The main legal point established in the judgment is that the limitation for recovery of a deposit under an MoU commences from the date when refund is demanded, and that an unstamped document can be cured by paying the deficient stamp duty and penalty.

Rajiv Sahai Endlaw, J.

IA No.5615/2011 (of the defendant No.1 for leave to defend)

1. The plaintiffs have instituted this suit under Order 37 of the CPC for recovery of Rs.10 crores along with pendente lite and future interest jointly and severally from the two defendants, pleading:

(i) that the defendant No.1 company through its Directors Sh. Kashi Nath Shukla and Sh. Anil Jain had in early 2007 offered to jointly develop with the plaintiff No.1 various projects which defendant No.1 had in hand or were under process of acquisition;

(ii) that the plaintiff No.1 was also interested in acquiring lands / development rights for its business purposes;

(iii) that the defendant No.1 expressed immediate needs for funds for the purpose of acquisition of certain properties in Jalandhar, Amritsar and other places and asked the plaintiff No.1 to deposit an amount of Rs.10 crores with the defendant No.1 and assured the plaintiff No.1 that the defendant No.1 will then offer joint development rights in the ratio of 50:50 based upon the actual costs of the projects;

(iv) that the plaintiff No.1 though agreed to so deposit a sum of Rs.10 crores with the defendant No.1 but was itself not possessed of such funds and requested its associate company plaintiff No.2 M/s Gold Hotels & Resorts Pvt. Ltd. to pay the said amount of Rs.10 crores to the defendant No.1;

(v) that on 05.02.2007 a Memorandum of Understanding (MoU) was executed by the plaintiff No.1 and the defendant No.1 where-under the plaintiff No.1 through the plaintiff No.2 paid a sum of Rs.10 crores to the defendant No.1 on the terms and conditions contained therein;

(vi) that as per the terms contained in the MoU aforesaid, the said sum of Rs.10 crores was adjustable towards various projects listed in Annexure-I to the MoU and was to be allocated to individual projects upon signing of project-specific Joint Development Agreement (JDA); it was further a term of the MoU that in case upon due diligence the plaintiff No.1 did not proceed with the JDA, the deposit of Rs.10 crores would be immediately refunded by the defendant No.1;

(vii) that the defendant No.1 did not offer the documents to the plaintiff No.1 for carrying out the due diligence and accordingly the plaintiff No.1 vide its letter dated 27.07.2007 recalled the amount of Rs.10 crores;

(viii) that no reply was received from the defendant No.1 to the letter dated 27.07.2007; another demand was made on 17.08.2007; no reply was given thereto also;

(ix) that Sh. K.N. Shukla, Director of the defendant No.1 however guaranteed repayment of the said amount of Rs.10 crores to the plaintiff No.1 through defendant No.2 M/s K.N. Consultants Pvt. Ltd. in which also he was a Director and issued a letter dated 31.03.2008 accompanied with a resolution of the Board of Directors of the defendant No.2 company in this regard;

(x) that a legal notice dated 19.08.2008 of demand on the defendant no.1 also went unheeded;

(xi) that though the plaintiff is also entitled to interest at 18% per annum but in order to keep the suit within Order 37 was confining the claim for recovery of amount paid of Rs.10 crores only with pendente lite and future interest.

2. Summons for appearance and thereafter summons for judgments were issued and both defendants have applied for leave to defend and to which applications replies and rejoinders have been filed. However since the plaintiffs are not pressing their claim against the defendant No.2, need is not felt to adjudicate the application of the defendant No.2 company for leave to defend.

3. The defendant No.1 seeks leave to defend on the following grounds:

i. that the summons for judgment were not served at the address given for service thereof in the appearance earlier filed and are thus non est;

ii. that the summons served were without prescribed affidavit of the plaintiffs and are nonest for this reason also;

iii. that the claim in suit is barred by time; the cause of action if any accrued to t