capital Limited against the alleged guarantors of Ankal Finance Ltd., ruling that neither the guarantee deed nor the alleged equitable mortgage by deposit of title deeds had been proved “in manner known to law.”
The Court delivered a clear message: “The absence of the defendant does not absolve the trial court from fully satisfying itself of the factual and legal veracity of the plaintiff’s claim.”
Recovery Suit Based on Guarantee and Alleged Equitable Mortgage
The appellant, a trading member of the National Stock Exchange, had transacted with Ankal Finance Ltd. After disputes arose, arbitration proceedings were initiated against Ankal, resulting in an award in favour of the appellant.
The present suit, however, was filed not against the company alone, but against its Directors — father and son — alleging that they had executed Deeds of Guarantee and that the first defendant had created an equitable mortgage by deposit of title deeds to secure Ankal’s liabilities.
The plaintiff sought a personal decree and a preliminary mortgage decree.
The defendants denied execution of both the Guarantee Deed and the mortgage by deposit of title deeds. They specifically pleaded that no such documents were executed with intent to create liability.
The Trial Court dismissed the suit. The plaintiff appealed.
The Appellant’s Core Argument: “A Preliminary Decree Has Already Been Passed”
The principal submission before the High Court was striking. The appellant argued that an earlier ex parte preliminary decree dated 30.10.2008 had been passed and had not been set aside as against the first defendant. Therefore, relying on Venkata Reddy v. Pethi Reddy, it was contended that the decree had attained finality and bound the parties.
The Division Bench, however, examined the so-called preliminary decree. It read:
“D2 called Absent set exparte. PW-1 examined. Ex.A1 to A17 marked claims proved. Preliminary decree is passed as prayed for with costs.”
The Court did not mince words. It held:
“The cryptic judgment, as extracted above, cannot be considered as valid in the eye of law.”
Ex Parte Does Not Mean Automatic Decree
Relying on authoritative Supreme Court precedents including Ramesh Chand Ardawatiya v. Anil Panjwani, Sushil Kumar Sabharwal v. Gurpreet Singh, and Maya Devi v. Lalta Prasad, the Bench reiterated a settled but often misunderstood principle:
“Merely because the defendant is absent would not create a presumption that the case of the plaintiff is true.”
The Court emphasized that even in ex parte proceedings, the plaintiff must prove execution of documents and entitlement to relief. Marking a document as an exhibit does not prove its execution.
“The failure to file a written statement… does not invite a punishment in the form of an automatic decree.”
The Bench stressed that where a written statement had already denied execution of the guarantee and mortgage, the burden on the plaintiff was heavier.
Guarantee Deed Not Proved — Attesting Witnesses Not Examined
The alleged Guarantee Deed (Ex.A5) was denied by the defendants. However, the plaintiff did not examine the attesting witnesses to prove execution.
The Court upheld the Trial Judge’s finding:
“The plaintiff had failed to prove the execution of Exs.A5 and A7 by not calling upon the attesting witnesses to prove its execution.”
Without proof of execution, no personal liability could be fastened on the defendants.
Equitable Mortgage by Deposit of Title Deeds — Found Unproven
The plaintiff also claimed that the first defendant had created an equitable mortgage by depositing title deeds.
The Court held that foundational facts demonstrating intention to create security were absent. The alleged deposit was not evidenced by a properly proved document. The Court also observed that the document relied upon required registration under the Registration Act.
It concluded:
“The execution of the guarantee had not been proved. The deposit of title deeds was not by a registered document.”
Accordingly, the creation of an equitable mortgage was not established.
Directors’ Liability Cannot Be Presumed
The Division Bench further rejected the attempt to impose personal liability merely because the second respondent was a Director of Ankal Finance Ltd.
“The respondents herein can never be mulcted with a personal decree only because the 2nd respondent was a Director.”
In the absence of a proved guarantee, the corporate entity remained separate and independent.
Non-Impleadment of Legal Representatives
The first defendant had died during pendency of the proceedings, leaving behind legal heirs other than the second respondent.
Though an application to implead them was allowed, they were never brought on record.
Invoking Section 2(11) CPC, the Court held:
“The appellant can never claim that the estate of the 1st respondent is represented only by the 2nd respondent.”
Failure to implead necessary legal representatives rendered the suit defective.
Preliminary Decree Without Proof Has No Force
The Court categorically rejected the appellant’s reliance on the doctrine of finality of preliminary decrees.
It held that a decree passed without compliance with procedural and evidentiary requirements cannot be treated as binding in law.
“We hold that the appellant can never place reliance on the preliminary decree passed on 30.08.2008.”
The supposed decree was no decree “in the eye of law.”
Appeal Dismissed With Costs
After examining all aspects — burden of proof, validity of ex parte decree, proof of guarantee, proof of mortgage, directors’ liability, and non-impleadment of legal heirs — the Division Bench found no merit in the appeal.
The appeal was dismissed with costs, and the Trial Court’s dismissal of the suit was confirmed.
The judgment stands as a strong reaffirmation of procedural discipline in civil litigation: even where a defendant is absent, courts must insist on strict proof. An ex parte decree is not a shortcut to recovery, and commercial claims based on guarantee and mortgage must be proved “to the hilt.”
Date of Decision: 12.02.2026
