2017 (4) TMI 1649 - HC - Indian Laws

Joint and several recovery of Rs. 5,32,50,000/- from defendants - time limitation - Legitimacy of the claim against defendants No. 1 to 3 - HELD THAT - The judgment of the single Judge of this Court in Zile Singh 2007 (11) TMI 714 - DELHI HIGH COURT merely follows (i) BENGAL NAGPUR RAILWAY COMPANY VERSUS RUTTANJI RAMJI 1937 (12) TMI 11 - BOMBAY HIGH COURT by observing that the provisions contained in the Interest Act, 1978 are almost similar to the provisions contained in the Interest Act, 1839; and, (ii) judgment of the Division Bench of the Madras High Court in Batliboi Co. Ltd. v. Beama Mfg. Pvt. Ltd. 2005 (10) TMI 618 - MADRAS HIGH COURT . Both the said judgments, on interpretation of the provisions of the respective Interest Act, held pre-suit interest to be payable thereunder only if conditions of the statute were satisfied. The Privy Council further held that interest cannot be recovered as damages under Section 73 of the Indian Contract Act, 1872. In the facts and circumstances of the present case, denial of pre-suit interest to the plaintiff appears to be inequitable. It cannot be lost sight of that the defendant, inspite of showing the sum of Rs. 50 lakhs as payable to the plaintiff in the balance sheet, took a false stand before the Court. A Division Bench of this Court in Bank of Maharashtra v. G.K. Enterprises 2005 (5) TMI 699 - DELHI HIGH COURT to have, relying on SECRETARY, IRRIGATION DEPARTMENT, GOVT. OF ORISSA VERSUS GC. ROY 1991 (12) TMI 268 - SUPREME COURT held that interest is recoverable both at law and in equity on money obtained by fraud or conversion and retained by the defendant and that it is always open to the Court, as the Interest Act is not exhaustive of all claims of interest, to appreciate the facts of each case and then to grant interest in cases not coming strictly within the purview of the said Act, on principles of justice, equity and good conscience. The said binding judgment unfortunately remained unnoticed in Zile Singh 2007 (11) TMI 714 - DELHI HIGH COURT As far as the rate of interest, pre-suit, pendente lite and future is concerned, the suit is found to have been instituted first on 27th April, 2016. In the facts and circumstances, it is deemed appropriate to award interest for a period of three years prior to the institution of suit @ 9% per annum, interest pendente lite and future, on the sum of Rs. 50 lakhs @ 12% per annum - a decree is passed in favour of the plaintiff and against the defendant Swift Initiative Pvt. Ltd. for recovery of Rs. 50 lakhs with interest @ 9% per annum with effect from 1st November, 2013 till institution of suit and interest @12% per annum with effect from the date of institution of the suit i.e. 27th April, 2016 till the date of realisation. Application disposed off.

Summary

Issues Involved:
1. Recovery of Rs. 5,32,50,000/- from defendants.
2. Legitimacy of the claim against defendants No. 1 to 3.
3. Timeliness of the claim for Rs. 50 lakhs.
4. Entitlement to pre-suit and post-suit interest.
5. Refund of court fees.

Detailed Analysis:

1. Recovery of Rs. 5,32,50,000/- from Defendants:
The plaintiff sought recovery of Rs. 5,32,50,000/- from the defendants, comprising a principal sum of Rs. 3.75 crores and interest. The plaintiff claimed that the defendants, known to him for a long time, requested a friendly loan of Rs. 5 crores in April 2013, promising to repay it within 12 to 18 months with 24% interest per annum and offering a 40% share in defendant No. 4 company. The plaintiff provided Rs. 3.75 crores instead, paid via cheques and instalments, but the defendants neither issued the shares nor repaid the loan or interest.

2. Legitimacy of the Claim Against Defendants No. 1 to 3:
On 31st May 2016, the court found defendants No. 1 to 3 unnecessary for the suit and struck off their names, making defendant No. 4 the sole defendant. The plaintiff accepted this order, which attained finality.

3. Timeliness of the Claim for Rs. 50 Lakhs:
The sole defendant, Swift Initiative Pvt. Ltd., denied the claim and argued that the recovery of Rs. 50 lakhs paid by cheques was barred by time. However, during the proceedings, the Director of the defendant company admitted receiving Rs. 50 lakhs by cheques as a friendly loan, shown as due in the company's balance sheet for 2013-14. The defendant's counsel eventually did not press the plea of the claim being time-barred.

4. Entitlement to Pre-Suit and Post-Suit Interest:
The court deliberated on the power to award pre-suit interest under Section 3 of the Interest Act, 1978, which allows interest if the debt is payable by a written instrument or if a written notice was given. The defendant argued no interest was agreed upon, and no written notice was provided. The plaintiff's counsel cited Aditya Mass Communications (P) Ltd. v. A.P.S.R.T.C., where pre-suit interest was awarded based on the facts of the case. The court acknowledged that denying pre-suit interest would be inequitable, as the defendant falsely denied the debt. Citing past judgments, the court held that interest could be awarded on principles of justice, equity, and good conscience, even if not strictly under the Interest Act. Consequently, the court awarded pre-suit interest at 9% per annum for three years prior to the suit and post-suit interest at 12% per annum.

5. Refund of Court Fees:
The plaintiff, while not pressing for the remaining reliefs, sought a pro-rata refund of court fees. The court ordered the refund of proportionate court fees in excess of the claim for Rs. 50 lakhs with interest at 18% per annum from 1st November 2013 till the suit's institution. The plaintiff was also entitled to the costs of the suit.

Conclusion:
The court decreed in favor of the plaintiff for recovery of Rs. 50 lakhs with interest at 9% per annum from 1st November 2013 till the suit's institution and 12% per annum from the suit's institution till realization. The plaintiff was also awarded costs, and a proportionate refund of court fees was ordered.