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1. This order will dispose of an application under Order VII Rule 11, Code of Civil Procedure (CPC) filed by the defendant (hereafter "NSIC").

2. The brief facts, necessary for deciding this application are that the plaintiff filed this suit, for rendition of accounts against NSIC; it also seeks permanent injunction restraining NSIC from CS(OS) No.1063/2002 Page 1 recovering of any amount, alleged to be due from it (i.e. the plaintiff). The plaintiff had, in 1993, established a manufacturing unit Greater NOIDA. It manufactured aluminium alloy, using aluminium wire rods and scrap as raw material. The plaintiff claims that the State Bank of India was its banker during 1996, and subsequently, the Punjab and Sind Bank. It approached NSIC, for raw material assistance, to purchase ingots and wire rods for its manufacturing activities, from the National Aluminium Co Ltd (NALCO). The plaintiff has outlined the terms of such financial assistance, in Para 7 and 8 of the suit; it urges that NSIC required it to furnish a bank guarantee, to secure the transaction. The plaintiff contends that the arrangement was working satisfactorily when, with effect from December 1998 NALCO reduced the basic price for sale of ingots in the domestic market and also revised the interest free credit period for all categories of ingots. The plaintiff claims to have furnished additional security to NSIC, through letters of credit; this brought the total security so given, to Rupees 125 lakhs; it also led to a corresponding increase in the total credit limit offered to it. The plaintiff alleges about a transaction whereby it had to hypothecate its property in favour of NSIC on 10-02-1999 and also deposit title deeds with it. The plaintiff claims that NSIC encashed the bank guarantee for Rs. 50 Lacs in September 1999 and thereafter issuing a letter on 14-10-1999, demanding Rupees 60,28,088/-as on 30-09-1999, consisting of principal and interest as well service charges.

3. The plaintiff alleges that the NSIC stopped extending credit facilities thereafter; it also contends asking it (NSI C) to render accounts but without any avail. The plaintiff further alleges that its requests to lease out the hypothecated property too did not meet with a positive response; however later there was an agreement that the property could be leased out, to CS(OS) No.1063/2002 Page 2 meet the mounting liabilities. The plaintiff complains that when the arrangement had been smoothened out to the mutual satisfaction of the parties to the present suit, and was working satisfactorily, it suddenly received information that the NSIC had issued a false recovery certificate dated 23-11-2001 for recovery of about Rs. 93,05,816/-. It is submitted that the recovery certificate was issued by NSIC by unjustifiably inflating a small principal amount and by not crediting the amounts paid by it. It is submitted that after representations were made to NSIC's management, the recovery certificate was withdrawn by its letter dated 24-12-01. It is submitted that the letter admitted existence of discrepancies in the accounts maintained by NSIC.

12. The agreement (for raw material assistance) was entered into, between the parties to this suit, on 07-03-1997; although the plaintiff has disputed that some parts of the agreement were "tampered with" inasmuch as, according to it, the NSIC filled in some blanks, as to the essentials, necessary to decide the issue in this application, there is no controversy. The agreement's recital describes the First Party (NSIC) as "Financer and as Agent" that gives financial assistance to small scale industrial units otherwise not in a position to procure such raw material from canalized or governmental agencies against purchase orders. The recitals also show that NSIC agreed to act as financer and agent, to the plaintiff, for procurement of supplies and raw materials. Clause 1 authorizes NSIC, to procure the agreed materials (spelt out in the schedules to the agreement) on which the latter (the plaintiff) would place indent. Clause (2) authorizes the NSIC to place orders upon the canalizing or government agencies, to procure the material, on behalf of the plaintiff. Clause 4 spells out the plaintiff's obligation to reimburse the cost of the material, and the time schedule for the purpose. Under Clause 5, the NSIC is entitled to administrative and processing charges. Clause 6 obliges the plaintiff to secure the amounts received through the assistance, from NSIC, for procurement of the material.

By clause 28, NSIC agreed to pay the taxes, provided the plaintiff reimbursed it. Clause 29 empowers NSIC to stop placing orders, without prejudice to its right to recover or claim amounts from the plaintiff. A similar power to stop placing orders is conferred upon NSIC, under Clause 32.

15. The agreement is facially one for "financial assistance" to the plaintiff, by the NSIC; however, a closer look at its terms would reveal that the latter (NSIC) has a deep and pervasive control over the goods. These are by way of the right to place purchase orders, on the suppliers, the right to receive the proceeds of sale (which the plaintiff can make, subject to NSIC's permission and authorization); in the event of a mishap, to receive insurance proceeds. The NSIC can also enter the plaintiff's premises, and seize goods, deal with them as it pleases, and sell them, to adjust the liabilities payable to it. Crucially, clause 8 records that the (hypothecated) goods would be held as (NSIC's) "the First Part's exclusive property specially appropriated to this security."