Allowed

Ilandfs Financial Services Limited v. Mr Nitin Kasliwal

Bombay HC10 Sept 2014SS/875/2013

Case brief

AI extract

What is this about?

In a summary suit under Order XXXVII CPC, the Bombay High Court decreed a claim for recovery of admitted debt against a guarantor. The court held that under the irrevocable guarantees executed, the plaintiff was not required to exhaust remedies against the principal debtor before enforcing the guarantee.

What did the court decide?

The suit was decreed in favour of the plaintiff against the defendant for Rs. 44,96,59,757/- with interest and costs.

Ilandfs Financial Services Limited Vs Mr… — Contract and Commercial Disputes | Bombay HC (2014)

Nitin

SJ-70-2013

IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION SUMMONS FOR JUDGMENT NO. 70 OF 2013

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SUMMARY SUIT NO. 875 OF 2013

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IL & FS Financial Services Limited … Applicant IN THE MATTER BETWEEN : IL & FS Financial Services Limited … Plaintiff Versus Mr. Nitin Kasliwal … Defendant

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Mr. Venkatesh Dhond, Senior Advocate, along with Amir Arsiwala and M. Kamdar, instructed by M/s. Udwadia Udeshi & Argus Partners, for the Plaintiff.

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Mr. Dara Mehta and Mr. Harjath Singh, instructed by M/s. Little & Co. for the Defendant.

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CORAM : S.J. KATHAWALLA, J. DATED : 10TH SEPTEMBER, 2014

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P.C. :

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By the above Summons for Judgment, the Plaintiff has prayed

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that a judgment be entered for the Plaintiff in the above Suit against the Defendant for Rs. 45,18,50,347/- as set out in the Plaint and for interest and costs.

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The above Suit is filed as a Summary Suit by the Plaintiff – IL & FS Financial Services Ltd. under Order XXXVII Rule 2 of the Code of Civil Procedure, 1908, for recovery of an admitted liability of debt due and payable by the Defendant (Nitin Kaliswal) to the Plaintiff which has arisen

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SJ-70-2013

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by virtue of the Letters of Guarantee at Exhibits-B and F to the Plaint.

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Briefly set out are the facts in the matter :-

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3.1 The Defendant is an individual, who is the Promoter and Director of one Tulja Enterprises Private Limited (TEPL).

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3.2. In the year 2010, TEPL approached the Plaintiff for a loan of Rs. 25 Crores, which loan was granted by the Plaintiff to TEPL (the said loan).

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3.3. In view of the said loan granted by the Plaintiff to TEPL, the following documents were inter alia executed by and between the parties :-

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(i) A loan cum pledge agreement dated 21^st May, 2010 was executed between the Plaintiff and TEPL. Other group companies of TEPL by the name of Verve Properties and Investment Private Limited (Verve), Chamundeshwari Mercantile Private Limited (Chamundeshwari) and Ingenious Finance and Investment Private Limited (Ingenious) were also parties to the said agreement. Under the said agreement, TEPL pledged 3832,500 shares in favour of the Plaintiff, Ingenious pledged 2,650,000 shares, Verve pledged 2,650,000 shares and Chamundeswari pledged 3,182,500 shares. All these shares were in S.Kumars Nationwide Limited (SKNL).

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(ii) A personal irrevocable guarantee dated 21^st May, 2010 was executed by the Defendant in favour of the Plaintiff, undertaking to pay all amounts arising under the loan agreement executed between the Plaintiff

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and TEPL, in the event of any default on the latter's part. The said personal guarantee stipulated that the Plaintiff was free to enforce the Defendants' obligations without first proceedings against / exhausting all of its remedies against TEPL. The Defendant further undertook to be treated as the principal debtor qua the Plaintiff.

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(iii) A letter of negative lien dated 21^st May, 2010, undertaking not to transfer, assign, encumber, charge, hypothecate or mortgage securities without the Plaintiff's prior approval was executed the Defendant. The Defendant also submitted an Affidavit detailing his properties and also the details of the guarantees issued by him to other banks and financial institutions. An irrevocable power of attorney dated 21^st May, 2010 was executed by Verve, Ingenious, TEPL and Chamundeshwari authorizing the Plaintiff to exercise all powers specified therein in respect of the shares pledged under the loan agreement.

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On 17^th February, 2011, TEPL entered into another loan agreement cum pledge with the Plaintiff for a sum of Rs 50 Crores. After the said loan agreement cum pledge was executed, the following documents were executed by and between the parties :

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(i) The Defendant executed a deed of undertaking dated 17^th February, 2011 in favour of the Plaintiff, undertaking that the securities pledged to the Plaintiff would not be pledged to any other lender without the latter's consent obtained prior in time.

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Nitin

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(ii) A deed of undertaking dated 21^st February, 2011 was executed by Ms. Jyoti Kasliwal, stating that she undertook in consideration of the loans made to TEPL (Rs. 25 Crores + 50 Crores), not to transfer, assign, encumber, pledge, hypothecate or dispose of the pledged shareholding in SKNL in any way.

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(iii) A negative lien dated 21^st February, 2011 was executed by the Defendant in favour of the Plaintiff stating that he undertook, in consideration of the loans made to TEPL (Rs. 25 Crores + 50 Crores), not to transfer, assign, encumber, pledge, hypothecate or dispose of the pledged shareholding in SKNL in any way.

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(iv) Another letter of guarantee dated 1^st March, 2011 was executed by the Defendant in favour of the Plaintiff guaranteeing the repayment of the 17^th February, 2011 loan to TEPL.

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(v) A pledge agreement dated 5^th January, 2012 was executed by the Defendant and Ms. Kasliwal in favour of the Plaintiff in respect of securities in SKNL.

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On 18^th January, 2012 the Plaintiff addressed a letter to TEPL informing them of a revision of interest rate on the Rs.50 Crores Loan to 16.25% p.a. (exclusive of interest tax) payable quarterly. This revision was accepted by TEPL. Clause 5 (i) of the pledge agreements stipulated that TEPL and its group companies were to maintain a margin necessary to serve as collateral for the loan. In the event that market, value of the

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Nitin

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securities pledged fell below the required margin, they were liable to jointly and severally pledge further additional securities. The Plaintiff addressed a letter dated 25^th September, 2012 to the Defendant, TEPL and others to pledge additional securities within two days of the notice.

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Despite repeated reminders, TEPL, its group companies and the Defendant failed to pay the outstanding amounts due. The Plaintiff was therefore constrained to address a notice dated 19^th October, 2012 to the Defendant informing that it would be compelled to sell the pledged securities and initiate a recovery if its loans were not serviced.

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Since the Defendant and TEPL failed to service the loans, the Plaintiff was forced to appropriate the pledged securities. The Plaintiff was able to appropriate a sum of Rs. 27,35,93,982/- from the sale of the pledged securities.

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On 5^th November, 2012 the Plaintiff addressed a letter to TEPL, its group companies and Ms. Kasliwal informing them that it was recalling the entire amount outstanding under both loans.

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On 8^th November, 2012 TEPL addressed a letter to the Plaintiff, wherein it expressed its inability to service the loans and / or pay the outstanding dues which were admitted. It further requested the Plaintiff to refrain from selling the pledged securities.

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By their Advocates letter dated 29^th April, 2013, the Plaintiff invoked the personal guarantees made by Defendant on 21^st May, 2010

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and 1^st March, 2011. Under both guarantees, the Defendant was required to pay the Plaintiff on demand within 24 hours, the amounts that were outstanding from TEPL qua the loan agreements of 21^st May, 2010 and 17^th February, 2011.

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On 9^th May, 2013 the Plaintiff filed the present Suit against the Defendant. On 10^th May, 2013, the Plaintiff filed Notice of Motion (L) No. 1071 of 2013 in the above Summary Suit against the Defendant under Order XXXVIII Rule 5 (2) of the Civil Procedure Code, 1908. In the said Notice of Motion, on 16^th May, 2013 this Court recorded the Defendant's statement that he had not disposed of the properties listed in Annexure A of Exhibit-D to the Plaint. This Court also recorded the Defendant's undertaking that he would not dispose of the said properties or remove them from the jurisdiction of this Court. The said Notice of Motion was accordingly disposed of.

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On 3^rd December, 2013 the Plaintiff took out the above Summons for Judgment and served it on the Defendant for a sum of Rs. 45,18,50,347/-. On 16^th December, 2013 the Defendant filed his reply to the said Summons for Judgment. In the said reply, the Defendant has admitted that he had executed the personal guarantees in favour of the Plaintiff. He contended that TEPL had admitted its debt owed to the Plaintiff. The Defendant sought an additional period of three months on behalf of TEPL to pay the amount claimed against them. The Defendant

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contended that the Plaintiff ought to exhaust its remedies against TEPL before seeking to recover the amount due from the former.

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I have heard the learned Advocates appearing for the parties.

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The Defendant has not disputed the loan or the failure to repay the loan. The factum of the Defendant being guarantor is also not disputed. Even in the Affidavit in reply the Defendant has requested for additional time to repay the amount claimed.

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The Defendant has in his Affidavit in reply contended that the Plaintiff ought to have exhausted its remedies against TEPL before seeking to recover the amount due from the former. The Plaintiff is always at liberty to move the Court against the guarantor without exhausting its remedies against the principal borrower. Under both the guarantees, the Defendant is required to pay the Plaintiff on demand within 24 hours, the amount outstanding from TEPL under the loan Agreements dated 21^st May, 2010 and 17^th February, 2011. In any event in the personal guarantees executed by the Defendant, it is clearly agreed between the parties that the Plaintiff is free to enforce the said guarantees without first proceedings against / exhausting all of its remedies against TEPL and further undertook to be treated as the principal debtor qua the Plaintiff. In view thereof, the Defendant now cannot be hard to say that the Plaintiff ought to exhaust its remedies against TEPL before seeking to recover the amount due from the former. In view of the above, there is no

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substance in the said defence raised by the Defendant that the Plaintiff ought to first exhaust its remedies against TEPL (the principal debtor).

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In the circumstances, in my view, the Defendant does not have any defence whatsoever qua the claim of the Plaintiff. The Suit therefore deserves to be decreed. The Summons for Judgment is therefore allowed and the Suit is decreed in terms of prayer clauses (a) and (b), which are reproduced hereunder :

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“ (a) That this Hon'ble Court be pleased to pass a decree in favour of the Plaintiff and against the Defendant for a sum of Rs. 449,659,757/- along with interest as described in detail in the Plaint.

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(b) For costs of the Suit.”

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The above Summons for Judgment as well as Suit are accordingly disposed of.

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(S.J. KATHAWALLA, J.)

Ilandfs Financial Services Limited v. Mr Nitin Kasliwal

Case brief

What is this about?

What did the court decide?

Ilandfs Financial Services Limited v. Mr Nitin Kasliwal

Case brief

What is this about?

What did the court decide?

What the court decided

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Issues for consideration

Statutes considered

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