Unnati Welfare Organisation v. M/S Safety Energy Solutions Pvt. Ltd. & Anr.

1. This is a Summary Suit filed under Order XXXVII of the Code of Civil Procedure, 1908 (CPC) by the Plaintiff for recovery of debt and liquidated demand in money payable by the Defendants, jointly and severally, to the Plaintiff on a written contract and on a guarantee as embodied in the Deed of Personal Guarantee dated December 19, 2016 and Deed of Settlement dated March 26, 2016 executed between the parties and cheques dated December 31, 2016 issued by the Defendant No. 1 to the Plaintiff.

2. At the outset, I shall narrate a brief factual background of the case. The Plaintiff is a Society registered under the Societies Registration Act, 1860. The Defendant No. 1 is a company closely 2022:DHC:3890 CS(COMM) 39/2020 Page 2 held, family-owned, managed and controlled by the Defendant NO. 2 and his family. The Plaintiff, in order to provide low cost housing to its members on a no-profit no-loss basis, was in the process of purchasing land in L-Zone territory of Delhi so as to develop a group housing complex for its members under the Master Plan, Delhi 2021. The Defendant No. 1 represented to the Plaintiff that it has the expertise and experience to arrange purchase of land required by the Plaintiff. Relying upon the assurance and representation of the Defendant No.1, the Plaintiff entered into a Memorandum of Understanding dated January 22, 2014 with the Defendant No.1 and appointed the Defendant No.1 for the purposes of acquiring land for and on behalf of the Plaintiff in villages of Pandwalan Kalan, Pandwalan Khurd, Daulatpur and Hasanpur in the territory of Delhi. The Defendant No.1 was to act as facilitator for the transactions and identify the lands and negotiate the price with the landowners. After negotiating the price with the landowners, the Defendant No.1 was to take the approval of the Plaintiff before finalising the transaction. Upon the Plaintiff approving the transaction, the Plaintiff would advance part sale consideration to the Defendant No.1 which was to be strictly utilised for making payment to the landowners as advance or part payment. The balance sale consideration was to be paid by the Plaintiff to the said landowners at the time of registration of the title. In accordance with the aforesaid arrangement, the Defendant No.1 identified and with the approval of the Plaintiff finalised sale CS(COMM) 39/2020 Page 3 transaction in respect of six plots of land. Detailsof the said six plots for which sale transactions were finalised is as under:- SI No. Land Owners Village Registration Details 1 Sanjay Kumar Rewla Khanpur 3807 dtd 20.03.2014

3. In accordance with the arrangement, the plaintiff, in good faith advanced part of the sale consideration to the Defendant No.1 for payment to the land owners and with the instructions that the same was to be utilised to pay part sale consideration to the landowners. At the time of registration of the Sale Deed in respect of the plots of land, the Plaintiff paid the balance sale consideration to the landowners. The registration of the sale deeds was effected in the name of the Plaintiff in respect of the plots of land. At the time of registration of the sale deeds, the Defendant No.1 had issued its own cheques in the name of the landowners in respect of two plots namely SI. No. 5 and 6 of the table above, purporting to be out of the advances received by Defendant No.1 from the Plaintiff. CS(COMM) 39/2020 Page 4

4. It is averred that the Defendant No. 1 appropriated part of the said advances by the Plaintiff for its own use and instead issued cheques in favour of the landowners from its own account without ensuring sufficient funds in its account to honour them. The cheques issued by the Defendant No.1 to two of the landowners were dishonoured. The said landowners Mr. Ram Avtar and joint owners Mr. Surinder Singh & Mr. Satish Kumar, in whose favour the cheques were issued and which were dishonoured filed objections to mutation of their plots of land in favour of the Plaintiff and it is only when the objections were filed and notice of objections was made to the Plaintiff that the Plaintiff became aware of the dishonour of the cheques and diversion of funds by Defendant No.1. Despite several opportunities, the Defendant No.1 failed to make good the amounts returned unpaid by the cheques issued by the Defendant No.1 to the two landowners. In such circumstances, the Plaintiff, in respect of one land parcel funded ₹1,27,00,000/- to the first landowner through the Defendant No.1 again on May 20, 2015 to have the mutation of that piece of land carried out. In respect of the second piece of land, the Plaintiff paid ₹2,30,03,558 directly to the landowner and the mutation was settled. The Plaintiff further paid an amount of ₹3,57,942/- on March 31, 2016 towards differential interest. Thus, including TDS amount of ₹3,04,611/- deposited on behalf of the Defendant No. 1, the Plaintiff had advanced ₹2,36,66,111/- to the second landowner. Thus, a total amount of ₹3,63,66,111/- was paid to the two landowners which also included the interest. Thus, as on March 31, CS(COMM) 39/2020 Page 5 2016, a liability of ₹3,63,66,111/- including the interest on the default amount had arisen on the part of the Defendant No.1 in favour of the Plaintiff and interest thereon continued to accrue even after March 31, 2016 on the said amount of ₹3,63,66,111/-. Since the non-payment to the land owners was due to its default, the Defendant No.1 agreed and undertook to reimburse the entire amount together with interest to the Plaintiff as claimed by the Plaintiff. The Plaintiff and the Defendant No.1 agreed to resolve the issue and in pursuance of the agreement to resolve the issue executed Deed of Settlement dated March 26, 2016, in terms of which, the Defendant No.1 handed over two cheques to the Plaintiff, details of which are as under: a. Cheque No. 007722 dated July 31, 2016 for ₹3,59,68,398/- drawn on Corporation Bank, Dwarka Sector-17 Branch, New Delhi being the aggregate default amount in respect of plots of land as mentioned above. b. Cheque No. 007723 dated July 31, 2016 for ₹27,08,736/- drawn on Corporation Branch, Dwarka Sector-17 Branch, New Delhi being the interest accrued.

5. The Defendant No.1 assured, represented and guaranteed to the Plaintiff that the drawees account with the said Bank shall be fully and adequately funded to honour the said cheques as and when the same are presented by the Plaintiff for payment thereof. The Defendant No. 1 further assured that the said cheques shall be duly honoured on presentation and in the event of dishonour of the same or any one of them, the Defendant No.1, apart from it being CS(COMM) 39/2020 Page 6 liable to whatever action under the Negotiable Instruments Act, 1881, Sections 138 to 145, shall also be liable to pay a compensatory interest of ₹ 20,000/- per day till the time the said payment is made by the Defendant No.1 in full and final to the Plaintiff. The Defendants, over and above the assurances and representations made above, assured to secure the debt through the property belonging to the Defendant No.2 at Shop No.5, Ground Floor, Pinnacle Mall, Plot No.3, Sector 10, Dwarka, New Delhi- 110075 measuring 250.83 sq. mtrs. valued at ₹16,00,00,000/- to the Plaintiff. As Tata Financial Services Ltd. had first charge on said property at Dwarka against loan granted by it to the Defendant No. 2, a second charge was to be created on the said property in favour of the Plaintiff after obtaining permission from Tata Financial Services Ltd. The Plaintiff was, in the event of the failure on the part of the Defendant No.1 to honour the payments under the above two cheques, entitled to realise the said outstanding dues by proceeding against the said property by enforcing the second charge thereon in its favour. However, the Defendant did not create the second charge as was assured.

6. It is stated by the learned counsel for the Plaintiff that the terms of settlement deed dated March 26, 2016 were arrived at and entered into by both the parties pursuant to their free will and without any kind of coercion or force on both of them or any one of them and it was agreed and understood that the terms of the Settlement Deed shall remain fully enforceable and binding on both the parties for the entire period till the liability of the CS(COMM) 39/2020 Page 7 Defendant No.1 is fully paid up to the satisfaction of the Plaintiff. The Defendant No.2, also personally guaranteed the due fulfillment of the terms and conditions of the Settlement Deed. However, later, the Defendant No. 1 and 2 requested the Plaintiff not to deposit the cheques dated July 31, 2016 on the due date or any later date as the Defendant No.1 did not have sufficient funds in its bank account, and that the cheques would be dishounoured and the Defendant No. 1 would become liable for criminal proceedings under the Negotiable Instruments Act, 1881.

7. It is stated that the Defendant No.2 assured and guaranteed to the Plaintiff that the Defendant No.2 shall be personally liable for the amount due from the Defendant No.1 to the Plaintiff. The Defendant No.2 further assured and guaranteed to the Plaintiff that the Defendant No.2 was in the process of acquiring land admeasuring 13.831 acres at the villages near Sohna District, Mewat, Haryana from M/s. Bhalotia Shyam Industries Limited, H. No. 682, Sector A[2], Gurgaon. The Defendants assured the Plaintiff that the stamp duty in respect of the said land which was under acquisition was already paid by the Defendant No.2 and that the registration of the said land parcel in favour of the Defendant No.2 shall be duly completed within next 15 days and in any case well before the expiry of the stamp duty payment i.e. by February 18,

2017. The Defendant No.2 assured and guaranteed to the Plaintiff that the said land parcels shall be available for satisfying the dues payable by the Defendant No.1 to the Plaintiff. CS(COMM) 39/2020 Page 8

8. It is further stated by the learned Senior Counsel for the Plaintiff that on the basis of the Personal Guarantee given by the Defendant No.2 to the Plaintiff, the Plaintiff agreed not to deposit the cheques dated July 31, 2016 for encashment or to initiate any civil or criminal proceedings against the Defendant No.1 in this regard. As on December 31, 2016, an amount of ₹4,09,96,334/was due and payable by the Defendant No.1 to the Plaintiff. Accordingly, the Defendant No.1 handed over the following two post-dated cheques to the Plaintiff in replacement of the cheques dated July 31, 2016:a. Cheque No. 016134 dated 31/12/2016 drawn on Corporation Bank for ₹3,63,66,111/- in replacement of Cheque No. 007722 dated July 31, 2016 for ₹3,59,68,398/issued earlier under the Deed of Settlement dated March 26, 2016. b. Cheque No. 016135 dated December 31, 2016 drawn on Corporation Bank for ₹46,30,223/- being the interest accrued.

9. The Defendants assured and guaranteed to the Plaintiff that they shall hand over the original registered documents of the land parcels totaling 6.831 Acres in the villages of Haryana as security, immediately upon registration to the Plaintiff and thereafter. The Defendants further assured and guaranteed to the Plaintiff that in the event of non-payment of the dues, the Defendants shall have the said land parcels executed at the cost of the Defendants in the name of the Plaintiff in settlement of the Defendants within a CS(COMM) 39/2020 Page 9 period of two months from the date of acquisition and registration of the land parcels by the Defendants with a provision for reconveyance. However, the Defendant No. 2 handed over the original registered documents of the land parcel in one village of Barrota vide registration No. 249 dated April 25, 2017 only and he did not carry out the execution in favour of the Plaintiff.

10. The Defendants No.1 and 2 further assured, represented and guaranteed to the Plaintiff that the drawees account with the Bank in respect of the two cheques dated December 31, 2016 shall be fully and adequately funded to honour the said cheques as and when the same were presented by the Plaintiff for payment thereof. The Defendants No. 1 and 2 also assured the Plaintiff that in the event of dishonour of the cheques, the Defendants, apart from being liable to whatever action under the Negotiable Instruments Act, 1881, shall also be liable to pay further compensatory interest @ 18% p.a. to the Plaintiff till the time the said payment was made in fully and finally. Accordingly, the Plaintiff and the Defendants executed the Deed of Personal Guarantee dated December 19, 2016 and the Defendant No. 1 deposited the original title deeds of the property “Land admeasuring 2 Acre 6 Kanal 5 Marla in Khasra No. 18(8-0), 19(3-17), 26(1-3), 23(7-15), 3(1-10) totaling

22 Kanal 5 Marla in the villages Barrota vide registration no. 249 dated 25.04.2017” to the Plaintiff to secure the debt.

11. The Plaintiff presented the aforesaid cheques to Kotak Mahindra Bank, Paschim Vihar Branch, New Delhi, 110063. However, the Plaintiff received a communication dated March 21, CS(COMM) 39/2020 Page 10 2017, from the said Bank, whereby the aforesaid cheques were returned to the Plaintiff as dishonoured on account of insufficient funds.

12. Accordingly, the Plaintiff sent notice dated April 15, 2017 to the Defendants calling upon them to make payment of ₹4,09,96,334/- (₹3,63,66,111/- plus ₹46,30,223/-) within 15 days of receipt of the said notice, failing which the Plaintiff shall proceed with criminal prosecution against the Defendants under section 138 of the Negotiable Instruments Act, 1881. Despite receipt of the said notice, the Defendants failed to pay the said amount, and as such, the Plaintiff initiated criminal proceedings under the Negotiable Instruments Act. 1881 against the Defendants as well as other Directors of the Defendant No. 1 Company, before the Metropolitan Magistrate, Tis Hazari Courts, bearing Complaint Case No. 3553/2017, which is pending.

13. The learned counsel for the Plaintiff also stated that an amount of ₹4,09,96,334/- is due and payable by the Defendants NO. 1 and 2 to the Plaintiff as on December 31, 2016 under the written contract and guarantee between the Plaintiff and the Defendants No. 1 and 2. The Defendants have till date, not paid the said amount. He also stated that the Plaintiff is further entitled to an interest at the rate of 18% per annum as per the contract and the guarantee between the parties on the said amount from January 01, 2017 till the date of actual payment.