Vishal Kedia vs Sureshkumar S. Bafna

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IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION IN ITS COMMERCIAL DIVISION SUMMONS FOR JUDGMENT NO. 108 OF 2018 IN COMMERCIAL SUMMARY SUIT NO. 1215 OF 2018

Vishal Kedia India Inhabitant, having his permanent address at 32, Kedia Apartments, 29-F, Dongershi Road, Malabar Hill, Mumbai 400 006 .. Plaintiff Vs. Sureshkumar S. Bafna Indian Inhabitant, having address at Darya Mahal-A, Flat No.2 (1st Flr) & 93 (16th Flr), 80, Napean Sea Road, Mumbai - 400 006 and office at Nagin Mahal, Churchgate, Mumbai 400 020. .. Defendant

Mr.Vivek V. Khemka for plaintiff.

Mr.Vivek Kantawala a/w. Mr. Amey Patil, Mr. Vivek M. Sharma, Mr.Jash Vyas, Ms.Shanay Bafna i/b M/s. Vivek Kantawala & Company for defendant.

CORAM : N.J. JAMADAR, J. DATE : 26TH FEBRUARY 2020

ORAL JUDGMENT :

1. This commercial division summary suit is instituted for a

recovery of a sum of Rs.2,11,51,500/- along with interest @ 18% per

annum on a sum of Rs.1,77,00,000/- from the date of the suit till

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realization, on the basis of a written contract.

2. The material averments in the plaint can be summarized as

under :-

(a) The defendant was involved in litigation with

one Mr.Aspi Sattha, over the tenancy rights in

respect of a premises admeasuring 5000 sq.ft. on the

ground floor of the building Beau Lieu, situated at

29, Dongersey Road, Malabar Hill, Mumbai 400 006.

(b) One Mrs.R.C. Patuck claimed to be a tenant

thereof. The defendant's family had instituted R.A.E.

Suit No.1430/5195/1982 in the Court of Small

Causes, Mumbai for recovery of the possession of the

demised premises. The acquisition proceedings were

also initiated by Maharashtra Housing and Area

Development (MHADA) under Chapter 8A of the

Maharashtra Housing and Area Development Act,

1976 ('The Act'). Alleging forcible dispossession Mrs.

Patuck had instituted a suit being Suit No.6468 of

1999 for regaining the possession of the demised

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premises under section 6 of the Specific Relief Act,

1963. Mr. Sattha claimed that he was a legatee of

Mrs.Patuck, who died on 15-09-2001. Mr. Sattha had

filed proceedings to get himself impleaded as a party

in the suit instituted by Mrs. Patuck.

(c) As multiple proceedings were, thus, pending

before various forums between the defendant's

family and Mr.Aspi Sattha, the defendant requested

the plaintiff on 5-01-2016 to co-ordinate for an

amicable resolution of the dispute between the

defendant and Mr.Aspi Sattha and to bring all legal

matters to an end. The plaintiff was holding a power

of attorney as well, of Mr.Aspi Sattha. The

defendant agreed to pay a sum of Rs.1,50,00,000/-

plus applicable taxes to the plaintiff towards co-

ordination fees for amicable resolution of the

dispute. Thus, a Memorandum of Agreement ('MOA')

came to be executed on 6-01-2016 whereunder the

defendant agreed to pay the aforesaid amount

towards co-ordination fees for getting the matter

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settled between Mr.Aspi Sattha and the defendant.

(d) It is the claim of the plaintiff that the disputes

between Mr.Aspi Sattha and the defendant's family

were settled and consent terms were entered on

8-01-2016. By an order dated 12-01-2016, the

Supreme Court disposed of SLP (C) No.11270/2009 in

accordance with of the consent terms executed on

8-01-2016. The plaintiff, thus, claims to have

successfully co-ordinated in the resolution of the

dispute in terms of the MOA. The plaintiff claimed

to have complied with his obligation under the MOA

and delivered all the documents to the defendant.

The plaintiff, thereupon, claimed to have called

upon the defendant to make the payment of the

agreed sum of Rs.1,50,00,000/- along with applicable

taxes thereon. The defendant committed default in

payment of the said amount, as agreed, despite

repeated communications from the plaintiff. Hence,

the suit for recovery of the said amount along with

taxes and interest thereon @ 18% p.a.

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3. The defendant appeared in response to the service of writ of

summons. Thereupon, the plaintiff has taken out this summons for

judgment. An affidavit in reply is filed on behalf of the defendant.

4. The defendant has sought an unconditional leave to defend the

suit. The substance of the resistance put-forth by the defendant is that

the suit does not fall within the ambit of the provisions contained in

Order 37 of the Code of Civil Procedure, 1908 ('The Code'). The MOA

cannot constitute the basis of the institution of the summary suit.

Secondly, the MOA, being not adequately stamped, is not admissible

in evidence in view of the provisions contained in section 34 of the

Maharashtra Stamp Act, 1958 and the said instrument cannot be acted

upon even for the purpose of summons for judgment. The instrument,

according to the defendant, is chargeable with duty as prescribed in

Article 5(h)(A)(iii) or in the alternative Article-5(h)(A)(iv) of the

Schedule I of the Act, 1958.

5. On the aspect of the execution of the MOA, the defendant has

conceded that he had agreed to pay consideration of Rs.1,50,00,000/-

plus applicable taxes to the plaintiff and accordingly executed the

MOA dated 6-01-2016. The defendant candidly conceded that it was

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agreed under the said MOA that the defendant would pay

coordination fees and applicable taxes, within six months from the

date of compensation which the defendant agreed to pay to Mr.Aspi

Sattha but not later than 30th June 2017.

6. A defence is sought to be raised that the defendant executed the

said MOA at the plaintiff's insistence and in his desperation, for co-

ordinating with Mr.Aspi Sattha so as to get all the disputes resolved.

The defendant asserts that the plaintiff was entitled to the said

amount under the MOA only upon resolution of all the disputes and

execution of the documents. The defendant contends that the plaintiff

has failed to perform his part of the contract and all the disputes

have yet not been resolved. Two of the terms, according to the

defendant, have not been complied with by the plaintiff. They read as

under :

"(a) Withdraw all allegations, applications, affidavits as well as claim in the proceedings being Case No. LAQ/MH & AD Act/ 45 pending before the Land Acquisition Office, MHADA at Mumbai.

(b) To make an application in R.A.E. Suit No.1430/5195/1982 in the Hon'ble Small Causes Court by

virtue to submit to a decree of which all tenancy rights, in the suit shall stand determined and the decree of possession be granted in favour of petitioner No.2."

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Therefore, the defendant is entitled to an unconditional leave to

defend the suit.

7. An affidavit in rejoinder is filed on behalf of the plaintiff. The

plaintiff avers that none of the grounds sought to be raised by the

defendant are worthy of consideration for grant of an unconditional

leave to defend the suit. There is neither a positive nor a reasonable

and fair defence. The objection to the instrument on the count that it

is not sufficiently stamped is stated to be untenable as the MOA is

chargeable with duty prescribed under Article 5(h)(B) of the

Maharashtra Stamp Act, 1958 and the instrument in question is thus

adequately stamped. The contention of the defendant that the plaintiff

has not complied with the terms of the contract is stated to be

incorrect. The default on the part of the defendant in making payment

to Mr.Aspi Sattha in accordance with the consent terms executed on

8-01-2016, leading to initiation of contempt proceedings against the

defendant is adverted to by the plaintiff. As regards the non-

compliance with term of submitting to a decree by Mr.Aspi Sattha, it

is pointed out that R.A.E. Suit No.1430/5195/1982, wherein the decree

was to be passed, itself stood dismissed on 7-12-2013. It was, thus,

for the plaintiff in the said suit to initiate the steps. In respect of non-

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compliance of the term (a), extracted above, of withdrawal of

allegations and claim pending before the Land Acquisition Officer,

MHADA, the plaintiff pressed into service the communication dated

19-12-2016, whereby Mr.Aspi Sattha allegedly withdrew all

allegations, applications as well as claims in the proceedings bearing

No. LAQ/MH & AD Act/45 pending before the Special Land

Acquisition Officer, MHADA, Mumbai.

8. In the backdrop of the aforesaid pleadings, I have heard

Mr.Vivek V. Khemka, the learned counsel for the plaintiff and Mr.

Vivek Kantawala, the learned counsel for the defendant, at some

length.

9. It was urged on behalf of the plaintiff that the defendant has

acknowledged the liability to pay the amount of Rs.1,50,00,000/- plus

applicable taxes thereon towards co-ordination fees for resolution of

the dispute between the defendant's family and Mr.Aspi Sattha by a

clear and explicit covenant under the MOA. To add to this, in the

affidavit in reply, the defendant has conceded in clear and

unequivocal terms that the said MOA was executed and the defendant

had agreed to pay the amount thereunder. The attention of the Court

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was also invited to an order dated passed by this Court on 11-12-

2018, wherein, this Court had noted the contentions in paragraphs 9

and 10 of the affidavit in reply, wherein the transaction has been

admitted. The learned counsel for the plaintiff urged that the defence

now sought to be raised by the defendant of the plaintiff having not

complied with the terms of MOA is not borne out by the material on

record. On the contrary, there is material to indicate that it was the

defendant, who committed default in compliance with the consent

terms, and was thus hauled up in the contempt proceedings. Thus,

according to the learned counsel for the plaintiff, the defendant is not

entitled leave to defend the suit. To lend support to this submission,

the learned counsel for the plaintiff placed reliance on the judgment

of the Supreme Court in the case of IDBI Trusteeship Services Limited

Vs. Hubtwon Limited.1

10. In opposition to this, the learned counsel for the defendant

would urge that the circumstances in which the MOA came to be

executed, cannot be lost sight. The MOA was executed on 6-01-2016.

On the very day after, i.e., on 8-01-2016, the consent terms came to

be executed between the parties. The circumstance in which the

defendant found himself when the MOA was executed and the 1 (2017) 1 SCC 568

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contempt proceedings was pending before the Supreme Court are

required to be taken into account. The fact that the defendant did not

raise a dispute before the Supreme Court that the dispute between the

defendant and Mr.Aspi Sattha was not fully resolved is required to be

appreciated in the backdrop of the threat of the contempt proceedings

initiated against the defendant. The learned counsel for the defendant

further submitted that the plaintiff cannot be said to have fully

complied with his part of the obligations as provided in clauses (e)

and (g) of the agreement.

"e. withdraw all allegations, Applications, Affidavits as well as claim in the proceedings being Case No.LAQ/MH & AD Act/45 pending before the Land Acquisition Officer, MHADA at Mumbai.

....

g. submit to a decree in R.A.E. Suit No. 1430/5195/1982 pending in the Hon'ble Small Causes Court by virtue of which all tenancy rights, in the suit-premises shall stand determined and the decree of possession be granted in favour of Petitioner No.2."

11. Apart from the aforesaid defences sought to be raised on behalf

of the defendant, this Court is confronted with the very enforceability

of the MOA on two counts. One, whether the consideration or object

of the agreement is unlawful under section 23 of the Indian Contract

Act, 1872 ('Contract Act'). Two, since the plaintiff claimed to be a

constituted attorney of Mr.Aspi Sattha, was there any conflict of duty

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and interest?

12. Section 23 of the Contract Act provides that the consideration

or object of an agreement is lawful, unless "it is forbidden by law; or

is of such a nature that, if permitted, it would defeat the provisions

of any law; or fraudulent; or involves or implies injury to the person

or property of another; or the Court regards it as immoral, or opposed

to public policy".

13. It is the bold case of the plaintiff that the plaintiff had agreed

to use his influence to bring about a settlement of the dispute

between the defendant and Mr.Aspi Sattha. Can the agreement

whereunder a person undertakes to provide services, for a

consideration, to use his influence with a third party to ensure

settlement of the dispute with the party to the contract be said to

defeat the provisions of law or involve or imply injury to the person

or property of the party to the suit or be opposed to public policy?

14. Per se, such an agreement does not seem to be opposed to

either public policy or the one which defeats the provisions of any

law. The situation where fiduciary relationship is involved, like a

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litigant and an advocate; a trustee and a beneficiary, different

considerations come into play. In the normal circumstances, where the

contract is with the free consent of the parties thereto, without there

being an element of fiduciary relation or public office, which one

party holds, such an agreement is not rendered unlawful.

15. In one of the oldest judgments in the case of Sayed Mahomed

Zahurul Huq Vs. Shah Wazirul Huq 2, the Calcutta High Court has

dealt with an identical situation. In the said case, the defendant had

asked the plaintiff to intervene and have the dispute between the

defendant and a third party settled. The defendant had promised to

pay the plaintiff a sum of Rs.300/- as his remuneration, if the

compromise was satisfactorily effected. The dispute was settled. On

failure of the defendant to pay the said amount, the plaintiff had

brought the action. The Calcutta High Court observed that the only

question which fell for consideration was, whether the consideration

or object of the agreement was lawful? The Court answered the

question in the following terms :

"....................In our opinion, upon no conceivable principle can it be maintained that an agreement to remunerate a person in order that he may exercise his influence to effect a settlement between two

2 (1911-12) 16 CWN 480

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persons, one of whom enters into the agreement, is in any way immoral or opposed to public policy."

16. A profitable reference, in this context, can also be made to the

judgment of the Supreme Court in the case of In the matter of Mr.'G'

a Senior Advocate of the Supreme Court 3, wherein a Senior Advocate

of the Supreme Court was facing disciplinary action for professional

misconduct for having agreed to take fees contingent upon, and

commensurate to, the outcome of the litigation. The Supreme Court,

in the said case observed, inter-alia, as under :-

"11. Now it can be accepted at once that a contract of this kind would be legally unobjectionable if no lawyer was involved. The rigid English rules of champerty and maintenance do not apply in India, so if this agreement had been between what we might term third parties, it would have been legally enforceable and good. It may even be that it is good in law and enforceable as it stands though we so not so decide because the question does not arise; but that was argued and for the sake of argument even that can be conceded. It follows that there is nothing morally wrong, nothing to shock the conscience, nothing against public policy and public morals in such a transaction per se, that is to say, when a legal practitioner is not concerned."

17. In the case of Rattan Chand Hira Chand Vs. Askar Nawaz Jung

(Dead) by L.Rs. & Ors.4, the plaintiff therein had agreed to use his

influence with the Public authorities to get a favourable consideration

in the matter of declaration of the status as the legal representative of

3 A.I.R.1954 SC 557 4 1991 3 SCC 67

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late Nawab Salar Jung. The observations of the Supreme Court in

paragraph 19 and 23 are relevant. They read as under :

"19 The contract such as the present one which is found by the city civil court as well as the High Court to have been entered into with the obvious purpose of influencing the authorities to procure a verdict in favour of the late Nawab was obviously a "carrier" contract. To enforce such a contract although its tendencies to injure public weal is manifest is not only to abdicate one's public duty but to assist in the promotion of a pernicious practice of procuring decisions by influencing authorities when they should abide by the law. To strike down such contracts is not to invent a new head of public policy but to give effect to its true implications. A democratic society is founded on the rule of law and any practice which seeks to subvert or circumvent the law strikes an its very root. When the court discountenances such practice, it only safeguards the foundation of the society. Even assuming, therefore, that the court finds a new head of public policy to strike down such practice, its activism is not only warranted but desired.

...

23 ...................Every agreement of which the object or consideration is unlawful is void. The consideration or object of an agreement is unlawful when the court regards it as opposed to public policy. If anything is done against the public law or public policy that would be illegal in as much as the interest of the public would suffer in case a contract against public policy is permitted to stand. Public policy is a principle of judicial interpretation founded on the current needs of the community. The law relating to public policy cannot remain immutable. It must change with passage of time. A bargain whereby one party is to assist another in recovering property and is to share in the proceeds of the action and such assistance is by using the influence with the administration, irrespective of the fact that the persons intended to be influenced are not amenable to such influence is against protection and

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promotion of public welfare. It is opposed to public policy. "

18. In view of the aforesaid exposition of the legal position,

reverting to the facts of the case, since there is no element of

fiduciary capacity or the possible abuse of the position to influence

the decision of the public officers, the agreement in question cannot

be said to be either prohibited by law or opposed to public policy.

19. On the second aspect, arising out of the status of the plaintiff as

an agent of Mr.Aspi Sattah, as indicated above, the consideration

would be in the realm of the possible conflict of duty and interest.

The jural relationship between the 'principal' and 'agent' in such

matters is governed by the provisions contained in sections 215 and

216 of the Indian Contract Act. An agent is under an obligation not to

act prejudicial to the interest of the principal or make a secret profit

out of the business of the agency. Section 215 of the Act, provides

that the principal may repudiate the transaction, if the case shows,

either that any material fact has been dishonestly concealed from him

by the agent, or that the dealings of the agent have been

disadvantageous to the principal. Section 216, on the other hand,

confers on the principal the right to claim from the agent any benefit

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which may have resulted to him from the transaction.

20. The question of enforceability of the contract, which an agent

had entered into, and the principal's entitlement to recover the benefit

derived by the agent would arise when the principal claims that the

principal was not aware of the transaction and agent had entered into

the transaction, without his consent. In the case at hand, Mr. Aspi

Sattha has filed an affidavit sworn on 5-02-2020 before a Notary

Public of Switzerland. In the said affidavit, Mr.Aspi Sattha has

affirmed that he was fully aware of the MOA dated 6-01-2016 entered

into between the plaintiff and the defendant and he never had any

objection to the said arrangement and it was done with his knowledge

and consent. The enforceability of the agreement is thus beyond cavil.

21. The submission based on the alleged adverse circumstances in

which the agreement in question was executed by and between the

plaintiff and the defendant, now warrants consideration. Once, the

execution of the agreement is admitted, a heavy burden rests on the

defendant to demonstrate that the agreement was executed under the

circumstances which would affect its enforceability. The affidavit-in-

reply is conspicuously silent on this aspect. To add to this, there is

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material on record in the form of the contempt proceedings initiated

against the defendant, wherein the defendant had sought time, on

multiple occasions, to make payment to Mr.Aspi Sattha. Eventually,

the consent terms were modified and the defendant agreed to pay an

enhanced sum of Rs.12,25,00,000/- instead of the initial agreed sum

of Rs.11,00,00,000/-. Evidently, no grievance was made till the filing

of affidavit in reply that the defendant was coerced to enter into the

agreement in question or the consent terms with Mr.Aspi Sattha on

8-01-2016. In the aforesaid view of the matter, I find it rather

difficult to accede to the submission that the circumstances in which

the MOA came to be executed warrant an unconditional leave to

defend the suit.

22. On the substance of the defence that the plaintiff had not

complied with all terms of the MOA, especially the clauses, extracted

above, the submission on behalf of the plaintiff carries conviction. It

is a matter of record that R.A.E. No.1430/5195/19, in which Mr. Aspi

Sattha had agreed to submit to the decree that all tenancy rights, in

the suit premises, stood determined, came to be dismissed by an order

dated 7-12-2013. Indisputably, it is for the plaintiff in the said suit to

take steps to get the suit restored and thereafter seek a decree

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therein. The plaintiff, in the instant suit, in the backdrop of the

aforesaid circumstance, cannot be faulted for non-compliance of the

said stipulation. As regards, withdrawal of the allegations, applications

etc. in Land Acquisition proceedings, being Case No.LAQ/MH & D

Act/45 pending before the Land Acquisition Officer, MHADA, the

plaintiff has placed on record a copy of the letter dated 19-12-2016

wherein a reference is made to the settlement of the dispute between

the parties, in accordance with the consent terms executed on

8-01-2016 and the order passed by the Supreme Court on 12-01-2016

in Civil Appeal No.261 of 2016. By the said letter Mr.Aspi Sattha has

withdrawn all allegations, applications, affidavits as well as claims in

the proceedings being Case No.LAQ/MH & AD Act/45 pending before

the Special Land Acquisition Officer (5), MHADA at Mumbai.

23. In contrast to this, there is no material on record to indicate

that the defendant had called upon the plaintiff to perform the terms

of the obligation, even after the plaintiff made demand of the amount

under the MOA by emails dated 19-01-2017 and 3-07-2017. The

defendant, on the other hand, by email dated 6 th August 2018 called

upon the plaintiff to prevail upon Mr.Aspi Sattha to grant extension of

time in contempt proceedings. Indisputably, the resolution of the

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dispute in the contempt proceedings was not part of the obligation

which the plaintiff was to discharge under the MOA.

24. The conspectus of the aforesaid consideration is that the

substantive defences sought to be raised on behalf of the defendant to

contest his liability do not fall in the category of either positive

defence or fair and reasonable defence. The clear and categorical

admission of the execution of the MOA and obligation thereunder to

pay a sum of Rs.1,50,00,000/- and taxes thereon towards the co-

ordination fees brings the case within the ambit of the proposition

17.6 of the judgment of the Supreme Court in the case of Hubtown

Limited (Supra), even if it is assumed that there is a fair and

reasonable defence, which reads as under :

"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."

25. As regards the defence of the MOA being insufficiently stamped,

which is technical in nature, prima-facie, it seems that the instrument

in question falls in the residuary category provided in Article 5(h)(B)

of the Schedule-I appended to the Stamp Act, 1958. The clause (E)

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and (3) of the MOA explicitly provide that the plaintiff was entitled to

co-ordination fees for co-ordination work. The MOA, if construed in

the backdrop of the intention of the parties, which becomes evident

from the text of the agreement, properly falls within the residuary

clause. Even otherwise, this Court has consistently held that the

defence of insufficiency of the stamps is not available to a litigant to

avoid the indisputable liability, especially at the stage of consideration

of grant of leave to defend in a summary suit.

26. Thus, in the facts of the case, I am not persuaded to agree with

the submission on behalf of the defendant that an unconditional leave

to defend the suit is required to be granted on the count of

insufficiency of stamp duty paid on the instrument in question.

27. In the aforesaid circumstances, in my considered opinion, having

regard to the entire setting of the matter, especially the fact that the

consent terms came to be executed a day after the execution of the

MOA, the defendant deserves a conditional leave to defend the suit

upon deposit of the amount of Rs.1,50,00,000/- in the Court. Hence,

I am inclined to pass the following order :

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O R D E R

(i) The leave to defend the suit is granted

to the defendant, subject to deposit of a sum of

Rs.1,50,00,000/- in Court, within a period of

eight weeks from today.

(ii) In the event of the deposit of the

amount, the defendant may file the written

statement within a period of four weeks of

deposit.

(iv) In the event, the defendant fails to

deposit the amount, the suit be listed before the

Court for passing the decree consequent to failure

of the defendant to comply with the condition of

deposit on which the leave to defend is granted.

(v) The summons for judgment stands

disposed of.

[ N.J. JAMADAR, J. ]

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