Bombay High Court
K G Millennium Realtors Private ... vs Samarth Erectors And Developers ... on 17 March, 2021
Bench: S.C. Gupte
Smita Digitally signed by Smita
Gonsalves
Gonsalves Date: 2021.03.19
sg 23. sj1-20a.w.nmcd2243-19incomss1168-29.doc
12:51:54 +0530
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION
SUMMONS FOR JUDGMENT NO.1 OF 2020
IN
COMMERCIAL SUMMARY SUIT NO.1168 OF 2019
WITH
NOTICE OF MOTION NO.2243 OF 2019
IN
COMMERCIAL SUMMARY SUIT NO.1168 OF 2019
K.G. Millennium Realtors Private ...Applicants/
Limited And 2 Ors. Original Plaintiffs
vs.
Samarth Erectors And Developers And 4 Ors. ...Defendants
.....
Mr. Kevic Setalvad, Senior Advocate, a/w. Mr. Arsh Misra, i/b. M. V. Kini &
Co., for the Applicants/Plaintiffs.
....
CORAM : S.C. GUPTE, J.
DATED : 17 MARCH 2021
P.C. :
. Heard learned Counsel for the Plaintiffs. None appears for the
Defendants to show cause at the hearing of the summons for judgment. On
the last occasion, i.e. on 15 March 2021, none appeared for the Defendants
and the matter was stood over to today's date. Since, even today, none
appears for the Defendants, the summons for judgment is heard in their
absence.
2. The commercial summary suit is based on a written contract
contained in the settlement agreement dated 7 May 2018. Under this
settlement agreement, the total claim of the Plaintiffs of Rs.19.25 crores was
compromised for a sum of Rs.13.35 crores, which amount was to be paid in
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7 installments as provided in clause (2) of the settlement agreement. The
settlement agreement provided that in the event of consecutive
default/delay at any point of time in payment of the installments provided
under clause (2) of the settlement agreement, the settlement agreement
would be deemed to have been breached by the Party of the First Part, i.e.
the Defendants herein and, in such event, Plaintiff Nos. 2 and 3 herein,
described in the settlement agreement as Party of the Second Part, would
have the absolute right and liberty to receive the entire amount of Rs.19.25
crores from the Party of the First Part with interest at the rate of 18% p.a.
from 7 May 2018 till full and final payment/recovery, with amount/s
already paid under the agreement being given credit against the amount due
and recoverable.
3. Neither the execution of the settlement agreement nor the
contents thereof are matters of dispute. The only defence raised by the
Defendants to the summons for judgment in their reply appears to be,
firstly, that the agreement between the parties included an arbitration clause
which requires disputes between the parties to be referred to an arbitral
forum in accordance with the provisions of the Arbitration and Conciliation
Act, 1996 and, secondly, that the settlement agreement of 7 May 2018 does
not amount to a written contract envisaged under Order 37 of the Code of
Civil Procedure.
4. Neither of the two defences raised by the Defendants has any
merit. So far as the purported arbitration agreement between the parties is
concerned, in the first place, the settlement agreement in itself does not
contain any arbitration agreement. The settlement agreement recites
certain MOUs executed between the parties earlier. Originally, the Plaintiffs
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and the Defendants were parties to a Memorandum of Understanding dated
12 November 2014, under which Plaintiff Nos. 2 and 3 were to be admitted
as partners of the 1st Defendant Partnership Firm for better effective
development of a particular SRA Project, on the terms and conditions,
including financial infusion, as set out therein. By a deed of admission of
the same date, i.e. 12 November 2014, Plaintiff Nos. 1 and 2 were admitted
as partners on a profit ratio of 27% for Plaintiff No.2 and 10% for Plaintiff
No.3. In the course of the business of the partnership, the parties entered
into several MOUs. In the last of these MOUs, namely, MOU dated 19
February 2015, it was agreed between the parties that Defendant No.1
(through its partners - Defendant Nos. 2 to 5 herein) shall pay to Plaintiff
Nos. 2 and 3 an aggregate sum of Rs.22.5 crores by the end of 24 months
from 15 February 2015, towards the contribution of Plaintiff Nos. 2 and 3 in
the business of Defendant No.1. By subsequent MOUs, the respective
contributions of Plaintiff Nos. 2 and 3 were revised, Defendant No.1 being,
thus, liable to pay a sum of Rs.3.5 crores out of the capital investment of
Rs.7 crores within 18 months, and a further sum of Rs.17.25 crores towards
the profit share to Plaintiff Nos. 2 and 3 to be paid by the end of 24 months
from 1 February 2015. The total amount, thus, payable by Defendant No.1
to Plaintiff Nos. 2 and 3 was to the tune of Rs.19.25 crores. It was against
this background that the parties entered into the last agreement, namely,
the suit agreement for settlement executed on 7 May 2018. Under this
settlement agreement, from out of the aforesaid sum of Rs.19.25 crores
(Rs.3.5 crores plus Rs.15.75 crores), Plaintiff Nos. 2 and 3 agreed to accept,
by way of a lumpsum settlement, an amount of Rs.17.35 crores in full and
final settlement of their share in the partnership. The amount was to be
paid in the manner stated in clause (2) of the settlement agreement.
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5. Clause (2) is in the following terms:
"(2) The Party of the First Part shall pay the settlement amount of
Rs.13.35 crores to the Party of the Second Part to Mr. Sunil D.
Gupta (which shall include the amounts due to Mr. Ravi S.
Gupta and Rs.1.18 Crs. shall be payable directly as per
Appendix B and C) within the period commencing from
7.5.2018 and ending at 28.2.2019 in 7 installments on the
following dates:-
Date Cheque No. Payment (Rs.)
30.05.2018 111268 Rs.0.85 Crores
30.05.2018 111269 Rs.0.50 Crores to Smt. Ruta Gupta
14.07.2018 111270 Rs.1.32 Crores
14.07.2018 111271 Rs.0.68 Crores to S P Gupta (HUF)
31.08.2018 111272 Rs.2 Crores
14.10.2018 111273 Rs.2 Crores
30.11.2018 111275 Rs.2 Crores
14.01.2019 111276 Rs.2 Crores
28.02.2019 111277 Rs.2 Crores
The Party of the First Part shall handover on execution of his
Settlement Agreement 7(seven) duly signed Cheques for the
amount referred herein above and the said Cheques shall be
submitted on the respective due dates for payment. However,
the Party of the Second Part with specific written request of the
Party of the First Part may extend the date for deposit of the
Cheques at the most for 45 more days from the due date but in
any event the said payment shall be paid on or before or along
with the immediate next installment and the last installment at
any circumstances be paid on or before 28th of February, 2019."
This clause, was followed by another clause, namely, clause (3), which
provided for a case of default in payment of two consecutive installments in
terms of clause (2) of the settlement agreement. The clause provided for
the right of Plaintiff Nos. 2 and 3 to recover entire Rs.2.19 crores.
6. Clause (3) is in the following terms:
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"(3) The Parties expressly agree that there shall not be two
consecutive defaults/delays at any point of time and in the
event of two consecutive defaults in the payment of the
installment as agreed hereinbefore or default in payment of
last installment by 28.02.2019, this Settlement Agreement
deemed to have been breached by the Party of the First Part
and in any such eventuality, the Party of the Second Part
shall have the absolute right and liberty to recover the entire
amount of Rs.19.25 Crores, from the Party of the First Part
and the Party of the First Part shall be liable to pay the said
entire amount to the Part of the Second Part along with
interest @ 18% p.a. on the said balance amount from
07.05.2018 till the full and final payment and/or recovery
thereof. It is, however, agreed that the amount already paid
under this Agreement shall be given credit against the
amount due and recoverable from the Party of the First Part."
7. In the case of default, by virtue of which the settlement
agreement failed, the settlement agreement provided for the default amount
to carry interest at the rate of 18% p.a. in accordance with clauses (4) and
(5) of the settlement agreement. Clauses (4) and (5) are in the following
terms:
"(4) In the event of this Settlement Agreement fails, the dues
mentioned herein, shall carry interest @ 18% p.a.
(5) It is also agreed that in the event of settlement fails, the Party
of the First Part shall be liable to pay the Party of the Second
Part the amount of Rs.19.25 Crores along with interest @
18% p.a. from the date of this Agreement. It is, however,
agreed that the amount already paid under this Agreement
shall be given credit against the amount due and recoverable
from the Party of the First Part."
8. As noted above, this agreement, which was to be treated as a
final agreement between the parties for payment of the entire settlement
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amount within a fixed period, does not contain any arbitration agreement.
In any event, even if the settlement agreement were to contain an
arbitration agreement, that would per se constitute no defence to the
summons for judgment. In the event of there being an arbitration
agreement between the parties to a suit concerning the subject matter of the
suit, it is for either party to such agreement to make an application to the
Court under Section 8 of the Arbitration and Conciliation Act, 1996 and seek
relegation of the parties to an arbitration forum. If no such application is
made, the suit is expected to proceed for hearing. Obviously, the
Defendants have not taken that step. It is, in the premises, impermissible to
invoke an alleged arbitration agreement as a defence to the summons for
judgment.
9. The only other defence offered by the Defendants, namely, the
settlement agreement of 7 May 2018 not amounting to a written contract
within the meaning of Order 37, Rule 1 of the Code of Civil Procedure, is
merely required to be stated to be rejected. The agreement is admittedly in
writing; it is appropriately stamped with a non-judicial stamp; and it is
executed by Defendant No.1, through its partners, namely, Defendant Nos. 2
to 5 herein, on the one hand, and Plaintiff Nos. 2 and 3, on the other, there
being no dispute as to its execution in the affidavit-in-reply filed by the
Defendants.
10. One other defence, which is stated merely in passing by the
Defendants in their affidavit, is that Plaintiff No.1 had no business to be a
party to the suit. Prayer clause (a) of the commercial summary suit prays
for a decree against the Defendants and in favour of the Plaintiffs. It is
nobody's case that Plaintiff Nos. 2 and 3 were not party to the settlement
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agreement or that the settlement agreement did not provide for payment
of Rs.19.25 crores to these Plaintiffs in the event of a default in payment of
the settlement amount in installments provided under clause (2) of the
settlement agreement. It is not the Defendants' case that there was no
default within the meaning of clause (2) of the settlement agreement. If
there is a default, Plaintiff Nos. 2 and 3 are entitled to receive from the
Defendants jointly and severally the entire sum of Rs.19.25 crores after
giving credit for the amount paid by the Defendants under the settlement
agreement. It is placed on record by the Plaintiffs that out of the settlement
amount of Rs.13.35 crores, Defendant No.1 has paid a sum of Rs.68 lakhs,
which has been duly acknowledged by the Plaintiffs. Learned Counsel for
the Plaintiffs is agreeable to deduction of this amount from the principal
amount of Rs.19.25 crores payable under the settlement agreement in the
event of default.
11. Accordingly, there being not even a statable defence on the part
of the Defendants to the summons for judgment and no case even for any
condition for grant of leave to defend, the summons for judgment would
have to be allowed and a decree would have to be passed in favour of the
Plaintiffs.
12. Summons for judgment is, accordingly, allowed by passing a
decree in terms of prayer clause (a) of commercial summary suit by
deducting a sum of Rs.68 lakhs from the total amount of Rs.19.25 crores
claimed in prayer clause (a). There will, accordingly, be a decree in the sum
of Rs.18.57 crores with interest at the rate of 18% p.a. from 7.5. 2018 till
full and final payment or realization thereof, and with costs to be taxed by
the Taxing Master.
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13. In view of the disposal of the suit, the notice of motion does not
survive and is disposed of.
( S.C. GUPTE, J. )
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