Dinesh Kumar Agrawal vs Jayant B. Soni
2021 Latest Caselaw 2859 Bom

                                                             12-sjl-6368-2020.doc




          IN THE HIGH COURT OF JUDICATURE AT BOMBAY
              ORDINARY ORIGINAL CIVIL JURISDICTION

            SUMMONS FOR JUDGMENT (L) NO.6368 OF 2020
                                IN
             COMMERCIAL SUMMARY SUIT NO.312 OF 2020
                           ALONG WITH
             INTERIM APPLICATION NO.2372 OF 2020 (NOB)

Dinesh Kumar Agrawal                                 ...Applicant
     In the matter between
Dinesh Kumar Agrawal                                 ...Plaintiff
           vs.
Jayant B. Soni                                       ...Defendant

Mr. Girish Kedia, for the Plaintiff
Mr. A. Narula i/b. Jhangiani Narula & Associates, for the
Defendant.

                         CORAM : N. J. JAMADAR, J.

DATE : FEBRUARY 12, 2021

ORAL ORDER

. This Commercial Division Summary Suit is instituted for

recovery of a sum of Rs. 1,55,62,500/- along with interest @ 15%

p.a on the principal amount of Rs. 1,50,00,000/- from the date of

the suit till realization.

2. The material averments in the Plaint can be stated in brief

as under:

a] The Plaintiff trades in edible oil. The Defendant deals in the

business of development and construction under the name and

Vishal Parekar, P.A. ...1 12-sjl-6368-2020.doc

style of M/s. Joy Legend. At the request of the Defendant, through

a common friend, the Plaintiff had advanced a sum of Rs.

1,50,00,000/- to the Defendant in between 17 th January, 2019 to

7th February, 2019 through banking channels. The Defendant had

agreed to repay the loan amount along with interest @ 15% p.a.

b] The Defendant had acknowledged the liability to re-pay the

loan amount and the interest accrued thereon by executing a

Balance Confrmation Letter dated 1st April, 2019. The Defendant

had drawn a cheque bearing No. 738226 payable on 24 th July,

2019 for the sum of Rs.1,68,750/- towards interest accrued on the

frst tranche of advance of Rs. 50 Lakhs. However, the said cheque

was returned unencashed on account of insuffciency of funds.

After repeated persuasion, Defendant eventually issued six

cheques; three towards repayment of the principal amount of Rs.

50 Lakhs each, and the rest three towards payment of the interest

accrued thereon aggregating to Rs.5,62,500/-. On presentment

the said chequs were returned unpaid on account of insuffciency

of funds vide cheque return memo dated 4th February, 2020.

c] The Plaintiff demanded payment of the amount covered by

the dishonoured cheques by addressing notice dated 8 th February,

2020. The notice was duly served on the Defendant on 11 th

Vishal Parekar, P.A. ...2 12-sjl-6368-2020.doc

February, 2020. The Defendant neither complied with the demand

nor gave reply to the notice. Hence, the Plaintiff was constrained

to institute the suit for recovery of the outstanding amount along

with further interest on the basis of negotiable instruments. The

Defendant entered appearance upon being served with the writ of

summons. Thereupon, the Plaintiff has taken out this Summons

for Judgment.

3. The Plaintiff has also fled an Interim Application No.2372 of

2020 for attachment before the judgment under Order XXXVIII

Rule 5 of the Code.

4. The Defendant fled an affdavit in reply and sought an

unconditional leave to defend the suit. The Defendant has

contested the claim of the Plaintiff. Unconditional leave to defend

the suit is sought on two principal counts. One, the suit is not

based on dishonoured cheques as averred by the Plaintiff. The

Plaintiff had, in fact, advanced the loan against the promissory

note. The transaction is thus barred by the provisions contained

in Maharashtra Money Lending (Regulation) Act, 2014 (the Act,

2014), as the Plaintiff has been dealing in the business of money

Vishal Parekar, P.A. ...3 12-sjl-6368-2020.doc

lending without a valid licence. The debt is thus not legally

enforceable. Two, the debt has not become due and payable as the

loan was advanced for a term of three years. The Plaintiff has

misused the custody of the cheques delivered by way of security.

Since there are multiple triable issues, the Defendant is entitled to

an unconditional leave to defend the suit.

5. In the backdrop of the aforesaid pleadings, I have heard Mr.

Kedia, the learned counsel for the Plaintiff and Mr. Narula, the

learned counsel for the Defendant at some length.

6. To start with, the second ground of the loan having not

become due and payable. There is a contention in the affdavit in

reply to the effect that the Plaintiff had advanced unsecured loan

for a term of three years and thus the debt is not due. The

cheques, which were dishonored on presentment, were issued by

way of securities for repayment of the said loan amount. The

contemporaneous conduct and documents militate against the

Defendant's claim. As indicated above, the Defendant had drawn a

cheque for the sum of Rs. 1,68,750/- on 24 th July, 2019 itself. As

the said cheque was returned un-encashed a demand notice was

Vishal Parekar, P.A. ...4 12-sjl-6368-2020.doc

served on the Defendant on 30th September, 2019. Evidently, the

amount covered by the cheque constituted the interest accrued on

a part of the loan amount. Moreover, the Defendant had drawn

two cheques apiece towards repayment of the principal amount of

Rs. 50,000,00/- and the interest accrued thereon, on 12 th

January, 2020, 20th January, 2020 and 2nd February, 2020. All

the cheques were returned un-encashed on 4 th February, 2020.

The demand notice calling upon the Defendant to pay the amount

covered by the aforesaid six dishonored cheques was served on

11th February, 2020.

7. The stoic silence on the part of the Defendant to join the

issue by giving an appropriate reply to the frst demand notice

dated 27th September, 2019 and second demand notice dated 8 th

February, 2020, cannot be said to be inconsequential . Had the

loan been advanced for a term of three years, the Defendant would

not have missed to contest and controvert the demand at frst

possible opportunity. Conversely the presumptions contained in

section 118 of the Negotiable Instrument Act, 1881 come to the aid

of the Plaintiff. In the absence of any justifable material, the

gratuitous contention that the loan was advanced for a term of

Vishal Parekar, P.A. ...5 12-sjl-6368-2020.doc

three years and thus had not fallen due is an illusory defence.

8. On the frst count of the transaction in question being one of

money lending, Mr. Kedia would urge that the said defence is also

a sham and moonshine defence and, therefore, the Defendant is

not entitled to leave to defend the suit. Mr. Kedia would submit

that the Defendant has raised the contention of illegal money

lending just to shore up the defence with a view to obtain leave to

defend the suit.

9. In opposition to this Mr. Narula, the learned counsel for the

Defendant strenuously urged that the averments in the Plaint

unmistakably indicate that the suit is not based on the

dishonored cheques. The Plaintiff is guilty of making disingenuous

pleadings with a view to suppress the fact that the loan was

advanced against a promissory note. Admittedly, the cheques were

drawn after a considerable period of the advance. Thus, the loan

cannot be said to have been advanced against the cheques. Once

it is conceded that the loan was advanced against a promissory

note, according to Mr. Narula, the transaction, falls outside the

purview of exclusionary clause (j) of Section 2(13) of the Act, 2014.

Vishal Parekar, P.A.                                                       ...6
                                                           12-sjl-6368-2020.doc

10. Mr. Kedia, the learned counsel for the Plaintiff joined the

issue by canvassing a submission that there is not an iota of

material to justify an inference that the Plaintiff deals in the

business of money lending. Consequently, as the suit is instituted

on the basis of dishonored cheques, the underlying transaction is

of no consequence. Thirdly, it is not the requirement of law that

the loan should be advanced against the cheque or a bill of

exchange instantaneously drawn.

11. To bolster up the aforesaid submissions, the learned counsel

for the Plaintiff placed reliance on the judgment of a learned

single Judge of this Court in the case of M/s.Ashok Commercial

Enterprises and Anr. vs. Parekh Aluminex Limited 1, and the

judgment of the Appeal Bench in the case of Parekh Aluminex

Limited vs. M/s.Ashok Commercial Enterprises 2 wherein the

judgment of the single Judge was upheld. Reliance was also

placed on another judgment of learned single Judge in the case of

Motilal Laxmichand Salecha vs. M/s. Mour Marbles Industries

Pvt. Ltd. & Ors.3 and the judgment of the Appeal Bench in the

case of Mour Marbles Industries Pvt. Ltd. vs. Motilal Laxmichand

1 Summons for Judgment No.21 of 2013 Dt.24-02-2014 2 2015(2) ALL MR 679.

3 Summons for Judgment No.64 of 2016 Dt.18-04-2018

Vishal Parekar, P.A. ...7 12-sjl-6368-2020.doc

Salecha4 wherein the judgment of the learned single Judge was

upheld. Support was also sought to be drawn from the

observations of the learned single Judge in the case of Tradelink

Exim (India) Pvt. Ltd. vs. Tulip Land and Developers Pvt. Ltd. 5

12. On the aspect of lending of money, as a business, the

learned counsel for the Plaintiff sought to place reliance on the

judgment of this Court in the case of Jwaladutta Jankidas HUF

vs. Jayant Bhavanji Soni and Ors.6 In the said case, this Court

after adverting to the previous pronouncements has observed,

inter alia, that:

"This Court has consistently held that mere advance of money on interest by itself is not suffcient to bring the case within the tentacles of the provisions of Money Lending Act, 2014. An advance made bonafde by any person who carries on any business if such advance is made in the regular course of business is excluded by clause (l) provided the primary object should not be lending of money, on interest. To qualify as a business, a course of lending money would require the elements of system, continuity and repetition. One or few instances of lending money on interest may not satisfy the description of lending money as a business."

13. A useful reference, in this context, can also be made to a

4 Commercial Appeal (L) No.248 of 2018 Dt.11-06-2018 5 2018(3) ALL MR 525.

6 Summons for Judgment (L) No.91 of 2019 Dt.20-03-2020

Vishal Parekar, P.A. ...8 12-sjl-6368-2020.doc

judgment of this Court in the case of Base Industries Groups &

Anr. vs.Mahesh P. Raheja & Ors. 7 wherein the learned single

Judge had traced the pronouncements on the transactions which

fall within the mischief of money lending and culled out the legal

propositions in the following words:

"36. From this discussion, the following propositions emerge:

(a) Not every loan is axiomatically a money-lending transaction for the purposes of the 1946 or the 2014 Acts. There is no such presumption in law.

(b) It is doing of the 'business of money-lending' that attracts the provisions of the statute. In interpreting the phrase, the correct emphasis is on the word 'business', not 'money-lending'. It is the word 'business', and not the expression 'money-lending', that is determinative. Simply put, every instance of lending money is not money-lending. Not every lender is a Shylock.

(c) To constitute 'business', a single isolated instance does not, and even several isolated stray instances do not, constitute 'the business of moneylending'. To be engaged in the 'business of money-lending', the activity must be systematic, regular, repetitive, and continuous, and must generate an appreciable revenue. The fact that the borrower is a stranger to the lender does not on its own make the latter a 'money-lender'.

(d) A loan recovery action is not barred merely because there is a loan. It has to be shown that the loan was part of 'the business of money-lending'.

(e) A plaintiff seeking a recovery of a loan is not required to show that his suit is not barred by the Money Lenders Act. It is always for the defendant who puts up money- lending as a defence to show that the transaction is forbidden by the Money Lenders Act."

7 2019(3) ALL MR 571.

Vishal Parekar, P.A.                                                               ...9
                                                                   12-sjl-6368-2020.doc

14. In the light of the aforesaid enunciation of the legal position,

reverting to the facts of the case, it becomes evident that in the

affdavit in reply there is a bald contention that the Plaintiff has

been carrying on the business of money lending on interest sans

the license under the Act of 2014. The Defendant has not made

any endevour to plead much less demonstrate even prima facie,

the elements of continuity, repetition and system in the

transactions which would justify an inference that the Plaintiff

advanced money on interest, as business. The mere fact that in

the transaction in question the parties had agreed that the

Defendant would pay interest on the amount advanced by

Plaintiff, by itself, is not suffcient to draw an inference that the

transaction is a "loan" within the meaning of section 2(13) of the

Act, 2014.

15. The submission on behalf of the Defendant that the Plaintiff

had, in fact, advanced the loan against the promissory note, has

an element of substance. In para 3 of the Plaint, the Plaintiff has

averred that against the receipt of the said loan amount, the

Defendant has executed Negotiable Instruments drawn in favour

of the Plaintiff on 17th and 25th January, 2019 and 7th February,

Vishal Parekar, P.A. ...10 12-sjl-6368-2020.doc

2019, respectively, and also promised to pay the interest @ 15%

p.a. on the loan amount. Plaintiff has not annexed and relied

upon Negotiable Instrument against which the loan was advanced.

However, this factor, in the totality of the circumstances, does not

advance the cause of the Defendant.

16. Undoubtedly, an advance against a promissory note, is

excluded by Clause (j) of Sec.2(13) of the Act, 2014. An advance

against a promissory note would thus fall within the defnition of

"loan" under the said section. However, since the material on

record does not indicate that the Plaintiff has been advancing loan

on interest as a business, clause (l) of Sec.2(13) of the Act comes

to the aid of the Plaintiff and the fact that the loan was advanced

against a promissory note, even if taken at par, would not detract

materially from the claim of the Plaintiff.

17. In addition to the cheques which were drawn by the

Defendant towards the repayment of the said amount, the Plaintiff

has relied upon a balance confrmation, executed by the

Defendant on 1st April, 2019. In view of the pronouncement of a

Full Bench of this Court in the case of Jyotsna K. Valia vs. Parekh

Vishal Parekar, P.A. ...11 12-sjl-6368-2020.doc

& Co.8 a suit based on duly confrmed accounts by the Defendant

is tenable as a summary suit.

18. The learned counsel for the Defendant would urge that the

question as to whether the balance confrmation was, in fact,

executed by the Defendant is a matter for adjudication. The denial

of the execution of balance confrmation in the affdavit in reply

according to the learned counsel for the Defendant is not

controverted by the Plaintiff by fling an affdavit in rejoinder.

19. I am afraid to accede to the aforesaid submission for the

reason that there is no dispute about the fact that the sum of Rs.

1,50,00,000/- was advanced by the Plaintiff to the Defendant. The

existence of a debt is thus admitted beyond the pale of

controversy. Even if maximum latitude is given to the defence

sought to be raised on behalf of the Defendant and it is construed

rather generously the fact remains that the debt of Rs.

1,50,00,000/- is an admitted liability.

20. In view of the pronouncement of the Supreme Court in the

8 2007(4) Mh.L.J. 517

Vishal Parekar, P.A. ...12 12-sjl-6368-2020.doc

case of IDBI Trusteeship Services Limited vs. Hubtown Limited 9 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. The aforesaid proposition applies with

equal force to the facts of the instant case. Hence, I am persuaded

to grant the Defendant leave to defend the suit on the condition of

deposit the amount of Rs. 1,50,00,000/-. Thus, the following

order:

ORDER

1] Leave is granted to the Defendant to defend the suit subject

to Defendant depositing in this Court a sum of Rs. 1,50,00,000/-

(One Crore and Fifty Lakhs) within a period of six weeks from

today.

2] If the aforesaid deposit is made within the stipulated period,

the suit shall be transferred to the list of "Commercial Causes".

3] The Defendant shall fle written statement within a period of

four weeks from the date of deposit.

9    (2017) 1 Supreme Court Cases 568

Vishal Parekar, P.A.                                                       ...13
                                                               12-sjl-6368-2020.doc




4]      If the conditional order of deposit is not complied within the

stipulated period as mentioned hereinabove, the Plaintiff shall

apply for ex parte decree after obtaining Non Deposit Certifcate

from the Prothonotory and Senior Master of this Court.

5] The Summons for Judgment stands accordingly disposed of.

In Interim Application No.2372 of 2020 :-

In view of the order passed in the Summons for Judgment

whereby leave is granted to the Defendant to defend the suit on

the condition of deposit of the amount of Rs. 1,50,00,000/-, I am

not inclined to deal with the Interim Application for attachment

before judgment as the order passed by this Court to deposit the

amount adequately protects the interest of the Plaintiff.

Interim Application accordingly stands disposed of.

                                                 (N. J. JAMADAR, J.)




Vishal Parekar, P.A.                                                        ...14