S P CHOPRA Vs. CHOPRA GEMS

JUDGEMENT

(1.) In this suit for recovery of money under Order XXXVII of the CPC, the defendant company has made an application for the grant of leave to defend. The striking feature of the defendant's case is that the liability to pay the suit amount of Rs. 52,16,334/- is undisputed. The documents placed on record by the defendant itself amply demonstrate that the suit amount is indeed outstanding against the defendant and that the defendant has been over the years paying interest to the plaintiff on the principal sum @ 6% per annum and deducting tax at source on such payments. Copies of the balance sheets and other documents leave no doubt about the existence of the liability, which fact is acknowledged even by the defendant. What is, all the same, argued in support of the application for grant of leave to defend the suit is that the payment of the suit amount to the plaintiff is in terms of an oral arrangement arrived at between the parties contingent upon vacation of a certain premises of which the plaintiff was put in possession. The defendant argues that since the plaintiff has not vacated the premises in question, his right to recover the outstanding debt from the defendant remains inchoate and unenforceable. The short question that, therefore, falls for consideration is whether the proposed defence to the suit as set out in the leave application is a substantial defence within the meaning of proviso to Order XXXVII Rule 3(v) of the Code of Civil Procedure to justify grant of leave. Time now to state the facts in brief :-

(2.) The defendant company is, it appears, a company closely held by the plaintiff, his father and brother. The plaintiff's case as set out in the plaint is that a sum of Rs. 47,79,194/- was advanced by the plaintiff as a loan to the defendant company on 5th September, 1997. The loan amount was to earn interest @ 6% per annum. The defendant was, according to the plaintiff, paying interest at the said rate and even deducting tax at source from out of such payments. In the income tax returns and the balance sheets enclosed therewith, the defendant clearly acknowledged the amount outstanding against it from time to time. The plaintiff has, in support of that assertion, produced the true copies of the balance sheets for the period from 1.4.97 to 31.3.2001. The plaintiff has also indicated the amount of tax deducted at source including surcharge from out of the payments due to the plaintiff towards interest. Copies of the TDS certificates and the accounts maintained by the company in the course of its business have been placed on record. The plaintiff in that background claims that apart from a principal sum of Rs. 48,41,157/- due from the defendant as on 16th October, 2001, the plaintiff is entitled to a sum of Rs. 3,75,177/- towards interest at the rate of 16% per annum up to 31st January, 2003 making a total of Rs. 52,16,334/-. This amount, the defendant has despite its acknowledgement in the books of accounts and other documents, failed to pay thereby entitling the plaintiff to a decree for the recovery of the same.

(3.) In the application seeking grant of leave to defend the suit, the defendant company has given the background in which the plaintiff and his father and brother had started a partnership business in the name and style of M/s Chopra Gems. The application states that in April 1993, the partnership purchased a shop/showroom out of property No. 2440/10, Beaden Pura, Karol Bagh in terms of the sale deed executed jointly in the name of the plaintiff and his brother V.P. Chopra. The sale deed recorded two purchasers as joint owners with the plaintiff having an undivided one- third share in the property while the remaining two-third vesting in the plaintiff's brother V.P. Chopra. The application goes on to state that accounts of partnership were settled between the partners on 31st March, 1994 and a balance sheet drawn up in which the shop/showroom mentioned above was shown as an asset of the partnership concern and the value thereof fixed at Rs. 86,400/-. The defendant's further case is that the shop/show room was a partnership asset no matter the purchase was in the names of the plaintiff and his brother. The defendant company was in the meantime floated in October, 1993 with the plaintiff, his brother Shri V.P. Chopra and father Shri Deshpal Chopra as shareholders and Directors in the same. The partnership business was taken over by the company w.e.f. 1st April, 1994 alongwith its assets and liabilities and the partnership wound up w.e.f. 31st March, 1994. The credit standing in the capital accounts of the partners of the firm also appears to have been taken over by the company. The defendant's case is that in the audited balance sheets of the company for the years commencing 31st March, 1995, the shop/showroom in question was shown as an asset of the company. The application then goes on to state that the plaintiff had voluntarily resigned from the directorship of the defendant company in September, 2000. At the time of the said resignation, the plaintiff had, according to the defendant, retained possession of two motor cars one of which belonged to the company and the other to M/s Chopra Gems whose assets and liabilities were taken over by the defendant. The defendant's case which constitutes the very basis of its defence is that according to a mutual unwritten agreement between the plaintiff and his brother and father who controlled the defendant company, the market value of the cars was to be ascertained and adjusted against the loan which the defendant company owed to the plaintiff. The defendant further alleges that at the time of his resignation from the Board of Directors, the plaintiff had demanded payment of the amount remaining to his credit in the accounts of the company, which amount the defendant was unable to pay on account of lack of liquidity as the loan amount was on 13th September, 2000 as high as Rs. 47,16,638/-. The defendant's case, therefore, is that by mutual agreement between the plaintiff and the defendant and to provide comfort to the plaintiff and to put to rest his anxiety regarding the outstanding loan amount, the plaintiff was allowed to occupy and utilise the shop/showroom in question without any charge so long as the defendant remained indebted to the plaintiff. The defendant's case is that ever since April, 2001, it has been requesting the plaintiff to collect the outstanding loan amount alongwith interest @ 6% per annum which was the agreed rate of interest paid by the company to all its creditors and to return the peaceful and vacant possession of the showroom to it. The plaintiff has not, according to the defendant, done the needful. Instead, he issued a notice demanding repayment of the loan with interest @ 18% per annum and the TDS certificates. In the reply sent to the said notice, the defendant had reminded the plaintiff that the outstanding loan amount could be refunded only if the shop/showroom in his occupation was surrendered. The plaintiff has despite the said reply failed to vacate the shop/showroom or collect the outstanding amount. He has, at the same time, claimed title to the shop in Suit No. 1834/2001 which is pending in this court. The defendant company has also instituted suit No. 1997/2002 for declaration of its title and interest in the suit shop and for injunction restraining the plaintiff herein from dealing with the said shop in any manner on the strength of the sale deed dated 19th April, 1993 executed in his name. It is in the above background that the defendant claims leave to defend the suit refusal whereof would according to it, cause irreparable injury to the defendant.