M/S MONGIA REALTY AND BUILDWELL PRIVATE LIMITEDversusMANIK SETHI

998            SUPREME COURT
                         [2022]REPORTS
                                1 S.C.R. 998                [2022] 1 S.C.R.


A     M/S MONGIA REALTY AND BUILDWELL PRIVATE LIMITED
                                        v.
                                 MANIK SETHI
                          (Civil Appeal No. 814 of 2022)
B                              JANUARY 31, 2022
              [DR DHANANJAYA Y CHANDRACHUD AND
                       SURYA KANT, JJ.]
             Limitation Act, 1963 – Issue of Limitation – Preliminary issue
      – Disputed question of facts – The case of the appellant was that
C
      the respondent had requested appellant to grant a business loan
      from time to time and the request was acceded – Respondent partly
      discharged the liability, however, failed to pay outstanding amount
      – The appellant instituted a suit for recovery against the respondent–
      The respondent filed written statement – The respondent denied that
D     there were any loan transactions, and on the contrary, set up the
      plea that the transactions between the parties pertain to the payment
      of commission by the appellant to the respondent in connection with
      real estate transactions – An application u/Or. 7 r.11 of the CPC
      was also filed by the respondent or the rejection of the plaint on the
      ground that the suit was barred by limitation – Pursuant to which,
E
      the trial Court framed a preliminary issue on whether the suit was
      barred by limitation – The trial Court held that the last payment was
      made on 20.06.2013 by the appellant and since the suit was instituted
      on 01.04.2017, three years nine months and ten days there after, it
      is barred by limitation – High Court dismissed the appeal filed by
F     the appellant against the order passed by the trial court – On appeal,
      held: The appellant has specifically set up a plea in the plaint that
      the loans were to be repaid within one year from the date of the
      payment of the last installment – The case of the appellant has to be
      proved on the basis of evidence adduced in the suit – Such an issue
      could not have been decided purely on the basis of oral arguments
G
      urged on behalf of the contesting parties – The trial Judge had
      heard the preliminary issue only on the basis of the arguments at
      the Bar – There are two conflicting versions on the nature of the
      business transactions between the parties – The issue of limitation
      in the instant case would require evidence to be adduced – Since
H     the determination of the issue of limitation in this case is not a pure
                                       998
  M/S MONGIA REALTY AND BUILDWELL PVT. LTD. v. MANIK SETHI            999


question of law, it cannot be decided as preliminary issue u/Or.XIV   A
r.2 – The issue of limitation which was framed by the trial Judge
may be decided, along with other issues at trial – Therefore, the
judgment of the trial Judge and the Single Judge of the High Court
are set aside – Code of Civil Procedure, 1908 – Or.XIV r.2.
      Allowing the appeal, the Court                                  B
       HELD: 1. The appellant has specifically set up a plea in the
plaint that the loans were to be repaid within one year from the
date of payment of the last installment. The case of the appellant
has to be proved on the basis of evidence adduced in the suit.
Such an issue could not have been decided purely on the basis of      C
oral arguments urged on behalf of the contesting parties. The
respondent has denied the existence of loan transactions and
has set up the plea that the payments made by the appellant were
on account of commission. There are two conflicting versions on
the nature of the business transactions between the parties, the
appellant alleging that it was a loan, while the respondent alleges   D
that it was in the nature of a commission for real estate services.
The issue as to whether the claim of the appellant is barred by
limitation cannot be isolated from the nature of the transactions
between the parties. In any event, whether the plea of the
appellant as set up in the plaint is proved would depend upon         E
evidence adduced at the trial. The course of action which was
followed by the trial Judge of directing the parties to address
arguments on the issue of limitation was irregular. The issue of
limitation in the present case would require evidence to be
adduced. Since the determination of the issue of limitation in this
case is not a pure question of law, it cannot be decided as           F
preliminary issue under Order XIV Rule 2 of the CPC. Hence,
this Court allow the appeal and set aside the judgment of the trial
Judge dated 16 August 2018 and of the Single Judge of the High
Court dated 4th September 2019. The issue of limitation which
has been framed by the learned trial Judge may be decided,            G
along with other issues at trial. [Paras 11, 12 & 15][1003-D-G;
1005-D-F]
      Nusli Neville Wadia v. Ivory Properties (2020) 6 SCC
      557: [2019] 15 SCR 795 - relied on.
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1000               SUPREME COURT REPORTS                          [2022] 1 S.C.R.


 A                               Case Law Reference
       [2019] 15 SCR 795                  relied on                   Para 14
               CIVIL APPELLATE JURISDICTION: Civil Appeal No. 814 of
       2022.
 B           From the Judgment and Order dated 04.09.2019 of the High Court
       of Delhi at New Delhi in RFA No.5 of 2019.
             Uday Gupta, Ms. Shivani M. Lal, Dhanesh Relan, M. K. Tripathi,
       Harish Dasan, Rajiv Ranjan, Paritosh Dhawan, Hiren Dasan, Advs. for
       the Appellant.
 C             Sanjay Sehgal, Avinash Sharma, Advs. for the Respondent.
               The Judgment of the Court was delivered by
               DR. DHANANJAYA Y CHANDRACHUD, J.
               1. Leave granted.
 D            2. This appeal arises from a judgment of a Single Judge of the
       High Court of Delhi in RFA No 5 of 2019. The trial Court dismissed the
       suit instituted by the appellant on the ground of limitation, by a judgment
       dated 16 August 2018. The High Court upheld the dismissal of the suit
       on that ground.
 E            3. The appellant instituted a suit against the respondent on 31
       March 2017 (Civil Suit No 76 of 2017 (new number 355 of 2017)) under
       Order 37 of the Code of Civil Procedure 19081 for the recovery of an
       amount of Rs 1,11,63,633 together with interest at the rate of 18% per
       annum from the date of the institution of the suit till the realization of the
 F     full amount. The respondent filed a written statement on 24 May 2017.
       An application was filed under Order 7 Rule 11 of the CPC for the
       rejection of the plaint on the ground that the suit was barred by limitation.
       On 4 January 2018, the trial Court framed a preliminary issue on whether
       the suit was barred by limitation. On 15 March 2018, the appellant was
       granted an opportunity to file its replication and the suit was adjourned to
 G     26 April 2018 for addressing arguments on the preliminary issue. The
       appellant filed its replication on 20 April 2018. On 26 April 2018 and 23
       May 2018, an adjournment was granted by the trial Court. On 26 July
       2018, the trial Court rejected a plea for an adjournment made by the

       1
 H         “CPC”
  M/S MONGIA REALTY AND BUILDWELL PVT. LTD. v. MANIK SETHI                       1001
           [DR. DHANANJAYA Y CHANDRACHUD, J.]

appellant. Oral arguments were heard on behalf of the respondent and             A
the appellant was granted fifteen days’ time to file written arguments.
The appellant failed to file the written arguments before 10 August 2018.
On 16 August 2018, the trial Court declined to grant any further time and
by its judgment decided the issue of limitation against the appellant. The
appellant carried the matter in appeal in RFA No 5 of 2019. The Single
                                                                                 B
Judge of the High Court dismissed the appeal by the impugned judgment
dated 4 September 2019.
       4. The case of the appellant is that the respondent had requested
the appellant to grant a business loan from time to time, and the request
was acceded to by the appellant. The loans were stated to be repayable
with interest at the rate of 18% per annum. The appellant claims to have         C
advanced an amount of Rs 10 lakhs on 13 June 2012, 18 lakhs on 11 July
2012 and Rs 15 lakhs on 21 December 2012 by cheques drawn on Axis
Bank, and a further amount of Rs 39 lakhs. The case of the appellant is
that the respondent partly discharged his liability and that he is entitled to
a decree for the balance in the amount of Rs. 1,11,63,633 along with an          D
interest at 18% per annum. Paragraph 5 of the plaint contains the following
averments:
       “The aforesaid loans have been given by the plaintiff to the
       defendant always with an understanding that aforesaid loans shall
       be returned along with interest @ 18% p.a. That the aforesaid             E
       loans were repayable within one year from the date of payment
       of the last instalment of the loan i.e. latest by 9th of April, 2014.
       However, the defendant was to pay interest on the aforesaid loan
       amounts on half yearly basis @ 18% p.a. to the plaintiff.”
       5. In paragraph 10 of the plaint, it has been pleaded that though         F
two and a half years had elapsed since the date for repayment of the
loan, the respondent had failed to pay the outstanding amount. The
appellant has also set up the case that a running account has been
maintained between the parties in pursuance of which, the last payment
was made on 24 October 2013.
                                                                                 G
       6. The defense in the written statement filed by the respondent is
that the respondent provided real estate services to the appellant for
which commission was being paid by the appellant. It was alleged that
payments made for business transactions are in a malafide manner
portrayed as loan transactions. On some occasions, it is alleged, payments
were made for carrying out renovation work in the properties. The                H
1002             SUPREME COURT REPORTS                           [2022] 1 S.C.R.


 A     respondent has denied that there were any loan transactions, and on the
       contrary, set up the plea that the transactions between the parties pertain
       to the payment of commission by the appellant to the respondent in
       connection with real estate transactions.
               7. On the preliminary issue framed on the question of limitation,
 B     no evidence was adduced by the respondent. The trial Judge heard the
       preliminary issue only on the basis of arguments at the Bar, noting that
       the appellant had failed to file written arguments. The trial Judge held
       that the admission in paragraph 10 of the plaint is that the last payment
       was made on 20 June 2013 by the appellant and since the suit was
       instituted on 1 April 2017, three years nine months and ten days thereafter,
 C     it is barred by limitation.
               8. In appeal, the High Court has also held that since the last
       payment was made on 24 October 2013 in the amount of Rs 3 lakhs, the
       suit which was instituted on 31 March 2017 was beyond three years of
       the last repayment. While dealing with the averment in paragraph 5 of
 D     the plaint, which has been extracted above, the High Court has held that
       since the appellant is a company, “it is not expected of a company to
       have oral mutual understandings with its customers”. Noting that that
       there is no written agreement to the effect that the loan would be
       repayable within one year from the date of payment of the last installment,
       the High Court held that it would be difficult to hold that such a condition
 E     formed part of the contract between the parties. Finally, the Single Judge
       of the High Court took the view that accepting the case of the appellant
       would lead to a wrong precedent since it would then be open to the
       plaintiff to take a plea that a loan given in 2000 was orally agreed to be
       paid in 2019 and hence a suit filed in 2020 is within limitation.
 F             9. Two submissions have been urged on behalf of the appellant by
       Mr Udai Gupta, learned counsel. Firstly, it has been submitted that the
       averments in paragraph 5 of the plaint set up an express plea to the
       effect that the loan was repayable within one year from the date of the
       payment of the last installment that is, by 9 April 2014. Hence, the suit
       which was instituted on 31 March 2017 is within limitation. On this limb
 G
       of the submission, it has been urged that in any event, this is a matter
       which has to be tried on the basis of evidence and could not have been
       disposed of purely on the basis of oral arguments. Secondly, it has been
       submitted that the contention that there was an open and running current
       account between the parties having been set up in the plaint, it has to be
 H     decided on the basis of evidence adduced at the trial.
  M/S MONGIA REALTY AND BUILDWELL PVT. LTD. v. MANIK SETHI                    1003
           [DR. DHANANJAYA Y CHANDRACHUD, J.]

       10. Opposing these submissions, Mr Sanjay Sehgal, learned counsel      A
appearing on behalf of the respondent submitted that (i) there is
admittedly no written agreement between the parties evidencing the terms
of an alleged loan transaction; (ii) there was no loan transaction at all
and the payments which were made by the appellant to the respondent
were on account of commission towards real estate transactions; (iii)
                                                                              B
the last payment having been made on 24 October 2013, the suit which
was instituted on 31 March 2017 is barred by limitation; (iv) Article 1 of
the Limitation Act has no application whatsoever since there was no
open, running and mutual current account envisaging mutual payments
and receipts between the parties; and (v) this is evident from the
averments contained in paragraph 3 of the plaint where the appellant          C
has set up the plea that it was only the appellant who was making
payments to the respondent.
       11. The appellant has specifically set up a plea in paragraph 5 of
the plaint that the loans were to be repaid within one year from the
date of the payment of the last installment. The case of the appellant        D
has to be proved on the basis of evidence adduced in the suit. Such an
issue could not have been decided purely on the basis of oral arguments
urged on behalf of the contesting parties. The respondent has denied
the existence of loan transactions and has set up the plea that the
payments made by the appellant were on account of commission. There           E
are two conflicting versions on the nature of the business transactions
between the parties, the appellant alleging that it was a loan, while the
respondent alleges that it was in the nature of a commission for real
estate services.
        12. The issue as to whether the claim of the appellant is barred by   F
limitation cannot be isolated from the nature of the transactions between
the parties. In any event, whether the plea of the appellant as set up in
paragraph 5 of the plaint is proved would depend upon evidence adduced
at the trial. The course of action which was followed by the learned trial
Judge of directing the parties to address arguments on the issue of
                                                                              G
limitation was irregular. The issue of limitation in the present case would
require evidence to be adduced.
       13. Order XIV Rule 2 of the CPC stipulates that when issues of
both law and facts arise in the same suit, the Court may dispose the suit
by trying the issue of law first. For this purpose, the provision specifies
                                                                              H
1004               SUPREME COURT REPORTS                          [2022] 1 S.C.R.


 A     two questions of law, which are (i) jurisdiction of the Court; and (ii) a bar
       to the suit created by any law for the time being in force. The provision
       is extracted below:
                2. Court to pronounce judgment on all issues.—(1)
                Notwithstanding that a case may be disposed of on a preliminary
 B              issue, the Court shall, subject to the provisions of sub-rule (2),
                pronounce judgment on all issues. (2) Where issues both of law
                and of fact arise in the same suit, and the Court is of opinion that
                the case or any part thereof may be disposed of on an issue of
                law only, it may try that issue first if the issue relates to—
 C                 (a) the jurisdiction of the Court, or
                   (b) a bar to the suit created by any law for the time being in
                   force, and for that purpose may, if it thinks fit, postpone the
                   settlement of the other issues until after that issue has been
                   determined, and may deal with the suit in accordance with the
 D                 decision on that issue.]
              14. Before this Court in Nusli Neville Wadia v. Ivory
       Properties2, the issue was whether the issue of limitation can be
       determined as a preliminary issue under Order XIV Rule 2. The three-
       judge bench of this court observed that if the issue of limitation is based
 E     on an admitted fact, it can be decided as a preliminary issue under Order
       XIV Rule(2)(b). However, if the facts surrounding the issue of limitation
       are disputed, it cannot be decided as a preliminary issue. This Court
       observed as follows:
                51. […] As per Order 14 Rule 1, issues arise when a material
 F              proposition of fact or law is affirmed by the one party and denied
                by the other. The issues are framed on the material proposition,
                denied by another party. There are issues of facts and issues of
                law. In case specific facts are admitted, and if the question of law
                arises which is dependent upon the outcome of admitted facts, it
                is open to the court to pronounce the judgment based on admitted
 G              facts and the preliminary question of law under the provisions of
                Order 14 Rule 2. In Order 14 Rule 2(1), the court may decide the
                case on a preliminary issue. It has to pronounce the judgment on
                all issues. Order 14 Rule 2(2) makes a departure and the court

       2
 H         (2020) 6 SCC 557
  M/S MONGIA REALTY AND BUILDWELL PVT. LTD. v. MANIK SETHI                       1005
           [DR. DHANANJAYA Y CHANDRACHUD, J.]

       may decide the question of law as to jurisdiction of the court or a       A
       bar created to the suit by any law for the time being in force, such
       as under the Limitation Act.
       52. In a case, question of limitation can be decided based on
       admitted facts, it can be decided as a preliminary issue under
       Order 14 Rule 2(2)(b). Once facts are disputed about limitation,          B
       the determination of the question of limitation also cannot be made
       under Order 14 Rule 2(2) as a preliminary issue or any other such
       issue of law which requires examination of the disputed facts. In
       case of dispute as to facts, is necessary to be determined to give
       a finding on a question of law. Such question cannot be decided
       as a preliminary issue. In a case, the question of jurisdiction also      C
       depends upon the proof of facts which are disputed. It cannot be
       decided as a preliminary issue if the facts are disputed and the
       question of law is dependent upon the outcome of the investigation
       of facts, such question of law cannot be decided as a preliminary
       issue, is settled proposition of law either before the amendment of       D
       CPC and post amendment in the year 1976.
       15. Since the determination of the issue of limitation in this case is
not a pure question of law, it cannot be decided as preliminary issue
under Order XIV Rule 2 of the CPC. Hence, we allow the appeal and
set aside the judgment of the trial Judge dated 16 August 2018 and of the        E
Single Judge of the High Court dated 4 September 2019. The issue of
limitation which has been framed by the learned trial Judge may be
decided, along with other issues at trial. The appeal shall stand allowed
in the above terms.
       16. Pending applications, if any, stand disposed of.                      F

Ankit Gyan                                                     Appeal allowed.
(Assisted by : Rahul Rathi, LCRA)


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