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IN THE HIGH COURT OF JUDICATURE AT MADRAS
HON’BLE MR. JUSTICE R. SUBRAMANIAN, HON’BLE MR. JUSTICE R. SAKTHIVEL, JJ.
V.M. Chettiar and Sons India L.L.P. – Appellant
Versus
V. Swarnalatha – Respondent
O.S.A. No. 225 of 2020, C.M.P. No. 11278 of 2020
Decided On : 11-01-2024
APPEAL - RECOVERY OF DEBT - Order 36 Rule 1, Clause 15 of Letters Patent - The court analyzed three agreements between the parties, determining that the liability to pay Rs. 1,60,00,000 was independent of the successful completion of the projects, as established in the third agreement. The court interpreted the language of the agreements, concluding that the defendants were liable despite the project's failure. The second defendant, as a director, was not personally liable without an express contract. The court confirmed the decree against the first defendant while setting aside the joint and several decree against the second defendant.
Fact of the Case:
The plaintiff sued the defendants for recovery of Rs. 3,30,25,360 based on three agreements related to an investment made by her deceased husband in the first defendant's real estate business. The defendants contended that their liability was contingent upon the successful completion of the projects, which did not occur.
Finding of the Court:
The court found that the liability to pay Rs. 1,60,00,000 was independent of the project's completion, as per the third agreement. The second defendant was not personally liable as there was no express contract imposing such liability on him.
Issues: 1. Whether the liability under the third agreement is independent of the non-implementation of the project? 2. Whether the second defendant could be personally made liable? 3. Whether the legal heirs of Kesava Chowdhry are necessary parties to the suit?
Ratio Decidendi: The court held that the language of the third agreement clearly established the defendants' liability irrespective of project completion. The second defendant could not be held personally liable without an express undertaking of liability.
Final Decision: The appeal was partly allowed; the decree against the first defendant was confirmed, while the joint and several decree against the second defendant was set aside. The plaintiff was entitled to recover Rs. 1,60,00,000 with interest from the first defendant only.
JUDGMENT :
Prayer: Appeal filed under Order 36 Rule 1 of Original Side Rules read with Clause 15 of Letters Patent, to set aside the judgment and decree dated 14.02.2020 made in C.S. No. 369 of 2008.
1. The defendants in C.S. No. 369 of 2008 are on appeal.
2. Challenge is to the joint and several decree granted by the Trial Court directing the defendants 1 and 2 to pay a sum of Rs. 1,60,00,000/- with interest at the rate of 6% per annum from 01.04.2008 till the date of realization along with costs of the suit.
3. For convenience, the parties will be referred to as per their rank in the Suit.
4. The plaintiff sued for recovery of a sum of Rs. 3,30,25,360/- with interest at the rate of 12% per annum as against the defendants. The first defendant is the Company and the second defendant is the Director of the first defendant Company. The claim was based on three agreements dated 23.10.1998, 14.07.1999 and 02.03.2005. According to the plaintiff, under the above three agreements, the defendants had agreed to pay a sum of Rs. 2,60,00,000/- in return for an investment of Rs. 1,00,00,000/- made by the husband of the plaintiff Late Mr.Kesava Chowdhry in the real estate business that was being carried on by the first defendant.
4.1. The first agreement dated 23.10.1998 was entered into between the husband of the plaintiff and the first defendant wherein the deceased Kesava Chowdhry had acknowledged the receipt of Rs. 40,00,000/- and the first defendant on its part, had assured payment of Rs. 2,20,00,000/-. Out of the said sum of Rs. 2,20,00,000/- a sum of Rs. 60,00,000/- was to be paid by end of December 1998 and remaining amount of Rs. 1,60,00,000/- was to be paid by the end of August 1999. It was agreed that this was in full settlement of all claims including interest, if any. The said agreement further stated that it will be subject to successful completion of the projects on hand.
4.2. This was followed by the second agreement dated 14.07.1999, which was entered into with the plaintiff since her husband Kesava Chowdhry had died by then. This agreement evidences part payment of Rs. 26,00,000/- out of Rs. 60,00,000/- payable before December 1998. There was an assurance to pay the balance of Rs. 34,00,000/- in instalments commencing from September 1999 and to be completed by December 1999 and the further sum of Rs. 1,60,00,000/- was agreed to be paid by the end of January 2001. The second agreement was in continuation of the first agreement dated 23.10.1998.
4.3. Thereafter, it appears that some payments were made and a third agreement came to be entered into between the parties on 02.03.2005. Under the third agreement, the plaintiff acknowledged receipt of Rs. 1,00,00,000/-. The balance of Rs. 1,60,00,000/- was to be paid by the end of January 2001. Significantly, the third agreement dispensed with the requirement of completion of projects or successful implementation of the projects. However, the first defendant wrote to the plaintiff on 12.03.2008 stating that since the project did not take off, it was not liable to pay a sum of Rs. 1,60,00,000/- as agreed to under the third agreement dated 02.03.2005. This lead to the plaintiff issuing a legal notice on 15.03.2008 to the first defendant demanding payment. The first defendant sent a reply on 24.03.2008 contending that the agreement to pay Rs. 1,60,00,000/- was deponent on successful completion of the projects and since the projects did not take off, the liability would not arise. This compelled the plaintiff to sue for recovery.
5. The second defendant is the Director of the first defendant company. The suit was resisted by the defendants contending that the agreement to pay itself was dependent on successful completion of the projects. The projects having failed, the defendants were forced to liquidate the assets and repay the secured creditors. It was claimed that the first defendant had incurred losses and therefore, payment of Rs. 1,60,00,000/- does not arise. It was also contended that t
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