Delhi District Court
M/S Silverton Finance & Leasing Ltd vs M/S D.S. Gupta Contracts P. Ltd on 28 April, 2007
IN THE COURT OF SH. RAKESH KUMAR
ADDITIONAL DISTRICT JUDGE: DELHI
(FAST TRACK COURT)
Suit No.83/06/98
M/s Silverton Finance & Leasing Ltd.
a public limited company,
having its regd. Office at
B-338, Chinttaranjan Park,
New Delhi-110019, and administrative office at
Omega Hotel Bldg., near Railway Station,
Muzaffar Nagar, (U.P.) through its Director,
Shri Bharat Bhushan Garg .....Plaintiff.
Versus
M/s D.S. Gupta Contracts P. Ltd.
a Pvt. Ltd. Co., having its office at
E-153, Kalkaji, New Delhi - 110019 .....Defendant.
SUIT FOR RECOVERY OF Rs. 8,60,000/- (Rs. EIGHT LAKHS SIXTY
THOUSAND ONLY)
JUDGMENT
1. The plaintiff, a public limited company, registered under the Companies Act, 1956, has filed the present suit, through Sh. Bharat Bhushan Garg, its Director against the aforesaid defendant for recovery of Rs.8,60,000/- alongwith pendentelite and future interest @24% per annum alongwith the cost of the suit.
2. As per the contents of the plaint, plaintiff is engaged in the business of financing and leasing of vehicles, equipments etc. The defendant is a private limited company and is one of the well known mechanical and Sanitary Engineers, contractor and consultants. Shri D.S. Gupta, the Managing Director of the defendant company approached Shri Bharat Bhushan Gar, the Director of the plaintiff company in the month of February, 1995 requesting for a short term loan of Rs. 5,00,000/- for the purpose of its business. Considering the requests and need of the defendant company, as represented by its Managing Director, aforenamed, and on the assurances and promises for the early refund of the said loan, the plaintiff company, after negotiation, paid a short term loan of Rs. 5,00,000/- to the defendant Company vide cheque No. 177105 dated 23.02.1995 drawn on United Bank of India, Soami Nagar Branch, New Delhi, and the defendant company issued a receipt dated 23.02.1995 for the same under the signatures of its Managing Director Sh. D.S. Gupta in acceptance of the said loan and its liability to refund the same alongwith interest at the rate of 24% per annum. The defendant company also executed a pronote dated 23.02.1995 in favour of the plaintiff company and promised to pay, on demand, the said loan amount alongwith interest at the rate of 24% per annum.
The plaintiff company from time to time, has always been raising bills for the interest to the defendant company, and the defendant company has always been acknowledging the same in acceptance of their liability to pay the same. The defendant company also acknowledged its liability towards the payment of aforesaid loan and interest accrued thereon and confirmed the same as per its balance sheet for the period ending 31.3.1996.
On 18.2.98, the defendant made a part payment of Rs. 25,000/- through a pay order towards its liability arising out of the said pronote dated 23.2.1995. The defendant failed to pay the remaining amount despite repeated demands, telephones, personal visits and requests made by the plaintiff company. Hence this suit for recovery of Rs. 8,60,000/- being the amount of Rs. 5,00,000/- paid as loan and Rs. 3,60,000/- as interest accrued thereon.
3. Defendant contested the suit by filing the Written Statement in which he took the preliminary objections that the suit has not been filed by a duly authorized person, merits dismissal on various ground like the suit is barred by law, misjoinder and non-joinder of necessary parties, etc. The present suit is not maintainable and is barred by law, as the plaintiff by its own admissions is a ''professional money lender'' who carried on business of advancing loans as defined in the Punjab Registration of Money Lenders Act, 1938 (hereinafter referred to as the Act) as extended to Delhi but is not registered under the said Act and does not hold the requisite money lender's licence, as required under the said Act. The alleged loan transaction and the promissory note, as well as the alleged bills raised by the plaintiff are on the basis of a sham transaction.
On merits, it is stated that the amount more than a sum of Rs. 5 Lakh was due to the Managing Director of the defendant company from Shri Bharat Bhushan Gar, on account of settlement of accounts of a partnership transaction which had been done by the said Shri D.S. Gupta and Shri Bharat Bhushan Garg, in connection with a construction of a hotel. The said amount was due to Shri D.S. Gupta on settlement of accounts and it was only therefore that Shri Bharat Bhushan Garg advanced the said amount to the defendant. However, as Shri Bharat Bhushan Garg was desirous of showing the said payment in his books of account, it was agreed that the transaction would be disguised as a loan transaction. It is further stated that in order to fully square off and settle the partnership transaction between Shri Bharat Bhushan Garg and Managing Director of the defendant company, a sum of Rs. 25,000/- was paid by the defendant company to the plaintiff on 18.2.1998. Rest of the contents of the plaint have been denied.
4. The plaintiff filed the replication to the Written Statement of defendant whereby objections and stand taken by the defendant has been vehemently denied and the contents of the plaint were reaffirmed and reasserted. It was specifically averred that the suit was properly filed by a duly authorized person Sh. Bharat Bhusan Garg, who has signed verified and instituted the plaint is also a Director of the plaintiff company and who is duly authorized to do so vide resolution dated 15.01.1998. The suit is correct, within limitation and is legally maintainable. The plaintiff is neither money lander, as defined in Sec. 2 (9) of the Punjab Registration of Money Landers Act, 1938, nor the transaction in question falls within the ambit of term loan as defined U/s 2 (8) of the said Act, and as such the provision of Sec.3 of the said Act are not applicable to the present case. The plaintiff is a public limited company and its accounts are subject to audit as per provisions of Companies Act, 1956. The plaintiff also can not be termed as creditor as defined U/s 2 (5) of the Punjab Regulation of Accounts Act, 1930. the rate of interest @ 24% per annum was duly agreed between the parties as is evident from the receipt and promissory note dated 23.02.1995, the execution of which has not been denied by the defendant.
5. From the pleadings of the parties following issues were farmed vide order dated 26.11.2001 and thereafter the case was fixed for plaintiff's evidence.:-
i). Whether the plaint has been signed, verified and filed by a duly authorized person? OPP.
ii). Whether the suit is not maintainable and barred on the grounds raised in preliminary objection no.4 of the Written Statement? OPD.
iii). Whether the defendant is not liable to pay any amount to the plaintiff on the grounds mentioned in preliminary objections no.5,6 & 7 of the Written Statement? OPD.
iv). Whether the plaintiff is entitled to the interest @ 24% per annum ? OPP.
v). To what amount, the plaintiff is entitled? OPP.
vi). Relief.
6. In support of the case of the plaintiff Sh. Bharat Bhusan appeared in the witness box as PW-1. The plaintiff has also filed the evidence of one more witness by way of affidavit namely Sh. R.L. Narula, the Auditor but this witness could not be produced in the witness box for his cross examination and the plaintiff's evidence was closed.
On the other hand Sh. Rajesh Gupta, the Director of defendant company, appeared in the witness box as DW-1 and then the defendant's evidence was also closed.
In his examination-in-chief tendered by way of affidavit as PW-1, he has reiterated the contents of plaint. He has also exhibited the following documents:-
a). Ex.PW1/1: The extract of Board resolution of plaintiff Co.
dated 15.01.1998.
b). Ex.PW1/2: The receipt dated 23.02.1995 issued by the defendant company in token of the receipt of the short term loan amounting to Rs.5,00,000/- given vide cheque no.177105 dated 23.02.1995 drawn of UBI, Soami Nagar Branch, Delhi. It was issued under the signatures of his MD Sh. D.S Gupta in acceptance of the loan and its liability to refund the same alongwith interest @ 24% per annum.
c). Ex.PW1/3: The pronote dated 23.02.1995 executed by the defendant in favour of the plaintiff company and promised to pay on demand the said amount of Rs.5,00,000/- alongwith interest @ 24% p.a.
d). Ex.PW1/4: Is the confirmation of the account showing that there was a debit balance of Rs. Five Lakh in the defendant company.
e). Ex.PW1/5 to
Ex.PW1/21: Are the various bills which were sent to the
defendant company and they were duly
acknowledged by them in acceptance of their liability to pay the same.
f). Ex.PW1/22: Is the loan (liability) summary of the defendant company for the period 01.04.1995 to 31.03.1996.
g). Ex.PW1/23: Is the letter vide which the pay order of Rs.25,000/- was sent by the defendant to the plaintiff company.
h). Ex.PW1/24 & Ex.PW1/25 are the certificates of the auditor.
i) Ex.PW1/26: Is the Memorandum & Article of Association of the new company. Also containing the certificate of change of name of the plaintiff company from Silverton Finance to Silverton Finance Motels & Resorts Ltd.
DW-1 has also repeated the contents of the Written Statement in his testimony tendered by way of affidavit. He claimed that the plaintiff is not entitled for any amount as the suit of the plaintiff is barred by law and the same is bad for mis joinder and non joinder of necessary party. The present suit for a money lander for recovery of an alleged load, deserves dismissal under Sec. 3 of the said Act. The interest claimed by the plaintiff is excessive and alleged transaction is substantially unfair. The plaintiff can not charge more than 12.5% per annum under the Usurious Loans Act, 1918, as amended by Punjab Relief Indebtedness Act, 1934 as applicable to Delhi.
7. I have carefully heard the rival submissions of the counsels for the parties. I have also throughly perused the entire relevant material placed in the file.
My issue wise findings are as under:-
ISSUE No.1:-
Whether the plaint has been signed, verified and filed by a duly authorized person? OPP.
The onus to prove this issue has been placed upon the plaintiff and to discharge the same PW-1 Sh. Bharat Bhusan Garg has proved the original extract of the resolution passed by the board of directors of the plaintiff company in the meeting held on 15.01.1998 which is Ex.PW1/1, whereby Sh. Bharat Bhusan Garg was authorized to sign, verify and file the civil recovery suit against the defendant company for the recovery of Rs.8,60,000/- and the interest @ 24 % per annum on the basis of pronote dated 23.02.1995 executed by the defendant in the name of the plaintiff. The defendant has been failed to bring any material in contrary to the same. Therefore, issue no.1 is decided in favour of the plaintiff and I hold that the plaint has been signed, verified and instituted by a duly authorized person.
8. ISSUE No.2:-
Whether the suit is not maintainable and barred on the grounds raised in preliminary objection no.4 of the Written Statement?
OPD.
The onus to prove this issue has been placed upon the defendant who has raised a preliminary objection to the effect that the suit of the plaintiff is barred by law and plaintiff by its own admission is a professional money lander who carries on business of advancing loans as defined in the Punjab Registration of Money Lenders Act, 1938, as extended to Delhi, but is not registered under the said Act and does not hold the requisite money lender's licence, as required under the said Act. Hence the suit presented by a money lender for recovery of an alleged loan deserves dismissal under the mandatory provisions of Sec. 3 of the said Act.
According to the plaintiff, the suit as filed by him is not barred under the mischief of the provisions of Sec. 3 of Punjab Registration of Money Lenders Act, 1938 as applicable to Delhi as the plaintiff is neither a money lander as defined in Sec. 2 (8) of the Punjab Registration of Money Lenders Act, 1938 nor the transaction in question falls with the ambit of loan as defined u/s 2 (7) of the said Act. The plaintiff is a public limited company and its account are subject to audit as per the provisions of companies Act, 1956. The certificate of the auditors are duly placed in the file.
Sub Sec. 8 of Sec. 2 of the aforesaid Act provides as under:-
''Money landers means a person, or a firm carrying on the business of advancing of loan as defined in this Act, and shall include the legal representative and the successor in interest whether by inheritance, assignment or otherwise, of such persons or firm provided that nothing in this definition shall apply to
a). a person who is the legal representative or is by inheritance the successor in interest of the estate of a deceased money lander together with all his rights and liabilities provided that such person only
i). winds up the estate of such money lender,
ii). realizes outstanding loans,
iii). Does not renew any existing loan, nor advanced any fresh loan
b). a bonafide assignment by a money lander of a single loan to anyone other than the wife or husband of such assignor as the case may be, or any person, who is descended from a common grand father of the assignor'' Sec. 2 (7) of the Act defines the terms loan as under:-
''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 a 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 any
Government in India or by or to any local
body under the authority of any
Government in India;
v). a loan advanced by a bank, a co-
operative society or a company whose
accounts are subject to audit by a
certificated audit or under the Indian
Companies Act, 1913;
vi). A loan advanced by a trader to a
trader, in the 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 Act, 1881, other than a promissory note.
In my considered opinion, the suit as filed by the plaintiff is not hit by the provisions of Sec. 3 of Punjab Registration of Money Lenders Act, 1938 as the plaintiff is a public limited company registered under the provisions of Companies Act, 1956 and is engaged in the business of financing and leasing of vehicles, equipments etc. Thus the plaintiff does not fall under the definition of money landers as defined under Sec. 2 (8) of the Act and also the term loan given by the plaintiff to the defendant does not fall within the definition of loan as defined under Sec. 2 (7) of the Act and the case of the plaintiff falls under exception VI of sec. 2 (7) of the Act. The plaintiff has duly proved the Memorandum and Article and Association of the plaintiff company which is Ex.PW1/26 and the company is subject to audit and as such the suit of the plaintiff is not barred under the mischiefs of Sec. 3 of the money landers Act. Thus suit of the plaintiff is maintainable. Accordingly issue stands decided in favour of plaintiff and against the defendant.
9. ISSUE No.3:-
Whether the defendant is not liable to pay any amount to the plaintiff on the grounds mentioned in preliminary objections no.5,6 & 7 of the Written Statement? OPD.
The onus to prove this issue has been placed upon the defendant who in preliminary objection no.5, 6 & 7 of his Written Statement has claimed as under:
a). the plaintiff is a creditor as defined under the Punjab Regulation of Account Act, 1930, as extended to Delhi. It does not regularly maintained the account for each of the creditors as required under the said Act and thus he is not entitled for the interest and cost on the alleged loan as the same is not permissible U/s 4 of the said Act.
b). the interest claimed by the plaintiff from the defendant is excessive and the alleged transaction between the plaintiff and defendant is substantially unfair. The plaintiff in any case can not charge interest more than 12.5% per annum under the Usurious Loans Act, 1918 as amended by the Punjab Relief Indebtedness Act, 1934 as applicable to Delhi.
c). The transaction between the plaintiff and the defendant was never a loan transaction and in fact, the amount which the plaintiff allegedly claims to have advanced as loan to Sh. D.S. Gupta, MD of th defendant company was due to him, under certain other independent transaction and it was for that purpose that the alleged loan was advanced to the defendant. It was however, not intended that the said loan was to be repaid or that any interest was to be paid on the said loan.
In the corresponding paras of the replication, the plaintiff has claimed as under:-
a). since the plaintiff is neither a money lander nor the nature of transaction in the present case is covered under the provisions of Punjab Registration of Money Landers Act, 1938, so plaintiff also can not be termed as creditor as defined under Sec. 2 (5) of the Punjab Relation of Accounts Act, 1930 and as such the provisions of the said Act are not applicable to the plaintiff and as such any alleged non compliance of the same can not vitiate the present proceedings.
b). the rate of interest @ 24% per annum was duly agreed between the parties as is evident from the receipt as Promissory note dated 23.02.1995, execution of which has not been denied by the defendant. Moreover, the bills of the plaintiff as well as the letter of the defendant dated 18.02.1998 also do not leave any ambiguity on this point. The defendant after having agreed to pay interest @ 24 % p.a. is now estopped from challenging the said rate of interest. The provisions of Usurious Loans Act, 1881 are not applicable to the present suit.
c). The defence raised in preliminary objection no.7 is sham defence which is also marred with self contradiction, even after having being confronted with the receipt and promissory note dated 23.02.1995, bills of the plaintiff sent to the defendant from time to time, defendants own balance sheet and profit and loss account and the letter of the defendant date 18.02.1998. The defendant has not disputed any of the said documents which are Ex.PW1/2 to Ex.PW1/24 and in his letter dated 18.02.1998 Ex.PW1/23, the defendant has not only admitted the said rate of interest but also expressed regret that due to financial constraint the amount of the plaintiff alongwith interest accrued thereon could not be paid and it was assured that the balance amount alongwith interest would be released shortly. Thus there is no dispute and because of this reasons the Hon'ble High court vide its order dated 17.05.2000 granted leave to defend the defendant subject to the condition of making payment of principle amount of Rs. Five Lakhs. Thus the allegations of the defendant that the amount of Rs. Five Lakhs was due to defendant from plaintiff under certain other independent transactions or the said loan was not repayable with interest speaks volume of the dishonest. The defendant on one hand alleged that the plaintiff was owing a sum of Rs. Five Lakhs to the defendant and to square off said liability, the amount of Rs. Five Lakhs was paid by plaintiff to the defendant, on the other hand the defendant is alleging that the sum of Rs.25,000/- was paid by the defendant to the plaintiff to settle the entire transaction without even attempting to explain that what was the need for the defendant to make the said payment when, as alleged, the amount of Rs. Five Lakhs was due to Sh. D.S. Gupta under certain other alleged independent transaction.
According to the Ld. Counsel for the defendant since the plaintiff falls under the provisions of Creditor as defined under the provisions of Punjab Regulation of Accounts Act, 1930 and the plaintiff is not maintaining the account of its creditors, so it is not entitled to claim interest @ 24 % per annum and cost. Further the interest claim is excessive and exorbitant and it is hit by the provisions of Usurious Loans Act, 1918 under which the plaintiff can not claim interest more than 12.5% per annum. Further the amount of Rs. Five Lakh was given by the plaintiff to the defendant under some independent transaction and it was not given as a loan. On the other hand according to the plaintiff the provisions of Punjab Regulation of Accounts Act, 1930 and Usurious Loans Act, 1918 are not applicable in the case of the plaintiff as it does not fall under the definition of creditor as the case of the plaintiff does not cover under the provisions of Punjab Registration of Money Lenders Act, 1938. The interest @ 24% per annum has been claimed being the contractual interest which is well evident by the receipt, promissory note and bills as well as the letter of defendant dated 18.02.1996. Further the plea of the independent transaction raised by the plaintiff is a sham defence which is self contradictory as the defendant has not denied the documentary evidence of the plaintiff like promissory note, receipt. etc. In my considered opinion the defendant has been failed to discharge its onus of proving this issue. The plaintiff does not fall under the definition of creditor as defined under Punjab Regulation of Accounts Act, 1930 and as such the alleged non compliance on the part of the plaintiff is immaterial and it does not vitiate the case of the plaintiff. The plaintiff is entitled to claim interest @ 24 % per annum being the contractual interest and the defendant has been failed to substantiate his claim of the independent transaction. Resultantly, the issue stands decided against the defendant.
10. ISSUE No.4:-
Whether the plaintiff is entitled to the interest @ 24% per annum ?
OPP While deciding the issue no.3, I have already reached to the conclusion that the plaintiff is entitled for the interest @ 24% per annum, as the defendant has been failed to establish his defence that the plaintiff is a creditor or the money lander and also the amount of Rs. Five Lakhs was actually received by the defendant in connection of some independent transaction. He has also not disputed the documents produced by the plaintiff. Thus the plaintiff is entitled for the aforesaid interest i.e. @ 24% per annum on the principle amount of Rs. Five Lakhs from the date of its payment by the plaintiff to the defendant till the date of its receipt from the defendant. The issue stands decided accordingly.
11. ISSUE No.5:-
To what amount, the plaintiff is entitled?
In view of my findings on the foregoing issues, I have come to the conclusion that the plaintiff is entitled for the recovery of the amount of Rs. Five Lakhs alongwith interest @ 24% per annum from the date of its payment by the plaintiff to the defendant till the date of its receipt from the defendant. Since the defendant has already made the payment of the principle amount of Rs. Five Lakhs in pursuance to the order of the Hon'ble High Court dated 17.05.2000, so now the plaintiff is only entitled for the interest on the said principle amount @ 24% per annum from the date of its payment by the plaintiff to the defendant till 17.05.2000 i.e. the date when the aforesaid order of the Hon'ble High Court of Delhi was passed and in pursuance of the order the defendant had made the payment to the plaintiff. The defendant is also entitled for the adjustment of Rs.25,000/- from the deceetal amount which has been admittedly received by the plaintiff alongwith the letter Ex.PW1/23.
It is well settled that the interest on the amount of interest is not payable. Issue stands decided accordingly.
12. RELIEF:-
In view of above, a decree for the amount of interest @ 24% per annum on the principle amount of Rs. Five Lakhs from 23.02.1995 i.e. date of its payment by the plaintiff to the defendant till 17.05.2000 i.e. the date when the aforesaid order of the Hon'ble High Court of Delhi was passed while deciding the application of the defendant to contest the suit after adjusting the amount of Rs.25,000/-, is passed in favour of the plaintiff and against the defendant. Cost of the suit is also awarded in favour of the plaintiff.
13. Decree Sheet be prepared accordingly.
14. File be consigned to Record Room after completion of necessary formalities.
(Announced in the open (RAKESH KUMAR)
court today on 28.04.2007) ADDL. DISTRICT JUDGE
DELHI