The main legal point established in the judgment is the interpretation and application of the Limitation Act to determine the limitation period for a loan agreement.

JUDGMENT :

B.K.NAYAK, J.

Judgment and decree respectively dated 15.10.2009 and 29.10.2009 passed in C.S. Nos.8/42/145 of 2009/2004/2000 by the learned 2nd Additional Civil Judge (Senior Division), Bhubaneswar have been challenged in this appeal by defendants-appellants.

2. The plaintiff, Industrial Promotion & Investment Corporation of Orissa Limited (IPICOL) is a wholly Government owned Company, incorporated with the object of promoting and financing the medium and large scale industries within the State of Orissa.

3. The case of the plaintiff runs as under :

(a) For the purpose of building infrastructure facilities for facilitating establishment of steel plant in Daitary region of the State and to utilize funds as Government contribution in equity in the ventures whenever necessary, the plaintiff decided to raise funds through issue of steel bonds in the year 1994-95. With this objective, the State Government in the Finance Department by Order No.37889 dated 07.11.1994 constituted one Empowered Committee with the Chief Secretary as its Chairman to take decision for utilization of proceeds raised on issue of bonds.

(b) Defendant no.1 was incorporated as a public limited company on 07.09.1992 for establishing 0.6 Metric tones pig iron per annum plant near the Duburi in the district of Jajpur. Defendant nos.2 and 3 are the group of companies of defendant no.1. Defendant nos.4 and 5 are respectively, the Chairman and the Managing Director of defendant no.1-company and are also promoters of the company.

(c) Defendant no.1 through its Chairman and Managing Director approached the plaintiff and the State of Orissa in December,1996 for subscription of an amount of Rs.25,00,00,000/-(Rupees twenty five crores) in equity/preference share/optionally convertible debenture (OCDs) with a view to financing the above company for establishment of the Pig Iron Plant at Duburi. On consideration of proposal the plaintiff sanctioned a loan of Rs.20,00,00,000/-(Rupees twenty crores) on 07.02.1997 out of the resources raised by it from issue of steel bonds. As per the terms and conditions of the loan sanction order, the loan was for a period of six months with an interest @ 30% per annum, by way of secured optional convertible debentures and the plaintiff would hold the second charge on the assets of defendant no.1. The loan was to be paid and the debentures be redeemed on the expiry of six months from the date of loan. The proposed terms as per the sanction letter dated 07.02.1997 were accepted by defendant no.1 through its Managing Director whereafter defendant no.1 issued two debentures certificates dated 10.06.1997 for 1,36,986/-(one lakh thirty six thousand nine hundred eight six) and 95,890/-(ninety five thousand eight hundred ninety) numbers of debentures of Rs.730/-(Rupees seven hundred thirty) each in favour of the plaintiff for a total amount of Rs.17,00,00,000/-(Rupees seventeen crores) carrying interest @ 30% per annum repayable on expiry of six months from the date of disbursement of the loan. That apart corporate guarantee from defendant nos.1 and 2 were furnished and some shares from defendant nos.1 and 2 were pledged as security.

4. Out of the sanctioned amount the plaintiff disbursed Rs.7,00,00,000/-(Rupees seven crores) on 07.02.1997 and Rs.10,00,00,000/-(Rupees ten crores) on 21.02.1997.

5. The defendants defaulted in repayment of the loan, both principal and interest after the due date and instead requested vide their letter dated 02.08.1997 for extension of time for repayment. The matter was considered by the plaintiff and since the defendants had not paid interest even, recall notice vide letter no.922 dated 11.5.1998 was issued, which was received by the defendants on 13.05.1998. Notices had also been issued by the plaintiff to the guarantors. Thereafter, defendant no.4 in his capacity as Chairman of defendant no.1 issued letter dated 15.09.1998 to the plaintiff requesting to reduce the interest on loan to 16% from 30% and to