The main legal point established in the judgment is that the remedy for recovery of a loan amount, as per the terms of the loan agreements, is specific performance of the Agreement, not a direct claim for recovery of the loan amount.

Rajiv Sahai Endlaw, J.

IA No.1232/2013 (of the defendants for leave to defend).

1. The plaintiff has instituted this suit under Order 37 of the CPC for recovery of Rs.1,47,00,000/-jointly and severally from the six defendants, pleading:-

(i) that the defendants are members of a joint Hindu family and which family controls and manages M/s. Infragro Industries Ltd.;

(ii) that the plaintiff from time to time advanced loan for the business of the said Company;

(iii) that the defendants upon being unable to return the said loan agreed that 5593 sq. mtrs (6420 sq. yds.) of land owned by the defendants at Rahe Murtaza Road, Civil Lines Rampur, U.P. would be jointly developed by the plaintiff and the defendants and the amount due to the plaintiff would be realized by selling the plaintiff’s portion of the built-up area to be constructed on the said land and to sell part of the land ad measuring approximately 2200 sq. yds. to the plaintiff, all on the terms and conditions contained in the Agreement dated 22nd March, 2006 between the parties;

(iv) the defendants however neither performed their part of the said Agreement dated 22nd March, 2006 nor liquidated their liability towards the plaintiff;

(v) that on 10th October, 2008 another agreement was entered into between the parties to find a buyer for the said 2200 sq. yds. of land and the defendants therein also agreed that if the buyer is willing to buy some more land, the defendants will be willing to do so and out of the consideration received, the defendants will first return an amount of Rs.1.80 crores to the plaintiff and the said amount shall be the first charge on the consideration received from the purchaser; that it was further a term of the agreement that if no buyer is available, the total amount payable to the plaintiff shall be Rs.1.85 crores and if the defendants do not pay the said amount, the defendants will execute a Conveyance Deed in favour of the plaintiff of the said 2200 sq. yds. of land on or before 28th February, 2009 in consideration of the loan amount of Rs.1.85 crores;

(vi) that however for reasons attributable to the defendants, no buyer could be located and the defendants also failed to execute the Conveyance Deed of the 2200 sq. yds. of land aforesaid in favour of the plaintiff, though out of Rs.1.85 crores returned Rs.38 lacs to the plaintiff vide cheque dated 30th November, 2009, leaving the balance amount of Rs.1,47,00,000/-; and,

(vii) that the defendants in response to the legal notice preceding the suit have set-up a false defence.

2. The suit was entertained under Order 37 of the CPC and summons for appearance and upon the defendants entering appearance summons for judgment were issued to the defendants and defendants have sought leave to defend on the following grounds:-

(a) the plaintiff is a Chartered Accountant by profession and runs a firm in the name of Shaival Sunil & Associates, Chartered Accountants and which firm is an Auditor of the defendants and their concern M/s. Infragro Industries Ltd.;

(b) the plaintiff was not only a confidant of the defendants but also a decision maker in all financial matters of the defendants and was actively involved in the businesses of the defendants since the year 1994 and had also arranged funds for the said businesses;

(c) the plaintiff was also a close friend of the younger brother of the defendant no.1 namely Shri Rajesh Verma who unfortunately died in the year 2002;

(d) that the Agreement dated 22nd March, 2006 was executed by the parties to secure the sum of Rs.55 lacs due to the plaintiff and as is apparent from the terms thereof;

(e) M/s. ITC Ltd. was interested in purchasing the 2200 sq. yds. of the land aforesaid of the defendants and offered to pay therefor at the rate of Rs.13,800/- per sq. yd. and whereafter the plaintiff started claiming a sum of Rs.2 crores instead of Rs.55 lacs stating that he was also entitled to a share in the profit out of the total sale value of Rs.3,03,60,000/-