Delhi High Court
Ifci Factors Ltd vs Innoventive Industries Limited & Ors on 7 August, 2019
Author: Rajiv Sahai Endlaw
Bench: Rajiv Sahai Endlaw
* IN THE HIGH COURT OF DELHI AT NEW DELHI
% Date of decision: 7th August, 2019.
+ CS(COMM) 88/2016 & IAs No.2562/2017 (of D-3 u/O XXXVII
R-5 CPC) & 5625/2017 (of D-2 u/O XXXVII R-5 CPC)
IFCI FACTORS LTD ..... Plaintiff
Through: Mr. Anupam Srivastava with Ms.
Swati Singh, Mr. Dhairya Gupta &
Ms. Divya Joshi, Advs.
Versus
INNOVENTIVE INDUSTRIES LIMITED & ORS ...Defendants
Through: Mr. Shiv Kumar Suri with Mr.
Shikhil Suri & Ms. Shilpa Saini,
Advs.
CORAM:
HON'BLE MR. JUSTICE RAJIV SAHAI ENDLAW
1. The plaintiff has instituted the suit, under Order XXXVII of the CPC,
for recovery of Rs.9,85,46,482.92 paise with pendente lite and future
interest jointly and severally from defendants No.1 to 4, namely (i)
Innoventive Industries Ltd., (ii) Chandu Chavan, (iii) Ravindra Katre and
(iv) Sanjay Waghulade, pleading (a) that the plaintiff is a government
undertaking and a non-banking finance company; (b) the defendant no.1 is
engaged in the business of manufacture of steel tubes and motor vehicle
(MV) parts; (c) the defendant no.1 had entered into an agreement dated 27 th
August, 2009 with the plaintiff, for factoring of receivables, whereunder the
plaintiff agreed to provide the domestic factoring with recourse facility to
the defendant no.1, for an amount of Rs.15 crores; (d) that the defendants
no. 2 to 4 executed separate Deeds of Guarantee, all dated 27 th August,
CS(COMM) 88/2016 Page 1 of 9
2009, in favour of the plaintiff, for securing the facility granted by the
plaintiff in favour of defendant no.1; (e) the liability of the defendant no.1
extended to ensuring due payment of all the amounts payable by the
defendant no.1 to the plaintiff in respect of factoring of receivables under
the said agreement, along with interest and other charges; (f) the liability of
defendants 2 to 4 was joint and several along with defendant no.1; (g) the
defendant no.1, under the agreement, raised invoices on its debtors and
presented the same to the plaintiff for factoring and the plaintiff paid a sum
of Rs.1,81,12,27,978/- to the defendant no.1 towards factoring; (h) a sum of
Rs.7,96,36,117/- is due to the plaintiff from the defendants towards factoring
charges discounts, overdue discounts, tax and other debits; and, (i) a sum of
Rs.9,85,46,482.92 paisa is due and payable by the defendants to the plaintiff
under the agreement and which the defendants have failed to pay in spite of
notice.
2. The suit came up first before this Court on 8 th February, 2016 and
thereafter on 4th March, 2016 and 19th July, 2016.
3. On 19th July, 2016, it was felt that there was no need to keep pending
the admission of the present suit as a suit under Order XXXVII of the CPC,
awaiting the outcome of the appeal preferred to the Division Bench against
IFCI Factors Ltd. Vs. Maven Industries Ltd. (2015) 225 DLT 32, since the
said judgment was per incuriam, having failed to notice the amendment of
Order XXXVII of the CPC by the Factoring Regulation Act, 2011. Thus,
the suit was admitted and summons for appearance ordered to be issued to
the defendants.
CS(COMM) 88/2016 Page 2 of 9
4. The counsel for the defendants no.2 and 3 appeared on 29 th
November, 2016 and summons for judgment ordered to be issued to the said
defendants. The order dated 28th April, 2017 records that a moratorium
under Section 14 of the Insolvency and Bankruptcy Code, 2016 was in
operation qua defendant no.1. The order dated 19th May, 2017 records that
the defendants no.2 and 3 had filed leave to defend. The counsel for the
defendant no.1 also appeared on 28th April, 2017 and 19th May, 2017. The
order dated 29th May, 2017 records the contention of the counsel for the
defendant no.1, that the plaintiff had already lodged its claim before the
Resolution Professional under the Insolvency and Bankruptcy Code. Vide
the same order, the proceedings in the suit, against defendant no.1 were also
stayed. Finally, the order dated 17th July, 2019 records that the defendant
no.4, despite service had not entered any appearance.
5. Thus the suit, insofar as against the defendant no.4 Sanjay
Waghulade, on the defendant no.4 failing to enter appearance despite
service, is entitled to be decreed forthwith.
6. As far as the defendant no.1 is concerned, the counsel for the
defendants no. 2 and 3 states that the NCLT has ordered liquidation of the
defendant no.1 and liquidation proceedings before the Liquidator are
underway and the plaintiff, though required to file claim before the
Liquidator, has not filed any such claim.
7. The counsel for the plaintiff confirms and further agrees that in view
of Section 33(5) of the IBC, the suit, insofar as against the defendant no.1,
cannot continue and seeks disposal thereof with liberty to approach the
Liquidator with the claim of the plaintiff.
CS(COMM) 88/2016 Page 3 of 9
8. IA No.2562/2017 and IA No.5625/2017 of defendants no. 3 and 2
respectively, for leave to defend are for consideration and the counsel for the
defendants no. 2 and 3 and the counsel for the plaintiff have been heard.
9. The counsel for the defendants no. 2 and 3 has argued the leave to
defend applications, without any difference between the pleas of defendants
no. 2 and 3, and on enquiry states that the two applications are identical.
10. The first argument of the counsel for the defendants no. 2 and 3 is,
that the present suit is not maintainable under Order XXXVII of the CPC on
account of IFCI Factors Ltd. Vs. Maven Industries Ltd. supra.
11. On enquiry, it is stated that the appeal preferred thereagainst is still
pending consideration.
12. However the aforesaid argument of the counsel for the defendants
no.2 and 3 does not notice the reasons which prevailed in the order dated
19th July, 2016 of this Court for entertaining and admitting the suit under
Order XXXVII of the CPC in spite of IFCI Factors Ltd. Vs. Maven
Industries Ltd. supra. The counsel for the defendants no. 2 and 3 also
agrees that the IFCI Factors Ltd. Vs. Maven Industries Ltd. supra does not
take notice of the amendment to Order XXXVII of the CPC on with effect
from 1st February, 2012. I have also informed the counsel for the defendants
no. 2 and 3 that the said amendment is not by amendment act of the CPC,
but vide Section 35 read with Schedule to the Factoring Regulation Act, to
provide for the suits filed by the factor for recovery of dues with respect to
transactions under the said Act, as summary suits.
13. The aforesaid also takes care of the argument of the counsel for the
defendants no.2 and 3, of the present suit being not for recovery of any debt.
CS(COMM) 88/2016 Page 4 of 9
The said argument is again lifted from the reasoning which prevailed in
IFCI Factors Ltd. Vs. Maven Industries Ltd. supra and which as aforesaid
decided the maintainability of a similar suit in that case as a suit under Order
XXXVII on the anvil of Order XXXVII as existed before 1st February, 2012.
With effect from 1st February, 2012, a suit for recovery of receivables,
instituted by any assignee of receivables is permitted to be entertained as a
summary suit, if only to recover a liquidated demand in money payable by
the defendants, with or without interest.
14. Though the counsel for the defendants has not argued, but I may at
this stage deal with another aspect. Though I had in order dated 17 th
January, 2018 in CS(COMM) 1579/2016 titled IFCI Factors Ltd. vs.
Gangotri Iron and Steel Company Ltd. & Ors. enquired, whether a suit
provided to be tried as a summary suit by amendment aforesaid, lies only
against the debtor of the person availing for the factoring facility or also
against the person availing the factoring facility and guarantors of such
persons, but the counsel for the plaintiff has drawn attention to the judgment
dated 1st August, 2019 in CS(COMM)752/2018 titled IFCI Factors Ltd. Vs.
Ramsarup Industries Ltd. & Ors., where a Coordinate Bench, after noticing
IFCI Factors Ltd. vs. Gangotri Iron and Steel Company Ltd. supra has
held a suit under Order XXXVII to be maintainable also against the person
availing the factoring facility as well as the guarantors of such person.
15. Thus, there is no merit in the contention of the counsel for the
defendants as to the maintainability of the present suit under Order XXXVII
of the CPC.
CS(COMM) 88/2016 Page 5 of 9
16. The counsel for the defendants no. 2 and 3 has also contended that
this Court does not have territorial jurisdiction to entertain the suit as no
cause of action has accrued within the territorial jurisdiction of this Court. It
is stated that the defendants are residents of Pune.
17. Per contra the counsel for the plaintiff has drawn attention to the
Factoring Agreement dated 27th August, 2009 and to the Guarantee Deeds,
also dated 27th August, 2009, and all of which are endorsed on Stamp Paper
of Delhi and shown to be executed at Delhi.
18. The counsel for the defendants no. 2 and 3 cannot controvert.
19. Once it is so, it cannot be said that no part of cause of action accrued
within the jurisdiction of this Court and this Court would not have territorial
jurisdiction to entertain the suit.
20. The counsel for the defendants has also contended that there is no
privity of contract between the defendants no. 2 and 3 and the plaintiff. It is
contended that the defendants no. 2 and 3 are not parties to the Factoring
Agreement.
21. However, on enquiry as to what was the consideration for the
defendants no. 2 and 3 to furnish the guarantee in favour of the plaintiff, the
counsel for the defendants no. 2 and 3 admits that the said consideration was
the factoring facility provided by the plaintiff to the defendant no.1 under
the Factoring Agreement. Once it is so, it is not open to defendants no. 2
and 3 to take the plea, of no privity of contract with plaintiff or of the
defendant being entitled to leave to defend on the said ground.
CS(COMM) 88/2016 Page 6 of 9
22. The counsel for the defendants no. 2 and 3 has next contended that the
defendants no.2 and 3, as guarantors, cannot be made liable without the
plaintiff first making efforts for recovery from defendant no.1, which is
according to the plaintiff also is the principal debtor.
23. The said argument is again contrary to the terms of the guarantee
admittedly executed by the defendants no.2 and 3, whereunder the
defendants no. 2 and 3 have agreed to be liable jointly and severally with the
defendant no.1 and agreed to the plaintiff taking recourse to the defendants
no. 2 and 3 even if owing to any law or otherwise not entitled to recourse
against the defendant no.1.
24. The counsel for the plaintiff, in this regard has also drawn attention to
State Bank of India Vs. Indexport Registered and Ors. (1992) 3 SCC 159
holding that a guarantor alone can be sued without even suing the principal
debtor, so long as the creditor satisfies the Court that the principal debtor is
in default.
25. The principal debtor in the present case, being the defendant no.1, as
aforesaid, is in liquidation.
26. The last argument of the counsel for the defendants no. 2 and 3 is of
limitation. It is contended that the receivables, for recovery of which the
suit is filed, are of the years 2010 to 2015 and this suit filed on 21 st
November, 2015 is beyond time.
27. Per contra, the counsel for the plaintiff has contended that the last
demand as per the statement of account filed by the plaintiff is of 31 st
October, 2014.
CS(COMM) 88/2016 Page 7 of 9
28. The counsel for the plaintiff, in this regard, has also drawn attention
to Clause 12 of the identical Guarantee Deeds executed by defendants no. 2
to 4, agreeing to the guarantee being a continuous security until repayment
of the balance due from the defendant no.1 under the agreement.
29. Mention in this regard may also be made of Clauses 11 to 14 of the
Factoring Agreement, whereunder the provision for accrual of liability of
the defendant no.1 is provided for.
30. I have also enquired from the counsel for the defendants no. 2 and 3,
invoking which Article of the Schedule to the Limitation Act, the plea of bar
of limitation is taken.
31. The counsel for the defendants no. 2 and 3 generally states that the
limitation is of three years.
32. That is a layman's perception of the Limitation Act. The Limitation
Act, in Schedule thereto, prescribes limitation for suits for different reliefs
along with date of commencement of the period of limitation. Taking of the
plea of bar of limitation, without reference to any specific Article of the
Schedule to the Limitation Act, itself shows shallowness of the plea.
33. No merit is thus found in the said plea either.
34. No other arguments has been urged by the counsel for the defendants
no. 2 and 3.
35. IA No.2562/2017 and IA No.5625/2017 for leave to defend are thus
dismissed.
CS(COMM) 88/2016 Page 8 of 9
36. Resultantly,
(i) the suit, insofar as against the defendant no.1 namely
Innoventive Industries Ltd. is disposed of with liberty to the plaintiff
to avail its remedy before the Liquidator; and,
(ii) a decree is passed, in favour of the plaintiff and jointly and
severally against the defendants no.2 to 4, namely Chandu Chavan,
Ravindra Katre and Sanjay Waghulade, of recovery of
Rs.9,85,46,482.92 paise together with interest pendente lite and future
at 13.50% per annum in accordance with the agreement between the
parties.
The plaintiff shall also be entitled to costs of the suit with professional
fee assessed at Rs. 2 lakhs.
Decree sheet be prepared.
RAJIV SAHAI ENDLAW, J.
AUGUST 07, 2019 'ak' (corrected & released on 16th August, 2019) CS(COMM) 88/2016 Page 9 of 9