National Small Industries ... vs Shri Dil Kishore & Another
2010 Latest Caselaw 5406 Del

                                REPORTED
*   IN THE HIGH COURT OF DELHI AT NEW DELHI

+                     RFA NO. 18/1997


NATIONAL SMALL INDUSTRIES CORP. LTD. ...... Appellant
             Through: Mr. S.S. Saluja, Advocate.

             versus

SHRI DIL KISHORE AND ANR.                             ..... Respondents
               Through:


%                         Date of Reserve : November 10, 2010
                          Date of Decision : November 29, 2010

CORAM:
HON'BLE MS. JUSTICE REVA KHETRAPAL

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

29.11.2010

: REVA KHETRAPAL, J.

This appeal is directed against the judgment and decree dated

19th September, 1996 passed in Suit No. 870/1994 whereby and

whereunder the learned Additional District Judge, Delhi, decreed the

suit of the appellant for ` 2,09,674/- with 10% interest on the

principal amount from the date of the filing of the suit till the

realization of the amount.

2. The facts leading to the filing of the suit briefly delineated are

that the respondent no.1 as the proprietor of M/s. Mahabir Plastic

Industries submitted an application for obtaining certain machines

from the plaintiff under a Hire-Purchase Scheme. The respondent

no.2 stood as a guarantor under the said Scheme. Along with the

application, the respondent no.1 supplied the details of the machines

and the name of the supplier from whom the machines would be

purchased. The respondent no.1 also furnished a declaration in the

said application regarding the terms and conditions governing the

supply of machinery under the aforesaid Scheme of the appellant.

Earnest money was paid by the respondent no.1 to the appellant and

the order was placed by the appellant on the suppliers of the

respondent no.1's choice for the supply of the requisite machines.

3. According to the terms of the Hire-Purchase agreement entered

into between the parties on 21st April, 1988, the respondent no.1 was

required to pay the installments of hire on the dates stipulated in the

Agreement. The hire-purchase value of the machines was fixed at

` 3,78,703/-. The first hire installment was to be in the sum of

` 27,599/- payable on the 1st of November, 1989, followed by twelve

half-yearly installments of ` 27,609/- each payable on the 1st of May

and the 1st of November, i.e. after every six months till the whole of

the hire-purchase value amount was paid.

4. In terms of the aforesaid Hire-Purchase agreement, executed

between the appellant and the respondent no.1, the following

machines were supplied by the defendant no.1: -

(a) 65 mm Extruder machine

(b) Take Off Unit with 6 Rubber Rolls.

(c) High Speed Mixture

(d) Scrap gruder 12"

(e) One Air Compressor 200 Lbs.

5. According to the clause 6 of the Hire-Purchase agreement, the

respondent no.1 was required to pay the half-yearly installments on

the due dates, failing which the respondent no.1 would be liable to

pay interest @ 2% per annum over and above the normal rate of

interest of 13% per annum on such defaulted installments or part

thereof, as the case may be, until payment.

6. Clause 3 of the Hire-Purchase agreement stipulated that the

respondent no.1 could exercise the option of purchasing the machines

supplied by the appellant after three years of the date of the

Agreement by paying the entire amount of hire-purchase value of the

machines, but till such time the machines would remain the sole

property of the appellant and the respondent no.1 would remain a

hirer and a mere bailee thereof. The relevant part of the Clause 3 of

the said Agreement is reproduced hereunder: -

"3. The Owner and the hirer, hereby covenant as follows :

(i) Provided that the obligations under this Agreement have in the meanwhile been duly performed by the Hirer, the Hirer may become the owner of the said property by paying such sums as hire-rent as will in the

aggregate amount to Hire-Purchase Price as also the sales-tax or general tax or purchase-tax or any tax levied or leviable on such transaction by any law for the time being in force, and all other dues, if any, payable by the hirers under this agreement and the Hirer has obtained a clear receipt in writing from the Owner admitting the payment by the Hirer of all the above amount and fulfillment of all the Hirer's obligation and liabilities under the agreement, and stating that the Hirer has become entitled to the ownership of the said property and thereupon this Agreement shall determine, but until such time the property shall remain the sole property of the owners and the hirer a mere bailee thereof.

Provided further that the Hirer shall not be entitled to exercise his aforesaid option of purchase in respect of the said property for a period of 3 years from the date hereof.

(ii) A metal plate showing that the said property belongs to the Owner shall be affixed there-on and the same shall not be removed by the Hirer so long as the said property remains the property of the owner.

(iii) No indulgence, delay or relaxation on the part of the Owner in enforcing the terms and condition of these presents shall constitute a notice or waiver of any breach of the terms and conditions hereof, nor

shall it in any way prejudice or effect the rights of the owners under theses presents.

(iv) The hirer agrees that the owner may in it sole discretion in any manner appropriate or adjust any payment(s) received from the hirer against any instalment(s) of hire-rent and/or any dues or amount outstanding against the hirer not withstanding the hirer's instruction in that behalf to the country. The hirer further agrees that the Owner may in its sole direction, appropriate and adjust any excess amount lying to the credit of the hirer under this agreement against the instalment(s) of hire- rent or any other dues or any amount outstanding against the hirer under any other hire-purchase agreement(s) between the owner and the hirer."

7. The appellant's case, as set out in the plaint, is that inspite of

repeated demands, the respondents failed to pay the installments of

hire on the due dates as laid down in the hire-purchase agreement, and

thereby the respondents defaulted in the payment of the appellant's

dues. The appellants also alleged that the respondent no.1 committed

breach of the Agreement by shifting the machines to a place which

had no shed or roof, where the machines were put in a dismantled

condition. This was despite the covenant in the Hire-Purchase

Agreement whereby the respondent no.1 had undertaken not to sell,

mortgage, pledge, assign, let or otherwise deal with or part with the

possession of the hired machines [clause 2 (iv)].

8. The appellant alleged that the respondents having failed to pay

a sum of ` 2,09,674/- (rupees two lakh nine thousand six hundred

and seventy four) as arrears of installments of hire and of interest

thereon due to the appellant from the respondent no.1 on account of

the fifth to the tenth installments, the appellant terminated the Hire

Purchase Agreement by a legal notice dated 4th October, 1994, calling

upon the respondent to handover the possession of the hired machines

along with a sum of ` 4,67,867/- inclusive of interest. The notice

having gone unheeded, the appellant filed a suit for recovery of `

2,09,674/- as arrears of installment and for possession of the

machines, claiming possession under clause 2(v) of the Agreement

with the prayer that in case the respondent had damaged or destroyed

the machines or had removed them, or for any reason, the machines

could not be handed back to the appellant in a sound condition, the

appellant be in the alternative held entitled to a decree in the sum of `

2,58,674/-, being the residual value of the machines, in addition to

the amount claimed towards the hire installments.

9. The suit was filed on 27th October, 1994. The notice of the

filing of the suit was served upon the respondents no.1 and 2. The

said respondents, though initially appeared and sought time for filing

written statement, were subsequently proceeded ex parte in default of

appearance, leading to an ex parte judgment being rendered by the

learned trial court, whereby the suit of the plaintiff was decreed in the

sum of ` 2,09,674/- with costs of the suit, against the respondents,

who were held jointly and severally liable to pay the amount with

interest.

10. Aggrieved and dissatisfied with the judgment of the learned

trial court, the present appeal was preferred by the appellant. Notice

of the appeal was served upon the respondents who did not care to

appear and the appeal was accordingly heard ex parte.

11. The main thrust of the learned counsel for the appellant was

that the learned trial court while decreeing the suit in the sum of

` 2,09,674/-, which was an amount due to the appellant for default in

payment of hire money under the Hire Purchase Agreement,

completely lost sight of the prayer of the appellant for possession of

the machines valued at ` 2,58,674/-.

12. In this context, Mr. S.S. Saluja, the learned counsel for the

appellant invited my attention to the sub-clause (v) of clause 2 of the

Hire Purchase Agreement which reads as under: -

"2. The Hirer hereby covenants with the Owner as follows;-

             (i)     XXX                XXX
                     XXX
             (ii)    XXX                XXX
                     XXX
             (iii)   XXX                XXX
                     XXX
             (iv)    XXX                XXX
                     XXX
             (v)     If the Hirer shall make default in payment
                     of any sum herein provided as and when

the same shall have become due or shall fail to observe and perform any of the terms and conditions of this agreement or if the Hirer shall be adjudicated insolvent or has any receiving order or any other order under an Insolvency Act and made against him or he wound up whether voluntarily or otherwise or if execution shall be levied or threatened to be levied

upon the said property or upon any premises where the said property may be or upon the Hirer's effect for rent, rates or taxes or if the execution shall be levied upon the Hirer's effect or if the Hirer shall allow any judgment against him remain unsatisfied then and in each and every such case the Owner shall forthwith become entitled to immediate possession of the hired property, (the "Dejure" possession shall always remain with the Owner and the Hirer being only entitled to work the said property in terms of this agreement) and the Owner may.

(a) Without prejudice to any claim for arrears of hire rent or damages for breach of this agreement forthwith and without notice or demand terminate the hiring and retake possession of the property and/or.

(b) By written notice either served personally on the Hirer or sent by post or otherwise to the Hirer or to his last known address forthwith for all purpose absolutely determine this agreement and the hiring hereby constituted and thereupon the Hirer shall no longer be in possession of the property with the owner, constent (sic.) nor shall either party thereafter have any rights under this Agreement, but such determination shall not

discharge any pre-existing liability of the hirer to the owners, and the Hirer shall not be entitled to claim any damages, compensation for such termination of the agreement and taking over of possession of the property by the owner or for any loss, damage, inconvenience that the Hirer may directly or indirectly, incur, as a result of such termination of agreement or taking over the said property by the Owner."

13. Reliance was also placed by Mr. Saluja, the learned counsel for

the appellant on the decisions rendered by this Court in National

Small Industries Corporation Ltd. vs. Tenmand Engineers and

Ors. 1998 1 AD (DELHI) 526 and The National Small Industries

Corporation Ltd. vs. M/s. Globe Circuits (India) 2005 VI AD

(DELHI) 782 to contend that apart from the arrears of installments of

hire rent and interest on the overdue payments, the appellant was

entitled to a decree for the recovery of possession of the machines

hired and in the event of the failure of the respondents to give re-

possession of the hired machines to the appellant in a sound

condition to a decree in the sum of ` 2,58,674/-, being the residual

value of the said hired machines, against the respondents with

pendente lite and future interest @ 15% per annum, which was the

contractual rate of interest.

14. Indubitably, I find from the judgment of the learned trial court

that the trial court has not at all dealt with the prayer for possession of

the machines by the appellant and in the alternative for payment of

the sum of ` 2,58,674/-, i.e. the value of the machines. Thus, in

terms of the agreement between the parties, the appellant must be

held entitled to the restoration of the hired machinery, the particulars

whereof are set out in paragraph 1 of the plaint, at serial no.1 (a) to

(e). In the event of the failure of the respondents to give re-

possession of the aforesaid machinery to the appellant, the appellant

shall be entitled to a decree in the sum of ` 2,58,674/- for the

residual value of the machines along with costs and interest @ 15%

per annum, which is the contractual rate of interest, from the date of

the institution of the suit till realization.

15. In the circumstances, it is directed that the respondent no.1

shall restore the machinery mentioned above to the appellant in sound

condition within one month from today and in case it is not possible

for the respondent no.1 to do so, the respondent no.1 and 2 shall be

jointly and severally liable to pay the residual value thereof in the

sum of ` 2,58,674/- with interest thereon @ 15% per annum.

Needless to say that the respondents no.1 and 2 shall also be jointly

and severally liable to pay a sum of ` 2,09,674/- with costs and

interest @ 15% per annum from the date of the filing of the suit till

the realization of the amount.

16. The appeal is allowed in the above terms.

REVA KHETRAPAL (JUDGE) November 29, 2010 sk