{"id":134325,"date":"2011-11-21T00:00:00","date_gmt":"2011-11-20T18:30:00","guid":{"rendered":"https:\/\/www.legalindia.com\/judgments\/p-k-gupta-anr-vs-ess-aar-universal-pvt-ltd-anr-on-21-november-2011"},"modified":"2015-09-04T18:42:20","modified_gmt":"2015-09-04T13:12:20","slug":"p-k-gupta-anr-vs-ess-aar-universal-pvt-ltd-anr-on-21-november-2011","status":"publish","type":"post","link":"https:\/\/www.legalindia.com\/judgments\/p-k-gupta-anr-vs-ess-aar-universal-pvt-ltd-anr-on-21-november-2011","title":{"rendered":"P.K.Gupta &amp; Anr. vs Ess Aar Universal Pvt. Ltd. &amp; Anr. on 21 November, 2011"},"content":{"rendered":"<div class=\"docsource_main\">Delhi High Court<\/div>\n<div class=\"doc_title\">P.K.Gupta &amp; Anr. vs Ess Aar Universal Pvt. Ltd. &amp; Anr. on 21 November, 2011<\/div>\n<div class=\"doc_author\">Author: Pradeep Nandrajog<\/div>\n<pre>*        IN THE HIGH COURT OF DELHI AT NEW DELHI\n\n%                     Judgment Reserved On: 17th November, 2011\n                     Judgment Pronounced On: 21st November, 2011\n\n+                              RFA(OS) 78\/2011\n\n         PK GUPTA &amp; ANR                              ..... Appellant\n                       Through:         Mr.S.K.Chachra, Advocate with\n                                        Mr.Gaganpreet Chawla,\n                                        Advocate.\n                          versus\n\n         ESS AAR UNIVERSAL PVT LTD &amp; ANR.    ..... Respondents\n                       Through: Mr.P.R.Agarwal, Advocate with\n                                 Mrs.Anju Bhushan and\n                                 Mr.Y.R.Sharma, Advocates.\n\n         CORAM:\n         HON'BLE MR. JUSTICE PRADEEP NANDRAJOG\n         HON'BLE MR. JUSTICE S.P.GARG\n\n     1. Whether the Reporters of local papers may be allowed\n        to see the judgment?\n\n     2. To be referred to Reporter or not?\n\n     3. Whether the judgment should be reported in the Digest?\n\nPRADEEP NANDRAJOG, J.\n<\/pre>\n<p>1.              A suit, under Order XXXVII of the Code of Civil<br \/>\nProcedure, was filed by the respondent against M\/s.Prestige<br \/>\nH.M.Poly Containers Ltd. (respondent No.2) and its Managing<br \/>\nDirector and Director respectively i.e. appellants No.1 and 2.<br \/>\nDecree prayed for was in sum of `20,40,023\/- (Rupees Twenty<br \/>\nLakhs Forty Thousand and Twenty Three only).              It had four<br \/>\nelements:- (i) Principal Amount covered by 5 cheques exhibits<br \/>\nP-5 to P-9 each in the sum of `2,90,495\/- i.e. `14,52,475\/-; (ii)<\/p>\n<p><span class=\"hidden_text\">    RFA (OS) No.78\/2011                                      Page 1 of 17<\/span><br \/>\n service charges as per lease agreement Ex.P-1: `5,79,048\/-<br \/>\n(Rupees Five Lakhs Seventy Nine Thousand and Forty Eight<br \/>\nonly); (iii) expenses towards legal notice: `7,700\/- (Rupees<br \/>\nSeven Thousand and Seven Hundred only); and (iv) bank<br \/>\ncharges: `800\/- (Rupees Eight Hundred only). Liability sought<br \/>\nto be enforced was stated to be joint and several.\n<\/p>\n<p>2.           The suit was instituted on 28th June 1997 and after a<br \/>\nprotracted battle, leave to defend was granted            to the<br \/>\nappellants and respondent No.2 upon the condition that the<br \/>\nappellants and respondent No.2 would deposit `25,00,000\/-<br \/>\n(Rupees Twenty Five Lakhs only) towards not only the sum<br \/>\nclaimed in the suit but even to secure the interest which may<br \/>\naccrue if claim was decreed.\n<\/p>\n<p>3.           The sum of `25,00,000\/- was deposited with the<br \/>\nRegistry of this Court on 21.11.2002. The amount was invested<br \/>\nin a fixed deposit and ultimately the respondent No.1 withdrew<br \/>\nthe amount deposited along with accrued interest thereon on<br \/>\n12.3.2004 after furnishing security.\n<\/p>\n<p>4.           6 issues were settled between the parties on the<br \/>\nbasis of the pleadings as under:-\n<\/p>\n<blockquote><p>      &#8220;1. Whether the plaintiff is incorporated under<br \/>\n      Companies Act, 1956 and the plaint has been signed<br \/>\n      verified and filed by a duly authorized person? OPP.<\/p>\n<blockquote><p>      2.   Whether the agreement dated 10.9.1993 and the<br \/>\n      personal guarantees are not duly stamped and<br \/>\n      executed documents? If so, its effect. OPD.\n<\/p><\/blockquote>\n<blockquote><p>      3.   Whether the plaintiff is entitled to recover any<br \/>\n      amount? If so, what amount and from which of the<br \/>\n      defendants. OPP.\n<\/p><\/blockquote>\n<p><span class=\"hidden_text\"> RFA (OS) No.78\/2011                                     Page 2 of 17<\/span><\/p>\n<blockquote><p>        4.   Whether the defendant is entitled to claim<br \/>\n       adjustment of `30,31,250\/- on account of margin<br \/>\n       money? OPD.\n<\/p><\/blockquote>\n<blockquote><p>       5.    Whether the plaintiff is entitled to claim any<br \/>\n       service charges from the defendants? If so, at what<br \/>\n       rate, what amount and from which date? OPP.\n<\/p><\/blockquote>\n<blockquote><p>       6.    Relief.&#8221;\n<\/p><\/blockquote>\n<p>5.           Reason why aforesaid issues were settled was that<br \/>\nin the plaint it was asserted by the plaintiff that it was a<br \/>\ncompany registered under the Companies Act 1956 and had<br \/>\ntaken over the company M\/s.Rustagi Engineering Udyog Pvt.<br \/>\nLtd. as per a scheme sanctioned, which company had executed<br \/>\na lease agreement dated 10.09.1993 with respondent No.2<br \/>\nand had leased out 1250 sets of M.S. Moulds on the covenants<br \/>\ncontained in the agreement, obliging respondent No.2 to pay<br \/>\nlease rental in sum of `2,90,495\/- for each quarter of the year,<br \/>\nand since the lease was for three years, for the twelve<br \/>\nquarters, twelve cheques, each in sum of `2,90,495\/- were<br \/>\nissued by respondent No.2 and appellant No.1 and appellant<br \/>\nNo.2    executed        personal   guarantee(s)   to   secure    any<br \/>\noutstanding due and payable to the plaintiff by respondent<br \/>\nNo.2. The company, M\/s.Rustagi Engineering Udyog Pvt. Ltd.<br \/>\nhad received `30,31,250\/- (Rupees Thirty Lakhs Thirty One<br \/>\nThousand Two Hundred and Fifty only) towards margin money<br \/>\nas per the agreement. It was pleaded that service charges, in<br \/>\ncase lease rentals went into arrears, were payable at 3%<br \/>\ncompounded quarterly as per the agreement. It was alleged<br \/>\nthat whereas seven cheques pertaining to seven quarters of<br \/>\nthe lease period were duly honoured, the respondent No.2<\/p>\n<p><span class=\"hidden_text\"> RFA (OS) No.78\/2011                                       Page 3 of 17<\/span><br \/>\n company defaulted qua two quarters as the cheques relatable<br \/>\nthereto were returned dishonoured by the banker on whom the<br \/>\ncheques were drawn.            The three other cheques were not<br \/>\npresented for encashment but the moulds were retained by the<br \/>\nrespondent No.2 for another one year and thus on expiry of<br \/>\nthree years after commencement of the lease, entire lease<br \/>\nrental for the twelve quarters had to be paid and since it was<br \/>\npaid only for seven quarters, amount due for the remaining five<br \/>\nquarters was liable to be paid to the plaintiff.\n<\/p>\n<p>6.           In the written statement filed, the signing of the<br \/>\nagreement was not denied. It was not denied that the moulds<br \/>\nwere    received       by   respondent   No.2    and   that   the   said<br \/>\nrespondent paid margin money in sum of `30,31,250\/-. But it<br \/>\nwas pleaded, in para 3 of the preliminary objections as under:-\n<\/p>\n<blockquote><p>       &#8220;That the suit is liable to be dismissed inasmuch as<br \/>\n       the lease agreement and the personal guarantees<br \/>\n       annexed with the plaint are neither duly executed in<br \/>\n       accordance with law nor properly stamped and,<br \/>\n       therefore, the same cannot become the basis for the<br \/>\n       claim made by the plaintiff in the case.&#8221;\n<\/p><\/blockquote>\n<p>7.           It was not denied that lease rental in sum of<br \/>\n`2,90,495\/- per quarter was payable.            It was not denied that<br \/>\nlease rental pertaining to five quarters was not paid.           It was<br \/>\npleaded that the margin money paid by appellant No.1 in sum<br \/>\nof `30,31,250\/- was retained by the plaintiff which came to<br \/>\nmuch more than the unpaid lease rental. Admitting the default<br \/>\nclause liability to pay service charges @3% compounded<br \/>\nquarterly if lease rentals went into arrears, it was pleaded that<br \/>\nthe amount was by way of penalty and being excessive was<br \/>\nunconscionable and hence not enforceable.\n<\/p>\n<p><span class=\"hidden_text\"> RFA (OS) No.78\/2011                                          Page 4 of 17<\/span><\/p>\n<p> 8.            We would like to speak a word here with respect to<br \/>\nissue No.2.\n<\/p>\n<p>9.            It is apparent that issue No.2 was settled in view of<br \/>\npreliminary objection No.3 i.e. that the agreement and the<br \/>\npersonal guarantee(s) were not duly stamped and executed<br \/>\ndocuments.       On what plea was it alleged that they were not<br \/>\nduly stamped?           And why were they not duly executed?<br \/>\nNothing was pleaded. As would be evident hereinafter the only<br \/>\nargument predicated qua them was that the stamp paper(s) on<br \/>\nwhich they were scribed were purchased from a stamp vendor<br \/>\nin the State of Uttar Pradesh but the documents were executed<br \/>\nat Delhi and hence it was urged that the stamp duty exigible<br \/>\nhad to be paid at Delhi i.e. the stamp papers had to be<br \/>\npurchased from a stamp vendor at Delhi.\n<\/p>\n<p>10.           Now, the plea as laid in paragraph 3 of the<br \/>\npreliminary objection (contents noted in para 6 above) would<br \/>\nshow that pertaining to the documents not being properly<br \/>\nstamped, any prudent person of even ordinary intelligence<br \/>\nwould think that the challenge is on the inadequacy of the<br \/>\nstamp duty paid and not that it was paid in a wrong State.\n<\/p>\n<p>11.           We       need   to   highlight   that   the   fundamental<br \/>\nprinciples, essential to the purpose of a pleading is to place<br \/>\nbefore a Court the case of a party with a warranty of truth to<br \/>\nbind the party and inform the other party of the case it has to<br \/>\nmeet. It means that the necessary facts to support a particular<br \/>\ncause of action or a defence should be clearly delineated with a<br \/>\nclear articulation of the relief sought. It is the duty of a party<br \/>\npresenting a pleading to place all material facts and make<br \/>\nreference to the material documents, relevant for purposes of<br \/>\n<span class=\"hidden_text\"> RFA (OS) No.78\/2011                                           Page 5 of 17<\/span><br \/>\n fair adjudication, to enable the Court to conveniently adjudicate<br \/>\nthe matter. The duty of candour approximates \u201euberrima fides\u201f<br \/>\nwhen a pleading, duly verified, is presented to a Court. In this<br \/>\ncontext it may be highlighted that deception may arise equally<br \/>\nfrom silence as to a material fact, akin to a direct lies. Placing<br \/>\nall relevant facts in a civil litigation cannot be reduced to a<br \/>\ngame of hide and seek. In the decision reported as 2011 (6)<br \/>\nSCALE 677 Rameshwari Devi Vs. Nirmala Devi the Supreme<br \/>\nCourt highlighted that pleadings are the foundation of a claim<br \/>\nof the parties and where the civil litigation is largely based on<br \/>\ndocuments, it is the bounden duty and obligation of the Trial<br \/>\nJudge to carefully scrutinize, check and verify the pleadings<br \/>\nand the documents filed by the parties.\n<\/p>\n<p>12.          Highlighting that pleadings must be sufficient and<br \/>\nconsequence of laconic pleadings, which cannot be permitted,<br \/>\nand the failure to plead sufficient details amounting to an<br \/>\ninsufficient plea, in the decision reported as AIR 1999 SC 1464<br \/>\nD.M.Deshpande Vs. Janardhan Kashinath Kadam, the Supreme<br \/>\nCourt observed qua a claim for tenancy that in the absence of<br \/>\na concise statement of material facts relating to the tenancy,<br \/>\nthe mere raising of a plea of tenancy is not enough for the<br \/>\npurpose of raising an issue on the question.          The Court<br \/>\ncautioned against a pedantic approach to the problem and<br \/>\ndirected that the Courts must ascertain the substance of the<br \/>\npleading and not the form, in order to determine the same. It<br \/>\nwas observed that pertaining to a claim of tenancy, the exact<br \/>\nnature of the right which is claimed has to be set-forth and no<br \/>\nissue pertaining to existence of tenancy could be framed on a<br \/>\nvague plea.\n<\/p>\n<p><span class=\"hidden_text\"> RFA (OS) No.78\/2011                                     Page 6 of 17<\/span><\/p>\n<p> 13.          Thus, we are of the opinion that issue No.2 ought<br \/>\nnot to have been even settled, inasmuch as it was not pleaded<br \/>\nas to in what manner the documents were not properly<br \/>\nstamped and that in what manner they were not properly<br \/>\nexecuted.\n<\/p>\n<p>14.          On the issue of execution qua the three documents,<br \/>\nwe simply note that as regards the two personal bonds, they<br \/>\nbear on their face the signature(s) of the executant thereof,<br \/>\nand as regards the agreement, we find that it bears the<br \/>\nsignatures of the authorized signatory of the respondent No.2,<br \/>\nwith the stamp of the company embossed thereunder.                           If<br \/>\nsignature(s) of an executant appears on a document, in what<br \/>\nmanner it is alleged that the document has not been properly<br \/>\nexecuted needs to be pleaded.\n<\/p>\n<p>15.          Holding that on the existing pleadings, issue No.2<br \/>\nought not to have even been settled, we shall be discussing on<br \/>\nthe subject as was debated before the learned Single Judge<br \/>\nwhile dealing with the submissions urged during hearing of the<br \/>\nappeal.\n<\/p>\n<p>16.          Issue No.1 decided against the appellants and<br \/>\nrespondent No.2 was not pressed before us. Only submissions<br \/>\nurged were to the admissibility of the lease agreement and the<br \/>\npersonal guarantee(s) and qua the sum decreed, we shall be<br \/>\nnoting hereinafter such facts as are relevant to deal with the<br \/>\nsame.\n<\/p>\n<p>17.          Before issues were settled, admission\/denial was<br \/>\ncompleted      and     it   needs   to   be   highlighted   that     during<br \/>\nadmission\/denial, the agreement was admitted as Ex.P-1 and<\/p>\n<p><span class=\"hidden_text\"> RFA (OS) No.78\/2011                                               Page 7 of 17<\/span><br \/>\n the personal guarantee bond(s) were admitted as Ex.P-3 and<br \/>\nEx.P-4. The five cheques were admitted as Ex.P-5 to Ex.P-9.\n<\/p>\n<p>18.           One witness each was examined by the parties and<br \/>\nMr.Sudhir Rustagi PW-1 tendered by way of affidavit his<br \/>\nexamination-in-chief and once again referred to the aforenoted<br \/>\ndocuments as having been duly executed and suffice would it<br \/>\nbe to highlight that at no stage was the admissibility of the<br \/>\ndocuments questioned.\n<\/p>\n<p>19.           On the issue of admissibility, with reference to<br \/>\nSections 33 and 35 of the Stamp Act and Section 36 thereof,<br \/>\nthe learned Single Judge has held that the rigors of Sections 33<br \/>\nand 35 of the Stamp Act were whittled down by Section 36<br \/>\nthereof which prohibited the questioning of any instrument<br \/>\nwhich was admitted in evidence, except to the extent provided<br \/>\nin Section 61 thereof. The learned Single Judge has held that<br \/>\nwhen the documents were tendered in evidence and proved,<br \/>\nno contemporaneous objection qua their admissibility being<br \/>\nraised, it was too late in the day for the appellants to have<br \/>\nargued with reference to the admissibility thereof.\n<\/p>\n<p>20.           We find sufficient force in the contention urged by<br \/>\nlearned counsel for the appellants that they had raised an issue<br \/>\npertaining to the admissibility of the said documents in the<br \/>\nwritten statement filed and it was not a case where question of<br \/>\nadmissibility was not predicated at the earliest. Counsel urged<br \/>\nthat the mere formality of not repeating the objection qua<br \/>\nadmissibility, when evidence was led would not mean that no<br \/>\nobjection qua admissibility with reference to stamp duty was<br \/>\nnot raised.\n<\/p>\n<p><span class=\"hidden_text\"> RFA (OS) No.78\/2011                                    Page 8 of 17<\/span><\/p>\n<p> 21.          But, we hold against the appellants for the reason,<br \/>\nwe have already held, that on the vague pleading no issue was<br \/>\nrequired to be settled qua the adequacy or inadequacy of the<br \/>\nthree documents inasmuch as we find that adequate stamp<br \/>\nduty was paid and the objection being raised was, as finally<br \/>\nargued, that the stamp duty was paid in the State of Uttar<br \/>\nPradesh. If this was the precise objection raised, the opposite<br \/>\nparty could have taken recourse to corrective measure as per<br \/>\nSection 31 of the Stamp Act.\n<\/p>\n<p>22.          Besides, we find that there is no evidence that the<br \/>\ndocuments were not executed in the State of Uttar Pradesh,<br \/>\nbut were executed at Delhi.\n<\/p>\n<p>23.          In the teeth of the agreement Ex.P-1 and admission<br \/>\nof the fact that five cheques in sum of `2,90,495\/- pertaining to<br \/>\nfive quarters remained unpaid, the learned Single Judge has<br \/>\nheld that the sum of `14,52,475\/- was payable, for the reason it<br \/>\nwas not disputed by the appellants and respondent No.2 that<br \/>\nthe leased moulds had not only been retained by respondent<br \/>\nNo.2 but even used all throughout.\n<\/p>\n<p>24.          The argument advanced before us by learned<br \/>\ncounsel for the appellants was that once the cheque for the<br \/>\neighth lease quarter was dishonoured, the plaintiff ought to<br \/>\nhave returned the margin money and taken back the moulds.\n<\/p>\n<p>25.          The argument has no legs to stand on, for the<br \/>\nreason, a perusal of the lease agreement Ex.P-1 would reveal<br \/>\nthat the value of the leased moulds, called the asset, as per the<br \/>\nAnnexure to the lease was `60,62,500\/- (Rupees Sixty Lakhs<br \/>\nSixty Two Thousand and Five Hundred only) and half of which<br \/>\ni.e `30,31,250\/- was the margin money. The term of the lease<br \/>\n<span class=\"hidden_text\"> RFA (OS) No.78\/2011                                    Page 9 of 17<\/span><br \/>\n was 36 months and vide serial number eight of the Schedule to<br \/>\nthe Agreement, after 36 months the lease could be renewed at<br \/>\na lease rental of only 1%.      We now note a few important<br \/>\nclauses of the lease. They are as under:-\n<\/p>\n<blockquote><p>        &#8220;2.3        Without affecting the Lessor\u201fs right or the<br \/>\n        Lessee\u201fs obligations to pay the lease rentals of the<br \/>\n        fixed period specified herein, in the event of Lessee<br \/>\n        being in arrears of such rentals, such arrears of lease<br \/>\n        rentals shall carry service charges at the rate of<br \/>\n        three percent (3%) per month compounded quarterly<br \/>\n        of each instalment of lease rent or part thereof that<br \/>\n        remain unpaid. The Lessor will be entitled to Bank<br \/>\n        charges, collection charges or any other expenses<br \/>\n        borne by the Lessor. The Lessor will immediately<br \/>\n        claim a service charge @ `150.00 for every<br \/>\n        dishonoured cheque, plus legal expenses for trial, if<br \/>\n        any, under the Negotiable Instrument Act which the<br \/>\n        Lessee shall pay to the Lessor on demand.\n<\/p><\/blockquote>\n<blockquote><p>        2.4 Upon termination of this lease by efflux of time<br \/>\n        or otherwise the Lessee shall, at its own cost and<br \/>\n        expenses forthwith deliver or cause to be delivered<br \/>\n        to the Lessor the Assets, at such time and place as<br \/>\n        may be directed by the Lessor, in good repair, order<br \/>\n        and condition (subject to normal and tear).\n<\/p><\/blockquote>\n<blockquote><p>        xxxxxx<\/p>\n<p>        4.16       On demand pay to the lessor all costs,<br \/>\n        charges and expenses incurred by the lessor in<br \/>\n        connection with the Assets (including inspection<br \/>\n        thereof as mentioned in Clause 4.10 above) or for<br \/>\n        the preservation, protection or enforcement of the<br \/>\n        lessor\u201fs right or for retaking or repossession of the<br \/>\n        Assets with service charges thereon at the rate of<br \/>\n        three per cent (3%) per month, from the date of the<br \/>\n<span class=\"hidden_text\">RFA (OS) No.78\/2011                                     Page 10 of 17<\/span><br \/>\n         incurring such costs, charges and expenses by the<br \/>\n        lessor, till payment.\n<\/p><\/blockquote>\n<blockquote><p>        xxxxxx<\/p>\n<p>        7.3 If the lessee fails to pay the moneys referred to<br \/>\n        in 7.1 and 7.2 above, the lessor may pay the same<br \/>\n        and the lessee shall reimburse all sums so paid<br \/>\n        together with service charges thereon at the rate of<br \/>\n        three per cent (3%) per month from the date of<br \/>\n        payment till such reimbursement.\n<\/p><\/blockquote>\n<blockquote><p>        xxxxxx<\/p>\n<p>        9.2.2      Without prejudice to and in addition to<br \/>\n        the lessor\u201fs rights provided in Clause 9.2.1<br \/>\n        hereinabove, the lessor shall also be entitled to<br \/>\n        recover from the lessee and the lessee shall be<br \/>\n        bound to pay to the lessor the following amounts,<br \/>\n        viz.:\n<\/p><\/blockquote>\n<blockquote><p>             a) the entire amount of the rentals for the<br \/>\n        Fixed Period of the lease computed in the manner set<br \/>\n        out in the Schedule attached as if the lease had not<br \/>\n        been terminated to the end and intend that the<br \/>\n        lessee shall pay to the lessor not only arrears of<br \/>\n        rentals upto the date of termination of the lease but<br \/>\n        also such further amount for the then unexpired<br \/>\n        residue of the term which the lessee would have<br \/>\n        been bound to pay to the lessor had the lease<br \/>\n        continued, and\n<\/p><\/blockquote>\n<blockquote><p>             b) the cost of all repairs and maintenance of<br \/>\n        the Assets to render and maintain it on good working<br \/>\n        order and condition and all costs, charges and<br \/>\n        expenses incurred by the lessor in repossessing the<br \/>\n        Assets and in enforcing its remedies howsoever<br \/>\n        occasioned. The parties hereto agree and record that<br \/>\n        the amounts to be paid by the lessee to the lessor or<br \/>\n<span class=\"hidden_text\">RFA (OS) No.78\/2011                                    Page 11 of 17<\/span><br \/>\n       aforesaid have been bonafide and satisfactorily<br \/>\n      estimated to be the proper and reasonable amount<br \/>\n      that may be suffered by the lessor as and by way of<br \/>\n      liquidated damages.\n<\/p><\/blockquote>\n<p>25.          The annexure to the lease reads as under:-\n<\/p>\n<blockquote><p>         ANNEXURE\/SCHEDULE TO LEASE AGREEMENT<br \/>\n       FORMING PART OF THE LEASE AGREEMENT DATED<br \/>\n                       10\/09\/1994<br \/>\n      0.1.    LESSOR                  RUSTAGI ENGINEERING UDYOG<br \/>\n                                      (P) LIMITED 201\/3, PANKAJ<br \/>\n                                      CHAMBERS<br \/>\n                                      COMMERCIAL COMPLEX<br \/>\n                                      PREET VIHAR, DELHI-110 092<\/p>\n<p>      0.2.    LESSEE                  PRESTIGE HM &#8211;\n<\/p><\/blockquote>\n<blockquote><p>                                      POLYCONTAINERS LIMITED<br \/>\n                                      8, SHREYAS<br \/>\n                                      OPP. AIR INDIA, NARIMAN POINT<br \/>\n                                      BOMBAY-400 020 &amp; DELHI<br \/>\n                                      OFFICE AT<br \/>\n                                      A-7, MAHARANI BAGH,<br \/>\n                                      NEW DELHI-110 065<\/p>\n<p>      0.3.    DESCRIPTION OF ASSETS   1250 SETS OF M.S. MOULDS @<br \/>\n                                      RS.4850\/- EACH (AS PER<br \/>\n                                      DRAWING ATTACHED AND<br \/>\n                                      FORMING PART OF THE LEASE<br \/>\n                                      AGREEMENT)<\/p>\n<p>      0.4.    SUPPLIER                M\/S.SHASHANK POLY-PLAST<br \/>\n                                      LIMITED<br \/>\n                                      B-90 &amp; B-107, SECTOR 6,<br \/>\n                                      NOIDA, DISTT. GHAZIABAD,<br \/>\n                                      U.P. &#8211; 201 301.\n<\/p><\/blockquote>\n<pre>      0.5.    VALUE OF ASSETS         Rs.60,62,500\/-\n\n      0.6.    LEASE TENOR             36 Months\n\n      0.7.    LEASE RENTAL            Rs.2,90,495\/- per quarter\n              STRUCTURE               continuously for 12 quarters\n                                      payable in advance, at par at\n                                      Deli commencing from the date\n                                      of disbursal.\n\n         0.8. RENEWAL OPTION          @ 1%\n<span class=\"hidden_text\">RFA (OS) No.78\/2011                                       Page 12 of 17<\/span>\n<\/pre>\n<blockquote><p>         0.9.    REPAIR, MAINTENANCE &amp;   To be undertaken by the lessee<br \/>\n                INSURANCE               at the lessee\u201fs cost. The lessee<br \/>\n                                        providing the appropriate<br \/>\n                                        insurance of the leased asset<br \/>\n                                        throughout the period of lease<br \/>\n                                        designating the lessor and\/or its<br \/>\n                                        nominees as loss payees.\n<\/p><\/blockquote>\n<pre>       0.10. MARGIN MONEY               Rs.30,31,250.00\n\n       0.11     DEPRECIATION            The moulds will be eligible for\n                ELIGIBILITY             100% write off in the financial\n                                        year ending 31.3.1994 under\n                                        First Proviso to Sub Clause (ii) of\n                                        Clause (1) of Section 32 of the\n                                        Income Tax Act, 1961\n\n<\/pre>\n<blockquote><p>        The lease rental structure as detailed above has<br \/>\n        been arrived at on the express assumption that the<br \/>\n        asset on lease as detailed above will be subject to<br \/>\n        depreciation at a rate of 100% i.e. in the accounting<br \/>\n        year ended 31.03.1994. It is also hereby agreed that<br \/>\n        all mention of assets as detailed above in the new<br \/>\n        singular shall mean to include the plural and vice<br \/>\n        versa.&#8221;\n<\/p><\/blockquote>\n<\/blockquote>\n<blockquote><p>26.            Suffice would it be to note that vide clause 9.1 and<br \/>\nits various sub-clauses, upon default by the lessee, the lease<br \/>\ncould be determined and vide clause 9.2.2, contents whereof<br \/>\nhave been noted hereinabove, notwithstanding the lease being<br \/>\ndetermined, the entire lease rentals were payable. Thus, it is<br \/>\napparent that the plaintiff was entitled to a lease rental for the<br \/>\nfull twelve quarters.\n<\/p><\/blockquote>\n<p>27.            It is not the case of the appellants that they ever<br \/>\nreturned or even offered to return the moulds. They continued<br \/>\nto use the same.\n<\/p>\n<p>28.            The lease in question has to be understood with<br \/>\nbusiness efficacy.      Moulds are perishable industrial tools and<\/p>\n<p><span class=\"hidden_text\">RFA (OS) No.78\/2011                                             Page 13 of 17<\/span><br \/>\n with passage of time a mould becomes scrap.                   The lease<br \/>\nagreement recognizes this fact by reducing its value to virtually<br \/>\nnil after three years, evidenced by the fact that after three<br \/>\nyears the lease rental agreed to was only 1%. The last part of<br \/>\nthe schedule reads: The lease rental structure as detailed<br \/>\nabove has been arrived at on the express assumption that the<br \/>\nasset on lease as detailed above will be subject to depreciation<br \/>\nat a rate of 100% i.e. in the accounting year ended 31.03.1994.<br \/>\nIt is also hereby agreed that all mention of assets as detailed<br \/>\nabove in the new singular shall mean to include the plural and<br \/>\nvice versa.       It is apparent that the moulds were subject to<br \/>\ndepreciation as recognized under the tax laws and after three<br \/>\nyears full depreciation of 100% was claimed. So understood, it<br \/>\nis apparent that the so-called margin money was half the price<br \/>\nof the moulds and the remainder half was agreed to be paid as<br \/>\na lease rental and in this connection we simply highlight that<br \/>\nthe twelve quarterly lease rentals @ `2,90,495\/- per quarter<br \/>\nmultiplied by 12 comes to `34,85,940\/- and this explains that<br \/>\non the remainder half investment, in sum of `30,31,250\/-, an<br \/>\ninbuilt interest element had been factored; being `4,54,690\/-.\n<\/p>\n<p>29.          Thus we agree with the learned Single Judge that<br \/>\nthe   plaintiff       was   entitled   to   receive   `14,52,475\/-   from<br \/>\nrespondent No.2 and since its Managing Director and Director<br \/>\ni.e. the appellants had stood personal guarantee(s), the two<br \/>\nwere jointly and severally liable to the plaintiff.\n<\/p>\n<p>30.          An argument was advanced that the plaintiff was<br \/>\nobliged in law to mitigate the loss as per the explanation to<br \/>\nSection 73 of the Contract Act. It was urged that upon default<br \/>\nbeing committed by the respondent No.2 the plaintiff was<br \/>\n<span class=\"hidden_text\">RFA (OS) No.78\/2011                                            Page 14 of 17<\/span><br \/>\n obliged to seize the moulds and sell them in the market at the<br \/>\nbest price and adjust the same from the balance outstanding.\n<\/p>\n<p>31.          The learned Single Judge has correctly held that the<br \/>\nmargin money, reflecting 50% of the value of the moulds, was<br \/>\nto secure the moulds and there was thus no question of<br \/>\nadjusting the margin money towards lease rentals.\n<\/p>\n<p>32.          Pot calling a kettle black! The appellants retained<br \/>\nthe moulds and never offered to return the same.                  Till the<br \/>\nmoulds came into possession of the plaintiff it could not sell the<br \/>\nsame.     Having not offered to return the moulds, which the<br \/>\nplaintiff could not seize forcefully as law did not permit it to do<br \/>\nso, it does not lie in the mouth of the appellants to so urge.\n<\/p>\n<p>33.          The      claim   for   `5,79,048\/-,   being   3%     of    the<br \/>\noutstanding lease rental compounded quarterly, payable as per<br \/>\nclause 2.3 and 4.16 of the lease agreement has rightfully being<br \/>\ndenied by the learned Single Judge holding the same to be<br \/>\npenal interest under the garb of service charges. The learned<br \/>\nSingle Judge has rightly observed that the plaintiff was not to<br \/>\nprovide any service under the agreement. The learned Single<br \/>\nJudge has rightly opined the same to be a penal provision akin<br \/>\nto a penal clause pertaining to damages and has rightly held<br \/>\nthat for money outstanding a reasonable rate of interest is to<br \/>\nbe paid to recompense the plaintiff.\n<\/p>\n<p>34.          Thus, the learned Single Judge has passed a decree<br \/>\nin sum of `14,52,475\/- (Rupees Fourteen Lakhs Fifty Two<br \/>\nThousand Four Hundred and Seventy Five only) with interest<br \/>\n@10% compounded annually till date of payment. Costs and<br \/>\nlawyer\u201fs fee quantified at `55,000\/- has also been decreed.\n<\/p>\n<p><span class=\"hidden_text\">RFA (OS) No.78\/2011                                             Page 15 of 17<\/span><\/p>\n<p> 35.          On the interest being compounded per annum,<br \/>\nsuffice would it be to state that as held in the decision reported<br \/>\nas 2010 SC 1511 State of Haryana &amp; Ors. Vs. M\/s.S.L.Arora &amp;<br \/>\nCo., unless a statute or a contract so specifies, Courts do not<br \/>\ngenerally, award interest by compounding the same.\n<\/p>\n<p>36.          As noted hereinabove, the plaintiff incurred a capital<br \/>\nexpenditure of `60,62,500\/- to purchase the moulds and leased<br \/>\nthe same to respondent No.2. Receiving `30,31,250\/- i.e half<br \/>\nthe capital towards margin money, balance capital expenditure<br \/>\nincurred in sum of `30,31,250\/- was to be recovered by way of<br \/>\nlease rentals in sum of `2,90,495\/- per quarter.            As noted<br \/>\nabove, the lease being for a period of three years, having<br \/>\ntwelve quarters, the lease rental recoverable was `34,85,940\/-.<br \/>\nThe difference        between      the balance   capital expenditure<br \/>\nincurred     and      what   was     recoverable    was   `4,54,690\/-<br \/>\n(`34,85,940\/- &#8211; `30,31,250\/-). In other words, the plaintiff was<br \/>\nto get a return of `4,54,690\/- on the balance capital of<br \/>\n`30,31,250\/- which gives a return of about 5% per annum on<br \/>\nthe    balance        investment     of   `30,31,250\/-.   Under     the<br \/>\ncircumstances, a reasonable rate of interest on the sum of<br \/>\n`14,52,475\/- (which already has an inbuilt element of about 5%<br \/>\ninterest per annum) would be 8% simple interest per annum.\n<\/p>\n<p>37.          The appeal is partially allowed.       Suit filed by the<br \/>\nplaintiff is decreed against the defendants i.e. the appellants<br \/>\nand respondent No.2, whose liability shall be joint and several,<br \/>\nin sum of `14,52,475\/- with interest @8% per annum from date<br \/>\nof suit till realization.    We maintain the cost imposed by the<br \/>\nlearned Single Judge, and as regards the appeal, would leave<br \/>\nthe parties to bear their own costs.\n<\/p>\n<p><span class=\"hidden_text\">RFA (OS) No.78\/2011                                         Page 16 of 17<\/span><\/p>\n<p> 38.          Noting that the appellants and respondent No.2 had<br \/>\njointly   deposited   `25,00,000\/-    vide   demand   draft   dated<br \/>\n18.11.2002 with the Registry of this Court which was invested<br \/>\nin a fixed deposit and along with the accrued interest was paid<br \/>\nto the plaintiff on 12.3.2004, we clarify that the interest<br \/>\nawarded by us on sum of `14,52,475\/- @8% per annum would<br \/>\nreckon from the date when suit was filed till 12.3.2004 and the<br \/>\nbenefit of the interest which accrued on the FDR on the deposit<br \/>\nof `25,00,000\/- would be to the credit of the appellants and<br \/>\nrespondent No.2.      We note that as per decree passed by us,<br \/>\nmoney would be refundable to the appellants and respondent<br \/>\nNo.2 and for which the appellants would be entitled to seek<br \/>\nrestitution by filing an appropriate application before the<br \/>\nlearned Single Judge.      Till restitution is effected, security<br \/>\nfurnished by the plaintiff when it withdrew the sum of<br \/>\n`25,00,000\/- deposited by the appellants and respondent No.2<br \/>\ntogether with accrued interest thereon shall be retained and<br \/>\nupon restitution effected, the learned Single Judge would pass<br \/>\nnecessary directions.\n<\/p>\n<p>                                     (PRADEEP NANDRAJOG)<br \/>\n                                            JUDGE<\/p>\n<p>                                        (S.P. GARG)<br \/>\n                                             JUDGE<br \/>\nNovember 21, 2011<br \/>\nmm<\/p>\n<p><span class=\"hidden_text\">RFA (OS) No.78\/2011                                      Page 17 of 17<\/span>\n <\/p>\n","protected":false},"excerpt":{"rendered":"<p>Delhi High Court P.K.Gupta &amp; Anr. vs Ess Aar Universal Pvt. Ltd. &amp; Anr. on 21 November, 2011 Author: Pradeep Nandrajog * IN THE HIGH COURT OF DELHI AT NEW DELHI % Judgment Reserved On: 17th November, 2011 Judgment Pronounced On: 21st November, 2011 + RFA(OS) 78\/2011 PK GUPTA &amp; ANR &#8230;.. Appellant Through: Mr.S.K.Chachra, [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_lmt_disableupdate":"","_lmt_disable":"","_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[14,8],"tags":[],"class_list":["post-134325","post","type-post","status-publish","format-standard","hentry","category-delhi-high-court","category-high-court"],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v27.6 - https:\/\/yoast.com\/product\/yoast-seo-wordpress\/ -->\n<title>P.K.Gupta &amp; Anr. vs Ess Aar Universal Pvt. 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