Calcutta High Court
Dilip Kumar Rungta vs Klg Tradefin Pvt. Ltd on 30 March, 2023
1
IN THE HIGH COURT AT CALCUTTA
CIVIL APPELLATE JURISDICTION
ORIGINAL SIDE
(COMMERCIAL DIVISION)
Present:
THE HON'BLE JUSTICE HARISH TANDON
&
THE HON'BLE JUSTICE SHAMPA DUTT (PAUL)
A.P.O.T 106 of 2022
CS 29 of 2022
I.A G.A No. 1 of 2022
Dilip Kumar Rungta
Vs.
KLG Tradefin Pvt. Ltd.
AND
A.P.O.T 107 of 2022
CS 30 of 2022
I.A G.A No. 1 of 2022
Anurag Rungta
Vs.
K.P. Credit & Traders Pvt. Ltd.
AND
A.P.O.T 108 of 2022
CS 31 of 2022
I.A G.A No. 1 of 2022
Dilip Kumar Rungta
Vs.
K.P. Credit & Traders Pvt. Ltd.
Appearance:
For the Appellants : Mr. Anirban Ray, Adv.
Ms. Sanjukta Gupta, Adv.
Ms. Sananda Ganguly, Adv.
APOT 106, 107, 108 of 2022
2
Mr. S. Roy, Adv.
For the Respondents : Mr. Suresh Sahani, Adv.
Mr. Chhandak Dutta, Adv.
Ms. Karuna Bose, Adv.
Mr. Soumik Ghosh, Adv.
Judgment On : 30.03.2023
Harish Tandon, J.:
All the aforesaid three matters are taken up together as, the legal
points involved therein are identical and similar and the answer to it shall
decide the fate of the aforesaid appeals.
The basic facts involved in the aforesaid appeals are more or less
similar except the quantum of money involved therein and therefore, the
facts narrated in APOT 106 of 2022 are adumbrated in the instant
judgment. The facts emerged from the pleading filed before the Single
Bench are that the respondent company is engaged in the business of
financial intermediation and activities apart from the other trading activities.
In or around the month of February, 2015 the appellant approach the
respondent as it was a need of funds and after the extensive discussion, the
negotiations held between the parties wherein the respondent agreed to
advance a sum of Rs. 2,87,00,000/- (Rupees two crores and eighty seven
lakhs) to the appellant payable with interest at 12 per cent per annum upon
maturity. It was further renegotiated and ultimately the rate of interest was
reduced to 7 per cent per annum on and from 1st April, 2020. It is further
stated that the interest would be payable on a monthly basis and in the
APOT 106, 107, 108 of 2022
event of default, the respondent is entitled to recall the loan and the entire
balance amount would be payable at one go. The aforesaid amount was
debited from the account of the respondent on diverse dates and credited
into the back account of the appellant. The pleading further revealed that
the part payment to the tune of Rs. 2,05,00,000/- (Rupees two crore and
five lakhs) was made between 20th March, 2015 and 23rd September, 2016.
The interest was also paid on diverse dates between 17th March, 2016 and
10th March, 2021 after deduction of TDS for the respective financial years
which would be evident from the copy of the Form 26AS uploaded on the
official website of the Income Tax Department. Since there was a default in
payment of interest and the principal amount due after part payment, the
respondent called upon the appellant to pay a sum of Rs. 82,00,000/-
(Rupees eighty-two lakhs) being the balance amount together with an
interest to the tune of Rs. 9,61,450/- (Rupees nine lakhs sixty-one thousand
four hundred and fifty) upon issuing a letter dated 23rd December, 2021
payable within 15 days from the date of receipt thereof. The said letter was
duly replied by the appellant on 7th January, 2022 admitting the receipt of
the said amount but denied the liability taking a sham defence and denying
the existence of privity of contract. Thereafter the lis was filed for recovery
of the said sum of Rs. 91, 61,450/- (Rupees ninety-one lakhs sixty-one
thousand four hundred and fifty) together with an interest at the rate of 18
per cent per annum from the date of decree till realization. It is pertinent to
note that the said suit was filed without exhausting the remedy of pre-
institution mediation contemplated under Section 12A of the Commercial
Courts Act, 2015 and one of the reliefs claimed in the plaint relates to the
APOT 106, 107, 108 of 2022
dispensation of the aforesaid recourses. An application was taken out in the
said suit seeking for an order of injunction restraining the appellant from
dealing and/or encumbering and/or alienating its assets and also to furnish
the security to the tune of Rs. 91, 61,450/- (Rupees ninety-one lakhs sixty-
one thousand four hundred and fifty). The said application was contested by
the appellant by filing the affidavit in opposition taking a plea that one Anil
Kumar Chaudhary being known to the deponent of the said affidavit assured
in arranging and facilitating the long term unsecured loan for the business
requirement of the appellant and pursuant to the several discussions having
held the entire amount was arranged by him and it was agreed that the said
amount would be repaid within 15 years from the date of its disbursement
and therefore, there is no privity of contract in relation to the said loan
between the appellant and the respondent.
On the basis of the pleadings exchanged by the parties the application
filed by the respondent was disposed of restraining the appellant from
dealing with, disposing of and/or in any manner, encumbering the fixed and
other assets of the appellant till the disposal of the suit. The appellant has
filed the instant appeals against the similar orders taking common grounds
of attack.
The counsel appearing for the appellant vehemently submits that the
instant suit was instituted without exhausting the remedy provided under
Section 12A of the Commercial Courts Act, 2015 and therefore, the same is
liable to be dismissed. It is further submitted that even apart on the facts
pleaded in the application, the order of injunction could not have been
APOT 106, 107, 108 of 2022
passed in the manner as has been done in the instant case. It is submitted
that in a suit simplicitor for recovery of money, the injunction should have
been the last resort and the only grounds open to the plaintiff is to seek the
security before proceeding for the attachment before judgment. It is
arduously submitted that there is no ingredient, required to be pleaded for
attachment before judgment, in the said application and therefore, even on
such score, no order for attachment before judgment could be passed and
the only recourse available is to dismiss the said application. The plea is
taken that the averments made in the plaint does not fulfill the conditions
laid down under the definition of 'Commercial Dispute' and therefore, it is
outside the purview of the said Act. To elaborate the aforesaid submission,
it is submitted that there is no mercantile document pleaded and proved in
the plaint and therefore, the suit before the Commercial Division of the High
Court is not maintainable.
Per contra, the learned advocate appearing for the respondents
submits that the suit involves an urgent interim relief contemplated under
Section 12A of the said Act and the dispensation was sought for, which
would be evident from one of the reliefs claimed in the plaint. It is further
submitted that an application for injunction and/or furnishing the security
was taken out as an urgent interim relief and having granted by the Single
Bench, the plea of a bar under Section 12A of the Act is not available. It is
further submitted that the transaction between the parties have not been
disputed and a sham and frivolous defence has been taken which is far from
the reality and contrary to the transactions held between the parties. It is,
APOT 106, 107, 108 of 2022
thus, submitted that the money was transferred directly in the bank
account of the appellant and the part payments including the interests were
paid upon deduction of the TDS and such documents are issued in course of
a transaction between the financier and the borrower and therefore, satisfies
the ingredients of the mercantile document. It is further submitted that the
documents executed by the parties in the ordinary course of transaction are
regarded as a mercantile document and therefore, the stand of the appellant
in this regard is untenable.
At the very outside, we must record that the memorandum of appeal
filed in the aforesaid appeals does not contain any ground relating to non-
adherence of pre-institution mediation required under Section 12A of the
said Act yet such point has been taken by the appellant and being the pure
question of law, we permit such point to be taken at the bar as it has a
greater impact on the maintainability of the suit. Section 12A of the Act is
reproduced as under:
"12-A. Pre-Institution Mediation and Settlement. - (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-institution mediation in accordance with such
manner and procedure as may be prescribed by rules made by
the Central Government.
(2) The Central Government may, by notification, authorize
the Authorities constituted under the Legal Services Authorities
APOT 106, 107, 108 of 2022
Act, 1987 (39 of 1987), for the purposes of pre-institution
mediation.
(3) Notwithstanding anything contained in the Legal
Services Authorities Act, 1987 (39 of 1987), the Authority
authorized by the Central Government under sub-section (2) shall
complete the process of mediation within a period of three
months from the date of application made by the plaintiff under
sub-section (1):
Provided that the period of mediation may be extended for
a further period of two months with the consent of the
parties:
Provided further that, the period during which the parties
remained occupied with the pre-institution mediation,
such period shall not be computed for the purpose of
limitation under the Limitation Act, 1963 (36 of 1963).
(4) If the parties to the commercial dispute arrive at a
settlement, the same shall be reduced into writing and shall be
signed by the parties to the dispute and the mediator.
(5) The settlement arrived at under this section shall have
the same status and effect as if it is an arbitral award on
agreed terms under sub-Section (4) of the Section 30 of the
Arbitration and Conciliation Act, 1996 (26 of 1996)."
APOT 106, 107, 108 of 2022
It appears from the language employed in the aforesaid section that
before institution of the suit relating to commercial dispute, the plaintiff has
to exhaust such remedy. There has been a divergent opinion on the
legislative intent sublime incorporation of the aforesaid provision whether
the same can be regarded as mandatory or directory. Different High Courts
have taken a divergent view and ultimately the matter travelled to the
Supreme Court in Patil Automation Pvt. Ltd. vs. Rakheja Engineers Pvt.
Ltd. reported in (2022) 10 SCC 1. The Apex Court held that the said
provision is mandatory in nature provided the suit does not involve urgent
interim relief in the following:
"99.3. The language used in Section 12-A, which includes
the word "shall", certainly, goes 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.
* * * * * * * * * * * * * * * * * * * * *
113.1. We declare that Section 12-A of the Act is
mandatory and hold that any suit instituted violating the
mandate of Section 12-A must be visited with rejection of the
plaint under Order 7 Rule 11. This power can be exercised even
APOT 106, 107, 108 of 2022
suo motu by the Court as explained earlier in the judgment. We,
however, make this declaration effective from 20-8-2022 so that
stakeholders concerned become sufficiently informed."
In view of the enunciation of law by the Supreme Court in the above
noted report, there is no ambiguity in our mind that the intention of the
legislature by incorporating the aforesaid provisions by way of an
amendment is that the party have to exhaust the said remedy before the
institution of the suit in the Commercial Division/Commercial Court and to
that extent it is mandatory. However, an exception is carved out in a case
involving an urgent interim relief manifestly seen from the pleadings as well
as the reliefs claimed in the plaint which laid the institution of the suit
before the Commercial Division/Commercial Court. The Apex Court has
further highlighted that in absence of any consequences having provided
under Section 12A of the Act, the only course available to the Court is to
reject the plaint subject, however, to the fact that the jurisdictional High
Court has declared such provision to be mandatory. The Apex Court further
deprecated the practice of keeping the suit in abeyance and directing the
plaintiff to exhaust the remedy under Section 12A of the Act which would be
manifestly seen from the following observations:
"85. One of the aspects which weighed with the learned
Single Judge of the Bombay High Court in Ganga Taro [Ganga Taro
Vazirani v. Deepak Raheja, (2021) SCC OnLine Bom 195] is that in a case
where the suit is instituted under Section 80 CPC without
issuing any notice, if the defendant does not take up the plea of
APOT 106, 107, 108 of 2022
violation of Section 80, there can be waiver. Thus, even if
Section 12-A in a given case, where the defendant does not set
up the case there can be waiver and therefore, Section 12-A is
not mandatory. No doubt, the Division Bench of the Bombay
High Court while reversing the learned Single Judge proceeded
to hold that there cannot be waiver as Section 12-A is based on
public interest. The approach of the learned Single Judge does
not commend itself to us. The question as to whether Section
12-A is mandatory or not, must be decided with reference to
language used, the object of the enactment and a host of other
aspects. The fact that if a defendant does not raise the plea
about compliance of Section 12-A, it may result in a given case
of waiver cannot result in Section 12-A not being mandatory. If
it were so, then in a case where there is no notice under Section
80, a plaint can never be rejected. It is legally untenable and
defies logic."
Recently, this Bench analyzed the ratio laid down in Patil
Automation (Supra) and held that the suit instituted without complying the
mandatory provisions contained under Section 12A of the Act in absence of
any urgent interim reliefs is liable to be dismissed by rejecting the plaint if
the jurisdictional High Court, prior to the institution of the instant suit,
have already held that the said provision is mandatory in nature in the
following:
APOT 106, 107, 108 of 2022
"Though the Apex Court have indicated that the law stated
therein would apply prospectively i.e., w.e.f 20.8.2022 but it can
be reasonably inferred that the provision contained under
Section 12A of the Act is mandatory in nature and if the
jurisdictional High Court have declared it so it will disentitle
the plaintiff to any reliefs.
The aforesaid observation may get impetus from the
enlightening observation of the Apex Court in the said report in
the following: "Finally, if the plaint is filed violating Section
12A after jurisdictional High Court has declared Section 12A
mandatory also, the plaintiff will not be entitled to the relief."
The meaningful reading of the aforesaid observations culled out
from the Patil Automation Private Limited (Supra) leads no
ambiguity that the moment the jurisdictional High Court have
taken a view that the provision contained under Section 12A is
mandatory even if the suit filed prior to the judgment rendered
in the said report, the same will be regarded as violative of said
provision and there is no fetter on the part of the Court to reject
the plaint on such count alone."
The plaint involved in the respective appeals does not contemplate an
urgent interim relief which would be evident from the reliefs claimed therein
and therefore, mere filing an application of injunction and/or security
cannot be regarded as dispensation of the rigor of Section 12A of the Act and
therefore, is not maintainable. Since, this Court has held the provision
APOT 106, 107, 108 of 2022
contained in Section 12A of the act to be mandatory in absence of any
urgent interim reliefs the suit which was instituted subsequent thereto is
liable to fail and the courses to be adopted on the basis of the decision
rendered in Patil Automation (Supra), there is no other option but to reject
the plaint. Since we have held that the suits falls within the mischief of the
Section 12A of the Act it would be an idle formality to go into the other
points canvassed before us the interim reliefs are granted in-aid of the final
relief in a variedly instituted suit and cannot be granted in a suit which is
otherwise not maintainable in view of the mandatory provision of the Act
therefore, the order impugned is set aside. The plaint is rejected. The
plaintiff is directed to exhaust the remedy provided under Section 12A and
after the outcome of the same if the cause of action still survive may
institute a suit and in such event, if any interim reliefs are sought for the
same shall be decided on merit without being influenced by the observation
made in the impugned order. The appeals are allowed.
No order as to costs.
Urgent Photostat certified copies of this judgment, if applied for, be
made available to the parties subject to compliance with requisite
formalities.
I agree. (Harish Tandon, J.)
(Shampa Dutt (Paul), J.)
APOT 106, 107, 108 of 2022
