ORDER
K.S. Kumaran, J. (Chairman)
1. Corporation Bank (hereinbefore referred to as ‘the 1st respondent-Bank’) filed Suit No. 2731/1993 before the Hon’ble High Court of Delhi against (1) M/s. United Data Base (India) Pvt. Ltd. (hereinafter referred to as ‘the UDP’); (2) M/s. United India Periodicals Ltd. (hereinafter referred to as ‘the UIP’)”; (3) T.P. Ahmed Ali; (4) M/s. Sterling Computers Ltd. (hereinafter referred to as ‘the appellant-Sterling Computers); (5) Mahanagar Telephone Nigam Ltd. (hereinafter referred to as ‘the MTNL’); (6) Central Bank of India; (7) Bank of Baroda; and (8) Bank of India. The suit was filed for the recovery of Rs. 7,53,09,020.83 with interest @ 21% per annum, out of which the liability of the appellant-Sterling Computers was limited to Rs. 4,09,76,270/- with interest as mentioned above. After the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (hereinafter referred to as ‘the Act’) came into force, the suit was transferred to Debts Recovery Tribunal-1, Delhi (hereinafter referred to as ‘the DRT’) and was taken on file as O.A. 399/95. The learned Presiding Officer of the DRT, accordingly, passed the final order with costs in favour of the 1st respondent-Bank by his order dated 11.3.2002.
2. Aggrieved, the appellant-Sterling Computers has filed the appeal, and also this application under Section 21 of the Act for waiver of the pre-deposit. The 1st respondent-Bank has filed a common reply to the appeal as well as to the application opposing the same. The 7th respondent-Bank of Baroda has also filed a reply. The 4th respondent remains ex parts while the other respondents 2, 3, 5, 6 and 8 have not filed any reply.
3. I have heard the Counsels for both the sides, and perused the records.
4. On 14.3.87, UIP entered into a contract with MTNL for printing and publishing Telephone Directories with Yellow Pages for the cities of Delhi and Bombay. With the consent of MTNL, UIP assigned the work, and the benefits of the contract to the UDI. UDI is a subsidiary company of the UIP. For the purpose of executing the work, UDI borrowed moneys and availed credit facilities from the 1st respondent-Bank and Bank of India. But, the printing and publishing of Telephone Directories were not carried out in time, and in terms Of the contract. Therefore, the 1st respondent-Bank filed Company Petitions 152and 153/90 while Bank of India filed Company Petitions 118 and 119/90 for winding-up UIP and UDI.
5. UIP and UDI approached the appellant-Sterling Computers for undertaking the work of printing and publishing of the Telephone Directories, and also sought the permission of MTNL in this regard. Appellant-Sterling Computers, UIP and UDI entered into certain Memoranda/agreements in this behalf. On 26.9.91, MTNL, UDI, UIP and appellant-Sterling Computers entered into an agreement, by and under which, appellant-Sterling Computers was appointed as principal Directory supplier for the purpose of printing and publishing the Directories.
6. The appellant-Sterling Computers, UIP, UDI and the 1st respondent-Bank entered into an agreement dated 31.3.1992 wherein we find reference to the above mentioned details. By and under this agreement, they had agreed that appellant-Sterling Computers was entitled to acquire the equity shares in UDI and also to appoint its nominees on the Board of Directors of UDI. But, MTNL stipulated that the 1st respondent-Bank and Bank of India who had lien over the revenue earnings in respect of the Directories should release the same in favour of MTNL. The appellant-Sterling Computers has undertaken to pay the 1 st respondent-Bank a sum of Rs. 3.75 crores in full and final settlement of the amount due to the 1 st respondent-Corporation Bank from or on behalf of UDI. On the date of the agreement i.e. 31.3.1992, appellant-Sterling Computers paid a sum of Rs. 1 crore to the 1st respondent-Bank by way of cheque, but of the balance, appellant-Sterling Computers agreed to pay Rs. 1 crore to the 1st respondent -Bank on or before 31.3.1993 for which appellant-Sterling Computers had also issued a post-dated cheque. The appellant-Sterling Computers also agreed to pay the balance of Rs. 1.75 crores on or before 30.9.1993, and had similarly given a post-dated cheque for that amount in favour of the 1st respondent-Bank.
7. It is on the basis of the agreement dated 31.3.1992, that the 1st respondent-Bank claimed the suit amount from appellant-Sterling Computers, though the claim against the other defendants in the Original Application is on the basis of other documents also.
8. But the above-said agreement dated 26.9.1991 between UPI, UDP, MTNL and the appellant-Sterling Computers was challenged by M/s. M. & N. Publications Ltd., and others in Writ Petition 1872 of 1992 before the Hon’ble High Court of Delhi. This Writ Petition was allowed by order dated 30.9.1992 quashing the agreement dated 26.9.1991. The appeals filed by appellant-Sterling Computers, UIP and UDP against the said order were dismissed by the Hon’ble Supreme Court of India by order dated 12.1.1993.
9. According to appellant-Sterling Computers, when the agreement dated 26.9.1991 has been quashed by the Court and has, therefore, become impossible of performance, the agreement dated 31.3.1992, which is based upon the agreement dated 26.9.1991 has also become non est and frustrated.
10. The learned Counsel for the appellant-Sterling Computers contends that the appellant is neither a borrower nor a customer nor aguarantor, and in the circumstances where the agreement dated 31.3.1992 under which only the liability is sought to be fastened upon the appellant-Sterling Computers, has become non est and frustrated the appellant-Sterling Computers is not bound to pay any amount to the 1 st respondent-Bank under the agreement dated 31.3.1992, whereas, the appellant-Sterling Computers is entitled to receive back a sum of Rs. 1 crore paid by it to the 1st respondent-Bank. But the learned Counsel for the 1st respondent-Bank, on the other hand contends that the agreement dated 31.3.1992, is an independent agreement and does not depend upon the agreement dated 26.9.1991. According to him the 1 st respondent-Bank is not a party either to the agreement dated 26.9.1991 or the previous agreements between appellant-Sterling Computers, UDI, UIP and MTNL. The learned Counsel for the 1st respondent-Bank contends that the agreement dated 31.3.1992 contains an unconditional undertaking by the appellant-Sterling Computers to pay the money referred to therein and, therefore, the agreementdated 31.3.1992 is capable of being enforced without reference either to agreement dated 26.9.1991, or the other earlier agreements to which the 1st respondent-Bank is not even a party. The learned Counsel for the Ist-Bank contends that it had lien over the revenue earnings realised from the advertisements, etc., contained in the Telephone Directories, but by virtue of this agreement dated 31.3.1992, the 1st respondent-Bank has given up this lien in favour of M.T.N.L., appellant-Sterling Computers, UDI and UIP. He also contends that the 1st respondent-Bank has even agreed under this agreement dated 31.3.1992, that appellant-Sterling Computers shall be entitled to acquire from UIP, the entire share holdings and also to nominate its persons on the Board of Directors of UDI. But the learned Counsel for the appellant-Sterling Computers, on the other hand contends that since the agreement dated 26.9.1991 was quashed, the appellant-Sterling Computers never acquired the share holdings or nominated its own persons in the Board of Directors of UDI. But the learned Counsel for the 1st respondent-Bank refers to paragraph 1 of the agreement portion of the Deed dated 31.3.1992, wherein, it has been specifically provided that notwithstanding the various amounts due to the 1st respondent-Bank in the account of or on behalf of UDI, appellant-Sterling Computers shall pay in full and final settlement of all dues, claims, etc., a sum of Rs. 3.75 crores in the manner set out therein to the 1st respondent-Bank. He also refers to the provision contained therein that out of the sum of Rs. 3.75 crores, Rs. 1 crore was paid on the date of the agreement i.e. 31.3.1992, and that the balance was to be paid in two instalments of Rs. 1 crore and Rs. 1.75 crores on or before 31.3.1993 and 30.9.1993 respectively. He further points out that post-dated cheques were given for these two amounts and the appellant-Sterling Computers has specifically undertaken unconditionally and without demur that the above said cheques shall be encashed upon presentation in the manner mentioned in the agreement. The learned Counsel for the 1st respondent-Bank, therefore, contends that the agreement dated 31.3.1992, is independent under which the appellant-Sterling Computers has unconditionally agreed to pay the amounts mentioned above, and in case of default, with interest.
11. The learned Counsel for the 1st respondent-Bank contends that when the operative part of the agreement dated 31.3.1992 is clear and unambiguous, the earlier recital found in that deed cannot control the operative part. In this connection, he relies upon the text of Edger’s “Construction of Deeds and Statutes (5th Edition) at pages 150 and 151”.
12. But as pointed out already, the case of the appellant-Sterling Computers is that, it is neither a borrower nor a guarantor nor even a customer of the 1st respondent-Bank, but had come into picture only by way of the agreement dated 26.9.1991, and once that agreement goes, there can be no liability under the agreement dated 31.3.1992. Therefore, in my view, the questions, whether the agreement dated 31.3.1992, is independent of the agreement dated 26.9.1991 and the earlier agreements or not, and whether in spite of the Hon’ble High Court of Delhi quashing the agreement dated 26 9.1991 (as confirmed by the Hon’ble Supreme Court of India), the appellant-Sterling Computers is still liable to pay the amount as per the agreement dated 31.3.1992 have to be gone into and decided in the main appeal. Further, while the appellant-Sterling Computers claims to have spent Rs. 30 crores for the publication of the Directories, it has to be seen whether the appellant-Sterling Computers has received any money from the advertisements. These are also matters which have to be considered in the appeal.
13. The learned Counsel for the appellant-Sterling Computers contends that as soon as M/s. M & N Publication and others filed the Writ Petition in May, 1992, challenging the agreement dated 26.9.1991, appellant-Sterling Computers gave a notice dated 27.7.1992 to the 1st respondent-Bank stating that the agreement dated 26.9.1991 is the basis for the agreement dated 31.3.1992, and if the agreement dated 26.9.1991 is quashed then appellant-Sterling Computers will be under no obligation to perform the agreement dated 31.3.92 and will have no liabilities under the same. The learned Counsel for the appellant-Sterling Computers also points out from that letter that the 1st respondent-Bank was informed that, if it so desired, it may withdraw from the agreement dated 31.3.1992.
14. By referring to this letter, the learned Counsel for the appellant-Sterling Computers contends that the 1st respondent-Bank still did not withdraw from the agreement dated 31.3.92, and, therefore, cannot claim any amount from the appellant-Sterling Computers. But, question is whether this contention of the appellant-Sterling Computers can be accepted for the reason that the appellant-Sterling Computers itself did not want to give up or withdraw from the agreement dated 31.3.1992. Because it had filed an appeal to the Hon’ble Supreme Court challenging the order of the Hon’ble Delhi High Court quashing the agreement dated 26.9.1991. This aspect has also to be considered in the main appeal.
15. The learned Counsel for the appellant-Sterling Computers points out that even in O.A. there is an alternative prayer that if it is held that the appellant (4th defendant) is not liable to pay the plaintiff any amount, and that the plaintiff is liable to refund. Rs. 1 crore to the appellant, then a decree may be passed against defendants 1 to 3 for Rs. 9,02,09,182.83.
16. Pointing out this alternative prayer made by the 1st respondent-Bank, the learned Counsel for the appellant-Sterling Computers contends that the 1st respondent-Bank itself was not sure of its case against the appellant-Sterling Computers. But, we find that the DRT has passed the final order against the appellant-Sterling Computers also. Even otherwise, the question whether the alternative prayer made by the 1st respondent-Bank could be a ground for rejecting its claim against the appellant-Sterling Computers has also to be and can be considered and decided in the appeal.
17. In these circumstances, in my view, the appellant-Sterling Computers has made out a prima facie case for entertaining the appeal.
18. Therefore, the next question is whether the waiver of pre-deposit has to be granted as prayed for by the appellant-Sterling Computers. In view of what I have pointed out, the respective rival contentions put forward by both the sides have to be considered in the main appeal. It has also to be seen as to how much money, if any, has been realised by the appellant-Sterling Computers from the advertisements made in the Directories, by virtue of the agreement dated 26.9.1991, before the said agreement was quashed by the Hon’ble High Court of Delhi.
19. In paragraph 10 of this application, the appellant-Sterling Computers has stated that it had been running in loss till recently, but has now recovered substantially and is doing good business. It has also stated that it is a healthy company, but if the pre-deposit has to be made, irreparable loss and harm would be caused to the appellant-Stearling Computers and it will have no option but to wind up the business. But the appellant-Sterling Computers has not placed on record any material to show its financial status like the copy of the balance sheets or income tax returns. Therefore, on the basis of this mere averment, the appellant-Sterling Computers cannot be granted waiver of pre-deposit of the 75% of the amount found due by the DRT. In the circumstances of this case, I am of the view that the appellant-Sterling Computers shall deposit 50% of the amount determined as due from it to the 1st respondent-Bank as per the order of the DRT.
20. Accordingly, this application is allowed in part. Applicant/appellant-Sterling Computers is directed to deposit 50% of the amount determined by the DRT as due and payable by appellant-Sterling Computers to the 1st respondent-Bank, for the purpose of entertaining the appeal. This amount shall be deposited on or before 9.7,2003 into the 1st respondent-Bank. The said amount shall be kept by the 1st respondent-Bank in a separate interest bearing account.
21. Waiver as prayed for by the applicant/appellant-Sterling Computers is granted in respect of the remaining amount only.
List the appeal for further proceedings on 16.7.2003.
Copy of this order be served upon the appellant-Sterling Computers and the respondents.