2001 (9) TMI 1065 - SC - Companies Law

Special Court - Jurisdiction, powers, authority and procedure of, in civil matters - Held that - As informed that 25 per cent which was directed to be paid by this Court on 20th November, 2000, amounting to Rs. 32,64,142.70 p. has since been paid to the Custodian. In this way what has been paid in respect of the wheel loaders by Apex Engineering is Rs. 56.21 lakhs plus Rs. 32.64,142.70p. Thus having regard to the special facts of this case and keeping in view the letter of 7th May, 1992, complaining about the quality of the wheel loaders which were stated to be having design defects it will be in the interest of justice that the decree of the Special Court is modified and the amount of Rs. 32,64,142.70p paid under orders of this Court should be regarded as full and final payment due from Apex Engineering to Fairgrowth. In addition thereto, Fairgrowth will transfer title of the wheel loaders to Apex Engineering on Apex Engineering paying the contractual price of Re. 1.

Issues:
1. Interpretation of hire-purchase agreement terms and conditions.
2. Effect of default in payment on interest calculation.
3. Impact of Special Courts Ordinance on recovery proceedings.
4. Calculation of outstanding amounts and payments made by Apex Engineering.
5. Dispute over payment of penal interest by Apex Engineering.
6. Orders passed by the Special Court and subsequent appeal proceedings.
7. Determination of final payment due and transfer of title of wheel loaders.
8. Discharge of bank guarantees and securities.

Issue 1: Interpretation of hire-purchase agreement terms and conditions
The case involved a hire-purchase agreement between two parties for the purchase of wheel loaders, specifying payment terms and interest rates in case of default. Apex Engineering was required to pay 36 equal quarterly instalments totaling Rs. 56.21 lakhs. The agreement mandated payment of interest at 2 per cent per month compounded on a daily basis in case of default.

Issue 2: Effect of default in payment on interest calculation
After some instalments were paid, Apex Engineering claimed inherent defects in the wheel loaders and requested repossession. Subsequently, the Special Courts Ordinance was enacted, designating Fairgrowth as a "notified person" for recovery purposes. Legal proceedings in the Karnataka High Court resulted in deposits by Apex Engineering, leading to a shortfall in payments.

Issue 3: Impact of Special Courts Ordinance on recovery proceedings
The enactment of the Special Courts Ordinance and Fairgrowth being declared as a "notified person" shifted the recovery responsibility to the Custodian. This legal development influenced the subsequent recovery actions and court decisions.

Issue 4: Calculation of outstanding amounts and payments made by Apex Engineering
Despite delays, Apex Engineering eventually paid the full amount due under the hire-purchase agreement between 1997-1999. However, there was a significant delay in making the complete payment, leading to a dispute over the total outstanding amount and the subsequent legal implications.

Issue 5: Dispute over payment of penal interest by Apex Engineering
Fairgrowth demanded penal interest of Rs. 86,54,393.63p, in addition to the full payment under the agreement. The Special Court passed a decree for this amount, along with the return of the wheel loaders to Fairgrowth, sparking a legal challenge and subsequent appeal.

Issue 6: Orders passed by the Special Court and subsequent appeal proceedings
The Special Court's decree for penal interest and return of the wheel loaders was challenged in an appeal. Interim orders required partial payment by Apex Engineering, leading to a modified decision by the Supreme Court based on the unique circumstances and the quality issues raised by Apex Engineering.

Issue 7: Determination of final payment due and transfer of title of wheel loaders
The Supreme Court modified the decree, considering the payments made by Apex Engineering and the quality concerns raised. The Court deemed the amount paid under its orders as full and final payment due from Apex Engineering to Fairgrowth, with the transfer of title of the wheel loaders to Apex Engineering upon payment of Re. 1.

Issue 8: Discharge of bank guarantees and securities
The appeal was disposed of with the questions of law left open, and the bank guarantees and securities furnished were discharged as per the Court's orders, concluding the legal proceedings in the matter.

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