*IN THE HIGH COURT OF DELHI AT NEW DELHI
+ IA.No. 13028/2007 and CS(OS) No. 197/2006
%26.02.2009 Date of decision:26th February, 2009
MADAN LAL LIMITED, ....... Plaintiff
Through: Mr. Anil Kher, Sr Advocate with Mr. Rishi
Manchanda, Advocate.
Versus
GROWTH TECHNO PROJECTS LTD. & ANR. ....... Defendants
Through: Mr. Prabhjit Jauhar with Ms Anupama Kaul and
Mr. Vikrant Rana, Advocates.
And
IA.No. 13029/2007 and CS(OS) 198/2006
CAMBRIDGE CONSTRUCTION (DELHI) LTD. ....... Plaintiff
Through: Mr. Anil Kher, Sr Advocate with Mr. Rishi
Manchanda, Advocate.
Versus
GROWTH TECHNO PROJECTS LTD. & ANR. ....... Defendants
Through: Mr. Prabhjit Jauhar with Ms Anupama Kaul and
Mr. Vikrant Rana, Advocates.
And
IA.No. 13020/2007 and CS(OS) 199/2006
MKJ DEVELOPERS LIMITED .... Plaintiff
Through: Mr. Anil Kher, Sr Advocate with Mr. Rishi
Manchanda, Advocate.
Versus
GROWTH TECHNO PROJECTS LTD. & ANR. ... Defendants
Through: Mr. Prabhjit Jauhar with Ms Anupama Kaul and
Mr. Vikrant Rana, Advocates.
And
IA.No. 13021/2007 and CS(OS) 200/2006
TWENTY FIRST CENTURY SECURITIES LTD .....Plaintiff
Through: Mr. Anil Kher, Sr Advocate with Mr. Rishi
Manchanda, Advocate.
Versus
GROWTH TECHNO PROJECTS LTD. & ANR. ... Defendant
Through: Mr. Prabhjit Jauhar with Ms Anupama Kaul and
Mr. Vikrant Rana, Advocates.
IA.No. 13028/07 & CS(OS) No. 197/06, IA.No. 13029/07 & CS(OS) 198/06 IA.No. 13020/07 & CS(OS) 199/06, Page 1 of 18
IA.No. 13021/07 & CS(OS) 200/06 & IA.No. 13018/07 & CS(OS) 201/06
And
IA.No. 13018/2007 and CS(OS) 201/2006
THE RIGHT ADDRESS LIMITED ....Plaintiff
Through: Mr. Anil Kher, Sr Advocate with Mr. Rishi
Manchanda, Advocate.
Versus
GROWTH TECHNO PROJECTS LTD. & ANR. .... Defendants
Through: Mr. Prabhjit Jauhar with Ms Anupama Kaul and
Mr. Vikrant Rana, Advocates.
CORAM :-
HON'BLE MR. JUSTICE RAJIV SAHAI ENDLAW
1. Whether reporters of Local papers may
be allowed to see the judgment? Yes
2. To be referred to the reporter or not? Yes
3. Whether the judgment should be reported
in the Digest? Yes
RAJIV SAHAI ENDLAW, J.
1. Applications of the defendants in each of these suits instituted
under Order 37 of the CPC are for consideration. Though, the
plaintiff in each of the suits is different but the defendants are the
same. The plaintiff company in each of the five suits appear to be of
the same group. The transaction subject matter of each suit though
different is identical. The pleadings of the parties are the same.
Common submissions have been addressed by the counsel for the
plaintiffs and the counsel for the defendants. As such the
applications are being disposed of together.
2. The plaintiff in each of the cases entered into an agreement
dated 18th April, 1999 with the defendant No.1 in each suit. The
recitals of the said agreements disclose that the defendant No.1 was
holding an agreement for raising construction on a plot of a land at
IA.No. 13028/07 & CS(OS) No. 197/06, IA.No. 13029/07 & CS(OS) 198/06 IA.No. 13020/07 & CS(OS) 199/06, Page 2 of 18
IA.No. 13021/07 & CS(OS) 200/06 & IA.No. 13018/07 & CS(OS) 201/06
Karkardooma, Shahdara, Delhi and under which agreement the
defendant No.1 was entitled to certain proposed built-up area and
which the defendant No.1 was entitled to sell/agree to sell and
realize consideration therefor. The agreement further discloses that
the land had been notified for acquisition and a writ petition had
been preferred in this court for quashing the said notification and
which writ petition had been dismissed and at the time of entering
into the agreement appeal was pending before the Apex court. It is
also clear from the recitals of the agreement that till the date of the
agreement the permissions for raising construction on the land had
not been obtained
3. Under the said agreement, the defendant No.1 agreed to sell to
the plaintiff in each of the cases, a certain portion of the proposed
built-up area of the share of the defendant No.1, on the terms &
conditions contained therein. A part of the said sale consideration
was paid by the plaintiff in each case to the defendant No.1 and the
balance was payable as mentioned in the said agreements. Clause 6
of the said agreement provided that the time was the essence of the
contract and that the defendant No.1 confirmed and declared to the
plaintiff that it had already submitted the layout and building plans
for approval to the respective authorities and that it will receive the
approval/sanction in respect thereof within 90 days from the date of
the signing of the agreement. The defendant No.1 had agreed to
send a written communication to the plaintiff in each case with a
certified copy of the sanction layout plan and building plan and
within 30 days of receiving such communication, the plaintiff in each
case had agreed to make further payments to the defendant No.1 as
mentioned in the agreement. Clause 7 of the agreement provides
that in the event the defendant No.1 failed to obtain the
IA.No. 13028/07 & CS(OS) No. 197/06, IA.No. 13029/07 & CS(OS) 198/06 IA.No. 13020/07 & CS(OS) 199/06, Page 3 of 18
IA.No. 13021/07 & CS(OS) 200/06 & IA.No. 13018/07 & CS(OS) 201/06
approval/sanction of plans from the appropriate authorities within
the stipulated period of 90 days, the defendant No.1 shall pay to the
plaintiff in each case on all amounts that had been paid towards part
consideration, interest at 24% per annum on quarterly rests from the
date of payment made till the date sanctioned layout and building
plans are received by the defendant No.1 or till such time the monies
is repaid to the plaintiff in each case on termination/cancellation of
the agreement by the plaintiff in each case. The defendant No.1
under the said agreement had agreed to commence the work of
construction within 30 days of receiving the sanctions and to
complete the said works within 24 months of the date of
commencement of construction and whereupon the possession of the
flats was agreed to be delivered to the plaintiff in each case. The
defendant No.1 had in Clause 14 of the agreement meted out
assurance to the plaintiff in each case of the flats agreed to be sold
being free of all encumbrance and further agreed that if it is proved
otherwise, the defendant No.1 shall be liable to refund the
consideration amount paid by the plaintiff in each case with interest
at 24% per annum to be compounded quarterly. Clause 25 of the
agreement provides that notwithstanding anything contained in the
agreement, the plaintiff in each case shall be at liberty to terminate
the agreement at any time by sending a written communication to
the said effect to the defendant No.1 and the defendant No.1 had
agreed to, within 180 days of receiving of such notice of termination,
refund all amounts paid by the plaintiff in each case with interest at
24% per month on quarterly rests from the date the said amount is
paid by the plaintiff. It is further provided that in the event the
defendant No.1 fails to refund the said amount within the said 180
days; the plaintiff in each case shall have the right to claim and
IA.No. 13028/07 & CS(OS) No. 197/06, IA.No. 13029/07 & CS(OS) 198/06 IA.No. 13020/07 & CS(OS) 199/06, Page 4 of 18
IA.No. 13021/07 & CS(OS) 200/06 & IA.No. 13018/07 & CS(OS) 201/06
recover penal interest at 2% per annum over and above the interest
of 24% per annum with quarterly interests. Though the agreement
contain a number of other clauses but the same are not relevant for
the purposes of the present case.
4. That besides the aforesaid agreements, the defendant No.2
also executed a common personal guarantee bond in favour of the
plaintiff in all the five cases. Referring to the agreements aforesaid
executed by the defendant No.1 in favour of each of the plaintiffs and
whereunder the plaintiffs together had paid a sum of
Rs.97,07,512.50 towards part consideration, the defendant No.2, in
consideration of the plaintiffs having paid the aforesaid sums to the
defendant No.1, guaranteed and undertook to pay to the plaintiffs on
demand all principal, interest, costs, charges and expenses due or
which may at any time become due to the plaintiffs from the
defendant No.1 against the payments made by the plaintiffs to the
defendant No.1. The guarantee was declared to be a continuing
guarantee, not to be considered as cancelled or affected by the
defendant No.1 agreeing or renewing to pay the amount due to the
plaintiffs. The defendant No.2 as guarantor made himself liable to
the plaintiffs and further agreed that the plaintiffs shall be entitled to
refer their entire dues payable by the defendant No.1 from the
person or properties of the defendant No.2, upon default in payment
by the defendant No.1. The guarantee was further declared to
remain unaffected by the death of the guarantor, until the plaintiffs
have received formal authentic notice thereof.
IA.No. 13028/07 & CS(OS) No. 197/06, IA.No. 13029/07 & CS(OS) 198/06 IA.No. 13020/07 & CS(OS) 199/06, Page 5 of 18
IA.No. 13021/07 & CS(OS) 200/06 & IA.No. 13018/07 & CS(OS) 201/06
5. The defendant No.2 died during the pendency of the suit and
his legal heirs being his wife and children have been substituted in
his place.
6. The plaintiffs instituted the present suits on 30th January, 2006
on the plea that the representations made by the defendants and as
recorded in the agreement had turned out to be false and wrong;
though the defendants had represented that they had challenged the
order of dismissal of the writ petition (challenging the acquisition of
land) in the Apex court but had not informed the outcome of the said
proceedings; that the defendant No.1 had however been sending
letters from time to time to seek confirmation of balance of the
amount paid by the plaintiffs to the defendant No.1 as shown in the
books of account maintained by the defendant No.1; reference was
made to the letter dated 17th October, 2003 sent by the defendant
No.1 and the letter dated 5th November, 2005 sent by the plaintiffs to
the defendant No.1 seeking confirmation of account and which had
been duly confirmed by the defendant No.1. The plaintiffs further
stated that since the defendant No.1 had failed to make any progress
of the project as promised, the plaintiffs did not want to continue
with the agreements and vide legal notice dated 27th March, 2004
had informed the defendant No.1 that the plaintiff was not willing to
proceed any further with the agreements and cancelling and
terminating the agreement and calling upon the defendant No.1 to
refund the amounts paid by each of the plaintiff with interest at 24%
per annum compounded quarterly. The said notices were stated to
be followed with another notice dated 29th May, 2004. The
defendant No.1 was stated to have responded vide reply dated 4th
June, 2004. It was further the averment in the plaint that the
defendants having failed to make the payment within 180 days from
IA.No. 13028/07 & CS(OS) No. 197/06, IA.No. 13029/07 & CS(OS) 198/06 IA.No. 13020/07 & CS(OS) 199/06, Page 6 of 18
IA.No. 13021/07 & CS(OS) 200/06 & IA.No. 13018/07 & CS(OS) 201/06
demand had also become liable to pay penal interest of 2% per
annum. It was further pleaded that in spite of the same the
defendant No.1 had continued to correspond with the plaintiffs and
vide letter dated 5th September, 2005 had informed the plaintiffs that
the Apex court had vide judgment dated 24th August, 2005 dismissed
the special leave petition and the defendant No.1 was contemplating
to file a review petition before the Apex court. The plaintiffs claimed
to have sent another notice dated 18th November, 2005 to the
defendants calling upon the defendants to pay the amount with
interest of 24% per annum compounded quarterly and penal interest
on 2% per annum. The defendant No.1 sent a reply dated 27th
December, 2005 denying any liability.
7. Thus, the present suits were filed under Order 37 of the CPC
on the basis of the written contract aforesaid between the parties.
The principal amount and the interest at 24% per annum
compounded quarterly and penal interest claimed in each suit till the
date of institution of the suit are as under:-
Sr. Suit No. Principal Total interest claimed till the date
No. amount claimed of institution of the suit.
1 197/2006 20,69,213/- 1,20,15,443/-
2 198/2006 19,44,000/- 1,12,88,362/-
3 199/2006 21,14,100/- 1,22,76,094/-
4 200/2006 17,90,100/- 1,03,94,700/-
5 201/2006 17,90,100/- 1,03,94,700/-
8. Upon institution of the suits, summons for appearance were
issued to the defendants and on 30th May, 2006 summons for
judgment were ordered to be issued to the defendants. Upon service
of summons for judgment applications under Section 8 of the
IA.No. 13028/07 & CS(OS) No. 197/06, IA.No. 13029/07 & CS(OS) 198/06 IA.No. 13020/07 & CS(OS) 199/06, Page 7 of 18
IA.No. 13021/07 & CS(OS) 200/06 & IA.No. 13018/07 & CS(OS) 201/06
Arbitration and Conciliation Act, 1996 came to be filed in each of the
cases by both the defendants. The said applications also are identical
in each case. It was inter-alia the plea of the defendants in the said
applications that plaintiffs had suppressed another agreement dated
18th April, 1999 between the parties, copy whereof was also annexed
to applications in each case. A copy of the said agreement annexed
to the application and which agreement was not denied by the
plaintiffs discloses that in furtherance to the agreement dated 18 th
April, 1999 forming the basis of the suits, it had been agreed
between the plaintiff in each case and the defendant No.1 that if the
plaintiff did not wish to purchase the flats, subject matter of the
agreement the defendant No.1 will buy back the said flats from the
plaintiff. The said agreement provided the terms & conditions
thereof as well as the consequences flowing therefrom and also
contained an arbitration clause. Notice of the said applications
under Section 8 of the Arbitration Act, 1996 was issued to the
plaintiffs.
9. The plaintiffs before filing replies to the applications under
Section 8 of the Arbitration Act filed applications in each of the cases
to the effect that the defendants inspite of being served with the
summons for judgments had failed to apply for leave to defend and
the plaintiffs had thus become entitled to judgment forthwith.
10. This court vide order dated 24th January, 2007, having regard
to the nature of the dispute felt appropriate that the plaintiff as well
as the defendant No.2 appear in the court on the next date of
hearing. However, on the next date it was informed that the
defendant No.2 had expired and thereafter applications for
IA.No. 13028/07 & CS(OS) No. 197/06, IA.No. 13029/07 & CS(OS) 198/06 IA.No. 13020/07 & CS(OS) 199/06, Page 8 of 18
IA.No. 13021/07 & CS(OS) 200/06 & IA.No. 13018/07 & CS(OS) 201/06
substitution of legal representatives of defendant No.2 were filed
and allowed.
11. The applications filed by the defendants under Section 8 of the
Arbitration Act, 1996 in each of the cases were dismissed vide order
dated 30th October, 2007. It was inter-alia held that the agreement
dated 18th April, 1999 on the basis whereof the applications under
Section 8 had been filed was only a contingent agreement which
could have come into force on construction of residential units as
was envisaged in the agreement dated 18th April, 1999 forming the
basis of the suit. It was further held that the agreement forming
basis of the applications under Section 8 was distinct from the
agreement forming basis of the suit and the arbitration clause in the
former did not cover the disputes subject matter of the suit. The
said order has since attained finality.
12. Upon dismissal of the applications under Section 8, it was the
contention of the senior counsel for the plaintiff that the defendants
having not applied for leave to defend the suits were entitled to be
decreed forthwith. However, this court vide order dated 30th
October, 2007, without prejudice to the said contentions of the
plaintiff gave further ten days time to the defendants to apply for
leave to defend. It was thereafter that the applications for leave to
defend came to be filed on 12th November, 2007 (10th & 11th
November, 2007 being second Saturday & Sunday). It may also be
noticed that the applications though stated to be on behalf of the
defendants are accompanied by the affidavit of the Director of the
defendant No.1 only and are neither signed by the legal heirs of the
defendant No.2 nor accompanying by their affidavits. After
IA.No. 13028/07 & CS(OS) No. 197/06, IA.No. 13029/07 & CS(OS) 198/06 IA.No. 13020/07 & CS(OS) 199/06, Page 9 of 18
IA.No. 13021/07 & CS(OS) 200/06 & IA.No. 13018/07 & CS(OS) 201/06
completion of pleadings on the said applications the same are now
for consideration.
13. The counsel for the defendants has during hearing only urged
that the claim in suit are not within limitation and that the
defendants are entitled to leave to defend on this ground alone. It is
argued that everything was disclosed by the defendants to the
plaintiffs in the agreement, i.e. that the land on which the
construction was to be raised being subject matter of acquisition
proceedings and of the sanctions for construction having not been
obtained till then. It was argued that under the agreement, the
defendant No.1 had agreed to get the sanctions for construction
within 90 days thereof; that there was no plea that it was at any time
represented by the defendants to the plaintiff that the sanctions had
been so obtained; that the plaintiffs therefore knew on expiry of 90
days from the agreements that there was no sanction; that the
plaintiffs ought to have instituted the suits for recovery of monies
paid within a period of three years from the expiry of the said 90
days from the agreement to sell dated 18th April, 1999 and the suits
had been instituted much later. It was further argued that the
acknowledgement of liability relied upon by the plaintiffs were no
acknowledgements within the meaning of Section 19 of the
Limitation Act; that an acknowledgment of liability has to itself be
within the period of limitation i.e. 3 years and any acknowledgement
of liability after the said period of three years is no acknowledgment
so as to extend the period of limitation. Attention was also drawn to
first legal notice dated 27th March, 2004 of the counsel for the
plaintiffs in which it was stated that the flats were to be constructed
within 24 months. It was argued that the suit was beyond three
years from the expiry of 24 months from the date of agreement also.
IA.No. 13028/07 & CS(OS) No. 197/06, IA.No. 13029/07 & CS(OS) 198/06 IA.No. 13020/07 & CS(OS) 199/06, Page 10 of 18
IA.No. 13021/07 & CS(OS) 200/06 & IA.No. 13018/07 & CS(OS) 201/06
It was thus argued that the suits were barred by time and the plaints
liable to be rejected and in any case the defendants were entitled to
leave to defend. The counsel for the defendants also argued that the
legal heirs of the defendant No.2 in any case will be liable only to the
extent of the estate inherited from the defendant No.2 and could not
be personally liable.
14. Per contra, the senior counsel for the plaintiffs drew attention
to the letters in each case of 17th October, 2003 by the defendant
No.1 to the plaintiff seeking confirmation for income tax purposes, of
the amounts standing to the credit of each of the plaintiffs in the
books of the defendant No.1 and similar confirmation given by the
defendant No.1 to each of the plaintiffs for the year ending 31st
March, 2005 and 30th September, 2005. It was thus contended that
it was not open to the defendants to contend that the claims were
barred by time.
15. At the beginning of the hearing, it was found that the original
documents on the basis whereof the suits have been filed have not
been filed by the plaintiffs. However, since there is no dispute of the
copies filed being true copies of their respective originals and no
such dispute had been raised in the applications for leave to defend
or during arguments and further since the defendants themselves
had along with their applications under Section 8 of the Arbitration
Act filed only a photocopy of the agreement relied upon by them, it
was not felt necessary to adjourn the hearing, though the senior
counsel for the plaintiffs stated that the original documents could be
filed if so directed by the court. In the circumstances aforesaid, I do
not find any such requirement; nor does Order 37 of the code
prohibits proceeding in the absence of the original documents. Rule
IA.No. 13028/07 & CS(OS) No. 197/06, IA.No. 13029/07 & CS(OS) 198/06 IA.No. 13020/07 & CS(OS) 199/06, Page 11 of 18
IA.No. 13021/07 & CS(OS) 200/06 & IA.No. 13018/07 & CS(OS) 201/06
5 of Order 37 empowers the court to order the bill, hundi or note on
which the suit is found to be deposited with an office of the court;
the same is indicative of there being no mandatory requirement of
the original being before the court where the filing of original is
deemed necessary for adjudication, of course the court can refuse to
proceed.
16. Though as aforesaid the hearing was confined on the aforesaid
aspect only but since vide order dated 30th October, 2007 the
question as to the effect of the defendants not filing applications for
leave to defend and instead of filing the application under Section 8
of the Arbitration Act, 1996, was left open, it is considered apposite
to deal with the same also.
17. The application under Section 8 Arbitration Act, 1996 has since
been dismissed and as aforesaid that order has attained finality. The
plea of the defendants of Section 8 was found to be untenable. Be
that as it may, the question which arises is as to whether the
defendant, who has being served with summons for judgment, is of
the opinion that the subject matter of the suit is the subject matter of
an arbitration agreement, is entitled to defer filing of the application
for leave to defend within the time prescribed therefor and to first
call upon the court to adjudicate his plea of Section 8.
18. In my opinion, the defendant is not entitled to do so and if does
so, does so at his own risk of, if not succeeding in the application
under Section 8, suffering a decree forthwith.
19. It will be seen that Section 8 of the 1996 Act does not require
an application thereunder to be filed before taking any step in the
suit, as was the position under the 1940 Act. All that Section 8
IA.No. 13028/07 & CS(OS) No. 197/06, IA.No. 13029/07 & CS(OS) 198/06 IA.No. 13020/07 & CS(OS) 199/06, Page 12 of 18
IA.No. 13021/07 & CS(OS) 200/06 & IA.No. 13018/07 & CS(OS) 201/06
requires is that the plea of arbitration should be raised not later than
while submitting the first statement on the subsistance of the
dispute. Thus, it is not as if a defendant would in any manner be
prejudiced qua his rights under Section 8 of the Arbitration Act if
made to file the application for leave to defend along with and
application under Section 8 of the Arbitration Act, 1996. The
provisions of a statute cannot be permitted to defeat the provisions
of another, especially when they are capable of being harmoniously
construed. Any other interpretation would interfere with the
mandate of Order 37 of an application for leave to defend being
required to be filed within 10 days of service for summons of
judgment and providing for the consequence of a decree upon such
failure. I am, thus, of the opinion that the defendants in the present
case were required to file the application for leave to defend within
10 days of service of summons for judgment and having failed to do
so are liable to suffer a decree forthwith.
20. Yet another factor as noticed above is that even after the order
dated 30th October, 2007 there does not appear to be any application
for leave to defend on behalf of the legal representatives of the
defendant No.2. Sub rule 5 of Rule 3 of Order 37 requires the
defendant to by affidavit or otherwise disclose facts sufficient to
entitle him to defend the suit. There is neither any affidavit of any of
the legal representative of the defendant No.2 accompanying the
leave to defend application nor is there anything to show that the
signatory thereof was authorized by the said defendants. There is
thus no option but to infer that there is no leave to defend of the
defendant No.2 and the suit is liable to be decreed against them for
this reason alone.
IA.No. 13028/07 & CS(OS) No. 197/06, IA.No. 13029/07 & CS(OS) 198/06 IA.No. 13020/07 & CS(OS) 199/06, Page 13 of 18
IA.No. 13021/07 & CS(OS) 200/06 & IA.No. 13018/07 & CS(OS) 201/06
21. Be that as it may, since there is an record, an application for
leave to defend and purporting to be on behalf of the defendants it is
deemed expedient for full and final adjudication to deal with the
same also.
22. Though the counsel for the defendant had argued on the point
of limitation only but a perusal of the application for leave to defend
shows that the defendants have therein also referred to the
agreement dated 18th April, 1999 forming the basis of the application
under Section 8 of the Arbitration Act. However, nothing further has
been formulated as to how the said agreement entitles the
defendants to leave to defend. Moreover, in view of this court
having while dismissing the application under Section 8 held the said
agreement to be a contingent agreement to come into force only in
the event of construction being raised, and which contingency has
not occurred, the said plea is now not open to the defendants and
perhaps for this reason only was not raised by the counsel for the
defendants during arguments.
23. The leave to defend application also refers to the full disclosure
having been made by the defendants to the plaintiffs and of all the
steps which the defendants have taken to have the land cleared and
to commence the construction. Some arguments were also raised to
that effect. However, in my view, the said pleas are not relevant.
The present is not a suit for damages for breach of contract in which
the said questions would have been relevant, but is only for recovery
of monies paid by way of advance sale consideration together with
agreed interest thereon and it is immaterial whether the defendants
have performed their part of the agreement or not and whether the
defendants had made full disclosure or not.
IA.No. 13028/07 & CS(OS) No. 197/06, IA.No. 13029/07 & CS(OS) 198/06 IA.No. 13020/07 & CS(OS) 199/06, Page 14 of 18
IA.No. 13021/07 & CS(OS) 200/06 & IA.No. 13018/07 & CS(OS) 201/06
24. The application for leave to defend also vaguely avers that it is
the plaintiffs who have failed to perform the various covenants of the
agreement; the defendants have forfeited the monies paid by the
plaintiffs owing to default by the plaintiffs. Not only no argument
was raised qua the same but the said pleas shall be considered while
discussing the plea of limitation.
25. The agreement between the parties from the clauses thereof
highlighted herein above was that the advance sale consideration
paid by the plaintiffs to the defendant No.1 was to be non interest
bearing for a period 90 days from payment; during the said period of
90 days it was expected that the various sanctions/permissions for
constructions would be obtained by the defendant No.1; had the said
sanctions been obtained and the construction had commenced within
30 days thereof, the said advance sale consideration was to still
remain non-interest bearing for a period of 24 months from the date
of commencement of constructions, the time agreed for completion
of construction. However, the parties were aware that the sanctions
may not be forthcoming within the said period of 90 days.
Considerable part of the sale consideration was being paid by the
plaintiffs to the defendant No.1, without even the acquisition of the
land being cleared. It was thus provided that if the sanctions were
not obtained within 90 days, then interest at 24% per annum with
quarterly interest would be payable. The plaintiffs were also given an
option to cancel the agreement at any time and to claim refund of
the monies with interest. This is so expressly provided in clauses
7&25 of the Agreement. The defendant was given a further time of
180 days from the said demand of the plaintiff to make the payment
and upon failure of the defendant to refund the money with interest
within said time, provision was made for further penal interest at 2%
IA.No. 13028/07 & CS(OS) No. 197/06, IA.No. 13029/07 & CS(OS) 198/06 IA.No. 13020/07 & CS(OS) 199/06, Page 15 of 18
IA.No. 13021/07 & CS(OS) 200/06 & IA.No. 13018/07 & CS(OS) 201/06
per annum over and above the interest at 24% per annum with
quarterly interest.
26. The counsel for the defendant in spite of inquiry as to
according to him under which article of Schedule-I of Limitation Act,
the claim fell did not point out any article. As far as the vague plea
in the application for leave to defend of the plaintiffs having failed to
perform their covenants and of forfeiture is concerned, neither there
are any particulars given nor is the same inconsonance with the
agreement. On the contrary clause 9 of the agreement provides that
even where the sanctions for construction had been obtained and
construction commenced and the plaintiffs had failed to pay the
installments of sale consideration to be paid thereafter, the
defendant No.1 could terminate the agreement but even then was
made liable to refund the monies paid by the plaintiffs till then with
interest at 24% per annum with quarterly rests.
27. The option under the agreement of cancelation of the
agreement in the event of sanctions/permissions being not obtained,
as is the case, was with the plaintiffs and the liability of the
defendant No.1 to refund the money with interest was to commence
from the date of the said demand of the plaintiffs. It is not in dispute
that the said demand was made by the plaintiffs for the first time
vide letter dated 27th March, 2004. The defendants have nowhere
contended any earlier termination of the agreement or demand for
refund by the defendants. The cause of action for refund would thus
accrue to the plaintiffs from the date of said termination/demand for
refund i.e. on 27th March, 2004. The Article of Schedule 1 of the
Limitation Act applicable to such cases is Article 22 i.e. a suit for
money deposited under an agreement that it shall be payable on
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demand. The limitation provided is of three years commencing from
the date when the demand is made. The suit has admittedly been
filed within three years of 27th March, 2004 and I do not find any
facts requiring trial so as to entitle the defendants to leave to defend
on the said plea. The transaction was not a loan transaction so as to
fall within Article 21.
28. Since the suit is found to be within time, it is not deemed
expedient to go into the plea raised by the defendants of the
acknowledgement of liability not being an acknowledgment within
the meaning of Section 19 of the Limitation Act. Suffice, it is to state
that the said documents in any case prove that the transaction
between the parties was very much alive and in force and subsisting
and was treated by the defendant to be so. The said documents in
any case, falsify the stand of the defendant of the plaintiff having
failed in their covenants and of the amount having been forfeited. In
fact, the application filed by the defendant under Section 8 of the
Arbitration Act, 1996 also falsifies the said stand of the defendants.
Had the claim been barred by time and or had the money been
forfeited, there was no occasion for the agreement on the basis
whereof that application was filed being applicable or the arbitration
clause therein barring the present suit. In fact, the stand of
forfeiture was not taken in the reply to the legal notices preceding
the legal proceedings also.
29. The leave to defend applications otherwise do not in any
manner dispute the amounts claimed in the suit. The applications
for leave to defend thus do not disclose any facts as may be deemed
sufficient to entitle the defendants to contest the suit and or do not
disclose that the defendants have any substantial defence to raise.
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The applications for leave to defend are dismissed. Consequently,
the plaintiffs are entitled to decree as prayed.
30. The next question is as to the pendente lite interest. Though
the agreement between the parties is for interest at 24% per annum
with quarterly rests as well as further penal interest at 2% per
annum but the plaintiffs are entitled to pendente lite interest i.e.
from the date of institution of the suit till decree at simple rate of
24% per annum only on the principal amount in each suit. However,
I do not see any reason to deprive the plaintiffs of the contractual
rate of interest if the defendants in spite of the decree and within
reasonable time thereof do not pay the amounts. Thus, the
defendants, if fail to pay the decreetal amount within 30 days of the
decree, shall thereafter be again liable for interest @ 24% per
annum compounded quarterly as agreed. However, in that
eventuality also, I do not deem it proper to grant further penal
interest of 2% per annum to the defendants. The suits of the
plaintiffs are decreed in above terms with costs. Counsels fee in each
case assessed at Rs.25,000/-. Decree sheet be drawn up.
RAJIV SAHAI ENDLAW
(JUDGE)
February 26, 2009
PP
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