Amanpreet Kohli v. Pankaj Dayal

SUBMISSIONS ON BEHALF OF THE LEARNED COUNSEL FOR THE PLAINTIFF

10. Based on the above pleadings, the learned counsel for the plaintiff submits that the present suit raises a “commercial dispute” within the meaning of Section 2(1)(c)(i) of the Commercial Courts Act, 2015. He submits that both, the plaintiff and the defendant, are engaged in the business of Real Estate Development and Constructions and therefore are a “Merchant”. The loan transaction constitutes ordinary transactions of the merchants and, therefore, any claim thereon falls within the ambit of the term “commercial disputes”. He further submits that the defendant in his written statement has also admitted that there have been past transactions between the plaintiff and the defendant of similar nature, therefore, the present transaction was not a one-of transaction, and the present suit raises a "commercial dispute” as defined in the Commercial Courts Act. In support he places reliance on the judgments of the High Court of Calcutta in South City Projects (Kolkata) Ltd. v. Ideal Real Estates Pvt. Ltd., MANU/WB/0270/2021; and Padma Logistics & Khanij Pvt. Ltd. v. Ideal Unique Realtors Pvt. Ltd., 2022 SCC OnLine Cal

126.

11. The learned counsel for the plaintiff further submits that the defendant has admitted the execution of the Loan Agreement, Promissory Note, Receipt, as also the three post-dated cheques. Therefore, the defence of the defendant that these documents are forged or fabricated is untenable. He submits that the defendant has not disclosed any particulars, as required under Order VI Rule 4 of the CPC, of the date, time, and place of the alleged fraud. He submits that in the absence of such pleadings, no credence can be given to the assertion of the defendant. In support he places reliance on the judgments of Bishundeo Narain & Ors. v. Seogeni & Jugernath, MANU/SC/0059/1951 and Ranganayakamma & Another v. K.S.Prakash (D) by LRs & Others., (2008) 15 SCC 673.

12. He further submits that, in any case, oral evidence cannot be allowed to impugn the above documents. In support he places reliance on the Roop Kumar v. Mohan Thedani, (2003) 6 SCC 595.

13. The learned counsel for the plaintiff further asserts that the plea of the defendant that the plaintiff has been unable to show the source of funds through cogent evidence, is also ill-founded. He submits that in terms of Section 139 of the NI Act, there is a presumption in favour of the due execution of the negotiable instrument for consideration. The onus of proof cannot be placed on the plaintiff to prove the source of funds as once the plaintiff has been able to show that there was an admitted business relationship between the parties, the „reverse onus‟ clauses become operational, and the obligation shifts upon the defendant to discharge the presumption imposed upon him. In support he places reliance on Kalamani Tex & Ors. v. P. Balasubramanian,(2021) 5 SCC 283.

14. He submits that the defendant has failed to raise any cogent or probable defence and, therefore, in terms of Order XIIIA of the CPC, the plaintiff is entitled to a Summary Judgment in his favour. He submits that even if this Court reaches a conclusion that the defendant has raised some defence, this would be a fit case where the defendant should be directed to disclose his assets on Oath and to provide adequate security for the satisfaction of the decree that may be passed in favour of the plaintiff. In support he places reliance on Uttam Singh Duggal & Co. Ltd.v. Union Bank of India & Ors., MANU/SC/0485/2000; Rahul S. Shah v. Jinendra Kumar Gandhi & Ors., (2021) 6 SCC 418; and IDBI Trusteeship Services Ltd. v. Hubtown Ltd.,(2017) 1 SCC 568.

SUBMISSIONS ON BEHALF OF THE LEARNED COUNSEL FOR THE DEFENDANT

15. On the other hand, the learned counsel for the defendant, placing reliance on the judgment of this Court in Kailash Devi Khanna and Ors v. DD Global Capital Ltd. and Ors., 2019 SCC OnLine Del 9954; and the judgment of the High Court of Calcutta in Ladymoon Towers Private Limited v. Mahendra Investment Advisors Private Limited, MANU/WB/0547/2021; and of the High Court of Bombay in Glasswood Realty Pvt. Ltd. & Ors. V. Chandravilas Kailashkumar Kothari, 2021 SCC OnLine Bob 5032, submits that as the plaintiff does not claim himself to be a „financer‟, the alleged loan transaction would not fall within the scope of the definition of “commercial dispute” as defined in Section 2(1)(c)(i) of the Commercial Courts Act, 2015.

16. On merit, he submits that the documents relied upon by the plaintiff in support of his claim have been forged on blank documents that were got signed by the plaintiff from the defendant in relation to the other loan transaction. He submits that this is also evident from the fact that there are cutting/additions made in the documents like the cheque number in the Loan Agreement, and the particulars in the receipt and the Promissory Note. He submits that even the cheques, apart from the signature of the defendant, do not bear the handwriting of the defendant.

17. He further submits that the plaintiff has also relied upon a forged and fabricated Deed of Equitable Mortgage and the alleged Cancellation Deed thereof. He submits that this forgery is evident from the fact that these documents are claimed to have been notorized, however, the stamp of the Notary on these documents bear different dates of expiry of Notary‟s licence. He submits that the Cancellation Deed also does not state any repayment of the loan by the plaintiff for release of the mortgage. The said Cancellation Deed again has been notorized by the same Notary, and the stamp of the Notary again bears different expiry date of Notary Licence on different pages of the Cancellation Deed. He submits that the said documents have been fabricated as the plaintiff could not answer for the source of funds for the lending of such a huge amount to the defendant as alleged.

18. Based on the above, the learned counsel for the defendant submits that the defendant has been able to raise a substantial defence and the present suit does not deserve a Summary Judgment.

ANALYSIS AND FINDINGS OF THE COURT

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

20. The first issue that needs to be determined is whether the present suit is a suit relating to a „commercial dispute‟ as defined in Section 2(1)(c)(i) of the Commercial Courts Act. Section 2(1)(c)(i) of the Commercial Courts Act is reproduced hereinbelow:- ―2. Definitions. (a) & (b) xxx xxx (c) "commercial dispute" means a dispute arising out of--

(i) ordinary transactions of merchants, bankers, financiers and traders such as those relating to mercantile documents, including enforcement and interpretation of such documents;‖

21. A reading of the above provision would show that a dispute relating to mercantile documents, including enforcement and interpretation of such documents, arising out of ordinary transactions of merchants, bankers, financiers and traders, shall fall within the definition of „commercial dispute‟.

22. In Ambalal Sarabhai Enterprises Limited v. K.S. Infraspace LLP and Another, (2020) 15 SCC 585, the Supreme Court observed that the question of whether the suit falls within the scope of a „commercial dispute‟, as defined under the Commercial Courts Act, cannot be dealt with in abstract. Instead, the nature of the dispute and the jurisdiction to try the same is to be reflected in the suit itself, since in a civil suit, the pleadings, namely, averments in the plaint would, at the outset, be relevant to confer jurisdiction. It was further held that the very purpose for which the Commercial Courts Act has been enacted is to expedite the adjudicatory process and to place the trial of the suits relating to Commercial Dispute on a fast track. The provisions of the Act are, therefore, required to be strictly construed, as, if the provisions are given a liberal interpretation, the object behind the Act will be defeated.

23. In South City Project (Kolkata) Ltd. (supra), a learned Single Judge of the Calcutta High Court, in relation to a similar transaction of loan, held as under:- ―24. So far as the Act of 2015 is concerned, the plaintiff is a legal entity incorporated under the provisions of the Companies Act, 1956 and is engaged in the business of real estate development. The defendant is also such entity and engaged in similar nature of business as that of the plaintiff. The plaintiff has disclosed its memorandum of association which in its objects clause permits the plaintiff to lend and advance money. The transaction that the plaintiff has entered into therefore cannot be said to be ultra vires the objects clause of the memorandum of the plaintiff.

25. In the facts of the present case, the disputes in the suit can be held to fall within Section 2(1)(c)(i) of the Act of 2015. A real estate developer will have developed flats as stock in trade. While such developer is selling the flats in its stock it is a trader or a merchant of such flats. A real estate developer has lent and advanced money to another real estate developer in its ordinary course of business. Both do not suffer from any legal impediment preventing either of them to enter into the transaction. Whether the dispute involved in the suit is a 'commercial dispute' or not within the meaning of the Act of 2015 depends upon the facts and circumstances of each case. In Swadha Builders Private Limited (supra) in the facts of that case, the Court had transferred the suit under Section 15 of the Act of 2015 to the Commercial Division. Following the ratio of Ambalal Sarabhai (supra) of giving a restrictive construction to the words used in Section 2 (1)(c)(i) of the Act of 2015 it cannot be said that the suit does not involve a commercial dispute.

26. Neither the word 'merchant' nor the word 'trader' has been defined in the Act of 2015. The ordinary meaning of such words as understood in the commercial world have to be applied more so since, the provisions of the Act of 2015 deals with commercial dispute. The authorities that the parties have cited on this subject therefore need not be discussed at length. Since the Court has held that, the disputes between the parties are commercial disputes within the meaning of section 2(1)(c)(i) of the Act of 2015, the question whether, the definition of service as envisaged under the Consumer Protection Act, 1986 for the Goods and Services Tax Act as introduced by the Finance Act, 1994 need not be discussed. The authorities cited at the bar by the parties on such score also need not be discussed as being irrelevant, in the facts and circumstances of the present case.

24. In Padma Logistic & Khanij Pvt. Ltd., (supra), another learned Single Judge of the Calcutta High Court, again, in relation to a transaction of loan, has observed as under:- ―12. I do not find merit in the argument of the respondent, that this is not a "commercial dispute" within the meaning of the Commercial Courts Act, 2015. On the contrary, I am of the view that this is a classic commercial dispute which falls within the ambit of Section 2(c)(i) of the Commercial Courts Act, 2015 read with Explanation (a) of Section 2(c) of the Act. The case cited by the respondent of Ladymoon Towers Pvt. Ltd. (Supra) is inapposite and distinguishable to the facts of the instant case. In the said decision, it was held that, the loan transaction was a "friendly" of "hand" loan and had been advanced without execution of any documents or mercantile documents. I find that, in the facts of the instant case, there is more than one document executed by the parties to support the conclusion that this is a commercial dispute and the respondent has admitted its liability towards the petitioner both in respect of principal and towards interest. I also find that the facts of the instant case, pertain to an ordinary transaction for realisation of monies and that there are mercantile documents which have been executed by and between the parties. I am also of the view that the negotiations and documents which merchants undertake ought not to depend on the subtleties and niceties of law but are best left to their commercial wisdom.‖

25. A reading of the above judgments would show that where the loan transaction is not a „friendly loan‟, but is, in fact, supported with proper documentation, like a Loan Agreement, a Promissory Note, Receipt, and the post-dated cheques for the repayment thereof, as is being alleged in the present suit; and the transaction is between two merchants, that is, persons whose job it is to buy and sell goods, in the present case – real estate; and the suit raises a dispute arising out of ordinary transactions of merchants, including enforcement of the documents executed in the course of such transaction, like in the present case, the dispute would fall within the meaning of the term „commercial dispute‟ as defined in Section 2(1)(c)(i) of the Commercial Courts Act.

26. In the present case, and as noted hereinabove, the plaintiff in his plaint has asserted that he is engaged in the business of Real Estate Development and Construction. The defendant is also engaged in the Real Estate business. It is alleged by the plaintiff that the loan was extended to the defendant by the plaintiff on the representation of the defendant that he required financial assistance to tide over his financial crises. The loan transaction is supported by the alleged loan Agreement, Receipt, Promissory Note and the post-dated cheques of the defendant, which would be ordinary transaction of merchants and financers. The loan carried interest and, therefore, was not a „friendly loan‟. The present suit has, therefore, been rightly filed by the plaintiff as raising a „commercial dispute‟.

27. In Kailash Devi Khanna (supra), a learned Single Judge of this Court has rightly held that all suits for recovery of monies cannot fall under Section 2(1)(c)(i) of the Commercial Courts Act; where the suit is not based on any transaction relating to Mercantile Document, such suit cannot be considered as a suit raising a „commercial dispute‟. As noted hereinabove, such is not the case in the present suit.

28. In Ladymoon Towers Pvt. Ltd. (supra); and Glasswood Realty Pvt. & Ors. (supra), the High Court of Calcutta and the High Court of Bombay respectively were considering suits where the plaintiff had admitted to have extended a „friendly loan‟ to the defendant therein. Therefore, the said judgments cannot come to the aid of the defendant inasmuch as, in the present case, the alleged loan transaction is not only supported by Mercantile Documents, but as per the plaintiff, also carried interest, which would be an antithesis to a „friendly loan‟.

29. I, therefore, find no merit in the objection of the defendant that the present suit does not fall within the scope of a „commercial dispute‟ as defined in the Commercial Courts Act.

30. Now coming on to the merit of the present application, Order XIIIA of the CPC, as applicable to „commercial dispute‟ of a specified value, is reproduced hereinbelow:- ―ORDER XIII-A Summary Judgment

1. Scope of and classes of suits to which this Order applies. — (1)This Order sets out the procedure by which Courts may decide a claim pertaining to any Commercial Dispute without recording oral evidence. (2) For the purposes of this Order, the word ―claim‖ shall include— (a) part of a claim; (b) any particular question on which the claim (whether in whole or in part) depends; or

(c) a counterclaim, as the case may be.

(3) Notwithstanding anything to the contrary, an application for summary judgment under this Order shall not be made in a suit in respect of any Commercial Dispute that is originally filed as a summary suit under Order

XXXVII.

2. Stage for application for summary judgment.—An applicant may apply for summary judgment at any time after summons has been served on the defendant: Provided that, no application for summary judgment may be made by such applicant after the Court has framed the issues in respect of the suit.

3. Grounds for summary judgment.—The Court may give a summary judgment against a plaintiff or defendant on a claim if it considers that–– (a) the plaintiff has no real prospect of succeeding on the claim or the defendant has no real prospect of successfully defending the claim, as the case may be; and (b) there is no other compelling reason why the claim should not be disposed of before recording of oral evidence.

6. Orders that may be made by Court.—(1) On an application made under this Order, the Court may make such orders that it may deem fit in its discretion including the following:— (a) judgment on the claim; (b) conditional order in accordance with Rule 7 mentioned hereunder;

(c) dismissing the application;

(d) dismissing part of the claim and a judgment on part of the claim that is not dismissed; (e) striking out the pleadings (whether in whole or in part); or (f) further directions to proceed for case management under Order XV-A. (2) Where the Court makes any of the orders as set forth in sub-rule (1) (a) to (f), the Court shall record its reasons for making such order.

7. Conditional order.—(1) Where it appears to the Court that it is possible that a claim or defence may succeed but it is improbable that it shall do so, the Court may make a conditional order as set forth in Rule 6 (1) (b). (2) Where the Court makes a conditional order, it may:— (a) make it subject to all or any of the following conditions:—

(i) require a party to deposit a sum of money in the Court;

(ii) require a party to take a specified step in relation to the claim or defence, as the case may be;

(iii) require a party, as the case may be, to give such security or provide such surety for restitution of costs as the Court deems fit and proper;

(iv) impose such other conditions, including providing security for restitution of losses that any party is likely to suffer during the pendency of the suit, as the Court may deem fit in its discretion; and (b) specify the consequences of the failure to comply with the conditional order, including passing a judgment against the party that have not complied with the conditional order.

8. Power to impose costs.—The Court may make an order for payment of costs in an application for summary judgment in accordance with the provisions of sections 35 and 35A of the Code.‖

31. A reading of Rule 3 of Order XIIIA would show that the Court may give a Summary Judgment where the defendant has no real prospect of successfully defending the claim. The Court may, in terms of Rule 6(b) read with Rule 7 of Order XIIIA, instead of passing a judgment on the claim, pass a conditional order where it is of the opinion that the defence may succeed, but it is improbable that it shall do so. Such conditional order may require a party to deposit a sum of money in Court or give such security or surety, as the Court may deem proper.

32. Though in relation to provision of Order XXXVII of the CPC, the Supreme Court in IDBI Trusteeship Services Ltd. (supra), laid down the principle applicable to the said provision as under:- ―17. Accordingly, the principles stated in para 8 of Mechelec case [Mechelec Engineers & Manufacturers v. Basic Equipment Corpn., (1976) 4 SCC 687] will now stand superseded, given the amendment of Order 37 Rule 3 and the binding decision of four Judges in Milkhiram case [Milkhiram (India) (P) Ltd. v. Chamanlal Bros., AIR 1965 SC 1698: (1966) 68 Bom LR 36], as follows:

17.1. If the defendant satisfies the court that he has a substantial defence, that is, a defence that is likely to succeed, the plaintiff is not entitled to leave to sign judgment, and the defendant is entitled to unconditional leave to defend the suit.

17.2. If the defendant raises triable issues indicating that he has a fair or reasonable defence, although not a positively good defence, the plaintiff is not entitled to sign judgment, and the defendant is ordinarily entitled to unconditional leave to defend.

17.3. Even if the defendant raises triable issues, if a doubt is left with the trial Judge about the defendant's good faith, or the genuineness of the triable issues, the trial Judge may impose conditions both as to time or mode of trial, as well as payment into court or furnishing security. Care must be taken to see that the object of the provisions to assist expeditious disposal of commercial causes is not defeated. Care must also be taken to see that such triable issues are not shut out by unduly severe orders as to deposit or security.

17.4. If the defendant raises a defence which is plausible but improbable, the trial Judge may impose conditions as to time or mode of trial, as well as payment into court, or furnishing security. As such a defence does not raise triable issues, conditions as to deposit or security or both can extend to the entire principal sum together with such interest as the court feels the justice of the case requires.

17.5. If the defendant has no substantial defence and/or raises no genuine triable issues, and the court finds such defence to be frivolous or vexatious, then leave to defend the suit shall be refused, and the plaintiff is entitled to judgment forthwith.

17.6. If any part of the amount claimed by the plaintiff is admitted by the defendant to be due from him, leave to defend the suit, (even if triable issues or a substantial defence is raised), shall not be granted unless the amount so admitted to be due is deposited by the defendant in court.

33. In Uttam Singh Dugal (supra), the Supreme Court held that the object of Order XII Rule 6 of the CPC is to enable a party to obtain a speedy judgment at least to the extent of the relief to which, according to the admission of the defendant, the plaintiff is entitled. It was held that one should not unduly narrow down the meaning of this Rule as the object is to enable a party to obtain speedy judgment, and where one party has made a plain admission entitling the other to succeed, it should apply. It should also apply where it is impossible for the party making such admission to succeed.

34. Applying the above test to the facts of the present case, the following considerations emerge for determining the present application:a) The plaintiff claims to have given a loan of Rs. 4,30,00,000/-Crores to the defendant in cash; b) Though the Loan Agreement, Receipt, Promissory Note and the post-dated cheques are admittedly signed by the defendant, there are handwritten insertions in the same, which, the defendant claims, are not in his handwriting. At the same time, the Loan Agreement contains the assertion in a typed form that an amount of Rs. 4,30,00,000/- has been extended as a loan to the defendant and is to be repaid along with “lumpsum interest/profit of Rs. 20,00,000/- (Rupees Twenty Lakhs only)”; the name of the bank from which the post-dated cheques have been issued is also in a typed form; c) The defendant in his written statement has admitted to have taken a loan of around Rs.50-60 lakhs from the plaintiff between 2013-14 but claims to have returned substantial amount of the same, however, neither the details of such loan transaction nor of its repayment have been mentioned or substantiated, either in the written statement or through other documents; d) The defendant alleges that the alleged Loan Agreement dated 01.09.2016 was forged over blank sheets of paper as the plaintiff used to take defendant‟s signatures on blank documents/blank sheets of paper, blank cheques, etc., on the pretext of extending the period of another loan which was taken by the defendant. However, such defence from the defendant, who is admittedly a man of business, appears more fanciful than real. When and how these blank sheets of paper were given to the defendant by the plaintiff is also not mentioned. It is only a bald assertion without any details to support the same; e) At the same time, there is a serious doubt on the alleged Memorandum of Equitable Mortgage dated 25.08.2016 and the Deed of Cancellation dated 11.10.2017, based on the Stamp of the Notary that these documents bear and the very nature of the transaction, wherein, again the amount is supposed to have been extended in cash by the uncle of the plaintiff to the father of the plaintiff, and thereafter, the Equitable Mortgage cancelled without mentioning any return of the said loan. The documents bear the stamp of the Notary, which on one page gives the expiry date of his license as 03.06.2019, while on the other page gives date of expiry of license as 03.06.2024; f) Though, the learned counsel for the plaintiff is correct in his submission that a presumption under Section 118 read with Section 139 of the NI Act would arise of the cheques been issued for valid consideration, the same is rebuttable. In Kalamani Tex (supra), the Supreme Court held that a probable defence needs to be raised, which must meet the standard of “preponderance of probability”, and not mere possibility; a bare denial of passing of consideration would not aid the defendant. The stage of substantiating the defence, however, is yet to arrive in the present case; g) What is also important is that the alleged loan has been claimed by the plaintiff to have been given in cash to the defendant. Therefore, barring the documents in question, authenticity of which is disputed by the defendant, there is no other proof of such huge amount been extended as a loan by the plaintiff to the defendant.

35. In view of the above discussion, I find that while the defence raised by the defendant may succeed, however, it appears to be highly improbable to do so.

36. Accordingly, exercising powers under Rule 6(1)(b) read with Rule 7 of Order XIIIA of the CPC, as applicable to „commercial dispute‟, the defendant is directed to deposit a sum of Rs.4,50,00,000/as was mentioned in the alleged Loan Agreement to be payable by the defendant, in Court, within a period of four weeks of this order, failing which the defence of the defendant shall stand closed and the plaintiff shall be entitled to a decree of the amount claimed. In case, the defendant deposits the amount in compliance with this order, the Registry is directed to invest it in an interest bearing fixed deposit for a period of one year with automatic renewal.

37. As a post script, this case presents very peculiar facts wherein both, the plaintiff as also the defendant, admit to having transacted in huge amounts in cash. While the plaintiff claims to have extended a loan of a staggering amount of Rs.4,30,00,000/- in cash to the defendant, the defendant admits to having taken a loan of Rs.50-60 lakhs from the plaintiff, again in cash. Both the parties, for their above claims, have not filed their Income Tax Returns or any bank documents showing availability of such huge amounts in cash. It prima facie appears that these amounts were unaccounted cash. The transaction also appears to be in violation of Section 269SS of the Income Tax Act, 1961. The Court, therefore, cannot shut its eyes and become party to a violation of law.

38. For the above reason, though on merit the adjudication of the Suit shall proceed, it is directed that a copy of the file of the present Suit, including the defence of the defendant, be forwarded to the Chief Commissioner of Income Tax, Delhi, who may, if so advised, institute an inquiry into the accounts of the parties to the Suit so as to determine if there is a case of evasion of tax, and if so, take appropriate action thereon.

39. The application is disposed of in the above terms.

40. List on 12th July, 2023 before the learned Joint Registrar (Judicial). NAVIN CHAWLA, J. MARCH 27, 2023/Arya/s