Delhi High Court - Orders
Max Ventures Investment Holdings Pvt ... vs Catalyst Trusteeship Ltd & Ors on 17 February, 2023
Author: Yashwant Varma
Bench: Yashwant Varma
$~35
* IN THE HIGH COURT OF DELHI AT NEW DELHI
+ CS(COMM) 868/2022 & I.A. 21158/2022(Stay), I.A. 21160/
2022, I.A. 21162/2022(file addl. Docs.)
MAX VENTURES INVESTMENT HOLDINGS PVT LTD
..... Plaintiff
Through: Mr. Ramji Srinivasan, Sr. Adv.
with Mr. Kartik Nayar and Mr.
Meenal Garg, Advs.
versus
CATALYST TRUSTEESHIP LTD & ORS. ..... Defendants
Through: Mr. Atul Sharma and Mr.
Anand Singh Sengar, Advs. for
D-1.
Mr. Sandeep Sethi, Sr. Adv.
with Mr. Vaijayant Paliwal, Ms.
Charu Bansal, Mr. Vikram
Singh Dalal, Ms. Shreya Sethi
and Ms. Tanvi Tewari, Advs.
for D-2 & 3.
CORAM:
HON'BLE MR. JUSTICE YASHWANT VARMA
ORDER
% 17.02.2023
1. The present suit has been instituted for a declaration that the sale of shares pledged by the plaintiff under the Pledge Agreement dated 07 March 2021 in terms of a Recall Notice dated 17 November 2022 was illegal, invalid and void. The suit also lays a claim for damages.
2. The Plaintiff and Defendant No.1 executed a Debenture Trust Deed dated 07 March 2021 in terms of which the Plaintiff issued and allotted 40,000 unlisted and non-convertible debentures of the nominal value of Rs.1,00,000 each and thus aggregating to Rs.400 crores in seven series to Defendant Nos.2 and 3. The Plaintiff in terms Signature Not Verified Digitally Signed By:NEHA Signing Date:21.02.2023 17:06:34 of the said Agreement appointed Defendant No.1 as the Debenture Trustee for the benefit of and to act on behalf of Defendant Nos.2 and 3, debenture holders. In order to secure the financial facility granted to Defendant Nos.2 and 3, the Defendant No.1 executed a Pledge Agreement in terms of which the shares came to be pledged in favour of Max Financial Services Limited.
3. The Defendant, vide a Recall Notice dated 17 November 2022, recalled the entire loan and provided that if the entire dues are not repaid within one day, the shares as pledged would be sold. It is the case of the Plaintiff that on the same date the Defendant Nos.1, 2 and 3 proceeded to sell a substantial portion of the pledged shares, namely, 54,00,000/- shares for INR 341,51,28,066.90/-. It is in the aforesaid backdrop, the instant suit came to be preferred before this Court.
4. Since the suit is registered on the commercial side of the Court and was asserted to stem from a commercial dispute which exists, it was also accompanied with a Statement of Truth1 as envisaged under Order VI Rule 15A of the Code of Civil Procedure, 19082 as adopted and made applicable to commercial suits in terms of the Schedule appended to the Commercial Courts Act, 20153.
5. On 16 December 2022 when the matter was taken up, an objection was taken by Defendant No.1, 2, and 3 with respect to the various disclosures made in the SoT. In order to enable the said Defendants to articulate the objections which stood raised, the Court had permitted them to file an affidavit specifying and particularizing the objections which had been orally addressed. It becomes pertinent to note that insofar as the Plaintiff is concerned, it had been the submission of Mr. Srinivasan, learned Senior Counsel appearing for the said party, from inception that the Defendants essentially seek the 1 SoT 2 Code Signature Not Verified 3 Digitally Signed 2015 Act By:NEHA Signing Date:21.02.2023 17:06:34 Court to undertake a pre-trial enquiry as to whether the disclosures made in the plaint suffer from suppression of material facts. It was his submission that the Defendants could have a right of audience only upon summons being issued.
6. Pursuant to the liberty granted, the Defendant Nos.1, 2 and 3 have proceeded to file the affidavit in terms of the liberty granted. From a reading of the said affidavit it is manifest that the Defendants contend that there has been a deliberate suppression of material facts and a failure on the part of the plaintiff to bring on record relevant documents and consequently the SoT suffers from fundamental defects and the suit therefore is liable to be rejected on that score.
7. Mr. Sethi, learned Senior Counsel appearing for the Defendant Nos.2 and 3, has drawn the attention of the Court to the provisions contained in Order VI Rule 15A and which mandates a SoT accompanying pleadings which form part of a commercial dispute. Apart from the provisions of Order VI Rule 15A, Mr. Sethi also placed reliance upon Order XI Rule 1(3) to submit that the Plaintiff is liable to make a declaration on oath that all documents in its power, possession and control pertaining to the facts and circumstances of the proceedings initiated by him have been disclosed, copies thereof annexed with the plaint and that the Plaintiff does not have any other documents in its power, possession, control or custody. Mr. Sethi also drew the Court‟s attention to the format of a SoT as set out in Appendix-I to the Schedule of the 2015 Act and more particularly to Paras 4 and 5 thereof which requires the party making the declaration to swear that it has not made a false statement, concealed any material fact, document or record and that the party has included information which, according to it, is relevant for the present suit. Para 5 of the template that stands set out in Appendix-I requires the person making the Signature Not Verified declaration to affirm on oath that all documents in his power, Digitally Signed By:NEHA Signing Date:21.02.2023 17:06:34 possession and control pertaining to the facts and circumstances of the proceeding have been disclosed and copies thereof annexed to the plaint. Para 5 in that sense is akin to the requirements placed by Order XI Rule 1(3).
8. From the affidavit which has been filed by the Defendants, it is apparent that it is their case that the Plaintiff has made a selective disclosure and has failed to bring all material documents on the record of the suit proceedings. It is also their allegation that although various documents have been alluded to in the plaint, they have been omitted from being annexed thereto. In view of the aforesaid, it is their contention that the declaration made in the SoT is not in accord with the statutory provisions which apply and consequently the Court should dismiss the suit outrightly without proceeding to issue summons. It is the correctness of the aforesaid submissions which falls for consideration.
9. The Court notes at the outset that the procedure which is liable to be adopted upon presentation of a plaint and whether summons must compulsorily issue is one which is no longer res integra. In Bright Enterprises Pvt. Ltd. vs. MJ Bizcraft LLP,4 a Division Bench of this Court explained the legal position in the following terms: -
"18. From the above and particularly upon examining the provisions of Section 27 and Order 5 Rule 1(1) CPC, it is evident that when a suit is regarded as having been "duly instituted", a summons may be issued to the defendant. The use of the expression "duly instituted" has to be seen in the context of the provisions of Orders 6 and 7 CPC. In the present matter, it is nobody's case that the suit had not been duly instituted in the sense that it did not comply with the requirements of Orders 6 and 7 CPC. It is neither a case of return of a plaint under Order 7 Rule 10 nor a case of rejection of a plaint under Order 7 Rule 11 CPC. The present case is one of dismissal of the suit itself on merits. Therefore, the only thing that needs to be examined is whether the Court had a discretion to issue or not to issue summons given that the suit had been duly instituted. In our view, the use of the word Signature Not Verified 4 Digitally Signed 2017 SCC OnLine Del 6394 By:NEHA Signing Date:21.02.2023 17:06:34 "may" does not give discretion to the Court and does not make it optional for it to issue summons or not. This is further fortified by the fact that the first proviso to Order 5 Rule 1(1) itself gives a situation where summons must not be issued and that happens when a defendant appears at the presentation of the plaint and admits the plaintiff's claim. Therefore, in such a situation, there is no requirement for issuance of summons and that is why the word "may" has been used in Order 5 Rule 1(1). In all other cases, when a suit has been "duly instituted" and is not hit by either Order 7 Rule 10 or Order 7 Rule 11 CPC, summons has to be issued to the defendant.
19. In the present case, the learned Single Judge has neither returned the plaint under Order 7 Rule 10 nor rejected the plaint under Order 7 Rule 11 CPC. Therefore, it was incumbent upon the learned Single Judge to have issued summons to the respondent- defendants, particularly because the respondent-defendants had not appeared at the time of resentation of the plaint and did not admit the claim of the appellant-plaintiffs. The Rule of audi alteram partem is embedded in Order 5 Rule 1 sub-rule (1) read with Section 27 CPC.
20. We may also point out that there is a clear distinction between "return of a plaint", "rejection of a plaint" and "dismissal of a suit".
These three concepts have different consequences. A dismissal of a suit would necessarily result in a subsequent suit being barred by the principles of res judicata, whereas this would not be the case involving "return of a plaint" or "rejection of a plaint". What the learned Single Judge has done is to have dismissed the suit of the appellant- plaintiffs at the admission stage itself without issuance of summons and this, we are afraid, is contrary to the provisions of the statute."
(Emphasis supplied)"
10. In Tajunissa vs. Vishal Sharma5, a question arose as to whether summons have to be issued on every suit which has been dully instituted and whether parties appearing on caveat at that stage are entitled to be heard. While the latter question does not arise for our determination in the present proceedings, the first question as was framed for consideration in Tajunissa clearly is of relevance. Noticing the principles which were enunciated by the Division Bench in Bright Enterprises, the learned Judge answered the question which stood posited as under: -
"6. Two issues, therefore, arise, for this Court to consider at this Signature Not Verified 5 Digitally Signed 2022 SCC OnLine Del 18 By:NEHA Signing Date:21.02.2023 17:06:34 incipient stage; firstly, whether summons have to be issued in every suit which is "duly instituted", and, secondly, whether the Court can hear Mr. Ravi Gupta, learned Senior Counsel for the Defendant No. 3 at this stage.
7. The first issue, in my considered opinion, stands squarely answered by paras 18 to 20 of Bright Enterprises, on which Mr. Das himself places reliance. These paragraphs clearly hold that summons are required to be issued in every suit duly instituted except where the suit is returned under Order VII Rule 10 or rejected under Order VII Rule 11. Clearly, therefore, it is open to a Court to examine, even before issuing summons, whether the suit is required to be returned under Order VII Rule 10 or rejected for any of the grounds contained in Order VII Rule 11. The submission, of Mr. Das, that summons have to be issued in every suit which is "duly instituted"
is, therefore, without substance and is accordingly rejected. It is open to the Court to examine, even at this stage, whether the suit is barred by Order VII Rule 10 or Order VII Rule 11."
11. As is evident from the aforesaid principles as laid down, a suit once duly instituted can either be returned under Order VII Rule 10 or rejected under Order VII Rule 11. The provisions of Order VII Rule 10 would apply where a court finds that the plaint has been wrongly instituted and filed and therefore proceeds to return the same to enable the Plaintiff to institute the suit before the proper court. Order VII Rule 11 enables the court to reject the plaint either where it fails to disclose a cause of action or where the Plaintiff fails to correct the valuation of the suit or in a situation where the plaint is insufficiently stamped or as contemplated in clauses „e‟ and „f‟ where it is either not filed in duplicate or where the plaintiff has failed to comply with Order VII Rule 9. A more significant power which stands conferred upon the Court is comprised in clause „d‟ and which enables the court to reject the plaint where it appears to be barred by any law. Apart from the preliminary examination which may be undertaken by a court, and even suo moto, in terms of Order VII Rule 10 and 11, the Code does not envisage any pre-trial enquiry being undertaken or for the court examining the objections and defenses that may be taken or urged at the behest of a Defendant which appears on advance notice.
Signature Not Verified Digitally Signed By:NEHA Signing Date:21.02.2023 17:06:3412. As noted hereinabove, the plaint in the present case is not sought to be returned on the Defendants asserting that it has been instituted before a wrong court. The objections which are taken with respect to the disclosures and declarations made also cannot and at least at this stage be said to fall within the ambit of either clause „a‟ or clause „d‟ of Order VII Rule 11. The Court notes that the Plaintiff is obliged to disclose all facts and bring on record the documents which according to it are material for the purposes of the suit. An allegation of non-disclosure of material facts or suppression of documents is one which can always be raised during the trial of the suit.
13. Whether the suit is liable to be dismissed on the ground of suppression of material facts is an issue which could also be addressed at the stage of the Court considering any application that may be moved referable to Order VII Rule 11. However, at the pre-summons stage, the Code clearly does not envisage an examination or adjudication being undertaken on lines as suggested by the Defendants. The nature of the issues which are raised at their behest would clearly warrant a more thorough and in-depth examination and adjudication of the assertions that are made. That clearly appears to be foreign to the extent of the scrutiny which the court is liable to bring to bear at the pre-summons stage.
14. The Court on its own motion and on a facile examination of the plaint also does not find that the provisions of Order VII Rule 10 or 11 are attracted. It becomes to note that at the stage when the plaint falls for consideration of the court, it is the allegations contained therein alone which warrant scrutiny and consideration. If the various allegations which are contained in the affidavit filed by the Defendants were to be examined, it would clearly amount to the Court initiating and undertaking an exercise at a pre-trial stage which is neither warranted nor contemplated under the Code.
Signature Not Verified Digitally Signed By:NEHA Signing Date:21.02.2023 17:06:3415. Accordingly, while it would be open to the Defendants to raise all objections as have been set forth in the affidavit which was filed, the Court finds no justification to desist from issuing summons on the suit.
16. It may be additionally noted that while Mr. Sethi in the course of his submissions did place reliance upon two decisions rendered by the Court in Nitin Gupta vs. Texmaco Infrastructure & Holding Limited6 and National Highways Authority of India vs. N. K. Toll Road Limited7 and which had stressed upon the sanctity attached to a SoT, both those decisions pertain to orders passed after summons had been issued and parties had been formally placed on notice. The decisions thus are clearly distinguishable and have no bearing on the issue which stands raised before the Court in these proceedings.
17. Issue summons on the suit to the Defendants. Since the Defendants are duly represented, the Defendants may file their written statements on or before the next date fixed.
18. Let the matter be placed before the concerned Joint Registrar on 24.03.2023.
YASHWANT VARMA, J.
FEBRUARY 17, 2023
bh
6
2019 SCC OnLine Del 8367
Signature Not Verified
7
Digitally Signed 2017 SCC OnLine Del 7663
By:NEHA
Signing Date:21.02.2023
17:06:34