THE HON’BLE SRI JUSTICE B.SESHASAYANA REDDY AND THE HON’BLE SRI JUSTICE P.DURGA PRASAD C.C.C.A.No.385 of 2003 and CCCAMP No.100 of 2005 Date:18th January, 2011 Between: Sri Ganesh Gupta …Appellant and 1. M/s.Shakthi Concrete Industries & Anr. …Respondents *** THE HON’BLE SRI JUSTICE B.SESHASAYANA REDDY AND THE HON’BLE SRI JUSTICE P.DURGA PRASAD C.C.C.A.No.385 of 2003 and CCCAMP No.100 of 2005 COMMON JUDGMENT: This Appeal is directed against the judgment and decree, dated 04.08.2003, passed in O.S.No.23 of 2001 on the file of I Additional Chief Judge, City Civil Court, Secunderabad, whereby and whereunder, the learned Additional Chief Judge dismissed the suit filed by the plaintiff for recovery of Rs.34,91,200/- with interest on Rs.19,20,000/- at 24% p.a. from the date of suit till the date of realization. 2. The appellant is the plaintiff in O.S.No.23 of 2001. The respondents are the defendants. The plaintiff filed the suit against the respondents/defendants for recovery of Rs.34,91,200/- basing on four mortgage deeds, dated 26.11.1997, 29.11.1997, 29.11.1997 and 30.11.1997. 3. The facts of the case, in a nutshell, leading to filing of this appeal by the appellant/plaintiff are: a) The plaintiff is carrying on business in iron and steel under the name and style of M/s.Gupta Steel Traders. The 1st defendant is a public limited company carrying on business in manufacture and sale of spun concrete poles and other concrete products. The 2nd defendant is the Managing Director of the 1st defendant company. During early part of November, 1997, 2nd defendant, in the capacity of the Managing Director of the 1st defendant company, approached the plaintiff and represented that the 1st defendant Company was awarded project of gauge conversion from meter gauge to broad gauge between Mudkhed and Adilabad Railway Stations from the South Central Railways, and during the process of gauge conversion, the defendants would be deriving scrap/used material of rails and sleepers and that they would supply the same to the plaintiff to the tune of 4,250 M.Ts. The plaintiff paid a sum of Rs.21,00,000/- as refundable deposit carrying interest at 2% p.m. The 2nd defendant, who is the Managing Director of the 1st defendant Company, offered immovable properties standing in his name as security for the advance received by the 1st defendant company. The plaintiff paid the following amounts against the securities offered by the 2nd defendant: a) Rs.4,80,000/- against the mortgage deed dt.26.11.1997; b) Rs.4,80,000/- against the mortgage deed dt.29.11.1997; c) Rs.4,80,000/- against the mortgage deed dt.29.11.1997; d) Rs.4,80,000/- against the mortgage deed dt.30.11.1997; In all the defendants received a sum of Rs.19,20,000/- against the four registered mortgage deeds. The defendants neither supplied the scrap/used material nor repaid the amount borrowed under the four registered mortgage deeds. The defendants also borrowed further amounts. For the amounts due under other accounts, separate proceedings were being taken up. The plaintiff issued a notice to the defendants calling upon them to arrange payment of the amounts due under the four registered mortgage deeds. The defendants neither complied with the notice nor gave any reply. Hence, the plaintiff filed the suit for recovery of the amounts due under the four mortgage deeds. b) The 2nd defendant filed written statement disputing the claim of the plaintiff. The sum and substance of the written statement of the 2nd defendant is: M/s.Modi Steels filed Company Petition No.61 of 1997 against the 1st defendant for its winding up. The company Court allowed the Company Petition, by judgment dated 25.01.2001 and appointed the Official Liquidator. In pursuance of the orders passed by the company Court, the Official Liquidator took over the possession of the office, factory and books of 1st defendant company. As such 1st defendant company is under liquidation and under the control of the Official Liquidator of the company Court. To the best of knowledge of the 2nd defendant, the 1st defendant company paid the entire amount due to the plaintiff. The plaintiff being aware of the winding up proceedings against the 1st defendant company filed the suit without making the Official Liquidator as a party and therefore, the suit is liable to be dismissed for non-joinder of necessary party. The 2nd defendant is not representing the 1st defendant company consequent on winding up order passed against the 1st defendant company by the company Court. c) The trial Court settled the following issues for trial: i) Whether the plaintiff is entitled for the suit amount? ii) Whether the suit is bad for mis-joinder of parties? iii) Whether the suit is bad for non-joinder of parties? iv) To what relief? d) On behalf of the plaintiff, he got himself examined as PW.1 and marked 10 documents as Exs.A1 to A10. On behalf of the 2nd defendant, he got himself examined as DW.1. e) The trial Court, on considering the evidence brought on record and on hearing the counsel appearing for the parties, came to the conclusion that without the presence of the Official Liquidator, no effective adjudication could be made with regard to the dispute between the parties and thereby proceeded to dismiss the suit, by judgment dated 04.08.2003. For better appreciation, we may refer the relevant portion of the judgment, which reads as hereunder: “Undisputedly, first defendant went into liquidation and Official Liquidator has taken over the same. in the given circumstances, second defendant will not be in a position to deal with the affairs of the first defendant. It is the contention of the second defendant as DW.1 that substantial amounts are already paid away to the plaintiff and the records of the first defendant will reflect the same, but for want of the said records, as the same were taken over by the Official Liquidator, he is not in a position to substantiate this claim. He has taken steps to get the said documents, but in vain. In the given circumstances and since the official liquidator, who alone, can represent the first defendant effectively, is not made party to this suit, the Court cannot decide whether the defendants 1 and 2 are liable to pay the suit amount to the plaintiff. This issue is answered accordingly.” Hence, this appeal by the plaintiff. 4. The appellant/plaintiff filed CCCAMP No.100 of 2005 to receive the certified copies of the orders passed by the Company Court in C.A.Nos.288 & 1513 of 2003 in C.P.No.61 of 1997 and the order passed in C.P.No.61 of 1997, as additional evidence. It is stated in the affidavit filed in support of the petition that the Company Petition No.61 of 1997 seeking liquidation of the 1st defendant company came to be dismissed by the Company Court on 13.04.2004 i.e., after the judgment passed in O.S.No.23 of 2001 and therefore, documents as to the status of the 1st defendant company and consequent discharge of the Official Liquidator are required to be noted for proper adjudication of the issue involved in the appeal. Para.12 of the affidavit filed in support of the petition needs to be noted and it is thus: “12. I submit that the judgment of the court below dismissing my suit on the sole ground that the suit was bad for non-joinder of necessary parties i.e., Official Liquidator of the Hon’ble Court is not correct and liable to be set aside as even at the time of passing of the judgment by the trial court, the winding up order passed in C.P.No.61/97 against the respondent company was under suspension and therefore, my suit was very much maintainable. Subsequent to filing of the above appeal, the said Company Petition No.61/97 was dismissed by this Hon’ble Court by the order dated 13.04.2004 and thus the respondent-company is not at all under winding up. In fact, as stated above, the court below dismissed the suit on the only ground of non-joinder of necessary party which is prima-facie not correct in view of the orders of this Hon’ble Court and therefore, the above appeal does not require a long hearing and not much time of the Hon’ble Court it would take for disposal.” 5. Heard learned counsel appearing for the appellant/plaintiff and learned counsel appearing for the 2nd respondent/2nd defendant. 6. Learned counsel appearing for the appellant submits that as on the date of filing of the suit, the order passed by the company Court winding-up the 1st defendant company has been under suspension and even otherwise, the 1st defendant paid off the debt to the petitioning creditor in Company Petition No.61 of 1997 and consequently the order of winding up came to be withdrawn and in which case, there cannot be any impediment for passing the decree against the 1st defendant company. The learned counsel refers the documents filed along with CCCAMP No.100 of 2005. 7. As could be seen from the documents filed along with Order 41, Rule 27 CPC petition, the 1st defendant company initially was directed to be wound-up and Official Liquidator was appointed and subsequently, the order of winding up came to be withdrawn, by dismissing the Company Petition. Under Order 41, Rule 27 CPC, the appellate Court has power to allow additional evidence not only if it requires such evidence to enable it to pronounce judgment, but also for substantial cause. If the appellate court feels on examination of record that it is unable to pronounce the judgment without the additional evidence, can direct introduction of the additional evidence. The lower court dismissed the suit on the ground that the 1st defendant company was directed to be wound-up and therefore, Official Liquidator was a necessary party for proper adjudication of the issue involved. The documents filed along with Order 41, Rule 27 CPC petition indicate that the order of winding up of the 1st defendant company came to be recalled and Company Petition No.61 of 1997 ended in dismissal. Therefore, the additional documents are essential for proper adjudication of the issue involved in the appeal. Hence, CCCA MP No.100 of 2005 is allowed and the additional documents are received in evidence and they are marked as Exs.A11 to A13. 8. Learned counsel appearing for the 2nd respondent/2nd defendant submits that the appellant filed cheque bouncing case consequent on the dishonour of the cheque and in the said case, conviction came to be recorded against the 2nd respondent/2nd defendant and thereupon, the 2nd respondent/2nd defendant carried the matter to the Supreme Court and ultimately, the offence therein came to be compounded as per the Order dated 11.07.2005 in Criminal Appeal No.806 of 2005 (arising out of SLP (CR) No.5869 of 2004) and as the amount covered under the cheque has been paid, the suit claim is deemed to have been discharged. Learned counsel refers the copy of the order of the Supreme Court in support of his submission. 9. Per contra, learned counsel appearing for the appellant/plaintiff submits that there are various transactions between the parties and the cheque, which is subject matter of the criminal case, came to be issued in respect of all the accounts and not relating to the suit transaction in particular. 10. We have gone through the written statement of the 2nd respondent/2nd defendant. The 2nd respondent/2nd defendant has not specifically pleaded in the written statement that the cheque, which is subject matter of the criminal case, has been issued towards discharge of the suit transaction. Such is the written statement, it is impermissible for the 2nd respondent/2nd defendant at this stage to contend that the cheque, which is subject matter of the criminal case, covers the suit transaction amount also. 11. The only issue that calls for adjudication in this appeal is, whether the plaintiff is entitled for a preliminary decree? 12. The 1st defendant is a company and it is represented by the 2nd defendant as Managing Director of it. The 1st defendant company received an advance of Rs.19,20,000/- from the plaintiff pursuant to the agreement dated 21.11.1997 which has been exhibited as Ex.A1. As per the agreement, the 1st defendant company has to supply scrap/used material of the railways. The 2nd defendant offered his properties as security and executed simple mortgage deeds. Exs.A2 to A5 are the registered mortgage deeds executed by the 2nd defendant in respect of the properties owned by him. Ex.A6 is the title deed for the suit schedule property owned by him. The 2nd defendant while being examined as DW.1 admits of his executing simple mortgage deeds. For better appreciation, we may refer the cross- examination of DW.1 in his own words and it is thus: “It is true that the case is pending before the Official Liquidator against D1 Company. It is true the property covered by 4 registered mortgages is not a subject matter in the case before the Official Liquidator. It is true that the above property is my own property. It is true that the Company has no connection with this property. It is true that the mortgages were executed in my personal capacity. Witness adds that in the Agreement between plaintiff and D1 this has been reflected. It is true I had issued a letter dated 14-11-2000 to the plaintiff seeking time for payment. The letter was written by me at the instance of the plaintiff. Certified copy of the said letter is Ex.A11. The prayer No.2 is for sale of the mortgaged property for realisation of the decretal amount. It is true that the plaintiff sought for decree against the D1 Company as well as me jointly. It is also true the third relief that was asked by the plaintiff is to pass a personal decree against me for balance if any, in case of deficiency in the sale proceeds. Witness adds the money was required by the company urgently and the plaintiff insisted that unless there is a some mortgage property in addition to agreement he would not realize the money hence, I was compelled to put my property as the additional security as demanded by Plaintiff.” It is explicit from the evidence of DW.1 that he did not dispute the execution of the four registered mortgage deeds, which have been exhibited as Exs.A2 to A5 and he also not disputed the liability of the 1st defendant company. The liquidation proceedings initiated against the 1st defendant company ended in dismissal and the Official Liquidator came to be discharged. Therefore, the ground on which the trial Court dismissed the suit cannot be sustained. When the 2nd defendant did not dispute the fact of putting his properties as security for the loan availed by the 1st defendant company, he cannot be permitted to contend that his properties are not liable for the amount due to the plaintiff by the 1st defendant company. The 1st defendant company did not choose to contest the suit. Therefore, the evidence of plaintiff with regard to the liability of the 1st defendant company remains unchallenged. 13. In the result, the appeal is allowed with costs setting aside the judgment and decree, dated 04.08.2003, passed in O.S.No.23 of 2001 on the file of I Additional Chief Judge, City Civil Court, Secunderabad, and consequently, the suit is decreed with costs. A preliminary decree is passed against the plaint schedule properties for a sum of Rs.34,91,200/- with interest at 12% p.a. from the date of suit till the date of redemption and thereafter at 6% p.a. from the date of redemption till the date of payment. Time for redemption is three months. ______________________ B.SESHASAYANA REDDY, J. _________________ P.DURGA PRASAD, J. Date:18th January, 2011. cs THE HON’BLE SRI JUSTICE B.SESHASAYANA REDDY AND THE HON’BLE SRI JUSTICE P.DURGA PRASAD C.C.C.A.No.385 of 2003 and CCCAMP No.100 of 2005 (Common Judgment of the Division Bench delivered by Hon’ble Sri Justice B.Seshasayana Reddy) Date:18th January, 2011