PNB FINANCE LIMITED Vs. SHITAL PRASAD JAIN

JUDGEMENT

(1.) The facts giving rise to the above mentioned crossappeals against order of the Single Judge dated 16th November, 1979, succinctly are that in December, 1976 the plaintiff-PNB Finance Limited (a public limited company) instituted a suit for recovery of Rs. l9,55,890/37p. against Shital Prasad Jain (defendant No. 1), his son Mukul Jain (defendant No. 2), Rajadhani Vanijya Ltd. (defendant No. 3), Poorvanchal Projects Ltd. (defendant No. 4) (both defendants 3 & 4) being public limited company) and Emnjay Overseas (Private) Limited (defendant No. 5) on the averments that defendant No. 1 had been Financial Adviser of the plaintiff from 1st February, 1972 to 11th June, 1975. Pursuant to a request made by defendant No. I on 7th November, 1974, a loan of Rs. 5,00,000.00 (rupees five lakhs only) was given to him on 23rd December, 1974, at 16% per annum as interest. Defendant No. I executed a promissory note on the same day in consideration of his having obtained the loan. Thereafter, on the request of defendant No. I vide letter dated 15th January, 1975, the plaintiff advanced another loan of Rs. l0,00,000.00 (rupees ten lakhs only) on 29th January, 1975. It was represented by defendant No. I that he would utilise the said amount for the purchase of immoveable property in Delhi and the Directors of the plaintiff- company sanctioned the grant of the loan on the following terms ;

(2.) A pronote with regard to the same was also executed by defendant No. 1 on the aforesaid date viz. 29th January, 1975. He did not pay anything either towards the principal amount or towards interest, instead he diverted the amount of both the loans to defendants 2 to 5. A part of the loan was also diverted to M/s. Dabri & Company, a sole proprietary concern of one Kundanmal Dabriwalla of Calcutta. It was further averred that the companies-defendants 3 to 5 were floated by defendants 1 & 2 and were controlled by them, the majority of shares in these companies being held by defendants 1 & 2 and other members of their family and close relatives. Thus, they are family concerns of defendants 1 & 2. These defendants in turn applied the amount of loans so diverted to them. in purchasing immoveable properties at New Delhi. Defendant No. 3 purchased he property bearing No. 10, Panchsheel Marg, New Delhi at the price of Rs. 10,00,000.00 approximately while defendants 4 &5 purchased flats bearing Nos. 101 & 102 comprised in New Delhi House, 27, Barakhamba Road, New Delhi, respectively, each priced at about Rs. 3,00,000.00 . It was further averred that the said properties were being held by the said defendants on behalf of defendant No. I inasmuch as the latter did not apply the amount of loans directly for the purchase of immoveable properties in his own name in order to defraud the plaintiff although the loan had been given to him for the specific purpose of purchasing immoveable property at Delhi. Hence defendants 3 to 5 are sought to be made fiadle for repayment of loans on the ground that the properties were held by them for the benefit of the plaintiff.

(3.) An application) being I.A. 2897/76, was also made by the plaintiff under Order XXXVIII Rules 1 & 5, and Order XXXIX Rules 1 & 2 read with Section 151 of the Code of Civil Procedure (hereinafter n ferred to as the Code) praying for attachment before judgment/ad-interim injunction restraining the defendants from transferring, alienating or disposing of the whole or part of the aforesaid properties, as also some properties and amounts held by defendant No. 1 in some banks etc. detailed therein. The application was resisted by defendants 2 to 5, who put in separate replies categorically denying that the loan amounts were diverted by defendant No. 1 as alleged or that they had purchased properties out of the amount of the loans in question. While it was denied that defendant No. 4 had acquired any immoveable property whatsover it was admitted that defendant No. 3 had purchased the property known as 10, Panchsheel Marg) New Delhi and that defendant No. 5 had purchased the flats bearing Nos. 101 &102, situated at 27, Barakhamba Road, New Delhi. However, they asserted that the said properties had been purchased by defendants 3 & 5 out of their own funds and being bodies corporate they were owner of the same in their own right. Further all these defendants took up the stand that there is no privity of contract between the plaintiff and any of them and as such the suit against them was not at all maintainable and was misconceived.