Dismissed

Mr D L Walton v. M/S Kirloskar Investments and Finance

Karnataka HC8 Jun 2023RFA/989/2008

Case brief

AI extract

What is this about?

The High Court of Karnataka dismissed the second defendant's appeal against a decree for recovery of money. The court held that the appellant, a director of the plaintiff company, executed a personal guarantee that was admitted to in his examination, making him liable for the debt.

What did the court decide?

Appellant held liable to pay the decree amount as per the personal guarantee executed; appeal dismissed.

Mr D L Walton Vs M/S Kirloskar Investments and Finance — Company and Corporate | Karnataka HC (2023)

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R.F.A No.989/2008

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IN THE HIGH COURT OF KARNATAKA AT BENGALURU

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DATED THIS THE 8^TH DAY OF JUNE, 2023

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PRESENT

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THE HON’BLE MR. JUSTICE P.S. DINESH KUMAR

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AND

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THE HON’BLE MR. JUSTICE T.G. SHIVASHANKARE GOWDA

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R.F.A NO.989 OF 2008 (MON)

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BETWEEN:

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MR. D.L. WALTON S/O MR. P.T. AMBROSE AGED ABOUT 51 YEARS R/A NO.32/2516, P.J.ANTONY ROAD MAMANGALAM, PALARIVATTOM P.O. COCHIN-682 025 …APPELLANT

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(BY SHRI. C.M. NAGABUSHANA, ADVOCATE)

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AND:

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M/S. KIRLOSKAR INVESTMENTS AND FINANCE LTD., REGD. OFFICE AT II FLOOR UNITY BUILDINGS, J.C. ROAD BANGALORE-560 002 REP. BY ITS SENIOR MANAGER MR. SURESH NARAYAN

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MAYURA SECURITIES LTD., 5^TH FLOOR, A.P. ARCADE (SINGAPORE PLAZA), 333 CROSS CUT ROAD, GANDHIPURAM COIMBATORE-641 012 NOW AT NEW COCHIN DEVASWOM BUILDING KARUNAKARAN NAMBIAR ROAD ROUND NORTH THRISSUR-680 020 BY ITS MANAGING DIRECTOR

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R.F.A No.989/2008

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C.P. RADHAKRISHNAN S/O LATE PADMANABHA MENON AGED ABOUT 54 YEARS XLI/131, 'MENONS' GOVT. PRESS ROAD COCHIN-682 011

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P.S. JOSEPH S/O P.J. SEBASTIAN AGED ABOUT 58 YEARS XLI/1232, PATHIKULANGARA CHITTOR ROAD COCHIN-682 018

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SIBY THOMAS S/O K.J. THOMAS AGED ABOUT 49 YEARS KADANTHOTTU HOUSE PERUNNA EAST, CHANGANACHERRY KERALA-686 102

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SIBY MATHEW S/O LATE MATHEW AUGUSTINE AGED ABOUT 50 YEARS CHERUKARA HOUSE NEAR BOAT JETTY CHANGANACHERRY KOTTAYAM KERALA-686 102

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BIJU ABRAHAM S/O P.J. ABRAHAM AGED ABOUT 45 YEARS IV/310, MARKET ROAD N.PARUR, KERALA-679 312

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P.S. PAUL S/O P.J. SEBASTIAN AGED ABOUT 49 YEARS XLI/1232, PATHIKULANGARA CHITTOR ROAD COCHIN-682 018

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R.F.A No.989/2008

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COCHIN STOCK EXCHANGE ERNAKULAM, KERALA BY ITS OFFICIATING SECRETARY VEEKSHESHAM ROAD, KALOOR COCHIN-682 011

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SECURITY EXCHANGE BOARD OF INDIA (SEBI) BY ITS SECRETARY NEW DELHI-110 001

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UNION OF INDIA MINISTRY OF FINANCE BY ITS SECRETARY NEW DELHI-110 001

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DEVASWOM BOARD DEVASWOM BUILDING KARUNAKARAN NAMBIAR ROAD ROUND NORTH, THRISSUR-680 020 BY ITS SECRETARY …RESPONDENTS

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(BY SHRI. K.S. MAHADEVAN, ADVOCATE FOR MS. REVATHY ADINATH NARDE, ADVOCATE FOR R1)

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NOTICE TO R2 TO R4 & R7 ARE DISPENSED WITH VIDE ORDER DATED 18.02.2016;

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NOTICE TO R5, R8, R9 TO R12 ARE DISPENSED WITH VIDE ORDER DATED 08.06.2015;

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VIDE ORDER DATED 22.02.2021 SERVICE OF NOTICE TO R6 IS HELD SUFFICIENT BY WAY OF PAPER PUBLICATION

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THIS RFA IS FILED UNDER SECTION 96 OF CPC, AGAINST THE JUDGEMENT AND DECREE DATED 20.03.2008 PASSED IN O.S.NO.5818/1994 ON THE FILE OF XXX ADDITIONAL CITY CIVIL JUDGE, BANGALORE, DECREEING THE SUIT FOR RECOVER OF MONEY.

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THIS RFA, HAVING BEEN HEARD AND RESERVED FOR JUDGMENT ON 02.06.2023 COMING ON FOR PRONOUNCEMENT OF JUDGMENT, THIS DAY, P.S. DINESH KUMAR, J. , PRONOUNCED THE FOLLOWING:-

R.F.A No.989/2008

JUDGMENT

This appeal by the second defendant is directed against the judgment and decree dated March 20, 2008 in O.S. No. 5818/1994 passed by XXX Addl. City Civil Judge, Bangalore.

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Brief facts of the case are, M/s. Kirloskar Investment and Finance Ltd., has brought the instant suit against Mayura Securities Ltd., its Directors and others for recovery of Rs.39,85,084/-. Suit has been decreed directing defendants No. 1 to 4, 6 & 7 to pay the said sum with interest at 12% p.a. Feeling aggrieved, second defendant has filed this appeal.

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We have heard Prof. C.M. Nagabhushan, learned Advocate for the appellant – second defendant and Shri. K.S. Mahadevan, learned Advocate for the first respondent – plaintiff.

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R.F.A No.989/2008

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For the sake of convenience, parties shall be

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referred as per their ranking in the Trial Court.

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Plaintiff’s case is, first defendant had sought

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financial assistance of Rs.35 Lakhs for purchase of Computer accessories, Telephone Network etc., under the Hire Purchase Scheme. Plaintiff advanced the said amount to the first defendant. Defendants

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No.2 to 8 were the Directors of the Company. In addition to the first defendant executing necessary documents, the second defendant has also executed a guarantee in favour of first defendant to repay the loan.

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Defendants resisted the suit by filing written statement. Second defendant has also filed his written statement contending inter alia that the Hire Purchase Agreement was executed by third defendant C.P. Radha Krishnan. Under the Articles of Association, the Managing Directors of the

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R.F.A No.989/2008

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Company is authorized to execute the agreement on behalf of the Company. No decision was taken by the Board of Directors nor any resolution passed authorizing C.P. Radha Krishnan to execute the documents.

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Based on the pleadings, Trial Court has framed following eight issues and one additional issue:

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“ 1. Whether the plaintiff proves that a sum of Rs.35,00,000/- was lent under a hire purchase agreement to the 1^st defendant company on 29-3-1994?

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2. Whether the plaintiff proves that the 1^st defendant company is a Partnership for all practical purposes being a closely knit company?

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3. Whether the plaintiff proves that the defendants are liable to pay Rs.34,85,084/jointly and severally to the plaintiff?

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4. Whether the defendant No.5 and 6 proves that there is no privity of contract with the plaintiff company?

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R.F.A No.989/2008

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5. Whether the 5^th defendant proves that he ceased to be a Director of the company by retiring in August 1993?

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6. Whether the defendant No.5 and 6 proves that they are not personally liable for any debts when the 1^st defendant company is a public limited company?

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7. Whether there is any cause of action against defendant No.9?

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8. To what relief and order the parties are entitled for?

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Additional Issue:-

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1. Whether the defendant No.2 proves that this Court has no territorial jurisdiction to try this suit? ”

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On behalf of the plaintiff, one witness was examined as P.W.1 and Exs. P1 to P23 marked. On behalf of defendants, three witnesses were examined as D.W.1, D.W.2 and D.W.3 and Exs. D1 to D4 marked. Answering issues No.1, 3, 4, 5, 6 in

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R.F.A No.989/2008

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affirmative, 2 & 7 in the negative, the learned Trial Judge decreed the suit.

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Prof. Nagabhushana, assailing the judgment

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and decree urged following grounds:

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the borrower is first defendant. It is Public Limited Company. Therefore, the Company alone is liable for repayment;

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third defendant C.P. Radhakrishnan, who was also a Director of the Company has played fraud on the Company and its Directors by availing the loan for his benefit;

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P.W.1 has stated in his evidence that the demand draft was given to the third defendant. P.W.1 has not been able to establish in whose account the amount was realized. He has also admitted that he does not know about the transaction;

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the plaintiff has not produced the invoices.

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R.F.A No.989/2008

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In substance, appellants’ case is, the loan was availed by the first defendant Public Limited Company. Loan Documents were signed by Shri. Radhakrishnan, who was not the Managing Director of the Company. Plaintiff has not proved in whose account the money was realized. Therefore, appellant is not liable to discharge Company’s debt and hence, not bound by the decree.

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Arguing in support of the judgment and decree, Shri. Mahadevan for plaintiff submitted that:

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appellant is one of the Directors of the Company;

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in addition to the documents executed for and on behalf of the Company, appellant has given his personal guarantee as per Ex.P19;

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R.F.A No.989/2008

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appellant was examined as D.W.2. He has admitted that he has signed the guarantee. The learned Trial Judge has considered this aspect and rightly decreed the suit.

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In the light of the material on record and the contentions urged on behalf of the appellant and the first respondent, the point that arises for consideration is, whether the impugned judgment and decree call for any interference?

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Undisputed facts of the case are, appellant was one of the Directors of Mayura Securities Ltd., Ex.P1 clearly disclose that a loan of Rs.35 Lakhs was availed by first defendant – Company.

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Ex.P19 is the guarantee executed by the appellant. The relevant portion reads as follows:

R.F.A No.989/2008

“ From:

D.L. Walton DIRECTOR MAYURA SECURITIES LTD 333, CROSS CUT ROAD GANDHIPURAM, COIMBATORE-12.

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Kirloskar Investments and Finance Ltd Unity Buildings, "C" Block II Floor, J.C.Road Bangalore - 560 002.

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In consideration of your having this day disbursed by way of Hire Purchase finance a sum of Rs.30,000,00/(Rupees Thirty Lakhs only) under Hire Purchase Agreement dated 29.03.1994 to MAYURA SECURITIES LTD. (Principal hirer/ debtor) at my request. I, D.L. WALTON aged about 36 years s/o Mr. P.T. Ambrose residing at H.No: 1/662, Kathleen Hall Queens street Fort Cochin, Cochin-682001 do here by undertake to be and shall during subsistence and at all time hereafter until repayment of all the installments of hire money and Finance Charges remain responsible and hereby guarantee the due and punctual payment by the user of all and other sums payable by the user under the Hire Purchase Agreement and due performance and observance by the User of all and singular. several stipulations and conditions contained therein and do further agree to pay to the company all sums which may from time to time become due and owing by the user under the said Agreement.

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R.F.A No.989/2008

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I agree that this Guarantee shall not be avoided, released or affected by the Company, giving time to the user for payment of any sums or granting the user any indulgence by the Company and user making any variations in the terms of the said agreement all of which things the Company shall be at hereby to do so without our consent or permission and I further agree that this guarantee shall not be avoided, released or affected by the Company giving time to the User either before or after any termination of the said agreement and whether before or subsequent to the Company exercising the right to re-possess the equipment. I am the Principal Debtor jointly with the User and, I am aware that I am not entitled to any of the rights conferred to sureties by sections 133, 134, 135, 139 & 141 or any other relevant provisions of the contract act.

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I hereby guarantee the payment of Rs. 4692500/amount financed and Finance Charges in case of default by the principal hirer/debtor together with interest thereon @ 36% p.a. for such delayed payments. I further guarantee the repayment of amount paid by the Company towards insurance of the equipment under the Hire Purchase Agreement and other charges incurred by the company for keeping the equipment in proper working condition. This guarantee shall not be affected by or granted any time or any other concession or indulgence or rescheduling the

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installments of hire under the said agreement or by insolvency of the hirer.

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I undertake to pay entire amount due under the Guarantee, on demand in writing by the Company, by registered post to either the address mentioned above or at the place of business of the firm, merely on demand upon termination and even before the expiry of the agreement, due to default in payment of installments of hire, overdue finance charges and other incidental charges.

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It is agreed that only in the event of the said agreement completed by the User, I shall be entitled to obtain, on demand from the Company a complete discharge of all my obligations under the terms and conditions of this Guarantee.”

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We may record that appellant has filled up

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the blanks in his own hand and signed the guarantee.

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He has stated in his examination-in-chief dated 05.03.1998 that he is not in the habit of putting signatures on blank forms. In his crossexamination dated 28.02.2006, he has stated thus:

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R.F.A No.989/2008

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“ As the director I signed on the guarantee form as a guarantor. I have signed in the guarantor form of Ex.P1. I now see Ex.p.19 personal guarantee and identify my signature at Ex.P.19(a). I have not produced any document to show that I have retired from the company in the 1^st week of March 1994. ”

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In view of the undisputed facts of the case and the admissions made by appellant that he

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was one of the Directors of the Company and executed a personal guarantee to discharge the debt, this appeal must fail. Accordingly, the point for consideration is answered in the negative . Hence, the appeal is dismissed with no order as to costs.

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Sd/JUDGE

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Sd/JUDGE

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SPS

Mr D L Walton v. M/S Kirloskar Investments and Finance

Case brief

What is this about?

What did the court decide?

Mr D L Walton v. M/S Kirloskar Investments and Finance

Case brief

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What did the court decide?

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