Case Note & Summary
The plaintiff, RMC Readymix (I) P.ltd, filed a summary suit under Order 37 of the Code of Civil Procedure, 1908, against the defendant, Kanayo Khubchand Motwani, for recovery of Rs.85,26,667/- comprising Rs.50,00,000/- as refund of security deposit and Rs.35,26,667/- as interest at 24% per annum. The dispute arose from a leave and licence agreement dated 23.11.1998, whereby the defendant granted the plaintiff a licence for commercial premises admeasuring 7500 sq. ft. on the first floor of 'Dakshana' building at CBD Belapur, New Mumbai, along with 10 car parking spaces. The agreement provided for a refundable security deposit of Rs.50,00,000/- which was not to carry interest. Clause 14(c) of the agreement stipulated that if the licensee defaulted in handing over vacant possession at the end of the three-year period, the licensor could forfeit the deposit. The plaintiff vacated the premises after the term but claimed refund of the deposit along with interest. The defendant refused, invoking the forfeiture clause. The plaintiff filed a summary suit. The defendant sought leave to defend, arguing that the forfeiture clause was valid and that the plaintiff had overstayed. The court examined the agreement and found that the forfeiture clause raised a triable issue. The court also noted that the claim for interest was contrary to the express term of the agreement. The court held that the defendant had raised a plausible defence and was entitled to unconditional leave to defend. The court dismissed the summons for judgment and granted leave to defend, directing the defendant to file a written statement within four weeks. The court did not impose any condition for deposit of the amount, as the defence was not frivolous.
Headnote
A) Civil Procedure - Summary Suit - Order 37 CPC - Leave to Defend - Triable Issue - Where the defendant raises a plausible defence based on a forfeiture clause in a leave and licence agreement, the court must grant unconditional leave to defend. The plaintiff's claim for refund of security deposit and interest was contested by the defendant relying on clause 14(c) which permitted forfeiture if the licensee overstayed. Held that the forfeiture clause creates a triable issue, and the court cannot decide the validity of the clause in a summary proceeding. (Paras 1-10) B) Contract Law - Forfeiture Clause - Security Deposit - Leave and Licence Agreement - Clause 14(c) of the agreement allowed the licensor to forfeit the deposit if the licensee failed to hand over vacant possession at the end of the term. The plaintiff/licensee overstayed for several months. The court held that the forfeiture clause is not per se invalid and raises a serious question requiring trial. (Paras 2-6) C) Interest - Claim for Interest on Security Deposit - Contractual Stipulation - The agreement expressly stated that the deposit shall not carry interest. The plaintiff claimed interest at 24% p.a. despite the clause. The court noted that the claim for interest is contrary to the contract and raises a triable issue. (Paras 2, 7-8)
Issue of Consideration
Whether the plaintiff is entitled to summary judgment for recovery of security deposit and interest when the defendant claims forfeiture under clause 14(c) of the leave and licence agreement and disputes the interest rate.
Final Decision
Summons for Judgment dismissed. Defendant granted unconditional leave to defend. Defendant to file written statement within four weeks. No order as to costs.
Law Points
- Summary suit under Order 37 CPC
- Leave and licence agreement
- Forfeiture clause
- Security deposit
- Triable issue
- Interest on deposit
- Unjust enrichment
- Penalty
- Section 74 Contract Act
