Defaulters take advantage of judicial system because courts do not impose costs: Madras High Court

The Madras High Court on Friday imposed costs of ₹25 lakh on a film production studio upon noting that it had needlessly dragged on a case before the Court for months, while making false promises to repay amounts owed by it (M/s.Gemini Film Circuit and ors v. M/s.Venkateswara Financiers and anr)..The Court added that the reason why such defaulting borrowers prey on the shortcomings of the judicial system, such as the delays in the court process, is also because courts do not impose appropriate costs. .The order passed by the Bench of Chief Justice Sanjib Banerjee and Justice PD Audikesavalu stated:"Defaulting borrowers, like the present Appellants, take advantage of the existing judicial system and prey on its shortcomings. This is because more often than not, courts do not pass appropriate order for costs and do not take matters to their logical conclusion by taking action in perjury in respect of false affidavits.".The Court further observed that the entire object of the Commercial Courts Act, 2015 would be defeated if commercial matters are not dealt with by applying commercial principles and by awarding appropriate costs and interest. .In this case, there is no doubt that the appellants took advantage of the system and its delays in dragging the matter over a long period, the Court said. The Bench noted that the appellants were even bold enough to submit that cheques were issued only to later "proffer some further specious excuse" for the cheques not arriving on time. .Adjournments were obtained for over a year while false promises for payment were made, the Bench remarked. Such subterfuge could have been avoided, the Court added."The appeal has been needlessly dragged by the appellants and in course of the last few months, both the court and the respondent plaintiff have been deceived by false promises made by or on behalf of the appellants without, as it now turns out, any intention to abide by the same," the Court's order stated. .Among other observations, it was also noted that during the course of the appeal, a film was allowed to be released upon the appellants' assurance that a sum of money would be paid by March 31, 2020. "... the promised payment has not been made despite the passage of more than 18 months after the promised date," the Court found. .In this backdrop, the Court dismissed the appeal as being completely devoid of merit. The appellants were directed to pay costs of ₹25 lakh to the respondent-financier in addition to whatever is due in terms of the commercial court decree under challenge. .[Read order]