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1995 Supreme(Del) 785
High Court Of Delhi
L.M.L.LIMITED - Appellant
Versus
SARASWATI TRADING COMPANY LIMITED - Respondent
Interim Application 2534 of 1995
Decided On : 10/01/1995
A.M.SANGHVI, A.S.CHADHA, ANIL KHER, ANIL MAKHIJA, ARUN JAITLEY, Indu Malhotra, Navin Chawla, RAJIV SAHANI, V.N.KALRA
Headnote:Civil Procedure Code, 1908 - Section 9 — Suit for enforcement of guarantee given by the defendant in suit for payment of an amount due from a co-defendant — The amount in question not granted to the sick company — The suit for enforcement of guarantee of such loan is maintainable and is not barred by the provisions of Section 22 of Sick Industrial Companies (SpeciaI Provisions) Act, 1985.
Order 39 Rule 1 & 2 — Application seeking interim injunction restraining the respondent from transferring, creating any charge, encumbering or creating any voting rights in respect of equity shares agreed to be transferred to the plaintiff in terms of Memorandum of Understanding — Existence of prima facie case in favor of the plaintiff — Interim injunction granted.
Securities Contract Regulation Act - Section 14 — Suit for enforcement of the guarantee agreeing to sell the share In terms of Memorandum of Understanding between the parties — The bar on sale of share is not applicable on such transaction.
Sick Industrial Companies(Special Provisions) Act, 1985 Section 22 — Suit for recovery of money or enforcement of any security against a sick industrial company or for enforcement of guarantee in respect of loans advanced to such company is barred.
Section 22 — Suit for enforcement of guarantee given by the defendant in suit for payment of an amount due from a co-defendant — The amount in question not granted to the sick company — The suit for enforcement of guarantee of such loan is maintainable.
Words & Phrases - Loan — Meaning of-A loan is undoubtedly a debt but every debt may not be a loan liability — The liability to pay debt may arise from diverse sources and a loan is only one of such sources — Every creditor who is entitled to receive a debt cannot be regarded as a lender.
( 1 ) THE LML Limited is a company engaged in manufacturing of scooters. A proposal for conversion of the company into a joint venture of the Indian Promoters and Piaggio was prepared and placed before the financial institutions and banks and more particularly to the Industrial Finance Corporation of India. LML Fibres and Prakati Synthetics Limited (PSL) were the subsidiary companies of LML Limited. LML Limited - the plaintiff No. 1 also had a fibre division besides the main business of manufacturing of scooters. The proposal of the plaintiff No. 1 company for conversion of the company into a joint venture was approved by the Industrial Finance Corporation of India by its letter dated 13th August, 1990 on the terms and conditions contained in the said letter. It appears at the relevant time and for sometimes even thereafter defendant No. 4 continued to be a Director of the plaintiff No. 1. The institutions and banks also conveyed approval to the proposal for transfer/sale of L. M. L. Fibres Limited to Shri Sitaram Singhania, defendant No. 4 and/or his nominee and transfer of ownership in Prakati Synthetics Limited in favour of L. M. L. Fibres Limited on the following lines : -
WE also hereby convey approval, in principle, on behalf of the Institutions/banks to the proposal for transfer/sale of LMLF to Shri Sitaram Singhania and/or his nominees and transfer of ownership in PSL in favour of LMLF on the following lines : - i)The consideration/transfer price in respect of LMLF/psl shall be Rs. 7,103 lakhs. ii)The consideration/transfer price shall be paid/amortised in the following manner : -
( 2 ). As a consequence to the said arrangement, the amount of Rs. 2,704 lakhs as mentioned in this letter of 13th August, 1990 was the balance consideration money which was payable by L. M. L. Fibres Limited to LML for transfer to it of fibre divisions by LML. This amount of Rs. 2,704 payable by L. M. L. Fibres Limited to LML as part of sale consideration/transfer price was to comprise of two components, namely, Rs. 9. 45 crores which was interest free and was to be repaid from out of the sale proceeds of the public issue to be made by L. M. L. Fibres Limited and the balance Rs. 17. 59 crores was to carry interest at the rate of 12. 5% p. a. w. e. f. 1st September, 1990. The dispute in the present case is confined to the amount of Rs. 9. 45 crores which was interest free and was to be repaid from out of the amount of the public issue to be made by L. M. L. Fibres Limited. Three Memorandum of Understandings were entered into between LML, L. M. L. Fibres Limited, Sitaram Singhania and Prakati Synthetics Limited. Presently, we are concerned with the third Memorandum of Understanding dated 17th August, 1990. This Memorandum of Understanding was subject to approval of the Industrial Finance Corporation of India and the Board of Directors of LML, L. M. L. Fibres Limited, Prakati Synthetics Limited and after approval it was to be a binding agreement between the parties. Defendant No. 4 had joined this Memorandum of Understanding in confirmation of the liabilities/obligations agreed and undertaken by L. M. L. Fibres Limited and Prakati Synthetics Limited. The amount of Rs. 9. 45 crores mentioned above was to be paid by L. M. L. Fibres Limited to LML towards part payment and satisfaction of the aforesaid total liability, from out of sale proceeds of a public issue of 94,50,000 equity shares of Rs. 10. 00 each fully paid up to be made on or before 31st March, 1992. It is the admitted case of the parties that L. M. L. Fibres Limited did not raise public issue and consequently 94,50,000 equity shares of Rs. 10. 00 each were not issued resulting in non-receipt of the amount of Rs. 9. 45 crores by LML from L. M. L. Fibres Limited. It is also mentioned in this Memorandum of Understanding that this amount of Rs. 9. 45 crores shall remain secured by a personal guarantee of Sitaram Singhania, the confirming partner.
( 3 ). On 17th August, 1990
