Delhi District Court
Varun Paliwal vs Nichi Manufacturing Pvt Ltd on 18 May, 2026
IN THE COURT OF RAMESH KUMAR-II, DISTRICT
JUDGE (COMMERCIAL COURT)-08, CENTRAL, TIS
HAZARI COURTS, EXTENSION BLOCK:
DELHI.
CS (COMM.) 185/2024
CNR NO.: DLCT01-001449-2024
IN THE MATTER OF:
Mr. Varun Paliwal,
Proprietor of M/s Sanguine Financial
Consultancy.
Carrying on business from A-68, Prem Nagar,
Shakti Nagar, Delhi-110007.
..........Plaintiff.
Versus
Nichi Manufacturing Pvt. Ltd.
D-1/44 B, Mansa Ram Park,
Dwarka Mor Metro Station Pillar No.786,
Uttam Nagar, West Delhi,
Delhi-110059.
..........Defendant.
Date of Institution : 02.02.2024
Date of final arguments : 21.04.2026
Date of decision : 18.05.2026
JUDGMENT
1 Vide this judgment, I shall dispose of instant suit filed by plaintiff against defendant under Order XXXVII CPC for recovery of Rs.27,40,114/- alongwith interest. 2 It is pertinent to mention herein that on 24.09.2024, Ld. Counsel for plaintiff made a prayer to treat the present suit as an ordinary suit instead of summary suit. In view of the request of CS (COMM.) 185/2024 Page no. 1 of 26 Ld. Counsel for plaintiff, present suit was ordered to be treated as an ordinary suit.
3 The dispute between the parties is a commercial dispute within the definition of Section 2 (1) (c) of the Commercial Courts Act, 2015. Pre-mediation between the parties remained unsuccessfully vide non-starter report dated 14.10.2023 of the concerned District Legal Services Authority. 4 Brief facts as set out in plaint are that the Plaintiff, in usual course works as a financial consultant and planner using the trade name 'Sanguine Financial Consultancy' (SFC) and the Plaintiff is its sole proprietor. It is further averred that in or about June, 2022, the Defendant engaged the Plaintiff as its official financial consultant with varied scope of work, including but not limited to identifying suitable banks and non-banking and other financial institutions as well as other licensed/authorized lenders for the Defendant based on the Defendant's requirements, capacity, creditworthiness, as well as the potential lenders' preconditions, eligibility criteria for lending money etc. 4.1 It is further averred that in course of his work the Plaintiff would also carry out due diligence and engage third party advisors/ experts including Chartered Accountants, Company Secretaries, Registered Valuers etc., if required, to facilitate the work and the plaintiff usually, the Plaintiff charges a portion of the loan approved in favour of the client-company as variable consideration while an upfront amount is charged as advance in lieu of the services rendered by the Plaintiff. The expenses of the outsourced works for which independent experts are hired is borne by the client-company (like the Defendant herein).
CS (COMM.) 185/2024 Page no. 2 of 26 4.2 It is further averred that the Defendant approached the
Plaintiff with a desire to avail his services to secure funds between Rs.12 Crore to 15 Crore from one or more financial institutions. It was mutually agreed between the parties herein that the Plaintiff would be entitled to 4.25% of the loan amount sanctioned by the identified lender (GST payable additionally) in favour of the Defendant as his variable fees for the entire services rendered by him.
4.3 It is further averred that it was further agreed that (i) a Positive Pay Letter would be issued in favour of the Plaintiff by a banker designated by the Plaintiff for payment of his consultancy fees; (ii) an undated cheque would be issued by the Defendant to the Plaintiff after receipt of the sanction letter/ Letter of Intent/ in-principal sanction to be encashed (by the Plaintiff) post disbursement of the loan amount by the lender to the Defendant.
4.4 It is further averred that the mutual covenants stated herein-above including other and further terms and conditions were reduced to a written contract by the parties herein. Accordingly, the written contract titled 'Financial Advisory Fee Agreement' (written contract) was executed on 28.06.2022 by and between the Plaintiff and the Defendant herein.
4.5 It is further averred that the Plaintiff duly performed his duties under the written contract dated 28.06.2022 and succeeded to ensure that Axis Bank Limited would sanction Rs.9.80 Crore in favour of the Defendant vide its sanction letter dated 13.09.2022. It is worth mentioning that the Bank directly communicated the factum of loan sanction to the Defendant and CS (COMM.) 185/2024 Page no. 3 of 26 not to the Plaintiff. The Plaintiff learnt about it from the Defendant.
4.6 It is further averred that consequently, as per the written contract, a liquidated sum of Rs.41,65,000/- [i.e. 4.25% of Rs.9.80 Crore] together with GST thereon @ 18% became payable by the Defendant to the Plaintiff.
4.7 It is further averred that acting in terms of the written contract dated 28.06.2022, the Defendant issued an account payee cheque for a sum of Rs.49,00,000/-bearing No. 000305, dated 16.09.2022 drawn on Kotak Mahindra Bank, C-12/15, Vasundhara, Ghaziabad-201012, Uttar Pradesh.
4.8 It is further averred that as per Clause 6 of the written contract 50% of the stipulated fees, as calculated hereinabove, would be payable to the Plaintiff in the event the Defendant refuses to take disbursement of the sanctioned amount and thus backs out from the deal.
4.9 It is further averred that on or about October 1, 2022, the Defendant backed out from the deal and categorically refused to take disbursement of loan amount sanctioned by Axis Bank vide its letter dated 13.09.2022. In view of Clause 6 of the written contract, therefore, the Plaintiff became entitled to recover a sum of not less than Rs. 20,82,500/- together with GST thereon @ 18% being a sum of Rs.3,74,850/- and aggregating to Rs. 24,57,350/-.
4.10 It is further averred that on 03.10.2022, the Plaintiff deposited the cheque (dated 16.09.2022) with his banker for CS (COMM.) 185/2024 Page no. 4 of 26 recovery of the consultancy fees that became due on 'refusal' by the Defendant of the disbursement from the bank.
4.11 It is further averred that the said cheque was dishonored upon presentation on the ground for 'funds insufficient.' In view of dishonour of the aforesaid cheque, the Plaintiff initiated Complaint No.3448/2022 before the Ld. Chief Judicial Magistrate, Delhi (North) against the Defendant and its the then directors under the Negotiable Instruments Act, 1881. The proceedings under the NI Act is pending. The plaintiff also exhausted the remedy of pre-mediation before DLSA (Central) but the defendant failed to participate in the proceedings and as such a non-starter report was issued on 14.10.2023.
4.12 It is further averred that as it may, in the facts and circumstances stated, the Plaintiff has become entitled to recover from the Defendant a sum of not less than Rs.27,40,114/- (Rupees Twenty-Seven Lakh Forty Thousand One Hundred and Fourteen only) as on 20.11.2023 particulars whereof are, as provided in the table below:
S. No. Particulars Amount
(1) 50% of the Consultancy fees as per the Rs. 20,82,500
written contract dated 28.06.2022
(2) GST @ 18% on (1) Rs. 3,74,850
(3) Pre-suit Interest on (1) @ 12% per annum Rs. 2,82,764
from 03.10.2022 to 20.11.2023
Total Rs. 27,40,114/-
CS (COMM.) 185/2024 Page no. 5 of 26
4.13 It is further averred that the Plaintiff is therefore entitled to recover Rs.27,40,114/- (Rupees Twenty-Seven Lakh Forty Thousand One Hundred and Fourteen only) from the Defendant. The Plaintiff is also entitled to further pendente lite and future interests on the sum above at a reasonable rate of 12% per annum till complete repayment/ realization. It is further averred that however, the Defendant failed and/or neglected and/or refused to pay any part of the aforesaid amount despite promise to pay. Hence the present suit.
5 Summons were issued to the defendant. The defendant was served and he has contested the present suit by filing his written statement thereby taking various preliminary objections inter-alia that the present suit is not maintainable as the claim involves complex questions of fact, disputed performance and breach of terms by the plaintiff.
5.1 It is further stated that the plaintiff has failed to fulfill his contractual obligations in material aspects and has approached this court with unclean hands, malafide intention of concealing crucial facts regarding his deficient performance, misrepresentation, and non-delivery of agreed outcomes according to the agreement enclosed with the plaint.
5.2 It is further stated that the plaintiff's claim is based on a contingent contract, where his 'fee' would become payable only upon the actual disbursement of the sanctioned loan facility according to favourable terms in favour of the defendant and not on the grant of a "draft sanction letter" by any bank, which never occurred.
CS (COMM.) 185/2024 Page no. 6 of 26 5.3 It is further stated that the dishonoured cheque was issued
conditionally and as a mere token of understanding post-sanction and was subject to actual loan disbursement on favourable terms to the defendant which never happened. The plaintiff unilaterally has deposited a conditionally issued cheque in violation of contractual understanding. Hence, no legal liability on part of the defendant arises in the absence of disbursement of actual funds. The plaintiff has failed to deliver the core outcome i.e. actual disbursement of loan in the favourable terms and has misrepresented the scope and timelines in his plaint. 5.4 It is further stated that the plaintiff has grossly misled the court by stating that "draft sanction letter" issued by a banker named as "Axis Bank Ltd." and has conveniently and misleadingly equated the "draft sanction letter" with "disbursement", which is contractually and commercially incorrect and is a gross misuse of the judicial time of this court.
5.5 It is further stated that as per Clause 3 of the said agreement, payment liability in favour of the plaintiff arises only upon disbursement and since the defendant never received any disbursed amount, no liability arises on the part of the defendant. Moreover, the defendant had genuine intentions of continuing the agreement and modifying the terms put forward by the plaintiff to any banker. Only after the aggressive and reactionary approach of the plaintiff, the defendant had genuine reasons to reject the offer based on adverse terms in the sanction letter, for which the plaintiff is solely responsible.
5.6 It is further stated that Clause 6 of the said agreement cannot be invoked in isolation, despite that the plaintiff is attempting to enforce a "penalty clause", which is void under CS (COMM.) 185/2024 Page no. 7 of 26 Section 74 of the Indian Contract Act, 1872. The defendant's refusal to accept the disbursement was due to non-compliance by the plaintiff with pre-disbursement responsibilities and non-viable terms from the bank in the draft sanction letter. 5.7 It is further stated that the claim of the liquidated damages or penalty is not enforceable under Section 74 of the Indian Contract Act and plaintiff is also not entitled to any interest, GST, or consultancy fees for an incomplete agreement. 5.8 It is further stated that no cause of action has validly arisen in favour of the plaintiff in absence of actual disbursement of credit amount on the defendant's agreed terms and also without the explicit backing off from availing the plaintiff's services. 5.9 As far far as merits are concerned, all the averments of the plaint are denied word by word and it is prayed that the present suit be dismissed with heavy costs.
6 No replication to written statement of the defendant has been filed on behalf of the plaintiff.
7 After completion of the pleadings, the following issues were framed by my Ld. Predecessor vide its order dated 14.10.2025:-
1. Whether the plaintiff has approached the court with unclean hands as plaintiff failed to fulfill his contractual obligations in material aspects? OPD
2. Whether the plaintiff is entitled for a decree for a sum of Rs.27,40,114/-? OPP
3. Whether the plaintiff is entitled for pendente lite and future interest @ 24% per annum? OPP
4. Relief.
CS (COMM.) 185/2024 Page no. 8 of 26 8 After framing of issues, matter was fixed for plaintiff's
evidence. To achieve timely and expedient disposal of this case, a Local Commissioner was appointed in this case by my Ld. Predecessor on 14.10.2025 under Order 15A Rule 6 (1) of the Commercial Courts Act and Order XXVI Rule 4A read with Order 18 Rule 4 CPC to record evidence of the defendant and the matter was fixed for final arguments.
9 In order to substantiate his case, the plaintiff examined himself as PW1 and tendered his evidence by way of affidavit as Ex.PW1/A and relied upon the following documents:-
i. Certified copy of the written contract titled as 'Financial Advisory Fee Agreement' executed on 28.06.2022 as Ex.PW1/1.
ii. Sanction letter dated 13.09.2022 as Ex.PW1/2. iii. Printouts of the WhatsApp chats with the sanction letter as attached from the bank to the borrower (defendant) and the borrower (defendant) to the plaintiff as Ex.PW1/3.
iv. Certified copy of cheque leaf bearing no.000305 dated 16.09.2022 drawn on Kotak Mahindra Bank, C-12/15, Vasundhara Ghaziabad, U.P.-201012 as Ex.PW1/4.
v. Copy of mediation notice dated 15.05.2023 as Ex.PW1/5.
vi. Non-starter report dated 14.10.2023 as Ex.PW1/6. vii. Copy of complaint no.3448/2022 before Ld. Chief Judicial Magistrate, Delhi (North) as Mark-A. 10 No other witness was examined on behalf of the plaintiff and plaintiff's evidence was closed vide order dated 08.12.2025. Thereafter, the opportunity was granted to the defendant to lead his defense evidence.
CS (COMM.) 185/2024 Page no. 9 of 26 11 The defendant has examined its employee Mr. Vibhu
Kushwaha as DW1, who has tendered his affidavit as Ex.DW1/A and reiterated the contents of the written statement. He has relied upon the following documents:-
i. GST certificate of the defendant company as Ex.DW1/1. ii. Aadhaar card of the Authorised Representative as Ex.DW1/2.
iii. Full set of draft sanction letter dated 13.09.2022 as Ex.DW1/3.
iv. WhatsApp Chats between DW1 and Mr. Varun Paliwal as Ex.DW1/4.
v. Affidavit under Section 63 of Bhartiya Sakshya Adhiniyam, 2023 in support of WhatsApp chats, screenshots, draft sanction letter and GST certificate as Ex.DW1/5 (wrongly typed as Ex.PW1/5). 12 No other witness was examined on behalf of the defendant, hence defendant's evidence was closed. 13 I have heard the arguments on behalf of Ms. Megha Aggarwal, Ld. Counsel for plaintiff and Sh. Arnav Kshitij, Ld. Counsel for defendant.
14 Ld. Counsels for both the parties have also filed their respective written submissions.
15 I have perused the record including written submissions filed on behalf of both the parties. On perusal of record, my issue-
wise findings are as follows:-
ISSUE NO.1 & 2 16 Both these issues are being taken up together for disposal being inter-connected. The onus to prove issue no.1 was upon the defendant and he had to prove that the plaintiff has not CS (COMM.) 185/2024 Page no. 10 of 26 approached the court with clean hands as he failed to fulfill his contractual obligations in material aspects, whereas the onus to prove issue no.2 was upon the plaintiff and the plaintiff had to prove that he is entitled for a decree for a sum of Rs.27,40,114/-. 17 PW1 Mr. Varul Paliwal was cross-examined on behalf of the defendant in question-answer form. Relevant Questions and Answers are reproduced as under:-
Q. What was the scope of work given to Sanguine Financial Consultancy (SFC)?
Ans. The scope of work was to raise funds as per the agreement. Q. What were the terms of work given to SFC? Are all of them covered under Ex.PW1/1?
Ans. The terms of work are mentioned in Ex.PW1/1. This agreement provides a broad outline of the scope of work which the both the parties to the agreement have to adhere. Q. Is it correct that your scope of work includes contacting multiple banks/financial institutions for the work? Ans. It is not mentioned in the agreement, however it was communicated to Mr. Arpit (Son of Promoter of defendant company) and the directors of the defendant company, through email and WhatsApp that the plaintiff had approached multiple banks.
Q. Is it correct that after the disagreement over Ex.PW1/2, you did not persuade any other bank/financial institution? Ans. No. It is not correct. (Vol. Mr. Aprit was not willing to proceed further).
Q. I put it to you that to save Ex.PW1/1 in your favour, you had to get any draft sanction letter from any bank of the amount which was even lower that the agreement. Is it correct?
CS (COMM.) 185/2024 Page no. 11 of 26 Ans. No. It is not correct. (Vol. The draft sanction letter was given but the defendant company denied to proceed further after getting the draft sanction letter).
Q. I put it to you that you have internal connections in the bank and deliberately framed disadvantaged terms in favour of the defendant company?
Ans. No, it is not correct.
Q. Is it correct as per Ex.PW1/1, the defendant company agreed for the total funds for Rs.12-15 crores and not below that? Ans. No. (Vol. As per Ex.PW1/1, Rs.12-15 crores was the amount which was the maximum eligibility as per the initial documents provided. However, the defendant company reduced the profitability by around 25% without even informing me and directly sent those documents to the banks, which reduced the amount).
Q. Is it correct that Ex.PW1/2 has an amount which is lesser than the amount which is specified in Ex.PW1/1? Ans. No. (Vol. In Ex.PW1/1, it is maximum amount which could be given to the defendant company).
Q. Is the maximum and the minimum limit of credit facility described in Ex.PW1/1?
Ans. No. Q. Is it correct that there is no disbursement in the account of the defendant company in accordance to Ex.PW1/2? Ans. No. Q. Is it correct that as per Clause 3 of Ex.PW1/1, the success fee is payable only after the disbursement of amount of credit facility into the account of the defendant company.
CS (COMM.) 185/2024 Page no. 12 of 26 Ans. Yes. (Vol. Clause 6 of Ex.PW1/1 mentions that 50% of the fees is payable if he does not take the disbursement). Q. I put it to you that as Ex.PW1/2 sent by you was not as per the agreed terms which were specifically mentioned in Clause 1 of Ex.PW1/1, therefore the Clause 6 of Ex.PW1/1 is not applicable?
Ans. I do not agree.
Q. Have you filed any proof of your expenses incurred in the process of getting credit facility to the defendant company in the judicial record?
Ans. No. (Vol. I have informed both the promoters that I have spent around Rs.20 lakhs in the process of getting the funding. Q. Do you agree that 4.25% of the total amount agreed was to be paid by the defendant company in support of which the defendant company issued Ex.PW1/4?
Ans. Yes.
Q. Is it correct that the total amount of the cheque is written to be Rs.49 lakhs?
Ans. Yes.
Q. I put it to you that upon calculation 4.25% of which the amount of Rs.49 lakhs comes out is Rs.12 crores? Ans. No. (Vol. 4.25% of 9.80 crores comes Rs.41.65 lakhs. When 18% GST is added, the final amount comes out is Rs.49,14,700/-. That is why the cheque of Rs.49 lakhs was given post sanction.
Q. On which date Ex.PW1/4 was given to you? Ans. 16.09.2022. Q. When did you encash the said cheque. CS (COMM.) 185/2024 Page no. 13 of 26
Ans. I do not remember. (Vol. It was encashed after the defendant company denied to proceed further). Q. I put it to you that you did not perform your part/duty as per Ex.PW1/1.
Ans. No. Q. I put it to you that the defendant company is not liable to pay any amount to you in the account of success fee. Ans. No. Q. I put it to you that your suit is false and frivolous and based on a concocted story to extort money out of the defendant company.
Ans. No. 18 DW1 Mr. Vibhu Kushwaha was also cross examined on behalf of the plaintiff, wherein he deposed that he handles all the financial credit arrangement of the defendant company and after two three meeting, he asked about defendant company's credit/financial requirement, which he communicated to be around 12-15 crores. He further deposed that he used to follow up with Mr. Varun Paliwal for over two months, after which the plaintiff failed miserably in providing the credit facilities as was asked by the defendant company, as the plaintiff brought an incomplete/unfavourable sanction letter which was not as per their requirements. He further deposed that there was an agreement Ex.PW1/1, which was signed by the Director of the defendant company. He further deposed that the communications have been done by him with the plaintiff i.e. Mr. Varun Paliwal over WhatsApp. He further deposed that the sanction letter was for the amount around 8 to 10 crores, which was brought by the plaintiff to him physically. He further deposed that the plaintiff CS (COMM.) 185/2024 Page no. 14 of 26 assured him that he would bring the competitive offers from Nationalized banks at the time of discussions. He further deposed that he read Ex.PW1/1 at the time of its execution but he does not remember whether he had seen the referred amount in the agreement. He further deposed that after discussions with his director, his director directed him to sign the sanction letter only if the amount is around 12-15 crores.
19 Further cross examination of DW1 has been conducted in question-answer form. Relevant Questions and Answers are reproduced as under:-
Q. Whether amount of Rs.12-15 crores has been mentioned in Ex.PW1/1 or not?
Ans. Yes, it is mentioned in para 1 of the agreement in last two lines as quoted "The fee is calculated on sanctioned amount only and you are currently applying for total funds of (secured and unsecured) etc. of upto Rs.12-15 crores approximately". Q. When did you receive sanction letter from the Axis Bank? Ans. I am not able to remember the date of receiving of the sanction letter Ex.PW1/2 from Axis Bank. It might be mentioned in sanction letter itself.
Q. How did you receive it (Ex.PW1/2)?
Ans. I do not remember. However, he might have given it to me physically.
Q. What did you do after receiving Ex.PW1/2? Ans. He denied it.
Q. What was the mode of denying the sanction letter Ex.PW1/2?
Ans. He had not signed the sanction letter given by the plaintiff issued by Axis Bank.
CS (COMM.) 185/2024 Page no. 15 of 26 Q. Was the sanction letter Ex.PW1/2 original? Ans. I do not know. Q. Did you communicate the rejection of sanction letter to the
plaintiff or Axis Bank through any written mode? Ans. I do not remember.
Q. Is the cheque no.000305 drawn on Kotak Mahindra Bank issued by the defendant company in favour of the plaintiff? Ans. Yes.
Q. Why was this cheque issued?
Ans. At the time of signing of the agreement, the defendant company issued this undated cheque to the plaintiff in favour of the plaintiff.
Q. Was sanction letter Ex.PW1/2 received on email ID:
[email protected]?
Ans. I do have the access of this email ID currently, and I do not remember whether it is received on this mail. This email ID belongs to the defendant company and I also use it. Q. Is it correct that, as per the Para 6 of the agreement, defendant company is liable to pay 50% of the total fee agreed by both the parties if the disbursement is refused? Ans. Yes. (Vol. It was applicable only after the agreed sanction terms and the amount of Rs.12-15 crores, were met by the plaintiff as per the agreement).
Q. Were the above conditions part of the agreement? Ans. Yes. It is clearly mentioned in the agreement in para 1 and 3.
Q. Can a bank disburse the funds without issuing the sanction letter?
Ans. No. It cannot.
CS (COMM.) 185/2024 Page no. 16 of 26 Q. Are you aware about the criminal complaint under Section
138 NI Act pending against the defendant company, filed by the plaintiff?
Ans. No. Q. I put it to you that the defendant company has agreed to pay 50% of the agreed fee as per the agreement to the plaintiff. Ans. No. 20 During the course of arguments, Ld. Counsel for plaintiff argued that the defendant has admitted that the sanction letter was procured through the plaintiff's efforts and no allegation of fabrication or illegality has been made against the sanction. That the plaintiff was never contractually bound to guarantee disbursement or acceptance of the sanction by the defendant and the agreement merely required the plaintiff to arrange credit facilities, which obligation stood fully discharged upon issuance of the draft sanction letter.
20.1 Ld. Counsel for plaintiff further contended that the defendant's principal defence that payment was contingent upon disbursement is ex facie untenable as disbursement is a subsequent stage dependent upon the borrower's acceptance of the sanction and fulfillment of pre-disbursement conditions. That the defendant admittedly rejected the draft sanction letter on his own commercial assessment, thereby preventing disbursement. 20.2 Ld. Counsel for plaintiff further contended that it is settled law that a party cannot take advantage of its own refusal or default to defeat contractual liability and the defendant cannot sabotage the transaction and then plead absence of disbursement as a defence.
CS (COMM.) 185/2024 Page no. 17 of 26 20.3 Ld. Counsel for plaintiff further contended that the
defendant had sought to portray the pre-disbursement conditions as oppressive or unviable and closure of existing loans and compliance with standard conditions are universally recognised banking practices. That the defendant in cross-examination admitted existence of multiple banking relationships and ongoing facilities, thereby justifying such conditions. Hence, the plaintiff cannot be faulted for standard banking norms over which he has no control.
20.4 Ld. Counsel for plaintiff further contended that the defendant has unequivocally admitted the issuance of the cheque; his signature on the cheque and dishonour for insufficiency of funds. That the plea that the cheque was "conditional" is legally impermissible and there is no written condition on the cheque, no contemporaneous correspondence restraining its presentation, and no stop-payment instruction.
20.5 Ld. Counsel for plaintiff further contended that in cross- examination, the defendant admitted that the cheque amount corresponds to 4.25% of the sanctioned amount (with GST), thereby reinforcing that the cheque was issued towards a legally enforceable liability which attracts a statutory presumption of liability.
20.6 Ld. Counsel for plaintiff further contended that the defendant's invocation of Section 74 of the Indian Contract Act to challenge Clause 6 of the agreement is misconceived. This clause was voluntarily accepted at the time of execution and never challenged contemporaneously. That in cross-examination, the defendant admitted the existence and applicability of Clause 6 providing payment upon refusal. Section 74 does not bar CS (COMM.) 185/2024 Page no. 18 of 26 recovery where breach is established and the compensation claimed represents a reasonable pre-estimate. Hence, she requested to decree the suit in favour of the plaintiff in terms of prayers made in the plaint.
21 Per contra, Ld. Counsel for defendant argued and submitted that the plaintiff's principal attempt of filing the present suit is merely on the ground that if the draft sanction letter was rejected, hence, 50% of the fee should be claimed from the defendant. However, Clause 6 of the agreement does not create an automatic debt recoverable as of right. 21.1 Ld. Counsel for defendant further contended that the agreement on its own showing, was a commercial arrangement under which plaintiff was to procure financial funding for the defendant and the fee was dependent upon the plaintiff securing the funding in terms contemplated by the plaintiff and the plaintiff's failure to not being able to secure an amount of the range of Rs.12-15 crores itself is a show of incompetence of the plaintiff to complete his side of obligation in the agreements. 21.2 Ld. Counsel for defendant further contended that the rejection as claimed by the plaintiff, was not a capricious rejection made on arbitrary grounds, the draft sanction letter from Axis Bank was of the value of Rs.9-8 crores, that too in 3 trenches, and in the form of Rs.4.9 crores as overdraft, Rs.3.1 crores as Term Loan and Rs.1.8 crores as bank guarantee. These conditions were very harmful to the defendant as they were humiliating and understated the defendant as a company in front of the bank.
21.3 Ld. Counsel for defendant further contended that the value of the draft sanction letter was for substantially lower amount, CS (COMM.) 185/2024 Page no. 19 of 26 also made the draft sanction letter commercially unacceptable and as such the plaintiff cannot contend that the contractual trigger on invoking the Clause 6 of the agreement stands satisfied because an underwhelming sanction letter, in whatever form, was placed before the defendant.
21.4 Ld. Counsel for defendant further contended that Section 74 of the Indian Contract Act states that even where a contract names a sum payable upon breach, the court may award only reasonable compensation, not exceeding the amount named. However, the plaintiff has failed to establish that the defendant has caused material and legal loss or expenditure of the plaintiff for which a reasonable compensation can be granted, the plaintiff has done neither.
21.5 Ld. Counsel for defendant further contended that there is no proof that the defendant wrongfully refused a conforming funding offer, and there is equally no proof of any actual expenses incurred, costs borne, or loss suffered by the plaintiff in the alleged process of arranging finance. That the plaintiff has not mentioned even the cost of incurring the draft sanction letter, instead the defendant has paid certain amounts pertaining to the payments to C.A. as requested by the plaintiff, and in the absence of such evidence, the claim for 50% of the fee is plainly penal, excessive and unenforceable.
21.6 Ld. Counsel for defendant further contended that the plaintiff cannot convert a conditional service fee or 'commitment charge' into a fixed recovery suit merely by invoking the refusal clause in isolation. The clause must be read in the commercial context of the agreement as a whole. When the plaintiff has failed to produce funding on terms substantially, and mismatching the CS (COMM.) 185/2024 Page no. 20 of 26 agreed objective, the defendant's rejection of a deficient or oppressive draft sanction letter cannot be treated as a contractual default entitling the plaintiff to a windfall. 21.7 Ld. Counsel for defendant further contended that the plaintiff's evidentiary foundation is independently defective as the plaintiff has relied upon electronic material such as message, electronic communications, printouts, or computer generated records, but has not duly proved the mandatory certificate contemplated by Section 63 of the Bharatiya Sakshya Adhiniyam, 2023.
21.8 Ld. Counsel for defendant further contended that the burden of proving an enforceable claim lay throughout upon the plaintiff but the same has not been discharged as the plaintiff has not proved that funding conforming to the agreement was actually procured. Therefore, he requested to dismiss the suit of the plaintiff with costs.
22 I have perused the record and given my consideration to the rival submissions made by both the parties.
23 In the present case, the plaintiff has claimed recovery of suit amount from the defendant on the basis of financial advisory fee agreement Ex.PW1/1 executed between both the parties, in view of Clause 6 which is reproduced as under:-
"6. By signing this agreement, you acknowledge that we have discussed these fee payment option with you. You also accept that the required documents will be provided to us to complete the program without any undue delay. After sanction, if you refuse to take the disbursement a commitment charge of 50% of the total fee agreed by you to be paid to Sanguine Financial Consultancy."
CS (COMM.) 185/2024 Page no. 21 of 26 24 The case of the plaintiff is that since the defendant refused
to take disbursement of loan amount sanctioned by Axis Bank vide sanction letter Ex.PW1/2, hence in view of Clause 6 of the agreement, the plaintiff is entitled to recover a sum of Rs.27,40,114/- from the defendant (Rs.20,82,500/- towards 50% of consultancy fees alongwith GST @ 18% i.e. Rs.3,74,850/- and Rs.2,82,764/- towards pre-suit interest @ 12% per annum from 03.10.2022 to 20.11.2023.
25 On the other hand, it is contended by the defendant that as per Clause 3 of the agreement Ex.PW1/1, payment liability in favour of the plaintiff arises only upon disbursement which the defendant never received and as such Clause 6 of the said agreement cannot be invoked in isolation and since the plaintiff failed to fulfill his contractual obligations in terms of agreement Ex.PW1/1 i.e. the plaintiff failed to arrange funds of Rs.12-15 crores, hence the present suit is liable to be dismissed. 26 Clause 1 of agreement Ex.PW1/1 is reproduced as under:-
"1. You (defendant) have to pay a success fee of 4.25% of the sanctioned amount of the Bank Funds (Secured and Unsecured) etc. plus GST by way of bank transfer for CC/OD/Working Capital/Business Loan/Project Loan and all the Funds Sanctioned (Secured & Unsecured) etc. limit. The fee is calculated on Sanctioned amount only and you (defendant) are currently applying for total funds of (Secured & Unsecured) etc. upto Rs.12-15 crores approx."
27 It is only mentioned in Clause 1 of the said agreement that the defendant is applying for total funds of (Secured & Unsecured) etc. upto Rs.12-15 crores approx. However, it is not specifically mentioned that if the amount is sanctioned below the range of Rs.12-15 crores, then the terms and conditions of the agreement CS (COMM.) 185/2024 Page no. 22 of 26 would have no binding upon the defendant or the defendant would be at liberty to back out from the agreement. However, the defendant has not proved on record any written communication/objection sent to the plaintiff thereby repudiating the agreement Ex.PW1/1. Further, during cross-examination, DW1 admitted that as per para 6 of the agreement Ex.PW1/1, defendant company is liable to pay 50% of the total fee agreed by both the parties if the disbursement is refused. Though it is specifically mentioned in Clause 3 of the agreement Ex.PW1/1 that "the success fees is payable only after the funds are disbursed into the account of the borrower and no payment is to be paid before the amount is disbursed into account of M/s Nichi Manufacturing Pvt. Ltd. i.e. defendant", yet this court is of the opinion that since, admittedly the defendant had refused to take disbursement after sanction, hence the Clause 3 will not apply in any manner. If there was no refusal by the defendant, then definitely there would be no hurdle in disbursing the amount into the account of the defendant. The sanction letter Ex.PW1/2 was procured through the efforts of the plaintiff and as per agreement Ex.PW1/1, the plaintiff was never bound to guarantee disbursement or acceptance of the sanction by the defendant. Both the parties are legally bound with agreement Ex.PW1/1. As per the said agreement, the plaintiff had to arrange credit facilities for the defendant and the plaintiff fulfilled its obligation by procuring sanction letter Ex.PW1/2 in favour of the defendant from the bank but the defendant rejected the same. Therefore, this court is of the opinion that the defendant cannot take advantage of its own refusal to defeat contractual liability in terms of agreement Ex.PW1/1.
CS (COMM.) 185/2024 Page no. 23 of 26 28 Further, in cross-examination, a specific question has been
put to PW1 by Ld. Counsel for defendant that "upon calculation 4.25% of which the amount Rs.49 lakhs comes out is Rs.12 crores, to which he gave reply in negative and then voluntarily stated that 4.25% of 9.80 crores comes to Rs.41.65 lakhs, when 18% GST is added, the final amount comes out is Rs.49,14,700/-. That is why the cheque of Rs.49 lakhs was given post sanction". 28.1 I have also calculated the amount. 4.25% of Rs.12 crores comes to Rs.51 lakhs and not Rs.49 lakhs and 4.25% of Rs.9.80 crores comes to Rs.41.65 lakhs and after adding GST @ 18%, the final amount comes to Rs.49,14,700/-. Admittedly, the defendant had issued the cheque Ex.PW1/4 in favour of the plaintiff for a sum of Rs.49 lakhs towards fee. This cheque, as per abovesaid calculation, was issued for arrangement of funds of Rs.9.80 crores and not for Rs.12 crores.
29 Further, as per Clause 2 of agreement Ex.PW1/1 it was agreed between both the parties that "Cheque (undated) of the fees favouring plaintiff company mentioning the amount of financial advisor fee must be given by the defendant to the plaintiff company after submission of all necessary documents to Bank/NBFC etc. but before procuring the sanction letter". It is the contention of the defendant that the cheque Ex.PW1/4 was issued conditionally and as a mere token of understanding post-sanction and was subject to actual loan disbursement. Even if it is presumed for the sake of arguments that the cheque was issued for arrangement of funds of Rs.12 crores and not Rs.9.80 crores, then the defendant should have issued the cheque towards fee of plaintiff in a sum of Rs.60.18 lakhs i.e. (4.25% of Rs.12 crores plus Rs.9.18 lakhs towards GST @ 18%) but the defendant had CS (COMM.) 185/2024 Page no. 24 of 26 issued cheque in favour of the plaintiff for Rs.49 lakhs only. Clause 2 of agreement Ex.PW1/1 clearly says that amount of financial advisor fee was to be given after submission of all necessary documents to Bank/NBFC etc. but before procuring the sanction letter. From this angle also it has become very clear that the defendant was well within the knowledge about sanction amount of Rs.9.80 crores, that is why the defendant had issued the cheque Ex.PW1/4 for a sum of Rs.49 lakhs in favour of the plaintiff on the basis of sanction letter Ex.PW1/2. The plaintiff had fulfilled its obligation by procuring sanction letter Ex.PW1/2 in favour of the defendant but the defendat rejected the same. Hence, it is clear that there was no violation of the terms and conditions of agreement Ex.PW1/1 on the part of the plaintiff, rather it is the defendant who violated the terms and conditions of the said agreement and as such the defendant is liable to pay 50% of the consultancy fees to the plaintiff in terms of agreement Ex.PW1/1. In the present case, the plaintiff is not claiming any compensation or damages from the defendant towards actual expenses incurred in procuring credit facility, rather the plaintiff is claiming 50% of his consultancy fees from the defendant in violation of Clause 6 of the agreement Ex.PW1/1. Therefore, in these facts and circumstances, it is held that the defendant has failed to prove that the plaintiff has approached the court with unclean hands as plaintiff failed to fulfill his contractual obligations in material aspects. On the other hand, the plaintiff has successfully proved that he is entitled for a decree for a sum of Rs.24,57,350/- (Rs.20,82,500/- towards 50% of the consultancy fees as per agreement Ex.PW1/1 plus Rs.3,74,850/- GST @ 18%). Issue no.1 and 2 are decided in favour of the plaintiff and against the defendant.
CS (COMM.) 185/2024 Page no. 25 of 26 ISSUE NO.3 30 Onus to prove this issue was also upon the plaintiff and he
had to prove that he is entitled for pendente lite and future interest @ 24% per annum. But the interest @ 24% per annum is highly excessive. Hence, this court is of the opinion that interest of justice would be served if the plaintiff is granted simple interest @ 6% per annum. This issue is also decided in favour of the plaintiff.
ISSUE NO.4 (RELIEF) 31 In view of the forgoing discussion, the present suit is hereby decreed in favour of plaintiff and against the defendant with the following reliefs:-
1. The plaintiff is entitled for decree of Rs.24,57,350/-
(Rs.20,82,500/- towards 50% of the consultancy fees as per agreement Ex.PW1/1 plus Rs.3,74,850/- GST @ 18%).
2. The plaintiff is also entitled for simple interest @ 6% per annum from 03.10.2022 till its realization.
3. Cost of the suit is also awarded in favour of the plaintiff.
32 Decree sheet be prepared accordingly.
33 File be consigned to Record Room after necessary compliance.
Digitally signed by RAMESH RAMESH KUMAR (Announced in open court on 18.05.2026). KUMAR Date:
2026.05.18 16:13:23 +0530 (RAMESH KUMAR-II) District Judge (Commercial Court)-08 Central District, Tis Hazari Courts, Extension Block, Delhi.
CS (COMM.) 185/2024 Page no. 26 of 26