2022 (9) TMI 1351 - HC - Companies Law

Suit for recovery alongwith interest - Order XXXVII of Code of Civil Procedure, 1908 - whether the averments in the pleadings constitute an acknowledgment of debt to the extent of the amount, the defendant agreed to refund? - HELD THAT - In the light of the exposition of the legal connotation of the terms debt and acknowledgment the pleadings extracted it satisfies the requirement of both debt and acknowledgment to the extent of the amount, which the defendant agreed to refund. The submission on behalf of the defendant that, in the absence of a written contract to refund the amount, the tenability of the suit itself is suspect, does not merit acceptance unreservedly, if the afore-extracted pleadings are construed in the light of the aforesaid enunciation of law. In my view, the acknowledgment of liability to pay the amount to the extent agreed to by the defendant itself furnishes a foundation for institution of Summary Suit. The audited balance-sheet of the defendant for the year ending 31st March, 2020, under the caption other current liabilities includes a sum of Rs.59,33,517/-, payable towards the advances from customers in E wing. This, according to the plaintiffs, is the very amount which is payable by the defendant to the plaintiffs, after deducting the amount which defendant claims it is entitled to deduct. There is material to indicate that apart from the plaintiffs, the transactions of the rest of the persons, who had booked the flats in E wing, did not materialise. Prima facie, the claim of the plaintiffs that the said amount represents the consideration parted with by the plaintiffs can not be said to be without substance. The audited balance-sheet may furnish a sustainable ground for institution of a summary Suit on the premise that the statement therein constitutes an acknowledgment of liability. The plaintiffs may be termed as investors , if not allotties . Nonetheless, the facts remain that the plaintiffs had parted with a sumptuous amount towards the consideration, the project has not come up and the defendant agreed to refund the consideration after deducting a portion of the said amount on account of cancellation and also the amount of service tax, albeit, allegedly, at the instance of plaintiffs - The defendant is granted leave to defend the suit on the condition of deposit of a sum of Rs.5,107,767/within a period of six weeks from the date of this order. Application disposed off.

Issues Involved:
1. Maintainability of the suit under Order XXXVII of the Code of Civil Procedure, 1908.
2. Alleged acknowledgment of liability by the defendant.
3. Discrepancy between the claims made before NCLT and in the present suit.
4. Entitlement to refund and interest claimed by the plaintiffs.
5. Conditional leave to defend the suit.

Detailed Analysis:

1. Maintainability of the Suit:
The defendant contended that the suit is not maintainable under Order XXXVII of the Code of Civil Procedure, 1908, as it is not based on a written contract for refund or payment of interest. The defendant argued that the plaintiffs selectively interpreted the affidavits filed before NCLT, which allegedly acknowledged liability, warranting an unconditional leave to defend the suit.

2. Alleged Acknowledgment of Liability:
The plaintiffs argued that the defendant's affidavits before NCLT and the audited balance-sheet constituted clear admissions of liability. The defendant admitted to refunding the amount after deducting 25% and service tax, which was evidenced by the repayment of Rs.9,50,000/- through two cheques. The court highlighted that admissions in pleadings stand on a higher pedestal and can form the foundation of rights and liabilities.

3. Discrepancy in Claims:
The defendant pointed out that the plaintiffs' claims before NCLT were based on a "work contract," while the current suit was based on a sale of flats. This inconsistency, according to the defendant, warranted a trial. The court noted that while the plaintiffs' stand appeared materially variant, the pleadings as a whole indicated an acknowledgment of liability by the defendant.

4. Entitlement to Refund and Interest:
The plaintiffs claimed a full refund of the amount paid along with interest. The defendant contended that there was no agreement to pay interest and that the refund was conditional upon the plaintiffs executing a letter of cancellation. The court recognized that the entitlement to a full refund and interest raised triable issues, but the acknowledgment of liability to refund Rs.5,107,767/- was clear from the defendant's own admissions.

5. Conditional Leave to Defend:
Given the acknowledgment of liability, the court granted the defendant leave to defend the suit on the condition of depositing Rs.5,107,767/- within six weeks. If the deposit was made, the suit would proceed to trial, and the defendant would file a written statement. Failure to deposit would entitle the plaintiffs to apply for an ex-parte decree.

Conclusion:
The court balanced the plaintiffs' claims and the defendant's defenses, ultimately granting conditional leave to defend the suit based on the acknowledged liability. The order emphasized the importance of admissions in pleadings and the sanctity of audited balance-sheets in establishing liability.

← Previous Next →