TaxTMI 
TaxTMI 
2021 (2) TMI 978
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....the amounts mentioned above. The suit is based on two dishonoured cheques, one for Rs. 5,00,00,000/- and the other for Rs. 54,00,000/-. These two cheques were given by the defendant to the plaintiff. Both the aforesaid cheques were dishonoured when presented for payment, hence the present suit. 3. To understand in what circumstances these two cheques were issued by the defendant to the plaintiff, it would be necessary to refer to the facts and which are undisputed. In 2011, pursuant to the defendant's request for financial assistance, the plaintiff agreed to disburse a sum of Rs. 5 Crores to the defendant as a loan for business purposes. The said loan was repayable along with interest @ 19 % p.a. According to the plaintiff, on the basis of the defendant's assurance of repayment along with the agreed rate of interest, the plaintiff issued a cheque of Rs. 5 Crores dated 1st January, 2011 in favour of the defendant. The said cheque was duly encashed by the defendant and honoured by the plaintiff. On 3rd January, 2011, the defendant also drew a Bill of Exchange in favour of the plaintiff in the sum of Rs. 5 Crores as a security for the said loan. 4. It is the case of the plaintif....
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.... Thereafter, the present Summons for Judgment was filed on 16th August, 2019. Since, there was a delay in filing a reply to the Summons for Judgment, the defendant filed an Interim Application seeking condonation of the delay and which was allowed by this Court vide its order dated 10th December, 2019. Thereafter, the Defendant filed an affidavit-in-reply dated 11th December, 2019 to which the plaintiff filed an affidavit-in-rejoinder dated 18th December, 2019 and the defendant filed an affidavit in sur-rejoinder dated 10th January, 2020. Thereafter, the matter was adjourned from time to time. Finally, on 4th November, 2020 the defendant, who was represented by an advocate, made a request to the Court that the defendant is desirous of sending a settlement proposal to the plaintiff to see if the matter can be resolved. He, therefore, requested that the matter be kept on 24th November, 2020. Acceding to this request, this Court adjourned the matter. Since no settlement fructified, finally, the matter was heard on 9th December, 2020 and 11th December, 2020 when the arguments were concluded and the order was reserved. 7. In this factual backdrop, Mr. Andhyarujina, the learned senior....
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....nd applications relating to a commercial dispute of a Specified Value. He submitted that it can hardly be disputed that the cause of action in the present suit would be a commercial dispute. The use of the word "all suits" appearing in section 6 of the CC Act clearly implies that a Commercial Court under the Commercial Courts Act, 2015 is authorized to try all commercial suits including a summary suit filed under Order XXXVII of the CPC. He submitted that section 12A, and which was inserted on 21st August, 2018, clearly contemplates that no suit, except one which contemplates any urgent interim relief, can be instituted, unless the plaintiff exhausts the remedy of pre - institution mediation in accordance with the manner and procedure as may be prescribed by Rules framed by the Central Government in that regard. He submitted that this attracts the application of the "doctrine of exhaustion of remedies". Therefore, this Court cannot entertain the suit if the remedy of pre-institution mediation is not exhausted. He submitted that in fact the objects and reasons clearly stipulate this also. To give effect to this section, the Government has also issued notifications providing for rule....
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....efines the word "loan" to mean an advance at interest whether of money or in kind, but does not include inter alia an advance of any sum exceeding rupees three lakhs made on the basis of a negotiable instrument as defined in the Negotiable Instruments Act, 1881 (26 of 1881), other than a promissory note [see section 2(13)(j)]. In the present case, monies were advanced by the plaintiff by cheque. For repaying the said advance (including interest), the defendant issued 2 post-dated cheques, one for Rs. 5 Crores towards the principal amount and the other for Rs. 54 Lacs towards interest. Both these cheques were dishonoured when presented for payment. Since the advance made by the plaintiff cannot be termed as a "loan" [as it is specifically excluded under section 2(13)(j)], the question of the bar set out in section 13(1) cannot and does not arise. This is for the simple reason because section 13(1) of the Money Lenders Act clearly stipulates that, no Court shall pass a decree in favour of a "money-lender" in any suit unless the Court is satisfied that at the time when the "loan" or any part thereof, to which the suit relates was lent, the money lender held a valid license. If the Cou....
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....e revenue. The fact that the borrower is a stranger to the lender does not on its own make the latter a 'money-lender'. (d) A loan recovery action is not barred merely because there is a loan. It has to be shown that the loan was part of 'the business of money-lending'. (e) A plaintiff seeking a recovery of a loan is not required to show that his suit is not barred by the Money Lenders Act. It is always for the defendant who puts up money-lending as a defence to show that the transaction is forbidden by the Money Lenders Act." 8. The transactions in question in Base Industries (and also in case of Ashok Commercial Enterprises & Anr Vs. Parekh Aluminex Ltd. to which I referred in Base Industries) stand on a different footing from the present suit. This action is altogether simpler because it is focused narrowly on the dishonour of the two cheques admittedly issued by the Defendant. That, as I have held, is exempted from the purview of the Money Lending Act, and therefore the bar of that Act cannot apply to a transaction such as this." (emphasis suppled) 13. Apart from the fact that the present suit is based on two dishonoured cheques and hence would ....
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....e plaintiff and hence the suit be dismissed. 15. Before I deal with the scope and ambit of section 12A of the CC Act, it would be apposite to understand why the Commercial Courts Act, 2015 was brought into force. The Law Commission of India, in its 253rd Report, had recommended the establishment of Commercial Courts and the Commercial Division and the Commercial Appellate Division in the High Courts for disposal of commercial disputes of a Specified Value. The purpose for establishing such a Law was to provide for speedy disposal of commercial disputes and which was under consideration of the Government for quite some time. The Government felt that high valued commercial disputes involve complex facts and questions of law, and therefore, there was a need to provide for an independent mechanism for their early resolution. Early resolution of commercial disputes would create a positive image to the investor world about the independent and responsive Indian legal system. It was in these circumstances that a Bill namely, the Commercial Courts, Commercial Division and Commercial Appellate Division of High Courts Bill of 2015 was introduced. As per this Bill, all suits, appeals or app....
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....tor. (5) The settlement arrived at under this section shall have the same status and effect as if it is an arbitral award on agreed terms under sub-section (4) of section 30 of the Arbitration and Conciliation Act, 1996 (26 of 1996)." (emphasis supplied) 17. Section 12A of the CC Act stipulates that where a suit, which does not contemplate any urgent interim relief under the Commercial Courts Act, shall not be instituted unless the plaintiff exhausts the remedy of pre-institution mediation. The manner in which and the procedure to be followed, are also set out under the said section. The time period for completion of the mediation process is also restricted to three months from the period of the application made by the plaintiff for mediation under sub-section (1). In furtherance of this provision, the Government has, under section 21A(2)(a) read with sub-section (1) of section 12A issued a notification No. G.S.R. 607(E) dated 3rd July, 2018 which inter alia enacts rules for pre-institution mediation and settlement, namely, The Commercial Courts (Pre-Mediation and Settlement) Rules, 2018. A separate notification No. S.O. 3232 (E) dated 3rd July, 2018 has been issued ....
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....t of the CC Act, namely, to resolve commercial disputes as quickly as possible and at the same time, if possible, to reduce the burden on the Court. To put it simply, the defendant, by his conduct, can in a given case, waive the privilege to drive the plaintiff to go to mediation. There could be a case where the defendant just does not want to amicably settle the matter or he may feel that he has valid defences to the claim of the plaintiff and there is nothing to resolve. In such a case it would, therefore, be futile to refer the parties to mediation. Despite this, if the Court was to take a view that the parties must compulsorily go for mediation as contemplated under section 12A of the CC Act, the same would run counter to the very purpose for which the CC Act was brought into force. It would have the effect of delaying the proceedings rather than having a quick resolution of the dispute and which is the very object for which the CC Act was brought on the statute book. I am, therefore, clearly of the view that the provisions of section 12A of the CC Act being procedural in nature, have to be interpreted keeping in mind the doctrine of substantial compliance. A procedural provisi....
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....f Secretary to that Government or any other officer authorised by that Government in this behalf; (c) in the case of a suit against any other State Government, a Secretary to that Government or the Collector of the district; (d) [* * *] and, in the case of a public officer, delivered to him or left at his office, stating the cause of action, the name, description and place of residence of the plaintiff and the relief which he claims; and the plaint shall contain a statement that such notice has been so delivered or left. (2) A suit to obtain an urgent or immediate relief against the Government (including the Government of the State of Jammu and Kashmir) or any public officer in respect of any act purporting to be done by such public officer in his official capacity, may be instituted, with the leave of the Court, without serving any notice as required by sub-section (1); but the Court shall not grant relief in the suit, whether interim or otherwise, except after giving to the Government or public officer, as the case may be, a reasonable opportunity of showing cause in respect of the relief prayed for in the suit: Provided that the Court....
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....s allow institution of the suit without fulfilment of the prescribed act, namely, service of notice (under section 80) or going for pre-institution mediation in the prescribed manner (under section 12A) respectively, where the suit contemplates urgent interim relief. The only difference is that under section 80 of the CPC the suit has to be instituted with the leave of the Court [see section 80(2)]. 23. In this regard, Mr. Andhyarujina relied upon a decision of this Court in the case of Chandrashekhar Purushottam Rathi v. State of Maharashtra [2002(2) Mh. L. J. 181] to contend that just as a notice under section 80 of the CPC is capable of being waived, so also is the requirement of the plaintiff to first invoke pre-institution mediation before filing a suit as contemplated under section 12A of the CC Act. This was a case where this Court was considering whether a notice under section 80 of the CPC is capable of being 'waived' or contemplates even a 'deemed waiver'. Answering this question in the affirmative, this Court held as under:- "15. From the ratio of the cases cited above that the notice under section 80 of Civil Procedure Code is capable of being waived, it fur....
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....t point and no objection was taken subsequently on that score at any stage of the trial nor any application was made for the amendment of issues. It was held that the defendant was deemed to have waived the notice. An elaborate discussion of the facts and law on the above point was made in this case. The observations in the earlier authorities were reproduced. 18. In para 14, the observations in Vellayan v. Madras Province, AIR 1947 PC 197 were quoted as below:- "The notice required to be given under section 80 is for the protection of the authority concerned. If in a particular case he does not require that protection and says so, he can lawfully waive his right to the notice." 19. Then the aforesaid observations, which are already reproduced above from Dhirendra Nath Gorai plus Subal Chandra Nath v. Sudhir Chandra Ghosh, AIR 1964 SC 1300, as regards the distinction between irregularity and nullity are also relied upon in this cited case in para 16. The aforesaid principles are concluded in para 18 of the cited case. While considering the facts of that particular case, which were indicating that the party was deemed to have waived the notice, it was poin....
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....e application, seeking dispensation of the requirement of notice, is cryptic but the fact remains that by allowing the application, after hearing the defendant State, the Judge has opined that the suit is for the purpose of obtaining an urgent and immediate order. Had the satisfaction been against the contractor, the court was bound to return the plaint to the contractor for re-presentation after curing the defect in terms of sub-section (1) of Section 80. Although we do not approve of the manner in which the afore-extracted order has been made and the leave has been granted by the Subordinate Judge but bearing in mind the fact that in its reply to the application, the State had not raised any specific objection about the maintainability of the application on the ground that no urgent and immediate relief had either been prayed for or could be granted, as has now been canvassed before us, we are of the opinion that having regard to the peculiar facts and the conduct of both the parties it is not a fit case where the matter should be remanded back to the Subordinate Judge for reconsideration. We find it difficult to hold that the order passed by the Subordinate Judge on the contract....
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....ght into force. This interpretation, which I have held earlier would sub-serve the ends of justice, would not in any event cause prejudice to the defendant. A defendant who genuinely desires to resolve the disputes through mediation, can always request the Court to invoke the provisions of section 89 of the CPC to send the parties to mediation. 27. Having taken a view on the interpretation and scope of section 12A, I shall now see how they apply to the facts of the present case. As narrated earlier, the present suit came to be lodged on 6th July, 2019. After the suit was filed, the writ of summons was served on the defendant and the plaintiff thereafter filed the above Summons for Judgement on 16th August, 2019. The defendant also filed an affidavit-in-reply dated 11th December, 2019 to the Summons for Judgment as well as an affidavit in sur-rejoinder dated 10th January, 2020 to rejoinder filed by the plaintiff on 18th December, 2019. At no point of time has the defendant ever raised the contention that the present suit cannot be instituted because the plaintiff has not invoked the remedy of pre-institution mediation as contemplated under section 12A of the CC Act. This argument....
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...., am clearly of the view that in the facts of the present case, the contention raised by Mr. Bookwala regarding dismissal of the suit for non-compliance of the provisions of section 12A is without any merit and is rejected. 29. Before concluding on this issue, it would only be fair to deal with the judgments that were relied upon by Mr. Bookwala. The first decision is in the case of Anil Gupta (supra), which is a decision of a single Judge of the Delhi High Court dated 30th September, 2020. I have carefully gone through the aforesaid decision. In the facts of that case, it was the argument on behalf of the plaintiff that since the plaintiff had filed an application seeking urgent interim reliefs under Order XXXVIII Rule 5 and another application under Order XXXIX Rule 10 of the CPC, there was no requirement for compliance of section 12A of the CC Act. This contention of the plaintiff was negated stating that the application did not satisfy the test of urgency. However, instead of dismissing the suit, the Delhi High Court issued summons in the Suit, subject to the plaintiff filing an application seeking exemption under section 12A of the CC Act. I fail to see how this decision ca....
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....t the Supreme Court has, in any way, opined that pre-institution mediation, in the given facts and circumstances of the case, cannot be waived. That was never in issue at all. All that the Supreme Court says is that even for prelitigation mediation and settlement time needs to be extended in view of the lockdown. I, therefore, find that even this decision is of no assistance to the decision. 32. The last decision relied upon by Mr. Bookwala was the decision of the Madhya Pradesh High Court in the case of GSD Constructions Pvt. Ltd. (supra). Even this judgment, I find, is wholly inapplicable to the facts of the present case. In fact, in this case too, the appellants before the Madhya Pradesh High Court had filed a civil suit for a declaration, recovery of money and for grant of injunction and they also moved applications under Order VII Rule 1 and Order XXXIX Rules 1 and 2 read with section 151 of the CPC. The learned Trial Court, taking into account the provisions of section 12A, returned the Plaint by directing the plaintiff to approach the authority as per the provisions of section 12A(1) of the CC Act by exhausting the remedy of pre-institution mediation. This order was chall....