9911796707
TMI Blog1997 (7) TMI 553X X X X Extracts X X X X X X X X Extracts X X X X ..... t for a period of three months on an interest of 22 per cent. per annum. To secure payment the respondent-company executed documents details of which are mentioned in paragraph 6 of the petition. The respondent, however, instead of making payment sought further extension of time by one month. The extension was granted subject to the payment of interest at the rate of 27 per cent. per annum with effect from December 20, 1995. The respondent-company, however, repaid a sum of rupees ten lakhs only and gave another cheque for Rs. 30 lakhs which was dishonoured by the bank. When contacted, the respondent undertook to pay back the entire amount of Rs. 30 lakhs in three equal monthly instalments with interest at the rate of 27 per cent, per annum with effect from January 7, 1996. As the respondent-company failed to keep its promise, the petitioner was constrained to serve a notice under section 434 of the Companies Act on the respondent-company which was not complied with, hence the present petition. On September 29, 1996, this court issued notices to the respondent to show cause why the petition should not be admitted and advertised. In reply to the said notice the company put in appea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e misconceived. The U.P. Regulation of Money Lending Act, 1976 (U.P. Act No. 29 of 1976), was enacted for the purpose of regularisation of money lending transactions and for the registration of money lenders and for matters connected therewith or incidental thereto. This Act will not apply to the petitioner, firstly, because section 2 of the said Act has exempted the Government, local authorities statutory corporations and public companies (as defined in the Companies Act) from the purview of Act No. 29 of 1976 in respect of any loan, advance or deposit. Secondly, section 3(6) of the said Act defines "money lender" as a person who carries on the business of money lending. The respondent has not placed any material on the record to show that the petitioner carries on the business of money lending. On the contrary paragraph 1( a ) of the petition mentions the objects for which the petitioner-company was incorporated. Money lending business is not mentioned. In this connection, article 111(11) of the articles of association which is quoted in paragraph 1 of the petition is relevant. It authorises the company to invest and deal with any moneys of the company not immediately required fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and what could be the pressure, undue influence, or coercion exercised by the petitioner over the managing director. It has been stated in the petition and has not been denied, that the respondent had approached the petitioner for an intercorporate deposit of Rs. 50 lakhs. The petitioner agreed to give Rs. 40 lakhs for a period of three months on an interest of 22.5 per cent. which subsequently, on the request of the respondent was reduced to 22 per cent. The board of directors of the respondent-company accepted the said terms and passed a resolution to the said effect. They also agreed to secure the payment by executing certain documents. If they were not agreeable to the terms of the petitioner it was open to them to refuse to sign the agreement and search for another party which would offer better terms. The managing director of the respondent-company was one of the promoters of the said company. He and his wife owned a substantial number of shares of the said company. It cannot be accepted that the managing director could be coerced by the petitioner in accepting the terms. It has been held by a Division Bench in the case of Sarju Pd. v . Jatan Singh [1936] AWR 84, that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ry, 7, 1996. I am prima facie of the view that the managing director was duly empowered to agree to the said increase in the facts and the circumstances specially when the company had sought extension and were unable to pay back the amount due. That apart it has been observed by the Calcutta High Court in the case of Kishan Rathi v. Mondal Brothers and Co. P. Ltd. [1967] 37 Comp Cas 256 , 263 ; AIR 1967 Cal 75, 79, as follows: "A person taking in due course a bill of exchange or hundi by a director who, consistently with the company's articles, might have been, but who was not in fact authorised to sign bills or hundis is upon the principle of Royal British Bank v. Turquand [1856] 6 EL and BL 327, entitled to assume that the director was 'acting under its authority' when he signed the bill and to recover on the bill or hundi against the company accordingly." Respectfully agreeing with the aforesaid observations of the Calcutta High Court I am of the view the petitioner was a bona fide creditor who lent money by way of an intercorporate deposit and has, therefore, a right to assume as against the company that all requirements of the management have been complied with s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the shares given in security stood in the name of the managing director and his wife. It has also not been denied that the same were not in marketable lots or that the period for which the transfer deed was given had expired. It was also not denied that there was a lock-in period of three years. What has been stated is that the lots could be made into marketable lots within two days if so desired by the petitioner. The transfer deed could be revalidated or a fresh deed could be issued to the petitioner if they asked for it and the lock-in-period could be reduced by the SEBI, in case a request was made to them. So far as the value of the shares are concerned it has not been denied that in December, 1996, the shares were being quoted below par. What has been stated is that the value of the shares had gone up in June, 1996, and the petitioner could have disposed of the shares at that time. Having considered the respective contention of learned counsel, prima facie, I find substance in the submission made by the petitioner that the shares which had been given by the two directors of the company as security under the circumstances could not be treated to be adequate security because eve ..... X X X X Extracts X X X X X X X X Extracts X X X X
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