Case: Ved Prakash Agarwal Vs. Rama Petrochemicals Limited

Conciliation Act, 1996, One of the submissions was that a reference was pending before the BIFR and that the agreement in question in realitv was not a lease agreement, but a finance agreement. The Court looked into the documents and observed in para 9 that section 22 of SICA has no application to a lease agreement, and in such a case the property is not the property of the company. ( 23 ) WE have considered the submissions made by both the Counsel. As noted earlier, what we have to examine is as to whether the guarantee concerned was in respect of any loan or advance granted to the industrial company. Having seen the clauses from the agreement, there is no difficulty in saying that the property in the equipment remains with the respondent all throughout and does not pass on to the industrial company. It is again material to note that the industrial company has all throughout understood the document as a lease agreement and not as a finance loan. At no point of time, there is any reference to the document as a finance agreement, not even in the letter of the Advocates of the appellant prior to the proceedings. The right of the lessor to take back the property at all material times is clearly writ large on the document. Besides, the guarantee given by the appellant is an independent guarantee given to the respondent. It clearly states in terms that it is as if given by the principal debtor and it will be irrevocable until the lessee discharges all the obligations. The Apex Court in some of the recent judgments has laid down the guidelines when it comes to interpreting the documents entered into between the parties. In para 10 of the judgment in the case of (M. Arul Jothi v. Lajja Bai), A. I. R. 2000 S. C. 1122, the Apex Court has observed that "once parties enter into a contract, then every word stated therein has to be given its due meaning which reveals the rights and obligations between the parties. No part of the agreement or words used therein could be said to be redundant. " In para 16 of (Roop Kumar v. Mohan Thedam), 2004 (1) Bom. C. R. (S. C.)329 : 2003 (6) S. C. C. 595, the Apex Court observed the following:"when persons express their agreements in writing, it is for the express purpose of getting rid of any indefiniteness and to put their ideas in such shape that there can be no misunderstanding, which so often occurs when reliance is placed upon oral statements. Written contracts presume deliberation on the part of the contracting parties and it is natural they should be treated with careful consideration by the Courts and with a disinclination to disturb the conditions of matters as embodied in them by the act of the parties (See Mckelveys Evidence, p. 294 ). "( 24 ) IN the present case, as stated above, we are concerned with the relationship created by the respondent with the industrial company. The respondent is undoubtedly saying that it is a lease document. The industrial company has no where stated in the documents or in correspondence that it is not a lease agreement. When the text of the totality of the clauses and their tenor is seen, one cannot take some clauses with respect to payment of interest apart and hold that it is a finance agrement. One has to read the agreement to provide meaning to all its clauses. Any such interpretation canvassed by the appellant will render the specific clauses on ownership and return on default, identification and insurance etc. redundant. That cannot be permitted as held in Arul Jothis case (supra ). Besides, any such interpretation will go against the express intention of the contracting parties. That also cannot be permitted as held in Roop Kumar (supra ). The tenor of the entire agreement is clear that the respondent had purchased the particular equipment and leased it to the industrial company and it was to remain equipment owned by the respondent throughout the period of the agreement. It is another matter that at the end of the period if the twenty equated instalments and the residual amount was paid, the ownership was to pass on to the industrial company. That will not change the nature of the agreement during the subsistence thereof, viz. that it was an agreement of lease of equipment and not a financial agreement. There is no scope to read the agreement as anything else as in the case of Sundaram Finance (supra ). Similarly the principles of purposive interpretation relied upon by the appellant have no application in the present case since the amendment to section 22 is clear and unambiguous as explained in PICUP (supra ). ( 25 ) IT is clear from the narration that it was the obligation of the industrial company to make the periodical payment and use the machines. The industrial company had defaulted in making the payment and, therefore, the respondent had every right to get back the machinery. As far as the present suit is concerned, it is with respect to the guarantee given by the appellant to fulfill the obligations of the industrial company on his own. The text of the guarantee is also very clear. That guarantee cannot be said to be a guarantee with respect to the repayment of a loan. Similarly, as stated earlier, in an advance of money the right of the financier is only with respect to money and not in the property. In the present case, there are clear rights of the financiers in the property. That being so, it cannot be said that the lease finance given by the respondent to the industrial company was in fact a loan or an advance and which was guaranteed by the appellant. In view of this conclusion arrived at, on the second point for determination also there is no substance in the appeal.

Decision (1 = appeal accepted, 0 = rejected): 0

Explanation:
0[ds]( 24 ) IN the present case, as stated above, we are concerned with the relationship created by the respondent with the industrial company. The respondent is undoubtedly saying that it is a lease document. The industrial company has no where stated in the documents or in correspondence that it is not a lease agreement. When the text of the totality of the clauses and their tenor is seen, one cannot take some clauses with respect to payment of interest apart and hold that it is a finance agrement. One has to read the agreement to provide meaning to all its clauses. Any such interpretation canvassed by the appellant will render the specific clauses on ownership and return on default, identification and insurance etc. redundant. That cannot be permitted as held in Arul Jothis case (supra ). Besides, any such interpretation will go against the express intention of the contracting parties. That also cannot be permitted as held in Roop Kumar (supra ). The tenor of the entire agreement is clear that the respondent had purchased the particular equipment and leased it to the industrial company and it was to remain equipment owned by the respondent throughout the period of the agreement. It is another matter that at the end of the period if the twenty equated instalments and the residual amount was paid, the ownership was to pass on to the industrial company. That will not change the nature of the agreement during the subsistence thereof, viz. that it was an agreement of lease of equipment and not a financial agreement. There is no scope to read the agreement as anything else as in the case of Sundaram Finance (supra ). Similarly the principles of purposive interpretation relied upon by the appellant have no application in the present case since the amendment to section 22 is clear and unambiguous as explained in PICUP (supra25 ) IT is clear from the narration that it was the obligation of the industrial company to make the periodical payment and use the machines. The industrial company had defaulted in making the payment and, therefore, the respondent had every right to get back the machinery. As far as the present suit is concerned, it is with respect to the guarantee given by the appellant to fulfill the obligations of the industrial company on his own. The text of the guarantee is also very clear. That guarantee cannot be said to be a guarantee with respect to the repayment of a loan. Similarly, as stated earlier, in an advance of money the right of the financier is only with respect to money and not in the property. In the present case, there are clear rights of the financiers in the property. That being so, it cannot be said that the lease finance given by the respondent to the industrial company was in fact a loan or an advance and which was guaranteed by the appellant. In view of this conclusion arrived at, on the second point for determination also there is no substance in the appeal.