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TMI Blog2006 (12) TMI 246X X X X Extracts X X X X X X X X Extracts X X X X ..... ity and soft loans under the Seed Capital Assistance Scheme of IDBI. Defendant No. 1 approached the plaintiff for providing equity assistance to the tune of Rs. 60 lakhs for setting up a project at Barotiwala. The plaintiff acceded to the request of defendant No. 1 and assistance to the tune of Rs. 60 lakhs, as applied for was provided. Defendant No. 1 company allotted six lakhs shares, each valuing Rs. 10 to the plaintiff and it was agreed that the shares will be bought back by company No. 1, on expiry of five years period from the date the project started commercial production. 3. Defendant No. 1 became sick. It approached the Board for Industrial and Financial Reconstruction, New Delhi, for rehabilitation of its unit. Rehabilitation package was sanctioned on 23-2-1993, as per which the industrial unit of company No. 1 was leased out to company No. 2. The plaintiff approached defendant No. 2 to purchase the shares of defendant No. 1 which were allotted to it as aforesaid. An agreement was executed between the plaintiff and company No. 2 on 26-7-1993. As per terms and conditions of this agreement, defendant No. 2 agreed to purchase the shares and to pay Rs. 60 lakhs together w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bad in law, as no permission of the Central Government was obtained, as per the provisions of sections 13 and 16 of the Securities Contracts (Regulation) Act, 1956, and the notification issued thereunder. 6. On the merits, liability of defendant No. 1 to pay the suit money has been denied because of defendant No. 1 being not a party either to the initial agreement for buying back the shares or subsequent agreement under which defendant No. 2 agreed to buy the shares. 7. Defendant No. 2 has also raised a number of preliminary objections, some of which are similar to the aforesaid preliminary objections raised by defendant No. 1. The additional ones are as follows : ( i )Suit against defendant No. 2 based on the subsequent agreement is barred by time. ( ii )The court does not have the territorial jurisdiction. 8. On the merits, defendant No. 2 has denied its liability to pay the suit amount. The statement of account filed with the plaint is alleged to be fabricated. 9. Following issues were framed on the pleadings of the parties : 1.Whether the plaintiff-company is company duly incorporated under the Companies Act, 1956 and whether Rajinder Parshad Gautam is co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as PW1 stated that approval for filing suit was accorded vide order passed in the note exhibit PW1/C by the managing director. Item No. 1 of this note exhibit PW1/C pertains to the authorisation to PW1-R.P. Gautam, in his capacity as Senior Manager (Project) to file the suit. In view of the aforesaid evidence, as also the fact that no evidence in rebuttal has been led by the defendants, it is held that Sh. R.P. Gautam, Senior Manager (Project), who has filed the suit, is authorised to do so by the plaintiff-Corporation. Issue is answered accordingly. Issue No. 2 : 12. From a bare reading of the plaint it is clear that the claim of the plaintiff is based upon the agreement, which it made with defendant No. 2, on 26-7-1993. The agreement is exhibit PW2/J. Signatures on the agreement are not denied by the defendants. The document stands duly proved by the testimony of PW2-Pawan Kumar Bali, an employee of the plaintiff-Corporation. Clause 1 of the agreement are as follows : "The company shall buy 6,00,000 (six lakhs) equity shares of Rs. 10 in Pamwi at par at a price of Rs. 10 each at an aggregate sum of Rs. 60 lakhs (Rupees sixty lakhs only) from the Corporation over a pe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ause the agreement specifically stated that the shares were to be bought over a period of eight years in instalments. For this reason also, the plaintiff cannot recover the price of those shares, which are still with it, and have not been purchased by defendant No. 2. 16. In view of the abovestated position, the plaintiff cannot be said to be entitled to recover the suit amount. Issue is answered accordingly. Issue No. 3 : 17. Claim of the plaintiff is based on the plea that defendant No. 2, as per agreement, was required to pay the price of the shares in quarterly instalments and that first default was made in respect of the instalment due in December, 1997, and that no instalment was paid thereafter. Suit was filed in July, 2000, or say within three years of the first default. Therefore, the alleged claim cannot be said to be barred by time. Issue is answered accordingly. Issue No. 4 : 18. No defect was pointed out in the valuation of the suit for the purpose of court fee and jurisdiction during the course of the hearing of the suit. So, the issue is found against the defendants. Issue No. 5 : 19. No evidence with respect to this issue has been led by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... senting the plaintiff submitted that the case of the plaintiff was covered by the second proviso, which permits the ready forward contracts by a banking company and certain other institutions. Learned counsel submitted that plaintiff was a banking company, per notification dated 5-11-1976, issued by the Government of India, Department of Revenue and Banking (Banking Wing), in pursuance of sub-clause ( i ) of clause ( a ) and clause ( c ) of sub-section (1) of section 9 of the Industrial Development Bank of India Act, 1964. As per this notification, the plaintiff-Corporation has been notified along with a couple of other institutions for the purposes of the aforesaid sub-clause and clause of sub-section (1) of section 9 of the Industrial Development Bank of India Act, 1964. The aforesaid sub-clause ( i ) of clause ( a ) and clause ( c ) of sub-section (1) of section 9 of this Act, read as follows : "9. Business of Development Bank. (1) The Development Bank shall function as the principal financial institution for co-ordinating the working of institutions engaged in financing, promoting or developing industry and for assisting the development of such institutions in such manner ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ced above is in no way supports the submission of learned counsel. 28. Sub-section (2) of section 16 of the Securities Contracts (Regulation) Act, 1956, says that a contract made in violation of sub-section (1) shall be illegal. The contract between the plaintiff and defendant No. 2 for the sale of the shares of defendant No. 1, is apparently in contravention of the notification dated 27-6-1969, issued under sub-section (1) of section 16 of the Securities Contracts (Regulation) Act, 1956, and is thus illegal, in view of the provision of sub-section (2) of section 16 of the same Act. Issue is answered accordingly. Issue No. 9 : 29. Learned counsel for defendant No. 2 argued that the agreement was executed at Delhi and defendant has its head office at Calcutta with no branch within the State of Himachal Pradesh and thus this court does not have the jurisdiction to entertain the suit. While countering the submission, learned counsel for the plaintiff submitted that the instalments on account of the price of the shares were agreed to be paid at Shimla. He urged that even though it was not mentioned in the agreement itself that the instalments were payable at Shimla, defenda ..... 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