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2023 Supreme(Online)(Bom) 1824
HIGH COURT OF BOMBAY
ANIL S. KILOR, J
AMA Industries Pvt. Ltd. – Appellant
Versus
Akhtar Parvez Maimoon – Respondent
WRIT PETITION NO. 5224 OF 2021
For the Appellants/Petitioners: Shri M.G.Bhangde, Shri A.M.Quazi
For the Respondents: Shri C.S.Kaptan, Shri Masood Sharif, Shri Adil Mirza
A summary suit requires a written contract or an explicit acknowledgment of liability, and informal accounting entries do not satisfy these prerequisites.
Headnote:(A) Indian Contract Act, 1872 - Section 10 - Code of Civil Procedure (CPC) - Order XXXVII - Summary Suit - The court quashed the order imposing a 25% condition for leave to defend, deciding that the suit did not meet the requirements of a summary suit under Order XXXVII, as no written contract existed nor evidence of acknowledgment of liability. (Paras 22-49)
(B) Summary Procedure - The court emphasized that a summary suit must be based on a written contract or sufficient acknowledgment of a debt or liquidated demand. (Paras 8-10, 22)
Facts of the case:
The plaintiffs, brothers and directors of a private company, claimed the defendant also, their brother, owed them a debt based on informal entries in company accounts while the defendant argued there was no written agreement supporting the claim.
Findings of Court:
The court found no basis for maintaining the summary suit as the entries did not amount to a written contract or acknowledgment of debt.
Issues: Whether the case was maintainable as a summary suit under Order XXXVII, and whether the entries in the balance sheet constituted a written contract.
Ratio Decidendi: The court articulated that a summary suit requires a definitive written contract or an explicit acknowledgment of liability and that informal entries do not suffice.
Result: The writ petition is allowed; the summary suit is directed to proceed as an ordinary suit without the imposed condition.
| Table of Content |
|---|
| 1. identification of parties involved and context of dispute. (Para 1 , 2 , 3) |
| 2. loan agreements and financial arrangements between parties. (Para 4 , 5) |
| 3. application for leave to defend and its implications. (Para 6 , 7) |
| 4. legal standards for summary suits under order xxxvii of cpc. (Para 8 , 9) |
| 5. arguments regarding written contracts and acknowledgment of debts. (Para 10 , 11) |
| 6. interpretation of what constitutes a written contract in civil law. (Para 22 , 23 , 24) |
| 7. criteria for maintainability of a summary suit based on acknowledged debts. (Para 25 , 26) |
| 8. final observations on the absence of written contracts and acknowledgment. (Para 44 , 46 , 48) |
| 9. conclusion and final order regarding the maintainability of the suit. (Para 49 , 50) |
1. Heard.
2. RULE. Rule made returnable forthwith. Heard finally by consent of the learned counsel for the parties.
3. The petitioner Nos.1 and 2 and the respondent are the real brothers. The respondent was a Director of the Petitioner No.1- Company. In a summary civil suit filed by the respondent for recovery of amount of Rs.3,80,99,758/-, the petitioners filed an application for grant of leave to defend the suit which came to be allowed subject to 25% payment of the suit claim vide order dated 27th October, 2021. The said order is under challenge in this writ petition to the extent imposition of condition of payment of 25% amount while granting leave to raise defence.
4. It is the case of the respondent that the petitioner No.1 company was in need of money for conducting the business and on request by the petitioner Nos. 2 and 3 the respondent had from time to time provided loan to the petitioner No.1 as per the requirement of the company since past several years. It is the further case of the respondent/ plaintiff that the amount advanced/paid by him was in regular course of the business of the company as much as there was no lending of money. It is contended that the defendants/petitioners used to annually provide the respondent the statement of account of the company for enabling the plaintiff to file his income tax returns and accordingly the amounts shown in the accounts of the petitioner No.1 company as unsecured loan from the respondent used to reflect in the income tax returns of the respondent/plaintiff. However, the petitioners have stopped the said practice giving the copy of balance sheet since 2019 though repeatedly demanded by the respondent. The respondent further states that as per records of petitioner No.1 company an amount of Rs.3,07,25,612.00 belonging to the respondent was reflected in the accounts of the company. It is contended that mentioning of the amount as outstanding amount in the books of account is an admission of the liability and amounts to balance confirmation and promise to pay the amount by the defendants to the plaintiff under the written contract. Therefore, the plaintiff filed a summary suit under Order XXXVII of Code of Civil Procedure (CPC) for recovery of amount of Rs.3,07,25,612.00 along with interest thereon from 01.04.2019 till realization.
5. The petitioners/defendants filed an application for grant of leave to defend the suit. In the said application, a question as regards maintainability of the summary suit was raised along with the defence. It is the case of the petitioners that the entry shown in the accounts in the name of the respondent was shown for fiscal and income tax purposes and thus, the said entries shown have been from the amount as a contribution from the family income and not out of any individual income as such there is absolutely no liability.
6. The said application was allowed subject to payment of 25% of the suit claim. Hence, this petition.
7. I have heard the learned counsel for the respective parties.
8. Shri Bhangde, learned Senior Advocate appearing for the petitioner argues that, to maintain a summary suit under Order XXXVII of CPC the suit must be based on Bills of Exchange, Hundies or Promisso
