KSL AND INDUSTRIES LIMITED Vs. NATH SEEDS

JUDGEMENT

(1.) IN or around November, 1995, the defendants requested the plaintiffs to grant financial accommodation against the security of shares. The defendants pledged with the plaintiffs collateral security consisting 1,25,000 equity shares of a Company known as Rama Pulp and Papers Ltd. , together with the blank transfer deeds duly signed by the holders of the shares with an irrevocable undertaking that the plaintiffs would be at liberty to dispose of the securities in the market upon the failure of the defendants to repay the amount advanced. In May 1996, the defendants for valuable consideration received, and in discharge of their liability issued a post dated cheque, dated 19th August, 1996, for the amount of Rs. 26. 25 lakhs drawn upon the Union Bank of India, in favour of the plaintiffs. The cheque was dishonoured upon presentation on the ground of insufficiency of funds. The plaintiffs have instituted proceedings under section 138 of the Negotiable Instruments Act, 1881 and a criminal complaint is pending. It is common ground between the parties that by a letter, dated 31st December, 1996, the Associate Company of the defendants furnished a revised schedule for the repayment of the dues of the plaintiffs. The said letter refers to the dues of the plaintiffs and a schedule for the repayment of the amount of Rs. 26 lakhs due to the plaintiffs and of Rs. 46 lakhs to an associate concern of the plaintiffs, by the name of Nath Pulp and Paper Mills Ltd. was furnished. In the present summary suit, the dispute relates to the outstanding dues of the plaintiffs in the amount of Rs. 26. 25 lakhs.

(2.) BY a letter, dated 17th February, 1997 the defendants enclosed a cheque in the amount of Rs. 7 lakhs towards part payment of the principal amount as agreed. Thereafter, by a letter dated 7th April, 1997, a further cheque in the amount of Rs. 7 lakhs was furnished by the defendants to the plaintiffs, this being in part payment of the balance due of Rs. 19. 25 lakhs. Thereafter, by a letter, dated 4th June, 1997 another cheque of Rs. 2 lakhs was paid by the defendants in part payment of the balance due of Rs. 12. 25 lakhs. Eventually, by another letter, dated 8th September, 1997 the defendants while referring to the outstanding dues of the plaintiffs as being Rs. 10. 25 lakhs sought a reduction of the rate of interest from 21% per annum with effect from 1st April, 1997. On 25th September, 1997 a further payment of Rs. 1 lakh by cheque was made by the defendants against the outstanding balance of Rs. 10. 25 lakhs.

(3.) BY a letter, dated 7th November, 1997, the plaintiffs claimed from the defendants the payment of the balance of Rs. 9. 25 lakhs together with interest @ 18% per annum. In so far as the shares which were pledged were concerned the plaintiffs recorded that they were not saleable in the open market as brokers were not ready to take them as there was hardly any trading in the shares. The plaintiffs stated that they had received an offer for the sale of the shares at the rate of Rs. 1. 50 per share. The defendants were given an option to release the pledged shares on the payment of the outstanding dues.