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2011 Supreme(HP) 2373
IN THE HIGH COURT OF HIMACHAL PRADESH AT SHIMLA.
Before(DivisionBench)
The Hon’ble Mr. Justice R.B. Misra, Judge.
The Hon’ble Mr. Justice Surinder Singh, Judge.
OSA No. 4 of 2007. Date of Decision: 1st September, 2011.
Himachal Pradesh State Industrial Development Corporation Limited.Versus
M/S. PAMWI Tissues Limited and another.
For Respondent No.1:Mr. Rahul Mahajan, Advocate.
For Respondent No.2:Mr. R.L. Sood, Sr. Advocate with Ms. Akshi Chauhan, Mr. Arjun Lall and Mr. Sanjeev Kumar, Advocates.
The central legal point established in the judgment is that transactions contrary to the Securities Contracts (Regulation) Act are not enforceable.
Headnote:
Securities Contracts (Regulation) Act - Recovery of Financial Assistance - 13, 16, 2(h)
Fact of the Case:
The appellant-Corporation filed a suit for the recovery of financial assistance against the respondents. The suit was dismissed by the Single Judge, and the appellant appealed the decision.
Finding of the Court:
The court held that the appellant was not entitled to recover the suit amount due to the illegal nature of the transaction under the Securities Contracts (Regulation) Act.
Issues: The issues included the competency of the plaintiff to file the suit, entitlement to recover the suit amount, limitation, court jurisdiction, misrepresentation and fraud, and non-joinder of necessary parties.
Ratio Decidendi: The court found that the transaction was illegal under the Securities Contracts (Regulation) Act, and therefore, the appellant was not entitled to recover the suit amount.
Final Decision: The appeal was dismissed with costs throughout.
Surinder Singh, J. The appellant-Corporation filed Civil Suit No.43 of 2000 for the recovery of ‘ 44,72,831/- against the respondents, was dismissed by the Hon’ble Single Judgevide a detailed judgment dated 19.12.2006, hence present appeal by the appellant-Corporation.
2.The case of the appellant, hereinafter to be referred as ‘the plaintiff’, has been that respondent No.1-Company, hereinafter to be referred as ‘defendant No.1’ approached the plaintiff for providing financial assistance to the tune of ` 60 lacs for setting up a project at Barotiwala. The request was acceded to consequently and defendant No.1 allotted six lacs shares each of the value of ` 10 to the plaintiff and it was agreed that the shares would be bought back by the said defendant on expiry of five years period from the date when the project would start its commercial production.
3.Vide letter Ext.PW2/D, defendant No.1 sent the acceptance letter alongwith copy of its resolution Ext.PW2/E. The agreement Ext.PW2/F to this effect was executed on 9.9.1981. But in the year 1987 the said defendant-Company became sick. Reference was registered with Board for Industrial and Financial Reconstruction (BIFR). A rehabilitation package Ext.PW2/G\ was sanctioned on 2.1 1.1992 by the BIFR. The Industrial-Unit of the defendant-Company was given on lease to respondent No.2, hereinafter to be referred as ‘defendant No.2’. The agreement was arrived at between the plaintiff and defendant No.2 for buying back the shares of defendant No.1-Company vide agreement Ext.PW2/J dated 26.7.1993. Defendant No.2 sent resolution Ext.PW2/A with respect to the buying back the shares of defendant No.1-Company. As per the terms, defendant No.2 was to buy the shares of defendant No.1 from the plaintiff- Corporation in 32 quarterly installments of ` 2,95,781. 25 paise each inclusive of interest. The installments were to start in April, 1993 and the last installment was payable on 31.1.2002. Defendant No.2 only paid 18 installments together with interest and committed default with respect to the remaining installments, hence the present suit for the recovery of the total remaining installments minus the amount already paid alongwith the interest.
4.The defendants resisted and contested the suit by filing their separate written statements. Defendant No.1 raised preliminary objections that there was no enforceable right and cause of action against the replying defendant and the original agreement relating to buy back six lacs shares was not between the plaintiff and the defendant-Company, but infact it was between the promoters of the said Company, namely Shri S.S. Khaitan and Shri M.L. Vohra, who are not alive, thus the suit was not maintainable, inter alia also put-up the point of limitation and the agreement aforesaid is not enforceable under the law, vis-à-vis took up the objection of misjoinder of defendant No.1 and non-joinder of the LRs of the promoters aforesaid, as alleged, fraud, misrepresentation of the agreement aforesaid by contravening the provisions of Sections 13 and 16 of the Security Control (Regulation) Act, 1956 and the notification issued thereunder, also contended that the suit was filed by a person not authorized by the plaintiff-Corporation. Further on merits, contested liability of the said defendant being not a party to any of the agreements.
5. Defendant No.2 raised almost the similar objections, but however, additionally took up the objections that the suit based upon the subsequent agreement was time-barred and the Court lacks the territorial jurisdiction. On merits, they also denied their liability to pay the suit amount and the statements of accounts are alleged to be fabricated. Thus prayed for the dismissal of the suit.
6.On the pleadings of the parties, the learned Single Judge framed the following issues:
1 Whether the plaintiff company is Company duly incorporated under the Companies Act, 1956 & whether Rajinder Parshad Gautam is competent to file the presen
