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Judgment
Tarlok Singh Chauhan, J.—1. Plaintiff has filed the instant suit for recovery of Rs. 72,37,562.00 with costs and interest @9% per annum from the date of suit till realization of the decretal amount with half yearly rests. It is averred that the plaintiff is a company incorporated under the Companies Act, 1956 and having its registered office at Shimla. Sh. Vinayaka Kahol (Senior Manager), Project of the Corporation is duly authorized by the Managing Director of the Plaintiff in terms of resolution No. 12 dated 18.6.1997, passed by the Board of Directors of the plaintiff company, to sign, verify plaints, institute suits on behalf of plaintiff company and to appoint advocate etc. for prosecuting suits etc.
One of the various functions of the Plaintiff Corporation is to provide financial assistance in the form of term loans, equity and soft loans (under Seed Capital assistance scheme of IDBI).
Defendant No. 1 company approached the plaintiff Corporation for the grant loan and was sanctioned a term loan of Rs. 33.00 lacs ( Rs. 15.00 lacs on 9.1.1984), Rs. 10.00 lacs on 29.12.1988 and Rs. 8.00 lacs on 2.12.1991) for the construction of factory building, purchase of land and plant and machinery and other assets for setting up an industrial unit for the manufacture of ERW galvanized Black Steel Tubes at Plot No. 10, Sector 3, Industrial Area, Parwanoo, District Solan, H.P. The interest agreed to be paid by defendant No. 1 on the loan amount was 12.5% per annum with half yearly rest on term loan of Rs. 15.00 lacs, Rs. 10 lacs and 19% per annum on Rs. 8.00 lacs.
For securing repayment of the said loan and interest thereon, defendant No. 1, through its Directors, i.e. Defendant No. 2 and 3 executed promissory note, loan agreements on 24.9.1984, 29.12.1988 and 2.12.1991 with respect to term loan of Rs. 33.00 lacs and hypothecation agreements regarding land, building, plant and machinery and other asset was also executed on 24.9.1984, 29.12.1988 and 2.12.1991. Apart from this, equitable mortgage by deposit of title deeds of the properties of the industrial concern of defendant No. 1 in favour of plaintiff Corporation was also made on 24.9.1984, 29.12.1988 and 2.12.1991 with proforma defendant No. 4, who was a co-financer with plaintiff and proforma defendant No. 5.
Defendants No. 2 and 3 stood guarantee with respect to aforesaid loans advanced to M/s. Chanana Steel Tubes Pvt. Ltd. and consequently executed deed of Guarantee on 24.9.1984, 29.12.1988, 2.12.1991 and 6.12.1991 guaranteeing repayment of aforesaid loans advanced to the company and interest thereon and they being guarantors are liable to pay the outstanding loan amount along with interest to the plaintiff. The liability of defendants No. 2 and 3 is joint and several with defendant No. 1 and it is a continuing guarantee provided by defendant No. 2 and 3 in favour of the plaintiff company in respect of the loans advanced by the plaintiff company to the defendant No. 1 company.
As per loan documents executed by the defendants in favour of plaintiff Corporation, the agreed interest was to be paid in half yearly instalments commencing from 10.8.1996 for loan of Rs. 15.00 lacs and Rs. 10.00 lacs and on 10.8.1998 for loan of Rs. 8.00 lacs and the last instalment was payable on or before 10.2.2001 as per revised repayment schedule agreement dated 23.12.1991.
Defendants failed to comply with the terms and conditions of the loan documents and also failed to pay the instalments of principal amount and interest thereon in accordance with the repayment schedule and, therefore, hypothecated/mortgaged assets of the industrial concern of defendant No. 1 were taken over by the plaintiff under the provision of Section 29 of the State Financial Corporation Act, 1951 on 21.7.1995. The defendants during the period of take over, submitted proposals for One Time Settlement of dues on 28.10.1996, 3.2.1997, 13.5.1997 and 19.8.1999, but the same were very low and not, therefore, was not accepted by the plaintiff. Thereafter, the assets, i.e. land, building, plant and machinery and other miscellaneous assets of the defendant No. 1 were put to auction by the plaintiff and an offer of Rs. 65.00 lacs was approved on 6.1.1999. Defendants were asked to produce better buyer, but they failed to do so and instead obtained stay from the court of Ld. Sub Judge, Solan in January, 1999 against the sale of assets. The stay order was finally vacated on 7.9.2001 and it is thereafter that the assets were sold by plaintiff on 15.9.2001 for Rs. 65.00 lacs to M/s. Plato Polymers Ltd., Plot No. 4, Sector-3, Industrial Area, Parwanoo. The sale proceeds were shared between plaintiff, proforma defendant No. 4 and 5 as under:
After adjustment of the sale proceeds in the aforesaid manner, liability of the defendants was calculated at the documented rate of interest on simple basis and a sum of Rs. 83,93,754.00 on account of interest was waived off. There was still a shortfall to the tune of Rs. 72,37,562.00 for the payment of which defendants No. 2 and 3 being guarantors were liable to pay this amount to the plaintiff. These defendants were called upon to pay the balance amount along with future interest from 30.9.2001 till final payment vide notice dated 23.11.2001 within one month from the receipt of notice and having failed to do so, the instant suit was filed for the reliefs already set out above.
Defendants 1 to 3 filed their joint written statement wherein preliminary objections like maintainability, suppression of facts, suit having not been filed by an officer authorized, valuation, want of cause of action, violation of the provisions of Section 51 of the Indian Contract Act and jurisdiction were raised. On merits, it was averred that it was on account of incentive and various packages offered by the State of HP that defendants decided to invest their money in Himachal Pradesh and obtained the aforesaid loan. The estimated cost of the unit in the year 1980 was Rs. 22.35 lacs with an installed capacity of 9000 tons per annum. It is further averred that it was on account of difficulties created by the HPSEB by not providing adequate power supply and thereafter on account of non availability of the cement and other materials that there was considerable delay in setting up of the unit, which resulted in an additional interest element during the construction period which rose from Rs. 3.50 lacs to Rs. 22.52 lacs. Moreover, due to the aforesaid facts although the plant and machinery was installed in March, 1982, the actual production could start only in the year 1983. Further, there was shortage of raw-material which was to be supplied by the government of HP and because of this, the cost of the project of the defendant No. 1 arose to Rs. 84.78 lacs. Defendant No. 1 continuously requested the plaintiff to sanction adequate working capital to enable the unit of the defendant No. 1 to run smoothly. However, the approval of the working capital was delayed which only increased the interest liability. Defendant No. 1 suffered continuous losses for more than three financial years, constraining it to make representations for declaring the unit as sick viable unit as per guidelines of Reserve Bank of India. The plaintiff failed to give rehabilitation package and instead advised defendant No. 1 to approach HP Consultancy Organization (HIMCON), a government of HP agency for preparation of rehabilitation package. The defendant No. 1 accordingly approached the HIMCON at the request of the plaintiff, who undertook a detailed Techno Economic Rehabilitations Study of the defendant No. 1 and pointed out the reasons for its being sick along with reliefs and concessions, economic viability and other recommendations.
The Government of HP in the year 1991 notified various concessions for viable units, which provided for various incentives to such units especially in respect to concessions in sales tax, easy availability of raw material and rebate in the rate of interest. However, the said concessions as assured by the government were not given to defendant No. 1 due to lapse on the part of plaintiff in not interacting with the various agencies of the Government of HP.
The Rehabilitation package prepared by HIMCON was not accepted by the plaintiff and instead it decided to frame its own Rehabilitation Package. As per this package, revival plan of defendant No. 1 was to be spread over a period of 9 years from 1.1.1992 to 1.12.2000 for which a fund of Rs. 30.11 lacs was required and the defendants 2 and 3 were called upon to contribute a sum of Rs. 12.50 lacs. This demand, is alleged to be arbitrary and against the settled norms and guidelines issued by the Reserve Bank of India and IDBI as the promoter''s contribution under the Rehabilitation Package could not be more than 10%.
However, still defendants arranged a sum of Rs. 12.50 lacs and contributed the same for revival of defendant No. 1. However, despite this, plaintiff also failed to adhere to the commitments made in the Rehabilitation Package and the plaintiff also failed to release funds which it was to do as per terms of Rehabilitation Scheme. This resulted in further losses of the defendant.
It is further alleged that as per the guidelines of Reserve Bank of India and IDBI, no interest was to be charged during the sickness period and in fact if any interest had actually been recovered, the same was to be refunded by the financial institutions/bank. Defendant No. 1 had paid more than Rs. 100.00 lacs towards interest element after 1986 and the plaintiff failed to refund the same.
It is also alleged that defendant No. 1 unit was illegally taken over by the plaintiff on 21.7.1995 because as per the case set up by the plaintiff itself, loan amount was to be repaid only from 10.8.1996 and, therefore, there was no cause for the plaintiff to have taken over the assets of the unit prior to the said date. Moreover, the malafides of the plaintiff are also borne out from the fact that plaintiff is alleged to have sent a notice only on 20.7.1995 that too under UPC wherein defendant No. 1 had been called upon to hand over the unit to the plaintiff on 21.7.1995 at 10.00 am. Therefore, even if the alleged letter was genuinely posted by the plaintiff on 20.7.1995, the same, by no stretch of imagination could have been reached the defendant No. 1 before 10.00 am on 21.7.1995, as such, entire action of the plaintiff in showing undue haste and unwarranted interest in forcibly taking possession of the sick unit of the plaintiff, by adopting the aforesaid illegal means, and thereafter disposing of the unit at a price much lower than the marked rate, speaks loud of the malafide intentions of the plaintiff and its officers.
Defendants have also questioned the jurisdiction of this court to try and determine the suit on the ground that the registered office of defendant No. 1 is at Delhi and even defendants 2 and 3 reside and work for gain at Delhi. On such allegations, defendants have prayed for dismissal of the suit.
Plaintiff has filed replication, wherein averments in the plaint have been reiterated and reaffirmed and the contrary averments of the written statement have been denied. The proforma defendants have also filed their written statements but the same need not to be referred to as these defendants are only a proforma defendants.
On the pleadings of the parties, this court vide its order dated 10.7.2003 framed the following issues.
"(i) Whether the plaint has been filed and verified by a person competent to do so on behalf of plaintiff, if not, its effect? ...OP Parties
(ii) Whether the suit is within time? ...OPP
(iii) Whether the plaintiff is entitled to the suit amount, as claimed, or any their amount, if so how much? ...OPP
(iv) Whether the plaint discloses any cause of action, if not, its effect? ...OPP
(v) Whether the suit is properly valued for the purposes of Court fee and jurisdiction? ...OPP
(vi) Whether the suit is hit under Section 51 of the Indian Contract Act, if so its effect? ...OPD
(vii) Whether this Court lacks territorial jurisdiction to entertain and determine the present suit, if so, its effect? ...OPD
(viii) Reliefs."
I have heard the learned counsel for the parties and have gone through the records of the case and my issue wise findings are as under:
Issue No (i)
The plaintiff has proved on record the copy of resolution Ext P-1, whereby Senior Manager (Projects) of the Plaintiff Corporation Sh. Vinayak Kohal has been duly authorized to sign the plaint. He has further been authorized to verify and sign the plaint as is evident from Ext P-2. The defendants, on the other hand, have led no evidence on this issue and, therefore, same is decided in favour of plaintiff and against the defendant.
Issue No (ii)
This issue is no longer res integra in view of the law laid down by Hon''ble Supreme Court in Civil Appeal No. 1971 of 1998, titled HPFC v. Smt. Pawna & ors decided on 18.12.2003 and also in view of subsequent judgment of the Hon''ble Supreme Court in Deepak Bhandari v. H.P. State Industrial Development Corporation Ltd., , AIR 2014 SC 961, wherein it has been categorically held that when the Corporation takes steps for recovery of the amount by resorting to the provisions of Section 29 of the Act, limitation period for recovery of balance amount would start only after adjusting the proceeds from the sale of assets of the industrial concern. As it would be then that the Corporation would be in a position to ascertain and know as to whether there is a shortfall or there is excess amount realized after sale of the mortgage hypothecated assets.
Undisputedly, the industrial concern of defendant No. 1 was taken over by the plaintiff under the provisions of Section 29 of the Act on 21.7.1995. The defendant during the period of take over, submitted proposals for One Time Settlement of dues on 28.10.1996, 3.2.1997, 13.5.1997 and 19.8.1999, but the same were found to be very low, therefore, not accepted by the plaintiff. Ultimately, assets of the defendant No. 1 were put to auction and offer of Rs. 65.00 lacs was approved by the plaintiff on 6.1.1999. The defendants were called upon to produce better buyers and they not only failed to do so, rather obtained stay from the court of learned Sub Judge, Solan in January, 1999 against the sale of assets which was vacated only on 7.9.2001 and it is thereafter that the assets of defendant No. 1 were sold by the plaintiff on 15.9.2001 for Rs. 65.00 lacs to M/s. Plato Polymers Ltd. After appropriating the sale proceeds jointly amongst the plaintiff and proforma defendants No. 4 and 5, final outstanding amount was worked out and thereafter suit was immediately instituted on 9.1.2002 and, therefore, is within the period of limitation. The issue is accordingly answered in favour of plaintiff.
Issue No (V).
Plaintiff has filed suit for recovery of Rs. 72,37,562/- and as per provisions of HP Court Fee, has affixed the proper court fee of suit Rs. 73,07,000/-, therefore, this issue is decided in favour of plaintiff.
Issue No (vi)
Section 51 of the Indian Contract Act reads thus:
"51. Promissor not bound to perform, unless reciprocal promisee ready and willing to perform.--When a contract consists of reciprocal promises to be simultaneously performed, no promissor need perform his promise unless the promisee is ready and willing to perform his reciprocal promise
Illustrations
(a) A and B contract that A shall deliver goods to B to be paid for by B on delivery. A need not deliver the goods, unless B is ready and willing to pay for the goods on delivery.
B need not pay for the goods, unless A is ready and willing to deliver them on payment.
(b) A and B contract that A shall deliver goods to B at a price to be paid by instalments, the first instalment to be paid on delivery.
A need not deliver, unless B is ready and willing to pay the first instalment on delivery.
B need not pay the first instalment, unless A is ready and willing to deliver the goods on payment of the first instalment."
Defendants have led no evidence whatsoever to prove that the suit is hit by the provisions of Indian Contract Act, more particularly section 51 thereof. Defendants have not denied availing of the loan after executing various documents from the plaintiff and thus are bound by various documents executed inter se them. They were well aware of the terms and conditions of the agreements and were thus required to lead specific evidence as to how the suit was hit by Section 51 of the Indian Contract Act, more particularly when onus of this issue rests upon them. Therefore, in absence of any evidence having been led by the defendants on this issue, the same is answered against the defendants.
Issue No (vii)
This issue has been redundant with the passage of time as the same stands already decided by this court in OMP No. 320 of 2003 vide order dated 25.11.2003 in favour of plaintiff and against the defendants. Even otherwise it is not disputed that the loans were availed of by the defendants for setting up of their industry in HP, moreover the loan and other documents were executed within the territorial jurisdiction of this Court. That apart, the cause of action has arisen within the jurisdiction of this Hon''ble Court and the loan was also to be paid in the jurisdiction of this court and, therefore, this court has territorial jurisdiction to entertain and determine the present suit. This issue is accordingly decided against the defendants.
Issue Nos (iii) & (iv)
Plaintiff, in support of this issue, examined various witnesses. PW-2 Rajinder Parsad Jain had been working as Senior Manager (Projects) in the head office of the plaintiff at Shimla and was at the relevant time the Incharge of the accounts of loan wing. He was looking after the accounts and the loan was to be sanctioned under his guidance and supervision. He has proved on record the original ledger Ext P-3 (5 sheets) and has authenticated and stated that there was an outstanding balance amount of Rs. 72,37,562/- till 30.9.2001. He was cross examined in length, but nothing adverse has come against the plaintiff.
Similarly, PW-3 Sh. P.K. Bali, Manager (Projects) was examined, who had stated that as per official records maintained by the plaintiff in its regular course of business, he is well acquainted with the files of this case pertaining to loan of defendant No. 1 company which was guaranteed by defendants No. 2 and 3, whereas defendants No. 4 and 5 were co financers of defendant No. 1 along with plaintiff. All the three financers, i.e. plaintiff and defendants No. 4 and 5 were to rank pari-passu so far as the financial assistance provided by them to defendant No. 1 was concerned. It was for this reason that defendants No. 4 and 5 had been arrayed as proforma defendants in the suit. He authenticated applications dated 7.9.1983, 30.5.1987 and 11.4.1991 which was marked as P-4, P-5 and P-6 respectively. This witness also submitted that a total loan of Rs. 33.00 lacs had been sanctioned vide different sanction letters Exts P-7, P-8 and P-9 respectively, whereby a sum of Rs. 15.00 lacs, Rs. 10.00 lacs and Rs. 8.00 lacs had been sanctioned in favour of defendant No. 1 company. He further stated that a sum of Rs. 33.00 lacs was to be returned by the plaintiff with interest in half yearly rests. Loan in the sum of Rs. 15.00 lacs and Rs. 10.00 lacs respectively was to carry interest @ 12.5% p.a. with half yearly rests, whereas on the loan of Rs. 8.00 lacs rate of interest was 19% p.a. with half yearly rests. This witness also authenticated that in terms of the sanction letters, repayment of Rs. 15.00 lacs and Rs. 10.00 lacs was to commence from 10.2.1987 and last instalment was payable on 10.8.1991 and similarly repayment of the loan amount of Rs. 8.00 lacs was to commence from 10.8.1998 and last instalment was to be paid on 10.2.2001. He further stated that defendant No. 1 did not adhere to the repayment schedule. Yet the plaintiff, with a view to rehabilitate, rescheduled the repayment of the first loan of Rs. 15.00 lacs and Rs. 10.00 lacs and an agreement in this regard was entered into between the parties vide Ext P-10. The defendant despite rescheduling the payment of loan again did not adhere to this revised reschedule.
He further authenticated the documents i.e. acceptance along with resolution passed by Board of Directors, which are Exts P-11, P-12 and P-13 respectively. Resolution accompanying it is Ext P-14 and resolutions passed by the Board of Directors of defendant No. 1 company are Exts P-15 and P-16 respectively. He further states that while availing loan in the sum of Rs. 15.00 lacs, loan agreement Ext P-17 was executed and for this amount demand promissory note Ext P-18 was also executed. Similarly, loan agreements availing loans in the sum of Rs. 10.00 lacs and Rs. 8.00 lacs are Exts P-19 and P-20 and for these loans demand promissory notes are Ext P-21 and P-22 respectively. Apart from this, three hypothecation agreements were also executed by defendant No. 1 and the same Ext P-23, P-24 and P-25. In addition to the above documents, defendants No. 2 and 3, with a view to secure repayment of the aforesaid sum of Rs. 33.00 lacs also furnished continuing personal guarantees vide Exts P-26, P-27, P-28 and P-29. He categorically states that no amount was paid in the loan account. Thereafter, first show cause notice was issued on 15.6.1995 Ext P-30 which was duly replied to by the defendants vide their letter dated 13.7.1995 Ext P-31. Thereafter, another notice was issued on 20.7.1995 vide Ext P-32. Plaintiff decided to take over the mortgage assets of the company and for this purpose, date was fixed on 21.7.1995. Assets of defendant No. 1 were taken over by the plaintiff and the minutes prepared at the time of taking over of the assets of the company were exhibited as Ext P-33.
This witness further states that plaintiff and defendant No. 5 were in correspondence with each other and the same has been proved on record as Exts P-34 to P-58, in which numerous proposals were submitted on behalf of defendant No. 1. An offer of Rs. 65.00 lacs was received by the plaintiff. However, before accepting this offer, defendants 1 to 3 were called upon to bring a better buyer vide letter dated 18.9.1998 Ext P-59, which was acknowledged and replied by the defendant vide Ext P-60. The offer was intimated on 6.1.1999 to the defendants vide Ext P-61. However, defendants instead of accepting the offer, filed a suit and obtained stay order from the court at Solan which was finally vacated on 7.9.2001. Ext P-62 is the copy of order passed by the court. After vacation of the stay order, sale offer of Rs. 65.00 lacs was accepted by the plaintiff and letter was issued to the purchaser on dated 15.9.2001 Ext P-63. Other communications addressed by the plaintiff to the defendants 4 and 5 are Exts P-64 and P-65 respectively. For the balance outstanding due after sale proceeds were shared between the plaintiff and proforma defendants 4 and 5, notice of demand was issued to the defendants 1 to 3 vide Ext P-66 and receipt of notice was acknowledged by the defendants on 5.12.2001 vide Ext P-67. Thereafter, writ petition was filed by defendants No. 1 bearing CWP No. 589 of 2002 which was finally dismissed on 20.6.2002 vide Ext P-68.
This witness has been cross examined at length. A suggestion was put to this witness regarding the applicability of the instructions/guidelines issued by the government of HP for establishing industries as well as for rehabilitation of sick industries which were required to be followed by the plaintiff Corporation, but then nothing vital has been extracted in the further cross examination, save and except that in terms of the industrial policy, units were to be provided concessions subject to fulfillment of certain conditions. The witness was further cross examined regarding the applicability of the IDBI guidelines, which he admitted to be applicable in the present case, but denied that it was on account of plaintiff that the defendant No. 1 had suffered losses in three successive financial years i.e. 1983-84, 1984-85 and 1985-86. He further stated that defendant No. 1 did not approach the plaintiff corporation for rehabilitation package in the year 1986 and volunteered to state that it had approached in the year 1989. He after verifying from the record stated that the request for rehabilitation by defendant No. 1 was examined by the plaintiff and package was sanctioned in the year 1991. He further stated that after 1991, defendant No. 1 had not applied for rehabilitation package.
In response to the suggestion that the plaintiff had asked defendant No. 1 to get the matter regarding rehabilitation examined, the witness stated that after receipt of Ext D-1 (69 sheets), matter was put up before consortium financing and admissible package was granted to the defendant No. 1. He further volunteered that the Punjab National Bank was the agency for the said purpose. He denied the suggestion that the plaintiff had unilaterally rejected the report of HIMCON Ext D-1 and then prepared its own report for providing rehabilitation package to defendant No. 1. He further denied the suggestion that from 1986 to 1991, plaintiff without any justifiable cause did not come forth for rehabilitation package to defendant No. 1. This witness also paced on record photocopies of the rehabilitation package Ext D-2 (3 sheets) and stated that in terms thereof, additional promoters contribution was Rs. 12.50 lacs plus Rs. 3.61 lacs. He, however, denied suggestion that the additional promoters contribution and internal accruals shown in Ext D-2 counted for 40% of the of the rehabilitation package and further denied that plaintiff could not have asked for this amount as per the guidelines issued by the IDBI.
This witness denied the suggestion that plaintiff was not entitled to any interest on its outstanding dues between 1986 to 1991 and further denied the suggestion that the interest charged in the account and as claimed in the suit was not payable by the defendants to the plaintiff. This witness to a court question as to ''how he justified the taking over notice Ext P-32 dated 20.7.1995 when taking over as per this communication was fixed on 21.7.1995 stated that taken over of assets of defendant No. 1 were not got evaluated before the same were taken over. However, volunteered that the needful was done after taking over though inventory was prepared on the spot on 21.7.1995. However, he candidly admitted that there is nothing on record to suggest that a copy of such inventory was ever supplied to the defendants. Further, admitted that no assessment of the capacity of plant of defendant No. 1 was got done before it was taken over except for getting the assets evaluated. He further stated that except for getting assets evaluated no assessment of the capacity of industrial unit was got done even after taken over. He admitted that no one was present on behalf of defendants 1 to 3 when the assets of defendant No. 1 were in fact taken over at the spot. He further stated that whatever was taken over by the plaintiff on 21.7.1995, is contained in the minutes prepared at the spot Ext (D-3). As per minutes there were no stock of finished/semi finishes goods worth Rs. 33.00 lacs at the spot. He denied the suggestion that these goods were sold to Municipal Corporation, Shimla and were lying there. He denied the suggestion that even after getting the rehabilitation package, plaintiff did not release the funds timely in favour of defendant No. 1. He admitted that the sale of taken over assets was subject to the terms and conditions contained in Ext P-45, which provided that all the statutory liabilities would be required to be borne by the prospective buyers. In addition thereto, they would have to bear the electricity, unearned increase of lease hold plot, expenses on registration of free hold plot and water and maintenance charges etc. if any. This witness categorically admitted that before confirmation of sale of assets of defendant No. 1 for Rs. 65.00 lacs an offer of Rs. 91.00 lacs was also received by the plaintiff, but the same was declined as it was considered to be on the lower side. He volunteered to state that the defendants had also brought the buyers for Rs. 180 lacs and such offer was in writing which was produced by this witness and marked as Ext D-4. He further stated that the offer made vide Ext D-4 did not materialize because the amount that was required to be deposited was not accompanying it. Further voluntarily stated that the party who made the offer vide Ext D-4 wanted to inspect the plant and machinery which was allowed. He denied the suggestion that offer made vide Ext D-4 was purposely not accepted by the plaintiff and as a consequence of it, it did not materialize. He further stated that as per record of the plaintiff, evaluation of the taken over assets of defendant No. 1 was found at Rs. 121.93 lacs in the year 1996. He denied the suggestion that even the evaluation of Rs. 65.00 lacs was purposely got done on the lower side by the plaintiff. In reply to the court question, as to when evaluation of the taken over assets was Rs. 121.93 lacs, then how it was sold for Rs. 65.00 lacs, the witness stated that taken over assets were got re-evaluated in the year 2001 and at that time, assessed value of these assets was Rs. 64.50 lacs and the realizable value was Rs. 55.73 lacs and further stated that he could not state whether prices of land, building and machinery had increased after 1996. This witness feigned ignorance regarding installed capacity of defendant No. 1 unit. This witness admitted that the suit had been filed after acceptance of offer of 65.00 lac.
Defendants examined 10 witnesses. D.W. -1 Jai Pal is the Assistant General Manager, RPCD, Reserve Bank of India and has proved on record the circulars of Small Scale Industries, issued by Reserve Bank of India, between July 1978 to December 1999, Ex D-1 and for the period January 2000 to 2004, Ex D-2. The circulars issued after March, 2004 till date of recording of the statement of this witness have been proved on record as Ex D-3. But then witness in his examination-in-chief itself has specifically stated that Exts D-1 to D-3 are not applicable to the case of plaintiff Corporation.
D.W. -2 and D.W. -3 are witnesses from HPSEB and their statements are hardly of any relevance since HPSEB is not a party to the suit and the plaintiff otherwise cannot be blamed or fastened with any liability for any inaction, if any, on the part of HPSEB.
D.W. -4 Het Ram Sharma is the Senior Manager of Punjab National Bank, Zonal Office, Shimla and has only deposed regarding the rehabilitation scheme of proforma defendant No. 5 which is not applicable to the case of the plaintiff.
Similarly, D.W. -5 is again a witness from Punjab National Bank, Parwanoo who has proved on record certain correspondence exchanged between defendants 1 to 3 with proforma defendant No. 5.
D.W. -6 Kewal Ram is the Deputy Director of Industries to the Government of HP and has proved on record the notification dated 27.3.1991 issued by the Government of HP, whereby revised Rules regarding grant of incentives to industrial units in HP, 1991 came into force. In his cross-examination, this witness has categorically stated that the incentive offered by the government would apply to the units which are established, otherwise they are inapplicable to the case of plaintiff.
D.W. -7, Ashok Kumar is Manager of Industrial Development Bank of India Limited and has proved on record the scheme Ex D-38 for rehabilitation of six small scale units and has further stated that in whatever cases plaintiff asked for providing refinance, needful was done by it on its demand. In cross-examination, this witness has stated that the IDBI, besides providing refinance, has also acted as coordinator regarding financial activities of the financial institutions though he had not brought any such circular. This witness was not in a position to state as to whether the entire refinance provided by the IDBI in respect of defendant No. 1 had been repaid by the plaintiff to it.
D.W. -8 Gauri Shankar, Executive Engineer, IPH, Shimla has proved on record the supply order of GI pipes of the value of Rs. 7,79,53,633/- placed by the Engineer-in-Chief with the defendant No. 1 and has further stated that on account of failure of defendant No. 1 to supply pipes in question, this order was cancelled on 28.1.1992.
D.W. -9 Ashok Kumar, Industrial Promotion Officer in the office of Member Secretary, Single Window System, Industries Department, Parwanoo had produced the freight subsidy record pertaining to defendant No. 1 According to him, defendant No. 1, in terms of the scheme, was required to submit its claim for grant of such subsidy within one year of the relevant period, but defendant No. 1 submitted the same beyond the prescribed period and, therefore, no freight subsidy was allowed to it.
D.W. -10 S.K. Chadha is Assistant General Manager, HPFC, but is statement is hardly of any relevance as the court is not adjudicating the claim of HPFC i.e. proforma defendant No. 4.
At this stage, it is relevant to observe that initially none of the defendants despite repeated opportunities had appeared in the witness box and ultimately their evidence was closed on 13.11.2006. However, this order was set aside by learned Division Bench of this court vide its order dated 13.3.2007 passed in LPA No. 28/2006 and Sh. Lokesh Kumar, Advocate, was appointed as a Commissioner to record statement of D.W. -2 at Delhi.
In compliance to the directions passed by this Court on 13.3.2007, D.W. -2 submitted his evidence in examination-in-chief by way of affidavit, wherein he reiterated the contents of the plaint which has already been reproduced in extenso. However, in the cross-examination conducted by the plaintiff, the witness admitted that documents Exts P-4, P-10 and P-17 to P-29 bore his signatures. However, he volunteered to state that these documents were signed by him on the assurances and commitments made by the plaintiff as well as H.P. Government that adequate material and electricity as well as other infrastructure shall be provided by them for running the unit. He further stated that he was restricted to run the unit only for one hour per day (300 watts a day) as neither adequate electricity nor adequate raw-material was supplied by the plaintiff or the HP Government to the Unit. The entire unit was set up for manufacturing of 93000 tonnes, but the plaintiff and HP Government failed to supply the raw-material and electricity for the installed capacity. He denied the suggestion that plaintiff had not made any commitment or assurance towards electricity and raw-material. He further denied the suggestion that he had received a loan of Rs. Rs. 33.00 lacs. However, he volunteered to state that the same was matter of record. He further stated that he did not remember the exact amount of the loan received by him. He admitted that he had filed a suit for damages against HP Government, HPSIDC, HPSEB, HFPC and PNB before this court which was subsequently dismissed. However, he volunteered to state that the same was dismissed as he was not in a position to pay the requisite court fee. He further admitted that he had filed CWP No. 589 of 2002, challenging therein the take over of the unit by the plaintiff and the said petition was dismissed. He admitted that rehabilitation package, upon his request was agreed to by the plaintiff. He volunteered to state that the unit became sick in the second year of its being set up. He further stated that plaintiff took 7-8 years to formulate the rehabilitation package and therein also the plaintiff violated all the norms and guidelines laid down by the RBI, IDBI, HP Government and Financial institutions.
In his further cross-examination, D.W. -2 stated that he did not remember whether the payments as per rehabilitation package had been made to him as per schedule. He admitted that plaintiff had issued notices of take over about 4-5 times before the unit was actually taken over. This witness was not in a position to state as to whether a notice was given by the plaintiff to him for producing a better buyer. He admitted that he had filed a suit for injunction in the civil courts at Solan and volunteered to state that he had withdrawn the suit for the purpose of filing the same before this court. He admitted that notice Ext P-66 had been served upon him and further admitted that he did not make any payments even after receipt of Ext P-66. However, he volunteered to state that he did not owe any money to the plaintiff. He admitted that he had applied for one time settlement, but volunteered to state that it was on the direction of this court. This witness further admitted that a loan had been availed by him from the PNB and the said dues of defendant No. 5 were paid by means of one time settlement. He, however, volunteered to state that these dues were paid by the mortgager as the immovable property had been mortgaged with PNB. He further admitted that defendant No. 4 had also filed recovery proceedings which were pending before the DRT, Chandigarh.
From the evidence adduced by both the parties, it would be evident that the defendant No. 1 has not denied the availing of the loan and even defendants 2 and 3 have not denied their having executed personal guarantees to secure the repayment thereof. It was on account of the default in payment of the loan that first show cause notice was issued on 15.6.1995 Ext P-30 which was duly replied to by the defendants vide their letter dated 13.7.1995 Ext P-31. However, thereafter another notice was issued on 20.7.1995 vide Ext P-32 and it is thereafter that the plaintiff decided to take over the mortgage assets of the company and for the purpose the date was fixed on 21.7.1995.
The plaintiff before accepting offer of Rs. 65.00 lacs, called upon defendants 1 to 3 to bring a better buyer vide letter dated 18.9.1998 Ext P-59, which was duly acknowledged and replied by defendants vide Ext P-60. But instead of accepting the offer, defendants filed civil suit and obtained stay orders from the court at Solan which was ultimately vacated only on 7.9.2001, Ext P-62. It was only after vacation of the stay order that sale of Rs. 65.00 lacs was accepted by the plaintiff and letter was issued to the purchaser on 15.9.2001 Ext P-63.
Thereafter, defendants were called upon to pay the balance outstanding due after the sale proceeds had been shared by the plaintiff and proforma defendants 4 and 5. Even at that stage, defendant No. 1 filed CWP No. 589 of 2002 which was finally dismissed on 20.6.2002 vide Ext P-68.
The only defence set up by the defendants is that the plaintiff has failed to provide the rehabilitation package within time, but even this fact has not been established on record as it is categorically stated by PW-3 in his cross-examination that the request for rehabilitation was duly examined by the plaintiff and was sanctioned in the year 1991 and after 1991, defendant No. 1 had not applied for the rehabilitation package. This witness has further stated that in terms of the rehabilitation package, an additional promoters contribution was Rs. 12.50 lacs plus Rs. 3.61 lacs.
It would also be noticed that as against sale of assets of the defendant for Rs. 65.00 lacs, an offer of Rs. 91.00 lacs was also received by the plaintiff, but the same was declined as it was considered to be on the lower side because defendants themselves had brought a buyer for Rs. 180 lacs. Said offer was in writing Ext D-4, but even this offer did not materialize because the amount that was required to be deposited was not accompanying it. No doubt, at one time, valuation of the take over assets of the defendant No. 1 was found to Rs. 121.93 lacs in the year 1996, but the same was diminished with the passage of time and in view of the stay orders passed by the Court at Solan in the proceedings instituted by the defendants. Even otherwise nothing prevented the defendants from bringing a better buyer during this entire period from 1998 to 2001.
Now, insofar as the claim of defendants that it suffered because of various issues like inadequate electricity or non supply of raw-material from the HP Government, it would be noticed that defendant had already filed a suit for damages against the HP Government, HPSIDC, HPSEB, HFPC and PNB before this court which was subsequently dismissed. It has further come in his cross-examination that defendants had filed CWP No. 589 of 2002 challenging therein the taking over of their unit by the plaintiff and even the said petition was dismissed. Since all these issues as are now being sought to be raised by the defendants have been questioned before the various courts and have been dismissed, the defendants cannot be permitted to raise these issues once again as the findings in the previous instituted litigations, at the instance of defendants, operates as res judicata and this court cannot go into the correctness or otherwise of the decisions so rendered.
Both these issues are accordingly decided in favour of plaintiff by holding that not only that the plaint disclose any enforceable cause of action, but the plaintiff is also entitled to the amount claimed in the suit i.e. Rs. 72,37,562/- along with cost and interest @ 9% with half year rests from the date of institution of the suit till its realization.
In view of my aforesaid issue wise findings, suit of the plaintiff succeeds and is decreed accordingly. The plaintiff is held entitled to an amount of Rs. 72,37,562/- along with cost and interest @ 9% p.a. with half year rests from the date of institution of the suit till its realization.
Decree sheet be prepared accordingly.