2003 (9) TMI 564 - HC - Companies Law

Court upholds validity of mortgage deed, orders respondents to pay Rs. 14,55,750 + interest.

The court found the mortgage deed valid and enforceable, rejecting the respondents' claims of it being a sham document. The respondents were held jointly ... Winding up - Suits stayed on Issues Involved:1. Validity and enforceability of the mortgage deed.2. Liability of the respondents to pay the claimed amount.3. Bar of limitation on the claim.Issue-wise Detailed Analysis:1. Validity and Enforceability of the Mortgage Deed:The applicant, the official liquidator of M/s. The Saptagiri Financiers, filed an application under sections 446(2) and 583 of the Companies Act, 1956, seeking a direction for the respondents to jointly and severally pay Rs. 14,55,750 with 18% interest per annum from 29-3-1997 till realization. The respondents denied knowledge of the loan transaction and the execution of the mortgage deed, claiming it to be a collusive document without valid attestations and consideration. However, the court noted that the respondents did not present any oral or documentary evidence to support their denial. The court emphasized that the mortgage deed (Ex. A1), registered before the Sub-Registrar, Palamaner, and bearing signatures of all respondents, indicated a loan of Rs. 9,00,000 for business development and debt clearance. The respondents' failure to cross-examine the applicant's witness or object to the document's marking further weakened their position. The court concluded that the mortgage deed was valid and enforceable, rejecting the respondents' contention that it was a sham document.2. Liability of the Respondents to Pay the Claimed Amount:The applicant claimed that the respondents acknowledged the loan amount and paid Rs. 22,500 towards interest for the period from 10-11-1994 to 9-12-1994, but made no further payments. The court noted that the applicant provided substantial evidence, including the mortgage deed (Ex. A1), statement of loan account (Ex. A3), and list of debtors (Ex. A4), showing the respondents' liability. The respondents' signatures on these documents further corroborated the applicant's claim. The court found that the respondents failed to provide any evidence or cross-examine the applicant's witness to refute the claim. Consequently, the court held the respondents jointly and severally liable to pay the claimed amount of Rs. 14,55,750 with 18% interest per annum from 29-3-1997 till realization.3. Bar of Limitation on the Claim:The respondents contended that the claim was barred by limitation. However, the court referred to Section 458A of the Companies Act, 1956, which excludes the period from the commencement of winding up to the date of the winding-up order, plus one year following the order, from the limitation period. The loan transaction occurred in 1994, the company petition was filed in 1999, and the winding-up order was made on 26-11-1999. The court calculated that excluding the relevant periods, the claim made in 2002 was within the limitation period. Therefore, the court rejected the respondents' contention and held that the claim was not barred by limitation.Conclusion:The court allowed the application, decreeing in favor of the applicant for Rs. 14,55,750 with 18% interest per annum from 29-3-1997 till the date of realization, and costs to be quantified by the office. The respondents were held jointly and severally liable to pay the decretal amount to the applicant.