Delhi High Court
A.E.C. Enterprises Ltd. And Anr. vs Peacock Chemicals Pvt. Ltd. And Ors. on 1 August, 1998
Equivalent citations: [1998]94COMPCAS912(DELHI), 75(1998)DLT484, 1998(47)DRJ520
Author: Dalveer Bhandari
Bench: Dalveer Bhandari
JUDGMENT Dalveer Bhandari, J.
1. By this order, I propose to decide these three aforesaid applications. The baste facts involved in all these applications are identical in nature and they are recapitulated in the succeeding paragraphs.
2. The following two suits were filed before this court : (1) Suit No. 1216 of 1998 by AEC Enterprises Ltd, and (2) Suit No. 1218 of 1998 by AEC (India) Ltd. against Peacock Chemicals Pvt. Ltd, and others. Both AEC Enterprises Ltd. and AEC (India) Ltd. are in the management of Aptes. Both the plaintiff companies are joint stock companies registered under the Companies Act, 1956. Mr. R. D. Apte and Sanjeev Apte, are promoter directors in these companies. Defendants Nos, 1, 6 and 7 are for all practical purposes sister companies under the same management and being fully managed and controlled by defendant No. 2, Mr. S. C. Goel.
3. It is stated in the plaintiffs' suits that Mr. Sanjeev Apte came in contact with Mr. S. C. Goel a few years ago. Acquaintances slowly led to close social contact and Mr. Goel gained the personal confidence and trust of the Aptes and consequently in the year 1995, when the plaintiff-companies were in need of funds, Interoperate deposits (for short "ICD") were offered and provided by the Goals to the Aptes for a period of 90 days or more.
4. On April 16, 1998, again there was an agreement between the plaintiffs and the defendant-company, Peacock Chemicals Pvt. Ltd., and defendant No. 1 agreed to provide an ICD facility to the plaintiffs aggregating up to Rs. 1 crore. The loan (ICD) was to carry an interest at the rate of 40 per cent. per annum. As a collateral security for the loan facility, the plaintiff-companies also pledged with the defendants 96,82,559 shares of the face value of Rs. 10 of the plaintiff-companies and 2,23,132 shares of AEC (India) Ltd. The shares of the plaintiff-companies were non-transferable being promoters' shares, i.e., the same were in locked period and could not be transferred by any of the promoters of the plaintiff-companies for a period of five years from the date of issue (March, 1995).
5. The plaintiff-companies had executed the following documents in favour of defendant No. 1 :
"(i) Interoperate deposit receipt dated April 16, 1998, acknowledging .the receipt of Rs, 1 crore, vide cheque No. 914392, dated April 17, 1998, for Rs. 70 lakhs and cheque No. 914393, dated April 17, 1998, for Rs. 30 lakhs both drawn on Punjab National Bank, Chander Nagar Branch, Ghaziahad. This amount along with interest was repayable on demand to defendant No. 1.
(ii) Demand promissory note for Rs. 1 crore thereby undertaking to repay this amount on demand with interest at the rate mentioned therein payable at monthly rests.
(iii) Letter of continuity in respect of the amount of Rs, 1 crore.
(iv) Interoperate deposit agreement.
(v) Resolution passed by the board of directors of the plaintiff-company in the meeting held on March 31, 1998, thereby authorising Shri R.D. Apte, chairman and managing director, to discuss and finalise the terms and conditions for availing of ICD facility to the extent of Rs. 1 crore,
(vi) With the letter dated April 16, 1998, in pursuance of the ICD agreement dated April 16, 1998, two cheques No. 015175, dated April 16, 1998, for Rs, 25 lakhs as liquidated damages and cheque No, 015174, dated April 16, 1998, for Rs. 1 crore towards repayment of this amount were enclosed.
(vii) Resolution dated March 31, 1998, of AEC (India) Ltd. authorising Shri Sanjiv R. Apte, vice chairman and director of the company, to execute the corporate guarantee in favour of defendant No. 1.
(viii) Deed of corporate guarantee by AEC (India) Ltd. in favour of defendant No. 1. .
(ix) Deed of personal guarantee by Shri R. D. Apte.
(x) Deed of personal guarantee by Shri Sanjeev R. Apte.
(xi) Board resolutions all dated March 30, 1998, of AEC Capital Market Ltd., AEC Investments Ltd. and AEC Holdings Pvt. Ltd. passing the resolutions regarding pledge of sufficient number of shares of the plaintiff and of AEC Leasing and Finance Pvt. Ltd. regarding pledge of sufficient number of shares of AEC (India) Ltd.
(xii) Letters of pledge all dated April 16, 1998, of AEC Capital Market Ltd., AEC Investments Ltd. and AEC Holdings Pvt. Ltd. pledging 27,39,950, 27,50,000 and 41,92,600 equity shares, respectively, of the plaintiff in favour of defendant No. 1 being the owner (shareholder) of the shares along with annexures giving the distinctive numbers of these shares pledged. Letter of pledge dated April 16, 1998, of AEC Leasing and Finance Ltd. pledging 22,03,132 equity shares of AEC (India) Ltd. in favour of defendant No. 1 being the owner (shareholder of the shares along with annexure giving the distinctive number of these shares pledged).
(xiii) Letters dated April 16, 1998, from the plaintiff to defendant No. 1 confirming the following :
(a) That the AEC Capital Market Ltd., AEC Investments Ltd. and AEC Holdings Pvt. Ltd. are the registered shareholders of the plaintiff in respect of 27,39,950, 27,50,000 and 41,92,600 equity shares, respectively, and are being pledged to defendant No. 1.
(b) Signatures on the transfer deed attached with the share certificates pledged are as per specimen registered with plaintiff.
(c) That the above shares have no lock-in-period and are freely transferable.
(d) That the plaintiff shall register without any delay, demur and protest all transfer(s) of the shares in favour of defendant No. 1 and/or its nominee(s) whenever so required as stated in the letters of pledge.
(xiv) Letter dated April 16, 1998, from AEC (India) Ltd. to defendant No. 1 confirming the following :
(a) That AEC Leasing and Finance Pvt. Ltd. is the registered shareholder in respect of 22,03,132 equity shares of AEC (India) Ltd.
(b) Signatures on the transfer deeds attached with the share certificates pledged are as per specimen registered with AEC (India) Ltd.
(c) That the above shares have no lock-in-period and are freely transferable.
(d) That AEC (India) Ltd. shall register without any delay, demur and protest all transfer(s) of the above shares in favour of defendant No. 1 and/or its nomineefs) whenever so required as stated in the letter of pledge."
6. At the time of signing of the ICD agreement, defendants Nos. 1 and 2 got signed and obtained from the plaintiffs and defendants Nos. 3 to 5 multiple documents, mentioned in the preceding paragraphs, inter alia, an undated cheque for rupees one crore, another undated cheque for Rs. 25 lakhs projected to be for the liquidated damages in case of default, undated endorsements on share certificates of ostensible transfer in favour of defendants Nos, 1, 6 and 7, copies of the alleged board resolutions, etc., on the letter heads of the plaintiffs and defendants Nos. 3 to 5 and AEC (India) Ltd, It is mentioned in the plaint that only when the liability of the plaintiffs to repay had arisen, only then defendant No. 1 could proceed against the aforesaid shares held by defendants Nos. 3 to 5 and AEC (India) Ltd.
7. It may be pertinent to mention that only after a few days of execution of the deeds of pledge, the plaintiffs received an envelope by speed post. On opening the same, the plaintiffs found only a duplicate copy of the receipt dated April 16, 1998, and, according to defendant No. 1, it contained a notice to repay the amount within two days. In pursuance of the agreement, the plaintiffs were under an obligation to repay the ICDs only on two days' notice. Admittedly, the date of the speed post cover sent by the defendants to the plaintiffs is dated April 26, 1998.
8. It is further mentioned by the plaintiffs that, after sending the speed post cover, defendant No. 1 in utter disregard of the understanding and without any intimation to the plaintiffs, had filled up the date in the cheque and wrongly and illegally presented it to its bankers on April 28, 1998. The cheque was dishonoured because of insufficient funds. The date of sending the notice is April 26, 1998, and the date for submitting the cheque for encashment is April 28, 1998. There is no dispute between the plaintiffs and the defendants on these dates.
9. It is further alleged that the plaintiffs got in touch with the defendants and the defendants mentioned that duplicate receipt was sent to ascertain the correct addresses of all the directors. Even at that juncture, the plaintiffs could not comprehend the entire game-plan of the defendants. Thereafter, a notice under sections 138 and 142 of the Negotiable Instruments Act was sent by the defendants to the plaintiffs on May 13, 1998. The notice was received on May 19, 1998. In the notice, it was mentioned that the amount had to be repaid within two weeks, meaning thereby around third or fourth of June, 1998. According to the plaintiffs at this point of time, they comprehended the game plan of the defendants and to safeguard and protect their interests, the plaintiffs rushed to the court. The plaintiffs filed these suits in this court. This court on June 12, 1998, while issuing the summons and notices in Suit No. 1216 of 1998, also granted ex parte ad interim injunction to the plaintiff-company.
10. On June 5, 1998, the plaintiffs were shocked and surprised to learn that an advertisement had been caused to be published by defendant No. 1 in Navbharat Times, New Delhi, a leading daily Hindi newspaper, as well as in other newspapers which have circulation in Delhi and Madhya Pradesh, by defendant No. 1 purporting to be under the Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeover) Regulations Act, 1997*. According to regulation 10 of the said Regulations, "no acquirer shall acquire shares or voting rights which (taken together with shares or voting rights, if any, held by him or by persons acting in concert with him), entitled such acquirer to exercise 10 per cent. or more of the voting rights in a company, unless such acquirer makes a public announcement to acquire shares of such company in accordance with the regulations", In this public announcement defendants Nos. 1, 6 and 7 claimed to have acquired over 32. 04 per cent. of the paid-up equity capital of the plaintiff-companies. According to the plaintiffs, this public announcement was totally mala fide. The said defendants were not only lenders of money, but they had an evil eye from the very inception over both the plaintiff-companies. It is also mentioned in the plaint that it was a well planned and engineered conspiracy and game-plan with mala fide intentions to take over the plaintiff-companies for a song. It is also mentioned that all their endeavour and wrongful acts, illegalities and fraud were committed towards achieving the said objectives.
11. The plaintiffs mentioned that the present loan cheque was given on April 16, 1998, and the cheque was presented for encashment on April 17, 1998. The defendants after only nine days, i.e., on April 26, 1998, demanded the amount as on April 28, 1998, deposited the blank cheque (taken by the defendants) in the bank without any intimation to the plaintiffs and the same was dishonoured. According to the plaintiffs, it was agreed and understood between the parties that the loan was for a period of ninety days which could be rolled over for another period of ninety days on mutual agreement.
12. On behalf of the plaintiffs, it was submitted that it would be ridiculous that a company in need of funds to obtain a loan of Rs. 1 crore, would be expected to repay the same on a notice of only nine days. It is also mentioned that the copy of the ICD agreement dated April 16, 1998, was not supplied to the plaintiffs by the defendants. It is further mentioned in the plaint that amongst the papers got signed by defendants Nos. 1 and 2 on or about April 16, 1998, also included a purported copy of the alleged resolution of the board of directors of the plaintiff-companies dated May 30, 1998, and a letter dated June 1, 1998, stating that with reference to the notice of demand dated April 2t5, 1998, regarding repayment of the Interoperate deposit and subsequent letter dated May 28, 1998, seeking transfer of the shares in favour of Yield Securities and Credit Pvt. Ltd, and Virgin Securities and Credit Pvt. Ltd., the board of directors had approved the transfers and recorded the same in the register of the members of the company.
13. It is specifically mentioned that no board meeting in fact was held either on May 30, 1998, or any other date approving any such alleged transfer nor were the same recorded in the register of members, nor was any notice of demand or letter seeking transfer of shares ever received. As a matter of fact the documents and blank papers obtained from the plaintiffs were used by defendants Nos. 1 and 2 in accomplishing the mischievous game-plan of taking over both the companies.
14. It is further submitted on behalf of the plaintiffs that the acts of the defendants were wrong, illegal and high handed and were designed to take over the plaintiff-companies. It is mentioned that the present suit is confined to the guarantees/pledge given by defendants Nos. 3 and 4, while AEC Enterprises Ltd. and AEC (India) Ltd., are filing separate suits to protect their respective rights. In fact, a suit has also been filed on behalf of AEC (India) Ltd.
15. It is also mentioned that charging of interest of 40 per cent. was highly exorbitant particularly when the loan given by the defendants was fully secured by the shares of much higher value. The interest is usurious under the Usurious Loans Act, 1918, and is liable to be reduced to 18 per cent. simple interest. It is mentioned that wrongful and illegal contract of defendants Nos. 1 and 2 has resulted in great injury and prejudice to the plaintiffs and has damaged the reputation and has considerably reduced its credit in the market.
16. It is mentioned that the cheque of Rs. 1 crore was dishonoured because it was wrongfully presented without any notice of demand to the plaintiffs. The object of presenting the cheque by defendant No. 1 was fraudulent and collateral. Defendants Nos. 1 and 2 have used arm-twisting tactics to subjugate the directors of the companies with the object of taking over the companies, It is mentioned in the plaint that the plaintiff-companies are in a position to make the payment of Rs. 1 crore and are ready and willing to make the payment forthwith of any amount which the court may determine to be due and payable to defendant No. 1 having regard to the provisions of the Usurious Loans Act, 1918. This suit again came up for consideration before this court on June 12, 1998. In the order, it is mentioned that counsel for the plaintiffs submit that the plaintiffs are willing to return the sum of Rs. 1 crore to defendant No. 1 along with interest forthwith provided that the shares pledged with defendant No. 1 and the corporate guarantees submitted are returned. The court continued the injunction already granted in terms of prayer (a) of 1. A. No. 5174 of 1998.
17. A comprehensive reply to this application and the written statements have been filed on behalf of the defendants. The defendants have submitted that the plaintiffs having transferred the shares in favour of defendants Nos. 1 to 4, vide letter dated June 1, 1998, after passing the board resolution on May 29, 1998, and also furnishing a true copy of the said resolution to defendant No. 1 is estopped from filing this suit and making such allegations. It is mentioned that the "Interoperate Deposit" was given to the plaintiffs subject to the condition that the repayment of the sum will be made to defendant No. 1 on demand though no duration was fixed for the repayment of the said amount. It is mentioned by the defendants that on April 26, 1998, a letter was sent by speed post recalling the amount. The plaintiffs failed to repay the amount. Therefore, a cheque dated April 16, 1998, given by the plaintiffs was presented on April 28, 1998, which was dishonoured on April 29, 1998. Again, a notice under sections 138 and 142 of the Negotiable Instruments Act was sent by the defendants to the plaintiffs. Even then the plaintiffs had failed to pay the amount.
18. The defendants also submitted that it was a commercial transaction and the defendants did not get the documents executed under coercion or undue influence, The defendants denied that the net worth of the company as on March 31, 1998, is Rs. 45.63 crores.
19. Learned counsel appearing for the plaintiffs and the defendants argued the case at length. Mr. Mukul Rohtagi, learned senior counsel appearing for the plaintiffs, submitted that the defendants instead of accepting the repayment of loan with interest are really interested in grabbing the companies. He submitted that the defendants by their evil design and game-plan were trying to acquire the plaintiff-companies for a song. According to Mr. Rohtagi, this is quite evident from the entire conduct of the defendants. He submitted that by an agreement dated April 16, 1998, a loan of Rs. 1 crore was given which was credited in the account of the plaintiffs on April 17, 1998. Even if the case of the defendants is accepted then also admittedly on April 26, 1998, i.e., after nine days, the defendants demanded the amount and on April 28, 1998, admittedly, the blank cheque given by the plaintiffs was deposited in the bank which was dishonoured on April 29, 1998.
20. Mr. Rohtagi submitted that though all the terms and conditions of the agreement are totally one sided but because of the urgent need of loan and because of trust and faith which the plaintiffs had reposed in the defendants, the plaintiffs literally signed on the dotted lines. It was the plaintiffs' understanding that these documents would never be misused by the defendants. There was a clear understanding that the loan was given for a period of ninety days (as given on earlier occasions) which could be rolled over for another period of ninety days by mutual agreement. Mr. Rohtagi submitted how could the defendants expect the plaintiffs to return the entire amount within nine days, though the clear standing of the plaintiffs is that no demand notice was to be received by the plaintiffs ? The plaintiffs in fact received only a duplicate copy of the receipt.
21. It was further submitted that if this aspect of the case of the defendants is presumed to be correct that the notice of demand was sent on April 26, 1998, by speed post, and admittedly on April 28, 1998, defendant No. 1 deposited the blank cheque which was duly filled in by the defendants for encashment on April 28, 1998, even the two days' minimum notice as envisaged in the agreement was also not given.
22. Mr. Rohtagi submitted that even before this court the plaintiffs offered to pay the amount with entire interest forthwith first on June 12, 1998, and again on June 26, 1998, the plaintiffs in fact brought the cheques in court but the defendants refused to accept the amount. Mr. Rohtagi also submitted that the defendants in fact do not want to get the repayment of the loan paid by them with interest but in the garb of repayment of the loan, the defendants are only keen to acquire both the companies of the plaintiffs. The relevant portion of the order dated June 26, 1998, in Suit No. 1216 of 1998 is reproduced as under :
"Mr. P. C. Khanna submits that as per the observations made by this court on June 12, 1998, the plaintiff is offering Rs. 1,08,55,219 by way of two cheques ; one is bearing No. 793931, dated June 26, 1998, for Rs. 1,00,00,000 and another is bearing No. 793952, dated June 26, 1998, for Rs. 8,55,219 issued by the plaintiff on the United Western Bank Limited, Karol Bagh, New Delhi, but Mr. D, P, Sharma, learned counsel for defendants Nos. 1, 2, G and 7 refused to accept the same."
23. In support of his arguments, Mr. Rohtagi placed reliance on a judgment of the Orissa High Court in Tapanga Light Foundry v. State Bank of India, . In this case, the court came to the conclusion that, under Section 176 of the Indian Contract Act , the pawner is entitled to reasonable notice before the sale of pawned goods. He also placed reliance on Ratna Sugar Mills Co. Ltd. v. State of Uttar Pradesh, , to buttress his arguments that the plaintiffs are not only entitled to a notice, but to a reasonable notice.
24. Mr. Rohtagi submitted that in a case where there is breach of contract, the defendants would be entitled to compensation but not to take over the two companies of the plaintiffs on such flimsy excuses. Mr. Rohtagi also submitted that, according to the provisions of Section 74 of the Indian Contract Act, the party complaining of breach of contract is entitled to only reasonable compensation. Section 74 reads as under :
"74. Compensation for breach of contract where penalty stipulated for.-- When a contract has been broken, if a sum is named in the contract as the amount to be paid in case of such breach or if the contract contains any other stipulation by way of penalty, the party complaining of the breach is entitled, whether or not actual damage or loss is proved to have been caused thereby, to receive from the party who has broken the contract reasonable compensation not exceeding the amount so named or, as the case may be, penalty stipulated for,"
25. Mr. Rohtagi had particularly the drawn attention of the court to the illustration (d) given along with the section. A gives B a bond for the repayment of Rs. 100 with interest at 12 per cent. at the end of six months, with a stipulation that, in case of default, the interest shall become payable at the rate of 75 per cent. from the date of default. This is a stipulation by way of penalty, and B is only entitled to recover from A such compensation as the court considers reasonable. He submitted that the plaintiffs on earlier occasion, on June 12, 1998, offered before the court that he is willing to pay the entire amount with interest forthwith and even now he is prepared to pay the entire loan amount with interest which the court may consider reasonable,
26. Mr. Arun Jaitley, the learned senior advocate, appeared on behalf of the defendants, repudiated the arguments advanced on behalf of the plaintiffs and submitted that it was a purely commercial contract which was not executed under coercion, undue influence or duress. He also submitted that, according to the terms of the agreement, the loan amount had to be paid by the plaintiffs to the defendants on demand. The defendants demanded the amount on April 26, 1998, and when the plaintiffs failed to pay the amount, then on April 28, 1998, the defendants deposited the cheque for encashment.
27. Mr. Jaitley further submitted that again when a notice under sections 138 and 142 of the Negotiable Instruments Act, 1881, was given on May 14, 1998, which was admittedly received by the plaintiffs on May 19, 1998, even then the amount was not paid within two days. Therefore, according to the terms of the agreement, the plaintiffs failed to repay the loan and in these circumstances pledged the shares of the companies with the defendant company. Now, the plaintiffs cannot make any grievance at this stage.
28. Mr. Jaitley submitted that ICD receipt clearly provided that the amount is payable on demand and it does not provide even two days' notice. Mr. Jaitley also submitted that when the loan was given, the defendants were under the impression that the plaintiffs had a temporary liquidity problem but later on the defendants learnt that their financial condition was disastrous and that is why the demand was made on April 26, 1998, to secure their amount ?
29. Mr. Jaitley, learned counsel for the defendants, submitted that it is settled position of law that a person who signs a document containing contractual terms is bound by them even though he is ignorant of their precise legal effect, He placed reliance on L'Estrange v. Gravcob [1934] 2 KB 394 ; [1934] All ER 16. In this case, it was held that "the contract having been signed by the buyer, the implied warranty was excluded by the express condition in the contract, notwithstanding that the buyer did not know that the contract contained such a condition".
30. Mr. Jaitley placed reliance on Bihar State Electricity Board v. Green Rubber Industries , In this case, their Lordships of the Supreme Court held that it is settled law that a person who signs a document which contains contractual terms is normally bound by them even though he has not read them, or he is ignorant of the precise legal effect.
31. Mr. Jaitley also placed reliance on Bharathi Knitting Company v. DHL Worldwide Express [1996] 87 Comp Cas 886 ; . In this case, the court relied on Anson's Law of Contract (26th edition) 152, in which it is mentioned that a person who signs a document containing contractual terms is normally bound by them even though he has not read them and even though he is ignorant of the precise legal effect. These judgments have been followed in the case of Classic Motors Ltd. v. Maruti Udyog Ltd. .
32. Mr. Jaitley further submitted that the court should not set aside the contract merely on the ground that the consideration for the same is inadequate. Consideration need not be adequate to the promise but it must be of some value in the eye of law. He placed reliance on Ram Chandra Singh v. Basdeo Singh, , Gaumont-British Picture Corporation Ltd. v. Alexander [1936] 2 All ER 168G (KBD), and Midland Bank Trust Co. Ltd. v. Green [1979] 3 All ER 28 (CA).
33. Mr. Jaitley also argued submitted that it is a well settled position in law that the plea of unconscionability of the contract is not available where both parties are businessmen and the transaction is a commercial transaction.
34. Learned counsel for the defendants placed reliance on the following judgments to buttress his arguments :
Eric Gnapp Ltd. v. Petroleum Board [1949] 1 All ER 980 (CA) ; Unikol Bottlers Ltd. v. Dhillon Kool Drinks [1994] 28 DRJ 83 ; Alec Lobb (Garages) Ltd. v. Total Oil GB Ltd. [1983] 1 All ER 944 (Ch. D).
Mr, Jaitley, learned counsel for the defendants, also referred to and relied upon Central Inland Water Transport Corporation Ltd. v. Brojo Nath Ganguly , to hammer the point that the principle of uneven bargaining power of employer and employee would not be applicable in a commercial transaction. In order to comprehend the ratio laid down by the said judgment, the judgment in toto has to be considered in the proper perspective. The relevant observations of the court are reproduced as under :
"This principle is that the courts will not enforce and will, when called upon to do so, strike down an unfair and unreasonable contract, or an unfair and unreasonable clause in a contract, entered into between parties who are not equal in bargaining power. It is difficult to give an exhaustive list of all bargains of this type. No court can visualize the different situations which can arise in the affairs of men. One can only attempt to give some illustrations. For instance, the above principle will apply where the inequality of bargaining power is the result of the great disparity in the economic strength of the contracting parties. It will apply where the inequality is the result of circumstances, whether of the creation of the parties or not, It will apply to situations in which the weaker party is in a position in which he can obtain goods or services or means of livelihood only upon the terms imposed by the stronger party or go without them. It will also apply where a man has no choice, or rather no meaningful choice, but to give his assent to a contract or to sign on the dotted line in a prescribed or standard form or to accept a set of rules as part of the contract, however, unfair, unreasonable and unconscionable a clause in that contract or form or rules may be. This principle, however, will not apply where the bargaining power of the contracting parties is equal or almost equal. This principle may not apply where both parties are businessmen and the contract is a commercial transaction. In today's complex world of giant corporations with their vast infrastructural organizations and with the State through its instrumentalities and agencies entering into almost every branch of industry and commerce, there can be myriad situations which result in unfair and unreasonable bargains between parties possessing wholly disproportionate and unequal bargaining power. These cases can neither be enumerated nor fully illustrated. The court must judge each case on its own facts and circumstances."
35. The Lordships of the Supreme Court observed that no hard and fast rules or universal principles can be laid down. The diverse variety of facts, circumstances, situation of cases cannot be comprehended or visualised. Therefore, the facts and circumstances of each case have to be examined whether the agreement is unfair or unreasonable because of unequal bargaining power between the parties.
36. On scrutiny of the relevant documents on record and on careful consideration of the submissions urged on behalf of the parties, the court prima facie comes to the following conclusions :
(a) The plaintiffs are not guilty of breach of agreement between the parties ;
(b) The documents on record clearly reveal that the loan by the defendants was not given to the plaintiff-companies for a period of nine days only. Apart from the agreement, even according to the provisions of Section 176 of the Contract Act, 1872, the plaintiffs were entitled to a reasonable notice. The bona fides of the plaintiffs were clearly established when on June 12, 1998, before the court, the plaintiffs were willing to return the sum of Rs. 1 crore to defendant No. 1 along with interest forthwith. On subsequent date of hearing on June 26, 1998, the plaintiffs had even brought the cheques for the entire amount in court but the defendants refused to accept the same.
(c) According to the terms of the agreement between the parties at least two days' clear notice is envisaged. In the instant case, even, according to the defendants, the demand notice itself was sent on April 26, 1998, by speed-post and on April 28, 1998, the cheque of Rs. 1 crore was presented to the bank. Though the plaintiffs submitted that the plaintiffs never received any demand notice, prima facie the court is of the opinion that in presenting the cheque defendants Nos. 1 and 2 had used arm-twisting tactics to subjugate the directors of the companies with the object of taking over the companies.
(d) The plaintiff-companies were in urgent need of some loan and because of the long association and relationship with the defendants, the plaintiffs had executed some blank documents, and gave a blank signed cheque of Rs. 1 crore for providing total security to the defendants. The documents and cheque were subsequently utilized by the defendants with a view to acquire the plaintiff companies.
(e) The defendants are really not interested in getting the repayment of the outstanding amount with interest but they are only keen, to acquire the plaintiff-companies in lieu of the loan amount.
(f) The rate of interest of 40 per cent. per annum is highly exorbitant, particularly, when the loan given by the defendants to the plaintiffs was fully secured by giving a large number of shares of the plaintiff-companies. This clause clearly demonstrates that financial and economic duress was exercised by the defendants on the plaintiffs.
(g) In view of the aforesaid prima facie conclusions of this court even without giving finding on the said clause of interest, the defendants at the most are entitled to the entire amount of Rs. 1 crore with interest according to the agreement from the date of payment, i.e., April 16, 1998, till June 26, 1998 (when in fact the plaintiffs had brought the cheque for the entire amount in court but it was not accepted by the defendants), and, thereafter, i.e., from June 27, 1998, till payment and the defendants are also entitled to 18 per cent. simple interest per annum.
37. All these three applications are accordingly disposed of in the aforementioned terms.
38. The case be listed for further proceedings on December 7, 1998.