Kiran Raj

The Delhi High Court Single Bench of Justice Anish Dayal, granted conditional leave to defend in a commercial suit concerning lease disputes. The plaintiff sought recovery of arrears of rent, mesne profits, and liquidated damages from the defendants, alleging default in payments under lease agreements for a commercial property in Moti Nagar, New Delhi. The defendants, who had leased the premises for running a banquet hall, contested the claim, arguing that the suit was barred by limitation and that one of the lease deeds was unregistered and, therefore, inadmissible in evidence.

The court recorded that "defendants do not have a defence relating to the arrears of rent. The defence raised is improbable, and further, the element of plausibility is very slim if not negligible." The court directed the defendants to deposit Rs. 73,44,969 within four weeks as a condition for defending the suit, failing which "the plaintiff shall be entitled to summons for judgment and the leave to defend application shall be considered as having been dismissed."

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The plaintiff, M/S PC Jain Textile Pvt. Ltd., filed a suit under Order XXXVII of the Code of Civil Procedure, 1908, seeking rendition of accounts and recovery of contractual amounts due under lease agreements dated April 6, 2016. The suit property, located on Najafgarh Road, consisted of a basement, ground floor, and first floor. The defendants, operating under the name "M/s Krishna Hospitality," had leased the premises for commercial use as a banquet hall named "Coral Bells."

Two lease deeds were executed between the parties. Lease deed-I, concerning the ground and first floors, was registered and stipulated an eight-year tenancy with a lock-in period of five years, a monthly rent of Rs. 5 lakh, and periodic escalations. Lease deed-II, pertaining to the basement, had similar terms but remained unregistered. The plaintiff alleged that the defendants defaulted in rent payments, issued dishonored cheques, and failed to vacate the premises despite a termination notice dated April 25, 2018.

The defendants vacated the property in August 2021 after the plaintiff sold it to a third party. The plaintiff claimed outstanding rent, mesne profits, cheque dishonor charges, and delayed payment penalties, amounting to Rs. 8.75 crore. The defendants sought leave to defend the suit, contending that the claim was barred by limitation and that lease deed-II, being unregistered, was inadmissible in evidence.

The court examined whether the defendants had raised a substantial defence or triable issues warranting unconditional leave to defend. It observed that "defendants do not deny the execution of lease deed-I and lease deed-II. The principal objection taken in the leave to defend is that lease deed-II, related to the basement, is an unregistered document and, therefore, cannot be relied upon." The court noted that even if lease deed-II was disregarded, the defendants' liability under lease deed-I remained undisputed.

Addressing the limitation plea, the court recorded that "the previous suit, filed in 2019, was withdrawn in 2021 with liberty to claim contractual dues. Mediation proceedings continued between the parties in 2022 and 2023, making the application of Section 14 of the Limitation Act, 1963 prima facie tenable." It concluded that limitation was a mixed question of fact and law requiring trial.

On the issue of rental dues, the court referred to the plaintiff's WhatsApp communications requesting payment of outstanding amounts. It observed that "plaintiff’s contention that they sent several reminders to defendants on WhatsApp before issuing the legal notice is supported by additional documents, showing requests to clear five months of pending dues." The court found that the defendants' plea regarding non-payment lacked bona fides.

Regarding the registration of lease deed-II, the court cited K.B. Saha & Sons (P) Ltd. v. Development Consultant Ltd., stating that "an unregistered document can be used as evidence for a collateral purpose. The collateral transaction must be independent of the primary transaction requiring registration." The court held that lease deed-II could be considered to determine possession and rent liability.

The court also relied on IDBI Trusteeship Services Ltd. v. Hubtown Ltd., which outlined conditions for granting leave to defend in commercial disputes. It recorded that "leave to defend is to be granted in cases where the defendant raises substantial defence or triable issues. However, where the defence is found to be improbable, heightened conditions such as payment into court may be imposed."

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The Delhi High Court allowed the defendants' leave to defend application subject to depositing Rs. 73,44,969 with the Registrar General within four weeks. The order stated, "If the said amount is not deposited, the plaintiff shall be entitled to summons for judgment, and the leave to defend application shall be considered as having been dismissed."

The court refrained from expressing conclusive views on limitation and the admissibility of lease deed-II, stating that these issues could be considered at the trial stage. It directed that pending applications be listed before the Joint Registrar (Judicial) on April 22, 2025, for further proceedings.

Advocates Representing the Parties

For the Plaintiff: Mr. Harender Kr Sangwan and Mr. Vidit Garg, Advocates

For the Defendants: Mr. Prateek Jain and Mr. Vardaan Mishra, Advocates

Case Title: M/S PC Jain Textile Pvt. Ltd. v. Shyam Sunder Suri & Anr.
Neutral Citation: 2025: DHC:1649
Case Number: CS(COMM) 560/2023 & I.A. No. 31874/2024
Bench: Justice Anish Dayal

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