1. The plaintiffs seek recovery of a sum of Rs.31,40,06,037 /- with interest thereon at 19.56% per annum from 28.02.2018 and further interest at 19.56% per annum on Rs.18,60,00,000/- from the date of presentation of the plaint until realization.
2. The suit claim arises out of the financial assistance provided by the plaintiffs to the defendants in relation to the acquisition of land for purposes of construction of a mega shopping mall.
3. In the plaint, the plaintiffs stated as follows. The defendants approached the plaintiffs in course of business and requested the plaintiffs to invest a sum of Rs.9,00,00,000/- for the purposes of enabling the acquisition of lands for construction of a mega mall. As consideration for such investment, the defendants agreed to provide an assured return on investment. In connection therewith, the defendants executed sale agreements and general powers of attorney as per details set out in paragraph 6 of the plaint. The plaintiffs further stated that all the original title deeds relating to immovable properties at Devadhanam and Panayakurichi villages in Tiruchirapalli Taluk and at Perambalur village were deposited with the plaintiffs as security for the investment. According to the plaintiffs, the defendants did not commence construction of the shopping mall until the year 2013. Thereafter, the defendants wanted the plaintiffs to exit the project and entered into two agreements with the plaintiffs for such purpose.
4. Under Memorandum of Agreement dated 27.06.2013(MOA-1), the defendants agreed to pay a sum of Rs.8,25,00,000/- to the plaintiffs after giving credit to the sum of Rs.75,00,000/-, which had been paid on the date of execution thereof. Under Memorandum of Agreement dated 21.05.2014 (MOA-2), the defendants agreed to pay a sum of Rs.9,00,00,000/- as return on investment on or before 31.12.2014. Thereafter, it is stated that the defendants failed to pay the amounts specified in MOA-1 and 2. Instead, the defendants requested the plaintiffs to advance a further sum of Rs.60,00,000/-. The said sum was disbursed by the plaintiffs on 26.12.2014 to Mr.P.K.S.Prasad and P.J.K.Sairam, as per the first defendant's request, and the first defendant executed two promissory notes as security for the said loan and issued two cheques for Rs.50,75,000/- and Rs.10,15,000/-. The first defendant also issued a letter of undertaking dated 26.12.2014 by which he undertook to repay the outstanding principal amount of Rs.8,25,00,000/- with interest thereon and a sum of Rs.9,75,00,000/- towards return on investment on or before 28.02.2015 with further interest thereon. One more letter of undertaking was issued by the first defendant on 15.03.2015 agreeing to discharge the entire liability along with interest at 19.56% per annum with monthly rests. Pursuant thereto, the defendants paid a sum of Rs.1,62,00,000/- by RTGS transfer on 15.04.2015 and promised to pay the remainder within 30 days.
5. According to the plaintiffs, the defendants thereafter fraudulently created a sham company called LSR Properties India Pvt. Ltd., the third defendant herein, and transferred the Devadhanam lands in favour of the third defendant without the consent of the plaintiffs. The plaintiffs further stated that the first defendant by e-mail of 03.06.2017 attached a draft memorandum of agreement and admitted liability. A similar acknowledgment of liability was made on 23.01.2018. Towards discharge of the principal liability, the defendants issued four cheques in favour of the first plaintiff. When the said cheques were presented for payment, the cheques were returned with the endorsement funds insufficient. After issuing a lawyer's notice dated 07.03.2018, and receiving a reply dated 16.03.2018 whereby the liability was denied without basis, the present suit was instituted.
6. The defendants filed a common written statement. In the written statement, the defendants stated that they had proposed a scheme for development of an integrated housing multiplex and shopping mall at Devadhanam Village, Trichirapalli Taluk. In relation thereto, it is stated that the third defendant company was floated. According to the defendants, the plaintiffs promised to make an initial investment of Rs.9,00,00,000/- in the said project as against the envisaged project cost of Rs.100,00,00,000/-. Such investment was to be made within 2 years from 2013. The defendants stated that they had borrowed a total sum of Rs.3,17,50,000/- from the first plaintiff between 08.05.2007 and 26.12.2014 and that the said amounts were repaid to the plaintiffs' bank account. At that juncture, it is stated that the defendants handed over the original title deeds pertaining to the immovable property owned by them at Devadanam and Panayakurichi village, Thiruchirapalli Taluk, and at Perambalur village.
7. According to the defendants, on 27.06.2013, they were physically intimidated by the plaintiffs and forced to sign MOA-1 and 2. The defendants further stated that the second defendant refused to sign the said MOAs and therefore the first defendant signed twice. The defendants alleged that the MOAs were executed under duress and coercion. The defendants asserted that they repaid the amount borrowed from and payable to the plaintiffs by remitting Rs.3,39,37,500/- through electronic transfer under real time gross settlement (RTGS). In spite of recovering the entire loan amount, the defendants stated that the plaintiffs refused to return the blank cheques, demand promissory notes and title documents on one pretext or other. The defendants alleged that the plaintiffs did not invest a sum of Rs.9,00,00,000/-. The defendants stated that they transferred the property to the name of the third defendant for the purpose of facilitating further development and for obtaining loans and other credit facilities. According to the defendants, they were unable to commence the project due to the unilateral withdrawal and refusal of the plaintiffs to return the title documents to the property. The defendants admitted receipt of a sum of Rs.60,00,000/- from the plaintiffs as loan and stated that the same was repaid on 15.04.2015.
8. Based on these pleadings, the following issues were framed by the Court on 09.08.2021:
(1) Whether the suit is barred by limitation
(2) Whether the present suit is maintainable before the commercial division
(3) Whether the High Court had territorial jurisdiction to entertain the suit
(4) Are the MOAs dated 27.06.2013, 21.05.2014 and letter of undertaking dated 15.03.2015 null and void, contrary to statute
(5) Whether the plaintiffs are entitled to the suit claim
(6) Whether the plaintiffs have accepted payment of settlement towards the debt owed by the defendants
(7) Whether the plaintiffs have accepted payment of Rs.3,39,37,500/- from the defendants in full and final settlement towards the debt owed by the defendants
(8) Whether the sale deeds executed by the first and second defendants in favour of the third defendant is bona fide and
(9) To what other reliefs, the parties are entitled to
9. The plaintiffs examined the first plaintiff as P.W.1 and exhibited 15 documents through P.W.1 as Exs.P1 to P15. P.W.1 was cross examined by learned counsel for the defendants. The defendants examined the first defendant as D.W.1. D.W.1 was cross examined by learned counsel for the plaintiffs.
10. Oral submissions on behalf of the plaintiffs were advanced by Mr.K.V.Babu, learned counsel, and on behalf of the defendants by Mr.T.Mohan, learned counsel.
11. Mr.Babu submitted that the defendants availed of financial assistance from the plaintiffs as evidenced by MOA-1(Ex.P1) and MOA2(Ex.P2). In relation thereto, he stated that the original title deeds were deposited with the plaintiffs as security. However, without the consent of the plaintiffs, the immovable property provided as security to the plaintiffs was conveyed in favour of the third defendant.
12. Mr.Babu dealt with the aspect of limitation first. He relied upon the certificate issued by the Indian Overseas Bank, Saligramam Branch, Chennai-93 dated 23.03.2018(Ex.P7) to contend that a sum of Rs.1,62,00,000/- was credited in the account of the plaintiffs on 15.04.2015 and that the remittance was made by the first defendant. He also referred to the bank statement for the period from 10.04.2015 to 30.04.2015 as evidence of the said amounts being credited on 15.04.2015 into the account of the first and second plaintiffs. After pointing out that the suit was presented on 12.04.2018, he also relied upon Ex.P14, which is the reply notice dated 16.03.2018 from the defendants to the notice dated 07.03.2018 (Ex.P13). Learned counsel submitted that the defendants denied liability under Exs.P1 and P2 for the first time by this reply. Consequently, he submitted that the plaintiffs are entitled to compute limitation from 16.03.2018. On this issue, he relied upon the judgment of this Court in Shango Technologies Pvt. Ltd. v. Chemplast Sammar Ltd. MANU/TN/1715/2018.
13. The next contention of learned counsel for the plaintiff was that the suit qualifies as a commercial suit both in terms of Section 2(1)(c) (i) and 2(1)(c)(vii) of the Commercial Courts Act, 2015(The Commercial Courts Act). In this connection, he relied upon the order passed by this Court on 14.07.2021 in the application to return the plaint. With reference thereto, he stated that this Court held that the suit is in respect of a commercial dispute as per Section 2(1)(c)(i) of the Commercial Courts Act. He also submitted that Exs.P1 to P8 and P11 to P12 qualify as mercantile documents.
14. On the merits of the dispute, he first dealt with issue No.4 which pertains to the validity of MOA-1 and 2 and the letter of undertaking dated 15.03.2015. On this issue, he referred to the cross examination of D.W.1 and, in particular, the answers to questions 5 to 10, 18 to 19 and 46 to 49. With specific reference to D.W.1's answer to question 10, he pointed out that D.W.1 agreed that he had signed Exs.P1, P2 and P5 both on his behalf and as the agent of his wife/the second defendant. With reference to question 19 and the answer thereto, he pointed out that D.W.1 admitted that he had regularly borrowed money from the first plaintiff from 2007. With reference to question 49 and the answer thereto, he submitted that D.W.1 admitted that a dispute in relation to Ex.P2 was raised for the first time through reply notice dated 16.03.2018(Ex.P14). Learned counsel submitted that the averments in paragraph 10 of the written statement are contradictory. He pointed out that Ex.P10, which is an e-mail admittedly issued by the first and second defendants to the plaintiffs, refers to Ex.P6. Therefore, Ex.P6, which is disputed by the defendants, is liable to be accepted. For all these reasons, learned counsel submitted that issue No.4 is liable to be decided in favour of the plaintiffs.
15. As regards issue Nos.5 and 6, which relate to the entitlement of the plaintiffs to the suit claim and whether the plaintiffs accepted the sum of Rs.3,39,37,500/- as full and final settlement, he submitted that there is no evidence of settlement. As against the liability of Rs.8,25,00,000/- under Ex.P1 and Rs.9,75,00,000/- under Ex.P2, he pointed out that only Rs.1,00,00,000 was repaid in 2015. Consequently, he submitted that the outstanding principal amount is Rs.17,00,00,000/-. With regard to issue No.8 which relates to the execution of sale deeds by the first and second defendants in favour of the third defendant, he referred to questions 69 to73 to D.W.1 and pointed out that D.W.1 admitted that the property was sold to third parties in the year 2010 although the original title deeds were in the custody of the plaintiffs. In support of these contentions, learned counsel for the plaintiffs referred to and relied on the following judgments:
(i) Shanti Conductors Pvt. Ltd. and others v. Assam Electricity Board and others 2016 (5) SCC 13.
(ii) S.Jahaberkassim v. Sukhversha. 2021 SCC Online Mad 2527.
(iii) Sangeetha Traders v. T.A.Shanmugam 2019 SCC Online Mad 26993.
(iv)Sri Vasavi Finance Corporation v. M.R.Patel and others MANU/TN/3792/2011.
(v) Michael Hart v. Ninestar Information Technologies Ltd 2013 4 CTC 351. [LQ/MadHC/2013/2543]
(vi) Skyscrappers Infrascon Pvt. Ltd. v. M/s. Tantia Constructions Ltd, C.P.No.470 of 2016, by order dated 02.12.2016.
(vii) Anita Rani v. Ashok Kumar 2022 (1) MLJ 268 [LQ/SC/2021/3207 ;] ">2022 (1) MLJ 268 [LQ/SC/2021/3207 ;] [LQ/SC/2021/3207 ;]
(viii) Acolyte Soft Pvt. Ltd. v. Kondaduvom Entertainment and others, MANU/TN/0048/2021.
16. Learned counsel for the defendants made submissions to the contrary. The first submission of learned counsel for the defendants was that the dispute is not a commercial dispute and therefore the Commercial Division does not have jurisdiction over the same. By referring to Section 2(1)(c)(i) of the Commercial Courts Act, learned counsel contended that disputes arising out of ordinary transactions of persons falling under four categories, namely, merchants, bankers, financiers and traders qualify as commercial disputes. He pointed out that the plaintiffs are not sellers of goods or providers of services and, therefore, are not merchants or traders. They are clearly not bankers because they do not carry on the business of banking. With reference to the question as to whether they are financiers, he referred to the answers to questions 10 and 11 by P.W.1 in course of cross examination, and pointed out that P.W.1 stated that he is not carrying on any business and that he has rental income. More importantly, he pointed out that P.W.1 denied that he is a financier by profession. His next contention, in this regard, was that the order of this Court in paragraph 14 of the application for return of plaint is not conclusive because the said order was passed at the pre-trial stage and the Court did not have the benefit of the evidence presently on record. By drawing reference to the judgment of the Hon'ble Supreme Court in Ambalal Sarabhai Enterprises Ltd. v. K.S.Infraspace LLR & another, Civil Appeal No.7843 of 2019, he submitted that the Hon'ble Supreme Court concluded that Section 2(1)(c) should be construed strictly so as to ensure that only genuine commercial disputes are dealt with under the expedited procedure prescribed by the Commercial Courts Act. He pointed out that the Court concluded that a dispute relating to immovable property would not qualify as a commercial dispute unless such immovable property is used exclusively in trade or commerce. In particular, he pointed out that the Court held that proposed use does not satisfy the requirements of Section 2(1)(c)(vii). Thus, he submitted that this dispute does not qualify as a commercial dispute either in terms of clause (i) or (vii) of Section 2(1)(c) of the Commercial Courts Act.
17. Learned counsel for the defendants further submitted that the plaintiffs provided financial assistance only to the extent of about Rs.3,17,00,000/-. In relation thereto, four sale agreements were executed by and between the parties. In the said sale agreements, the amount received was specified as Rs.4,05,00,000/-, which includes interest on the sum of Rs.3,17,00,000/-. By referring to the answers to questions 26 to 34 by P.W.1 in course of cross examination, he pointed out that P.W.1 admitted in response to question 33 that no sale took place pursuant to the sale agreements. Although P.W.1 stated that the balance sale consideration under the sale agreement was paid, he submitted that no evidence thereof was provided by the plaintiffs. By drawing reference to the answers to questions 110 and 111 in course of cross examination of P.W.1, he submitted that P.W.1 was unsure and stated that he has to check whether the plaintiffs received Rs.3,39,37,500/- from the defendants by bank transactions. With reference to Ex.P9, learned counsel submitted that the e-mail was filed without attaching the MOA. In that factual context, the e-mail was admitted in the affidavit of admission/denial of documents. When the plaintiffs subsequently tendered the attachment (the MOA), the defendants raised objections and were allowed to canvass such grievances by this Court, in course of final disposal, by order dated 17.11.2011.
18. With regard to the interest claim of the plaintiffs, learned counsel relied upon the Tamil Nadu Money Lenders Act, 1957 (the Money Lenders Act) and pointed out that the maximum interest that may be levied for a secured loan is 9% p.a. By referring to the answers to questions 51, 54 and 69 to 75 during the cross examination of P.W.1, he stated that the evidence discloses that only Rs.4,05,00,000/- and Rs.62,00,000/- were provided as loans. Out of this, the repayment of Rs.1,62,00,000/- on 15.04.2015 is established by the documents on record. The sum of Rs.4,05,00,000/- was paid under agreements of sale and the plaintiffs intentionally opted not to exhibit the agreements of sale after filing them as plaint documents when the suit was instituted. By referring to questions 109 to 113 in course of the cross examination of P.W.1 and the answers thereto, he stated that P.W.1 admitted that the sale transactions were not concluded pursuant to the sale agreements. Therefore, he submitted that the defendants are not liable for the suit claim.
19. By way of rejoinder, learned counsel for the plaintiffs referred to the answers to questions 15 to 18 in course of the cross examination of D.W.1 and stated that D.W.1 admitted that there was an understanding for investment on profit sharing basis between the plaintiffs and the defendants. By relying on the answer to question 19, he submitted that D.W.1 admitted that he had regularly borrowed from the first plaintiff from 2007. In view of these answers, learned counsel submitted that the plaintiffs qualify as financiers as per Section 2(1)(c)(i) of the Commercial Courts Act. As regards the suit claim, learned counsel reiterated that the execution of Exs.P1, P2 and P5 were admitted by the defendants. Consequently, the plaintiffs are entitled to the suit claim.
20. Upon considering the pleadings, evidence and contentions, the issues framed by the Court should be determined. Issue No.1 deals with limitation and is considered first.
Issue No.1
21. The suit was presented on 12.04.2018. The suit is for recovery of money. The plaintiffs relied on Exs.P1 and P2 as the foundation for the money claim. Ex.P1 is dated 27.06.2013 and provides for the payment of a sum of Rs.8,25,00,000/- by the defendants on or before 30.06.2014. Likewise, Ex.P2 also provides for the payment of a sum of Rs.9.75,00,000/- by the defendants on or before 31.12.2014. Thus, assuming that there are no subsequent acknowledgments, the limitation period would run from 30.06.2014 and 31.12.2014, which are the dates on which the defendants agreed to pay Rs.8,25,00,000/- and Rs.9,75,00,000 /-, respectively. The plaintiffs also exhibited a letter of undertaking dated 26.12.2014(Ex.P5). By this document, the defendants agreed to repay the sums of Rs.8,25,00,000/- and Rs.9,75,00,000/- on or before 28.02.2015. By virtue of this document, the limitation period is extended by three years from 01.03.2015. In addition, the plaintiffs exhibited a certificate dated 23.03.2018 from the Indian Overseas Bank(Ex.P7), whereby the bank certified that a total sum of Rs.1,62,00,000/- was received from the defendants into the bank account of the plaintiffs on 15.04.2015. As a result of this payment, the limitation period stands extended by three years from 15.04.2015, i.e. up to 14.04.2018. Since the plaint was presented on 12.04.2018, the suit is within time. Therefore, issue No.1 is decided in favour of the plaintiffs and against the defendants.
Issue No.2
22. Issue No.2 relates to whether the suit is maintainable before the Commercial Division. In relation thereto, while disposing of an application for return of the plaint, this Court entered the following findings in the order dated 14.07.2021 in A.No.1655 of 2021:
“14. The pleadings as found in the plaint, prima facie indicates that the suit arising from an agreement for finance in promoting business/construction of Mega Mall. After execution of Memorandum of Understanding, Letter of Undertaking, power of attorney and deposit of title deed, the defendants have issued cheques and same were bounced without fund. The issuance of cheques and bouncing happened within the jurisdiction of this Court. There is an element of financial assistance in the course of real estate business besides enforcement of mercantile documents. Thus, the lis falls within the ambit of Section 2(1)(c)(i) of the Act which reads, 'Ordinary transactions of merchants, bankers, financiers and traders such as those related to mercantile documents, including enforcement and interpretation of such document.'
15. The suit falls within the definition of commercial dispute. The suit claim is above the specified value fixed to be heard by the Commercial Division...”
Learned counsel for the defendants contended that the aforesaid observations were made at the pre-trial stage and cannot be construed as conclusive or dispositive. The said contention merits acceptance. Therefore, the objection of the defendants warrants consideration. In order to maintain a suit before the Commercial Division, the suit should relate to a commercial dispute as per Section 2(1)(c) of the Commercial Courts Act. 22 categories of commercial dispute are enumerated in Section 2(1)(c), including one category to be notified by the Central Government. Out of these 22 categories, the relevant categories for the present purposes are those covered by clause (i) and (vii). The said clauses are set out below:
(c) “commercial dispute” means a dispute arising out of–
(i) ordinary transactions of merchants, bankers, financiers and traders such as those relating to mercantile documents, including enforcement and interpretation of such documents;
(ii) – (vi) * * *
(vii) agreements relating to immovable property used exclusively in trade or commerce.
(viii) – (xxii) * * *”
From the language of Section 2(1)(c), it follows that the enumeration is exhaustive because the word “means” is used therein. However, it should be noticed that the expression a dispute arising out of is used immediately thereafter and this expression has the effect of expanding the amplitude of each of the 22 clauses set out therein. Clause (i) deals with ordinary transactions of merchants, bankers, financiers and traders. The contention of learned counsel for the defendants that the plaintiffs do not qualify as merchants or traders is liable to be accepted because they are not engaged in the sale of goods or the provision of services. Because they do not carry on banking business, they are not bankers. The only category that warrants close consideration is financiers. Since the statute does not define the word “financiers”, definitions from two recognised dictionaries are set out below. The definition from the 4th edition of Black's Law Dictionary is as under:
"FINANCIER: A person employed in the economical management and application of public money; one skilled in matters appertaining to the judicious management of money affairs.”
The definition of financier from the 2008 Edition of Merriam-Webster's Advanced Learner's English Dictionary is reproduced below:
“a person who controls the use and lending of large amounts of money.”
The use of the words “ordinary transactions” means all transactions entered into by the specified categories of business persons in course of their regular business activity. The meaning thereof would be clear if tested with illustrations. A merchant is ordinarily engaged in the business of sale of goods. Any dispute arising out of such sale of goods would qualify as a dispute arising out of the ordinary transactions of a merchant. Instead, if the said merchant were to buy an immovable property and a dispute arises therefrom, the said dispute would not qualify as a dispute arising out of the ordinary transactions of the merchant. Likewise, as is evident from the above definitions, a financier ordinarily carries on the business of lending money. Any dispute arising out of the lending activity of the financier would qualify as a commercial dispute. If the said lender enters into an agreement to acquire the business of another lender, a dispute arising therefrom would not qualify as arising out of an ordinary transaction of the financier. It should, however, be borne in mind that a transaction which is outside the ordinary course of business of merchants, bankers, financiers and traders may nonetheless qualify as a commercial dispute if it falls within the scope of one of the other entries in Section 2(1)(c).
23. In this case, the primary contention of the plaintiffs is that the dispute arises out of the ordinary transactions of the plaintiffs as financiers. The defendants relied on the answers of P.W.1 in course of cross examination to contend that the plaintiffs do not qualify as financiers. Questions 10 and 11 are relevant in this connection and are set out below:
Q.10: What are you doing
A: I am not doing any business. Witness adds: I have rental income.
Q.11: Are you a financier by a profession
A: No.
Thus, in reply to question 10 above, P.W.1 stated that he is not a financier by profession. Learned counsel for the defendants relied strongly on this answer to set up the case that the plaintiffs are not financiers. In order to decide this issue, it is necessary to consider the evidence holistically. In paragraph 3 of the proof affidavit of P.W.1, he stated that defendants 1 and 2 were short of funds when they decided to construct a commercial complex in T.Nagar. He stated that they approached him for financial assistance and that he provided financial assistance of Rs.50,00,000/-. In paragraph 4 of the proof affidavit, P.W.1 stated that defendants 1 and 2 approached him with a proposal to develop land and establish a commercial/shopping complex. In relation thereto, he stated that the plaintiffs requested for and received an investment of Rs.9,00,00,000/- in the project. In paragraph 7, he stated that the defendants agreed, in 2014, to repay Rs.9,00,00,000/- towards the principal sum and Rs.9,75,00,000/- as return on investment because they did not make any progress on the proposed construction of the shopping complex. The evidence of D.W.1 should also be taken into consideration while deciding this issue. In paragraph 4 of the proof affidavit of D.W.1, D.W.1 stated that the plaintiffs gave a loan of Rs.50,00,000/- to the defendants for the construction of a commercial complex in T.Nagar. In paragraphs 7 and 17, D.W.1 stated that he borrowed a sum of Rs.3,17,50,000/- from the plaintiffs. In reply to questions 18 and 19, D.W.1 stated as follows:
Q.18: Is it correct to state that there has been business dealings between yourself and the first plaintiff on earlier occasions before filing of this suit
A: Yes
Q.19: Is it correct to state that since 2005 there has been regular borrowals from your end with the first plaintiff and you used to repay the loans availed
A: No, it is only from 2007.
Therefore, the evidence of D.W.1 is that there were business dealings between him and the first plaintiff and that he had borrowed monies from the first plaintiff from 2007.
24. The answer of P.W.1 to question 10 should be viewed in the above overall context. While P.W.1 denied that he was a financier by profession, he deposed in course of the examination-in-chief that he had provided financial assistance to the defendants for construction of a commercial complex in the first instance and thereafter as investment for the proposed construction of a commercial complex/shopping mall. D.W.1 also admitted that there were regular business dealings and borrowing by him from the plaintiffs from 2007. When the above evidence is examined cumulatively, I conclude that the transactions between the plaintiffs and defendants qualify as transactions between financiers and borrowers. Since this dispute arises out of such transaction, it qualifies as a commercial dispute. In view of the above conclusion, it is unnecessary to examine whether the dispute qualifies as a commercial dispute as per clause (vii) of Section 2(1)(c) of the Commercial Courts Act. Issue No.2 is, therefore, decided in favour of the plaintiffs and against the defendants.
Issue No.3
25. Issue No.3 relates to the territorial jurisdiction of this court. Exs.P1 and P2 form the foundation for the suit claim. Both these documents were executed at Chennai. In fact, Ex.P5, which is the letter of undertaking dated 26.12.2014 was also executed at Chennai. All the defendants reside or carry on business at Chennai. Therefore, Issue No.3 is decided by concluding that this Court has territorial jurisdiction .
Issue Nos. 4 to 7
26. These issues relate to the validity of Exs.P1, P2 and P5, the entitlement of the plaintiffs to the suit claim and whether the plaintiffs have accepted a sum of Rs.3,39,37,500/- from the defendants in full and final settlement. Since these issues are inter-related, they are dealt with and disposed of jointly.
27. As stated earlier, the suit claim is founded largely on Exs.P1, P2 and P5. The execution of these documents is admitted by D.W.1. Question No.10 and the answer thereto of D.W.1 are set out below:
Q.10: Is it correct to state that you have affixed your signature in Exs.P5, P1 and P2 for yourself and also as power agent of your wife, the second defendant
A: Yes.
Thus, D.W.1 does not deny executing the above mentioned three documents. The defence of the defendants is that these documents were executed under undue influence and coercion. Since the said defence is set up by the defendants, the burden of proof is on the defendants. Apart from the assertions in the written statement and proof affidavit, the defendants have not exhibited any documents that even refer to undue influence or coercion. If Exs.P1, P2 and P5 were, indeed, executed under undue influence or coercion, the normal conduct of the defendants would have been to issue communications within a reasonable time thereafter to disown the said documents. Ex.P1 was executed on 27.06.2013, Ex.P2 on 21.05.2014 and Ex.P5 on 26.12.2014. From the above, it should be noticed that there was an interval of almost one year between Exs.P1 and P2 and a further interval of about 7 months between Exs.P2 and P5. During this period, the defendants borrowed further sums of Rs.10,00,000/- and Rs.50,00,000/- from the plaintiffs under Exs.P3 and P4 (promissory notes). Thereafter, the first reference to undue influence and coercion is made in the reply notice dated 16.03.2018(Ex.P14). On the basis of the above evidence, I conclude that the defendants failed to establish that Exs.P1, P2 and P5 were executed under undue influence or coercion. In view of the admitted position that the documents were executed by the first defendant for and on behalf of himself and the second defendant, I conclude that Exs.P1, P2 and P5 are valid and binding on the defendants.
28. This leads to the question whether the plaintiffs are entitled to the suit claim. The suit claim is for a sum of Rs.31,40,06,037/-. This claim consists of a sum of Rs.8,25,00,000/- under Ex.P1 and Rs.9,75,00,000/- under Ex.P2. Learned counsel for the defendants disputed this claim on the ground that the plaintiffs failed to prove that they advanced a sum of Rs.9,00,00,000/- to the defendants. This contention was controverted by learned counsel for the plaintiffs on the basis that the defendants admitted receipt of Rs.9,00,00,000/- under Ex.P1 and that Ex.P1 also records that a sum of Rs.75,00,000/- was paid towards part repayment of the liability of Rs.9,00,00,000/-. Learned counsel for the defendants contended that only Rs.3,17,00,000/- was received from the plaintiffs and that about Rs.3,39,50,000/- was repaid. The said assertion was not corroborated by the defendants by placing evidence of repayment of Rs.3,39,50,000/-. The evidence on record with regard to repayment is limited to Ex.P8 and the enclosure thereto, which reflect repayment of Rs.1,62,00,000/-. The said sum of Rs.1,62,00,000/- includes repayment of the aggregate sum of Rs.60,00,000/- , which was received under the two promissory notes(Exs.P3 and P4). Thus, as regards the liability under Exs.P1 and P2, the evidence on records leads to the conclusion that only Rs.1,00,00,000/- was repaid. In effect, out of Rs.8,25,00,000/-, there is evidence of repayment of Rs.1,00,00,000/- leaving a balance of Rs.7,25,00,000/-.
29. The claim under Ex.P2 should be examined next. Ex.P2 provides for the payment of a sum of Rs.9,75,00,000/- as return on investment. The defendants herein agreed to pay the said sum on or before 31.12.2014. Under Ex.P5, which is dated 26.12.2014, the plaintiffs issued cheques towards discharge of liability under Exs.P1 and P2 and undertook to repay the same by 28.02.2015. A return on investment is in the nature of profit from investment. Since the defendants agreed to pay these amounts not only under Exs.P1 and P2 but also under Ex.P5, it is not open to the defendants to deny liability at this juncture on the ground that they did not receive a sum of Rs.9,00,00,000/- from the plaintiffs. Therefore, the plaintiffs are entitled to a sum of Rs.8,25,00,000/- under Ex.P1 and Rs.9,75,00,000/- under Ex.P2 after setting off the sum of Rs.1,00,00,000/- which was repaid in April 2015.
30. The interest claim warrants careful consideration. As regards the sum of Rs.8,25,00,000/-, which is payable in terms of Ex.P1, the claim is a straight forward claim for repayment of a debt due. The evidence on record indicates that the transaction between the parties is commercial. Under Ex.P1, the defendants agreed to pay the said sum on or before 30.06.2014. No interest rate is specified in Ex.P1. Ex.P5 also does not specify the rate of interest. The document which specifies the rate of interest is the letter dated 15.03.2015(Ex.P6). In Ex.P6, the defendants appear to have agreed to repay the amounts due and payable under Exs.P1 and P2 with interest at the rate of 1.5% per month with monthly rests until realization. The defendants dispute the signature in Ex.P6. The other relevant document is Ex.P10. As regards this document, the defendants deny receipt of the attachment but admit receipt of the e-mail. The e-mail does not disclose that there is an attachment thereto. When the above evidence is considered carefully, it appears that there was no clear understanding with regard to the rate of interest. Significantly, learned counsel for the defendants referred to the Moneylenders Act and contended that the maximum interest that may be charged in relation to a secured loan is 9% p.a. This contention warrants acceptance because it was earlier concluded that the plaintiffs are financiers. As financiers, the plaintiffs fall within the definition of moneylenders under the above enactment. Consequently, as regards Ex.P1, ordinarily, the plaintiffs would be entitled to interest at a maximum of 9% p.a. from 30.06.2014 on the outstanding amount. However, the impact of Ex.P2 on the interest claim should be examined before conclusions are drawn.
31. Turning to Ex.P2, as indicated earlier, the amount agreed to be paid thereunder is by way of profit on the investment of Rs.9,00,00,000/- under Ex.P1. The return on investment is payable in lieu of interest. Put differently, when a loan is advanced, the loan is ordinarily repayable with interest. In this case, instead of paying interest on the sum invested, the sum specified in Ex.P2 was agreed to be paid to the investor. Consequently, the plaintiffs are not entitled to both interest on the amounts payable under Ex.P1 and the amounts payable under Ex.P2. If granted, the same would amount to unjust enrichment. Without doubt, the defendants agreed to provide this return on investment on or before 31.12.2014. Because such return on investment was not provided to the plaintiffs by 31.12.2014, the plaintiffs have been deprived of this amount since then. On taking into consideration the fact that there is no agreed rate of interest, interest is awarded on the sum of Rs.9,75,00,000/- at 9% from 01.01.2015.
32. Hence, the plaintiffs are entitled to a sum of Rs.7,25,00,000/- under Ex.P1. As regards interest, they are not entitled thereto on the sums due under Ex.P1 but are entitled thereto on the sum payable under Ex.P2. Thus, the plaintiffs are entitled to interest on Rs.9,75,00,000/- at 9% per annum from 01.01.2015 until realization.
Issue No.8
33. No relief is claimed in relation to the sale deeds executed by the first and second defendants in favour of the third defendant, and the suit is a simple suit for recovery of money. Therefore, it is not necessary to decide issue No.8.
Issue No.9
34. Since the plaintiffs succeeded fully with regard to the principal claim and partly with regard to the interest claim, the plaintiffs are entitled to proportionate costs. The defendants are directed to pay the plaintiffs a sum of Rs.20,00,000/- consisting of a sum of Rs.17,00,000/- towards court fees and a sum of Rs.3,00,000/- towards lawyer's fees and other expenses.
35. In the result, the suit is partly decreed by directing the defendants to pay the plaintiffs the following sums:
(i) A sum of Rs.7,25,00,000/-;
(ii) A sum of Rs.9,75,00,000/- with interest thereon at 9% p.a. from 01.01.2015 until realization.
(iii) Costs of Rs.20,00,000/- consisting of Rs.17,00,000/- towards court fees and Rs.3,00,000/- towards reasonable lawyer's fees and other expenses.
