Jindal Menthol India Ltd. vs Mr. J.C.Khandelwal & Others
2011 Latest Caselaw 1054 Del

         THE HIGH COURT OF DELHI AT NEW DELHI

%                    Judgment Pronounced on:22.02.2011

+           CS(OS) No.2352/1997

JINDAL MENTHOL INDIA LTD.                       .....Plaintiff

                            - versus -

MR. J.C.KHANDELWAL & OTHERS                     ....Defendants

Advocates who appeared in this case:
For the Plaintiff:      Mr.    Nishant    Dutta               and
                        Ms.Ruchita Dutta, Advs.
For the Defendants:     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 filed under Order XXXVII of the Code

of Civil Procedure for recovery of Rs.42,15,138.22. It is

alleged in the plaint that the plaintiff company had

advanced an inter-corporate deposit of Rs.50 lakhs, for 90

days, to a Company PAN Asia Industries Limited vide two

agreements, both dated 16.1.1996. The deposit carried

interest rate of 28% per annum. The amount of interest for

90 days, the period of inter-corporate deposit, was deducted

at the time of disbursal. Defendants No.1 to 3 stood

guarantors for repayment of the deposit. Since there was

default in repayment of the deposit, the plaintiff served a

notice dated 15.9.1997 to the borrower as well as the

guarantors seeking repayment of the deposit. The deposit

was, however, not repaid either by the borrower or by the

guarantors. The plaintiff made a payment of Rs.14 lakhs in

various instalments between 10.6.1996 to 23.8.1997. The

plaintiff company also sold shares of Europlast India

Limited totalling 1,53,100 for a total amount of

Rs.10,47,415/-. The principal amount which remained

payable to the plaintiff comes to Rs.25,52,585/-. The

interest claimed by the plaintiff at the rate of 28% per

annum is 16,12,796.22. The plaintiff has also claimed

Rs.49,757/- towards expenses and other charges.

2. An application for leave to contest being IA

1807/1998 was filed by defendants seeking unconditional

leave to defend the suit. This was accompanied by IA

1808/1998 for condonation of delay in seeking leave to

contest. Before any order could be passed on the merits of

these applications, the defendants filed IA 2258/1999

seeking the stay of proceedings on the ground that the

principal borrower PAN Asia Industries Limited had been

registered under Sick Industrial Companies Act, 1985, and

the proceedings had been stayed vide order dated

13.5.1999. The proceedings were revived by the Court vide

order dated 22.5.2002. The plaintiff brought it to the notice

of the Court that BIFR, vide its order dated 15.1.1999, had

granted permission to the creditors who had filed the suit

for recovery of money, though it had directed that in case of

decree being passed against M/s. Pan Asia Industries

Limited, the decree holders were required to obtain the

consent of the Board for its execution. Since there was no

appearance on behalf of defendants No.1 to 3, IAs

1807/1998 & 1808/1998 filed by defendants were

dismissed in default on 14.1.2011.

3. Clause 17(c) of the Agreements dated 16.1.1996

reads as under:-

(c) The liability of the Guarantor's is joint and given several along with the liability of the Borrower as and coextensive with that of the Borrower as between the Company and Guarantor, they will be considered as principal debtor to the Company for all dues of the

Borrower."

4. Clause 17(e) of the Agreements reads as under:-

"The guarantor's obligation to pay hereunder shall arise on the notice being given by the Company irrespective of whether the borrower has been called upon to pay or proceeded against."

5. It would thus be seen that in this case, the liability

of guarantor is at par with that of the principal borrower

and therefore it arose when a notice was served on him

requiring him to pay the dues of the creditor.

6. Vide notice dated 15.9.1997 sent to the

defendants, the plaintiff referring to the guarantee furnished

by them and reminding that their liability was joint as well

as several and co-extensive with the liability of M/s. PAN

Asia Industries Limited, called them upon to pay the

amount of Rs.41,15,412/- within seven days of the receipt

of this notice. The principal borrower M/s. PAN Asia

Industries Limited sent a reply dated 6.10.1997 alleging

therein that the plaintiff had not sent accounts to them and

was demanding exorbitant interest. Defendant No.1 -

J.C.Khandelwal sent a reply dated 29.9.1997, denying his

liability to make any payment to the plaintiff and also

denied having given any personal guarantee whatsoever. He

also expressed surprise at the sale of the shares which had

been pledged with the plaintiff company. In its reply dated

30.9.1997, defendant No.3 - Blue Whale Trading P. Ltd.,

referring to the sale of the shares which had been pledged

with the plaintiff company, claimed that no details of the

sale has been furnished to them. Defendant No.3 also

denied its liability to make payment to the plaintiff and

sought details of the shares.

7. Considering the terms of the Agreements dated

16.1.1997, defendants No.1 to 3 are liable to pay the

amount which is due to the plaintiff under these

Agreements.

8. The learned counsel for the plaintiff states that the

amount of interest claimed by the plaintiff is based on the

aggregate interest of 31% per annum since there was

default in repayment of the inter-corporate deposit taken

from the plaintiff company. Since the application of the

defendants for leave to contest stands dismissed, the

plaintiff is entitled to recover the principal amount of

Rs.25,52,585/- as also the amount of interest from

defendants. In view of the provisions contained in Order

XXXVII Rule 1(2) of the Code of Civil Procedure, only the

principal sum and interest can be claimed in a suit under

Order XXXVII of the Code. Hence, the expenses amounting

to Rs.49,757/- cannot be claimed and the plaintiff

company, therefore, is not entitled to this amount.

9. For the reasons given in the preceding paragraphs,

the decree for recovery of Rs.40,65,655/- (principal amount

with interest) with proportionate costs and pendente lite and

future interest at the rate of 6% per annum is hereby

passed in favour of the plaintiff and against the defendants.

I am awarding pendent lite and future interest at

rather low 6% per annum considering the facts that the

interest for the pre-suit period appears to be very much on

higher side.

Decree sheet be drawn accordingly.

(V.K. JAIN) JUDGE FEBRUARY 22, 2011 'sn'