2013 (9) TMI 421 - HC - Companies Law

Court rules against defendants, holding them jointly liable for payment, rejects fraud claims, upholds plaintiff's case.

The court dismissed the defendants' applications for leave to defend, decreeing that they were jointly and severally liable to pay the plaintiff Rs. ... Recovery Suit - Under the Raw Material Assistance Scheme (RMAS), the plaintiff procures raw material from canalized/govt. agencies and others, for and on behalf of the SSU by making payment directly to the supplier and delivering the said raw material to the said SSU as per their requirement – Held that:- The defendants were in breach of the agreement dated June 25, 1999 and were jointly and severally liable to pay the acknowledged sum along with interest @ 18% per annum from the date of institution of the suit till realization of the amount - There was no merit in the applications for leave to defend filed by the answering defendants - The same were accordingly liable to be dismissed - In terms of the agreement dated 25th June, 1999, which was the written contract between the parties and the foundation of the suit of the plaintiff u/O XXXVII of the Code, the admitted liability as on 25th June, 1999 - As regards interest payable to the plaintiff, this being a suit under Order XXXVII of the Code of Civil Procedure which by itself was a self- contained code, the claim of the plaintiff for the grant of interest wholly depends upon the terms of the agreement between the parties - The rate of interest as provided for in the agreement dated December 5, 1989 was to be 16% from the date of the debit of the amount till reimbursement. The suit under Order 37 was based on the written acknowledgment of the defendants and it was held by this Court that though the defendants specifically denied the written acknowledgment and alleged that the case of the plaintiff was based on a false document and the claim was barred by time, leave to defend the suit could be granted to the defendants only upon their furnishing a bank guarantee for the amount decreed by the trial court and in case of their failure to do so, the plaintiff would be entitled to pursue her execution application. National Small Scale Industries v. Novavision Electronics Pvt. Ltd. & Ors. [2006 (7) TMI 574 - DELHI HIGH COURT] - Not only has the agreement between the parties, but the RMAS also stipulated that the defendant no. 1 was required to make payments to the plaintiff from time to time - It was manifestly clear from the record that the defendants themselves gave a proposal to the plaintiff for re-scheduling of payments due from them and it was in this backdrop that the agreement dated 25th June, 1999 was entered into between the parties - Having failed to abide by the terms of the agreement dated 25th June, 1999, it does not now lie in the mouth of the defendants to allege that they have a substantial defense to the suit. Issues Involved:1. Recovery of dues under Order XXXVII of the Code of Civil Procedure.2. Validity and enforceability of the agreements and guarantee deeds.3. Liability of the defendants, including guarantors, under the agreements.4. Allegations of fraud and manipulation by the defendants.5. Limitation and validity of the suit.6. Interest and additional charges claimed by the plaintiff.Detailed Analysis:1. Recovery of Dues Under Order XXXVII of the Code of Civil Procedure:The plaintiff, a Government Company, filed a suit for recovery of Rs. 78,49,274.89 under Order XXXVII of the Code of Civil Procedure. The plaintiff provided financial assistance to the defendant no. 1 under the Raw Material Assistance Scheme (RMAS), which was acknowledged by the defendant no. 1 through various agreements and acknowledgments.2. Validity and Enforceability of the Agreements and Guarantee Deeds:The plaintiff and defendant no. 1 entered into agreements dated March 8, 1989, December 5, 1989, and June 25, 1999. The defendants no. 2 to 4 and Late Sh. P. C. Manchanda executed Guarantee Deeds on March 8, 1989, ensuring compliance with the terms of the agreements. The plaintiff contended that these guarantees were continuing and binding until full compliance with the agreements.3. Liability of the Defendants, Including Guarantors, Under the Agreements:The plaintiff claimed that the defendants acknowledged their liability multiple times, including in an agreement dated June 25, 1999, where defendant no. 1 accepted a liability of Rs. 27,24,945.59. Despite this, the defendants defaulted on payments, leading to the plaintiff's claim for the outstanding amount along with interest. The court found that the defendants' liability was clear and enforceable, as the guarantees were valid until full payment was made.4. Allegations of Fraud and Manipulation by the Defendants:Defendants no. 1 and 3 alleged that the agreement dated June 25, 1999, was a result of fraud and manipulation, claiming that the plaintiff misused blank signed papers. However, the court found this defense frivolous and unsubstantial, noting that the defendants had acknowledged their liability through various documents and resolutions.5. Limitation and Validity of the Suit:Defendant no. 4 contended that the suit was time-barred and that she was not informed about the transactions after executing the guarantee bond in 1989. The plaintiff argued that the acknowledgment of debt by the defendants kept the suit within the limitation period. The court agreed with the plaintiff, stating that the acknowledgment of liability by the defendants from time to time kept the suit within the limitation period.6. Interest and Additional Charges Claimed by the Plaintiff:The plaintiff claimed interest at the rate of 16% per annum, with an additional 2% on overdue amounts, as per the agreements. The court upheld this claim, citing the relevant clauses in the agreements that provided for these interest rates. The court found the defendants jointly and severally liable to pay the acknowledged sum along with interest at 18% per annum from the date of the suit's institution until the realization of the amount.Conclusion:The court dismissed the defendants' applications for leave to defend, finding no merit in their defenses. The court decreed that the defendants were jointly and severally liable to pay the plaintiff Rs. 27,24,945.59 along with interest at 18% per annum from the date of the suit's institution until the realization of the amount. The judgment emphasized the enforceability of the agreements and guarantees, the frivolous nature of the defendants' fraud allegations, and the validity of the plaintiff's claims within the limitation period.