The impact of the Sick Industrial Companies (Special Provisions) Act 1985 on distress proceedings and the entitlement to interest at a reduced rate due to the defendant being declared a sick industrial company.

JUDGMENT :

(Prayer: Civil suit filed praying for judgment and decree against the defendant as follows :-

(a) Direct the defendant to pay to the plaintiff a sum of Rs.38,80,060.68/- along with interest @ 16% on Rs. 26,21,662.62 from the date of plaint till realization.

(b) direct the defendant to pay the cost to the suit

(c) pass such further or other orders as this court may deem fit and necessary in the circumstances of the case.)

1. The civil suit is filed by the plaintiff M/s. Thamaraparni Enterprises praying for recovery of money and the prayer is to direct the defendant to pay to the plaintiff a sum of Rs.38,80,060.68 along with interest @ 16% on Rs.26,21,662.62 from the date of plaint till realization and to direct the defendant to pay the cost of the suit.

2. The case of the Plaintiff in brief is as follows :-

(a) The plaintiff is a partnership firm registered under the partnership Act and represented by its Partner Mr.K.S.Sundaram. The defendant company is involved in manufacture and marketing of paints and chemicals and the plaintiff firm was a consumer sales agent of the defendant company since 1984-85. During the course of its business, the plaintiff was required to make a security deposit in the defendant company on account of which, supplies will be made to the plaintiff by the defendant. Therefore, a Security Deposit was paid to the defendant in 1984-85 for a mutually agreed amount. The defendant company agreed to pay interest on the security deposit @ 16% per annum. The defendant used to periodically credit the interest to the account of the plaintiff and debit the sales made as per the actual transactions. Statements reflecting the transactions and the balance in the security deposit account was furnished by the defendant periodically. In or around the year 2001, the plaintiff has ceased to act as the sales agent of the defendant company. On 18.01.2002, the defendant issued a statement showing the security deposit balance as Rs.25,31,679.85. However, the interest that was accrued is shown as 12%. Subsequently, similar statement was issued on 14.03.2002, wherein the plaintiff’s security deposit amount is shown as Rs.26,21,662.68. This was the last statement issued by the defendant company. The plaintiff has been requesting the defendant to close the security deposit account and make payment to the plaintiff. However, the rate of interest has to be given at the agreed rate of 16% per annum. The plaintiff has also issued letter dated 6.11.2004 pointing out to the defendant that the interest rate was 16% per annum and not 12% as shown in the statement dated 18.1.2002. In the said letter, the plaintiff further requested the defendant to return the entire deposit amount with accrued interest at 16% per annum from the date of deposit till repayment. The letter has been received by the defendant. However, no reply has been forthcoming. Despite acknowledgment of the amount due to the plaintiff and despite issuing periodical statements and tax deduction certificates to the plaintiff, the defendant has failed and neglected to return the amount due. The defendant has no valid defence to the claim of the plaintiff as the amount is acknowledged as due by the defendant. Hence, the plaintiff has no other remedy but to file the present suit for refund of the security deposit amount.

3. The contentions in the written statement filed by the defendant is as follows :-

(a) The defendant filed the written statement denying the allegations made in the plaint. It is stated by the Defendant company that the suit is not filed within the period of limitation and is hopelessly barred by limitation. Further, the suit is misconceived and unsustainable in law or on facts and is liable to be dismissed in limine. It is stated by the defendant that the Defendant Company is the manufacturer of paints and chemicals. This Defendant company due to various reasons suffered continuous losses and was therefore referred to the Board of Industrial and Financial