* IN THE HIGH COURT OF DELHI AT NEW DELHI
+ C.S. (OS) No.267 of 2006
%
M/S. NATIONAL SMALL INDUSTRIES CORPORATION LIMITED
......Plaintiff
Through: Ms. Shobha, Mr. Mohinder Pal Thakur &
Mr. Prithvi Pal, Advocates.
versus
M/S. SHRISHTI AUTO ENGINEERING PVT. LTD. & ORS.
......Defendants
Through: Ms. Maneesha Dhir, Ms. Geeta Sharma,
Ms. Preeti Dalal & Mr. K.P.S. Kohli,
Advocates.
Date of Reserve: 19th November, 2009
Date of Order: 14th December, 2009
JUSTICE SHIV NARAYAN DHINGRA
1. Whether reporters of local papers may be allowed to see the judgment?
2. To be referred to the reporter or not?
3. Whether judgment should be reported in Digest?
JUDGMENT
I.A. No.5563 of 2007
1. By this order, I shall dispose of this application made under Order 37, Rule 3 (5) CPC for leave to defend by the defendant.
2. This suit has been filed under Order 37 CPC by the plaintiff for recovery of Rs.1,45,08,077/-. The plaintiff contended that it was Government of India undertaking registered under the provisions of Companies Act and was incorporated with the aim of promoting and developing small-scale industries in the country. Defendant No.1, a company registered under the provisions of Companies Act had approached the plaintiff for financing two machines on hire purchase basis. An agreement dated 20th March, 1999 was signed between the parties for hire purchase of first machine. The total value of hire C.S. (OS) No.267/2006 Page No.1 of 8 purchase came to Rs.1,04,61,639/-. The defendant company was to pay this amount within a span of five years by way of twenty installments of Rs.4,84,731/- each. The second hire purchase agreement was signed between plaintiff and the defendant company on 19th June, 1999 in respect of second machine worth Rs.54,20,975/-. The total hire purchase value came to Rs.82,95,764/-. This amount was also payable within a period of five years by way of twenty installments of Rs.3,76,841/- each.
3. The plaintiff submitted that the defendants were defaulters from the first installment and the post dated cheques given by the defendant company got dishonoured and the defendants failed to pay installments despite repeated requests made by the plaintiff. Defendant Nos.2 and 3, being Directors of defendant No.1 company had executed indemnity bond, jointly and severally to indemnify the plaintiff corporation to the extent of Rs.122.44 lac and executed affidavits disclosing their individual properties as security for the loan amount. Thus, they became guarantor for satisfaction of the loan amount. Defendant No.4 also furnished a declaration and indemnified the plaintiff jointly and severally to the extent of Rs.122.44 lac. It is submitted that in view of the fact that the defendants failed to pay even a single installment, the total hire purchase value against the two machines became payable forthwith and the amount due from the defendants as on 31st July, 2005 against the two machines was Rs.1,45,08,077/-.
4. Instead of paying dues of the plaintiff, to prevent plaintiff from exercising its right under the agreement, the defendants filed a suit against the plaintiff for injunction and vide order dated 1st November, 2000, the plaintiff company was restrained from taking any action against the defendant company or to present the cheques of installments for encashment. This order was vacated by the learned District Judge on 25th April, 2005. Since, the defendants had not made payment of the installments or of the due amount C.S. (OS) No.267/2006 Page No.2 of 8 against the loan agreements and hence the suit under Order 37 CPC.
5. In leave to defend, the defendants have taken a stand that suit as against defendant Nos.2 and 3 was not maintainable under Order 37 since indemnification bond signed by defendant Nos.2 and 3 does not entitle the plaintiff to recover amount from defendant Nos.2, 3 and 4. Regarding defendant No.1, it is not disputed that hire purchase agreements were entered and machines were taken on hire purchase basis. However, it is stated that the defendants were made to deposit two FDRs as security and an amount of Rs.24,40,547/- by way of an FDR was lying as security with the plaintiff against first agreement and an amount of Rs.18,97,341/- (as FDR) against the second agreement. It is submitted that apart from this, the defendants were directed to pay a sum of Rs.20 lac to the plaintiff by this court in Suit No.2279 of 2000 vide its order dated 14th January, 2003 and the defendants duly complied with this order and made a payment of Rs.20 lac. The defendants also claim that they had paid some installments totaling to Rs.29 lac approximately. It is submitted that the plaintiff has not given credit of any amount to the defendants and, therefore, the suit was not maintainable under Order 37 CPC and no decree can be passed under Order 37. The defendants also submit that the machinery was repossessed by the plaintiff and in view of repossession of the machinery, the plaintiff was not entitled to recover any amount from the defendants. The plaintiff could not have filed the present suit after repossessing the hire purchase machinery. The repossession itself satisfied the claim of the plaintiff.
6. The other stand taken by the defendants is that the suit filed by the plaintiff was barred by limitation. It is submitted that the triable issues have been raised by the defendants and, therefore, the defendants were entitled to leave to defend. It is further submitted that the agreement entered into between the parties was null and void because C.S. (OS) No.267/2006 Page No.3 of 8 of the exorbitant rate of interest charged by the plaintiff and this itself was a triable issue and the court should grant leave to defend on this ground.
7. As far as the suit against defendant No.1 is concerned, indisputably it is based on written contracts between the parties. The plaintiff has placed on record the statement of accounts as on 31st July, 2005. This statement of accounts has not been disputed by the defendants. A perusal of the statement of account shows that the plaintiff had given credit to the defendants of the amounts received in respect of both the hire purchase agreements. In case of first hire purchase agreement, the plaintiff has given credit of Rs.46,07,429/- to the defendants and after giving credit of this, the balance recoverable from defendant No.1 has been shown in the statement of accounts. Similarly, the statement of account of second machine also shows that due credit has been given of the amounts received. The statement of accounts starts from 1st January, 2000 and is upto 31st July, 2005. The defendants have failed to point out any incorrect entry into the statement of accounts and have failed to point out how the statement of accounts was deficient.
8. In case of both machines, the plaintiff has placed on record detailed statement of accounts as on 31st July, 2005 starting from November, 1999. The installments paid by the defendants have been shown in the amounts received by the plaintiff and the statement of accounts show that due credit has been given to the defendants of the amounts paid. In view of the fact that the defendants have failed to point out the statement of accounts were not true or incorrect, no triable issue arises in this respect. Making bald statement by the defendants that they paid installments of Rs.29 lac or paid Rs.20 lac again would not entitle the defendants to leave to defend. Accounting of the amounts paid by the plaintiff in any case does not raise a triable issue and the calculations C.S. (OS) No.267/2006 Page No.4 of 8 can be checked and re-checked and can be brought to the notice of the court when issue of satisfaction of decree arises. A triable issue is one where some adjudication is needed. Accounting of the money paid by the defendants to the plaintiff does not need an adjudication but only needs ascertainment whether the amount has been properly reflected in the statement of accounts or not.
9. I, therefore, consider that on this ground, the defendants are not entitled for leave to defend. If the defendants have paid and can duly account for the amounts paid, the plaintiff is bound to give credit of all those amounts to the defendants. Similarly, if there are FDRs of the defendants lying with the plaintiff and FDRs are still valid and encashable, the plaintiff would be liable to give credit to the defendants of these FDRs on adjustment of the FDR amounts. The FDRs were lying as security, it is not known whether this security has been encashed or not and whether the FDRs need revalidation? However, this does not raise any triable issue.
10. As far as limitation is concerned, the loan was taken in the year 1999. In the year 2000, the defendants filed a suit against the plaintiff that the plaintiff should not take any action against the defendants in respect of hire purchase agreements and the court granted an ex-parte injunction. This ex-parte injunction was in operation from November, 2000 till 25th April, 2005 when the order for injunction was vacated. The plaintiff would be entitled to deduct this period when the court injunction was operative from the period of limitation. The suit was filed by the plaintiff in December, 2005. Thus, the suit is not barred by limitation and this plea raised by the defendants is frivolous. No triable issue arises on account of limitation.
C.S. (OS) No.267/2006 Page No.5 of 8
11. The lifting of machinery by the plaintiff on 29th July, 2005 would not exhaust the liability of the defendants under hire purchase agreement. Only the residual value of the machinery can be adjusted towards the amount receivable. It is specifically provided in the agreement that even when the contract between the plaintiff and the defendants is determined because of non-payment of the installments and the plaintiff repossesses the machinery or seizes the machinery that shall be without prejudice to the claim of the plaintiff against hirer for arrears and hire payment and damages for breach of the agreement. I, therefore, consider that no triable issue arises on the plea that since possession of the machinery has been taken by the plaintiff, the plaintiff was not entitled to recover the amount.
12. In this case, after taking possession of the machinery, the plaintiff with the permission of the court had put machinery to public auction so that whatever amount can be realized from sale of machine should be realized and credit of the same should be given to the defendants. The defendants, in this case, under the orders of injunction of the court have been using the machinery without payment of installments all along from the date of hire purchase agreement till the year 2005, when the injunction was vacated. After the machinery was seized by the plaintiff it had become obsolete in view of the development of latest techniques and it did not attract any bidders. The proceedings regarding auction of the machinery would show that the machinery now has only junk value and has no real value. As and when the machine is sold by the plaintiff in auction, the plaintiff is bound to give credit of the same to the defendants. The defendants if consider that the machinery has more value, are at liberty to participate in the auction and bid for the machines for whatever worth they are and pay the amount and get the adjustment.
C.S. (OS) No.267/2006 Page No.6 of 8
13. I, therefore, find that no triable issues have been raised by defendant No.1 in this case. The only effort of the defendants from the very beginning had been to see that the proceedings in this case are delayed on one or the other ground. As far as defendant Nos.2, 3 and 4 are concerned, they have given affidavits about their assets along with giving their affidavits of assets. Mrs. Shalini Ahuja and Mr. Rajiv Kapur, the two Directors of the company executed an indemnity bond in favour of the plaintiff to the following extent :-
"In consideration of your having placed/agreed to place orders for machines for giving them to our company on H.P. Basis, we hereby jointly and severally agree to indemnify the National Small Industries Corporation, Gurgaon-Haryana against all losses, expenses which may be suffered and incurred by the Corporation in relation thereto, to the extent of Rs.122.44 lacs."
14. In view of their indemnifying the plaintiff for the losses that may be suffered by the plaintiff in respect of hire purchase agreements, I consider both Mrs. Shalini Ahuja and Mr. Rajiv Kapur are entitled for leave to defend in view of judgment of Supreme Court in the case of State Bank of Saurashtra Vs. M/s. Ashit Shipping Services Private Limited & Another reported in 2002 (4) SCC 736. I, therefore, dismiss the application made by defendant No.1 under Order 37 Rule 3 (5) CPC for leave to defend and defendant Nos.2 and 3's prayer for leave to defend is allowed.
C.S. (OS) No.267 of 2006
15. In view of the fact that the application for leave to defend of defendant No.1 has been dismissed, the plaintiff is entitled for a decree of the suit as against defendant No.1. The suit of the plaintiff is decreed for a sum of Rs.1,45,08,077/- along with cost and pendente lite and future interest @ 8 per cent per annum as against defendant No.1. C.S. (OS) No.267/2006 Page No.7 of 8 Decree sheet be prepared as against defendant No.1. The suit shall proceed as ordinary suit against defendant Nos.2 and 3. Written statement be filed by defendant Nos.2 and 3 within 30 days from today.
List before the Joint Registrar for completion of pleadings viz-a-viz defendant Nos.2 and 3 on 24th February, 2010.
SHIV NARAYAN DHINGRA J.
DECEMBER 14, 2009 'AA' C.S. (OS) No.267/2006 Page No.8 of 8