Karnataka High Court
Kap Chem Limited vs Chamundeshwari Sugars Ltd on 5 November, 2013
Bench: K.L.Manjunath, A.V.Chandrashekara
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IN THE HIGH COURT OF KARNATAKA AT BANGALORE
DATED THIS THE 5TH DAY OF NOVEMBER, 2013
PRESENT
THE HON'BLE MR. JUSTICE K.L.MANJUNATH
AND
THE HON'BLE MR. JUSTICE A.V.CHANDRASHEKARA
R.F.A. NO.1913/2005
C/W
R.F.A. NO.230/2006
IN RFA 1913/2005
BETWEEN:
1. KAP CHEM LIMITED
A COMPANY INCORPORATED
UNDER THE COMPANIES ACT 1956
WITH ITS REGD. OFFICE
AT 309, 1ST FLOOR,
"WESTMINISTER", 13, CUNNINGHAM ROAD
BANGALORE - 560052.
REPRESENTED BY ITS DIRECTOR
SHRI SUNIL KAPUR
2. SHRI SUNIL KAPUR
SON OF MR. J.C. KAPUR
AGED ABOUT 50 YEARS
RESIDING AT "KAPUR VILLA"
NO 132, NANDIDURG ROAD
BANGALORE - 560046
DIRECTOR, KAPCHEM LIMITED
AT 309, 1ST FLOOR,
"WESTMINISTER", 13, CUNNINGHAM ROAD
BANGALORE - 560052
...APPELLANTS
(BY SRI. S. SREEVATSA SR. COUNSEL FOR M. BIRDY
AIYAPPA ADV.
2
AND:
CHAMUNDESHWARI SUGARS LTD
A COMPANY INCORPORATED UNDER
THE COMPANIES ACT, 1956 HAVING ITS
REGD. OFFICE AT NO.76
ULSOOR ROAD,
BANGALORE - 560092
REPRESENTED BY ITS
EXECUTIVE DIRECTOR
... RESPONDENT
(BY SRI. H.N. SHASHIDHARA, ADV. FOR KESVY & CO ADV.
AND SRI. G.S.ARUNA, ADV FOR C/R)
THIS APPEAL IS FILED UNDER SECTION 96 OF CPC
AGAINST THE JUDGEMENT DECREE DATED 15.10.2005
PASSED IN O.S. NO. 266/1996 ON THE FILE OF THE II
ADDL. CIVIL JUDGE (SR. DN) AND CJM, MYSORE, PARTLY
DECREEING AND PARTLY DISMISSING THE SUIT FOR
RECOVERY OF MONEY.
IN RFA 230/2006
BETWEEN:
CHAMUNDESHWARI SUGARS LTD
A COMPANY INCORPORATED UNDER
THE COMPANIES ACT, 1956,
WITH ITS REGISTERED OFFICE AT:
#76, ULSOOR ROAD
BANGALORE - 560042
REPRESENTED BY ITS MANAGING
DIRECTOR: SRI. M. SRINIVASAN
AGED ABOUT 40 YEARS
...APPELLANT
(BY SRI. H.N. SHASHIDHARA, ADV. FOR KESVY & CO
ADV.)
AND:
1. KAP CHEM LIMITED
A COMPANY INCORPORATED UNDER THE
COMPANIES ACT 1956
WITH ITS REGISTERED OFFICE AT:
WHITE FIELD ROAD
3
MAHADEVAPURA POST, BANGALORE - 560048
REPRESENTED BY ITS DIRECTOR
2. SRI. SUNIL KAPUR
DIRECTOR
KAP CHEM LIMITED
WHITE FIELD ROAD
MAHADEVAPURA POST,
BANGALORE - 560048
... RESPONDENTS
(BY SRI. S. SREEVATSA SR. COUNSEL ADV.)
THIS APPEAL IS FILED UNDER SECTION 96 OF CPC
AGAINST THE JUDGEMENT DECREE DATED 15.10.2005
PASSED IN O.S. NO. 266/1996 ON THE FILE OF THE II
ADDL. CIVIL JUDGE (SR. DN) AND CJM, MYSORE, PARTLY
DECREEING AND PARTLY DISMISSING THE SUIT FOR
RECOVERY OF MONEY.
***
THESE APPEALS COMING ON FOR FINAL HEARING,
THIS DAY, K.L.MANJUNATH, J., DELIVERED THE
FOLLOWING:
JUDGMENT
The legality and correctness of the judgment and decree passed by the II Additional Civil Judge, (Sr.Dn.) & CJM, Mysore dated 9.11.2005 in O.S.266/1996 is called in question in these appeals.
2. For the sake of convenience, the parties would be referred to as per their ranking before the Court below.
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3. The plaintiff, Sri Chamundeshwari Sugars Ltd. filed a suit for recovery of Rs.1,20,00,000/- from the defendants with interest at 18% p.a. from the date of filing of the suit till the date of realization. The defendant No.1 is a company and defendant No.2 is its Director. Defendant No.1, the owner of an industry which was manufacturing Acetic Acid Distillery Unit had been closed for more than 2 years. Thereafter, the defendant approached the plaintiff to grant lease of distillery unit with common facilities to be enjoyed by the plaintiff and defendant. The plaintiff agreed to take the distillery unit free from all encumbrances with Excise Licence and Molasses Storages Licence. In the process, lease came into existence with effect from 1.11.1995 and plaintiff was put into possession of the Molasses unit and plaintiff had paid Rupees one crore to the defendant as advance to be refunded at the time of redelivering the possession.
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4. Based on the agreement, excise licence and molasses licence were also endorsed by the plaintiff upto 30.6.1996. Though, plaintiff was ready and willing to commence the distillery unit, it could not do it on account of failure of boiler. The same was rectified in the month of January 1996. Inspite of the same, rents were paid by the plaintiff. The Karnataka Pollution Control Board, by its order dated 12.3.1996, passed an order to close the unit on account of violation of the provisions of the Act. In view of the same, the plaintiff could not commence the operation of the business. Therefore, the plaintiff by terminating the lease, called upon the defendant to refund the security deposit of Rupees one crore by taking possession of the unit. Inspite of repeated requests, the defendant did not take possession of the unit and failed to return the advance amount. In the meanwhile, the plaintiff was made to spend a sum of Rs.4,00,000/- towards maintenance and establishment charges including electricity and 6 security and further claimed a sum of Rs.7,00,000/- towards loss of profit and a sum of Rs.9,00,000/- towards interest at the rate of 18% p.a. from January 1996 to July 1996. In all, the suit came to be filed for recovery of Rs.1,20,00,000/-.
5. The defendant filed written statement, in which, the defendant has admitted the lease transaction. It has admitted the receipt of Rupees one crore as security deposit from the plaintiff, but has denied that there is negligence on the part of the defendant in not obtaining clearance from the Karnataka Pollution Control Board. It is the specific case of the defendant that against the order of closure of the Pollution Control Board, a writ petition was filed and interim order was obtained within two days from the date of receipt of passing of the order by the Pollution Control Board and as such there was no difficulty for the plaintiff to commence the distillery unit. It is also contended that the defendant was not liable to pay interest or maintenance 7 charges. It is contended that plaintiff is not entitled to claim loss of profit since plaintiff could not deliver possession of the unit to the defendant. The excise and molasses licence could not have been transferred to the defendant unless the articles are cleared from the department. In the circumstances, the defendant requested the Court to dismiss the suit.
6. In addition to that, the counter claim was filed by the defendant claiming a sum of Rs.1,57,54,981/- contending that it has sustained loss and rents are to be paid upto date.
7. Based on the pleadings, the Trial Court framed following issues:-
a) Whether plaintiff proves that the Lease agreement was frustrated on account of default on the part of the defendant?
b) Whether plaintiff was entitled to terminate the Lease Agreement? Whether it has been validly terminated?8
c) Whether defendant proves that the plaintiff was liable to pay rents from February, 1996 to 22.9.1997 amounting to Rs. 1,57,60,000/-?
d) Whether plaintiff proves that the defendant was liable to pay Rs. 1,20,00,000/- as claimed in para 19 of the plaint?
e) Whether plaintiff is entitled for interest at 18% on the security amount of Rs.1 crore as claimed in para 7 of the plaint?
f) Is the plaintiff liable to re-imburse defendant a sum of Rs.30,96,610.15/-, which has been paid to the statutory Authority and is the plaintiff liable to pay a sum of Rs.11,07,120/-
towards the non-handling over of machineries as stated in para.4 of the Additional written statement, filed by the defendants?
g) In the plaintiff liable to pay a sum of R. 57,91,251.18 towards interest for expenses incurred towards the payment made to the Statutory Authority and defaulted rentals?
h) Is the plaintiff liable to re-imburse the defendant Rs.15,39,058/- towards electricity charges paid to K.E.B. and water charges of Rs.4,82,051/- paid to water Board, Rs.9,83,000/- paid towards distillery Licence fee and Rs.92,501,15 towards telephone and other expenses in all amounting to Rs.30,96,610/-?
i) Does the defendant prove that he is entitled to claim a sum of Rs.2,57,54,981.33 and is the 9 defendant entitled to claim an equitable set- off of Rs.1,00,00,000/- and if so is he entitled to a counter claim of Rs.1,57,54,981.33, after adjusting a sum of Rs.1,00,00,000/-?
j) Are the defendants entitled to relieves, if any, as a counter claim.
k) To what order or decree?
8. In order to prove their respective contentions, plaintiff, on its behalf, has examined one N.Sainthil as PW-1. He has relied upon Ex.P-1 to 28. The defendant, on its behalf has examined one N.Rama Mohan Rao as DW-1 and R.Parashiva as DW-2. They have relied upon Ex.D-1 to 35.
9. The Trial Court, after appreciating the evidence let in by the parties has held issue Nos.1, 2 and 5 in the affirmative and issue Nos.3 4, 6 to 10 as partly affirmative and negative.
10. Ultimately, the suit filed by the plaintiff came to be partly decreed directing the defendants to pay a sum of Rs.76,00,000/- with interest. The 10 counter claim filed by defendant came to be partly decreed holding that out of Rs.1,00,00,000/- security deposit, a sum of Rs.24,00,000/- has to be deducted by the defendants.
11. Aggrieved by the judgment and decree of the Court below, plaintiff and defendant have filed these appeals.
12. Sri.Sreevatsa, learned Senior Counsel appearing for the defendant submits that the Trial Court has committed an error in decreeing the suit of the plaintiff and not granting the decree based on the counter claim of the defendant. According to him, the appreciation of the evidence of the Trial Court is perverse because though there was an order of Pollution Control Board to close down the unit within two days, an interim order was obtained by the defendant from the Hon'ble High Court against the said order of closure passed by the Board. In view of the same, there was no difficulty for the plaintiff to 11 continue lease. On the contrary, the plaintiff which was not in a position to commence the unit due to its own fault, has ventured to file a false case. Therefore, he contends that the judgment and decree has to be set aside. Lastly, he submits that the personal decree in favour of defendant No.2 is bad in law, since the order of returning security deposit has to be ordered only against the company as the lease deed was executed between the plaintiff and the defendant No.1 company and there cannot be any personal decree against defendant No.2-Director.
13. Per contra, the learned counsel for the plaintiff submits that the Trial Court has committed an error in not considering the amount spent by the plaintiff towards maintenance of the distillery unit. According to him, when there was obstacle for commencing the unit and if the tenant was not willing to continue the possession, there was no legal impediment for the plaintiff to surrender the lease since there is no agreement between the parties for 12 surrendering of the lease with prior notice. It is also contended by him that though plaintiff was ready and willing to surrender the lease, the defendant failed to refund the security deposit. The electricity charges and maintenance charges are liable to be reimbursed by the defendant in favour of the plaintiff, since the said amount was paid on behalf of the defendant. He lastly contends that the Trial Court did not consider the loss of profit during the relevant period.
14. Having heard the learned counsel for the parties, the following points arise for our consideration:-
a) Whether the appreciation of the evidence by the Trial Court is based on oral and documentary evidence and whether the same is perverse ?
b) Whether the Trial Court has committed an error in not granting decree in favour of the plaintiff as prayed for ? 13
c) Whether the Trial Court is justified in not dismissing the suit as contended by the defendant?
15. Since all the points are interlinked, we would deal with these points together. Defendant No.1, the owner of the unit let out the unit to the plaintiff on a monthly rent of Rs.8,00,000/- and Rupees one crore as security deposit is not in dispute. Admittedly, the lease is not a registered lease. Therefore, it has to be considered as month to month tenancy. It is not in dispute that even before commencement of the unit, there was an order from the Pollution Control Board order to close down the unit. In the light of such a hurdle, tenant was not able to commence the business and hence, the tenant could always surrender the possession. Therefore, this Court cannot filed fault with the Trial Court holding that the tenancy was month to month tenancy and that the plaintiff demanded the security deposit cannot be found fault with. Infact the learned 14 trial Judge has adverted to the contents of the lease deed and has held that the tenancy must be continued as a month to month tenancy. This finding is given on the basis of the provisions of Sections 105, 106, 107 and 111 of Transfer of Property Act.
16. The question is whether the plaintiff is entitled for a sum of Rs.4,00,000/.- towards electricity and maintenance charges and whether the defendant is entitled for counter claim as contended.
17. Admittedly, the plaintiff had not commenced any manufacturing. Though, plaintiff was willing to surrender the possession, there is no positive evidence let in by PW-1 that plaintiff was not in a position to deliver the possession on account of storage of molasses. It is no doubt true that an attempt was made by the plaintiff to take possession of the tenanted premises. But the fact remains that it could not be done unless the molasses were cleared by it and all relevant licences being transferred. In 15 such circumstances, the Trial Court is justified in allowing the defendant to deduct 3 months rent from the security deposit of Rupees One crore ordering only for refund of Rs.76,00,000/-. So far as the maintenance and other expenses are concerned, the Trial Court has held that the plaintiff is liable to pay the rental for 3 months and any maintenance for the said period has to be borne by plaintiff only. This factual finding is based on proper evaluation of the evidence of PW-1.
18. PW-1 in his evidence has not explained as to how plaintiff is entitled to claim maintenance charges of Rs.4,00,000/-. Merely because in the plaint it is averred that plaintiff is entitled to claim Rs.4,00,000/- towards maintenance, the same can be granted only when the same is proved through acceptable oral and documentary evidence. Hence, it is not possible for any Court to grant decree to that extent. In such circumstances, if the Trial Court has rejected the claim, this Court cannot interfere as the 16 appreciation of the evidence by the Trial Court is based on proper evaluation of the evidence let in by the parties.
19. When the plaintiff did not commenced any business, then the question to consider the profit does not arise at all. The plaintiff has not invested any amount except security deposit of Rupees One crore which has to be ordered to be refunded with interest at 18% p.a.. Therefore, we are of the view that the claim of the plaintiff with regard to loss of profit for the relevant period does not arise at all. Accordingly, we answer claim of the plaintiff in the negative and in favour of the defendant.
20. So far as the claim of the defendant is concerned, as we have already held that the tenant has agreed to surrender the tenancy rights and if the defendant has failed to take possession of the same, the defendant cannot find fault with the plaintiff. As a matter of fact, the Trial Court has directed the 17 defendant to deduct 3 months rent from January 1996 to April 1996. Therefore, the defendant cannot have any further claim against the plaintiff.
21. The Trial Court has properly evaluated the oral and documentary evidence in right perspective. Since this Court being the First Appellate Court in concurring with the judgment of the trial Court, elaborate discussion is not required as per the principles reiterated by the Hon'ble Supreme Court in the case of Santosh Hazari v/s Purushottam Tiwari (dead by LRs) reported in AIR (2001) 3 SCC 179.
22. So far as the decree granted against defendant No.2 is concerned, we are of the view that the Trial Court did not consider the terms and conditions of the lease. The lease is entered by two companies and defendant No.2 has not stood as guarantor for due repayment of security deposit to the plaintiff in his individual capacity. Merely because he has signed the agreement representing 18 the company, the Trial Court could not have passed personal decree against the defendant No.2 and to that extent the judgment and decree of the Trial Court is liable to be modified.
23. In the result, the following order is passed.
a) RFA * 1913/2005 is allowed in part setting aside the judgment and decree of the Trial Court only in so far as defendant No.2- Director is concerned only. The judgment and decree against defendant No.1 is confirmed in its entirety.
b) RFA 230/2006 by the defendant is
dismissed.
c) In view of the facts and circumstances of
the case, parties to bear their own costs.
Sd/-
JUDGE Sd/-
JUDGE DM/-
* Corrected vide chamber order dated 03.01.2014