State Bank Of India vs Suresh Kumar And Ors.
1995 Latest Caselaw 216 Del

JUDGMENT

Usha Mehra, J.

(1) State Bank of India filed this suit for the recovery of Rs.1,36,123.00 against Shri Suresh Kumar and others based on the facts that defendantNo. 1 Suresh Kumar borrowed money from the plaintiff bank for the purchase ofa Tata open truck model 1980. On the request of defendant No. 1 and on the guarantee being furnished by defendant No. 2, a Medium Term Loan of Rs.l,45,000.00 was sanctioned favoring defendant No. 1. The said truck after purchase was to be hypothecated with the bank as security. The bank was to charge interest at the rate of 4% per annum below State Bank of India's Advance Rate with a minimum of 12.5% per annum. The said truck was comprehensively ensured with defendant No. 3 i.e. the New India Assurance Co. Ltd. It was insured in the name of defendant No. 1. and the plaintiff bank was shown as the pledgee of the vehicle as interested party. Defendant No. 2 pledged his special term deposit receipt forRs. 45,000 / - with the bank. It was duly discharged in favor of the plaintiff creating a lien in favor of the bank. Usual and necessary banking documents were got executed from the defendants. Term Loan was to be repaid in monthly Installments of Rs. 3,625/- each. But the defendants failed to adhere to the same. On or about1st week of November, 1981, defendant No. 1 reported that the truck had beenstolen/lost. An Fir was lodged with Police Station Mehrauli, New Delhi. Claim was lodged with defendant No. 3 for the reimbursement of the loss suffered on account of truck in ques on being stolen. Defendant No. 3 refused to make payment inspite of all formalities having been completed. Police Station Mehrauli issued 'No Trace Certificate' about the lose of this truck. This was communicated to defendant No. 3. The defendant No. 3 did not settle the claim nor the Medium Term Loan has been returned by the defendants 1 and 2. Hence the plaintiff after due notice adjusted and appropriated the Special Term Deposit deposited by defendant No. 2 and for the balance outstanding amount, the present suit has beenfiled.

(2) Defendants 1 and 2 in their written statement took the plea that the entire responsibility for making payment was that of the Insurance Company as the truck was insured with the said defendant. After it was declared by the police not traceable and it having been lost, defendant No. 3 being an Insurance Company became liable to make payment. The authority of the person who filed the suit has been denied. It is their case that the plaintiff bank could not encash the Special Term Deposit Receipt amounting to Rs. 45,000/- because the said defendant was not liable in any manner for the loss of the truck.

(3) The Insurance Company defendant No. 3 has challenged the locus stand of the plaintiff bank on the ground that there did not exist any privity of contract.Moreover, defendant No. 3 stood discharged as soon as the claim preferred by defendant No. 1 was withdrawn by him. Defendant No. 1 being a policy holder discharged the Insurance Company by withdrawing the claim of the loss. As the claim stood withdrawn by the policy holder, the Insurance Company stood absolved from the liability.

(4) On the pleadings of the parties, the following issues were framed : 1. Whether the plaint has been signed,verified and the suit instituted bya duly authorised person?2. Whether the defendant No. 3 is liable to pay any amount? If so, howmuch?3. What is the effect of withdrawal of the claim by defendant No. 1against defendant No. 3?4. Whether the suit is bad for mis-joinder of parties?5. To what amount is the plaintiff entitled and from which of the defendants?6. Relief.

(5) I have heard Mr.H.C.Dhall, Advocate for the plaintiff and Mr.J.P.Gupta,Advocate for defendant No. 1. After perusing the documentary and oral evidence produced by the respective parties as well as after hearing their submissions made at the bar, my considered decision on the above issues are as follow.Issue No. 1:

(6) The burden to prove this issue was on the plaintiff. To my mind, the plaintiff bank has discharged the same by the testimony of PW. I Mr. K.K. Chachra,Branch Manager. He testified that vide a Notification dated 28th December,1985exhibit PW.1/l he was authorised to sign, verify and institute this suit and also to issue power of attorney in favor of the Counsel. By virtue of exhibit PW. I/l he was competent to engage a lawyer and institute the suit This part of his testimony has not remained unrebutted on the record. Mr. Gupta's contention that authorisation could not be retrospective, to my mind, has no force. Reading of exhibit PW. 1 /1shows that the power to sign, verify and institute the suit vested with the BranchManagers. Mr. K.K. Chachra was working as Branch Manager since August, 1982.The fact that Branch Managers were competent to institute the suit was notified vide exhibit PW. I/l. Because the Notification appeared subsequently does not me an that being Branch Manager he had no authority to institute the suit. Rather the Notification exhibit PW. 1/2 empowered the Branch Managers to institute the suit and engage the lawyer. Harmonious reading of exhibit PW.1/1 and PW.I/2would lead to the conclusion that Mr. K.K. Chachra being Branch Manager was competent to sign, verify and institute the suit. Hence, this objection is notsustainable. The issue is accordingly decided in favor of the plaintiff and against the defendants.Issues 2,3 & 4:

(7) These issues being inter-connected, therefore, taken up together. Burden of ese issues was on defendant No-3. But no one appeared on behalf of Insurance Company to discharge the burden. It was for the Insurance Company to prove that the defendant No. 1 withdrew the claim after having lodged the same. No such withdrawal letter alleged to have been issued by defendant No. 1 thereby withdrawing the claim has been produced. On the contrary, the plaintiff by the testimony of Mr. K.K. Chachra, PW.I has proved that the vehicle in question was insured with defendant No. 3. Vide Insurance cover Exhibit P.7 defendant No. 3insured the risk and loss of this truck. He also proved that at the time of granting Medium Term Loan, a letter was obtained from defendant No. 1 containing particulars of the vehicle. The same is Exhibit P.3. This letter contained all the terms and conditions agreed to between the parties. The truck in question was inspected& got verified because it was a second sale. In case of second sale, verification isnecessary. Verification Report is Exhibit P.4. These documents clearly show that the vehicle was in existence at the time term loan was given. The truck in question was available at the time it was got insured by defendant No. 1 from defendant No.3. It has been proved on record that the truck was lost. After lodging Fir, the defendant No. 1 preferred claim on the Insurance Company. Bank also pursued the matter with the Insurance Company as it had interest in the truck. Copies of the letters exchanged between the plaintiff bank and defendant No. 3 have been proved on record as Exhibits PW.I/3 and PW.I/5 to PW.I/8. The Insurance Company vide Exhibit PW.I/4 informed the plaintiff that the matter was under consideration. It has been proved that the bank had first charge over the truck. Shri B.R.Sharma, another Branch Manager of the bank appearing as PW.2 corroborated the testimony of Mr. K.K. Chachra, PW.I. He stated that the loan for the purchase of the truck was given. PW.2 was present at the time the truck was sold by Shri Kanwar Lal vide Exhibit PW.2 /1. Loan amount was paid directly to Shri KanwarLal the seller of the truck. This was done at the instance of defendant No. 1. He further testified that he had seen the truck at that time. In reply to the question put in cross examination by Mr. S.M. Suri, Counsel for defendant No. 3, this witness reiterated that the bank had a charge on the truck. It was the bank who got the insurance amount paid through defendant No. 1. To another question put by Mr.Suri, Counsel for defendant No. 3 as to whether the bank had lodged any claim on the Insurance Company after the loss of the vehicle, this witness, PW.2 answered in the affirmative. He stated that the bank did lodge the claim and the said claim has not been paid by the Insurance Company. He further testified that even the defendant No. 1 also lodged claim with defendant No. 3. From the set of questions asked in the cross examination from Mr. B.R. Sharma, PW.2, it clearly emerges that defendant No. 3 had not put its defense as set up in the written statement. In the written statement, defendant No. 3 had taken the plea that defendant No. 1withdrew the claim and thus absolved the Insurance Company. In fact there is no cross examination on this aspect of the matter to PW.2. So far as Shri Suresh Kumar,DW.I is concerned, he also proved on record that he lodged the claim with defendant No. 3 after the truck was stolen and that he never withdrew the claim from defendant No. 3. The suggestion that defendant No. 1 withdrew the claim has been vehemently denied by defendant No. 1 when he appeared as his own witness.,On the contrary, defendant No. 1 stated that the Insurance Company in fact sanctioned the claim of Rs. 1,80,000/-. He was assured that the amount would be deposited by the Insurance Company directly with the plaintiff bank. He denied that he ever gave in writing to withdraw the claim. Defendant No. 1 could not be shaken by the cross examination rather his testimony that he never withdrew the claim has remained unshaken on record. It was for defendant No. 3 to have produced the letter alleged to have been written by defendant No. 1 asking to withdraw the claim. But no such writing has been produced nor confronted the same to defendant No. 1 when he appeared as his own witness. The defendant No.3 has not produced any witness to prove that defendant No. 1 withdrew his claim at a later stage. From the unrebutted and uncontroverted testimony of the plaintiff's witnesses and that of defendant No. 1, it is fully established that defendant No. 1 did not withdraw his claim at any stage. Hence, the Insurance Company is liable to pay the claim. Insurance Company's liability is joint andseverally. The question that there was no privity of contract between the plaintiff bank and Insurance Company is without merits. Plaintiff bank had interest and first charge over the vehicle in question. This fact finds special mention on ExhibitP.7 where it has been stated that State Bank of India, Khera Khurd, Delhi wasinterested. Insurance Company was thus fully aware of the fact that truck in question was pledged with the bank and, therefore, bank's interest. The plaintiff bank accordingly lodged the claim with the defendant No. 3. This has not beendenied. The only defense taken by defendant No.3 that defendant No. 1 withdrew his claim has not been proved on record. Hence to my mind, the defendant No. 3has miserably failed to discharge the burden of these issues. For the above reasons,these issues are decided against defendant No. 3. As the vehicle in question was insured with the defendant No. 3, therefore, defendant No. 3 i.e. Insurance Company is a proper party.

(8) The plaintiff by the testimony of Mr. K.K. Chachra, PW.1 has proved that Medium Term Loan was granted to defendant No. 1 vide agreement exhibit P.I.This Term Loan was granted against the hypothecation of the Truck in question.Defendant No. 2 stood guarantee by executing a Deed of Guarantee Exhibit P.5.Defendant No. 1 also executed an affidavit Exhibit P.6. He not only executed thisaffidavit, but also signed the balance confirmation statement vide Exhibit P.8. As per exhibit P.8, an amount of Rs. 1,79,032.92 paise was due as on 5th October, 1983.Legal notice dated 28th February,1984 has been proved as Exhibit PW.1/16whereby an amount of Rs. 1,84,784.07 paise was claimed which amount included interest due on that date. Mr. B.R. Sharma, PW.2 proved exhibits P. 1 to P.3, P.5 andP.6 which according to him were executed in his presence. These documents were signed by defendants 1 and 2 in his presence. Defendant No. 1, Shri Suresh Kumar admitted having taken the Medium Term Loan from the bank for the purchase of this truck. It has also come on record that the truck in question was insured and the insurance amount was paid by the bank on behalf of defendant No. 1. It has also not been disputed that the truck in question was stolen while in custody of defendant No. 1. Claim was lodged by the defendant No. 1 with the Insurance Company which claim was never withdrawn by defendant No. 1. Insurance cover Exhibit P.7 clearly indicates that in case of theft or the truck being stolen. Insurance Company would be liable to pay the insured amount. It is an admitted fact on record that the truck was insured for Rs. 2 lakhs and the insurance amount has not been paid either to defendant No. 1 or to the interested party i.e. the bank. From these admitted facts, the only conclusion which can be arrived at is, that Insurance Company Along with other defendants would be liable jointly and severally. The defendantNo. 1 being borrower and defendant No. 2 being guarantor. The plaintiff bank being interested in the truck as the same was pledged with the bank and the bank had first charge over the same, hence the plaintiff bank is entitled to recover this amount from defendant No. 3 also. Accordingly, I decree the suit for a sum ofRs. 1,36,123.00 with costs in favor of the plaintiff bank and against the defendants.They shall be jointly and severally liable to pay the decretal amount Along with simple interest at the rate of 12% per annum from the date of institution of the suit till realisation.