Delhi High Court
M/S Hb Leasing & Finance Co. Ltd. vs M/S Mahavit Spinning Mills Ltd. on 27 August, 2008
Author: Hima Kohli
IN THE HIGH COURT OF DELHI AT NEW DELHI
CS(OS)No.2389/1992
Date of decision : 27.08.2008
IN THE MATTER OF :
#M/S HB LEASING & FINANCE CO. LTD. ..... Plaintiff
Through : Mr. Pratap K. Mittal with
Mr. Praveen K. Mittal and
Mr. Kamal, Advs.
Versus
$ M/S MAHAVIR SPINNING MILLS LTD. ..... Defendant
Through : None.
CORAM
* HON'BLE MS.JUSTICE HIMA KOHLI
1. Whether Reporters of Local papers may
be allowed to see the Judgment? Yes
2. To be referred to the Reporter or not? Yes
3. Whether the judgment should be
reported in the Digest? Yes
HIMA KOHLI, J. ( O R A L )
The present suit has been instituted by the plaintiff against
the defendant claiming a decree for possession in respect of a
machinery known as 'Hydraulic Bricketting Press', in possession of the
CS(OS) No.2389/1992 Page 1 of 23
defendant and for a decree of recovery of Rs.23,04,199/- against the
defendant along with interest @ 18% per annum. Apart from the
above, relief has also been sought by the plaintiff against the
defendant for grant of a decree for recovery of mesne profits for use
and occupation of the machine @ Rs.700/- per month for the period
w.e.f. 1.5.1992, till the date of putting the plaintiff in actual physical
possession of the machine.
2. At the very outset, counsel for the plaintiff submits that the
plaintiff does not wish to press for the relief in respect of possession of
the machine or recovery of mesne profits as prayed for in prayers (b) &
(c) of the plaint. He submits that the present suit be confined to the
reliefs sought for a decree of recovery with interest as prayed for in
prayers (a) & (e) of the plaint.
3. The brief facts of the case are that the plaintiff is a company
registered under the Companies Act and having its registered office at
Delhi. One Shri Anil Goyal is the duly constituted attorney appointed
by the plaintiff Company's Board of Directors in their meeting held on
CS(OS) No.2389/1992 Page 2 of 23
10.3.1992. A copy of the Board Resolution passed by the plaintiff
company in favour of Shri Anil Goyal, its Managing Director, is marked
as Ex.PW-1/1. The power of attorney dated 11.5.1992 executed in
favour of Shri Anil Goyal is marked as Ex.-PW.1/2. The certificate of
incorporation of the plaintiff company dated 30.3.1982 is marked as
Ex.PW-1/3. The said documents establish that Shri Anil Goyal is
authorized by the Board of Directors of the plaintiff company to sign,
verify and institute the present suit against the defendant.
4. The defendant is a company having its registered office at
Ludhiana, Punjab and is engaged in the manufacture of Cotton and
Acrylic yarns. The plaintiff is engaged in leasing and other financial
services. On 23.5.1984, the plaintiff received a request letter from
M/s. Mohta Industries Ltd., the predecessor-in-interest of the
defendant, for taking on lease, a Hydraulic Bricketting Press costing
Rs.12.00 lacs, to be purchased from M/S Punjab Machinery
Manufacturers Corporation, Ludhiana. Hence, a leasing facility was
sought by M/s. Mohta Industries Ltd. from the plaintiff.
CS(OS) No.2389/1992 Page 3 of 23
5. It is the case of the plaintiff that after discussions with the
plaintiff, the predecessor-in-interest of the defendant, M/s. Mohta
Industries Ltd. entered into a lease agreement dated 31.5.1984 with
the plaintiff (Ex.PW-1/6) in respect of the machinery.
6. Article 2 of the lease agreement refers to the terms of
lease. As per Article 2.1, it was recorded that the equipment was
leased by the lessor to the lessee for a period of 96 months. Article 2.2
stipulated that arrears of lease rental would carry interest @ 1.5% per
month on compounding basis with monthly rests. Article 6 of the lease
agreement dealt with the lessee's confirmation. Counsel for the
plaintiff draws the attention of this Court to Article 6.1 which stated
that the lessee acknowledged and confirmed that the equipment was
of the required size, design, capacity and manufacture, suitable for its
purpose and was selected by the lessee relying on its own judgment
and not on the statement made by the lessor or its agents. Article
10.8 recorded that the parties agreed that civil courts in Delhi shall
have the exclusive jurisdiction in respect of any matter, claim or
dispute arising out of/or in relation to the lease.
CS(OS) No.2389/1992 Page 4 of 23
7. Counsel for the plaintiff submits that the equipment in
question was duly installed at the premises of M/s. Mohta Industries
Ltd. In this regard, he refers to Ex.PW-1/5 which is the invoice raised
by the manufacturer of the equipment, namely, M/S Punjab Machinery
Manufacturers Corporation, Ludhiana. The said invoice dated
25.5.1984 was raised on plaintiff. The invoice reflects the amount of
Rs. 13,20,000/- payable for the equipment. Ex.PW-1/9 is a letter dated
18.10.1986 whereby M/s. Mohta Industries Ltd. continued to pay the
lease rental to the plaintiff regularly till 30.9.1986 and thereafter
stopped paying the same.
8. In this regard, counsel for the plaintiff refers to Ex.PW-2/1
which is the receipt issued by the manufacturer for Rs.12.00 lacs
towards the amount paid by the plaintiff for the equipment purchased.
Ex.-PW-2/2 is the copy of the ledger account of the plaintiff maintained
in normal course of business which reflects the entry of the payment of
Rs.12.00 lacs by the plaintiff. Ex.PW-2/3 is the copy of the ledger of
the plant and machinery maintained by the plaintiff which shows
CS(OS) No.2389/1992 Page 5 of 23
payment of Rs.12.00 lacs made by the plaintiff. Ex.PW-2/4 is the copy
of the general lease rental brouchure issued by the plaintiff in respect
of the installment received from M/s. Mohta Industries Ltd. towards
lease rental. Ex.-PW2/5 is the copy of the ledger maintained by the
plaintiff with regard to lease income received from different parties.
The amount received from M/s. Mohta Industries Ltd. has been
reflected in the entries in the ledger dated 12.9.1984, 13,10.1984,
12.11.1984, 4.12.1984, 23.1.1985, 2.3.1985, 6.4.1985 and 11.5.1985.
9. In the meantime, M/s. Mohta Industries Ltd. was declared as
a sick unit and was taken over by the defendant company w.e.f.
1.1.1987, which fact was not disputed by the defendant. The scheme
of amalgamation issued by the Board of Industrial Financial
Reconstruction in respect of M/s. Mohta Industries Ltd. is marked as
Ex.PW-1/10. As per para 3(a) of the said Scheme, all the assets and
liabilities of M/s. Mohta Industries Ltd. were transferred in favour of the
defendant herein.
CS(OS) No.2389/1992 Page 6 of 23
10. It is the case of the plaintiff that as a consequence of the
aforesaid taking over of liabilities by the defendant, the defendant
stepped into the shoes of M/s. Mohta Industries Ltd. and was liable to
pay lease rental to the plaintiff in terms of the lease agreement dated
31.5.1984. However, as the defendant failed to make any payments to
the plaintiff despite assurances and correspondence exchanged
between the parties as also legal notices issued to the defendant, the
plaintiff was compelled to institute the present suit.
11. The plaintiff claims a sum of Rs.10,46,760/- toward lease
rental payable by the defendant for the period w.e.f. 1.10.1986 to
30.4.1992 along with penal interest in respect of the overdue lease
rental in accordance with the lease agreement @ 18% per annum upto
29.5.1992 which amounts to Rs.12,57,439/-. The plaintiff also claims
future interest @ 1.5% per month on the amount found due and
payable by the defendant.
12. The present suit was instituted on 29.5.1992. The plaint
was registered and summons were issued to the defendant on
CS(OS) No.2389/1992 Page 7 of 23
15.7.1992. The defendant entered appearance on 5.1.1993 and filed
its written statement. After the pleadings were completed, the
following issues came to be framed vide order dated 25.2.1997:
(i) Whether the suit is barred by limitation?
(ii) Whether this Court has territorial jurisdiction to
try and decide the suit?
(iii) Whether the plaint discloses any cause of action?
(iv) Whether the plaintiff entered into a lease
agreement dated 30.5.1984 with Mohta
Industries Ltd., in pursuance of a request raised
by the plaintiff under letter dated 23.5.1984 for
leasing out one Hydraulic Bricketting Press?
(v) Whether the 'Hydraulic Bricketting Press' was
delivered and supplied to the defendant
company by the plaintiff?
(vi) Whether the plaintiff is entitled to a decree for
Rs.23,04,199/- from the defendant and also for
recovery of possession of Hydraulic Bricketting
Press, as claimed in the suit?
(vii) Whether the plaintiff is entitled to interest and if
so, at what rate?
CS(OS) No.2389/1992 Page 8 of 23
(viii) Relief.
13. Thereafter, parties were directed to lead their evidence.
The plaintiff produced Shri Anil Goyal, Managing Director of the plaintiff
company as PW-1 and Shri Vijay Grover, Manager (Accounts) of the
plaintiff company as PW-2. The defendant produced Shri O.P.
Sharma, Vice-President of the defendant company as DW-1.
14. After pleadings were completed and evidence recorded vide
order dated 19.10.2005, the case was listed in the category of 'finals'
for disposal. This case has remained in the list of 'final matters' for the
past few months. However, none has been appearing for the
defendant. Same is the position even today. Be that as it may, in
view of the pleadings of the parties and the evidence placed on the
record as also the documents filed by the respective parties, this Court
proposes to decide the issues as follows.
CS(OS) No.2389/1992 Page 9 of 23
15. Issue No.1. Whether the suit is barred by
limitation ?
This objection has been taken by the defendant in its
written statement as preliminary objection No.1. Counsel for the
plaintiff submits that the onus to prove the aforesaid issue lies on the
defendant. However, as none is present on behalf of the defendant, it
is necessary to peruse the records. A perusal of the affidavit dated
31.8.2005 filed by the defendant (Ex.D-1) shows that apart from
making a bald averment in para 11 to the effect that the suit of the
plaintiff is time barred and without any cause of action, there is no
elaboration or substantiation of the said objection taken by the
defendant.
16. Counsel for the plaintiff, however, submits that the lease
agreement was executed on 31.5.1984, the lease rental was payable
by the predecessor-in-interest of the defendant spread over a period of
96 months w.e.f. 1.6.1984 to 30.4.1992. It is stated that as the lessee
continued to default in paying the installments right till the end of
April, 1992, the plaintiff instituted the present suit on 29.5.1992, by
CS(OS) No.2389/1992 Page 10 of 23
virtue of Article 37 of the Limitation Act. He submits that Article 37
deals with a promissory note or bond payable by installments, which
provides that, if default be made in payment of one or more
installments, the whole amount shall be due and the period of
limitation for making recoveries is 3 years from the date when default
is made, unless where the payee or obligee waives the benefits of the
provision and then, when fresh default is made in respect of which
there is no waiver. It is further stated by the counsel for the plaintiff
that had the plaintiff determined the lease agreement with the
predecessor-in-interest of the defendant, in that eventuality, the period
of limitation for instituting the suit would be calculated immediately
after such a determination. However, in the present case, the lease
agreement was not determined by the plaintiff and thus, he submits
that the suit has been instituted well within the period of limitation. In
support of his submission that the suit filed by the plaintiff is within the
period of limitation, learned counsel for the plaintiff relies on the
following judgments :
(1) Arjun Sahai vs. Pitamber Das, AIR 1963 All 278;
(2) Bangwantrao vs. Moh Khan, AIR 1977 MP 276;
CS(OS) No.2389/1992 Page 11 of 23
(3) In Re: Punjab Finance (P) Ltd. vs. Mohan Lal & Anr., 1978 (48)
Company Cases 271,
(4) National Research Development Corporation vs. Pulver Ash
Proj. Ltd, MANU/DE/9007/2007 (DHC); and
(5) C. Dhanam vs. A.M. Srinivasan, AIR 2006 Mad 210 (Full
Bench)
17. In the case of National Research Development Corporation
(supra) after examining the issue of limitation in respect of a case
where installments on royalty were payable on six-monthly basis and
payments were not being made, the court disagreed with the
contention of the counsel for the respondent therein that the cause of
action arose in favour of petitioner on each such default and that the
period of 3 years shall have to be calculated for each default from the
date of such default. Instead, the court held that if the agreement was
not determined, such a right to sue would arise on the expiry of the
period of the agreement, and once the claim is filed within 3 years of
such period, the same could not be held to be barred by limitation and
that apart, Part I of the Schedule to the Limitation Act would come to
the aid of the parties.
18. Counsel for the plaintiff is justified in drawing strength from
the aforesaid judgment. In the present case, the last installment paid
by the predecessor-in-interest of the defendant was upto 30.9.1986
and in terms of the lease agreement, the 96th installment was payable
on or before 30.4.1992. In these circumstances, the plaintiff was
entitled to institute the present suit within a period of 3 years from
1.5.1992. Hence, issue No.1 is decided in favour of the plaintiff and
against the defendant.
19. Issue No.2 - Whether this Court has territorial
jurisdiction to try and decide the suit.
The onus to prove issue No.2 lies with the defendant who
took such an objection in the written statement. However, a perusal of
the affidavit sworn by the defendant, (Ex.D-1) shows that there is no
mention of the said objection. Furthermore, no evidence has been led
by the defendant in this regard. Matter should rest here. However,
this Court proceeds to examine the pleadings and the documents
placed on the record to decide this issue. The lease agreement dated
31.5.1994 shows that the same was executed at Delhi. Article 10.8 of
the lease agreement stipulates that civil courts at Delhi shall have the
exclusive jurisdiction. Counsel for the plaintiff states that all cheques
towards lease rentals were tendered at Delhi and deposited by the
plaintiff at Delhi. Similar averments have been made in para 29 of the
plaint, to which there is a bald denial in the corresponding para of the
written statement. In view of the unrebutted evidence on the record,
it is held that this Court has the territorial jurisdiction to try and decide
the case. Accordingly, issue No.2 is decided in favour of the plaintiff
and against the defendant.
20. Issue No.3 - Whether the plaint discloses any cause
of action?
Issue No. 4 - Whether the plaintiff entered into a lease
agreement dated 30.5.1984 with M/s. Mohta Industries Ltd., in
pursuance of a request raised by the plaintiff under letter
dated 23.5.1984 for leasing out one Hydraulic Bricketting
Press? and
Issue No.5 - Whether the 'Hydraulic Bricketting Press' was
delivered and supplied to the defendant company by the
plaintiff?
All the aforesaid issues are interlinked and therefore taken up
together for consideration.
21. In so far as the cause of action for instituting the plaint is
concerned, it is stated by the plaintiff in para 23 of the plaint that the
cause of action for institution of the suit occurred when the lease rental
fell due on 1.10.1986 and continued to accrue thereafter and lastly
accrued when the plaintiff sent a legal notice dated 20.6.1991 through
their counsel to the defendant. The defendant has stated in para 3 of
the preliminary objections in the written statement that no cause of
action arises against it. It is further elaborated that the machinery in
question never came to the defendant, but is stated to have been
delivered by the plaintiff under an alleged agreement dated 31.5.1984
to M/s Mohta Industries Ltd., who was held responsible by the plaintiff
for its safety.
22. Counsel for the plaintiff submits that in view of the fact that
the defendant took over all the assets liabilities of M/s Mohta Industries
Ltd. in terms of the order of BIFR (Ex.-PW 1/10), it does not lie in its
mouth to allege that there is no cause of action for institution of the
present suit against the defendant. He further refers to the affidavit
of DW-1 (Ex.D-1) wherein in para 3 thereof, the defendant admits
taking over the assets and liabilities of M/s Mohta Industries Ltd.
However, it was disputed that the machinery in question came in the
possession of the defendant company and instead, it was averred that
no entry of such machines was entered in the records of M/s Mohta
Industries Ltd.
23. In this regard, reference to the cross-examination of the
DW-1 is relevant. DW-1 in his cross-examination, admitted purchasing
the management of M/s Mohta Industries Ltd. in early 1987. However,
he denied personal knowledge of the lease agreement. He also stated
that he was unaware of the date when the plant and machinery of M/s
Mohta Industries Ltd. was taken over by the defendant company. He
admitted that he had not attached the list of plant and machinery
along with his affidavit. It was admitted that the extract of the register
of assets/plant and machinery in support of the claim of the defendant
that the possession of the equipment in question was not with the
defendant, was not filed with the affidavit. The witness also admitted
that he had not seen the register of assets/plants and machinery of M/s
Mohta Industries Ltd. for the years 1984, 1985 and 1986.
24. It was further admitted in the affidavit by DW-1 that the
defendant had not written any letter to the earlier management
regarding leasing of the equipment in question or making any
enquiries thereof. It was admitted that books of accounts, records and
documents of M/s Mohta Industries Ltd. for the period 1984-1986 were
not seen by the witness and he was unaware as to which plant and
machinery had been disposed of by the previous management and
whether any plant and machinery had ever been disposed of by the
said management for the years 1987, 1988 and 1989. The witness
also admitted not having brought with him, the register of plant and
machinery of M/s Mohta Industries Ltd. for the years 1984-86 or the
books of accounts, invoices, documents and papers of the said
company.
25. In view of the aforesaid cross examination of the DW-1, his
deposition in the affidavit that no equipment had been leased out by
the plaintiff, that no machinery was in the possession of the defendant
company, and that there was no entry of such a machine in the
material register of M/s Mohta Industries Ltd., is unacceptable and
liable to be rejected as the same has not been substantiated by any of
the relevant documents in this regard.
26. Further, apart from the aforesaid deposition of DW-1, the
plaintiff has placed on record Ex.PW-1/4, which was a letter issued by
M/s Mohta Industries Ltd. requesting for lease of the equipment in
question. Ex.-PW-1/5 is the invoice of the manufacturer in the name of
the plaintiff in respect of the machinery in question. Ex.-PW-1/6 is the
lease agreement dated 31.5.1984 between the plaintiff and the
predecessor-in-interest of the defendant. Ex.PW-1/7 is the agreement
entered into between the plaintiff and the M/s Mohta Industries Pvt.
Ltd. Ex.PW-1/8 is the letter dated 10.10.1986 issued by the defendant
confirming installation of the machinery on 29.5.1984. Ex.-2/1 is
issued by the manufacturer confirming receipt of Rs.12.00 lacs from
the plaintiff, being the cost of machinery. Ex.-PW2/2 is the ledger of
the plaintiff showing payment of Rs.12.00 lacs by the plaintiff to the
manufacturer. Ex.-PW2/3 is the copy of the ledger of the plaintiff
showing purchase of the plant and machinery. Ex.PW-2/4 are the
copies of vouchers maintained by the Accounts Department of the
plaintiff showing receipts of installments paid by the defendant
towards lease rental in respect of the equipment leased to it. Ex.-PW-
2/5 are the copies of the ledger showing receipt of lease rental
recoverable from the defendant.
27. In the light of all the aforementioned documents, it is clearly
established that pursuant to a request received by the plaintiff from
M/s. Mohta Industries Ltd. dated 23.5.1984 for leasing out one
'Hydraulic Bricketting Press' the plaintiff entered into a lease
agreement dated 31.5.1984 with M/s Mohta Industries Ltd. It is also
established from the aforesaid documents that the 'Hydraulic
Bricketting Press' was delivered and installed at the premises of M/s
Mohta Industries Ltd. Once the defendant company took over assets
and liabilities of M/s Mohta Industries Ltd. in terms of the order of
Board of Industrial Financial Reconstruction, the defendant cannot
dispute the lease agreement entered into with M/s Mohta Industries Ltd
or the installment of the machinery at the premises of the M/s
Industries Ltd. In these circumstances, issues No.3, 4 and 5 are
decided in favour of the plaintiff and against the defendant.
28. Issue No.6 - Whether the plaintiff is entitled to a
decree for Rs.23,04,199/- from the defendant and also for
recovery of possession of 'Hydraulic Bricketting Press', as
claimed in the suit?
29. As already recorded at the outset, counsel for the plaintiff
does not press for the relief of recovery of possession of the equipment
and confines the present suit to its claim for entitlement to
Rs.23,04,199/-.
30. Insofar as the claim of the plaintiff for Rs.23,04,199/- is
concerned, the plaintiff admits having received all the installments
payable by M/s Mohta Industries Ltd. from the date of execution of the
lease agreement to 30th September, 1986. The same is also borne out
from a perusal of Ex. PW-2/4, referred to in para 9 hereinabove. He
further states that the plaintiff is entitled to claim lease rental for the
period from 1.10.1986 to 30.4.1992, totalling to Rs.10,46,760/-. On
the aforesaid amount, the plaintiff has calculated penal interest @ 18%
per annum, in terms of Article 2.2 of the lease agreement which
amount is calculated as Rs.12,57,439/- upto 29.5.1992. In reply to the
aforesaid tabulation of the plaintiff, the defendant has only made a
bald denial that the machine was not delivered by the plaintiff and
there was no lease agreement and hence the defendant was not liable
to pay any amount to the plaintiff.
31. The aforesaid defence taken by the defendant stands
demolished in the light of the evidence led by the plaintiff and the
documents placed on the record. Issues No.3,4 & 5 have already been
decided against the defendant and in favour of the plaintiff. In view of
the unrebutted evidence placed on the record, it is held that the
plaintiff is entitled to a decree for Rs.23,04,199/- against the defendant
as claimed in the suit. Issue No. 6 is answered in the favour of the
plaintiff to the aforesaid extent.
32. Issue No.7 whether the plaintiff is entitled to interest
and if so, at what rate?
33. This leaves the issue with regard to the claim of interest.
The plaintiff has claimed interest on Rs. 23,04,199/- @ 18% per annum.
Taking into consideration the fact that the plaintiff has been held
entitled to receive from the defendant a sum of Rs.23,04,199/- which
includes penal interest calculated @ 18% per annum coming to
Rs.12,57,239/-, it is deemed appropriate to grant the plaintiff pendente
lite interest @ 12% per annum from the date of institution of the suit
till the date of passing of the decree and future interest @ 9% till
realization.
34. Suit is decreed on the aforesaid terms. Decree sheet be
drawn up accordingly.
HIMA KOHLI,J
AUGUST 27, 2008
Sk/sushil
