9911796707
TMI Blog1995 (7) TMI 435X X X X Extracts X X X X X X X X Extracts X X X X ..... dum of Association and it has amongst others an object of giving on lease all kinds of plant machinery, motor vehicles, marine engines, marine boats, trawlers, launching ships, vessels, barges, earth moving equipment, open cast mining equipment, compressors, drilling machines, industrial gas cylinders and any other equipment that the Company may think, fit. The Company approached the petitioner with a proposal to by the equipment/machinery described as M, G. Framings with loading arrangement and other accessories required for the said equipment from M/s. Hindon Engineering Private Limited, Saharanpur and M/s. Pat Fab Engineers Private Limited, Ahmedabad who are the manufactures and suppliers of the said machinery and accessories and leasing out the same to it. A proposal form for this purpose was duly filled up and signed by the Company through its Directors and the same was submitted to the petitioner along with the personal statement of the guarantors. On the request of the Company, the petitioner purchased the aforesaid equipment/machinery and accessories as per the requirement and specifications supplied by the Company from the aforesaid manufacturers and suppliers- Photo cop ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nify the petitioner at all times against loss, destruction or damage to the equipment by fire; accident or any other cause what soever. It was agreed between the parties that the Company shall not transfer, assign or otherwise dispose of its rights and obligations under the agreement. The petitioner on the other hand was at liberty to assign or otherwise deal with its rights or interest in the equipment covered under the agreement. It was further agreed that the petitioner would not sell, transfer, hypothecate, pledge or otherwise create any encumbrances or lien on the equipment whether under repairs or otherwise. Clause 22 of the agreement then provides that on the expiry of the term of the lease, it may be renewed for a further period on the terms and conditions to be mutually agreed to between the parties on notice for renewal to be addressed by the Company to the petitioner six months prior to the expiration of the lease and to be accepted by the petitioner within three months from its receipt. It was clearly understood that the petitioner would have the absolute right not to renew the arrangement even after the receipt of notice for renewal. Clauses (a), (b) and (c) of Clause ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oner was to revert back to it and the Company under no circumstances had the option to buy the equipment even after payment of the agreed lease charges. 3. The case of the petitioner is that the Company made defaults in the schedule of payments of lease rentals and paid only a sum of ₹ 6,55,600 / - as lease charges and another sum of ₹ 75,000/- towards interest in the form of additional lease charges as per the terms and conditions of the agreement. It is alleged that thereafter the Company failed and neglected to make the payments and a sum of Rs, 9,83,400/- was due from it up to 15-11-1992 as lease charges and another sum of ₹ 5,85,045/- as additional lease charges as on 15-3-1993. It is further alleged that the Company issued two cheques dated 30-1-1992 and 20-2-1992 for a sum of ₹ 60,000/ - each towards the payment of the amounts due from it but the said cheques were returned unpaid by the bankers with the remarks exceeds arrangement . The Company is then stated to have taken the plea that the aforesaid cheques were issued on the understanding that the petitioner would contact the Company before encashing them. This plea of the Company, according to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4. In the reply filed on behalf of the Company, some preliminary objections have been taken in regard to the maintainability of the petition. It is pleaded that the petition has sought to impose upon the Company an illegal, unconscionable and unlawful claim. It is further stated that the petitioner is a finance company which inter alia grants loans for the purchase of machinery and that the transaction between the parties namely, lease agreement was in substance and in reality a loan agreement for all intents and purposes and that the petitioner provided a loan to the company for the purchase of the equipment covered by the so called lease agreement. It is also averred that the petitioner obtained signatures of the Directors of the Company on printed documents purporting to be a lease agreement. According to the Company, the agreement contained various blanks which were not filled in at the time when the document was signed and later on the figures were typed out in the blank spaces. It is also alleged that the petitioner is not a manfuacturer or a supplier of the equipment covered by the agreement and, therefore, the agreement was a loan agreement hit by the provisions of the U ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eement considered in the light of the surrounding circumstances. In each case, the Court has the power to go behind the document and to determine the nature of the transaction whatever may be the form of the documents, Some of the observations of their Lordships may be quoted hereunder :- An owner of the goods who purports absolutely to convery or acknowledge to have conveyed goods and subsequently purports to hire them under a hire-purchase agreement is / not estopped from proving that the real bargain was a loan on the security of the goods. If there is a bona fide and completed sale of goods, evidenced by documents, anterior to and independent of a subsequent and distinct hiring to the vendor, the transaction may not be regarded its a loan transaction, even though the reason for which it was entered into was to raise money. If the real transaction is a loan of money secured by a right of seizure of the goods, the property ostensibly passed under the documents embodying the transaction, but subject to the terms of the hiring agreement, which become part of the buyer's title, and confer a licence to seize. When a person desiring to purchase goods and not having sufficient ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... acturers, and (2) subsequent lease of the same by the petitioner to the Company -- and even though these transactions were entered into for the reason that the Company may not have had funds to buy the equipment, the subsequent lease transaction cannot in the circumstances be described as a loan. Since the subsequent transaction was a lease agreement, it is, therefore, not hit by the provisions of the Usurious Loans Act as amended by the Punjab Relief of Indebtedness Act. The contention advanced on behalf of the Company has, therefore, no merit. 8. There is yet another aspect of the matter. The Company, as already observed, had defaulted in the payment of lease rentals and had, therefore, become liable to pay interest at the agreed rate of 21/2. per cent, per mensem which is being claimed by the petitioner as additional lease charges. At no stage prior to the filing of the written statement did the Company dispute its liability to pay the amount as claimed by the petitioner in terms of the lease agreement. It is for the first time that the plea was raised in this Court that the lease agreement was in fact a loan transaction. No doubt, the Company has instituted a sui_t in the Di ..... X X X X Extracts X X X X X X X X Extracts X X X X
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