ON

02.06.2023

COMING

ON

FOR

PRONOUNCEMENT

OF

JUDGMENT,

THIS

DAY,

P.S. DINESH KUMAR, J., PRONOUNCED THE FOLLOWING:-

4

JUDGMENT

This appeal by the second defendant is directed

against the judgment and decree dated March 20,

2008 in O.S. No. 5818/1994 passed by XXX Addl.

City Civil Judge, Bangalore.

2. Brief facts of the case are, M/s. Kirloskar

Investment and Finance Ltd., has brought the

instant suit against Mayura Securities Ltd., its

Directors and others for recovery of Rs.39,85,084/-.

Suit has been decreed directing defendants No. 1 to

4, 6 & 7 to pay the said sum with interest at 12%

p.a. Feeling aggrieved, second defendant has filed

this appeal.

3. We have heard Prof. C.M. Nagabhushan,

learned Advocate for the appellant – second

defendant and Shri. K.S. Mahadevan, learned

Advocate for the first respondent – plaintiff.

5

4. For the sake of convenience, parties shall be

referred as per their ranking in the Trial Court.

5. Plaintiff’s case is, first defendant had sought

financial assistance of Rs.35 Lakhs for purchase of

Computer accessories, Telephone Network etc.,

under the Hire Purchase Scheme. Plaintiff advanced

the said amount to the first defendant. Defendants

No.2 to 8 were the Directors of the Company. In

addition to the first defendant executing necessary

documents,

the

second

defendant

has

also

executed a guarantee in favour of first defendant to

repay the loan.

6. Defendants resisted the suit by filing written

statement. Second defendant has also filed his

written statement contending inter alia that the Hire

Purchase

Agreement

was

executed

by

third

defendant C.P. Radha Krishnan. Under the Articles

of Association, the Managing Directors of the

6

Company is authorized to execute the agreement

on behalf of the Company. No decision was taken

by the Board of Directors nor any resolution passed

authorizing C.P. Radha Krishnan to execute the

documents.

7. Based on the pleadings, Trial Court has

framed following eight issues and one additional

issue:

“ 1. Whether the plaintiff proves that a sum of

Rs.35,00,000/- was lent under a hire purchase

agreement to the 1^st defendant company on

29-3-1994?

2. Whether the plaintiff proves that the 1^st

defendant company is a Partnership for all

practical purposes being a closely knit company?

3.

Whether

the

plaintiff

proves

that

the

defendants are liable to pay Rs.34,85,084/-

jointly and severally to the plaintiff?

4. Whether the defendant No.5 and 6 proves

that there is no privity of contract with the

plaintiff company?

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5. Whether the 5^th defendant proves that he

ceased to be a Director of the company by

retiring in August 1993?

6. Whether the defendant No.5 and 6 proves

that they are not personally liable for any debts

when the 1^st defendant company is a public

limited company?

7. Whether there is any cause of action against

defendant No.9?

8. To what relief and order the parties are

entitled for?

Additional Issue:-

1. Whether the defendant No.2 proves that this

Court has no territorial jurisdiction to try this

suit? ”

8. On behalf of the plaintiff, one witness was

examined as P.W.1 and Exs. P1 to P23 marked. On

behalf

of

defendants,

three

witnesses

were

examined as D.W.1, D.W.2 and D.W.3 and Exs. D1

to D4 marked. Answering issues No.1, 3, 4, 5, 6 in

8

affirmative, 2 & 7 in the negative, the learned Trial

Judge decreed the suit.

9. Prof. Nagabhushana, assailing the judgment

and decree urged following grounds:

 the borrower is first defendant. It is Public

Limited Company. Therefore, the Company

alone is liable for repayment;

 third defendant C.P. Radhakrishnan, who was

also a Director of the Company has played

fraud on the Company and its Directors by

availing the loan for his benefit;

 P.W.1 has stated in his evidence that the

demand

draft

was

given

to

the

third

defendant. P.W.1 has not been able to

establish in whose account the amount was

realized. He has also admitted that he does

not know about the transaction;

 the plaintiff has not pr