M/S MONGIA REALTY AND BUILDWELL PRIVATE LIMITED versus MANIK SETHI on 31 January 2022

Conclusion

1. Leave granted.D

2. This appeal arises from a judgment of a Single Judge of theHigh Court of Delhi in RFA No 5 of 2019. The trial Court dismissed thesuit instituted by the appellant on the ground of limitation, by a judgmentdated 16 August 2018. The High Court upheld the dismissal of the suiton that ground.

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3. The appellant instituted a suit against the respondent on 31March 2017 (Civil Suit No 76 of 2017 (new number 355 of 2017)) underOrder 37 of the Code of Civil Procedure 1908[1]for the recovery of anamount of Rs 1,11,63,633 together with interest at the rate of 18% perannum from the date of the institution of the suit till the realization of theFfull amount. The respondent filed a written statement on 24 May 2017.An application was filed under Order 7 Rule 11 of the CPC for therejection of the plaint on the ground that the suit was barred by limitation.On 4 January 2018, the trial Court framed a preliminary issue on whetherthe suit was barred by limitation. On 15 March 2018, the appellant wasgranted an opportunity to file its replication and the suit was adjourned toG26 April 2018 for addressing arguments on the preliminary issue. Theappellant filed its replication on 20 April 2018. On 26 April 2018 and 23May 2018, an adjournment was granted by the trial Court. On 26 July2018, the trial Court rejected a plea for an adjournment made by the H1 “CPC”

appellant. Oral arguments were heard on behalf of the respondent andthe appellant was granted fifteen days’ time to file written arguments.The appellant failed to file the written arguments before 10 August 2018.On 16 August 2018, the trial Court declined to grant any further time andby its judgment decided the issue of limitation against the appellant. Theappellant carried the matter in appeal in RFA No 5 of 2019. The SingleJudge of the High Court dismissed the appeal by the impugned judgmentdated 4 September 2019.

4. The case of the appellant is that the respondent had requestedthe appellant to grant a business loan from time to time, and the requestwas acceded to by the appellant. The loans were stated to be repayablewith interest at the rate of 18% per annum. The appellant claims to haveadvanced an amount of Rs 10 lakhs on 13 June 2012, 18 lakhs on 11 July2012 and Rs 15 lakhs on 21 December 2012 by cheques drawn on AxisBank, and a further amount of Rs 39 lakhs. The case of the appellant isthat the respondent partly discharged his liability and that he is entitled toa decree for the balance in the amount of Rs. 1,11,63,633 along with aninterest at 18% per annum. Paragraph 5 of the plaint contains the followingaverments:

“The aforesaid loans have been given by the plaintiff to thedefendant always with an understanding that aforesaid loans shallbe returned along with interest @ 18% p.a. That the aforesaidloans were repayable within one year from the date of paymentof the last instalment of the loan i.e. latest by 9th of April, 2014.However, the defendant was to pay interest on the aforesaid loanamounts on half yearly basis @ 18% p.a. to the plaintiff.”

5. In paragraph 10 of the plaint, it has been pleaded that thoughtwo and a half years had elapsed since the date for repayment of theloan, the respondent had failed to pay the outstanding amount. Theappellant has also set up the case that a running account has beenmaintained between the parties in pursuance of which, the last paymentwas made on 24 October 2013.

6. The defense in the written statement filed by the respondent isthat the respondent provided real estate services to the appellant forwhich commission was being paid by the appellant. It was alleged thatpayments made for business transactions are in a malafide mannerportrayed as loan transactions. On some occasions, it is alleged, paymentswere made for carrying out renovation work in the properties. The AB

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Arespondent has denied that there were any loan transactions, and on thecontrary, set up the plea that the transactions between the parties pertainto the payment of commission by the appellant to the respondent inconnection with real estate transactions.

7. On the preliminary issue framed on the question of limitation,Bno evidence was adduced by the respondent. The trial Judge heard thepreliminary issue only on the basis of arguments at the Bar, noting thatthe appellant had failed to file written arguments. The trial Judge heldthat the admission in paragraph 10 of the plaint is that the last paymentwas made on 20 June 2013 by the appellant and since the suit wasinstituted on 1 April 2017, three years nine months and ten days thereafter,Cit is barred by limitation.

8. In appeal, the High Court has also held that since the lastpayment was made on 24 October 2013 in the amount of Rs 3 lakhs, thesuit which was instituted on 31 March 2017 was beyond three years ofthe last repayment. While dealing with the averment in paragraph 5 ofDthe plaint, which has been extracted above, the High Court has held thatsince the appellant is a company, “it is not expected of a company tohave oral mutual understandings with its customers”. Noting that thatthere is no written agreement to the effect that the loan would berepayable within one year from the date of payment of the last installment,the High Court held that it would be difficult to hold that such a conditionEformed part of the contract between the parties. Finally, the Single Judgeof the High Court took the view that accepting the case of the appellantwould lead to a wrong precedent since it would then be open to theplaintiff to take a plea that a loan given in 2000 was orally agreed to bepaid in 2019 and hence a suit filed in 2020 is within limitation.F9. Two submissions have been urged on behalf of the appellant by F9. Two submissions have been urged on behalf of the appellant byMr Udai Gupta, learned counsel. Firstly, it has been submitted that theaverments in paragraph 5 of the plaint set up an express plea to theeffect that the loan was repayable within one year from the date of thepayment of the last installment that is, by 9 April 2014. Hence, the suitwhich was instituted on 31 March 2017 is within limitation. On this limbGof the submission, it has been urged that in any event, this is a matterwhich has to be tried on the basis of evidence and could not have beendisposed of purely on the basis of oral arguments. Secondly, it has beensubmitted that the contention that there was an open and running currentaccount between the parties having been set up in the plaint, it has to beHdecided on the basis of evidence adduced at the trial.

10. Opposing these submissions, Mr Sanjay Sehgal, learned counselappearing on behalf of the respondent submitted that (i) there isadmittedly no written agreement between the parties evidencing the termsof an alleged loan transaction; (ii) there was no loan transaction at alland the payments which were made by the appellant to the respondentwere on account of commission towards real estate transactions; (iii)the last payment having been made on 24 October 2013, the suit whichwas instituted on 31 March 2017 is barred by limitation; (iv) Article 1 ofthe Limitation Act has no application whatsoever since there was noopen, running and mutual current account envisaging mutual paymentsand receipts between the parties; and (v) this is evident from theaverments contained in paragraph 3 of the plaint where the appellanthas set up the plea that it was only the appellant who was makingpayments to the respondent.

11. The appellant has specifically set up a plea in paragraph 5 ofthe plaint that the loans were to be repaid within one year from thedate of the payment of the last installment. The case of the appellanthas to be proved on the basis of evidence adduced in the suit. Such anissue could not have been decided purely on the basis of oral argumentsurged on behalf of the contesting parties. The respondent has deniedthe existence of loan transactions and has set up the plea that thepayments made by the appellant were on account of commission. Thereare two conflicting versions on the nature of the business transactionsbetween the parties, the appellant alleging that it was a loan, while therespondent alleges that it was in the nature of a commission for realestate services.

12. The issue as to whether the claim of the appellant is barred bylimitation cannot be isolated from the nature of the transactions betweenthe parties. In any event, whether the plea of the appellant as set up inparagraph 5 of the plaint is proved would depend upon evidence adducedat the trial. The course of action which was followed by the learned trialJudge of directing the parties to address arguments on the issue oflimitation was irregular. The issue of limitation in the present case wouldrequire evidence to be adduced.

13. Order XIV Rule 2 of the CPC stipulates that when issues ofboth law and facts arise in the same suit, the Court may dispose the suitby trying the issue of law first. For this purpose, the provision specifies A

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Atwo questions of law, which are (i) jurisdiction of the Court; and (ii) a barto the suit created by any law for the time being in force. The provisionis extracted below:

2. Court to pronounce judgment on all issues.—(1)Notwithstanding that a case may be disposed of on a preliminaryBissue, the Court shall, subject to the provisions of sub-rule (2),pronounce judgment on all issues. (2) Where issues both of lawand of fact arise in the same suit, and the Court is of opinion thatthe case or any part thereof may be disposed of on an issue oflaw only, it may try that issue first if the issue relates to—

C(a) the jurisdiction of the Court, or

(b) a bar to the suit created by any law for the time being inforce, and for that purpose may, if it thinks fit, postpone thesettlement of the other issues until after that issue has beendetermined, and may deal with the suit in accordance with theDdecision on that issue.]

14. Before this Court in Nusli Neville Wadia v. IvoryProperties[2], the issue was whether the issue of limitation can bedetermined as a preliminary issue under Order XIV Rule 2. The three-judge bench of this court observed that if the issue of limitation is basedEon an admitted fact, it can be decided as a preliminary issue under OrderXIV Rule(2)(b). However, if the facts surrounding the issue of limitationare disputed, it cannot be decided as a preliminary issue. This Courtobserved as follows:

51. […] As per Order 14 Rule 1, issues arise when a materialFproposition of fact or law is affirmed by the one party and deniedby the other. The issues are framed on the material proposition,denied by another party. There are issues of facts and issues oflaw. In case specific facts are admitted, and if the question of lawarises which is dependent upon the outcome of admitted facts, itis open to the court to pronounce the judgment based on admittedGfacts and the preliminary question of law under the provisions ofOrder 14 Rule 2. In Order 14 Rule 2(1), the court may decide thecase on a preliminary issue. It has to pronounce the judgment onall issues. Order 14 Rule 2(2) makes a departure and the court M/S MONGIA REALTY AND BUILDWELL PVT. LTD. v. MANIK SETHI[DR. DHANANJAYA Y CHANDRACHUD, J.]

may decide the question of law as to jurisdiction of the court or abar created to the suit by any law for the time being in force, suchas under the Limitation Act.

52. In a case, question of limitation can be decided based onadmitted facts, it can be decided as a preliminary issue underOrder 14 Rule 2(2)(b). Once facts are disputed about limitation,the determination of the question of limitation also cannot be madeunder Order 14 Rule 2(2) as a preliminary issue or any other suchissue of law which requires examination of the disputed facts. Incase of dispute as to facts, is necessary to be determined to givea finding on a question of law. Such question cannot be decidedas a preliminary issue. In a case, the question of jurisdiction alsodepends upon the proof of facts which are disputed. It cannot bedecided as a preliminary issue if the facts are disputed and thequestion of law is dependent upon the outcome of the investigationof facts, such question of law cannot be decided as a preliminaryissue, is settled proposition of law either before the amendment ofCPC and post amendment in the year 1976.

15. Since the determination of the issue of limitation in this case isnot a pure question of law, it cannot be decided as preliminary issueunder Order XIV Rule 2 of the CPC. Hence, we allow the appeal andset aside the judgment of the trial Judge dated 16 August 2018 and of theSingle Judge of the High Court dated 4 September 2019. The issue oflimitation which has been framed by the learned trial Judge may bedecided, along with other issues at trial. The appeal shall stand allowedin the above terms.

16. Pending applications, if any, stand disposed of.

Ankit Gyan

Appeal allowed.

(Assisted by : Rahul Rathi, LCRA)

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