IN THE HIGH COURT OF HIMACHAL PRADESH, SHIMLA CS No. 22 of 1998 Judgment reserved on: 22nd March, 2010 Decided on : 29th March, 2010 H.P. State Industrial Development Corporation Limited Plaintiff Versus M/s Vikram Cements Ltd. & others Defendants Coram The Hon’ble Mr. Justice Surjit Singh, Judge. Whether approved for reporting?1 For the Plaintiff : Mr. Balwant Kukreja, Advocate For the Defendants: None. Surjit Singh, Judge Plaintiff has filed this suit against defendants No.1 to 5 for recovery of a sum of Rs.1,19,10,784/- pleading the following cause of action. 2. Plaintiff is a Company incorporated under the Companies Act, 1956, with head office at Shimla. Shri Chetan Sharma, Senior Manager (Project), employed with the plaintiff, is duly authorized to sign and verify the plaint and to institute the suit on behalf of the plaintiff. Plaintiff- Corporation provides financial assistance in the form of loans to entrepreneurs. Defendant No.1, which is a Company, applied through defendants No.4 and 5 for grant of loan to the tune of Rs.90 lacs. Loan was sanctioned on 7.11.1988. Documents were executed on 20.12.1989. Defendants Whether reporters of the local papers may be allowed to see the judgment? …2… agreed to repay the loan with interest @ 12.5% per annum. Defendants No.2 to 5 guaranteed the repayment of loan and executed separate guarantee deeds. Some of them executed guarantee deeds on 20.12.1989 and others on 26.12.1989. Property of defendant No.1, including its land, building, plant and machinery and other assets, was mortgaged on 20.12.1989. Liability of defendant No.1 and the guarantors was joint and several and the guarantee was continuing. Loan was agreed to be repaid in half yearly instalments, commencing from 10th January, 1993 and ending on 10th July, 2000. Repayment arrangement was rescheduled on 29th January, 1996, per which the repayment was to commence on 10th July, 1996 and to be over on 10.1.2002. 3. Defendants failed to stick to the schedule of repayment. A reference was made by defendant No.1 to Board for Industrial and Financial Reconstruction under the Sick Industrial (Special Provisions) Act, 1985 for rehabilitation of its unit. The said Board opined, on 20.10.1997, that it would be just and equitable to wind up defendant No.1-Company and forwarded its opinion to Delhi High Court. 4. It was further pleaded that a sum of Rs.1,27,72,182/- was due from the defendants as on 31.10.1997, on account of principal amount and the interest accrued thereon, out of which a sum of Rs.8,61,398/- had been waived off by charging simple interest instead of …3… compound interest. Plaintiff claimed the remaining amount of Rs.1,19,10,784/- with interest @ 12.5%. 5. Various preliminary issued were raised by the defendants in the written statement, besides contesting the claim on merits. It was stated that the signatures of defendants had been obtained on blank printed formats. It was further stated that the plaintiff was estopped to file the suit on principle of promissory estoppel and also by the acts, conduct and deeds of its functionaries. Also, it was stated that suit was barred, under Section 446 of the Companies Act, as an order for winding up of the company had been passed by Delhi High Court on the opinion of the Board for Industrial and Financial Reconstruction. It was denied that the person, who had signed and verified the plaint and instituted the suit, was authorized to do so. Jurisdiction to try the suit was also challenged. 6. It was also pleaded that a sum of Rs.59 lacs, approximately, had been paid to the plaintiff, but they had not accounted for the same in the statement of account, filed with the plaint. 7. On the pleadings of parties, following issues were framed:- “1. Whether the plaintiff is entitled to the suit amount, as prayed for, and from whom?OPP 2. Whether defendant No.1 created equitable mortgage to secure the loan in favour of the plaintiff, as alleged? OPP …4… 3. Whether there is a valid novation of guarantee as alleged? OPP 4. To what rate of interest is the plaintiff entitled to and from which date? OPP 5. Whether the suit is barred by the principles of promissory estoppel and on account of act, conduct and deed of the plaintiff? OPD 6. Whether the suit is barred in view of provisions of Section 446 of Companies Act, 1956? OPD 7. Whether the suit has been filed by a competent and duly authorized person. If not, its effect? OPD. 8. Whether the signatures of defendants were taken on blank printed forms containing unilateral terms opposed to the public policy. If so, its effect? OPD 9. Whether the court has no jurisdiction to try and entertain the suit? OPD 10. Relief. 8. Parties have adduced evidence. Plaintiff, besides examining some witnesses, proved documents of loan and guarantee. 9. I have gone through the pleadings and the evidence and heard the learned counsel for the plaintiff. Nobody has appeared for the defendants. …5… Issues No.1,2,3,4 and 8 10. All these issues, being interconnected, are taken up together. Plaintiff has very categorically pleaded that various documents were executed by the defendants before release of the loan amount and those documents, included loan agreement Ext.PW3/D, hypothecation agreement Ext.PW3/E, document of deposit of title deed Ext.PW3/F, guarantee deeds Ext. PW3/G, PW3/H and PW3/H-1 and power of attorney Ext. PW3/J. 11. PW-3 Pawan Kumar Bali, working as Senior Manager, Project (legal) with the plaintiff-Corporation, proved the aforesaid documents. The witness also proved revised repayment schedule Ext.PW3/K. Other documents proved by the witness are Trust letter Ext.PW3/L, which was signed by defendant No.5, who was the Managing Director of defendant No.1. Said defendant No.5 was authorized by defendant-Company to sign letter Ext.PW3/L, vide Resolution Ext. PW3/M. Plaintiff also proved the statement of account Ext.PW2/A. 12. Defendants examined, in rebuttal, DW-1 Harish Chander, employed as Accounts Officer, with defendant No.1. The witness stated that he was Special Attorney of defendant No.5, by virtue of instrument of Power of Attorney Ext.DW1/A. The witness did not say even a word about the aforesaid documents, proved by PW-3 Pawan Kumar Bali. He made omnibus type statement that the plaintiff generally got blank documents signed on printed formats and that no …6… mortgage deed was ever executed in favour of the plaintiff. He stated that defendant No.5 had revoked the guarantee furnished in favour of the plaintiff. In the cross-examination he admitted that copies of all the documents, executed by the defendants, were supplied to them within 10-15 days of their execution and that no communication was addressed to the plaintiff after the receipt of the copies that the terms and conditions incorporated in the documents were not in line with the agreement between the parties or that the interest claimed therein was excessive. Thus, there is no evidence from the side of the defendants, suggesting that the documents, proved by PW-3 Pawan Kumar Bali, were not executed by the defendants. Also, an adverse inference is required to be drawn against defendants No. 2 to 5 for their not stepping into the witness box in support of their plea that their signatures were obtained on blank forms of various documents. 13. Statement of account Ext.PW2/A shows that all the payments made by the defendants towards the discharge of their liability have been duly credited and the amount adjusted towards the interest accrued on the principle amount of loan. The statement further shows that at the time of institution of suit, a sum of Rs.1,19,10,784/- was due after giving credit for Rs.8,61,39/- on account of difference between the amount of compound interest and simple interest. …7… 14. In view of the above discussed evidence, all the four issues are answered in favour of the plaintiff and against the defendants. Issues No. 5,7 and 9 15. Defendants have led no evidence in support of these issues. Hence, the same are answered against the defendants. Issue No.6 16. Initially, suit had been stayed vide order dated 26.4.2001, in view of provision of Section 446 of the Companies Act. Later on, an application, being OMP No.361 of 2007, was moved by the plaintiff for reviving the suit, as according to it, the winding up proceedings started in Delhi High Court, stood closed as all the assets of defendant- company had been sold and the sale proceeds thereof apportioned amongst various creditors of the Company, including the present plaintiff. That application was allowed, vide order dated 4.1.2008 and the suit was ordered to be proceeded in accordance with law. 17. Later on, another application, being OMP No.233 of 2008, was moved for deleting the name of defendant No.1 on account of its assets having been sold in the winding up proceedings, held by Delhi Court. That application was allowed vide order dated 3.9.2008. Since the name of defendant No.1 has been deleted and the said defendant is no longer a party to the suit and now the claim is only against defendants No.2 to 5 in their individual capacity, …8… being the guarantors, the same cannot be said to be bad for want of leave, under Section 446 of the Companies Act. Hence, this issue is also answered in favour of the plaintiff. Relief 18. In view of the findings on the aforesaid issues, suit of the plaintiff is decreed as against defendants No.2 to 5 and a decree for a sum of Rs.1,19,10,784/-, with interest at the agreed rate, from the date of institution of the suit to this date, i.e. 29th March, 2010, and with future interest, i.e. from the date of passing of this decree to the date of payment of the decretal amount, is passed in favour of the plaintiff and against defendants No. 2 to 5, whose liability to satisfy the decree shall be joint and several. Decree sheet shall be drawn by the Registry, accordingly. March 29, 2010 (ss) (Surjit Singh), J