IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED: 07.07.2008 CORAM: THE HONOURABLE MR.JUSTICE V.DHANAPALAN A.S.No.1078 of 1994 1. The City Theatres Pvt. Ltd., rep. by its Managing Director S.Subramaniam, Karthikeyan (alias) Mani 2. S.Subramaniam Karthikeyan ... Appellants vs. Sureshkumar G.Nichani ... Respondent Appeal filed under Section 96 of the Code of Civil Procedure praying to set aside the judgment and decree dated 28.02.1994 in O.S.No.8986 of 1991 on the file of the III Assistant Judge, City Civil Court, Madras. For Appellants : Mr.K.Mani For Respondent : Mr.C.Ramesh J U D G M E N T
The first and third defendants in the suit have preferred this appeal challenging the judgment and decree of the Court below dated 28.02.1994 made in O.S.No.8986 of 1991 on the file of the III Assistant Judge, City Civil Court, Madras.
2. It is the case of the plaintiff before the Court below that on 17.08.1985, the defendants 1 to 4 borrowed a sum of Rs.30,000/- from him for their business and executed a promissory note for Rs.30,000/- in his favour, promising to repay the same on demand together with interest at 24% per annum and in respect of the same, the defendants paid interest up to 16.03.1986 and thereafter when demands were made by him for repayment of principal and interest, the defendants failed and neglected to comply with the same; thereafter, the plaintiff caused a legal notice dated 02.08.1988 to the defendants calling upon them jointly and severally to pay the amounts to him; the defendants acknowledged the receipt of the legal notice and requested the plaintiff not to take any further legal action against them. The plaintiff further stated that the first defendant company issued a cheque dated 09.02.1989 for Rs.30,000/- in his favour towards repayment of the principal due under the said promissory note, however, the cheque was returned with an endorsement payment stopped by the drawer.
2a. It is the further case of the plaintiff that the defendants 1 to 4 sent a letter dated 17.03.1989 to him, stating that due to unavoidable circumstances, they could not arrange funds in the Bank to meet the said cheque and to maintain their prestige with their bankers, they had instructed their bankers to stop payment of the cheque and in the letter, they also gave an undertaking jointly and severally to repay the principal sum of Rs.30,000/- together with arrears of interest due thereon at 24% per annum by means of a Demand Draft and in the event of their failure to repay the amount, the plaintiff could well approach the Court for the appointment of a Receiver to take charge of recovery of the amounts.
2b. Since the defendants failed to repay the sum of Rs.30,000/- towards principal and a sum of Rs.35,903/- towards interest calculated at 24% per annum, the plaintiff filed a suit in O.S.No.8986 of 1991 for a direction to the defendants jointly and severally to pay to the plaintiff the sum of Rs.65,903/- together with further interest at 24% per annum on Rs.30,000/- from the date of the plaint till the date of realisation.
3. In the Written Statement, the first defendant denied the plaint averments. It is stated that the plaintiff and the defendants proposed to jointly exhibit certain imported films, for which purpose, the plaintiff agreed to advance funds and to assist them in the matter of securing the imported foreign films through the appropriate authorities; though the plaintiff advanced a sum of Rs.30,000/-, he did not co-operate with the defendants; therefore, with a view to compromise the matter, the defendants agreed to repay the amount, because of the association with the plaintiff and their sister concerns. Later, the defendants 1 to 4 agreed to execute a promissory note for the amount, but it was agreed between the parties that no interest would be payable and the defendants should be given sufficient time to pay back the amount; since the defendants have executed a promissory note, the plaintiff attempted to take undue advantage of the same and pursuant thereto, the plaintiff approached the Company and under threat and compulsion, secured a letter of undertaking to pay the amount.
3a. It is further stated in the written statement that the amount advanced by the plaintiff was not a loan and was not intended to carry any interest, however, contrary to the assurances, the plaintiff had issued notice. According to the first defendant, in so far as no money was borrowed by the defendants, they are in no way liable to pay back any amount of money with interest at 24% per annum as claimed by the plaintiff; and in so far as there was no commercial transaction between the plaintiff and the defendants and as the business transaction between them had not materialised, it is not proper on the part of the plaintiff to seek recovery of the amount treating the amount as a loan and claiming interest on the same at an excessive rate.
3b. It is also stated in the Written Statement that the cheque dated 09.02.1989 for a sum of Rs.30,000/- issued to the plaintiff was not meant for repayment of the alleged loan as stated by the plaintiff and the amount was advanced as an understanding that the plaintiff would secure some business arrangements to the first defendant company; in so far as the plaintiff has failed to carry out the terms and conditions of the agreement, the question of repayment of the amount advanced by the defendants would arise. It is the case of the first defendant that if at all any amount is due and payable to the plaintiff, it is only the principal amount of Rs.65,903/- advanced by the plaintiff to the defendants for securing the exhibition of foreign films and therefore prayed for the dismissal of the suit.
3c. The defendants 2, 3 and 4 have denied the allegations contained in the plaint and have adopted the Written Statement of the first defendant.
4. In his reply to the written statements filed by the defendants, the plaintiff has denied the allegations contained therein and has stated that the defendants have jointly and severally borrowed a sum of Rs.30,000/- from him for their business purposes on 17.08.1985 under a promissory note executed by them on the said date at Madras in favour of the plaintiff; there was no proposal to jointly exhibit any imported films as falsely alleged by the defendants and the plaintiff never agreed to assist in the matter of securing any imported films through any appropriate authorities. The plaintiff has further stated that since the defendants have jointly and severally borrowed the monies from him, he is absolutely entitled to recover the monies treating the amounts as loan and also claim interest at the rate of 24% per annum and according to the plaintiff, the interest charged is not excessive. It was his further submission that apart from borrowing the said sum of Rs.30,000/- from him, the defendants have also borrowed a sum of Rs.5,20,000/- from his associates on the same day at Madras.
5. The Trial Court, on consideration of the entire facts and on analysis of the material records decreed the suit in favour of the plaintiff with a direction to the defendants to pay a sum of Rs.65,903/- to the plaintiff together with interest at the rate of 24% per annum from the date of filing of the suit till the date of realisation. Aggrieved by the said judgment and decree of the Trial Court, the defendants 1 and 3 have come on appeal before this Court.
6. Learned counsel for the appellants/defendants 1 and 3 have contended that the learned Trial Judge has failed to note that the plaintiff and the defendants entered into a joint venture to exhibit certain imported films, for which purpose, the plaintiff has agreed to advance funds and that the 1st and 3rd defendants have never drawn a cheque on behalf of the 1st defendant for the repayment of Rs.30,000/-. It was his further contention that the total borrowal of Rs.5,50,000/- paid to the 1st defendant by way of a cheque was never enjoyed by the 1st defendant firm and that the 1st defendant is in no way liable to pay the suit amount of Rs.30,000/-, which was included in the total borrowal of Rs.5,50,000/-. Learned counsel strenuously contended that once the defendants have discharged the burden that they have not received the amount, by placing the Bank Statement (B), then the burden is shifted to the respondent/plaintiff to prove that the said borrowal was made by the first defendant, which the plaintiff has failed to do so and pleaded that the appeal may be allowed by setting aside the judgment made in the suit as far as the rate of interest at 24% from the date of the plaint till the date of realisation is concerned.
7. In support of his contentions, learned counsel for the appellants has relied on the following decisions:
(i) In 1997 (III) CTC 367 in the case of Mahesh Chandra Bansal vs. Krishna Swaroop Singhal and another, the Supreme Court has held as under:
3. … The appellant was a partner in a partnership firm. He ceased to be a partner in the firm with effect from 12.05.1979. On his ceasing to be a partner a deed of dissolution was drawn on 12.05.1979 whereunder the share of the appellant in the assets and goodwill of the partnership was worked out at Rs.90,000/-. The appellant was paid Rs.45,000/- at that time and the balance amount of Rs.45,000/- was to be paid after one year. The said amount, however, was no paid and, therefore, the appellant, on 11.05.1982, filed the suit which was given rise to this appeal for the recovery of the amount of Rs.45,000/- with interest @ 12% per annum. The said suit was decreed by the trial court and interest was awarded @ 6% per annum throughout, from 25.05.1980 till realisation of money. On appeal, the appellate court modified the decree and awarded interest @ 12% per annum from 12.05.1980 to 11.05.1982, the date of filing of the suit, and @ 19.5% per annum for the period subsequent to the date of filing of the suit till realisation of the amount. The High Court, in second appeal, has maintained the direction regarding payment of interest @ 12% per annum from 12.05.1980 till the date of the filing of the suit on the view that payment of interest for the period was governed by the interest Act, 1978. As regards the interest pendent lite and future interest the High Court has held that it was governed by Section 34 of the Code of Civil Procedure and the High Court has directed that the said interest shall be paid @ 6% per annum. …
(ii) This Court in 1993 MLJ 454 in the case of K.A.Kunjalu vs. V.V.Jose, has held as under:
4. … The relevant language used in Section 34, C.P.C. is that the Court, may in the decree, order interest at such rate as the court deems reasonable to be paid on the principal sum adjudged, from the date of the suit to the date of the decree.
…
In fact, the judgment, even according to the counsel for respondent is totally silent about this aspect. When there is such an omission on the part of the court below, with referent to the grant of interest pendente lite, it is the judgment, if at all, which has to be corrected, either under Section 152 C.P.C. or O.47 Rule 1, C.P.C. or by filing a regular appeal, whichever course is in accordance with law. Without doing that, the respondent has filed the present petition to amend the decree. The decree can only grant 6% interest. It does not speak of 24% interest anywhere.
8. In response, learned counsel for the respondent/plaintiff has submitted that the appellants/defendants 1 and 3 have falsely stated that the amount was borrowed only by the second defendant and the entire amount were utilised only for the business of the second defendant. According to the learned counsel, when the appellants itself have admitted the execution of the suit Promissory Note, they are bound to pay the principal amount together with the interest stated therein. It is his submission that the Trial Court has carefully taken into consideration the entire facts and having analysed the material records has come to a conclusion that the defendants should pay the principal amount with interest along with the further interest at 24% per annum from the date of plaint till the date of realisation. The learned counsel would submit that the appellants having admitted the execution of the suit Promissory Note and denying the payment of interest agreed therein would be a valid ground to dismiss the appeal. In support of his stand, learned counsel has relied on a judgment of this Court reported in 2006 (3) L.W. 211 in the case of A.Kannivel Chettiar vs. M.K.Govindaraja Mudaliar, wherein, in paragraph 15, it is held as follows:
Section 79 of the Negotiable Instruments Act contains a mandate that Court shall allow the interest on the principal amount advanced against a promissory note at the rate specified in that note and this interest shall have to be allowed even after filing of the suit till the money is actually tendered or realised or a date has been fixed at the institution of the suit to recover such amount. The discretion given to the Court under Section 34 of Code of Civil Procedure for allowing interest pendente lite at the rate not execeeding 6% per annum cannot be applied to the debt incurred on the basis of pronote, which is definitely governed by the provisions of the Negotiable Instruments Act.
9. Heard both sides and given consideration to the oral and documentary evidence on record.
10. It is seen from the pleadings that the defendants 1 to 4 have borrowed a sum of Rs.30,000/- from the plaintiff and they have executed a promissory note on 17.08.1985 promising to repay the same together with interest at the rate of 24% per annum and all the defendants have signed in it. The said pronote is marked as Ex.A1. Pursuant to the promise made in Ex.A1, the defendants paid interest to the plaintiff up to 16.03.1986. The defendants sent letters to the plaintiff, as could be seen from Exs.A5, A6 and A7 dated 02.11.1985, 09.11.1985 and 20.03.1986, respectively, indicating their responsibility to repay the amount. As no payment was made by the defendants as per the pronote, the plaintiff sent a legal notice to the defendants on 02.08.1988, marked as Ex.A8, for which a reply notice has been sent by the defendants on 09.08.1988 in Ex.A9. The defendants have also sent a letter to the plaintiff on the same date as could be seen in Ex.A10. Also, it is seen that the cheque dated 09.02.1989 for Rs.30,000/- issued by the defendants towards repayment of the principal due under the promissory note was returned with an endorsement “payment stopped by the drawer” and the same is marked as Ex.A12. The receipt of the said cheque by the Bank is marked as Ex.A13. In the letters dated 17.03.1989 and 11.12.1987 sent to the plaintiff, marked as Exs.A14 and A15, respectively, the defendants have expressed their inability to collect funds to meet the said cheque amount and in order to maintain their prestige with the Bankers, they have instructed the Bankers to stop payment of the cheque and they have also given an undertaking to the plaintiff jointly and severally to repay the principal amount together with arrears of interest due thereon at 24% per annum. The statement of accounts showing the amounts due by the defendants are marked as Ex.A19. The case filed by the plaintiff against the defendants in C.S.No.847 of 1991 and the certified copy of the judgment in Petition No.4579 of 1992 is marked as Ex.A20. The correspondence made by the defendants to the plaintiff are not in dispute.
10a. The defendants have relied on Ex.B1, letter dated 25.01.1994 written by the Indian Overseas Bank to the first defendant to prove that the first defendant Company is represented by its Managing Director, the third defendant and the defendants 2 to 4 are its Directors. Ex.B2 is the authorisation letter given by the defendants.
11. Since the defendants failed to repay the dues even after causing legal notice, having no other alternative, the plaintiff filed a suit claiming a sum of Rs.65,903/- towards principal and interest together with further interest at 24% per annum on Rs.30,000/- from the date of the plaint till the date of realisation. The Trial Court, on appreciation of the evidence on record decreed the suit in favour of the plaintiff, thereby directing the defendants to pay the principal amount together with interest at 24% per annum totalling to Rs.65,903/- and further interest at 24% per annum on Rs.30,000/- from the date of the plaint till the date of realisation. That apart, with regard to the period of limitation, the Trial Court has clearly held that Ex.A9 dated 09.08.1988 will amount to acknowledgement of liability to revive the cause of action for filing the suit against the defendants, which in my considered opinion cannot be found fault with. Hence, the suit cannot be held to be barred by limitation.
12. The main grievance of the defendants is with regard to the interest portion. According to the defendants, they had a proposal with the plaintiff to jointly exhibit certain imported films for which the plaintiff agreed to advance funds and help them succeed in their business; though the plaintiff advanced a sum of Rs.30,000/- to the defendants, he did not co-operate with them; therefore the defendants went for a compromise with the plaintiff agreeing to repay the said sum and executed a promissory note in that regard. It is the further case of the defendants that the said amount advanced by the plaintiff is not a loan and hence they are not liable to pay any interest towards the same. Though the defendants have pleaded so, they have no proof to that effect, as such they have failed to establish the same before the Trial Court with proper material documents.
13. In the light of the above discussions, this Court is not inclined to interfere with the judgment and decree of the Court below with regard to the payment of principal amount and interest at the rate of 24% per annum, totalling to Rs.65,903/- up to the date of filing of the suit. However, this Court, as per the provisions under Section 34 of the Code of Civil Procedure feels it necessary to modify the further interest awarded at 24% per annum on the principal amount from the date of the plaint till the date of decree and accordingly, it is modified to 12% per annum. Further, this Court awards interest at the rate of 6% per annum on the principal amount from the date of decree till the date of realisation.
This appeal suit stands disposed of on the above terms. However, there shall be no order as to costs.
abe
To :
The III Assistant Judge,
City Civil Court,
Madras