Delhi High Court
The Uniworld Garden Apartment ... vs Unitech Realty Private Ltd on 9 January, 2018
* IN THE HIGH COURT OF DELHI AT NEW DELHI
% Reserved on: 20th September, 2017
Decided on: 09th January, 2018
+ CS(OS) 396/2016
THE UNIWORLD GARDEN APARTMENT
OWNERS ASSOCIATION ..... Plaintiff
Represented by: Mr. Jatin Mongia, Mr. Rohan
Sharma and Mr. Raghav
Kakkar, Advocates.
versus
UNITECH REALTY PRIVATE LTD ..... Defendant
Represented by: Mr. Mriganga Dutta, Mr. Arjun
Taneja, Mr. Rajiv Virmani, Mr.
Atul Malhotra and Ms.
Samprikta Ghosal, Advocates.
CORAM:
HON'BLE MS. JUSTICE MUKTA GUPTA
I.A. Nos.1404/2017 (under Order XXXVII Rule 3 (5) CPC) and
1405/2017 (under Section 8 of the Arbitration and Conciliation Act,
1996)
1. Plaintiff has filed the present suit under Order XXXVII inter alia
seeking a recovery of a sum of ₹17,76,64,952/- along with interest @18%
per annum from the defendant on the basis of unequivocal and written
admissions on part of the defendant about its liability to hand over the
Interest Bearing Maintenance Security (in short 'IBMS') to the plaintiff
association once the association is formed. The said IBMS had been
collected by the defendant from the individual apartment owners and was to
be handed over when the association was formed to take over the
maintenance of the apartment complex. It is the case of the plaintiff that
CS(OS) 396/2016 Page 1 of 19
though the plaintiff was formed in the year 2006, the plaintiff was prevented
from taking over of the complex due to failure of the defendant to complete
the complex in all respects in time and thereafter as well despite repeated
requests to hand over the possession after the complex was equipped with all
basic and essential facilities.
2. The plaintiff inter alia relies upon the admissions of the defendant
vide its email dated 24th January, 2009 enclosing the IBMS amount @8.25%
as on 31st December, 2008; defendant's letter dated 5th April, 2011
responding to the plaintiff's letter dated 18th March, 2011 admitting the
liability to hand over IBMS amount; handing over letter dated 20th August,
2013 enclosing the IBMS amount with interest @8.25% till 31st August,
2013; balance sheet of the financial year 2012-13 and 2013-2014 and
affidavit of defendant dated 11th March, 2015 filed in Company Petition
No.513/2004. Reliance is placed on the decisions reported as AIR 1999
Bom 340 BOI Finance Limited vs. Padma Alloy Casting Private Limited &
Ors., 2001 (1) Mh.L.J. 687 R. Kumar & Co. vs. Chemicals Unlimited AIR
2003 and Bom 168 Sun N Sand Limited vs. V.V. Kumar.
3. Responding to the plea of defendant that there is an arbitration clause
in the Agreement to Sell it is contended that the plea ought to have been
taken as part and parcel of the leave to defend application and not by way of
separate application under Section 8 of the Arbitration Act. It is claimed
that the plaintiff association is a society registered under the Societies'
Registration Act, 1860 thus a separate legal entity, independent of its
individual apartment owners, hence any arbitration agreement entered
between the members would not be binding on the plaintiff association.
Reliance is placed on the decisions reported as AIR 1946 Bom 516
CS(OS) 396/2016 Page 2 of 19
Satyavart Sidhantalankar & Ors. vs. Arya Samaj, Bombay, AIR 1958 AP
773 Pamulapati Buchi Naidu College Committee vs. Govt. of A.P. & Ors.
and AIR 1970 Pat 163 K.C. Thomas vs. R.L.Gadeock & Anr.
4. In the alternative it is also submitted that money was deposited by the
individual members of the plaintiff association in terms of Clause 5 of the
Maintenance and Service Agreement (in short 'M & S Agreement') which
agreement did not contain an arbitration clause. As regards the contention
relating to rate of interest the same can be as per the prevailing bank rate and
mere non-mentioning of rate of interest will not be a triable issue requiring
grant of leave to defend. No substantial defence having been raised in terms
of the decision reported as 2017 (1) SCC 568 IDBI Trusteeship Services Ltd.
vs. Hubtown Ltd. the applications are liable to be dismissed and the suit be
decreed. Reliance is further placed on the decisions reported as AIR 2002
Bom 481 Suraj Sanghi Finance Ltd. vs. Credential Finance Ltd. & Ors.,
AIR 2003 Bom 92 Motorola India Limited vs. Kiklu I. Malani and AIR 2003
Bom 111 Leela Capital and Finance Ltd. vs. Modiluft Limited.
5. Responding to the summary suit filed by the plaintiff, the defendant
filed two applications being I.A. No. 1404/2017 under Order XXXVII Rule
3 (5) CPC seeking leave to defend and I.A No. 1405/2017 under Section 8
of the Arbitration and Conciliation Act (in short 'Arbitration Act').
6. In the applications it is claimed that by virtue of Section 8 of the
Arbitration Act being applicable, the suit is incompetent and not
maintainable. The suit of the plaintiff is premised on Clause 3.5 of the
Agreement to Sell dated 25th August, 2004 executed by a flat owner with the
defendant and as per Clause 11.2 of the said Agreement to Sell all disputes,
difference and disagreements arising out of/in connection with/or in relation
CS(OS) 396/2016 Page 3 of 19
to this Agreement have to be decided by arbitration. In terms of Agreement
to Sell parties executed Maintenance Agreement dated 15th October, 2006
which records having been executed in terms of the requirement contained
in the Agreement to Sell. The members of the plaintiff company deposited
towards the 'sinking fund' as prescribed by Clause 3.5 of the Agreement to
Sell. Thus for all purposes the Agreement to Sell is the primary document
establishing the rights and obligations of each party and subsequent
Maintenance Agreement is secondary/ancillary to the Agreement to Sell
merely recording the details/particulars to be completed by each party. The
primary document, that is, Agreement to Sell containing the arbitration
clause all disputes in relation to all subsequent agreements will have to be
decided by arbitration. The formation of association is envisaged by
Clauses 3.1 and 3.5 of the Agreement to Sell besides Clauses 5 and 6 of the
Maintenance Agreement. The association is merely a culmination of various
individual flat owners with commonality of interest and thus are permitted to
be sued through the association. Every correspondence between the parties
being in terms of the Agreement to Sell, there exists no privity of contract or
relationship between the association and the defendant. The association
does not enjoy any independent status dehors the Agreement to Sell and/or
Maintenance Agreement. Section 8 of the Arbitration and Conciliation Act
prohibits/debars the continuance of any such civil proceedings. Reliance is
placed on the decisions reported as 2000 (4) SCC 539 P. Anand Gajapathi
Raju & Ors. vs. P.V.G. Raju, 2007(3) SCC 685 Agri Gold Exims Ltd. vs. Sri
Lakshmi Knits and Wovens and Ors., 2006 (7) SCC 275 Rashtriya Ispat
Nigam Limited and Anr. vs. Verma Transport Company and 2015 (14) SCC
444 Sundaram Finance Limited and Ors. vs. T. Thankam.
CS(OS) 396/2016 Page 4 of 19
7. The application under Section 8 of the Arbitration Act having been
filed this Court is duty bound to first decide the said application and would
go on the merits of the dispute only after dismissing the said application.
Reliance is placed on 2009 (4) SCC 585 Sunder Kukreja and Ors. vs. Mohan
Lal Kukreja and Anr., 194 (2012) DLT 143 Ultra Home Constructions (P)
Ltd. vs. Choice Hotels International Inc. & Ors. and 199 (2013) DLT 275
M/s. Damco India Private Ltd. vs. M/s. Samtel Glass Limited & Ors. It is
also contended that the present suit cannot be entertained being beyond the
territorial jurisdiction of this Court.
8. Before proceeding to deal with the rival contentions of the parties it
would be appropriate to note the relevant Clauses of the Agreement to Sell
dated 25th August, 2004, entered into between the defendant and one of the
members of the plaintiff the other Agreements to Sell also being similar:
"ARTICLE 3
MAINTENANCE.
3.1 The Purchaser hereby agrees and undertakes that it shall
enter into a separate Maintenance Agreement with the
maintenance agency appointed or nominated by the
Developer for the maintenance of the Complex and the
Common Services in the Complex. The Purchaser agrees
to pay the charges as mentioned in the Maintenance
Agreement. The Purchaser hereby undertakes to comply
with all the terms and conditions stipulated in the
Maintenance Agreement.
The Purchaser undertakes to become a member of the
Apartment Owners Association and shall continue to pay
the maintenance charges as determined by the said
association from the date the same is handed over to it.
CS(OS) 396/2016 Page 5 of 19
3.2 That the scope of maintenance and general upkeep of
various common services within the building shall
broadly include operation and Maintenance of lifts,
operation and Maintenance of Generators including
Diesel, Maintenance of fir fighting system, Garbage
disposal and upkeep of common areas Water supply,
Sewerage System, Common area lighting. The Services
outside but within the Complex, shall broadly include
Maintenance and upkeep of internal roads, pathways,
boundary walls/fencing, Parks and Horticulture, External
Sewerage and drainage system. Street Lighting, Water
Supply, General Watch and ward of the complex.
3.3 That the indicative Maintenance charges at the time of
giving the possession of the Apartment would be approx.
₹ 1.25 per sq. ft. per month. The Purchaser shall pay the
necessary charges for maintenance of common service
and facilities as may be determined by the Developer
and/or its nominated maintenance Agency from time to
time. In case of delay/failure in making the payment of
maintenance charges, interest @ 18% shall be charged
on outstanding dues, for the delayed period.
3.4 That it is understood by the Purchaser that the internal
maintenance of the Apartment and also its insurance
shall always remain the responsibility of the Purchaser.
3.5 In addition to the payment of maintenance charges, the
purchaser shall pay an Interest Bearing Maintenance
Security (IBMS) towards creation of "Sinking Fund".
The interest accrued/earned on the security deposit shall
be utilized towards cost of replacement, refurbishing,
major repairs of the plants and equipments etc.. Installed
in the complex or towards any unforeseen contingency in
future. However, on formation of the Association of
Apartment owners the balance fund available in this
account shall be remitted to the Association.
CS(OS) 396/2016 Page 6 of 19
ARTICLE 10
APPLICABLE LAW AND JURISDICTION
10.1 This Agreement shall be construed and the legal relations
between the Parties hereto shall be determined and
governed according to the laws of India.
10.2 That the Courts at Gurgaon and the Punjab and Haryana
High Court at Chandigarh alone shall have the
Jurisdiction in all matters arising out of and/or
concerning this transaction.
ARTICLE 11
ARBITRATION
11.1 All disputes, difference or disagreement arising out of, in
connection with or in relation to this Agreement shall be
mutually discussed and settled between the Parties.
11.2 All disputes, difference or disagreement arising out of, in
connection with or in relation to this Agreement, which
cannot be amicably settled shall be finally decided by
arbitration of three arbitrators one to be appointed by
each party, to be held in accordance with the provisions
of the Arbitration and Conciliation Act, 1996. Any
arbitration pursuant hereunder shall be a domestic
arbitration under the Applicable Law.
11.3 The Venue of arbitration shall be Gurgaon or such other
place as may be mutually agreed between the parties".
9. Relevant clauses of Maintenance Agreement between members of the
association and defendant are as under:
"(3) That in consideration of the MAINTENANCE AGENCY
carrying out the maintenance of various services had facilities,
as enumerated in Clause 2 above, the Owner(s) agrees to pay
the maintenance charges amounting to ₹72972.00 (Rupees
CS(OS) 396/2016 Page 7 of 19
SEVENTY TWO THOUSAND NINE HUNDRED SEVENTY
TWO ONLY) in lump-sum calculated @ ₹1.50/- per. Sq. ft. per
month of the Super Area of the Apartment from the date when
the actual possession is offered by the SECOND PART i.e. the
date mentioned in the Final Notice of Possession till August
31,2008. The Payment(s) shall be made by cheque/draft drawn
in favour of "UNITECH REALITY PVT. LTD.
MAINTENANCE ACCOUNT".
(4) ....
(5) That in addition to the payment of maintenance charges,
the second part shall pay ₹101350.00 (Rupees ONE LAC ONE
THOUSAND THREE HUNDRED FIFTY) calculated @ ₹50/-
per sq. ft. of the Super Area as Interest Bearing Maintenance
Security (IBMS) towards creation of "Sinking Fund". The
interest accrued on the security deposit shall be utilized
towards cost of replacement, refurbishing, major repairs of the
plants and equipments etc. Installed in the complex or any
unforeseen occurrence in the future. However, on formation of
the Association of Residents, while handling over the
operation and maintenance of the complex by Maintenance
Agency, the balance fund available in this account shall be
remitted to the Association. The payment(s) shall be made by
cheque/draft drawn in favour of "UNITECH REALITY PVT.
LTD. SECURITY DEPOSIT ACCOUNT.".
The above said amount shall bear interest as per bank rate
prevailing at that time.
(6) That the Maintenance Agency shall continue to provide
the services upto August 31, 2008 and the Residents shall form
an Association/ Society within that period. After completion of
above mentioned Maintenance period by the Maintenance
Agency, the Resident Association/society, shall take over
maintenance of common areas and facilities in the complex.
After that, the OWNER(s) shall be responsible for payment of
CS(OS) 396/2016 Page 8 of 19
Maintenance charges to the Association/Society at rates as
determined by the latter."
10. Supreme Court in the decision reported as Sundaram Finance Limited
(supra) delineating the jurisdiction of the civil court once it is brought to its
notice that its jurisdiction has been taken away in terms of the procedure
prescribed under the special statute held:
9. The position was further explained in Hindustan Petroleum
Corpn. Ltd. v. Pinkcity Midway Petroleums [(2003) 6 SCC
503]. To quote: (SCC pp. 510-11, para 14)
"14. This Court in P. Anand Gajapathi Raju v. P.V.G.
Raju [(2000) 4 SCC 539: (2000) 2 SCR 684] has held
that the language of Section 8 is peremptory in nature.
Therefore, in cases where there is an arbitration clause
in the agreement, it is obligatory for the court to refer the
parties to arbitration in terms of their arbitration
agreement and nothing remains to be decided in the
original action after such an application is made except
to refer the dispute to an arbitrator. Therefore, it is clear
that if, as contended by a party in an agreement between
the parties before the civil court, there is a clause for
arbitration, it is mandatory for the civil court to refer the
dispute to an arbitrator. In the instant case the existence
of an arbitral clause in the agreement is accepted by both
the parties as also by the courts below but the
applicability thereof is disputed by the respondent and
the said dispute is accepted by the courts below. Be that
as it may, at the cost of repetition, we may again state
that the existence of the arbitration clause is admitted. If
that be so, in view of the mandatory language of Section
8 of the Act, the courts below ought to have referred the
dispute to arbitration."
10. .....
11. The attempt of the trial court and the approach made by
the High Court in bifurcating the cause of action, is fallacious.
It would only lead to delaying and complicating the process.
The said issue is also no more res integra. In Sukanya
Holdings (P) Ltd. v. Jayesh H. Pandya [(2003) 5 SCC 531:
AIR 2003 SC 2252] at paras 16 and 17, it was held as follows:
(SCC p. 536)
"16. The next question which requires consideration is--
even if there is no provision for partly referring the
dispute to arbitration, whether such a course is possible
under Section 8 of the Act. In our view, it would be
difficult to give an interpretation to Section 8 under
which bifurcation of the cause of action, that is to say, the
subject-matter of the suit or in some cases bifurcation of
the suit between parties who are parties to the arbitration
agreement and others is possible. This would be laying
down a totally new procedure not contemplated under the
Act. If bifurcation of the subject-matter of a suit was
contemplated, the legislature would have used
appropriate language to permit such a course. Since
there is no such indication in the language, it follows that
bifurcation of the subject-matter of an action brought
before a judicial authority is not allowed.
17. Secondly, such bifurcation of suit in two parts, one to
be decided by the Arbitral Tribunal and the other to be
decided by the civil court would inevitably delay the
proceedings. The whole purpose of speedy disposal of
dispute and decreasing the cost of litigation would be
frustrated by such procedure. It would also increase the
cost of litigation and harassment to the parties and on
occasions there is possibility of conflicting judgments and
orders by two different forums."
13. Once an application in due compliance with Section 8 of
the Arbitration Act is filed, the approach of the civil court
should be not to see whether the court has jurisdiction. It
should be to see whether its jurisdiction has been ousted.
There is a lot of difference between the two approaches. Once
it is brought to the notice of the court that its jurisdiction has
been taken away in terms of the procedure prescribed under a
special statute, the civil court should first see whether there is
ouster of jurisdiction in terms or compliance with the
procedure under the special statute. The general law should
yield to the special law--generalia specialibus non derogant.
In such a situation, the approach shall not be to see whether
there is still jurisdiction in the civil court under the general
law. Such approaches would only delay the resolution of
disputes and complicate the redressal of grievance and of
course unnecessarily increase the pendency in the court.
11. The mother agreement in the present case is the Agreement to Sell
which provides that any dispute between the parties has to be referred to
arbitration. Article 3 of the Agreement to Sell provides in respect of the
maintenance for which a further agreement has been entered into for
maintenance of the complex (common areas) directly or through its
nominated agency.
12. The case of the plaintiff is that there being no arbitration agreement
between the plaintiff which is an association registered under the Societies
Registration Act, an independent entity and the defendant, it will not be
bound by Article 11 of the Agreement to Sell.
13. Thus the issue that arises is whether the plaintiff which is an
association of apartment owners duly registered under the Societies'
Registration Act, 1980 is independent of its members and would thus be not
bound by the arbitration clause in the Agreements to Sell executed between
its members and defendant. It is trite law that a society registered under the
Societies Registration Act is a legal persona capable of suing and being sued
in the name of its President, Chairman or Principal Secretary or trustees as
may be determined by the rules and regulations of the Society. [See: AIR
1962 SC 458 Board of Trustees, Ayurvedic and Unani Tibia College vs.
State of Delhi]
14. In the decision reported as AIR 1946 Bom 516 Satyavart
Sidhantalankar Vs. Arya Samaj, the High Court noting the distinction
between a society registered and its members held:
24. Do these provisions of the Societies Registration Act XXI
(21) of 1860 constitute the society as registered with the
Registrar of Joint Stock Companies a legal entity capable of
suing or being sued? Has the society as registered with the
Registrar of Joint Stock Companies a legal existence apart
from the members constituting the same? It is significant to
observe that the members of the society are a fluctuating body.
A member of the society is a person who having been admitted
therein according to the rules and regulations thereof has paid
the subscription or signed the roll of the members thereof and
has not resigned according to the rules and regulations. The
governing body of the society is the governors, council,
directors, committees, trustees or other body to whom by the
rules and regulations of the society the management of its
affairs is entrusted. The members as well as the governing
body are not always the same and that is the reason why it has
been necessary to provide that no suit or proceeding in any
civil Court shall abate or discontinue by reason of the person
by or against whom such suit or proceedings may have been
brought or continued dying or ceasing to fill the character in
the name whereof he shall have sued or been sued, but the
same suit or proceedings shall be continued in the name of or
against the successor of such person.
25. Even though the members of the society or the governing
body fluctuate from time to time, the identity of the society is
sought to be made continuous by reason of these provisions.
The identity of the original members and their successors is
one. The liability or obligation once binding on the society
binds the successors even though they may not be expressly
named, and in this the society savours of the character of a
corporation. The resignation or the death of a member does
not make any difference to the legal position of the society.
The increase or decrease of the members of the society
similarly does not make any difference to the position. A
partnership under similar circumstances would come to an
end, but not the society. The society continues to exist and to
function as such until the dissolution thereof under the
provisions of the Societies Registration Act. The properties of
the society continue vested in the trustees or in the governing
body irrespective of the fact that the members of the society for
the time being are not the same as they were before nor will be
the same thereafter. Could it under these circumstances be
said that the society by reason of its registration with the
Registrar of Joint Stock Companies becomes a legal entity
apart from the members constituting the same? I am of opinion
that by reason of the provisions of the Societies Registration
Act, once the society is registered with the Registrar of Joint
Stock Companies by the filing of the memorandum and
certified copy of the rules and regulations thereof with the
Registrar and the Registrar has certified under his hand that
the society is registered under the Act, the society enjoys the
status of a legal entity apart from the members constituting the
same and is capable of suing or being sued.
15. In the decision of the Supreme Court reported as 2003 (5) SCC 531
Sukanya Holdings Pvt. Ltd. vs. Jayesh H. Pandya & Anr. the Supreme Court
held that there is no provision in the Arbitration Act that when the subject
matter of the suit includes subject matter of the arbitration agreement as well
as other disputes, the matter is required to be referred to arbitration. Further
there is also no provision in the Arbitration Act as to what is required to be
done in a case where some parties to the suit are non-parties to the
arbitration agreement. It was held that third parties to the arbitration
agreement cannot be subjected to arbitration under Section 8 of the
Arbitration Act. Though the three judges bench of the Supreme Court in the
decision reported as 2013 (1) SCC 641 Chloro Controls India Private Ltd.
vs. Seven Trent Water Purification Inc. referred to Sukanya Holdings (supra)
however, did not overrule the same. Thus the legal position would be that a
party who has not entered into an arbitration agreement cannot be subjected
to arbitration.
16. In view of the discussion above since the plaintiff is an independent
legal entity and not a party to the Agreements to Sell entered into between
its members and the defendant, it is not amenable to arbitration under
Section 8 of the Arbitration Act I.A. No. 1405/2017 under Section 8 of the
Arbitration Act filed by the defendant is dismissed.
17. In respect of I.A. No. 1404/2017 under Order XXXVII Rule 3 (5)
CPC seeking leave to defend the claim of the defendant inter alia is that this
Court has no jurisdiction to adjudicate the present dispute as the parties had
agreed Gurgaon as the venue for arbitration as per Clause 11.3 of the
Agreement to Sell, the suit is barred by the limitation as the claim made by
the plaintiff is with respect to the cause of action which arose in 2004
whereas present suit has been filed only in the month of August, 2016; the
plaintiff has not filed all documents thus, sufficient notice has not been
given to the defendant; the present suit is an attempt to harass the defendant
as a company petition has already been filed by the plaintiff before this
Court and the defendant has already deposited a sum of ₹10.71 crores with
the Registry of this Court in Company Petition No. 513/2014, the plaintiff is
not entitled to the interest @18% as claimed; the suit is not in respect of
liquidated debt and though the plaintiff has filed the suit on behalf of its
members however, the procedure prescribed under Order 1 Rule 8 CPC has
not been followed.
18. Rebutting the contentions of defendant in leave to defend application
learned counsel for plaintiff contends that the summary suit is based on the
admissions of the defendant admitting its liability to pay a sum of
₹5,49,98,100/-, that is, the principal amount along with the interest that has
accrued thereon calculated on the prevailing bank rate of interest from the
date of payment by the members of the plaintiff till 31 st July, 2016, that is,
immediately prior to the filing of the instant suit being ₹17,76,64,952/-.
These admissions are incorporated in a number of documents including the
defendant's emails, letters, balance sheets, affidavit of the defendant in
company petition. Since no defence has been raised by the defendant the suit
is required to be decreed in favour of the plaintiff as the money usurped by
the defendant is for maintenance and upkeep of Uniworld Garden which has
deteriorated significantly with rampant sewage, for want of pending repairs
etc. This Court has territorial jurisdiction to entertain the suit under Section
20 CPC as the defendant's registered office is in Delhi. The suit has been
instituted within the period of limitation from the date of acknowledgement
of the liability. The documents necessary for the proper adjudication of the
suit have already been filed. Winding up petition filed before the company
court and the suit by a party are two separate legal remedies and there is no
bar in law in pursuing both the remedies simultaneously. There is no
concealment of material facts.
19. Overruling the decision reported as AIR 1977 SC 577 Mechelec
Engineers & Manufacturers vs. Basic Equipment Corporation the Supreme
Court has laid down the guidelines for grant of leave to defend in IDBI
Trusteeship Services Ltd. (supra) as under:
a. If the Defendant satisfies the Court that he has a substantial
defence, that is, a defence that is likely to succeed, the Plaintiff
is not entitled to leave to sign judgment, and the Defendant is
entitled to unconditional leave to defend the suit;
b. if the Defendant raises triable issues indicating that he has
a fair or reasonable defence, although not a positively good
defence, the Plaintiff is not entitled to sign judgment, and the
Defendant is ordinarily entitled to unconditional leave to
defend;
c. even if the Defendant raises triable issues, if a doubt is left
with the trial judge about the Defendant's good faith, or the
genuineness of the triable issues, the trial judge may impose
conditions both as to time or mode of trial, as well as payment
into court or furnishing security. Care must be taken to see
that the object of the provisions to assist expeditious disposal
of commercial causes is not defeated. Care must also be taken
to see that such triable issues are not shut out by unduly severe
orders as to deposit or security;
d. if the Defendant raises a defence which is plausible but
improbable, the trial Judge may impose conditions as to time
or mode of trial, as well as payment into court, or furnishing
security. As such a defence does not raise triable issues,
conditions as to deposit or security or both can extend to the
entire principal sum together with such interest as the court
feels the justice of the case requires.
e. if the Defendant has no substantial defence and/or raises no
genuine triable issues, and the court finds such defence to be
frivolous or vexatious, then leave to defend the suit shall be
refused, and the Plaintiff is entitled to judgment forthwith;
f. if any part of the amount claimed by the Plaintiff is admitted
by the Defendant to be due from him, leave to defend the suit,
(even if triable issues or a substantial defence is raised), shall
not be granted unless the amount so admitted to be due is
deposited by the Defendant in court.
20. In IDBI Trusteeship Services Ltd. (supra) the Supreme Court further
held:
17. It is thus clear that Order XXXVII has suffered a change in
1976, and that change has made a difference in the law laid
down. First and foremost, it is important to remember that
Milkhiram's case is a direct authority on the amended Order
XXXVII provision, as the amended provision in Order XXXVII
Rule 3 is the same as the Bombay amendment which this Court
was considering in the aforesaid judgment. We must hasten to
add that the two provisos to Sub-rule (3) were not, however,
there in the Bombay amendment. These are new, and the effect
to be given to them is something that we will have to decide.
The position in law now is that the trial Judge is vested with a
discretion which has to result in justice being done on the facts
of each case. But Justice, like Equality, another cardinal
constitutional value, on the one hand, and arbitrariness on the
other, are sworn enemies. The discretion that a Judge
exercises under Order XXXVII to refuse leave to defend or to
grant conditional or unconditional leave to defend is a
discretion akin to Joseph's multi-coloured coat-a large number
of baffling alternatives present themselves. The life of the law
not being logic but the experience of the trial Judge, is what
comes to the rescue in these cases; but at the same time
informed by guidelines or principles that we propose to lay
down to obviate exercise of judicial discretion in an arbitrary
manner. At one end of the spectrum is unconditional leave to
defend, granted in all cases which present a substantial
defence. At the other end of the spectrum are frivolous or
vexatious defences, leading to refusal of leave to defend. In
between these two extremes are various kinds of defences
raised which yield conditional leave to defend in most cases. It
is these defences that have to be guided by broad principles
which are ultimately applied by the trial Judge so that justice
is done on the facts of each given case."
21. Testing the grounds taken in the leave to defend application on the
touchstone of the law laid down by the Supreme Court in IDBI Trusteeship
Services Ltd. (supra) this Court finds that no triable issues have been raised
by the defendant. The plea of the defendant that this Court has no territorial
jurisdiction to try the suit for the reason that by virtue of Clause 11.3 of the
Agreement to Sell, parties choose the venue of arbitration at Gurgaon
deserves to be rejected for the reason this Court has already held that the
plaintiff is not bound by the arbitration clause, that is, Article 11 of the
Agreement to Sell executed between its members and defendant. Thus an
agreement on the venue of arbitration to be Gurgaon or such other place as
may be mutually agreed between the parties has no application to the facts
of the present case. The defendant does not dispute that its registered office
is in Delhi. Thus, since the defendant is working for gain in Delhi as per
Section 20 of CPC, this Court has territorial jurisdiction to try the suit. The
claim of the plaintiff is based on admissions of the defendant to deposit the
IBMS by the defendant with the plaintiff so that the plaintiff thereafter
continuous with the maintenance and upkeep of the buildings. The plaintiff
relies upon the admission of the defendant vide its email dated 24 th January,
2009 including the IBMS amount @8.25% as on 31 st December, 2008;
defendant's letter dated 5th April, 2011 responding to the plaintiff's letter
dated 18th March, 2011 admitting the liability to hand over IBMS amount;
handing over letter dated 20th August, 2013 enclosing the IBMS amount
with interest @8.25% till 31st August, 2013; balance sheet of the defendant
of the financial years 2012-13 and 2013-14; affidavit of the defendant dated
11th March, 2015 filed in Company Petition No. 513/2004 and the present
suit having been instituted on 25th July, 2016 the same is within the period
of limitation. The filing of the company petition by the plaintiff does not bar
its remedy to recover the amount due by way of a civil suit and the deposit
of the defendant of part payment pursuant to the order of the company court
further fortifies the claim of the plaintiff.
22. In respect of the ground that the plaintiff is not entitled to seek interest
@18% this Court in the decisions reported as 2015 (2) MWN (Civil) 33
A.G. Exports vs. Alftach Construction & Pvt. Ltd., Suraj Sanghi (supra),
Motorola India Ltd. (supra) and Leela Capital (supra) held that leave to
defend cannot be granted merely for determining the rate of interest which
the Court can grant as per the prevailing practice.
23. Since the defendant has admitted the rate of interest @8.25% which
can be treated as the prevailing interest rate, no leave to defend is required to
be granted to the defendant. Application is accordingly dismissed.
CS(OS) 396/2016
1. Application under Section 8 of the Arbitration Act being I.A. No.
1405/2017 and leave to defend application being I.A. No. 1404/2017 having
been dismissed, suit is decreed in favour of the plaintiff and against the
defendant directing the defendant to pay a sum of ₹17,76,64,952/- with
interest @8.25% pendentile and future till the recovery.
2. No order as to cost.
(MUKTA GUPTA)
JUDGE
JANUARY 09, 2018
'vn'
