THE HONOURABLE SMT. JUSTICE P.SREE SUDHA
APPEAL SUIT No.2551 of 2001
JUDGMENT:
This appeal is filed against the Judgment of the trial Court in O.S.No.216 of 1995 dated 02.06.2001.
2. The Central Bank of India filed suit for recovery of amount of Rs.5,76,161.10ps from the defendants on the basis of demand promissory note, hypothecation agreement, guarantee agreement and on the basis of equitable mortgage before the trial Court. The first defendant is a company incorporated under Indian Companies Act. Defendant No.2 is the Managing Director and defendant No.3 was the Director of the first defendant. At request of the first defendant, bank sanctioned cash credit loan of Rs.1,00,000/- on 27.02.1990 with interest at the rate of 14% per annum with quarterly rests. The first defendant also executed the relevant documents. On the same day again bank sanctioned term loan facility to an extent of 2.16 lakhs repayable in 36 months with interest at the rate of 13.5% per annum and the concerned documents were also executed by the first defendant. The above two loan facilities are guaranteed by execution of a guarantee deed dated 27.02.1990 by defendant 2 Nos.2 and 3 in their individual capacity along with defendant Nos.5 to 7 making themselves jointly and severally liable along with the first defendant to repay the loan.
3. As per the resolution of the first defendant dated 20.01.1992 the resignation of the third defendant as Director was accepted. On 01.07.1992 first defendant represented by Managing Director second defendant acknowledged the liability of Rs.82,188.47ps under cash credit loan and another sum of Rs.2,92,550/- under term loan facility outstanding as on 30.06.1992. As per resolution dated 07.06.1993 the first defendant co-opted defendant No.4 as one of the Directors and authorized defendant No.2 and 4 as Directors of the first defendant company to operate the bank account.
4. On 08.10.1993 first defendant executed the relevant documents acknowledging the liability. The loan amount is guaranteed by the defendant Nos.2 and 4 in their individual capacity and also executed a form of guarantee dated 08.10.1993 making themselves jointly and severally liable along with defendant Nos.5 to 7 to repay the loan. The first defendant executed a promissory note on 08.10.1993 for Rs.3,64,955/- 3 with interest at the rate of 18.75% per annum with quarterly rests. The above two loans sanctioned by the bank secured by equitable mortgage by deposit of title deeds created by the defendant No.6 who is also guarantor in respect of his immovable property on 27.02.1990. The defendant No.6 also informed the same to the bank his intention to create equitable mortgage of his immovable property as a security and it was acknowledged by the bank on 26.06.1990 and they also received title deeds from defendant No.6. The defendant No.6 deposited the original registered sale deed dated 25.04.1969 along with a copy of encumbrance certificate. The property mortgaged is a vacant plot bearing No.56, block No.D, admeasuring 400 Sq.yards situated in Sy.Nos.268, 269 and 270 of Rampally village, Medchal Taluk. As the first defendant failed to repay the amount, bank issued legal notice on 13.10.1994 and 20.12.1994 and they did not give reply to the notice. Hence bank filed suit for recovery of amount.
5. The defendant Nos.1 to 3 and 5 to 7 remained exparte. The defendant No.4 alone filed the written statement and contested the suit. He denied the loan transaction, execution of the relevant documents and also correctness of statement of 4 account filed by the bank and further stated that plaint is not properly signed and verified in accordance with the provisions of C.P.C and G.P.A holder cannot file the suit.
6. The trial Court examined P.W.1 and 2 and marked Exs.A1 to A35. As the defendants did not adduce any evidence considering the arguments of both sides passed preliminary decree for sale of A-schedule property against defendant No.6 for realization of Rs.5,76,161.10ps with costs and subsequent interest at the rate of 18.75% per annum from the date of suit till the date of realization and also for the sale of hypothecated machinery shown in plaint 'B' schedule belonging to defendant Nos.1 to 4.
7. Against the said Judgment defendant No.4 preferred an appeal and he mainly contended that he is not liable to pay any amount as he never received amount from the bank and there is no privity of contract between him and the bank and his liability in personal capacity is barred by limitation. Bank might have used his blank signatures under Ex.A14 and A18. He also stated that he was not the Director of the bank and he is not liable for cash credit loan and term loan. He also contended that 5 P.W.1 was not signatory on the plaint and is not proper person to speak about the pleadings. P.W.2 is not authorized by the bank and thus their oral evidence is to be excluded. In view of the improper pleadings, he also stated that rate of interest is exorbitant and unreasonable. The trial Court ought to have used its discretion under Order 34 rule 11 of C.P.C. The bank ought to have proceeded against defendant No.1 Company and also against the mortgaged property for recovery of suit claim instead of the proceedings against him and requested this Court to set aside the Judgment of the trial Court.
8. Heard arguments of appellant counsel on 30.11.2022 and respondents counsel was absent and hence posted for their arguments on 02.12.2022. Even on that day respondents did not turn up for arguments hence treated as there is no argument of respondents counsel and reserved for Judgment.
9. The counsel for the appellant mainly contended that interest granted at the rate of 18.75% per annum was decreed from the date of suit till the date of realization and it is to be altered. Admittedly first defendant firm executed a demand promissory note on 08.10.1993 for Rs.3,64,955/- with interest 6 at the rate of 18.75% per annum with quarterly rests and also acknowledged the deed, moreover defendant No.6 mortgaged his property vide registered sale deed dated 25.04.1969 and bank also received the same on 26.06.1990. The said mortgage property is a land admeasuring 400 Sq.yards in Sy.Nos.268, 269 and 270 of Rampally village, Medchal Taluk. The argument of the appellant is that there is no privity of contract between him and the bank and he is not liable to pay the amount but it was held by the trial Court that defendant No.4 was one of the Directors of the company. As per the resolution dated 07.06.1993 the first defendant authorized defendant No.2 and 4 as Directors and to operate bank account with plaintiff bank and they also executed relevant documents on 08.10.1993, as such arguments of the appellants that there is no privity of contract and he is not liable cannot be accepted. The defendant No.4 filed written statement but he denied the entire transaction without any basis. The issue of Jurisdiction was dealt with by the trial Court and held that the concerned Court is having jurisdiction and issue of limitation was also dealt with. Regarding the issue of limitation it was held that the suit is within the limitation. They claimed relief of sale of mortgaged property for recovery of amount. It was held that suit loan 7 transaction took place on 27.02.1990 and the suit was filed on 27.03.1995 and well within the time. Even regarding the personal decree against the defendants, the period of limitation is 3 years. The agreement of loan along with guarantee agreement executed on 27.02.1990. The relevant clause in Ex.A9 reads that an acknowledgment of liability by the principle borrower in writing binds the guarantor also for the purpose of Limitation Act and thus the trial Court held that limitation extends to all the defendants except defendant No.4. It was further held that defendant No.4 also executed guarantee agreement on 08.10.1993 and thus the suit is well within the limitation against defendant No.4. The trial Court held that though defendant No.4 contesting the matter, he did not cross- examine P.W.Nos.1 & 2 and he did not choose to enter into the witness box though he denied the statement of account as incorrect and thus he is liable to pay the suit amount as the Director of defendant No.1 and also in his individual capacity. Considering the evidence of P.W.1 and 2 along with Ex.A19 defendant Nos.1 to 7 are liable to pay the suit amount and the equitable mortgage was created under Ex.A10 & A20 and it is valid and binding on defendant No.6 and accordingly suit was decreed. Therefore, this Court finds that there is no irregularity 8 or illegality in the Judgment of the trial Court and it warrants no interference. However, this Court finds it reasonable to modify the interest as follows:
" The plaintiff is entitled for interest @ 18.75% per annum from the date of suit till the date of decree and 6% per annum from the date of decree till the date of realization."
In the result, appeal is dismissed except to an extent of interest. Defendant No.4 is liable to pay the interest @ 18.75% per annum from the date of suit till the date of decree and 6% per annum from the date of decree till the date of realization. There shall be no order as to costs.
Miscellaneous petitions pending, if any, shall stand closed.
_________________________ JUSTICE P.SREE SUDHA DATED: 12.12.2022 tri 9 THE HONOURABLE SMT. JUSTICE P.SREE SUDHA APPEAL SUIT No.2551 of 2001 DATED: 12 .12 .2022 TRI