R.F.A No. 630 of 2011

## **IN THE HIGH COURT OF KERALA AT ERNAKULAM** ## **PRESENT** ## **THE HONOURABLE MR. JUSTICE P.B.SURESH KUMAR** ## **&** **THE HONOURABLE MRS. JUSTICE C.S. SUDHA** **FRIDAY, THE 25[TH] DAY OF FEBRUARY 2022 / 6TH PHALGUNA, 1943 RFA NO. 630 OF 2011** **AGAINST THE DECREE AND JUDGMENT IN OS 1094/2006 OF 1ST ADDITIONAL SUB COURT, THRISSUR** ## **APPELLANT/DEFENDANT:** - **1 B.K.SARVOTHAMAN, (DIED) 52 YEARS, S/O.KRISHNANKUTTY, RESIDING AT BLAYITHARA HOUSE, KUNDANOOR JUNCTION, P.O.MARADU, ERNAKULAM DISTRIST.** **ADDL.A2 P.P.SHEELA, AGED 58 YEARS, W/O.LATE SARVOTHAMAN, BLAYITHARA HOUSE, KUMBALAM, KUMBALAM VILLAGE, KANAYANNOOR TALUK- 682506** - **ADDL.A3 B.S.SANEESH,** **AGED 36 YEARS,S/O.LATE SARVOTHAMAN, BLAYITHARA HOUSE, KUMBALAM, KUMBALAM VILLAGE, KANAYANNOOR TALUK- 682506** **THE LEGAL HEIRS OF DECEASED SOLE APPELLANT ARE IMPLEADED IN THE PARTY ARRAY AS ADDITIONAL APPELLANTS 2 AND 3 VIDE ORDER DATED 22.10.2021 IN IA.NO.1/2021** **BY ADVS. SRI.T.A.RAJAN T.A.RAJAN(K/655/1979) SRI.LUIZ GODWIN DCOUTH** ## **RESPONDENT/PLAINTIFF:** **1 M/S.STEEL INDUSTRIALS KERALA LIMITED A GOVERNMENT OF KERALA UNDERTAKING REGD OFFICE, AT SILK NAGAR P.O., ATHANI, THRISSUR 780 771.** 2 R.F.A No.630 of 2011 ## **ADDL.R2 STATE OF KERALA** **REPRESENTED BY THE CHIEF SECRETARY, GOVT. OF KERALA** **IS IMPLEADED AS ADDL.2ND RESPONDENT IN THE APPEAL VIDE ORDER DATED 10/1/13 IN IA 2922/11 BY ADVS. SRI.K.ANAND FOR R1 SMT.LATHA KRISHNAN FOR R1 SRI.V.K.SUNIL. SR GOVERNMENT PLEADER FOR R2** **THIS REGULAR FIRST APPEAL HAVING COME UP FOR HEARING ON 25.02.2022, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:** 3 R.F.A No.630 of 2011 ## **P.B.SURESH KUMAR & C.S.SUDHA, JJ.** **-----------------------------------------------** **R.F.A. No.630 of 2011** **----------------------------------------------Dated this the 25[th] day of February, 2022.** ## **JUDGMENT** ## **P.B.Suresh Kumar, J.** The defendant in a suit for realisation of money is the appellant. 2. The plaintiff, a company entered into an agreement with the Government for collection of toll from vehicles passing through Aroor-Panangad Bridge for the period from 8.7.2000 to 7.7.2001. After collecting the toll directly for some time, on a promise made by the defendant that he will pay to the plaintiff a sum of Rs.68,000/- per day, the plaintiff entrusted the work of collection of toll to the defendant on subcontract basis on condition that he should furnish security for a sum of Rs.25 lakhs. Accordingly, after furnishing a demand 4 R.F.A No.630 of 2011 draft for Rs.5 lakhs and two cheques of Rs.10 lakhs each by way of security, the defendant started collecting toll from 11.12.2002. The defendant did not, however, pay the amounts agreed and consequently, the contract was terminated by the plaintiff with effect from 08.06.2003. It is stated by the plaintiff that the amounts payable to them by the defendant in terms of the contract from 11.12.2002 to 08.06.2003, less the amount paid by the defendant is Rs.39,29,660/-. The suit, in the circumstances, was instituted for realisation of the said amount from the defendant with interest at the rate of 12% per annum from 08.06.2003 to the date of realisation. 3. The defendant contested the suit contending, _inter alia,_ that the officials of the plaintiff made him believe that the company was getting an average sum of Rs.80,000/- per day when they were collecting the toll directly and it is on believing the said representation that he has promised to pay a sum of Rs.68,000/- per day. It was also contended by the defendant that on an average, he could collect only a lesser amount and he has deposited the same in the bank account of R.F.A No.630 of 2011 5 the plaintiff less the expenses incurred by him and that the plaintiff is, therefore, not entitled to realise any further amount from him. 4. The court below rejected the contentions of the defendant and passed a decree permitting the plaintiff to realise Rs.39,29,660/- with interest at the rate of 6% per annum on the said amount from the date of suit till the date of realisation. The defendant is aggrieved by the said decision of the court below. 5. Heard the learned counsel for the defendant as also the learned counsel for the plaintiff. 6. The learned counsel for the defendant submitted that when the suit was instituted, the proceedings initiated by the Board for Industrial and Financial Reconstruction (BIFR) constituted under the Sick Industrial Companies (Special Provisions) Act, 1985 (the Act), in respect of the plaintiff company was pending and as such, the permission of BIFR was required for instituting the suit in terms of Section 22 of the Act, and the suit being one instituted 6 R.F.A No.630 of 2011 without obtaining the permission of BIFR, it is not maintainable. It was also argued by the learned counsel that no document authorising the Managing Director who has signed and verified the pleadings on behalf of the plaintiff has been produced in the suit and the court below, in the circumstances, ought to have held that the suit is not one properly instituted and ought to have dismissed the same on that ground. The learned counsel has also argued that the materials on record would indicate that the officials of the plaintiff were aware of the fact that the defendant could collect only an amount far less than the amount agreed to be paid by him and nevertheless, they made the defendant believe that they were getting an average sum of Rs.80,000/- per day when they were collecting the toll, and it is based on the said representation that the defendant happened to undertake the work. According to the learned counsel, in the circumstances, the contract sought to be enforced is vitiated on account of misrepresentation and not enforceable by law. Placing reliance on the representation submitted by the plaintiff to the Government seeking waiver of a portion of the amount R.F.A No.630 of 2011 7 payable by them to the Government, the learned counsel has attempted to reinforce his stand that the officials of the plaintiff were aware of the fact that the defendant would not be able to collect toll as agreed by him. It was also argued by the learned counsel that insofar as the contract entered into with the defendant was terminated by the plaintiff on 8.6.2003, the suit instituted on 27.10.2006 is barred by limitation. It was also argued by the learned counsel that there is absolutely no justification for the plaintiff to forfeit the security deposit of Rs.5 lakhs furnished by him in the form of bank guarantee. At any rate, according to the learned counsel, the plaintiff ought to have adjusted the said amount towards the amounts payable by the defendant. 7. Per contra, the learned counsel for the plaintiff submitted that insofar as the plaintiff is a Corporation in terms of the provisions of Order 29 of the Code of Civil Procedure, in the absence of a case for the defendant that the Managing Director of the plaintiff who has signed and verified the pleadings of the plaintiff on their behalf is not a principal officer 8 R.F.A No.630 of 2011 of the plaintiff who is able to depose to the facts of the case, the contention that the Managing Director of the plaintiff was not competent to institute the suit is unsustainable in law. The learned counsel has relied on the decision of the Apex court in **United Bank of India v. Naresh Kumar,** (1996) 6 SCC 660, in support of said stand. Placing reliance on the decision of the Madras High Court in **Trichy Steel Rolling Mills Ltd v. Arvind Steels (P) Ltd,** (1996) 85 Company Cases 425(Mad), it was argued by the learned counsel that permission of the BIFR is not required for the purpose of instituting a suit on behalf of the company and the said provision would apply only when a suit is sought to be instituted against the company in respect of which a proceedings under the Act is pending. As regards the plea of limitation, it was argued by the learned counsel that in Exts.A4 and A5 representations submitted by the defendant to the plaintiff seeking waiver of the amount payable by him in terms of the contract, he has acknowledged the liability and therefore, in the light of the provisions contained in Section 18 of the Limitation Act, the suit is well within the period of 9 R.F.A No.630 of 2011 limitation. 8. We have perused the materials on record and considered the arguments advanced by the learned counsel for the parties on either side. 9. As noted, the pleadings in the suit is signed and verified on behalf of the plaintiff by the Managing Director of the plaintiff. It is beyond dispute that a company can sue and be sued in its own name. Under Order 6 Rule 14 of the Code of Civil Procedure, a pleading is required to be signed by the party and its pleader, if any. A company being a juristic entity, it is obvious that some person has to sign and verify the pleadings on behalf of the company. Order 29 Rule 1 of the Code of Civil Procedure, therefore provides that in a suit by or against a Corporation, any principal officer of the Corporation who is able to depose to the facts of a case may sign and verify the pleadings on behalf of the company. A reading of Order 6 Rule 14 together with Order 29 Rule 1 of the Code of Civil Procedure would therefore, show that even in the absence of any formal letter of authority or power of attorney having been executed, a 10 R.F.A No.630 of 2011 person referred to in Order 29 Rule 1, can by virtue of the office which he holds sign and verify the pleadings on behalf of the Corporation[See **United Bank of India** ]. In the case on hand, the defendant has no case that the Managing Director of the plaintiff who has signed and verified the pleading is not a principal officer of the plaintiff who is able to depose to the facts of the case. We do not, therefore, find any merit in the argument advanced by the learned counsel for the defendant that the institution of the suit is improper in any manner. 10. As noted, it is placing reliance on Section 22 of the Act that the learned counsel for the defendant contended that permission of the BIFR was required for the purpose of instituting the suit. Section 22 of the Act reads thus: **22. Suspension of legal proceedings, contracts, etc** .— (1) Where in respect of an industrial company, an inquiry under section 16 is pending or any scheme referred to under section 17 is under preparation or consideration or a sanctioned scheme is under implementation or where an appeal under section 25 relating to an industrial company is pending, then, notwithstanding anything contained in the Companies Act, 1956 (1 of 1956) or any other law or the memorandum and articles of association of the industrial 11 R.F.A No.630 of 2011 company or any other instrument having effect under the said Act or other law, no proceedings for the winding up of the industrial company or for execution, distress or the like against any of the properties of the industrial company or for the appointment of a receiver in respect thereof and no suit for the recovery of money or for the enforcement of any security against the industrial company or of any guarantee in respect of any loans or advance granted to the industrial company shall lie or be proceeded with further, except with the consent of the Board or, as the case may be, the Appellate Authority. (2) Where the management of the sick industrial company is taken over or changed 3 in pursuance of any scheme sanctioned under section 18, notwithstanding anything contained in the Companies Act, 1956 (1 of 1956) or any other law or in the memorandum and articles of association of such company or any instrument having effect under the said Act or other law— (a) it shall not be lawful for the shareholders of such company or any other person to nominate or appoint any person to be a director of the company; (b) no resolution passed at any meeting of the shareholders of such company shall be given effect to unless approved by the Board. (3) Where an inquiry under section 16 is pending or any scheme referred to in section 17 is under preparation or 12 R.F.A No.630 of 2011 during the period of consideration of any scheme under section 18 or where any such scheme is sanctioned thereunder, for due implementation of the scheme, the Board may by order declare with respect to the sick industrial company concerned that the operation of all or any of the contracts, assurances of property, agreements, settlements, awards, standing orders or other instruments in force, to which such sick industrial company is a party or which may be applicable to such sick industrial company immediately before the date of such order, shall remain suspended or that all or any of the rights, privileges, obligations and liabilities accruing or arising thereunder before the said date, shall remain suspended or shall be enforceable with such adoptions and in such manner as may be specified by the Board: Provided that such declaration shall not be made for a period exceeding two years which may be extended by one year at a time so, however, that the total period shall not exceed seven years in the aggregate. (4) Any declaration made under sub-section (3) with respect to a sick industrial company shall have effect notwithstanding anything contained in the Companies Act, 1956 (1 of 1956) or any other law, the memorandum and articles of association of the company or any instrument having effect under the said Act or other law or any agreement or any decree or order of a court, tribunal, officer or other authority or of any submission, settlement or 13 R.F.A No.630 of 2011 standing order and accordingly,— (a) any remedy for the enforcement of any right, privilege, obligation and liability suspended or modified by such declaration, and all proceedings relating thereto pending before any court, tribunal, officer or other authority shall remain stayed or be continued subject to such declaration; and (b) on the declaration ceasing to have effect— (i) any right, privilege, obligation or liability so remaining suspended or modified, shall become revived and enforceable as if the declaration had never been made; and (ii) any proceeding so remaining stayed shall be proceeded with, subject to the provisions of any law which may then be in force, from the stage which had been reached when the proceedings became stayed. (5) In computing the period of limitation for the enforcement of any right, privilege, obligation or liability, the period during which it or the remedy for the enforcement thereof remains suspended under this section shall be excluded. A reading of the extracted provision would show beyond doubt that that the bar in terms of the said provision would apply only to suits against sick companies and there is absolutely no 14 R.F.A No.630 of 2011 impediment in a sick company instituting a suit for realisation of the amount due from a third party. **Trichy Steel Rolling Mills Ltd** is one of the cases in which the said aspect has been clarified by the Madras High Court. 11. Except the assertion made by defendant in his evidence which was challenged in cross examination, there is no convincing evidence in this case to indicate that the officials of the plaintiff have made any representation to the defendant as to the amount which the plaintiff was collecting by way of toll prior to the period during which the defendant was entrusted the work. That apart, it has come out in evidence that the plaintiff was running a hotel near the bridge during the relevant period. As such, as rightly held by the court below, it is only prudent to hold that the decision to undertake the work was taken by the defendant on his own volition. The contention raised by the learned counsel for the defendant that it is on account of the misrepresentation by the officials of the plaintiff that the defendant happened to undertake the work is therefore, only to be rejected. 15 R.F.A No.630 of 2011 12. Coming to the contention raised by the learned counsel for the defendant that the suit is barred by limitation, as noted, the said contention is raised on the premise that the contract was terminated by the plaintiff as early as on 08.06.2003 and as such, the suit should have been filed within 3 years from the said date and the suit has been filed only after 3 years on 27.10.2006. It is the common case of the parties that the suit is governed by Article 113 of the Schedule to the Limitation Act and as such, the suit should have been instituted within 3 years from the date on which the right to sue accrued to the plaintiff. If the right to sue is taken as accrued to the plaintiff on the date of termination of the contract, the suit is barred by limitation. The plaintiff, however, pleaded in paragraph 8 of the plaint that the defendant has sent two letters to the plaintiff on 18.05.2003 and 14.11.2003 requesting them to waive the amount payable in terms of the contract. According to the plaintiff, the said documents would amount to acknowledgement in terms of Section 18 of the Limitation Act and therefore, there is no bar of limitation for the suit. 16 R.F.A No.630 of 2011 13. In terms of Section 18 of the Limitation Act, an acknowledgement of liability made in writing in respect of any right claimed by the opposite party and signed by the party against whom such a right is claimed made before the expiration of the prescribed period for a suit in respect of such a right has the effect of commencing a fresh period of limitation from the date on which the acknowledgement was so signed. It is well settled that to amount to an acknowledgement of liability within the meaning of Section 18 of the Limitation Act, it is not necessary that the acknowledgement should contain a promise to pay either expressly or by implication. It is sufficient that the words used in the acknowledgement must indicate the existence of jural relationship between the parties such as that of debtor and creditor [See **Prabhakaran v. M.Azhagiri Pillai** , (2006) 4 SCC 484 and **Lakshmirattan Cotton Mills Co. Ltd. v. Aluminium Corpn. of India Ltd.** , (1971) 1 SCC 67]. The letters dated 18.05.2003 and 14.11.2003 are Exts.A4 and A5. We have perused the said documents. As noted, the aforesaid documents are representations submitted by the 17 R.F.A No.630 of 2011 defendant to the plaintiff admitting the jural relationship with the plaintiff as debtor and creditor, nevertheless requesting the plaintiff to waive the balance amounts payable in terms of the contract. The said documents, according to us, would amount to acknowledgement in terms of Section 18 of the Limitation Act and in the light of the said documents, we are of the view that the suit is well within the period of limitation. 14. The contention of the defendant remaining to be dealt with, is the contention raised by his learned counsel as regards the forfeiture of the security deposit furnished by the defendant to the plaintiff in the form of demand draft. It is settled that the security deposit being the amount collected by the plaintiff from the defendant to safeguard the interest of the plaintiff in the event of improper performance of contract by the defendant, it was obligatory for the plaintiff to adjust the said amount against the amount payable by the defendant when steps were taken for realisation of the amounts covered by the contract on the ground of breach. It is all the more so since the suit claim represents the entire loss caused to the plaintiff on 18 R.F.A No.630 of 2011 account of the breach of contract committed by the defendant. In other words, the plaintiff was entitled to the amount outstanding in the account less Rs.5 lakhs. In the result, the appeal is allowed in part and the impugned decree and judgment are modified permitting the plaintiff to realise Rs.34,29,660/- in the place of Rs.39,29,660/together with interest as ordered by the court below. Sd/- **P.B.SURESH KUMAR, JUDGE.** Sd/- **C.S.SUDHA, JUDGE.** YKB