Harish C. Bhasin & Anr. vs Bank Of Baroda & Ors.
2010 Latest Caselaw 5532 Del

               IN THE HIGH COURT OF DELHI AT NEW DELHI
+                         RFA NO. 178 OF 2005
%                                   Date of Decision: 6th December, 2010


#      HARISH C. BHASIN & ANR.                           ....Appellants
!                           Through: Mr. S.K. Puri, Sr. Advocate with
                            Mr. Pradeep K. Mittal, Mr. Praveen K.
                            Mittal and Mr. Gautam K. Laha, Mr.
                            Praveen Kumar & Ms. Hrishika Pandit,
                            Advocates.

                                 Versus

$      BANK OF BARODA & ORS.                        ... Respondents
!                          Through: Mr. Pallav Saxena, Advocate for
                           Respondent No. 1. None for Respondents
                           No. 2-4.

       CORAM:
*      HON'BLE MR. JUSTICE P.K.BHASIN

1. Whether Reporters of local papers may be allowed to see
   the Judgment? (No)
2. To be referred to the Reporter or not? (No)
3. Whether the judgment should be reported in the digest? (No)
                              JUDGMENT

P.K.BHASIN, J:

The present appeal is filed by the two appellants for setting aside the

judgment and decree dated 4th November, 2004 passed by the Additional

District Judge whereby the suit filed by the respondent no.1 bank for

recovery of ` 7,16,505/- and pendente lite and future interest thereon @

16 ½ % p.a. has been decreed against the appellants as the principal

borrowers and respondents no. 3-5 as their guarantors.

2. The relevant facts giving rise to the present appeal culled from the

pleadings of the parties, evidence adduced by them and the submissions

made during the course of hearing of this appeal by the counsel for the

appellants and respondent no.-1 bank are that on 2nd January,1981

appellant no.1, Harish Chandra Bhasin, as the sole proprietor of appellant

no. 2, Raja Ram Bhasin & Co., was sanctioned cash credit facility of `

five lacs by the Traders' Bank Ltd.(which subsequently in May,1988 had

got amalgamated with Bank of Baroda). At that time appellant no.1 had

signed usual loan documents and had also pledged some shares with the

bank as security. Account no.84 was opened in the name of appellant no.2

on 2nd January,1981 itself and thereafter the appellants had been

withdrawing and depositing money in their said account from time to time.

They had vide their letter dated 8th January, 1983, written to the Traders'

Bank, admitted that a sum of ` 6,79,815.40 was correctly reflected in

their account to be payable by them as on 31st December, 1982. However,

in January 1983 the appellants wrote a letter to the Traders' Bank that the

credit facility was given to them not for themselves but to accommodate

bank's valuable customer P.S.Jain Motors(respondent no.5 herein) and so

money due in the cash credit account should be recovered from P.S.Jain

Motors Thereafter also the appellants had written similar similar letters to

the Traders' Bank but the Bank had been continuing to demand money

from the appellants lying outstanding in their cash credit account while

denying the appellants' claim that they were not liable to re-pay the

money due to the bank in their account.

3. The appellants did not clear their liability till April,1987. The

Traders' Bank Ltd. got amalgamated with the Bank of Baroda,

respondent no.1-plaintiff, pursuant to the notification dated 12th May,1988

issued by the Government of India under Section 45 of the Banking

Regulations Act,1949. As a result of that amalgamation Bank of Baroda

became entitled to recover the money which was still due from the

appellants in their cash credit account with the erstwhile Traders' Bank

Ltd. and accordingly it also demanded the outstanding amount of `

495867.94 from them vide letter dated 26th June, 1988 and the appellants

were called upon to clear these dues within ten days. It appears from the

record of the trial Court that on receipt of the said demand letter in which

respondent no. 1 had also claimed that in case of non-payment of its dues

within ten days legal proceedings for recovery of the dues shall be

initiated, respondents no. 3 to 5 herein, who were also already availing

various credit facilities of crores of rupees from the erstwhile Traders'

Bank Ltd. and out of whom respondent no. 5 herein, P.S. Jain Motor

Co.(Punjab) Ltd. was according to the appellants' own case the real

beneficiary of the cash credit facilities extended by the erstwhile Traders'

Bank Ltd. in the name of the appellants, were introduced by the appellants

to respondent no.1-plaintiff and they offered to clear the bank's

outstanding dues in the account of the appellants and to assure the

respondent no.1-plaintiff that they really meant to honour their

commitment to clear the bank's dues they also offered to mortgage some

land in favour of the bank. In that regard respondent no. 4 herein wrote a

letter dated 31st May, 1988 to the respondent no.1-plaintiff and after

verification of the title deeds in respect of the properties proposed to be

mortgaged respondent no. 3 executed a formal agreement of guarantee in

favour of respondent no.1-plaintiff on 6th October, 1988 and it also

mortgaged its land situated in district Faridabad in favour of respondent

no.1- plaintiff to secure the money due from the appellants. However,

thereafter neither the appellants nor respondents no. 3 to 5 paid any money

to the respondent no.1-plaintiff to clear the outstanding dues in the

account of the appellants and, therefore, the respondent no.1-plaintiff

was left with no other alternative but to initiate legal proceeding for the

recovery of its money from the appellants and accordingly suit was filed

on 21st August, 1990 for recovery of ` 7,16,505.85 which amount was

claimed to be due on the date of the filing of the suit.

4. The appellants were arrayed as defendants no. 1 and 2 in the plaint

and from now onwards reference to them shall be made in this judgment

also as defendants no. 1 and 2. They contested the suit and in their written

statement it was claimed by them, inter alia, that though the loan was

taken by them from the erstwhile Traders' Bank Ltd. but it was, in fact,

taken for the benefit of and utilization by one Mr. Ramesh Jain who

happened to be one of the Directors of the Traders' Bank Ltd. and was also

running his own Group of Companies( which were impleaded in the suit as

defendants no.3-5 and are respondents no. 3-5 in this appeal and reference

to them shall be made hereinafter as defendants no.3-5). It was also

pleaded that defendant no.1 had only lent his name for the loan

transaction and so the loan amount was repayable by that Ramesh Jain

and his Group of Companies namely, defendants no. 3 to 5 and that was

evident from the statement of account which showed the same that when

loan was sanctioned the entire loan amount of `5 lacs was given to

defendant no.5 and thereafter some amounts had been transferred from the

account of defendant no.5 to the account in the name of the defendants no.

1 and 2 towards repayment of the loan and no payments were made by

defendants no. 1 and 2. It was further pleaded in the written statement by

defendant nos. 1 and 2 that in the year 1983 itself they had informed the

erstwhile Traders' Bank Ltd. that the loan in question had been taken for

Mr. Ramesh Jain and as per the clear understanding between the appellants

and the Traders' Bank the loan amount was repayable by Mr. Ramesh

Chand Jain and his Group Companies. Other objections taken in the

written statement were that the suit, as framed, was not maintainable since

in the plaint it had not been disclosed as to what amount was being

claimed on account of principal and what was being claimed on account of

interest. The rate of interest being claimed by the plaintiff bank was also

claimed to be arbitrary and excessive and so not chargeable in law.

These defendants also denied having made any payments in their account

at any time and pleaded that since they had disowned their liability in the

year 1983 itself and the erstwhile Traders' Bank Ltd. having not initiated

any legal proceedings for the recovery of its dues outstanding in the

account in the name of the appellants for years the suit filed by Bank of

Baroda was time barred. It was further pleaded by defendants no. 1 and 2

that since the loan in question was taken for the benefit of Mr. Ramesh

Chand Jain that is why defendants no.3-5 had undertaken to clear the

outstanding dues in the account of the appellants and they had accordingly

written letters dated 31st May,1988 and 15th June,1988 and defendant no.3

and they had also executed a guarantee agreement dated 6th October, 1988

for a sum of ` 4,95,867.94 along with interest etc. and mortgage of some

land in district Faridabad was also created by defendant no. 3 of Jain

Group and ,therefore, the bank should have recovered its dues from the

Jain Group only by exercising its rights as mortgagee in respect of the

mortgaged land.

5. Defendants no. 3 to 5 also contested the suit by filing a joint written

statement which was signed on behalf of defendant no. 3 by one of its

Directors Sh. R.C. Jain and on behalf of defendants no.4 and 5 by one Sh.

Prabhash Jain as a partner of defendant no. 4 and Director defendant no.

5. It was pleaded by these defendants, inter alia, by way of preliminary

objections that the plaintiff bank had no cause of action against them and

further that the suit was in any case time barred. On merits, it was pleaded

by these defendants that they were availing of credit facilities extended to

them by the Traders' Bank Ltd. through its branch at Jallandhar till 20th

November, 1987 when suddenly the operation of their accounts was

suspended on the ground that the Reserve Bank of India had imposed a

moratorium due to which their entire business came to a standstill. When

the Traders' Bank Ltd. got merged with the plaintiff bank they became

very anxious for revival of their business and so they had approached the

plaintiff bank for the revival of their credit facilities and after negotiations

and talks with the officials of the plaintiff bank the officials of the bank

coerced them to give letter dated 31st May, 1988 undertaking therein to

have the account of Raja Ram Bhasin and Co. also regularized and the

defendants were also asked to execute a bond of guarantee in respect of the

account of defendant no. 1 otherwise the credit facilities being availed of

by them shall not be revived. Since the defendants 4 and 5 were facing

dire financial constraints and their business had come to a standstill they

gave letter dated 31st May, 1988 on the terms and lines suggested by the

officials of the plaintiff bank the plaintiff bank also got executed a bond

of guarantee from defendant no. 3, a sister concern of defendant nos. 4

and 5, and also got mortgaged its land but even then their credit limits

were not revived and consequently the commitments made by them in the

letter dated 31st May, 1988 of defendants 4 and 5 and in the bond of

guarantee dated 6th October, 1988 executed by defendant no.3 in favour of

the plaintiff bank became illegal and void being without consideration

and consequently unenforceable in law.

6. The above-noted pleadings of the parties led to the framing of the

following issues by the trial Court:-

"1. Whether the plaint has been signed and instituted by duly authorized person?

2. Whether the suit is bad for misjoinder of parties?

3. Whether loan was not taken by the defendant no. 1 but was taken for and on behalf of M/S P.S. Jain Motors? If so, its effect?

4. Whether the suit of the plaintiff is barred by the time in view of letter dated 29th January, 1983?

5. Does the execution of letter dated 31.5.1988 by defendants no. 4 and 5 absolves defendants no. 1 and 2 of their liability under the suit transaction?

6. Whether the defendant no. 3 is not bound by the personal guarantee executed by him?

7. To what amount the plaintiff is entitled and from which of the defendants?

8. To what rate of interest the plaintiff is entitled to pendent lite and future?

9. Relief."

7. From the side of the plaintiff bank two witnesses were examined

while from the side of defendants no.1 and 2 only defendant no.1

appeared in the witness box. No evidence was adduced on behalf of

defendants no. 3 to 5 who, in fact, had stopped appearing in the case after

framing of the issues. The trial Court after examining the evidence

adduced by the plaintiff bank and defendants no.1 and 2 rejected all the

defences raised by the defendants in opposition to the plaintiff's claim in

the suit and vide judgment under challenge decreed the suit in favour of

the plaintiff bank and against all the defendants as had been prayed for in

the plaint. Defendants No. 1 and 2 only felt aggrieved with the trial

Court's judgment and filed the present appeal while defendants 3 to 5 have

not challenged the trial Court's verdict against them.

8. Mr. S.K. Puri, learned senior counsel appearing for the appellants

did not challenge the findings of the trial Court on issues no.1 and 2. I

have in any case gone through the findings of the trial Court on these two

issues and I have also found no infirmity in the trial Court's findings and,

therefore, the same are affirmed.

9. Issue no. 3 is in respect of the plea of defendants no.1 and 2 to the

effect that the loan was taken by them not for themselves but for the

benefit and utilization by defendants no. 3 to 5, being run and managed by

one Mr. Ramesh Jain and also that facility was extended in their names

with the clear understanding with the bank that loan would be repayable

only by that Mr. Ramesh Jain and defendants no. 3 to 5. This issue was

also decided by the trial Court in favour of the plaintiff. The findings on

this issue were challenged by the learned senior counsel for the appellants.

However, on going through the evidence adduced by the contesting parties

and the findings of the trial Court on this issue I do not find any substance

in the challenge thereto. It was admitted by defendants no.1 and 2 that

they had applied for grant of cash credit facility to the erstwhile Traders'

Bank Ltd. and their request had been accepted also and cash credit facility

of ` 5 lakhs for a period of six months was sanctioned on 2nd January,

1981 and that various loan documents were also executed by defendant no.

1 in favour of the Traders' Bank. It was also admitted case of defendants

no. 1 and 2 that vide their letter dated 8th January, 1983(Ex.P-8) they had

acknowledged that a sum of ` 6,79,815.40 was due from them in their

cash credit account on 31st December, 1982. Thus, up to 8th January, 1983

these defendants had not claimed that they themselves were not the real

beneficiaries of the cash credit facility sanctioned by the Traders' Bank

Ltd. and that in fact Ramesh Jain, one of the Directors in that bank, and his

Group of Companies (defendants no. 3-5) were the real beneficiaries or

that defendant no.1 had only lent his name for getting the credit facility

from the Traders' Bank Ltd. for Mr. Ramesh Jain and his Group of

Companies. Defendants no. 1 and 2 had, however, subsequently taken the

stand in their letters dated 29th January, 1983, 9th September, 1983 and 5th

March,1986 addressed to the Traders' Bank Ltd. that they were not liable

to pay any money since they were advanced loan to accommodate

defendant no.5 Company which was its valuable client. The Traders'

Bank had denied these defendants' claim made in their three letters that

they had no connection with the grant of loan of ` 5 lakhs and it was

conveyed to them that even if they had lent their names as was being

claimed by them they still continued to be liable to clear the Bank's dues.

On this aspect of the matter there is only the statement of defendant no.1

but that statement shows that he had during his evidence given up his stand

taken in the written statement. He had deposed that one Mr. Ramesh Jain,

who was one of the Directors of the Traders' Bank and was also a

partner in defendant no.4 and a director in defendant no.5, was his good

friend and a client also and that Mr. Jain had approached him with a

request that since he wanted a loan of ` 5 lakhs from the Traders' Bank

Ltd. he should take the loan in his name for a period of six months and Mr.

Jain had also assured at that time that the loan shall be discharged within

six months. DW-1 further deposed that he had accepted the request of Mr.

Ramesh Jain and on his request loan of ` 5 lakhs was given for six months

to him(DW-1) by Traders' Bank against the security of his shares. He had

further deposed that Mr. Ramesh Jain had taken a cheque of ` 5 lakhs in

the name of M/s P.S. Jain Motors Ltd.(defendant no. 5) and one cheque of

`3,90,000 from his cash credit account. Thus in this statement of

defendant no.1 it was not claimed by him that the loan was sanctioned in

his name by the Traders' Bank with the clear understanding that the

liability to repay the loan was to be of Ramesh Jain and defendants no. 3-

5. In his evidence DW-1 had also deposed that he had informed the bank

that in view of the liability having been taken over by defendants no. 3-5

he would no longer be liable to the bank. It is common case of all the

parties that defendants no. 3 to 5 had stepped in only in May, 1988 and had

assured the plaintiff bank that they would be clearing the outstanding dues

in the account of the defendants 1 and 2. Thus, the plea taken by the

defendants no. 1 and 2 in their evidence is not consistent with the stand

taken by them in their written statement that there was an understanding

with the bank that the loan would be repayable by Ramesh Jain and his

Group of Companies even though it had been sanctioned in the name of

defendant no. 2 Raja Ram Bhasin & Co. In fact, the above referred

statement of DW-1 is a clear admission on his part that the loan was taken

by him. It was irrelevant whether it was taken at the request of some Mr.

Jain who has not even been produced by defendants no. 1& 2 in support of

their case. In any event, even if the loan had been taken by defendants 1

and 2 on somebody's request that would not debar the bank from

recovering its dues from them and even if defendant no.1 had claimed in

his evidence that there was some kind of understanding with the Traders'

Bank that the loan would be repayable by Ramesh Jain and defendants 3-5

that statement would not have made any difference in view of the various

loan documents(Ex. P-1 to P-6) proved on record by the plaintiff which

admittedly had been executed by defendants 1 and 2 in favour of Traders'

Bank Ltd. and in which nowhere it had been stated that the loan would be

repayable not by the executants of those documents but by defendants 3-5

and Ramesh Jain. Therefore, the defence of defendants 1 and 2 has been

rightly rejected by the learned trial Judge. Learned senior counsel for the

appellants only drew my attention to that part of the findings on issue no.3

where the trial Judge had observed that the defence of these defendants

appeared to be probable. There is no doubt that the trial Judge had

observed so while deciding issue no.3 but that observation is of no help to

the appellants since finally it was concluded by the trial Judge that these

defendants had failed to establish their defence and with that conclusion I

am in full agreement.

10. Issue no.4 is in respect of the plea of the defendants that the suit of

the plaintiff was in any case time barred. The trial Court has decided this

issue also in favour of the plaintiff bank. Learned senior counsel for the

appellants had submitted that since the appellants had disowned their

liability totally way back in the year 1983 vide their letter dated 29th

January,1983 the bank was bound to file the suit for recovery of its dues

within three years from that date but that was not done and the suit filed in

the year 1990 was hopelessly barred by time. Learned senior counsel also

submitted that there was nothing on record to show that the appellants had

either acknowledged their liability or had made any part payments in their

cash credit account after they had written to the Traders' Bank Ltd. that

they were not liable to pay any money to it since the real beneficiary of the

credit facility sanctioned in their name was Ramesh Chand Jain and his

Group of Companies. Consequently, plaintiff bank was not entitled to

benefit of the provisions of Section 18 and 19 of the Limitation Act.

11. Mr. Pallav Saxena, learned counsel for the plaintiff, on the other

hand, submitted that there was sufficient material produced by the plaintiff

bank to show that defendants no. 1 and 2 had not only been admitting the

jural relationship of creditor and debtor with the plaintiff bank but had also

been making part payments towards the discharge of their liability from

time to time and those payments had been extending commencement of

period of limitation. Learned counsel submitted that last payment made

by defendants no. 1 and 2 was on 22nd August, 1987 and, therefore, the suit

filed on 21st August, 1990 was within the period of limitation. In support

of the submission that defendants no. 1 and 2 had been making part

payments from time to time in their cash credit account even after

claiming that the loan was taken for the benefit of Mr. Ramesh Jain and his

Group of Companies, learned counsel for the plaintiff bank relied upon the

statement of account in respect of appellants' cash credit account No.84

copy of which duly certified under the Bankers' Books Evidence Act 1891

was proved as Ex. PW-1/2.

12. It is common case of the parties that defendants no. 1 and 2 were

given the credit facility for a period of six months from 2 nd January, 1981

and so the period of limitation of three years commenced on the expiry of

six months period. Admittedly, defendants 1 and 2 had vide their letter

dated 8th January, 1983 acknowledged their liability towards the Traders'

Bank Ltd. to the extent of ` 6,79,815.40. So, fresh period of limitation

commenced from that date. Mr. Puri did not dispute the correctness of the

credit entries made in the cash credit account of defendants no. 1 and 2

from time to time but it was his contention that most of those credits were

by way of transfer of funds from the current account of defendant no.

5(being CA no. 3092) and those transfer entries cannot entitle the plaintiff

to the benefit of fresh period of limitation as provided under Section 19 of

the Limitation Act since nothing has been produced on record by the

plaintiff bank to show that those payments were made by defendant no. 5

from their current account as an agent of defendants no. 1 and 2 with their

consent, knowledge and authorization. A perusal of the statement of

account in respect of cash credit account no. 84 shows that on 20 th

November, 1984 a sum of ` 50,000 was transferred to that account from

the current account of defendant no. 5. Then another sum of ` 50,000

was transferred from that account and credited to the account of

defendants no. 1 and 2 on 20th March, 1985. Another sum of ` 22,340

was credited to the account of defendants no. 1 and 2 by way of transfer of

funds from the current account of defendant no. 5. Again on 7 th October,

1985 a sum of rupees two lacs was transferred from the account of

defendant no. 5 to the account of defendants no. 1 and 2. On 16th January,

1987 rupees two lacs were transferred from current account no. 3092 to

cash credit account no. 84 of defendants no. 1 and 2. Finally, on 22nd

August, 1987 a sum of ` 20,000 was transferred from the account of

defendant no. 5 to the account of defendants no. 1 and 2. Now, the

question is whether these transfer entries can be utilized by the plaintiff

bank to get benefit of the provisions of Section 19 of the Limitation Act

which provides that where some payment on account of some debt is made

before the expiration of the prescribed period by the person liable to pay

the debt or by his agent duly authorized in that behalf a fresh period of

limitation shall be computed from the time when the payment was made.

13. Admittedly, in the present case the plaintiff bank is relying upon the

payments made in the account of defendants no. 1 and 2 by way of transfer

of funds from the account of defendant no. 5 to get the benefit of Section

19 of the Limitation Act. It is the case of defendants 1 and 2 themselves

that defendants no. 3 to 5 were the concerns of one Mr. Ramesh Jain and

that Mr. Ramesh Jain was a friend of defendant no. 1. It is also the case

of the defendants no. 1 and 2 that the cash credit facility in question had

been taken by them on the request of Mr. Ramesh Jain. In these

circumstances, the only inference which this Court can draw is that

defendants no. 2 to 5 were all like family concerns and whatever payments

were being credited in the account of defendants no. 1 and 2 by way of

transfer of funds from the account of defendant no. 5 were, in fact, being

made by defendant no. 5 on behalf of defendants no. 1 and 2 and that too

with the authority of defendants no. 1 and 2 as otherwise there was no

occasion whatsoever for defendant no. 5 permitting transfer of huge

amount of money from its account for being credited in the account of

defendants no. 1 and 2. Defendants no. 3 to 5 in their written statement

had not claimed that they had no concern whatsoever with defendants no.

1 and 2 or that money transferred from the account of defendant no. 5 to

the account of defendants no. 1 and 2 was without their knowledge or

consent or that it had not been asked by defendants no. 1 and 2 to transfer

money from its current account no. 3092 to cash credit account no. 84.

Therefore, the plaintiff bank was entitled to get the benefit of

commencement of fresh period of limitation every time money was

transferred from the account of defendant no. 5 to the account of

defendants no. 1 and 2. It was not disputed by the learned senior counsel

for the appellants that if the transfer of money from the account of

defendant no. 5 to that of defendants no. 1 and 2 is held to be a payment

made for and on behalf of defendants 1 and 2 and with their authority then

the suit filed on 21st August, 1990 would not be time barred.

Consequently, I hold that the suit filed by the plaintiff bank on 21 st August,

1990 was not time barred and the learned trial Court has also rightly held

so.

14. Now, I come to the challenge to the trial Court's findings against

defendants no. 1 and 2 in respect of issue no. 5. It was contended by the

learned senior counsel for the appellant that even if the suit is held to have

been filed within the period of limitation because of the payments of

money in the account of defendants no. 1 and 2 by way of transfer of funds

from the current account of defendant no. 5(respondent no. 4 herein) even

then the suit of the plaintiff bank is liable to be dismissed against

defendants no. 1 and 2 at least since the moment defendants no. 3 to 5

wrote the letter dated 31st May, 1988 to the plaintiff bank offering to

liquidate the outstanding dues of defendants no. 1 and 2 and the plaintiff

bank accepted that offer and got a mortgage of land created in its favour in

respect of some land owned by defendant no. 3 in district Faridabad a

fresh contract came into existence between the plaintiff bank and

defendants no. 3 to 5 whereby defendants no. 1 and 2 stood absolved of

the liability to clear the bank's dues under the cash credit account no. 84.

Learned senior counsel argued that this is a case of novation of contract

and defendants no. 1 and 2 are, therefore, entitled to the benefit of the

provisions of Section 62 of the Indian Contract Act whereunder it is

provided that if the parties to a contract agree to substitute a new contract

for it or to alter it the original contract need not be performed. In support

of this argument, learned senior counsel cited one judgment of the

Supreme Court in "Satish Chandra Jain vs. National Small Industries

Corpn. Ltd. and Ors.", AIR 2003 SC 623 and one judgment of Kerala

High Court reported as AIR 1998 Kerala 31.

15. On the other hand, learned counsel for the plaintiff bank argued that

there was no novation of contract between the plaintiff bank and

defendants no. 1 and 2 at any time and even defendants no. 3 to 5 had at no

stage represented to the plaintiff bank that defendants no. 1 and 2 would

stand absolved of their liability to clear the bank's dues in their cash credit

account upon defendants no. 3 to 5 agreeing to regularize their cash credit

account. Learned counsel contended that all that defendants no. 3 to 5 did

was to give an offer to the plaintiff bank to give guarantee for the

repayment of dues by defendants no. 1 and 2 and even the agreement dated

6th October, 1988 executed by defendant no. 3 clearly stipulated that it was

only guaranteeing the repayment of the bank's dues payable by defendants

no. 1 and 2 and nowhere in that agreement also it was agreed between

defendant no. 3 and the plaintiff bank that with the execution of that

agreement defendants no. 1 and 2 would stand absolved of their liability to

clear the dues of the bank or that the plaintiff bank will not recover any

money from defendants no. 1 and 2 because of defendants no. 3 to 5

having agreed to secure the bank's money due from defendants no. 1 and

2.

16. I am in full agreement with the aforesaid submissions made by the

learned counsel for the plaintiff bank and do not find any merit in the plea

of novation of contract taken on behalf of defendants no. 1 and 2. Plaintiff

bank was concerned with recovery of its money and since defendants no.

3 to 5 had offered to secure the bank's money due from defendants no. 1

and 2 it could have very well accepted the guarantee of defendants no. 3 to

5 which it did. Because of the guarantee given by defendants no. 2 to 5, of

which fact defendants no. 1 and 2 were not aware, the account of

defendant no. 5 was being debited for different sums and defendants no. 1

and 2 were given the credit for those amounts in their cash credit account

from time to time and because of those transfer entries having been made

from the account of defendant no. 5 it cannot be said that plaintiff bank

had given up its right to recover its dues from defendants no. 1 and 2 as the

principal borrowers. Learned senior counsel for the appellant had also

contended that the novation of contract should be inferred also from the

fact that the shares of defendant no. 1 which had been kept with the bank

as security had been returned to him which would not have been done if

the plaintiff was to recover its money from defendants no. 1 and 2. There

is no doubt that in the plaint itself the plaintiff had pleaded that the shares

which had earlier been deposited by defendant no. 1 were returned back

but at the same time it had also been pleaded that those shares had been

substituted with new shares of different companies. In any case, defendant

no. 1 had claimed in his evidence that the shares which he had deposited

with the bank as security were returned to him in July, 1981. Therefore,

defendant no. 1 had got back his shares many years before defendants no.

3 to 5 had stepped in to guarantee the repayment of bank's dues in the

account of defendants no. 1 and 2 and so it cannot be said that return of

shares to defendants no. 1 and 2 in July, 1981 amounted to a novation of

contract between the erstwhile Traders' Bank and these two defendants.

Therefore, findings of the learned trial Court on this issue are also

affirmed.

17. Issue no. 6 has also been decided in favour of the plaintiff and

against defendant no. 3. The findings of the learned trial Court on this

issue have not been challenged by defendant no. 3 by filing any appeal.

The learned trial Court had rejected the defence that the guarantee

agreement dated 6th October, 1988 had been got executed by the plaintiff

bank under coercion. Since there was no evidence adduced by defendants

no. 3 to 5 to substantiate their stand that they were coerced to execute

letters and guarantee agreement showing that they had themselves offered

to guarantee the repayment of money due to the bank from defendants no.

1 and 2 there is no infirmity in the trial Court deciding this issue in favour

of the plaintiff.

18. Finally, learned senior counsel for the appellants relying upon a

judgment of Bombay High Court reported as AIR 1992 Bombay 482 had

submitted that since in the plaint it had not been stated as to what was the

principal amount and what was the interest amount out of the total suit

amount the suit was liable to be dismissed on this ground also. Learned

counsel for the plaintiff on the other hand cited a judgment of the Supreme

Court in the case of "Central Bank of India vs. Ravindra & Ors.", (2002)

I SCC 367 and contended that the decision of Bombay High Court relied

upon by the appellants had been overruled by the Supreme Court in the

said judgment and it had been held that parties could voluntarily enter into

transactions and agree to payment of compound interest and authorizing

the creditor to capitalize the interest and that once interest is capitalized it

becomes a part of the principal so as to bind the borrower. Faced with this

judgment, the learned senior counsel for the appellant did not advance any

further submissions on this aspect and in my view rightly so because in the

present case also defendants no. 1 and 2 had agreed to pay interest to the

plaintiff bank @ 20 ½ % p.a. on the daily balance of the cash credit

account and it was also agreed that the interest so charged shall form part

of the principal.

19. In the result, this appeal being devoid of any merit is dismissed with

costs.

December 6, 2010/sh                                    P.K. BHASIN,J