Delhi District Court
Ms Tanwar Maketing Services vs Ms Zenith Rubber Ltd on 16 November, 2024
1
IN THE COURT OF SH. SUMIT DASS, ADDITIONAL
SESSIONS JUDGE - 05, NEW DELHI DISTRICT, PATIALA HOUSE
COURTS, NEW DELHI
CS No. 57961/16 (OLd No.. CS (OS) 864/1998
M/s Tanwar Marketing Services
PO Box No.16584
Dubai - UAE. .......Plaintiff
VERSUS
1. M/s Zenith Rollers Limited
9/49, Kirti Nagar, Industrial Area,
New Delhi - 110015
2. M/s Zenith Rubber Limited
9/49, Kirti Nagar, Industrial Area,
New Delhi - 110015
3. M/s Zenith International
9/49, Kirti Nagar, Industrial Area,
New Delhi 110015
4. Sh. H.S.Paintal
r/o A-45, Kirti Nagar,
New Delhi 110015 ...... Defendants
AND
CS 57893/16 Old No. CS (OS) 886/1998
1. M/s Tanwar Marketing Services
PO Box No. 16584, Dubai, UAE ....... Plaintiff
VERSUS
Zenith Rollers Limited
9/49 Industrial Area,
Kirti Nagar, New Delhi - 110015. .........Defendant
CS No. 57961/16
CS No. 57893/16
CS No. 57188/16 1/63
2
AND
CS No. 57188/16 Old Suit No. 1524/1999
1. M/s Zenith Rollers Limited
9/49, Kirti Nagar, Industrial Area,
New Delhi.
2. Sh. Harbhajan Singh Paintal
s/o Late Sardar Makhan Singh
3. Smt. Darshan Kaur Paintal
w/o Sh. H.S.Paintal
Both r/o A-45, Kirti Nagar,
New Delhi. .......Plaintiff
VERSUS
1. Sh. Darshan Singh Tanwar
s/o Sh. Bachan Singh
2. Mrs. Sapna Tanwar
w/o Sh. D.S. Tanwar
Both r/o 2204, C-2, Vasant Kunj
New Delhi. ...... Defendants
Date of Institution : 01.05.1998, 20.04.1998, 01.07.1999
Arguments heard &
concluded on : 25.09.2024
Date of Decision : 16.11.2024
JUDGMENT
1. Vide this common order I shall dispose of captioned three suits for recovery. All matter are now 25 years old matters. Record is quite CS No. 57961/16 CS No. 57893/16 CS No. 57188/16 2/63 3 voluminous. Substantial evidence was also recorded through Local Commissioner. The evidence also is quite lengthy and I may say so that it had taken substantial time and had also meandered off the tangent and was dragged unnecessarily notwithstanding the short controversy involved in the case.
In order to lend clarity to this order irrespective of the nomenclature as plaintiff or defendant, for the sake of convenience the parties shall be denoted as Tanwar Marketing Services / Dashrath Singh Tanwar as the Plaintiff whereas the Zenith Group / H S Paintal shall be referred to as the Defendant(s).
1.1 I shall deal all the suits vide the present order. I am noting the facts of all the three cases first - they shall be referred to as First Suit, Second Suit and Third Suit respectively. The issues struck and the evidence therein is also more or less similar and as such I shall deal with the issues of the first case in extenso which would also to a large extent can be adopted as findings in so far as other issues in Second Suit and Third Suit are concerned. The same would also be obvious from reading of the discussion.
FIRST SUIT -
2. The first suit is the suit bearing no. 864/1998. The same is premised on the following averments:
i) Plaintiff M/s Tanwar Marketing Services is a Dubai based company duly registered with Sharjah Municipality (UAE) managed and CS No. 57961/16 CS No. 57893/16 CS No. 57188/16 3/63 4 controlled by Sh Dashrath Singh Tanwar, an NRI who is entitled to maintain the present suit.
ii) Defendant no.1 and 2 are stated to be companies duly registered under the Companies Act, 1956 while defendant no.3 is incorporated under the Partnership Act. All the business of defendant no.1 to 3 are being run / maintained by defendant no.4. They are being housed in the same premises and practically controlled by defendant no.4.
iii) The defendants had negotiated for purchase of a machine make MRC-90 Roll Wrapping Extruder Plan from M/s Italmatic SRS, Italy, for import in the name of defendants' business and to finance the said purchase/for acquisition of machine, a part amount was remitted by the plaintiff to the aforesaid supplier. The same was a temporary loan repayable with interest. Plaintiff had transferred USD 65,000 at different intervals which were duly acknowledged by defendant no.4. The amount was not refunded despite repeated requests whereafter a legal notice dated 07.11.1997 was served upon the defendants which was replied by legal reply dated 28.11.1997 (on behalf of defendants) wherein for the first time it was propounded that balance payment was not made by the plaintiff as a result machine was not supplied to them.
iv) It is further contended that in fact the defendant no.4 had placed a confirmed order with the supplier for purchase of machinery at the value of Rs. USD 1,25,000 however due to delay the same was increased to USD 1,50,000/-. Letter of credit was to be issued which the CS No. 57961/16 CS No. 57893/16 CS No. 57188/16 4/63 5 defendants failed to do so.
v) As such the instant suit was filed for recovery of USD 1,11,800 [USD 65,000 + USD 46,800 as interest] which comes to Rs. 44,16,100/- Indian currency at the conversion rate of 39.50 per US Dollar. The said amount was sought for with interest vide the present suit.
3. Written statement was filed by the defendants. Preliminary objections were taken that plaintiff is not a juristic person as such it had no locus standi to file the present suit. Dashrath Singh Tanwar had represented himself as a sole proprietor of the plaintiff firm whereupon the summons for judgment were issued - suit having been filed U/o 37 CPC whereas he is now taking another bogey/stand and describing the same to be a Company. As such the suit filed by M/s Tanwar Marketing Services is not maintainable. Further it was stated that the suit is also not maintainable qua defendant no.2, 3 and 4 who have been wrongfully impleaded and no cause of action accrued against them - plaint is liable to be rejected for misjoinder of parties.
Defendants stated that the plaintiff - Dashrath Singh Tanwar and defendant no.4 H.S.Paintal had joined together for setting up a project of steel and rubber rollers required by the paper and textile industry for which they intend to promote a new company by the name of M/s. Zenith Rollers Pvt. Ltd. which was later on converted into public ltd. company. Dashrath Singh Tanwar was a subscriber of the initial capital and a promoter/founder director of the said concern. This fact was concealed in CS No. 57961/16 CS No. 57893/16 CS No. 57188/16 5/63 6 the plaint. That for the purposes of commencement of business the company had to acquire machinery and for the said it was decided that old machinery would be purchased and the said task was to be performed by the Dashrath Singh Tanwar. It was also agreed that in the said company, there would be investment so made whereafter the share of defendant no.4 would be 55% and Dashrath Singh Tanwar and his nominee would be having 45% share and a board resolution was passed wherein the wife of Dashrath Singh Tanwar namely Sapna Tanwar was inducted as 4 th director on 05.04.1995. To finance the business loan was also sought from the UPFC (Uttar Pradesh Financial Corporation). Industrial unit was also to be acquired from UPFC. For the said purpose both the parties had also undertaken steps and Sapna Tanwar wife of Dashrath Singh Tanwar was also duly empowered to act on behalf of company. It was further stated that loan and other project details were also firmed up. Loan was sanctioned however the same was not disbursed. Terms and conditions warranted that documentations had to be given by both H.S.Paintal and Dashrath Singh Tanwar. Both were required to execute the bond of guarantee in their individual capacities besides performing other acts for disbursement of loan to the company. Dashrath Singh Tanwar did not co- operate in the same.
3.1 Further a second hand machinery was sought to be purchased and the same was shipped to India. Dashrath Singh Tanwar had also undertaken to take a new machine - the machine for which advance payment was given to M/s Italmatic however later on the said machine was not shipped to India. It was also stated that Dashrath Singh Tanwar CS No. 57961/16 CS No. 57893/16 CS No. 57188/16 6/63 7 had not co-operated with defendant no.4 for grant of loan from UPFC and neither had contributed towards the capital for the new company. So much so he had also filed a petition bearing no. 46/98 titled as M/s Tanwar Marketing Services v/s M/s Zenith Rollers before the Companies Court for recovery of the said amount. As such owing to the misdeeds the defendant has also preferred a suit for recovery of Rs.89,03,316/- bearing suit no. 1524/1999 before the Hon'ble High Court. In fact the machine had to be purchased and value thereof had to be credited in the account of Dashrath Singh Tanwar towards his contribution for setting up the project.
3.2 On merits, all the averments made in the plaint were denied and the stand taken by the defendants in the preliminary objection was reiterated. Defendants denied any liability and sought dismissal of the suit.
4. Initially the suit was filed U/o 37 of the Civil Procedure Code, 1908 (in short CPC). In terms of order passed by the Hon'ble High Court dated 25.01.2002 unconditional leave was granted. Accordingly as such pleadings were filed and completed. Issues were settled which reads as here under in terms of order dated 17.07.2007:
1. Whether the plaintiff is a juristic person and the suit in the name of the plaintiff is maintainable? OPP
2. Whether the plaint has been signed and verified and the suit instituted by a duly authorised person?OPP
3. Whether the plaintiff has any cause of action against defendant nos. 2, 3 and 4?OPP CS No. 57961/16 CS No. 57893/16 CS No. 57188/16 7/63 8
4. Whether there was an agreement between plaintiff and defendant no. 2, 3 and 4 to set-up a joint venture project?
If so, whether the plaintiff committed default in complying with the terms and conditions of the same and its effect?OPD
5. Whether Shri Dashrath Singh Tanwar agreed to purchase a machinery MRC-90 Roll Wrapping Extruder on behalf of defendant no. 1 and dispatched the same for delivery to defendant no. 1?OPP
6. Whether the plaintiff had paid US$ 65,000/- towards purchase of a machinery MRC-90 Roll Wrapping Extruder?OPP
7. Whether a sum of US $ 65,000/- was advanced by way of loan to the defendants?OPP
8. Whether the defendant is liable to pay any amount to the plaintiff as claimed in the suit?OPP
9. Whether the plaintiff is entitled to any interest? If so, at what rate and for which period? OPP
5. One witness was examined on behalf of either side.
Sh. Dashrath Singh Tanwar was examined as PW-1. He had tendered his evidence by way of affidavit Ex. PW-1/A and relied upon the documents as Ex. P-1 to P-14 which are as under:
1. Ex. P-1 Copy of registration certificate of plaintiff business.
2. Ex. P-2 Copy of correspondences, deposited with plaintiff consisting of letter dated 02.06.1993.
3. Ex. P-3 Fax communication dated 20.05.1994
4. Ex. P-4 Fax communication dated 07.06.1994
5. Ex. P-5 Order confirmation signed by defendant no.4 in the name of defendant no.2.CS No. 57961/16 CS No. 57893/16 CS No. 57188/16 8/63 9
6. Ex. P-6 Certificate of remittance of USD 14,000 made on 27.03.1995 and of USD 50,000 on 16.05.1995.
7. Ex. P-7 Copy of legal notice dated 07.11.1997
8. Ex. P-8 Reply to the notice dated 28.11.1997
9. Ex. P-9 Copies of Fax messages exchanged between defendants and supplier dated 28.06.1995
10. Ex. P-10 Fax message dated 06.07.1995
11. Ex.P-11 Fax message dated 03.10.1995
12. Ex.P-12 Fax message dated 04.10.1995
13. Ex.P-13 Fax message dated 05.10.1995
14. Ex.P-14 Fax message dated 06.10.1995 This witness was cross examined on behalf of defendants and PE was closed.
5.1 Sh. Harbhajan Singh Paintal/Defendant no.4 was examined as DW-1 and deposed in consonance withe the case set forth in the written statement. He had tendered his evidence by way of affidavit Ex.DW1/A. He was cross examined by Ld. Counsel for plaintiff. DE was closed.
SECOND SUIT
6. Now coming to the second suit that is suit bearing no.
57893/2016 same is for recovery of Rs. 94,21,816/-. The facts of the same are quite common to the first suit. Additionally it was contended that the defendant wished to set up a manufacturing unit for which it had required second hand machinery and it imported from the plaintiff CS No. 57961/16 CS No. 57893/16 CS No. 57188/16 9/63 10 machinery for an amount of DM 2,55,750 equivalent to USD 1,82,679. This amount had to be paid within 180 days through their banker UCO Bank, Kirti Nagar to the banker of the plaintiff i.e. Union National Bank, A1. Fahidi Street Branch, Dubai. Defendant was to remit the said amount on or before 19/20.10.95. Part amount of USD 44,000 was remitted. Balance USD 1,38,679 was never remitted despite repeated requests/reminder. Legal notices were exchanged. The defendant had also acknowledged the said amount however, the amount was not paid. Calculating interest thereon on the said amount total comes to Rs. USD 2,38,527 (Principal of 1,38,679 USD + interest on the same amounting to Rs. 91,848/-USD). As such the present suit is for recovery of Rs. 94,21,816/- - again at the conversion rate of 39.50 per Dollar.
7. Version of the defendant again in the present suit is similar to the earlier one. In addition to whatever has been stated in the first suits written statement it was further stated as under :
Dashrath Singh Tanwar had agreed for purchase of second hand machinery as well as new machinery which he had undertaken to ship to India for the defendant company. New machinery was to be purchased from M/s Italmatic SRS, Italy. Plaintiff was also entitled to the actual price upon which the old machinery was acquired, the amount equivalent whereof would be his contribution / investment towards the joint venture. Furthermore it was also taken umbrage that the previous consent of the board of directors had to be taken as it was transaction with the promoters director. Coming to the payment aspect it was made that is 45,000/- USD the same was arranged by the defendants by borrowing the CS No. 57961/16 CS No. 57893/16 CS No. 57188/16 10/63 11 same and had paid the same as Dashrath Singh Tanwar had insisted that he was in urgent need of money.
8. Issues were settled vide order dated 17.07.2007 as here under :-
i) Whether the suit is barred by law of limitation? OPP
ii) Whether the suit is bad for mis-joinder of parties, if so its effect? OPP
iii) Whether the plaintiff is entitled to the sum of Rs.
94,21,816/- being equivalent to USD 2,36,527 as per the exchange rate of US$ INR 39.50 or any other amounts based on the foreign exchange rate variations? OPD
iv) Whether the plaintiff is entitled to interest on amounts found due and payable by the defendant to it? If so, on what amount, at what rate and for what period? OPP
v) Whether the amount found in favour of the plaintiff is liable to be adjusted towards the claim of damages of the defendant in CS (OS) No. 1524/1999? OPP
v) Relief.
9. Coming to the evidence in the present case, PW-1 was Dashrath Singh Tanwar and he had deposed by way of affidavit Ex.P-X and the documents were exhibited from Ex.P-1 to Ex. P-14. Same reads as under:-
1. Ex. P-1 The facsimile copy of invoice for purchase of machine.
2. Ex. P-2 Documents sent by plaintiff through its banker CS No. 57961/16 CS No. 57893/16 CS No. 57188/16 11/63 12 dated 08.04.1995.
3. Ex. P-3 Bill of exchange dated 08.04.1995 containing acceptance by defendant dated 20.04.1995.
4. Ex. P-4 Correspondence thereon received by plaintiff in regard to documents.
5. Ex. P-5 Message dated 03.02.1996
6. Ex. P-6 Banker's letter dated 14.05.1995
7. Ex. P-7 Letter dated 15.07.1995
8. Ex. P-8 Letter dated 10.03.1997
9. Ex.P-9 Letter dated 19.05.1997
10. Ex. P-10 Copy of notice dated 07.11.1997
11. Ex. P-11 Reply thereto dated 28.11.1997
12. Ex. P-12 Copy of balance sheet as on 30.09.1995
13. Ex. P-13 Certified copy of balance sheets of defendant for year ending 31.03.1997 onwards.
14 Ex. P-14 Copy of proceedings initiated by defendant referred to CEGAT Order.
This witness was cross examined at length.
9.1 On behalf of defendant H S Paintal has stepped into the witness box and tendered his evidence by way of affidavit. Certain documents were proved during his evidence. First one being Ex.DW-1/1 i.e. a letter written by Dashrath Singh Tanwar that he had located second hand machinery in Europe and which was reverted by the defendants in terms of letter dated 02.12.1994 Ex.DW-1/2 which was again communicated back on 04.12.1994 with documents Ex. DW-1/3. Letter CS No. 57961/16 CS No. 57893/16 CS No. 57188/16 12/63 13 dated 08.12.1994 is Ex. DW-1/4. The bill of lading was made to order and not to Zenith Rollers Limited whereas for the said reason the machinery was confiscated. The custom appeal was filed which was Ex.DW-1/6 which was against the order dated 28.07.1995 of Commissioner of Customs, New Delhi imposing fine of Rs.2,00,000/-. The Ex. DW-1/5 was the copy of the order passed by the Commissioner of Customs. Other charges incurred by the defendants i.e. the detention charges were Ex.DW-1/7 to DW-1/9. Cross examination was carried out. DE was closed.
THIRD SUIT
10. Coming to the suit preferred by the Paintals / Zenith Rollers ltd. the suit is for recovery of Rs. 89,03,016/-. Three of the parties i.e. Zenith Rollers, Harbhajan Singh Paintal and Darshan Kaur Paintal had joined as plaintiffs. It is contended in the plaint as here under:
i) Plaintiff no.2 and 3 (Paintals) and defendant no.1 and 2 i.e. Tanwars had joined together for the purposes of setting up of a joint venture for manufacturing of steel and rubber rollers. For the said purpose Plaintiff no.1 was incorporated of which defendant no.1 was also the promoter/director having signed the Memorandum of Article and also having subscribed the initial capital. Initially the company was incorporated as a private limited company later on was deemed public limited company. Present suit has been instituted on the strength of a resolution passed by the Board of Directors in the meeting held on 21.06.1999. It is contended therein that the parties to the suit had CS No. 57961/16 CS No. 57893/16 CS No. 57188/16 13/63 14 agreed/carried out an exercise for preparation of a project report, which comprise of capital, land, power and history of the company including the cost of production and the future profitability (Project viability and profitability report). The details whereof are stated in para 2 of the plaint.
Simultaneously the resources required / capital required for are also stated in para 2 itself which included a term loan of Rs. 1 crore 50 lakhs from UPFC and also the share and capital of Rs. 1 crore 5 lakhs.
ii) Since the company/plaintiff no.1 was to manufacture rubber roller/still roller, it ought to have the requisite machinery for which it was agreed that the old machinery from abroad would be purchased by defendant no.1 and thereafter the same would be dispatched to India by defendant no.1.
iii) The investment part was also agreed inasmuch as Paintal group would be having 55% share and Tanwar group would be having 45% share. All this was recorded in the minutes of meeting dated 05.04.1995. Defendant no.2, wife of defendant no.1 was also appointed as 4th director on behalf of the company in terms of minutes of meeting which was held on 05.04.1995.
iv) Insofar as the land / industrial plot was concerned the same was to be acquired from UPFC. To meet the capital requirement it was agreed that plaintiff no.2 and 3 would invest a sum of Rs. 112.50 lakhs as their share of contribution whereas the defendant would invest 67.50 lakhs as their share. Further for the purpose of obtaining loan, an CS No. 57961/16 CS No. 57893/16 CS No. 57188/16 14/63 15 application for loan was moved before UPFC for grant of loan of Rs. 1.50 crores. This loan was sanctioned by UPFC in terms of its letter no.8595/FC:NOIDA: UP:95:96 dated 18.09.95. The terms and conditions of the loan warranted that the loan would be disbursed after compliance of the terms and conditions of the sanction of the loan.
v) One of the compliance was that there would be active participation of the parties to the suit and they were required to execute bond of guarantee in favour of UPFC besides performing the other acts to enable UPFC to disburse the loan. The plaintiffs have also reproduced the terms and conditions of the loan. I am not dealing the same again but it was contended that it required personal guarantees.
vi) It is further pleaded that in terms of the understanding defendant no.1 had agreed to look for second hand machinery required for the industrial project. One of the condition for import was that the machinery would be imported by the actual user. One of the reason of such a requirement was that the machinery would be in favour of the proposed buyer otherwise it was deemed to be that of for trading purpose.
vii) Now knowing the said requirement or despite knowing the same the defendant no.1 had purchased the machines without disclosing the actual value and also made the invoice in favour of M/s Tanwar Marketing Services, UAE which was the sole proprietorship concern of defendant no.1. The bill of lading was made to order. The invoice dated 26.02.1995 was further drawn in the name of plaintiff no.1 company. This CS No. 57961/16 CS No. 57893/16 CS No. 57188/16 15/63 16 mischief was for the purpose that the defendant no.1 would dispose of the machinery in case if he get a better price and also make profit on the transaction.
viii) Ultimately machines were confiscated as the same were not imported by the actual user. Default was a deliberate act of the defendant no.1. Plaintiff no.1 had to take steps, make representation and incur heavy expenses and ultimately the machine was released on payment of penalty of Rs. 2 lacs. Retention charges were also payable to the tune of Rs. 13,54,315/- equivalent to US $ 42,996. An appeal was also preferred before the Customs, Excise and Gold Appellate Tribunal but the appeal was dismissed.
ix) Recounting other details it was contended that the defendant had not paid the contribution of 45% i.e. the capital amounting to Rs. 67.5 lacs. Owing to the said aspect and the fact that the defendants have not executed the documents required for, the loan also could not be disbursed by UPFC. The defendants were grossly non-cooperative and sought that the amount remitted back to them. Plaintiffs paid a sum of US $ 44,000 on 24.10.1995 taking a loan from M/s SRF Ltd. However the defendants still chose to be evasive and did not extend cooperation insofar as the loan from UPFC was concerned. Owing to the omission and defaults attributable to the defendants, plaintiffs suffered heavy losses and this fact was also informed to them vide letter dated 07.06.1995 and 08.08.1995. Further the plaintiffs were also handicapped to take loan from any other organization and lastly UPFC had also communicated that CS No. 57961/16 CS No. 57893/16 CS No. 57188/16 16/63 17 owing to non compliance of the requirements the loan may be cancelled. Six months period granted for compliance was over by then.
x) Defendant no.1 had also filed a company petition bearing no. 46/98 titled as Tanwar Marketing Services, UAE v/s Zenith Rollers Ltd. U/s 433(a) r/w Section 434 of the Companies Act on the ground that the company is indebted to the defendants in the sum of Rs. US $2,46,979 being the balance value of the machinery acquired by the defendant no.1 or on behalf of plaintiff no.1 / Zenith. Plaintiffs were also made to face suit for recovery of Rs. 94,21,816/-. The plaintiffs have sought for the recovery of the following sums :-
i) the amount incurred towards expenses for the release of the machinery from the custom authorities and the demurrage incurred directly attributable to the acts / defaults of the defendants Rs.13,54,316/-.
ii) Loss of profit attributable to delay in implementation of the project on account of acts of commission and omission attributable to the defendants being the difference projected in the project report Rs.1,05,49,000/-
iii) Damages towards loss of reputation Rs. 20,00,000/-.
xi) Plaintiffs claimed that out of the said sum they are seeking a recovery of Rs. 89,03,016/- after allowing tentative adjustment of Rs. 50 lacs being the balance price of the machinery acquired by defendant no.1 on behalf of plaintiff no.1.CS No. 57961/16 CS No. 57893/16 CS No. 57188/16 17/63 18
With the aforesaid facts and circumstances the suit was filed seeking recovery of amount as well as relief of injunction.
11. Common written statement was filed on behalf of defendants. Preliminary submissions/objections were taken in which the entire factual scenario was stated - as per the version of the defendants. It was contended that defendant no.1 was an NRI and was managing the business of a concern by the name of M/s Tanwar Marketing Services Pvt. PO Box 16384 registered under the laws of UAE. In February 1994 he met plaintiff no.2 . Plaintiff no.2 persuaded him to invest in the business. At that point of time authorized capital of M/s Zenith Rollers was stated to be 120 lakh divided into 12 lakhs Equity Shares. Defendant no.1 agreed to invest his money for procurement of machines as here under :
I. In December, 1984 defendant No.1 advanced USD 65,000 against purchase of MRC 90 Roll Wrap- per Extruder Plant from M/s Italmatic S.R.L. Italy.
II. In April, 1995, defendant No.1 invested DM 2,55,750/- equivalent to USD 1,82,769 in purchase of second-hand Lathe and Grinding machine supplied by M/s Tanwar Marketing Services.
III. In August, 1995 defendant transferred USD 23713 by way of loan to business of plaintiff No.2 carried on under the name and style of M/s Zenith Rubber Ltd.
It was contended that plaintiff no.1 and 2 had themselves drawn the minutes of the meeting in the name of plaintiff no.1 by labeling defendant no.1 as shareholder subscriber of 45% shares and designated him as a director. However, in fact no equity was transferred in the said CS No. 57961/16 CS No. 57893/16 CS No. 57188/16 18/63 19 names/their names against the money received as above. In fact the amount shown was reflected as advance from defendant no.1 and payment was to be given 180 days after the delivery for which bill of exchange was also executed for payment on or before 19.10.1995. In fact against the said head plaintiff no.2 had also remitted US $ 44000 on 19.10.1995. This indebtedness was acknowledged and reflected by the plaintiffs in their audited balance sheet. Subsequently in terms of legal notice dated 07.11.1997 defendant no.1 demanded monies from the plaintiffs / Paintals / Zenith wherewith vide reply notice dated 28.11.1997 plaintiff no.1 and 2 admitted their liability to the sum of US $ 95683. The same was also not paid. Suits bearing no. 863/1998 for recovery of Rs.
14,98,640/- and suit no. 864/1998 for recovery of Rs. 44,16,100/- and suit no. 886/1998 for recovery of Rs. 94,21,816/- was filed. The instant suit was filed as a counter blast to the aforesaid suits - to deny the liability. It was also contended that the suit was barred by law of limitation being filed in July, 1999. The suit is also liable to be dismissed for mis joinder of parties. The suit was also stated to be an abuse of law.
11.1 Replying on merits it was contended that the defendants had never agreed to join any joint venture. Defendant no.1 had only subscribed to the memorandum of articles and association of the body corporate M/s Zenith Roller Ltd. Further no equity share was ever issued nor any share was received against the investment made by the business concern of defendant no.1. The defendants denied that they had ever participated in the business activities of the plaintiff no.1. The defendants denied that any such project or any other business activity was sought to CS No. 57961/16 CS No. 57893/16 CS No. 57188/16 19/63 20 be done by the plaintiffs insofar as alleged by them after the purchase of the machinery. The defendants reiterated it was a loan. It was contended that defendant no.1 had invested monies which was reflected in the balance sheet of the plaintiff company. Amount was sought to be repaid on or before 19.10.1995. Liability is admitted in the legal notice dated 28.11.1997. The defendant denied the case set forth by the plaintiff and contended that there was no agreement for investment/shareholding as contended by the plaintiff and the minutes of meeting were drawn by the plaintiffs themselves wherein the defendant no.1 and 2 were held to be 45% shareholders. In fact the entire case is belied for the reason that no share was ever issued to the defendants. In fact the defendants were never co-opted in the said company nor the plaintiffs had ever allowed them any participation. Insofar as the signatures of the defendant no.1 with UPFC are concerned the same were obtained without disclosing the purpose/relevance of such firms. It was also contended that though the defendant no.2 was appointed as a director she was not allowed any participation in the affairs of the company. The amount invested by the defendant no.1 was shown as loan. The defendants denied the terms and conditions including the terms and conditions of disbursal of loan. Defendants denied the same to be in their knowledge. Defendants denied the fact that the machine was sent to order for the purpose of re-selling at higher profit. The defendants denied that there was any financial loss occurred due to their negligence. By and large the entire case set forth was denied and dismissal of the suit was sought for.
12. Replication to the written statement of the defendants was CS No. 57961/16 CS No. 57893/16 CS No. 57188/16 20/63 21 filed. Contrary averments were denied as false and incorrect and the stand pleaded in the plaint was reiterated and reaffirmed as correct.
13. Matter was put for trial on the basis of the issues which were settled in terms of order dated 17.07.2007. The same read as here under :
1. Whether the suit is barred by law of limitation? OPP
2. Whether the suit is bad for mis-joinder of parties? If so, its effect? OPP
3. Whether there was an agreement between plaintiff nos. 2 and 3 and defendants to set-up a joint venture project, if so, whether the defendant committed default in complying with the terms and conditions of the same and its effect? OPP
4. Whether defendant no. 1 advanced US $ 65,000 by way of loan to plaintiff no. 2? OPD
5. Whether plea of plaintiff based on project agreed to between H.S. Paintal and Dashrath Singh Tanwar in promoting plaintiff company to deny defendants claim is frivolous and vexatious besides being barred by limitation? OPD
6. Whether the plaintiffs are entitled to decree directing/injuncting defendant no. 1 to disclose the real purchase price of plaint and machinery purchased by him in the name of M/s Tanwar Marketing Services acquired on behalf of the plaintiff and invoiced and delivered to plaintiff no. 1 so as to ascertain the exact amount of adjustment liable and be given to the amount recoverable from the defendant towards damages? OPP
7. Whether the plaintiff is entitled for a decree in the sum of Rs.89,03,316/-? OPP
14. On behalf of plaintiff Mr. H S Paintal had stepped into the witness box and tendered his evidence by way of affidavit as Ex.PW-1/X. Documents were proved. Same reads as under:
CS No. 57961/16 CS No. 57893/16 CS No. 57188/16 21/63 221. Ex. PW 1/1 Certified true copy of Memorandum & Articles of Association, containing certificate of its incorporation as well as a fresh certificate of incorporation, issued upon its becoming a deemed public limited company by the Registrar of Companies, NCT of Delhi and Haryana.
2. Ex. PW 1/2 Copy of Board resolution dated 02.01.1995
3. Ex. PW 1/3 True copy of project report.
4. Ex. PW 1/4 Copy of the minutes of GBM dated 05.04.1995
5. Ex. PW 1/5 Copy of Board Resolution dated 02.05.1995
6. Ex. PW 1/6 Copy of sanction letter dated 18.09.1995
7. Ex. PW 1/7 Copy of invoice dated 26.02.1995
8. Ex. PW 1/8 Copy of bill of lading
9. Ex. PW 1/9 Copy of order dated 28.07.1995
10. Ex. PW 1/10 Copy of order dated 28.04.1997 dismissing the appeal.
11. Ex. PW 1/11 Copy of fax message dated 08.08.1995
12. Ex. PW 1/12 to Ex. PW-1/14 Three receipts / bills of payment of retention charges of Samrat Shipping Corporation Pvt. Ltd. and of Container Corporation of India.
This witness was examined before the Hon'ble High Court wherein the document Ex.PW-1/9 was not there. So there is no such document. Evidence of this witness was conducted before the Hon'ble High Court and thereafter before my Ld. Predecessor. On 25.10.2017 the remaining evidence of the witness was sought to be done by the ld. local commissioner.
CS No. 57961/16 CS No. 57893/16 CS No. 57188/16 22/63 2314.1 Now coming to the testimony of DW-1 namely Dashrath Singh Tanwar the same is vide affidavit Ex. DW-1/A. As per the evidence by way of affidavit the same were Ex.DW-1/1 to Ex.DW-1/43. I am not quoting the same hereunder to avoid any confusion.
As mentioned above once the matter was marked to the Ld. local commissioner for recording of evidence the evidence part nearly took 5 years and the evidence also which has been led contains lots of duplication / questions which were also not clear and had dragged. Evidence was closed.
15. Submissions were heard at length advanced by Sh. Lalit Basoya, Ld. counsel appearing on behalf of M/s Tanwar Marketing Services / Tanwars and Sh. Ramesh Kumar, Ld. counsel appearing on behalf of Zenith / Paintals. Written submissions have also been filed.
16. I have considered the entire evidence which has been recorded in all the cases as the evidence commenced in the year 2008 and culminated in the year 2024 through the Ld. local commissioner.
17. All the aforesaid suits which have been referred to as First suit Second suit and Third suit respectively predicate on different factual matrix but there are some common points which warrant that First suit should dealt in first and observations / findings made therein to the extent applicable be adopted in the other cases.
CS No. 57961/16 CS No. 57893/16 CS No. 57188/16 23/63 2417.1 I am also summarising all the issues in the said three cases at one place:
FIRST SUIT :-
1. Whether the plaintiff is a juristic person and the suit in the name of the plaintiff is maintainable? OPP
2. Whether the plaint has been signed and verified and the suit instituted by a duly authorised person? OPP
3. Whether the plaintiff has any cause of action against defendant nos. 2, 3 and 4?OPP
4. Whether there was an agreement between plaintiff and defendant no. 2, 3 and 4 to set-up a joint venture project? If so, whether the plaintiff committed default in complying with the terms and conditions of the same and its effect?OPD
5. Whether Shri Dashrath Singh Tanwar agreed to purchase a machinery MRC-90 Roll Wrapping Extruder on behalf of defendant no. 1 and dispatched the same for delivery to defendant no. 1?OPP
6. Whether the plaintiff had paid US$ 65,000/-
towards purchase of a machinery MRC-90 Roll Wrapping Extruder?OPP
7. Whether a sum of US $ 65,000/- was advanced by way of loan to the defendants?OPP
8. Whether the defendant is liable to pay any amount to the plaintiff as claimed in the suit?OPP
9. Whether the plaintiff is entitled to any interest? If so, at what rate and for which period?
CS No. 57961/16 CS No. 57893/16 CS No. 57188/16 24/63 25SECOND SUIT :-
i) Whether the suit is barred by law of limitation? OPP
ii) Whether the suit is bad for mis-joinder of parties, if so its effect? OPP
iii) Whether the plaintiff is entitled to the sum of Rs.
94,21,816/- being equivalent to USD 2,36,527 as per the exchange rate of US$ INR 39.50 or any other amounts based on the foreign exchange rate variations? OPD
iv) Whether the plaintiff is entitled to interest on amounts found due and payable by the defendant to it? If so, on what amount, at what rate and for what period? OPP
v) Whether the amount found in favour of the plaintiff is liable to be adjusted towards the claim of damages of the defendant in CS (OS) No. 1524/1999? OPP
v) Relief.
THIRD SUIT :-
1. Whether the suit is barred by law of limitation? OPP
2. Whether the suit is bad for mis-joinder of parties? If so, its effect? OPP
3. Whether there was an agreement between plaintiff nos. 2 and 3 and defendants to set-up a joint venture project, if so, whether the defendant committed default in complying with the terms and conditions of the same and its effect? OPP CS No. 57961/16 CS No. 57893/16 CS No. 57188/16 25/63 26
4. Whether defendant no. 1 advanced US $ 65,000 by way of loan to plaintiff no. 2? OPD
5. Whether plea of plaintiff based on project agreed to between H.S. Paintal and Dashrath Singh Tanwar in promoting plaintiff company to deny defendants claim is frivolous and vexatious besides being barred by limitation? OPD
6. Whether the plaintiffs are entitled to decree directing/injuncting defendant no. 1 to disclose the real purchase price of plaint and machinery purchased by him in the name of M/s Tanwar Marketing Services acquired on behalf of the plaintiff and invoiced and delivered to plaintiff no. 1 so as to ascertain the exact amount of adjustment liable and be given to the amount recoverable from the defendant towards damages? OPP
7. Whether the plaintiff is entitled for a decree in the sum of Rs.89,03,316/-? OPP 17.2 First of all I shall be dealing with Issue no.1 and 2 as settled in the first suit. Though the said issues have not been specifically taken in the subsequent suit but the finding thereof would be covered in issue no.
(iv) of the second suit. The issues are as hereunder:
1. Whether the plaintiff is a juristic person and the suit in the name of the plaintiff is maintainable? OPP
2. Whether the plaint has been signed and verified and the suit instituted by a duly authorised person?
OPP Said issues take hue from the objections which have been raised by the defendants that M/s Tanwar Marketing Services / plaintiff is CS No. 57961/16 CS No. 57893/16 CS No. 57188/16 26/63 27 not a juristic entity. In fact during the course of proceedings M/s Tanwar Marketing Services has been described as a company whereas later on it has been described as a proprietary concern of Dashrath Singh Tanwar. So much so the said entity does not have exist any more and this fact was not brought to the record by the said Dashrath Singh Tanwar on his own or by way of any amendment to the suit. Resultantly this issue should be decided adverse to the plaintiff and the suits should be dismissed. Per contra Ld. Counsel appearing on behalf of plaintiff / Tanwars vehemently contended that insofar as this particular point is concerned infact the company was registered before the laws of UAE and therein there is a requirement of engaging a local partner / UAE Citizen and accordingly the said local partner is normally a passive investor who has no concern with the operations of the company and in pith and substance it was the sole entity of Dashrath Singh Tanwar dealing with the defendants particularly Mr.H.S.Paintal. He further contends that qua this aspect there is no umbrage whatsoever raised by the defendants during the course of their transaction and later on these technical points have been raised/raked up to deny the liability which otherwise stood admitted. He further submits that all these amounts including the suit amount has been admitted in the books of accounts and therefore there is no denial to the liability perse. In support thereof he has relied upon the judgment titled as K.S.Exports Through Mr. Harinder Singh Prop. v/s M/s Ethiopian Airlines by our own Hon'ble High Court.
17.3 Repelling the aforesaid argument Ld. Counsel for the defendant contended that this is not a technical objection as to the fact CS No. 57961/16 CS No. 57893/16 CS No. 57188/16 27/63 28 that the plaintiff concern as on now is non-existing one and still the suit is being pursued which is an important material fact, which the plaintiff has deliberately concealed. As of now the suit is being continued by an entity which does not exist.
17.4 For the sake of clarity I am quoting para no.1 of the plaint again. I am also quoting some part of the written arguments which have been filed by the plaintiff in the present case. Same reads as here under :
That plaintiff above named is a Dubai based company, duly registered with Sharjah Municipality (UAE) managed / controlled by a non - resident indian (NRI) Dashrath Singh Tanwar, who is entitled to maintain suit in above said name in the court.
17.5 In the written arguments it is contended as under:
That the defendant is registered under Companies Act, 1956. That in UAE, business that is owned and operated by one individual with the trade licence that is issued in his or her name is known as Sole Establishment also often as a Sole Proprietorship and owner of a sole establishment is solely responsible for all the business liabilities and financial obligations of the entity. The said establishments that are owned by foreign nationals are permitted to retain 100% ownership and are required to appoint Local Service Agent (as in the present case mentioned in the letter issued by Union National Bank) which must be a UAE national individual and they acts as a company representative between employers and government bodies for all arrangements with government officials but do not receive share of the profits however they are paid a fixed annual fee through a commercial contract for their services.
Relevant to note herein that the suit at the very inception was CS No. 57961/16 CS No. 57893/16 CS No. 57188/16 28/63 29 filed U/o 37 CPC and subsequently it was converted into a regular suit. I am also quoting from the evidence by way of affidavit which reads as here under of Dashrath Singh Tanwar PW-1:
That I am resident outside India. I carry on business at Dubai. Plaintiff above described is a legal and juristic person registered with Sharjah Municipality UAE in accordance with their laws, rules and regulations in enabling persons residing outside India involved in such business. I managed and controlled business of plaintiff. I produce copy of registration certificate of plaintiff business in evidence as Ex.P-1.
17.6 A careful perusal of the same reveals that what has been described in the written arguments has not at all been summed up in the plaint. Obviously if the plaintiff is a commercial entity/company may be registered under UAE laws then also there ought to be a resolution favouring Dashrath Singh Tanwar to institute the present suit on behalf of company. May be the beneficial interest holder or the majority shareholder may be Dashrath Singh Tanwar but still it was incumbent upon him to place on record the exact details of the company coupled with the resolution in favour of Dashrath Singh Tanwar to file the present suit on behalf of the present concern. The added fact that it was for all practical purposes it was of / akin to the proprietorship concern of Dashrath Singh Tanwar then it would have been much easier to procure such documents/resolutions. Admittedly it is not a proprietorship concern of which Dashrath Singh Tanwar was the proprietor thereof. In fact during the entire 25 years of litigation or so Dashrath Singh Tanwar had CS No. 57961/16 CS No. 57893/16 CS No. 57188/16 29/63 30 not disclosed the composition of the company which he claims to be owned by him. In fact though it is a corporate entity under the laws of UAE having a local partner - even to place on record such innocuous facts the plaintiff is hesitant though during the course of oral arguments it was contended that the second partner or person is silent or a dormant one. In fact if I look at the entire evidence at many places Dashrath Singh Tanwar had adopted an obdurate stand insofar as disclosure of correct facts. For example the composition / shareholding of the plaintiff concern.
17.7 More than that to my mind, the plaintiff / Dashrath Singh Tanwar had not filed the bank account details of the concern which is more relevant and I shall dwell on the same at the later stage. Suffice to state that a formal resolution on behalf of plaintiff concern / company would have first of all cleared a number of issues including the facet whether the amount ultimately extended to the defendants was of Dashrasth Singh Tanwar. Except the fact that there was a bank certificate informing the payment to M/s Italmatics nothing else has been placed on record.
17.8 The said entity / plaintiff does not exist anymore. Who owned the plaintiff company - whether the same was as per what has been stated by the plaintiff during the course of arguments / stated in the written arguments. Who has got the right to continue with the pending litigations in the event of closure of the company - there are other questions as well which particularly cast a doubt as to the nature of the company - whether it was company or any other body / juristic entity.CS No. 57961/16 CS No. 57893/16 CS No. 57188/16 30/63 31
18 Viewing from the perspective of Civil Procedure Code, Order 29 Rule 1 CPC reads as here under:
Order 29 Rule 1 CPC -
1. Subscription and verification of pleading - In suits by or against a corporation, any pleading may be signed and verified on behalf of the corporation by the secretary or by any director or other principal officer of the corporation who is able to depose to the facts of the case.
18.1 Plaintiff has not described himself as the secretary/ director or principal officer. What he is continuously harping upon is that he is the majority shareholder / owner of the company / proprietor thereof. To my mind the same is not the mandate which is required to be followed insofar as any suit which is to be filed by any corporate. Apart thereof thereof the said corporations does not exist. In fact had the proceedings of closure of the company brought on record, it would have thrown light at the constitution of the company. There are various unanswered questions and I am not inclined to accept the contentions of the plaintiff / Dashrath Singh Tanwar that he was the proprietor of plaintiff concern. It is altogether a different aspect that he had dealt with the defendants /Paintal on behalf of the plaintiff concern.
18.2 Coming to the judgment of K S Exports (Supra) which has been relied upon by the plaintiff, same is not applicable to the facts herein. The company has filed the suit - it is contended that the said company in fact is owned by Dashrath Singh Tanwar. It is not that there is CS No. 57961/16 CS No. 57893/16 CS No. 57188/16 31/63 32 mis description of the plaintiff. The authority to institute the suit, the composition of plaintiff concern and the fact that the documents with respect to the closure whereof all have not been placed on record. As such, issue no.1 and 2 are decided adverse to the plaintiff.
19. ISSUE NO. 4, 5, 6, 7 -
4. Whether there was an agreement between plaintiff and defendant no. 2, 3 and 4 to set-up a joint venture project? If so, whether the plaintiff committed default in complying with the terms and conditions of the same and its effect?OPD
5. Whether Shri Dashrath Singh Tanwar agreed to purchase a machinery MRC-90 Roll Wrapping Extruder on behalf of defendant no. 1 and dispatched the same for delivery to defendant no. 1?OPP
6. Whether the plaintiff had paid US$ 65,000/-
towards purchase of a machinery MRC-90 Roll Wrapping Extruder?OPP
7. Whether a sum of US $ 65,000/- was advanced by way of loan to the defendants?OPP All these issues are interconnected based on same evidence and as such in my opinion can be conveniently decided altogether. Admittedly plaintiff concern i.e. M/s Tanwar Marketing Services had extended a sum of Rs. USD 65000 which is an admitted fact for purchase of a machinery which was to be ultimately shipped to India from M/s Italmatics, Italy. Now in so far as the aspect - purchase of machinery is concerned there is no document placed on record by the plaintiff or otherwise Dashrath Singh Tanwar that the said amount was a loan to the defendants. There is absolutely no documentation of any loan transaction. There is no exchange of communication from which it could be inferred that the amount paid by the plaintiff concern was a sort of loan. Dashrath CS No. 57961/16 CS No. 57893/16 CS No. 57188/16 32/63 33 Singh Tanwar was also in Dubai carrying out his business and not a layman. The question of giving any loan simplicitor does not arise.
19.1 Nothing stopped the plaintiff or Dashrath Singh Tanwar to seek any acknowledgment at that relevant time that the amount given or extended was a loan / interest bearing. Notwithstanding the same Dashrath Singh Tanwar had searched / scanned old machinery for the purposes of shipping them to India. There is ample communication that he was involved in the said process. All such facts at least point out that his participation in the company / association with the defendant was not merely that of a person giving money or loan. The fact of the matter is that machines were procured and shipped to India including the fact that in the second suit initially the machines were sent "To order" demolishes the story of loan. It was infact a sort of collaborative effort then/ at least at the time of procurement of machines that the machines were procured for the purpose of developing a long term business relations or for fetching a quick return by disposing the same in India.
19.2 Having said so it is important to note that there is no corresponding letter/communication also issued by the defendants seeking financial assistance from the plaintiff or Dashrath Singh Tanwar insofar as the said acquisition of machine is there or as to fact that the money was to be given / or treated as a loan. In fact in the legal notice dated 07.11.1997 there is a categoric admission as hereunder "you had agreed to allot shares of a equivalent value in lieu thereof to Dashrath Singh Tanwar who happen to be the promoter director of your company after obtaining the CS No. 57961/16 CS No. 57893/16 CS No. 57188/16 33/63 34 necessary permissions from Reserve Bank of India".
In the teeth of such categoric admissions at the very onset, I fail to understand on what basis the plaintiff is contending that it was a loan transaction.
19.3 Coming to the question as to whether there was no agreement interse the parties for setting up a joint venture. Suffice to note herein that the company M/s Zenith Rollers was incorporated in which Dashrath Singh Tanwar and Sapna Tanwar were the founding directors. The machines were also imported jointly. Formation of a company perse is a strong indicator that the company was the vehicle whereby the parties to the suit intended to proceed further. The terms and conditions of the company could not finally be reached/agreed upon for the reason that there were differences and secondly imports were stuck up - regulatory permissions were also not available insofar as the investment in shareholding against the acquisition of second hand machines was not permitted then/at the relevant time.
19.4 The very fact that M/s Zenith Rollers was incorporated notwithstanding the fact that other companies/entities were there of Paintal group and also in which Dashrath Singh Tanwar and Sapna Tanwar were inducted as promoter director itself probablizes the version that the ultimate aim at that relevant point of time was to incorporate a joint venture/form a new company. The minutes of the meeting also so reveals that parties had also resolved to take the machines from Italmatic CS No. 57961/16 CS No. 57893/16 CS No. 57188/16 34/63 35 as quickly as possible for which both of them had agreed to raise funds/make necessary investments.
19.5 Apart thereof the absence of loan documents / any correspondence towards the same was there also is a strong indicator that the parties had agreed to form a joint venture / incorporate a new venture.
The correspondences in this regard by and large made by the defendant / on behalf of M/s Zenith Rollers Pvt. Ltd or H S Paintal does not mean that there was no interse agreement between the parties to form a joint venture. It is not uncommon between the parties to distribute/divide the work between persons who are more savvy in technical matters as compared to financial matters. Obviously manufacturing or otherwise insofar as technical aspects are concerned the defendants were much better place as already they were running a business / manufacturing concern. Not much credence can be given to the facts that the defendants/H.S.Paintal had communicated with M/s Italmatics. To put it simply same does not mean that the machine was been purchased by the defendants without taking the plaintiff into loop or the amount was to be treated/given as a loan.
19.6 Further relevant to note herein that in the correspondence with M/s Italmatics there is a reference by M/s Italmatics that the "deposit you paid is kept by us as reimbursement of expenses and damages caused to us with your non fulfillment". This is in the fax letter dated 06.07.1995. There is no understanding of forfeiture of the money and infact in the CS No. 57961/16 CS No. 57893/16 CS No. 57188/16 35/63 36 communication dated 08.10.1995 also it was informed that there was no clause of forfeiture / enhancement. The payment was made by the plaintiff - the bank account details were also not furnished. The composition of the plaintiff company was also not disclosed. The refund of the said advance money also to my mind cannot be ruled out or otherwise the part refund thereof. Infact when this witness was questioned on 16.04.2009 he had answered as "it is correct that M/s Italmatics, Italy neither supplied the machinery for which I had paid a sum of USD 65,000/- as advance nor M/s Italmatics, refunded the said sum of USD 65,000/-." Again this witness said I have no knowledge of the same.
19.7 Further in the cross examination of the said date he deposed "it is correct that it was pursuant to a joint venture by me with Mr. H S Paintal. It is also correct that the incorporation of defendant no.1 was a result of the joint venture. I do not remember if initially the defendant no.2 was intending to import the machinery in question or that the same was subsequently decided to be imported by defendant no.1 pursuant to the joint venture".
19.8 Considering the totality of facts and circumstances the fact of the matter is that no money was given directly by the plaintiff to the defendants or any documents were executed whereby it can be held that it was any sort of loan coupled with fact the money was extended by company based in Dubai outside India without any regulatory approval or intimation and the fact that plaintiff / Dashrath Singh Tanwar was privy to CS No. 57961/16 CS No. 57893/16 CS No. 57188/16 36/63 37 all the transactions/visits/communications made by the defendants with respect to the machine in question from Italmatic as well as all other aspects shows that his role was not merely that of a person who had granted a simplicitor loan. He was infact an active investor in the concern or was involved in the business transaction as a whole. The business / factory was to be established in India. Obviously as mentioned above the technical aspects were more in the knowledge or with participation with the defendant / Paintal Group and as such the communications with the foreign supplier have to be read in the said light.
19.9 Coming to the cross examination of DW-1 which has mentioned above is quite exhaustive perse reveals it was not mere a loan transaction but much more than that. Thus, on the basis of the evidence led it is more probable that there was a joint understanding to do business together.
Issue no. 4 of if I may say so this first part of said issue is decided accordingly i.e. in favour of the defendants.
20. Coming to the second part of this issue as to whether there has been any breach on the part of the plaintiff. Obviously there are no written terms and conditions which have been agreed upon initially. They had agreed and the transaction had broadly unfolded as here under :
i) Machines were to be procured. Part Payment was made by the plaintiff.
ii) Machines had to be dispatched to India including the machines which is involved in the present case coupled with CS No. 57961/16 CS No. 57893/16 CS No. 57188/16 37/63 38 the fact that other machines were also purchased by the plaintiff and sent to India [subject matter of Second Suit]
iii) Machines were stuck up in customs were released after payment of penalty [subject matter of the Second Suit].
iv) Necessary financial sanction from UPFC but still there was no capital infusion as the loan could not be disbursed.
v) Simultaneously there was no allotment of equity share insofar as the plaintiff group is concerned in the newly incorporated company.
20.1 Though the Second Suit deals with the said aspect but one thing is clear that the plaintiff would not have purchased machines and shipped to India had there been a loan agreement simplicitor. The further fact that Dashrath Singh Tanwar and his wife were also Director in the company coupled with the fact that alternate Director was also named shows their participation - may be initially around April-May, 1995. Subsequently the plaintiff / Dashrath Singh Tanwar withdrew from the project may be either or account of trust deficit or otherwise for any other reason but the funds envisaged for such a project to part finance the same / or to make the same running could not be gathered/obtained as parties to the suit started fighting and the capital required to finance the project or infact may be to pay the plaintiff could not be generated.
20.1 In the light of the aforesaid discussion - relevant for the present suit it is important to note that both the parties in my opinion intended to interpret the terms and conditions/oral bargain/ understanding CS No. 57961/16 CS No. 57893/16 CS No. 57188/16 38/63 39 as per their convenience and have continued to litigate accordingly. Plaintiff had not placed on record the bank account details from where the payment was made. Shares were also not allotted to the plaintiff concern / its nominee. The balance project finance could also not be released/disbursed from UPFC. The machines were stuck up in customs and thereafter released but the funds could not be generated for payment thereof (in the second suit) or for paying the same back to Italmatics itself shows that both parties were at fault. Issue no.4 (part 2) is decided accordingly i.e. to say that the plaintiff was not solely responsible.
21. Coming to issues no.5, 6 & 7. Issue no.5 primarily pertained to the fact that the defendants had contended that the plaintiff ought to have purchased the machinery in its entirety and dispatch the same to India. Meaning thereby the machines had to be purchased fully by the plaintiff / remaining payment had to be given by the plaintiff / Dashrath Singh Tanwar. To that aspect there is no evidence whatsoever that the payment had to be given solely by the plaintiff / Dashrath Singh Tanwar. In fact in the legal notices exchanged i.e. dated 07.11.1997 and the reply dated 28.11.1997 this aspect was put forth for the first time. Infact there is no correspondent whatsoever on behalf of defendant as to the said fact prior there to. Further except there being a bare reference in the communication which was with Italmatics dated 28.06.1995 wherein HS Paintal had stated "we have already requested Tanwar Marketing Services to do needful" nothing else has been specified that the balance payment had to be plaintiff by the plaintiff. Infact during the cross examination of DW-1 which is quite elaborate he was questioned as under:
CS No. 57961/16 CS No. 57893/16 CS No. 57188/16 39/63 40Q.24 Is it correct that there is no document on record which can show that M/s Italmatic SRL was informed by you, Zenith International, Zenith Rubber Ltd. and Zenith Rollers Ltd. that the plaintiff will make the entire payment of the machine i.e. MRC 90 Roll Wrapping Extruder Plant?
Ans. I do not remember whether there is any such document on record or not.
There is no document also placed on record by the defendant's side evidencing that the payment had to be given exclusively by the plaintiff or Dashrath Singh Tanwar. Relevant to again note I have already held that the underlying transaction was to form a joint venture. Once that existed to contend that it was the exclusive responsibility of the plaintiff / Dashrath Singh Tanwar to pay the entire money is also difficult to accept. As such Issue No.5 is decided is accordingly that there was no understanding that the machine had to be provided by the plaintiff / Dashrath Singh Tanwar.
21.1 Taking hue from the discussion on the preceding issues the understanding was that machines had to be acquired for a business to be established in India and capital was also to be jointly raised / infused in the business by pooling their resources. The question of there being a loan transaction does not arise. The fact that the payment of 65,000 USD was made has to be read in the light of the fact that the plaintiff had not placed on record the bank account details for the reason that the amount has not been forfeited by Italmatics [as quoted earlier]. Thus, to contend that the plaintiff had paid such sum of money actually cannot be accepted.
Infact in the year 1998 i.e. the certificate has been sought for United CS No. 57961/16 CS No. 57893/16 CS No. 57188/16 40/63 41 Nation Bank, UAE and the bank was given only a certificate showing that the payment was made to Italmatics. Infact the corresponding letter from whereby such information was sought for i.e. 23.02.1998 was also not placed on record. This also has to be read in the light of the plaintiff assertion that he was the proprietor of the concern. Issue no.6 & 7 are decided accordingly i.e. 6 adverse to the plaintiff and 7 is in favor of the plaintiff.
22. Coming to issue no.3,8 & 9. same reads as under:
3. Whether the plaintiff has any cause of action against defendant nos. 2, 3 and 4?OPP
8. Whether the defendant is liable to pay any amount to the plaintiff as claimed in the suit?OPP
9. Whether the plaintiff is entitled to any interest? If so, at what rate and for which period? OPP 22.1 All these issues can be conveniently decided together. The discussion on the preceding issues is relevant and is also adopted herein.
Importantly once it is there on record that the machines had to be procured by the plaintiff/Dashrath Singh Tanwar for the use of Zenith Rollers Ltd., the transaction is between promoters directors of the said concern and the company itself, it becomes important that the said transaction requires ratification / consent of the board of directors. In this regard section 297 of Erstwhile Companies Act, 1956 and section 188 of the Companies Act, 2013 are relevant. For the sake of convenience both are extracted as under:
CS No. 57961/16 CS No. 57893/16 CS No. 57188/16 41/63 42Section 188 -\ Related party transactions. (1) Except with the consent Directors given by a resolution of the Board of at a meeting of the Board and subject conditions as may be prescribed, no company shall enter into any contract or arrangement with a related party with respect to-
(a) sale, purchase or supply of any goods or materials;
(b) selling or otherwise disposing of, or buying, property of any kind;
(c) leasing of property of any kind;
(d) availing or rendering of any services;
(e) appointment of any agent for purchase or sale of goods, materials, services property;
(f) such related party's appointment to any office or place of profit in the company, its subsidiary company or associate company; and
(g) underwriting the subscription of any securities or derivatives thereof, of the company:
Provided that no contract or arrangement, in the case of a company having a paid-up share capital of not less than such amount, Hor transactions] exceeding such sums, as may be prescribed, shall be entered into except with the prior approval of the company by a [resolution]:
Provided further that no member of the company shall vote on such [resolution], to approve any contract or arrangement which may be entered into by the company, if such member is a related party:
Provided also that nothing in this sub-section shall apply to any transactions entered into by the company in its ordinary course of business other than transactions which are not on an arm's length basis:
[Provided also that the requirement of passing the resolution under first proviso shall not be applicable for transactions entered into between a holding company and its wholly owned subsidiary whose accounts are consolidated with such holding company and placed before CS No. 57961/16 CS No. 57893/16 CS No. 57188/16 42/63 43 the shareholders at the general meeting for approval.] Explanation. In this sub-section,-
a) the expression "office or place of profit" means any office or place-
(i) where such office or place is held by a director, if the director holding it receives from the company anything by way of remuneration over and above the remuneration to which he is entitled as director, by way of salary, fee, commission, perquisites, any rent-free accommodation, or otherwise;
(ii) where such office or place is held by an individual other than a director or by any firm, private company or other body corporate, if the individual, firm, private company or body corporate holding it receives from the company anything by way of remuneration, salary, fee, commission, perquisites, any rent-free accommodation, or otherwise;
(b) the expression "arm's length transaction" means a transaction between two related parties that is conducted as if they were unrelated, so that there is no conflict of interest.
(2)Every contract or arrangement entered into under sub-
section (1) shall be referred to in the Board's report to the shareholders along with the justification for entering into such contract or arrangement.
(3)Where any contract or arrangement is entered into by a director or any other employee, without obtaining the consent of the Board or approval by a solution] in the general meeting under sub-section (1) and if it is not ratified the Board or, as the case may be, by the shareholders at a meeting within three months from the date on which such contract or arrangement was entered into, such contract or arrangement shall be voidable at the option of the Board and if be contract or arrangement is with a related party to any director, or is authorised any other director, the directors concerned shall indemnify the company against any loss incurred by it.
CS No. 57961/16 CS No. 57893/16 CS No. 57188/16 43/63 44(4) Without prejudice to anything contained in sub-section (3), it shall be open the company to proceed against a director or any other employee who had entered into such contract or arrangement in contravention of the provisions of this for recovery of any loss sustained by it as a result of such contract or arrangement.
5) Any director or any other employee of a company, who had entered into authorised the contract or arrangement in violation of the provisions of this section shall,-
(i) in case of listed company, be punishable with imprisonment for a term which may extend to one year or with fine which shall not be less than twenty-five thousand rupees but which may extend to five lakh rupees, or with both; and
(ii) in case of any other company, be punishable with fine which shall not be less than twenty-five thousand rupees but which may extend to five lakh rupees.
Section 297 Board's sanction to be required for certain contracts in which particular directors are interested.-(1) Except with the consent of the Board of directors of a company, a director of the company or his relative, a firm in which such a director or relative is a partner, any other partner in such a firm, or a private company of which the director is a member or director, shall not enter into any contract with the company-
(a) for the sale, purchase or supply of any goods, materials or services; or
(b) after the commencement of this Act, for underwriting the subscription of any shares in, or debentures of, the company:
CS No. 57961/16 CS No. 57893/16 CS No. 57188/16 44/63 45[Provided that in the case of a company having a paid-up share capital of not less than rupees one crore, no such contract shall be entered into except with the previous approval of the Central Government.] [(2) Nothing contained in clause (a) of sub-section (1) shall affect-
(a) the purchase of goods and materials from the company, or the sale of goods and materials to the company, by any director, relative firm, partner or private company as aforesaid for cash at prevailing market prices; or
(b) any contract or contracts between the company on one side and any such director, relative, firm, partner or private company on the other for sale, purchase or supply of any goods, materials and services in which either the company or the director, relative, firm, partner or private company, as the case may be, regularly trades or does business:
Provided that such contract or contracts do not relate to goods and materials the value of which, or services the cost of which, exceeds five thousand rupees in the aggregate in any year comprised in the period of the contract or contracts; or
(c) in the case of a banking or insurance company any transaction in the ordinary course of business of such company with any director, relative, firm, partner or private company as aforesaid.
(3) Notwithstanding anything contained in sub-sections (1) and (2), a director, relative, firm, partner or private company as aforesaid may, in circumstances of urgent necessity, enter, without obtaining the consent of the Board, into any contract with the company for the sale, purchase or supply of any goods, materials or services even if the value of such goods or cost of such services exceeds five thousand rupees in the aggregate in any year comprised in the period of the contract; but in such a case, the consent of the Board shall be obtained at a meeting within three months of the date of which the contract was entered into.CS No. 57961/16 CS No. 57893/16 CS No. 57188/16 45/63 46
(4) Every consent of the Board required under this section shall be accorded by a resolution passed at a meeting of the Board and not otherwise; and the consent of the Board required under sub-section (1) shall not be deemed to have been given within the meaning of that sub-section unless the consent is accorded before the contract is entered into or within three months of the date on which it was entered into.
(5) If consent is not accorded to any contract under this section, anything done in pursuance of the contract shall be voidable at the opinion of the Board.
(6) Nothing in this section shall apply to any case where the consent has been accorded to the contract before the commencement of the Companies (Amendment) Act, 1960 (65 of 1960).] 22.2 The machines were being purchased by the directors for the company/for the benefit of the company. The directors ought to have sought the Board approval. Same was not sought for. Such contracts in my opinion cannot be enforced being in violation of law. Section 297(5) makes such contracts unenforceable or voidable at the opinion of the Board. The liability cannot be fastened upon the defendant no.1 concern.
Precisely for the said reason other parties have been named / joined as parties to the suit.
Now in this regard let me again have a look at the legal notices which have been exchanged particularly the legal noticed dated 07.11.1997. Insofar as the suit machine is concerned again the noticees are only Zenith Rollers Ltd and Mr. H S Paintal. Qua Zenith Rollers the CS No. 57961/16 CS No. 57893/16 CS No. 57188/16 46/63 47 liability cannot be enforced and insofar as the defendant no.4 is concerned he was also a director in the said company and had no personal liability. As such, insofar as the suit qua defendant 2,3 4 are concerned there is no cause of action against them.
22.3 The net result of the aforesaid is that the suit of the plaintiff is liable to be dismissed owing to the reasons as spelled out in the preceding paragraph. Further there is no cause of action against defendants no. 2, 3 and 4 and also considering the fact that the contract cannot be enforced against the defendant no.1 being a company in which Dashrath Singh Tanwar was a Director.
24. Issues are decided accordingly. Suit no.1 or the first suit is dismissed.
25. SECOND SUIT :
Coming to the issues which have been set forth in the second suit. Obviously the findings insofar as the first suit have to be adopted. Delving on the issues which have been settled in the present case. The first issue is with regard to the suit being barred by limitation.
25.1 ISSUE NO.1 :- Whether the suit is barred by law of limitation? OPP The present suit has been filed on 20.04.1998. I fail to understand on what basis the limitation aspect has been pressed upon, infact the machines have been imported were sought to be paid by way of 180 days of LC. The payment was to be made on 19 / 20.10.1995. On CS No. 57961/16 CS No. 57893/16 CS No. 57188/16 47/63 48 19.10.1995 USD 44,000/- was paid. Infact in reply to paragraph no.4 on merits the aspect of payment was not disputed. Counting from the last payment the suit is within time. Issue is decided accordingly in favour of the plaintiff.
26. ISSUE NO.2:- Whether the suit is bad for mis-joinder of parties, if so its effect? OPP Coming to the said issue suffice to note herein that by and large the understanding between the parties was to develop a joint venture by the name of M/s Zenith Rollers wherein each of them would be having a definite share/would make necessary investment according to their share. The reason for purchase of machinery and to import to India was the furtherance to the joint venture. Dashrath Singh Tanwar / Tanwar Marketing had shipped those machines to India. Zenith Rollers had also opened a letter of credit. Thus, the question of misjoinder of parties does not arise. Even otherwise, order I Rule 9 of CPC itself speaks that no suit shall be defeated by reason of misjoinder of parties, as such this issue is also decided adverse to defendant.
27. ISSUE NO.3 & 4 :-
iii) Whether the plaintiff is entitled to the sum of Rs.
94,21,816/- being equivalent to USD 2,36,527 as per the exchange rate of US$ INR 39.50 or any other amounts based on the foreign exchange rate variations? OPD
iv) Whether the plaintiff is entitled to interest on amounts found due and payable by the defendant to it? If so, on what amount, at what rate and for what CS No. 57961/16 CS No. 57893/16 CS No. 57188/16 48/63 49 period? OPP Both these issues are interconnected based on same evidence and hence can be decided together.
27.1 Suffice to note herein that the plaintiff has tried to project that it had sold the machinery and the money was to be paid by way of LC which was dishonored. The said money has been sought to be recovered by way of present suit. Relevant to note herein that for a considerable period of time Dashrath Singh Tanwar and H.S.Paintal both were dealing /discussing purchase of machinery and other related aspects with regard to the project which they were forming together. The extensive cross examination of DW-1 H S Paintal so reveals. In furtherance the Dashrath Singh Tanwar/Sapna Tanwar as well as the defendant had also adopted the minutes of the meeting dated 05.04.1995. Same also reveals that there was an understanding between them to do business together/acquire machinery, obtain loan and to do all necessary steps. The said minutes of the meeting are extracted as hereunder:
"The meeting was held under the Chairmanship of Shri. Paintal. Shri. Mohinder Singh & Shri. S.J. Salwan special invitees.
(1) It was resolved that Mrs. Sapna Tanwar be the fourth Director on the Board of Directors addition to the existing Directors Shri. H.S. Paintal Shri. Dashrath S. Tanwar and Mrs. Darshan Kaur Paintal.
(2) It is further resolved that Mr. S.J. Salwan will be an alternate Director in place of Shri. Dashrath S. Tanwar who is an N.R.I. CS No. 57961/16 CS No. 57893/16 CS No. 57188/16 49/63 50 (3) It was agreed that the Group holdings in the Company would be 55% by Shri. H.S. and 45% by Shri. Dashrath S. Paintal and his nominees Tanwar and his nominees.
(4) All the matters pertaining to the financial management shall be placed before the Board of Directors for taking policy decisions on the utilization of funds in terms of procurement plant, construction of building etc. of machinery and (5) It was agreed that Shri. H.S. Paintal, will act as the Chairman of the Company and shall be at liberty to take decision on financial matters in the interest of the work of the Company and loan incur an expenditure to the extent of Rs.50,000.00 at any time without reference to Board of Directors. However this would not apply for any statutory payments like payment of interest on Borrowings, stamp duty for registration of Company property or any other such payment etc. The details of all such expenditures shall be placed before the Board of Directors for ratification in their next meeting.
(6) The Company shall have its camp office at newly acquired plot of land at D-10, Sector VIII, Noida (U.P.).
and a telephone will be got installed at the site. The Company shall purchase a car for its day to day activities.
(7) It was also agreed that the Company will utilize the Secretarial services of Zenith Rubber Ltd., for the time being and shall pay a sun of Rs. 10,000/- per month in lieu thereof to Zenith Rubber Limited.
(8) The Directors shall be reimbursed any expenditure incurred by then on telephones, transport or any such expenditure which they might have to incur in the interest of the business of the Company. The same shall be placed for ratification before the Board Directors in their next meeting. of CS No. 57961/16 CS No. 57893/16 CS No. 57188/16 50/63 51 (9) It was unanimously agreed that expeditious action be taken to procure the machinery, its installation and to approach financial institutions for raising of loans etc.
10) The Board of Director shall hold a meeting once in a month preferably on 1st Saturday of the month to appraise themselves with the development of the project and to take decision on future course of action.
The meeting came to the close with vote of thanks to the. Chairman."
Same reveals that there was a common understanding to do business under Zenith Rollers Ltd.
27.2 The import made by the defendant from the Director - Dashrath Singh Tanwar first of all had to ratified by the Board. Same had not been done. Infact had all these agendas put forth before the Board at that relevant point of time many of the disputes raked up subsequently would not have arisen. Infact later on virtually on every aspect both the parties tend to depose as per their convenience and have distorted facts.
27.3 Plaintiff had dispatched machines which were seized by the customs. The order passed by the custom authority particularly the Appellate Authority is relevant. Same is dated 23.04.1997. The Hon'ble CEGAT had observed as under:
"I have carefully considered the submissions of both the sides and find that the learned DR is correct in pointing out that since there is no evidence on record to establish the claim of the appellants that the documents had been endorsed in their name at any point of time prior to 08th CS No. 57961/16 CS No. 57893/16 CS No. 57188/16 51/63 52 April, 1995, the department was correct in concluding that on the date of shipment i.e. date of import for the purpose of the Import Policy the appellants were not the owners of the goods; therefore, the goods were liable to confiscation.
5. The plea of the learned counsel for reduction in the quantum of fine is also not justified having regard to the fact that the import is valued at Rs.58 Lakhs while the redemption fine is Rs.2 Lakhs. Hence, I do not see any reason to interfere with the impugned order and accordingly uphold the same and reject the appeal".
27.4 I have purposively quoted the said order. Relevant to note herein that the documents which have been relied upon by the plaintiff in support of his case i.e. the purchase orders and LCs etc. are of the said date itself i.e. 08.04.1995. The custom authorities had concluded that the goods which were shipped to India at that relevant point of time before 08.04.1995 the same were not the property of the defendant. Ex.P-1 is also a fax letter addressed to Tanwar Marketing. The LC was also sought for in terms of letter dated 08.04.1995 subsequently the documents were accepted for payment on 20.04.1995 by UCO bank. Point to be emphasized is that at the time of shipping of goods by the plaintiff which was shipped to order the name of the buyer was not there and at the high seas the goods were sold by way of LC. Infact this transaction to my mind is laced with suspicion and was undertaken to release the goods from customs as the same could not have been imported by the plaintiff in his own name to India. The LC and other details were hurriedly sought for by the plaintiff so that the goods could be released in India which were in high seas. It can't be ruled out that the initial aim of the plaintiff was to seek a better bargain by importing those goods to India. Hence, the urge CS No. 57961/16 CS No. 57893/16 CS No. 57188/16 52/63 53 to conceal the purchase prices of those goods. It is also quite possible that both of them intended to do it jointly i.e. Dashrath Singh / HS Paintal intended to import second hand machinery to trade the same or earn a profit or it can be the aim of the plaintiff Dashrath Singh Tanwar as well as he had also become wise as was scouting for old machinery. However as providence would have the scheme got stuck/foiled for the reason that import of second hand machinery by a non user then was not permitted as per the prevailing regulations.
27. The question of payment by way of LC did not arise for the reason that it was a hurriedly agreed transaction, which even the custom authorities did not believe on the face value and imposed a penalty which order was also affirmed by the Hon'ble CEGAT. Worthwhile to note herein that the payment of those machines could not be done by LC was something which was not even alien to the plaintiff/Dashrath Singh Tanwar as well for the reason that in the first salvo, which the plaintiff had fired i.e. legal notice served upon the defendant dated 07.11.1997, it was stated "According to our clients your bank - UCO Bank Kirti Nagar, Delhi was at the relevant time headed by a relative of your Mr. H S Paintal and therefore against all norms not yet even returned the said documents despite several requests made by our client's banker. Such acts of your banker have thus depriving our clients of their rights to initiate action for recovery of their dues. Our clients are taking separate actions against you and your banker for such unlawful acts on their part".
27.1 Thus, it was known to the plaintiff / Dashrath Singh Tanwar CS No. 57961/16 CS No. 57893/16 CS No. 57188/16 53/63 54 that the payments of the machines would not be received by way of the said LC. Obviously those machines otherwise also owing to the said documentation/stand before the customs authorities were now being imported for a specific user i.e. would become the property of the company which they had formed. Apart from being hit by the provisions of the Companies Act (Supra), 1956 in a sense such a contract had to be ratified by the Board what actually happened was that the machines were imported finally in the name of the company which had no means to pay at that relevant point of time or at later point of time as the loan was not yet firmed up / disbursed. The defendant had made payment of 44,000 / 45,000 USD which infact may be towards the cost of machines which were taken by other companies of HS Paintal. The plaintiff/Dashrath Singh Tanwar also did not take any action against the banker of the defendant is a pointer to the said facet.
27.2 Owing to the imports being taken by the defendant or accepted by the defendant it is but obvious that they would again with the property of the concern in which both of them were equally interested or responsible i.e. the company Zenith Rollers Ltd. either by choice or circumstances the imports of goods was also in the said company. Had there been equity allotment in the said company against the investment made by the plaintiff towards purchase of the machines the controversy would not have arisen.
Adding to the same the machine from Italmatics also could not be acquired or probably the said transaction was not pursued as other CS No. 57961/16 CS No. 57893/16 CS No. 57188/16 54/63 55 second hand machines were imported in the second suit and were also imported by Zenith Rollers. As such in the correspondences subsequently with Italmatics the defendant/H.S.Paintal is communicating/informing that they have got second hand machines at good rate. It is quite probable that the machines imported in the second suit - some of them had to be traded for obtaining a profit may be to finance the costing of machines of Italmatics but the transaction as such could not fructify. In fact the plaintiff's amount was stuck in the transaction and he ended up as a big loser as shares were also not allotted. In such circumstances he did not wish to proceed further or give guarantees to loan which may expose him to further liabilities.
27.3 In my considered opinion the case is also because of the fact that both the parties to the suit never acted within the domain of law. Be that at the time of formation of the company or seeking approval of the board. Importing as per their will without caring for the relevant custom law at that point of time which prohibited import of second hand machinery and also seeking and accepting LC which also could not have been honored.
27.4 Excluding the aforesaid reasoning the fact of the matter is that payment could only have been received by the plaintiff had he joined hands for obtaining loan from UPFC. He withdrew from the said exercise. The project was stuck. Obviously he had invested his money for purchase of the machines from Italmatics, which had also ballooned owing to the fact that second hand machines were also purchased from his CS No. 57961/16 CS No. 57893/16 CS No. 57188/16 55/63 56 capital and imported to India coupled with the fact that in company also so he could not get shares allotted which led to the ultimate collapse of the joint venture/business transaction. This was the arrangement which could not culminate. It was not a simple transaction of sale purchase of machinery or loan as pleaded by the plaintiff.
27.5 Much emphasis has been made on the statement of account wherein M/s Tanwar Marketing is reflected as a Creditor and there is an entry of Rs.57 Lakhs odd standing in the books of account. The same is wide Ex.P-13. This was precisely the reason of filing the suit at the very inception under Order 37 CPC i.e. there was an admission on the part of the defendant in their business account and that admission was also reflected in the exchange of legal notices prior to filing of the suit. Having said so first of all the said amount could only be recoverable had there been compliance with the provisions of Company's Act. Secondly and more importantly that amount could only have been recovered/paid back when the loan which was sanctioned from UPFC could have been disbursed. Plaintiff had not participated in the said process. There was no other avenue to pay back the said amount to the plaintiff. Additionally as mentioned above Dashrath Singh Tanwar cannot act on behalf of the plaintiff company. [discussion of issues no.1 and 2 be read herein].
27.6 Much emphasis has been laid by the plaintiff/Dashrath Singh Tanwar that he was cheated by the defendants/H.S.Paintal. Machines were obtained / procured from his money, same were utilized, capital was CS No. 57961/16 CS No. 57893/16 CS No. 57188/16 56/63 57 not issued to him. In fact he was left in lurch. May be the plaintiff was the loser in the bargain - one reason may be the lack of proper documentation with regard to their arrangements / business venture but the plaintiff / Dashrath Singh Tanwar can seek his remedy before the Criminal Court as he is pursuing a litigation therein qua the said grievance.
27.7 Plaintiff / Dashrath Singh Tanwar also cannot merely efface from the company or the loan application given to UPFC by him. That was also part and parcel of the bargain. He is not a layman. It was his investment decision in a company. He could not have retraced his steps without suffering loss. He had done so and had to bear the consequences. To put it simply all endeavors / efforts / expenses were towards investments towards formation of a corporate entity/business venture which failed.
Issue No. 3 and 4 are accordingly also decided against the plaintiff.
28. Issue No.5 reads as under:-
v) Whether the amount found in favour of the plaintiff is liable to be adjusted towards the claim of damages of the defendant in CS (OS) No. 1524/1999? OPP This issue which has been framed takes into hue by and large the stand taken in the third suit. I shall deal with the same in discussion on the issues of third suit and insofar as second suit is concerned the CS No. 57961/16 CS No. 57893/16 CS No. 57188/16 57/63 58 plaintiff fails and suit is liable to be dismissed. Ordered accordingly.
29. THIRD SUIT Coming to the issue no.1. Same reads as here under:
1. Whether the suit is barred by law of limitation? OPP The suit has been filed on 01.07.1999 i.e just after the re-
opening of Court/after vacations. The plaint averment reflects that it is a suit for the following :-
i) Recovery of the loss sustained due to machines having been confiscated;
ii) ii) loss of profit attributable to the delay in project occasioned on account of non co-operation of the defendants herein;
iii) damages towards loss of reputation. 29.1 Relevant to note herein that the the parties infact were still in
the process to get the machines released from the customs as the amount was paid in terms of the orders passed by the Hon'ble CEGAT. Further more part payment was also made on 20.10.1995. The loan from UPFC was finally cancelled on 29.06.1996. Thus, counting from the said date the suit is within time and is not barred by law of limitation. Issue no.1 is decided accordingly.
30. Coming to the second point/issue no.2 as to the suit being liable to be dismissed for mis joinder of parties. Same was encapsulated CS No. 57961/16 CS No. 57893/16 CS No. 57188/16 58/63 59 in issue no.2. As mentioned in the discussion earlier mis-joinder of parties is not a ground for dismissal of the suit. By and large parties to the suit herein are the same i.e. parties were intending to form a joint venture for carrying out business and for the said purpose plaintiff no.1 company was formed/to be formed. This issue is also decided against the defendants.
31. Coming to issue no.3,4 & 5. Same reads as under :
3. Whether there was an agreement between plaintiff nos. 2 and 3 and defendants to set-up a joint venture project, if so, whether the defendant committed default in complying with the terms and conditions of the same and its effect? OPP
4. Whether defendant no. 1 advanced US $ 65,000 by way of loan to plaintiff no. 2? OPD
5. Whether plea of plaintiff based on project agreed to between H.S. Paintal and Dashrath Singh Tanwar in promoting plaintiff company to deny defendants claim is frivolous and vexatious besides being barred by limitation? OPD These issues have already been dealt in the preceding issues/issues in first suit and second suit. The same reasoning is adopted herein. As such the issues are decided accordingly.
32. Issue no.6,7 & 8 :-
6. Whether the plaintiff had paid US$ 65,000/-
towards purchase of a machinery MRC-90 Roll Wrapping Extruder? OPP CS No. 57961/16 CS No. 57893/16 CS No. 57188/16 59/63 60
7. Whether a sum of US $ 65,000/- was advanced by way of loan to the defendants?OPP
8. Whether the defendant is liable to pay any amount to the plaintiff as claimed in the suit?OPP These issues can be conveniently bunched up together. As discussed herein above the machines were dispatched to the company M/s Zenith Rollers and the same were confiscated. Obviously the expenses incurred had to be divided equally in the ratio of the contributing parties/ in the ratio of the capital being contributed or the shareholding. It could have also been adjusted in the balance sale price. Either way around if the said amount is held payable then also the same does not make any difference as the amount outstanding is much more in the balance sheet of M/s Zenith Rollers qua the import of the goods/the goods finally which went in their kitty. As such insofar as the expenses incurred in release of machines are concerned 55% had to be borne by the plaintiffs and 45% by the defendants as per the terms and conditions of their joint venture. However Rs.57 lacs were already advanced. No amount accordingly is due to be payable by the defendants on this score.
32. Coming to the aspect of loss of profit/loss of reputation. Dashrath Singh Tanwar had imported machines or financed the same through Tanwar Marketing Ltd. Obviously the project could not commence and therefore the question of loss to the Paintal group is more or less a hypothetical loss. In fact the investment was made more by the Tanwar group and in fact money was not taken out by issuance of shares. Paintal group had the machines and had used the machines and therefore CS No. 57961/16 CS No. 57893/16 CS No. 57188/16 60/63 61 the question of loss of profit does not arise. Apart thereof the project report or the feasibility report is only for the purposes of grant of loan. The same is not conclusive in any manner or cannot be the yardstick to evaluate loss of profits. I am not delving too much on this aspect for the reason that profitability otherwise also depends on variety of reasons which includes the regulatory environment first of all as both the parties to the third suit had repeatedly infracted the same or the victim thereof. Thus, the question of loss of profit does not arise at the first place.
32.1 Apart thereof there is no cogent evidence led by the parties as to what was the profitability in such a competitive industry in which M/s Zenith Rollers was operating or had to operate after the commencement of the project. This amount, which is sought by the plaintiffs is only to negate the claim of the plaintiff/Tanwar Marketing in the first suit and second suit.
32.2 Coming to the loss of reputation in case if the defendants herein had approached any Court including Criminal Court or Company's Court for vindication of their grievance then I fail to understand on what basis the plaintiffs can seek any loss towards the head of loss of reputation. No amount can be paid towards the said head.
33. In my considered opinion there is no justifiable reason evident from the record whereby any of the claim made by the plaintiffs in the third suit particularly towards loss of profit or loss of reputation can be sustained.
CS No. 57961/16 CS No. 57893/16 CS No. 57188/16 61/63 6233.1 Coming to the aspect of adjustments, if any the plaintiffs have been held not entitled to any amount as such the question of adjustment also does not arise. The issue no.5 of the second suit is also decided accordingly.
33.2 Coming to issue no.6 or delving a little on the same. Any decree of injunction requires the parties to approach the Court with clean hands. None of the parties had approached the Court with clean conscience or had contested the suit accordingly. This issue is otherwise more sort of an academic discussion and is decided against the plaintiff.
34. The upshot of the aforesaid discussion is that the third suit is also liable to be dismissed with the aforesaid caveat which I have mentioned above i.e. the amount spent in release of machine had to apportioned in the ratios as mentioned above.
35. FINAL RELIEF :- All suits stands dismissed. No order as to cost. Decree sheet be prepared accordingly.
Before concluding this 25 years old litigation/drawing the curtains I may note that any suit ought to be decided within a reasonable period of time otherwise not only it adds to the pendency but also gives parties the leeway to bring new facts or bring extraneous material which unnecessarily prolongs the shelf life/span life of the litigation. This is an example as evidence was commenced in the year 2007 after settlement of issues and concluded in the year 2024. All sort of extraneous material has CS No. 57961/16 CS No. 57893/16 CS No. 57188/16 62/63 63 been brought in and in fact false pleas/contrary to the documents have been taken with impunity. Such a conduct is not commended.
File be consigned to Record Room after due compliance.
Pronounced in open Court
on 16.11.2024 (Sumit Dass)
Additonal Sessions Judge -05
New Delhi District, Patiala House Courts
New Delhi.
Note : The judgment was reserved during the stint as District Judge -02 & Waqf Tribunal, Patiala House Courts. The same is pronouned in terms of the transfer orders.
CS No. 57961/16 CS No. 57893/16 CS No. 57188/16 63/63