IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED: 24.11.2010 C O R A M THE HONOURABLE MR.JUSTICE P.R.SHIVAKUMAR C.S.No.825 of 1999 Southern Petrochemical Industries Corporation Ltd., Rep. by its Secretary ... Plaintiff Vs. 1.Samyukta Alagappan, Sole Proprietrix of M/s.Sriya Enterprises 2.Sekar Alagappan ... Defendants Civil Suit filed under Order XXXIV Rule 1 CPC read with Order XXXVII Rule 1 of Original Side Rules. Plaintiff : Mr.AR.L.Sundaresan, Sr.Counsel for Mr.Aravind Subramanian Defendants : Mr.P.V.S.Giridhar for D2 JUDGMENT The plaint averments, in brief, are as follows:- The plaintiff is a public limited company incorporated under the provisions of the Companies Act, 1956 having its registered office at No.36-40, Armenian Street, Chennai 600 001. Its principal office is at "SPIC CENTRE", No.97, Mount Road, Guindy, Chennai-600 032. It is represented by its Director and Secretary A.Santhanakrishnan. The first defendant is the sole proprietrix of Sriya Enterprises having its place of business at No.937, Poonamallee High Road, Madras  600 034. The second defendant is the Chief Executive of M/s.Sriya Enterprises. M/s.Sriya Enterprises is carrying on the business as manufacturers and exporters of steel products and it also acts as agent in procuring export orders, organising manufacturing of products and completing export obligations. In connection with the export of stainless steel restaurant-ware products, the plaintiff had advanced amounts to the defendants for the purpose of completing export obligations arising out of the orders obtained from parties in United States of America. In respect of the said transactions, a sum of Rs.27,63,694/- was left due and payable by the first defendant. When several demands were made through letters and fax messages and personal representations, Sriya Enterprises evaded payment by giving false assurances and undertakings. By a letter dated 28.03.1997, the defendants agreed to clear the outstanding by obtaining a Letter of Credit from the buyer in favour of the plaintiff on or before 31.07.1997. The plaintiff, by a letter dated 02.04.1997, called upon the defendants to pay the above said outstanding sum of Rs.27,63,694/- by issuing a cheque in favour of the plaintiff. Accordingly, by a letter dated 28.07.1997, the defendants came forward to offer collateral security in respect of the outstanding amounts. By letters dated 10.10.1997 and 07.02.1998, the plaintiff asked the defendants to forward the documents in respect of the collateral security proposed to be given. On 03.03.1998, the defendants issued a cheque for the above said amount and also deposited the title deeds of the immovable property belonging to the second defendant bearing Plot No.1, situated at Nerkundram Village, Saidapet Taluk, Chengalpattu District morefully described in plaint schedule, with an intention to create an equitable mortgage. The cheque dated 30.04.1998 drawn on the Punjab National Bank for a sum of Rs.27,63,694/- and issued in favour of the plaintiff in respect of the above said outstanding was dishonoured on its presentation for encashment with an endorsement "insufficient funds". Accordingly, the plaintiff sent a notice dated 01.07.1998 informing the defendants of the dishonour of the cheque. By a letter dated 31.07.1998, the defendants requested further time of 60 days to clear the outstanding. As it was not done within the said period, the plaintiff again sent a notice dated 15.10.1998 through its counsel calling upon the defendants to pay a sum of Rs.27,63,694/- together with a sum of Rs.21,23,673/- towards interest up to the date of notice and a further interest at the rate of 20% per annum. For the said notice an interim reply dated 18.11.1998 seeking time to send a proper reply through counsel was sent by the second defendant. As the defendants have failed to pay the amount even after they were called upon to do so, the plaintiff was constrained to approach the court by way of the present suit praying for a decree directing the defendants to jointly and severally to pay a sum of Rs.48,87,367/- towards the total amount of principal and interest up to the date of plaint, together with a further interest on the principal sum of Rs.27,63,694/- from the date of plaint till the date of realisation @ 20% per annum within a time to be fixed by the court and for a decree on mortgage directing the sale of the properties described in the plaint schedule, in default of payment of the said decreetal amount within the time fixed by the court and also for a personal decree in case of any short fall. 2. The averments found in the written statement of the defendants, in brief, are as follows:- The suit, as framed, is vexatious and is not maintainable. It is also bad for non-joinder of necessary parties besides being barred by limitation. The plaint is bereft of material particulars including those required to be furnished under Order XXXVII Rule 1 of Original Side Rules and hence the plaint is liable to be rejected. The plaint is also not accompanied by a certificate issued by the Registry regarding the result of the search for encumbrances over the property, the subject matter of mortgage. M/s.Sriya Enterprises is a proprietory concern of which Mrs.Samyuktha Alagappan, the first defendant is the proprietrix. The second defendant is only an employee of Sriya Enterprises employed as its Chief Executive. As such no liability can be fastened on him. It is true that M/s.Sriya Enterprises is carrying on the business as manufacturer and exporter of steel products. The plaintiff availed the services of Sriya Enterprises, only in order to evade their tax liabilities by showing inflated export earnings, which are not taxable. The transactions that are the subject matter of the plaint, have been made as a collateral one to the above said illegal act of tax evasion, which is against public policy. A contract arising in respect of such transactions cannot be enforced in law in view of Section 23 of the Contract Act. It is false to contend that any outstanding sum is due to the plaintiff from the defendants, much less a sum of Rs.27,63,694/-, as claimed in the plaint. Though it is true that the plaintiff sent a few letters to the defendants, all along the defendants were requesting the plaintiff to give a statement of accounts showing full particulars of actual some due, but the plaintiff failed to do so. The plaintiff sought collateral security and also a cheque as security for the business transaction of the plaintiff and the defendants. But contrary to their promise, the plaintiff stopped placing orders with Sriya Enterprises and the same caused a heavy financial loss and loss of reputation in the market to the defendants. The first defendant had placed various orders with the manufacturers of steel utensils relying on the promise made by the plaintiff. But because of the default committed by the plaintiff to place orders, the first defendant was not able to honour the commitment made to the manufacturers. The first defendant also incurred considerable expenditure by visiting foreign countries, obtaining orders and towards tooling cost, which were quite heavy. The plaintiff all along was trying to make profit without any investment or effort in an unconscionable manner. It is false to state that the defendants failed to supply the materials or obtain letters of credit from the buyer in favour of the plaintiff. The particulars regarding actual transactions other than vague averments are not furnished in the plaint. It is true that pursuant to the demand made by the plaintiff, the defendants had given a cheque and the documents relating to the property at Nerkundram as collateral security. Such a security cannot be equated to an equitable mortgage, particularly as the property is not within the city limits of Chennai. In fact a cheque bearing cheque No.054032 drawn on Punjab National Bank for a sum of Rs.25,00,000/- had been given to the plaintiff as security for their business transaction in 1997 itself. Only on the expiry of the said cheque and at the request of the plaintiff, the second defendant issued another cheque only as security and not in admission of the liability. The cheque thus given as security was presented for collection after enticing the defendants and the same was pointed out to the plaintiff by a letter dated 31.07.1998. For the notice of the plaintiff dated 15.10.1998, an interim reply was sent on 18.11.1998, as the then counsel for the defendants had been hospitalised. The interest claimed by the plaintiff is usurious. The date from which the interest is claimed will show that the claim is barred by limitation. The claim originates from 25.03.1995, whereas the suit has been filed after four years on 01.04.99. There was no agreement between the plaintiff and the defendants to pay interest, much less @ 20% per annum. The plaintiff is not entitled to enforce the security as it had gone back from its promise and since in any case the transaction itself was opposed to public policy. Plaintiff has not come to the court with clean hands and on the other hand has, tried to unjustly enrich itself by frivolous litigation. Hence the suit must be dismissed. 3. In the light of the above said pleadings, the following issues have been framed: 1. Whether the plaintiff is entitled for a decree for a sum of Rs.48,87,367/- together with interest @ 20% p.a. on Rs.27,63,694/-? 2. Whether, in default of decree amount, the plaintiff is entitled for the sale of the properties as found in the plaint schedule? 3. Whether the plaintiff is entitled for any other relief? The following are the additional issues framed before pronouncement of the judgment on the basis of the pleadings and evidence:- i) Whether the enforceability of the suit claim is barred by Section 23 of the Contract Act? ii) Whether the suit is barred by limitation? iii) Whether the second defendant is not liable to be proceeded against for the amount due from the first defendant? iv) Whether the suit as framed is not maintainable? v) Whether the suit is bad for non-joinder of necessary parties? And vi) Whether this court does not have jurisdiction to try the suit? 4. One witnesses was examined as P.W.1 and twenty documents were marked as Exs.P1 to P20 on the side of the plaintiff. On the side of the defendants one witness was examined as D.W.1 and six documents were marked as Ex.D1 to D6. 5. As per the original plaint, M/s.Sriya Enterprises and Sekar Alagappan were shown as the first and second defendants respectively. It was also averred in paragraph 2 of the plaint as it stood before amendment, that M/s.Sriya Enterprises was a firm and the details of its constitution were not known to the plaintiff. Sekar Alagappan, who figures as the second defendant was sought to be proceeded against as the Chief Executive of M/s.Sriya Enterprises. However after receipt of summons, Sekar Alagappan, the second defendant entered appearance and filed a written statement on his own behalf and on behalf of M/s.Sriya Enterprises as its power of attorney holder. In Paragraph 4 of the said written statement it was stated that M/s.Sriya Enterprises was a proprietory concern, of which Samyukta Alagappan was the proprietrix. In view of the revelation of the nature of composition of the said business concern M/s.Sriya Enterprises, the plaintiff got the plaint amended by amending the name of the first defendant as follows:- "Mrs.Samyukta Alagappan, Sole Proprietor of M/s.Sriya Enterprises". As such Samyukta Alagappan is the first defendant and Sekar Alagappan is the second defendant. No contention that the description of parties even after amendment is incorrect, has been raised by the defendants. 6. Admittedly, the first defendant, namely Samyukta Alagappan is running a Proprietary concern M/s.Sriya Enterprises, of which she is the sole proprietrix. It is also not in dispute, but on the other hand admitted by the defendants in their written statement itself, that the second defendant Sekar Alagppan is the Chief Executive of the above said business concern. He is sought to be proceeded against not only as the Chief Executive of the above said proprietary concern, but also on the ground that he has made himself liable for the debt of the first respondent due to the plaintiff by figuring as a surety, submitting a cheque drawn on his personal account and depositing the title deeds of the immovable property described in the plaint schedule belonging to him with the intention of creating a security for the repayment of the amount due from the first respondent and thus creating an equitable mortgage. 7.It is not in dispute that the first respondent is the proprietrix of M/s.Sriya Enterprises and the first defendant, in the name of the said proprietary concern, is carrying on the business as manufacturer and exporter of steel products and is also acting as agent for procuring export orders, organizing manufacturing products and completing export obligations. It is the specific case of the plaintiff that in connection with the export of stainless steel restaurant-ware, the plaintiff had advanced amount to M/s.Sriya Enterprises for the purpose of completing its export obligations arising out of the orders obtained from parties in United States of America and the first defendant had left an outstanding sum of Rs.27,63,694/-, for discharge of which amount, the second defendant issued his personal cheque and created an equitable mortgage in respect of his personal property as a surety for the first defendant. The defendants have taken the following defence pleas:- a) The plaintiff availed the services of the first defendant with an intention of evading its tax liability by showing inflated export earning and hence the contract arising out of the said transaction cannot be enforced in law in view of Section 23 of the Contract Act, as it is opposed to public policy. b) Contrary to the promise made by the plaintiff, the plaintiff company stopped placing orders with the proprietary concern of the first defendant, which resulted in a heavy financial loss and loss of reputation to the defendants. c) Cheques were issued periodically by the defendants only as security and not as admission of any liability and the cheque referred to in the plaint was presented for collection much against the advice of the defendants. d) The security of immovable property offered by the second defendant cannot be equated to an equitable mortgage, more particularly when the property offered as a security is not situated within the city limits of Chennai to which the original territorial jurisdiction of this court extends. e) The interest claimed by the plaintiff is usurious and the defendants are not liable to pay interest much less at the rate of 20% per annum, as there was no agreement between the parties regarding payment of interest. f) The suit is barred by limitation. Additional Issue No.v 8. Let us now consider the case of the plaintiff in the light of the above said contentions raised by the defendants. The first and foremost contention raised by the defendants in their written statement before amendment of the plaint was that the suit was bad for non-joinder of necessary parties. In the written statement, the said contention has not been elaborated as to who the necessary party was. However, from the arrangement of pleadings made in the written statement, it can be discerned that the filing of the suit describing M/s.Sriya Enterprises as the first defendant, without giving its nature of composition as proprietary concern and without showing the name of its proprietor, was sought to be projected as non-joinder of necessary parties. Order XXX of the Civil Procedure Code permits suits being filed against firms and other persons carrying on business in the names other than their own, in the name of the firm or in the name of the proprietary concern, as the case may be. Especially, Order XXX Rule 10 deals with the question of filing suits against persons carrying on business in the name other than their own. It enables the persons dealing with such a business concern to file a suit against the person carrying on business in a name or style other than his own name, in the name of the business concern as if it were a firm. For better appreciation, Rule 10 of Order XXX Civil Procedure Code is reproduced here under:- 10. Suit against person carrying on business in name other than his own.  Any person carrying on business in a name or style other than his own name, or a Hindu undivided family carrying on business under any name, may be sued in such name or style as if it were a firm name, and, in so far as the nature of such case permits, all rules under this Order shall apply. 9. In the case on hand, admittedly M/s.Sriya Enterprises is a proprietary concern and the present first defendant, namely Samyukta Alagappan is its sole proprietor. Therefore, there was nothing wrong in a suit being filed in the name of the business concern, namely M/s.Sriya Enterprises with an explanatory note that the composition of such a business concern was not known to the plaintiff. The filing of the suit showing M/s.Sriya Enterprises as the first defendant shall, nonetheless, be a suit filed against its proprietor, namely Samyukta Alagappan, the present first defendant. Even then, in view of a stand taken by the defendants in their written statement that M/s.Sriya Enterprises is a proprietary concern and Samyukta Alagappan is its proprietrix, the plaintiff thought it fit to amend the cause title after filing necessary application and getting the leave of the court. Thus the suit cause title stands amended as it stands now. The name of the first defendant has been corrected to Samyukta Alagappan, Sole Proprietor of M/s.Sriya Enterprises. After such amendment, there cannot be any valid defence that Samyukta Alagappan, being necessary party, has not been named in the array of parties. Even otherwise there shall be nothing wrong in proceeding against Samyukta Alagappan in the name of M/s.Sriya Enterprises, the name and style with which she is carrying on business. There is no other specific plea made by the defendants that any other person, who is a necessary party, has been left out from the array of parties. Therefore, we have to arrive at a conclusion that the plea of non-joinder of necessary parties was made only on a misconception and that even such a plea, no longer survives after the amendment of the cause title showing Samyukta Alagappan, Proprietor of M/s.Sriya Enterprises, as the first defendant. For the above said reasons, this court comes to the conclusion that the plea of non-joinder of necessary parties must fail and accordingly, the said plea deserves rejection as untenable. Additional Issue No.iv 15. The next contention raised by the defendants is that the framing of the suit itself is not proper; that the plaintiff, despite the demand made by the defendants for the furnishing of accounts, failed to do so and that hence the suit for recovery of a specified amount without filing the suit on accounts is not maintainable. In this regard, this court wants to point out the fact that the plaintiff has made a clear and concrete averment that it had made financial assistance to the first defendant for the purpose of completing her export obligations arising out of orders obtained from the parties in the United States of America; that in respect of such transactions, the first defendant had left due and payable to the plaintiff a sum of Rs.27,63,694/- as the outstanding amount towards principal; that when demand for payment of the same was made, the defendants agreed to clear the outstandings by obtaining a Letter of Credit from the buyer in the United States of America in favour of the plaintiff and also admitted that such an amount was due to the plaintiff as outstanding principal; that in view of the said acceptance and acknowledgment of liability, there is no necessity to file the suit as one on accounts and that the suit for recovery of a specified sum with subsequent interest based on the admission and acknowledgment of the liability is perfectly in order. In this regard, in paragraph 5 of the plaint, the plaintiff has made an averment to the effect that, by a letter dated 28.03.1997, the defendants agreed to clear the outstandings by obtaining a Letter of Credit in favour of the plaintiff from the buyer on or before 31.07.1997, but subsequently failed to do so. In paragraph 6 of the plaint also, the plaintiff has made a specific averment that a demand was made by the plaintiff to the defendants by issuing a letter dated 02.04.1997 calling upon them to pay the outstanding sum of Rs.27,63,694/- and in response to the said letter, the defendants issued a cheque dated 30.04.1998 for the above said amount and also deposited the title deeds relating to the property described in plaint schedule belonging to the second defendant with the intention of creating an equitable mortgage to secure the above said outstanding amount due from the first defendant. 16. P.W.1, in his evidence has clearly stated that the plaintiff advanced Rs.64,82,946/- to the first defendant, who was a manufacturer and exporter of steel products and also was acting as an agent for completing export obligations arising out of orders obtained from parties in United States of America; that towards the said amount advanced by the plaintiff, the defendants had supplied materials to the tune of Rs.37,19,252/- and that a sum of Rs.27,63,694/- was left as outstanding debt due and payable to the plaintiff. The second defendant, who appeared as D.W.1 (sole witness on the side of the defendants) also admitted the fact that a demand was made by the plaintiff for the settlement of the outstanding amount due, by sending a fax message to the second defendant under Ex.P2, describing him to be the Chief Executive of M/s.Sriya Enterprises, calling upon him to send a cheque in favour of the plaintiff for the outstanding amount of Rs.27,63,694/- as assured by him. The said fax message is dated 02.04.1997. For the said demand made by the plaintiff, the second defendant, in his capacity as Chief Executive of M/s.Sriya Enterprises has issued a letter in the letter head of M/s.Sriya Enterprises on 28.07.1997. The same has been marked as Ex.P3. In the said letter given as reply to the fax message evidenced by Ex.P2, the outstanding amount quoted in Ex.P2 was not disputed. On the other hand, the second defendant, as the Chief Executive of M/s.Sriya Enterprises, came forward to give a farm house situate at 17.5 acres of farm land fully fenced with chain link fencing together with three wells, pump-sets, pump houses, godown, Manager's quarters and coconut trees, etc. valued at Rs.1.5 crores, as collateral security. The said letter was responded by the plaintiff by a letter dated 10.10.1997, a copy of which has been marked as Ex.P4. In the said letter, the second defendant was asked to produce a number of documents and certificates for taking a decision regarding creation of collateral security towards the outstanding amount due from M/s.Sriya Enterprises. Thereafter, Ex.P6, letter came to be sent by the second defendant as Chief Executive of Sriya Enterprises. In Ex.P6, it had been stated that the defendants were in the process of obtaining their own export packing credit limit from their bankers to the tune of Rs.1.5 Crores and the same was expected only after the year end i.e. after 31.03.1998 and that on receipt of the funds during the first week of April 1998 from the bank, the defendants would be in a position to settle the outstanding amount due to the plaintiff. It was also mentioned therein that they would propose to create collateral security for further funding and continuance of the business. In response to the said letter, the plaintiff seems to have sent a reply on 07.02.1998 calling upon the defendants to submit 15 number of documents towards the creation of collateral security for the amount owed by the first defendant. Copy of the said letter has