HIGH COURT OF HIMACHAL PRADESH AT SHIMLA CS No.: 135 of 1995 Reserved on: 27.6.2008 Decided on: 15.7.2008 The Himachal Pradesh State Industrial Development Corporation Ltd. ...…Plaintiff. Versus M/s Kalima Enterprises (P) Ltd. and others. ...…Defendants. Coram: The Hon’ble Mr.Justice V.K. Ahuja, Judge. Whether approved for reporting? No. For the plaintiff: Mr.Ajay Kumar, Advocate. For defendants No.1 to 4: Mr.Dushyant Dadwal, Advocate. For defendants No.5 and 6: Mr.Ramakant Sharma, Advocate. V.K. Ahuja, J: This is a suit for the recovery of Rs.72,95,807/- filed by the plaintiff. The plaintiff alleged that it is a Company registered under the Companies Act and one of the functions of the Corporation is to provide financial assistance and term loans. It was alleged that defendant No.1, through its Promoter-Director applied to the plaintiff-Corporation for the grant of term loan of Rs.64.77 lacs for the construction of a factory building and for purchase of plant, machinery etc. for setting up an industrial unit for the manufacture of steel ingots at Parwanoo. ___________ 1.Whether reporters of Local papers may be allowed to see the judgment? Yes. - 2 - The term loan was sanctioned in favour of defendant No.1 by the plaintiff- Corporation on different dates and defendant No.1 was paid a sum of Rs.64.77 lacs on various dates. The defendant-Company agreed to pay the amount at the rate of 6.5% per annum over the refinance rate as may be notified by the Industrial Development Bank of India with minimum interest payable at the rate of 12.5%. The defendants executed the loan agreement on different dates in favour of the plaintiff-Corporation besides creating equitable mortgage by deposit of title deeds of the properties of the industrial concern in favour of the plaintiff-Corporation. Defendants No.5 and 6 executed the necessary deed of guarantee in favour of the plaintiff-Corporation for repayment of the principal amount and interest accrued thereon. Subsequently, defendants No.5 and 6 approached the plaintiff-Corporation for change in the management of their industrial concern and defendants No.2 to 4 joined defendant No.1 Company as Directors and executed deed of guarantee etc. and as such the personal guarantees of defendants No.5 and 6 were released on 27.11.1993. It was further alleged that the industrial unit of the defendants was jointly financed by the plaintiff-Corporation and proforma defendant No.7 and as such both are holding pari-passu charge on the assets of the industrial concern in order to recover the term loan advanced in the ratio of Rs.64.77 lacs : Rs.30.00 lacs. The amount was payable in half yearly instalments but the defendants failed to pay the amount, hence the suit for recovery of principal amount and interest thereon filed by the plaintiff after serving notice on the defendants. - 3 - The defendants No.2 to 4 filed written statement and pleaded that the suit was not maintainable and that the defendants are not liable to pay the amount. It was also pleaded that the suit was bad for non-joinder of necessary parties. On merits, they pleaded that the mortgage was created by B.N. Kataria for and on behalf of defendant No.1 and that defendants No.5 and 6 have acted in collusion with the plaintiff-Corporation. They denied the allegations and mainly took up the plea that the plaintiff and defendants No.5 to 7 have acted in collusion with each other and, therefore, the defendants are not liable. Defendants No.5 and 6 took up the plea that no cause of action had arisen against them and they are not necessary party and since they have been released by the plaintiff, the suit is not liable to be decreed against them. On the pleadings of the parties, the following issues were settled by this Court: 1. Whether the suit is not maintainable in view of the provisions of Section 29 of the State Financial Corporation Act? OPD 2 to 4. 2. Whether the defendants No.2 to 4 are not liable to pay the suit amount? OPD 2 to 4. 3. Whether defendants No.5 and 6 are not liable to pay the suit amount? OPD 5 and 6. 4. Whether the suit is bad for non-joinder and mis-joinder of parties? OPD 5. Whether Mr.M.K. Chaudhary is competent to file the suit? OPP 6. To what amount the plaintiff is entitled to and from whom? OPP 7. To what rate of interest the plaintiff is entitled to in the event of suit is decreed? OPP 8. Relief. - 4 - In support of these issues, the plaintiff examined 3 witnesses. The defendants examined 6 witnesses. No evidence was led in rebuttal. I have heard the learned counsel for the parties and have gone through the record of the case. Issue No.5: In support of this issue, there is a statement of M.K. Chaudhary that he had filed the suit in his capacity as Financial Advisor. He has also stated that he has been authorized by the Managing Director of the plaintiff-Corporation to file the present suit. He had also brought the file containing the note authorizing him to file the suit. He has proved the copy of the said note as Ext.PW-1/A, which document was admitted in evidence subject to payment of cost. In cross examination, he has clarified that the Managing Director has been empowered to perform certain acts on behalf of the Corporation under the Article of Association. His statement goes unrebutted since no evidence has been led by the defendants to show that he was not competent to file the suit and his statement was also not shattered in cross examination to hold that he has deposed falsely or incorrectly. In view of the above discussion, I accordingly hold that the plaintiff- Corporation has proved that M.K. Chaudhary was competent to file the suit. Therefore, this issue is decided in favour of the plaintiff and as against the defendants. Issues No.2, 6 and 7: In support of these issues, there is statement of PW-2 R.K. Bansi, Manager, Finance Accounts of the plaintiff-Corporation, who has proved the - 5 - statement of account Ext.PW-2/A showing the balance as on that date. PW-3 P.K. Bali, Manager of the plaintiff-Corporation, has proved the documents Ext.PW-3/A to Ext.PW-3/D, vide which the loan of Rs.64.77 lacs was sanctioned in favour of defendants No.1 Company. He has also proved the documents executed by defendants No.5 and 6 as Ext.PW-3/E to Ext.PW-3/H. He also stated that defendants No.5 and 6 have created equitable mortgage deed by depositing the lease deed copy of which is Ext.PW-3/J. This lease deed was in respect of 3500 sq.yards in Parwanoo, which was in favour of defendant No.1. This lease deed was executed by defendants No.5 and 6, who were the Promoter-Directors of defendant No.1 Company. PW-3 P.K. Bali has also proved agreements of hypothecation Ext.PW-3/K to Ext.PW-3/N, deeds of guarantee Ext.PW-3/O to Ext.PW-3/R executed by defendants No.5 and 6. He has further stated that defendants No.2 to 4 came to be inducted as Directors of defendant No.1 and they also executed agreement- cum-undertaking Ext.PW-3/S as well as copy of guarantee Ext.PW-3/T, Ext.PW- 3/U and Ext.PW-3/V. He further stated that as on date, a sum of Rs.72,95,807/- was due from the defendants alongwith agreed rate of interest at the rate of 12.5% per annum. In cross examination, he has admitted that the guarantee deeds furnished by defendants No.5 and 6 were released on 27.11.1993 after accepting the new management, who had executed the relevant documents in favour of the plaintiff-Corporation taking over the liability of defendant No.1. In case fresh deeds of guarantee have been furnished, defendants No.5 and 6 stand discharged of their personal liability. - 6 - To rebut this evidence, defendants had also examined some witnesses. DW-1 Baldev Kumar had only brought the record. DW-2 H.P. Kapoor has stated that he was nominated as Director of the defendant-Company vide letter Ext.DW-2/A. However, he withdrew as Director and he never attended any meetings. DW-3 Vinayak Kahol has stated that a lease deed was entered into in between M/s Kalima Enterprises Private Limited and M/s Kalima Plastics Private Limited. His statement does not further substantiate the case of the defendants. In cross examination, he admitted that M/s Kalima Enterprises Pvt.Ltd. was not competent to surrender the lease hold right during the currency of the loan. No permission was given by the plaintiff-Corporation with regard to the surrender of the lease. He also admitted that the entire loan has not been repaid till date. His statement rather shows that the liability of defendant No.1 continued apart from that of defendants No.2 to 4. DW-4 G.R. Kakkar, from the office of Registrar of Companies, has proved that Vijay Kumar Gupta was the Managing Director of the Company, who is defendant No.2. He stated that the names of the Directors of the Company are mentioned in Ext.PW-4/C. He also stated that Vijay Kumar Gupta was shown as Managing Director in Form No.32 and has also proved the annual return under the signatures of B.B. Sood and then under the signatures of B.N. Kataria. DW-5 Vijay Kumar is defendant No.2, who has stated that he had entered into an agreement with plaintiff-Corporation for the taking over of the unit in case the industrial building, plant etc. were transferred in his favour, - 7 - which were never transferred. He admitted that the unit of defendant No.1 Company is in possession of HPFC. He also admitted that he is ready to pay the amount in suit to the plaintiff Corporation in case ownership is transferred in his name. From the above discussion of the evidence, it is clear that the loan was taken by the defendants in the name of defendant No.1 Company and the necessary documents were also executed in favour of the plaintiff-Corporation, who has proved that the suit amount is due to them on the date of filing of the suit alongwith interest, which fact stands proved from the evidence led by the plaintiff and not rebutted by the defendants. However, the statement of PW-3 P.K. Bali, again examined in additional evidence, shows that the mortgaged property was sold by the H.P. Financial Corporation during the pendency of the suit and the plaintiffs have received a sum of Rs.44,33,339/- out of this sum of Rs.72,00,000/-. The documents and necessary correspondence have been proved as Ext.PW-3/Z-1 to Ext.PW-3/Z-7. Accordingly, the plaintiffs are entitled to the suit amount less Rs.44,33,339/- realized by them by the sale of the property and as such the suit is decreed for balance amount of Rs.28,62,468/- alongwith interest at the agreed rate from the date of filing of the suit till realization. The plaintiff-Corporation is also entitled to the interest on the amount realized by them till the date of sale at the same agreed rate of interest. All these issues are, therefore, decided in favour of the plaintiff and as against the defendants. There is also nothing to show as to how defendants No.2 to 4 are not liable to pay the amount and as such all these issues are decided in - 8 - favour of the plaintiff and as against the defendants No.1 to 4. Issue No.1: No arguments were advanced by the learned counsel for the defendants No.2 to 4 as to how the suit is not maintainable in view of the provisions of Section 39 of State Financial Corporation Act and, therefore, this issue is decided as against them and in favour of the plaintiff. Issue No.3: I have already discussed above that the defendants No.5 and 6 stood discharged as per the allegations made in the plaint itself and fresh documents were executed in favour of the plaintiff-Corporation and as such defendants No.5 and 6 are not liable to pay the suit amount. The issues are accordingly decided in favour of defendants No.5 and 6 and as against the plaintiff and other defendants. Issue No.4: There is nothing to show as to how the suit is bad for non-joinder of necessary parties. This issue is accordingly decided in favour of the plaintiff- Corporation and as against the defendants. Relief: In view of my above findings, the suit of the plaintiff is decreed for a sum of Rs.28,62,468/- alongwith interest, as detailed above as against the defendants No.1 to 4. The suit is decreed with costs. In view of the final disposal of the main suit, all the pending miscellaneous application, if any, shall also stand disposed of. July 15, 2008. (V.K. Ahuja), (TILAK) Judge.