NATIONAL HOUSING BANK Vs. SANTOSH KUMAR BAGLA

JUDGEMENT

(1.) This is a suit for specific performance of a contract filed by the plaintiff. The plaintiff is a body corporate constituted under the National Housing Bank Act, 1987 and is seeking specific performance of an agreement vide which the defendants were to buy back 3,30,000 equity shares of the face value of Rs.10/- each held by the plaintiff bank in terms of their undertakings dated 8.7.1994 and 2.9.1994.

(2.) It is averred in the plaint that a limited company by the name of Marnite Polycast Ltd. (now known as MPL Corporation Limited) (hereinafter referred to as the 'Company') was incorporated vide Certificate of Incorporation dated 31.5.1990 and certificate of commencement of business issued on 18.6.1990. It was promoted by Sh.A.K. Chandra and Sh.V.N.V. Iyengar. This company set up a plant for manufacture of cast polyester molded products at Malanpur, District Bhind. At that time, the company through its promoters, Sh.A.K. Chandra and Sh.Iyengar, approached the plaintiff bank and requested for subscription to the equity in terms of the aforesaid guidelines. This proposal was considered by the plaintiff bank and vide order dated 26.6.1991 read with letter dated 4.7.1991, the plaintiff bank conveyed its decision to participate in the equity of the company to the extent of Rs.20 lacs subject to certain specific and certain usual terms and conditions contained in the said letters. The condition (e) appearing in this letter is as under:-

(3.) Thereafter, the company's board meeting was held on 10.7.1991 wherein the aforesaid terms and conditions stipulated by the plaintiff bank were accepted on 16.8.1991. The plaintiff bank executed a letter of specification agreeing to subscribe equity shares of the aggregate face value of Rs.20 lacs out of the total issue of equity shares of the aggregate face value of Rs.133 lacs proposed to be offered by the company for subscription at par and reiterated that the promoters shall undertake to buy back the shares of the company subscribed by the bank at any time after five years of the issue. On specific undertakings given in the favour of the bank agreeing to buy back the shares in the aforesaid manner at any time after five years of issue or at such earlier time as the bank may deem at the return of 20% or at the market price whichever is higher, the Bank subscribed the equity share capital of the company and received 2,00,000 equity shares, fully paid, vide company's letter dated 7th October 1991. In June 1993, the promoters as well as the defendants No.1 and 2 approached the plaintiff bank for its proposal as to change in management from the promoters to the defendants which was granted by the plaintiff bank vide its letter dated 30.9.1993 subject to the condition that buy back conditions stipulated earlier would remain in force. The defendants No.1 and 2 accepted those terms and conditions and also executed separate undertakings on 8.7.1994 in this behalf. The undertakings of the earlier directors/promoters were accordingly released. The new Management of the company took up an expansion programme costing Rs.1313 lacs with issue component of Rs.1015 lacs in September 1994 and requested the plaintiff Bank to subscribe in the preferential allotment category on firm allotment basis. The plaintiff Bank agreed to the proposal vide its letter dated 26.7.1994 to subscribe to the equity capital in the public issue of the company under preferential allotment category to Indian Financial Institutions to the extent of Rs.32 lacs subject to certain terms and conditions as contained therein. The conditions relevant for our purposes are as follows:-