S. Ravindra Bhat, J.

1. In this suit - initially instituted as a summary suit under Order XXXVII CPC - the plaintiff claims a decree for Rs. 20,40,023/- against the defendants.

2. The plaintiff is a Company and had taken-over M/s. Rustagi Engineering Udyog Private Limited in terms of the order of Court under Section 394 of the Companies Act. The first defendant is also a Company; the second and third defendants are its Managing Director and Director. It is stated that the latter stood as sureties for the repayment of the first defendant company's dues arising out of its agreement with the plaintiff. The second and third defendants also allegedly executed personal guarantees in favor of the plaintiffs. The suit submits that the defendants entered into an arrangement with the erstwhile M/s. Rustagi Engineering Udyog Private Limited, succeeded to by the plaintiff, for taking on lease huge quantities of M.S. Moulds of particular specifications. The plaintiff agreed to offer and lease-out 1250 sets of such moulds. According to the plaintiff, the value of each such mould was Rs. 4850/-. The plaintiff relies upon a lease agreement entered into with the first defendant company on 10.09.1993. It is further stated that in fulfillment of the terms set-out in that agreement, 12 Post-Dated Cheques of Rs. 2,90,495/- each were given to the plaintiff towards lease rental payment per quarter. The plaintiff states that the defendants had also agreed with it to pay three percent per month service charges in the event of lease rental default and that such charges were to be compounded quarterly along with bank charges, conclusion charges etc. The Agreement of 10.09.1993 provides for its termination by efflux of time or otherwise.

3. The suit submits that the defendants had duly acted upon the terms of agreement and made payment of Rs. 30,31,250/- towards margin money and also issued 12 post-dated cheques, drawn on State Bank of India, Noida, i.e. Nos. 126801 to 126812 towards 12 quarterly cheques. It is stated that 7 of these cheques when presented on due dates were encashed. When the plaintiff presented the cheque dated 09.11.1995 - for Rs. 2,90,495/-, it was returned dishonored with the remarks "Insufficient Funds/refer to drawer", which was towards the eighth quarterly instalment. A similar cheque towards ninth quarterly instalment dated 09.02.1996 for the same amount was returned dishonored with the same remarks. It is stated that in these circumstances, the subsequent three cheque Nos. 126810-126812 towards the tenth, eleventh and twelfth instalments were not encashed and presented. The plaintiff relies upon a letter dated 30.04.1996 whereby it was requested not to present the cheque for the tenth instalment, i.e. 10.05.1996 for Rs. 2,90,000/-. It is further stated that the defendants closed the bank account No. 16615 with the assurance that they would issue fresh cheques in lieu of the cheques for the eighth to twelfth instalments. The suit alleges that despite this assurance, the defendants did not issue fresh cheques and that the closing of the accounts was calculated and mala fide move.

4. The plaintiff relies upon the following clauses of the lease agreement:

"XXXXXX XXXXXX XXXXXX

2.2. The Lessee shall pay to the Lessor the lease management fee including processing fee and documentation charges and deposit rental as specified in Schedule attached.

The Lessee shall pay to the Lessor all instalments of rental regularly on due dates sanctioned in the schedule without any deduction or abatement irrespective of whether or not the Assets are in use by Lessee or is working for one or more shifts or is under maintenance or replacement for any period whatsoever. All lease rentals shall be paid to the Lessor by the Lessee at New Delhi by demand drafts payable at New Delhi or cheque payable at part at New Delhi or as otherwise directed by the Lessor in writing. All payments made by post shall be at the risk of the Lessee.

2.3 Without affecting the Lessor'