National Horticulture Board vs M/S. M.R. Mashrooms And Agro Forms ...
2009 Latest Caselaw 1202 Del

*          IN THE HIGH COURT OF DELHI AT NEW DELHI

+                     IA No. 8826/2002, 9209/2002 &
                      CS(OS) No. 390/2002

%                     Date of Decision: April 06, 2009


# National Horticulture Board.
                                                          ..... Plaintiff

!                     Through: Mr. Sanjiv Singh, Advocate

                                 Versus

$ M/s M.R. Mashrooms & Agro Forms Pvt. Ltd & Ors..
                                                      .....Defendants

^                     Through: Mr. R.M. Aggarwal, Advocate.

CORAM:

HON'BLE MR. JUSTICE S.N. AGGARWAL

1.

Whether reporters of Local paper 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

S.N.AGGARWAL, J (ORAL)

1. The plaintiff has filed this suit against the defendants for

recovery of Rs.39,28,426/- under Order XXXVII, CPC.

2. Briefly stated, the facts of the case are that the plaintiff,

National Horticulture Board, is a society registered under the

Societies Registration Act, 1860 formed by the Government of

India, Ministry of Agriculture, inter alia for the purpose of

promoting, developing and supporting Horticulture activities by

rendering financial assistance to various institutions engaged in

horticulture activities including processing of Fruits, Vegetables and

Floriculture.

3. Defendant no. 1 is a company incorporated under the

provisions of the Companies Act, 1956. The defendant no. 1 has its

registered office at 10/20, Holambi Kalan, Alipur, Narela Road,

Delhi. Defendant nos. 2 to 4 were the Directors of defendant no. 1

company at the time of alleged transaction of loan between the

plaintiff and defendant no. 1.

4. It is stated that the defendant no. 1 has made an application

dated 21.03.1994 to the plaintiff for financial assistance for its

Integrated Mushroom Project for cultivation of button mushroom

situated on a plot of land measuring one acre at 10/21, Holambi

Kalan, Alipur, Narela Road, Delhi. It is pleaded that relying upon

the representation made by the defendants and the documents

submitted by them, the plaintiff vide its letter of intent/sanction

dated 01.03.1995 agreed to lend and advance to the defendant no.

1 as and by way of term loan of a sum of Rs. 21 lakhs in aggregate

to finance defendant no. 1's project. The said loan of Rs. 21 lakhs

was sanctioned upon and subject to the terms and conditions

contained in the letter of intent/sanction dated 01.03.1995 and in

the loan agreement dated 20.03.1995 entered into between the

plaintiff and defendant no. 1.

5. It is averred that the sanctioned loan amount of Rs. 21 lakhs

was disbursed to defendant no. 1 by the plaintiff vide cheque no.

243656 dated 28.03.1995 drawn on Indian Overseas Bank, NHB

Extension Counter, Gurgaon.

6. As per the loan agreement dated 20.03.1995, defendant no. 1

had agreed to repay the principal sum of the soft loan in five equal

yearly installments of Rs. 4,20,000/- each commencing on or before

31.03.1997. The entire repayment of the whole of the principal

sum of the loan was agreed to be paid by defendant no. 1 latest by

31.03.2001. The defendants also agreed to pay to the plaintiff

service charges on the principal amount of the outstanding loan at

4% per annum.

7. The loan taken by defendant no. 1 from the plaintiff was

secured by way of hypothecation created in favour of the plaintiff

on 20.03.1995 on all their movable properties including movable

machinery, machinery spares, tools and accessories present and

future laying or stored in the defendant no. 1 company's project

situated on a plot of land measuring one acre at 10/21, Holambi

Kalan, Alipur, Narela Road, Delhi and wherever else the same may

be or held by defendant no. 1. In order to further secure the soft

loan advanced by the plaintiff to defendant no. 1, an irrevocable

and unconditional personal guarantee dated 20.03.1995 was

executed by defendant nos. 2 to 4 in favour of the plaintiff for the

due repayment of the loan and service charges and all other

charges accrued in terms of the loan agreement.

8. It is further stated that the defendants had executed the

following loan documents in consideration of their having received

a loan of Rs. 21 lakhs from the plaintiff :-

a) Defendant no. 1, executed a Demand Promissory Note

dated 20.03.1995 in favour of the plaintiff acknowledging

thereby its liability to pay on demand to the plaintiff an

amount of Rs. 21,00,000/- (Rupees Twenty One Lac only)

along with service charges @ 4% per annum.

b) Defendant nos. 2 to 4 executed an Undertaking dated

20.03.1995 undertaking that they shall not transfer, dispose

of or in any way encumber their existing or future share

holdings in the Defendant company in favour of any person

or company.

9. After availing the loan amount of Rs. 21 lakhs, defendant no. 1

failed to reach the milestones fixed by the plaintiff and failed to

adhere to the financial discipline. The plaintiff in view of the failure

of defendant no. 1 in repaying the principal amount and service

charges as per the schedule and unsatisfactory implementation of

the project by defendant no. 1, recalled the entire loan along with

service charges and the penal interest vide legal notice dated

21.12.2001 sent by their lawyers Sanjeev Singh & Associates,

through registered post and UPC. It is further pleaded in the plaint

that the defendant no. 1 had acknowledged its liability towards the

plaintiff for payment of the amount due under the promissory note

dated 20.03.1995 and the defendant no. 1 has further

acknowledged its liability through revival letter dated 30.11.1997.

The defendants are stated to have paid an amount of Rs. 10000/-

as part payment of service charges vide cheque on 24.08.2000.

10. It is stated that as on date of filing of the suit, an amount of

Rs.39,28,426/- was due and outstanding to the plaintiff from the

defendants. The liability of all the defendants to pay the suit

amount is alleged to be joint and several. The break-up of the

claim made by the plaintiff in the suit is given in para 26 of the

plaint which is as follows :-

      Principal                         Rs. 21,00,000

      Service Charges for 1994-95       Rs.      920

      Service Charges for 1995-96       Rs.   84,000

      Service Charges for 1996-97       Rs.   84,000

      Service Charges for 1997-98       Rs.   84,000

      Service Charges for 1998-99       Rs.   84,000

      Service Charges for 1999-00       Rs.   84,000

      Service Charges for 2000-01       Rs.   84,000

      Penal Interest on Principal &
      Service Charges
      (Upto 31.12.2001)                 Rs. 1,33,506
                                        Rs. 39,38,426

      Less : Service Charge received Rs.      10,000
             on 24.08.2000

      Total amount outstanding on       Rs. 39,28,426
      24.08.2000

11. Since the defendants have failed to pay the above outstanding

amount despite service of legal notice dated 21.12.2001, the

plaintiff has filed the present suit against the defendants under

Order XXXVII, CPC.

12. The summons of the suit were sent to the defendants in the

prescribed proforma meant for suits under Order XXXVII, CPC. In

response to the summons of the suit received by the defendants,

they entered appearance in the matter through their counsel and in

response to summons for judgment served on them, they have filed

leave to defend applications seeking leave to contest the present

suit. Two separate leave to defend applications have been filed,

one by defendant nos. 1 & 2 and the second by defendant nos. 3

and 4.

13. Defendant no. 4 is reported to have expired during the

pendency of the present suit and Mr. Sanjiv Singh, learned counsel

appearing on behalf of the plaintiff, says on instructions that the

plaintiff does not want to proceed against defendant no. 4 who has

died. The court is, therefore, not concerned with the leave to

defend application filed on behalf of defendant no. 4.

14. Mr. R.M. Aggarwal has appeared on behalf of defendant nos.

1, 2 and 3.

15. I have heard the arguments of counsel for both the parties on

the leave to defend applications and have also gone through the

case file and the documents available on record.

16. Mr. R.M. Aggarwal, counsel appearing on behalf of the

defendants, has argued that the claim of the plaintiff for service

charges and for penal interest does not fall within the ambit of

Order XXXVII, CPC. He has referred and relied upon the statutory

provisions contained in Order XXXVII Rule 1(2), CPC which reads as

follows :-

"1. Courts and classes of suits to which the Order is to apply --

(1) XXXXX

(2) Subject to the provisions of sub-rule (1), the

Order applies to the following classes of suits, namely :-

(a) suits upon bills of exchange, hundies and promissory notes;

(b) suits in which the plaintiff seeks only to recover a debt or liquidated demand in money payable by the defendant, with or without interest, arising, -

(i) on a written contract, or

(ii) on an enactment, where the sum sought to be recovered is a fixed sum of money or in the nature of a debt other than a penalty; or

(iii) on a guarantee, where the claim against the principal is in respect of a debt or liquidated demand only."

Before dealing with the above argument advanced on behalf

of the defendants, I would like to note that Mr. Sanjiv Singh, learned

counsel appearing on behalf of the plaintiff, on instructions has

given up the claim of the plaintiff on account of penal interest and,

therefore, this court while considering leave to defend application

of the defendants need not go into the question of maintainability

of the suit in regard to penal interest claimed in the suit. The claim

of the plaintiff on account of penal interest amounting to Rs.

13,33,506/- is, therefore, rejected as not pressed.

17. After rejection of the claim of the plaintiff on account of penal

interest of Rs. 13,33,506/-, we are left with only two claims of the

plaintiff, one on account of principal amount of Rs. 21 lakhs and the

second on account of service charges at 4% on the principal

outstanding amount for the years 1994-95 to 2000-01. The total

claim on account of service charges claimed in para 26 of the plaint

comes to Rs. 5,04,920/-. The objection of the defendants is that the

claim of the plaintiff for service charges amounting to Rs. 5,04,920/-

does not fall within the ambit of Order XXXVII Rule 1(2) of CPC,

1908. It may be noted that the defendants have not disputed the

loan agreement dated 20.03.1995 executed between the parties.

The defendants have also not disputed that they have received loan

of Rs. 21 lakhs from the plaintiff. It is also not the case of the

defendants that after taking loan of Rs. 21 lakhs by them from the

plaintiff, they had returned any amount to the plaintiff, except

paying an amount of Rs. 10000/- on 24.08.2000 towards part

service charges. A perusal of the loan agreement between the

parties dated 20.03.1995 reveals that the defendants with eyes

wide open had entered into a contract with the plaintiff to pay

service charges at 4% per annum on the outstanding loan amount.

Reference for the same may be made to para 5 of the loan

agreement. I am of the view that the claim of service charges at

4% made by the plaintiff against the defendants is clearly within

the terms of the written contract between the parties and,

therefore, the claim on this account squarely falls within the four

corners of Order XXXVII Rule 1(2) referred above. The claim on

account of service charges made by the plaintiff is a claim for

liquidated demand in terms of written contract between the parties

and, therefore, by no stretch of imagination, it can be said that the

said claim does not fall within the purview of Order XXXVII, CPC.

Therefore, the plea taken by the defendants that the case needs a

trial for proving that the service charges are not a part of the

contract or that the said claim does not fall within the purview of

Order XXXVII does not raise any triable issue.

18. Mr. Aggarwal, counsel appearing on behalf of the defendants,

has further argued that in terms of the loan agreement dated

20.03.1995, the loan granted by the plaintiff to defendant no. 1 was

a soft loan and, therefore, according to him, this soft loan could not

carry any liability for payment of interest. I need not go into this

argument of the counsel for the defendants because the plaintiff

has not claimed any interest on the principal amount. What it has

claimed is service charges at 4% per annum on the outstanding

loan amount. Service charges cannot be equated with interest.

The service charges have been claimed by the plaintiff in terms of

the loan agreement between the parties dated 20.03.1995.

Therefore, even if we assume that the soft loan granted by the

plaintiff to defendant no. 1 was not to carry any interest still it does

not make any difference to the right of the plaintiff to recover this

loan amount or the liability of the defendants to repay it in terms of

the loan agreement. This plea of the defendants that the loan was

a soft loan also does not raise any triable issue.

19. Mr. Aggarwal, learned counsel appearing on behalf of the

defendants, has also contended that the total outstanding amount

of Rs. 39,28,426/- claimed by the plaintiff in para 26 of the plaint

appears to be incorrect as per its own break-up of claims given by

the plaintiff in the said para. In response to this contention of the

defendant's counsel, Mr. Sanjiv Singh appearing on behalf of the

plaintiff, has submitted that there is a typographical error in

mentioning the amount of penal interest as according to him, the

penal interest claimed in the legal notice dated 21.12.2001 was to

the tune of Rs. 13,33,506/- and due to a typographical error, the

said figure has been wrongly got typed in para 26 at page 8 of the

plaint as Rs. 1,33,506/- instead of Rs. 13,33,506/-.

20. Learned counsel appearing for the plaintiff has made a

statement at Bar that this claim of Rs. 13,33,506/- made on account

of penal interest on principal and service charges be excluded from

the claim of Rs. 39,28,426/- made by the plaintiff in the present

suit. On this concession being given by counsel for the plaintiff, the

recoverable amount on account of principal and service charges

comes to Rs. 26,04,920/- and this claim is on account of principal

loan amount and service charges at 4% up to the date of filing of

the suit. Hence, the objection raised on behalf of the defendants

regarding mistake in the outstanding amount that occurred in para

26 of the plaint, does not call for any adjudication or raises any

triable issue. This is so because the defendants have admitted that

they have taken a loan of Rs. 21 lakhs from the plaintiff and have

not paid any amount except Rs. 10000/- on 24.08.2000. As such,

the defendants were liable to return the principal loan amount of

Rs. 21 lakhs on the date of filing of this suit and they were also

liable to pay service charge of Rs. 5,04,920/- up to the date of the

suit in terms of the loan agreement dated 20.03.1995.

21. Learned counsel appearing on behalf of the defendants has

also argued that the loan documents are fabricated by the plaintiff

after disbursement of the loan to defendant no. 1 on 20.03.1995.

The contention of counsel for the defendants is that the blanks in

the loan agreement were filled up by the plaintiff after execution of

the loan agreement on 20.03.1995. This plea ex facie appears to

be sham, vexatious and an after-thought. It may be noted that the

defendants have not denied their signatures on the loan agreement

and the related loan documents executed by them in favour of the

plaintiff on 20.03.1995. They have also not denied that they had

taken a loan of Rs. 21 lakhs from the plaintiff. Therefore, it cannot

be said that the loan transaction in question was without

consideration. In my opinion, the plea in this regard taken on

behalf of the defendants does not raise any triable issue. The

defendants are bound by the contract contained in the loan

agreement dated 20.03.1995 as they admittedly have not repaid

the loan amount, they are under a legal obligation to repay the

principal amount together with the service charges in terms of the

loan agreement.

22. The learned counsel appearing on behalf of the defendants,

has also argued that the defendant no. 3 in her leave to defend

application has denied execution of personal guarantee by her and,

therefore, this according to him, raises a triable issue. This

objection, in my opinion, is false to the own knowledge of defendant

no. 3. The defendant no. 3 at the time loan was disbursed by the

plaintiff to defendant no. 1 was admittedly a Director in defendant

no. 1 company. She has not denied her signatures on the deed of

personal guarantee executed by her in favour of the plaintiff at the

time of loan transaction in question. That being so, it does not lie in

the mouth of defendant no. 3 to contend that she did not execute

the personal guarantee and is, therefore, not liable to pay the

amount claimed in the present suit. This plea also, in the peculiar

facts and circumstances of the case, does not raise any triable

issue.

23. Mr. Aggarwal, counsel appearing on behalf of the defendants,

has further submitted that the defendants intend to file a counter

claim of Rs. 50 lakhs against the plaintiff because of breach on the

part of the plaintiff in providing technical knowhow due to which

defendant no. 1 company has suffered huge losses. This plea

raised on behalf of the defendants in my view appears to be

misconceived and is not tenable. In case, defendants have any

claim against the plaintiff, then they can file a substantive suit for

such claim but by no means, they can be permitted to take it as a

ground for disputing their liability to repay the amount admittedly

taken by them as loan in terms of loan agreement dated

20.03.1995.

24. It was further argued on behalf of the defendants that the suit

is liable to be dismissed because of non-impleadment of Indian

Overseas Bank as according to the defendants, the defendants had

created pari passu charge in respect of the movable and

immovable assets in favour of Indian Overseas Bank also. This

argument made on behalf of the defendants is not tenable while

considering the leave to defend application. The defendants cannot

be permitted to take any advantage of any charge being created by

them in respect of their assets in favour of Indian Overseas Bank. I

am of the view that at best, the Indian Overseas Bank can come

and object to the execution of the decree in favour of the plaintiff

against the assets of the defendants in regard to which the said

Bank also holds a charge along with the plaintiff. The question

regarding competing claim of the plaintiff and that of the Indian

Overseas Bank arising out of the charge over the assets of the

defendants may be considered at the time if objection to the

execution is raised by the Indian Overseas Bank.

25. No other argument was advanced by learned counsel on

behalf of the defendants in support of leave to defend applications.

26. Having regard to the above facts of the case and the

submissions made by counsel for the parties, I do not find any merit

in the leave to defend applications filed on behalf of the

defendants. I am of the view that all the pleas raised by the

defendants in their leave to defend applications and urged before

the court at the time of hearing of these applications are vexatious

pleas and do not raise any triable issue requiring a trial in the case.

27. Upon perusal of the plaint and the documents filed therewith, I

am satisfied that the plaintiff has made out a case for grant of

decree in its favour in the sum of Rs. 25,94,920/- together with

service charge @ 4% per annum on the principal amount of Rs. 21

lakhs till the decretal amount is paid.

28. The liability of all the defendants (defendant nos. 1, 2 and 3) is

held to be joint and several.

29. At this stage, counsel appearing on behalf of the defendants,

has submitted that the defendants have paid Rs. 2 lakhs to the

plaintiff on different dates during the pendency of the present suit

and this fact of payment of Rs. 2 lakhs by the defendants to the

plaintiff is not denied by the learned counsel appearing on behalf of

the plaintiff. The defendants will, therefore, be entitled to adjust

the said amount of Rs. 2 lakhs paid by them to the plaintiff during

the pendency of the present suit.

30. In view of the above and having regard to the facts and

circumstances of the case, leave to defend applications filed by the

defendants are dismissed and a decree of Rs. 25,94,920/- is hereby

passed in favour of the plaintiff and against defendant nos. 1, 2 and

3, with costs and service charges at 4% per annum on the principal

amount of Rs. 21 lakhs till realisation. An adjustment of Rs. 2 lakhs

paid by the defendants to the plaintiff during the pendency of the

suit may be given to them while executing the decree.

31. Decree sheet be prepared.

32. This suit stands disposed of in terms referred above.

APRIL 06, 2009                            S.N.AGGARWAL, J
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