Madras High Court
M/S.Kalson Health Care (P) Ltd vs Vinod Kannan on 25 February, 2026
Author: Senthilkumar Ramamoorthy
Bench: Senthilkumar Ramamoorthy
C.S No. 346 of 2016
IN THE HIGH COURT OF JUDICATURE AT MADRAS
Judgment reserved on 11.02.2026
Judgment pronounced on 25.02.2026
CORAM
THE HONOURABLE MR JUSTICE SENTHILKUMAR
RAMAMOORTHY
C.S No. 346 of 2016
1. M/s.Kalson Health Care (P) Ltd.
(A Unit of Ramani Resorts and Hotels Pvt.
Ltd), Rep. by its Director,
Mr.P.R.Shanmugam
No. 8/42, Maharaja Surya Road,
Alwarpet, Chennai 600 018.
2. M/s.Ramani Resorts and Hotels Pvt. Ltd.
Rep. by its Liquidator, Mr. Ashok Velamur
Seshadri, #8/42, Maharaja Surya Road
Alwarpet, Chennai-600 018.
(amended as per order dated 19.08.2024 in
A. No.2761/2024 and time extended as per
order dated 18.09.2024)
3. P.R. Shanmugam,
39/87, Poes Garden
Chennai-600 086.
(amended as per order dated 06.11.2019 in
A. No.7487/2019)
... Plaintiffs
Vs
1. Vinod Kannan
Proprietor of M/s Legend Gym and
partner in M/s Asian Industries
Valves and Instruments, 86,
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C.S No. 346 of 2016
Chamiers Road, Nandanam,
Chennai -600 040.
2. M/s. Asian Industries Valves and
Instruments, Represented by its
partner, Vinod Kannan, No.-b-16,
Industrial Area, Mogappair East,
Chennai-600 050.
3. Mr. Soundararajan @ M.S.Rajan,
Partner in M/s Asian Industries
Valves and Instruments, No. B-16,
Industrial Area, Mogappair East,
Chennai-600 050.
...Defendants
PRAYER: Plaint filed under Order VII Rule 1 & 2 of C.P.C. & Order VII
Rule 1 of the Original Side Rules praying that this Court may be pleased
to pass a judgment and decree:
a. Directing the defendants to jointly and severally pay a sum of
Rs.95,00,000/- (i.e. Rs.50,00,000/- being the advance paid by the
Plaintiffs as advance as per the business agreement, sum of
Rs.30,00,000/- being money spent towards renovation of the gym by the
Plaintiffs along with a sum of Rs.15,00,000/- being interest at the rate of
24% annum on the above sum from the date of cause of action i.e.
17.05.2015 till the date of filing this plaint) along with further interest at
the rate of 24% p.a. on principal amount of Rs.50,00,000/- from the
date of filing this plaint till the date of realisation;
b. Directing the defendants to return the gym equipments installed by
the Plaintiffs in the 1st defendant’s gym, failing which, to pay the
Plaintiffs a sum of Rs.20,00,000/- being the cost of the gym equipments
along with further interest at the rate of 24% p.a. from the date of filing
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C.S No. 346 of 2016
this plaint till the date of realisation;
c. Directing the defendants to jointly and severally pay a sum of
Rs.5,00,000/- as damages for wrongful detention of the Plaintiffs’ gym
equipments along with further interest at the rate of 24% p.a. from the
date of filing this plaint till the date of realisation;
d. A preliminary decree be passed in favour of the Plaintiffs directing the
1st Defendant to render account of profits made by illegally collecting
gym fees from members of the gym, and a final decree be passed in
favour of the 1st Plaintiff for the amount of profits thus found to have
been made by the Defendants after the latter has rendered accounts;
e. Directing the defendants to jointly and severally pay a sum of
Rs.50,00,000/- (i.e. a sum of Rs.30,00,000/-) for the loss of income
through the misappropriation of funds done by the defendants and a
sum of Rs.20,00,000/- towards mental agony) towards damages for the
mental agony and loss suffered by the plaintiffs and
f. directing the Defendants to pay to the Plaintiff the costs of the suit.
For Plaintiff(s): M/s. Jayanthi K. Shah &
Shalma I
For Defendant 1: M/s M.Sriram
K.Paramaguru
For Defendants
2 &3 : Mr. S. M. Loganathan
JUDGMENT
Kalson Health Care (P) Ltd (a unit of Ramani Resorts and Hotels Pvt. Ltd), Ramani Resorts and Hotels Pvt. Ltd and P.R.Shanmugam have 3 / 33 https://www.mhc.tn.gov.in/judis ( Uploaded on: 27/02/2026 08:33:29 pm ) C.S No. 346 of 2016 instituted the suit against Vinod Kannan, proprietor of M/s. Legend Gym and M/s. Asian Industries Valves and Instruments and Mr.Soundararajan @ M.S.Rajan, Partner in M/s. Asian Industries Valves and Instruments. In the suit, the plaintiffs seek a judgment and decree jointly and severally against the three defendants in respect of the following:
(i) a sum of Rs.95,00,000/- with further interest thereon at 24% p.a. from the date of plaint till the date of realisation;
(ii) return of gym equipments or, upon default, payment of a sum of Rs.20,00,000/- with interest thereon at 24% p.a.;
(iii) a sum of Rs.5,00,000/- as damages for wrongful detention of the gym equipments with interest thereon at 24% p.a. from the date of filing of the suit till the date of realisation;
(iv) A preliminary decree directing the 1st defendant to render accounts of profits made by illegally collecting gym fees and a final decree for such profits;
(v) a sum of Rs.50,00,000/- towards damages for the loss of income and mental agony; and
(vi) for costs of the suit.4 / 33
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2. In the plaint, the plaintiffs state that the first and second plaintiffs are closely held private limited companies and that the third plaintiff is a director in both the companies. In the course of business, it is stated that the first plaintiff entered into a Memorandum of Understanding dated 28.02.2015 with the first defendant (the MoU) for the purchase of the business under the name and style of “M/s. Legend Gym” (the Gym). Pursuant thereto, it is stated that a Business Purchase Agreement dated 17.05.2015 (the BPA) was executed by and between the above mentioned parties and the total consideration for the purchase of the gym business was fixed at Rs. 2,25,00,000/-. It is also stated that a sum of Rs.50,00,000/- was paid by RTGS to the second defendant under instructions from the first defendant and that two cheques for an aggregate sum of Rs.1,75,00,000/- were issued by the second plaintiff in favour of the second defendant and were handed over to the first defendant.
3. The plaintiffs further state that they renovated the Gym by investing lakhs of rupees after being put in possession thereof. It is also stated that gym equipments worth approximately Rs.20,00,000/- were shifted to the premises of the Gym from another gym operated by the plaintiffs. As per clause 6 of the BPA, it is stated that the first defendant 5 / 33 https://www.mhc.tn.gov.in/judis ( Uploaded on: 27/02/2026 08:33:29 pm ) C.S No. 346 of 2016 was permitted to function as the Manager of the Gym. According to the plaintiffs, the vendors under the BPA declared and confirmed that the business is free from all encumbrances and that they have the right and power to transfer the same to the purchaser.
4. The plaintiffs assert that they were shocked to learn that the defendants had mortgaged or hypothecated the gym equipments with the Syndicate Bank and availed a loan of Rs.1,50,00,000/-. The plaintiffs also state that they ascertained that the first defendant had taken various other loans and even defaulted in payment of rent to the extent of Rs.50,00,000/- for the Gym premises. Instead of complying with the various obligations under the BPA, the plaintiffs state that the defendants fraudulently collected money from the new members and misappropriated such receipts in the account of the first defendant in the Karur Vysya Bank under Account No.1285135000003147.
5. In these circumstances, it is stated that the plaintiffs approached the first defendant and expressed willingness to proceed with the BPA on condition that the first defendant clears all outstanding dues to the bank, landlord and other lenders. Because the first defendant refused to 6 / 33 https://www.mhc.tn.gov.in/judis ( Uploaded on: 27/02/2026 08:33:29 pm ) C.S No. 346 of 2016 comply with this reasonable request, it is stated that the plaintiffs issued standing instructions to stop payment for the two cheques for sums of Rs.1,00,00,000/- and Rs.75,00,000/- respectively. Thereafter, it is stated that the defendants illegally took possession of the Gym and terminated the BPA.
6. In the written statement of the first defendant, it is stated that Mr. P.R.Shanmugam is not a director of the first plaintiff and that the plaint as framed is not maintainable. It is also stated that the first defendant is not a partner of M/s. Asian Industries Valves and Instruments. According to the first defendant, possession of the premises and transfer of business was to take place only upon receipt of the full consideration of Rs.2,25,00,000/-. The first defendant asserts that the terms of the MoU were given a go-by by the plaintiffs and a clause regarding handing over of possession was inserted in the BPA. The first defendant also states that there was an interval of more than three months between the date of execution of the MoU and the date of execution of the BPA, and that the plaintiffs could have ascertained whether there are any debts before signing the BPA. According to the first defendant, the payment of a sum of Rs.50,00,000/- on the date of signing of the BPA was only for the purpose of returning the said sum to 7 / 33 https://www.mhc.tn.gov.in/judis ( Uploaded on: 27/02/2026 08:33:29 pm ) C.S No. 346 of 2016 the second and third defendants. It is also stated that the purpose of transferring the business was to settle the dues of the Syndicate Bank.
7. The assertion by the plaintiffs that the first defendant had hypothecated the machinery and equipment of the Gym was admitted by the first defendant at paragraph 19 of the written statement. The first defendant asserts that amounts collected for and on behalf of the plaintiffs were re-transferred to the plaintiffs. The first defendant states that the plaintiffs were under an obligation to pay the entire sale consideration and thereafter take over the business, whereas this was not done because the plaintiffs did not have sufficient funds. The first defendant expressly denies the assertion that the plaintiffs had installed equipment in the Gym. It is stated that the only equipment in the Gym was the equipment of the first defendant. The first defendant also expressly denies the assertion that a sum of Rs.30,00,000/- was collected and misappropriated by the said defendant. The first defendant further states that there is no privity of contract between the plaintiffs and the second and third defendants.
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8. A separate written statement was filed by the second and third defendants. In the said written statement, it is stated that the said defendants are not parties either to the MoU or the BPA. The second and third defendants denied having received any cheque from the plaintiffs. They also deny knowledge of letter dated 16.05.2015. They expressly deny the assertion that they acted in concert with the first defendant and played fraud on the plaintiffs.
9. By considering the pleadings, the following issues were framed on 19.07.2018:
“1. Whether the defendants are jointly and severally liable to pay plaintiffs Rs.95 lakhs with interest at the rate of 24% p.a. from 17.05.2015?
2. Whether the defendants are liable to return the Gym equipments installed by the plaintiffs in the first defendant Gym or in the alternative pay a sum of Rs.20 lakhs with interest at the rate of 24% p.a.?
3. Whether the 2nd and 3rd plaintiffs have privity of contract with defendants and consequently have right to sue the defendants?
4. Whether the plaintiff unilaterally extended the date of payment of consideration by fraudulent means over the 1 st defendant and by taking undue advantage of the first 9 / 33 https://www.mhc.tn.gov.in/judis ( Uploaded on: 27/02/2026 08:33:29 pm ) C.S No. 346 of 2016 defendant’s weak financial condition?
5. Whether the suit is bad for misjoinder of parties namely defendants 2 & 3?
6. To what other reliefs?
10. The plaintiff adduced oral evidence by examining Mr.P.R. Shanmugam as P.W. 1. In course of the examination-in-chief of PW1, 18 documents were exhibited as Exs. P1 to P18. The defendants did not examine any witnesses. However, in course of cross-examination of P.W. 1, 5 documents were exhibited by the defendants as Exs. D1 to D5. Counsel and their contentions:
11. Oral arguments on behalf of the plaintiffs were advanced by Ms. Jayanthi K. Shah, learned counsel. Oral arguments on behalf of the first defendant were advanced by Mr. Sriram, learned counsel. Oral arguments on behalf of the second and third defendants were advanced by Mr. S.M.Loganathan, learned counsel.
12. Learned counsel for the plaintiffs submitted that the suit is maintainable, as framed, and that it was instituted pursuant to a board resolution. She also submitted that the second plaintiff was directed to 10 / 33 https://www.mhc.tn.gov.in/judis ( Uploaded on: 27/02/2026 08:33:29 pm ) C.S No. 346 of 2016 be liquidated by order dated 13.07.2023 of the National Company Law Tribunal, Chennai. Pursuant thereto, she submitted that Mr. Ashok Velamur Seshadri was appointed as liquidator and that the liquidator has authorised the continued prosecution of the suit on behalf of the second plaintiff by counsel.
13. Referring to the MoU and the BPA which were exhibited (Exs. P1 & P2), learned counsel submitted that the total sale consideration of Rs.2,25,00,000/- is mentioned therein. Out of this sum, she submitted that a sum of Rs.50,00,000/- was paid on the date of execution of the BPA. As regards the balance, she submitted that the plaintiffs were constrained to not pay the same because the defendants committed a breach of clause 15 of the BPA. Referring to clause 15, she pointed out that it records that the business of the Gym is free from all encumbrances and that the vendor has the power to transfer the same to the purchaser. With regard to proof of receipt of the sum of Rs.50,00,000/-, learned counsel invited my attention to lawyer’s notice dated 08.08.2015 (Ex.P7) to submit that the receipt of the sum of Rs.50,00,000/- is admitted therein.
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14. Referring next to Ex.P11, learned counsel submitted that this is the proposal form of the United India Insurance Company Limited for a standard fire and special perils policy. She pointed out that this document shows that there is a hypothecation/mortgage in favour of the Syndicate Bank with regard to the assets described therein. She also pointed out that it is admitted in paragraph 19 of the written statement that the equipment was hypothecated to the Syndicate Bank. Learned counsel next contended that business of the value of Rs.30,00,000/- was diverted unlawfully to the first defendant. With reference to paragraph 10 of the counter affidavit of Vinod Kannan, she pointed out that it is stated therein that Vinod Kannan retired from the second defendant on 25.11.2013, but that this contradicts the earlier stand of the defendant. She also submitted that the BPA was terminated by the lawyer’s notice (Ex.P7) referred to earlier.
15. In response, learned counsel for the first defendant raised the preliminary objection that the first plaintiff is a private limited company and that Mr.P.R.Shanmugam was not a director at the time of execution of the MoU or at the time of filing of the suit. Therefore, he submitted that the very institution of the suit is unauthorized. Comparing and contrasting the MoU and BPA, he pointed out that the MoU provides for 12 / 33 https://www.mhc.tn.gov.in/judis ( Uploaded on: 27/02/2026 08:33:29 pm ) C.S No. 346 of 2016 handing over of possession after receipt of the total consideration of Rs.2,25,00,000/-, whereas clause 2 of the BPA provides for the immediate hand over of possession. Referring to the BPA, he pointed out that it does not contain schedules providing particulars of assets, customers, etc.
16. As regards the evidence adduced by the plaintiffs, learned counsel submitted that Ex. P3 is an alleged invoice of Grand Decors, but that this document does not prove that the plaintiffs made payments to Grand Decors towards renovation of the interiors of the Gym premises. As regards the list of equipments with the value thereof (Ex. P4), he submitted that it is a document prepared unilaterally by the plaintiffs and that it should not be accorded any probative value. He also pointed out that the lawyer’s notice from the first defendant to the first and third plaintiffs (Ex. P7) was not replied to by the said plaintiffs. As regards Ex. P11, he submitted that it is a proposal for insurance and that the loan availed of from the Syndicate Bank was repaid. Referring to the statement showing amounts due (Ex. P14), he submitted that it is an unsigned statement and cannot be relied upon as evidence. Referring to the counter affidavit dated 20.09.2016 of Vinod Kannan in O.A.No.488 of 2016 (Ex. P17), learned counsel submitted that it is recorded therein 13 / 33 https://www.mhc.tn.gov.in/judis ( Uploaded on: 27/02/2026 08:33:29 pm ) C.S No. 346 of 2016 that the Gym was handed over to the first defendant's landlord on 20.04.2016, and that the said landlord is running the Gym since then. Referring to reply affidavit dated 22.11.2016 (Ex.D1) in O.A. No.488 of 2016 of the third plaintiff on behalf of all the plaintiffs, learned counsel submitted that this document shows that the plaintiffs were aware of the financial condition of the first defendant.
17. Turning to the cross-examination of PW1 on 28.09.2020, learned counsel pointed out that PW1 admitted that the originals of Exs. P1 and P3 to P16 were not filed.
18. In support of these contentions, learned counsel referred to and relied upon the following judgments:
(i) State Bank of Travancore v. Kingston Computers India Private Limited, (2011) 11 SCC 524, restoring the trial Court’s judgment dismissing the suit because it was not instituted on the basis of a valid board resolution.
(ii) Swadharma Swarajya Sangha v. Indian Commerce and Industries co. Pvt. Ltd, 1999 (98) Comp Cases 151, holding that the suit was not maintainable because it was not instituted with the approval of the board of directors.
(iii) S.P. Chengalvaraya Naidu (dead) by LRs v. Jagannath 14 / 33 https://www.mhc.tn.gov.in/judis ( Uploaded on: 27/02/2026 08:33:29 pm ) C.S No. 346 of 2016 (dead) by Lrs and Others, (1194) 1 SCC 1;
(iv) H.Siddiqui (dead) by LRs v. A.Ramalingam, (2011) 4 SCC 240, regarding the conditions to be satisfied for permitting secondary evidence.
19. Learned counsel for the second and third defendants submitted that the said defendants were not parties either to the MoU or the BPA. In the absence of privity of contract, he submitted that the suit is liable to be dismissed against the second and third defendants.
20. By way of rejoinder, learned counsel for the plaintiffs submitted that the suit was presented along with a board resolution. She also handed over a copy thereof. Referring to the counter affidavit of Vinod Kannan (Ex.P17), especially paragraph 23 thereof, she submitted that there was an admission that the first defendant received payments from Gym members for and on behalf of the plaintiffs. She added that he did not hand over such payments to the plaintiffs.
Discussion, analysis and conclusion Maintainability
21. Although no issue was framed with regard to the maintainability of the suit, the first defendant contended that the suit is 15 / 33 https://www.mhc.tn.gov.in/judis ( Uploaded on: 27/02/2026 08:33:29 pm ) C.S No. 346 of 2016 not maintainable because it was not duly authorised by a resolution of the board of directors. Learned counsel for the first defendant referred to paragraph 3 of the plaint wherein the plaintiffs stated that the first and second plaintiffs are closely held private limited companies and that the third plaintiff is a director of both the companies. On that basis, he submitted that the institution of the suit should have been authorised by a resolution of the board of directors of not only the first plaintiff but also the second plaintiff.
22. In response, learned counsel for the plaintiffs submitted that the first plaintiff is a unit of the second plaintiff and that the statement in paragraph 3 of the plaint is not accurate. Learned counsel also stated that the plaint was numbered after examining the board resolution. She handed over a copy of the board resolution passed at the meeting on 04.01.2016.
23. Both Exs. P1 and P2 were executed by M/s.Kalson Health Care, which is described as a unit of Sri Ramani Resorts and Hotels Pvt. Ltd. A unit of a limited company is not a juristic entity. Because it is not a juristic entity, any resolution for the institution of proceedings should be 16 / 33 https://www.mhc.tn.gov.in/judis ( Uploaded on: 27/02/2026 08:33:29 pm ) C.S No. 346 of 2016 authorised by the juristic entity. The resolution filed by learned counsel for the plaintiffs is a resolution of the board of directors of Sri Ramani and Resorts and Hotels Pvt. Ltd., which is the second plaintiff. In relevant part, the resolution reads as under:
“RESOLVED THAT Mr.P.R. SHANMUGAM MANGING DIRECTOR and KALSAN HEALTH CARE (A UNIT OF SRI RAMANI RESORTS AND HOTELS PVT LTD) be and is hereby authorised in the matter of legends gym and related parties to initiate recovery proceedings and to sign Vakkalat, affidavit, proof affidavit, deeds, agreement, to appear in evidence on oath, to produce/to collect the documents either through court or out of the court and/or any other paper relating to effectively carry out and to do all such other act and things directly related or incidental to the company as may be required in connection with all or any of the litigation to be initiated including suit to be filed by the company in anywhere in court of India”.
24. Although a copy of the resolution was not exhibited in course of trial, a copy was filed in Court after serving a copy thereof on learned counsel for the defendants. In United Bank of India v. Naresh Kumar and Others, (1996) 6 SCC 660 ('United Bank of India'), the Hon'ble Supreme Court concluded that an allegation that the suit was not duly 17 / 33 https://www.mhc.tn.gov.in/judis ( Uploaded on: 27/02/2026 08:33:29 pm ) C.S No. 346 of 2016 authorised may be defended by providing evidence thereof even at a later stage. The Hon’ble Supreme Court also held that it is possible to ratify the institution of the suit subsequently. Paragraph 10, in relevant part, as set out below:
“It cannot be disputed that a company like the appellant can sue and be sued in its own name. Under Order 6 Rule 14 of the Code of Civil Procedure a pleading is required to be signed by the party and its pleader, if any. As a company is a juristic entity it is obvious that some person has to sign the pleadings on behalf of the company. Order 29 Rule 1 of the Code of Civil Procedure, therefore, provides that in a suit by or against a corporation the Secretary or any Director or other Principal Officer of the corporation who is able to depose to the facts of the case might sign and verify on behalf of the company. Reading Order 6 Rule 14 together with Order 29 Rule 1 of the Code of Civil Procedure it would appear that even in the absence of any formal letter of authority or power of attorney having been executed a person referred to in Rule 1 of Order 29 can, by virtue of the office which he holds, sign and verify the pleadings on behalf of the corporation. In addition thereto and de hors Order 29 Rule 1 of the Code of Civil Procedure, as a company is a juristic entity, it can duly authorise any person to sign the plaint or the written statement on its behalf and this would be regarded as sufficient compliance with the provisions of Order 6 Rule 14 of the Code of Civil Procedure. A person may be expressly authorised to sign the pleadings on 18 / 33 https://www.mhc.tn.gov.in/judis ( Uploaded on: 27/02/2026 08:33:29 pm ) C.S No. 346 of 2016 behalf of the company, for example by the Board of Directors passing a resolution to that effect or by a power of attorney being executed in favour of any individual. In absence thereof and in cases where pleadings have been signed by one of its officers a corporation can ratify the said action of its officer in signing the pleadings. Such ratification can be express or implied. The court can, on the basis of the evidence on record, and after taking all the circumstances of the case, specially with regard to the conduct of the trial, come to the conclusion that the corporation had ratified the act of signing of the pleading by its officer.”
25. The second plaintiff is currently a company in liquidation, represented by its liquidator, Mr.Ashok Velamur Seshadri. The said liquidator has verified the amended plaint. He has also authorized counsel on record for the plaintiffs to continue to prosecute the suit. Considering these aspects, I overrule the objection of the first defendant that the suit was not duly instituted.
Issue No.5
26. Issue No.5 pertains to whether the suit is bad for misjoinder of defendants 2 and 3. The second defendant is a partnership firm. The third defendant has been arrayed in the capacity of partner of the second 19 / 33 https://www.mhc.tn.gov.in/judis ( Uploaded on: 27/02/2026 08:33:29 pm ) C.S No. 346 of 2016 defendant. After recording the total sale consideration of Rs.2,25,00,000/- in clause 1 of the BPA (Ex.P2), particulars of cheques issued towards payment of such total sale consideration are recorded in a table in clause 1 thereof. Copies of the cheques are appended to the BPA. On perusal, it is noticeable that all three cheques were issued by the second plaintiff to the second defendant. Out of these three cheques, the agreed position is that the cheque for Rs.50,00,000/- bearing cheque No.326400 dated 12.05.2015 and drawn on the Punjab National Bank was cleared. In lawyer’s notice dated 08.08.2015 from the first defendant to the second and third defendants (Ex P.7), it is stated at paragraph 6 thereof, as under:
“ 6. My client states that on 19-05-2015 the first tranche under the BPA being a sum of Rs.50.00 Lakhs was paid to my client by the 2nd of you from the bank account of the 1st of you through Cheque No.326400 dated 17.05.2015. Since the cheque was realized, my client believed that the 1st and 2nd of you would fulfil the obligations under the BPA including the execution of the sale agreement. On this basis, the members of Gym belonging to the 2nd of you were allowed to use my client's Gym for free of cost. This apart, the revenues earned for the period 17-05-2015 to 25-07-2015 were completely taken by the 2nd of you. My client did not receive a single rupee from the profits made by Legends Gym for the 20 / 33 https://www.mhc.tn.gov.in/judis ( Uploaded on: 27/02/2026 08:33:29 pm ) C.S No. 346 of 2016 period 17-05-2015 to 25-07-2015 during which the entire management and control vested only with you both.
Therefore, my client has actually lost a sum of Rs.25.00 Lakhs towards revenue alone. While you both had received the benefit of management and control of my client's gym, you had failed to pay the monthly outgoings such as Rent, Electricity, Water, Maintenance & Amenities charges and Security, which aggregates to sum of Rs.16.00 Lakhs. Therefore, although you had paid to my client a sum of Rs.50.00 Lakhs, you had already received benefits from my client worth Rs.41.00 Lakhs.”
27. Thus, it is clear that the second plaintiff paid a sum of Rs.50,00,000/- to the second defendant on instructions from the first defendant. The receipt of the sum was admitted and acknowledged by the first defendant through his counsel. As noticed earlier, the other cheques, which were subsequently not cleared, were also issued in the name of the second defendant. The conclusion that follows is that these defendants are proper parties, whose presence is required for the effective adjudication of all issues arising for consideration in the suit. Hence, I conclude that the suit is not liable to be dismissed for misjoinder of defendants 2 and 3. Issue No.5 is thus decided in favour of the plaintiffs and against the defendants.
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28. Issue No.1 relates to whether the defendants are jointly and severally liable to pay plaintiffs the sum of Rs.95,00,000/- with interest thereon at the rate of 24% p.a. from 17.05.2015. Issue No.3 relates to whether there is privity of contract between the second and third plaintiffs and the defendants and consequently whether there is a right to sue the defendants. I intend to first deal with Issue No.3.
29. The MoU (Ex.P1) was executed by and between Mr.Vinod Kannan, Proprietor, Legend Gym, and Kalson Health Care (A unit of Sri Ramani Resorts and Hotels Pvt. Ltd). The BPA (Ex.P2) was also executed by the same parties, i.e. parties to Ex.P1. The only link with the second and third defendants is the issuance of cheques in the name of the second defendant by Sri Ramani Resorts and Hotels Pvt. Ltd (the second plaintiff), which is a partnership firm in which the third defendant is a partner, pursuant to instructions from the first defendant. Merely on this basis, it cannot be said that there is privity of contract between the plaintiffs and the second and third defendants. In the absence of privity, the plaintiffs are not entitled to claim monetary or other relief against the second and third defendants. Issue No.3 is disposed of on these terms. I consider Issue No.1 next.
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30. The composite claim of the sum of Rs.95,00,000/- consists of a sum of Rs.50,00,000/- towards the advance paid by the plaintiffs; a sum of Rs.30,00,000/- towards amounts allegedly spent on renovation; and a sum of Rs.15,00,000/- towards interest. As discussed earlier, the sum of Rs.50,00,000/- was paid under cheque No.326400 dated 17.05.2015, and the receipt thereof was acknowledged by the first defendant inter alia in Ex.P7. In paragraph 15 of the written statement of the first defendant, the first defendant responded to the averments in paragraph 6 of the plaint that a sum of Rs.50,00,000/- was paid under instructions of the first defendant to the second defendant. In relevant part, the first defendant stated as under:
“The averments made in para 6 are hereby denied the 1st payment Rs. 50,00,000/- on the date of signing of the business purchase agreement was only for the purpose of return of the borrowal to 2nd defendant and 3rd defendant.” On a combined reading of Ex.P7 and paragraph 15 of the written statement, there is no doubt that the first defendant admitted and acknowledged receipt of the sum of Rs.50,00,000/- from the second plaintiff.23 / 33
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31. In Ex.P7, the first defendant stated that the members of a gym belonging to the third plaintiff (P.R.Shanmugam) were allowed to use the Gym and that the revenues earned between 17.05.2015 and 25.07.2015 were appropriated by the third plaintiff. It is stated that a sum of Rs.25,00,000/- was earned as revenue and that this represents a loss for the first defendant. It is also stated that an aggregate sum of Rs.16,00,000/- was payable by the first and third plaintiffs towards rent, electricity, water, maintenance, amenity charges and security expenses, but the same was not paid. The first defendant has thus stated that benefits worth Rs.41,00,000/- accrued to the first and third plaintiffs.
32. The first defendant did not adduce evidence to establish that the plaintiffs benefitted to the extent of Rs.41,00,000/- after paying a sum of Rs.50,00,000/- to the first defendant through the second defendant. In fact, the defendants did not field a witness in this suit. In Ex.P7, it is also recorded that the BPA stands terminated on account of wilful breach by the plaintiffs.
33. Upon consideration of the evidence adduced by the plaintiffs and in view of the lack of any evidence on the part of the defendants, I conclude that the plaintiffs have established that a sum of Rs.50,00,000/- was received by the first defendant through the second 24 / 33 https://www.mhc.tn.gov.in/judis ( Uploaded on: 27/02/2026 08:33:29 pm ) C.S No. 346 of 2016 defendant. I also conclude that the defendants failed to establish that the plaintiffs received benefits of the value of Rs.41,00,000/- pursuant to the BPA.
34. The next aspect to be considered is whether the plaintiffs have established that a sum of Rs.30,00,000/- was incurred as expenditure for the renovation of the Gym by the plaintiffs. In support of the claim towards renovation, the plaintiffs exhibited invoice dated 10.06.2015 of M/s. Grand Decors (Ex. P3). Said invoice contains the buyer's name. The buyer's name mentioned therein is that of the first plaintiff. It also contains an address. The address mentioned therein is the address of M/s. Legend Gym as per the MoU (Ex.P1) and the BPA (Ex.P2). The invoice refers to the supply of mirrors, vitrified tiles, etc. The total invoice value is Rs.25,68,972/-. There is, however, no evidence that such supplies were made by Grand Decors and received by the plaintiffs or that the plaintiffs made payment of a sum of Rs.25,68,972/- to M/s.Grand Decors. Apart from this document, there is no evidence with regard to the plaintiffs incurring an expenditure of Rs.30,00,000/-
towards renovation. Therefore, the claim for a sum of Rs.30,00,000/- fails.
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35. As regards the sum of Rs.50,00,000/-, the plaintiffs are entitled to interest. The MoU and the BPA do not envisage a situation wherein the parties do not fulfil their respective obligations or provide for an applicable interest rate in such event. Considering the totality of facts and circumstances, including that the plaintiffs did not pay the full sale consideration by citing undisclosed liabilities thereby resulting in the failure of the BPA, the nature of the transaction, the absence of a contractual rate of interest and prevalent interest and inflation rates, I conclude that the second plaintiff is entitled to interest at the rate of 9% p.a. on the sum of Rs.50,00,000/- from 17.05.2015 (date of payment) till the date of realisation. Issue Nos.1 and 3 are disposed of on the above terms.
Issue Nos.2 and 4
36. Issue No.2 relates to whether the defendants are liable to return the gym equipments or in the alternative pay a sum of Rs.20,00,000/- with interest at the rate of 24% p.a. to the plaintiffs. Plaintiffs rely on Ex. P4. Ex.P4 is a document signed only by the first plaintiff through the third plaintiff. This specifies the name of M/s.Legend Gym as the supplier and the name of the first plaintiff as the buyer. It contains particulars of gym equipment. There is nothing to establish that this 26 / 33 https://www.mhc.tn.gov.in/judis ( Uploaded on: 27/02/2026 08:33:29 pm ) C.S No. 346 of 2016 invoice was part of the BPA. Even proceeding on the basis that this document was prepared at the time of execution of the BPA, the subsequent developments lead to the conclusion that the plaintiffs paid only a sum of Rs.50,00,000/- out of a total sum of Rs.2,25,00,000/-. The BPA was terminated pursuant to Ex.P7. In these circumstances, the plaintiffs are not entitled to gym equipment intended to be transferred under the BPA for the sum of Rs.2,25,00,000/-. As held earlier, the plaintiffs are only entitled to recover the advance of Rs.50,00,000/- along with interest thereon.
37. While the plaintiffs also assert that gym equipments of the plaintiffs were shifted and installed in the premises of M/s.Legend Gym, there is absolutely no evidence regarding either the nature of such equipments or the value thereof. Therefore, the plaintiffs are not entitled to an order directing either the return of all gym equipments or to a sum of Rs.20,00,000/- in the alternative. Issue No.2 is therefore decided in favour of the defendants and against the plaintiffs.
38. Issue No.4 pertains to whether the plaintiffs unilaterally extended the date of payment of consideration by taking undue 27 / 33 https://www.mhc.tn.gov.in/judis ( Uploaded on: 27/02/2026 08:33:29 pm ) C.S No. 346 of 2016 advantage of the first defendant's weak financial condition. As narrated earlier, the agreed position is that the plaintiffs did not pay the full sale consideration. As a result, the first defendant terminated the BPA. In paragraph 34 of the counter affidavit dated 20.09.2016 of Vinod Kannan in O.A.No.489 of 2016, it is stated that the Gym was handed over to the first defendant’s landlord, and that the said landlord is running the Gym since 20.04.2016. In view of these developments, Issue No.4 has become entirely inconsequential. The said issue is disposed of on the terms set out above.
Issue No.6:
39. The only remaining issue is with regard to whether any other relief should be granted to the parties to the suit. The plaintiffs have partly succeeded with regard to recovery of a sum of Rs.50,00,000/- with interest thereon. As the partly successful party, the plaintiffs are entitled to proportionate costs. The plaintiffs paid aggregate court fees of Rs.1,84,175/- and the costs shall include Rs.60,000 towards court fees. The defendants shall pay an aggregate sum of Rs.2,50,000/- to the plaintiffs towards partial court fee, lawyer’s fees and expenses. 28 / 33 https://www.mhc.tn.gov.in/judis ( Uploaded on: 27/02/2026 08:33:29 pm ) C.S No. 346 of 2016
40. In the result, the suit is partly decreed by directing the first defendant to pay the second plaintiff a sum of Rs.50,00,000/- with interest thereon at 9% p.a. from 17.05.2015 till the date of realisation. The first defendant is also directed to pay a sum of Rs.2,50,000/- to the second plaintiff as costs.
25-02-2026 Neutral Citation: Yes / No kal Plaintiffs' witness:
1. Mr.P.R.Shanmugam - P.W.1 Defendant's witness:
Nil Documents exhibited by the plaintiffs:
Exhibits Description
Ex.P1 The xerox copy of Memorandum of Understanding dated
28.02.2015.
Ex.P2 The xerox copy of Business Purchase Agreement dated
17.05.2015.
Ex.P3 The xerox copy of receipt of renovation dated 10.06.2015.
Ex.P4 The xerox copy of list of equipments and its value dated
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C.S No. 346 of 2016
15.03.2015.
Ex.P5 The xerox copy of Daily Collection Report of Alwarpet and
Chamiers Road Branch for the month of May, June and July 2015 dated May 2015.
Ex.P6 The xerox copy of Notice affixed at the entrance of the gym dated 25.07.2015.
Ex.P7 The xerox copy of Legal notice issued by 1 st defendant
dated 08.08.2015
Ex.P8 The xerox copy of FIR dated 18.08.2015.
Ex.P9 The xerox copy of Board Resolution dated 17.04.2015
Ex.P10 The xerox copy of Bail order dated 07.09.2015.
Ex.P11 The xerox copy of Loan proposal in favour of 1 st defendant
dated 2014
Ex.P12 The xerox copy of notice from Commercial Tax
Department to 1st defendant dated 03.06.2015
Ex.P13 The xerox copy of EB card for Chamiers Road gym
Ex.P14 The xerox copy of statement including amounts due by 1 st
defendant to 3rd parties.
Ex.P15 The xerox copy of letter from 1st defendant dated
16.05.2015.
Ex.P16 The xerox copy of Email sent by 1 st defendant dated
23.06.2016
Ex.P17 The court copy of counter filed by all defendants in
A.Nos.488,489,2891 and 2892 of 2016 in C.S.No.346 of 2016 Ex.P18 The court copy of Advocate Commissioner Report dated 07.02.2018 30 / 33 https://www.mhc.tn.gov.in/judis ( Uploaded on: 27/02/2026 08:33:29 pm ) C.S No. 346 of 2016 Defendants’ documents marked during cross-examination of PW1:
Exhibits Description
Ex.D1 Reply affidavit filed by the plaintiff
dated 22.11.2016.
Ex.D2 FIR filed against the plaintiff dated
30.06.2015
Ex.D3 FIR filed against the plaintiff dated
25.08.2015.
Ex.D4 FIR filed against the plaintiff dated
25.08.2025
Ex.D5 Form DIR-12 of Registrar of
Companies
25.02.2026
kal
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C.S No. 346 of 2016
To
1. Vinod Kannan
Proprietor of M/s Legend Gym and
partner in M/s.Asian Industries
Valves and Instruments, 86,
Chamiers Road, Nandanam,
Chennai -600 040.
2. M/s.Asian Industries Valves and
Instruments, Represented by its
partner Vinod Kannan, No.-b-16,
Industrial Area, Mogappair East,
Chennai-600 050.
3. Mr.Soundararajan @ M.S.Rajan,
Partner in M/s.Asian Industries
Valves and Instruments, No.-b-16,
Industrial Area, Mogappair East,
Chennai-600 050.
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C.S No. 346 of 2016
SENTHILKUMAR RAMAMOORTHY J.
KAL
Pre-delivery judgment made in
C.S.No.346 of 2016
25-02-2026
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