Prash sj-520.09\ IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION SUMMONS FOR JUDGMENT NO. 520 OF 2009 IN SUMMARY SUIT NO. 2600 OF 2009 Satyam Investment and Finance Corporation. .. Plaintiffs Vs Dr. Shwetank Jain & Others. .. Defendants -- Shri S.A. Bhagwat i/by Nagi & Associates for the Plaintiffs. Shri Pankaj Shah for Defendant Nos. 2 to 5. Ms Sheetal Chhabria for Defendant No.1. -- CORAM : A.S. OKA, J DATE ON WHICH SUBMISSIONS WERE HEARD: 31ST JANUARY, 2011 DATE ON WHICH JUDGMENT IS PRONOUNCED : 7TH EBRUARY, 2011 JUDGMENT : . The Plaintiffs have filed the present suit for recovery of a sum of Rs.94,91,915/- from the Defendants with interest on the principal 1 Prash sj-520.09\ amount of Rs.81,36,638/- at the rate of 18% per annum from the date of filing of the suit. 2. According to the case of the Plaintiffs, the said firm is holding a money lending license. It is stated that the Defendants are the borrowers of the Plaintiffs. It is stated that the amounts were advanced by the Plaintiffs to the Defendants, the details of which have been set out in Paragraph 3 of the Plaint. It is alleged that various documents were executed by the Defendants for securing loan. 3. The case made out in the plaint is that the Defendants had issued various post dated cheques to the Plaintiffs towards repayment of loan. The cheques were dishonoured and, therefore, various complaints have been filed by the Plaintiffs under Section 138 the Negotiable Instruments Act. During the pendency of the said complaints, the Defendants showed willingness to settle the dispute and accordingly executed a Memorandum of Understanding and undertaking dated 26th December, 2005. As per the said Memorandum of Understanding, the Defendants agreed and undertook to pay a sum of Rs.75 lacs to the Plaintiffs in full and final settlement of the claims of the Plaintiffs. The said amount was to be paid on or before 31st March, 2006. A schedule was incorporated in the said Memorandum of Understanding which 2 Prash sj-520.09\ provided that on receipt of a particular amount, a particular complaint shall be withdrawn by the Plaintiffs. It is stated that acting upon the said Memorandum of Understanding, two cases were withdrawn by the Plaintiffs including a case against the 2nd Defendant. It is stated that as per the Memorandum of Understanding and undertaking, the Defendants paid a sum of Rs.13,63,640/- in cash to the Plaintiffs. The 1st Defendant for himself and on behalf of the other Defendants signed the writing dated 1st July, 2006 by which liability to pay a sum of Rs.61,36,360/- was accepted in writing. It was stated that the amount will be paid on or about 31st July, 2006. The writing was addressed to the Constituted Attorney of the Plaintiffs. The case made out in the plaint is that the amount was not paid by the Defendants in terms of the said writing. 4. Learned counsel appearing for the Plaintiffs in support of the Summons for Judgement stated that execution of both the documents has not been disputed by the Defendants. He submitted that there is no basis for the defence that the writing was not to be acted upon. He submitted that as the writings have been admitted, there is no defence available to the Defendants. 5. The learned counsel appearing for the 1st Defendant submitted that a specific stand has been taken by the 1st Defendant that 3 Prash sj-520.09\ the Memorandum of Understanding was agreed not to be acted upon and it was to be treated as only a collateral security. It was submitted that even the writing dated 1st July, 1996 was also executed towards the collateral security. She pointed out that the averments made in the reply that the Defendants have already paid the entire amount by cash which was due to the Plaintiffs and nothing remains payable. It was submitted that even assuming that the Defendants have not paid the amount, at highest, the documents relied upon may amount to acknowledgement of debts. It was submitted that when the documents were executed, the claim of the Plaintiffs under the dishonoured cheques was already barred by limitation. It was submitted that in view of a decision of Allahabad High Court in the case of Firm Kamta Prasad Jagannath Prasad v. Gulzari Lal and Another [AIR 1955 Allahabad 41 (FB)], the acknowledgement will have the effect of extending the period of limitation provided the claim is not already barred. The learned counsel appearing for the Defendant Nos.2 to 5 submitted that the writings were not to be acted upon which were issued only by way of collateral security. He submitted that false complaints were filed under Section 138 of the Negotiable Instruments Act by the Plaintiffs just to pressurise the Defendants. He pointed out that in the Memorandum of Understanding, it is set out that a sum of Rs.8,13,638/- was received by the Plaintiffs and the said amount is not accounted for in the subsequent documents dated 1st July, 2006. 4 Prash sj-520.09\ 6. I have carefully considered the submissions. In Paragraph 6 of the Plaint, the Plaintiffs have specifically relied upon the Memorandum of Understanding dated 26th December, 2005 by which the Defendants agreed to pay a total amount of Rs.75,00,000/- to the Plaintiffs in full and final settlement of the claim of the Plaintiffs on or before 31st March, 2006. In the said paragraph, it is also averred that on the basis of the Memorandum of Understanding, the Defendants paid a sum of Rs.13,63,640/- in cash. As regards the writing dated 1st July, 2006, the Plaintiffs have stated thus:- “6. …..The Plaintiffs further submits that pursuant to the said M.O.U. the Defendants jointly and severally in order to comply their part as per the above referred M.O.U. and undertaking have paid a sum of Rs. 13,63,640/- in cash to the Plaintiffs. The Plaintiffs submit that they have accepted the said amount. The Plaintiffs submit that after acceptance of the said amount, the Defendants have shown their readiness and willingness to pay balance amount of Rs.61,36,360/- to the Plaintiffs and to that effect the Defendant No.1 have signed and executed a Writing dated 1 st July, 2006 for self and on behalf of other defendants Nos. 2 to 5. The Plaintiffs state that in the said Writing dated 1 st July, 2006, the Defendant No.1 interealia admits and undertakes that the balance amount of Rs.61,36,360/- will be paid to the Plaintiffs on or about 31st July, 2006. The Plaintiffs state that the said writing has been signed and executed by the Defendant No.1 dated 1st July, 2006. The Plaintiffs state that copy of the said Writing dated 1st July, 2006 has been given and signed by the Defendant No.1 and same has been addressed to 5 Prash sj-520.09\ the C.A. of the Plaintiffs. Copy of the said Writing is hereto annexed and marked as Exhibit ”B”. The Plaintiffs state that the contents of the said writing are truly, completely and effectively binding upon the Defendant Nos.1 to 5 to the fullest extent”. ( Underline supplied) 7. The 1st Defendant has filed a reply to the summons for judgment. In paragraph 8 of the said affidavit in reply, the 1st Defendant has dealt with the contents of paragraph 6 of the plaint. The relevant part of paragraph 8 of the said affidavit in reply reads thus:- “8. .....I say that though it is true that the parties had executed a Memorandum of Understanding dated 26-12-205, it was orally agreed between the Plaintiff and the Defendants that the same was not to be acted upon and the same would be treated as further collateral security only. I say that the said Memorandum of Understanding was not to be acted upon is clear from the fact that the Defendants had paid an amount of Rs.13,63,640/- in cash to the Plaintiff and the Plaintiff accepted the said amount though paid in cash. I say that the Defendants had paid the various amounts to the Plaintiff and the Plaintiff accepted the same towars the balance amount of Rs.61,36,360/-. I say that the writing dated 01-07-2006 was also executed towards collateral security at the request of the Plaintiff.” ( Underline supplied ) 6 Prash sj-520.09\ 8. The 3rd Defendant has filed an affidavit in reply for herself and on behalf of 2nd, 4th and 5th Defendants. In her affidavit, paragraph 11 deals with paragraph 6 of the plaint. The averments in the said paragraph are almost identical to the affidavit of the 1st Defendant. There is no specific or even a general denial of the fact that the writing dated 1st July, 2006 was executed by the 1st Defendant for himself and on behalf of Defendant Nos. 2 to 5. 9. Thus, the writing dated 1st July, 2006 will have to be treated as the writing executed by the 1st Defendant for himself and on behalf of the other Defendants and, therefore, the said writing will bind for all the Defendants. 10. The Memorandum of Understanding relied upon by the Plaintiffs incorporates a clear agreement that the Defendants will pay a sum of Rs.75,00,000/- to the Plaintiffs on or before 31st March, 2006. It is not merely an acknowledgement of the debts payable under the dishonoured cheques but it is an agreement to pay the sum of Rs. 75,00,000/- to the Plaintiffs. If the Memorandum of Understanding is read as a whole, then it is clear that the reference to the payment of Rs. 8,13,638/- is a reference to the amount paid prior to the said agreement. The schedule incorporated in the Memorandum of Understanding 7 Prash sj-520.09\ regarding payment of amounts by instalments and withdrawal of the complaints by the Plaintiffs clearly shows that the Defendants agreed to pay the total amount of Rs.75,00,000/- after execution of the Memorandum of Understanding. The subsequent payment admittedly made in cash has been accounted for while incorporating the amount in the writing dated 1st July, 2006. The said writing is an acknowledgement of liability of making payment of Rs.61,36,360/- by 31st July, 2006. Though a vague contention has been raised that the entire amount has been paid in cash by the Defendants, there is not even a prima facie material produced by the Defendants to substantiate the said case. No particulars of the payments made, such as, the amounts and dates, have been incorporated in the reply filed by the Defendants. Therefore, the said defence has no merit. The defence of bar of limitation has no merit. 11. The criminal complaints are pending in the Court of Magistrate. Considering the facts of the case, though practically there is no defence, an opportunity deserves to be granted to the Defendants to contest the suit subject to deposit of the principal amount. 12. Hence, I pass the following order. 8 Prash sj-520.09\ (i) Upon deposit of the sum of Rs.61,36,360/- in this Court within a period of twelve weeks from today, the Defendants will be entitled to defend the suit. (ii) On deposit of the said amount, the suit shall be transferred to the list of commercial causes. Written Statement shall be filed within a period of 12 weeks from the date of deposit of the amount. (iii) It will be open for the Plaintiffs to withdraw the said amount subject to furnishing adequate security for the said amount to the satisfaction of the Registrar (O.S)/ Prothonotary and Senior Master of this Court. (iv) If the amount is not deposited within the stipulated time, it will be open for the Plaintiffs to apply for judgment against the Defendants. (v) Summons for Judgment is disposed of in above terms. ( A.S. OKA, J ) 9