Final Order 1

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MHCC010068532018
IN THE COURT OF JUDGE, CITY CIVIL COURT
AT GREATER BOMBAY
SUMMONS FOR JUDGMENT NO. 167 OF 2018
IN
SUMMARY SUIT NO.407 OF 2018
Kiran Vrajlal Goradia, aged 64 years,
Occupation:Business, carrying on business at
25 Sagar Building, Vitthawadi, Kalbadevi,
Mumbai-400 002.
...Plaintiff
VERSUS
1. M/s. Kiran Brothers, a partnership firm
duly registered the Indian Partnership Act
carrying on business at 68/72, Champa Galli,
Ground floor, Opposite Office Galli,
M.J.Market, Kalbadevi Road, Mumbai-400
002.
2. Kaushik Vrajlal Goradia, aged 61 years,
Occupation:Business,
3. Usha Kaushik Goradia, aged 57 years,
Occupation:Business,
4. Sagar Kaushik Goradia, aged 36 years,
Occupation:Business,Defendant Nos 2, 3 and
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4 also carrying on business at 68/72,
Champa Galli, Ground Floor, Opposite Office
Galli, M.J.Market, Kalbadevi Road,
Mumbai-400 002.
...Defendants
Appearance :
Ld. Adv. Mr. Dalal for plaintiff.
Ld. Adv. Mr. Gaonkar for defendants.
CORAM : DR. S. D. TAWSHIKAR
(Court Room No.61)
Heard on : 27-04-2023
Decided on: 27-04-2023
ORAL ORDER
(Dictated and pronounced in Open Court)
Plaintiff has taken out present Summons for Judgment (SJ)
as per Sub rule (4) of Rule 3 of Order XXXVII of Code of Civil
Procedure, 1908 (hereinafter referred as ‘CPC’ for short) and thereby
claims Judgment against defendants for recovery of principal amount of
Rs. 53,14,176.37/-, more particularly described in particulars of claim
at Exh.D to the plaint.
Plaintiff’s case-
2. Plaintiff is a retired partner of defendant No.1 Firm,
whereas Defendant Nos.2 to 4 are existing partners of said firm.
Plaintiff contends that he had retired from defendant No.1 Firm on
16-11-2015. The Deed of Retirement (Exh.A) came to be executed on
04-01-2016. In view of said deed, defendants had agreed to pay retiring
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partner the amount payable to him as per the account of the Firm as on
16-11-2015.
3. The plaintiff claims that the audited Balance Sheet of
defendant No.1 for accounting year 01-04-2015 to 31-03-2016, shows
sum of Rs. 53,14,176.37/- due and payable to the plaintiff. Based on
said entry, plaintiff demanded the same to the defendants by notice
dated 01-06-2017. However, neither the amount was paid nor the
notice was replied. Hence, the present suit.
4. By way of present SJ plaintiff claims that the defendants
have admitted their liability by way of audited Balance Sheet and
therefore defendants have no defence at all. Plaintiff, thus, prays for
judgment forthwith.
Defendants’ case-
5. Record reveals that despite service of summons, defendant
No.1 failed to cause appearance. Thus suit proceeding exparte against
it. Defendant No.2 to 4 have objected the SJ by filing detailed affidavit-
in-reply and thereby claims unconditional leave to defend.
6. During the pendency of SJ original defendant No.3 expired
and her LR is brought on record. Mr. Dalal, Ld Adv for the plaintiff
submits that in view of death of defendant No.3, SJ is restricted against
defendant No.2 and 4 only.
7. Defendants though admitted the fact that the plaintiff was
the partner of defendant No.1 Firm and further that he got retired by
way of Retirement Deed (Exh.A), however, defendants strongly disputed
the contentions of plaintiff regarding defendants liability to pay the
amount claimed by him. The defendants have objected the
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maintainability of summary suit on the count that the suit is not based
on written contract.
8. It is contended that there was another partnership firm
namely M/s. L.V. Enterprises having defendant No.2, defendant No.4 as
well as plaintiff along with his family as its partners. It is contended that
Memorandum of Understanding (MOU) was signed by parties on 23-09-
2015. As per the said MOU plaintiff and his family agreed to pay an
amount of Rs.20,95,000/- to the defendant Nos.2 to 4. The copy of the
said MOU is placed on record at ExhC-1 to the reply.
9. Defendants also contend that considering several bad debts
of the defendant No.1 firm defendant No.1 had suffered certain losses.
The plaintiff, as per agreed upon by parties, is liable to bear 50% of loss
suffered by defendant No.1, which approximately comes to Rs. 6 lakhs.
Defendant claims that plaintiff is liable to pay an amount of
Rs.55,19,950/- to the defendants herein for various liabilities of the
Firms.
10. Defendants further contend that the present suit is not
maintainable owing to the arbitration clause in the Retirement Deed
itself. The clause (27) of the Retirement Deed (Exh.8) specifically
provides appointment of sole arbitrator to resolve or dispute and
differences with respect to partnership firm. Thus, for the various
grounds narrated in the reply, defendant Nos. 2 to 4 seek unconditional
leave to defend.
Points-
11. Heard both the sides. Perused documents placed on record
by either sides. Following points arise for my determination. I have
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recorded findings thereon along with reasons, as under :-
Sr. No. Points Findings
1. Whether defendant is entitled for
leave to defend ?
If yes, conditional or unconditional?
Conditional leave to
defend is granted to the
defendant Nos.2 and 4.
2. What order ? SJ is rejected.
REASONS
As to Point No.1-
12. It is settled position of law that while dealing with the
Summons for Judgment viz-a-viz leave to defend, Court is not supposed
to delve deep on merits of either side. The court is expected to examine
whether the defendant raises substantial defence or some issues which
needs to be tried. With a view to examine this aspect, it is necessary to
ponder at the contentions and documents relied upon by both the sides.
13. I have extensively heard ld. advocates for either side. Mr.
Dalal, Ld. advocate for plaintiff, by pointing out the clauses of the
Retirement Deed submits that in clause (12) it was specifically agreed
that the continuing partners would pay the sum payable to the retiring
partner as shown in the balance sheet as on 16-11-2015, within the
reasonable period of time. He submits that plaintiff came across with
the balance sheet of defendant No.1 for the said financial year, from
which he came to know that the balance sheet reflects an outstanding
loan of Rs.53,14,176.37/- due to the plaintiff from defendants. The said
amount is clearly reflected in the ‘partners capital account’ as well as
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under the caption ‘unsecured loan’ of the firm. He submits that the said
balance sheet being audited, reveals clear liability of defendants to pay
said amount to the plaintiff.
14. Ld. Advocate Mr. Dalal further submits that though there is
an arbitration clause in the Retirement Deed, however, plaintiff being a
retired partner of the firm, he is not bound by said clause. In other
words plaintiff contends that the arbitration clause would not bar the
present suit. He further submits that the plea of arbitration clause is not
at all raised in the reply filed by the defendants and therefore this
argument cannot be considered.
15. Mr. Dalal further submits that the ground of bad debts
suffered by defendant No.1 firm cannot be appreciated as the account
statement of the firm as well as balance sheet does not disclose it. He
further contends that if the defendants hold any claim against the
plaintiff, they ought to have filed appropriate proceedings for the same.
However, the said ground cannot be considered while considering
application for leave to defend.
16. Mr. Dalal further points out that though the defendant Nos.
2 to 4 contend that defendant No.1 firm is dissolved, however, no
document is placed on record to boost the said contention. He thus,
submits that there is no triable issue at all raised by the defendants and
therefore SJ be made absolute forthwith.
17.
Per contra, Mr. Prasad Gaonkar, Ld advocate for defendant
Nos.2 to 4 agitates the ground of arbitration clause and thereby non
maintainability of the present suit. He contends that even though the
plaintiff is a retired partner, still he is bound by the arbitration clause.
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He thus submits that the dispute is clearly amenable to the arbitration
and the present suit is not maintainable.
18. Mr. Gaonkar points out clause Nos. (4) to (6) of the
Retirement deed and submits that the said clauses clearly reveal that
there was no outstanding amount of plaintiff towards the defendants’
firm. Everything is already settled and therefore no where any amount
as a liability of defendant Firm is shown in the Retirement Deed. Mr.
Gaonkar by referring to the balance sheet (Exh.B) of the plaint submits
that the entry in the column of the partners capital account “Trf to Kiran
Goradia Loan A/C 5314176.37 ” does not necessarily mean that the
defendant firm was liable to pay the said amount to the plaintiff. He
further submits that if it is the case of plaintiff that some amount was
due from the Firm, then plaintiff ought to have points out the payment
of such loan to the defendant No.1 Firm. In absence of said pleadings
mere entry in the balance sheet would not make defendant liable to pay
any amount to the plaintiff.
19. Mr. Gaonkar points out the MOU dated 23-09-2015
(Annexture–I to the reply) MOU dated 23-01-2016 annexed to the
rejoinder filed by the plaintiff and submits that even the said MOU
nowhere reflects any liability of defendants. Had there been any
amount due to the plaintiff, that would have been mentioned in this
MOU dated 23-01-2016 as the said MOU is executed after the execution
of Retirement Deed. Thus, the defendants ultimately claim that there
are various triable issues involved in the matter and therefore
unconditional leave to defend be granted.
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20. Before appreciating the merit of the contentions of either
side, it needs to be noted that the Hon’ble Apex Court in the IDBI
Trusteeship Services Limited Vs. Hubtown Limited, (2017) 1 SCC 568,
has dealt with various situation wherein leave to defend can be granted
or refused. The Hon’ble Apex Court in Para No.17 has laid down certain
guidelines to be considered while granting/refusing to leave to defend.
Those are as under-
“17. Accordingly, the principles stated in para 8 of Mechelec
case will now stand superseded, given the amendment of
Order 37 Rule 3 and the binding decision of four judges in
Milkhiram case, as follows:
17.1. If the defendant satisfies the court that he has a
substantial defence, that is, a defence that is likely to succeed,
the plaintiff is not entitled to leave to sign judgment, and the
defendant is entitled to unconditional leave to defend the
suit.
17.2 If the defendant raises triable issues indicting that he
has a fair or reasonable defence, although not a positively
good defence, the plaintiff is not entitled to sign judgment,
and the defendant is ordinarily entitled to unconditional
leave to defend.
17.3 Even if the defend raises triable issues, if a doubt is left
with the trial Judge about the defendant’s good faith, or the
genuineness of the triable issues, the trial Judge may impose
conditions both as to time or mode of trial, as well as
payment into court or furnishing security. Care must be taken
to see that the object of the provisions to assist expeditious
disposal of commercial causes is not defeated. Care must also
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be taken to see that such triable issues are not shut out by
unduly severe orders as to deposit or security.
17.4 If the defendant raises a defence which is plausible but
improbable, the trial Judge may impose conditions as to time
or mode of trial, as well as payment into court, or furnishing
security. As such a defence does not raise triable issues,
conditions as to deposit or security or both can extend to the
entire principal sum together with such interest as the court
feels the justice of the case requires.
17.5 If the defendant has no substantial defence and/or
raises no genuine triable issues, and the court finds such
defence to be frivolous or vexatious, then leave to defend the
suit shall be refused and the plaintiff is entitled to judgment
forthwith.
17.6 If any part of the amount claimed by the plaintiff is
admitted by the defendant to be due from him, leave to
defend the suit, (even if triable issues or a substantial defence
is raised), shall not be granted unless the amount so admitted
to be due is deposited by the defendant in court.”
21. In the light of guidelines issued by the Hon’ble Apex Court
it would be necessary to appreciate the contentions of either side.
22. In matter in hand the claim of the plaintiff is solely based
on audited Balance Sheet of defendant No.1 Firm (Exh.B). Defendants
did not dispute the said balance sheet. Thus, the entries in the balance
sheet needs to be accepted to be true and correct, at this stage. The
defendants tried to contend that the some entries in the Balance Sheet
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may be towards the adjustment and formal, however said contention
cannot be considered in law. The entries need to be accepted as it is.
23. Defendants further contend about certain outstanding due
from the plaintiff, however it needs to be noted that the claim of the
defendant in the nature of set off or counter claim cannot be considered
in the present suit, that too at the stage of leave to defend. The said
contention is not supported by admissible material. The defendants are
at liberty to pursue appropriate legal proceeding against the plaintiff for
said claim, as would permissible under the law. But that may not be
seen as a triable issue. Thus, the fact remains that there is no material
available with the defendants at this stage to dispute the entries in the
audited balance sheet.
24. Defendants though contend about the arbitration clause,
however, on perusal of the clause (27) of the Retirement Deed, I find
that arbitration clause is applicable to the ‘partners of the firm’. It would
not be bind the plaintiff, as he is a retired partner. Thus, I find no force
in the argument in respect of the maintainability of the present suit on
the premises of arbitration clause.
25. Thus, from the submissions of either side, it can be
appreciated that defendants though claim to have raised triable issues
and though pointed out certain discrepancies in the plaintiff’s case,
however, that would not be designed as a substantial defence. The
defenses tried to be canvassed by the defendant can at the most be
plausible or distant defences. Therefore, I find that the interest of justice
would serve by granting conditional leave to defend to the defendant
Nos.2 and 4.
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26. Considering the nature of the claim and the contentions of
either side, I find that the condition to deposit 50% of principal amount
would be just and proper (which approximately comes to Rs.
26,50,000/-). The said condition is necessary so as to safeguard the
claim of the plaintiff and for expeditious disposal of the suit. Hence, I
answer point No.1 accordingly.
As to Point No. 2-
27. It is obvious that due to grant of conditional leave to
defend, plaintiff is not entitled for judgment at this stage. Hence, SJ is
bound to be rejected.
28. It is made clear that observations made in this order are
prima facie and without prejudice to the rights of the parties in trial.
29. In view of the above, I pass following order-
ORDER
A Conditional leave to defend is granted to the defendant No. 2 and
4 subject to their depositing an amount of Rs. 26,50,000/-
(Rupees Twenty Six Lakhs Fifty Thousand only) before this Court,
as a security, within eight (08) weeks from today.
B Amount, if deposited by the defendants, be invested in fixed
deposits with Nationalized Bank, as per the rules.
C Defendant Nos. 2 and 4 are at liberty to file Written Statement
within next two weeks from the date of compliance of condition
of deposit of amount.
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D Summons for Judgment No.167 of 2018 is disposed of
accordingly.
(Dr. S. D. Tawshikar)
Judge, City Civil Court, Gr. Mumbai.
Date: 27-04-2023. Court Room No.61
Dictated on : 27-04-2023
Transcribed on : 02-05-2023
Corrected on : 02-05-2023
Printed and signed on : 02-05-2023
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“CERTIFIED TO BE TRUE AND CORRECT COPY OF THE ORIGINAL
SIGNED JUDGMENT/ORDER”
UPLOAD DATE AND TIME NAME OF STENOGRAPHER
02-05-2023 at 5.55p.m. Mrs. V. V. Malgaonkar
Name of the Judge
(with Court Room No.)
Dr. S.D. Tawshikar
C.R. No.61
Date of Pronouncement of JUDGMENT/
ORDER
27-04-2023
JUDGMENT/ORDER signed by P. O. on 02-05-2023
JUDGMENT/ORDER uploaded on 02-05-2023
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