Punjab National Bank vs Five Star Pencil Industries
1988 Latest Caselaw 64 Del

JUDGMENT

C.M. Nayar, J.

1. The plaintiff has filed the present suit for recovery of a sum of Rs. 2,69,473.28 against the defendants with costs and pendente lite and future interest. The plaintiff is a body corporate constituted under the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970, having its Head Office at 5, Parliament Street, New Delhi and amongst others one branch office at Rajouri Garden, New Delhi and is competent/entitled to sue in its own name. Shri Bhola Singh is the Branch Manager of the Rajouri Garden Branch of the Bank and as such is its principal officer and a person conversant with the facts of the case and is able to depose about the same and is also the general attorney of the Bank who is fully authorised to institute and present the suit, sign pleadings, engage a lawyer, to prosecute the same and to do all other acts, deeds and things in this regard.

2. It is alleged that defendants No. 2 to 6 in the capacity of partners of defendant No. 1, the partnership firm, approached the plaintiff Bank in August, 1980 and requested for the Term Loan Limit of Rs. 1,20,000/- for the purchase of machinery and further requested for the grant of Cash Credit Limit to the extent of Rs. 2.00 lacs for the manufacturing of the pencils of different types. The plaintiff Bank, however, agreed for the grant of Term Loan of Rs. 75,000/- and Cash Credit Limits of Rs. 85,000/- and another Cash Credit (Pledge) loan limit of Rs. 75,000/- which were sanctioned in the name of defendant No. 1 on 5.9.1980 subject to the conditions that all the partners, defendants 2 to 6 shall execute the relevant documents and further the said loan should be guaranteed by defendants 7 and 8. Defendants 2 to 6 executed the relevant documents inter alia the Demand Promissory Note for Rs. 85,000/-dated 5.9.1980, Agreement of Hypothecation dated 5.9.1980, whereby the raw material, finished and semi-finished goods purchased or to be purchased were hypothecated as security for the repayment of the loan, interest and other charges. Various documents pertaining to the medium term loan were also executed and defendants 1 to 6 also hypothecated the machinery purchased or to be purchased for the term loan repayable together with interest @ 3.5% p.a. over the Reserve Bank of India rate with a minimum of 12.5% p.a. with quarterly rest, subject to the various rates of interest as per the direction of the Reserve Bank of India. Defendants 7 and 8 Sh. S.C. Puri and L.K. Trehan, executed the agreement of guarantee in favour of the plaintiff Bank with regard to the loans availed by defendants 1 to 6. Defendant No. 7 had also created equitable mortgage on property No. RA-101, Inderpuri, New Delhi in favour of the plaintiff in consideration of defendants 1 to 6 availing the loan facilities detailed hereto before. The details of creating equitable mortgage are given below:-

(a) Date of mortgage : Defendant No. 7 created an equitable mortgage on his property No. RA-101, Inderpuri, New Delhi in favour of the plaintiff Bank in consideration of the loan sanctioned to defendant No. 1 with the intention to create mortgage and secure the amount of loan granted under term loan and cash credit loan facilities.

(b) Details of the title deeds: A registered original sale/title deeds are lying with East Patel Nagar Branch of Punjab National Bank, since defendant No. 7, the owner of the plot measuring 250 sq.yds. bearing No.RA-101, Inderpuri, New Delhi had constructed the same by raising loan from another branch of the Punjab National Bank situated at East Patel Nagar, New Delhi and the original title deeds are lying with the said branch and the second charge for the Rajouri Garden Branch had been created and noted in the Title Deed Register.

(c) Name of the Mortgagor : Shri S.C.Pury resident of RA-101, In-derpuri, New Delhi.

(d) Name of the Mortgagee: Punjab National Bank, Rajouri Garden Branch, New Delhi. Plaintiff.

(e) Amount of loan sanctioned: Cash Credit loan of Rs. 85,000/- and Rs. 75,000/- and Medium Term Loan for Rs. 75,000/- were granted by the plaintiff Bank to defendant No. 1 through its partners, defendants No. 2 to 6 who availed the loan facilities and had agreed to pay interest at the prevailing rate of interest.

(f) Rate of Interest : The defendants have agreed to pay interest @ 3.5% p.a. over the Reserve Bank of India rate with a minimum of 12.5% p.a. with quarterly rests or at such enhanced rate as may be levied by the Bank.

(g) Property subject to mortgage: Constructed House bearing No. RA-101, Inderpuri, New Delhi.

3. Defendants 2 to 6 in the capacity of partners and defendants No. 7 and 8 being guarantors approached the plaintiff Bank for and on behalf of defendant No. 1, the partnership firm and requested for the raise of Cash Credit Loan facility from Rs. 85,000/- to Rs. 1,00,000/- which the plaintiff Bank agreed and the loan limit of Rs. 85,000/- was enhanced to Rs. 1 lac and another loan of Cash Credit (Pledge) Limit of Rs. 75,000/- was also sanctioned on 2nd July, 1981. Defendants No. 7 and 8 executed the relevant documents on 13.7.1981 inter alia the Demand Promissory Note as well as the letter of Hypothecation for the enhanced amount of Rs. 1,00,000/- and another document for the pledge of Cash Credit Loan limit, whereby the raw material, finished, unfinished goods, purchased or to be purchased, fully shown in the Schedule thereto had also been pledged with the Plaintiff Bank.

4. Defendants No. 7 and 8 also stood guarantors for the repayment of the loan which was enhanced and sanctioned fully detailed hereto before and thus held themselves jointly and severally liable along with defendants 1 to 6 and further agreed to pay interest @ 3.5% p.a. over the Reserve Bank of India rate with a minimum of 13.5% p.a. subject to various rates as per the Reserve Bank of India rules and bye laws. Defendant No. 7 further agreed to create charge on his property No.RA-101 Inderpuri, New Delhi on the enhanced limit of Rs. 1 lac and the loan limit of Rs. 75,000/-. Defendants No. 1 to 6 have been availing the loan facilities from time to time and various entries of withdrawal as well as deposits of the amount in their respective accounts have been duly entered by the plaintiff Bank in their ledger account duly maintained in ordinary course of banking business and since the defendants failed to operate the account and furnish the relevant details/returns' of stocks hypothecated with the bank, the plaintiff Bank had been left with no option but to call upon the defendants to pay through legal notice dated 28th Feb. 1985, which was duly served upon the defendants, but they failed to comply with the same and the plaintiff Bank had to transfer the accounts of the defendants to the protested accounts on 1st Dec. 1985. The certificate as well as certified true copy of the Cash Credit Loan Account No. 24 showing outstanding balance of Rs. 1,74,096.28 as on 1st Dec. 1985 and in Medium Term Loan (Machinery) Account No. 36/80 showing the outstanding amount of Rs. 93,925.80 as on 1st Dec. 1985 are placed on the record.

5. The defendants after availing the loan facilities, fully detailed above failed to comply with the Terms and conditions of the loan and further failed to repay the loan amount as well as interest and other charges despite repeated demands and request, though defendant No. 1 through its partners had acknowledged the outstanding amount from time to time and they have signed the revival letters/balance confirmation letters acknowledging their liability but failed to liquidate the outstanding amounts due from them.

6. Defendants No. 1 to 8 were jointly and severally liable to pay the outstanding amount in their respective cash credit and term loan accounts as under:-

Loan Outstanding Balance.

1. Cash Credit (Hyp.) Account No.24 (as on 1.12.1985) Rs. 1,74,096.28

2. Interest due from 1.12.1985 to 15.12.1985

(@13% p.a.) Rs. 930.10

3. Term Loan(Machinery) Account No. 36/80 (As on 1.12.1985) Rs. 93,925.80

Interest due from 1.12.1985 to 15.12.1985

(@) 13.5% p.a.) Rs. 521.10

TOTAL Rs. 2,69,473,28

7. Defendants failed to pay and clear the outstanding amounts despite repeated demands and final demand notice dated May 18, 1985. It is further alleged that the cause of action arose on various dates when the above referred loan facilities were sanctioned and defendants No. 1 to 8 executed the various documents on September 5,1980 and thereafter when the loan limit was enhanced at the request of the defendants and relevant documents were executed on 13th July, 1981. The cause of action is continuous and subsisting since the suit has been filed on the basis of collateral security on the property No.RA-101, Inderpuri, New Delhi mortgaged with the plaintiff bank for the repayment of the loan. Therefore, the suit is within time. The defendants had also acknowledged their liability vide various letters addressed to the plaintiff bank including the letter dated July 10,1984 and balance confirmation letter dated August 7,1984. Defendant No.7 had also vide his letter dated November 9,1.983 acknowledged his liability in the capacity of a guarantor. Summons were issued to the defendants and they were duly served. Vide order dated December 13, 1991 the defendants were directed to be proceeded against ex parte. Affidavit by way. of ex parte evidence has been filed by the plaintiff.

8. The Power of Attorney Exhibit P-41 in favour of Mr. Bhola Singh, Branch Manager of the Rajouri Garden Branch, New Delhi has been filed by the plaintiff by which he was authorised to institute, sign pleadings, engage lawyer to prosecute the same and to do all other acts, deeds and things. It is held that the suit has been instituted and plaint signed and verified by a duly authorised person.

9. The relevant documents filed by the plaintiff have been marked as Exhibits P-1 to P-38. Exhibit P1 is the Demand Promissory Note for Rs. 85,000/- dated September 5, 1980 signed by the defendants. Exhibit P-2 is the Agreement of Hypothecation dated September 5, 1980 whereby the raw material, finished and semi-finished goods purchased or to be purchased have been hypothecated as security for the repayment of the loan, interest and other charges. Exhibit P-3 is another Demand Promissory Note dated July 1,3, 1981 for Rs. 15,000/- and Exhibit P-4 is the Agreement of Hypothecation duly signed by the defendants. Exhibit P-5 is another Demand Promissory Note dated 1.3th July, 1981 for Rs. 75,000/-. Exhibit P-6 is the Hypothecation of Assets to secure Term Loans for Rs. 75,000/-. Exhibits P-7, P-8 and P-9 are the Agreements of Guarantee. Exhibits P-39 and P-40 are the Statements of Account. Exhibit P-22 is the Demand Notice dated May 18, 1985 sent to the defendants through Advocate. The postal receipts and acknowledgment cards are Exhibits P-23 to P-36.

10. In his affidavit filed by way of evidence Mr. R.C. Sharma, Chief Manager, Punjab National Bank, Rajouri Garden, New Delhi has stated in paragraphs 8 and 9 as follows:

"8. That after institution of the suit the plaintiff Bank received the following amount towards the Cash Credit Account No. 24 on the various dates fully detailed hereunder:

Date Amount received

28.2.1987 Rs. 1,36,000.00

3.3.1987 Rs. 14,000.00

10.3.1987 Rs. 1,016.56

1.2.1988 Rs. 2,000.00

12.3.1988 Rs. 2,000.00

26.4.1988 Rs. 2,000.00

7.6.1988 Rs. 15,000.00

Rs. 1,72,016.56

9. That after adjusting the aforesaid amount of Rs. 1,72,016.56 now a sum of Rs. 2079.72 is due and payable by the defendants 1 to 8 jointly and severally and also personally liable to pay in respect of cash credit account No. 24.

It is further submitted that the plaintiff bank is further entitled to recover the interest on the contractual rate of 13% per annum from the date of filing of the suit w.e.f. 16.12.1985 to the date of decree and till the date of realisation of the decretal amount on the reducing balance.

Similarly, the plaintiff has also received a sum of Rs. 29,000/- towards term loan No. 36/80 fully detailed hereunder:

Date Amount received

19.6.1988 Rs. 4,000.00

9.11.1988 Rs. 25,000.00

Rs. 29,000.00

After adjusting the said sum of Rs. 29,000/- the defendants 1 and 2 are jointly and severally liable to pay Rs. 64,925.80 in the term loan account.

The defendants 1 to 8 are further liable to pay interest from the date of filing of the suit w.e.f. 16.12.1985 till the date of decree and till the realisation of the decretal amount @13.5 per cent per annum.

The Plaintiff Bank has also paid the guarantee fee in respect of the account of defendant No. 1 pertaining to the year 1990 to 1993 totalling to a sum of Rs. 5025.40 which has not been debited to the protested account of the defendant No. 1 but has been entered in the account of other charge, which is recoverable from the defendants. The Statement of Accounts showing the payments received by the plaintiff Bank in the aforesaid two facilities of Cash Credit and Term Loan are annexed hereto."

11. It is further submitted in the affidavit that now a total balance outstanding amount of Rs. 72,030.92 in respect of the loan facilities of Cash Credit (Hypothecation) and Term Loan is due. The perusal of the documents placed on record as well as the evidence produced by way of affidavit by the plaintiff leave no manner of doubt that the facilities were enjoyed and defendants are liable to pay the amount of Rs. 72,030.92.

12. In view of the above, I pass a decree in the sum of Rs. 72,030.92 with costs in favour of the plaintiff and against the defendants with pendents lite and future interest at the rate of 12 per cent per annum from the date of institution of suit till realisation.