1981 (3) TMI 179 - HC - Companies Law

Issues Involved:

1. Recovery of principal and interest due from respondents under section 446(2)(b) of the Companies Act, 1956.
2. Validity of the discharge of debt claimed by the respondents.
3. Admissibility and credibility of evidence provided by the respondents.
4. Application of section 81 of the Negotiable Instruments Act, 1881.

Issue-wise Detailed Analysis:

1. Recovery of Principal and Interest Due:

The application was filed by the official liquidator under section 446(2)(b) of the Companies Act, 1956, to recover Rs. 1,709 from respondents Nos. 1, 2, and 3 jointly and severally. The amount was due from a chit fund transaction where the 1st respondent was the highest bidder and executed a promissory note for Rs. 1,675 with 18% per annum interest. Despite notices of demand, no payments were made by the respondents, prompting the official liquidator to file the application.

2. Validity of the Discharge of Debt Claimed by the Respondents:

The respondents claimed that the debt was settled on December 2, 1975, and produced a stamped receipt (Ex. R-1) for Rs. 1,078.80. However, the court found inconsistencies in the respondents' evidence. The 1st respondent's son, who testified, admitted to knowing about the transaction but failed to recall the name of the managing director and did not provide corroborative evidence. The managing director was not examined to verify the signature on Ex. R-1, and no documentary evidence was provided to support the claim of adjustment of accounts.

3. Admissibility and Credibility of Evidence Provided by the Respondents:

The court found that the respondents did not produce the best evidence available. The 1st and 2nd respondents did not testify themselves, and the witness (R.W. 1) was deemed an interested party. The absence of formal proof of Ex. R-1 and lack of corroboration led the court to reject the plea of discharge. The court noted that the promissory note and consideration receipt remained with the company, indicating no discharge of debt.

4. Application of Section 81 of the Negotiable Instruments Act, 1881:

The court referred to precedents from the Madras and Kerala High Courts to explain the application of section 81 of the Negotiable Instruments Act. It emphasized that the possession of the promissory note by the official liquidator without any endorsement of discharge was prima facie evidence of the liability not being discharged. The court held that the respondents, being knowledgeable individuals, should have ensured the promissory note was endorsed with the discharge.

Conclusion:

The court concluded that the official liquidator had proved the existence of the debt, and the respondents failed to prove the discharge. The application was allowed with costs, directing respondents Nos. 1, 2, and 3 to jointly and severally pay Rs. 1,078.80 with costs and current interest at 6% per annum from the date of application until realization.

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