MADRAS METROPOLITAN DEVELOPMENT AUTHORITY Vs. SEARS ELECTRONICS LIMITED

JUDGEMENT

(1.) SUIT for recovery of a sum of Rs. 62,94,520.50 with further interest on Rs. 50,00,000 from March 16, 1993, till the date of realisation.

(2.) THE plaint averments are as follows : The plaintiff is the Madras Metropolitan Development Authority (hereinafter referred to as 'M.M.D.A.'), represented by its member -secretary. The first defendant is a company registered under the Companies Act; it was ordered to be wound up by order of this Court, dated November 26, 1993. Hence, the official liquidator is substituted in place of the first defendant. The second and third defendants are the non -rotational whole time directors of the first defendant -company. On December 21, 1990, the first defendant wrote a letter to the chairman of the Electronics Corporation of Tamil Nadu Limited to forward a letter of request to M. M. D. A. for placing an inter -corporate deposit of Rs. 50 lakhs for interest and the same was forwarded to the plaintiff by the chairman of M/s. Electronics Corporation of Tamil Nadu Limited (hereinafter referred to as 'ELCOT'). The plaintiff considered the request of the first defendant and since it was a joint venture with Elcot, the plaintiff agreed to make the deposit. The cash management committee of M. M. D. A. decided to deposit a sum of Rs. 50 lakhs with the first defendant -company on a 45 day roll -over short term deposit with interest at the rate of 15 per cent, per annum. The first defendant by letter dated December 24, 1990, accepted the short -term deposit and the interest rate. The second and third defendants have executed personal guarantees in their capacity as non -rotational directors in whole time employment of the company for prompt repayment on demand. The first defendant also gave a true copy of resolution of the board meeting held on December 21, 1990, by which the second and third defendants were authorised to execute necessary documents and to do all such acts necessary for availing of short -term deposit from the plaintiff. On December 26, 1990, the first defendant executed a promissory note and received a sum of Rs. 50 lakhs on the above terms. After expiry of 45 days, the first defendant executed fresh promissory notes, taking back the old promissory notes and finally on June 24, 1991, the first defendant executed the suit promissory note. The first defendant paid interest at the rate of 15 per cent up to June 24, 1991, only. Thereafter, the first defendant failed to pay the interest, in spite of repeated demands. The principal amount has also not been repaid. Therefore, the defendants are liable to pay a sum of Rs. 50 lakhs towards principal and a sum of Rs. 12,94,520.50 towards interest from June 24, 1991, till the date of the plaint, totally aggregating to a sum of Rs. 62,94,520.50. The first defendant as the borrower and defendants Nos. 2 and 3 as guarantors are jointly and severally liable to pay the amount. The defendants are liable to pay interest at 15 per cent per annum as it is a commercial transaction.

(3.) ON these pleadings, the following issues were framed :