2013 (3) TMI 807 - HC - Indian Laws

Summary

Issues Involved:
1. Applications for leave to defend.
2. Allegations of misjoinder of parties.
3. Non-filing of original documents.
4. Allegations of "money rotation transaction."
5. Claims of the transaction being a sham.
6. Deduction of tax at source.
7. Personal liability of a company director.

Summary:

1. Applications for Leave to Defend:

Applications for leave to defend two suits u/O 37 of CPC, 1908 for recovery of Rs. 5,75,17,240/- and Rs. 9,94,14,041/- with interest and costs were adjudicated. The defendants argued that the suits were bad for misjoinder of parties, the original documents were not filed, and the transaction was a "money rotation transaction" meant to show large volumes of business for obtaining bank loans. They also claimed that the loan agreements were a farce and the amounts were never actually paid as loans.

2. Allegations of Misjoinder of Parties:

The defendants argued that the suit against the defendant No.3, merely for being a Director of the defendant No.1 Company, was bad for misjoinder of parties and could not be tried as a summary suit. The court found that the law requires the joinder of such causes of action and dismissed this argument.

3. Non-filing of Original Documents:

The defendants claimed the suit was not maintainable under Order 37 as the original documents were not filed. The court held that non-filing of original documents is not fatal when there is no dispute about their existence, especially when shown in Section 138 NI Act proceedings.

4. Allegations of "Money Rotation Transaction":

The defendants argued that the transactions were "money rotation transactions" to show large volumes of business, which was unsubstantiated and illogical. The court found no foundation for this argument in the leave to defend applications and dismissed it as unpalatable.

5. Claims of the Transaction Being a Sham:

The defendants claimed that the loan agreements were a sham and did not represent the actual agreements between the parties. The court held that the defendants, having signed the loan agreements and issued post-dated cheques, were bound by them. The plea of the transaction being a sham was not supported by any substantial evidence or circumstances in the leave to defend applications.

6. Deduction of Tax at Source:

The court noted that the defendants had deducted tax at source on the interest amount due to the plaintiffs but did not issue TDS certificates. The defendants did not take any stand on whether the tax was deposited with the authorities. The court held that the defendants could not take a contrary stand before the court from that taken before the taxation authorities.

7. Personal Liability of a Company Director:

The court found no case against defendant No.3, who was only a director of the defendant No.1 Company, as being personally liable for the company's dues. The suit against her was dismissed.

Judgment:

The applications for leave to defend were rejected. The court passed a decree in favor of the plaintiffs for Rs. 5,75,17,240/- and Rs. 9,94,14,041/- respectively, with interest pendente lite at 9% and future interest at 15% per annum on the principal amount of the loan. The plaintiffs were also entitled to costs in accordance with the law. The suit against defendant No.3 was dismissed.