Full Judgment Text
2023/DHC/000857
* IN THE HIGH COURT OF DELHI AT NEW DELHI
th
% Decided on: 07 February, 2023
+ CS(COMM.) 444/2021
SANDEEP SINGH
F-14, Green Meadows,
Saharpur Extn., Khasra No.544,
Opp. Mallu Farm, Chhatarpur,
New Delhi - 110 074
..... Plaintiff
Represented by: Mr. A. Maitri and Ms. Radhika,
Advocate.
versus
HINDUSTAN SPIRITS LTD.
Through its
Chairman/Managing Director/CEO
D-10/1, Phase-I, Okhla,
New Delhi - 110 020
Also at:
th
402, 4 Floor,
Solitaire Plaza,
M.G. Road, Gurgaon,
Haryana - 122 002.
Also at:
10-A, New Mandi,
Muzaffarnagar-251 001
Uttar Pradesh.
Also at:
D-136, Gayatri Sadadan,
Opposite Meena Petrol Pump,
Laxmi Narayan Puri,
Suraj Pole, Jaipur,
Rajasthan - 302 003.
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Also at:
Village - Paniyala,
Tehsil - Kotputli,
Distt. - Jaipur,
Rajasthan - 303 108.
..... Defendant
Represented by: Mr. Tanmaya Mehta, Advocate
CORAM:
HON'BLE MS. JUSTICE NEENA BANSAL KRISHNA
J U D G E M E N T
NEENA BANSAL KRISHNA, J.
I.A. 3017/2022 (U/O XII Rule 6 r/w Section 151 of CPC, 1908)
1. The present application under Order XII Rule 6 read with Section 151
of the Code of Civil Procedure, 1908 (hereinafter referred to as “CPC,
1908” ) has been filed on behalf of the plaintiff seeking a Decree in the sum
of Rs. 6,97,00,000/- along with interest @ 18% per annum pre-litigation,
pendente lite and future interest @ 18% per annum.
2. It is submitted in the application that the plaintiff had given advances
to the defendant Company as loan, by way of bank transfer/ RTGS/ NEFT.
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An amount of Rs. 18,38,27,000/- was given during the period from 03
st
January, 2014 to 01 August, 2018 to the defendant Company. After giving
an adjustment of the repaid amount, an amount of Rs. 7,06,65,844/- along
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with interest@ 18% per annum amounting to Rs. 10,66,09,541/- till 30
September, 2019 is payable.
3. It is asserted by the plaintiff that the defendant in its Written
Statement has made clear, unambiguous, unconditional acknowledgement of
the liability. It has disputed only an amount of Rs.1,61,00,000/-, even though
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it had been paid by the defendant by way of bank
transfers/RTGS/NEFT/bank cheques. The defendant-Company has made
unequivocal admissions in paragraph 17 and 21 in respect of its liability to
pay the sum of Rs. 6,97,00,000/-out of the claimed amount. Hence, a prayer
has been made that a Decree in respect of the admitted amount of
Rs. 6,97,00,000/- along with the interest @ 18% per annum may be made.
4. The defendant in its response has asserted that there is no admission
of any kind made by the defendant which would entitle the plaintiff to a
Decree on admissions; rather the defendant has filed a counter-claim
claiming various amounts and has also sought adjustment/set-off.
5. It is denied that the amounts which are claimed by the plaintiff were
advances as loan. It is asserted that infact the amounts were actually
investments and the plaintiff is not entitled to the said amounts. It is
submitted that the detailed defence is mentioned in the Written Statement
which may be read as part and parcel of this application, which may be
dismissed.
6. Submissions heard.
7. This application for judgement under Order XII Rule 6 of CPC, 1908
has been filed by the plaintiff seeking decree of Rs.6,97,00,000/- in the light
of unambiguous and categorical admissions made by the defendant. Before
embarking on the merits of the case, it would be pertinent to first highlight
under what circumstances a decree can be made under Order XII Rule 6 of
CPC.
8. Hon'ble Supreme Court in Himani Alloys Ltd. Vs. Tata Steel Ltd.
(2011) 7 SCR 60 had observed that Order XII Rule 6 CPC is an enabling
provision and the court has to exercise its judicial discretion after
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examination of facts and circumstances, keeping in mind that a judgment on
admission is a judgment without trial which permanently denies any remedy
to the defendant, by way of an appeal on merits. Therefore, unless the
admission is clear, unambiguous and unconditional, the discretion should
not be exercised to deny the valuable right of a defendant to contest. It is
only when the admission is clear that it may be acted upon. Similar
observations were made by the Supreme Court in the case of M/s Jeevan
Diesels & Electrical Ltd. (2010) 6 SCC 601.
9. The Division Bench of Delhi High Court in Vijay Myne vs. Satya
Bhushan Kaura , 142 (2007) DLT 483 (DB) explained the scope of Order
XII Rule 6 of CPC as follows: -
"12. …Purpose would be served by summarizing
the legal position which is that the purpose and
objective in enacting the provision like Order 12
Rule 6, CPC is to enable the Court to pronounce
the judgment on admission when the admissions
are sufficient to entitle the plaintiff to get the
decree, inasmuch as such a provision is enacted
to render speedy judgments and save the parties
from going through the rigmarole of a protracted
trial. The admissions can be in the pleadings or
otherwise, namely in documents, correspondence
etc. These can be oral or in writing. The
admissions can even be constructive admissions
and need not be specific or expressive which can
be inferred from the vague and evasive denial in
the written statement while answering specific
pleas raised by the plaintiff. The admissions can
even be inferred from the facts and circumstances
of the case. No doubt, for this purpose, the Court
has to scrutinize the pleadings in their detail and
has to come to the conclusion that the admissions
are unequivocal, unqualified and unambiguous. In
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the process, the Court is also required to ignore
vague, evasive and unspecific denials as well as
inconsistent pleas taken in the written statement
and replies. Even a contrary stand taken while
arguing the matter would be required to be
ignored."
10. The Division Bench of Delhi High Court in Delhi Jal Board v.
Surendra P. Malik, 104 (2003) DLT 151 laid down the following tests: -
"9. The test, therefore, is (i) whether admissions
of fact arise in the suit, (ii) whether such
admissions are plain, unambiguous and
unequivocal, (iii) whether the defense set up is
such that it requires evidence for determination of
the issues and (iv) whether objections raised
against rendering the judgment are such which go
to the root of the matter or whether these are
inconsequential making it impossible for the party
to succeed even if entertained. It is immaterial at
what stage the judgment is sought or whether
admissions of fact are found expressly in the
pleadings or not because such admissions could
be gathered even constructively for the purpose of
rendering a speedy judgment."
11. In Rajeev Tandon &Anr. Vs. Rashmi Tandon CS (OS) 501/2016
decided by Delhi High Court on 28.02.2019 it was held that while
considering an application under Order XII Rule 6 CPC the court can ignore
vague and unsubstantiated pleas.
12. In Abbot India Ltd. Vs. Rajinder Mohindra (2014) 208 DLT 201 it
was held that once it is found that there was no defence, merely because a
bogey thereof is raised at the stage of framing of issues or upon the
respondents/ plaintiffs filing an application under Order XII Rule 6 of the
CPC, would not call for framing of an issue.
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13. In A.N. Kaul Vs Neerja Kaul &Anr. 2018 SCC OnLine Del 9597 it
was observed that even if there is no express admission in the written
statement but an intelligible reading of the written statement shows
propositions or pleas taken to be not material and no issue to be arising
therefrom, the Court is still entitled to pass a decree forthwith.
14. In Anil Khanna Vs. Geeta Khanna 2013 SCC OnLine Del 3365,
Hon'ble High Court of Delhi had observed that the preliminary objections
are based on legal advice, the same are not reply on merits wherein the party
is required to plead facts specifically. In the preliminary objections parties
can even take contrary pleas and same would not amount to an admission.
Further, the facts stated in the preliminary objections are without prejudice
and do not constitute reply on merits and the averments cannot be read in
isolation. Further, in the verification it is clearly stated that the averments in
the preliminary objections are believed to be true on the basis of legal
information.
15. Having discussed the law, it requires no reiteration that for the
judgement to be based on admissions, the admissions have to be
unequivocal and unambiguous leading to no other conclusion but to a
decision in favour of the plaintiff.
16. In this background, the facts of the present case need to be examined.
17. The plaintiff has asserted that he is a family friend of Anejas who are
the Directors in the defendant Company which is doing various businesses.
The plaintiff has claimed that he gave loan/financial assistance on regular
basis and a sum of Rs. 18,38,27,000.00/- was given during the period from
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03 June, 2014 to 01 August, 2018 through bank
transfers/NEFT/RTGS/bank cheques. The loan amount is clearly reflected in
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the ledger accounts of the plaintiff maintained in the name of the defendant
Company. Part payments have been made by the defendant totaling to
Rs.11,31,61,156.00/-. After adjusting amounts paid from time to time, a
sum of Rs.7,06,65,844/- remains to be paid. The only amount that has been
disputed is Rs. 1.61 crores. After deduction of this amount, Rs.7,06,65,844/-
still remains due along with interest @ 18% per annum which amounts to
Rs.10,66,09,541/-.
18. The plaintiff has further asserted that the defendant Company a duly
registered Company under the Company’s Act is mandatorily required to
maintain its accounts, balance sheets and under no circumstances can the
accounts be falsified by the defendant Company. On inspection of the
Defendant Company’s balance sheet in the office of ROC (Registrar of
Companies), it has been revealed that massive bungling in the accounts of
the defendant Company has been committed and false balance sheets have
been filed before ROC simply to commit the fraud upon the plaintiff. The
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balance sheets show an amount of Rs.12.92 Crore payable to plaintiff on 31
March, 2017. An amount of Rs.7.49 Crore is shown to have been paid
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during the Financial Year 1 April, 2017 till 31 March, 2019, but the
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balance sheet ending on 31 March, 2018 shows that only Rs.13.23 lakhs is
payable to the plaintiff. The plaintiff has claimed that the defendant
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Company has committed fraud upon the plaintiff. A Notice dated 17
October, 2019 was sent to the defendant Company, but in response to the
said Notice defendant Company has sent an evasive reply, which itself
shows that defendant has no intention to pay the claimed amount.
19. The plaintiff was constrained to initiate proceedings of insolvency
under Section 9 of Insolvency & Bankruptcy Code, 2010 before NCLT
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Chandigarh bench, but the said proceedings did not result in the payment of
the loan amounts of the plaintiff.
20. The first aspect which deserves a comment is that the plaintiff has
claimed that he had given loans to the defendant Company, as Anejas who
are the Directors of the Defendant Company and are close friends. As
against this claim, it may be significant to refer to the Written Statement,
wherein it is asserted that the plaintiff for the reasons best known to him
alone, has hidden the most vital fact that he was himself a Director as well
as approximately 47% shareholder in the defendant-Company since 2014 till
2018. Given the equal stake of the plaintiff and the Aneja family in the
defendant-Company, there was a clear Agreement between the
defendant-Company, Aneja family and the plaintiff which was encompassed
partly in a written agreement and partly verbally with the oral agreement not
in any manner being contradictory to the terms of the written agreement,
rather being a supplementary to the agreement. The understanding was in
the following terms: -
“(i) All losses and expenses would be shared
equally between the plaintiff on the one hand and the
Aneja family on the other, and the Company‟s
coffers and accounts will be replenished with funds
in proportion to the shareholding of the plaintiff and
the Aneja family. It may be noted that the
shareholding of the plaintiff and the Aneja family
was equal and translated into 44.4% shareholding
each in the defendant Company (as a small
percentage of 6% was owned by some of the
previous shareholder i.e., the Kamboj family);
(ii) Apart from loses and expenses, the
shareholder would contribute monies to the
Company in proportion to their shareholding to
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enable the Company to repay bank credit and
loans.”
21. It was understood and agreed that the Company would have a claim
against the shareholders in proportion to their shareholding and if as a result
of failure of one shareholder, the other shareholder had to replenish the
accounts of the Company for either replenishing losses or expenses or
paying bank loans, credit etc. then, they would be jointly and severally have
a claim against the default shareholder to the extent of a shortfall in
replenishing losses or funds to enable payment of bank loans and the credits.
22. It has been further claimed that because of this special characteristics
of the defendant-Company of being a closely held Company that
shareholding being held primarily by Aneja family and the plaintiff, it
continues to be in the natures of the family Company and quasi partnership.
Hence, the special arrangements and equity principles akin to partnership
principles where mutual understanding and arrangements on which the
Company was to be run which are significant, paramount and binding on the
Company as well as the shareholders. The decision of the House of Lords in
Ebrahimi vs. Westbourne Galleries Ltd. 1972 2 All ER 492, laid down the
principles which were endorsed by the Hon’ble Supreme Court in Hind
Overseas Pvt. Ltd. vs. Raghunath Prasad Jhunjhunwalla 1976 2 SCR 226.
Lord Wilberforce observed that while a Limited Company is more than a
mere judicial entity, with a personality in law of its own: that there is room
in Company law for recognition of the fact that behind it, or amongst it,
there are individuals, with rights, expectations and obligations inter se which
are not necessarily submerged in the Company structure. That structure is
defined by the Companies Act, 1948 and by the Articles of Association by
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which shareholders agree to be bound. In most Companies and in most
contexts, this definition is sufficient and exhaustive, equally so whether the
Company is large or small. The „just and equitable‟ provision does not, as
the defendant suggests, entitle one party to disregard the obligation he
assumes by entering in a Company, nor the court to dispense him from it. It
does, as equity always does, enable the court to subject the exercise of legal
rights to equitable considerations; considerations that is of a personal
character arising between one individual and another, which may make it
unjust, or inequitable, to insist on legal rights, or to exercise them in a
particular way. Such indicators are, namely:
(i) an association formed or continued on the basis
of a personal relationship, involving mutual
confidence – this element will often be found where
a pre-existing partnership has been converted into a
limited company;
(ii) an agreement, or understanding, that all, or
some (for there may be „sleeping‟ members), of the
shareholders shall participate in the conduct of the
business; and
(iii) restriction on the transfer of the members‟
interest in the company – so that if confidence is
lost, or one member is removed from management
he cannot take out his take and go elsewhere.
23. In the present case, the defendant has not denied that a total sum of
Rs.18,38,27,000/- had been credited to the account of the defendant
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Company from the period 03 January, 2014 to 01 August, 2018 by the
plaintiff but has asserted following defences:
(i) The amount was admittedly shown as loan in the
accounts of the defendant, but in fact was by nature
of an investment by Shri Sandeep Singh the
Director of plaintiff Company by way of
investments to infuse funds in the defendant
Company since Shri Sandeep Singh was a Director
in the defendant Company having approx. 47%
shareholding;
(ii) The oral understanding between the parties was
that the Company would return the money to the
extent possible;
(iii) The due amounts is liable to be adjusted towards
meeting the liability towards bank loans etc to the
extent of the shareholding of Shri Sandeep Singh;
and
(iv) The amounts found due from the defendant
Company are liable to be adjusted against the
counter-claim/ set off of the defendant Company.
24. There are specific defences taken by the defendant in regard to the
nature of transactions which cannot be termed as an unequivocal or
admission of liabilities by the Company.
25. The second aspect which emerges from the plaint itself is that: -
(i) On inspection of defendant-Company’s balance sheets filed in
the Office of ROC (Registrar of Companies), it was found that
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massive bungling in the account books of the defendant-Company
has been done;
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(ii) the Balance Sheet as on 31 March, 2017 reflected that a sum
of Rs. 12,92,00,000/- was payable to the plaintiff;
(iii) the balance sheet further reflected that a sum of Rs.
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7,49,00,000/- was repaid during financial year 01 April, 2017 till
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31 March, 2018 and only a sum of Rs. 13,23,000/- was payable as
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on 31 March, 2018.
26. It is claimed that these bank statements are false, frivolous and
fabricated balance sheets which have been placed before the Registrar of
Companies.
27. The plaintiff himself has stated in the plaint that as per the balance
sheets of the defendant only a sum of Rs.13,23,000/- is shown as payable to
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the plaintiff on 31 March, 2018. If the documents of the defendant and the
claim of the plaintiff reviewed, it cannot be said that there is any
unequivocal admission of the liability of the defendant to pay the plaintiff as
claimed.
28. The other aspect is that the plaintiff, in order to substantiate its claim
has relied upon its his own bank ledger accounts of the defendant-Company.
29. Learned counsel on behalf of the plaintiff has placed reliance on the
decision of the Hon’ble Supreme Court in Asset Reconstruction Company
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vs. Bishal Jaiswal &Anr. Civil Appeal No. 323/2021 decided on 15 April,
2021. In the said judgement, reference was made to the Consolidated
Agencies Ltd. Vs. Bertram Ltd. (1964) 3 All. E.R. 282, wherein the Privy
Council had recognized that the balance sheets could in certain
circumstances, amount to acknowledgements of liability. It cannot, however,
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be said as a general proposition of law that statements in balance sheets of a
Company would always operate as acknowledgement of liability.
30. In Beni vs. BisanDayal AIR (1925) Nag. 445, it was observed that
entries in books of account are not by themselves sufficient to charge any
person with liability, the reason being that a man cannot be allowed to make
evidence for himself when he chooses to write in his own books behind the
back of the parties.
31. In Hira Lal vs. Ram Rakha AIR (1953) Pepsu 113, a reference was
made to Section 34 of the Indian Evidence Act and the Court observed that
the entries in books of account regularly kept in the ordinary course of
business are relevant whenever they refer to a matter in which the Court has
to enquire, but it is subject to salient proviso that such entries shall not alone
be sufficient evidence to charge any person with liability. Therefore, merely
that the books of accounts have been maintained regularly in the course of
business, would not be sufficient to draw any conclusion of concluded
liability against the defendant. It was further observed that such entries are
only corroborative evidence and it is to be shown further by some
independent evidence that the entries represent honest and real transactions
and that money was paid in accordance with those entries.
32. In Durga Builders (P) Ltd. vs. Motor and General Finance Ltd. &Ors.
MANU/DE/4794/2013, this Court observed that the alleged admissions of a
liability in the balance sheet can be explained and these issues must be put to
trial.
33. In R. Janakiraman vs. State AIR 2006 SCC 697, the Hon’ble Supreme
Court observed that the bar to Section 92 of the Evidence Act, 1872 to
explain any contents of a written document does not apply. Bar of leading
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oral evidence to explain the contents of a document under Section 92 of the
Evidence Act, 1872 does not bar oral evidence to show that a transaction
under a particular document is sham or fictitious or nominal, or not intended
to be acted upon.
34. The Hon’ble Supreme Court in Central Bureau of Investigation vs.
V.C. Shukla &Ors. (1998) 3 SCC 410, held that even correct and authentic
entries in books of account cannot, without independent evidence of their
trustworthiness, fix a liability upon a person.
35. So are the facts in the present case, wherein the plaintiff is relying on
his own bank account and ledger accounts created by him on which he
cannot claim an unequivocal admission without proving the same by way of
evidence. At the same time, the plaintiff himself has stated that the balance
sheets filed by the defendant with Registrar of Companies reflect a different
position of the outstanding liabilities vis-a-viz the plaintiff which are limited
to Rs. 13,23,000/-. Once the balance sheets of the defendant are reflecting a
different position, it cannot be asserted that there is any admission in favour
of the plaintiff entitling himself to a Decree on admissions.
36. Learned counsel on behalf of the plaintiff has argued that the
defendant has categorically admitted the outstanding amounts in its Written
Statement. However, there is no such unequivocal admission by the
defendant in its Written Statement. What has been stated is that whatever be
the amounts reflected in the Statement of Account /ledger is a matter of
record. It is for the plaintiff to prove the outstanding amount and there is no
unequivocal admission made by the defendant about the outstanding
liabilities.
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37. In Ram Niranjan Kajaria&Ors. vs. Sheo Prakash Kajaria & Ors.
(2015) 10 SCC 203, the Hon’ble Supreme Court held that the admissions
even if made, must be allowed to be explained by the party making the
admissions.
38. In the light of specific defences taken up by the defendant, it cannot
be said that the defendant has made any unequivocal admissions entitling the
plaintiff to a decree. Rather, the defendant is entitled to prove its defences as
enumerated above.
B. Counterclaim and Set- Off filed by the Defendant:
39. The other aspect which emerges for consideration is whether the
plaintiff can claim judgement on admission in the light of counter-claim/ set
off filed by the defendant.
40. The defendant has asserted that the plaintiff transferred his 40%
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shareholding on 01 April, 2018 and also resigned as a Director from
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defendant Company w.e.f 31 March, 2018. It is claimed that since as per
the arrangement and agreement, the plaintiff had the obligation to infuse
funds into the defendant Company for smooth running of the affairs of the
Company, the plaintiff had infused Rs.18,38,27,000/- but has contended that
it was by way of advance loan which is a malafide statement without any
basis. The amount was actually in the nature of an investment, though for
accounting convenience was shown as loans and advances with the
understanding that the same would be repaid to the extent possible if the
finances of the Company permitted. However, there was no surety of the
returns. The amounts to the extent possible were returned from time to time
in good faith. However, the characterization of the monetary transactions as
described by the plaintiff is denied.
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41. It is further asserted that the amounts claimed by the plaintiff are not
repayable since they were actually investments by shareholders even though
they were described as loans. In fact, plaintiff owes money to the defendant.
Being an equal shareholder, he was also under an obligation to share the
losses, expenses of the defendant Company equally along with proportionate
contribution towards infusing funds for settling bank liabilities. The
defendant has claimed that as on the date of transfer of shares by the plaintiff
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i.e. 01 April, 2018 the total losses in the books of the defendant Company
was Rs.9,27,961/- and Rs.2,69,01,286/- under the head of deferred revenue
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expenditure. The total loss as on 31 March, 2018 was Rs.2,78,28,247/- and
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on 31 March, 2019 i.e the end of the Financial Year in which the plaintiff
transferred his shares were of total INR 5,07,67,380/- plus deferred revenue
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expenditure of Rs.4,90,27,413/-. The outstanding bank loan on 31 March,
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2018 was Rs.12,35,92,904/- and as on 31 March, 2019 it was
Rs.9,01,42,760/-.
42. The defendant has further asserted that at the time when the plaintiff
made his exit from the Company and transferred his shareholding to Aneja
Family, it was understood and agreed that the obligation and liability to
contribute proportionately and equally would continue qua amount of losses,
deferred revenue expenditure and outstanding bank liabilities as on date of
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transfer of shares i.e. 01 April, 2018 and at the end of the Financial Year
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31 March, 2019 whichever was higher, each head considered separately.
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From the balance sheet for the year ending on 31 March, 2018 and 31
March, 2019 it is evident that the defendant Company did not have enough
funds to pay the bank or replenish the losses or meet deferred revenue
expenditure. The Aneja Family contributed funds to the defendant Company
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to enable it to pay off the bank loan, bank credit and therefore, both
defendant Company jointly and severally have a proportionate claim against
the plaintiff to the extent especially because the plaintiff himself was a
personal guarantor of the bank loan/ credit. It is asserted that the bank loan/
credit could be repaid on account of the contribution made by the Aneja
Family and not by the plaintiff.
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43. The defendant has further claimed that even after 01 April, 2018, the
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plaintiff transferred Rs.50 lakhs to the defendant in July, 2018 and 01
August, 2018. These payments were upon the understanding of bearing
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proportionate share of losses, expenses, bank loans etc. However, after 01
August, 2018 plaintiff turned dishonest and did not contribute and as an
afterthought, gave a Notice in July, 2019 claiming sums which he knew he
was not entitled to. The defendant has asserted that out of the sum of
Rs.18.38 Crores which the plaintiff claims to have advanced to the
defendant, it is asserted that a sum of Rs.1,61,00,000/- was never received
into the account of the defendant Company.
44. It is further asserted that the monies as claimed by the plaintiff though
received in the name of defendant Company, but the account was always
under the control of previous shareholders i.e the Garg Family and as such
the money never came to the beneficial control of the Company under the
new ownership/ shareholding which was purchased by Aneja Family and
also by the plaintiff as shareholder. Such money was never made available
to the defendant Company for its use and benefit and as per the
understanding with the defendant, these amounts were paid by the plaintiff
not as payment to the defendant Company but to the previous shareholders
i.e. Garg Family irrespective of whose name the said account may have
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stood i.e whether the Company or the shareholder. The monies were
actually given in the accounts owned or controlled by the previous
shareholders and for the benefit of such shareholders and not the Company.
45. Furthermore, the description in the Statement of Account relied upon
by the plaintiff mentions "Adarsh Mahila Mercantile". According to the
defendant, such an account whether in the name of the defendant Company
or any other name, must have been under the control of erstwhile Garg
Family and never came to the benefit of the defendant Company.
46. The defendant has asserted that the defendant Company had
purchased a few luxury cars from its own funds to be used by the Company
in its business. The plaintiff being a shareholder was given one such car
DL3CU 0011 Model Mercedes Benz G63AMG for official use, which was
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purchased at a cost of approx. 1.92 crores on 04 September, 2015. A sum
of Rs.1.75 crore principle plus interest was taken as a loan amount to finance
the car. A sum of Rs.1.47 crores was paid towards the loan and interest by
the defendant Company. Once, the plaintiff resigned as a Director and gave
up his shareholding, he was under an obligation to return the car back to the
Company. However, it has come to the light that plaintiff unauthorizedly
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sold of the luxury car on 03 October, 2017 and thereafter misappropriated
some portion of the money.
47. The defendant has filed a police complaint on this account. The
plaintiff was authorized to sell the Company assets. He could not unilaterally
decide how the amount was to be adjusted. His unilateral credits may reduce
his alleged claim against the defendant, but would not make any difference
to the claim of the defendant against the plaintiff except to the extent of loan
cleared by him. The defendant has claimed that he is entitled to recover the
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entire amount of loan of Rs.1.47 crores paid qua the vehicle plus a sum of
Rs.77 lakhs as a balance vis-a-vis the value of the vehicle. He is also
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entitled to interest @ 18% per annum w.e.f. 03 October, 2017.
48. The defendant has further submitted that during the period between
April, 2017 to February, 2018 a sum of approx. Rs.2,10,50,000/- has been
transferred from the account of HA Enterprises (partnership firm of Aneja
Family) to the personal account of Sandeep Singh which has not been
returned till date. This amount is also liable to be set of/ adjusted qua the
plaintiff. HA Enterprises is a partnership firm of Aneja Family with Rajni
Aneja, Rishabh Aneja and Pranay Aneja being its partners. The defendant
has claimed that this amount arises from and is inextricably linked with the
same set of transactions on which the plaintiff has asserted his claim. On
merits, all the averments made in the plaint are denied and the defence as
disclosed in the preliminary objections has been reiterated.
49. The defendant by way of counter-claim has claimed:
(a) Recovery of Rs.11,16,93,848/- aside from deferred revenue
expenditure and outstanding bank loans as on 31st March, 2018/
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31 March, 2019 whichever is higher and has also claimed interest
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@ 18% per annum on the recovery of money w.e.f 01 April, 2019
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till 15 December, 2021 on the sum of Rs.5,44,50,751/- along with
pendente lite and future interest @ 18% per annum.
(b) Rs.2,24,00,000/- qua the Mercedes Car along with interest @
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18% per annum w.e.f 03 October, 2017 till 15 December, 2021
in the sum of Rs.1,13,45,600/- along with pendente lite and future
interest @ 18% per annum.
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(c) Defendant has claimed set off/ adjustment of Rs.2,10,50,000/-
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along with interest @ 18% per annum w.e.f 01 April, 2019 which
comes to 1,02,61,875/- along with pendente lite and future interest.
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50. “Set-off” is defined in Black‟s Law Dictionary (7 Edn., 1999) inter
alia as a debtor’s right to reduce the amount of a debt by any sum the
creditor owes the debtor; the counterbalancing sum owned by the creditor.
The dictionary quotes Thomas W. Waterman from A Treatise on the Law of
Set-Off, Recoupment, and Counter Claim as stating:
“ Set-Off signifies the subtraction or taking away
of one demand from another opposite or cross-
demand, so as to distinguish the smaller demand
and reduce the greater by the amount of the less;
or, if the opposite demands are equal, to
extinguish both. It was also, formerly, sometimes
called stoppage, because the amount to be set off
was stopped or deducted from the cross-demand”.
51. The contours of set-off may be as defined in Sub-rule (1) of Rule 6 of
Order VIII CPC or it may be equitable. The two concepts have been
explained by the Apex Court in Union of India vs. Karam Chand Thapar &
Bros. (Coal Sales) Ltd. and Others, (2004) 3 SCC 504 , wherein while
referring to concept of set-off in Sub-rule (1) of Rule 6 of Order VIII CPC it
was explained that the claim sought to be set off must be for an
ascertained sum of money and legally recoverable by the claimant .
What is more significant is that both the parties must fill the same character
in respect of the two claims sought to be set off or adjusted. Apart from the
rule enacted in Rule 6 above-said, there exists a right to set-off , called
equitable , independently of the provisions of the Code. Such mutual debts
and credits or cross-demands, to be available for extinction by way of
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equitable set-ff, must have arisen out of the same transaction or ought to be
so connected in their nature and circumstances as to make it inequitable for
the court to allow the claim before it and leave the defendant high and dry
for the present unless he files a cross-suit of his own. When a plea in the
nature of equitable set-off is raised it is not done as of right and the
discretion lies with the court to entertain and allow such plea or not to do so.
52. In M/s. Lakshmichand & Balchand vs. State of Andhra Pradesh
(1987) 1 SCC 19, the Apex Court has ruled that when a claim is founded on
the doctrine of equitable set-off, all cross-demands that arise out of the
same transaction or the demands if so connected in the nature and
circumstances then they can be looked upon as a part of one transaction.
53. However, a plea in the nature of equitable set-off is not available
when the cross-demands do not arise out of the same transaction and are not
connected in its nature and circumstances as has been explained by the Apex
Court in Raja Bhupendra Narain Singha Bahadur vs. Maharaj Bahadur
Singh & Ors. AIR 1952 SC 782 that a wrongdoer who has wrongfully
withheld moneys belonging to another, cannot invoke any principles of
equity in his favour and seek to deduct therefrom the amounts that have
fallen due from him. There is nothing improper or unjust in telling the
wrongdoer to undo his wrong, and not to take advantage of it.
54. This case has been followed by the Co-ordinate Bench of this Court in
Amit Kumar Chopra vs. Narain Cold Storage & Allied Industries Pvt. Ltd. &
Ors. 2014 (208) DLT 509, observed as under:
“
16. From the aforesaid enunciation of law it is
quite clear that equitable set-off is different from
the legal set-off; that it is independent of the
provisions of the Code of Civil Procedure; that the
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mutual debts and credits or cross-demands must
have been arisen out of the same transaction or to
be connected in the nature of circumstances; that
such a plea is raised not as a matter of right; and
that it is the discretion of the court to entertain and
allow such a plea or not. The concept of equitable
set-off is founded on the fundamental principles of
equity, justice and good conscience. The
discretion rests with the court to adjudicate upon it
and the said discretion has to be exercised with an
equitable manner.”
55. An equitable set-off is not to be allowed where protracted enquiry is
needed for the determination of the sum due, as has been stated in Dobson &
Barlow vs. Bengal Spinning & Weaving Co., (1897) 21 Bom 126 and
Girdharilal Chaturbhuj vs. Surajmal Chauthmal Agarwal, AIR 1940 Nag
177.
56. In Bhagwati Prasad vs. Hukamchand Mills Ltd. 1961 MPLJ. 272, the
High Court of Madhya Pradesh held that in case of an equitable set-off, the
principle contained in Order VIII Rule 6 of CPC, 1908 applies not strictly
but only by analogy. This implies that the Court should consider the
question of convenience and of the mechanics of the litigation. If the claim
of the inequitable set-off relates to transactions that can be suitably
investigated in the suit itself, then even if it is a claim for unliquidated sum it
should be taken up.
57. In Cofex Exports Ltd. vs. Canara Bank 1997 AIR (Del) 355, this
Court observed that where a plea of adjustment of payment is taken as a
defence, if upheld, it has the effect of mitigating or wiping out the plaintiff’s
claim on the date of the suit itself. It is not a claim made by the defendant in
the nature of a counter-claim or a plea of set-off. It does not extinguish the
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plaintiff’s claim; it exonerates the defendant from honouring plaintiff’s
claim, if upheld. Such plea if raised shall be gone into by the court and
would have an effect of Decree in favour of the defendant taking away
plaintiff’s right to realize such amount as has been upheld in favour of the
defendant.
58. Similar were the observations made by this Court in M/s. CRB Capital
Markets Ltd. vs. Smt. Bimla Devi Sahney 2005 (121) DLT 471.
59. In the present facts, the defendant in addition to denying its liability to
pay the amount as claimed by the plaintiff, has also filed a counter-claim for
recovery of about Rs. 11,16,93,848/- as plaintiff’s proportionate contribution
of 50% towards losses, deferred revenue expenditure, outstanding bank
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loans as on 31 March, 2018. The defendant, in addition, has claimed a set-
off/adjustment of Rs. 2,10,50,000/- along with interest @ 18% per annum
given to the plaintiff by HA Enterprises and not yet returned by the plaintiff,
by way of adjustment as in his defence. These amounts relate to the same
business transactions on the basis of which the plaintiff has sought its
recovery. Thus, in view of the case law discussed above, the counter-claim/
set of the defendant also needs to be adjudicated for final determination of
the amounts due to either party.
Conclusion:
60. In the light of the above discussion, it cannot be said that there are
unambiguous and unequivocal admissions made by the defendant in regard
to the outstanding liability either in the pleadings or in any of the
documents/balance sheets or ledger accounts.
61. The application of the plaintiff under Order XII Rule 6 of CPC for
judgment on admission is, therefore, dismissed.
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CS(COMM.) 444/2021 & I.A.11954/2021
62. List this matter before the Roster Bench for framing of issues on
21.02.2023.
(NEENA BANSAL KRISHNA)
JUDGE
FEBRUARY 07, 2023
va/ s.sharma
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