Case Name: Anil Sharma & Ors v. Genesis Finance Co. Ltd. & Ors
Case No.: RFA(OS)(COMM) 39/2019
Dated: May 08, 2024
Quorum: Justice Vibhu Bakhru and Justice Tara Vitasta Ganju
FACTS OF THE CASE:
In this intra-court appeal, the appellants have challenged a judgement and decree dated 27.03.2019 (referred to as the challenged order) issued by the learned Single Judge in CS(COMM) 307/2016, which is captioned Genesis Finance Company Ltd. v. Anil Sharma & Others.
By the contested order, the learned single judge granted respondent no. 1’s application under Order XIIIA of the Code of Civil Procedure and issued a preliminary decree in accordance with Order XXXIV Rule 4 of the CPC, stating that the plaintiff was entitled to recover ₹2,03,00,000/-as a joint and several recovery from the appellants and respondent nos. 2 and 3 (defendants in the suit), together with interest at the rate of 18% annually from the date of the lawsuit’s institution until its realisation and 24% annually from the Settlement Deed dated 20.01.2014 until the date of the suit’s institution, or 31.03.2016.
Furthermore, the educated Single Judge had also ordered costs to be measured at ₹2.5 lacs. The learned Single Judge gave the respondent nos. 2 and 3 and the appellants six months to pay the plaintiff’s debt; if they fail to do so, the plaintiff may seek a final decree for the sale of the mortgaged properties, or a portion of them, to recoup the outstanding amounts.
The defendant had filed the aforementioned suit in order to recover ₹4,15,14,023.76/- (Rupees Four Crores Fifteen lakhs Fourteen thousand Twenty-Three and Seventy-Six paise only) as well as pendente lite and future interest at the rate of 36% per annum (reducing). The plaintiff also requested a decree for the sale of mortgaged properties as stated in Paragraph 4 of the complaint.
The appellants have based their defence on the claim that they were misled into signing a Loan Agreement with the plaintiff on May 19, 2011 (henceforth referred to as the Loan Agreement) on the false impression that the loan came with a simple interest rate of 17.67% annually.
On the other hand, the loan was structured with an interest rate of 17.67% (flat), which, when calculated using the decreasing balance approach, amounted to about 30.08%. This assumption was made when the documentation was created.
The experienced single judge concluded that the appellants had no chance of winning their defence. Based on the appellants’ admission of the payment schedule that was a component of the loan agreement, the aforementioned conclusion was reached. Furthermore, there was no disagreement about the parties’ agreement to settle their differences over the outstanding liability and interest that was due on it when they signed the Settlement Agreement.
LEGAL PROVISIONS:
- Section 138 of the Negotiable Instruments Act, 1881. Penalises the dishonouring of any cheque written for “any debt or other liability” that has been partially or fully paid. Furthermore, there is coextensive accountability between the major debtor and the guarantor. So, in accordance with section 138, N.I., the guarantor cannot avoid liability.
CONTENTIONS OF THE APPELLANTS:
According to the appellants’ learned counsel, they were under the false impression that the equivalent monthly installment for loan facility repayment was ₹11,68,735/-. Nevertheless, they had paid back ₹2,61,98,620/- against a loan of ₹2,75,00,000/-, or 22.4 equal monthly installments. The plaintiff argued that the EMIs were based on a 30.08% annual interest rate, but that the plaintiff had deceitfully convinced appellant nos. 1 through 3 to agree to pay interest at the rate of 17.67%.
According to his submission, if the annual percentage rate for the EMIs was 17.67%, the corresponding monthly installment would be ₹9,89,644. He presented evidence that the appellants signed the Settlement Agreement at the time the mother of appellants nos. 1 and 3 was brought into the intensive care unit. The appellants acknowledged that ₹2,03,00,000 was still owed as of January 20, 2014, but they had signed the Settlement Agreement in error because they had put their trust in the plaintiff.
Additionally, he argued that the plaintiff had taken advantage of the appellants’ pressing need for money to force them to sign on the dotted line. He argued that the Settlement Agreement was unenforceable because it was signed while the appellants were extremely agitated and not in a normal mental state due to the mother of appellants nos. 1 and 3 being critically ill and admitted to the intensive care unit due to multiple organ failure.
The court determined that the parties in question in the debt Agreement, the defendants committed to repaying the debt over the course of 36 monthly installments. The fixed amount for the monthly installment was ₹11,68,735/-. Consequently, there could be no misinterpretation of the payable interest.
COURT’S ANALYSIS AND JUDGMENT:
According to the court’s ruling, interest is computed over the whole loan duration. Thus, in this instance, the appellant would be required to pay a total of 53.01% in interest over the course of three years, or 17.67% annual interest. The appellants would be required to return ₹4,20,74,460/-, with the aforementioned interest being payable on the whole ₹2,75,00,000/-loan principal. Because the repayment schedule was attached to the loan paperwork and stated that the total amount above was due, the appellants could not have been misled about the method used to calculate the interest.
The court determined that the plaintiff had filed complaints under Section 138 of the NI Act, which were pending in the Dwarka courts, because the appellants’ checks had been returned unpaid. Therefore, there could not have been any doubt at that point regarding the appellants’ knowledge of the conditions of the Loan Agreement. The parties to mediation were referred to by the court, and as a result, the appellants entered into a Settlement Agreement that was included in the mediation proceedings.
The appellants had complete knowledge of the plaintiff’s allegation, the court further noted. It is evidently an afterthought to argue that the appellants were not in a proper state of mind since their mother was in the intensive care unit (ICU) at the relevant period. The appellants did not make any such claim in their written declaration. Furthermore unsubstantial is the claim that the appellants were not given access to the whole Settlement Agreement. Moreover, the written declaration that the defendants filed makes no mention of this kind. As said earlier, there is no disagreement regarding the implementation of the Settlement Agreement.
Additionally, take note of the fact that even though the Settlement Agreement is clear and stipulates that interest will be paid at a rate of 36% annually on a decreasing balance basis, the learned Single Judge had lowered the pre-suit interest rate to 24% annually. The plaintiff has agreed to the impugned order’s reduction in interest rates from 36% to 24% annually, even though it is not discussed in it. We see no need to investigate this further as a result.
“PRIME LEGAL is a full-service law firm that has won a National Award and has more than 20 years of experience in an array of sectors and practice areas. Prime legal fall into a category of best law firm, best lawyer, best family lawyer, best divorce lawyer, best divorce law firm, best criminal lawyer, best criminal law firm, best consumer lawyer, best civil lawyer.”
Judgment reviewed by Riddhi S Bhora.
