1993 (10) TMI 288 - HC - Companies Law

Summary

Issues Involved:
1. Entitlement to the recovery of Rs. 97,775.76 inclusive of interest.
2. Limitation of the claim.
3. Legality of the hire-purchase agreement dated November 15, 1978.
4. Consideration of the hire-purchase agreement.
5. Fabrication of entries in the account books.

Issue-wise Detailed Analysis:

1. Entitlement to Recovery of Rs. 97,775.76:
The learned company judge initially held in favor of the petitioning companies, decreeing the claim petitions. However, upon appeal, it was determined that the hire-purchase agreements were invalid and unenforceable due to a lack of authorization by the appellant company for its directors to enter into such agreements. The court found no positive evidence that the board of directors had authorized the agreements. Consequently, no liability could be fastened on the appellant company based on the invalid agreements.

2. Limitation of the Claim:
Issue No. 2 regarding the limitation of the claim was given up by the counsel for the appellant during the proceedings, and thus, it was not contested further in the judgment.

3. Legality of the Hire-Purchase Agreement:
The court concluded that the hire-purchase agreements were per se invalid and unenforceable. It was imperative for the petitioning companies to establish that the appellant company had authorized its directors to enter into the agreements. No such authorization was proved. The agreements were found to be invalid as they were entered into by individuals without the necessary authority from the appellant company.

4. Consideration of the Hire-Purchase Agreement:
The court found that the petitioning companies were not the owners of the vehicles mentioned in the hire-purchase agreements. The agreements stated that the petitioning companies were the full owners of the vehicles, which was contradicted by the testimony of Shri Bhupinder Singh Bala. He admitted that the companies were neither the owners nor in possession of the vehicles and that the vehicles were actually the property of the appellant company. Therefore, the agreements were without consideration, as no valid transfer of possession for consideration was established.

5. Fabrication of Entries in the Account Books:
The court found that the ledger account relied upon by the petitioning companies was not supported by corroborative evidence such as cash vouchers or entries in the appellant company's account books. The petitioning companies failed to establish that any amount was due from the appellant company. The claim petitions were based on book entries without substantive proof of actual transactions.

Conclusion:
The appeals were successful, and the judgments and decrees under challenge were set aside. The claim petitions filed by the petitioning companies were dismissed with costs. The court emphasized the necessity of proper authorization and actual consideration for the validity of hire-purchase agreements, which were lacking in this case.