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2000 DIGILAW 846 (BOM)

SICOM Ltd. v. Prakash Pai (Shri)

2000-11-29

R.J.KOCHAR

body2000
JUDGMENT - R.J. KOCHAR, J.:---The plaintiffs, a public limited company incorporated under the provisions of the Companies Act, 1956, is carrying on the business of giving finance to the needy borrowers. The above suit has arisen from the transaction between the plaintiffs and one M/s. Firth (India) Steel Company Limited of advancing a short term loan of Rs. 50,00,000/- on the terms and conditions contained in the plaintiffs sanction letter dated 9-1-1996 following their agreement dated 6-2-1996. The said company is not impleaded as a defendant in the above suit. The plaintiffs have also not annexed a true copy of the aforesaid agreement dated 6-2-1996 between the plaintiffs and the said company on the basis of which the plaintiffs had advanced the aforesaid amount of Rs. 50 lakhs as short loan to the said company. It further appears that the present defendant being the Managing Director of the said company gave his irrevocable personal guarantee securing the said loan given by the plaintiffs to the said company. It further appears that a separate Deed of Agreement was executed on 6-2-1996 by the defendant. It further appears that the defendant had also executed a Demand Promissory Note on the same day in favour of the plaintiffs. The present suit has arisen on account of defaults in payment of the amounts as agreed by the borrower company and by the defendant. The plaintiffs have prayed for a decree against the defendant guarantor as under :- "that the defendant be ordered and decreed to pay to the plaintiffs a sum of Rs. 92,07,445/- as per Particulars of claim shown in Exhibit "D" to the plaint with further interest thereon at the rate of 27.5% per annum from 1st September, 1998 with monthly rests till payment and/or realisation and costs of the suit: and". The plaintiffs have prayed for a decree against the defendant guarantor, who entered his appearance after receipt of the writ of summons in the above suit. The plaintiffs have thereafter filed the above summons for judgment for a decree against the defendant on the basis that the suit claim is an ascertained and liquidated amount arising under the Deed of Guarantee executed by the defendant as a security for the loan advanced by the plaintiffs to the borrower company. The plaintiffs have thereafter filed the above summons for judgment for a decree against the defendant on the basis that the suit claim is an ascertained and liquidated amount arising under the Deed of Guarantee executed by the defendant as a security for the loan advanced by the plaintiffs to the borrower company. According to the plaintiffs, the summons for judgment should be made absolute and judgment should be entered in their favour as the defendant has no defence of any nature. The plaintiffs have filed an affidavit in support of the summons for judgment verifying the facts stated in the plaint. The defendant has filed affidavit in reply to contest the suit claim on various grounds. 3. I have heard both the learned Counsel and I have also gone through the agreement entered into by the plaintiffs and the borrower company and also the Deed of Guarantee executed by the present defendant in favour of the plaintiffs. As far as the plaintiffs are concerned the borrower company has committed default by failing to make payment in terms of the contract, the defendant guarantor has become liable to make payment and he also having failed to discharge his obligations under the Deed of Guarantee, the plaintiffs are entitled to get a decree against the defendant. It was pointed out by the Counsel for the plaintiffs that the borrower company has been ordered to be wound up on 15-3-1999 in Company Petition No. 457 of 1997. The Official Liquidator has been appointed for the assets and liabilities of the company. According to the learned Counsel for the plaintiffs the suit was maintainable against the defendant guarantor without impleading the borrower company and that official liquidator need not be joined. The suit was filed on 17-9-1998 while Official Liquidator was appointed on 15-3-1999. 4. Shri Soni, the learned Advocate for the defendant has raised the following triable issues and has submitted that the defendant is entitled to an unconditional leave to defend. 1. It was pointed out by the learned Advocate from the particulars of claim annexed to the plaint that the plaintiffs have charged interest on interest and compound interest on interest which terms they were never agreed between the plaintiffs and the borrower company. For ready reference I am reproducing the portion of the particulars of claim : Amount (in Rs) 1. Principal outstanding and overdue 50,00,000 2. For ready reference I am reproducing the portion of the particulars of claim : Amount (in Rs) 1. Principal outstanding and overdue 50,00,000 2. Simple interest on Rs./ 50,00,000/- @ 25% p.a. from 01-06-96 to 31-08-98. 28,14,976 3. Additional interest on Rs. 50,00,000/- @ 2.5% p.a. from 01-06-96 to 31-08-98. 2,70,884. 4. Compound Interest @ 27.50% p.a. from 01-06-96 to 31-08-98 11,21,585 42,07,445 ------------ 92,07,445 ------------ It is pointed out by the learned Advocate for the defendant that the plaintiffs were entitled to charge interest only at the rate of 25% p.a. on the principal amount and in case of default in making payment of interest they could charge 27.50% on such accrued interest. From the particulars of claim it appears that the plaintiffs have charged interest at the rate of 27.50% p.a. not only on the accrued interest but also on the principal amount. Shri Soni urged that the plaintiffs could charge only 25% on the principal amount and 27.5% on the amount of interest which was accrued but not paid. The plaintiffs have charged by calculating different type of interests i.e. simple interest, additional interest and compound interest, the total rate of interest charged by the plaintiffs comes to 55% p.a. Shri Soni has pointedly drawn my attention to Clause 7 of the agreement with the Borrower Company. From the said clause it appears that the plaintiffs could charge interest at the rate of 27.5% only on the interest which was not paid by the borrower company. Prima facie it appears that the plaintiffs have charged not only simple interest on the principal amount but they have also charged additional interest of 2.5.% on the principal amount and not on the amount accrued unpaid interest only. It further appears that on the whole amount (principal and the accrued unpaid interest) the further compound interest at the rate of 27.5% is charged for the said period. Prima facie I find much substance in the submissions of Shri Soni that the aforesaid Clause 7 of the Agreement and the particulars of claim required to be construed correctly. According to him, the plaintiffs have filed the suit claiming exorbitant rate of interest i.e. 55% which was never agreed upon between the plaintiffs and the borrower company. 2. Shri Soni has also pointed out that there was no agreement to pay compound interest which was claimed by the plaintiffs. According to him, the plaintiffs have filed the suit claiming exorbitant rate of interest i.e. 55% which was never agreed upon between the plaintiffs and the borrower company. 2. Shri Soni has also pointed out that there was no agreement to pay compound interest which was claimed by the plaintiffs. According to me, therefore the suit in the present frame as summary suit is not maintainable. 3. The plaintiffs have further prayed for per day interest which is also not agreed between the parties, says the learned Advocate. 4. The borrower company ought to have been impleaded as a defendant as a necessary and proper party and therefore, the suit deserve to be dismissed for non joinder of the proper and necessary party. 5. Under Clause 5 of the agreement the plaintiffs are required to disclose the accounts and therefore, it cannot be said that the amount due from the borrower company as shown in the accounts of the plaintiffs would be conclusive. The plaintiffs having not shown such accounts the defendant had no opportunity of verifying the same. 6. Shri Soni further pointed out that on 23-10-1997 the Company Court had ordered provisional wounding up of the company and had appointed provisional Official Liquidator. In view of this order the plaintiffs ought to have taken leave under section 46(2) of the Companies Act to file the present suit. He further submitted that though the final order was passed by the Company Court on 15-3-1999 after filing of the above suit the provisional order would be the relevant date and therefore it was necessary for the plaintiffs to have obtained a leave from the Company Court before filing the present suit. Clause 16 of the Contract is contrary to law. Shri Soni pointed out that if no suit could have been filed against the borrower company without leave under section 446(2) of the Companies Act no suit can be filed against the defendant guarantor. 7. The plaintiffs have lodged their claim with the Official Liquidator. Moreover, Shri Soni submitted that though the Company has assets/property worth Rs. 7 crores and the plaintiffs can realise the debt by loding their claim with the Official Liquidator. 8. Shri Soni also submitted that the plaintiffs cannot charge the defendant more than what they could have charged the borrower company under the agreement. 9. Moreover, Shri Soni submitted that though the Company has assets/property worth Rs. 7 crores and the plaintiffs can realise the debt by loding their claim with the Official Liquidator. 8. Shri Soni also submitted that the plaintiffs cannot charge the defendant more than what they could have charged the borrower company under the agreement. 9. It is further urged by the learned Advocate for the defendant that from the conduct of the plaintiffs the defendant has been left without any remedy. According to him, the plaintiffs did not give consent or no objection for second charge on the borrower company's property to get loan from the Canara Bank. If the plaintiffs had given such a consent the borrower company would have repaid the whole amount to the plaintiffs. 10. The contract between the plaintiffs and the borrower company is contrary to and in violation of sections 138 and 139 of the Indian Contract Act. 11. Shri Soni has relied on a judgment of the learned Single Judge of this Court (F.I. Rebello, J.) in the case of (B.I.O. Finance Ltd. v. Padma Alloy Casting Pvt. Ltd. others)1, reported in 1999(4) Bom.C.R. (O.O.C.J.)218 . The learned Advocate has relied on the following Head Note (E) of the Judgment: (E) Civil Procedure Code, 1908, Order XXXVII, Rule 2-Summary suit-Additional or penal interest-Does not cover interest with quarterly rests-Capitalisation of interest-Does not mean additional interest-Penal interest-Means Additional interest on defaulted interest payment-Summary suit for recovery of such additional or penal interest-Not maintainable. 5. In my opinion the defendant has raised substantial defence and from the facts disclosed the defendant is entitled to get unconditional leave to defend the suit. According to me, the defendant has not raised any frivolous or vexatious or any moonshine defence. The points which are raised by Shri Soni the learned Advocate for the defendant are triable issues which require consideration and judgment finally. The defendant is therefore entitled to get unconditional leave to defend. The defendant is therefore granted unconditional leave to defend the suit. 6. The defendant is directed to file his written statement within 12 weeks. Both the parties shall file their affidavit of documents within eight weeks thereafter and complete the discovery and inspection of the documents within eight weeks thereafter. The suit stands transferred to the list of commercial causes. 7. 6. The defendant is directed to file his written statement within 12 weeks. Both the parties shall file their affidavit of documents within eight weeks thereafter and complete the discovery and inspection of the documents within eight weeks thereafter. The suit stands transferred to the list of commercial causes. 7. All concerned to act on an ordinary copy of this order duly authenticated by the chamber registrar. Order accordingly. -----