Cutler Hammer Provident Fund & ... vs Pradeshiya Industrial & ...
2009 Latest Caselaw 2520 Del

*     IN THE HIGH COURT OF DELHI AT NEW DELHI

+     W.P.(C) 1286/2006

      CUTLER HAMMER PROVIDENT FUND T            ..... Petitioner
                    Through Mr. Sudhir Kumar & Mr. Rakesh
                    Wadhwa, Advocates.

                  versus

      PRADESHIYA INDUSTRIAL & INVEST            ..... Respondent
                     Through Mr. Sandeep Aggarwal, Advocate for
                     respondent Nos. 1 to 5.
                     Mr. Gautam Avasthi, Advocate for respondent
                     State of U.P.

+     W.P.(C) 4879/2006

      BHARTIA CULTER-HAMMER LTD. EMP           ..... Petitioner
                     Through Mr. Sudhir Kumar & Mr. Rakesh
                     Wadhwa, Advocates.

                  versus

    PRADESHIYA INDUSTRIAL & INVEST             ..... Respondent
                   Through Mr. Sandeep Aggarwal, Advocate for
                   respondent Nos. 1 to 5.
                   Mr. Gautam Avasthi, Advocate for respondent
                   State of
                   U.P.
                   Mr. Aarohi Bhall, Advocate with Mr. Shekhar Raj
                   Sharma, Advocate for respondent No.6.
CORAM:
HON'BLE MR. JUSTICE SANJIV KHANNA, J.

                           ORDER

% 08.07.2009

The petitioners herein are two trusts created for the benefit of the

employees of the company Bhartia Cutler-Hammer Ltd. now known as

BCH Electric. The two trusts have been forced to file the present writ

WPC Nos.1286/2006 & 4879/2006 Page 1 petitions as the Pradeshiya Industrial and Investment Company of U.P.

Ltd (PICUP for short) and State of Uttar Pradesh have failed to pay the

interest and principal amount on the bonds issued by PICUP and

guaranteed by the State of Uttar Pradesh. The petitioner trusts had

purchased these bonds from M/s. Lotus Gilts Pvt. Ltd and M/s. Lotus

Securities. The two petitioners were paid interest in some bonds up to

14th September, 2002 and in other cases up to 14th October, 2002.

2. The respondent PICUP and State of Uttar Pradesh do not dispute

purchase of bonds by the petitioner or the fact that the purchase was

duly recorded/registered. The amount due towards the principal and

interest is also not disputed. It is stated that PICUP is facing financial

crisis and is in financial difficulties and State of Uttar Pradesh does not

want to honour their guarantee, which was admittedly extended at the

stage when bonds were issued to the public.

3. It is obvious that on merits, the liability is admitted and failure to

pay off that liability is also admitted. In these circumstances, counsel for

the respondents has raised two technical objections. Firstly, it is

submitted that the writ petition is not maintainable and an appropriate

remedy for recovery of contractual dues. Secondly, High Court of Delhi

does not have territorial jurisdiction to entertain the present writ

petitions.

WPC Nos.1286/2006 &
4879/2006                                                             Page 2

4. The first contention was considered and rejected by this Court in

an identical case of Modern Food Industries (India) Limited versus

State of Uttar Pradesh and Others, 125 (2005) DLT 463. In this case,

the bonds issued by U.P. Co-operative Spinning Mills Federation Ltd.,

which were guaranteed by State of Uttar Pradesh were not honoured and

discharged. Learned single Judge of this Court referred to decisions of

the Supreme Court in case of Gujrat State Financial Corporation V.

M/s Lotus Hotels Pvt. Ltd., AIR 1983 SC 848, ABL International

Ltd. V. Export Credit Guarantee Corporation of India Limited , JT

2003 (10) SC 300 and State of Jammu and Kashmir V. Ghulam

Mohd Dar, (2004) 12 SCC 327 and observed that a writ petition was

maintainable against a State in an appropriate case, even if the same

pertains to a contractual obligation.

5. The aforesaid Delhi High Court decision of the learned single Judge

was challenged before the Division Bench and thereafter before the

Supreme Court. The Hon'ble Supreme while dismissing the civil appeal

directed the State Government to pay principal amount and interest. The

Hon'ble Supreme Court made the following observations :-

"5. Though several contentions were urged by the State Government and the Federation, when the matter came up today, the learned counsel for the State Government handed over a Pay Order for Rs. 15,00,000/- (Rupees fifteen lakhs) to the learned counsel for respondent towards the refund WPC Nos.1286/2006 & 4879/2006 Page 3 of the principal amount. In regard to interest, the learned counsel for the Federation and the State Government submitted that as the Federation is under liquidation and as the State Government has paid the principal amount, the respondent should be relegated to other remedies in law for recovery of interest.

6. Such contention is not tenable. The amount invested by first respondent belongs to the workmen of first respondent. The amount was invested in the bonds of the Federation in view of the express guarantee by the State Government that the same will be repaid with interest upto 15.5% p.a. The very purpose of the State Government guarantee is to ensure payment in case the Federation was not able to make payment. In the circumstances, the fact that the Federation is in financial difficulties cannot be a ground for the State Government to say that it will not make payment of interest, even though it had guaranteed the repayment with interest. If such a contention is accepted, the very purpose of the guarantee will be defeated. We are indeed surprised that such a plea is put forward on behalf of the State of Uttar Pradesh.

7. In the circumstances, we are of the view that the State Government should pay the interest also. However, on the facts and circumstances, we are of the view that interest should be paid at the rate of 14.9% p.a. for a period of five years from the date of deposit and thereafter at the rate of 9.5% per annum (which is equal to the minimum rate of interest that is payable by the first respondent to its workers on the provident fund dues). The above concession regarding interest is granted on the peculiar facts of these appeals. Three months' time is granted to the Government of Uttar Pradesh to pay the balance interest."

(emphasis supplied)

WPC Nos.1286/2006 & 4879/2006 Page 4

6. The first contention is rejected following the aforesaid decision. As

stated above, on merits all facts and liability to pay is admitted by the

respondents.

7. Learned counsel for the petitioner has filed before me a copy of

SLP filed in the case of Modern Food Industries. One of the questions and

pleas raised before the Supreme Court in the said SLP relates to territorial

jurisdiction of High Court.

8. Photocopies of the bonds and memorandum of private placement

of bonds have been placed on record. Photocopies of the bonds do not

reveal that there was an exclusion clause, which gives exclusive territorial

jurisdiction to courts at Lucknow or to courts in the State of Uttar

Pradesh. In fact no such plea is raised by the counsel for the respondent.

Counsel for the respondent, however, submitted that the bonds were

issued at Lucknow and the registered office of PICUP is at Lucknow. He

further submitted that the transfer in the name of the petitioner was

registered at Lucknow and, therefore, the courts at Lucknow alone have

exclusive jurisdiction and no cause of action has arisen in Delhi. He relied

upon Kusum Ingots & Alloys Ltd. Vs. Union of India and Another

(2004) 6 SCC 254.

9. The Memorandum of private placement of bonds reveals that

PICUP had appointed three arrangers, namely, Bajaj Capital Limited, HB

WPC Nos.1286/2006 & 4879/2006 Page 5 Portfolio Limited and RR Financial Consultants Limited. The three

arrangers were in Delhi. The Memorandum does not state that courts at

any location/place will have exclusive jurisdiction. The Memorandum

provides that a person interested in applying for bonds can pay the

amount by cheque or demand draft in favour of PICUP Ltd in any of the

collection centres specified in this document. The respondents have not

filed on record the original application form, which was submitted by M/s.

Lotus Gilts Pvt. Ltd and M/s. Lotus Securities for the issue of said bonds.

It is admitted that both companies are Delhi based. The only possible

reason why these application forms have not been filed is that these

forms were received in Delhi. The bonds were transferable and

negotiable as promissory notes. The petitioners purchased these bonds in

Delhi. It is admitted by the respondents that payments towards

dividends/interest of the bonds were made to M/s. Lotus Gilts Pvt. Ltd

and M/s. Lotus Securities and subsequently to the petitioners at Delhi. It

is well settled that a part of cause of action arises at the place where the

amount due is payable. In these circumstances, I do not think that the

respondents can derive any support from the decision of the Supreme

Court in the case of Kusum Ingots & Alloy Ltd. (Supra). It is unfortunate

that the respondent State under Article 12 of the Constitution have taken

this technical plea, inspite of the decision of the Supreme Court on

merits. The liability to pay bond amount is admitted. There is no dispute

WPC Nos.1286/2006 & 4879/2006 Page 6 about the rate of interest as mentioned in the bond. It is also not

disputed by the respondents that principal amount as well as the interest

amount has not been paid.

10. In these circumstances, the writ petition is allowed. The

respondents including the State of Uttar Pradesh will pay the principal

amount and the interest as stipulated in the bond till the date bonds

matured. Thereafter, as held by the Supreme Court, the respondents

including State of Uttar Pradesh will pay interest @ 9.5% per annum.

Three months' time is granted to the respondents including State of Uttar

Pradesh to make payment of the said amount i.e. the principal amount

and the interest. The respondents including State of Uttar Pradesh will

pay costs of Rs.25,000/- in each case to the petitioners. The said cost will

be paid along with the principal amount and interest.

SANJIV KHANNA, J.

      JULY 08, 2009
      NA




WPC Nos.1286/2006 &
4879/2006                                                             Page 7