Delhi District Court
M/S Goyal Mg Gases Pvt. Ltd vs M/S Premium International Finance Ltd on 16 February, 2018
IN THE COURT OF MS. SHUNALI GUPTA, ADJ06, SOUTH DISTRICT,
SAKET COURT COMPLEX, NEW DELHI
CS No.: 21/17
CNR No. DLST010016942016
Unique I.D No. CS DJ/208206/16
M/s Goyal MG Gases Pvt. Ltd.,
A Company incorporated under
The provision of the Indian Companies Act, 1956
Through authorized representative Mr. Shahzed Khan
having its registered office at
53, Friends Colony (East)
New Delhi 110065
......Plaintiff
Versus
1. M/s Premium International Finance Ltd.
A company incorporated under the
Provision of the Indian Companies Act, 1956,
Having its office at 'M' Floor
Devika Tower, 6 Nehru Place
New Delhi.
2. Sh. Sumaj Jain, Managing Director,
Premium International Finance Ltd.
R/o. S287, Panchsheel Park,
New Delhi.
3. M/s Dhanam Trades & Agencies Ltd.
Jumbo House, Okhla, Phase III, New Delhi.
4. M/s Charismatic Trade Links Ltd.,
1500B, Top Floor, Devika Tower,
Nehru Place, New Delhi.
5. M/s Oasis ( India ) Ltd.
Upper Ground Floor, Devika Tower,
Nehru Place, New Delhi.
......Defendants
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Date of Institution : 22.09.1998
Date of reserving judgment : 27.01.2018
Date of pronouncement of judgment : 16.02.2018
SUIT FOR RECOVERY OF RS.55 LAKHS ALONGWITH INTEREST
J U D G M E N T:
1. Vide this judgment, I shall dispose off the present suit filed by plaintiff
seeking recovery of a sum of Rs.55 lakhs along with interest from the
defendants.
Brief facts of the present suit as culled out from the pleadings of the
parties are stated as under:
1.1 It is stated in the plaint that the plaintiff is a public limited company
duly incorporated under the provisions of Companies Act, 1956. The
suit has been filed by Sh. N. K. Bagri Company Secretary, and also
duly authorized by Resolution of the Board in this regard.
1.2 The defendant no.1 company in its course of business approached
the plaintiff for grant of financial assistance in the form of bill
discounting facility. The said facility was provided to defendant no.1
to the extent of Rs.55 lakhs and the terms and conditions whereof
were contained in the letter dated 12.09.1995 duly signed by
authorized signatory of the defendant company and as such the letter
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formed the agreement between the parties. As per the agreement the
bill discounting facility was given for a period of 105 days. It was also
clearly stated in the letter dated 12.09.1995 that the time limit shall
not be extended beyond 105 days and in case of default in making
repayment of principal amount, penal interest @ 48% p.a. would be
payable from the date of maturity i.e. after expiry of period of 105
days till the date of payment. Vide letter dated 14.09.1995 the
defendant no.1 again confirmed and accepted all the terms and
conditions as stated in the letter dated 12.09.1995. For the said bill
discounting facility the following acts were done by the defendants:
i. 4 postdated cheques in the sum of Rs.55 lakhs were issued by
defendant no.1 in favour of the plaintiff.
ii. The defendant no.1 also pledged with the plaintiff, the shares
which the defendants no.3 to 5 were holding in defendant no.1
company. Defendants no. 3, 4 & 5 also submitted the letters of
pledge dated 15.09.1995 thereby undertaking that the pledge of
shares shall operate as a continuing security to secure the
prompt and complete discharge together with blank transfer
forms duly signed by the defendants no. 3 to 5.
iii. Sh. Sumaj Jain defendant no.2 and who was the Managing
Director of the defendant no.1 gave his personal guarantee for
the bill discounting facility and accordingly executed the
personal guarantee letter dated 15.09.1995 on a stamp paper
of Rs. 50/.
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iv. The defendant no.1 also furnished the documents of the
company viz MOA, AOA and copies of Annual Report etc. with
the plaintiff company.
v. The defendant no.1 also submitted the demand promissory
note, letter of continuity, a post dated cheque for an amount of
Rs.8.25 lakhs being 15 % of the principal towards payment of
liquidated damages.
vi. The defendant no.3 also furnished four hundies duly executed
by them in favour of the plaintiff in the sum of Rs. 55 lakhs.
1.3 The said bill discounting agreement was also duly approved by the
Directors of defendant no.1 vide resolution passed by the Board of
Directors. Accordingly, the plaintiff after deducting the discounting
charges at the agreed rate of 33%, issued to defendant no.1 an
account payee cheque dated 16.09.1995 bearing no.586786 for a
sum of Rs.49,77,877/ in favour of M/s Dhanam Trades and
Agencies Limited - defendant no.3. The cheque was duly credited in
the bank account of defendant no.3. The stipulated period of the bill
discounting facility of 105 days expired on 30.12.1995. Accordingly,
the four cheques in the sum of Rs.55 lakhs (earlier given by
defendant no.1) were deposited in the bank by the plaintiff.
However, vide memos dated 01.01.1996 all the four cheques were
returned dishonoured due to insufficiency of funds. It is stated that in
view of the cheques having been bounced, defendant no.1 has
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committed breach of contract / agreement and thus also became
liable for payment of damages of Rs.8,25,000/ and also penal
interest @ 48% w.e.f. 31.12.1995 till the date of payment. Further
the cheque of Rs.8,25,000/ was also deposited in the Bank for
realization of damages. However, the same was also returned
dishonoured vide memo dated10.01.1996.
1.4 Letter dated 13.01.1996 was issued to the defendants no.1 & 2
calling them to make payment of Rs.63,25,000/ the principle amount
along with interest and damages. After receipt of the said letter
defendant no.1 vide letter dated 26.06.1996 submitted the revised
schedule for making the payment. As per the said schedule, the
entire amount along with interest was to be repaid by 31.08.1996.
Accordingly, cheques were issued in favour of the plaintiff. However,
on presentation before the bank, even the said cheques got
dishonoured. Thus, the plaintiff served a notice dated 17.02.1997
under Section 434 of Indian Companies Act 1956 upon the defendant
no.1. After receipt of the said notice, defendant no.1 issued a cheque
in favour of the plaintiff in the sum of Rs.4 lakhs. However, the same
was also dishonoured. Thus, on persistent default of defendant no.1
a legal notice dated 5.06.1997 was sent to defendant no.1, 2 & other
directors of defendant no.1 despite receipt of the said legal notice the
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defendants failed to make the payment. Hence, the present suit has
been filed seeking a decree against the defendants severally and
jointly for a sum of Rs.55 lakhs along with pendent lite and future
interest @ 24 % p.a. from the date of the suit till the realization of the
amount. Cost of the suit has also been prayed.
2. As the suit was filed under Order 37 CPC, summons of the Suit in
prescribed performa were issued to the defendants. Initially,
defendant no. 1 and 2 were served who filed their appearance.
However, the Hon'ble High Court observed that the appearance filed
by them was not within time and hence, vide order dated 29.08.2000
passed decree against defendant no.1 and 2 for recovery of money
claimed in the Suit. Thereafter, on 11.10.2000 decree for recovery
was also passed against defendant no.3, 4 and 5 as they failed to
enter appearance.
3. Subsequently, an application under Order 37 Rule 4 CPC seeking
setting aside the exparte decree was moved by defendant no.2 and
vide order dated 31.07.2006 the Hon'ble High Court while condoning
the delay of defendant no.1 and 2 in entering appearance allowed
the application thereby setting aside the exparte decree dated
29.07.2000 passed against defendant no.1 and 2. Further, on the
statement of the plaintiff the suit initially filed under Order 37 CPC
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was treated as an ordinary recovery suit and vide order dated
06.04.2009 defendant was directed to file his written statement.
Written statement was filed only by defendant no.2.
4. In the written statement filed by defendant no.2 the following
preliminary objections were taken.
(i) The company has already been directed to be wound up by
order of Hon'ble Company Judge dated 22.05.1998 and official
liquidator of the company has also been appointed. Hence
permission under Section 446 of the Companies Act is required
to institute the present Suit.
(ii) The defendant no. 1, 3, 4 and 5 had pledged their shares with
the plaintiff and had also given blank transfer forms to the
plaintiff. The plaint does not disclose as to whether the said
shares have been got transferred by the plaintiff in its own
name or whether it had sold the said shares. In case the
plaintiff has not sold the said shares then the plaintiff is liable to
give credit of the value of the same.
(iii) The document titled as personal guarantee has been executed
on a stamp paper of Rs. 50/ though it was required to be
executed on a stamp paper of Rs. 100/ and hence has not
been executed on a proper stamp paper.
(iv) The document alleged to be personal guarantee of defendant
no. 2 was in fact executed as a 'deed of guarantee and
indemnity' and the liability of the defendant no. 2 would arise
only after the plaintiff has to failed to recover the amount from
defendant no.1. Hence, the Suit filed against defendant no. 2 is
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premature and is liable to be dismissed.
(v) The Suit of the plaintiff is hit by Section 3 of Punjab Money
Lenders Act as the plaintiff cannot institute any such Suit unless
it is registered under the said Act and has obtained a licence.
There is no avernment in the plaint about the registration of the
plaintiff under the said Act and therefore the Suit is liable to be
dismissed.
(vi) The plaintiff has suppressed from the court that it has already
received a sum of Rs. 12.53 lakhs from the defendant (Rs. 4.53
lakhs by cheque and Rs. 3 lakhs and Rs. 5 lakhs by pay orders)
That the claim made by the plaintiff is not due to him and also
the accounts of the plaintiff are not reliable.
4.1 On merits the averment of providing loan to the defendant no.1 was
admitted. However, instead of admitting it as a bill discounting facility,
it was stated to be an amount advanced in the form of loan for a
period of 105 days. The guarantee deed executed by the defendant
no. 2 was stated to be in the official capacity being the Managing
Director of the defendant company as he was authorized by a
resolution of Board of Directors to execute the loan documents on
behalf of the company. Regarding the interest portion, it was stated
that the interest claimed is substantially unfair and comes within the
meaning of Section 3 of the Usurious Loans Act, 1918 and Section 5
and 6 of Punjab Relief of Indebtedness Act, 1934. Further, it was
stated that no notice has ever been served upon the defendant
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invoking the guarantee against him. Rest all the avernments of the
plaint were denied and dismissal of the Suit was sought.
5. Replication was filed by the plaintiff reiterating the contents of the
plaint and denying the contrary avernments made by the defendant.
It was stated that the protection of Section 446 of the Companies Act
as pleaded by the defendant is not available to him as the said
section stays the proceedings pending in a court against the
company under liquidation were as in the case herein the plaintiff is
basing his claim on the basis of personal guarantee of the defendant.
Further, during the relevant period the volume of sale / purchase of
shares of defendant no. 1 was negligible in the stock market and
subsequently trading in shares of defendant no. 1 was suspended by
stock exchange. Hence the plaintiff could not have sold the shares of
respondent no.1 to recover its dues. Also in terms of letters of
pledge, it was the discretion of the plaintiff to sell the pledged shares to recover amount due under agreement dated 12.09.1995. As the plaintiff did not sell/transfer the shares of defendant no.1, the question of granting credit to defendants for pledged shares does not arise. The document dated 15.09.1995 executed by defendant no.2 is in essence his personal guarantee. Regarding the averment of defendant of having paid Rs.12.53 lakhs to the plaintiff, the receipt of CS No.208206/2016 M/s Goyal MG Gases Pvt. Ltd. Vs. M/s Premium International Finance Ltd. & Ors. Page No.9/31 the said amount though was admitted but it was stated to be an amount paid towards interest due under the agreement dated 12.09.1995 and was accordingly, adjusted towards the same. Rest all the contrary averments were denied.
6. After completion of the pleadings the following issues were framed vide order dated 21.08.2017: i. Whether the present suit is not maintainable in view of nonregistration of the plaintiff under The Punjab Money Lenders Act? OPD ii. Whether the plaintiff is entitled for recovery of suit amount? If so, against which all defendants? OPP iii. Whether the plaintiff is entitled to interest on suit amount? OPP iv. Relief.
7. Evidence was lead by either side. Plaintiff in support of his case has examined two witnesses who are as under: PW1 Shahzeb Khan - AR of the plaintiff company. In lieu of his examination in chief he has deposed by way of affidavit and tendered the same as Ex.PW1/A wherein he has relied upon following documents:
1. Board Resolution dated 05.06.2009, Ex.PW 1/1;
2. Letter dated 12.09.1995, Ex.PW1/ 2;
3. Personal Guarantee dated 15.09.1995, Ex.PW1/3;CS No.208206/2016 M/s Goyal MG Gases Pvt. Ltd. Vs. M/s Premium International Finance Ltd. & Ors. Page No.10/31
4. Letter dated 15.09.1995, Ex.PW1/4;
5. Letter dated 14.09.1995, Ex.PW1/5;
6. Demand Promissory Note for Rs. 55,00,000/, Ex.PW1/6;
7. Letter of continuity, Ex.PW1/7;
8. Letter dated 15.09.1995, Ex.PW1/8;
9. Copy of resolution dated 12.09.1995 of Dhanam Trades & Agencies Ltd., Ex. PW 1/9;
10. Copy of resolution dated 12.09.1995 of Charismatic Trades Links Ltd., Ex.PW1/10;
11. Copy of resolution dated 12.09.1995 of Oasis (India) Ltd., Ex.PW1/11;
12. Copy of four Hundies, Mark PA;
13. Four challan cum invoices, Mark PB;
14. Resolution dated 28.06.1995, Ex.PW1/14;
15. Copy of cheque return memo dated 01.01.1996 alongwith copy of cheque, Mark PC;
16. Copy of cheque return memo dated 10.01.1996 alongwith copy of cheque, Mark PD;
17. Copy of letter dated 13.01.1996, Mark PE;
18. Copy of letter dated 26.06.1996, Ex. PW 1/18;
19. Cheque return memo dated 17.08.1996 along with copy of cheque, Mark PF;
20. Cheque return memo dated 16.01.1997 along with copy of cheque, Mark PG;
21. Notice dated 17.02.1997, Mark PH;
22. Cheque return memo dated 30.05.1997 alongwith copy of cheque, Mark PI;CS No.208206/2016 M/s Goyal MG Gases Pvt. Ltd. Vs. M/s Premium International Finance Ltd. & Ors. Page No.11/31
23. Legal notice dated 05.06.1997, Mark PJ;
24. Copy of three cheques, Mark PK;
25. Legal notice dated 01.07.1997, Mark PL;
26. Legal notice dated 17.07.1997, Mark PM;
27. Copy of MOM & MOA, Ex. PW 1/27;
This witness was crossexamined extensively by Ld. Defence counsel. In his crossexamination he admitted that the defendant company is in liquidation and the claim made in the present Suit was not placed before the official liquidator. At the time of transaction in question, plaintiff was a Public Ltd. Company but now is Private Ltd. Company, however, except the change in name there is no other change in the constitution of the company. Money lending is one of the objects of the plaintiff company. He has joined the plaintiff company in year 2006 and since the day of his joining he has seen about 56 files wherein the company has extended loan or bill discounting facility to the third parties.
PW2 Sh. M K Khare - Civil Nazir in Mahila Courts, Patiala House Courts. He has produced the summoned record i.e. original court file of Complaint Case No.12577/17 titled as 'M/s. Goyal MG Gases Limited Vs. Premium International Finance Ltd.' pending in the said court and after seeing the original documents from the said file, has proved the documents as Ex.PW1/12, Ex.PW1/13, Ex.PW1/15 and CS No.208206/2016 M/s Goyal MG Gases Pvt. Ltd. Vs. M/s Premium International Finance Ltd. & Ors. Page No.12/31 Ex.PW1/16. Further, copy of letter dated 13.01.1996 has also been proved and marked as Ex.PW2/1.
8. On behalf of defendant, only one witness i.e. defendant no.2 stepped into the witness box and was examined as DW1.
DW1 Sh. Sumaj Jain - the defendant no.2 himself. He tendered his examination in chief by way of affidavit Ex.DW1/A and deposed as per the stand taken by him in the written statement. No additional document was relied upon.
During crossexamination, he deposed that their company was engaged in the business of taking and extending finance. Defendant no.1 company was listed with Stock Exchange and was professionally managed.
9. Final arguments addressed by Ld. Counsel Sh. Tarun Singla for the plaintiff and Ld. Counsel Sh. Rajesh Arora for defendant no.2 were heard and record carefully perused.
10. Discussion on Issues:
Issue No.1: Whether the present suit is not maintainable in view of non registration of the plaintiff under The Punjab Money Lenders Act? OPD Ld. Counsel for the defendant had contended that though the plaintiff had given loan to the defendant company but the plaintiff company CS No.208206/2016 M/s Goyal MG Gases Pvt. Ltd. Vs. M/s Premium International Finance Ltd. & Ors. Page No.13/31 is neither registered nor holds a licence under the Punjab Money Lenders Act, 1938 and in absence whereof u/s 3 of the said Act the suit is liable to be dismissed. On the contrary, Ld. Counsel for the plaintiff had argued that the transaction is not at all covered under the said Act as the loan advanced by him in the form of bill discounting facility comes within the exceptions provided under Section 2(8) of the Act. Further his company was not engaged in the business of granting finance. For the applicability of the Act there has to be a 'business' of money lending and for casual transactions of money lending the money lenders Act is not attracted.
Hence, no licence as such was required by the company for the present transaction / the bill discounting facility. He has also relied upon judgments to support his reasoning.
Now, admittedly the plaintiff company is not registered under the Punjab Registration of Money Lenders Act, 1938 (hereinafter referred to as 'the Act'). That being the situation, it has to be seen whether for the present loan in the form of bill discounting facility registration under the Punjab Money Lenders Act was required or not?\ For better appreciation of the arguments it would be apt to reproduce Section 2(8) of the Act which defines 'loan' as well as excludes certain transactions from the ambit of loan.CS No.208206/2016 M/s Goyal MG Gases Pvt. Ltd. Vs. M/s Premium International Finance Ltd. & Ors. Page No.14/31
Section 2 (8) of the Act reads as under: (8) "Loan" means an advance whether secured or unsecured of money or in kind at interest and shall include any transaction which the Court finds to be in substance a loan, but it shall not include
(i) an advance in kind made by a landlord to his tenant for the purposes of husbandry; provided the market value of the return does not exceed the market value of the advance as estimated at the time of advance;
(ii) a deposit of money or other property in Government Post Office, Bank, or any other Bank, or with a company, or with a cooperative society or with any employer as security from his employees;
(iii) a loan to, or by, or a deposit with any society or association registered under the Societies Registration Act, 1860, or under any other enactment;
(iv) a loan advanced by or to the Central or any {State} Government or by or to any local body under the authority of the Central or any {State} Government;
(v) a loan advanced by a bank, a cooperative society or a company whose accounts are subject to audit by a certified auditor under the Indian Companies Act, 1913;
(vi) a loan advanced by a trade to a trader, in the CS No.208206/2016 M/s Goyal MG Gases Pvt. Ltd. Vs. M/s Premium International Finance Ltd. & Ors. Page No.15/31 regular course of business, in accordance with trade usage;
(vii) an advance made on the basis of a negotiable instrument as defined in the Negotiable Instruments Acts, 1881, other than a promissory note.
Reverting to the facts of the case, admittedly at the time of extending the bill discounting facility, the plaintiff was a Public Limited Company. The accounts of every public limited company are subject to audit by a certified auditor under the Companies Act. Secondly, for the amount advanced by the plaintiff towards the bill discounting facility, the defendant company had issued four post dated cheques in favour of the plaintiff for the entire sum i.e. for Rs.55 lakhs. Thus, it was clearly an advance made on the basis of a negotiable instrument i.e. cheque.
That being so the loan advanced by the plaintiff clearly falls within clause (V) & (VII) of Section 2 (8) of the Act. Thus, the loan transaction does not tantamount to a 'loan' within the meaning of the Act; and consequently the suit filed by the plaintiff is not hit by Section 3 of the said Act.
Otherwise also, for the applicability of the said Act, the person advancing loan should be engaged in the business of money lending or in other words one of its source of income should be from the business of CS No.208206/2016 M/s Goyal MG Gases Pvt. Ltd. Vs. M/s Premium International Finance Ltd. & Ors. Page No.16/31 money lending. Mere casual or few transactions of money lending do not bring the case within the purview of this Act. In this regard observations made by Hon'ble High Court in the case of Atul Anand Vs. Nanak Food Industries 2006 (132 ) DLT 481 are relevant. It was held in the said case that "...... The Punjab Registration of Money Lenders Act, 1939 requires a person to obtain a license to act as a money lender if the person is in the business of money lending. It was for the defendants to have made specific averments that the plaintiff was engaged in the business of money lending. The said Act does not prohibit casual advancing of loan by a person to a third party. Casual loans do not require a license."
In the case herein no evidence has been led by the defendant to show that plaintiff was carrying out the business of money lending.
That being so the transaction in issue cannot be termed as 'loan' within the meaning of Punjab Money Lender Act, 1938 and thus there is no requirement of any registration under the said Act for filing the present suit. Issue stands decided accordingly in favour of the plaintiff. Issue No. 2: Whether the plaintiff is entitled to recovery of suit amount? If so, against which all defendants? OPP and CS No.208206/2016 M/s Goyal MG Gases Pvt. Ltd. Vs. M/s Premium International Finance Ltd. & Ors. Page No.17/31 Issue No.3: Whether the plaintiff is entitled to interest on suit amount? OPP The crux of the plaintiff's case is that their company had advanced loan to defendant no.1 in the form of bill discounting facility and as security for the loan availed, the defendant no.3, 4 & 5 had pledged with the plaintiff company the shares of the defendant no.1 company, defendant no.1 issued postdated cheques in favour of the plaintiff for the entire loan amount and over and above that the defendant no.2 also gave his personal guarantee for discharge of the said loan. The defendant no.1 failed to repay the same after the expiry of stipulated period of 105 days - the post dated cheques issued to the plaintiff on presentation were returned dishonoured by the bank and the securities / shares of defendant no.1 pledged with the plaintiff company lost their value. Thus, the loan having not been repaid, the defendants' liability to repay the same is standing.
The said liability to repay the loan has been refuted by defendant no.2 on two counts; firstly that the shares of defendant no.1 were already pledged with the plaintiff and thus, for the default of defendant no.1 in repaying the said loan, the plaintiff company should have sold the shares to realize the amount due to them. The plaintiff company did not deliberately sell the same though at the first instance it was their duty to CS No.208206/2016 M/s Goyal MG Gases Pvt. Ltd. Vs. M/s Premium International Finance Ltd. & Ors. Page No.18/31 sell them to realize the dues. The deed of guarantee dated 15.09.1995 is a deed of guarantee and indemnity and not purely guarantee. And secondly defendant no.2 cannot be made personally liable for repayment of the loan as the guarantee given by him was not his personal guarantee but the guarantee given in his official capacity - being the Managing Director of the Company.
That being the broad framework of the case of either side, the Court has now to appreciate whether the contentions raised by the defendants have any substance or in other words can the defendants be discharged from their liability to pay? And secondly, if the liability is found due then whether the liability is of company alone or the liability of other defendants also.
At the outset, I may note that there is no dispute or denial to the documents filed by the plaintiff. Further, as per Section 91 of the Indian Evidence Act, 1872 where the terms of a contract have been reduced in the form of a document, any oral evidence to prove the terms of the contract is precluded. Hence, I have to restrict to the documents alone and no oral evidence to the contrary can be countenanced. That being the legal principle, I have to carefully scrutinize the guarantee deed executed by defendant no.2 to assess whether it was a personal guarantee or a guarantee given by him in his official capacity and secondly whether the CS No.208206/2016 M/s Goyal MG Gases Pvt. Ltd. Vs. M/s Premium International Finance Ltd. & Ors. Page No.19/31 said deed provided for sale of shares at the first instance before invoking the guarantee as pleaded by the defendant.
The guarantee deed dated 15.09.1995 executed by defendant no.2 is Ex.PW1/3. For better appreciation of the controversy, the relevant extracts from the guarantee deed are reproduced as under: Personal guarantee This deed of guarantee and Indemnity executed at New Delhi this 15 th day of September, 1995 and made by Mr. Sumaj Jain, S/o Dr. M.P.Jain, R/o S287, Pancheel Park, New Delhi ( the "Guarantor") in favour of Goyal Gases Limited having its Registered office at 4B Jangpura B, Mathura Road, New Delhi 110014 ( the "Lender") .....
1 (b) The expression "the Guarantor" shall mean Sumaj Jain and include his successor in interest and permitted assigns;....
2.01 In consideration of the Lender giving or continuing to give Bill discounting facility or such other financial accommodation for such amount and as long as it may think fit to the Borrower (which consideration shall be regarded as an adequate consideration for the purpose of this Deed of Guarantee), the Guarantor hereby jointly and severally and unconditionally, absolutely and irrecoverably guarantees to pay on CS No.208206/2016 M/s Goyal MG Gases Pvt. Ltd. Vs. M/s Premium International Finance Ltd. & Ors. Page No.20/31 demand to the Lender all moneys and discharge all obligations and liabilities, whether actual or contingent, now or hereafter, due owing or incurred to the Lender by the Borrower whether as and by way of repayment of the Principal amount of Bills and discount charges thereon or of any other account or otherwise in any manner whatsoever (whether alone or jointly and in whatever style, name or form and whether as principal or as surety) together with and discount charges thereon (as well as after / before in demand or judgment) till the date of payment at such rates and upon such terms as may from time to time be payable to the Borrower) (or which would have been so payable but for the liquidation, administration or other legal incapacity / infirmly of the Borrower) and of legal and other cost and expenses incurred by the Lender in relation to the Borrower or this guarantee or any other guarantee, indemnity or security for any moneys, obligation or liabilities hereby guaranteed on full indemnity basis.
2.02 Subject to the terms and provisions of this Deed of Guarantee the total amount recoverable by the Lender from the Guarantor in this Deed of Guarantee shall be limited to a principal amount of bills drawn on the drawees amounting to Rs.55,00,000/ (Rupees Fifty Five Lacs Only) together with discount charges thereon and of costs charges and expenses referred to herein. CS No.208206/2016 M/s Goyal MG Gases Pvt. Ltd. Vs. M/s Premium International Finance Ltd. & Ors. Page No.21/31 Now a bare reading of the title of the document, the name and description of the executant Sumaj Jain and the meaning given to the expression 'the guarantor' makes it clear that it was the personal guarantee given by Sumaj Jain. Had it been a guarantee given by Mr. Sumaj Jain in his official capacity, then it would have been specifically so stated in the guarantee deed. However, neither in the title of the document nor in the entire body of the deed, there is any whisper that the guarantee given by Sumaj Jain is a guarantee in his official capacity. I am conscious of the fact that import of the document has to be seen rather than its title or nomenclature. Viewing from both perspectives i.e. title as well as content of the guarantee deed, there is crystal clear, unambiguous and unequivocal expression in the guarantee deed, which leaves no scope for further discussion and I hold that the guarantee given by Sumaj Jain was his personal guarantee.
Delving further, reading of the guarantee deed, more specifically clause 2.01 (reproduced hereinabove) clearly states that it was an unconditional, absolute and irrevocable guarantee to pay on demand to the lender. There is no such precondition anywhere stated in the entire guarantee deed that the lender has to first resort to sale of shares pledged. The deed is couched in such words that it puts unconditional CS No.208206/2016 M/s Goyal MG Gases Pvt. Ltd. Vs. M/s Premium International Finance Ltd. & Ors. Page No.22/31 liability upon the guarantor to pay on demand the principle amount along with discount and other charges. Needless to reiterate, as the terms of the contract of guarantee have been put into writing in the form of a deed Ex.PW1/3, any oral deposition of the parties, contrary to the terms of the deed cannot be accepted. That being so, I hold that the guarantee given by Sumaj Jain to repay the loan amount was not circumscribed by any such precondition as is now being pleaded by the defendant. Ld. Counsel for the plaintiff has also relied upon the judgment of Hon'ble Supreme Court in the case of Industrial Finance Corporation of India Ltd. vs. Cannanore Spinning & Weaving Mills Ltd., 2002 (5) SCC 54, wherein Sections 139 to 141 of Indian Contract Act, 1872 was a matter of interpretation. In the said case, the Hon'ble Supreme Court relied upon a decision of the privy counsel in the case of China and South Sea Bank Limited Vs. Tan [1989(3) ALL ER 839] wherein it was observed as under:
35. The creditor is not obliged to do anything. If the creditor does nothing and the debtor declines into bankruptcy the mortgaged securities become valueless and if the surety decamps abroad the creditor loses his money. If disaster strikes the debtor and the mortgaged securities but the surety remains capable of repaying the debt then the CS No.208206/2016 M/s Goyal MG Gases Pvt. Ltd. Vs. M/s Premium International Finance Ltd. & Ors. Page No.23/31 creditor loses nothing. The surety contracts to pay if the debtor does not pay and the surety is bound by his contract. If the surety perhaps less indolent or less well protected that the creditor, is worried that the mortgaged securities may decline in value then the surety may request the creditor to sell and if the creditor remains idle then the surety may bustle about, pay off the debt, take over the benefit of the securities and sell them. No creditor could carry on the business of lending if he could become liable to a mortgagee and to a surety or to either of them for a decline in value of mortgaged property, unless the creditor was personally responsible for the decline. The creditor was not under a duty to exercise his power of sale over the mortgaged securities at any particular time or at all."
Thus, the said judgment also clearly holds that the creditor is not duty bound to sell the security mortgaged to him to realize the dues.
Dehors the aforesaid, the plaintiff in his replication has stated that at the relevant point of time / at the time when the loan amount became due from the defendants, there was only a little trading in the shares of the defendant no.1 company which too was later on suspended by stock exchange. That being so, as per the version of the plaintiff the securities pledged to them could not be sold by them to recover the dues of the CS No.208206/2016 M/s Goyal MG Gases Pvt. Ltd. Vs. M/s Premium International Finance Ltd. & Ors. Page No.24/31 company. To this assertion of the plaintiff neither any cross examination has been done by the defendant nor they have led any evidence to the contrary or to show any negligence on part of the plaintiff. Hence, the averment of the plaintiff on this count also in a manner stands admitted by the defendant and therefore, the plaintiff company otherwise also could not have realized the dues from the securities pledged to them.
Thus, from the aforesaid discussion, I conclude that the guarantee given by Sh. Sumaj Chand Jain was his personal unconditional guarantee and which he is bound to honour.
Now, the second limb of the issue is as to how much is the liability towards the bill discounting facility availed by defendant no.1 and who all from the defendants arrayed are liable for repayment of the same.
Regarding the liability of the defendants, the company i.e. defendant no.1 had availed the bill discounting facility. Thus, is the principal borrower and liable for repayment of the same. Further, the plaintiff had preferred an application U/Sec.446 of The Companies Act, 1956 seeking leave of the court to proceed against the defendant no.1 company which is in liquidation and vide order dated 23.02.2017, Hon'ble Delhi High Court had granted the said leave. Defendant no.2 i.e. Sumaj Jain gave his personal guarantee for repayment towards the said facility and the interest and other charges thereon. As already held above the CS No.208206/2016 M/s Goyal MG Gases Pvt. Ltd. Vs. M/s Premium International Finance Ltd. & Ors. Page No.25/31 guarantee given by defendant no.2 was his personal guarantee and thus, he is personally liable to discharge the said liability. Now regards defendant no.3, 4 & 5, their role was to the extent that they had pledged with the plaintiff the shares held by them in defendant no.1 company and had executed the letters of pledge Ex.PW1/4 (colly). The paras in the letters of pledge Ex.PW1/4 (colly) that contain the stipulation regarding their liability to pay are para no.4, 5 and 7. The same are reproduced herein under:
"4. I hereby agree and undertake so long as any money remains due to you in respect of the said Bill Discount Facility and discounting charges and other expenses that may be incurred in enforcing payment of the said Hundi or otherwise relating thereto, to deposit, pledge and maintain with you securities the market value of not less than Rs.49,00,000/ (Rupees Forty Nine Lacs only) and if it falls short at any time I undertake to deposit short number of additional shares in order to cover the said security amount.
5. (i) In the event of Premium International Finance Limited, not duly paying amount of Hundi for the Bill Discounting Facility being extended together with all interest and charges or in case they at any time fail to maintain the margin of security above stipulated, (your valuation of the security shall be CS No.208206/2016 M/s Goyal MG Gases Pvt. Ltd. Vs. M/s Premium International Finance Ltd. & Ors. Page No.26/31 the average of the price quoted on the Bombay Stock Exchange on any particular day) I hereby authorise you to sell and dispose off the said securities or any part of the same by publication, auction or otherwise as and when you may in your absolute discretion deem fit by giving a notice of 30 days to me and mine not setting the default right during the period of 30 days to me and mine not setting the default right during the period of 30 days to apply the net proceeds of such sale in satisfaction so far as the same extend towards liquidation of the amount due for principal and interest in respect of the said Hundi together with all charges and expenses incurred by you.
5. (ii) In order to enable you to sell and dispose off the said securities under the circumstances mentioned in clause 5(i) above, I hereby give you the authority to undertake all deeds and acts, to dispose off the said shares to adjust the outstanding amount.
7. If the net sum realised by such a sale should be insufficient to cover the full amount due in respect of the said Hundi together with charges, overdue penal interest and expenses as shown by you of said amount I agree to pay you forthwith a delivery of the said amount any balance due to you on the footing thereof. If the net sum realised CS No.208206/2016 M/s Goyal MG Gases Pvt. Ltd. Vs. M/s Premium International Finance Ltd. & Ors. Page No.27/31 by such a sale shall be in excess of the amount due in respect of the said Hundi for the Bill Discounting Facility, the excess will be made over by you to me forthwith."
A meaningful meaning of the same reveals that defendant no.3, 4 & 5 had pledged their shares, undertaken to even give more shares in the event the earlier shares fall short to discharge the liability on that account. Further more, if the proceeds from sale of shares falls short to meet the liability, then to meet the shortfall by payment. However, all the said is conditioned on sale of shares. Needless to reiterate, sale of shares never took place. That being the situation on the basis of the letters of pledge Ex.PW1/4 (colly) alone, it is very difficult fasten the liability upon defendant no.3, 4 & 5.
However, in so far as defendant no.3 is concerned, admittedly the bill discounting facility was availed by defendant no.1 for discounting the bills of defendant no.3 due against defendant no.1. The cheque for the loan amount (after deducting the discounting charges) issued by the plaintiff was credited in the account of defendant no.3. Apart from letters of pledge, defendant no.3 also executed four hundies/bills of exchange in favour of the plaintiff for a total sum of Rs.55 lakhs which are collectively exhibited as Ex.PW1/12. Thus, on the strength of these hundies, CS No.208206/2016 M/s Goyal MG Gases Pvt. Ltd. Vs. M/s Premium International Finance Ltd. & Ors. Page No.28/31 defendant no.3 also becomes liable to pay for the said amount/debt.
To sum up, defendant no.4 & 5 are held not liable to discharge the liability. However, defendant no.1, 2 & 3 are held jointly & severally liable to discharge the said liability.
Coming to the last aspect i.e. the amount due on account of the said bill discounting facility. Admittedly, the bill discounting facility was for a sum of Rs.55 lakhs and for a period of 105 days. The discounting charges were already deducted or in other words, out of the sum of Rs. 55 lakhs, Rs.49,77,877/ were disbursed as the remaining amount was adjusted towards the discounting charges for the said period. The facility was extended on 16.09.1995 when the cheque in the said sum was issued in the favour of defendant no.3 and was also duly credited. The said facility expired on 30.12.1995. Hence, as per the terms agreed upon, the defendants became liable to pay interest on the said amount from 01.01.1996.
Defendant no.2 in his written statement has stated that he had paid a sum of Rs.12.53 lakhs to the plaintiff receipt whereof has been duly admitted by the plaintiff in the replication. However, the said payment is stated to have been a payment towards the interest accrued from 01.01.1996 and adjusted towards the interest due to the plaintiff under the agreement. Ld. Counsel for the plaintiff has submitted that they have CS No.208206/2016 M/s Goyal MG Gases Pvt. Ltd. Vs. M/s Premium International Finance Ltd. & Ors. Page No.29/31 adjusted this payment towards the interest due from 01.01.1996 till the date of filing of the suit and therefore, they have claimed interest only from the date of filing of the suit and no claim has been made for interest accrued to them prior to the filing of the suit. Thus, the case put forth by the plaintiff is that the amount of Rs.12.53 lakhs has been adjusted as pre suit interest i.e. interest accrued to them for the period 01.01.1996 to 16.09.1998 (date of filing of the suit).
Defendant has also not placed on record any document whatsoever to show that the payment of this amount was towards return of the principal amount nor there has been any crossexamination of PWs on this aspect or even a suggestion given in crossexamination. Thus, in all probability the payment of this amount was towards the interest.
Now though the plaintiff has claimed interest @24% p.a., however, he has accepted a sum of Rs.12.53 lakhs towards interest for the period 01.01.1996 to 16.09.1998 i.e. approximately for 2 years 8 months. Thus, treating this to be the yardstick for calculation of rate of interest by the plaintiff, ends of justice would be met if interest @ 9% p.a. is awarded on the amount of Rs.55 lakhs from the date of filing of the suit till recovery thereof.
Relief:
In view of the discussion on the aforesaid issues, plaintiff is held CS No.208206/2016 M/s Goyal MG Gases Pvt. Ltd. Vs. M/s Premium International Finance Ltd. & Ors. Page No.30/31 entitled for recovery of a sum of Rs.55 lakhs along with interest @ 9% p.a. from the date of filing of the suit till recovery thereof. The defendant no.1, 2 & 3 are held liable jointly & severally for the same. Suit is dismissed against defendant no.4 & 5. Cost of the suit is also awarded. Decree sheet be prepared accordingly. File be consigned to Record Room after necessary compliance.
Announced in the Open Court (Shunali Gupta)
Dated: 16.02.2018 Addl. District Judge(06)
South Distt. Saket Courts,
New Delhi.
CS No.208206/2016
M/s Goyal MG Gases Pvt. Ltd. Vs. M/s Premium International Finance Ltd. & Ors. Page No.31/31