* IN THE HIGH COURT OF DELHI AT NEW DELHI
+ C.S. (OS) No.267 of 2006
%
M/S. NATIONAL SMALL INDUSTRIES CORPORATION LIMITED
......Plaintiff
Through: Ms. Shobha, Mr. Mohinder Pal Thakur &
Mr. Prithvi Pal, Advocates.
versus
M/S. SHRISHTI AUTO ENGINEERING PVT. LTD. & ORS.
......Defendants
Through: Ms. Maneesha Dhir, Ms. Geeta Sharma,
Ms. Preeti Dalal & Mr. K.P.S. Kohli,
Advocates.
Date of Reserve: 19th November, 2009
Date of Order: 14th December, 2009
JUSTICE SHIV NARAYAN DHINGRA
1. Whether reporters of local papers may be allowed to see the judgment?
2. To be referred to the reporter or not?
3. Whether judgment should be reported in Digest?
JUDGMENT
I.A. No.5563 of 2007
1. By this order, I shall dispose of this application made under Order 37, Rule 3 (5)
CPC for leave to defend by the defendant.
2. This suit has been filed under Order 37 CPC by the plaintiff for recovery of
Rs.1,45,08,077/-. The plaintiff contended that it was Government of India undertaking
registered under the provisions of Companies Act and was incorporated with the aim of
promoting and developing small-scale industries in the country. Defendant No.1, a
company registered under the provisions of Companies Act had approached the plaintiff
for financing two machines on hire purchase basis. An agreement dated 20th March, 1999
was signed between the parties for hire purchase of first machine. The total value of hire
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purchase came to Rs.1,04,61,639/-. The defendant company was to pay this amount
within a span of five years by way of twenty installments of Rs.4,84,731/- each. The
second hire purchase agreement was signed between plaintiff and the defendant company
on 19th June, 1999 in respect of second machine worth Rs.54,20,975/-. The total hire
purchase value came to Rs.82,95,764/-. This amount was also payable within a period of
five years by way of twenty installments of Rs.3,76,841/- each.
3. The plaintiff submitted that the defendants were defaulters from the first
installment and the post dated cheques given by the defendant company got dishonoured
and the defendants failed to pay installments despite repeated requests made by the
plaintiff. Defendant Nos.2 and 3, being Directors of defendant No.1 company had
executed indemnity bond, jointly and severally to indemnify the plaintiff corporation to
the extent of Rs.122.44 lac and executed affidavits disclosing their individual properties
as security for the loan amount. Thus, they became guarantor for satisfaction of the loan
amount. Defendant No.4 also furnished a declaration and indemnified the plaintiff jointly
and severally to the extent of Rs.122.44 lac. It is submitted that in view of the fact that
the defendants failed to pay even a single installment, the total hire purchase value against
the two machines became payable forthwith and the amount due from the defendants as
on 31st July, 2005 against the two machines was Rs.1,45,08,077/-.
4. Instead of paying dues of the plaintiff, to prevent plaintiff from exercising its right
under the agreement, the defendants filed a suit against the plaintiff for injunction and
vide order dated 1st November, 2000, the plaintiff company was restrained from taking
any action against the defendant company or to present the cheques of installments for
encashment. This order was vacated by the learned District Judge on 25th April, 2005.
Since, the defendants had not made payment of the installments or of the due amount
C.S. (OS) No.267/2006 Page No.2 of 8
against the loan agreements and hence the suit under Order 37 CPC.
5. In leave to defend, the defendants have taken a stand that suit as against defendant
Nos.2 and 3 was not maintainable under Order 37 since indemnification bond signed by
defendant Nos.2 and 3 does not entitle the plaintiff to recover amount from defendant
Nos.2, 3 and 4. Regarding defendant No.1, it is not disputed that hire purchase
agreements were entered and machines were taken on hire purchase basis. However, it is
stated that the defendants were made to deposit two FDRs as security and an amount of
Rs.24,40,547/- by way of an FDR was lying as security with the plaintiff against first
agreement and an amount of Rs.18,97,341/- (as FDR) against the second agreement. It is
submitted that apart from this, the defendants were directed to pay a sum of Rs.20 lac to
the plaintiff by this court in Suit No.2279 of 2000 vide its order dated 14th January, 2003
and the defendants duly complied with this order and made a payment of Rs.20 lac. The
defendants also claim that they had paid some installments totaling to Rs.29 lac
approximately. It is submitted that the plaintiff has not given credit of any amount to the
defendants and, therefore, the suit was not maintainable under Order 37 CPC and no
decree can be passed under Order 37. The defendants also submit that the machinery was
repossessed by the plaintiff and in view of repossession of the machinery, the plaintiff
was not entitled to recover any amount from the defendants. The plaintiff could not have
filed the present suit after repossessing the hire purchase machinery. The repossession
itself satisfied the claim of the plaintiff.
6. The other stand taken by the defendants is that the suit filed by the plaintiff was
barred by limitation. It is submitted that the triable issues have been raised by the
defendants and, therefore, the defendants were entitled to leave to defend. It is further
submitted that the agreement entered into between the parties was null and void because
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of the exorbitant rate of interest charged by the plaintiff and this itself was a triable issue
and the court should grant leave to defend on this ground.
7. As far as the suit against defendant No.1 is concerned, indisputably it is based on
written contracts between the parties. The plaintiff has placed on record the statement of
accounts as on 31st July, 2005. This statement of accounts has not been disputed by the
defendants. A perusal of the statement of account shows that the plaintiff had given
credit to the defendants of the amounts received in respect of both the hire purchase
agreements. In case of first hire purchase agreement, the plaintiff has given credit of
Rs.46,07,429/- to the defendants and after giving credit of this, the balance recoverable
from defendant No.1 has been shown in the statement of accounts. Similarly, the
statement of account of second machine also shows that due credit has been given of the
amounts received. The statement of accounts starts from 1st January, 2000 and is upto
31st July, 2005. The defendants have failed to point out any incorrect entry into the
statement of accounts and have failed to point out how the statement of accounts was
deficient.
8. In case of both machines, the plaintiff has placed on record detailed statement of
accounts as on 31st July, 2005 starting from November, 1999. The installments paid by
the defendants have been shown in the amounts received by the plaintiff and the
statement of accounts show that due credit has been given to the defendants of the
amounts paid. In view of the fact that the defendants have failed to point out the
statement of accounts were not true or incorrect, no triable issue arises in this respect.
Making bald statement by the defendants that they paid installments of Rs.29 lac or paid
Rs.20 lac again would not entitle the defendants to leave to defend. Accounting of the
amounts paid by the plaintiff in any case does not raise a triable issue and the calculations
C.S. (OS) No.267/2006 Page No.4 of 8
can be checked and re-checked and can be brought to the notice of the court when issue
of satisfaction of decree arises. A triable issue is one where some adjudication is needed.
Accounting of the money paid by the defendants to the plaintiff does not need an
adjudication but only needs ascertainment whether the amount has been properly
reflected in the statement of accounts or not.
9. I, therefore, consider that on this ground, the defendants are not entitled for leave
to defend. If the defendants have paid and can duly account for the amounts paid, the
plaintiff is bound to give credit of all those amounts to the defendants. Similarly, if there
are FDRs of the defendants lying with the plaintiff and FDRs are still valid and
encashable, the plaintiff would be liable to give credit to the defendants of these FDRs on
adjustment of the FDR amounts. The FDRs were lying as security, it is not known
whether this security has been encashed or not and whether the FDRs need revalidation?
However, this does not raise any triable issue.
10. As far as limitation is concerned, the loan was taken in the year 1999. In the year
2000, the defendants filed a suit against the plaintiff that the plaintiff should not take any
action against the defendants in respect of hire purchase agreements and the court granted
an ex-parte injunction. This ex-parte injunction was in operation from November, 2000
till 25th April, 2005 when the order for injunction was vacated. The plaintiff would be
entitled to deduct this period when the court injunction was operative from the period of
limitation. The suit was filed by the plaintiff in December, 2005. Thus, the suit is not
barred by limitation and this plea raised by the defendants is frivolous. No triable issue
arises on account of limitation.
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11. The lifting of machinery by the plaintiff on 29th July, 2005 would not exhaust the
liability of the defendants under hire purchase agreement. Only the residual value of the
machinery can be adjusted towards the amount receivable. It is specifically provided in
the agreement that even when the contract between the plaintiff and the defendants is
determined because of non-payment of the installments and the plaintiff repossesses the
machinery or seizes the machinery that shall be without prejudice to the claim of the
plaintiff against hirer for arrears and hire payment and damages for breach of the
agreement. I, therefore, consider that no triable issue arises on the plea that since
possession of the machinery has been taken by the plaintiff, the plaintiff was not entitled
to recover the amount.
12. In this case, after taking possession of the machinery, the plaintiff with the
permission of the court had put machinery to public auction so that whatever amount can
be realized from sale of machine should be realized and credit of the same should be
given to the defendants. The defendants, in this case, under the orders of injunction of the
court have been using the machinery without payment of installments all along from the
date of hire purchase agreement till the year 2005, when the injunction was vacated.
After the machinery was seized by the plaintiff it had become obsolete in view of the
development of latest techniques and it did not attract any bidders. The proceedings
regarding auction of the machinery would show that the machinery now has only junk
value and has no real value. As and when the machine is sold by the plaintiff in auction,
the plaintiff is bound to give credit of the same to the defendants. The defendants if
consider that the machinery has more value, are at liberty to participate in the auction and
bid for the machines for whatever worth they are and pay the amount and get the
adjustment.
C.S. (OS) No.267/2006 Page No.6 of 8
13. I, therefore, find that no triable issues have been raised by defendant No.1 in this
case. The only effort of the defendants from the very beginning had been to see that the
proceedings in this case are delayed on one or the other ground. As far as defendant
Nos.2, 3 and 4 are concerned, they have given affidavits about their assets along with
giving their affidavits of assets. Mrs. Shalini Ahuja and Mr. Rajiv Kapur, the two
Directors of the company executed an indemnity bond in favour of the plaintiff to the
following extent :-
“In consideration of your having placed/agreed to place orders for
machines for giving them to our company on H.P. Basis, we hereby
jointly and severally agree to indemnify the National Small
Industries Corporation, Gurgaon-Haryana against all losses,
expenses which may be suffered and incurred by the Corporation
in relation thereto, to the extent of Rs.122.44 lacs.”
14. In view of their indemnifying the plaintiff for the losses that may be suffered by
the plaintiff in respect of hire purchase agreements, I consider both Mrs. Shalini Ahuja
and Mr. Rajiv Kapur are entitled for leave to defend in view of judgment of Supreme
Court in the case of State Bank of Saurashtra Vs. M/s. Ashit Shipping Services Private
Limited & Another reported in 2002 (4) SCC 736. I, therefore, dismiss the application
made by defendant No.1 under Order 37 Rule 3 (5) CPC for leave to defend and
defendant Nos.2 and 3’s prayer for leave to defend is allowed.
C.S. (OS) No.267 of 2006
15. In view of the fact that the application for leave to defend of defendant No.1 has
been dismissed, the plaintiff is entitled for a decree of the suit as against defendant No.1.
The suit of the plaintiff is decreed for a sum of Rs.1,45,08,077/- along with cost and
pendente lite and future interest @ 8 per cent per annum as against defendant No.1.
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Decree sheet be prepared as against defendant No.1. The suit shall proceed as ordinary
suit against defendant Nos.2 and 3. Written statement be filed by defendant Nos.2 and 3
within 30 days from today.
List before the Joint Registrar for completion of pleadings viz-a-viz defendant
Nos.2 and 3 on 24th February, 2010.
SHIV NARAYAN DHINGRA J.
DECEMBER 14, 2009
‘AA’
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