1999 (1) TMI 420 - HC - Companies Law

Summary

Issues involved:
1. Interpretation of a decree against multiple defendants.
2. Determination of personal liability of managing director and director in a decree.
3. Consideration of whether defendants are necessary parties.
4. Correction of judgment and decree to remove personal liability.
5. Application of legal principles regarding nullity of a decree.

Interpretation of Decree Against Multiple Defendants:
The Indian Overseas Bank obtained a decree against multiple defendants, including a private limited company and its managing director and director. The executing court was approached by the bank to proceed against the properties of the defendants. However, the defendants contended that they were not personally liable for the decree amount. The court analyzed the decree and found that it clearly included all three defendants, making them jointly liable. The court emphasized that unless the decree is a nullity, the executing court must enforce it as per its plain language, rejecting the defendants' argument against personal liability.

Personal Liability of Managing Director and Director:
The court referred to a previous decision by the Orissa High Court, which highlighted that directors are generally immune from liability to creditors of their company unless fraudulent misrepresentations were involved in obtaining the loan. In this case, the trial court found that the managing director and director were personally liable based on their specific undertaking to repay the loan. The court distinguished this case from the Orissa High Court decision, emphasizing that here, the trial court correctly held the defendants personally liable based on the evidence presented.

Determination of Necessary Parties and Amount Due:
The trial court established that the managing director and director were necessary parties in the suit and personally liable for the amount due to the plaintiff. The court found that the defendants' contentions lacked evidence, while the plaintiff's documents supported the claim. Consequently, the trial court decreed in favor of the plaintiff, reinforcing the personal liability of the defendants.

Correction of Judgment and Decree:
The defendants attempted to correct the judgment and decree to remove their personal liability, but the court rejected this request. The court reasoned that the liability was not a mistake but a result of judicial reasoning, estopping the defendants from raising the same contentions again. The court emphasized that the correction sought did not fall within the purview of the Civil Procedure Code.

Application of Legal Principles Regarding Nullity of Decree:
The court discussed the concept of a decree being a nullity and highlighted that executing courts can ignore decrees that are nullities, such as those passed without jurisdiction. Referring to Supreme Court decisions, the court emphasized that a decree's validity should be challenged in appellate proceedings if deemed incorrect, rather than in execution proceedings. The court concluded that the decree in this case was not a nullity, as it was clear and based on judicial reasoning, affirming the personal liability of the defendants.

In conclusion, the High Court set aside the lower court's order and held that the managing director and director were personally liable for the decree, allowing the bank to proceed against their properties. The Civil Revision Petition was allowed, affirming the personal liability of the defendants as per the decree.