Case Note & Summary
The plaintiff, Niskalp Investments & Trading Company Ltd., filed a summary suit under Order 37 of the Code of Civil Procedure, 1908, against the defendant, Hunduja TMT Ltd., for recovery of Rs. 8,67,11,781/- with interest at 20% per annum on the principal amount of Rs. 3,70,00,000/-. The claim arose from an agreement dated 25.11.1997 between the plaintiff and the defendant, under which Hinduja Finance Corporation Ltd. (HFCL) agreed to sell 10 lakh shares of Mody International Paper Ltd. (MIP) to the plaintiff at Rs. 37 per share, and the defendant agreed to buy back those shares. The plaintiff alleged that it paid the consideration but the defendant failed to buy back the shares, leading to the suit. The defendant sought leave to defend, contending that the agreement was not enforceable as conditions precedent were not fulfilled, and that the claim was for liquidated damages, not a debt or liquidated demand, making the summary suit not maintainable. The court analyzed the agreement and found that the plaintiff had not demonstrated fulfillment of all conditions, particularly the listing of shares. The court also noted that the claim appeared to be for damages for breach of contract, which is not a liquidated demand under Order 37. Consequently, the court held that the defendant had raised triable issues and granted unconditional leave to defend, allowing the defendant to file a written statement within four weeks.
Headnote
A) Civil Procedure - Summary Suit - Leave to Defend - Order 37 Rule 3 CPC - The court considered whether the defendant raised triable issues entitling it to unconditional leave to defend in a summary suit for recovery of money based on a buyback agreement. The court held that the defendant's contentions regarding non-fulfillment of conditions precedent and the claim being for liquidated damages rather than a debt or liquidated demand disclosed triable issues, and thus unconditional leave to defend was granted. (Paras 1-10) B) Contract Law - Buyback Agreement - Conditions Precedent - The agreement required the plaintiff to acquire shares and the defendant to buy them back, but the plaintiff failed to prove that all conditions precedent, including listing of shares, were fulfilled. The court held that such non-fulfillment raises a triable issue as to the defendant's liability. (Paras 5-8) C) Civil Procedure - Summary Suit - Liquidated Demand - Order 37 CPC - The court examined whether the claim for buyback consideration constituted a liquidated demand. It held that where the claim is for damages for breach of contract, it may not be a liquidated demand unless the amount is fixed or ascertainable. The court found that the claim in this case was for liquidated damages, which is not a debt or liquidated demand under Order 37, and thus the suit itself may not be maintainable as a summary suit. (Paras 9-10)
Issue of Consideration
Whether the defendant is entitled to unconditional leave to defend in a summary suit under Order 37 of the Code of Civil Procedure, 1908, when the claim arises from a share buyback agreement and the defendant raises triable issues regarding non-fulfillment of conditions precedent and the applicability of liquidated damages.
Final Decision
The court granted unconditional leave to the defendant to defend the suit. The defendant is directed to file a written statement within four weeks from the date of the order.
Law Points
- Summary suit
- leave to defend
- triable issues
- buyback agreement
- conditions precedent
- liquidated damages
- Order 37 CPC
