State Bank Of Bikaner And Jaipur vs Subhash Chander Jain And Ors.
1994 Latest Caselaw 718 Del

JUDGMENT

P.K. Bahri, J.

(1) This is a suit for recovery of Rs.1,93,010/25P. The case set up by the plaintiff- Bank, in brief, is that Subhash Chander Jain was the sole proprietor of M/s.Swastik Paper Convertors-defendant No. 1 and he had approached the plaintiff-Bank for grant of a credit facility known as Cash Credit Pledge against the security and pledge of his stocks consisting of papers and on January 2, 1980, and the said facility was granted to defendant No.1 to the extent of Rs.75,000.00 as per the document executed by him and on that very day defendant No.1 had executed a document of undertaking and handed over the keys of the padlocks fixed on the door of the godown of defendant No.1 situated in the factory premises of Village Mauzpur near Gonda, Shahdara-Delhi where the pledged goods stood stored. Defendant No.1 had executed another document of undertaking to preserve the safety of the stock lying in the open compound of the factory premises as well and had dispensed with the necessity of posting of any chowkidar by the plaintiff-Bank for the safe custody of the pledged stocks.

(2) It is averred in the plaint that defendant No.1 failed to give any list of the pledged goods at any time and at no point of time the plaintiff-Bank came into effective control of the pledged goods. Defendant No.1 had agreed to pay interest @ 3% per annum below the State Bank advance rate with a minimum of 13-1/2% per annum to be calculated on the daily balances in the account of defendant No.1 to be debited in the account quarterly. As defendant No.1 has failed to adjust the account despite repeated reminders, the amount in the suit is stated to be due. Defendant No.1 is stated to have executed balance confirmations from time to time details of which have been given in para 7 of the plaint.

(3) Defendant No.1 is stated to have also obtained a term loan of Rs.40,000.00 for purchasing machinery and executed the term loan agreement dated January 2, 1980, agreeing that the machinery to be purchased would remain charged with the plaintiff-Bank and was to pay 13% per annum interest initially and 14% per annum interest later on. Rs.40,000.00 were stated to have been paid to M/s.Jandoo Engineering Works from whom defendant No.1 purchased the machinery which was of the value of Rs.58,850.00 as per its bill. The balance amount of Rs.l8,850.00 was paid by defendant No.1 himself. It is averred that Rs.74,270/80P were due in the said account from defendant No.1 and defendant No.1 has been making acknowledgement of the balances in that account also from time to time as men- tioned in para 10 of the plaint.

(4) Moti Lal Jain, at the request of defendant No.1, stood as guarantor for due payments of the amount due to the. plaintiff-Bank in respect of the aforesaid two facilities and had executed documents Demand Promissory Note in the sum of Rs.l,15,000.00 , Dpn delivery letter, letter of continuity, letter of waiver, agreement of guarantee in that respect.

(5) It is also averred that defendant No.1 executed revival letter dated August 3, 1983 whereby he agreed to pay Rs.l,15,000.00 due at that time from defendant No.1. Moti Lal Jain had expired on November 28, 1980. Defendants 1, 3 & 4 are the sons of Moti Lal Jain and defendant No.2 is the widow. It is averred that the estate inherited by them is liable for payment of the amount in this suit as the same was recoverable from their predecessor who has given guarantee for the loan taken by defendant No.1.

(6) Defendant No.1 has suffered ex-parte proceedings. Defendants 2 to 4 have contested the suit and have pledged that the suit against them is barred by time. It is also pleaded that guarantee deed, if any, executed by Moti Lal Jain is no longer surviving for any action on the part of the plaintiff-Bank after the death of Moti Lal Jain and thus, defendants 2 to 4 are not liable to the plaintiff-Bank on the basis of the guarantee deed executed by Moti Lal Jain. It was also pleaded that the documents executed by defendant No.1 acknowledging the amount due to the plaintiff-Bank from time to time after the death of Moti Lal Jain are not binding on defendants 2 to 4 for purposes of limitation. It is also pleaded that the suit could not have been brought against defendants 2 to 4 before the plaintiff had got sold the hypothecated goods and pledged machinery. Another plea taken is that the suit is bad for non-joinder of the parties as some of the legal representatives of Moti Lal Jain have not been imp leaded as defendants.

(7) A plea is also taken that the suit is not instituted by any duly authorised person on behalf of the plaintiff-Bank and that the plaintiff was not'entitled to charge interest at any rate higher than 7- 1/2% per annum.

(8) In replication the pleas taken by the defendants were controverter and the pleas raised in the plaint were reiterated. It was pleaded that as the estate of Moti Lal Jain is being represented by the defendants, the suit is not bad for omission to implead any other legal representative of Moti Lal Jain. Following issues were framed:-

1. Whether the plaint in the suit has been signed and verified and the suit has been instituted by a duly authorised person? 2. Whether the plaintiff has no cause of action against defendants 2 to 4? 3. Whether the suit is within time? 4. Whether the suit is bad for non-joinder or necessary parties? 5. Whether the plaintiff is entitled to charge interest? If so, at what rate? 6.To what amount is the plaintiff entitled to recover and from which of the defendants? 7. Relief.

Issue No.1

(9) Pw 1, who is working as Manager of the plaintiff-Bank at Connaught Place, deposed that in 1980 he was working as accountant in the Barakhamba Branch of the plaintiff-Bank and that defendant No.1 had opened the account in the said branch of the Bank. He identified the signatures of R.K. Soin, the then Branch Manager, on the plaint as well as on the Power of Attorney executed in favor of counsel for the plaintiff. He produced on record a copy of the gazette notification dated October 22, 1978, Ex.PWI/l. The learned counsel for the plaintiff has made reference to Section 63 of the State Bank of India (Subsidiary Banks) Act, 1959 and Regulation 55 of the Subsdiary Banks General Regulations, 1959, in support of his contention that Mr. Soin who had signed, verified the plaint and had executed the power of attorney in favor of counsel for the plaintiff had the due authority not only to sign and verify the plaint as required by Order Xxix Rule I of the Code of Civil Procedure but had also the authority to institute the suit on behalf of the plaintiff.

(10) The learned counsel for the defendants, on the other hand, has argued that the aforesaid notification proved by the plaintiff only shows that Mr.Soin had the authority only to sign and verify the plaint but had not been given any authority to institute the suit. He has urged that Mr.Soin may be a competent person as contemplated by Order Xxix Rule I of the Code of Civil Procedure for signing and verifying the plaint but he would not be competent to institute the suit on behalf of the plaintiff inasmuch as no Power of Attorney admittedly has been executed by the plaintiff-Bank in favor of Mr.Soin authorising him to institute the suit on behalf of the plaintiff. He has also urged that no resolution has been passed by the Board of Directors of the plaintiff-Bank authorising Mr.Soin to institute this suit on behalf of the plaintiff-Bank.

(11) His true that mere competency of a person to sign. and verify the plaint does not vest him the power to institute the suit on behalf of the plaintiff. But in the present case the notification Ex.PW1/1 not only gives power to Mr.Soin to sign and verify the plaint but it also gives power to him to sign other documents and one of the documents signed by Mr.Soin is the power of attorney in favor of counsel for the plaintiff when he had been given an authority to sign the documents on behalf of the plaintiff. If that is so, counsel for the plaintiff being validly appointed on behalf of the plaintiff could institute the suit on behalf of the plaintiff on the basis of the power of attorney signed by Mr.Soin on behalf of the plaintiff in favor of the counsel.

(12) Similar question arose for decision in the case of State Bank of India Vs Sahni finance Co. & Others, 1982(52) Company Cases 430. Similar provisions appearing in the State Bank of India Act and the regulations framed under the said Act came up for consideration and this court held that where the power has been given to a person on behalf of the Bank for signing not only the plaint but other documents, then the said power would include executing of a power of attorney in favor of the counsel on behalf of the plaintiff. That would entitle the said person to institute the suit on behalf of the plaintiff.

(13) The Punjab & Haryana High Court in the case of State Bank of India Vs K.Art Printing Press, , while construing the similar regulations 76 & 77 framed by the State Bank of India, held that the Branch Manager has the authority not only to sign the pleadings and verify them but has the authority to sign the Vakalatnama to authorise an Advocate to file suit or to file the same himself.

(14) The learned counsel for the defendants has, however, placed reliance on a judgment of this Court given in M/s.Mibro Ltd. Vs National Insurance Co., 1991 Delhi 25. In this judgment the provisions of Order Xxix Rule 1 of the Code of Civil Procedure have been interpreted and , was laid down that Order Xxix Rule I does not authorise persons mentioned therein to institute suits on behalf of the company. It only authorises them to sign and verify the pleadings on behalf of the company and it is well settled that under Section 291 of the Companies Act except where express provision is made that the powers of a company in respect of a particular matter are to be exercised by the company in general meeting and in all other cases by the Board of Directors and unless the power to institute the suit is specifically conferred on a particular director, the said director has no authority to institute a suit on behalf of the company.

(15) This judgment is not applicable to the present case inasmuch as the provisions of the regulations framed under the State Bank of India Act or under the Subsidiary Banks General Regulations or provisions of the State Bank of India or of the State Bank (Subsidiary Banks) Act have not come up for consideration in the said case.

(16) Order Iii Rule I of the Code of Civil Procedure provides that any appearance, application, or act in or to any court required or authorised by law can be made or done by the party in person or by his recognised agent or by a pleader appearing, applying or acting, as the case may be, on his behalf. Keeping in view the aforesaid provisions, it is evident that once it is held that Mr. Soin had the authority on behalf of the plaintiff-Bank to sign any document besides being authorised to sign and verify the pleadings Mr.Soin had the authority to engage a counsel and sign the power of attorney in favor of such a counsel on behalf of the plaintiff and in view of the provisions of Order Iii Rule I of the Code of Civil Procedure the counsel duly engaged on behalf of the plaintiff has the authority to institute the suit on behalf of the plaintiff. So, I hold that the plaint has been signed and verified and the suit has been instituted by a duly authorised person on behalf of the plaintiff-Bank. This issue is decided in favor of the plaintiff. Issue No.2

(17) The learned counsel for defendants 2-4 has contended that Moti Lal Jain, predecessor-in-interest of the defendants, had died on November 28, 1980 and thus, the guarantee, if any, given by him in respect of the loan in question had lapsed and there is no cause of action for filing the suit available to the plaintiff against defendants 2-4. Public Witness 1 has proved on record the various documents executed by Moti Lal Jain which are Ex.P1 letter of continuity, Ex.P2 Demand Promissory Note, Ex.P3 letter in favor of the bank and Ex.P4 letter of guarantee. These documents do indicate that Moti Lal Jam has given a continuing guarantee in respect of the said loan taken by defendant No. I from the bank. Letter of guarantee is dated August 25, 1980. It shows that it has been executed by Moti Lal Jain not only to bind himself but also to bind his heirs and legal representatives. Clause 2 of the document shows that it was a continuing guarantee and the same shall not be wholly or partially discharged by any partial payment or any fluctuation or settlement of accounts or the existence of credit balances in the account any time. It was also mentioned in clause 13 that any notice of demand or otherwise hereunder shall be sufficiently given if delivered by hand or left at or sent by registered post to the guarantor. Section 129 of the Contract Act lays down as to what could be termed as a continuing guarantee, a guarantee which extends to a series of transaction is called as a continuing guarantee and Section 131 lays down that the death of a-surety operates in the absence of any contract to the contrary as are vocation of the continuing guarantee so far as regards future transactions. So, the death of Moti Lal Jain in the present case, who had given the continuing guarantee, would not wipe out the liabilities incurred in the loan account of defendant No.1 prior to his death and the guarantee would not be enforceable in respect of any future transactions. The present case pertains to the liability incurred by defendant No.1 prior to the death of Moti Lal Jain. Hence; defendants 2 to 4 are liable for such liability and there exists a cause of action for filing the suit against defendants 2 to 4.

(18) It is contended on behalf of defendants 2 to 4 that defendants 2 to 4 have not inherited any estate from Moti Lal Jain and thus, there is no cause of action for filing the suit against them. The question whether any decree which may be passed in this case against the estate inherited by defendants 2 to 4 could be executed or not could be determined only in execution proceedings. The decree is not to be passed against the persons of defendants 2 to 4 and is to be realised from the estate, if any, inherited by defendants 2 to 4. So, I hold that there exists cause of action for filing the suit against these defendants. Issue is decided against the defendants. Issue No.3

(19) The suit has been filed on March 18,1985. Public Witness 1 has proved on record various balance confirmations executed by defendant No.1 in these ac- counts. They are Ex.PW 1/8 dated July 5, 1982, Ex.PW1/9 dated January 24,1983, Ex.PW1/11 January 12, 1984, Ex.PW1/15 dated January 24, 1983, Ex.PW 1/16 dated August 3, 1983 and Ex.PW1/17 dated January 12, 1984. For invoking the bank guarantee a notice had been sent to defendants on June 30, 1983, copy of which is Ex.PW1/22. The balance confirmations executed by defendant No.1, the main borrower, makes the suit within limitation. The liability of the guarantor was- co-extensive with the liability of the borrower. The liability of defendants 2 to 4 came to be enforced. by the bank by giving a notice in 1983. So, the limitation as required by Article 55 of the Limitation Act commenced against defendants 2 to 4 for filing the suit from the date of the service of the notice invoking the bank guarantee and the suit having been filed within three years from that date against defendants 2 to 4 is also within limitation. I decide this issue in favor of the plaintiff. Issue No.4

(20) It has been contended by the learned counsel for the defendants that there are other legal heirs of Moti Lal Jain who have not been imp leaded as co- defendants and so the suit is bad for non-joinder of the necessary parties. The estate of Moti Lal Jain is well represented by the defendants. So, the mere omission to implead other legal heirs of Moti Lal Jain as codefendants does not make the suit bad for non- joinder of the necessary parties. Issue is decided against the defendants. Issues Nos.5 & 6

(21) Issues 5 & 6 would be taken up together.

(22) From the statements of account proved on the record Ex.PW1/7 and PW1/14, it is evident that the amount claimed in this suit i.e. Rs.1,93,010/25P is due from the defendants. It is not the case of the defendants that the plaintiff has charged any rate of interest which is not in consonance with the terms agreed upon between the parties or is in excess of the rate of interest fixed by the Reserve Bank of India from time to time in respect of the credit facilities in question. So, I hold. that the plaintiff is entitled to recover the sum of Rs.l,93,010/25P Along with interest @ 19% per annum from the date of the suit till realisation. Issue No. 7

(23) Suit is liable to be decreed.

(24) I decree the suit for recovery of Rs.l,93,010/25P with costs and interest pendente lite @ 19% per annum from the date of the suit till realisation in favor of the plaintiff and against the defendants but as far as defendants 2 to 4 are concerned, the decree can be executed against them only from the estate which they might have inherited from Moti Lal Jain.