Delhi High Court
Ifci Factors Ltd. vs Maven Industries Ltd. & Ors. on 20 November, 2015
Author: Valmiki J. Mehta
* IN THE HIGH COURT OF DELHI AT NEW DELHI
+ CS(OS) No.2950/2015
% 20th November, 2015
IFCI FACTORS LTD. ..... Plaintiff
Through: Mr. Anupam Srivastava, Advocate
with Ms. Sharmistha Ghosh,
Advocate.
Versus
MAVEN INDUSTRIES LTD. & ORS. ..... Defendants
Through:
CORAM:
HON'BLE MR. JUSTICE VALMIKI J.MEHTA
To be referred to the Reporter or not? Yes
VALMIKI J. MEHTA, J (ORAL)
1. Plaintiff who is the lender/creditor has filed this suit for
recovery of Rs.10,45,05,890.43/- against three defendants. Defendant no.1
is the principal borrower company and the defendant nos.2 and 3 are the
guarantors.
2. In terms of the averments made in the plaint, the plaintiff in
terms of an agreement for factoring of receivables lent an amount of Rs.4.98
crores under the subject Agreement dated 28.1.2011 which was for domestic
factoring upto a limit of Rs.5 crores. The working of the factoring
CS(OS) No.2950/2015 Page 1 of 36
agreement is that the defendant no.1 is supplier of goods and when it
supplies goods to a third party, such third party is liable to make the payment
for the goods supplied to the defendant no.1, but such third party instead of
making the payment to the defendant no.1 will make the payment to the
plaintiff which has lent the amount to the defendant no.1 under the
Agreement for Factoring of Receivables dated 28.1.2011. Effectively, the
plaintiff discounts the bills which are raised by the defendant no.1 upon the
buyer and the plaintiff on such discounting grants financial facility to the
defendant no.1 on the security of the discounted bills. As per the plaint,
after giving the final limit to the defendant no.1 a total repayment of
Rs.42,04,068/- was made and as per the plaintiff now a sum of
Rs.10,45,05,890.43/- is due to the plaintiff from the defendants alongwith
contractual rate of interest @ 13% per annum. The subject suit is filed
stating that the suit is based upon the written contract being the Agreement
for Factoring of Receivables dated 28.1.2011 under which a limit of Rs.5
crores was available to the defendant no.1 and which agreement was used by
the defendant no.1 to avail an amount of Rs.4,98,07,015 by discounting of
the bills, and on the date of the suit an amount of Rs.10,45,05,890.43/- is due
being the amount of principal plus interest after giving benefit to the
defendants of an amount of Rs.42,04,068/- having been paid.
CS(OS) No.2950/2015 Page 2 of 36
3. This matter was listed for admission before the Joint Registrar
and the Joint Registrar vide Order dated 7.10.2015 listed the suit in this
Court on account of non-maintainability of the same because the Agreement
dated 28.1.2011 had an arbitration clause. The Order of the Joint Registrar
dated 7.10.2015 reads as under:-
"IA No. 20423/2015 (Exemption)
Allowed, plaintiff be directed to file the original document be
filed within four weeks time.
Accordingly IA stands disposed of.
CS(OS) 2950/2015
During the course of argument, it revealed that there was an
agreement dated 28.01.2011 incorporated the arbitration clause No. 25
between the plaintiff and defendant No.1 which says that:-
"all disputes, differences, claims, questions and controversies
arising in connection with this agreement which the parties are
unable to settle between themselves, shall be referred to
Arbitration, in accordance with the Arbitration and Conciliation
Act, 1996 or any statutory amendment or modification thereof.
The Arbitration proceedings shall be held in the English
language and shall be held at Mumbai/New Delhi."
Plaintiff also averted in para 6 of the plaint that defendants 2 &
3 executed separate deed of guarantee titled as 'Guarantee' dated
28.01.2011 in favour of the plaintiff for securing the facility in favour
of defendant No.1 by the plaintiff. The amount of guarantee given by
defendants 2 & 3 to the plaintiff was to extend Rs 5 Crore each. The
plaintiff has also relied upon the judgment in case (2003) 5 Supreme
Court Cases 531 titled as Sukanya Holdings Pvt Ltd vs Jayesh H
Pandey and ors and further prayed that to issue the summons to the
defendants under Order 37 CPC.
In view of the submission and the arbitration clause, the matter
be placed before the Hon'ble Court on 20.11.2015 for further
directions"
CS(OS) No.2950/2015 Page 3 of 36
4. In addition to the non-maintainability of the suit because of the
arbitration clause, there would also be an issue as to whether the subject suit
of the type in the present case is maintainable under Order XXXVII of the
Code of Civil Procedure, 1908 (CPC) inasmuch as the amount claimed in the
suit does not directly arise from the written Contract dated 28.1.2011, but in
effect the suit seeks the balance payment after the availing of the financial
limit by the defendant no.1 and thereafter defendant no.1 made certain
payments i.e the amount claimed in the suit is not the amount payable by the
defendants as being stated as that specific amount in the Agreement dated
28.1.2011 and the Agreement dated 28.1.2011 is only a historical fact and
the amount mentioned as a financial limit therein is not the amount which is
claimed in the suit inasmuch as what is claimed in the suit is the balance due
and payable to the plaintiff after repayment by the defendants of different
amounts totaling to a sum of Rs.42,04,068/-.
5. At the outset so far as the view of the Joint Registrar with
respect to non-maintainability of the suit is concerned, reference is required
to be made to Section 14(2) of the Specific Relief Act, 1963 which provides
that where there is an arbitration clause/arbitration agreement between the
parties, a person who is party to such an arbitration agreement cannot file a
CS(OS) No.2950/2015 Page 4 of 36
suit and such a suit would be barred. Section 14(2) of the Specific Relief
Act, 1963 reads as under:-
"Section 14. Contracts not specifically enforceable.-
(1) xxx xxx xxx xxx
(2) Save as provided by the Arbitration Act, 1940 (10 of 1940), no
contract to refer present or future differences to arbitration shall be
specifically enforced; but if any person who has made such a contract
(other than an arbitration agreement to which the provisions of the
said Act apply) and has refused to perform it, sues in respect of any
subject which he has contracted to refer, the existence of such contract
shall bar the suit.
(3) xxx xxx xxx xxx"
6. Clearly therefore a civil suit for recovery of money would be
barred because of Section 14(2) of the Specific Relief Act, 1963 on account
of there existing an arbitration clause. However, I must hasten to add that
qua this aspect the aforesaid observations are only prima facie observations
with respect to non-maintainability of the suit because of the arbitration
clause, inasmuch as, there is a possibility of examination of the aspect that
arbitration proceedings cannot be resorted to in a case such as the present
because it is only a Court which can decide a civil suit as per the procedure
of Order XXXVII CPC and not the arbitration tribunal.
7. Learned counsel for the plaintiff also concedes that so far as
defendant nos.2 and 3 are concerned, and who are the guarantors for the
CS(OS) No.2950/2015 Page 5 of 36
financial limit granted to the defendant no.1, they have not signed the
Agreement dated 21.8.2011 relied upon for filing the suit nor any other
document admitting and acknowledging any liability with respect to the
original amount lent of Rs.4,98,07,015/- and much less the amount which is
now claimed in the suit being the amount of Rs.10,45,05,890.43/-.
Therefore, so far as defendant nos.2 and 3 are concerned, once there is no
written contract from which the amount claimed in the suit directly springs
and arises so far as defendant nos.2 and 3/guarantors are concerned, this suit
clearly qua defendant nos.2 and 3 would not be maintainable under Order
XXXVII CPC. It may be noted that every suit which is filed under Order
XXXVII CPC requires an endorsement to be made therein that no relief is
claimed in the Order XXXVII suit which does not arise under Order
XXXVII CPC. Therefore, a suit cannot be filed where it is pleaded to be
maintainable against one defendant being defendant no.1, whereas against
other defendant nos.2 and 3/guarantors the suit does not lie under Order
XXXVII CPC as they are not parties to the Contract dated 28.1.2011 which
as per the plaintiff contains a liquidated amount which is sought in the suit.
Once in an Order XXXVII CPC suit reliefs are claimed which do not fall
under Order XXXVII CPC, viz no reliefs being available against defendant
nos.2 and 3 under Order XXXVII CPC, then such a suit in part claims reliefs
CS(OS) No.2950/2015 Page 6 of 36
not falling under Order XXXVII CPC, the suit as a whole itself will not lie
under Order XXXVII CPC.
8. Apart from the suit not being maintainable under Order
XXXVII CPC on account of reliefs claimed against defendant nos.2 and 3,
the real issue is also with respect to non-maintainability of the present suit
under Order XXXVII CPC qua the defendant no.1 also inasmuch as the suit
under Order XXXVII CPC can only be filed if the same is based on a written
contract containing a liquidated amount, or a dishonoured bill of exchange
or a cheque or a guarantee containing the liquidated amount for filing of the
suit under Order XXXVII CPC whereas there is no document relied upon by
the plaintiff which obliges the defendant no.1 with respect to the amount
claimed in the suit.
9. Let us therefore see the averments which are made by the
plaintiff in the present suit as to whether the suit should be treated under
Order XXXVII CPC. In this regard, I would therefore reproduce and refer
to paras 4, 5 and 8 to 10 of the suit plaint, and which paras read as under:-
"4. That the Defendant No.1, through its Senior Management,
approached the Plaintiff and requested it to grant the Domestic
Factoring facility to the Defendant No.1. The said Domestic Factoring
facility was granted to the Defendant No.1 and the same was
communicated to it by the Plaintiff vide Sanction Letter bearing no.
IFL/VSK/2011/01/162 dated 24.01.2011 pursuant to which the
CS(OS) No.2950/2015 Page 7 of 36
Plaintiff entered into an agreement titled as 'Agreement for
Factoring of Receivables' dated 28.01.2011 with the Defendant No.1
(hereinafter referred to as the 'Agreement').
5. That by way of said Agreement dated 28.01.2011, the Plaintiff
provided the Domestic Factoring with Recourse (hereinafter referred
to as the 'Facility') facility to the Defendant No.1 for an amount of
Rs. 5,00,00,000/- (Rupees Five Crores only).
xxxxx
xxxxx
8. That the Defendant No.1, pursuant to the said Agreement,
raised invoices on Jayesh Oil Trade Pvt. Ltd. and presented the same
to the plaintiff for factoring. The Plaintiff paid a sum of
Rs.4,98,07,015/- (Rupees Four Crores Ninety Eight Lacs Seven
Thousand Fifteen only) towards the factoring of invoices. A sum of
Rs.5,89,02,943/- (Rupees Five Crores Eight Nine Lacs Two Thousand
Nine Hundred Forty Three only) is due from the Defendants towards
the factoring charges, discounts, overdue discounts, tax and other
factoring debits as per the said Agreement.
9. The defendants made an aggregate payment of Rs.42,04,068/-
(Rupees Forty Two Lacs Four Thousand Sixty Eight only) towards
their liability. The Defendant no.1 on 07.08.2013, handed over a bank
draft bearing no.010505 in a sum of Rs.10,00,000.00 (Rupees Ten
Lacs only) to the Plaintiff before the Court of Shri Vinay Kumar
Khanna, Additional Session Judge, which money was realized. On
the same day the Defendant no.1 also handed over a Cheque bearing
no.291026 in a sum of Rs.4,00,000.00 (Rupees Four Lacs Only) and a
cheque bearing no.291027 in a sum of Rs.11,00,000.00 (Rupees
Eleven Lacs Only), which cheques were also duly realized on
presentation. Further a sum of Rs.5,00,000.00 (Rupees Five Lacs
only) was paid by the Defendants to the Plaintiff on 21.02.2014 and
another sum of Rs.10,00,000.00 (Rupees Ten Lacs only) was paid by
the Defendants on 01.04.2014 to the Plaintiff.
10. A sum of Rs. 10,45,05,890.43 (Rupees Ten Crores Forty Five
Lacs Five Thousand Eight Hundred Ninety and paisa Forty three only)
is due and payable by the Defendants to the Plaintiff towards the
satisfaction of the Agreement. The Defendants are liable to repay the
same to the Plaintiff along with the pendent lite and future interest @
13% per annum as per the contract between the parties."
CS(OS) No.2950/2015 Page 8 of 36
10. The issue is that whether the subject suit is maintainable under
Order XXXVII CPC and can it be said that the amount claimed in the suit
being of Rs.10,45,05,890.43/- is the liquidated amount which arises from a
written contract. I do not have to examine the aspect, and nor is the case of
the plaintiff, that the suit is based upon the dishonoured bill of exchange or
cheque.
11. I have recently had an occasion to examine the maintainability
of a suit which is stated to be filed and maintainable under Order XXXVII
CPC in the following three cases, and these are as under:-
(i) Order dated 4.11.2015 in CS(OS) No.3316/2015 titled as Krishan
Kumar Wadhwa & Ors. Vs. Arjun Som Dutt & Ors.
(ii) Order dated 16.11.2015 in CS(OS) No.1369/2015 titled as Vinod
Kumar Abbey Vs. Mountain Fall India Pvt Ltd & Ors.
(iii) Judgment dated 16.10.2015 in CS(OS) No.2552/2011 titled as GE
Capital Services India Vs. Dr. K.M. Veerappa Reddy and Ors.
12. In the judgment in the case of GE Capital Services India
(supra), I have also referred to earlier judgments passed by this Court with
respect to non-maintainability of the suit under Order XXXVII CPC unless
CS(OS) No.2950/2015 Page 9 of 36
and until the amount claimed in the suit directly springs and arises from the
written contract i.e a suit under Order XXXVII CPC cannot be filed if
besides the written contract various other evidences and documents have to
be looked into so as to determine the amount which is claimed in the suit.
13. The Order dated 4.11.2015 in the case of Krishan Kumar
Wadhwa & Ors. (supra) reads as under:-
"I.A. No.23300/2015 (u/S 149 CPC)
1. This application is allowed as amount of court fees has been
deposited. Deficient court fees be made up within one week from
today.
Application stands disposed of.
CS(OS) 3316/2015 & I.A. No.23298/2015 (Stay)
2. It is unfortunate that counsels and litigants without even
understanding the basics of what are the requirements of law for filing
an Order 37 of the Code of Civil Procedure, 1908 (CPC) suit, insist on
wrongly filing and even insist during arguments on maintaining the
suit although the suit does not lie under Order 37 CPC. This is a very
sorry state of affairs because this has become a regular practice of
filing suits under Order 37 CPC although obviously which cannot be
under Order 37 CPC. The object of provision of Order 37 CPC is that
when there is a written document which ex facie, in itself, without any
further factual events to be pleaded as a cause of action in the suit,
admits and acknowledges liability and obligation of the defendant to
pay to the plaintiff and only when a suit can be filed under Order 37
CPC suit. A historical fact of an amount paid under an agreement to
sell long back and which is stated to be refundable in case the
agreement does not go through, cannot be the basis of Order 37 CPC
suit once various events transpire after execution of a particular
document and the document is not to be taken as the last word as the
contractual document between the parties from which arises the
obligation to pay as required by Order 37 CPC. When we look at
CS(OS) No.2950/2015 Page 10 of 36
Order 37 CPC it is seen that the said provision is with respect to filing
of the suits either on the basis of a negotiable instrument or a written
contract of guarantee or a written contract obliging payment of
liquidated amount. Order 37 CPC is antithesis of the ordinary
procedure where a defendant can contest a matter as a matter of right.
This provision of Order 37 CPC is provided where from a written
document a clear cut obligation of a liquidated amount is shown to be
payable to the plaintiff by the defendant and execution of which fact
without anything more is the only and the complete cause of action of
the Order 37 CPC suit. If facts have to be stated in addition to the
document which falls under Order 37 CPC then such a suit does not
lie under Order 37 CPC. Order 37 CPC therefore provides that the
suit must say that no other relief is claimed in the Order 37 CPC suit
i.e. except because of the documents which are the subject matter of
Order 37 CPC. In the light of these preliminary observations, let us
see if the present suit can be maintained under Order 37 CPC.
3. Admittedly, the suit is a suit for recovery of money filed by
three plaintiffs against five defendants. The crux of the averments
made in the suit plaint are that there was an Agreement to Sell dated
03.01.2012 entered into by three plaintiffs with the five defendants
pertaining to the property bearing no.B-8, Maharani Bagh, New Delhi.
Total price fixed under the Agreement to Sell dated 03.01.2012
payable by the plaintiffs to the defendants was Rs.65,00,07,000/- and
of which the Agreement to Sell advance payment made was of Rs.10
crore and liability to refund the same in case the Agreement to Sell
does not go through and which amount is claimed under this Order 37
CPC suit. The situation of payment is as existing on the date of
Agreement way-back on 03.01.2012 and today we are in November,
2015. In this period from January, 2012 till November, 2015 there
have occasioned a chain of events as mentioned in the plaint itself
which talk of various factual aspects, and which as per the plaintiffs
includes aspects of breach of contract by the defendants; admission by
some of the defendants of the breach by other defendants; admission
by some of the defendants of the Agreement to Sell having entered
into with its terms and so on. It is therefore clear that once a
document mentions a historical fact with respect to an amount which
is said to be liquidated amount, the cause of action in the suit is not the
entire cause of action arising only from the document which is alleged
to be passed under Order 37 CPC. Clearly therefore the suit under
Order 37 CPC which has to be based on the cause of action only of the
CS(OS) No.2950/2015 Page 11 of 36
document containing the liquidated amount for being filed under
Order 37 CPC, such a situation does not exist in the present case
because cause of action in the plaint only begins with the Agreement
to Sell but thereafter the plaint contains 26 other pages with respect to
events which have transpired after the Agreement to Sell and which
facts constitute the cause of action for the suit.
4. The reliance placed by counsel for the plaintiff upon certain
documents being an execution petition filed by some defendants
mentioning about the agreement to sell will not help the plaintiff to
argue that merely because of these subsequent documents, that too of
only some defendants, making reference to the agreement to sell, the
present suit hence will be a suit under Order 37 CPC.
5. Therefore, in conclusion, this Court is forced to observe that it
is high time that whenever a litigant, or for that matter a lawyer who
chooses to file a suit under Order 37 CPC, there before filing of such a
suit takes place a reading of the elementary requirements of Order 37
CPC and a suit should be filed under Order 37 CPC only if a suit is
maintainable strictly under Order 37 CPC. Merely because a person
has a strong case or a strong cause of action supported by various
documents, as averred in the present plaint, will not mean that the
cause of action is only on the basis of a written document and which is
the sole cause of action for filing a suit under Order 37 CPC and
maintainable under Order 37 CPC.
6. Instead of dismissing the suit, I direct that plaintiff should
amend the suit and delete all unnecessary averments which do not
pertain to the suit being under Order 37 CPC.
7. List on 18th November, 2015."
14. The Order dated 16.11.2015 in the case of Vinod Kumar Abbey
(supra) reads as under:-
"I.A No. 23685/2015(U/o 37 Rule 3 CPC by defendants)
1. This is an application for grant of leave to defend. In my
opinion, there was no need of filing this application under Order 37
CPC because the suit in fact is not maintainable, and ought not to have
been filed, under Order 37 CPC. The reasons for the same are given
hereinafter.
CS(OS) No.2950/2015 Page 12 of 36
2. An Order 37 CPC suit, it is trite, is filed where liability against
the defendant and in favour of the plaintiff ex facie arises from a
written document containing the specific liquidated amount which is
claimed in the suit or a bill of exchange or a cheque. Order 37
CPC is not an ordinary procedure where on the basis of principles of
natural justice a defendant as a matter of right contests a suit and
Order 37 CPC proceeds on the basis that before contesting the suit the
defendant must seek leave from the Court in view of the suit having
satisfied the requirement of Order 37 CPC. The requirement of Order
37 CPC is that the entire cause of action in the plaint must commence
and conclude in terms of the averments of the written contract
containing the liquidated demand or a bill of exchange or a cheque. If
other facts are required to be added to the averments and cause of
action as stated in the plaint to complete the same besides the written
contract or cheque or bill of exchange, the suit cannot and ought not to
be filed under Order 37 CPC. It is for this reason that the suit which is
filed has to state that it is filed under Order 37 CPC and the suit does
not claim any relief which does not arise from Order 37 CPC viz the
entire cause of action in the suit can only be averments of facts in
terms of the documents creating the obligation in favour of the
plaintiff and against the defendant in view of Order 37 CPC and which
is clear from use of the expression 'arises' found in Order 37 CPC.
With this preliminary statement of facts let us see what is the suit
plaint.
3. The suit plaint is a suit for recovery of Rs.33,52,003/- by the
plaintiff Sh. Vinod Kumar Abbey who was an employee of the
defendant no.1-M/s Mountain Fall India Pvt. Limited. Plaintiff as an
employee claims that he has not been paid the complete and correct
salary and therefore it is pleaded that he is entitled to the suit amount.
Essentially the main paras of the suit pleads entitlement of the plaintiff
on account of admissions of the defendants made in various
documents over a period of time including in the statement of
accounts of the defendant no.1
4. I have about half a dozen of times put it to the counsel for the
plaintiff to show me the averments and the cause of action in the
plaint that the suit amount as claimed of Rs. 33,52,003/-arises from
which specific written document, inasmuch, the document on the basis
of which an Order 37 CPC suit is filed must contain this specific
liquidated amount which is either the principal amount or the principal
CS(OS) No.2950/2015 Page 13 of 36
amount plus interest. Counsel for the plaintiff could not answer this
query of the Court and there is no averment in the plaint that which is
the specific document which mentions this liquidated amount of Rs.
33,52,003/- which is claimed in the suit as being a liquidated demand
'arising' from a written contract as required by Order 37 CPC. A
historical document containing the terms of employment is not a
document which can be the basis for an Order 37 suit as the document
envisaged for filing the suit under Order 37 is a document from which,
directly and only, the specific amount claimed in the suit is mentioned
as a liquidated amount and liability of the defendant towards the
plaintiff on the basis of such document. Clearly therefore, the suit is
not maintainable under Order 37 CPC. Merely because a plaintiff
may have a strong case does not mean that the suit is filed under Order
37 CPC. All that I have to further say is that this Court has passed
similar orders as a present one in quite a few number of cases in last
few weeks and which show that it is high time that litigants must
understand and read Order 37 CPC before filing suits under Order 37
CPC.
5. Though I was inclined to dismiss the suit as it ought not to
have been filed under Order 37 CPC, however, instead of dismissing
the suit I direct that the plaintiff must delete all references in the plaint
to Order 37 CPC and must amend the plaint so as to make it a simple
suit filed for simple recovery of monies.
6. I.A is accordingly allowed for the aforesaid reasons and
defendants are granted unconditional leave to defend. Amended plaint
be filed by the plaintiff within a period of four weeks from today.
CS(OS) 1369/2015
7. List before the Joint Registrar for completion of pleadings and
for further proceedings on 19th February, 2016, the date already
fixed."
15. The relevant paras of the judgment in the case of GE Capital
Services India (supra) are paras 6 to 13 and these paras read as under:-
"6. The relevant paras in the judgment in the case of plaintiffs earlier
suit being CS(OS) No. 2859/2011 viz GE Capital Services India (supra)
are paras 3 to 6 and which read as under:-
CS(OS) No.2950/2015 Page 14 of 36
"3. I put it to counsel for the plaintiff that in the suits such as the
present, where the amount due effectively arises from the balance due at
the foot of the account, it cannot be said to be a liquidated amount arising
from a written agreement. The suit amount has to be the liquidated
amount arising from the written agreement and in cases where the
balance due at the foot of account is claimed the same automatically does
not become a part of original loan document which contains a totally
different amount. On the pleaded basis the suit is not maintainable under
Order 37 CPC. I have so held in two judgments, one in the case of M/s K
& K Health Care Pvt. Ltd. Vs. M/s Pehachan Advertising in RFA
202/2011 decided on 23.1.2012 and another in M/s Associates India
Financial Services (P) Ltd. Vs. M/s Atwal and Associates & ors in
CS(OS) No.2109/2002 and I.As therein for leave to defend decided on
9.8.2012. I have also observed that there is a gross wastage of judicial
time where plaintiffs unnecessarily file suits under Order 37 CPC
although quite clearly the same are not maintainable under Order 37 CPC
because there is no such category in Order 37 CPC where suit can be
filed on amounts stated in an agreement entered into long back but the
suit amount is wholly different and is the balance due at the foot of the
account.
4. Paras 4 to 6 of the judgment in the case of M/s Associates India
Financial Services (P) Ltd. are relevant and which read as under:-
"4. Admittedly, there is no other averment in the plaint as to how the
amount claimed in the suit of Rs. 44,83,209/- arises from a particular
written agreement. In an Order 37 suit the amount claimed in the
suit may be the principal amount plus interest arising therefrom,
however, once again the plaint makes no reference to a specific
particular principal amount which has been stated as a liquidated
amount in a written agreement payable to the plaintiff, and the
balance claimed in the suit is only interest arising thereafter.
5. The object of an Order 37 CPC suit is that on the basis of the
documents specified therein the liability towards the plaintiff is
admitted. Only when the liability which is admitted in the
dishonoured instrument or in the written document containing a
liquidated demand as payable to the plaintiff, suits can be filed under
Order 37 CPC. Those suits claiming amounts which are only
balances due at the foot of account cannot be treated as falling under
Order 37 CPC because the suit claim is based on the account and the
amount claimed is not a liquidated amount arising/payable to the
plaintiff on an instrument on the limited types which are the subject
matter of Order 37 CPC. Entries and statements of account have
necessarily to be proved as per Section 34 of the Evidence Act,1872
CS(OS) No.2950/2015 Page 15 of 36
for the balance at the foot of the account to be arrived at. The
present suit plaint also makes no mention of any written
acknowledgment of debt, which may have amounted to a written
agreement containing the liquidated demand with interest arising.
6. I have had an occasion to examine the aspect as to whether a suit
such as the present can be said to be one under Order 37 CPC in the
judgment of M/s K&K Health Care Pvt. Ltd. Vs. M/s Pehachan
Advertising, RFA 202/2011 decided on 23.1.2012, in which, I have
observed that such type of suit cannot be filed under Order 37 CPC.
Paras 2 to 5 of that judgment are relevant and which read as under:-
2. The subject suit for recovery of money was filed
by the respondent/plaintiff for recovery of monies on the cause
of action of non-payment of bills by the appellant/defendant.
The bills were raised by the respondent/plaintiff on the
appellant/defendant on account of advertisements issued in
newspapers by the respondent/plaintiff on behalf of the
appellant/defendant. The suit which was filed under Order 37
CPC, claimed the amounts due under the bills which were stated
to be 'written contracts containing liquidated demand', though
simultaneously admitting that after the bills were raised various
payments were made towards the bills. The details of bills and
payments made, when first filed by the respondent/plaintiff,
were as under:-
"Accounts Statement of M/s K & K Health Care Pvt. Ltd. from
01.07.2005 to 15.11.2005
Date Particulars Amount Amount Balance (Dr)
(Dr) (Cr)
15.06.2005 Balance 32,372.25
B/F
30.07.2005 Bill 290,652.00
No.07/020
11.08.2005 Bill 66,376.00
No.08/010
13.08.2005 Bill 72,127.00
No.08/019
18.08.2005 Bill 72,127.00
No.08/022
25.08.2005 Bill 288,609.00
No.08/035
05.09.2005 Bill 72,127.00
No.09/003
08.09.2005 Bill 99,418.00
No.09/005
08.09.2005 Bill 5,254.00
No.09/008
07.11.2005 Ch. 87,652.00
No.527736
10.11.2005 Ch. 254,453.00
No.527738
Total 999,062.25 342,105.00 6,56,957.25"
3. Subsequently, on the appellant/defendant stating and
detailing other payments, a fresh statement of account was filed
by the respondent/plaintiff reflecting the position of bills and
payments as under:-
" M/s K & K Health Care Pvt. Ltd.
Ledger Account from 01.04.2005 to 7.11.2005
Date Particulars Debit Credit Balance
01.04.2005 Dr Opening 9,54,722.81 9,54,722.81
Balance
11.04.2005 Cr Ch. 100,000.00 2,112,065.25
No.860348
30.05.2005 Cr Ch. 200,000.00 1,912,065.25
No.474952
06.06.2005 Dr Bill 72,126.91 1,098,976.63
No.06/015
09.06.2005 Cr Ch.No.474 100,000.00 1,812,065.25
16.06.2005 Dr Bill 73,199.07 1,72,175.70
No.06/018
23.06.2005 Dr Bill 72,126.91 1,026,849.72
No.06/031
29.06.2005 Cr Ch. 100,000.00 1,712,065.25
No.464018
30.06.2005 Cr Ch. 100,000.00 1,612,065.25
No.464025
30.06.2005 Dr Bill 73,199.07 1,245,374.77
No.06/059
22.07.2005 Cr Ch.No.464 100,000.00 1,512,065.25
30.07.2005 Dr Bill 290,651.96 1,536,026.73
No.07/020
05.08.2005 Cr Ch. 64,313.00 1,447,752.25
No.464078
06.08.2005 Cr Ch. 65,183.00 1,318,256.25
No.464079
08.08.2005 Dr Bill 66,376.25 1,674,529.89
No.08/010
13.08.2005 Dr Bill 72,126.91 1,608,153.64
No.08/019
18.08.2005 Dr Bill 72,126.91 1,746,656.80
No.08/022
25.08.2005 Dr Bill 288,609.18 2,035,265.98
No.08/035
26.08.2005 Cr Ch. 64,313.00 1,383,439.25
No.464160
29.08.2005 Cr Ch. 65,268.00 1,252,988.25
No.464161
09.09.2005 Cr Bill 72,126.91 2,107,392.89
No.09/003
09.09.2005 Cr Bill 99,418.18 2,206,811.07
No.09/005
09.09.2005 Dr Bill 5,254.18 2,212,065.25
No.09/008
21.10.2005 Cr Ch.No.527 4,632.00 1,248,356.25
24.10.2005 Cr Ch.No.527 58,521.00 1,189,835.25
27.10.2005 Cr Ch.No.527 63,591.00 1,126,244.25
27.10.2005 Cr Ch.No.522 63,591.00 1,062,653.25
30.10.2005 Cr Ch.No.527 63,591.00 999,062.25
07.11.2005 Cr Ch.No.527 87,652.00 911,410.25
10.11.2005 Cr Ch.No.527 254,453.00 656,957.25
Total Outstanding Rs.656,957.25"
This latter statement of account is a part of the statement of
account running into a total number of eight pages. This second
statement of account, in addition to the two payments reflected in
the first statement of account, admitted and reflected as many as
five other payments. The fact that payments have been made as
reflected in aforesaid two statements of account is not in dispute
between the parties. The suit really therefore is a suit for the
balance due at the foot of the account and is not one which is only
and only on the basis of the amounts contained in the bills. The
suit thus could not have been filed under Order 37 CPC as the
amount claimed in the suit was not the amount as mentioned in
the bills which are stated to be written contracts containing the
liquidated demands of moneys payable.
4. Learned counsel for the respondent relies upon a
decision of learned Single Judge of this Court in the case of M/s.
Lohmann Rausher Gmbh. Vs. M/s. Medisphere Marketing Pvt.
Ltd.; 2005 II AD (Delhi) 604 to argue that the suit on the basis of
invoices is maintainable under Order 37 CPC. Of course, I am
bound by the decision of the learned Single Judge and therefore a
suit on the basis of invoices can be said to be maintainable under
Order 37 CPC, however, in the present case the suit is not based
on the invoices only but the amount claimed in the suit is the
balance due at the foot of a running account i.e. after giving
adjustment/credit for certain payments made for the invoices/bills.
The suit is therefore definitely not only on the basis of invoice
amounts alone for the same to be covered under Order 37 CPC.
Also, in my opinion, in an appropriate case this issue will have to
be examined whether a suit under Order 37 CPC can be filed on
the basis of invoices alleging the same to be 'written contracts
containing a debt or liquidated demand'- the necessary
requirement of Order 37 CPC. The whole purpose of the
provision of Order 37 Rule 1 CPC entitling filing of the suit on a
debt or liquidated demand was that there is an agreement showing
that there is an admitted liability and a liquidated liability or debt
which is claimed in an Order 37 suit. When an Order 37 suit is
filed on bills, the bills only reflect goods supplied and therefore I
feel that it cannot be said that bills should be taken as agreements
containing liquidated demands or an acknowledgment or promise
to pay or an admitted liability or such other factor so as to bring
the claim as "claim for debt or liquidated demand arising on a
written contract" as found in Order 37 CPC.
5. In view of the above, I need not go into the merits of the
matter inasmuch as the plaintiff cannot arm-twist a defendant by
filing a suit under Order 37 CPC, and argue in the trial Court and
also before this Court, that it has a prima facie strong case on
merits and therefore the impugned order granting conditional
leave to defend must be sustained. Merely because a
plaintiff/respondent feels it has a strong case on merits cannot
mean that the suit can be filed under Order 37 unless the
mandatory requirement of basing the suit on one of the four
requirements of Order 37 Rule 1 sub Rule 2 is complied with. If
the suit is not maintainable under Order 37, there does not arise an
issue of any conditional leave to defend as was granted by the trial
Court. (underlining added)
5. Counsel for the plaintiff has failed to point out any written
agreement containing the specific amount claimed in the suit and
which is the liquidated amount and which is stated in the written
agreement. Merely because there is a written agreement way back of
the year 2002, cannot mean that the suit amount which is not stated in
the said agreement would also become a liquidated amount in the suit
filed under Order 37 CPC.
6. During the course of hearing, I put it to the counsel for the plaintiff
as to whether in the light of facts which have emerged should the suit at all
be pressed as one under Order 37 CPC, and the counsel insists that the suit
lies under Order 37 CPC.
In view of above, and considering the fact that unnecessarily
judicial time is being wasted by the plaintiff who insists on filing suits
under Order 37 CPC which cannot be filed under Order 37 CPC which
cannot be filed under Order 37 CPC, I allow the application for leave to
defend with costs of Rs.25,000/-. The defendants are granted
unconditional leave to defend." (emphasized bold portion is by me)
7. It may be noted that the plaintiff in the said suit, and who is
also the plaintiff in the present suit, was represented by the same counsel
who today has argued the applications for leave to defend and the aspect
of maintainability of the suit under Order XXXVII CPC.
8. A reading of the relevant ratios of the aforesaid judgments
shows that the object of Order XXXVII CPC never was to allow
filing of the suit under Order XXXVII CPC if the amount which is
claimed is the balance due at the foot of the account. I have
already expounded above the object of bringing in Order XXXVII
CPC by the legislature, and there cannot be even an iota of doubt
that Order XXXVII suits were not intended to be filed for claiming
balances due at the foot of an account. With the aforesaid
preliminary discussion, let us turn to the cause of action as alleged
in the present suit.
9(i) Plaintiff as per the suit plaint avers that by means of a total
of 8 loan agreements dated 25.3.2003, 28.3.2004, 6.8.2003 and 27.9.2003,
a sum of Rs. 1,72,88,100/- was given as loan to a company M/s Starr
Hospital & Research Centre Ltd. and for which loan transactions the
defendants stood as guarantors. In the plaint, it is further averred that the
aforesaid eight loan agreements got merged into a fresh Compromise
Deed dated 25.9.2005 thereby rescheduling the payments. Curiously, there
is no averment in the plaint as to for the actual amount the Compromise
Deed dated 25.9.2005 was entered into the amount, and which amount had
remained due to the plaintiff for the loans which were earlier granted to
M/s Starr Hospital & Research Centre Ltd under the eight agreements of
four dates of March, August, September 2003 and March 2004 as stated
above. Counsel for the plaintiff concedes that this factual aspect is not
mentioned in the plaint and that the amount due as on 25.9.2005 was not
the amount due of Rs.1,72,88,100/- payable under the earlier eight
agreements of March, 2003 to March, 2004. Reference of this Court is
invited so as to know what is the amount due on 25.9.2005, not to the
averments in the plaint, but to the documents filed with the plaint and of
which documents there is no reference in the plaint so that this Court
should read the said document to know the amount due as on the date of
the Compromise Deed dated 25.9.2005. The document which is referred
to is a statement of account showing that as on 25.9.2005, a sum of
Rs.1,30,00,000/- was due to the plaintiff ie admittedly the amount said to
be due on 25.9.2005 is different than the original loan amount of
Rs.1,72,88,100/-. It may be noted that when the Compromise Deed dated
25.9.2005 was entered into, the name of the principal borrower company
had changed from Starr Hospital to M/s Gold Star Hospital & Research
Centre Ltd.
(ii) The next averments in the plaint with respect to the amount
due to the plaintiff, are found in para 11 of the plaint, and as per this para
11, the plaintiff pleads that as per the statements of accounts of 'two
agreements', a total sum of Rs.1,19,58,688.94 is due to the plaintiff
including TDS dues and which total comprises of two amounts of
Rs.1,13,29,626.94 plus Rs.6,29,062/-. How the total amount of Rs.
1,19,58,688.94 is referable to a liquidated amount specified in any written
contract as being the amount due and payable to the plaintiff is
conspicuous by its absence in the plaint and in fact a sum figure is also not
found even in any of the documents filed by the plaintiff. Also, there is
no detail given in para 11 of the plaint as to under what two heads the
amount of Rs. 1,13,29,626.94 and Rs. 6,29,062/- fall i.e whether the
amounts are towards principal or principal plus interest or only interest or
TDS dues etc and this Court is left guessing as to under what heads these
amounts fall. A lot is therefore to be said with respect to the drafting of
the plaint for filing the same under Order XXXVII CPC.
(iii) Plaintiff thereafter in para 11 of the plaint itself states that
from the amount of Rs.1,19,58,688.94 an amount of Rs. 8,00,000/- which
was financed under one principal agreement has been reduced, as also a
further amount of Rs.4,69,157.52, and hence the suit amount which is
claimed is said to be the figure of Rs.1,06,89,531.40 as pleaded in para 14
of the plaint. Once again, there is no reference in the plaint to any
document as to how this amount of Rs.1,06,89,531.40 is the liquidated
amount under which written contract by which defendants are liable to
pay such amount and obliged to pay such amount to the plaintiff and thus
for the suit to be filed under Order XXXVII CPC. In fact, counsel for the
plaintiff concedes that there is no statement of account filed alongwith the
suit showing how this amount of Rs. 1,06,89,531.40 which is claimed in
the suit is as per that statement of account due, and counsel for the
plaintiff wanted to invite my attention to the reply filed by the plaintiff to
the leave to defend applications giving calculations as to how this amount
of Rs. 1,06,89,531.40 is arrived at, ie what I am observing is that the
calculations given in the reply to the leave to defend applications are not
given in the plaint and in case such amount is not supported as a figure
even arising from a statement of account filed with the plaint, leave aside
the said amount arising as the liquidated amount from a written contract
under which defendants obliged themselves to pay such amount to the
plaintiff and which is the mandatory requirement of Order XXXVII CPC.
10. In order to understand the observations which have been
made above, I am reproducing paras 4, 6 and 11 of the plaint and these
paras read as under:-
"4. Based on defendants assurances and representations of
defendants, the plaintiff company entered into Equipment Master
Security & Loan Agreements, bearing nos.W10827 (A120052),
W10867 (A120086), W10866 (A120085), W10918 (A120190),
W10965 (A120240), W10968 (A120238, W11120 (A120440),
W11196 (A120528) with Starr Hospital & Research Centre Ltd. For
nos. W10827 (A120052), W10867 (A120086), W10866 (A120085),
W10965 (A120240) and W11120 (A120440) a single agreement
booklet dated 25-Mar-2003 was executed between the parties.
Further, for no. W10968 (A120238) agreement dated 27-Sep-2003,
for no. W10918 (A120190) agreement dated 06-Aug-2003 and for
no. W11196 (A120528) agreement dated 28-Mar-2004 were
executed between the parties. In the aforesaid manner total of four
Loan Agreements were entered into with Starr Hospital & Research
Centre Ltd. The said Loan Agreements were concluded and
executed in New Delhi. Under the Loan Agreements a total sum of
rs.1,72,88,100/- (Rupees One Crore Seventy Two Lacs Eighty Eight
Thousand and One Hundred Only) was financed by the Plaintiff
Company to Starr Hospital & Research Centrae Ltd. The amount
financed under the Loan Agreements was used by Starr Hospital &
Research Centre Ltd. for the purchase of various medical equipment.
As per the terms of said Loan Agreements various following
medical equipments ("Collateral" hereinafter) were financed to
Starr Hospital & Research Centre Ltd. and the said equipments
were also the collateral under the respective Loan Agreements:
S.No. Agreement No. Equipment/Collateral
i) W10827 (A120052) OEC 9800
ii) W10866 (A120085) MAC 5000
iii) W10867 (A120086) Marquette Patient Monitoring
Package
iv) W10918 (A120190) Anaesthesia Equipment
v) W10965 (A120240) Logiq 400 Pro
vi) W10968 (A120238) Sarns Hurt Lung Machine
vii) W11120 (A120440) 300 mA X-Ray & 60mA X-Ray
viii) W11196 (A120528) Biomed-Photometer,
Blood Gas Analyzer, I Lyte
NA
xxxxxx
6. That the amount financed under the loan agreements was to be
repaid through monthly instalments. The instalments were to be paid
by Starr Hospital & Research Centre Ltd. after deducting TDS and
also to provide TDS Certificates to the Plaintiff. It was, inter alia, a
representation from Starr Hospital & Research Centre Ltd. and also
the Defendants, that the terms of the Loan Agreements will be
adhered to, in full, and that there will not be any default. However,
the Principal Borrower started committing defaults in payment of
instalments under the loan agreements and also did not provide TDS
certificates to the Plaintiff or pay the equivalent amount to the
Plaintiff. Thereafter, the Starr Hospital & Research Centre Ltd.
changed its name to Gold Star Hospital & Research Centre Ltd. After
repeated follow-ups by Plaintiff, Gold Star Hospital & Research
Centre Ltd. again approached Plaintiff Company in or around
September 2005 and expressed it's difficulty in paying the
instalments as per the schedule under the loan agreements. Gold Star
Hospital & Research Centre Ltd., further requested Plaintiff to
reschedule the outstanding amount under the loan agreements. After
discussions a Deed of Compromise dated 25-Sep-2005, and fresh
repayment schedule were entered into between Gold Star Hospital
and Research Centre Ltd., and Plaintiff, and new agreement nos. viz.
W12042 (A121444) & W12043 (A121445) were given to the fresh
repayment schedules. Agreements No.W12042 was towards the
repayment schedule of Loan Agreement Nos.W10827, W10867,
W10866, W10918, W10965, W11120, W11196, and Agreement
No.W12043 was towards the repayment schedule of Loan
Agreement No.W10968. Gold Star Hospital and Research Centre
Pvt. Ltd., agreed to pay the Outstanding amount in accordance with
the fresh repayment schedules.
As per the repayment schedules, the loans were to be repaid in
instalments uptill 25.03.2010. Under the fresh repayment schedule
also Gold Star Hospital & Research Centre Ltd. was to deduct TDS
from the monthly instalment amount and provide TDS Certificates to
the Plaintiff.
xxxxx
xxxxx
11. That when the Defendants failed to pay the outstanding amount
even after repeated follow ups by the officers of the Plaintiff
Company, the Plaintiff was constrained to issue a notice of demand
dated 13.07.2011 issued on 19.07.2011 to the Defendants and
Spatica Super Speciality Hospitals Ltd. (Principal Borrower) through
registered post. The notice addressed to Defendant Nos.1 and 4 have
been received back with the remarks "Left". The address on which
the notice was sent is the address given in the Personal Guarantee
signed by the Defendants, and it is the last known address of the
Defendants No.1 and 4 to the Plaintiff. The notice was sent to the
Defendant No.4 at both the addresses of his. However, the Defendant
No.2 has replied to the said Notice vide his Reply dated 15.08.2011,
wherein has denied his liability. But Defendant No.3 has not replied
to the notice. It is pertinent to mention here that in the notice dated
13.07.2011 it was specifically stated that the total Outstanding
amount mentioned therein did not include the TDS dues which are
additionally payable. As per the records of the Plaintiff Company
out of the total TDS dues of Rs.9,61,457/-, TDS certificates
amounting to Rs.6,29,062/- are still to be provided to the Plaintiff
Company. As such none of the Defendants have paid the outstanding
dues as mentioned in the notice nor the TDS dues of the Plaintiff
have been cleared. As per the statements of accounts with respect to
Agreement No.W12042 (the new Agreement Number allotted to the
said Agreement is A121444) and Agreement No.W12043 (the new
Agreement Number now allotted to the said Agreement is A121445)
maintained by Plaintiff, a total sum of Rs.1,19,58,688.94
(Rs.1,13,29,626.94 + Rs.6,29,062/-), including TDS dues, ("Total
Outstanding") is still due and payable as per the fresh repayment
schedules under the Deed of Compromise, which was in addition to
and not in supersession of the initial loan agreements, and
consequently there is also liability of the Defendants to pay the
above said Total Outstanding amount under the initial Loan
Agreement nos. W10827 (A120052), W10867 (A120086), W10866
(A120085), W10918 (A120190), W10965 (A120240), W10968
(A120238), W11120 (A120440), W11196 (A120528).
Out of the said amount of Rs.1,19,58,688.94, the Plaintiff is not
claiming an amount of Rs.8,00,000/- which was financed under the
Agreement bearing No.W11196 (which was part of new Agreement
No.W12042 and which was later on Agreement No.A121444) and
also an amount of Rs.4,69,157.52 which is payable to the Plaintiff
Company under new repayment schedule no.W12043 and
abandoning its claim qua the said amounts."
11. From the aforesaid discussions, the following conclusions
emerge:-
(i) Suits which are to be filed under Order XXXVII CPC, were as per
the legislative intent, only those where the amount claimed in the suit is
the same liquidated amount which arises as emerging/flowing directly
from the written instrument which is the subject matter of the Order
XXXVII suit, and, a civil court cannot under Order XXXVII CPC be
called upon to look at various documents and various statements of
accounts, spread over periods running into years, so as to determine how
the amount due in the suit claimed is arrived at, and which amount is
admittedly different from the amount contained in the written
document(s).
(ii) The plaint in the present suit when it refers to the amount which is
claimed in the suit of Rs. 1,06,89,531.40 does not make averments and
refer to any specific document being the written contract between the
parties containing this specific liquidated amount as due and payable by
the defendants to the plaintiff.
(iii) Not only there is no cause of action pleaded in the plaint with
respect to the amount of Rs. 1,06,89,531.40, even the figure of
Rs.1,19,58,688.94 which is referred to in para 11 of the plaint is not
supported by any written document as a liquidated amount being due and
payable by the defendants to the plaintiff. Also, as stated above, not only
there is no written contract containing this liquidated amount of Rs.
1,19,58,688.94, there is in fact not even a supporting statement of account
where this figure is shown as the balance due at the foot of the account.
(iv) The plaintiff, in spite of a directly applicable judgment
passed in an earlier suit of the plaintiff, holding that suits such as the
present are not maintainable under Order XXXVII CPC, insists that suits
such as the present be held as maintainable under Order XXXVII CPC,
that such suits must be continued to be heard and decided under Order
XXXVII CPC.
(v) The suit plaint leaves wide gaps with respect to averments
required of co-relating the three separate amounts as stated in the plaint
being the amounts of Rs.1,72,88,100/-, Rs.1,19,58,688.94/- and
Rs,1,06,89,531.40/- as stated above.
(vi) The final figure of Rs.1,06,89,531.40/- claimed as being the
suit amount is neither supported by any contract containing this liquidated
amount stating that such amount is due and payable by the defendants to
the plaintiff nor even a statement of account as to how this figure is the
balance due at the foot of which account.
12. Learned counsel for the plaintiff very strongly sought to
place reliance upon a judgment of this Court in the case of the plaintiff
itself being GE Capital Services India Vs. G. Neuromed Diagnostic
Centre 2007 VIII AD (Delhi) 464 to argue that Order XXXVII suits are
maintainable even for the balance due at the foot of the account and which
amount is different than the amount in the historical loan agreements
entered into many years earlier. It is argued that original agreements can
be used as written documents for filing of the suit under Order XXXVII
CPC though the amount claimed in the suit is completely different than
the amount stated in the written contracts of the earlier historical dates and
the suit is filed for the amount which actually is the different amount due
after many years being such balance due at the foot of the account.
Reliance is placed upon paras 21 to 23 of the said judgment and these
paras read as under:-
"21. I find no force in the last submission of the defendant that the
suit is based on a statement of account and not on the written
agreement and the documents executed along with it. The basis of
the claim in the suit is the written loan agreement, the promissory
notes executed by defendant nos. 1 to 4 and the individual guarantees
executed by defendant nos.2 to 4. The statement of account merely
sets out the outstanding amounts along with overdue interest
computed by the plaintiff.
22. Counsel for the defendant fairly admits that the entries contained
in the statement of account filed by the plaintiff have not been
questioned in the defendant's present application. I any event, in my
view, mere general denial of the statement of account filed by the
plaintiff is not sufficient, and the defendants ought to have raised
specific pleas in relation to the various entries which go to make the
statement of account, if according to them, any, or all of them were
incorrect.
23. In my view, the defences as raised by the defendants are
moonshine and frivolous and do not raise any triable issue. No useful
purpose would be served in granting leave to the defendants to
defend the suit, since the defences raised, even if proceeded further
for examination in a trial, cannot succeed as they are misconceived
and untenable in law. Accordingly, I dismiss this application."
13. In my opinion, the judgment in the case of GE Capital
Services India (supra) (2007's case) relied upon by the plaintiff is
distinguishable for the reason that the reading of the said judgment does
not show that after the original loan agreements were entered into and
amounts paid as loans, in the said suit there took place repayments by the
borrowers towards the amounts due and that the amounts which were
claimed in the suit were as per the statement of account prepared after
taking consideration of the subsequent payments made by borrowers. In
fact, there are clear cut observations in para 4 of this judgment that the
amount which was claimed in the said suit was the principal amount stated
in the agreements and changes thereto were only on account of arising of
interest thereon. It need not be again said that Order XXXVII suit is
maintainable with respect to the principal amount provided that it is that
principal amount which is claimed alongwith the interest arising thereon
as stated in the written agreement. The first line of para 4 of the said
judgment observes that the defendants in the said suit had failed to adhere
to the time schedule from the very beginning. Para 21 of the judgment in
the said case further clarifies that the suit was taken to be on the basis of
the documents and not on the statement on account as the statement of
account in the said case only sets out the outstanding amounts alongwith
overdue interest. Outstanding amount obviously when read with the first
line of para 4 of this judgment is the original amounts as stated in the
original agreements. In any case the most important and distinguishing
fact of the said judgment with the facts of the present case is that in the
said case the statement of account was not disputed by the defendants as is
seen from para 22 of the judgment, and therefore there was an admitted
document containing a liquidated amount in the said case.
I do not find anything observed in the said judgment to support
what is argued before me by the counsel for the plaintiff that in the facts
of the said case various repayments were made by the borrowers and the
amounts which were claimed in the suit therefore were balances due in
terms of the balance due at the foot of the account after giving credits for
the repayments made, inasmuch as, there is no such discussion on these
facts as regards this aspect in the said judgment. In any case as stated
above, nothing turns on this aspect, as in the said case the statement of
account was admitted and which is not the position in the present case."
16. It is trite, and as observed in the aforesaid three
orders/judgment, that Order XXXVII CPC is a unique departure from the
ordinary principles of natural justice wherein a defendant has an automatic
right to defend the suit. By Order XXXVII CPC, exceptions have been
carved out whereby defendant cannot defend the suit as a matter of right as
is done in other cases and this is because ex facie or at least prima facie the
specific liability of a defendant in terms of a liquidated amount is shown to
clearly exist from a written contract containing the liquidated amount or
from a dishonoured bill of exchange or a cheque. Once there are such
documents, being a written contract containing liquidated amount or a
dishonoured bill of exchange or a cheque, which by themselves without any
further fact(s) or document(s) required to be pleaded and proved, shows
clearly the liability of the defendant in favour of the plaintiff as existing, it is
for this reason that filing of such suits under Order XXXVII CPC are
allowed and defendant who is otherwise ex facie or prima facie liable by
virtue of the written document is asked to seek leave to defend to contest the
suit. Obviously an exception from the normal procedure and the requirement
of following the principles of natural justice when it exists, the same has to
be necessarily construed within the strict terms of the requirements
contained in Order XXXVII CPC. Order XXXVII CPC is not intended to
allow parties to extend the scope of Order XXXVII CPC so as to allow filing
of the suits when amounts which are claimed in the suit do not directly
spring and arise from the written document or the dishonourd bill of
exchange or cheque. Putting it in other words, the cause of action in the suit
for recovery of money which is filed under Order XXXVII CPC concludes
as regards the averments on the existence of the cause of action to the
written document containing the liquidated amount or the dishonoured bill
of exchange or cheque. If in the suit plaint, besides the averments of the
cause of action of the written contract containing the specific liquidated
amount which is specifically claimed in the suit, necessary further facts,
averments and cause of action has to be pleaded for the plaintiff to show the
claim to the amount claimed in the suit, then, such a suit is not based only on
the written document only or the dishonoured bill of exchange or cheque
only because other facts are to be established to show the liability of the
defendant claimed in the suit, and thus such a suit was not intended by the
legislature to be filed under Order XXXVII CPC. Accordingly, therefore
once the suit amount which is claimed in the suit is not the amount which
directly arises in terms of the liquidated amount stated in the written
document or a dishonoured bill of exchange or a cheque, the suit will not be
maintainable under Order XXXVII CPC otherwise a large category of cases
which were not meant by the legislature to be filed under Order XXXVII
CPC will be sought to be filed and entertained under Order XXXVII CPC.
17. Learned counsel for the plaintiff places reliance upon the
judgment of a learned Single Judge of this Court in the case of Bijender
Chauhan @ Bijender Kumar Vs. M/s. Financial Eyes (India) Ltd. ILR
(2013) IV Delhi 3234 and it is sought to be argued by placing reliance upon
paras 19 to 21 of the said judgment that in fact the suit under Order XXXVII
CPC can be filed even on the basis of a balance due at the foot of a statement
of account. The paras 19 to 21 which are relied upon of the judgment in the
case of Bijender Chauhan @ Bijender Kumar (supra) read as under:-
"19. The third contention of the defendant that the present suit is
based on a Statement of Account and hence would not lie is a vague
contention and is also without merits. A perusal of the plaint would
show that the present case is not based on a statement of accounts
but is based on the 20 invoices which have been raised on the
defendant pursuant to which the goods have been supplied to the
defendant. The plaint in paragraph 4 relies on the said invoices. The
Plaint further states that out of the total figure of Rs. 52,12,726/-
worth of invoices raised on the plaintiff the defendant had paid Rs.
23,30,804. Hence, the suit is based on the balance on these
invoices. Merely because a mention is made to a Statement of
Account in the plaint would not make the present suit to be based
on Statement of Accounts. A specific query was made to learned
senior counsel appearing for the defendant about the figures
mentioned in the plaint. Learned senior counsel fairly stated that in
the application for leave to defend the receipt of the goods, the
value of the goods and payments having been made by the
defendant is not disputed. He submitted that the defence of the
defendant is regarding quality of goods.
20. The judgments cited by the learned counsel for the plaintiff to
argue that a suit based on statement of account does not lie under
Order 37 CPC would not apply to the facts of the case. In both
cases namely Associate India Financial Services (supra) and M/s. K
& K Health Care Pvt. Ltd. the Court came to the conclusion that the
case is based on the statement of accounts. Hence, the said
judgments have no application to the present facts as I have held
that the present suit is based on invoices.
21. In the context of the above contention of the learned senior
counsel for the defendant, reference may also be had to the
judgment of this Court in M/s. Dura - Line India Pvt. Ltd. Vs. BPL
Broadband Network Pvt. Ltd. (MANU/DE/1359/2003 : AIR 2004
Delhi 186) where in para 8 the Court held as follows:
8....
The said submission is misconceived. The suit is based on a
written contract comprising the offer, its acceptance by
issuance of purchase orders and raising of invoices in
execution thereof. These constitute the written contract. The
amounts claimed are those due in the suit under the above
written contract. Additionally, reliance has been placed on
the acknowledgement and confirmation of balance issued by
the defendant. The mere averment in the plaintiff that the
plaintiff also maintains a running account, reflecting the
price of the goods supplied and the payments made therefore,
does not change the nature of the suit as in one being based
on a running account. The mere maintenance of a running
account does not disentitle the plaintiff from filing the suit
under Order XXXVII, CPC, based on a written contract and
acknowledgement in writing." (underlining added)
18(i). I am unable to agree with the argument urged on behalf of the
plaintiff by placing reliance upon the judgment in the case of Bijender
Chauhan @ Bijender Kumar (supra) for the reason that paras 19 to 21 of
the said judgment make it clear that the court held that the statement of
accounts which were referred to in the plaint of that suit were only
incidentally mentioned, however, the amounts which were claimed in the
suit were amounts which directly arose from the written documents or the
written invoices and which were claimed in the suit. This aspect that the suit
in the case of Bijender Chauhan @ Bijender Kumar (supra) was based on
amounts stated in the invoices was taken by the court alongwith the fact that
in the case referred to in para 21 of the judgment in the case of Bijender
Chauhan @ Bijender Kumar (supra) it was found that the amount which
was claimed by the plaintiff arose besides from the written contract also
from an acknowledgement in writing. Thus so far as the decision in the case
of Bijender Chauhan @ Bijender Kumar (supra) is concerned, the learned
Single Judge found that the amount claimed in the suit was based only on
the invoices i.e balance due on the invoices which were to be taken as
written contracts and the suit was not taken as being filed on the basis of a
statement of account. Therefore, counsel for the plaintiff cannot argue that
paras 19 to 21 of the judgment in the case of Bijender Chauhan @ Bijender
Kumar (supra) holds that a suit on a statement of account is maintainable
under Order XXXVII CPC. On the contrary, the said paras 19 to 21 hold
that the suit in that case was not filed on the basis of statement of accounts
and hence was taken under Order XXXVII CPC being filed on written
documents/invoices. Also, I may note that the judgment in the case of
Bijender Chauhan @ Bijender Kumar (supra) was based on the peculiar
facts of the case where the defence of the defendant with respect to defective
goods could not be looked into in view of Sections 41 and 42 of the Sale of
Goods Act, 1930 and which Sections prevent a buyer of goods from raising
objections with respect to defects in the goods after a period of time as
envisaged by Sections 41 and 42 of the Sale of Goods Act, 1930 and
consequently the amount claimed in the suit in the case of Bijender
Chauhan @ Bijender Kumar (supra) was only the amount claimed of the
unpaid invoices. In the facts of the present case, no benefit can be taken by
the plaintiff of the judgment in the case of Bijender Chauhan @ Bijender
Kumar (supra) which was only filed relying on the invoices by a supplier of
goods and which invoices were taken as written contracts with the fact that
no other defence of the defendant/buyer was available with respect to
defective goods because of Sections 41 and 42 of the Sale of Goods Act,
1930.
(ii) The facts of the present case show that present suit is not a suit
by a seller of goods for claiming balance payment due on the invoices, but
the suit is a suit by a lender for recovery of balance amount of moneys out of
the amounts which were lent to the defendant no.1 and obviously for such a
suit the amount claimed in the suit will be the balance due at the foot of the
account after taking various repayments by the defendant no.1 and the suit
plaint's cause of action will not conclude with the original/historical
Agreement dated 28.1.2011 because plaintiff in the plaint has pleaded other
facts so as to arrive at the cause of action for the amount claimed in the suit.
(iii) Therefore, there is no need of referring of this matter to a larger
Bench as prayed for on behalf of the plaintiff on the ground that there are
different views which are taken by the different learned Single Judges of this
Court. If there exist different views of different learned Single Judges of
this Court, then, in an appropriate case that matter would be examined by a
Division Bench of this Court, but so far as the facts of the present case are
concerned they do not fall within the ratio laid down in the case of Bijender
Chauhan @ Bijender Kumar (supra). Counsel for the plaintiff however
states that he would be challenging the present order, and therefore, in any
case the matter would be listed before the Division Bench of this Court.
19. In view of the above, the suit is clearly not maintainable under
Order XXXVII CPC. Ordinarily I would have dismissed the suit however
instead of dismissing the suit I give time to the plaintiff to amend the suit
plaint so that all averments in the same with respect to Order XXXVII CPC
are deleted and the suit is treated as an ordinary civil suit for recovery of
moneys. The plaintiff may also if it so chooses withdraw the suit and initiate
appropriate arbitration proceedings against the defendant no.1 as the cause
of action for recovery of moneys from defendant no.1 is separate and
independent of the cause of action against defendant nos.2 and 3.
20. Needful be done by the plaintiff in six weeks. List on 4th March,
2016 for further proceedings.
NOVEMBER 20, 2015 VALMIKI J. MEHTA, J.
Ne
