Delhi High Court
Fox Mandal And Co. And Anr vs Ravi Bishnoi & Anr. on 29 August, 2022
$~ 93
* IN THE HIGH COURT OF DELHI AT NEW DELHI
Reserved on: 26th August 2022
Pronounced on: 29th August 2022
+ CM(M) 854/2022 & CM APPL.36993/2022, CM
APPL.36994/2022
FOX MANDAL AND CO. AND ANR ..... Petitioners
Through: Mr. Atul Chitale, Sr. Adv. with
Mr. Savinder Singh, Mr. Parth Awasthi and
Ms. Ipsita Kataky, Advs.
versus
RAVI BISHNOI & ANR. ..... Respondents
Through: Mr. Kailash Vasdev, Sr. Adv.
with Mr. Manish Sharma, Mr. Vijay
Kaundal and Ms. Nandini Aishwarya, Advs.
with R-1 in person
CORAM:
HON'BLE MR. JUSTICE C. HARI SHANKAR
ORDER
% 29.08.2022
1. The petitioner, a reputed firm of lawyers, was sued by the
respondent, a lawyer who was working with the petitioner on
retainership basis. The respondent preferred a suit as a summary suit
under Order XXXVII of the Code of Civil Procedure, 1908 (CPC).
Leave to defend the suit has been granted by the learned Additional
District Judge ("the learned ADJ") under Order XXXVII Rule 3(5) of
Digitally Signed
By:SUNIL SINGH NEGI
Signing Date:29.08.2022
16:06:51
the CPC, vide order dated 9th June 2022, conditional on the petitioner
depositing, with the court, ₹ 58,93,935/-, being the amount claimed by
the respondent from the petitioners in the suit. The learned ADJ has
also directed release of the said deposited amount to the respondent,
on the respondent furnishing of an equivalent bank guarantee.
2. Aggrieved by the direction, of the learned ADJ, to the
petitioners, to deposit ₹ 58,93,935/- as a condition for leave to defend
the suit instituted by the respondent, the petitioners have approached
this Court, invoking Article 227 of the Constitution of India for the
said purpose.
3. I have heard Mr. Atul Chitale, learned Senior Counsel for the
petitioners and Mr. Kailash Vasdev, learned Senior Counsel for the
respondent, at length.
4. Learned Senior Counsel ad idem request that the present
hearing be limited to question of issuance of notice and grant of stay
in the petition.
5. Mr. Chitale prays that notice be issued in the petition and that
an interim order, staying the direction, by the learned ADJ, to the
petitioners, to deposit ₹ 58,93,935/-, be granted.
6. Mr. Vasdev, per contra, submits that the petition is completely
devoid of merits and prays that the petition be dismissed.
Digitally Signed
By:SUNIL SINGH NEGI
Signing Date:29.08.2022
16:06:51
7. This order, therefore, is restricted to the consideration of the
question of whether the petition filed by the petitioners is required to
be dismissed outright, or whether notice should be issued thereon and,
if so, whether the petitioner deserves any interim protection.
8. As such, it is not necessary to delve deep into the controversy
between the parties. A brief recital of facts would suffice.
9. The dispute revolves around a Consulting Agreement, dated 8 th
December 2009, executed between the petitioners and the respondent.
The relevant clauses/recitals of the Consulting Agreement may be
reproduced thus:
"This Consulting Agreement ("Agreement") is entered into on
the 8th day of December 2009 in Delhi by and between Fox
Mandal & Co. a Partnership Firm, having offices at Delhi and
Noida among others, through Mr. Som Mandal, Manging
Partner of the firm duly authorised to sign (hereinafter
referred to as "FM") and Mr. Ravi Bishnoi s/o Mr. H.R.
Bishnoi R/O C-98B, Sector 44, Noida, 201303 (hereinafter
referred to as "Consultant").
WHEREAS the company is in the business of providing legal
services to its clients in various fields of law and the
Consultant is a lawyer who has worked with FM on a
retainership for the period April 2006 to 30th of November
2009.
WHEREAS now FM has approached the Consultant to
engage the services of the Consultant for assisting FM with
the legal services related to the Hinduja National Power
Corporation Ltd.‟s (HNPCL) thermal power project in the
state of Andhra Pradesh (hereinafter referred to as the
"Project") and the Consultant agrees to offer his services,
subject to the terms and conditions hereinafter set forth:
NOW, THEREFORE, in consideration of the mutual promises
Digitally Signed
By:SUNIL SINGH NEGI
Signing Date:29.08.2022
16:06:51
and upon the terms and conditions set forth below, FM and
the Consultant agree as follows:
1. OUTSTANDING DUES AND THE PAYMENT OF
OUTSTANDING DUES OF THE CONSULTANT
1.1 FM acknowledges and agrees that the Consultant has
rendered services to FM as a retainer till the 30th of November
2009 on the basis of a pre agreed retainership fee and out of
which an aggregate amount of ₹ 90,43,935/- (Rupees Ninety
lakhs Forty Three thousand Nine hundred and Thirty five) of
the retainership fee is due and payable to the Consultant
(Outstanding Amount) by FM as on November 30, 2009. The
parties agree that the said Outstanding Amount shall be paid
by FM to the Consultant as follows:-
a. An amount of ₹ 20,00,000/- (Rupees Twenty
lakhs) shall be paid by the 7th of January 2010.
b. An amount of ₹ 12,00,000/- (Rupees Twelve
Lakhs) shall be paid in four equal monthly instalments
of ₹ 300,000/- (Rupees Three lakhs) each on 15th
December 2009, 15th January 2010, 15th February,
2010 and 15th March, 2010 respectively.
c. An amount of ₹ 20,00,000/- (Rupees Twenty
lakhs) shall be paid by the 31st March 2010.
d. The balance amount of ₹ 38,43,935/- (Rupees
Thirty Eight Lakhs Forty Three thousand Nine hundred
Thirty Five only) shall be paid in four equal
installments of ₹ 7,68,787/- (Rupees Seven lakhs Sixty
Eight Thousand Seven Hundred Eighty Seven) each on
30th April 2010, 31st May 2010, 30th June 2010, 31st
July 2010 and 31st August 2010 respectively.
The parties acknowledge and agree that payment of the above
Outstanding Amount is exclusive of any service taxes
whenever applicable.
2. SCOPE OF SERVICES FOR THE PROJECT.
2.1 The Consultant agrees to provide legal services to FM
Digitally Signed
By:SUNIL SINGH NEGI
Signing Date:29.08.2022
16:06:51
for the project.
3 TERM
3.1 The term of this Agreement shall be from the 8th of
December 2009 till the 31st of August 2010. The parties may
extend this Agreement upon mutual agreement, as evidenced
by written amendment at any time prior to the end of the
Agreement.
4. FEES AND PAYMENTS FOR THE
CONSULTANCY SERVICES
4.1 FM agrees to pay the Consultant an hourly fee of ₹
9,000/- (Rupees Nine Thousand) for each man hour spent by
the Consultant in rendering the legal services on the Project.
The fees shall be payable on a monthly basis. The Consultant
shall raise an invoice by the 7th day of every month for the
services rendered in the previous month and FM shall make
payments by the 14th day of every month. The hourly fee is
exclusive of any service tax whenever applicable.
6. REPRESENTATION
6.1 The Consultant shall during the term of this Agreement
always represent to HNPCL that he is a part of the team of
FM and is rendering services as a part of the team.
7. TERMINATION
7.1 The parties may terminate this Agreement upon not
less than fifteen (15) days written notice to the other party. In
the event of termination, FM shall have no obligation to the
Consultant save and except to (i) make all the payments of
unpaid Outstanding Amount as per Clause l of this
Agreement; and (ii) to compensate the Consultant (as
provided in clause 4 of this Agreement) for the services and
expenses actually performed or incurred by him prior to
termination of this Agreement.
8. ENTIRE AGREEMENT
Digitally Signed
By:SUNIL SINGH NEGI
Signing Date:29.08.2022
16:06:51
8.1 This Agreement represents entire agreement between
FM and the Consultant and supersedes and is in full
substitution for any and all prior agreements or
understandings, whether oral or written, relating to the
Consultant‟s services."
10. The Plaint
10.1. The respondent alleged, in the plaint, that he had rendered legal
services to the petitioners on retainership basis, for the period April
2006 to November 2009 and that, as on 30th November 2009, an
amount of ₹ 90,43,935/- remained outstanding to be paid by the
petitioners to the respondent. It was at this stage, pointed the plaint,
that the Consulting Agreement dated 8th December 2009 was executed
between the Petitioner 1 and the respondent.
10.2. Reliance was placed, in the plaint, on the acknowledgment, in
Clause 1.1 of the Consulting Agreement, of the dues of ₹ 90,43,935/-,
as owed by Petitioner 1 to the respondent as on 8 th December 2009. It
was pointed out that the schedule for payment of the said dues also
stood delineated in Clause 1.1 of the Consulting Agreement.
10.3. Of the aforesaid dues of ₹ 90,43,935/-, as they existed on 30th
November 2009, the plaint alleged that Petitioner 1 had paid, to the
respondent, merely ₹ 31,50,000/-, vide cheques dated 16th December
2009 and 7th January 2010. As such, an amount of ₹ 58,93,935/- was
alleged to be outstanding from Petitioner 1 to the respondent. The
legal notice to Petitioner 1, by the respondent, calling on the Petitioner
1 to pay the said amount having failed to elicit any response, the
Digitally Signed
By:SUNIL SINGH NEGI
Signing Date:29.08.2022
16:06:51
respondent instituted CS 20407/2016 against the petitioners under
Order XXXVII of the CPC, seeking a decree for ₹ 79,36,305/- in
favour of the respondent and against the petitioners along with
pendente lite and future interest @ 24 % annum.
11. Petitioners‟ application for leave to defend
11.1 Consequent on issuance of summons for judgment by the
learned ADJ, an application was filed by the petitioners under Order
XXXVII Rule 3(5) of the CPC, seeking leave to defend the suit. The
petitioners contended, in the said application, that the Consulting
Agreement contained reciprocal promises, and envisaged payment, to
the respondent, of the dues reflected in para 1.1 of the Consulting
Agreement, conditional on the respondent fulfilling his obligations
under the said agreement. The petitioners alleged that the respondent
had defaulted in fulfilling the obligations under the Consulting
Agreement, as contemplated by Clauses 2 and 6, and could not,
therefore, seek to enforce Clause 1.1 of the said agreement in
isolation.
11.2 The respondent, it was alleged, had defaulted in complying with
the obligations that Consulting Agreement cast on him as, inter alia,
(i) he had kept Petitioner 2 in the dark, regarding the
quantum of work executed by him,
(ii) he had delayed execution of various duties that the
Consulting Agreement cast on him and
(iii) he had violated Clause 6 of the Consulting Agreement by
Digitally Signed
By:SUNIL SINGH NEGI
Signing Date:29.08.2022
16:06:51
representing and holding out, to Hinduja Powers
Corporation Ltd. (HNPCL), the client under the
Consulting Agreement, that he was no longer part of
Petitioner 1.
These, it was asserted in the application for leave to defend, were
some of the defaults committed by the respondent in complying with
his obligations under the Consulting Agreement.
11.3 The petitioners further alleged that, owing to the machinations
of the respondent, other team members who, with him, were
associated with the project forming subject matter of the Consulting
Agreement gradually became disassociated with the project, resulting
in a situation in which the respondent alone was liaising with HNPCL
on the project. The respondent, it was further alleged, had also
defaulted in raising invoices on HNPCL, which were required to be
raised at the time of financial closing. The application for leave to
defend further alleged that, on Petitioner 2 requesting the respondent
to provide details of the work executed for HNPCL, the respondent
resigned the services of Petitioner 1 on 30th November 2009 and
threatened to quit the project. According to the application for leave
to defend, it was in these circumstances that, driven to the wall, the
Consulting Agreement dated 8th December 2009 came to be executed
by the petitioners.
11.4 Various other allegations are also to be found in the application
for leave to defend, which, given the fact that the present order is
limited to the aspect of issuance of notice and grant of stay, are not of
Digitally Signed
By:SUNIL SINGH NEGI
Signing Date:29.08.2022
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particular relevance.
12. The respondent filed a reply to the petitioners‟ application for
leave to defend the suit.
13. The Impugned Order
13.1 By the impugned order dated 9th June 2022, the learned ADJ has
granted leave, to the petitioners, to defend the suit, conditional on the
petitioners depositing the entire claimed amount of ₹ 58,93,935/-,
which could be released to the respondent against a bank guarantee of
an equivalent amount to be provided by the respondent. As already
noted, the petitioners have approached this Court, challenging the said
decision.
13.2 The learned ADJ has, in the impugned order, proceeded on the
premise that the Consulting Agreement dated 8th December 2009 was
in two parts, the first part relating to the dues outstanding by the
petitioners to the respondent and the second relating to the services to
be rendered by the respondent to or on behalf of the petitioner under
the Consulting Agreement. The recitals in the Consulting Agreement,
relating to the dues outstanding from the petitioners to the respondent,
it has been observed, had nothing to do with the performance, by the
respondent, of his obligations thereunder. Paras 8 and 9 of the
impugned order, which so hold, read thus:
"8 Both the parties have admitted Consulting Agreement
dated 18.12.2009. From the perusal of this document, it
Digitally Signed
By:SUNIL SINGH NEGI
Signing Date:29.08.2022
16:06:51
appears that the same is in two parts. First part speaks about
outstanding dues and the second part speaks about the scope
of services for the project.
9. Plaintiff have sought the recovery of money on the
basis of outstanding dues. Nowhere in this entire document,
there is any stipulation that the outstanding dues mentioned in
Clause 1.1 has any connection with the performance of any
other clauses."
13.3 Though he has not said so in so many words, the learned ADJ,
therefore, proceeded on the premise that no triable issue had been
raised by the petitioners, insofar as the claim of the respondent for ₹
58,93,935/- was concerned. A triable issue, it was found, existed only
with respect to the claim of the respondent for 18% interest on the said
amount.
13.4 It is for this reason that the impugned order has granted leave, to
the petitioners, to defend the suit instituted by the respondent subject
to deposit by them, and consequent release to the respondent, of ₹
58,93,935/-, conditional on the respondent furnishing of a bank
guarantee of an equivalent amount.
Rival Submissions
14. Submissions of Mr Chitale
14.1 Mr. Chitale, learned Senior Counsel for the petitioners, submits
that the learned ADJ seriously erred in bifurcating the Consulting
Agreement into two parts. He has invited my attention to the opening
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By:SUNIL SINGH NEGI
Signing Date:29.08.2022
16:06:51
recital, in the Consulting Agreement, which specifically states that the
agreement envisaged "mutual promises". The clauses that follow
thereafter, starting with Clause 1.1, submits Mr. Chitale, are, therefore,
mutually dependent on each other. Default, on the part of the
respondent, in adhering to his obligations under the Consulting
Agreement would, therefore, submits Mr. Chitale ipso facto disentitle
the respondent to payment in terms of Clause 1.1.
14.2 In this context, Mr. Chitale has invited my attention to an e-mail
dated 17th May 2010, addressed by the respondent to the petitioners,
which reads thus:
"From: Ravi Bishnoi <[email protected]>
Date: 17 May 2010 12:58; 12 PM GMT+05:30
To: „[email protected]‟
Cc: Ravi Bishnoi
Subject: Re: Outstanding Payments
Dear Sir,
I had written the below mail to you on the 13th of this month
and subsequent to that I had tried to call you up but neither
have I received a response to my below mail nor has my
phone call been answered or returned.
Please note that I have been diligently working as per the
terms of the Agreement entered into between us and I accept
the same level of commitment at your end. I request you to
clear my Outstanding Payments at the earliest.
Best Regards,
Ravi
Ravi Bishnoi
Partner
SRGR Law Offices
Digitally Signed
By:SUNIL SINGH NEGI
Signing Date:29.08.2022
16:06:51
E-mail: [email protected]"
Mr. Chitale submits that the afore-extracted e-mail clearly indicates
that the respondent, too, understood the obligations envisaged by the
Consulting Agreement to be mutual in nature.
14.3 Mr. Chitale has also adverted, in this context, to paras 2, 3 and
5 of the preliminary submissions/objections contained in the
application filed by the petitioners seeking leave to defend the suit,
which read thus:
"2. The suit as filed by the plaintiff is not maintainable
under the Summary Procedure of the Code of Civil Procedure,
1908 (hereinafter referred to as the CPC) as the basis of the
suit, i.e the Consulting Agreement dated 08.12.2009
contemplates reciprocal promises. It is submitted that the
payments claimed by the Plaintiff was dependent on him
providing the services in respect of the Project mentioned in
the said Agreement, which was not provided. It is pertinent to
mention that the Plaintiff in his own e-mail dated 17.05.2010,
contents whereof are disputed, filed with plaint, has
acknowledged this aspect wherein he has himself asked for
the payments based on his alleged services. Thus, on
plaintiff‟s own admission it is beyond any doubt that the said
agreement contemplated reciprocal promises. There has been
admitted failure on the part of the Plaintiff to perform his part
of the promises. He is, therefore, precluded from seeking any
relief.
3. The provisions of Order XXXVII Rule 2 of the CPC
mandates that a suit under the said provision could be filed to
recover a debt or liquidated demand in money payable by the
Defendant. It is thus clear that such a written instrument ought
to be unequivocal wherein the Defendant, in no uncertain
terms, has acknowledged his liability. In other words, the
payment ought not to be preconditioned on certain
contingencies. It is submitted that a bare perusal of the
Consulting Agreement relied upon by the Plaintiff would
Digitally Signed
By:SUNIL SINGH NEGI
Signing Date:29.08.2022
16:06:51
show that the payment was contingent upon the Plaintiff
performing his obligations in so far as rendering his services
to the Defendant No.1 in terms of the said Agreement. It is
further submitted that the plaintiff failed and neglected to
perform his obligations as contained inter alia in Clause 2, and
Clause 6 of the said Agreement. The aforesaid provisions are
reproduced herein below for ready reference:
2. SCOPRE OF SERVICES FOR THE
PROJECT
2.1 The Consultant agrees to provide legal services
to FM for the project.
2.2 The services rendered by the Consultant shall
cover the following areas amongst others: Drafting,
finalization, negotiation of the (i) Power Purchase
Agreement (ii) Documentation related to the financing
of the Project (iii) EPC Contract (iv) Investment
Agreements (v) other Agreements, documents,
approvals etc. and any other areas of services as may
be mutually agreed between FM and the Consultant.
2.3 The Consultant shall make himself reasonably
available to FM on a part time basis throughout the
term of this Agreement, which may entail reasonable
travel within India, and to other countries.
6. REPRESENTATION
6.1 The Consultant shall during the term of this
Agreement always represent to HNPCL that he is a
part of the team of FM and is rendering services as a
part of the team.
It is stated that the Plaintiff, during the subsistence of
the said Agreement, acted contrary to the agreed terms
by not providing the services as mandated in Clause
2.2 by deliberately keeping the Defendant No.2 in dark
regarding the quantum of work carried out by him as
also delaying execution of various works as mandated
in the said provision of the Agreement. The Plaintiff
also violated Clause 6 of the Agreement by
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By:SUNIL SINGH NEGI
Signing Date:29.08.2022
16:06:51
representing and held out to the client in question that
he was no longer part of the Defendant No. 1. It is
submitted that these are only few instances of violation
on the part of the Plaintiff of the said Agreement. In
view of the same and since the plaintiff has failed to
perform his part of the obligations mandated by the
said agreement, he is precluded from claiming any
relief whatsoever much less the amount claimed in the
instant suit. At best, the claim could be in a suit for
accounts which cannot be filed under Order XXXVII
CPC.
*****
5. Without prejudice to the above, the Plaintiff is
guilty of suppressio veri. He has deliberately
suppressed material facts from the Hon‟ble Court by
not disclosing that he was a Partner in the zonal
partnership of Defendant No.1 under the name and
style of Fox Mandal & Partners having its office at
1104, Dalamal Towers, Nariman Point, Mumbai-
400023. The Plaintiff has also not disclosed before this
Hon'ble Court that by virtue of him being a Partner in
the said entity that he held himself out as Partner of the
Defendant No. 1. Copy of the Partnership deed dated
19.04.2007 is annexed herewith as Annexure-A.
Furthermore, the Plaintiff has malafidely suppressed
that as per the Partnership deed of the Mumbai entity,
he was precluded from soliciting the clients of the
Defendant No.1 for a period of one year from the date
of his resignation/retirement. Admittedly, the Plaintiff
has acted wilfully and contrary thereto by not only
soliciting work from the clients of the Defendants but
also in effect has taken away various clients, namely
PFC, Sunborne. Sky Lufthansa. Ecolulion Gre Energy
to name a few. The Plaintiff by not disclosing this
material fact has sought to mislead this Hon'ble Court
and has approached the Hon'ble Court with unclean
hands and on this ground itself the Defendants ought to
be allowed leave to defend the suit."
14.4 To substantiate his allegation that the respondent was soliciting
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By:SUNIL SINGH NEGI
Signing Date:29.08.2022
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the clients of the petitioners, Mr. Chitale has placed reliance on the
following e-mail, dated 4th March 2010, from the respondent to Mr
Hugh Gardner, who, at that time, was a client of the petitioners:
"Ravi‟s letter writing to our clients and contact
From: Ravi Bishnoi
To: Hugh Gardner
To: Ravi Bishnoi
Cc: [email protected]
Cc: Akshat Pande
Subject: Introduction to SRGR Law Offices and Meeting in
London
Sent: Mar, 4, 2010 12:49
Dear Hugh,
Trust this finds you in best of health and professional
excellence.
I hope you would recall our meeting November 2009 at
FoxMandal offices. We had met while I was a Partner with
Fox Mandal.
There has been a recent development. I along with three other
Partners have quit Fox Mandal and have set up a law Firm by
the name of SRGR Law Offices. It‟s a full service law firm
with 8 Senior Associates/Associates and a list of
international/domestic clients. The other three Partners are
Saroj Jha (Real Estate, M&A), Rajan Gupta (M&A), Tax,
General Corporate) and Gaurav Bhatia (Litigation).
I would be in London along with Saroj from the 22nd to 25th of
March 2010 and would like to take this opportunity to meet
up with your colleague at the London offices. Please let me
know if it would be possible. We would suggest the following
times.
22nd March
09:00 AM, 12.30 PM, 06:30 PM
Digitally Signed
By:SUNIL SINGH NEGI
Signing Date:29.08.2022
16:06:51
23rd March
09:00 AM, 11.00 PM, 06:30 PM
25th March
09:00 AM, 06:30 PM
I am attaching the following for your perusal:
1. General practice profile of the Firm
2. Profile of Saroj
3. My profile
Looking forward to hearing from
Best Regards
Ravi"
14.5 These submissions, points out Mr. Chitale, have been noticed
by the learned ADJ in para 4 of the impugned order, but have not been
addressed therein.
15. Submissions of Mr Kailash Vasdev
15.1 Responding to Mr. Chitale‟s submission, Mr. Kailash Vasdev,
learned Senior Counsel for the respondent, submits that the present
petition is completely bereft of merit, in view of the clear covenant
contained in Clause 1.1 of the Consulting Agreement. Clause 1.1, he
submits, unequivocally admits the debt of ₹ 90,43,935/-. Not only
was the debt admitted, Mr. Vasdev submits that the manner in which
the debt was to be liquidated was also admitted. The petitioners
cannot, therefore, in Mr. Vasdev‟s submission, seek to contend that
there was no admitted debt, as would justify a decree under Order
XXXVII Rule 3(5) of the CPC. No triable issue can, in the face of the
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By:SUNIL SINGH NEGI
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express recitals contained in Clause 1.1 of the Consulting Agreement,
be said to exist in favour of the petitioners and, therefore, no
exception could be taken by the petitioners, to the impugned order
passed by the learned ADJ.
15.2 Mr. Kailash Vasdev submits that there is no infirmity
whatsoever, in the view of the learned ADJ that the Consulting
Agreement was in two parts. A bare reading of the Consulting
Agreement, he submits, vouchsafes the correctness of this
interpretation. Referring to the opening recitals of the Consulting
Agreement, Mr. Vasdev submits that the two opening recitals in the
Consulting Agreement themselves indicate that the agreement is in
two parts. The first part, reading "Whereas the company is in the
business of providing legal services to its clients in various fields of
law and the Consultant is a lawyer who has worked with FM on a
retainership for the period April 2006 to 30 th of November 2009",
submits Mr. Vasdev, refers to the earlier services rendered by the
respondent to the petitioners, and relates to Clause 1.1 of the
Consulting Agreement. The second opening recital, reading
"Whereas now FM has approached the Consultant to engage the
services of the Consultant for assisting FM with the legal services
related to the Hinduja National Power Corporation Ltd.‟s (HNPCL)
thermal power project in the state of Andhra Pradesh (hereinafter
referred to as the "Project") and the Consultant agrees to offer his
services, subject to the terms and conditions hereinafter set forth",
submits Mr. Vasdev , relates to the services to be rendered under the
Consulting Agreement to HNPCL, the substantive recitals in respect
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of which commenced from Clause 2 onwards. These two distinct
opening recitals, submits Mr. Vasdev, justify the view, of the learned
ADJ, that the Consulting Agreement is in two parts.
15.3 The petitioners cannot, therefore, according to Mr Vasdev, seek
to renege from their obligations under Clause 1.1 of the Consulting
Agreement on the ground that respondent had failed to discharge the
obligations cast on him under the succeeding covenants thereof.
Where, therefore, there was an admitted debt of ₹ 90,43,935/-, out of
which an amount of ₹ 31.5 lacs alone had been paid, the learned ADJ,
in Mr. Vasdev ‟s submissions, was entirely justified in requiring the
petitioners to deposit the balance ₹ 58,93,935/-, as a condition for
grant of leave to defend.
15.4 In this context, Mr. Vasdev has also invited my attention to
Clause 7 and, particularly, Clause 7.1 of the Consulting Agreement
which deals with termination thereof. Even if the agreement were to
be terminated, submits Mr. Vasdev, Clause 7.1 requires the petitioners
to pay, to the respondent, all outstanding amounts as per Clause 1 of
the Consulting Agreement. The responsibility to pay, to the
respondent, the amounts envisaged by Clause 1.1 of the Consulting
Agreement is, therefore, according to Mr. Vasdev, non-negotiable in
nature.
15.5 Insofar as the Clause "NOW, THEREFORE, in consideration
of the mutual promises and upon the terms and conditions set forth
below, FM and Consultant agree as follows" on which Mr. Chitale
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relies, is concerned, Mr. Vasdev submits that the Clause is required to
be understood as disjunctive in nature and not as resulting in an
amalgamation of all succeeding clauses of the Consulting Agreement.
15.6 Mr. Vasdev further submits that, in an earlier suit instituted by
the respondent against the petitioners, the petitioners had raised a
defence that the suit was barred by Order II Rule 2 of the CPC. The
said defence was, however, dismissed by the learned Trial Court,
against which the petitioners approached this Court by way of CRP
95/2015 (Fox Mandal Company and Ors. v. Ravi Bishnoi and Ors.),
which was also dismissed vide order dated 24th September 2015.
15.7 In view thereof, the present petition, he submits, cannot be
maintained.
15.8 Mr. Vasdev has, finally, relied on the well-established
limitations that apply to the jurisdiction vested in High Courts by
Article 227 of the Constitution of India. He submits that the
impugned order being discretionary in nature, this Court should
refrain from interfering with it under Article 227.
Analysis
16. As already observed at the commencement of this order, this
Court is presently only examining whether a case of notice or grant of
interim relief is made out or not. In that regard, if a sufficiently
arguable case is made out by the petitioners, given the nature of the
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impugned order, ordinarily, a status quo regarding the direction for
deposit would be justified, pending disposal and final hearing of the
present petition.
17. Tested on that touchstone and keeping in view the principles
that have, from time to time, been enunciated by the Supreme Court
regarding the scope of Order XXXVII Rule 3(5) of the CPC, it cannot
be said that the petitioners have not made out an arguable case, as
would justify issuance of notice and a direction for status quo at
present.
18. The development of the law, relating to the law on Order
XXXVII Rule 3(5) of the CPC, as it stands today, may easily be
charted through three decisions of the Supreme Court, namely
Mechelec Engineers & Manufactures v. Basic Equipment
Corporation1, IDBI Trusteeship Services Ltd v. Hubtown Ltd2 and
B.L. Kashyap and Sons Ltd v. JMS Steels and Power Corporation3.
19. Order XXXVII Rule 3 of the CPC was amended in 1976.
Mechelec Engineers1 dealt with a case arising under the pre-amended
Order XXXVII Rule 3(5) of the CPC, whereas IDBI2 and B.L.
Kashyap3 deal with cases arising under the provision as it stood after
its amendment.
20. Needless to say, we are concerned with the post-amendment
(1976) 4 SCC 687
(2017) 1 SCC 568
(2022) 3 SCC 294
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Order XXXVII Rule 3(5) of the CPC in the present case.
21. IDBI Trusteeship2, in para 17 of the report, postulated the
following principles, to govern Order XXXVII Rule 3 of the CPC, in
supersession of the principles earlier enunciated in Mechelec
Engineers1:
"1. 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;
2. 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;
3. 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;
4. 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.
5. 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
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suit shall be refused, and the plaintiff is entitled to judgment
forthwith;
6. 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."
22. Though IDBI Trusteeship2 envisaged the afore-extracted
principles, enunciated by it, as superseding the principles laid down in
Mechelec Engineers1, the Supreme Court, in paras 33 to 33.3 of the
report in B.L. Kashyap3 held as under:
"33. It is at once clear that even though in the case of IDBI
Trusteeship2, this Court has observed that the principles
stated in paragraph 8 of Mechelec Engineers' case1 shall
stand superseded in the wake of amendment of Rule 3 of
Order XXXVII but, on the core theme, the principles remain
the same that grant of leave to defend (with or without
conditions) is the ordinary rule; and denial of leave to defend
is an exception. Putting it in other words, generally, the
prayer for leave to defend is to be denied in such cases where
the defendant has practically no defence and is unable to give
out even a semblance of triable issues before the Court.
33.1. As noticed, if the defendant satisfies the Court that he
has substantial defence, i.e., a defence which is likely to
succeed, he is entitled to unconditional leave to defend. In the
second eventuality, where the defendant raises triable issues
indicating a fair or bonafide or reasonable defence, albeit not
a positively good defence, he would be ordinarily entitled to
unconditional leave to defend. In the third eventuality, where
the defendant raises triable issues, but it remains doubtful if
the defendant is raising the same in good faith or about
genuineness of the issues, the Trial Court is expected to
balance the requirements of expeditious disposal of
commercial causes on one hand and of not shutting out
triable issues by unduly severe orders on the other. Therefore,
the Trial Court may impose conditions both as to time or
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mode of trial as well as payment into the Court or furnishing
security. In the fourth eventuality, where the proposed
defence appear to be plausible but improbable, heightened
conditions may be imposed as to the time or mode of trial as
also of payment into the Court or furnishing security or both,
which may extend to the entire principal sum together with
just and requisite interest.
33.2. Thus, it could be seen that in the case of substantial
defence, the defendant is entitled to unconditional leave; and
even in the case of a triable issue on a fair and reasonable
defence, the defendant is ordinarily entitled to unconditional
leave to defend. In case of doubts about the intent of the
defendant or genuineness of the triable issues as also the
probability of defence, the leave could yet be granted but
while imposing conditions as to the time or mode of trial or
payment or furnishing security. Thus, even in such cases of
doubts or reservations, denial of leave to defend is not the
rule; but appropriate conditions may be imposed while
granting the leave. It is only in the case where the defendant is
found to be having no substantial defence and/or raising no
genuine triable issues coupled with the Court's view that the
defence is frivolous or vexatious that the leave to defend is to
be refused and the plaintiff is entitled to judgment forthwith.
Of course, in the case where any part of the amount claimed
by the plaintiff is admitted by the defendant, leave to defend is
not to be granted unless the amount so admitted is deposited
by the defendant in the Court.
33.3. Therefore, while dealing with an application seeking
leave to defend, it would not be a correct approach to
proceed as if denying the leave is the rule or that the leave to
defend is to be granted only in exceptional cases or only in
cases where the defence would appear to be a meritorious
one. Even in the case of raising of triable issues, with the
defendant indicating his having a fair or reasonable defence,
he is ordinarily entitled to unconditional leave to defend
unless there be any strong reason to deny the leave. It gets
perforce reiterated that even if there remains a reasonable
doubt about the probability of defence, sterner or higher
conditions as stated above could be imposed while granting
leave but, denying the leave would be ordinarily
countenanced only in such cases where the defendant fails to
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show any genuine triable issue and the Court finds the
defence to be frivolous or vexatious."
(Emphasis supplied)
23. The guidelines enunciated in the afore-extracted passage from
B.L. Kashyap3 are clear and categorical and delineate, with positive
certainty, the principles governing grant of leave to defend under
Order XXXVII Rule 3(5) of the CPC. What is clear, from the afore-
extracted passages, is that, as the legal position stands today,
unconditional leave to defend is the rule, conditional leave to defend
is the exception and denial of leave to defend is to be limited to the
most extreme of cases. The Supreme Court has, in para 33.1 of the
report, gone to the extent of holding that, where the defendant raises a
triable issue, indicating a fair or bona fide or reasonable defence,
albeit not a positively good defence, he would be entitled to
unconditional leave to defend. This position is reiterated in para 33.2
by observing that "even in the case of a triable issue on a fair and
reasonable defence, the defendant is ordinarily entitled to
unconditional leave to defend" and, in para 33.3, by observing that
"even in the case of raising of triable issue with the defendant
indicating its having a fair or reasonable defence, he is ordinarily
entitled to unconditional leave to defend unless there be any strong
reason to deny the leave". Two important indicia which emerge from
these principles are that
(i) a "triable issue" indicates the existence of a fair or bona
fide or reasonable defence, albeit not a positively good defence,
and
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(ii) where a case of existence of such a triable issue is made
out by the defendant, unconditional leave to defend is to be
granted, unless there be any strong reason to deny the leave.
If, therefore, even in the face of the existence of a triable issue having
been raised by the defence, the Court decides not to grant
unconditional leave to defend, the Court has to provide strong reasons
for the said decision. The precedential tilt is, therefore, clearly in
favour of grant of unconditional leave to defend.
24. The submissions of Mr. Chitale and Mr. Vasdev are, to one
extent or the other, equally compelling and deserving of serious
consideration. The exact interpretation of the clause "NOW,
THEREFORE, in consideration of the mutual promises and upon the
terms and conditions set forth below, FM and Consultant agree as
follows" in the Consulting Agreement, is a matter which appears,
prima facie, to be complex and debatable.
25. Read literally, the Clause would seem to indicate that it
envisages the succeeding clauses in the Consulting Agreement to
contemplate mutual obligations, which is what Mr. Chitale seeks to
contend. If the clause is so understood, it would mean that the
entitlement of the respondent, even to payment of the amount
admitted in Clause 1.1, is conditional on fulfilment, by the respondent,
of the obligations envisaged by the succeeding clauses of the
Consulting Agreement. In that event, breach, by the respondent, of
the clauses in the Consulting Agreement which succeed Clause 1.1
could be legitimately cited as a ground to deny, to the respondent, any
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right to payment under Clause 1.1.
26. If, on the other hand, as the learned ADJ holds and as Mr.
Vasdev would seek to contend, predicated on the two opening
"whereas" clauses in the Consulting Agreement, Clause 1.1 relates to
the obligations discharged prior to the Consulting Agreement and the
remaining clauses of the Consulting Agreement relate to the
obligations to be discharged in future, then the entitlement of the
respondent to payment under Clause 1.1 would arise irrespective of
whether the respondent has or has not, fulfilled its obligations under
the remainder of the Consulting Agreement. That, Mr. Vasdev would
seek to contend, is the correct interpretation of the Consulting
Agreement.
27. In any event, it cannot, prima facie, be said that the petitioners
have not raised a triable issue. At the very least, the petitioners have
advanced a bona fide and reasonable defence to the suit, which
involves a proper and incisive consideration of the various clauses of
the Consulting Agreement. Applying the principles enunciated in
B.L. Kashyap3, the petitioners would, therefore, be ordinarily entitled
to unconditional leave to defend.
28. The only circumstance in which unconditional leave to defend
could be denied, would be where the bona fides of the petitioners are
in doubt. There is no such finding in the impugned order. Besides the
fact that no real of want of bona fides of the petitioners appears, prima
facie, to exist, that is a consideration which at the highest, may be
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examined when the present petition is finally heard. At the stage of
issuance of notice and grant of interim relief, it would not be
appropriate for this Court to return any finding on the said decision,
especially as the impugned order passed by the learned ADJ, too, does
not doubt the bona fides of the petitioners. To reiterate, this Court
being seized with the challenge of the impugned order, which does not
use want of bona fides as a consideration to direct complete deposit by
the petitioners, it is somewhat doubtful as to whether such a plea
would be available to the respondent, contesting the present petition.
29. Mr Vasdev has also relied on order dated 24th September 2015
vide which CRP 95/2015 was dismissed. This Court does not have,
with it, the record of CRP 95/2015 or any other document on the basis
of which the circumstances in which the order came to be passed
could be gleaned. The order, itself, dismisses the CRP as not
maintainable, as it was preferred against an order passed in a suit filed
under Order XXXVII of the CPC seeking damages on account of a
disability suffered by the respondent. Holding that the suit, from
which the CRP had emanated, was not founded on any negotiable
instrument, and did not claim any liquidated amount, the learned Trial
Court had apparently dismissed the suit. This Court upheld the
decision, and dismissed the CRP as not maintainable. How the said
order would operate against the petitioner in the present proceedings
is not immediately apparent. Nonetheless, I refrain from voicing any
opinion, even tentative, on the issue, and leave it open for decision at
a later, and appropriate, stage.
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30. In view of the aforesaid, I am of the opinion that a prima facie
case has been made out by the petitioners. The impugned order of the
learned ADJ does not appear to have considered all these aspects
while directing deposit by the petitioners. Prima facie, therefore, a
case for issuance of notice and grant of interim relief is made out.
Inasmuch as Petitioner 1, as Defendant 1 in the suit, instituted by the
respondent is a law firm of considerable repute, there is no threat of
the respondent being unable to recover, if he were ultimately to
succeed in the suit. Considerations of balance of convenience and
irreparable loss would also, therefore, justify non-enforcement of the
direction for deposit, as contained in the impugned order dated 9th
June 2022 passed by the learned ADJ, pending consideration of the
present petition.
31. Indeed, any direction for deposit at this stage would result,
effectively, in the impugned order being affirmed at the interlocutory
stage.
32. In the circumstances, issue notice, returnable on 21st December,
2022. Notice is accepted on behalf of the respondent by Mr. Manish
Sharma.
33. Reply be filed in four weeks from today with advance copy to
learned Counsel for the petitioners, who may file rejoinder thereto, if
any, within four weeks thereof.
34. Till the next date of hearing, there shall be an ad interim stay of
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operation of the impugned order dated 9th June 2022 passed by the
learned ADJ, insofar as it directs the petitioners to deposit ₹
58,93,935/- as a precondition for grant of leave to defend the suit
instituted by the respondent.
35. Needless to say, this Court is not interdicting continuance of the
suit. The trial of the suit may continue, without, however, insisting
on compliance with the direction for deposit, contained in the
impugned order dated 9th June 2022 passed by the learned ADJ.
36. Observations contained in this order are merely prima facie,
and intended to adjudicate on the prayer of the petitioner for issuance
of notice and grant of stay pending disposal of the present petition
under Article 227 of the Constitution of India. They would not bind
either this Court at the stage of final hearing of the present petition, or
the learned ADJ, while proceeding with and trying the suit instituted
by the respondent.
37. Dasti.
C. HARI SHANKAR, J.
AUGUST 29, 2022
dsn/r.bararia
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