Punjab National Bank vs Kusum Saxena
1997 Latest Caselaw 1061 Del

JUDGMENT

C.M. Nayar, J.

(1) The plaintiff has filed the present suit against the defendants for recovery of a sum of Rs. 1,02,534.60 along with interest @ 12% per annum with costs.

(2) The plaintiff is a body corporate constituted under the Banking companies (Acquisition and Transfer of Undertakings) Act No. 5 of 1970, having its Head Office at 5, Parliament Street, New Delhi and one of its branches at Jhandewalan Extension, Ram Tirath Nagar, New Delhi, Shri H.C. Haquir is the Principal officer and manager of the plaintiff Bank, working at its branch at Jhandewalan Extension, Ram Tirath Nagar New Delhi and is conversant with the facts of the case. He is authorised by a general power of attorney to sign and verify pleadings, to institute suits and also to do all other things necessary for the prosecution of the case.

(3) Defendant No. 1 is the sole proprietor of defendant no. 2 and is carrying on the business of printing in the name and style of M/s. Gandharva Printers and has its factory at Shed no. 111, Okhla Phase-II Okhla Industrial Estate, New Delhi and its office at 9-A, Babar Road, New Delhi. Defendant no. 1 is the principal borrower for herself and defendant no. 2 and defendant no. 3 is the guarantor who has guaranteed the repayment of the loans advanced to defendants 1 and 2. Defendant no. 1 approached the plaintiff Bank for grant of financial assistance in April 1976 and requested for a Term Loan facility for purchase of printing machinery, typewriter etc. against the hypothecation of the said printing machinery typewriter etc. Defendant no. 1 also requested at the same time for Cash Credit facility against the security of their stocks of paper which were to be hypothecated by them with the plaintiff Bank.

(4) It is alleged that defendant no. 1 opened a Bank account in the name of defendanno. 2 and was granted a Term Loan facility of Rs. 34,341.53 on 4-5-1976 on account of the purchase of machinery. The said sum of Rs. 34,341.53 was transferred to the account of defendant no. 2 and in consideration of the said facility in the form of Term Loan having been granted, defendant no. 1 for herself and as proprietor of defendant no. 2 signed a Deed of Hypothecation dated May 4, 1976 to secure the said Term Loan and thereby Hypothecated the machinery i.e. Treadle 13 X 19. Treadle 11 X 16, Cutting Machine 32", Stitching Machine, Perforating Machine, Rule Cutting, Proof Press etc. in favour of the plaintiff bank. Defendant no. 1 had also requested for grant of cash credit facility and the said facility was granted to defendants 1 and 2 on June 25, 1976 when another account was opened by defendant no. 1 in the name of defendant no. 2. A cash credit (hypothecation) facility in the sum of Rs. 20,000.00 was granted to defendants 1 and 2 and in consideration of the said facility having been granted, defendant No. 1 herself and as proprietor of defendant no. 2 signed a Demand Promissory Note for Rs. 20,000.00 promising to pay to the plaintiff the said amount of Rs. 20,000.00 with interest at the rate of 3% above the Reserve Bank of India rate subject to a minimum rate of 12% per annum with monthly rests.

(5) Defendants 1 and 2 further hypothecated their stocks of paper vide a deed of hypothecation dated 25th June, 1976. Defendant no. 1 furnished the guarantee of defendant no. 3 for payment of all the facilities granted to her in the name of defendant no. 2. Defendant no. 3 is the guarantor and his local address as given by him is c/o Ramu Art Press, Ram Nagar, New Delhi. The said defendant is believed to have now moved to Hissar and he is shown as defendant No. 3A at the Hissar address which is c/o M/s Dwarka Parshad & Sons, Booksellers and Stationers, Moti Bazar, Hissar. Defendant no. 3 signed and executed an agreement of guarantee whereby he guaranteed the repayment of the Term Loan and the Cash Credit facility granted to defendant No. 1 in the name of defendant No. 2 and, as such, defendant No. 3 is also liable to repay the same. Defendant no. 1 had authorised the plaintiff to get the machinery and stocks of defendant no. 2 insured from time to time on her account and as such the stocks and machinery were got insured by the plaintiff from time to time and the premium, therefore, were debited to the account of defendant no. 2. Defendant no. 1 had undertaken to repay the Term Loan in the monthly instalments of Rs. 1000.00 but has failed to do so. Further facts are mentioned in paras 14, 15, 16 & 17 of the plaint which read as under:

"14.Presently a sum of Rs. 53,824.57 is due from the defendants in the term loan account as on January 23, 1980 and a sum of Rs. 48,710.23 is due from the defendants in the Cash Credit (hypothecation) account as on January 23, 1980. The amounts withdrawn by defendants 1 and 2 in the above (two accounts were debited in the respective accounts and amounts deposited in the said accounts by the defendants were credited in the respective accounts from time to time. The above balances of Rs. 53,824.57 and Rs. 48,710.23 standing to the debit of the accounts of defendant no. 2 have been derived from the respective books of account maintained by the plaintiff bank in the usual and ordinary course of its business. 15.The defendants have failed to pay the aforesaid amount despite notices of demand sent to them. 16.Defendant no. 1 signed a balance confirmation letter dated August 12, 1976 with respect to debit balance in the cash credit account. Defendant no. 1 again signed another balance confirmation letter dated December 15, 1976 with respect to term loan. Thereafter on 25-1-1977 defendant No. 1 signed two balance confirmation letters as sole proprietor of defendant No. 2 one in respect of the cash credit account No. 86 and the other in respect of the term loan account No. 82/76 thereby acknowledging her liability in favour of the plaintiff bank. Defendant no. 3 is liable under the agreement of guarantee executed by him and all acknowledgements of debt by the principal borrower are taken as acknowledgement by the guarantor also. 17.The defendants are liable to pay interest at the rate of 3% over the Reserve Bank of India rate with a minimum of 12% and at present the Reserve Bank of India rate being 9% the defendants are liable to pay interest at the rate of 12% per annum.

(6) It is further stated that the cause of action arose in favour of the plaintiff on 4-5-1976 and 25-6-1976 when the Term Loan and the Cash Credit (hypothecation) facilities were respectively granted to defendants 1 and 2 and when defendant no. 3 also signed the agreement of guarantee for repayment or both the facilities. It is alleged that the cause of action further arose on August 12, 1976, December 15, 1976 and January 25, 1977 when the defendants acknowledged their liability to pay to the plaintiff and confirmed the amount due from them to the plaintiff. The cause of action also arose from month to month when the defendants were to pay the term loan amount in monthly instalments and failed to pay the same. The cause of action lastly arose on 17-1-80 when telegraphic notices were sent to the defendants demanding from them the repayment of the aforesaid loans and confirmity copies whereof were also sent to the defendants by registered A.D. on 19-1-1980.

(7) Written statement has been filed by defendants 1 and 2 thereby controverting the allegations made in the plaint. Plaintiff filed its replication reiterating the averments as made in the plaint.

(8) The learned counsel for defendants 1 and 2 states that he has received no instructions in the matter for the last three years and he seeks leave to withdraw from the present case. The counsel for defendants 1 and 2 is, permitted to withdraw from the proceedings in the facts and circumstances as placed before the Court. The defendants are, accordingly, directed to be proceeded against ex parte.

(9) On the pleadings of the parties, the following issues were framed:

1.HASthe suit been instituted by a duly authorised person, and the plaint signed and verified by such person? 2.What amounts are due to the plaintiff from the defendants under the accounts in dispute? 3.Had plaintiff taken any insurance in respect of machinery and stock of defendant no. 2? If so, was plaintiff competent to do so, and are the defendants liable for the premiums thereof? 4.Is the suit barred by time? 5.Whether the plaintiff did not honour any commitments made to the defendants? If so, to what effect? 6.Is the suit bad for misjoinder of causes of action? 7.Relief".

(10) The plaintiff has examined Shri H.C. Haqir, who has signed and verified the plaint. He has also produced the original Power of Attorney, copy whereof has already been filed and is exhibited as Ex.P/6. There is nothing in the cross examination to discredit the statement of this witness in this regard and, as such, the issue is decided in favour of the plaintiff. Issue NO. 2

(11) The second issue is as to what amounts are due to the plaintiff from the defendants. It is stated in para 6 of the plaint that the plaintiff granted a Term Loan facility on 4th May, 1976 in the sum of Rs. 34,341.53 and Cash Credit (Hypothecation) facility in the sum of Rs. 20,000.00 on June 25, 1976. In consideration of the grant of these facilities, which were duly availed of by defendant Nos. 1 and 2, the said defendants had also signed Deed of Hypothecation dated 4th May 1976 with respect to the Term Loan and a Demand Promissory Note for Rs. 20,000.00 with respect to the Cash Credit facility. It is stated in para 8 of the plaint that defendants 1 and 2 had hypothecated their stocks vide Deed of Hypothecation dated 25th June, 1976. Defendants 1 and 2 have admitted the contents of the plaint as substantially correct in paras 6, 7 and 8 of the written statement. During the course of admission/denial, defendants 1 and 2 have admitted the hypothecation Deeds with respect to the Term Loan as well as the Cash Credit facilities as also the Promissory Notes. These documents have been marked as Exhibits P/1 to P/5. Exhibit P/3 is the Transfer Voucher whereby Rs. 34,341.53 was transferred to the Term Loan Account of Defendants 1 and 2. Public Witness/1 Shri H.C Haqir, has further Proved the statement of accounts as Exhibits P/7 and P/8 which give the balance due from the defendants as on the date of filing of the suit. Public Witness 1 has further proved the notice of demand (Ex. P/9) as also the Postal and Telegraphic Receipts for the said notice (Ex. P/10 to P/16).

(12) Plaintiff has further examined Public Witness 3 Shri O.P. Trehan, who has stated that he was posted as the Manager of the plaintiff at the Branch concerned between 1973 and 1978 when the loan was disbursed. He has proved the loan documents as well as the Agreement of Guarantee signed by defendant No. 3 which has been exhibited as Ex. Public Witness 3/1. The said witness has also proved the balance confirmation letters signed by defendant No. 1 which have been marked as Ex. Public Witness 3/2 to Public Witness 3/5. Even though the defendant has raised the defense that these balance confirmation letters were signed in blank at the time of the disbursement of the loan, a perusal of these balance confirmation letters will show that defendant No. 1 while putting her signatures on each of these four documents, has put the dates in her own handwriting below her signatures. As such her own stand is belied by the documents. Accordingly, the plaintiff has proved that a sum of Rs. 1,02,534.60 was due from the defendants. This issue is decided in favour of the plaintiff and against the defendants. Issue NO. 3

(13) In the present case the plaintiff has insured the plant and machinery and the stocks from time to time and has placed on record the original Insurance Policies against fire and burglary from the period 6th August, 1976 to 10th September, 1981. All these Insurance Policies have been proved and marked as Exhibits P/17 to P/30. The said policies have been proved by Shri S.K. Chakraborthy, Public Witness 2 who was then the Branch Manager in the New India Assurance Company Ltd. through whom the policies were taken. Even Public Witness 1 in his statement has mentioned taking out of the Insurance Policies to cover the risks against the securities and Public Witness /3 has also stated that the plaintiff used to take insurance covers against the hypothecated goods. The fact remains that the defendants have not placed any document on record to show that they had taken out any insurance or had intimated the plaintiff about the same. As regards the obligation to take out insurance the plaintiff has referred to the Hypothecation Deed to secure Term Loans which is an admitted document being Exhibit P/4. Para 7(a) of the said document imposes a condition on the borrower to insure all the securities against fire, war, riots and risk of any other description. The said clause further provides that if the borrower fails on demand being made by the Bank to insure or to deliver the policies or receipts for premia the Bank shall be at liberty, but not bound, to effect such insurance at the risk, responsibility and cost of the borrower in such insurance companies as the Bank in its absolute and unfettered discretion, thinks fit and to an extent of the full market value of the security of which the Bank shall be the sole judge. Similar clause appears in case of Hypothecation Deed with respect of the cash credit facility which covers the hypothecated stocks. Exhibit P/4 the earlier Hypothecation Deed was with respect to the plant and machinery for which advance was given as a Term Loan. The facility of Cash Credit is covered by the Hypothecation Deed which is also an admitted document being Exhibit P/5 and Clause 7(a) of the said Deed is in the same terms as that of Exhibit P/4. In these circumstances it was obligatory for defendants 1 and 2 to take out insurance and they having failed to do so, the bank took out the insurance on their account and debited the insurance charges in the account of the said defendants and are entitled to recover the same from the defendants. Issue No. 3 is decided in favour of the plaintiff and against the defendants. Issue NO. 4

(14) As regards Issue No. 4 the onus was placed on the defendants to prove that the suit was barred by time. The defendants have failed to adduce any evidence to establish the same. In any case the documents placed on record would show that the last Balance Confirmation Letters were signed by defendant No. 1 for herself and on behalf of defendant No. 2 on 25-1-1977 which date appears in the hand writing of defendant No. 1 and the suit has been filed within three years of the said date. It was a feeble attempt on the part of the defendants to raise the plea of limitation by saying that all the balance confirmation letters were signed in blank without any dates. These balance confirmation letters (Public Witness 3/2 to Public Witness 3/5) belie the stand of the defendants and, as such, the suit is within time. Issue NOS. 5 & 6

(15) As the defendants have failed to adduce any evidence in respect of these issues the same are decided in favour of the plaintiff and against the defendants.

(16) In view of the above, I pass a decree for recovery of Rs. 1,02,534.60 with costs in favour of the plaintiff and against the defendants. The plaintiff shall also be entitled to pendente lite and future interest at the rate of 12 per cent per annum from the date of suit till realisation.