ANSAL HOUSING LTD. v. SAMYAK PROJECTS PVT. LTD.

13. He further submits that even in the statement of account filed by the plaintiff, it is shown that the plaintiff is charging interest sometimes on quarterly basis while other times on half yearly basis. He submits that the same has not been explained.

14. He submits that in terms of the Cancellation Deed, the plaintiff was authorised to adjust the amounts due under the Cancellation Deed from the other amounts owed by it to the plaintiff. The plaintiff adjusted such amounts and therefore, no further amount is payable by the defendant to the plaintiff. He submits that the adjustment is also evident from the fact that the plaintiff has admittedly been paying amounts to the defendant against other accounts, in spite of the defendant owing money to the plaintiff under the Cancellation Deed. He submits that, in fact, after such adjustment also, huge amount is due and payable by the plaintiff to the defendant, for which separate arbitration proceedings are pending between the parties. In this regard, he draws my attention to the affidavit(s) filed by Mr. Tarun Kathuria, Chief Financial Officer (in short “CFO”) and Head (Finance) of Ansal Housing Limited before the learned Sole Arbitrator, showing certain amounts to be adjusted.

SUBMISSIONS OF THE LEARNED SENIOR COUNSEL FOR THE PLAINTIFF

15. On the other hand, the learned senior counsel for the plaintiff submits that the present suit is not barred by limitation as the defendant had made a payment to the credit of the plaintiff on 30.09.2015 as also in March 2016 in the form of TDS. Placing reliance on Section(s) 194A and 198 of the Income Tax Act, 1961 (hereinafter referred to as „Income Tax Act‟), he submits that the TDS deposited is to the credit of the plaintiff, and is, therefore, part payment of the debt due, which shall extend the period of limitation as provided in Section 19 of the Limitation Act. In support, he places reliance on the judgement of the High Court of Bombay in Mahindra Lifespace Developers Limited vs. Biecrete Project Private Limited, 2012 SCC OnLine Bom 1730; and the judgement of the Supreme Court in Baranagore Jute Factory Plc. Mazdoor Sangh (BMS) and Ors. V. Baranagore Jute Factory Plc. And Ors, (2017) 5 SCC 506. He submits that deposit of TDS is a payment to a party, and therefore, the limitation to file the instant suit will expire only in March 2019.

16. He submits that there is no documentary evidence to support the alleged claim of adjustment made by the defendant. He submits that, in any case, it was the right and not the obligation of the plaintiff to adjust the amounts. The plaintiff therefore, was within its rights not to adjust the amounts, but claim the same in the form of the present Suit. In support he places reliance on the judgements of Akhilesh Kumar Verma v. Maruti Udyog Ltd, 2005 SCC OnLine P&H 212, and Cofex Exports Ltd v. Canara Bank, 1997 (43) DRJ 754 (DB).

17. On the aspect of the rate of interest being compounded annually, the learned senior counsel for the plaintiff submits that where an agreement is vague or uncertain on the method of calculating interest, the conduct of the parties has to been seen. In the present case, drawing reference to the Account Statement of the defendant, he submits that the defendant for three consecutive years has paid interest at the rate of 24% compounded annually. In support, he places reliance on the judgment of the Supreme Court in The Godhra Electricity Co. Ltd. & Anr. v. The State of Gujarat & Anr., (1975) 1 SCC 199.

ANALYSIS AND FINDINGS:

18. I have considered the submissions made by the learned senior counsels for the parties.

GENERAL PRINCIPLES:

19. At the outset, one would like to remind oneself of the principles that govern the consideration of an application under Rule 3(5) of Order XXXVII of the CPC filed by the defendant seeking leave to defend the suit. In B.L. Kashyap & Sons (supra), the Supreme Court stated these principles in the following words:

20. Keeping in view the above principles, I shall now consider the grounds on which the defendant prays for leave to defend the present suit.

WHETHER THE MAINTAINABLE UNDER ORDER XXXVII OF THE CPC

21. As noted hereinabove, the learned senior counsel for the defendant has asserted that as the present suit is based on the ledger account maintained by the plaintiff, the present suit is not maintainable under Order XXXVII of the CPC.

22. I am unable to accept this submission of the learned senior counsel for the defendant.

23. The present suit is based on the Deed of Cancellation dated 20.04.2013 executed between the parties. By the said Cancellation Deed, the defendant acknowledged its liability to refund an amount of Rs.12 Crores with interest calculated at the rate of 24% per annum. The relevant terms of the Cancellation Deed are reproduced hereinunder:

24. The ledger account maintained by the plaintiff merely reflects the amounts received from the defendant in part-payment of the above liability. There is, in fact, no dispute on the amounts reflected in the said ledger account. The present suit is, therefore, not based on the ledger account maintained by the plaintiff but on the Deed of Cancellation and is, therefore, maintainable under Order XXXVII of the CPC, being a suit to recover a debt with interest on a written contract.

25. In Ge Capital Services India (supra), the plaintiff therein claimed to have extended a certain sum of money to the defendant by means of a total of eight loan agreements. The plaintiff was further relying upon various documents filed with the plaint to show the amount due from the defendant as on the date of the Compromise Deed executed between the parties therein. The amount claimed by the plaintiff therein was not on the basis of such Compromise Deed. The Court found that the plaint, when it refers to the amount claimed, did not make any averments and refer to any specific document containing the specified liquidated amount as due and payable by the defendant. The Court in fact distinguished an earlier judgment of GE Capital Services India vs. G.Neuromed Diagnostic Centre 2007 VIII AD (Delhi) 464, and observed as under: “…….It need not be again said that Order XXXVII suit is maintainable with respect to the principal amount provided that it is that principal amount which is claimed alongwith the interest arising thereon as stated in the written agreement.”

26. In Sunpro Integrated Communication Services Ltd. v. Capricot Technologies Pvt. Ltd. & Anr. 2020 SCC OnLine Del 2284, another learned Single Judge of this Court, relying upon an earlier judgment in Bijender Chauhan @ Bijender Kumar v. Financial Eyes (India) Ltd., ILR (2013) 4 Del 3234, held that a suit claiming an amount against an invoice remaining unpaid in part is maintainable under Order XXXVII of the CPC.

27. I need not multiply authorities on the said proposition. In the present case, the Suit is claiming amount due under a written agreement, that is, the Cancellation Deed. The ledger account merely shows the amounts that have been received against the Cancellation Deed from the defendant. This would not change the claim to be one based on the ledger account, especially where there is no dispute on the entries in the ledger account.

28. It is, therefore, held that the present Suit is maintainable under Order XXXVII of the CPC.

WHETHER THE SUIT IS BARRED BY LIMITATION

29. The learned senior counsel for the defendant has asserted that as the case of the plaintiff itself is that the last payment made against the Deed of Cancellation was received by the plaintiff from the defendant on 27.03.2015, the present Suit having been filed on 20.09.2018, is, therefore, barred by limitation. He has submitted that the mere fact of the deposit of TDS on 30.09.2015 by the defendant would not extend the period of limitation.

30. The above submission is disputed by the learned senior counsel for the plaintiff contending that the TDS deposited is to the account of the plaintiff and, therefore, would extend the period of limitation.

31. Section 19 of the Limitation Act, 1963 reads as under:

32. To attract the above provision and take benefit thereof, the plaintiff has to prove that:- (a) The payment on account of the debt was made by the defendant before the expiration of the prescribed period; (b) The payment was acknowledged by some term of writing either in the handwriting of the payer or signed by the payer.

33. Section 194A of the Income Tax Act obliges the person responsible for paying interest to another to deduct, at the time of credit of such income to the account of the payee or at the time of payment thereof in cash or by an issue of a cheque or draft or by any other mode, whichever is earlier, income tax thereon at the rate in force. Explanation to Section 194A (1) further provides that where any income by way of interest is credited to any account in the books of account of the person liable to pay such income, such crediting shall also be deemed to be a credit of such income to the account of the payee making such person liable to deduct TDS.

34. Section 198 of the Income Tax Act further provides that all sums deducted shall, for the purpose of computing the income of the assessee, be deemed to be income received by such assessee.

35. In Baranagore Jute Factory PLC. Mazadoor Sangh (BMS) (supra), the Supreme Court observed that the amount deposited as TDS also partakes the character of compensation that was payable by NHAI in the said case.

36. In the present case, as the deposit of TDS was made on 30.09.2015, in terms of Section 198 of the Income Tax Act, it would be deemed to be an income received by the plaintiff. The said payment being made against the Cancellation Deed, which is not denied by the defendant, would in terms of Section 19 of the Limitation Act, extend the period of limitation. The issue of the TDS Certificate by the defendant shall satisfy the second condition of Section 19 of the Limitation Act as culled out above.

37. In M/s Utility Powertech Limited (supra), the Court held that the deduction of TDS is not an admission of liability. The same was the ratio in Actal (supra) and in S.P. Brothers (supra). The said judgments would, however, have no application to the facts of the present case. Though deposit of TDS may not act as an acknowledgment of debt by the defendant, it being a payment made by the defendant on account of the plaintiff and on account of a debt, would lead to a fresh period of limitation being computed from the date when the deposit of TDS was made.

38. The Suit therefore, cannot be said to be barred by limitation.

WHETHER COMPOUND INTEREST IS PAYABLE UNDER THE CANCELLATION DEED

39. The plaintiff has claimed that the defendant is liable to pay interest @24% per annum compounded annually under the Cancellation Deed. The learned senior counsel for the plaintiff has submitted that the deposit of TDS by the defendant itself would show that the interest was payable on a compounding basis. In the alternative, he submits that the plaintiff would confine its claim of interest as Simple Interest.

40. The learned senior counsel for the defendant, on the other hand, submits that the Cancellation Deed does not provide for compounding of interest and, therefore, the suit, not being based on the written Agreement, is not maintainable under Order XXXVII of the CPC.

41. Clause 2 of the Cancellation Deed has been reproduced hereinabove. The same does not provide for compounding of interest. The Supreme Court in State of Haryana and Ors v. S.L.Arora and Company, (2010) 3 SCC 690 (though the judgment is overruled on the power of the Arbitral Tribunal to award compound interest post Award), in relation to power of the Court to award compound interest, has observed as under:-

42. The submission of the learned senior counsel for the plaintiff that the amount of TDS deposited would show that interest is payable on a compounding basis, is not prima facie acceptable. As noted hereinabove, the deposit of TDS is not an acknowledgment of debt. In fact, if one has to look at other documents to draw an inference of the interest payable by the defendant to the plaintiff, that itself would be a ground for the defendant to be granted leave to defend the present suit.

43. Similarly, the assertion of the learned senior counsel for the plaintiff that as the defendant had not denied, in its reply to the Legal Notice dated 24.08.2018 of the plaintiff, that the interest was to be paid on compounding basis, the same would amount to an admission, is also not acceptable. A mere non-denial in reply to a Legal Notice cannot be considered as an admission of liability. The plaintiff would still have to prove its own case.

44. Similarly, reliance of the learned senior counsel for the plaintiff on the account conformation statement dated 01.04.2013 or the ledger account of the defendant, without adequate explanation thereof, which would occur only when only parties lead their evidence, cannot be considered as an admission of the fact that the interest was to be paid on compounding basis by the defendant.

45. In The Godhra Electricity Co. Ltd. & Anr. (Supra), relied upon by the learned senior counsel for the plaintiff, the Supreme Court held that in the process of interpretation of the terms of a Contract, the Court can get an assistance from the conduct of the parties. However, the said judgment would not have an application at the present stage, inasmuch as, the parties are yet to prove their respective conduct, which can be done only when the defendant is granted leave to defend the present suit.

46. Faced with the above, the learned senior counsel for the plaintiff, placing reliance on the judgment of the High Court of Bombay in SICOM Ltd. v. Prashant S. Tanna, 2004 SCC OnLine Bom 181, has contended that the plaintiff can always give up and abandon its relief which is beyond the scope of Order XXXVII of the CPC, that is, one which may not fall within the scope of the written Agreement on the basis whereof the suit has been filed. He submits that, therefore, the above issue, in fact, pales into insignificance as the plaintiff is ready to confine its relief only to the grant of Simple Interest at the rate of 24% per annum from the defendant.

47. I find prima facie merit in the submission made. The plaintiff, having found that certain portion of his claim is beyond the scope of Order XXXVII of the CPC, can give up such claim. The same shall of course be with prejudice to the rights of the plaintiff. However, for my observation below, I need not bind the plaintiff to the statement made of giving up part of its claim at the present stage only to have the application of the defendant seeking leave to defend rejected. This is so as I find that the defendant is otherwise also entitled to an unconditional leave to defend the Suit.

PLEA OF SET OFF /ADJUSTMENT

48. Placing reliance on Clause 3 of the Cancellation Deed, the learned senior counsel for the defendant has asserted that the amount claimed by the plaintiff stood adjusted from the amounts that were due from the plaintiff to the defendant against the other contracts between the parties. In support, he has drawn my reference to the affidavits filed on behalf of the plaintiff in the arbitration proceedings between the parties in relation to such other contracts, as also to a Statement of Account, which shows payments being made by the plaintiff to the defendant in August and October, 2015 and even thereafter. He submits that in case any amount was payable by the defendant to the plaintiff, there would have been no occasion for the plaintiff to have made these payments to the defendant.

49. On the other hand, the learned senior counsel for the plaintiff asserts that in terms of Clause 3 of the Cancellation Deed, which has been reproduced hereinabove, it was the sole right and prerogative of the plaintiff to adjust any amount due to the defendant in any other account against the amounts payable by the defendant to the plaintiff under the Cancellation Deed. He submits that, therefore, the defendant cannot insist on adjustment of the amounts. He further submits that the claim of the defendant in the arbitration proceedings is in the nature of damages and, therefore, in any case, adjustment cannot be claimed by the defendant of the amounts that have been claimed by the defendant in such arbitration proceedings.

50. Though, the learned senior counsel for the plaintiff prima facie is correct in his assertion that it is the right of the plaintiff in terms of Clause 3 of the Cancellation Deed to adjust the amounts owed by the defendant under the Cancellation Deed against any amount that the plaintiff may owe to the defendant in other accounts, for the purposes of consideration of the present application, the defendant, by the conduct of the plaintiff, has been able to raise a substantial defence that such amounts may have been adjusted by the plaintiff but are now claimed from the defendant in the present suit.

51. For the above prima facie finding, and at least for the purposes of the present application, the following conduct of the parties is relevant:- (a) the plaintiff has filed the present suit almost at the end of the period of limitation that too based on an extension that may be available to the plaintiff only due to the deposit of the TDS by the defendant. The plaintiff has not even asserted as to the reason for which it did not raise its claim against the defendant at an earlier stage; (b) The affidavits of Sh.Tarun Kathuria, CFO and Head (Finance) of the plaintiff-company filed in the arbitration proceedings show certain amounts being adjusted against the claim of the defendant herein. The exact nature of such adjustments and on what account they were made would, therefore, have to be considered in the present suit. Equally, it would have to be considered why the plaintiff, in spite of claiming that the defendant owed amounts to the plaintiff, continued to make payments to the defendant rather than adjusting the amounts.

52. Testing the above defence and circumstances on the principles laid down by the Supreme Court in B.L.Kashyap (supra) and other judgments, in my opinion, the defendant has been able to show that it has a substantial defence and has raised a triable issue, entitling it to an unconditional leave to defend the present suit.

53. In view of the above, the present application is allowed and the defendant is granted an unconditional leave to defend the present suit. CS(OS) 479/2018 & IA 13144/2018

54. The defendant may file its written statement to the plaint, along with the affidavit of admission/denial of documents filed by the plaintiff, within a period of four weeks from today.

55. The plaintiff may file replication within a period of four weeks of the receipt of the copy of the written statement from the defendant. The replication shall also be accompanied with an affidavit of admission/denial of documents filed by the defendant.

56. List before the learned Joint Registrar (Judicial) for completion of pleadings and for further proceedings on 25th July, 2023.

NAVIN CHAWLA, J. APRIL 26, 2023