Suresh K. Jogani vs Karan Champalal Vardhan
2022 Latest Caselaw 11361 Bom

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

                                SUMMONS FOR JUDGMENT 35 OF 2022
SANTOSH                                        WITH
SUBHASH
KULKARNI                      INTERIM APPLICATION (L) NO. 22002 OF 2022
Digitally signed by
SANTOSH
                                                IN
SUBHASH
KULKARNI
Date: 2022.11.10
                              COMM SUMMARY SUIT (L) NO. 22001 OF 2022
20:48:02 +0530



                      Suresh K. Jogani                                      ...Plaintiff
                                       Versus
                      Karan Champalal Vardhan                             ...Defendant


                      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 Defendant.

                                                    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.1,21,34,890/- 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. Defendant is also primarily engaged in the business

of real estate.

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

defendant (Vardhan) have had familial relations for several

decades as the patriarchs of both the families Mr. Kaulchand

Jogani and Mr. Champalal Vardhan, have been friends. The

plaintiff and other members of Jogani family had advanced

amounts to the defendant and his family members and firm by

way of friendly loans, as and when demanded, on mutually

agreeable terms to assist them in tiding over financial

difficulties.

(c) As a part of the aforesaid arrangement, in the month

of February-2008 the plaintiff had advanced a sum of

Rs.50,00,000/- to the defendant. 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

defendant also executed confirmation of accounts at the end of

each financial year commencing from FY-2007-2008 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.

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

However, the defendant expressed his 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. Defendant also deposited TDS

on the interest component at 15% p.a. for FY-2017-2018.

However, defendant did not, in fact, pay interest to the plaintiff.

Upon further representation and persuasion of the defendant,

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 defendant executed the confirmation

of accounts for the amount of Rs.57,60,417/- only. This

mechanism was resorted to as the defendant would then be not

required to deposit TDS on the accrued interest.

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

started to avoid the plaintiff. Despite assurances the defendant

failed to repay the principal amount and the interest accrued

thereon. Thus, the plaintiff addressed a letter on 8 th September,

2021 calling upon the defendant to repay the principal amount

of Rs.50,00,000/- along with interest accrued thereon at the

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rate of 15% p.a. with effect from 1st April, 2017. In the reply

dated 28th September, 2021 though the defendant 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 the

defendant would repay only the principal sum of Rs.50,00,000/-

by 31st December, 2023.

(f) The plaintiff claimed to have categorically

controverted the aforesaid claim on behalf of the defendant 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.1,21,34,890/-, provide

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

alienating or otherwise disposing of his assets and properties.

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

entered appearance. Thereupon the plaintiff has taken out the

summons for judgment. The defendant has filed an affidavit-in-

reply seeking an unconditional leave to defend the suit.

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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 defendant contends, is

barred by the provisions contained in Section 12A of the

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

contends that the loan, which was advanced in the year 2008,

has 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 defendant, 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

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 2016-

2017, which the plaintiff wants the Court to read along with the

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alleged acknowledgment of the liability in the letters dated 28 th

September, 2021 and 30th October, 2021. Therefore, the suit is

wholly time-barred.

6. On merits, the defendant categorically contends that in

the correspondence dated 28th September, 2021 and 30th

October, 2021, the defendant has 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 defendant, constitutes a novation of

contract and, thus, the suit is premature.

7. Lastly, the defendant contends 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 defendant

is entitled to an unconditional leave to defend the suit.

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

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

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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.50,00,000/- is incontrovertible. No

endeavour is made on behalf of the defendant to contest the fact

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

defendant has 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 behalf of

defendant no.1 for the FY-2009-2010 to FY-2010-2011 and 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. In the

confirmation of accounts for the FY-2017-2018, FY-2018-2019,

FY-2019-2020 and FY-2020-2021, however, the outstanding

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amount stood freezed at Rs.57,60,417/-, the closing balance as

of 31st March, 2017.

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

on the said amount of Rs.57,60,417/- at the allegedly agreed

rate of 15% p.a. with effect from 1 st April, 2017. The defendant

contends 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

defendant would repay only the principal amount of

Rs.50,00,000/-, by December, 2023.

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

controversy, the submissions canvassed on behalf of the parties

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

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Dr. Saraf, the defendant has 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 fact 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

defendant has not at all endeavoured to meet the principal 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 four successive years, 2017-2018, 2018-2019, 2019-2020 and

2020-2021, urged Dr. Saraf.

14. Mr. Khandeparkar, the learned Counsel for the defendant,

joined the issue by canvassing a submission that mere filing of

an interim application mechanically incorporating the prayers

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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 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,

12021 SCC Online Bom 3124.

22022 SCC Online SC 1028.

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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 his

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

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

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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 defendant 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

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

3(1985) 1 Supreme Court Cases 565.

42008 SCC Online Bom 1036.

5(1992) 4 Supreme Court Cases 683.

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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.

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.

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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 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

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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 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.

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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

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

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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..."

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

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of determination of the prayer for interim relief on 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

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 2008 and, allegedly, recalled in 2016. In the

circumstances, no interim relief could have been legitimately

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pressed for. Averments in the plaint and the interim application

that the defendant was 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

defendant was 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

defendant was taking steps to alienate several of his assets and

properties. In response to the said notice, the defendant, in

fact, remonstrated by asserting that the said allegation was a

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 defendant may alienate the assets and properties and

he 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

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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 defendant, would urge that the material on record

indicates that the plaintiff recovered interest from the defendant

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-26AS indicating the

tax deducted at source show that there is a pattern in

advancing money on interest to many persons and 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.

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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.

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,- ............

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(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

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:

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(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."

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 constitue

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.

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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 defendant 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

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

defendant is 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 delve deep into this issue

for the simple reason that the execution of the balance

confirmations has not been specifically disputed in the affidavit-

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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 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:

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

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

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"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. Mr. Khandeparkar would, however, urge that the alleged

balance confirmation for the FY-2017-2018, 2018-2019, 2019-

2020 and 2020-2021, pressed into service by the plaintiff, are of

no assistance in fastening the liability upon the defendant.

Elaborating the submission, Mr. Khandeparker would urge that

the balance confirmations are not at all signed by the defendant

Karan Vardhan nor there is any material to indicate that those

balance confirmations were so signed by any person under the

authority of the defendant. Comparing and contrasting the

signatures on the balance confirmations for the years 2017-

2018, 2018-2019, 2019-2020 and 2020-2021 a strenuous effort

was made to draw home the point that at best the balance

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confirmation for the year 2017-2018 can be said to have been

signed by and/or on behalf of Karan Vardhan, the defendant.

Rest of the balance confirmations are not at all signed by the

defendant. The last balance confirmation as of 1 st April, 2021 is

signed by Champalal Vardhan, the father of the defendant.

46. Dr. Saraf controverted the submissions on behalf of the

defendant. It was submitted that the execution of the balance

confirmation has not at all been put in contest in the affidavit-

in-reply. It would, therefore, be impermissible for the defendant

at this stage to build a defence by comparing and contrasting

the signatures on the balance confirmations.

47. I find substance in the submission of Dr. Saraf. In

paragraph no.17 of the plaint, the plaintiff has specifically

averred that on the request and pursuation of the defendant,

the confirmation of the accounts was restricted to

Rs.57,60,417/- so that the defendant was not required to deposit

TDS on the accrued interest. All the balance confirmations

(Exhibit-D collectively) for four years were referred to in the said

paragraph.

48. In the affidavit-in-reply (in paragraph 22) whilst denying

that at the request of the defendant the confirmation of

accounts was restricted to Rs.57,60,417/-, it is pertinent to note,

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the defendant did not dispute the execution of the balance

confirmations as such. On the contrary, it was contended that

since no further interest was payable, no confirmation as

regards interest component was sought and/or was given.

Plainly, the execution of the balance confirmation has not been

denied. Moreover, if the balance confirmations are read in

conjunction with the reply dated 28th September, 2021 to the

demand notice, wherein the defendant categorically asserted

that it had been mutually agreed between the parties that the

defendant would repay the principal sum of Rs.50,00,000/- only

by 31st December, 2023, the existence of debt as such can

hardly be contested. Resultantly, the endeavour on the part of

the defendant to seek an unconditional leave to defend the suit

by putting in contest the factum of confirmation of accounts

does not merit acceptance.

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

years preceding the institution of the suit, the outstanding

amount stood freezed at Rs.57,60,417/-. The plaintiff

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

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

source. The defendant, in contrast, contends that the parties

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

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there was a mutual agreement between the parties in the month

of July-2021 that the defendant would repay the principal

amount of Rs.50,00,000/- only by 31st December, 2023. This

stand of the defendant is manifested in the communications

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

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

advance of Rs.50,00,000/- is indisputable. Secondly,

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

Rs.57,60,417/- has also not been specifically denied. The

question as to whether the defendant is liable to pay interest on

the said amount from 1st April, 2017, as claimed by the plaintiff,

or the liability stood freezed at the very amount thence, is

essentially a matter for adjudication.

51. 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

confirmations for four successive years preceding the institution

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

balance confirmations reflect the agreement between the parties

and disrupt the earlier course of payment of interest.

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52. Likewise, the submission on behalf of the defendant 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 defendant was to

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

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

extent of Rs.57,60,417/-, acknowledged under balance

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

defendant 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.

54. Thus, the following order:

:ORDER:

(i) The defendant is granted leave to defend the suit on

the condition of deposit of a sum of Rs.57,60,417/-

within a period of six weeks from the date of this

order.

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

period, this suit shall be transferred to the list of

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Commercial Causes and the defendant shall file his

written statement within a period of four weeks from

the date of deposit;

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

with, within the above stipulated period, the plaintiff

shall be entitled to apply for an ex-parte decree

against the defendant after obtaining a non-deposit

certificate from the Prothonotary and Senior Master

of this Court.

(iv) The Summons for Judgment stands disposed.

In view of disposal of the Summons for Judgment,

Interim Application (L) No.22002 of 2022, also stands

disposed.

[N. J. JAMADAR, J.]