BANK OF MAHARASHTRA LTD Vs. OFFICIAL LIQUIDATOR

JUDGEMENT

(1.) The above Company Application is a suit filed against the Karnataka Paper Mills Ltd. (in liquidation) which is ordered to be wound up in Company Petition No.11 of 1970 by this Court. The said suit was originally instituted as O.S. No.32 of 1969 on the file of the Civil Judge, Dharwar, before the Company was ordered to be wound up and after the order of winding up was passed, by an order passed under S. 446 of the Companies Act, 1956 (hereinafter referred to as the Act), it was withdrawn to this Court for disposal, and numbered as Company Application No.57 of 1972.

(2.) The parties to the above application shall be referred to as plaintiff and defendants in accordance with 'their description in the Court of the Civil Judge at Dharwar and the pleadings shall be referred to as the plaint and written statements.

(3.) The plaintiff is the Bank of Maharashtra and the suit is filed for recovery of Rs. 1,97,343-01 with future interest and costs by sale of mortgaged properties belonging to the first defendant and if necessary by applying for a personal decree against such of the defendants as are liable. The case of the plaintiff is briefly as follows : The plaintiff is engaged in banking business. Defendant 1 was a Company engaged in the business of manufacturing paper and mill board. Defendants 2, 3 and 4 are members of the Board of Directors of defendant 1 and defendant 2 is its Chairman. That in the year 1964 defendant 1 was being managed by a firm of Managing Agents called M s. Paranjape Shah & Co., and defendants 4 & 5 were partners of the said firm. That in the year 1964 defendants 2 to 5 acting on behalf of defendant 1 and on their own behalf, opened a cash credit account in the name of defendant 1 and borrowed a sum of Rs. 1,50,000 in order to pay the price of the machinery bought by defendant 1. In connection with the said loan, defendants 2 to 4 executed a promissory note dt.27-7-1964, an agreement dt.27-7-1964 stating that the said promissory note should be regarded 'as continuing security for the loan, a document dt.20-7-1964 hypothecating the goods of defendant 1 to secure the demand cash credit and a registered memorandum of equitable mortgage dt. 15-5-1964 offering the properties of defendent 1 covered by the title deeds referred to in the Second Schedule of the plaint as security for the said loan. The amount borrowed was repayable with the stipulated interest in five annua] instalments and that the whole liability was repayable before 15-5-1969. Defendants 1 to 5 having committed default in payment of the debt, on the date of the suit a sum of Rs. 1,97,343-01 was due. It was stated that the equitable mortgage had been duly registered with the Registrar of Companies under S.125 of the Act.