Gopesh Mehta vs Swift Initiative Pvt. Ltd.
2017 Latest Caselaw 1717 Del

*      IN THE HIGH COURT OF DELHI AT NEW DELHI

%                                          Date of decision: 10th April, 2017.

+                                 CS(OS) 209/2016

       GOPESH MEHTA                                                ..... Plaintiff
                  Through:              Mr. Vikas Arora and Ms. Radhika
                                        Arora, Advs. with plaintiff-in-person.

                                  Versus

    SWIFT INITIATIVE PVT. LTD.                  ..... Defendant
                  Through: Mr. Akhil Sibal, Sr. Adv. with Mr.
                           Pradeep Chhindra and Mr. Shiv
                           Chopra, Advs.
CORAM:
HON'BLE MR. JUSTICE RAJIV SAHAI ENDLAW

1.

The plaintiff instituted this suit for recovery of Rs.5,32,50,000/- jointly and severally from defendant No.1 Rajinder Rai, defendant No.2 Madhurima Rai, defendant No.3 Bharat Sidheshwar Rai and defendant No.4 Swift Initiative Pvt. Ltd., pleading (i) that the defendants No.1&2 being husband and wife and the defendant No.3 being their son and known to the plaintiff for long, in April, 2013, requested the plaintiff for a friendly loan of Rs.5 crores and lured the plaintiff by representing that they would return the amount within a period of 12 to 18 months along with interest @ 24% per annum and would also give to the plaintiff 40% share in the defendant No.4 company and which share the plaintiff would continue to hold, even after re- payment of loan; (ii) that the plaintiff, instead of giving loan of Rs.5 crores, gave a loan of Rs.3.75 crores on the same terms with which he was lured;

(iii) that the said amount of Rs.3.75 crores was paid by two cheques for

Rs.25 lakhs each and by further payment of Rs.3.25 crores in instalments duly acknowledged and accepted by the defendants; (iv) that all payments were taken in the name of the defendant No.4 company; (v) that the defendants however did not issue shares of the defendant No.4 company in favour of the plaintiff and also did not pay monthly interest as was promised;

(vi) that the defendants also did not re-pay the loan; (vii) that besides the principal sum of Rs.3.75 crores, the defendants, till the date of institution of the suit are also liable to pay a sum of Rs.1,57,50,000/- towards interest @ 18% from 1st November, 2013 on the said amount of Rs.3.75 crores; pendente lite and future interest @ 18% is also claimed.

2. The suit came up for admission before this Court on 31 st May, 2016, when the defendants No.1 to 3 were not found to be necessary and proper parties to the suit and their names were struck off from the array of defendants and summons issued to the defendant No.4 only which is now the sole defendant. The plaintiff has filed amended memo of parties and allowed the said order to attain finality.

3. The sole defendant has filed a written statement denying the claim; insofar as claim for recovery of Rs.50 lakhs received by cheques is concerned, the same is to be barred by time.

4. The plaintiff has filed a replication reiterating his claim.

5. The suit came up on 27th March, 2017 for framing of issues when both the counsels handed over proposed issues. On going through the pleadings, the personal presence of the plaintiff as well as of Mr. Rajinder Rai / Mr. Bharat Sidheshwar Rai, erstwhile defendants No.1&3 respectively was directed for 29th March, 2017.

6. On 29th March, 2017, the plaintiff and Mr. Bharat Sidheshwar Rai, Director of the sole defendant appeared and their statements on oath as under recorded:

"Statement of Gopesh Mehta, S/o Late Sh. Harish Chander Mehta, aged about 50 years, R/o B-27, Church Road, Shanti Kunj, Vasant Kunj, New Delhi.

OnSA Q. From where did you draw the amounts of Rs.3.25 crores which you claim to have paid to the defendants? A. I took Rs.1.5 crores from my mother Mrs. Nirmal Mehta and Rs.1 crore from Mr. Harpreet who resides in Sainik Farms. I do not know the surname of Mr. Harpreet or his father's name.

Q. Have you repaid Rs.1.5 crores to your mother and Rs.1 crores to Mr. Harpreet?

A. Not to my mother but I have repaid Rs.35 lacs to Mr. Harpreet.

Q. Do you file income tax returns and in those income tax returns have you shown the loan taken from those two persons and repayment thereof?

A. Yes I file income tax returns but I have not shown the loan therein.

Q. Does your mother file income tax returns and has she in her income tax returns shown the amount paid by her as loan to you?

A. Yes my mother files income tax returns but she has not shown the said amount as loan to me in her income tax returns. Vol. this was in cash, saved by her over the years."

"Statement of Bharat S. Rai, S/o Sh. Rajinder Rai, aged about 32 years, R/o S-53, Panchsheel Park, New Delhi-110017. OnSA Q. Have you received any monies from plaintiff Mr. Gopesh Mehta?

A. Yes my company Swift Initiative Pvt. Ltd. has received the

monies.

       Q.      How much?
       A.      Rs.25,00,000/- by one cheque and Rs.25,00,000/- by
       another cheque.
       Q.      On what account?
       A.      It was by way of a friendly loan.
       Q.      Have you repaid that money?
       A.      There was no talk of repayment. At the time when the

monies were paid by the plaintiff Gopesh Mehta, we were told that we could refund the same at any time as and when the company Swift Initiative Pvt. Ltd. starts making profit. Q. Is this money shown in the balance sheet of the company Swift Initiative Pvt. Ltd. as due to plaintiff Gopesh Mehta?

A. Yes. It is shown as due to the plaintiff Gopesh Mehta in the balance sheet of the company Swift Initiative Pvt. Ltd. for the financial year 2013-14.

Q. Is this money shown in the balance sheets of the subsequent years of the company Swift Initiative Pvt. Ltd.? A. Although, I have filed balance sheets for the financial years 2014-15 and 2015-16 but I have to verify whether it is shown as due to plaintiff Gopesh Mehta or not. Q. In your books of accounts, has any other money been shown as due to plaintiff Gopesh Mehta?

       A.      Not at all.
       Q.      Were there any other banking transactions between the

plaintiff Gopesh Mehta on the one hand and any of the defendants on the other hand?

       A.      No.
       Q.      What interest was agreed to be paid?
       A.      No interest was agreed to be paid as it was a friendly

loan repayable on the company Swift Initiative Pvt. Ltd. making profit.

       Q.      Was Rs.3.25 crores received in cash?
       A.      Not at all."

7. On the basis of the aforesaid statements, it was observed (i) that a

decree could forthwith be passed in favour of the plaintiff and against the defendant for recovery of Rs.50 lakhs with interest post institution of the suit at such rate as may be deemed appropriate by the Court; (ii) that there is no likelihood of the plaintiff being able to substantiate the claim of payment of Rs.3.25 crores also to the defendant. It was as such put to the counsel for the plaintiff that if at all the plaintiff wants to press for the relief of recovery of Rs.3.25 crores, the plaintiff will have to give undertaking or deposit in this Court the costs which the defendant would suffer for contesting the suit. On request of the counsel for the plaintiff, opportunity was given to the counsel for the plaintiff to respond and suit adjourned to today. The counsels were also asked to address on the discretion of the Court in decreeing the suit for appropriate rate on the sum of Rs.50 lakhs for a period of three years prior to the institution of the suit.

8. The counsel for the plaintiff has today stated that the plaintiff, subject to a decree for Rs.50 lakhs with interest being passed in his favour, is not pressing for the remaining reliefs claimed in the suit; he has however sought refund of the court fee pro-rata.

9. The senior counsel for the defendant, in the light of the admission of Mr. Bharat Sidheshwar Rai, Director of the defendant that the defendant in its balance sheet is showing the said sum of Rs.50 lakhs as due to the plaintiff, has fairly not pressed the plea taken in the written statement of the relief for recovery of the said amount being barred by time.

10. The counsels have been heard on the aspect of the power of the Court to decree pre-suit interest without any trial and the rate at which the post suit interest is to be awarded.

11. The senior counsel for the defendant has argued (a) that admittedly no interest has ever been paid by the defendant to the plaintiff; (b) that the plaintiff has not pleaded or filed copies of any letter / notice which may have been issued by the plaintiff at any time after 20th April, 2013 and 20th June, 2013, when the monies under the two cheques were paid to the defendant;

(c) that the power of the Court to allow pre-suit interest is contained in Section 3 of the Interest Act, 1978, which is as under:

"3. Power of court to allow interest--(1) In any proceedings for the recovery of any debt or damages or in any proceedings in which a claim for interest in respect of any debt or damages already paid is made, the court may, if it thinks fit, allow interest to the person entitled to the debt or damages or to the person making such claim, as the case may be, at a rate not exceeding the current rate of interest, for the whole or part of the following period, that is to say,--

(a) if the proceedings relate to a debt payable by virtue of a written instrument at a certain time, then, from the date when the debt is payable to the date of institution of the proceedings;

(b) if the proceedings do not relate to any such debt, then, from the date mentioned in this regard in a written notice given by the person entitled or the person making the claim to the person liable that interest will be claimed, to the date of institution of the proceedings:

Provided that where the amount of the debt or damages has been repaid before the institution of the proceedings, interest shall not be allowed under this section for the period after such repayment. (2) Where, in any such proceedings as are mentioned in sub-section (1),--

(a) judgment, order or award is given for a sum which, apart from interest on damages, exceeds four thousand rupees, and

(b) the sum represents or includes damages in respect of personal injuries to the plaintiff or any other person or in respect of a person's death, then, the power conferred by that sub-section shall be exercised so as to include in that sum interest on those damages or on such part of

them as the court considers appropriate for the whole or part of the period from the date mentioned in the notice to the date of institution of the proceedings, unless the court is satisfied that there are special reasons why no interest should be given in respect of those damages.

       (3)    Nothing in this section,--
              (a)    shall apply in relation to--
                     (i)     any debt or damages upon which interest is payable
                             as of right, by virtue of any agreement; or
                     (ii)    any debt or damages upon which payment of
                             interest is barred, by virtue of an express
                             agreement;
              (b)    shall affect--
                     (i)     the compensation recoverable for the dishonour of a

bill of exchange, promissory note or cheque, as defined in the Negotiable Instruments Act, 1881 (26 of 1881); or

(ii) the provisions of Rule 2 of Order II of the First Schedule to the Code of Civil Procedure, 1908 (5 of 1908);

(c) shall empower the court to award interest upon interest."

(d) that neither is it the case in the plaint that the debt of Rs.50 lakhs is payable by virtue of written instrument at a certain time or that any written notice within the meaning of Section 3(1)(b) of the Interest Act was given;

(e) attention has also been invited to Section 2(b) of the Interest Act defining the expression "current rate of interest", as meaning the highest of the maximum rates at which interest may be paid on different classes of deposits (other than those maintained in savings accounts or those maintained by charitable or religious institutions) by different classes of scheduled banks in accordance with the directions given or issued to banking companies generally by the Reserve Bank of India; (f) that accordingly, for the post-suit period also, interest at the rate not more than 9% can be awarded to the plaintiff; (g) reliance was placed on Zile Singh Vs. Mangloo Ram Bansal

(2008) 146 DLT 50 holding that in the absence of a written instrument under which the debt is payable at a certain time and an averment of any agreement with the defendant regarding payment of interest or of any usage having the force of law regarding payment of interest, the claim for pre-suit interest can be sustained only if it is proved that a written notice of demand to that effect has been issued; since in that case admittedly no written notice was issued claiming interest, no amount towards pre-suit interest was awarded.

12. Per contra, the counsel for the plaintiff has argued that the defendant has not given any explanation for non-refund of Rs.50 lakhs admittedly due to the plaintiff. Reliance was placed on Aditya Mass Communications (P) Ltd. Vs. A.P.S.R.T.C. AIR 2003 SC 3411 where it was held that the quantum of interest which a Court may allow in a given case is governed by the facts of the case and not by any precedent law unless, of course, limited by a statute and that if a Court comes to the conclusion on a given set of facts that a party has been wrongly denied the use of its own money, it is the duty of the Court to see that the said party is appropriately compensated and pre-suit interest @ 12% per annum was awarded.

13. I have considered the controversy.

14. I may at the outset clarify that the counsel for the plaintiff has not pressed for an opportunity to lead evidence to prove the agreement claimed for payment of interest.

15. The judgment of the single Judge of this Court in Zile Singh supra merely follows (i) Bengal Nagpur Railway Co. Ltd. Vs. Ruttanji Ramji AIR 1938 Privy Council 67 by observing that the provisions contained in the Interest Act, 1978 are almost similar to the provisions contained in the

Interest Act, 1839; and, (ii) judgment of the Division Bench of the Madras High Court in Batliboi & Co. Ltd. Vs. Beama Mfg. Pvt. Ltd. (2006) 1 MLJ

276. Both the said judgments, on interpretation of the provisions of the respective Interest Act, held pre-suit interest to be payable thereunder only if conditions of the statute were satisfied. The Privy Council further held that interest cannot be recovered as damages under Section 73 of the Indian Contract Act, 1872.

16. However in the facts and circumstances of the present case, denial of pre-suit interest to the plaintiff appears to be inequitable. It cannot be lost sight of that the defendant, inspite of showing the sum of Rs.50 lakhs as payable to the plaintiff in the balance sheet, took a false stand before the Court. I have explored, whether Interest Act could be said to be not exhaustive of the law relating to pre-suit interest.

17. I find a Division Bench of this Court in Bank of Maharashtra Vs. G.K. Enterprises (2005) 122 DLT 655 to have, relying on Secretary, Irrigation Department, Govt. of Orissa Vs. G. C. Roy (1992) 1 SCC 508 held that interest is recoverable both at law and in equity on money obtained by fraud or conversion and retained by the defendant and that it is always open to the Court, as the Interest Act is not exhaustive of all claims of interest, to appreciate the facts of each case and then to grant interest in cases not coming strictly within the purview of the said Act, on principles of justice, equity and good conscience. The said binding judgment unfortunately remained unnoticed in Zile Singh supra.

18. Earlier also, it was held by a Single Judge of this Court in Bank of India Vs. T.R. Arora 1999 SCC OnLine Del 668 that Section 3 or Section

4(2) of the Interest Act do not take away the power of the Court where interest is otherwise payable by virtue of any enactment or other rule of law or usage having force of law; other rule of law would include the power of the court to award interest on equitable grounds.

19. Yet earlier, in Union of India Vs. National Overseas and Grindlays Bank Ltd. 1976 SCC Online Del 6 also this Court held interest is recoverable both at law and in equity on money obtained by fraud or conversion and retained by a defendant and that the Interest Act is not exhaustive of all claims as to interest and it is open to the courts to award interest in cases not coming strictly within the purview of the said Act, on principles of equity, justice and good conscience.

20. Both the aforesaid judgments also, applying which, in my opinion the plaintiff is entitled to pre-suit interest owing to attempt by defendant to deprive the plaintiff of his dues by taking a false plea before the court, remained to be noticed in Zile Singh supra. Though Zile Singh relies on the judgment of Division Bench of Madras High Court in Batliboi & Co. Ltd. supra but the Madras High Court also, as far back as in Sena Muhammad Abdul Gaffur Rowthar Vs. Hamida Beevi Ammal AIR 1919 Mad. 164 held that Interest Act is not comprehensive of all claims to interest. This view was reiterated in Ramireddi Rayalamma Vs. Sree Muthangi Butchiramayya Garu ILR 1942 (Mad) 464 (DB).

21. As far as Aditya Mass Communications (P) Ltd. supra cited by the counsel for the plaintiff is concerned, the Trial Court therein had awarded interest pre-suit, pendente lite as well as future @ 12% per annum but the High Court in appeal modified the rate of interest from that awarded of 12%

to 9% per annum. The observation cited by counsel for the plaintiff came to be made while deciding the "only question" "whether the High Court was justified in reducing the interest from 12% per annum to 9% per annum". It was held that the High Court was not justified in so reducing the rate of interest. It would thus be seen that the Supreme Court in the said judgment was not debating the liability for payment of pre-suit interest and the said judgment cannot be construed as a precedent for the said question.

22. As far as the rate of interest, pre-suit, pendente lite and future is concerned, the suit is found to have been instituted first on 27 th April, 2016. In the facts and circumstances, it is deemed appropriate to award interest for a period of three years prior to the institution of suit @ 9% per annum, interest pendente lite and future, on the sum of Rs.50 lakhs @ 12% per annum.

23. Accordingly, a decree is passed in favour of the plaintiff and against the defendant Swift Initiative Pvt. Ltd. for recovery of Rs.50 lakhs with interest @ 9% per annum with effect from 1st November, 2013 till institution of suit and interest @12% per annum with effect from the date of institution of the suit i.e. 27th April, 2016 till the date of realisation.

24. The plaintiff shall also be entitled to costs of the suit.

25. Out of the court fees paid on the claim for recovery of Rs.5,32,50,000/-, proportionate court fees in excess of the claim for Rs.50 lakhs with interest @ 18% per annum from 1st November, 2013 till institution of suit be refunded to the plaintiff and a certificate in this regard be handed over to the counsel for the plaintiff. Needless to add that while computing costs of the suit, court fees only on the sum of Rs.50 lakhs with

interest @ 18% per annum from 1st November, 2013 till institution of suit shall be computed.

Decree sheet be drawn up.

RAJIV SAHAI ENDLAW, J.

APRIL 10, 2017 „bs‟ (corrected & released on 8th May, 2017)