OVERSEAS SANMAR FINANCIAL LIMITED Vs. SIVAKAAMI MILLS LIMITED

JUDGEMENT

(1.) FOR the This application is filed by the applicant/plaintiff to appoint an advocate-commissioner to seize and sell the assets more particularly described in schedules A and B and after adjusting the costs of the sale, direct the sale proceeds to be made over to the applicant. The case in brief is as follows : The applicant/plaintiff filed the suit for recovery of a sum of Rs. 53 lakhs odd together with interest. The respondent had requested the applicant to extend to it certain credit facility by way of lease of equipment. The applicant had purchased an automatic conewinding machine and one crosclean file opener along with the accessories more fully described in schedules A and B to the judge's summons. These assets were leased to the respondent under the lease agreement dated October 4, 1993. The applicant also purchased the assets described in the A schedule for a consideration of Rs. 80 lakhs odd. A sum of Rs. 1, 69, 049 was payable each month by the respondent by way of lease rentals commencing from April, 1994, and ending in January, 1999. B schedule property was purchased by the applicant for a consideration of Rs. 12, 50, 016. The lease rental of Rs. 26, 250 per month was payable commencing from September, 1994, and ending in August, 1999. As per clause 3 of the agreement, the applicant is the sole and exclusive owner of the said assets. The respondent has no right or interest over the said assets except as a bailee. In terms of clause 6 of the agreement, the respondent has agreed to pay lease rentals to the applicant at Madras.

(2.) IN the event of any default in the payment of the lease rentals, the respondent shall be liable to pay default interest at the rate of 3 per cent. per month. As per clause 23 of the agreement, the applicant is entitled to terminate the agreement and on termination, the respondent shall forthwith deliver the leased assets to the applicant and in the case of failure, the applicant is entitled to repossess the same.The then managing director of the respondent, the late Karumutthu S. Chockalingam on October 4, 1993, executed a deed of personal guarantee in favour of the applicant. He died in May, 1997. Defendants Nos. 2 to 4 are the legal heirs of the guarantor who have inherited his estate and are liable to repay the said amount. Since the respondent has been highly irregular in the payment of the lease rentals, the applicant on February 18, 1998, sent a legal notice to defendants Nos. 1 to 3 terminating the lease agreement and calling upon them to pay the amount. Despite notices, the defendants have failed and neglected to pay the amount. The first defendant was by then declared a sick industrial company. While filing the suit, they have not secured the consent of the Board for INdustrial and Financial Reconstruction (hereinafter referred to as "BIFR") as required under section 22 of the Sick INdustrial Companies (Special Provisions) Act, 1985 (hereinafter referred to "SIC Act").