Full Judgment Text
* IN THE HIGH COURT OF DELHI AT NEW DELHI
+ CS(OS) No. 228/2010
th
% 6 May, 2016
SANJAY KHANNA ..... Plaintiff
Through: Mr. Dinesh Kumar Seth, Advocate with
plaintiff in person.
versus
M/S VASU TECH LTD. & ORS ..... Defendants
Through: Mr. Saksham Marwah, Advocate
CORAM:
HON’BLE MR. JUSTICE VALMIKI J.MEHTA
To be referred to the Reporter or not?
VALMIKI J. MEHTA, J (ORAL)
I.A. No. 6165/2010 (under Order XXXVII Rule 3(5) CPC for grant of leave
to defend)
1. This application for leave to defend is filed by the defendants under
Order XXXVII Rule 3(5) of the Code of Civil Procedure, 1908 (CPC). There
are a total of four defendants in the suit. Defendant no.1/company is under
liquidation, and therefore, counsel for the plaintiff does not press the suit against
defendant no.1 but seeks and is granted liberty to file appropriate claims before
the official liquidator, and accordingly, the suit will stand disposed of giving the
aforesaid liberty to the plaintiff as regards the defendant no.1. Counsel for the
plaintiff also prays for deletion of defendant nos. 3 and 4 from the array of
defendants as no decree is sought against these defendants. Ordered
CS(OS) No.228/2010 Page 1 of 12
accordingly. The leave to defend application is therefore to be decided with
respect to the rights of the plaintiff in this Order XXXVII suit as regards the
defendant no.2, and which defendant no.2 as per the plaintiff was the dramatis
personae with respect to the entire transactions and dealings between the
parties.
2. By this suit filed under Order XXXVII CPC, plaintiff seeks
recovery of Rs.6,90,26,340/- alongwith pendente lite and future interest at 24%
per annum. Though the plaint sets out the entire history of transactions between
the parties and which started from the year 2002, and which transactions were
pertaining to the loans granted by the plaintiff to the family concerns of
defendant no.2, the paras 8 to 23 of the plaint containing only historical facts of
various payments due to the plaintiff, issuing of cheques and dishonouring of
the same, filing of cases under Section 138 of the Negotiable Instruments Act,
1881 (hereinafter referred to as „the NI Act‟) etc are irrelevant inasmuch as the
cause of action on the basis of which decree is sought in the present suit is on
the basis of a later Corporate Guarantee given by the defendant no.1 on
4.9.2006 and with respect to which the defendant no.2 stood as a personal
guarantor to repay the amount as stated in the corporate guarantee. The details
as to the dues payable by the defendants to the plaintiff and cheques issued by
the defendants to the plaintiff are stated in paras 24 to 26 of the suit plaint and
these paras 24 to 26 read as under:-
CS(OS) No.228/2010 Page 2 of 12
“24. Thereafter the Defendant No.1 and Defendant No.2‟s family H.U.F.
i.e. M/s RL Varma HUF, and its karta, member(s) and co-
Parcenor(s) (which included the Defendant No.2) arranged for a
fresh corporate guarantee dated September 4, 2006 (third
guarantee), from Defendant No.1, wherein Defendant No.1
guaranteed the payments on behalf of the Defendant No.2‟s family
H.U.F. i.e. M/s RL Varma HUF, and its karta, member(s) and co-
Parcenor(s) (which included the Defendant No.2). The Defendant
No.1 agreed to guarantee and pay an amount of Rs.5,14,00,000/-
(Rupees Five Crores And Fourteen Lacs Only), plus an additional
amount of interest of Rs.2,01,26,340/- (Rupees Two Crores One Lac
Twenty Six Thousand Three Hundred And Forty Only) in all
amounting to Rs.7,15,26,340/- (Rupees Seven Crores Fifteen Lacs
Twenty Six Thousand Three Hundred And Forty Only) in
instalments between 1.4.2006 to 31.3.2007. In the aforesaid
corporate guarantee dated September 4 2006, which was issued by
Defendant No.1, it was also recorded that to secure the payments,
which are payable, the Defendant No.1 has handed over cheques
amounting to Rs.7,15,26,340/- to Plaintiff as per the following
details:
S.No. Date Cheque No. Amount(In Rs. Drawn on
1. 01.04.2006 100657 25,00,000/- UTI Bank,
New Delhi
2. 01.10.2006 349324 4,89,00,000/- Central Bank
of India,
Parliament
Street, New
Delhi
3. 01.10.2006 349326 44,01,000/- Central Bank
of India,
Parliament
Street, New
Delhi
4. 01.10.2006 349327 47,97,090/- Central Bank
of India,
Parliament
Street, New
Delhi
5. 01.01.2007 349328 52,28,828/- Central Bank
of India,
Parliament
Street New
Delhi
6. 31.03.2007 349329 56,99,422/- Central Bank
of India,
Parliament
Street, New
CS(OS) No.228/2010 Page 3 of 12
Delhi
25. That The aforesaid 6 cheques were issued by Defendant No.1 in
discharge of the liabilities of Defendant No.2‟s family H.U.F. i.e.
M/s R.L. Varma HUF, and its karta, member(s) and co-parcenor(s)
(which included the Defendant No.2) and in discharge of the
Corporate Guarantee dated September 4, 2006 given by Defendant
No.1. The Corporate Guarantee given by the Defendant No.1 was
supported by the Board Resolution of the Defendant No.1 dated
September 4, 2006 which authorizes Defendant No.2 as Director of
Defendant No.1 to give the corporate guarantee and secure
payments for the Plaintiff along with covering note dated September
4, 2006 and Board Resolution also dated September 4, 2006.
Moreover it is/was expressly clarified that the Defendant No.2 also
personally guaranteed the transaction by signing and endorsing the
factum of providing and issuing his personal guarantee on the last
page of the Corporate Guarantee dated September 4, 2006, issued
by Defendant No.1.
26. That except for the cheque listed at serial No.1, amounting to
Rs.25,00,000/- (Rupees Twenty Five Lacs Only), which was paid as
a consulting fee by Vasu Tech Limited, all other cheques were
returned unpaid by the banker of the Defendant No.1 on account of
“insufficient funds” in the accounts. The Plaintiff states that the
cheques listed at Serial 2 to 5 above were dishonoured on 9.2.2007
and the cheque listed at Serial No.6 above was dishonoured on
20.4.2007. The Plaintiff received information about the dishonour of
the cheques by way of the Cheque Return Memos dated 9.2.2007
and 20.4.2007 issued by his Bankers M/s ABN Amro Bank,
Hansalaya Branch Barakhamba Road, New Delhi 110001.”
3. The subject suit is filed therefore for the recovery of the balance
amount due under the Corporate Guarantee dated 4.9.2006 after reducing
therefrom the amount of the first cheque stated in paras 24 and 26 of the plaint
which was given towards consultancy charges.
4. In the leave to defend application, the defendant no.2 has not
disputed the signing and execution of the Corporate Guarantee Agreement dated
4.9.2006. Defendant no.2 only pleads existence of duress and pressure from the
CS(OS) No.228/2010 Page 4 of 12
plaintiff, as also pressure on account of pendency of criminal cases, thus having
to forcibly sign the Corporate Guarantee dated 4.9.2006.
5. The principles with respect to grant of leave to defend are now well
settled. If an arguable case is raised by the defendant then unconditional leave
to defend has to be granted. If the defences however raised in the application
for leave to defend are only a moonshine, then the leave to defend is to be
declined. In my opinion, the facts in the present case are such that defence
raised is a complete moonshine and therefore, the leave to defend is liable to be
and is accordingly dismissed. The reasons for the same are given hereinafter.
6. I have already noted above that defendant no.2 does not dispute the
execution of the Corporate Guarantee Agreement dated 4.9.2006. I have
examined this Corporate Guarantee dated 4.9.2006 qua the liability of the
defendant no.2 and which is only now in issue and it is seen that at the last page
of this corporate guarantee, it is specifically written as under:-
“I, Mr. Dhruv Varma as specified above, also Guarantee the above in my
individual capacity.
For VASU TECH LIMITED
Sd/-
Authorised Signatory
Dhruv Varma
September 4, 2006, New Delhi”
Thus, it is seen that defendant no.2 also agreed to his personal
liability as a guarantor.
CS(OS) No.228/2010 Page 5 of 12
7. The details of how the liability of the defendant no.1 and the
defendant no.2 arose towards the amounts are stated in the following terms in
the Corporate Guarantee Agreement dated 4.9.2006:-
“ WHEREAS:
1. R.L.Varma & Sons (HUF) and its Members/Co-parcener(s), namely
Mr. R.L.Varma, Karta, R.L.Varma & Sons, (HUF), Ms. Aruna
Varma, Mr. Dhruv Varma (together herein referred to as the
“ Borrowers ”), owe a sum of Rs.4,10,00,000/-(Rupees four crore
and ten lakhs only) to the Beneficiary as per details contained in the
Borrowers letter dated February 3,2004, which is attached herewith
as Exhibit 1 .
1.a) It is expressly confirmed, agreed and recorded by and between the
Parties of the both parts that the amount of Rs.4,10,00,000/-
(Rupees four crores and ten lacs only) includes consultancy charges
payable to the Beneficiary by the Borrowers amounting to
Rs.65,00,000/- (Rupees sixty five lacs only).
2. The Borrowers had entered into an agreement (for a compromise
settlement at a reduced amount, with time being the essence of the
compromise settlement) with the Beneficiary for the payment of the
legitimate dues of Rs.2,65,00,000/- (Rupees two crores sixty five
th
lacs only) to the Beneficiary as per the settlement dated 4 February
2004 filed in the Court of Ms. Pinki, Metropolitan Magistrate,
Patiala House Courts, New Delhi, a copy whereof, is attached
herewith as Exhibit 2. The Borrowers did not adhere to the
financial discipline and to the Schedule of repayments attached with
th
the Deed of Settlement dated 4 February 2004 and except for one
th
installment dated 26 February 2004, amounting to Rs.10,00,000/-
(Rupees ten lacs only), towards consultancy charges, which was
duly paid, the Borrowers defaulted in the payment of the rest of the
installments from March 2004 onwards.
2.a) It is expressly confirmed, agreed and recorded by and between the
Parties of the both parts that the total amount of Rs.2,65,00,000/-
(Rupees two crores and sixty five lacs only) payable to the
Beneficiary includes a reduced amount of consultancy charges
payable to the Beneficiary by the Borrowers amounting to
Rs.44,60,000/- (Rupees forty four lacs sixty thousand only), which
th
was set out in para (xii) of the settlement dated 4 February, 2004,
filed in the court of Ms. Pinky, Metropolitan Magistrate, Patiala
House Court, New Delhi.
3. On account of default at their end, the Borrowers approached the
Beneficiary Mr. Sanjay Khanna, with a revised payment schedule
for the payment of the outstanding dues and after discussions and
CS(OS) No.228/2010 Page 6 of 12
deliberations it was agreed by and between the Borrowers and the
Beneficiary that the entire outstanding dues payable by the
Borrowers to the Beneficiary, amounting to Rs.4,10,00,000/-
(Rupees four crore ten lacs only) less the amount of Rs.10,00,000/-
(Rupees ten lacs only) paid on 26 February, 2004, as per para 2
st
above, shall be paid by 31 December 2004 and in the event of
st
payments not being made by the Borrowers by 31 December 2004
st
then positively by and not later than 31 March 2005. It was
represented and undertaken by the Borrowers that under any
circumstances whatsoever the repayment of the outstanding dues
st
shall not be delayed beyond 31 March 2005. This arrangement as
agreed to between the Borrowers and the Beneficiary was recorded
separately before the Court of Ms. Pinki, Metropolitan Magistrate,
Patiala House Courts, New Delhi by way of an application, a copy
whereof is attached herewith as Exhibit 3. However, the
obligations could not be fulfilled by the Borrowers.
3a) It is expressly confirmed, agreed and recorded by and between the
Parties of the both parts that the amount of Rs.4,10,00,000/-
(Rupees four crores and ten lacs only) includes consultancy charges
payable to the Beneficiary by the Borrowers amounting to
Rs.65,00,000/- (Rupees sixty five lacs only).
4. At the behest of the Borrowers and in consideration of the amount
owed by the Borrowers to the Beneficiary, and the Guarantor having
agreed to provide its Guarantee, the Beneficiary has agreed to
accept the payments of the entire outstanding amounts due and
payable by the Borrowers as per compromise terms filed in
Criminal Complaint No. 370/1/2003 at Patiala House Court on
30/8/04 a copy whereof is attached herewith as Exhibit 4, subject to
the condition that the said entire outstanding dues are not paid to the
st
Beneficiary on or before 31 March 2006, the Beneficiary shall be
entitled to recover and receive the full amount of Rs.5,44,00,000/-
(Rupees five crores forty four lacs only) from the Borrower and the
Guarantor, jointly and severally, together with accrued interest @
st
4% per month for the period from 1 April 2006 onwards.
4a) The Borrowers did not adhere to the financial discipline and to the
th
Schedule of repayments as per compromise terms dated 30 August
2004 filed in court as per para 4 above except for one installment
th
dated 5 October 2005, amounting to Rs.30,00,000/- (Rupees thirty
lacs only), towards consultancy charges, which was duly paid. The
Borrowers defaulted in the payment of the rest of the installments as
per Exhibit 4 above filed at Patiala Court House in CC No.
370/1/2003 on 30/08/04.”
8. The exact amount of liability in monetary terms is specified in
paras 1(a) and (b) of this corporate guarantee agreement and the same read as
CS(OS) No.228/2010 Page 7 of 12
under:-
“ NOW THESE PRESENTS WITNESSETH as follows:
1.(a) The Guarantor doth hereby irrevocably and unconditionally
Guarantee the due repayment to the Beneficiary on the due date
without demur and/or contestation and notwithstanding any dispute
between the Beneficiary and the Borrowers, all indebtedness due
and payable by the Borrowers to the Beneficiary or any one or more
or all of them or any part thereof for the time being outstanding and
all interest, commission, costs, charges and expenses and all other
moneys whatsoever due owing and payable by the Borrower to the
Beneficiary thereunder for the sum of Rs.5,14,00,000/-(Rupees five
crores fourteen lacs only) [i.e. Rs.5,44,00,000/- less Rs.30,00,000/-
received on October 5,2005] hereinafter referred to as the “ said
Dues ”, along with interst at 36% (thirty six percent) per annum,
compounded at quarterly rests, till repayment of consultancy
charges, interest and principle, in the event of failure on the part of
the Borrower in repaying the same to the Beneficiary or discharging
its liability thereunder when the same are due and payable, the
Guarantor shall pay to the Beneficiary forthwith on the first demand
made by the Beneficiary (the decision of the Beneficiary as to such
default/failure of the Borrower and the amount claimed therein,
being final, conclusive and binding on the Guarantor).
(b) In order to secure the payment of the said Dues and performances of
the obligation hereunder by the Guarantor, the Guarantor has
ALREADY provided the following security/(ies) in the form of
cheques in favour of the Beneficary:
Date Cheque No. Amount Drawn on
I) 1.4.2006 100657 Rs.25,00,000/- UTI Bank, New Delhi
( including TDS deducted: actual cheque for Rs.23,59,750/- after deducting TDS)
II a) 1.10.2006 349324 Rs.4,89,00,000/- Central Bank of India
Parliament Street, New Delhi.
II b) 1.10.2006 349326 Rs.44,01,000/- -do-
II c) 1.10.2006 349327 Rs.47,97,090/- -do-
II d) 1.1.2007 349328 Rs.52,28,828/- -do-
II e) 31.3.2007 349329 Rs.56,99,422/- -do-
Total Rs.7,15,26,340.00.”
9. Learned counsel for the defendant no.2 basically has argued two
CS(OS) No.228/2010 Page 8 of 12
aspects. First is with respect to the corporate guarantee having been signed
under duress and pressure from the plaintiff as also on account of pending
criminal cases under Section 138 of the NI Act and hence not binding on the
defendant no. 2, and secondly that the endorsement of the defendant no.2/Mr.
Dhruv Varma given at the end of corporate guarantee document as reproduced
above is not a written contract and also not a guarantee for the same to fall
under Order XXXVII CPC. Reliance is placed by the counsel for defendant no.
2 upon the judgment of a learned Single Judge of this Court in the case of Shri
J.S. Sood Vs. Mrs. Prem Lata Mehta & Another ILR (1984) II Delhi 716. The
paras of this judgment which are relied upon, and would be relevant, are paras 2
and 12 and these paras read as under:-
“(2) The plaintiff has alleged that there was a verbal agreement under
which he agreed to finance the production of the aforesaid film. He has
further alleged that in pursuance thereto he made various payments to the
defendants from time to time for this purpose. It is specifically averred that
though the whole finance for the production of this picture was given by
the plaintiff there existed no writing between the parties to that effect. It is
further stated that sometime in July, 1983, the plaintiff requested the
defendants to go into the accounts and confirm the payments received by
them so that the plaintiff could have an exact idea of his investments. This
plea appears to be rather strange when the money was advanced by the
plaintiff and there could be no question of defendants going into the
accounts and confirming the payments received by them from the plaintiff.
It is then stated that after great persuasion the defendants agreed to
acknowledge only receipt of Rs. 2,00,000 though the plaintiff could trace
out payment of Rs. 2,08,000 "from whatever little bank accounts he was
having". The plaintiff has also stated that in fact the payments made by him
were more than this amount of Rs. 2,08,000 as he also made payments by
means of bearer cheques and cash as well. On the basis of the following
writing of the defendants, the plaintiff has filed the present suit under Order
XXXVII of the Code of Civil Procedure:
"J. S. Sood
GLOBE FILM DELHI
Regarding: Nadaniyan
CS(OS) No.228/2010 Page 9 of 12
This is to certify that you have paid a sum of Rs. 2 LAKH in
completion of picture Nadaniyan till date which will be repaid to
you before release of the picture 'NANDANIYAN'.
xxxxx
xxxxx
(12) As to whether the written contract may be signed by both the parties
does not call for decision in the present case though it appears that the
words "written contract" envisage some sort of a formal document between
the contracting parties. I would rather think that it would be a condition,
precedent that there should be a formal agreement executed by (ha parties
and signed by them. plaintiff's own version is that it was a verbal contract
and the document on the basis of which the suit has been filed merely
acknowledges the money due under the aforesaid verbal contract. Such a
writing may at best be a written acknowledgement which extends the
period of limitation under Section 18 of the Limitation Act, 1963, but no
more. Thus I do not think that such a document would fall within the
definition of written contract and the provisions of Order XXXVII would
not apply. It must, Therefore be held that the present suit is not
maintainable under the summary procedure prescribed under Order
XXXII.”
10. In my opinion, the defence raised by the defendant no.2 is clearly a
moonshine because defendant no.2 does not dispute that he did execute the
Corporate Guarantee Agreement dated 4.9.2006 for the defendant no.1 and also
gave his endorsement agreeing to the defendant no. 2 being personally liable as
a guarantor at the end of the corporate guarantee document which has been
reproduced above. The defence of the agreement having been signed on
account of duress and pressure is a totally frivolous defence inasmuch as till the
date of filing of the present suit and the leave to defend application no suit has
been filed by the defendant no.2 for cancelling the Corporate Guarantee
Agreement dated 4.9.2006 on the ground that this document has been got signed
by duress and pressure and therefore is void. The first defence and argument of
the defendant no.2 is accordingly rejected.
CS(OS) No.228/2010 Page 10 of 12
11. The second argument of the defendant no.2 that the endorsement
given above is not a written contract and is also not the contract of guarantee
once again is a totally frivolous argument inasmuch as endorsement given by
Mr. Dhruv Varma/defendant no.2 has to be read in continuation of and forming
part of the entire letter of Corporate Guarantee dated 4.9.2006. I have already
reproduced above the relevant paras of the corporate guarantee which show
existent liability towards plaintiff and consequently of the defendant nos. 1 and
2 executing the corporate guarantee specifying the specific amounts in para 1(b)
of the corporate guarantee. Accordingly, the endorsement given in categorical
terms at the end of this corporate guarantee by the defendant no.2 in my opinion
when read as a part and parcel of the entire Agreement of Corporate Guarantee
dated 4.9.2006, the same clearly is a written contract as also a guarantee
executed by the defendant no.2 with respect to the liability specified in para 1(b)
of the corporate guarantee agreement. The second argument urged on behalf of
the defendant no.2 is therefore rejected.
12. The argument of the defendant no.2 that the endorsement of the
defendant no.2 is not a written contract by placing reliance upon the judgment
of Shri J.S. Sood (supra) is again a misconceived argument for the self same
reasons given for rejecting the second argument inasmuch as the endorsement
not only specifies that the defendant no.2 has stood as a guarantor, the
liquidated amount due is also mentioned in the corporate guarantee document,
CS(OS) No.228/2010 Page 11 of 12
and therefore corporate guarantee document is a formal document specifically
containing the liability of defendant nos. 1 and 2, and obliging the defendant
nos. 1 and 2 by this written document to make payments to the plaintiff. The
corporate guarantee therefore is a written contract falling under Order XXXVII
Rule 1 CPC containing a liquidated amount and hence the suit under Order
XXXVII CPC is clearly maintainable on the basis of this Corporate Guarantee
Agreement dated 4.9.2006.
13. In view of the above, there is no merit in the leave to defend
application which is rejected.
CS(OS) No.228/2010
14. Since the application for leave to defend is rejected, the suit of the
plaintiff against the defendant no. 2 is decreed for a sum of Rs. 6,90,26,340/-
alongwith pendente lite and future interest at 9% per annum simple. Plaintiff
will also be entitled to costs of the suit. Decree sheet be drawn. Suit is decreed
and disposed of accordingly.
MAY 06, 2015 VALMIKI J. MEHTA, J.
ib
CS(OS) No.228/2010 Page 12 of 12