Silicon Graphics Systems India ... vs Nidas Estates Private Ltd. And ...
2004 Latest Caselaw 1367 Del

JUDGMENT

R.C. Jain, J.

1. These applications filed under Order 37 Rule 3(5) read with Section 151 of the CPC have been made on behalf of the defendants seeking unconditional leave to defend the summary suit.

2. The relevant facts leading to the filing of the present applications are that the plaintiff has filed a summary suit under the provisions of Order 37 CPC for the recovery of a sum of Rs. 45,23,414/- along with pendente lite and future interest on the averments and allegations that defendant No. 1 was the owner of the Flats No. 305-A and 305-B, situated in a building known as Embassy Square No. 148, Infantry Road, Bangalore-560 001 at all material times. On 1.9.1995 the plaintiff and defendant No. 1 entered into a license agreement at New Delhi, in terms of which defendant No. 1 gave the above numbered flats on license to the plaintiff for use as office space for a period of 36 months effective from 1.9.1995, the license being renewable for a further period of three years. Defendants No. 2 and 3 were responsible for providing maintenance services in relation to various flats/apartments in the above building, Embassy Square, including to the flats licensed to the plaintiff. Under the terms of the license, the plaintiff had deposited a sum of Rs. 27,45,000/- as security refundable on the expiry of the license agreement. Besides, the plaintiff had also deposited a sum of Rs. 2,02,100/- with the defendants for being made over to the Karnataka Electricity Board for grant of a higher load of electricity at the licensed premises. A further sum of Rs. 6,25,000/- was also deposited with defendants No. 2 and 3 with the consent and concurrence of defendant No. 1 for providing standby generating sets and services for upkeep and maintenance of the premises and common areas, which they were liable to refund on the expiry of the license.

3. It is alleged that after the expiry of the license agreement on 31.8.1998, it was renewed w.e.f. 1.9.1998 for a period of three years, and ultimately the license expired on 31.8.2001. Upon the expiry of the license agreement by efflux of time, the plaintiff made an offer to renew the license on certain more favorable terms to him subject to acceptance by defendant No. 1 failing which, the plaintiff offered to hand over the possession of the licensed premises to defendant No. 1 provided the security deposits made by him with the defendants were refunded to him. It is, however, alleged that defendant No. 1 was not ready and willing to accept possession and so the matter was dragged on and certain correspondence was exchanged and discussions took place. According to the plaintiff, the plaintiff surrendered the possession of the licensed premises to defendant No. 1 sometimes in October, 2001. Since defendants did not return a sum of Rs. 35,72,100/- which was refundable to the plaintiff under the terms of the license, the plaintiff filed the suit claiming the said amount plus a sum of Rs. 9,51,314/- as interest accrued thereon @12% per annum thereby totalling to Rs. 45,23,414/-.

4. After issuance of the summons, the defendants entered appearance and on summons for judgment being served, has filed the present applications seeking leave to defend the suit, inter alia, on the grounds that defendant No. 1 is not liable to pay the said amount or any other amount and, on the other hand, the plaintiff owes an amount of Rs. 9,58,448/- to defendant No. 1 even after adjusting the amounts deposited by the plaintiff with the defendants on account of security etc. and, therefore, a suit for recovery of the said amount has been filed by him against the plaintiff. The said suit, on the change in the pecuniary jurisdiction of the Court brought about by Section 2 of the Delhi High Court (Amendment) Act, 2003 has, however, been made over to the District Courts for trial and is pending there. It is alleged that the possession of the licensed premises was not handed over by the plaintiff to defendant No. 1 as the plaintiff failed to remove the false ceiling, the air-conditioner ducting, fire protection pipes, electrical control panels or to quote the amount for the same in case they were to be left at the premises uptill December, 2001 and, therefore, the plaintiff is liable to pay additional license fee @ Rs. 3,73,276/- per month for the month of September, 2001 and @ Rs. 4,10,604/- for the months of October, November and December, 2001 and January, 2002 and up to 10th February, 2002. The application filed on behalf of defendant No. 1 is supported by the affidavit of one Mrs. A.K. Gill, who is stated to be a duly authorised representative of defendant No. 1.

5. Defendants No. 2 and 3 have also made a similar application seeking leave to defend the suit on identical grounds.

6. The plaintiff has opposed the leave to defend applications and has filed a detailed reply thereby denying that the defendant is entitled to any leave to defend or any amount is due and payable to defendant No. 1 by the plaintiff. In the rejoinder, the defendant/applicant has controverter the pleas and has reiterated the averments made in the application.

7. I have heard Mr. Rajiv Tyagi, learned counsel representing the plaintiff, Ms. Malvika Rajkotia, learned counsel for defendant No. 1 and Mr. Sushant Kumar, learned counsel representing defendants No. 2 and 3 at length and have given my thoughtful consideration to their respective submission.

8. The law as to when leave to defend should be granted or refused or be granted conditionally is well settled through a catena of judgments of the Supreme Court and various High Courts. In particular, reference may be made to the decision of the Supreme Court in the case of M/s Mechalec Engineers and Manufacturers v. M/s Basic Equipment Corporation, where the Supreme court has laid down the following principles for granting leave to defend:

''(a) If the defendant satisfies the Court that he has a good defense to the claim on its merits the plaintiff is not entitled to leave to sign judgment and the defendant is entitled to unconditional leave to defend.

(b) If the defendant raises a friable issue indicating that he has a fair or bona fide or reasonable defense although not a positively good defense the plaintiff is not entitled to sign judgment and the defendant is entitled to unconditional leave to de end.

(c) If the defendant discloses such facts as may be deemed sufficient to entitle him to defend, that is to say, although the affidavit does not positively and immediately make it clear that he had a defense, yet, shows such a state of facts as leads to the inference that at the trial of the action he may be able to establish a defense to the plaintiff's claim the plaintiff is not entitled to judgment and the defendant is entitled to leave to defend but in such a case the Court may in its discretion impose conditions as to the time or mode of trial but not as to payment into Court or furnishing security.

(d) If the defendant has no defense or the defense set up is illusory or sham or practically moonshine then ordinarily the plaintiff is entitled to leave to sign judgment and the defendant is not entitled to leave to defend.

(e) If the defendant has no defense or the defense is illusory or sham or practically moonshine then although ordinarily the plaintiff is entitled to lave to sign judgment. The Court may protect the plaintiff by only allowing the defense to proceed if the amount claimed is paid into Court or otherwise secured and give leave to the defendant on such condition, and thereby show mercy to the defendant by enabling him to try to prove a defense''.

9. Reference can also be made to a decision of the Supreme Court in the case of Mrs. Raj Duggal v. Ramesh Kumar Bansal, 1990 SC 2218 where the Hon'ble Court has held as under:

''Leave is declined where the Court is of the opinion that the grant of leave would merely enable the defendant to prolong the litigation by raising untenable and frivolous defenses. The test is to see whether the defense raises a real issue and not a sameone, in the sense that if the facts alleged by the defendant are established there would be a good or even a plausible defense on those facts. If the Court is satisfied about that leave must be given. If there is a friable issue in the sense that there is a fair dispute to be tried as to the meaning of a document on which the claim is based or uncertainty as to the amount actually due or where the alleged facts are of such a nature as to entitle the defendant to interrogate the plaintiff or to cross examine his witnesses leave should not be denied. Where also, the defendant shows that even on a fair probability he has a bona fide defense, he ought to have leave. Summary judgments under Order 37 should not be granted where serious conflict as to matter of fact or where any difficulty on issues as to law arises. The Court should not reject the defense of the defendant merely because of its inherent implausibility or its inconsistency.''

10. Two judgments of this Court in the case of K. Balakrishna Rao v. M/s Volga Restaurant, and in the case of M/s KIG Systel Ltd. v. M/s Fujitsu ICIM Ltd., may also be referred for taking advantage in this connection

11. Bearing in mind the legal proposition flowing from these decisions, I may now proceed to examine various facts, circumstances and factors which are relevant for the purpose of deciding the question as to whether the leave to defend should be granted or declined or granted conditionally in the present case. In the case in hand, the existence of the license agreement dated 1.9.1995 containing various stipulations as also the fact that it was renewed once from 1.9.1998 and, in that view of the matter it expired on 31.8.2001 by efflux of time, is not disputed. It is also not disputed that the plaintiff had, in fact, deposited a sum of Rs. 27,45,000/- with defendant No. 1 as refundable security which they were liable to refund to the plaintiff on the expire of the license agreement, as apparent from clause No. 3 of the aforesaid agreement, which reads as under:

''As a security for the due payment by the Licensee and due performance by the Licensee of its obligations hereunder, the Licensee shall at the time of the execution of this Agreement deposit with the Licensor a sum of Rs. 27,45,000/- (Rupees Twenty Seven Lac Forty Five Thousand only) which the Licensor shall hold until the Licensee vacates the licensed Premises.

Without prejudice to any other right or remedy which the Licensor has in this behalf, the Licensor shall be entitled to adjust from the security deposit any License Fee or other amounts payable hereunder, which remain unpaid by the Licensee, and upon such adjustment the Licensee shall forthwith replenish the security deposit to bring it to an amount of Rs. 27,45,000/- (Rupees twenty seven lacs and forty five thousand only) and pay interest on the amount adjusted @18% per annum from the date of adjustment up to date of repletion.

The Licensor shall refund to the Licensee the unadjusted amount of the security deposit remaining in the hand of the Licensor simultaneously at the time of the Licensee vacating the Licensed Premises, free of any liability of interest. However, should the Licensor fail to make the refund of the security deposit stipulated above simultaneously with the Licensee delivering the vacant possession of the Licensed Premises, the Licensor shall be liable to pay interest during the period the unadjusted amount of security deposit remains unpaid by the Licensor to the Licensee. Such interest on the unadjusted amount of security deposit shall be payable by the Licensor to the Licensee at the rate of the 18% per month (payable on a per day basis) for up to the first 10 days during the period the amounts remain unpaid and thereafter at a rate which is enhanced by 10% (ten per cent) of the rate immediately prior thereto for each 30 (thirty) days period after the first 30 (thirty) days period of non-refund of the unadjuted amount of security deposit. Interest at the enhanced rates of interest shall be payable on a cumulative basis.''

12. The core question, therefore, is as to when the plaintiff had or can be deemed to have handed over the vacant possession of the premises to defendant No. 1 because the plaintiff would be entitled to refund of security deposit only on the date he hands over the possession. To find the answer, it is necessary to refer to the correspondence exchanged between the parties from the beginning of September, 2001 till February 2002 as also certain discussions held between the representative of the parties as eflected in the minutes of the meeting held on 5th October, 2001 and the conduct of the parties during this period of about six months.

13. After the termination of the license w.e.f. 31.8.2001, the first communication emanated from the plaintiff is a letter dated 4.9.2001 addressed to Mrs. Adarsh Gill, Director of defendant No. 1. After noting the factum of expiry of the lease agreement on 31.8.2001, the letter refers to the discussion which the plaintiff had with Mrs. Adarsh Gill in regard to the possible renewal of the agreement effective from 1.9.2001. The plaintiff gave a proposal to defendant No. 1 to renew the lease for a period of two years at a reduced rent @ Rs. 50 per sq.ft., security deposit of 12 months rent and all other terms and conditions remaining the same as contained in the lease agreement dated 1.9.1995. The plaintiff had also made it clear that if the above offer was not acceptable to defendant No. 1, they must refund the interest free security and accept the vacant possession of the premises. In response to this letter, defendant No. 1 made a counter offer for renewal of the lease at the rent of Rs. 60 per sq.ft., leaving all other conditions to be worked out later on, which was not accepted by the plaintiff.

14. Vide another communication dated 28.9.2001 the plaintiff reiterated its request to refund the security deposit and called upon the defendant to send its authorised representative to accept the vacant possession of the premises. The plaintiff desired the defendant to complete the formalities latest by 5.10.2001. The defendant responded to this letter and informed the plaintiff that an authorised representative of the defendant will get in touch with the plaintiff on 5.10.2001 to do the following:

''(a) Take vacant possession of my premises in tenantable conditions subject to wear and tear regular and that the premises are restored to its original condition when you took it under license.

(b) Handover security deposit amount after deducting outstanding dues against the premises including cost of restoration to original conditions if it be found necessary and deducting rent arrears in accordance with enclosed statement''.

15. It appears that on 5.10.2001 a certain Mr. Ashish Randhawa, a representative of defendant No. 1 held a meeting with Mr. K.V. Subramanian of the plaintiff and that meeting led to the following minutes:

''1. NEPL acknowledge the receipt of security deposit of Rs. 27,45,000.00

2. NEPL also has confirmed from Embassy Group, the deposit of Rs. 6,25,000 for genset paid by SGI to Embassy Group on NEPL's behalf. This amount needs to be refunded to SGI. Embassy Group and NEPL to decide amongst themselves as to who would refund this.

3. NEPL have claimed that rent for the month of September 1995 (Rs. 152,500.00 less TDS of Rs. 35,075.00) has not been received by them. SGI to reconcile this account by Tuesday the October 9, 2001 and get back to NEPL.

4. NEPL has also claimed Rs. 1,37,250.00 being the balance due against arrears received in the month of May, 1998. SGI to reconcile this as well by Tuesday the October 9, 2001 and get back to NEP.

5. NEPL has requested SGI not to surrender the additional electrical load obtained by SGI to KEB since NEPL wants to retain the same. NEPL to apply to KEP for transferring the same from SGI to NEPL. Any deposits paid by SGI would be refunded to SGI by NEL. All charges pertaining to this would be borne by NEPL.

6. The vacant possession has already been offered by SGI to NEPL at the end of the lease period, against refund of Security Deposit.

7. SGI offers the following to NEPL against payment. Amounts to be mutually decided.

False Ceiling

Air Condition ducting with pipes

Fire protection pipes

Electrical Control Panel''.

16. It appears that no action was taken between 5.10.2001 and uptill 22.11.2001 when the plaintiff giving reference of the earlier communications dated 4.9.2001 and 28.9.2001 again wrote to the defendant to arrange for the refund of the security deposit without any further delay and at the same time informing the defendant that the plaintiff would be charging interest as per the agreement from the date of termination of the license. Defendant No. 1 after about a month shot a legal notice dated 27.12.2001 to the plaintiff calling upon the plaintiff to handover the vacant and peaceful possession of the premises within one week of receipt of letter and also to pay a sum of Rs. 25,29,582.50 paise towards the license fee as under:

a) License fee for the months of June, July, August 2001.

b) Additional fee for the month of September 2001 Rs. 1,50,000/-

c) License fee for the month of September 2001 Rs. 2,23,275/-

d) License fee and additional fee for the month of October 2001 Rs. 4,10,602.50/-

e) License fee and additional fee for the month of November 2001 Rs. 4,10,602.50.

f) License fee and additional fee for the month of December 2001 Rs. 4,10,602.50.

g) Rent for the month of September 1995 as per the minutes of the meeting held on 5th October, 2001 and also a sum of Rs. 1,37,250/- being the balance due against the arrears received in the month of May 1998.''

17. Another letter dated 18.1.2002 was issued by the defendant to the plaintiff seeking possession of the premises and to settle the accounts without any further delay warning that if no action is taken within 48 hours, they will be at liberty to take appropriate legal action. The notice dated 27.12.2001 and letter dated 22.1.2002 was replied to by the plaintiff on 22.1.2002 and 23.1.2002 thereby controverting the various facts and pleas contained in the notice again asking to refund the security deposit of Rs. 27,45,000/- in addition to Rs. 6,25,000/-.

18. A careful perusal of the above correspondence exchanged between the parties and more particularly the decisions arrived at between the representatives of the parties as reflected in the minutes of the meeting held on 5.10.2001, would prima facie show that the defendant had in unequivocal terms accepted their liability to refund the security deposit of Rs. 27,45,000/- as also a sum of Rs. 6,25,000/- towards generator set etc and the plaintiff on their part had agreed to reconcile the account in regard to the allegedly unpaid rent for the month of September, 1995 and of May, 1998. This clearly shows that the plaintiff were ready and willing to hand over the possession of the suit premises after the end of the lease period provided the security amount was refunded to them.

19. Mr. Rajiv Tyagi, learned counsel appearing for the plaintiff has vehemently urged that defendant No. 1 had deliberately avoided to take the possession of the premises because the rent of the premises had come down and they were not finding a suitable tenant and were gaining time on wholly untenable grounds. He also urged that defendant No. 1 even after a period of six months instead of taking over the possession in a lawful manner, as offered by the plaintiff, unlawfully took over the possession of the premises by using duplicate set of keys solely with the mala fide and fraudulent intention of not refunding the security deposit and other deposits. According to him, this option was available to defendant No. 1 as early as on 1.9.2001 upon expiry of the icense but the defendant waited for all this period so that it could mis-appropriate the entire security deposit until it found a suitable tenant. It was also contended that the defense of defendant No. 1 is not probable and it also lacks in bona fides because a tenant cannot be forced to continue in symbolic possession of the tenanted premises even after the expiry of the lease/licensed period and when the tenant had offered the possession to the landlord/owner on wholly untenable grounds that some arrers have not been cleared and some fixtures and fittings installed by the tenant still existed at the premises. According to him, it was open to defendant No. 1 to remove the fittings etc. at the cost of the plaintiff and to proceed to recover the arrears of rent etc., if any, after taking over the possession of the premises and refunding the security.

20. As against this, the submission of learned counsel for the defendant is that the refund of security deposit was conditional on the handing over of the possession of the premises to the defendant in the same condition in which the plaintiff had occupied the same and unless the plaintiff had removed the fittings/fixtures and air-conditioning ducts etc. from the premises or could negotiate about the price of the said fixtures, if he chose to leave the same at the premises, the premises were not ready to be handed over to defendant No. 1.

21. These are questions of facts which can only be answered with certainty after the parties have led their evidence. However, only a prima facie view can be taken at this stage lest it may cause prejudice to one or the other party so as to see if the defendant has a probable defense. The very fact that the defendant has filed a cross suit for recovery of certain amount against the plaintiff which is pending trial by itself would prima facie show that the defendant has some defense and, therefore, strictly speaking friable issue have been raised. However, this Court cannot loose sight of the important fact that even in the 5th October, 2001 meting the only claim made by the defendant was in respect of the adjustment of rent pertaining to two months i.. August, 1995 and May, 2001 which they wanted to adjust from the amount of security, otherwise they were ready and willing to refund the deposited amount of Rs. 27,45,000/- and Rs. 6,25,000/-. This would mean that even after adjusting a sum of Rs. 2,74,50/- allegedly due to defendant No. 1 towards the arrears for these two months, the defendants were liable to refund for a sum of Rs. 30,95,500/- on that date. The question as to whether the defendant was or was not justified in not taking over the possess on of the said premises in October 2001 and not refunding the deposited amount, for that reason, can only be answered after a full-fledged trial.

22. Thus, having considered the matter in its entirety and keeping in view the peculiar facts and circumstances of this case, this Court is of the opinion that though leave to defend the suit may be granted to the defendant to defend the present suit, such a leave should not be granted to them unconditionally. This is for the reasons that defendants were liable to refund the amount of security deposit to the plaintiff on termination of the license agreement. At best, defendant No. 1 could adjust the amount, which according to them, was due towards the arrears of two months which could not be reconciled. The rest of the amount had become payable to the plaintiff.

23. In the result, the applications of the defendants for grant of leave to defend the suit are hereby allowed, subject to defendant No. 1 without prejudice depositing a sum of Rs. 30,95,500/- in the Court within two weeks, or in the alternative defendant No. 1 depositing a sum of Rs. 24,70,500/- and defendants No. 2 and 3 depositing a sum of Rs. 6,25,000/- within a period of two weeks. The amount so deposited will not be payable to the plaintiff at the present and will abide by the outcome of the suit. Deposited amount shall, however, be put in a fixed deposit/term deposit in a nationalised bank for a period of one year so that it may earn some interest. The observations made hereinabove are tentative and for the disposal of the present applications and shall not tentamout to expression of opinion on the merits of the present suit or the cross suit filed by the defendant.

CS(OS) 1661/2003

The defendants would be entitled to file the written statements within four weeks. Replication thereto, if any, maybe filed within four weeks thereafter. List before the Joint Registrar for completion of pleadings and admission/denial of documents on 7th February, 2005.