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IN THE HIGH COURT OF DELHI AT NEW DELHI
V. KAMESWAR RAO, J.
Skylink Construction Pvt.Ltd. & Anr – Appellants
Versus
Sachin Mittal & Anr – Respondent
CS(OS) 387 of 2020, I.As. 5167 of 2021 & 4556 of 2022
Decided on : 25-07-2022
Civil Procedure Code, 1908 - Order XXXVII – Rule 3 and 4 - Section 49 - Sale Deed - Collaboration agreement - Reconstruction/redevelopment of suit property - Non-payment of balance of consideration- Whether defendant No.1 has shown special circumstance for this Court to set aside decree passed against him - Case of plaintiffs that plaintiff is owner of a freehold property vide sale deed executed - Being absolute owner, plaintiff No.2 entered into a collaboration agreement with plaintiff No.1 for reconstruction/redevelopment of suit property - Pursuant to collaboration agreement, plaintiff No.1 reconstructed suit property comprising of basement/stilt, ground floor, first floor, second floor and third floor with terrace after dismantling old structure - As agreed in collaboration agreement, entire basement of said property had fallen to share of plaintiff No.2 and entire ground floor, first floor, second floor and third floor with terrace along with stilt area for car parking along with 22.5% indivisible/undivided and impartibly freehold ownership rights in land underneath had fallen to share of plaintiff No. 1 - Court view that defendant No.1 has not disclosed any facts which shows special circumstance which prevented him from appearing and additionally, he has also not disclosed any facts entitling him to obtain leave to defend. Court do not see any reason to grant the prayers as made in the application. (Para 36)
Finding of the court :
When admittedly the Order XXXVII CPC suit qua defendant No. 1 was filed in respect of a memorandum of understanding which was entered between the plaintiffs and the defendant No. 1 and the memorandum of understanding clearly stipulates that the defendant no. 1 shall pay an amount of Rs. 4 Crores in respect of the transaction with regard to the property in question and it is also the case of the defendant No. 1 that he had issued cheques for Rs. 4 Crores in favour of the plaintiff No. 1 which were dishonoured. Hence the claim of the plaintiffs against defendant No.1 was maintainable under Order XXXVII CPC. Hence the decree qua defendant No. 1 cannot be faulted at this stage - This I say so, assuming for a moment, summons were received by defendant No.1, the defendant was conscious about date of hearing, but he did not care to appear before Court on the said date and at least file appearance in Court itself which he did not do – Court find from notings of Registry there is no reference to any application having been filed by defendant either when the 10 day’s time had expired - Hence, this Court is of view that defendant has not disclosed any facts which shows special circumstance which prevented him from appearing and additionally, he has also not disclosed any facts entitling him to obtain leave to defend.
Result: Application is dismissed.
Based on the provided legal document, the key legal principles and points of law are as follows:
Scope of Order XXXVII CPC: Order XXXVII is intended to facilitate the expeditious disposal of suits involving a liquidated demand arising from a written document, dishonoured bill of exchange, or cheque. It does not extend to suits where the claim does not directly arise from such documents or where additional facts and circumstances are involved that are not directly linked to the written contract or instrument (!) .
Suit Maintainability under Order XXXVII: A suit filed under Order XXXVII must be based on a cause of action that directly springs from the written document or a dishonoured bill or cheque. If the claim involves additional facts, circumstances, or causes of action beyond the scope of the written contract or instrument, the suit may not be maintainable under Order XXXVII (!) (!) .
Service of Summons and Notice: Proper service of summons, including through email, is crucial. If service is effected via email and the email address is active and in use, the service is deemed valid unless it is proven that the email was not in use or the summons were bounced back. The court emphasizes that the email ID used for service must be active and operational at the time of service (!) (!) .
Effect of Non-Appearance: Non-appearance of a defendant despite proper service does not automatically invalidate a decree if the service was valid and the defendant had actual or constructive knowledge of the proceedings. The defendant must show valid reasons or special circumstances that prevented appearance to seek setting aside of the decree (!) (!) .
Leave to Defend and Special Circumstances: To obtain leave to defend under Order XXXVII Rule 3 and 4, a defendant must demonstrate not only that there are special circumstances preventing appearance but also that there are facts which entitle him to defend the suit. The application must disclose these facts clearly and convincingly (!) (!) .
Validity of Memorandum of Understanding (MoU): An MoU that is not registered may have limited evidentiary value regarding rights in immovable property unless it falls within exceptions or is supported by other legal documents. The MoU's legal effect depends on its content, signatures, and compliance with registration requirements (!) (!) .
Authenticity and Content of Documents: The case emphasizes that the primary basis of a suit under Order XXXVII is the existence of a written document that clearly states the liability and amount. Discrepancies or contradictions in related documents, such as sale deeds or sale agreements, can be used to challenge the claim but do not necessarily invalidate the suit if the core liability is established through the primary document (MoU and cheques) (!) (!) .
Effect of Dishonoured Cheques: Cheques issued as part of a liability that are dishonoured serve as a strong basis for a suit under Order XXXVII, provided that the cheques were issued in accordance with the agreement and the dishonour is duly established (!) .
Timelines and Procedural Requirements: Strict adherence to procedural timelines, including filing appearances within the prescribed period, is essential. Failure to do so without valid reasons or showing of special circumstances leads to the dismissal of applications for setting aside decrees (!) .
Burden of Proof and Evidence: The defendant must prove that service was not effective, or that there are valid reasons for non-appearance, to succeed in setting aside a decree. Mere denial or assertions without supporting evidence are insufficient (!) (!) .
In summary, the legal framework underscores the importance of proper service, the necessity of a cause of action directly linked to a written document or instrument, and the requirement for defendants to demonstrate valid reasons and facts that justify setting aside a decree or granting leave to defend.
JUDGMENT :
V. KAMESWAR RAO, J.
1. By this order, I shall decide I.A. No. 5167/2021 filed by the defendant No.1 for setting aside the decree dated March 9, 2021 whereby this Court decreed the suit filed by the plaintiffs under Order XXXVII CPC in so far as the defendant No.1/applicant is concerned for Rs.4 Crores along with interest @ 18% per annum w.e.f. March 12, 2018 till realisation on the ground that despite service through e-mail on February 6, 2021, defendant No.1/applicant has not appeared in the proceedings. The order dated March 9, 2021, reads as under:
2. There is no appearance on behalf of defendant No.1 despite service through email on 06th February, 2021. The plaintiff’s suit is, therefore, decreed for Rs. 4 crore along with interest at the rate of 18% per annum w.e.f. 12th March, 2018 till realisation in favour of the plaintiff and against defendant No.1.
3. Defendant No.2 was served on 15th February, 2021 and defendant No.2 filed the memo of appearance on 23rd February, 2021 i.e. within 10 days of the service.
4. Learned counsel for the plaintiff submits that she would be filing an application for issuance of summons for judgment to defendant No.2.
5. List for further hearing as a part heard matter on 06th April, 2021.
6. Defendant No.2 shall remain present before this Court on the next date of hearing.
7. The order be uploaded on the website of this Court forthwith.”
2. The brief facts for considering this application are, the suit has been filed by the plaintiffs under Order XXXVII CPC for recovery of Rs.4 Crores against two defendants along with interest @ 18% per annum from the date of default, i.e., March 2, 2018.
3. It is the case of the plaintiffs that plaintiff No.2 is the owner of a freehold property bearing No. B-8, admeasuring 500 Sq. Yds., Green Park Main, New Delhi – 110016 vide sale deed executed on December 9, 2009. Being the absolute owner, plaintiff No.2 entered into a collaboration agreement with plaintiff No.1 for reconstruction/redevelopment of the suit property. Pursuant to the collaboration agreement, plaintiff No.1 reconstructed the suit property comprising of basement/stilt, ground floor, first floor, second floor and third floor with terrace after dismantling the old structure. As agreed in the collaboration agreement, the entire basement of the said property had fallen to the share of the plaintiff No.2 and entire ground floor, first floor, second floor and third floor with terrace along with stilt area for car parking along with 22.5% indivisible/undivided and impartibly freehold ownership rights in the land underneath had fallen to the share of the plaintiff No.1.
4. In the year 2017, the defendant No.1 who is known to plaintiff No.1, along with defendant No.2 visited the office of the plaintiff No.1 and showed his willingness and desire to purchase the entire basement and entire ground floor of the freehold property bearing No.B-8, Green Park Main, New Delhi – 110016. After due consideration of the offer made by the defendant No.2, the plaintiffs agreed to sell the property to defendant No.2 for a total consideration of Rs. 10 Crores and the defendant No.1 being the intermediary between the plaintiffs and defendant No.2, facilitated the sale and purchase of the property of the plaintiffs.
5. It is the case of the plaintiffs that during the finalisation of the transaction it was represented by defendant Nos.1 and 2 that defendant No.1 holds a sum of Rs.4 Crores of the defendant No.2, assured and represented that out of the total consideration of Rs.10 Crores, Rs.6 Crores shall be paid by defendant No.2 and the remaining balance of the total consideration for the purchase of the said property amounting to Rs.4 Crores shall be paid by the defendant No.1 to the plaintiffs. Accordingly, a Memorandum of Understanding (‘MoU’, for short) was entered between the plaintiffs and the defendant No.1 on September 14, 2017.
6. It is the case of the pla
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