Bombay High Court
Ganga Taro Vazirani vs Deepak Raheja on 16 February, 2021
Equivalent citations: AIRONLINE 2021 BOM 427
Author: B. P. Colabawalla
Bench: B. P. Colabawalla
sj.45.2019.doc
dik
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION
Dhanappa
I. Koshti
Digitally signed by
Dhanappa I. Koshti
SUMMONS FOR JUDGMENT NO. 45 OF 2019
Date: 2021.02.16
11:35:26 +0530
IN
COMM. SUMMARY SUIT NO. 972 OF 2019
Ganga Taro Vazirani ...Applicant/Plaintiff
Vs
Deepak Raheja ... Defendant
Mr. Zal Andhyarujina Sr. counsel a/w Ms. Ishani Khanwilkar a/w Mr. Ativ
Patel a/w Darshit Dave i/b AVP Partners for the applicant/plaintiff
Mr. Arif Bookwala Sr. counsel a/w Jyoti B. Singh, Sakil Ansari i/b The Law
Office of Jyoti B. Singh for the defendant.
CORAM : B. P. COLABAWALLA, J.
Reserved on :11th December, 2020
Pronounced on : 16th February, 2021
JUDGEMENT :
1. This Summons for Judgment seeks a decree against the defendant in the sum of Rs.5,54,00,000/- along with an amount of Rs.1,49,75,342.47 towards interest calculated on the amount of Rs.5,00,00,000/- @ 12% per annum from 1st January, Page 1 of 42 sj.45.2019.doc 2017 to 30th June, 2019 (aggregating to Rs.7,03,75,342.47) and further interest @ 12% p.a. on the amount of Rs.5,00,00,000/- from the date of filing of the suit till payment and/or realization.
2. The above suit has been filed as a Commercial Summary Suit under the provisions of Order XXXVII of the Code of Civil Procedure, 1908 (for short "the CPC") seeking a decree of the amounts mentioned above. The suit is based on two dishonoured cheques, one for Rs.5,00,00,000/- and the other for Rs.54,00,000/-. These two cheques were given by the defendant to the plaintiff. Both the aforesaid cheques were dishonoured when presented for payment, hence the present suit.
3. To understand in what circumstances these two cheques were issued by the defendant to the plaintiff, it would be necessary to refer to the facts and which are undisputed. In 2011, pursuant to the defendant's request for financial assistance, the plaintiff agreed to disburse a sum of Rs.5 Crores to the defendant as a loan for business purposes. The said loan was repayable along with interest @ 19 % p.a. According to the plaintiff, on the basis of the defendant's assurance of repayment along with the Page 2 of 42 sj.45.2019.doc agreed rate of interest, the plaintiff issued a cheque of Rs.5 Crores dated 1st January, 2011 in favour of the defendant. The said cheque was duly encashed by the defendant and honoured by the plaintiff. On 3rd January, 2011, the defendant also drew a Bill of Exchange in favour of the plaintiff in the sum of Rs.5 Crores as a security for the said loan.
4. It is the case of the plaintiff that the defendant continued to pay interest on the loan to the plaintiff as per the agreed terms until 9th December, 2016. Thereafter, as the defendant wanted a reduction in the rate of interest, on 9th December, 2016, the defendant addressed a letter to the plaintiff inter alia acknowledging the plaintiff's loan of Rs.5 Crores and requested the plaintiff to reduce the rate of interest to 12% p.a. By the said letter, the defendant requested confirmation of the revised terms, namely, that the interest amount of Rs.27,22,192/- at the rate of 12% p.a. till 31st December, 2016 would be paid through RTGS and thereafter the interest rate would be 12% p.a. payable at the end of the calendar year i.e. 31st December, 2017. Acceding to this request, the plaintiff obliged to reduce the rate of interest from 19% p.a. to 12% p.a. Accordingly, on 20th December, Page 3 of 42 sj.45.2019.doc 2016, the defendant and four others gave an undertaking (Exhibit "D" to the plaint) to the plaintiff as well as two other persons, under which, inter alia, the defendant acknowledged the loan of Rs.5 Crores taken from the plaintiff and also agreed to issue the post-dated cheques for repayment. Accordingly, the defendant issued two post-dated cheques, one in the sum of Rs.5 Crores dated 1st January, 2018, and the other in the sum of Rs.54 Lacs dated 31st December, 2017 respectively. The cheque for Rs.5 Crores was towards the principal amount and the cheque for Rs.54 Lacs was towards interest.
5. On 26th March, 2018, the plaintiff deposited the aforesaid two post-dated cheques, which were dishonoured on 27th March, 2018. The cheques were returned with the remark "Funds Insufficient". In these circumstances, on 17th April, 2018 the advocates for the plaintiff sent a notice under section 138 of the Negotiable Instruments Act, 1881 to the defendant inter alia stating that the defendant had acknowledged the debt due and payable to the plaintiff and in case of failure to pay, the plaintiff would be constrained to initiate criminal action under section 138 of the said Act. The defendant failed to respond to the Page 4 of 42 sj.45.2019.doc said notice or make repayment. Hence, on 6th July, 2019, the plaintiff was constrained to file the present suit.
6. After the present suit was filed, the writ of summons was duly served and the advocates for the defendant filed their appearance as contemplated under Order XXXVII Rule 2(3) of the CPC. Thereafter, the present Summons for Judgment was filed on 16th August, 2019. Since, there was a delay in filing a reply to the Summons for Judgment, the defendant filed an Interim Application seeking condonation of the delay and which was allowed by this Court vide its order dated 10th December, 2019. Thereafter, the Defendant filed an affidavit-in-reply dated 11th December, 2019 to which the plaintiff filed an affidavit-in- rejoinder dated 18th December, 2019 and the defendant filed an affidavit in sur-rejoinder dated 10th January, 2020. Thereafter, the matter was adjourned from time to time. Finally, on 4th November, 2020 the defendant, who was represented by an advocate, made a request to the Court that the defendant is desirous of sending a settlement proposal to the plaintiff to see if the matter can be resolved. He, therefore, requested that the matter be kept on 24th November, 2020. Acceding to this request, Page 5 of 42 sj.45.2019.doc this Court adjourned the matter. Since no settlement fructified, finally, the matter was heard on 9th December, 2020 and 11th December, 2020 when the arguments were concluded and the order was reserved.
7. In this factual backdrop, Mr. Andhyarujina, the learned senior counsel appearing on behalf of the plaintiff, submitted that there is absolutely no defence to the present suit. He submitted that taking of the loan is undisputed. He further submitted that the defendant has time and again acknowledged his liability and this is clear from the letter dated 9th December, 2016 as well as the undertaking executed on 20th December, 2016. He submitted that in furtherance of the said undertaking, the defendant also issued two post-dated cheques, one for the sum of Rs.5 Crores towards the principal amount of the loan and the second for Rs.54 Lacs towards interest. Both these cheques, when presented for payment, were dishonoured with a remark "Funds Insufficient". This was also brought to the notice of the defendant by the plaintiff's advocate's notice dated 17th April, 2018 to which there was no reply. This being the case, he submitted that there is absolutely no defence to the present Page 6 of 42 sj.45.2019.doc Summary Suit, and therefore, the Summons for Judgment be made absolute.
8. On the other hand, Mr. Bookwala, the learned senior counsel appearing on behalf of the defendant, submitted the following :-
(i) the above suit is filed for recovery of a loan and is therefore, barred by section 13(1) of the Maharashtra Money Lending (Regulation) Act, 2014 (for short the "Money Lenders Act"). This being the case, the present suit is not maintainable, and therefore, unconditional leave ought to be granted to the defendant. To buttress this argument, Mr. Bookwala submitted that the Money Lenders Act, categorically defines the words "Money Lender", "debtor", "business of money lending", and "loan". He submitted that the present plaintiff is squarely covered under the definition of a "Money Lender" and is therefore, required to obtain a license from the office of the Assistant Registrar of the area, as per the provisions of section 5 of the Act. He submitted that Page 7 of 42 sj.45.2019.doc admittedly the plaintiff does not have any license, and therefore, by virtue of the provisions of section 13(1) of the Money Lenders Act, the present suit is barred.
(ii) Without prejudice to the aforesaid argument, the present suit is barred for non-compliance of the provisions of section 12A of the Commercial Courts Act, 2015 (for short the "CC Act"). Mr Bookwala submitted that section 6 of the CC Act stipulates that the Commercial Court shall have jurisdiction to try all suits and applications relating to a commercial dispute of a Specified Value. He submitted that it can hardly be disputed that the cause of action in the present suit would be a commercial dispute. The use of the word "all suits" appearing in section 6 of the CC Act clearly implies that a Commercial Court under the Commercial Courts Act, 2015 is authorized to try all commercial suits including a summary suit filed under Order XXXVII of the CPC. He submitted that section 12A, and which was inserted on 21st August, 2018, clearly contemplates that no suit, except one Page 8 of 42 sj.45.2019.doc which contemplates any urgent interim relief, can be instituted, unless the plaintiff exhausts the remedy of pre - institution mediation in accordance with the manner and procedure as may be prescribed by Rules framed by the Central Government in that regard. He submitted that this attracts the application of the "doctrine of exhaustion of remedies". Therefore, this Court cannot entertain the suit if the remedy of pre-
institution mediation is not exhausted. He submitted that in fact the objects and reasons clearly stipulate this also. To give effect to this section, the Government has also issued notifications providing for rules for pre-institution mediation and settlement proceedings, namely, the Commercial Courts (Pre- institution Mediation and Settlement) Rules, 2018. He submitted that in the present case, admittedly, the remedy of pre-institution mediation has not been availed of by the plaintiff. This being the case, the suit itself is barred under section 12A of the CC Act. To substantiate this argument, Mr. Bookwala relied upon the following decisions:-
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(a) Anil Gupta Vs. Babu Ram Singla (CS (OS) 201/2020), decided by Single bench comprising of Ms. Justice Mukta Gupta of Delhi High Court, vide order dated 30th September, 2020
(b) Terai Overseas Pvt. Ltd. Vs. Kejriwal Sugar Agencies Pvt. Ltd. & Ors (C.S. No.78 of 2020) decided by Single Bench comprising of Mr. Justice Debangsu Bask of Calcutta High Court vide order dated 3rd September, 2020
(c) Re. Cognizance For Extension of Limitation (MANU/SC/0654/2020) decided by Full Bench comprising of Mr. CJI S. A. Bobde, Mr. Justice R. Subhash Reddy and Mr. Justice A.S. Bopanna, Supreme Court on 10th July, 2020.
(d) GSD Constructions Pvt. Ltd. Vs. Balaji Febtech Engineering Pvt. Ltd. (MANU/MP/0451/(2019)
9. Lastly, Mr. Bookwala contended that the present suit has been filed in contravention of the CPC for the following reasons:-
(a) The plaint does not comply with Rule 2(a) of Order VII as inserted by section 16 of the Act 4 of 2016 in its application to a suit in respect of commercial disputes in as much as the plaint is silent on the method and manner in which interest has to be calculated and averred;Page 10 of 42
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(b) the particulars of the claim and paragraph 17 and 22(a) of the plaint wrongly mentions an interest amount of Rs.54 Lacs as a part of the principal amount. He, therefore, submitted that for all the aforesaid reasons above Summons for Judgment be dismissed and unconditional leave to defend the above suit be granted to the defendant.
10. I have heard the learned counsel for parties at length and have perused the papers and proceedings in the above suit.
11. The first contention raised by Mr. Bookwala is that the present suit is barred by virtue of section 13(1) of the said Act. I find no substance in this submission whatsoever. Firstly, the present Summary Suit is filed on the basis of dishonoured cheques and not on the antecedent transaction of the loan. Section 2(13) defines the word "loan" to mean an advance at interest whether of money or in kind, but does not include inter alia an advance of any sum exceeding rupees three lakhs made on the basis of a negotiable instrument as defined in the Negotiable Instruments Act, 1881 (26 Page 11 of 42 sj.45.2019.doc of 1881), other than a promissory note [see section 2(13)(j)]. In the present case, monies were advanced by the plaintiff by cheque. For repaying the said advance (including interest), the defendant issued 2 post-dated cheques, one for Rs.5 Crores towards the principal amount and the other for Rs.54 Lacs towards interest. Both these cheques were dishonoured when presented for payment. Since the advance made by the plaintiff cannot be termed as a "loan" [as it is specifically excluded under section 2(13)(j)], the question of the bar set out in section 13(1) cannot and does not arise. This is for the simple reason because section 13(1) of the Money Lenders Act clearly stipulates that, no Court shall pass a decree in favour of a "money-lender" in any suit unless the Court is satisfied that at the time when the "loan" or any part thereof, to which the suit relates was lent, the money lender held a valid license. If the Court is satisfied that the money lender did not hold a valid license, it shall dismiss the suit. On bare reading of section 13(1), it is ex-facie clear that the bar applies when a money lender seeks a decree in any suit with reference to recovery of a loan or any part thereof. If the money advanced cannot be termed as a "loan" under the Money Lenders Act, then the question of the suit being barred as set out in section 13(1) does not arise at all.
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12. I must note that a similar issue came up before another learned Single Judge of this Court in the case of Bipin Vazirani Vs. V. Raheja Design Construction Pvt. Ltd. & Anr. (Summons for Judgment No.101 of 2018 in Comm. Summary Suit No. 424 of 2018, decided on 12th December, 2018). In the facts of that case also there were two cheques that were issued by the 1st defendant to the plaintiff and which were dishonoured for the reason "Funds Insufficient". There too, an argument with reference to money lending was raised. Negating the contention of the defendants in that case, this Court held as under :-
"7. In that decision I considered the settled law on the subject including amendments to the Money Lending Act and the interpretation of the expressions 'loan', 'money lender', 'business of money lending', and, in particular how such a defence could be raised. In paragraph 36 of the Base Industries Group decision I culled out propositions that seemed to me to emerge from that discussion:-
"36. From this discussion, the following propositions emerge:
(a) Not every loan is axiomatically a money-lending transaction for the purposes of the 1946 or the 2014 Acts.
There is no such presumption in law.
(b) It is doing of the 'business of money-lending- that attracts the provisions of the statute. In interpreting the phrase, the correct emphasis is on the word 'business', not Page 13 of 42 sj.45.2019.doc 'money-lending'. It is the word 'business' and not the expression 'money-lending', that is determinative. Simply put, every instance of lending money is not money-lending. Not every lender is a Shylock.
(c) To constitute 'business', a single isolated instance does not, and even several isolated stray instances do not, constitute 'the business of money-lending'. To be engaged in the 'business of money-lending', the activity must be systematic, regular, repetitive, and continuous, and must generate an appreciable revenue. The fact that the borrower is a stranger to the lender does not on its own make the latter a 'money-lender'.
(d) A loan recovery action is not barred merely because there is a loan. It has to be shown that the loan was part of 'the business of money-lending'.
(e) A plaintiff seeking a recovery of a loan is not required to show that his suit is not barred by the Money Lenders Act. It is always for the defendant who puts up money-lending as a defence to show that the transaction is forbidden by the Money Lenders Act."
8. The transactions in question in Base Industries (and also in case of Ashok Commercial Enterprises & Anr Vs. Parekh Aluminex Ltd. to which I referred in Base Industries) stand on a different footing from the present suit. This action is altogether simpler because it is focused narrowly on the dishonour of the two cheques admittedly issued by the Defendant. That, as I have held, is exempted from the purview of the Money Lending Act, and therefore the bar of that Act cannot apply to a transaction such as this."
(emphasis suppled)
13. Apart from the fact that the present suit is based on two dishonoured cheques and hence would not attract the rigours of the Money Lenders Act, even otherwise there is nothing on record to Page 14 of 42 sj.45.2019.doc establish that the present suit would be barred under the provisions of the said Act. As set out in the aforesaid judgment referred to earlier, not every loan is axiomatically a money lending transaction for the purposes of the Money Lenders Act. There is no such presumption in law. It is doing the business of money-lending that attracts the provisions of the statute. In interpreting that phrase, the correct emphasis is on the word 'business', not 'money-lending'. It is the word 'business' and not the expression 'money-lending', that is determinative. Simply put, every instance of lending money would not amount to a money-lending transaction as contemplated under the Money Lenders Act. To constitute 'business of money lending', a single isolated instance does not, and even several isolated stray instances do not, constitute 'the business of money- lending'. To be engaged in the 'business of money-lending', the activity must be systematic, regular, repetitive, and continuous, and must generate an appreciable revenue. The fact that the borrower is a stranger to the lender does not on its own make the latter a 'money-lender'. A loan recovery action is not barred merely because there is a loan. It has to be shown that the loan was part of the 'business of money-lending'. A plaintiff seeking a recovery of a loan is not required to show that his suit is not barred by the Money Page 15 of 42 sj.45.2019.doc Lenders Act. It is always for the defendant who puts up money- lending as a defence to show that the transaction is forbidden by the Money Lenders Act. In the instant case, the defendant has not been able to satisfy any of these tests. In these circumstances, I find absolutely no substance in the first argument canvassed by Mr. Bookwala.
14. The second contention raised by Mr. Bookwala and which was pressed into service was that the present suit ought to be dismissed as the plaintiff has instituted the suit without complying with the provisions of section 12A of the CC Act. In other words, it was his contention that unless the plaintiff exhausts the remedy of pre - institution mediation as contemplated under section 12A of the CC Act, the present suit cannot be instituted. It was his contention that in the facts of the present case, pre-institution mediation has admittedly not been resorted to by the plaintiff and hence the suit be dismissed.
15. Before I deal with the scope and ambit of section 12A of the CC Act, it would be apposite to understand why the Commercial Courts Act, 2015 was brought into force. The Law Commission of Page 16 of 42 sj.45.2019.doc India, in its 253rd Report, had recommended the establishment of Commercial Courts and the Commercial Division and the Commercial Appellate Division in the High Courts for disposal of commercial disputes of a Specified Value. The purpose for establishing such a Law was to provide for speedy disposal of commercial disputes and which was under consideration of the Government for quite some time. The Government felt that high valued commercial disputes involve complex facts and questions of law, and therefore, there was a need to provide for an independent mechanism for their early resolution. Early resolution of commercial disputes would create a positive image to the investor world about the independent and responsive Indian legal system. It was in these circumstances that a Bill namely, the Commercial Courts, Commercial Division and Commercial Appellate Division of High Courts Bill of 2015 was introduced. As per this Bill, all suits, appeals or applications relating to commercial disputes of a Specified Value were to be dealt with by the Commercial Courts or the Commercial Division of the High Court. This Bill was then made into an Act, namely, The Commercial Courts, Commercial Division and Commercial Appellate Division of High Courts Act, 2015. Thereafter, the name of the Act was changed to The Commercial Page 17 of 42 sj.45.2019.doc Courts Act, 2015 w.r.e.f 03-05-2018. To put it in a nutshell, to ensure quick resolution of commercial disputes and which is very important in the business world, as well as to boost the image of India with the international investor community, the aforesaid Act was brought into force. The entire Act and the provisions thereunder are basically to achieve the aforesaid objectives.
16. After this Act (the CC Act) was brought into force, Chapter IIIA was inserted by Act 28 of 2018 with retrospective effect from 3rd May, 2018. Under this Chapter, section 12A was brought on the statute book and which reads as under:-
"12A. Pre-Institution Mediation and Settlement.- (1) A suit, which does not contemplate any urgent interim relief under this Act, shall not be instituted unless the plaintiff exhausts the remedy of pre-institution mediation in accordance with such manner and procedure as may be prescribed by rules made by the Central Government.
(2) The Central Government may, by notification, authorise the Authorities constituted under the Legal Services Authorities Act, 1987 (39 of 1987), for the purposes of pre-institution mediation.
(3) Notwithstanding anything contained in the Legal Services Authorities Act, 1987 (39 of 1987), the Authority authorised by the Central Government under sub-section (2) shall complete the process of mediation within a period of three months from Page 18 of 42 sj.45.2019.doc the date of application made by the plaintiff under sub-section (1);
Provided that the period of mediation may be extended for a further period of two months with the consent of the parties:
Provided further that, the period during which the parties remained occupied with the pre-institution mediation, such period shall not be computed for the purpose of limitation under the Limitation Act, 1963 (36 of 1963).
(4) If the parties to the commercial dispute arrive at a settlement, the same shall be reduced into writing and shall be signed by the parties to the dispute and the mediator.
(5) The settlement arrived at under this section shall have the same status and effect as if it is an arbitral award on agreed terms under sub-section (4) of section 30 of the Arbitration and Conciliation Act, 1996 (26 of 1996)."
(emphasis supplied)
17. Section 12A of the CC Act stipulates that where a suit, which does not contemplate any urgent interim relief under the Commercial Courts Act, shall not be instituted unless the plaintiff exhausts the remedy of pre-institution mediation. The manner in which and the procedure to be followed, are also set out under the said section. The time period for completion of the mediation process is also restricted to three months from the period of the application Page 19 of 42 sj.45.2019.doc made by the plaintiff for mediation under sub-section (1). In furtherance of this provision, the Government has, under section 21A(2)(a) read with sub-section (1) of section 12A issued a notification No.G.S.R. 607(E) dated 3rd July, 2018 which inter alia enacts rules for pre-institution mediation and settlement, namely, The Commercial Courts (Pre-Mediation and Settlement) Rules, 2018. A separate notification No. S.O. 3232 (E) dated 3rd July, 2018 has been issued by the Central Government under sub-section (2) of section 12A authorizing the State Authorities and District Authorities constituted under the Legal Services Authorities Act, 1987 for conducting mediation contemplated under section 12A of the CC Act.
18. Firstly, on perusing section 12A of the CC Act it is clear that it is a procedural provision and there is no absolute embargo in instituting the suit unless the plaintiff exhausts the remedy of mediation. This is clear from sub-section (1) of section 12A of the CC Act which contemplates that where any urgent interim relief is applied for under the Act, the plaintiff is not required to exhaust the remedy of mediation before approaching the Court. It is not as if the Court lacks inherent jurisdiction to entertain the suit because the Page 20 of 42 sj.45.2019.doc remedy of mediation is not resorted to before approaching the Court. The purpose of section 12A of the CC Act appears to be that parties should try and resolve their disputes before coming to the Court. This is for the simple reason that if parties resolve their disputes, they need not approach the Court at all. However, when parties have tried to resolve their disputes unsuccessfully, it would be futile to still drive the parties to pre-institution mediation. If such an interpretation is put on the said provision, it would militate against the very object for which the Commercial Courts Act, 2015 was brought into force. As mentioned earlier, the purpose of bringing the said Act into force was to ensure speedy disposal of commercial disputes of a Specified Value and to instil confidence that disputes of a commercial nature would be resolved as quickly as possible either through mediation or by approaching the Court of Law. Take a case, where through correspondence, the parties have tried to resolve their disputes before approaching the Court without any success. Can it then be contended that parties are still to be referred to mediation to resolve their disputes when an attempt has already been made and failed? I think not. To my mind, one has to interpret this provision to see that there is substantial compliance, namely, that an attempt has been made to resolve the disputes Page 21 of 42 sj.45.2019.doc amicably which has failed, and therefore, the plaintiff is constrained to approach the Court for redressal of his grievances. Whilst interpreting this section, one must not lose sight of the primary object of the CC Act, namely, to resolve commercial disputes as quickly as possible and at the same time, if possible, to reduce the burden on the Court. To put it simply, the defendant, by his conduct, can in a given case, waive the privilege to drive the plaintiff to go to mediation. There could be a case where the defendant just does not want to amicably settle the matter or he may feel that he has valid defences to the claim of the plaintiff and there is nothing to resolve. In such a case it would, therefore, be futile to refer the parties to mediation. Despite this, if the Court was to take a view that the parties must compulsorily go for mediation as contemplated under section 12A of the CC Act, the same would run counter to the very purpose for which the CC Act was brought into force. It would have the effect of delaying the proceedings rather than having a quick resolution of the dispute and which is the very object for which the CC Act was brought on the statute book. I am, therefore, clearly of the view that the provisions of section 12A of the CC Act being procedural in nature, have to be interpreted keeping in mind the doctrine of substantial compliance. A procedural provision has to be Page 22 of 42 sj.45.2019.doc interpreted in such a manner that it aids in meting out justice rather than frustrate it. As Justice Vivian Bose has so eloquently put it, [AIR 1955 SC 425] "It is procedure, something designed to facilitate justice and further its ends: not a penal enactment for punishment and penalties; not a thing designed to trip people up. Too technical a construction of sections that leaves no room for reasonable elasticity of interpretation should therefore be guarded against (provided always that justice is done to both sides) lest the very means designed for the furtherance of justice be used to frustrate it". To put it simply, section 12A being a procedural provision, the Court has to see if the object sought to be achieved thereby is substantially complied with. If there is substantial compliance, then the plaintiff cannot be non-suited.
19. There is one more facet to this. The objection of non- compliance of the provisions of section 12A must be taken by the defendant at the earliest opportunity. If he doesn't, then, at least for the purposes of section 12A, it would be presumed that the defendant does not want to resolve his dispute through mediation. To my mind, such an interpretation would not only further the object sought to be achieved by section 12A but also the main object Page 23 of 42 sj.45.2019.doc of the CC Act i.e. quick resolution of commercial disputes.
20. I agree with Mr. Andhyarujina that a similar provision to section 12A (of the CC Act) can be found in section 80 of the Code of Civil Procedure, 1908 (for short "the CPC"). Section 80 of the CPC reads thus:-
"80. Notice.-- (1) Save as otherwise provided in sub-section (2), no suit shall be instituted against the Government (including the Government of the State of Jammu and Kashmir) or against a public officer in respect of any act purporting to be done by such public officer in his official capacity, until the expiration of two months next after notice in writing has been delivered to, or left at the office of--
(a) in the case of a suit against the Central Government, except where it relates to a railway, a Secretary to that Government;
(b) in the case of a suit against the Central Government where it relates to a railway, the General Manager of that railway;
(b) [* * *] (bb) in the case of a suit against the Government of the State of Jammu and Kashmir, the Chief Secretary to that Government or any other officer authorised by that Government in this behalf;
(c) in the case of a suit against any other State Government, a Secretary to that Government or the Collector of the district;
(d) [* * *] and, in the case of a public officer, delivered to him or left at his office, stating the cause of action, the name, description and place of residence of the plaintiff and the relief which he claims; and the plaint shall contain a statement that such notice has been so delivered or left.
(2) A suit to obtain an urgent or immediate relief against the Government (including the Government of the State of Jammu and Kashmir) or any public officer in respect of any act purporting to be done by such public Page 24 of 42 sj.45.2019.doc officer in his official capacity, may be instituted, with the leave of the Court, without serving any notice as required by sub-section (1); but the Court shall not grant relief in the suit, whether interim or otherwise, except after giving to the Government or public officer, as the case may be, a reasonable opportunity of showing cause in respect of the relief prayed for in the suit:
Provided that the Court shall, if it is satisfied, after hearing the parties, that no urgent or immediate relief need be granted in the suit, return the plaint for presentation to it after complying with the requirements of sub- section (1).
(3) No suit instituted against the Government or against a public officer in respect of any act purporting to be done by such public officer in his official capacity shall be dismissed merely by reason of any error or defect in the notice referred to in sub-section (1), if in such notice--
(a) the name, description and the residence of the plaintiff had been so given as to enable the appropriate authority or the public officer to identify the person serving the notice and such notice had been delivered or left at the office of the appropriate authority specified in sub-section (1), and
(b) the cause of action and the relief claimed by the plaintiff had been substantially indicated."
(emphasis supplied)
21. Section 80(1) also stipulates that no suit can be instituted against the Government or a public officer until the expiration of 2 months of giving notice as contemplated in the said section. Sub-section (2) of section 80 of the CPC contemplates that a suit to obtain an urgent or immediate relief against the Government or any public officer in respect of any act purporting to be done by such public officer in his official capacity, may be instituted, with the Page 25 of 42 sj.45.2019.doc leave of the Court without serving any notice as required by sub- section (1). However, the Court shall not grant relief in the suit, whether interim or otherwise, except after giving to the Government or public officer, as the case may be, a reasonable opportunity of showing cause in respect of the relief prayed for in the suit.
22. The similarity between section 80 of the CPC and section 12A of the CC Act are (i) that before institution of the suit, a prescribed act has to be performed/fulfilled; and (ii) where urgent interim relief is sought for, the suit can be instituted without performing or fulfilling the prescribed act. Under section 80 of the CPC, the prescribed act is to serve a notice in writing to the Government or the public officer (as the case may be) and wait for 2 months before instituting the suit. Under section 12A of the CC Act a suit cannot be instituted unless the plaintiff exhausts the remedy of pre-institution mediation. Both sections allow institution of the suit without fulfilment of the prescribed act, namely, service of notice (under section 80) or going for pre-institution mediation in the prescribed manner (under section 12A) respectively, where the suit contemplates urgent interim relief. The only difference is that Page 26 of 42 sj.45.2019.doc under section 80 of the CPC the suit has to be instituted with the leave of the Court [see section 80(2)].
23. In this regard, Mr. Andhyarujina relied upon a decision of this Court in the case of Chandrashekhar Purushottam Rathi v. State of Maharashtra [2002(2) Mh. L. J. 181] to contend that just as a notice under section 80 of the CPC is capable of being waived, so also is the requirement of the plaintiff to first invoke pre-institution mediation before filing a suit as contemplated under section 12A of the CC Act. This was a case where this Court was considering whether a notice under section 80 of the CPC is capable of being 'waived' or contemplates even a 'deemed waiver'. Answering this question in the affirmative, this Court held as under:-
"15. From the ratio of the cases cited above that the notice under section 80 of Civil Procedure Code is capable of being waived, it further follows that if the notice is waived, the plaint need not be returned for compliance.
16. The learned A.G.P. contended that in the instant case, the issuance of the notice under section 80(1), Civil Procedure Code was not waived by the defendants. He pointed out that in the written statement filed on behalf of the State of Maharashtra and Collector, Yavatmal, on the trial Court's record, which is at Exhibit 16, the defendants, at the end of para 2, have pleaded that it was not necessary to reply the averments of the plaintiff as regards the dispensing with notice since the Court had granted leave to the plaintiff under section 80(2), Civil Procedure Code to Page 27 of 42 sj.45.2019.doc institute the suit by dispensing with the mandatory notice. The learned A.G.P. canvassed that these pleadings indicate that the defendants were under the impression that the leave under section 80(2), Civil Procedure Code to bring the suit without notice was granted to the plaintiff and, therefore, the defendants did not raise any objection as to the non- issuance of notice.
17. The material on record shows that the State Government and the Collector had not waived the notice under section 80(1), Civil Procedure Code in express terms. However, the learned counsel for the plaintiff- appellant submitted that there was a deemed waiver of the notice on the part of the defendants (State of Maharashtra and Collector, Yavatmal). The question is whether such deemed waiver is contemplated in law and if it is so, whether in the instant case, the defendants are deemed to have waived the issuance of notice under section 80, Civil Procedure Code and what is its effect. In this connection, the learned counsel for the plaintiff- appellant cited Paleti Sivarama Krishnaiah v. Executive Engineer, N.C. Canals Sathenapalli, AIR 1978 AP 389. In this cited case, the principle that although the notice under section 80, Civil Procedure Code is mandatory, even a mandatory provision can be waived if it is not concerned in public interest, but in the interest of the party that waives it, is followed and it was held that the notice under section 80 is meant for the benefit of the party to whom it is intended and it can be waived by the party for whose benefit it is intended. In this cited case, an objection was raised in respect of non-issuance of notice in the written statement, but no issue was framed on that point and no objection was taken subsequently on that score at any stage of the trial nor any application was made for the amendment of issues. It was held that the defendant was deemed to have waived the notice. An elaborate discussion of the facts and law on the above point was made in this case. The observations in the earlier authorities were reproduced.
18. In para 14, the observations in Vellayan v. Madras Province, AIR 1947 PC 197 were quoted as below:--
"The notice required to be given under section 80 is for the protection of the authority concerned. If in a particular case he does not require that protection and says so, he can lawfully waive his right to the notice."Page 28 of 42
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19. Then the aforesaid observations, which are already reproduced above from Dhirendra Nath Gorai plus Subal Chandra Nath v. Sudhir Chandra Ghosh, AIR 1964 SC 1300, as regards the distinction between irregularity and nullity are also relied upon in this cited case in para 16. The aforesaid principles are concluded in para 18 of the cited case. While considering the facts of that particular case, which were indicating that the party was deemed to have waived the notice, it was pointed out that though the plea raising an objection to the non-issuance of notice was taken in the written statement, no issue in that respect was framed, no objection in that respect was taken in suit at any stage and even in the grounds of appeal, the plea of want of notice was not taken but the said plea was taken for the first time in the arguments in appeal. In such circumstances, it was held that the defendant concerned was deemed to have waived the notice.
20. The learned counsel for the plaintiff-appellant submitted that the case of the plaintiff herein is on a better footing. He pointed out that in the cited case, the plea of want of notice was raised, whereas in the present case no such plea was taken and the absence of urgency was not pleaded. Further in the cited case, the plea of want of notice was taken for the first time at the time of arguments in the appeal, whereas in the present case that plea was not taken by the defendants even at the stage of arguments in the appeal and the lower Appellate Court itself suo motu dealt with that issue.
21. Again the following observations in Purna Chandra Sarkar v. Radharani Dassya, AIR 1931 Cal. 175, which are reproduced in para 21 of the abovesaid authority, are relevant. They are as under:
"The plea of want of notice under section 80, Civil Procedure Code, which is a clear bar to the institution of proceedings against public officer must be taken at the earliest possible opportunity and must be specifically pleaded. Where such a plea is taken by the defendant at a very late stage of the suit and at a time when the plaintiff would be precluded by the law of limitation from bringing a further suit against the defendant, the defendant must be deemed to have waived the privilege of notice."Page 29 of 42
sj.45.2019.doc (emphasis supplied)
24. There is also a Supreme Court judgement in the case of State of A.P. v. Pioneer Builders, [(2006) 12 SCC 119], wherein the Supreme Court has taken a similar view and held as under:
"19. Bearing in mind the aforenoted legal position, we advert to the facts in hand. As noted above, the Subordinate Judge, vide order dated 2-2- 1993 came to the conclusion that "there was no tenable ground to refuse the relief asked for". Though there may be some substance in the submission of Mr Chaudhari, learned Senior Counsel appearing for the State, that the order allowing the application, seeking dispensation of the requirement of notice, is cryptic but the fact remains that by allowing the application, after hearing the defendant State, the Judge has opined that the suit is for the purpose of obtaining an urgent and immediate order. Had the satisfaction been against the contractor, the court was bound to return the plaint to the contractor for re-presentation after curing the defect in terms of sub-section (1) of Section 80. Although we do not approve of the manner in which the afore-extracted order has been made and the leave has been granted by the Subordinate Judge but bearing in mind the fact that in its reply to the application, the State had not raised any specific objection about the maintainability of the application on the ground that no urgent and immediate relief had either been prayed for or could be granted, as has now been canvassed before us, we are of the opinion that having regard to the peculiar facts and the conduct of both the parties it is not a fit case where the matter should be remanded back to the Subordinate Judge for reconsideration. We find it difficult to hold that the order passed by the Subordinate Judge on the contractor's application under Section 80(2) CPC was beyond his jurisdiction. Accordingly, we decline to interfere with the finding recorded by the High Court on this aspect of the matter. The High Court has held that having participated in the original proceedings, it was not now open to the State to raise a fresh issue as to the maintainability of the suit, in view of waiving the defect at the earliest point of time. The High Court has Page 30 of 42 sj.45.2019.doc also observed that knowing fully well about non-issue of notice under Section 80 CPC the State had not raised such a plea in the written statement or additional written statement filed in the suit and, therefore, deemed to have waived the objection. It goes without saying that the question whether in fact, there is waiver or not necessarily depends on the facts of each case and is liable to be tried by the court, if raised, which, as noted above, is not the case here.
(emphasis supplied)
25. As can be seen from the aforesaid two decisions, though serving a notice under section 80 of the CPC is mandatory, the same is capable of being waived. Naturally, whether there is a waiver or not, would depend on the facts and circumstances of the case. In fact, the plea for want of notice under section 80, and which is a clear bar to the institution of proceedings against the Government or a public officer, must be taken at the earliest possible opportunity and must be specifically pleaded. Where such a plea is taken by the defendant at a very late stage of the suit and at a time when the plaintiff would be precluded by the law of limitation from bringing a further suit against the defendant, the defendant must be deemed to have waived the privilege of the notice.
26. Having seen that the provisions of section 12A of the Page 31 of 42 sj.45.2019.doc CC Act and section 80 of the CPC are similar, I do not see why on parity of reasoning, it cannot be held that in a given set of facts and circumstances, the defendant has waived the privilege of asking the plaintiff to first invoke the remedy of pre-institution mediation before instituting a suit in this Court. As mentioned earlier, without considering the facts and circumstances of a particular case, to mechanically drive the plaintiff to go for mediation under section 12A of the CC Act before allowing him to institute the suit, would in fact run counter to the very object and purpose for which the CC Act was brought into force. This interpretation, which I have held earlier would sub-serve the ends of justice, would not in any event cause prejudice to the defendant. A defendant who genuinely desires to resolve the disputes through mediation, can always request the Court to invoke the provisions of section 89 of the CPC to send the parties to mediation.
27. Having taken a view on the interpretation and scope of section 12A, I shall now see how they apply to the facts of the present case. As narrated earlier, the present suit came to be lodged on 6th July, 2019. After the suit was filed, the writ of Page 32 of 42 sj.45.2019.doc summons was served on the defendant and the plaintiff thereafter filed the above Summons for Judgement on 16th August, 2019. The defendant also filed an affidavit-in-reply dated 11th December, 2019 to the Summons for Judgment as well as an affidavit in sur-rejoinder dated 10th January, 2020 to rejoinder filed by the plaintiff on 18th December, 2019. At no point of time has the defendant ever raised the contention that the present suit cannot be instituted because the plaintiff has not invoked the remedy of pre-institution mediation as contemplated under section 12A of the CC Act. This argument is, for the first time, canvassed only across the Bar by Mr. Bookwala when it was argued on 9th December, 2020 and 11th December, 2020. I am, therefore, of the opinion that not having raised this issue at the earliest point of time, the defendant is now precluded from doing so. In fact, if I were to allow such a plea at this stage, it takes the plaintiff by surprise. The scope and ambit of section 12A is not to defeat a just claim of the plaintiff. As mentioned earlier, section 12A is a procedural provision and it is well settled that procedure cannot defeat justice. I am, therefore, clearly of the view that in the facts of the present case, the plaintiff cannot be non-suited on this ground considering that the plea of requiring the plaintiff to Page 33 of 42 sj.45.2019.doc invoke pre-institution mediation has not even been raised in the pleadings before me and is only argued across the Bar for the first time in December, 2020.
28. Even otherwise, in the facts of the present case, I find that the provisions of section 12A have been substantially complied with. As mentioned earlier, the scope and ambit of section 12A is to try and see if the parties can resolve their disputes before approaching the Court of law. If they cannot, then naturally the parties have to approach the Court for redressal of their grievances. In the facts of the present case, after the suit was filed, the parties did try to resolve their disputes. This is clear from the order passed by this Court on 4th November, 2020, wherein it was specifically recorded on behalf of the defendant that the defendant is desirous of sending a settlement proposal to the plaintiff to see if the disputes can be resolved. Such a proposal was, in fact, sent by the defendant to the plaintiff and which was rejected by the plaintiff. This would, therefore, clearly go to show that in the facts of the present case, the parties did try to resolve their disputes amicably, albeit after the filing of the suit, but without any success. This being the case, it would not only be ridiculous, but highly unjust to now hold that the Page 34 of 42 sj.45.2019.doc plaintiff ought to be non-suited merely because he did not avail of the pre-institution mediation process as contemplated under section 12A of the CC Act. Such a rigid interpretation of section 12A would, in fact, do more injustice than justice to the parties. Such an interpretation should always be avoided. I, therefore, am clearly of the view that in the facts of the present case, the contention raised by Mr. Bookwala regarding dismissal of the suit for non-compliance of the provisions of section 12A is without any merit and is rejected.
29. Before concluding on this issue, it would only be fair to deal with the judgments that were relied upon by Mr. Bookwala. The first decision is in the case of Anil Gupta (supra), which is a decision of a single Judge of the Delhi High Court dated 30th September, 2020. I have carefully gone through the aforesaid decision. In the facts of that case, it was the argument on behalf of the plaintiff that since the plaintiff had filed an application seeking urgent interim reliefs under Order XXXVIII Rule 5 and another application under Order XXXIX Rule 10 of the CPC, there was no requirement for compliance of section 12A of the CC Act. This contention of the plaintiff was negated stating that the application did not satisfy the test of urgency. However, instead of dismissing the suit, the Delhi Page 35 of 42 sj.45.2019.doc High Court issued summons in the Suit, subject to the plaintiff filing an application seeking exemption under section 12A of the CC Act. I fail to see how this decision can be of any assistance to the defendant. In the facts of that case, the Court came to a finding that since the test for urgency was not met, the plaintiff could not contend that he was not required to comply with the provisions of section 12A. That is not the case before us at all. In the facts of our case, as narrated above, the objection that section 12A has not been complied with, has never been taken at all, except across the Bar. Even otherwise, as stated earlier, in the facts of the present case, the defendant, in fact, albeit after the filing of the suit, had given a settlement proposal to the plaintiff to try and resolve the disputes amicably. This was rejected by the plaintiff. In these circumstances, the fact situation before the Delhi High Court was totally different from the facts before me. The aforesaid decision, therefore, has no application in the present case.
30. The next decision is that of the Calcutta High Court in the case of Terai Overseas Private Ltd. & Ors. (supra). In this decision, the plaintiff filed an application for leave to institute a suit without complying with the provisions of section 12A of the CC Act. Page 36 of 42
sj.45.2019.doc In paragraph 23 of the plaint it was stated that the plaintiff apprehends that the defendants are acting in collusion and, therefore, there is no chance for any conciliation as mandated under the CC Act. It was in these circumstances that the Court, at the very first instance, came to the conclusion that what was stated in paragraph 23 of the Plaint would not come within the ambit and scope of section 12A of the CC Act. This judgment too will not be of any assistance to the defendant.
31. The next decision relied upon is the decision of the Supreme Court - In Re: Cognizance For Extension of Limitation dated 10th July, 2020. This order of the Supreme Court was passed in view of the fact that the parties had prayed to the Court for extending the time where limitation is to expire during the period when the lock-down was in operation due to the Covid-19 Pandemic or the time to perform a particular act is to expire during the said lock-down. It is in these circumstances that the Supreme Court in paragraph 8 stated that under section 12A of the CC Act, the time prescribed for completing the process of compulsory pre-litigation mediation and settlement is also liable to be extended. On reading Page 37 of 42 sj.45.2019.doc this order, I do not think that the Supreme Court has, in any way, opined that pre-institution mediation, in the given facts and circumstances of the case, cannot be waived. That was never in issue at all. All that the Supreme Court says is that even for pre- litigation mediation and settlement time needs to be extended in view of the lockdown. I, therefore, find that even this decision is of no assistance to the decision.
32. The last decision relied upon by Mr. Bookwala was the decision of the Madhya Pradesh High Court in the case of GSD Constructions Pvt. Ltd. (supra). Even this judgment, I find, is wholly inapplicable to the facts of the present case. In fact, in this case too, the appellants before the Madhya Pradesh High Court had filed a civil suit for a declaration, recovery of money and for grant of injunction and they also moved applications under Order VII Rule 1 and Order XXXIX Rules 1 and 2 read with section 151 of the CPC. The learned Trial Court, taking into account the provisions of section 12A, returned the Plaint by directing the plaintiff to approach the authority as per the provisions of section 12A(1) of the CC Act by exhausting the remedy of pre-institution mediation. This order was challenged before the Madhya Pradesh High Court in Page 38 of 42 sj.45.2019.doc Appeal and the Madhya Pradesh High Court, after hearing the parties and going through the record, directed the Trial Court to hear the applications filed by the appellants and proceed ahead in the matter without forcing the appellants to invoke the remedy of pre-institution mediation. Again, I fail to see how this judgment in any way supports the defendant. In fact, the Trial Court had returned the Plaint and had directed the plaintiff to exhaust the remedy of pre-institution mediation. This direction was set aside by the Appeal Court. In these circumstances, this judgment also is of no assistance to the defendant.
33. I, therefore find that all these decisions have no application to the facts of the present case and do not assist the defendant in any manner whatsoever.
34. The last contention canvassed, and I must fairly say not seriously pressed by Mr. Bookwala, was that the present suit has been filed in contravention of certain provisions of the CPC, namely, that the plaint does not comply with Rule 2-A of Order VII of the CPC inasmuch as the plaint is silent on the mode and manner in which the interest has to be calculated.
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35. I find this argument to be totally fallacious. In the present case, the plaintiff has made his claim on two dishonoured cheques. One cheque is for the principal amount of Rs.5 Crores and the second cheque is for the amount of Rs.54 lacs towards interest. Both the aforesaid cheques were dishonoured. The claim for interest in the plaint has been made at the agreed rate of interest of 12% p.a. on the sum of Rs.5 Crores and not Rs.5.54 Crores. This is clear from merely looking at the calculations given in the particulars of the claim. I, therefore, find that there is absolutely no merit in the aforesaid contention either.
36. In the facts of the present case, I find that there is no dispute whatsoever with reference to the merits of the claim of the plaintiff. From the facts narrated above, it is clear that the defendant had taken moneys from the plaintiff and has not repaid the same. In fact, the defendant, to repay the moneys advanced by the plaintiff to the defendant, had also issued a post-dated cheque of Rs.5 crores which was dishonoured when presented for payment. Similarly, even the cheque issued for the payment of Rs.54 lakhs Page 40 of 42 sj.45.2019.doc (towards interest) was dishonoured. The reason for dishonour of both the aforesaid cheques was 'funds insufficient'. There is also no dispute with reference to the rate of interest payable. When one looks at the overall facts of the matter, it is abundantly clear that the defendant has absolutely no defence on the merits of the claim of the plaintiff. The only defences raised are defences in law and which I have negated by my discussion earlier. In these circumstances, and finding that there is no defence whatsoever, I would be fully justified in allowing the Summons for Judgment and ordering the defendant to pay the sums claimed therein to the plaintiff. However, purely out of mercy and to allow the defendant to file a written statement and contest the suit, I grant conditional leave to the defendant and pass the following order:-
(a) The defendant shall deposit in this Court, a sum of Rs.5.54 crores within a period of twelve weeks from today. On the aforesaid condition being complied with, the defendant is granted leave to defend the suit and he shall file his written statement within a period of eight weeks from the date of deposit.Page 41 of 42
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(b) If the aforesaid condition of deposit is not adhered to within the stipulated time, the plaintiff shall be entitled to apply for an ex-parte decree after obtaining a non-deposit certificate from the Prothonotary & Senior Master of this Court.
37. The Summons for Judgment is, accordingly, disposed of. There shall be no order as to costs.
38. This order shall be digitally signed by the Private Secretory /Personal Assistant of this Court. All concerned shall act on production by fax or e-mail of a digitally signed copy of this order.
(B.P. COLABAWALLA, J. ) Page 42 of 42