Nainesh Mahendra Gandhi vs Prash Builders Pvt.Ltd
2022 Latest Caselaw 11956 Bom

SWAROOP Digitally
        SWAROOP
                  signed by

SHARAD SHARAD PHADKE
PHADKE Date:  2022.11.24
        17:59:55 +0530
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                     IN THE HIGH COURT OF JUDICATURE AT BOMBAY
                        ORDINARY ORIGINAL CIVIL JURISDICTION
                             IN ITS COMMERCIAL DIVISION
                         SUMMONS FOR JUDGMENT NO.31 OF 2020
                                         IN
                          COMM. SUMMARY SUIT NO.79 OF 2020

Nainesh Mahendra Gandhi                                           ...      Plaintiff
      versus
Prash Builders Pvt. Ltd.                                          ...      Defendants

Ms. Apurva Gupte i/by Mr. Vijay S. Sharma, for Plaintiff.
Mr. Faran Khan with Mr. Manish Doshi, Ms. Virti Shah, Ms. Shivam Trivedi i/by
Vimadalal and Co., for Defendant.

                               CORAM:        N.J.JAMADAR, J.

                               DATE:         22nd NOVEMBER, 2022

P.C.:

1. This Commercial Division Summary Suit is instituted for recovery of a

sum of Rs.3,54,81,200/- along with further interest from the date of the suit till

payment and/or realization.

2. Shorn of unnecessary details, the Plaintiff's case runs as under :

2.1 The Plaintiff is the Karta and Manager of Nainesh Gandhi, HUF. The

Defendant is a company incorporated under the Companies Act, 1956, which deals in

the business of builders and developers. Praful A. Mehta is the director of the

Defendant Company. The Plaintiff had known Praful A. Mehta since long.

2.2                     In the year 2007, since the Defendant was in financial constrains, Praful



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A. Mehta had approached the Plaintiff to provide financial assistance. Pursuant to the

representation, Plaintiff had advanced a sum of Rs.3,54,81,200/- to the Defendant

through banking channel. The Defendant acknowledged the liability by executing the

balance confirmations from time to time. The last balance confirmation for the period

01-04-2015 to 31-03-2016 was executed on 01-04-2016. In the audited balance sheet as

of 31st March, 2017 also, the Defendant had shown the said amount of

Rs.3,54,81,200/- under the caption 'other current liability'.

2.3 The Plaintiff repeatedly requested the Defendant to repay the loan

amount and discharge the liability. The Defendant failed and neglected to repay the

amount on one and other pretext. Thus, the Plaintiff addressed a legal notice on 25 th

January, 2019 calling upon the Defendant to repay the loan amount of

Rs.3,54,81,200/- along with interest @ 12% p.a.

2.4 Vide Reply dated 20th February, 2019, the Defendant raised false and

frivolous contentions and unjustifiably denied the liability. Eventually as the pre-

institution mediation resulted in a failure report, the Plaintiff was constrained to

institute this suit.

3. Upon service of the writ of summons, the Defendant entered

appearance. Thereupon, the Plaintiff took out the Summons for Judgment.

4. An Affidavit in Reply seeking unconditional leave to defend the Suit is

filed on behalf of the Defendant. After assailing the tenability of the suit under the

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provisions of Order XXXVII of the Code of Civil Procedure, 1908, the Defendant

contends that, the suit suffers from the vice of suppressio veri and suggestio falsi. The

Plaintiff has deliberately suppressed multiple transactions between the Plaintiff,

Defendant and Praful A. Mehta, especially the fact that the purported loan amount of

Rs.3,54,81,200/- was a mere transfer entry as on the very day of the transfer of the

said amount in the account of the Defendant, the very same amount stood credited to

the account of the Plaintiff from the account of Praful A. Mehta.

5. The Defendant further contends the Plaintiff had infact overdrawn an

amount of Rs.5.53 Crores over and above his entitlement to profit from the account of

J.P.Enterprises, a partnership firm of which Plaintiff, Praful A. Mehta and three others

were the partners. Thus, Praful A. Mehta invoked arbitration and filed Commercial

Arbitration Petition No.36 of 2019 against the partners of J.P.Enterprises, including

the Plaintiff, wherein reliefs were sought against the Plaintiff as well. To give a

counter blast to the said proceedings, the Plaintiff has instituted this Suit by falsely

claiming that the amount was advanced by way of loan. The execution of the balance

confirmations is disputed. In any event, the balance confirmations and the entries in

balance sheet, according to the Defendant, do not constitute admission of liability.

6. Lastly, the suit is stated to be barred by limitation as the last confirmation

of accounts was as of 1 st April, 2016 and, even after excluding the period spent in pre-

institution mediation, the suit ought to have been lodged within 25 days of the failure

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report. The institution of the Suit on 10th December, 2019 is, therefore, stated to be

barred by law of limitation.

7. An Affidavit in Rejoinder followed by an Affidavit in Sur-Rejoinder and

two additional Affidavits on behalf of the Plaintiff came to be filed. It would be

necessary to note that two additional Affidavits were filed pursuant to the directions of

this Court as the Court considered it appropriate to ascertain as to how the amount

which came to be credited to the account of the Plaintiff from the account of Praful A.

Mehta was treated in the books of account of the Plaintiff. In the last additional

Affidavit sworn on 15th November, 2022, the Plaintiff affirms that the amount received

from Praful A. Mehta has been treated as loan.

8. In the wake of the aforesaid pleadings, I have heard Ms. Gupte, learned

Counsel for the Plaintiff, and Mr. Faran Khan, learned Counsel for the Defendant, at

some length. I have also perused the documents placed on record in support of the

rival contentions.

9. Ms. Gupte, learned Counsel for the Plaintiff would urge that the fact

that the Plaintiff had advanced a sum of Rs.3,54,81,200/- to the Defendant through

banking channel, is not put in contest. Nor the execution of the balance confirmation

as of 1st April, 2016 on behalf of the Defendant is contestible. In any event, the

balance sheet of the Defendant Company for the period ending March, 2017 explicitly

records that a sum of Rs.3,54,81,200/- was shown payable to the Plaintiff as of 31 st

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March, 2017. In the face of these clear and unequivocal admissions of debt, according

to Ms. Gupte, the defence sought to be raised on behalf of the Defendant can only be

said to be sham and moonshine. It was further submitted that the Defendant is taking

an undue advantage of the business and familial relations between the Plaintiff and

Praful A. Mehta to bolster up a false defence that the transaction is one of a mere

transfer entry.

10. In contrast to this, Mr. Faran Khan, learned Counsel for the Defendant

strenuously submitted that the very fact that the Plaintiff chose to suppress transfer of

the loan amount from the account of Praful A. Mehta to the account of the Plaintiff on

the very day of the loan advanced gives rise to a triable issue. It was incumbent upon

the Plaintiff to explain the circuitous nature of the transaction. Endeavour of the

Plaintiff to now turn around and offer an explanation is of no avail. The learned

Counsel for the Defendant further submitted that the defence of the instant suit

having been instituted with a view to give a counter blast to arbitration proceeding

initiated by Praful A. Mehta is borne out by the time lag of a couple of days only in the

institution of the petition under Section 11 of the Arbitration and Conciliation Act,

1996 by Praful A. Mehta and the institution of this suit. It was further submitted that

an earlier endeavour on the part of the Plaintiff to obtain a decree in a summary suit in

respect of an identical transaction pertaining another entity Mahavir Corporation, did

not fructify. Eventually, the Plaintiff conceded to grant an unconditional leave with a

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schedule being fixed for completion of pre-trial formalities. To this end, attention of

the Court was invited to an order dated 13 th December, 2018 in Summons for

Judgment No.81 of 2018 in Comm. Summary Suit No.612 of 2018.

11. Ms. Gupte's submission that the confirmation of accounts furnishes a

foundation for summary suit is impeccable. Reliance placed on a judgment of the

learned Single Judge of this Court in the case of Sun N Sand Hotel Limited M/s.

V.V.Kamat, HUF1 wherein it was, inter alia, enunciated that the balance

confirmation letter furnishes the Plaintiff a cause of action for a summary suit, appears

to be well founded. A Full Bench of this Court in the case of Jyotsna K. Valia vs. TS

Parekh and Co.,2 has also expounded the law that confirmation of accounts furnishes

a surer foundation for a summary suit.

12. The second limb of the submission of Ms. Gupte based on an entry in

the balance sheet of the Defendant is also not without substance. In a recent

pronouncement, the Supreme Court in the case of Asset Reconstruction Company

(India) Ltd. V/s. Tulip Star Hotels Ltd. and Ors.3 has enunciated the law as under :

"85. It is well settled that entries in books of accounts and/or balance sheets of a corporate debtor would amount to an acknowledgment under Section 18 of the Limitation Act. In Bishal Jaiswal (supra) authored by Nariman, J. this Court quoted with approval the judgments, inter alia, of Calcutta Hihg Court 1 [2003(3) Mh.L.J.932] 2 2007 (3) BCR 772 3 2022 SCC Online SC 944

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in Bengal Silk Mills Co. V/s. Ismail Golam Hossain Ariff and Pandem Tea Co. Ltd., the Judgment of the Delhi High Court in South Asia Industries (P) Ltd. V/s. General Krishna Shamsher Jung Bahadur Rana and the judgment of Karnataka High Court in Hegde Golay Ltd. V/s. State Bank of India and held that an acknowledgment of liability that is made in a balance sheet can amount to an acknowledgment of debt."

13. The aforesaid legal propositions are well recognized. However, in the

case at hand, the Court is confronted with a factual controversy which bears upon the

grant of leave to defend the Suit. Whether the facts borne out by record render the

defence sought to be raised by the Defendant substantial or, in the least, plausible, is

the core issue.

14. First and foremost, it is imperative to note that the Plaintiff approached

the Court with a plain and simple case that the amount was advanced to the Defendant

in the year 2007. It was not repaid till the year 2019 despite their being confirmations

of accounts from time to time, and, therefore, the Plaintiff was constrained to institute

the suit. There was no reference to any contemporaneous collateral transaction

between the parties.

15. In the Affidavit in Reply, the Defendant categorically asserted that the

amount of Rs.3,54,81,200/- which was shown to have been advanced to the Defendant

on 24th August, 2007 was instantaneously withdrawn on the very day from the account

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of Praful A. Mehta, maintained with Kapol Co-op. Bank Ltd. The ledger of the

accounts of the Plaintiff in the books of Praful A. Mehta (Exhibit 1) and the ledger of

the account of the Plaintiff in the books of account of the Defendant (Exhibit 2) were

annexed to the Affidavit in Reply. The entries therein are also borne out by the copies

of the extract of account of Praful A. Mehta and Defendant Company maintained with

Kapol Co-op. Bank Ltd. (Exhibit B to the Affidavit in Sur-Rejoinder).

16. Can this be brushed aside as a matter of mere co-incidence ? The

Plaintiff surely owes an explanation. That explanation is not forthcoming in the

Plaint. However, the plaint touches upon the role of Praful A. Mehta as the key

person at whose behest the Plaintiff advanced the amount to the Defendant Company

as Praful A. Mehta happened to be a director of Defendant.

17. In the aforesaid backdrop, the Court desired to ascertain as to how the

said amount received from Praful A. Mehta was treated in the accounts of the Plaintiff.

In the additional Affidavit filed on 15th November, 2022, an endeavour was made to

demonstrate that as of 2nd September, 2007 the Plaintiff owed an amount of

Rs.4,80,000/- to Praful A. Mehta and, upon being inquired by the Income Tax

authorities, the Plaintiff had replied that the advance of Rs.3,54,81,200/- made to the

Defendant was a loan.

18. I am afraid the said explanation does not adequately address the core

core question as to how the receipt of the very amount of Rs.3,54,81,200/- in the

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account of the Plaintiff from the account of Praful A. Mehta, has been shown in the

books of account of the Plaintiff. Neither the amount is too small to pale in

significance. Nor the instantaneous transfer can be wished away as a mere co-

incidence. The inaction on the part of the Plaintiff for almost 12 years can also not be

brushed aside as immaterial or inconsequential. It does not stand to reason that for

almost 12 years, the Plaintiff would not have insisted for payment of a reasonable

return on the said investment, if not return of the principal amount. The Plaintiff has

not admittedly claimed any interest on the said amount.

19. It is true that the fact that, in an almost identical matter, the Plaintiff

conceded to grant of an unconditional leave may not by itself be decisive. However,

institution of this suit within a couple of days of the institution of the Arbitration

Petition by Praful A. Mehta cannot be said to be wholly irrelevant. In the Affidavit in

Sur-Rejoinder, the Defendant has shown a trail of the transactions between the

Plaintiff, Defendant and the related parties including Praful A. Mehta and

J.P.Enterprises. Prima facie, it appears that the transactions are inextricably

intermingled. To add to this, there is no satisfactory explanation by the Plaintiff.

20. In the aforesaid view of the matter, I am persuaded to hold that the

Defendant has raised a fair and reasonable defence. In view of the instantaneous

withdrawal of the amount from the account of Praful A. Mehta on the very day of the

transaction in question, there is a cloud of doubt over the very nature of the

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transaction reflected in the confirmation of accounts and the balance sheet. In the

circumstances, it may not be justifiable to deprive the Defendant of an opportunity to

contest the claim.

21. It is trite, admissions are not conclusive. Evidentiary admissions can be

explained at the trial. In the instant case, the Defendant has offered an explanation

which competes in probability with the Plaintiff's case. Therefore, leave to defend

cannot be made conditional upon deposit of the amount which the confirmation of

accounts and balance sheet represent, which is otherwise a norm in case of an

admitted liability

22. It would be suffice to make a reference to the Judgment of the Supreme

Court in the case of B.L. Kashyap and Sons Limited vs. JMS Steel and Power

Corporation and Anr.4 wherein after considering the judgments of the Supreme

Court in the cases of Mechelec Engineers & Manufacturers vs. Basic Equipment

Corpn.5 and IDBI Trusteeship Services Ltd. vs. Hubtown Limited 6, wherein the

tests were reformulated, the Supreme Court enunciated the principles as under :

"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 exceptional cases or only in cases where the

4 (2022) 3 SCC 294 5 (1976) 4 SCC 687 6 (2017) 1 SCC 568

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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."

23. If the aforesaid principles of law are applied to the facts of the present

case, in my view, the Defendant is entitled to an unconditional leave to defend the

Suit. Hence, the following order :

ORDER

(i) The Defendant is granted unconditional leave to defendant the suit.

(ii) The Defendant shall file written statement within a period of 30 days

from today.

      (iii)    The Summons for Judgment stands disposed.




                                                          ( N.J.JAMADAR, J. )



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