New Bank Of India vs Racmann Auto (P) Ltd. And Ors.
2002 Latest Caselaw 2138 Del

JUDGMENT

C.K. Mahajan, J.

1. This is a suit filed by the plaintiff against the defendants for recovery of Rs. 5,24,734.01/- with costs and interest @ 18% per annum.

2. Initially the present suit was filed by New Bank of India. Thereafter the said Bank was transferred to and vested in Punjab National Bank under Amalgamation & Transfer of Undertaking Scheme w.e.f. 4th September, 1993.

3. Briefly stated the facts of the present case are that the defendant No. 1 which is a private limited company has had dealings with the plaintiff Bank as a Principal debtor. Defendants 2, 3, 4 and 5 had been its Managing Director and/or directors and they became guarantors for the discharge of the liabilities of defendant No. 1. Defendant No. 6 is a private limited company to whom the defendant No. 1 wrongly transferred by lease or otherwise their machinery etc. hypothecated to the plaintiff bank without its permission or consent.

4. The defendant No. 1 had been availing various credit facilities from the plaintiff bank at its Branch at Old Faridabad from time to time by drawing diverse advances and offering various securities. As per letter dated 5th April, 1972 the plaintiff Bank sanctioned a B.P. limit of Rs. 70,000/- against drafts, cheques of Tata Engineering and Locomotive Co. Ltd., Escorts Ltd., Bajaj Auto Ltd., Automobile Products of India Ltd. and Premier Automobile of India Ltd., and a B.D.Limit of Rs. 80,000/- against Bills covering R/Rs and T.Rs. of approved companies. A resolution was passed by defendant No. 1 on 10th April, 1972 in that connection. S. Manjit Singh, the director was authorised to execute all loan documents and operate these accounts. S. Puran Singh then Managing Director agreed to become guarantor in his personal capacity. On 14th April, 1972 certain loan and guarantee documents were executed. As per Head Office's letter dated 21/27th February, 1972 the defendant No. 1 was sanctioned a letter of credit cum cash credit limit of Rs. 1 lac against pledge of imported goods like lens for head lamps and scaled bearings and B.P. Sheets. S. Puran Singh, defendant No. 3 was to stand guarantee in his personal capacity and pledged stock was to be kept insured against all risks. Defendants 1 and 3 executed certain documents. Thereafter on execution of some documents on 8th December, 1972 cash credit limit of Rs. 2 lacs and B.P. limit of Rs. 70,000/- was granted to defendant No. 1. Vide resolution dated 7th December, 1972 Shri Manjit Singh Sethi was authorised by defendant No. 1 to execute all necessary loan documents and acknowledgement of liability and to operate the account.

5. Thereafter the plaintiff bank by letter dated 2nd March, 1973 sanctioned to defendant No. 1 fixed term loan limit of Rs. 1.40 lacs against hypothecation of new machinery purchased and to be purchased and a B.D.Limit of Rs. 1 lacs was also granted for discounting 60 to 90 days. S.Manjit Singh Sethi was authorised to execute the loan documents and to operate the accounts.

6. The plaintiff bank thereafter also granted to defendant No. 1 certain credit facilities on execution of document.

7. Pursuant to the arrangements agreed to between the plaintiff and defendants 1 to 5 as per the various documents executed various accounts were opened in the name and for the benefit of defendant No. 1 and the said defendant drew diverse advances from the plaintiff bank in these accounts from time to time. All withdrawals were debited to these accounts. The amounts becoming due for interest, service charges, incidental charges, insurance charges and other expenses incurred and other charges were debited from time to time and the amounts received from defendant No. 1 were also credited. Diverse amounts were transferred from one account to the other. It is stated that finally the following unadjusted accounts remain which show outstanding balances due to the plaintiff against defendant No. 1:-

(a) Cash credit against bills account No. 39. It commenced on 8.12.1972 and shows a debit balance of Rs. 1,91,476.50 at the end of June, 1980.

(b) Letter of Credit cum pledge account No. 40. It commenced on 13.12.1972 and shows a debit balance of Rs. 56,868.70 at the end of June 1980. There appears a credit of Rs. 1,53,375/- given on 21.2.1980 on account of amount received from Paharganj Branch of the plaintiff Bank as the proceeds of three F.D.Rs. of defendants 3 and 5 which had been made subject to lien and charge of the plaintiff Bank in respect of the amount due from defendant No. 1 in various accounts.

(c) Cash credit against hypothecation of machinery account No. 43. It commenced on 9.3.1973 and shows a debit balance of Rs. 1,39,146.24 at the end of June, 1980.

(d) Current over-draft account No. 278. It was opened on 22.11.1972. Various bills were discounted and credits for the same were given in this account. Various amounts withdrawn by defendant No. 1 were debited. Amounts due for various bills returned unpaid were also debited. Interest items, incidental charges and other charges due to the plaintiff Bank were also debited. Finally this account shows a debit balance of Rs. 1,37,242.57 at the end of June, 1980.

8. Thus the plaintiff has become entitled to recover a total sum of Rs. 5,24,734.01 from the defendant No. 1 as Principal Debtor being the total of the debits of the aforesaid accounts. It is stated that defendants 2 to 5 as guarantors are also jointly and severally liable to pay the said sum of Rs. 5,24,734.01 along with defendant No. 1. It is further stated that defendants 1 to 5 have wrongly parted possession of the hypothecated machinery in favor of defendant No. 6 without the consent or permission of the plaintiff bank. It is stated that despite various demands and notices the defendants failed and neglected to pay the money due to the plaintiff bank. Hence the present suit.

9. Defendants have filed the written statements denying the averments made in the plaint.

10. On the pleadings of the parties, the following issues were framed on 6th April, 1989:-

1. Whether the plaint has been signed and verified, and the suit filed by a duly authorised person on behalf of the plaintiff bank? OPP.

2. Whether the suit is bad for misjoinder of parties and cause of action? OPD.

became guarantors for payment of money due from defendant No. 1? If so, in respect of which indebtedness? OPP.

4. Whether the guarantors stood discharged on account of fresh and enhanced limits allowed by the plaintiff? OPD.

5. Whether the plaintiff bank allowed the loan facilities to defendant No. 1 and the latter executed the loan documents as mentioned in paras 5 to 12 of the plaint? If so, with what effect? OPP.

6. Whether the accounts mentioned in para 15 of the plaint were maintained by the plaintiff in respect of dealings of defendant No. 1? If so, what amounts remained due to the plaintiff bank in these accounts against defendant No. 1? OPP.

7. Whether defendant No. 1 signed and delivered the various acknowledgments in writing as mentioned in para 22 of the plaint? If so, whether the suit is not within limitation?

8. What items of machinery and/or goods were hypothecated by defendant No. 1 with plaintiff? If so, with what effect?

9. Whether defendant No. 6 is liable for any amount on account of rent or otherwise for the hypothecated machinery and goods taken by it on lease from defendant No. 1? OPP.

10. Relief and against whom?. OPP"

11. The case was listed for trial on 16th to 18th August, 1993 when the statement of PW-1 and PW-2 was recorded. The defendants thereafter were not represented. Counsel for defendants 3 and 5 sought discharge from the case as he was not getting instructions. He was discharged by order dated 30th August, 1994. The plaintiff filed affidavit by way of evidence and thereafter dates for cross-examination of the witnesses were fixed from time to time. The plaintiff's witnesses were cross-examined. The defendants did not lead evidence in spite of opportunities being granted and finally they were proceeded ex-parte by order dated 9th January, 2000.

12. I have heard learned counsel for the plaintiff and LRs. of defendant No. 4.

ISSUE NO. 1.

13. In the statement of Shri V.K. Sharma PW-1, it is proved that Resolution No. 38 was passed on 16th June, 1980 by the Board of Directors of the plaintiff bank authorising Shri R.D. Aggarwal or Shri V.K. Gupta or Shri O.P. Kapoor as General Attorney of the New Bank of India to sign, verify and institute the suit. He has proved the Resolution No. 38 as Ex.PW-1/1. He also proved the signatures of Shri Desh Raj Gandotra, Custodian Chairman of the New Bank of India on the Resolution. Shri R.D. Aggarwal, PW-2 in his statement also proved his power of attorney as Ex.PW-2/1.

14. Hence it has been proved that the plaint has been signed and verified by a duly authorised person on behalf of the plaintiff. Therefore, issue No. 1 is decided in favor of the plaintiff and against the defendants.

15. These issues were framed on the averments made by the defendants in their written statement. The defendants have failed to adduce evidence despite several opportunities and on 19th January, 2000 they were proceeded ex-parte. The defendants have failed to prove these issues.

PW-3 V.P. Gupta proved that Puran Singh, defendant No. 3 has signed guarantee deed dated 14.4.1972 (Ex.PW-3/8). This is also supported by the resolution of the defendant No. 1 dated 10th April, 1972 (Ex.PW-3/2). He has also proved the deed of guarantee dated 8.12.1972 (Ex.PW-3/16) by Manjit Singh and Puran Singh, defendants 2 and 3. The resolution of the defendant No. 1 dated 7.12.1972 (Ex.PW-3/17) also supports the said fact. The said PW-3 also proved the deed of guarantee dated 9th March, 1973 (Ex.PW-3/32) executed by defendants 2 and 3. The guarantee deed by defendant No. 3 Puran Singh in respect of limit allowed on 24.8.1973 (Ex.PW-3/40) was also proved by PW-3. Mr. V.P. Gupta, PW-3 also proved the Guarantee deeds dated 13.11.1973 signed by defendants 2 and 3 (Ex.PW-3/51) and guarantee deed dated 14.3.1974 signed by defendants 2 and 3 (Ex.PW-3/59). A resolution dated 14.3.1974 (Ex.PW-3/53) in this regard was also proved by PW-3 in his evidence. By a resolution dated 3.2.1977 of defendant No. 1 signed by Gur Charan Singh, defendant No. 4 is proved by Shri S.K. Modi, PW-4 in his affidavit. By the said resolution Gur Charan Singh, defendant No. 4 agreed to guarantee the repayment of loan to be covered by documents to be signed thereafter. PW-4 also proved in his evidence the letter dated 31.3.1977 (Ex.PW-4/3) that Puran Singh Sethi, defendant No. 3 and Surinder Singh Sethi, defendant No. 5 created Bank's lien on their F.D. of Rs. 1.50 lacs in favor of the bank for the loan of defendant No. 1. Thus it is proved that guarantees of defendants 2 and 3 was made in writing and the guarantee of defendants 4 and 5 were made through letter dated 31.3.1977. Accordingly this issue is also decided in favor of the plaintiff and against the defendants.

ISSUE NOs. 5 & 6

In his affidavit PW-3 has stated that he was the Manager in the Old Faridabad Branch of the plaintiff Bank from 1971 to 1974. He has stated that during his tenure B.P. limit of Rs. 70,000/- and B.D. limit of Rs. 80,000/- was sanctioned in favor of defendant No. 1 by letter dated 6.4.1972 (Ex.PW-3/1). PW-3 proved the resolution dated 10.4.1972 (Ex.PW-3/2) and the loan documents (Ex.PW-3/3 to PW-3/7). A letter of credit cum C.C. limit of Rs. 1 lac to defendant No. 1 was sanctioned by letter dated 21.7.1972 (Ex.PW-3/9) which was also proved by PW-3. The said witness PW-3 also proved the loan documents signed by defendant No. 1 (Ex.PW-3/10 to Ex.PW-3/15). Resolution of the defendant No. 1 dated 7.12.1972 (Ex.PW-3/17) was proved by PW-3. The said witness has stated and proved that the Bank sanctioned a loan of Rs. 1.40 lacs and BD Loan of Rs. 1 lac vide letter dated 2.3.1973 (Ex.PW-3/18). The defendant No. 1 vide letter dated 5.3.1973 (Ex.PW-3/19), signed by Shri Manjit Singh, gave list of machinery to be hypothecated for their fixed term loan. Resolution of the defendant No. 1 dated 6.3.1973 (Ex-PW3/20) indicating availing of the limits was also proved by PW-3. The defendant No. 1 on 9th March, 1973 executed and delivered certain loan documents which were proved by PW-3 as Ex.PW-3/21 to PW-3/31. He further stated that the said documents were signed by Shri Manjit Singh in his presence. PW-3 also stated the central office of the bank conveyed their sanction to defendant No. 1 of enhanced limit of Rs. 50,000/- for Packing Credit and Rs. 60,000/- for FBP limit by their letter dated 24.8.1973 (Ex.PW-3/33). The defendant No. 1 signed and delivered certain loan documents on 24.8.1973 which are proved by PW-3 as Ex.PW-3/34 to Ex.PW-3/39. Shri Puran Singh stood guarantee for the said limits and signed deed of guarantee. The Central Office of the Bank conveyed by their letter dated 12.11.1973 (Ex.PW-3/41) their sanction of the enhancement of BP limit to Rs. 2 lacs and Cash credit limit to Rs. 2.50 lacs. Accordingly on 13.11.1973 to avail these limits the defendant No. 1 executed and delivered certain loan documents. PW-3 has stated that the said documents were filled in by him and thereafter they were signed by Shri Manjit Singh, Director of defendant No. 1 in his presence. The said documents are proved by him as Ex.PW-3/42 to Ex.PW-3/50. It is stated that defendant No. 1 sent true copy of the Board Resolution dated 14.3.1974 (Ex.PW-3/53) to the bank which was signed by Shri Puran Singh and on 14.3.1974 the defendant No. 1 executed and delivered certain loan documents which were signed by Manjit Singh. PW-3 has stated that the said documents were filled in by his staff in his presence and the same were proved by him as Ex.PW-3/54 to Ex.PW-3/58.

16. Shri R.D. Aggarwal, PW-2 has compared the entries from 8th December, 1972 to July 1980 with respect to Cash Credit Account No. 39, entries from 13th December, 1972 to 28th June, 1980 with respect to Cash Credit Account No. 40, entries from 9th March, 1973 to 28th June, 1980 with respect to Cash Credit Account No. 43 and entries from 22nd November, 1972 to 28th June, 1980 with respect to Cash Credit Account No. 278 of defendant No. 1 with the original ledgers and proved same as Ex.PW-2/2, Ex.PW-2/3, Ex.PW-2/4 and Ex.PW-2/5.

executed to loan documents. It is also proved the plaintiff maintained the accounts mentioned in para 15 of the plaint. The aforesaid statements proved the claim of the plaintiff against the defendant No. 1 as also against guarantors defendants 2 to 4. Accordingly these issues are also decided in favor of the plaintiff and against the defendants.

ISSUE NO. 7:

In his statements PW-3 and PW-4 proved that the defendant No. 1 acknowledged in writing in the form of Balance Confirmations signed and delivered by defendant No. 1 The B.Cs. dated 21.3.1974 (Ex.PW-3/60), 25.1.1977 (Ex.PW-4/4), 1.7.1977 (Ex.PW-4/5), 1.1.1978 (Ex.PW-4/6), 31.1.1974 (Ex.PW-3/61), 25.1.1977 (Ex.PW-4/7), 1.7.1977 (Ex.PW-4/8), 1.1.1978 (Ex.PW-4/9), 26.7.1973 (Ex.PW-3/62), 31.1.1974 (Ex.PW-3/63), 25.1.1977 (Ex.PW-4/10), 1.7.1977 (Ex.PW-4/11), 1.1.1978 (Ex.PW-4/12) and 1.7.1977 (Ex.PW-4/13) were proved by the said witnesses. The defendants vide letter dated 6.2.1976 (Ex.PW-4/15) indicated the amounts due to the plaintiff.

signed and delivered the acknowledgments in writing as mentioned in para 22 of the plaint.

The defendants are to prove whether the suit is not within limitation. The defendants have failed to adduce evidence despite several opportunities. Thus the defendants have failed to prove that the suit is not within limitation.

Accordingly this issue is also decided in favor of the plaintiff and against the defendants.

ISSUE NO. 8:

The defendant No. 1 vide letter dated 5th March, 1973 (Ex.PW-3/20) admitted that the plaintiff bank sanctioned the loan against hypothecation of the following machinery:-

1. Shaper

2. Lathe

3. Die Sinking Machine

4. Surface grinder

5. Injection moulding machine

6. Power Presses

7. Converised Oven

8. Filter Unit.

17. All the hypothecated deeds hypothecate the entire machinery of defendant No. 1.

Thus it is proved that the aforesaid machinery were hypothecated by defendant No. 1. Accordingly, this issue is decided in favor of the plaintiff and against the defendants.

ISSUE NO. 9:

has admitted that defendant No. 1 had handed over possession of a portion of its factory on lease vide lease deed dated 17th March, 1978 at a monthly rent of Rs. 5000/-. As the machinery installed in the factory was hypothecated to the plaintiff bank, the rental income should have been paid to the plaintiff. The defendant No. 6 is, accordingly, liable to pay the same. Hence this issue is decided in favor of the plaintiff and against the defendants.

In the facts and circumstances aforesaid, the suit of the plaintiff deserves to be decreed against defendant No. 1 as principal debtor and against defendants 2 to 4 as guarantors and against the defendant No. 6 as lessee of hypothecated goods.

18. In the circumstances, a decree for Rs. 5,24,773.01/- is passed in favor of the plaintiff and against the defendants. The plaintiff shall also be entitled to interest @ 18% per annum from the date of filing of the suit till the date of decree. In case the decretal amount is not paid within three months from today, the plaintiff shall also be entitled to interest on the decretal amount @ 18% per annum from the date of decree till realisation.

A decree sheet be prepared accordingly.

The suit stands disposed of.