Madras High Court
M/S. Twaarsh Floritech Company vs Suresh Rowvey on 13 September, 2023
A.S.No. 515 of 2020
IN THE HIGH COURT OF JUDICATURE AT MADRAS
DATED: 13.09.2023
CORAM:
THE HON'BLE MRS.JUSTICE T.V.THAMILSELVI
A.S.No. 515 of 2020
and
C.M.P.No. 7036 of 2020
1.M/s. Twaarsh Floritech Company
Private Limited,
rep. By its Managing Director
Mr. Ramneek Singh
2. Mr. Rohan Shetty,
S/o. Mr.Umanath Shetty
3. Mr. Ramneek Singh,
S/o. Pannu Rajpal Singh
... Appellants
Vs.
Suresh Rowvey,
S/o. Late V.K.S. Rowvey .. Respondent
PRAYER : Appeal Suit filed under Sec.96 of Civil Procedure Code r/w
Order 41 Rule 1 of Civil Procedure Code, to set aside the judgment and
decree dated 16.12.2017 passed by the learned District Judge of Nilgiris at
Udhagamandalam in O.S.No.24 of 2014.
1/12
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A.S.No. 515 of 2020
For Appellants : Mr.M.Rajasekar
For Respondent : Mr.S.S.Rajesh
JUDGMENT
The appellants herein are the defendants in the suit in O.S.No. 24 of
2014 on the file of learned District Court, Nilgiris at Udhagamandalam.
Challenging the findings rendered by the trial judge directing them to pay
a sum of Rs.12,75,617/- with interest at the rate of 12% per annum with
cost to the plaintiff in the suit, the defendants preferred this appeal.
2. For the sake of convenience, the parties are referred as per
ranking in the suit.
3. According to plaintiff, the 1st defendant is the company dealing
with growing, cultivating and marketing of flowers, cut flowers etc. The
2nd defendant is one of the acting Directors of 1st defendant company and
the 3rd defendant is the Managing Director of the said company. The
plaintiff and the 2nd defendant are known each other for several years and
due to some financial problem, the 2 nd defendant requested the plaintiff for
funding aid. Agreeing the same, the plaintiff transferred a sum of
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A.S.No. 515 of 2020
Rs.3,00,000/- in favour of 1st defendant company on 15.11.2010 through
his NRI account and again during December 2010, another sum of
Rs.1,00,000/- and again in the year of 2011, an additional sum of
Rs.5,00,000/- have been transferred to the 1st defendant company. Totally,
a sum of Rs.9,00,000/- paid by him and the said payments were made to
the 1st defendant company at the instance of 2nd defendant, who was
engaged by them. When there is no repayment, in the year of 2013, the
plaintiff demanded for repayment and sent email reminding the said
settlement. The 2nd defendant acknowledged the same, but not settled the
amount. Hence, the suit.
4. The 1st defendant filed a written statement and the same was
adopted by defendants 2 and 3. The contention of 2nd defendant that he
has not borrowed any loan from the plaintiff, on the other hand, having
interest upon the 2nd defendant's business, he has invested the said amount
to the 1st defendant's company in anticipation of profit return and the same
is subject to the loss of the company. Furthermore, the 1st defendant is the
Private Limited, in which, the 2nd and 3rd defendants are Directors, so they
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A.S.No. 515 of 2020
are not liable for the dues of the company, since because the plaintiff
invested the amount only in the 1 st defendant's company, thereby they
denied their liability.
5. Before the trial court, issues were framed as to whether the
plaintiff is entitled for the suit claim as prayed for? Both parties adduced
oral evidence, but no documentary evidence adduced on the side of both
sides. But, the suit was contested by all the defendants. Considering the
evidence as well as statements made by both sides, the trial judge held
that based upon account statement Ex.A1 and Ex.A2, the plaintiff
transferred totally a sum of Rs.9,00,000/- to the 1 st defendant's account
from his NRI account and the defendants also admitted the said payment,
but contend that it was only the investment in the 1st defendant's company
and denied that it is not an hand loan, however there is no proof on the
side of defendants that it was invested in the 1 st defendant's company nor
there is a share certificate issued in favour of plaintiff. Further, the said
amount was transferred to 1st defendant's account at the request of 2nd
defendant and there is no proof that the said amount was invested in the
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A.S.No. 515 of 2020
company for the business purpose nor produced any account by the
defendants. Accordingly, the claim made by the plaintiff as such is
maintainable and the said claim was decreed with an interest at the rate of
12%. Challenging the same, the defendants preferred this appeal.
6. The learned counsel for appellant would submit that the trial
judge failed to take note of the fact that the payment made by the plaintiff
as an investment return on profit, for that, 2 nd and 3rd defendants neither
guarantors nor acknowledged repayment on behalf of company. When
there is no such personal guarantee, the 2 nd and 3rd defendants are not
liable to pay the amount. But, without appreciating the legal proposition,
the trial judge decreed the suit in favour of defendants, as such is liable to
be set aside.
7. To substantiate his arguments, he relied on the authority reported
in 1998 (45) DRJ – Space Enterprises vs. Srinivasa Enterprises Ltd.,
wherein in para 11, High Court of Delhi held as follows:-
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A.S.No. 515 of 2020
“11. In so far as the liability of defendant No.2 is
concerned, the effect of the registration of a company under
Section 34 of the Companies Act is that it is a distinct and
independent persons in law and is endowed with special
rights and privileges; a person distinct from its members.
Consequently, the company is enabled to contract with its
shareholders also, to use common seal and acquire and
hold property in its corporate name. The company is
distinct from its shareholders and its Directors. Neither the
shareholders nor the Director can treat the company's
assets as their own. Directors of a company are liable for
misappropriation of company's funds and other
misfeasance, but not for an ordinary contractually liability
of the company. The liability of the embers or the
shareholders or the Directors is limited to the capital
invested by them. So long the liability is not unlimited
under Sections 322 and 323 of the Companies Act and no
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A.S.No. 515 of 2020
special resolution of the limited company making liability
of the Directors or the Managing Directors unlimited is
alleged. The doctrine of lifting of the corporate veil could
be applied in cases of tax evasion, or to circumvent tax
obligation or to perpetuate fraud or trading with an enemy
are concerned. It is not alleged that the Director has lost
the privilege of limited liability and has become directly
liable to the plaintiff i.e. creditor of the company on the
ground that with his knowledge the company carries on
business six months after the number of its members was
reduced below the legal minimum number. In absence of
such a case it would be totally inappropriate and improper
to say that the defendant No.2 is patently covered under
Order 37 C.P.C.”
8. By way of reply, the learned counsel for respondent/plaintiff
would submit that at the request of 2nd defendant to improve the financial
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A.S.No. 515 of 2020
position of the 1st defendant's company, the plaintiff transferred the total
sum of Rs.9,00,000/- as loan to the 1st defendant's account at the instance
of 2nd defendant and it was not paid as an investment on return as alleged
by the defendants. The trial judge rightly appreciated all the facts and
evidence and decreed the suit as such is well-reasoned and prayed to
dismiss the appeal as no merits.
9. Point is to be decided is whether plaintiff proved his claim or it is
an investment made by him in 1st defendant company?
10. The foremost objection raised by the 2nd and 3rd defendants is
that the payment made by the plaintiff was the investment towards 1st
defendant's company and it is not a loan borrowed by them. The
defendants admitted the payment made by the plaintiff, but they would
content that it was paid as an investment for profit returns and not the
loan. So, the burden is casted upon the defendants to prove that it was
paid voluntarily by the plaintiff for investment. As stated by the trial judge,
there is no statement of account nor no document adduced on the side of
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A.S.No. 515 of 2020
defendants to prove the same. Even before the trial court, there is no
documents adduced to establish their claim, thereby the defendants failed
to establish that the said payment was made for the purpose of investment
in the 1st defendant's company. Therefore, the authorities relied on by the
appellants is not applicable to the facts of the case for the reason that the
referred case is not applicable to the facts of case.
11. Furthermore, before the trial court, the 2nd defendant was
examined as D.W.1 and he admits that the plaintiff is not a share holder
with the 1st defendant's company, on the other hand, the plaintiff proved
that the amount was transferred from his NRI account to 1st defendant's
account at the instance of 2nd defendant. In order to escape from the
liability, now the defendants 2 and 3 taken a defence that only 1 st
defendant's company is liable, as such is unsustainable one for the
aforesaid reasons. So, though the 1st defendant is the registered Private
Limited Company, no account statement was produced with regard to
transaction, the claim of investment as alleged by the defendants are
totally false. Furthermore, the 2nd defendant was already known to the
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A.S.No. 515 of 2020
plaintiff. So, at his request, the said amount was paid by the plaintiff in
order to develop his business. Hence, all the three defendants are jointly
and severally liable to pay the said amount, which was rightly concluded
by the trial judge, which needs no interference. Accordingly, this Appeal
Suit is dismissed as no merits and the trial court findings in O.S.No.24 of
2014 are confirmed, thereby the suit is decreed. No costs. Consequently,
connected Civil Miscellaneous Petition is closed.
13.09.2023
Index : Yes / No
Internet : Yes / No
Speaking/Non-speaking order
rpp
To
District Judge,
Nilgiris at Udhagamandalam.
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A.S.No. 515 of 2020
T.V.THAMILSELVI, J.
rpp
A.S.No. 515 of 2020
https://www.mhc.tn.gov.in/judis
A.S.No. 515 of 2020
13.09.2023
https://www.mhc.tn.gov.in/judis
