A corporate entity can ratify lawsuits filed without initial authorization if later validated by board resolutions or evidence of subsequent approval, emphasizing enforceability of agreements in business transactions.

JUDGMENT :

Senthilkumar Ramamoorthy, J.

Kalson Health Care (P) Ltd (a unit of Ramani Resorts and Hotels Pvt. Ltd), Ramani Resorts and Hotels Pvt. Ltd and P.R.Shanmugam have instituted the suit against Vinod Kannan, proprietor of M/s. Legend Gym and M/s. Asian Industries Valves and Instruments and Mr.Soundararajan @ M.S.Rajan, Partner in M/s. Asian Industries Valves and Instruments. In the suit, the plaintiffs seek a judgment and decree jointly and severally against the three defendants in respect of the following:

(i) a sum of Rs.95,00,000/- with further interest thereon at 24%p.a. from the date of plaint till the date of realisation;

(ii) return of gym equipments or, upon default, payment of a sum of Rs.20,00,000/- with interest thereon at 24% p.a.;

(iii) a sum of Rs.5,00,000/- as damages for wrongful detention of the gym equipments with interest thereon at 24% p.a. from the date of filing of the suit till the date of realisation;st

(iv) A preliminary decree directing the 1 defendant to render accounts of profits made by illegally collecting gym fees and a final decree for such profits;

(v) a sum of Rs.50,00,000/- towards damages for the loss of income and mental agony; and (vi) for costs of the suit.

2. In the plaint, the plaintiffs state that the first and second plaintiffs are closely held private limited companies and that the third plaintiff is a director in both the companies. In the course of business, it is stated that the first plaintiff entered into a Memorandum of Understanding dated 28.02.2015 with the first defendant (the MoU) for the purchase of the business under the name and style of “M/s. Legend Gym” (the Gym). Pursuant thereto, it is stated that a Business Purchase Agreement dated 17.05.2015 (the BPA) was executed by and between the above mentioned parties and the total consideration for the purchase of the gym business was fixed at Rs. 2,25,00,000/-. It is also stated that a sum of Rs.50,00,000/- was paid by RTGS to the second defendant under instructions from the first defendant and that two cheques for an aggregate sum of Rs.1,75,00,000/- were issued by the second plaintiff in favour of the second defendant and were handed over to the first defendant.

3. The plaintiffs further state that they renovated the Gym by investing lakhs of rupees after being put in possession thereof. It is also stated that gym equipments worth approximately Rs.20,00,000/- were shifted to the premises of the Gym from another gym operated by the plaintiffs. As per clause 6 of the BPA, it is stated that the first defendant was permitted to function as the Manager of the Gym. According to the plaintiffs, the vendors under the BPA declared and confirmed that the business is free from all encumbrances and that they have the right and power to transfer the same to the purchaser.

4. The plaintiffs assert that they were shocked to learn that the defendants had mortgaged or hypothecated the gym equipments with the Syndicate Bank and availed a loan of Rs.1,50,00,000/-. The plaintiffs also state that they ascertained that the first defendant had taken various other loans and even defaulted in payment of rent to the extent of Rs.50,00,000/- for the Gym premises. Instead of complying with the various obligations under the BPA