Company ordered to pay Rs. 50 lakhs with pre-suit interest at 9% from 2013 despite false denials in balance sheet dispute

Delhi HC granted decree for recovery of Rs. 50 lakhs against defendant company with pre-suit interest at 9% per annum from November 2013 until suit filing, and 12% per annum from suit institution date until realization. Court found denial of pre-suit interest inequitable given defendant's false stand despite showing amount as payable in balance sheet. HC relied on principles of justice, equity and good conscience, distinguishing earlier precedent that limited pre-suit interest recovery under Interest Act provisions.

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Issues Involved:
1. Recovery of Rs. 5,32,50,000/- from defendants.
2. Legitimacy of the claim against defendants No. 1 to 3.
3. Timeliness of the claim for Rs. 50 lakhs.
4. Entitlement to pre-suit and post-suit interest.
5. Refund of court fees.

Detailed Analysis:

1. Recovery of Rs. 5,32,50,000/- from Defendants:
The plaintiff sought recovery of Rs. 5,32,50,000/- from the defendants, comprising a principal sum of Rs. 3.75 crores and interest. The plaintiff claimed that the defendants, known to him for a long time, requested a friendly loan of Rs. 5 crores in April 2013, promising to repay it within 12 to 18 months with 24% interest per annum and offering a 40% share in defendant No. 4 company. The plaintiff provided Rs. 3.75 crores instead, paid via cheques and instalments, but the defendants neither issued the shares nor repaid the loan or interest.

2. Legitimacy of the Claim Against Defendants No. 1 to 3:
On 31st May 2016, the court found defendants No. 1 to 3 unnecessary for the suit and struck off their names, making defendant No. 4 the sole defendant. The plaintiff accepted this order, which attained finality.

3. Timeliness of the Claim for Rs. 50 Lakhs:
The sole defendant, Swift Initiative Pvt. Ltd., denied the claim and argued that the recovery of Rs. 50 lakhs paid by cheques was barred by time. However, during the proceedings, the Director of the defendant company admitted receiving Rs. 50 lakhs by cheques as a friendly loan, shown as due in the company's balance sheet for 2013-14. The defendant's counsel eventually did not press the plea of the claim being time-barred.

4. Entitlement to Pre-Suit and Post-Suit Interest:
The court deliberated on the power to award pre-suit interest under Section 3 of the Interest Act, 1978, which allows interest if the debt is payable by a written instrument or if a written notice was given. The defendant argued no interest was agreed upon, and no written notice was provided. The plaintiff's counsel cited Aditya Mass Communications (P) Ltd. v. A.P.S.R.T.C., where pre-suit interest was awarded based on the facts of the case. The court acknowledged that denying pre-suit interest would be inequitable, as the defendant falsely denied the debt. Citing past judgments, the court held that interest could be awarded on principles of justice, equity, and good conscience, even if not strictly under the Interest Act. Consequently, the court awarded pre-suit interest at 9% per annum for three years prior to the suit and post-suit interest at 12% per annum.

5. Refund of Court Fees:
The plaintiff, while not pressing for the remaining reliefs, sought a pro-rata refund of court fees. The court ordered the refund of proportionate court fees in excess of the claim for Rs. 50 lakhs with interest at 18% per annum from 1st November 2013 till the suit's institution. The plaintiff was also entitled to the costs of the suit.

Conclusion:
The court decreed in favor of the plaintiff for recovery of Rs. 50 lakhs with interest at 9% per annum from 1st November 2013 till the suit's institution and 12% per annum from the suit's institution till realization. The plaintiff was also awarded costs, and a proportionate refund of court fees was ordered.

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