Bombay High Court

Dariya K Jogani vs Champalal K. Vardhan And Co. And 4 ... on 10 November, 2022

Bench: N. J. Jamadar

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


SANTOSH                        SUMMONS FOR JUDGMENT NO. 34 OF 2022
SUBHASH
KULKARNI                                       WITH
Digitally signed by
SANTOSH
                              INTERIM APPLICATION (L) NO. 21983 OF 2022
SUBHASH
KULKARNI
Date: 2022.11.10
                                                IN
20:48:02 +0530
                              COMM SUMMARY SUIT (L) NO. 21977 OF 2022

                      Dariyav K. Jogani                                     ...Plaintiff
                                        Versus
                      M/s. Champalal K. Vardhan & Co. & ors.             ...Defendants


                      Dr. Birendra Saraf, Senior Counsel, a/w Mr. Muttahar Khan,
                            i/b Mr. Dharmesh Joshi, for the Plaintiff/Applicant.
                      Mr. Mayur Khandeparkar, a/w Mr. Vikramjit Garewal, Mr.
                            Paresh Shah and Ms. Meghna Mehta i/b M/s. Shah and
                            Sanghavi, for the Defendants.

                                                    CORAM: N. J. JAMADAR, J.

RESERVED ON: 5th SEPTEMBER, 2022 PRONOUNCED ON: 10th NOVEMBER, 2022 ORDER:-

1. This commercial division summary suit is instituted for

recovery of a sum of Rs.4,13,58,189/- along with further interest

at the rate of 15% p.a. from the date of the suit till payment

and/or realization based on the confirmation of the liability.

2. The material averments in the plaint can be summarised

as under:

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(a) The plaintiff is primarily engaged in the business of

real estate. M/s. Champalal K. Vardhan & Co. (M/s.

Champalal), defendant no.1, is a registered firm. Defendant

nos.2 to 5 are the partners of defendant no.1. Defendants are

also primarily engaged in the business of real estate.

(b) The families of the plaintiff (Jogani) and that of the

defendants (Vardhan) have had familial relations for several

decades as the patriarch of the both the families Mr. Kaulchand

Jogani and Mr. Champalal Vardhan have been friends. At the

representation of Mr. Champalal, defendant no.2, the plaintiff

and other members of Jogani family had advanced amounts to

the defendants by way of friendly loans, as and when demanded

on mutually agreeable terms to assist the defendants in tiding

over financial difficulties.

of January-2004 and June-2008, the plaintiff had advanced a

sum of Rs.1,75,00,000/- in two tranches of Rs.25,00,000/- and

Rs.1,50,00,000/-, respectively, to the defendants. The latter had

agreed to pay interest and, as agreed, did pay interest at the rate

of 12% p.a. at the end of every financial year upto 31 st March,

2016. The defendants also executed confirmation of accounts at

the end of each financial year commencing from FY-2005-2006

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to FY-2016-2017. In the confirmation of accounts also the

amount charged and paid towards interest at the rate of 12%

p.a. has been duly reflected.

(d) In April-2016, the plaintiff recalled the loan.

However, defendant no.1 expressed its inability to repay the loan

on account of liquidity crunch and assured to pay interest at an

enhanced rate at 15% p.a. Accordingly, charge of interest at

15% p.a. was reflected in the confirmation of the accounts for

the year ending 31st March, 2017 and 31st March, 2018.

Defendant no.1 also deposited TDS on the interest component at

15% p.a. for FY-2016-2017 and FY-2017-2018. However,

defendants did not, in fact, pay interest to the plaintiff. Upon

further representation and persuasion of the defendants, the

plaintiff, in good-faith, and having regard to the longstanding

familial relations between Jogani and Vardhan families deferred

the claim for interest. Thus, for the FY-2017-2018 to FY-2020-

2021, the defendants executed the confirmation of accounts for

the amount of Rs.2,26,18,482/- only. This mechanism was

resorted to as the defendants would then be not required to

deposit TDS on the accrued interest.

(e) From the year 2020 onwards, however, the

defendants started to avoid the plaintiff. Despite assurances

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the defendants failed to repay the principal amount and the

interest accrued thereon. Thus, the plaintiff addressed a letter

on 8th September, 2021 calling upon the defendants to repay the

principal amount of Rs.1,75,00,000/- along with interest

accrued thereon at the rate of 15% p.a. with effect from 1 st April,

2017. In the reply dated 28th September, 2021 though defendant

no.1 admitted the debt, yet raised a false plea that in a meeting

in the month of July-2021, it was mutually agreed between the

parties that defendant no.1 would repay only the principal sum

of Rs.1,75,00,000/- by 31st December, 2023.

(f) The plaintiff claimed to have categorically

controverted the aforesaid claim on behalf of the defendants by

addressing a letter dated 20th October, 2021. In response

thereto, defendant no.1 again reiterated the alleged mutual

understanding between the parties, without disputing the

liability. Hence, this suit.

(g) Along with the suit, the plaintiff has filed an

application purportedly under Order XXXVIII Rule 5 of the Code

of Civil Procedure, 1908 ("the Code") seeking, inter alia, a

direction to deposit the amount of Rs.4,13,58,189/-, provide

security for suit claim, and also to restrain the defendants from

alienating or otherwise disposing of their assets and properties.

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3. Upon the service of writ of summons, the defendants

entered appearance. Thereupon the plaintiff has taken out the

summons for judgment. The defendants have filed an affidavit-

in-reply seeking an unconditional leave to defend the suit.

4. First and foremost, the tenability of the suit under Order

XXXVII of the Code is assailed on the ground that there is no

agreement to pay interest on the amount advanced by the

plaintiff. The institution of the suit without resorting to

mandatory pre-institution mediation, the defendants contend, is

barred by the provisions contained in Section 12A of the

Commercial Courts Act, 2015 ("the Act, 2015"). The defendants

contend that the loans, which were advanced in the year 2004

and 2008 and were allegedly been recalled in the year 2016. In

this backdrop, the institution of the suit, without pre-institution

mediation, in the absence of any averment in the plaint

contemplating an urgent interim relief, is in teeth of Section 12A

of the Act, 2015.

5. The suit is also stated to be barred by limitation.

According to the defendants, the averments in the plaint on the

aspect of limitation are mutually destructive. At one breath, the

plaintiff avers that the loan was recalled in the month of April-

2016. At another breath, the plaintiff has endeavoured to rely

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upon the letters dated 28th September, 2021 and 30 th October,

2021 to breath life into the suit. However, the reliance on the

letters is misplaced as the instant claim is not in accordance

with the alleged confirmation of accounts for the year 2018-

2019, 2019-2020 and 2020-2021, which the plaintiff wants the

Court to read along with the alleged acknowledgment of the

liability in the letters dated 28th September, 2021 and 30th

October, 2021. Therefore, the suit is wholly time-barred.

6. On merits, the defendants categorically contend that in

the correspondence dated 28th September, 2021 and 30th

October, 2021, the defendants have specifically referred to the

mutual agreement between the parties that no further interest

shall be charged and payable from 2017 onwards and that only

principal amount would repaid by December-2023. The said

agreement, according to the defendants, constitutes a novation

of the contract and, thus, the suit is premature.

7. Lastly, the defendants contend that the suit is barred by

the provisions contained in Section 13 of the Maharashtra

Money-lending (Regulation) Act, 2014 ("the Money-Lending Act,

2014") as the plaintiff has been carrying on business of Money-

lending sans a valid licence. On this sole count, the defendants

are entitled to an unconditional leave to defend the suit. In the

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passing, it is contended that defendant no.3 has retired from the

defendant no.1 - firm with effect from 31 st March, 2021 and,

therefore, the suit qua defendant no.3 suffers from vice of mis-

jonder of parties.

8. An affidavit-in-rejoinder is filed by the plaintiff

controverting the contentions in the affidavit-in-reply.

9. I have heard Dr. Saraf, the learned Senior Counsel for the

plaintiff and Mr. Khandeparkar, the learned Counsel for the

defendants, at some length. With the assistance of the learned

Counsel for the parties, I have perused the pleadings, affidavits-

in-reply and rejoinder thereto and the documents placed on

record.

10. It may be apposite to note uncontroverted facts before

considering the rival submissions. The fact that the plaintiff had

advanced a sum of Rs.1,75,00,000/- in two tranches of

Rs.25,00,000/- and Rs.1,50,00,000/- is incontrovertible. No

endeavour is made on behalf of the defendants to contest the

fact that the said amount was advanced by way of loan. Though

the defendants have endeavoured to controvert the claim for

interest on the said loan yet, indisputably, interest was charged

and paid on the said amount at the rate of 12% p.a. till the year

2016. The confirmation of accounts, admittedly executed on

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behalf of defendant no.1 for the FY-2005-2006 to FY-2015-2016,

wherein the principal loan amount along with interest

component charged at the rate of 12% p.a. have been distinctly

shown, seal the issue on both the quantum of the principal

amount and application and payment of interest thereon. The

parties are not at issue over the fact that interest was charged at

the rate of 15% p.a. for the FY-2016-2017. Nor there is any

controversy over the execution as such of the confirmation of

accounts for the FY-2017-2018, FY-2018-2019, FY-2019-2020

and FY-2020-2021. For all four years, the outstanding amount

stood freezed at Rs.2,26,18,482/-, the closing balance as of 31 st

March, 2018.

11. At the core of the controversy is the liability to pay interest

on the said amount of Rs.2,26,18,482/- at the allegedly agreed

rate of 15% p.a. with effect from 1st April, 2018. The defendants

contend that it was agreed between the parties that no interest

shall be charged and paid on the said amount and, secondly, it

was also mutually agreed between the parties that the

defendants would repay only the principal amount of

Rs.1,75,00,000/-, by December, 2023.

12. In the light of the aforesaid uncontroverted facts and core

controversy, the submissions canvassed on behalf of the parties

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deserve consideration. Dr. Saraf, the learned Senior Counsel for

the plaintiff, would urge that in the light of the indubitable

advance of the loan amount and confirmations of the liability by

executing successive balance confirmations, comprising the

principal amount as well as interest thereon, at agreed rate, and

also the acknowledgment of the liability in response to the

demand notice addressed on behalf of the plaintiff, vide replies

dated 28th September, 2021 and 30th October, 2021, there is no

semblance of contest. Faced with such situation, according to

Dr. Saraf, the defendants have resorted to technical and

disingenuous defences.

13. Dr. Saraf urged that the challenge to the institution of the

suit, for want of pre-institution mediation, does not deserve any

countenance as alongwith the plaint the plaintiff filed an

application for urgent interim relief. Resultantly, the interdict

contained in Section 12A of the Act, 2015 does not come into

play. The defence of illegal money-lending, according to Dr.

Saraf, in the facts of the case, can only be said to be sham and

illusory. Such defence is the last refuge of a debtor who claims

illegal money lending in desperation to obviate otherwise

admitted liability. Dr. Saraf laid emphasis on the fact that the

defendants have not at all endeavoured to meet the principal

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case of the plaintiff based on balance confirmation. In any

event, even if maximum latitude is given to the defence,

especially on the aspect of liability to pay interest, a decree must

follow for the amount for which the balance confirmations have

been executed for three successive years, 2018-2019, 2019-2020

and 2020-2021, urged Dr. Saraf.

14. Mr. Khandeparkar, the learned Counsel for the

defendants, joined the issue by canvassing a submission that

mere filing of an interim application mechanically incorporating

the prayers for interim reliefs would not be sufficient to wriggle

out of the mandatory requirements of Section 12A of the Act,

2015. Mr. Khandeparkar stoutly submitted that if the

provisions of Section 12A are construed in such a manner, the

very object of introducing the salutary mechanism of pre-

institution mediation would be frustrated. Pre-institution

mediation can be obviated by a device of merely filing of an

application for interim relief, howsoever ill-justified it may be.

Therefore, according to Mr. Khandeparkar, the Court must

inquire into the necessity and justifiability of the prayer for

interim relief and for that purpose the plaint needs to be read

meaningfully to ascertain as to whether there exists an element

of urgency which would justify interim relief. Lest, the mandate

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of Section 12A would be rendered otiose, urged Mr.

Khandeparkar.

15. A strong reliance was placed on the Division Bench

judgment of this Court in the case of Deepak Raheja vs. Ganga

Taro Vazirani1 and the judgment of the Supreme Court in the

case of Patil Automation Private Limited and others vs. Rakheja

Engineers Private Limited2, wherein the mandatory nature of

pre-institution mediation envisaged under Section 12A of the

Act, 2015 has been underscored. In the facts of the case,

according to Mr. Khandeparkar, there is not a shred of material

to show that any urgent interim relief can be said to have been

contemplated whilst instituting the suit.

16. Mr. Khandeparkar further submitted that the defence that

the transaction in question is hit by the bar contained in

Section 13 of the Money-Lending Act, 2014 is borne out by the

very documents relied upon by the plaintiff to substantiate her

claim. There is material on record to indicate that the plaintiff

(along with plaintiffs in the companion suits) has been dealing

in the business of illegal money-lending. Since the transaction

in question does not fall in any of the exclusionary clauses of

Sub-section (13) of Section 2 of Money-Lending Act, 2014, and

12021 SCC Online Bom 3124.

22022 SCC Online SC 1028.

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there is no material to show that the advance can be said to be

a bona fide business transaction, there is no other go but to

draw an inference of illegal money-lending sans a valid licence.

17. It was further urged that the question as to whether the

transaction falls within the mischief of "loan" proscribed by

Money-Lending Act, 2014 is essentially a jurisdictional fact and

thus raises a triable issue. To lend support to this submission,

Mr. Khandeparkar placed reliance on a judgment of the

Supreme Court in the case of Budhu Sao and ors. vs. Baleswar

Prosad Sao and anr.3 and a judgment of this Court in the case

of Ramprasad Bhagirath Agrawal vs. Uttamchand Danmal

Pande4.

18. Lastly, Mr. Khandeparkar submitted that the very

averments in the plaint workout the retribution of the plaintiff's

claim. On the one hand, the plaintiff banks upon the replies

dated 28th September, 2021 and 30th October, 2021 to bolster up

the case that the defendants acknowledged the debt. On the

other hand, the plaintiff avers that the contents of those letters

are false and misleading. It was thus submitted that the

plaintiff cannot be permitted to aprobate and reprobate. To this

end, reliance was sought to be placed on a judgment of the

3(1985) 1 Supreme Court Cases 565.

42008 SCC Online Bom 1036.

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Supreme Court in the case of R. N. Gosain vs. Yashpal Dhir5

wherein it was enunciated that law does not permit a person

both to approbate and reprobate. This principle is based on the

doctrine of election which postulates that no party can accept

and reject the same instrument and that, "a person cannot say

at one time that a transaction is valid and thereby obtain some

advantage to which he could only be entitled on the footing that

it is valid, and then turn round and say it is void for the

purpose of securing some other advantage."

19. I have given anxious consideration to the aforesaid

submissions.

20. To being with, the challenge to the institution of the suit

for not resorting to mandatory pre-institution mediation. Sub-

section (1) of Section 12A of the Act, 2015 reads as under:

"Section 12-A(1) A suit, which does not contemplate any urgent interim relief under this Act, shall not be instituted unless the plaintiff exhausts the remedy of pre-instituion mediation in accordance with such manner and procedure as may be prescribed by rules made by the Central Government."

21. On a plain reading the text of Section 12A(1) bars the very

institution of the suit without exhausting the remedy of the pre-

institution mediation, if the suit does not contemplate any

urgent interim relief.

5(1992) 4 Supreme Court Cases 683.

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22. This Court in the case of Deepak Raheja (supra) had an

occasion to consider whether the aforesaid provision is

mandatory or directory in nature. After an analysis, this Court

ruled that Section 12A is mandatory and a commercial suit of

specified value, which does not contemplate an urgent interim

relief under the Act of 2015 cannot be instituted unless the

plaintiff exhausts the remedy of pre-institution mediation.

23. In Patil Automation Ltd. (supra), the Supreme Court held

that the provision is mandatory. The observations in paragraph

80 encapsulate the reasons.

"80. We may sum-up our reasoning as follows:

The Act did not originally contain Section 12A. It is by amendment in the year 2018 that Section 12A was inserted. The Statement of Objects and Reasons are explicit that Section 12A was contemplated as compulsory. The object of the Act and the Amending Act of 2018, unerringly point to at least partly foisting compulsory mediation on a plaintiff who does not contemplate urgent interim relief. The provision has been contemplated only with reference to plaintiffs who do not contemplate urgent interim relief. The Legislature has taken care to expressly exclude the period undergone during mediation for reckoning limitation under the Limitation Act, 1963. The object is clear. It is an undeniable reality that Courts in India are reeling under an extraordinary docket explosion. Mediation, as an Alternative Dispute Mechanism, has been identified as a workable solution in commercial matters. In other words, the cases under the Act lend themselves to be resolved through mediation. Nobody has an absolute right to file a civil suit. A civil suit can be barred absolutely or the bar may operate unless certain conditions are fulfilled. Cases in point, which amply illustrate this principle, are Section 80 of the CPC and Section 69 of the Indian Partnership Act. The language used in Section 12A, which includes the word 'shall', certainly, go a long way to assist the Court to

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hold that the provision is mandatory. The entire procedure for carrying out the mediation, has been spelt out in the Rules. The parties are free to engage Counsel during mediation. The expenses, as far as the fee payable to the Mediator, is concerned, is limited to a one-time fee, which appears to be reasonable, particularly, having regard to the fact that it is to be shared equally. A trained Mediator can work wonders. Mediation must be perceived as a new mechanism of access to justice. We have already highlighted its benefits. Any reluctance on the part of the Court to give Section 12A, a mandatory interpretation, would result in defeating the object and intention of the Parliament. The fact that the mediation can become a non-starter, cannot be a reason to hold the provision not mandatory. Apparently, the value judgment of the Law-giver is to give the provision, a modicum of voluntariness for the defendant, whereas, the plaintiff, who approaches the Court, must, necessarily, resort to it. Section 12A elevates the settlement under the Act and the Rules to an award within the meaning of Section 30(4) of the Arbitration Act, giving it meaningful enforceability. The period spent in mediation is excluded for the purpose of limitation. The Act confers power to order costs based on conduct of the parties.

24. It is imperative to note that taking note of the cleavage of

judicial opinion on the aspect of mandatory or directory nature

of the said provision and the consequences the declaration that

the provision is mandatory entails, the Supreme Court resorted

to the device of prospective declaration, by ordering as under:

"92. Having regard to all these circumstances, we would dispose of the matters in the following manner. We declare that Section 12A of the Act is mandatory and hold that any suit instituted violating the mandate of Section 12A must be visited with rejection of the plaint under Order VII Rule 11. This power can be exercised even suo moto by the court as explained earlier in the judgment. We, however, make this declaration effective from 20.08.2022 so that concerned stakeholders become sufficiently informed. Still further, we however direct that in case plaints have been already rejected and no steps have been taken within the period of limitation, the matter cannot be reopened on the basis of this

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declaration. Still further, if the order of rejection of the plaint has been acted upon by filing a fresh suit, the declaration of prospective effect will not avail the plaintiff. Finally, if the plaint is filed violating Section 12A after the jurisdictional High Court has declared Section 12A mandatory also, the plaintiff will not be entitled to the relief."

25. Since this Court in the case of Dipak Raheja (supra) had

ruled the mandatory nature of Section 12A on 1 st October, 2021

and the instant suit came to be lodged on 11 th July, 2022, the

plaintiff can not claim the benefit of prospective declaration i.e.

with effect from 20th August, 2022. The question that thus

wrenches to the fore is whether the plaintiff succeeds in taking

the suit out of purview of Section 12A on the count that the suit

does contemplate an urgent interim relief?

26. As noted above, the plaintiff has filed an interim

application seeking reliefs of direction for deposit, furnishing

security and restraint against alienation of the property. Interim

reliefs which are essentially in the nature of attachment before

judgment are purportedly sought under Order XXXVIII Rule 5 of

the Code.

27. Mr. Khandeparkar would urge that mere filing of an

application without foundation in the plaint of the necessity and

urgency of interim reliefs is of no avail. In contrast, Dr. Saraf

submitted that the contemplation as to the necessity of an

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urgent interim relief is that of the plaintiff. Therefore, once an

application for interim relief is filed along with the plaint, the

bar under Section 12A, by the very phraseology thereof, would

not operate.

28. In the case of Patil Automation (supra) the Supreme Court

has emphasized the legislative object behind introduction of pre-

institution mediation as a mandatory measure. Evidently, the

outlet for not resorting to pre-institution mediation is provided

by the text of Section 12A itself, namely, a suit contemplating an

urgent interim relief. In my view, if the said outlet is construed

too loosely in the sense that mere filing of an application for

interim relief, howsoever unjustified and unwarranted it may be,

would take the suit out of the purview of Section 12A, it may

run counter to the legislative object. The interdict contained in

Section 12A can be easily circumvented by filing an application

for interim relief without their being any reason or basis

therefor. Such an interpretation may not advance the legislative

object.

29. The Parliament, it seems, has designedly used the

expression, "a suit, which does contemplate any urgent interim

relief ....". This phrase cannot be interchangeably used with the

expression, "where the plaintiff seeks an urgent interim relief...".

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The test would be whether the suit does contemplate an urgent

interim relief.

30. In a given case, the Court may be justified in embarking

upon an inquiry as to whether there is an element of

justifiability in the claim for urgent interim relief or such a

prayer is a mere subterfuge to overcome the bar under Section

12A. At the same time, the scope of such an inquiry would be

extremely narrow. Such an inquiry cannot partake the character

of determination of the prayer for interim relief on its merits. It

cannot be urged that if the Court is disinclined to grant interim

relief then the justifiability of the institution of the suit, without

pre-institution mediation, can itself be questioned. Therefore,

the Court may be called upon to stear clear of two extremes.

31. In my considered view, the proper course would be to

asses whether there are elements which prima facie indicate

that the suit may contemplate an urgent interim relief

irrespective of the fact as to whether the plaintiff eventually

succeeds in getting the interim relief. In a worst case scenario,

where an application for interim relief is presented without there

being any justification whatsoever for the same, to simply

overcome the bar under Section 12A, the Court may be justified

in recording a finding that the suit in effect does not

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contemplate any urgent interim relief and then the institution of

the suit would be in teeth of Section 12A notwithstanding a

formal application.

32. On the aforesaid premise reverting to the facts of the case,

the thrust of the submission of Mr. Khandeparkar was that

there was no element of urgency as the loan was advanced in

the year 2004 and 2008 and, allegedly, recalled in 2016. In the

circumstances, no interim relief could have been legitimately

pressed for. Averments in the plaint and the interim application

that the defendants were alienating the assets with a view to

delay and defeat the decree which may eventually be passed,

were, according to Mr. Khandeparkar, actuated by the design to

sidestep the bar under Section 12A.

33. I am afraid to accede to aforesaid submission. There is

contemporaneous material to indicate that before the institution

of the suit the plaintiff had raised the concern that the

defendants were in the process of alienating the assets. In the

demand notice dated 8th September, 2021 the plaintiff asserted,

inter alia, that it was learnt from reliable sources that the

defendants were taking steps to alienate several of their assets

and properties. In response to the said notice, the defendants,

in fact, remonstrated by asserting that the said allegation was a

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figment of imagination and also called upon the plaintiff to

desist from fanning such rumors. The aforesaid pre-suit

correspondence thus indicates that the plaintiff apprehended

that the defendants may alienate the assets and properties and

she would be left in the lurch. From this standpoint, in the

facts of the case, it cannot be said that the prayer for interim

relief was wholly unwarranted or unjustifiable. I am, therefore,

not inclined to accede to the challenge to the institution of the

suit for want of pre-institution mediation.

34. This takes me to the quality of defence rested in the bar for

passing of a decree under Section 13 of the Money-Lending Act,

2014 on the premise that the transaction suffers from the vice of

illegal money-lending. Mr. Khandeparkar, the learned Counsel

for the defendants, would urge that the material on record

indicates that the plaintiff recovered interest from the

defendants at a stiff rate of 12% p.a. The plaintiff endeavoured

to further enhance the rate of interest to 15% p.a. which can

only be said to be exorbitant one. Advance of money on interest,

in question, cannot be said to be a stray incident as the very

documents banked upon by the plaintiff namely Form-26-AS

indicating the tax deducted at source show that there is a

pattern in advancing money on interest to many persons and

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entities. Therefore, a clear case of illegal money-lending is

made out.

35. Support was sought to be drawn from the pronouncement

of the Supreme Court in the case of Budhu Sao (supra) wherein,

in the context of the provisions contained in Bihar Debt Relief

Act, 1976, the Supreme Court observed that the question

whether the person who had lent money is money-lender or not

is undoubtedly a question relating to jurisdictional fact.

Attention of the Court was also invited to the judgment of this

Court in the case of Ramprasad Bhagirath Agrawal (supra)

wherein, in the facts of the said case, which revealed several

instances of dealing in money-lending, this Court held that the

bar under Section 10 of the Bombay Money-Lending Act, 1946

(Precursor to Money-Lending Act, 2014) would come into play.

36. Per contra, Dr. Saraf strenuously submitted that the

affidavit-in-reply as well as the replies to the demand notice

dated 28th September, 2021 and 30th October, 2021 do not

divulge the alleged incidents of money-lending. A bald

contention in the affidavit-in-reply that the plaintiff deals in

money-lending as a business, which has assumed a standard

form defence, cannot sustain a triable issue, urged Dr. Saraf.

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37. In the case at hand, the plaintiff asserts that friendly

loans were advanced on account of familial relations. In effect,

the plaintiff seeks to assert that the loans were not advanced,

on interest, by way of business. Exclusion under Clause (l) of

Sub-Section (13) of Section 2, which defines 'loan', is claimed by

the plaintiff. The relevant part of Sub-section (13) of Section 2 of

Money-Lending Act, 2014 reads as under:

"Section 2(13) "loan" means an advance at interest whether of money or in kind but does not include,- ............

(l) an advance made bonafide by any person carrying on any business, not having for its primary object the lending of money, if such advance is made in the regular course of his business;

........"

38. While construing Clause (1) extracted above, this Court

has consistently held that mere advance of money, on interest,

by itself, is not sufficient to bring the case within the tentacles

of the provisions of Money-Lending Act, 2014. An advance made

bona fide by any person, who carries on any business if such

advance is made in the regular course of business is excluded

by Clause (l) provided the primary object should not be lending

of money, on interest. To qualify as a business, a course of

lending money would require the elements of system, continuity

and repetition. One or few instances of lending money, on

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interest, may not satisfy the description of lending money as a

business.

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

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

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

Judge had traced the pronouncements on the transactions

which fall within the mischief of money lending and culled out

the legal propositions in the following words:

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

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

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

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

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

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

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40. The aforesaid pronouncement underscores that emphasis

is on the word "business" and not "money-lending". It has to be

seen whether the instances of money-lending were by way of

"business". Number of instances, by themselves, are not

determinative. Several isolated stray instances do not constitute

a business of money-lending. Onus is on the defendant who

raises money-lending as a defence to show that the transaction

is forbidden by the Act of 2014.

41. In the instant case, indisputably, the plaintiff had charged

and collected interest upto March, 2016. The TDS certificates do

indicate that interest was received from other entities as well.

However, those entities include banks and financial institutions

also. That by itself, in my considered view, can not bring the

transaction in question within the tentacles of the 'loan'

envisaged by Money-Lending Act, 2014. It is imperative to note

that the defence of illegal money-lending did not see the tight of

the day till the affidavit-in-reply came to be filed. On the

contrary, the defendants asserted that it was agreed between

the parties that the principal amount would be repaid by

December-2023. Moreover, the transactions of charging and

receiving of interest have been duly documented and accounted

for. In the circumstances, I am not persuaded to agree with the

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submission of Mr. Khandeparkar that, on this count, the

defendants are entitled to an unconditional leave to defend the

suit.

42. The edifice of the defence of suit being barred by limitation

was sought to be built on the alleged inconsistency in the case

of the plaintiff. I find it superfluous to delve deep into this issue

for the simple reason that the execution of the balance

confirmations has been specifically admitted in the affidavit-in-

reply. It is trite that a balance confirmation furnishes a

sustainable foundation for institution of a summary suit.

43. A profitable reference in this context can be made to a Full

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

T. S. Parekh & Co.,6 wherein it was enunciated that a suit based

on duly confirmed accounts by the defendant is tenable as a

summary suit. Paragraph 29 of the said judgment reads as

under:

"29. In so far as the 'settled account is concerned,' it is no doubt true as noticed by the learned single Judge, that the various judgments adverted to, for holding that the summary suit would lie on a settled account, either of the Privy Council or of the Supreme Court did not arise from suits filed as summary suits. However, after the judgment of the Privy Council (Elvira L. Rodrigues) Sequeira (supra) which has been considered by the Supreme Court in Hiralal & Ors. (supra), a summary suit on a settled account, duly confirmed by the Defendant is maintainable as it is an acknowledgement by the Defendant in the ledger in which

62007(4) Mh.L.J. 517.

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mutual accounts have been entered and the accounts settled between them. Such settling of accounts gives rise to a written contract on a fresh cause of action, with an implied promise to pay the amount settled. A summary suit would therefore lie on 'Settled accounts duly confirmed by the defendants. Issue (1) is answered accordingly."

44. Dr. Saraf was justified in placing reliance on a judgment of

a learned Single Judge of this Court in the case of Sun and

Sand Hotel Limited vs. M/s. V. V. Kamat, HUF7 wherein in

paragraph 27, it was enunciated as under:

"27. In Khan Chand v. Dayaram, AIR 1929 Lahore, 263, affirmed by the Supreme Court in the above case) the Division Bench held that even a balance struck and accepted implies a promise to pay.

In Gordon Woodroffe & Co. v. Sk. M.A. Majid & Co., , the Supreme Court held :

"The legal position is that the accounts are settled or stated if they are submitted and accepted as correct by the other side to whom the accounts have been rendered. Such a statement of accounts need not be in writing, nor is it necessary, that before the accounts are settled, they should be gone into by the parties and scrutinized and supported by vouchers. It is sufficient if the accounts are accepted and such acceptance may be inferred by conduct of parties."

Thus, the balance confirmation letters furnish the plaintiff a cause of action on which the suit is maintainable."

45. As noted above, in the balance confirmations, for four

years preceding the institution of the suit, the outstanding

amount stood freezed at Rs.2,26,18,482/-. The plaintiff

endeavoured to impress upon the Court that it was so freezed so

72003(3) Mh.L.J. 932.

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as to relive the defendants of the burden to deduct the tax at

source. The defendants, in contrast, contend that the parties

had agreed that no interest would be chargeable and, in fact,

there was a mutual agreement between the parties in the month

of July-2021 that the defendant would repay the principal

amount of Rs.1,75,00,000/- only by 31st December, 2023. This

stand of the defendants is manifested in the communications

dated 28th September, 2021 and 30th October, 2021.

46. The situation which thus obtains is that, firstly, the

advance of Rs.1,75,00,000/- is indisputable. Secondly,

confirmation of the liability as of 1st April, 2021 to the tune of

Rs.2,26,18,482/- is also rather admitted. The question as to

whether the defendants are liable to pay interest on the said

amount from 1st April, 2018, as claimed by the plaintiff, or the

liability stood freezed at the very amount thence, is essentially a

matter for adjudication.

47. I am not persuaded to accede to the submission of Dr.

Saraf that since interest was paid for years together, it can be

assumed that there was a tacit understanding to pay interest

though the amount stood freezed, in the face of the balance

confirmation for three successive years preceding the institution

of the suit. It can be legitimately urged that the successive

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balance confirmations reflect the agreement between the parties

and disrupt the earlier course of payment of interest.

48. Likewise, the submission on behalf of the defendants that

the plaintiff is guilty of approbating and reprobating whilst

relying upon the replies dated 28th September, 2021 and 30th

October, 2021 does not warrant a definative determination at

this stage. It would be a matter for trial as to whether there was

an agreement between the parties that the defendants were to

repay the principal amount only by 31st December, 2023.

49. For the forgoing reasons, in my view, as the liability to the

extent of Rs.2,26,18,482/-, acknowledged under balance

confirmations, is in the nature of an admitted liability, the

defendants cannot be granted leave to defend the suit without

depositing the said amount. Hence, I am inclined to grant

conditional leave to defend the suit.

50. Thus, the following order:

:ORDER:

         (i)        The defendants are granted leave to defend the suit

                    on   the   condition      of   deposit   of   a   sum   of