Canara Bank vs Jain Plastic Moulders & Ors.
2000 Latest Caselaw 713 Del

ORDER

S.K. Agarwal, J.

1. This is a suit filed by the plaintiff bank for recovery of Rs. 8,78,306.40 p. It is alleged that defendant No.1 is the proprietorship concern of Mr. S.K. Jain. He approached the Bank for grant of credit facilities and an advance of Rs.1,96,000/- was sanctioned by the Bank for the purchase of the machinery. The loan amount along with interest @ 13.5% per annum was agreed to be repaid in 47 monthly instalments of Rs. 4,100/- and last 48th instalment of Rs. 3,300/-. The cost of machinery amounting to Rs.1,96,000/- was paid by the plaintiff to the suppliers M/s.Guru Ram Das General Industries, Mayapuri, Delhi at the instance of the defendant no.1 towards the cost of the machinery. Defendants No. 2 and 3 guaranteed the repayment of the loan. It is further alleged that Defendant no.2 had mortgaged his immovable property bearing House No. 700-C/43, Shambu Nagar, Tri Nagar, Delhi by depositing the title deeds creating security for repayment of ultimate balance in their machinery loan and Cash Credit Limit hypothecation accounts together with upto date interest and all other charges. Defendants failed to pay the instalments regularly and committed defaults in repayment of loan. The defendants utilised the machinery and subsequently same was shifted to some unknown place without knowledge of the Bank. On 26th October, 1993 a sum of Rs.1,68,479.80p was found due and payable by the defendants jointly and severally to the Bank. The defendants acknowledged their liability on 28th October, 1990 and 3rd September, 1993.

2. It is also alleged that the first defendant was also allowed credit facilities of Rs.2 lacs in the form of a cash credit limit which was enhanced to Rs.3 lacs. To secure the repayment of the advance by way of the cash credit limit, on 25th February, 1989 defendants executed in favour of the Bank, a demand promissory note for Rs.3 lacs agreeing to pay the loan amount along with interest @ 5.5% per annum over the bank rate with minimum of 15.5% per annum with quarterly rests; Cash Credit (Open Loan) agreement, hypothecating all raw materials, semi finished and finished goods, and all commodities belonging to the defendants, letter of request for overdraft facility; Defendants 2 and 3 also executed continuing guarantee whereby they guaranteed in their personal capacity the due repayment all advances upto Rs. 6,15,000/- with interest thereon and costs. The guarantees includ- ed both accounts.

3. It is alleged that the account became sticky and the defendants did not adhere to the financial discipline. They failed to submit their stock statements periodically and truly. They did not route their sale proceeds through this account. Stocks were depleted and, in fact, on certain stages the stocks were not available at all. The plaintiff Bank took up the matter with the defendants number of times. It was pleaded that after adjusting all deposits made in the cash credit hypothecation on 26th October, 1993 a sum of Rs.7,09,826.60p was due and payable by the defendants jointly and severally to the plaintiff bank and that the plaintiff bank is entitled to charge interest at the rate of 22.25% per annum to be compounded quarterly from the defendants from 26.10.93 i.e. the date of institution of the suit till the date of final realisation of the decretal amount and that the plaintiff is entitled to recover interest from the defendants at the above stated rate under section 21-A of the Banking Regulations Act, 1949. On 2nd November, 1992 plaintiff bank served a notice on the defendants calling upon them to clear the accounts but they failed to make any payment.

4. The plaintiff has prayed for a decree for Rs. 8,78,306.40p along with future interest from the date of filing of the suit till realisation against the defendants jointly and severally and also a preliminary decree in the suit for sale of the mortgaged property bearing house No.700-C.43, Shambu Nagar, Tri Nagar, Delhi (for short mortgaged property). for liquidation of the suit amount along with interest @ 22.25% per annum compounded quarterly rests from 26.10.93 till the date of the institution of the suit.

5. The plaint was registered, summons to the defendants were issued; defendants could not be served by ordinary process or by registered AD post. Ultimately defendant No. 2 and 3 were served only by substituted service by publication in 'Statesman' as well as by fixation of summons at their last known address. The summons were also exhibited at the notice board of the court. None of the defendants appeared. Consequently on 16th January, 1998 they were proceeded ex parte and the plaintiff was directed to lead ex parte evidence by way of affidavits.

6. The plaintiff, in support of its case, has filed the affidavit of PW-1 K C Kanojia, Manager, Vivek Vihar branch, Delhi who has fully supported its case and has stated that from June, 1984 to July 1989 he was posted at Wazirpur branch, Ashok Vihar, Delhi. The defendant no.1 was sanctioned and granted machinery loan. facility of Rs.1,96,000/- and Overdraft Cash Credit (for short OCC) limit of Rs.2,00,000/-; the defendants executed the documents. He also proved the documents executed by the defendants namely demand promissory note, PW-1/1, letter of request for over draft facilities Ex. PW-1/2, letter of authorisation dated 25.2.89 Ex. PW-1/3; certificate from the borrower Ex. PW-1/4, letter of undertaking that the defendants had not availed "OCC" elsewhere Ex. PW-1/5; agreement for opening for OCC account Ex.PW-1/6, hypothecation deed of machinery dated 25.2.89 Ex.PW-1/7 and letters by defendant no.1 dated 28.2.1989 and 26.11.1991 PW-1/8 and PW- 1/9 respectively. He also proved covering letters dated 25th February, 1989 signed by defendant No. 2 and defendant No. 3 and identified the signatures of the defendants on Ex.PW-1/10 and PW-1/11. He also identified defendants' signatures on letters for continuing guarantees dated 25.2.89 Ex. PW-1/12 and Ex. PW-1/13 and also proved the sanction letter PW-1/14.

7. The plaintiff also filed affidavit of PW-2, Mr. A.R. Pillai who has stated that he was working from 19th December, 1985 to June, 1991, in the branch of the plaintiff at Wazirpur branch, Ashok Vihar, New Delhi; that the defendants 2 and 3 as guarantors for defendant No.1 had mortgaged is immovable property. He also proved the documents executed by the defendants including specimen signatures of Satish Kumar Jain, sole proprietor of defendant no.1 PW-2/1, letter of authorisation PW-2/2, letter of terms and conditions dated 11.11.87 PW-2/3, documents containing particulars of machinery PW-2/4, articles of agreements PW-2/5 and deed of hypothecation of machinery PW-2/6, letter evidencing the deposit of title deeds with schedule A and B PW-2/7 deed of declaration cum indemnity PW-2/8, affidavit by defendant No.2, PW-2/9, sale deed dated 21.9.70 PW-2/10, release deed dated 14th July, 1978 PW-2/11. He also proved the letter dated 28th Octo- ber, 1990 written by the defendant no.1 to the Bank confirming the balance PW-2/13.

8. PW-3, Deepak Gupta, in his affidavit has stated that he was working in the concerned branch of the Bank from October, 1991 to June, 1996 that Satish Kumar Jain, proprietor of defendant no.1 in his presence signed the acknowledgment of debt and securities PW-3/1 on 3.9.93, letter of acknowl- edgment dated 3rd September, 1994 and the letter reconfirming its contents PW-3/2 and PW-3/3. PW-4, S K Arora, Manager of the Bank from 1993 till March 1995 has stated that suit for recovery of Rs.8,75,306.40p was signed and verified by him. He has proved statement of account of the defendants duly certified under the Bankers Books Evidence Act, PW-4/3. Legal notice PW-4/4, postal receipts and acknowledgment PW-4/5 and PW-4/6, undelivered registered covers PW-4/7 and PW-4/8 and PW-4/9.

9. I have heard learned counsel for the plaintiff and have been taken through the record.

10. Evidence led by the plaintiffs by way of affidavits of four its Branch Managers during the relevant period is duly supported by the documents executed by the defendants. As noticed above defendants have not cared to put in appearance and to contest the suit. The evidence of the bank witnesses has gone unchallenged. The plaintiff has thus succeeded in proving that the first defendant had approached the bank and had availed loan facilities noted above and was liable to pay the suit amount to the plaintiff bank. The plaintiff has also proved a statement of account duly certified under the Bankers Books and Evidence Act showing the outstanding liability payable by the defendants to the Bank as claimed in the suit. It is further proved that the defendant No. 2 had mortgaged his property bearing No.700-C/43, Shambu Nagar, Tri Nagar, Delhi with the Bank guaranteeing repayment of the loan amounts along with interest and other charges. The suit was filed within a period of limitation. For the foregoing reasons, the plaintiff is entitled to recover the suit amount of Rs.8,75,306.40p (Rupees Eight lacs Seventy Five Thousand Three Hundred Six and Forty paise only) from the defendants inclusive of interest up to the date of filing the suit.

11. The plaintiff bank has also claimed future interest at the contractual rate of interest of 22.25% per annum compounded quarterly w.e.f. 26th October,1993 i.e., the date of institution of the suit till realisation under section 21A of the Banking Regulation Act, 1949 in both the accounts. I am not inclined. Nothing has been placed on record to prove that after the filing of the suit the Bank is entitled to recover interest with quarterly rests. Section 21-A was introduced by Banking Laws (Amendment) Act, 1983. This section only provides that the courts cannot reopen the accounts relating to the transaction between the Bank and the Borrower on the ground that the rate of interest charged is excessive or unreasonable under the Usurious Loans Act, 1918 or any other law relating to indebtedness This has no bearing on the jurisdiction of the court to award future interest from the date of the filing of the suit till realisation. Section 34 of the Code of Civil Procedure empowers the court to award reasonable pendente lite and future interest. Thus, the plaintiff bank is awarded interest @ 18% per annum on the suit amount from the date of the suit till realisation alongwith the costs.

12. For the foregoing reasons, a preliminary decree is passed for sale of the mortgaged property for recovery of the decretal amount in terms of the Order 34 Rule 4 of the Code of Civil Procedure. In case the defendants fail to pay the decretal amount within a period of six months, the plaintiff shall be at a liberty to apply for the final decree for the sale of the mortgaged property in accordance with law. Decree be prepared accordingly.