1 IN THE HIGH COURT OF JDICATURE AT BOMBAY ORDINARY ORIGINA CIVIL JURISDICTION SUMMONS FOR JUDGMENT NO. 292 OF 2008 IN SUMMARY SUIT NO. 2281 OF 2008 Roosi K. Modi ......Plaintiff V. Rajkumar Bajaj .......Defendant Mr. Gauvrav Joshi a/w Mr. Simil Purohit and Mr. Rajeev Bhatia i/b Apex Consillis for the plaintiff Mr. S. Rajguru a/w J.B. Mishra and M.S. Bhardwaj for the defendant CORAM : A.A. SAYED, J. DATE : 7TH JULY, 2009. P.C. 1 The above Summons for Judgment is taken out by the plaintiff to enter a Judgment against the defendant for a sum of Rs. 20 lacs, alongwith interest. 2 The plaintiff is the proprietor of M/s Pushpam Enterprises and his principal business is exhibition and distribution of films and other co- related activities. The case of the plaintiff is that at the request of the defendant, who was undergoing severe financial crisis, he granted a friendly loan of an amount of Rs. 20 lacs to the defendant to be repaid @ 19% per annum. Initially, the amount of interest was paid from time to time. However, thereafter it was agreed by the plaintiff not to charge 2 interest on the request and representations of the defendant. The plaintiff has relied on confirmation letters written by the defendant, acknowledging the outstanding amount of liability. However, the defendant failed and neglected to repay the amount inspite of repeated reminders. Hence the plaintiff has filed the above suit and Summons for Judgment. 3 The defendant has filed an affidavit in reply opposing the Summons for Judgment. It is the case of the defendant in his reply that the dispute between the plaintiff and defendant was referred to and subject matter of Arbitration and therefore, this Court would have no jurisdiction to entertain and try the suit. It is further stated in the reply that the claim is time barred. The plaintiff has suppressed material facts in the plaint. It is further stated that the plaintiff was given sole and exclusive rights and license to supply for exhibition and screening Motion Pictures at New Empire Cinema, Mumbai by M/s Rumanek Estate Pvt. Ltd, in which the plaintiff is the Director. It is further stated that the plaintiff is partner of M/s Empire Estate alongwith Mrs. M.B. Cooper, who are the owners of New Empire Cinema and that the said company and partnership firm have common office and the plaintiff is in full and absolute control of their affairs. The said Company and partnership firm are interconnected and are the same for all practical purposes. The plaintiff has advanced that the amount of Rs. 20 lacs loan on interest to the defendant for renovation work to be carried out at New Empire Cinema and not as a friendly loan. It is further stated that M/s Empire Estate in which the plaintiff is one of the partners is liable to pay more than Rs. 20 lacs to the defendant and that a complaint for recovery of an amount of Rs. 16,86,837.66 was filed by the defendant before the Theatre Owners 3 Association, which has later merged with Cinematography Exhibitors Association of India, which jointly formed Cinema Owners and Exhibitors Association of India (COEAI). It is further stated that the plaintiff has acknowledged the dues of Rs. 20 lacs are payable by him before the Arbitrators. The defendant's complaint dated 17-8-2006 was lodged on 21-8-2006 before the Association against the said M/s Empire Estate and M/s Rumanek Estate Pvt. Ltd. The plaintiff had also filed a complaint before the Association for his alleged claim of Rs. 20 lacs against the defendant and has participated in the Arbitration proceedings. The defendant has relied upon the documents signed by the plaintiff as partner of M/s Empire Estate and Director of M/s Rumanek Estate Pvt. Ltd. It is also stated that the plaintiff had agreed to mutually settle the dispute before the Arbitration and therefore, the plaintiff and defendant agreed to withdraw their respective complaints before COEAI. The defendant has relied upon the letter dated 5/9/2007 to show that the complaint was withdrawn by the plaintiff. He further stated that in view of the settlement, the defendant also agreed to withdraw the complaint before the Arbitrator. Exh. D to the affidavit in reply of the defendant is a copy of letter dated 22-8-2008 written by COEAI, wherein the admission by the plaintiff of the agreement to adjust the claim is recorded. However as the plaintiff has, instead of settling the dispute amicably, mischievously filed the above suit, the defendant has revived the arbitration before COEAI. It is further averred that the present suit does not fall within the scope of Order 37 of CPC and that the defendant is entitled to leave to defend the suit. 4 A rejoinder has been filed by the plaintiff, wherein it is stated that 4 he has ceased to be a partner of the M/s Empire Estate from 20-04-2008. He has also ceased to be a director of Rumanek Estates Pvt. Ltd. from 12-05-2008. It is stated by the plaintiff that the loan amount was advanced by the plaintiff to the defendant in his individual capacity and the complaint of the defendant is directed against M/s. Empire Estate and Rumnek Pvt. Ltd., which are separate legal entities. It is further stated that there is no arbitration agreement and proceedings pending pertain to the subject matter of the present suit. 5 The learned Counsel for the plaintiff reiterated the facts and contentions raised in the plaintiff's pleadings and submitted that the loan was given by the plaintiff to the defendant in his individual capacity and the defendant has admitted his liability by way of confirmation letters. The learned Counsel further submitted that last confirmation was made on 18th October, 2006 and the suit was filed on 14-03-2008 therefore, the question of the suit being barred by limitation does not arise. The learned Counsel argued that the claim of the defendant was against separate legal entities and not against the plaintiff. The learned Counsel for the plaintiff submitted that there is no written Arbitration Agreement between the parties and that the case before the Association was only in the form of mediation and therefore, no cognizance can be taken of the complaint before the Association. The learned counsel for the plaintiff placed reliance upon the following cases :- (1) National Insurance Company Ltd. V. Padma Tobacco Company, reported in AIR 2005 AP 124 (2) Ramakrishna Theatre Ltd. V. General Investments and Commercial Corporation Ltd., reported in AIR 2003 Kant 502 (3) R. Kamalam V. The State of Tamil Nadu and another, 5 reported in AIR 1980 Mad. 86 (4) Mahesh Kumar V. Rajasthan State Road Transport Corporation, reported in AIR 2006 Raj. 56 (5) M/s Kohinoor Creations and others V. Syndicate Bank, reported in 2005(2 R.A.J. 622 (Del) (6) Anis Ahmad V. Chongqing and Shanghai Banking Corporation, reported in 2005(2) R.A.J. 652 (Del) (7) Surat Sang hi Finance Ltd. V. Credential Finance Ltd. and others, reported in AIR 2002 Om. 481, which rulings largely deal with section 8 of the Arbitration and Conciliation Act, 1996 and reference of dispute to Arbitration by Court. The learned Counsel for the plaintiff contended that the defendant has admitted his liability and no substantial defence is raised by the defendant. He therefore urged that the Summons For Judgment be allowed and the suit be decreed as prayed, with interest. 6 On the other hand, the learned Counsel for the defendant at the out- set placed on record the Memorandum and Articles of Association of Theatre Owners Association and pointed out clause 3(g) to submit that the Association provides machinery and procedures to settle and arbitrate disputes between members of the Association or between members and their employees. The said clause 3(g) reads as under:- "To provide machinery and procedures to settle disputes between members of the Association or between members and persons engaged in the allied and /or associated trade and to establish, maintain and conduct a court of arbitration either voluntary or otherwise in such cases, to settle and arbitrate in all matters of disputes between members and their employees. " The learned Counsel submitted that since the parties have submitted to the jurisdiction of Association and the plaintiff had participated in the 6 arbitration, this Court would have no jurisdiction to adjudicate the dispute between the parties. The learned Counsel for the defendant placed reliance on the following cases:- (1) M/s Shakily Hog Food Ltd. V. Kola Shipping Ltd., reported in AIR 2009 SC. 12, (2) Visa International Ltd. V. Continental Resources (USA) Ltd., reported in AIR 2009 S.C. 1366 (3) Executive Engineer, Annapurna Sahib Hyde Construction Division V. Dina Nat, AIR 2007 SC. 2157 (4) Gas Authority of India Ltd V. Ketti Construction (I) Ltd. (2007) 5 SCC 38 (5) Maharashtra Spat Bigamy Ltd V. M/s Vera Transport Company,AIR 2006 S.C. 2800. The learned Counsel for the defendant contended that in any event the defendant had a good case on merits and the defendant had raised triable issues and the defendant was entitled to unconditional leave to defend the suit. 7 I have heard the learned Counsel for the parties and perused the material on record. 8 In the affidavit in rejoinder, the plaintiff himself has stated as follows:- "I state that the alleged issue which is pending in arbitration is pending between defendant and the aforesaid entities and I have nothing to do with the said arbitration." In view of the aforesaid admission of the plaintiff as also on perusal of clause 3(g) of the Memorandum of Association of the Theatre Owners Association which is reproduced hereinabove, prima facie, the contention of the plaintiff that the proceedings before the Association 7 were not Arbitration proceedings would have no merit. Really speaking this contention is not open for the plaintiff to raise as it would not be consistent with the pleadings of the plaintiff. 9 It is significant to note that both the parties have filed complaints with the Association in the format as required by the Association along with their forwarding letters. The complaint of the defendant is dated 17th August, 2006, which is annexed as Exhibit "A" to the affidavit in reply of the defendant and the complaint of the plaintiff is dated 6th August, 2007 and is annexed as Exhibit "B" to the said reply. 10 Pertinently in letter dated 6th August, 2007 (Exh. B to the reply of defendant) addressed by the plaintiff to the Secretary of the Association enclosing therewith his complaint, it is stated by the plaintiff as follows:- "I enclose herewith a claim for outstanding dues from M/s Pushpam Enterprises for a sum of Rs. 20,00,000/- (Rupees Twenty Lacs Only). It is further stated in the last paragraph of this letter as follows:- "As these two complaints are directed linked we would request that these two complaints be combined and viewed jointly." This letter is on the plaintiff's own letterhead and signed in his individual capacity. 8 11 It is also significant to note that in the letter dated 5th September, 2007, addressed by the plaintiff on his own letterhead to the Secretary of the Association, which is annexed as Exhibit "C" to the affidavit in reply of the defendant, the plaintiff has stated as follows:- "This is to inform you that I want to withdraw the complaint against M/s Pushpam Enterprises as it has been mutually agreed between Mr. Kumar Bajaj of M/s Pushpam Enterprises and me that we will try and settle the matter amicably." The withdrawal of the complaint is also by the plaintiff in his individual capacity and not in the capacity as a partner of M/s Pushpam Enterprises or a Director of Rumanek Estates Pvt. Ltd. In the plaint itself it is averred by the plaintiff in para 13 as follows:- "The plaintiff states that thereafter for reasons best known to the Defendant, the Defendant held several meetings with the plaintiff and requested the plaintiff not to aggravate the matter and infact suggested to settle the matter without intervention of the Honorable Courts of law. The Defendant requested the plaintiff to afford one last opportunity to the Defendant. The defendant also informed the plaintiff that the Defendant would be in a position to repay the aforesaid loan amount in favour of the plaintiff subject to the condition that the plaintiff had to withdraw the complaint preferred by the plaintiff against the Defendant 9 before the Cinema Owners and Exhibitors Association of India. The plaintiff states in order to ensure that no stone remains unturned and in order to recover the legitimate dues, the plaintiff had no option but to withdraw the complaint preferred by the plaintiff against the Defendant, vide a letter dated 5th September, 2007. The plaintiff craves leave to refer to and rely upon the papers and proceedings filed in the said complaint as and when produced." 12 It is to be further noted that it is only after the complaint was filed by the defendant on 17th August, 2006 which was forwarded to the Secretary of Association wherein the defendant claimed an amount of Rs. 16,86,836.66 from the plaintiff and requested that the matter be referred to Arbitration Committee for the recovery of the said outstanding dues from the plaintiff, that plaintiff, has, thereafter filed his complaint with the Association about a year later, on or about 6th August, 2007. Pertinently, the plaintiff has himself requested that the two complaints be "combined and viewed jointly" since they were "directly linked." The complaint of the plaintiff is also signed by the plaintiff in his individual capacity. It is not the case of the plaintiff that the partnership firm of M/s Empire Estate and Company- Rumanek Estates Pvt. Ltd. had a separate and distinct claim of Rs. 20. lacs. Thus, the subject matter of complaint which was filed by the plaintiff before the Association and the subject matter of the present suit are no different. Considering the above, it is not possible to accept the the case of the plaintiff that he has nothing to do with the transaction between the defendant and the partnership firm of M/s. Empire Estate and the company-Rumanek Estate 10 Pvt. Ltd. since those were separate entities. The plaintiff had throughout acted in his individual capacity and as such in my view, the plaintiff cannot be allowed to approbate and reprobate as and when convenient to him. 13 Furthermore, in the letter dated 22nd August, 2008 (Exh. "D" to the affidavit in reply of the defendant) written by the Secretary of the Association to the members of the Administrative and Adjudicating Sub- Committee of the Association, copies whereof has been marked to the plaintiff and the defendant, a reference has been made to the complaints of the plaintiff and the defendant. Extracts of the relevant portion of the said letter is reproduced hereunder:- "... After hearing both sides, the position was that M/s Pushpam Enterprises was to receive a balance amount of Rs. 16,86,837.66 from M/s. Empire Estate, out of that amount loaned for renovation of New Empire Cinema. However, Mr. Modi of New Empire Cinema states as amount of loan of Rs. 20,00,000/- given to M/s. Pushpam Enterprises is not repaid. Both sides admitted the above position. However, Mr. Rajkumar Bajaj stated that there are other pending issues with the other side which cannot be brought before the Association. Both sides were advised to meet in a cordial atmosphere, even some weightage to their past relations and try to settle the dispute amicably" In the aforesaid letter dated 22-08-2008, a reference is also made to the 11 separate letters written by the plaintiff and defendant that they wanted to withdraw their respective complaints and they had mutually agreed to try to settle the matter amicably. The said letter dated 22-08-2008 of the Association also makes a reference to the letter dated 18-08-2008 wherein the defendant had made a grievance to the Association, the relevant portion whereof reads thus:- "Instead of adjusting the amounts payable and receivable by M/s Pushpam Enterprises, Mr. Roosi K. Modi has filed a Summary Suit No. 2281 of 2008 in the High Court at Mumbai for recovery of his loan amount. A Copy of the summons is enclosed herewith. In the aforesaid circumstances we request you to kindly restore our complaint against M/s Empire Estate & Rumanek Estates Pvt. Ltd. and place the matter for hearing before the adjudicating sub-committee for the recovery of out dues" 14 Thus, from the above what emerges is that there were dealings between the parties besides what is referred to in the plaint. The contents of the letter dated 22-06-2008 and other correspondence exhibited to the reply of the defendant is not denied in the rejoinder by the plaintiff. Curiously, however, there is no reference of these dealings by the plaintiff in the plaint. Moreover, from the conduct of the parties it is clear that they had voluntarily submitted themselves to the Arbitration of the Association and participated in the arbitration proceedings. Being so, the fact that there was no written agreement between the parties to refer the dispute to the Arbitration is of no consequence. It is also noted that though the plaintiff has claimed interest, no interest rate is specified in the plaint. 12 15 Insofar as the case of the plaintiff that he has ceased to be a partner of the Firm of M/s Empire Estate and ceased to be a Director of M/s Rumanek Estates Pvt. Ltd., in my prima faice view the same is an afterthought. In any case, it is an event subsequent to the filing of the present suit and no credence can be attached to the same. 16 In so far as plea of the defendant that the suit is barred by limitation is concerned, a perusal of the record indicates that the plaintiff has lodged the plaint on 14.03.2008. The last of the confirmation letters written and signed by the defendant is dated 18.10.2006 and, therefore, it cannot be said that the claim of the plaintiff is barred by limitation as suit is filed well within 3 years of the said confirmation letter. Hence this plea of the defendant is devoid of merits and would stand rejected. 17 Strictly speaking, the defendant would prima facie be right in contending that the suit would not be maintainable in view of the arbitration proceedings filed before the Association. However as the plaintiff has already withdrawn his complaint before the Association whereas the defendant has applied to revive his complaint before the Association, in my view the plaintiff ought to be given an opportunity to ventilate his grievance/claim in the present suit leaving the issue of maintainability open to be raised by the defendant at a later stage. It would however be open for the plaintiff to revive his complaint before the Association in accordance with law. It may also be clarified that the pendency of this suit would not preclude the Association from deciding the arbitration proceedings, if any, before it. It is also clarified that the observation in this order are prima facie and may not be deemed to be 13 an expression of opinion on merits of the case. 18 In so far as the rulings relied upon by the parties, it is required to be noted that those rulings essentially deal with pre arbitration stage i.e. reference of the dispute to arbitration by Court and to section 8 of the Arbitration and Conciliation Act 1996 as also to be existence of an Arbitration Agreement. In the present case, having observed as above that the parties had already submitted themselves to the jurisdiction of the arbitration of the Association and participated in the arbitration proceedings, those rulings in my view, would not be applicable. 19 For the reasons above in my prima facie view, the defendant has made out bonafide and substantial defence and has raised triable issues. I am therefore, inclined to grant the defendant unconditional leave to defend the suit. Hence, I pass the following order:- ORDER (i) The defendant is granted unconditional leave to defend the suit. (ii) Written statement to be filed within a period of 3 months from today. (iii) Affidavit of documents to be filed within eight weeks thereafter. Discovery and Inspection of Documents thereafter within eight weeks. 20 Summons for Judgment is dismissed. A.A. SAYED, J. 14