Punjab & Sindh Bank vs M/S Singh United Engineering And ...
2001 Latest Caselaw 948 Del

ORDER

V.S. Aggarwal, J.

1. Punjab and Sindh Bank, hereinafter described as the plaintiff, has preferred the present suit against the defendants for the recovery of Rs. 8,12,727/-.

2. The facts alleged are that defendant no. 1 (M/s Singh United Engineering) through M.S. Bakshi approached the plaintiff and requested for credit facility (bank guarantee) to the tune of Rs. 5 lakhs. He agreed to provide margin money for issuing of bank guarantee on their behalf. Plaintiff bank considered the request of defendant no. 1 and allowed the bank guarantee facility. The bank guarantee facility was enhanced at the request of defendant no. 1 from Rs. 5 lakh to Rs. 10 lakhs. As security of hypothecation as aforesaid and guarantee of defendant no. 4 continued to subsist. Defendants 2 and 3 (S B Bakshi and B M Mehta) besides M S Bakshi personally also guaranteed repayment by a letter of guarantee. Subsequently, defendant no. 1 was converted into a partnership firm with M S Bakshi and defendants 2 and 3 as its partners. The partners of defendant no. 1 requested that bank should guarantee the earlier facility. The plaintiff bank acceded to the said request.

3. The plaintiff bank issued at the instance of defendant no. 1 and its partners the said facility and accordingly defendant no. 1 through its partners opened a current account with the plaintiff bank. On 5th January 1987 the said current account showed a credit balance of Rs. 902.17. The bank guarantee had been invoked and encashed by the beneficiaries and payment was made to the beneficiaries by debiting the above current account. The defendant no. 1 and the partners undertook to place funds at the disposal of the plaintiff bank in case any of the bank guarantees were invoked by the beneficiaries and encashment thereof was sought. However, defendants failed to place funds at the disposal of the bank and payments with respect to bank guarantees detailed in Annexure P1 were made after appropriating or adjusting margin money and by debiting the current account maintained in the name of defendant no. 1. It resulted in overdraft.

4. On 5th January, 1987 the bank guarantees were invoked and payment thereof after adjusting the margin money was made to the respective beneficiaries. Similarly on 19th January, 1987 the bank guarantees were invoked and payment thereof was made to the beneficiaries to the debit of the account of defendant no. 1. In April 1987, defendant no. 1 and its partners were called upon to provide additional security/guarantee in lieu of overdraft in the account. On 18th April, 1987 the said overdraft account showed a debit balance of Rs. 4,66,887.03 and defendant no. 2 late M S Bakshi as partner of defendant no. 1 in consideration of the subsisting advance executed and delivered the following loan documents:

(a) Promissory Note

dated 18th April, 1987 for Rs. 4,66,887.03 agreeing to pay the sum due on demand with interest at the rate of 7.5% per annum above the Reserve Bank of India rate, subject to a minimum of Rs. 17.5% per annum with quarterly rests;

dated 18th April, 1987 waiving the right of presentment for payment of the relative pronote and other negotiable instruments;

dated 18th April, 1987 agreeing that the facility would continue during the Bank's pleasure and/or would be recalled without notice;

dated 18th April, 1987 agreeing that in case of any default or irregularity, the Bank would be entitled to additional interest up to 2.5% per annum in addition to the normal rate of interest;

dated 18th April, 1987 agreeing that the pronote would remain as security with the bank notwithstanding the fact that amounts are paid into the said account and the balance in the account is reduced at any time or the account may show even credit balance;

(f) Deed of Hypothecation

dated 18th April, 1987 confirming hypothecation unto the bank of mixers, pumps, vibrators, welding machines, power backsaw, tractor and other assets.

5. Again a deed of hypothecation too was executed on the same day. Defendant no. 4 in her personal capacity executed and delivered on 18th April, 1987 a letter of guarantee, the repayment of the entire amount to the extent of Rs. 10 lakhs with interest at the rate of 17.5%. Additional guarantee of defendant no. 6 was offered and it was also accepted. The guarantee of defendant no. 6 in this process continued. On 1st March, 1988 the bank guarantee was invoked. The defendants had not placed funds at the disposal of the plaintiff. The payment was made by the plaintiff to the respective beneficiaries.

6. One of the partners M S Bakshi had died and defendant nos. 4, 5, 7 and 8 are legal representatives. In this process it is claimed that by virtue of invoking the said bank guarantees and payments that have been made by the bank the amount claimed above was due. Hence the present suit.

7. Only defendant no. 3 filed the written statement and took up the objection that he has ceased to be the partner of defendant no. 1 with effect from 31st December, 1983 vide resolution deed of 2nd March, 1985. The liability to pay thus was denied. It was admitted that defendant no. 3 is signatory of four counter guarantees executed by the partners but it is the defense of defendant no. 3 that they were only for a period of six months in the case of bank guarantee dated 16-4-1985 and 27-4-1985 and one year in case of bank guarantee for Rs 2 lakhs of 27-4-1985 and for Rs. 70,000/- dated 6.5.1985. There the defendants had failed to appear.

8. On 12th January, 1998 the defendants had been directed to be proceeded ex parte by this court. On 22nd July, 1999 it was brought to the notice of the court that defendant no. 2 had died. His wife Kuldeep Kaur was already on the record and that proceedings be taken ex parte.

9. In terms of the directions of the court affidavits had been filed. It becomes unnecessary to refer to all the documents but the record reveals from Exhibit PW-21/7 that a bank guarantee had been executed by the plaintiff to the tune of Rs. 2 lakhs in favor of Hindustan Pre-Fifre Limited. Similarly PW 2/38 is the bank guarantee for and on behalf of plaintiff bank in favor of National Thermal Power Corporation dated 10th December, 1986. Exhibit PW 2/39 is the counter guarantee by defendant no. 1 and the partners for paying in cash Rs. 1,40,000/- on demand to the bank. The bank guarantee had been extended for a period of six months up to 9th March, 1988. Similar bank guarantee has been proved on the record as PW 2/44 by the plaintiff bank for Rs. 75,000/- and in consideration of the obligation undertaken by the bank, the defendant no. 1 concern also took guarantee to repay back the amount. Once the payments as such had been made by the bank necessarily they can seek for repayment of the money and there is little on the record to indicate that the amount as such is not due.

10. Defendant no. 3 failed to show as to when it ceased to be a partner and consequently must be held to be liable.

11. Resultantly suit is decreed to the sum of Rs. 8,12,727/- with costs and interest @ 12% PA from the date of the filing of the suit till realisation.