Kerala High Court
S.Chandradas vs Choolayil Finance & Investment ... on 30 September, 2023
IN THE HIGH COURT OF KERALA AT ERNAKULAM
PRESENT
THE HONOURABLE MRS. JUSTICE C.S. SUDHA
SATURDAY, THE 30TH DAY OF SEPTEMBER 2023 / 8TH ASWINA, 1945
RFA NO. 246 OF 2004
AGAINST THE ORDER/JUDGMENT IN OS 113/1999 OF PRINCIPAL SUB
COURT, ATTINGAL
APPELLANTS/PLAINTIFF/PETITIONER IN I.A.NO.279/2004:
1 S.CHANDRADAS, S/O. LATE SRI SANKARAN,
BUSINESSMAN, SUKHAGIRI BUNGLOW, SREENIVASAPURAM,,
VARKALA VILLAGE.(DIED)
2 *ADDL.A2.GIRIJA DAMODARAN,AGED 63 YEARS,
W/O.LATE S CHANDRADAS, SUKHAGIRI BUNGLOW,
SREENIVASAPURAM, VARKALA VILLAGE
3 *ADDL.A3.KAVITHA C.,
AGED 38 YEARS,
D/O..LATE S CHANDRADAS, SUKHAGIRI BUNGLOW,
SREENIVASAPURAM, VARKALA VILLAGE.
4 *ADDL.A4.BINU C.,
AGED 37 YEARS,
S/O.LATE S CHANDRADAS, SUKHAGIRI BUNGLOW,
SREENIVASAPURAM, VARKALA VILLAGE.
*LEGAL HEIRS OF DECEASED SOLE APPELLANT ARE
IMPLEADED AS ADDITIONAL A2 TO A4 VIDE ORDER
DATED 20/11/2019 IN IA 524/2017.
*ADDITIONAL A2 IS APPOINTED AS THE NEXT FRIEND
OF ADDITIONAL A3 VIDE ORDER DATED 20/11/2019 IN
IA 526/2017.
BY ADVS.
SRI.GEORGE VARGHESE(PERUMPALLIKUTTIYIL)
SRI.A.R.DILEEP
SRI.MANU SEBASTIAN, SRI.NIMESH THOMAS
RESPONDENTS/DEFENDANTS IN I.A.NO.279/2004:
1 CHOOLAYIL FINANCE & INVESTMENT CO.PVTLTD
PVT.LTD., HAVING ITS REGISTERED OFFICE AT,
CHOOLAYIL, AYROOR P.O., VARKALA,, REPRESENTED BY
ITS DIRECTORS RESPONDENTS 2 AND 3
2 K.RAJENDRAN NAIR SO. SRI.KRISHNA PILLAI
BUSINESSMAN, DIRECTOR, CHOOLAYIL FINANCE AND,
INVESTMENT COMPANY PVT.LTD., RESIDING AT,
MULAKKAL VEEDU, AYIROOR VARKALA.
3 A.SHEELA DEVI WO. K.RAJENDRAN NAIR
DIRECTOR CHOOLAYIL FINANCE AND INVESTMENT,
COMPANY PVT. LTD., RESIDING AT MULAKKAL VEEDU,
FROM RAMAVILASOM AYIROOR, VARKALA.
BY ADV SRI.P.R.VENKATESH
THIS REGULAR FIRST APPEAL HAVING COME UP FOR
ADMISSION ON 30.09.2023, THE COURT ON THE SAME DAY
DELIVERED THE FOLLOWING:
R.F.A.No.246 of 2004
2
C.S.SUDHA, J.
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R.F.A.No. 246 of 2004
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Dated this the 30th day of September, 2023
JUDGMENT
This appeal under Order XLI Rule 1 C.P.C. has been filed by the
plaintiff in O.S.No.113/1999 on the file of the Subordinate Judge's Court,
Attingal, against the judgment and decree dated 05/03/2004 by which the
suit has been dismissed. The respondents herein are the defendants in the
suit. During the pendency of this appeal, the sole appellant/ plaintiff passed
away and hence his legal representatives have been impleaded as additional
appellants 2 to 4 vide order dated 20/11/2019 in I.A.No.524/2017. The
additional second appellant has been appointed as the next friend of the
additional third appellant vide order dated 20/11/2019 in I.A.No.526/2017.
The parties will be referred to as described in the suit.
2. According to the plaintiff, the first defendant (D1) is a Private
Limited Company incorporated under the Companies Act, 1956, engaged in
banking business, having its registered office at Choolayil, Ayroor, Varkala
R.F.A.No.246 of 2004
represented by its Directors, namely, defendants 2(D2) and 3(D3). D2 is the
husband of D3. They are the Directors of D1 Company doing banking
business from the date of the registration of the Company. On 31/12/1997,
D2 received a sum of ₹2,00,000/- from the plaintiff as fixed deposit with the
D1 Company. On the same day, Ext.A1 fixed deposit receipt was issued on
behalf of D1 Company signed by D2 along with the Manager and
Accountant of the Company. As per Ext.A1, the deposit for a period of one
year would carry interest at the rate of 15% per annum. The maturity date of
the deposit was 01/01/1999. Interest was paid from 31/01/1998 till
31/08/1998. Thereafter, there has been no payment of interest. When the
fixed deposit matured, the plaintiff approached D2 and D3 and demanded
the repayment of the amount with interest. However, the defendants evaded
payment on one pretext or the other. Thereafter, the plaintiff has come to
know that D2 and D3 have closed down D1 company and have absconded.
Hence the suit for recovery of a sum of ₹2,33,750/- with interest on the
principal amount of ₹2,00,000/- at the rate of 15% per annum from the date
of suit till realisation and costs from the defendants and their assets.
3. D1 and D2 are ex parte.
3.1. D3 entered appearance and filed written statement, in which
R.F.A.No.246 of 2004
she contended that she had been made a Director of the D1 Company by her
husband/D2, without her knowledge or consent. She is unaware of the
transaction referred to in the plaint. From January 1998, she is suffering
from mental disorder and is under treatment for the same. D2 has deserted
D3 and her children from the time D3 has been afflicted with mental illness.
D3 had resigned as Director of the Company and in her place one
S.P.Rajendran Nair has been inducted as a Director w.e.f. 05/04/1998, which
has been approved by the Registrar of Companies. D3 is not liable for any
debt incurred by defendants 1 and 2. She is an unnecessary party in the suit.
The plaintiff can realise the plaint amount if he is lawfully entitled to the
same from defendants 1 and 2 and S.P. Rajendran Nair, the Director, who
has been inducted in the place of D3 and from their assets.
4. Necessary issues were framed by the trial court. PW1 to PW3
were examined and Exts.A1 to A4 were marked on the side of the plaintiff.
DW1 was examined and Ext.B1 was marked on the side of D3. The trial
court on an appreciation of the oral and documentary evidence and after
hearing both sides, passed the impugned judgment, dismissing the suit.
Aggrieved, the plaintiff has come up in appeal.
R.F.A.No.246 of 2004
5. The only point that arises for consideration in this appeal is
whether there is any infirmity in the findings of the court below calling for
an interference by this Court.
6. Heard both sides.
7. As per the plaint, an amount of ₹2,00,000/- was received by D2
on 31/12/1997 from the plaintiff as fixed deposit in the name of D1
Company. Ext.A1 is the fixed deposit receipt evidencing the same. The
allegation that this amount has been received by D2 in the name of D1
Company and that Ext.A1 had been issued, is not denied by D3, who is
none other than the wife of D2 in the written statement filed by her. On the
other hand, she only pleads ignorance of the said transaction. Defendants 1
and 2 are ex parte in this suit. Therefore, the case of the plaintiff that D2
had received an amount of ₹2,00,000/- on 31/12/1997 as fixed deposit in the
name of D1 Company and had issued Ext.A1 receipt stands unchallenged or
undisputed. Therefore, the case of the plaintiff that he did deposit the said
amount with D1 Company stands established.
8. Now the question is whether D3 is liable for the amount due to
the plaintiff. Ext.A1 fixed deposit receipt is seen signed by D2 as well as the
Manager and Accountant of D1 Company. Admittedly, the same is not
R.F.A.No.246 of 2004
signed by D3. Ext.A4, the Search Report and Ext.B1, Form No.32 under the
Companies Act, 1956 showing the particulars of appointment of Directors
and Manger and changes among them in the D1 Company, show that D3
resigned from the Directorship of the Company on 06/04/1998 and in her
place one S.P.Rajendran Nair has been appointed as Director. Therefore, the
fact that D3 was a Director of D1 company till 06/04/1998 also stands
established. D3 takes up a contention that D2, her husband, inducted her as
a Director of the Company without her knowledge or consent. She also
contends that from January 1998, she has been suffering from mental illness
and has been under treatment for the same. D3 never entered the witness
box. On the other hand, she examined her brother DW1 on her behalf
taking up a plea that she is mentally unsound. However, absolutely no
evidence has been produced to substantiate the allegation that D3 has been
mentally unsound from January 1998. It is quite interesting to note that
though D3 has taken up such a contention, she is seen to have filed
I.A.No.1894/2001 for setting aside the ex parte decree passed against D1
Company. Initially, an ex parte decree had been passed by the trial court on
03/01/2003. D3 filed I.A.No.1894/2001 for setting aside the ex parte
decree. The petition was dismissed by the trial court against which she filed
F.A.O.No.71/2003. This Court by order dated 03/09/2003 set aside the order
R.F.A.No.246 of 2004
of the trial court on condition that D3 pay a sum of ₹1,000/- towards costs
within a period of one month from the date of the order. The trial court was
directed to take back the suit to file on compliance of the said condition and
to dispose of the same at the earliest. Accordingly, the trial court took up
the matter, gave opportunity to D3 to file written statement, recorded
evidence and passed the impugned judgment. In the aforesaid proceedings,
D3 never had a case of mental disorder. She is seen to have prosecuted the
proceedings on her own without the appointment of a next friend. Further,
going by the version of DW1, he has no direct knowledge of the plaint
transaction and that he was deposing on the basis of the instructions of his
sister, D3. Therefore, it is clear that the defence of insanity taken up by D3
is just a ploy to avoid appearing before the court.
9. Be that as it may, Ext.A1 fixed deposit receipt is not signed by
D3. There is no case in the plaint that D3 had accompanied D2 to the house
of the plaintiff and had persuaded the plaintiff to part with the amount and
deposit the same in the name of D1 Company. There is no pleadings or
evidence to show that D3 was in charge and responsible for the conduct of
the business of the Company. As per Section 291 of the Companies Act,
1956, the Board of Directors shall be entitled to exercise all such powers
R.F.A.No.246 of 2004
and to do all such acts and things, as the Company is authorised to exercise
and do. A Company though a legal entity can act only through its Board of
Directors. The settled position is that a Managing Director is prima facie in
charge and responsible for the Company's business and affairs and can be
prosecuted for offences of the Company. But in so far as the other Directors
are concerned, they can be prosecuted only if they were in charge of and
responsible for the conduct of the business of the Company. (National
Small Industries Corpn. Ltd. v. Harmeet Singh Paintal, (2010) 3 SCC
330; M.A.A. Annamalai v. State of Karnataka, (2010) 8 SCC 524.)
10. Further, even according to the plaintiff, the cause of action
arose on 31/12/1997, the date of the fixed deposit; on 01/01/1999, the date
of issuance of Ext.A1 receipt and on 05/01/1999, the last date of demand for
repayment of the amount made to D3 in person. On the date of maturity of
Ext.A1, that is, on 01/01/1999, D3 was admittedly not a Director of the
Company. In such circumstances, when the cause of action arose, D3 not
being a Director of the Company, cannot be held liable for the amount
stated in Ext.A1.
11. Though D3 cannot be held liable, D1 and D2 certainly ought to
have been made liable. The trial court was labouring under the wrong
R.F.A.No.246 of 2004
impression that the ex parte decree passed on 03/01/2003 still subsists
against D1 and D2 as only D3 had moved the court for setting aside the ex
parte decree. I.A.No.1894/2001 filed by D3 for setting aside the ex parte
decree passed on 16/02/2001 was dismissed by the trial court by order dated
24/03/2003. It was against the said order, F.A.O.No.71/2003 was filed.
This Court as per order dated 03/09/2003 set aside the order in
I.A.No.1894/2001 and the trial court was directed to take back the suit to
file and dispose of the same at the earliest. Therefore, the statement of the
learned trial judge in paragraph 7 of the impugned judgment that an ex
parte decree passed against defendants 1 and 2 on 03/01/2003 is still in
force, is apparently incorrect. In such circumstances, a decree ought to have
been passed against defendants 1 and 2. Even D3 in her written statement
states that the plaintiff can get the plaint amount from D1 and D2, if he is
legally entitled to the same. As stated earlier, the case of the plaintiff that an
amount of ₹2,00,000/- was received by D2 on 31/12/1997 and had issued
Ext.A1 receipt stands unchallenged. That being the position, the plaintiff is
certainly entitled to get a decree as against defendants 1 and 2.
In the result, the appeal is partly allowed and the decree and judgment
of the court below is set aside. The suit is decreed and the plaintiff is
R.F.A.No.246 of 2004
entitled to realise an amount of ₹2,33,750/- with interest on the principal
amount of ₹2,00,000/- with interest at the rate of 15% per annum from the
date of suit till decree and thereafter at the rate of 6% per annum from the
date of decree till realisation and cost from defendants 1 and 2 and their
assets. Suit as against D3 is dismissed.
Sd/-
C.S.SUDHA
JUDGE
ak
R.F.A.No.246 of 2004
APPENDIX OF R.F.A.No.246 of 2004
RESPONDENTS' ANNEXURES:-
ANNEXURE 1: CERTIFIED TRUE COPY OF THE REPORT OF THE
AMIN EFFECTNG ATTACHMENT WITH ORDER TO
CALL FOR SECURITY AND THE SCHEDULE OF
PROPERTY.
