RSA No. 1486 of 2010 -1- IN THE HIGH COURT OF PUNJAB & HARYANA AT CHANDIGARH RSA No. 1486 of 2010 (O&M) Date of decision : 16.8.2011 ... Arvind Chaudhary ................ Appellant vs. M/s Saratech Consultants and Engineers and another ................. Respondents Coram: Hon'ble Mr. Justice K.C. Puri Present: Sh. Rohit Suri, Advocate for the appellant Sh. Anil Ghangas, Advocate for respondent No.1. None for respondent No.2. ... K.C. Puri, J. This is an appeal directed by one of the defendants against judgment and decree dated 29.7.2009 passed by Sh. Rajneesh Bansal, Additional District Judge, Karnal, vide which the appeal preferred by the appellant against the judgment and decree dated 26.10.2006 passed by Sh. Vijay Singh, Additional Civil Judge (Senior Division), Karnal, was dismissed with costs. Briefly stated, plaintiff-respondent M/s Saratech Consultants and Engineers filed a suit for recovery of ` 3,04,000/- with the allegation that plaintiff firm deals in erection construction, RSA No. 1486 of 2010 -2- maintenance, renovation etc. of solvent extraction plants and also deals in steel fabrication and consultancy services. Defendant No.2 Arvind Chaudhary used to deal with plaintiff in the capacity of Managing Director of the company for supply of malleable steel materials. On being convinced by defendant No.2-appellant, plaintiff placed an order of supply of M.N. Plates and joists. Defendants arranged the said material from Mandi Gobindgarh and supplied the same at site on 25.6.1993. On 1.7.1993, the appellant visited Karnal to receive his payment against goods supplied on 25.6.1993 and requested for further orders. Plaintiff-firm placed further order for supply of malleable steel plates, channel, girders and flats. An amount of ` 1,26,931/- was paid through demand draft dated 1.7.1993 and another demand draft for ` 2,00,000/- was paid to defendant No.2 in favour of Arsh Castings Pvt. Ltd. as advance money against the goods ordered to be supplied. Both these demand drafts were handed over at Karnal. Defendants failed to supply the abovesaid material against the payment of ` 2,00,000/- in advance on 1.7.1993. On 26.10.1994, registered notice was issued, but on receipt of this letter, defendant vide his letter dated 31.10.1994 replied, requesting plaintiff to contact S.K. Mutreja fur supply of material, but the latter has also not supplied the material and that fact was brought to the notice of defendants vide letter 27.1.1995. No material was supplied. Hence the suit. On put to notice, defendants filed joint written statement, contesting the same by taking preliminary objections of jurisdiction of Civil Courts at Karnal. It is alleged that plaintiff firm was engaged RSA No. 1486 of 2010 -3- by Strishti Agro Industries Pvt. Limited for erection of their solvent extraction plant in Karnal. S.K. Mutreja and Harbhajan Singh were the Directors of the said concern. S.K. Mutreja introduced N.B. Nambiar to defendant No.2 for supply of steel as per requirement. As per order placed by the plaintiff, steel used to be supplied from Mandi Gobindgarh at Karnal. Demand draft of ` 2,00,000/- dated 1.7.1993 was delivered by plaintiff at Yamuna Nagar by S.K. Mutreja. Goods were to be supplied at the asking of S.K. Mutreja. On demand of the plaintiff for refund of amount of ` 2,00,000/- vide letter dated 16.10.1994, the firm was informed vide letter dated 31.10.1997 that they have already paid the amount to S.K. Mutreja and hence plaintiff should contact him but S.K. Mutreja did not entertain them. Defendant No.1 vide bill No. 93 dated 11.3.1995 worth ` 1,11,034.56 Paise and vide bill No. 107 dated 27.3.1995 goods worth ` 1,30,390/-, total goods of ` 2,41,424.56 paise were supplied at plaintiff premises at Karnal after adjusting advance of ` 2,00,000/-. A sum of ` 41,426.56 paise remained due to defendant No.1 from the plaintiff. Replication was filed controverting the allegations contained in the written statement and reasserting the stand taken in the plaint. From the pleadings of parties, following issues were framed:- 1) Whether the suit has been filed by duly authorized person? OPP 2) Whether the plaintiff firm is entitled to recover a sum of `3,04,000/- alongwith interest as alleged in the plaint, if so, RSA No. 1486 of 2010 -4- at what rate of interest? OPP. 3) Whether the jurisdiction of the Civil Court at Karnal is barred to try and entertain the present suit as alleged in para No.1 of the preliminary objection of the written statement? OPD 4) Whether the plaintiff has got no cause of action? OPD 5) Whether the plaintiff is estopped from filing the present suit by its own act and conduct? OPD 6) Relief. The plaintiff, in support of its case examined PW-1 N.B. Nambiar, PW-2 Nirmal Parkash, Officer Canara Bank, Karnal, PW-3 Sharat Chandra, PW-4 Surinder Gupta and closed the evidence after relying upon certain documents. In rebuttal, Arvind Chaudhary – now appellant stepped into witness box as DW-1 and closed the evidence. Learned trial Court returned the findings on all the issues in favour of the plaintiff and decreed the suit of the plaintiff alongwith interest. Feeling dissatisfied with the above said judgment, Arvind Chaudhary – defendant No.2– appellant only filed the Ist appeal. Whereas Arsh Castings Pvt. Ltd. – defendant No.1, has not preferred the appeal. The point raised before the Ist Appellate Court was that Arvind Chaudhary was the Managing Director of the firm, but since he has retired and as such the amount cannot be recovered from the appellant – Arvind Chaudhary. RSA No. 1486 of 2010 -5- The Ist Appellate Court held Arvind Chaudhary jointly and severally liable to pay the amount. Consequently, the appeal preferred by the appellant was dismissed. Still feeling dissatisfied with both the judgments and decree dated 29.7.2009 passed by Sh. Rajneesh Bansal, Additional District Judge and dated 26.10.2006 passed by Sh. Vijay Singh, Additional Civil Judge (Senior Division), Karnal, the appellant has preferred the present appeal. The appellant in paragraph No. 22 of the grounds of appeal has mentioned that following substantial questions of law have arisen for consideration by this Court:- a) Whether the judgment and decree of the Courts below is against law and unsustainable? b) Whether the Managing Director is personally liable for the amounts as received by admittedly a Registered Private Limited Company? c) Whether personal liability can be fastened upon the Appellant for the amounts as received by the Company? d) Whether the interest as awarded could be suo-moto be increased by the Lower Appellate Court? e) Whether any interest can at all be levied, where there is no agreement to that effect? f) Whether the courts at Karnal had jurisdiction to adjudicate the matter, as the payments were given at Yamunanagar? g) Whether the Courts below mis-read the evidence on record? RSA No. 1486 of 2010 -6- Counsel for the appellant has raised two fold contentions. The first contention raised by counsel for the appellant is that the appellant was merely the Managing Director of the company and there is no personal guarantee given by him in respect of the amount in question. So, in view of the authorities, reported as Tikam Chand Jain vs. State Government of Haryana through its Secretary, Excise and Taxation, Haryana and another 1987 (2) PLR 151, Indian Overseas Bank vs. R.M. Marketing and Services Pvt. Ltd., 2002 AIR (Delhi) 344 and Kuriakose vs. P.K.V. Group Industries 2002 (3) RCR (Civil) 415, the appellant is not liable to pay the amount of decree. The second contention raised by counsel for the appellant is that as per the judgment and decree of the trial court, the interest has been granted @ 8% per annum from the date of filing of suit till the passing of the decree and future interest @ 6% per annum has been allowed, from the date of passing of decree till realisation. It is submitted that the Ist Appellate Court has wrongly held that defendant- appellant is liable to pay interest @ 18% per annum from the date of filing of suit till the date of decree. Counsel for the plaintiff-respondent No.1 has supported the judgment of the trial Court. I have given my thoughtful consideration to the rival submissions made by counsel for both the parties and have also gone through the record. So far as the fact that defendant-appellant received an amount of ` 2,00,000/-, as advance amount in lieu of supply of RSA No. 1486 of 2010 -7- goods and that goods have not been supplied to the plaintiff-firm, is concerned, there is concurrent finding of fact recorded by both the Courts below in this regard. So, that being a finding of fact cannot be interfered in the regular second appeal. The stand taken by the defendant -appellant is that the goods were supplied in lieu of the advance amount of ` 2,00,000/- but no evidence in this regard was produced except the bald statement made by the appellant and as such both the Courts below have rightly returned the finding regarding supply of the material against the defendant-appellant. So far as, personal liability of the defendant-appellant to pay the amount is concerned, that fact has been dealt with by Ist Appellate Court. The defendant- appellant appeared as DW-1 and in his affidavit he has taken a stand that he ceases to be the Managing Director of the company in the year 1997. The present suit was filed on 23.5.1996 i.e. prior to the period when he alleges that he ceases to be the Managing Director of Arsh Castings Pvt. Ltd. - defendant No.1 before the trial Court. The Ist Appellate Court while dealing with this issue, observed that the appellant has not produced the certificate of incorporation of defendant No.1. It is not disputed by the defendant- appellant in the written statement that he received the demand draft of ` 2,00,000/- . Besides Managing Director, he was also the share holder as per his written statement. The learned Ist Appellate Court has relied upon the authorities reported as Dhhabil Das vs. Pappu 2007 (1) Civil Court Cases 183 SC, Satyadhyan Ghosal and others vs. Smt. Deorajan Debi and another AIR 1960 (SC) 941 and Jagannath Prasad vs. District Judge, Allahabad and others AIR RSA No. 1486 of 2010 -8- 1987 Allahabad 317, wherein it has been held that Managing Director of the company is liable if he is proved to be the Director of the company on the date of liability. In the present case also, it is admitted that besides the Managing Director, the appellant was share holder of the company. The amount of advance was taken by him, which fact has been held proved by both the Courts below. So far as, the authorities in Tikam Chand Jain's case (Supra), Indian Overseas Bank's case (Supra) and Kuriakose 's case (Supra), are concerned, that are distinguishable as in none of the above cases, there was a dispute that it was a private company and that the petitioner was the Director of the company, besides Managing Director. In the present case, the appellant has failed to prove that company is registered under the Companies Act. The Ist Appellate Court has rightly held that the appellant cannot be allowed to play fraud upon the plaintiff. So, in these circumstances, the finding of the Ist Appellate Court that the appellant is personally liable to pay the amount on the facts of the present case, remains unassailable and stands affirmed. Otherwise also, that being a finding of fact cannot be challenged in the regular second appeal. So, far as the submission regarding rate of interest from the date of filing of suit till the date of decree at the rate of 18% per annum is concerned, while deciding issue No.3 it has been categorically stated that plaintiff has been entitled to interest @ 18% per annum. Mere fact that in the decree sheet the rate has been mentioned as 8% per annum for the said period, does not dis-entitle RSA No. 1486 of 2010 -9- the plaintiff to claim the interest @ 18% per annum. The Ist Appellate Court has reached at the conclusion that interest granted by the trial Court was 18% per annum from the date of filing of suit till passing of the decree and that finding is based upon the judgment of the trial Court. The clerical error in the decree sheet cannot be allowed to prevail and the Ist Appellate Court has rightly held that appellant is entitled to interest @ 18% per annum for the said period. The future interest has been granted @ 6% per annum only and that is in consonance of Section 34 of the Code of Civil Procedure and that future rate of interest has not been challenged during the course of arguments. In view of the above discussion, all the substantial questions of law raised by the appellant stand determined against him. Consequently, the appeal is without any merits and the same stands dismissed. A copy of the judgment be sent to the trial Court for compliance. ( K.C. Puri ) 16.8.2011 Judge chugh