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IN THE HIGH COURT OF DELHI AT NEW DELHI
Vibhu Bakhru, Amit Mahajan, JJ.
Brijesh Kumar Agarwal & Ors. – Appellants
Versus
IFCI Factors Limited & Anr. – Respondents
RFA(OS)(COMM) 10 of 2020
Decided On : 07-03-2023
Commercial Courts Act - Summary Judgment - Order XIII-A of the CPC
Fact of the Case:
The suit filed by IFL under Order XXXVII of the CPC was decreed against the appellants. The appellants raised several defenses, including the lack of registration of IFL as a factor under the Factoring Regulation Act, 2011, and the need for IFL to prove the claimed amount. The court proceeded to render a summary judgment without completing the admission and denial of documents and without striking the issues.
Finding of the Court:
The court found that the summary judgment was passed contrary to the procedure established by law and that there were disputes of facts in the suit. It held that the suit could not have been disposed of by a summary judgment under Order XIII-A of the CPC and set aside the impugned judgment, restoring the suit to the stage as obtaining on 05.09.2019.
Issues: The main issue was whether the court could proceed to render a summary judgment in a matter involving a commercial dispute. The court also considered the lack of completion of admission and denial of documents and the absence of striking the issues before rendering the summary judgment.
Ratio Decidendi: The court held that the suit could not have been disposed of by a summary judgment under Order XIII-A of the CPC and that the provisions of Order XIII-A would override any conflicting provisions of the Delhi High Court (Original Side) Rules, 2018. It emphasized the need to follow the elaborate procedure provided under Order XIII-A of the CPC for rendering a summary judgment.
Final Decision: The impugned judgment was set aside, and the suit was restored to the stage as obtaining on 05.09.2019, with directions for further proceedings before the concerned Commercial Court on 27.03.2023. The appeal was allowed in the aforesaid terms.
JUDGMENT
Vibhu Bakhru, J. The appellants have filed the present intra-court appeal under Section 13 of the Commercial Courts Act, 2015 impugning a judgment dated 05.09.2019 (hereafter `the impugned judgment') passed by the learned Single Judge, whereby the suit filed by respondent no.1 (hereafter `IFL'), being CS(COMM) 1265/2016, was decreed against the appellants, who were arrayed as defendant nos. 2 to 5 in the suit.
2. IFL (IFCI Factors Limited) had filed the aforementioned suit [CS(COMM) 1265/2016] as a summary suit under Order XXXVII of the Code of Civil Procedure, 1908 (hereafter `the CPC'), inter alia, claiming a decree for a sum of Rs.4,78,37,930.22/- (Four Crore Seventy Eight Lakh Thirty Seven Thousand Nine Hundred Thirty Rupees And Twenty Two Paise Only) along with pendente lite and future interest at the rate of 13.75% per annum as well as costs towards the counsel's fee assessed at Rs.1,50,000 (One Lakh Fifty Thousand Rupees Only), against the appellants and respondent no.2, who were arrayed as defendants in the suit.
3. In its plaint, IFL claimed that it is a Government of India Undertaking and a Non-Banking Finance Company incorporated under the Companies Act, 1956. IFL claimed that it is, inter alia, engaged in the business of providing financial facilities including factoring of receivables as defined under Section 2(p) of the Factoring Regulation Act, 2011. Respondent no.2 (Shyam Forgings Private Limited - arrayed as defendant no.1 in the suit) was, at the material time, engaged in the business of steel processing, forging and rolling. It had approached IFL seeking Domestic Factoring Facilities. IFL entered into an "Agreement for the Factoring of Receivables" dated 07.05.2010 (hereafter `Factoring Agreement') with respondent no.2, whereby it granted facility of domestic factoring of gross worth of Rs.3,00,00,000/- (Rupees Three Crores Only) at a discount charge of 13.75% per annum.
4. IFL claims that separate Deeds of Guarantee dated 07.05.2010 were executed by the appellants (defendant nos.2 to 5) in favour of IFL for securing the said facilities. In terms of the Factoring Agreement, IFL had disbursed 80% of the invoices raised by respondent no.2 in respect of three entities - (a) Kunj Forging Pvt. Ltd., (b) R.K.G. International Pvt. Ltd., and (c) Supreme Electrocast Pvt. Ltd. - aggregating Rs.2,77,99,639.12/- (Rupees Two Crores Seventy Seven Lacs Ninety Nine Thousand Six Hundred Thirty Nine and Twelve Paise only). IFL claimed that it was entitled to recover a sum of Rs.4,78,37,930.22/- (Rupees Four Crores Seventy Eight Lacs Thirty Seven Thousand Nine Hundred Thirty and Twenty Two Paise Only) including service charges and administrative charges. In addition, IFL claimed that the defendants were also liable to pay further pendente lite and future interest at the rate of 13.75%.
5. IFL stated that it had issued a notice dated 07.04.2016 to respondent no.2 calling upon it to pay the amount of Rs.4,49,53,724.79/. It had, thereafter, by a notice dated 11.04.2016, invoked the guarantees furnished by the appellants and called upon them to pay the aforesaid amount of Rs.4,49,53,724.79/- within a period of seven days of the receipt of the notice. IFL claimed that despite service of notices, the defendants did not pay the amount as demanded.
6. Insofar as respondent no.2 is concerned, it was disclosed that a petition (being CO.PET.487/2018 under Section 433 of the Companies Act, 1956) was filed by the Small Industries Development Bank of India seeking winding up of the respondent no.2 company and the Company Court had passed an order dated 26.02.2016, appointing the Official Liquidator as a Provisional Liquidator in respect of respondent no.2 company.
7. As stated above, IFL had filed the suit as a summary suit under Order XXXVII of the CPC. The appellants filed an application seeking leave to defend raising several defenses. First, the appellants claimed that IFL could not be treated as a factor as it had neither
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