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Case Number
Attorney(S)
  • Mr. Achal Gupta, Adv.
  • Mr. Sumit Pushkar, Mr. Abhijeet Swaroop & Mr. Ankur Khandelwal, Advs.
Judges
  • Rajiv Sahai Endlaw, J.
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Citation Codes
Equivalent Citations
citation codes
Case Number
Attorney(S)
  • Mr. Achal Gupta, Adv.
  • Mr. Sumit Pushkar, Mr. Abhijeet Swaroop & Mr. Ankur Khandelwal, Advs.
Judges
  • Rajiv Sahai Endlaw, J.
Acts
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Smart Summary

Factual and Procedural Background

The plaintiff instituted a suit under Order 37 of the Code of Civil Procedure (CPC) for recovery of Rs. 25,68,676/-, inclusive of principal sums and interest, with pendente lite and future interest. The plaintiff alleged that he was appointed as a Transition Captain of an Airbus A-320 by the defendant at New Delhi, with a consolidated salary of Rs. 4,30,000 per month and joined on 7 January 2008. The plaintiff pleaded that the defendant was unable to pay salaries due to financial difficulties, and the plaintiff resigned by letter dated 13 February 2012; the resignation was accepted in June 2012 and a No Objection Certificate was issued.

The plaintiff alleged non-payment of salary for December 2011 to 14 February 2012 (two and a half months). He claimed Rs. 13,00,000/- towards salary for that period, Rs. 64,066/- for leave encashment (31 days) and Rs. 10,00,000/- towards gratuity, and interest at 12% per month till institution of the suit, aggregating to Rs. 25,68,676/-.

The suit was entertained under Order 37 and summons issued. The defendant entered appearance and applied for leave to defend under Order 37, raising multiple contentions including maintainability under Order 37, absence of the original appointment letter (noted by court that the original had in fact been filed), applicability of an arbitration clause in Clause 17 of the appointment letter, exclusive jurisdiction of courts at Mumbai, alleged breach by the plaintiff of a five-year commitment (Clause 15.4), entitlement of the defendant to deduct sums for breach/notice, and that these issues raised triable questions.

The court heard counsel, considered the leave to defend application and related submissions, and proceeded to adjudicate the application and the plaintiff's substantive claim for arrears of salary.

Legal Issues Presented

  1. Whether the defendant is entitled to leave to defend under Order 37 CPC on the grounds pleaded (including counterclaims and alleged breaches by the plaintiff).
  2. Whether the suit is maintainable under Order 37 CPC for the claimed amounts (in particular as regards leave encashment and gratuity claims).
  3. Whether an arbitration clause in the appointment letter (Clause 17) requires reference of the dispute to arbitration and whether the defendant's plea of arbitrability suffices in a leave-to-defend application.
  4. Whether the plaintiffs' territorial forum choice (Delhi) is ousted by an exclusive jurisdiction clause in the appointment letter favouring the courts at Mumbai.
  5. Whether the defendant's asserted contractual obligation on the plaintiff to serve five years (and related liquidated damages/deductions) bars the plaintiff's claim for arrears of salary.

Arguments of the Parties

Plaintiff's Arguments

  • The plaintiff was appointed as Transition Captain (Airbus A-320) effective 7 January 2008, paid a consolidated salary of Rs. 4,30,000 per month.
  • The defendant was in financial distress and unable to pay salaries; the plaintiff resigned on 13 February 2012, resignation accepted in June 2012 with a No Objection Certificate.
  • The plaintiff was not paid salary for December 2011 to 14 February 2012 (two and a half months) and claimed Rs. 13,00,000/- for that period.
  • The plaintiff initially claimed leave encashment (Rs. 64,066/-) and gratuity (Rs. 10,00,000/-) but, during the hearing, the plaintiff's counsel gave up the relief for leave encashment (acknowledging no contractual provision) and also gave up the claim for gratuity (recognising gratuity would accrue only after five years which the plaintiff did not complete).
  • The plaintiff relied on e-mails allegedly admitting liability by the defendant for some dues (used initially to support leave encashment claim, later given up).

Defendant's Arguments

  • The suit is not maintainable under Order 37 CPC.
  • The plaintiff did not place the original appointment letter on record (the court noted the original was filed with the plaint).
  • Clause 17 of the appointment letter provides for arbitration before the Chief Operating Officer (COO) or his nominee, with venue in Mumbai or other places designated by the COO.
  • The appointment letter provides for exclusive jurisdiction of the courts at Mumbai, so the Delhi court lacks territorial jurisdiction.
  • The plaintiff breached Clause 15.4 by not completing a five-year commitment and not serving the notice period.
  • Because the plaintiff did not complete the commitment period, the plaintiff could not terminate without paying amounts due to the defendant; the defendant alleged entitlement to liquidated damages/deductions.
  • The claim for leave encashment is contrary to the appointment letter dated 15 June 2007.
  • The defendant is entitled to deduct from the plaintiff’s salary the dues due to it on account of the commitment period and notice period.
  • All the above points raise triable issues preventing summary adjudication under Order 37.
  • The affidavit of the plaintiff accompanying the plaint was attested by a notary public in Singapore and India has no reciprocity with Singapore, therefore the suit is not maintainable (argued later in the hearing).

Table of Precedents Cited

Precedent Rule or Principle Cited For Application by the Court
Deutsche Raitco GMBH v. Mohan Murti (1993) DLT 288 That a defendant's plea of having a counterclaim is not a ground for the grant of leave to defend under Order 37. The court applied this principle to hold that the defendant's counterclaim or asserted dues did not entitle it to leave to defend the plaintiff's claim for arrears of salary.
Ajanta Offset & Packagings Ltd. v. Kintetsu World Express (MANU/DE/6551/2011) Used alongside Deutsche Raitco to support the proposition that a counterclaim is not a ground for leave to defend. The court relied on this authority to reinforce that the defendant's suggestion of counterclaims did not justify permitting a defence under Order 37 to the admitted salary arrears.
Inter Globe Aviation Ltd. v. N. Satchidanand (2011) 7 SCC 463 The question of parties restricting jurisdiction to one of several courts arises only when several courts have jurisdiction. The court applied this principle to hold that the exclusive jurisdiction clause favouring Mumbai could not oust the jurisdiction of the Delhi courts where the plaintiff averred he was appointed, based and paid at Delhi and the defendant did not controvert those averments.
Swastik Gases Pvt. Ltd. v. Indian Oil Corp. Ltd. (2013) 9 SCC 32 Relied upon by the defendant in support of the jurisdictional/arbitration point. The court found the defendant's reliance on this decision of no avail in the facts of this case because the prerequisite facts for ousting jurisdiction (i.e., that Mumbai courts otherwise had jurisdiction) were not established.
G. Rajarajan v. AIG Consumer Financial Services (India) Ltd. (2012) 5 CTC 313 Single Judge Madras HC decision cited by defendant to contend that a plea of arbitration in a leave-to-defend application suffices instead of filing a Section 8 application. The court considered this authority but proceeded to reject the defendant's contention because the defendant had not filed an application under Section 8 of the Arbitration and Conciliation Act and there was in any event no real dispute on the admitted arrears requiring arbitration.
LA Chemise Lacoste v. Crocodile Indl Pte. Ltd. (judgment dated 18 January 2007) Authority cited by the plaintiff to negate the defendant's argument regarding non-reciprocity of notarisation in Singapore. The court accepted the plaintiff's reliance on this judgment to reject the defendant's contention that the suit was not maintainable due to the plaintiff's affidavit being notarised in Singapore where India has no reciprocity.

Court's Reasoning and Analysis

The court proceeded through a sequence of legal observations and factual findings:

  1. Non-dispute as to basic claim: The court observed that the defendant did not dispute the rate of salary or the period for which salary was due. Given that admission, there was effectively no denial of the core claim for arrears of salary.
  2. Counterclaim not a ground for leave to defend: Applying settled law (as in Deutsche Raitco and Ajanta Offset), the court held that a defendant's claim of having a counterclaim does not justify grant of leave to defend under Order 37. Accordingly, the defendant's asserted counter-dues could not, by themselves, entitle it to resist summary judgment.
  3. Plaintiff's concessions trimming the claim: The plaintiff's counsel conceded, during the hearing, that the claim for leave encashment could not be maintained under Order 37 because there was no contractual provision; accordingly the plaintiff gave up that relief. Similarly, the plaintiff gave up the gratuity claim since gratuity would accrue only after five years of service and the plaintiff admittedly had not completed five years.
  4. Absence in contract of alleged five-year commitment: The court noted that although the defendant asserted that the plaintiff was committed to serve for five years, the employment contract did not contain any provision to that effect.
  5. Territorial jurisdiction clause ineffective on facts: The appointment letter's clause providing exclusive jurisdiction to Mumbai could only operate where courts other than Mumbai also had jurisdiction. The plaintiff averred he was appointed, based and paid in Delhi; the defendant did not controvert these averments or explain how Mumbai courts had jurisdiction. Thus, the clause could not be held to confer jurisdiction on Mumbai courts to the exclusion of Delhi.
  6. Arbitration clause and Section 8: The defendant relied on Clause 17 (arbitration before the COO or nominee). The defendant had not filed an application under Section 8 of the Arbitration and Conciliation Act, 1996. The court considered the defendant's reliance on a Madras High Court decision to contend that a plea in a leave-to-defend application sufficed, but found that where there was no real dispute on the admitted arrears, there was nothing to be referred to arbitration. The court therefore rejected the contention that arbitration should be compelled in the present circumstances, observing that compelling arbitration when there was effectively no dispute would only burden the plaintiff and be futile.
  7. Notarisation/reciprocity objection rejected: The defendant contended that the plaintiff's affidavit was notarised in Singapore with which India has no reciprocity; the court accepted the plaintiff's reliance on the cited earlier decision (LA Chemise Lacoste v. Crocodile) negating such an argument.
  8. Conclusion on leave to defend application: Given the absence of dispute on the essential claim, the inapplicability of the defendant's procedural defences, and the plaintiff's concession to drop non-maintainable heads of claim, the court found that the application for leave to defend did not disclose grounds as regards the claim for recovery of arrears of salary and dismissed the application.
  9. Decree and interest: The court held that the plaintiff's claim for Rs. 13,00,000/- (arrears for two and a half months) should be decreed and awarded interest at 10% per annum from the end of each month for which salary was due until payment. The court also awarded costs (counsel fee assessed at Rs. 15,000/-).
  10. Reservation as to precedent: The court expressly stated that it did not intend its rejection of the arbitration point in these facts to constitute precedent.

Holding and Implications

Holding:

The application for leave to defend was dismissed. The plaintiff's suit for recovery of arrears of salary in the sum of Rs. 13,00,000/- was decreed, and interest was awarded at the rate of 10% per annum from the end of each month for which salary was due until payment. The plaintiff was also awarded costs, with counsel's fee assessed at Rs. 15,000/-.

Implications:

  • The direct effect of the decision is the grant of a decree in favour of the plaintiff for Rs. 13,00,000/- plus interest at 10% per annum (from the end of each month for which salary was due) and costs (counsel fee Rs. 15,000/-).
  • The court dismissed procedural defences raised by the defendant — specifically that a counterclaim, territorial jurisdiction clause and the arbitration clause prevented summary adjudication — insofar as they related to the admitted arrears of salary.
  • The court noted that its rejection of the plea to refer the matter to arbitration was confined to the facts of the present case and was not intended to be a precedent. In other words, no broad new legal precedent was declared by this order.
  • The court also recorded that the dismissal of the defendant's leave-to-defend application and the decree for the plaintiff would not preclude the defendant from pursuing any legitimate claim for dues against the plaintiff in accordance with law.
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    Amar Bhatia v. Kingfisher Airlines Limited

    RAJIV SAHAI ENDLAW, J.

    IA No. 20857/2013 (of the defendant for leave to defend)

    1. The plaintiff has instituted this suit under Order 37 of the CPC for recovery of Rs. 25,68,676/- with pendente lite and future interest, pleading:-

    (i) that the plaintiff was appointed as a Transition Captain of Airbus-A-320 Aircraft with the defendant at New Delhi with a consolidated salary of Rs. 4,30,000/- per month and joined w.e.f 7th January, 2008;

    (ii) that the defendant was however in a financial mess and unable to pay the salaries and owing whereto the plaintiff had no option but to resign from the employment of the defendant vide letter dated 13 February, 2012 which was accepted by the defendant in June, 2012 and the plaintiff was given No Objection Certificate;

    (iii) that the plaintiff has not been paid his salary for the months of December, 2011 to 14 February, 2012 i.e for a period of two and a half months;

    (iv) that a sum of Rs. 13,00,000/- is due to the plaintiff towards salary from December, 2011 to 14 February, 2012 at the rate of gross salary of Rs. 5,20,000/- and a sum of Rs. 64,066/- is due to the plaintiff towards Leave Encashment of 31 days and a sum of Rs. 10,00,000/- is due towards gratuity;

    (v) that the said salary/dues have been admitted by the defendant in various e-mails but not paid; and,

    (vi) that besides the aforesaid total principal sum of Rs. 23,64,066/- a sum of Rs. 2,04,610/- is also due towards interest thereon at 12% per month till the date of institution of the suit, making a total of Rs. 25,68,676/-.

    2. The suit was entertained under Order 37 and summons for appearance, and upon the defendant entering appearance summons for judgment, were issued to the defendant and in response whereto the defendant has sought leave to defend contending:-

    (a) that the suit is not maintainable under Order 37 of the CPC;

    (b) that the plaintiff has not even placed on record the original Appointment Letter containing the contract between the parties (I may record that the original letter was filed along with the plaint and the plea appears to have been taken because of the leave to defend application being on the same lines as filed in CS(OS) No. 1603/2013 also listed today and in which original was not filed);

    (c) that as per Clause 17 of the Appointment Letter, any dispute or difference between the plaintiff and the defendant has to be resolved by way of arbitration of the Chief Operating Officer of the defendant or his nominee with the venue of the arbitration being at Mumbai or at any other place designated by the Chief Operating Officer of the defendant;

    (d) that even otherwise, this Court does not have territorial jurisdiction as the Letter of Appointment of the plaintiff provides for the exclusive jurisdiction of the Courts at Mumbai;

    (e) that the plaintiff has committed breach of Clause 15.4 of the Letter of Appointment and has not completed the Commitment Period of five years and not served the notice period;

    (f) that the plaintiff having not completed the Commitment Period of five years could not have terminated the Agreement without paying to the defendant such amounts as were due to the defendant;

    (g) that the plaintiff has failed to pay liquidated damages due to the defendant;

    (h) that the claim on account of Leave Encashment is contrary to the letter dated 15 June, 2007 of appointment of the plaintiff;

    (i) that the defendant is entitled to deduct from the salary of the plaintiff the dues of the plaintiff qua the Commitment Period and notice period; and,

    (j) that all the aforesaid raise triable issues.

    3. Reply/rejoinder have been filed to the application for leave to defend but since the counsels during the hearing did not advert thereto, need is not felt to refer to the same.

    4. The counsels have been heard.

    5. What strikes one immediately is that the defendant, in the application for leave to defend, has not disputed the rate of salary or the period for which the salary is due. As far as the ground, of the defendant having counterclaim against the plaintiff is concerned, even if it be so, it is the settled position in law (See Deutsche Raitco GMBH v. Mohan Murti52 (1993) DLT 288, Ajanta Offset & Packagings Ltd…. v. Kintetsu World Express MANU/DE/6551/2011) that the plea of the defendant having a counterclaim against the plaintiff is not a ground for grant of leave to defend.

    6. Though the counsel for the plaintiff has from the e-mails exchanged attempted to show that the defendant in the said e-mails admitted the liability for Leave Encashment also but there being admittedly no provision therefor in the contract of employment and upon it being put to the counsel for the plaintiff that in view thereof the suit therefor cannot be under Order 37 of the CPC and if the plaintiff insists upon recovery of the same, the suit for the entire amount shall have to be treated as an ordinary suit, the counsel for the plaintiff gives up the relief for recovery of amount on account of Leave Encashment.

    7. The counsel for the plaintiff similarly, realizing that as per the terms of appointment, the gratuity could accrue to the plaintiff only after completing service for five years and which the plaintiff admittedly did not complete, gives up the claim for gratuity also.

    8. I may however notice that though the defendant has taken the ground, of the plaintiff being committed to serve the defendant for five years, but no provision therefor is to be found in the Employment Contract.

    9. That leaves only the objection qua territorial jurisdiction and abitrability. I have during the hearing enquired from the counsel for the defendant whether the defendant has any Chief Operation Officer at the moment. The factum of the defendant having closed its operations and being under heavy debts and a large number of employees of the defendant being left without salary for several months is today public knowledge. Though the counsel for the defendant earlier stated that there is no Chief Operating Officer but subsequently states that there is.

    10. As far as the aspect of territorial jurisdiction is concerned, though the Appointment Letter of the plaintiff does provides for exclusive jurisdiction of the Courts of Mumbai but as per the law laid down in Inter Globe Aviation Ltd. v. N. Satchidanand(2011) 7 SCC 463, the question of the parties restricting the jurisdiction to one of the several Courts having jurisdiction arises only when several Courts have jurisdiction. It is the averment of the plaintiff in the plaint that the plaintiff was appointed at Delhi, was based at Delhi and was being paid his salary at Delhi. The defendant, in the application for leave to defend, has not controverted any of the said facts and has also not stated as to how the Courts at Mumbai have jurisdiction. Without any averment to the said effect, the said clause of exclusive jurisdiction cannot be held to have vested the Courts at Mumbai, which otherwise have no jurisdiction, jurisdiction over the matter. The reliance by the counsel for the defendant on Swastik Gases Private Limited v. Indian Oil Corporation Limited(2013) 9 SCC 32 in this regard is thus of no avail.

    11. As far as the plea of arbitrability is concerned, defendant has not filed any application under Section 8 of the Arbitration and Conciliation Act, 1996. Upon the same being put to the counsel for the defendant, the counsel for the defendant invites attention to G. Rajarajan v. AIG Consumer Financial Services (India) Ltd.(2012) 5 CTC 313 of a Single Judge of the Madras High Court, to contend that a plea to the said effect in the leave to defend application suffices.

    12. I have considered the aforesaid contention.

    13. It cannot be lost sight of that there is really no denial or dispute raised by the defendant to the claim of the plaintiff for recovery of arrears of his salary. There is thus really no dispute for adjudication by arbitration. I see no reason to deny to the plaintiff in this suit the relief of recovery of money which admittedly is due to the plaintiff and the chances of recovery whereof, even if a decree were to be passed in favour of the plaintiff, are remote and to compel the plaintiff to spend more monies in invoking the arbitration clause when there is really nothing for arbitration. Without thus intending this to be precedent, in the facts and circumstances of the present case, I reject said argument also of the defendant. I may also notice that today CS(OS) No. 1603/2013 & CS(OS) No. 1152/2013 also filed by two other pilots of defendant, for similar claims are also listed and in the appointment letter subject matter of CS(OS) No. 1152/2013, there is no arbitration clause or the clause for the exclusive jurisdiction of the Courts at Mumbai.

    14. The counsel for the defendant has lastly contended that the affidavit of the plaintiff accompanying the plaint is attested by a notary public of Singapore with which country India has no reciprocity. He contends that the suit is not maintainable on this ground. The counsel for the plaintiff has in response invited attention to the judgment dated 18 January, 2007 of this Court in LA Chemise Lacoste v. Crocodile Indl Pte. Ltd. negativing such an argument.

    15. I therefore find that the application for leave to defend does not disclose any ground in so far as the claim for recovery of arrears of salary is concerned. The application is accordingly dismissed.

    CS (OS) No. 1151/2013.

    16. Axiomatically, the suit of the plaintiff for recovery of arrears of salary of two and a half months of Rs. 13,00,000/- has to be decreed. As far as the claim of the plaintiff for interest is concerned, I deem it proper to award to the plaintiff interest at the rate of 10% per annum from the end of each month for which salary is due till the date of payment.

    17. A decree is accordingly passed in favour of the plaintiff and against the defendant for recovery of Rs. 13,00,000/- with interest at 10% per annum from the end of each month for which salary was due till the date of payment.

    18. The plaintiff shall also be entitled to costs of the suit. The counsel's fee assessed at Rs. 15,000/-.

    19. Needless to state, the aforesaid would not come in the way of defendant, if entitled to, making a claim for its dues on the plaintiff.

    Decree sheet be prepared.

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    Comments

    Amar Bhatia v. Kingfisher Airlines Limited
    (Apr 3, 2014)