This is an application filed by defendant no.1-company seeking leave to defend. I
have already passed an order today that the suit has to continue and no permission is required
under Section 22 of the SICA in view of the Division Bench judgment of this Court in the
case of Saketh India Ltd (supra) and more importantly of the Supreme Court in Raheja
Universal’s case. The only defence which is raised in the application for leave to defend by
defendant no.1 is that it is a sick company. There is no credible denial of the dues which are
payable under the subject suit. The relevant paras of this leave to defend application are paras
3 to 13 and which only talk of defendant no.1-company being a sick company or with respect
to prior proceedings under Section 138 of the Negotiable Instrument Act, 1881 or allegedly
that of all material documents having been suppressed from the record. The defence is
therefore quite clearly only a moonshine, and since as already stated above, Section 22 of
SICA does not apply, the application for leave to defend is dismissed and the suit is decreed
against the defendant no.1 for the reasons given hereinafter. I may however clarify that for
execution of the decree or like proceedings against defendant No.1 prior permission will
have to be taken under Section 22 of SICA.
I (2013) BC 10 (CN)
DELHI HIGH COURT
Valmiki J. Mehta, J.
FMI INVESTMENT P. LTD.—Plaintiff
versus
MONTARI INDUSTRIES LTD. & ANR.—Defendants
CS (OS) No. 2373 of 2001—Decided on 11.10.2012
Valmiki J. Mehta, J (Oral)— On 10.9.2012, the following order was passed:—
2. Today, counsel appearing for defendant no.2 states that the defendant no.1 company,
and which is the principal borrower, is a sick company and therefore, the present suit cannot
proceed. Attention of this Court is invited to the order dated 12.2.2008, as per which, the suit
had to be heard qua the maintainability in view of Section 22 of the Sick Industrial
Companies (Special Provisions) Act, 1985 ( in short SICA).
3. The issue as to continuation of a suit filed against a sick company is no longer res
integra and is fully covered by two recent judgments one of the Division Bench of this Court
in the case of Sakethh India Ltd. Vs W. Diamond 2010 (119) DRJ 190; 2010 (160) CC 562
and second is the judgment of the Supreme Court in the case of Raheja Universal Ltd. Vs.
NRC Ltd. (2012) 4 SCC 148.
4. The ratio of the judgment in Saketh India Ltd.’s (supra) case is that unless the dues
are admitted by the sick company in a sanctioned scheme or is admitted before the Court
where the same suit is filed, no permission is required under Section 22 of SICA. More
particularly it is held that before Section 22 applies the proceedings have to be in the nature
of „execution, distress or the like .
Paras 6 and 14 of the said judgment are as under:—
“6. Courts, however, have always been alive to the possible mischief that invocation
of SICA can lead to. In a nutshell, where the net worth of a company is reduced to a
negative, and the amelioration that is sought is for reviving the company rather than
winding it up, the recourse to the Act would be legitimate. There is no justifiable
reason, therefore, for all legal proceedings to be immediately even held in abeyance,
if not dismissed. We are mindful of the fact that Parliament has incorporated an
amendment in the Section with effect from 1.2.1994 in these words - “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”. It appears to us that
the phrase “recovery of money” must be construed ejusdem generis and accordingly
recovery proceedings in the nature of execution or any other coercive enforcement
that has been ordained to be not maintainable. We do not find any logic in holding
legal proceedings to be not maintainable, or to be liable to be halted unless, even if
the debt sought to be proved in the Plaint has not been admitted. Given the delays
“1. Though there is no ground for adjournment in the present suit in which the
application for leave to defend is listed, however, since the counsel for the
defendant is stated to be not well and not appearing in any court, list on 11th
October, 2012.
2. It is made clear that no adjournment shall be granted on the next date of
hearing.”presently endemic in the justice delivery system if a creditor is disallowed even
from proving the indebtedness of a recalcitrant debtor SICA company, it would
cause unjustified hardship. Whichever way we look at the matter, there can be no
logic in denying legal recourse to a party for proving its debt. In the event that at
least the principal amount, or a substantial part of it stands admitted, either in the
suit or by means of a mention in the Scheme placed before the BIFR, the aggrieved
party must be permitted to prove its claim. In holding so, the only prejudice that we
can conceive of is incurring expenditure in legal fees. When this is weighed against
the interests of a person claiming that the company is indebted to it, the balance tilts
in favour of the latter. A holistic reading of Section 22(1) of SICA makes it
manifestly clear that Parliament’s intention was to insulate sick companies only
against proceedings for winding-up or for execution, or distress or the like or for
enforcement of any security or guarantee. In the case in hand, despite several
opportunities granted to the Appellant, it has miserably and perhaps deliberately
failed to substantiate that the claim mentioned in the Suit has been reflected in the
Scheme placed before the BIFR but even more poignantly, that a scheme was, in
fact, pending before BIFR. If an Appeal is pending, has BIFR failed to grant or has
withdrawn registration under SICA. We see the conduct of the Appellant as nothing
more than an abuse of SICA.
14. The discussion contained above leads to the thesis that as soon as a claim stands
admitted, either because it has been reflected in the Scheme, or because it stands
favourably adjudicated in a Court of law, the protection of Section 22 of SICA
would automatically have to be implemented. This is the watershed between the
present and the preceding case. Having obtained a decree, further proceedings fall
within the protective mantle of Section 22 of SCIA as they cannot but be in the
nature of “execution, distress or the like”. A plain reading of the provision cannot
but lead to any other conclusion. If there are unique circumstances, which would
justify the execution of the decree, even in the face of the registration of a Scheme
under SICA, the proper recourse possible would be to obtain the permission or
consent of the Board or the Appellate Authority as the case may be. Any other
interpretation would completely annihilate and defeat the intendment of
Parliament.” (underlining added)
In view of the judgment of the Division Bench in the case of Saketh India Ltd. (supra), it
is quite clear that no permission is required under Section 22 of SICA to continue with the
present suit inasmuch as it has not been pointed out to me as to how dues in the subject suit
are admitted by the defendant No.1 in the present suit.
5. In fact now the controversy as to the interpretation of Section 22 is set at rest by the
recent judgment of the Supreme Court rendered by a Division Bench of three Judges in the
case of Raheja Universal Ltd. Vs. NRC Ltd., 2012 (4) SCC 148. The relevant paras of this
judgment are paras 55, 58, 61 and 76 to 81, which read as under:—
“55. Despite these judgments and with an intention to clarify the law, we would
state that the matters which are connected with the sanctioning and implementation
of the scheme right from the date on which it is presented or the date from which the
scheme is made effective, whichever is earlier, would be the matters which squarely
fall within the ambit and scope of Section 22 of the Act of 1989 subject to their
satisfying the ingredients stated under that provision. This would include the
proceedings before the civil court, revenue authorities and/or any other competent
forum in the form of execution or distress in relation to recovery of amount by sale
or otherwise of the assets of the sick industrial company. It is difficult for us to holdthat merely because a demand by a creditor had not been made a part of the scheme,
pre or post-sanctioning of the same for that reason alone, it would fall outside the
ambit of protection of Section 22 of the Act of 1985.
58. Section 22 is the reservoir of the statutory powers empowering the BIFR to
determine a scheme, right from its presentation till its complete implementation in
accordance with law, free of interjections and interference from other judicial
processes. Section 22(1)deals with the execution, distress or the like proceedings
against the company’s properties, including appointment of a Receiver. It also
specifically provides that even a winding up petition would not be instituted and no
other proceedings shall lie or proceed further, except with the consent of the BIFR.
61. It can safely be perceived that the provisions of Section 22 of the Act of 1985
are self-explanatory. They would cease to operate within their own limitations and
not by force of any other law, agreement, memorandum or even articles of
association of the company. The purpose is so very clear that during the
examination, finalization and implementation of the scheme, there should be no
impediment caused to the smooth execution of the scheme of revival of the sick
industrial company. It is only when the specified period of restrictions and
declarations contemplated under the provisions of the Act of 1985 is over, that the
status quo ante as it existed at the time of the consideration and finalization of the
scheme, would become operative. This is done primarily with the object that the
assets of the company are not diverted, wasted, taken away and/or disposed of in
any manner, during the relevant period.
76. On the analytical analysis of the above-stated dictum of this Court and the
legislative purpose and object of the Act, it has to be held that on its plain reading
the provisions of Sections 22(1) and 22(3) of the Act are the provisions of wide
connotation and would normally bring the specified proceedings, contractual and
non-contractual liabilities, within the ambit and scope of the bar and restrictions
contained in Sections 22(1) and 22(3) of the Act of 1985 respectively. The
legislative intent is explicit that the BIFR has wide powers to impose restrictions in
the form of declaration and even prohibitory/injunctive orders right from the stage
of consideration of a scheme till its successful implementation within the ambit and
scope of Sections 22(3) and 22A of the Act.
77. Section 22 of the Act of 1985 is very significant and of wide ramifications and
application. More often than not, the jurisdiction of the BIFR is being invoked,
necessitated by varied actions of third parties against the sick industrial company.
The proceedings, taken by way of execution, distress or the like, may have the effect
of destabilizing the finalization and/or implementation of the scheme of revival
under consideration of the BIFR. It appears that, the Legislature intended to ensure
that no impediments are created to obstruct the finalization of the scheme by the
specialized body. To protect the industrial growth and to ensure revival, this
preventive provision has been enacted. The provision has an overriding effect as it
contains non obstante clauses not only vis-- vis the Companies Act but even qua any
other law, even the memorandum and articles of association of the industrial
company and/or any other instrument having effect under any other Act or law.
These proceedings cannot be permitted to be taken out or continued without the
consent of the BIFR or the AAIFR, as the case may be.
78. The expression ‘no proceedings’ that finds place in Section 22(1) is of wide
spectrum but is certainly not free of exceptions. The framers of law have given a
definite meaning to the expression ‘proceedings’ appearing under Section 22(1) ofthe Act of 1985. These proceedings are for 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.
79. The expression ‘the like’ has to be read ejusdem generis to the term
‘proceedings’. The words ‘execution, distress or the like’ have a definite
connotation. These proceedings can have the effect of nullifying or obstructing the
sanctioning or implementation of the revival scheme, as contemplated under the
provisions of the Act of 1985. This is what is required to be avoided for effective
implementation of the scheme. The other facet of the same Section is that, no suit
for recovery of money, or for enforcement of any security against the industrial
company, or any guarantee in respect of any loan or advance granted to the
industrial company shall lie, or be proceeded with further without the consent of the
BIFR. In other words, a suit for recovery and/or for the stated kind of reliefs cannot
lie or be proceeded further without the leave of the BIFR. Again, the intention is to
protect the properties/assets of the sick industrial company, which is the subject
matter of the scheme.
80. It is difficult to state with precision the principle that would uniformly apply to
all the proceedings/suits falling under Section 22(1) of the Act of 1985. Firstly, it
will depend upon the facts and circumstances of a given case, it must satisfy the
ingredients of Section 22(1) and fall under any of the various classes of proceedings
stated thereunder. Secondly, these proceedings should have the impact of interfering
with the formulation, consideration, finalization or implementation of the scheme.
81. Once these ingredients are satisfied, normally the bar or limitation contained in
Section 22(1) of the Act of 1985 would apply. For instance, execution of a decree
against the assets of a company, if permitted, is bound to result in disturbing the
scheme, which has or may be framed by the BIFR. The sale of an asset during such
execution or even withdrawing the money from the bank account of the company
would certainly defeat the very purpose of the protection sought to be created by the
Legislature under Section 22(1) of the Act of 1985.” (underlining added)
6. The salient conclusions which can be arrived at from reading of the aforesaid paras in
the case of Raheja Universal (supra) are :—
7. Learned counsel for the defendant no.2 sought to place reliance on the following three
judgments to argue that permission under Section 22 is a sine qua non.
(i) The proceedings which are affected by Section 22(1) are proceedings in the
nature of execution, distress or the like.
(ii) It depends on facts of each case as to whether the suit is hit by Section 22 i.e all
suits including of recovery, are not hit by Section 22(1).
(iii) Only those suits which have the effect of execution, distress or like action
against the properties of the sick company are hit by Section 22 i.e where a suit
is simply for recovery of moneys, and the properties of a sick company are not
threatened by the proceedings including interim proceedings such as
appointment of receiver, execution, distress or the like, such suits can continue
without permission under Section 22.
(i) Managing Director, Bhoruka Textiles Ltd.Vs. Kashmiri Rice Industries (2009)
7 SCC 521;
(ii) Tata Davy Ltd. Vs. State of Orissa and Ors (1997) 6 SCC 669;
(iii) Dr. B.K.Modi Vs. M/s Morgan Securities and Credits Pvt. Ltd. and M/s 8. In my opinion, all the three judgments, which have been cited on behalf of defendant
no.2 have no application because the legal position is sufficiently elaborated by the Supreme
Court in the judgment of Raheja Universal (supra).
9. None of the aforesaid judgments cited on behalf of defendant no.2 deal with the issue
of interpretation of Section 22 of SICA as has been done by the Division Bench of three
Judges in the case of Raheja Universal (supra) and which holds that unless the suit
proceedings are in the nature of „execution, distress or the like , the suit can continue. The
judgments relied upon by the defendant no.2 are judgments which simply hold that once a
company is a sick company, permission is required under Section 22 of the SICA, however,
none of the judgments cited on behalf of the defendant no.2 deal with the proposition as
incorporated in the later judgment of the Division Bench of three Judges of the Supreme
Court of in the case of Raheja Universal (supra). Accordingly, it is held that the suit is
maintainable.
10. In the present suit for recovery it cannot be said that the suit is of a nature which has
impact of or threat to the properties of the defendant No.1 sick company to affect the scheme
of revival. The suit is a simple suit for recovery under Order 37 CPC not having proceedings,
whether interim or final, of execution, distress or the like and hence the suit is not hit by
Section 22 of SICA. So far as defendant No.2/guarantor is concerned, the suit against him
will not surely hit any assets of the sick company and hence is not barred under Section 22 of
SICA.
I.A.No.8605/2003 (leave to defend by D-1)
11. This is an application filed by defendant no.1-company seeking leave to defend. I
have already passed an order today that the suit has to continue and no permission is required
under Section 22 of the SICA in view of the Division Bench judgment of this Court in the
case of Saketh India Ltd (supra) and more importantly of the Supreme Court in Raheja
Universal’s case. The only defence which is raised in the application for leave to defend by
defendant no.1 is that it is a sick company. There is no credible denial of the dues which are
payable under the subject suit. The relevant paras of this leave to defend application are paras
3 to 13 and which only talk of defendant no.1-company being a sick company or with respect
to prior proceedings under Section 138 of the Negotiable Instrument Act, 1881 or allegedly
that of all material documents having been suppressed from the record. The defence is
therefore quite clearly only a moonshine, and since as already stated above, Section 22 of
SICA does not apply, the application for leave to defend is dismissed and the suit is decreed
against the defendant no.1 for the reasons given hereinafter. I may however clarify that for
execution of the decree or like proceedings against defendant No.1 prior permission will
have to be taken under Section 22 of SICA.
12. The subject suit has been filed by the plaintiff for recovery of 1,46,95,206/- and
which amount comprises of the principal amount of 65 lacs and the balance is interest
thereon. The suit amount is the liquidated amount arising out of the written agreement dated
17.11.1998. In fact, the agreement dated 17.11.1998 is preceded by the initial/original
transaction of grant of Inter-Corporate Deposit/Loan on 28.7.1994 of 1,00,00,000/- to the
defendant no.1 alongwith interest.
13. I have already referred to the stand of the defendant no.1 in the leave to defend
application and which is in fact a pure moonshine because on merits the only thing which is
averred is that the plaintiff has concealed documents and what are the documents allegedly
concealed is not stated. There is no denial of the merits of the matter as stated in the plaint
Morgan Securities and Credits Pvt. Ltd. Vs. Dr. B.K.Modi
MANU/DE/2779/2012that the defendant no.1 executed the agreement dated 17.11.1998, and which binds the
defendant no.1 to pay the amount of 65,00,000 plus interest.
14. However, I am not inclined to grant the extremely high rate of interest at 25% per
annum simple as claimed by the plaintiff. In Delhi, interest on a loan transaction is governed
by Usurious Loans Act, 1918 as amended by the Punjab Relief of Indebtedness Act, 1934.
As per this amendment of the Usurious Loans Act, as applicable to Delhi, the rates of interest
which can be charged by a lender are at two different rates. One rate is when the debt is a
secured debt and another is when the debt is unsecured. For secured debt, interest at 7 ½%
per annum simple will be payable whereas for the unsecured debt interest at 12 ½% per
annum simple is payable-vide Section 3(i)(e) of the Act. In the present case, since the debt is
an unsecured debt, interest at 12 ½ % will be payable. Plaintiff cannot therefore be allowed
interest at 25% per annum simple in view of the aforesaid provision of Usurious Loans Act. I
may state that plaintiff is not a banking company or other notified company as per the
Usurious Loans Act and hence not exempted from application of the provisions of Usurious
Loans Act as applicable to Delhi and therefore the contractual rate of interest cannot prevail
in the face of the statute.
15. The suit of the plaintiff is hence decreed for a sum of 65,00,000/- alongwith interest
at 12 ½% per annum simple from 17.11.1998 till the date of filing of the suit. Plaintiff will
also be entitled to the same rate of 12 ½% per annum simple interest pendente lie and future
till realization of the decretal amount. Plaintiff is entitled to costs in terms of the Rules of the
Court against the defendant no.1.
I.A.No.1288/2003 (Leave to defend by D-2).
16. This is an application filed by the defendant no.2 seeking leave to defend. The
application is almost identically worded as is the application of defendant no.1 seeking leave
to defend, and which has been dismissed above. The only additional aspect that the defendant
no.2 has contended is that there is no personal guarantee which has been executed by the
defendant no.2, and, therefore, defendant no.2 cannot be made liable to pay the amount as
claimed in the present suit. I may note that there is no denial of the fact that the agreement
dated 17.11.1998 was executed in favour of the plaintiff. When we look at the agreement
dated 17.11.1998 executed by defendant No.2 who is the Managing Director of defendant
No.1 in favour of the plaintiff, we find that the same contains the following Clause 4:
“4. It is also agreed that Bhai Manjit Singh being the Promoter and Managing
Director of THE PARTY OF THE SECOND PART (Montari Industries Ltd) has in
his personal capacity agreed and guaranteed the payment of Rs.67,00,000/-(Rupees
sixty seven lacs) being the principal amount of loan to the party of the FIRST Part
and has also agreed to take over the liability from Montari Industries Ltd in his
personal capacity and has agreed to pay the principal amount of loan to the Party of
the FIRST PART as per the agreed schedule.”
17. The aforesaid agreement dated 17.11.1998 is signed by the defendant no.2. The
signatures of the defendant no.2 Bhai Manjit Singh have not been put alongwith the stamp
and seal of the defendant no.1 company thus showing that the signatures of Bhai Manjit
Singh-defendant no.2 are not only for and on behalf of defendant no.1-company, the
signatures are in his personal capacity as well.
18. In my opinion, a reading of the aforesaid para 4 leaves no manner of doubt that for
the liability of the defendant no.1 company, who was the principal borrower, the defendant
no.2 stood as a guarantor for payment of the principal amount of the loan of 65 lacs.
19. Learned counsel for the defendant no.2 relied upon two judgments in support of the
grant of leave to defend, the first judgment is in the case of Mrs. Raj Duggal Vs. RameshKumar Bansal AIR 1990 SC 2218 and the second is of learned Single Judge of this
Court in the case of Steel Authority of India Ltd. Vs. Century Tubes Ltd. Ors. 121 (2005)
DLT 122.
20. The judgment in the case of Mrs. Raj Duggal (supra) is relied upon for the
proposition that there is a triable issue if there is a fair dispute to be tried as regards the
meaning of the document. In my opinion, this judgment in the case of Mrs. Raj Duggal
(supra) can have no application to the facts of the present case inasmuch as, Clause 4 of the
agreement dated 17.11.1998 is more than clear. Seeking to raise baseless technical
interpretation, to avoid payment of dues, should not be countenanced by Courts of law and
hence I hold that there can be no doubt as to the language and interpretation of clause 4
which categorically says that defendant No.2 is a guarantor and liable for dues payable of the
defendant No.1. Clause-4 of the agreement dated 17.11.1998, even if it is given only a
cursory reading, yet the same leaves no manner of doubt as regards the liability of the
defendant no.2 as a guarantor for payment of the dues of the defendant no.1/principal
borrower. Clause-4 specifically uses the expressions “guaranteed the payment” i.e the
defendant no.2 is a guarantor.
21. So far as the judgment in the case of Steel Authority of India Ltd.(supra) is
concerned, it is relied upon for the proposition that there must be sufficient averments in the
plaint to fasten liability upon a particular person as a guarantor. Once again, the judgment of
Steel Authority of India Ltd.(supra) does not apply to the facts of the present case inasmuch
as, plaint in the present case clearly makes out averments of the fact that defendant no.2 is
liable. The fact that there is a defaulted payment under the agreement dated 17.11.1998 by
the defendant no.1, and therefore there is liability of both the defendant nos.1 and 2 is quite
clearly averred in paras 11,12,14,15,16 and 19 of the suit plaint, and the same read as under:-
“11. That during the pendency of the above mentioned Cr. M. (Main) No.
2220/1997 FMI Investments Pvt. Ltd. Vs. State & Others, the defendant no.2 as
Managing Director of Defendant No.21 approached the plaintiff and both the parties
entered into an amicable settlement vide agreement dated 17th November, 1998
whereby the defendants acknowledged and admitted the amount of Rs.67,00,000/-
(Rupees Sixty seven lakhs only) and repayment schedule was made for the
repayment of the said amount in four instalments. The schedule for repayment of the
said was made as follows:-
The said agreement dated 17.11.1998 was duly signed by the Plaintiff as first party
and the defendant No.1 through defendant No.2 as second party. Accordingly,
defendants paid a sum of Rs.20,00,000/- (Rupees Twenty Lakhs only) vide Demand
Draft No. 779388 dated 17.11.1998 drawn on Grindlays Bank, New Delhi which
was got encashed on 19.11.1998, towards the repayment of the said amounts as first
instalment as per the said agreement dated 17.11.1998.
12. That vide Clause 4 of the said agreement dated 17.11.1998 it was also agreed
that Bhai Manjit Singh defendant No.2 being the Promoter and Managing Director
of defendant No.1 has, in his personal capacity, agreed and guaranteed the
Repayment date on or
before:
Amount.
17.11.1998 Rs. 20,00,000/-
17.5.1999 Rs. 15,00,000/-
17.11.1999 Rs. 15,00,000/-
17.5.2000 Rs. 17,00,000/-repayment of Rs.67,00,000/- (Rupees Sixty seven Lakhs only) being the Principal
amount of ICD loan to the plaintiff and has also agreed to take over the liability
from Montari Industries Ltd. in his personal capacity as well as has agreed to pay
the principal amount of loan to the plaintiff as per agreed schedule. The said Clause
4 of the said agreement dated 17.11.1998 is reproduced below for ready
reference:—
“4. It is also agreed that Bhai Manjit Singh being the promoter and Managing
Director of the Party of the Second part (Montari Industries Ltd.) has in his personal
capacity agreed and guaranteed the payment of Rs.67,00,000/-(Rupees Sixty seven
lakhs) being the principal amount of loan to the party of the First Part and has also
agreed to take over the liability from Montari Industries Ltd. in his personal capacity
and has agreed to pay the Principal amount of loan to the Party of the First Part as
per the agreed schedule.”
14. That as per the terms and conditions of the said agreement, defendants paid a
sum of Rs.20,00,000/- (Rupees Twenty Lakhs only) on 17.11.1998 by Demand draft
which was got encashed on 19.11.1998 towards the repayment of the said amounts
but failed and neglected to pay the balance amounts as per schedule/Annexure A of
the said agreement dated 17.11.1998, as such the plaintiff is entitled to recover the
entire amounts of debts and liabilities towards principal and interest as per the
original ICD loan.
15. That the plaintiff sent various letters to the defendants and made demands but
the defendants failed and neglected to pay the same. Defendant No.2 as Managing
Director of Defendant No.1 also made promise that he is going to sell the property
No.61, Golf Links, New Delhi to some prospective buyer and on receipt of the sale
consideration or part thereof he will make the payment to the plaintiff but he again
failed and neglected to pay the same. Defendant No.2 has already entered into an
agreement to sell the said property for a sum of Rs.8.25 Crores and has received
substantial amounts as part payment from the purchasers M/s Senior Builders Pvt.
Ltd. New Delhi but so far has not paid the dues of the plaintiff.
16. That as per clause 4 of the said agreement dated 17.11.1998, defendant No.2 in
his personal capacity as well as liable to pay the entire amounts due to the plaintiff.
19. That the suit is based on the written contract/agreement entered into between the
parties on 17.11.1998. The said written contract/agreement came out of the ICD
loan granted by the plaintiff to the defendants as mentioned above and defendant
no.2 in his personal capacity not only admitted and acknowledged the said debts and
liabilities payable to the plaintiff but also agreed/guaranteed to pay in terms of the
I.C.D. loan.”
22. In my opinion, the aforesaid paras surely are more than sufficient to show the
liability of the defendant no.1 as the principal borrower and the defendant no.2 as guarantor.
The triable issues in law which entitle leave to defend are only bona fide triable issues. On
every disputed question of fact an issue has to be framed, but, it is only a bona fide triable
issue which entitles leave to defend. In my opinion, mere technical defences, and which of
course are also without any basis in view of the categorical language of the agreement dated
17.11.1998, read with the averments in the plaint, shows that there does not arise a triable
issue entitling leave to defend. The issues raised in the leave to defend application are only
moonshine and do not entitle the defendant no.2 for leave to defend.
23. Even qua the defendant no.2 the observations with respect to the interest not being
granted at 25%, as has been observed so far as the defendant no.1, also squarely applies andtherefore, even against the defendant no.2, the decree will only be for a sum of 65 lacs
along with interest at 12 ½ % per annum simple pendente lie and future till realization of the
decretal amount. Plaintiff is entitled to costs in terms of the Rules of the Court against the
defendant no.2.
24. Since the leave to defend applications are dismissed, suit will stand decreed in terms
of the observations made above. Decree sheet be prepared making it clear that the liability of
the defendant nos. 1 and 2 is joint and several with respect to the entire decretal amount.
25. Since the suit is disposed of all pending applications do not survive and accordingly
stand disposed of as such, preserving any rights, if granted for the deposit of the amount in
this Court.
Suit disposed of.
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Print Page
have already passed an order today that the suit has to continue and no permission is required
under Section 22 of the SICA in view of the Division Bench judgment of this Court in the
case of Saketh India Ltd (supra) and more importantly of the Supreme Court in Raheja
Universal’s case. The only defence which is raised in the application for leave to defend by
defendant no.1 is that it is a sick company. There is no credible denial of the dues which are
payable under the subject suit. The relevant paras of this leave to defend application are paras
3 to 13 and which only talk of defendant no.1-company being a sick company or with respect
to prior proceedings under Section 138 of the Negotiable Instrument Act, 1881 or allegedly
that of all material documents having been suppressed from the record. The defence is
therefore quite clearly only a moonshine, and since as already stated above, Section 22 of
SICA does not apply, the application for leave to defend is dismissed and the suit is decreed
against the defendant no.1 for the reasons given hereinafter. I may however clarify that for
execution of the decree or like proceedings against defendant No.1 prior permission will
have to be taken under Section 22 of SICA.
I (2013) BC 10 (CN)
DELHI HIGH COURT
Valmiki J. Mehta, J.
FMI INVESTMENT P. LTD.—Plaintiff
versus
MONTARI INDUSTRIES LTD. & ANR.—Defendants
CS (OS) No. 2373 of 2001—Decided on 11.10.2012
Valmiki J. Mehta, J (Oral)— On 10.9.2012, the following order was passed:—
2. Today, counsel appearing for defendant no.2 states that the defendant no.1 company,
and which is the principal borrower, is a sick company and therefore, the present suit cannot
proceed. Attention of this Court is invited to the order dated 12.2.2008, as per which, the suit
had to be heard qua the maintainability in view of Section 22 of the Sick Industrial
Companies (Special Provisions) Act, 1985 ( in short SICA).
3. The issue as to continuation of a suit filed against a sick company is no longer res
integra and is fully covered by two recent judgments one of the Division Bench of this Court
in the case of Sakethh India Ltd. Vs W. Diamond 2010 (119) DRJ 190; 2010 (160) CC 562
and second is the judgment of the Supreme Court in the case of Raheja Universal Ltd. Vs.
NRC Ltd. (2012) 4 SCC 148.
4. The ratio of the judgment in Saketh India Ltd.’s (supra) case is that unless the dues
are admitted by the sick company in a sanctioned scheme or is admitted before the Court
where the same suit is filed, no permission is required under Section 22 of SICA. More
particularly it is held that before Section 22 applies the proceedings have to be in the nature
of „execution, distress or the like .
Paras 6 and 14 of the said judgment are as under:—
“6. Courts, however, have always been alive to the possible mischief that invocation
of SICA can lead to. In a nutshell, where the net worth of a company is reduced to a
negative, and the amelioration that is sought is for reviving the company rather than
winding it up, the recourse to the Act would be legitimate. There is no justifiable
reason, therefore, for all legal proceedings to be immediately even held in abeyance,
if not dismissed. We are mindful of the fact that Parliament has incorporated an
amendment in the Section with effect from 1.2.1994 in these words - “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”. It appears to us that
the phrase “recovery of money” must be construed ejusdem generis and accordingly
recovery proceedings in the nature of execution or any other coercive enforcement
that has been ordained to be not maintainable. We do not find any logic in holding
legal proceedings to be not maintainable, or to be liable to be halted unless, even if
the debt sought to be proved in the Plaint has not been admitted. Given the delays
“1. Though there is no ground for adjournment in the present suit in which the
application for leave to defend is listed, however, since the counsel for the
defendant is stated to be not well and not appearing in any court, list on 11th
October, 2012.
2. It is made clear that no adjournment shall be granted on the next date of
hearing.”presently endemic in the justice delivery system if a creditor is disallowed even
from proving the indebtedness of a recalcitrant debtor SICA company, it would
cause unjustified hardship. Whichever way we look at the matter, there can be no
logic in denying legal recourse to a party for proving its debt. In the event that at
least the principal amount, or a substantial part of it stands admitted, either in the
suit or by means of a mention in the Scheme placed before the BIFR, the aggrieved
party must be permitted to prove its claim. In holding so, the only prejudice that we
can conceive of is incurring expenditure in legal fees. When this is weighed against
the interests of a person claiming that the company is indebted to it, the balance tilts
in favour of the latter. A holistic reading of Section 22(1) of SICA makes it
manifestly clear that Parliament’s intention was to insulate sick companies only
against proceedings for winding-up or for execution, or distress or the like or for
enforcement of any security or guarantee. In the case in hand, despite several
opportunities granted to the Appellant, it has miserably and perhaps deliberately
failed to substantiate that the claim mentioned in the Suit has been reflected in the
Scheme placed before the BIFR but even more poignantly, that a scheme was, in
fact, pending before BIFR. If an Appeal is pending, has BIFR failed to grant or has
withdrawn registration under SICA. We see the conduct of the Appellant as nothing
more than an abuse of SICA.
14. The discussion contained above leads to the thesis that as soon as a claim stands
admitted, either because it has been reflected in the Scheme, or because it stands
favourably adjudicated in a Court of law, the protection of Section 22 of SICA
would automatically have to be implemented. This is the watershed between the
present and the preceding case. Having obtained a decree, further proceedings fall
within the protective mantle of Section 22 of SCIA as they cannot but be in the
nature of “execution, distress or the like”. A plain reading of the provision cannot
but lead to any other conclusion. If there are unique circumstances, which would
justify the execution of the decree, even in the face of the registration of a Scheme
under SICA, the proper recourse possible would be to obtain the permission or
consent of the Board or the Appellate Authority as the case may be. Any other
interpretation would completely annihilate and defeat the intendment of
Parliament.” (underlining added)
In view of the judgment of the Division Bench in the case of Saketh India Ltd. (supra), it
is quite clear that no permission is required under Section 22 of SICA to continue with the
present suit inasmuch as it has not been pointed out to me as to how dues in the subject suit
are admitted by the defendant No.1 in the present suit.
5. In fact now the controversy as to the interpretation of Section 22 is set at rest by the
recent judgment of the Supreme Court rendered by a Division Bench of three Judges in the
case of Raheja Universal Ltd. Vs. NRC Ltd., 2012 (4) SCC 148. The relevant paras of this
judgment are paras 55, 58, 61 and 76 to 81, which read as under:—
“55. Despite these judgments and with an intention to clarify the law, we would
state that the matters which are connected with the sanctioning and implementation
of the scheme right from the date on which it is presented or the date from which the
scheme is made effective, whichever is earlier, would be the matters which squarely
fall within the ambit and scope of Section 22 of the Act of 1989 subject to their
satisfying the ingredients stated under that provision. This would include the
proceedings before the civil court, revenue authorities and/or any other competent
forum in the form of execution or distress in relation to recovery of amount by sale
or otherwise of the assets of the sick industrial company. It is difficult for us to holdthat merely because a demand by a creditor had not been made a part of the scheme,
pre or post-sanctioning of the same for that reason alone, it would fall outside the
ambit of protection of Section 22 of the Act of 1985.
58. Section 22 is the reservoir of the statutory powers empowering the BIFR to
determine a scheme, right from its presentation till its complete implementation in
accordance with law, free of interjections and interference from other judicial
processes. Section 22(1)deals with the execution, distress or the like proceedings
against the company’s properties, including appointment of a Receiver. It also
specifically provides that even a winding up petition would not be instituted and no
other proceedings shall lie or proceed further, except with the consent of the BIFR.
61. It can safely be perceived that the provisions of Section 22 of the Act of 1985
are self-explanatory. They would cease to operate within their own limitations and
not by force of any other law, agreement, memorandum or even articles of
association of the company. The purpose is so very clear that during the
examination, finalization and implementation of the scheme, there should be no
impediment caused to the smooth execution of the scheme of revival of the sick
industrial company. It is only when the specified period of restrictions and
declarations contemplated under the provisions of the Act of 1985 is over, that the
status quo ante as it existed at the time of the consideration and finalization of the
scheme, would become operative. This is done primarily with the object that the
assets of the company are not diverted, wasted, taken away and/or disposed of in
any manner, during the relevant period.
76. On the analytical analysis of the above-stated dictum of this Court and the
legislative purpose and object of the Act, it has to be held that on its plain reading
the provisions of Sections 22(1) and 22(3) of the Act are the provisions of wide
connotation and would normally bring the specified proceedings, contractual and
non-contractual liabilities, within the ambit and scope of the bar and restrictions
contained in Sections 22(1) and 22(3) of the Act of 1985 respectively. The
legislative intent is explicit that the BIFR has wide powers to impose restrictions in
the form of declaration and even prohibitory/injunctive orders right from the stage
of consideration of a scheme till its successful implementation within the ambit and
scope of Sections 22(3) and 22A of the Act.
77. Section 22 of the Act of 1985 is very significant and of wide ramifications and
application. More often than not, the jurisdiction of the BIFR is being invoked,
necessitated by varied actions of third parties against the sick industrial company.
The proceedings, taken by way of execution, distress or the like, may have the effect
of destabilizing the finalization and/or implementation of the scheme of revival
under consideration of the BIFR. It appears that, the Legislature intended to ensure
that no impediments are created to obstruct the finalization of the scheme by the
specialized body. To protect the industrial growth and to ensure revival, this
preventive provision has been enacted. The provision has an overriding effect as it
contains non obstante clauses not only vis-- vis the Companies Act but even qua any
other law, even the memorandum and articles of association of the industrial
company and/or any other instrument having effect under any other Act or law.
These proceedings cannot be permitted to be taken out or continued without the
consent of the BIFR or the AAIFR, as the case may be.
78. The expression ‘no proceedings’ that finds place in Section 22(1) is of wide
spectrum but is certainly not free of exceptions. The framers of law have given a
definite meaning to the expression ‘proceedings’ appearing under Section 22(1) ofthe Act of 1985. These proceedings are for 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.
79. The expression ‘the like’ has to be read ejusdem generis to the term
‘proceedings’. The words ‘execution, distress or the like’ have a definite
connotation. These proceedings can have the effect of nullifying or obstructing the
sanctioning or implementation of the revival scheme, as contemplated under the
provisions of the Act of 1985. This is what is required to be avoided for effective
implementation of the scheme. The other facet of the same Section is that, no suit
for recovery of money, or for enforcement of any security against the industrial
company, or any guarantee in respect of any loan or advance granted to the
industrial company shall lie, or be proceeded with further without the consent of the
BIFR. In other words, a suit for recovery and/or for the stated kind of reliefs cannot
lie or be proceeded further without the leave of the BIFR. Again, the intention is to
protect the properties/assets of the sick industrial company, which is the subject
matter of the scheme.
80. It is difficult to state with precision the principle that would uniformly apply to
all the proceedings/suits falling under Section 22(1) of the Act of 1985. Firstly, it
will depend upon the facts and circumstances of a given case, it must satisfy the
ingredients of Section 22(1) and fall under any of the various classes of proceedings
stated thereunder. Secondly, these proceedings should have the impact of interfering
with the formulation, consideration, finalization or implementation of the scheme.
81. Once these ingredients are satisfied, normally the bar or limitation contained in
Section 22(1) of the Act of 1985 would apply. For instance, execution of a decree
against the assets of a company, if permitted, is bound to result in disturbing the
scheme, which has or may be framed by the BIFR. The sale of an asset during such
execution or even withdrawing the money from the bank account of the company
would certainly defeat the very purpose of the protection sought to be created by the
Legislature under Section 22(1) of the Act of 1985.” (underlining added)
6. The salient conclusions which can be arrived at from reading of the aforesaid paras in
the case of Raheja Universal (supra) are :—
7. Learned counsel for the defendant no.2 sought to place reliance on the following three
judgments to argue that permission under Section 22 is a sine qua non.
(i) The proceedings which are affected by Section 22(1) are proceedings in the
nature of execution, distress or the like.
(ii) It depends on facts of each case as to whether the suit is hit by Section 22 i.e all
suits including of recovery, are not hit by Section 22(1).
(iii) Only those suits which have the effect of execution, distress or like action
against the properties of the sick company are hit by Section 22 i.e where a suit
is simply for recovery of moneys, and the properties of a sick company are not
threatened by the proceedings including interim proceedings such as
appointment of receiver, execution, distress or the like, such suits can continue
without permission under Section 22.
(i) Managing Director, Bhoruka Textiles Ltd.Vs. Kashmiri Rice Industries (2009)
7 SCC 521;
(ii) Tata Davy Ltd. Vs. State of Orissa and Ors (1997) 6 SCC 669;
(iii) Dr. B.K.Modi Vs. M/s Morgan Securities and Credits Pvt. Ltd. and M/s 8. In my opinion, all the three judgments, which have been cited on behalf of defendant
no.2 have no application because the legal position is sufficiently elaborated by the Supreme
Court in the judgment of Raheja Universal (supra).
9. None of the aforesaid judgments cited on behalf of defendant no.2 deal with the issue
of interpretation of Section 22 of SICA as has been done by the Division Bench of three
Judges in the case of Raheja Universal (supra) and which holds that unless the suit
proceedings are in the nature of „execution, distress or the like , the suit can continue. The
judgments relied upon by the defendant no.2 are judgments which simply hold that once a
company is a sick company, permission is required under Section 22 of the SICA, however,
none of the judgments cited on behalf of the defendant no.2 deal with the proposition as
incorporated in the later judgment of the Division Bench of three Judges of the Supreme
Court of in the case of Raheja Universal (supra). Accordingly, it is held that the suit is
maintainable.
10. In the present suit for recovery it cannot be said that the suit is of a nature which has
impact of or threat to the properties of the defendant No.1 sick company to affect the scheme
of revival. The suit is a simple suit for recovery under Order 37 CPC not having proceedings,
whether interim or final, of execution, distress or the like and hence the suit is not hit by
Section 22 of SICA. So far as defendant No.2/guarantor is concerned, the suit against him
will not surely hit any assets of the sick company and hence is not barred under Section 22 of
SICA.
I.A.No.8605/2003 (leave to defend by D-1)
11. This is an application filed by defendant no.1-company seeking leave to defend. I
have already passed an order today that the suit has to continue and no permission is required
under Section 22 of the SICA in view of the Division Bench judgment of this Court in the
case of Saketh India Ltd (supra) and more importantly of the Supreme Court in Raheja
Universal’s case. The only defence which is raised in the application for leave to defend by
defendant no.1 is that it is a sick company. There is no credible denial of the dues which are
payable under the subject suit. The relevant paras of this leave to defend application are paras
3 to 13 and which only talk of defendant no.1-company being a sick company or with respect
to prior proceedings under Section 138 of the Negotiable Instrument Act, 1881 or allegedly
that of all material documents having been suppressed from the record. The defence is
therefore quite clearly only a moonshine, and since as already stated above, Section 22 of
SICA does not apply, the application for leave to defend is dismissed and the suit is decreed
against the defendant no.1 for the reasons given hereinafter. I may however clarify that for
execution of the decree or like proceedings against defendant No.1 prior permission will
have to be taken under Section 22 of SICA.
12. The subject suit has been filed by the plaintiff for recovery of 1,46,95,206/- and
which amount comprises of the principal amount of 65 lacs and the balance is interest
thereon. The suit amount is the liquidated amount arising out of the written agreement dated
17.11.1998. In fact, the agreement dated 17.11.1998 is preceded by the initial/original
transaction of grant of Inter-Corporate Deposit/Loan on 28.7.1994 of 1,00,00,000/- to the
defendant no.1 alongwith interest.
13. I have already referred to the stand of the defendant no.1 in the leave to defend
application and which is in fact a pure moonshine because on merits the only thing which is
averred is that the plaintiff has concealed documents and what are the documents allegedly
concealed is not stated. There is no denial of the merits of the matter as stated in the plaint
Morgan Securities and Credits Pvt. Ltd. Vs. Dr. B.K.Modi
MANU/DE/2779/2012that the defendant no.1 executed the agreement dated 17.11.1998, and which binds the
defendant no.1 to pay the amount of 65,00,000 plus interest.
14. However, I am not inclined to grant the extremely high rate of interest at 25% per
annum simple as claimed by the plaintiff. In Delhi, interest on a loan transaction is governed
by Usurious Loans Act, 1918 as amended by the Punjab Relief of Indebtedness Act, 1934.
As per this amendment of the Usurious Loans Act, as applicable to Delhi, the rates of interest
which can be charged by a lender are at two different rates. One rate is when the debt is a
secured debt and another is when the debt is unsecured. For secured debt, interest at 7 ½%
per annum simple will be payable whereas for the unsecured debt interest at 12 ½% per
annum simple is payable-vide Section 3(i)(e) of the Act. In the present case, since the debt is
an unsecured debt, interest at 12 ½ % will be payable. Plaintiff cannot therefore be allowed
interest at 25% per annum simple in view of the aforesaid provision of Usurious Loans Act. I
may state that plaintiff is not a banking company or other notified company as per the
Usurious Loans Act and hence not exempted from application of the provisions of Usurious
Loans Act as applicable to Delhi and therefore the contractual rate of interest cannot prevail
in the face of the statute.
15. The suit of the plaintiff is hence decreed for a sum of 65,00,000/- alongwith interest
at 12 ½% per annum simple from 17.11.1998 till the date of filing of the suit. Plaintiff will
also be entitled to the same rate of 12 ½% per annum simple interest pendente lie and future
till realization of the decretal amount. Plaintiff is entitled to costs in terms of the Rules of the
Court against the defendant no.1.
I.A.No.1288/2003 (Leave to defend by D-2).
16. This is an application filed by the defendant no.2 seeking leave to defend. The
application is almost identically worded as is the application of defendant no.1 seeking leave
to defend, and which has been dismissed above. The only additional aspect that the defendant
no.2 has contended is that there is no personal guarantee which has been executed by the
defendant no.2, and, therefore, defendant no.2 cannot be made liable to pay the amount as
claimed in the present suit. I may note that there is no denial of the fact that the agreement
dated 17.11.1998 was executed in favour of the plaintiff. When we look at the agreement
dated 17.11.1998 executed by defendant No.2 who is the Managing Director of defendant
No.1 in favour of the plaintiff, we find that the same contains the following Clause 4:
“4. It is also agreed that Bhai Manjit Singh being the Promoter and Managing
Director of THE PARTY OF THE SECOND PART (Montari Industries Ltd) has in
his personal capacity agreed and guaranteed the payment of Rs.67,00,000/-(Rupees
sixty seven lacs) being the principal amount of loan to the party of the FIRST Part
and has also agreed to take over the liability from Montari Industries Ltd in his
personal capacity and has agreed to pay the principal amount of loan to the Party of
the FIRST PART as per the agreed schedule.”
17. The aforesaid agreement dated 17.11.1998 is signed by the defendant no.2. The
signatures of the defendant no.2 Bhai Manjit Singh have not been put alongwith the stamp
and seal of the defendant no.1 company thus showing that the signatures of Bhai Manjit
Singh-defendant no.2 are not only for and on behalf of defendant no.1-company, the
signatures are in his personal capacity as well.
18. In my opinion, a reading of the aforesaid para 4 leaves no manner of doubt that for
the liability of the defendant no.1 company, who was the principal borrower, the defendant
no.2 stood as a guarantor for payment of the principal amount of the loan of 65 lacs.
19. Learned counsel for the defendant no.2 relied upon two judgments in support of the
grant of leave to defend, the first judgment is in the case of Mrs. Raj Duggal Vs. RameshKumar Bansal AIR 1990 SC 2218 and the second is of learned Single Judge of this
Court in the case of Steel Authority of India Ltd. Vs. Century Tubes Ltd. Ors. 121 (2005)
DLT 122.
20. The judgment in the case of Mrs. Raj Duggal (supra) is relied upon for the
proposition that there is a triable issue if there is a fair dispute to be tried as regards the
meaning of the document. In my opinion, this judgment in the case of Mrs. Raj Duggal
(supra) can have no application to the facts of the present case inasmuch as, Clause 4 of the
agreement dated 17.11.1998 is more than clear. Seeking to raise baseless technical
interpretation, to avoid payment of dues, should not be countenanced by Courts of law and
hence I hold that there can be no doubt as to the language and interpretation of clause 4
which categorically says that defendant No.2 is a guarantor and liable for dues payable of the
defendant No.1. Clause-4 of the agreement dated 17.11.1998, even if it is given only a
cursory reading, yet the same leaves no manner of doubt as regards the liability of the
defendant no.2 as a guarantor for payment of the dues of the defendant no.1/principal
borrower. Clause-4 specifically uses the expressions “guaranteed the payment” i.e the
defendant no.2 is a guarantor.
21. So far as the judgment in the case of Steel Authority of India Ltd.(supra) is
concerned, it is relied upon for the proposition that there must be sufficient averments in the
plaint to fasten liability upon a particular person as a guarantor. Once again, the judgment of
Steel Authority of India Ltd.(supra) does not apply to the facts of the present case inasmuch
as, plaint in the present case clearly makes out averments of the fact that defendant no.2 is
liable. The fact that there is a defaulted payment under the agreement dated 17.11.1998 by
the defendant no.1, and therefore there is liability of both the defendant nos.1 and 2 is quite
clearly averred in paras 11,12,14,15,16 and 19 of the suit plaint, and the same read as under:-
“11. That during the pendency of the above mentioned Cr. M. (Main) No.
2220/1997 FMI Investments Pvt. Ltd. Vs. State & Others, the defendant no.2 as
Managing Director of Defendant No.21 approached the plaintiff and both the parties
entered into an amicable settlement vide agreement dated 17th November, 1998
whereby the defendants acknowledged and admitted the amount of Rs.67,00,000/-
(Rupees Sixty seven lakhs only) and repayment schedule was made for the
repayment of the said amount in four instalments. The schedule for repayment of the
said was made as follows:-
The said agreement dated 17.11.1998 was duly signed by the Plaintiff as first party
and the defendant No.1 through defendant No.2 as second party. Accordingly,
defendants paid a sum of Rs.20,00,000/- (Rupees Twenty Lakhs only) vide Demand
Draft No. 779388 dated 17.11.1998 drawn on Grindlays Bank, New Delhi which
was got encashed on 19.11.1998, towards the repayment of the said amounts as first
instalment as per the said agreement dated 17.11.1998.
12. That vide Clause 4 of the said agreement dated 17.11.1998 it was also agreed
that Bhai Manjit Singh defendant No.2 being the Promoter and Managing Director
of defendant No.1 has, in his personal capacity, agreed and guaranteed the
Repayment date on or
before:
Amount.
17.11.1998 Rs. 20,00,000/-
17.5.1999 Rs. 15,00,000/-
17.11.1999 Rs. 15,00,000/-
17.5.2000 Rs. 17,00,000/-repayment of Rs.67,00,000/- (Rupees Sixty seven Lakhs only) being the Principal
amount of ICD loan to the plaintiff and has also agreed to take over the liability
from Montari Industries Ltd. in his personal capacity as well as has agreed to pay
the principal amount of loan to the plaintiff as per agreed schedule. The said Clause
4 of the said agreement dated 17.11.1998 is reproduced below for ready
reference:—
“4. It is also agreed that Bhai Manjit Singh being the promoter and Managing
Director of the Party of the Second part (Montari Industries Ltd.) has in his personal
capacity agreed and guaranteed the payment of Rs.67,00,000/-(Rupees Sixty seven
lakhs) being the principal amount of loan to the party of the First Part and has also
agreed to take over the liability from Montari Industries Ltd. in his personal capacity
and has agreed to pay the Principal amount of loan to the Party of the First Part as
per the agreed schedule.”
14. That as per the terms and conditions of the said agreement, defendants paid a
sum of Rs.20,00,000/- (Rupees Twenty Lakhs only) on 17.11.1998 by Demand draft
which was got encashed on 19.11.1998 towards the repayment of the said amounts
but failed and neglected to pay the balance amounts as per schedule/Annexure A of
the said agreement dated 17.11.1998, as such the plaintiff is entitled to recover the
entire amounts of debts and liabilities towards principal and interest as per the
original ICD loan.
15. That the plaintiff sent various letters to the defendants and made demands but
the defendants failed and neglected to pay the same. Defendant No.2 as Managing
Director of Defendant No.1 also made promise that he is going to sell the property
No.61, Golf Links, New Delhi to some prospective buyer and on receipt of the sale
consideration or part thereof he will make the payment to the plaintiff but he again
failed and neglected to pay the same. Defendant No.2 has already entered into an
agreement to sell the said property for a sum of Rs.8.25 Crores and has received
substantial amounts as part payment from the purchasers M/s Senior Builders Pvt.
Ltd. New Delhi but so far has not paid the dues of the plaintiff.
16. That as per clause 4 of the said agreement dated 17.11.1998, defendant No.2 in
his personal capacity as well as liable to pay the entire amounts due to the plaintiff.
19. That the suit is based on the written contract/agreement entered into between the
parties on 17.11.1998. The said written contract/agreement came out of the ICD
loan granted by the plaintiff to the defendants as mentioned above and defendant
no.2 in his personal capacity not only admitted and acknowledged the said debts and
liabilities payable to the plaintiff but also agreed/guaranteed to pay in terms of the
I.C.D. loan.”
22. In my opinion, the aforesaid paras surely are more than sufficient to show the
liability of the defendant no.1 as the principal borrower and the defendant no.2 as guarantor.
The triable issues in law which entitle leave to defend are only bona fide triable issues. On
every disputed question of fact an issue has to be framed, but, it is only a bona fide triable
issue which entitles leave to defend. In my opinion, mere technical defences, and which of
course are also without any basis in view of the categorical language of the agreement dated
17.11.1998, read with the averments in the plaint, shows that there does not arise a triable
issue entitling leave to defend. The issues raised in the leave to defend application are only
moonshine and do not entitle the defendant no.2 for leave to defend.
23. Even qua the defendant no.2 the observations with respect to the interest not being
granted at 25%, as has been observed so far as the defendant no.1, also squarely applies andtherefore, even against the defendant no.2, the decree will only be for a sum of 65 lacs
along with interest at 12 ½ % per annum simple pendente lie and future till realization of the
decretal amount. Plaintiff is entitled to costs in terms of the Rules of the Court against the
defendant no.2.
24. Since the leave to defend applications are dismissed, suit will stand decreed in terms
of the observations made above. Decree sheet be prepared making it clear that the liability of
the defendant nos. 1 and 2 is joint and several with respect to the entire decretal amount.
25. Since the suit is disposed of all pending applications do not survive and accordingly
stand disposed of as such, preserving any rights, if granted for the deposit of the amount in
this Court.
Suit disposed of.
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