Bombay High Court

First Rand Services Private ... vs Pantheon Infrastructure Private ... on 5 January, 2022

Bench: N. J. Jamadar

                                                              SJ13-2021INCOMSS2-21.DOC

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


                                SUMMONS FOR JUDGMENT NO. 13 OF 2021
                                               IN
                                  COMM SUMMARY SUIT NO. 2 OF 2021

                      First Rand Services Private Limited                  ...Applicant
                      In the matter between
                      First Rand Services Private Limited                    ...Plaintiff
                                           Versus
                      Pantheon Infrastructure Limited                     ...Defendant
SANTOSH
SUBHASH
KULKARNI              Mr. Naushad Engineer, a/w Mr. Viraj Parikh, i/b Karansingh
Digitally signed by
SANTOSH SUBHASH
                           Shekhawat, for the Applicant/Plaintiff.
                      Mr. Shanay Shah, i/b M/s. Bachubhai Munim & Co., for the
KULKARNI
Date: 2022.01.05
17:28:44 +0530
                          Defendant.

                                                     CORAM: N. J. JAMADAR, J.

RESERVED ON: 26th OCTOBER, 2021.

PRONOUNCED ON: 5th JANUARY, 2022 ORDER:-

1. This commercial division summary suit is instituted for

recovery of a sum of Rs.3,66,58,175/-, comprising of the

security deposit of Rs.1,72,82,430/- in respect of Leave and

Licence Agreement dated 12th August, 2016 and a sum of

Rs.1,77,97,164/- in respect of Leave and Licence Agreement

dated 27th February, 2018, along with interest at the rate of 18%

p.a. from 31st May, 2020 till 31st August, 2020 and, future

interest at the rate of 18% p.a. on the principal amount of the

security deposit from 1st September, 2020 till realization.

SJ13-2021INCOMSS2-21.DOC

2. In response to the writ of summons, the defendant has

entered appearance.

3. Thereupon, the plaintiff has taken out this Summons for

Judgment.

4. The material averments in the plaint can be summarized

as under:

(a) The plaintiff is a company incorporated under the

provisions of Companies Act, 1956. It is a licensed financial

services provider engaged in the business of providing corporate

and investment banking solutions focused on the India Africa

Corridor. The defendant is also incorporated under the

provisions of the Companies Act, 1956. The defendant is the

owner of the office premises on the first floor admeasuring

approximately 17,160 sq. ft. carpet area and on the second floor

admeasuring approximately 18,785 sq. ft. area, in Tower two of

Raiaskaran Tech Park, Phase 2, Marol, Andheri East, Mumbai -

400 072 (the licensed premises).

(b) The defendant had given the aforesaid licensed

premises on Leave and Licence basis to the plaintiff by executing

two agreements. The first dated 12th August, 2016 (second floor

agreement) and the second dated 27th February, 2018 (first floor

agreement). Under the terms of agreement dated 12th August,

SJ13-2021INCOMSS2-21.DOC

2016, the plaintiff was to pay security deposit of

Rs.1,72,82,430/- to the defendant, which was to be refunded by

the defendant to the plaintiff upon expiry of the tenure of the

license simultaneously with handing over of the possession of

the second floor in good condition (reasonable wear and tear

excepted). In the event of default on the part of the defendant to

refund the security deposit, the plaintiff was entitled to continue

to occupy the second floor without payment of any license fee

and also to claim interest on security deposit at the rate of 18%

p.a. Clause 4 of the second agreement dated 27 th February,

2018 (first floor) contained identical stipulation.

letters to the defendant expressing its intention to terminate the

agreement with effect from 31st March, 2020. On 9 th March,

2020, the plaintiff addressed letters seeking short

accommodation and postponement of the date of termination to

30th April, 2020 instead of 31st March, 2020. On 21st April,

2020, the plaintiff sought further extension and postponement

of the date of termination to 31 st May, 2020. The defendant

accepted those requests and the period of license stood

extended upto 31st May, 2020.

SJ13-2021INCOMSS2-21.DOC

(d) On 27th April, 2020, the plaintiff addressed a letter to

the defendant intimating the defendants of its readiness and

willingness to hand over the first floor licensed premises on 30 th

April, 2020. In response, on 30th April, 2020, the defendant

contended that the defendant was not in a position to accept the

early termination of the license as both the parties agreed that

the period would stand extended upto 31st May, 2020. Pursuant

to the invoices raised by the plaintiff for the license fee, in the

month of May, 2020, the plaintiff cleared the license fee upto

May, 2020.

(e) By a communication dated 6th May, 2020, the

plaintiff apprised the defendant that it had already vacated the

premises on the first floor on 30 th April, 2020 and it was ready

to hand over possession thereof and requested the defendant to

complete the formalities and return the security deposit of

Rs.1,77,99,164/-. By another communication dated 22 nd May,

2020, the plaintiff apprised the defendant its willingness to

hand over the second floor to the defendant and demanded the

refund of the security deposit of Rs.1,72,82,430. Since there

SJ13-2021INCOMSS2-21.DOC

was no response, the plaintiff addressed a reminder on 22 nd

May, 2020.

5. At that juncture, according to the plaintiff, the defendant

deliberately delayed the refund of the security deposit. On 22 nd

May, 2020, the defendant addressed an e-mail to the plaintiff

attaching a snag list of purported damage/missing items/minor

defects to the first floor premises. In respect of the second floor

premises also, the defendant took no steps to inspect the said

premises and ultimately on 20th June, 2020 the defendant

addressed an e-mail to the plaintiff attached thereto a snag list

of purported damage/missing items/minor defects to the

second floor premises. The snag list prepared by the defendant,

according to the plaintiff, contained defect/damages to the

premises that were only in the nature of reasonable wear and

tear, specifically excepted under the terms of the agreement.

6. In order to further delay the refund of the security deposit,

the plaintiff avers, the defendant procured quotations absurdly

inflating its claim as to repairs and rectification of damages.

The initial quotation was for Rs.65,14,000/- for civil/plumbing/

electrical works and Rs.11,96,116/- for HVAC works. To add to

this, on 20th July, 2020, the defendant addressed an e-mail to

the plaintiff claiming that it was entitled to deduct a huge sum

SJ13-2021INCOMSS2-21.DOC

of Rs.1,44,08,819/- from the security deposit. The said claim is

completely frivolous and fictitious. The plaintiff has paid the

due license fee up to 31st May, 2020. The plaintiff has vacated

the licensed premises, though under the terms of the agreement

the plaintiff was entitled to hold on to the lecenced premises

without payment of license fee till the security deposit was

refunded. In any event, from the defendant's own showing, the

defendant is unjustifiably holding on to the sum of

Rs.2,06,70,775/-, even if the claim of the defendant for the sum

of Rs.1,44,08,819/- is taken at par. Hence, the plaintiff was

constrained to institute this suit for recovery of the entire

amount of security deposit along with interest accrued thereon

from 31st May, 2020 till the date of the institution of the suit and

future interest at the said rate, till realization.

7. The defendants filed an affidavit seeking unconditional

leave to defend the suit. At the outset, the defendant contested

the tenability of the suit by raising multi-fold grounds. The

jurisdiction of this Court to entertain the suit was sought to be

questioned on the premise that since the basis of the suit was

the Leave and Licence Agreements, the Court of Small Causes at

Mumbai had exclusive jurisdiction under the Presidency Small

Causes Courts Act, 1882.

SJ13-2021INCOMSS2-21.DOC

8. Secondly, it was contended that the suit was not properly

constituted as the person, who has signed and verified the

plaint, did not have the requisite authority to institute the suit

and file affidavit in support of the judgment. Thirdly, the suit

was stated to be not maintainable under the provisions of Order

XXXVII of the Code of Civil Procedure, 1908 ("the Code") as it

was neither based on debt nor a liquidated demand in money.

9. On merits, the defendant contended that the plaintiff is

guilty of suppression of facts. Adverting to the correspondence

exchanged between the parties, the defendant has categorically

denied that the defendant committed default in either taking

possession of the licensed premises or handing over the security

deposit. On the contrary, to pre-empt the claim for damages,

despite the parties having carried the joint inspection of the

licensed premises on 19th and 21st May, 2020, a communication

was addressed by the plaintiff on 22nd May, 2020 falsely

claiming that no amount was due from the plaintiff to the

defendant. The defendant had already addressed an e-mail of

even date with a snag list which specified the damage caused by

the plaintiff and its personnel to the licensed premises. It was

further contended that in the first week of June, 2020, at the

behest of the plaintiff, CB Richard Ellis ("CBRE"), an

SJ13-2021INCOMSS2-21.DOC

international Property Consultant, was roped in to determine

the extent and costs of rectification of the damage caused to

the licensed premises. Based on the advice of CBRE, quotes

were invited from various vendors for repairing the damage

caused to the licensed premises. The snag list attached to the

e-mail dated 22nd July, 2020 was prepared based on joint

inspection of the licensed premises carried on 9 th June, 2020 by

the representatives of the plaintiff company, the CBRE and the

defendant. In contrast, the alternative quotations procured by

the plaintiff, annexed at Exhibit-P to the plaint, were never

shared by the plaintiff with the defendant. The fact that the

damage has been caused to the licensed premises and

estimates, obtained for repairs thereof, are at variance, itself

raises triable issues and, therefore, the defendant is entitled to

unconditional leave to defend the suit.

10. The defendant has also made a counter-claim. On account

of the default on the part of the plaintiff to rectify the damage

caused to the licensed premises, holding on to the licensed

premises till 25th July, 2020 and the one months expected

period, which was required to rectify the damage, resulting in

loss of rent to the defendant, and the loss of interest on the

deposit and advance license fee, which the defendant could

SJ13-2021INCOMSS2-21.DOC

have otherwise fetched from the new licensee, the defendant has

filed a counter-claim of Rs.3,89,75,850/-. Thus, on account of

the genuine and bona fide issues, which the defendant claims to

have raised, the defendant has sought unconditional leave to

defend the suit.

11. An affidavit-in-rejoinder is filed on behalf of the plaintiff to

deal with the contentions in the affidavit-in-reply. The

defendant followed it with an affidavit-in-sur-rejoinder.

12. In the light of the aforesaid pleadings, I have heard Mr.

Engineer, the learned Counsel for the plaintiff and Mr. Shah, the

learned Counsel for the defendant, at length. With the

assistance of the learned Counsels for the parties, I have

perused the material on record including the documents

annexed to the plaint and filed by the parties along with the

affidavits.

13. To begin with, few uncontroverted facts. The jural

relationship between the plaintiff and the defendant as the

licensee and the licensor is incontrovertible. Indisputably, the

second floor premises was given on leave and licence under the

agreement executed on 12th August, 2016. Whereas the first

floor premises was given on license under the agreement dated

27th February, 2018. There is not much controversy over the

SJ13-2021INCOMSS2-21.DOC

essential terms of the agreements like the term of the license,

the license fee and the stipulation as to the consequences of

the default on the part of the parties. Indisputably, the plaintiff

has paid the license fee upto 31st May, 2020. The controversy

between the parties essentially revolves around the condition of

the premises as of the date, the plaintiff claims to have handed

over the possession of the licensed premises. The exact date of

the delivery of possession of the licensed premises is a matter in

issue.

14. At this stage, it may be apposite to note the stipulations in

the agreements dated 12th August, 2016 and 27th February,

2018, which govern the aforesaid controversy. Clauses 4 and

21 of the Agreement (second floor) are material and hence

extracted below.

"4. Security Deposit:

(a) On or before the execution of this Agreement, the Licensee has deposited with the Licensor a sum of Rs.1,72,82,430/- (Rupees One Crore Seventy Two Lakhs Eighty Two Thousand four Hundred and Thirty only) as and by way of a refundable security deposit (the payment and receipt whereof, the Licensor hereby admits and acknowledges) for the due observance and fulfillment by the Licensee of the terms and conditions of this Agreement (hereinafter referred to as "the Security Deposit"). After the expiry of 36 months from the License Commencement Date, the Security Deposit shall be escalated by 15% on the last paid amount (i.e. from 1st August, 2010) and the same shall be Rs.1,98,74,795/- (Rupees One Crore Ninety Eight Lakhs Seventy Four Thousand Seven Hundred and Ninety Five only).

SJ13-2021INCOMSS2-21.DOC

(b) The Security Deposit shall remain deposited with the licensor throughout the term of this Agreement and shall not carry any interest.

(c) The Security Deposit shall be refunded by the ilcensor to the Licensee on expiry of this Agreement or sooner determination thereof, as the case may be. Simultaneously with the Licensee handing back the Licensed premises in good condition (reasonable wear and tear excepted) to the Licensor. Provided that the Licensor shall be entitled to deduct there from all appropriate and permissible amounts due and owing by the Licensee to the Licensor pursuant to the terms of his Agreement and all amount outstanding and payable by the Licensee in respect of the License premises.

(d) In the event of failure on the part of the Licensor to refund the Security Deposit as aforesaid, the Licensee shall, until the Licensor refunds the entire amount of the Security Deposit, be entitled to continue to use and occupy the Licensed premise without payment to the Licensor of any License fees and such staying over by the Licensee in the Licenses Premise shall not constitute a breach by the Licensee of any term of this Agreement. Without prejudice to the aforesaid and without prejudice to the Licensee's right to take any other appropriate legal proceedings against the Licensor, the Licensee shall be entitled to interest on the Security Deposit at the rate of 18% per annum for the period starting from the time the Licensee was ready and willing to handover charge of the Licensed Premise to the Licensor till actual refund of the Security Deposit by the Licensor.

21. Damage/Loss of Licensed Premises:

If any damage or loss whatsoever is caused to the Licensed Premises or to the said building or any part thereof, by the Licensee and/or its employees, consultants, workmen, contractors, agents, servants, guests or visitors the Licensee shall at its own costs, charges and expenses make good the same to the satisfaction of the Licensor, within 10(ten) days from being required to do so by the Licensors, falling which the Licensor may incur expenditure in this regard on behalf of the Licensee and shall recover the same from the Licensee."

15. Evidently, the parties had agreed that:

(i) Security deposit shall be refunded by the licensor to

the licensee on the expiry of the agreement or sooner

determination thereof.

SJ13-2021INCOMSS2-21.DOC

(ii) The deposit was to be refunded simultaneously with

the licensee handing over the possession of the

licensed premises in good condition.

(iii) Reasonable wear and tear were specifically excluded

from the loss or damage to the licensed premises.

(iv) The licensor was entitled to deduct from the security

deposit to be refunded, all appropriate and

permissible amount due and owed by the licensee to

the licensor under the terms of the agreement.

(v) In the event of default on the part of the licensor

to refund the security deposit, the licensee was

entitled to continue to use and occupy the licensed

premise without payment of any license fee, until the

entire amount of security deposit was refunded.

(vi) Without prejudice to the right to hold on to the

licensed premise and any other action, the licensee

was entitled to claim interest on the security deposit

at the rate of 18% p.a. from the time the licensee was

ready and willing to hand over the possession of the

licensed premise till the refund of the security

deposit.

SJ13-2021INCOMSS2-21.DOC

(vii) If any damage or loss was caused to the licensed

premise by the licensee or any person claiming

through the licensee, the licensee was enjoined to

make good the same to the satisfaction of the

licensor at former's costs, charges and expenses

within 10 days of being called upon to do so by the

licensor.

(viii) In the event of default on the part of the licensee

to carry out such repairs/rectification the licensor

was at liberty to incur the expenditure for repairs

and recover the same from the licensee.

16. In the backdrop of the aforesaid stipulations in the

agreement, Mr. Engineeer, the learned Counsel for the plaintiff

would urge that the endeavour on the part of the defendant to

claim that there was damage or loss to the licensed premise,

which warranted extensive repairs, was actuated by a design to

delay the refund of the security deposit. Inviting the attention

of the Court to the communication dated 22nd May, 2020

(Exhibit-N to the plaint) Mr. Engineer would urge that the

purported snag list contains many items which can only be said

to be part of reasonable wear and tear of the licensed premises.

Since such reasonable wear and tear were specifically excluded

SJ13-2021INCOMSS2-21.DOC

by the parties under Clause 4(c), extracted above, the defence

sought to be shored up to hold on to the security deposit can

neither be said to be fair and reasonable nor bona fide.

17. Mr. Engineer would further urge that the claim of license

fee for the month of June 2020 is plainly in derogation of the

express terms of the contract. Since the plaintiff had shown

willingness to hand over the first floor premises by 30 th April,

2020 itself and both the licensed premises were vacant as of 31 st

May, 2020, and the said fact was indicated vide e-mails dated 6 th

May, 2020 and 22nd May, 2020, the plaintiff cannot be saddled

with the liability to pay license fee. On the contrary, on account

of the default on the part of the defendant to refund the security

deposit, the plaintiff was entitled to charge interest at the rate of

12% p.a. on unpaid security deposit in addition to its right to

hold on the licensed premises without payment of license fee, as

expressly agreed to by and between the parties under clause

4(d), extracted above. Mr. Engineer further submitted that the

counterclaim sought to be made by the defendant is nothing but

an exercise to make up the amount which the defendant owes to

the plaintiff by raising utterly absurd and untenable claims.

18. In contrast to this, Mr. Shah, the learned Counsel for the

defendant, would submit that in the instant case triable issues,

SJ13-2021INCOMSS2-21.DOC

which warrant adjudication, have been raised bona fide by the

defendant. Mr. Shah, fairly submitted that the defendant, at

this stage, does not pursue the technical objections to the

tenability of the suit and seeks an unconditional leave to defend

the suit on the substantive ground that the defence raised by

the defendant is fair and reasonable and cannot, by any stretch

of imagination, be said to be moonshine. Laying emphasis on

the fact that the CBRE carried out the inspection of the licensed

premises, in the presence of the representatives of both the

plaintiff and the defendant, to ascertain the damage/loss to the

licensed premises and furniture and fixtures thereof and the

probable expenses were quantified on the basis of the invoices

received from the vendors, Mr. Shah would urge that under the

terms of the agreement the defendant was entitled to deduct the

amount towards the expenditure for the repairs and

rectification. Moreover, from the own showing of the plaintiff,

the security guards of the plaintiff were very much on the

licensed premises till 25th July, 2020. Thus, the plaintiff cannot

be absolved of the liability to pay the license fee for the months

of June and July, 2020. In this view of the matter, since the

defendant has made a counter-claim, which cannot be said to be

frivolous and sham, the issues merit trial, submitted Mr. Shah.

SJ13-2021INCOMSS2-21.DOC

19. In order to bolster up the aforesaid submission, Mr. Shah

placed a strong reliance on a Four Judge Bench judgment of the

Supreme Court in the case of Santosh Kumar vs. Bhai Mool

Singh,1 wherein the rationale behind the special procedure

under Order XXXVII was expounded in the following words:

"8. It is always undesirable, and indeed impossible, to lay down hard and fast rules in matters that affect discretion. But it is necessary to understand the reason for a special procedure of this kind in order that the discretion may be properly exercised. The object is explained in Kesavan v. South Indian Bank Ltd. (ILR 1950 Mad 251), and is examined in greater detail in Sundaram Chettiar v. Valli Ammal (1935 ILR 58 Mad 116), to which we have just referred. Taken by and large, the object is to see that the defendant does not unnecessarily prolong the litigation and prevent the plaintiff from obtaining an early decree by raising untenable and frivolous defences in a class of cases where speedy decisions are desirable in the interests of trade and commerce. In general, therefore, the test is to see whether the defence raises a real issue and not a sham one, in the sense that, if the facts alleged by the defendant are established, there would be a good, or even a plausible, defence on those facts.

Now, what is the position here? The defendants admitted execution of the cheque but pleaded that it was only given as collateral security for the price of goods which the plaintiff supplied to the defendants. They said that those goods were paid for by cash payments made from time to time and by other cheques and that therefore the cheque in suit had served its end and should now be returned. They set out the exact dates on which, according to them, the payments had been made and gave the numbers of the cheques.

This at once raised an issue of fact, the truth and good faith of which could only be tested by going into the evidence and, as we have pointed out, the learned trial Judge held that this defence did raise a triable issue. ........"

20. Reliance was also placed on the judgment of the Supreme

Court in the case of Raj Duggal vs. Ramesh Kumar Bansal2

1 AIR 1958 SC 321.

2 1991 (1) Supp. SCC 191.

SJ13-2021INCOMSS2-21.DOC

wherein the circumstances in which discretion to grant leave to

defend the suit under Order XXXVII ought to be exercised, were

enunciated:

"3. Leave is declined where the court is of the opinion that the grant of leave would merely enable the defendant to prolong the litigation by raising untenable and frivolous defences. The test is to see whether the defence raises a real issue and not a sham one, in the sense that if the facts alleged by the defendant are established there would be a good or even a plausible defence on those facts. If the court is satisfied about that leave must be given. If there is a triable issue in the sense that there is a fair dispute to be tried as to the meaning of a document on which the claim is based or uncertainty as to the amount actually due or where the alleged facts are of such a nature as to entitle the defendant to interrogate the plaintiff or to cross-examine his witnesses leave should not be denied. Where also, the defendant shows that even on a fair probability he was a bona fide defence, he ought to have leave. Summary judgments under Order 37 should not be granted where serious conflict as to matter of fact or where any difficulty on issues as to law arises. The court should not reject the defence of the defendant merely because of its inherent implausibility or its inconsistency."

21. The legal position as regards the leave to defend in

summary suit instituted under Order XXXVII of the Code is

fairly crystallized. If the defendant discloses, prima facie, fair

and reasonable defence, ordinarily, the defendant is entitled to

an unconditional leave. In contrast to this, if the defence raised

by the defendant appears frivolous, false, or sham the leave to

defend shall be refused, and the plaintiff is entitled to judgment.

The controversy, however, arises in those matters where there is

a doubt as to whether the defendant has raised a triable issue,

and the nature of the conditions to be imposed, if the Court

comes to the conclusion to grant conditional leave to defend.

SJ13-2021INCOMSS2-21.DOC

There is a significant development in law, especially as regards

the grant of leave on the condition as to deposit of the amount

in the Court.

22. The law on the aspect of grant of leave was revisited by the

Supreme Court in the case of IDBI Trustship Limited vs.

Hubtown Limited3 and the governing principles were culled out

by the Supreme Court. The observations in paragraphs 16 and

17 are instructive and hence extracted below:

"16. It is thus clear that Order 37 has suffered a change in 1976, and that change has made a difference in the law laid down. First and foremost, it is important to remember that Milkhiram's case (AIR 1965 SC 1698) is a direct authority on the amended Order 37 provision, as the amended provision in order 37 Rule 3 is the same as the Bombay amendment which this Court was considering in the aforesaid judgment. We must hasten to add that the two provisos to sub-rule (3) were not, however, there in the Bombay amendment. These are new, and the effect to be given to them is something that we will have to decide. The position in law now is that the trial Judge is vested with a discretion which has to result in justice being done on the facts of each case. But Justice, like Equality, another cardinal constitutional value, on the one hand, and arbitrariness on the other, are sworn enemies.

The discretion that a Judge exercises under Order 37 to refuse leave to defend or to grant conditional or unconditional leave to defend is a discretion akin to Joseph's multi-coloured coat - a large number of baffling alternatives present themselves. The life of the law not being logic but the experience of the trial Judge, is what comes to the rescue in these cases; but at the same time informed by guidelines or principles that we propose to lay down to obviate exercise of judicial discretion in an arbitrary manner. At one end of the spectrum is unconditional leave to defend, granted in all cases which present a substantial defence. At the other end of the spectrum are frivolous or vexatious defences, leading to refusal of leave to defend. In between these two extremes are various kinds of defences raised which yield conditional leave to defend in most cases. It is these defences that have to be guided by broad principles which are ultimately

3 (2017) 1 SCC 568.

SJ13-2021INCOMSS2-21.DOC

applied by the trial Judge so that justice is done on the facts of each given case.

17. Accordingly, the principles stated in paragraph 8 of Mechelec case [(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, 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."

23. On the aforesaid touchstone, reverting to the facts of the

case, the controversy revolves around the nature of the damage

SJ13-2021INCOMSS2-21.DOC

and loss to the licensed premise, furniture and fixtures therein.

Mr. Engineer, the learned Counsel for the plaintiff made an

earnest endeavour to draw home the point that most of the

items in the purported snag list shared along with e-mail dated

22nd May, 2020 would properly fall within the ambit of the term

'reasonable wear and tear'. Mr. Shah controverted the

submissions by inviting the attention of the Court to the items

in the list appended to the communication dated 20th July,

2020, which was preceded by a joint inspection of the licensed

premises by officials of CBRE, in the presence of the

representatives of both the parties.

24. From the very nature of the controversy, the question as to

whether a particular item included in the snag list shared on

22nd May, 2020 and 20th July, 2020 falls within the ambit of

reasonable wear and tear or warrants rectification by the

licensee at the cost and expenses of licensee, is essentially

rooted in facts. Similarly, the estimate of the expenses for

making good the loss or damage and restoring the particular

items to its prior position, is again a matter of evidence. To put

it in other words, whether the defendant has included items

which do not fall within the ambit of loss and/or damage to the

licensed premises and amount to reasonable wear and tear and

SJ13-2021INCOMSS2-21.DOC

whether the defendant has allegedly inflated the estimated

expenses for the repairs/rectification are the questions which

warrant determination on facts.

25. Indisputably, the parties had agreed that the licensed

premises would be delivered back to the licensor in good

condition. Under Clause 21, the parties had agreed that the

licensee would be liable to make good the loss and/or damage to

the licensed premise. What was, however, excluded was the loss

or damage which could properly be termed to be as a result of

reasonable wear and tear of the premises on account of its use.

Viewed through this prism, the defence sought to be raised by

the defendant that the licensed premises was not handed over to

the defendant in a good condition and required extensive

repairs, entailing huge expenditure, can be said to legitimately

raise a triable issue.

26. The second limb of the defence is the alleged liability of the

plaintiff to pay license fee for the period commencing from 1 st

June, 2020 til 25th July, 2020. This claim is divisible in two

parts. First, the license fee for the month of June, 2020. This

becomes evident from the communication dated 20 th July, 2020.

Vide said letter, the defendant professed to deduct a sum of

Rs.1,44,08,819/- out of the security deposit towards repairs of

SJ13-2021INCOMSS2-21.DOC

the assets of the premises and one months license fees as the

plaintiff was allegedly unable to hand over the licensed premises

to the defendant in conformity with the terms and conditions of

the agreement. Second, by raising a counterclaim the defendant

has sought a sum of Rs.61,74,015/- for the period of one month

commencing from 1st July, 2020 to 25th July, 2020, which was

allegedly in excess of the agreement between the parties.

27. Mr. Engineer, the learned Counsel for the plaintiff,

strenuously submitted that even if the defence of the defendant

is taken at par and it is assumed that triable issues are raised

in the context of alleged liability to make good the loss and

damage and to pay license fee for the month of June, 2020, the

defendant is not entitled to hold on to a sum of

Rs.2,06,70,775/-. The liability of the defendant to pay the said

amount can thus be said to be an admitted liability and,

therefore, a decree must follow in the sum of Rs.2,06,70,775/-

along with interest at the agreed rate of 18% p.a. under clause

4(d) of the agreement. To contest rest of the claim, the

defendant must be directed to deposit the amount in Court,

urged Mr. Engineer.

28. Mr. Shah, joined the issue by canvassing a submission

that the matter cannot be looked at from such simplistic

SJ13-2021INCOMSS2-21.DOC

perspective, as was sought to be canvassed on behalf of the

plaintiff. Since the defendant has raised a genuine and bona

fide counterclaim, which exceeds or at any rate competes with

the claim of the plaintiff, the defendant is entitled to an

unconditional leave to defend the suit.

29. Reliance was sought to be placed on a judgment of this

Court in the case of C.A. Galiakotwala and Co. Pvt. Ltd. 4

wherein in the context of winding-up petition it was inter alia

observed that if the company bona fide disputes its liability to

pay the amount, even though the amount may be a decreetal

amount, then in that case it can not be said that the company

has neglected to pay within the meaning of Section 434 (1)(a). If

there is a genuine cross claim, then it implies that the claim of

the petitioner is a disputed claim and a disputed claim can

never be a good subject matter of a winding up petition.

Paragraphs 13 to 15 of the said judgment read as under:

"13. Now, the word "neglected" has not been defined in the Companies Act. However, judicial pronouncements have interpreted the word "neglected" to mean that if there is a refusal to pay without any reasonable cause then it could be said that the company has neglected to pay the amount.

The mere omission to pay is not a neglect to pay. If the company bona fide disputes it liability to pay the amount, even though the amount may be a decretal amount, then in that case it cannot be said that the company has neglected to pay within the meaning of s.434(1)(a). It is all a question of fact as to whether the company has a bona fide dispute and in order to ascertain whether the company has a bona

4 1981 SCC Online Bom 383.

SJ13-2021INCOMSS2-21.DOC

fide dispute to the amount claimed by the petitioning creditor, it would be necessary for the court to consider the facts and circumstances of each and to come to a decision whether the company has a bona fide dispute to the claim of the petitioner. If there is a genuine cross-claim, then it amounts to this that the claim of the petitioner is a disputed claim and a disputed claim can never be a good subject- matter of a winding-up petition.

14. In re L.H.F. Wools Ltd. [1969] 39 comp Cas 934 (CA), the observations of Lord Denning in Re Portman Provincial Cinemas Ltd. [1964] 108 SJ 581 (CA), were quoted with approval. Lord Denning had stated (see p.938 of 39 Comp Cas):

"As I understand the law on the matter, it is this: If this is a genuine cross-claim with substance in it, then let it be tried out in the Queen's Bench Division: this petition must be rejected. But if there is no substance in cross-claim, then let the court do justice to the petitioners in this case and not give heed to so insubstantial a cross-claim."

15. If the claim of the company "overtops" the claim of the petitioner in the petition, the petition must be dismissed."

30. Drawing anology, Mr. Shah would urge that, in the case at

hand, the counter-claim raised by the defendant merits being

termed as a genuine and bona fide cross claim and, therefore,

the defendant deserves an unconditional leave to defend the

suit.

31. Assailing the correctness of the aforesaid proposition, Mr.

Engineer stoutly submitted that it is not an immutable rule of

law that the moment the defendant raises a counterclaim, he is

entitled to an unconditional leave to defend the suit. On the

contrary, the stage of counterclaim would arrive only when the

Court grants the defendant leave to defend the suit. A

defendant thus cannot be permitted to circumvent the rigour of

SJ13-2021INCOMSS2-21.DOC

the provisions contained in Order XXXVII by simply making out

a counterclaim howsoever baseless and absurd it may be, urged

Mr. Engineer. To buttress the aforesaid submission, Mr.

Engineer placed reliance on the judgments of this Court in the

cases of Suraj Sanghi Finance Ltd. vs. Credential Finance Ltd

and others5 and Elegant Capitals Pvt. Ltd. vs. In Cablenet

(Andhra) Ltd.6

32. In the case of Suraj Sanghi (supra), a learned Single Judge

dealt with a submission that a summary suit would not be

maintainable where the counterclaim has been filed and

accepted. Repelling the submission, the learned Single Judge

observed as under:

"5. It is lastly contended that as the counter claim has been filed and has been accepted the suit as Summary suit would not be maintainable. Order 37 contemplates a specific procedure. The first step in the procedure is for plaintiff to file suit and cause summons to be served for appearance.

Within the time stipulated appearance has to be filed. It is on filing of the appearance that the plaintiff thereafter have to take out summons for judgment and serve it on the defendants. It is only at the stage when the Court grants leave conditional or unconditional to contest the suit that the stage of filing written statement arises. A counter claim can be filed along with the Written statement. Therefore, merely because a counter claim has been filed, would not detract or result in the suit filed as summary suit being treated as regular suit. Even otherwise the counter claim was not taken on record by any speaking order. The issue was not in issue before the Court. It was not for consideration before the Court. Therefore, merely accepting the same, to my mind is of no consequence. In the instant case, the counter claim is for damages. It is not yet an ascertained amount or "debt". To my mind, therefore, it is

5 2002(4) MhLJ 770.

6 2012(1) MhLJ 962.

SJ13-2021INCOMSS2-21.DOC

not material for the purpose of considering the amount to be deposited in the event Court has to grant conditional leave. The Apex Court has settled the law that damages are not debt as decided in Union of India v. Roman Foundry, AIR 1974 SC 1265. That contention must also be rejected."

33. In the case of Elegant Capitals (supra), following the

aforesaid judgment in the case of Suraj Sanghi (supra), another

learned Single Judge rejected the submission advanced on

behalf of the defendant therein that the defendant is entitled to

an unconditional leave on the ground that it may file a

counterclaim against the plaintiff.

34. I find substance in the submission of Mr. Engineer. If the

contention on behalf of the defendant that the defendant is

entitled to an unconditional leave to defend the suit since the

defendant has raised a counterclaim is accepted, the very object

of providing summary procedure under Order XXXVII of the

Code would be rendered otiose. It is one thing to contend that,

while seeking leave to defend the suit, the defendant has raised

a counterclaim which raises a substantive defence or at any rate

triable issues. It is a completely different thing to assert that

since the defendant has raised a counterclaim, irrespective of

the nature and quality of the defence and/or counterclaim, the

defendant is entitled to an unconditional leave to defend the

suit. It all turns upon the quality of the defence raised by the

defendant. The tests enunciated by a catena of decisions and

SJ13-2021INCOMSS2-21.DOC

reformulated in the case of Hubtown (supra) are required to be

applied even in a case where the defendant raises a

counterclaim. An unconditional leave cannot be granted on the

sole premise that the defendant has raised a counterclaim.

35. Re-adverting to the facts of the case, it is imperative to

note that under clause 4(d), in the event of default on the part of

the licensor to refund the security deposit, the licensee was

entitled to retain the possession of the licensed premises,

without payment of license fee and in addition thereto as well as

any other remedy available in law, claim interest at the rate of

18% p.a. What is of material significance is the fact that the

interest was to be paid from the time the licensee was ready and

willing to hand over possession of the licensed premises to the

licensor. Conversely, Clause 21 only gave the licensor the right

to recover the expenditure incurred in carrying out the repairs

and rectification of the damage from the licensee. If these

stipulations are considered in the light of the fact that the

plaintiff had communicated its readiness and willingness to

hand over the licensed premise by 30th April, 2020 (first floor)

and both the floors by 30th May, 2020, the plaintiff would have

been justified in holding on to the licensed premise till the

SJ13-2021INCOMSS2-21.DOC

refund of the security deposit, without payment of the license

fee.

36. In the aforesaid view of the matter, the question as to

whether the plaintiff was liable to pay the license fee for the

period from 1st June, 2020 to 30th June, 2020, even if assumed

to be a matter for trial, is such that leave to defend can only be

granted upon deposit of the amount of license fee which was

sought to be deducted by the defendant in Court. The nature

and extent of damage/loss to the licensed premises and

estimated costs of the repairs and rectification required to be

borne by the plaintiff are again matters of evidence and trial.

37. The situation which thus obtains is that no triable issue

seems to have been raised as regards the liability to refund the

amount of Rs.2,06,70,775. Triable issues are raised as regards

the entitlement of the defendant to deduct the amount towards

the expenses of repairs and claim for license fee.

38. At the hearing of the summons for judgment, where the

Court finds that a part of claim deserves to be decreed and leave

to defend is required to be granted in respect of rest of the

claim, it is open to the Court to pass a decree for a part of the

claim and grant unconditional or conditional leave to defend the

suit in respect of the rest of the claim. A profitable reference, in

SJ13-2021INCOMSS2-21.DOC

this context, can be made to a Full Bench Judgment of this

Court in the case of SICOM Ltd. vs. Prashant S. Tanna and

others,7 wherein the legal position was summarized, inter alia,

as under:

"28. .... (1) ......

(2) In a summary suit filed under Order XXXVII of the Civil Procedure Code, the plaintiff is entitled at any time to abandon or give-up a part of the claim unilaterally. This, the plaintiff may do by making a statement to be recorded by the Court and without the necessity of the plaintiff making a formal application for the same by withdrawing the summons for judgment, amending the plaint and thereafter taking out a fresh summons for judgment or otherwise. (3) At the hearing of the summons for judgment, it will be open to the Court to pass a decree for a part of the claim and grant unconditional leave to defend the suit in respect of rest of the claim.

(4) At the hearing of the summons for judgment, it is open to the Court to grant conditional leave to defend in respect of a part of the claim and unconditional leave to defend for the remaining part of the claim. In such an order it would follow that in the event of the defendant failing to comply with the condition, he would suffer the consequences mentioned in Order XXXVII qua only that part of the claim for which conditional leave to defend has been granted and not in respect of that part of the claim for which unconditional leave has been granted. ......."

39. Applying the aforesaid principles to the facts of the case,

the summons for judgment is required to be made absolute so

far as the sum of Rs.2,06,70,775/- along with interest at the

agreed rate of 18% p.a. from 31st May, 2020 till realization.

Conditional leave is required to be granted as regards the

amount which was sought to be deducted by the defendant

towards the expenses for repairs and rectification of loss and 7 2004(2) Mh.L.J. 292.

SJ13-2021INCOMSS2-21.DOC

damage to the licenced premises, furniture and fixtures therein

and the claim for license fee for the month of June, 2020

subject to deposit of the sum of Rs.1 Crore in Court.

40. Hence, the following order:

:Order:

(i) The summons for judgment is made partly absolute.

(ii) The defendant do pay a sum of Rs.2,06,70,775/-

along with the interest at the rate of 18% p.a. from

31st May, 2020, till realization, to the plaintiff.

(iii) A decree be drawn and sealed expeditiously.

(iv) Leave to defend the suit in respect of the rest of the

claim is granted to the defendant subject to deposit

of a sum of Rs.1 Crore in Court within a period of six

weeks from today.

(v) If the aforesaid deposit is made within the stipulated

period, this suit shall be transferred to the list of

Commercial Causes and the defendant shall file its

written statement within a period of four weeks from

the date of deposit.

(vi) If this conditional order of deposit is not complied

with within the aforesaid stipulated period the

plaintiff shall be entitled to apply for an ex-parte

SJ13-2021INCOMSS2-21.DOC

decree against the defendant, after obtaining a non-