1 IN THE HIGH COURT OF JUDICATURE AT BOMBAY APPELLATE SIDE First Appeal No.847 of 1991 R.C.G. Malleable Castings Industries Pvt. Ltd. & ors. Appellants Vs. Ghansham Electrical Steel Foundary Pvt.Ltd. and ors. Respondents Mr.A.M.Kulkarni for appllants. Mr.M.B.Badkar for resp.nos.1 and 2. Mr.M.D.Angal for resp.no.3. CORAM: B.H.MARLAPALLE & D.B.BHOSALE,JJ. July 15, 2008 ORAL JUDGMENT (PER B.H.MARLAPALLE,J) 1. This appeal filed by the original plaintiffs is directed against the judgment and order dated 25/2/1991 of the learned 2nd Joint Civil Judge, Senior Division at Sangli thereby dismissing Special Civil Suit No.160 of 1986. The said suit was filed for recovery of damages allegedly sustained by the plaintiffs on account of breach of contract by the defendants. 2. Plaintiff no.1 is a private limited company registered under the Companies Act, 1956 and was 2 engaged in the business of manufacturing the inserts required by the Indian Railways. Plaintiff nos.2 and 3 were the Directors of Plaintiff no.1 which had its factory at CTS No.961/1A/1A admeasuring 2 hectors 43 Rs. at Miraj. The inserts manufactured by the plaintiff no.1 were being supplied to the Indian Railways through the Maharashtra Small Scale Industries Development Corporation (MSSIDC) and claims to be employing about 200 employees with a manufacturing capacity of three lakhs inserts per year. The company had borrowed funds from the defendant no.4 - Bank and it had mortgaged its property (movable and immovable) in favour of the defendant no.4. The plaintiff no.1 failed to repay the loan amount and, therefore, the Bank filed Special Civil Suit Nos.51 and 53 of 1980 for recovery of Rs.20,68313/- and Rs.1,57,159/- respectively. The hypothecated property came to be attached before judgment under Order XXXVIII Rule 5 of CPC in the said suits. 3. Defendant nos.1 to 3 had shown their willingness to purchase the property of the plaintiff no.1 and on negotiations they entered into an agreement with the plaintiff nos.2 and 3 on 8/5/1982. 3 The consideration amount was fixed at Rs.17,90,000/- and as an earnest amount the defendant nos.1 to 3 had paid Rs.4,30,000/- to the plaintiff nos.2 and 3 on the day the agreement was signed. It was also agreed that the balance amount of consideration would be paid to the plaintiffs subsequently. It is the case of the plaintiffs that the defendant nos.1 to 3 took possession of the factory and its property while the suits filed by the Bank were pending despite the fact that all the assets of the plaintiff no.1 were attached by the Court. The defendant nos.1 to 3 got themselves as co-defendants in the said suits on an application filed by them and in both these suits compromise purshis came to be filed on the basis of which they were decided in terms of the compromise decree dated 6/6/1983. As per the said compromise, the defendant no.4 Bank had agreed to accept Rs.15,92,840/- in full satisfaction of its claim pending in both the suits. The defendant nos.1 to 3 paid an amount of Rs.5,50,000/- to the defendant no.4 - Bank as per the compromise decree and plaintiff no.2 paid an additional amount of Rs.50,000/- and thus the Bank received Rs.6,00,000/- thereby leaving an outstanding balance of Rs.9,92,840/-. 4 4. It was alleged by the plaintiffs that on handing over the possession of the property the defendant nos.1 to 3 failed to discharge their liability towards the defendant no.4 - Bank and, therefore, the Bank filed Special Darkhast Nos.40 of 1984 and 57 of 1984 on 21/6/1984 against the defendant nos.1 to 3 and the plaintiffs. As per the plaintiffs on account of attachment of the property, the plaintiff no.2 came in danger and was defamed and his reputation was damaged. The Bank withheld the payment of loan to the plaintiffs and, therefore, the plaintiff nos.2 and 3 were constrained to close their other factories. Consequently the plaintiff nos.2 and 3 had to pay an amount of Rs.1,00,000/- by way of retrenchment compensation to the workers and on account of the alleged disgusting atmosphere and humiliation, the plaintiff no.2 suffered an attack of paralysis and had to incur huge expenditure on his medical treatment. The plaintiffs claimed that all these developments had originated because of the breach of contract by the defendant nos.1 to 3 and, therefore, they were entitled for damages on these counts quantified at Rs.12,97,994/- with interest at the rate of 15 per cent interest per annum and for a declaration that the defendant nos.1 to 3 had acted in 5 breach of the agreements dated 8/5/1982 and 6/6/1983 and for a declaration that the power of attorney dated 21/12/1982 was cancelled. 5. The trial Court framed the issues and on consideration of the evidence of the parties and the rival averments held that the plaintiff nos.1 to 4 could not prove that the defendant nos.1 to 3 had acted in breach of the agreements dated 8/5/1982 and 6/6/1983, the plaintiffs could not prove that they had sustained a loss of Rs.12,97,994/- by the alleged illegal acts of the defendant nos.1 to 3 and, therefore, it held that the plaintiffs were not entitled for the declaration as well as for the payment of damages sought. 6. The learned counsel for the plaintiffs submitted that the Trial Court failed to consider the evidence or record and erroneously dismissed the suit. As per the plaintiffs the trial Court was in error to hold that the plaintiffs had no locus standi for action to claim the amount by way of damages as the execution proceedings filed by the defendant no.4 Bank were pending. The learned counsel for the original defendants have defended the impugned order of 6 dismissal of suit. The only issue that is required to be considered by us is whether the trial Court committed any error in dismissing the suit filed by the plaintiffs. 7. On behalf of the plaintiffs, plaintiff no.2 had stepped in the witness box (Exh.61) and one Ramesh Kumbhar, representative of MSSIDC was also examined at Exhibit 78, Shri Dilip Shah PW 3 was examined at Exhibit 89on the ground of loss of reputation, loss of goodwill of the plaintiffs and the defamation suffered by them. Shri Anand Jagtap - PW 4 was examined at Exhibit 90 and he was one of the employees of the plaintiffs. Dr.Digambar Joshi - PW 5 was examined in support of the medical treatment underwent by the plaintiff no.2, Shri Soman Nayar - PW 6 and Supervisor of the plaintiff no.1 - factory was examined on the point of production cost of each insert. Shri Vilas Kamat was examined to show that the Bank had not granted loan facility to the plaintiffs. On the other hand, no oral evidence was adduced by the defendants and they placed reliance upon certain documents placed before the Court. The agreement dated 8/5/1982 (Exh.52) was an agreement for sale and as noted earlier, it was executed between the plaintiffs and 7 the defendant nos.1 to 3. The defendant nos.1 to 3 had agreed to purchase the factory and property of the plaintiff no.1 for a total sum of Rs.17,90,000/- and on the same day the plaintiffs had received an amount of Rs.4,30,000/- from the defendant nos.1 to 3 thus leaving the balance of Rs.13,60,000/-. The documents dated 6/6/1983 are in fact not an agreement, but they were the compromise decrees (Exhibits 57 and 58) passed in both the suits by the trial Court. They are between the Bank on one hand and the plaintiff nos. 1 to 3 and defendant nos.1 to 3 on the other. As per the same the Bank had agreed to settle all its dues payable by the plaintiffs for an amount of Rs.15,92,840/- and from the same an amount of Rs.5,50,000/- was already paid by the defendant nos.1 to 3 to the Bank and Rs.50,000/- was paid by the plaintiffs thus leaving a balance of Rs.9,92,840/- to be paid as agreed therein. It was also agreed that the amount of sale proceeds will be received through the defendant no.4 - Bank and deductions will be made so as to recover the balance amount of Rs.9,92,840/-. It was further stated that in case the defendant nos.1 to 3 were not able to pay the said amount, monthly instalment of Rs.75,000/- will be payable by the defendant nos.1 to 3 to the defendant no.4 - Bank. In 8 Special Civil Suit No.53 of 1980 the decretal amount was Rs.1,57,159/-, whereas in Special Civil Suit No.51 of 1980 the decretal amount was Rs.9,92,840/-. The total amount out of both the decrees came to Rs.11,49,999/-. 8. There is no dispute that the defendant nos.1 to 3 could not satisfy the decrees in their entirety and, therefore, Special Darkhast Nos.40 and 57 of 1984 came to be filed by the Bank against the plaintiffs as well as defendant nos.1 to 3. So far as agreement for sale at Exhibit 52 is concerned, it clearly stated that the balance amount of Rs.13,62,000/- will be payable to the plaintiffs after they would discharge the remaining terms and conditions of the agreement viz. (a) to obtain no objection certificate from the defendant no.4 - Bank, (b) to discharge all the financial liabilities including the payments to the Bank, to the Government, to the private parties as well as the workmen and the plaintiffs had taken the responsibility to pay the same on themselves and (c) to transfer the entire property in the name of defendant nos.1 to 3 on obtaining all such clearances from the Bank on payment of all debts. The initial time limit fixed for extension of the sale deed was 9 8/11/1982 and extendable by another six months i.e. upto 8/5/1983. There is no dispute that till 8/5/1983 the plaintiffs could not discharge their obligations under the said agreement for sale. There is also no dispute that the plaintiffs and defendant nos.1 to 3 jointly approached the Bank and defendant nos.1 to 3 came to be added as defendant nos.4 to 6 in the suits filed by the Bank. The negotiations were held and compromise purshis was filed before the trial Court on the basis of which compromise decrees were passed in both the Suits on 6/6/1983 at Exhibits 57 and 58. It is thus clear that there was no agreement signed on 6/6/1983 and at the most it may be the compromise purshis submitted by the Bank on the one hand and the plaintiffs and defendant nos.1 to 3 on the other hand before the trial Court. It is, therefore, evident that at the first place the plaintiffs could not prove that the defendant nos.1 to 3 had acted in breach of the agreement for sale dated 8/5/1982 and the trial Court was right in its findings that if at all there was breach of the said agreement, it was attributable to the plaintiffs and not to the defendant nos.1 to 3. 9. The compromise decree dated 6/6/1983 could not 10 be called as an agreement and if the Bank was satisfied that the said decree was not fully satisfied, it had rightly taken steps to file execution proceedings against the plaintiffs as well the Defendant Nos.1 to 3. The total amount payable to the Bank by the defendant nos.1 to 3 was Rs.9,92,840/- + Rs.1,57,159 = Rs.11,49,999/- on account of both the compromise decrees. It was not permissible for the plaintiffs to pray for a declaration that the defendant nos.1 to 3 had acted in breach of the so called agreement dated 6/6/1983 when such an agreement did not exist and the Bank had rightly initiated proceedings for execution of a compromise decree. So long as the execution proceedings were pending, there was no cause of action for the plaintiffs to file the suit against the defendant nos.1 to 3 for recovery of damages or for declaration and, therefore, the trial Court was right in recording its findings to that effect. 10. Even otherwise, if we consider the liability of the defendant nos.1 to 3 arising from the agreement for sale dated 8/5/1982, out of the total consideration of Rs.17,90,000/- the defendant nos.1 to 3 had already paid an amount of Rs.4,30,000/- to the 11 plaintiffs, an amount of Rs.5,50,000/- to the defendant no.4 - Bank on the day the compromise decree was passed thus making a total of Rs.9,80,000/-. The Defendant No.4 - Bank had filed Written Statement in Special Civil Suit No.160 of 1986 and had also submitted a plea that the suit filed by the plaintiffs was not maintainable. The defendant nos.1 to 3 in their Written Statement pointed out that in addition to the amount of Rs.9,80,000/- paid earlier, it had paid an amount of Rs.4,21,000/- to the Bank and Bank was to recceive a further amount of Rs.4,93,800/- from the Indian Railways. In this fashion the defendants had discharged their liability to the extent of Rs.18,94,000/- as against the total consideration of Rs.17,90,000/-. The trial Court has rightly accepted that the defendant no.3 had paid the total amount of Rs.16,81,000/- on all counts and, therefore, it could not be held that the defendant nos.1 to 3 were guilty of acting in breach of the agreement dated 8/5/1982. The Bank had received an amount of Rs.15,14,000/- in all from the defendant nos.1 to 3 and if it claimed that there was any further recovery against the defendants arising from the compromise decrees, it had already taken steps to file execution proceedings. There was no cause of action for the plaintiffs to 12 claim that on account of the alleged failure of the defendant nos.1 to 3 to implement the compromise decrees dated 6/6/1983 by filing Special Civil Suit No.160 of 1986 and claim damages from the defendant nos.1 to 3. The suit has been rightly dismissed by the trial Court. It is evident that the claim made by the plaintiffs was frivolous and far fetched and in fact the plaintiffs themselves had acted in breach of the agreement dated 8/5/1982. 11. In the premises, this appeal fails and the same is hereby dismissed. (D.B.BHOSALE,J.) (B.H.MARLAPALLE,J.)