M/S. Hanu Motel Pvt. Ltd. & Anr vs U.P. Financial Corpn. Ltd. & Anr

3. Facts in brief of the case are that appellant No. 1 M/s Hanu Motel Pvt. Ltd. is a company registered under the Companies Act, 1956 (`Company' for short) and is engaged in the business of hotel and hospitality and having its Head Office at Lucknow. Appellant No. 2 Avdesh Kumar is a Director of the appellant No. 1-Company. Respondent No. 1, Uttar Pradesh Financial Corporation (`Corporation' for short) is a Corporation constituted under the State Financial Corporations Act, 1956. Respondent No. 2, Ram Raj Singh has been joined as contesting respondent who was the Director of appellant 3 No.1-Company, but who had resigned from the said position subsequently.

4. From the record it appears that there was an agreement between appellant No.1- Company and respondent No. 1-Corporation dated May 10, 1991 whereunder loan was given by the Corporation to the Company for the purpose of its business. It was the case of the Corporation that though substantial amount was paid by the Corporation, the Company did not abide by the terms and conditions and the Corporation was constrained to cancel agreement on October 31, 1991. The Corporation also issued demand notice on August 29, 2000. Under the said notice, a demand was made by the Corporation from the appellant No. 1-Company to pay an amount of Rs.185.20 lakhs. The appellant No.1-Company, therefore, filed a suit being Civil Suit No. 111 of 2001 in the Court of Civil Judge (Senior Division), Haridwar on April 28, 2001. It was a suit for declaration that the recovery sought by the Corporation was 4 barred by time since cause of action had arisen in 1991 and proceedings were not initiated for a long time. It was also the case of the Company that cancellation of loan agreement by the Corporation was ex parte, unilateral and hence illegal.

5. It may be stated that the suit was filed by two plaintiffs. Plaintiff No. 1 was the Company (appellant No. 1 herein) and plaintiff No. 2 was Ram Raj Singh (respondent No. 2 herein) who is a practising Advocate. It was stated in the plaint that plaintiff No. 1 was a Company and plaintiff No. 2 was a Director who was authorized to file a suit on behalf of the Company-plaintiff No.1. On January 19, 2002 an application was filed by the plaintiffs under Order XXXIX, Rules 1 and 2 of the Code of Civil Procedure, 1908 (hereinafter referred to as `the Code') for interim injunction restraining the Corporation from selling hotel or property of plaintiff No. 1-Company. On February 20, 2002, application 5 was allowed and the defendants were restrained from selling the land and building of the plaintiffs.

6. Being aggrieved by the order of injunction passed by the trial Court, the Corporation preferred an appeal being Appeal against Order No. 120 of 2002 under Order XLIII Rule 1 of the Code on May 31, 2002. On June 01, 2002, the High Court after hearing the parties directed the Company to deposit an amount of Rs. Fifty lakhs in the Court within 45 days. The matter was ordered to be listed on July 26, 2002. The company filed Miscellaneous Application No. 4347 of 2002 on July 10, 2002 contending that the appeal filed by the Corporation was barred by limitation. The High Court directed the Corporation to file reply.

- Ram Raj Singh as Director of the Company. By 6 the same resolution, it authorized appellant No. 2 Avdesh Kumar to prosecute the suit and other proceedings.

8. Immediately thereafter on August 05, 2002, respondent No. 2 Ram Raj Singh instituted Miscellaneous Application No. 4839 of 2002 in Appeal against Order No. 120 of 2002 in the High Court of Uttranchal to delete his name from the array of parties in the appeal alleging therein that he was not aware of any suit being filed through him and he had not signed the plaint. It was alleged by him that fraud was committed by showing him as plaintiff No. 2 and filing suit for and on behalf of the Company. It was a case of impersonation. He, therefore, prayed for deletion of his name and to take appropriate proceedings for unpardonable fraud committed by the persons responsible.

24. As to the report of CBI and prima facie case found against Ram Raj Singh in the investigation undertaken, it would not be appropriate to state anything one way or the other. Since we are of the view that both the orders passed by the High Court are liable to be set aside only on the ground of non- observance of natural justice, the matter should be remanded to the High Court for fresh disposal in accordance with law. Observations made by this Court may adversely affect one or the other party and it is not appropriate to express any such opinion. We are, however, convinced that both the orders dated May 06, 2003 and May 28, 2003 passed by the High Court are liable to be set aside.

25. In the result, both the appeals are allowed. Orders dated May 06, 2003 and May 28, 1 2003 are hereby set aside. The matters are remanded to the High Court for fresh decision in accordance with law after giving opportunity of hearing to all the parties.

26. Before parting with the matter, we may clarify that we may not be understood to have expressed any opinion on the merits of the matter, one way or the other. As and when the matter will be placed before the High Court, it will be decided on its own merits without being influenced by any observations made by it in the impugned orders or by us in this judgment.

27. Ordered accordingly. On the facts and in the circumstances of the case, there shall be no order as to costs.

CIVIL APPEAL NO. 6282 OF 2008 @ SPECIAL LEAVE PETITION (CIVIL) NO.5593 OF 2007

28. Leave granted.

29. The present appeal is an offshoot of appeals arising out of Special Leave Petition (Civil) Nos. 10554-55 of 2002 titled M/s Hanu 1 Motels Pvt. Ltd. v. U.P. Financial Corporation Ltd. & Anr.

33. Accused Ram Raj Singh in view of the complaint filed by Registrar General of the 2 High Court made an Application for Direction No. 11659 of 2006 in Appeal against Order No. 120 of 2002 praying therein that no cognizance should be taken of the investigation by Inspector, CBI and for quashing of proceedings.

35. Since we have allowed the appeals filed by the appellants in the connected matters and set aside the order passed by the High Court by remitting the matter to the High Court for fresh disposal in accordance with law after affording opportunity of hearing to all the parties, in our opinion, this order also is liable to be set aside. Since the High Court 2 will consider the entire material on record including report of CBI, it is obvious that the High Court will pass appropriate order in the light of materials placed before the Court.

36. For the foregoing reasons, the appeal deserves to be allowed and is accordingly allowed. The order dated December 22, 2006 passed by the High Court in Application for Direction No. 11659 of 2006 in Appeal against Order No. 120 of 2002 is set aside and the matter is remitted to the High Court for fresh decision in accordance with law after affording opportunity of hearing to all the parties.

37. Ordered accordingly. On the facts and in the circumstances of the case, there shall be no order as to costs.