S.P.Garg, J
1. The present suit has been filed by M/S Canbank Financial Services Ltd.(hereinafter ‘the plaintiff’) against Gitanjali Motors Ltd.(D-1),Â
Asha Ram (D-2), S.S.Bedi (D-3), Moksh Bedi (D-4), Col.K.S.Malik(D-5), Pramod Gulati (D-6) and Eicher Motors Ltd. (D-7) for
recovery Rs. 2,58,38,152.81. Presently the suit is contested by D-7 only.
2. Briefly stated the facts of the case as reflected in the plaint are that on 10.05.1991, D-1 applied to the plaintiff for sanction of lease finances to the
tune of Rs. 200 lacs for 26 buses and 30 trucks manufactured by D-7. The plaintiff considered the application and communicated their sanction on the
terms contained in the letter dated 18.07.1991 (Ex.PW-1/2). Sanction terms dated 18.07.1991 were modified on 20.08.1991 (Ex.PW-1/3). D-2 to 6
accorded approval to the terms and conditions contained in the letter dated 18.07.1991 and authorized defendant No.3 to negotiate and sign the
documents for and on behalf of defendant No.1. The lease agreement was executed on 18.07.1991 on behalf of defendant No.1. It contained the
terms of the grant of lease finances. Defendant No.1 executed letter of indemnity (Ex.PW-1/8) on 19.07.1991. D-2 to 6 also executed personal
guarantees, guarantying the payment of lease rentals and also agreed to indemnify the plaintiff against loss vide (Ex.PW-1/10 to Ex.PW-1/14).
3. It is averred that on 18.07.1991 itself, it was represented to the plaintiff by D-3 that due to steep depreciation in Indian rupee, D-1 has been advised
by D-7 that the prices of the vehicles would go up by Rs. 30,000/- latest by 23.07.1991. D-3 produced a letter dated 19.07.1991 purportedly written by
D-7 to D-1 to assure that they would be in a position to deliver 60 vehicles within a week if the payment was made by 20.07.1991 (Ex.PW-1/16). On
this, the plaintiff, agreed to release the entire sanctioned money within a margin of few days. Three pay orders of Rs. 41,96,000/-, Rs. 41,96,000/-and
Rs. 1,16,27,250/- along with purchase orders of different denominations were issued. D-3 received the pay orders personally to deliver it to D-7 and
obtained their signatures.
4. It is further averred that on 27.07.1991, D-1 furnished to the plaintiff particulars of 11 vehicles (Ex.PW-1/25) received by them. On 30.07.1991 D-3
handed over the plaintiff a letter dated 30.07.1991 purportedly written by D-7 acknowledging the receipt of purchase orders and the amounts against
each purchase order. On 28.08.1991, D-1 furnished list of 12 more vehicles received by it (Ex.PW-1/29). On 30.08.1991, D-7 agreed to expedite the
delivery of the vehicles and confirmed that 11 more buses would be delivered within a week and documentation for 46 vehicles would be completed
by 7.9.1991. On 11.09.1991, D-1 furnished particulars of two more vehicles and total number of vehicles delivered reached to 25. There was delay in
the delivery of the vehicles. By August/September, 1991, D-7 had delivered only 35 vehicles to D-1. It came to the plaintiff’s knowledge that
certain documents allegedly written by D-7 were forged and fabricated by D-3. The defendant No.1 in connivance with D-2 to 6 had played a fraud
on the plaintiff and had misused the pay orders to place different purchase orders; misinformed the plaintiff about delivery of the vehicles and
sold/transferred the same without plaintiff’s permission. D-1 sought to explain their conduct vide letter dated 25.09.1991 (Ex.PW-1/38) and
undertook that they would arrange to deposit the balance security amount. On 23.10.1991, D-1 gave a schedule as to how it proposed the
capitalization of 35 vehicles received by it. However, nothing was done and the cheques given by it, on presentation, were dishonoured (Ex.PW1/41).
5. On 24.10.1991, D-7 informed the plaintiff that 35 vehicles valued at Rs. 1,12,47,540/- stood delivered to D-1; they were not aware if the delivery
was financed by the plaintiff. It was further informed that an FIR has been lodged against D-1 and they have stopped the delivery of the vehicles to it
(Ex.PW-1/42). The plaintiff also lodged an FIR under Sections 406, 420, 468, 471 read with Section 120-B IPC against D-1 to 6 at Police Station
Baba Kharak Singh Marg, Connaught Place (Ex.PW-1/43). On 16.05.1992, notice was issued to D-1 to 6 recording defaults, terminating the lease
finance agreement and calling upon them to pay the outstanding amount within 14 days of the receipt of the said notice along with interest. D-1 replied
to the notice on 8.6.1992 (Ex.PW-1/45). On 14.10.1991, as D-7 had admitted receipt of Rs. 200.1925 lacs of the plaintiff from D-1 and had delivered
35 vehicles, the plaintiff requested D-7 to refund the balance amount of Rs. 87,71,516/-. A notice was also served upon D-7 in this regard on 2.5.1992.
It was responded to on 29.05.1992 (Ex.PW-1/82).
6. It is further averred that as on the date of filing of the suit i.e.16.07.1992 under lease finance facility, the defendants No.1 to 6 were liable to pay
the amount of Rs. 2,58,38,152.81/-.
7. The suit was contested by defendants. Written statements were filed by them. It was pleaded by D-1, 3 and 4 that in their joint written statement
that the contract was entered into between the plaintiff and D-7; D-1 acted only as an agent of D-7. The entire payment of Rs. 2 crores for purchase
of the vehicles was made directly by the plaintiff to D-7 and D-1 had no role in the said payment. As per the understanding between D-1 and D-7,
nine vehicles were booked by D-1 for selling in the open market but were to form part of the initial delivery. Therefore, out of the 35 vehicles
delivered, D-1 sold the 9 vehicles and offered 26 vehicles to the plaintiff. Out of 26 vehicles, seven buses were not registered because they did not
have provision for emergency doors. Consequently, 19 vehicles were given to the plaintiff. It is further pleaded that liability to pay the balance amount
and interest was only upon D-7. D-2 to D-6 had executed personal guarantees in favour of the plaintiff as an agent of D-7. Lease agreements and
Demand Promissory Note (DPN) for Rs. 3,00,36,000/-were executed on behalf of D-7.
8. In his separate written statement, D-5 claimed that he was not responsible for the day-to-day affairs of the company (D-1) and no personal
guarantee was executed by him. He further claimed that he was a Director in name only and was not aware of any Board Resolution dated
18.07.1991. Resolution dated 18.07.1991 is a fabricated document. Bank documents executed on 18.07.1991 disclose impracticability of the
transaction and criminal connivance between the officials of the plaintiff and D-3. So far as the guarantee is concerned, a typed document was
presented to him at Noida for signatures stating that it was a routine matter without disclosing the nature of the transaction. Letter dated 19.07.1991
was forged with active connivance of the plaintiff with D-3 as D-7 was not in a position to deliver 60 vehicles within a week. It is not clarified by the
plaintiff as to why three pay orders were issued in a hurry without complying with the express conditions of the sanction. The plaintiff did not take
steps to capitalize and record their name in RC books and lost the securities due to their negligence. It resulted in discharge of D-5 in its capacity as
guarantor.
9. D-7 in the written statement averred that there was no privity of contract between him and the plaintiff. Orders placed by D-1 on D-7 on principal
to principal basis were without disclosing for whom the vehicles were earmarked. Letter dated 30.07.1991 was never issued by them and signatures
of S.M.Bajaj over it were forged. When this fact was brought to the knowledge of D-7; it acted promptly and terminated the contract with D-1 on
8.10.1991 and lodged FIR against D-1 and its officers. On receipt of the information, it stopped the supply of the vehicles. Communication dated
9.9.1991 was mala-fide and motivated. D-7, thus was kept in dark in respect of the transaction with the plaintiff and D-1 to 6.
10. The defendant No.2 expired during the pendency of the suit. Defendants No.2(a) to 2(c), his legal heirs, were brought on record. In the written
statement, they controverted the assertions in the plaint and claimed that there was no privity of contract between the plaintiff and D-2 and he has
been unnecessary dragged in the litigation. D-2 had no occasion to stand surety in favour of plaintiff; his signatures on guarantee lease dated
18.07.1991 were forged and fabricated and were not authored by him. D-1 was substantially controlled and managed by D-3 to the exclusion of D-2;
he (D-2) had no stake or interest in the finance management and administration of D-1.
11. On the basis of pleadings of the parties and the documents on record, following issues were framed on 23.05.1996:
(i) Whether the personal guarantees and the other documents were executed by the defendants 2 to 6 only as an agent of defendant No.7 as alleged
by the defendant No.1, defendant No.3 and defendant No.4?
(ii) Whether the resolution and documents relied by the plaintiff are forged and fabricated as alleged by the defendant No.5? If so, its effect?
(iii) Whether the defendant No.1 acted only as an agent of defendant No.7 and, therefore, only defendant No.7 is liable to the claim of the plaintiff?
(iv) Whether the defendant No.1 as Principal Debtor and the defendants 2 to 6 as Guarantors are not liable to pay the claim of the plaintiff because
they acted on behalf of and at the behest of the defendant no.7?
(v) How many vehicles have been delivered by the defendant No.7 to the defendant No.1 out of the money advanced by the plaintiff and the value of
the said vehicles?
(vi) Whether there is no privity of contract between the plaintiff and the defendant No.7 and accordingly defendant No.7 is not liable to pay to the
plaintiff the balance amount of the plaintiff lying in their hands alongwith the interest and costs thereon?
(vii) Whether the defendant No.1 alongwith its Directors, Defendants 2 to 6 played fraud on the plaintiff to deprive the plaintiff of their money and
security?
(viii) Whether the defendant No.7 was a party to the fraud? If yes, whether the defendant no.7 is not liable to the full amount along with defendants
No.1 to 6?
(ix) To what amount the plaintiff is entitled to and from which of the defendant?
(x) Interest.
12. Following additional issues were framed on 21.07.2003 :-
(i) Whether there was active criminal connivance and collusion between officials of the plaintiff and defendant No.3 If so, its effect? OPD
(ii) Whether the plaintiff released the entire amount of Rs.2 crores to defendant No.1 through defendant No.3 on 20.07.91, 22.7.91 and 24.7.91 against
the expressed terms of sanction and not complied to by defendant No.1 or defendant No.3. If so, its effect? OPD
(iii) Whether defendant No.5 as guarantor is discharged because of the pleas taken in paras 13,14,15 and 18 of the written statement? OPD
13. Following additional issues were framed on 05.12.2011
(i) Whether the suit against defendant No.2 is not maintainable in view of preliminary objection No.2 in the written statement of defendants 2(a) to
(c)? OPD2
(ii) Whether the plaint has been signed and verified and the suit is instituted by a competent person? OPP
(iii) Whether the deed of guarantee dated 18.07.1991 was executed by deceased defendant No.2? OPP
(iv) Relief.
14. To prove its case, the plaintiff examined PW-1 (M.V.Shenoy). Defendants No.2(a) to 2(c) examined DW-1 (Sandeep Chaudhary) and DW-2
(Col.K.S.Malik). D-5 and D-6 examined themselves as witnesses. D-7 examined D7W2 (Sarva Mitra Bajaj) in his defence.
15. None of the defendants except D-7 put appearance on the several dates before the court.
16. Arguments have been addressed only by the learned counsel for the plaintiff and learned counsel for defendant No.7.
17. I have considered their arguments and have gone through the file. The issue-wise findings are as under :-
Issue No.(ii) framed on 05.12.2011
18. This issue has not been pressed by the learned counsel for defendant No.7. Moreover, PW-1 (M.V.Shenoy) in his additional affidavit deposed that
the plaint was signed and verified by G.Suresh who was then the Assistant Vice President and Principal Officer of the plaintiff. He was personally
aware with the facts of the case and was competent to sign and verify the plaint and institute the suit. In addition, he was also authorized by the
plaintiff by a power of attorney (Ex.PW-1/A) dated 14.11.1991 granted in his favour through plaintiff’s managing director authorizing him to
commence and institute the suit, sign and verify the plaint. The suit has been accordingly instituted by Sh.Ganesh. He further informed that G.Suresh
has left the services of the plaintiff on or before 28.11.1994 and is no more in service. These assertions have remained unchallenged in the cross-
examination. The defendants have not produced on record any document to show if the present suit has not been filed by the duly authorized person.
19. The issue is decided in favour of the plaintiff and against the defendants.
Issues No.11(i), 11(vi), 11(viii), 11(ix), 11(x), 12(ii), 12(iii), 13(i) & 13(iii)
20. All these issues are taken together as they are inter-related. Moreover, defendants No.1 to 3 did not opt to contest the suit; they did not produce
any evidence. Counsel for defendants No.4 to 6 did not appear to address final arguments.
21. To prove its case, the plaintiff examined PW-1 MV Shenoy who tendered affidavit in evidence (EXP-X) and relied on documents Ex.PW-1/1,
Ex.PW-1/1A, Ex.PW-1/2 to 4, Ex.PW-1/6 to 1/21, Ex.PW-1/23 to 1/24, Ex.PW-1/26 to 1/28, Ex.PW-1/32 to 1/34, Ex.PW-1/36, Ex.PW-1/38 to 1/43,
Ex.PW-1/43A, Ex.PW-1/43B, Ex.PW-1/46 to 1/49, Ex.PW-1/54 to 1/56, Ex.PW-1/58 to 1/68, Ex.PW-1/68A to 1/81, Ex.PW-1/83 to 1/85 and
Ex.PW-1/87 to 1/92. PW-1 also filed additional affidavit of evidence (Ex.P-Y) and relied upon documents Ex.PW-1/5, Ex.PW-1/41A, Ex.PW-1/25,
Ex.PW-1/29, Ex.PW-1/30, Ex.PW-1/31, Ex.PW-1/35. PW-1 reiterated and proved the averments in the plaint.
22. PW-1 was cross-examined on behalf of defendants No.5, 6, 7 and legal heirs of defendant No.2. His testimony qua defendants No.1,3 and 4
remained unchallenged and unrebutted. These defendants opted not to examine any witness in their defence; they opted to remain ex-parte after the
filing of the written statements.Adverse inference is to be drawn against them for not appearing and contesting the suit.
23. Defendant No.2, 5 and 6 cross-examined the witness primarily denying furnishing of personal bank guarantees. PW-1 in the cross-examination on
behalf of DW-5 reiterated that loan of above Rs. 2,00,00,000/- (Rupees two crore) used to be sanctioned generally by the registered office of the
company. The conditions pertaining to the sanction of loan were stipulated by the Managing Director on the recommendation of the branch office of
the plaintiff company. On the basis of the sanction of the Managing Director, letter of sanction was handed over personally to defendant No.3.
(S.S.Bedi) and he produced a resolution accepting the terms of sanction. He further informed that the transaction was dealt with by defendant No.3
and the documentation was completed the same day. All the documents i.e. lease agreement, pronote, indemnity bond and five guarantees were
executed on 18.07.1991. He further informed that it was internally discussed that the terms and conditions of the sanction may be changed on the
same day. He denied the suggestion that the terms and conditions were changed without the permission of the Managing Director of the company. He
revealed that only condition ‘T’ as mentioned in the document (Ex.PW-1/2) was changed and it was communicated vide letter dated
18.07.1991. The defendant No.3 had represented that the loan be disbursed immediately as the prices of the vehicles were likely to rise due to
depreciating value of Indian rupee, by appropriately Rs. 30,000/- for each vehicle. He fairly admitted that no enquiry was conducted by him regarding
rise in the price of the vehicle. He volunteered to add that because kits of the vehicles were imported and the price of Indian rupee was going down
every day. The witness further responded that defendant No.3 was authorized by a Board Resolution to represent the company and had specifically
been empowered to negotiate, vary the terms and execute the documents on behalf of the company. He further informed that they had given to
defendant No.3 purchase orders along with three pay orders to enable him to immediately hand it over to defendant No.7 for delivery of the vehicles
before any increase in prices. He expressed ignorance as to when the pay orders along with purchase orders were given by defendant No.3 to
defendant No.7. He further disclosed that the particulars of 23 vehicles were supplied. The plaintiff was not having any vehicle in its custody. He
expressed ignorance if before the supply of vehicles originally ordered, the defendant No.1 had charged original price or enhanced price. He admitted
receipt of letter dated 11.10.1991 by defendant No.7 to the plaintiff which is Ex.PW 1/D5/2. He also admitted that letter Ex.PW-1/34 dated 9.9.1991
was written by defendant No.1 to defendant No.7. He admitted that defendant No.1 had changed the particulars of the vehicles to be purchased. He
volunteered to clarify that it was done only on 9.9.1991 for which the plaintiff had not agreed. He admitted that letter Ex.PW-1/39 was written by
defendant No.1, based upon the statement of defendant No.7. He further informed that total 56 vehicles were to be purchased against advance of Rs.
2 crores; 25 vehicles had been delivered and out of this only 14 vehicle were capitalized. The parties did not come forward for capitalization of the
balance vehicles. He elaborated that the plaintiff had written letters to defendant No.1 for capitalizing the balance vehicles failing which action would
be taken. Ex.PW-1/87, PW-1/91, PW-1/44 were the certified copies of the criminal complaints. The witness admitted that at D-1’s behest, there
had been variations in terms of the loan/disbursement. He denied the suggestion that variations did not result in advantages to the plaintiff and as a
matter of fact the bank was rather put to some disadvantage. He explained that at the time when the variations were effected, these were
advantageous to the plaintiff. He denied the suggestion that because of the variations in the original terms, the defendants were not able to maintain
their financial discipline.
24. The witness denied the suggestion that most of the documents were executed at the premises of defendant No.1 at Noida. He admitted that he
had never met defendant No.5 in the bank premises except at the time of signing of the guarantee bond. He denied the suggestion that defendant No.5
had never executed any guarantee bond and he was not bound by that. He denied that due to variance in the terms of loan, defendant No.5 stood
discharged from such obligations and was not liable to pay any amount, interest or charges.
25. In the cross-examination conducted on behalf of defendant No.6, the witness informed that there were certain modifications in the present case
relating to the disbursement for which he had sought telephonic approval. The bank had not informed the guarantors about the said modification. He
admitted that as per the terms of the sanction, all the directors were to furnish their personal guarantees. He admitted that the plaintiff had not made
any enquiry into the number of directors or their credentials. He volunteered to explain that they had proceeded on the basis of information supplied by
defendant No.1 in the application for loan and other documents. Defendant No.3 had given them all the information and documents for and on behalf
of defendant No.1.
26. He reaffirmed that all loan documents and guarantee bonds were signed at their office on 18.07.1991, he had counter-signed the guarantee bonds
for and on behalf of the plaintiff that day. When confronted with document EXPX, he admitted that it did not bear his signatures. He explained that it
might have been left inadvertently. He denied that document Ex.PW1/14 was forged and fabricated subsequently. He further denied that defendant
No.6 never visited the bank/branch on 18.07.1991 in respect of execution of any such document. He denied that defendant No.6 had never been the
director with defendant No.1 or that he was a mere employee. He denied that bank guarantee agreement was handed over by the plaintiff to
somebody else or that it was misused by defendant No.1 in connivance with the plaintiff. He denied that the vehicles were to be registered in the
name of the plaintiff. He denied that defendant No.6 was an employee/Marketing Manager of defendant No.1 and/or that he had resigned w.e.f.
31.7.1999 itself.
27. In the cross-examination on behalf of defendant No.2(a) to 2(c), the witness denied the suggestion that Ex.PW1/13 did not bear the signatures of
defendant No.2 (Asha Ram) or that it was a forged or fabricated document. He denied that defendant no.2 (Asha Ram) had never undertaken any
guarantee for and on behalf of defendant No.1 or that he had no occasion to sign the guarantee bond in favour of the plaintiff bank. He denied that
signatures over Ex.PW-1/13 have been forged and put by somebody else and not by defendant No.2. The witness reiterated that the guarantee bond
Ex.PW1/13 was signed by defendant No.2 in his presence. Denial was made that he had no occasion to meet defendant No.3 or to get his signatures
on Ex.PW-1/13. He denied that this was an attempt only to validate the document. He denied that he was not a competent witness. He further denied
that LRs of defendant No.2 had not inherited any property after his demise.
28. On scanning the lengthy cross-examination on behalf of defendants No.2, 5 and 6, it stands established that material facts proved on record by the
witness remained unchallenged and unrebutted. Despite searching cross-examination, no material discrepancy or inconsistency could be extracted in
the cross-examination. The witness has categorically stated that defendants No.2 to 6 were directors in defendant No.1 company and were actively
participating in day-to-day affairs of the business. Besides that, the defendant Nos.2 to 6 had executed personal bank guarantees to ensure the return
of the loan. He identified signatures of D-2 to D-6 over various guarantee deeds executed on 18.07.1991.
29. To disprove the plaintiff’s case, the defendant No.5 examined himself as DW-2 and produced his evidence by way of affidavit Ex.DW-2/A.
In the affidavit Ex.DW-2/A, defendant No.5 admitted that he was the director of defendant No.1 for some time as appointed on 26.07.1987. He,
however, disclosed that he ceased to be the director of the defendant No.1 company on 01.09.1988 much before the alleged facility was granted to
defendant No.1. He further deposed that he was the director in the name only because of his status and was not responsible for the day-to-day affairs
of the company and was not liable for any of the liabilities of the company. He further disclosed that certain typed documents running into various
papers with blanks were presented to him at Noida for his signatures by defendant No.3, his relative, on the false pretext without disclosing the nature
of the transaction and he had put signatures thereon in good faith. None of the official of the bank was present at that time and he had never agreed to
stand as a guarantor for any facility provided by the plaintiff to defendant No.1. He further disclosed that the application for grant of alleged lease
finance was neither ever mentioned to him nor any board resolution was passed by the company in his presence authorizing defendant No.3 to either
apply or negotiate with the plaintiff for the alleged advance. He was not aware of any resolution furnished by defendant No.3 dated 5.5.1991 which
was a fabricated document signed by defendants No.2 and 3 only. He alleged connivance between the plaintiff and defendant No.3. There were
certain modifications after the execution of the alleged documents by defendant No.3 on 18.07.1991 itself which were without his knowledge or
intimation. As per sanction letter, Directors of defendant No.1 were to give personal guarantee for grant of the said facility. Without any investigation
or enquiry the entire amount of Rs. 2 crores was disbursed by the plaintiff to defendant No.1 against the terms and conditions of the facility granted.
Due to variance in the terms and conditions of the sanction without his consent and knowledge the guarantee deed was not enforceable against him.
30. DW-2 in the cross-examination admitted that Ex.PW1/12 bore his signatures at Points ‘A’, ‘B’, ‘C’ and ‘D’. He further
admitted to have been appointed as Director in defendant No.1 in 1987. He admitted that form 32 submitted to the Registrar of the Company
regarding resignation as Director from defendant No.1 on 01.09.1988 was not brought by him. He expressed ignorance if he was having any shares in
defendant no.1 or who was the major shareholder of defendant No.1. He further disclosed that he did not know late defendant No.2; defendant No.3
director of the defendant company was his good friend. He did not know if late Asha Ram or defendant No.6 were directors in defendant No.1. He
claimed that Ex.PW1/12 was blank when he signed it and it was signed in good faith without asking the purpose at defendant No.3’s behest. He
was not aware if PW-1/12 was to be filed with a financial institution. He admitted that no notice was served upon defendant No.3 for getting a blank
document signed from him. He, however, admitted that after seeing Ex.PW-1/12 and the plaint, he realized that he could be saddled with huge liability.
Admittedly he did not serve any notice on defendant No.3 and did not initiate criminal complaint against him. No letter was written to the plaintiff that
he was made to sign on blank papers.
31. In similar circumstances Pramod Gulati, defendant No.6 in his evidence by way of affidavit claimed that certain blank typed documents were got
signed by defendant No.3 during the course of his employment with defendant No.1 on the false pretext and he signed it in good faith. He never
agreed to stand as guarantor for any facility provided by the plaintiff to defendant No.1 and never visited plaintiff’s branch on 18.07.1991. The
plaintiff was aware that he was not the director of the defendant company and was merely an employee/marketing manager and had resigned from
the said post on 31.07.1991. Ex.PX did not bear signatures of any officials of the plaintiff; it was forged and fabricated. Ex.PW-1/14 is the forged
guarantee deed.
32. In the cross-examination, the witness disclosed that he was Marketing Manager of defendant No.1 from 1.9.1990 to 31.07.1991 and his job was to
create market for the vehicles and their sale. He admitted that in his capacity as Managing Marketing, he was not to sign any documents in the regular
course of business. He admitted his signatures at point ‘X’ on all pages of Ex.PW-1/14. He admitted that after he left the services with
defendant No.1, he did not write to the plaintiff that the documents containing blanks were got signed from him by defendant No.1. He admitted that
legal notice Ex.PW1/44 dated 16.05.1992 was served upon him and it was responded by his counsel. He, however, denied if Ex.PW1/45 was his
response through his counsel. He changed his position and stated that he did not give any reply to Ex.PW1/44.
33. Sandeep Chaudhary legal heir of defendant No.2 (Asha Ram Chaudhary) examined himself as DW-1 and tendered his evidence by way of
affidavit (Ex.DW-1/A) disclosing that defendant No.2 had expired on 11.03.2007. He further deposed that defendant No.2, his father, had no stake in
and control over the business, management and administration of defendant No.1. which was substantially owned and controlled by defendant No.3.
There was no occasion for defendant No.2 to execute Deed of Guarantee dated 18.07.1991.
34. In the cross-examination, he admitted that his father was literate and had not specifically informed him about the present case. He did not file any
written statement or application in the present suit. He disclosed that his father had a bank account and he was not aware if his father was the
director in defendant No.1. He denied signatures of his father on Ex.PW1/13. He, however, admitted that address on Ex.PW1/44 was correct. He did
not admit or deny if Ex.PW1/45 was a joint reply (dated 8.6.1992) filed on behalf of defendants No.1 to 6 by Mr.D.S.Narula, Advocate. He was
unable to admit or deny if his father used to attend to the business of defendant No.1.
35. On perusal of the evidence adduced by some of the defendants, it reveals that all of them have attempted to seek exoneration on the ground that
documents though were signed by them but were never intended to be so as these were blank papers. They also denied their involvement in the day-
to-day running of the affairs of defendant No.1 company. Apparently, the contesting defendants have made an attempt to escape from their liability.
No credible evidence has been adduced by them to establish that none of them was director in the defendant’s company at the relevant time or
was not concerned with the day-to-day activities of defendant No.1. They never lodged any complaint against defendant No.3 or anyone else if their
signatures were obtained on blank papers. No valid reasons exist to discard the various documents signed by these defendants who were direct
beneficiaries in the disbursement of loan by the plaintiff to defendant No.1. The agreement was not only executed but was also acted upon and
various vehicles were purchased by defendant No.1 At no stage these contesting defendants initiated any complaint against defendant No.3 or
defendant No.1 for mismanagement or fraud committed by defendant No.3. They never lodged any protest to the plaintiff for involving them in the
litigation. They were well aware about the change/variation in the initial terms and conditions and had voluntarily accepted to it.
36. Admitted position is that defendant No.7 is a company engaged in the manufacturing of light commercial vehicles. It received payments from
defendant No.1 towards the supply of vehicles totalling 56. Only 36 vehicles could be delivered. The amount of Rs. 87,71,710/- being the balance price
of the remaining vehicle remained in defendant No.7’s possession. It is not in dispute that the plaintiff had sanctioned Rs. 200 lacs for lease
finance of 56 vehicles to defendant No.1. Lease agreement containing terms of the grant of lease finance (Ex.PW-1/5) was executed between the
plaintiff and defendant No.1. Defendant No.1 executed letter of indemnity (Ex.PW-1/18) on 19.07.1991. Defendants No.2 to 6 agreed to personally
guarantee the payment of lease rental and also agreed to indemnify the plaintiff against loss vide documents (Ex.PW-1/10 to PW-1/14). Apparently,
there was no privity of contract between the plaintiff and defendant No.7. The defendant No.7 had appropriated the payments received by him from
the plaintiff on behalf of defendant No.1 for delivery of the vehicles made by it. Due to his inability to deliver the vehicles completely, Rs. 84 lacs have
already been returned by him to the plaintiff in compliance of the orders of this Court. Nothing material has surfaced on record if there was any
connivance whatsoever between the defendants No.1 and 7 to cause any wrongful loss to the plaintiff or D-2 to D-6. For omission or inaction of
defendant No.1, defendant No.7 cannot be fastened with any liability due to non-payment of the loan sanctioned by the plaintiff to defendant No.1. In
the cross-examination, PW-1 (M.V.Shenoy) admitted that the defendant No.1 had kept defendant No.7 in dark, in relation to the transaction between
the plaintiff and defendant No.1. Defendant No.7 categorically denied if any letter (Ex.PW-1/26) was issued by them. PW-1 (M.V.Shenoy) admitted
in the cross-examination that it did not bear the seal of defendant No.7. He did not know S.M.Bajaj whose signatures purportedly appeared on
Ex.PW-1/26; he was unable to recognise his signatures. The witness was unable to recollect if defendant No.7 had any correspondence evidencing
the fact that they have been pursuing the defendant side for expediting the delivery of the vehicles. He was unable to recollect if the Bank had ever
asked the defendant No.1 to produce any such correspondence between defendants No.1 & 7.
37. Defendant No.7 in its evidence by way of affidavit examined PW-Dharmendra Singh Parihar who categorically deposed that defendant No.7 was
not aware of the alleged transaction between the plaintiff and defendants No.1 to 6. The purchase orders were placed by defendant No.1 on
defendant No.7 on principal to principal basis without disclosing the name of the entity for whom the vehicles were ultimately earmarked. Defendant
No.1 concealed from defendant No.7 the material fact that the said vehicles were lease financed by the plaintiff. The plaintiff did not at any point of
time placed any order directly on defendant No.7. The payments for the vehicles were made by defendant No.1. Letter dated 30.07.1991 is a forged
letter and was never signed by S.M.Bajaj. The total amount received by defendant No.7 was Rs. 200.1925 lacs and the invoice value of 35 vehicles
delivered to defendant No.1 was of the value of Rs. 1,12,47,540/-. When defendant No.7 received complaints against defendant No.1 the transactions
were immediately stopped. An FIR was lodged against defendant No.1 on 12.10.1991 at PS Kalkaji.
38. Material facts deposed by the witness remained unchallenged in the cross-examination. No ulterior motive was imputed to defendant No.7 to have
any connivance in the transaction.
39. D7W2 is Sarva Mitra Bajaj who came from USA to depose that Ex.PW-1/26 did not bear his signatures at any place.
40. From the above it can be inferred that no liability whatsoever can be attributed or fastened upon defendant No.7. The amount which was lying in
balance on behalf of defendant No.1 has already been returned to the plaintiff by the orders of this Court.
41. So all these issues are decided accordingly in favour of the plaintiff and defendant No.7 and against defendants No. 1 to 6.
42. The liability of defendants No.1 to 6 to pay the decreetal amount shall be joint and several. However, legal heirs of defendant No.2 shall be liable
to pay the decreetal amount to the extent they have inherited the properties of their late father defendant No.2, Asha Ram.
43. In view of above discussion, the plaintiff is entitled for the recovery of Rs. 2,58,38,152.81/- as the costs. Out of this amount, Rs. 83,46,416/- paid to
the plaintiff by order dated 18.01.1996 shall be adjusted/subtracted. The plaintiff shall be entitled to interest at the simple rate of 6% from the date of
filing of the suit till the date of realization of the decreetal amount.
Issue No.11(iii)
44. The burden to prove this issue was upon the defendant No.1. As observed above, the defendant No.1 did not produce any evidence and opted to
remain ex-parte. At the time of final hearing there was no appearance on behalf of the defendant No.1 to urge this issue.
45. The findings on the issues referred above reveal that the defendant No.1 never acted as agent of defendant No.7. There was no privity of
contract between the plaintiff and defendant No.7. The transaction was primarily between the plaintiff and defendant No.1 represented by defendant
No.3. The issue is decided in favour of the plaintiff and against the defendants No.2 to 6.
Issue No. 11(iv)
46. The burden to prove this issue was upon the defendants No.2 to 6. There is, however, no credible evidence on record to show if the defendant
No.1 as principal debtor and defendants No.2 to 6 as guarantors were not liable to pay the claim of the plaintiff because they acted on behalf of and at
the behest of defendant No.7. As discussed above, defendant No.7 was not in the picture and the contract was with the plaintiff and defendant No.1
company.
47. This issue is decided in favour of the plaintiff and against the defendants No.2 to 6.
Issue No.11(v)
48. No separate findings need to be recorded on this issue, it has already been discussed above. It is immaterial as to how many vehicles were
delivered by defendant No.7 to defendant No.1 out of the money advanced by the plaintiff. The amount which was lying unutilized with the defendant
No.7 as balance amount for non-delivery of the balance vehicles has already been returned to the plaintiff pursuant to the orders of this Court. This
issue is disposed of accordingly.
Issue No.11(vii)
49. No evidence whatsoever has come on record to infer if defendant No.7 was a party to fraud played on the plaintiff to deprive it of its money and
security. This issue has already been discussed above and no further findings are required to be recorded. The issue stands disposed of.
Issue No.12(i)
50. The burden to establish the issue was on the defendants. However, no evidence has emerged on record to prove if there was any active criminal
connivance or collusion between the officials of the plaintiff and defendant No.3. Defendant No.3 did not lead any evidence to support this plea. No
complaint was lodged by the defendants No.2 to 6 against defendant No.3 any time for any criminal connivance with the officials of the plaintiff. This
issue is decided in favour of the plaintiff and against the defendants.
Issue No.11(ii)
51. As noted above, counsel for the defendant No.5 did not appear to address arguments at the time of final disposal of the case. It has not been
informed as to how the resolution and documents relied upon by the plaintiff are forged and fabricated. This issue is decided in favour of the plaintiff
and against the defendant.
Relief
52. In view of the above, a decree in the sum of Rs. 2,58,38,152.81/-with costs is passed in favour of the plaintiff and against the defendants No.1 to
6. Out of this amount, Rs. 83,46,416/- paid to the plaintiff vide order dated 18.01.1996 shall be adjusted / subtracted.
53. The plaintiff shall also be entitled for interest at the simple rate of 6% per annum from the date of filing of the suit till the realization of the
decreetal amount. The plaintiff, however, shall also be entitled to interest on the reduced amount i.e. Rs. 2,58,38,152.81/- minus Rs. 83,46,416/-
w.e.f. 18.01.1996.
54. Decree sheet be prepared accordingly.
