Delhi High Court
Sameer Bhutani vs Kewal Krishan Kumar on 24 January, 2019
Equivalent citations: AIRONLINE 2019 DEL 193
Author: Rajiv Sahai Endlaw
Bench: Rajiv Sahai Endlaw
* IN THE HIGH COURT OF DELHI AT NEW DELHI
% Date of decision: 24th January, 2019.
+ CS(OS) 462/2018, IA No.16387/2018 (u/O XXXVII R-3(4) read
with S-151 CPC) & IA No.472/2019 (u/O XXXVII R-3(5) CPC)
SAMEER BHUTANI ..... Plaintiff
Through: Mr. Abhijat, Mr. Rishabh Bansal &
Mr. Ajay Arjun Sharma, Advs.
Versus
KEWAL KRISHAN KUMAR ..... Defendant
Through: Mr. Narendera M. Sharma, Ms. Prachi
Gupta & Mr. Abhishek Sharma, Advs.
AND
+ CS(OS) 463/2018, IA No.16386/2018(u/O XXXVII R-3(4) read
with S-151 CPC) & IA No.471/2019 (u/O XXXVII R-3(5) CPC)
RAJEEV KUMAR BATRA ..... Plaintiff
Through: Mr. Abhijat, Mr. Rishabh Bansal &
Mr. Ajay Arjun Sharma, Advs.
Versus
KEWAL KRISHAN KUMAR ..... Defendant
Through: Mr. Narendera M. Sharma, Ms. Prachi
Gupta & Mr. Abhishek Sharma, Advs.
CORAM:
HON'BLE MR. JUSTICE RAJIV SAHAI ENDLAW
1. The applications of the sole defendant in both the suits under Order
XXXVII of the Code of Civil Procedure, 1908 (CPC), for recovery of
CS(OS) 462/2018 & CS(OS) 463/2018 Page 1 of 16
Rs.2,50,00,000/- and for recovery of Rs.2,00,00,000/- respectively, are for
consideration.
2. The counsel for the plaintiffs and the counsel for the defendant state
that the pleadings in both the suits and in the applications for leave to defend
in both suits are identical and have argued the two suits as one only. Thus
this order is in the context of facts in CS(OS) No.462/2018 but will also
apply to CS(OS) No.463/2018 with the variations of the amount in claim in
the two suits.
3. The counsel for the plaintiffs and the counsel for the defendant have
been heard.
4. The plaintiff has instituted the suit pleading that (i) the plaintiff is an
exporter of home textile (the plaintiff in CS(OS) No.463/2018 is in the
business of printing and paper conversion as well as export of stationary);
(ii) the defendant is a renowned businessman and is on the Board of
Directors of many renowned companies such as Shakti Bhog Foods Ltd.
(SBFL), Bikano Foods Pvt. Ltd., Sumesh Financiers Pvt. Ltd. etc.; (iii)
sometimes in August, 2014 (April, 2015 in CS(OS) No.463/2018), the
defendant approached the plaintiff and represented that he was in dire need
of funds and sought a loan on friendly basis for a period of three years from
the plaintiff; (iv) the plaintiff, on account of past acquaintance with the
defendant and because of the illustrious background of the defendant agreed
to loan a sum of Rs.50,00,000/- (Rs.2,00,00,000/- in CS(OS) No.463/2018)
for a period of three years at an interest rate of 15% per annum and on 2nd
September, 2014 (10th April, 2015 in CS(OS) No.463/2018) forwarded a
loan of Rs.50,00,000/- to the defendant vide RTGS; (v) in October, 2014, the
CS(OS) 462/2018 & CS(OS) 463/2018 Page 2 of 16
defendant again sought a loan of Rs.1,00,00,000/- from the plaintiff at the
same rate of interest and to which the plaintiff agreed and the said amount of
Rs.1,00,00,000/- also was loaned on 15th October, 2014 vide RTGS on the
same terms; (vi) similarly on 23rd December, 2014, a further amount of
Rs.1,00,00,000/- was loaned to the defendant via RTGS transfer; (vii) thus
the plaintiff loaned a total sum of Rs.2,50,00,000/- to the defendant; (viii) the
defendant immediately started paying interest at the agreed rate of interest
and continued to promptly pay the same till March, 2016; (ix) after March,
2016, the defendant started defaulting in payment of interest, compelling the
plaintiff to repeatedly call upon the defendant to return the entire loan with
interest; (x) by the end of April, 2018, a sum of Rs.78,12,500/-
(Rs.60,00,000/- in CS(OS) 463/2018) had accumulated on account of interest
alone besides the principal amount of Rs.2,50,00,000/-; (xi) on 30th April,
2018, the defendant drew five cheques in the sum of Rs.2,50,00,000/- in
favour of the plaintiff in part payment of his total liability of
Rs.3,28,12,500/-; (xii) however all the aforesaid cheques were returned
dishonoured for the reason, either of the funds in the account of the
defendant being „Insufficient‟ or the „Drawer‟s Signatures Differing‟; (xiii) a
notice of demand was got served on the defendant but to which no reply was
received from the defendant; and, (xiv) a complaint under Section 200 of the
Code of Criminal Procedure, 1973 (Cr.P.C) of commission of offence under
the Negotiable Instruments Act, 1881 has been filed by the plaintiff against
the defendant. Hence, the suit for recovery of principal amount of
Rs.2,50,00,000/- with interest at 15% per annum of Rs.90,62,500/-. The
plaintiff also claims pendente lite and future interest at 15% per annum. The
CS(OS) 462/2018 & CS(OS) 463/2018 Page 3 of 16
claim in CS(OS) No.463/2018 is for the principal sum of Rs.2,00,00,000/-
and for pre-suit interest at 15% per annum of Rs.72,50,000/-.
5. The defendant seeks leave to defend pleading that, (a) the plaintiffs in
the two suits had approached the defendant, who was the Managing Director
of SBFL and represented that they wanted to try their hand in the business of
foods and grains and showed interest to purchase rice grain in bulk quantity,
to supply the same in the market at wholesale rates; (b) however, during the
discussions, it was pointed out by the defendant to the plaintiffs that since
the plaintiffs did not have necessary license / permissions to lift the goods
from the market in such high quantity, the plaintiffs could not take up the
business of supplying the goods in the market at wholesale rates; (c) after
some time, the plaintiffs reverted to the defendant and requested the
defendant to do forward trading for and on behalf of plaintiffs whereby the
plaintiffs would deposit an amount with the defendant for purchase of rice
grain and request the defendant to immediately transfer the said amount in
the account of SBFL for purchase of rice grain in bulk from the vendors /
farmers, as and when the plaintiffs instructed; (d) the defendant agreed to the
aforesaid proposal of the plaintiffs and the plaintiffs assured that in the
meantime they would make best efforts to obtain necessary license /
permission for trading the rice grain in the market; (e) the plaintiffs, on
account of forward trading, transferred the principal amount in each of the
suits, in terms of the understanding with the defendant; (f) the defendant /
SBFL assured quarterly payment of nominal amount towards return to the
plaintiffs on the amounts so paid by the plaintiffs, till instructions for
purchase of rice grain were issued by the plaintiffs to defendant / SBFL; (g)
this understanding between the parties is evident from the fact that "SBFL
CS(OS) 462/2018 & CS(OS) 463/2018 Page 4 of 16
immediately on receipt of the aforesaid amounts which were disbursed on
various dates waged some amount towards nominal returns to the plaintiff";
(h) there was neither any written agreement between the parties nor was the
rate of interest fixed; (i) the defendant issued undated security cheques in the
sum of Rs.2,50,00,000/- to the plaintiffs in each of the suits stating that if the
plaintiffs did not issue any instructions for purchase of rice grain, the said
cheques for refund of the amounts received by the plaintiffs will be returned
without any interest; (j) copy of statement of account of the defendant
reflecting the remittance of funds to SBFL and receipt of amount from SBFL
towards nominal returns which were ultimately disbursed to the plaintiffs are
annexed to the leave to defend applications; (k) the plaintiffs failed to place
any order for purchase of rice grain for nearly one and a half years, making
the defendant / SBFL bear the unwarranted return which was serviced to the
plaintiffs quarterly; (l) the plaintiffs, in the first quarter of the year 2017,
instructed the defendant to purchase goods for a sum of Rs.2,50,00,000/-
(Rs.2,00,00,000/- in CS(OS) No.463/2018) and assured to lift the rice grain
in due course; (m) the defendant accordingly forwarded the said instruction
for purchase of rice grain to SBFL, in terms of arrangement between the
parties, and SBFL, without holding up the order of the plaintiffs, purchased
rice grain worth Rs.2,50,00,000/- from the vendors / farmers; (n) the
plaintiffs however did not turn up or approach the defendant to lift the rice
grain which was so purchased by the defendant / SBFL at the instance of the
plaintiffs; (o) considering that the rice grain was perishable and could not be
stored for long, the defendant made several attempts to meet the plaintiffs
but the plaintiffs avoided to do so and on the contrary continued to assure
that they were likely to get permissions to commence the business and would
CS(OS) 462/2018 & CS(OS) 463/2018 Page 5 of 16
lift the rice grain shortly; (p) on account of failure of the plaintiffs to lift the
goods, SBFL sold the goods in scrap in order to mitigate the losses and got
the warehouse space vacated; (q) to the shock of the defendant, the plaintiffs
presented the cheques which were given by way of security and were
axiomatically returned to the plaintiffs; (r) on learning from the banker that
the cheques had been presented, the defendant requested the plaintiffs to
return the cheques but the plaintiffs being well aware that SBFL had gone
into liquidation, threatened the defendant to pay the amounts; (s) the
plaintiffs, without holding any necessary license / permission, insisted on the
defendant indulging in forward trading on the assurance that the plaintiffs
would obtain such permissions / license shortly; (t) the plaintiff in CS(OS)
462/2018 has wrongly pleaded receipt of Rs.2,50,000/- on 30th January, 2015
when in fact the payment made on that date by the defendant to the plaintiff
was of Rs.12,50,000/-; (u) the plaintiffs have not sent a single demand to the
defendant for payment of interest; (v) the plaintiffs have misused the cheques
given by way of security; (w) in fact, it is the defendant and SBFL who were
entitled to claim damages from the plaintiffs for the loss suffered on behalf
of the plaintiffs; and, (x) the suits are bad for non-joinder of SBFL.
5. The defendant, in the leave to defend application in CS(OS)
No.463/2018, in addition has pleaded to have issued cheques for
Rs.2,50,00,000/- by way of security instead of for Rs.2,00,00,000/- which
was in fact received from the plaintiff, on the insistence of the plaintiff for
the purpose of entries in account books of the plaintiff.
6. The leave to defend applications filed by the defendant came up first
before this Court on 14th January, 2019 when, while issuing notice thereof to
CS(OS) 462/2018 & CS(OS) 463/2018 Page 6 of 16
the plaintiffs for today, a direction was also issued to the defendant to remain
present in person today along with all documents which the defendant may
have in support of his pleas in the applications for leave to defend.
7. The counsel for the defendant states that the defendant is unwell and
has undergone a surgery and has thus not come to the Court. It is further
stated that the documents have been filed as annexure to the leave to defend
applications. However, what has been filed as annexure to the leave to
defend applications is only the statement of account of the defendant with
Axis Bank to show transfer by the defendant of the monies received from the
plaintiffs on the same day to SBFL.
8. The counsel for the defendant, besides what is already stated in the
applications for leave to defend, argues that, (i) these suits have been filed
because SBFL is in liquidation; (ii) the suits are bad for non-joinder of
SBFL; (iii) the accounts between the parties cannot be settled in the absence
of SBFL; and, (iv) the plaintiff in CS(OS) 462/2018 also has now admitted
that on 30th January, 2015, a sum of Rs.12,50,000/- instead of Rs.2,50,000/-
as pleaded in the plaint was received from the defendant; however, the plaint
in CS(OS) No.462/2018 has not been amended and in pursuance to the
aforesaid change, the summons for judgment also have not been amended.
9. The counsel for the plaintiffs admits the mistake and states that the
figure of Rs.2,50,000/- instead of Rs.12,50,000/- received from the defendant
on 30th January, 2015 was mistakenly typed in the plaint in CS(OS)
462/2018.
10. The counsel for the defendant has further argued that, (a) the
dishonoured cheques, on the basis of which the suits under Order XXXVII of
CS(OS) 462/2018 & CS(OS) 463/2018 Page 7 of 16
the CPC have been filed, were given only as security, the verbal
understanding being that if the plaintiffs did not issue any order for purchase
of rice grain and the monies given by the plaintiffs to defendant / SBFL not
used for the said purpose, the plaintiffs could fill in the date of the cheques
and present the cheques for refund of the monies paid; it is highlighted that
the dishonoured cheques, on the basis of which these suits under Order
XXXVII have been filed, are filed in type save the dates which have been
filled up in hand; (b) the said understanding is evident from the statement of
the account of the defendant in which monies vide RTGS were received
from the plaintiffs and which statements unequivocally show that the
defendant did not retain the monies received in his bank account from the
plaintiffs, for a single day and immediately transferred the same to SBFL;
and, (c) without opportunity to lead evidence being granted, it cannot be
adjudicated whether the verbal version of the plaintiffs is correct or the
verbal version of the defendant is correct.
11. Per contra, the counsel for the plaintiffs argues, that (i) the only
document produced by the defendant along with the leave to defend
application is the statement of his account with Axis Bank and which
document is self-serving; (ii) merely because the defendant immediately
transferred the monies received from the plaintiffs to SBFL, does not show
any understanding or verbal agreement of forward trading; (iii) no document
to show such forwarding trading has been filed; (iv) no demand was ever
made by the defendant on the plaintiffs for return of the cheques claimed to
have been given by way of security; (v) there is no correspondence in writing
between the parties; (vi) the defendant has set up a cock and bull story,
CS(OS) 462/2018 & CS(OS) 463/2018 Page 8 of 16
without relying on a single document in support thereof; and, (vii) there is no
likelihood of the defendant succeeding, even if leave to defend is granted.
12. Though this Court vide order dated 14th January, 2019 gave an
opportunity to the defendant to file additional documents, but still no
documents have been produced.
13. The counsel for the plaintiffs relies on my dicta in Puneet Kumar
Agarwal Vs. Imaginations Agri Exports 2013 SCC OnLine Del 701 dealing
with an application for leave to defend and holding that if a negotiable
instrument is given in blank, there is implicit authority in law to the holder
thereof to fill up the same. It is argued that thus, the mere fact that the dates
of the cheques has been filled in hand, is of no consequence.
14. The counsel for the plaintiffs has further argued that the defendant
never demanded return of cheques from the plaintiffs nor issued instructions
to his banker for stopping payment thereof.
15. The counsel for the defendant argues that since according to the
plaintiffs also the loan was verbal and there is nothing to show the rate of
interest settled or as to for how much time/period the loan was given, there is
no option but to allow parties to lead evidence for determination of, which of
the two oral versions is correct.
16. I have considered the contentions aforesaid.
17. I have enquired from the counsel for the defendant, that if according to
the defendant the oral understanding arrived at between the parties was that
the defendant, immediately on receipt of monies from the plaintiff will
CS(OS) 462/2018 & CS(OS) 463/2018 Page 9 of 16
transfer the same to SBFL, why could the monies from the plaintiffs have
not been directly received by SBFL.
18. The counsel for the defendant states that the plaintiffs "could not give
to SBFL because the plaintiffs trusted the defendant more than they trusted
SBFL and that is why the monies were not directly given by the plaintiffs to
SBFL."
19. In my view, the response aforesaid of the counsel for the defendant is
enough to hold the defendant to be not entitled to leave to defend. Once the
defendant himself admits that the reason for the monies being transferred by
the plaintiffs in the personal account of the defendant, when according to the
defendant the monies were for the benefit of SBFL, was that the plaintiffs
trusted the defendant more than they trusted SBFL, there can be no iota of
doubt that it is the defendant who is liable to refund to the plaintiffs the
monies admittedly received from the plaintiffs and the plea of the defendant
in the applications for leave to defend the suits, of the suits being bad for
non-joinder of SBFL or SBFL being a necessary and proper party to the suit
loses its steam.
20. Else, I find the leave to defend applications of the defendant to be
falling in para 17.5 as under:
"17.5. 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 suit shall be refused, and the plaintiff is entitled to
judgment forthwith."
of IDBI Trusteeship Services Limited Vs. Hubtown Limited (2017) 1 SCC
568, for the following reasons:
CS(OS) 462/2018 & CS(OS) 463/2018 Page 10 of 16
A. No particulars have been given of the legal constraint of the
plaintiffs, if desirous of purchasing large quantities of rice grain
for subsequently selling the same, to do so without involving
defendant and/or SBFL.
B. Similarly, no particulars have been given of entitlement of
SBFL to do so. It has not been pleaded, what did SBFL have, to
be qualified to do so, which the plaintiffs did not have.
C. No dates have been given of (i) when the plaintiffs instructed
the defendant / SBFL to purchase rice grain; (ii) when such rice
grain was procured by SBFL, at what price and from whom;
(iii) when SBFL sold the said rice grain, for how much and to
whom; and, (iv) what loss if any has been suffered by SBFL on
account of stress sale of the said rice grain.
D. Had there been any semblance of truth in the pleas on which
leave to defend is sought, it would not have been difficult for
the defendant, who has not disputed to be the Managing
Director of SBFL, though now in liquidation, to furnish the said
particulars. In fact, the date on which SBFL went in liquidation
has also not been pleaded.
E. Without the said particulars being pleaded, it has but to be held
that there is no chance of the defendant succeeding, even if was
to be given an opportunity to lead evidence. Even if the suit had
not been under Order XXXVII, in the absence of such pleas
which under the law the defendant was required to incorporate
CS(OS) 462/2018 & CS(OS) 463/2018 Page 11 of 16
in his pleadings, the plaintiffs would be entitled to a decree
forthwith under Order XV Rule 1 of the CPC.
F. Without the said particulars, the story set up is indeed a cock
and bull story.
G. Else, the defendant has not disputed receipt of monies from the
plaintiffs and / or the rate of interest agreed which the defendant
had agreed to pay to the plaintiffs. Though the defendant has
pleaded that reasonable return was agreed to be given to the
plaintiffs on the amounts paid by the plaintiffs to the defendant
but the defendant has shied away from disclosing the rate at
which such reasonable return was agreed to be given.
H. It is inconceivable that had there been any semblance of truth in
the version of the defendant, there would have been no
reflection thereof in the income tax returns and / or books of
accounts, which not only the defendant but SBFL also is
statutorily required to maintain. The defendant again, has shied
from making a statement in the applications for leave to defend,
as to how the amounts received from the plaintiffs were
reflected in the income tax returns which the defendant can be
presumed to be filing and/or in the books of accounts and
balance sheet of SBFL. Though SBFL is not a party to the suits
but the defendant in his capacity as Managing Director of SBFL
was/is in a position to disclose all the said particulars specially
since the monies were routed through the defendant.
CS(OS) 462/2018 & CS(OS) 463/2018 Page 12 of 16
I. It is unbelievable that the plaintiffs, if had wanted to trade in
rice grain would have advanced monies therefor one and a half
years before they are actually claimed to have so traded. The
said version of the defendant is contrary to normal human
conduct and is unbelievable.
J. I have in Raj Narain Vs. HBN Housing Finance Ltd. 2013
SCC OnLine Del 3847 and Renu Aggarwal Vs. Baldev Raj
Sachdeva 2018 SCC OnLine Del 12299 (SCL(C) Nos.30541-
30542/2018 preferred whereagainst was dismissed on 30th
November, 2018) held that "if such unsubstantiated and vague
pleas were to be entitled to grant of leave to defend, I fail to
fathom as to in which cases, leave can be refused and if such
interpretation is to be taken, the same would render the
provisions of Order XXXVII of the CPC nugatory." It was
further held that if on such pleas leave to defend were to be
granted, the same would not serve the purpose for which Order
XXXVII incorporated in the CPC, to provide summary
procedure for disposal of some kind of suits and would result in
leave to defend being granted qua all suits filed under Order
XXXVII of the CPC, making the procedure for disposal thereof
more elaborate rather than summary. Similarly, in Sasumorov
Enterprises Pvt. Ltd. Vs. Odeon Builders Pvt. Ltd. 2018 SCC
OnLine Del 12509 it was held that once the defendant does not
dispute the transaction, amount due whereunder is claimed by
the plaintiff, it is incumbent on the defendant to produce its
statement of account to disprove the claim of the plaintiff and to
CS(OS) 462/2018 & CS(OS) 463/2018 Page 13 of 16
show the status of the said transactions in the books of the
defendant statutorily required to be maintained. It was further
held that the defendant, without producing the same, cannot be
heard to contend that the statement of account produced by
plaintiff is contrary to the books of account of the defendant and
the silence of the defendant in this regard entitles the Court to,
while considering the application for leave to defend, draw
adverse inference against the defendant. It was yet further held
that a defendant cannot be permitted to convert a summary suit
to an ordinary suit, by mere denial and by contending that the
onus is on the plaintiff to prove; Order XXXVII of the CPC, if
so interpreted, will defeat the legislative intent and will make
the procedure for disposal of suits of the class intended to be
summarily decided, longer rather than shorter. It was yet yet
further held that Order XXXVII is concerned with commercial
suits, claim wherein is based on documents and a mere denial of
the document cannot entitle the defendant to leave to defend;
the defendant, in the leave to defend application, is required to
plead all surrounding circumstances concerning the document,
to create a doubt as to authenticity of the document and if the
defendant does not plead so and/or does not produce documents
which in the ordinary course of the transaction ought to be with
the defendant, leave to defend has to be refused. To the same
effect is Versatile Commotrade Private Limited Vs. Balraj
2019 SCC OnLine Del 6558 holding that a defendant in an
Order XXXVII suit cannot be entitled to leave to defend,
CS(OS) 462/2018 & CS(OS) 463/2018 Page 14 of 16
merely by taking a plea and without giving particulars and filing
documents as would logically be available in support of the said
plea and if fails to do so, cannot be entitled to leave to defend. It
was reiterated that if leave to defend suits under Order XXXVII
of the CPC were to be granted merely by taking a plea, even if
does not inspire confidence owing to lack of particulars and
documents, there would be no case in which leave would not be
granted owing to the drafting skills of the Advocates for the
defendants and disposal of the suits under Order XXXVII of the
CPC, instead of being summary, would be lengthier, for having
additional issuance of summons for appearance, summons for
judgment and filing of application for leave to defend and
consideration thereof.
21. Resultantly, the applications for leave to defend are dismissed.
22. The claim of the plaintiffs for pre-suit interest at 15% per annum in
terms of the contract between the parties has to be upheld in the face of the
defendant shying away from disclosing the rate at which reasonable return
was agreed to be given to the plaintiffs.
23. The plaintiffs are thus found entitled to pre-suit interest at the
contractual rate claimed.
24. As far as pendente lite and future interest is concerned, it is deemed
appropriate to award interest at the rate of 10% per annum.
25. Axiomatically, a decree is passed (i) in favour of the plaintiff and
against the defendant in CS(OS) No.462/2018 for recovery of
Rs.3,40,62,500/- with interest at 10% per annum on Rs.2,50,00,000/- with
CS(OS) 462/2018 & CS(OS) 463/2018 Page 15 of 16
effect from date of institution of the suit till realization; and, (ii) in favour of
the plaintiff in CS(OS) No.463/2018 and against the defendant therein for
recovery of Rs.2,72,50,000/- with interest at 10% per annum on the sum of
Rs.2,00,00,000/- from the date of institution of the suit till realization.
26. The plaintiff in both the suits will also be entitled to costs of the suit
with professional fee assessed at Rs.1,50,000/- per suit.
Decree sheets be drawn up.
RAJIV SAHAI ENDLAW, J.
JANUARY 24, 2019 „gsr/bs‟ CS(OS) 462/2018 & CS(OS) 463/2018 Page 16 of 16