2019 (8) TMI 1866 - HC - Indian Laws

Court awards Rs.10 crores plus 8% interest to Plaintiff against Defendant No.2. Payment due in 3 months.

IFCI Factors Limited Versus Ramsarup Industries Limited & Ors.

The court decreed the suit for a sum of Rs.10 crores along with interest at 8% per annum against Defendant No.2. Defendant No.2 was directed to pay within ... Seeking stay of the present suit proceedings - suit is barred by time limitation or not - suit under Order XXXVII CPC not being for a liquidated sum is maintainable or not - entitlement to unconditional leave to defend - main borrower i.e. Defendant No.1 is facing insolvency proceedings under the IBC - moratorium pending - complaint under Section 138 of the Negotiable Instruments Act, 1888 also filed - HELD THAT:- The entire purpose of FRA, 2011 and the amendment to the CPC would be defeated, if lenders like the Plaintiff are not given the benefit of summary procedure. The suit under Order XXXVII CPC is within limitation and is maintainable as it is for an ascertainable and a liquidated sum. The amount for which recovery is sought is Rs. 32,02,90,309.32 along with pendente lite and future interest at 13% p.a. The liability of Defendant No.2, under the Guarantee is a sum of Rs. 10 crores along with interest and other charges. The terms of the Guarantee are clear that the liability is independent of the Principal borrower. None of the defences or grounds raised are either tenable, nor is evidence required to be recorded. The Factoring agreement is admitted, the execution of guarantee is admitted and the money disbursed by the Plaintiff is also admitted. The issuance of cheques for a sum of Rs.10 crores by Defendant No. 1 is also admitted. In the facts and circumstances of the present case, Defendant No.2 would not be entitled to any leave to defend insofar as the sum of Rs. 10 crores, which is a liquidated sum as per the guarantee, is concerned. Insofar as any other charges or expenses are concerned, the Plaintiff is free to file its claims before the NCLT against Defendant no.1, the principal borrower. Application disposed off. Issues Involved:1. Moratorium under Insolvency and Bankruptcy Code (IBC)2. Leave to Defend by Defendant No. 23. Maintainability of Suit under Order XXXVII CPC4. Factoring Agreement and Guarantee5. Limitation Period6. Concurrent Civil and Criminal ProceedingsIssue-wise Detailed Analysis:1. Moratorium under Insolvency and Bankruptcy Code (IBC)The court noted that the suit against Defendant No.1 was stayed due to the moratorium under Section 14 of the IBC. However, the suit against Defendant No.2 was allowed to proceed since the moratorium does not apply to guarantors as per Section 14(3)(b) of the IBC, which was amended with retrospective effect from 6th June, 2018.2. Leave to Defend by Defendant No. 2Defendant No.2 sought leave to defend on several grounds, including the claim being barred by limitation, the suit not being for a liquidated sum, and the insolvency proceedings against Defendant No.1. The court condoned the delay in re-filing the application for leave to defend but ultimately found the defenses raised by Defendant No.2 to be untenable.3. Maintainability of Suit under Order XXXVII CPCThe court examined whether the suit was maintainable under Order XXXVII CPC, given the Factoring Regulation Act, 2011 (FRA, 2011). It was argued that the suit should only be maintainable against debtors and not assignors or guarantors. However, the court found that the amendments to the CPC under FRA, 2011, allowed for summary suits for recovery of receivables against both debtors and guarantors. The court distinguished the present case from previous judgments and held that the suit was maintainable.4. Factoring Agreement and GuaranteeThe court analyzed the factoring agreement and the guarantee executed by Defendant No.2. It was established that Defendant No.2 had guaranteed up to Rs.10 crores along with interest and other charges. The court found that the guarantee was an independent contract and that Defendant No.2 was liable for the guaranteed amount, which was considered a liquidated sum.5. Limitation PeriodThe court addressed the issue of limitation, noting that the period during which the reference was pending before the Board of Industrial and Financial Reconstruction (BIFR) could be excluded. The suit was filed within the three-year limitation period after excluding the time during which the BIFR proceedings were pending.6. Concurrent Civil and Criminal ProceedingsThe court clarified that filing a complaint under Section 138 of the Negotiable Instruments Act, 1888, does not bar the filing of a civil suit for recovery of the same amount. This was supported by the Supreme Court's ruling in D. Purushotama Reddy & Anr. v. K. Sateesh.Conclusion:The court decreed the suit for a sum of Rs.10 crores along with interest at the rate of 8% per annum from the date of filing of the suit till the date of payment against Defendant No.2. The Defendant No.2 was required to pay the amount within three months, failing which the interest would continue to accrue at 8% simple interest on the decretal sum until payment. The court also disposed of all interim applications and directed that a decree sheet be drawn.