Delhi District Court
Central Bank Of India vs (1) M/S Febron India Pvt Ltd on 18 August, 2012
ID No.02401C0428182009
IN THE COURT OF SHRI PANKAJ GUPTA : ADDL. DISTRICT
JUDGE (CENTRAL07) : TIS HAZARI COURT : DELHI
CIVIL SUIT NO.201/2010/1983
Central Bank of India,
Having its Central Office,
At Chander Mukhi,
Nariman Point,
Bombay - 400021 and
Branch amongst others at
Parliament Street,
New Delhi - 110 001. ............. PLAINTIFF
VERSUS
(1) M/s Febron India Pvt Ltd.,
16A, Sunder Nagar Market,
New Delhi.
(2) Mr. Sucha Singh Anand,
Chairman,
Fabron India Pvt. Ltd.,
6Dr. G. C. Narang Marg,
Delhi - 110 007.
(3) Mr. M. S. Anand,
Managing Director,
Fabron India Pvt. Ltd.
16A, Sunder Nagar Market,
1/15 Central Bank of India vs. Fabron India Pvt. Ltd.
New Delhi. ............ DEFENDANTS
Date of Institution : 05.07.1983
Date when the case reserved for order : 18.08.2012
Date of Order : 18.08.2012
J U D G M E N T
1. The plaintiff filed the suit for recovery of Rs.6,28,511.48 along with pendent elite and future interest @ 18 % p.a. against the defendants. Initially, the suit was filed before the Hon'ble Delhi High Court. On 18.11.2006, the Hon'ble Delhi High Court transmitted the suit to the District Court on the issue of pecuniary jurisdiction.
2. In the plaint, it is stated that the plaintiff is a banking company and Shri H P Minocha, the Chief Officer and Attorney holder of the plaintiff is authorised to institute, sign, verify the pleading and contest the suit. The defendant no.1 is a private limited company and has been carrying on the business of Export of clothes and handicraft. The defendant no.2 is the Chairman and the defendant no.3 is the Managing Director of the defendant no.1. The defendant no.1 approached the plaintiff on various occasions for grant of credit facilities. The said requests were accepted by the plaintiff from time to time and various credit facilities were granted to the defendant no.1 accordingly. To secure the said credit facilities, the defendants no.2 and 3 stood as guarantors. The defendants executed the necessary documents in favour of the plaintiff bank from time to time. The defendant no.1 failed to pay the outstanding amount. Hence, the plaintiff filed the present suit. 2/15 Central Bank of India vs. Fabron India Pvt. Ltd.
3. Notice of the suit was issued to the defendants who filed their common written statement (WS). The defendants denied their liability to pay the suit amount. The defendant also denied that Shri H P Minocha is authorised to institute the suit. It is stated that the plaintiff got signed certain blank documents from them, hence, the same are not enforceable in law. It is also stated that the plaintiff had taken the LIC policies of the defendant for seeking their valuation for grant and sanction of term loan which was never granted. Hence, it is prayed that the suit may be dismissed.
4. The plaintiff filed the replication and reiterated the averments made in the plaint.
5. On 17.05.1988, the following issues were framed :
(1) Whether the plaint has been signed and verified and the suit has been instituted by a duly authorised person?
(2) Whether the documents were blank when the defendants signed them? If so, to what effect ?
(3) Whether the plaintiff is entitled to charge interest ? If so, to what effect ?
(4) Whether the defendants no.2 and 3 stood surety for repayment of the amount by the defendant no.1 ?
(5) What amount, if any, is due to the plaintiff and from which of the defendants?
(6) Relief. 3/15 Central Bank of India vs. Fabron India Pvt. Ltd.
6. The plaintiff examined Shri V K Pasricha as PW1 who tendered his evidence by way of affidavit. The plaintiff relied upon the documents Ex.PW1/1 to Ex.PW1/22.
7. The defendant no. 3 examined himself as DW1 and tendered his affidavit in evidence.
8. During the proceedings, the defendant no.1 was ordered to be wound up; and the defendant no.2 expired.
9. I have heard the Ld. Counsels for the parties and have perused the material available on record including the written submissions filed by the respective parties.ISSUE NO. 1
10. Onus to prove the issue no. 1 was on the plaintiff. Entire evidence of the plaintiff including the affidavit filed by PW1 is silent as to whether Shri H P Minocha was the authorised official to institute the present suit against the defendants. As such, the plaintiff has failed to lead evidence to prove that Shri H P Minocha was authorized to institute the present suit.
Therefore, the issue no. 1 is decided against the plaintiff and in favour of the defendants.
4/15 Central Bank of India vs. Fabron India Pvt. Ltd.
ISSUES NO. 2 to 5
11. Issues no.2 to 5 are taken up together as they involve common discussions.
12. Before dealing with the said issues on merits, it is inevitable to mention that during the proceedings, the defendant no.1 was ordered to be wound up; and the defendant no.2 expired. The plaintiff opted not to get appointed the official liquidator in place of the defendant no.1. The defendant no. 3 is one of the legal representatives of deceased defendant no.2. However, the plaintiff also opted not to implead the other LRs of deceased defendant no.2. In this background, now the present suit is being contested by the plaintiff against the defendant no.3 only as guarantor and also as LRs of deceased defendant no.3.
13. Counsel for the defendant no.3 pleaded that it is the own case of the plaintiff that the defendant no.1 was the principal borrower and the defendant no. 3 was one of the guarantors. The plaintiff has opted not to get appointed the official liquidator to represent the defendant no.1 despite the permission granted by the company court, hence, as per section 134 of the Contract Act, in the absence of any prosecution against the principal borrower, there cannot be any prosecution against the guarantors also i.e. the defendants no.2 and 3 and therefore, the present suit is liable to be dismissed against them.
5/15 Central Bank of India vs. Fabron India Pvt. Ltd.
14. Now what is to be examined whether by the said omission on the part of the creditor i.e. the plaintiff, which had resulted in the abatement of the suit against the principal debtor i.e. the defendant no. 1 and consequential discharge against the principal debtor would result in discharge of the surety or not. In other words, the question which arose for decision is as to whether the suit has abated as a whole i.e. against defendants no. 2 and 3 as well. I propose to examine this issue presuming that the defendant no. 1 was the principal debtor and the defendants no. 2 and 3 stood as guarantors.
15. In the judgment titled as Syndicate Bank v. Pamidi Somaiah (died) , (Andhra Pradesh) reported in AIR 2002 AP 12, the Hon'ble High Court held:
" 9. A perusal of the above provisions clearly shows that the person, who gives guarantee to discharge the liability of a third person in case of his default, is called surety and the person in respect of whose default the guarantee is given is called the `principal debtor'. The liability of the surety is coextensive with that of the principal debtor. Section 134 shows that the surety's liability stands discharged by any contract between the creditor and the principal debtor by which the principal debtor is released or by any act or omission of the creditor, the legal consequence of which is the discharge of the principal debtor. Section 139 also con templates the discharge of surety by the creditor's act or omission impairing surety's eventual remedy. As per Sec tion 140, where a guaranteed debt has become due, or on default of the principal debtor, the surety, upon payment, is invested with all the rights, which the creditor had against the principal debtor. In the above provisions, it is clear that 6/15 Central Bank of India vs. Fabron India Pvt. Ltd.
the rights and obligations on both the creditor and the surety are provided. In the present case it is a fact that though the creditor filed the suit both against the principal debtor and the surety, the principal debtor died during the pendency of the suit and because of the omission on the part of the creditor the suit stands abated against the prin cipal debtor. The effect of it is the creditor cannot proceed against the principal debtor or his legal heirs and the debt stands discharged because of the omission to act on the part of the creditor. Now it is to be examined `Whether by the said omission on the part of the creditor, which had re sulted in the abatement of the suit against the principal debtor and consequential discharge against the principal debtor would result in discharge of the surety or not'. As al ready noticed, the surety is only a guarantor for the due to be discharged by the principal debtor and in case of default committed by the principal debtor, the surety has to make good the loss to the creditor. It is also not in dispute that the creditor has the right to proceed against the surety also, even though he can proceed against the principal debtor. If the creditor has recovered the amount due by the principal debtor from the surety, the surety stands subrogated into the shoe of the creditor and he can proceed and recover the amount paid as a surety from the principal debtor. By virtue of the act of omission by the creditor, the surety had lost such a right. The surety is only a guarantor and in case he pays the amount guaranteed by him on behalf of the principal debtor, he must have the right to proceed against the principal debtor. In the present case, as a result of an act of omission on the part of the creditor, the liability of the principal debtor stands discharged, as the creditor's suit against him had abated. Therefore, in terms of Section 134, it should be inferred that the liability against the sure ty also sands discharged, as a result of the abatement of the suit against the principal debtor."
16. In the judgment passed by the Hon'ble Delhi High Court in the case titled as "State Bank of India vs. S.K.Mathur" reported in 179 (2011) Delhi Law Times 118, it was held:
7/15 Central Bank of India vs. Fabron India Pvt. Ltd.
"8. The instant is not one such case. Admittedly, in this case, a joint claim had been preferred against the two de fendants of whom one having died, the suit proceedings stood abated qua him on 08.02.2007. Since the suit pro ceedings had abated against the principal debtor, the ques tion of continuance of the suit against the guarantor would not arise. Claim against the guarantor was not divisible; it was not an independent claim. Section 134 of the Indian Contract Act was applicable; surety stood discharged.
9.In AIR 1996 SC 1427, Sri Chand V. M/s. Jagdish Per shad Kishan Chand, the Apex Court had held that no ex haustive statement can be made as to when and under what circumstances the appeal will abate as a whole or it would proceed. The three tests laid down by the Court to determine this read as follows:
"This Courts will not proceed with an appeal (a) when the success of the appeal may lead to this Court's coming to a decision which may be in conflict with the decision between the appellant and the deceased respondent and therefore, it would lead to the Court's passing a decree which will be contradictory to the decree which had become final with re spect to the same subject matter between the appellant and the deceased respondent; (b) when the appellant could not have brought the action for the necessary relief against those respondents alone who are still before the Court and (
c) when the decree against the surviving respondents, if the appeal succeeds, be ineffective that is to say it could not be successfully executed. These three tests, as point out by this Court in Sri Chand v. M/s. Jagdish Pershad Kishan Chand, MANU/SC/0008/1966 are not cumulative tests.
Even if one of them is satisfied, the Court may dismiss the appeal."
10. Applying the first test, it is clear that once the suit had abated against defendant No.1, the result would be that the suit is dismissed qua him; if the claim is decreed against defendant No.2 it would be a conflict between the decree of 8/15 Central Bank of India vs. Fabron India Pvt. Ltd.
dismissal passed against defendant No.1 and, therefore, it would lead to the Court passing a decree which has even otherwise become final with respect to the same subject matter between the appellant and the deceased defendant No.1."
17. In the present case, admittedly, the defendant no.1, a private limited company, was wound up. Perusal of the record reveals that on 16.02.1989, the counsel for the defendants informed the court that the defen dant no.1 had been ordered to be wound up. Consequently, the liberty was granted to the plaintiff to take the appropriate steps for getting permission from the company court to continue with the suit. The company court vide or der dated 29.11.1995 passed in CA no. 155/95 granted permission to the plaintiff to continue with the present suit against the defendant no.1. On 12.01.1996 at the request of the counsel for the plaintiff, the notice was is sued to the official liquidator on filing of process fee. The record reveals that the plaintiff filed the process fee however, the same was returned with cer tain objections. The record does not suggest that the plaintiff either took the steps to remove the said objections or ever requested the court to issue the fresh notice upon the official liquidator. The fact remains that despite grant of permission on 29.11.1995, the plaintiff had not taken any effective step to bring on record the official liquidator to represent the defendant no.1 in the present suit. Rather, the plaintiff opted to proceed with the suit in absence of appointment of the official liquidator. As a result of such an act of omission on the part of the plaintiff being the creditor, the liability of the principal debtor i.e. the defendant no. 1 stands discharged, as the plaintiff's suit against it had abated. The plaintiff has failed to prove the liability of the de fendants no. 2 and 3 was coextensive and joint and several with the defen 9/15 Central Bank of India vs. Fabron India Pvt. Ltd.
dant no. 1. Therefore, in terms of Section 134 of the Contract Act, it should be inferred that the liability against the surety i.e. the defendants no. 2 and 3 also sands discharged, as a result of the abatement of the suit against the principal debtor.
18. Counsel for the defendant no.3 also pleaded that the defendant no.2 died during the proceedings. On 10.07.2002, it was recorded that he had died. However, the plaintiff did not take any steps for impleadment of the LRs within the stipulated period. Rather, On 04.06.2010 the plaintiff made a statement and gave up its claim against the LRs of the defendant no.2 except the defendant no.3. Hence, once the plaintiff had not taken the steps for the impleadment of the LRs within 90 days and for condoning abatement in next 60 days period, the limitation ran out. Hence, the suit stands abated against the LRs of the deceased defendant no.2 including the defendant no.3.
19. Now the question arises whether the plaintiff can pursue the suit against the defendant no.3 being legal representative of deceased defen dant no.2.
20. In the judgment passed by the Hon'ble Supreme Court in the case titled as "Balwant Singh vs. Jagdish Singh & others" reported in V (2010) SLT 790, it was held:
" Civil Procedure Code, 1908Order 22 Rule 3 Abatement of suit suit or appeal abates automatically if LRs particularly of sole plaintiff or appellant are not brought on record within stipulated period."
10/15 Central Bank of India vs. Fabron India Pvt. Ltd.
21. In the present case, perusal of the record reveals that on 10.07.2002, counsel for the defendants informed the court that the defendant no.2 had expired. On 05.05.2003, the plaintiff moved an application to bring on record the LRs of deceased defendant no.2. On 11.07.2003, the suit was dismissed in default. Perusal of order dated 26.02.2010 reveals that upon restoration of the suit, the notice on the application under Order 22 Rule 4 of CPC was issued to the LRs of deceased defendant no.2. As such, when the application was filed on 05.05.2003, the period of 90 days to implead the LRs of deceased defendant no.2 had already expired. More so, further period of 60 days to get set aside the abatement order had also expired. Hence, it can be held that when the plaintiff moved an application under order 22 Rule 4 of CPC on 05.05.2003, the suit had already been abated against the defendant no.2. The plaintiff has not moved an application for setting aside the abatement order. Therefore, the moving of the application under Order 22 Rule 4 of CPC was of no consequence. As such, the present suit cannot be continued against the LRs of deceased defendant no.2 including the defendant no.3.
22. Perusal of the record also reveals that on 04.06.2010 Shri B S Hari Lal, AGM, Central Bank of India made a statement to drop the LRs of deceased defendant no.2 except the defendant no.3 and showed the plaintiff's inclination to continue against the defendant no.3 only as one of the LRs of deceased defendant no.2. As discussed above, on the date of moving the application, the suit stood abated against the defendant no.2. On 04.06.2010, 11/15 Central Bank of India vs. Fabron India Pvt. Ltd. the plaintiff also opted not to proceed against the LRs of deceased defendant no.2 except the defendant no.3. Once the plaintiff opted not to proceed against the LRs of deceased defendant no.2, the same shall operate as a whole and not in pick and choose manner. It cannot be held that the suit stands abated against defendant no.2 and/or some of his LRs while it will continue against the defendant no.3 because if it is allowed, the same shall result into conflict of the decision.
23. In view of the abovementioned judgments and foregoing discussions, it can be held that the suit is liable to be dismissed against the defendant no. 3 out rightly. But I propose to decide the case on merits also.
24. To prove its case, the plaintiff examined PW1 who deposed that he filed his affidavit in evidence and verified the same as true to his personal knowledge. He showed his ignorance as to the status of the defendant no.1; its winding up; and the steps taken by the plaintiff to ask for liquidator to represent the defendant no.1. He also showed his ignorance whether the LRs of deceased defendant no.2 were brought on record or not. He deposed that he was shown the documents filed on the court record and was asked to say that they were filled in his presence. Again said, the documents were shown to him before the affidavit was signed by him. He deposed that he was called by the plaintiff bank and was shown the affidavit and was asked to sign it and he signed the same. Hence, it can be held that the facts deposed by PW1 in his affidavit were not within his knowledge and were not instructed by him rather he signed at behest of the official of the plaintiff bank. He deposed 12/15 Central Bank of India vs. Fabron India Pvt. Ltd. that he did not check up the balance confirmation stated in PW1/1 at the time of swearing the affidavit. He admitted that the said document was not signed by the defendant no.1 in his presence. Regarding demand promissory note dated 26.09.1972 Mark C (Ex. PW1/7), he deposed that he only filled up the date and the amount in his own handwriting and rest of the contents were filled up by some other official whose name he did not remember. He admitted that the said document was not signed by defendant no.1 in his presence and the particulars were not filled up by his senior in his presence. He deposed that the documents mark D,E,F,H,I,J,K and M (Ex. PW1/8, Ex. PW1/9, Ex. PW1/12, Ex. PW1/14, Ex. PW1/16, Ex. PW1/18, Ex. PW1/19 and Ex. PW1/20 were not signed nor executed in his presence. He showed his ignorance who filled up the said documents. He showed his ignorance what securities were provided by defendant no.1. PW1 could not trace out the extract of pledged goods. He deposed that there is no stock statement dated 27.11.1975 marked as Ex.PW 1/ 4 in his affidavit. He admitted that he had not verified the documents step by step which are mentioned in his affidavit. He failed to give the details of the bills as mentioned in para 7 of his affidavit. He admitted that the plaintiff had not placed on record current account number 2005. He deposed that the source of knowledge of the facts stated in para 2 of the affidavit is the talk between the bank officials and he had no personal knowledge in this regard. Hence, the same are hearsay in nature. He admitted that there is no letter in the court file authorising any specific person to execute the loan documents on behalf of the defendant no.1. Regarding rate of interest, he deposed that the same depends on RBI directions whether the same would be charged on monthly rests or quarterly rests. He had no circular till this matter regarding the rate of interest. In 13/15 Central Bank of India vs. Fabron India Pvt. Ltd. para 11 of the affidavit in evidence, PW1 deposed that the defendants no. 2 and 3 stood personal surety for repayment of the dues and executed a joint letter of guarantee dated 01.07.1981 in favour of the plaintiff. However, PW1 has not proved any such letter or the guarantee deed to show that the defendants no. 2 and 3 stood as guarantors for repayment of the loan amount.
25. On the other hand, in his cross examination, the defendant no. 3 as DW1 deposed that the defendant no.1 had negotiated the term loan which was not granted and had continued under negotiation. No suggestion to the contrary is given. He deposed that the document mark X1 bears his signature but that time it was blank. No suggestion to the contrary is given. He deposed that no goods were pledged by the defendant no.1 and he signed the blank document for getting the term loan. No suggestion to the contrary is given. He deposed that he gave his LIC policy to the plaintiff bank for finding out the face value thereof but the same was not pledged by him. No suggestion to the contrary is given.
26. The plaintiff has not examined any witness to prove the statement of account to ascertain the liability and fix the same upon the defendants. Even PW1 has neither tendered nor proved the statement of account. As such, the plaintiff has not proved the statement of account to claim the suit amount. Hence, the question of interest does not arise at all.
27. In view of the foregoing discussions, it can be held that the plaintiff has failed to discharge its onus that the loan documents were duly 14/15 Central Bank of India vs. Fabron India Pvt. Ltd. executed between the parties. The plaintiff has also failed to prove that it is entitled to recover the suit amount from the defendant no. 3. As such, the plaintiff has completely failed to prove its case against the defendant no. 3. Therefore, the issues no. 2 to 5 are decided against the plaintiff and in favour of the defendant no. 3.
ISSUE NO.6 (RELIEF)
28. In view of the foregoing discussions, the plaintiff is held not entitled to the decree as prayed for. Therefore, the suit is dismissed. No order as to cost. Decree sheet be prepared accordingly.
File be consigned to Record Room.
ANNOUNCED IN THE OPEN COURT, On 18th of August, 2012.
(PANKAJ GUPTA) ADJ(CENTRAL07)/DELHI 18.08.2012 15/15 Central Bank of India vs. Fabron India Pvt. Ltd.