Delhi High Court
Bhupinder Singh vs Housing Development Financing ... on 2 August, 2018
* IN THE HIGH COURT OF DELHI AT NEW DELHI
+ RFA No.373/2018 and C.M. No.18205/2018(stay)
% 2nd August, 2018
BHUPINDER SINGH ..... Appellant
Through: Mr. Bharat Deepak, Advocate
with Ms. Vandana S. Bhandari,
Advocate.
versus
HOUSING DEVELOPMENT FINANCING CORPORATION
LIMITED & ANR. ..... Respondents
Through: Mr. Ajay Saroya, Advocate for
Respondent No.1.
CORAM:
HON'BLE MR. JUSTICE VALMIKI J.MEHTA
To be referred to the Reporter or not?
VALMIKI J. MEHTA, J (ORAL)
1. This Regular First Appeal under Section 96 of the Code
of Civil Procedure, 1908 (CPC) is filed by the defendant no.1 in the
suit impugning the judgment of the Trial Court dated 23.1.2018 by
which trial court has dismissed the leave to defend application filed by
the appellant/defendant No. 1 and has decreed the suit for recovery of
RFA No.373/2018 Page 1 of 23
moneys filed by the respondent no.1/plaintiff for a sum of
Rs.20,26,108/-.
2. A reading of the plaint shows that the suit is not based on a
dishonoured cheque or a written agreement containing the liquidated
amount which is the suit amount. The suit plaint shows that the suit is
filed on the ground that the term loan was granted to the
appellant/defendant No. 1 and the appellant/defendant No. 1 executed
a Loan Agreement on 22.03.2011. The total disbursement of Rs.18.75
lacs was made and which was repayable in equal monthly installments
every month. Respondent no.1/plaintiff pleaded default in paying of
the loan amount and the amount claimed in the suit is actually the
amount which is the balance due at the foot of the account inasmuch
as the appellant/defendant no.1 paid certain EMIs but defaulted in
payment of certain other EMIs. Therefore the amount claimed in the
suit is as a result of various debit and credit entries, and the balance at
the foot of this account is the amount which is claimed by the
respondent no.1/plaintiff in the suit.
3. An Order XXXVII CPC suit lies if the suit is based on a
dishonoured cheque or an amount which is claimed in the suit arising
RFA No.373/2018 Page 2 of 23
as a liquidated amount specifically so stated as a liquidated liability in
the written instrument including a guarantee. The suit amount claimed
is not a liquidated amount payable under an agreement because the
suit amount is the amount which is different than as contained in the
loan agreement as it is the balance at the foot of the account as a result
of various debit and credit entries over a long period of time. The
subject suit therefore is not maintainable under Order XXXVII CPC
and as so held by this Court in the judgment in the case of IFCI
Factors Ltd. Vs. Maven Industries Ltd. & Ors. 225 (2015) DLT 32.
The relevant paras of this judgment in the case of IFCI Factors Ltd.
(supra) are paras 9 to 16 and these paras read as under:-
"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 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).
RFA No.373/2018 Page 3 of 23
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."
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:-
RFA No.373/2018 Page 4 of 23
(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
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 Order 37 CPC it is seen that the said provision is with respect to
RFA No.373/2018 Page 5 of 23
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 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
RFA No.373/2018 Page 6 of 23
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.
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
RFA No.373/2018 Page 7 of 23
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 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.
RFA No.373/2018 Page 8 of 23
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:-
"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.
RFA No.373/2018 Page 9 of 23
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 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) (Cr) (Dr)
15.06.2005 Balance B/F 32,372.25
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
RFA No.373/2018 Page 10 of 23
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.
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 No.06/015 72,126.91 1,098,976.63
09.06.2005 Cr Ch.No.474974 100,000.00 1,812,065.25
16.06.2005 Dr Bill No.06/018 73,199.07 1,72,175.70
23.06.2005 Dr Bill No.06/031 72,126.91 1,026,849.72
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 No.06/059 73,199.07 1,245,374.77
22.07.2005 Cr Ch.No.464062 100,000.00 1,512,065.25
RFA No.373/2018 Page 11 of 23
30.07.2005 Dr Bill No.07/020 290,651.96 1,536,026.73
05.08.2005 Cr Ch. 64,313.00 1,447,752.25
No.464078
L 06.08.2005 Cr Ch. 65,183.00 1,318,256.25
e No.464079
d
08.08.2005 Dr Bill No.08/010 66,376.25 1,674,529.89
g
e 13.08.2005 Dr Bill No.08/019 72,126.91 1,608,153.64
r 18.08.2005 Dr Bill No.08/022 72,126.91 1,746,656.80
A 25.08.2005 Dr Bill No.08/035 288,609.18 2,035,265.98
c
c 26.08.2005 Cr Ch. 64,313.00 1,383,439.25
No.464160
o
u 29.08.2005 Cr Ch. 65,268.00 1,252,988.25
n No.464161
t 09.09.2005 Cr Bill No.09/003 72,126.91 2,107,392.89
f 09.09.2005 Cr Bill No.09/005 99,418.18 2,206,811.07
r
09.09.2005 Dr Bill No.09/008 5,254.18 2,212,065.25
o
m 21.10.2005 Cr Ch.No.527737 4,632.00 1,248,356.25
24.10.2005 Cr Ch.No.527732 58,521.00 1,189,835.25
0
27.10.2005 Cr Ch.No.527734 63,591.00 1,126,244.25
1
. 27.10.2005 Cr Ch.No.522233 63,591.00 1,062,653.25
0 30.10.2005 Cr Ch.No.527735 63,591.00 999,062.25
4 07.11.2005 Cr Ch.No.527736 87,652.00 911,410.25
.
2 10.11.2005 Cr Ch.No.527738 254,453.00 656,957.25
05 to 7.11.2005
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."
4. In view of the aforesaid discussion since the suit itself was
not maintainable under Order XXXVII CPC, there does not arise any
issue of any prayer by the appellant/defendant no.1 to seek leave to
defend or the trial court declining leave to defend by the impugned
judgment. The suit had to be tried as an ordinary suit and not an Order
XXXVII CPC suit.
5. This appeal is therefore allowed and the impugned
Judgment of the Trial Court dated 23.1.2018 is set aside. Trial court will
now treat the suit as an ordinary suit for recovery of money and will
proceed accordingly. Parties to appear before the District & Sessions
Judge, New Delhi District, Patiala House Courts, New Delhi on 11th
September, 2018 and the District & Sessions Judge will now mark the
suit for disposal to a competent court in accordance with law.
AUGUST 02, 2018 VALMIKI J. MEHTA, J
Ne
