Judgement Key Points

SANJAY KISHAN KAUL, J.

( 1 ) THE plaintiff has filed a suit for recovery of Rs. 21,00,650/- against the defendants jointly and severally. The plaintiff is the proprietorship concern of Smt. Prabha Uppal and claims to be engaged in the business of exports. Defendant No. 1 is the private limited company stated to be engaged in the business of leasing and financing having been incorporated on 17. 08. 1995. Defendants No. 2 and 3 are the Directors of defendant No. 1 company while defendant No. 4 is the husband of defendant No. 3 and the brother of defendant no. 2. It is stated in the plaint that the subscribed capital is held by defendants No. 2 and 3 being 10 equity shares each amounting to the total amount of Rs. 100/- for each of the defendants.

( 2 ) IN November, 1996, defendant No. 4 is stated to have approached Mr. Virendra uppal, Authorised Representative of the plaintiff firm and the brother-in-law of smt. Prabha Uppal stating that defendant No. 1 company was inviting short-term deposits at good interest rates. Defendant No. 4 is stated to have represented that his brother and wife are also the Directors of defendant No. 1 company. The plaintiff made a deposit of Rs. 15 lakhs in the name of defendant No. 1 company for a period of six months with interest @ 18% p. a. in pursuance to a cheque No. 681911 dated 22. 11. 1996 drawn on Syndicate Bank, Kirti Nagar, New delhi to carry interest @ 18% p. a.

( 3 ) THE plaintiff claims to have demanded the money back in March, 1997 and after considerable persuasion cheque No. 296473 dated 25. 03. 1997 for Rs. 15 lakhs drawn on Allahabad Bank, Parliament Street, New Delhi was issued on behalf of defendant No. 1 company and signed by defendant No. 2. However, the plaintiff firm was apparently asked not to present the cheque with the assurance of payment of further interest. The plaintiff states that acting in good faith and relying upon the representations made by the defendants, the cheque was not presented for encashment. The time-period for presentation of the cheque expired, but other than promise from the defendants, nothing came out. The plaintiff has, thus, sued for the said amount along with overdue interest.

( 4 ) A common written statement has been filed on behalf of defendants No. 1 to 3 while a separate written statement was filed by defendant No. 4. The liability of defendant No. 1 to pay the amount is not disputed, but it has been stated that defendant No. 1 company is almost defunct as it suffered losses due to unavoidable circumstances. Defendants No. 2 and 3 have denied their liability on the ground that there is no personal liability of the said Directors as the deposit was received in the name of defendant No. 1 company. Defendant No. 4 has denied the liability on the ground that it had nothing to do with the transaction in question as he was neither a Director nor a share-holder of defendant No. 1 company. However, it is not disputed that the said defendant is the husband of defendant No. 3, Director of defendant No. 1 company.

( 5 ) ON the pleadings of the parties, the following issues were framed on 17. 01. 2003:"1. Whether the suit filed by the plaintiff is bad for misjoinder of parties in view of Preliminary Objection Nos. 1 and 2 taken by the defendants in their written statement? OPD 2. Whether defendants No. 2 to 4 are personally liable for the amount claimed in the plaint? OPP 3. At what rate of interest the plaintiff deposited the amount with the defendants? OPP 4. Relief. "

( 6 ) THE plaintiff produced two witnesses to substantiate its plea being Smt. Prabha as PW-1 and Virendra Uppal as PW-2. Defendant No. 2 appeared in the witness box as DW-1 while defendant No. 4 appeared in the witness box as DW-1.

( 7 ) A perusal of the testimony shows that DW-2 has stated that defendant No. 4 had nothing to do with the transaction in question. In response to specific questions about the functioning of the company, its Directors and its accounts, dw-2 was vague and evasi

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