1 23-805-02.sxw IN THE HIGH COURT OF JUDICATURE AT BOMBAY srj ORDINARY ORIGINAL CIVIL JURISDICTIION SUIT NO.805 OF 2002 Deepak Fertilizer & Petrochemicals ] Corporation Limited ] a company registered and incorporated ] under the companies Act, 1956, having ] its Registered Office at Opp. Golf Course] Shastri Nagar, Yerawada, Pune 411 006 ] and an Office at 61/62, Mehta Mahal, ] Ground Floor, 89, Dadasaheb Phalke ] Marg, Dadar (East), Mumbai 400 014. ] .. Plaintiffs. Vs. 1. Suryakant Ambalal Patel of Dubai ] a Non Resident Indian, having ] the postal address as Post Box No. ] 7350, Dubai, U.A.E. ] 2 Mrs. Jyotsnaben Suryakant Patel, ] of Dubai, a Non Resident Indian, ] having the postal address as Post ] Box No.7350, Dubai, U.A.E. ] .. Defendants. 2 23-805-02.sxw Mr. S.V.Doijode i/b. Doijode Associates, for the Plaintiff. None for Defendants. CORAM : R.Y.GANOO, J. DATE : 21st FEBRUARY, 2011. JUDGMENT:- 1 The Plaintiffs have filed this suit for recovery of Rs.3,74,500/- along with interest at the rate of Rs.18% p.a. from the date of filing of the suit till payment or realization against Defendant No.1. Similar relief is sought in the terms of prayer clause (b) as against Defendant No.2. The Plaintiffs have prayed for costs in terms of prayer clause (c). 2 The writ of summons was served upon Defendant Nos.1 and 2. No written statement has been filed. The suit was treated as undefended suit. 3 The facts necessary for the disposal of the suit are as under:- 3 23-805-02.sxw (a) In the year 1989, the Plaintiffs issued 14% Secured Convertible Debentures of Rs.100/- each. On the application filed by Defendants No.1 and 2, 10,000/- debentures were allotted to each of them. Each debenture was in three parts i.e. Part – ‘A’ of Rs.20/- , Part ‘B’ namely debentures-cum-share certificate of Rs.30/- and Part ‘C’ was Debentures Certificate of Rs.50/- with detachable warrants. According to the Plaintiffs, debentures in various parts with detachable warrants allotted to Defendant Nos.1 and 2 respectively were sent to the Bank of Oman Limited, now known as Mashreq Bank on 11th and 12th September, 1990 as per the instructions of both the Defendants. According to the Plaintiffs, the present suit relates to these 20,000 debentures in part ‘C’. According to the Plaintiffs, each of the Defendant had transferred his/her debentures in part ‘C’ (herein after referred to as the said debentures) in favour of the Indian Bank Mutual Fund, (for short “Indian Bank”). Apart from the said debentures, various other debentures were also transferred in favour of Indian Bank. A large number of debentures came to be transferred in favour of Indian Bank as set out in paragraph 5 of the plaint. According to the Plaintiffs, the transfer deeds lodged by the Indian Bank in respect of said debentures did not contain the names of the witnesses in the transfer deeds. Consequently the transfer of the 4 23-805-02.sxw said debentures in favour of Indian Bank was not approved. It is noticed that the question of non- transfer of various debentures by the Plaintiffs in favour of various purchasers came up before the Bombay Stock Exchange and on the basis of the meeting held on 18th December, 1990, solution was arrived at. New transfer forms were obtained in regards to the various debentures and the said debentures were transferred. Fact remains that said debentures were not transfered in favour of Indian Bank. (b) According to the Plaintiffs, in February, 1991, the officers of the Enforcement Directorate (E), Bombay suspected possible FERA violation in respect of the subscription to the debentures by about 36 NRIs and the name of present each of Defendant was included in the said list. On account of the said inclusion, the Enforcement Directorate addressed a letter to the Plaintiffs asking the Plaintiffs not to give effect to the transfer of said debentures. Said letter dated 29.11.1991 is at Ex. P-3. The name of the each of the Defendant was included in annexure II of said letter. Consequently, the Plaintiffs were prohibited from transferring the said debentures in favour of Indian Bank. The Plaintiffs, therefore, returned to Indian Bank the said debentures certificate along with transfer forms by letter dated 6th 5 23-805-02.sxw January, 1992 (Ex.P-4). Defendants had through their Advocate’s letter dated 19th December, 1990 (Ex.P-5) informed the Plaintiffs that the said debentures should not be transferred in favour of Indian Bank as issue of forgery of the transfer forms was involved. The Plaintiffs received letter dated 4th August, 1992 at Ex.P-6 from the Enforcement Directorate, informing the Plaintiffs that the names of Defendant Nos. 1 and 2 were removed from the list of those 36 NRI whose cases were under objection. Accordingly, the Enforcement Directorate permitted the Plaintiffs to deal with the said debentures in the normal course. (c) It is noticed that the Indian Bank was aggrieved by stand taken by the Plaintiffs about refusal to transfer said debentures in favour of Indian Bank. Indian Bank filed Company Petition No.120 of 1991, challenging refusal to transfer said debentures in favour of the Indian Bank. The said petition was for in all 1,28,000 debentures including the said debentures. This Court in the Company Petition No.120 of 1991 upheld the stand of Indian Bank and came to the conclusion that refusal to transfer the said debentures in favour of Indian Bank was wrong. This Court by order dated 10/11th March, 1999 (For short “said order”) passed in Company Petition No.120 of 1991 came to the conclusion that the directions can be issued to 6 23-805-02.sxw rectify the register of debenture holders and record the name of the Indian Bank in the register so maintained and the interest thereon should be paid to the Indian Bank. This would mean that the claim of the Indian Bank that they were entitled to transfer of said debentures in their favour by making necessary entries in the register of books maintained by the Plaintiffs was accepted. This will also mean that it was necessary for the Plaintiffs to rectify register of members maintained by the Plaintiffs in regards to the said debentures. It was also necessary to complete transfer of the said debentures also. In so far as the interest on the said debentures was concerned, the Court deciding the said Company Petition observed that the 3rd, 4th and 5th installments were already deposited with the Enforcement Directorate and directions can be issued to the Enforcement Directorate to deposit interest on the said debentures in the court with liberty to Indian Bank to withdraw said amount. So far as other unpaid interest, the Court came to the conclusion that the Plaintiffs can be directed to pay the interest to the Indian Bank. In so far the interest which was paid to the each of the Defendant, the said Court came to the conclusion that liberty can be given to plaintiffs to recover the interest from the present Defendants. The Plaintiffs claim that as per the said order, the Plaintiffs were required to pay to Indian Bank interest 7 23-805-02.sxw for the period 1st January, 1992 to 30th June, 1998 amounting to Rs.7,49,000/- in respect of said debentures. According to the Plaintiffs, the Plaintiffs paid to the Indian Bank Rs.7,49,000/- on 24th December, 2001. Averment to that effect is found in para 16 of the plaint. According to the Plaintiffs, as per said order, the Plaintiffs were entitled to recover from the Defendant No.1, a sum of Rs. 3,74,500/- and from Defendant No.2, a sum of Rs.3,74,500/- being the amount wrongly paid to each of them. (d) As the Plaintiffs were permitted to recover the interest paid to Defendant Nos.1 and 2 respectively, the Plaintiffs by their letter dated 7th July, 1999 as Ex. P-12 called upon the Defendant No.1 to pay to the Plaintiff Rs.3,74,000/-. Similar demand was made from Defendant No.2 in terms of letter dated 7th July, 1999 at Ex.P-13. As Defendant Nos.1 and 2 did not pay the amount respectively, reminder dated 14th January, 2000 at Ex. P-14 was sent to Defendant No.1. Similar reminder was sent to Defendant No.2 by letter at Ex.P-15. (e) It is the stand of the Plaintiffs that the Plaintiffs had paid interest to Indian Bank for said debentures for the period 1st January, 1992 to 30th June, 1998 as per said order and payment to Defendant 8 23-805-02.sxw Nos.1 and 2 respectively was made though they were not entitled to receive it. 4 On the basis of above developments, Plaintiffs have filed suit to recover monies from Defendant Nos.1 and 2 respectively as per the prayers in the suit. 5 According to Plaintiffs, cause of action accrued to Plaintiffs on 10/11th March, 1999 when this Court had passed order in Company Petition No.120 of 1991 and consequently suit is filed within the period of limitation. 6 Considering the nature of the claim, it was necessary for the Plaintiffs to prove their case by leading evidence. Hence, Plaintiffs examined Mr. Vivek Kumar Sehgal as PW-1. Mr. Vivek Kumar Sehgal gave evidence in his capacity as Assistant General Manager (Legal) of the Plaintiffs’ company. As Defendants did not appear all through out, evidence of Vivek Kumar Sehgal – PW-1 was not subjected to cross examination. No other witness was examined by the Plaintiffs. 9 23-805-02.sxw 7 Learned counsel Mr. Doijode for the Plaintiffs took me through the plaint as well as various documents on which the Plaintiffs had relied upon. He explained to the Court as to how the debentures came to be issued to the various persons and in particular 10,000 debentures to Defendant No.1 and 10,000 debentures to Defendant No.2. Learned Counsel for the Plaintiffs had pointed out that the large number of debentures came to be sold to Indian Bank including the suit debentures. He had also drawn my attention to various developments which took place concerning said debentures upto the stage of payment of Rs.7,49,500/- to Indian Bank towards interest on said debentures from 1.1.1992 to 30.6.1998. All those developments are stated in para 3(a) to (d) of this order. 8 Learned counsel for the Plaintiffs has drawn my attention to the order dated 10/11th March, 1999 at Ex.P-9 passed by this Court in Company Petition No.120 of 1991 and submitted that on account of the said order, Indian Bank was entitled to hold said debentures and consequently, they were entitled to have interest in regard to the said debentures for the period 1st January, 1992 up to 30th June, 1998. Learned Counsel for the Plaintiffs pointed out that the Court had directed the Plaintiffs to rectify the register of the debentures in 10 23-805-02.sxw regard to the said debentures and pay interest for the period 1st January, 1992 to 30th June, 1998. He had pointed out to me the paragraph 10(f) of order dated 10/11th March, 1999 by which the Plaintiffs were permitted to recover from Defendant Nos.1 and 2 interest for the period 1st January, 1992 to 30th June, 1998. 9 Learned Counsel for the Plaintiffs had submitted that on account of specific directions contained in order dated 10/11th March, 1999 at Ex.P-9, Plaintiffs have instituted the suit for recovery of the interest against the Defendants. Learned Counsel for the Plaintiffs had drawn my attention to the evidence of Mr. Vivek Kumar Sehgal- PW-1 in support of the stand of the Plaintiffs that the interest of Rs.7,49,000/- was paid to the Indian Bank on 24th December, 2001. Mr. Doijode submitted that the evidence of Vivek Kumar Sehgal has gone challenged. He submitted that the claim of the Plaintiffs towards the recovery of the dues as set out in the plaint is not opposed by Defendant Nos.1 and 2 and, therefore, Plaintiffs’ claim is required to be granted. 11 23-805-02.sxw 10 Learned Counsel for the Plaintiffs had taken me through the evidence of PW-1 and in particular para 20. Learned Counsel for the Plaintiffs had submitted that the Plaintiffs have recovered interest from both the defendants from the dividend which were payable to them from dividends payable on other holdings of Defendants in accordance with the provisions of section 207 (d) of the Companies Act, 1958. Learned Counsel submitted that account of the adjustments as set out in paragraph 20 of evidence of Mr. Vivek Kumar Sehgal – PW-1, Plaintiffs are entitled to recover from Defendant No.1 a sum of Rs.2,500/- and sum of Rs.2,500/- from Defendant No.2. He, further submitted that the Plaintiffs will be entitled to recover interest at the rate of 18% p.a. on the amount which were adjusted as set out in the table at Ex.P-16. Learned Counsel, therefore, submitted that the Court should pass appropriate decree in favour of the Plaintiffs. 11 I have considered the submissions of Mr. Doijode, learned counsel for the Plaintiffs. I have perused the evidence of Mr. Vivek Kumar Sehgal - PW-1 and the various documents relied upon by the Plaintiffs. 12 23-805-02.sxw 12 For reasons to follow, I am inclined to dismiss the suit filed by the Plaintiffs. 13 Up to the stage of the issuance of the said debentures in favour of Defendant Nos.1 and 2, the Plaintiffs have made out a case. The Plaintiffs contention that because the Enforcement Directorate called upon the Plaintiffs not to accept the transfer forms lodged by the Indian Bank in their favour as set out in letter dated 29th November, 1991 at Ex.P-3 cannot be accepted. It is required to be noted that the Plaintiffs had rejected request for transfer solely on the ground that names of witnesses were not mentioned in the aforesaid forms. The subsequent order of Enforcement Directorate lifting the restrictions has nothing to do with the rejection of transfer. This is stated on the strength of letter dated 6th January, 1992 at Ex.P-4. 14 By the said order and in particularly para 10(a), directions were issued to the Plaintiffs to rectify the register of debentures in respect of 20,000 debentures standing in the name of Defendant Nos. 1 and 2 respectively in favour of the Indian Bank and pay to the Indian Bank redemption amount along with all interest thereon except the interest deposited with the Enforcement Directorate. The 13 23-805-02.sxw Enforcement Directorate was directed to deposit interest of 3rd, 4th and 5th installments within 12 weeks from 10/11th March, 1999 amounting to Rs.2,29,600/- in Court and the liberty was given to Indian Bank to withdraw the said amount. Directions contained in para 10(e) relate to payment of interest to the Indian Bank towards installments No.1, 2, 6 to 18. By directions contained in para 10(f), liberty was granted to the Plaintiffs to recover interest paid to Defendant Nos.1 and 2. Plaintiffs claim that they had paid interest to Indian Bank for the period 1st January, 1992 to 30th June, 1998. The evidence in this behalf is found in para 17 of the notes of evidence of PW-1. Plaintiffs claim that the said interest was paid on 24th December, 2001. It is required to be mentioned that there is no documentary evidence placed before the Court to show that interest of Rs.7,49,000/- was paid to Indian Bank on 24th December, 2001. The interest is stated to be paid in 2001. Mr. Vivek Kumar Sehgal-PW-1 joined Plaintiffs in 2006. Hence, he has no personal knowledge of such payment. Hence, I am not inclined to accept bare word of Vivek Kumar Sehgal-PW-1. 15 In so far as the payment of interest to Defendant Nos.1 and 2 for the period 1st January, 1992 to 30th June, 1998, no documentary evidence is produced before the Court. Here again bare word of Vivek Kumar Sehgal-PW-1 cannot be accepted. 14 23-805-02.sxw 16 Now, I come to the question whether Plaintiffs have rightly paid interest to Indian Bank to the tune of Rs.7,49,000/-. It would be pertinent to note that a person can be called as a debenture holder provided the request for transfer is duly granted by the concerned Company and after such grant of transfer, necessary entries are made by the Company, showing the transferee as a new debenture holder. After said entries are made in the register of debentures, then only a person can be called as the debenture holder and said person will be entitled to exercise all rights as debenture holders. 17 As the facts are made available by the Plaintiffs to the Court , it is clear that by forwarding letter dated 6th January, 1992, the transfer forms along with debentures certificates were returned to Indian Bank. There is no material placed before the Court by the Plaintiffs to show that at a particular time the Plaintiffs had called upon the Indian Bank to sent back to them transfer forms and the debentures certificate. It is also required to be mentioned that in the notices both dated 7th July, 1999 addressed to Defendant Nos.1 and 2 respectively at Ex.P-12 and Ex.P-13, Plaintiffs have specifically stated that they have not transferred the said debentures pursuant to the 15 23-805-02.sxw letter dated 19th December, 1990 sent by their Advocate. The Plaintiffs, have mainly relied upon said order by which the Plaintiffs were directed to rectify register of debentures holders by entering the name of Indian Bank as regards said debentures. The reading of the said order would show that the Plaintiffs were directed to rectify register of debentures in respect of 20,000 debentures. This would mean that the Court passing the said order was required to go into question of rejection of transfers by the Plaintiffs in favour of Indian Bank on account of absence of names of the witnesses in the transfer forms. The court declined to accept the objection raised by the Plaintiffs and upheld the contention of the Indian Bank that the Indian Bank was entitled to have debentures transferred in their name. The Court directed the Plaintiffs to rectify the register of debenture holders. This would mean that after the aforesaid order passed, it was obligatory upon the Plaintiffs to rectify their register of debentures, delete the name of Defendant Nos.1 and 2 in respect of 10,000 debentures each i.e. said debentures and show Indian Bank as a debentures holders. Till such rectification, it was wrong on part of Plaintiffs to treat Indian Bank as debentures holders of the said debentures. It was necessary for the Plaintiffs to rectify the register of debentures holders. There are no averments in the plaint that 16 23-805-02.sxw rectification as ordered was done. In the entire record which was produced before the Court, the Plaintiffs have not produced before the Court any documentary evidence to show that the Plaintiffs acted in terms of para 10(a) of said order and rectified the register of debentures holders. I am inclined to hold that in the absence of such rectification of register of debentures, the Plaintiffs could not call Indian Bank as debenture holders. Consequently, Plaintiffs could not have paid interest as they claim to have paid to the Indian Bank for the period 1st January, 1992 to 30th June, 1998. Without rectifying the register, Plaintiffs treated Indian Bank as a debenture holders and acted in terms of directions contained in para 10(e) and paid the interest for the period 1st January, 1992 to 30th June, 1998. If the Plaintiffs would have rectified the register of the debentures and then paid the amount to the Indian Bank, such payment made by the Plaintiffs would have been in accordance with the scheme of transfer of debentures in favour of the transferee and payment of interest to the new debenture holders on the basis of their right to get the interest as the debenture holders. In my view, payment of interest said to have been made to Indian Bank without rectifying the register of debentures cannot be treated as payment in accordance with provisions of law. If interest has been paid by the Plaintiffs to Indian 17 23-805-02.sxw Bank without rectification of register of debentures, such payment has been done by the Plaintiffs at their own risk. It is true that the Plaintiffs were permitted to recover from Defendant Nos1 and 2. Payment of interest to Defendant Nos.1 and 2 as alleged can be treated as wrongly paid only after the rectification of the register has been done. So long as names Defendant Nos. 1 and 2 remain in the register of debentures maintained by Plaintiffs as debentures holders, one cannot say that said payment was wrongly made. 18 For the reasons mentioned aforesaid, I hold that in the absence of rectification of register of debentures, if any amount has been paid to the Indian Bank it cannot be considered as payment in accordance with the provisions of law. In the absence of deletion of names Defendant Nos.1 and 2 from the register of debentures, if any interest has been paid, such payment of interest cannot be termed as illegal or wrongful payment. 19 In view of the above, claim of the Plaintiffs to recover Rs.3,74,500/- and the interest from Defendant Nos.1 and 2 respectively cannot be accepted. 18 23-805-02.sxw 20 For the reasons mentioned aforesaid, I pass the following order:- (i) The Plaintiffs’ suit is dismissed. (ii) In the facts and circumstances of the case, there shall be no order as to costs. 21 After the aforesaid order is passed, learned counsel for the Plaintiffs submitted that the ad interim order granted by this Court on 27th March, 2002 passed in Notice of Motion No.801 of 2002, taken out in this suit was confirmed by order dated 23rd June, 2005. He pointed out that on account of the said order dated 23rd June, 2005, pending the hearing and final disposal of the suit, Court was pleased to grant relief in terms of prayer (f) of said motion. Learned Counsel for the Plaintiffs submitted that the Plaintiffs will have to peruse the text of the judgment passed in the suit and may be required to take steps to protect the interest of Plaintiffs . He submitted that the order dated 23rd June, 2005 be continued for 10 weeks. Request is granted and accordingly, interim injunction granted against Defendants in terms of order dated 23rd June, 2005 passed in Notice of Motion No. 801 of 2002 to continue till 8th June, 2011. (R.Y.GANOO, J.)