Madras High Court
A.K.Saravanan vs M.Pandithurai on 16 June, 2025
Author: P.T.Asha
Bench: P.T. Asha
CRP Nos.1421, 1412 & 1203 of 2025
IN THE HIGH COURT OF JUDICATURE AT MADRAS
RESERVED ON : 28-04-2025
PRONOUNCED ON : 16.06.2025
CORAM
THE HONOURABLE MS. JUSTICE P.T. ASHA
CRP Nos.1421, 1412 & 1203 of 2025
and
CMP Nos.8365, 8322 & 7248 of 2025
1. A.K.Saravanan
S/o.Kittusamy, NO.15, R.Mohan Nagar, Nachathira Classic,
Kalapatti Village, Coimbatore and 3 Others
2.R.Kalpana
W/o.A.K.Saravanan, NO.15, R.Mohan Nagar, Nachathira
Classic, Kalapatti Village, Coimbatore
3.K.Kitusamy
S/o.Kuppusamy, NO.129, Kala Gounden Thottam,
Akkaraipati Village, Palani Taluk, Dindugul District
4.K.K.K.Ravindranath
S/o.Kandasamy, No.25, KPK Pannai Illam, Karatatipalayam
Post, Gopichettipalayam
Petitioner(s) in all cases
Vs
M.Pandithurai
S/o.Late Manickam, Res at V-24, Rangas
Thriyambava, Kalapatti Village, Coimbatore
Respondent(s) in all cases
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CRP Nos.1421, 1412 & 1203 of 2025
PRAYER in CRP No.1421 of 2025:
Civil Revision Petition filed under Article 227 of the Constitution of India to set
aside the docket order dated 13-03-2025 passed in I.A.No.4 of 2024 in O.S.No.1014 of
2024 on the file of the III Additional District Court, Coimbatore.
PRAYER in CRP No.1412 of 2025:
Civil Revision Petition filed under Article 227 of the Constitution of India to
strike of the plaint in O.S.No.1014 of 2024 on the file of the III Additional District
Court, Coimbatore.
PRAYER in CRP No.1203 of 2025:
Civil Revision Petition filed under Article 227 of the Constitution of India to set
aside the fair and decreetal order dated 18.12.2024 passed in I.A.No.4 of 2024 in
O.S.No.1014 of 2024 on the file of the III Additional District Court, Coimbatore,
insofar as, the condition imposed to furnish security for the suit claim.
For Petitioner(s)
in all cases : Ms.Chitra Sampath, Senior Counsel
for Mr.M.Ashwin Kumar
For Respondent(s)
in all cases : Mr.K.V.Babu
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CRP Nos.1421, 1412 & 1203 of 2025
COMMON ORDER
While the civil revision petitions in C.R.P.Nos.1203 & 1421 of 2025 have been
filed by the defendants to set aside the orders dated 18.12.2024 and 13.03.2025 passed
in I.A.No.4 of 2024 in O.S.No.1014 of 2024 on the file of the III Additional District
Court, Coimbatore, respectively, the civil revision petition in C.R.P.No.1412 of 2025
has been filed by the defendants to strike of the plaint in O.S.No.1014 of 2024 on the
file of the III Additional District Court, Coimbatore.
2. The parties are being referred to in the same ranking as before the trial
Court.
3. Before proceeding to discuss the grounds, on which, the defendants seek to
strike of the plaint, it would be apposite to briefly allude to the facts as set out in the
plaint in O.S.No.1014 of 2024 on the file of the III Additional District Court,
Coimbatore, as below:
3.1 The above referred suit has been filed for recovery of a sum of
Rs.23,84,11,886/- together with interest at the rate of 24% per annum from the date of
the plaint till the date of realization.
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3.2 It is the case of the plaintiff that the defendants 1 and 2, Rishi Ganesh,
plaintiff's son and Meenakshi Sundar were partners of the firm called 'Sri Saravana
Constructions'. The third defendant is the father of the first defendant and father-in-law
of the first defendant. The fourth defendant is the father of the second defendant and
father-in-law of the first defendant.
3.3 The plaintiff would contend that he is engaged in the business of Highways
contract with the Government of Tamil Nadu as an 'A' Class Contractor. The first
defendant is also a Contractor with the Highways Department of the State of Tamil
Nadu since 2013. The first defendant has approached the plaintiff with a request to
jointly operate the contracts through the firm 'Sri Saravana Constructions' and after
negotiations, a partnership agreement was entered into, in and by which, Rishi Ganesh,
the plaintiff's son and Meenakshi Sundar, the plaintiff's cousin, had been inducted as
partners along with the defendants 1 and 2 and Iyyappan. Rishi Ganesh, at that point in
time, was a minor. After he had attained majority, a revised deed was executed on
30.04.2020. The firm Sri Saravana Constructions is a registered firm and the bank
accounts were to be operated by the first defendant jointly with Rishi Ganesh and all the
contracts and other official documents were to be signed by both the first defendant and
the said Rishi Ganesh till 13.07.2021.
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3.4 The plaintiff would further contend that in order to develop the business of
the partnership firm, he had arranged for financial assistance from his friends,
S.Ramachandran of Pudhukottai, S.Selva Saravanan also of Pudhukottai and Saravanan
of Coimbatore. That apart, the plaintiff had also contributed his personal funds for the
partnership firm. By reason of the infusion of these funds, the firm had signed various
contracts with the Highways Department at Tiruppur, Ottanchatiram, Palani and
Mettupalayam and was doing very well. However, due to certain differences of opinion
among the partners, it was decided that the business would be continued by defendants
1 and 2 and the said Rishi Ganesh and Meenakshi Sundar would retire. It was further
agreed that the defendants 1 and 2 would settle the amounts, which was lent by the
plaintiff and which he had brought in from third parties as well. In furtherance of this
agreement, Rishi Ganesh and Meenakshi Sundar had retired.
3.5 The plaintiff would submit that since he had suspected foul play in the
accounts, he had on 13.07.2021 addressed a complaint to the Manager of the Canara
Bank, Palani Branch, to block the internet banking service of the firm with respect to
the five bank accounts standing in the name of the firm. He would further submit that
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with the help of the internet banking, the first defendant had swindled several crores of
the firm. Thereafter, a memorandum of joint compromise agreement was entered into on
18.10.2021 between the plaintiff and the defendants, whereunder, the defendants had
jointly agreed to settle the amounts due to the plaintiff. The parties had no objection to
the first defendant continuing the business after Rishi Ganesh and Meenakshi Sundar
had resigned.
3.6 Further, the plaintiff would submit that under this memorandum of joint
compromise agreement, the defendants had agreed to settle the following amounts:
(1) Rs.3,42,50,000/- payable to the plaintiff constituting the amount that he had
contributed to the firm;
(2) Rs.7,54,38,666/- payable to Ramachandran of Pudhukottai, from whom, the
plaintiff had borrowed the amounts for the sake of the firm together with
interest at 18% per annum;
(3) Rs.5,37,00,000/- payable to Selva Saravanan of Pudhukottai, from whom, the
plaintiff had borrowed the amounts for the sake of the firm together with
interest at 21% per annum;
(4) Rs.2,16,00,000/- payable to Saravanan of Coimbatore, from whom, the
plaintiff had borrowed the amounts for the sake of the firm together with
interest at 24% per annum;.
Although the defendants had undertaken to pay the above amounts, however, the
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undertaking was observed in the breach. The plaintiff also came to learn that the first
defendant had withdrawn funds using cheques without the joint signature of Rishi
Ganesh. Despite several demands made for payment of the outstanding amounts, the
defendants had not come forward to settle the dues. On the contrary, it has given rise to
several litigations between the plaintiff and the defendants.
3.7 It is the contention of the plaintiff that the memorandum of joint
compromise agreement dated 18.10.2021 also finds a mention in these litigations. Since
the amounts were not forthcoming, the plaintiff had approached the Court by filing a
summary suit in O.S.No.1014 of 2024.
3.8 The defendants, on entering appearance, had filed I.A.No.4 of 2024 seeking
unconditional leave of the Court to defend the suit. In the affidavit filed in support of
the said application, the defendants would deny the allegations contained in the plaint.
They would submit that the suit filed as a summary suit is not maintainable as the plaint
does not fall under the mandatory provisions as provided in Order XXXVII Rule 1 and
2 CPC. The suit is not in the nature of a mere recovery of money, since there was no
lender-borrower relationship between the defendants and plaintiff. Further, the
defendants 3 and 4 were no in way related to the business carried on by the defendants 1
and 2 along with the plaintiff's son and cousin. The defendants had also pleaded non-
joinder of necessary parties, inasmuch as, even according to the plaintiff, it was his son
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Rishi Ganesh, who was jointly operating all the bank transactions of the firm and he had
not been made party to the proceedings. Further, the firm 'Sri Saravana Constructions',
in which, the said Rishi Ganesh was a partner has not been impleaded as party to the
proceedings.
3.9 The defendants would further submit that the execution of the
memorandum of understanding dated 18.10.2021 was related to the day to day affairs of
the firm. The partners Rishi Ganesh and Meenakshi Sundar are third parties to the
memorandum of understanding, which itself would clearly show that the memorandum
of understanding was entered into under pressure and the defendantrs have been
coerced into entering into the said agreement.
3.10 The defendants would contend that they had been running the business
peacefully and after the induction of the plaintiff's son and cousin as the partners of the
firm, there was a repeated interference in the day to day affairs of the firm by the
plaintiff and he had gone to the extent of freezing the financial flow of the firm. The
plaintiff has no locus standi to claim the amounts due to Ramachandran, Selva
Saravanan and Saravanan, as he has not been authorized by the said persons to recovery
the money.
3.11 The defendants would further contend that even assuming that admittedly
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the memorandum of understanding was voluntarily entered into, even then, the
memorandum contains reciprocal promises and without performing his part of the
contract, the plaintiff cannot claim money on behalf of the third parties.
3.12 The defendants would submit that in the release deed executed by Rishi
Ganesh and Meenakshi Sundar on 18.10.2021, they have admitted their investment
amount as Rs.1,11,00,000/- and not Rs.27,78,50,000/- as pleaded by the plaintiff. Even
as per the memorandum of understanding dated 18.10.2021, it has been admitted by the
defendants that only a sum of Rs.3,42,50,000/- was due to the plaintiff and admittedly, a
sum of Rs.3,11,50,000/- was paid by cash on 11.03.2022 to the plaintiff, for which, a
receipt has also been issued on 11.03.2022. Further, a sum of Rs.88,50,000/- was paid
by way of RTGS to the account of the plaintiff's company viz. Hariway Lines Private
Limited. Even after the receipt of this amount, the plaintiff neither returned the security
cheques nor had handed over the account statement having the entries of the investment
of himself and his men named in the memorandum of understanding. The defendants
would claim that they have paid a sum of Rs.20,25,000/- each to the plaintiff on
10.04.2022, 10.05.2022 and 11.06.2022, which comes totally to the tune of
Rs.60,75,000/- by way of RTGS.
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3.13 The defendants would further submit that on verification of the bank
account, they were shocked to learn that only Ramachandran has invested monies to the
firm and none else. From 01.08.2019 to 06.11.2022, the total investment by the plaintiff
and his men comes to the tune of Rs.19,34,00,000/-, but, the defendants have paid in
excess to the plaintiff and on coming to know about the same, a complaint to the
Inspector of Police, Peelamedu Police Station, was given regarding the illegal activities
of the plaintiff including the non-production of bank accounts details and non-return of
cheques.
3.14 Further, the defendants would submit that the plaintiff has attempted to
misuse the blank cheques given as security and that the plaintiff has not provided the
statement of accounts relating to the amounts received by the plaintiff. Therefore, they
are entitled to unconditional leave to defend the suit.
3.15 Initially, by order dated 18.12.2024, I.A.No.4 of 2024 was allowed and
unconditional leave was granted on condition that the defendants should furnish
security for the suit claim on or before 09.01.2025, failing which, it was stated that the
leave granted would automatically stand revoked. Thereafter, the records would show
that by order dated 13.03.2025 the leave granted was revoked, since the conditional
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order has not been complied with.
3.16 Aggrieved by the aforesaid orders dated 18.12.2024 and 13.03.2025 passed
in I.A.No.4 of 2024 in O.S.No.1014 of 2024, the defendants have filed C.R.P.No.1203
of 2025 and C.R.P.No.1421 of 2025, respectively.
3.17 The defendants have filed C.R.P.No.1412 of 2025 seeking to strike of the
plaint in O.S.No.1014 of 2024 on the ground that the said suit is an abuse of process of
law, inasmuch as, the plaintiff has circumvented the procedure contemplated under the
Commercial Courts Act, 2015 (for brevity "the CC Act") by instituting the suit as an
ordinary suit and not as a commercial dispute.
3.18 The defendants would submit that it appears that the plaintiff is attempting
to overcome the mandate of pre-mediation settlement as contemplated under Section
12A of the CC Act, wherein, the pre-mediation is compulsory. The defendants would
further submit that Section 12A of the CC Act makes pre-mediation mandatory and
failing to adhere to this procedure would render the suit to be rejected at the threshold.
That apart, the suit is based on the memorandum of joint compromise agreement and it
partakes all the ingredients of a commercial dispute and therefore, they sought to have
the plaint rejected.
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3.19 The defendants have challenged the order dated 18.12.2024 passed in
I.A.No.4 of 2024 by filing C.R.P.No.1203 of 2025 on the ground that the learned Judge
has imposed an onerous condition while granting leave and there is absolutely no
reasoning given. The defendants would submit that the plaintiff has filed the suit
admittedly for recovering amounts, which are due to the third parties as well and these
third parties have not initiated any proceedings. Once the right of the plaintiff to claim
the entire amount is questioned in the light of the fact that the amounts have come in
from the third parties, the suit itself is not maintainable and consequently, the
conditional leave granted has to necessarily be set aside and unconditional leave
granted.
3.20 The defendants have challenged the order dated 13.03.2025 passed in
I.A.No.4 of 2024 by filing C.R.P.No.1421 of 2025 on the ground that the docket order
rejecting the security offered is totally erroneous, since the security offered is sufficient
to satisfy the suit claim. The defendants would submit that the learned Judge, while
revoking the leave and rejecting the security offered has not given any reasons for
revoking the leave. The learned Judge has simple stated that the security offered is
insufficient. The order had been passed in haste and that apart, the very order granting
leave on condition that the entire suit claim should be furnished as security is per se
erroneous, inasmuch as, the plaintiff cannot institute a suit for recovering amounts due
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to the third parties without these third parties filing any claim against the defendants.
They would further submit that the suit itself is a bad for non-joinder of necessary
parties, inasmuch as, the persons, from whom, the plaintiff claims that he has received
money, have not been made parties to the proceedings.
4. Heard Ms.Chitra Sampath, learned Senior Counsel for Mr.M.Ashwin
Kumar, learned counsel for the petitioners/defendants and Mr.K.V.Balu, learned
counsel for the respondent/plaintiff.
5. The learned counsel on either side have addressed common arguments for
all the revisions and have also filed common written arguments for all these civil
revision petitions and the same has herein below set out.
6. The learned counsel for the petitioners/defendants would make the
following submissions:
6.1 The suit is instituted under the provisions of Order XXXVII Rule 1 & 2
CPC for recovering a sum of Rs.23,84,11,886/- together with interest at the rate of 24%
per annum from the date of plaint till the date of realization. The cause of action and the
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genesis of the suit is the memorandum of joint compromise agreement dated 18.10.2021
allegedly executed by the defendants and the plaintiff.
6.2 The Court below has failed to consider the fact that the defendants have
prima facie made out a case that there are triable issues and therefore, ought to have
granted unconditional leave.
6.3 A perusal of the memorandum of joint compromise agreement dated
18.10.2021 reveals that only a sum of Rs.3,42,50,000/- is payable to the plaintiff and
the defendants have totally paid a sum of Rs.4,60,75,000/- over and above the money
that is payable to the plaintiff. The receipt of the sum of Rs.4,60,75,000/- has been
acknowledged by the plaintiff himself. The memorandum of joint compromise
agreement not only deals with the money payable to the plaintiff, but, also the monies
that are due to three other persons viz. Ramachandran, Selva Saravanan and Saravanan.
The plaintiff has not received any authorization from these persons for recovering
money from the defendants and therefore, the institution of the suit by the plaintiff is
not maintainable.
6.4 The trial Court ought to have seen that the issue as to whether the plaintiff
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can claim the amounts due to the third parties is the triable issue. That apart, the
statement of accounts have not been filed into the Court and therefore, the order
directing to furnish security for the entire suit claim is an onerous condition and
practically amounts to decreeing the suit.
6.5 The counsel would rely upon the judgment in Trois Corporation in HK
Ltd Vs. National Ventures Pvt Ltd, wherein, the Supreme Court has set aside the
onerous condition to deposit 75% of the suit amount to set aside the ex parte decree by
holding that the said condition to be disproportionate.
6.6 By filing an undertaking affidavit by the defendants pursuant to the order
of the trial Court dated 18.12.2024 does not in any manner deprive or extinguish the
defendants' right to challenge the said order.
6.7 In support of this argument, the counsel would rely upon following
judgments:
➢ Wada Arun Asbestos Private Limited vs Gujarat Water Supply and Sewerage
Board1; and
➢ Shivsu Canadian Clear International Limited vs Freightcan Global Logistics
Private Limited2.
6.8 The counsel would question the filing of an ordinary suit when the dispute
1 (2009) 2 SCC 432
2 2013-2-L.W. 949
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arises out of a partnership agreement, which is commercial in nature. Reliance was
placed on the judgment of the Supreme Court in Namita Gupta vs Suraj Holdings
Limited3. The plaintiff would come within the ambit of the term 'financier' as
contemplated under Section 2(1)(c)(i) of the CC Act, as he had lent money over a
period of time.
6.9 That apart, since the trial Court does not have the jurisdiction to entertain
the dispute, acquiescence cannot be pleaded by the defendants and the plaint deserves to
be struck of.
7. Per contra, the learned counsel for the respondent/plaintiff would make the
following submissions:
7.1 The order in I.A.No.4 of 2024 had been passed after hearing both the
parties and the leave was granted on condition that the defendants should furnish
security for the suit claim on or before 09.01.2025, failing which, the conditional leave
granted would stand revoked.
7.2 The defendants on 09.01.2025 had filed an affidavit disclosing the security
containing three items of property, wherein, it was stated that the properties were under
3 (2024) 312 DLT 242
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mortgage with the Canara Bank and therefore, the plaintiff had immediately filed a
memorandum of objection stating that the properties, which already had a charge,
cannot be taken as security and thereafter, the matter was adjourned for valuation and
since no valuation report was received on 13.03.2025, considering the objections of the
plaintiff and taking note of the fact that security had not been furnished, the leave was
revoked.
7.3 C.R.P.No.1203 of 2025 is not maintainable in the light of the fact that the
defendants have already given an affidavit of undertaking to provide security. After
having undertaken to provide security as ordered, it does not lie in the hands of the
defendants to now challenge the conditional order leave granted on 18.12.2024 in
I.A.No.4 of 2024.
7.4 As regards C.R.P.No.1421 of 2025, the same has been filed challenging the
consequential order dated 13.03.2025 passed in I.A.No.4 of 2024 and once again, after
having given an affidavit of undertaking, the defendants cannot renege on the
undertaking. The memorandum of understanding dated 18.10.2021 has been accepted
by the defendants in a connected suit in O.S.No.214 of 2023, which was filed for
mandatory injunction. Since the defendants had accepted to settle the entire claim, it
was in this circumstance, the trial Court was of the opinion that the plaintiff's interest
would be protected if a conditional order of leave was granted. Therefore, the
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defendants have no legs to challenge the consequential order dated 13.03.2025 passed
in I.A.No.4 of 2024 and consequently, C.R.P.No.1421 of 2025 has to be dismissed.
7.5 With reference to C.R.P.No.1412 of 2025, which is a revision filed to strike
of the plaint in O.S.No.1014 of 2024, he would submit that the plaintiff has made a
sufficient cause of action for filing the suit and that apart C.R.P.No.1412 of 2025 has
been filed on the ground that the suit is commercial in nature as per Section 2(1)(c)(xv)
of the CC Act, as the dispute is arising out of the partnership firm and the suit is based
on the memorandum of joint compromise agreement dated 18.10.2021. A perusal of
clause 10 of the memorandum of joint compromise agreement would show that the
defendants have agreed to settle the entire dues to the plaintiff and on settling the dues,
he is entitled to return the security cheques. The contents of the agreement would
clearly show that it is not commercial in nature. That apart, after having accepted to
settle the entire sum to the plaintiff, the defendants cannot now call the transactions
commercial in nature, since there is no commercial activities involved. These issues are
being raised by the defendants for the first time and the same have not been raised
before the Court below.
7.6 The suit is based only upon the memorandum of joint compromise
agreement. The suit is not based upon the partnership agreement, as set out by the
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defendants. The parties to the lis and the parties to the memorandum of joint
compromise agreement are not partners in any event. Therefore, the plaint cannot be
struck of.
7.7 The defendants were directed to produce the valuation report in respect of
the documents of the properties that was being offered as security. Valuation report has
been obtained on 24.10.2024 after filing of the suit. As regards the three properties that
had been offered as security, the defendants had stated that these properties are also the
subject property of the mortgage under a memorandum of title deeds.
Discussion:
8. Before considering the correctness or otherwise of the orders passed in
I.A.No.4 of 2024, which are the subject matter of C.R.P.No.1203 of 2025 and
C.R.P.No.1421 of 2025, it would be necessary to first decide C.R.P.No.1412 of 2025
filed to strike of the plaint, as any decision taken in this revision would have a direct
bearing on the other revisions.
9. The revision petition to strike of the plaint has been filed on the premise
that the suit is a commercial dispute falling within the provisions of Section 2(1)(c)(xv)
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of the CC Act. Before discussing the aforesaid provisions, it would make useful
reading, if the provisions of Section 2(c) (i), (xv) and (xvii) are herein below extracted:
“2.Definitions
(1) In this Act, unless the context otherwise requires,-
....
(c) “commercial dispute” means a dispute arising out of -
(i) ordinary transactions of merchants, bankers,
financiers and traders such as those relating to
mercantile documents, including enforcement
and interpretation of such documents;
(xv) partnership agreements;
(xvii) intellectual property rights relating to registered and
unregistered trademarks, copyright, patent, design, domain
names, geographical indications and semi-conductor
integrated circuits;”
Likewise Section 6 of the CC Act makes it clear that the Commercial Courts deal with
commercial disputes.
10. The main fulcrum of the argument of the defendants is that the disputes
arise in respect of a partnership firm from out of a memorandum of joint compromise
agreement dated 18.10.2021 and this memorandum relates to the partnership agreement.
Therefore, at the outset, it is necessary to analyse if the compromise is one relating to
the partnership business.
11. A perusal of the preamble of the memorandum of joint compromise
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agreement would indicate that for the development of the firm “Sri Saravana
Constructions”, the plaintiff had borrowed money from his friends S.Ramachandran of
Pudhukottai, S.Selva Saravanan also of Pudhukottai and Saravanan of Coimbatore and
has also given his money as a loan to the firm. Further, a reading of Clause 3 to 6 would
describe that amounts as a loan. Therefore, it is clear that the amounts have been given
as a loan to the firm “Sri Saravana Constructions”. The memorandum of joint
compromise agreement would further read that the son of the plaintiff, Rishi Ganesh
and the plaintiff's cousin, Meenakshi Sundar would retire from the firm and the first
defendant would continue the firm by himself. The defendants 2 to 4, under this
memorandum undertook to settle the amounts due to the persons, who have lent the
money, and the amounts were payable to the plaintiff for and on behalf of the lenders.
12. That apart, the plaintiff had produced a plaint filed in O.S.No.214 of 2023
on the file of the III Additional District Court, Coimbatore, which is a suit filed by the
defendants in the instant suit and the firm for a direction to the plaintiff, his son Rishi
Ganesh, cousin Meenakshi Sundar to hand over documents described in the schedule to
the plaint and the account statements from 08.01.2019 to 18.10.2022 and for an
injunction restraining the defendants therein from using the documents. In the plaint,
the defendants herein have admitted the loan, but would state that the amounts are
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repayable by the firm (which is not the language of the deed concerned) which states
that the defendants 1 to 4 should repay it.
13. Therefore, from the above referred clauses of the memorandum and the
plaint in O.S.No.214 of 2023, it is clear that the amounts given by the plaintiff is only a
loan advanced by the plaintiff by himself as well as by sourcing it through his friends.
By signing this memorandum, the defendants have undertaken to repay the said sum,
which had been advanced to the firm. Therefore, the suit filed is simplicitor a suit for
recovery of money due under the memorandum of joint compromise agreement dated
18.10.2021 and would therefore, not be covered by the provisions of Section 2(1)(c)(xv)
of the Act.
14. Another argument that was made was that the plaintiff is a financier and
therefore, the provisions of Section 2(1)(c)(i) would apply. Even this argument has to be
rejected as the defendants have themselves described the plaintiff as a Highways
Contractor and it is not their case that the plaintiff is ordinarily carrying on business as a
financier.
15. Therefore, the very basis on which the defendants have sought to strike of
the plaint is not available to them. Hence, CR.P.No.1412 of 2025 has to necessarily be
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dismissed.
16. Since C.R.P.No.1412 of 2025 has been dismissed, the veracity of the
orders, which is the subject matter of C.R.P.Nos.1203 & 1421 of 2025 has to be
analysed.
17. The defendants are aggrieved by the fact that after the Court below has
come to the conclusion that the defendants have a triable issue, the learned Judge
committed a grave error in imposing the onerous condition that the defendants should
furnish security to the tune of the suit amount.
18. The arguments advanced by the defendants are that only a sum of
Rs.3,42,50,000/- is payable to the plaintiff and the defendants have already paid over a
sum of Rs.4,60,75,000/-. Further, the plaintiff does not have the locus standi to recover
the amounts owed to third parties and this issue of locus standi has been held to be a
triable issue by the III Additional District Judge, Coimbatore. Therefore, the onerous
condition imposed for grant of leave to defend the suit has to be necessarily set aside.
The defendants would also submit that the memorandum of understanding filed by the
defendants would not be a bar to challenge the order impugned in I.A.No.4 of 2024.
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19. That the plaintiff has procured financial assistance from third parties and
has himself extended similar assistance has been admitted by the defendants themselves
in their plaint in O.S.No.214 of 2023 on the file of the III Additional District Court,
Coimbatore. This suit is filed before the filing of the instant suit. In the said plaint, it is
stated as follows:
“5. As per the terms of the said Memorandum of
Understanding dated 18./10/2021,
i) it was agreed that the 1st defendant had invested
Rs.27,78,50,000/- in the Fir, out of which he had already been paid
a sum of Rs.14,36,00,000/- from the firm and that out of balance
amount of Rs.13,42,50,000/-, a sum of Rs.3,75,00,000/- shall be
deposited in account of defendants 2 & 3 and a sum of
Rs.6,25,00,000/- shall be given as cash to the 1st defendant.
Thereafter, the remaining balance of Rs.3,42,50,000/- shall be paid
in 6 months.
ii) It was further agreed that from and out of the loans
borrowed from various persons for the firm, after deducting the
payments so far made, the 1st plaintiff firm shall be repay the
balance out standings of following persons within 6 months:
1. Ramachandran, Pudukottai - Rs.7,45,38,666/-
2. Selvarasaravanan, Pudukottai - Rs.5,37,00,000/-
3. Saravanan, Coimbatore - Rs.2,16,00,000/-
4. M/s.Skill Plus (Supplier) - Rs.2,61,00,000/-
With regard these loans, at the time of compromise talks held on
18/10/2021, the 1st defendant strangely insisted that the plaintiff
shall handover number of signed blank cheques and promissory
notes to him. He promised to keep them only as security and not to
present for collection and that after payment of their dues, he will
return those signed blank cheques and promissory notes to the
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plaintiffs. Believing his words, the plaintiffs handover several signed
blank cheques and pro-notes to the 1st defendant which are meant
only as security and to show their bonafied. Those cheques are more
fully mentioned in the Schedule of this plaint. ”
The defendants further stated in the plaint that pursuant to the memorandum of
understanding dated 18.10.2021, they have paid a part of the amounts agreed therein i.e.
a sum of Rs.4,60,75,000/- to the plaintiff and the arrangements were being made to pay
the other persons, who have also agreed to extend the time for repayment. Therefore,
the defendants have clearly admitted the borrowals and that only a sum of
Rs.4,60,75,000/- had been repaid.
20. In this regard, when the memo of valuation in the instant case
(O.S.No.1014 of 2024) is perused, it can be seen that the sum of Rs.4,60,75,000/- has
been given credit to and a balance of Rs.23,84,11,886/- is stated to be due. As to
whether the plaintiff can recover the amounts due to the third parties is an issue that has
to be decided in the suit as well as the issue of non-joinder of parties. The only question
that now engages the attention of this Court is whether the Court below was right in
granting conditional leave that the defendants should furnish security to the tune of the
suit claim.
21. In the affidavit filed in support of the leave to defend application, the
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defendants would submit that they had paid Rs.4,60,75,000/-, but, the plaintiff did not
hand over the accounts showing the investment. Therefore, the defendants stopped
further payment. The defendants would also contend that a perusal of the bank account
of the firm would reveal that only Ramachandran has paid amount to the firm and from
01.08.2019 to 06.11.2022, the total amount invested by the plaintiff is only a sum of
Rs.19,34,00,000/-, towards which, a sum of Rs.26,00,06,532/- has been paid by the
defendants.
22. From the contents of the affidavit filed in support of the leave to defend
petition, it is seen that there are legal proceedings both criminal and civil between the
parties.
23. In the counter filed by the plaintiff, apart from denying the various
allegations in the affidavit filed in support of the leave to defend application, he would
contend that since the defendants have admitted the execution of Doc.No.1,
memorandum dated 18.10.2021, the defendants are bound to settle the said sum to him.
Therefore, he would pray that they are not entitled to an unconditional stay.
24. This would clearly indicate that the plaintiff's case is that since the
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execution of the agreement is admitted, the defendants can only be granted conditional
leave.
25. The learned III Additional District Judge, Coimbatore, had observed that
the defendants have raised a valid defense regarding the locus standi of the plaintiff to
recover the amounts due to third parties and has also observed that there is nothing to
show that the plaintiff had paid these third parties the amount paid by them to the firm.
That apart, these amounts have been lent to the firm (which is not impleaded as a party)
when the plaintiff's son and cousin were partners, they have not been made parties to
the memorandum of understanding or in the suit. This despite the fact that the recitals of
the memorandum contains an undertaking that they will retire from the partnership. The
third parties to whom monies are said to be due, have not been made parties to the
proceedings. In fact, they are not parties to the memorandum of understanding well.
Therefore, there are several triable issues that arise in the above suit and the defense is
neither illusory nor a moonshine. Therefore, the order directing the deposit of the entire
suit claim as a condition for granting leave to defend appears onerous especially when
the right of the plaintiff to recover amounts due to third parties is in issue. There is no
reason given in the order dated 18.12.2024 passed in I.A.No.4 of 2024 as to why
conditional leave was granted after the learned Judge has observed that there is a triable
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issue.
26. In the judgment relied upon by the plaintiff in Wada Arun Asbestos supra,
the learned Judges were considering the issue as to whether a revision petition would lie
against an order granting conditional leave and held that a civil revision petition would
lie against an order granting conditional leave. The learned Judges also considered
earlier judgments, where the principles for grant of leave in a summary suit was set out.
In Mechelec Engineers & Manufacturers Vs. Basic Equipment Corporation4, the
learned Judges have set out the principles as follows:
“(a) If the defendant satisfies the court that he has a good
defence to the claim on its merits the plaintiff is not entitled to leave
to sign judgment and the defendant is entitled to unconditional leave
to defend.
(b) If the defendant raises a triable issue indicating that he has
a fair or bona fide or reasonable defence although not a positively
good defence the plaintiff is not entitled to sign judgment and the
defendant is entitled to unconditional leave to defend.
(c) If the defendant discloses such facts as may be deemed
sufficient to entitle him to defend, that is to say, although the affidavit
does not positively and immediately make it clear that he has a
4 (1976) 4 SCC 687
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defence, yet, shews such a state of facts as leads to the inference that
at the trial of the action be may be able to establish a defence to the
plaintiff's claim the plaintiff is not entitled to judgment and the
defendant is entitled to leave to defend but in such a case the court
may in its discretion impose conditions as to the time or mode of trial
but not as to payment into court or furnishing security.
(d) If the defendant has no defence or the defence set-up is
illusory or sham or practically moonshine then ordinarily the plaintiff
is entitled to leave to sign judgment and the defendant is not entitled
to leave to defend.
(e) If the defendant has no defence or the defence is illusory or
sham or practically moonshine then although ordinarily the plaintiff
is entitled to leave to sign judgment, the court may protect the
plaintiff by only allowing the defence to proceed if the amount
claimed is paid into court or otherwise secured and give leave to the
defendant on such condition, and thereby show mercy to the
defendant by enabling him to try to prove a defence.”
In the judgment of the Apex Court in Sify Ltd. Vs. First Flight Couriers Ltd.5, these
principles have been reiterated in paragraph no.11 of the judgment.
27. On a reading of these principles, it is clear that where the defendant has
been able to establish a valid defense, which is neither illusory nor a moonshine, leave
5 (2008) 4 SCC 246
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should be granted unconditionally. Therefore, the order dated 18.12.2024 has to be
set aside and C.R.P.No.1203 of 2025 be allowed.
28. The subsequent order dated 13.03.2025 (subject matter of C.R.P.No.1421
of 2025) is nothing but a consequential order and once this Court has found that the
order of conditional leave to defend is onerous, the consequential order should also fail.
Therefore, C.R.P.No.1421 of 2025 has also to be allowed.
29. It is seen that the properties, which have been offered as security by the
defendants vide their affidavit dated 09.01.2025 are Item Nos.4, 5 and 6 of the
properties, in respect of which, the plaintiff has sought attachment before judgment. In
the affidavit dated 09.01.2025, the defendants have undertaken not to
alienate/encumber/transfer the same.
30. Ex consequenti, this Court passes the following orders in the above
revisions:
i. C.R.P.No.1412 of 2025 is dismissed;
ii. C.R.P.Nos.1203 of 2025 is allowed and consequently, C.R.P.No.1421 of 2025 is
allowed;
iii. The properties that have been described in the affidavit of understanding dated
09.01.2025 filed in I.A.No.4 of 2024 as also the valuation report shall not be
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alienated/transferred or in any other way dealt with without orders of the Court
till the disposal of the suit;
iv. The defendants shall file their written statement within a period of fifteen days
from the date of receipt of a copy of this order; and
v. The learned Judge shall endeavour to dispose of the suit in O.S.No.1014 of 2024
within a period of four months therefrom.
16-06-2025
nsd
Index:Yes/No
Speaking/Non-speaking order
Internet:Yes; Neutral Citation:Yes/No
To
The III Additional District Judge,
Coimbatore.
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CRP Nos.1421, 1412 & 1203 of 2025
P.T.ASHA J.
nsd
Pre-delivery order made in
CRP Nos.1421,1412 & 1203 of 2025
16.06.2025
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