Bombay High Court
Mohammed Azharuddin vs Toucan Agro And Developers Pvt. Ltd on 6 October, 2022
Author: Gs Patel
Bench: G.S.Patel, Gauri Godse
Mohammed Azharuddin v Toucan Agro & Developers Pvt Ltd
905-COMAP-259-2018+260-2018.doc
Shephali
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION
IN ITS COMMERCIAL APPELLATE DIVISION
COMMERCIAL APPEAL NO. 259 OF 2018
IN
NOTICE OF MOTION NO. 388 OF 2017
IN
COMMERCIAL SUIT NO. 189 OF 2016
WITH
NOTICE OF MOTION NO. 582 OF 2018
IN
COMMERCIAL APPEAL NO. 259 OF 2018
Mohammed Azharduddin,
Aged 55 years, Occupation: Business,
Residing at Plot No. 948/A, Road No. 47,
Jubilee Hills, Hyderabad,
District Hyderabad,
Telangana - 33. ...Appellant
~ versus ~
Toucan Agro And Developers
Pvt Ltd,
A Company registered under the companies
Act 1956 and having its registered office at
Construction House "B", 623, Linking
Road, Opp. Khar Telephone Exchange,
Khar (West), Mumbai 400 052. ...Respondent
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Mohammed Azharuddin v Toucan Agro & Developers Pvt Ltd
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A PPEARANCES
for the appellant Mr Dushyant S Pagare, with Urmila
Purekar.
for respondent Mr Sharan Jagtiani, Senior
Advocate, with Surbhi Agarwal
& Madhu Hiraskar, i/b Mr
Saluja.
COMMERCIAL APPEAL NO. 260 OF 2018
IN
SUMMONS FOR JUDGMENT NO. 25 OF 2017
IN
COMMERCIAL SUIT NO. 189 OF 2016
WITH
NOTICE OF MOTION NO. 583 OF 2018
IN
COMMERCIAL APPEAL NO. 260 OF 2018
Mohammed Azharduddin,
Aged 55 years, Occupation: Business,
Residing at Plot No. 948/A, Road No. 47,
Jubilee Hills, Hyderabad,
District Hyderabad,
Telangana - 33. ...Appellant
~ versus ~
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Mohammed Azharuddin v Toucan Agro & Developers Pvt Ltd
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Toucan Agro And Developers
Pvt Ltd,
A Company registered under the companies
Act 1956 and having its registered office at
Construction House "B", 623, Linking
Road, Opp. Khar Telephone Exchange,
Khar (West), Mumbai 400 052. ...Respondent
A PPEARANCES
for the appellant Mr Karl Tamboly, with Malcom
Siganporia, Diwakar Singh,
Kajal Singh & Kishore Salunke.
for respondent Mr Sharan Jagtiani, Senior
Advocate, with Surbhi Agarwal
& Madhu Hiraskar, i/b Mr
Saluja.
CORAM : G.S.Patel &
Gauri Godse, JJ
DATED : 6th October 2022
ORAL JUDGMENT (Per GS Patel J):-
1. Although the matters are placed on board for directions today, by consent of the parties, these are taken up for final disposal.
2. There several Appeals clubbed together and tagged before us. The present order deals only with two of these Appeals, namely, Commercial Appeal No. 259 of 2018 and Commercial Appeal No. 260 of 2018. There are two Appeals because, by a common order of Page 3 of 17 6th October 2022 ::: Uploaded on - 11/10/2022 ::: Downloaded on - 25/12/2022 03:34:50 ::: Mohammed Azharuddin v Toucan Agro & Developers Pvt Ltd 905-COMAP-259-2018+260-2018.doc 20th March 2018, the learned Single Judge, SC Gupte J, disposed of not only a Summons for Judgment No. 25 of 2017 in Commercial Suit No. 189 of 2016 but also a Notice of Motion No. 388 of 2017 in that very Commercial Suit.
3. The Appellant in both Appeals is Mohammed Azharuddin, the well-known former Test Cricketer. He was the original Defendant in the Commercial Suit. The Summons for Judgment was by the Plaintiff ("Toucan Agro"), a real estate development company. The Notice of Motion was filed by Azharuddin under Section 8 of the Arbitration and Conciliation Act 1996.
4. A copy of the Plaint in the Summary Suit is at page 177 of the Appeal paper-book in Commercial Appeal No. 260 of 2018. The solitary prayer below paragraph 32 at pages 190 and 191 reads thus:
"32. THE PLAINTIFF THEREFORE PRAYS THAT:
(a) The Defendant be ordered and decree to pay to Plaintiff a sum of Rs.8,26,87,500/- being the amount due and payable under the dishonoured Cheques together with the interest at the ate of 18% from the date of dishonour of cheque till the date of filing of Suit and further Interest at the rate of 18% p.a. or at such other rate as this Hon'ble Court may deem fit and proper on the sum of Rs.
6,75,00,000/- from the date of filing of suit till payment and or realization thereof."
5. The particulars of claim, Exhibit "V" to the Plaint, are to be found at page 294. This is reproduced below.
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PARTICULARS OF CLAIM
SR. NO PARTICULARS AMOUNT
1. Amount due under the Cheque 5,00,00,000/-
bearing No 579779 dated
15/08/2015
2. Amount due under the Cheque 1,00,00,000/-
bearing No 579780 dated
15/08/2014
3. Amount due under the Cheque 75,00,000/-
bearing No 579782 dated
15/08/2014
4. Add Interest from the date of 1,51,87,500/-
dishonour dated 22/08/2014
till 22/11/2015 at the rate of
18% p.a. on Rs. 6,75,00,000/-
5 Grand Total 8,26,87,500/-
6. Paragraphs 23 and 24 of the Plaint at pages 188 and 189 read as follows:
"23. The Plaintiff states that the Plaintiff by this action now seeks to recover a sum of Rs.7,96,50,000/- being the amount due and payable by the Defendant to the Plaintiff Company together with the interest at the rate of 18% from the date of the dishonour of cheques out of which Rs.6.75,00,000/- the amount due under the Dishonoured Cheques and the said Writing dated 7th May 2014 and Rs.1,51,87,500/- is the interest at the rate of 18% from the date of Dishonour of cheque till the date of filing of the Suit as more particularly set out in the Particulars of Claim marked as Exhibit "V" to the Plaint.Page 5 of 17
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24. The Plaintiff states that Supplementary MOU dated 24th October 2010 and the Supplementary Writings dated 21st November 2012, 29th April 2013, 27th July 2013, 20th November 2013 and 7th May 2014 are all executed by the Defendant in favour of the Plaintiff admitting his liability and further the issuance of the Post dated Cheques towards the repayment as per the said MOU, Supplementary MOU and Writings constitute a valid written contract between the parties and since the transaction being commercial in nature and as per the provision of the Contract Act and the Negotiable Instrument Act the Plaintiffs are entitled to claim interest from the Defendant and Defendant is liable to pay interest at the rate of 18% from the date of Dishonour of Cheque as per the provision of section 80 of the N.I.Act and further interest at the rate of 18% or at such other ate from the date of filing of the suit till the date of payment or at such other rate as this Hon'ble court may deem fit and proper depending upon the facts and circumstance of the case."
7. Mr Jagtiani for the original Plaintiff/Respondent in Appeal is correct in saying that the Plaint was brought solely on the basis of dishonoured cheques and not on the basis of the Writing and Memoranda of Understanding referred to in paragraph 24. The cause of action is set out in paragraph 23, not paragraph 24.
8. By the impugned order, Gupte J granted conditional leave to defend upon Azharuddin depositing an amount of Rs.6.75 crores within eight weeks. Then there were additional directions.
9. An Appeal against an order of conditional leave to defend on a Summons for Judgment in a Commercial Summary Suit does not lie Page 6 of 17 6th October 2022 ::: Uploaded on - 11/10/2022 ::: Downloaded on - 25/12/2022 03:34:50 ::: Mohammed Azharuddin v Toucan Agro & Developers Pvt Ltd 905-COMAP-259-2018+260-2018.doc and is not maintainable under Section 13 of the Commercial Courts Act 2015. We have recently delivered a reasoned judgment on this aspect of the matter, with particular reference to orders of conditional leave to defend in commercial summary suits in SKIL Himachal & Tourism Pvt Ltd & Ors v IL&FS Financial Services Ltd & Ors,1
10. For the reasons set out in that judgment, Commercial Appeal No. 260 of 2018 must fail. It is not maintainable. It is accordingly dismissed.
11. This leaves the question of whether the order of Gupte J on Azharuddin's Motion under Section 8 of the Arbitration Act calls for interference.
12. This requires a brief analysis of the relevant facts. Toucon Agro and Azharuddin had a contractual relationship under a Memorandum of Understanding ("MoU") dated 15th January 2008. A copy is at Exhibit "A1" to the Plaint. Azharuddin was described as "Confirming Party No.1" in that document. There was a second Confirming Party. Then there were four entities named as "Procurers". These or some of them are the Appellants in the other Appeals that are before us today. We will be hearing those Appeals separately. The transaction in contemplation was that the so-called four Procurers would obtain good and marketable title to a large tract of land in the aggregate of about 478 acres in Taluka Devanahalli, Bengaluru Rural District from the original landowners, 1 Commercial Appeal (L) No. 95 OF 2020, with other appeals, decided on 22nd September 2022.
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13. Two years later, on 24th October 2010, the parties executed a Supplementary MoU to extend time by 120 days to enable the Procurers to fulfil their obligations. This time was further extended by a Supplementary Writing dated 11th April 2011. The second extension was by another 120 days.
14. In the Supplementary Writing, Azharuddin was now shown as one of the Procurers. On 21st November 2012, Azharuddin came to Tocuan Agro's Mumbai office and signed yet another Supplementary Writing. He agreed that the original four Procurers had not performed their obligations under the MoU, even within the twice-extended time. Two of the original Procurers had paid Rs.50 lakhs each to Azharuddin from the Rs.2.60 crores they had received from Toucan Agro. Azharuddin had effectively received Rs.2 crores from Toucan Agro. He gave Toucan Agro a post-dated cheque of 31st March 2013 for Rs.5 crores. On 31st March 2013, that cheque was dishonoured for insufficiency of funds. Toucan Agro, through its Advocate, issued a notice under Section 138 of the Negotiable Instruments Act ("the NI Act") on 18th April 2013. A few days later, on 29th April 2013, Azharuddin came back to Toucan Agro's office in Mumbai. He now signed yet another Supplementary Writing requesting that proceedings not be initiated against him for this dishonour and gave two post-dated cheques of Rs. 5 crores and Page 8 of 17 6th October 2022 ::: Uploaded on - 11/10/2022 ::: Downloaded on - 25/12/2022 03:34:50 ::: Mohammed Azharuddin v Toucan Agro & Developers Pvt Ltd 905-COMAP-259-2018+260-2018.doc Rs. 30 lakhs towards interest. Both cheques were dated 30th June 2013. On 30th June 2013, both cheques were dishonoured for insufficiency of funds. Toucan Agro's Advocate issued another notice on 26th July 2013 under Section 138 of the NI Act.
15. Back came Azharuddin to Toucan Agro's Mumbai office on 27th July 2013. He once again gave two post-dated cheques of 30th September 2013 in the amounts of Rs. 5 crores and Rs. 60 lakhs (towards interest). These cheques were also dishonoured on presentment for insufficiency of funds and Toucan Agro's Advocate issued a third Section 138 notice.
16. On 28th November 2013, Azharuddin for the fourth time came to Toucan Agro in Mumbai with the same request and now handed over three post-dated cheques: one dated 10th December 2013 for Rs. 1 crore, a second dated 28th February 2014 for Rs. 4 crores and a third also dated 28th February 2014 towards interest in the amount of Rs. 1 crore. On 28th November 2013, Azharuddin wrote to his bankers, the State Bank of India, saying that he had issued the cheques and authorised the State Bank of India to clear them when presented. He then requested the Plaintiff not to deposit these three post-dated cheques and sought more time to make payment. On 7th May 2014, Azharuddin visited Toucan Agro's office in Mumbai and issued a fifth Supplementary Writing. This time he gave Toucan Agro three post-dated cheques of 15th August 2014 for Rs. 5 crores, Rs. 1 crore and, towards interest, Rs. 75 lakhs.
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17. On 15th August 2014 (or presumably a day after), all three cheques were dishonoured for insufficiency of funds. Memos of the dishonoured cheques are on record. Yet another notice under Section 138 of the NI Act followed on 18th September/20th September 2014.
18. By our count, Azharuddin had executed five Supplement Writings. By any reckoning, all five sets of cheques were dishonoured on presentment. Any single dishonour would have been sufficient as a foundation as a Summary Suit. Beyond the first dishonour, the others were an indulgence by Toucan Agro. Azharuddin kept at this for two full years from November 2012 to May 2014.
19. Some of these facts are compactly noted in the impugned order. There is some controversy about Azharuddin having shifted address and notices not being delivered, but that need not detain us.
20. As to the Application under Section 8, we believe it is thoroughly misconceived. The dispute is not in regard the payments under the MoUs/Supplementary MoUs at all. Under those Agreements, Azharuddin, first as Confirming Party and then as a Procurer, was to be the recipient of payment upon successful completion of the transaction, i.e., obtaining clear and marketable titles to the lands in question in favour of Toucan Agro. The cheque payments on which alone the Summary Suit is based do not relate to payments to be made under the MoUs to Azharuddin. The transaction had evidently failed but Azharuddin had received Page 10 of 17 6th October 2022 ::: Uploaded on - 11/10/2022 ::: Downloaded on - 25/12/2022 03:34:50 ::: Mohammed Azharuddin v Toucan Agro & Developers Pvt Ltd 905-COMAP-259-2018+260-2018.doc amounts either directly from Toucan Agro or from the original Procurers. On a failure of the transaction, he was bound to repay Toucan Agro.
21. If there was any doubt about this, it is put to rest by Azharuddin's own letter of 7th May 2014. This is the date on which Azharuddin came to Toucan Agro for the fifth time pleading for clemency. It is at this time that he issued the fifth set of post-dated cheques, all of which bounced. A copy this letter is at page 259 of the Appeal paper book in Appeal No 260 of 2018. There is no dispute about its execution. It is from Azharuddin and addressed to Toucan Agro. Paragraph 1 narrates the MoU. Paragraph 2 says that Rs. 8.8 crores was paid by Toucan Agro to the Procurers under the MoU as part consideration. In paragraph 3, Azharuddin accepts that Procurers failed to fulfil their obligations even within the extended time. Consequently, by his Writing of 21st November 2012, Azharuddin had agreed to refund to Toucan Agro the amount of Rs. 1 crore paid by Toucan Agro to Azharuddin under the MoU together with Rs 50 lakhs that he received from one of the original Procurers, another Rs. 50 lakhs that he had received from another Procurer. In addition, Azharuddin agreed that an amount of Rs. 3 crores was payable by him as his share of liquidated damages or compensation on account of mesne profits and interest.
22. Then from paragraph 4 of this letter, Azharuddin details the various writings he executed, the post-dated cheques that he gave and the fact of dishonour. Paragraphs 11 to 14 at pages 260 and 261 are important and this is how they read:
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12. I have represented to you and assured you further that :-
(a) the said cheque nos. 579779, 579780 and 579782 shall be definitely honoured by my Bankers when the same are presented for payment by you and that the same shall not be returned unpaid to you on any ground whatsoever;
(b) I shall not raise any objection at any time with regard tot he said cheque nos. 579779, 579780 and 579782 or my liability in discharge of which the said cheque nos. 579779, 579780 and 579782 are handed over by me to you;
(c) I shall not any any time issue any stop payment instructions to my Bankers or any request/ instruction to you to withhold/ delay the presentation of the said cheque nos. 579779, 579780 and 579782 for payment;
(d) I shall not at any time close or freeze the said Bank Account from which the said cheque nos. 579779, 579780 and 579782 have been issued and handed over by me to you.
13. I confirm that the acceptance by you of the said cheque nos. 579779, 579780 and 579782 by you will not prejudice your rights to recover the entire outstanding amount, compensation and interest thereon, from me and the other Procurers.
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14. I confirm that the aforesaid is without prejudice to your rights and contentions in the matter against me and the other Procurers. I further confirm, without prejudice to the above, that in case any of the said cheque nos. 579779, 579780 and 579782 issued by me is/are dishonoured for any reason then I shall continue to be jointly and severally laibale along with the other Procurers to pay to you all amounts due to you together with interest thereon as agreed and provided under the said MOU read with the said Supplementary Writings and/or as stated herein and you shall be free and at liberty to initiate such legal action against me as you may deem fit for cheating and or for recovery of all amounts stated above as well as to take proceedings under the provisions of the Negotiable Instruments Act."
23. Reliance was placed on Clause 19 of the MoU to suggest that this was a dispute that was properly referable to arbitration. Clause 19 is reproduced at page 213 of the paper-book in Appeal No. 260 of 2018 and this is how it reads:
"19. All and any disputes and differences of whatsoever nature or kind that may arise between the Procurers and the Confirming Parties (or any one or more of them) on the one hand and the Purchaser on the other hand at any time or times hereafter concerning the construction, meaning and effect of this MOU and/ or any deeds, documents and papers to be executed in pursuance hereof or any act, deed, matter or thing required to be done or any payment to be made or received by any party hereto thereunder or any other act, deed, matter or thing in any manner touching this MOU and/ or any deeds, documents and papers executed/ to be executed in pursuance hereof shall be referred to the arbitration of a Sole Arbitrator to be mutually appointed by the parties to the dispute/ difference. The award of the Page 13 of 17 6th October 2022 ::: Uploaded on - 11/10/2022 ::: Downloaded on - 25/12/2022 03:34:50 ::: Mohammed Azharuddin v Toucan Agro & Developers Pvt Ltd 905-COMAP-259-2018+260-2018.doc Arbitrator shall be reasoned and in writing. The provisions of the Arbitrator and Conciliation Act, 1996 or any statutory modification or re-enactment thereof for the time being in force, shall apply to such arbitration proceedings. Such arbitration proceedings shall be held at Bangalore and the arbitration shall be conducted in English language."
24. Reliance was placed on this clause before Gupte J. The submission was that the Supplementary Writings, including that of 7th May 2014, and all post-dated cheques were issued pursuant to the MoU. Gupte J emphatically rejected the submission. He held, and we believe completely correctly, that a mere reference to the execution of the MoU and its terms in the plaint or even in the Supplementary Writings did not mean that the writings themselves or the cheques were under or pursuant to the MoU. He held, as we do now, that the reference to the MoU and its terms was a mere historical narrative in the plaint. The cheques were not issued pursuant to any act, matter, deed, or thing done or required to be done under the MoU. This was not in contemplation by the phrase "payment to be made or received by any party thereunder". Gupte J was completely correct. The reference to payment in Clause 19 is clearly a reference to payments required to be effected once the MoU progressed towards fulfilment. The fact that the last set of bounced cheques were executed with the Supplementary Writing of 7th May 2014 or that this particular Writing recites the historical fact on the MoU does not mean that the MoU was the consideration for, or the basis of, the issuance of the cheques in Suit. That MoU failed because the Procurers were not able to complete their obligations under it. There is no controversy in the suit which is covered by the MoU.
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25. Azharuddin raised a plea before the learned Single Judge that he was coerced by Toucan Agro. He said that this Writing of 7th May 2014 and the issuance of the three post-dated cheques was voidable at his instance. His case on coercion is in paragraphs 8 and 9 of his Additional Affidavit in Reply to the Summons for Judgment. He claims that Toucan Agro "blackmailed" him by threatening to lodge a false complaint with the Economic Offenses Wing ("EOW") and to take the matter into the public domain and the media if Azharuddin did not make payment. He claims that Toucan Agro threatened him with an offence of cheating. There are further allegations in that vein. Gupte J held that even if there was a compliant to the EOW or a statement to the media, it is hard to see how such a complaint could be set to be malicious or false to sustain a plea of coercion or duress. He held that in fact it would be perfectly appropriate and legitimate to make that complaint. He also noted that the 7th May 2014 writing was not an isolated one. As we ourselves have noted there were four previous almost identical situations that preceded. Azharuddin made no allegations and had no case regarding these previous occasions, writings or his own actions. Gupte J held that this case was not credible. In particular, he held that it was hardly credible that a person of Azharuddin's reputation and standing would go on attending Toucan Agro's office only to be 'coerced' and to have post-dated cheques teased out of him in progressively larger amounts. He held his defence was not probable and therefore said that it warranted conditional leave to defend by putting Azharuddin to terms and requiring him to make a deposit of Rs 6.75 crores. He also for these reasons held that there was no merit in the Notice of Motion under Section 8 of the Arbitration and Conciliation Act.
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26. We see no infirmity at all in the impugned order. Azharuddin's defence having been found to be thoroughly unbelievable and hollow, possibly the order to have been made was to make the Summons for Judgment absolute and to decree the Summery Suit. But there is no such plea before us. We therefore do not see any reason to interfere with the order in so far as it pertains to the Application under Section 8 of the Arbitration and Conciliation Act on Azharuddin's Notice of Motion.
27. Consequently, the second appeal, from the order on the Defendant's Notice of Motion under Section 8 of the Arbitration Act, is also dismissed.
28. These are Appeals in Commercial Division governed by the provisions of the Commercial Courts Act 2015. That Act, inter alia on account of Section 16, made several amendments to the Code of Civil Procedure 1908 ("CPC"). Section 16 tells us that it is the CPC as amended that will apply. Section 35 of the CPC is entirely substituted by the Commercial Courts Act. In addition, Section 35A of the CPC is deleted.
29. We are therefore required to make an order of costs. If not, we are to give reasons. We see no reason not to grant an order of costs against the Appellant in both Appeals. In our view. the conditions in substituted Section 35(3)(a) and (e) must be taken into account. The purpose of the Commercial Courts Act is not to encourage but rather to discourage appeals at every stage.
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30. Accordingly, the two Appeals stand dismissed with an accompanying order of costs quantified Rs.2.5 lakhs in each Appeal. Costs are to be paid within four weeks from today. If not paid within that time, the order of costs will carry interest at 6% per annum.
31. Time to make the deposit in the trial Court is extended by four weeks. Upon that deposit being made, liberty to the Plaintiff to apply to the trial Court for leave to withdraw the amount decided. That application will be decided on its merits uninfluenced by any observations either made in the impugned order or in this judgment. If the deposit is not made within that time in view of the provisions of Order 37 Rule 6(b), there will forthwith be a decree in terms of prayer clause (a), with interest at the applicable rate under the Negotiable Instruments Act, i.e., 18% per annum until payment or realisation.
32. The ad-interim order of stay dated 13th June 2018 was granted on the basis that in the companion appeal by the Procurers there was a stay. That stay order stands immediately vacated. All pending Notices of Motion or Interim Applications also stand dismissed but without a separate order of costs.
33. The Advocates for the Defendant are permitted to file their vakalatnama within one week upon obtaining an NOC from the previous Advocates.
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