Mr D L Walton vs M/S Kirloskar Investments And ...
2023 Latest Caselaw 3015 Kant

                                      R.F.A No.989/2008

                           1


     IN THE HIGH COURT OF KARNATAKA AT BENGALURU

          DATED THIS THE 8TH DAY OF JUNE, 2023

                        PRESENT

       THE HON'BLE MR. JUSTICE P.S. DINESH KUMAR

                          AND

 THE HON'BLE MR. JUSTICE T.G. SHIVASHANKARE GOWDA

            R.F.A NO.989 OF 2008 (MON)

BETWEEN:

MR. D.L. WALTON
S/O MR. P.T. AMBROSE
AGED ABOUT 51 YEARS
R/A NO.32/2516, P.J.ANTONY ROAD
MAMANGALAM, PALARIVATTOM P.O.
COCHIN-682 025                             ...APPELLANT

(BY SHRI. C.M. NAGABUSHANA, ADVOCATE)

AND:

1.     M/S. KIRLOSKAR INVESTMENTS
       AND FINANCE LTD.,
       REGD. OFFICE AT II FLOOR
       UNITY BUILDINGS, J.C. ROAD
       BANGALORE-560 002
       REP. BY ITS SENIOR MANAGER
       MR. SURESH NARAYAN

2.     MAYURA SECURITIES LTD.,
       5TH FLOOR, A.P. ARCADE
       (SINGAPORE PLAZA), 333
       CROSS CUT ROAD, GANDHIPURAM
       COIMBATORE-641 012
       NOW AT NEW COCHIN
       DEVASWOM BUILDING
       KARUNAKARAN NAMBIAR ROAD
       ROUND NORTH
       THRISSUR-680 020
       BY ITS MANAGING DIRECTOR
                                  R.F.A No.989/2008

                         2


3.   C.P. RADHAKRISHNAN
     S/O LATE PADMANABHA MENON
     AGED ABOUT 54 YEARS
     XLI/131, 'MENONS'
     GOVT. PRESS ROAD
     COCHIN-682 011

4.   P.S. JOSEPH
     S/O P.J. SEBASTIAN
     AGED ABOUT 58 YEARS
     XLI/1232, PATHIKULANGARA
     CHITTOR ROAD
     COCHIN-682 018

5.   SIBY THOMAS
     S/O K.J. THOMAS
     AGED ABOUT 49 YEARS
     KADANTHOTTU HOUSE
     PERUNNA EAST, CHANGANACHERRY
     KERALA-686 102

6.   SIBY MATHEW
     S/O LATE MATHEW AUGUSTINE
     AGED ABOUT 50 YEARS
     CHERUKARA HOUSE
     NEAR BOAT JETTY
     CHANGANACHERRY
     KOTTAYAM
     KERALA-686 102

7.   BIJU ABRAHAM
     S/O P.J. ABRAHAM
     AGED ABOUT 45 YEARS
     IV/310, MARKET ROAD
     N.PARUR, KERALA-679 312

8.   P.S. PAUL
     S/O P.J. SEBASTIAN
     AGED ABOUT 49 YEARS
     XLI/1232, PATHIKULANGARA
     CHITTOR ROAD
     COCHIN-682 018
                                       R.F.A No.989/2008

                             3


9.     COCHIN STOCK EXCHANGE
       ERNAKULAM, KERALA
       BY ITS OFFICIATING SECRETARY
       VEEKSHESHAM ROAD, KALOOR
       COCHIN-682 011

10.    SECURITY EXCHANGE BOARD OF INDIA
       (SEBI) BY ITS SECRETARY
       NEW DELHI-110 001

11.    UNION OF INDIA
       MINISTRY OF FINANCE
       BY ITS SECRETARY
       NEW DELHI-110 001

12.    DEVASWOM BOARD
       DEVASWOM BUILDING
       KARUNAKARAN NAMBIAR ROAD
       ROUND NORTH, THRISSUR-680 020
       BY ITS SECRETARY                  ...RESPONDENTS

(BY SHRI. K.S. MAHADEVAN, ADVOCATE FOR
    MS. REVATHY ADINATH NARDE, ADVOCATE FOR R1)

      NOTICE TO R2 TO R4 & R7 ARE DISPENSED
      WITH VIDE ORDER DATED 18.02.2016;

      NOTICE TO R5, R8, R9 TO R12 ARE DISPENSED
      WITH VIDE ORDER DATED 08.06.2015;

      VIDE ORDER DATED 22.02.2021 SERVICE OF
      NOTICE TO R6 IS HELD SUFFICIENT BY WAY
      OF PAPER PUBLICATION

     THIS RFA IS FILED UNDER SECTION 96 OF CPC,
AGAINST THE JUDGEMENT AND DECREE DATED 20.03.2008
PASSED IN O.S.NO.5818/1994 ON THE FILE OF XXX
ADDITIONAL CITY CIVIL JUDGE, BANGALORE, DECREEING
THE SUIT FOR RECOVER OF MONEY.


      THIS RFA, HAVING BEEN HEARD AND RESERVED FOR
JUDGMENT     ON    02.06.2023   COMING    ON   FOR
PRONOUNCEMENT       OF    JUDGMENT,    THIS   DAY,
P.S. DINESH KUMAR, J., PRONOUNCED THE FOLLOWING:-
                                          R.F.A No.989/2008

                               4


                       JUDGMENT

This appeal by the second defendant is directed

against the judgment and decree dated March 20,

2008 in O.S. No. 5818/1994 passed by XXX Addl.

City Civil Judge, Bangalore.

2. Brief facts of the case are, M/s. Kirloskar

Investment and Finance Ltd., has brought the

instant suit against Mayura Securities Ltd., its

Directors and others for recovery of Rs.39,85,084/-.

Suit has been decreed directing defendants No. 1 to

4, 6 & 7 to pay the said sum with interest at 12%

p.a. Feeling aggrieved, second defendant has filed

this appeal.

3. We have heard Prof. C.M. Nagabhushan,

learned Advocate for the appellant - second

defendant and Shri. K.S. Mahadevan, learned

Advocate for the first respondent - plaintiff.

R.F.A No.989/2008

4. For the sake of convenience, parties shall be

referred as per their ranking in the Trial Court.

5. Plaintiff's case is, first defendant had sought

financial assistance of Rs.35 Lakhs for purchase of

Computer accessories, Telephone Network etc.,

under the Hire Purchase Scheme. Plaintiff advanced

the said amount to the first defendant. Defendants

No.2 to 8 were the Directors of the Company. In

addition to the first defendant executing necessary

documents, the second defendant has also

executed a guarantee in favour of first defendant to

repay the loan.

6. Defendants resisted the suit by filing written

statement. Second defendant has also filed his

written statement contending inter alia that the Hire

Purchase Agreement was executed by third

defendant C.P. Radha Krishnan. Under the Articles

of Association, the Managing Directors of the R.F.A No.989/2008

Company is authorized to execute the agreement

on behalf of the Company. No decision was taken

by the Board of Directors nor any resolution passed

authorizing C.P. Radha Krishnan to execute the

documents.

7. Based on the pleadings, Trial Court has

framed following eight issues and one additional

issue:

" 1. Whether the plaintiff proves that a sum of Rs.35,00,000/- was lent under a hire purchase agreement to the 1st defendant company on 29-3-1994?

2. Whether the plaintiff proves that the 1st defendant company is a Partnership for all practical purposes being a closely knit company?

3. Whether the plaintiff proves that the defendants are liable to pay Rs.34,85,084/- jointly and severally to the plaintiff?

4. Whether the defendant No.5 and 6 proves that there is no privity of contract with the plaintiff company?

R.F.A No.989/2008

5. Whether the 5th defendant proves that he ceased to be a Director of the company by retiring in August 1993?

6. Whether the defendant No.5 and 6 proves that they are not personally liable for any debts when the 1st defendant company is a public limited company?

7. Whether there is any cause of action against defendant No.9?

8. To what relief and order the parties are entitled for?

Additional Issue:-

1. Whether the defendant No.2 proves that this Court has no territorial jurisdiction to try this suit? "

8. On behalf of the plaintiff, one witness was

examined as P.W.1 and Exs. P1 to P23 marked. On

behalf of defendants, three witnesses were

examined as D.W.1, D.W.2 and D.W.3 and Exs. D1

to D4 marked. Answering issues No.1, 3, 4, 5, 6 in R.F.A No.989/2008

affirmative, 2 & 7 in the negative, the learned Trial

Judge decreed the suit.

9. Prof. Nagabhushana, assailing the judgment

and decree urged following grounds:

 the borrower is first defendant. It is Public

Limited Company. Therefore, the Company

alone is liable for repayment;

 third defendant C.P. Radhakrishnan, who was

also a Director of the Company has played

fraud on the Company and its Directors by

availing the loan for his benefit;

 P.W.1 has stated in his evidence that the

demand draft was given to the third

defendant. P.W.1 has not been able to

establish in whose account the amount was

realized. He has also admitted that he does

not know about the transaction;

 the plaintiff has not produced the invoices.

R.F.A No.989/2008

10. In substance, appellants' case is, the loan

was availed by the first defendant Public Limited

Company. Loan Documents were signed by

Shri. Radhakrishnan, who was not the Managing

Director of the Company. Plaintiff has not proved in

whose account the money was realized. Therefore,

appellant is not liable to discharge Company's debt

and hence, not bound by the decree.

11. Arguing in support of the judgment and

decree, Shri. Mahadevan for plaintiff submitted

that:

 appellant is one of the Directors of the

Company;

 in addition to the documents executed for

and on behalf of the Company, appellant

has given his personal guarantee as per

Ex.P19;

R.F.A No.989/2008

 appellant was examined as D.W.2. He has

admitted that he has signed the guarantee.

The learned Trial Judge has considered this

aspect and rightly decreed the suit.

12. In the light of the material on record and the

contentions urged on behalf of the appellant and

the first respondent, the point that arises for

consideration is, whether the impugned judgment

and decree call for any interference?

13. Undisputed facts of the case are, appellant

was one of the Directors of Mayura Securities Ltd.,

Ex.P1 clearly disclose that a loan of Rs.35 Lakhs

was availed by first defendant - Company.

14. Ex.P19 is the guarantee executed by the

appellant. The relevant portion reads as follows:

R.F.A No.989/2008

" From:

D.L. Walton DIRECTOR MAYURA SECURITIES LTD 333, CROSS CUT ROAD GANDHIPURAM, COIMBATORE-12.

To

Kirloskar Investments and Finance Ltd Unity Buildings, "C" Block II Floor, J.C.Road Bangalore - 560 002.

In consideration of your having this day disbursed by way of Hire Purchase finance a sum of Rs.30,000,00/- (Rupees Thirty Lakhs only) under Hire Purchase Agreement dated 29.03.1994 to MAYURA SECURITIES LTD. (Principal hirer/ debtor) at my request. I, D.L. WALTON aged about 36 years s/o Mr. P.T. Ambrose residing at H.No: 1/662, Kathleen Hall Queens street Fort Cochin, Cochin-682001 do here by undertake to be and shall during subsistence and at all time hereafter until repayment of all the installments of hire money and Finance Charges remain responsible and hereby guarantee the due and punctual payment by the user of all and other sums payable by the user under the Hire Purchase Agreement and due performance and observance by the User of all and singular. several stipulations and conditions contained therein and do further agree to pay to the company all sums which may from time to time become due and owing by the user under the said Agreement.

R.F.A No.989/2008

I agree that this Guarantee shall not be avoided, released or affected by the Company, giving time to the user for payment of any sums or granting the user any indulgence by the Company and user making any variations in the terms of the said agreement all of which things the Company shall be at hereby to do so without our consent or permission and I further agree that this guarantee shall not be avoided, released or affected by the Company giving time to the User either before or after any termination of the said agreement and whether before or subsequent to the Company exercising the right to re-possess the equipment. I am the Principal Debtor jointly with the User and, I am aware that I am not entitled to any of the rights conferred to sureties by sections 133, 134, 135, 139 & 141 or any other relevant provisions of the contract act.

I hereby guarantee the payment of Rs. 4692500/- amount financed and Finance Charges in case of default by the principal hirer/debtor together with interest thereon @ 36% p.a. for such delayed payments. I further guarantee the repayment of amount paid by the Company towards insurance of the equipment under the Hire Purchase Agreement and other charges incurred by the company for keeping the equipment in proper working condition. This guarantee shall not be affected by or granted any time or any other concession or indulgence or rescheduling the R.F.A No.989/2008

installments of hire under the said agreement or by insolvency of the hirer.

I undertake to pay entire amount due under the Guarantee, on demand in writing by the Company, by registered post to either the address mentioned above or at the place of business of the firm, merely on demand upon termination and even before the expiry of the agreement, due to default in payment of installments of hire, overdue finance charges and other incidental charges.

It is agreed that only in the event of the said agreement completed by the User, I shall be entitled to obtain, on demand from the Company a complete discharge of all my obligations under the terms and conditions of this Guarantee."

15. We may record that appellant has filled up

the blanks in his own hand and signed the

guarantee.

16. He has stated in his examination-in-chief

dated 05.03.1998 that he is not in the habit of

putting signatures on blank forms. In his cross-

examination dated 28.02.2006, he has stated thus:

R.F.A No.989/2008

" As the director I signed on the guarantee form as a guarantor. I have signed in the guarantor form of Ex.P1. I now see Ex.p.19 personal guarantee and identify my signature at Ex.P.19(a). I have not produced any document to show that I have retired from the company in the 1st week of March 1994. "

17. In view of the undisputed facts of the

case and the admissions made by appellant that he

was one of the Directors of the Company and

executed a personal guarantee to discharge the

debt, this appeal must fail. Accordingly, the point

for consideration is answered in the negative.

Hence, the appeal is dismissed with no order as to

costs.

Sd/-

JUDGE

Sd/-

JUDGE

SPS