MANU/DE/2450/2019

Equivalent Citation: 262(2019)DLT455

IN THE HIGH COURT OF DELHI

CS (COMM) 752/2018
Decided On: 01.08.2019
Appellants: IFCI Factors Limited
Vs.
Respondent: Ramsarup Industries Limited and Ors.
Hon'ble Judges/Coram:
Prathiba M. Singh, J.
Counsels:
For Appellant/Petitioner/Plaintiff: Anupam Srivastava, Dhairya Gupta, Advocates and
Lalit Narayan Joshi, AR
For Respondents/Defendant: Dileep Tandon and Neha T. Phookan, Advs.
JUDGMENT
Prathiba M. Singh, J.
I.A. No. 13840/2018 (seeking leave to defend) & I.A. No. 13841/2018 (for delay)
1. Plaintiff - IFCI Factors Limited has filed the present suit under Order XXXVII CPC
against the Defendants - assignor/principal borrower, Ramsarup Industries Limited,
and guarantor, Mr. Ashish Jhunjhunwala - Defendant No. 2. The suit was registered
and summons were issued. Defendant No. 1 - Ramsarup Industries Limited filed I.A.
No. 7212/2018 under Section 151 CPC read with Section 14 of the Insolvency and
Bankruptcy Code, 2016 (hereinafter IBC) for stay of the present suit proceedings. On
7th September, 2018, it was ordered as under:
"...
2. Since the claim is pending and the moratorium period under Section 14 of
the Insolvency and Bankruptcy Code, 2016 has commenced, insofar as the
Defendant No. 1 is concerned, the suit will remain stayed. However, insofar
as Defendant No. 2 is concerned, the suit shall proceed. Upon the end of the
moratorium period, liberty is given to the Plaintiff to revive the suit qua
Defendant No. 1, depending upon the outcome of the proceedings in the
NCLT.
3. I.A. is disposed of."
2. Defendant No. 2 had filed I.A. No. 13840/2018 seeking leave to defend. The same
was filed with condonation of delay in re-filing being I.A. No. 13841/2018. Delay in
re-filing of the said application is condoned. I.A. is disposed of.
3. Submissions were heard on the application for leave to defend.
4 . The case of the Plaintiff is that the Plaintiff is a Non-banking Finance Company
(hereinafter 'NBFC'). Defendant No. 1 is, inter alia, engaged in the business of
manufacturing of wires, TMT bars and steel. It had made supplies to various clients,

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 who were the approved debtors. Defendant No. 1 approached the Plaintiff for grant of
domestic factoring facility (hereinafter 'facility'). Defendant No. 2 is a director of
Defendant No. 1. The facility was sanctioned by the Plaintiff on 30th December,
2009. An agreement for factoring of the receivables (hereinafter 'factoring
agreement') dated 31st December, 2009 was entered into with Defendant No. 1.
5 . Under the factoring agreement, the Plaintiff was to disburse up to 80% of
Defendant No. 1's invoice value raised by the approved debtors, in exchange for
Defendant No. 1's receivables, interest and other charges in terms of the schedule to
the agreement. After execution of the facility agreement, Defendant No. 2 executed a
guarantee in favour of the Plaintiff dated 31st December, 2009. The amount
guaranteed was Rs. 10 crores along with interest at the agreed rate, cost, charges
and other expenses. Sometime in 2011, further approved debtors were added. The
Plaintiff had disbursed 80% of the invoice value of the various approved debtors. A
total sum of Rs. 10,00,07,323/- was disbursed by the Plaintiff, to the Defendant No.
1. Under the agreement, apart from the amounts disbursed, the charges payable were
as under:
...

6. Notices of assignment of debts were also duly issued by Defendant No. 1 to all the
debtors and the acceptance was issued by the debtors in favour of the Plaintiff.
7 . Under the guarantee issued by Defendant No. 2 in favour of the Plaintiff it was
clearly undertaken that the guarantor would be liable upto a sum of Rs. 10 crores.
The relevant clause in the guarantee reads as under:
"...
6 . That my/our liability under this guarantee shall not exceed the principal
sum of Rs. 10,00,00,000 (Rupees Ten Hundred lakhs only) with interest at
the agreed rate and costs, charges and other expenses, including legal
expenses, that may be payable to you by the Obligant under the said
Agreement."
8. Defendant No. 2 also executed undertakings on behalf of Defendant No. 1 whereby

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 cheques for a sum of Rs. 10 crores were also issued and an undertaking was given to
deposit all receivables in an Escrow account with HDFC Bank.
9. Defendant No. 1 defaulted in its obligations and, accordingly, Plaintiff invoked the
guarantee against Defendant No. 2 vide notice dated 25th May, 2016. Along with the
said notice, a complete statement of accounts was also annexed.
10. Defendant No. 2 filed his leave to defend raising various pleas, which are as
under:
) That the suit is barred by limitation.
) That the suit under Order XXXVII CPC not being for a liquidated sum is not
maintainable.
) Defendant No. 2 has no liability to pay and is entitled to unconditional
leave to defend.
) The main borrower i.e. Defendant No. 1 is facing insolvency proceedings
under the IBC and there is a moratorium operating.
) That a complaint under Section 138 of the Negotiable Instruments Act,
1888 has also been filed.
11. The submission of Mr. Tandon, ld. counsel for Defendant No. 2 is that the two
earlier judgments of this Court in IFCI Factors Ltd. v. Maven Industries Ltd. & Anr.,
MANU/DE/3623/2015 : 2015 (255) DLT 32 and IFCI Factors Ltd. v. Vasudev Rao &
Anr., [FAO(OS) 214/2014, Decided on May 2, 2014], clearly cover the present case
and the suit under Order XXXVII CPC is not maintainable in the case of a transaction
governed by the Factoring Regulation Act, 2011 ('hereinafter 'FRA, 2011'). It is
further submitted that the suit under Order XXXVII, Rule 1(2)(b) CPC is only
maintainable if the suit is for recovery of a debt or liquidated demand. It is further
argued that the liability, if any, is of the debtors and not of the assignors. Various
provisions of the Factoring Regulation Act, 2011 (hereinafter 'FRA, 2011') are
referred to, to submit that the suit raises various triable issues as a recovery suit
under Order XXXVII, Rule 1(2)(b)(iv) CPC is only maintainable against the Debtor. It
is submitted that as per the judgment of the Supreme Court in GE Capital Services
India v. Mayflower Healthcare Pvt. Ltd., [CS(OS) 2859/2011, Decided on 31st
August, 2012], entries would have to be proved under Section 34 of the Evidence
Act, 1872 for the balance at the foot of the account to be arrived at and hence a suit,
such as the present suit, claiming an amount which is only the balance due at the
foot of the account is not maintainable under Order XXXVII CPC.
12. On the other hand, ld. counsel for the Plaintiff, Mr. Srivastava, has submitted
that the agreement and the guarantee are admitted by the Defendants, including
Defendant No. 2. He relies upon two judgments, namely M/s. Housing Development
Finance Corporation Ltd. v. Vikas Garg, [CS (OS) 217/2011, Decided on May 20,
2014] and Bijender Chauhan v. M/s. Financial Eyes (India) Ltd.,
MANU/DE/2138/2013 : ILR (2013) IV DELHI 3234 to argue that a suit based on a
statement of account is maintainable under Order XXXVII CPC. It is further submitted
by ld. counsel for the Plaintiff that the CPC was specifically amended and a provision
was introduced to protect NBFC's like the Plaintiff to file a suit under Order XXXVII
CPC. The said amendment was introduced in 2012 and the same was not noticed in
the case of IFCI Factors Ltd. v. Maven Industries Ltd. & Anr. (Supra). There being a
specific amendment to the CPC, it cannot be held that the suit under Order XXXVII
CPC is not maintainable. It is further submitted that the Plaintiff is entitled to recover

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 money either from debtors or from the assignors. Ld. counsel for Plaintiff also seeks
to distinguish the judgment in IFCI Factors Ltd. v. Vasudev Rao & Anr. (Supra) on the
facts.
Factoring services - Concept
1 3 . In the 1980s, internationally, it was noticed, that small and medium scale
businesses which used to supply goods and services to bigger enterprises were
facing several difficulties due to belated recovery or non-recovery of dues from their
customers. This used to result in clogging up their capital and left lesser money in
circulation for them. In order to better the liquidity of such businesses the concept of
'Factoring' was formalised in the UNIDROIT Convention on International Factoring,
adopted on 28th May 1988. This Convention defined a 'factoring contract' as under:
"Article 1
...
2. For the purposes of this Convention, "factoring contract" means a contract
concluded between one party (the supplier) and another party (the factor)
pursuant to which:
(a) the supplier may or will assign to the factor receivables arising
from contracts of sale of goods made between the supplier and its
customers (debtors) other than those for the sale of goods bought
primarily for their personal, family or household use;
(b) the factor is to perform at least two of the following functions:
- finance for the supplier, including loans and advance
payments;
- maintenance of accounts (ledgering) relating to the
receivables;
- collection of receivables;
- protection against default in payment by debtors;
(c) notice of the assignment of the receivables is to be given to
debtors."
1 4 . However, the above Convention itself was applicable to only international
transactions and not domestic transactions.
1 5 . In India, the Factoring Regulation Act, 2011 (hereinafter, 'FRA, 2011') is a
legislation, which has been introduced to regulate a factoring facility availed of by a
small scale or an ancillary industrial undertaking. The legislation was enacted in the
background of various reports, which recommended the development of factoring
services for small scale industries in order to effectively trace the problem of liquidity
for micro or small industries. It was in this background that the central government
introduced a bill titled "The Regulation of Factor (Assignment of Receivables) Bill,
2011". The said bill was thereafter enacted as the FRA, 2011.
16. A factoring agreement is an agreement under which the receivables are assigned
and the collection of amounts is contracted out, thereby reducing the cost,
inconvenience and manpower employed in recovering dues, maintenance of accounts

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 related to the same, management of the risks associated with the debts etc., The FRA
2011 defines a factoring business as under:
"(j) "factoring business" means the business of acquisition of receivables of
assignor by accepting assignment of such receivables or financing whether
by way of making loans or advances or otherwise against the security
interest over any receivables but does not include--
(i) credit facilities provided by a bank in its ordinary course of
business against security of receivables;
(ii) any activity as commission agent or otherwise for sale of
agricultural produce or goods of any kind whatsoever or any activity
relating to the production, storage, supply, distribution, acquisition
or control of such produce or goods or provision of any services.
3. Explanation.--For the purposes of this clause--
(i) the expression "agricultural produce" shall have the meaning
assigned to it under clause (a) of section 2 of the Agricultural
Produce (Grading and Marking) Act, 1937 (1 of 1937); and
(ii) the expressions "goods" and "commission agent" shall have the
meanings assigned to them respectively under clause (d) and
Explanation (ii) of clause (i) of section 2 of the Forward Contracts
(Regulation) Act, 1952 (74 of 1952);"
17. In every factoring transaction, there are at least three parties and sometimes four
if there is a surety or a guarantor. They are -
• the assignor i.e., the principal borrower,
• the assignee i.e., the factor,
• the approved debtor i.e., the purchaser of the goods or services; and
• optionally, a surety or a guarantor.
A factoring agreement is slightly different from a bill discounting facility in the sense
that in the case of bill discounting the principal borrower has the responsibility of
collecting the bills and remitting the proceeds to the financing agency whereas in a
factoring arrangement the responsibility of collecting the bills and remitting after
deducting the charges and commission are that of the financing agency. Further the
financing agency, in a bill discounting facility, does not offer any other additional
services such as management of the account, maintenance of ledgers etc.
18. In the present case, there were three contractual relationships that were created:
1 . Contract between Defendant No. 1 and Approved Debtors/Purchasers:
Defendant No. 1 to sell steel articles to Approved Debtors/Purchasers on
whom invoices are raised. These approved debtors signed notices of
assignment of debts confirming that they would make payments to the
Plaintiff.
2. Contract between Defendant No. 1 and Plaintiff: Plaintiff to disburse up to
80% of Defendant No. 1's invoice value raised on the approved debtors, in
exchange for Defendant No. 1's receivables, interest and other charges in

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 terms of the schedule to the agreement.
3 . Contract between Plaintiff and Defendant No. 2: Contract of personal
guarantee by Defendant No. 2 to the Plaintiff for pre-payments made to
Defendant No. 1.
A diagrammatic representation of the factoring arrangement is set out below:

19. One of the objects of the said Act was to introduce an amendment in the CPC to
make available the benefit of summary procedure for recovery of debts. Accordingly,
CPC came to be amended and sub-section (iv) was inserted in Order XXXVII, Rule
1(2)(b) by the FRA, 2011. Section 35 of the FRA, 2011 reads as under:
"35. The enactments specified in the Schedule shall be amended in the
manner specified therein."
The amendment introduced in the CPC, reads as under:
"In Order XXXVII, in rule 1, in sub rule (2), in clause (b), after sub clause
(iii), the following sub-clause shall be inserted, namely:--
"(iv) suit for recovery of receivables instituted by any assignee of a
receivable."
The notes on clauses for clause 35 reads as under:
"Clause 35. -- This clause relates to amendments of certain enactments.
This clause provides to amend the Code of Civil Procedure, 1908 to make
available the benefits of summary proceedings for recovery of debts or dues
under a factoring arrangement to a factor and amends the Credit Information
Companies (Regulation) Act, 2005 to define factor as a "credit institution
which are consequential nature."
20. A perusal of the above provisions and notes on clauses clearly shows that the
purpose of the legislation was to extend the benefit of availing summary procedure
for 'recovery of debts' given under Factoring arrangements. The wording of the
amendment brought about in the CPC as also Section 16 of the FRA, 2011, clearly
shows that rights are conferred on the assignee to file a summary suit for recovery of
receivables. The amendment in the CPC is not qualified in any manner as to against
whom such a suit can be filed. Clearly, there is nothing in the wording of the
amendment to raise any ambiguity that a suit is not maintainable against the assignor
or guarantor and is only maintainable against the debtor. Section 16 of the FRA, 2011
provides broader rights to the assignee to sue the debtor. However, that does not
mean that the suit cannot be filed against the assignor or guarantor. Since there is no
privity of contract between the assignee and the debtor, the statute specifically
confers a right to sue the debtor. Availability of the said remedy does not in any

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 manner foreclose the remedy against the assignor and the guarantor. Recently in IFCI
Factors Ltd. v. Gangotri Iron and Steel Co. Ltd., [C.S. (COMM.) 1579/2016, Decided
on January 17, 2018], a ld. Single Judge of this Court has, expressed some
reservations as to against whom such a suit would be maintainable. However, on a
perusal of the statement of objects and reasons, the notes on clauses and the
amendment to the CPC, as also the purpose behind the modification, it is clear that
the suit is maintainable by the assignee of the debt, i.e. the factor under FRA, 2011,
against the debtors and the assignors/guarantors, if any.
21. Insofar as Defendant No. 2 is concerned, moratorium under Section 14 of the
IBC does not apply. Section 14(3)(b), which deals with moratorium has clearly
provided that the moratorium under Section 14(1) does not apply to a surety or
guarantor. The said section has been amended in 2011 with retrospective effect from
6th June, 2018, which reads as under:
"14. ...
(3) The provisions of sub-section (1) shall not apply to--
...
(b) a surety in a contract of guarantee to a corporate debtor."
22. Thus, the moratorium against Defendant No. 1 does not extend the benefit of the
moratorium to Defendant No. 2. It is also a well settled position in law that the
guarantee is an independent contract from the main factoring agreement. The
guarantee provided in the present case clearly states that the guarantee is distinct
from the main factoring agreement. The said clauses read as under:
"2. That this guarantee shall be independent of the said Agreement and I/we
shall be independently liable to you under this guarantee, notwithstanding
any of the provisions of the said Agreement or any other contract or
arrangement between you and the Obligant or any other person or persons.
...
7 . That my/our liability under this guarantee shall not be affected by any
infirmity or irregularity on the part of the Obligant to enter into the said
Agreement or to undertake all or any of the obligations thereunder or the
winding up/dissolution/insolvency or appointment of Receiver of the
assets/or part of the assets of or change in the constitution of the Obligant.
...
16. That to give effect to this guarantee you may act as though I/we were
the Obligant/s and my/our liability hereunder will be several."
Defendant No. 2, who has executed the guarantee, is thus bound to honour the same,
independent of Defendant No. 1 as the liability is several.
23. The guarantee also clearly relates to a liquidated sum, which is clear from clause
6 of the guarantee extracted above. As per the said clause, the guarantee covers the
sum of Rs. 10 crores with interest at the agreed rate, costs, charges and other
expenses, including legal expenses. The same is clearly a liquidated sum with
interest and other charges being nothing but a percentage of the amount disbursed.
Thus, the amount is clearly an ascertainable and not an unascertainable sum. The
facts of IFCI Factors Ltd. v. Maven Industries Ltd. & Anr. (Supra) and IFCI Factors

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 Ltd. v. Vasudev Rao & Anr. (Supra) are clearly distinguishable. IFCI Factors Ltd. v.
Maven Industries Ltd. & Anr. (Supra), was based on a statement of account, which
was required to be proved in order for the amount due to be arrived at. This is clear
from a reading of paragraph 9 of the judgment wherein various sums were disbursed.
The Defendants had made several payments and thereafter the suit was filed for a
sum of Rs. 10.45 crores. In the said judgment, the specific amendment, which was
brought about in the CPC by FRA, 2011 is not brought to the notice of the Court.
24. Insofar as the ld. Division Bench judgment in IFCI Factors Ltd. v. Vasudev Rao &
Anr. (Supra) is concerned, in the said case, the Court came to the conclusion that the
Plaintiff had failed to plead that the suit was for a liquidated demand and even the
statement of account was not acknowledged by the Defendants.
2 5 . A reading of FRA, 2011 and the provisions therein clearly shows that the
Legislature was conscious of the fact that the factor would be entitled to various
sums apart from the money disbursed. This is clear from a perusal of the definition of
receivables, which is broad enough to include interest and other charges. Section
2(p) reads as under:
"(p) "receivables" mean all or part of or undivided interest in any right of any
person under a contract including an international contract where either the
assignor or the debtor or the assignee is situated or established in a State
outside India; to payment of a monetary sum whether such right is existing,
future, accruing, conditional or contingent arising from and includes, any
arrangement requiring payment of toll or any other sum, by whatever name
called, for the use of any infrastructure facility or services;"
26. In fact, the statement of objects and reasons also specifically mentions that one
of the objects of this legislation is to provide for the process of assessment of
receivables. The CPC having been specifically amended to enable summary
procedures for recovery of 'receivables', the argument that the suit is not
maintainable as it is not an ascertained sum or a liquidated sum, would not be
tenable. If such an argument is accepted, it would run contrary to the intent and
purpose of the amendment itself.
27. The amount, thus, payable by the Defendants is clearly an ascertainable sum.
From the said amount, any amount that has been paid would have to be given credit
to.
2 8 . Under the factoring agreement, Defendant No. 1 assigned all its receivables
which existed on the date of commencement to the Plaintiff. Clause 4 of the
agreement reads as under:
"4. TRANSFER OF RECEIVABLES
(1) The Client agrees to sell and the Factor agrees to purchase the
receivables, existing at the commencement date or arising thereafter during
the currency of this Agreement, in relation to any Debtor of the class or
description specified in paragraph 11 of the Schedule with recourse to the
Client. The ownership of each such receivable shall, as regards receivables
existing at the commencement date, vest in the Factor on that date and, as
regards future receivables, vest in the Factor automatically upon the same
coming into existence. Provided that the Factor may refuse to purchase any
further Receivable by giving due notice in writing to the client. If any
receivable should fail to vest effectively in the Factor in equity the Client
shall hold such receivable and any associated rights relating thereto in trust

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 for the Factor.
(2) Upon any receivable vesting in the Factor under sub-clause (1) there
shall also automatically vest in the Factor all the associated rights in relation
to such receivable.
(3) The Client shall at the request of the Factor and at the Client's expense
execute a formal written assignment to the Factor of the receivables and
associated rights referred to in sub-clause (1) and (2) and deliver to the
Factor any instrument or security included therein with any necessary
endorsement or other signature.
(4) The Client hereby irrevocably and unconditionally agrees that in the event
of termination of this Agreement, if the Factor is yet to recover any dues
from the Debtor/Client, the Client shall continue to assign to the Factor all
future Debts and Receivables that may arise till such time as the Factor
recovers his entire dues."
29. The purchase price of each of the existing receivables and future receivables was
payable by Defendant No. 1 to the Plaintiff. Defendant No. 1's Debt Purchase Account
was also to be maintained by the Plaintiff. Upon receipt of the receivables, the pre-
payment was to be made by the Plaintiff. Service charges, Discount Charges etc.
could be deducted. However, if any petition for winding up, bankruptcy etc. was
instituted against Defendant No. 1 or if Defendant No. 1 went into liquidation, the
prepayment obligation remained suspended and at that stage, the Plaintiff could
terminate the agreement.
3 0 . Defendant No. 1 had filed a reference before the Board of Industrial and
Financial Reconstruction (hereinafter, 'BIFR') on 7th November, 2012. The BIFR
dissolved with effect from 15th December, 2016 and the enquiry/reference against
Defendant No. 1 abated. Thereafter a moratorium was declared by the NCLT on 8th
January, 2018. While the BIFR proceedings were pending, the guarantee of Defendant
No. 2 was invoked by the Plaintiff on 25th May, 2016 and thereafter the present suit
was filed on 9th March, 2018.
31. Under Clause 4(1) of the factoring agreement, the receivables could either be
existing receivables on the date of agreement, i.e., on 31st December, 2009, or
future receivables. The various invoices which have been confirmed by the approved
debtors are of August, 2011. The transactions continued till November, 2011. The
reference was filed on 7th November, 2012 before the BIFR, which was abated only
on 15th December, 2016. When insolvency proceedings were pending, all pre-
payment stopped.
32. Under the extant Sick Industrial Companies (Special Provisions) Act, 1985, the
legal position as per Section 22 was that during the pendency of an enquiry under
Section 16, the preparation/consideration/implementation of any scheme under
Section 17 or an appeal under Section 25, any guarantee in respect of any loans or
advance granted to the industrial company stood suspended. Section 22 of the Act
reads as under:
"22. Suspension of legal proceedings, contracts, etc.--
(1) Where in respect of an industrial company, an inquiry under
section 16 is pending or any scheme referred to under section 17 is
under preparation or consideration or a sanctioned scheme is under
implementation or where an appeal under section 25 relating to an

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 industrial company is pending, then, notwithstanding anything
contained in the Companies Act, 1956 (1 of 1956) or any other law
or the memorandum and articles of association of the industrial
company or any other instrument having effect under the said Act or
other law, no proceedings for the winding up of the industrial
company or for execution, distress or the like against any of the
properties of the industrial company or for the appointment of a
receiver in respect thereof and no suit for the recovery of money or
for the enforcement of any security against the industrial company or
of any guarantee in respect of any loans or advance granted to the
industrial company shall lie or be proceeded with further, except
with the consent of the Board or, as the case may be, the Appellate
Authority.
(2) Where the management of the sick industrial company is taken
over or changed in pursuance of any scheme sanctioned under
section 18, notwithstanding anything contained in the Companies
Act, 1956 (1 of 1956) or any other law or in the memorandum and
articles of association of such company or any instrument having
effect under the said Act or other law--
(a) it shall not be lawful for the shareholders of such
company or any other person to nominate or appoint any
person to be a director of the company;
(b) no resolution passed at any meeting of the shareholders
of such company shall be given effect to unless approved by
the Board.
(3) Where an inquiry under section 16 is pending or any scheme
referred to in section 17 is under preparation or during the period of
consideration of any scheme under section 18 or where any such
scheme is sanctioned thereunder, for due implementation of the
scheme, the Board may by order declare with respect to the sick
industrial company concerned that the operation of all or any of the
contracts, assurances of property, agreements, settlements, awards,
standing orders or other instruments in force, to which such sick
industrial company is a party or which may be applicable to such
sick industrial company immediately before the date of such order,
shall remain suspended or that all or any of the rights, privileges,
obligations and liabilities accruing or arising thereunder before the
said date, shall remain suspended or shall be enforceable with such
adaptations and in such manner as may be specified by the Board:
Provided that such declaration shall not be made for a period
exceeding two years which may be extended by one year at
a time so, however, that the total period shall not exceed
seven years in the aggregate.
(4) Any declaration made under sub-section (3) with respect to a
sick industrial company shall have effect notwithstanding anything
contained in the Companies Act, 1956 (1 of 1956) or any other law,
the memorandum and articles of association of the company or any
instrument having effect under the said Act or other law or any
agreement or any decree or order of a court, tribunal, officer or

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 other authority or of any submission, settlement or standing order
and accordingly,--
(a) any remedy for the enforcement of any right, privilege,
obligation and liability suspended or modified by such
declaration, and all proceedings relating thereto pending
before any court, tribunal, officer or other authority shall
remain stayed or be continued subject to such declaration;
and
(b) on the declaration ceasing to have effect--
(i) any right, privilege, obligation or liability so remaining
suspended or modified, shall become revived and
enforceable as if the declaration had never been made; and
(ii) any proceeding so remaining stayed shall be proceeded
with, subject to the provisions of any law which may then be
in force, from the stage which had been reached when the
proceedings became stayed.
(5) In computing the period of limitation for the enforcement of any
right, privilege, obligation or liability, the period during which it or
the remedy for the enforcement thereof remains suspended under
this section shall be excluded."
33. The Plaintiff was therefore entitled to exclude the period between 7th November,
2012 till 15th December, 2016, in calculating the limitation period for institution of
the present suit. As the suit was instituted on 9th March, 2018, the Plaintiff is well
within the three years' limitation period prescribed.
34. Further, it is well settled that filing of a complaint under S. 138 of the Negotiable
Instruments Act, 1888 does not bar the filing of a civil suit for recovery in respect of
amounts due and payable. This is settled in D. Purushotama Reddy & Anr. v. K.
Sateesh, MANU/SC/7905/2008 : (2008) SCC 8 505, the relevant paragraph of which
is extracted below:
"9. A suit for recovery of money due from a borrower indisputably is
maintainable at the instance of the creditor. It is furthermore beyond any
doubt or dispute that for the same cause of action a complaint petition under
terms of Section 138 of the Act would also be maintainable."
3 5 . In the case of IDBI Trusteeship Services Ltd. v. Hubtown Ltd.,
MANU/SC/1490/2016 : (2017) 1 SCC 568, the Supreme Court has held as under:
"17. Accordingly, the principles stated in para 8 of Mechelec case [Mechelec
Engineers & Manufacturers v. Basic Equipment Corpn., MANU/SC/0043/1976
: (1976) 4 SCC 687] will now stand superseded, given the amendment of
Order 37 Rule 3 and the binding decision of four Judges in Milkhiram case
[Milkhiram (India) (P) Ltd. v. Chamanlal Bros., MANU/SC/0376/1965 : AIR
1965 SC 1698: (1966) 68 Bom LR 36], as follows:
17.1. If the defendant satisfies the court that he has a substantial
defence, that is, a defence that is likely to succeed, the plaintiff is
not entitled to leave to sign judgment, and the defendant is entitled
to unconditional leave to defend the suit.

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 17.2. If the defendant raises triable issues indicating that he has a
fair or reasonable defence, although not a positively good defence,
the plaintiff is not entitled to sign judgment, and the defendant is
ordinarily entitled to unconditional leave to defend.
17.3. Even if the defendant raises triable issues, if a doubt is left
with the trial Judge about the defendant's good faith, or the
genuineness of the triable issues, the trial Judge may impose
conditions both as to time or mode of trial, as well as payment into
court or furnishing security. Care must be taken to see that the
object of the provisions to assist expeditious disposal of commercial
causes is not defeated. Care must also be taken to see that such
triable issues are not shut out by unduly severe orders as to deposit
or security.
17.4. If the defendant raises a defence which is plausible but
improbable, the trial Judge may impose conditions as to time or
mode of trial, as well as payment into court, or furnishing security.
As such a defence does not raise triable issues, conditions as to
deposit or security or both can extend to the entire principal sum
together with such interest as the court feels the justice of the case
requires.
17.5. If the defendant has no substantial defence and/or raises no
genuine triable issues, and the court finds such defence to be
frivolous or vexatious, then leave to defend the suit shall be refused,
and the plaintiff is entitled to judgment forthwith.
17.6. If any part of the amount claimed by the plaintiff is admitted
by the defendant to be due from him, leave to defend the suit, (even
if triable issues or a substantial defence is raised), shall not be
granted unless the amount so admitted to be due is deposited by the
defendant in court."
3 6 . The entire purpose of FRA, 2011 and the amendment to the CPC would be
defeated, if lenders like the Plaintiff are not given the benefit of summary procedure.
The suit under Order XXXVII CPC is within limitation and is maintainable as it is for
an ascertainable and a liquidated sum. The amount for which recovery is sought is
Rs. 32,02,90,309.32 along with pendente lite and future interest at 13% p.a. The
liability of Defendant No. 2, under the Guarantee is a sum of Rs. 10 crores along with
interest and other charges. The terms of the Guarantee are clear that the liability is
independent of the Principal borrower. None of the defences or grounds raised are
either tenable, nor is evidence required to be recorded. The Factoring agreement is
admitted, the execution of guarantee is admitted and the money disbursed by the
Plaintiff is also admitted. The issuance of cheques for a sum of Rs. 10 crores by
Defendant No. 1 is also admitted. In the facts and circumstances of the present case,
Defendant No. 2 would not be entitled to any leave to defend insofar as the sum of
Rs. 10 crores, which is a liquidated sum as per the guarantee, is concerned. Insofar
as any other charges or expenses are concerned, the Plaintiff is free to file its claims
before the NCLT against Defendant no. 1, the principal borrower.
37. All I.As. are disposed of.
CS (COMM) 752/2018
38. Accordingly, the suit is decreed for a sum of Rs. 10 crores along with interest at

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 the rate of 8% per annum from the date of filing of the suit, till date, against
Defendant No. 2 to be paid to the Plaintiff within a period of three months from
today. If the payment is not made during the said period, 8% simple interest would
be liable to be paid on the decretal sum till date of payment. Decree sheet be drawn.
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