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2015 Supreme(Del) 3222
THE HIGH COURT OF DELHI AT NEW DELHI
VALMIKI J.MEHTA, J.
IFCI FACTORS LTD. - Plaintiff
Versus
MAVEN INDUSTRIES LTD. & ORS. - Defendants
CS(OS) No.2950/2015
Decided on : 20.11.2015
Mr. Anupam Srivastava, Advocate with Ms. Sharmistha Ghosh, Advocate.
Headnote:
Suit for recovery of money under Order XXXVII of the Code of Civil Procedure, 1908 (CPC) is not maintainable where the amount claimed in the suit does not directly arise from the written contract.
Fact of the Case:
Plaintiff filed a suit for recovery of Rs.10,45,05,890.43/- against three defendants. Defendant nos.2 and 3 were the guarantors. The suit was filed under Order XXXVII of the CPC. The defendants filed an application for leave to defend.
Finding of the Court:
The Court held that the suit was not maintainable under Order XXXVII of the CPC because the amount claimed in the suit did not directly arise from the written contract. The Court observed that Order XXXVII of the CPC is a unique departure from the ordinary principles of natural justice wherein a defendant has an automatic right to defend the suit. By Order XXXVII of the CPC, exceptions have been carved out whereby defendant cannot defend the suit as a matter of right as is done in other cases and this is because ex facie or at least prima facie the specific liability of a defendant in terms of a liquidated amount is shown to clearly exist from a written contract containing the liquidated amount or from a dishonoured bill of exchange or a cheque. Once there are such documents, being a written contract containing liquidated amount or a dishonoured bill of exchange or a cheque, which by themselves without any further fact(s) or document(s) required to be pleaded and proved, shows clearly the liability of the defendant in favour of the plaintiff as existing, it is for this reason that filing of such suits under Order XXXVII of the CPC are allowed and defendant who is otherwise ex facie or prima facie liable by virtue of the written document is asked to seek leave to defend to contest the suit.
Issues: Whether the suit was maintainable under Order XXXVII of the CPC.
Ratio Decidendi: The Court held that the suit was not maintainable under Order XXXVII of the CPC because the amount claimed in the suit did not directly arise from the written contract. The Court observed that Order XXXVII of the CPC is a unique departure from the ordinary principles of natural justice wherein a defendant has an automatic right to defend the suit. By Order XXXVII of the CPC, exceptions have been carved out whereby defendant cannot defend the suit as a matter of right as is done in other cases and this is because ex facie or at least prima facie the specific liability of a defendant in terms of a liquidated amount is shown to clearly exist from a written contract containing the liquidated amount or from a dishonoured bill of exchange or a cheque. Once there are such documents, being a written contract containing liquidated amount or a dishonoured bill of exchange or a cheque, which by themselves without any further fact(s) or document(s) required to be pleaded and proved, shows clearly the liability of the defendant in favour of the plaintiff as existing, it is for this reason that filing of such suits under Order XXXVII of the CPC are allowed and defendant who is otherwise ex facie or prima facie liable by virtue of the written document is asked to seek leave to defend to contest the suit.
Final Decision: The Court held that the suit was not maintainable under Order XXXVII of the CPC and gave time to the plaintiff to amend the suit plaint so that all averments in the same with respect to Order XXXVII of the CPC are deleted and the suit is treated as an ordinary civil suit for recovery of moneys.
VALMIKI J. MEHTA, J.
1. Plaintiff who is the lender/creditor has filed this suit for recovery of Rs.10,45,05,890.43/- against three defendants. Defendant no.1 is the principal borrower company and the defendant nos.2 and 3 are the guarantors.
2. In terms of the averments made in the plaint, the plaintiff in terms of an agreement for factoring of receivables lent an amount of Rs.4.98 crores under the subject Agreement dated 28.1.2011 which was for domestic factoring upto a limit of Rs.5 crores. The working of the factoring agreement is that the defendant no.1 is supplier of goods and when it supplies goods to a third party, such third party is liable to make the payment for the goods supplied to the defendant no.1, but such third party instead of making the payment to the defendant no.1 will make the payment to the plaintiff which has lent the amount to the defendant no.1 under the Agreement for Factoring of Receivables dated 28.1.2011. Effectively, the plaintiff discounts the bills which are raised by the defendant no.1 upon the buyer and the plaintiff on such discounting grants financial facility to the defendant no.1 on the security of the discounted bills. As per the plaint, after giving the final limit to the defendant no.1 a total repayment of Rs.42,04,068/- was made and as per the plaintiff now a sum of Rs.10,45,05,890.43/- is due to the plaintiff from the defendants alongwith contractual rate of interest @ 13% per annum. The subject suit is filed stating that the suit is based upon the written contract being the Agreement for Factoring of Receivables dated 28.1.2011 under which a limit of Rs.5 crores was available to the defendant no.1 and which agreement was used by the defendant no.1 to avail an amount of Rs.4,98,07,015 by discounting of the bills, and on the date of the suit an amount of Rs.10,45,05,890.43/- is due being the amount of principal plus interest after giving benefit to the defendants of an amount of Rs.42,04,068/- having been paid.
3. This matter was listed for admission before the Joint Registrar and the Joint Registrar vide Order dated 7.10.2015 listed the suit in this Court on account of non-maintainability of the same because the Agreement dated 28.1.2011 had an arbitration clause. The Order of the Joint Registrar dated 7.10.2015 reads as under:-
“IA No. 20423/2015 (Exemption)
Allowed, plaintiff be directed to file the original document be filed within four weeks time.
Accordingly IA stands disposed of.
CS(OS) 2950/2015
During the course of argument, it revealed that there was an agreement dated 28.01.2011 incorporated the arbitration clause No. 25 between the plaintiff and defendant No.1 which says that:-
“all disputes, differences, claims, questions and controversies arising in connection with this agreement which the parties are unable to settle between themselves, shall be referred to Arbitration, in accordance with the Arbitration and Conciliation Act, 1996 or any statutory amendment or modification thereof. The Arbitration proceedings shall be held in the English language and shall be held at Mumbai/New Delhi.”
Plaintiff also averted in para 6 of the plaint that defendants 2 & 3 executed separate deed of guarantee titled as ‘Guarantee’ dated 28.01.2011 in favour of the plaintiff for securing the facility in favour of defendant No.1 by the plaintiff. The amount of guarantee given by defendants 2 & 3 to the plaintiff was to extend Rs 5 Crore each. The plaintiff has also relied upon the judgment in case (2003) 5 Supreme Court Cases 531 titled as Sukanya Holdings Pvt. Ltd. vs. Jayesh H Pandey and ors and further prayed that to issue the summons to the defendants under Order 37 CPC.
In view of the submission and the arbitration clause, the matter be placed before the Hon’ble Court on 20.11.2015 for further directions”
4. In addition to the non-maintainability of the suit because of
