1 IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION SUIT NO.1463 OF 1998 Indbank Merchant Banking Services Limited ...Plaintiffs vs. 1 Nicelcon Limited(in liquidation) 2 Raju H. Mahatani ...Defendants Mr.B.A.D Lima i/b M/s..G.V.D Lima & Co.for the plaintiffs None for the defendants CORAM :A.S.OKA, DATE ON WHICH JUDGMENT IS RESERVED: DECEMBER 14, 2009 DATE ON WHICH JUDGMENT IS PRONOUNCED: 6th JANUARY 2010 JUDGMENT : 1 The plaintiffs have filed the present suit for declaration that the lease agreement dated 2nd January 1996 stands duly and validly terminated and the first defendants are not entitled to retain the possession of the machinery leased in their favour under the said agreement. The second prayer in the suit is for money decree in the sum of Rs.48,01,949.78 being the amount of arrears of lease rentals including the overdue interest as well as default premium. A prayer is also made for grant of interest on the said amount at the rate of 24% per annum. Another prayer is for a decree directing the first defendant to pay to the plaintiffs a sum of Rs. 48,01,949.78 by way of compensation or mesne profits per 2 quarter for the machinery from the date of filing of the suit till the possession of the machinery is handed over to the plaintiffs. 2 The case of the plaintiffs is that in September 1995 the first defendants approached them with a request for financial assistance for acquiring certain machinery such as Pattern Grading Machine, Clicking Boards Plaining machine etc. The first defendants submitted to the plaintiffs invoices dated 18th December 1995 of M/s. Sonam Enterprises who agreed to supply the machinery to the first defendant. After considering the request of the first defendant, the plaintiffs agreed for grant of financial assistance. The terms and conditions of the sanction were incorporated in the letter dated 19th December 1995. As per the agreed terms and conditions, a lease agreement dated 2nd January 1996 was executed by the first defendants in favour of the plaintiffs. Under the said agreement, the first defendant agreed to take on lease the machinery described under the schedule to the said agreement. The first defendant agreed to pay to the plaintiffs lease rentals of Rs.82,500/- per month in advance. There was default clause in the agreement which provided that in case of any default on the part of the first defendants in making the payment of installments, the first defendants will be liable to pay damages calculated at the rate of 2% per month from the due date 3 of installment till payment with monthly rests. Various other terms and conditions agreed between the parties were incorporated in the agreement. The second defendant executed a deed of guarantee in favour of the plaintiffs by which he guaranteed payment of various amounts by the first defendants. The case of the plaintiffs is that the first defendants committed defaults in payment of installment. The cheques issued by the first defendants were returned dishonored. By letter dated 10th July 1997 sent by the Advocate for the plaintiffs to the 1st and 2nd defendants, a demand was made for outstanding amount of lease rentals together with interest at the rate of 24% per annum. It is stated in the plaint that inspite of receipt of the said notice the defendants failed to pay any amount. Therefore, the present suit was filed by the plaintiffs. 3 The first defendant-company went in liquidation. The Official Liquidator was appointed. The Official Liquidator representing the first defendant filed the written statement. Reliance was placed on the suit filed by the Bank of India against the 1st defendants which was transferred from this Court to the Debt Recovery Tribunal. It is pointed out that the Official Liquidator has already adjudicated upon the claims of the workers. In the written statement it was contended that the assets of the first defendant-company were taken in custody by 4 the Court Receiver, High Court, Bombay in a suit filed by the Bank of India and hence, the Official Liquidator has not taken possession of any assets of the company. It is contended that the Official Liquidator was not aware of as to whether the machinery forms a part of the assets of the first defendant. The second defendants did not file the written statement. 4 The issues were settled on 6th September 2007 which reads thus : 1. Whether the plaintiff proves that the defendant no.1 in Liquidation entered into a lease agreement dated 2nd January 1996 ? 2. Whether the plaintiff proves that it is entitled to a decree of a sum of Rs.48,01,949.78 and interest at the rate of 24% ? 3. Whether the plaintiffs proves that the defendant no. 2 has executed a personal guarantee dated 2nd January 1996 in favour of the plaintiff ? 4. What decree ? 5. What Order ? 5 The plaintiffs examined one Kishor Aiyar, its authorised signatory and Senior Project Executive as their witness. His examination in chief was recorded on 23rd October 2007. The plaintiffs produced 8 documents along with the list. On that day, all documents except 5 the document at serial no.3 was exhibited. No cross examination of the said witness was made by the defendants. After 23rd October 2007, the suit appeared on board on 25th August 2009. On that day, the counsel for the plaintiffs made a statement that the plaintiffs have closed their evidence. Time was granted to the defendants to file their affidavit in lieu of evidence and documents. On 8th September 2009, when the suit was called out, the counsel for the first defendant (Official Liquidator) sought time of two weeks to inform the Court whether the Liquidator desires to lead evidence. Thereafter, the suit appeared on board on 17th November 2009 when none appeared for the defendants. As affidavit in lieu of examination-in-chief was not filed by the defendants, evidence of the defendants was closed. Thereafter, the suit appeared on board on 8th December 2009, 10th December 2009 and 14th December 2009. None appeared for the defendants on the said dates. Arguments of the learned counsel for the plaintiffs were heard. 6 The plaintiffs have produced a letter of sanction dated 19th December 1995 issued by them to the defendants which is marked as Exh.P-3. All the terms and conditions on which financial assistance was agreed to be granted were incorporated in the said letter. The lease agreement dated 2nd January 1996 has been duly proved by the plaintiffs which is at Exh. P-4. The agreement of 6 guarantee executed by the 2nd defendant has been duly proved which is at Exh.P-5. Notice of demand dated 10th July 1997 together with postal acknowledgments of 1st and 2nd defendants have been marked as (Exh.P-7 collectively). The report of the Court Receiver dated 14th March 2000 has been produced at Exh.P-8 in which it is stated that the Court Receiver has already taken possession of the machinery in the High Court Suit no.661 of 1988 filed by the Bank of India. 7 Perusal of the agreement at Exh.P-4 shows that the plaintiffs agreed to lease the machinery and equipments more particularly described in schedule 1 to the said agreement. The lease rental was fixed at Rs.82,500/- per month. Fixed period of lease was agreed to be 60 months. The lease assistance of Rs.30,00,000/- was granted by the plaintiffs to the 1st defendants. The terms and conditions annexed to the agreement provided for consequence of default on the part of the 1st defendant which provides for liquidated damaged at the rate of 2% per month on the overdue installments till the payment with monthly rests. The agreement also provides for payment of an amount equivalent to 10% of the rentals payable under the agreement being the default premium amount. The agreement of guarantee dated 2nd January 1996 executed by the 2nd defendants provides that the 2nd defendants guaranteed repayment of the amounts due and 7 payable by the 1st defendants under the said agreement. It is set out in the notice dated 10th June 1997 that the 1st defendants committed consistent defaults and as on 10th July 1997, the overdue amount was Rs.42,92,000/-. Similar averments have been made in the plaint. As far as overdue amount is concerned, there is a mere denial in the written statement. But the first defendants have not come out with a case that the lease rentals were paid. 8 Thus, the execution of the agreement by the 1st defendant has been duly proved by the plaintiffs. The liability to pay monthly lease rentals and various amounts on account of default has been established by the plaintiffs. By notice dated 10th July 1997 at Exh.P-3, the agreement was terminated and the first defendants were called upon to hand over possession of the machinery. 9 The claim made by the plaintiffs in the present suit is of sum of Rs.48,01,949.78. The particulars of the claim annexed to the plaint are as under : Details Amt.(Rs.) Amount due as outstanding installments under the lease agreement on date of termination i.e. 15/03/1998 ...1565700.00 Additional finance charges at the rate of 2% per month from the respective due dates of each installment till the 8 filing of the suit ? ... 355199.78 Release lease rentals from the date of termination till expiry of full term of lease ...2722500.00 Default premium ... 156750.00 Total ...4801949.78 As the agreement of lease has been duly proved by the plaintiffs, the liability of the first defendants to pay lease rentals and other amounts described in particulars of the claim has been duly established. 10 The first prayer in the suit is as regards declaration of valid termination of the agreement dated 2nd January 1996 and the declaration that the first defendants are not entitled to retain the possession of the said machinery. The third prayer is for appointment of the Officer of this court to assess the damage caused to the said machinery while the same was in custody of the first defendants. Another prayer is for payment of sum of Rs.48,01,949.78. 11 As far as first prayer is concerned, the declaration part that the agreement dated 2nd January 1996 stands validly terminated will have to be granted. However, no relief can be granted in respect of the machinery subject matter of the said agreement in as much as the report of the Court Receiver at Exh.P-8 shows that the possession 9 of the machinery was taken over by the Receiver in suit filed by the Bank of India. The plaintiffs have not taken any steps in that behalf. Therefore, no relief can be granted in respect of the machinery. 12 The plaintiffs have prayed for further interest at the rate of 24% per annum. The said claim is made on the basis of the clause in the agreement which provides that in case of failure of the defendants to pay monthly installments, liquidated damages on the overdue amount shall be payable by the defendants at the rate of 2% per month from the due date of the respective installments till payment of overdue amount with monthly rests. Considering the facts of the case, further interest will have to be granted at the rate of 9% per annum. The issues will have to be answered accordingly. 13 There is a claim made in the form of prayer clause (d) for grant of mesne profits till the date on which the possession of the machinery is handed over. The said prayer cannot be granted as no relief can be granted in respect of the machinery. As stated earlier, the plaintiffs have not taken any steps though it was pointed out that the possession of the machinery was taken over by the Court Receiver in another suit. 14 Hence, I pass the following order : 10 i) It is hereby declared that the lease agreement dated 2nd January 1996 (Exh.P-4) stands validly terminated. ii) The defendants are jointly and severally ordered and decreed to pay to the plaintiffs a sum of Rs. 48,01,949.78 together with interest thereon at the rate of 9% per annum from the date of institution of the suit till realisation or payment. iii)The plaintiffs shall be entitled to recover the costs of the suit from the defendants and the defendants shall bear their own costs. iv)The suit is partly decreed in above terms. JUDGE