Himachal Pradesh High Court
H.P.S.I.D.C. Ltd vs M/S Kanol Herbals (P) Ltd & Ors on 9 March, 2018
Author: Sandeep Sharma
Bench: Sandeep Sharma
IN THE HIGH COURT OF HIMACHAL PRADESH
SHIMLA
Civil Suit No.20 of 2003.
Judgment Reserved on: 06.03.2018
.
Date of decision: 09.03.2018
H.P.S.I.D.C. Ltd. .... Plaintiff
Versus
M/s Kanol Herbals (P) Ltd & Ors. .... Defendants
Coram
The Hon'ble Mr.Justice Sandeep Sharma,Judge.
Whether approved for reporting ? Yes.
For the Plaintiff: Mr.Ajay Kumar Sood, Senior Advocate
r with Mr.Dheeraj K.Vashishta, Advocate.
For Defendants 1 to 4: Mr.R.L. Sood, Senior Advocate with
Mr.Arjun Lall, Advocate.
Defendant No.5: Ex-parte.
Sandeep Sharma,J.
1. Instant Civil Suit has been instituted by the plaintiff, Himachal Pradesh State Industrial Development Corporation Limited (for short 'H.P.S.I.D.C. Ltd.'), a Government Company within the meaning of Section 617 of Companies Act, 1956 against the defendants, claiming a decree for a sum of Rs.40,20,631/- with future interest.
2. Defendant No.1 is a Private Limited Company, whereas defendants No.2 to 4 are its Guarantors. Defendant No.5-Himachal Pradesh Financial Corporation, who is a proforma defendant, stood ex-parte on 21.7.2004.
1Whether the reporters of Local Papers may be allowed to see the judgement? Yes.
::: Downloaded on - 13/03/2018 23:25:41 :::HCHP 23. Aforesaid suit came to be filed on behalf of plaintiff-Company through Shri Pawan Kumar Bali, Manager Project(Legal), who is authorized by Managing Director of .
plaintiff-Company to sign, verify plaint, institute suit on behalf of the plaintiff-Company and to appoint advocate etc. for prosecuting the suit. Plaintiff pleads that defendant No.1 made an offer of Rs.96 lacs to the proforma defendant No.5 to purchase the taken over assets of M/s.RKB Herbals (P) Ltd., village Shillu Patta Road, Parwanoo, District Solan, H.P. Aforesaid offer made on behalf of defendant was finalized in favour of defendant No.1 for a sum of Rs.96 lacs only for the entire taken over assets of M/s.RKB Herbals (P) Ltd. The plaintiff and proforma defendant No.5 had pari-passu and joint charge on the assets of M/s.RKB Herbals (P) Ltd.
4. The averments made in the plaint further reveal that plaintiff-Company had given a term loan of Rs.52.54 lacs to M/s.RKB Herbals (P) Ltd. and in this regard requisite documents were executed by it on 10.2.1983, 7.4.1986, 17.11.1988 & 22.6.1987. Since M/s.RKB Herbals (P) Ltd.
failed to pay the term loan, property/assets in question came to be taken over by plaintiff and proforma defendant No.5.
Offer of defendant No.1 to purchase the entire taken over assets of M/s.RKB Herbals (P) Ltd. at a value of Rs.96 lacs was accepted by the plaintiff and proforma defendant No.5 and as such hypothecated/mortgaged assets of M/s.RKB Herbals (P) ::: Downloaded on - 13/03/2018 23:25:41 :::HCHP 3 Ltd. were sold to the defendant No.1 for Rs.96 lacs. As per averments contained in the plaint, defendant No.1 paid Rs.24 lacs against total sale consideration of Rs.96 lacs and for .
payment of balance amount executed an agreement.
5. Plaintiff has pleaded that as per agreement of purchase dated 30.3.1994, executed interse parties, out of balance sale price of Rs.72 lacs, the plaintiffs were to receive Rs.47.37 lacs and proforma defendant No.5 was to receive Rs.24.63 lacs. Defendant No.1 agreed to pay the balance sale price to the plaintiff and defendant No.5 in ten half yearly installments commencing from 10.4.1995. It is further averred by the plaintiff that the aforesaid amount was to be repaid by 10.10.1999 in the following manner:-
HPSIDC HPFC Date of
Plaintiff Proforma payment
Defendant No.5
i) Rs.4,73,700/- 2,46,300/- 10.04.1995
ii) Rs.4,73,700/- 2,46,300/- 10.10.1995
iii) Rs.4,73,700/- 2,46,300/- 10.04.1996
iv) Rs.4,73,700/- 2,46,300/- 10.10.1996
v) Rs.4,73,700/- 2,46,300/- 10.04.1997
vi) Rs.4,73,700/- 2,46,300/- 10.10.1997
vii) Rs.4,73,700/- 2,46,300/- 10.04.1998
viii) Rs.4,73,700/- 2,46,300/- 10.10.1998
ix) Rs.4,73,700/- 2,46,300/- 10.04.1999
x) Rs.4,73,700/- 2,46,300/- 10.10.1999
Rs.47,37,000/- Rs.24,63,000/-
::: Downloaded on - 13/03/2018 23:25:41 :::HCHP
4
6. Plaintiff further averred that the defendant agreed to pay interest on the balance purchase amount @ 17.5% with six monthly rests. It is further averred in the plaint that for .
securing the payment of the balance sale consideration and interest thereon, defendant No.1 executed purchase agreement on 30.3.1994 with respect to payment of Rs.72 lacs with the plaintiff and proforma defendant No.5 jointly.
7. Plaintiff further averred that defendants No.2 to 4 stood guarantee with respect to the balance sale consideration of the agreement dated 30.3.1994 and as a consequence of which executed deed of guarantee on 30.3.1994 and 19.7.1994, guaranteeing therein payment of balance sale consideration and interest thereon as per agreement dated 30.3.1994. Plaintiff further averred that defendants No.2 to 4 being guarantors are liable to pay outstanding amount alongwith interest to the plaintiff because their liability being guarantors is joint and several and it is continuing guarantee provided by defendants No.2 to 4 in favour of the plaintiff-
Company in respect of the balance sale consideration payable to the plaintiff-Company by defendant No.1. Plaintiff has further pleaded that since assets of M/s.RKB Herbals (P) Ltd.
were sold jointly by the plaintiff and proforma defendant No.5 under one agreement of sale dated 30.3.1994, they kept their pari-passu charge on the said assets for unpaid sale consideration in proportion to their share.
::: Downloaded on - 13/03/2018 23:25:41 :::HCHP 58. It has further been averred in the plaint that as per documents executed by defendant No.1 in favour of the plaintiff-Company, as has been taken note hereinabove, the .
balance amount of purchase together with agreed interest was to be repaid in half yearly installments commencing from 10.4.1995 and the last installment was to be repaid on or before 10.10.1999.
9. Defendant No.1 continued to pay principal amount and interest and last payment towards principle amount was made on 3.1.2000 and last payment towards installments of interest was received on 20.5.2000. Since defendants No.1 to 4 continued to commit default and were irregular in repayment of dues and they failed to comply with terms and conditions of purchase agreement, as detailed hereinabove, and had also failed to pay the installment of principal amount and interest thereon in accordance with the re-payment schedule entered in the agreement of purchase, referred hereinabove, plaintiff issued recall-cum-take over notice on 3.11.2000. Possession of assets was taken over on 4.12.2000 by proforma defendant No.5 and the plaintiff under Section 29 of the State Financial Corporations Act, 1951 (for short 'SFC Act'), whereafter, the assets were sold by proforma defendant No.5 with the consent of plaintiff after giving due notice to the defendants No.1 to 4.
Plaintiff further averred that plant and machinery were sold for Rs.3.45 lacs on 30.3.2002 and land and building was sold for ::: Downloaded on - 13/03/2018 23:25:41 :::HCHP 6 Rs.70 lacs on 30.1.2003, whereafter sale proceeds were shared between plaintiff and proforma defendant No.5 as under:-
.
"i) HPSIDC Rs.48,01,338.00
ii) HPFC Rs.25,43,662.00
Total Rs.73,45,000.00"
10. As per averments contained in the plaint, after adjustment of Rs.48,01,338/- received from the sale of assets on 30.3.2002 and 30.1.2003 respectively, a sum of Rs.1,02,18,573/- was still due to the plaintiff from defendants No.1 to 4 as on 31.1.2003. But, plaintiff of its own waived a sum of Rs.61,97,942/- by calculating interest on simple basis and thereafter found a sum of Rs.40,20,631/- still payable by defendants No.1 to 4 on account of shortfall in the amount payable by them to the plaintiff and as such issued demand notice dated 5.2.2003 for Rs.40,20,631/-. In the aforesaid background, plaintiff further averred that liability of defendants No.1 to 4 is joint and several and since they have failed to pay the amount, it was compelled to file the present suit.
11. Apart from above, plaintiff has also claimed that since the transaction between plaintiff and defendants is of commercial nature, the plaintiff is entitled to pendentelite and future interest at the contractual rate of interest as per the purchase agreement @ 17.5% P.A. with half yearly rests.::: Downloaded on - 13/03/2018 23:25:41 :::HCHP 7
12. As per plaintiff, cause of action accrued to the plaintiff against the defendants firstly on 30.3.1994 when the agreement of purchase was executed and thereafter on the .
dates on which the amount was agreed to be repaid between 10.4.1995 to 10.4.1999 and also on 20.5.2000, when defendant No.1 made payments towards loan amount and the on 4.12.2000 when assets were taken over by defendant No.5, then on 30.3.2002 and 30.1.2003 when assets were sold and sale proceeds were received by the plaintiff from proforma defendant No.5 and lastly on 5.2.2003 when demand notice was issued. With the aforesaid pleadings/averments contained in the plaint, plaintiff has sought decree in the sum of Rs.40,20,631/- with costs and interest @ 17.5.% per annum from the date of suit till realization of the decreetal amount with half yearly rests in its favour and against the defendants.
13. Defendants No.2 to 4 contested the suit by way of filing joint written statement and took preliminary objections regarding malafide, mis-conceived, estoppel, mis-
representation, suppression and concealment of material facts, limitation, cause of action and maintainability of the suit in the present form etc.
14. Defendants, while claiming that suit filed by the plaintiff is malafide, mis-conceived and is not maintainable, have categorically contended that the plaintiff did not grant any loan or advance to the first defendant and as such, the ::: Downloaded on - 13/03/2018 23:25:41 :::HCHP 8 plaintiff has no cause of action against the defendants.
Defendants further pleaded that plaintiff is estopped by its own acts and conduct to file and maintain the suit because in the .
present suit, the purchase agreement was executed inter-se plaintiff, proforma defendant No.5 and defendant No.1 on 30.3.1994. In the purchase agreement, it was represented by the plaintiff that the HPSIDC initiated take-over action under Section 29 of the 'SFC Act' against the debtor (previous owners R.K.B. Herbals Private Limited) and took over the possession of the mortgaged hypothecated assets of the debtors Unit at Village Shillu, Patta Road, Parwanu on 10.7.1992, for sale of the said assets in order to recover outstanding loan dues of both the Corporations. Defendants further averred that Section 29 of the 'SFC Act' is not applicable to the plaintiff Corporation as it is not Financial Corporation within the meaning of Section 2(b) of the 'SFC Act'. It is averred that the plaintiff by way of misrepresentation of facts allured the first defendant to enter into the covenant/instrument and as such, present suit deserves to be dismissed. Defendants have also sought dismissal of the suit on the ground of the limitation and have claimed that suit is barred in law in as much as it is based on a covenant/instrument (purchase agreement in question), which is against the provisions of the Indian Contract Act as also beyond the power purview and jurisdiction of the 'SFC Act'. Defendants have further averred ::: Downloaded on - 13/03/2018 23:25:41 :::HCHP 9 that plaintiff has connived with defendant No.5 by entering into tripartite agreement although in-fact defendant No.5 was never empowered by Sections 25 and 26 of the 'SFC Act' to .
grant loan or advances to the first defendant as wrongly alleged and claimed by the plaintiff. Defendants have claimed that bare perusal of covenant/instrument would go to show that balance consideration amount of Rs. 72 lacs has been shown as loans to the defendants, which are in fact not loans or advances to the first defendant, and it is highly unethical, unlawful, illegal, r unconstitutional to treat the balance consideration amount as loans by the plaintiff and the proforma defendant No.5, which are the instruments of the State. As per defendants, they have paid total amount of Rs.57,20,260/- to the plaintiff and Rs.23,38,032/- to defendant No.5, which fact has been totally concealed/suppressed by the plaintiff in the plaint.
Defendants, while giving reaction on the plaint on the law of limitation, have further pleaded that purchase agreement itself was executed on 30.3.1994. As per the purchase agreement, installments were to be paid as per the table framed therein.
The period for the payment of the installments commenced on 10.4.1995 and the last installment due and payable was on or before 10.10.1999. As per the averments made in the plaint itself show that the first defendant paid towards principal lastly on 3.1.2000 and payments towards interest were made ::: Downloaded on - 13/03/2018 23:25:41 :::HCHP 10 by the first defendant, which, according to the plaintiff, was received on 20.5.2000.
15. It is averred by the defendants that the payment .
was made by a bank draft on 15.5.2000 and not on the 20.5.2000, as wrongly averred in the plaint and that the suit has been filed and presented before the Hon'ble Court on 19.5.2003 and admitted on 20.5.2003. It is further averred that the present suit is barred under the provisions of Limitation Act, 1963, as the same is beyond the statutory period of three years and therefore, the same is liable to be dismissed on this ground also.
16. It is further averred that the plaintiff, in collusion with the proforma defendant No.5, has caused irreparable loss and injury to the defendants by not only wrongly taking possession of the Factory Unit sold to the first defendant, but also misappropriating the consideration amount of Rs.80,58,290/- paid to them. Defendants further averred that they have also been wronged by illegal re-sale of the land & building to Bakson Drugs and Pharmaceuticals Co. Ltd., Parwanoo at the throw away price of Rs.70,00,000/- and plant & machinery at Rs.3,45,000/- respectively. Defendants have further averred that the plaintiff and proforma defendant No.5 have already realized an amount of Rs.1,54,03,290/- and as such claim set up of Rs.40,20,631/- in the present suit is wholly misconceived and untenable. It is further averred that ::: Downloaded on - 13/03/2018 23:25:41 :::HCHP 11 the plaintiff and defendant No.5 wrongfully sold the Herbal Unit for the balance sum of Rs.15,41,710/- and realized Rs.73,45,000/- from the sale proceeds and as such have made .
the wrongful claims against the defendants.
17. Defendants pleads that the throw away prices at which the said factory and plant and machinery have been sold are clear and unmistakable evidence of collusion and conspiracy between the plaintiff and the proforma defendant No.5 to defraud the defendants to enrich themselves at the expense of the defendants.
18. On merits, defendant Nos. 2 to 4 also refuted the allegations contained in the plaint. Defendants have denied the authorization given to Shri Pawan Kumar Bali to sign or verify the plaint or to act on behalf of the plaintiff, in any manner. It is also averred that if the function of the plaintiff is to provide financial assistance in the form of Term Loan, EQUITY and Soft Loans, in that eventuality neither the plaintiff nor the proforma defendant ever granted any loan or made any advances to the defendants or any of them in regard to the transaction in this suit and that the discussions between the parties for the sale and purchase of Herbals' assets and properties were conducted solely by and between the defendants and the plaintiff and the proforma defendant never came into the picture at all until 30.3.1994, when, upon the execution of the said indenture of purchase, the defendants ::: Downloaded on - 13/03/2018 23:25:41 :::HCHP 12 came to know for the first time that the plaintiff and the proforma defendant were the sellers of Herbals' assets and properties and they allegedly were the secured Creditors of .
Herbals Unit in respect of very large sums of money. It is the claim of the defendants that the said indenture of purchase dated 30.3.1994 is unlawful, illegal, un-constitutional, contrary to public policy of India and other Laws. Defendants further claimed that similarly, the purported guarantees alleged to be executed on the basis of the alleged Indenture of Purchase dated 30.3.1994 are also unlawful, illegal and contrary to public policy. It is averred that the original of Indenture of Purchase and Deeds of Guarantee and other documents are not in the custody of the proforma defendant.
19. It is averred by the defendants that although from time to time and also in the year 2000 the first defendant made various payments to the plaintiff and the plaintiff in most of those cases wrongfully appropriated them to the interest account and not to the principal installment account and thereby the plaintiff caused undue prejudice to the defendants.
It is alleged by the defendant that the claim of the plaintiff for Rs.40,20,631/-, as made in the plaint, is wholly without merit as no sum is/was ever due or owing by the defendants or any of them to the plaintiff. It is further alleged that since the aforesaid sum of Rs.40,20,631/- is not due or payable by them to the plaintiff, the claim for interest thereon at the rate of ::: Downloaded on - 13/03/2018 23:25:41 :::HCHP 13 17.5% per annum or at any other rate is wholly misconceived.
It is alleged by the defendants that except the Indenture of Purchase, dated 30.3.1994, which was executed at Shimla, no .
cause of action accrued within the jurisdiction of Himachal Pradesh. It is also averred that no cause of action accrued in favour of the plaintiff because notice, dated 3.11.2000, under Section 29 of the Act issued by the proforma defendant, was served upon the defendants at Kolkata, which is situated outside the aforesaid jurisdiction. In the aforesaid background, defendants have prayed for dismissal of the aforesaid suit with costs.
20. The plaintiff filed replication reaffirming its own case and refuting the case of the defendants as pleaded in the written statement.
21. On the pleadings of the parties, the following issues came to be framed on 09.07.2004:-
"1. Whether the plaintiff Company is incorporated under the Companies Act, 1956 and whether Shri P.K. Bali is competent to file the present suit on behalf of the plaintiff Company as alleged? OPP.
2. Whether the plaintiff Company is entitled to recover the suit amount alongwith interest as claimed or at any other rate? OPP.
3. Whether the suit of the plaintiff is within limitation? OPP.
4. Whether the suit is not properly valued for purpose of Court fees and jurisdiction? OPD.::: Downloaded on - 13/03/2018 23:25:41 :::HCHP 14
5. Whether this Hon'ble Court has no jurisdiction to try this suit? OPD.
6. Whether the plaintiff company is estopped from filing the suit on account .
of its acts, deeds and conduct etc. as alleged? OPD
7. Whether the plaintiff and proforma defendant sold the taken over assets at throw away prices as alleged? OPD
8. Whether the purchase agreement dated 30.3.1994 is illegal and void as alleged and if so its effect? OPD.
9. Whether the plaintiff delayed the delivery of the factory premises to the defendants by about six months, if so, its effect? OPD.
10. Relief."
22. Before exploring answer to aforesaid issues framed by this Court on 9th July, 2004, certain facts are required to be noticed. On 10th September, 2004, evidence of plaintiff was closed on the statement of learned counsel representing the plaintiff, whereafter repeatedly the matter was adjourned by this Court for examination of defendants' evidence. Subsequently, on 30th August, 2005, an application bearing OMP No.413 of 2005 under Order 26 Rule 4 of the Code of Civil Procedure came to be filed on behalf of defendant No.2 through his Attorney for recording his statement as his own witness on Commission. Vide order dated 30th August, 2005, this Court appointed Commissioner for recording statement of defendant No.2 at Kolkata, however, fact remains that time was repeatedly enlarged for recording statement of ::: Downloaded on - 13/03/2018 23:25:41 :::HCHP 15 defendant on the requests having been made by the defendants. On 24th March, 2006, this Court recorded that Local Commissioner has recorded the statement of witness of .
the defendants and accordingly closed evidence of the defendants. Subsequently on 5th October, 2007, an application bearing OMP No.18 of 2007 under Order 22 Rules 3 and 9 CPC read with Section 5 of the Limitation Act came to be filed on behalf of the plaintiff for bringing on record legal representatives of deceased defendant No.2. On 26th February, 2009, proposed legal representative; namely; Udit Kanoi was ordered to be proceeded ex-parte since he refused to take the notice.
23. On 4th June, 2009, ex-parte order, passed by this Court against defendant No.2, was set aside, whereafter time was granted to defendant No.2 for moving an application for amendment of written statement. Vide order dated 10th September, 2010, this Court allowed/permitted newly added defendant No.2 to file additional written statement. Newly added defendant, after having filed additional written statement, claimed that some additional issues arise from the additional written statement, however, fact remains that this Court vide order dated 4th April, 2011, rejected the aforesaid prayer, having been made on behalf of newly added defendant No.2 on the ground that in the additional written statement, newly added defendant No.2 has taken more or less same ::: Downloaded on - 13/03/2018 23:25:41 :::HCHP 16 stand, as has been taken by the original defendants No.2 to 4 in the earlier written statement filed on 20.12.2003.
Defendants being aggrieved with the order dated 4th April, .
2011 preferred LPA No.179 of 2011 before the Division Bench of this Court, which came to be rejected vide judgment dated 28.9.2011.
24. This Court, while passing order dated 4.4.2011, specifically observed in para-27 of its order that newly added defendant No.2 Udit Kanoi in substance has taken same pleas as have been taken by original defendants No.2 to 4 in their written statement, which findings came to be upheld by the Division Bench of this Court in LPA referred hereinabove. Now, this Court shall proceed to decide the issues framed hereinabove.
Issue No.1:
25. Mr.R.L. Sood, learned Senior counsel representing the defendants, contended that suit has not been filed by the competent person. PW-2, Mr.Pawan Kumar Bali, has failed to prove Ex.P-2, whereby the Managing Director of the plaintiff was authorized to nominate an officer to institute the present suit. Mr.Sood, while referring to Ex.P-2, submitted that Mr.Pawan Kumar Bali has failed to identify his signatures on Ex.P-2 or to prove the contents of the same in accordance with law. While seeking dismissal of the suit on this sole count, learned Senior counsel has further contended that PW-2;::: Downloaded on - 13/03/2018 23:25:41 :::HCHP 17
namely; Mr.Pawan Kumar Bali, has failed to properly prove or exhibit, Ex.P-3 as he has failed to identify the signatures of the Managing Director on Ex.P-3, whereby he is/was authorized to .
file the suit. Mr.Sood further contended that mere exhibition of documents by marking them as exhibits, even without any objection from the other side cannot and does not dispense with the proof required in law to prove them and as such suit deserves to be dismissed.
26. Aforesaid arguments/submissions, having been made by learned Senior counsel, are not tenable on the face of documentary evidence adduced on record by the plaintiff, which has been proved in accordance with law. Plaintiff-
Company was incorporated as a Company under the Companies Act, 1956 vide Certificate Ex.P-1, proved in evidence by PW-2 Shri Pawan Kumar Bali, whose deposition in that regard remained un-rebutted during cross-examination.
Perusal of Ex.P-2 clearly suggests that Board of Directors of plaintiff-Corporation vide Resolution dated 18.6.1997 considered the proposal for delegation of various powers to the Managing Director/Head of Division and other Officers. Board of Directors vide aforesaid resolution approved delegation of powers as contained in Annexure-I annexed with Ex.P-2, perusal whereof suggests that Managing Director of the plaintiff-Corporation was authorized to nominate a officer to institute the present suit. Since Ex.P-2 bears no signatures of ::: Downloaded on - 13/03/2018 23:25:41 :::HCHP 18 Managing Director being a copy of resolution of Board of Directors, authenticity of which is also not under challenge, PW-2 Pawan Kumar Bali, who was authorized to institute the .
present suit on behalf of the plaintiff, is/was not required to identify the signatures of Managing Director, if any, on the Ex.P-2. Perusal of Ex.P-3, whereby Managing Director authorized PW-2 Pawan Kumar Bali in terms of Board's Resolution No.18 of 18.6.1997 i.e. Ex.P-2 for filing suit, verifying and signing the pleadings on behalf of plaintiff-
Corporation, clearly suggests that it bears signatures of Managing Director, which has been duly identified/verified by PW-2 in his examination-in-chief. PW-2 Pawan Kumar Bali, Manager Project(Legal) of the plaintiff Corporation has proved on record Resolution Ex.P-2 and Authorization letter Ex.P-3.
There is no evidence on record to prove that suit has not been filed by the competent person. There cannot be any quarrel with the submissions of learned Senior Counsel that mere exhibition of documents by marking them as exhibits, even without any objection from the other side cannot and does not dispense with the proof required in law to prove them, but, in the instant case, as has been discussed hereinabove, documents Ex.P-2 and Ex.P-3 have not been merely exhibited, but the same have been proved in accordance with law by PW-2.
Moreover, no suggestion worth the name has been put to this witness in his cross-examination conducted by defendants qua ::: Downloaded on - 13/03/2018 23:25:41 :::HCHP 19 the aforesaid aspect of the matter. Law relied upon by learned Senior Counsel in support of aforesaid submissions has no application in the present case because documents Ex.P-2 and .
Ex.P-3 duly exhibited have been proved in accordance with law by plaintiff by examining PW-2 Shri Pawan Kumar Bali and as such, there is no need to refer the same. Accordingly, in view of above, issue is decided in favour of the plaintiff and against the defendants.
Issue Nos.4 & 5:
27. r Onus to prove that suit is not properly valued for the purpose of court fee and jurisdiction is/was on the defendants, but neither there is any evidence led on record nor any argument addressed in this regard and as such the same are decided against the defendants. I hold that the suit has been properly valued for the purpose of court fee and jurisdiction.
Issue Nos.2, 6 and 8:
28. All these issues being interconnected and inter linked can conveniently be disposed of together in order to avoid the repetition of evidence and findings and as such same are being taken up together for consideration. Onus to prove issues No.6 & 8 is on defendants, whereas issue No.2 is to be proved by the plaintiff.
29. Mr.Ajay Kumar, learned Senior counsel, representing the plaintiff while inviting the attention of this ::: Downloaded on - 13/03/2018 23:25:41 :::HCHP 20 Court to Ex.P-4 i.e. agreement of purchase, contended that pursuant to offer made by defendant No.1 for purchase of taken over assets of M/s RKB Herbals Pvt.Ltd, plaintiff agreed .
to sell the taken over assets for Rs.96 lacs. Defendant No.1 gave Rs.24 lacs to plaintiff as well as proforma defendant No.5 against total sale consideration and for further balance of Rs.72 lacs executed agreements with the Corporations. Out of the balance sale consideration of Rs.72 lacs, the plaintiff-
Corporation was to receive Rs.47.37 lacs, whereas proforma defendant No.5 was to receive Rs.24.63 lacs, as agreed interse parties vide agreement dated 30.3.1994 Ex.P-4. As per agreement, amount was agreed to be paid in ten half yearly installments starting from 10.4.1995 and ending on 10.10.1999 as per details given in the agreement and also reproduced in para-4 of the plaint. Vide aforesaid agreement, defendants were also liable to pay interest @ 17.5% per annum with half yearly rests on the balance sale consideration of Rs.72 lacs. Since defendants failed to adhere to the repayment schedule as agreed interse parties vide agreement Ex.P-4, plaintiff issued recall-cum-take over notice on 3.11.2000 and assets were taken over on 4.11.2000 by proforma defendant No.5 under Section 29 of the 'SFS Act'. Assets, taken over by proforma defendant No.5, were sold with the consent of plaintiff. Plant and machinery were sold on 30.3.2002 for Rs.3.45 lacs and the land and building was sold for Rs.70 lacs ::: Downloaded on - 13/03/2018 23:25:41 :::HCHP 21 on 30.1.2003, whereafter, sale proceeds were distributed amongst the plaintiff and proforma defendant No.5 as detailed in para-10 of the plaint i.e. Rs.48,01,338/- to the plaintiff-
.
Corporation and Rs.25,43,662/- to the proforma defendant No.5. Though after adjusting aforesaid amount received from the sale of the assets, a sum of Rs.1,02,18,573/- was found due to the plaintiff from defendants No.1 to 4 as on 31.1.2003, however, the plaintiff of its own waived a sum of Rs.61,97,942/- by calculating interest on simple basis and thereafter found a sum of Rs.40,20,631/- still payable by defendants No.1 to 4 on account of shortfall in the amount payable by them to the plaintiff and as such a demand notice dated 5.2.2003 came to be issued against defendants for Rs.40,20,631/-.
30. Mr.Sood, while referring to the deeds of guarantee dated 30.3.1994 and 19.7.1994 (Ex.P-7 & Ex.P-8) duly executed by defendants No.2 to 4 with respect to balance sale consideration, contended that defendants No.2 to 4 being guarantors are liable to pay outstanding amount alongwith interest to the plaintiff because their liability being guarantors is joint and several and it is continuing guarantee provided by defendants No.2 to 4 in favour of the plaintiff-Company in respect of the balance sale consideration payable to the plaintiff-Company by defendant No.1. Mr.Sood further contended that plaintiff is also entitled to pendentelite and ::: Downloaded on - 13/03/2018 23:25:41 :::HCHP 22 future interest at the contractual rate of interest as per the purchase agreement @ 17.5% P.A. with half yearly rests.
31. Mr.R.L. Sood, learned Senior Counsel representing .
the defendants, contended that Ex.P-4 i.e. alleged agreement of purchase is illegal because plaintiff-Corporation alone as the owner was required under law to sell and transfer the taken over assets by a registered sale deed alone. In law it could not enter into an agreement of purchase with the defendant No.1- Company and as such same being against law is unenforceable and illegal and the suit based on the same is bound to be dismissed.
32. To substantiate his aforesaid arguments, learned Senior Counsel placed reliance upon judgment passed by Hon'ble Apex Court in Gajraj Jain vs. State of Bihar and Others, (2004)7 SCC 151. While seeking reliance upon aforesaid judgment, learned Senior Counsel strenuously argued that it is an established/settled law that after taking over the mortgaged/hypothecated immovable and movable assets of RKB Herbals the plaintiff-Corporation became the owners thereof, therefore, the mandatory provisions as contained in Section 29(4) of the 'SFC Act' casts a statutory obligation on the plaintiff to sell the same by executing a registered sale deed in favour of any party including the present defendant No.1. Mr.Sood, while refuting submissions/arguments advanced by Mr.Ajay Kumar Sood, ::: Downloaded on - 13/03/2018 23:25:41 :::HCHP 23 learned Senior Counsel that agreement of purchase Ex.P-4 was a sale of immovable property in terms of Section 54 of Transfer of Property Act, 1882, contended that "Sale" is a transfer of .
ownership in exchange of a price paid or promised or part paid or part promised. Learned Senior Counsel contended that such transfer in the case of tangible immovable property of the value of Rs.100/- and upwards or in the case of a reversion or other intangible things can be made only by a registered instrument and as such agreement to sell Ex.P-4 does not amount to the sale of the taken over immovable assets of M/s RKB Herbals and as such agreement of sale could not be entered into in view of the mandatory provisions of Section 29(4) of the 'SFC Act'. Mr.Sood further contended that Ex.P-4 is infact only an agreement of purchase and same is not enforceable against the defendants. No agreement to sell and corresponding purchase of immovable property could be entered into or executed between the parties in view of the law laid down in Gajraj Jain's case supra.
33. Mr.Sood, learned Senior Counsel further argued that agreement to sell Ex.P-4 cannot be termed as "Term Loan Agreement" because no loan amount was ever made available by the plaintiff or proforma defendant No.5 to defendant No.1- Company for the purchase of the immovable property in question. He further argued that agreement although illegal, at best provides for agreed upon sale consideration to be paid ::: Downloaded on - 13/03/2018 23:25:41 :::HCHP 24 in future by way of installments alongwith interest. Since neither amount was advanced by the plaintiff/defendant No.5 to defendant No.1 nor it had changed hands between the .
parties, plaintiff at best could file suit for specific performance, praying therein for decree against defendant No.1 for recovery of unpaid sale consideration amount alongwith interest. While placing reliance upon judgment passed by Hon'ble Apex Court in Meghmala and Others vs. G.Narasimha Reddy and Others, (2010)8 SCC, 383 and Suraj Lamps and Industries Pvt.Ltd. vs. State of Haryana, (2012)1 SCC 656, Mr.Sood contended that an agreement to sell does not create any right to title in favour of intending buyer and transfer of immovable property by way of sale can only be made by a deed of conveyance of sale In the absence of duly stamped/registered sale deed no right title or interest in the immovable property passes in favour of anyone. Learned Senior Counsel further contended that State Financial Corporation is a special statute, therefore, the provisions thereof have to be strictly construed as held.
34. Mr.Sood, learned Senior Counsel, while referring to judgment passed by Hon'ble Apex Court in Karnataka State Industrial and Development Corporation Limited vs. S.K.K. Kulkarni and Others, (2009)2 SCC 236, contended that when a statute mandates that a power has to be exercised in a certain way, it can only be exercised in that way alone and ::: Downloaded on - 13/03/2018 23:25:41 :::HCHP 25 in no other manner. Learned Senior Counsel further contended that something prohibited in law cannot be pleaded and as such agreement of purchase Ex.P-4, which is .
prohibited in law, cannot be enforced against the defendants.
In this regard he placed reliance upon the judgment passed by Hon'ble Apex Court in Hukam Chand Shyam Lal vs. Union of India and Others, (1976)2 SCC 128.
35. In nutshell, case, as projected by learned Senior counsel representing the defendants, is that Ex.P-4, purchase agreement to sell, is illegal and could not be acted upon or enforced against the defendants. However, this Court, after having perused purchase agreement Ex.P-4 as well as other documents adduced on record by plaintiff, is not inclined to accept aforesaid submissions of learned Senior Counsel. It is quiet apparent from the pleadings adduced on record by the respective parties that there is no dispute, if any, with regard to execution of purchase agreement Ex.P-4, which has been duly proved in accordance with law by PW-2 Shri Pawan Kumar Bali in witness box. Factum with regard to execution of agreement referred in Ex.P-4 has also been acknowledged/ admitted in the written statement having been filed by the defendants.
36. In the written statement as well as arguments advanced during the proceedings of the case endeavour has been made to suggest that the plaintiff-Corporation was not ::: Downloaded on - 13/03/2018 23:25:41 :::HCHP 26 well within its rights or empowered under any law to sell the taken-over assets without there being any registered sale deed.
It may be noticed that purchase agreement Ex.P-4 came to be .
executed on 30.3.1994 interse plaintiff and defendant and at no point of time, question, if any, with regard to validity of purchase agreement, was raised by the defendants and for the first time, defendants raised issue with regard to the validity of purchase agreement Ex.P-4 in the written statement filed on 30.12.2003 i.e. approximately after nine years of execution of purchase agreement and it is also not in dispute, rather it clearly emerge from documents adduced on record by the plaintiff that pursuant to aforesaid purchase agreement, defendants took over the possession of the taken over assets and also paid installments towards repayment of loan as agreed interse parties in terms of purchase agreement dated 30.3.1994. Now question remains that whether the defendant is entitled to raise aforesaid question with regard to validity of purchase agreement dated 30.3.1994 i.e. after nine years that too when the parties to the lis acted upon the same.
37. At this stage, it may also be noticed that parties to the lis specifically agreed interse them that balance sale amount of Rs.72 lacs shall be treated as a loan in proportion to the original pari-passu agreement between plaintiff and proforma defendant No.5. Defendants specifically agreed by way of aforesaid agreement that he shall pay an amount of ::: Downloaded on - 13/03/2018 23:25:41 :::HCHP 27 Rs.47.37 lacs to HPSIDC i.e. plaintiff and Rs.24.63 lacs to HPFC i.e. proforma defendant No.5, out of the total sale consideration of Rs.96 lacs alongwith interest and both the .
Corporations i.e. plaintiff and proforma defendant No.5 shall have joint charge in the aforesaid proportion upon the aforesaid assets sold to the purchaser. Purchase agreement further provides that plaintiff as well as proforma defendant No.5 shall have the right to proceed against the purchaser in the event of default jointly or severally and in the event of realization of amount from the purchaser, they shall distribute the sale proceeds of the assets on the pari-passu basis. It is also not in dispute that out of sale consideration of Rs.96 lacs defendant, who happened to be purchaser in terms of purchase agreement, had deposited with the plaintiff-
Corporation a sum of Rs.24 lacs, which amount came to be distributed between the plaintiff and proforma defendant No.5 as per the terms of their pari-passu agreement. Defendant also agreed to pay balance sale consideration amounting to Rs.72 lacs to plaintiff and proforma defendant No.5 by way of installments with effect from 10.4.1995 to 10.10.1999 payable on or before 10th of April and 10th October every year alongwith interest in the manner as prescribed in the re-payment schedule. In the agreement in question, i.e. Ex.P-4, defendants also undertook that their liability shall be continuing one till the whole amount alongwith interest is paid ::: Downloaded on - 13/03/2018 23:25:41 :::HCHP 28 to the plaintiff-Corporation. It has also been undertaken by the defendants (purchasers) that on account of default in payment of any one or more installments of principal amount .
or of interest, the amount due may be recalled at once by the said plaintiff-Corporation, which, otherwise purchaser undertake to pay within a month of the issuance of recall notice by the plaintiff-Corporation and proforma defendant No.5 to the purchaser. Most importantly, clause-(h) of terms and conditions contained in agreement of purchase Ex.P-4, clearly suggests that purchaser i.e. defendants agreed to repay the sale consideration as a loan and in this regard right is reserved to the plaintiff and proforma defendant No.5 to recover the same through other lawful means of recovery, as arrears of land revenue and under Section 29 of the 'SFC Act', meaning thereby that the plaintiff is/was well within its rights to recover the balance sale consideration, which was to be considered as loan in terms of purchase agreement, by way of filing instant suit for recovery. Aforesaid remedy provided under clause-(h) to the plaintiff-Corporation is independent of right available to it to initiate proceedings, if any, under Section 29 of the 'SFC Act'. Clause-(h), provided in purchase agreement, clearly suggests that plaintiff or proforma defendant No.5 could resort to either of remedies i.e. suit for recovery of balance sale consideration or takeover the assets ::: Downloaded on - 13/03/2018 23:25:41 :::HCHP 29 resorting to the provisions of law contained under Section 29 of the 'SFC Act'.
38. In the case at hand, plaintiff-Corporation has filed .
suit for recovery of balance sale consideration, which was to be termed as loan in terms of purchase agreement and as such aforesaid submissions/arguments raised by learned Senior Counsel representing the defendants are not tenable in the eye of law. Plaintiff-Corporation is/was well within its rights to file suit for recovery of amount due from defendants on account of balance sale consideration, which was to be considered as loan in terms of agreement Ex.P-4. Whether proceeding, if any, under Section 29 of the 'SFC Act' by plaintiff-Corporation or proforma defendant No.5, could be initiated or resorted to, is not an issue before this Court and as such submissions/arguments advanced on this account are wholly misconceived and bound to be rejected. Otherwise also, as emerge from pleadings and also stated during the proceedings of the case that defendants have already laid challenge to the action initiated by plaintiff and proforma defendant No.5 resorting to provisions contained under Section 29 of the 'SFC Act' by way of Civil Writ Petition before this Court, which is still pending for adjudication.
39. PW-1 Shri Rakesh Kaul, an official of the defendant No.5-Corporation, merely produced the record of the ::: Downloaded on - 13/03/2018 23:25:41 :::HCHP 30 defendants, since original agreement was on the file of the proforma defendant No.5.
40. PW-2 Shri Pawan Kumar Bali has successfully .
proved on record that he is the signatory of the plaint and Principal Officer of the plaintiff-Corporation. PW-2, while making his statement before the Court, also proved Ex.P-4 i.e. the agreement dated 30.3.1994 incorporating terms and conditions of sale. Perusal of agreement clearly suggests that it is an agreement of purchase, containing therein schedule of re-payment. r Clause 2(e) of Ex.P-4 clearly provides that the liability of defendants would be continuing one till the whole amount alongwith interest is paid. Similarly, Clause 2(g) stipulates that the plaintiff and proforma defendant No.5 would continue to be owners of land and machinery as unpaid sellers till full consideration is paid. Clause 2(h) and 2(k) of the agreement i.e. Ex.P-4 specifically empowers plaintiff and proforma defendant No.5 to invoke Section 29 of the 'SFC Act' and take over possession of the sold movable and immovable property to recover their outstanding dues from the defendants. Ex.P-5 is the List of Assets sold to the defendants.
Ex.P-6 is the Trust Letter executed by defendants No.1 and 2.
Clause 2 and 2(e) of the Trust Letter also provides that the assets would remain as security for recovery of loan and the Corporations i.e. plaintiff and proforma defendant No.5, shall be entitled to invoke 'SFC Act' to recover the amount in case of ::: Downloaded on - 13/03/2018 23:25:41 :::HCHP 31 default by the defendants. Ex.P-9 is the recall-cum-take over Notice issued before taking over of plant & machinery. Exts.P-
10 to P-12 are letters received from proforma defendant No.5 .
regarding sale of assets by it. Ex.P-13 is Demand Notice issued by the plaintiff after sale of assets. Exts.P-14 to P-26 are the letters sent by the defendants and Exts.P-27 to P-31 are replies given by the plaintiff. Ex.P-32 is the copy of ledger account. PW-2 has categorically stated before the Court that the last payment was received from the defendants on 20.5.2000. He further in his cross-examination stated that the building and land was sold on 30.1.2003 for Rs.70 lacs and plant and machinery was sold on 30.3.2002 for Rs.3.45 lacs.
41. PW-3 Shri Santosh Sharma, Deputy Manager of the plaintiff-Corporation also proved the account statement, i.e. ledger Ex.P-32. Cross-examination conducted upon aforesaid plaintiff witnesses nowhere suggests that defendants are/were able to extract anything material from their cross-
examination. Rather, careful perusal of statements having been made by the plaintiff witnesses clearly suggests that they proved the case of the plaintiff to the hilt.
42. In the case at hand, defendants only led one witness to prove their case. Perusal of statement of Shri Hari Krishan Kanoi, whose statement was recorded on Commission at Kolkata as CW-1 on 21.2.2006, clearly suggests that the same is not in consonance with the stand taken by the ::: Downloaded on - 13/03/2018 23:25:41 :::HCHP 32 defendants in the written statement. Interestingly, written statement was also not signed by any of the defendants, rather the same came to be signed by one Shri Jose Mukahtu, who .
was never examined by the defendants. CW-1, in his cross-
examination, categorically admitted his signatures on Ex.P-25, Ex.P-17 and Ex.P-6. He also admitted Exts. P-14 to P-16, P-18 to P-24 having been signed by Shri K.K. Lodha, Chief Executive of the Company. The fact remains that the defendants with a view to prove their case did not produce any document such as account book or balance sheets of the Company. It has specifically come in his cross-examination that he never served any notice on the plaintiff and proforma defendant No.5 regarding forcible signing of the documents. It has also come in his cross-examination that he came to know with regard to sale of the assets in 2003 and he did not file any written complaint against the same.
43. At the cost of repetition, it may be observed that the defendants have acted on the said agreement and obtained possession of the property agreed to be sold to them on deferred payment. They even paid part of the sale consideration and also remitted amounts from time to time towards remaining part payment of the sale price which was treated as loan. Similarly, perusal of Exts. P-14 to P-26, i.e. letters written by the defendants, clearly suggests that the defendants had no objection about the transaction entered into ::: Downloaded on - 13/03/2018 23:25:41 :::HCHP 33 between them and the plaintiff and proforma defendant No.5.
Now, the question which arises for consideration of this Court is that, can the defendants be allowed to take a somersault .
and claim that the agreement Ex.P-4 and consequent thereto transaction took place between them and the plaintiff is illegal, especially when it stands duly proved on record that pursuant to execution of aforesaid documents, both the parties acted upon the same and defendants kept on making payments towards balance sale consideration strictly in terms of Schedule of payment prescribed in the agreement itself. There is considerable force in the arguments of Shri Ajay Kumar Sood, learned Senior counsel representing the plaintiff, that the defendants have taken their benefit under the agreement and allowed the Corporation to change its position by handing over the movable and immovable assets to them and when it came to the question of payment of money, they cannot be allowed to change their position. It is also apparent from the perusal of letters sent by the defendants, Exts.P-14 to P-26, that before filing the written statement, no objection was ever raised by the defendants with regard to legality of the transaction, pursuant to agreement of purchase Ex.P-4.
Under the law, defendants cannot be allowed to approbate and reprobate in the same breath. It has been repeatedly held by the Constitutional Courts that the doctrine of approbate and reprobate is one among the species of estoppel and it applies to ::: Downloaded on - 13/03/2018 23:25:41 :::HCHP 34 the conduct of the parties and the very purpose/object of estoppel is to prevent fraud and secure justice between the parties by promoting honesty and good faith. The aforesaid .
doctrine is based on the maxim Qui approbate non-reprobate i.e. take advantage of one portion of the document and reject the other.
44. Provisions contained in Section 115 of the Indian Evidence Act enunciating the principles of estoppel are attracted to the facts of the present case. Under the principles of approbation and reprobation, which are certainly applicable to the facts of the present case, the defendants are estopped from questioning the validity of agreement and subsequent transaction by calling it as illegal transaction that too after having taken benefit of the same. The doctrine of approbation and reprobation is based upon the principle that a party at the same time cannot be allowed to affirm and disaffirm the same transaction. This principle is so just and reasonable in itself and often expressed in the terms that one can not be allowed to approbate and reprobate of the same transaction, which are to administer justice according to equity and good conscience and promote honesty in business dealings. (See: Bhau Ram vs B. Baijnath Singh And Others, AIR 1961 1327, Bar Council Of Delhi And Anr. Etc vs Surjeet Singh And Ors. Etc. Etc, AIR 1980 1612, Shyam Telelink Ltd. now Sistema Shyam Teleservices Ltd. Vs. Union of India, (2010)10 SCC 165, Karam Kapahi & Ors vs M/S Lal Chand Public Charitabl, (2010)9 SCC 753, Jai ::: Downloaded on - 13/03/2018 23:25:41 :::HCHP 35 Narain Parasurampuria (Dead) vs Pushpa Devi Saraf & Ors.
(2006)7 SCC 756.).
45. Reliance is placed upon State of Punjab & Ors.
.
vs. Dhanjit Singh Sandhu, 2014 AIR SCW 4485, wherein the Hon'ble Apex Court has held as under:-
"21. As noticed above, the facts are quite different from the facts in Tehal Singh's case. In the instant case, the respondents-allottees accepted the terms and conditions of the allotment letter and possession were taken but they did not raise any construction upto 2000. There was a specific condition that non-construction of building would lead to the resumption of the said plot under the provisions of the Acts and the Rules. As noticed above, when the allottees r did not raise construction on the plot, the demand was raised for payment of non-
construction fee/extension fee in order to avoid resumption of the plot by the Authority, allottee paid the extension fee. After availing the benefit of extension on payment of extension fee, the allottee sent a letter to the Estate Officer demanding refund of the extension fee on the basis of amended Rule 13 of 1995 Rules. The said demand was rejected by the Estate Officer by passing the reasoned order in compliance of the directions of the High Court. In the facts of the instant case, we have no doubt in our mind in holding that the ratio decided in Tehal Singh's case will not apply in the instant case. In our considered opinion defaulting allottes of valuable plots cannot be allowed to approbate and reprobate by first agreeing to abide by terms and conditions of allotment and later seeking to deny their liability as per the agreed terms.
22. The doctrine of "approbate and reprobate" is only a species of estoppel, it implies only to the conduct of parties. As in the case of estoppel it cannot operate against the provisions of a statute. (vide C.I.T. vs. Mr. P. Firm Maur, AIR 1965 SC 1216).
It is settled proposition of law that once an order has been passed, it is complied with, accepted by the other party and derived the benefit out of it, he cannot challenge it on any ground. (Vide Maharashtra State Road ::: Downloaded on - 13/03/2018 23:25:41 :::HCHP 36 Transport Corporation vs. Balwant Regular Motor Service, Amravati & Ors., AIR 1969 SC
329). In R.N. Gosain vs. Yashpal Dhir, AIR 1993 SC 352, this Court has observed as under:-
"Law does not permit a person to both approbate and reprobate. This principle is .
based on the doctrine of election which postulates that no party can accept and reject the same instrument and that "a person cannot say at one time that a transaction is valid and thereby obtain some advantage, to which he could only be entitled on the footing that it is valid, and then turn round and say it is void for the purpose of securing some other advantage."
23. This Court in Sri Babu Ram Alias Durga Prasad vs. Sri Indra Pal Singh (dead) by Lrs., AIR 1998 SC 3021, and P.R. Deshpande vs. Maruti Balram Haibatti, AIR 1998 SC 2979, the Supreme Court has observed that the doctrine of election is based on the rule of estoppel- the principle that one cannot approbate and reprobate inheres in rit. The doctrine of estoppel by election is one of the species of estoppel in pais (or equitable estoppel), which is a rule in equity. By that law, a person may be precluded by his actions or conduct or silence when it is his duty to speak, from asserting a right which he otherwise would have had.
24. The Supreme Court in The Rajasthan State Industrial Development and Investment Corporation and Anr. vs. Diamond and Gem Development Corporation Ltd. and Anr., AIR 2013 SC 1241, made an observation that a party cannot be permitted to "blow hot and cold", "fast and loose" or "approbate and reprobate". Where one knowingly accepts the benefits of a contract or conveyance or an order, is estopped to deny the validity or binding effect on him of such contract or conveyance or order. This rule is applied to do equity, however, it must not be applied in a manner as to violate the principles of right and good conscience.
25. It is evident that the doctrine of election is based on the rule of estoppel the principle that one cannot approbate and reprobate is inherent in it. The doctrine of estoppel by election is one among the species of estoppel in pais (or equitable estoppel), which is a rule of equity. By this law, a person may be precluded, by way of his actions, or conduct, or silence when it is his duty to speak, from asserting a right which he would have otherwise had."
::: Downloaded on - 13/03/2018 23:25:41 :::HCHP 3746. In Shyam Telelink Ltd. now Sistema Shyam Teleservices Ltd. Vs. Union of India, (2010)10 SCC 165, the .
Hon'ble Apex Court has held:-
"23. The maxim qui approbat non reprobat (one who approbates cannot reprobate) is firmly embodied in English Common Law and often applied by Courts in this country. It is akin to the doctrine of benefits and burdens which at its most basic level provides that a person taking advantage under an instrument which both grants a benefit and imposes a burden cannot take the former without complying with the latter. A person cannot approbate and reprobate or accept and reject the same instrument.
24. In Ambu Nair v. Kelu Nair, AIR 1933 PC 167, the r doctrine was explained thus: (1A p.271) "Having thus, almost in terms, offered to be redeemed under the usufructuary mortgage in order to get payment of the other mortgage debt, the appellant, Their Lordships think, cannot now turn round and say that redemption under the usufructuary mortgage had been barred nearly seventeen years before he so obtained payment. It is a well- accepted principle that a party cannot both approbate and reprobate. He cannot, to use the words of Honyman, J. in Smith v. Baker (1873) LR 8 CP 350 at p. 357:
`...at the same time blow hot and cold. He cannot say at one time that the transaction is valid and thereby obtain some advantage to which he could only be entitled on the footing that it is valid, and at another time say it is void for the purpose of securing some further advantage'."
25. The view taken in the above decision has been reiterated by this Court in City Montessori School v. State of Uttar Pradesh and Ors. (2009) 14 SCC 253. To the same effect is the decision of this Court in New Bihar Biri Leaves Co. v. State of Bihar 1981 (1) SCC 537 where this Court said:
(New Bihar case, (1981)1 SCC 537, SCC p.558, para 48) "48. It is a fundamental principle of general application that if a person of his ::: Downloaded on - 13/03/2018 23:25:41 :::HCHP 38 own accord, accepts a contract on certain terms and works out the contract, he cannot be allowed to adhere to and abide by some of the terms of the contract which proved advantageous to him and repudiate the other terms of the same contract which might be .
disadvantageous to him. The maxim is qui approbat non reprobat (one who approbates cannot reprobate). This principle, though originally borrowed from Scots Law, is now firmly embodied in English Common Law.
According to it, a party to an instrument or transaction cannot take advantage of one part of a document or transaction and reject the rest. That is to say, no party can accept and reject the same instrument or transaction (Per Scrutton, L.J., Verschures Creameries Ltd. v. Hull & Netherlands Steamship Co.)"
26. The decision of this Court in R.N. Goswain v.
Yashpal Dhir AIR 1993 SC 352, brings in the doctrine of election in support of the very same conclusion in the following words : (SCC pp.687- 88, para 10) "10. Law does not permit a person to both approbate and reprobate. This principle is based on the doctrine of election which postulates that no party can accept and reject the same instrument and that "a person cannot say at one time that a transaction is valid and thereby obtain some advantage, to which he could only be entitled on the footing that it is valid, and then turn round and say it is void for the purpose of securing some other advantage".
[See: Verschures Creameries Ltd. v. Hull and Netherlands Steamship Co. Ltd. (1921) 2 KB 608, at p.612, Scrutton, L.J.] According to Halsbury's Laws of England, 4th Edn., Vol. 16:
"1508. Examples of the common law principle of election.- After taking an advantage under an order (for example for the payment of costs) a party may be precluded from saying that it is invalid and asking to set it aside."
47. Reliance is also placed on Jai Narain Parasrampuria (Dead) and Others vs. Pushpa Devi Saraf ::: Downloaded on - 13/03/2018 23:25:41 :::HCHP 39 & Others, (2006)7 SCC 756, wherein the Hon'ble Apex Court has held as under:-
.
"37. In Bank of India & Ors. etc. vs. O.P. Swarnakar & Ors. etc. [(2003) 2 SCC 721], this Court took notice of the following passage from Halsbury's Law of England, 4th Edn., Vol.16 (Reissue), para 957 at p.844:
"On the principle that a person may not approbate and reprobate a special species of estoppel has arisen. The principle that a person may not approbate and reprobate expresses two propositions:
(1) That the person in question, having a choice between two courses of conduct is to be treated as having made an r election from which he cannot resile.
(2) That he will be regarded, in general at any rate, as having so elected unless he has taken a benefit under or arising out of the course of conduct, which he has first pursued and with which his subsequent conduct is inconsistent."
48. In Bar Council of Delhi And Another (etc.etc.) vs. Surjeet Singh And Others (etc.etc.), AIR 1980 SC 1612, the Hon'ble Supreme Court has held as under:-
"11. The contesting respondents could not be defeated in their writ petitions on the ground of estoppel or the principle that one cannot approbate and reprobate or that they were guilty of laches. In the first instance some of the contesting respondents were merely voters. Even Shri Surjeet Singh in his writ petition claimed to be both a candidate and a voter. As a voter he could challenge the election even assuming that as a candidate after being unsuccessful he was estopped from doing so. But to be precise, we are of the opinion that merely because he took part in the election by standing as a candidate or by exercise of his right of franchise he cannot be estopped from challenging the whole election when the election was glaringly illegal and void on the basis of the obnoxious proviso. There is no question of approbation and reprobation at the ::: Downloaded on - 13/03/2018 23:25:41 :::HCHP 40 same time in such a case. A voter could come to the High Court even earlier before the election was held. But merely because he came to challenge the election after it was held it cannot be said that he was guilty of any laches and .
must be non-suited only on that account.
14. Mudholkar J., delivering the leading and the majority judgment of a Full Bench of the Nagpur High Court in Kanglu Baula Kotwal & another v. Chief Executive Officer, Janpad Sabha, Durg and others, rejected the plea of estoppel to challenge the election at page 58, para 25 in these terms:-
"As regards the petitioners who were also candidates at the elections but were defeated, the learned counsel said that those who took their chances at the elections and failed should not now be allowed to challenge elections of their opponents on the ground that the electoral rolls were defective. The plea is in substance one of estoppel. There can be no question of any estoppel, because it cannot be r said that the position of the other side has in any way altered by reason of something done or not done by the petitioners."
49. Applying the ratio laid down in the aforesaid exposition of law laid down by the Hon'ble Apex Court vis-à-vis facts of the present case, this Court has no hesitation to conclude that the principle of estoppel and doctrine of approbation and reprobation are attracted in the present case and as such plea/contention raised by learned Senior Counsel representing the defendants that the agreement of purchase being illegal and contrary to the provisions of law is not enforceable, cannot be accepted at this stage and as such same deserves to be rejected.
50. Mr.R.L. Sood, learned Senior Counsel representing the defendants, while placing reliance upon Gajraj Jain's case supra, argued that after taking over the mortgaged/ ::: Downloaded on - 13/03/2018 23:25:41 :::HCHP 41 hypothecated immovable and movable assets of M/s.RKB Herbals, the plaintiff-Corporation became the owner thereof and as such mandatory provision, as contained in Section .
29(4) of the 'SFC Act', casts a statutory obligation on the plaintiff to sell the same by executing a registered sale deed in favour of any party including the present defendant No.1.
51. At this stage, it would be apt to take note of Section 29(4) of the State Financial Corporation Act, 1951:-
"29. Rights of Financial Corporation in case of default.
(1) ... ... ... ... ... ... ... ... ... ...
r (2) ... ... ... ... ... ... ... ... ... ...
(3) ... ... ... ... ... ... ... ... ... ...
(4) [Where any action has been taken
against an industrial concern] under the provisions of sub-section (1), all costs, [charges and expenses which in the opinion of the Financial Corporation have been properly incurred] by it [as incidental thereto] shall be recoverable from the industrial concern and the money which is received by it shall, in the absence of any contract to the contrary, be held by it in trust to be applied firstly, in payment of such costs, charges and expenses and, secondly, in discharge of the debt due to the financial Corporation, and the residue of the money so received shall be paid to the person entitled thereto.]"
52. After having carefully examined aforesaid provision of law in the light of judgment rendered by the Hon'ble Apex Court in Gajraj Jain's case supra, this Court is persuaded to agree with the contention of learned Senior Counsel representing the plaintiff that there is no prohibition in law for the plaintiff-Corporation to enter into agreement of sale and ::: Downloaded on - 13/03/2018 23:25:41 :::HCHP 42 sell the property on deferred payment with the stipulation that the sale deed would be executed after receipt of entire sale consideration. In-fact, concept of ownership, as mentioned .
under Section 29 of the 'SFC Act', is limited one and the very object and purpose behind taking over management and possession is to secure and realize the loans advanced by it.
While taking over possession under Section 29 of the 'SFC Act', the owner always retains the right of ownership of the property and property does not pass on to the Financial Corporation, but it is only for certain purposes for affecting recovery of its dues by the sale. In this regard reliance is placed upon judgment passed by Hon'ble Delhi High Court in the case of M/s.Disco Electronics Ltd., (In Liquidation), AIR 1997 Delhi 251, wherein in para 28 of the judgment the Hon'ble Court has held as under:-
"28. In my view, in the taking over of possession under section 29 of the State Financial Corporation Act, the owner always retains the right of ownership of the property does not pass to the financial corporation, but it is only for certain purposes of affecting recovery of its dues by the sale and to remove any impediments in their way that the statute by a deeming provision has granted to the financial corporation powers of the owner for limited purposes of realizing the security, to convey good marketable title to the purchaser, and to defend any legal action, but the property absolutely does not vest in it. ... ... ..."
53. After having carefully gone through the aforesaid provisions of law as well as law laid down by Delhi High Court, ::: Downloaded on - 13/03/2018 23:25:41 :::HCHP 43 this Court is inclined to agree with the contention of Shri Ajay Kumar Sood, learned Senior counsel representing the plaintiff that there is no prohibition in law that the Corporation could .
not enter into an agreement of sale and sell the property on deferred payment with the stipulation that sale deed would be executed after receipt of entire sale consideration. Ex.P-4 is an agreement of purchase dated 30.3.1994 incorporating terms and conditions of sale. Schedule of repayment is given in the agreement. Clause 2(e) of agreement Ex.P-4 clearly provides that the liability of the defendants would be continuing one till the whole amount alongwith interest is paid. Similarly, clause 2(g) stipulates that the plaintiff and proforma defendant No.5 would continue to be owners of land and machinery as unpaid sellers till full consideration is paid. On the top of everything, clause 2(h) and 2(k) of the agreement Ex.P-4 empowers the plaintiff and proforma defendant No.5 to invoke Section 29 of the 'SFC Act' and take over possession of sold movable and immovable property to recover their outstanding dues from the defendants. Ex.P-6 is the Trust Letter executed by defendants No.1 and 2. Clause 2 and 2(e) of the Trust letter further stipulates that the assets would remain as security for recovery of loan and the Corporations will be entitled to invoke 'SFC Act'. Para 2(h) of the agreement Ex.P-4 specifically provides that the balance sale consideration would be treated ::: Downloaded on - 13/03/2018 23:25:41 :::HCHP 44 as loan and would be recoverable by resorting to section 29 of the 'SFC Act'.
54. Mr.R.L. Sood, learned Senior Counsel, while .
placing reliance upon Gajraj Jain's case supra, contended that it is established position in law that after taking over the mortgaged/hypothecated immovable and movable assets of M/s.RKB Herbals, the plaintiff-Corporation became the owner thereof and, as such, the mandatory provision of Section 29(4) of the 'SFC Act' casts a statutory obligation on it to sell the same by executing a Registered Sale Deed in favour of any party including the present defendant No.1-Company also.
But, the aforesaid submission does not appear to be correct.
In Gajraj Jain's case supra, it has been nowhere held by Hon'ble Apex Court that there is total prohibition of sale of taken over assets/property by an agreement of sale, rather in para-11 of judgment, which is reproduced hereinbelow, Hon'ble Apex Court has dealt with the issue involved in the case that what is the difference between 'mortgage and a charge':-
"11. In the light of the aforestated judgment of this Court, the issue which arises for determination is - whether respondent 2 Corporation acted reasonably and in accordance with Section 29 of the 1951 Act in transferring the assets of the Company on 19.3.2002 and in entering into agreement for sale with Respondent 4 on 26.4.2002. As stated above, Respondent 2 Corporation had a paramount first charge on the assets of the flour mill whereas the Central Bank of India had the ::: Downloaded on - 13/03/2018 23:25:41 :::HCHP 45 second charge thereon. There is a difference between a charge and mortgage. In the case of a charge under Section 100 of the TP Act, there is no transfer of interest in the property. A .
charge is not a jus in rem. It is jus ad rem. It creates a right of payment out of the property/fund charged with the debt or out of proceeds of the realisation of such property, a phrase used in Section 29(1) of the 1951 Act. A charge as defined under Section 100 of TP Act may be enforced by sale [See Mulla Civil Procedure Code (15th Edn.) p.2420]. We have discussed the concept of charge as it has a direct bearing on the interpretation of Section 29 of the 1951 Act."
55. Bare reading of aforesaid para of the judgment suggests that issue which had arisen for determination of the Hon'ble Apex Court was whether respondent No.2-Corporation acted reasonably and in accordance with Section 29 of the 'SFC Act' in transferring the assets of the Company on 19.3.2002 and in entering into agreement for sale with Respondent No.4 on 26.4.2002. In the above captioned case, issue before Hon'ble Apex Court was that the Corporation had received downright payment of Rs.28.85 lakhs (its own dues) and the balance of Rs.170 lakhs was received by it in the form of a promise to it by Respondent No.4 to pay the dues of Central Bank of India, which was not even a party to the arrangement. The Corporation, with a view to recover its dues, issued public notice dated 22.2.2002 and tenders were to be submitted by 21.3.2002. Under the said notice, the tenders were to be opened on 22.3.2002 and the assets were taken ::: Downloaded on - 13/03/2018 23:25:41 :::HCHP 46 over on 18.3.2002. However, the Corporation handed over assets to Respondent No.4 on 19.3.2002 against down payment of Rs.28.85 lacs and a part payment was made by .
demand draft dated 9.3.2002. The appellant Gajraj Jain had cleared the dues of the Corporation on 21.3.2002 i.e. before opening of tenders on 22.3.2002.
56. In the aforesaid background, action of Financial Corporation was found to be breach of law by Hon'ble apex Court as under:-
"15. In addition to the vitiating circumstances r enumerated above, we find that under the public notice dated 22.2.2002, tenders were invited.
They were to be submitted by 21.3.2002. Under the said notice, the tenders were to be opened on 22.3.2002. The take over of assets is on 18.3.2002. However, on 19.3.2002, the corporation hands over the assets to respondent no.4 against down payment of Rs.28.85 lacs plus promise to the corporation that the purchaser undertakes to pay the dues of Central Bank of India. A part of the amount of Rs.28.85 lacs was paid by demand drafts dated 9.3.2002.
These circumstances indicate collusion between respondent no.2 corporation, respondent 3 and respondent no.4. The take over of assets is ordered on 18.3.2002 and on 19.3.2002, the assets are handed over to respondent no.4 against down payment of Rs.28.85 lacs in demand drafts dated 9.3.2002. Under section 29(1) of the Act, the corporation is entitled to sell or lease the assets in order to realise the pledged/hypothecated or mortgaged property. Under what colour of title were the assets handed over to respondent no.4 on 19.3.2002? Was it under sale, lease or repayment of loan? There is no explanation as to how respondent no.4 could have drawn demand drafts in favour of corporation on 9.3.2002 when their offer to purchase was on 17/19.3.2002. It is alleged on behalf of respondent no.4 that they were given the assets with a specific understanding of return of property if a higher offer was received in the auction. No such understanding is recited ::: Downloaded on - 13/03/2018 23:25:42 :::HCHP 47 in the minutes of the tender committee nor in the recitals in the impugned agreement dated 26.4.2002. We do not find any resolution/minutes of the Board of Directors of the corporation in that regard. In the agreement .
dated 26.4.2002, it has been recited that Rs.90 lacs were advanced as loan in 1988 by corporation to the company against equitable mortgage of land and assets. Under section 69 of T.P. Act, equity of redemption existed in favour of the company. A mere agreement for sale of assets cannot extinguish the equity of redemption; it is only on execution of conveyance that the mortgagor's right of redemption will be extinguished. [See: T.P. Act by Mulla page 794]. In the present case, till today there is no conveyance and, therefore, on 21.3.2002 when appellant herein paid Rs.28.85 lacs to the corporation representing its full dues, there was complete liquidation of the dues of the corporation and yet the corporation did not return the assets to the company and arbitrarily and for extraneous reasons adjusted the said amount to the account of M/s Aditya Flour Mills.
The reason is obvious. The corporation intended to sell the assets only to respondent no.4 for a paltry amount of Rs.28.85 lacs. It has been repeatedly urged before us, on behalf of respondent no.4, that the assets in question were not worth Rs.10 crores as alleged by the appellant. Even if we assume that respondent no.4 is right in its submission, even then, in terms of the offer of respondent no.4, the property was worth Rs.198 lacs. But the corporation handed over the assets and agreed to sell them against down payment of Rs.28.85 lacs. No reason has been given by the corporation as to why it did not insist on the full payment of Rs.198.85 lacs. Be that as it may, the appellant herein cleared the dues of the corporation on 21.3.2002, before opening of tenders on 22.3.2002, and yet the corporation did not return the assets to the company. Even the tender money deposited by the appellant was returned without any demand from the appellant so that it could be argued by the corporation that the appellant had withdrawn from the auction and therefore the offer of respondent no.4 was accepted. In fact, the document at page 186 shows that appellant refused to collect the earnest money and, therefore, the amount was kept by the corporation in a separate account. Lastly, in the case of Narandas Karsondas v. S. A. Kamtam & Anr. reported in [AIR 1977 SC 774], it has been ::: Downloaded on - 13/03/2018 23:25:42 :::HCHP 48 held that putting of property to auction does not extinguish the right of redemption. Therefore, on 21.3.2002, the company had a right to redeem the assets. It was submitted that the appellant intended to buy the assets in his own name. We .
do not find merit in this argument. The record shows that the appellant as the director of the company offered to clear the dues of the corporation for which he insisted on the return of the title deeds (transfer papers) of M/s Katihar Flour Mills. In any event, in this case, we are concerned with the conduct of the corporation which was required to act in accordance with section 29 of the 1951 Act and not unreasonably. In this connection, it may further be pointed out that under the public notice inviting tenders, the corporation was obliged to call for matching offers from the directors/promoters/guarantors. The corporation did not call for such offers as its object was to keep out all counter-offers. Lastly, we are satisfied that the impugned agreement dated r26.4.2002 has been entered into without any consideration in favour of Central Bank of India.
In conclusion, we may state that in the present case, respondent no.2 corporation has misused its authority and power in breach of law by taking into account extraneous matters and by ignoring relevant matters which has rendered all its acts ultra-vires. [See: Express Newspapers Pvt. Limited & Ors. v. Union of India & Ors. AIR 1986 SC 872 para 118].
16. In the circumstances, we set aside the impugned judgment and order of the High Court and grant to the appellant the reliefs claimed by him in the writ petition. We hereby set aside the agreement dated 26.4.2002 and we direct respondent no.2 - corporation to transfer Rs.28.85 lacs, wrongly appropriated to the account of M/s Aditya Flour Mills, to the account of M/s Katihar Flour Mills (P) Ltd. Consequent upon such appropriation, the loan taken by the said company shall stand repaid. We further direct the concerned District Judge to restore possession of the assets (handed over by respondent no.2 - corporation to respondent no.4 - company on 19.3.2002) to M/s Katihar Flour Mills (P) Ltd. In this connection, the District Judge is directed to draw-up an inventory of the assets. In case of shortfall, it would be open to M/s Katihar Flour Mills (P) Ltd.
to take such steps as they may be advised.
Consequent upon our setting-aside the agreement dated 26.4.2002, we direct the ::: Downloaded on - 13/03/2018 23:25:42 :::HCHP 49 corporation to return the amount paid to it by respondent no.4 on 19.3.2002."
57. If the judgment passed by Hon'ble Apex Court in .
the aforesaid case is read in its entirety, it nowhere suggests that there is total prohibition in law for the plaintiff-
Corporation to enter into agreement of sale by transfer of assets/property and, as such, the reliance placed upon aforesaid judgment by learned Senior Counsel for the defendants is wholly misplaced and same cannot be applied in the facts and circumstances of the present case. Facts of the case, as were before the Hon'ble Apex Court in Gajraj Jain's case supra, do not fit in with the fact situation of the present case. By now it is well settled that Courts should not place reliance on decisions without discussing as to how the factual situation fits in with the fact situation of the decision on which reliance is placed and the judgments of the Courts are not to be construed as statutes and to interpret words, phrases and provisions of a statute, it may become necessary for judges to embark into lengthy discussions but the discussion is meant to explain and not to define. At this stage it would be apt to take note of judgment rendered by Hon'ble Supreme Court in Haryana Financial Corporation and Another vs. Jagdamaba Oil Mills and Another, (2002)3 SCC 496, wherein, while over-ruling its earlier judgment passed in Mahesh Chandra vs. Regional Manager, U.P. Financial ::: Downloaded on - 13/03/2018 23:25:42 :::HCHP 50 Corporation and Others, (1993)2 SCC 279, the Hon'ble Apex Court has categorically held as under:-
.
"19. Courts should not place reliance on decisions without discussing as to how the factual situation fits in with the fact situation of the decision on which reliance is placed. Observations of Courts are not to be read as Euclid's theorems nor as provisions of the statute. These observations must be read in the context in which they appear. Judgments of courts are not to be construed as statutes. To interpret words, phrases and provisions of a statute, it may become necessary for judges to embark into lengthy discussions but the discussion is meant to explain and not to define. Judges interpret statues, they do not interpret judgments. They interpret words of statutes, their words are not to be interpreted as statutes. In London Graving Dock Co. Ltd. v. Horton 1951 r AC 737 (at p. 761), Lord Mac Dermot observed:
(All ER p.14C-D) "The matter cannot, of course, be settled merely by treating the ipsissima vertra of Willes, J. as though they were part of an Act of Parliament and applying the rules of interpretation appropriate thereto. This is not to detract from the great weight to be given to the language actually used by that most distinguished judge."
20. In Home Office v. Dorset Yacht Co. (1970 (2) All ER 294) Lord Reid said, "Lord Atkin's speech..is not to be treated as if it was a statute definition.
It will require qualification in new circumstances." Megarry, J. in (1971) 1 WLR 1062 observed: "One must not, of course, construe even a reserved judgment of even Russell L.J. as if it were an Act of Parliament." And, in Herrington v. British Railways Board, (1972) 2 WLR 537 Lord Morris said:
"There is always peril in treating the words of a speech or a judgment as though they are words in a legislative enactment, and it is to be remembered that judicial utterances made in the setting of the facts of a particular case."
21. Circumstantial flexibility, one additional or different fact may make a world of difference between conclusions in two cases. Disposal of ::: Downloaded on - 13/03/2018 23:25:42 :::HCHP 51 cases by blindly placing reliance on a decision is not proper.
22. The following words of Lord Denning in the matter of applying precedents have become locus .
classicks:
"Each case depends on its own facts and a close similarity between one case and another is not enough because even a single significant detail may alter the entire aspect. In deciding such cases, one should avoid the temptation to decide cases (as said by Cordozo) by matching the colour of one case against the colour of another. To decide, therefore, on which side of the line a case falls, the broad resemblance to another case is not at all decisive."
* * * "Precedent should be followed only so far as it marks the path of justice, but you must r cut the dead wood and trim off the side branches else you will find yourself lost in thickets and branches. My plea is to keep the path to justice clear of obstructions which could impede it."
58. Mr.R.L. Sood, learned Senior Counsel, also placed reliance upon the judgment passed by a Division Bench of this Court in case titled: H.P.S.I.D.C. vs. M/s.Manson India Pvt.Ltd. and Others, 2008(3) Shim.L.C. 300 to suggest that bare perusal of Section 29 of the 'SFC Act' suggests that the Financial Corporation is authorized and empowered to take over the management or possession of the property, which was pledged, mortgaged, hypothecated or assigned to it and that since no property was pledged, mortgaged, hypothecated or assigned by defendant No.1 in favour of Corporation, defendant No.1 is continued to be an exclusive owner of the property in question and as such no power vests upon the ::: Downloaded on - 13/03/2018 23:25:42 :::HCHP 52 plaintiff Corporation and proforma defendant No.5 under Section 29 of the 'SFC Act' to take over the already taken over assets of M/s.RKB Herbals. It would be apt to take note of .
para-25 of aforesaid judgment:
"25. A bare perusal of the aforesaid provision shows that the State Financial Corporation has a right to transfer by way of lease or sale only the property which was pledged, mortgaged, hypothecated or assigned to the Financial Corporation. There is no material on record to show that the property which was hypothecated with the plaintiff was either pledged or mortgaged or hypothecated or assigned to the Financial Corporation. There is no explanation as to how the Financial Corporation sold the assets which were not hypothecated with it. In fact the material placed on record only shows r that the unit was sold. There is nothing on record to show that whether the goods which were hypothecated with the plaintiff and were subject-matter of the two hypothecation agreements were ever in fact sold by the HPFC."
59. Interestingly, in the case at hand factum with regard to aforesaid tripartite agreement executed by the plaintiff, proforma defendant No.5 and defendants have not been denied in the written statement, rather wholly untenable stand has been taken that defendant No.2 was made to sign on the documents forcibly, but even in this regard no evidence has been led on record.
60. In H.P.S.I.D.C. vs. M/s.Manson India Pvt.Ltd.
case supra, facts are altogether different because in that case there was no material on record to show that the property, which was hypothecated with the plaintiff, was either pledged or mortgaged or hypothecated or assigned to the Financial ::: Downloaded on - 13/03/2018 23:25:42 :::HCHP 53 Corporation. Similarly, no explanation, if any, was rendered that how the Financial Corporation sold the assets, which were not hypothecated with it. Apart from above, there was nothing .
on the record to show that the Unit was sold. But, in the case at hand, as has been discussed in detail hereinabove, there was tripartite agreement between plaintiff, proforma defendant No.5 and the defendants. Clause 2(g) of agreement stipulates that plaintiff and proforma defendant No.5 would continue to be owners of land and machinery as unpaid sellers till full consideration is paid and they shall have right to invoke Section 29 of the 'SFC Act' to take over possession of sold movable and immovable property to recover their outstanding amount from the defendants. (See: clauses 2(g), 2(h) and 2(k) of agreement Ex.P-4).
61. After having carefully perused pleadings and evidence adduced on record of the case, this Court has no hesitation to conclude that purchase agreement dated 30.3.1994 Ex. P-4, is legal and enforceable against defendants for recovery of outstanding amount and plaintiff-Company is well within its rights to file suit for recovery of outstanding dues since agreement to purchase Ex.P-4 stands duly proved in accordance with law. Plaintiff-Company is also entitled to recover the suit amount alongwith interest as claimed in the plaint and it is not estopped from filing the suit on account of its acts, deeds and conduct, rather taking note of facts and ::: Downloaded on - 13/03/2018 23:25:42 :::HCHP 54 evidence available on record, this Court has no hesitation to conclude that the conduct of the defendants' has not been above the board and at this stage they cannot be allowed to .
defeat the claim of the plaintiff terming the agreement Ex.P-4 to be illegal and un-enforceable. Accordingly, all the aforesaid issues are decided in favour of the plaintiff and against the defendants.
Issue No.3:
62. The instant issue has arisen for the consideration of this Court out of preliminary objection raised by the defendants. Needless to say that limitation is a mixed question of law and facts and as such, whether defendants have succeeded in discharging the onus, which is definitely upon them qua issue at hand, needs to be determined in the light of given facts and circumstances as well as law on the point.
63. As has been discussed hereinabove above in detail, agreement of purchase Ex.P-4 came to be executed inter se plaintiff and defendants on 30.3.1994, whereby plaintiff, pursuant to offer made by defendant No.1 for the purchase of taken over assets of M/s.RKB Herbals Pvt.Ltd., agreed to sell the taken over assets for the total consideration of Rs.96 lacs.
It is also not in dispute that defendant No.1 paid Rs.24 lacs to plaintiff and proforma defendant No.5 at the time of execution of aforesaid agreement and further for payment of balance amount i.e. Rs.72 Lacs executed agreement with Corporation.
::: Downloaded on - 13/03/2018 23:25:42 :::HCHP 55As per agreement Ex. P-4 amount was agreed to be paid in ten half yearly installments starting from 10.4.1995 and ending on 10.10.1999 as stands detailed in the agreement. Since .
defendants failed to adhere to the repayment schedule as agreed interse the parties vide agreement Ex.P-4, plaintiff issued recall-cum-take over notice on 3.11.2000 and ultimately assets were taken over on 4.12.2000 by the proforma defendants. Taken over assets were sold on 30.1.2003, whereafter sale proceeds were distributed amongst plaintiff and proforma defendant No.5 as stands mentioned in para-10 of the plaint. Since after adjustment of amount received from the sale of assets, some amount was found due to the plaintiff and proforma defendant No. 5 from defendants No.1 to 4 as on 31.1.2003, demand notice dated 5.2.2003 came to be issued against defendants for Rs.40,20,631/-.
64. Mr.R.L. Sood, learned Senior Counsel vehemently argued that though no loan was ever advanced by the plaintiff-
Corporation to defendant No.1, but even otherwise last installment was payable on or before 10.10.1999, as per own case set up by the plaintiff and as such limitation would commence on the first or atleast the last default in payment of installments. He also argued that once limitation starts, it cannot be rested and as such suit was required to be filed on or before 9.4.1998 and/or at best it could be filed on 9.10.2002 i.e. within three years of default in the payment of ::: Downloaded on - 13/03/2018 23:25:42 :::HCHP 56 last installment. Mr.Sood further argued that even for the sake of arguments it is considered that a loan had been advanced and the same had to be paid back in installments .
then also the suit is barred by limitation because the plaintiff-
Corporation has failed to incorporate any pleading in the plaint to show that how the suit is within limitation, which is mandatorily required under Order 7 Rule 6 of the Code of Civil Procedure.
65. Learned Senior Counsel further contended that it has been specifically provided in clause-(f) of the agreement Ex.P-4 that in the event of defendant No.1, making any default, in the payment of anyone or more installments of principal amount, or of interest, the plaintiff-Corporation shall have the right to immediately recall the complete amount due by issuance of a recall notice, by the plaintiff or proforma defendant No.5. He further contended that the recall notice was issued on 23.9.1999 vide Ex.P-28 and as such, the suit was required to be filed positively on or before 22.9.2002.
While placing reliance upon Article 37 of Limitation Act 1963, Mr.Sood contended that the suit is hopelessly barred by limitation. He further contended that since the default in the payment was made right from the beginning i.e. from the date of installments which was due on 10.04.1995 and positively from the date of recall notice i.e. 23.9.1999, therefore, the suit could be filed on or before 22.09.2002. In support of aforesaid ::: Downloaded on - 13/03/2018 23:25:42 :::HCHP 57 submissions, Mr.Sood placed reliance upon the following judgments:-
Gokhul Mahaton vs. Shevoprasad Lal Seth and .
Others, AIR 1939 Patna 433, Suda Ram Finance vs. Nur Jahan, (2016)13 SCC 117, Devi Dass Dhani Ram vs. Padma Golhlia, AIR 1959 M.P. 413, Shiv Dayal vs. Ram Rikh, AIR 1955 Rajasthan 188, Jawahar Lal vs. Mathura Prasad, AIR 1934 Allahabad 661.
66. While refuting contentions put forth on behalf of Mr.Ajay Kumar, learned Senior Counsel representing the plaintiff that suit is within limitation since the sale proceeds of the assets were received on 30.03.2002. Mr.Sood placed reliance upon judgment delivered by the Division Bench of this Court in H.P.S.I.D.C. vs. M/s.Manson India's case supra and stated that plaintiff had neither granted any loan nor had mortgaged or hypothecated any of its assets to the plaintiff-
Corporation and as such assets continued to be in the ownership of the plaintiff-Corporation, therefore, the suit is hopelessly barred by limitation.
67. After having carefully perused material available on record, especially evidence led on record by the plaintiff, this Court is not persuaded to agree with the aforesaid contention raised by learned Senior Counsel representing the defendants. Agreement Ex.P-4 clearly reserves right to the plaintiff to recover balance amount by sale of property sold to the defendants. Needless to say that the sold property both ::: Downloaded on - 13/03/2018 23:25:42 :::HCHP 58 movable and immovable was made security for payment of money and as such the case of the plaintiff is squarely covered by Section 100 of the Transfer of Property Act vis-à-vis .
agreement Ex.P-4, whereby the defendants had agreed that in case of default the plaintiff and proforma defendant No.5 shall have the right to take over the possession of the plant, machinery, land and building and recover their money by sale thereof. Limitation in the case at hand would definitely start from the date when the property was put to sale and not from the date of default. In the present case, movable assets i.e. plant and machinery was admittedly sold on 30.3.2002 and land and building was sold on 30.1.2003, which fact has not been disputed by the defendants either in the written statement or by way of oral evidence. Hon'ble Apex Court in case titled: Deepak Bhandari vs. Himachal Pradesh State Industrial Department Corporation Ltd., AIR 2014 SC 961 has categorically held that limitation period for recovery of balance amount would start only after adjusting the proceeds from the sale of assets of the industrial concern because the Corporation would be in a position to know as to whether there is a shortfall or there is excess amount realized only after the sale of the mortgage/hypothecated assets. Since law on the issue is no more res integra, more particularly, in the light of judgment rendered by Hon'ble Apex Court in Deepak Bhandari's case supra, this Court sees no reason to refer to ::: Downloaded on - 13/03/2018 23:25:42 :::HCHP 59 the judgments relied upon by the learned Senior Counsel representing the defendants in support of aforesaid contentions qua issue of limitation and as such same need not .
be referred to. Otherwise also, it may be noticed that during arguments learned Senior Counsel representing the defendants was unable to distinguish the judgment rendered by Hon'ble Apex Court in Deepak Bhandari's case supra as far as facts of the present case are concerned.
68. In view of above, suit, which has been filed on 22.4.2003 i.e. after sale of movable and immovable assets of taken over property, is well within the period of limitation. As has been taken note above, no evidence, whatsoever, has been led on record to dispute the factum placed on record by the plaintiff with regard to sale of movable and immovable taken over assets on 30.1.2003, whereafter plaintiff as well as proforma defendant No.5 after adjusting the aforesaid amount received from the sale of assets found a sum of Rs.40,20,631/-
still payable by the defendants on account of shortfall in the amount payable by them and accordingly issued demand notice dated 5.2.2003. Leaving everything aside, it stands duly proved on record that last payment was made by the defendants on 20.5.2000. Ledger/account book Ex.P-32 placed on record by the plaintiff has been duly proved in accordance with law by the plaintiff. PW-3 Deputy Manager of the plaintiff-Corporation has proved on record account ::: Downloaded on - 13/03/2018 23:25:42 :::HCHP 60 statements/ledger Ex.P-32. Cross-examination conducted on this witness nowhere suggests that the defendants were able to extract something contrary to what he has stated in his .
examination-in-chief. On the other hand, defendants have not led any evidence on record to prove that loan payment towards balance sale consideration was made by bank draft on 15.5.2000 and not on 20.5.2000 and as such if it is assumed that suit was to be filed at the time of first default even then suit, which admittedly came to be filed on 22.4.2003 is/was well within limitation.
r Hence for the reasons stated above, issue in hand is decided in favour of the plaintiff and against the defendants.
Issue Nos.7 & 969. Though defendants in their written statement have pleaded that plaintiff delayed the delivery of the factory premises in favour of the plaintiff for about six months and subsequently they sold the taken over assets in throw away prices, but no evidence, if any, has been led on record by the defendants to prove aforesaid case set up by it in the written statement. Onus to prove aforesaid issues was on the defendants, but, there is no evidence led on record that communication, if any, was sent by the defendants to the plaintiff-Corporation alleging therein that delay is being caused by the plaintiff in the delivery of the factory premises pursuant to the agreement entered into between the parties Ex.P-4.
::: Downloaded on - 13/03/2018 23:25:42 :::HCHP 61Though CW-1 defendant Hari Kishan Kanoi in his statement stated that factory premises were not handed over immediately after execution of the agreement, but, as has been taken note .
above, no documentary evidence has been led on record by the defendants. Similarly no evidence has been led on record by the defendants suggestive of the fact that defendants, with a view to fetch adequate price of the property in question, had brought better buyer. Both these issues are, therefore, decided in favour of the plaintiff and against the defendants.
70. Relief:
In view of the findings on all the above issues, the present suit is decreed in the sum of Rs.40,20,631/- alongwith interest @ 15.5% per anum from the date of filing of the suit till its realization in favour of the plaintiff and against the defendants No.1 to 4. Parties are left to bear their own costs.
A decree sheet be prepared, accordingly.
March 09, 2018 (Sandeep Sharma)
(aks) Judge.
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