Maharashtra State Road ... vs Amit Jagannath Shetty And Anr
2022 Latest Caselaw 11299 Bom

                                                                                           sj-28-2019.doc




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

                                         SUMMONS FOR JUDGMENT NO.28 OF 2019
                                                        IN
                                       COMMERCIAL SUMMARY SUIT NO.280 OF 2019

                      Maharashtra State Road Development
                      Corporation Limited                                   ...Plaintiff
                                 vs.
                      Amit Jagannath Shetty and Another                     ...Defendants
VISHAL
SUBHASH
PAREKAR               Mr. Tanmay Vispute a/w. Mr. Tapan Agarwal, Mr. J. Kapadia, Ms.
                      Juhu Parekh i/b. Little & Co., for the Plaintiff.
Digitally signed by
VISHAL SUBHASH        Mr. Ashutosh Gole, for the Defendants.
PAREKAR
Date: 2022.11.10
19:16:33 +0530
                                                   CORAM :         N.J. JAMADAR, J.
                                              RESERVED ON :        AUGUST 18, 2022
                                            PRONOUNCED ON :        NOVEMBER 9, 2022
                                                        -------------

                      JUDGMENT:

1. This Commercial Division Summary Suit is instituted to

recover a sum of Rs. 2,19,80,214 along with further interest @ 18%

p.a from the date of institution of the suit till payment and/or

realization based on a written contract and acknowledgments of

liability.

2. Shorn of unnecessary details the material averments in the

plaint can be stated as under:

a] The plaintiff is a limited liability company incorporated under

the Companies Act, 1956. It is a Government company within the

Vishal Parekar 1/24 sj-28-2019.doc

meaning of section 617 of the Companies Act, 1956. The plaintiff is

engaged in the business, inter alia, of improving and developing

integrated transport infrastructure and other public utility

activities, within the state of Maharashtra. The defendant No.1 is

the proprietor of, "Hotel Pooja". The defendant No. 2 is a joint

signatory to the agreement executed between the parties.

3. In the year 2013 the plaintiff had invited offers for leasing out

a built up food mall situated at Taje, Tal. Maval, Dist. Pune along

Yashwantrao Chavan Expressway for a period of 10 years. The lease

period was subsequently enhanced to 12 years. The defendant No. 1

submitted an offer. The defendant No.1's offer was accepted vide a

letter of acceptance dated 5th February, 2014. The defendant No. 1

had offered to pay first yearly upfront compensation of Rs.

1,09,31,333/- and a subsequent yearly compensation with a 10%

increase over the previous year's compensation, together with

service tax as applicable. The defendants paid first yearly upfront

compensation of Rs. 1,09,31,333/-, performance security of Rs.

54,65,666/- and a security deposit of Rs. 21,86,227/-, on 3 rd March,

2014. Thereupon, on 4th March, 2014 an agreement came to be

executed between the plaintiff and defendant Nos. 1 and 2. The

agreement inter alia provided for payment of upfront yearly

Vishal Parekar 2/24 sj-28-2019.doc

compensation for the subsequent years with 10% increase over the

previous year's compensation, recovery of dues as land revenue,

termination of the agreement for various defaults including default

in payment of any amount payable to the lessor under the contract

for a period of 30 days after due date, charge of compensation @ 3

times the monthly lease rent for holding over the leased premises

after the termination of the lease till the handing over of the leased

premises to the lessor.

4. In accordance with the terms of the agreement, the

defendants were bound and liable to pay the second yearly

compensation along with service tax and deposit an increased

amount towards performance security on or before 15 th February,

2015. However, the defendants failed and neglected to pay the

second yearly lease rent of Rs. 1,20,24,666/-, service tax of Rs.

14,86,224/- and deposit performance security of Rs. 5,46,567/-. The

plaintiff called upon the defendants vide letter dated 20 th March,

2015 to make the aforesaid payment. There was an exchange of

correspondence, during the course of which, the defendants, whilst

acknowledging the liability, sought concessions and accommodation

in making the said payment. Few of the cheques drawn by the

defendants were also dishonoured. Eventually, vide letter dated 25 th

Vishal Parekar 3/24 sj-28-2019.doc

January, 2016 the plaintiff informed the defendants that as of 20 th

January, 2016 after accounting for the payment made by the

defendants, an amount of Rs. 96,30,233/- was still due and payable

by the defendants to the plaintiff. The defendants were categorically

put to notice that in the event of default in payment of any of the

balance 5 cheques drawn for Rs. 90 lakhs, the plaintiff would be

constrained to take action in accordance with the terms and

conditions of the agreement including termination of contract and

also for dishonor of the cheques.

5. In the meanwhile, the third yearly compensation amount

became due and payable, on 14th February, 2016. The defendants

failed to pay the said installment. Third of the 9 post dated cheques

drawn by the defendants was also dishonored. Therefore, vide letter

dated 1st March, 2016 the plaintiff terminated the agreement with

effect from 30 days of receipt of the said letter. Further

correspondence was exchanged wherein also the defendants

categorically admitted the liability to pay the outstanding amount.

However, defendants continued to commit default in payment.

Eventually, the plaintiff took over the possession of the leased

premises on 13th October, 2016. The defendants thus became liable

to pay compensation at 3 times the agreed rent for the period

Vishal Parekar 4/24 sj-28-2019.doc

beyond the date of termination of the contract. The defendants were

also liable to pay interest @ 18% p.a. on the outstanding amount. As

of the date of the suit, a sum of Rs. 2,19,80,214/- became due and

payable by the defendants to the plaintiff. Hence, the plaintiff was

constrained to institute the suit for recovery of the said amount

based on the written contract and the acknowledgment of liability in

the correspondence exchanged between the parties.

6. The defendant No. 1 appeared in response to the service of the

Writ of Summons. Thereupon, the plaintiff took out a Summons for

Judgment.

7. An affidavit in reply is filed on behalf of defendant No. 1

seeking an unconditional leave to defend the suit. At the outset, the

defendant No. 1 has assailed the tenability of the suit for non

compliance of the mandatory requirement of pre-institution

mediation under section 12A of the Commercial Courts Act, 2015.

Since the suit came to be instituted on 21st December, 2018 after the

Amendment Act, 28 of 2018 came into force with effect from 3 rd

May, 2018, the bar under section 12A operates and in the absence of

pre institution mediation, the plaint is liable to be rejected on the

said count. Secondly, the agreement dated 4 th March, 2014 is not

adequately stamped and therefore cannot be acted upon. Thirdly,

Vishal Parekar 5/24 sj-28-2019.doc

since the agreement dated 4th March, 2014 created an interest in

the immovable property, it cannot be read in evidence for want of

registration. Therefore, such an inadequately stamped and

unregistered instrument cannot be the basis of a summary suit.

Fourthly, the suit is not maintainable as summary suit as the claim

for compensation at 3 times the agreed rent for the alleged holding

over is in the nature of penalty and beyond the purview of Order

XXXVII of the Code.

8. On merits, it was contended that in accordance with the terms

of the agreement, the defendant No. 1 has paid the yearly

compensation, security deposit and service tax for first year. The

defendant No. 1 contends that though the defendant No. 1 was made

to part with the said amount, yet the plaintiff failed to hand over

clear and vacant possession of the leased premises. The predecessor

lessee continued to squat over the leased premises. The defendants

could not operate the food mall or renovate it as the predecessor

lessee continued to occupy a portion of the leased premises. Despite

relentless persuasion, the plaintiff did not make any diligent efforts

and eventually the actual possession of the entire structure could be

handed over to the defendants on 30th August, 2015. Thus,

according to the defendant, it was the plaintiff who was in breach of

Vishal Parekar 6/24 sj-28-2019.doc

contract and thus not entitled to claim compensation and other

charges for the period for which the defendants were not put in

possession of the leased premises.

9. As regards the second yearly compensation, the defendants

claimed to have paid a total sum of Rs. 4,27,86,312/- during the

period March, 2014 to August, 2016. The defendants were made to

incur expenses of Rs. 70 lakhs towards renovation of part of the

food mall. In any event, according to the own showing of the plaintiff

only an amount of Rs. 96,30,223/- was due and payable to the

plaintiff as of 20th January, 2016. Even after the alleged

termination, the defendants were coerced to pay a sum of Rs.

51,50,000/- to the plaintiff on the assurance that the said

termination would be withdrawn. Yet, the plaintiff did not withdraw

the termination notice. The defendants have thus paid more amount

to the plaintiff than due for the year 2015-16.

10. The defendant Nos. 1 and 2 further contend that the claim of

the plaintiff that the defendants acknowledged the liability, in the

correspondence exchanged between the parties, is unsustainable as

those communications were addressed by the defendants in

desperation after recording the circumstances which the

Vishal Parekar 7/24 sj-28-2019.doc

defendants were made to encounter. Therefore, the alleged

admissions in the said letters cannot be read in isolation and torn

out of context. As a substantial part of the plaintiff's claim is in the

nature of penalty for the alleged holding over the leased premises,

the defendant Nos. 1 and 2 are entitled to an unconditional leave to

defend the suit.

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

controverting the contentions in the affidavit in reply.

12. I have heard Mr. Vispute, the learned counsel for the plaintiff

and Mr. Ashutosh Gole, learned counsel for the defendants at some

length. With the assistance of the learned counsel for the parties I

have perused the averments in the plaint, affidavit in support for

Summons for Judgment, affidavit in reply and rejoinder thereto and

the documents placed on record.

13. Mr. Vispute, the learned counsel for the plaintiff submitted

that the defendants have incurred the liability under a written

contract i.e. agreement dated 4th March, 2014. In accordance with

the terms of the contract, the defendants were liable to pay upfront

yearly compensation at the agreed rate along with performance

security and services charges. Laying emphasis on the

Vishal Parekar 8/24 sj-28-2019.doc

correspondence exchanged between the parties, especially letters

addressed on behalf of the defendants, Mr. Vispute would urge that

the liability is not only borne out by the written contract but also

clearly acknowledged. Attention of the Court was invited to the

letter dated 19th April, 2017 wherein the defendant No. 1 undertook

to pay the outstanding dues of Rs. 1,97,53,296/-, the letter dated

11th September, 2017, wherein the defendant No. 1 acknowledged

that as of 3rd August, 2016 there was an outstanding balance of Rs.

4,72,17,741/-, the letter dated 8th December, 2017 whereby difficulty

was expressed by defendant No. 1 to pay the outstanding amount of

Rs. 1,50,00,000/- as the food mall was shut and the letter dated 20 th

December, 2017 whereby the defendant No. 1 assured to pay the

outstanding amount once the termination is revoked. In the face of

these acknowledgments, according to Mr. Vispute, there is no

defence to the plaintiff's claim.

14. In opposition to this, Mr. Gole, learned counsel for the

defendants submitted that the entire claim of the plaintiff is

egregiously exaggerated and inflated. According to Mr. Gole, the

lease commenced on 15th March, 2014 and by the own showing of

the plaintiff, it stood terminated with effect from 31st March, 2016.

There is no controversy over the payment of Rs. 1,99,34,380/- for

Vishal Parekar 9/24 sj-28-2019.doc

the first year. For the second year, a sum of Rs. 1,40,57,457/-

became due and payable. As against this, according to Mr. Gole, the

defendants have paid a sum of Rs. 2,28,51,933/- (paragraph 22 of

the affidavit in reply). Any demand for the period post termination

of the agreement would be in the nature of damages. A summary

suit would not be maintainable for recovery of damages, urged Mr.

Gole.

15. On the aspect of the alleged acknowledgment of the liability,

Mr. Gole canvassed a two-fold submission. First, the communication

addressed by defendant No. 1 must be read as a whole and it would

be impermissible to resort to selective reading to infer an admission.

Secondly, if the entire tenor of the correspondence addressed by

defendant No. 1 is considered, it becomes evident that the defendant

No. 1 had all along been raising the grievances about the non-

delivery of the leased premises immediately after the execution of

the agreement and failure to grant permission to renovate the

leased premises within time. In any event, a summary suit can not

be based on a mere acknowledgment of a debt. According to Mr.

Gole, the claim for compensation at three times of the agreed rent

would clearly be in the nature of penalty, for the recovery of which a

summary suit is not maintainable.

Vishal Parekar                                                       10/24
                                                              sj-28-2019.doc

16. I have given a careful consideration to the aforesaid

submissions.

17. To start with, it may be apposite to note in-controvertible

facts. There is not much controversy over the fact that pursuant to

invitation of bids to operate the food mall, the defendants had made

an offer and a letter of acceptance dated 5 th February, 2014 was

issued and, evidently, the Lease Agreement came to be executed on

4th March, 2014 between the plaintiff and defendant Nos. 1 and 2.

The agreement, inter alia, provided that for running the food mall

the lessee would pay upfront lease rent of Rs. 23,37,58,727/- for 12

years. The agreement also provided for payment of performance

security @ 50% of the yearly compensation agreed upon between the

parties. Performance security was to be refundable within two

months of the expiry of the contract period. Clause 19 provided that

the unpaid amount shall carry interest @ 18% p.a. In addition, for

due observance and performance of terms and conditions of the

agreement, the lessee had to pay Rs. 21,86,267/- towards security

deposit. The said deposit was not to carry any interest. Clause 29

provided for termination of the lease, inter alia, on the ground of

default on the part of the lessee in making payment of any amount

under the contract for a period of 30 days after the due date.

Vishal Parekar                                                     11/24
                                                                 sj-28-2019.doc

Though the parties are at issue over the exact date on which the

entire leased premises was delivered to the defendants by the

plaintiffs, yet there is not much controversy over the fact that the

compensation, service charges and performance security for the

first year were paid by the defendants to the plaintiff. The

controversy between the parties revolves around the alleged default

in payment of the compensation, enhanced performance security

and service charges for the subsequent years.

18. Before adverting to deal with the contentious issue, it may be

appropriate to consider the challenge to the tenability of the suit for

non compliance of the provisions contained in section 12A of the

Commercial Courts Act, 2015. Banking upon the pronouncement of

Division Bench of this Court in the case of Deepak Raheja vs. Ganga

Taro Vazirani1 , it was urged on behalf of the defendants that the

provisions contained in section 12A of the Commercial Courts Act,

2015 have been held to be mandatory and non-compliance thereof

would necessarily entail the consequence of rejection of the plaint.

19. This challenge need not detain the Court any more. With the

pronouncement of the Supreme Court in the case of Patil

Automation Private Limited and Others vs. Rakheja Engineers 1 (2021) 6 Bom CR 115

Vishal Parekar 12/24 sj-28-2019.doc

Private Limited2 the controversy can be said to have been put at

rest. The Supreme Court has declared that the provisions of section

12A of the Commercial Courts Act, 2015 are mandatory in nature.

However, the Supreme Court has made the said declaration

prospective in operation. It is further provided that if the

jurisdictional High Court had declared the provision of section 12A

mandatory, the plaintiff would not be entitled to the benefit of said

prospective declaration as the situation would then be governed by

the pronouncement of the jurisdictional High Court.

20. In the case at hand, since the suit was instituted on 20 th

February, 2019 and the Division Bench declared the law in the case

of Deepak Raheja (supra) on 1st October, 2021, the bar under section

12A of the Commercial Courts Act, 2016 would not operate and,

therefore, the challenge on the said count to the tenability of the suit

does not merit countenance.

21. To appreciate the challenge to the claim on the ground that it

is in the nature of enforcement of penalty clause, it maybe

necessary to note that in the particulars of the claim, the plaintiff

chose not to divulge the requisite details. During the course of the

submission, however, the plaintiff tendered a chart, indicating the 2 2022 SCC OnLine SC 1028.

Vishal Parekar                                                        13/24
                                                                  sj-28-2019.doc

amount which according to the plaintiff became due and payable by

the defendants under the various heads. It indicate that as of 30 th

March, 2015 a sum of Rs. 1,90,83,193/- was outstanding under

various heads. It further indicates that for the period between 31 st

March, 2016 (the date the Lease Agreement came to be terminated)

and 13th October, 2016 (the date the plaintiff claimed to have taken

over the possession of the leased premises), the compensation is

claimed at thrice the lease rent. It would be imperative to note that

the plaintiff acknowledges that the aggregate amount received from

the defendants and the appropriated security deposit comes to Rs.

4,36,83,731/-.

22. The learned counsel for the plaintiff has fairly assisted the

Court by placing on record two charts which indicate that as of 20 th

December, 2018, without compensation at thrice the agreed rent, a

sum of Rs. 49,88,557/- becomes due and payable and, with

compensation, a sum of Rs. 2,19,80,214/- becomes due and payable.

23. From the aforesaid particulars of the claim of the plaintiff, it

becomes abundantly clear that a major component of the plaintiff's

claim comprises the compensation at thrice the agreed rent for the

occupation of the leased premises by the defendant post termination

Vishal Parekar 14/24 sj-28-2019.doc

of the agreement i.e. beyond 31st March, 2016.

24. The relevant part of clause 20 under the heading "Re-entry"

reads as under:-

20} ...... Upon the expiry or the sooner termination of this agreement, the Lessee shall be deemed to have been divested of all rights and privileges under this contract and they shall hand over vacant and peaceful possession of the said premises to the Lessor along with immovable structures, additions, permanent fixtures and permanent facilities and the said new building as it is to the Lessor and the Lessee shall not claim any compensation for the cost incurred by it for the same during the contract period. On failure to do so, the Lessee shall be liable to pay to the Lessor compensation at the rate of three (3) times of the monthly lease rent to be calculated on the basis of the upfront lease rent till the said premises are vacated and handed over to the Lessor.

25. What is the import of the aforesaid clause ?

26. Mr. Vispute, the learned counsel for the plaintiff would urge

that the liability to pay the compensation at the enhanced rate is a

contractual liability. It is in the nature of a liquidated debt. The

parties had entered into the contract being fully cognizant of its

import and consequences. Therefore, at this stage, the defendants

cannot be heard to urge that the clause is in the nature of penalty.

27. In opposition to this, Mr. Gole would submit that the aforesaid

Vishal Parekar 15/24 sj-28-2019.doc

stipulation is clearly in the nature of the penalty, which is expressly

excluded by sub clause (ii), clasue (b) of sub rule (2) of Rule 1 of

Order XXXVII of the Code. At any rate, according to Mr. Gole, the

claim is in the nature of damages and cannot be a subject matter of a

summary suit.

28. I am persuaded to agree with the submissions of Mr. Gole. The

stipulation that upon failure to handover the possession of the

leased premises post termination 'the lessee' would be liable to pay

compensation at thrice the agreed rent is clearly in terrerom.

Whether the aforesaid clause is a "reasonable pre-estimate of the

damages" or partakes the character of "penalty", surely raises a

triable issue.

29. Reliance placed by Mr. Gole on the judgment of a Division

Bench of this Court in the case of Karim Hussainali Wajawalia and

Another vs. Origin Information Technology (India) 3 appears to be

well founded. In the said case, the second defendant had entered

into a contract with the plaintiff undertaking that the first

defendant will abide by the contract and in case the first defendant

failed to complete the training or left the service in breach of

contract, he would be liable to pay an amount of Rs. 5 lakhs to the 3 2008(4) Mh.L.J. 937.

Vishal Parekar                                                       16/24
                                                                              sj-28-2019.doc

plaintiff as liquidated damages. Relying on the said clause, the

plaintiff instituted a summary suit as the first defendant had left

service without completing the training period. The Division Bench

held that the principal question which required consideration was,

as to whether such type of suit can be instituted by resorting to

Order XXXVII of the Code. After extracting the provisions

contained in the sub rules (1) and (2) of Rule 1 of Order XXXVII of

the Code, the Division Bench observed, inter alia, as under:-

5. ...... .......... In our view, so far as the claim for damages is concerned, the plaintiffs are required to prove its case by leading evidence in order to substantiate that they have suffered damages for particular amount. In our view, suit for damages, therefore, cannot be instituted by way of a summary suit and the plaintiffs are required to move the Court by way of a regular suit wherein, after appreciating the evidence on record, the Court has to adjudicate the claim and to find out the actual loss or damages suffered by the plaintiffs. Even if it is held that the first defendant has left the services without completing the training, yet, the plaintiffs are required to prove the actual damage suffered by it for getting damages towards such abandonment of service by first defendant. So far as Section 74 of the Contract Act is concerned, it may be true that in terms of the said provision, in a given case, the Plaintiffs may not be required to prove the actual damages. It cannot be said that by virtue of Section 74 of the Contract Act, summary suit of this nature is maintainable under Order 37 of the Code, as maintainability of summary suit is required to be considered in the light of the provisions contained under Order 37 of the Code. So far as reference to Section 74 of the Contract Act is concerned, it is for the plaintiffs to rely upon the same in a suit by leading proper evidence in this behalf. At this stage we are not expressing our opinion on this aspect of the matter but we are satisfied from the averments in the plaint

Vishal Parekar 17/24 sj-28-2019.doc

that the suit in the present case is not maintainable as a summary suit under Order 37 of the Code. Simply because, according to the plaintiffs, there is an ascertained sum of damages for which they have filed the suit is no ground for bringing the suit as a summary suit. It is a special remedy provided only in certain type of transactions as provided under Order 37 of the Code. We are, therefore, of the view that the suit in question is not maintainable as a summary suit under Order 37 of the Code and the remedy available to the plaintiffs is to move the regular suit. Considering this aspect, we set aside the impugned order and decree and remand the matter to the learned single Judge.

6. Considering the aforesaid, in our view, the defendants are entitled to get leave to defend the suit unconditionally and accordingly, while setting aside the order and decree of the learned single Judge, we grant unconditional leave to the defendants to defend the suit.

30. The matter can be looked at from a slightly different

perspective. The aforesaid stipulation of payment of compensation

at thrice the agreed rate of rent for holding over the leased

premises, is essentially a measure for determination of damages.

31. In the event of a breach of contract under section 73 of the

Indian Contract Act, 1872, the party who suffers damage on account

of the breach of contract is entitled to receive compensation for any

loss or damage caused to him, which the parties knew when they

entered into the contract to be likely to result from the breach

thereof. Section 73 is required to be read in conjunction with section

Vishal Parekar 18/24 sj-28-2019.doc

74 of the Contract Act which deals with a situation where a sum is

named in the contract as the amount to be paid in case of such

breach or any other stipulation by way of penalty. The party

complaining of the breach is entitled to receive from the party who

has broken the contract reasonable compensation not exceeding the

amount so named or the penalty stipulated. It is imperative to note

that section 74 emphasizes that in case of breach of contract, the

party complaining of breach is entitled to receive reasonable

compensation whether or not any loss is proved to have been caused

by such breach. The entitlement for a reasonable compensation is

thus underscored. If the compensation named in the contract is in

the nature of penalty, a party is entitled to reasonable compensation

for the loss suffered. On the contrary, if the compensation named in

the contract appears to be a genuine pre-estimate of loss which was

in the contemplation of the parties while entering into the contract,

proof of loss or damage is not peremptory. The party complaining of

breach would then be justified in claiming the sum so named.

32. A useful reference in this context can be made to a judgment

of the Supreme Court in the case of Oil & Natural Gas Corporation

Ltd. vs. Saw Pipes Limited4 wherein the principles which govern the

award of damages in case of breach of contract were culled out as 4 (2003) 5 Supreme Court Cases 705.

Vishal Parekar                                                       19/24
                                                                       sj-28-2019.doc




under:-

68. From the aforesaid discussions, it can be held that:- (1) Terms of the contract are required to be taken into consideration before arriving at the conclusion whether the party claiming damages is entitled to the same; (2) If the terms are clear and unambiguous stipulating the liquidated damages in case of the breach of the contract unless it is held that such estimate of damages/compensation is unreasonable or is by way of penalty, party who has committed the breach is required to pay such compensation and that is what is provided in Section 73 of the Contract Act.

(3) Section 74 is to be read along with Section 73 and, therefore, in every case of breach of contract, the person aggrieved by the breach is not required to prove actual loss or damage suffered by him before he can claim a decree. The Court is competent to award reasonable compensation in case of breach even if no actual damage is proved to have been suffered in consequences of the breach of a contract.

(4) In some contracts, it would be impossible for the Court to assess the compensation arising from breach and if the compensation contemplated is not by way of penalty or unreasonable, Court can award the same if it is genuine pre-estimate by the parties as the measure of reasonable compensation.

33. Mr. Vispute, the learned counsel for the plaintiff urged with a

degree of vehemence that the plaintiff's claim is also based on clear

and un-equivocal acknowledgment of liability reflected in the

correspondence addressed by the defendant No. 1. Undoubtedly, in

the letter dated 19th April, 2017, the defendant No. 1 had agreed to

pay the outstanding dues of Rs. 97,56,296/- as soon as the food mall

become ready. Likewise, in the letter dated 11 th September, 2017 the

defendants acknowledged the balance of Rs. 47,21,741/- as of 3 rd

Vishal Parekar 20/24 sj-28-2019.doc

August, 2016 and in the letter dated 8th December, 2017 the

defendants expressed difficulty in paying the outstanding amount of

Rs. 1,50,00,000/- as there was no generation of income from the

food mall and in the letter dated 20 th December, 2017, defendant

No.1 agreed to pay the outstanding amount no sooner the

termination was revoked.

34. However, the aforesaid admissions/ acknowledgment, if they

can at all be termed so, are required to be read in the context of the

entire setting of the matter. The defendants were desperate in

getting the termination of the lease agreement revoked. The

defendants adverted to the circumstances of delayed delivery of

possession of leased premises and hindrances in renovation of the

leased premises for want of approval. Revocation of the termination

was sought as that would have enabled the defendants to raise

finance. It is in these circumstances, the defendant No. 1 offered to

make the payment. It would be impermissible to read those

admissions in isolation and torn out of context

35. The situation which thus obtains is that if the component of

compensation is excluded from consideration, for the moment, as

against the total dues claimed by the plaintiff as of 20 th December,

Vishal Parekar 21/24 sj-28-2019.doc

2018 (comprising of interest @ 18% p.a.) aggregating to Rs.

4,86,72,288/-, the defendants have paid a sum of Rs. 4,36,83,731/-.

From this stand point, the defences raised by the defendants,

especially the challenge to the entitlement of the plaintiff to recover

compensation for the period beyond termination of the Lease

Agreement, at thrice the agreed rate of rent, cannot be said to be

sham or vexatious. The defendants have, thus, raised triable issues.

36. A useful reference in this context can be made to the judgment

of the Supreme Court in the case of B.L. Kashyap and Sons Limited

vs. JMS Steel and Power Corporation and Another 5 wherein the

Apex Court held as under:-

33. It is at once clear that even though in the case of IDBI Trusteeship, this Court has observed that the principles stated in paragraph 8 of Mechelec Engineers' case shall stand superseded in the wake of amendment of Rule 3 of Order XXXVII but, on the core theme, the principles remain the same that grant of leave to defend (with or without conditions) is the ordinary rule; and denial of leave to defend is an exception. Putting it in other words, generally, the prayer for leave to defend is to be denied in such cases where the defendant has practically no defence and is unable to give out even a semblance of triable issues before the Court.

33.1 As noticed, if the defendant satisfies the Court that he has substantial defence, i.e., a defence which is likely to succeed, he is entitled to unconditional leave to defend. In the second eventuality, where the defendant raises triable issues indicating a fair or bonafide or reasonable defence, albeit not a positively

5 (2022) 3 SCC 294

Vishal Parekar 22/24 sj-28-2019.doc

good defence, he would be ordinarily entitled to unconditional leave to defend. In the third eventuality, where the defendant raises triable issues, but it remains doubtful if the defendant is raising the same in good faith or about genuineness of the issues, the Trial Court is expected to balance the requirements of expeditious disposal of commercial causes on one hand and of not shutting out triable issues by unduly severe orders on the other. Therefore, the Trial Court may impose conditions both as to time or mode of trial as well as payment into the Court or furnishing security. In the fourth eventuality, where the proposed defence appear to be plausible but improbable, heightened conditions may be imposed as to the time or mode of trial as also of payment into the Court or furnishing security or both, which may extend to the entire principal sum together with just and requisite interest.

33.2 Thus, it could be seen that in the case of substantial defence, the defendant is entitled to unconditional leave; and even in the case of a triable issue on a fair and reasonable defence, the defendant is ordinarily entitled to unconditional leave to defend. In case of doubts about the intent of the defendant or genuineness of the triable issues as also the probability of defence, the leave could yet be granted but while imposing conditions as to the time or mode of trial or payment or furnishing security. Thus, even in such cases of doubts or reservations, denial of leave to defend is not the rule; but appropriate conditions may be imposed while granting the leave. It is only in the case where the defendant is found to be having no substantial defence and/or raising no genuine triable issues coupled with the Court's view that the defence is frivolous or vexatious that the leave to defend is to be refused and the plaintiff is entitled to judgment forthwith. Of course, in the case where any part of the amount claimed by the plaintiff is admitted by the defendant, leave to defend is not to be granted unless the amount so admitted is deposited by the defendant in the Court.

33.3 Therefore, while dealing with an application seeking leave to defend, it would not be a correct approach to proceed as if denying the leave is the rule or that the leave to defend is to be granted only in

Vishal Parekar 23/24 sj-28-2019.doc

exceptional cases or only in cases where the defence would appear to be a meritorious one. Even in the case of raising of triable issues, with the defendant indicating his having a fair or reasonable defence, he is ordinarily entitled to unconditional leave to defend unless there be any strong reason to deny the leave. It gets perforce reiterated that even if there remains a reasonable doubt about the probability of defence, sterner or higher conditions as stated above could be imposed while granting leave but, denying the leave would be ordinarily countenanced only in such cases where the defendant fails to show any genuine triable issue and the Court finds the defence to be frivolous or vexatious.

37. In view of the aforesaid exposition of law reverting to the facts

of the case, in my view, the defendants are entitled to an

unconditional leave to defend the suit.

Hence, the following order:

ORDER

a] Unconditional leave to defend the suit is granted to the

defendants.

b] Defendants shall file written statement within 30 days from

the date of this order.

c]       Summons for Judgment stands dismissed.



                                                    (N. J. JAMADAR, J.)




Vishal Parekar                                                                     24/24