Manju Aggarwal v. Prayag Polytech Private Limited & Ors.

III. No amounts were ever received from the plaintiff between the years

IV. A reading of the plaint would show that the sum of Rs.1,50,00,000/allegedly advanced by the plaintiff to the defendants between 1995 and 2010 is a part of Rs.2,50,00,000/- loaned by the plaintiff to the defendant no.1 company, which amount has been duly repaid to the plaintiff.

V. In fact, a loan of Rs.21,00,000/- was given by the defendant no.1 company to the plaintiff, which amount was returned by the plaintiff to the defendant no.1 company on 27th June, 2018. Therefore, there was no reason why the settlement agreement would be signed by the parties on 1st April, 2018.

VI. This Court does not have the territorial jurisdiction to entertain the present suit as the defendant no.1 company is registered in Alwar, Rajasthan and all the other defendants are residents of Haryana.

6. In support of the leave to defend applications filed on behalf of the defendants no.2, 4 and 5, counsel for the said defendants has made the following submissions:-

I. Signatures of the defendants no.2, 4 and 5 are not denied on the settlement agreement, but the aforesaid signatures were obtained under coercion, misrepresentation and undue influence. In this regard, reliance is placed on the letter dated 13th September, 2018 sent by the said defendants.

II. The present suit is barred by limitation. Reliance in this regard is placed on Section 18(1) of Limitation Act, 1963 and the judgment of BANSAL the Supreme Court in Sampuran Singh v. Niranjan Singh, AIR 1999 SC 1047.

III. The plaint is based on vague pleadings. No explanation has been provided as to how the alleged loan of Rs.1,50,00,000/- has become Rs.3,31,00,000/-. Therefore, the present suit is not maintainable under order XXXVII of the CPC.

IV. This Court does not have the territorial jurisdiction to entertain the present suit as the defendant no.1 company is registered in Alwar, Rajasthan and all the other defendants are residents of Haryana.

V. Various triable issues have been raised by the defendants and therefore, unconditional leave to defend should be granted.

7. Per contra, counsel for the plaintiff has made the following submissions:-

I. The settlement agreement was duly signed by all the defendants of their own free will without any force or coercion and pursuant thereto three post-dated cheques were handed over by the defendants to the plaintiff. The letter dated 13th September, 2018 written by the defendants no.2, 4 and 5 is neither addressed to the plaintiff, nor makes any reference to the plaintiff or the settlement agreement dated 1st

II. As regards the plea of limitation, reliance is placed on Section 25(3) of the Indian Contract Act, 1872 and the judgment of the Supreme Court in Kotak Mahindra Bank Ltd. v. Kew Precision Part Private Limited And Ors., (2022) SCC OnLine SC 978.

III. There is no misjoinder of cause of action or parties as all the defendants are signatories to the settlement agreement and therefore, BANSAL all the defendants are jointly and severally liable.

IV. The settlement agreement was executed at Delhi and the cheques were also handed over by the defendants to the plaintiff in Delhi. Therefore, this Court has the jurisdiction to try the present suit.

V. The present suit is maintainable under Order XXXVII of the CPC as the same is based on a written agreement entered into between the parties in terms of which three post-dated cheques were issued by the defendants in favour of the plaintiff.

VI. There is no basis to say that the loan of Rs.1,50,00,000/-, advanced by the plaintiff between the years 1995 to 2010, was a part of Rs.2.50,00,000/- loan advanced by the plaintiff to the defendant no.1 company in 2014. Aforesaid two loans are separate and independent and the same is also evident from a reading of the plaint. The loan of Rs.21,00,000/- given by the defendant no.1 company to the plaintiff was a separate commercial transaction and is independent of the personal loans that are the subject matter of the present suit.

8. I have heard the counsels for the parties and perused the record.

9. The entire case of the plaintiff is based on the settlement agreement entered into between the plaintiff and all the defendants on 1st Therefore, it may be relevant to refer to the relevant clauses of the said agreement: “… The Second Party, Third Party, Fourth Party, Fifth Party, Sixth Party, Seventh Party and the Eighth Party are together referred to as the “Prayag Group”

WHEREAS the First party and the second party/Prayag Group has personal loans under which an amount of Rs.3,31,00,000/- (Rupees BANSAL Three Crores Once Lacs Only) is payable by second party to the first party.

AND WHEREAS the Prayag Group personally requested the first party to grant them time for arranging funds for paying back the due amount of the first party.

AND WHEREAS the board of directors of second party met on 01.04.2018 and discussed the issue of making payments to the first party and unanimously resolved that an amount of Rs.3,31,00,000/- is due and payable to the first party by the second party against the value received. The resolution of board of directors is attached hereto as Annexure-2. AND WHEREAS keeping in view the request made by the Prayag Group, the first party has agreed to enter into this agreement on the following terms and conditions:- NOW THIS AGREEMENT WITNESSETH AS UNDER:-

1. That the second party hereby admits its liability of Rs.3,31,00,000/- to be paid to the first party and the Second Party, Third Party, Fourth Party, Fifth Party and the Sixed Party i.e. the Prayag Group hereby unconditionally agree to pay the said amount through the following cheques:- Cheque Nos. Dated Amounts Drawn on 451814 01.07.2019 1,00,00,000/- CANARA BANK 451815 08.07.2019 1,00,00,000/- -do- 451816 15.07.2019 l,31,00,000/- -do-

2. That the Prayag Group hereby assure and undertakes that the said cheques shall be encashed on their respective due dates and they will not seek any extension. The Third Party, Fourth Party, Fifth Party and the Sixed Party thereby personally undertake that the said cheques BANSAL shall be honoured on their respective due dates and they shall be personally liable, from their own assets, to make good the amount of the said cheques, if the said cheques are cheques are dis-honoured for any reason and for any loss is suffered by the first party/its directors/officers.

3. That the Prayag Group hereby undertakes that they shall render themselves to be liable for all civil and criminal consequences in case of dishonourement of the any of aforesaid cheques.

4. That the Prayag Group has willingly entered into this agreement, without any force or coercion of any kind.”

10. A perusal of the aforesaid clauses of the agreement dated 1st April, 2018 reveals that all the defendants collectively had admitted their joint liability of Rs.3,31,00,000/- towards the plaintiff. It has also been noted in the agreement that the parties have willingly entered into this agreement without any force or coercion of any kind. The agreement bears the signatures of the plaintiff and all the defendants on all the pages, with the defendant no.2 signing the agreement on behalf of the defendant no.1 company. The agreement is also duly witnessed and notarised. Not only have the defendants admitted their liability, they have also unconditionally agreed to pay the aforesaid amount through post-dated cheques totalling to Rs.3,31,00,000/-. The said cheques bear the signatures of the defendants no.2 and 3 as authorised signatories of the defendant no.1. Even though the cheques have been issued by the defendant no.1, the defendants no. 2 to 7 have undertaken that the said cheques would be honoured on their due dates and that they shall remain personally liable through their own assets to make good the loan amount in the event the said three cheques are dishonoured. It is undisputed that the said three post-dated cheques were dishonoured upon BANSAL presentation on their due dates.

11. Defendants no.2, 4 and 5 have admitted their signatures on the agreement and the defendant no.2 has admitted his signature on the cheques, whereas the defendants no.3, 6 and 7 have denied their signatures on the said agreement.

12. Counsel for the defendants no.2, 4 and 5 has placed reliance on the communication dated 13th September, 2018 sent by the defendants no.2, 4 and 5 to contend that the aforesaid agreement was entered into on account of coercion, misrepresentation and undue influence and therefore, does not constitute a valid agreement. These are matters which can only be determined in a trial and therefore, unconditional leave to defend should be granted to the defendants.

13. I have perused the said communication dated 13th September, 2018. The said communication has been sent to the defendants no.1, 3, 6 and 7 and the husband of the plaintiff, Mr.Dinesh Aggarwal, but significantly, not to the plaintiff. There is no reference in this entire communication either to the plaintiff or to the settlement agreement dated 1st April, 2018. From the said communication, it appears that there were various other financial transactions/dealings between the defendants no.1, 3, 6 and 7, and the husband of the plaintiff and the defendants no.2, 4 and 5 have raised their grievances with regard to the same. Also, the said communication is of 13th September, 2018, whereas the settlement agreement was signed on 1st April,

2018. If the defendants no.2, 4 and 5 had signed the settlement agreement under coercion, misrepresentation and undue influence, they would not have waited for a period of more than five months to send this communication. Of course, allegations of coercion, misrepresentation and undue influence BANSAL would have to be proved by the said defendants in the trial.

14. It is submitted on behalf of the counsel for the defendants no.1, 3, 6 and 7 that the defendant no.2 was not authorised to sign the said agreement or the cheques on behalf of the defendant no.1 company. He further submits that the signatures of defendants no.3, 6 and 7 have been forged on the said agreement. Nothing has been placed on record to show that the defendant no.2 was not authorised to enter into an agreement or sign a cheque on behalf of the defendant no.1 company. In view of the fact that the defendants no.2, 4 and 5 have admitted their signatures on the said agreement, I find it hard to believe that the signatures of the defendants no. 3, 6 and 7 have been forged on the same agreement. Once again, allegations of forgery would have to be proved by the said defendants in the trial. Similarly, whether defendant no.2 was authorised to sign on behalf of the defendant no.1 company, would be a matter of trial.

15. It is also pertinent to mention here that a legal notice was issued on behalf of the plaintiff to all the defendants on 16th March, 2020, wherein a reference was made to the settlement agreement dated 1st April, 2018 and the aforesaid three post-dated cheques. However, no response has been given by the defendants to the aforesaid legal notice.

16. As regards the plea of limitation, counsel for the plaintiff has placed reliance on Sub-Section (3) of Section 25 of the Indian Contract Act, 1872, which is set out below: “25. Agreement without consideration, void, unless it is in writing and registered, or is a promise to compensate for something done, or is a promise to pay a debt barred by limitation law.- An agreement made without consideration is void, unless- BANSAL (1)… (2)… (3) it is a promise, made in writing and signed by the person to be charged therewith, or by his agent generally or specially authorized in that behalf, to pay wholly or in part a debt of which the creditor might have enforced payment but for the law for the limitation of suits.”

17. A reference may also be made to illustration (e) to the aforesaid Section, which is set out below:- “(e) A owes B Rs. 1,000, but the debt is barred by the Limitation Act. A signs a written promise to pay B Rs. 500 on account of the debt. This is a contract.”

18. On the other hand, counsel for the defendants have relied upon Section 18(1) of the Limitation Act, 1963 to submit that the present suit is barred by limitation as the acknowledgement of the outstanding loan has been made after the original period of limitation had expired. Section 18(1) of the Limitation Act, 1963 is set out below: “18. Effect of acknowledgment in writing. (1) Where, before the expiration of the prescribed period for a suit or application in respect of any property or right, an acknowledgment of liability in respect of such property or right has been made in writing signed by the party against whom such property or right is claimed, or by any person through whom he derives his title or liability, a fresh period of limitation shall be computed from the time when the acknowledgment was so signed.”

19. The interplay between Section 25(3) of the Indian Contract Act, 1872 and Section 18(1) of the Limitation Act, 1963 was the subject matter of consideration before the Supreme Court in Kotak Mahindra Bank Ltd. (supra). The relevant observations of the Supreme Court are set out as under: BANSAL “30. In this appeal, it is contended that the last offer of 20th December, 2018 was followed by an agreement. Whether there was such agreement or not would have to be considered by the Adjudicating Authority. To invoke Section 25(3), the following conditions must be satisfied:—

(i) It must refer to a debt, which the creditor, but for the period of limitation, might have enforced;

(ii) There must be a distinct promise to pay such debt, fully or in part;

(iii) The promise must be in writing, and signed by the debtor or his duly appointed agent.

31. Under Section 25(3), a debtor can enter into an agreement in writing, to pay the whole or part of a debt, which the creditor might have enforced, but for the limitation of a suit in law. A written promise to pay the barred debt is a valid contract. Such a promise constitutes novation and can form the basis of a suit independent of the original debt, for it is well settled that the debt is not extinguished, the remedy gets barred by passage of time as held by this Court in Bombay Dyeing and Manufacturing Company Limited v. State of Bombay[1].

32. Section 25(3) applies only where the debt is one which would be enforceable against the defendants, but for the law of limitation. Where a debt is not binding on the defendant for other reasons, and consequentially not enforceable against him, there is no question of applicability of Section 25(3).

33. There is a distinction between acknowledgment under Section 18 of the Limitation Act, 1963 and a promise within the meaning of Section 25 of the Contract Act. Both promise and acknowledgment in writing, signed by a party or its agent authorised in that behalf, have the effect of creating a fresh starting of limitation. The difference is that an acknowledgment BANSAL under Section 18 of the Limitation Act has to be made within the period of limitation and need not be accompanied by any promise to pay. If an acknowledgment shows existence of jural relationship, it may extend limitation even though there may be a denial to pay. On the other hand, Section 25(3) is only attracted when there is an express promise to pay a debt that is time barred or any part thereof. Promise to pay can be inferred on scrutinising the document. Only the promise should be clear and unconditional.”

20. A reading of the aforesaid paragraphs would show that a written promise to pay a time barred debt is a valid contract in law and such a promise can form an independent basis for a suit. Noting the distinction between the acknowledgement under Section 18 of the Limitation Act, 1963 and a promise under Section 25 (3) of the Contract Act, the Supreme Court observed that acknowledgement under Section 18 of the Limitation Act has to be within the period of limitation and need not be accompanied by a promise to pay. On the other hand, Section 25(3) of the Indian Contract Act is attracted only when there is an express promise to pay a time-barred debt and the said promise should be clear and unconditional and can be inferred on scrutinising the documents.

21. Applying the aforesaid principles of law to the present case, in my considered view, the settlement agreement qualifies as an agreement under Section 25(3) of Indian Contract Act inasmuch as it is a clear and unconditional promise on behalf of all the defendants to pay a sum of Rs.3,31,00,000/- to the plaintiff. On the face of it, the said agreement has been signed by all the defendants and they have even admitted their joint liability to pay the aforesaid loan to the plaintiff. Therefore, the judgment in Sampuran Singh (supra) would not be applicable to the facts of the present BANSAL case. Whether the loans were given by the plaintiff to the defendants between the years 1995 and 2010, is a matter of trial.

22. The judgment in Rashtriya Mahila Kosh v. International Rural Education & Cultural Association, MANU/DE/9169/2007 relied upon by the defendants has no application in the present case as in the said case the Court granted unconditional leave to the defendant on the ground that the letter written by the defendant was not an unconditional promise but was a conditional offer or proposal and therefore, it could not be conclusively held that the letter was a contract under Section 25(3) of the Contract Act. In the present case, the settlement agreement is not a conditional offer but a clear unconditional promise on behalf of the defendants.

23. Similarly, the judgment in Promod Tandon v. Anil Tandon, 2011 SCC OnLine Del 1701, turned on the ground that the communication by the defendant could not lead to the inference that a promise was made by the defendant to the appellant and therefore, did not fulfil the requirement of Section 25(3) of the Contract Act.

24. In light of the settlement agreement, wherein all the defendants have admitted to the joint liability of the amount claimed in the suit, there is no merit in the submission of the defendants with regard to misjoinder of parties or cause of action.

25. In view of the fact that the settlement agreement was executed between the parties in Delhi and post-dated cheques were also handed over in Delhi, I do not find any merit in the objection raised by the defendants with regard to territorial jurisdiction of this Court at this stage, while considering applications for grant of leave to defend.

26. Since the present suit is seeking recovery of a liquidated amount BANSAL arising out of a written agreement between the parties and dishonoured cheques, the same would be maintainable under the Order XXXVII of the CPC. A reading of the plaint would show that the loan of Rs.2,50,00,000/that was repaid to the plaintiff by the defendant no.1 was separate from the loan of Rs.1,50,00,000/-, which is the subject matter of the present suit.

27. The principles on which the leave to defend has been granted in summary suits filed under Order XXXVII of the CPC have been elucidated by Supreme Court in IDBI Trusteeship Services Ltd v. Hubtown Ltd., (2017) 1 SCC 568. The relevant observations are set out below: “17. Accordingly, the principles stated in paragraph 8 of Mechelec's case will now stand superseded, given the amendment of Order XXXVII Rule 3, and the binding decision of four judges in Milkhiram's case, 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 BANSAL 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.”

28. Applying the aforesaid principles to the facts of the present case, in my view, the present case would be covered under paragraphs 17.[3] and 17.[4] set out above, wherein the defendants have raised defences which are plausible but do not inspire confidence of the Court. Therefore, this is not a case where unconditional leave to defend can be granted to the defendants.

29. In my view, ends of justice would be met if conditional leave to defend is granted to the defendants on deposit of Rs.1,50,00,000/- before the

30. It appears that there are two distinct groups of defendants in the present suit – defendants no. 1, 3, 6 and 7 on one side and defendants no. 2, 4 and 5 on the other side. I am of the view that each of the aforesaid groups of defendants should be directed to deposit 50% share so that one group of defendants is not prejudiced by the act of other group of defendants in not depositing the amount.

BANSAL

31. Accordingly, leave to defend applications filed on behalf of the defendants no.1, 3, 6 and 7 are allowed subject to the said defendants jointly or severally depositing a sum of Rs.75,00,000/- with the Registrar General of this Court within eight weeks from today.

32. Similarly, leave to defend applications filed on behalf of defendants no.2, 4 and 5 are allowed subject to the said defendants jointly or severally depositing a sum of Rs.75,00,000/- with the Registrar General of this Court within eight weeks from today.

33. On failure of the defendants to deposit the amount as directed by the Court, the plaintiff would be entitled to a judgment and decree for a sum of Rs.3,31,00,000/- along with pendente lite and future interest @6% per annum till the date of realisation.

34. Accordingly, I.A. 1304/2021, I.A. 1305/2021, I.A. 1308/2021, I.A 1324/2021, I.A. 1325/2021, I.A. 1326/2021 and I.A. 1963/2021 for leave to defend stand disposed of.

35. Needless to state any observations made herein are only for the purposes of deciding the present applications and would have no bearing on the final adjudication of the suit. CS(OS) 288/2020 I.A. 8709/2020 (u/O-XXXIX R-1 & 2 of CPC), I.A. 8710/2020 (u/O-XXXVIII R-5 of CPC), I.A. 9659/2020 (u/O- XXXVII R- 3(4) of CPC)

36. Upon the defendants depositing the aforesaid amounts as a condition for grant of leave to defend, written statement shall be filed within thirty days of deposit of the aforesaid amounts.

37. The amounts so deposited shall be kept in an interest-bearing fixed deposit by the Registry till further orders.

BANSAL

38. In view of the orders passed above, the interest of the plaintiff in the present suit stands secured and no further orders are required to be passed in I.A 8709/2020 under Order XXXIX Rules 1 and 2 of the CPC and I.A 8710/2020 under Order XXXVIII Rule 5 of the CPC.

39. Both the aforesaid applications stand disposed of.

40. List before the Joint Registrar on 19th January, 2023 for completion of pleadings. AMIT BANSAL, J. NOVEMBER 02, 2022 BANSAL