Delhi High Court
M/S Indcap Enterprises Llp vs Niaz Ahmed on 13 September, 2018
$~17
* IN THE HIGH COURT OF DELHI AT NEW DELHI
Date of Decision: 13th September, 2018
+ CS (OS) 3805/2014 & I.A. 7626/2015
M/S INDCAP ENTERPRISES LLP ..... Plaintiff
Through: Mr. P.S. Bindra and Ms. Rishika
Arora, Advocates. (M:9811054970)
versus
NIAZ AHMED ..... Defendant
Through: Mr. Sanjay Kumar Chhetry and Mr.
Arun Francis, Advocates.
(M:9899933574)
CORAM:
JUSTICE PRATHIBA M. SINGH
Prathiba M. Singh, J. (Oral)
1. The present suit has been filed under Order XXXVII CPC seeking
recovery of a sum of Rs.3,95,85,000/-which includes the principal sum of
Rs.1,74,00,000/- along with interest @ 18% per annum.
2. The case of the Plaintiff, in brief, is that the Plaintiff had invested a
sum of Rs.3,24,54,000/- in a company by the name M/s. Integrity
Geosciences Pvt. Ltd. The said investment was made pursuant to an
agreement dated 29th October, 2007 entered into between the Plaintiff on
one hand, and Mrs. Shama Niaz Ahmed, Dr. Niaz Ahmed and Mr. Arindom
Ganguly, on the other hand.
3. The agreement clearly acknowledged the payment of a sum of Rs.3.24
crores by the Plaintiff. The relevant clause is set out herein below: -
"9. The Company will be able to achieve the above
projections with the contribution of Rs 32.454 million
from the Investor"
4. It is the Plaintiff's case that the funds which were invested by the
Plaintiff, were misused by the said persons for their personal gains and
benefits. The investor's nominee was also not appointed as a Director. There
was also gross mismanagement of the Company, which led to the Plaintiff
taking a serious view of the matter. When the Plaintiff brought up the issues
which were plaguing the Company with the Defendants, the Defendant
suggested a scheme for revival of the Company. The parties thereafter
entered further into an agreement dated 16th February 2009 by which a
scheme for revival of M/s. Integrity Geosciences Pvt. Ltd. was agreed.
According to the Plaintiff, the Defendants failed to act as per the scheme of
revival. The Plaintiff thereafter served legal notice dated 28th February 2009
demanding refund of the entire investment of Rs.3.24 crores along with
interest.
5. After receipt of the said legal notice dated 28th February 2009, the
Defendants introduced an overseas investor for buying out the company,
which also failed. A second notice was served on 22 nd March 2010, in
response to which the Defendants again sought time till 30th September 2010
to look for an investor. Unfortunately, the same also did not come through
after which Memorandum of Understanding (MOU) dated 12th April, 2010
was entered into. The said MOU was entered into between the Defendant,
Dr. Niaz Ahmed and Mr. Arindom Ganguly with the Plaintiff. As per the
said MOU, the Defendant and Mr. Arindom Ganguly handed over 13
cheques for a total sum of Rs.3,24,54,000/-. The details of the said cheques
are set out below: -
Sl. No. Cheque No. Cheque Amount
1. 320351 Rs.25,00,000/-
2. 320352 Rs.25,00,000/-
3. 320353 Rs.25,00,000/-
4. 320354 Rs.25,00,000/-
5. 320355 Rs.25,00,000/-
6. 320356 Rs.25,00,000/-
7. 320357 Rs.25,00,000/-
8. 320358 Rs.25,00,000/-
9. 320359 Rs.25,00,000/-
10. 320360 Rs.25,00,000/-
11. 320361 Rs.25,00,000/-
12. 320362 Rs.25,00,000/-
13. 320363 Rs.24,54,000/-
TOTAL Rs.3,24,54,000/-
6. After the said cheques were encashed and amounts were received by
the Plaintiff, the Plaintiff was to release the promoters of their obligations
under the agreement dated 29th October, 2007. Out of the above listed
cheques, the payment under the first four cheques were made. Thus, a part
payment of Rs. 1 crore was made leaving a balance of 2.24 crores.
7. However, the remaining cheques were dishonoured leading to a
further notice being issued by the Plaintiff. This led to the execution of
another MOU dated 31st March 2011, whereby the Defendant issued the
following 10 cheques in the name of the Plaintiff company. The details of
the said cheques are set out below:
Sl. No. Cheque No. Cheque Amount
1. 798299 Rs.25,00,000/-
2. 798300 Rs.25,00,000/-
3. 798301 Rs.25,00,000/-
4. 798302 Rs.25,00,000/-
5. 798306 Rs.25,00,000/-
6. 798307 Rs.25,00,000/-
7. 798308 Rs.25,00,000/-
8. 798309 Rs.25,00,000/-
9. 798310 Rs.24,00,000/-
10. 798312 Rs. 54,000/-
Rs.2,24,54,000/-
The Defendant confirmed that the above amounts would be honoured and
also agreed to pay interest at 18% per annum in case of default.
8. The Defendant failed to honour his commitments. Except for the last
cheque for Rs. 54,000/- all the remaining nine cheques were returned with
the remarks `Funds insufficient'. This led to the issuance of another notice
dated 12th December 2011 demanding payment of Rs. 2.24 crores which
remained outstanding. Upon failure to make payment, the Plaintiff filed
proceedings under Section 138 of the Negotiable Instruments Act, 1881.
During the pendency of the said Complaint, another Memorandum of
Settlement was entered into on 23rd August, 2012 by which the Defendant,
Dr. Niaz Ahmed undertakes to repay the outstanding amount to the Plaintiff
and agreed to repay the amounts as per the following schedule:
Instalment By (date) Amount (In Rs.)
First 11.09.12 50,00,000/-
Second 11.01.13 50,00,000/-
Third 11.04.13 40,00,000/-
Fourth 11.07.13 40,00,000/-
Fifth & Final 11.10.13 44,00,000/-
TOTAL 2,24,00,000/-
9. This Settlement agreement also provided that if the payments were
not made as per schedule, interest at 18% p.a. would be liable to be paid.
Out of the above five payments, the first payment for Rs. 50,00,000/- was
made vide cheque bearing number 11th September 2012 which was
honoured. However, the remaining amounts were not paid and remained
outstanding. As per the Settlement, post dated cheques were to be given,
which was also not done.
10. The above facts led to the filing of the present suit. The Plaintiff has
filed the present suit based on the last Memorandum of Settlement dated 23rd
August, 2012, only against Dr. Niaz Ahmed seeking recovery of the
remaining amount outstanding. The Plaintiff has also commenced
proceedings under Section 138 of the Negotiable Instruments Act, 1881
which is stated to be pending.
11. The present suit being a summary suit, the Defendant has entered
appearance and has thereafter filed their leave to defend. The primary
defence in the leave to defend application is that the agreements were
entered into under coercion and duress as the Defendant is more than 75
years of age. Learned counsel for the Defendant submits that the investment
made by the Plaintiff was only to the tune of Rs.87,00,000/- and hence there
is no amount that is due. On a specific query as to whether the Defendant
admits the execution of the various MOUs and the Memorandum of
Settlement, learned counsel submits that the same were entered into.
However, he further submits that the same was due to constant pressure and
threat by the Plaintiff.
12. A perusal of the leave to defend application shows that the agreement
dated 23rd August, 2012 is not disputed. The earlier agreements i.e. the
agreement of 12th April, 2010 and the investment agreement, none of them
are disputed. The only question is as to whether an allegation of coercion or
threat entitles the Defendant for leave to defend. Some of the paragraphs of
the leave to defend application are set out below:
"...
6. That the Defendant had signed the purported
Memorandum of Settlement dated 23.08.2012 against
his wish or free will. This purported agreement was
signed by the Defendant under extreme coercion,
duress and misrepresentation and was clearly without
his volition. In fact, the two previous agreements, being
the Memorandum of Understanding dated 12.04.2010
and 31.03.2011 were also signed by the Defendant
under extreme coercion, duress and misrepresentation.
Further, even the amounts, which were paid by the
Defendant to the Plaintiff and its associates, being a
sum of Rs.1.5 Crores, were also paid due to
misrepresentation, coercion and duress. These acts by
the Plaintiff and its associates were clearly acts of
extortion and fraud committed on the Defendant. The
Defendant is in the process of initiating legal remedies
available to him for recovery of the said amounts from
the Plaintiff and its associates and also for any other
legal remedies available to him in law, including
criminal remedies.
7. The Defendant was being constantly threatened by
the Plaintiff organization with a false criminal
complaint and he was being constantly pressurized to
enter into a memorandum of settlement with them. It
was because of this constant threat and pressure,
which was being exerted by the Plaintiff organization
that the Defendant out of sheer fear of being
prosecuted in a false criminal case, signed the
purported Memorandum of Settlement dated
23.08.2012 against his wish or free will. It is pertinent
to point out that the Defendant had neither any need
nor any necessity to enter into any settlement
agreement with the Plaintiff as there were no debts or
liabilities payable by the Defendant to the Plaintiff.
The document (Memorandum of Settlement dated
23.08.2012) was clearly a void document as per
Section 10 and 23 of the Indian Contract Act as it was
executed under extreme coercion, misrepresentation,
duress and by putting the Defendant under a fear of a
false criminal prosecution. There was no free will or
consent from the Defendant while entering into this
agreement. Moreover, it was a document executed
without any consideration and was therefore clearly hit
by Section 25 of the Indian Contract Act. It is pertinent
to mention here that with respect to the same
transaction in question, the Defendant had preferred a
Criminal Miscellaneous Petition before the Hon'ble
High Court of Delhi, under Section 482 CrPC for
quashing of the criminal complaint of the Plaintiff filed
under Section 138 Negotiable Instruments Act, being
C.C. No. 112/1, in the said petition, the grounds sought
by the defendant for quashing of the criminal
complaint were that the cheques issued by the
Defendant to the Plaintiff were not towards any legally
enforceable debt or liability and also that the
agreements entered into were also without any
consideration. The Hon'ble High Court upon hearing
the petition granted liberty to the Defendant to raise
the said pleas before the trial court at an appropriate
stage. The matter before the trial court is still pending
and is fixed for cross examination of the Plaintiffs
witness. The defendant is therefore entitled to an
unconditional leave to contest and defend the suit.
8. That there are no dues payable by the Defendant to
the Plaintiff and as such there is no liability of the
Defendant to pay any sums of money to the Plaintiff.
The sums of monies, which were paid by the Defendant
to the Plaintiff were also because of misrepresentation,
extreme coercion and duress. In fact, these amounts
were illegally extorted by the Plaintiff organization
from the Defendant. The Defendant is in the process of
recovering these amounts from the Plaintiff and its
associates. In this regard, the Defendant also issued a
legal notice to the Plaintiff on 20.08.2013 and
demanded his payment back of Rs. 1,50,54,000/- (One
Crore Fifty lakhs and Fifty-Four Thousand), which
was illegally extorted from him by the Plaintiff and its
associates. The said legal notice was replied by the
Plaintiff through its lawyer vide letter dated
04.09.2013, wherein, interestingly, it is alleged by the
Plaintiff that the Defendant along with Mrs. Shama
Niaz Ahmed and Mr. Arindom Ganguly are jointly and
severally liable to pay a sum of Rs. 3,24,54,000/-
(Rupees Three Crores Twenty Four Lacs and Fifty
Thousand Only). In other words, the Plaintiffs own
stand is contradictory and inconsistent, as on the one
hand, in the reply to the legal notice the Plaintiff
contends/alleges that the liability is a joint and several
liability of the Defendant and other directors, whereas,
on the other hand, in the plaint filed in the present suit
the Plaintiff contends/alleges that the liability is that of
the Defendant alone. Therefore, there is clear
inconsistency and contradiction in the Plaintiffs stand.
The suit is therefore liable to be dismissed on this
count alone and also for non-joinder of necessary and
proper parties. The suit filed by the Plaintiff is baseless
and misconceived and is liable to be dismissed with
exemplary costs. The defendant is therefore entitled to
an unconditional leave to contest and defend the suit.
...
10. That the present plaint is liable to be dismissed as
the Plaintiff has deliberately concealed material facts
from this Hon'ble Court and has narrated distorted
facts so as to project an incorrect picture to this
Hon'ble Court. It is therefore necessary to put the
records straight so that the entire facts can be
appreciated in the correct perspective, the same are as
follows:
...
h. The Defendant and the other directors of M/s
Integrity Geoscinece Pvt. Ltd. were being
unnecessarily harassed and put under constant
pressure by the Plaintiff organization. Because of this
tremendous pressure, the Defendant along with the
Director of M/s Integrity Geoscience Pvt. Ltd. Shri
Arindom Ganguly was forced to enter into a
Memorandum of Understanding (MoU) with the
Plaintiff on 12.04.2010. As per this MoU, the
Defendant handed over 13 cheques to the Plaintiff,
which were equivalent to the value of the investment
made by the Plaintiff, i.e Rs.3,24,54,000/- crores
(Rupees Three Crores Twenty Four Lacs and Fifty
Four Thousand). This was done with a clear
understanding that the cheques will not be misused and
that they were meant for the purposes of facilitating a
buyout of the investment of the Plaintiff. It is pertinent
to point out that although 13 post dated cheques were
issued by the Defendant in favour of the Plaintiff for a
total value of Rs. 3,24,54,000/-, they were clearly not
towards the discharge of any debt or a liability, ether
in whole or in part. Moreover, these, cheques were
deliberately split into smaller amounts so that if a
buyout was to take place for a lesser amount, then
cheques of the value of the equivalent to the buyout
amount could be returned and the balance cheques
could be used by the Plaintiff, which in any case was
illegal. It is pertinent to point out that this MoU itself
was without any consideration and as such the MoU
was not a valid document in law. The Defendant and
Shri Arindom Ganguly, despite making best efforts
were unable to bring any investor to buyout the
180,000 (One Hundred Eighty Thousand) numbers of
equity shares of the Plaintiff.
i. In the meanwhile, the Defendant because of the
tremendous and constant pressure and harassment by
the Plaintiff and although not obliged to, paid out of
his own pocket a sum of Rs 1 Cr (Rupees One Crore)
to the Plaintiff and to its associate Mrs Sonia Chand as
buy out consideration for the shares of the Plaintiff. It
is pertinent to note that although the sum of Rs. l Crore
was paid by the Defendant to the Plaintiff and its
associates, the proportionate number of shares for the
value equivalent to the sum of Rs. l Crore, were not
transferred back to either the Defendant or to the
company M/s Integrity Geoscinece Pvt. Ltd.
j. In the meanwhile, because of the tremendous and
constant pressure, the Defendant was once again
forced to enter into a second Memorandum of
Understanding (MoU) dated 31.03.2011, whereby the
Defendant was compelled to issue 10 cheques (PDCs)
for the value of Rs. 2,24,54,000/- as a replacement of
the previous cheques. Again, these cheques were issued
as a mode of security deposit so as to facilitate a
buyout of the investment of the Plaintiff. Once again,
these cheques were not towards the discharge of any
debt or a liability, either in whole or in part.,
Moreover, even this MoU was without any
consideration and as such the MoU itself was not a
valid document in law.
...
n. That upon receipt of the summons from the court,
the Defendant, who at that time was 73 years old
panicked and under pressure and fear of being
prosecuted in a false criminal case, signed a
Memorandum of Settlement dated 23.08.2012 and
further paid a sum. of Rs. 50. Lacs (Fifty lakhs Only).
It is submitted that this Memorandum of Settlement
was signed under extreme coercion, duress and
misrepresentation and was clearly without the
Defendant's free will. In any case the said MoU was
clearly an invalid document and a void contract in law
as it was without any consideration. There were no
amounts due and payable by the Defendant to the
Plaintiff."
13. Thus, the grounds seeking Leave to defend are briefly set out
below:
i. That the Memorandum of Settlement dated 23rd August 2012 is
not a valid document in law. There was no need for the
defendant to enter into any settlement agreement with the
Plaintiff;
ii. The Settlement was not executed on stamp paper;
iii. The Settlement was signed against the wish or free will of
Defendant;
iv. The settlement was signed under extreme coercion, duress and
misrepresentation;
v. Even the earlier agreements dated 12th April 2010 and 31st
March 2011 were signed under coercion, duress and
misrepresentation;
vi. The acts of the Plaintiff of recovering a sum of Rs. 1.5 crores
were acts of extortion;
vii. A legal notice dated 20th August 2013 has been issued to
recover the amount of Rs. 1.5 crores;
viii. That the liability of the Defendant and the other promoters was
joint and several;
ix. The Plaintiff was a part and parcel of the management of the
Company and had to therefore share the profits and losses.
x. The handing over of the 13 cheques as per the MoU dated 12th
April, 2010 and 10 cheques as per the MoU dated 31st March,
2011 was clearly admitted;
xi. The Defendant has issued a legal notice and hence is liable to
recover the sum of Rs. 1.5 crores
A perusal of the leave to defend shows that the stand of the Defendant is
absolute moonshine to say the least. The following facts are admitted -
i. The payments made by the Plaintiff;
ii. The signing of the 2 MoUs and the Settlement Agreement;
iii. The issuance of the various cheques;
iv. The repayment of Rs. 1.5 crores;
v. Most of the cheques that were issued were dishonoured
vi. The overseas investor had been called for the buyout and hence
the allegation of coercion is not made out;
14. The three agreements clearly show that firstly the main agreement by
which the investment was made by the Plaintiff was made in a company
where not only Dr. Niaz Ahmed, the Defendant, but also his wife was one of
the promoters. The company had acknowledged by the said agreement, the
receipt of the sum of Rs.3.24 crores. This investment was almost 11 years
ago i.e. on 29th October, 2007. Thereafter, the two MOUs have been
executed which are of 12th April, 2010 and 23rd August, 2012. The
transaction has been a long duration transaction and not an overnight
transaction. The stand of the Defendant that there was any threat is belied
by the fact that these agreements span over seven to eight years. Further the
fact that some payments under the 2010 agreement as also under the 2012
agreement having been made, the allegation of coercion is not made out.
Moreover, the Defendant himself looked for and arranged an overseas
buyer, which also did not work out. These facts go to prove that there was
no coercion or duress or pressure.
15. Proceedings before the criminal court under the Negotiable
Instruments Act are tested under a different yardstick than a suit under Order
XXXVII. In a suit under Order XXXVII all that the Court needs to see as
per the settled law in IDBI Trusteeship Services Ltd. v. Hubtown
Ltd., (2017) 1 SCC 568 passed by the Supreme Court is as to whether the
Defendant has a triable defence. In the present case, the agreements
themselves having been admitted and some payments under the said
agreements/settlement have already been made, a mere allegation of
coercion or threat is not sufficient to raise a triable defence.
16. Under these circumstances, the suit is liable to be decreed as there is
no triable defence. The suit is decreed for a sum of Rs.1,74,00,000/-
towards the principal amount. Since payment was to be last made, as per
MoU dated 23rd August, 2012 and keeping in mind the age of the Defendant,
and other circumstances, interest is directed to be paid only @ 6% per
annum from 11th January, 2013 to date. The payment is to be made within
eight weeks, failing which interest @ 8% per annum would apply on the
decretal amount.
17. The share certificates of the company M/s. Integrity Geosciences shall
be deposited by the Plaintiff within a period of four weeks in Court.
18. List for reviewing compliance on 3rd October, 2018.
PRATHIBA M. SINGH
JUDGE
SEPTEMBER 13, 2018
Rekha
