2018 (10) TMI 271 - HC - Indian Laws

Recovery of outstanding amount - Mis-utilization of investment made in a company - It is the Plaintiff s case that the funds which were invested by the Plaintiff, were misused by the said persons for their personal gains and benefits - revival scheme - Section 138 of the Negotiable Instruments Act, 1881. Held that - The three agreements clearly show that firstly the main agreement by which the investment was made by the Plaintiff was made in a company where not only Dr. Niaz Ahmed, the Defendant, but also his wife was one of the promoters. The company had acknowledged by the said agreement, the receipt of the sum of ₹ 3.24 crores. This investment was almost 11 years ago i.e. on 29th October, 2007. Thereafter, the two MOUs have been executed which are of 12th April, 2010 and 23rd August, 2012. The transaction has been a long duration transaction and not an overnight transaction. The stand of the Defendant that there was any threat is belied by the fact that these agreements span over seven to eight years. Further the fact that some payments under the 2010 agreement as also under the 2012 agreement having been made, the allegation of coercion is not made out. Moreover, the Defendant himself looked for and arranged an overseas buyer, which also did not work out. These facts go to prove that there was no coercion or duress or pressure. Proceedings before the criminal court under the Negotiable Instruments Act are tested under a different yardstick than a suit under Order XXXVII - In a suit under Order XXXVII all that the Court needs to see is as to whether the Defendant has a triable defence. In the present case, the agreements themselves having been admitted and some payments under the said agreements/settlement have already been made, a mere allegation of coercion or threat is not sufficient to raise a triable defence. The suit is liable to be decreed as there is no triable defence - The suit is decreed for a sum of ₹ 1,74,00,000/- towards the principal amount.

Summary

Issues Involved:
1. Recovery of Investment and Interest
2. Allegations of Misuse of Funds and Mismanagement
3. Validity of Agreements and Memoranda of Understanding (MOUs)
4. Allegations of Coercion, Duress, and Misrepresentation
5. Issuance and Dishonour of Cheques
6. Legal Proceedings under Section 138 of the Negotiable Instruments Act
7. Determination of Triable Defence

Detailed Analysis:

1. Recovery of Investment and Interest:
The Plaintiff filed a suit under Order XXXVII CPC seeking recovery of ?3,95,85,000/-, which includes a principal sum of ?1,74,00,000/- along with interest at 18% per annum. The Plaintiff had invested ?3,24,54,000/- in M/s. Integrity Geosciences Pvt. Ltd. as per an agreement dated 29th October 2007. The Plaintiff alleged that the funds were misused and demanded a refund of the investment with interest.

2. Allegations of Misuse of Funds and Mismanagement:
The Plaintiff claimed that the invested funds were misused for personal gains by the Defendants, and there was gross mismanagement of the company. The Plaintiff’s nominee was not appointed as a Director, leading to serious concerns and subsequent legal notices demanding a refund.

3. Validity of Agreements and Memoranda of Understanding (MOUs):
Several agreements and MOUs were entered into between the parties to address the issues and facilitate the refund. The agreements dated 16th February 2009, 12th April 2010, 31st March 2011, and the Memorandum of Settlement dated 23rd August 2012 were pivotal. The Defendants issued cheques to the Plaintiff under these agreements, but most cheques were dishonoured.

4. Allegations of Coercion, Duress, and Misrepresentation:
The Defendant contested the suit, claiming that the agreements were signed under coercion, duress, and misrepresentation due to constant threats from the Plaintiff. The Defendant argued that the agreements were void under Sections 10 and 23 of the Indian Contract Act and lacked consideration, making them invalid under Section 25 of the Act.

5. Issuance and Dishonour of Cheques:
The Defendant issued several cheques totaling ?3,24,54,000/-, but only the first four cheques amounting to ?1 crore were honoured. Subsequent cheques were dishonoured due to insufficient funds, leading to further legal notices and another MOU on 31st March 2011, where the Defendant issued 10 more cheques, most of which were also dishonoured.

6. Legal Proceedings under Section 138 of the Negotiable Instruments Act:
The Plaintiff initiated proceedings under Section 138 of the Negotiable Instruments Act due to the dishonoured cheques. During the pendency of these proceedings, another settlement was reached on 23rd August 2012, where the Defendant agreed to repay the outstanding amount in installments, but defaulted again.

7. Determination of Triable Defence:
The Defendant’s primary defence was that the agreements were signed under coercion and duress. However, the court noted that the agreements spanned over several years, and payments were made under these agreements, indicating a lack of coercion. The court referred to the Supreme Court’s ruling in IDBI Trusteeship Services Ltd. v. Hubtown Ltd., emphasizing that mere allegations of coercion are insufficient to establish a triable defence in a summary suit.

Judgment:
The court decreed the suit in favour of the Plaintiff for a sum of ?1,74,00,000/- towards the principal amount. Interest was directed to be paid at 6% per annum from 11th January 2013 to the date of payment, with an increased rate of 8% per annum if payment was not made within eight weeks. The Plaintiff was also directed to deposit the share certificates of M/s. Integrity Geosciences in court within four weeks. The case was listed for reviewing compliance on 3rd October 2018.