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Delhi District Court

Canara Bank vs Amit Kumar Bairagi on 30 November, 2023

  IN THE COURT OF SH. REETESH SINGH, DISTRICT JUDGE
          COMMERCIAL COURT-04, SHAHDARA,
            KARKARDOOMA COURTS, DELHI

CNR No. DLSH01-007288-2022
CS (Comm) No. 683/2022
In the matter of :-

Canara Bank
(From April 1, 2022, Syndicate Bank
has been merged with Canara Bank)
Having Head Office at:-
112 JC Road, Bangalore, Karnataka
And

Its Branch Office at:
Plot No. 10, Surya Niketan,
Vikas Marg Extension, Delhi - 110093.
(Through its Senior Manager Mr. Ayush Aggarwal)

                                              ............Plaintiff
                             (Through Ld. Counsel Sh. Vipin Kumar)

                              Versus

1.

Amit Kumar Bairagi S/o Sh. Ajit Kumar Bairagi (Veldel Engineers & Constructors Pvt.Ltd.

India Glycols Complex) Plot No.2B, T-3, 2nd and 3rd Floor, Sector-126, Noida, Uttar Pradesh-201304 Also At:-

Amit Kumar Bairagi S/o Sh. Ajit Kumar Bairagi (Valdel Engineers & Constructions Pvt. Ltd.) No.9, Meghadooth Mansion, Civil Station, Civil Station, Hosur Road, Bangalore-56025.

....Defendant No.1 (Defendant No.1 is ex-parte) CS (Comm) No.683/2022 Page 1/13

2.M/s Unibera Developers Pvt. Ltd.

(Through Its Directors) H-187, Sarita Vihar, New Delhi-110044 Also at:-

A-11a, 2nd Floor, Sector-58, Noida UP-201301 ....Defendant No.2 (Defendant No.2 is ex-parte) Date of institution of the case : 13.12.2022 Date of final arguments : 03.11.2023 Date of judgment : 30.11.2023 EX-PARTE JUDGMENT

1. This suit has been filed by Canara Bank Ltd. against defendant No.1 Sh. Amit Kumar Bairagi and defendant No.2 M/s Unibera Developers Pvt.

Ltd. seeking a decree for recovery of Rs.11,82,751/- (Rupees Eleven Lakh Eighty-Two Thousand Seven Hundred Fifty One Only) along with Interest pendent lite and future @ 8.80 % per annum compounded with monthly rests with 2% penal interest and costs of the suit.

2. It is averred that the defendant No.1 had sought housing loan for Rs.42,00,000/- to purchase a flat to be constructed by the society/builder defendant No.2 and submitted an application dated 17.04.2015. The plaintiff bank on 12.05.2015 sanctioned housing loan for Rs.35,00,000/- which the defendant No.1 agreed to repay along with interest @ 10.25% p.a. in 360 installments of Rs.31,600/- each. It is averred that the defendants executed documents in respect of the loan which are detailed in para 6 of the plaint. It is averred that the loan account of the defendant No.1 was declared Non-

Performing Asset on 30.09.2019 as the borrower did not adhere to financial discipline. The plaintiff therefore became entitle to recall the loan. It is averred that as on 30.09.2022, Rs.11,82,751/- was due and payable by the defendant No.1 along with interest @ 8.80 % per annum compounded with monthly rests with 2% penal interest against his loan account No.91377740000028.

3. The plaintiff availed pre-institution mediation under Section 12A of the Commercial Courts Act, 2015 before the Shahdara District Legal Services Authority by filing an application on 14.07.2022 which closed by the authority on 24.08.2022 as Non-Starter after which this suit was filed.

4. Summons of the suit were directed to be issued to the defendants vide order dated 13.12.2022. As defendants could not be served in the ordinary manner, on the request of the plaintiff, the defendants vide order dated 10.05.2023 were directed to be served with the summons of the suit by way of publication in newspaper 'Veer Arjun'. Publication of summons was carried out in the edition dated 31.07.2023 of newspaper 'Veer Arjun' and as none appeared, the defendants were proceeded ex-parte by order dated 14.09.2023.

5. Plaintiff led evidence and examined its Senior Manager/Authorized Representative Sh. Krishna Saxena. He tendered his evidence by way of his affidavit Ex.PW1/A and placed reliance on the following documents :-

(i) The Power of Attorney/ Authority Letter vide Ex. PW-1/1

(ii) The Copy of the Notification dated 04.03.2020 vide Ex. PW-1/2.

(iii) Copy of Loan Application Form dated 17.04.2015 along with Performa invoice vide Ex.

PW-1/3 (Colly).

           (iv) The Copy of Letter            of   Sanction   dated
           12.05.2015 vide Ex. PW-1/4


CS (Comm) No.683/2022                                         Page 3/13

(v). Agreement to Mortgage dated 12.05.2015 vide Ex. PW-1/5.

(vi) Financial facilities on the security of immovable property/ies dated 22.08.2014 vide Ex. PW-1/6.

(vii) ASD-24 Agreement dated 12.05.2015 vide Ex.

PW-1/7.

(viii) Builder Buyer's Agreement dated 09.03.2015 vide Ex. PW-1/8.

(ix) Statement of the account no. 91377740000028 vide Ex. PW-1/9.

(x) Certificate under Section 65B of Indian Evidence Act vide Ex. PW-1/10.

6. On 08.11.2023 an additional document i.e. Quadripartite Agreement dated 12.05.2015 was filed and was tendered in evidence as Ex.PW-1/11. As the defendants were ex-parte, PW-1 was not subjected to any cross- examination. Plaintiff thereafter closed its evidence.

7. Arguments were addressed by Sh. Vipin Kumar, Ld. Counsel for the plaintiff who submitted that the case of the plaintiff in the plaint and evidence led stood unrebutted. He submitted that the plaintiff was therefore entitled to the decree as prayed for.

8. I have heard the Ld. Counsel for the plaintiff and have perused the record of the case. Defendants did not appear to defend the suit. The averments made by the plaintiff in the plaint and evidence led by PW-1 have gone unrebutted and unchallenged. Plaintiff has proved on record amongst others the loan application form, sanction letter, mortgage agreement, builder- buyers agreement as well as statement of the loan account which reveals an outstanding balance of Rs.11,82,751/- as on 30.09.2022. Plaintiff is therefore held entitled to recovery of the said amount.

9. There are two defendants in this suit, Sh. Amit Kumar Bairagi the borrower who is the Defendant No.1 and M/s Unibera Developers Pvt. Ltd. the builder which is the Defendant No.2. As per the Quadripartite Agreement dated 12.05.2015 entered into between the plaintiff, defendant No.1, CS (Comm) No.683/2022 Page 4/13 defendant No.2, M/s Solaris Infraprojects Pvt. Ltd. and the plaintiff bank, the borrower/defendant No.1 had agreed to purchase a flat "tentatively numbered as at Flat/Unit No. T1-2001, Block-E in plan of the proposed Building situated Unibera Towers Plot No.16-F, Sector-1, Greater Noida, West, UP for a total price consideration of Rs.50,19,750/-". The same reveals that the flat in question was yet to be constructed. The loan agreement dated 12.05.2015 provides that the loan amount was to be released by the bank directly to the builder/defendant No.2 in installments as per subvention plan and demand raised by the builder/defendant No.2.

10. During the course of arguments, Ld. Counsel for the plaintiff submitted that the plaintiff bank had no knowledge whether the flat in question was ever constructed by the defendant No.2/builder. On the record is an office copy of letter dated 21.03.2020 addressed by the Chief Manager of Syndicate Bank Retail and MSME Loan Centre to the Branch Head of the said Bank at Vikas Marg stating that the sale/conveyance deed had not been submitted in respect of the said loan account and request was made to seek information from the borrower regarding execution of sale/conveyance deed. There is no further information on the record regarding the status of the construction of the financed flat. It is to be noticed that the Branch of the plaintiff bank is at Vikas Marg Ext. Delhi while the flat was to be constructed at Greater Noida, West, UP which is not very far from the said branch of the bank. As per the documents filed by the plaintiff the loan is secured against the said flat. In all probability the financed flat was never constructed by the defendant No.2/builder and it is for this reason there is nothing placed on the record by the plaintiff bank regarding the status of the same. It is therefore apparent that the flat was never constructed and as such nothing came to the defendant No.1 while the entire housing loan amount went to the defendant No.2. Question which arises is that in such facts and circumstances, should the CS (Comm) No.683/2022 Page 5/13 defendant No.1 be made liable to repay the loan jointly and severally along with the defendant No.2?

11. In this regard, clauses 1, 12, 13 and 14 of the Quadripartite Agreement dated 12.05.2015 executed between the plaintiff and the defendants are relevant. The same read as under:-

"1. That the BORROWER hereby authorities THE BANK to make disbursement (s) of the sanctioned Housing Loan to the BUILDER/LANDLORD/AUTHORITY directly on behalf of the BORROWER and any such payment made to the BUILDER/LANDLORD/AUTHORITY shall be deemed to be the payment (s) made to the BORROWER and the BORROWER shall in each case be liable for the amount of loan disbursed on his behalf of the BUILDER/LANDLORD/AUTHORITY as though the same had been disbursed directly to the BORROWER. If there is any delay in payment to the BUILDER/LANDLORD/AUTHORITY, it will be treated as default in payment to the BORROWER and the BORROWER shall be liable to pay the BUILDER/LANDLORD/AUTHORITY the penalty on such delayed payment, if any, according to the agreement with BUILDER/LANDLORD/AUTHORITY."

"12. That in the cancellation of allotment of the BORROWER by the BUILDER/LANDLORD/AUTHORITY for any reason whatsoever, the BUILDER/LANDLORD shall refund to THE BANK forthwith, the entire amount received by the BUILDER/LANDLORD/AUTHORITY to THE BANK with the applicable interest as per the agreement entered into by the BORROWER with THE BANK, including the BORROWER's own deposit made with the BUILDER/LANDLORD/AUTHORITY.

13. The BUILDER/LANDLORD/AUTHORITY undertakes that till such time the House/Flat/Plot is legally conveyed in favour of the BORROWER, they will be holding the money received from the BORROWER as well as the loan disbursed by THE BANK on behalf of the BORROWER IN TRUST for THE BANK and in case of cancellation of the Booking for any reason of whatsoever nature, the amount received from the BORROWER and THE BANK will be refunded to THE BANK with interest.

14. That the Builder/Landlord undertakes to pay the interest of the money advanced by the bank on account of Borrower till the offer of possession of the flat or execution of sale deed in favour of Borrower (Branch to verify from Builder Buyer Agreement/Welcome Letter) and in case the Builder/Landlord fails to pay interest as mentioned above, the bank will be entitled to recover the same from the Borrower, who may CS (Comm) No.683/2022 Page 6/13 thereafter receiver the same from the Builder/Landlord as per the Interest Subvention Scheme provided in Builder Buyer Agreement/Welcome letter."

12. As per clause 1 of the Quadripartite Agreement dated 12.05.2015, the borrower/defendant No.1 has authorized the plaintiff bank to make disbursement of the sanctioned housing loan directly to the builder/defendant No.2. Clause 12 provides that in the event of cancellation of allotment, the builder/defendant No.2 would refund the entire amount received by it to the bank with the applicable interest as per the agreement entered into by the borrower/defendant No.1 with the plaintiff bank. Clause 13 provides that builder/defendant No.2 shall hold all the monies received by it from the borrower as well as from the bank under the loan agreement in trust for the bank and in the event of cancellation of booking, the amount received from the borrower and the bank is to be refunded by the builder/defendant No.2 to the bank. Lastly, clause 14 provides that the builder/defendant No.2 has undertaken to pay interest on the money advanced by the bank on account of borrower till the offer of possession of the flat or execution of the sale deed in favour of the borrower and in case the builder fails to pay the interest, the bank shall be entitled to recover the same from the borrower who i.e. the borrower may then recover the same from the builder as per Interest Subvention Scheme as provided in the builder-buyer agreement.

13. The terms of the Quadripartite Agreement dated 12.05.2015 make it clear that till the defendant No.2/ builder hands over possession of the property and legally conveys the same to the borrower/defendant No.1, it is the builder who will have the liability to pay the interest on the loan amount and that the monies received by the builder will be held in trust by it. In case the allotment is cancelled the builder/defendant No.1 will be liable to refund the entire amount received by it with applicable interest to the plaintiff bank. However, at the same time, clause 14 does not absolve the defendant CS (Comm) No.683/2022 Page 7/13 No.1/borrower of his obligation to repay the loan, even if, the builder/defendant No.2 fails to complete the project as it is provided that where the builder fails to pay interest, the bank may recover the same from the borrower. In the opinion of this court, in such circumstances, i.e. where the borrower/defendant No.1 has not been conveyed the flat which was to be constructed by the builder/defendant No.1, it will be highly unjust and inequitable for this court to hold the defendant No.1/ borrower will be liable to repay the loan amount. Enforcement of clause 14 of the Quadripartite Agreement against the defendant No.1 will be against the principles of equity and good conscience.

14. In the case of Central Inland Water Transport Corpn. v. Brojo Nath Ganguly, (1986) 3 SCC 156, the Hon'ble Supreme Court while considering unconscionable contracts/terms was pleased to refer to American law as contained in Reinstatement of the Law -- Second as adopted and promulgated by the American Law Institute, Volume II which deals with the law of contracts and in which in Section 208 at p. 107, it is provided as under:-

"§ 208. Unconscionable Contract or Term If a contract or term thereof is unconscionable at the time the contract is made a court may refuse to enforce the contract, or may enforce the remainder of the contract without the unconscionable term, or may so limit the application of any unconscionable term as to avoid any unconscionable result."

15. Thus, where a contract or a term of the same is unconscionable, the court may refuse to enforce the contract or may enforce the remainder of the contract without the unconscionable term. The court may also limit the application of such term to avoid any unconscionable result. The Hon'ble Supreme Court in the case of Central Inland Water Transport Corpn. v. Brojo Nath Ganguly (supra) after reviewing the law on such aspects was pleased to hold in para 89 as under:-

"89. Should then our courts not advance with the times? Should they still continue to cling to outmoded concepts and outworn ideologies? Should we not adjust our thinking caps to match the fashion of the day? Should all jurisprudential development pass us by, leaving us floundering in the sloughs of 19th century theories? Should the strong be permitted to push the weak to the wall? Should they be allowed to ride roughshod over the weak? Should the courts sit back and watch supinely while the strong trample underfoot the rights of the weak? We have a Constitution for our country. Our judges are bound by their oath to "uphold the Constitution and the laws". The Constitution was enacted to secure to all the citizens of this country social and economic justice. Article 14 of the Constitution guarantees to all persons equality before the law and the equal protection of the laws. The principle deducible from the above discussions on this part of the case is in consonance with right and reason, intended to secure social and economic justice and conforms to the mandate of the great equality clause in Article 14. This principle is that the courts will not enforce and will, when called upon to do so, strike down an unfair and unreasonable contract, or an unfair and unreasonable clause in a contract, entered into between parties who are not equal in bargaining power. It is difficult to give an exhaustive list of all bargains of this type. No court can visualize the different situations which can arise in the affairs of men. One can only attempt to give some illustrations. For instance, the above principle will apply where the inequality of bargaining power is the result of the great disparity in the economic strength of the contracting parties. It will apply where the inequality is the result of circumstances, whether of the creation of the parties or not. It will apply to situations in which the weaker party is in a position in which he can obtain goods or services or means of livelihood only upon the terms imposed by the stronger party or go without them. It will also apply where a man has no choice, or rather no meaningful choice, but to give his assent to a contract or to sign on the dotted line in a prescribed or standard form or to accept a set of rules as part of the contract, however unfair, unreasonable and unconscionable a clause in that contract or form or rules may be. This principle, however, will not apply where the bargaining power of the contracting parties is equal or almost equal. This principle may not apply where both parties are businessmen and the contract is a commercial transaction. In today's complex world of giant corporations with their vast infrastructural organizations and with the State through its instrumentalities and agencies entering into almost every branch of industry and commerce, there can be myriad situations which result in unfair and unreasonable bargains between parties possessing wholly disproportionate and unequal bargaining CS (Comm) No.683/2022 Page 9/13 power. These cases can neither be enumerated nor fully illustrated. The court must judge each case on its own facts and circumstances."

(emphasis supplied)

16. The Hon'ble Supreme Court in the case of Central Inland Water Transport Corpn. v. Brojo Nath Ganguly (supra), inter - alia, held that the courts will not enforce and will strike down an unfair and unreasonable contract, or an unfair and unreasonable clause in a contract, entered into between parties who are not equal in bargaining power. It was further held that this principle will apply where:-

• the inequality of bargaining power is the result of the great disparity in the economic strength of the contracting parties. • the inequality is the result of circumstances, whether of the creation of the parties or not.

• It will apply to situations in which the weaker party is in a position in which he can obtain goods or services or means of livelihood only upon the terms imposed by the stronger party or go without them.

• where a man has no choice, or rather no meaningful choice, but to give his assent to a contract or to sign on the dotted line in a prescribed or standard form or to accept a set of rules as part of the contract, however unfair, unreasonable and unconscionable a clause in that contract or form or rules may be.

17. The above dictum was followed by the Hon'ble Supreme Court in several cases including the case of Kalpraj Dharamshi v. Kotak Investment Advisors Ltd., (2021) 10 SCC 401 in which it was held as under:

"109. This Court has held, that the courts will not enforce and will, when called upon to do so, strike down an unfair and unreasonable contract, or an unfair and unreasonable clause in a contract, entered into between parties who are not equal in bargaining power. It has been held, that this principle will apply where a man has no choice, or rather no meaningful choice, but to give his assent to a contract or to sign on the dotted line in a prescribed or standard form or to accept a set of rules as part of the contract, however unfair, unreasonable and unconscionable a clause in that contract or form or rules may be."

18. In the case of K.C. Cinema v. State of J&K, (2023) 5 SCC 786 the Hon'ble Supreme Court was pleased to explain that the test laid down in the case of Central Inland Water Transport Corpn. v. Brojo Nath Ganguly (supra) will apply not only where the parties have unequal bargaining power but also where a contractual term or a contract is unfair, unreasonable or unconscionable. The Hon'ble Supreme Court has held that a contractual term or a contract is unfair, unreasonable or unconscionable where it is one sided or devoid of any commercial logic. The relevant portion of the said judgment reads as under:-

"30. The test in Central Inland Water Transport Corpn.9 is not only to assess whether the parties have unequal bargaining power relative to one another but also to ascertain whether a contractual term or a contract is unfair, unreasonable or unconscionable. A contract (or a term in a contract) can be said to be unfair or unreasonable if it is one- sided or devoid of any commercial logic. In the present case, although theatre owners may unilaterally determine the conditions of entry into cinema hall, the condition imposed in this instance is not unfair, unreasonable or unconscionable"

19. In the present case, the borrower/defendant No.1 had sought the housing loan when the flat to be purchased was yet to be constructed. The only security which the borrower/defendant No.1 had was an allotment letter issued by the builder/defendant No.2 and clauses 12,13 and 14 of the Quadripartite Agreement which obliged the builder/defendant No.2 to refund to the plaintiff bank the entire money received by it along with interest as applicable under the loan agreement in case the builder failed to deliver the flat. It is thus obvious that the borrower/defendant No.1 could not have had the same bargaining power as available with the plaintiff and the defendant No.2. With the defendant seeking a housing loan against a flat yet to be constructed by the defendant No.2, same resulted in inequality due to the circumstances and as such the borrower/defendant No.1 had no choice but to CS (Comm) No.683/2022 Page 11/13 accept the terms of clause 14 of the Quadripartite Agreement dated 12.05.2015.

20. As on date, the borrower/defendant No.1 has nothing in his hand, neither the loan amount nor the flat which was to be constructed. In fact the builder/defendant No.2 has indulged in unjust enrichment as it has not constructed the financed flat despite having received monies from the plaintiff bank directly through the housing loan availed by the defendant No.1. In these facts and circumstances, and keeping in view the ratio laid down by the Hon'ble Supreme Court in the above mentioned cases, enforcing the loan agreement against the defendant No.1 along with clause 14 of the Quadripartite Agreement will give rise to an unconscionable result, i.e. requiring the defendant No.1 to pay the money directly received by the defendant No.2 without having the financed asset i.e. the flat in question in his hand. The said contractual clauses are unfair, unreasonable and unconscionable being one sided and devoid of any commercial logic as the same call upon the borrower/defendant No.1 to repay the loan amount directly received by the defendant No.2 from the plaintiff bank despite not delivering the financed flat.

21. Hence for the reasons recorded above, this court holds that the defendant No.1 will not have any liability towards the suit amount. Plaintiff bank will be entitled to recover the same only from the defendant No.2 and not from the defendant No.1/borrower.

22. Plaintiff bank has prayed for grant of pendent lite and future interest @ 8.80 % per annum compounded with monthly rests with 2% penal interest and costs of the suit. In the opinion of this court, the same is excessive. Grant of simple interest on the outstanding amount @ 9% p.a. from the date of filing of the suit till the date of realization shall meet the ends of justice. Plaintiff shall also be entitled to costs of the suit.

23. For the reasons recorded above, suit of the plaintiff is decreed in the following manner :-

(a) Plaintiff is granted a decree for recovery of Rs.11,82,751/- against the defendant No.2 only along with simple interest @ 9% per annum w.e.f. date of filing till the date of realization and

(b) Plaintiff shall be entitled to costs of the suit along with simple interest @ 9% per annum from the date of the decree till the date of realization against the defendant No.2 only.

24. Decree sheet be prepared. File be consigned to record room.

Announced in the open                 (REETESH SINGH)
court on this 30th day                DISTRICT JUDGE
of November 2023                   (COMMERCIAL COURT)-04
                                SHAHDARA, KKD COURTS, DELHI




CS (Comm) No.683/2022                                         Page 13/13