Bank Of Baroda vs Navratan Trading Co. Pvt. Ltd. And ...
2002 Latest Caselaw 95 Del

JUDGMENT

Mukundakam Sharma, J.

1. This is a suit filed by the plaintiff seeking for a decree for recovery of an amount of Rs. 2,04,303.59 with interest and costs.

2. The plaintiff is a schedule bank constituted under the Banking Companies (Acquisition and Transfer of Undertakings) Act. The defendant No. 1 is a Private Limited Company registered under the Companies Act and the defendants 2 & 3 at the relevant time were the Directors of the first defendant along with defendant No. 4. In or about April, 1976, defendants 2 to 4, on behalf of defendant No. 1, approached the plaintiff bank for grant of financial facilities. On 5.5.1976, after the defendants had signed and executed a Demand Promissory Note for Rs. One lakh, an agreement of hypothecation of goods and other relevant documents were executed between the plaintiff bank and the defendants.

The plaintiff bank granted to the defendants Packing Credit Limit of Rs. One lakh. Subsequently, the defendants approached the plaintiff bank for extension and/or renewal of the same including an increase of the facilities from Rs. One lakh to Rs. Two lakhs and upon defendants' executing the Demand Promissory Note and other relevant documents like Letter of Continuing Security and Hypothecation of Goods, a Deed of Guarantee, guaranteeing due re-payment of the facilities, the plaintiff bank increased the facilities to Rs. Two lakhs some time in July, 1977. The said increased facilities were duly guaranteed by the defendants 2 to 4., who undertook to clear the same in case of any default by defendant No. 1. However, although the said facilities were utilised by the defendants, the amounts taken on loan were

addressed a letter to the plaintiff bank informing the plaintiff that he was withdrawing his guarantee. The said defendant was informed by the plaintiff that eh could not withdraw the guarantee at his own and that he could withdraw the same on payment of the entire dues of the defendant No. 1. By letter dt. 14.12.1979, the plaintiff called upon the defendants to clear the account, failing which legal action would be taken but since the aforesaid amount was not re-paid, the aforesaid suit was filed seeking for the aforesaid relies.

3. The aforesaid suit was contested by the defendants, who filed their written statement and on the basis of the pleadings of the parties, following issues were framed in the suit:-

1. What is the amount due under the hypothecation of goods account which defendant No. 1 opened with the plaintiff bank?

2. Was the guarantee extended by defendants 2 to 4 for payment of the amount due under the said account subsisting on the date of the institution on the suit?

3. Is the suit barred by time?

4. Has this Court no jurisdiction to try this suit?

5. Relief.

4. During, the pendency of the suit, defendant No. 2 died and his legal representatives were brought on record. In view of addition of the legal representative of decreased defendant No. 2, an additional issue was also framed in the suit by an order dt. 27.10.88 to the following effect:-

"Whether the L.Rs. of defendant No. 2 are not personally liable of the amount claimed in the suit"?

5. The suit proceeded ex parte as against defendant No. 4 and defendant No. 1 whereas legal representatives of defendant No. 2 and the defendant No. 3 were represented by their counsel. On behalf of the plaintiff two witnesses were examined whereas defendant No. 3 examined himself. No other witness was examined by the parties. After oral and documentary evidence were received, the suit was listed for final hearing and in that process I heard the learned counsel for the plaintiff as also the counsel appearing for the substituted defendant No. 2 and defendant No. 3.

ISSUE NO.1.

In their deposition, the witnesses produced on behalf of the plaintiff have stated that in or about April, 1976 the defendant No. 1 granted packing credit facility on execution of the documents like Demand Promissory Note and Letter of Continuing Security both dt. 5.5.1976 Ex. PW-1/2 and Ex.PW-1/3. It is stated by them that the said facility was duly availed of. The letter dt. 2.4.1977, by which defendant No. 1 requested for enhancement of the credit facility is also exhibited as Ex. PW-1/4. The aforesaid facility of enhancement of credit facility to Rs. Two lakhs was also granted in favor of defendant No. 1 upon defendant No. 2 executing Demand Promissory Note, Ex.PW-1/6, Agreement of Hypothecation of Goods, Ex.PW-1/7 both dt. 29.7.1977. The Demand Promissory Note Ex.PW-1/6 was also signed by defendants 2 & 3. It is stated by the aforesaid witnesses produced on behalf of the plaintiff that personal guarantees were also executed by defendants 2 & 3 but the same have been misplaced and, therefore, the same could not be exhibited in the suit. However, some contemporaneous documents have been placed on record by the plaintiff's witnesses marked as Ex.P-8, Ex. PW-2/1 and Ex.PW-2/2. Ex.P-8 is a letter dt. 6.10.1978 written by the defendant No. 2 wherein the said defendant had stated that he had asked for credit facilities for production and export of leather garments and leather articles from the leather unit of defendant No. 1 and that he signed the documents as guarantor for the said credit facilities up to Rs. One lakh. He also stated that he was co-guarantor with Dr. J.Joshi. By the aforesaid letter the said defendant No. 2 sought to withdraw his guarantee and requested the plaintiff bank to treat that there is only one guarantor, namely, Dr. J.Joshi for the facilities extended to their business. By letter dt. 25.11.1978, the plaintiff bank informed the defendant No. 2 that the limits were sanctioned to the defendant No. 1 in addition to other securities on the personal guarantee of defendant NO. 3 and defendant No. 2. He was also informed that the debit balance in the aforesaid account as of date i.e. on 25.11.1978 was Rs. 1,49,772.34 and he was informed that if he was interested in withdrawing the said guarantee, he is to re-pay the aforesaid amount immediately to liquidate the accounts. Subsequently, another letter of similar nature was issued by the plaintiff bank to the defendant No. 2, which is dt. 19.12.1978 exhibited as Ex.PW-2/2. the personal guarantee executed by defendant NO. 4 is proved as Ex.PW-1/8. It was stated by the aforesaid two witnesses examined on behalf of the plaintiff that the aforesaid facilities were availed and continued to be enjoyed by the defendants and the outstandings in the said account were demanded by the plaintiff bank vide two letters i.e. letter dt. 14.12.1979, Ex.P-2/9 and Ex.PW-2/10. The plaintiff bank also proved the statement of account as Ex.PW-2/11, which indicates that the outstanding amount was Rs. 2,01,031.99 as on 25.6.1980. In addition to the said amount, interest was also claimed on the outstanding amount from 26.6.1980 to 28.7.1980 and the suit was filed claiming payment of an amount of Rs. 2,04,303.59.

6. The aforesaid documents placed on record through the evidence of PW-1 and PW-2 clearly establish that a sum of Rs. 2,04,303.59 was due and payable under the credit facilities and, therefore, the Issue No. 1 is answered in favor of the plaintiff and against the defendants.

ISSUE NO. 2.

7. Now, I proceed to decide Issue No. 2 as framed in the present suit. Guarantee of defendant No. 4 is dt. 29.7.1977, which is exhibited as Ex.PW-1/8 and is proved. Although it is stated that both defendants 2 & 3 also executed their personal guarantees on the same terms and conditions, the same, however, were not traceable and, therefore, could not be proved in the suit. However, the document exhibited as Ex.P-8, proves and establishes that personal guarantee was executed. The said letter Ex.P-8, is dated 6.10.1978 by which the defendant No. 2 intended to withdraw his personal guarantee. the two letters written by the bank on 25.11.1978 and 19.12.1978 also prove that the bank asked the defendant No. 1 to deposit a sum of Rs. 1,49,772.34 as was due then, as a condition to withdraw the guarantee. The said evidence and the aforesaid documents were not challenged in the cross-examination and therefore, there is no denial to the said facts. The aforesaid documents are, therefore, admitted documents and the same establish that defendant 2 to 4 gave personal guarantee for due payment of the loan amount. The guarantee was executed on 29.4.77 and the suit was filed on 28.7.1980 and thus the guarantees of defendants 2 to 4 were subsisting on the date of filing of the suit.

ISSUE NO. 3.

8. With the decision on the aforesaid two issues, I now proceed to decide as to whether the suit is barred by time. The credit facility was availed of and documents were executed on 5.7.1976 and the credit facility was extended and documents were executed on 29.7.1977 being Ex. PW-1/6 to Ex. PW-1/8 and the letters dt.6.8.1977 Ex. PW-2/7 and dt.16.3.1978 Ex.PW-2/8 establish and admit jural relationship between the parties. There are debit and credit entries in the accounts by which its nature is current, open and general upon 25.6.80 and, therefore, the suit is clearly within time.

ISSUE NO. 4.

9. The defendants also sought to allege that this court has no jurisdiction to try the suit. Onus to prove the said issue was on the defendants. No such evidence could be led by the defendants to prove as to why this court has no jurisdiction to try the present suit. On the other hand, the plaintiff bank has proved that the facilities were granted and were repayable at Delhi and, therefore, the Delhi courts have the jurisdiction to try and decide the present suit.

ADDITIONAL ISSUE

10. So far the additional issue, which was framed on 27.10.88 to the effect whether the L.Rs of defendant No. 2 are not personally liable of the amount claimed in the suit, is concerned, onus to prove the said issue was on the legal representatives of the said defendant. The said legal representatives have not led any evidence and, therefore, they have failed to establish the aforesaid issue so framed. On the other hand, the bank has proved Ex.P8, which is dated 6.10.1978 and which proves the personal liability of the deceased defendant NO. 2 so far the suit amount is concerned. The said document along with Ex.PW2/1 and Ex.PW2/2 are not challenged by the legal representatives of the said defendant No. 2 in cross-examination and, therefore, the said documents fasten liability not only on the said legal representatives but also on the defendant No. 3, who also has not challenged the said part of the evidence. Accordingly, it is held that the said legal representatives of defendant No. 2 are also personally liable for repayment of the amount claimed in the suit by the plaintiff bank.

11. It was also sought to be contended by the counsel appearing for defendant No. 3 that defendant No. 3 was only a working Director of the company, on salary and he did not execute any guarantee in his personal capacity in favor of the plaintiff bank for any loans advanced to defendant No. 1. I have considered the said submission of the counsel for defendant No. 3 also. The said defendant has stated in his examination-in-chief that he, in his official capacity, signed several documents on behalf of defendant No. 1 but he did not sign any guarantee for re-payment of the loan. A suggestion was given to the said witness/defendant No. 3, in his cross-examination, by the counsel appearing for the plaintiff bank, which was denied by him stating that he had not signed the guarantee and had not undertaken the obligation for re-payment of the loan. However, it is already pointed out from the contents of Ex.P-8, authenticity of which is not denied by the said defendant No. 3, that the said defendant No. 3 was also a co-guarantor.

12. In that view of the matter and on the basis of evidence on record, both oral and documentary, I hold that the plaintiff has been able to prove its case to the hilt and that the plaintiff is entitled to a decree for recovery of the amount, as sought for by the plaintiff. Apart from defendant No. 1 and defendant No. 4 legal representatives of deceased defendant No. 2 and the defendant No. 3 are also personally liable for re-payment of the aforesaid loan amount and, therefore, a decree is passed for recovery of an amount of Rs. 2,04,303.59 in favor of the plaintiff and as against all the defendants jointly and severally. In addition, the plaintiff shall also be entitled to payment of interest @ 9% p.a. from the date of institution of the suit till the date of realisation along with a cost, which is assessed at Rs. 5,000/-. Decree be drawn accordingly.