M/S Felicia Realcon India Pvt Ltd vs M/S Shri Colonizers And ...
2018 Latest Caselaw 4329 Del

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*        IN THE HIGH COURT OF DELHI AT NEW DELHI
%                                              Reserved on: 17th July, 2018
                                             Pronounced on: 27th July, 2018

+        CS(COMM) 344/2017

         M/S FELICIA REALCON INDIA PVT LTD           ..... Plaintiff
                        Through: Mr.Mukti Choudhary, Mr.Prateek,
                                 Advocates with Mr.Vivek Kalia
                                 AR in person.
                        versus

         M/S SHRI COLONIZERS AND
         DEVELOPERS PVT LTD & ORS              .... Defendants
                       Through: Mr.Raman Gandhi, Advocate.

CORAM:
HON'BLE MR. JUSTICE YOGESH KHANNA

YOGESH KHANNA, J.

IA No.13877/2017

1. Before coming to the application under Order 37 Rule 3 (5) of the Civil Procedure Code (hereinafter referred as 'the CPC'), let me state few facts of the case.

2. Plaintiff has filed this suit under Order 37 CPC on the basis of three cheques of 1.00 Crore each against the defendants. The case pleaded by the plaintiff is as follows:-

a) The plaintiff is a company incorporated under the Companies Act. The defendant No.1 is also a private limited company and the defendants No.2 to 5 are its directors;

b) the Plaintiff states in order to meet population growth increasing urbanization, the State of Uttar Pradesh announced the high-tech Township policy 2007 to promote and facilitate private sector participation in development of high-tech Township's in Uttar Pradesh having a world class infrastructure. In compliance with the same, public sector agencies such as Bulandshar Development Authority promoted private investment in the field of urban housing and infrastructure. A committee constituted by the State of Uttar Pradesh after evaluation selected Developer namely one M/s Rivaj Infratech Private Ltd for construction of high-tech Township. The said developer entered into MOU with affiliates and subsidiary of Defendant No.1 namely U.P Infraestate Pvt Ltd which represented to be in a position to acquire land admeasuring 500 acres land in and around the village Daularajpura, Bulandshar, Uttar Pradesh, viz., the site of proposed township;

c) the defendant No.l represented to the Plaintiff to be engaged in the field of bulk land acquisition and structure development and it offers allied real estate services to its clients such as Township planning, marketing and sales support. The defendants No.2 to 5 fraudulently represented to the plaintiff their terms with principal developer are all in place and order and thus manipulated the plaintiff to participate in the development project of high-tech Township which was being developed by M/s U.P Infraestate Pvt Ltd a subsidiary of defendant No.l company;

d) the defendants No.2 to 5 induced plaintiff to part with sum of 3.00 Crores given by plaintiff vide cheques bearing number 000011 and 000012 for a sum of 1.00 Crore each dated 31.07.2014 and cheque number 000013 for a sum of 1.00 Crore dated 07.08.2014 in favour of

defendant No.1 Company, although defendant No.1 was only an economic entity created by defendants No.2 to 5. The defendants No.2 to 5 further represented and assured to the plaintiff that this amount will be refunded in the event joint ventures is not accomplished. The payment of 3.00 Crores made by plaintiff in favour of defendant No.1 company was duly encashed by the defendant No.1 company acting through their directors/defendants No.2 to 5;

e) the plaintiff while analysing the project detail, came to know the principal/developer M/s Rivaj Infratech Private Ltd who had permitted the development of township to subsidiary of defendant No.l Company had sued all the defendants with the result contemplated transaction did not accomplish. Thus all the representations given by defendant No.1 to 5 to plaintiff were bogus and sham. The plaintiff company was induced by defendants No.2 to 5 to part with 3.00Crores on the false representation about their contract with developer and possibility of their succeeding to carry out project of high-tech township, Uttar Pradesh;

f) as per the agreed terms, the defendants No. 2 to 5 had assured plaintiff company in case of not accomplishing the transaction the amount of 3.00 crores shall be refunded to the plaintiff company. Therefore the defendant No.l company with consent and knowledge of defendants No.2 to 5 issued three cheques of 1.00 crore each signed by defendants No.2 bearing No.066056 dated 10.01.2015; No.066057 dated 20.01.2015; and No.066058 dated 30.01.2015 all drawn on Punjab National Bank, K G Marg, New Delhi;

g) all the above three cheques when presented were dishonoured for 'insufficient funds', hence notices of demand dated 03.04.2015 and

05.05.2015 were issued to the defendants, but they failed and hence this suit is filed for recovery of `3,48,70,000/- i.e., for the cheque amount and interest @ 18% pa along with pendentelite and future interest.

3. The defendants have filed the instant application (IA No.13877/2017) for leave to defend alleging inter alia:- i. plaintiff has concealed the fact that the parties had entered into a written agreement dated 26.07.2014 containing the terms and conditions of the joint execution of the development of high tech city in 540 acres of land at Bulandshahar and the cheques which were issued by the defendants were in the form of security and were all post dated; executed at the time of the agreement and were to be encashed only after the defendants alleged default in the performance of its obligation. However, in the breach of the agreement by the plaintiff, the plaintiff was not entitled to recover the money by presenting the said cheques; ii. after execution of the agreement on 26.07.2014 the plaintiff did not show any interest or inclination to participate in the development of the project or performance of the agreement, but whereas the defendant was always ready and willing to perform its duties under the agreement; iii. the plaintiff allegedly did not get in touch with the defendants for quite a period of time after the execution of the agreement and did not coordinate with the principal developer M/s Rivaj for getting the requisite permissions so that the project could be commenced and took no steps even to terminate the agreement between the parties and suddenly presented the PDCs;

iv. defendants were already in the advance stage of the acquisition of 334 acres of land and had undertaken to further acquire 247 acres of land in the agreement executed by the defendants with the principal developer and the principal developer had entered into agreement of assignment of license permitting the defendants to develop the high tech city after it had conducted the due diligence and examined all the documents in possession of the defendants; the alleged inducement on the part of the defendant has also been denied by the applicant; and v. the main reason for withholding the amount of `3.00 Crores of the plaintiff was the plaintiff failed under the agreement to pay further amount of `60.00 crores and kept silent by months; whereas the defendants were willing to complete its part of the project and since the plaintiff is at default; is not entitled to refund of any amount.

4. Defendant has referred to an agreement, purportedly entered into between M/s Sree Infratech Private Limited with the plaintiff on 26.07.2014 duly signed by all the parties, which the plaintiff submits is not the defendant no.1 to whom the cheques were given. However the defendants urge M/s Sree Infratec Private Limited is only a title name of the defendants and hence the agreement dated 26.07.2014 is the actual agreement between the parties under which a sum of `3.00 crores was received.

5. Heard.

6. The plaintiff denies execution of any such like agreement with defendant no.1. The plaintiff also denies if M/s.Shree Infratech Pvt. Ltd. is a title name of defendant no.1. The name itself shows it is a company

viz., a separate legal entity. However even if one pursue the financial terms and conditions of the draft agreement dated 26.07.2014 relied upon by defendants, the same are as follows:

 Equity Holding of the Project Company i.e. UP Infraestate Pvt Ltd and the land holding companies shall be as follows: The First Party shall hold: Based on the negotiations post investment due diligence and o The second Party shall hold : Based on negotiations post investment due diligence but minimum of 51% second Party shall pay proportionate amount to buy the equity in the project company.

 The Second Party shall pay to the First Party 17.00 Crores (Rupees Fifteen (sic) Crores Only) in the following stages: o Initial amount shall be for purchase of Equity (51% Minimum) in Project Company.

o Second Party shall pay the balance amount post purchase of Equity as Refundable / Adjustable Advance amount o the first party in the following manner (this amount shall be adjusted against the Investment value of First party in the Project for evaluation purposes): o Rs.3.00 Crores (Rupees Three Cores Only) at the time of signing of this Term Sheet - against this amount the first party shall give a 60 days PDC which in case of final negotiations not getting complete within sixty days of signing of term sheet then the second party will encash same to recover the advance paid and deal shall be terminated; o Rs.2.00 Crores (Rupees Two Crores Only) on possession (post Due diligence) of land as defined earlier in this term sheet along with the execution of Shareholders Agreement and Transfer/allotment of Equity Share Capital of UP Infraestate to Second Party; o Rs.3.00 Crores (Rupees Three Crores only) at the Launch of the project;

o Rs.3.00 Crores (Rupees Three Crores only) within 3 months from the date of launch of the project;

o Rs.5.00 Crores (Rupees Five Crores only) within next months of above.

7. Though, the plaintiff denies execution of any agreement, much less agreement dated 26.07.2014 above, either with the defendant no.1 company or with its sister concern but even if the agreement relied upon by the defendant is assumed to be correct then also the defendant was to refund Rs.3 crores to the plaintiff if final negotiations failed. It was for this purpose probably, the PDC's were given.

8. The defendant in its application do not plead any loss it allegedly suffered due to cancellation of deal with the plaintiff. All he says in its rejoinder to the reply of plaintiff is the defendant suffered whooping losses, which is non-specific and does not lead anywhere.

9. In Manoj Tomar vs. Smt.Neena Khatter & Anr. 2015 SCC Online Del 12831, and in Kailash Nath Associates vs. Delhi Development Authority and Another (2015) 4 SCC 136, the Supreme Court observed:-

"5. The issue is that even if the plaintiff is guilty of breach of contract, whether the defendants are entitled to forfeit the advance money received by the defendants under the agreement to sell. Para 14 of the written statement shows that defendants have made an averment that the defendants have forfeited the amount because the plaintiff did not call upon the defendants to complete the sale transaction, however there is no averment in the written statement that defendants have forfeited the amount on account of loss being caused to them by the plaintiff on account of the breach of contract, much less details of loss and how caused as required by Order VI Rule 4 CPC is pleaded. In law, once no loss is caused to the aggrieved party as per Section 73 and 74 of the Indian Contract Act, 1872, no cause of action arises for claiming damages or forfeiture of advance money received under the agreement to sell as damages. This is the law as laid down in the Constitution Bench judgment of the Supreme Court in the case of Fateh Chand Vs. Balkishan Dass, AIR 1963 SC 1405 and which judgment has been recently followed by the Supreme Court in the judgment in the case of Kailash Nath Associates Vs. Delhi Development Authority and Another, (2015) 4 SCC 136.

6. A reading of the ratio of Kailash Nath Associates's case (supra) makes it more than clear that the law with respect to entitlement of a defendant/proposed seller to forfeit an amount received under the agreement to sell is subject to loss being caused and appropriation is actually pursuant to Section 74 of the Indian Contract Act by taking the advance payment received as liquidated damages, but once there is no plea of loss being caused along with necessary details, there does not arise issue of appropriation by the defendants, of the advance price received under the contract as liquidated damages.

10. Thus considering the submissions so made, the leave is though granted to the defendants to contest the suit but only upon its depositing 3.00 Crores within six weeks from today with the Registrar General of

this Court and on deposit it shall be converted into FDR for one year with an automatic renewal clause.

11. In view of the above the application stands disposed of.

CS(COMM) 344/2017

12. On deposit of such amount aforesaid, the defendant to file written statement within four weeks with advance copy to the plaintiff. The plaintiff to file replication within two weeks thereafter.

13. List before learned Joint Registrar on 14.11.2018 for completion of pleadings.

YOGESH KHANNA, J JULY 27, 2018 M