Canara Bank vs M/S M.K.Industries And Ors.
2009 Latest Caselaw 505 Del

*           IN THE HIGH COURT OF DELHI AT NEW DELHI


+                              RFA (OS) 21/1996


%                                      Date of decision: 12.02.2009


CANARA BANK                                          ...APPELLANT

                           Through:    None.

                                   Versus

M/s M.K.INDUSTRIES AND ORS.                          ...RESPONDENT

                           Through:    None for R-1 and R-2.
                                       Mr.N.Menon, Advocate for R-3.


CORAM:
HON'BLE MR. JUSTICE SANJAY KISHAN KAUL
HON'BLE MR. JUSTICE SUDERSHAN KUMAR MISRA, J.

1. Whether the Reporters of local papers may be allowed to see the judgment? No

2. To be referred to Reporter or not? No

3. Whether the judgment should be reported in the Digest? No

SANJAY KISHAN KAUL, J. (Oral)

1. The appellant bank filed a suit for recovery of

Rs.5,43,472.00 against the defendants with the allegation

that respondent No.2 herein was the sole proprietor of the

first respondent and had imported "Brass Scrap Honey"

from Holland under OGL. A revision in the custom duty had

arisen which was challenged by respondents 1 & 2 by filing

a writ petition before this Court and the Court had directed

stay of the differential duty on furnishing a bank guarantee

for a sum of Rs.3,75,000.00, being 50 per cent of the

differential amount.

2. In order to obtain the said bank guarantee respondents

1 & 2 along with the third respondent approached the

appellant bank and in view of the documents executed by

the respondents, the appellant bank issued the bank

guarantee with 10 per cent margin money. Respondent

No.3 deposited the sum of Rs.37,500.00, being the 10 per

cent margin money with the appellant bank.

3. The writ petition ultimately did not succeed resulting in

the invocation of the bank guarantee and the appellant

bank making the payment of Rs.3,75,000.00 to the

President of India through the Collector of Customs. Only

10 per cent of the margin money was available with the

bank and the respondents failed to deposit the balance

amount along with interest accrued thereon resulting in the

filing of the suit.

4. The appellant claimed that it was entitled to interest @

17.5 per cent per annum on the amount of Rs.3,75,000.00,

being the contractual rate of interest. Respondents 1 & 2

did not even appear and were proceeded ex parte while

respondent No.3 filed the written statement. Respondent

No.3 sought to set up defences that it is only at the request

of some relatives that he had furnished the margin money

and that he did not know the first two respondents.

5. On the pleadings of the parties, the following issues

were framed:

"1. Whether the plaint has been signed, verified and the suit instituted by a duty authorized person?

2. Whether the defendant No.3 is not liable for the suit amount?

3. What rate of interest the plaintiff is entitled to charge?

4. To what amount, if any the plaintiff is entitled and from whom?

5. Relief."

6. The appellant examined one witness while respondent

No.3 failed to produce any witness. The findings on the

issues are in favour of the appellant and the suit was

accordingly decreed in terms of the impugned judgement

and decree dated 18.9.1995 for the sum of Rs.5,43.472.00

(which included interest of 17 per cent per annum) along

with 12 per cent interest from the date of filing of the suit

till the date of realization. The appellant is aggrieved by the

impugned judgement and decree whereby only 12 per cent

interest has been granted pendente lite and future contrary

to the commercial documents.

7. We have perused the impugned judgement and

decree. The findings on issue No.3 are as under:

"ISSUE No.3

The plaintiff has claimed interest at the rate of 17.5 per cent per annum with quarterly rest. PW-1 in the statement says that Reserve Bank of India's prevailing rate of interest at that time was 17 per

cent per annum and presently the rate of interest is 19 per cent per annum. There is no rebuttal to the statement nor there is anything in the cross- examination which may show that the defendant is not liable to pay interest at the aforesaid rate. I, therefore, hold that defendant is liable to pay interest at the rate of 17 per cent per annum on the aforesaid amount of Rs.3,75,000/-."

8. The aforesaid findings, thus, show that the learned

single Judge finds that the rate of interest is 17 per cent per

annum as per the RBI guidelines and that the appellant is

entitled to the said interest rate on the principal amount of

Rs.3,75,000.00. However, while passing the judgement and

decree the interest rate had been reduced to 12 per cent

per annum for pendente lite and future interest.

9. The grounds of appeal show that the grievance of the

appellant is that once the interest rates are established as

fixed by the Reserve Bank of India for

nationalized/commercial banks and a debtor is held liable to

pay interest, there is no reason why a lower rate of interest

should be fixed for the pendente lite and future period. It is

also pleaded that the suit was pending for quite some time

and the appellant bank had been deprived of the money.

During this period of time there has also been inflation and

decrease in the value of rupee.

10. We find merit in the aforesaid contention raised in the

grounds of appeal. The transaction in question is a purely

commercial transaction whereby the bank guarantee was

furnished. In fact, the bank showed consideration by not

keeping a 100 per cent margin money but granted the bank

guarantee at 10 per cent margin money. Once the bank

guarantee was invoked and paid and the said payment was

not in dispute, there was no reason for the respondents not

to remit the amount due to the appellant bank.

11. Respondents 1 & 2 did not even appear to contest the

suit. The liability of respondent No.3 has been discussed

while giving the findings on issue No.2. The deposit receipt

given by respondent No.3 along with covering letter would

amount to admitted lien on the bank for the said receipt.

Respondent No.3 also executed a letter of guarantee

agreeing to pay the demand, which would otherwise be

made in case respondents 1 & 2 failed to clear the

outstanding.

12. The plea raised by respondent No.3 that the bank

guarantee has been paid beyond time has been negated.

13. We may also notice that respondent No.3 filed cross-

objections without payment of court fee. These cross-

objections in the form of CM No.683/1997, were, however,

dismissed on 4.10.1999 on account of the fact that despite

the indulgence being shown to the said respondent to pay

court fee the same had not been paid. The plea of

respondent No.3 that he was not liable to pay court fee

already stood negated even earlier.

14. We also find from the order sheet that on 7.3.2007

learned counsel for the appellant had stated that he was

pressing the appeal only against respondent No.3.

15. In the impugned order we find no cogent reason why

in a purely commercial transaction the appellant bank

should be deprived of the commercial rate of interest

agreed to between the parties whether for the past,

pendente lite or future. The same principle would apply for

the pendente lite and future period as for the past. Since

the learned single Judge has already held interest @ 17 per

cent per annum for the past, we consider it appropriate that

the same rate of interest should be payable for the

pendente lite and future period. This finding of interest rate

for the past is not on a mere whim of the learned single

Judge but is based on a categorical finding on issue No.3

taking into account the statement of PW-1 that the

prevailing rate of interest at that time was 17 per cent per

annum and, in fact, had reached 19 per cent per annum at

the time of the judgement. There was no rebuttal to this

statement nor had any worthwhile cross-examination being

carried out which could have given rise to a different

conclusion.

16. In view of the aforesaid, we set aside the judgement

and decree dated 18.9.1995 to the extent that the rate of

interest for the pendente lite and future period was

restricted to 12 per cent per annum and hold that the

appellant is entitled to interest @ 17 per cent per annum

even for this period being from the date of filing of the suit

till the date of realization, but this benefit would be

available only against respondent No.3 in view of the

statement recorded on 7.3.2007 of the learned counsel for

the appellant. The judgement and decree qua respondents

1 & 2 stands affirmed since the appellant had given up the

challenge to the impugned judgement and decree against

the said respondents.

17. The appeal is accordingly allowed leaving the parties

to bear their own costs. We have not awarded costs as

none has appeared for the appellant.

SANJAY KISHAN KAUL, J.

FEBRUARY 12, 2009 SUDERSHAN KUMAR MISRA, J. b'nesh