Ifci Factors Ltd. vs Maven Industries Ltd. & Ors.

on 20 November, 2015 21/03/25, 6:46 PM

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Ifci Factors Ltd. vs Maven Industries Ltd. & Ors. on 20 November, 2015
Author: Valmiki J. Mehta

Bench: Valmiki J.Mehta

* IN THE HIGH COURT OF DELHI AT NEW DELHI

+ CS(OS) No.2950/2015

% 20th November, 2015

IFCI FACTORS LTD. ..... Plaintiff

Through: Mr. Anupam Srivastava, Advocate
with Ms. Sharmistha Ghosh,
Advocate.

Versus

MAVEN INDUSTRIES LTD. & ORS. ..... Defendants

Through:

CORAM:
HON'BLE MR. JUSTICE VALMIKI J.MEHTA

To be referred to the Reporter or not? Yes

VALMIKI J. MEHTA, J (ORAL)

1. Plaintiff who is the lender/creditor has filed this suit for recovery of Rs.10,45,05,890.43/- against three defendants.
Defendant no.1 is the principal borrower company and the defendant nos.2 and 3 are the guarantors.

2. In terms of the averments made in the plaint, the plaintiff in terms of an agreement for factoring of receivables lent an
amount of Rs.4.98 crores under the subject Agreement dated 28.1.2011 which was for domestic factoring upto a limit of
Rs.5 crores. The working of the factoring agreement is that the defendant no.1 is supplier of goods and when it supplies
goods to a third party, such third party is liable to make the payment for the goods supplied to the defendant no.1, but such
third party instead of making the payment to the defendant no.1 will make the payment to the plaintiff which has lent the
amount to the defendant no.1 under the Agreement for Factoring of Receivables dated 28.1.2011. Effectively, the plaintiff
discounts the bills which are raised by the defendant no.1 upon the buyer and the plaintiff on such discounting grants
financial facility to the defendant no.1 on the security of the discounted bills. As per the plaint, after giving the final limit to
the defendant no.1 a total repayment of Rs.42,04,068/- was made and as per the plaintiff now a sum of Rs.10,45,05,890.43/-
is due to the plaintiff from the defendants alongwith contractual rate of interest @ 13% per annum. The subject suit is filed
stating that the suit is based upon the written contract being the Agreement for Factoring of Receivables dated 28.1.2011
under which a limit of Rs.5 crores was available to the defendant no.1 and which agreement was used by the defendant no.1
to avail an amount of Rs.4,98,07,015 by discounting of the bills, and on the date of the suit an amount of
Rs.10,45,05,890.43/- is due being the amount of principal plus interest after giving benefit to the defendants of an amount of
Rs.42,04,068/- having been paid.

3. This matter was listed for admission before the Joint Registrar and the Joint Registrar vide Order dated 7.10.2015 listed
the suit in this Court on account of non-maintainability of the same because the Agreement dated 28.1.2011 had an
arbitration clause. The Order of the Joint Registrar dated 7.10.2015 reads as under:-

"IA No. 20423/2015 (Exemption) Allowed, plaintiff be directed to file the original document be filed within four
weeks time.

Accordingly IA stands disposed of.

CS(OS) 2950/2015 During the course of argument, it revealed that there was an agreement dated 28.01.2011
incorporated the arbitration clause No. 25 between the plaintiff and defendant No.1 which says that:-

"all disputes, differences, claims, questions and controversies arising in connection with this agreement which the
parties are unable to settle between themselves, shall be referred to Arbitration, in accordance with the Arbitration and
Conciliation Act, 1996 or any statutory amendment or modification thereof. The Arbitration proceedings shall be held
in the English language and shall be held at Mumbai/New Delhi."

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Ifci Factors Ltd. vs Maven Industries Ltd. & Ors. on 20 November, 2015 21/03/25, 6:46 PM

Plaintiff also averted in para 6 of the plaint that defendants 2 & 3 executed separate deed of guarantee titled as 'Guarantee'
dated 28.01.2011 in favour of the plaintiff for securing the facility in favour of defendant No.1 by the plaintiff. The amount
of guarantee given by defendants 2 & 3 to the plaintiff was to extend Rs 5 Crore each. The plaintiff has also relied upon the
judgment in case (2003) 5 Supreme Court Cases 531 titled as Sukanya Holdings Pvt Ltd vs Jayesh H Pandey and ors and
further prayed that to issue the summons to the defendants under Order 37 CPC.

In view of the submission and the arbitration clause, the matter be placed before the Hon'ble Court on 20.11.2015 for further
directions"

4. In addition to the non-maintainability of the suit because of the arbitration clause, there would also be an issue as to
whether the subject suit of the type in the present case is maintainable under Order XXXVII of the Code of Civil
Procedure, 1908 (CPC) inasmuch as the amount claimed in the suit does not directly arise from the written Contract
dated 28.1.2011, but in effect the suit seeks the balance payment after the availing of the financial limit by the
defendant no.1 and thereafter defendant no.1 made certain payments i.e the amount claimed in the suit is not the
amount payable by the defendants as being stated as that specific amount in the Agreement dated 28.1.2011 and the
Agreement dated 28.1.2011 is only a historical fact and the amount mentioned as a financial limit therein is not the
amount which is claimed in the suit inasmuch as what is claimed in the suit is the balance due and payable to the
plaintiff after repayment by the defendants of different amounts totaling to a sum of Rs.42,04,068/-.

5. At the outset so far as the view of the Joint Registrar with respect to non-maintainability of the suit is concerned,
reference is required to be made to Section 14(2) of the Specific Relief Act, 1963 which provides that where there is
an arbitration clause/arbitration agreement between the parties, a person who is party to such an arbitration agreement
cannot file a suit and such a suit would be barred. Section 14(2) of the Specific Relief Act, 1963 reads as under:-

"Section 14. Contracts not specifically enforceable.-

(1) xxx xxx xxx xxx (2) Save as provided by the Arbitration Act, 1940 (10 of 1940), no contract to refer present or
future differences to arbitration shall be specifically enforced; but if any person who has made such a contract (other
than an arbitration agreement to which the provisions of the said Act apply) and has refused to perform it, sues in
respect of any subject which he has contracted to refer, the existence of such contract shall bar the suit.

(3) xxx xxx xxx xxx"

6. Clearly therefore a civil suit for recovery of money would be barred because of Section 14(2) of the Specific Relief
Act, 1963 on account of there existing an arbitration clause. However, I must hasten to add that qua this aspect the
aforesaid observations are only prima facie observations with respect to non-maintainability of the suit because of the
arbitration clause, inasmuch as, there is a possibility of examination of the aspect that arbitration proceedings cannot
be resorted to in a case such as the present because it is only a Court which can decide a civil suit as per the procedure
of Order XXXVII CPC and not the arbitration tribunal.

7. Learned counsel for the plaintiff also concedes that so far as defendant nos.2 and 3 are concerned, and who are the
guarantors for the financial limit granted to the defendant no.1, they have not signed the Agreement dated 21.8.2011
relied upon for filing the suit nor any other document admitting and acknowledging any liability with respect to the
original amount lent of Rs.4,98,07,015/- and much less the amount which is now claimed in the suit being the amount
of Rs.10,45,05,890.43/-.

Therefore, so far as defendant nos.2 and 3 are concerned, once there is no written contract from which the amount claimed
in the suit directly springs and arises so far as defendant nos.2 and 3/guarantors are concerned, this suit clearly qua
defendant nos.2 and 3 would not be maintainable under Order XXXVII CPC. It may be noted that every suit which is filed
under Order XXXVII CPC requires an endorsement to be made therein that no relief is claimed in the Order XXXVII suit
which does not arise under Order XXXVII CPC. Therefore, a suit cannot be filed where it is pleaded to be maintainable
against one defendant being defendant no.1, whereas against other defendant nos.2 and 3/guarantors the suit does not lie
under Order XXXVII CPC as they are not parties to the Contract dated 28.1.2011 which as per the plaintiff contains a
liquidated amount which is sought in the suit.

Once in an Order XXXVII CPC suit reliefs are claimed which do not fall under Order XXXVII CPC, viz no reliefs being
available against defendant nos.2 and 3 under Order XXXVII CPC, then such a suit in part claims reliefs not falling under
Order XXXVII CPC, the suit as a whole itself will not lie under Order XXXVII CPC.

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Ifci Factors Ltd. vs Maven Industries Ltd. & Ors. on 20 November, 2015 21/03/25, 6:46 PM

8. Apart from the suit not being maintainable under Order XXXVII CPC on account of reliefs claimed against defendant
nos.2 and 3, the real issue is also with respect to non-maintainability of the present suit under Order XXXVII CPC qua the
defendant no.1 also inasmuch as the suit under Order XXXVII CPC can only be filed if the same is based on a written
contract containing a liquidated amount, or a dishonoured bill of exchange or a cheque or a guarantee containing the
liquidated amount for filing of the suit under Order XXXVII CPC whereas there is no document relied upon by the plaintiff
which obliges the defendant no.1 with respect to the amount claimed in the suit.

9. Let us therefore see the averments which are made by the plaintiff in the present suit as to whether the suit should be
treated under Order XXXVII CPC. In this regard, I would therefore reproduce and refer to paras 4, 5 and 8 to 10 of the suit
plaint, and which paras read as under:-

"4. That the Defendant No.1, through its Senior Management, approached the Plaintiff and requested it to grant the
Domestic Factoring facility to the Defendant No.1. The said Domestic Factoring facility was granted to the Defendant
No.1 and the same was communicated to it by the Plaintiff vide Sanction Letter bearing no. IFL/VSK/2011/01/162
dated 24.01.2011 pursuant to which the Plaintiff entered into an agreement titled as 'Agreement for Factoring of
Receivables' dated 28.01.2011 with the Defendant No.1 (hereinafter referred to as the 'Agreement').

5. That by way of said Agreement dated 28.01.2011, the Plaintiff provided the Domestic Factoring with Recourse
(hereinafter referred to as the 'Facility') facility to the Defendant No.1 for an amount of Rs. 5,00,00,000/- (Rupees
Five Crores only).

xxxxx xxxxx

8. That the Defendant No.1, pursuant to the said Agreement, raised invoices on Jayesh Oil Trade Pvt. Ltd. and
presented the same to the plaintiff for factoring. The Plaintiff paid a sum of Rs.4,98,07,015/- (Rupees Four Crores
Ninety Eight Lacs Seven Thousand Fifteen only) towards the factoring of invoices. A sum of Rs.5,89,02,943/-
(Rupees Five Crores Eight Nine Lacs Two Thousand Nine Hundred Forty Three only) is due from the Defendants
towards the factoring charges, discounts, overdue discounts, tax and other factoring debits as per the said Agreement.

9. The defendants made an aggregate payment of Rs.42,04,068/- (Rupees Forty Two Lacs Four Thousand Sixty Eight
only) towards their liability. The Defendant no.1 on 07.08.2013, handed over a bank draft bearing no.010505 in a sum
of Rs.10,00,000.00 (Rupees Ten Lacs only) to the Plaintiff before the Court of Shri Vinay Kumar Khanna, Additional
Session Judge, which money was realized. On the same day the Defendant no.1 also handed over a Cheque bearing
no.291026 in a sum of Rs.4,00,000.00 (Rupees Four Lacs Only) and a cheque bearing no.291027 in a sum of
Rs.11,00,000.00 (Rupees Eleven Lacs Only), which cheques were also duly realized on presentation. Further a sum of
Rs.5,00,000.00 (Rupees Five Lacs only) was paid by the Defendants to the Plaintiff on 21.02.2014 and another sum of
Rs.10,00,000.00 (Rupees Ten Lacs only) was paid by the Defendants on 01.04.2014 to the Plaintiff.

10. A sum of Rs. 10,45,05,890.43 (Rupees Ten Crores Forty Five Lacs Five Thousand Eight Hundred Ninety and
paisa Forty three only) is due and payable by the Defendants to the Plaintiff towards the satisfaction of the Agreement.
The Defendants are liable to repay the same to the Plaintiff along with the pendent lite and future interest @ 13% per
annum as per the contract between the parties."

10. The issue is that whether the subject suit is maintainable under Order XXXVII CPC and can it be said that the amount
claimed in the suit being of Rs.10,45,05,890.43/- is the liquidated amount which arises from a written contract. I do not have
to examine the aspect, and nor is the case of the plaintiff, that the suit is based upon the dishonoured bill of exchange or
cheque.

11. I have recently had an occasion to examine the maintainability of a suit which is stated to be filed and maintainable
under Order XXXVII CPC in the following three cases, and these are as under:-

(i) Order dated 4.11.2015 in CS(OS) No.3316/2015 titled as Krishan Kumar Wadhwa & Ors. Vs. Arjun Som Dutt &
Ors.

(ii) Order dated 16.11.2015 in CS(OS) No.1369/2015 titled as Vinod Kumar Abbey Vs. Mountain Fall India Pvt Ltd
& Ors.

(iii) Judgment dated 16.10.2015 in CS(OS) No.2552/2011 titled as GE Capital Services India Vs. Dr. K.M. Veerappa

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Ifci Factors Ltd. vs Maven Industries Ltd. & Ors. on 20 November, 2015 21/03/25, 6:46 PM

Reddy and Ors.

12. In the judgment in the case of GE Capital Services India (supra), I have also referred to earlier judgments passed by this
Court with respect to non-maintainability of the suit under Order XXXVII CPC unless and until the amount claimed in the
suit directly springs and arises from the written contract i.e a suit under Order XXXVII CPC cannot be filed if besides the
written contract various other evidences and documents have to be looked into so as to determine the amount which is
claimed in the suit.

13. The Order dated 4.11.2015 in the case of Krishan Kumar Wadhwa & Ors. (supra) reads as under:-

"I.A. No.23300/2015 (u/S 149 CPC)

1. This application is allowed as amount of court fees has been deposited. Deficient court fees be made up within one
week from today.

Application stands disposed of.

CS(OS) 3316/2015 & I.A. No.23298/2015 (Stay)

2. It is unfortunate that counsels and litigants without even understanding the basics of what are the requirements of
law for filing an Order 37 of the Code of Civil Procedure, 1908 (CPC) suit, insist on wrongly filing and even insist
during arguments on maintaining the suit although the suit does not lie under Order 37 CPC. This is a very sorry state
of affairs because this has become a regular practice of filing suits under Order 37 CPC although obviously which
cannot be under Order 37 CPC. The object of provision of Order 37 CPC is that when there is a written document
which ex facie, in itself, without any further factual events to be pleaded as a cause of action in the suit, admits and
acknowledges liability and obligation of the defendant to pay to the plaintiff and only when a suit can be filed under
Order 37 CPC suit. A historical fact of an amount paid under an agreement to sell long back and which is stated to be
refundable in case the agreement does not go through, cannot be the basis of Order 37 CPC suit once various events
transpire after execution of a particular document and the document is not to be taken as the last word as the
contractual document between the parties from which arises the obligation to pay as required by Order 37 CPC. When
we look at Order 37 CPC it is seen that the said provision is with respect to filing of the suits either on the basis of a
negotiable instrument or a written contract of guarantee or a written contract obliging payment of liquidated amount.
Order 37 CPC is antithesis of the ordinary procedure where a defendant can contest a matter as a matter of right. This
provision of Order 37 CPC is provided where from a written document a clear cut obligation of a liquidated amount is
shown to be payable to the plaintiff by the defendant and execution of which fact without anything more is the only
and the complete cause of action of the Order 37 CPC suit. If facts have to be stated in addition to the document which
falls under Order 37 CPC then such a suit does not lie under Order 37 CPC. Order 37 CPC therefore provides that the
suit must say that no other relief is claimed in the Order 37 CPC suit i.e. except because of the documents which are
the subject matter of Order 37 CPC. In the light of these preliminary observations, let us see if the present suit can be
maintained under Order 37 CPC.

3. Admittedly, the suit is a suit for recovery of money filed by three plaintiffs against five defendants. The crux of the
averments made in the suit plaint are that there was an Agreement to Sell dated 03.01.2012 entered into by three
plaintiffs with the five defendants pertaining to the property bearing no.B-8, Maharani Bagh, New Delhi. Total price
fixed under the Agreement to Sell dated 03.01.2012 payable by the plaintiffs to the defendants was Rs.65,00,07,000/-
and of which the Agreement to Sell advance payment made was of Rs.10 crore and liability to refund the same in case
the Agreement to Sell does not go through and which amount is claimed under this Order 37 CPC suit. The situation
of payment is as existing on the date of Agreement way-back on 03.01.2012 and today we are in November, 2015. In
this period from January, 2012 till November, 2015 there have occasioned a chain of events as mentioned in the plaint
itself which talk of various factual aspects, and which as per the plaintiffs includes aspects of breach of contract by the
defendants; admission by some of the defendants of the breach by other defendants; admission by some of the
defendants of the Agreement to Sell having entered into with its terms and so on. It is therefore clear that once a
document mentions a historical fact with respect to an amount which is said to be liquidated amount, the cause of
action in the suit is not the entire cause of action arising only from the document which is alleged to be passed under
Order 37 CPC. Clearly therefore the suit under Order 37 CPC which has to be based on the cause of action only of the
document containing the liquidated amount for being filed under Order 37 CPC, such a situation does not exist in the
present case because cause of action in the plaint only begins with the Agreement to Sell but thereafter the plaint
contains 26 other pages with respect to events which have transpired after the Agreement to Sell and which facts
constitute the cause of action for the suit.

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Ifci Factors Ltd. vs Maven Industries Ltd. & Ors. on 20 November, 2015 21/03/25, 6:46 PM

4. The reliance placed by counsel for the plaintiff upon certain documents being an execution petition filed by some
defendants mentioning about the agreement to sell will not help the plaintiff to argue that merely because of these
subsequent documents, that too of only some defendants, making reference to the agreement to sell, the present suit
hence will be a suit under Order 37 CPC.

5. Therefore, in conclusion, this Court is forced to observe that it is high time that whenever a litigant, or for that
matter a lawyer who chooses to file a suit under Order 37 CPC, there before filing of such a suit takes place a reading
of the elementary requirements of Order 37 CPC and a suit should be filed under Order 37 CPC only if a suit is
maintainable strictly under Order 37 CPC. Merely because a person has a strong case or a strong cause of action
supported by various documents, as averred in the present plaint, will not mean that the cause of action is only on the
basis of a written document and which is the sole cause of action for filing a suit under Order 37 CPC and
maintainable under Order 37 CPC.

6. Instead of dismissing the suit, I direct that plaintiff should amend the suit and delete all unnecessary averments
which do not pertain to the suit being under Order 37 CPC.

7. List on 18th November, 2015."

14. The Order dated 16.11.2015 in the case of Vinod Kumar Abbey (supra) reads as under:-

"I.A No. 23685/2015(U/o 37 Rule 3 CPC by defendants)

1. This is an application for grant of leave to defend. In my opinion, there was no need of filing this application under
Order 37 CPC because the suit in fact is not maintainable, and ought not to have been filed, under Order 37 CPC. The
reasons for the same are given hereinafter.

2. An Order 37 CPC suit, it is trite, is filed where liability against the defendant and in favour of the plaintiff ex facie
arises from a written document containing the specific liquidated amount which is claimed in the suit or a bill of
exchange or a cheque. Order 37 CPC is not an ordinary procedure where on the basis of principles of natural justice a
defendant as a matter of right contests a suit and Order 37 CPC proceeds on the basis that before contesting the suit
the defendant must seek leave from the Court in view of the suit having satisfied the requirement of Order 37 CPC.
The requirement of Order 37 CPC is that the entire cause of action in the plaint must commence and conclude in terms
of the averments of the written contract containing the liquidated demand or a bill of exchange or a cheque. If other
facts are required to be added to the averments and cause of action as stated in the plaint to complete the same besides
the written contract or cheque or bill of exchange, the suit cannot and ought not to be filed under Order 37 CPC. It is
for this reason that the suit which is filed has to state that it is filed under Order 37 CPC and the suit does not claim
any relief which does not arise from Order 37 CPC viz the entire cause of action in the suit can only be averments of
facts in terms of the documents creating the obligation in favour of the plaintiff and against the defendant in view of
Order 37 CPC and which is clear from use of the expression 'arises' found in Order 37 CPC. With this preliminary
statement of facts let us see what is the suit plaint.

3. The suit plaint is a suit for recovery of Rs.33,52,003/- by the plaintiff Sh. Vinod Kumar Abbey who was an
employee of the defendant no.1-M/s Mountain Fall India Pvt. Limited. Plaintiff as an employee claims that he has not
been paid the complete and correct salary and therefore it is pleaded that he is entitled to the suit amount. Essentially
the main paras of the suit pleads entitlement of the plaintiff on account of admissions of the defendants made in
various documents over a period of time including in the statement of accounts of the defendant no.1

4. I have about half a dozen of times put it to the counsel for the plaintiff to show me the averments and the cause of
action in the plaint that the suit amount as claimed of Rs. 33,52,003/-arises from which specific written document,
inasmuch, the document on the basis of which an Order 37 CPC suit is filed must contain this specific liquidated
amount which is either the principal amount or the principal amount plus interest. Counsel for the plaintiff could not
answer this query of the Court and there is no averment in the plaint that which is the specific document which
mentions this liquidated amount of Rs. 33,52,003/- which is claimed in the suit as being a liquidated demand 'arising'
from a written contract as required by Order 37 CPC. A historical document containing the terms of employment is
not a document which can be the basis for an Order 37 suit as the document envisaged for filing the suit under Order
37 is a document from which, directly and only, the specific amount claimed in the suit is mentioned as a liquidated
amount and liability of the defendant towards the plaintiff on the basis of such document. Clearly therefore, the suit is

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Ifci Factors Ltd. vs Maven Industries Ltd. & Ors. on 20 November, 2015 21/03/25, 6:46 PM

not maintainable under Order 37 CPC. Merely because a plaintiff may have a strong case does not mean that the suit
is filed under Order 37 CPC. All that I have to further say is that this Court has passed similar orders as a present one
in quite a few number of cases in last few weeks and which show that it is high time that litigants must understand and
read Order 37 CPC before filing suits under Order 37 CPC.

5. Though I was inclined to dismiss the suit as it ought not to have been filed under Order 37 CPC, however, instead
of dismissing the suit I direct that the plaintiff must delete all references in the plaint to Order 37 CPC and must
amend the plaint so as to make it a simple suit filed for simple recovery of monies.

6. I.A is accordingly allowed for the aforesaid reasons and defendants are granted unconditional leave to defend.
Amended plaint be filed by the plaintiff within a period of four weeks from today. CS(OS) 1369/2015

7. List before the Joint Registrar for completion of pleadings and for further proceedings on 19th February, 2016, the
date already fixed."

15. The relevant paras of the judgment in the case of GE Capital Services India (supra) are paras 6 to 13 and these paras read
as under:-

"6. The relevant paras in the judgment in the case of plaintiffs earlier suit being CS(OS) No. 2859/2011 viz GE
Capital Services India (supra) are paras 3 to 6 and which read as under:-

"3. I put it to counsel for the plaintiff that in the suits such as the present, where the amount due effectively arises from
the balance due at the foot of the account, it cannot be said to be a liquidated amount arising from a written agreement.
The suit amount has to be the liquidated amount arising from the written agreement and in cases where the balance
due at the foot of account is claimed the same automatically does not become a part of original loan document which
contains a totally different amount. On the pleaded basis the suit is not maintainable under Order 37 CPC. I have so
held in two judgments, one in the case of M/s K & K Health Care Pvt. Ltd. Vs. M/s Pehachan Advertising in RFA
202/2011 decided on 23.1.2012 and another in M/s Associates India Financial Services (P) Ltd. Vs. M/s Atwal and
Associates & ors in CS(OS) No.2109/2002 and I.As therein for leave to defend decided on 9.8.2012. I have also
observed that there is a gross wastage of judicial time where plaintiffs unnecessarily file suits under Order 37 CPC
although quite clearly the same are not maintainable under Order 37 CPC because there is no such category in Order
37 CPC where suit can be filed on amounts stated in an agreement entered into long back but the suit amount is
wholly different and is the balance due at the foot of the account.

4. Paras 4 to 6 of the judgment in the case of M/s Associates India Financial Services (P) Ltd. are relevant and which
read as under:- "4. Admittedly, there is no other averment in the plaint as to how the amount claimed in the suit of Rs.
44,83,209/- arises from a particular written agreement. In an Order 37 suit the amount claimed in the suit may be the
principal amount plus interest arising therefrom, however, once again the plaint makes no reference to a specific
particular principal amount which has been stated as a liquidated amount in a written agreement payable to the
plaintiff, and the balance claimed in the suit is only interest arising thereafter.

5. The object of an Order 37 CPC suit is that on the basis of the documents specified therein the liability towards the
plaintiff is admitted. Only when the liability which is admitted in the dishonoured instrument or in the written
document containing a liquidated demand as payable to the plaintiff, suits can be filed under Order 37 CPC. Those
suits claiming amounts which are only balances due at the foot of account cannot be treated as falling under Order 37
CPC because the suit claim is based on the account and the amount claimed is not a liquidated amount arising/payable
to the plaintiff on an instrument on the limited types which are the subject matter of Order 37 CPC. Entries and
statements of account have necessarily to be proved as per Section 34 of the Evidence Act,1872 for the balance at the
foot of the account to be arrived at. The present suit plaint also makes no mention of any written acknowledgment of
debt, which may have amounted to a written agreement containing the liquidated demand with interest arising.

6. I have had an occasion to examine the aspect as to whether a suit such as the present can be said to be one under
Order 37 CPC in the judgment of M/s K&K Health Care Pvt. Ltd. Vs. M/s Pehachan Advertising, RFA 202/2011
decided on 23.1.2012, in which, I have observed that such type of suit cannot be filed under Order 37 CPC. Paras 2 to
5 of that judgment are relevant and which read as under:-

2. The subject suit for recovery of money was filed by the respondent/plaintiff for recovery of monies on the cause of

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Ifci Factors Ltd. vs Maven Industries Ltd. & Ors. on 20 November, 2015 21/03/25, 6:46 PM

action of non-payment of bills by the appellant/defendant. The bills were raised by the respondent/plaintiff on the
appellant/defendant on account of advertisements issued in newspapers by the respondent/plaintiff on behalf of the
appellant/defendant. The suit which was filed under Order 37 CPC, claimed the amounts due under the bills which
were stated to be 'written contracts containing liquidated demand', though simultaneously admitting that after the bills
were raised various payments were made towards the bills. The details of bills and payments made, when first filed by
the respondent/plaintiff, were as under:-

"Accounts Statement of M/s K & K Health Care Pvt. Ltd. from 01.07.2005 to 15.11.2005 Date Particulars Amount
Amount Balance (Dr) (Dr) (Cr) 15.06.2005 Balance 32,372.25 B/F 30.07.2005 Bill 290,652.00 11.08.2005 Bill
66,376.00 13.08.2005 Bill 72,127.00 18.08.2005 Bill 72,127.00 25.08.2005 Bill 288,609.00 05.09.2005 Bill
72,127.00 08.09.2005 Bill 99,418.00 08.09.2005 Bill 5,254.00 07.11.2005 Ch. 87,652.00 No.527736 10.11.2005 Ch.
254,453.00 No.527738 Total 999,062.25 342,105.00 6,56,957.25"

3. Subsequently, on the appellant/defendant stating and detailing other payments, a fresh statement of account was filed by
the respondent/plaintiff reflecting the position of bills and payments as under:-

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Ifci Factors Ltd. vs Maven Industries Ltd. & Ors. on 20 November, 2015 21/03/25, 6:46 PM

" M/s K & K Health Care Pvt. Ltd.

Ledger Account from 01.04.2005 to 7.11.2005
Date Particulars Debit Credit Balance
01.04.2005 Dr Opening 9,54,722.81 9,54,722.81
Balance
11.04.2005 Cr Ch. 100,000.00 2,112,065.25
No.860348
30.05.2005 Cr Ch. 200,000.00 1,912,065.25
No.474952
06.06.2005 Dr Bill 72,126.91 1,098,976.63

09.06.2005 Cr Ch.No.474 100,000.00 1,812,065.25

16.06.2005 Dr Bill 73,199.07 1,72,175.70

23.06.2005 Dr Bill 72,126.91 1,026,849.72

29.06.2005 Cr Ch. 100,000.00 1,712,065.25

No.464018
30.06.2005 Cr Ch. 100,000.00 1,612,065.25
No.464025
30.06.2005 Dr Bill 73,199.07 1,245,374.77

22.07.2005 Cr Ch.No.464 100,000.00 1,512,065.25

30.07.2005 Dr Bill 290,651.96 1,536,026.73

05.08.2005 Cr Ch. 64,313.00 1,447,752.25

No.464078
06.08.2005 Cr Ch. 65,183.00 1,318,256.25
No.464079
08.08.2005 Dr Bill 66,376.25 1,674,529.89

13.08.2005 Dr Bill 72,126.91 1,608,153.64

18.08.2005 Dr Bill 72,126.91 1,746,656.80

25.08.2005 Dr Bill 288,609.18 2,035,265.98

26.08.2005 Cr Ch. 64,313.00 1,383,439.25

No.464160
29.08.2005 Cr Ch. 65,268.00 1,252,988.25
No.464161
09.09.2005 Cr Bill 72,126.91 2,107,392.89

09.09.2005 Cr Bill 99,418.18 2,206,811.07

09.09.2005 Dr Bill 5,254.18 2,212,065.25

21.10.2005 Cr Ch.No.527 4,632.00 1,248,356.25

24.10.2005 Cr Ch.No.527 58,521.00 1,189,835.25

27.10.2005 Cr Ch.No.527 63,591.00 1,126,244.25

27.10.2005 Cr Ch.No.522 63,591.00 1,062,653.25

30.10.2005 Cr Ch.No.527 63,591.00 999,062.25

07.11.2005 Cr Ch.No.527 87,652.00 911,410.25

10.11.2005 Cr Ch.No.527 254,453.00 656,957.25

Total Outstanding Rs.656,957.25"

This latter statement of account is a part of the statement of account running into a total number of eight pages. This second
statement of account, in addition to the two payments reflected in the first statement of account, admitted and reflected as
many as five other payments. The fact that payments have been made as reflected in aforesaid two statements of account is
not in dispute between the parties. The suit really therefore is a suit for the balance due at the foot of the account and is not
one which is only and only on the basis of the amounts contained in the bills. The suit thus could not have been filed under
Order 37 CPC as the amount claimed in the suit was not the amount as mentioned in the bills which are stated to be written
contracts containing the liquidated demands of moneys payable.

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4. Learned counsel for the respondent relies upon a decision of learned Single Judge of this Court in the case of M/s.
Lohmann Rausher Gmbh. Vs. M/s. Medisphere Marketing Pvt. Ltd.; 2005 II AD (Delhi) 604 to argue that the suit on the
basis of invoices is maintainable under Order 37 CPC. Of course, I am bound by the decision of the learned Single Judge
and therefore a suit on the basis of invoices can be said to be maintainable under Order 37 CPC, however, in the present case
the suit is not based on the invoices only but the amount claimed in the suit is the balance due at the foot of a running
account i.e. after giving adjustment/credit for certain payments made for the invoices/bills. The suit is therefore definitely
not only on the basis of invoice amounts alone for the same to be covered under Order 37 CPC. Also, in my opinion, in an
appropriate case this issue will have to be examined whether a suit under Order 37 CPC can be filed on the basis of invoices
alleging the same to be 'written contracts containing a debt or liquidated demand'- the necessary requirement of Order 37
CPC. The whole purpose of the provision of Order 37 Rule 1 CPC entitling filing of the suit on a debt or liquidated demand
was that there is an agreement showing that there is an admitted liability and a liquidated liability or debt which is claimed
in an Order 37 suit. When an Order 37 suit is filed on bills, the bills only reflect goods supplied and therefore I feel that it
cannot be said that bills should be taken as agreements containing liquidated demands or an acknowledgment or promise to
pay or an admitted liability or such other factor so as to bring the claim as "claim for debt or liquidated demand arising on a
written contract" as found in Order 37 CPC.

5. In view of the above, I need not go into the merits of the matter inasmuch as the plaintiff cannot arm-twist a defendant by
filing a suit under Order 37 CPC, and argue in the trial Court and also before this Court, that it has a prima facie strong case
on merits and therefore the impugned order granting conditional leave to defend must be sustained. Merely because a
plaintiff/respondent feels it has a strong case on merits cannot mean that the suit can be filed under Order 37 unless the
mandatory requirement of basing the suit on one of the four requirements of Order 37 Rule 1 sub Rule 2 is complied with. If
the suit is not maintainable under Order 37, there does not arise an issue of any conditional leave to defend as was granted
by the trial Court. (underlining added)

5. Counsel for the plaintiff has failed to point out any written agreement containing the specific amount claimed in the suit
and which is the liquidated amount and which is stated in the written agreement. Merely because there is a written
agreement way back of the year 2002, cannot mean that the suit amount which is not stated in the said agreement would also
become a liquidated amount in the suit filed under Order 37 CPC.

6. During the course of hearing, I put it to the counsel for the plaintiff as to whether in the light of facts which have emerged
should the suit at all be pressed as one under Order 37 CPC, and the counsel insists that the suit lies under Order 37 CPC.

In view of above, and considering the fact that unnecessarily judicial time is being wasted by the plaintiff who insists on
filing suits under Order 37 CPC which cannot be filed under Order 37 CPC which cannot be filed under Order 37 CPC, I
allow the application for leave to defend with costs of Rs.25,000/-. The defendants are granted unconditional leave to
defend." (emphasized bold portion is by me)

7. It may be noted that the plaintiff in the said suit, and who is also the plaintiff in the present suit, was represented by the
same counsel who today has argued the applications for leave to defend and the aspect of maintainability of the suit under
Order XXXVII CPC.

8. A reading of the relevant ratios of the aforesaid judgments shows that the object of Order XXXVII CPC never was to
allow filing of the suit under Order XXXVII CPC if the amount which is claimed is the balance due at the foot of the
account. I have already expounded above the object of bringing in Order XXXVII CPC by the legislature, and there cannot
be even an iota of doubt that Order XXXVII suits were not intended to be filed for claiming balances due at the foot of an
account. With the aforesaid preliminary discussion, let us turn to the cause of action as alleged in the present suit.

9(i) Plaintiff as per the suit plaint avers that by means of a total of 8 loan agreements dated 25.3.2003, 28.3.2004, 6.8.2003
and 27.9.2003, a sum of Rs. 1,72,88,100/- was given as loan to a company M/s Starr Hospital & Research Centre Ltd. and
for which loan transactions the defendants stood as guarantors. In the plaint, it is further averred that the aforesaid eight loan
agreements got merged into a fresh Compromise Deed dated 25.9.2005 thereby rescheduling the payments. Curiously, there
is no averment in the plaint as to for the actual amount the Compromise Deed dated 25.9.2005 was entered into the amount,
and which amount had remained due to the plaintiff for the loans which were earlier granted to M/s Starr Hospital &
Research Centre Ltd under the eight agreements of four dates of March, August, September 2003 and March 2004 as stated
above. Counsel for the plaintiff concedes that this factual aspect is not mentioned in the plaint and that the amount due as on
25.9.2005 was not the amount due of Rs.1,72,88,100/- payable under the earlier eight agreements of March, 2003 to March,
2004. Reference of this Court is invited so as to know what is the amount due on 25.9.2005, not to the averments in the
plaint, but to the documents filed with the plaint and of which documents there is no reference in the plaint so that this Court
should read the said document to know the amount due as on the date of the Compromise Deed dated 25.9.2005. The
document which is referred to is a statement of account showing that as on 25.9.2005, a sum of Rs.1,30,00,000/- was due to
the plaintiff ie admittedly the amount said to be due on 25.9.2005 is different than the original loan amount of
Rs.1,72,88,100/-. It may be noted that when the Compromise Deed dated 25.9.2005 was entered into, the name of the
principal borrower company had changed from Starr Hospital to M/s Gold Star Hospital & Research Centre Ltd.

(ii) The next averments in the plaint with respect to the amount due to the plaintiff, are found in para 11 of the plaint, and as

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per this para 11, the plaintiff pleads that as per the statements of accounts of 'two agreements', a total sum of
Rs.1,19,58,688.94 is due to the plaintiff including TDS dues and which total comprises of two amounts of Rs.1,13,29,626.94
plus Rs.6,29,062/-. How the total amount of Rs. 1,19,58,688.94 is referable to a liquidated amount specified in any written
contract as being the amount due and payable to the plaintiff is conspicuous by its absence in the plaint and in fact a sum
figure is also not found even in any of the documents filed by the plaintiff. Also, there is no detail given in para 11 of the
plaint as to under what two heads the amount of Rs. 1,13,29,626.94 and Rs. 6,29,062/- fall i.e whether the amounts are
towards principal or principal plus interest or only interest or TDS dues etc and this Court is left guessing as to under what
heads these amounts fall. A lot is therefore to be said with respect to the drafting of the plaint for filing the same under Order
XXXVII CPC.

(iii) Plaintiff thereafter in para 11 of the plaint itself states that from the amount of Rs.1,19,58,688.94 an amount of Rs.
8,00,000/- which was financed under one principal agreement has been reduced, as also a further amount of Rs.4,69,157.52,
and hence the suit amount which is claimed is said to be the figure of Rs.1,06,89,531.40 as pleaded in para 14 of the plaint.
Once again, there is no reference in the plaint to any document as to how this amount of Rs.1,06,89,531.40 is the liquidated
amount under which written contract by which defendants are liable to pay such amount and obliged to pay such amount to
the plaintiff and thus for the suit to be filed under Order XXXVII CPC. In fact, counsel for the plaintiff concedes that there
is no statement of account filed alongwith the suit showing how this amount of Rs. 1,06,89,531.40 which is claimed in the
suit is as per that statement of account due, and counsel for the plaintiff wanted to invite my attention to the reply filed by
the plaintiff to the leave to defend applications giving calculations as to how this amount of Rs. 1,06,89,531.40 is arrived at,
ie what I am observing is that the calculations given in the reply to the leave to defend applications are not given in the
plaint and in case such amount is not supported as a figure even arising from a statement of account filed with the plaint,
leave aside the said amount arising as the liquidated amount from a written contract under which defendants obliged
themselves to pay such amount to the plaintiff and which is the mandatory requirement of Order XXXVII CPC.

10. In order to understand the observations which have been made above, I am reproducing paras 4, 6 and 11 of the plaint
and these paras read as under:-

"4. Based on defendants assurances and representations of defendants, the plaintiff company entered into Equipment
Master Security & Loan Agreements, bearing nos.W10827 (A120052), W10867 (A120086), W10866 (A120085),
W10918 (A120190), W10965 (A120240), W10968 (A120238, W11120 (A120440), W11196 (A120528) with Starr
Hospital & Research Centre Ltd. For nos. W10827 (A120052), W10867 (A120086), W10866 (A120085), W10965
(A120240) and W11120 (A120440) a single agreement booklet dated 25-Mar-2003 was executed between the parties.
Further, for no. W10968 (A120238) agreement dated 27-Sep-2003, for no. W10918 (A120190) agreement dated 06-
Aug-2003 and for no. W11196 (A120528) agreement dated 28-Mar-2004 were executed between the parties. In the
aforesaid manner total of four Loan Agreements were entered into with Starr Hospital & Research Centre Ltd. The
said Loan Agreements were concluded and executed in New Delhi. Under the Loan Agreements a total sum of
rs.1,72,88,100/- (Rupees One Crore Seventy Two Lacs Eighty Eight Thousand and One Hundred Only) was financed
by the Plaintiff Company to Starr Hospital & Research Centrae Ltd. The amount financed under the Loan Agreements
was used by Starr Hospital & Research Centre Ltd. for the purchase of various medical equipment. As per the terms of
said Loan Agreements various following medical equipments ("Collateral" hereinafter) were financed to Starr
Hospital & Research Centre Ltd. and the said equipments were also the collateral under the respective Loan
Agreements:

S.No. Agreement No. Equipment/Collateral

i) W10827 (A120052) OEC 9800
ii) W10866 (A120085) MAC 5000
iii) W10867 (A120086) Marquette Patient Monitoring
Package
iv) W10918 (A120190) Anaesthesia Equipment
v) W10965 (A120240) Logiq 400 Pro
vi) W10968 (A120238) Sarns Hurt Lung Machine
vii) W11120 (A120440) 300 mA X-Ray & 60mA X-Ray
viii) W11196 (A120528) Biomed-Photometer,
Blood Gas Analyzer, I Lyte
NA
xxxxxx

6. That the amount financed under the loan agreements was to be repaid through monthly instalments. The instalments
were to be paid by Starr Hospital & Research Centre Ltd. after deducting TDS and also to provide TDS Certificates to
the Plaintiff. It was, inter alia, a representation from Starr Hospital & Research Centre Ltd. and also the Defendants,
that the terms of the Loan Agreements will be adhered to, in full, and that there will not be any default. However, the
Principal Borrower started committing defaults in payment of instalments under the loan agreements and also did not
provide TDS certificates to the Plaintiff or pay the equivalent amount to the Plaintiff. Thereafter, the Starr Hospital &
Research Centre Ltd. changed its name to Gold Star Hospital & Research Centre Ltd. After repeated follow-ups by
Plaintiff, Gold Star Hospital & Research Centre Ltd. again approached Plaintiff Company in or around September

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2005 and expressed it's difficulty in paying the instalments as per the schedule under the loan agreements. Gold Star
Hospital & Research Centre Ltd., further requested Plaintiff to reschedule the outstanding amount under the loan
agreements. After discussions a Deed of Compromise dated 25-Sep-2005, and fresh repayment schedule were entered
into between Gold Star Hospital and Research Centre Ltd., and Plaintiff, and new agreement nos. viz. W12042
(A121444) & W12043 (A121445) were given to the fresh repayment schedules. Agreements No.W12042 was towards
the repayment schedule of Loan Agreement Nos.W10827, W10867, W10866, W10918, W10965, W11120, W11196,
and Agreement No.W12043 was towards the repayment schedule of Loan Agreement No.W10968. Gold Star Hospital
and Research Centre Pvt. Ltd., agreed to pay the Outstanding amount in accordance with the fresh repayment
schedules.

As per the repayment schedules, the loans were to be repaid in instalments uptill 25.03.2010. Under the fresh
repayment schedule also Gold Star Hospital & Research Centre Ltd. was to deduct TDS from the monthly instalment
amount and provide TDS Certificates to the Plaintiff.

xxxxx xxxxx

11. That when the Defendants failed to pay the outstanding amount even after repeated follow ups by the officers of the
Plaintiff Company, the Plaintiff was constrained to issue a notice of demand dated 13.07.2011 issued on 19.07.2011 to the
Defendants and Spatica Super Speciality Hospitals Ltd. (Principal Borrower) through registered post. The notice addressed
to Defendant Nos.1 and 4 have been received back with the remarks "Left". The address on which the notice was sent is the
address given in the Personal Guarantee signed by the Defendants, and it is the last known address of the Defendants No.1
and 4 to the Plaintiff. The notice was sent to the Defendant No.4 at both the addresses of his. However, the Defendant No.2
has replied to the said Notice vide his Reply dated 15.08.2011, wherein has denied his liability. But Defendant No.3 has not
replied to the notice. It is pertinent to mention here that in the notice dated 13.07.2011 it was specifically stated that the total
Outstanding amount mentioned therein did not include the TDS dues which are additionally payable. As per the records of
the Plaintiff Company out of the total TDS dues of Rs.9,61,457/-, TDS certificates amounting to Rs.6,29,062/- are still to be
provided to the Plaintiff Company. As such none of the Defendants have paid the outstanding dues as mentioned in the
notice nor the TDS dues of the Plaintiff have been cleared. As per the statements of accounts with respect to Agreement
No.W12042 (the new Agreement Number allotted to the said Agreement is A121444) and Agreement No.W12043 (the new
Agreement Number now allotted to the said Agreement is A121445) maintained by Plaintiff, a total sum of
Rs.1,19,58,688.94 (Rs.1,13,29,626.94 + Rs.6,29,062/-), including TDS dues, ("Total Outstanding") is still due and payable
as per the fresh repayment schedules under the Deed of Compromise, which was in addition to and not in supersession of the
initial loan agreements, and consequently there is also liability of the Defendants to pay the above said Total Outstanding
amount under the initial Loan Agreement nos. W10827 (A120052), W10867 (A120086), W10866 (A120085), W10918
(A120190), W10965 (A120240), W10968 (A120238), W11120 (A120440), W11196 (A120528).

Out of the said amount of Rs.1,19,58,688.94, the Plaintiff is not claiming an amount of Rs.8,00,000/- which was financed
under the Agreement bearing No.W11196 (which was part of new Agreement No.W12042 and which was later on
Agreement No.A121444) and also an amount of Rs.4,69,157.52 which is payable to the Plaintiff Company under new
repayment schedule no.W12043 and abandoning its claim qua the said amounts."

11. From the aforesaid discussions, the following conclusions emerge:-

(i) Suits which are to be filed under Order XXXVII CPC, were as per the legislative intent, only those where the
amount claimed in the suit is the same liquidated amount which arises as emerging/flowing directly from the written
instrument which is the subject matter of the Order XXXVII suit, and, a civil court cannot under Order XXXVII CPC
be called upon to look at various documents and various statements of accounts, spread over periods running into
years, so as to determine how the amount due in the suit claimed is arrived at, and which amount is admittedly
different from the amount contained in the written document(s).

(ii) The plaint in the present suit when it refers to the amount which is claimed in the suit of Rs. 1,06,89,531.40 does
not make averments and refer to any specific document being the written contract between the parties containing this
specific liquidated amount as due and payable by the defendants to the plaintiff.

(iii) Not only there is no cause of action pleaded in the plaint with respect to the amount of Rs. 1,06,89,531.40, even
the figure of Rs.1,19,58,688.94 which is referred to in para 11 of the plaint is not supported by any written document
as a liquidated amount being due and payable by the defendants to the plaintiff. Also, as stated above, not only there is
no written contract containing this liquidated amount of Rs.

1,19,58,688.94, there is in fact not even a supporting statement of account where this figure is shown as the balance due at

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the foot of the account.

(iv) The plaintiff, in spite of a directly applicable judgment passed in an earlier suit of the plaintiff, holding that suits such as
the present are not maintainable under Order XXXVII CPC, insists that suits such as the present be held as maintainable
under Order XXXVII CPC, that such suits must be continued to be heard and decided under Order XXXVII CPC.

(v) The suit plaint leaves wide gaps with respect to averments required of co-relating the three separate amounts as stated in
the plaint being the amounts of Rs.1,72,88,100/-, Rs.1,19,58,688.94/- and Rs,1,06,89,531.40/- as stated above.

(vi) The final figure of Rs.1,06,89,531.40/- claimed as being the suit amount is neither supported by any contract containing
this liquidated amount stating that such amount is due and payable by the defendants to the plaintiff nor even a statement of
account as to how this figure is the balance due at the foot of which account.

12. Learned counsel for the plaintiff very strongly sought to place reliance upon a judgment of this Court in the case of the
plaintiff itself being GE Capital Services India Vs. G. Neuromed Diagnostic Centre 2007 VIII AD (Delhi) 464 to argue that
Order XXXVII suits are maintainable even for the balance due at the foot of the account and which amount is different than
the amount in the historical loan agreements entered into many years earlier. It is argued that original agreements can be
used as written documents for filing of the suit under Order XXXVII CPC though the amount claimed in the suit is
completely different than the amount stated in the written contracts of the earlier historical dates and the suit is filed for the
amount which actually is the different amount due after many years being such balance due at the foot of the account.
Reliance is placed upon paras 21 to 23 of the said judgment and these paras read as under:-

"21. I find no force in the last submission of the defendant that the suit is based on a statement of account and not on
the written agreement and the documents executed along with it. The basis of the claim in the suit is the written loan
agreement, the promissory notes executed by defendant nos. 1 to 4 and the individual guarantees executed by
defendant nos.2 to 4. The statement of account merely sets out the outstanding amounts along with overdue interest
computed by the plaintiff.

22. Counsel for the defendant fairly admits that the entries contained in the statement of account filed by the plaintiff
have not been questioned in the defendant's present application. I any event, in my view, mere general denial of the
statement of account filed by the plaintiff is not sufficient, and the defendants ought to have raised specific pleas in
relation to the various entries which go to make the statement of account, if according to them, any, or all of them
were incorrect.

23. In my view, the defences as raised by the defendants are moonshine and frivolous and do not raise any triable
issue. No useful purpose would be served in granting leave to the defendants to defend the suit, since the defences
raised, even if proceeded further for examination in a trial, cannot succeed as they are misconceived and untenable in
law. Accordingly, I dismiss this application."

13. In my opinion, the judgment in the case of GE Capital Services India (supra) (2007's case) relied upon by the plaintiff is
distinguishable for the reason that the reading of the said judgment does not show that after the original loan agreements
were entered into and amounts paid as loans, in the said suit there took place repayments by the borrowers towards the
amounts due and that the amounts which were claimed in the suit were as per the statement of account prepared after taking
consideration of the subsequent payments made by borrowers. In fact, there are clear cut observations in para 4 of this
judgment that the amount which was claimed in the said suit was the principal amount stated in the agreements and changes
thereto were only on account of arising of interest thereon. It need not be again said that Order XXXVII suit is maintainable
with respect to the principal amount provided that it is that principal amount which is claimed alongwith the interest arising
thereon as stated in the written agreement. The first line of para 4 of the said judgment observes that the defendants in the
said suit had failed to adhere to the time schedule from the very beginning. Para 21 of the judgment in the said case further
clarifies that the suit was taken to be on the basis of the documents and not on the statement on account as the statement of
account in the said case only sets out the outstanding amounts alongwith overdue interest. Outstanding amount obviously
when read with the first line of para 4 of this judgment is the original amounts as stated in the original agreements. In any
case the most important and distinguishing fact of the said judgment with the facts of the present case is that in the said case
the statement of account was not disputed by the defendants as is seen from para 22 of the judgment, and therefore there was
an admitted document containing a liquidated amount in the said case.

I do not find anything observed in the said judgment to support what is argued before me by the counsel for the plaintiff that
in the facts of the said case various repayments were made by the borrowers and the amounts which were claimed in the suit
therefore were balances due in terms of the balance due at the foot of the account after giving credits for the repayments
made, inasmuch as, there is no such discussion on these facts as regards this aspect in the said judgment. In any case as
stated above, nothing turns on this aspect, as in the said case the statement of account was admitted and which is not the
position in the present case."

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16. It is trite, and as observed in the aforesaid three orders/judgment, that Order XXXVII CPC is a unique departure from
the ordinary principles of natural justice wherein a defendant has an automatic right to defend the suit. By Order XXXVII
CPC, exceptions have been carved out whereby defendant cannot defend the suit as a matter of right as is done in other
cases and this is because ex facie or at least prima facie the specific liability of a defendant in terms of a liquidated amount is
shown to clearly exist from a written contract containing the liquidated amount or from a dishonoured bill of exchange or a
cheque. Once there are such documents, being a written contract containing liquidated amount or a dishonoured bill of
exchange or a cheque, which by themselves without any further fact(s) or document(s) required to be pleaded and proved,
shows clearly the liability of the defendant in favour of the plaintiff as existing, it is for this reason that filing of such suits
under Order XXXVII CPC are allowed and defendant who is otherwise ex facie or prima facie liable by virtue of the written
document is asked to seek leave to defend to contest the suit. Obviously an exception from the normal procedure and the
requirement of following the principles of natural justice when it exists, the same has to be necessarily construed within the
strict terms of the requirements contained in Order XXXVII CPC. Order XXXVII CPC is not intended to allow parties to
extend the scope of Order XXXVII CPC so as to allow filing of the suits when amounts which are claimed in the suit do not
directly spring and arise from the written document or the dishonourd bill of exchange or cheque. Putting it in other words,
the cause of action in the suit for recovery of money which is filed under Order XXXVII CPC concludes as regards the
averments on the existence of the cause of action to the written document containing the liquidated amount or the
dishonoured bill of exchange or cheque. If in the suit plaint, besides the averments of the cause of action of the written
contract containing the specific liquidated amount which is specifically claimed in the suit, necessary further facts,
averments and cause of action has to be pleaded for the plaintiff to show the claim to the amount claimed in the suit, then,
such a suit is not based only on the written document only or the dishonoured bill of exchange or cheque only because other
facts are to be established to show the liability of the defendant claimed in the suit, and thus such a suit was not intended by
the legislature to be filed under Order XXXVII CPC. Accordingly, therefore once the suit amount which is claimed in the
suit is not the amount which directly arises in terms of the liquidated amount stated in the written document or a
dishonoured bill of exchange or a cheque, the suit will not be maintainable under Order XXXVII CPC otherwise a large
category of cases which were not meant by the legislature to be filed under Order XXXVII CPC will be sought to be filed
and entertained under Order XXXVII CPC.

17. Learned counsel for the plaintiff places reliance upon the judgment of a learned Single Judge of this Court in the case of
Bijender Chauhan @ Bijender Kumar Vs. M/s. Financial Eyes (India) Ltd. ILR (2013) IV Delhi 3234 and it is sought to be
argued by placing reliance upon paras 19 to 21 of the said judgment that in fact the suit under Order XXXVII CPC can be
filed even on the basis of a balance due at the foot of a statement of account. The paras 19 to 21 which are relied upon of the
judgment in the case of Bijender Chauhan @ Bijender Kumar (supra) read as under:-

"19. The third contention of the defendant that the present suit is based on a Statement of Account and hence would
not lie is a vague contention and is also without merits. A perusal of the plaint would show that the present case is not
based on a statement of accounts but is based on the 20 invoices which have been raised on the defendant pursuant to
which the goods have been supplied to the defendant. The plaint in paragraph 4 relies on the said invoices. The Plaint
further states that out of the total figure of Rs. 52,12,726/- worth of invoices raised on the plaintiff the defendant had
paid Rs. 23,30,804. Hence, the suit is based on the balance on these invoices. Merely because a mention is made to a
Statement of Account in the plaint would not make the present suit to be based on Statement of Accounts. A specific
query was made to learned senior counsel appearing for the defendant about the figures mentioned in the plaint.
Learned senior counsel fairly stated that in the application for leave to defend the receipt of the goods, the value of the
goods and payments having been made by the defendant is not disputed. He submitted that the defence of the
defendant is regarding quality of goods.

20. The judgments cited by the learned counsel for the plaintiff to argue that a suit based on statement of account does
not lie under Order 37 CPC would not apply to the facts of the case. In both cases namely Associate India Financial
Services (supra) and M/s. K & K Health Care Pvt. Ltd. the Court came to the conclusion that the case is based on the
statement of accounts. Hence, the said judgments have no application to the present facts as I have held that the
present suit is based on invoices.

21. In the context of the above contention of the learned senior counsel for the defendant, reference may also be had to
the judgment of this Court in M/s. Dura - Line India Pvt. Ltd. Vs. BPL Broadband Network Pvt. Ltd.
(MANU/DE/1359/2003 : AIR 2004 Delhi 186) where in para 8 the Court held as follows:

8....

The said submission is misconceived. The suit is based on a written contract comprising the offer, its acceptance by issuance
of purchase orders and raising of invoices in execution thereof. These constitute the written contract. The amounts claimed
are those due in the suit under the above written contract. Additionally, reliance has been placed on the acknowledgement
and confirmation of balance issued by the defendant. The mere averment in the plaintiff that the plaintiff also maintains a

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Ifci Factors Ltd. vs Maven Industries Ltd. & Ors. on 20 November, 2015 21/03/25, 6:46 PM

running account, reflecting the price of the goods supplied and the payments made therefore, does not change the nature of
the suit as in one being based on a running account. The mere maintenance of a running account does not disentitle the
plaintiff from filing the suit under Order XXXVII, CPC, based on a written contract and acknowledgement in writing."
(underlining added) 18(i). I am unable to agree with the argument urged on behalf of the plaintiff by placing reliance upon
the judgment in the case of Bijender Chauhan @ Bijender Kumar (supra) for the reason that paras 19 to 21 of the said
judgment make it clear that the court held that the statement of accounts which were referred to in the plaint of that suit were
only incidentally mentioned, however, the amounts which were claimed in the suit were amounts which directly arose from
the written documents or the written invoices and which were claimed in the suit. This aspect that the suit in the case of
Bijender Chauhan @ Bijender Kumar (supra) was based on amounts stated in the invoices was taken by the court alongwith
the fact that in the case referred to in para 21 of the judgment in the case of Bijender Chauhan @ Bijender Kumar (supra) it
was found that the amount which was claimed by the plaintiff arose besides from the written contract also from an
acknowledgement in writing. Thus so far as the decision in the case of Bijender Chauhan @ Bijender Kumar (supra) is
concerned, the learned Single Judge found that the amount claimed in the suit was based only on the invoices i.e balance due
on the invoices which were to be taken as written contracts and the suit was not taken as being filed on the basis of a
statement of account. Therefore, counsel for the plaintiff cannot argue that paras 19 to 21 of the judgment in the case of
Bijender Chauhan @ Bijender Kumar (supra) holds that a suit on a statement of account is maintainable under Order
XXXVII CPC. On the contrary, the said paras 19 to 21 hold that the suit in that case was not filed on the basis of statement
of accounts and hence was taken under Order XXXVII CPC being filed on written documents/invoices. Also, I may note
that the judgment in the case of Bijender Chauhan @ Bijender Kumar (supra) was based on the peculiar facts of the case
where the defence of the defendant with respect to defective goods could not be looked into in view of Sections 41 and 42 of
the Sale of Goods Act, 1930 and which Sections prevent a buyer of goods from raising objections with respect to defects in
the goods after a period of time as envisaged by Sections 41 and 42 of the Sale of Goods Act, 1930 and consequently the
amount claimed in the suit in the case of Bijender Chauhan @ Bijender Kumar (supra) was only the amount claimed of the
unpaid invoices. In the facts of the present case, no benefit can be taken by the plaintiff of the judgment in the case of
Bijender Chauhan @ Bijender Kumar (supra) which was only filed relying on the invoices by a supplier of goods and which
invoices were taken as written contracts with the fact that no other defence of the defendant/buyer was available with respect
to defective goods because of Sections 41 and 42 of the Sale of Goods Act, 1930.

(ii) The facts of the present case show that present suit is not a suit by a seller of goods for claiming balance payment due on
the invoices, but the suit is a suit by a lender for recovery of balance amount of moneys out of the amounts which were lent
to the defendant no.1 and obviously for such a suit the amount claimed in the suit will be the balance due at the foot of the
account after taking various repayments by the defendant no.1 and the suit plaint's cause of action will not conclude with the
original/historical Agreement dated 28.1.2011 because plaintiff in the plaint has pleaded other facts so as to arrive at the
cause of action for the amount claimed in the suit.

(iii) Therefore, there is no need of referring of this matter to a larger Bench as prayed for on behalf of the plaintiff on the
ground that there are different views which are taken by the different learned Single Judges of this Court. If there exist
different views of different learned Single Judges of this Court, then, in an appropriate case that matter would be examined
by a Division Bench of this Court, but so far as the facts of the present case are concerned they do not fall within the ratio
laid down in the case of Bijender Chauhan @ Bijender Kumar (supra). Counsel for the plaintiff however states that he would
be challenging the present order, and therefore, in any case the matter would be listed before the Division Bench of this
Court.

19. In view of the above, the suit is clearly not maintainable under Order XXXVII CPC. Ordinarily I would have dismissed
the suit however instead of dismissing the suit I give time to the plaintiff to amend the suit plaint so that all averments in the
same with respect to Order XXXVII CPC are deleted and the suit is treated as an ordinary civil suit for recovery of moneys.
The plaintiff may also if it so chooses withdraw the suit and initiate appropriate arbitration proceedings against the
defendant no.1 as the cause of action for recovery of moneys from defendant no.1 is separate and independent of the cause
of action against defendant nos.2 and 3.

20. Needful be done by the plaintiff in six weeks. List on 4th March, 2016 for further proceedings.

NOVEMBER 20, 2015 VALMIKI J. MEHTA, J.

Ne

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