This suit has been filed by the plaintiff seeking a direction to the defendants to pay to the plaintiff a sum of Rs.10,66,000/- and interest thereon at 24 per cent per annum from the date of plaint till the date of realization and for costs.
2.The case of the plaintiff as narrated in the plaint is as follows:-
(a)The first defendant is carrying on business in three places. During September-1993, both the defendants approached the plaintiff and stated that the first defendant wanted finance from the second defendant and for that purpose, requested the plaintiff to give the security of 65 share certificates of various companies along with the blank transfer forms duly signed standing in the name of the plaintiff and his wife. The plaintiff believed the defendants and handed over to the defendants 65 share certificates signed in blank transfer forms of 44 Companies. It transpires that the first defendant handed over all these share certificates with blank transfer forms to the second defendant and raised a loan from the second defendant on the security of the said share certificates and blank transfer forms. The second defendant was clearly informed that without the prior written consent of the plaintiff, he has no right whatsoever to transfer any of the shares either in the name of the second defendant or to any third party.
(b)The first defendant could not repay the loan received by him to the second defendant. The first defendant wrote to the plaintiff a letter dated 26.6.1994 at Madras, wherein he admitted that on 18th September, 1993, 65 share certificates of various Companies with blank transfer forms duly signed were received and handed over to the second defendant for raising finance from the second defendant for the business of the first defendant. He also admitted that both the defendants assured the plaintiff that the shares would not be sold and that the share certificates would be returned to the plaintiff in tact within one month. The first defendant in his letter stated that due to certain problems, he could not honour his commitment and could not repay the principal loan of Rs.3 lakhs to the second defendant though he was regularly paying interest to the second defendant. In the said letter dated 26.6.1994, the first defendant undertook that the shares would not be sold without the prior written permission of the plaintiff and he undertook to bear all the losses, expenses and costs which the plaintiff may suffer. The said letter was personally handed over by the first defendant to the plaintiff at Madras. The first defendant in the said letter further assured the plaintiff that it will be his endeavour to settle the entire amount before 15th July, 1994 and in any case, he did not envisage any difficulty in settling the entire transaction on or before 24.09.1994, failing which, he admitted that a legal action can be taken against him. A copy of the said letter was also marked by the first defendant to the second defendant. With that letter at Madras on 26.6.1994 the first defendant also executed and handed over to the plaintiff a promissory note promising to pay to the plaintiff at Madras a sum of Rs.7,16,000/- towards the value received carrying interest at 24 per cent per annum repayable on or before 25.09.1994. The said promissory note / receipt was executed by the first defendant in favour of the plaintiff for the value of share certificates, namely Rs.7,16,000/- and he promised to pay the said sum with interest at 24 per cent per annum.
(c)On 09.07.1994 the plaintiff wrote a letter to the second defendant reminding the second defendant about the understanding on which during September-1993, the share certificates and the blank transfer forms duly signed were handed over to him. The second defendant was cautioned that any attempt on his part to sell the shares in the market would entail legal complications. The second defendant received the letter on 12.07.1994 but failed to reply.
(d)The plaintiff came to understand that the second defendant utilised the blank signed transfer forms and got all the shares transferred in his name. The plaintiff, therefore, sent an lawyer notice dated 4.2.1995 to both the defendants stating that they had committed a fraud on the plaintiff. The second defendant gave a reply dated 15.03.1995, after a lapse of 40 days, making false allegations and wrongfully denying liability to return back the shares or its value. The case of the second defendant in his reply notice is that the first defendant gave a clear undertaking that if he failed to repay the money on or before 18.04.1994, the shares could be sold or transferred and after appropriating the dues, the second defendant was to refund the excess money recovered, if any, to the first defendant. The further case of the second defendant was that the first defendant failed to repay the money on the due date and that the shares were sold by the first defendant to the second defendant and that after adjusting the dues, the second defendant has paid to the first defendant the excess money recovered and that all the transactions were completed in April-May,1994. In the said reply notice, the second defendant also falsely stated that the plaintiff signed certain share transfer forms on 20.09.1994. The plaintiff sent a rejoinder notice on 25.03.1995.
(e)Both the defendants are jointly and severally liable to the plaintiff for a sum of Rs.7,16,000/- towards the principal value of the share certificates as on 26.6.1994 as admitted by the first defendant in his letter dated 26.6.1994 and the pro-note / receipt dated 26.6.1994 executed at Madras. The share certificates along with the blank transfer forms duly signed were handed over to both the defendants with the clear understanding that the blank transfer forms will not be used and the share certificates will not be sold under any circumstances. If the first defendant, who borrowed money from the second defendant on the security of those share certificates, did not pay the money to the second defendant. At the most, the second defendant can charge interest or go to the competent Court of law and get a decree and then, through the Court, sell the share certificates. The second defendant acted illegally, unlawfully and fraudulently in misusing the blank transfer forms and selling away the share certificates. Therefore, the second defendant is liable to the plaintiff for the suit claim. As far as the first defendant is concerned, he has admitted in his letter dated 26.6.1994 and in the pro-note / receipt dated 26.6.1994 that the value of the share certificates as on that date was Rs.7,16,000/- and that he will pay the same with interest at 24 per cent per annum. Therefore, both the defendants are liable to pay to the plaintiff the principal sum of Rs.7,16,000/- being the value of the share certificates as on 26.6.1994 and a sum of Rs.3,50,000/- towards the interest thereon at 24 per cent per annum from 26.6.1994 as on this date, in all Rs.10,66,000/-. The defendants have failed and neglected to either return back the 65 share certificates described or to pay the amount due in spite of the plaintiff's lawyer notice dated 4.2.1995 and the rejoinder notice dated 25.3.1995. Therefore, the plaintiff filed the present suit against the defendants for the recovery of Rs.10,66,000/-. The plaintiff has suffered a net loss equal to the suit claim. The value of the 65 share certificates as on 26.6.1994 was ascertained at Rs.7,16,000/- and from that date 24 per cent interest was agreed to be paid. Both the defendants are, therefore, liable to reimburse the plaintiff with a sum of Rs.10,66,000/- a detailed above.
(f)The cause of action for this suit arose at Madras on 18.09.1993 when both the defendants received from the plaintiff 65 share certificates of various Companies along with blank transfer forms duly signed for the purpose of raising finance for the first defendant from the second defendant with clear understanding that under no circumstances the blank transfer forms will be utilised or the shares sold or transferred and that all the share certificates and the blank transfer forms will be duly returned back to the plaintiff. The cause of action arose on 26.6.1994 when the first defendant by his letter confirmed the above fact and undertook that the shares would not be sold and also undertook to bear all the losses, expenses and costs. The cause of action also arose on 16.6.1994 when the value of the share certificates was ascertained at Rs.7,16,000/- and the first defendant executed a pro-note / receipt promising to pay to the plaintiff the said sum with interest at 24 per cent per annum. The cause of action arose on 9.7.1994 when the plaintiff wrote a letter to the second defendant by registered post reminding him of the understanding that the share certificates shall not be sold. The cause of action arose in the beginning of 1995 when the plaintiff came to know that the second defendant committed fraud and misused the blank transfer forms and had the shares transferred in his name. The cause of action arose at Madras on 4.2.1995 when the plaintiff gave a lawyer notice dated 4.2.1995 to both the defendants demanding the return of the share certificates and the blank transfer forms. Hence, the suit.
3.The first defendant has not filed any written statement.
4.The second defendant has filed a written statement contending as follows:-
(a) The second defendant is not a necessary party to the suit as there is no privity of contract between him and the plaintiff. The second defendant submits that the first defendant approached him for a short term loan of Rs.4,00,000/- to meet some urgent financial requirement. The first defendant represented that he would repay the loan within 15 days. As the second defendant could not provide the entire amount himself, he mobilised the amount from some friends and relatives. The above loans carried interest at the rate of 2% per fifteen days and the interest for the first fifteen days was deducted at the time of disbursing the loan. The loan was given on 3.4.1994 and the first defendant undertook to repay the same on or before 18.4.1994.
(b)In order to secure the above sums, the first defendant offered the share certificates of various companies to the lenders, which he claimed to have purchased from the plaintiff and his wife Mrs.Usharani Nambi. The share certificates were accompanied by Share Transfer Forms executed in blank by the plaintiff and his wife. The first defendant delivered separate letters to each of the lenders acknowledging the borrowal and undertaking to repay the loan within 15 days. He further stated in the letters that if he failed to repay the loan on or before 18.4.1994, the lenders will have the right to have the shares transferred to their names or to sell the same and appropriate the proceeds towards his dues. Any excess amount realised was to be refunded to the first defendant and in case of any shortfall the first defendant undertook to pay the same.
(c)The first defendant failed to repay the dues as undertaken. Therefore, the lenders utitlised the share transfer forms and had the shares transferred in accordance to the undertaking letters of 3.4.1994 issued by the first defendant. This was done with the full knowledge and consent of the first defendant. The adjustment was done on the basis of the prevailing prices of the shares as per paper quotations on 3.4.1994 and 27.4.1994 and the excess proceeds realised were returned to the first defendant. Those facts were acknowledged by the first defendant in the letters dated 3.4.1994 and 27.4.1994 addressed to the lenders. Thus the entire transaction was over by 3.4.1994 and the plaintiff was nowhere in the picture until then.
(d)While so, the 2nd defendant was shocked and surprised to receive a letter dated 09.07.1994 from the plaintiff, enclosing a letter dated 26.06.1994 said to have been written by the first defendant. The letter dated 26.06.1994 contained an undertaking from the first defendant that the shares would not be sold without the prior written permission of the plaintiff. This was really surprising in view of the fact that the first defendant had already sold the shares in lieu of his borrowings and had also received the excess amount of the proceeds. It was clear from the foregoing that the plaintiff and the first defendant were acting in collusion with each other and it is obvious to say that the present suit is also a collusive suit filed to harass the second defendant for reasons best known to the plaintiff and the first defendant. The second defendant issued a reply dated 18.07.1994 to the plaintiff's aforesaid letter dated 09.07.1994 expressing surprise at the contents and pointing out the suspicious nature of the alleged undertaking between the plaintiff and the first defendant.
(e)The First defendant had given 100 shares of N/S.Liption India Ltd., to the second defendant which were in the joint names of the plaintiff and his wife. However, the transfer deed was signed only by the plaintiff's wife. The second defendant submits that on 16.07.1994 the second defendant had written to the first defendant with a copy to the plaintiff pointing out that inspite of several requests reminders, the share holder viz., the plaintiff had not signed the transfer deed and calling upon the first defendant to obtain the plaintiff's signature on the same. The second defendant submits that subsequent to the correspondence referred to supra, the plaintiff and the first defendant met the second defendant on 30.09.1994, in which meeting the whole issue was classified and the plaintiff also signed the transfer deed and his signature was duly notarised.
(f)Just as the second defendant started to believe that the matter was settled, the plaintiff issued a legal notice dated 4.2.1995 reiterating the false allegations made by him earlier. This notice was suitably replied by the second defendant on 15.3.1995, the delay being on account of the fact that the second defendant was out of station at the time of receipt of the notice. In order to harass and intimidate him, the plaintiff also filed a police complaint. Although the complaint was not registered, the police at the behest of the plaintiff, kept visiting the second defendant on the pretext of enquiring into the complaint. The second defendant was, therefore, forced to move the Principal Sessions Judge, Chennai, for anticipatory bail and the same was granted vide order date 3.4.1995. The present suit is a continuation of the vexatious attempt of the plaintiff to harass and intimidate the second defendant. This defendant is not bound by any understanding alleged to have been existing between the plaintiff and the first defendant. This defendant is not a party to the same. This defendant and his associates have acted in a bonafide manner, but on the contrary, there seems to be a well knit conspiracy between the plaintiff and the first defendant to cheat and defraud this defendant. This defendant is not aware of the circumstances, in which the letter dated 26.06.1994 was written by the first defendant. The plaintiff and the first defendant are colluding with each other in order to cheat and defraud the second defendant. This defendant is not liable to pay any money to the plaintiff. The plaintiff has no cause of action. Hence, the plaint is liable to be dismissed.
5.On the side of the plaintiff Ex.P.1 to Ex.P.5 were marked and the plaintiff was examined as P.W.1. On the side of the defendants, Ex.D1 to Ex.D.21 were marked and D.W.1 was examined.
6.The following issues were framed on 03.04.2003 for consideration:-
1)Whether the plaintiff is not entitled to decree against the defendants 1 and 2?
2)Whether the defendants are not jointly and severally liable to pay the suit claim?
7.Point Nos.1 & 2:- The suit has been filed by the plaintiff seeking for recovery of a sum of Rs.10,66,000/- with interest at 24% per annum from the defendants on the foot of a promissory note executed by the first defendant in favour of the plaintiff and also on a letter of undertaking written by the first defendant to the plaintiff on 26.6.1994. According to the plaintiff, the defendants 1 and 2 had approached the plaintiff for the loan to be advanced by the second defendant to the first defendant and the plaintiff had handed over 65 share certificates of various companies with blank transfer forms duly signed by the plaintiffs to the defendants on 18.09.1993. In confirmation of the said endorsement, the defendant 1 had written a letter dated 26.6.1994 undertaking not to transfer those share certificates to any other name and also executed a promissory note in favour of the plaintiff for a sum of Rs.7,16,000/-. The first defendant in turn handed over the share certificates and blank transfer forms duly signed by the plaintiff and his wife to the second defendant in security of the loan obtained by him from the second defendant and the second defendant had utilised the said blank signed transfer forms and had the shares transferred in his name. Therefore, the plaintiff had sent a lawyer notice dated 4.2.1995 for the breach of trust and the fraud committed on the plaintiff. But, the same was replied by the second defendant on 15.03.1995 with false allegations. Therefore, he had filed the suit seeking for a decree against both the defendants for the said sum of Rs.7,16,000/- and the accrued interest thereon, to a total amount of Rs.10,66,000/- till the date of suit and thereafter, at 24% interest till the date of payment.
8.Per contra, the second defendant would contend that there was no privity of contract in between the plaintiff and the second defendant for advancement of loan for a sum of Rs.4 lakhs and since he did not have sufficient funds for the loan asked by the 1st defendant he had arranged for the said loan through his relatives and friends and the first defendant had sought for a short term loan for a period of 15 days with 2% interest per month thereon and therefore, after deducting the said 15 days interest by various creditors including the second defendant on 3.4.1994, loans were advanced to the 1st defendant and immediately, he had also executed letters evidencing the said borrowal and the entrustment of the share certificates with the blank transfer-forms duly signed, by saying that the first defendant had purchased the shares from the plaintiff and his wife, and on that basis a sum of Rs.4 lakhs, in toto, was disbursed to the first defendant by the said creditors known to the second defendant as listed in the written statement.
9. Further, the case of the second defendant was that the first defendant could not repay the said loan within the time limit of 15 days ending with 18.04.1994 and therefore, the blank transfer forms obtained by the first defendant from the plaintiff and his wife were transferred in the name of second defendant and other lenders and the balance money was received by the first defendant from the second defendant and other lenders. The first defendant had also executed letters to the lenders including the second defendant on various dates towards the receipt of the said excess amount and the transactions were over and in one transfer-form the plaintiff's wife alone had signed and the plaintiff was yet to sign and therefore, the second defendant had informed the first defendant to get the signature of the plaintiff in the said transfer form and he had also signed the said transfer from on 30.09.1994. But, the plaintiff had questioned that the transfer of the shares given by the first defendant to the second defendant and other lenders were wrongly transferred against the terms of the entrustment and undertaking given by the defendants in the letter dated 26.6.1994. The said letter dated 26.6.1994 was not executed by the second defendant and he was not aware of the said letter and he was shocked to receive a copy of the letter with the letter dated 9.7.1994 written by the plaintiff and he had asked the first defendant on 16.07.1994 through a letter, a copy marked to the plaintiff to put signature in the blank transfer-form. Subsequently also he had replied to the letter dated 9.7.1994 about its falsity. However, the matter was clarified with the plaintiff and the first defendant on 30.9.1994 and accordingly the plaintiff had signed the blank transfer-form for the share certificates standing in the name of the plaintiff and his wife, being transferred to the name of the second defendant. Therefore, he would seek for the dismissal of the suit against the second defendant, since the alleged entrustment was only made with the first defendant and he alone executed a promissory note and the alleged letter dated 26.6.1994.
10.The plaintiff had examined himself as P.W.1 and had produced Ex.P.1 to Ex.P.5 in support of his case. The first defendant remained exparte and did not participate in the trial. The second defendant was examined as D.W.1 and he has produced Ex.D.1 to Ex.D.21 in order to substantiate his case. Ex.D.1, was filed by the plaintiff but it was not produced in the chief-examination of P.W.1. However, it was marked during the cross-examination of D.W.1 as Defendants' document which is a mistake. The said document ought to have been marked on the side of the plaintiff in the P-series exhibits. Since it was marked as Ex.D.1 and it has been referred in the evidence of D.W.1, no change of nomenclature of the exhibit is necessary and it has been left as it is.
11. The learned counsel for the plaintiff would submit in his argument that the defendants are jointly and severally liable to the plaintiff for the payment of Rs.7,16,000/- towards the principal value of the share certificates as on 26.6.1994 as stated by the first defendant in the said letter. He would further submit that since the share certificates numbering 65 along with the blank transfer-forms duly signed were already handed over to the defendants with the clear understanding that the blank transfer-forms will not be used and the share certificates will not be sold under any circumstance, the second defendant would also be liable. He would further submit that the 2nd defendant could pursue the case before the competent Court by filing a suit to get a decree for selling the share certificates, but he had unlawfully and fraudulently exercised the blank transfer forms and sold away the shares certificates. He would also submit that since the second defendant had violated the undertaking by filing the share certificates and blank transfer-forms in his favour, he is also liable along with the first defendant to pay the suit claim.
12. The learned counsel for the plaintiff would also submit that the defendants are under the liability to honour the undertaking given under the letter dated 26.6.2004 and the value of the share certificates as on that date (i.e) Rs.7,16,000/- and the defendants are liable to pay the said amount in the absence of production of the share certificates. He would further insist in his argument that the second defendant is impliedly bound by the act of the first defendant, who was liable to pay the plaintiff the principal sum of Rs.7,16,000/- being the value of the share certificates and the subsequent interest of Rs.3,50,000/- as claimed in the suit. He would also insist in his argument that the transfer of share certificates with the help of the blank transfer-forms with the signature of the plaintiff and his wife would lead to the breach of undertaking and even the said transfer would not be valid as there was no notice of transfer given to the plaintiff by the second defendant. As per the dictum laid down in AIR 1997 SC 1411 in between M/s.John Tinson and Co.Pvt. Ltd., Vs. Surjeet Malhan to the principle that if a person has not been authorised with the entrusted shares and the blank transfer-forms, the person who is in possession of the share certificates has no authority to transfer the ownership of the shares without any specific authority.
13. He would further submit that the suit claim was made by the plaintiff as the value of the share and it is not a suit for recovery of money simpliciter, which is a lesser relief sought for, even though the plaintiff was entitled to seek for return of the share certificates from the defendants. He would again submit in his argument that while P.W.1 was examined it was suggested by the second defendant that the share should be held as security for a period of one month and in case of default, the second defendant will have the right to sell the shares, would tantamount to the admission of the second defendant towards the entrustment of the shares as told by the plaintiff and it is for the second defendant to show as to how the share certificates are liable to be sold after a period of one month. He would further submit in his argument that the second defendant did not state the names of those persons, from whom the first defendant was said to have received financial assistance in the previous reply letter dated 18.7.1994. The raising of such defence for the first time in the written statement would go to show that the plea of the defendants was absolutely false.
14. He would again submit in his argument that the denial of the relief sought for by the plaintiff in Application No.3892 of 2008 for sending the documents relied upon by the second defendant to Forensic Science Expert to find out the different time of typing cannot be placed against the plaintiff. He would further submit that in the said order the whole case of the plaintiff was not discussed and it was not rejected by the Court. Moreover, it was at a preliminary stage and it may not prevail at the stage of the trial. He would rely upon a judgment rendered in AIR 1964 SC 993 (Arjun Singh Vs. Mohindra Kumar) for the said proposition of law. Therefore, he would request the Court that the evidence of P.W.1 would go to prove the entrustment of 65 share certificates of 44 companies belonging to the plaintiff and his wife to the defendants 1 and 2 for keeping it as security and to return them on the discharge of the debts incurred by the first defendant from the second defendant, but they were fraudulently transferred by the second defendant and therefore, the defendants are liable to honour the undertaking by paying the suit claim. He would further submit that the second defendant even though has not signed in Ex.P.1-promissory note and Ex.P.2-undertaking letter is tacitly bound to pay the suit claim along with the first defendant.
15. Per contra, the learned counsel for the second defendant would submit in his argument that there is no cause of action against the second defendant in the suit as the second defendant had not joined with the first defendant in receiving the share certificates from the plaintiff as put forth by the plaintiff. The alleged entrustment of the share certificates belonging to the plaintiff and his wife was not known to him. It was a shock to the second defendant when he came across the copy of alleged letter written by the first defendant in favour of the plaintiff in respect of the undertaking of returning the share certificates of the plaintiff and it was a collusive act so as to defraud the second defendant by the plaintiff with the help of the first defendant.
16. He would further submit that the first defendant had borrowed the short term loan on 3.4.1994 to the tune of Rs.4 lakhs and since the second defendant was not having such a huge money, he had arranged the loan from his friends and relatives and accordingly, the first defendant had deposited the share certificates, to which he represented that he has purchased the same from the plaintiff and executed letters in favour of the lenders and the second defendant for such loan, which are produced as Ex.D.3 to Ex.D.10. He would also submit that the first defendant did not honour the said undertaking of repaying the said loan to the lenders and the second defendant and therefore, the shares deposited by him in security of the said loan were sold by using the transfer-forms except the shares standing in the name of the second defendant as per the agreements reached in Ex.D.3 to Ex.D.10 and the surplus amount from out of the sale proceeds were given to the first defendant.
17. Accordingly, the 1st defendant had executed letters acknowledging the payment out of the excess amount in Ex.D.11 to Ex.D.18. The shares, which were shown as security to the loan advanced by the second defendant, were standing in the name of the plaintiff and his wife and the plaintiff's wife alone had signed in the one of transfer forms and the second defendant, therefore, requested the first defendant to get the signature of the plaintiff through his letter dated 16.07.1994, Ex.D.14 and on that basis the first defendant had approached the plaintiff to put his signature in the presence of the Notary Public and the Commissioner of oaths and after the signature was laid by the plaintiff, those shares which were yet to be transferred, have been sold for the debt incurred by the first defendant in favour of the second defendant.
18. He would again insist the Court that after the plaintiff sent the alleged undertaking letter dated 26.6.1994 as if the first defendant had given an undertaking not to transfer the shares without the written consent of the plaintiff, as if it was accepted by the second defendant. The plaintiff had come forward to sign the said omitted transfer form on 13.09.1994 after everything has been clarified and settled in between the parties. The said transfer form signed by the plaintiff in the presence of Notary Public and Commissioner of oaths has been produced as Ex.D.2, which would prove the case of the second defendant and it would also go to show that the second defendant has nothing to do with the alleged execution of the promissory note and the letter dated 26.6.1994 which were executed by the first defendant alone.
19. He would further submit that the plaintiff could have issued a notice to the second defendant not to sell the shares standing in the name of the plaintiff and his wife, if really an undertaking letter dated 26.6.1994 was true, immediately after signing of the transfer form in Ex.D.2. The plaintiff could have also filed a suit for injunction against the second defendant if really there was any privity of contract existed in between the plaintiff and the second defendant. He would, therefore, submit that the plaintiff has no say in the borrowals of the first defendant from the second defendant and other lenders as per Ex.D.3 to Ex.D.10 since he had handing over of share certificates duly signed in transfer-forms and subsequently, signed in Ex.D.2 transfer-form (in which he had omitted to sign) on a subsequent day viz., 13.09.1994, by means of transferring it in favour of the first defendant and the first defendant had inturn sold them to the second defendant and other eight lenders through Ex.D.11 to Ex.D.18 and received the excess money.
20. Similarly, the second defendant is not a party to either the promissory note or the letter dated 26.06.1994 executed by the first defendant in favour of the plaintiff, for which the first defendant alone would be liable. The undertaking reached in between the plaintiff and the first defendant in respect of handing over the share certificates and the blank signed transfer-form would not in any way rope in the second defendant to the liability to pay the said amount as claimed by the plaintiff. He would also submit that the case of the plaintiff that the share certificates were entrusted with the defendants as pleaded in the plaint was given go by, by the plaintiff when he was examined as P.W.1 and he had categorically admitted that he had entrusted the share certificates and the blank signed transfer-forms to the first defendant alone. Such an admission of the plaintiff would relieve the second defendant from any liability to pay the suit claim in a transaction had in between the plaintiff and the first defendant. He would also submit that the suit has been cunningly laid by the plaintiff with the active collusion of the first defendant and therefore, the first defendant remained exparte to confuse the transaction had by him with the second defendant and other lenders. The best evidence would be the first defendant, who remained exparte and he was not examined by the plaintiff. He would, therefore, submit that the various admissions of the plaintiff in the evidence would disprove his case, but on the other hand would show that the second defendant had no contractual relationship with the plaintiff in respect of the suit transaction. Therefore, he would request the Court to dismiss the suit with cost against the second defendant.
21. I have given anxious thoughts to the arguments advanced by both sides. The crux of the case would be that whether the second defendant was also a party to the undertaking given by the first defendant through Ex.P.1. Ex.P.1 is the letter written by the first defendant to the plaintiff dated 26.6.1994. On the same day, he has executed a promissory note in favour of the plaintiff for a sum of Rs.7,16,000/- towards the value he received. Ex.P.1-letter was written by the first defendant from his Bombay address. A copy of the said letter was stated to have been sent to one Mr.Bimal Chand, 420, Mint Street, Madras-69. The second defendant had stoutly denied that he did not receive the said letter and he received the copy of the said letter, when it was enclosed with Ex.P1- 09.07.1997, to which he had suitably denied in his reply. No doubt, the letter was not jointly executed by the second defendant.
22. At this juncture, we have to see whether the allegations made in Ex.P.1 would also bind the second defendant. The author of the said document is first defendant. He was not examined. But he remained exparte. In the wake of denial by the second defendant, it is the duty of the plaintiff to examine the first defendant in order to bring the truth for being considered by the Court. In the absence of such best evidence, namely the evidence of the 1st defendant the Court has to consider the available evidence produced in this case and to decide the issue.
23. The second defendant had produced the documents executed by the first defendant for the borrowals with the deposit of the share certificates standing in the name of the plaintiff and plaintiff's wife in Ex.D.3 to Ex.D.10. Those documents would go to show that the first defendant had executed all those documents. The evidence of the plaintiff would also show that the first defendant was having a business in the name of "Precision Builders". Those letters dated 3.4.1994 would go to show that the borrowal of the money from the lenders if not repaid on or before the date mentioned therein, a 2% interest for first 15 days, the lender has got every right to get the above mentioned shares transferred in the name of the lender or to sell the same and appropriate the proceeds. According to the other letters produced by the second defendant in Ex.D.11 to Ex.D.18, which are dated 27.4.1994 and 23.04.1994 and 03.05.1994, would go to show that the shares held by the lenders and the second defendant for the borrowals through the letter dated 03.04.1994 for the borrowed amount mentioned therein were sold as per the paper quotation on the date of such letters to the lenders and the excess amounts were acknowledged to have been received by the first defendant.
24. In an earlier occasion, the plaintiff had sought for sending these documents Ex.D.3 to Ex.D.10 and Ex.D.11 to Ex.D.18 to Forensic Science Expert in order to find out whether those type writings were done on a single day or on different days in order to prove that those letters would have been created by the second defendant subsequent to the date of the information given to the second defendant about Ex.P.1-letter and about the undertaking of the second defendant. The said application in A.No.3892 of 2008 was dismissed by this Court on 3.11.2008. Admittedly the plaintiff did not prefer any appeal against the said order. Therefore it would certainly bind the plaintiff as well the defendants. Since those letters namely Ex.D.3 to Ex.D.10 and Ex.D.11 to Ex.D.18 were having the signature of D1 in his letter-head. All these letters should have been considered to be truly executed by the first defendant.
25. In such circumstances, when we analyze the truth and genuineness of Ex.P.1-letter, dated 26.06.1994, the said undertaking given by the first defendant to the plaintiff should have been falsely given by the first defendant. For the purpose of roping the 2nd defendant for his debt. The second defendant did not join as one of the promisors in the said letter. If really the contents mentioned in Ex.P.1 are true, a letter of undertaking ought to have been obtained separately from the second defendant also. Even if the first defendant has given an undertaking through Ex.P.1, it will not bind the second defendant who is admittedly the financier of the first defendant for the transactions held in Ex.D.3 to Ex.D.10, which show a different terms and conditions in between the first defendant and his lenders. Similarly the plaintiff had also admitted that he had not filed any suit nor taken any legal action questioning the transfer of shares by the second defendant when he met the second defendant on 03.05.1994 and knew about some of the shares have been sold. The plaintiff would categorically would admit in his evidence that he had signed in Ex.D.2 blank transfer forms.
26. The subsequent putting of signature by the plaintiff in Ex.D.2 on 13.09.1994 much after the exchange of letters, in the share certificates transfer from and the non issuance of any notice or non filing of any case for not transferring the share certificates from the name of the plaintiff and his wife would go a long way to show that the alleged undertaking said to have been given by the second defendant to the plaintiff either directly at the time of handing over the share certificates by the plaintiff or through phone as spoken in his evidence, cannot be true. The evidence of the plaintiff would go to show that his relationship was only with the first defendant for the handing over of the securities and he has secured himself with the necessary documents and hence, he did not get any document from the second defendant. Apart from that, he would also admit that the does not have any documentary proof executed by the second defendant that he should not transfer the shares without the prior written consent. When the allegations made in Ex.P.1-letter is not binding upon the second defendant there is absolutely no privity of contract in between the plaintiff and the second defendant.
27. Indisputably, the plaintiff had handed over his share to the first defendant only and in turn the first defendant had raised loan from the second defendant and other lenders on the basis of the deposit of those share certificates with the signed blank transfer-forms. In these circumstances, the judgment of our Honourable Apex Court as cited by the learned counsel for the plaintiff reported in AIR 1997 SC 1411 in between M/s.John Tinson and Co.Pvt. Ltd., Vs. Surjeet Malhan and its facts are not applicable to the present facts and circumstances of the case. The plaintiff himself had shown to have signed before the Commissioner of Oaths on 13.09.1994 after the exchange of letters.
28. Therefore, the plaintiff is estoped from questioning the proprietary of the lenders and the second defendant to act in pursuance of the loan agreements in Ex.D.3 to Ex.D.10 against the first defendant. Admittedly, the promissory note produced in Ex.P.2 was also executed by the first defendant only. The said promissory note as well as the letter dated 26.06.1994 executed by the first defendant would go to show that that the first defendant alone had agreed to repay the amount towards the shares handed over by the plaintiff to the first defendant. When the plaintiff had admitted that he had handed over the shares only to the first defendant, he cannot lay any claim against the second defendant on the foot of the promissory note and the letter executed by the first defendant in Ex.P.1 & Ex.P.2. The plaintiff admitted in his evidence that he was having contact with the first defendant for few years and thereafter he could not communicate the first defendant since his whereabouts was not know to the first defendant who was one of the clients of the plaintiff. In the aforesaid circumstances, the plaintiff has miserably failed to prove his case without examining the best evidence viz., D1 on his side. When the evidence of the first defendant is not available before this Court, it cannot be said that the second defendant had committed fraud as mentioned by the plaintiff in his re-joinder notice -Ex.P.5.
29. The second defendant had categorically mentioned about the transactions had by the first defendant, in which the share certificates entrusted of sold by the plaintiff to the first defendant was deposited for the purpose of getting the loan from the second defendant and other eight lenders. The names of eight lenders were also enumerated in the documents Ex.D.3 to Ex.D.10 and Ex.D.11 to Ex.18 and the other documents relied upon in Ex.D.19 to Ex.D.21. In order to controvert the averments made in the written statement, the plaintiff has not filed any reply statement nor took any steps to implead the other eight lenders as parties to disprove the case of the second defendant. These circumstances would also go to show that the money transactions had by the first defendant with the second defendant and other lenders cannot be affected by any promise given by the first defendant in favour of the plaintiff. The plaintiff could at best enforce the promise given by the first defendant only against him and not against the second defendant or against other lenders.
30. Therefore, I am of the considered view that the second defendant is neither jointly nor severally liable to pay the suit claim along with the first defendant to the plaintiff. Therefore, the plaintiff is not entitled to a decree against the second defendant. Accordingly, both the issues are decided in favour of the second defendant. However the plaintiff is entitled to get a decree only against the first defendant with costs. The suit against the second defendant is liable to be dismissed with costs.
In fine, the suit is decreed only against the first defendant as prayed with costs and the suit is dismissed as against the second defendant with costs of D2.