2006 (7) TMI 574 - HC - Companies Law

Summary

Issues Involved:
1. Whether the claim of the plaintiff falls within the ambit of Order 37 of the Code of Civil Procedure.
2. Whether the suit is within the period of limitation.
3. Whether the plaintiff's claim is valid and enforceable.
4. Whether the defendants have a substantial defense to the suit.
5. Whether the defendants are liable to pay the claimed amount with interest.

Detailed Analysis:

1. Claim under Order 37 of the Code of Civil Procedure:
The plaintiff, M/s. National Small Industries Corporation Ltd., filed a suit under Order 37 of the CPC for a decree of Rs. 57,78,585.86 along with interest at 17% p.a. The plaintiff's claim is based on a written agreement dated 25th June 1999, where the defendant No. 1 acknowledged a liability of Rs. 26,88,133.78. The court held that the suit falls within the ambit of Order 37 of the CPC since it is based on a written contract and acknowledgment of debt.

2. Limitation Period:
The agreement was entered into on 25th June 1999, and the suit was filed on 16th March 2002. The court found that the suit was filed within the limitation period, dismissing the defendants' contention that the suit was time-barred.

3. Validity and Enforceability of the Claim:
The plaintiff provided raw material assistance to the defendant No. 1 under the 'Raw Material Assistance Scheme'. Defendants No. 2 to 4 executed a Deed of Guarantee ensuring compliance with the agreement terms. Despite several reminders and a legal notice, the defendants failed to pay the dues. The court noted that the defendants acknowledged their liability in the agreement dated 25th June 1999, and thus, the claim is valid and enforceable.

4. Substantial Defense by Defendants:
The defendants sought leave to defend on grounds that the claim did not fall under Order 37 CPC, was time-barred, and that the plaintiff did not release the raw material causing losses. However, the court found no substantial defense as the defendants did not provide any evidence or details of their claims. The court held that the defense was not bona fide and was frivolous and vexatious.

5. Liability to Pay the Claimed Amount with Interest:
The court referred to the agreement dated 25th June 1999, which stipulated that in case of default, the defendants were liable to pay the entire amount along with interest. The court decreed that the defendants are liable to pay Rs. 26,88,133.78 with interest at 16% p.a. from 1st April 1992 till realization, jointly and severally.

Conclusion:
The court dismissed the applications for leave to defend filed by the defendants and passed a decree in favor of the plaintiff for Rs. 26,88,133.78 with interest at 16% p.a. from the date of institution of the suit till realization. The defendants were held jointly and severally liable to pay the amount, and the plaintiff was also entitled to the costs of the suit. The registry was directed to draw up the decree-sheet accordingly.