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Judgment
Rajiv Sahai Endlaw, J
IA No.2131/2017 (of the defendants u/O VII R-11 CPC).
The plaintiff has instituted this suit for recovery of Rs.6,22,56,850/- jointly and severally from Sagar Infra Rail International Ltd. and its Directors K.
Udayananda Reddy and K. Surekha Udaya, pleading that (i) the plaintiff, on 19th May, 2011 advanced a loan of Rs.3,50,00,000/- to the defendant no.1
for a period of six months and bearing interest for the first three months @18% per annum and for the remaining three months @20% per annum and
a Short Term Loan Agreement dated 19th May, 2011, Receipt dated 19th May, 2011, Demand Promissory Note dated 19th May, 2011 were executed
by the defendant no.2 on behalf of defendant no.1 in favour of the plaintiff; (ii) two irrevocable and unconditional personal guarantees were also
furnished in favour of the plaintiff by the defendant no.2 and the defendant no.3 inter alia guaranteeing due repayment of the loan as well as interest
by the defendant no.1; (iii) the defendants also handed over to the plaintiff title deeds of five immovable properties towards their intent of mortgaging
the said properties and providing the same as collateral for the loan and interest due thereon; (iv) the defendant no.2 pledged his 50,00,000/- shares
held by him in defendant no.1 with the plaintiff, by physical delivery of the Share Certificates and signed Transfer Deeds; (v) the defendants failed to
pay interest as well as principal amount by the stipulated dates; (vi) towards the end of January and February, 2015, the defendant no.2 acknowledged
the amount due and promised the plaintiff that they would like to clear all dues under the Loan Agreement dated 19th May, 2011 and proposed that if
the title deeds of their five properties were handed over by the plaintiff to the defendant no.2, the loan with interest due would be cleared by sale of
the said properties; (vii) to assure the plaintiff, the defendants also offered post dated cheques in full and final settlement; (viii) the plaintiff, believing
the representation of the defendant no.2, gave back the original title documents / Sale Deeds of one of the properties to defendant no.2 and the
defendant no.2 simultaneously handed over two cheques, both dated 14th February, 2015 for Rs.3,50,00,000/- towards refund of principal and for
Rs.2,72,56,850/- towards payment of interest; (ix) by handing over the aforesaid cheques to the plaintiff, the defendants acknowledged their liability to
repay the principal as well as interest thereon under the Short Term Loan Agreement dated 19th May, 2011; and, (x) however both the cheques, on
presentation were returned dishonoured and the plaintiff has initiated action against the defendants under the Negotiable Instruments Act, 1881.
The suit, filed on 30th November, 2016 and re-filed successively on 7th December, 2016, 8th December, 2016 and 10th December, 2016, came up
before this Court first on 19th December, 2016 when it was enquired from the counsel for the plaintiff, how the suit claim for recovery of money
loaned on 19th May, 2011 and repayable within six months therefrom i.e. by 18th November, 2011, filed on 30th November, 2016 was within time. It
appeared that the suit claim was barred by time.
The counsel for the plaintiff however on 9th December, 2016 stated that the defendants, by issuing the cheques dated 14th February, 2015 and
handing over the same to the plaintiff in January, 2015, had acknowledged their liability.
It was enquired from the counsel for the plaintiff whether not the acknowledgment of liability itself was beyond the prescribed period of limitation
which lapsed on 18th November, 2014.
The senior counsel for the plaintiff appearing on 9th December, 2016 contended that the suit was not on the basis of loan transaction of the year
2011 but on the basis of cheques dated 14th February, 2015 which constitute acknowledgment of debt and a promise to pay. It was argued that
acknowledgment of even time barred debt with a promise to pay was a valid acknowledgment. However on request of the senior counsel then
appearing for the plaintiff, hearing was adjourned. On 15th December, 2016, the senior counsel for the plaintiff drew attention to Section 25 of the
Contract Act, 1872.
The suit was entertained and summons thereof ordered to be issued and the defendants restrained from alienating, encumbering or parting with plot
No.B-18/2-B ad-measuring 350 sq. yds. out of Khasra No.1026 situated in the Revenue Estate of Village Dindarpur, Delhi also known as
Roshanpura, Najafgarh, New Delhi, and also known as Shyam Vihar, Phase- II, Najafgarh, New Delhi being the property of which documents had
been taken away by the defendants from the plaintiff.
The defendants, on services of summons, besides filing their joint written statement, filed this application for rejection of the plaint on the ground of
suit claim being barred by time and have also filed a counterclaim seeking direction to the plaintiff to handover all the documents of the defendants
mentioned in the covering letter dated 19th May, 2011. However for the purpose of this application, the need to refer to the written statement or the
counterclaim of the defendants is not felt.
It is the contention of the defendants in this application seeking rejection of the plaint, that (a) the two cheques, both claimed by the plaintiff to be
dated 14th February, 2015, were issued by the defendants way back on 19th May, 2011, one as a security to the principal amount and the other for
future interest and “apparently both the cheques did not mention any dateâ€;
(b) the plaintiff has subsequently filled in the blanks and thus tampered with the cheques issued by the defendants; (c) the cheques may be sent for
forensic examination; (d) the cheques which are issued as security at the time of granting loan, cannot be claimed for recovery; (e) now that the loan
transaction is time barred and thus not enforceable in law, the plaintiff has lost the right to recover the time-barred debt; (f) since non-CTS cheques
are invalid from 2012, the cheques issued by the defendants now cannot be considered negotiable instruments; (g) the suit claim is barred by time; (h)
there is no explanation why the plaintiff did not claim the loan amount within the limitation period; (i) even for applicability of Section 25(3) of the
Contract Act, the plaintiff needs to satisfy three conditions, firstly it must refer to a debt with the creditor but the same must be in force in terms of
limitation; secondly, there must be a distinct promise to pay wholly or in part such debt; and, thirdly, promise must be in writing by the person or his
duly appointed agent; and, (j) admittedly there is no written promise by the defendants.
The plaintiff has filed reply to the application of the defendants for rejection of the plaint, but again the need to advert thereto is not felt.
I may record that a number of pleas in the application of the defendants for rejection of the plaint are beyond the scope of Order VII Rule 11 of
the Code of Civil Procedure, 1908 for seeking rejection of plaint. All that is required to be seen is that the plaintiff on the averments in the plaint and
documents filed therewith, even if believed, is not likely to succeed in the suit owing to the suit being barred by any law or for the other reasons
enumerated in Order VII Rule 11 CPC. The defence of the defendants cannot be seen in adjudication of an application under Order VII Rule 11 of
the CPC. Reference in this regard may be made to Saleem Bhai Vs. State of Maharashtra (2003) 1 SCC 55,7 C. Natarajan Vs. Ashim Bai (2007) 14
SCC 183, Mansa Ram Vs. Tilak 195 (2012) DLT 182 (DB), Utvair Aviation Vs. Jagson Airlines Ltd. 2012 (129) DRJ 630, Gopal Johari Vs. Anup
Diwan 2012 (131) DRJ 98
The counsel for the parties were heard on 3rd December, 2018 and thereafter again on 18th July, 2019. The counsel for the defendants on 3rd
December, 2018 handed over copies of judgments in Chander Mohan Mehta Vs. William Rosario Fern Andes 2008 SCC OnLine Bom 159, 0Unitel
Technology (India) Pvt. Ltd. Vs. SMP International 2014 SCC OnLine Del 711 8and Ashwini Satish Bhat Vs. Jeevan Divakar Lolienkar 1999 SCC
OnLine Bom 69 but was unable to show as to how the same applied to the facts of the case. The senior counsel for the plaintiff on 3rd December,
2018 relied on Suresh Kumar Joon Vs. Mool Chand Motors 2012 SCC OnLine Del 430 h3olding that issuance of a cheque towards a time barred debt
is a contract, containing a promise in writing to pay the debt, within the meaning of Section 25(3) of the Indian Contract Act, 1872.
The counsel for defendants, on 18th July, 2019 contended that the plaintiff cannot rely on the two cheques dated 14th February, 2015 for
Rs.3,50,00,000/- and Rs.2,72,56,850/- respectively to extend the period of limitation because the said cheques themselves are, in any case, issued
beyond 18th November, 2011, by which time the loan was repayable.
On enquiry, why Section 25(3) of the Contract Act on the basis whereof, vide order dated 15th December, 2016 summons of the suit were
ordered to be issued, is not attracted, the counsel for the defendants has contended that for Section 25(3) to be attracted, there has to be a promise in
writing, signed by the person to be charged therewith, to pay the debt of which the creditor might have enforced payment but for the law for limitation
of suits. It was argued that a cheque is not a promise to pay. Reference in this regard was made to Sections 4 to 6 of the Negotiable Instruments Act,
1881. It was contended that while Section 4 defines a “promissory note†as an instrument in writing containing an unconditional undertaking,
signed by the maker, to pay a certain sum of money and would constitute a promise within the meaning of Section 25(3) supra, but a cheque is not a
promissory note. It is contended that Section 5 defines a “bill of exchange†as an instrument in writing containing an unconditional order, signed by
the maker, directing a certain person to pay a certain sum of money only to, or to the order of, a certain person or to the bearer of the instrument and
Section 6 defines a “cheque†as a bill of exchange drawn on a specified banker. It was argued that thus a cheque is not a promise but an order to
the banker to pay.
I enquired from the counsel for the applicants/defendants that if a cheque is not a promise, how does Section 139 of the Negotiable Instruments
Act provides for a rebuttable presumption that the holder of a cheque received the cheque for the discharge, in whole or in part, of any debt or other
liability.
No specific answer had come to the aforesaid.
On enquiry as to why Suresh Kumar Joon supra relied upon by the senior counsel for the plaintiff during the hearing on 3rd December, 2018 did
not apply on all fours, the counsel for the defendants contended that paras 7 to 13 of the said judgment, on which the senior counsel for the plaintiff
relied, are not the ratio of the judgment but are only obiter. On enquiry, what the ratio of the said judgment was, attention was invited to paras 2 and 13
of the judgement to contend that the ratio of the said judgment is that a cheque accompanied with a promise to pay as made in the reconciliation
statement would constitute a promise in writing within the meaning of Section 25(3) of the Act. It was argued that the defendants nowhere in the
cheque have stated or admitted that they owe the amount thereof to the plaintiff. It is stated that even a currency note contains a promise to pay and
which is not so qua the cheque.
The senior counsel for the plaintiff again took me through the Suresh Kumar Joon contending that the same applies on all fours. The senior counsel
for the plaintiff also reiterated that the suit was for recovery of the cheque amounts.
In Suresh Kumar Joon supra, the question for adjudication was “whether a dishonoured cheque, which defendant no.2 issued to the plaintiff can
be said to be a promise made to pay the amount of the cheque to the plaintiffâ€. The contention of the counsel for the defendants in that case was
“that Section 25(3) envisages a contract whereby the debtor expressly promises to pay the whole or part of the debt and a cheque which is only a
bill of exchange and does not contain any such promise, it is not a contract saved by the said provisionâ€. A Co-ordinate Bench, of this Court relying
on the judgments of the High Court of Kerala, Karnataka, Madras, held as under:-
“8. It is true that the cheque does not contain an express promise in writing, to pay the amount of the cheque to the payee or the cheque. However,
Section 9 of the Indian Contract Act makes it very clear that the promise can be express as well as implied. In my view, when a debtor issues a
cheque to his creditor, he makes an implied promise to him to pay the amount of the cheque being issued by him. It is only towards fulfillment of that
such promise that a cheque is issued by the debtor to the creditor. Once it is alleged that the relationship between the parties was that of debtor and a
creditor and it is further alleged that the cheque was issued by the debtor to the creditor, it would be difficult to dispute that a cheque contains an
implied promise, in writing, to pay the amount of the cheque. Since, even a time- barred debt is saved by Section 25(3) of the Indian Contract Act,
1872, the issuance of a cheque towards repayment of a time-barred debt constitutes a contract within the meaning of Section 25(3) of the Indian
Contract Act, 1872.â€
I am unable to agree with the contention of the counsel for the defendants/applicants that the aforesaid does not constitute the ratio of the
judgment.
I must however notice that in para 13, while reiterating that when considering the application under Order VII Rule 11 of the CPC, the Court has
to consider only the averments in the plaint and not the written statement or the documents filed by the defendants, Suresh Kumar Joon supra also
held as under:-
“It is true that there is no specific averment in the plaint that the cheque issued by defendant no.2 to the plaintiff amounts to a „contract‟ within
the meaning of Section 25(3) of the Indian Contract Act. But, this, to my mind, would not be relevant if such a contract can otherwise be culled out
from the averments made in the plaint. It has been specifically alleged in para 11 of the plaint that on 13.3.2007, the principal amount due on the
defendants was Rs.47 lac along with Rs.4,29,000/- and the cost of the tanker which the defendants had taken on rent and on reconciliation of amount
an acknowledgment of debts took place by intervention of the mediators, whereupon defendant no.2 issued cheque bearing number 352451 drawn on
Union Bank of India for a sum of Rs.51,29,000/- towards repayment of debt to the plaintiff and the plaintiff accepted the cheque upon reconciliation of
the account of tanker‟s payment. These averments are sufficient, in my view, to constitute a contract under Section 25(3) of the Indian Contract Act,
1872.â€
Merely because in that case there was a plea of reconciliation of amount, would not deflect from what is quoted hereinabove being the ratio of the
judgment.
The counsel for the defendants then stated that his response to Section 139 of the Negotiable Instruments Act is that while it raises a presumption
of debt and existence of which even Section 25(3) envisages; it is not a promise to pay. The counsel for the defendants/applicants further stated that
in Suresh Kumar Joon itself the counsel for the defendants had referred to Tulsi Ram Vs. Same Singh 19 (1981) DLT 378, which though was
distinguished, but in his submission, erroneously and the matter needs to be referred to the larger Bench.
I have gone through Tulsi Ram supra as well. In Tulsi Ram this Court, at the stage of second appeal, was concerned with an endorsement made
on 10th July, 1966 on the back of a pronote dated 5th January, 1963, to the effect ""Is pronote ko main manzoor karta hoon ki yeh agle teen saal ke liye
theek hai"". It was the contention of the plaintiff therein that the endorsement dated 10th July, 1966 at the back of the pronote was not a mere
acknowledgment but a promise to pay in writing within the meaning of Section 25(3) of the Contract Act and thus the suit claim was within time. It
was held that (i) Section 25(3) uses the words “promise made in writing to payâ€; (ii) thus there should be an express promise to pay a time barred
debt, to constitute a contract which may be the basis of the suit; (iii) if no express promise to pay is spelt out by the writing, such writing cannot be the
basis of the suit; (iv) reading of Section 9 and Section 25(3) of the Contract Act, makes it clear that though the word “express†is not used in
Section 25(3), but it is essential that the promise to pay must be clear and express; (v) otherwise there will be no promise to pay in writing as is the
requirement of Section 25(3); (vi) an implied promise is not sufficient to satisfy the condition of Section 25(3); and, (vii) what is required is a clear
promise and the language of the document is to be studied to find out if there is a clear and fresh promise. It was held that the endorsement dated 10th
July, 1966 at the back of the pronote did not constitute an express promise to pay within the meaning of Section 25(3) of the Contract.
I however do not find the present to be a fit case to be referred to the Division Bench, because (i) the defendants, by making a counterclaim for
return of the documents, have also admitted having deposited the title documents of their property with the plaintiff; (ii) while Tulsi Ram supra was a
case of endorsement at the back of the pronote, Suresh Kumar Joon supra was a case of a cheque and the facts of the present case match fully with
the facts of Suresh Kumar Joon supra and once the two judgments are based on two different sets of documents, in a case having the same facts as
one sets of documents, no need for reference to the Division Bench arises.
Resultantly, IA No.2131/2017 is dismissed. However, the dismissal of this application shall not come in the way of the defendants seeking an issue
of limitation.