2007 (7) TMI 685 - HC - Companies Law

Summary

Issues Involved:
1. Maintainability of the suit.
2. Territorial jurisdiction.
3. Misguide of cause of action and multifariousness.
4. Limitation period.
5. Authorization of plaint signing and verification.
6. Entitlement to recovery amount.
7. Entitlement to interest and its rate.
8. Relief.

Issue-wise Detailed Analysis:

1. Maintainability of the Suit:
The defendant objected to the suit based on Section 10 of the Code of Civil Procedure (CPC) due to a prior suit filed by Dany Dairy in Saharanpur. However, since the Saharanpur suit was dismissed in default and Dany Dairy was ordered to be wound up, the objection was not pressed, rendering the issue non-surviving.

2. Territorial Jurisdiction:
The plaintiff argued that the bank guarantees were issued and invoked in Delhi, and the defendant had a zonal office in Delhi, thus conferring jurisdiction to Delhi courts. The defendant contended that the guarantees were issued and payable in Saharanpur. The court held that since the guarantees did not specify a place of payment and could be paid at any place, including Delhi, and considering the defendant's presence in Delhi, the Delhi courts had jurisdiction.

3. Misguide of Cause of Action and Multifariousness:
This issue was not pressed by the defendant.

4. Limitation Period:
The defendant argued that the suit was barred by limitation, asserting that the cause of action arose when the bank guarantees were invoked (21.03.1990) and the suit was filed beyond the limitation period on 22.05.1993. The court excluded the period during which an injunction was in operation (17.01.1991 to 13.02.1992) and held that the suit was filed within the limitation period. Additionally, the court noted that the liability under the bank guarantees was not written off and continued to be reflected in the defendant's balance sheets, potentially extending the limitation period under Section 18 of the Limitation Act.

5. Authorization of Plaint Signing and Verification:
The plaint was signed and verified by the company secretary of the plaintiff, which was deemed in compliance with Order XXIX Rule 1 of the CPC. The defendant did not contest this issue, and it was decided in favor of the plaintiff.

6. Entitlement to Recovery Amount:
The court examined the terms of the bank guarantees, which required payment upon a demand by the plaintiff stating that the amount was due to loss or damage caused by Dany Dairy's breach of contract. The plaintiff had sent demand notices in accordance with the terms. The court held that the plaintiff was entitled to the amounts under the three bank guarantees: Rs. 25,00,000 under Bank Guarantee No. 614, Rs. 16,50,000 under Bank Guarantee No. 615, and Rs. 12,00,000 under Bank Guarantee No. 626.

7. Entitlement to Interest and Its Rate:
The plaintiff claimed interest at 20% per annum. The court considered the interest rates at the time of the bank guarantees' execution (17-18%) and the subsequent decline in interest rates. The court awarded simple interest at 17% per annum from 01.05.1989 till the filing of the suit (21.05.1993) and 12% per annum from the date of filing till realization on the principal amount of Rs. 53,50,000.

8. Relief:
The court decreed in favor of the plaintiff for Rs. 53,50,000 along with simple interest at 17% per annum from 01.05.1989 to 21.05.1993 and 12% per annum from 22.05.1993 till realization, along with costs.