The main legal point established in the judgment is the liability of the defendants for forgery, fraud, and misuse of funds under the Indian Contract Act and the Indian Penal Code.

S.P.GARG, J.

1. The present suit has been filed by M/S Canbank Financial Services Ltd.(hereinafter ‘the plaintiff’) against Gitanjali Motors Ltd.(D-1), Asha Ram (D-2), S.S.Bedi (D-3), Moksh Bedi (D-4), Col.K.S.Malik(D-5), Pramod Gulati (D-6) and Eicher Motors Ltd. (D7) for recovery Rs.2,58,38,152.81. Presently the suit is contested by D-7 only.

2. Briefly stated the facts of the case as reflected in the plaint are that on 10.05.1991, D-1 applied to the plaintiff for sanction of lease finances to the tune of Rs.200 lacs for 26 buses and 30 trucks manufactured by D-7. The plaintiff considered the application and communicated their sanction on the terms contained in the letter dated 18.07.1991 (Ex.PW-1/2). Sanction terms dated 18.07.1991 were modified on 20.08.1991 (Ex.PW-1/3). D-2 to 6 accorded approval to the terms and conditions contained in the letter dated 18.07.1991 and authorized defendant No.3 to negotiate and sign the documents for and on behalf of defendant No.1. The lease agreement was executed on 18.07.1991 on behalf of defendant No.1. It contained the terms of the grant of lease finances. Defendant No.1 executed letter of indemnity (Ex.PW-1/8) on 19.07.1991. D-2 to 6 also executed personal guarantees, guarantying the payment of lease rentals and also agreed to indemnify the plaintiff against loss vide (Ex.PW-1/10 to Ex.PW-1/14).

3. It is averred that on 18.07.1991 itself, it was represented to the plaintiff by D-3 that due to steep depreciation in Indian rupee, D-1 has been advised by D-7 that the prices of the vehicles would go up by Rs.30,000/- latest by 23.07.1991. D-3 produced a letter dated 19.07.1991 purportedly written by D-7 to D-1 to assure that they would be in a position to deliver 60 vehicles within a week if the payment was made by 20.07.1991 (Ex.PW-1/16). On this, the plaintiff, agreed to release the entire sanctioned money within a margin of few days. Three pay orders of Rs.41,96,000/-, Rs.41,96,000/- and Rs.1,16,27,250/- along with purchase orders of different denominations were issued. D-3 received the pay orders personally to deliver it to D-7 and obtained their signatures.

4. It is further averred that on 27.07.1991, D-1 furnished to the plaintiff particulars of 11 vehicles (Ex.PW-1/25) received by them. On 30.07.1991 D-3 handed over the plaintiff a letter dated 30.07.1991 purportedly written by D-7 acknowledging the receipt of purchase orders and the amounts against each purchase order. On 28.08.1991, D-1 furnished list of 12 more vehicles received by it (Ex.PW-1/29). On 30.08.1991, D-7 agreed to expedite the delivery of the vehicles and confirmed that 11 more buses would be delivered within a week and documentation for 46 vehicles would be completed by 7.9.1991. On 11.09.1991, D-1 furnished particulars of two more vehicles and total number of vehicles delivered reached to 25. There was delay in the delivery of the vehicles. By August/September, 1991, D-7 had delivered only 35 vehicles to D-1. It came to the plaintiff’s knowledge that certain documents allegedly written by D-7 were forged and fabricated by D-3. The defendant No.1 in connivance with D-2 to 6 had played a fraud on the plaintiff and had misused the pay orders to place different purchase orders; misinformed the plaintiff about delivery of the vehicles and sold/transferred the same without plaintiff’s permission. D-1 sought to explain their conduct vide letter dated 25.09.1991 (Ex.PW-1/38) and undertook that they would arrange to deposit the balance security amount. On 23.10.1991, D-1 gave a schedule as to how it proposed the capitalization of 35 vehicles received by it. However, nothing was done and the cheques given by it, on presentation, were dishonoured (Ex.PW1/41).

5. On 24.10.1991, D-7 informed the plaintiff that 35 vehicles valued at Rs.1,12,47,540/- stood delivered to D-1; they were not aware if the delivery was financed by the plaintiff. It was further informed that an FIR has been lodged against D-1 and they have stoppe