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1999 Supreme(Bom) 245
IN THE HIGH COURT OF BOMBAY
F.I. Rebello, J.
BOI Finance Limited. Plaintiffs.
Versus
Padma Alloy Casting Private Ltd. others..... Defendants.
Summons for Judgment No. 662 of 1994 in Summary Suit No. 2289 of 1993, decided on 26-3-1999.
Advocates appeared :
Mrs. Ferzana Z. Behramkamdin with Mrs. Bhakti Popat i/b Wadia Ghandy Co., for the plaintiffs.
D.H. Mehta i/b. Womoncar for defendant No. 2.
S. Shah i/b Mansukhlal Hiralal Co., for defendant No. 3.
Headnote:Order XXXVII, Rule 1-Summary suit-Maintainability - "Additional or penal interest"-The receipt and undertaking contemplate that in event defendant fails to pay instalment on due dates, then interest there as may be due will be compounded quarterly and added to principal - Thus it is not additional or penal interest but interest which is capitalised suit as summary suit not maintainable.
Order XXXVII, Rule 2-Summary suit-Inter-corporate deposit - Recovery of money of-Agreement Document exchanged between parties can be said as agreement in writing between parties-This summary suit maintainable.- The question as to whether there is written agreement between the parties. It is now accepted principle that agreement in writing need not necessarily mean document appending signatures of both the parties. Document accepted or exchanged by and between the parties by themselves can be construed to be an agreement in writing. In the present case, firstly there is a resolution passed by the Board of Directors of defendant No. 1 to accept inter-corporate deposit on terms and conditions. Secondly receipt by defendant No.1 admits receipt of payment and agreeing to pay the amount in terms of the receipt issued which includes interest at the rate of 18% p.a. (quarterly rest). So also undertaking given by defendant No. 1 to make payment on the due date with interest on terms already set out above. In the light of the documents exchanged between the parties, in Courts opinion there is no agreement in writing between the parties.
Order XXXVII, Rule 2-Summary suit-Recovery of additional or penal interest-Summary suit for such recovery not maintainable.-There, the question will arise whether the expression such additional interest includes interest with quarterly rest (compounded quarterly). As pointed out earlier the suit is a summary suit. Plaintiff is asking for summons for judgment based on a document. As observed by the Division Bench in M/s. Randerian & Singh Pvt. Ltd. (supra) once defendant is subject to strict terms equally plaintiffs must be put to stringent terms. The receipt and undertaking contemplate that in the event defendant fails to pay instalment on the due dates then interest thereon as may be due will be compounded quarterly and added to the principal. Therefore, it is not additional interest which is capitalished. Considering the above, in Courts opinion, the expression additional or penal interest would not cover case of interest with quarterly rest (compounded quarterly). What the receipt and undertaking provide is that interest would be capitalised if instalment is not paid on time. This would not fall within the expression additional or penal interest. The expression additional interest would mean a higher rate of interest than what was agreed. Capitalization of interest would not mean additional interest. It would be interest at the same rate but on an increased capital. Penal interest normally understood is additional interest on defaulted interest payment.
Section 446(2)-Order for winding up of company-Suit filed before such order-Leave of Company Court not required.-An additional argument was raised that as Provisional Liquidator had been appointed in proceedings for winding up, the suit was not maintainable under Section 446(2) of the Companies Act. In the light of language of Section 446(2) it is clear that there is no merit in the said contention. Permission under Section 446(2) would be required in the event winding up order is made or after liquidator is appointed. In the present case suit was filed before Provisional Liquidator was appointed and consequently no leave is required.
2.It is the case of the plaintiffs-Bank that the Board of Directors of defendant No. 1 by resolution dated 8th May 1990 resolved to accept intercorporate Deposit from the plaintiff-Bank for a period of 181 days as per terms and conditions decided by the plaintiffs. The plaintiff, thereafter advanced the said sum in respect of which defendant No. 1 issued stamped receipt dated 17-5-1990. Under that receipt, defendant No. 1 accepted that they have received from the plaintiff a sum of Rs. 50 Lacs on account of Intercorporate Deposit for 181 days with interest rate of 18% per annum with quarterly rests. By another document dated 16-5-1990, styled as undertaking, defendant No. 1 agreed to pay principal amount with interest at the rate of 18% p.a. (quarterly rest) on due dates. Defendants Nos. 2 and 3 on 16-5-1990 by an agreement of guarantee stood as guarantors. By virtue of the said guarantee which is typed on a stamp paper of Rs. 10/-, defendant No. 2 agreed that they would make payment on default being committed by defendant No. 1. It is the case of the plaintiffs that thereafter as defendants No. 1 failed to pay the said amount they issued notices to defendant No. 1 as well as defendant Nos. 2 3 which have been duly received by them. In spite of that, amount has not been paid. Exhibit G to the plaint is particulars of claim which shows the principal amount due by the defendants to the plaintiff as Rs. 50,00,000/-; interest on the said amount from 16th August 1990 to 21st June 1993 as Rs. 32,64,141.50 and as such the total amount due and payable is Rs. 82,64,141.50. Plaintiffs claim further interest on the said amount at the rate of 18% p.a. with quarterly rest from 22nd June 1993 till payment and/or realization. The plaintiffs on appearance being filed on behalf of defendants No. 2 and 3 have thereafter moved this Summons for Judgment. There is a provisional liquidator appointed for defendant No. 1 company.
3.Defendants Nos. 2 and 3 have filed affidavit opposing this Summons for Judgment. In the affidavit filled by defendant No. 2, it is contended that the suit is not maintainable as the petition for winding up of the Company has been admitted and consequently permission of the Company Court was required under section 446(2) of the Companies Act. It is further stated that plaintiffs have sought reliefs which fall outside the purview of Order 37, Rule 2 of the Civil Procedure Code, and as such the suit is not maintainable. The suit, it is contended, was filed on 22nd June 1993 and summons for Judgment was taken out on 9th November 1994. In view of that, it is pointed out, defendants are entitled to unconditional leave to defend the suit on that ground alone. It is then contended that guarantee was executed by defendant No. 2 in his capacity as Director of the Company and said guarantee, it is alleged, is not valid and enforceable as the same was exec
