2018 (3) TMI 1062 - HC - Indian Laws

Enforcement of Loan Repayment Order Upheld

The court upheld the order directing private individuals/directors to deposit funds for loan repayment by a corporate entity under Order 39 Rule 10 CPC. ... Interest on repayment of loan - appellant submits that the impugned order is erroneous because it directs private individuals/directors for repayment of loan taken by respondent no. 2 which is a corporate entity - Held that: - the appellants were directed to deposit an amount of ₹ 85 lacs within 30 days failing which the defence shall stand struck off. While, it is not in dispute that the loan was taken by the corporate entity/respondent no. 2 and the loan would have ordinarily to be repaid by it, but something more transpired regarding the repayments - the appellant nos. 1 and 2 admitted and undertook to repay the loan amount. There is a clear admission by the appellants to repay the loan on behalf of their corporate entity. Insofar as there is an acknowledgement and undertaking on behalf of two individuals – appellant nos. 1 & 2 to repay the loan on behalf of their corporate entity/respondent no. 2, and the appellants would fall within the purview of Order 39 Rule 10 CPC. The impugned order directing them to deposit the said monies cannot be faulted - appeal dismissed - decided against appellant. Issues involved:1. Interpretation of Order 39 Rule 10 CPC regarding the liability of private individuals/directors to deposit money for repayment of a loan taken by a corporate entity.2. Examination of written statements and legal notices to determine admission and undertaking to repay the loan on behalf of the corporate entity.3. Comparison with previous judgments to establish liability under Order 39 Rule 10 CPC.Detailed Analysis:1. The judgment revolves around the interpretation of Order 39 Rule 10 CPC concerning the obligation of private individuals/directors to deposit funds for the repayment of a loan acquired by a corporate entity. The appeal contested an order directing the appellants and respondent no. 2 to deposit a specified amount to secure the interest of respondent no. 1 in loan repayment. The appellants argued against the order, citing lack of privity of contract between the corporate entity and its directors for loan repayment, challenging the validity of the directive under Order 39 Rule 10 CPC.2. The court analyzed the written statements filed by the defendants, noting clear admissions regarding the loan transaction and partial payments made. The court highlighted specific excerpts from the written statement acknowledging the loan amount, installment payments, and the involvement of the directors in facilitating the loan repayment. The court emphasized the significance of these admissions in determining the liability of the appellants under Order 39 Rule 10 CPC, considering the admitted undertakings and acknowledgments made in legal notices and written statements.3. In support of the decision, the court referenced previous judgments, including Space Enterprises vs. Srivivasa Enterprises Limited and Mukesh Hans & Anr. vs. Smt. Uma Bhasin & Ors., to establish the legal precedent regarding liability under Order 39 Rule 10 CPC. The court emphasized the distinction between the liability of individual directors and the corporate entity, relying on the admissions and undertakings made by the appellants in legal notices and written statements to affirm the applicability of the impugned order. The court concluded that the appeal lacked merit, upholding the impugned order directing the deposit of funds for loan repayment.In conclusion, the judgment provides a detailed analysis of the issues surrounding the liability of private individuals/directors for loan repayment on behalf of a corporate entity, emphasizing the importance of admissions and undertakings in legal proceedings to determine such liabilities under Order 39 Rule 10 CPC.