Crimson Interactive Pvt. Ltd. And ... vs Jayant Bhavanji Soni And Anr
2022 Latest Caselaw 212 Bom

                                    SJ25-2021INCOMSSL10662-2021.DOC

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


            SUMMONS FOR JUDGMENT NO. 25 OF 2021
                           IN
           COMM SUMMARY SUIT (L) NO. 10662 OF 2021

Crimson Interactive Pvt. Ltd. & ors.                        ...Plaintiffs
                     Versus
Jayant Bhavanji Soni & anr.                            ...Defendants


Mrs. Sunanda Kumbhat, a/w Mr. Kunal Kumbhat & Ms. Anita
      Manjrekar, for the Plaintiffs.
Mr. A. Narula, i/b M/s. Jhangiani, Narula & Associates, for
      the Defendants.


                                   CORAM: N. J. JAMADAR, J.

RESERVED ON: 2nd DECEMBER, 2021 PRONOUNCED ON: 6th JANUARY, 2022 (Video Conferencing) ORDER:-

1. This commercial division summary suit is instituted for

recovery of an amount of Rs.2,18,80,173/- along with further

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

Rs.1,79,65,000/- covered by the dishonoured cheques, which

form the basis of the suit.

2. Shorn of unnecessary details, the plaintiffs case can be

stated as under:

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(a) Plaintiff no.1 is a private limited company. Plaintiff

no.2 is its Chief Finance Officer. Plaintiff no.3 is one of the

Directors of plaintiff no.1. Defendant no.1, who expired on 20 th

May, 2021, was the sole proprietor of JOY Builders, under the

name and style of which, the deceased defendant no.1 carried

on the business of construction and redevelopment of real

estate. Defendant no.2 is the son of defendant no.1 and

authorised representative of JOY Builders. Defendant no.1A is

the wife of deceased defendant no.1 and defendant nos.1B and

1C are the daughters of deceased defendant no.1.

(b) The plaintiffs aver that pursuant to the request of

the deceased defendant no.1, the plaintiff had provided a

financial assistance of Rs.3 Crore to the defendants. It was

agreed by and between the plaintiffs and defendants that the

said amount would be repaid along with interest at the rate of

24% p.a., payable on quarterly basis, and a one time

compensation of Rs.1 Crore. The said amount of Rs.3 Crore was

credited in the account of the defendants on 14th July, 2016.

The defendants issued a reservation-cum-provisional allotment

letter dated 14th July, 2016 in favour of plaintiff no.1 whereby

Flat No.501 in Wing B, 5th Floor of JOY Legend, Dr. Ambedkar

Road, Khar (West), Mumbai, was provisionally allotted by the

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defendants to plaintiff no.1. It was inter alia recorded therein

that the said amount of Rs.3 Crore was to be returned along

with interest at the rate of 24% p.a. plus one time compensation

of Rs.1 Crore. The defendants had also issued four cheques

drawn for Rs.1 Crore each towards repayment of the principal

amount of Rs.3 Crore and the compensation of Rs.1 Crore.

(c) The plaintiffs further aver that on 1st October, 2016,

the defendants paid a sum of Rs.10,66,500/- towards interest

on the said amount of Rs.3 Crore. On 22 nd November, 2016, the

defendant repaid the entire principal amount of Rs.3 Crore.

However, the compensation of Rs.1 Crore, as agreed, was not

paid. Eventually, the defendant paid a sum of Rs.7,02,000/- on

27th December, 2016 towards payment of interest for the balance

period at the rate of 18% p.a. The amount so paid represented

interest at the rate of 18% p.a. instead of 24% p.a., as agreed.

Upon being confronted, the defendants undertook to pay the

balance amount towards agreed interest as they were in

financial constraints, at that point of time.

(d) The plaintiffs further aver that the defendants sought

time to pay the said amount of Rs.1 Crore towards

compensation on one or the other pretext. To compensate the

loss to the plaintiff, the defendant agreed to pay interest on the

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said amount of Rs.1 Crore at the rate of 25% for the delayed

period. Thus, in the month of April a cheque was drawn for

Rs.50,00,000/- in favour of the plaintiff no.2 towards the

interest. On 1st February, 2020 another cheque for

Rs.29,65,000/- was drawn in favour of plaintiff no.2. Believing

the assurance of the defendants, the plaintiff presented the

cheques drawn for Rs.1 Crore towards the compensation,

and Rs.50,00,000/- and Rs.29,65,000/- towards

interest, on 3rd February, 2020. Upon presentment, the cheques

were returned un-encashed. The plaintiffs were constrained to

issue a demand notice under Section 138 of the NI Act, 1881.

The defendants neither complied with the demand nor gave

reply to the demand notice. Hence the plaintiffs were

constrained to institute the suit for recovery of the said amount

of Rs.2,18,18,173/- along with further interest at the rate of 18%

p.a. on the amount of Rs.1,79,65,000/-, covered by the

dishonoured cheques.

3. In response to the writ of summons, the defendants

appeared. As defendant no.1 expired during the pendency of

the suit, his legal representatives came to be impleaded.

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4. Defendant no.2 has propounded a Will of deceased no.1

and filed an affidavit seeking unconditional leave to defend the

suit.

5. At the outset, the tenability of the suit is questioned on

the ground that it is for recovery of alleged unsecured loans,

which were never advanced by the plaintiffs. According to

defendant no.2, the plaintiffs were not entitled to recover the

compensation, as the contract incorporated in the letter dated

14th July, 2016 stood terminated premature as the defendants

repaid the amount of Rs.3 Crore within four months of the

advance. It was further contended that the instant suit was not

maintainable as a commercial division summary suit.

6. On merits, defendant no.2 contended that it was agreed by

and between the parties that the amount of Rs.3 Crore would

stay invested with the defendants for a full period of 15 months.

Only after the said lock-in period of 15 months, compensation of

Rs.1 Crore, in addition to the interest as agreed between the

parties, would become due and payable. In the event, the said

amount of Rs.3 Crore was repaid within the stipulated period of

15 months, defendant no.1 was not liable to pay any

compensation to the plaintiff over and above the interest

component. With the repayment of Rs.3 Crore within four

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months of the advance, according to defendant no.2, the entire

transaction between the parties, as envisaged under the

reservation-cum-provisional allotment letter, came to an end.

7. Defendant no.2 has further asserted that the plaintiffs

have misused the custody of the blank cheque leaf, bearing

No.599465 (Exhibit-I), which was admittedly undated, and the

cheques bearing Nos.633529 (Exhibit-J) and 739132 (Exhibit-K)

drawn for Rs.50,00,000/- and Rs.29,65,000/- were in respect of

separate transactions which did not materialize. Defendant

no.2 has thus prayed that having regard to the nature of the

transaction, the defendants deserve an unconditional leave to

defend the suit.

8. An affidavit-in-rejoinder is filed on behalf of the plaintiffs.

Averments in the affidavit-in-reply adverse to the interest of the

plaintiffs have been contested. It was specifically denied that

the transaction came to an end with the repayment of the sum

of Rs.3 Crore and the plaintiffs have misused the custody of the

cheques.

9. In the backdrop of the aforesaid facts and pleadings, I

have heard Ms. Sunanda Kumbhat, the learned Counsel for the

plaintiffs and Mr. Narula, the learned Counsel for the

defendants, at length. With the assistance of the learned

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Counsels for the parties, I have perused the averments in the

plaint, affidavit in support of the summons for judgment and in

opposition thereto, as well as the documents on record.

10. Ms. Kumbhat, the learned Counsel for the plaintiffs

strenuously submitted that the instant claim being based on

dishonoured cheques squarely falls within the ambit of the

provisions contained in Order XXXVII Rule 1(2)(a) of the Code of

Civil Procedure, 1908 ("the Code"). According to Ms. Kumbhat,

there is ample material to indicate that the defendants had

drawn the cheques in question towards payment of

compensation and interest for the delayed payment of

compensation. Ms. Kumbhat laid emphasis on the fact that

there is no dispute over the underlying transaction between the

parties. Since the advance of Rs.3 Crore, payment of interest on

the said amount at the rate of 18% p.a. and the repayment of

the principal amount of Rs.3 Crore are all evidenced by

documents of unimpeachable character and the essential terms

of the contract between the parties have been further

incorporated in the provisional letter of allotment, according to

Ms. Kumbhat, the liability of the defendants arose out of a

written contract. Therefore, the defence sought to be raised on

behalf of the defendants is a frivolous and moonshine defence

SJ25-2021INCOMSSL10662-2021.DOC

and, hence the plaintiffs are entitled to a decree, submitted Ms.

Kumbhat.

11. Mr. Narula, the learned Counsel for the defendants joined

the issue by canvassing a submission that the very premise of

the suit is flawed. Mr. Narula would urge that under the letter

of reservation-cum-provisional allotment (Exhibit-C), it was

specifically stipulated that the amount of Rs.3 Crore would stay

invested with the defendant for the period of 15 months.

However, the defendant repaid the said amount of Rs.3 Crore

under four months of the said advance. Since the plaintiff had

received the interest on the said amount of Rs.3 Crore, the

liability to pay the compensation of Rs.1 Crore never

crystallized. The claim of the plaintiffs, according to Mr. Narula,

is wholly unconscionable. In substance, in addition to the

interest, the plaintiffs are claiming huge compensation of Rs.1

Crore despite the fact that the amount of Rs.3 Crore remained

with the defendants for a little over four months. In the

circumstances, the endeavour of the plaintiffs to claim

compensation is highly contentious. The claim for interest

thereon stands on a much weaker foundation, urged Mr. Narula.

12. Laying emphasis on the fact that the cheques Exhibit-J

and Exhibit-K were drawn in favour of the individuals, Mr.

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Narula made an endeavour to demonstrate that by misusing the

custody of cheques, drawn in respect of altogether different

transactions in favour of the individuals, the plaintiffs have

instituted this suit. Therefore, the defendants deserve an

unconditional leave to defend the suit, urged Mr. Narula.

13. The facts are rather incontrovertible. One, the plaintiff

no.1 had advanced a sum of Rs.3 Crore to the defendants on

14th July, 2016. The terms of the contract, it appears, were

sought to be reduced into writing in the form of reservation-

cum-provisional allotment letter (Exhibit-C). It is a different

matter that the said exercise was in the nature of a subterfuge.

This becomes evident from the fact that the said letter contained

a disclaimer that it would not constitute or create relationship of

promoter and purchaser between the defendants and the

plaintiffs and the said letter was issued only in support and for

the purpose of securing the plaintiffs monetary investment

with the defendants.

14. Under the said letter (Exhibit-C), Flat No.504 was

provisionally allotted in favour of the plaintiffs. In the said letter,

the defendants acknowledged to have received a sum of Rs.3

Crore. The defendants undertook to pay guaranteed return at

the rate of 24% p.a. on the said amount, every quarter. The

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defendants also agreed to pay compensation of Rs.1 Crore as

well.

15. The lock-in period for the said investment was 15 months.

Upon the expiry of the lock-in period, the defendants

acknowledged the liability to refund the total invested amount

along with interest payable till then, either on their own or by

selling the flat reserved for the plaintiffs.

16. There is not much controversy over the fact that the said

amount of Rs.3 Crore was repaid by the defendants to the

plaintiffs on 22nd November, 2016, after a little over four months

of the advance. Nor is it in dispute that the interest on the said

amount of Rs.3 Crore for the said period was paid in two

tranches of Rs.10,06,500/- and Rs.7,02,000/-; the last on 27 th

December, 2016.

17. In the backdrop of the undisputed facts, the nature of the

claim in the instant suit requires appreciation. At this juncture,

in view of the presumptions contained in Section 118 of the

Negotiable Instruments Act, 1881 ("the NI Act"), it may not be

appropriate to delve deep into the defences sought to be raised

by the defendants regarding the abuse of the custody of the

undated cheque bearing No.599465 (Exhibit-I) drawn for Rs.1

Crore and two cheques bearing Nos.633529 (Exhibit-J) and

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739132 (Exhibit-K) drawn in the name of Shilpa. Apparently,

the suit is based on dishonoured cheques. Presumptions

contained in NI Act, 1881 and Section 114 of the Evidence Act

do come into play. However, the substance of the matter cannot

be lost sight of.

18. The plaintiffs claim that the loan was advanced to the

defendants on an express stipulation that it would be repaid

along with interest at the rate of 24% p.a. and a compensation

of Rs.1 Crore. The terms on which the loan was advanced, as

indicated above, were incorporated in the reservation-cum-

provisional allotment letter (Exhibit-C). The plaintiffs claim that

the said allotment letter was issued to secure the money

invested by the plaintiffs and was not to operate as a document

creating interest in the Flat No.504, which was purportedly

allotted provisionally thereunder. Nonetheless the said letter

(Exhibit-C) records the terms of the bargain. It may be

expedient to extract the relevant portion thereof:

"We confirm that we have received Rs.300,00,000/- (Rupees Three Crores only) against the reservation of above mentioned that flat from you.

In consideration of the investment of the said sum of Rs.300,00,000/- we hereby covenant and promise to pay to you a guaranteed fixed appreciation calculated @ 24% per annum on the invested amount, which shall be credited/paid to the original amount of investment at the end of every 3 months from the date of this reservation cum provisional allotment letter alongwith one time compensation or Rs.100,00,000/- (Rupees One Crores only).

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The lock in period for the said investment is 15 months from the date of this reservation cum provisional allotment letter. Upon the expiry of lock in period, we shall be liable to refund/return to you the total invested amount along with the interest payable till then either on our own or by selling the flat so reserved for the you as mentioned above. Any amount realized upon sale of the flat over and above the said invested amount and interest payable to the Investor, shall solely belong to us."

19. The situation which thus obtains is that the said advance

of Rs.3 Crore was to be refunded with interest at the rate of 24%

p.a. In addition, the defendants agreed to pay a further sum of

Rs.1 Crore, by way of compensation. The use of the expression

compensation, however, cannot conceal the real nature of the

transaction. The said amount of Rs.1 Crore was agreed to be

paid only as and by way of the return on the loan advanced i.e.

Rs.3 Crore. There was no other consideration for the said

promise to pay the sum of Rs.1 Crore. The said amount thus

constituted interest, pure and simple, on the advance of Rs.3

Crore styled as compensation.

20. In Black's Law Dictionary, Eighth Edition, the word

'compensate' has been defined as:

(1) To pay (another) for services rendered.

(2) To make an amendatory payment to; to recompense (for

an injury).

Whereas the word 'compensation' is defined as:

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(1) Remuneration and other benefits received in return

for services rendered; esp., salary or wages.

(2) Payment of damages or any other act that a court

orders to be done by a person who has caused

injury to another.

21. In Advanced Law Lexicon (P. Ramanatha Aiyar), the

word 'compensation' is explained, inter alia, as under;

"Usually a sum of money paid in lieu of something

lost (banking)

1. Remuneration and other benefits received in

return for services rendered; especially, salary or

wages.

2. Payment of damages, or any other act that a

Court orders to be done by a person who has

caused injury to another and must therefore

make the other whole. (Black, 7th Edn, 1999)

Money given to compensate loss or injury' - Black's

Law Dictionary as cited in Phola Sings @ Phola Ram v

State of Punjab, IV (2004) SLT 417, 423, para 13 and

Clariant International Ltd v. Securities & Exchange Board,

V (2004) Slt 752, para 33."

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Thus, the mere nomenclature of compensation, is not of decisive

significance. In the factual context, the payment of

compensation was nothing else than the return on the amount

invested by the plaintiff.

22. What accentuates the situation is the fact that the said

amount was agreed to be paid in addition to the interest at the

rate of 24% p.a. From this stand point, the submission on

behalf of the defendants that the contract between the parties

was to the effect that the said amount would stay invested with

the defendants for the period of 15 months and only thereupon

compensation would become payable, cannot be said to be

unsustainable. The letter (Exhibit-C) expressly records that lock-

in period for the said investment was 15 months. Indisputably,

the amount was refunded on 22nd November, 2016, a little over

four months of the advance. The defendants did pay interest on

the said amount of Rs.3 Crore in two tranches, as indicated

above.

23. In this setting of the matter, can the plaintiffs seek and

enforce the stipulation as to compensation of Rs.1 Crore is the

pivotal question. In my considered view, the letter (Exhibit-C) is

required to be read as a whole. The stipulation as to lock-in

period constitutes an integral part of the bargain. The liability

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to pay compensation cannot be construed disjointed from the

said stipulation as to lock-in period. Essentially, it is a question

of time value of money.

24. This aspect would become abundantly clear if the liability

is construed as absolute irrespective of the period for which the

amount would stay invested with the defendants. By way of

illustration, even if the amount of Rs.3 Crore was refunded on

the next day of advance, in addition to interest at the stipulated

rate, the defendants would have become liable to pay a huge

compensation of Rs.1 Crore for using the amount of Rs.3 Crore

for one day. In that event, the compensation would partake the

character of penalty. The construct sought to be put on behalf

of the plaintiffs on the terms of the bargain, in my view, thus

leads to anomalous and absurd consequences.

25. For the foregoing reasons, in the peculiar facts of the case,

I am persuaded to hold that the defence raised by the

defendants is fair and reasonable and the defendants deserve an

unconditional leave to defend the suit.

26. Hence, the following order:

:Order:

(i) The defendants are granted unconditional leave to

defend the suit.

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(ii) The defendants shall file written statement within a

period of 30 days from today.

The Summons for Judgment stands disposed of.

[N. J. JAMADAR, J.]

SANTOSH SUBHASH KULKARNI Digitally signed by SANTOSH SUBHASH KULKARNI Date: 2022.01.07 12:31:19 +0530