2002 (10) TMI 807 - HC - Indian Laws

Issues Involved:

1. Recovery of principal and interest.
2. Validity and effect of balance confirmation letters.
3. Defendant's denial of signing the balance confirmation letters.
4. Defendant's claim of mutual accommodation arrangement.
5. Payment of interest and the rate applicable.
6. Whether the suit is maintainable as a Summary Suit.
7. Whether the balance confirmation letters imply a promise to pay interest.

Detailed Analysis:

1. Recovery of Principal and Interest:
The plaintiff filed a Summary Suit under Order XXXVII Rule 2 of the Code of Civil Procedure, 1908, to recover Rs. 5,04,26,250/- towards principal and interest up to 15th July 2000, with further interest at 18% per annum on Rs. 3,57,00,000/- from 16th July 2000 till payment. The plaintiff claimed that between 24.2.1995 and 23.7.1997, it placed deposits aggregating to Rs. 4,79,00,000/- with the defendant, who agreed to repay with interest initially at 16% per annum and later at 18% per annum from 1.1.1997. The defendant repaid Rs. 1,22,00,000/- towards the principal, leaving a balance of Rs. 3,57,00,000/-. The defendant paid interest until 31.3.1998 but made no payments thereafter.

2. Validity and Effect of Balance Confirmation Letters:
The plaintiff relied on balance confirmation letters signed by the defendant to substantiate its claim. The plaintiff sent a Statement of Account for the period 1st April 1997 to 31st March 1998, which the defendant's Accountant confirmed. The defendant also sought the plaintiff's confirmation of its account on 31.3.1999, which the plaintiff did. These letters confirmed the principal amount due, the interest paid, and the closing balance as Rs. 3,57,00,000/-.

3. Defendant's Denial of Signing the Balance Confirmation Letters:
The defendant denied that its Accountant signed the plaintiff's Ledger Account dated 8th April 1998, claiming the signatory was not their Accountant and thus not binding. However, this denial was found to be false and of no legal consequence as the defendant had previously accepted the documents.

4. Defendant's Claim of Mutual Accommodation Arrangement:
The defendant contended that the amounts were part of a mutual accommodation/cash advance arrangement between two business groups, with no independent transactions between the plaintiff and defendant. The defendant claimed no interest was payable under this arrangement. However, the court found no evidence supporting this claim, and the balance confirmation letters and correspondence indicated an agreement to pay interest.

5. Payment of Interest and the Rate Applicable:
The balance confirmation letters and the defendant's own correspondence indicated that interest was agreed to be paid at 18% per annum. The defendant's argument that no interest was payable was contradicted by its own admissions and the absence of any such claim in prior correspondence. The court found that interest was indeed agreed upon and paid at 18% per annum.

6. Whether the Suit is Maintainable as a Summary Suit:
The court held that the suit based on the balance confirmation letters was maintainable as a Summary Suit. The balance confirmation letters were deemed to imply a promise to pay, thus providing a cause of action for the suit. The court referred to precedents where unconditional acknowledgements of debt were held to imply a promise to pay, making the suit maintainable under Order XXXVII Rule 2.

7. Whether the Balance Confirmation Letters Imply a Promise to Pay Interest:
The court concluded that the balance confirmation letters, which acknowledged the principal amount and the payment of interest at 18% per annum, implied a promise to continue paying interest at that rate. The court rejected the defendant's argument that the letters did not stipulate future interest, holding that the implied promise included the payment of interest as previously agreed.

Conclusion:
The defendant was granted conditional leave to defend the suit on depositing Rs. 5,04,26,250/- or furnishing an unconditional bank guarantee for the same amount with interest at 10% per annum. The suit was transferred to the list of commercial causes, with further procedural directions given. The court dismissed the defendant's various defenses and upheld the plaintiff's claim based on the balance confirmation letters.

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