National Small Industries Corp. ... vs Siddhartha Pharmachem And Anr.
2011 Latest Caselaw 1039 Del

         THE HIGH COURT OF DELHI AT NEW DELHI

%                        Judgment Pronounced on: 22.02.2011

+           CS(OS) No. 695/2001

NATIONAL SMALL INDUSTRIES CORP. LTD.
                                  .....Plaintiff

                               - versus -

SIDDHARTHA PHARMACHEM AND ANR.
                                                   .....Defendant

Advocates who appeared in this case:
For the Plaintiff: Mr. Mohit Chaudhary & Mr. Dheeraj Gupta
For the Defendant: None.

CORAM:-
HON'BLE MR JUSTICE V.K. JAIN

1. Whether Reporters of local papers may
   be allowed to see the judgment?                             No

2. To be referred to the Reporter or not?                      No

3. Whether the judgment should be reported                     No
   in Digest?

V.K. JAIN, J. (ORAL)

1. This is a suit for recovery of 89,04,274.95. The

plaintiff is a government company registered under

Companies Act, 1956. Defendant No.1 which is also a

company incorporated under Companies Act, 1956, through

defendant No.2, who is its director, approached the plaintiff

company on 7th May 1997, seeking financial assistance

under plaintiff's Integrated Marketing Support Programme.

Pursuant to negotiations between the parties, they entered

into an agreement dated 29th August 1997, whereby plaintiff

agreed to finance/discount the bills drawn by various small

scale industrial units on defendant No.1, to the extent of

Rs.60 Lacs. Defendant No.1 pledged its 30 Lacs shares in

favour of the plaintiff. Defendant No.2 executed a Deed of

Guarantee in favour of the plaintiff company and also gave

an undertaking not to sell, mortgage or alienate or part with

possession of properties comprising in Khasra No. 225, 292,

297, 299 and 300, Lawn Road, Ghaziabad and Flat No.

109H-1817, Sector-7, Rohini till the discharge of its

liabilities. Defendant No.3 also executed a Deed of

Guarantee in favour of the plaintiff company and also

pledged the shares which it held in defendant No.1

company. The plaintiff claims to have discounted four bills

and the financial assistance extended by it under the

aforesaid scheme was to the tune of Rs.50,76,240/-. As per

the agreement between the parties, the plaintiff was entitled

to interest at the rate of 19% per annum along with 3%

interest tax. Defendant No.1 was also liable to pay service

charges to the plaintiff at the rate of 0.5% per month. The

bills discounted by the plaintiff were to mature on 90 th day

from the date of issue. It is alleged that defendant No.1

failed to discharge its liability which as on 12 th October

2000 accumulated to Rs.89,04,274.95. The plaintiff has

claimed the aforesaid amount from the defendant along with

interest thereon at the rate of 26% per annum.

The defendants were proceeded ex parte vide order

dated 8th May 2006.

2. The plaintiff has filed affidavit of its Deputy

General Manager, Mr. K.L. Shah by way of ex parte

evidence. In his affidavit, Mr. Shah has supported on oath

the case setup in the plaint and has proved the documents

relied upon by the plaintiff. He has stated that defendant

No.1, through defendant No.2 who is its Director,

approached the plaintiff company on 7th May 1997, seeking

financial assistance under Integrated Marketing Support

Programme scheme of the plaintiff vide application Ex.PW-

1/3 and also submitted a request letter dated 7th May 1997

seeking financial assistance which is Ex.PW-1/3A. The

plaintiff sanctioned a limit of Rs.60 Lacs to defendant No.1

vide letter dated 26th August 1997 (Ex.PW-1/4). An

agreement dated 29th August 1997 was accordingly

executed. In terms of the agreement defendant No.1

pledged 30 lacs shares in favour of the plaintiff company.

On the same day a Deed of Guarantee Ex.PW-1/7 was

executed by late Sh. P.K. Jain, who was impleaded as

defendant No.2 in this suit and who died during the

pendency of this suit. Another Deed of Guarantee was

executed in favour of the plaintiff by defendant No.3, which

is Ex.PW-1/8. An agreement to pledge shares was also

executed by defendant No.3 in favour of the plaintiff and the

same is Ex.PW-1/9.

3. Mr. K.L. Shah has stated that four bills Ex.PW-

1/10 to Ex.PW-1/13 were discounted by the plaintiff, the

first bill on 16th July 1997, the second bill on 18th July 1997

and the third and fourth bill on 1st November 1997 and the

bills were to mature on 14th October 1997, 16th October

1997 and 28th January 1998, respetively. Defendant No.1,

however, failed to discharge its liability which according to

the witness, stood at Rs.89,04,274.95 on 12th October 2000.

He further stated that cheques Ex.PW-1/16A to Ex.PW-

16/C were issued by defendant No.1, which when presented

to the bank, were dishonoured.

4. A perusal of the letter Ex.PW-1/3 would show that

the plaintiff company through its Director late Sh. P.K. Jain

sought to avail the benefit of Raw Material Assistance

Scheme, Bills Financing Scheme and Working Capital

Assistance/Export Development Assistance from the

plaintiff company and submitted the requisite papers in this

regard. This was followed by a letter dated 7 th May 1997

(Ex.PW-1/3A) stating therein that the plaintiff belonged to

Siddhartha Group which had a group turnover exceeding

Rs.100 Crore and was pharmaceutical manufacturer.

Defendant No.1 submitted an application for seeking

financial assistance under NSIC Financial Services and

submitted requisite documents for the purpose. A perusal

of the sanction letter dated 26th August 1997, which is

Ex.PW-1/4 would show that a limit of Rs.6 Lacs was

sanctioned to defendant No.1 under Bills Financing Scheme

of the plaintiff against security of 30 Lacs fully paid shares

of Rs.10/- each, subject to furnishing of documents

including personal guarantee of Managing Director. A

perusal of the agreement Ex.PW-1/6 executed by defendant

No.1 Siddhartha Pharachem Ltd. in favour of the plaintiff

company would show that the defendant accepted

financial/discounted bill facility to the extent of Rs.60 Lacs

from the plaintiff company. The amount was to be paid by

discounting/financing bills and overdue payment was to

carry interest at the rate of 19% per annum with monthly

rests. This document also shows that 30Lac shares of

defendant No.1 company were pledged with the plaintiff

company. Ex.PW-1/7 is the Deed of Guarantee executed by

late Sh.P.K. Jain in favour of the plaintiff company on 29th

August 1997. Ex.PW-1/10 to Ex.PW-1/13 are the Bills of

Exchange which were submitted by defendant No.1 to the

plaintiff and were discounted. Ex.PW-1/14 is the letter

from Saran Agencies Pvt. Ltd to the plaintiff acknowledging

receipt of Rs.17,52,897/- towards supplies made by that

company to defendant No.1 company against its bill No.32

dated 16th July 1997. Ex.PW-1/15 dated 26th August 1997

was written by Ploy Pack India to the plaintiff company

certifying that they had sold goods worth Rs.22,46,4000/-

to defendant No.1 and had drawn/endorsed the bill in

favour of NSIC and had further authorized defendant No.1

to pledge the aforesaid bill to the plaintiff for discounting.

Ex.PW-1/16A, Ex.PW-1/16B and Ex.PW-1/16C are the

copies of three cheques which defendant No.1 had issued to

the plaintiff company. The cheques when presented to the

bank were dishonoured with the endorsement "insufficient

funds" as is evident from the bank memo annexed to the

cheques. Ex.PW-1/20 is the chart showing the amount due

to the plaintiff. A perusal of this chart would show that

interest has been charged by the plaintiff company at the

rate of 19.57% per annum.

The amount claimed by the plaintiff comprises

Rs.5,076,240, Rs.2,919,366.15 towards interest and

Rs.908,668.80 towards service charges making a total of

Rs.8,904,274.95. A perusal of the sanction letter Ex.PW-

1/4would show that the interest was to be charged at the

rate of 19% per annum besides interest tax as applicable

from time to time. The borrower was also liable to pay

service charges at the rate of 0.5% for first 30 days and at

the rate of 0.25% for every block of 15 days. The plaintiff

has thus fully proved its case against defendants No.1 and

2. Defendant No.1 company is liable to pay a sum of

Rs.5,076,240/- as principal sum, Rs.2,919,366.15 towards

interest and a sum of Rs.908,668.80 towards service

charges. Since the first bill becomes due on 14 th October

1997, the suit having been filed on 11th October 2000 is well

within limitation.

5. As far as defendant No.2 is concerned he having

stood as guarantor for defendant No.1, is also liable to pay

the aforesaid amount to the plaintiff company.

However, no document has been filed by the

plaintiff company to prove that defendant No.3 also had

stood as guarantor for repayment of the loan taken by

defendant No.1 by way of bill discounting facility. A perusal

of the index filed by the plaintiff company along with the

suit would show that though the original Deed of Guarantee

of defendant No.3 Vishunpriya Finlease Pvt. Ltd was

included in the index, the document was not actually filed.

The first document as per index is the original undertaking

of Sh. P.K. Jain dated 29th August 1997 which had been

given at serial No.2. Third document as per the index was

original Deed of Guarantee by Sh. P.K. Jain, which was on

pages 2 to 5. The fifth document as per the index was the

original of Bill of Exchange, which was given pages No.6 to

9. Other documents were given pages No.10 to 73. Had the

plaintiff company filed the original Deed of Guarantee

executed by defendant No.3 in its favour, some page

number would have to given to that document. The learned

counsel for the plaintiff has gone through the file, but has

not been able to locate the document on it. Though the

document was shown as Ex.PW-1/8 in the affidavit of Mr.

K.L. Shah, no document Ex.PW-1/8 is on record. In the

absence of any documentary evidence, I have no option but

to hold that the plaintiff has not been able to prove that

defendant No.3 had also stood as guarantor for the loan

facility availed by defendant No.1.

ORDER

For the reasons given in the preceding paragraphs,

a decree for recovery of Rs 8904274.95 with interest and

pendente lite and future interest at the rate of 12% per

annum is passed in favour of the plaintiff and against

defendants No.1 and 2 only. The suit is dismissed against

defendant No.3 without any order as to cost.

(V.K. JAIN) JUDGE FEBRUARY 22, 2011 Ag