ORDER K.S. Gupta, J.
1. Indian Aluminium Cables Ltd. (name changed w.e.f. 26th March, 1998 to Hindustan Vidyut Products Ltd.) filed this suit, inter alia, alleging that it is a Public Limited Company incorporated under the Companies Act, 1956 and has its registered office at Kanchenjunga Building, 7th Floor, 18-Barakhamba Road, New Delhi. It carries the business of manufacturing of aluminium conductors etc. Defendant was the Managing director of plaintiff company from its inception till 22nd June, 1973 and in that capacity he entered into a collaboration agreement on 7th November, 1971 with Sherkate Sahami-Zohbek Tohodan, Avenus Ekbatan, No. 223, Teheran, Iran (hereinafter referred to as the "Sherkate Company") for supply of machineries as detailed in sub para (1) of Para 2 of the plaint. The terms and conditions of said collaboration agreement which have been set out in sub-paras (2) to (9) of Para 2 of the plaint, are as follows :-
"2. Cost of Machinery : Rls. 12,000,000.00 (Rials Twelve million) equivalent in U.S. Dollars C and F Khorramshahr.
3. The plaintiff shall make available to the Sherkate Company technical know-how for the manufacture of Malleable Pipe
Fittings, Feritic and Pearilitic Automotive parts, Chilled Iron Shots for foundry use, steel castings and Iron Balls.
4. As compensation for the technical know-how the Sherkate Company shall pay to the plaintiff a consolidated amount of Rls. 3,000,000.00 (equivalent in U.S. Dollars).
5. The Sherkate Company will make the payment towards the supply of the machinery and the fees for the technical know-how to the plaintiff in equity shares.
6. The plaintiff shall send its Engineers and/or Technicians and/or Erectors of the plant for the installation and for the successful operation of the plant for production of items herein- after referred to above.
7. The Sherkate Company shall pay for the boarding, lodging and other expenses at actuals for Engineers and/or Technicians and/or Erectors of the plant sent by the Plaintiff.
8. The Sherkate Company shall obtain the necessary permission from the CENTRE FOR THE PROTECTION OF FOREIGN INVESTMENT, IMPERI- AL GOVERNMENT OR IRAN, for the investment of the plaintiff.
9. The Sherkate Company shall allow the Iranian customers of the plaintiff to visit the Factory for seeing the machinery supplied by them."
2. It is further alleged that Government of Iran issued a decree being No. 6676 dated 1st July, 1972 permitting the plaintiff, according to the law for Attraction and Protection of foreign investment to import the necessary capital. Said collaboration agreement was also approved by the Government of India, Ministry of Foreign Trade vide Letter No. F1(1)/72-F Inb dated 20th August, 1972. Approval by the Reserve Bank of India too was accorded by letter No. EC.DH.MII/HT/4409/33(SM-J)/72 dated 15th September, 1972.
3. It is stated that the plaintiff despatched machineries of the value of Rs. 2.60 lakhs through the Ship - Golden Chrysentheium on 21st December, 1972, Rs. 2.50 lacs through Ship - Mahabarat on 19th February, 1973, Rs. 3.60 lakhs through Ship - Ocean Empress on 24th February, 1973 and Rs. 1.50 lakhs through ship Vishwa Suman on 21st March, 1973 to Sherkate Company. Before entering into the aforesaid collaboration agreement the defendant did not seek approval of the Board of Directors of the plaintiff company and there was criticism by the Board as to the manner in which said agree- ment had been brought about by the defendant. In the meeting of the Board held on 24th May, 1973 the following resolutions were unanimously passed :-
"Resolved that as and when found necessary the Company do apply to the Reserve Bank of India and other appropriate Government for cancellation of the Collaboration agreement and for permission to get back the Company's investment in M/s. Sherkate Sahami Zohbeh Tohodan, Iran.
Further resolved that it shall be the sole responsibility and personal liability of Mr. B.M. Patel to get back the Company's investment in M/s. Sherkate Sahami Zohbeh Tohodan, Iran and for that purpose to get the necessary permission and approvals from the Government of India, Reserve Bank of India, Government of Iran, the Sherkate Sahami Zohbeh Tohodan or any other party in India or in Iran, concerned or interested in this collaboration project including procuring cancellation of the collaboration agreement without any claim for damages etc. and carrying out such other local formalities as are incidental to or connected with the cancellation of the collaboration agreement and return of the company's funds invested in the aforesaid Iranian Projects."
Resolved that Shri B.M. Patel be and he is hereby authorised to negotiate and enter into an agreement on behalf of the company in connection with the sale of Company's investment in equity shares in M/s. Sherkate Sahami Zohbeh Tohodan to the extent of Rs. 5 lakhs (Rupees Five lacs only). The agreement shall, however, be subject to the approval and permission of the appropriate author- ities.
Further resolved that as required by Article No. 151 of the Articles of Association of the Company one more Director namely Shri. R.P. Mody be and he is hereby authorised to sign the afore- said agreement.
Further resolved that the Managing Director Sh. B.M. Patel be and he is hereby authorised to carry the common seal of the Company to any place outside Delhi for affixing the same on the above Agreement."
4. Proceedings of the aforesaid meeting and the resolutions were con- firmed by the defendant by signing the relevant pages of the minute book.
5. In pursuance of said resolutions on 16th June, 1973 the defendant brought about an agreement between the plaintiff company and (1) Ashok P. Hinduja, (2) Mrs. Lalita G. Hinduja and (3) Mrs. Areeta S. Hinduja who were carrying on business in the name and style of M/s. Permanand Deepchand & Sons, for sale of fully paid up equity shares in said Sherkate Company on being allotted by it to the plaintiff company. Defendant on or about 22nd June, 1973 executed a letter of guarantee to get back the plaintiff's investment in Sherkate Co. on 22nd June 1973 the defendant also resigned from the directorship of the plaintiff company. It is alleged that despite all attempts made by the plaintiff company to get the shares allotted as per the aforesaid collaboration agreement, the Sherkate Company failed to allot any shares to the plaintiff. Sherkate Company even did not bother to reply to certain requests for information made to it which the plaintiff required in order to send a progress report to the Government of India. Thus, by a registered letter dated 26th February, 1974 the plaintiff wrote to the defendant to use his influence on Sherkate Company to furnish the relevant information for the purpose of preparing progress report as well as in getting the shares of Rs. 10.20 lakhs being the value of the machin- eries supplied, allotted to the plaintiff company. In the said letter it was also indicated that if a satisfactory reply was not received the plain- tiff company would have no alternative but to take drastic action in terms of said personal guarantee against the defendant.
6. It is pleaded that the plaintiff company also sought the help of First Secretary (Commerce), Embassy of India in Tehran to make enquiries there about Sherkate Company in addition to seeking its advise in the matter of securing payment of the machineries already despatched to said Sherkate Company. The plaintiff company also sought the help of Engineering Export Promotion Council (India) for the purpose of recovering the amount due and/or allotment of shares by said Sherkate Company to the plaintiff. Engineering Export Promotion Council (India) after great difficulties contacted the Sherkate Company and found that it was not willing either to pay the amount or allot shares to the plaintiff company as per the collabo- ration agreement dated 7th November, 1971. It is stated that as per the personal guarantee dated 22nd May, 1973 the defendant is liable to pay the said amount to the plaintiff company which he has failed to pay despite service by registered AD cover of the notice dated 9th November, 1974. It was prayed that a decree for Rs. 1,035,600/- with costs and interest pen- dente lite and future may be passed against the defendant.
7. Defendant contested the suit by filing written statement on 23rd April 1976. In I.A. No. 6579/91 filed under Order 6 Rule 17 read with Section 151 CPC the defendant was allowed to amend the written statement by the order dated 29th October 1991. In the amended written statement by way of prelim- inary objections it is alleged that the suit as framed is not maintainable. The claim of the plaintiff company on its own admission is against Sherkate Sahami Zohbeh Tohodan, Iran with whom the plaintiff entered into an agree- ment of collaboration for supply of machineries etc. Suit is bad for non- joinder of said Sherkate Company and barred by limitation. It is further stated that this Court has no territorial jurisdiction to entertain the present suit as no part of cause of action had arisen in Delhi. Guarantee allegedly given by the defendant is in violation and contrary to the provi- sions of Article 181 and other articles of the Memorandum and Articles of Association of the plaintiff company. It is pleaded that the defendant was coerced to sign the guarantee for extending cooperation in getting his and his wife's liability released from the banks under the guarantees executed prior to the transfer of management of the plaintiff company. Defendant's resignation was not accepted till he was made to sign the guarantee.
8. On merits, it is not disputed that the defendant was Managing Director of the plaintiff company from its inception till 22nd June, 1973 and as Managing Director of the company he entered into the collaboration agree- ment on 7th November, 1971 with Sherkate Company as alleged. It is admitted that the Government of Iran issued a decree on 1st July, 1972. It is plead- ed that the plaintiff company failed to invoke that decree and seek the permission from Indian Government for its investment in Iran. It is pleaded that the machineries to Sherkate Company were allegedly despatched after obtaining the approval of Government of India, Ministry of Foreign Trade and also the Reserve Bank of India. The plaintiff company neither supplied the machineries to Sherkate Company nor the same were received by it as alleged in Para No. 5 of the plaint. It is further alleged that said agree- ment of collaboration with Sherkate Company was entered into with the full consent and approval of the Board of Directors of plaintiff company. Reso- lution dated 24th May, 1973 foisting sole responsibility and personal liability on the defendant to get back the plaintiff's investment in Sher- kate Company was unilateral action and is not binding on the defendant. It is pleaded that the letter of guarantee dated 22nd June 1973 is without consideration as no contemporaneous advantage accrued to the defendant or Sherkate Company. In any case the guarantee was enforceable against the defendant only when any claim for damages was made by Sherkate Company against the plaintiff. It is denied for lack of verification that the defendant resigned from the Board of Directors on 22nd June 1973 or that attempts were made by the plaintiff company to get the shares allotted by Sherkate Company in terms of said collaboration agreement. Receipt of the plaintiff's letter dated 26th February 1974 is denied. It is stated that mere writing to the First Secretary (Commerce), Embassy of India or the Engineering Export Promotion Council (India) for the purpose of recovering the amounts due from Sherkate Company was of no consequence as that company was/is not under the control of either of them. It is stated that the plaintiff company had failed to enforce its claim against Sherkate Company what to say of exhausting its remedy against it. Plaintiff had further failed to perform its part of the contract under said collaboration agree- ment by not fully supplying the agreed machineries and technical know how to Sherkate Company. It is emphatically denied that the defendant is liable to pay the suit amount to the plaintiff.
9. In the replication the plaintiff has controverted the averments made in the amended written statement besides reaffirming those made in the plaint.
10. On the pleadings of the parties following issues were framed :-
"1. Whether the plaint has been signed and verified and the suit instituted by a duly authorised person? OPP
2. Whether the suit is maintainable against the defendant in his individual and personal capacity? OPP
3. Whether the suit is bad for non-joinder of Sheikate Sohami- Zohbek Tohodan, Avenue Ekebaten, No. 223, Tehran (Iran) ? OPD
4. Whether the suit is within limitation? OPD
5. Whether this court has no territorial jurisdiction to enter- tain the suit? OPD
6. Whether the agreement in question became impossible of performance, if so, to what effect? OPD
7. Whether the suit is not maintainable in its present form? If not, to what effect? OPD
8. Whether the alleged guarantee was executed without consider- ation? OPD
9. Whether the suit is not maintainable against the defendant in view of the mandatory provision in Article 181 of the Memorandum of Articles of the plaintiff company? OPD
10. Whether the guarantee was obtained under coercion and is as such not enforceable as alleged in Para 8 of the preliminary objections? OPD
11. Whether the plaintiff failed to enforce its rights, if any, against the Iranian Company, as well as the Iranian Govern- ment and if so what is its effect? OPD
12. What amount, if any, the plaintiff is entitled to recover and from whom? OPP
13. Relief."
11. The following additional issue was further framed on 18th March 1993:-
"1-A. Whether the Plaintiff Co. supplied the contracted goods to the foreign collaborator M/s. Sherkate Sahami-Zohbek, Theodan, Teheran, Iran and if so, of what amounts?"
ISSUE NO. 112. Ex. PW.8/A is the copy of resolution dated 3rd December 1974 passed by the Board of Directors of plaintiff company authorising M.M. Karnik, Secre- tary who signed and verified the plaint and instituted suit, to sign and verify the plaint and to file suit on behalf of the company. Contention advanced by Ms. Sunita Harish appearing for the defendant was that Ex. PW.8/A cannot be read in evidence in the absence of averments made in the plaint that said Sh. Karnik was authorised by the plaintiff company to sign and verify the plaint and institute suit. On the other hand, it was pointed out by Sh. B. Mohan for the plaintiff that in verification clause which forms part of plaint, it has been specifically stated that said Sh. Karnik was duly authorised to sign and verify the plaint and to institute suit on behalf of the company. Verification clause of the plaint which is material reads as under :-
"I, M.M. Karnik, Secretary, being duly authorised to sign and verify this plaint and to institute the suit on behalf of the plaintiff company do hereby verify at Delhi this 13th day of August 1975 that the contents of Paras 1 to 18 of the above plaint are true to my knowledge based on the records of the company and those of 19 to 21 are true upon legal advise tendered to me, believed by me to be correct. The last para is prayer to this Hon'ble Court."
13. It may be noticed that the written statement filed by defendant is silent about absence of averments in the plaint to the said effect. Also having regard to said verification clause as it stands the resolution dated 3rd December 1974 (copy Ex. PW8/A) cannot be excluded from consideration on the said ground. Issue is, therefore, answered in affirmative.
ADDITIONAL ISSUE NO. 1-A
14. On this additional issue the statements of R.G. Menon, Director, Ocean Carriers Pvt. Ltd., Bombay, PW-1. S.R. Kumar, Deputy Manager (Commercial), Shipping Corporation of India, PW-3, S.K. Bhagwat, employed as a clerk with M/s. Ishwar Lal Madanlal & Co., Bombay, PW-4 and S.S. Bhuwania, Managing Director of the plaintiff company, PW-8 are relevant in addition to the other evidence which I shall be referring hereinafter.
i) PW-1 deposed that Ex. P-1 is the bill of lading signed by him on behalf of Ocean Carriers Pvt. Ltd. In cross-examination be stated that after passing through customs and port trust formalities the cargo is loaded under the supervision of Chief officer of the ship who issues mate's receipt to the shipper. Unless the mate receipt is surrendered, the bill of lading is not prepared. It is further in his cross-examination that it is only after physical checking that bill of lading is prepared. Mate receipt pertaining to bill of lading Ex. P-1 was maintained upto 1988 and thereaf- ter it was destroyed. Since no claim regarding this transaction was made on the company he can say that the goods against Ex. P-1 must have been deliv- ered. He did not have personal knowledge whether the goods were actually delivered or not. PW-3 deposed that for issuing bill of lading the shipper has first to file shipping bill duly approved by the customs authorities and only thereafter if the things are in order the bill of lading is issued by the shipping corporation. He knew A.B. Kadam who was working as Assist- ant Manager (shipping) in fright department of the Corporation uptil the last year. Carbon copy of bill of lading Ex. P-3 was stamped by A.B. Kadam on behalf of the corporation. In cross-examination he stated that he had no personal knowledge about Ex. P-3. PW-4 stated that M/s. Ishwarlal Madanlal & Co. is a partnership concern and Ishwar Lal, Manohar Dass Kanakia and Jaswantlal Uttam lal Kanakia are its partners. Shipping bills Ex. P-4/1 to P-4/4 bear the signatures of Jawant lal Uttam lal Kanakia whom he has seen writing and signing. When cross-examined, he stated that he joined the said firm on 16th August 1983 and he did not have personal knowledge about Ex. P-4/1 to P-4/4. These documents relate to export department while he is working in the import department. Despite admissions made to the said effect in cross-examination, the veracity of shipping bills Ex. P-4/1 to P- 4/4 cannot be doubted as PW-4 was employed with the said firm and summoned for a limited purpose of proving the said shipping bills Ex. P-4/1 to P- 4/4.
PW. 8 deposed that as is evident from the record of plaintiff company the machineries of the total value of Rs. 10.20 lakhs were supplied to Sherkate Company during the period 21st October, 1972 to 1st April 1973. He can identify the handwritings and signatures of J.K. Kapur, and Swamina- than, employed with the plaintiff company as having seen them writing and signing. Invoice Ex.PW-8E bears the signature of J.K. Kapur. With regard to this invoice Ex. PW-8/E-1 in the packing list which bears the signature of Swaminathan. Invoice Ex. PW-8/F bears the signature of J.K. Kapur while the packing list relating to it Ex. PW-8/F-1 bears the signature of Swamina- than. Again invoice Ex. PW-8/G bears the signature of J.K. Kapur and the packing list relating to it is Ex. PW-8/G-1 which bears the signature of Swaminathan. Invoice Ex. PW-8/H bears the signature of said Swaminathan. Letter Ex.-8/I is signed by the defendant which he identifies. He further deposed that on 24th May 1973 a meeting of the Board of Directors of plain- tiff company took place in which a resolution (copy Ex. PW-8/L) was passed unanimously. Defendant executed a personal guarantee Ex. PW-8/N dated 22nd June, 1973. Ex. PW-8/R dated 5th May 1974 is the letter received by plain- tiff company from the Indian Embassy in Tehran. In cross-examination he stated that machineries were supplied to Sherkate Company at the time the defendant was the Managing Director of plaintiff company and the invoices and the bills of lading, give the description of machineries supplied. He expressed his inability in saying whether the plaintiff company received any communication from Sherkate Company with regard to supply of machinery. He denied the suggestion that no such communication was received by the plaintiff company as it did not supply any machinery to it.
Total amount of the invoice Ex. PW.8/E dated 21st December, 1972 is Rs. 2,60,000/-. Invoice Ex. PW.8/F dated 13th February, 1973 is for a total amount of Rs. 2,50,000/-. Yet another invoice Ex. PW8/G dated 24th Febru- ary, 1973 is for a total sum of Rs. 3,60,000/, Rs. 1,50,000/- is the amount of the invoice Ex. PW8/H dated 1st April, 1973. Machineries covered by bill of lading Ex. P-1 and shipping bill Ex. P4/3 are relatable to invoice Ex. PW8/G while that of bill of lading Ex. P-3 and shipping bill Ex.P4/4 to invoice Ex.PW8/H. Likewise machineries covered by shipping bill EX. P4/2 are relateable to invoice Ex. PW8/F while that of shipping bill Ex. P4/1 to invoice Ex. PW8/E. In the bills of lading Ex. P-1 and P-3 and shipping bills Ex. P4/1 and P4/4 the name of the consignor has been shown as Indian Aluminium Cables Ltd. while that of the consignee as M/s. Sherkate Sahami Zohbek Tohodan, Tehran.
ii) In terms of the letter Ex. PW.8/I dated 18th September, 1972 admittedly bearing the signature of defendant, the Sherkate Company was informed that the plant and machineries as noted in the proforma invoice forwarded therewith, was lying ready for shipment and the later was re- quested to arrange for the import licence and to intimate number thereof to enable the company to commence the shipment of plant and machineries with- out any delay. Ex. PW. 8/L is the copy of the resolution passed by the Board of Directors of plaintiff company on 24th May 1973. Relevant portion of this resolution at Page 53 (Part III file) reads thus :-
"The Board requested Mr. B.M. Patel, Managing Director to throw some light on the progress and the present position of the joint venture for the manufacture of malleable castings which the company had undertaken in Iran. Mr. Patel informed the Board that the company had to supply machinery worth Rs. 12 lakhs to our collaborators in Tehran and that party would allot us the equity shares worth Rs. 15 lakhs which includes Rs. 3 lakhs for techni- cal know how to be given to this company. Mr. Patel also informed the Board that out of Rs. 12 lakhs worth of machinery the company had exported various machines as detailed below :-
Date of Despatch Name of Ship Value of machine 31.12.72 Golden Rs. 2.60 lakhs Chrysentheion 13.02.73 Mahabharat Rs. 2.50 lakhs 20.03.73 Ocean Empress Rs. 3.60 lakhs 01.04.97 Vishwa Suman Rs. 1.50 lakhs together valued at Rs. 10.20 lakhs. Company had yet to despatch machinery worth Rs. 1.50 lakhs and also technical know how."
15. Ex. PW.8/R dated 5th May 1974 (at Page 74) is the photostat copy of the letter sent by R. Ranganathan, then posted as Counsellor in Indian Embassy at Tehran, to the Secretary of plaintiff company. Contents of this letter which are material are reproduced below :-
"Please refer to your letter No. F/1003A/MMK dated March 28, 1974.
We have made enquiries in Tehran from Mr. Karimi, officials of the Industrial Credit Bank and Mr. B.M. Patel.
Mr. B.P. Patel is now the Managing Director of the firm having acquired most of the shares of Mr. Karimi.
Neither the Industrial Credit Bank nor other persons have so far received any formal intimation from the Indian Aluminium Cables Ltd. that Mr. Patel had severed connections with the IACL last year. So far as they were concerned, Mr. Patel continued to represent the IACL and there was thus no need for them to enter into direct correspondence with you.
While from personal discussion, I gathered that there was no complaint about supply of bad machinery by the IACL. Mr. Patel had numerous complaints in this regard.
It is now most essential that an authorised representative of the Indian Aluminium Cables Ltd. should come to Tehran to hold dis- cussions with all the parties concerned and assert the claims of IACL. This should have been done much earlier but failure to do so now can only jeopardise the interest of IACL.
Please send me a telegram about the date of arrival of your representative and other details."
16. In I.A. No. 2410/81 by the order dated 20th August, 1982 it was or- dered that commission shall issue by way of interrogatories for examining the said Counsellor. Interrogatories by the plaintiff and cross interroga- tories by the defendant were thereafter filed as is evident from the order sheets dated 6.10.1982 and 17.3.1983. Letter dated 21st February, 1995 sent by Y.C. Narang, Second Secretary (CONS) to the Registrar of this court enclosing therewith the answers to the interrogatories, cross interrogato- ries and rejoinder interrogatories, placed on the file notices that Nantu Sarkar, the present incumbent of the post of Counsellor (Commerce), Embassy of India Tehran, after administering oath was examined on 20th February 1995 on the basis of the interrogatories, cross interrogatories and rejoin- der interrogatories forwarded to the Embassy. The gist of the answers given by said Nantu Sarkar is that in response to the plaintiff's letter dated 28th August, 1974 concerning the supplies of machineries by plaintiff to Sherkate Co. the enquiries were made by said R. Ranganathan, the then Councillor (Commerce) from B.M. Patel, Karimi, Nazari, Industrial Credit Bank (ICB) and Azarpur ICB, that Karimi was a member of the Board of Directors of Sherkate Company and the result of enquiries conducted was communicated to the plaintiff vide letter dated 5th May 1974 (copy Ex. PW8/R) under the signature of said R. Ranganathan.
(iii) Letter of guarantee Ex. PW.8/N dated 22nd June, 1973 admittedly bearing the signature of defendant was executed by the defendant to indem- nify the plaintiff company in the sum of Rs. 1,200,000/- being the value of the machineries supplied by plaintiff to Sherkate Company.
17. In Ellerman and Bucknall Steam Ship Co. Ltd. Vs. Sha Nisrimal Bhera- jee, it was held that the bill of lading serves three purposes, viz. - (i) it is a receipt for the goods shipped containing the terms on which they have been received; (ii) it is evidence of the contract of goods for the carriage of goods; and (iii) it is a document of title for the goods specified therein.
18. In the face of evidence referred to in sub-paras (i) & (ii) above it stands proved beyond doubt that the machineries worth Rs. 10.20 lakhs were despatched through ships by the plaintiff to Sherkate Company at Tehran. During the course of arguments it was pointed out on behalf of defendant that the value of the machineries as reflected in aforesaid four invoices does not tally with the value as shown in above bills of lading/shipping bills. It is pertinent to note that no suggestion even remotely was put to S.S. Bhuwania, PW. 8 in cross examination in regard to the discrepancy in value now pointed out nor the defendant who disclosed the said value in the Board's meeting dated 24th May 1973 examined himself to explain how that error had crept in said two sets of the documents. Thus the said discrepan- cy deserves to be ignored.
19. As regards the receipt of machineries despatched by Sherkate Company, from the aforesaid letter Ex. PW. 8/R coupled with the answers on oath as given by Nantu Sarkar to interrogatories, cross interrogatories and rejoin- der interrogatories it may be gathered that there was no complaint about non-supply of machineries by Karimi, one of the directors of Sherkate Company and it was the defendant then the managing director of that company who made numerous complaints about the quality of machines supplied by plaintiff company. The defendant did not have the audacity to examine himself and deny on oath that the machines supplied by plaintiff were not received by Sherkate Company as pleaded in the written statement. Moreover, there was hardly any occasion on the part of defendant to have executed letter of guarantee Ex. PW8/N referred to in aforementioned sub-para (iii) in favour of the plaintiff company if the machineries despatched were not received by Sherkate Company. Thus the plea taken in the written statement by defendant that neither the machineries were supplied nor received by Sherkate Company being dishonest deserves to be rejected. Additional issue is answered in affirmative.
ISSUE NO. 420. As is manifest from the averments made in plaint the liability to pay the suit amount is sought to be fastened on defendant on the strength of letter of guarantee Ex. PW.8/N dated 22nd June, 1973. Suit which was filed on 14th August ,1975 and refiled on 6th September, 1975 being within 3 years period of the execution of said letter of guarantee, is thus within limitation. Issue is answered in affirmative.
ISSUE NO. 521. By way of preliminary objection No. 4 in the amended written statement it is alleged that this Court has no territorial jurisdiction to entertain the suit as no part of cause of action arose at New Delhi and even the collaboration agreement with Sherkate Company was executed at Tehran. It was pointed out by Sh. B. Mohan that the letter of guarantee Ex. PW.8/N which is the basis of suit, was executed by the defendant in Delhi. Con- tents of said Ex. PW8/N too indicate that it was executed at New Delhi and at that time the defendant was residing at 6, Retendon Road, New Delhi.
22. In support of the submission that execution of said letter of guaran- tee forms part of cause of action, strong reliance was placed on behalf of the plaintiff on the decision in ABC Laminart Pvt. Ltd. & Another, Vs. A.P. Agencies, Salem, it was held by the Supreme Court :-
11. "The jurisdiction of the court in matter of a contract will depend on the situs of the contract and the cause of action arising through connecting factors.
12. A cause of action means every fact, which, if traversed, it would be necessary for the plaintiff to prove in order to support his right to a judgment of the Court. In other words, it is a bundle of facts which taken with the law applicable to them gives the plaintiff a right to relief against the defendant. It must include some act done by the defendant since in the absence of such an act no cause of action can possibly accrue. It is not limited to the actual infringement of the right sued on but includes all the material facts on which it is founded. It does not comprise evidence necessary to prove such facts, but every fact necessary for the plaintiff to prove to enable him to obtain a decree. Everything which if not proved would give the defendant a right of immediate judgment must be part of the cause of ac- tion. But it has no relation whatever to the defense which may be set up by the defendant nor does it depend upon the character of the relief prayed for by the plaintiff.
15. In the matter of a contract there may arise causes of action of varios kinds. In a suit for damages for breach of contract the cause of action consists of the making of the contract, and of its breach, so that the suit may be filed either at the place where the contract was made, or at the place where it should have been performed and the breach occurred. The making of the con- tract is part of the cause of action. A suit on a contract, therefore, can be filed at the place where it was made. The determination of the place where the contract was made is part of the law of contract. But making of an offer on a particular place does not form cause of action in a suit for damages for breach of contract. Ordinarily, acceptance of an offer and its intimation result in a contract and hence a suit can be filed in a court within whose jurisdiction the acceptance was communicated. The performance of a contract is part of cause of action and a suit in respect of the breach can always be filed at the place where the contract should have performed or its performance completed. If the contract is to be performed at the place where it is made, the suit on the contract is to be filed there and nowhere else. In suits for agency actions the cause of action arises at the place where the contract of agency was made or the place where actions are to be rendered and payment is to be made by the agent. Part of cause of action arises where money is expressly or impliedly payable under a contract. In cases of repudiation of a contract, the place where repudiation is received is the place where the suit would lie. If a contract is pleaded as part of the cause of action giving jurisdiction to the court where the suit is filed and that contract is found to be invalid, such part of cause of the action disappears. The above are some of the con- necting factors."
23. Applying the ratio in A.B. Laminart's case (supra), a part of cause of action within the meaning of section 20 C.P.C. had arisen in Delhi because of the execution of aforesaid letter of guarantee Ex. PW. 8/N and this court has thus the territorial jurisdiction to try the suit. Issue is decided accordingly.
ISSUES NOS. 8, 10 & 1124. These issues can be taken together for discussion. Indisputably, liability to pay the suit amount is sought to be enforced by plaintiff company against the defendant on the basis of aforesaid letter of guarantee Ex. PW. 8/N dated 22nd June 1973. In the replication filed an 23rd October, 1976 by way of preliminary objection No. 6 it is alleged that said letter of guarantee was for consideration in as much as the defendant was relieved of his personal guarantees given to various banks of the plaintiff amount- ing to more than a crore of rupees. In I.A. No. 6579/91 which was allowed on 29th October, 1991 the defendant was permitted to raise the plea of said letter of guarantee having been obtained under coercion. In Para 8 of amended written statement the defendant has alleged that as a pre-condition he was coerced to sign the guarantee for the promised cooperation in get- ting his and his wife's liabilities released from the banks under the guarantees executed prior to transfer of management; that his resignation was not accepted till he was made to sign the guarantee.
25. Before adverting to the submissions advanced on behalf of both the sides, reference to some of the documentary evidence is necessary. It is not in dispute that Ex. PW.8/8 dated 7th November, 1971 is the collabora- tion agreement executed in between the plaintiff and Sherkate Company. This agreement was admittedly executed on behalf of plaintiff company by the defendant being its Managing Director. As is evident from Ex. PW.8/8 in lieu of supplies of machineries of the value of Rs. 12 lakhs and providing of technical know-how the Sherkate Company had agreed to issue equity shares of that company worth Rs. 15 million Rials of the plaintiff. The resolution passed by the Board of Directors of plaintiff company in the meeting held on 24th May, 1973 - Ex. PW8/L notices that the defendant offered to execute a personal guarantee in favour of plaintiff in the sum of Rs. 10.20 lakhs being the value of machineries supplied to Sherkate Company and the defendant was authorised to negotiate with a party on behalf of plaintiff to buy shares worth Rs. 5 lakhs in Sherkate Company. Another resolution Ex. PW.8/O passed in the Board's meeting dated 16th June, 1973 between the plaintiff and the partners of firm M/s. Parmanand Deep Chand & Sons for sale of equity shares of the value of Rs. 5 lakhs to them in Sherkate Company was considered and approved and the defendant and R.P. Mody were authorised to sign the agreement on behalf of plaintiff company. Draft of the personal guarantee to be executed by the defendant for an amount of Rs. 5.20 lakhs was further approved by the Board. Ex. PW. 8/M is the agreement executed in between plaintiff company and M/s. Perma- nand Deep Chand & Sons pursuant to the Board's said resolution. Clause 7 of this agreement which is relevant reads as under :-
"It is agreed and understood between the parties hereto that in the event of said Sherkate Sahami Zohbeh Tohodan not allotting the said shares to the vendor or in case of such allotment having been made but the vendor not being able to obtain the necessary permission and/or sanction from the Reserve Bank and all other governmental authority for sale of the said shares to the pur- chasers in terms thereof on or before 30th June, 1976, this agreement shall become void and ineffective and the vendor shall return to the purchasers the aforesaid sum of Rs. 10,000/- paid by the purchasers as earnest money as aforesaid but without interest and in that event neither party shall have any claim or demand whatsoever against the other."
26. Last para of aforesaid letter of guarantee Ex. PW. 8/N which is mate- rial runs as under :-
"In case you are unable to realise the whole sum of Rs. 1,200,000/- invested by you by way of sale of machinery to the said Iranian company and in case any claim for damages is made against you by the said Iranian company I hereby guarantee to compensate you for the same and agree to pay the same to you on a registered post notice to me at 3-1-C, IIIrd Floor, Darshan Apartment, Mount Pleasant Road, Malabar Hills, Bombay-6 for payment of the said sum. This guarantee shall be a continuing guarantee and shall remain in force and shall not be cancelled or removed until you get full satisfaction of all your dues."
27. Ex. PW.8/P dated 21st June 1973 is the letter sent by the defendant tendering resignation both as Director and Managing director of the plain- tiff company which was accepted by the Board on 22nd June 1973.
28. Ex. PW.8/Q1 dated 23rd/24th July, 1973 and Ex. PW. 8/Q2 dated 9th August, 1973 are the copies of letters sent by the plaintiff by registered post to Sherkate Company asking them to furnish requisite information as de manded in the telex dated 30th April, 1973 immediately for being submit- ted to the Ministry of Commerce, Government of India. Ex. PW. 8/Q3 dated 28th September/1st October 1973 is the copy of letter sent by plaintiff company by registered post to defendant on the address of Tehran complain- ing that despite number of letters and telex messages the Sherkate Company has failed to supply certain information to be supplied to the Government of India regarding collaboration agreement. It was impressed upon the defendant to use his good offices in ensuring that Sherkate Company sends the requisite information without delay, Ex. PW. 8/Q4 dated 26th February, 1974 is the copy of letter sent by registered post by the plaintiff company to defendant again on the address of Tehran wherein he was asked to use his influence in getting the shares of Rs. 10.20 lakhs allotted to plaintiff company in lieu of the value of machineries supplied. Ex. PW. 8/S-2 dated 2nd September, 1974 is the copy of letter sent by registered post by the plaintiff company to Sherkate Company for allotting the equity shares of the aggregate amount of Rs. 13.20 lakhs within two weeks of the receipt of that letter. Ex. PW. 8/E-1 dated 31st January, 1974 is a copy of the letter again sent by the plaintiff company to Sherkate Company through registered AD for allotting equity shares of the face value of Rs. 13.20 lakhs. Exs. PW. 8/U-2 to PW. 8/U-12 are the copies of the telegrams despatched by plaintiff company to Sherkate Company on the above subject. Ex. PW 7/C1 dated 2nd November, 1975 is the English version of the legal notice in Persian got issued by the plaintiff through H. Martin Daftry, practicing in Tehran to Sherkate Company calling upon it to allot enquity shares under the collaboration agreement dated 7th November, 1971 to the plaintiff.
29. In short, on issues 8 & 10 the submission advanced by Ms. Sunita Harish was that the aforesaid letter of guarantee Ex. PW. 8/N was without consideration as no advantage had accrued thereunder to the defendant; the condition for invoking it was also not fulfillled. Elaborating the submis- sion it was contended by her that the plaintiff should have first exhausted the remedy including the filing of suit against Sherkate Company for recov- ery of the suit amount and only thereafter, if the claim remained unsatis- fied, the plaintiff could have enforced the liability against the defend- ant. As part of the said submission it was further urged that the case as set up in para No. 6 of the replication that relieving of the defendant of the personal guarantees given by him to various banks of the plaintiff amounting to more than a crore of rupees was the consideration, had not been pleaded in the plaint. She also invited my attention to the admission made in cross examination by S.S. Bhuwania, PW. 8 that suit against Sher- kate Company was filed by the plaintiff company in the year 1978 i.e. much after the filing of this suit. While refuting the said submissions, it was argued by Sh. B. Mohan that only after the defendant came forward with the plea in para No. 6 of the preliminary objections of the written statement filed on 23rd April, 1976 that said letter of guarantee was without consid- eration, the plaintiff company got the opportunity to explain in para No. 6 of the replication as to how the said personal guarantee was not without consideration. It was further argued by him that in terms of the last para of letter of guarantee Ex. PW. 8/N sufficient steps for issuing the equity shares as per the collaboration agreement Ex. PW.8/B or refund of the amount of the machineries supplied, by Sherkate company, were taken by the plaintiff company. It was only after the plaintiff company failed to get any response in the matter from Sherkate Company the present suit was filed. According to the learned counsel the defendant can not take any advantage of the fact that suit against Sherkate Company in Tehran was filed in 1978 as the liability of the defendant for the suit amount was co- extensive with Sherkate company under the said letter of guarantee. Strong reliance was placed on the decisions in Ku. Sonia Bhatia Vs. State of U.P. and Others, and State Bank of India Vs. Messrs Index port Registered and Others, .
30. I am inclined to agree with the submission advanced on behalf of the plaintiff that the occasion for the plaintiff to take the plea as noted in para 6 of the replication arose only after the defendant raised the defense of personal guarantee being without consideration in the written statement.
31. In Ku. Sonia Bhatia's case (supra) the term 'consideration' as used in section 2(d) of the Contract Act also came to be considered by the Supreme Court. In Para 18 of the report (at page 1280) it was held :-
"In Volume 17 of Corpus Juris Secundum (pp. 420-421 and 425) the import of `consideration' has been described thus :-
"Various definitions of consideration are to be found in the text books and judicial opinions. A sufficient one, as stated in Corpus Juris and which has been quoted and cited with approval, is, "a benefit to the party promising, or a loss or detriment to the party to whom the promise is made........
At common law every contract not under seal requires a considera- tion to support it, that is, as shown in the definition above, some benefit to the promiser, or some loss or detriment to the promise ....
There is a sufficient consideration for a promise if there is any benefit to the promisor or any detriment to the promisee. It may be laid down as a general rule, in accordance with the definition given above, that there is a sufficient consideration for a promise if there is any benefit to the promisor or any loss or detriment to the promisee."
32. Ex. P-2 dated 1st November, 1976 is the certificate issued by Con- naught Circus branch of Dena Bank, New Delhi and it notices that personal guarantee of B.M. Patel and Mrs. R.B. Patel in respect of various credit facilities granted to the plaintiff stood released with effect from 22nd June, 1973 upon receipt of personal guarantee of R.P. Mody on that date. It may be stated that this certificate is relatable to one of the personal guarantees reference whereof is made in aforementioned para 6 of the repli- cation, furnished by defendant. Considering the ratio in Ku. Sonia Bhatia's case (supra), I have no hesitation in holding that relieving of the defend- ant of personal guarantees furnished by him with various banks on behalf of the plaintiff amounting to more than a crore of rupees, was sufficient consideration for execution of letter of guarantee Ex. PW. 8/N.
33. This brings me to yet another limb of argument advanced on behalf of the defendant. From the aforementioned letters/telegrams/notice sent by the plaintiff to Sherkate Company which remained unresponded, it is manifest that the plaintiff company had been continuously pursuing the matter of allotment of equity shares to them with Sherkate Company. As is further born out from the deposition of S.S. Bhuvania, PW. 8 in December 1974 he alongwith the Chairman of plaintiff company even visited Tehran and met the officers of the Indian Embassy and Engineering Promotion Council for re- trieving the company's money. However, the Sherkate Company neither issued the equity shares nor refunded the aforesaid amount of Rs. 10.20 lakhs. In my view, said condition for invoking the letter of guarantee Ex. PW. 8/N was satisfied. The interpretation as put by Ms. Sunita Harish to aforemen- tioned last para of Ex. PW. 8/N cannot be accepted.
34. On the point of liability of surety/guarantor in State Bank of India's case (supra) on pages 1743-44 it was held :-
"14. In Pollock & Mulla on Indian Contract and Specific Relief Act, Tenth Edition, at page 728 it is observed thus :
"Co-extensive - Surety's liability is co-extensive with that of the principal debtor.
A surety's liability to pay the debt is not removed by reason of the creditor's omission to sue the principal debtor. The creditor is not bound to exhaust his remedy against the principal before suing the surety, and a suit may be maintained against the surety though the principal has not been sued."
15. In Chitty on Contracts 24th Edition Volume 2 at page 1031 paragraph 4831 it is stated as under :-
"Prima facie the surety may be proceeded against without demand against him, and without first proceeding against the principal debtor."
17. In Hukumchand Insurance Co. Ltd. Vs. Bank of Baroda, , a Division Bench of the High Court of Karna- taka had an occasion to consider the question of liability of the surety vis-a-vis the principal debtor. Venkatchaliah, J. (as His Lordship then was) observed (Para 12) :-
"The question as to the liability of the surety, its extent and manner of its enforcement have to be decided on first principles as to the nature and incidents of suretyship. The liability of a principal debtor and the liability of a surety which is co-exten- sive with that of the former are really separate liabilities, although arising out of the same transaction. Notwithstanding the fact that they may stem from the same transaction, the two li- abilities are distinct. The liability of the surety does not also, in all cases, arise simultaneously."
18. It will be noticed that the guarantor alone could have been sued, without even suing the principal debtor, so long as the creditor satisfies the Court that the principal debtor is in default."
35. Since Sherkate Company is in default by reason of its having not allotted the equity shares or refunded the amount of Rs. 10.20 lakhs to the plaintiff company, this suit is maintainable against the defendant as per the ratio in State Bank of India's case (supra) notwithstanding the remedy which the plaintiff company may have against Sherkate Company.
36. It was also pointed out on behalf of the defendant that on the draft of personal guarantee for Rs. 5.20 lakhs being approved and agreement Ex. PW.8/M executed on 16th June, 1973 by M/s. Parmanand Deep Chand & Sons for purchase of equity shares worth of Rs. 5 lakhs in Sherkate Company pursuant to the Board's resolution dated 2nd June, 1973 (copy Ex. PW. 8/O), the amount of personal guarantee to be furnished by the defendant came to be reduced from Rs. 10.20 lakhs to Rs. 5.20 lakhs. Therefore, the defendant could not have been asked to execute letter of guarantee in question for the entire amount of Rs. 10.20 lakhs by the plaintiff company. As may be noticed from aforementioned clause 7 of Ex. PW. 8/N, this agreement was to become effective only on Sherkate Company's allotting the equity shares to the plaintiff and as they failed to allot the shares it is not open to the defendant to say now that his liability was restricted to Rs. 5.20 lakhs only.
37. As regards the plea of coercion covered by issue No. 10, it is suffice to say that the same was permitted to be taken in I.A. 6573/91 by the order dated 29th October 1991 after expiry of more than 14 years of the filing of written statement by the defendant. Further, for a period of over 1 1/2 years of the executing of aforesaid letter of guarantee and upto the date of filing of suit no steps whatsoever seem to have been taken by the de- fendant to have it annuled on the ground of alleged coercion. Even the defendant did not examine himself to support the aforesaid plea. After having taken advantage of discharge of the personal guarantee given on behalf of the plaintiff to various banks amounting to more than a crore of rupees, it does not lie in the mouth of defendant to contend that aforesaid personal guarantee was obtained under coercion.
38. Coming to part of issue No. 11 concerning the Iranian Government, from the decree No. 6676 dated 1st July, 1972 Ex. PW. 8/DA and the letter en- closed therewith Ex. PW. 8/D-1A it is clear that said decree was to become operative only on Sherkate company allotting the equity shares to the plaintiff company. In the absence of such an allotment, the plaintiff could not have enforced the liability against the Iranian Government on the basis of said decree.
Issues 8, 10 and 11 are answered accordingly.
ISSUES 2 & 3
39. In view of the findings on issues 8, 10 and 11 the suit must be held to be maintainable against the defendant and it is not bad for non-joinder of Sherkate Company.
ISSUE NO. 640. It was argued on behalf of the defendant that because of the failure of plaintiff company to supply machineries for the balance amount of Rs. 1.80 lakhs and also the technical know-how to Sherkate Company as provided in collaboration agreement Ex. PW. 8/B, the agreement became impossible of performance. At no point of time Sherkate company seem to have complained to the plaintiff that they were unable to use the machineries supplied because of non-supply of either the technical know-how or balance machiner- ies by the plaintiff company. The defendant who had acquired interest in Sherkate Company after supplies of machineries as is evident from the letter Ex. PW. 8/R and was obviously in collusion with that company, cannot be permitted to urge that the agreement became impossible of performance on the above score.
ISSUE NO. 941. In the facts and circumstances of the case, Article 181 of the memo- randum and articles of association of the plaintiff company has no applica- bility to the case.
ISSUES 12 & 13
42. It is in the deposition of S.S. Bhuwania, PW. 8 that the defendant is liable to pay interest at the rate of 10% p.a. on the suit amount. Suit amount of Rs. 1,035,600/- includes Rs. 2,85,600/- by way of interest upto the date of filing of suit. Considering the time gap in between the execu- tion of letter of guarantee Ex. PW. 8/N and the filing of suit, guarantee being conditional and the time taken in pursuing the claim with Sherkate Company for allotment of equity shares and/or refund of the amount of machineries supplied, the plaintiff company who is entitled to recover Rs. 10.20 lakhs could only be allowed interest after the institution of suit.
43. The transaction of supplies of machineries being commercial, the plaintiff is entitled to recover interest pendente lite on the said amount @ 6% p.a. upto 30th June, 1977 and pendente lite and future interest @ 10% p.a. with effect from 1st July, 1977 on which date Section 34 Cr. P.C. came to be amended by the amending Act 104/76.
44. In view of the findings on aforesaid issues, suit is decreed for Rs. 10.20 lakhs against the defendant with proportionate costs and interest pendente lite at the rate of 6% p.a. upto 30th June, 1977 and pendente lite and future interest thereafter @ 10% p.a. on the said amount.