Kerala High Court
Indian Overseas Bank vs A.B. Senan And Anr. on 25 January, 1999
Equivalent citations: AIR1999KER364, [1999]96COMPCAS639(KER), AIR 1999 KERALA 364, (1999) ILR(KER) 2 KER 488, (1999) 2 KER LT 478, (1999) 4 CIVLJ 556, (1999) 96 COMCAS 639, (1999) 2 BANKCLR 137
ORDER S. Sankarasubban, J.
1. The Indian Overseas Bank, Thiruvananthapuram is the revision petitioner. It obtained a decree against respondents 1 and 2 for money along with K. R. L. Engineering and Construction Company Pvt. Ltd. In execution when the Bank sought to proceed against the properties belonging to the respondents, respondents filed E. A. 867/1992 for a direction that they are not personally liable for the decree amount and hence their property cannot be sold in auction. The Court below, by the impugned order, has held that the suit was filed for getting certain amounts from the first defendant, which is a private Limited Company, Respondents 1 and 2, who were defendants 2 and 3, were only Managing Director and Director respectively. Unless any fraudulent act was pleaded, no personal liability can be tacked on to respondents 1 and 2. In the above view of the matter, the Court below held that judgment debtors 2 and 3 cannot be personally proceeded against. It is against that the present C. R. P. is filed.
2. Learned counsel for the petitioner Shri Chacko George contended before me that if the decree is perused, it would show that the decree is passed against all the three defendants, viz., M/s. K. R. L. Engineering and Construction Company Pvt. Ltd., A. B. Senan, Managing Director and K. R. Lalithambika, Director. The decree is as follows :--
"In the result the suit is decreed against the defendants and their assets for Rs. 54,790.14/-with interest at 19.50% per annum from the date of suit till this day and at 6% per annum thereafter i.e. from this day till date of recovery and with costs".
Thus, there is no dispute or there is no confusion that the decree is against respondents 1 and 2 also. Learned counsel then submitted that unless the decree is a nullity, the executing Court has to execute the decree. He further submitted that there is no difficulty in construing the decree because the language of the decree is plain. Learned counsel further submitted that it was contended before the trial Court by defendants 2 and 3 that they are not necessary parties. In fact Issue No. 2 was whether defendants 2 and 3 are necessary parties. The trial Court held that they are necessary parties. Further, the learned counsel submitted that the plaintiff had a case that loan was given to the Company on the basis of the promise made by defendants 2 and 3. It was in that capacity that they were impleaded in the suit.
3. Learned counsel for the respondents Shri G.S. Raghunath brought to my notice the decision of the Orissa High Court in Hrushikesh Panda v. Indramani Swain, AIR 1987 Orissa 79. In that case, a Division Bench of the Orissa High Court held as follows (para 10):--
"A money decree was passed in a suit against a Company and its Managing Director making both jointly and severally liable. The decree holder applied for attachment of personal property of the Managing Director. The executing Court disallowed the same. The first appellate Court, however, held that the executing court could not go behind the decree. The question before the Court in the present case was whether the executing Court could construe the decree."
Thereafter the Court held as follows :--
"As there is no general rule for construing decrees, each case must depend upon its own facts. A general direction making the defendants 'jointly and severally' liable no doubt prima facie imposes a personal liability on all the defendants, but the above words are not conclusive of the question and empower the executing Court to construe the decree and in case of a doubt benefit must be given to the judgment debtor in this regard."
Thereafter the Court went on to hold as follows (at page 82) :--
"The directors are personally liable to persons who lend money to the company only if they obtain the loan by fraudulent misrepresentations. It is, therefore, obvious that directors are generally immune from liability to creditors of their company."
Thus, in that case the Orissa High Court held that even though the Managing Director was made liable under the decree, it went on to hold that under substantive law, the Director was not personally liable and hence it construed the decree as one making the company alone liable. In this context it is pertinent to note that in paragraph 6 of the judgment the High Court of Orissa found that no issue was raised in the suit regarding the personal liability of the Managing Director; nor was there any discussion on this aspect of the matter in the entire judgment as to whether the appellant as the Managing Director of the Company was liable in his personal capacity also.
4. So far as the case in hand is concerned, the trial Court judgment was given to me for my perusal. In the first paragraph itself the allegations on the plaint are stated. The following allegations are worth noting.-- The plaintiff has granted the first defendant a temporary overdraft accommodation for the purpose of meeting its working capital requirements, firstly on 25-10-78 and subsequently on several dates thereafter. The second and third defendants are the Managing Director and Director respectively of the first defendant-Company. The advances granted to the first defendant-Company. The advances granted to the first defendant was on the strength of a specific undertaking/promise made by the defendants to liquidate the entire outstanding in the said account including costs and expenses within one month.
5. The contention taken by the defendants was that the suit was barred by limitation. Defendants 2 and 3 are unnecessary parties and they are not personally liable.
6. Considering issue No. 1, the trial Court held as follows :--
"I cannot accept this argument because the last two sentences in Exhibit A1 would go to prove that the liability of repayment has been admitted by the defendants............. Exhibit A2 would also go to prove that the liability has been admitted by the defendants. ............ All these documents would go to prove that the liability has been admitted by the defendants and so the suit is not barred by limitation".
Issue No. 2 was whether defendants 2 and 3 are necessary parties. The Court held that they are necessary parties. Issue No. 4 was, what is the amount due to the plaintiff. In discussing that issue, the trial Court has held as follows :--
"The contention raised by defendants 2 and 3 is that they are not liable for the plaint amount and the suit is barred by limitation............... There is absolutely no evidence to substantiate the contentions raised in the written statement of the defendants.............. The documents produced by the plaintiff would prove the plaintiff's case on all fours. The defendant did not come to the box to present their case in its entirety. The perspicacity of Exhibit A1 to A7 would convince this Court to decree the suit as prayed for in the plaint with cost".
Thus, on facts even going by the judgment of the Orissa High Court, the case stands on a different footing. Here, the trial Court found that defendants 2 and 3 are personally liable.
7. There is also another factor which stands against the present respondents, that is, they filed a petition under Sections 151 and 152, C. P. C. to correct the judgment and decree so as to take away the liability cast on them in the judgment and decree. For this purpose, the respondents had filed I. A. 1863/1986. That was disposed of by order dated 25-8-1990. The Court went on to find whether the correction can be allowed. In paragraph 5, the Court held as follows :--
"The contentions of the learned counsel for applicants-defendants 2 and 3 are that Court passed a personal decree against defendants 2 and 3 by accidental slip or omission. Defendants 2 and 3 raised a contention in the suit that they are not personally liable. But the Court found that they are personally liable for the suit amount. Such a conclusion was arrived at on the basis judicial reasonings. Therefore the correction sought for is not one that comes within the purview of Section 152 of C.P.C".
According to me, this order estops the defend-ants from taking the same contentions again.
8. According to me, the Division Bench decision of the Orissa High Court with great respect, is not correct. It is true that when the decree is a nullity, the executing Court can ignore the decree. That is a circumstance when the executing Court is allowed to go behind the decree because usually the rule is, the executing Court cannot go behind the decree. In this context, it is useful to refer the decision of the Supreme Court in Vasudev Dhanjibhai Modi v. Rajabhai Abdul Rehman (1971) 1 SCR 66 : (AIR 1970 SC 1475) (at page 1476 (of AIR)):--
"When a decree which is a nullity, for instance, where it is passed without bringing the legal representatives on record of a person who was dead at the date of the decree, or against a ruling prince without a certificate, is sought to be executed an objection in that behalf may be raised in a proceeding for execution. Again, when the decree is made by a Court which has no inherent jurisdiction to make it, objection as to its validity may be raised in an execution proceeding if the objection appears on the face of the record: where the objection as to the jurisdiction of the Court to pass the decree does not appear on the face of the record and requires examination of the questions raised and decided at the trial or which could have been but have not been raised, the executing Court will have no jurisdiction to entertain an objection as to the validity of the decree even on the ground of absence of jurisdiction. In Jnanendra Mohan Bhaduri v. Rabindra Nath Chakravarti (AIR 1933 PC 61) the Judicial Committee held that where a decree was passed upon an award made under the provisions of the Indian Arbitration Act, 1899, an objection in the course of the execution proceeding that the decree was made without jurisdiction, since under the Indian Arbitration Act, 1899, there is no provision for making a decree upon an award, was competent. That was a case in which the decree was on the face of the record without jurisdiction."
Further, when a proposition is mixed with law and facts, the executing Court cannot say that the decree is a nullity. As a matter of fact, in Ittavira Mathai v. Varkey Varkey (1964) 1 SCR 495 : (AIR 1964 SC 907), the question raised before the Supreme Court was whether a question of limitation which was not raised before the trial Court or the High Court could be raised before the Supreme Court. The Supreme Court held that question of limitation raised was not a pure question of law, but was a mixed question of law and fact. Recently a similar question arose before the Supreme Court in the decision reported in Bhawarlal Bhandari v. U.H.M. Lifting Enterprises, JT 1998 (8) SC 393: (AIR 1999 SC 246). In that case, during execution a contention was raised before the executing Court that the award filed by the Arbitrator was barred by limitation. The question was whether the award was filed by the Arbitrator on his own or not. The Division Bench of the High Court noted that if the award was filed by the Arbitrator suo motu, then the award decree cannot be said to be barred by limitation but if, on the other hand, the award was filed at the instance of the decree holder, then the question of limitation would arise. The Supreme Court then observed that this shows that it is a question of fact and law. That issue should be raised before the award was made and such plea can never make the decree a nullity. The Supreme Court thereafter went on to hold as follows (at page 250 (of AIR)) :--
"This is not a case in which the award decree on the face of it was shown to be without jurisdiction. Even if the decree was passed beyond the period of limitation, it would be an error of law or at the highest a wrong decision which can be corrected in appellate proceeding and not by the executing court which was bound by such decree. In the present case the award decree has become final and that too when the respondent-judgment debtor did not think it fit to contest the proceedings and did not contend that no decree could be passed. He cannot now, in execution proceedings, contend that the decree should be ignored as being a nullity."
Thus, it could be seen from the decree itself that it was a nullity. According to me, the decision of the Orissa High Court is not in consonance with the Supreme Court decision referred to above. In the present case since the decree is very clear that all the defendants are personally liable, the decree cannot be said to be a nullity, since there is no contention that the decree was passed without jurisdiction. The question whether defendants 2 and 3 are personally liable is a question of law and fact. If the trial Court was wrong, then defendants 2 and 3 ought to have agitated the matter by taking it in the hierarchy of proceedings. Added to this, there is the other fact that the defendants 2 and 3 attempted to correct the judgment and decree. The Court held that it was not a mistake; but defendants 2 and 3 were personally made liable on judicial reasoning.
In the above view of the matter, I set aside the impugned order. I hold that respondents 1 and 2 are personally liable for the decree and their properties can be proceeded against.
The C. R. P. is allowed.